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EXHIBIT 10.22
THE EDISON PROJECT INC.
SUBSCRIPTION AGREEMENT
DECEMBER 30, 1997
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TABLE OF CONTENTS
Section Page
1. Purchase and Sale of Series D Convertible Preferred Stock,
Options, Notes, Series G Common Stock and Series H
Common Stock.............................................................................................1
1.1 Sale and Issuance of Series D Convertible Preferred Stock,
Options, Notes. Series G Common Stock and Series H
Common Stock at First Closing...................................................................1
1.2 Sale and Issuance of Series D Convertible Preferred Stock.
Options and Notes at Subsequent Closings........................................................3
1.3 Certain Definitions Several Obligations.........................................................6
1.4 First Closing...................................................................................6
1.5 Subsequent Closings.............................................................................7
1.6 JPMIC Fee.......................................................................................7
2. Representations and Warranties of the Company............................................................8
2.1 Organization, Good Standing and Qualification...................................................8
2.2 Capitalization..................................................................................8
2.3 Authority; Execution and Delivery: Requisite Consents,
Nonviolation...................................................................................10
2.4 Subsidiaries...................................................................................11
2.5 Financial Information..........................................................................11
2.6 Certain Changes or Events......................................................................12
2.7 Title to Assets................................................................................13
2.8 Contracts......................................................................................13
2.9 Intellectual Property..........................................................................14
2.10 Insurance......................................................................................16
2.11 Labor Union Activities Employee Relation.......................................................16
2.12 ERISA..........................................................................................17
2.13 Litigation.....................................................................................18
2.14 Compliance with Laws; Permits..................................................................18
2.15 Taxes..........................................................................................19
2.16 Books and Records..............................................................................19
2.17 Environmental Matters..........................................................................19
2.18 Transactions with Affiliates...................................................................20
2.19 Registration Rights............................................................................20
2.20 No Brokers or Finders..........................................................................20
2.21 Investment Company Act.........................................................................20
2.22 Confidential Information Memorandum............................................................21
2.23 Employee Confidentiality Agreement.............................................................21
2.24 Disclosure.....................................................................................21
2.25 Small Business.................................................................................21
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2.26 Use of Proceeds................................................................................21
2.27 Business Activity..............................................................................22
2.28 Acknowledgment of JPM Investors as SBICs.......................................................22
3. Representations and Warranties of the Investors.........................................................22
3.1 Organization...................................................................................22
3.2 Authorization..................................................................................22
3.3 No Intended Resale.............................................................................22
3.4 No Agency Relationship.........................................................................22
3.5 Investment Experience..........................................................................23
3.6 Memorandum and Agreements......................................................................23
3.7 Opportunity to Ask Questions...................................................................23
3.8 Access.........................................................................................23
3.9 Own Investigation..............................................................................23
3.10 Securities Registration........................................................................23
3.11 Restricted Securities..........................................................................23
3.12 No Brokers or Finders..........................................................................24
3.13 Pre-emptive Rights.............................................................................24
4. Conditions of Investors' Obligations at First Closing...................................................24
4.1 Representations and Warranties.................................................................24
4.2 Performance....................................................................................24
4.3 Stock Certificates. Etc........................................................................24
4.4 No Material Adverse Change.....................................................................25
4.5 Consents.......................................................................................25
4.6 No Actions.....................................................................................25
4.7 Opinion of Counsel.............................................................................25
4.8 Compliance Certificate.........................................................................25
4.9 Directors......................................................................................25
4.10 Related Documents..............................................................................25
4.11 Proceedings and Documents......................................................................26
5. Conditions of Investors' Obligations at Subsequent Closings.............................................26
5.1 HSR Compliance.................................................................................26
5.2 Stock Certificates. Etc........................................................................26
5.3 No Actions.....................................................................................26
6. Conditions of the Company's Obligations at First Closing................................................26
6.1 Representations and Warranties.................................................................26
6.2 Payment of Purchase Price......................................................................27
6.3 No Actions.....................................................................................27
6.4 Proceedings and Documents......................................................................27
6.5 Consents.......................................................................................27
6.6 Related Documents..............................................................................27
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7. Conditions of the Company's Obligations at Subsequent Closings..........................................27
7.1 HSR Compliance.................................................................................27
7.2 Payment of Purchase Price......................................................................28
7.3 No Actions.....................................................................................28
8. Certain Post-Closing Covenants..........................................................................28
8.1 Observer Rights................................................................................28
8.2 Information....................................................................................29
8.3 Annual Meetings................................................................................32
8.4 Exemption from Investment Company Act..........................................................32
8.5 Accounting and Reserves........................................................................32
8.6 Transactions with Affiliates...................................................................32
8.7 Provisions Relating to JPM Investors...........................................................32
8.8 Assistance in Sales............................................................................34
8.9 Additional Covenants...........................................................................35
8.10 HSR Compliance.................................................................................35
9. Miscellaneous...........................................................................................35
9.1 Expenses.......................................................................................35
9.2 ▇.▇. ▇▇▇▇▇▇ Fee................................................................................35
9.3 Publicity......................................................................................36
9.4 Indemnification................................................................................36
9.5 Survival.......................................................................................36
9.6 Assignment.....................................................................................37
9.7 Amendment Waiver...............................................................................37
9.8 APPLICABLE LAW.................................................................................37
9.9 DISPUTE RESOLUTION.............................................................................37
9.10 Notices........................................................................................38
9.11 Integration....................................................................................39
9.12 Severability...................................................................................39
9.13 Descriptive Headings...........................................................................39
9.14 Counterparts...................................................................................39
9.15 Understanding Among Investors..................................................................40
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EXHIBIT LIST
Exhibit A Amended and Restated Certificate of Incorporation
Exhibit B-1 Form of WSI A Option
Exhibit B-2 Form of Tranche 1 Option
Exhibit B-3 Form of Tranche 2 Option
Exhibit C Form of Promissory Note
Exhibit D [Intentionally Omitted]
Exhibit E Shareholders Agreement
Exhibit F Financial Statements
Exhibit G By-Laws
Exhibit H Opinion of Counsel
Exhibit I Regulation Y Term Sheet
Exhibit J Employee Confidentiality Agreements
SCHEDULE LIST
Schedule A Schedule of Investors
Schedule I Schedule of Exceptions
Schedule 2 Names of Stockholders and holders of Options and/or
Warrants, etc.
Schedule 3 Subsidiaries
Schedule 4 Directors
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CROSS REFERENCES TO
SELECTED DEFINITIONS
Term Section Location
Actions Section 2.13
Affiliate Section 2.6
Aggregate Remaining Commitments Section 1.2(b)(iii)
Agreement Prefatory Language
Amended and Restated By-laws Section 4.6
Audited Financials Section 2.5
Certificate Section 1.1(a)
Code Section 2.12(a)
Common Stock Section 2.2
Companies Section 2.1
Company Prefatory Language
Company's Documents Section 2.3
Condition Section 2.1
Contracts Section 2.8
Conversion Stock Section 1.3
Conversion Series A Common Stock Section 1.3
Conversion Non-Voting Common Stock Section 1.3
Defaulting Investor Section 1.2(d)
Environmental Laws Section 2.17
ERISA Section 2.12(2)
ERISA Affiliate Section 2.12(a)
Financial Statements Section 2.5
First Closing Section 1.4
Governmental Authority Section 2.3
HSR Act Section 2.3
IAB Prefatory Language
Intellectual Property Section 2.9
Intellectual Property Licenses Section 2.9
Investor Notice Section 1.5
Investors Prefatory Language
JPM Investors Prefatory Language
JPMIC Prefatory Language
Laws Section 2.14
LIBOR Accrual Section 1.2(b)(iii)
Liens Section 2.7
Memorandum Section 2.1
Non-Voting Common Stock Section 1.3
Non-Voting Series E Stock Section 1.3
Note Section 1.1(b)(v)
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Options Section 1.1(b)(iv)
Order Section 2.13
Other Investors Prefatory Language
Patents and Applications Section 2.9(d)(i)
Permits Section 2.14
Person Section 2.3
Plan(s) Section 2.12(a)
Preferred Stock Section 2.2
Principal Owner Section 2.8(d)
Purchased Securities Section 1.3
Ratable Share Section 1.2(b)(iii)
Regulation Y Investor Section 7.7(e)
Regulation Y Term Sheet Section 7.7(e)(ii)
Remaining Commitment Section 1.2(b)(iii)
Returns Section 2.15
RLEC Prefatory Language
Scheduled Contracts Section 2.8
Securities Section 1.3
Securities Act Section 2.19
Series A Common Stock Section 1.1(b)(ii)
Series A Stock Section 2.2
Series B Stock Section 2.2
Series C Stock Section 2.2
Series D Stock Section 1.1(b)(i)
Series G Common Share Section 1.1(b)(vi)
Series H Common Share Section 1.1(b)(vii)
Shareholders Agreement Section 2.2
Shares Section 1.3
Sixty Wall Prefatory Language
Small Business Investment Act Section 2.25
Stock Option Plans Section 2.2
Subsequent Closing Section 1.5
Subsequent Closing Notice Section 1.5
Subsequent Closing Request Section 1.2(a)
Subsidiaries Section 2.1
Taxes Section 2.15
Tranche 1 Options Section 1.1(b)(iii)
Tranche 2 Options Section 1.1(b)(iv)
Unaudited Financials Section 2.5
Unit Section 1.1(b)
WEG III Prefatory Language
WEG IV Prefatory Language
WSI Prefatory Language
WSI Investors Prefatory Language
WSI A Options Section 1.1(b)(ii)
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SUBSCRIPTION AGREEMENT
This Subscription Agreement (this "Agreement") is made as of the 30th
day of December, 1997 by and among THE EDISON PROJECT INC., a Delaware
corporation (the "Company"), ▇.▇. ▇▇▇▇▇▇ INVESTMENT CORPORATION, a Delaware
corporation ("JPMIC"), SIXTY WALL STREET SBIC FUND, L.P. ("Sixty Wall", and
together with JPMIC, the "JPM Investors"), INVESTOR INVESTMENTS AB, a
corporation organized under the laws the of the Kingdom-of Sweden ("IAB"), WSI
INC., a Delaware corporation ("WSI"), WEG III L.P., a Delaware limited
partnership ("WEG III"), WEG IV L.P., a Delaware limited partnership ("WEG IV"),
and together with WEG III and WSI, the ("WSI Investors"), Richmont Leeds
Education Company L.L.C. ("RLEC") (if RLEC elects to commit to purchase Units
pursuant to Section 1.1(c) below) and each of the other investors identified on
the signature pages hereto under the caption "Other Investors" (collectively,
the "Other Investors", and collectively with the JPM Investors, IAB, the WSI
Investors and (if applicable) RLEC, the "Investor").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Series D Convertible Preferred Stock, Options,
Notes, Series G Common Stock and Series H Common Stock.
1.1 Sale and Issuance of Series D Convertible Preferred Stock,
Options, Notes. Series G Common Stock and Series H Common Stock at First
Closing.
(a) The Company shall adopt and file with the
Secretary of State of the State of Delaware on or before the First Closing (as
defined below) an Amended and Restated Certificate of Incorporation in the form
attached hereto as Exhibit A (the "Certificate").
(b) Subject to the terms and conditions of this
Agreement, each Investor, severally and not jointly, agrees to purchase at the
First Closing, and the Company agrees to sell and issue to each Investor at the
First Closing, the following:
(i) that number of shares of Series D
Convertible Preferred Stock of the Company, par value $0.01 per share
(the "Series D Stock"), set forth opposite such Investor's name in
Column A on Schedule A attached hereto;
(ii) an option in the form attached hereto
as Exhibit B-1 entitling the holder thereof to purchase, at an initial
exercise price of $10.00 per share, that number of shares of Series A
Common Stock, par value $0.01 per share, of the Company (the "Series A
Common Stock") set forth opposite such Investor's name in Column B on
Schedule A attached hereto (each a "WSI A Option" and collectively, the
"WSI Options");
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(iii) an option in the form attached hereto
as Exhibit B-2, entitling the holder thereof to purchase, at an initial
exercise price of $1.50 per share, that number of shares of Series A
Common Stock set forth opposite such Investor's name in Column C on
Schedule A attached hereto (each a "Tranche 1 Option" and collectively
the "Tranche 1 Options");
(iv) an option in the form attached hereto
as entitling the holder thereof to purchase, at an initial exercise
price of $8.00 per share, that number of shares of Series A Common
Stock set forth opposite such Investor's name in Column D on Schedule A
attached hereto (each a "Tranche 2 Option" and collectively the
"Tranche 2 Options" and collectively with the WSI A Options and the
Tranche 1 Options, the "Options"); and
(v) a Promissory Note in the form attached
hereto as Exhibit C in the principal amount set forth opposite such
Investor's name in Column E on Schedule A attached hereto (each a
"Notes" and collectively the "Notes");
(vi) in the case of JPMIC only, one (1)
share of Series G Common Stock of the Company, par value $.01 per share
(the "Series G Common Share"); and
(vii) in the case of IAB only, one (1) share
of Series H Common Stock of the Company, par value $.01 per share (the
"Series H Common Share");
at a price of $3.98 per unit (a "Unit") consisting of (I) one share of Series D
Stock, (II) a WSI A Option to purchase 0.019191 of a share of Series A Common
Stock, (III) a Tranche 1 Option to purchase 0.019191 of a share of Series A
Common Stock, (IV) a Tranche 2 Option to purchase 0.028786 of a share of Series
A Common Stock and (V) a Note in the principal amount of $0.114213, for an
aggregate purchase price set forth opposite such Investor's name in Column F on
Schedule A attached hereto; provided that the Units purchased by JPMIC or IAB at
the First Closing shall include the Series G Common Share and Series H Common
Share, respectively, and no additional consideration shall be paid by either of
JPMIC or IAB in respect of the Series G Common Share or Series H Common Share,
respectively.
(c) At any time on or before January 28, 1998, RLEC
may, at its option, elect to commit to purchase up to 848,801 Units in the
aggregate on the terms and condition provided in this Agreement. If RLEC elects
to commit to purchase Units as provided in this Section 1.1(c), RLEC shall, on
or prior to January 28, 1998, deliver to the Company (i) written notice of its
election to commit to purchase Units under this Agreement, which shall set forth
the aggregate number of Units it has elected to commit to purchase, and (ii) a
wire transfer in the amount of the aggregate purchase price for
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the number of Units that RLEC elects to purchase immediately upon delivery of
its election to commit to purchase Units, which shall be not less than 40% (or
such greater percentage of the aggregate commitments, under this Agreement that
have been required by the Company to have been paid as of such date) of the
aggregate number of Units which RLEC shall have elected to purchase pursuant to
this Section 1.1(c). Upon delivery of the foregoing election to commit to
purchase Units and payment of the purchase price for the applicable proportion
of such Units, RLEC shall be deemed to be an "Investor" hereunder and shall have
all rights, remedies and obligations of an Investor for all purposes under this
Agreement, and RLEC shall be deemed to have become an Investor as of the date of
this Agreement. In the event RLEC fails to deliver the election to commit to
purchase Units or payment of the purchase price for the applicable proportion of
such Units on or before January 28, 1998, RLEC shall not be an "Investor" under
this Agreement for any purpose and shall have no rights, remedies or obligations
hereunder. By its execution and delivery of this Agreement, RLEC hereby confirms
that it has waived and/or exercised (as the case may be) any and all preemptive
rights it has against the Company with respect to the transactions described in
this Agreement and that it has no right to purchase any Units except as provided
in this Agreement.
1.2 Sale and Issuance of Series D Convertible Preferred Stock.
Options and Notes at Subsequent Closings.
(a) Request. Subject to the terms and conditions of
this Agreement, the Company and each Investor may, each at its respective
option, at any time and from time to time during the period from the date of the
First Closing through December 31, 2000 request a Subsequent Closing (as defined
below) for the purchase and sale of additional Units (each such request is
referred to herein as a "Subsequent Closing Request").
(i) Subsequent Closing Request by the
Company. Each Subsequent Closing Request made by the Company shall
relate to Units having an aggregate purchase price (excluding LIBOR
Accruals (as defined below)) of not less than the lesser of (x) ten
million dollars ($10,000,000) in the aggregate or (y) the aggregate
Remaining Commitments of all Investors (as defined below), and of not
more than the aggregate Remaining Commitments of all Investors. Each
Subsequent Closing Request made by the Company shall be made to all
Investors pro rata (based on each Investor's "Ratable Share" (as
defined below)).
(ii) Subsequent Closing Request by
Investors. Each Subsequent Closing Request made by one or more
Investors shall relate to Units having an aggregate purchase price
(excluding LIBOR Accruals) of not less than the lesser of (x) five
million dollars ($5,000,000) in the aggregate or (y) the Remaining
Commitment (as defined below) of such Investor(s), and of not more than
the Remaining Commitment of such Investor(s). Each Subsequent Closing
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Request made by one or more Investors may be made independently of all
other Investors (and, accordingly, no Investor shall have an obligation
to purchase its Ratable Share at any Subsequent Closing requested by
another Investor or Investors).
(b) Purchase and Sale.
(i) Subsequent Closing Requested by Company.
Subject to the terms and conditions of this Agreement, each Investor,
severally and not jointly, agrees to purchase at each Subsequent
Closing requested by the Company, and the Company agrees to sell and
issue to each Investor at each such Subsequent Closing, such Investor's
"Ratable Share" (as defined below) at a price per Unit of $3.98 plus
the LIBOR Accrual.
(ii) Subsequent Closing Requested by
Investor(s). Subject to the terms and conditions of this Agreement,
each Investor, severally and not jointly, agrees to purchase at each
Subsequent Closing which such Investor requested (or in which such
Investor has elected to join pursuant to Section 1.6), and the Company
agrees to sell and issue to each such Investor at each such Subsequent
Closing, the number of Units that such Investor has requested to
purchase (up to a number of Units equal to such Investor's Remaining
Commitment divided by $3.98), at a price per Unit of $3.98 plus the
LIBOR Accrual.
(iii) Certain Definitions. An Investor's
"Ratable Share" shall mean the number of Units determined by dividing
(i) an amount equal to the product of (X) the aggregate dollar amount
requested by the Company to be invested at such Subsequent Closing (not
including any LIBOR Accruals) and (Y) a fraction, the numerator of
which is such Investor's Remaining Commitment and the denominator of
which is the aggregate Remaining Commitments of all the Investors, by
(ii) $3.98, provided, however that in no event shall any Investor's
Ratable Share exceed such Investor's Remaining Commitment divided by
$3.98. The "Remaining Commitment" of each Investor, at any time, shall
mean the amount set forth opposite such Investor's name in Column G on
Schedule A attached hereto, reduced by any and all investments (other
than the payment of LIBOR Accruals) made by such Investor at Subsequent
Closings which shall have occurred prior to such time. The "aggregate
Remaining Commitments of all the Investors" shall mean the sum of all
Remaining Commitments. The "LIBOR Accrual", as determined in connection
with any Subsequent Closing, shall mean the amount of interest that
would accrue on $3.98 at the six (6) month LIBOR rate publicly
announced by Citibank (London) (determined on the date of the First
Closing), during the period from the date of the First Closing through
(and including) the day immediately prior to the date of the applicable
Subsequent Closing, provided that at each Subsequent Closing the LIBOR
rate will be adjusted to the six (6) month LIBOR rate publicly
announced by ▇▇▇▇▇▇▇▇
▇▇
(▇▇▇▇▇▇) in effect on the date of such Subsequent Closing.
(c) Notwithstanding anything to the contrary
contained herein, in no event shall any Investor be obligated under this
Agreement (pursuant to the First Closing and all Subsequent Closings) to invest
in the Company an amount greater than its Aggregate Commitment set forth in
Column H on Schedule A plus the LIBOR Accruals on any Units purchased after the
First Closing.
(d) If any Investor fails to purchase any Units that
such Investor was obligated to purchase at any Subsequent Closing after written
notice of such failure has been received by such Investor and such Investor has
failed to cure within ten (10) business days of receipt of the notice of such
failure (each such Investor, a "Defaulting Investor"), the LIBOR Accrual on each
Unit that was required to be purchased by such Defaulting Investor shall be
deemed to be the amount of interest that would accrue on $3.98 at the rate of
24.9% per annum (or, if less, the maximum rate permitted by law) during the
period from the First Closing through the date such Defaulting Investor
purchases all the Units such Defaulting Investor was required to purchase at
such Subsequent Closing. In addition, each Defaulting Investor shall be liable
for all costs relating to the enforcement of such Defaulting Investor's
obligations under this Agreement, including, without limitation, all attorneys'
fees (all of which costs periodically shall be reimbursed as incurred).
(e) The total of the WSI Investors' obligations to
purchase Units hereunder shall be $10,000,000, plus any LIBOR Accruals in
respect of any such amount not invested at the First Closing, and vis-a-vis
other Investors and, except as specifically set forth in this paragraph (e), the
Company, the WSI Investors shall be treated as one Investor for all purposes
under this Section 1. The WSI Investors shall be obligated to purchase Units,
severally and not jointly, as follows: (i) WEG III shall be obligated to
purchase $1,000,000 of the Units to be purchased by the WSI Investors (plus any
LIBOR Accruals due in respect of the purchase of such Units, the "WEG III
Commitment") and (ii) WEG IV shall be obligated to purchase $6,000,000 of Units
to be purchased by the WSI Investors hereunder (plus any LIBOR Accruals due in
respect of the purchase of such Units, the "WEG IV Initial Commitment"), and WSI
shall not be required to purchase Units under this Agreement until all of the
Units to be purchased under the WEG III Commitment and WEG IV Initial Commitment
have been, or have been required by the Company to be, purchased. Thereafter,
the WSI Investors' Remaining Commitment (initially $3,000,000 plus any LIBOR
Accruals due in respect of the purchase of such Units) shall be divided between
WEG IV and WSI such that each is responsible for 25% and 75%, respectively,
thereof, provided, that in the event that WEG IV fails to purchase any Units
other than Units to be purchased under the WEG IV Initial Commitment, WSI shall
be solely responsible for the purchase of such Units and for any interest due as
provided in paragraph 1.2 (d) above and the Company shall have recourse solely
against WSI in connection with any failure by WSI to purchase such Units
(including that WSI shall be solely responsible for all costs and expenses
related to the enforcement of such obligations).
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1.3 Certain Definitions Several Obligations. The total amount
of Series D Stock (and in the case of JPMIC and IAB, the Series G Common Share
and Series H Common Share, respectively) sold to the Investors pursuant to this
Agreement is sometimes hereinafter referred to as the "Shares". The total amount
of the Non-Voting Series E Convertible Preferred Stock, par value $0.01 per
share, of the Company issuable upon conversion of Series D Stock is sometimes
hereinafter referred to as "Non-Voting Series E Stock." The Series A Common
Stock issuable directly or indirectly upon conversion of the Series D Stock
and/or Non-Voting Series E Stock and upon exercise of the Options (and in the
case of JPMIC and IAB, upon conversion of the Series G Common Share and Series H
Common Share, respectively) is sometimes hereinafter referred to as the
"Conversion Series A Common Stock." The non-voting common stock, par value $0.01
per share, of the Company (the "Non-Voting Common Stock") issuable upon
conversion of each of the Series A Common Stock and Non-Voting Series E Stock is
hereinafter referred to as the "Conversion Non-Voting Common Stock" and,
together with the Conversion Series A Common Stock, is hereinafter referred to
as the "Conversion Stock." The Shares, Options and Notes (and in the case of
JPMIC and IAB, the Series G Common Share and Series H Common Share,
respectively) are sometimes hereinafter collectively referred to as the
"Purchased Securities". The Purchased Securities and the Conversion Stock are
sometimes hereinafter collectively referred to as the "Securities." The sale of
the Securities to each Investor under this Agreement shall constitute a separate
sale, and the obligations of each Investor under this Agreement shall be
separate from and independent of the obligations of each other Investor under
this Agreement.
1.4 First Closing. Subject to the conditions set forth below,
the purchase and sale of Units at the First Closing shall take place on the date
of the execution and delivery of this Agreement at the offices of Cadwalader,
▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, at 10:00 a.m., or
at such other time and place as the Company and each of the Investors mutually
agree upon orally or in writing (which time and place are designated as the
"First Closing"). At the First Closing, the Company shall deliver to each
Investor a certificate and instruments, as applicable, representing the
Purchased Securities to be purchased by such Investor at the First Closing,
against delivery to the Company by such Investor of a wire transfer in the
amount of the aggregate purchase price therefor. Such certificates and
instruments shall be issued in the names and the amounts set forth on Schedule A
hereto. The execution and delivery of this Agreement and the First Closing shall
be simultaneous in that neither the execution and delivery of this Agreement nor
any event required by the terms of this Agreement to occur at the First Closing
shall be deemed to have occurred until such execution and delivery and all such
events shall have occurred, and when such execution and delivery and all such
events have occurred, they shall be deemed to have occurred simultaneously.
1.5 Subsequent Closings. Subject to the conditions set forth
below, the purchase and sale of Units at Subsequent Closings shall take place at
the offices of
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Cadwalader, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, at
10:00 a.m. on the date specified in the applicable Subsequent Closing Notice, or
at such other time and place as the Company and the Investors purchasing 662/3%
of the Purchased Securities to be purchased at such Subsequent Closing mutually
agree upon orally or in writing (which time and place are designated as a
"Subsequent Closing"). The Company shall give each Investor at least twenty (20)
days prior written notice (the "Subsequent Closing Notice") of each Subsequent
Closing, which notice shall specify the date and time of such Subsequent
Closing, the aggregate number of Units to be purchased and sold at such
Subsequent Closing, the amount of the LIBOR Accrual per Unit, instructions for
the payment of the purchase price and, if applicable, each Investor's Ratable
Share to be purchased at such Subsequent Closing. In the event an Investor or
Investors elect to request a Subsequent Closing, such Investor(s) shall deliver
a written notice to the Company requesting such Subsequent Closing (an "Investor
Notice"). The Company shall, promptly after receipt of an Investor Notice,
deliver a Subsequent Closing Notice to each of the Investors. Such Subsequent
Closing Notice shall provide each Investor with at least twenty (20) days prior
written notice of the proposed Subsequent Closing, and shall provide each
Investor a period of not less than ten (10) days in which to notify the Company
of the number of Units, if any, such Investor has elected to purchase at the
Subsequent Closing. No Investor shall be obligated to purchase any Units at a
Subsequent Closing requested by another Investor(s) and no Investor's rights or
obligations under this Agreement shall be affected by the failure of an Investor
to participate in such a Subsequent Closing. At each Subsequent Closing, the
Company shall deliver to each Investor participating in such Subsequent Closing
a certificate and instruments representing the Purchased Securities to be
purchased by such Investor, against delivery to the Company by such Investor of
a wire transfer in the amount of the aggregate purchase price therefor. Such
certificates and instruments shall be issued in the names and the proportions
set forth on Schedule A hereto.
1.6 JPMIC Fee. At the First Closing, JPMIC shall be entitled
to receive a fee of 4.0% of the aggregate consideration to be provided by JPMIC
under this Agreement (the "Fee"). JPMIC shall be entitled, at its option, to
offset the aggregate amount of consideration payable by JPMIC to the Company at
the First Closing by the amount of the Fee.
2. Representations and Warranties of the Company. The Company hereby
represents and warrants to, and agrees with, the Investors, except as set forth
on the Schedule of Exceptions furnished to the Investors and attached hereto as
Schedule 1, specifically identifying the relevant subsection hereof, which
exceptions shall be deemed to be representations and warranties as if made
hereunder, as follows:
2.1 Organization, Good Standing and Qualification. Each of the
Company, Sprout Edison Project, Inc., a Delaware corporation and a wholly-owned
subsidiary of the Company ("SEP") and The Edison Project L.P., a Delaware
limited partnership, the sole general partner and 74.56203% owner of which is
the Company
15
and the sole limited partner and 25.43797% owner of which is SEP ("Edison LP"
and, together with SEP, the "Subsidiaries"; the Company and the Subsidiaries are
sometimes hereinafter collectively referred to as the "Companies"), is duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Each of the Companies has all requisite power and authority to carry
on its business as now conducted and as proposed to be conducted in the
Confidential Information Memorandum dated November, 1997, the Supplement thereto
dated November 14, 1997 and the Second Supplement thereto dated December 13,
1997 (collectively, the "Memorandum"). The Company has all requisite power and
authority to enter into and perform this Agreement and the transactions
contemplated hereby. Each of the Companies is duly qualified to transact
business and is in good standing in each jurisdiction in which the failure so to
qualify could have a material adverse effect on its business, properties,
operations, earnings, assets, liabilities, condition (financial or otherwise) or
prospects (collectively, "Condition").
2.2 Capitalization. After giving effect to the transactions
contemplated by this Agreement, and immediately after the First Closing, the
capital stock of the Company, as authorized by the Certificate, will consist of.
(i) 94,390,253 shares of common stock, par value $0.01 per share (collectively,
the "Common Stock") of the Company, of which (A) 87,630,826 shares shall have
been designated Series A Common Stock, 6,214,704 shares of which will be issued
and outstanding, 14,101,728 shares of which will be reserved for issuance upon
conversion, directly or indirectly, of the Series D Stock, 947,163 shares of
which will be reserved for issuance upon exercise of the Options, 37,563,144
shares of which will be reserved for issuance upon conversion of the outstanding
shares of Preferred Stock (other than Series D Stock) of the Company, and
18,200,250 shares will be reserved for issuance upon exercise of the options and
warrants described on Schedule 2, (B) one share shall have been designated as
Series B Common Stock, which share will be issued and outstanding, (C) one share
shall have been designated as Series C Common Stock, which share shall be issued
and outstanding, (D) one share shall have been designated as Series D Common
Stock, which share will be issued and outstanding, (E) one share shall have been
designated as Series E Common Stock, which share will be issued and outstanding,
(F) one share shall have been designated as Series F Common Stock, which share
will be issued and outstanding, (G) one share shall have been designated as
Series G Common Stock, which share will be issued and outstanding, (H) one share
shall have been designated as Series H Common Stock, which share will be issued
and outstanding, and (I) 6,759,420 shares shall have been designated as
NonVoting Common Stock, none of which will be issued and outstanding and all of
which will be reserved for issuance upon conversion of Non-Voting Series E Stock
and/or Series A Common Stock; and (ii) 65,028,129 shares of Preferred Stock, par
value $0.01 per share (collectively, the "Preferred Stock"), of the Company, of
which (I) 31,000,000 shares shall have been designated Series A Convertible
Preferred Stock (the "Series A Stock"), 30,294,435 shares of which will be
issued and outstanding and 213,333 of which will be reserved for issuance upon
exercise of warrants issued to Comdisco, Inc., (II) 1,010,101 shares shall have
been designated Series B Convertible Preferred Stock
16
(the "Series B Stock"), of which 1,010,101 shares will be issued and outstanding
(III) 6,258,608 shares shall have been designated Series C Convertible Preferred
Stock (the "Series C Stock"), of which 6,258,608 shares will be issued and
outstanding, (IV) 20,000,000 shares shall have been designated Series D Stock,
of which 5,689,432 shares will be issued and outstanding, and 8,412,296 shares
will be reserved for issuance pursuant to this Agreement, and (V) 6,759,420
shares shall have been designated Non-Voting Series E Stock, no shares of which
will be issued and outstanding and all of which will be reserved for issuance
upon conversion of Series D Stock. The rights, privileges and preferences of the
Common Stock and Preferred Stock are as stated in the Certificate, a true and
complete copy of which is attached hereto as Exhibit A. Except as set forth on
Schedule 2 and except for conversion rights of issued and outstanding shares of
Preferred Stock, as of the First Closing, the Company will not (i) have
outstanding any capital stock or other securities convertible into or
exchangeable for any shares of its capital stock and, except for the preemptive
rights contained in the Amended and Restated Shareholders' Agreement in the form
of Exhibit E hereto (the "Shareholders Agreement") and except as provided herein
no person will have any right against the Company to subscribe for or to
purchase from the Company (including conversion or preemptive rights), or any
options for the purchase from the Company of, or any agreements providing for
the issuance (contingent or otherwise) by the Company of, or any calls,
commitments or other claims of any character against the Company relating to,
any capital stock or any stock or securities convertible into or exchangeable
for any capital stock of the Company; (ii) have any capital stock, equity
interests or other securities reserved for issuance for any purpose; or (iii) be
subject to any obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any shares of its capital stock or any convertible securities,
rights or options of the type described in the preceding clause (i). Except as
set forth on Schedule 2, no outstanding options, warrants or other securities
directly or indirectly exercisable for or convertible into any class or series
of the Company's capital stock require anti-dilution adjustments by reason of
the transactions contemplated by this Agreement. All of the issued and
outstanding shares of Common Stock and Preferred Stock have been duly and
validly issued, are fully paid and nonassessable and were issued in compliance
with all applicable federal and state securities laws. All of the shares of
Series D Stock, Conversion Stock and Non-Voting Series E Stock and the Series G
Common Share and the Series H Common Share, when issued as contemplated hereby,
(i) will be duly and validly issued, fully paid and nonassessable, (ii) except
as set forth in the Shareholders Agreement, will be free of any Liens (as
defined below) other than those created by the Investor, and (iii) will be
issued in compliance with all applicable federal and state securities laws. To
the best knowledge of the Company, there are no agreements among the Company's
stockholders with respect to the voting or transfer of the Company's capital
stock, other than the agreements regarding voting contained in the Shareholders
Agreement and the agreements regarding transfer contained in the Shareholders
Agreement. Schedule 2 sets forth a complete and correct list of (i) the name of
each of the Company's stockholders and the number of shares and class and series
of capital stock registered in the name of such stockholder, and (ii) the name
of each holder of an outstanding
17
stock option and/or warrant, and the number of options and/or warrants to
purchase capital stock owned by such holder (and the applicable class and series
of capital stock) and the exercise price at which such option(s) or warrants may
be exercised.
2.3 Authority; Execution and Delivery; Requisite Consents,
Nonviolation. The Company has, and as of the First Closing will have, all
requisite power and authority to execute, deliver and perform this Agreement,
the Notes, the Options, the Shareholders Agreement and each other document or
instrument executed by it, or any of its officers, in connection herewith or
therewith or pursuant hereto or thereto (this Agreement, together with all of
the foregoing documents and instruments, are sometimes collectively referred to
herein as the "Company's Document"), and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance of this
Agreement and the other Company's Documents and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary action on the part of the Company and its
stockholders. This Agreement and each of the other Company's Documents that has
been executed as of the date hereof is, and each of the Company's Documents will
be as of the First Closing, duly executed and delivered by the Company and the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as the enforceability thereof may
be limited by bankruptcy, insolvency or other similar laws affecting the
enforceability of creditors' rights in general or by general principles of
equity. The execution, delivery and performance of this Agreement and the other
Company's Documents (including, without limitation, the Notes, the Options and
the Shareholders Agreement), the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the offer, sale
and delivery by the Company of the Purchased Securities) will not (a) except for
filings required to comply with the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act
of 1976, as amended (the "HSR Act") and the filing of the Certificate with the
Secretary of State of the State of Delaware require the consent, license,
permit, waiver, approval, authorization or other action of, by or with respect
to, or registration, declaration or filing with, any court or governmental
authority, department, commission, board, bureau, agency or instrumentality,
domestic or foreign ("Governmental Authority") or any other individual,
partnership, corporation, unincorporated organization or association, limited
liability company, trust or other entity (collectively, a "Person") other than
such as shall already have been made or obtained and shall be in full force and
effect; (b) violate or conflict with any provision of the Certificate, or the
Amended and Restated By-Laws of the Company as in effect immediately prior to
the execution and delivery of this Agreement; or (c) constitute a default under
(with or without notice or lapse of time or both), violate or conflict with, or
give rise to a right of termination, cancellation or acceleration under, or
result in a loss of a material benefit under, any Law (as defined in Section
2.14 below), Contract (as defined in Section 2.8 below), rights relating to
Intellectual Property (as defined in Section 2.9 below), Permit (as defined in
Section 2.14 below) or Order (as defined in Section 2.13 below) to which the
Company is or hereafter may be a party or by which the Company or its properties
are or hereafter may be bound.
18
2.4 Subsidiaries. Schedule 3 correctly sets forth all of the
subsidiaries of the Company, the place of incorporation or organization (as
applicable) of each such subsidiary and its authorized capitalization, its
shares of capital stock or partnership interests (as applicable) outstanding,
and the record and beneficial owner of those shares or partnership interests.
Except for the Subsidiaries, the Company does not, and prior to the First
Closing will not, own or control, directly or indirectly, any partnership
interests, stock or other equity interests in any partnership, corporation or
other entity or any voting rights or right to control the policies and direction
of any partnership, corporation or other entity. There are not outstanding (and
neither the Company nor any Subsidiary has any plan to issue, grant or enter
into) any options, warrants, rights (including conversion or preemptive rights),
subscriptions or agreements for the purchase or acquisition from or by the
Company or any Subsidiary of any shares of capital stock of any Subsidiary.
Other than the Amended and Restated Agreement of Limited Partnership of Edison
LP, as amended, there are no voting agreements, voting trust agreements,
shareholder agreements or other agreements relating to the capital stock or
equity of any of the Subsidiaries.
2.5 Financial Information. The Company previously has provided
to each Investor its consolidated balance sheet as of June 30, 1997, and the
related consolidated statements of operations, stockholders' equity and cash
flows for the year then ended (the "Audited Financials"), as audited by Coopers
& ▇▇▇▇▇▇▇ L.L.P., who issued their report thereon dated September 26, 1997.
Attached hereto as Exhibit F is an unaudited consolidated balance sheet of the
Company as of November 30, 1997 and the related unaudited consolidated statement
of operations for the period then ended (the "Unaudited Financials" and,
together with the Audited Financials, the "Financial Statements"). The Financial
Statements are complete and correct in all material respects; are in accordance
with the books of account, ledgers and records of the Companies; have been
prepared in conformity with generally accepted accounting principles applied, in
the case of the Unaudited Financials, on a basis consistent with that of the
Audited Financials; and present fairly the consolidated financial position,
results of operations and cash flows of the Companies as of the respective dates
thereof. Except as reflected in the Unaudited Financials, in the footnotes to
the Audited Financials and in Part 2.5 of Schedule 1, none of the Companies has
on the date hereof, and none of the Companies will have as of the First Closing,
any obligation or liability, contingent or otherwise, other than (i) liabilities
incurred in the ordinary course of business and consistent with past practice
since the date of the Audited Financials, which liabilities are not,
individually or in the aggregate, material to the Condition of the Companies,
taken as a whole (ii) obligations under Scheduled Contracts or Contracts of a
type not required to be listed as Scheduled Contracts, and (iii) obligations and
liabilities which, individually or in the aggregate, are not material to the
Condition of the Companies taken as a whole. The Company and each of the
Subsidiaries maintain and will continue to maintain a standard system of
accounting established and administered in accordance with generally accepted
accounting principles.
19
2.6 Certain Changes or Events. Except as set forth in Part 2.6
of Schedule 1, since June 30, 1997, the business of each of the Companies has
been operated only in the ordinary course, consistent with past practice, and in
addition to, and not in limitation of the foregoing: (i) there has been no
change in the Condition of any of the Companies, except for changes in the
ordinary course of business consistent with past practice which have not been,
in the aggregate, materially adverse to the Companies taken as a whole; (ii)
there has been no change of Laws, no revocation or change in any Contract or
Permit or right to do business, and no other event or occurrence of any
character, whether or not insured against, which has resulted, or could
reasonably be expected to result, in a material adverse change in the Condition
of the Companies taken as a whole; (iii) except as reflected in the Unaudited
Financials, 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; (iv) none of the Companies has entered into any transaction, other
than in the ordinary course of business and consistent with past practice, which
is material to the Companies taken as a whole; (v) except as reflected in the
Unaudited Financials, none of the Companies has incurred any indebtedness for
borrowed money or made any loans or advances to any Person; (vi) there has been
no waiver by any of the Companies of a valuable right or of a material debt owed
to it; (vii) none of the Companies has failed to satisfy or discharge any Lien,
except in the ordinary course of business and which is not material to the
Condition of the Companies taken as a whole (as such business is presently
conducted and as it is proposed to be conducted); (viii) there has been no
material change in any compensation, arrangement or agreement with any key
employee, director, stockholder or Affiliate (as defined below); and (ix) there
has been no agreement or commitment by any of the Companies to do or perform any
of the acts described in this Section 2.6. "Affiliate" of a specified Person
shall mean a Person that directly, or indirectly through one or more
intermediaries, controls or is controlled by, or is under common control with,
the Person specified.
2.7 Title to Assets. Except as set forth in Part 2.7 of
Schedule 1, each of the Companies has good and marketable title to all of its
assets and properties, free and clear of any liens, pledges, security interests,
claims or encumbrances (collectively, "Liens") and, with respect to any assets
or properties it leases, each Company holds a valid and subsisting leasehold
interest therein, free and clear of any Liens, is in compliance, in all material
respects, with the terms of the applicable lease, and enjoys peaceful and
undisturbed possession under such lease. All of the assets and properties of
each of the Companies that are material to the conduct of business as presently
conducted or as proposed to be conducted by the Companies taken as a whole are
in good operating condition and repair, subject to ordinary wear and tear.
2.8 Contracts. None of the Companies is a party to, nor are
any of the Companies or any of their respective assets or properties bound by,
or subject to, any contracts, agreements, notes, instruments, franchises,
leases, licenses, commitments,
20
arrangements or understandings, written or oral (collectively, "Contracts") of
the following types, except for those (the "Scheduled Contracts") listed in Part
2.8 of Schedule 1 hereto:
(a) any Contracts pursuant to which any of the
Companies, or another party thereto, is obligated to pay in excess of fifty
thousand dollars ($50,000) per year,
(b) any Contracts pursuant to which any of the
Companies acquired the right to use any Intellectual Property or information
that is material to or necessary in the business of such Company, or pursuant to
which any of the Companies has granted to others the right to use, or which
otherwise relates to, its Intellectual Property;
(c) any Contracts (other than advances of expenses to
employees in the ordinary course of business) involving loans, loan agreements,
debt securities, mortgages, deeds of trust, security agreements, suretyships or
guarantees;
(d) any Contracts between any of the Companies, on
the one hand, and any of their respective officers, directors, employees or
Persons that beneficially own in excess of 1.0% of the outstanding equity
interest of the Company (each a "Principal Owner") or any Affiliate or relative,
or Affiliate of a relative, of any of the foregoing, on the other;
(e) other than the Stock Option Plans, any deferred
compensation agreements, bonus, pension, profit sharing, stock option and
incentive plans or arrangements, hospitalization, medical and insurance plans,
agreements and policies, retirement and severance plans and other employee
compensation policies and agreements affecting employees of any of the
Companies;
(f) any Contracts with any labor union affecting
employees of any of the Companies;
(g) any Contracts which restrict any of the Companies
from freely engaging in business or competing anywhere; or
(h) any Contracts which otherwise are material to the
Condition of any of the Companies.
True and correct copies of all Scheduled Contracts have been
made available to the Investors. Except as set forth on Part 2.8 of Schedule 1
hereto, all of the Scheduled Contracts are in full force and effect and
constitute legal, valid and binding obligations of each of the Companies that is
a party thereto and, to the best knowledge of the Company, the other parties
thereto; the Companies and, to the best knowledge of the Company, each other
party thereto, has performed in all material
21
respects all obligations required to be performed by it under the Scheduled
Contracts, and no material violation exists in respect thereof on the part of
any of the Companies or, to the best knowledge of the Company, any other party
thereto; and none of the Scheduled Contracts is currently being renegotiated.
The validity, effectiveness and continuation of all Scheduled Contracts will not
be adversely affected by the transactions contemplated by this Agreement. No
default or violation exists under any Contract(s) which, in the aggregate, are
material to the Companies taken as a whole.
2.9 Intellectual Property. (a) (i) Set forth on Part 2.9 of
Schedule 1 hereto is a true, correct and complete list of all patents,
trademarks, service marks, trade names, brand names, proprietary computer
software and programs, franchises, proprietary technology and registered
copyrights, and any applications for any of the foregoing (collectively, the
"Intellectual Property") of any kind which in any material respect are used in
the business of the Companies. Part 2.9 of Schedule 1 hereto contains a true,
correct and complete list of all licenses or agreements that in any way affect
the rights of the Companies to any of the Intellectual Property or any trade
secret material of the Companies (the "Intellectual Property Licenses").
(ii) Except as set forth in Part 2.9 of
Schedule 1, the Companies are the sole and exclusive owners, free and
clear of all Liens, and have all right, title and interest in all of
the Intellectual Property. With respect to any Intellectual Property or
trade secret necessary to conduct its business, each Company owns or
has the exclusive right to use such Intellectual Property or trade
secret in its business.
(iii) Each of the Intellectual Property
Licenses is in full force and effect and constitutes a legal, valid,
binding and enforceable obligation in accordance with its terms against
each Company party thereto, and, to the best knowledge of the Company,
each other Person party thereto. Each Company has performed all
obligations imposed upon it under each of the Intellectual Property
Licenses to which it is a party. None of the Companies nor, to the best
knowledge of the Company, any other party thereto is in default
thereunder, nor, to the best knowledge of the Company, is there any
event that with notice or lapse of time, or both, would constitute a
default thereunder. None of the Companies has received any notice that
any other party to any of the Intellectual Property Licenses intends to
cancel, terminate or refuse to renew the same or to exercise or decline
to exercise any option or other right thereunder. No licenses,
sublicenses, covenants or agreements have been granted or entered into
by any Company in respect of any of the Intellectual Property or any
trade secret material of any Company, except the Intellectual Property
Licenses. To the best knowledge of the Company, no director, officer,
stockholder, employee or other Affiliate of the Company owns, directly
or indirectly, in whole or in part, any of the Intellectual Property or
any trade secret material of any Company. Except as set forth on Part
2.9 of Schedule 1 hereto, to the best knowledge of the Company, no
director, officer, employee or Affiliate of any
22
Company has entered into any agreement relating to the Companies'
business regarding the assignment of rights in inventions, or
prohibiting or restricting competition or solicitation of customers, or
any other similar restrictive agreement or covenant, whether written or
oral, with any Person other than a Company.
(iv) The consummation of the transactions
contemplated hereby will not alter or impair the rights of any Company
to any of the Intellectual Property, any trade secret material to any
Company, or under any of the Intellectual Property Licenses.
(b) (i) No claim with respect to the Intellectual
Property, any trade secret material to the Company, or any Intellectual Property
License which would adversely affect the ability of any Company to conduct its
business as presently conducted and as proposed to be conducted is currently
pending or, to the best knowledge of the Company, has been asserted, or overtly
threatened by any Person, nor does the Company know of any grounds for any claim
against any Company, (A) to the effect that any operation or activity of any
Company presently occurring or contemplated, including, inter alia, the
manufacture, use or sale of any product, device, instrument, or other material
made or used according to the patents or patent applications included in the
Intellectual Property or Intellectual Property Licenses, infringes or
misappropriates any United States or foreign copyright, patent, trademark,
service ▇▇▇▇ or trade secret; (B) to the effect that any other Person infringes
on the Intellectual Property or misappropriates any trade secret or know-how or
other proprietary rights material to any Company; (C) challenging the ownership,
validity or effectiveness of any of the Intellectual Property or trade secret
material of such Company; or (D) challenging the license of any Company or other
legally enforceable right under, any Intellectual Property or the Intellectual
Property Licenses.
(ii) None of the Companies is aware of any
presently existing United States or foreign patents or any patent
applications which if issued as patents would be infringed by any
activity contemplated by any Company.
2.10 Insurance. Each of the Companies has in full force and
effect (i) fire and casualty insurance policies, with extended coverage,
sufficient in amount (subject to reasonable deductibles) to allow it to replace
any of its properties that might be damaged or destroyed, (ii) all workers'
compensation or similar insurance required by the laws of any jurisdiction in
which the business of such Company is operated, (iii) public liability insurance
against claims for personal injury, death or property damage suffered upon, in
or about any premises occupied by such Company or occurring as a result of the
ownership, maintenance or operation by such Company of any automobile, truck or
other vehicle, (iv) products liability insurance against claims for personal
injury, death or property damage suffered as a result of the distribution,
resale or use of products distributed, manufactured, produced or sold by such
Company or services rendered by it, providing coverage in such amounts as is
customary for companies of
23
established reputation engaged in the same or similar business and similarly
situated, (v) comprehensive general liability insurance providing coverage in
such amount as is customary for companies of established reputation engaged in
the same or similar business and similarly situated, and (vi) such other
insurance policies as are sufficient for compliance with all requirements of law
and applicable agreements.
2.11 Labor Union Activities; Employee Relations. Except as set
forth in Part 2.11 of Schedule 1, no employee of any of the Companies is
represented by any labor union or covered by any collective bargaining agreement
to which the Company is a party or is subject or by which it is bound; nor, to
the best knowledge of the Company, has any labor union sought to represent any
employee of any of the Companies. There is no strike or other labor dispute
involving or affecting any of the Companies pending, or to the best knowledge of
the Company, threatened. To the best knowledge of the Company, no officer or key
employee intends to terminate his employment with any of the Companies. To the
best knowledge of the Company, no officer or key employee of any of the
Companies is a party to or bound by any Contract, or subject to any restrictions
(including, without limitation, any non-competition restriction), which would
restrict the right of such person to participate in the affairs of any of the
Companies.
2.12 ERISA. Part 2.12 of Schedule 1 contains a true and
complete list of all "employee benefit plans," within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and any other bonus, profit sharing, compensation, severance,
deferred compensation, fringe benefit, insurance, welfare, medical,
post-retirement health or welfare benefit, life, stock option, stock purchase,
disability, termination, retention or other plan, agreement, trust fund or
arrangement (whether written or unwritten), maintained, sponsored or contributed
to by the Company or any entity that would be deemed a "single employer" with
the Company under Section 414(b), (c), (m) or (o) of the Internal Revenue Code
of 1986, as amended (the "Code") or Section 4001 of ERISA (an "ERISA Affiliate")
on behalf of any employee of the Company or any ERISA Affiliate (whether
current, former or retired) or their beneficiaries or with respect to which the
Company or any ERISA Affiliate has or has had any obligation on behalf of any
such employee or beneficiary (each a "Plan" and, collectively, the "Plans").
(a) None of the ERISA Affiliates or the Company has
ever contributed to or contributes to, been required to contribute to, or
otherwise participated in or participates in (i) any "multiemployer plan"
(within the meaning of Section 4001 (a) (3) of ERISA or Section 414(f) of the
Code), (ii) any single employer pension plan (within the meaning of Section 4001
(a)(1 5) of ERISA) which is subject to Sections 4063 and 4064 of ERISA or (iii)
any plan subject to Title IV of ERISA or Section 412 of the Code.
(b) The Company, each ERISA Affiliate, each Plan and
each "plan sponsor" (within the meaning of Section 3(16) of ERISA) and each
"employee benefit plan" (within the meaning of Section 3(3) of ERISA) has
complied in all material
24
respects with applicable law including, without limitation, the Code and ERISA,
and each Plan complies with and has been maintained and operated in all material
respects in accordance with its terms.
(c) With respect to each of the Plans on Part 2.12 of
Schedule 1: (i) all payments required by any Plan or by law with respect to all
periods through the date of the First Closing have been made prior to the First
Closing; (ii) no "prohibited transaction," within the meaning of Section 4975 of
the Code and Section 406 of ERISA, has occurred, or to the best of the Company's
knowledge is expected to occur, with respect to any Plan which has subjected or
could subject the Company, any officer, director or employee thereof or any
trustee, administrator or other fiduciary, to a tax or penalty on prohibited
transactions imposed by either Section 502 of ERISA or Section 4975 of the Code,
or any other liability with respect thereto; and (iii) no Plan is under audit or
investigation by the Internal Revenue Service or the Department of Labor or any
other governmental authority and no such completed audit, if any, has resulted
in the imposition of any tax or penalty.
2.13 Litigation. Except as set forth in Part 2.13 of Schedule
1, there is no action, suit, proceeding, investigation or governmental approval
process (collectively, "Actions") pending or, to the best knowledge of the
Company, threatened against any of the Companies, or affecting any of the
properties or assets of any of the Companies (including, without limitation, any
of its Permits) which individually or in the aggregate could have a material
adverse effect on the Condition of the Companies taken as a whole. To the best
knowledge of the Company, there is no Action against any director, officer or
employee of any of the Companies in connection with the business of any of the
Companies which, in the event of an adverse judgment against any such Person,
could have a material adverse effect on the Condition of the Companies taken as
a whole. The foregoing includes, without limitation, any Action pending or, to
the Company's best knowledge, threatened involving the prior employment of any
employees of any of the Companies, their use in connection with the business of
any of the Companies of any information or techniques allegedly proprietary to
any of their former employers, or their obligations under any agreements with
prior employers. None of the Companies nor any of their respective assets or
properties, nor, in connection with its business, any stockholder, director,
officer or employee of any of the Companies, is subject to any order, judgment,
writ, injunction, decree, ruling or decision (collectively, an "Order") of any
Governmental Authority which is material to the Condition the Companies taken as
a whole. There is no Action by any of the Companies currently pending or which
any of the Companies intends to initiate which is material to the Condition of
the Companies taken as a whole.
2.14 Compliance with Laws; Permits. Except as set forth in
Part 2.14 of Schedule 1 hereto, none of the Companies has violated or failed to
comply with, in any material respect, any material statute, law, ordinance,
rule, regulation or policy of any Governmental Authority (collectively, "Laws")
to which it or any of its properties or assets is subject. Each of the Companies
has all permits, licenses, orders, certificates,
25
authorizations and approvals of any Governmental Authority (collectively, the
"Permits") that are material to the conduct of the Companies' business as
presently conducted and as proposed to be conducted; all such Permits are, and
as of the First Closing will be, in full force and effect; no violations or
notices of failure to comply have been issued or recorded in respect of any such
Permits; and none of the Companies has any knowledge of any reason why such
Permits may be revoked or suspended. All material applications, reports, notices
and other documents required to be filed by the Companies with all Governmental
Authorities have been timely filed and are complete and correct in all material
respects as filed or as amended prior to the date hereof. With respect to any
required Permits, applications for which are either pending or contemplated to
be made pursuant to the business strategy of the Companies, none of the
Companies knows of any reason why such Permits should not be approved and
granted by the appropriate Governmental Authority. None of the Companies nor any
of their respective officers or agents has made any illegal or improper payments
to, or provided any illegal or improper inducement for, any governmental
official or other Person in an attempt to influence any such Person to take or
to refrain from taking any action relating to any of the Companies.
2.15 Taxes. Except as set forth in Part 2.15 of Schedule 1
hereto, all federal, state, city, county, local and foreign income, franchise,
sales, use and value added tax returns and reports, and all other material tax
returns and reports required to be filed by any Company in those or in any other
jurisdiction (collectively, "Return") have been timely filed. All such Returns
were true, correct and complete in all material respects at the time of filing.
All taxes, assessments, fees, interest, penalties and other charges with respect
thereto (collectively, "Taxes") due or claimed to be due from any of the
Companies have been paid except to the extent reserved against on the Financial
Statements. Except as set forth in Part 2.15 of Schedule 1 hereto, there are no
pending audits of any income tax return of any of the Companies by the
applicable Governmental Authority, and there are in effect no waivers of the
applicable statute of limitations for Taxes in any jurisdiction for any of the
Companies for any period.
2.16 Books and Records. The books of account, ledgers and
records of each of the Companies accurately and completely reflect in all
material respects all material information relating to its business, the nature,
acquisition, maintenance, location and collection of its assets, and the nature
of all transactions giving rise to its obligations or accounts receivable. The
minute books of each of the Companies fully set forth all action taken by the
Board of Directors, stockholders and, if any, executive board (or other
committee thereof) of each such Company.
2.17 Environmental Matters. The business, assets and
properties of each of the Companies are and have been operated and maintained in
compliance with all applicable federal, state, city, county and local
environmental protection laws and regulations (collectively, the "Environmental
Laws"). Except as set forth in Part 2.17 of Schedule 1, no event has occurred
which, with or without the passage of time or the giving of notice, or both,
would constitute a non-compliance by any of the Companies
26
with, or a violation by any of the Companies of, the Environmental Laws and none
of the Companies nor any of their respective predecessor companies has caused or
permitted to exist, as a result of an intentional or unintentional act or
omission, a disposal, discharge or release of solid wastes, pollutants or
hazardous substances, on or from any site which currently is or formerly was
owned, leased, occupied or used by any of the Companies or any predecessor
company, except where such disposal, discharge or release was in compliance with
the Environmental Laws. Part 2.17 of Schedule 1 hereto contains a complete and
correct list of the name and location of each site (i) which is listed, or
proposed for listing on a registry or inventory of inactive hazardous waste
sites maintained by any Governmental Authority and which currently is or
formerly was owned, leased, occupied or used by any of the Companies or any
predecessor company or (ii) with respect to which any of the Companies or any
predecessor company has received notice that such Company is considered to be a
potentially responsible person for cleanup or other liability in respect of
Environmental Laws.
2.18 Transactions with Affiliates. Except as set forth on Part
2.18 of Schedule 1, none of the Companies is a party or subject to any
contractual obligation between any such Company and any officer, director,
stockholder, partner or employee of any of the Companies or, to the best
knowledge of the Company, any affiliate of any thereof, including without
limitation any contractual obligation providing for the furnishing of services
to or by, providing for rental of property, real, personal or mixed, to or from,
or providing for the lending or borrowing of money to or from or otherwise
requiring payments to or from, any such person, other than employment agreements
that individually or in the aggregate are not material to the Companies taken as
a whole. To the best knowledge of the Company, no past or present Principal
Owner of any of the Companies, nor any of his or its Affiliates, associates or
relatives, has any direct or indirect interest of any kind in any business or
entity which is competitive with the Companies.
2.19 Registration Rights. Except as set forth in Part 2.19 of
Schedule 1 and as provided in the Shareholders Agreement, no Person has, and as
of the First Closing no Person shall have, demand, "piggy-back," or other rights
to cause any of the Companies to file any registration statement under the
Securities Act of 1933, as amended (the "Securities Act") relating to any
securities of any of the Companies or to participate in any such registration
statement.
2.20 No Brokers or Finders. Except for agreements with ▇.▇.
▇▇▇▇▇▇ Securities Incorporated and with NationsBanc ▇▇▇▇▇▇▇▇▇▇ Securities, Inc.,
none of the Companies nor any of their respective Affiliates has entered into or
will enter into any agreement pursuant to which any of the Companies or any
Investor will be liable, as a result of the transactions contemplated by this
Agreement or any of the Company's Documents, for any claim of any Person for any
commission, fee or other compensation as finder or broker.
27
2.21 Investment Company Act. Neither the Company nor any of
its Subsidiaries is an "investment company" nor is the Company or any of its
Subsidiaries directly or indirectly controlled by or acting on behalf of any
Person which is an "Investment Company" within the meaning of the Investment
Company Act of 1940, as amended.
2.22 Confidential Information Memorandum. The Memorandum,
including the projections contained therein, is based on assumptions believed by
the Company to be reasonable. The Company has no reason to believe that the
Company will not achieve substantially the results described in the Memorandum.
2.23 Employee Confidentiality Agreement. Each key executive
employee of each of the Companies has executed an Agreement which contains a
confidentiality provision substantially in the form attached hereto as Exhibit
J. The Company is not aware that any such employee is in violation thereof, and
the Company and each of the Subsidiaries will make reasonable efforts to prevent
any such violation.
2.24 Disclosure. In connection with the purchase of the
Securities by the Investors as contemplated hereby, the Company has disclosed to
the Investors all material facts concerning the Companies, their Condition and
the Securities, and has not made any untrue statement of a material fact or
omitted to state any material fact necessary in order to make the statements
contained herein, in the Memorandum or in any other Company's Documents not
misleading.
2.25 Small Business. The Company, together with its
"affiliates" (as that term is defined in Title 13 of the United States Code of
Federal Regulations, Section 121.103), is a "Small Business" within the meaning
of the Small Business Investment Act of 1958, as amended (the "Small Business
Investment Act"), and the regulations promulgated thereunder (including Parts
107 and 121 of Title 13 of the United States Code of Federal Regulations). The
information provided by the Company on SBA Forms 480, 652 and 1031 delivered in
connection herewith is true and correct.
2.26 Use of Proceeds. The proceeds from the sale of the
Securities to the Investors will be used solely to fund working capital, and for
growth, modernization and expansion. No portion of such proceeds will be used
(i) to purchase stock in, provide capital to or repay any indebtedness incurred
for the purpose of investing in a company licensed under the Small Business
Investment Act, (ii) to acquire realty or to discharge an obligation relating to
the prior acquisition of realty (except that a portion of the proceeds may be
used (x) to acquire an existing property, provided that at least 51% of the
usable square footage of such property will be used for an eligible business
purpose and (y) to build or renovate a building, provided that at least 67% of
the usable square footage of such property will be used for an eligible business
purpose), (iii) outside the United States (except to acquire abroad materials
and equipment or property rights for use or sale in the United States), or (iv)
for any purpose contrary to the public interest (including but not limited to
activities which are in violation of law) or
28
inconsistent with free competitive enterprise, in each case, within the meaning
of Section 107.720 of the United States Code of Federal Regulations.
2.27 Business Activity. The Company's primary business
activity does not involve, directly or indirectly, providing funds to others,
the purchase or discounting of debt obligations, factoring or long-term leasing
of equipment with no provision for maintenance or repair, and the Company is not
classified under Major Group 65 (Real Estate) or Industry No. 1531 (Operative
Builders) of the SIC Manual. None of the employees or tangible assets of the
Company and its subsidiaries are located outside of the United States.
2.28 Acknowledgment of JPM Investors as SBICs. The Company
hereby acknowledges its awareness that each of the JPM Investors is a Federal
licensee under the Small Business Investment Act.
3. Representations and Warranties of the Investors. Each Investor
severally, as to itself, and not jointly, hereby represents and warrants to, and
agrees with, the Company as follows:
3.1 Organization. Such Investor, if a corporation or a
partnership, is duly and validly organized and validly existing in good standing
as a corporation or partnership, as applicable, under the laws of its
jurisdiction of organization.
3.2 Authorization. Such Investor has all requisite power and
authority to enter into and perform, and has taken all actions necessary to
authorize such Investor to enter into and perform, such Investor's obligations
under this Agreement, and to consummate the transactions contemplated hereby
and, except for filings under the HSR Act, such execution, delivery and
performance do not and will not require the consent, waiver, approval, license,
designation or authorization of, or filing with, any Person or public authority
other than those which have been made or obtained or those which are required to
be made after the First Closing (which will be timely made). This Agreement is
and will be as of the First Closing, the legal, valid and binding obligation of
such Investor, enforceable against such Investor in accordance with its terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency or
other similar laws affecting the enforceability of creditors' rights in general
or by general principles of equity.
3.3 No Intended Resale. Such Investor's Purchased Securities
are being acquired for investment for such Investor's own account (except for
transfers between JPM Investors) and not with a view to the resale or
distribution thereof in violation of applicable securities laws.
3.4 No Agency Relationship. Such Investor is not acting as a
nominee or agent for any Person, and does not have any contracts,
understandings, agreements or arrangements with any Person to sell, transfer or
grant participation in its Purchased
29
Securities to any Person, except for arrangements between the JPM Investors and
arrangements between RLEC and certain of its investors.
3.5 Investment Experience. Such Investor is an "accredited
investor" (as defined in Rule 501 promulgated under the Securities Act), can
bear the economic risk of its investment for an indefinite period of time and
has such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of its investment in the Company.
3.6 Memorandum and Agreements. Such Investor has received and
reviewed the Memorandum and understands that to the extent, if any, that this
Agreement, the Disclosure Schedules hereto, the Certificate, the Notes, or the
Options are inconsistent with the Memorandum, the Memorandum is qualified in its
entirety by, and is subject to the terms set forth in, such agreements and
Disclosure Schedules.
3.7 Opportunity to Ask Questions. Such Investor has had an
opportunity to ask questions of the Company and its senior management regarding
the term of this offering and other matters pertaining to this investment.
3.8 Access. Such Investor has been afforded an opportunity to
examine the books, records, financial statements, contracts, documents and other
information concerning the Companies and their respective Affiliates, and has
been given all information as has been requested by such Investor in order to
evaluate the merits and risks of this investment.
3.9 Own Investigation. Such Investor has performed its own due
diligence with respect to this investment and is relying on that due diligence
in making this investment. Such Investor is not relying on ▇.▇. ▇▇▇▇▇▇
Securities Incorporated or NationsBanc ▇▇▇▇▇▇▇▇▇▇ Securities, Inc. or their
respective Affiliates with respect to tax, suitability or other economic
considerations of this investment.
3.10 Securities Registration. Such Investor understands and
acknowledges that the purchase of its Securities will not be registered under
the Securities Act, in reliance upon an exemption from the registration
requirements thereof, and that the purchase of its Securities will not be
registered or qualified under the securities or Blue Sky laws of any other
jurisdiction. Such Investor understands and acknowledges that the availability
of such exemption is based, in part, upon its representations in this Agreement.
Such Investor also understands and acknowledges that no federal or state agency
has made any recommendation or endorsement of an investment in the Company.
3.11 Restricted Securities. Such Investor understands that (a)
its Series D Stock, Options, Notes and Conversion Stock are each a "restricted
security" (as defined in Rule 144 promulgated under the Securities Act) and that
they may not be resold or otherwise transferred without registration under the
Securities Act and
30
applicable state securities laws unless an exemption from registration is
available; (b) transfer of its Series D Stock, Options and Conversion Stock is
further restricted by the Shareholders Agreement; and (c) legends may be placed
on any certificate or other document evidencing the Securities, setting forth
the foregoing transfer restrictions.
3.12 No Brokers or Finders. Such Investor has not and will not
enter into any agreement pursuant to which the Company or any of the Investors
will be liable, as a result of the transactions contemplated by this Agreement,
for any claim of any Person for any commission, fee or other compensation as
finder or broker.
3.13 Pre-emptive Rights. Such Investor, if a shareholder of
the Company prior to the First Closing, hereby agrees that the execution and
delivery of this Agreement constitutes the exercise in full by such Investor of
any and all pre-emptive rights such Investor has against the Company with
respect to the transactions described in this Agreement.
Nothing contained in this Section 3 shall in any respect limit or modify the
representations and warranties of the Company in Section 2 of this Agreement or
the right of each Investor to rely thereon.
4. Conditions of Investors' Obligations at First Closing. The
obligation of each Investor to purchase the Purchased Securities to be purchased
by it at the First Closing is subject to the fulfillment to each such Investor's
satisfaction, prior to or at the First Closing, of each of the following
conditions:
4.1 Representations and Warranties. The representations and
warranties of the Company contained in this Agreement and the other Company's
Documents shall be true and correct in all material respects on and as of the
date of the First Closing as if made on and as of such date.
4.2 Performance. The Company shall have performed and complied
with all agreements and conditions required by this Agreement and the other
Company's Documents to be performed or complied with by it prior to or at the
First Closing.
4.3 Stock Certificates. Etc. At the First Closing, the Company
shall have tendered to each Investor for delivery upon payment in full therefor
in accordance with the provisions of this Agreement, a certificate representing
shares of Series D Stock, a WSI A Option, a Tranche 1 Option, a Tranche 2 Option
and a Note (and, in the cases of JPMIC and IAB only, a certificate representing
the Series G Common Share and a certificate representing the Series H Common
Share, respectively), in accordance with Section 1.1 hereof, all in form and
substance satisfactory to such Investor and sufficient to transfer to and vest
in such Investor good and valid title to such Purchased Securities, free and
clear of any Lien.
31
4.4 No Material Adverse Change. There shall not have occurred
any material adverse change in the Condition of any of the Companies since June
30, 1997.
4.5 Consents. The Company shall have obtained all consents,
approvals or waivers from Governmental Authorities and third Persons necessary
for the execution, delivery and performance of this Agreement, the other
Company's Documents and the amendments to the Certificate and the By-Laws of the
Company in the form of Exhibit G hereto (the "Amended and Restated By-Laws") and
the transactions contemplated hereby and thereby. Without limiting the
generality of the foregoing, each of the Company's existing stockholders shall
have exercised (in which case their rights are being satisfied in full by their
purchase of Securities under this Agreement) or waived any preemptive right any
such stockholder may have to purchase any of the Securities.
4.6 No Actions. No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or proposed
before any court, governmental agency or authority or legislative body to
enjoin, restrain, prohibit, or obtain substantial damages in respect of, this
Agreement or the consummation of the transactions contemplated by this
Agreement.
4.7 Opinion of Counsel. The Investors shall have received from
Cadwalader, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇ an opinion dated as of the First Closing, in the
form attached hereto as Exhibit H.
4.8 Compliance Certificate. The Investors shall have received
certificates dated as of the day of the First Closing executed by a senior
officer of the Company certifying that the conditions specified in Sections 4.1,
4.2, 4.4 through 4.6 and 4.10 have been fulfilled.
4.9 Directors. Those persons listed on Schedule 4 hereto shall
have been duly elected and qualified as directors of the Company and immediately
following the First Closing shall constitute the entire Board of Directors of
the Company.
4.10 Related Documents. The Shareholders Agreement shall have
been executed and delivered by each of the parties thereto and in full force and
effect, and the Certificate and Amended and Restated By-Laws shall be in full
force and effect.
4.11 Proceedings and Documents. All proceedings in connection
with the transactions contemplated hereby and all documents and instruments
incident to such transactions shall be satisfactory in substance and form to the
Investors and their counsel, and the Investors shall have received all such
counterpart originals or certified or other copies of such documents as the
Investors may reasonably request.
If at the First Closing the Company fails to tender to the
Investors the documents specified herein which are required to be delivered to
the Investors at the
32
First Closing or if at the First Closing any of the conditions specified in this
Section 4 shall not have been fulfilled to each Investor's satisfaction, such
Investor shall, at its election, be relieved of all further obligations under
this Agreement.
5. Conditions of Investors' Obligations at Subsequent Closings. The
obligation of each Investor to purchase the Purchased Securities to be purchased
by it at each Subsequent Closing is subject to the fulfillment to each such
Investor's satisfaction, prior to or at such Subsequent Closing, of each of the
following conditions:
5.1 HSR Compliance. All filings required to be made under the
HSR Act in connection with the transactions contemplated by this Agreement shall
have been made and the waiting period under the HSR Act shall have thereafter
expired or been terminated.
5.2 Stock Certificates, Etc. At each Subsequent Closing, the
Company shall have tendered to each Investor for delivery upon payment in full
therefor in accordance with the provisions of this Agreement, a certificate
representing shares of Series D Stock, a WSI A Option, a Tranche 1 Option, a
Tranche 2 Option and a Note in accordance with Section 1.2 hereof, all in the
form delivered at the First Closing and sufficient to transfer to and vest in
such Investor good and valid title to such Purchased Securities, free and clear
of any Lien.
5.3 No Actions. No injunction or other order or decree of a
court or Governmental Authority restraining or prohibiting the Subsequent
Closing under this Agreement shall be in effect.
6. Conditions of the Company's Obligations at First Closing. The
obligations of the Company to an Investor under this Agreement are subject to
the fulfillment to the Company's satisfaction, prior to or at the First Closing,
of each of the following conditions:
6.1 Representations and Warranties. The representations and
warranties of such Investor contained in this Agreement shall be true and
correct in all material respects on and as of the date of the First Closing as
if made on and as of such date.
6.2 Payment of Purchase Price. Such Investor shall have
delivered to the Company the purchase price specified in Section 1.1 hereof.
6.3 No Actions. No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or proposed
before any court, governmental agency or authority or legislative body to
enjoin, restrain, prohibit, or obtain substantial damages in respect of, this
Agreement or the consummation of the transactions contemplated by this
Agreement.
33
6.4 Proceedings and Documents. All proceedings in connection
with the transactions contemplated hereby and all documents and instruments
incident to such transactions shall be satisfactory in substance and form to the
Company and its counsel, and the Company shall have received all such
counterpart originals or certified or other copies of such documents as it may
reasonably request.
6.5 Consents. The Company shall have obtained all consents,
approvals or waivers from Governmental Authorities and third Persons necessary
for the execution, delivery and performance of this Agreement, the other
Company's Documents and the amendments to the Certificate and the Amended and
Restated By-Laws and the transactions contemplated hereby and thereby. Without
limiting the generality of the foregoing, each of the Company's existing
stockholders shall have exercised or waived any preemptive right or right of
first offer any such stockholder may have to purchase any of the Securities.
6.6 Related Documents. The Shareholders Agreement shall have
been executed and delivered by each of the parties thereto and in full force and
effect, and the Certificate and Amended and Restated By-Laws shall be in full
force and effect.
If at the First Closing an Investor fails to tender to the
Company the payment or documents specified herein which are required to be
delivered to the Company at the First Closing or if at the First Closing any of
the conditions specified in this Section 6 shall not have been fulfilled to the
Company's satisfaction, the Company shall, at its election, be relieved of all
further obligations to such Investor under this Agreement and shall have such
other remedies available under the law.
7. Conditions of the Company's Obligations at Subsequent Closings. The
obligations of the Company to an Investor under this Agreement are subject to
the fulfillment to the Company's satisfaction, prior to or at each Subsequent
Closing, of each of the following conditions:
7.1 HSR Compliance. All filings required to be made under the
HSR Act in connection with the transactions contemplated by this Agreement shall
have been made and the waiting period under the HSR Act shall have thereafter
expired or been terminated.
7.2 Payment of Purchase Price. Such Investor shall have
delivered to the Company the purchase price specified in Section 1.2 hereof.
7.3 No Actions. No injunction or other order or decree of a
court or Governmental Authority restraining or prohibiting the Subsequent
Closing under this Agreement shall be in effect.
If at a Subsequent Closing an Investor fails to tender to the
Company the payment or documents specified herein which are required to be
delivered to the
34
Company at such Subsequent Closing or if at such Subsequent Closing any of the
conditions specified in this Section 7 shall not have been fulfilled to the
Company's satisfaction, the Company shall, at its election, be relieved of all
obligations to such Investor at such Subsequent Closing under this Agreement and
shall have such other remedies available under the law.
8. Certain Post-Closing Covenants. The Company covenants and agrees
with the Investors (except that (x) Section 8.1 shall be for the benefit of
JPMIC and IAB only and (y) Section 8.7 shall be for the benefit of the JPM
Investors (and their permitted assigns) only) as follows:
8.1 Observer Rights. During any time that either JPMIC and/or
IAB has not designated at least one director on the Company's Board of
Directors, the Company shall give to JPMIC and/or IAB (as applicable) notice of
each meeting of the Board of Directors of the Company and/or its subsidiaries
and of each committee thereof at the same time and in the same manner as notice
is given to the directors (or their equivalent in the case of a partnership
subsidiary) of the Company or such subsidiary. One (1) designee of JPMIC and/or
one (1) designee of IAB (as applicable) shall be entitled to attend in person,
as an observer, all meetings held in person and to listen to telephone meetings
of the Board of Directors of the Company and each of its subsidiaries and of
each committee thereof solely for the purpose of allowing JPMIC and/or IAB to
have current information with respect to the affairs of such Company. The
Company shall provide to JPMIC and/or IAB in connection with each meeting its
respective observer designee is entitled to attend, whether or not present at
such meeting, copies of all notices, minutes, consents, and all other materials
or information that it provides to the directors of the applicable Company with
respect to such meeting, at the same time such materials and information are
given to the directors of such Company (except that materials and information
provided to directors of the Company or such subsidiary at meetings at which a
designee of JPMIC and/or IAB is not present shall be provided to JPMIC and/or
IAB, as applicable, promptly after the meeting). If the Board of Directors of
any of the Company or any subsidiary or any committee thereof proposes to take
any action by written consent in lieu of a meeting, the Company shall give
written notice thereof to JPMIC and/or IAB prior to the effective date of such
consent describing in reasonable detail the nature and substance of such action.
The Company shall bear all travel and related expenses incurred by the observer
designees of JPMIC and/or IAB associated with attending meetings.
8.2 Information. For as long as a Designated Investor (as
hereinafter defined) and/or its permitted assignees holds at least 250,000
shares (as adjusted for any stock splits, combinations and similar events) of
Series D Stock (or any other securities into which such shares have been
converted or for which they have been exchanged), such Investor and/or its
permitted assignees shall be entitled to receive, and the Company agrees to
provide to such Investor and its permitted assignees (unless such Investor or
such assignee requests that such information not be delivered to it at such
time), the information and access set forth below. For purposes of this
35
Section 8.2 the term "Designated Investor" shall mean any Investor that holds or
is purchasing on the date hereof a share of Special Common Stock (as-defined in
the Certificate).
(a) Financial and Related Data.
(i) As soon as available, but in any event
not later than 45 days after the end of each month, the unaudited
consolidated balance sheet as at the end of such month of the Company
and its subsidiaries and the related unaudited consolidated statements
of operations, stockholders' equity and cash flows for such month and
for the elapsed period in such fiscal year, all in reasonable detail
and stating in comparative form the figures as of the end of and for
the comparable period of the preceding fiscal year and budgeted figures
for the period. All such financial statements shall be complete and
correct in all material respects, shall be prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods reflected therein (except that such financial
statements may omit footnotes and would be subject to normal year-end
adjustments which are not, in the aggregate, material) and shall be
accompanied by a certificate of the President or chief financial
officer of the Company to such effect and shall be accompanied by a
certificate of the President or chief financial officer of the Company
to such effect.
(ii) As soon as available, but in any event
within 90 days after the end of each fiscal year of the Company, the
audited consolidated and unaudited consolidating balance sheet of the
Company and its subsidiaries as at the end of such fiscal year and the
related audited consolidated statements and unaudited consolidating
statements of operations, stockholders' equity and cash flows of the
Company and its subsidiaries for such fiscal year, all in reasonable
detail and stating in comparative form the figures as at the end of and
for the previous fiscal year and budgeted figures for the fiscal year
accompanied by an opinion of an accounting firm of nationally
recognized standing selected by the Company with respect to the
consolidated statements, which opinion shall state that such accounting
firm's audit was conducted in accordance with generally accepted
auditing standards and, accordingly, included such tests of accounting
records and such other auditing procedures as were considered necessary
under the circumstances and which opinion shall not be subject to any
qualification resulting from a limit on the scope of the examination of
the financial statements or the underlying data or which could be
eliminated by changes in the financial statements or the notes thereto
or by the creation of or increase in a reserve or a decreased carrying
value of assets. All such financial statements shall be complete and
correct in all material respects and prepared in reasonable detail and
in accordance with generally accepted accounting principles applied,
except as stated therein, on a consistent basis throughout the periods
reflected therein.
36
(iii) As soon as available, but in any event
not later than 30 days prior to the end of each fiscal year of the
Company, the financial plan of the Company for the next succeeding
fiscal year, including but not limited to cash flow and balance sheet
projections and operating budget, calculated monthly, and any updates
or revisions as soon as available.
(iv) Promptly after receipt, copies of all
management letters from accountants and all certificates prepared by or
for the Company or its subsidiaries as to compliance, defaults,
material adverse changes, material litigation or similar matters, but
only to the extent that the delivery thereof would not result in the
loss of any generally recognizable privilege otherwise applicable
thereto.
(v) Within 15 days after the Company obtains
knowledge of the commencement or written threat of commencement of any
material litigation or proceeding against any of the Companies or their
respective assets, written notice by the Company of the nature and
extent of such litigation or proceeding.
(vi) Promptly, but in any event within
fifteen (15) days, after any distribution to its stockholders generally
or to specific stockholders by agreement, to its directors, to
prospective investors or to the financial community of an annual
report, proxy statement, registration statement or other similar report
or communication, a copy of each such report, proxy statement,
registration statement or other similar report or communication;
promptly, but in any event within fifteen (15) days after any filing
with the Securities and Exchange Commission or with any national
securities exchange or with the National Association of Securities
Dealers, Inc., of any publicly available annual or periodic or special
report or proxy statement or registration statement, a copy of such
report or statement; and promptly, but in any event within two (2)
business days after released, copies of all press releases and other
statements made available generally by any of the Companies to the
public concerning material developments.
(vii) Within 60 days after the end of each
fiscal year, a list of stockholders and other security holders, showing
the authorized and outstanding shares by class (including the common
stock equivalents of any convertible security), the holdings of each
stockholder (both before giving effect to dilution and on a
fully-diluted basis) and the holdings of each Person that holds
options, warrants or convertible securities (both before giving effect
to dilution and on a fully diluted basis).
(viii) Within 60 days after the end of each
fiscal year, and in addition to the information requested in paragraph
(vii) above, copies of all
37
stock option plans, and a list detailing all options granted, issued,
exercised or lapsed; all warrants granted, issued (whether to
directors, in connection with financings or otherwise), exercised or
lapsed; and all stock issued or sold (including in each case, without
limitation, all option and warrant exercise prices, stock issuance
prices, and other terms).
(ix) Promptly, but in any event not later
than ten (10) days after execution, copies of any agreement entered
into by the Company or any of its subsidiaries, with any stockholder,
director, or officer of the Company or any of its subsidiaries or any
past or present Principal Owner or Affiliate.
(x) From time to time, and promptly, such
additional information and financial data regarding results of
operations, financial condition, business, affairs or prospects of the
Company and its subsidiaries, including without limitation cash flow
analyses and projections, as is available to the Company that any
Investor shall reasonably request.
(b) Access. The Company shall permit, and shall cause
its subsidiaries to permit, representatives designated by each Investor, upon
reasonable prior notice to the Company, to visit and inspect each of the
Company's or its subsidiaries' properties, to examine their respective corporate
and financial records (and make copies thereof or extracts therefrom), to
discuss their respective affairs, finances and accounts; with the Company's or
its subsidiaries' directors and officers, key employees and accountants, all at
such reasonable times as may be requested by any such Investor.
(c) Other Information. The Company shall provide,
from time to time, such additional information regarding the Company or its
subsidiaries as any of JPMIC or IAB reasonably may request, including without
limitation, any information or reports required by reason of reporting or
regulatory requirements to which any such Investor, or any Person controlling
any such Investor is subject.
8.3 Annual Meetings. The Company will hold annual meetings as
required by law.
8.4 Exemption from Investment Company Act. The Company shall
conduct its business so that neither the Company nor any of its subsidiaries
shall become an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
8.5 Accounting and Reserves. The Company shall, and the
Company shall cause each of its subsidiaries to, maintain a standard and uniform
system of accounting and shall keep proper books and records and accounts in
which full, true and correct entries shall be made of its transactions, all in
accordance with generally accepted accounting principles applied on a consistent
basis through all periods, and
38
shall set aside on such books for each fiscal year all such proper reserves for
depreciation, obsolescence, amortization, bad debts and other purposes in
connection with its operations as are required by such principles so applied.
8.6 Transactions with Affiliates. Neither the Company nor any
subsidiary of the Company shall directly or indirectly, enter into any
transaction or agreement with any stockholder of the Company or any Affiliate of
the Company, unless the transaction or agreement is (i) reviewed and approved by
a majority of Disinterested Directors (as defined below) and (ii) on terms no
less favorable to the Company or any such subsidiary than those obtainable from
a non-Affiliated Person. A "Disinterested Director" shall mean an individual who
is not and who has not been an officer or employee of the Company and who is not
a member of the family of, controlled by or under common control with, any such
officer or employee.
8.7 Provisions Relating to JPM Investors.
(a) Use of Proceeds. The Company will use the
proceeds from the sale of the Securities as provided in the first sentence of
Section 2.26, and no portion of such proceeds shall be applied to any prohibited
use described in the second sentence of Section 2.26. The Company will provide
to the JPM Investors and the U.S. Small Business Administration access to its
books and records for the purpose of confirming the use of the proceeds and for
all other purposes required by the U.S. Small Business Administration. Upon the
request of any JPM Investor at any time or from time to time, the Company will
provide a certificate of its chief financial officer (or other executive
officer) (i) describing the use of such proceeds and (ii) certifying compliance
by the Company with this Section 8.7 and Section 2.26.
(b) Business Activity. For a period of one year
following the date hereof, the Company will not change its business activity if
such change would render the Company ineligible as a "Small Business" under the
Small Business Investment Act and the regulations thereunder.
(c) Non-Discrimination Compliance. The Company will
at all times comply with the non-discrimination requirements of Title 13 of the
United States Code of Federal Regulations Parts 112, 113 and 117.
(d) Information. Upon request, the Company promptly
(and in any event within twenty (20) days of such request) will provide to each
JPM Investor an assessment, in form and substance satisfactory to such JPM
Investor, of the economic impact of its financing, specifying the full-time
equivalent jobs created or retained, the impact of the financing on the
Company's business, in terms of expanded revenue and profits, and on taxes paid
by the business and its employees. Upon request, the Company promptly (and in
any event within twenty (20) days of such request) will furnish to each JPM
Investor all information requested by it in order for it to prepare and file SBA
Form 468 and any other information requested or required by any
39
governmental agency asserting jurisdiction over such JPM Investor.
(e) Transfers by JPM Investors to Affiliates. The
Company and each of the Investors hereby covenant and agree that, upon the
request of a JPM Investor in connection with a proposed transfer of shares of
capital stock of the Company from such JPM Investor to one or more of its
affiliates that is subject to the provisions of Regulation Y of the Board of
Governors of the Federal Reserve System (12 C.F.R. Part 225) or any successor to
such regulation (a "Regulation Y Shareholder"), the Company and the Investors
will take such commercially reasonable actions (including, without limitation,
voting all shares of stock of the Company held by them in favor of such actions)
as such JPM Investor may reasonably request in order to permit such Regulation Y
Shareholder to comply with regulatory limitations applicable to it, including,
without limitation, taking such actions as may be required in order:
(i) to amend this Agreement and the
Shareholders Agreement so that (x) at the election of such JPM
Investor, any covenant in favor of and any right afforded to such JPM
Investor as applicable, shall run in favor of and be afforded to such
Regulation Y Shareholder (including, without limitation, registration
rights, tag-along rights, preemptive rights and informational rights),
(y) the covenants and agreements contained in Sections 2.26 and
8.7(a)-(c) of this Agreement and Sections 3.5, 3.11 and 4.11 of the
Shareholders Agreement shall terminate with respect to such JPM
Investor and shall not apply to such Regulation Y Shareholder, and
neither such JPM Investor nor such Regulation Y Shareholder shall be a
party to or bound by or have the right to enforce, amend or waive such
provisions and (z) such Agreements are consistent with the Regulation Y
Term Sheet (as defined below); and
(ii) to cause the Company and the Investors
to enter into an agreement with the Regulation Y Shareholder providing
for the matters referred to in the term sheet attached hereto as
Exhibit I ("Regulation Y Term Sheet").
Without limiting the generality of the foregoing, in connection with
any such transfer by a JPM Investor to a Regulation Y Shareholder, the
Company, the Investors and the Common Shareholders shall take such
other actions and enter into such further agreements as such JPM
Investor or such Regulation Y Shareholder may reasonably request in
order to permit such transfer and to permit such Regulation Y
Shareholder to comply with regulatory limitations applicable to it
provided, that no Investor shall be obligated to take any action
pursuant to this sentence or Section 8.8 which would adversely affect
such Investor's rights under any of the Company's Documents, as the
same may be amended from time to time.
(f) Nothing in this Section 8.7 shall relieve the JPM
Investors from their obligation to purchase any Securities as set forth in this
Agreement.
40
8.8 Assistance in Sales. In the event that it becomes unlawful
for any Investor to continue to hold all or some portion of the Securities to be
held by it, or restrictions are imposed on such Investor by any Law which, in
the reasonable judgement of such Investor, make it unduly burdensome to continue
to hold all or some portion of such Securities, then such Investor, subject to
the Shareholders Agreement, may sell or otherwise dispose of all or any portion
of its Securities, and the Company shall use reasonable efforts to assist such
Investor in disposing of such interest in a prompt and orderly manner, and, at
the request of any such investor, shall provide (and authorize such Investor to
provide) financial and other information concerning the Company and its
subsidiaries to any prospective purchaser of such interest, provided, however,
that neither the Company, its subsidiaries nor any Investor shall provide any
confidential information regarding the Company and its subsidiaries to any such
prospective purchaser unless such prospective purchaser shall first have entered
into a confidentiality agreement in form and substance reasonably satisfactory
to the Company.
8.9 Additional Covenants.
(a) When applicable, the Company shall file the
reports required to permit sales under Rule 144 of the Securities Act.
(b) During any period in which the Company is not
subject to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended, the Company shall make available information required to be provided by
Rule 144A(d)(4), upon request.
8.10 HSR Compliance. The parties hereto will cooperate and use
their reasonable best efforts promptly to have JPMIC, IAB and the Company file
under the HSR Act with respect to the purchase by JPMIC and IAB of Purchased
Securities and obtain termination or expiration of the waiting period under the
HSR Act. In the event of the expiration of the notification filed by JPMIC or
IAB under the HSR Act prior to its purchase in full of the Purchased Securities
under this Agreement, JPMIC and/or IAB, as applicable, shall refile under the
HSR Act to the extent required to permit the purchase by such Investor of all
Purchased Securities that remain to be purchased by such Investor under this
Agreement.
9. Miscellaneous.
9.1 Expenses. The Company shall pay all stamp, documentary and
other taxes which may be payable in connection with the execution, delivery and
performance of this Agreement, and the purchase and sale of the Securities. In
addition, the Company shall, upon presentation of an appropriate invoice
relating thereto, pay all reasonable legal and accounting fees and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby (i) by the
41
JPM Investors, including the fees and expenses of Proskauer Rose LLP and the
fees and expenses of accountants for the JPM Investors in connection with
accounting due diligence, in an aggregate amount not to exceed $130,000, (ii) by
IAB, including the fees and expenses of ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇, in an aggregate
amount not to exceed $40,000 and (iii) by all other Investors, in an aggregate
amount not to exceed $20,000, to be allocated among such Investors submitting
invoices based upon their aggregate commitments under this Agreement In
addition, the Company shall pay all filing fees relating to filings under the
HSR Act required to be made by any Investor, provided that the Company shall not
be obligated to pay the filing fees in connection with more than one such filing
per Investor.
9.2 ▇.▇. ▇▇▇▇▇▇ Fee. The Company shall not pay any fee to ▇.▇.
▇▇▇▇▇▇ Securities Incorporated on the portion of the Purchased Securities
purchased by the JPM Investors.
9.3 Publicity. Except as may be required by Law, the Company
shall not use the name of, or make reference to, any Investor or any of its
Affiliates in any press release or in any public manner without such Investor's
prior written consent. Except as required in furtherance of the Company's
activities or as otherwise required by law or regulation or requested by
regulatory agencies, each Investor shall treat, and shall cause its
representatives to treat, as confidential all confidential and proprietary
information regarding the Company and Edison LP which such Investor receives
from the Company as an Investor or Stockholder of the Company.
9.4 Indemnification. The Company agrees to indemnify each
Investor and each officer, director, employee, agent, partner, stockholder and
affiliate of each Investor (collectively, the "Indemnified Parties") for, and
hold each Indemnified Party harmless from and against: (i) any and all damages,
losses, claims and other liabilities of any and every kind, including, without
limitation, judgments and costs of settlement, and (ii) any and all
out-of-pocket costs and expenses of any and every kind, including, without
limitation, reasonable fees and disbursements of counsel for such Indemnified
Parties (all of which expenses periodically shall be reimbursed as incurred), in
each case, arising out of or suffered or incurred in connection with any of the
following: (a) any misrepresentation or any breach of any warranty made by the
Company herein or in any of the other Company's Documents, (b) any breach or
non-fulfillment of any covenant or agreement made by the Company herein or in
any of the other Company's Documents, (c) any claim relating to or arising out
of a violation of applicable federal or state securities laws by the Company in
connection with the sale of the Securities by the Company to the Investors and
(d) any failure by the Company to use the proceeds from the sale of the
Securities as specified herein.
9.5 Survival. All representations, warranties, covenants and
agreements contained in or made pursuant to this Agreement or contained in any
certificate delivered pursuant to this Agreement, shall remain operative and in
full force and effect, regardless of any investigation made by or on behalf of
any party hereto,
42
and shall survive the transfer and payment for the Securities and the
consummation of the transactions contemplated hereby; provided, however, that
the representations and warranties contained in Sections 2 and 3 (other than (x)
the representations and warranties set forth in Sections 2.1, 2.2, 2.3, 2.4,
2.18, 2.19, 2.25, 2.26, 2.27, 3.1 and 3.2 which shall survive indefinitely and
(y) the representations and warranties set forth in Sections 2.12 and 2.15 which
shall terminate on the fourth anniversary of the date of this Agreement) shall
terminate upon the later to occur of (i) two years from the date hereof and (ii)
ninety (90) days after delivery to the Investors of the audited financial
statements pursuant to Section 8.2(a)(ii) above for the fiscal year ending June
30, 1999, provided further, however, that no representation or warranty shall
terminate until after the final non-appealable resolution of any claim relating
to such representation or warranty, which claim shall have been made prior to
the expiration of such representation or warranty.
9.6 Assignment. This Agreement and all the provisions hereof
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and assigns, except that neither this Agreement nor
any rights or obligations hereunder shall be assigned or delegated by the
Company without the prior written consent of the Investors. After the First
Closing, any Investor may assign this Agreement and such Investor's rights
hereunder, in whole or in part without the consent of the Company or any other
Investor to (i) any Affiliate of such Investor (which shall include, without
limitation, in the case of JPMIC, Sixty Wall and, in the case of Sixty Wall,
JPMIC) or (ii) any other transferee of at least 25% of the Securities acquired
and to be acquired by such Investor (the WSI Investors to be treated as one
Investor for purposes of this clause (ii)) under this Agreement (it being
understood that all transfers of Securities shall be in accordance with the
terms of the Shareholders Agreement). No such assignment shall relieve an
Investor of its obligation to purchase the Purchased Securities at Subsequent
Closings.
9.7 Amendment; Waiver. Any term, covenant, agreement or
condition of this Agreement may be amended, and compliance therewith may be
waived (either generally or in a particular circumstance and either
retroactively or prospectively), by one or more substantially concurrent written
instruments signed by the Company and by Investors that have the right to
acquire 85% or more of the Series D Stock to be acquired by the Investors under
this Agreement. Any amendment or waiver effected in accordance with this
paragraph shall be binding upon each Investor and the Company.
9.8 APPLICABLE LAW. THE LAWS OF THE STATE OF NEW YORK SHALL
GOVERN THE INTERPRETATION, VALIDITY AND PERFORMANCE OF THE TERMS OF THIS
AGREEMENT, REGARDLESS OF THE LAW THAT MIGHT BE APPLIED UNDER PRINCIPLES OF
CONFLICTS OF LAW.
9.9 DISPUTE RESOLUTION. IN THE EVENT OF ANY DISPUTE,
CONTROVERSY OR CLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE RIGHTS
OR INTERESTS OF THE INVESTORS OR THE
43
COMPANY OR THE BREACH OR ALLEGED BREACH OF TIES AGREEMENT (EACH OF THE FOREGOING
DISPUTES, CONTROVERSIES AND CLAIMS HEREINAFTER REFERRED TO AS A "DISPUTE"), SUCH
DISPUTE WILL BE SETTLED BY ARBITRATION IN NEW YORK CITY, NEW YORK. THE
ARBITRATION WILL BE CONDUCTED IN ACCORDANCE WITH THE PROCEDURES IN THIS SECTION
9.9 AND THE COMMERCIAL ARBITRATION RULES OF THE AAA ("AAA RULES"). IN THE EVENT
OF A CONFLICT, THE PROVISIONS OF TIES SECTION 9.9 WILL CONTROL.
THE ARBITRATION WILL BE CONDUCTED BEFORE A PANEL OF THREE
ARBITRATORS, REGARDLESS OF THE SIZE OF THE DISPUTE, TO BE SELECTED AS PROVIDED
IN THE AAA RULES. ANY ISSUE CONCERNING THE. EXTENT TO WHICH ANY DISPUTE IS
SUBJECT TO ARBITRATION, OR CONCERNING THE APPLICABILITY, INTERPRETATION, OR
ENFORCEABILITY OF THESE PROCEDURES, INCLUDING ANY CONTENTION THAT ALL OR PART OF
THESE PROCEDURES ARE INVALID OR UNENFORCEABLE, SHALL BE GOVERNED BY THE FEDERAL
ARBITRATION ACT AND RESOLVED BY THE ARBITRATORS. NO POTENTIAL ARBITRATOR MAY
SERVE ON THE PANEL UNLESS HE OR SHE HAS AGREED IN WRITING TO ABIDE AND BE BOUND
BY THESE PROCEDURES.
THE ARBITRATORS SHALL HAVE NO POWER TO AWARD (I) DAMAGES
INCONSISTENT WITH THIS AGREEMENT OR (II) PUNITIVE DAMAGES OR ANY OTHER DAMAGES
NOT MEASURED BY THE PREVAILING PARTY'S ACTUAL DAMAGES, AND THE PARTIES EXPRESSLY
WAIVE THEIR RIGHT TO OBTAIN SUCH DAMAGES IN ARBITRATION OR IN ANY OTHER FORUM.
IN NO EVENT, EVEN IF ANY OTHER PORTION OF THESE PROVISIONS IS HELD TO BE INVALID
OR UNENFORCEABLE, SHALL THE ARBITRATORS HAVE POWER TO MAKE AN AWARD OR IMPOSE A
REMEDY THAT COULD NOT BE MADE OR IMPOSED BY A FEDERAL COURT DECIDING THE MATTER
IN THE SAME JURISDICTION.
NO DISCOVERY WILL BE PERMITTED IN CONNECTION WITH THE
ARBITRATION UNLESS IT IS EXPRESSLY AUTHORIZED BY THE ARBITRATION PANEL UPON A
SHOWING OF SUBSTANTIAL NEED BY THE PARTY SEEKING DISCOVERY.
ALL ASPECTS OF THE ARBITRATION SHALL BE TREATED AS
CONFIDENTIAL. NEITHER THE PARTIES NOR THE ARBITRATORS MAY DISCLOSE THE
EXISTENCE, CONTENT OR RESULTS OF THE ARBITRATION, EXCEPT AS NECESSARY TO COMPLY
WITH LEGAL OR REGULATORY REQUIREMENTS. BEFORE MAKING ANY SUCH DISCLOSURE, A
PARTY SHALL GIVE WRITTEN NOTICE TO ALL OTHER PARTIES AND SHALL AFFORD SUCH
PARTIES A REASONABLE OPPORTUNITY TO PROTECT THEIR INTERESTS.
44
THE RESULT IN THE ARBITRATION WILL BE BINDING ON THE
PARTIES, AND JUDGMENT ON THE ARBITRATORS' AWARD MAY BE ENTERED
IN ANY COURT HAVING JURISDICTION.
9.10 Notices. All notices and other communications provided
for herein shall be dated and in writing and shall be deemed to have been duly
given (x) on the date of delivery, if delivered personally or by telecopier,
receipt confirmed, (y) on the second following business day, if delivered by a
recognized overnight courier service, or (z) seven days after mailing, if sent
by registered or certified mail, return receipt requested, postage prepaid, in
each case, to the party to whom it is directed at the following address (or at
such other address as any party hereto shall hereafter specify by notice in
writing to the other parties hereto):
(i) If to the Company, to it at the following address:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, President;
with a copy to:
Cadwalader, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
(ii) If to any Investor, to it at the address set forth below
its name on the signature page hereto.
9.11 Integration. This Agreement and the documents referred to
herein or delivered pursuant hereto or pursuant to such documents, including all
exhibits and schedules, contain the entire understanding of the parties with
respect to their subject matter and supersede all prior agreements and
understandings between the parties with respect to their subject matter.
9.12 Severability. Each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited or invalid under
applicable law, such provision will be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of this Agreement.
9.13 Descriptive Headings. The section and other headings
contained
45
in this Agreement are for convenience of reference only and shall not affect the
meaning or interpretation of this Agreement.
9.14 Counterparts. This Agreement may be executed in two or
more counterparts, each of which when so executed and delivered shall be deemed
to be an original and all of which together shall be deemed to be one and the
same agreement.
9.15 Understanding Among Investors. The decision of each
Investor to purchase Securities pursuant to this Agreement has been made by such
Investor independently of any other Investor (in its capacity as such) and
independently of any statements or opinions as to the Condition of the Company
which may have been made or given by any other Investor (in its capacity as
such) or by any agent or employee of any other Investor. Each Investor
acknowledges that no other Investor has acted as agent for such Investor in
connection with making its investment hereunder and that no other Investor will
be acting as agent of such Investor in connection with monitoring its investment
hereunder.
[Remainder of page intentionally left blank]
46
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first above written.
THE COMPANY:
The Edison Project Inc.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: President
INVESTORS:
▇.▇. ▇▇▇▇▇▇ INVESTMENT CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Managing Director
Address: ▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
J. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Proskauer Rose LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
SIXTY WALL STREET SBIC FUND, L.P.
By: Sixty Wall Street SBIC Corporation,
its General partner
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
47
Title: Managing Director
Address: ▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
J. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Proskauer Rose LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
INVESTOR INVESTMENTS AB:
By: /s/ M. Wattenborg /s/ Guje Holmborg
--------------------------------------
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
----------------------------
Name: Marcus Wattenborg/Guje ▇▇▇▇▇▇▇▇/
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Executive Vice President and Deputy
Chief Executive Officer, Investor AB/
Vice President Group Accounting/Vice
President
Address: c/o Investor UK Ltd.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇ ▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Attention: Kles ▇▇▇▇▇▇▇▇▇
Telecopy: 011-44-171-409-1305
with a copy to:
▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
WSI INC.
48
By: /s/ H. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------
Name: H. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
Address: ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: H. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Cadwalader, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
WEG III L.P.
By: WSI INC., its General Partner
By: /s/ H. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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Name: H. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
Address: ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: H. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Cadwalader, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
WEG IV L.P.
By: WSI INC., its General Partner
By: /s/ H. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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Name: H. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
Address: ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: H. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telecopy: (▇▇▇)▇▇▇-▇▇▇▇
with a copy to:
Cadwalader, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
RICHMONT LEEDS EDUCATION COMPANY
L.L.C.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Member
Address: Leeds Group Inc.
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▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
50
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
Address: ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
/s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Address: c/o ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ Capital
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
GREENWOOD PARTNERS
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇, its General Partner
Address: c/o ▇▇▇▇▇▇ ▇▇▇▇▇▇
PFP Associates
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇. ▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
FORUM PARTNERS
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇, its General Partner
Address: c/o ▇▇▇▇▇▇ ▇▇▇▇▇▇
51
PFP Associates
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇. ▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
ABS EMPLOYEES' VENTURE FUND L.P.
By: Alex. ▇▇▇▇▇ Investments Inc.
By: /s/ ▇▇▇▇▇▇▇ ▇ .▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Treasurer
Address: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇.▇. ▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇'▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇
▇ ▇ ▇ ▇ ▇
- - - - -
▇▇▇▇▇▇▇▇▇
▇▇▇ A Option Tranche 1 Tranche 2 Amount of
Series D to be to be Options to be Options to be Note to be
Purchased at Purchased at Purchased at Purchased at Purchased at
First Closing First Closing First Closing First Closing First Closing
Investor ------------- ------------- ------------- ------------- -------------
--------
▇.▇. ▇▇▇▇▇▇ Investment 1,909,547 36,646 36,646 54,968 218,095
Corporation
Sixty Wall Street SBIC Fund, 100,502 1,928 1,928 2,893 11,478
L.P.
Investor Investments AB 2,010,050 38,574 38,574 57,861 229,573
WEG III L.P. 150,753 2,893 2,893 4,339 17,217
WEG IV L.P. 903,015 17,329 17,329 25,994 103,136
WSI Inc. -- -- -- -- --
Richmond Leeds Education 339,520 6,515 6,515 9,773 38,773
Company LLC
▇▇▇▇ ▇. ▇▇▇▇▇▇ 16,750 321 321 482 1,913
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ 8,040 154 154 231 918
Greenwood Partners 150,753 2,693 2,693 4,339 17,217
Forum Partners 50,251 964 964 1,446 5,739
ABS Employees' Venture Fund 50,251 964 964 1,446 5,739
L.P.
Total 5,689,432 109,181 109,181 163,772 649,802
Total w/o Leeds 5,349,912 102,668 102,666 153,999 611,025
F G H I
- - - -
Aggregate
Aggregate Remaining Commitment Aggregate
Purchase Price Commitment not including Number of
to be paid at After First LIBOR Units To Be
First Closing Closing Accruals Purchased
Investor ------------- ----------- ------------- -----------
--------
▇.▇. ▇▇▇▇▇▇ Investment 7,600,000 11,400,000 19,000,000 4,773,609
Corporation
Sixty Wall Street SBIC Fund, 400,000 600,000 1,000,000 251,256
L.P.
Investor Investments AB 8,000,000 12,000,000 20,000,000 5,025,125
WEG III L.P. 600,000 400,000 1,000,000 251,256
WEG IV L.P. 3,594,000 3,156,000 6,750,000 1,695,979
WSI Inc. -- 2,250,000 2,250,000 565,326
Richmond Leeds Education 1,351,292 2,206,937 3,378,229 848,801
Company LLC
▇▇▇▇ ▇. ▇▇▇▇▇▇ 66,667 100,001 166,668 41,676
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ 32,000 48,000 80,000 20,100
Greenwood Partners 600,000 900,000 1,500,000 376,884
Forum Partners 200,000 300,000 500,000 125,628
ABS Employees' Venture Fund 200,000 300,000 500,000 125,628
L.P.
Total 22,643,959 33,480,938 56,124,897 14,101,728
Total w/o Leeds 21,292,667 31,454,001 52,746,668 13,252,927