1
EXHIBIT 10.1
VIAGRAFIX CORPORATION
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SERIES A CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
August 16, 1994
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SERIES A CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
INDEX
Page
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Section 1. PURCHASE, SALE AND TERMS OF PURCHASED SHARES . . . . 1
1.1 The Purchased Shares. . . . . . . . . . . . . 1
1.2 Purchase and Sale of Purchased Shares . . . . 1
(a) The Closing . . . . . . . . . . . . . . . 1
(b) Use of Proceeds . . . . . . . . . . . . . 2
(c) Subsequent Sales. . . . . . . . . . . . . 2
Section 2. REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND PRINCIPAL SHAREHOLDERS . . . . . . 2
2.1 Business; Organization, Corporate Power
and Authority, etc. . . . . . . . . . . . . 2
2.2 Validity . . . . . . . . . . . . . . . . . . . 2
2.3 Capitalization; Status of Capital Stock. . . . 3
2.4 Taxes . . . . . . . . . . . . . . . . . . . . 4
2.5 Litigation . . . . . . . . . . . . . . . . . . 4
2.6 No Violations.. . . . . . . . . . . . . . . . 4
2.7 Other Agreements . . . . . . . . . . . . . . . 5
2.8 Other Agreements of Officers, etc. . . . . . . 5
2.9 Governmental Consents, etc.. . . . . . . . . . 5
2.10 Transactions with Affiliates . . . . . . . . . 5
2.11 Compliance with Law . . . . . . . . . . . . . 6
2.12 Financial Statements . . . . . . . . . . . . . 6
2.13 Material Contracts . . . . . . . . . . . . . . 6
2.14 Title to Assets; Intellectual Property . . . . 8
2.15 Disclosure . . . . . . . . . . . . . . . . . 9
2.16 Compliance with Securities Laws . . . . . . . 9
Section 3. CONDITIONS OF PURCHASE . . . . . . . . . . . . . . . 10
3.1 Certificate of Company . . . . . . . . . . . . 10
3.2 Opinion of Counsel . . . . . . . . . . . . . . 10
3.3 Authorization; Consents.. . . . . . . . . . . 10
3.4 Certificate of Incorporation . . . . . . . . . 10
3.5 Stockholders Agreement . . . . . . . . . . . . 10
3.6 Registration Rights Agreement . . . . . . . . 10
3.7 Nondisclosure and Developments
Agreements . . . . . . . . . . . . . . . . . 11
3.8 Non-Competition Agreements . . . . . . . . . . 11
3.9 Board of Directors . . . . . . . . . . . . . . 11
3.10 Repurchases. . . . . . . . . . . . . . . . . . 11
3.11 Officers Certificate as to Financial
Statements . . . . . . . . . . . . . . . . . 11
3.12 All Proceedings Satisfactory . . . . . . . . . ▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ OF THE COMPANY . . . . . . . . . . . 11
4.1 Financial Statements . . . . . . . . . . . . . . 12
4.2 Conduct of Business . . . . . . . . . . . . . . 12
4.3 Adverse Changes . . . . . . . . . . . . . . . . 12
4.4 Insurance . . . . . . . . . . . . . . . . . . . 13
4.5 Life Insurance . . . . . . . . . . . . . . . . . 13
4.6 Maintenance of Properties . . . . . . . . . . . 13
4.7 Affiliated Transactions . . . . . . . . . . . . 13
4.8 Management Compensation; Compensation
Committee; Dividends . . . . . . . . . . 13
4.9 Lock-up for Certain Stockholders . . . . . . . . 14
4.10 Inspection . . . . . . . . . . . . . . . . . . . 14
4.11 Board of Directors Meetings.. .. . . . . . . . . 15
4.12 Right to Participate in Sale of
Additional Securities . . . . . . . . . 15
4.13 Conduct of the Company . . . . . . . . . . . . . 16
4.14 Loans and Advances . . . . . . . . . . . . . . . 16
4.15 Indebtedness . . . . . . . . . . . . . . . . . . 17
Section 5. REPRESENTATIONS AND WARRANTIES OF INVESTORS . 17
Section 6. MISCELLANEOUS. . . . . . . . . . . . . . . . . 19
6.1 Brokers' Fee . . . . . . . . . . . . . . . . . . 19
6.2 Remedies . . . . . . . . . . . . . . . . . . . . 19
6.3 Amendments and Waivers . . . . . . . . . . . . . 20
6.4 Survival of Covenants; Assignability of Rights . 21
6.5 Governing Law . . . . . . . . . . . . . . . . . 21
6.6 Section Headings . . . . . . . . . . . . . . . . 21
6.7 Counterparts . . . . . . . . . . . . . . . . . . 21
6.8 Notices and Demands . . . . . . . . . . . . . . 21
6.9 Severability . . . . . . . . . . . . . . . . . . 22
6.10 Definitions of Terms . . . . . . . . . . . . . . 23
6.11 Expenses . . . . . . . . . . . . . . . . . . . . 24
6.12 Entire Agreement . . . . . . . . . . . . . . . . 24
Schedules
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I. Schedule of Investors
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Exhibits
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1.1 Terms of Series A Preferred Stock
2.1 Subsidiaries
2.3 Holders of Issued and Outstanding
Stock of the Company
2.4 Taxes
2.5 Litigation
2.9 Governmental Consents
2.10 Transactions with Affiliates
2.12 Unaudited Financial Statement of the Company
2.13 Material Contracts of the Company
2.14 Existing Liens and Intellectual Property
3.2 Opinion of Counsel
3.5 Stockholders Agreement
3.6 Registration Rights Agreement
3.7 Employee Nondisclosure and Developments Agreement
3.8 Non-Competition Agreement
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SERIES A CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
AGREEMENT made as of this 16th day of August, 1994 by and among
VIAGRAFIX CORPORATION (the "Company"), an Oklahoma corporation, with its
current principal place of business at Five ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (the "Principal Shareholders") and the
persons and entities listed on the Schedule of Investors designated as Schedule
I hereto (collectively referred to as the "Investors" and individually referred
to as an "Investor").
1. PURCHASE, SALE AND TERMS OF PURCHASED SHARES
Section 1.1. The Purchased Shares. The Company has authorized the
issuance and sale to the Investors of 1,710,000 shares (the "Purchased Shares")
of its authorized, but unissued shares of Series A Convertible Preferred Stock
(the "Series A Preferred Stock") at a purchase price of approximately $1.7544
per share. The designations, rights and preferences and other terms and
conditions relating to the Series A Preferred Stock shall be as set forth on
Exhibit 1.1 attached hereto. Any shares of the Company's common stock ("Common
Stock") hereafter issued or issuable upon conversion of the Purchased Shares
are herein referred to as the "Common Shares". The Purchased Shares and Common
Shares are collectively referred to herein as the "Securities".
Section 1.2. Purchase and Sale of Purchased Shares.
(a) The Closing. The Company agrees to issue and sell to the
Investors, and, subject to and in reliance upon the representations,
warranties, terms and conditions of this Agreement, the Investors, severally
but not jointly, agree to purchase, that number of the Purchased Shares set
forth opposite their respective names on Schedule I attached hereto. The
aggregate purchase price for the Purchased Shares being purchased by each
Investor is set forth opposite such Investor's name on Schedule I. Such
purchase and sale shall take place at a closing (the "Closing") to be held at
the offices of ▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, Exchange Place, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇, at 10:00 A.M. on August 16, 1994 or on such other date
and at such time as may be mutually agreed upon by the Company and the
Investors (the "Closing Date") provided, however, that the aggregate price paid
for the Purchased Shares shall not be less than Three Million Dollars
($3,000,000). At the Closing the Company will deliver to each Investor
certificates for the number of Purchased Shares set forth opposite its name on
Schedule I against delivery to the Company of a check or wire transfer in the
amount set forth opposite such Investor's name on Schedule I.
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(b) Use of Proceeds. The Company shall use the proceeds from
the sale of the Purchased Shares to repurchase up to (i) 863,636 shares of
presently issued and outstanding Common Stock at a price of $1.7544 per share
from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and; (ii) 1,416,364 shares of presently issued and
outstanding Common Stock at a price of $1.7544 per share from ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇.
(c) Subsequent Sales. At any time on or before October 31,
1994, the Company may sell up to 570,000 additional shares of Series A
Preferred Stock under the terms of this Agreement. By execution of a
counterpart of this Agreement, a purchaser of any such shares shall be deemed
to be an Investor for all purposes hereof, such shares of Series A Preferred
Stock shall be deemed to be Purchased Shares hereunder, and Schedule I hereto
shall be amended to reflect such additional sale of Series A Preferred Stock.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce the Investors to enter into this Agreement, the
Company represents and warrants that, except as set forth on the attached
schedules of exception:
Section 2.1. Business; Organization, Corporate Power and Authority,
etc. The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Oklahoma and has full corporate power
and authority to own and hold its properties and to carry on its business as
presently conducted. The Company is duly licensed or qualified and in good
standing as a foreign corporation authorized to do business in all
jurisdictions in which the character of property owned or leased, or the nature
of the activities conducted by it, makes such licensing or qualification
necessary, except where the failure to so qualify would not have a material
adverse effect on the business, assets or condition, financial or otherwise, or
operations of the Company. Except as set forth on Exhibit 2.1 attached hereto,
the Company has no Subsidiaries and does not own of record or beneficially any
shares of capital stock or securities convertible into capital stock of, or any
other proprietary interest in, any Person.
Section 2.2. Validity. The Company has all necessary power and
authority, and has taken all action required to execute, deliver and perform
this Agreement, the Stockholders Agreement referred to in Section 3.5 hereof
(the "Stockholders" Agreement") and the Registration Rights Agreement referred
to in Section 3.6 hereof (the "Registration Rights Agreement"), to issue, sell
and deliver the Purchased Shares, and to issue the Common Shares issuable upon
conversion of the Purchased Shares. This Agreement, the Purchased Shares, the
Stockholders Agreement, the Registration Rights Agreement, and all other
documents and instruments executed by the Company pursuant hereto when
delivered, are and will be duly authorized, valid and binding
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obligations of the Company, enforceable against the Company in accordance with
their respective terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors; equitable principles limiting
rights to specific performance or other equitable remedies; and, with respect
to the enforceability of the provisions set forth in the Registration Rights
Agreement, applicable Federal and state securities laws. Upon the issuance,
sale and delivery of the Securities in accordance with the terms hereof, the
Securities will be validly issued, fully paid and non-assessable and will be
free and clear of all liens, charges, restrictions, claims and encumbrances of
any kind, subject to restrictions on transfer under Federal and state
securities laws, this Agreement, the Stockholders Agreement and the Company's
Certificate of Incorporation, as amended (the "Charter").
Section 2.3. Capitalization; Status of Capital Stock. The authorized
capital stock of the Company consists of (i) 2,280,000 shares of Preferred
Stock, all of which have been designated Series A Convertible Preferred Stock,
and (ii) 10,000,000 shares of Common Stock. Immediately prior to the Closing,
7,500,000 shares of the Company's Common Stock will be issued and outstanding,
and no shares of Series A Convertible Preferred Stock will have been issued.
All issued and outstanding shares of the Company's Common Stock have been duly
authorized and validly issued, are fully paid, and non-assessable, and were
issued in compliance with all applicable state and Federal securities laws. The
Company has authorized and reserved, and covenants to continue to reserve, a
sufficient number of shares of Common Stock for issuance upon the conversion of
the Purchased Shares, which when so issued and delivered, will be duly
authorized and validly issued, fully paid, and non-assessable. Except as set
forth on Exhibit 2.3 attached hereto or as otherwise contemplated by this
Agreement: (a) there are no options or rights to purchase shares of capital
stock of the Company, or securities convertible into shares of capital stock,
authorized, issued or outstanding, and the Company is not obligated in any
manner to issue any shares of its capital stock or securities convertible into
or evidencing any right to acquire shares of its capital stock, or to
distribute to holders of any of its capital stock any evidence of indebtedness
or assets; (b) no Person has any preemptive right, right of first refusal or
similar right to acquire additional shares of capital stock in connection with
the sale and purchase of the Purchased Shares or issuance of the Common Shares
pursuant to this Agreement or otherwise; (c) there are no restrictions on the
transfer of the shares of capital stock of the Company, other than those
imposed by relevant state and Federal securities laws or the Charter; (d) no
Person has any right to cause the Company to effect the registration under the
Securities Act of any shares of capital stock or any other securities
(including debt securities) of the Company; (e) except for the agreements
described in Section 3.10 below, the Company has no obligation to purchase,
redeem or
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otherwise acquire any of its equity securities or any interests therein, or to
pay any dividend or make any other distribution in respect thereto; and (f)
there are no voting trusts, stockholders' agreements, or proxies relating to
any securities of the Company. A complete and correct schedule of the holders
of the issued and outstanding capital stock of the Company, and the number of
shares of capital stock beneficially owned by such holders, is set forth on
Exhibit 2.3 attached hereto. The Company has heretofore delivered to the
Investors true and correct copies of its Charter and By-laws, each as amended
and in effect on the date hereof and certified by the Company's Secretary.
Section 2.4. Taxes. Except as set forth on Exhibit 2.4, the Company has
accurately prepared and timely filed all Federal, state and other tax returns
that are required to be filed by it and has paid or made provision for the
payment of all taxes that have become due pursuant to such returns and, to the
best of its knowledge, all other taxes, assessments and governmental charges
which have become due and payable, including, without limitation, all taxes
which the Company is obligated to withhold from amounts owing to employees,
creditors and third parties. No deficiency assessment with respect to or
proposed adjustment of the Company's Federal, state, or other taxes is pending
or, to the best of the Company's knowledge, threatened. There is no tax lien,
whether imposed by any Federal, state, or other taxing authority, outstanding
against the assets, properties or business of the Company.
Section 2.5. Litigation. Except as set forth on Exhibit 2.5 attached
hereto, there is no action, suit, proceeding or investigation pending or, to
the best of the Company's knowledge, threatened against or affecting the
Company which might result, either in any case or in the aggregate, in any
material adverse change in the business, assets or condition, financial or
otherwise, or operations of the Company, or which might call into question the
validity of, or hinder the enforceability or performance of this Agreement, the
Stockholders Agreement, the Registration Rights Agreement, or the Purchased
Shares, or any action taken or to be taken pursuant hereto; and, to the best of
the Company's knowledge, no event has occurred and no condition exists on the
basis of which any litigation, proceeding or investigation might properly be
instituted. The Company is not in default with respect to any order, writ,
injunction, decree, ruling or decision of any court, commission, board or other
government agency that might result, either in any case or in the aggregate, in
any material adverse change in the business, assets or condition, financial or
otherwise, or operations of the Company.
Section 2.6. No Violations. The execution, delivery and performance of
this Agreement, the Stockholders Agreement, the Registration Rights Agreement,
and any documents or instruments
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delivered, executed and performed in connection herewith or therewith, the
consummation of the transactions contemplated hereby (including the issuance,
sale and delivery of the Purchased Shares and, upon conversion of the Purchased
Shares, the issuance and delivery of the Common Shares), and compliance with
the provisions hereof, will not violate any provision of law, the Charter, or
By-laws, as amended, of the Company, any order of any court or other agency of
government or indenture, agreement or other instrument to which the Company is
bound, or conflict with, result in the breach of or constitute (with due notice
or lapse of time or both) a default under any such indenture, agreement or
other instrument, or result in the creation or imposition of any lien, charge,
restriction, claim or encumbrance of any nature whatsoever upon any of the
properties or assets of the Company.
Section 2.7. Other Agreements. To the best of its knowledge, the
Company is not a party to or bound by any agreement, contract or commitment or
subject to any charter, bylaw or other corporate restriction, which materially
adversely affects, or which in the future could materially adversely affect its
business, assets or condition, financial or otherwise, or operations.
Section 2.8. Other Agreements of Officers, etc. To the best of the
Company's knowledge, no officer or Key Employee of the Company is a party to
or bound by any agreement, contract or commitment, or subject to any
restriction, which materially and adversely affects, or which in the future
could materially and adversely affect, the business, assets or condition,
financial or otherwise, or operations of the Company or the right of any such
Person to participate in the affairs of the Company. To the best of the
Company's knowledge, no Key Employee of the Company has any present intention
of terminating his or her employment with the Company, and the Company has no
present intention of terminating any such employment.
Section 2.9. Governmental Consents, etc. Except as set forth on
Exhibit 2.9 attached hereto, no consents, approvals or authorizations of, or
registrations, qualifications, designations, declarations or filings with, any
Federal, state or local governmental authority (other than with respect to
United States Federal and state securities laws with which the Company has
represented and warranted in Section 2.16 hereof that the Company is in
compliance) on the part of the Company are required as a condition precedent to
the valid execution and delivery of this Agreement or the valid offer, issue,
sale and delivery of the Securities.
Section 2.10. Transactions with Affiliates. Except as set forth on
Exhibit 2.10 attached hereto, there are no loans, leases or other continuing
transactions between the Company or any of the Company's customers,
franchisees or suppliers, and any
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stockholder, director or officer of the Company, or any member of such
officer's, director's or stockholder's immediate family, or any Person
controlled by such officers, directors or stockholders or their immediate
families.
Section 2.11. Compliance with Law. To the best of the Company's
knowledge, the Company is currently in compliance in all material respects with
all Federal and state laws, rules, regulations and orders applicable to its
business, operations, properties, assets, products, and services (including,
without limitation, any such laws, rules, regulations and orders relating to
franchisement).
Section 2.12. Financial Statements. The unaudited consolidated
financial statements of the Company for the eighteen months ended June 30,
1994, which are set forth on Exhibit 2.12 attached hereto, present fairly the
financial position of the Company as at the dates thereof and for the periods
covered thereby and have been prepared in accordance with generally accepted
accounting principles consistently applied. Since June 30, 1994, (i) there has
been no material adverse change in the business, assets or condition, financial
or otherwise, or operations of the Company; (ii) neither the business,
condition, financial or otherwise, or operations of the Company nor any of the
properties or assets of the Company have been materially adversely affected by
any event or occurrence of any type, whether or not insured against; (iii)
except as entered into in the ordinary course of business, the Company has not
incurred any liabilities or obligations; and (iv) the Company has not entered
into any transaction which, to the best of the Company's knowledge, would have
a material adverse effect on the business, assets, condition, financial or
otherwise, or operations of the Company.
Section 2.13. Material Contracts. To the best of the Company's
knowledge, except for the contracts of the Company set forth on Exhibit 2.13
attached hereto (collectively, the "Contracts"), the Company is not a party to
or otherwise bound by any written or oral:
(a) contract or series of contracts with the same Person for
the purchase of machinery, equipment, goods or services, or the furnishing of
services, including without limitation, contracts with franchisees, which
contracts have a value in excess of $25,000;
(b) contract with any labor union (and, to the best of the
Company's knowledge, no organizational effort is being made with respect to any
of their employees);
(c) contract or other commitment with any supplier or
franchisee containing any provision permitting any party other than the Company
to renegotiate the price or other terms, or
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containing any pay-back or other similar provision, upon the occurrence of a
failure by the Company to meet its obligations under the contract when due or
the occurrence of any other event;
(d) contract for the future purchase of fixed assets or for
the future purchase of materials, supplies or equipment in excess of its normal
operating requirements;
(e) contract for the employment of any officer, employee or
other person on a full-time or consulting basis, which is not terminable on
notice without cost or liability to the Company, except normal severance
arrangements and accrued vacation pay;
(f) bonus, pension, profit-sharing, retirement,
hospitalization, insurance, stock purchase, stock option or other plan,
contract or understanding pursuant to which benefits are provided to any
employee of the Company (other than group insurance plans applicable to
employees generally);
(g) agreement or indenture relating to the borrowing of
money or to the mortgaging or pledging of, or otherwise placing a lien or
security interest on, any asset of the Company or any agreement or instrument
evidencing any guaranty by the Company of payment or performance by any other
Person;
(h) voting trust or agreement, stockholders' agreement,
pledge agreement, buy-sell agreement or first refusal or preemptive rights
agreement relating to any securities of the Company other than the Stockholders
Agreement;
(i) agreement or obligation (contingent or otherwise) to
issue, sell or otherwise distribute or to repurchase or otherwise acquire or
retire any shares of its capital stock or any of its other equity securities
(except as contemplated in Section 3.10);
(j) agreement under which the Company has advanced or agreed
to advance money, or under which the Company has agreed to lease any property
as lessee or lessor for annual lease payments in excess of $25,000;
(k) agreement under which the Company has granted any person
any registration rights, other than the Registration Rights Agreement;
(l) agreement under which the Company has limited or
restricted its right to compete with any Person in any respect;
(m) contract or other commitment involving more than $25,000
and not in the ordinary course of the Company's business;
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(n) agreement providing for disposition of the business,
assets or shares of the Company agreement of merger or consolidation to which
the Company is a party or letter of intent with respect to the foregoing; or
(q) agreement or letter of intent with respect to the
acquisition of the business, assets or shares of any other Person.
The Company has supplied to or made available for review by special
counsel to the Investors copies of all of the Contracts to which it is a party.
The Company, to the best of the Company's knowledge, and all of the other
parties to such Contracts, have performed all obligations required to be
performed by such Persons to date under the Contracts, have received no notice
of default and are not in default under any of the Contracts, unless such
default or failure to perform would not have a material adverse effect on the
Company. The Company is in compliance in all material respects with the terms
and provisions of its Charter and By-laws, each as amended and in effect on the
date hereof.
Section 2.14. Title to Assets; Intellectual Property. With the
exception of those of its properties which are under lease, and except as set
forth on Exhibit 2.14 attached hereto, the Company has good and marketable
title to, and is the owner, free and clear, of all of its properties and assets
and there are no liens or other security interests outstanding against any of
these properties and assets. The term "properties" as used herein shall include
all property of whatever nature used by the Company in the conduct of its
business. All leases pursuant to which the Company leases real or personal
property are in good standing and are valid and effective in accordance with
their respective terms and there exists no default or other occurrence or
condition which could result in a default or termination thereof. Set forth in
Exhibit 2.14 is a list and brief description of all domestic and foreign
patents, patent rights, patent applications, trademarks, trademark
applications, service marks, service ▇▇▇▇ applications, trade names and
copyrights, and all applications for such which are in the process of being
prepared, owned by or registered in the name of the Company, or of which the
Company is a licensor or licensee or in which the Company has any right, and in
each case a brief description of the nature of such right. The Company owns or
possesses adequate licenses or other rights to use all patents, patent
applications, trademarks, trademark applications, service marks, service ▇▇▇▇
applications, trade names, copyrights, manufacturing processes, formulae,
trade secrets, customer lists and know how (collectively, "Intellectual
Property") necessary or desirable to the conduct of its business as conducted
and as proposed to be conducted, and no claim is pending or, to the best of the
Company's knowledge, threatened to the effect that the operations of the
Company infringe upon or conflict with the asserted rights of any other person
under any Intellectual Property, and there is
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of any other person under any Intellectual Property, and there is no basis for
any such claim (whether or not pending or threatened). No claim is pending or
threatened to the effect that any such Intellectual Property owned or licensed
by the Company, or which the Company otherwise has the right to use, is invalid
or unenforceable by the Company, and there is no basis for any such claim
(whether or not pending or threatened). To the best of the Company's knowledge,
all technical information developed by and belonging to the Company which has
not been patented has been kept confidential. The Company has not granted or
assigned to any other person or entity any right to manufacture, have
manufactured, assemble or sell the products or proposed products or to provide
the services or proposed services of the Company.
Section 2.15. Disclosure. Neither this Agreement nor any certificate,
list, exhibit, letter or other written statement furnished by the Company to
the Investors or their special counsel in connection herewith, to the best of
the Company's and each Principal Shareholder's knowledge, contains any untrue
statement of a material fact or, when read together, omits to state any
material fact necessary in order to make the statements contained therein not
misleading in the light of the circumstances under which they are or were made.
There exists no fact or circumstances which materially and adversely affects,
or to the best of the Company's knowledge, has a reasonable possibility of
materially and adversely affecting, the business, assets or condition,
financial or otherwise, or operations of the Company, which has not been
reflected in financial statements of the Company heretofore delivered to the
Investors or set forth in this Agreement or the Exhibits and Schedules attached
hereto or fully disclosed in a written statement or certificate furnished to
the Investors by the Company pursuant to this Agreement.
Section 2.16. Compliance with Securities Laws. Based in part on the
representations of the Investors set forth in Section 5 hereof, the Company
has, to the best of the Company's knowledge, complied and will comply with all
applicable United States Federal and state securities laws in connection with
the offer, issuance and sale of the Securities. The Company has not, to the
best of the Company's knowledge, either directly or through any agent, offered
any securities to, or otherwise approached, negotiated or communicated in
respect of any securities with, any Person so as thereby to require that the
offer or sale of such securities (including but not limited to the Securities)
be registered pursuant to the provisions of Section 5 of the Securities Act of
1933, as amended (the "1933 Act"). Based in part on the representations of the
Investors set forth in Section 5 hereof, the offer, sale and issuance of the
Purchased Shares and of the Common Shares in conformity with the terms of this
Agreement are exempt from the registration requirements of Section 5 of the
1933 Act and all applicable state securities laws.
14
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3. CONDITIONS OF PURCHASE
Each Investor's obligation to purchase and pay for the Purchased
Shares hereunder shall be subject to compliance by the Company and each
Principal Shareholder in all material respects with their agreements herein
contained and to the fulfillment on or before and at the Closing of the
following conditions:
Section 3.1. Certificate of Company. The representations and
warranties of the Company contained in this Agreement, including but not
limited to the representations and warranties made in Section 2 hereof, shall
be true and correct in all material respects with the same force and effect as
though such representations and warranties had been made on and as of the
Closing Date; the Company's business, assets or condition, financial or
otherwise, or operations shall not have been materially and adversely affected
prior to the Closing; the conditions hereafter specified in this Section 3
shall have been satisfied in all material respects; and on the Closing Date a
certificate to such effect executed by the President, the principal financial
officer of the Company and each Principal Shareholder shall be delivered to the
Investors.
Section 3.2. Opinion of Counsel. The Investors shall have received
from counsel for the Company, ▇▇▇▇ ▇▇▇▇, Esq., his favorable opinion, dated the
Closing Date, in the form attached hereto as Exhibit 3.2.
Section 3.3. Authorization; Consents. The Board of Directors and
stockholders of the Company shall have duly adopted resolutions in form
satisfactory to the Investors authorizing the Company to consummate the
transactions contemplated hereby to which it is a party in accordance with the
terms hereof, and the Investors shall have received a duly executed certificate
of the Secretary of the Company dated the Closing Date setting forth a copy of
such resolutions and such other matters as may be requested by the Investors.
The Company shall have obtained any and all other consents, permits and waivers
and made all filings necessary or appropriate for consummation of the
transactions contemplated by this Agreement except for such post-Closing filings
as may be required under applicable securities laws.
Section 3.4. Certificate of Incorporation. The Charter shall read as
set forth on Exhibit 1.1 attached hereto.
Section 3.5. Stockholders Agreement. The Company, the Investors,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ shall have executed and delivered a
Stockholders Agreement, substantially in the form of Exhibit 3.5 attached
hereto.
Section 3.6. Registration Rights Agreement. The Company, the
Investors, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ shall have
15
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executed and delivered a Registration Rights Agreement, substantially in the
form of Exhibit 3.6 attached hereto.
Section 3.7. Nondisclosure and Developments Agreements. Each Key
Employee shall have executed and delivered an Employee Nondisclosure and
Developments Agreement substantially in the form of Exhibit 3.7 attached
hereto.
Section 3.8. Non-Competition Agreements. Each Key Employee shall have
executed and delivered a Non-Competition Agreement substantially in the form of
Exhibit 3.8 attached hereto.
Section 3.9. Board of Directors. ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall have been
elected to the Company's Board of Directors as the director elected by the
holders of Series A Convertible Preferred Stock, voting as a separate series
(the "Series A Director").
Section 3.10. Repurchases. The Company shall have entered into an
agreement with ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ to repurchase on August 16, 1994, 863,636 shares
of Common Stock currently owned by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ at a purchase price of
approximately $1.7544 per share and shall have entered into an agreement with
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ to repurchase on August 16, 1994, 1,416,364 shares of Common
Stock currently owned by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ at a purchase price of approximately
$1.7544 per share.
Section 3.11. Officers' Certificate as to Financial Statements. Each
officer of the Company shall execute and deliver on the Closing Date a
certificate as to the completeness and accuracy of the financial statements
delivered by the Company to the Investors pursuant to Section 2.12 hereof.
Section 3.12. All Proceedings Satisfactory. All corporate and other
proceedings taken prior to or at the Closing in connection with the
transactions contemplated by this Agreement, and all documents and evidences
incident thereto, shall be satisfactory in form and substance to the Investors,
and the Investors shall receive such copies thereof and other materials
(certified, if requested) as they may reasonably request in connection
therewith.
4. COVENANTS OF THE COMPANY
Until the later of such time as less than 25% of the Purchased Shares
or the Common Shares are outstanding and held by the Investors or any
affiliates of the Investors or the Company completes a Qualified Public
Offering; or unless otherwise agreed by a majority of the outstanding Common
Shares (assuming the conversion of all outstanding Purchased Shares), the
Company shall comply with the following covenants:
16
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Section 4.1. Financial Statements. The Company shall furnish to the
Investors the following reports: (a) within ninety (90) days after the end of
each fiscal year, an audited consolidated balance sheet of the Company as at
the end of such year, together with audited consolidated statements of income,
stockholders' equity and cash flows of the Company for such year, certified by
independent public accountants of recognized standing (which shall be one of
the six largest independent public accounting firms in the United States, or
such other independent public accountants of recognized national or regional
standing as may be approved by the Board of Directors of the Company) prepared
in accordance with generally accepted accounting principles and practices
consistently applied; (b) within thirty (30) days after the end of each month,
an unaudited consolidated balance sheet of the Company as at the end of such
month and an unaudited consolidated statement of income and cash flows for the
Company for such month and for the year to date prepared in accordance with
generally accepted accounting principles consistently applied (except that such
financial statements need not contain footnotes) and fairly reflecting the
financial affairs of the Company subject to year-end adjustments; (c) within
sixty (60) days prior to the start of each fiscal year, a proposed budget for
such fiscal year which shall include, where appropriate, capital and operating
expense budgets, cash flow projections and income and loss projections for the
Company; and (d) such other financial information as the Investors may
reasonably request, including without limitation, certificates of the principal
financial officer of the Company concerning compliance with the covenants of
the Company under Section 3 hereof. At any time when the Company has
Subsidiaries, all financial statements furnished hereunder will be
consolidated.
Section 4.2. Conduct of Business. The Company shall continue to engage
principally in the business of providing video-based educational products and
shall engage in only such additional business activities as (i) shall be
reasonably related or incidental thereto and which shall facilitate the
conduct, development or expansion of such business, or (ii) which shall be
approved or ratified by the Board of Directors. The Company will keep in full
force and effect its corporate existence and will comply in all material
respects with all applicable laws and regulations in the conduct of its
business.
Section 4.3. Adverse Changes. The Company shall promptly advise the
Investors of (i) any event which represents a material adverse change in the
business, assets or condition, financial or otherwise, or operations of the
Company and (ii) any suit or proceeding commenced or threatened against the
Company which, if adversely determined, would result in such a material adverse
change.
17
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Section 4.4. Insurance. The Company shall keep its insurable
properties insured by financially sound and reputable insurers against the
perils of liability, casualty, fire and extended coverage in amounts of
coverage at least equal to those customarily maintained by companies in the
same or a similar business of similar size. The Company shall also maintain
with such insurers insurance against other hazards and risks and liability to
persons and property, to the extent and in the manner customary for
corporations engaged in the same or a similar business of similar size.
Section 4.5. Life Insurance. The Company shall use its best efforts to
obtain, within thirty (30) days following the Closing Date, and thereafter
shall maintain and continue to pay the premiums on a key-man term life
insurance policy on the life of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, in the amount of not less than
$1,000,000, naming the Company as beneficiary. The life insurance proceeds
received by the Company, if any, shall be used for valid business purposes of
the Company as approved by the Board of Directors of the Company.
Section 4.6. Maintenance of Properties. The Company will maintain all
properties used or useful in the conduct of its business in good repair,
working order and condition as necessary to permit such business to be properly
and advantageously conducted.
Section 4.7. Affiliated Transactions. All transactions between the
Company and any officer, Key Employee, director or stockholder of the Company
or Persons controlled by or affiliated with such officer, Key Employee,
director or stockholder, other than transactions in their capacity as such,
shall be conducted on an arms-length basis, shall be on terms and conditions no
less favorable to the Company than could be obtained from nonrelated Persons
and shall be unanimously approved in advance by the disinterested Directors of
the Company after full disclosure of the terms thereof.
Section 4.8. Management Compensation; Compensation Committee; Dividends.
(a) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇'▇ salary as President of the Company shall
initially be $150,000 per annum and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇'▇ salary as Vice President,
Secretary and Treasurer of the Company shall initially be $25,000 per annum.
Compensation paid by the Company to others of its management shall be
reasonably comparable to compensation paid to management in companies of
similar size, of similar maturity, of similar profitability and in similar
industries and shall be approved by the Board of Directors of the Company.
18
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(b) If so requested by the Series A Director, the Board of
Directors shall establish a three-member Compensation Committee to determine
management salaries consisting of one member of management, the Series A
Director and a non-employee director other than the Series A Director (the
"Independent Director"), if any. It is contemplated that an Independent
Director will be elected to the Board of Directors within one year of the date
hereof. In the event that, at the time the Compensation Committee is to be
formed, there is no Independent Director and there is a dispute between the
other two members of the Compensation Committee regarding management
compensation, then the Company will elect an Independent Director who is
reasonably acceptable to the Investors and will appoint such person to the
Compensation Committee prior to making any management salary adjustments or
awarding any management bonuses.
(c) The Board of Directors or the Compensation Committee, if so
created, shall review and approve salary and cash bonuses payable to management
(the "Approved Compensation"). If the Board of Directors shall determine that
funds in excess of Approved Compensation are available for distribution in the
form of bonuses and/or dividends in any fiscal year, then the holders of Series
A Convertible Preferred Stock shall be entitled to receive as dividends a
portion of such additional funds calculated by multiplying the total amount of
such additional funds available for distribution by a fraction, the numerator
of which shall be the number of shares of Common Stock owned by the Investors,
and the denominator of which shall be the total number of shares of Common
Stock outstanding (assuming in each case the conversion of all outstanding
shares of Series A Convertible Preferred Stock).
Section 4.9. Lock-Up for Certain Stockholders. The Company will cause
any compensation benefit plan or contract, whether now existing or hereafter
created, under which offers and sales of securities of the Company are made to
officers, directors and Key Employees of the Company, to provide that in
connection with an underwritten public offering, upon the request of the
Company or the principal underwriter managing such public offering, resales of
such securities may not be sold without the prior written consent of the
Company or such underwriters, as the case may be, for at least one hundred and
eighty (180) days or such other period of time (which may be greater or less
than one hundred and eighty (180) days) as the Investors holding at least a
majority in interest of the Common Shares issued or issuable upon conversion of
the Purchased Shares may specify, but in no event greater than the period of
time imposed on the Investors pursuant to Section 3 of the Stockholders
Agreement.
Section 4.10. Inspection. The Company shall permit authorized
representatives of the Investors to visit and inspect any of the properties of
the Company, including its books of account (and to make copies thereof and
take extracts therefrom),
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and to discuss its affairs, finances and accounts with its officers,
administrative employees and independent accountants, all at such reasonable
times and as often as may be reasonably requested; provided that all such
information provided to the Investors by the Company will be maintained as
confidential by the Investors, will not be disclosed to third parties and will
not be used by the Investors in a manner that is adverse to the Company.
Section 4.11. Board of Directors Meetings. The Company will reimburse
full coach airfare and all other direct out-of-pocket expenses reasonably
incurred by the Series A Director in attending meetings of the Board of
Directors or any committee thereof or in conducting any other business of the
Company which has been requested of such director by the Board of Directors or
any committee thereof or by senior management. The Series A Director shall be
entitled to receive those fees and benefits, including the issuance of stock
options, as are afforded the other non-employee members of the Board of
Directors. The Company shall ensure that meetings of its full Board of
Directors are held at least four times each year and at intervals of not more
than four months. The Company's Charter and By-laws, each as amended from time
to time, shall provide for indemnification and exculpation of directors from
personal liability, to the fullest extent permitted under applicable state law.
The Company shall, from time to time, consider the appropriateness of obtaining
directors' and officers' liability insurance, and, if appropriate and approved
by the Board of Directors of the Company, the Company shall obtain such
insurance providing reasonable coverage and the payment of reasonable premiums.
Section 4.12. Right to Participate in Sale of Additional Securities.
The Company hereby covenants and agrees that it shall not, until such date as
the Company completes a Qualified Public Offering, issue or sell any (i) shares
of capital stock of the Company, (ii) securities convertible into or carrying
any rights to purchase capital stock of the Company, or (iii) options, warrants
or other rights to subscribe for, purchase or otherwise acquire any capital
stock of the Company, other than in connection with such Qualified Public
Offering, unless (a) the Company has received a bona fide, arms' length offer
to purchase such securities from a third party and (b) the Company first
submits a written offer to the Investors to permit them to purchase their
"proportionate share" of such securities on terms and conditions, including
price, not less favorable to the Investors than those offered by such other
prospective purchaser. Each Investor shall have the right to elect to purchase
a number of such securities based on the ratio which the Common Stock of the
Company owned by the Investor or obtainable by said Investor upon conversion of
the Purchased Shares owned by him bears to all the issued and outstanding
shares of Common Stock of the Company, including shares of Common Stock
issuable upon conversion of any outstanding Purchased Shares or other
20
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convertible securities. The Company's offer to the Investors shall remain open
and irrevocable for a period of thirty (30) days. Promptly upon the expiration
of such thirty-day period, the Company shall, in writing, inform each Investor
which elects to purchase all the securities available to it of any other
Investor's failure to do likewise. During the ten (10) day period commencing
after the receipt of such information, each fully-exercising Investor shall
have the right to elect to purchase up to its proportionate share of the
securities not subscribed for by the other Investors based on the ratio which
the Common Stock of the Company owned by the fully-exercising Investor or
obtainable by said Investor upon conversion of the Purchased Shares owned by
him bears to the Common Stock of the Company owned by, or obtainable upon
conversion of the Purchased Shares owned by, all fully-exercising Investors who
desire to purchase certain of the unsubscribed for securities.
Any Investor may transfer its right to be offered any such opportunity
to any transferee who (i) is an Investor, (ii) is an affiliate, as that term is
defined in the Investment Company Act of 1940, of an Investor (including a
partner of an Investor), or (iii) has theretofore acquired from an Investor at
least 100,000 Common Shares, issued or issuable upon conversion of the
Purchased Shares (or such lesser number of Common Shares which constitutes the
total number of Common Shares purchased by the transferee under this Agreement)
(as adjusted for stock splits, stock dividends, reclassifications,
recapitalizations or other similar events). Any securities offered to the
Investors pursuant to this Section 4.12 which such Investors have not elected
to purchase within the time fixed herein may, within ninety (90) days after the
date for making such election, be sold by the Company at not less than the same
price and upon terms not materially less favorable to the Company than were
offered to the Investors but may not otherwise be sold without renewed
compliance with this Section 4.12. Notwithstanding the above, the Company may
from the date hereof, without having offered such securities to the Investors,
issue up to an aggregate of 187,500 shares of Common Stock (as adjusted for
stock splits, stock dividends, reclassifications, recapitalizations or other
similar events) for issuance to or for the benefit of employees or directors
pursuant to stock option, stock purchase or similar plans approved by the Board
of Directors.
Section 4.13. Conduct of the Company. From the date hereof until the
Closing Date, the Company shall conduct its business in the ordinary course
consistent with past practice and to use its best efforts to preserve intact
their business organizations and relationships with third parties and to keep
available the services of their present officers and employees.
Section 4.14. Loans and Advances. The Company will not make any loan
or advance in excess of $50,000 to, or own any stock or other securities of,
any Person without the approval of the Board
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of Directors, except that the Company may own all of the outstanding capital
stock of a Subsidiary. The Company will not make any loans or advances to
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or ▇▇▇▇▇▇ ▇▇▇▇▇▇▇.
Section 4.15. Indebtedness. The Company will not create, incur, assume
or suffer to exist any Indebtedness, or repay any Indebtedness existing on the
Closing Date, to its stockholders, except as provided in Section 1.2(b) of this
Agreement.
5. REPRESENTATIONS AND WARRANTIES OF INVESTORS
In order to induce the Company to enter into this Agreement, each
Investor, severally and not jointly, represents and warrants that:
A. This Agreement, the Stockholders Agreement and the
Registration Rights Agreement and all other documents and instruments
executed by the Investor pursuant hereto, have each been duly executed
and delivered by the Investor and each is a legal, valid and binding
obligation of the Investor enforceable against the Investor in
accordance with its terms. All consents, approvals or authorizations
of any Person, and all qualifications, designations, declarations or
filings with any governmental authority, on the part of the Investor
required as a condition precedent to the valid execution and delivery
of this Agreement, the Stockholders Agreement and the Registration
Rights Agreement shall have been obtained or completed prior to, and
be effective as of, the Closing.
B. The Investor is acquiring the Purchased Shares for its
own account, for investment, and not with a view to any "distribution"
thereof within the meaning of the Securities Act.
C. The Investor understands that because the Securities
have not been registered under the Securities Act, it cannot dispose
of any or all of the Securities unless such Securities are
subsequently registered under the Securities Act or exemptions from
such registration are available. The Investor acknowledges and
understands that, except as provided in the Registration Rights
Agreement, it has no independent right to require the Company to
register the Securities under the Securities Act or any state
securities law. The Investor is aware that the Company may not
undertake a public offering of its stock. The Investor further
understands that the Company will, as a condition to the transfer of
any of the Securities, require that the request for transfer be
accompanied by opinion of counsel, in form and substance satisfactory
to the Company, to the effect that the proposed transfer does not
result in violation of the Securities Act, unless such transfer is
covered by an effective registration statement under the Securities
Act.
22
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The Investor understands that each certificate representing the Securities will
bear the following legends or ones substantially similar thereto:
These securities have not been registered under the Securities Act of
1933 or the Oklahoma Securities Act. These Securities have been
acquired for investment and not with a view to distribution or resale,
and may not be sold, mortgaged, pledged, hypothecated or otherwise
transferred without an effective registration statement for such
shares under the Securities Act of 1933, or an opinion of counsel for
the corporation that registration is not required under such act.
The Securities represented by this certificate are subject to the
terms and conditions of a Stockholders Agreement dated August 16,
1994. A copy of such agreement is on file at the principal executive
offices of VIAGRAFIX CORPORATION and VIAGRAFIX CORPORATION will
furnish copies of such agreement to the holder of this certificate
upon request and without charge.
D. The Investor is knowledgeable and experienced in the making of
venture capital investments, is able to bear the economic risk of loss of its
investment in the Company, has been granted the opportunity to make a thorough
investigation of the affairs of the Company, and has availed itself of such
opportunity to the extent it has deemed necessary, either directly or through
its authorized representative.
E. The Investor has been advised that the Purchased Shares
delivered hereunder and the Common Shares issuable upon conversion of the
Purchased Shares have not been and are not being registered under the
Securities Act and that the Company in issuing the Purchased Shares and the
Common Shares is relying upon, and will rely upon, among other things, the
representations and warranties of the Investor contained in this Section 5 in
concluding that each such issuance is a "private offering" and does not require
compliance with the registration provisions of the Securities Act.
F. The Investor is an "accredited investor" as that term is
defined in Rule 501 of Regulation D under the Securities Act.
23
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6. MISCELLANEOUS
Section 6.1. Brokers' Fee. Each party hereto will indemnify and hold
harmless the others against and in respect of any claim for brokerage or other
commissions relative to this Agreement or to the transactions contemplated
hereby, based in any way on agreements, arrangements or understandings made or
claimed to have been made by such party with any third party.
Section 6.2. Remedies.
(a) The Company and each Principal Shareholder agrees to indemnify
each holder of any Purchased Shares against all claims, losses, damages and
liabilities, including legal and other expenses reasonably incurred in
investigating or defending against the same, arising out of any breach of any
representation and warranty made by the Company and each Principal Shareholder
in Section 2 hereof provided, however, that the liability of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ hereunder shall be limited, in the aggregate, to the total
purchase price of all Purchased Shares purchased pursuant to this Agreement.
(b) The Investors agree to indemnify the Company against all
claims, losses, damages and liabilities, including legal and other expenses
reasonably incurred in investigating or defending against the same, arising out
of any breach of any representation and warranty made in Section 5 hereof by
the Investors.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to this Section 6.2, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing. No
indemnification provided for in Section 6.2(a) or (b) hereof shall be available
to any party who shall fail to give notice as provided in this Section 6.2(c),
but the failure to give such notice shall not relieve the indemnifying party or
parties from any liability which it or they may have to the indemnified party
for contribution or otherwise than on account of the provisions of Section
6.2(a) or (b) hereof. In case any such proceeding shall be brought against any
indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party and shall pay as incurred the
fees and disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel at its own expense. Notwithstanding the foregoing, the indemnifying
party shall pay as incurred the fees and expenses of the counsel retained by
the indemnified party in the event (i) the indemnifying party and the
24
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indemnified party shall have mutually agreed to the retention of such counsel
or (ii) the named parties to any such proceeding (including any impleaded
parties) include both the indemnifying party and the indemnified party and
representation of both parties by the same counsel would be inappropriate due
to actual or potential differing interests between them. The indemnifying party
shall not be liable for any settlement of any proceeding effected without its
written consent but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment.
(d) In the event indemnification arises hereunder as a result of a
third party claim against the indemnifying party, no indemnification shall be
made effected pursuant to this Section 6.2 until such time as the indemnifying
party shall have been finally adjudicated or otherwise bound to be liable
hereunder to such third party.
(e) Arbitration. Except as otherwise provided hereunder, any
controversy or claim among the parties hereto arising out of or relating to
this Agreement or the existence, validity, breach, or termination thereof, will
be finally settled by compulsory arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association ("AAA"), as modified
or supplemented under this Section 6.2(e). To initiate arbitration, either
party will file the appropriate notice at the Regional Office of the AAA in
Dallas, Texas. The arbitral award will be the exclusive remedy of the parties
for all claims, counterclaims, issues, or accountings presented or pled to the
arbitrators. Judgment upon the arbitral award may be entered in any court that
has jurisdiction thereof. Any additional costs, fees, or expenses incurred in
enforcing the arbitral award will be charged against the party that resists its
enforcement. This Section 6.2(e) shall be binding upon the parties and their
respective heirs or successors and assigns and any trustee, receiver, or
executor of each party hereto. Except to the extent required by law, no party,
arbitrator, representative, counsel, or witness shall disclose or confirm to
any person not present at the arbitration hearings any information about the
hearings, including the names of the parties and arbitrators, the nature and
amount of the claims, the financial condition of any party, the expected date
of hearing, or the award made.
Section 6.3. Amendments and Waivers. This Agreement may not be amended
or modified, and no provisions hereof may be waived, without the written
consent of the Company and Investors holding at least a majority of the Common
Shares (calculated as though all outstanding Purchased Shares had been
converted into Common Shares immediately prior to such consent).
25
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Section 6.4. Survival of Covenants; Assignability of Rights.
(a) All covenants, agreements, representations and warranties of
the Company made herein and in the certificates, lists, exhibits, schedules or
other written information delivered or furnished in connection therewith and
herewith, except as provided otherwise in this Agreement, shall survive the
delivery of the Securities and shall bind the Company's successors and assigns,
whether so expressed or not, and, except as provided otherwise in this
Agreement, all such covenants, agreements, representations and warranties shall
inure to the benefit of the Investor's successors and assigns and to permitted
transferees of the Securities, whether so expressed or not.
(b) All covenants, agreements, representations and warranties of
the Investors made herein shall, except as provided otherwise in this
Agreement, shall survive the delivery of the Securities and shall bind each of
the Investor's successors and assigns, whether so expressed or not and, except
as provided otherwise in this Agreement, all such covenants, agreements,
representations and warranties shall inure to the benefit of the Company's
successors and assigns whether so expressed or not.
Section 6.5. Governing Law. This Agreement shall be deemed to be a
contract made under, and shall be construed in accordance with, the laws of the
State of Oklahoma.
Section 6.6. Section Headings. The descriptive headings in this
Agreement have been inserted for convenience only and shall not be deemed to
limit or otherwise affect the construction of any provision hereof.
Section 6.7. Counterparts. This Agreement may be executed
simultaneously in any number of counterparts, each of which when so executed
and delivered shall be taken to be an original; but such counterparts shall
together constitute but one and the same document.
Section 6.8. Notices.
As the terms "notice" or "notices" are used herein as between the
parties, such term shall mean a written document, explaining in reason for the
notice, and the same shall be mailed by United States Postal Service Via
Certified Mail, Return Receipt Requested, addressed as follows:
to the Company or the Principal Shareholders:
ViaGrafix Corporation
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇
Five ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
26
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with a copy by mail and fax which shall not constitute notice, to:
▇▇▇▇ ▇. ▇▇▇▇, Attorney
▇.▇. ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
to the Investors:
GEO Capital III, L.P.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
with a copy by mail and fax, which shall not constitute notice, to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., Esquire
▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Such notice shall be deemed to have been given on the date placed in the U.S.
Mails, and sent by fax to counsel, whether actually received by the addressee
or not. The parties shall, as a matter of convenience and courtesy send each
party receiving notice a copy of said notice by facsimile or electronic means,
or by courier, Federal Express, or similar service, but such notifications
shall not be deemed lawful "notice" as required hereby. The parties may from
time to time amend the above addresses and names by written notice given the
other party.
Section 6.9. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be deemed
prohibited or invalid under such applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, and such
prohibition or invalidity shall not invalidate the remainder of such provision
or the other provisions of this Agreement.
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Section 6.10. Definitions of Terms.
Definition Section
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Company Preamble
Investors Preamble
Common Shares 1.1
Purchased Shares 1.1
Securities 1.1
Series A Preferred Stock 1.1
Closing 1.2
Closing Date 1.2
Best Knowledge. The term "best knowledge", or similar terms when
applied to the Company, means the actual knowledge of its respective Key
Employees, officers or directors without independent investigation or, when
applied to each Principal Shareholder, means the actual knowledge of the
individual shareholder without independent investigation.
Certified. A financial statement shall be deemed to be "certified"
only if the person or firm certifying it shall unqualifiedly express the
opinion that it has been prepared in accordance with generally accepted
accounting principles and that the balance sheet included therein fairly
presents the financial position of the Company as at the date thereof and that
the statements of income and of changes in financial position included therein
fairly present the results of operations of the Company for the period
indicated. If the person certifying is a officer of the Company, the
certificate shall also state that the financial statements are true, correct
and complete. If the person certifying is a member of an accounting firm, the
certificate shall also state that the examination included such tests of
accounting records and such other auditing procedures as the accountant
considered necessary in the circumstances.
Immediate Family. The term "immediate family" shall include spouse,
parents, mother-in-law and father-in-law, brother and sister, brother-in-law
and sister-in-law, son-in-law and daughter-in-law, and children.
Indebtedness. The term "Indebtedness" shall mean with respect to any
Person (i) all indebtedness or other obligations of such Person for borrowed
money or for the deferred purchase price of property or services, other than
for trade accounts payable incurred in the ordinary course of the Company's
business, (ii) all Indebtedness described in clause (i) of any
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other Person in respect of which such Person is liable, contingently or
otherwise, to pay or advance money or property as guarantor, endorser or
otherwise (except as endorser for collection in the ordinary course of
business), and (iii) all lease obligations of such Person which are required,
in accordance with generally accepted accounting principles ("GAAP"), to be
capitalized on the books of the lessee.
Key Employees. The term "Key Employees" shall mean ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and
any other employee of the Company designated by the Board of Directors
subsequent to the Closing.
Person. The term "Person" shall mean any corporation, association,
partnership, joint venture, organization, business or individual.
Qualified Public Offering. The term "Qualified Public Offering" shall
mean a firm commitment underwritten public offering of shares of Common Stock
pursuant to a registration statement filed with the Commission under the
Securities Act, in which net proceeds, after deducting underwriters' discounts
and commissions and offering expenses, to the Company equal or exceed
$5,000,000.
Subsidiary. The term "Subsidiary" shall mean any Person of which a
Person at the applicable time owns or controls, directly or indirectly through
one or more Subsidiaries, a majority of the voting stock.
Section 6.11. Expenses.
The Company shall pay all costs and expenses that (i) it incurs with
respect to the negotiation, execution, delivery and performance of this
Agreement and (ii) the Investors shall incur with respect to the due diligence
investigation of the Company and the negotiation, execution, delivery,
performance, amendment and/or enforcement of this Agreement and the other
documents delivered pursuant hereto, in an amount not to exceed $30,000.
Section 6.12. Entire Agreement.
This Agreement and the other contract documents delivered pursuant
hereto constitute the full and entire understanding and agreement between the
parties with respect to the subjects hereof and thereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the undersigned have executed this Series A
Convertible Preferred Stock Purchase Agreement as of the day and year first
above written.
VIAGRAFIX CORPORATION
By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
INVESTORS
GEOCAPITAL III, L.P.
By: Geocapital Management, L.P.
By: /s/ ILLEGIBLE
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General Partner
PRINCIPAL SHAREHOLDERS:
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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