EXHIBIT 10.2
SERIES B PREFERRED
SHARE PURCHASE AGREEMENT
DATED FEBRUARY 2, 1998
BETWEEN
REAL EDUCATION, INC.
AND
THE PERSONS LISTED ON THE ATTACHED SCHEDULE OF PURCHASERS
TABLE OF CONTENTS
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PAGE
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1. DEFINITIONS.............................................................................. 1
2. AUTHORIZATION AND CLOSING................................................................ 4
A. Authorization of the Units...................................................... 4
B. Purchase and Sale of the Units.................................................. 4
C. The Closing..................................................................... 4
3. CONDITIONS OF EACH PURCHASER'S OBLIGATION AT THE CLOSING................................. 5
A. Representations and Warranties: Covenants....................................... 5
B. No Material Adverse Change...................................................... 5
C. Charter Amendment............................................................... 5
D. Company's Bylaws................................................................ 5
E. Registration Agreement.......................................................... 5
F. Stockholders Agreement.......................................................... 5
G. Board of Directors.............................................................. 6
H. Blue Sky Clearance.............................................................. 6
I. Opinion of the Company's Counsel................................................ 6
J. Proceedings..................................................................... 6
K. Waiver.......................................................................... 6
L. Closing Documents............................................................... 6
4. COVENANTS................................................................................ 7
A Financial Statements and Other Information...................................... 7
B. Inspection of Property.......................................................... 8
C. Directors' Meetings; Expenses and Indemnification............................... 9
D. Attendance at Board Meetings.................................................... 9
E. Board Approvals................................................................. 9
F. Restrictions.................................................................... 10
G. Affirmative Covenants........................................................... 13
H. Compliance with Agreements...................................................... 14
I. Current Public Information...................................................... 14
J. Reservation of Common Stock..................................................... 14
K. Proprietary Rights.............................................................. 14
L. First Refusal Rights............................................................ 15
M. Management Stock Pool........................................................... 15
N. Use of Proceeds................................................................. 16
5. TRANSFER OF RESTRICTED SECURITIES........................................................ 16
6. REPRESENTATIONS AND WARRANTIES OF COMPANY................................................ 17
A Organization and Corporate Power................................................ 17
B. Capital Stock and Related Matter................................................ 17
C. Subsidiaries; Investments....................................................... 18
D. Authorization; No Breach........................................................ 18
E. Financial Statements............................................................ 19
F. Absence of Undisclosed Liabilities.............................................. 19
G. No Material Adverse Change...................................................... 19
H. Absence of Certain Developments................................................. 19
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I. Assets.......................................................................... 21
J. Tax Matters..................................................................... 21
K. Contracts and Commitments....................................................... 21
L. Proprietary Rights.............................................................. 23
M. Litigation, etc................................................................. 24
N. Brokerage....................................................................... 24
O. Governmental Consent. etc....................................................... 24
P. Insurance....................................................................... 24
Q. Employees....................................................................... 24
R. ERISA........................................................................... 25
S. Compliance with Laws............................................................ 25
T. Affiliated Transaction.......................................................... 26
U. Disclosure...................................................................... 26
V. Closing Date.................................................................... 26
7. MISCELLANEOUS............................................................................ 26
A Expenses........................................................................ 26
B. Purchaser's Investment Representations.......................................... 27
C. Consent to Amendments........................................................... 28
D. Survival of Representations and Warranties...................................... 28
E. Successors and Assigns.......................................................... 28
F. Generally Accepted Accounting Principles........................................ 29
G. Severability.................................................................... 29
H. Counterparts.................................................................... 29
I. Descriptive Headings; Interpretation............................................ 29
J. Notices......................................................................... 29
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SHARE PURCHASE AGREEMENT
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THIS AGREEMENT is made as of February 2, 1998, between REAL EDUCATION,
INC., a Colorado corporation (the "COMPANY"), and the Persons listed on the
Schedule of Purchasers attached hereto (collectively referred to herein as the
"PURCHASERS" and individually as a "PURCHASER"). Except as otherwise indicated
herein, capitalized terms used herein are defined in Section 1 hereof.
The parties hereto agree as follows:
1. Definitions. For the purposes of this Agreement, the following
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terms have the meanings set forth below:
"AFFILIATE" of any particular person or entity means any other
person or entity controlling, controlled by or under common control with such
particular person or entity.
"CHARTER AMENDMENT" shall have the meaning set in Section 2.A.
"CLOSING" and "CLOSING DATE" shall have the respective meanings
set in Section 2.C.
"COMMON STOCK" shall mean the Company's Common Stock, no par
value per share.
"COMPENSATORY STOCK" means Common Stock (or options to purchase
Common Stock) issued for compensatory or incentive purposes to directors,
officers, employees and consultants of the Company, issuances of which are from
time to time approved by the Company's Board of Directors.
"EBITDA" for a particular accounting period shall mean the sum of
the Company's net income (or loss) plus net interest expense, tax expense and
amortization and depreciation expense, as all such amounts are reported in the
Company's financial statements for such period.
"INDEBTEDNESS" shall mean at a particular time, without
duplication, (i) indebtedness for borrowed money or for the deferred purchase
price of property or services in respect of which any Person is liable,
contingently or otherwise, as obligor or otherwise (other than trade payables
and other current liabilities incurred in the ordinary course of business) or
any commitment by which any Person assures a creditor against loss, including
contingent reimbursement obligations with respect to letters of credit, (ii)
indebtedness guaranteed in any manner by any Person, including guarantees in the
form of an agreement to repurchase or reimburse and (iii) obligations under
capitalized leases in respect of which obligations any Person is liable,
contingently or otherwise, as obligor, guarantor or otherwise, or in respect of
which obligations any Person assures a creditor against loss.
"INVESTMENT" as applied to any Person means (i) any direct or
indirect purchase or other acquisition by such Person of any notes, obligations,
instruments, stock, securities or ownership interest (including partnership
interests and joint venture interests) of any other Person and (ii) any capital
contribution by such Person to any other Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and
any reference to any particular IRC section shall be interpreted to include any
revision of or successor to that section regardless of how numbered or
classified.
"IRS" means the United States Internal Revenue Service.
"KEY EMPLOYEES" shall mean those senior management and other
employees whose service is deemed significant to the continued growth and
prosperity of the Company, as specified in a schedule to be jointly developed by
Company management and representatives of the Purchasers.
"LATEST BALANCE SHEET DATE" shall mean December 31, 1997.
"OFFICER'S CERTIFICATE" means a certificate signed by the
Company's president or its chief financial officer, stating that (i) the officer
signing such certificate has made or has caused to be made such investigations
as are necessary in order to permit him to verify the accuracy of the
information set forth in such certificate and (ii) to the best of such officer's
knowledge, such certificate does not misstate any material fact and does not
omit to state any fact necessary to make the certificate not misleading.
"OPTION PLAN" shall have the meaning set in Section 4.M.
"PERSON" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, a limited
liability company, an unincorporated organization and a governmental entity or
any department, agency or political subdivision thereof.
"PREFERRED STOCK" shall mean the Series A Preferred and the
Series B Preferred, considered together.
"PROPRIETARY RIGHTS" means all (i) patents, patent applications,
patent disclosures and inventions, (ii) trademarks, service marks, trade dress,
trade names and corporate names and registrations and applications for
registration thereof, (iii) copyrights and registrations and applications for
registration thereof, (iv) mask works and registrations and applications for
registration thereof, (v) computer software, data and documentation, (vi) trade
secret and other confidential information (including ideas, formulas, patentable
or unpatentable and whether or not reduced to practice), know-how, manufacturing
and production processes and techniques, research and development information,
drawings, specifications, designs, plans, proposals, financial and marketing
plans and customer and supplier lists and information), (vii) other intellectual
property rights and (viii) copies and tangible embodiments thereof (in whatever
form or medium).
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"REPRESENTATIVES" shall have the meaning set in Section 4.B.
"RESTRICTED SECURITIES" means (i) the Series B Preferred issued
hereunder, (ii) the Common Stock issued upon conversion of Series B Preferred
and (iii) any securities issued with respect to the securities referred to in
clauses (i) or (ii) above by way of a stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization. As to any particular Restricted Securities, such
securities shall cease to be Restricted Securities when they have (a) been
effectively registered under the Securities Act and disposed of in accordance
with the registration statement covering them, (b) become eligible for sale
pursuant to Rule 144(k) (or any similar provision then in force) under the
Securities Act or (c) been otherwise transferred and new certificates for them
not bearing the Securities Act legend of the character set forth in Section 7.C
have been delivered by the Company.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or
any similar federal law then in force.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended, or any similar federal law then in force.
"SECURITIES AND EXCHANGE COMMISSION" includes any governmental
body or agency succeeding to the functions thereof.
"SERIES A HOLDERS" shall mean the holders of Series A Preferred,
from time to time.
"SERIES A PURCHASE AGREEMENT" shall mean that certain Unit
Purchase Agreement, dated June 11, 1997, between the Company and the Purchasers
named therein.
"SERIES A PREFERRED" shall mean the Company's Series A
Convertible Preferred Stock, no par value per share.
"SERIES B PREFERRED" shall mean the Company's Series B
Convertible Preferred Stock, no par value per share.
"SUBSIDIARY" means, with respect to any Person, any corporation,
partnership, association or other business entity of which (i) if a corporation,
a majority of the total voting power of shares of stock entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof or (ii) if a partnership, limited liability
company, association or other business entity, a majority of the partnership,
membership or other similar ownership interest thereof is at the time owned or
controlled, directly or indirectly, by any Person or one or more Subsidiaries of
that Person or a combination thereof. For purposes hereof, a Person or Persons
shall be deemed to have a majority ownership interest in a partnership,
association or other business entity if such Person or Persons shall be
allocated a majority of partnership, association
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or other business entity gains or losses or shall be or control the managing
director or general partner of such partnership, association or other business
entity.
"TREASURY REGULATIONS" means the United States Treasury
Regulations promulgated under the IRC and any reference to any particular
Treasury Regulation section shall be interpreted to include any final or
temporary revision of or successor to that section regardless of how numbered or
classified.
"UNDERLYING COMMON STOCK" means (i) the Common Stock issued or
issuable upon either conversion of the Series A Preferred or the Series B
Preferred and (ii) any Common Stock issued or issuable with respect to the
securities referred to in clause (i) above by way of stock dividend or stock
split or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization. For purposes of this Agreement, any
Person who holds Series A Preferred or Series B Preferred shall be deemed to be
the holder of the Underlying Common Stock obtainable upon conversion of the
Series A Preferred or the Series B Preferred in connection with the transfer
thereof or otherwise regardless of any restriction or limitation on the
conversion of the Series A Preferred or the Series B Preferred. As to any
particular shares of Underlying Common Stock, such shares shall cease to be
Underlying Common Stock when they have been (a) effectively registered under the
Securities Act and disposed of in accordance with the registration statement
covering them or (b) distributed to the public through a broker, dealer or
market maker pursuant to Rule 144 under the Securities Act (or any similar
provision then in force).
"WARRANTS" shall mean the Company's outstanding warrants to
purchase one share of the Company's Common Stock, exerciseable at a price of
$7.58 per share, for a period of three years from the Closing.
1. Authorization and Closing .
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A. Authorization of the Shares. The Company shall authorize the
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issuance and sale to the Purchasers of 326,833 shares of its Series B Preferred,
having the rights and preferences set forth in Article II of the Company's
Amended and Restated Articles of Incorporation, the form of which is attached
hereto as Exhibit A (the "CHARTER AMENDMENT"). The Series B Preferred is
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convertible into shares of the Company's Common Stock.
B. Purchase and Sale of the Shares. At the Closing, the Company
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shall sell to each Purchaser and, subject to the terms and conditions set forth
herein, each Purchaser shall severally purchase from the Company, the number of
shares of Series B Preferred (the "SHARES") set forth opposite such Purchaser's
name on the Schedule of Purchasers attached hereto, at a price of $18.36 per
Share. The aggregate purchase price to be paid by each Purchaser is set forth on
the Schedule of Purchasers. The sale of Shares to each Purchaser shall
constitute a separate sale hereunder.
C. The Closing. The closing of the separate purchases and sales
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of the Shares (the "CLOSING") shall take place at the offices of ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇, Ltd. at 10:00 a.m. on February 2, 1998 (the "CLOSING DATE"), or at such
other place or on such other date as may be
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mutually agreeable to the Company and each Purchaser. At the Closing, the
Company shall deliver to each Purchaser a stock certificate evidencing the
Series B Preferred to be purchased by such Purchaser, registered in such
Purchaser's or its nominee's name, upon payment of the purchase price thereof by
certified or cashier's check, or wire transfer of immediately available funds to
a Company bank account designated by the Company in the amount set forth
opposite such Purchaser's name on the Schedule of Purchasers.
2. Conditions of Each Purchaser's Obligation at the Closing.
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The obligation of each Purchaser to purchase and pay for the
Series B Preferred at the Closing is subject to the satisfaction as of the
Closing of the following conditions:
A. Representations and Warranties: Covenants. The
------------------------------------------
representations and warranties contained in Section 6 hereof shall be true and
correct at and as of the Closing as though then made, except to the extent of
changes caused by the transactions expressly contemplated herein, and the
Company shall have performed in all material respects all of the covenants
required to be performed by it hereunder prior to the Closing.
B. No Material Adverse Change. Since the Latest Balance Sheet
--------------------------
Date, there shall have been no material adverse change in the business,
financial condition, operating results, assets, employee relations, customer or
supplier relations, product development efforts, research and development
efforts or business prospects of the Company and there shall have been no
material casualty loss or damage to the Company's assets (whether or not covered
by insurance).
C. Charter Amendment. The Charter Amendment shall have been
-----------------
duly filed with the Colorado Secretary of State and shall be in full force and
effect, and the Company's Articles of Incorporation shall not have been further
amended in any way.
D. Company's Bylaws. The Company's bylaws shall be unchanged
----------------
from June 1, 1997.
E. Registration Agreement. The Purchasers shall have been added
----------------------
as parties to the Company's Registration Agreement dated June 11, 1997, which
agreement shall have been further amended as provided in Exhibit B attached
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hereto (as so amended, the "REGISTRATION AGREEMENT") and the Registration
Agreement, as so amended, shall be in full force and effect as of the Closing.
The Company shall not be party to any other agreements providing rights relating
to the registration of the Company's securities.
F. Shareholders Agreement. The Company, the Purchasers and all
----------------------
of the Company's current holders of Common Stock or Series A Preferred shall
have entered into an Amended and Restated Shareholders Agreement in form and
substance as set forth in Exhibit C attached hereto (the "SHAREHOLDERS
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AGREEMENT") and the Shareholders Agreement, as so amended, shall be in full
force and effect at the Closing. Neither the Company nor any of its shareholders
shall be parties to any other agreement relating to the voting of the Company's
capital stock.
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G. Board of Directors. The size of the Board of Directors shall
------------------
be set at nine, Messrs. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ and Oakliegh ▇▇▇▇▇▇ shall have been
appointed as directors and Audit and Compensation Committees of the Board of
Directors shall have been appointed pursuant to the terms of the Shareholders
Agreement.
H. Blue Sky Clearance. The Company shall have made all filings
------------------
under applicable state securities laws necessary to consummate the issuance of
the Series B Preferred pursuant to this Agreement in compliance with such laws.
I. Opinions of the Company's Counsel. Each Purchaser shall have
---------------------------------
received from ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Ltd, and ▇▇▇▇ ▇▇▇▇▇▇▇, counsel for the Company,
opinions with respect to the matters set forth in Exhibit D attached hereto,
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which shall be addressed to each Purchaser, dated the Closing Date and in form
and substance reasonably satisfactory to each Purchaser.
J. Proceedings. All corporate and other proceedings taken or
-----------
required to be taken by the Company in connection with the transactions
contemplated hereby to be consummated at or prior to the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to Purchasers' counsel.
▇. ▇▇▇▇▇▇▇▇ Release Undertaking. The undertaking of ▇▇▇ ▇▇▇▇▇▇▇
----------------------------
to obtain a release of the Company by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and AWE, and to indemnify
and defend the Company and certain other persons until such release is obtained,
shall have been amended to include the Purchasers as beneficiaries and shall in
all other respects remain in full force and effect and shall not have been
otherwise amended since it was issued.
L. Waiver. Any condition specified in this Section 3 may be
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waived if consented to by each Purchaser, provided that no such waiver shall be
effective against any Purchaser unless it is set forth in a writing executed by
such Purchaser.
M. Closing Documents. The Company shall have delivered to each
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Purchaser all of the following documents:
(1) an Officer's Certificate, dated the Closing Date, stating
that the conditions specified in Section 2 and Sections 3.A through 3.L,
inclusive, have been fully satisfied;
(2) certified copies of (a) the resolutions duly adopted by the
Company's Board of Directors authorizing the execution, delivery and
performance of this Agreement, the Registration Agreement, the Shareholders
Agreement and each of the other agreements contemplated hereby, the filing
of the Charter Amendment referred to in Section 2.A, the issuance and sale
of the Series B Preferred, the reservation of an aggregate of 326, 833
shares of Common Stock for issuance upon conversion of any of the
authorized shares of Series B Preferred and the consummation of all other
transactions contemplated by this Agreement; (b) the resolutions duly
adopted by the Company's Shareholders approving the Charter Amendment; and
(c) waivers obtained from the Series A Holders with respect to (i) granting
other registration rights pursuant to Section 2.E of the Registration
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Agreement, as previously in effect, (ii) First Refusal Rights pursuant to
Section 4.L of the Series A Purchase Agreement, and (iii) all other rights
held by the Series A Holders under the Series A Purchase Agreement, By-Laws
or otherwise which maybe in conflict with the terms of this Agreement and
the transactions contemplated hereby;
(3) certified copies of the Amended and Restated Articles of
Incorporation and the Company's bylaws, each as in effect at the Closing;
(4) copies of all third party and governmental consents,
approvals and filings required in connection with the consummation of the
transactions hereunder (including, all blue sky law filings and waivers of
all preemptive rights and rights of first refusal); and
(5) such other documents relating to the transactions
contemplated by this Agreement as Purchasers' counsel may reasonably
request.
3. Covenants.
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So long as at least 195,000] Shares of Series B Preferred remain
outstanding (as appropriately adjusted for any stock dividends payable in shares
of Series B Preferred and any combinations, subdivisions and split-ups of the
shares of Series B Preferred), the Company covenants and agrees to observe the
covenants stated in Sections 4.A, 4.B and 4.F. The Company shall comply with the
remaining provisions of this Article 4 so long as any shares of Series B
Preferred remain outstanding.
A. Financial Statements and Other Information. The Company
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shall deliver to each Purchaser:
(1) as soon as available but in any event within 30 days after
the end of each monthly accounting period in each fiscal year, unaudited
consolidated statements of income and cash flows of the Company and its
Subsidiaries for such monthly period and for the period from the beginning
of the fiscal year to the end of such month and consolidated balance sheets
of the Company and its Subsidiaries as of the end of such monthly period,
setting forth in each case comparisons to the corresponding period in the
preceding fiscal year, and all such statements shall be prepared in
accordance with generally accepted accounting principles, consistently
applied;
(2) accompanying the monthly financial statements delivered
pursuant to Section 4.A(1) above, an executive summary which discusses the
Company's results of operations and material developments in the Company's
business;
(3) within 90 days after the end of each fiscal year,
consolidated statements of income and cash flows of the Company and its
Subsidiaries for such fiscal year, and consolidated balance sheets of the
Company and its Subsidiaries as of the end of such fiscal year, setting
forth in each case comparisons to the preceding fiscal year, all prepared
in accordance with generally accepted accounting principles, consistently
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applied, and accompanied by (a) with respect to the consolidated
portions of such statements, an opinion containing no exceptions or
qualifications (except for qualifications regarding specified
contingent liabilities) of an accounting firm of national recognition
and (b) a copy of such firm's annual management letter to the Company's
Board of Directors;
(4) promptly upon receipt thereof, any additional reports,
management letters or other detailed information concerning significant
aspects of the Company's operations or financial affairs given to the
Company by its independent accountants (and not otherwise contained in
other materials provided hereunder);
(5) at least 30 days but not more than 90 days prior to the
beginning of each fiscal year, an annual budget prepared on a monthly
basis for the Company and its Subsidiaries for such fiscal year
(displaying anticipated statements of income and cash flows and balance
sheets) and promptly upon preparation thereof, any other significant
budgets prepared by the Company and any revisions of such annual or
other budgets;
(6) promptly (but in any event within ten business days) after
the discovery or receipt of notice of any default under any material
agreement to which it or any of its Subsidiaries is a party or any
other material adverse event or circumstance affecting the Company or
any Subsidiary (including the filing of any material litigation against
the Company or any Subsidiary or the existence of any dispute with any
Person which involves a reasonable likelihood of such litigation being
commenced), an Officer's Certificate specifying the nature and period
of existence thereof and what actions the Company and its Subsidiaries
have taken and propose to take with respect thereto; and
(7) with reasonable promptness, such other information and
financial data concerning the Company and its Subsidiaries as any
Purchaser may reasonably request.
Each of the financial statements referred to in subparagraphs (1) and (3) above
shall be true and correct in all material respects as of the dates and for the
periods stated therein, subject in the case of the unaudited financial
statements to changes resulting from normal year-end audit adjustments (none of
which would, alone or in the aggregate, be materially adverse to the financial
condition, operating results, assets, operations or business prospects of the
Company and its Subsidiaries taken as a whole).
B. Inspection of Property. The Company shall permit any
----------------------
representatives ("REPRESENTATIVES"), designated by any Purchaser or group of
purchasers holding at least 1% of the outstanding Common Stock equivalents, upon
reasonable notice and during normal business hours and such other times as any
such Representative may reasonably request, to (i) visit and inspect any of the
properties of the Company and its Subsidiaries, (ii) examine the corporate and
financial records of the Company and its Subsidiaries and make copies thereof or
extracts therefrom and (iii) discuss the affairs, finances and accounts of any
such corporations with the directors, officers, employees and independent
accountants of the Company and its Subsidiaries. The presentation of an executed
copy of this Agreement by any Purchaser to the Company's independent accountants
shall constitute the Company's permission to its independent
8
accountants to participate in discussions with such Persons. The inspection
rights provided under this Section 4.B may be exercised, if at all, not more
than once per calendar quarter by all Purchasers as a group.
C. Directors' Meetings; Expenses and Indemnification. There
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will be at least six meetings of the Company's Board of Directors during each
fiscal year until the first anniversary of the Closing Date; after such date,
there will be at least four meetings during each fiscal year. Upon request of
any director, all reasonable travel and other out-of-pocket expenses of such
board member incurred in connection with attending regular and special Board of
Directors' meetings, attending any meeting of any committee thereof or
conducting any other business on behalf of the Company, will be paid by the
Company. The Company shall give each director written notice of each meeting of
its Board of Directors and each committee thereof, at least ten days prior to
the date of each such meeting. Promptly after the Closing, the Company shall
enter into an indemnification agreement with each of its outside directors
providing for indemnification to the fullest extent permitted by law.
D. Attendance at Board Meetings. The Company shall give each
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Purchaser of more than 35,000] Shares of Series B Preferred notice of each
meeting of its Board of Directors and each committee thereof at the same time
and in the same manner as notice is given to the directors (which notice shall
be confirmed in writing to each such Purchaser), and the Company shall permit
each such Purchaser or a Representative of such Purchaser to attend as an
observer all meetings of its Board of Directors and all committees thereof. Each
Representative shall be entitled to receive all written materials and other
information (including copies of meeting minutes) given to directors in
connection with such meetings at the same time such materials and information
are given to the directors. If the Company proposes to take any action by
written consent in lieu of a meeting of its Board of Directors or of any
committee thereof, the Company shall give written notice thereof to each such
Purchaser or Representative at least five days prior to the effective date of
such consent describing in reasonable detail the nature and substance of such
action. Each Purchaser or Representative shall pay his or her out-of-pocket
expenses incurred in connection with attending such board and committee
meetings.
E. Board Approvals. The affirmative vote of a majority of the
---------------
members of the Board of Directors attending a meeting held following due notice
shall be required to approve the following acts by the Company listed below in
this Section 4.E. The Company covenants and agrees not to enter into any such
action without the required Board of Directors consent:
(1) the authorization, execution or delivery of significant
distribution, licensing or other arrangements entered into outside the
ordinary course of business;
(2) the authorization or incurrence of any new Indebtedness
(other than Indebtedness subject to Section 4.F(14), as to which the
Shareholder approval specified by such Section shall be necessary and
sufficient);
(3) all executive compensation arrangements (as to which, the
Board of Directors shall act only following an affirmative
recommendation of the Compensation Committee);
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(4) approval of the Company's annual operating plan and capital
budget;
(5) undertaking capital expenditures in excess of the agreed-
upon capital budget; and
(6) commencing any executive searches.
F. Restrictions. The Company shall not, without the prior
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written consent of the holders of at least 66 2/3% of the shares of Underlying
Common Stock, voting together as a single class (provided that, in the case of
subparagraphs 2 and 11 below, the approval of the holders of at least 66 2/3% of
the Underlying Common Stock related to or derived from only the Series B
Preferred shall be required, rather than 66 2/3% of the Underlying Common Stock
as a whole):
(1) directly or indirectly redeem, purchase or otherwise
acquire, or permit any Subsidiary to redeem, purchase or otherwise
acquire, any of the Company's equity securities (including warrants,
options and other rights to acquire equity securities) other than (a)
the Preferred Stock pursuant to the terms of the Articles of
Incorporation as amended by the Charter Amendment or (b) the redemption
of shares of Common Stock from employees or consultants at a price
equal to the original purchase price paid by such consultants or
employees, pursuant to "Securities Buy-Sell Agreements" approved by the
Board of Directors and entered into at or prior to the time such Common
Stock was originally issued to such employees or consultants;
(2) authorize, issue or enter into any agreement providing for
the issuance (contingent or otherwise) of, or the appointment of any
underwriter in connection with the sale of (a) any notes or debt
securities containing equity features (including any notes or debt
securities convertible into or exchangeable for equity securities,
issued in connection with the issuance of equity securities or
containing profit participation features) (b) any equity securities (or
any securities convertible into or exchangeable for any equity
securities), which equity features (in the case of notes or debt
securities) or equity securities are in either case senior to or on a
parity with the Series B Preferred with respect to voting, the payment
of dividends, redemptions or distributions upon liquidation or
otherwise or (c) any equity securities or securities containing equity
features at a price per equivalent share of Common Stock less than
$18.36, other than securities issued upon exercise of stock options
under the Option Plan;
(3) make, or permit any Subsidiary to make, any loans or
advances to, guarantees for the benefit of, or, except as otherwise
permitted by Section 4.F(8) below, Investments in, any Person (other
than a wholly-owned Subsidiary), except for (a) reasonable advances to
employees in the ordinary course of business, (b) acquisitions
permitted pursuant to Section 4.F(8) below, (c) advances against
anticipated future license fees or royalties in connection with
acquisitions of software products or licensing rights with respect to
software products and (d) Investments having a stated maturity no
greater than one year from the date the Company makes such Investment
in (i)
10
obligations of the United States government or any agency thereof or
obligations guaranteed by the United States government, (ii)
certificates of deposit of commercial banks having combined capital and
surplus of at least $50 million, (iii) commercial paper with a rating
of at least "Prime-l" by ▇▇▇▇▇'▇ Investors Service, Inc. or (iv) public
mutual funds which invest primarily in the instruments described in
items (i) and (iii) above;
(4) liquidate, dissolve or effect a recapitalization or
reorganization in any form of transaction (including any reorganization
into partnership form);
(5) merge or consolidate with any Person or, except as permitted
by Section 4.F(8) below, permit any Subsidiary to merge or consolidate
with any Person (other than a wholly-owned Subsidiary);
(6) sell, lease or otherwise dispose of, or permit any
Subsidiary to sell, lease or otherwise dispose of, more than 25% of the
consolidated assets of the Company and its Subsidiaries (computed on
the basis of book value, determined in accordance with generally
accepted accounting principles, consistently applied, or fair market
value, determined by the Company's Board of Directors in its reasonable
good faith judgment) in any transaction or series of related
transactions (other than sales in the ordinary course of business) or
sell or permanently dispose of any of its or any Subsidiary's
Proprietary Rights;
(7) engage an underwriter or file with the Securities and
Exchange Commission any registration statement in either case relating
to a proposed public offering of the Company's securities, other than a
Qualified IPO (as defined in the Charter Amendment);
(8) acquire, or permit any Subsidiary to acquire, any interest
in any business (whether by a purchase of assets, purchase of stock,
merger or otherwise), or enter into any joint venture, involving an
aggregate consideration (including the assumption of liabilities
whether direct or indirect) exceeding $100,000 in any one transaction
or exceeding $100,000 in the aggregate in any twelve-month period;
(9) enter into, or permit any Subsidiary to enter into, the
ownership, active management or operation of any business other than
those owned, managed or operated as of the Closing;
(10) become subject to, or permit any of its Subsidiaries to
become subject to, any agreement or instrument which by its terms would
(under any circumstances) restrict the Company's right to perform the
provisions of this Agreement, the Registration Agreement, the Articles
of Incorporation or the Company's bylaws (including provisions relating
to payment of dividends on and making redemptions and conversions of
the Series A Preferred);
(11) except as expressly contemplated by this Agreement, make any
amendment to the Amended and Restated Articles of Incorporation, or the
Company's bylaws, or file any resolution of the Board of Directors with
the Colorado Secretary of State containing
11
any provisions which would increase or decrease (other than by
redemption or conversion) the number of authorized shares of the Series
B Preferred or adversely affect the rights or relative priority of the
holders of the Series B Preferred or the Underlying Common Stock under
this Agreement, the Amended and Restated Articles of Incorporation, the
Company's bylaws or the Registration Agreement;
(12) (a) enter into, or permit any Subsidiary to enter into, any
transaction with any of its or any Subsidiary's officers, directors,
employees or Affiliates (or any individual related by blood or marriage
to any such Person or any entity in which any such Person or individual
owns a beneficial interest), except (i) for normal employment
arrangements and benefit programs on reasonable terms and except as
otherwise expressly contemplated by this Agreement and (ii) in the
ordinary course of and pursuant to the reasonable requirements of its
business and upon fair and reasonable terms no less favorable to it
than it would obtain in a comparable arm's length transaction with a
Person who is not an officer, director, employee or Affiliate or (b)
hire or employ any individual, other than ▇▇▇▇ ▇▇▇▇▇▇▇, the Company's
outside general counsel, related to an officer of the Company or any
Subsidiary by blood or marriage;
(13) establish or acquire any Subsidiaries;
(14) create, incur, assume or suffer to exist, or permit any
Subsidiary to create, incur, assume or suffer to exist, Indebtedness to
any banks or other financial institutions exceeding in the aggregate
the greater of (a) $1,000,000 or (b) four (4) times total EBITDA over
the four most recent fiscal quarters; outstanding at any time on a
consolidated basis;
(15) make any capital expenditures (including payments with
respect to capitalized leases, as determined in accordance with
generally accepted accounting principles, consistently applied but
excluding any amounts of product development expenditures which are
capitalized in conformity with generally accepted accounting
principles, consistently applied) more than 35% greater than the amount
authorized for such expenditures in the applicable line item of the
Company's latest annual budget, as approved pursuant to Section 4.E(4)
of this Agreement;
(16) amend the Articles of Incorporation or bylaws to set the
size of the Company's Board of Directors at any number greater than
seven ;
(17) issue any Common Stock, unless the purchaser or subscriber
is or becomes a party to the Shareholders Agreement; or
(18) grant any options under the Option Plan if, after giving
affect to such grant, the sum of (i) all shares of Common Stock subject
to then-outstanding options issued under the Option Plan plus (ii) all
shares of Common Stock previously issued upon the exercise of options
under the Option Plan, would exceed 182,000 shares.
12
G. Affirmative Covenants. The Company shall, and shall cause
---------------------
each Subsidiary to:
(1) at all times cause to be done all things necessary to
maintain, preserve and renew its corporate existence and all material
licenses, authorizations and permits necessary to the conduct of its
businesses;
(2) maintain and keep its properties in good repair, working
order and condition, and from time to time make all necessary or
desirable repairs, renewals and replacements, so that its businesses
may be properly and advantageously conducted at all times;
(3) pay and discharge when payable all taxes, assessments and
governmental charges imposed upon its properties or upon the income or
profits therefrom (in each case before the same becomes delinquent and
before penalties accrue thereon) and all claims for labor, materials or
supplies which if unpaid would reasonably be expected to have a
material adverse effect upon the financial condition, operating
results, assets, operations or business prospects of the Company and
its Subsidiaries taken as a whole, unless and to the extent that the
same are being contested in good faith and by appropriate proceedings
and adequate reserves (as determined in accordance with generally
accepted accounting principles, consistently applied) have been
established on its books with respect thereto;
(4) comply with all other obligations which it incurs pursuant
to any contract or agreement, whether oral or written, express or
implied, as such obligations become due, unless and to the extent that
the same are being contested in good faith and by appropriate
proceedings and adequate reserves (as determined in accordance with
generally accepted accounting principles, consistently applied) have
been established on its books with respect thereto;
(5) comply with all applicable laws, rules and regulations of
all governmental authorities, the violation of which would reasonably
be expected to have a material adverse effect upon the financial
condition, operating results, assets, operations or business prospects
of the Company and its Subsidiaries;
(6) apply for and continue in force with good and responsible
insurance companies adequate insurance covering risks of such types and
in such amounts as are customary for well-insured corporations of
similar size engaged in similar lines of business;
(7) maintain proper books of record and account which fairly
present its financial condition and results of operations and make
provisions on its financial statements for all such proper reserves as
in each case are required in accordance with generally accepted
accounting principles, consistently applied; and
13
(8) enter into and maintain Employment Agreements containing
confidentiality covenants and intellectual property rights assignments
provisions with all Key Employees of the Company and each consultant to
the Company.
H. Compliance with Agreements. The Company shall perform and
--------------------------
observe (i) all of its obligations to each holder of the Series B Preferred and
all of its obligations to each holder of the Underlying Common Stock set forth
in the Amended and Restated Articles of Incorporation, as amended, and the
Company's bylaws and (ii) all of its obligations to each holder of Registrable
Securities set forth in the Registration Agreement.
I. Current Public Information. At all times after the Company
--------------------------
has filed a registration statement with the Securities and Exchange Commission
pursuant to the requirements of either the Securities Act or the Securities
Exchange Act, the Company shall file all reports required to be filed by it
under the Securities Act and the Securities Exchange Act and the rules and
regulations adopted by the Securities and Exchange Commission thereunder and
shall take such further action as any holder or holders of Restricted Securities
may reasonably request, all to the extent required to enable such holders to
sell Restricted Securities pursuant to (i) Rule 144 adopted by the Securities
and Exchange Commission under the Securities Act (as such rule may be amended
from time to time) or any similar rule or regulation hereafter adopted by the
Securities and Exchange Commission or (ii) a registration statement on Form S-2
or S-3 or any similar registration form hereafter adopted by the Securities and
Exchange Commission. Upon request, the Company shall deliver to any holder of
Restricted Securities a written statement as to whether it has complied with
such requirements.
J. Reservation of Common Stock. The Company shall at all times
---------------------------
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of issuance upon the conversion of the Series B
Preferred, such number of shares of Common Stock as are issuable upon the
conversion of all outstanding Series B Preferred. The Company represents and
covenants that all shares of Common Stock which are so issuable shall, when
issued, be duly and validly issued, fully paid and nonassessable and free from
all taxes, liens and charges. The Company shall take all such actions as may be
necessary to assure that all such shares of Common Stock may be so issued
without violation of any applicable law or governmental regulation or any
requirements of any domestic securities exchange upon which shares of Common
Stock may be listed (except for official notice of issuance which shall be
immediately transmitted by the Company upon issuance).
K. Proprietary Rights. The Company shall, and shall cause each
------------------
Subsidiary to, possess and maintain all material Proprietary Rights necessary to
the conduct of their respective businesses and shall own all right, title and
interest in and to, or have a valid license for, all material Proprietary Rights
used by the Company and each Subsidiary in the conduct of their respective
businesses. Neither the Company nor any Subsidiary shall take any action, or
fail to take any action, which would result in the invalidity, abuse, misuse or
unenforceability of such Proprietary Rights or which would infringe upon any
rights of other Persons, provided that the foregoing shall not obligate the
Company to undertake litigation or other enforcement actions
14
which the Company's Board of Directors in its discretion determines to be not
economically justified.
L. First Refusal Rights.
--------------------
(1) Except for the issuance of (a) Compensatory Stock, (b)
Common Stock upon the conversion of the Preferred Stock, (c) Common
Stock or other equity securities in connection with the acquisition of
another business as contemplated by Section 4.F(8) or in a transaction
approved by the holders of 66 2/3% of the Underlying Common Stock, (d)
Common Stock upon exercise of the Warrants and (e) Common Stock
pursuant to a public offering registered under the Securities Act, if
the Company authorizes the issuance or sale of any shares of Common
Stock or any securities containing options or rights to acquire any
shares of Common Stock (other than as a dividend on the outstanding
Common Stock), the Company shall first offer to sell to each holder of
Underlying Common Stock a portion of such stock or securities equal to
the quotient determined by dividing (1) the number of shares of
Underlying Common Stock held by such holder by (2) the sum of the total
number of shares of Underlying Common Stock and the number of shares of
Common Stock outstanding which are not shares of Underlying Common
Stock. Each holder of Underlying Common Stock shall be entitled to
purchase such stock or securities at the most favorable price and on
the most favorable terms as such stock or securities are to be offered
to any other Persons.
(2) In order to exercise its purchase rights hereunder, a holder
of Underlying Common Stock must, within 21 days after receipt of
written notice from the Company describing in reasonable detail the
stock or securities being offered, the purchase price thereof, the
payment terms and such holder's percentage allotment, deliver a written
notice to the Company describing its election hereunder. If not all of
the stock and securities offered to the holders of Underlying Common
Stock are fully subscribed by such holders, the remaining stock and
securities shall be reoffered by the Company to the holders purchasing
their full allotment upon the terms set forth in this Section 4.L,
except that such holders must exercise their purchase rights within
five days after receipt of such reoffer.
(3) Upon the expiration of the offering periods described above,
the Company shall be entitled to sell such stock or securities which
the holders of Underlying Common Stock have not elected to purchase
during the 90 days following such expiration on terms and conditions no
more favorable to the purchasers thereof than those offered to such
holders. Any stock or securities offered or sold by the Company after
such 90-day period must be reoffered to the holders of Underlying
Common Stock pursuant to the terms of this Section 4.L.
(4) The rights under this Section 4.L shall terminate upon the
closing of a Qualified IPO, as such term is defined in the Charter
Amendment.
M. Management Stock Pool. The Company shall maintain its
---------------------
incentive stock option plan (the "OPTION PLAN") in the form adopted on March 24,
1997, for which 150,000
15
shares of the Common Stock have been reserved, and for which no more than 32,000
additional shares will be reserved. The Option Plan provides for the grant of
options to the Company's employees, which options shall vest over a two year
period from the date of issuance, with 50% of the options vesting on the first
anniversary of the date of issuance and 50% on the second anniversary of the
date of issuance. The Option Plan provides, and it shall continue to be the
case, that the Compensation Committee of the Company's Board of Directors shall
determine the recipients and size of all option grants.
N. Use of Proceeds. The Company covenants and agrees that
---------------
except as required by any agreements governing any existing debt obligations of
the Company, which are listed on the "Liabilities Schedule," as such agreements
existed immediately prior to the Closing Date, it shall not apply any of the
proceeds from the sale of the Shares of Series B Preferred to pay, repay,
discharge, or secure any amounts of principal, interest or other amounts owing
under any secured or unsecured debt of the Company existing immediately prior to
or as of the Closing Date. The remaining proceeds shall be added to the
Company's working capital and used for general corporate purposes. Pending their
disposition as provided in the prior sentence, the Company covenants and agrees
to invest such proceeds in short-term, investment grade, interest-bearing
securities.
4. Transfer of Restricted Securities.
---------------------------------
Each Purchaser acknowledges that Restricted Securities are
transferable only pursuant to (i) public offerings registered under the
Securities Act, (ii) Rule 144 or Rule 144A of the Securities and Exchange
Commission (or any similar rule or rules then in force) if such rule is
available or (iii) subject to the conditions specified in subsection (A) below,
any other legally available means of transfer.
A. In connection with the transfer of any Restricted
Securities, the holder thereof shall deliver written notice to the Company
describing in reasonable detail the transfer or proposed transfer, together with
an opinion of counsel which (to the Company's reasonable satisfaction) is
knowledgeable in securities law matters to the effect that such transfer of
Restricted Securities may be effected without registration of such Restricted
Securities under the Securities Act. In addition, if the holder of the
Restricted Securities delivers to the Company an opinion of such counsel that no
subsequent transfer of such Restricted Securities shall require registration
under the Securities Act, the Company shall promptly upon such contemplated
transfer deliver new certificates for such Restricted Securities which do not
bear the Securities Act legend set forth in Section 7.C. If the Company is not
required to deliver new certificates for such Restricted Securities not bearing
such legend, the holder thereof shall not transfer the same until the
prospective transferee has confirmed to the Company in writing its agreement to
be bound by the conditions contained in this Section 5.A and Section 7.C.
B. Upon the request of any Purchaser, the Company shall
promptly supply to such Purchaser or its prospective transferees all information
regarding the Company required to be delivered in connection with a transfer
pursuant to Rule 144A of the Securities and Exchange Commission.
16
C. Upon the request of any holder of Restricted Securities, the
Company shall remove the foregoing legend from the certificates for such
holder's Restricted Securities; provided that such Restricted Securities are
eligible for sale pursuant to Rule 144(k). Whenever any particular securities
cease to be Restricted Securities, the holder thereof shall be entitled to
receive from the Company, without expense, new certificates representing such
securities but of not bearing a Securities Act legend of the character set forth
in Section 7.C.
5. Representations and Warranties of Company. As a material
-----------------------------------------
inducement to the Purchasers to enter into this Agreement and purchase the
Shares, the Company hereby represents and warrants that:
A. Organization and Corporate Power. The Company is a
--------------------------------
corporation duly organized, validly existing and in good standing under the laws
of Colorado and is qualified to do business in Colorado and in every other
jurisdiction in which its ownership of property or conduct of business requires
it to qualify. The Company has all requisite corporate power and authority and
all material licenses, permits and authorizations necessary to own and operate
its properties, to carry on its businesses as now conducted and presently
proposed to be conducted and to carry out the transactions contemplated by this
Agreement. The copies of the Company's charter documents and bylaws which have
been furnished to the Purchasers' counsel reflect all amendments made thereto at
any time prior to the date of this Agreement and are correct and complete.
B. Capital Stock and Related Matters.
---------------------------------
(1) As of the Closing and immediately thereafter, the authorized
capital stock of the Company shall consist of (a) 132,000 shares of
Series A Preferred, of which 132,000 Shares shall be issued and
outstanding, (b) 326,833 Shares of Series B Preferred, of which
[272,221] shall be issued and outstanding, (c) 10,000,000 shares of
Common Stock, of which 1,050,000 shares shall be issued and
outstanding, 132,000 shares shall be reserved for issuance upon
conversion of the outstanding Series A Preferred, 326,833 shall be
reserved for issuance upon conversion of the Series B Preferred to be
issued upon closing, 192,000 shall be reserved for issuance upon
exercise of the Warrants, 13,000 shall be reserved for issuance upon
exercise of options granted to members of the Board of Directors and
[150,000 or 182,000] shall be reserved for issuance pursuant to the
terms of the Option Plan. None of the previous issuances of the Series
A Preferred, Common Stock, Warrants or any other outstanding security
of the Company have been in violation of any preemptive right or
similar right of first refusal.
(2) As of the Closing, the Company shall not have outstanding
any stock or securities convertible or exchangeable for any shares of
its capital stock or containing any profit participation features, nor
shall it have outstanding any rights or options to subscribe for or to
purchase its capital stock or any stock or securities convertible into
or exchangeable for its capital stock or any stock appreciation rights
or phantom stock plans, except for the Series A Preferred, the Series B
Preferred and the Warrants and except as set forth on the attached
"CAPITALIZATION SCHEDULE." The Capitalization Schedule
17
accurately sets forth the following with respect to all outstanding
shares of the Company's capital stock: name of the holder and number of
shares of each class of capital stock held. The fact that the
Purchasers are aware of the Company's agreement with ▇▇▇▇▇▇▇ ▇▇▇▇▇, a
copy of which is attached as Exhibit E, shall in no way affect the
Purchaser's entitlement to rely on the representations in this
Paragraph 6(B)(1). The Capitalization Schedule accurately sets forth
the following with respect to all outstanding options and rights to
acquire the Company's capital stock: the holder, the number of shares
covered, the exercise price, the grant date and the expiration date.
(3) As of the Closing, the Company shall not be subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire
or retire any shares of its capital stock or any warrants, options or
other rights to acquire its capital stock, except as set forth on the
Capitalization Schedule and except pursuant to the Amended and Restated
Articles of Incorporation. As of the Closing, all of the outstanding
shares of the Company's capital stock shall be validly issued, fully
paid and nonassessable.
(4) There are no statutory or contractual Shareholders'
preemptive rights or rights of refusal with respect to the issuance of
the Series B Preferred hereunder or the issuance of the Common Stock
upon conversion of the Series B Preferred, except for First Refusal
Rights held by Series A Holders under the Series A Purchase Agreement,
which rights have all been duly and validly waived. The Company has not
violated any applicable federal or state securities laws in connection
with the offer, sale or issuance of any of its capital stock, and,
assuming the truth of the Purchasers' representations in Section 7.C
hereof, the offer, sale and issuance of the Shares hereunder does not
require registration under the Securities Act or any applicable state
securities laws. Except as described on the Affiliate Transactions
Schedule (as defined in Section 6.T), there are no agreements between
the Company and any of its Shareholders or, to the Company's knowledge
between the Company's Shareholders with respect to the voting or
transfer of the Company's capital stock or with respect to any other
aspect of the Company's affairs, except for the Registration Agreement,
the Shareholders Agreement and this Agreement.
C. Subsidiaries; Investments. The Company does not own or hold
-------------------------
any rights to acquire any shares of stock or any other security or interest in
any other Person and the Company does not have any Subsidiary. The Company
formerly owned all of the stock of Brecknet Internet Service, Inc., a Colorado
corporation ("BRECKNET"). The Company sold the assets of Breknet to Vailnet,
Inc. pursuant to an Asset Purchase Agreement dated May 30, 1997. The Company
subsequently sold the stock of Breknet for a nominal consideration
D. Authorization; No Breach. The execution, delivery and
------------------------
performance of this Agreement, the Registration Agreement, the Shareholders
Agreement and all other agreements contemplated hereby to which the Company is a
party have been duly authorized by the Company. This Agreement, the Registration
Agreement, the Shareholders Agreement and all other agreements contemplated
hereby each constitutes a valid and binding obligation of the Company,
enforceable in accordance with its terms. The execution and delivery by the
Company of this Agreement, the Registration Agreement, the Shareholders
Agreement and all other
18
agreements contemplated hereby to which the Company is a party, the offering,
sale and issuance of the Shares hereunder, the issuance of the Common Stock upon
conversion of the Series B Preferred and the fulfillment of and compliance with
the respective terms hereof and thereof by the Company, do not and shall not (i)
conflict with or result in a material breach of the terms, conditions or
provisions of, (ii) constitute a material default under, (iii) result in the
creation of any lien, security interest, charge or encumbrance upon the
Company's capital stock or assets pursuant to, (iv) give any third party the
right to modify, terminate or accelerate any obligation under, (v) result in a
material violation of, or (vi) require any authorization, consent, approval,
exemption or other action by or notice to any court or administrative or
governmental body pursuant to, the Amended and Restated Articles of
Incorporation or bylaws of the Company, or any law, statute, rule or regulation
to which the Company is subject, or any agreement, instrument, order, Judgment
or decree to which the Company is subject.
E. Financial Statements. Attached hereto as the "FINANCIAL
--------------------
STATEMENTS SCHEDULE" are the unaudited balance sheets of the Company as of
December 31, 1997 (the "LATEST BALANCE SHEET"), and December 31, 1997, and the
related statements of income and cash flows (or the equivalent) for the periods
then ended. Each of such financial statements (including in all cases the notes
thereto, if any) is accurate and complete in all material respects, is
consistent with the books and records of the Company (which, in turn, are
accurate and complete in all material respects) and has been prepared in
accordance with generally accepted accounting principles, consistently applied,
subject to the lack of footnote disclosure (none of which disclosures would,
alone or in the aggregate, be materially adverse to the financial condition,
operating results, assets, operations or business prospects of the Company and
its Subsidiaries taken as a whole).
F. Absence of Undisclosed Liabilities. Except as set forth on
----------------------------------
the attached "LIABILITIES SCHEDULE," the Company does not have any material
obligation or liability (whether accrued, absolute, contingent, unliquidated or
otherwise, whether or not known to the Company, whether due or to become due and
regardless of when asserted) arising out of transactions entered into at or
prior to the Closing, any action or inaction at or prior to the Closing or any
state of facts existing at or prior to the Closing, other than: (i) liabilities
set forth on the Latest Balance Sheet (including any notes thereto), (ii)
liabilities and obligations which have arisen after the date of the Latest
Balance Sheet in the ordinary course of business (none of which is a liability
resulting from breach of contract, breach of warranty, tort, infringement, claim
or lawsuit and all of which in the aggregate are not material to the Company)
and (iii) other liabilities and obligations expressly disclosed in the other
Schedules to this Agreement.
G. No Material Adverse Change. Since the date of the Latest
--------------------------
Balance Sheet, there has been no material adverse change in the financial
condition, operating results, assets, operations, business prospects, employee
relations or customer or supplier relations of the Company.
H. Absence of Certain Developments.
-------------------------------
19
(1) Except as expressly contemplated by this Agreement or as set
forth on the attached "DEVELOPMENTS SCHEDULE," since the date of the
Latest Balance Sheet, the Company has not:
a) issued any notes, bonds or other debt securities or any
equity securities or any securities convertible,
exchangeable or exercisable into any equity securities;
b) borrowed any amount or incurred or become subject to
any liabilities, except current liabilities incurred in the
ordinary course of business and liabilities under contracts
entered into in the ordinary course of business;
c) discharged or satisfied any lien or encumbrance or paid
any obligation or liability, other than current liabilities
paid in the ordinary course of business;
d) declared or made any payment or distribution of cash or
other property to its Shareholders with respect to its stock
or purchased or redeemed any shares of its stock or any
warrants, options or other rights to acquire its stock;
e) mortgaged or pledged any of its properties or assets or
subjected them to any lien, security interest, charge or
other encumbrance, except liens for current property taxes
not yet due and payable;
f) sold, assigned or transferred any of its tangible
assets, except in the ordinary course of business, or
canceled any debts or claims;
g) sold, assigned or transferred any patents or patent
applications, trademarks, service marks, trade names,
corporate names, copyrights or copyright registrations,
trade secrets or other intangible assets, or disclosed any
proprietary confidential information to any Person;
h) suffered any extraordinary losses or waived any rights
of material value, whether or not in the ordinary course of
business or consistent with past practice;
i) made capital expenditures or commitments therefor that
aggregate in excess of $25,000 (excluding any amounts of
product development expenditures which are capitalized in
conformity with generally accepted accounting principles,
consistently applied);
j) entered into any other transaction other than in the
ordinary course of business or entered into any other
material transaction, whether or not in the ordinary course
of business;
20
k) made any loans or advances to, guarantees for the
benefit of, or any Investments in, any Persons;
l) suffered any damage, destruction or casualty loss
exceeding in the aggregate $25,000, whether or not covered
by insurance; or
m) made any Investment in or taken steps to incorporate
any Subsidiary.
(2) The Company has not at any time made any payments for
political contributions or made any bribes, kickback payments or other
illegal payments.
I. Assets. Except as set forth on the attached "ASSETS
------
SCHEDULE," the Company has good and marketable title to, or a valid leasehold
interest in, the properties and assets used by it, located on its premises or
shown on the Latest Balance Sheet or acquired thereafter, free and clear of all
liens, security interests, charges and encumbrances, except for properties and
assets disposed of in the ordinary course of business since the date of the
Latest Balance Sheet and except for liens disclosed on the Latest Balance Sheet
(including any notes thereto) and liens for current property taxes not yet due
and payable. The Company's buildings, equipment and other tangible assets are in
good operating condition in all material respects and are fit for use in the
ordinary course of business. The Company owns, or has a valid leasehold interest
in, all assets necessary for the conduct of its business as presently conducted.
J. Tax Matters. The Company has filed all tax returns which it
-----------
is required to file (taking into account all extensions of due dates) under
applicable laws and regulations; all such returns are true and correct in all
material respects; the Company has paid, or has made sufficient provision for,
all taxes due and owing by it and has withheld and paid over all taxes which it
is obligated to withhold from amounts paid or owing to any employee,
Shareholder, creditor or other third party; the Company has not waived any
statute of limitations with respect to taxes or agreed to any extension of time
with respect to a tax assessment or deficiency; the assessment of any additional
taxes for periods for which returns have been filed is not expected; no foreign,
federal, state or local tax audits are pending or being conducted with respect
to the Company, no information related to tax matters has been requested by any
foreign, federal, state or local taxing authority and no notice indicating an
intent to open an audit or other review has been received by the Company from
any foreign, federal, state or local taxing authority; and there are no material
unresolved questions or claims concerning the Company's tax liability. The
Company has not made an election under Section 341(f) of the IRC.
K. Contracts and Commitments.
-------------------------
(1) Except as expressly contemplated by this Agreement or as set
forth on the attached "CONTRACTS SCHEDULE," as of the Closing, the
Company is not a party to any written or oral:
a) pension, profit sharing, stock option, employee stock
purchase or other plan or arrangement providing for deferred
or other compensation to
21
employees or any other employee benefit plan or arrangement,
or any contract with any labor union, or any severance
agreements;
b) contract for the employment of any officer, individual
employee or other Person on a full-time, part-time,
consulting or other basis, other than the Employment
Agreements, or contract relating to loans to officers,
directors or affiliates;
c) contract under which the Company has advanced or loaned
any other Person any amounts;
d) agreement or indenture relating to the borrowing of
money or the mortgaging, pledging or otherwise placing a
lien on any material asset or material group of assets of
the Company;
e) guarantee of any obligation;
f) lease or agreement under which the Company is lessee of
or holds or operates any property, real or personal, owned
by any other party, except for any lease of real or personal
property under which the aggregate annual rental payments do
not exceed $20,000;
g) lease or agreement under which the Company is lessor of
or permits any third party to hold or operate any property,
real or personal, owned or controlled by the Company;
h) contract or group of related contracts with the same
party or group of affiliated parties the performance of
which involves a consideration in excess of $20,000;
i) assignment, license, indemnification or agreement with
respect to any intangible property (including any patent,
trademark, trade name, copyright, know-how, trade secret or
confidential information);
j) warranty agreement with respect to its services
rendered or its products sold or leased;
k) agreement under which it has granted any Person any
registration rights (including piggyback rights);
l) contract or agreement prohibiting it from freely
engaging in any business or competing anywhere in the world;
or
m) any other contractor agreement which is material to its
operations and business prospects.
22
(2) All of the contracts, agreements and instruments set forth
on the Contracts Schedule are valid, binding and enforceable in
accordance with their respective terms. The Company has performed all
material obligations required to be performed by it and is not in
default under or in breach of nor in receipt of any claim of default or
breach under any contract, agreement or instrument to which it is
subject; no event has occurred which with the passage of time or the
giving of notice or both would result in a default, breach or event of
noncompliance under any contract, agreement or instrument to which it
is subject; and the Company has no knowledge of any breach or
anticipated breach by the other parties to any contract or commitment
to which it is a party.
(3) The Purchasers' counsel has been supplied with a true and
correct copy of each of the written contracts and an accurate
description of the oral contracts which are referred to on the
Contracts Schedule, together with all amendments, waivers or other
changes thereto.
(4) The Employment Agreements and ▇. ▇▇▇▇▇▇▇'▇ Buy-Sell
Agreement entered into in connection with the sale of the Series A
Preferred and Warrants on June 11, 1997, have not been amended or
modified and remain in full force and effect.
L. Proprietary Rights. The attached "PROPRIETARY RIGHTS
------------------
SCHEDULE" contains a complete and accurate list of (i) all patented and
registered Proprietary Rights owned by the Company, specifically identified,
(ii) all pending patent applications and applications for registrations of other
Proprietary Rights filed by the Company, specifically identified, (iii) all
unregistered trade names and corporate names owned or used by the Company,
specifically identified and (iv) all unregistered trademarks, service marks and
copyrights and computer software which are material to the financial condition,
operating results, assets, operations or business prospects of the Company,
either specifically identified or described by category. The Proprietary Rights
Schedule also contains a complete and accurate list of all licenses and other
rights granted by the Company to any third party with respect to any Proprietary
Rights and all licenses and other rights granted by any third party to the
Company with respect to any Proprietary Rights. The Company owns or has the
right to use pursuant to a valid license all Proprietary Rights necessary for
the operation of the businesses of the Company as presently conducted and as
presently proposed to be conducted. Except as set forth on the Proprietary
Rights Schedule, the loss or expiration of any Proprietary Right or related
group of Proprietary Rights would not have a material adverse effect on the
conduct of the Company's business, and no such loss or expiration is threatened,
pending or reasonably foreseeable. The Company has taken all necessary and
desirable actions to maintain and protect the Proprietary Rights which it owns
and uses. To the best of the Company's knowledge, the owners of any Proprietary
Rights licensed to the Company have taken all necessary and desirable actions to
maintain and protect the Proprietary Rights which are subject to such licenses.
Except as indicated on the Proprietary Rights Schedule, (i) the Company owns all
right, title and interest in and to all of the Proprietary Rights listed on such
schedule and all other Proprietary Rights material to the operation of the
business of the Company, (ii) there have been no claims made against the Company
asserting the invalidity, misuse or unenforceability of any of such rights and
there are no grounds for the same, (iii) the Company has not received a notice
of conflict with the asserted rights of others within
23
the last five years and (iv) the conduct of the Company's business has not
infringed or misappropriated and does not infringe or misappropriate any
Proprietary Rights of other Persons, nor would any future conduct as presently
contemplated infringe any Proprietary Rights of other Persons and, to the best
of the Company's knowledge, the Proprietary Rights owned by the Company have not
been infringed or misappropriated by other Persons.
M. Litigation, etc.. Except as set forth on the attached
---------------
"LITIGATION SCHEDULE," there are no actions, suits, proceedings, orders,
investigations or claims pending or, to the best of the Company's knowledge,
threatened against or affecting the Company (or to the best of the Company's
knowledge, pending or threatened against or affecting any of the officers,
directors or employees of the Company with respect to their businesses or
proposed business activities) at law or in equity, or before or by any
governmental department, commission, board, bureau, agency or instrumentality
(including any actions, suit, proceedings or investigations with respect to the
transactions contemplated by this Agreement), the Company is not subject to any
arbitration proceedings or, to the best of the Company's knowledge, any
governmental investigations or inquiries (including inquiries as to the
qualification to hold or receive any license or permit) and, to the best of the
Company's knowledge, there is no basis for any of the foregoing. The Company is
not subject to any judgment, order or decree of any court or other governmental
agency.
N. Brokerage. There are no claims for brokerage commissions,
---------
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement binding
upon the Company. The Company shall pay, and hold each Purchaser harmless
against, any liability, loss or expense (including reasonable attorneys' fees
and out-of-pocket expenses) arising in connection with any such claim.
O. Governmental Consent. etc.. No permit, consent, approval or
--------------------------
authorization of, or declaration to or filing with, any governmental authority
is required in connection with the execution, delivery and performance by the
Company of this Agreement or the other agreements contemplated hereby, or the
consummation by the Company of any other transactions contemplated hereby or
thereby.
P. Insurance. The attached "INSURANCE SCHEDULE" contains a
---------
description of each insurance policy maintained by the Company with respect to
its properties, assets and businesses, and each such policy is in full force and
effect as of the Closing. The Company is not in default with respect to its
obligations under any insurance policy maintained by it. The Company maintains
"key man" insurance on the life of ▇. ▇▇▇▇▇▇▇ in a minimum amount of
[$1,000,000]. The Company further covenants and agrees that any proceeds
received under such policy shall immediately be placed in a segregated account
and thereafter disbursed solely to fund the Company's obligations to redeem the
Preferred Stock, on the terms, and subject to the conditions, of the Charter
Amendment
Q. Employees. The Company is not aware that any executive or
key employee of the Company or any group of employees of the Company has any
current or immediate plans to terminate employment with the Company. The Company
has complied in all material respects
24
with all laws relating to the employment of labor, including provisions thereof
relating to wages, hours, equal opportunity, collective bargaining and the
payment of social security and other taxes, and the Company is not aware that it
has any material labor relations problems (including any union organization
activities, threatened or actual strikes or work stoppages or material
grievances). Neither the Company nor, to the best of the Company's knowledge
after due inquiry, any of its employees is subject to any noncompete,
nondisclosure, confidentiality, employment, consulting or similar agreements
relating to, affecting or in conflict with the present or proposed business
activities of the Company, except for agreements between the Company and its
present and former employees.
R. ERISA.
-----
(1) Multiemployer Plans. The Company does not have any
-------------------
obligation to contribute to (or any other liability, including current
or potential withdrawal liability, with respect to) any "MULTIEMPLOYER
PLAN" (as defined in Section 3(37) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")).
(2) Retiree Welfare Plans. The Company does not maintain or have
---------------------
any obligation to contribute to (or any other liability with respect
to) any plan or arrangement whether or not terminated, which provides
medical, health, life insurance or other welfare-type benefits for
current or future retired or terminated employees (except for limited
continued medical benefit coverage required to be provided under
Section 4980B of the IRC or as required under applicable state law).
(3) Defined Benefit Plans. The Company does not maintain,
---------------------
contribute to or have any liability under (or with respect to) any
employee plan which is a tax-qualified "DEFINED BENEFIT PLAN" (as
defined in Section 3(35) of ERISA), whether or not terminated.
(4) Defined Contribution Plans. The Company does not maintain,
--------------------------
contribute to or have any liability under (or with respect to) any
employee plan which is a tax-qualified "DEFINED CONTRIBUTION PLAN" (as
defined in Section 3(34) of ERISA), whether or not terminated.
(5) Other Plans. Except as explicitly set forth in the Contracts
-----------
Schedule, the Company does not maintain, contribute to or have any
liability under (or with respect to) any plan or arrangement providing
benefits to current or former employees, including any bonus plan, plan
for deferred compensation, employee health or other welfare benefit
plan or other arrangement, whether or not terminated.
S. Compliance with Laws. To the best of the Company's
--------------------
knowledge, the Company is not in material violation of any law, regulation or
requirement and has not received notice of any such violation. The Company is
not subject to any clean up liability, or has any reason to believe it may
become subject to any clean up under any federal, state or local environmental
law, rule or regulation.
25
T. Affiliated Transaction. Except as set forth on the attached
----------------------
"AFFILIATED TRANSACTIONS SCHEDULE," no officer, director, Shareholder or
Affiliate of the Company or any individual related by blood or marriage to any
such Person or any entity in which any such Person or individual owns any
beneficial interest, is a party to any agreement, contract, commitment or
transaction with the Company or has any interest in any property, real, personal
or mixed, tangible or intangible, used in or pertaining to the business of the
Company.
U. Disclosure. Neither this Agreement, nor any of the
----------
schedules, attachments, written statements, documents, certificates or other
items prepared or supplied to any Purchaser by or on behalf of the Company with
respect to the transactions contemplated hereby contain any untrue statement of
a material fact or omit a material fact necessary to make each statement
contained herein or therein not misleading. There is no fact which the Company
has not disclosed to the Purchasers in writing and of which any of its officers,
directors or executive employees is aware and which has had or would reasonably
be anticipated to have a material adverse effect upon the existing or expected
financial condition, operating results, assets, customer or supplier relations,
employee relations or business prospects of the Company and its Subsidiaries
taken as a whole.
V. Closing Date. The representations and warranties of the
------------
Company contained in this Section 6 and elsewhere in this Agreement and all
information contained in any exhibit, schedule or attachment hereto or in any
writing delivered by, or on behalf of, the Company to any Purchaser shall be
true and correct in all material respects on the Closing Date as though then
made, except as affected by the transactions expressly contemplated by this
Agreement.
6. Miscellaneous.
-------------
A. Expenses. The Company agrees to pay, and hold each Purchaser
and all holders of Series B Preferred harmless against liability for the payment
of, (i) the Purchasers' fees and expenses (not to exceed $35,000) arising in
connection with their legal review of the Company, the negotiation and execution
of this Agreement and the consummation of the transactions contemplated by this
Agreement, including fees and disbursements of their legal counsel, (ii) the
fees and expenses incurred with respect to any amendments or waivers (whether or
not the same become effective) under or in respect of this Agreement, the
agreements contemplated hereby or the Amended and Restated Articles of
Incorporation and (iii) stamp and other transfer taxes which may be payable in
respect of the execution and delivery of this Agreement or the issuance,
delivery or acquisition of any Shares of Series B Preferred or any shares of
Common Stock issuable upon conversion of the Series B Preferred.
B. Remedies, Enforcement, Governing Law, Venue.
-------------------------------------------
(1) Each holder of Shares and Underlying Common Stock shall have
all rights and remedies set forth in this Agreement, the Amended and
Restated Articles of Incorporation and all rights and remedies which
such holders have been granted at any time under any other agreement or
contract and all of the rights which such holders have under any law.
Any Person having rights under any provision of this Agreement will be
entitled to enforce such rights specifically to recover damages caused
by reason of any
26
breach of any provision of this Agreement and to exercise all other
rights granted by law. The parties hereto agree and acknowledge that
money damages may not be an adequate remedy for any breach of the
provisions of this Agreement and that any party may in its sole
discretion apply to any court of law or equity of competent
jurisdiction (without posting any bond or other security) for specific
performance and for other injunctive relief in order to enforce or
prevent violation of the provisions of this Agreement.
(2) All questions concerning the relative rights of the Company
and its shareholders and the construction, validity and interpretation
of this Agreement and the exhibits and schedules hereto shall be
governed by and construed in accordance with the domestic laws of the
State of Colorado, without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of Colorado or
any other jurisdiction) that would cause the application of the laws of
any jurisdiction other than the State of Colorado.
(3) Any controversy or claim arising out of or relating to this
Agreement, including, without limitation, the making, performance, or
interpretation of this Agreement, may be heard and resolved by any
state or federal court located in Denver or Arapahoe Counties,
Colorado.
(4) The parties agree that they will not seek from the court
hearing any claim under this Agreement any award or judgment for
punitive damages (or any other amount awarded for the purpose of
imposing a penalty), and that if any such award or judgment is granted,
the parties agree not to seek to satisfy such award or judgment.
(5) The court hearing any claim under this Agreement shall award
all costs of the proceeding, including court costs, filing fees, travel
costs of witnesses, costs of depositions and reasonable attorney fees,
to the substantially prevailing party.
C. Purchasers' Investment Representations.
--------------------------------------
(1) Each Purchaser hereby represents that it is acquiring the
Restricted Securities purchased hereunder or acquired pursuant hereto
for its own account with the present intention of holding such
securities for purposes of investment and that it has no intention of
selling such securities in a public distribution in violation of the
federal securities laws or any applicable state securities laws;
provided that nothing contained herein shall prevent any Purchaser and
subsequent holders of Restricted Securities from transferring such
securities in compliance with the provisions of Section 5 hereof.
(2) Each Purchaser acknowledges that the Shares are being issued
and sold to such Purchaser under exemptions from registration provided
in the Securities Act and under applicable state securities laws and,
therefore, cannot be resold by such Purchaser unless subsequently
registered under the Securities Act or applicable state securities laws
or an exemption from such registrations is available. Accordingly, each
Purchaser represents and warrants that it is able to bear the economic
risk of any investment in the Series B Preferred for an indefinite
period of time.
27
(3) Each certificate for Restricted Securities shall be
imprinted with a legend in substantially the following form:
"The securities represented by this certificate were
originally issued on February 2, 1998, and have not
been registered under the Securities Act of 1933, as
amended. The transfer of the securities represented
by this certificate is subject to the conditions
specified in the Share Purchase Agreement and the
Amended and Restated Shareholders Agreement, both
dated as of February 2, 1998, between the issuer
(the "Company") and certain investors, and the
Company reserves the right to refuse the transfer of
such securities until such conditions have been
fulfilled with respect to such transfer. A copy of
such conditions shall be furnished by the Company to
the holder hereof upon written request and without
charge."
(4) Each Purchaser represents that it has had the opportunity to
ask questions and receive answers concerning the Shares and to obtain
whatever information concerning the Company as has been requested by
the Purchaser in order to make its investment decision.
(5) Each Purchaser represents that (a) it is an "Accredited
Investor" as such term is defined under applicable regulations
promulgated under the Securities Act and (b) it is sophisticated in
financial matters and is able to evaluate the risks and benefits of any
investment in the Shares.
D. Consent to Amendments. Except as otherwise expressly
---------------------
provided herein, the provisions of this Agreement may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company has obtained the written
consent of the holders of 66 2/3 % of the Underlying Common Stock derived from
or related to the Series B Preferred . No other course of dealing between the
Company and the holder of any Series B Preferred or Underlying Common Stock
derived from or related to the Series B Preferred or any delay in exercising any
rights hereunder or under the Articles of Incorporation shall operate as a
waiver of any rights of any such holders. For purposes of this Agreement, shares
of Series B Preferred or Underlying Common Stock held by the Company or any
Subsidiaries shall not be deemed to be outstanding.
E. Survival of Representations and Warranties. All
------------------------------------------
representations and warranties contained herein or made in writing by any party
in connection herewith shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby and
continue until the Company has delivered to the Purchasers, in the manner
specified in Section 4.A, its audited financial statements as of and for the
year ended December 31, 1998, regardless of any investigation made by any
Purchaser or on its behalf.
F. Successors and Assigns. Except as otherwise expressly
----------------------
provided herein, all covenants and agreements contained in this Agreement by or
on behalf of any of the parties
28
hereto shall bind and inure to the benefit of and be enforceable by the
respective successors and assigns of the parties hereto whether so expressed or
not. In addition, and whether or not any express assignment has been made, the
provisions of this Agreement which are for any Purchaser's benefit as a
purchaser or holder of Series B Preferred or Underlying Common Stock are also
for the benefit of, and enforceable by, any subsequent holder of such Series B
Preferred or such Underlying Common Stock.
G. Generally Accepted Accounting Principles. Where any
----------------------------------------
accounting determination or calculation is required to be made under this
Agreement or the exhibits hereto, such determination or calculation (unless
otherwise provided) shall be made in accordance with generally accepted
accounting principles, consistently applied.
H. Severability. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
I. Counterparts. This Agreement may be executed in separate
------------
counterparts, anyone of which need not contain the signatures of more than one
party, but all such counterparts taken together shall constitute one and the
same agreement.
J. Descriptive Headings; Interpretation. The descriptive
------------------------------------
headings of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement. The use of the word "INCLUDING" in this
Agreement shall be by way of example rather than by limitation. Disclosure of a
fact or document on one disclosure schedule shall be deemed to be disclosure on
all schedules to which such fact or document manifestly applies.
K. Notices. All notices, demands or other commutations to be
-------
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given when delivered personally
to the recipient, sent to the recipient by reputable national express courier
service guaranteeing overnight delivery (charges prepaid) or mailed to the
recipient by certified or registered mail, return receipt requested and postage
prepaid. Such notices, demands and other communications shall be sent to each
Purchaser at the address indicated on the Schedule of Purchasers and to the
Company at the address indicated below:
If to the Company, to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
CEO & President
Real Education, Inc.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
with a copy to:
29
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
General Counsel
▇▇▇▇▇ ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
If to the Purchasers, to the respective addresses indicated on
the Schedule of Purchasers,
with a copy to:
▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Sidley & Austin
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
* * * * *
[Remainder of page intentionally left blank]
30
[Signature Page to Real Education, Inc. Series B Preferred Share Purchase
Agreement]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
REAL EDUCATION, INC.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------
Its ____________________________
▇▇▇▇▇▇▇▇▇▇▇/▇▇▇▇▇▇ INFORMATION PARTNERS I, L.P.
By: ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Information Partners, L.L.C., as General Partner
By: /s/ Oakleigh ▇▇▇▇▇▇
--------------------
Oakleigh ▇▇▇▇▇▇
Its Co-President
--------------------
[Signature Page to Real Education, Inc. Series B Preferred Share Purchase
Agreement]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first written above.
REAL EDUCATION, INC.
By _____________________________
Its ____________________________
▇▇▇▇▇▇▇▇▇▇▇/▇▇▇▇▇▇ INFORMATION PARTNERS I, L.P.
By: ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Information Partners, L.L.C., as General Partner
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
-----------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Co-President
OTHER PURCHASERS:
Signature: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------
Print Name: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------
Dollar Value of Shares Purchased: $ 150,000
---------
31
[Signature Page to Real Education, Inc. Series B Preferred Share Purchase
Agreement]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first written above.
REAL EDUCATION, INC.
By _____________________________
Its ____________________________
▇▇▇▇▇▇▇▇▇▇▇/▇▇▇▇▇▇ INFORMATION PARTNERS I, L.P.
By: ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Information Partners, L.L.C., as General Partner
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
---------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Co-President
OTHER PURCHASERS:
Signature: /s/ ▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇
--------------------------
Print Name: /s/ ▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇
-------------------------
Dollar Value of Shares Purchased: $
---------
31
[Signature Page to Real Education, Inc. Series B Preferred Share Purchase
Agreement]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first written above.
REAL EDUCATION, INC.
By _____________________________
Its ____________________________
▇▇▇▇▇▇▇▇▇▇▇/▇▇▇▇▇▇ INFORMATION PARTNERS I, L.P.
By: ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Information Partners, L.L.C., as General Partner
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Co-President
OTHER PURCHASERS:
Signature: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------
Print Name: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------
Dollar Value of Shares Purchased: $ 49,994.28
-----------
31
[Signature Page to Real Education, Inc. Series B Preferred Share Purchase
Agreement]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
REAL EDUCATION, INC.
By _______________________________
Its ______________________________
▇▇▇▇▇▇▇▇▇▇▇/▇▇▇▇▇▇ INFORMATION PARTNERS I, L.P.
By: ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Information Partners, L.L.C., as General Partner
By: _______________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Co-President
OTHER PURCHASERS:
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇▇ ▇. Dorbrin
-------------------------------------- ------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------ ------------------------------------------------
Its:▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
McDONALD & CO. SECURITES, INC. McD VENTURE CAPITAL FUND, L.P.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇, ▇▇. By: /s/ ▇▇▇▇▇▇▇▇ & Company Securities, Inc
----------------------------- --------------------------------------------
Its: Senior Managing Director Its: General Partner - ▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇, ▇▇.
----------------------------- -------------------------------------------
Chair, Board of Advisors
/s/ ▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇
SILVER FAMILY TRUST, U/D/T
12/19/97
/s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇. Silver
---------------------------------- ------------------------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. Silver, Trustee
By: /s/ ▇▇▇▇▇▇▇▇ ▇. Silver
------------------------------------------------
▇▇▇▇▇▇▇▇ ▇. Silver, Trustee
[Signature Page to Real Education, Inc. Series B Preferred Share Purchase
Agreement]
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇ /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------- --------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------- --------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
32
SCHEDULE OF PURCHASERS
Amount Purchased
Name # of Shares ($) Address
---- ----------- --- -------
▇▇▇▇▇▇▇▇▇▇▇/▇▇▇▇▇▇ 272,331 4,999,997.16 ▇▇▇▇▇▇▇▇▇▇▇/ ▇▇▇▇▇▇ Information
Partners I, L. P. Information Partners I, L.P.
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇ 1,362 25,006.32 ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
303/758-0256
▇▇▇ ▇. ▇▇▇▇▇▇ 1,362 25,006.32 ▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(h) 303/777-4292
(w) 303/778-1165
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 4,085 75,000.60 ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
303/278-3670
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 1,362 25,006.32 ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(h) 847/251-2210
(w) 312/360-3888
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 1,362 25,006.32 ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇,▇▇ ▇▇▇▇▇
(h) 312/255-1845
(w) 312/360-3883
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 2,723 49,994.28 ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(h) 612/941-7787
(w) 612/829-5919
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, 1,362 25,006.32 ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(h) 317/546-5558
(w) 317/562-9251
33
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ 2,723 49,994.28 ▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇., #▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(h) 312/951-8934
(w) 312/364-8432
Silver Family Trust U/D/T 1,362 25,006.32 ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
December 19, 1997 ▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
▇▇▇▇▇▇ ▇. Silver and (h) 650/947-9623
▇▇▇▇▇▇▇▇ ▇. Silver, (f) 650/493-1426
as Trustees
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ 1,362 25,006.32 c/o ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & Co.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
303/877-8200
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 2,723 49,994.28 c/o ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ and Company, L.L.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
312/364-8448
McDonald & Co. Securities, Inc. 10,911 200,325.96 c/o ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
Senior Managing Director
McDonald & Co. Securities, Inc.
McDonald Investment Centre
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
McD Venture Capital Fund, L.P. 10,910 200,307.60 c/o ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
Senior Managing Director
▇▇▇▇▇▇▇▇ & Co. Securities, Inc.
McDonald Investment Centre
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 8,170 150,001.20 c/▇ ▇▇▇▇▇▇▇▇ & Co.
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
34
McDonald & Company 2,723 49,994.28 c/▇ ▇▇▇▇▇▇▇▇ & Co.
----- ---------
Securities, Inc., as Custodian ▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇
for ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
TOTALS 326,833 $6,000,653.88
======= =============
35