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Exhibit 10.55
WARRANT AGREEMENT
THE PRINCETON REVIEW, INC.
and
THE HOLDERS REFERRED TO HEREIN
Dated as of December 14, 2000
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TABLE OF CONTENTS
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Section 1. DEFINITIONS, ACCOUNTING TERMS AND DETERMINATIONS ........................... 1
1.01 Definitions ................................................................... 1
1.02 Accounting Terms and Determinations ........................................... 8
Section 2. PURCHASE, SALE AND EXERCISE OF WARRANTS .................................... 9
2.01 Authorization and Issuance of Shares and Warrants ............................. 9
2.02 The Closing ................................................................... 9
2.03 Initial Holder Representations, Warranties and Agreements ..................... 9
2.04 Securities Act Compliance ..................................................... 10
2.05 Exercise of Warrants .......................................................... 10
Section 3. REPRESENTATIONS AND WARRANTIES ............................................. 11
3.01 Issuance of Warrants and Warrant Stock ........................................ 11
3.02 Registration Rights ........................................................... 12
3.03 Private Offering .............................................................. 12
Section 4. TRANSFERS GENERALLY; SECURITIES ACT COMPLIANCE ............................. 12
4.01 Transfers Generally ........................................................... 12
4.02 Transfers of Restricted Securities Pursuant to Registration Statements and Rule
144, Etc. ..................................................................... 12
4.03 Notice of Certain Transfers ................................................... 12
4.04 Restrictive Legend ............................................................ 12
4.05 Termination of Restrictions ................................................... 13
Section 5. ADDITIONAL PROVISIONS RELATING TO TRANSFERS ................................ 13
5.01 Disposition of Securities ..................................................... 13
5.02 Cancellation and Reissuance ................................................... 14
5.03 Transfer, Division and Combination ............................................ 14
Section 6. PUT RIGHTS ................................................................. 15
6.01 Put Rights .................................................................... 15
6.02 Closing ....................................................................... 15
6.03 Seniority of Put Right ........................................................ 17
6.04 Restrictive Agreements ........................................................ 18
Section 7. RIGHT TO JOIN IN SALE ...................................................... 18
7.01 Tag-Along Rights .............................................................. 18
7.02 Procedures .................................................................... 18
7.03 The Company's Covenants ....................................................... 19
Section 8. ADJUSTMENT OF STOCK UNIT ................................................... 20
8.01 Stock Dividends, Subdivisions and Combinations ................................ 20
(i)
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8.02 Issuance of Additional Shares of Common Stock ................................. 20
8.03 Issuance of Convertible Securities ............................................ 21
8.04 Superseding Adjustment of Stock Unit .......................................... 22
8.05 Other Provisions Applicable to Adjustments Under this Section 8 ............... 23
Section 9. CONSOLIDATION, MERGER, SHARE EXCHANGE, ETC.; DISTRIBUTIONS ................. 24
9.01 Consolidation, Merger, Share Exchange, etc. ................................... 24
9.02 Distributions upon Declaration of Dividend or Other Distribution .............. 25
9.03 Dilution in Case of Other Securities .......................................... 25
Section 10. NOTICE TO WARRANT HOLDERS ................................................. 26
10.01 Notice of Adjustment of Stock Unit or Exercise Price .......................... 26
10.02 Notice of Certain Corporate Actions ........................................... 26
10.03 Limitation on Holders' Rights ................................................. 27
Section 11. RESERVATION AND AUTHORIZATION OF COMMON STOCK ............................. 27
Section 12. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS ........................ 27
Section 13. HOLDERS' SPECIAL RIGHTS ................................................... 28
13.01 Replacement of Instruments .................................................... 28
13.02 Restrictions on Certain Action ................................................ 28
13.03 Inspection Rights ............................................................. 28
13.04 Board Attendance .............................................................. 28
13.05 Preemptive Rights ............................................................. 29
13.06 Transactions with Affiliates of the Company ................................... 30
13.07 Indemnification ............................................................... 31
Section 14. REGISTRATION RIGHTS ....................................................... 31
14.01 Grant of Right ................................................................ 31
14.02 Certain Definitions ........................................................... 31
14.03 [reserved] .................................................................... 32
14.04 Piggyback Registration ........................................................ 32
14.05 Expenses of Registration ...................................................... 34
14.06 Obligations of the Company .................................................... 34
14.07 Indemnification ............................................................... 36
14.08 Information by Grantee ........................................................ 39
14.09 Transfer of Registration Rights ............................................... 39
14.10 Form S-3 ...................................................................... 40
14.11 Delay of Registration ......................................................... 41
14.13 Rule 144 Reporting ............................................................ 41
14.14 Market Stand-Off Agreement .................................................... 41
14.15 Amendment of Registration Rights .............................................. 42
14.16 Termination of Registration Rights ............................................ 42
Section 15. MISCELLANEOUS ............................................................. 42
15.01 Waiver ........................................................................ 42
(ii)
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15.02 Notices ....................................................................... 42
15.03 Office of the Company ......................................................... 43
15.04 Expenses, Transfer Taxes and Other Charges .................................... 43
15.05 Amendments, Etc. .............................................................. 44
15.06 Successors and Assigns ........................................................ 44
15.07 Survival ...................................................................... 44
15.08 Captions ...................................................................... 44
15.09 Counterparts .................................................................. 44
15.10 Governing Law ................................................................. 44
15.11 Severability .................................................................. 44
15.12 Entire Agreement .............................................................. 44
15.13 No Third Party Beneficiary .................................................... 44
15.14 Specific Performance .......................................................... 45
15.15 Waiver of Jury Trial .......................................................... 45
SCHEDULE 1 - Warrants to be Issued to the Initial Holders
ANNEX 1 - Form of Warrant
ANNEX 2 - Joinder Agreement
(iii)
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WARRANT AGREEMENT
WARRANT AGREEMENT dated as of December 14, 2000 among THE
PRINCETON REVIEW, INC., a corporation duly organized and validly existing under
the laws of the State of Delaware (the "Company") and each of the investors
signatory hereto (individually, an "Initial Holder" and, collectively, the
"Initial Holders").
WHEREAS, the Company and the Initial Holders are parties to a
Loan Agreement dated as of the date hereof (as modified and supplemented and in
effect from time to time, the "Loan Agreement"), providing for extensions of
credit to be made by the Initial Holders thereunder in the aggregate amount of
$25,000,000.
WHEREAS, as an inducement for the Initial Holders entering
into the Loan Agreement and making the extensions of credit thereunder, the
Company has agreed to issue Warrants to the Initial Holders providing for the
purchase of shares of Class A Common Stock of the Company, in the manner
hereinafter provided.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
Section 1. DEFINITIONS, ACCOUNTING TERMS AND DETERMINATIONS.
1.01 Definitions. Except as expressly provided herein, the
following terms shall have the following meanings (all terms in this Section 1
or in other provisions of this Agreement in the singular to have the same
meanings in the plural and vice versa):
"Accruing Liability" shall have the meaning assigned to such
term in Section 6.02.
"Additional Shares of Common Stock" shall mean all shares
(including treasury shares) of Common Stock issued or sold by the Company on or
after the date hereof, other than (a) the shares of Common Stock described as
being issued and outstanding in Section 4.14 of the Loan Agreement, (b) the
shares of Common Stock to be issued upon conversion of the Company's Series A
Preferred Stock described as being issued and outstanding in Section 4.14 of the
Loan Agreement, (c) the shares of Common Stock to be issued upon exercise or
conversion of the Warrants, (d) the Option Stock, (e) the shares of Common Stock
to be issued upon exercise or conversion of the warrants issued by the Company
on June 2, 2000, more fully described in Item 15 of the Company's Registration
Statement No. 333-43874, as amended (the "▇▇▇▇▇▇▇▇ Warrants") and (f) the
issuance of securities pursuant to the acquisition of another entity by the
Company whereby the Company owns more than 50% of the voting power or the assets
of such Company.
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"Affiliate" shall have the meaning assigned thereto in Rule
12b-2 of the Exchange Act.
"Applicable Price" shall mean, with respect to the issuance of
securities by the Company to any Person, the highest of (i) the Current Warrant
Price per share of Common Stock and (ii) the Current Market Price per share of
Common Stock.
"Board" shall mean the Board of Directors of the Company.
"Business Day" shall mean any day on which commercial banks
are not authorized or required to close in New York City.
"Class A Common Stock" shall mean the Company's Class A Common
Stock with voting rights, par value $0.01 per share, and any stock into which
such Class A Common Stock shall be changed, including any subdivisions,
combinations, consolidation, splits or reclassifications thereof.
"Class B Common Stock" shall mean the Company's Class B Common
Stock without voting rights, par value $0.01 per share, and any stock into which
such Class B Common Stock shall be changed, including any subdivisions,
combinations, consolidation, splits or reclassifications thereof.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Commencement Date" shall mean the date specified in a Warrant
on and after which such Warrant shall be exercisable.
"Commission" shall mean the Securities and Exchange Commission
or any other similar or successor agency of the Federal government with primary
responsibility for administering the Securities Act.
"Common Stock" shall mean the Company's authorized Common
Stock, par value $0.01 per share, including the Class A Common Stock and the
Class B Common Stock, and any stock into which such Common Stock may thereafter
be changed, including any subdivisions, combinations, consolidation, splits or
reclassifications thereof, and also shall include stock of the Company of any
other class (including, without limitation, any future class(es) of such Common
Stock), which is not preferred as to dividends or assets over any class of stock
of the Company.
"Company" shall have the meaning assigned to such term in the
forepart of this Agreement, and shall include any successors and permitted
assigns of the Company.
"Company Notice Date" shall have the meaning assigned to such
term in Section 6.01.
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"Company Securities" shall have the meaning assigned to such
term in Section 13.05.
"Convertible Securities" shall mean evidences of indebtedness,
shares of stock or other securities which are convertible into or exchangeable
or exercisable for Additional Shares of Common Stock or Convertible Securities,
either immediately or upon the arrival of a specified date or the happening of a
specified event, and any warrant, option or other rights to subscribe for or
purchase Additional Shares of Common Stock or Convertible Securities, other than
the shares of the Company's Series A Preferred Stock described as being issued
and outstanding in Section 4.14 of the Loan Agreement.
"Current Market Price", per share of Common Stock, for the
purposes of any provision hereof or of a Warrant at the date herein or therein
specified, shall be deemed to be the average of the daily market prices for each
day during the 20 consecutive trading days immediately preceding such date as of
which such a price can be established in the manner set forth in the next
sentence. The market price for each such trading day shall be the last sale
price on such day as reported in the Consolidated Last Sale Reporting System, or
as quoted by the Nasdaq National Market System, or if such last sale price is
not available or if the Common Stock is listed on a securities exchange then the
last reported sales price of the Common Stock on such exchange which shall be
for consolidated trading if applicable to such exchange, or if not so reported,
quoted or listed, the average of the closing bid and asked prices as reported in
either such system. If the Current Market Price per share of Common Stock cannot
be ascertained by any of the foregoing methods, the Current Market Price per
share of Common Stock shall be deemed to be the Fair Value of the Common Stock.
"Current Warrant Price", for the purpose of any provision
hereof or of a Warrant at the date herein or therein specified, shall mean the
amount per share of Common Stock equal to the quotient resulting from dividing
the Exercise Price per Stock Unit in effect on such date by the number of shares
(including any fractional share) of Common Stock comprising a Stock Unit on such
date.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations of the Commission thereunder, all as
the same shall be in effect at the time or any replacement act.
"Exercise Notice" shall have the meaning assigned to such term
in Section 2.05 hereof.
"Exercise Period" shall have the meaning assigned to such term
in Section 2.05 hereof.
"Exercise Price" shall have the meaning assigned to such term
in the form of Warrant attached as Annex 1 hereto.
"Expiration Date" shall mean December 15, 2003.
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"Fair Value" per share of Common Stock (or other property as
the case may be) shall be the fair market value as determined in good faith by
the Board of Directors, provided that if the Majority Holders disagree with such
determination, then the Company and the Majority Holders shall each designate a
representative, and such representatives will meet and use their best efforts to
reach an agreement on the Fair Value. If the representatives designated by the
Company and the Majority Holders are unable to reach such an agreement, then the
Majority Holders will submit a list of at least three independent appraisers
each of which is a recognized independent expert experienced in valuing
businesses similar or related to the principal business of the Company and its
Subsidiaries. The Company shall select one of the independent appraisers set
forth on such list. The independent appraiser so selected by the Company will
determine the fair market value of a share of Common Stock (or other property,
as the case may be) and its determination thereof will be final and binding on
all parties concerned. The Company will provide the independent appraiser so
selected by the Company with all information about the Company and its
Subsidiaries which such independent appraiser reasonably deems necessary for
determining the Fair Value. The fees and expenses of the appraisal process
(including those of the independent appraiser) will be paid by the Company. The
Company may require that the independent appraiser keep confidential any
non-public information received as a result of this paragraph pursuant to
reasonable confidentiality arrangements.
"GAAP" shall mean generally accepted accounting principles
applied on a consistent basis.
"Government Authority" shall mean any nation or government,
any state or other political subdivision thereof, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to any such government.
"Holder" shall mean any Person who acquires Warrants or
Warrant Stock pursuant to the provisions of this Agreement, including any
transferees of Warrants or Warrant Stock in accordance with the terms of this
Agreement; provided, however, that a holder of Warrant Stock purchased pursuant
to an effective registration statement or, after an Initial Public Offering of
the Common Stock of the Issuer, pursuant to paragraph (k) of Rule 144 shall not
be deemed a Holder.
"Initial Holder" shall have the meaning assigned to such term
in the forepart of this Agreement.
"Initial Public Offering" shall mean an underwritten public
offering of shares of Common Stock of the Company which includes shares of Class
A Common Stock (or any stock into which such Class A Common Stock shall have
been changed) pursuant to a registration statement under the Securities Act
which results in a listing of the Company's shares on a national securities
exchange or a quotation on Nasdaq.
"Investor Rights Agreement" shall mean the Investor Rights
Agreement, dated as of April 18, 2000, among the Company, SGC Partners II, LLC,
Olympus Growth Fund III L.P. and Olympus Executive Fund, L.P.
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"Joinder Agreement" shall mean a Joinder Agreement between the
Company and a Stockholder, which shall be substantially in the form attached as
Annex 2 hereto.
"Lien" shall mean any pledge, assignment, hypothecation,
mortgage, security interest, deposit arrangement, conditional sale or title
retaining contract, sale and leaseback transaction, financing statement filing,
or any other type of lien, charge, encumbrance or preferential arrangement.
"Loan Agreement" shall have the meaning assigned to such term
in the forepart of this Agreement.
"Majority Holders" shall mean Holders of a majority of the
Warrant Stock issued or issuable upon exercise of the Warrants. For purposes of
giving notices hereunder, Holders of Warrants shall be deemed holders of Warrant
Stock issued upon the exercise thereof.
"Option Stock" shall mean shares of Common Stock issued or
issuable in accordance with the stock option plans for the benefit of employees,
consultants or directors approved by the Board of Directors of the Company.
"Other Securities" shall mean any stock (other than Warrant
Stock) and other securities of the Company or any other Person (corporate or
otherwise) which a Holder at any time shall be entitled to receive, or shall
have received, upon exercise of the Warrants held by such Holder or pursuant to
Section 9 hereof, in lieu of or in addition to Warrant Stock, or which at any
time shall be issuable or shall have been issued in exchange for or in
replacement of Warrant Stock or Other Securities received in an earlier
exchange, exercise or replacement of Warrant Stock.
"Participating Security" shall mean any security (other than
Common Stock as constituted on the date hereof or a Convertible Security) the
rights of the holders of which are not limited to (i) a fixed sum or percentage
of liquidation preference or principal amount, (ii) a sum determined by
reference to a formula based on a published index of interest rates, (iii) an
interest rate publicly announced by a financial institution or a similar index
of interest rates in respect of interest or dividends or (iv) a fixed sum or
percentage of principal amount or liquidation preference in any distribution of
assets.
"Permitted Contractual Restriction" shall have the meaning
assigned to such term in Section 6.02.
"Permitted Transfer" shall mean, with respect to a Seller, (a)
a transfer in a Public Sale, (b) a transfer by any of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, SGC
Partners II, LLC, Olympus Growth Fund III L.P., and Olympus Executive Funds L.P.
to each other pursuant to that letter agreement dated April 17, 2000 by and
among the foregoing named parties and (c) a transfer to (i) an "Affiliate" or
"Subsidiary" of such Seller as those terms are defined in Rule 405 under the
Securities Act, (ii) a spouse (other than pursuant to any divorce or separation
proceedings or settlement), parent, child (natural or adopted), stepchild or
grandchild or a trust or a family limited partnership for
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the benefit of any one or more of such persons in the case of a Seller that is
an individual, (iii) any person receiving Common Stock or Convertible Securities
pursuant to a distribution without consideration by a Seller (or a Permitted
Transferee thereof) that is a partnership to any of its partners, retired
partners, or to the estate of any of its partners, and (iv) any person receiving
Common Stock or Convertible Securities pursuant to a distribution without
consideration by a Seller (or a Permitted Transferee thereof) that is a
corporation or limited liability company to any of its shareholders or members,
as applicable (provided that as to a transfer to an Affiliate of a Seller, such
transferee must execute and deliver to the Company and each Holder a Joinder
Agreement as a condition to the validity of such transfer).
"Permitted Transferee" shall mean (a) an "Affiliate" or
"Subsidiary" of such Holder as those terms are defined in Rule 405 under the
Securities Act, (b) a spouse (other than pursuant to any divorce or separation
proceedings or settlement), parent, child (natural or adopted), stepchild or
grandchild or a trust or a family limited partnership for the benefit of any one
or more of such persons in the case of a transferring holder that is an
individual, (c) any person receiving Restricted Securities pursuant to a
distribution without consideration by an Initial Holder (or a Permitted
Transferee thereof) that is a partnership to any of its partners, retired
partners, or to the estate of any of its partners, and (d) any person receiving
Restricted Securities pursuant to a distribution without consideration by an
Initial Holder (or a Permitted Transferee thereof) that is a corporation or
limited liability company to any of its shareholders or members, as applicable.
"Person" shall mean a corporation, an association, a limited
liability company, a partnership, a joint venture, an organization, a business,
an individual or a Government Authority.
"Preemptive Notice" shall have the meaning assigned to such
term in Section 13.05.
"Preferred Stock" shall mean, as to any Person, any capital
stock of such Person which is preferred as to dividends or assets over any other
class of any other stock of such Person.
"Proportional Number" shall have the meaning assigned to such
term in Section 13.05.
"Public Sale" means any transfer (i) in an underwritten public
offering of equity securities of the Company pursuant to an effective
registration statement under the Securities Act, or (ii) on Nasdaq or a national
securities exchange on which the Common Stock is listed following the Initial
Public Offering, provided that in either case such transfer is not directed to a
particular purchaser or group of purchasers with whom the transferor has an
understanding, agreement or arrangement (written or otherwise) regarding such
transfer.
"Put Notice" shall have the meaning assigned to such term in
Section 6.01.
"Put Postponement" shall have the meaning assigned to such
term in Section 6.02.
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"Put Response Notice" shall have the meaning assigned to such
term in Section 6.02.
"Put Right" shall have the meaning assigned to such term in
Section 6.01.
"Put Withdrawal Notice" shall have the meaning assigned to
such term in Section 6.02.
"Qualified Initial Public Offering" shall mean an Initial
Public Offering which results in gross proceeds to the Company in excess of
$30,000,000.
"Representative" shall have the meaning assigned to such term
in Section 13.04 of this Agreement.
"Registrable Securities" shall have the meaning assigned to
such term in Section 14.02.
"Restricted Certificate" shall mean a certificate for Common
Stock, Warrants or Other Securities bearing the restrictive legend set forth in
Section 4.04 hereof.
"Restricted Securities" shall mean Restricted Stock and
Restricted Warrants.
"Restricted Stock" shall mean Common Stock evidenced by a
Restricted Certificate.
"Restricted Warrants" shall mean Warrants evidenced by a
Restricted Certificate.
"Rule 144" shall mean Rule 144 as promulgated by the
Commission under the Securities Act and any successor provision thereto, all as
the same shall be in effect at the time.
"Sale Notice" shall have the meaning assigned to such term in
Section 13.05.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time or any replacement act.
"Seller" shall have the meaning assigned to such term in
Section 7.01 hereof.
"Stockholder" shall mean any Person who directly or indirectly
owns any shares of Common Stock of the Company.
"Stockholders Agreement" shall mean the agreement, dated April
1, 2000, among the Company, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, certain management stockholders
named therein, Random House TPR, Inc., the Investors (as defined therein) and
the Converting LLC Holders (as defined therein).
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"Stock Unit" shall mean one share of Class A Common Stock, as
such Common Stock is constituted on the date hereof and any stock into which
such Class A Common Stock may thereafter be changed, and thereafter shall mean
such number of shares (including any fractional shares) of Common Stock and
Other Securities, cash or other property as shall result from the adjustments
specified in Sections 8 and 9 hereof.
"Subsidiary" shall mean, for any Person, any corporation or
other entity of which at least a majority of the securities or other ownership
interests having by the terms thereof ordinary voting power to elect a majority
of the board of directors or other persons performing similar functions of such
corporation or other entity is at the time directly or indirectly owned or
controlled by such Person and/or one or more Subsidiaries of such Person.
"Tag-Along Pro Rata Portion" shall have the meaning assigned
to such term in Section 7.02.
"Tag-Along Purchaser Offer" shall have the meaning assigned to
such term in Section 7.02.
"transfer" shall mean any disposition of any Restricted
Securities, or of any interest in any thereof, which would constitute a sale
thereof within the meaning of the Securities Act.
"Transferred Warrant" shall have the meaning assigned to such
term in Section 5.03.
"Warrants" shall mean the warrant certificates covering the
purchase of Stock Units, each in the form of Annex 1 to this Agreement,
originally issued by the Company pursuant to Section 2 hereof, and all Warrants
issued upon transfer, division or combination of, or in substitution for, any
thereof. All Warrants shall at all times be identical as to terms and conditions
and expiry date, except as to the number of Stock Units for which they may be
exercised and the Exercise Price.
"Warrant Stock" shall mean the shares of Common Stock of the
Company purchasable or purchased upon the exercise of Warrants issued by the
Company, including any such Common Stock into which such Common Stock may
thereafter be changed.
1.02 Accounting Terms and Determinations. Except as otherwise
may be expressly provided herein, all accounting terms used herein shall be
interpreted, and all certificates and reports as to financial matters required
to be delivered to the Holders hereunder and under the Warrants shall be
prepared, in accordance with GAAP. All calculations made for purposes of
determining compliance with the terms of this Agreement and the Warrants shall
(except as may be expressly provided herein) be made by application of GAAP.
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Section 2. PURCHASE, SALE AND EXERCISE OF WARRANTS.
2.01 Authorization and Issuance of Shares and Warrants. The
Company has authorized: (a) the issue of the Warrants for issuance to the
Initial Holders pursuant to this Agreement; and (b) the reservation for issuance
of such number of shares of its Class A Common Stock as shall be issuable upon
exercise of the Warrants.
2.02 The Closing.
(a) The Company shall issue to each Initial Holder, on the
date hereof and for no cash consideration, Warrants covering such number of
Stock Units as is specified opposite the name of such Initial Holder in Schedule
1 hereto. The number of shares of Common Stock comprising each Stock Unit
covered by the Warrants issued under this Agreement shall be subject to
adjustment as provided in Sections 8 and 9 hereof.
(b) On the date hereof, the Company shall deliver to each
Initial Holder (i) a single certificate for the Warrants representing the number
of Stock Units as is specified opposite the name of such Initial Holder in
Column A of Schedule 1 hereto, (ii) a single certificate for the Warrants
representing the number of Stock Units as is specified opposite the name of such
Initial Holder in Column B of Schedule 1 hereto, and (iii) a single certificate
for the Warrants representing the number of Stock Units as is specified opposite
the name of such Initial Holder in Column C of Schedule 1 hereto, each such
certificate registered in the name of such Initial Holder, except that, if such
Initial Holder shall notify the Company in writing prior to such issuance that
it desires certificates for such Warrants to be issued in other denominations or
registered in the name or names of any Person or Persons referred to in Section
5.01(a)(i) or (ii) hereof or any nominee or nominees for its or their benefit,
then if permitted under applicable law the certificates for such Warrants to be
issued by the Company shall be issued to such Initial Holder in the
denominations and registered in the name or names specified in such notice.
(c) On or before the date hereof, the Company shall cause ▇▇▇▇
▇▇▇▇▇▇▇ to execute and deliver to the Company and the Initial Holders a Joinder
Agreement.
2.03 Initial Holder Representations, Warranties and
Agreements. Each Initial Holder represents and warrants to, and agrees with the
Company that (a) such Initial Holder is purchasing for its own account, and not
with a view to the resale or distribution of such Warrants or the Warrant Stock
or any part thereof, and such Initial Holder is prepared to bear the economic
risk of retaining such Warrants and the Warrant Stock for an indefinite period,
all without prejudice, however, to the right of such Initial Holder at any time,
in accordance with this Agreement, lawfully to sell or otherwise to dispose of
all or any part of such Warrants or the Warrant Stock held by it, (b) such
Initial Holder is experienced in evaluating and investing in securities, and
understands that the Warrants and the Warrant Stock will be restricted
securities, and that a legend to that effect shall be placed on the Restricted
Securities, and no public market shall exist for the disposition or transfer of
such Restricted Securities, and (c) the acquisition, holding and any transfer of
any Restricted Securities by an Initial Holder shall be in compliance with all
laws applicable to such Initial Holder.
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2.04 Securities Act Compliance. Each Initial Holder
understands that the Company has not registered or qualified the Warrants or the
Warrant Stock under the Securities Act or any applicable state securities laws
and each Initial Holder agrees that neither the Warrants nor the Warrant Stock
shall be sold or offered for sale without registration under the Securities Act
or the availability of an exemption therefrom, all as more fully provided in
Section 4 hereof.
2.05 Exercise of Warrants. Each Warrant shall be exercisable
beginning on the Commencement Date specified in such Warrant and until 5:00
p.m., New York City time, on the Expiration Date (the "Exercise Period"). On and
after the date hereof, each Holder may, on one or more occasions, on any
Business Day, in whole or in part:
(a) exercise for cash all or some of the Warrants held by it
which are exercisable on such date pursuant to their terms; and
(b) convert all or some of the Warrants held by it which are
exercisable on such date pursuant to their terms into the number of
shares of Common Stock for each Stock Unit evidenced by such Warrant
which is being so converted, equal to (a)(i) the product of (x) the
number of shares of Common Stock comprising a Stock Unit at the time of
such conversion and (y) the Current Market Price per share of Common
Stock at the time of such conversion minus (ii) the Exercise Price per
Stock Unit at the time of such conversion, divided by (b) the Current
Market Price per share of Common Stock at the time of such conversion,
in each case by delivering to the Company, at its office maintained for such
purpose pursuant to Section 15.03 hereof:
(i) a written notice (the "Exercise Notice") of such Holder's
election to exercise such Warrant or convert such Warrant, as the case
may be, in the form of the Exercise Form set out at the end thereof (or
a reasonable facsimile thereof), which notice shall specify the number
of Stock Units to be purchased or converted, as the case may be, and
shall reflect such Holder's agreement to join the Stockholders
Agreement as an Additional Stockholder (as that term is defined
therein) on the terms specified in the last paragraph of this Section
2.05; and
(ii) such Warrant,
and, in the case of an exercise of such Warrant, a certified or bank check or
checks payable to the Company in an aggregate amount equal to the aggregate
Exercise Price for the number of Stock Units as to which such Warrant is being
exercised. Upon receipt thereof, the Company shall, as promptly as practicable
and in any event within three Business Days thereafter, execute or cause to be
executed and deliver or cause to be delivered to such Holder a stock certificate
or certificates representing the aggregate number of shares of Warrant Stock and
Other Securities issuable upon such exercise or conversion and any other
property to which such Holder is entitled by virtue of the exercise of any
Warrants.
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The stock certificate or certificates for Warrant Stock so
delivered shall be in such denominations as may be specified in the Exercise
Notice and shall be registered in the name of such Holder or such name or names
as shall be designated in such Exercise Notice. Such stock certificate or
certificates shall be deemed to have been issued and such Holder or any other
Person so designated to be named therein shall be deemed to have become a holder
of record of such shares, including, to the extent permitted by law, the right
to vote such shares or to consent or to receive notice as a Stockholder, as of
the date on which the last of the Exercise Notice, payment of the Exercise Price
and the Warrant to which such exercise relates is received by the Company as
aforesaid, and all taxes required to be paid by Holder, if any, pursuant to
Section 15.04(c) hereof, prior to the issuance of such shares have been paid. If
such Warrant shall have been exercised or converted only in part, the Company
shall, at the time of delivery of the certificate or certificates representing
Warrant Stock and Other Securities, execute and deliver to such Holder a new
Warrant evidencing the rights of such Holder to purchase (or convert) the
unpurchased (or unconverted) Stock Units called for by such Warrant, which new
Warrant shall in all other respects be identical with the surrendered Warrant.
All shares of Common Stock issuable upon the exercise or
conversion of a Warrant shall, upon payment therefor in accordance herewith, be
duly and validly issued by the Company, fully paid and nonassessable and free
and clear of all Liens.
The Company shall not be required to issue a fractional share
of Common Stock or Other Securities upon exercise or conversion of any Warrant.
As to any fraction of a share of Common Stock or Other Securities which a Holder
would otherwise be entitled to purchase upon such exercise or conversion, the
Company may in lieu of the issuance of a fractional share either (i) pay a cash
adjustment in respect of such final fraction in an amount equal to the same
fraction of the Current Market Price per share of Common Stock or Other
Securities on the date of exercise or (ii) issue a number of shares rounded up
to the next higher whole share.
On consummation of a Qualified Initial Public Offering, the
Warrants shall automatically be converted as provided in paragraph (b) above,
except that the Current Market Price shall be deemed to be the price to the
public in such offering. If such Price is below $10 per Stock Unit, the number
of Stock Units issued on conversion will be multiplied by a fraction of which
the numerator is $10 and the denominator is such price.
The Stockholders Agreement shall not be exclusive of rights
that the Holders have pursuant to this Agreement. The Company agrees not to
exercise its rights under Section 2.1 of the Stockholders Agreement with respect
to transfers of shares by Holders. The Company shall not amend the Stockholders
Agreement in any respect that would be adverse to the interests of the Holders.
Section 3. REPRESENTATIONS AND WARRANTIES. The Company
represents and warrants to the Initial Holders that:
3.01 Issuance of Warrants and Warrant Stock. The Warrant Stock
initially covered by the Warrants will, when issued and delivered against
payment therefor in accordance with the Warrants, be duly and validly issued,
fully paid and nonassessable and free and clear of
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all Liens; and none of the Warrant Stock issued pursuant to the terms hereof
will be in violation of any preemptive rights.
3.02 Registration Rights. There is not in effect on the date
hereof any agreement by the Company pursuant to which any holders of securities
of the Company have a right to cause the Company to register such securities
under the Securities Act other than (i) this Agreement, (ii) the Investor Rights
Agreement, (iii) the Stockholders Agreement and (iv) the ▇▇▇▇▇▇▇▇ Warrants.
3.03 Private Offering. Assuming the truth and accuracy of the
Initial Holders' representations and warranties contained in Section 2.03, the
issuance and sale of the Warrants to the Initial Holder hereunder are exempt
from the registration and prospectus delivery requirements of the Securities
Act. The Company agrees that neither it nor anyone acting on its behalf has
offered or will offer the Warrants or the Warrant Stock, or any part thereof, or
any similar securities for issue or sale to, or has solicited or will solicit
any offer to acquire any of the same from, anyone so as to bring the issuance
and sale of the Warrants within the provisions of Section 5 of the Securities
Act.
Section 4. TRANSFERS GENERALLY; SECURITIES ACT COMPLIANCE.
4.01 Transfers Generally. Except as otherwise permitted by
Section 5 hereof, the Restricted Securities shall be transferable only upon the
conditions specified in this Section 4, which conditions are intended, among
other things, to insure compliance with the provisions of the Securities Act in
respect of the transfer of any Restricted Securities. Any Holder shall, by its
acceptance of any Warrant hereunder, be deemed to have made the representations,
warranties and agreements set forth in Section 2.03 hereof on the date of such
acceptance.
4.02 Transfers of Restricted Securities Pursuant to
Registration Statements and Rule 144, Etc. The Restricted Securities may be
offered or sold by the Holder thereof pursuant to (a) an effective registration
statement under the Securities Act, (b) to the extent applicable, Rule 144 or
(c) subject to Section 4.03 hereof, any other applicable exemption from the
Securities Act.
4.03 Notice of Certain Transfers. If any Holder of any
Restricted Security desires to transfer such Restricted Security other than
pursuant to an effective registration statement, Rule 144 under the Securities
Act or in accordance with Section 5.01 hereof, such Holder shall deliver to the
Company at least three Business Days' prior written notice with respect to the
proposed transfer, together with an opinion (obtained at such Holder's expense)
of Milbank, Tweed, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, or other counsel reasonably satisfactory
to the Company, to the effect that an exemption from registration under the
Securities Act is available and specifying the applicable exemption.
4.04 Restrictive Legend. Until otherwise permitted by this
Section 4, each certificate for Warrants issued under this Agreement, each
certificate for any Warrants issued to any subsequent transferee of any such
certificate, each certificate for any Warrant Stock issued upon exercise of any
Warrant, each certificate for any Warrant Stock issued to any subsequent
transferee of any such certificate, each certificate for any Other Securities
issued in connection with the exercise of any Warrant and each certificate for
any Other Securities issued to any
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subsequent transferee of any such certificate in respect thereof, shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, AND ACCORDINGLY, SUCH
SECURITIES MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED
OF EXCEPT IN COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION
PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR
APPLICABLE EXEMPTIONS THEREFROM."
"THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO THE CONDITIONS SPECIFIED IN THAT
CERTAIN WARRANT AGREEMENT DATED AS OF DECEMBER 14, 2000,
BETWEEN THE PRINCETON REVIEW, INC., A DELAWARE CORPORATION,
AND CERTAIN HOLDERS, AS SUCH WARRANT AGREEMENT MAY BE MODIFIED
AND SUPPLEMENTED AND IN EFFECT FROM TIME TO TIME, AND NO
TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN
FULFILLED. A COPY OF THE FORM OF SUCH WARRANT AGREEMENT IS ON
FILE AND MAY BE INSPECTED AT THE PRINCIPAL EXECUTIVE OFFICE OF
THE AFORESAID CORPORATION. THE HOLDER OF THIS CERTIFICATE, BY
ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY THE
PROVISIONS OF SUCH WARRANT AGREEMENT."
4.05 Termination of Restrictions. The restrictions imposed by
this Section 4 upon the transferability of the Restricted Securities shall cease
and terminate as to any particular Restricted Security when such Restricted
Security shall have been effectively registered under the Securities Act and
sold by the Holder thereof in accordance with such registration or sold under
and pursuant to Rule 144 or are eligible to be sold pursuant to paragraph (k) of
Rule 144. Whenever the restrictions imposed by this Section 4 shall terminate as
to any Restricted Security as hereinabove provided, the Holder thereof shall,
upon written request, be entitled to receive from the Company, without expense,
a new certificate evidencing such Restricted Security not bearing the
restrictive legend otherwise required to be borne by a certificate evidencing
such Restricted Security.
Section 5. ADDITIONAL PROVISIONS RELATING TO TRANSFERS.
5.01 Disposition of Securities.
(a) Subject to compliance with the provisions of Section 4
hereof (except with respect to the requirement in Section 4.03 for an opinion of
counsel to the Holder, which shall not be required under this Section 5.01(a)),
any Holder shall have the right to transfer any Restricted Securities:
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(i) to a Permitted Transferee; or
(ii) to another Holder.
5.02 Cancellation and Reissuance. Subject to compliance with
the provisions of Section 4 hereof, if any Initial Holder or any of its
Affiliates assigns or otherwise transfers any or all of its loans and/or
commitments (including by selling participations therein) arising pursuant to
the Loan Agreement, or assigns or otherwise transfers any of its rights or
obligations under the Loan Agreement to any Person, such Initial Holder may
request (upon five Business Days' prior notice to the Company) that a number of
Warrants held by such Initial Holder be cancelled on the date of such assignment
and transfer and that a like number of Warrants be issued by the Company to the
Person to whom such loans and/or commitments, or such rights or obligations, are
being assigned or otherwise transferred. Upon the date specified in such
request, the Company shall issue, and the Initial Holder shall deliver to the
Company for cancellation, such number of Warrants as aforesaid and the Company
and such Person shall execute and deliver an instrument pursuant to which such
Person becomes a "Holder" hereunder entitled to all the benefits accorded to a
Holder under, and subject to all of the obligations imposed upon a Holder
pursuant to, this Agreement and the Warrants.
5.03 Transfer, Division and Combination. Subject to Sections 4
and 5 hereof, transfer of a Warrant and all rights thereunder, in whole or in
part (the "Transferred Warrant"), shall be registered on the books of the
Company to be maintained for such purpose, upon surrender of such Transferred
Warrant at the office of the Company maintained for such purpose pursuant to
Section 15.03 hereof, together with a written assignment substantially in the
form set out at the end of such Transferred Warrant, duly executed by the
relevant Holder and payment of funds sufficient to pay any transfer taxes
payable upon the making of such transfer. Upon such surrender and, if required,
such payment, the Company shall, subject to Sections 4 and 5 hereof and the
second following sentence, (a) execute and deliver a new Warrant or Warrants in
the name of the assignee or assignees and in the denominations specified in such
instrument of assignment, (b) issue to the assignor a new Warrant evidencing the
portion of such Transferred Warrant not so assigned or transferred and (c)
promptly cancel such Transferred Warrant. A Warrant, if properly assigned in
compliance with Sections 4 and 5 hereof, may be exercised by an assignee for the
purchase of shares of Common Stock without having a new Warrant or Warrants
issued. Notwithstanding any provision herein to the contrary, the Company shall
not be required to register the transfer of Warrants or Warrant Stock in the
name of any Person who acquired such Warrant (or part thereof) or any Warrant
Stock otherwise than in accordance with this Agreement.
The Company shall maintain with its transfer agent or at its
aforesaid office, books for the registration and transfer of the Warrants.
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Section 6. PUT RIGHTS.
6.01 Put Rights.
(a) If the Company has not consummated a Qualified Initial
Public Offering prior to March 31, 2005, or if a transaction of the type
referred to in Section 9.01 has occurred, then at any time and from time to time
thereafter any Holder or Holders will have the right to require the Company to
purchase all or any part of the Stock Units or Warrants owned by such Holder or
Holders ("Put Right").
(b) A Put Right shall be exercised by such Holders by sending
a notice to the Company that such Holder wishes to sell the Stock Units
specified in such notice. Any notice given pursuant to the first sentence of
this Section 6.01(b) is herein called a "Put Notice". Within five days after the
date such Put Notice shall be received by the Company, the Company shall give a
notice to the Holders (other than the Holder who gave such Put Notice) advising
them of the receipt by the Company of such Put Notice, together with a copy of
such Put Notice. The date upon which the Company shall so advise the other
Holders is herein called the "Company Notice Date". Within 15 days after the
Company Notice Date, such Holders also may give Put Notices to the Company and
such Put Notices shall be deemed given as of the date the Put Notice was given
by the Holder initially exercising the Put Right. The failure so to give a Put
Notice by a Holder within such 15-day period shall be without prejudice to the
right of such Holder to give thereafter a Put Notice pursuant to this Section 6.
(c) In the event the Company receives notice from a holder of
Class B Common Stock in accordance with Section 4.2 of the Stockholders
Agreement, it shall, within 10 days thereof, give notice to the Holders of a
request by a holder of Class B Common Stock for the purchase by the Company of
its Class B Common Stock thereunder. Each Holder will then have 30 days to give
a Put Notice to the Company requiring the Company to redeem all or a portion of
the Warrants or Stock Units then owned by such Holder in accordance with the
terms hereof. If, within 20 days of its receipt of the Put Notice, the Company
fails to redeem all of the Warrants or Stock Units with respect to which the Put
Notice applies, except pursuant to the provisions of Section 6.03 below, the
Company shall not be permitted to effect any repurchase of Class B Common Stock
pursuant to the requirements of Section 4.2 of the Stockholders Agreement, until
it effects the redemption of all Stock Units that are the subject of the Put
Notice.
6.02 Closing.
(a) The purchase and sale of the Warrants and the Warrant
Stock to be purchased from the Holders giving Put Notices shall be consummated
on a date selected by the Company upon at least 10 days' prior notice to such
Holders, which date shall be no later than 90 days after the date the Put Notice
was given by the Holder initially exercising the Put Right. On such date, the
Company shall purchase from the Holder which has given such Put Notice, and such
Holder shall sell to the Company, each of the Warrants and/or the Warrant Stock
specified in such Put Notice at $11.82 per Stock Unit (the "Put Price"). If it
is determined in accordance with the procedure outlined in Section 3.3 of the
Investor Rights Agreement (without giving
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effect to any waivers or amendments of that agreement and with the Holders of
Warrants having the rights of the Series A Investors provided therein) that the
Company has breached any of the covenants contained in Sections 3.1 or 3.2
thereof, the Put Price shall be increased by $.62 for each Breach Occurrence (as
defined in the Investor Rights Agreement as it exists on the date hereof). The
Company shall furnish to the Holders notice of all such breaches. Payment of the
purchase price for the Stock Units so purchased by the Company shall be made in
immediately available funds.
(b) If the Company is prohibited from purchasing all Stock
Units put to it pursuant to a Put Notice as a result of (i) the Company's not
having funds legally available under Delaware corporate law, or (ii) a
contractual restriction contained in the Loan Agreement or the agreements
relating to the Senior Debt (as defined in the Loan Agreement) restricting,
directly or indirectly, the payment to the Holder under this Section 6 on
account of the exercise by such Holder of the applicable Put Right (such
restriction being herein called the "Permitted Contractual Restriction"), then
the Company shall give notice (a "Put Response Notice") to each Holder which has
delivered such Put Notice of the aggregate amount of such Stock Unit, if any,
which the Company will be able to purchase, which Put Response Notice shall be
delivered at the time of the notice given by the Company pursuant to the first
sentence of Section 6.02(a). Each such Holder shall have the right to withdraw
its Put Notice by delivering a notice (a "Put Withdrawal Notice") to the Company
not later than 15 days after the giving of the Put Response Notice. If any such
Holders have not timely delivered Put Withdrawal Notices, the Company thereupon
shall purchase from such Holders the aggregate amount of Stock Units, if any, it
may purchase on such date with funds legally available under Delaware corporate
law for such purpose (subject to the Permitted Contractual Restriction). Such
purchase shall be allocated among the Holders which have not timely delivered
Put Withdrawal Notices pro rata, based on the ratio of the number of Stock Units
put to the Company by each such Holder to the number of Stock Units put to the
Company by all such Holders.
If the Company is prohibited from purchasing any Stock Units
upon the exercise by a Holder of a Put Right for any of the reasons described in
the first sentence of this Section 6.02(b), then the Company shall use its best
efforts to increase its legally available funds under Delaware law to an amount
sufficient to enable it to purchase legally all Stock Units put to it pursuant
to a Put Notice or to obtain relief from the Permitted Contractual Restriction
in order to enable it to make the required payments, whether by means of
obtaining additional financing, selling the Company, affecting a refinancing of
some or all its then outstanding indebtedness (including any indebtedness
outstanding pursuant to the Loan Agreement), or otherwise.
(c) If the Company is prohibited from purchasing some of or
all Stock Units upon the exercise by a Holder of a Put Right for any of the
reasons described in the first sentence of Section 6.02(b) and such Holder shall
not have timely delivered a Put Withdrawal Notice, then: (i) the amount to be
paid to such Holder pursuant to Section 6.02(a) herein shall become an accruing
liability of the Company with interest thereon commencing on the date of
exercise of such Put Right through the date on which the related Stock Units are
purchased by the Company, compounded quarterly and calculated on the basis of a
360-day year, at a rate per annum equal to 10% per annum or, if higher, 100
basis points above the highest rate then paid by the Company for borrowed money
(such liability and interest being herein called the "Accruing Liability");
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and (ii) such obligation of the Company to purchase shall otherwise be deemed
suspended for so long as and to the extent that the Company is unable to
repurchase such Stock Units after taking all the action described in the last
paragraph of Section 6.02(b) (a "Put Postponement"). At any time after the
delivery of a Put Response Notice when additional funds of the Company are
legally available for purchasing Stock Units, such funds shall immediately be
used to (x) purchase the balance of the Warrants and Warrant Stock which the
Company has become obligated to purchase pursuant to a Put Notice but which it
has not purchased and (y) pay the interest accruing on such Stock Units pursuant
to this Section 6.02(c).
6.03 Seniority of Put Right.
(a) Each Holder agrees, for the benefit of the Lenders under
the Loan Agreement, that any Accruing Liability shall be subordinated in right
of payment to the prior payment in full of all amounts owing under the Loan
Agreement and that no payment shall be made in respect of the Accruing Liability
until the earlier to occur of: (i) the date on which all amounts owing under the
Loan Agreement have been fully paid; and (ii) the date on which the Initial
Holders and/or the agent under the Loan Agreement consent in writing to the
making of such payment. The Put Right granted to each Holder in this Section 6
is intended to rank (x) pari passu with the rights of the holders of the
Company's Series A Preferred Stock to require the Company to redeem all or a
portion of such Series A Preferred Stock and (y) senior to the rights of the
holders of Class B Common Stock to require the Company to repurchase all or a
portion of such Class B Common Stock.
(b) In the event that the Company has insufficient funds
available to satisfy all of (x) the redemption of shares of Series A Preferred
Stock in accordance with the terms of the Company's Certificate of
Incorporation, (y) the Put Right as described above and (z) Class B Stockholder
Put Rights as set forth in Section 4.2 of the Stockholders Agreement, then the
parties agree as follows:
(i) First, the funds of the Company legally available for
redemption shall be used to redeem the maximum number of shares ratably
(based on the ratio of the respective redemption value of all shares
being redeemed by the holders of the Series A Preferred Stock (the
"Series A Holders"), compared to all of the shares being redeemed by
the Holders) among (x) the Series A Holders to be redeemed at the
Series A Liquidation Preference (as defined in the Certificate of
Incorporation) and (y) the Holders to be redeemed at the Put Price, up
to an aggregate dollar amount equal to the number of shares of Series A
Preferred Stock held by such holders multiplied by the Series A
Liquidation Preference (such amount being the "Series A Holders
Redemption Amount").
(ii) After the full payment of the Series A Holders Redemption
Amount to the Holders and the Series A Holders as described in (a)
above, the funds of the Company legally available for redemption shall
be used to redeem the maximum number of shares ratably (based on the
ratio of the respective redemption value of all the shares being
redeemed under this paragraph (b)(ii) by the Series A Holders, compared
to the respective redemption value of all the shares being redeemed
under this paragraph (b) by the Holders, compared to the respective
redemption value of all shares being redeemed
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by the holders of Class B Common stock) among (x) the Series A Holders to be
redeemed at the Series A Liquidation Preference, (y) the Holders at the Put
Price and (z) the holders of any shares of Class B common Stock to be redeemed
at the Agreed Value in accordance with Article IV of the Stockholders Agreement.
The Initial Holders that are Series A Holders, and constitute at least 75% of
such Series A Holders, hereby agree to the provisions of this paragraph as an
amendment to the Investor Rights Agreement.
6.04 Restrictive Agreements. The Company will not, directly or
indirectly, enter into, incur or permit to exist any agreement or other
arrangement that prohibits, restricts or imposes any condition upon the ability
of the Company to satisfy its obligations under this Section 6 upon the exercise
of a Put Right by a Holder; provided that the foregoing shall not apply to (x)
restrictions and conditions imposed by law or by this Agreement, or (y)
restrictions and conditions imposed by the Senior Debt (but shall apply to any
extension or renewal of, or any amendment or modification expanding the scope
of, any such restriction or condition)
Section 7. RIGHT TO JOIN IN SALE.
7.01 Tag-Along Rights.
(a) Notwithstanding anything herein to the contrary, but
subject to the provisions of Section 7.01(b), if at any time before the
consummation of a Qualified Initial Public Offering ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, SGC
Partners II, LLC, Olympus Growth Fund III or Olympus Executive Fund (or any of
their respective Affiliates to whom they transfer shares in accordance with this
Section 7) (such transferring Person or group of Persons, the "Seller")
proposes, in a single transaction or a series of related transactions (each, a
"Tag-Along Sale") to sell, dispose of or otherwise transfer, directly or
indirectly, any shares of Common Stock of the Company then outstanding in any
manner other than in a Permitted Transfer, then the Company shall cause such
Seller to refrain from effecting such transaction unless, prior to the
consummation thereof, the Holders shall have been afforded the opportunity to
join in such transfer as provided in Section 7.02.
(b) None of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, SGC Partners II, LLC, Olympus
Growth Fund III and Olympus Executive Fund nor any of their respective
Affiliates shall pledge or otherwise encumber any shares of Common Stock of the
Company.
7.02 Procedures.
(a) Prior to the consummation of any transaction subject to
Section 7.01, the Company and the Seller shall cause the Person or group of
Persons (the "Proposed Purchaser") that proposes to acquire shares of Common
Stock of the Company in a Tag-Along Sale to make a written offer (the "Tag-Along
Purchase Offer") to each of the Holders to acquire from such Holder the number
of shares of Common Stock that equals such Holder's Tag Along Pro Rata Portion.
With respect to each Holder, its "Tag-Along Pro Rata Portion" shall be the
number of shares proposed to be transferred by the Seller pursuant to the
Tag-Along Sale multiplied by a percentage, the numerator of which shall be the
sum of (i) the total number of shares of Warrant
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Stock owned by such Holder and (ii) the total number of shares of Warrant Stock
issuable upon the exercise of all Warrants owned by such Holder which are
exercisable on the date of such Tag-Along Purchase Offer pursuant to their
terms, and the denominator of which shall be the sum of (A) the total number of
shares of Warrant Stock owned or so issuable on such date by the Holders, and
(B) as to a Tag-Along Sale in which ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ is the Seller, the total
number of shares of Common Stock (1) owned by the parties to whom similar
tag-along rights have been granted pursuant to Section 2.5 of the Stockholders
Agreement and (2) issuable upon the conversion of all shares of Preferred Stock
of the Company owned by the parties to whom similar tag along rights have been
granted pursuant to Section 2.5 of the Stockholders Agreement, and (C) the total
number of shares of Common Stock (1) owned by the Seller and (2) issuable upon
the conversion of all shares of Preferred Stock of the Company owned by the
Seller.
(b) The Tag-Along Purchase Offer shall be made at the same
price and on the same terms and conditions as the offer by the Proposed
Purchaser to the original selling Person or group of Persons, provided, however,
that (i) such Holders shall not be obligated to pay their pro rata portion of
the transaction costs associated with the sale, disposition or other transfer,
(ii) such Holders shall not be required to make any representations or
warranties to any person in connection with such sale, disposition or other
transfer except as to their respective ownership of shares of Warrant Stock
and/or Warrants to be transferred in the Tag-Along Sale, and (iii) in the event
that ▇▇. ▇▇▇▇▇▇▇ receives a compensation arrangement in connection with a
Tag-Along Sale that is substantially excessive, such amount of compensation as
is substantially excessive shall be deemed to be part of the purchase price for
the shares of Common Stock transferred by ▇▇. ▇▇▇▇▇▇▇ and shall be taken into
account for purposes of determining the purchase price to be paid to the Holders
for the shares of Warrant Stock being transferred by them in accordance with the
terms of this Section 7. The Holders shall have 15 days from the receipt of the
Tag-Along Purchase Offer in which to accept the Tag-Along Purchase Offer. The
number of shares which the Seller is entitled to transfer in the Tag-Along Sale
shall be reduced to the extent of the Tag-Along Purchase Offers accepted by the
Holders pursuant to this Section 7.02.
7.03 The Company's Covenants. The Company will not, on or
after the date hereof, either (a) deliver a certificate evidencing any shares of
Common Stock being sold, disposed of or otherwise transferred, directly or
indirectly, in a transaction requiring that a Tag-Along Purchase Offer be made
unless the Proposed Purchaser shall have in fact made a Tag-Along Purchase Offer
in accordance with the provisions of Section 7.02, or (b) deliver a certificate
evidencing any shares of Common Stock of the Company to ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, SGC
Partners I, LLC, Olympus Growth Fund III, Olympus Executive Fund or any of their
respective Affiliates that are required to enter into a Joinder Agreement
pursuant to the definition of "Permitted Transfer" herein, in either case
without including on the reverse side of such certificate a legend in
substantially the following form:
THE SALE, DISPOSITION OR OTHER TRANSFER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE PROVISIONS
OF SECTION 7 OF THE WARRANT AGREEMENT DATED AS OF DECEMBER 14,
2000, BETWEEN THE PRINCETON REVIEW, INC., A
24
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DELAWARE CORPORATION (THE "COMPANY"), AND CERTAIN HOLDERS, AS
SUCH WARRANT AGREEMENT MAY BE MODIFIED AND SUPPLEMENTED AND IN
EFFECT FROM TIME TO TIME. A COPY OF THE FORM OF SUCH WARRANT
AGREEMENT IS ON FILE AND MAY BE INSPECTED AT THE PRINCIPAL
EXECUTIVE OFFICE OF THE COMPANY. THE HOLDER OF THIS
CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE
BOUND BY THE PROVISIONS OF SECTION 7 OF SUCH WARRANT
AGREEMENT.
Section 8. ADJUSTMENT OF STOCK UNIT. The number of shares of
Common Stock comprising a Stock Unit shall be subject to adjustment from time to
time as set forth in this Section 8. All of the adjustments referred to in this
Section 8 shall apply only to Warrants which have not yet been exercised.
8.01 Stock Dividends, Subdivisions and Combinations. If at any
time the Company shall:
(a) declare or pay a dividend payable in Additional Shares of
Common Stock, or
(b) subdivide or reclassify its outstanding shares of Common
Stock into a larger number of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock,
then immediately after the occurrence of any such event the number of shares of
Common Stock comprising a Stock Unit shall be adjusted to equal the number of
shares of Common Stock which such Holder would have been entitled to receive if
such holder had exercised the Warrant immediately prior to the occurrence of
such event.
8.02 Issuance of Additional Shares of Common Stock. If at any
time the Company shall (except as hereinafter provided) issue or sell any
Additional Shares of Common Stock and the consideration per Additional Share of
Common Stock to be paid is less than the Applicable Price, then the number of
shares of Common Stock thereafter comprising a Stock Unit shall be adjusted to
that number determined by multiplying the number of shares of Common Stock
comprising a Stock Unit immediately prior to such adjustment by a fraction (a)
the numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to the issuance of such Additional Shares of Common Stock plus
the number of such Additional Shares of Common Stock so issued, and (b) the
denominator of which shall be the number of shares of Common Stock outstanding
immediately prior to the issuance of such Additional Shares of Common Stock plus
the number of shares of Common Stock which the aggregate consideration for the
total number of such Additional Shares of Common Stock so issued would purchase
at the Applicable Price. For purposes of this Section 8.02, for all
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issuances of shares of Common Stock (except for those shares issued in
connection with an acquisition of assets or stock, a tender or exchange offer, a
merger or other business combination), the date as of which the Applicable Price
shall be computed shall be the earlier of (i) the date on which the Company
shall enter into a firm contract for the issuance of such Additional Shares of
Common Stock and (ii) the date of actual issuance of such Additional Shares of
Common Stock.
Aggregate consideration for purposes of clause (b) in the
preceding paragraph shall be determined as follows: in case any Additional
Shares of Common Stock shall be issued or sold for cash, the consideration
received therefor shall be deemed to be the amount payable to the Company
therefor, after deduction of any accrued interest or dividends and before
deducting any expenses incurred or any underwriting commissions or concessions
or discounts or, in the case of a private placement thereof, finders' fees or
commissions paid or allowed by the Company in connection therewith; in case any
Additional Shares of Common Stock shall be issued or sold for a consideration
other than cash payable to the Company, the consideration received therefor
shall be deemed to be the Fair Value of such consideration, after deduction of
any accrued interest or dividends and before deducting any expenses incurred or
any underwriting commissions or concessions or discounts paid or allowed by the
Company in connection therewith.
Subject to Section 8.05 hereof, no further adjustment of the
number of shares of Common Stock comprising a Stock Unit shall be made under
this Section 8.02 upon the issuance of any Additional Shares of Common Stock:
(a) for which an adjustment is provided under Section 8.01
hereof;
(b) which are issued pursuant to the conversion, exchange or
exercise of any Convertible Securities, if any such adjustment shall
previously have been made upon the issuance of such Convertible
Securities pursuant to Section 8.03 hereof; or
(c) as a distribution or a dividend which is distributed or
declared and paid in accordance with Section 9.02 hereof.
8.03 Issuance of Convertible Securities. If at any time the
Company shall issue or sell any Convertible Securities and the consideration per
share for which Additional Shares of Common Stock are deliverable upon exercise
conversion or exchange of such Convertible Securities (determined by dividing
(x) the total amount received or receivable by the Company in consideration of
the issuance of or subscription for such Convertible Securities, plus the
minimum aggregate amount of premiums (if any) payable to the Company upon such
exercise, conversion or exchange, by (y) the total maximum number of Additional
Shares of Common Stock necessary to effect the exercise, conversion or exchange
of all such Convertible Securities) shall be less than the Applicable Price per
share of Common Stock, then the number of shares of Common Stock thereafter
comprising a Stock Unit shall be adjusted to that number determined by
multiplying the number of shares of Common Stock comprising a Stock Unit
immediately prior to such adjustment by a fraction (a) the numerator of which
shall be the number of shares of Common Stock outstanding immediately prior to
the issuance of such Additional Shares of
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Common Stock plus the total maximum number of Additional Shares of Common Stock
outstanding after giving effect to the assumed exercise or conversion of all
such Convertible Securities, and (b) the denominator of which shall be the
number of shares of Common Stock outstanding immediately before such date plus
the number of shares of Common Stock which the aggregate consideration (as
calculated pursuant to clause (x) and (y) above) for the total number of such
Convertible Securities so issued or sold would purchase at the Applicable Price.
Aggregate consideration for purposes of clause (b) in the
preceding paragraph shall be determined as follows: in case any Convertible
Securities shall be issued or sold, or exercisable, convertible or exchangeable
for cash, the consideration received therefor shall be deemed to be the amount
payable to the Company (as calculated pursuant to clause (x) and (y) above)
therefor, after deduction of any accrued interest or dividends and before
deducting any expenses incurred or any underwriting commissions or concessions
or discounts or, in the case of a private placement thereof, finders' fees or
commissions paid or allowed by the Company in connection therewith; in case any
such Convertible Securities shall be issued or sold, or exercisable, convertible
or exchangeable for a consideration other than cash payable to the Company, the
consideration received therefor (calculated pursuant to clause (x) and (y)
above) shall be deemed to be the Fair Value of such consideration, after
deduction of any accrued interest or dividends and before deducting any expenses
incurred or any underwriting commissions or concessions or discounts paid or
allowed by the Company in connection therewith.
No further adjustment of the number of shares of Common Stock
comprising a Stock Unit shall be made under this Section 8.03 upon the issuance
or sale of any Convertible Securities or the conversion or exchange of such
Convertible Securities into Additional Shares of Common Stock:
(A) if any such adjustment in respect thereof shall previously
have been made upon the setting of a record date therefor, or upon any
deemed issuance or sale of such options, rights or convertible or
exchangeable securities; or
(B) as a distribution or a dividend which is distributed or
declared and paid in accordance with Section 9.02 hereof.
8.04 Superseding Adjustment of Stock Unit. If, at any time
after any adjustment of the number of shares of Common Stock comprising a Stock
Unit shall have been made pursuant to Section 8.03 hereof as a result of the
issuance of any Convertible Securities, or after any new adjustment of the
number of shares of Common Stock comprising a Stock Unit shall have been made
pursuant to this Section 8.04, (a) such Convertible Securities shall expire, and
all or a portion of such Convertible Securities shall not have been exercised or
treated as having been exercised or otherwise cancelled or acquired by the
Company in connection with any settlement (including, without limitation, any
cash settlement) of such Convertible Securities, or (b) there has been any
change (whether by the passage of time or otherwise) in the number of shares
issuable upon exercise, conversion or exchange of such Convertible Securities
(including as a result of the operation of antidilution provisions applicable
thereto), or (c) the consideration per share for which Additional Shares of
Common Stock are issuable pursuant to the terms of
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any Convertible Securities, or the maturity thereof, shall be changed (whether
by the passage of time or otherwise), then such previous adjustment shall be
rescinded and annulled and the Additional Shares of Common Stock which were
deemed to have been issued by virtue of the computation made in connection with
the adjustment so rescinded and annulled shall no longer be deemed to have been
issued by virtue of such computation. Thereupon, a recomputation shall be made
of the effect of such Convertible Securities on the basis of:
(i) treating the number of Additional Shares of Common Stock,
if any, theretofore actually issued or issuable pursuant to the
previous exercise, conversion or exchange of such Convertible
Securities as having been issued on the date or dates of such issuance
as determined for purposes of such previous adjustment and for the
consideration actually received and receivable therefor;
(ii) treating the maximum number of Additional Shares of
Common Stock necessary to effect the exercise, conversion or exchange
of all Convertible Securities which then remain outstanding, as having
been issued (subject, however, to further adjustment under this Section
8.04); and
(iii) making the computations called for in Section 8.03
hereof on the basis of the revised terms of such Convertible Securities
as if the options, rights or securities being subject to recomputation
were newly issued as of the relevant recomputation date and, if and to
the extent called for by the foregoing provisions of this Section 8 on
the basis aforesaid, a new adjustment of the number of shares of Common
Stock comprising a Stock Unit shall be made, and such new adjustment
shall supersede the previous adjustment so rescinded and annulled.
No readjustment of the number of shares of Common Stock comprising a
Stock Unit pursuant to this Section 8.04 shall increase the applicable number of
shares by an amount in excess of the adjustment originally made to the number of
shares of Common Stock comprising a Stock Unit in respect of the issue, sale or
grant of the applicable Convertible Securities.
8.05 Other Provisions Applicable to Adjustments Under this
Section 8. The following provisions shall be applicable to the making of
adjustments of the number of shares of Common Stock comprising a Stock Unit
hereinbefore provided for in this Section 8, irrespective of the accounting
treatment of any consideration described below:
(a) Computation of Consideration for Dividends. In case of the
issuance at any time of any Additional Shares of Common Stock in
payment or satisfaction of any dividend upon any class of stock other
than Common Stock, the Company shall be deemed to have received for
such Additional Shares of Common Stock consideration equal to the
amount of such dividend so paid or satisfied.
(b) When Adjustments to be Made. The adjustments required by
this Section 8 shall be made whenever and as often as any specified
event requiring an adjustment shall occur except that any adjustment of
the number of shares of Common Stock comprising a Stock Unit that would
otherwise be required may be postponed (except in
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the case of a subdivision or combination of shares of the Common Stock,
as provided for in Section 8.01 hereof) if such adjustment either by
itself or with other adjustments not previously made adds or subtracts
less than 1% of the aggregate Exercise Price for all Warrants then
outstanding. Any adjustment representing a change of less than such
minimum percent (except as aforesaid) shall be carried forward and made
as soon as such adjustment, together with other adjustments required by
this Section 8 and not previously made, would result in such a minimum
adjustment. For the purpose of any adjustment, any specified event
shall be deemed to have occurred at the close of business on the date
of its occurrence.
(c) Fractional Interests. In computing adjustments under this
Section 8, fractional interests in Common Stock shall be taken into
account to the nearest one-hundredth of a share.
(d) When Adjustment Not Required. (i) If the Company shall
take a record of the holders of its Common Stock for the purpose of
entitling them to receive a dividend or distribution or subscription or
purchase rights and shall, thereafter and before the distribution
thereof to Stockholders, legally abandon its plan to pay or deliver
such dividend, distribution, subscription or purchase rights, then no
adjustment shall be required by reason of the taking of such record and
any such adjustment previously made in respect thereof shall be
rescinded and annulled, and no adjustment in the number of shares of
Common Stock thereafter comprising a Stock Unit under Section 8.02 or
8.03 hereof shall be made in respect of the Warrants held by such
Holder.
(e) Other Action Affecting Common Stock. In the case at any
time or from time to time the Company shall take any action affecting
its Common Stock or any Subsidiary of the Company shall take any action
affecting the capital stock of such Subsidiary, other than an action
described in any of the foregoing Sections 8.01 through 8.04
(inclusive), or in Section 9, then, unless in the reasonable opinion of
the Board such action will not have an adverse effect upon the rights
of the Holders of the Warrants, the number of shares of Common Stock or
Other Securities comprising a Stock Unit shall be adjusted in such
manner and at such time as the Board may reasonably determine in good
faith to be equitable in the circumstances (it being agreed that such
adjustment shall be subject to the reasonable approval of the holders
of Warrants entitled to purchase a majority of the Stock Units covered
by all the Warrants).
Section 9. CONSOLIDATION, MERGER, SHARE EXCHANGE, ETC.;
DISTRIBUTIONS. The provisions set forth in this Section 9 shall only apply to
Warrants which have not yet been exercised.
9.01 Consolidation, Merger, Share Exchange, etc. In case a
consolidation, merger or share exchange of the Company shall be effected with
another Person after the date hereof and the Company shall not be the surviving
entity, or the Company shall be the surviving entity but its Common Stock shall
be changed into securities or other property of another Person, or the sale,
lease or transfer of all or a substantial part of its assets to another Person
shall be effected after the date hereof, then, as a condition of such
consolidation, merger, share exchange, sale, lease or transfer, lawful and
adequate provision shall be made whereby each Holder shall
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thereafter have the right to purchase and receive, upon the exercise of its
Warrants, on the basis and the terms and conditions specified herein (and in
lieu of each Stock Unit immediately theretofore purchasable and receivable upon
the exercise of the Warrants), the highest amount of cash, securities or other
property to which such Holder would actually have been entitled as a Stockholder
upon such consummation if such Holder had exercised its Warrants immediately
prior to such event (taking into account the availability of any election
available to Stockholders in connection with such consolidation, merger, share
exchange, sale, lease or transfer), subject to adjustments (subsequent to such
consummation) as nearly equivalent as possible to the adjustments provided for
in Section 8 and this Section 9.01. The Company shall not effect any such
consolidation, merger, share exchange, sale, lease or transfer unless prior to
or simultaneously with the consummation thereof the successor Person (if other
than the Company) resulting from such consolidation, merger or share exchange or
the Person purchasing, leasing or otherwise acquiring such assets shall assume,
by written instrument, the obligation to deliver to such Holder such shares of
stock, securities, cash or other property as, in accordance with the foregoing
provisions, such Holder may be entitled to upon the exercise of its Warrants.
The above provisions of this Section 9.01 shall similarly apply to successive
consolidations, mergers, share exchanges, sales, leases or transfers.
9.02 Distributions upon Declaration of Dividend or Other
Distribution. So long as any Warrants remain outstanding, the Company shall pay,
upon the declaration and payment of any dividend or distribution (whether such
dividend or distribution is in the form of cash, debt securities, equity
securities or other property) on any class of Common Stock, to each Holder the
dividend or distribution that such Holder would be otherwise entitled to receive
had such Holder exercised the Warrants held by it in full immediately prior to
the taking of record of those holders of Common Stock entitled to any such
dividend or distribution. If such dividend or distribution is in the form of a
voting equity security, such Holder will be entitled to receive, at its option,
in its stead non-voting equity securities otherwise identical to and convertible
at such Holder's option into the equity securities to which such Holder is
otherwise entitled thereunder and continuing benefiting from antidilution
provisions similar to those herein. This provision shall not apply to stock
dividends of Additional Shares of Common Stock, or to a reclassification or
recapitalization, provided that the Company adjusts the number of shares of
Common Stock comprising a Stock Unit pursuant to Section 8.01 hereof.
9.03 Dilution in Case of Other Securities. In case any Other
Securities shall be issued or sold or shall become subject to issue or sale upon
the conversion or exchange of any stock (or Other Securities) of the Company (or
any issuer of Other Securities or any other Person referred to in Section 9.01
hereof) or to subscription, purchase or other acquisition pursuant to any
rights, options, warrants to subscribe for, purchase or otherwise acquire either
Additional Shares of Common Stock or securities directly or indirectly
convertible into or exchangeable for Additional Shares of Common Stock, issued
or granted by the Company (or any such other issuer or Person) for a
consideration such as to dilute, on a basis consistent with the standards
established in the other provisions of Section 8 hereof, the purchase rights
granted by the Warrants, then, and in each such case, the computations,
adjustments and readjustments provided for in said Section 8 with respect to the
Stock Units shall be made as nearly as possible in the manner so provided and
applied to determine the amount of Other Securities from time to time
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receivable upon the exercise of the Warrants, so as to protect the Holders
against the effect of such dilution.
Section 10. NOTICE TO WARRANT HOLDERS.
10.01 Notice of Adjustment of Stock Unit or Exercise Price.
Whenever the number of shares of Common Stock comprising a Stock Unit shall be
adjusted pursuant to Section 8 or 9 hereof, the Company shall forthwith obtain a
certificate signed by the chief financial officer of the Company, setting forth,
in reasonable detail, the event requiring the adjustment and the method by which
such adjustment was calculated (including a statement of the Applicable Price of
Additional Shares of Common Stock or other securities issued or sold and, if the
consideration therefor was other than cash, a description of how such
consideration was valued), specifying the number of shares of Common Stock
comprising a Stock Unit and (if such adjustment was made pursuant to Section 9
hereof) describing the number and kind of any other securities comprising a
Stock Unit, and any change in the Exercise Price, after giving effect to such
adjustment or change. The Company shall promptly and in any case within 10 days
after the making of such adjustments cause a signed copy of such certificate to
be delivered to each Holder in accordance with Section 15.02 hereof. The Company
shall keep at its office or agency, maintained for the purpose pursuant to
Section 15.03 hereof, copies of all such certificates and cause the same to be
available for inspection at said office during normal business hours by any
Holder or any prospective permitted purchaser of a Warrant designated by a
holder thereof.
10.02 Notice of Certain Corporate Actions. In case the Company
shall propose (a) to pay any dividend to the holders of its Common Stock or to
make any other distribution to the holders of its Common Stock, or (b) to offer
to the holders of its Common Stock rights to subscribe for or to purchase any
Additional Shares of Common Stock or Other Securities, rights or options, or (c)
to effect any reclassification of its Common Stock (other than a
reclassification involving only the subdivision, or combination, of outstanding
shares of Common Stock), or (d) to effect any capital reorganization, or (e) to
effect any consolidation, merger or share exchange, or any sale, lease, transfer
or other disposition of all or a majority of its property, assets or business,
or (f) to effect the liquidation, dissolution or winding up of the Company,
then, in each such case, the Company shall give to each Holder, in accordance
with Section 15.02 hereof, a notice of such proposed action, which shall specify
the date on which a record is to be taken for the purposes of such stock
dividend, distribution or offering of rights, or the date on which such
reclassification, reorganization, consolidation, merger, share exchange, sale,
lease, transfer, disposition, liquidation, dissolution or winding up is to take
place and the date of participation therein by the holders of Common Stock, if
any such date is to be fixed and shall also set forth such facts with respect
thereto as shall be reasonably necessary to indicate the effect of such action
on the Common Stock, if any, and the number and kind of any other shares of
stock which will comprise a Stock Unit, and the purchase price or prices
thereof, after giving effect to any adjustment, if any, which will be required
as a result of such action. Such notice shall be so given in the case of any
action covered by clause (a) or (b) above at least 20 days prior to the record
date for determining holders of the Common Stock for purposes of such action,
and in the case of any other such action, at least 20 days prior to the date of
the taking of such proposed
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action or the date of participation therein by the holders of Common Stock,
whichever shall be the earlier.
10.03 Limitation on Holders' Rights. Prior to the exercise of
any Warrant, the Holder thereof shall not be entitled to any rights of a
Stockholder (subject to Section 9.02 hereof with respect to dividends and
distributions), including, without limitation, the right to vote or receive
dividends or other distributions, or any notice of any proceedings of the
Company except as expressly provided in this Agreement.
Section 11. RESERVATION AND AUTHORIZATION OF COMMON STOCK. The
Company shall at all times reserve and keep available for issue upon the
exercise or conversion of Warrants such number of its authorized but unissued
shares of Class A Common Stock (or any stock into which such Class A Common
Stock shall be changed) as will be sufficient to permit the exercise in full of
all outstanding Warrants from time to time. All shares of Class A Common Stock
(or any stock into which such Class A Common Stock shall be changed) which shall
be so issuable, when issued upon exercise of any Warrant and payment of the
applicable Exercise Price therefor in accordance with the terms hereof and of
the Warrants, shall be duly and validly issued by the Company, fully paid and
nonassessable and free and clear of all Liens.
Before taking any action which would result in an adjustment
in the number of shares of Common Stock comprising a Stock Unit or which would
cause an adjustment reducing the Current Warrant Price per share of Common Stock
below the then par value, if any, of the shares of Common Stock issuable upon
exercise of the Warrants, the Company shall take any corporate action which is
necessary in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock free and clear of all Liens upon the
exercise of all the Warrants immediately after the taking of such action.
Before taking any action which would result in an adjustment
in the number of shares of Common Stock comprising a Stock Unit or in the
Current Warrant Price per share of Common Stock, the Company shall obtain all
such authorizations or exemptions thereof, or consents thereto, as may be
necessary from any public regulatory body or bodies having jurisdiction thereof.
The Company will list on each national securities exchange on
which any Common Stock may at any time be listed, subject to official notice of
issuance upon exercise of the Warrants, and will maintain such listing of, all
shares of Common Stock from time to time issuable upon the exercise of the
Warrants. The Company will also so list on each national securities exchange,
and will maintain such listing of, any Other Securities if at the time any
securities of the same class shall be listed on such national securities
exchange by the Company.
Section 12. TAKING OF RECORD; STOCK AND WARRANT TRANSFER
BOOKS.
(a) In the case of all dividends or other distributions by the
Company to the holders of its Common Stock with respect to which any provision
of Section 8 and Section 9.02
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hereof refers to the taking of a record of such holders, the Company shall in
each such case take such a record as of the close of business on a Business Day.
(b) The Company shall not at any time, except upon complete
dissolution, liquidation or winding up, close its stock transfer books or
Warrant transfer books so as to result in preventing or delaying the exercise,
conversion or transfer of any Warrant, unless otherwise required by any
applicable federal, state or local law.
Section 13. HOLDERS' SPECIAL RIGHTS.
13.01 Replacement of Instruments. Upon receipt by the Company
of evidence reasonably satisfactory to it of the ownership of and the loss,
theft, destruction or mutilation of any certificate or instrument evidencing any
Warrants issued by the Company, and
(a) in the case of loss, theft or destruction, of an indemnity
reasonably satisfactory to it, provided that, if the owner of the same
is an Initial Holder, its own agreement of indemnity shall be deemed to
be satisfactory, or if the owner of the same is a Holder the Company
may require a bond, or
(b) in the case of mutilation, upon surrender or cancellation
thereof, the Company, at its expense, shall execute, register and
deliver, in lieu thereof, a new certificate or instrument for (or
covering the purchase of) an equal number of Warrants or Warrant Stock.
13.02 Restrictions on Certain Action.
(a) The Company shall not at any time enter into an agreement
or other instrument limiting in any manner its ability to perform its
obligations under this Agreement or the Warrants or making such performance or
the issuance of shares of Common Stock upon the exercise of any Warrant issued
by it a default under any such agreement or instrument.
(b) Neither the Company nor any of its Subsidiaries shall (i)
issue any Participating Security or securities convertible into a Participating
Security or (ii) make or agree to make payments to any Person, such as any
"phantom" stock payments, where the amount thereof is calculated with reference
to fair market or equity value of the Company or any of the Subsidiaries.
13.03 Inspection Rights. Until a Qualified Initial Public
Offering, as and when requested, the Company shall provide to any holder of
Warrants or Warrant Shares or the agents or representatives of such holder all
information and/or access to all information in respect of the Company and its
Subsidiaries as the Company provides to members of the Board at the same time or
times and/or subject to the same conditions to which such information or access
thereto is provided to such members of the Board.
13.04 Board Attendance. Until the closing of a Qualified
Initial Public Offering, ▇▇▇▇▇ ▇▇▇▇ or ▇▇▇▇▇ ▇▇▇▇▇▇▇ or if neither of them is
affiliated with Reservoir Capital Group
33
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L.L.C. another representative (the "Representative") appointed by the Majority
Holders shall be entitled to attend all meetings of (i) the Board, (ii) the
board of directors of any Subsidiary of the Company and (iii) any committee of
(i) and (ii) above provided, however, that the Representative shall not be
entitled to vote at any such meeting. The Company shall give each Representative
notice of all such meetings at the same time and in the same manner as notice is
given to members of the Board and of the board of directors of each Subsidiary
of the Company. Each Representative shall be entitled to receive all written
materials and other information given to the directors of the Company and the
directors of each Subsidiary of the Company in connection with such meetings at
the same time and in the same manner and form as such materials and information
are given to the directors; provided that the Company reserves the right to
withhold any information and to exclude the Representative from any meeting or
portion thereof if, in the reasonable judgment of the Chairman of the Board of
Directors or the Board of Directors of the Company, such information or the
agenda for such meeting relate to matters concerning the business relationship
between the Company on the one hand and the Initial Holders solely in their
capacity as Lenders to the Company on the other hand, where such matters present
a conflict of business interests between the Company and the Initial Holders in
their capacities as Lenders (it being understood that general discussions
concerning the repayment or refinancing of any amounts owing under the Loan
Agreement and similar matters shall not generally present conflicts of business
interests).
13.05 Preemptive Rights.
(a) Subject to the terms and conditions specified in this
Section 13.05, the Company hereby grants to each holder of Warrants or shares of
Warrant Stock a preemptive right with respect to sales by the Company of shares
of Common Stock or Convertible Securities (collectively, "Company Securities").
For purposes of this Section 13.05, "holder" includes transferees of any holder
and any general partners, members and/or affiliates of a holder. A holder shall
be entitled to apportion the preemptive right hereby granted it among itself and
its partners and affiliates in such proportions as it deems appropriate.
(b) Each time the Company proposes to issue or sell any
Company Securities (a "Company Offering"), the Company shall permit each Holder
to exercise preemptive rights in accordance with the following provisions:
(i) The Company shall deliver written notice (the "Sale
Notice") to each holder stating (A) the class, series and number of Company
Securities proposed to be sold by the Company, (B) the proposed price and terms
upon which it is selling such Company Securities and (C) the Company's
determination of the number of shares of Company Securities which may be
purchased by such holder if it chooses to exercise its rights under this Section
13.05.
(ii) Within 15 days (or five business days pursuant to the
issuance of securities in connection with a bona fide business acquisition of or
by the Company, whether by merger, consolidation, sale of assets, sale or
exchange of stock or otherwise) after receipt of the Sale Notice, each holder
may, by giving notice thereof to the Company (a "Preemptive Notice"), elect to
purchase, at the price paid by the purchaser in the Company Offering and on the
terms of
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the Company Offering, up to that holder's Proportional Number of shares of
Company Securities. As used herein, the term "Proportional Number" shall mean
(A) the total number of shares of Company Securities being issued or sold by the
Company in the Company Offering multiplied by (B) a fraction, the numerator of
which shall be the number of shares of Warrant Stock then issued and held, or
issuable upon exercise or conversion of all Warrants which are then exercisable
pursuant to their terms and which are then held, by such holder, and the
denominator of which shall be the total number of shares of Common Stock of the
Company (assuming full conversion and exercise of all securities convertible or
exercisable for shares of Common Stock) held by all the Company's Stockholders
immediately prior to the Company Offering.
(iii) The closing of the purchases of any shares of Company
Securities with respect to which the holders have given a Preemptive Notice
shall be held at the principal executive office of the Company on the 30th day
after the giving by the Company of the Sale Notice contemplated by Section
13.05(b)(i), or at such other time and place as the parties to the transaction
may agree. At such closing, the Company shall deliver certificates representing
the Company Securities to be sold to the holders. Each holder shall deliver at
the closing payment of the purchase price in full in immediately available funds
or by certified bank check for the Company Securities purchased by him or it
pursuant to this Section 13.05. At such closing, all of the parties to the
transaction shall execute such additional documents as are otherwise necessary
or appropriate. If it is inconvenient for any holder to conduct a physical
closing at the offices of the Company, the closing may be conducted by mail or
messenger service if such a procedure is feasible, so long as payment for the
shares of Company Securities is made to the Company in accordance with the
requirements of this Section 13.05(b)(iii) at the address of its principal
executive office in advance of the delivery by the Company of the Company
Securities required to be delivered by it hereunder.
(iv) Notwithstanding anything to the contrary contained
herein, the preemptive rights contained in this Section 13.05 shall not be
applicable to the issuance by the Company of (A) shares of Common Stock or
Convertible Securities pursuant to an Initial Public Offering; (B) Option Stock;
(C) shares of Common Stock or Convertible Securities pursuant to the conversion
or exercise of Convertible Securities if the Company shall have offered
previously such preemptive rights to the Holders upon the issuance of such
Convertible Securities; (D) shares of Common Stock or Convertible Securities
upon conversion of the Series A Preferred Stock described as being issued and
outstanding in Section 4.14 of the Loan Agreement, (E) shares of Common Stock or
Convertible Securities upon exercise or conversion of the Warrants, and (F)
shares of Common Stock or Convertible Securities upon exercise or conversion of
the ▇▇▇▇▇▇▇▇ Warrants.
(c) Except in the case of rights and obligations that have been
exercised but not been fulfilled, the rights and obligations of the Company and
holders set forth in this Section 13.05 shall terminate upon the closing of a
Qualified Initial Public Offering.
13.06 Transactions with Affiliates of the Company. The Company
will not, nor will it permit any of its Subsidiaries to, sell, lease or
otherwise transfer any property or assets to, or purchase, lease or otherwise
acquire any property or assets from, or otherwise engage in any
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other transactions with, any of its Affiliates, except (a) transactions in the
ordinary course of business at prices and on terms and conditions not less
favorable to the Company or such Subsidiary than could be obtained on an
arm's-length basis from unrelated third parties, (b) transactions between or
among the Company and its wholly owned Subsidiaries not involving any other
Affiliate and (c) any Restricted Payment (as defined in the Loan Agreement)
permitted by Section 7.06 of the Loan Agreement.
13.07 Indemnification. The Company will defend and indemnify
each of the Initial Holders and their officers, directors, managers, members,
partners, stockholders, attorneys, representatives, agents, and employees
against, and hold each such person harmless from, all losses (including any
diminution in value of the shares of Common Stock or other securities of the
Company hereafter acquired by the Initial Holders under this Agreement),
demands, actions, causes of action, assessments, damages, liabilities, costs or
expenses, including without limitation, interest, penalties, fines, fees,
deficiencies, claims of damage, reasonable attorneys' and other professional
fees and expenses incurred in the investigation, prosecution, defense or
settlement thereof arising out of or based on any breach of any warranty,
representation or agreement set forth in this Agreement or the Warrants, other
than any of such amounts resulting from any breach of any warranty or
representation of the Initial Holders set forth in Section 2.03 herein or any
action on the part of such indemnified party that is finally determined in such
proceeding to be primarily and directly a result of such party's gross
negligence or willful misconduct. Each Initial Holder shall reimburse the
Company for any payments made by the Company to it pursuant to this paragraph
for any such losses that are finally determined in such proceeding to result
primarily and directly from the breach of any warranty of representation of the
Initial Holders set forth in Section 2.03 herein or the gross negligence or
willful misconduct of the Initial Holders. Nothing contained in this Section
13.07 shall limit in any manner any remedy at law or in equity to which a party
indemnified hereunder shall be entitled against the Company as a result of fraud
or intentional misrepresentation by the Company or any of its representatives or
agents.
Section 14. REGISTRATION RIGHTS.
14.01 Grant of Right. The Company hereby grants to each
Grantee (as defined below) the registration rights set forth in this Section 14,
with respect to the Registrable Securities (as defined below) owned by such
Grantee. The Company and the Grantees agree that the registration rights
provided herein set forth the sole and entire agreement, and supersede any prior
agreement, between the Company and the Grantees with respect to registration
rights for the Company's Registrable Securities.
14.02 Certain Definitions. As used in this Section 14:
(a) The terms "register," "registered" and "registration"
refer to a registration effected by filing with the Commission a registration
statement (the "Registration Statement") in compliance with the Securities Act,
and the declaration or ordering by the Commission of the effectiveness of such
Registration Statement.
(b) The term "Registrable Securities" means (i) shares of the
Warrant Stock, (ii) shares of Class A Common Stock issued or issuable upon
exercise or conversion of the
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Warrants held by any Holder or any transferee through a Section 14 Permitted
Transfer (as defined in Section 14.09(b)) and (iii) any shares of Class A Common
Stock issued as (or issuable upon the conversion or exercise of any warrant,
right or other security that is issued as) a dividend or other distribution with
respect to, or in exchange or in replacement of, such Registrable Securities;
provided, however, that shares of Class A Common Stock or other securities shall
only be treated as Registrable Securities if and so long as (A) they have not
been sold to or through a broker or dealer or underwriter in a public
distribution or a public securities transaction, (B) they have not been sold in
a transaction exempt from the registration and prospectus delivery requirements
of the Securities Act under Section 4(l) thereof so that all transfer
restrictions and restrictive legends with respect thereto are removed upon the
consummation of such sale, and (C) they are held by a Grantee who cannot sell
all Registrable Securities held by such Grantee in any three-month period except
in a private transaction exempt from registration pursuant to Rule 144,
provided, however, that such shares of Class A Common Stock or other securities
shall continue to be treated as Registrable Securities with respect to any
Grantee owning more than two percent (2%) of the Company's outstanding Common
Stock until such time as such Grantee owns less than two percent (2%) of the
outstanding Common Stock.
(c) The term "Grantee" (collectively, "Grantees") means any
Holder (and any transferee as permitted by Section 14.09 hereof) holding
Registrable Securities, securities exercisable or convertible into Registrable
Securities or securities exercisable for securities convertible into Registrable
Securities.
(d) The term "Initiating Grantee" means any Grantee(s) holding
at least fifteen percent (15%) of the Registrable Securities, or securities
exercisable or convertible into Registrable Securities or securities exercisable
for securities convertible into Registrable Securities, then held by all
Grantees.
14.03 [reserved].
14.04 Piggyback Registration.
(a) Company Registration. If at any time or from time to time
the Company shall determine to register any of its securities (other than the
Company's Initial Public Offering), either for its own account or for the
account of security holders, other than a registration relating solely to
employee benefit plans, a registration on Form S-4 relating solely to Rule 145
transaction or a registration pursuant to Section 14.10 hereof, the Company
will:
(i) promptly (but in any event within 10 days) give to
each Grantee written notice thereof; and
(ii) include in such registration (and any related
qualification under state securities laws or other compliance), and in any
underwriting involved therein, all the Registrable Securities specified in a
written request or requests, made within fifteen (15) days after receipt of such
written notice from the Company, by any Grantee or Grantees, except as set forth
in Section 14.04 (b) below.
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Such Registrable Securities shall only be included to the
extent that inclusion will not diminish the number of securities included by the
Company.
(b) Underwriting. If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise the Grantees as a part of the written notice given
pursuant to Section 14.04(a)(i). In such event the right of any Grantee to
registration pursuant to this Section 14.04 shall be conditioned upon such
Grantee's participation in such underwriting and the inclusion of such Grantee's
Registrable Securities in the underwriting to the extent provided herein.
All Grantees proposing to distribute their Registrable
Securities through such underwriting shall, together with the Company and the
other parties distributing their securities through such underwriting, enter
into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by the Company. Notwithstanding any
other provision of this Section 14.04, if the underwriter determines that
marketing factors require a limitation of the number of shares to be
underwritten, the underwriter may limit the number of Registrable Securities to
be included in the registration and underwriting, or may exclude Registrable
Securities entirely from such registration and underwriting subject to the terms
of this Section 14.04. The Company shall so advise all holders of the Company's
securities that would otherwise be registered and underwritten pursuant hereto,
and the number of shares of such securities, including Registrable Securities,
that may be included in the registration and underwriting shall be allocated in
the following manner: shares, other than Registrable Securities and other
securities that have contractual rights with respect to registration similar to
those provided for in this Section 14.04 including without limitation rights
under the Stockholders Agreement and Investor Rights Agreement (provided that
such rights existed prior to the date of this agreement or the holders of
Registrable Securities shall have consented to the granting of such registration
rights pursuant to Section 14.12 hereof), requested to be included in such
registration by shareholders shall be excluded, and if a limitation on the
number of shares is still required, the number of Registrable Securities and
other securities that have contractual rights with respect to registration that
may be included shall be allocated among the holders thereof in proportion, as
nearly as practicable, to the amounts of Registrable Securities requested to be
registered and such other securities requested to be registered and held by each
such holder at the time of filing the Registration Statement. For purposes of
any such underwriter cutback, all Registrable Securities and other securities
held by any holder that is a partnership or corporation, shall also include any
Registrable Securities held by the partners, retired partners, shareholders or
affiliated entities of such holder, or the estates and family members of any
such partners and retired partners and any trusts for the benefit of any of the
foregoing persons, and such holder and other persons shall be deemed to be a
single "selling holder," and any pro rata reduction with respect to such
"selling holder" shall be based upon the aggregate amount of shares carrying
registration rights and requested to be registered owned by all entities and
individuals included in such "selling holder," as defined in this sentence. No
securities excluded from the underwriting by reason of the underwriter's
marketing limitation shall be included in such registration. Nothing in this
Section 14.04(b) is intended to diminish the number of securities to be included
by the Company in the underwriting.
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If any Grantee disapproves of the terms of the underwriting,
it may elect to withdraw therefrom by written notice to the Company and the
underwriter. The Registrable Securities so withdrawn shall also be withdrawn
from registration.
(c) Right to Terminate Registration. The Company shall have
the right to terminate or withdraw any registration initiated by it under this
Section 14.04 prior to the effectiveness of such registration whether or not any
Grantee has elected to include securities in such registration.
14.05 Expenses of Registration. All Registration Expenses (as
defined below) incurred in connection with all registrations effected pursuant
to Sections 14.04 and 14.10 shall be borne by the Company; provided, however,
that the Company shall not be required to pay stock transfer taxes or
underwriters' discounts or selling commissions relating to Registrable
Securities. "Registration Expenses" means any and all expenses incident to
performance of or compliance with this Agreement, including, without limitation,
(a) all registration and filing fees of the Commission, a stock exchange or the
National Association of Securities Dealers, Inc., (b) all fees and expenses of
complying with securities or blue sky laws (including fees and disbursements of
counsel for the underwriters in connection with blue sky qualifications of the
Registrable Securities) unless paid by the underwriters, (c) all printing,
messenger and delivery expenses, (d) all fees and expenses incurred in
connection with the listing of the Registrable Securities on any securities
exchange, (e) the reasonable fees and disbursements of counsel for the Company
and of its independent public accountants, including the expenses of any special
audits and/or "cold comfort" letters required by or incidental to such
performance and compliance, (f) the reasonable fees and disbursements of one
counsel selected by the Grantees holding a majority of the Registrable
Securities being registered to represent all Grantees that hold the Registrable
Securities being registered in connection with each such registration, (g) any
fees and disbursements of underwriters customarily paid by the issuers or
sellers of securities, including fees and disbursements of counsel for the
underwriters, but excluding underwriting discounts and commissions, (h)
liability insurance if the Company so desires or if the underwriters so require,
and (i) the fees and expenses of any special experts retained by the Company in
connection with the requested registration.
14.06 Obligations of the Company. Whenever required under this
Section 14 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) use its reasonable best efforts to cause such Registration
Statement to become effective, and keep such Registration Statement effective
for the lesser of 120 days or until the Grantee or Grantees have completed the
distribution relating thereto;
(b) prepare and file with the Commission such amendments and
supplements to such Registration Statement and the prospectus used in connection
with such Registration Statement as may be necessary to keep such Registration
Statement effective and to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such registration
statement in accordance with the intended methods of disposition by the seller
or sellers thereof set forth in such Registration Statement; provided, that
before filing a
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Registration Statement or prospectus, or any amendments or supplements thereto,
the Company will furnish to one counsel selected by the Grantees that hold a
majority of the Registrable Securities covered by such Registration Statement to
represent all Grantees of Registrable Securities covered by such Registration
Statement, copies of all documents proposed to be filed, which documents will be
subject to the review of such counsel;
(c) furnish to the Grantees such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them;
(d) use its reasonable best efforts to register or otherwise
qualify the securities covered by such Registration Statement under such other
securities laws of such states and other jurisdictions as shall be reasonably
requested by the Grantees or the managing underwriter, provided that the Company
shall not be required in connection therewith or as a condition thereto to
qualify to do business or to file a general consent to service of process in any
such states or jurisdictions where, but for the requirements of this paragraph
(d), it would not be obligated to be so qualified;
(e) in the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering (each Grantee
participating in such underwriting shall also enter into and perform its
obligations under such an agreement);
(f) notify each Grantee that holds Registrable Securities
covered by such Registration Statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the happening
of any event as a result of which the prospectus included in such Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing and at the request of any such seller, promptly prepare and
promptly furnish to such seller a reasonable number of copies of an amended or
supplemental prospectus as may be necessary so that, as thereafter delivered to
the sellers of such Registrable Securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
the light of the circumstances then existing;
(g) otherwise use its reasonable best efforts to comply with
all applicable rules and regulations of the Commission, and make available to
its security holders, as soon as reasonably practicable after the effective date
of the Registration Statement, an earnings statement that shall satisfy the
provisions of Section 11(a) of the Securities Act and the rules and regulations
promulgated thereunder;
(h) obtain a "cold comfort" letter or letters from the
Company's independent public accountants in customary form and covering matters
of the type customarily covered by
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"cold comfort" letters as the seller or sellers of a majority of such
Registrable Securities shall reasonably request;
(i) obtain an opinion of counsel for the Company in customary
form and covering matters of the type customarily covered in opinions of
issuer's counsel as the sellers shall reasonably request;
(j) use its best efforts to list the Registrable Securities
covered by such Registration Statement with any securities exchange or Nasdaq on
which the Common Stock is then listed;
(k) make available for inspection by each Grantee including
Registrable Securities in such registration, any underwriter participating in
any distribution pursuant to such registration, and any attorney, accountant or
other agent retained by such Grantee or underwriter, all financial and other
records, pertinent corporate documents and properties of the Company, as such
parties may reasonably request, and cause the Company's officers, directors and
employees to supply all information reasonably requested by any such Grantee,
underwriter, attorney, accountant or agent in connection with such Registration
Statement;
(l) cooperate with Grantees including Registrable Securities
in such registration and the managing underwriters, if any, to facilitate the
timely preparation and delivery of certificates representing Registrable
Securities to be sold, such certificates to be in such denominations and
registered in such names as such Grantees or the managing underwriters may
request at least two Business Days prior to any sale of Registrable Securities;
(m) permit any Grantee which Grantee, in the sole and
exclusive judgment, exercised in good faith, of such Grantee, might be deemed to
be a controlling person of the Company, to participate in good faith in the
preparation of such Registration Statement and to require the insertion therein
of material, furnished to the Company in writing, that in the reasonable
judgment of such Grantee and its counsel should be included; and
(n) promptly notify each Grantee including Registrable
Securities in such registration and the underwriters, if any, (i) when the
Registration Statement, any pre-effective amendment, the prospectus or any
prospectus supplement or post-effective amendment to the Registration Statement
has been filed and, with respect to the registration statement or any
post-effective amendment, when the same has become effective, (ii) of any
written request by the Commission for amendments or supplements to the
Registration Statement or prospectus, (iii) of any the notification to the
Company by the Commission of its initiation of any proceedings with respect to
the issuance by the Commission of, or the issuance of by the Commission of, any
stop order suspending the effectiveness of the Registration Statement, and (iv)
of the receipt by the Company of any notification with respect to the suspension
of the qualification of any Registrable Securities for sale under the applicable
securities or blue-sky laws of any jurisdiction.
14.07 Indemnification.
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(a) The Company will, and does hereby undertake to, indemnify
and hold harmless each Grantee that holds Registrable Securities, each of such
Grantee's officers, directors, partners and agents, and each person controlling
such Grantee, with respect to any registration, qualification or compliance
effected pursuant to this Section 14, and each underwriter, if any, and each
person who controls any underwriter, of the Registrable Securities held by or
issuable to such Grantee, against all claims, losses, damages and liabilities
(or actions in respect thereto) to which they may become subject under the
Securities Act, the Exchange Act, or other federal or state law arising out of
or based on (i) any untrue statement (or alleged untrue statement) of a material
fact contained in any prospectus, offering circular or other similar document
(including any related Registration Statement, notification, or the like)
incident to any such registration, qualification or compliance, or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances in which they were made, (ii) any violation or
alleged violation by the Company of any federal, state or common law rule or
regulation applicable to the Company in connection with any such registration,
qualification or compliance, or (iii) any failure to register or qualify
Registrable Securities in any state where the Company or its agents have
affirmatively undertaken or agreed in writing that the Company (the undertaking
of any underwriter chosen by the Company being attributed to the Company) will
undertake such registration or qualification on behalf of the Grantees that hold
such Registrable Securities (provided that in such instance the Company shall
not be so liable if it has undertaken its reasonable best efforts to so register
or qualify such Registrable Securities) and will reimburse, as incurred, each
such Grantee, each such underwriter and each such director, officer, partner,
agent and controlling person, for any legal and any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action in accordance with Section 14.07(c); provided, that
the Company will not be liable in any such case to the extent that any such
claim, loss, damage, liability or expense arises out of or is based on any
untrue statement or omission made in conformity with written information
furnished to the Company by such Grantee or underwriter specifically for use
therein; provided, further, that this indemnity agreement shall not inure to the
benefit of any Grantee that holds Registrable Securities, each of such Grantees,
officers, directors, partners and agents and each person controlling such
Grantee, or to the benefit of any Underwriter and any person who controls any
Underwriter in connection with any claim, loss, damage or liability arising out
of or based upon any untrue statement (or alleged untrue statement) of a
material fact contained in any prospectus, offering circular or other similar
document or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statement
therein not misleading in light of the circumstances under which they were made
if each such Grantee (to the extent such Grantee is required to deliver a
prospectus) or Underwriter failed to send or give a copy of the prospectus,
offering circular or similar document, as the same may be amended or
supplemented, in a timely manner and the untrue statement or alleged untrue
statement of a material fact or omission (or alleged omission) to state a
material fact in such earlier prospectus, offering circular or similar document,
was corrected in the final prospectus, offering circular or similar document,
unless such failure resulted from non-compliance by the Company with its
obligation to prepare and deliver a final prospectus.
(b) Each Grantee will, and if Registrable Securities held by
or issuable to such Grantee are included in such registration, qualification or
compliance pursuant to this Section 14,
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does hereby undertake to indemnify and hold harmless the Company, each of its
directors, partners, agents, officers, and each person controlling the Company,
each underwriter, if any, and each person who controls any underwriter, of the
Company's securities covered by such a Registration Statement, and each other
Grantee, each of such other Grantee's officers, partners, directors and agents
and each person controlling such other Grantee, against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any such Registration Statement, prospectus, offering circular or
other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances in which they were made,
and will reimburse, as incurred, the Company, each such underwriter, each such
other Grantee, and each such director, officer, agent, partner and controlling
person of the foregoing, for any legal or any other expenses reasonably incurred
in connection with investigating or defending any such claim, loss, damage,
liability or action in accordance with Section 14.07(c), in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) was made in such Registration
Statement, prospectus, offering circular or other document, in reliance upon and
in conformity with written information furnished to the Company by such Grantee
specifically for use therein; provided, however, that the liability of each
Grantee hereunder shall be limited to the proportion of any such claim, loss,
damage or liability that is equal to the proportion that the public offering
price of the shares sold by such Grantee under such Registration Statement bears
to the total public offering price of all securities sold thereunder, but in any
event not to exceed the net proceeds received by such Grantee from the sale of
securities under such Registration Statement.
(c) Each party entitled to indemnification under this Section
14.07 (the "Indemnified Party") shall give notice to the party required to
provide such indemnification (the "Indemnifying Party") of any claim as to which
indemnification may be sought promptly after such Indemnified Party has actual
knowledge thereof, and shall permit the Indemnifying Party to assume the defense
of any such claim or any litigation resulting therefrom; provided, that counsel
for the Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be subject to approval by the Indemnified Party (whose
approval shall not be unreasonably withheld) and the Indemnified Party may
participate in such defense at the Indemnifying Party's expense if
representation of such Indemnified Party would be inappropriate due to actual or
potential differing interests between such indemnified party and any other party
represented by such counsel in such proceeding; and provided, further, that the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Section 14, except
to the extent that such failure to give notice shall materially adversely affect
the Indemnifying Party in the defense of any such claim or any such litigation.
An Indemnifying Party, in the defense of any such claim or litigation, may,
without the consent of each Indemnified Party, consent to entry of any judgment
or enter into any settlement that includes as an unconditional term thereof the
giving by the claimant or plaintiff therein, to such Indemnified Party, of a
release from all liability with respect to such claim or litigation.
(d) In order to provide for just and equitable contribution to
joint liability under the Securities Act in any case in which either (i) any
indemnified party under this Agreement, or any controlling person of any such
indemnified party, makes a claim for
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indemnification pursuant to this Section 14.07 but it is judicially determined
(by the entry of a final judgment or decree by a court of competent jurisdiction
and the expiration of time to appeal or the denial of the last right of appeal)
that such indemnification may not be enforced in such case notwithstanding the
fact that this Section 14.07 provides for indemnification in such case, or (ii)
contribution under the Securities Act may be required on the part of any such
Grantee or any such controlling person in circumstances for which
indemnification is provided under this Section 14.07; then, and in each such
case, the Company and such Grantee will contribute to the aggregate claims,
losses, damages or liabilities to which they may be subject (after contribution
from others) in such proportion as is appropriate to reflect the relative fault
of the Indemnifying Party on the one hand and of the Indemnified Party on the
other hand in connection with the statements or omissions which resulted in such
claim, loss, damage liability or expense as well as any other relevant equitable
considerations. The relevant fault of the Indemnifying Party and the Indemnified
Party shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. Notwithstanding anything to the contrary in this
Agreement, (A) no Grantee will be required to contribute any amount in excess of
the public offering price of all securities offered by it pursuant to such
Registration Statement, after deduction of underwriting discounts and
commissions; and (B) no person or entity guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) will be entitled to
contribution from any person or entity who was not guilty of such fraudulent
misrepresentation.
(e) The indemnities provided in this Section 14.07 shall
survive the transfer of any Registrable Securities by such Grantee.
14.08 Information by Grantee. The Grantee or Grantees of
Registrable Securities included in any registration shall furnish to the Company
such information regarding such Grantee or Grantees and the distribution
proposed by such Grantee or Grantees as the Company may reasonably request in
writing and as shall be required in connection with any registration,
qualification or compliance referred to in this Section 14.
14.09 Transfer of Registration Rights.
(a) The rights, contained in Sections 14.04 and 14.10 hereof,
to cause the Company to register the Registrable Securities, may be assigned or
otherwise conveyed to a transferee or assignee of Registrable Securities, who
shall be considered a "Grantee" for purposes of this Section 14; provided, that
(i) any such transfer is effected in compliance with Sections 4 and 5 hereof;
and (ii) such transfer is a "Section 14 Permitted Transfer" as defined below.
(b) For purposes of this Agreement, a "Section 14 Permitted
Transfer" shall mean: (i) a transaction not involving a change in beneficial
ownership; (ii) transactions involving distribution without consideration by a
shareholder that is a partnership to any of its partners, retired partners, or
to the estate of any of its partners; (iii) transactions involving distribution
without consideration by a shareholder that is a corporation or limited
liability
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company to any of its shareholders or members, as applicable; (iv) transfers by
any shareholder who is an individual to a trust for the benefit of such
shareholder or his family; (v) a transfer in which the transferee acquires at
least 50,000 shares of Registrable Securities, or securities convertible into or
exercisable for such number of shares, subject to adjustment for combinations,
consolidations, recapitalizations, stock splits, stock dividends and the like;
(vi) transfers by gift, will or intestate succession to the spouse, lineal
descendants or ancestors of any shareholder or spouse of a shareholder; or (vii)
transfer by any Grantee to any of its Affiliates.
14.10 Form S-3.
(a) If the Company's stock becomes publicly traded, the
Company shall use its reasonable best efforts to qualify for registration on
Form S-3 and to that end the Company shall register the Common Stock under the
Exchange Act within twelve (12) months following the effective date of the first
registration of any securities of the Company on Form S-1. After the Company has
qualified for the use of Form S-3, the Initiating Grantees that hold Registrable
Securities shall have the right to request registrations on Form S-3 thereafter
under this Section 14.10. If the Company shall receive from Initiating Grantees
a written demand that the Company effect a registration pursuant to this Section
14.10, the Company shall promptly give notice to all Grantees that hold
Registrable Securities of the receipt of a request for registration pursuant to
this Section 14.10 and shall provide a reasonable opportunity for other Grantees
to participate in the registration. Subject to the foregoing, the Company will
use its reasonable best efforts to effect such registration as soon as
practicable on Form S-3 to the extent requested by the Initiating Grantee or
Grantees, as the case may be; provided, however, that the Company shall not be
obligated to effect any such registration if (a) the Initiating Grantee or
Grantees, as the case may be, together with the holders of any other securities
of the Company entitled to inclusion in such registration, propose to sell
Registrable Securities and such other securities (if any) at an aggregate price
to the public of less than $1,000,000, or (b) the Company shall have already
made two registrations on Form S-3 within the 12-month period immediately
preceding the request. Notwithstanding the foregoing, nothing herein shall
restrict, prohibit, or limit in any way a Grantee's ability to exercise its
registration rights under Section 14.04 hereof. The Company shall have no
obligation to take any action to effect any registration pursuant to this
Section 14.10 in case of any of the circumstances referred to in Section
2.2(a)(ii)(A), (B), (C), (D) or (E) of the Investor Rights Agreement as in
effect on the date hereof (which shall be deemed to apply to the obligations
under this Section 14.10 with equal force). In addition, any registration
pursuant to this Section 14.10 shall be subject to the provisions of Section
2.2(b) of the Investor Rights Agreement as in effect on the date hereof, which
shall be deemed to apply to the obligations under this Section 2.2 with equal
force, except that any reference therein to Section 14.03 or a subsection
thereof shall, for these purposes only, be deemed to be a reference to this
Section 14.10.
(b) In the event that (i) the Company receives from Initiating
Grantees a written demand that the Company effect a registration pursuant to
this Section 14.10 and (ii) the offering to which such registration relates is
to be an underwritten public offering, then to the extent that either the
holders of a majority of the Registrable Securities to which such registration
relates or the managing underwriter notifies the Company in writing that, in the
judgment of such holders or such managing underwriter, the inclusion of
additional information in the Form S-3
45
-41-
registration statement is of material importance to the success of the offering,
then the Company shall be obligated to include such additional information in
the registration statement to the reasonable satisfaction of the Initiating
Grantees or such managing underwriter, as the case may be.
14.11 Delay of Registration. No Grantee shall have any right
to obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 14.
14.13 Rule 144 Reporting. With a view to making available to
the Grantees the benefits of certain rules and regulations of the Commission
that may permit the sale of the Registrable Securities to the public without
registration, the Company agrees to:
(a) make and keep current public information available, within
the meaning of Rule 144 or any similar or analogous rule promulgated under the
Securities Act, at all times after it has become subject to the reporting
requirements of the Exchange Act;
(b) file with the Commission, in a timely manner, all reports
and other documents required of the Company under the Securities Act and the
Exchange Act (after it has become subject to such reporting requirements);
(c) so long as a Grantee owns any Registrable Securities,
furnish to such Grantee forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of Rule 144 (at any
time commencing 90 days after the effective date of the first registration filed
by the Company for an offering of its securities to the general public), the
Securities Act and the Exchange Act (at any time after it has become subject to
such reporting requirements); a copy of the most recent annual or quarterly
report of the Company; and such other reports and documents as a Grantee may
reasonably request in availing itself of any rule or regulation of the
Commission allowing it to sell any such securities without registration.
14.14 Market Stand-Off Agreement. Each Holder that is a "One
Percent Stockholder" (as defined below) hereby agrees that during a period, not
to exceed 180 days, following the effective date of a registration statement of
the Company filed under the Securities Act, it shall not, to the extent
requested by the Company and any underwriter, sell, pledge, transfer, make any
short sale of, loan, grant any option for the purchase of, or otherwise transfer
or dispose of (other than to donees who agree to be similarly bound) any Common
Stock held by it at any time during such period except Common Stock included in
such registration; provided, however, that:
(a) such agreement shall be applicable only to the first such
registration statement of the Company that covers Common Stock (or other
securities) to be sold on its behalf to the public in an underwritten offering
unless otherwise required by the underwriter in connection with a subsequent
registration in which case the maximum period shall be 90 days rather than 180
days; and
46
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(b) all other One Percent Stockholders with registration
rights (whether or not pursuant to this Agreement) and all officers and
directors of the Company enter into similar agreements.
For purposes of this Section 14.14, the term "One Percent
Stockholder" shall mean a Stockholder of the Company who holds at least one
percent of the outstanding Common Stock of the Company (assuming conversion of
all outstanding Preferred Stock of the Company and all Warrants which are
exercisable on such date pursuant to their terms).
In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Registrable Securities of
each Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
14.15 Amendment of Registration Rights. Any provision of this
Section 14 may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Grantees
that hold at least seventy-five percent (75%) of the Registrable Securities then
outstanding (determined as provided in Section 14.02(d)). Any amendment or
waiver effected in accordance with this Section 14.14 shall be binding upon each
Grantee, each future Grantee that holds Registrable Securities and the Company.
14.16 Termination of Registration Rights. The rights of any
particular Grantee to cause the Company to register securities under Sections
14.04 and 14.10 hereof shall terminate as to any Grantee on the date such
Grantee is able to dispose of all of its Registrable Securities in any 90-day
period pursuant to Rule 144 (or any similar or analogous rule promulgated under
the Securities Act); provided, however, that such rights shall not terminate
with respect to any Grantee owning more than two percent (2%) of the Company's
outstanding Common Stock of the Company until such time as such Grantee owns
less than two percent (2%) of the outstanding Common Stock of the Company.
Section 15. MISCELLANEOUS.
15.01 Waiver. No failure on the part of any Holder to exercise
and no delay in exercising, and no course of dealing with respect to, any right,
power or privilege under this Agreement shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege under this
Agreement preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law.
15.02 Notices. All notices and other communications provided
for herein and the Warrants (including, without limitation, any modifications
of, or waivers or consents under, this Agreement) shall be given or made in
writing (including, without limitation, by telecopy), if to (a) any party
hereto, delivered to the intended recipient at the "Address for Notices"
specified below its name on the signature pages hereof; or, as to any party, at
such other address as shall be designated by such party in a written notice to
each other party, or (b) any other Person who is the registered Holder of any
Warrants or Warrant Stock, to the address for such Holder as it
47
-43-
appears in the stock or warrant ledger of the Company. Except as otherwise
provided in this Agreement, all such communications shall be deemed to have been
duly given when transmitted by telecopier or personally delivered, or, in the
case of a mailed notice, upon receipt, in each case given or addressed as
aforesaid. The Company agrees to deliver to each Holder in the manner prescribed
by this Section 15.02 any notices or other communications delivered to the
stockholders of the Company.
15.03 Office of the Company. So long as any of the Warrants
remains outstanding, the Company shall maintain an office in the continental
United States of America where the Warrants may be presented for exercise,
transfer, division or combination provided herein and in the Warrants. Such
office shall be at ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ unless and until the
Company shall designate and maintain some other office for such purposes and
give notice thereof to all Holders.
15.04 Expenses, Transfer Taxes and Other Charges.
(a) Expenses, Etc. The Company agrees to pay or reimburse each
of the Initial Holders for paying: (i) all reasonable out-of-pocket costs and
expenses of the Initial Holders (including, without limitation, the reasonable
fees and expenses of Milbank, Tweed, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
and ▇▇▇▇▇▇▇▇), in connection with (x) the negotiation, preparation, execution
and delivery of this Agreement and the issuance of Warrants hereunder and (y)
any amendment, modification or waiver of any of the terms of this Agreement or
the Warrants; and (ii) all reasonable fees, costs and expenses of the Initial
Holders (including reasonable fees of a single counsel appointed by the Majority
Holders) in connection with any default by the Company hereunder or under any
Warrant or in connection with any enforcement action or other proceedings
relating hereto or thereto (including, without limitation, the enforcement of
this Section 15.04).
(b) Certain Taxes, Etc. Except as otherwise provided in
Section 15.04(c), the Company shall pay all taxes (other than Federal, state or
local income taxes) which may be payable in connection with the execution and
delivery of this Agreement or the issuance and sale of the Warrants hereunder or
in connection with any modification of this Agreement or the Warrants and shall
hold each Holder harmless without limitation as to time against any and all
liabilities with respect to all such taxes. The obligations of the Company under
this Section 15.04(b) shall survive any redemption, repurchase or acquisition of
Warrants by the Company and the termination of this Agreement.
(c) Transfer Taxes, Etc. The Company shall pay any and all
expenses, transfer taxes and other charges, including all costs associated with
the preparation, issue and delivery of stock or warrant certificates, that are
incurred in respect of the issuance or delivery of shares of Common Stock upon
exercise or conversion of the Warrants pursuant to Section 2 thereof or in
connection with any transfer, division or combination of Warrants pursuant to
Section 3 thereof. The Company shall not, however, be required to pay any tax
which may be payable in respect of any transfer involved in the issue and
delivery of shares of Common Stock in a name other than that in which the
relevant Warrant is registered, and no such issue or delivery shall be made
unless and until the Person requesting such issue has paid to the Company the
amount of any such tax, or has established, to the satisfaction of the Company,
that such tax has been paid.
48
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15.05 Amendments, Etc. Except as otherwise expressly provided
in this Agreement, any provision of this Agreement may be amended or modified
only by an instrument in writing signed by the Company and the Holders of at
least 66 2/3% of the Warrant Stock (including Warrant Stock issuable on exercise
of Warrants); provided that (a) the consent of the Holders shall not be required
with respect to any amendment or waiver which does not affect the rights or
benefits of such Holders under this Agreement, (b) the consent of the Holders of
Registrable Securities shall be required with respect to any amendment or waiver
of Section 14, and (c) no such amendment or waiver shall, without the written
consent of all Holders of Warrant Stock (including Warrant Stock issuable on
exercise of Warrants) at the time outstanding, amend this Section 15.05.
15.06 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
15.07 Survival. All representations and warranties made by the
Company herein or in any certificate or other instrument delivered by it or on
its behalf under this Agreement shall be considered to have been relied upon by
each Initial Holder and shall survive the execution and delivery of this
Agreement and the issuance of the Warrants or the Warrant Stock regardless of
any investigation made by or on behalf of any Initial Holder. All
representations and warranties made by the Initial Holders set forth in Section
2.03 herein shall be considered to have been relied upon by the Company and
shall survive the execution and delivery of this Agreement and the issuance to
the Initial Holders of the Warrants, the Warrant Stock and any Other Securities
regardless of any investigation made by or on behalf of the Company.
15.08 Captions. The captions and section headings appearing
herein are included solely for convenience of reference and are not intended to
affect the interpretation of any provision of this Agreement.
15.09 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.
15.10 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal law of the State of New York.
15.11 Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
15.12 Entire Agreement. This Agreement supersedes all prior
discussions and agreements between the parties with respect to the subject
matter hereof, and (together with the Warrants) contains the sole and entire
agreement among the parties hereto with respect to the subject matter hereof.
15.13 No Third Party Beneficiary. The terms and provisions of
this Agreement are intended solely for the benefit of each party hereto, their
respective successors and permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights upon any
49
-45-
other Person other than any Person entitled to indemnification under Sections
13.07 or 14.07 herein.
15.14 Specific Performance. Damages in the event of breach of
this Agreement by a Holder or the Company would be difficult, if not impossible,
to ascertain, and it is therefore agreed that each Holder and the Company, in
addition to and without limiting any other remedy or right it may have, will
have the right to an injunction or other equitable relief in any court of
competent jurisdiction, enjoining any such breach, and enforcing specifically
the terms and provisions hereof, and each Holder and the Company hereby waives
any and all defenses it may have on the ground of lack of jurisdiction or
competence of the court to grant such an injunction or other equitable relief.
The existence of this right will not preclude the Holders or the Company from
pursuing any other rights and remedies at law or in equity which the Holders or
the Company may have.
15.15 Waiver of Jury Trial. EACH OF THE PARTIES HERETO
IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO TRAIL BY JURY IN ANY LEGAL
OR EQUITABLE ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT, ANY OTHER RELEVANT DOCUMENT OR THE WARRANTS OR ANY TRANSACTION
CONTEMPLATED HEREBY OR THEREBY OR THE SUBJECT MATTER OF ANY OF THE FOREGOING.
50
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
THE PRINCETON REVIEW, INC.
By /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
____________________
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Chief Executive Officer
Address for Notices:
THE PRINCETON REVIEW, INC.
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chief Executive Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Patterson, Belknap, ▇▇▇▇ & Tyler LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
RESERVOIR CAPITAL PARTNERS, L.P.,
By: Reservoir Capital Group, L.L.C.,
General Partner
By /s/ ▇▇▇▇▇ ▇▇▇▇
_____________________________________
Name: ▇▇▇▇▇ ▇▇▇▇
Title: Managing Director
51
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RESERVOIR CAPITAL ASSOCIATES L.P.
By: Reservoir Capital Group, L.L.C.,
General Partner
By /s/ ▇▇▇▇▇ ▇▇▇▇
_____________________________________
Name: ▇▇▇▇▇ ▇▇▇▇
Title: Managing Director
RESERVOIR CAPITAL MASTER FUND, L.P.
By: Reservoir Capital Group, L.L.C.,
General Partner
By /s/ ▇▇▇▇▇ ▇▇▇▇
_____________________________________
Name: ▇▇▇▇▇ ▇▇▇▇
Title: Managing Director
Addresses for Notices:
RESERVOIR CAPITAL PARTNERS, L.P.
RESERVOIR CAPITAL ASSOCIATES L.P.
RESERVOIR CAPITAL MASTER FUND, L.P.
c/o Reservoir Capital Group, L.L.C.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Milbank, Tweed, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
52
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SGC PARTNERS II, LLC
By: SG Merchant Banking Fund L.P., its
Managing member
By: SG Capital Partners L.L.C., its
general partner
By /s/ V. ▇▇▇▇▇ ▇▇▇▇▇▇
_____________________________________
Name: V. ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Managing Director
OLYMPUS GROWTH FUND III, L.P.
By: OGP III, LLC, its general partner
By /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
_____________________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: Member
OLYMPUS EXECUTIVE FUND, L.P.
By: OEF, L.P., its general partner
By: LJM, L.L.C., a general partner
By /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
_____________________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: Member
53
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SCHEDULE 1
WARRANTS TO BE ISSUED TO THE INITIAL HOLDERS
COLUMN A COLUMN B COLUMN C
-------- -------- --------
Warrants Exercisable Warrants Exercisable
Name of Warrants Exercisable if Loan Outstanding if Loan Outstanding
Initial Holder Immediately Upon First Anniversary Upon Second Anniversary
-------------- ---------------------- ----------------------- -----------------------
Reservoir Capital Partners,
L.P. 128,145 140,960 205,032
Reservoir Capital Master
Fund, L.P. 21,540 23,694 34,464
Reservoir Capital Associates
L.P. 315 346 504
SGC Partners II, LLC 50,000 55,000 80,000
LLC Olympus Growth Fund III,
L.P. 49,670 54,637 79,472
Olympus Executive Fund, L.P.
330 363 528
TOTAL 250,000 Stock Units 275,000 Stock Units 400,000 Stock Units
=================== =================== ===================
54
ANNEX 1 TO
WARRANT AGREEMENT
[Form of Warrant]
WARRANT
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, AND ACCORDINGLY, SUCH SECURITIES
MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT IN
COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION PROVISIONS OF
APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS
THEREFROM.
THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO THE CONDITIONS SPECIFIED IN THAT CERTAIN WARRANT AGREEMENT
DATED AS OF DECEMBER [___], 2000, BETWEEN THE PRINCETON REVIEW, INC.,
A DELAWARE CORPORATION, AND CERTAIN HOLDERS, AS SUCH WARRANT
AGREEMENT MAY BE MODIFIED AND SUPPLEMENTED AND IN EFFECT FROM TIME TO
TIME, AND NO TRANSFER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE
BEEN FULFILLED. A COPY OF THE FORM OF SUCH WARRANT AGREEMENT IS ON
FILE AND MAY BE INSPECTED AT THE PRINCIPAL EXECUTIVE OFFICE OF THE
AFORESAID CORPORATION. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE
OF THIS CERTIFICATE, AGREES TO BE BOUND BY THE PROVISIONS OF SUCH
WARRANT AGREEMENT.
No. of Stock Units: Warrant No.
---- ---
WARRANT
to Purchase Shares of Class A Common Stock of
THE PRINCETON REVIEW, INC.
THIS IS TO CERTIFY THAT [NAME OF INITIAL HOLDER], or its registered
assigns, is entitled to purchase in whole or in part from THE PRINCETON REVIEW,
INC., a Delaware corporation (the "Company"), at any time and from time to time
on or after the Commencement Date (as defined below), but not later than 5:00
p.m., New York City time, on December [__], 2003 (the "Expiration Date"), [__]
Stock Units (as defined in the Warrant Agreement referred to below) at a
purchase price of $0.01 per Stock Unit (the "Exercise Price");
55
-2-
provided, that such purchase price shall not be less than the aggregate par
value of the capital stock contained in a Stock Unit, subject to the terms and
conditions set forth herein and in the Warrant Agreement, each such purchase of
a Stock Unit to be made, and to be deemed effective for the purpose of
determining the date of exercise, only upon surrender of this Warrant to the
Company at its office referred to in Section 15.03 of the Warrant Agreement,
with the Form of Exercise attached hereto (or a reasonable facsimile thereof)
duly completed and signed, and upon payment in full to the Company of the
Exercise Price (i) in cash or (ii) by certified or official bank check or (iii)
by any combination of the foregoing, all as provided in the Warrant Agreement
and upon compliance with and subject to the conditions set forth herein and in
the Warrant Agreement.
For the purposes of this Warrant, the "Commencement Date"
shall be the [[first/second] anniversary of] the date hereof[; provided, that
any amount owing by the Company pursuant to the terms of the Loan Agreement (as
defined in the Warrant Agreement) remains outstanding on such anniversary. If no
such amount remains outstanding under the Loan Agreement on such anniversary,
this Warrant shall be cancelled and the Holder shall relinquish all rights
herein.]
On and after the Commencement Date and on or prior to the
Expiration Date, this Warrant may be converted, in whole or in part, at the
Holder's option, and shall on consummation of a Qualified Initial Public
Offering (as defined in the Warrant Agreement be converted, into the number of
shares of Class A Common Stock for each Stock Unit evidenced hereby which is
being so converted, equal to (a)(i) the product of (x) the number of shares of
Common Stock comprising a Stock Unit at the time of such conversion and (y) the
Current Market Price per share of Common Stock at the time of such conversion
minus (ii) the Exercise Price per Stock Unit at the time of such conversion,
divided by (b) the Current Market Price per share of Common Stock at the time of
such conversion, all as provided in the Warrant Agreement and upon compliance
with and subject to the conditions set forth herein and in the Warrant
Agreement.
This Warrant is issued under and in accordance with the
Warrant Agreement dated as of December [__], 2000 between the Company and
certain holders (as the same may be modified and supplemented in accordance with
its terms and as in effect from time to time, the "Warrant Agreement"), and is
subject to the terms and provisions of the Warrant Agreement, which terms and
provisions are hereby incorporated by reference herein and made a part hereof.
Every Holder of this Warrant consents to all of the terms contained in the
Warrant Agreement by acceptance hereof.
The number of shares of Common Stock or other securities
of the Company constituting one "Stock Unit" are subject to adjustment in
certain events as provided in the Warrant Agreement.
The Company shall not be required to issue a fractional
share of Common Stock upon exercise of this Warrant. As to any fraction of a
share which the Holder hereof would otherwise be entitled to purchase upon such
exercise, the Company may pay a cash adjustment in respect of such final
fraction in an amount equal to the same fraction of the
▇▇
-▇-
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Price per share of Common Stock on the date of exercise or may be
round up to the next whole number of shares.
This Warrant may be exchanged either separately or in
combination with other Warrants at the office of the Company referred to in
Section 15.03 of the Warrant Agreement for new Warrants representing the same
aggregate number of Warrants evidenced by the Warrant or Warrants exchanged,
upon surrender of this and any other Warrant being exchanged and upon compliance
with and subject to the conditions set forth herein and in the Warrant
Agreement.
The Warrants and the Warrant Stock shall be transferable
only upon compliance with the conditions specified in Sections 4 and 5 of the
Warrant Agreement, which conditions are intended, among other things, to ensure
compliance with the provisions of the Securities Act in respect of the transfer
of any Warrant or any Warrant Stock, and any Holder hereof shall be bound by the
provisions of (and entitled to the benefits of) said Sections 4 and 5. Upon any
such transfer effected in compliance with said Sections 4 and 5, a new Warrant
or new Warrants of different denominations, representing in the aggregate a like
number of Warrants, will be issued to the transferee. Every Holder hereof, by
accepting this Warrant, consents and agrees with the Company and with every
subsequent Holder of this Warrant that until due presentation for the
registration of transfer of this Warrant on the Warrant register maintained by
the Company, the Company may deem and treat the Person in whose name this
Warrant is registered as the absolute and lawful owner for all purposes
whatsoever and the Company shall not be affected by any notice to the contrary.
Nothing contained in the Warrant Agreement or in this
Warrant shall be construed as conferring on the holder of any Warrants or his or
her transferee any rights whatsoever as a stockholder of the Company.
No provision hereof, in the absence of affirmative action
by the Holder hereof to purchase shares of Common Stock, and no mere enumeration
herein of the rights or privileges of such Holder, shall give rise to any
liability of such Holder for the Exercise Price or as a Stockholder of the
Company, whether such liability is asserted by the Company, by any creditor of
the Company or any other Person.
Any notices and other communications pursuant to the
provisions hereof shall be sent in accordance with Section 15.02 of the Warrant
Agreement.
This Warrant shall be deemed a contract made under the
laws of the State of New York and for all purposes shall be construed in
accordance with the laws of the State of New York without giving effect to the
principles of conflicts of laws thereof.
Each term used herein without definition shall have the
meaning assigned thereto in the Warrant Agreement.
57
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IN WITNESS WHEREOF, the Company has duly executed this
Warrant.
Dated: _________ __, 2000
THE PRINCETON REVIEW, INC.
By___________________________
Name:
Title:
58
FORM OF EXERCISE
To be executed by the registered holder hereof) The
undersigned registered owner of this Warrant hereby
SELECT ONE OF THE FOLLOWING TWO CHOICES:
[irrevocably exercises this Warrant for the purchase of Stock Units
of THE PRINCETON REVIEW, INC., a Delaware corporation, and herewith
makes payment therefor in the amount of $_____________, all at the
price and on the terms and conditions specified in this Warrant,]
OR
[irrevocably converts this Warrant into shares of Class A Common
Stock of THE PRINCETON REVIEW, INC., a Delaware corporation, all in
the manner and on the terms and conditions specified in this
Warrant,]
and requests that (i) certificates and/or other instruments covering such Stock
Units be issued in accordance with the instructions given below and (ii) if such
Stock Units shall not include all of the Stock Units to which the Holder is
entitled under this Warrant, that a new Warrant of like tenor and date for the
balance of the Stock Units issuable hereunder be delivered to the undersigned.
By signing below, each of the undersigned hereby (I) acknowledges that it as
received a copy of the Stockholders Agreement, dated April 11, 2000, by and
among the PRINCETON REVIEW, INC. and its stockholders and agrees that, upon
issuance of the Stock Units, it will automatically and without further action on
its part or on the part of the Company become an Additional Stockholder under
the Stockholder Agreement, subject to the terms of the Warrant Agreement.
Dated: ___________, ____
__________________________________
(Signature of Registered Holder)
59
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Instructions for issuance and registration of Stock Units:
Name of Registered Holder:____________________________________________
(Please print)
Social Security or Other Identifying Number:__________________________
Please deliver certificate to the following address:
__________________________________
__________________________________
__________________________________
60
FORM OF ASSIGNMENT
FOR VALUE RECEIVED the undersigned registered owner of this
Warrant hereby sells, assigns and transfers unto the assignee named below all
the rights of the undersigned under this Warrant with respect to the number of
Stock Units covered thereby set forth hereinbelow unto:
Number of
Name of Assignee Address Stock Units
---------------- ------- -----------
Dated:__________________
______________________________
Signature of Registered Holder
______________________________
Name of Registered Holder
(Please Print)
Witness:
_____________________________
61
ANNEX 2 TO
WARRANT AGREEMENT
JOINDER AGREEMENT
JOINDER AGREEMENT, dated the date set forth below, between The
Princeton Review, Inc., a Delaware corporation (the "Company") and the
undersigned stockholder of the Company.
A. Reference is made to the Warrant Agreement, dated as of December
[__], 2000 (the "Warrant Agreement"), by and among the Company and each of
investors listed on the signature page thereto. Terms used by not defined herein
shall have the meanings as are set forth in the Warrant Agreement.
[B. Section 2.02(d) of the Warrant Agreement provides that ▇▇▇▇ ▇.
▇▇▇▇▇▇▇, shall execute and deliver to the Company and the Initial Holders this
Joinder Agreement.]
[B. Pursuant to Section 7.01(a) and the definition of "Permitted
Transfer" under the Warrant Agreement certain transferees of shares of Common
Stock are required to execute and deliver to the Company and each Holder this
Joinder Agreement.]
In consideration of the foregoing and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
undersigned hereby agrees that:
1. The undersigned acknowledges receipt of a copy of the Warrant
Agreement.
2. The undersigned hereby agrees to be bound by the provisions of
Section 7 of the Warrant Agreement.
62
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IN WITNESS WHEREOF, the undersigned has signed this Joinder Agreement
on the date set forth below.
Date: ______________ [_________________]
By____________________
Title:
AGREED AND ACCEPTED:
THE PRINCETON REVIEW, INC. Date: ____________
By____________________
Title: