EXECUTION COPY
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PREFERRED STOCK PURCHASE AGREEMENT
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dated as of
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October 26, 1999
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between
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CALIBER LEARNING NETWORK, INC.
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and
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▇▇▇▇▇▇▇ US DISCOVERY OFFSHORE FUND III, L.P.
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TABLE OF CONTENTS
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SECTION 1. SALE AND PURCHASE OF PREFERRED STOCK.......................1
SECTION 2. THE CLOSING................................................2
SECTION 3. DEFINITIONS................................................3
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............16
4.1. Corporate Existence, Power and Authority..................16
4.2. Capital Stock.............................................17
4.3. Subsidiaries..............................................18
4.4. Business..................................................19
4.5. No Defaults or Conflicts..................................19
4.6. Disclosure Materials; Other Information...................20
4.7. Litigation................................................20
4.8. Taxes.....................................................21
4.9. ERISA.....................................................21
4.10. Legal Compliance..........................................23
4.11. Outstanding Securities....................................23
4.12. Intellectual Property and Other Rights....................23
4.13. Key Employees.............................................24
4.14. Properties................................................24
4.15. Suppliers and Customers...................................24
4.16. Environmental Compliance..................................25
4.18. Offering of Shares........................................26
4.19. SEC Reports...............................................26
4.20. Indebtedness..............................................26
4.21. Use of Proceeds...........................................27
4.22. Other Names...............................................27
4.23. Brokers...................................................27
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER...........28
5.1. Corporate Power and Authority.............................28
5.2. Investment Intent.........................................28
5.3. Brokers...................................................28
SECTION 6. RESTRICTIONS ON TRANSFER..................................29
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SECTION 7. INFORMATION AS TO THE COMPANY.............................29
7.1. Financial Information.....................................29
7.2. Communication with Accountants............................32
7.3. Inspection................................................32
7.4. Notices...................................................32
SECTION 8. AFFIRMATIVE COVENANTS.....................................34
8.1. Maintenance of Existence, Properties and Franchises;
Compliance with Law;Taxes; Insurance......................34
8.2. Office for Payment, Exchange and Registration;
Location of Office; Notice of Change of Name or Office....35
8.3. Fiscal Year...............................................35
8.4. Environmental Matters.....................................35
8.5. Reservation of Shares.....................................37
8.6. Securities Exchange Act Registration......................37
8.7. Delivery of Information for Rule 144A Transactions........37
8.8. Senior Securities.........................................37
8.9. Further Assurances........................................38
SECTION 9. NEGATIVE COVENANTS........................................38
9.1. No Dilution or Impairment; No Changes in Capital Stock....39
9.2. Indebtedness..............................................40
9.3. Consolidation, Merger and Sale............................40
9.4. No Change in Business.....................................40
9.5. Restricted Payments; Investments..........................40
9.6. Affiliate Loans and Guaranties............................41
9.7. Transactions with Affiliates..............................41
9.8. Liens.....................................................42
9.9. Private Placement Status..................................42
9.10. Maintenance of Public Market..............................42
9.11. Actions Prior to the Closing Date.........................43
SECTION 10. PREEMPTIVE RIGHTS.........................................43
SECTION 11. CONDITIONS TO PURCHASER'S OBLIGATIONS.....................44
11.1. Articles Supplementary; Stockholders'Agreement;
Registration Rights Agreement.............................45
11.2. Certificates for Shares...................................45
11.3. Senior Status.............................................45
11.4. Accuracy of Representations and Warranties................45
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11.5. Compliance with Agreements................................45
11.6. Officers'Certificates.....................................45
11.7. Proceedings...............................................46
11.8. Legality; Governmental and Other Authorization............46
11.9. No Material Adverse Change................................46
11.10. Opinion of Counsel........................................46
11.11. Additional Purchases of Shares............................46
11.12. Other Documents and Opinions..............................47
SECTION 12. BREACH OF REPRESENTATIONS, WARRANTIES AND COVENANTS.......47
SECTION 13. SPECIFIC PERFORMANCE......................................47
SECTION 14. EXPENSES..................................................48
SECTION 15. DIRECT PAYMENTS...........................................50
SECTION 16. AMENDMENTS AND WAIVERS....................................50
SECTION 17. EXCHANGE OF SHARES; CANCELLATION OF SURRENDERED SHARES;
REPLACEMENT...............................................50
SECTION 18. NOTICES...................................................51
SECTION 19. MISCELLANEOUS.............................................51
EXHIBIT A Articles Supplementary
EXHIBIT B Stockholders' Agreement
EXHIBIT C Registration Rights Agreement
EXHIBIT D Opinion of Counsel for the Company
EXHIBIT E Confidentiality Agreement
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PREFERRED STOCK PURCHASE AGREEMENT
This PREFERRED STOCK PURCHASE AGREEMENT is dated as of October
26, 1999 between Caliber Learning Network, Inc., a Maryland corporation (the
"Company"), and the Purchaser listed on the signature page of this Agreement
(the "Purchaser").
W I T N E S S E T H :
WHEREAS, the Company desires to issue and sell to the
Purchaser, and the Purchaser desires to purchase from the Company, shares of the
Company's Series A Convertible Preferred Stock, par value $.01 per share (the
"Series A Preferred"), upon the terms and provisions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
SECTION 1. SALE AND PURCHASE OF PREFERRED STOCK
(a) The Company agrees to sell to the Purchaser and, subject
to the terms and conditions hereof and in reliance upon the representations and
warranties of the Company contained herein or made pursuant hereto, the
Purchaser agrees to purchase from the Company on the Closing Date specified in
Section 2 hereof, the number of shares of Series A Preferred set forth opposite
the Purchaser's name on Schedule 1 hereto. The shares of Series A Preferred
being acquired under this Agreement and by the other Purchasers under the other
Stock Purchase Agreements (as hereinafter defined) are collectively referred to
herein as the "Shares", containing rights and privileges as more fully set forth
in the Articles Supplementary of the Company in the form attached hereto as
Exhibit A (the "Articles Supplementary").
(b) The aggregate purchase price to be paid to the Company by
the Purchaser for the Shares to be purchased by the Purchaser pursuant to this
Agreement shall be the amount set forth opposite the Purchaser's name on
Schedule 1 hereto. No further payment shall be required from the Purchaser for
the Shares.
(c) The parties further acknowledge and agree that the Shares
are intended not to constitute "preferred stock" as that term is used in Section
305(b)(4) of the Code and Treasury Regulation ss 1.305-5(a). Except as required
by any Taxing Authority or court, the Company and the Purchaser agree to treat
the Shares for Federal, state and local income and franchise tax
purposes as not constituting "preferred stock", and to take no position
inconsistent with such characterization on any Tax Return or before any Taxing
Authority or court.
(d) The Shares are being sold to the purchasers listed on
Schedule 1 hereto (the "Purchasers") pursuant to this Agreement and the other
Series A Convertible Preferred Stock Purchase Agreements entered into
simultaneously with this Agreement (all such agreements collectively, as from
time to time assigned, supplemented or amended or as the terms thereof may be
waived, the "Stock Purchase Agreements"). All Stock Purchase Agreements shall be
dated the date hereof and shall be identical except as to the identities of the
respective Purchasers, the number of Shares to be purchased thereunder and the
amount paid therefor. The sale of Shares to each Purchaser under each Stock
Purchase Agreement is to be a separate sale, and no Purchaser shall have any
liability under any Stock Purchase Agreement other than the Stock Purchase
Agreement to which it is a party.
(e) The Company will use the proceeds from the sale of the
Shares, together with other funds it will receive on the Closing Date to fund
future development opportunities and for working capital purposes.
SECTION 2. THE CLOSING
(a) Subject to the terms and conditions hereof, the closing of
the purchase and sale of the Shares to be purchased by the Purchaser and the
other Purchaser (the "Closing") will take place at the offices of ▇▇▇▇▇▇, ▇▇▇▇▇
& Bockius LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ at 10:00 A.M., New York City
time, on October 26, 1999, or such other time and date as shall be mutually
agreed to by the Company and the Purchaser, but in any event no later than
October 29, 1999 (such time and date are herein referred to as the "Closing
Date"). The sale and purchase of Shares by the Purchasers pursuant to the Stock
Purchase Agreements between each of the Purchasers and the Company shall be
consummated concurrently, for an aggregate purchase price of $15,000,000 on the
Closing Date.
(b) Subject to the terms and conditions hereof, on the Closing
Date (i) the Company will deliver to the Purchaser a certificate registered in
the Purchaser's name (or the name of its nominee, if any, as specified on
Schedule 1 hereto) evidencing the number of Shares set forth opposite the
Purchaser's name on Schedule 1, and (ii) upon the Purchaser's receipt thereof,
the Purchaser will deliver to the Company a certified or official bank check (or
wire transfer) in an amount equal to the aggregate purchase price (as specified
in Section 1(b) hereof) for the Shares to be purchased by the Purchaser payable
to the order of the Company in federal or other immediately available funds.
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SECTION 3. DEFINITIONS
(a) For purposes of this Agreement, the following definitions
shall apply (such definitions to be equally applicable to both the singular and
plural forms of the terms defined):
"6% Non-Voting Convertible Preferred Stock" means the
Company's 6% Non-Voting Preferred Stock, par value $.01, which is
expressly subordinated, in all respects, to the Series A Preferred.
"Affiliate", when used with respect to any Person, means (i)
if such Person is a corporation, any officer or director thereof (other
than a director elected pursuant to Section 4(c) of the Articles
Supplementary) and any Person which is, directly or indirectly, the
beneficial owner (by itself or as part of any group) of more than five
percent (5%) of any class of any equity security (within the meaning of
the Securities Exchange Act) thereof, and, if such beneficial owner is
a partnership, any general partner thereof, or if such beneficial owner
is a corporation, any Person controlling, controlled by or under common
control with such beneficial owner, or any officer or director of such
beneficial owner or of any corporation occupying any such control
relationship, (ii) if such Person is a partnership, any general or
limited partner thereof, and (iii) any other Person which, directly or
indirectly, controls or is controlled by or is under common control
with such Person. For purposes of this definition, "control" (including
the correlative terms "controlling", "controlled by" and "under common
control with"), with respect to any Person, shall mean possession,
directly or indirectly, of the power to direct or cause the direction
of the management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise. The holding
of Shares (or of Conversion Shares obtained upon conversion of Shares),
and the rights under any Stock Purchase Agreement or under the Articles
Supplementary, the Stockholders' Agreement or the Registration Rights
Agreement (or the exercise of any such rights, including, without
limitation, nominating a director to the Board (or Board committee) of
the Company and Subsidiaries or sending an observer to Board (or Board
committee) meetings of the Company and Subsidiaries), shall not cause a
Purchaser to be deemed to be an "Affiliate" of the Company or any
Subsidiary.
"Affiliate Agreements" means (i) Lease Agreement, dated as of
May 30, 1997, between SHL Financial Services and the Company, (ii)
networkMCI Enterprise Management Agreement, dated as of July 1, 1997,
between the Company and MCI Systemhouse Corp., (iii) Intercompany
Management and Facility Use Agreement, dated as of January 1, 1998, by
and between Sylvan and the Company, and (iv) Testing Center Management
and CBT Services Agreement, dated as of May 1, 1997 (as amended by
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Amendment No. 1, dated as of May 2, 1997), by and between Sylvan and
the Company, each as may be amended, modified or renewed from time to
time.
"Agreement" means this Stock Purchase Agreement (together with
exhibits and schedules) as such may be from time to time assigned,
supplemented or amended or as the terms hereof may be waived.
"Articles Supplementary" has the meaning set forth in Section
1(a) hereof.
"Benefit Plan" means any Plan, existing at the Closing Date or
prior thereto, established or to which contributions have at any time
been made by the Company or any ERISA Affiliate, or any predecessor of
any of the foregoing, or under which any employee, former employee or
director of the Company or any ERISA Affiliate or any beneficiary
thereof is covered, is eligible for coverage or has benefit rights as a
result of employment by or service with the Company or any ERISA
Affiliate, or as a result of designation as a beneficiary by any
employee, former employee or director of the Company or any ERISA
Affiliate.
"Board" or "Board of Directors" means with respect to any
Person which is a corporation, a business trust or other entity, the
board of directors or other group, however, designated, which is
charged with legal responsibility for the management of such Person, or
any committee of such board of directors or group, however designated,
which is authorized to exercise the power of such board or group in
respect of the matter in question.
"Business Day" means any day other than a Saturday, Sunday or
any day on which banks in the location of the office of the Company
provided for in Section 18 hereof are authorized or obligated to close.
"Capitalized Leases" means (a) any lease to which the Company
or a Subsidiary is party as lessee, or by which it is bound, under
which it leases any property (real, personal or mixed) from any lessor
other than the Company or a Subsidiary, and (b) which either (i) is
required to be capitalized in accordance with GAAP, or, (ii) with
respect to real property, even if not so required to be capitalized,
shall have a remaining term of greater than three (3) years (including
leases of shorter duration which are or were extendible to a total term
greater than three (3) years at the option of the lessor) (the
"Extended Leases"); provided that the Company makes a determination as
to whether, at the time of its calculation of Capitalized Lease Value,
it could be released from its obligations under such Extended Leases
without any adverse economic consequence and (I) the Extended Leases
shall not be included in the calculation of Capitalized Leases if the
Company determines there would be no adverse economic consequences, and
(II) the Extended Leases shall be included in the calculation of
Capitalized Leases to the extent of
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such adverse economic consequence if the Company determines that there
would be adverse economic consequences.
"Capitalized Lease Value" means, as of the time of any
determination thereof, the sum of the then present values, determined
as hereinafter provided, of future obligations of the Company and its
subsidiaries under then existing Capitalized Leases. To compute the
value of any Capitalized Lease, the following methods shall be used, as
applicable:
(i) values of leases required to be capitalized in
accordance with GAAP shall be computed in accordance
with such principles; and
(ii) values of other leases (and values of contracts or
other items which this Agreement provides are to be
valued as if they were Capitalized Leases) shall be
computed by discounting, to the date of
determination, at an assumed interest rate of eight
percent (8%) per annum, the minimum amount of future
rental payments that will be due from the Company or
its subsidiaries under the related documentation,
including rental payments that may be due during
extensions which are at the other party's option, but
excluding any amounts in respect of insurance on,
taxes on and/or maintenance of the properties subject
to such leases (provided that such amounts are owed
and paid only to the extent actually incurred).
"Closing" has the meaning set forth in Section 2(a) hereof.
"Closing Date" has the meaning set forth in Section 2(a)
hereof.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Commission" means the Securities and Exchange Commission and
any other similar or successor agency of the federal government
administering the Securities Act or the Securities Exchange Act.
"Common Stock" means the Company's Common Stock, par value
$.01 per share, and shall also include any common stock of the Company
hereafter authorized and any capital stock of the Company of any other
class hereafter authorized which is not preferred as to dividends or
assets over any other class of capital stock of the Company or which
has ordinary voting power for the election of directors of the Company;
provided that Common Stock shall not include the Series A Convertible
Preferred Stock.
"Company" means Caliber Learning Network, Inc., a Maryland
corporation, its successors and assigns.
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"Confidentiality Agreement" has the meaning set forth in
Section 7.5 hereof.
"Consolidated" or "consolidated", when used with reference to
any financial term in this Agreement, means the aggregate for the
Company and any of its majority-owned Subsidiaries of the amounts
signified by such term for all such Persons, with intercompany items
eliminated, and, with respect to net worth, after eliminating the
portion of net worth properly attributable to minority interests, if
any, in the capital of any such Person (other than in the capital of
the Company) and otherwise as determined in accordance with GAAP
(except as otherwise expressly provided herein).
"Conversion Share" or "Conversion Shares" means the shares of
the Company's Common Stock obtained or obtainable upon conversion of
Shares and shall also include any capital stock or other securities
into which such shares of Common Stock are changed and any capital
stock or other securities resulting from or comprising a
reclassification, combination or subdivision of, or a stock dividend
on, any such shares of Common Stock. In the event that any Conversion
Shares are sold either in a public offering pursuant to a registration
statement under the Securities Act or pursuant to a Rule 144
Transaction, then the transferees of such Conversion Shares shall not
be entitled to any benefits under this Agreement with respect to such
Conversion Shares and such Conversion Shares shall no longer be
considered to be "Conversion Shares" for purposes of any consent or
waiver provision of this Agreement.
"Disclosure Material" has the meaning specified in Section
4.6(a) hereof.
"EBITDA" means, the consolidated or combined, as the case may
be, net income for such period plus (a) the sum of, without
duplication, to the extent deducted in computing consolidated or
combined net income: (i) income tax expense, (ii) interest expense,
(iii) depreciation, amortization (exclusive of deferred rent
amortization) and other non-cash charges and (iv) any extraordinary or
non-recurring losses or expenses, minus (b) the sum of (without
duplication), to the extent included in computing consolidated net
income, (i) interest or dividend income, (ii) non-operating income and
(iii) any extraordinary or non-recurring gains or income, all as
determined in accordance with GAAP, where applicable, consistently
applied.
"Environmental Laws" means all federal, state, local, foreign,
civil and criminal laws, statutes, ordinances, orders, codes, rules,
policies, and regulations and common law relating to the protection of
the environment and human health or relating to the handling, use,
generation, treatment, storage, transportation or disposal of Hazardous
Materials, including but not limited to the Resource Conservation and
Recovery Act of 1976, 42 U.S.C. ' 6901 et seq.; the Toxic Substances
Control Act, 15 U.S.C. ' 2601 et seq.; the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. ss 9601 et
seq.; the Federal Water Pollution Control Act, 33 U.S.C. ss 1251 et
seq.;
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the Clean Air Act, 42 U.S.C. ss 7401 et seq.; the Hazardous Materials
Transportation Act, 49 U.S.C. ss 1801 et seq.; the Occupational Safety
and Health Act, 29 U.S.C. ss 651; the Federal Insecticide, Fungicide
and Rodenticide Act, 7 U.S.C. ss 136y et seq.; and the Oil Pollution
Act of 1990, 33 U.S.C. ss 2701 et seq., all as may be amended or
superseded from time to time, and all common law claims relating to the
same.
"Environmental Lien" has the meaning set forth in Section 4.16
hereof.
"Environmental Permits" means all permits, licenses,
approvals, authorizations or consents required by any Governmental
Authority under any applicable Environmental Law and includes any and
all orders, consent orders or binding agreements issued or entered into
by a Governmental Authority under any applicable Environmental Law.
"ERISA" means Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" means each "person" (as defined in Section
3(9) of ERISA) which is, or at any time was, a member of a controlled
group (within the meaning of Section 412(n)(6) of the Code) that
includes, or at any time included, the Company or any of its
Subsidiaries.
"Financial Investor" means an investor that acquires an equity
interest in the Company for investment purposes, and without the
purpose, or without the effect, of changing or influencing the control
of the Company holds an equity interest in the Company purposes.
"▇▇▇▇▇▇▇ Designee" means each person that any ▇▇▇▇▇▇▇ Holder
designates in writing to the Company to receive, on behalf of such
▇▇▇▇▇▇▇ Holder, the information to which such ▇▇▇▇▇▇▇ Holder is
entitled to pursuant to Section 7.1(b)(v) hereof; provided that each
▇▇▇▇▇▇▇ Holder may not designate more than two persons pursuant hereto.
The initial two ▇▇▇▇▇▇▇ Holder Designees shall be ▇▇▇▇▇▇ ▇. ▇▇▇▇ and
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇.
"▇▇▇▇▇▇▇ Funds" means ▇▇▇▇▇▇▇ US Discovery Fund III, L.P.,
▇▇▇▇▇▇▇ US Discovery Offshore Fund III, L.P. and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Nominees Limited, or any successor thereof.
"▇▇▇▇▇▇▇ Holders" means (i) the ▇▇▇▇▇▇▇ Funds and (ii) any
Affiliate, officer or employee of an Affiliate or investment fund
managed by an Affiliate of the ▇▇▇▇▇▇▇ Funds, or any successor thereof,
to which the ▇▇▇▇▇▇▇ Funds may transfer record and/or beneficial
ownership of the Shares or the Conversion Shares.
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"Fully Diluted" means, with respect to the calculation of the
number of shares of Common Stock, as of the time of determination
thereof, the sum of (i) all shares of Common Stock outstanding at the
time of determination and (ii) all shares of Common Stock issuable upon
the exchange, exercise or conversion of all warrants, options and
convertible securities then outstanding (whether or not such warrants,
options or convertible securities are then exercisable, exchangeable,
convertible or subject to contingencies).
"Fundamental Transaction" has the meaning set forth in Section
9.3 hereof.
"GAAP" means generally accepted accounting principles
consistently applied.
"Going Private Transaction" has the meaning set forth in
Section 9.10 hereof.
"Governmental Authority" means any federal, state, or local
governmental agency or authority (including regulatory authority)
having jurisdiction over the Company or any of its Subsidiaries or any
of its respective assets or businesses.
"Guaranty" means (i) any guaranty or endorsement of the
payment or performance of, or any contingent obligation in respect of,
any indebtedness or other obligation of any other Person, (ii) any
other arrangement whereby credit is extended to one obligor (directly
or indirectly) on the basis of any promise or undertaking of another
Person (a) to pay the indebtedness of such obligor, (b) to purchase an
obligation owed by such obligor, (c) to purchase or lease assets (or to
provide funds, goods or services) under circumstances that would enable
such obligor to discharge one or more of its obligations or (d) to
maintain the capital, working capital, solvency or general financial
condition of such obligor, in each case whether or not such arrangement
is disclosed in the balance sheet of such other Person or is referred
to in a footnote thereto and (iii) any liability as a general partner
of a partnership in respect of indebtedness or other obligations of
such partnership; provided, however, that the term "Guaranty" shall not
include (1) endorsements for collection or deposit in the ordinary
course of business, (2) any guaranty of indebtedness of the Company by
a subsidiary of the Company or (3) obligations of the Company or its
Subsidiaries which would constitute Guaranties solely by virtue of the
continuing liability of a Person which has sold assets subject to
liabilities for the liabilities which were assumed by the Person
acquiring the assets, unless such liability is required to be carried
on the consolidated balance sheet of the Company. The amount of any
Guaranty and the amount of indebtedness resulting from such Guaranty
shall be the maximum amount of the guarantor's potential obligation in
respect of such Guaranty.
"Hazardous Materials" means any petroleum, petroleum
hydrocarbons, petroleum waste or petroleum products, underground
storage tanks, asbestos or asbestos-containing
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materials, pesticides, lead and lead-containing materials, urea
formaldehyde insulation and polychlorinated biphenyls (PCBs), ionizing
and non-ionizing radiation including radon and electromagnetic
frequency radiation; and any chemicals, materials, substances or wastes
in any amount or concentration which are now or hereafter "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely
hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants" or words of similar import, under any applicable
Environmental Law.
"Indebtedness" of any Person means, without duplication, as of
any date as of which the amount thereof is to be determined, (i) all
obligations of such Person to repay money borrowed (including, without
limitation, all notes payable and drafts accepted representing
extensions of credit, all obligations under letters of credit, all
obligations evidenced by bonds, debentures, notes or other similar
instruments and all obligations upon which interest charges are
customarily paid), (ii) the Capitalized Lease Value of all Capitalized
Leases in respect of which such Person is liable as lessee or as the
guarantor of the lessee, (iii) all monetary obligations which are
secured by any Lien existing on property owned by such Person whether
or not the obligations secured thereby have been incurred or assumed by
such Person, (iv) all conditional sales contracts and similar title
retention debt instruments under which such Person is obligated to make
payments, (v) all Guaranties by such Person and (vi) all contractual
obligations (whether absolute or contingent) of such Person to
repurchase goods sold and distributed. "Indebtedness" shall not
include, however, (1) Indebtedness of the Company to any of its
wholly-owned Subsidiaries or Indebtedness of any wholly-owned
Subsidiary to the Company or to another wholly-owned Subsidiary, and
(2) any unfunded obligations in any employee pension benefit plan (as
defined in ERISA) of the Company or of any Subsidiary.
"Internal Rate of Return" means the discount rate at which the
present value of the future cash flows of an investment equal the cost
of the investment.
"Investment" means, with respect to any Person, (i) any loan,
advance or extension of credit by such Person to, and any contributions
to the capital of, any other Person, (ii) any Guaranty by such Person,
(iii) any interest in any capital stock, equity interest or other
securities of any other Person, (iv) any transfer or sale of property
of such Person to any other Person other than upon full payment, in
cash or other consideration, of not less than the agreed sale price
bargained on an arms-length basis and (v) any commitment or option to
make an Investment if, in the case of an option, the consideration
therefor exceeds $10,000, and any of the foregoing under clauses (i)
through (v) shall be considered an Investment whether such Investment
is acquired by purchase, exchange, merger or any other method;
provided, that the term "Investment" (1) shall not include an
Investment in the Company or in a wholly-owned Subsidiary, (2) shall
not include current trade and customer accounts receivable and
allowances,
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provided they relate to goods furnished in the ordinary course of
business and are given in accordance with the customary practices of
the Company or a Subsidiary, (3) shall not include temporary
investments of excess cash of the Company or of any Subsidiary in any
of the following: (A) investment grade obligations maturing within one
year of their issuance which as to principal and interest constitute
direct obligations of, or obligations guaranteed by, the United States
of America, (B) negotiable certificates of deposit of banks or trust
companies which are organized under the laws of the United States of
America or any state thereof and which have capital and surplus of at
least $500,000,000, (C) commercial paper which is rated not less than
prime-one or A-1 or their equivalents by ▇▇▇▇▇'▇ Investor Service, Inc.
or Standard & Poor's Corporation or their successors, (D) any
repurchase agreement secured by any one or more of the foregoing and
(E) money market funds primarily investing in any of the foregoing
securities and sponsored by or affiliated with nationally recognized
brokerage or investment advisory firms, and (4) shall not include
Investments of the Company existing on the date hereof and disclosed on
Schedule 3(a) hereto.
"Lien" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, or preference, priority or other
security interest of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement,
any financing lease having substantially the same effect as any of the
foregoing, any assignment or other conveyance of any right to receive
income and any assignment of receivables with recourse against the
assignor), any filing of a financing statement as debtor under the
Uniform Commercial Code or any similar statute and any agreement to
give or make any of the foregoing; provided that the term "Lien" shall
not include Permitted Liens.
"MCI" means MCI Telecommunications Corporation, which as of
the date of this Agreement holds 1,856,086 shares of Common Stock.
"MCI Warrants" means the amended and restated warrant to
purchase 1,193,573 shares of Common Stock, as adjusted pursuant to the
anti-dilution terms thereof, issued to MCI.
"Outside Directors" means those directors on the Company's
Board of Directors at any time who are not otherwise Affiliates of or
employed by the Company; provided that notwithstanding the foregoing,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and R. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇▇ shall be deemed
Outside Directors for the purposes hereof.
"Outstanding" or "outstanding" means (a) when used with
reference to the Shares or the Conversion Shares as of a particular
time, all Shares or Conversion Shares theretofore duly issued except
(i) Shares and Conversion Shares theretofore reported as lost, stolen,
mutilated or destroyed or surrendered for
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transfer, exchange or replacement, in respect of which new or
replacement Shares or Conversion Shares have been issued by the
Company, (ii) Shares and Conversion Shares theretofore canceled by the
Company and (iii) Shares and Conversion Shares registered in the name
of, as well as Shares owned beneficially by, the Company, any
Subsidiary or any of its Affiliates. For purposes of the preceding
sentence, in no event shall "Affiliates" include (x) the Purchasers or
(y) any Affiliates of the Purchasers.
"Patents and Applications" has the meaning set forth in
Section 4.12 hereof.
"Pension Plan" means any "employee pension benefit plan" as
defined in Section 3(2) of ERISA.
"Permitted Lien" means (i) any Lien for Taxes, governmental
charges or levies not yet due or delinquent or being contested in good
faith by appropriate proceedings for which adequate reserves have been
established in accordance with GAAP, (ii) any imperfections of title,
easements, rights of way or similar Liens, zoning laws or land use
restrictions as normally exist with respect to property similar in
character to the property affected thereby and which individually or in
the aggregate with other such Liens, zoning laws or land use
restrictions do not materially impair the value or marketability of the
property subject to such Liens, zoning laws or land use restrictions or
interfere with the use of such property in the conduct of the business
of the Company and which do not secure obligations for money borrowed,
(iii) Liens imposed by any law, such as mechanic's, materialman's,
landlord's, warehouseman's and carrier's Liens, securing obligations
incurred in the ordinary course of business which are not yet overdue
or which are being diligently contested in good faith by appropriate
proceedings and, with respect to such obligations which are being
contested, for which the Company has set aside adequate reserves, if
appropriate, (iv) any Lien resulting from purchase by the Company of
goods in the ordinary course of business as to which Liens are not
filed of record and (v) any Lien necessary to secure Indebtedness that
is not prohibited by Section 9.2 hereof; provided that "Permitted Lien"
shall not include any Lien upon or with respect to any shares of
capital stock of any Subsidiary.
"Permitted Transferee" means any Transferee that holds not
less than an aggregate of 20,000 Shares.
"Permitted Transferee Designee" means each person that any
Permitted Transferee designates in writing to the Company to receive,
on behalf of such Permitted Transferee, the information to which such
Permitted Transferee is entitled to pursuant to Section 7.1(b)(v)
herof; provided that each Permitted Transferee may not designate more
than two persons pursuant hereto.
-11-
"Person" or "person" means an individual, corporation,
partnership, limited liability company, firm, association, joint
venture, trust, unincorporated organization, government, governmental
body, agency, political subdivision or other entity.
"Plan" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase,
stock option, stock ownership, stock appreciation rights, phantom
stock, leave of absence, layoff, vacation, day or dependent care, legal
services, cafeteria, life, health, accident, disability, worker's
compensation or other insurance, severance, separation or other
employee benefit plan, practice, policy or arrangement of any kind,
whether written or oral, or whether for the benefit of a single
individual or more than one individual including, but not limited to,
any "employee benefit plan" within the meaning of Section 3(3) of
ERISA.
"Preferred Stock" means any class of the capital stock of a
corporation (whether or not convertible into any other class of such
capital stock) which has any right, whether absolute or contingent, to
receive dividends or other distributions of the assets of such
corporation (including, without limitation, amounts payable in the
event of the voluntary or involuntary liquidation, dissolution or
winding-up of such corporation), which right is superior to the rights
of another class of the capital stock of such corporation. "Preferred
Stock" includes, without limitation, the Series A Convertible Preferred
Stock and such preferred stock as may be issued as described in Section
8.8(b) hereof (upon the issuance of such preferred stock).
"Purchaser" means the person who accepts and agrees to the
terms hereof as indicated by such person's signature (as "the
undersigned Purchaser") on the execution page of this Agreement,
together with its successors and assigns.
"Purchasers" has the meaning set forth in Section 1(c) hereof,
together with their respective successors and assigns.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Closing Date, among the Company and each of
the Purchasers.
"Restricted Payment" means (i) every payment in connection
with the redemption, purchase, retirement or other acquisition by or on
behalf of the Company or any Subsidiary of any shares of the Company's
or a Subsidiary's capital stock (as defined below), whether or not
owned by the Company or any Subsidiary, (ii) any prepayments or
repayments made on Indebtedness of the Company or any Subsidiary, (iii)
every payment to or on behalf of any Affiliate of the Company or any
Affiliate of any Subsidiary on account of or with respect to
-12-
any lease arrangements, and (iv) every payment by or on behalf of the
Company or of any Subsidiary (whether as repayment or prepayment of
principal or as interest or otherwise) on or with respect to (A) any
obligation to repay money borrowed owing to any Affiliate of the
Company or of any Subsidiary or (B) any obligation, to any Person, of
any Affiliate of the Company or of any Subsidiary or to any other
holder of shares of the Company's capital stock (as defined below),
which obligation is assumed, or is the subject of a Guaranty, by the
Company or a Subsidiary; provided, however, (a) that the restrictions
of the foregoing clause (i) shall not apply to (A) any payment in
respect of capital stock of the Company to the extent payable in shares
of the capital stock of the Company, (B) any redemption of the Series A
Preferred or (C) any redemption or repurchase pursuant to the 1997
Stock Option Plan and the 1998 Stock Incentive Plan as in effect on the
date hereof, (b) that the restrictions of the foregoing clause (ii)
shall not apply to any regularly scheduled prepayment or repayment of
Indebtedness, provided that such Indebtedness being prepaid or repaid
is not at the time of such prepayment or repayment or at any prior time
thereto owing to an Affiliate of the Company, or any payments due under
the Affiliate Agreements, (c) that none of the foregoing clauses shall
apply to any payments from a Subsidiary to the Company or from a
Subsidiary to a wholly-owned Subsidiary and (d) that none of the
foregoing clauses shall apply to any payments, distributions or other
transfers or actions on or with respect to the Shares or the Conversion
Shares or to the Purchasers (or holders of Shares or the Conversion
Shares) under the Stock Purchase Agreements. For purposes of this
definition, "capital stock" shall also include warrants and other
rights and options to acquire shares of capital stock (whether upon
exercise, conversion, exchange or otherwise).
"Rule 144" means (i) Rule 144 under the Securities Act as such
Rule is in effect from time to time and (ii) any successor rule,
regulation or law, as in effect from time to time.
"Rule 144A" means (i) Rule 144A under the Securities Act as
such Rule is in effect from time to time and (ii) any successor rule,
regulation or law, as in effect from time to time.
"Rule 144 Transaction" means a transfer of Conversion Shares
(A) complying with Rule 144 as such Rule is in effect on the date of
such transfer (but not including a sale other than pursuant to
"brokers' transactions" as defined in clauses (1) and (2) of paragraph
(g) of such Rule as in effect on the date hereof) and (B) occurring at
a time when Conversion Shares are registered pursuant to Section 12 of
the Securities Exchange Act.
"SEC Reports" has the meaning set forth in Section 4.19
hereof.
-13-
"Securities Act" means the Securities Act of 1933, as amended,
and the rules, regulations and interpretations thereunder.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended, and the rules, regulations and interpretations
thereunder.
"Series A Preferred" means the Company's Series A Convertible
Preferred Stock, par value $.01 per share, which will have the rights,
powers and privileges on the Closing Date as more fully set forth in
the Articles Supplementary.
"Shares" has the meaning set forth in Section 1(a) hereof. In
the event that any Shares are sold either in a public offering pursuant
to a registration statement under Section 5 of the Securities Act or
pursuant to a Rule 144 Transaction, then the transferees of such Shares
shall not be entitled to any benefits under this Agreement with respect
to such Shares and such Shares shall no longer be considered to be
"Shares" for purposes of any consent or waiver provision of this
Agreement.
"Stock Purchase Agreements" has the meaning set forth in
Section 1(d) hereof.
"Stockholders' Agreement" means the Stockholders' Agreement,
dated as of the Closing Date, among the Company, the Purchasers and
certain other stockholders of the Company.
"Strategic Investor" means a technology partner or other
company with related products and services; provided that "Strategic
Investor" shall not include an Affiliate of the Company, Sylvan or MCI.
"Subsidiary", with respect to any Person, means any
corporation, association or other entity of which more than 50% of the
total voting power of shares of stock or other equity interests
(without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is, at the time as
of which any determination is being made, owned or controlled, directly
or indirectly, by such Person or one or more of its Subsidiaries, or
both. The term "Subsidiary" or "Subsidiaries" when used herein without
reference to any particular Person, means a Subsidiary or Subsidiaries
of the Company.
"Sylvan" means Sylvan Learning Systems, Inc., which holds
1,227,393 shares of Common Stock and all of the outstanding 6%
Nonvoting Convertible Preferred Stock.
"Takeover Proposal" shall mean any tender or exchange offer
for in excess of 15% of the outstanding securities involving the
Company, any proposal for a merger,
-14-
consolidation or other business combination involving the Company, any
proposal or offer to acquire in any manner a greater than 15% equity
interest in, or a significant portion of the business or assets of, the
Company (other than immaterial or insubstantial assets or inventory in
the ordinary course of business or assets held for sale), any proposal
or offer with respect to any recapitalization or restructuring with
respect to the Company or any proposal or offer with respect to any
other transaction similar to any of the foregoing with respect to the
Company other than pursuant to the transactions to be effected pursuant
to the Stock Purchase Agreements.
"Takeover Proposal Interest" has the meaning set forth in
Section 7.4(e) hereof.
"Tax" or "Taxes" means all federal, state, local or foreign
net or gross income, gross receipts, net proceeds, sales, use, ad
valorem, value added, franchise, bank shares, withholding, payroll,
employment, excise, property, alternative or add-on minimum,
environmental or other taxes, assessments, duties, fees, levies or
other governmental charges of any nature whatsoever, whether disputed
or not, together with any interest, penalties, additions to tax or
additional amounts with respect thereto.
"Tax Returns" means any returns, reports or statements
(including any information returns) required to be filed for purposes
of a particular Tax.
"Taxing Authority" means any governmental agency, board,
bureau, body, department or authority of any United States federal,
state or local jurisdiction, or any foreign jurisdiction, having or
purporting to exercise jurisdiction with respect to any Tax.
"Transferees' shall mean any transferee (except for a ▇▇▇▇▇▇▇
Holder) of the Shares or the Conversion Shares (as such terms are
defined within the definition of "▇▇▇▇▇▇▇ Holders") from a ▇▇▇▇▇▇▇
Holder. Transferees shall not include a transferee of Shares or
Conversion Shares sold in either a public offering pursuant to a
registration statement under the Securities Act or pursuant to a Rule
144 Transaction.
(b) For all purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires:
(i) the words "herein", "hereof" and "hereunder" and
other words of similar import refer to this Agreement as a whole and
not to any particular Section or other subdivision;
(ii) all accounting terms not otherwise defined
herein have the meanings assigned to them in accordance with GAAP
(except as otherwise provided herein);
-15-
(iii) all computations provided for herein, if any,
shall be made in accordance with GAAP (except as otherwise provided
herein);
(iv) any uses of the masculine, feminine or neuter
gender shall also be deemed to include any other gender, as
appropriate;
(v) all references herein to actions by the Company
or any Subsidiary, such as "create", "sell", "transfer", "dispose of",
etc., mean such action whether voluntary or involuntary, by operation
of law or otherwise;
(vi) the exhibits and schedules to this Agreement
shall be deemed a part of this Agreement;
(vii) each of the representations and warranties of
the Company contained in Section 4 hereof is separate and is not
limited, qualified or modified by the existence, wording or
satisfaction of any other representation or warranty of the Company in
Section 4 or otherwise;
(viii) each of the covenants of the Company contained
in Sections 7, 8 and 9 hereof or otherwise contained in any Stock
Purchase Agreement, the Certificate of Designations, the Stockholders'
Agreement or the Registration Rights Agreement is separate and is not
limited or satisfied by the existence, wording or satisfaction of any
other covenant of the Company in Section 7, 8 or 9 or otherwise; and
(ix) all references herein (in covenants or
otherwise) to any action(s) which are to be taken (or which are
prohibited from being taken) by any Person or the Company or any
Subsidiary shall apply to such Person or the Company or such
Subsidiary, as the case may be, whether such action is taken directly
or indirectly.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser as
follows as of the date hereof and as of the Closing Date, except as set forth in
the disclosure schedules attached hereto:
4.1. Corporate Existence, Power and Authority.
(a) Each of the Company and each Subsidiary is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. The Company and each Subsidiary is duly
qualified, licensed and authorized to do business and is in good standing in
each jurisdiction in which it owns or leases any property or in which the
conduct of its business requires it to so qualify or be so licensed, except for
such jurisdictions where the failure to so qualify or be so licensed would not
have a material adverse effect on the
-16-
Company's assets, properties, liabilities, business, affairs, results of
operations, condition (financial or otherwise) or prospects, on a consolidated
basis.
(b) No proceeding has been commenced looking toward the
dissolution or merger of the Company or any Subsidiary or the amendment of their
respective certificates of incorporation (other than the Articles
Supplementary). Neither the Company nor any Subsidiary is in violation in any
respect of its charter or by-laws.
(c) Each of the Company and each Subsidiary has all requisite
power, authority (corporate and other) and legal right to own or to hold under
lease and to operate the properties it owns or holds and to conduct its business
as now being conducted.
(d) The Company has all requisite power, authority (corporate
and other) and legal right to execute, deliver, enter into, consummate the
transactions contemplated by and perform its obligations under (i) the Stock
Purchase Agreements, including, without limitation, the issuance by the Company
of the Shares and the Conversion Shares as contemplated herein and therein and
in the Articles Supplementary (subject to the proper filing with the Maryland
State Department of Assessments and Taxation of the Articles Supplementary for
the Series A Preferred), (ii) the Stockholders' Agreement and (iii) the
Registration Rights Agreement. The execution, delivery and performance of the
Stock Purchase Agreements, the Stockholders' Agreement and the Registration
Rights Agreement by the Company (including, without limitation, the issuance by
the Company of the Shares and the Conversion Shares as contemplated herein and
therein and in the Articles Supplementary) have been duly authorized by all
required corporate and other actions. The Company has duly executed and
delivered the Stock Purchase Agreements and at the Closing will have duly
executed and delivered the Stockholders' Agreement and the Registration Rights
Agreement. The Stock Purchase Agreements constitute and, at the Closing, the
Stockholders' Agreement and the Registration Rights Agreement will constitute
the legal, valid and binding obligations of the Company enforceable in
accordance with their respective terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to the rights of
creditors generally or under general principles of equity.
4.2. Capital Stock.
(a) Schedule 4.2(a) hereto correctly and completely lists (i)
the authorized capital stock of the Company (Common Stock and Preferred Stock),
(ii) the number of designated shares of Preferred Stock in each series or class
after giving effect to the Articles Supplementary and (iii) on October 19, 1999,
after giving effect to the issuance of Shares contemplated by the Stock Purchase
Agreements, the number of shares outstanding in each series or class. There have
been no material issuances of shares since June 30, 1999. All of such
outstanding shares are, or on the Closing Date will be, duly authorized, validly
issued and outstanding, fully paid and non-assessable. The shares of the
Company's Common Stock issuable upon conversion of the Series A Preferred will
be, when issued in accordance with the
-17-
terms of the Series A Preferred, duly authorized, validly issued, fully paid and
non-assessable. Except as provided in the Articles Supplementary and as
described in Schedule 4.2(a), none of the shares of the Company's capital stock
which will be outstanding at the Closing (i) were or will be subject to
preemptive rights when issued or (ii) provide the holders thereof with any
preemptive rights with respect to any issuances of capital stock.
(b) Schedule 4.2(b) hereto correctly and completely lists the
number and purpose for which shares of the Company's Common Stock are reserved
for issuance by the Company.
(c) Except as referred to in Section 4.2(b), there are no
outstanding options, warrants, subscriptions, rights, convertible securities or
other agreements or plans under which the Company may become obligated to issue,
sell or transfer shares of its capital stock or other securities.
(d) Except for the registration rights contained in the
Registration Rights Agreement and as described in Schedule 4.2(d), there are and
will be no outstanding registration rights with respect to any capital stock of
the Company or of any Subsidiary, which (in either case) will be outstanding on
the Closing Date, or any capital stock referred to in Section 4.2(b) or 4.2(c).
(e) There are no voting agreements, voting trusts, proxies or
other agreements or understandings with respect to the voting of any capital
stock of the Company or any Subsidiary.
(f) Except as described in Schedule 4.2(f), there are no
anti-dilution protections or other adjustment provisions in existence with
respect to any capital stock of the Company or any Subsidiary or any capital
stock referred to in Section 4.2(b) or 4.2(c).
(g) The Articles Supplementary has been duly adopted by the
Company and is fully effective as a supplement to the Company's charter. The
Shares will have all of the rights, priorities and terms set forth in the
Articles Supplementary.
(h) To the knowledge of the Company, those persons who
beneficially own, directly or indirectly, more than 5% (calculated in accordance
with Rule 13d-3 under the Securities Exchange Act) of the Company's outstanding
Common Stock are as listed on Schedule 4.2(h); provided that the Company may
rely on the accuracy of all Schedules 13D and Schedules 13G filed under the
Securities Exchange Act for purposes of determining those persons who
beneficially own, directly or indirectly, more than 5% of the Company's
outstanding Common Stock.
4.3. Subsidiaries.
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The Company has no Subsidiaries. The Company has no Investments
in any other Person.
4.4. Business.
The Company is engaged primarily in the business of
distributed learning. The Company neither currently engages in, nor has any
intention of engaging in, any other business.
4.5. No Defaults or Conflicts.
(a) Neither the Company nor any of its Subsidiaries is in
violation or default in any material respect (and is not in default in any
respect regarding any Indebtedness) under any indenture, agreement or instrument
to which it is a party or by which it or its properties may be bound that would
materially adversely affects or will materially adversely affect the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company or the ability of the
Company to perform its obligations under the Stock Purchase Agreements, the
Articles Supplementary, the Stockholders' Agreement, the Registration Rights
Agreement or any of the transactions contemplated hereby or thereby. Neither the
Company nor any Subsidiary is in default in any material respect under any
material order, writ, injunction, judgment or decree of any court or other
governmental authority or arbitrator(s).
(b) The execution, delivery and performance by the Company of
the Stock Purchase Agreements, the Stockholders' Agreement and the Registration
Rights Agreement and any of the transactions contemplated hereby or thereby
(including, without limitation, the issuance of the Shares and the Conversion
Shares as contemplated herein and therein and in the Articles Supplementary, the
adoption of the Articles Supplementary as an amendment to the Company's charter)
do not and will not (i) violate or conflict with, with or without the giving of
notice or the passage of time or both, any provision of (A) the respective
certificates of incorporation or by-laws of the Company or any of its
Subsidiaries, (B) any law, rule, regulation or order of any federal, state,
county, municipal or other governmental authority, (C) any judgment, writ,
injunction, decree, award or other action of any court or governmental authority
or arbitrator(s), or (D) any agreement, indenture or other instrument applicable
to the Company or any of its Subsidiaries or any of their respective properties,
(ii) result in the creation of any Lien upon any of the Company's or any
Subsidiary's properties, assets or revenues, except as provided in the Articles
Supplementary of the Series A Preferred, (iii) require the consent, waiver,
approval, order or authorization of, or declaration, registration, qualification
or filing with, any Person (whether or not a governmental authority and
including, without limitation, any shareholder approval) (other than approvals
which have been obtained prior to the Closing Date), or (iv) cause antidilution
clauses of any outstanding securities to become operative or give rise to any
preemptive rights. No provision of any item referred to in Sections (A) and (C)
of the preceding clause (i) materially adversely affects or will materially
adversely affect the assets, properties, liabilities, business, affairs, results
of operations, condition (financial or otherwise) or
-19-
prospects of the Company or the ability of the Company to perform its
obligations under the Stock Purchase Agreements, the Articles Supplementary, the
Stockholders' Agreement, the Registration Rights Agreement or any of the
transactions contemplated hereby or thereby.
4.6. Disclosure Materials; Other Information.
(a) The Company has previously furnished to the Purchasers the
materials described on Schedule 4.6(a) hereto (the "Disclosure Material"). The
audited and unaudited financial statements referred to or contained in the
materials referred to on Schedule 4.6(a) fairly present the consolidated
financial condition of the Company as of the respective dates thereof and the
consolidated results of the operations of the Company for such periods and have
been prepared in accordance with GAAP, except that any such unaudited statements
may omit notes and may be subject to normal year-end adjustment.
(b) Since June 30, 1999, except as disclosed in the Company's
Quarterly Report on Form 10-Q for the three months ended June 30, 1999 or
subsequently publicly announced, (i) the business of the Company has been
conducted in the ordinary course and (ii) there has been no material adverse
change in the assets, properties, liabilities, business, affairs, results of
operations, condition (financial or otherwise) or prospects of the Company. As
of such Closing Date and as of the date hereof, there are no material
liabilities of the Company or any Subsidiary which would be required to be
provided for in a consolidated balance sheet of the Company as of either such
date prepared in accordance with GAAP, other than liabilities provided for in
the financial statements referred to in Section 4.6(a). Since June 30, 1999, no
amount or property has directly or indirectly been declared, ordered, paid, made
or set aside for any Restricted Payment nor has any such action been agreed to.
(c) There are no material liabilities, contingent or
otherwise, of the Company or the Subsidiaries that have not been disclosed in
the financial statements referred to in Section 4.6(a) or otherwise disclosed in
the schedules hereto.
(d) The financial projections included in the Disclosure
Material conform with the internal operating forecasts of the Company and its
Subsidiaries and were based on good faith assumptions when made and have been
prepared in good faith.
(e) There is no fact known to the Company or any of the
Subsidiaries which is not in the disclosure schedules hereto which is necessary
in order to make the representations and warranties made, in light of the
circumstances under which they were made, not misleading.
-20-
4.7. Litigation.
There is no action, suit, proceeding, investigation or claim
pending or, to the knowledge of the Company or the Subsidiaries, threatened in
law, equity or otherwise before any court, administrative agency or arbitrator
which (i) questions the validity of the Stock Purchase Agreements, the Articles
Supplementary, the Stockholders' Agreement, the Registration Rights Agreement,
the Shares or the Conversion Shares or any action taken or to be taken pursuant
hereto or thereto, (ii) might adversely affect the right, title or interest of
any Purchaser to the Shares or the Conversion Shares or (iii) might result in a
material adverse change in the assets, properties, liabilities, business,
affairs, results of operations, condition (financial or otherwise) or prospects
of the Company.
4.8. Taxes.
Each of the Company and each Subsidiary has duly and timely
filed all Tax Returns required to be filed by it, and each such Tax Return
correctly and completely reflects the Tax liability and all other information
required to be reported thereon. Each of the Company and each Subsidiary has
paid or caused to be paid all Taxes (whether or not reflected on such Tax
Returns) that are due and payable. The provision for Taxes due by the Company
and its Subsidiaries in the most recent financial statement included in the
Disclosure Material is sufficient for all unpaid Taxes, being current Taxes not
yet due and payable, of the Company and its Subsidiaries, as of the end of the
period covered by such financial statement, and as of the Closing Date, such
provision, as adjusted for the passage of time through the Closing Date, will be
sufficient for the then-accrued and unpaid Taxes not yet due and payable of the
Company and its Subsidiaries. No Tax Returns of the Company or any Subsidiary
have ever been audited by any Taxing Authority, there is no dispute concerning
any Tax liability of the Company or any Subsidiary either threatened, claimed or
raised by any Taxing Authority, and the Company does not expect any Taxing
Authority to assess additional Taxes against or in respect of it or any
Subsidiary for any past period. The Company and each Subsidiary has withheld and
paid, or, if not yet due for payment, set aside in accounts for such purposes,
all Taxes required to have been withheld in connection with amounts paid or
owing to any employee, creditor, independent contractor or other third party.
Other than stamp taxes, the Company and its Subsidiaries have no liability for
Taxes of any Person other than the Company and its Subsidiaries (i) as a
transferee or successor, (ii) by contract, or (iii) otherwise.
4.9. ERISA.
(a) All Benefit Plans are listed in Section 4.9(a) of Schedule
4.9, and copies of all documentation relating to such Benefit Plans have been
delivered to or made available for review by Purchasers (including, without
limitation, copies of written Benefit Plans, written descriptions of oral
Benefit Plans, summary plan descriptions, trust agreements, the three most
recent annual returns, employee communications, and IRS determination letters).
-21-
(b) Each Benefit Plan has at all times been maintained and
administered in all material respects in accordance with its terms and with the
requirements of all applicable law, including, without limitation, ERISA and the
Code, and each Benefit Plan intended to qualify under section 401(a) of the Code
has at all times since its adoption been so qualified, and each trust which
forms a part of any such plan has at all times since its adoption been
tax-exempt under section 501(a) of the Code.
(c) No Benefit Plan has incurred any "accumulated funding
deficiency" within the meaning of section 302 of ERISA or section 412 of the
Code, and the "amount of unfunded benefit liabilities" within the meaning of
section 4001(a)(18) of ERISA does not exceed zero with respect to any Benefit
Plan subject to Title IV of ERISA.
(d) No "reportable event" (within the meaning of section 4043
of ERISA) has occurred with respect to any Benefit Plan since the effective date
of said section 4043 for which notice is not waived under the regulations issued
pursuant to said section 4043.
(e) No Benefit Plan is a multiemployer plan within the meaning
of section 3(37) of ERISA.
(f) No direct, contingent or secondary liability has been
incurred or is expected to be incurred by the Company or any ERISA Affiliate
under Title IV of ERISA to any party with respect to any Benefit Plan.
(g) Neither the Company nor any ERISA Affiliate has incurred
any liability for any tax imposed under Chapter 43 of the Code or any liability
under Part 5 of Title I of ERISA.
(h) No benefit under any Benefit Plan, including, without
limitation, any severance or parachute payment plan or agreement, will be
established or become accelerated, vested or payable by reason of any
transaction contemplated under this Agreement.
(i) No Benefit Plan provides health or death benefit coverage
beyond the termination of an employee's employment, except as required by Part 6
of Subtitle B of Title I of ERISA or section 4980B of the Code or any State laws
requiring continuation of benefits coverage following termination of employment.
(j) No suit, action or other litigation (excluding claims for
benefits incurred in the ordinary course of plan activities) has been brought
or, to the knowledge of the Company or any Subsidiary, threatened against or
with respect to any Benefit Plan and there are no facts or circumstances known
to the Company or any Subsidiary that could reasonably be expected to give rise
to any such suit, action or other litigation.
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(k) All contributions to Benefit Plans that were required to
be made under such Benefit Plans have been made, and all benefits accrued under
any unfunded Benefit Plan have been paid, accrued or otherwise adequately
reserved in accordance with GAAP, all of which accruals under unfunded Benefit
Plans are as disclosed in Schedule 4.9, and each of the Company and each
Subsidiary has performed all material obligations required to be performed under
all Benefit Plans.
(l) The execution, delivery and performance of the Stock
Purchase Agreements, the Stockholders' Agreement and the Registration Rights
Agreement and the consummation of the transactions contemplated hereby and
thereby (including, without limitation, the offer, issue and sale by the
Company, and the purchase by the Purchaser of the Shares and the Conversion
Shares) will not involve any "prohibited transaction" within the meaning of
ERISA or the Code that could subject the Company or any ERISA Affiliate to a
tax, penalty or liability under ERISA or the Code.
4.10. Legal Compliance.
(a) Each of the Company and each Subsidiary has complied with
all applicable laws, rules, regulations, orders, licenses, judgments, writs,
injunctions, decrees or demands, except to the extent that failure to so comply
would not materially adversely affect the assets, properties, liabilities,
business affairs, results of operations, condition (financial or otherwise) or
prospects of the Company on a consolidated basis.
(b) There are no adverse orders, judgments, writs,
injunctions, decrees, or demands of any court or administrative body, domestic
or foreign, or of any other governmental agency or instrumentality, domestic or
foreign, outstanding against the Company or any Subsidiary.
4.11. Outstanding Securities.
Schedule 4.11 hereto correctly and completely lists the
outstanding securities (as defined in the Securities Act) of the Company and the
Subsidiaries. All securities of the Company have been offered, issued, sold and
delivered in compliance with, or pursuant to exemptions from, all applicable
federal and state laws, and the rules and regulations of federal and state
regulatory bodies governing the offering, issuance, sale and delivery of
securities.
4.12. Intellectual Property and Other Rights.
(a) Each of the Company and each Subsidiary owns or possesses
all patents, patent rights, trademarks, trademark rights, trade names, trade
name rights and copyrights (collectively, the "Intellectual Property") (each of
which is listed on Schedule 4.12(a) hereto), and all rights and privileges with
respect to any of the foregoing, as are necessary for the conduct of its
business as now being conducted and as proposed to be conducted. To the best of
the
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Company's knowledge, the rights of (and use by) each of the Company and each
Subsidiary with respect to such Intellectual Property or any other patents,
patent rights, trademarks, trademark rights, trade names, trade name rights or
copyrights do not conflict with or infringe any rights of others in a manner
which might materially and adversely affect the assets, properties, liabilities,
business, affairs, results of operations, condition (financial or otherwise) or
prospects of the Company, and no such claim of conflict or infringement has been
asserted by any Person.
(b) Each of the Company and each Subsidiary owns and holds all
franchises, licenses, permits, consents, approvals and other authority,
governmental or otherwise (collectively, the "Licenses") (each of which is
listed on Schedule 4.12(b) hereto), and all rights and privileges with respect
to any of the foregoing, as are materially necessary for the conduct of its
business as now being conducted and as proposed to be conducted, except to the
extent that failure to so own or hold is not reasonably likely to materially
adversely affect the assets, properties, liabilities, business, affairs, results
of operations, condition (financial or otherwise) or prospects of the Company.
Neither the Company nor any Subsidiary is in default in any material respect
under any of such Licenses. To the best of the Company's knowledge, the rights
of (and use by) each of the Company and each Subsidiary with respect to such
Licenses or any other franchise, license, permit, consent, approval or other
authority do not conflict with or infringe any rights of others in a manner
which might materially and adversely affect the assets, properties, liabilities,
business, affairs, results of operations, condition (financial or otherwise) or
prospects of the Company, and no such claim of conflict or infringement has been
asserted by any Person.
4.13. Key Employees.
Each of the Company and each Subsidiary has good relationships
with its employees and has not had and does not expect any substantial labor
problems. Neither the Company nor any Subsidiary has no knowledge as to any
intentions of any key employee to leave the employ of the Company or any
Subsidiary. The employees of the Company and each Subsidiary are not and have
never been represented by any labor union, and no collective bargaining
agreement is binding and in force against the Company or any Subsidiary or
currently being negotiated by the Company or any Subsidiary.
4.14. Properties.
Neither the Company nor any Subsidiary owns any real property.
Other than Permitted Liens, each of the Company and each Subsidiary has good and
marketable title to each of its other properties other than real property or
leased properties. Certain real property used by the Company or the Subsidiaries
in the conduct of their respective businesses is held under lease (as identified
on Schedule 4.14 hereto), and neither the Company nor any Subsidiary is aware of
any pending or threatened claim or action by any lessor of any such property to
terminate any such lease. All such leases are valid and in full force and
effect, and none of such leases is in default. None of the properties owned or
leased by the Company or any Subsidiary is subject to
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any Liens which could materially and adversely affect the assets, properties,
liabilities, business, affairs, results of operations, condition (financial or
otherwise) or prospects of the Company on a consolidated basis.
4.15. Suppliers and Customers.
(a) Each of the Company and each Subsidiary has adequate
sources of supply for its business as currently conducted and as proposed to be
conducted. Each has good relationships with all of its material sources of
supply of goods and services and each does not anticipate any material problem
with any such material sources of supply.
(b) Neither the Company nor any Subsidiary has any knowledge
that the customer base of the Company and its Subsidiaries might materially
decrease.
4.16. Environmental Compliance.
(a) To the knowledge of the Company or any Subsidiaries, there
is no Hazardous Material on, about, under or in, any property, real or personal,
in which the Company or any Subsidiary has or has formerly had any interest in
an amount or concentration which could constitute a violation that would result
in a liability in excess of $25,000 or otherwise result in a liability in excess
of $25,000 to the Company or any Subsidiary under any applicable Environmental
Law.
(b) There is no (and has not been any) off-site use, handling,
storage or disposal or on-site use, handling, storage or disposal of Hazardous
Material at or from any locations currently or formerly owned, leased, operated
or occupied by the Company or any Subsidiary as a result of which use, handling,
storage or disposal the Company could incur a material liability or obligation
under any applicable Environmental Law.
(c) Neither the Company nor any Subsidiary has received any
verbal or written notice, citation, subpoena, summons, complaint or other
correspondence or communication from any person with respect to the presence of
any non-indigenous Hazardous Material upon, into, beneath, or emanating from or
affecting any of the real property (including improvements) currently or
formerly owned or occupied by the Company that could result in a liability to
the Company or any Subsidiary in excess of $25,000.
(d) There has been no intentional or unintentional, gradual or
sudden, release, disposal or discharge by the Company or, to the Company's
knowledge, by others, upon, into or beneath the real property (including
improvements) currently or formerly owned or occupied by the Company or any
Subsidiary that has caused or is causing soil or groundwater contamination
which, under applicable Environmental Laws could require investigation or
remediation or could otherwise create a material liability or obligation on the
part of the Company or any Subsidiary.
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(e) The Company and its Subsidiaries are in material
compliance with all applicable Environmental Laws, has received all required
Environmental Permits and is in material compliance with the terms and
conditions of all Environmental Permits.
(f) To the best knowledge of the Company and its Subsidiaries
after reasonable inquiry, there are no Liens arising under or pursuant to any
Environmental Law ("Environmental Liens") relating to any real property
(including improvements thereon) currently owned by the Company or any
Subsidiary.
(g) There are no (i) underground storage tanks, (ii)
polychlorinated biphenyl containing equipment or (iii) asbestos-containing
materials at any site currently owned, operated or leased by the Company or any
Subsidiary, except in compliance with all applicable Environmental Laws.
4.17. No Burdensome Agreements.
To the best of the knowledge of the Company and its
Subsidiaries, other than this Agreement and the related documents, the Company
is not a party to any contract or agreement with any Affiliate of the Company or
of any Subsidiary, the terms of which are materially less favorable to the
Company or such Subsidiary, as the case may be, than those which might have been
obtained, at the time such contract or agreement was entered into, from a person
who was not such an Affiliate.
4.18. Offering of Shares.
None of the Company, any Subsidiary, any agent or any other
person acting on its behalf, directly or indirectly, (i) offered any of the
Shares or any similar security of the Company (A) by any form of general
solicitation or general advertising (within the meaning of Regulation D under
the Securities Act) or (B) for sale to or solicited offers to buy any thereof
from, or otherwise approached or negotiated with respect thereto with, any
person other than (x) the Purchasers and (y) not more than five other
institutional investors or Strategic Investors, each of which the Company
reasonably believed was an "accredited investor" within the meaning of
Regulation D under the Securities Act or (ii) has done or caused to be done (or
has omitted to do or to cause to be done) any act which act (or which omission)
would result in bringing the issuance or sale of the Shares within the
provisions of Section 5 of the Securities Act or the filing, notification or
reporting provisions of any state securities laws.
4.19. SEC Reports.
The Company has filed all proxy statements, reports and other
documents required to be filed by it under the Securities Exchange Act. The
Company has furnished the Purchaser with copies of (i) its Annual Report on Form
10-K for the fiscal year ended December 31, 1998, (ii) its Quarterly Reports on
Form 10-Q for the fiscal quarters ended March 31, 1999
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and June 30, 1999 and (iii) its Proxy Statement dated April 22, 1999
(collectively, the "SEC Reports"). Each SEC Report was in substantial compliance
with the requirements of its respective form and none of the SEC Reports, nor
the financial statements (and the notes thereto) included in the SEC Reports, as
of their respective dates, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
4.20. Indebtedness.
Schedule 4.20 hereto sets forth (i) the amount of all
Indebtedness of the Company and any Subsidiary outstanding as of September 30,
1999 (and there is no additional material amount of Indebtedness of the Company
outstanding other as set forth on such Schedule 4.20), (ii) any Lien with
respect to such Indebtedness and (iii) a description of each instrument or
agreement governing such Indebtedness. The Company has made available to the
Purchaser a complete and correct copy of each such instrument or agreement
(including all amendments, supplements or modifications thereto). No material
default exists with respect to or under any such Indebtedness or any instrument
or agreement relating thereto and no event or circumstance exists with respect
thereto that (with notice or the lapse of time or both) could give rise to such
a default.
4.21. Use of Proceeds.
The Company will use the proceeds realized from the sale of
the Shares to fund future development opportunities and for working capital
purposes. No portion of such proceeds will be used for the purpose, whether
immediate, incidental or ultimate, of purchasing or carrying, within the meaning
of Regulation U of the Board of Governors of the Federal Reserve System, as
amended from time to time, any "margin stock" as defined in said Regulation U,
or any "margin stock" as defined in Regulation G of the Board of Governors of
the Federal Reserve System, as amended from time to time, or for the purpose of
purchasing, carrying or trading in securities within the meaning of Regulation T
of the Board of Governors of the Federal Reserve System, as amended from time to
time, or for the purpose of reducing or retiring any indebtedness which both (i)
was originally incurred to purchase any such margin stock or other securities
and (ii) was directly or indirectly secured by such margin stock or other
securities. None of the assets of the Company or any Subsidiary includes any
such "margin stock." Neither the Company nor any Subsidiary has any present
intention of acquiring any such "margin stock."
4.22. Other Names.
Except as listed on Schedule 4.22, the businesses previously
or presently conducted by the Company and any Subsidiary have not been conducted
under any corporate, trade or fictitious name.
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4.23. Brokers.
No broker, finder or investment banker or other party is
entitled to any brokerage, finder's or other similar fee or commission in
connection with any Stock Purchase Agreement, the Stockholders' Agreement, the
Registration Rights Agreement or the Articles Supplementary or any of the
transactions contemplated hereby or thereby, based upon arrangements made by or
on behalf of the Company or any Subsidiary or any of their respective
Affiliates.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company as
follows:
5.1. Corporate Power and Authority.
The Purchaser has all requisite power, authority and legal
right to execute, deliver, enter into, consummate the transactions contemplated
by and perform its obligations under this Agreement, the Stockholders' Agreement
and the Registration Rights Agreement. The execution, delivery and performance
of this Agreement, the Stockholders' Agreement and the Registration Rights
Agreement by the Purchaser have been duly authorized by all required corporate
and other actions. The Purchaser has duly executed and delivered this Agreement,
the Stockholders' Agreement and the Registration Rights Agreement, and this
Agreement, the Stockholders' Agreement and the Registration Rights Agreement
constitute the legal, valid and binding obligations of the Purchaser enforceable
against the Purchaser in accordance with their respective terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to the rights of creditors generally or under general principles of
equity.
5.2. Investment Intent.
The Purchaser is capable of evaluating the risk of its
investment in the Shares being purchased by it and is able to bear the economic
risk of such investment. The Purchaser is purchasing the Shares to be purchased
by it for its own account for investment and not with a present view to any
distribution thereof in violation of applicable securities laws; provided,
however, that the Purchaser may transfer record and/or beneficial ownership of
the Shares or the Conversion Shares to one or more Affiliates, officers or
employees of Affiliates or investment funds managed by Affiliates of the
Purchaser, in all cases in compliance with federal securities laws. It is
understood that the disposition of the Purchaser's property shall at all times
be within the Purchaser's control. If the Purchaser should in the future decide
to dispose of any of its Shares or Conversion Shares, it is understood that it
may do so only in compliance with the
-28-
Securities Act, applicable securities laws and this Agreement. The Purchaser is
an "accredited investor" as defined in Rule 501(a) under the Securities Act.
5.3. Brokers.
Except as disclosed on Schedule 5.3 hereto, no broker, finder
or investment banker or other party is entitled to any brokerage, finder's or
other similar fee or commission in connection with any Stock Purchase Agreement,
the Stockholders' Agreement, the Registration Rights Agreement or the Articles
Supplementary or any of the transactions contemplated hereby or thereby, based
upon arrangements made by or on behalf of the Purchaser or any Subsidiary or any
of their respective Affiliates.
SECTION 6. RESTRICTIONS ON TRANSFER
The Purchaser agrees that it will not sell or otherwise
dispose of any Shares or Conversion Shares unless such Shares or Conversion
Shares have been registered under the Securities Act and, to the extent
required, under any applicable state securities laws, or pursuant to an
applicable exemption from such registration requirements. The Company may
endorse on all certificates representing Shares or Conversion Shares a legend
stating or referring to such transfer restrictions; provided, that no such
legend shall be endorsed on any Share certificates which, when issued, are no
longer subject to the restrictions of this Section 6.
SECTION 7. INFORMATION AS TO THE COMPANY
The Company covenants and agrees as follows:
7.1. Financial Information.
(a) The Company will maintain, and cause each Subsidiary to
maintain, a system of accounting established and administered in accordance with
sound business practices to permit preparation of financial statements in
accordance with GAAP.
(b) So long as at least 20,000 Shares are outstanding, the
Company will deliver to (I) the ▇▇▇▇▇▇▇ Holders and (II) each Permitted
Transferee, the following:
(i) as soon as practicable but not later than five
(5) Business Days after their issuance, and in any event within ninety (90) days
after the close of each fiscal year of the Company, (A) a consolidated balance
sheet of the Company and its Subsidiaries as of the end of such fiscal year and
(B) consolidated statements of operations, stockholders' equity and cash flows
of the Company and its Subsidiaries for such fiscal year, in each case setting
forth in comparative form the corresponding figures for the preceding fiscal
year, all such balance sheets
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and statements to be in reasonable detail and certified without qualification by
Ernst & Young LLP or any other "Big Five" independent public accounting firm
selected by the Company, and such statements shall be accompanied by a
management analysis of any material differences between the results for such
fiscal year and the corresponding figures for the preceding year; the Company's
Annual Report on Form 10-K shall satisfy such requirement provided that it is in
compliance with all applicable requirements of the SEC and is certified by a
"Big Five" accounting firm;
(ii) as soon as practicable, copies (A) of all
financial statements, proxy material or reports sent to the Company's or any
Subsidiary's stockholders, (B) of any public press releases and (C) of all
reports or registration statements filed with the Commission pursuant to the
Securities Act or the Securities Exchange Act;
(iii) as soon as practicable and in any event within
forty-five (45) days after the close of each of the first three (3) fiscal
quarters of the Company, (A) a consolidated balance sheet of the Company and its
Subsidiaries as of the end of such fiscal quarter, (B) consolidated statements
of operations, stockholders' equity and cash flows of the Company and its
Subsidiaries for the portion of the fiscal year ended with the end of such
quarter, in each case in reasonable detail, certified by (I) the Chief Financial
Officer, (II) the Chief Executive Officer or (III) the President of the Company
and setting forth in comparative form the corresponding figures for the
comparable period one year prior thereto (subject to normal year-end
adjustments), together with a management analysis of any material differences
between such results and the corresponding figures for such prior period and (C)
a certificate of (I) the Chief Financial Officer, (II) the Chief Executive
Officer or (III) the President certifying the Company's compliance with the
covenants contained in Section 9 of this Agreement; the Company's Quarterly
Report on Form 10-Q shall satisfy such requirement provided that it is in
compliance with all applicable requirements of the SEC;
(iv) as soon as practicable but not later than thirty
(30) days after the end of each month other than the final month of the
Company's fiscal year, (A) an unaudited consolidated balance sheet of the
Company and its Subsidiaries as at the end of such month and (B) unaudited
consolidated statements of operations, stockholders' equity and cash flows of
the Company and its Subsidiaries for the portion of the fiscal year ended with
the end of such month, in each case in reasonable detail, setting forth in
comparative form the corresponding figures for the corresponding period one year
prior thereto (subject to normal year-end adjustments);
(v) as soon as practicable and without duplication of
any of the above items, any other materials furnished to the Company's Board of
Directors or to holders of the Company's capital stock or Indebtedness,
including, without limitation, any compliance certificates furnished in respect
of such Indebtedness, which shall be delivered to the ▇▇▇▇▇▇▇ Designee(s) and
the Transferee Designee(s); and
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(vi) as soon as practicable, such other information
as may reasonably be requested by (I) the ▇▇▇▇▇▇▇ Holders or (II) any Permitted
Transferee.
(c) The Company will deliver to each member of the Company's
Board of Directors and each observer to the Company's Board of Directors
appointed pursuant to Section 3(a) of the Stockholders' Agreement, as soon as
practicable (and in the case of (iii), prior to the end of each fiscal year) and
without duplication of any of the items listed below, the following:
(i) copies of any annual, special or interim audit
reports or management or comment letters with respect to the Company or its
Subsidiaries or their operations submitted to the Company by independent public
accountants;
(ii) copies of summary financial information prepared
on a quarterly basis regarding the Company on a consolidated basis as presented
to the Board and any other summary financial information otherwise prepared;
(iii) copies of the annual budget and business plan
for the next fiscal year;
(iv) copies of all formal communications, from time
to time, to directors of the Company (including without limitation all
information furnished to such directors in connection with such communications),
and copies of minutes of meetings of the Board of Directors (and of any
executive committees thereof) of the Company;
(v) notice of default under any material agreement,
contract or other instrument to which the Company or any of its Subsidiaries is
a party or by which any of them is bound;
(vi) notice of any action or proceeding which has
been commenced or threatened against the Company or any of its Subsidiaries and
which, if adversely determined, would have, individually or in the aggregate, a
material adverse effect on the assets, properties, liabilities, business,
affairs, results of operations, condition (financial or otherwise) or prospects
of the Company on a consolidated basis; and
(vii) copies of all filings made with the Commission.
(d) All such financial statements referred to in this Section
7.1 shall be prepared in accordance with GAAP (except for any change in
accounting principles specified in the accompanying certificate, in the
financial statements themselves or required by GAAP, and except that any interim
financial statements may omit notes and may be subject to normal year-end
adjustments).
-31-
(e) Without limiting the foregoing provisions of this Section
7.1, the Company agrees that, if requested in writing by any holder of Shares,
it will not deliver to such holder (until otherwise instructed by such holder)
(x) any non-public information or non-public materials regarding the Company or
any Subsidiary (whether described in this Section 7.1 or otherwise) and (y) any
information (whether or not included in clause (x)) which such holder specifies
that it does not want to receive. The Company shall comply with any such request
with respect to each person entitled to information hereunder, until instructed
otherwise by the then holder of such Shares.
7.2. Communication with Accountants.
The Company (on behalf of itself and each of its Subsidiaries)
hereby authorizes (i) the Purchaser to communicate directly with the independent
certified public accountants for the Company or any Subsidiary and (ii) such
accountants to disclose to the Purchaser any and all financial statements and
any other information of any kind that they may have with respect to the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company or any Subsidiary; provided
that (a) the Purchaser in good faith and based upon reasonable assumptions has
financial concerns regarding the Company that causes it to desire to communicate
with such accountants and (b) the Purchaser must first notify the Company of its
intention to speak with such accountants and permit the Company to participate
in such conversation if the Company desires to do so. The Company shall deliver
a letter addressed to such accountants instructing them to comply with the
provisions of this Section 7.2.
7.3. Inspection.
The Company will permit (I) the ▇▇▇▇▇▇▇ Holders, (II) any
Permitted Transferee, and (III) any authorized representative of the ▇▇▇▇▇▇▇
Holders or such Permitted Transferee, to visit and inspect any of the properties
of the Company and its Subsidiaries, to examine their respective books and
records and to discuss with their officers their books and records and the
assets, properties, liabilities, business, affairs, results of operations,
condition (financial or otherwise) or prospects of the Company or any
Subsidiary, all at such reasonable times, all on reasonable notice and as often
as may be reasonably requested.
7.4. Notices.
The Company will give notice to all holders of Shares promptly
after it learns, other than by notice from all of such holders, of the existence
of any of the following:
(a) any default under any Indebtedness (or under any
indenture, mortgage or other agreement relating to any Indebtedness) which
Indebtedness is in an aggregate principal amount exceeding $100,000 (or the
equivalent thereof in other currencies) in respect of which the Company or any
Subsidiary is liable;
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(b) any action or proceeding which has been commenced or
threatened against the Company or any of its Subsidiaries and which, if
adversely determined, would have, individually or in the aggregate, a material
adverse effect on the assets, properties, liabilities, business, affairs,
results of operations, condition (financial or otherwise) or prospects of the
Company on a consolidated basis or the ability of the Company to perform its
obligations under the Stock Purchase Agreements, the Stockholders' Agreement,
the Registration Rights Agreement or the Articles Supplementary;
(c) any dispute which exists between the Company or any of its
Subsidiaries and any governmental regulatory body which, in the reasonable
opinion of the Company is reasonably likely to, individually or in the
aggregate, materially adversely affect the normal business operations of the
Company or any of its Subsidiaries or the assets, properties, liabilities,
business, affairs, results of operations, condition (financial or otherwise) or
prospects of the Company on a consolidated basis or the ability of the Company
to perform its obligations under the Stock Purchase Agreements, the
Stockholders' Agreement, the Registration Rights Agreement or the Articles
Supplementary; and
(d) if any (i) "reportable event" (as such term is described
in Section 4043(c) of ERISA) has occurred; or (ii) "accumulated funding
deficiency" (within the meaning of Section 412(a) of the Code or Section 302 of
ERISA) has been incurred with respect to a Pension Plan maintained or
contributed to (or required to be maintained or contributed to) by the Company
or any ERISA Affiliate that is subject to the funding requirements of ERISA
and/or the Code or that an application may be or has been made to the Secretary
of the Treasury for a waiver or modification of the minimum funding standard
(including any required installment payments) or an extension of any
amortization period under Section 412 of the Code or Section 302 of ERISA, in
each case with respect to such a Pension Plan; or (iii) Pension Plan maintained
or contributed to (or required to be maintained or contributed to) by the
Company or any ERISA Affiliate has been terminated, reorganized, petitioned or
declared insolvent under Title IV of ERISA; or (iv) Pension Plan maintained or
contributed to (or required to be maintained or contributed to) by the Company
or any ERISA Affiliate has an unfunded current liability giving rise to a lien
under ERISA or the Code; or (v) proceeding has been instituted pursuant to
Section 515 of ERISA to collect a delinquent contribution to a Pension Plan
maintained or contributed to (or required to be maintained or contributed to) by
the Company or any ERISA Affiliate; or (vi) of the Company or its ERISA
Affiliates will or may incur any liability (including any contingent or
secondary liability) to or on account of the termination or withdrawal from a
Pension Plan maintained or contributed to (or required to be maintained or
contributed to) by the Company or any ERISA Affiliate; or (vii) "prohibited
transaction" (as such term is defined in Section 406 of ERISA or Section 4975 of
the Code) in connection with an "employee benefit plan" (as defined in Section
3(3) of ERISA), maintained or contributed to (or required to be maintained or
contributed to) by the Company or any ERISA Affiliate that could subject the
Company or any ERISA Affiliate to a tax penalty or liability under ERISA or the
Code.
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(e) if any proposals, inquiries or expressions of interest are
received by, any information is requested from, or any negotiations or
discussions are sought to be initiated or continued with the Company or any of
its Subsidiaries or its representatives, in each case in connection with any
Takeover Proposal or the possibility or consideration by a third party of making
a Takeover Proposal ("Takeover Proposal Interest") indicating, in connection
with such notice, the name of the Person indicating such Takeover Proposal
Interest and the terms and conditions of any proposals or offers, and continuing
to keep the ▇▇▇▇▇▇▇ Holders informed, on a current basis, of the status and
terms of any Takeover Proposal Interest; provided that the timing and content of
such notice shall be the same as that which is provided to the Board of
Directors. The Company agrees that it will take the necessary steps promptly to
inform the Persons referred to in the first sentence hereof of the obligations
undertaken in this Section 7.4(e).
Such notice (i) with respect to subsection (a) above, shall specify the nature
and period of existence of any such default and what the Company proposes to do
with respect thereto and (ii) with respect to subsections (b), (c) or (d) above,
shall specify the nature of any such matter referred to in such clause, what
action the Company proposes to take with respect thereto and what action any
other relevant Person is taking or proposes to take with respect thereto.
7.5. Confidentiality Agreement.
The Company's obligation to provide any non-public information
under this Section 7 or otherwise to any person other than members of its Board
of Directors shall be subject to prior execution of a confidentiality agreement
between the Company and the recipient of such information as more fully set
forth in the form attached hereto as Exhibit E (the "Confidentiality
Agreement").
SECTION 8. AFFIRMATIVE COVENANTS
The Company covenants and agrees as follows:
8.1. Maintenance of Existence, Properties and Franchises;
Compliance with Law; Taxes; Insurance.
The Company will, and will cause each Subsidiary to:
(a) maintain their respective corporate existence, rights and
other franchises in full force and effect;
(b) maintain their respective tangible assets in good repair,
working order and condition so far as necessary or advantageous to the proper
carrying on of their respective businesses;
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(c) comply with all applicable laws and with all applicable
orders, rules, rulings, certificates, licenses, regulations, demands, judgments,
writs, injunctions and decrees, provided, that such compliance shall not be
necessary so long as (i) the applicability or validity of any such law, order,
rule, ruling, certificate, license, regulation, demand, judgment, writ,
injunction or decree shall be contested in good faith by appropriate proceedings
and (ii) failure to so comply will not have a material adverse effect on the
assets, properties, liabilities, business, affairs, results of operations,
condition (financial or otherwise) or prospects of the Company on a consolidated
basis;
(d) pay promptly when due all Taxes imposed upon its
properties, assets or income and all claims or indebtedness (including, without
limitation, vendor's, workmen's and like claims) which might become a lien upon
such properties or assets; provided, that payment of any such Tax shall not be
necessary so long as (i) the applicability or validity thereof shall be
contested in good faith by appropriate proceedings and a reserve, if
appropriate, shall have been established with respect thereto and (ii) failure
to make such payment will not have a material adverse effect on the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company on a consolidated basis;
and
(e) keep adequately insured, by financially sound and
reputable insurers of nationally recognized stature, all its properties of a
character customarily insured by entities similarly situated, against loss or
damage of the kinds and in amounts customarily insured against by such entities
and with such deductibles or coinsurance as is customary.
8.2. Office for Payment, Exchange and Registration;
Location of Office; Notice of Change of Name or
Office.
(a) So long as any of the Shares is outstanding, the Company
will maintain an office or agency where Shares may be presented for redemption,
exchange, conversion, exercise or registration of transfer as provided in this
Agreement. Such office or agency initially shall be the office of the Company
specified in Section 18 hereof, subject to Section 8.2(b).
(b) The Company shall give each holder of Shares at least
twenty (20) days' prior written notice of any change in (i) the name of the
Company as then in effect or (ii) the location of the office of the Company
required to be maintained under this Section 8.2.
8.3. Fiscal Year.
The fiscal year of the Company and its Subsidiaries for tax,
accounting and any other purposes shall end on December 31 of each calendar
year.
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8.4. Environmental Matters.
(a) The Company and each Subsidiary shall keep and maintain
any property either owned leased, operated or occupied by the Company or any
Subsidiary free and clear of any Environmental Liens, and the Company and each
Subsidiary, as the case may be, shall keep all such property free of Hazardous
Material contamination and in compliance with all applicable Environmental Laws
and the terms and conditions of any Environmental Permits; provided, however,
that the Company or any Subsidiary shall have the right at its cost and expense,
and acting in good faith, to contest, object or appeal by appropriate legal
proceeding the validity of any Environmental Lien. The contest, objection or
appeal with respect to the validity of an Environmental Lien shall suspend the
Company's obligation to eliminate such Environmental Lien under this paragraph
pending a final determination by appropriate administrative or judicial
authority of the legality, enforceability or status of such Environmental Lien,
provided that the following conditions are satisfied: (i) contemporaneously with
the commencement of such proceedings, the Company shall give written notice
thereof to each ▇▇▇▇▇▇▇ Holder and its Transferees while they hold Shares or
Conversion Shares; and (ii) if under applicable law any real property or
improvements thereon are subject to sale or forfeiture for failure to satisfy
the Environmental Lien prior to a final determination of the legal proceedings,
the Company or such Subsidiary must successfully move to stay such sale,
forfeiture or foreclosure pending final determination of the Company's (or
Subsidiary's) action; and (iii) the Company or such Subsidiary must, if
requested, furnish to the ▇▇▇▇▇▇▇ Holders and their Transferees, as a group,
while they hold Shares or Conversion Shares a good and sufficient bond, surety,
letter of credit or other security satisfactory to such holders equal to the
amount (including any interest and penalty) secured by the Environmental Lien.
(b) The Company will, by administrative or judicial process,
enforce the obligations of any other Person who is potentially liable for
damages, contribution or other relief in connection with any violation of
Environmental Laws, including, but not limited to, asbestos abatement, Hazardous
Material remediation or off-site or on-site disposal.
(c) The Company will defend, indemnify and hold harmless each
current, former and future holder of Shares or Conversion Shares, its employees,
officers, directors, stockholders, partners, financial and legal representatives
and assigns, from and against any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits and claims, joint or several, and any
costs, disbursements and expenses (including attorneys' fees and expenses and
costs of investigation) of whatever kind or nature, known or unknown, contingent
or otherwise asserted against, imposed on, or sustained by, them, arising out of
or in any way related to (i) the presence, disposal, release, removal, discharge
or storage of any Hazardous Material upon, into, from or affecting any real
property (including improvements) currently or formerly owned, leased, operated
or occupied by or on behalf of the Company or any Subsidiary or any predecessor
thereof; (ii) any judicial or administrative action, suit or proceeding, actual
or threatened, relating to Hazardous Material upon, in, from or affecting any
real property (including improvements) currently or formerly owned, leased,
operated or occupied by the
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Company for which the Company or any Subsidiary could be liable; (iii) any
violation of any Environmental Law or Environmental Permit, by the Company or
any Subsidiary or any of their agents, tenants, subtenants or invitees; (iv) the
imposition of any Environmental Lien for the recovery of costs expended in the
investigation, study or remediation of any environmental liability of (or
asserted against) the Company or any Subsidiary; and (v) any liability arising
out of or related to the off-site shipment, transportation, disposal, treatment,
handling or disposal of Hazardous Materials by or on behalf of the Company or
any predecessor thereof. This Section 8.4(c) and Section 8.4(d) shall survive
any payment, conversion or transfer of Shares and any termination of this
Agreement.
(d) To the extent that the Company or any Subsidiary is
strictly liable without regard to fault under any Environmental Law, the
Company's obligations to the holders of Shares or Conversion Shares under any of
the indemnification provisions of the Stock Purchase Agreements shall likewise
be strict without regard to fault with respect to the violation of any
Environmental Law which results in any liability to any of the indemnified
persons referred to in Section 8.4(c).
8.5. Reservation of Shares.
There have been reserved, and the Company shall at all times
keep reserved, free from preemptive rights, out of its authorized Common Stock a
number of shares of Common Stock sufficient to provide for the exercise of the
conversion rights provided in Section 5 of the Articles Supplementary.
8.6. Securities Exchange Act Registration.
(a) the Company will maintain effective a registration
statement (containing such information and documents as the Commission shall
specify and otherwise complying with the Securities Exchange Act), under Section
12(b) or Section 12(g), whichever is applicable, of the Securities Exchange Act,
with respect to the Common Stock of the Company, and the Company will file on
time such information, documents and reports as the Commission may require or
prescribe for companies whose stock has been registered pursuant to such Section
12(b) or Section 12(g), whichever is applicable.
(b) The Company will, upon the request of any holder of
Shares, make whatever other filings with the Commission, or otherwise make
generally available to the public such financial and other information, as any
such holder may deem reasonably necessary or desirable in order to enable such
holder to be permitted to sell Shares pursuant to the provisions of Rule 144.
8.7. Delivery of Information for Rule 144A Transactions.
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If a holder of Shares proposes to transfer any such Shares
pursuant to Rule 144A under the Securities Act (as in effect from time to time),
the Company agrees to provide (upon the request of such holder or the
prospective transferee) to such holder and (if requested) to the prospective
transferee any financial or other information concerning the Company and its
Subsidiaries which is required to be delivered by such holder to any transferee
of such Shares pursuant to such Rule 144A, subject to confidentiality
provisions, if applicable.
8.8. Senior Securities.
(a) Subject to Section 8.8(b), the Company shall maintain the senior
status of the Series A Preferred such that it shall rank senior in all respects,
including the payment on liquidation and redemption, to all other equity
securities of the Company.
(b) Notwithstanding the foregoing Section 8.8(a):
(i) the Company may issue up to $10,000,000 of Preferred
Stock, with pricing terms that are no more favorable than
those of the Series A Preferred, to either:
(A) a Strategic Investor, provided that (I) such
Preferred Stock may rank either senior to or pari
passu with the Series A Preferred; and provided
further that the Company shall use its reasonable
best efforts in its negotiations with such Strategic
Investor to have the Preferred Stock rank pari passu
with (instead of senior to) the Series A Preferred
and (II) the Company shall permit the ▇▇▇▇▇▇▇ Funds
to be involved in such issuance of Preferred Stock to
such Strategic Investor, or
(B) a Financial Investor; provided that such
Preferred Stock shall rank either pari passu with or
junior to the Series A Preferred; and
(ii) the Company may issue up to an additional $10,000,000 of
Preferred Stock ranking pari passu with the Series A
Preferred; provided that the conversion price per share of
Common Stock into which such Preferred Stock is convertible is
at least 145% of the Conversion Price of the Series A
Preferred (as defined in the Articles Supplementary) at the
time of issuance of such Preferred Stock.
8.9. Further Assurances.
The Company shall from time to time, upon the request of the
▇▇▇▇▇▇▇ Holders or any Transferee, promptly and duly execute and deliver any and
all such further instruments and documents as the ▇▇▇▇▇▇▇ Holders or such
Transferee, as the case may be, may reasonably deem necessary or desirable to
obtain the full benefits of (i) the obligations of the Company under this
Agreement and (ii) the other rights and powers herein granted. Upon the
instructions from time
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to time of the ▇▇▇▇▇▇▇ Holders or any Transferee, the Company shall execute and
cause to be filed any document or filing presented to the Company in proper form
for signing or filing, in each case as the ▇▇▇▇▇▇▇ Holders or such Transferee
may reasonably deem necessary or desirable in light of the Company's obligations
under this Agreement, and the Company shall pay or cause to be paid any filing
or other fees in connection therewith.
SECTION 9. NEGATIVE COVENANTS
The Company covenants and agrees that (i) with respect to
Sections 9.1, 9.2, 9.3, 9.4, 9.5, 9.6, 9.8, 9.9, 9.9, 9.10 and 9.11, without the
prior written consent of the holders of more than 50% of outstanding Shares and
(ii) with respect to Section 9.7, without the approval described therein:
9.1. No Dilution or Impairment; No Changes in Capital Stock.
The Company will not, by amendment of its charter or through
any consolidation, merger, reorganization, transfer of assets, dissolution,
issue or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of the Stock Purchase
Agreements, the Articles Supplementary, the Registration Rights Agreement or the
Stockholders'' Agreement. The Company will at all times in good faith assist in
the carrying out of all such terms, and in the taking of all such action, as may
be necessary or appropriate in order to protect the rights of the holders of
Shares (as such rights are set forth in the Stock Purchase Agreements, the
Articles Supplementary, the Registration Rights Agreement and the Stockholders'
Agreement) against dilution or other impairment. Without limiting the generality
of the foregoing, the Company (a) will not issue any shares or class or series
of equity or equity-linked security, which is senior to, or pari passu with, the
Series A Preferred as to dividend payments or amounts payable in the event of
liquidation or winding up of the Company, except as otherwise provided in
Section 8.8(b) hereof, (b) will not enter into any agreement or instrument which
would restrict or otherwise materially adversely affect the ability of the
Company to perform its obligations under the Stock Purchase Agreements, the
Stockholders' Agreement, the Registration Rights Agreement or the Articles
Supplementary, (c) will not amend its charter or by-laws in any manner which
would impair or reduce the rights of the Preferred Stock, including, without
limitation, an amendment which would alter or change the powers, privileges or
preferences of the holders of the Series A Preferred (including, without
limitation, changing the Articles Supplementary after any Shares have been
called for redemption), (d) except as otherwise provided in the Articles
Supplementary will not redeem, repurchase or otherwise acquire, either directly
or indirectly through its Subsidiaries, any shares of capital stock of the
Company or any of its Subsidiaries or any other rights or options to subscribe
for or purchase any capital stock of the Company or any other securities
convertible into or exchangeable for capital stock of the Company, (e) will not
permit the par value or the determined or stated value of any shares of Common
Stock receivable upon the conversion of the Shares to exceed the amount payable
therefor upon such conversion, (f) will take all such action
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as may be necessary or appropriate in order that the Company may at all times
validly and legally issue duly authorized, fully paid and nonassessable shares
of the Common Stock free from all taxes, Liens and charges with respect to the
issue thereof, upon the conversion of the Shares from time to time outstanding,
(g) will not take any action which results in any adjustment of the current
conversion price under the Articles Supplementary if the total number of shares
of the Common Stock (or other securities) issuable after the action upon the
conversion of all of the then outstanding Shares would exceed the total number
of shares of Common Stock (or other securities) then authorized by the
Company''s charter and available for the purpose of issuance upon such
conversion or exercise, (h) will not have any authorized Common Stock (and will
not issue any Common Stock) other than its existing authorized Common Stock, and
(i) will not amend its charter to change any terms of its Common Stock.
9.2. Indebtedness.
So long as more than 25% of the Shares are outstanding, the
Company will not (i) incur Indebtedness, including any Indebtedness set forth on
Schedule 4.20 hereto, in excess of the greater of either (A) $30,000,000 in
aggregate principal amount or (B) 3.5 times EBITDA for the preceding twelve
months; or (ii) enter into any agreement, amendment or modification with respect
to any Indebtedness, which agreement, amendment or modification under clause
(ii) restricts or prohibits (or was intended primarily to restrict or prohibit)
the Company from making any payments under, or otherwise performing under the
Stock Purchase Agreements.
9.3. Consolidation, Merger and Sale.
Neither the Company nor any Subsidiary will (or will agree
to): (a) wind up, liquidate or dissolve its affairs (except that a wholly-owned
Subsidiary can be wound-up, dissolved and liquidated into another wholly-owned
Subsidiary or into the Company), (b) so long as more than 25% of the Shares are
outstanding, sell, lease, transfer or otherwise dispose of all or substantially
all of its assets to any other Person (except that a wholly-owned Subsidiary can
sell, lease, transfer or otherwise dispose of all or substantially all of its
assets to another wholly-owned Subsidiary or to the Company); or (c) so long as
more than 25% of the Shares are outstanding, effect a merger or consolidation if
the Company is not the surviving corporation from such merger or consolidation.
Notwithstanding the foregoing, the Company may take any of the actions described
in the foregoing subsection (b) or (c) pursuant to a contemplated transaction
(the "Fundamental Transaction"); provided that, prior to taking any such action,
the Company offers, in writing, to the ▇▇▇▇▇▇▇ Funds the right to choose either
(I) to receive securities or other consideration in the Fundamental Transaction
that are substantially similar from an economic standpoint to the outstanding
value of the Shares, on substantially similar terms as the other investors in
the Fundamental Transaction, or (II) to receive the greater of (x) 200% of the
then Conversion Price (pursuant to the Articles Supplementary) or (y) a 25%
Internal Rate of Return from the Closing Date through the date of the
Fundamental Transaction.
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9.4. No Change in Business.
So long as more than 25% of the Shares are outstanding,
neither the Company nor any of its Subsidiaries will change substantially the
character of its business as conducted on the Closing Date as represented in
Section 4.4 hereof and described in the Disclosure Material.
9.5. Restricted Payments; Investments.
Neither the Company nor any of its Subsidiaries will declare
or make or permit to be declared or made:
(ai any Restricted Payment; or
(bi any Investment.
9.6. Affiliate Loans and Guaranties.
Neither the Company nor any Subsidiary may incur or permit to
exist any of the following:
(a) any obligation of the Company or of any Subsidiary to
repay money borrowed owing to (i) any Affiliate of the Company, (ii) any
Affiliate of any Subsidiary or (iii) any other holder of shares of the capital
stock of the Company or a Subsidiary; or
(b) any obligation, to any Person, which obligation is assumed
or guaranteed by the Company or a Subsidiary and which is an obligation of (i)
any Affiliate of the Company, (ii) any Affiliate of any Subsidiary or (iii) any
other holder of shares of the capital stock of the Company or a Subsidiary
(excluding, in the case of this clause (b), any obligation of the Company or of
a wholly-owned Subsidiary which is not owed to an Affiliate of the Company or to
an Affiliate of a Subsidiary or to any other holder of shares of the capital
stock of the Company or of a Subsidiary).
This Section 9.6 shall not apply to (1) any obligations under the Stock Purchase
Agreements or with respect to the Shares, (2) any loans, advances or Guarantees
referred to in clause (1) of the proviso to the definition of "Investment"
contained in Section 3 hereof, (3) Indebtedness identified on Schedule 4.20
hereto or (4) any obligations under any of the Affiliate Agreements.
9.7. Transactions with Affiliates.
The Company will not, and will not permit any Subsidiary to,
directly or indirectly, enter into any transaction or agreement (including,
without limitation, the purchase, sale, distribution, lease or exchange of any
property or the rendering of any service) with any Affiliate of the Company or
of any Subsidiary, other than a wholly-owned Subsidiary of the
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Company, unless such transaction or agreement (a) is approved by a majority of
the Outside Directors on the Board of Directors, and (b) is on terms that are no
less favorable to the Company or such Subsidiary, as the case may be, than those
which might be obtained at the time of such transaction from a Person who is not
such an Affiliate; provided, however, that this Section 9.7 shall not limit, or
be applicable to, (i) employment arrangements with (and general salary and
benefits compensation for) any individual who is a full-time employee of the
Company or any Subsidiary if such arrangements are approved by a majority of the
Outside Directors on the Board of Directors; and (ii) the payment of reasonable
and customary regular fees to directors of the Company who are not employees of
the Company; and (iii) any obligations under any of the Affiliate Agreements.
9.8. Liens.
The Company will not create or permit to exist, or permit any
of its Subsidiaries to create or suffer to exist, any Lien upon or with respect
to any of its assets or income, other than Permitted Liens and existing liens
set forth on Schedule 9.8 hereto.
9.9. Private Placement Status.
Neither the Company nor any agent nor other Person acting on
the Company's behalf will do or cause to be done (or will omit to do or to cause
to be done) any act which act (or which omission) would result in bringing the
issuance or sale of the Shares or the Conversion Shares within the provisions of
Section 5 of the Securities Act or the filing, notification or reporting
requirements of any state securities law (other than in accordance with a
registration and qualification of Conversion Shares pursuant to the Registration
Rights Agreement).
9.10. Maintenance of Public Market.
So long as more than 25% of the Shares are outstanding, the
Company will not proceed with a program of acquisition of its Common Stock,
initiate a corporate reorganization or recapitalization or undertake a
consolidation or merger or authorize, consent to or take any action which would
have the effect of:
(a) removing the Company from registration with the Commission
under the Securities Exchange Act with respect to the Company's Common Stock;
(b) requiring the Company to make a filing under Section 13(e)
of the Securities Exchange Act;
(c) reducing the average daily trading volume over a 30-day
period of the Common Stock on the principal securities exchange under which it
is then listed to less than 5,000 shares of Common Stock or eliminating the
public market for shares of Common Stock of the Company;
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(d) causing a delisting of the Company's Common Stock as a
Nasdaq National Market Security on the Nasdaq Stock Market (unless such stock is
delisted as a result of being listed on a national securities exchange); or
(e) if any shares of the Company's Common Stock are at any
time listed on a national securities exchange, causing a delisting of such stock
from such exchange, unless such delisting is in connection with a listing on
another national securities exchange.
Notwithstanding the foregoing, the Company may take any of the actions described
in the foregoing subsection (a) or (c) pursuant to a contemplated transaction
(the "Going Private Transaction"); provided that, prior to taking any such
action, the Company offers, in writing, to the ▇▇▇▇▇▇▇ Funds the right to choose
either (I) to receive securities or other consideration in the Going Private
Transaction that are substantially similar from an economic standpoint to the
outstanding value of the Shares, on substantially similar terms as the other
investors in the Going Private Transaction, or (II) to receive the greater of
(x) 200% of the then Conversion Price (as defined in the Articles Supplementary)
or (y) a 25% Internal Rate of Return from the Closing Date through the date of
the Going Private Transaction.
9.11. Actions Prior to the Closing Date.
From the date hereof through the Closing Date, the Company
will not, and will not permit any Subsidiary to, (a) issue or agree to issue any
capital stock or any securities exercisable for, or convertible or exchangeable
into, capital stock or (b) purchase, redeem or otherwise acquire any of its
capital stock; provided, however, that this Section 9.11 shall not limit, or be
applicable to, (i) the transactions contemplated by the Stock Purchase
Agreements, including any issuance of capital stock in connection with the
transactions contemplated by Sections 9.1 and 9.10 hereof and (ii) grants of
options or issuances of Common Stock to officers, directors or employees of the
Company pursuant to the current terms of the Company's 1997 Stock Option Plan
and 1998 Stock Incentive Plan or the exercise of any existing warrants listed on
Schedule 4.11 hereto.
SECTION 10. PREEMPTIVE RIGHTS
(a) Except (i) for issuances of pro rata dividends to all
holders of Common Stock, (ii) stock issued to employees, officers or directors
in connection with management options or incentive plans approved by the Board
of Directors, (iii) stock issued in connection with any merger, acquisition or
business combination, (iv) stock issued for consideration amounting to less than
$500,000 in any single transaction where the purchase price is not less than the
then applicable Conversion Price (as defined in the Articles Supplementary),
provided that the aggregate amount of all such transactions shall not exceed
$1,000,000, (v) up to 5,167,328 shares of stock issuable upon conversion of the
6% Non-Voting Convertible Preferred Stock (as adjusted pursuant to the
antidilution provisions therein), or (vi) up to 1,193,573 shares
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of stock issuable pursuant to the MCI Warrant (as adjusted pursuant to the
antidilution provisions therein), in order to enable such holders to maintain
their Fully Diluted percentage ownership of the Company, the holders of the
Series A Preferred shall have preemptive rights, as hereinafter set forth, to
purchase any capital stock, including any warrants or securities convertible
into capital stock, of the Company hereafter issued by the Company so that a
holder of the Series A Preferred shall hereafter be entitled to acquire a
percentage of capital stock which is hereafter issued equal to the same
percentage of the issued and outstanding Common Stock of the Company as is held
(directly or obtainable upon conversion of the Series A Preferred) by such
holder of Series A Preferred immediately prior to the date on which the capital
stock is to be issued on a Fully Diluted basis. As used herein, "issue" (and
variations thereof) includes sales and transfers by the Company of treasury
shares.
(b) The Company shall, before issuing any additional capital
stock (other than the exceptions referred to in Section 10(a) hereof), give
written notice thereof to the holders of the Series A Preferred. Such notice
shall specify what type of instrument the Company intends to issue and the
consideration which the Company intends to receive therefor. For a period of
twenty (20) days following receipt by the holders of the Series A Preferred of
such notice, the Company shall be deemed to have irrevocably offered to sell to
the holders of the Series A Preferred a sufficient number of shares of such
capital stock so that the holders of the Series A Preferred, if such holders
elects to acquire such shares as hereinafter set forth, shall be capable of
acquiring the same percentage of such shares as the percentage of Common Stock
beneficially owned (directly or obtainable upon conversion of the Series A
Preferred) by such holders immediately prior to the proposed issuance on a Fully
Diluted basis. In the event any such offer is accepted, in whole or in part, by
the holders of the Series A Preferred, the Company shall sell such shares to
holders of the Series A Preferred for the consideration and on the precise terms
set forth in the Company's notice (given under the first two sentences of this
paragraph). In the event that one or more holders of the Series A Preferred
elects not to, or fails to, exercise its rights under this Section 10 within the
twenty (20) day period, then the Company may issue the remaining shares of
capital stock offered to, but not purchased by, such holders of the Series A
Preferred, to third persons but only for the same consideration set forth in the
Company's notice (given under the first two sentences of this paragraph) and no
later than ninety (90) days after the expiration of such twenty day period. The
closing for such transaction shall take place as proposed by the Company with
respect to the shares of capital stock proposed to be issued, at which closing
the Company shall deliver certificates for the shares of capital stock in the
respective names of the holders of the Series A Preferred against receipt of the
consideration therefor.
(c) Notwithstanding any other provision hereof, the preemptive
rights granted to holders of Series A Preferred by this Section 10 shall
terminate with respect to a share of Series A Preferred upon the conversion or
redemption of such share of Series A Preferred in accordance with the provisions
hereof or in the Articles Supplementary.
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SECTION 11. CONDITIONS TO PURCHASER'S OBLIGATIONS
The Purchaser's obligation to purchase Shares hereunder is
subject to satisfaction of the following conditions at the Closing (any of which
may be waived by the Purchaser); provided that Section 11.11 is a condition to
the obligations to consummate the transaction provided for herein of each of (I)
the Purchaser and (II) the Company:
11.1. Articles Supplementary; Stockholders' Agreement;
Registration Rights Agreement.
(a) The charter of the Company shall have been duly
supplemented by the filing of the Articles Supplementary in the form of Exhibit
A hereto.
(b) The Company, the Purchasers and certain other stockholders
of the Company named therein shall have entered into a Stockholders' Agreement
substantially in the form of Exhibit B hereto.
(c) The Company shall have entered into a Registration Rights
Agreement with the Purchasers substantially in the form of Exhibit C hereto.
11.2. Certificates for Shares.
The Purchaser shall concurrently receive the certificates for
Shares contemplated by Section 2(b) hereof.
11.3. Senior Status.
The Company shall have taken all of the necessary actions,
including the amendment of the appropriate existing agreements, so that, except
as otherwise provided in Section 8.8(b) hereof, the Series A Preferred shall
rank senior in all respects, including the payment on liquidation and
redemption, to all other equity securities of the Company.
11.4. Accuracy of Representations and Warranties.
The representations and warranties of the Company contained in
the Stock Purchase Agreement herein or in any certificate or document delivered
pursuant hereto shall be correct and complete on and as of the Closing Date with
the same effect as though made on and as of the Closing Date (after giving
effect to the transactions contemplated by this Agreement).
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11.5. Compliance with Agreements.
The Company shall have performed and complied in all material
respects with all agreements, covenants and conditions contained in the Stock
Purchase Agreements and any other document contemplated hereby or thereby which
are required to be performed or complied with by the Company on or before the
Closing Date.
11.6. Officers' Certificates.
The Purchaser shall have received a certificate dated the
Closing Date and signed by the President or Chief Executive Officer and by the
Secretary or the Chief Financial Officer of the Company, to the effect that the
conditions of Sections 11.4, 11.5, 11.8 (second sentence only) and 11.9 have
been satisfied.
11.7. Proceedings.
All corporate and other proceedings in connection with the
transactions contemplated by the Stock Purchase Agreements, and all documents
incident thereto, shall be in form and substance satisfactory to the Purchaser
and its counsel, and the Purchaser shall have received all such originals or
certified or other copies of such documents as the Purchaser or its counsel may
reasonably request.
11.8. Legality; Governmental and Other Authorization.
The purchase of and payment for the Shares shall not be
prohibited by any law or governmental order, rule, ruling, regulation, release,
interpretation or opinion applicable to the Purchaser and shall not subject the
Purchaser to any penalty, tax, liability or other onerous condition. Any
necessary consents, approvals, licenses, permits, orders and authorizations of,
and any filings, registrations or qualifications with, any governmental or
administrative agency or other Person, with respect to the transactions
contemplated by the Stock Purchase Agreements shall have been obtained or made
and shall be in full force and effect. The Company shall have delivered to the
Purchaser, upon its reasonable request setting forth what is required, factual
certificates or other evidence, in form and substance satisfactory to the
Purchaser and its counsel, to enable the Purchaser to establish compliance with
this condition.
11.9. No Material Adverse Change.
There shall have been no material adverse change in the
assets, properties, liabilities, business, affairs, results of operations,
condition (financial or otherwise) or prospects of the Company on a consolidated
basis since June 30, 1999, except that (i) its cash position as of September 30,
1999 is $16,369,462 and (ii) except as disclosed in Schedule 11.9 hereto.
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11.10. Opinion of Counsel.
The Purchaser shall have received an opinion, dated the
Closing Date and addressed to the Purchasers, of Piper & Marbury L.L.P., counsel
for the Company, which opinion shall be in form and substance satisfactory to
the Purchaser and its counsel and shall be to the effect set forth in Exhibit D
hereto.
11.11. Additional Purchases of Shares.
The sale and purchase of Shares by the ▇▇▇▇▇▇▇ Funds pursuant
to the Stock Purchase Agreements between each of the Purchasers and the Company
shall be consummated concurrently for an aggregate purchase price of $15,000,000
on the Closing Date.
11.12. Other Documents and Opinions.
The Purchaser shall have received such other documents and
opinions, in form and substance reasonably satisfactory to the Purchaser and its
counsel, relating to matters incident to the transactions contemplated hereby as
the Purchaser may reasonably request.
SECTION 12. BREACH OF REPRESENTATIONS, WARRANTIES AND COVENANTS
(a) The representations, warranties, covenants and agreements
of the Company and the Purchaser contained in this Agreement, the Stockholders'
Agreement, the Registration Rights Agreement or in any document or certificate
delivered pursuant hereto or thereto or in connection herewith shall survive
from the Closing Date, and shall continue in effect following, the execution and
delivery of the Stock Purchase Agreements, the Stockholders' Agreement, the
Registration Rights Agreement, the closings hereunder and thereunder, any
investigation at any time made by the Purchaser or on its behalf or by any other
Person, the issuance, sale and delivery of the Shares, any disposition thereof
and any payment, conversion or cancellation of the Shares; provided that Section
9 shall terminate upon conversion of all of the Shares. All statements contained
in any certificate or other document delivered by or on behalf of the Company
pursuant hereto shall constitute representations and warranties by the Company
hereunder.
(b) The Company agrees to indemnify and hold the Purchaser
harmless from and against and will pay to the Purchaser the full amount of any
loss, damage, liability or expense (including amounts paid in settlement and
reasonable attorneys' fees and expenses) to the Purchaser resulting either
directly or indirectly from any breach of the representations, warranties,
covenants or agreements of the Company contained in any Stock Purchase
Agreement, or in the Stockholders' Agreement, the Registration Rights Agreement
or any other document or certificate delivered pursuant hereto or thereto or in
connection herewith or therewith.
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SECTION 13. SPECIFIC PERFORMANCE
The parties agree that irreparable damage will result in the
event that this Agreement is not specifically enforced, and the parties agree
that any damages available at law for a breach of this Agreement would not be an
adequate remedy. Therefore, the provisions hereof and the obligations of the
parties hereunder shall be enforceable in a court of equity, or other tribunal
with jurisdiction, by a decree of specific performance, and appropriate
injunctive relief may be applied for and granted in connection therewith. Such
remedies and all other remedies provided for in this Agreement shall, however,
be cumulative and not exclusive and shall be in addition to any other remedies
which a party may have under this Agreement or otherwise.
SECTION 14. EXPENSES
(a) Whether or not the transactions herein contemplated are
consummated, the Company shall pay (i) the costs, fees and expenses of the
Company and its counsel in connection with the Stock Purchase Agreements, the
Articles Supplementary, the Stockholders' Agreement and the Registration Rights
Agreement, other related documentation and the issuance of the Shares and the
Conversion Shares and the furnishing of all opinions by counsel for the Company,
(ii) the costs, fees and expenses of ▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius LLP in connection
with the Stock Purchase Agreements, the Articles Supplementary, the
Stockholders' Agreement and the Registration Rights Agreement, the issuance of
the Shares and the Conversion Shares, other related documentation and the
transactions contemplated hereby and thereby (whether or not a Closing occurs
hereunder) and if the Closing occurs the Company will make such payment on the
Closing Date); provided, however, that (x) such fees and expenses shall not
exceed $60,000 without the approval of the Company and (y) in the event that the
Closing does not occur, the Company shall pay all such costs, fees and expenses
upon the termination of negotiations between the Company and the ▇▇▇▇▇▇▇
Holders, (iii) the costs, fees and expenses of counsel to the Purchasers in
connection with any amendments to or modifications or waivers of any provisions
of the Stock Purchase Agreements, the Articles Supplementary, the Stockholders'
Agreement or the Registration Rights Agreement, other related documentation or
in connection with any other agreements between the Purchasers and the Company
and (iv) the costs, fees and expenses (including the attorneys' fees and
expenses) of any holder of Shares or Conversion Shares in enforcing its rights
against the Company if the Company defaults in its obligations hereunder, under
the Articles Supplementary, the Stockholders' Agreement or the Registration
Rights Agreement.
(b) In addition to all other sums due hereunder or provided
for in this Agreement, the Company shall pay to the Purchaser or its agents,
respectively, an amount sufficient to indemnify such persons (net of any Taxes
on any indemnity payments) against all reasonable costs and expenses (including
reasonable attorneys' fees and expenses and reasonable
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costs of investigation) and damages and liabilities incurred by the Purchaser or
its agents pursuant to any investigation or proceeding against any or all of the
Company, the Purchasers, or their agents, arising out of or in connection with
the Stock Purchase Agreements, the Stockholders' Agreement, the Registration
Rights Agreement, the Purchaser's purchase of the Shares (or any transaction
contemplated hereby or thereby or any other document or instrument executed
herewith or therewith or pursuant hereto or thereto), whether or not the
transactions contemplated by the Stock Purchase Agreements are consummated,
which investigation or proceeding requires the participation of the Purchaser or
its agents or is commenced or filed against the Purchaser or its agents because
of the Stock Purchase Agreements, the Stockholders' Agreement, the Registration
Rights Agreement, the Purchaser's purchase of the Shares or any of the
transactions contemplated hereby or thereby (or any other document or instrument
executed herewith or therewith or pursuant hereto or thereto), other than any
investigation or proceeding in which it is finally determined that there was (i)
gross negligence or willful misconduct on the part of the Purchaser or its
agents, (ii) a material breach by Purchaser of any of its representations or
warranties contained herein, (iii) a material breach by the Purchaser of any
provision of the Confidentiality Agreement or any other confidentiality
agreement between the Company and the Purchaser, in any case, which was not made
by the Purchaser in reliance upon any of the Company's representations,
warranties, covenants or agreements in the Stock Purchase Agreements, the
Stockholders' Agreement, the Registration Rights Agreement or in any other
documents or instruments contemplated hereby or thereby or executed herewith or
therewith or pursuant hereto or thereto. The Company shall assume the defense,
and shall appoint counsel (which counsel may be the same counsel that the
Company uses so long as there is no conflict of interest) to represent the
Purchaser and such agents, in connection with investigating, defending or
preparing to defend any such action, suit, claim or proceeding (including any
inquiry or investigation); provided, however, that the Purchaser, or any such
agent, shall have the right (without releasing the Company from any of its
obligations hereunder) to employ its own counsel and either to direct its own
defense or to participate in the Company's defense, but the fees and expenses of
such counsel shall be at the expense of such person unless (i) the employment of
such counsel shall have been authorized in writing by the Company in connection
with such defense, (ii) the Company shall not have provided its counsel to take
charge of such defense or (iii) there may be defenses available to the
Purchaser, or such agent of the Purchaser which are different from or additional
to those available to the Company, then in any of such events referred to in
clauses (i), (ii) or (iii) such counsel fees and expenses (but only for one
counsel for the Purchaser and its agents) shall be borne by the Company. Any
settlement of any such action, suit, claim or proceeding shall require the
consent of both the Company and such indemnified person (neither of which shall
unreasonably withhold its consent).
(c) The Company agrees to pay, or to cause to be paid, all
documentary, stamp and other similar Taxes, other than transfer taxes payable
upon the transfer by the Purchaser of Shares to a Transferee (which transfer
taxes shall be paid by the Transferee), levied under the laws of the United
States of America, any state or local Taxing Authority thereof or therein or any
other applicable jurisdiction in connection with the issuance and sale of the
Shares, the conversion of Shares into Conversion Shares and the execution and
delivery of the Stock
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Purchase Agreements, the Stockholders' Agreement, the Registration Rights
Agreement and any other documents or instruments contemplated hereby or thereby
and any modification of the Stock Purchase Agreements, the Articles
Supplementary, the Stockholders' Agreement or the Registration Rights Agreement
or any such other documents or instruments and will hold the Purchaser harmless
without limitation as to time against any and all liabilities with respect to
all such Taxes.
(d) The obligations of the Company under this Section 14 shall
survive the Closing hereunder and any termination of the Stock Purchase
Agreements.
SECTION 15. DIRECT PAYMENTS
As long as the Purchaser or any institutional holder which is
a direct or indirect transferee (as a result of one or more transfers) from the
Purchaser shall be the holder of any Shares, the Company will make all
redemption payments, liquidation payments and other distributions by wire
transfer to the Purchaser's or such other holder's (or its nominee's) account at
any bank or trust company, notwithstanding any contrary provision herein or in
the Company's charter with respect to the place of payment. The Purchaser has
provided an address on Schedule 1 hereto for payments by wire transfer, and such
address may be changed for the Purchaser or any subsequent holder by notice to
the Company. All such payments shall be made in U.S. dollars and in federal or
other immediately available funds.
SECTION 16. AMENDMENTS AND WAIVERS
(a) The terms and provisions of this Agreement may be amended,
waived, modified or terminated only with the written consent of the holders of
more than 50% of outstanding Shares; provided, however, that no such amendment,
waiver, modification or termination shall change this Section 16(a) without the
written consent of the holders of all the Shares and the Conversion Shares then
outstanding.
(b) Promptly after obtaining the written consent of the
holders as herein provided, the Company shall transmit a copy of any amendment,
waiver, modification or termination which has been adopted to all holders of
Shares and Conversions Shares then outstanding, but failure to transmit copies
shall not in any way affect the validity of any such amendment, waiver,
modification or termination.
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SECTION 17. EXCHANGE OF SHARES; CANCELLATION OF SURRENDERED SHARES; REPLACEMENT
(a) Subject to Section 6 hereof, at any time at the request of
any holder of Shares to the Company at its address provided under Section 18
hereof, the Company at its expense (other than transfer taxes payable upon the
transfer by the Purchaser of Shares to a Transferee, which transfer taxes shall
be paid by the Transferee) will issue and deliver to or upon the order of the
holder in exchange therefor a new certificate or certificates in such amount or
amounts as such holder may request in the aggregate representing the number of
Shares represented by such surrendered certificates, and registered in the name
of such holder or as such holder may direct.
(b) Any Share certificate which is converted into Conversion
Shares in whole or in part shall be canceled by the Company, and no new Share
certificates shall be issued in lieu of any Shares which have been converted
into Conversion Shares. The Company shall issue a new certificate with respect
to any Shares which were not converted into Conversion Shares and were
represented by a certificate which was converted in part.
(c) Upon receipt of evidence satisfactory to the Company of
the loss, theft, destruction or mutilation of any Share certificate and, in the
case of any such loss, theft or destruction, upon delivery of an indemnity
agreement reasonably satisfactory to the Company (if requested by the Company
and unsecured in the case of the Purchaser or another similar institutional
holder), or in the case of any such mutilation, upon surrender of such Share
certificate (which surrendered Share certificate shall be canceled by the
Company), the Company will issue a new Share certificate of like tenor in lieu
of such lost, stolen, destroyed or mutilated Share certificate as if the lost,
stolen, destroyed or mutilated Share certificate were then surrendered for
exchange.
SECTION 18. NOTICES
All notices, requests, demands, consents and other
communications hereunder shall be in writing and shall be delivered by hand or
shall be sent by telex or telecopy (confirmed by registered, certified or
overnight mail or courier, postage and delivery charges prepaid), (i) if to the
Company, to Caliber Learning Network, Inc., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, with a copy to Piper & Marbury L.L.P., ▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
or (ii) if to the Purchaser, at the address indicated on Schedule 1 hereto, with
a copy to ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇,
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq., or at such other address as a party may from
time to time designate as its address in writing to the other party to this
Agreement. Whenever any notice is required to be given hereunder, such notice
shall be deemed given and such requirement satisfied only when such notice is
delivered or, if sent by telex or telecopier, when received.
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SECTION 19. MISCELLANEOUS
(a) The Stock Purchase Agreements, the Stockholders'
Agreement, the Registration Rights Agreement and, upon the closing hereunder,
the Articles Supplementary, together with any further agreements entered into by
the Purchaser and the Company at the closing hereunder, contain the entire
agreement between the Purchaser and the Company, and supersede any prior oral or
written agreements, commitments, terms or understandings, regarding the subject
matter hereof.
(b) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, the parties
hereby waive any provision of law which may render any provision hereof
prohibited or unenforceable in any respect.
(c) This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns,
whether so expressed or not; provided, that (a) the Company may not assign any
of its rights, duties or obligations under this Agreement, except with the
Purchasers written consent, and (b) the Purchaser may assign any of its rights,
duties or obligations under this Agreement to a purchaser of its Shares,
provided that such purchaser is reasonably acceptable to the Company.
(d) In addition to any assignment by operation of law, the
Purchaser may assign, in whole or in part, any or all of its rights (and/or
obligations) under this Agreement to any transferee of any or all of its Shares
or Conversion Shares, and (unless such assignment expressly provides otherwise)
any such assignment shall not diminish the rights the Purchaser would otherwise
have under this Agreement or with respect to any remaining Shares or Conversion
Shares held by the Purchaser.
(e) No course of dealing and no delay on the part of any party
hereto in exercising any right, power, or remedy conferred by this Agreement
shall operate as a waiver thereof or otherwise prejudice such party's rights,
powers and remedies. No single or partial exercise of any right, power or remedy
conferred by this Agreement shall preclude any other or further exercise thereof
or the exercise of any other right, power or remedy.
(f) The headings and captions in this Agreement are for
convenience of reference only and shall not define, limit or otherwise affect
any of the terms or provisions hereof.
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(g) This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York (other than any conflict of
laws rule which might result in the application of the laws of any other
jurisdiction).
(h) This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument, and all signatures need not appear on any one counterpart.
(i) THE COMPANY HEREBY CONSENTS TO THE JURISDICTION OF ANY
STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK
AND IRREVOCABLY AGREES THAT, SUBJECT TO THE PURCHASER'S ELECTION, ALL ACTIONS OR
PROCEEDINGS RELATING TO THIS AGREEMENT, THE ARTICLES SUPPLEMENTARY, THE
STOCKHOLDERS' AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT, THE SHARES OR THE
CONVERSION SHARES MAY BE LITIGATED IN SUCH COURTS. THE COMPANY ACCEPTS FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, THE ARTICLES SUPPLEMENTARY,
THE STOCKHOLDERS' AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT, THE SHARES OR
THE CONVERSION SHARES. THE COMPANY HEREBY AGREES THAT SERVICE OF ALL PROCESS IN
ANY SUCH PROCEEDING IN ANY SUCH COURT SHALL BE RECEIVED BY THE COMPANY AT THE
COMPANY'S HEADQUARTERS AT THE ADDRESS AND TO THE ATTENTION OF SUCH PERSON
DESIGNATED PURSUANT TO SECTION 18 HEREOF, AND SUCH SERVICE BEING HEREBY
ACKNOWLEDGED BY THE COMPANY TO BE EFFECTIVE AND BINDING SERVICE IN EVERY
RESPECT. A COPY OF ANY SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL
TO THE COMPANY AT THE ADDRESS OF THE COMPANY PROVIDED HEREUNDER EXCEPT THAT
UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL
NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS. AS AN ALTERNATIVE TO SERVICE OF
PROCESS ON SUCH AGENT (WHETHER OR NOT ANY SUCH AGENT HAS BEEN APPOINTED), THE
COMPANY HEREBY AGREES THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT
NOTICE AND SERVICE OF PROCESS. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE
PURCHASER TO BRING PROCEEDINGS OR OBTAIN OR ENFORCE JUDGMENTS AGAINST THE
COMPANY IN THE COURTS OF ANY OTHER JURISDICTION.
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(j) THE COMPANY AND THE PURCHASER HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT, THE ARTICLES SUPPLEMENTARY, THE STOCKHOLDERS'
AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT, THE SHARES OR THE CONVERSION
SHARES, OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS
TRANSACTION. THE COMPANY AND THE PURCHASER ALSO WAIVE ANY BOND OR SURETY OR
SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF THE
PURCHASER. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY
AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT
MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT
CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.
THE COMPANY AND THE PURCHASER FURTHER WARRANT AND REPRESENT THAT EACH HAS
REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO (OR ASSIGNMENTS OF) THIS AGREEMENT,
THE ARTICLES SUPPLEMENTARY, THE STOCKHOLDERS' AGREEMENT, THE REGISTRATION RIGHTS
AGREEMENT, THE SHARES OR THE CONVERSION SHARES. IN THE EVENT OF LITIGATION, THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL (WITHOUT A JURY) BY THE
COURT.
[remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written
CALIBER LEARNING NETWORK, INC.
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President and Chief
Executive Officer
Accepted and Agreed to as of the
date first above written by the
undersigned Purchaser:
▇▇▇▇▇▇▇ US DISCOVERY OFFSHORE FUND III, L.P.
By: ▇▇▇▇▇▇▇ US DISCOVERY PARTNERS, L.P.,
its general partner
By: ▇▇▇▇▇▇▇ US DISCOVERY, LLC,
its general partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇, member
[Signature page to Stock Purchase Agreement]
Schdule 1
to the Stock Purchase Agreement
Name of Number of Aggregate
Purchaser Shares Purchase Price
--------- ------- --------------
▇▇▇▇▇▇▇ US Discovery 107,728 $10,772,800
Fund III,
▇.▇.
▇▇▇▇▇▇▇ US Discovery 17,272 $1,727,200
Offshore Fund III, L.P.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Nominees 25,000 $2,500,000
Limited
(a) address for communications:
c/▇ ▇▇▇▇▇▇▇ Asset Management USA
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
(b) address for payments by
wire transfer:
(i) ▇▇▇▇▇▇▇ US Discovery Fund III, ▇.▇.
▇▇▇▇▇ Manhattan Bank
ABA # ▇▇▇▇▇▇▇▇▇
A/C: ▇▇▇▇▇▇▇ US Discovery Fund III, L.P.
A/C # 400-704129
(ii) ▇▇▇▇▇▇▇ US Discovery Offshore Fund III, L.P.
Citibank, N.A.
ABA # ▇▇▇▇▇▇▇▇▇/Chips UID# 0008/Swift Code - ▇▇▇▇▇▇▇▇
A/C: The Bank of Bermuda Limited, ▇▇▇▇▇▇▇▇, Bermuda
Chips UID# 005584
Swift Code: BBDA BM HM
A/C: ▇▇▇▇▇▇▇ US Discovery Offshore Fund III, L.P.
A/C # 0246769
(iii) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Nominees Limited