EXECUTION COPY
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STOCKHOLDERS' AGREEMENT
dated as of
October 26, 1999
among
Caliber Learning Network, Inc.,
Xxxxxxx US Discovery Fund III, L.P.,
Xxxxxxx US Discovery Offshore Fund III, L.P.,
Xxxxxx Xxxxxxx Nominees Limited
and
Xxxxx X. Xxxxxx
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STOCKHOLDERS' AGREEMENT
This STOCKHOLDERS' AGREEMENT is dated as of October 26, 1999,
among Caliber Learning Network, Inc., a Maryland corporation (the "Company"),
Xxxxx X. Xxxxxx ("Xxxxxx"), Xxxxxxx US Discovery Fund III, L.P., Xxxxxxx US
Discovery Offshore Fund III, L.P. and Xxxxxx Xxxxxxx Nominees Limited
(collectively, the "Xxxxxxx Funds"). The Xxxxxxx Funds, any Xxxxxxx Holder and
any Transferee are collectively referred to herein as the "Investor Group" and,
individually, an "Investor."
W I T N E S S E T H:
WHEREAS, pursuant to the terms of the Stock Purchase
Agreements, dated as of October 26, 1999, between the Company and each of the
Xxxxxxx Funds (the "Stock Purchase Agreements"), the Xxxxxxx Funds have
purchased an aggregate of 150,000 shares (the "Shares") of the Company's Series
A Convertible Preferred Stock, par value $.01 per share (the "Series A
Preferred"), convertible into shares of the Company's Common Stock (the
"Conversion Shares");
WHEREAS, Xxxxxx beneficially owns (i) 262,805 shares of Common
Stock, and (ii) options including, but not limited to, options exercisable
within 60 days, and rights to purchase 209,032 shares of Common Stock, which
constitute, on an as-converted basis, approximately 3.82% of the outstanding
shares of Common Stock (such shares, along with any shares of Common Stock or
other equity securities of the Company that Xxxxxx may subsequently acquire, the
"Xxxxxx Shares");
WHEREAS, it is a condition precedent to the Company's and the
Xxxxxxx Funds' respective obligations to consummate the transactions
contemplated by the Stock Purchase Agreements that the parties hereto shall have
entered into this Agreement; and
WHEREAS, each of Xxxxxx, the Company and the Xxxxxxx Funds
desires to enter into this Agreement to regulate certain aspects of their
relationship;
NOW, THEREFORE, in consideration of the arguments and mutual
covenants contained herein, the parties hereto hereby agree as follows:
1. Rights of Inclusion (Tag-Along Rights).
So long as the Xxxxxxx Holders hold at least 25% of the Conversion
Shares issuable on the Closing Date, calculating the Shares on an as-converted
basis (to be appropriately adjusted to reflect any stock split, stock dividend,
recapitalization or similar event):
(a) In the event Xxxxxx proposes to Transfer any Xxxxxx Shares
(the "Transferor Shares") to any Person (the "Buyer"), as a condition to such
Transfer, Xxxxxx shall cause the Buyer to offer (the "Inclusion Offer") to
purchase from each Xxxxxxx Holder, at each such Xxxxxxx Holder's option, up to
that number of Xxxxxxx Holder Shares determined in accordance with Section 1(b)
on the same terms and conditions as are applicable to the Transferor Shares,
except that each Xxxxxxx Holder shall not be required to provide any
representation, warranty or other undertaking other than with respect to its
ownership of, and authority to Transfer, the Xxxxxxx Holder Shares owned by it
free of any liens or encumbrances. Xxxxxx shall provide prompt written notice to
each Xxxxxxx Holder (the "Inclusion Notice") setting forth all the terms and
conditions of the Inclusion Offer, and each Xxxxxxx Holder may accept the
Inclusion Offer in whole or in part by providing a written notice of acceptance
with respect to Xxxxxxx Holder Shares owned by it to Xxxxxx within twenty (20)
days of delivery of the Inclusion Notice to it (the "Acceptance Notice").
(b) Each Xxxxxxx Holder shall have the right to sell, pursuant
to the Inclusion Offer, Xxxxxxx Holder Shares representing the same percentage
of all Xxxxxxx Holder Shares owned by it as the Transferor Shares are of all
Xxxxxx Shares owned by Xxxxxx (such percentage shall be calculated on the basis
that all shares of Series A Preferred owned by each Xxxxxxx Holder have been
converted into shares of Common Stock at the current conversion price per share
under Section 4 of the Articles Supplementary); provided, however, that if no
Xxxxxxx Holder elects to exercise such right, Xxxxxx shall nonetheless be
entitled to Transfer all or any portion of the Transferor Shares described in
the Inclusion Notice. In the event the number of Xxxxxxx Holder Shares for which
the Xxxxxxx Holders elects to exercise such right, along with the Transferor
Shares and any other shares of the Company to be sold by other stockholders
pursuant to any similar rights granted to such other stockholders, exceed the
number of shares which the Buyer is willing to purchase, the number of shares to
be Transferred to the Buyer by each transferor shall be reduced so that each
transferor is entitled to Transfer the same percentage of its shares included in
its Acceptance Notice as each other transferor. If a Xxxxxxx Holder elects to
exercise such right, such Xxxxxxx Holder may, in its sole discretion, determine
the composition of the Xxxxxxx Holder Shares (i.e., the number of the shares of
Series A Preferred and Common Stock to be included in the Xxxxxxx Holder Shares)
to be Transferred by it to the Buyer pursuant to the Inclusion Offer. In the
event that any Xxxxxxx Holder chooses to include any shares of Series A
Preferred in the Xxxxxxx Holder Shares to be Transferred by it to the Buyer
pursuant to the Inclusion Offer, any such Xxxxxxx Holder shall, prior to or
simultaneously with such Transfer, convert such shares of Series A Preferred
into shares of Common Stock so that each Xxxxxxx Holder Transfers only Common
Stock to the Buyer.
(c) Xxxxxx shall have ninety (90) days, commencing on the date
of the Inclusion Notice, in which to Transfer, on behalf of himself and the
Xxxxxxx Holders up to the number of shares covered by the Inclusion Offer
(including the Transferor Shares) to the Buyer. The terms of such Transfer,
including, without limitation, price and form of consideration, shall be as set
forth in the Inclusion Notice. If at the end of such ninety (90) day period has
not completed the Transfer of the Transferor Shares and the Xxxxxxx Holder
Shares (if any) proposed to be Transferred, Xxxxxx may not proceed with such
Transfer or any other Transfer without first giving a new Inclusion Notice
pursuant to the provisions of this Section 1.
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(d) If Xxxxxx is able to complete the Transfer of the
Transferor Shares and the Xxxxxxx Holder Shares (if any) proposed to be
Transferred within such ninety (90) day period, at the closing thereof, each
Xxxxxxx Holder shall deliver to the Buyer a certificate or certificates
representing the Xxxxxxx Holder Shares owned by it to be Transferred pursuant to
the Inclusion Offer, free and clear of all liens and encumbrances, and the Buyer
shall pay to each such Xxxxxxx Holder the purchase price for the Xxxxxxx Holder
Shares so Transferred pursuant to this Section 1 and shall furnish such other
evidence of the completion of such Transfer and the terms thereof as may be
reasonably requested by the Xxxxxxx Holders.
(e) The provisions of this Section 1 shall not apply to any
Transfer or proposed Transfer by Xxxxxx of Xxxxxx Shares which represents twelve
and one-half percent (12.5%) or less of the Xxxxxx Shares held by Xxxxxx on the
Closing Date (as defined in the Stock Purchase Agreements) if such Transfer or
proposed Transfer by Xxxxxx of Xxxxxx Shares, together with all other Transfers
by Xxxxxx of Xxxxxx Shares on or in the four years prior to the date of such
Transfer, represent twenty-five percent (25%) or less of the Xxxxxx Shares held
by Xxxxxx on the Closing Date, with Xxxxxx Shares held by Xxxxxx on the Closing
Date to be appropriately adjusted to reflect any stock split, stock dividend,
recapitalization or similar event; provided, however, that each Transfer of
Xxxxxx Shares that takes place within one year of any other Transfer to the same
Person or any Affiliate of such Person shall be aggregated for purposes of such
twelve and one-half percent (12.5%) threshold. In the event that Xxxxxx desires
to exercise an option to purchase shares of Common Stock of the Company, then
Xxxxxx may Transfer Xxxxxx Shares to the extent necessary to obtain the funds to
exercise such option and such Transfer shall not be included in the calculation
of the percentages in this Section 1(e).
(f) The provisions of this Section 1 shall only apply to
Xxxxxx so long as Xxxxxx is an executive officer of the Company at the time of
any proposed Transfer.
(g) Xxxxxx shall not Transfer any Xxxxxx Shares to any Person
in a public sale except pursuant to the terms and conditions of Section 1(e)
hereof.
(h) The provisions of this Section 1 shall not apply to any
Xxxxxx Shares Xxxxxx Transfers to any trust which is established solely for the
benefit of the spouse or any lineal ancestor or descendant (including by
adoption and stepchildren) of Xxxxxx and whose terms are not inconsistent with
the terms of this Agreement.
2. Board Observer Rights; Committees.
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(a) So long as 50% of the Shares are outstanding, the Company
agrees with the Xxxxxxx Funds that the Xxxxxxx Holders (or if no shares of
Series A Preferred are held by a Xxxxxxx Holder, any Transferee, shall have the
right to have one (1) representative (the "Xxxxxxx Observer") attend and
participate in meetings of the Company's Board of Directors, or any committee
thereof, and the Company shall permit the Xxxxxxx Observer to attend and
participate in all such meetings as an observer; provided that during such time
that the holders of the Series A Preferred have elected one director to the
Company's Board of Directors (or have waived their right to so elect such
director) pursuant to Section 3 of the Company's Articles Supplementary with
respect to the Series A Preferred (the "Investor Director"), the Xxxxxxx Holders
or the Transferee, as the case may be, shall not have the right to have a
Xxxxxxx Observer. The Xxxxxxx Observer shall not have the right to vote on any
matter presented to the Board or any committee thereof. The Company shall give
the Xxxxxxx Observer written notice of each meeting of the Board of Directors or
any committee thereof and all written materials and other information given to
the Company's directors and committee members in the same manner and at the same
time such notices, materials and other information are given to the directors
and committee members. The Company shall reimburse the Xxxxxxx Observer for
travel and other expenses in connection with such meetings to the same extent
that the Company reimburses its directors and committee members. If the Board of
Directors or any committee thereof proposes to take any action by written
consent in lieu of a meeting, the Company shall give written notice thereof to
the Xxxxxxx Observer prior to the effective date of such consent describing the
nature and substance of such action.
(b) So long as 50% of the Shares are outstanding, the Company
and Xxxxxx acknowledge that the parties to this Agreement desire that one
Investor Director be appointed to the Executive Committee and the Compensation
Committee of the Company's Board of Directors and at each time the Company's
Board of Directors appoints committee members, agree to use their best efforts
and take any other action necessary or appropriate to ensure such appointment;
provided, however, that the agreements of this paragraph (c) shall terminate
with respect to an Investor Director upon the Xxxxxxx Holders' or the
Transferee's delivery of a written notice to the Company and Xxxxxx to the
effect that such Investor Director need not be appointed to the aforesaid
committees.
3. Definitions.
As used herein, the following terms shall have the respective
meanings set forth below:
"Acceptance Notice" shall have the meaning set forth in
Section 1(a) hereof.
"Affiliate" shall have the meaning given it in Section 3 of
the Stock Purchase Agreements.
"Articles Supplementary" shall have the meaning given it in
Section 1(a) of the Stock Purchase Agreements.
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"Board" or "Board of Directors" shall have the meaning given
it in Section 3 of the Stock Purchase Agreements.
"Buyer" shall have the meaning set forth in Section 1(a)
hereof.
"Capital Stock" means the Common Stock (including, without
limitation, any Common Stock issuable upon conversion of the Series A
Preferred), Series A Preferred and any other class of equity security which the
Company may issue and any securities or other rights convertible, exchangeable
or exercisable for or into any Capital Stock.
"Common Stock" means the Company's Common Stock, par value
$.01 per share.
"Company" shall have the meaning set forth in the first
paragraph hereof.
"Conversion Share" or "Conversion Shares" means the shares of
the Company's Common Stock obtained or obtainable upon conversion of Shares and
shall also include any capital stock or other securities into which such shares
of Common Stock are changed and any capital stock or other securities resulting
from or comprising a reclassification, combination or subdivision of, or a stock
dividend on, any such shares of Common Stock. On the Closing Date the Shares are
convertible into 2,727,273 Conversion Shares.
"Xxxxxxx Funds" shall have the meaning set forth in the first
paragraph hereof.
"Xxxxxxx Holders" means (i) the Xxxxxxx Funds and (ii) any
Affiliate, officer or employee of an Affiliate or investment fund managed by an
Affiliate of the Xxxxxxx Funds, or any successor thereof, to which the Xxxxxxx
Funds may transfer record and/or beneficial ownership of the Shares or the
Conversion Shares.
"Xxxxxxx Holder Shares" means all Series A Preferred and
Common Stock owned by the Xxxxxxx Holders.
"Xxxxxxx Observer" shall have the meaning set forth in Section
2(a) hereof.
"Fully Diluted Basis" means, with respect to the calculation
of the number of shares of Capital Stock, as of each date of determination
thereof, (i) all shares of Capital Stock outstanding at the time of
determination and (ii) all shares of Capital Stock issuable upon the exchange,
exercise or conversion of any security or other right (other than any Capital
Stock) then outstanding which is exchangeable, exercisable or convertible into
Capital Stock.
"Inclusion Notice" shall have the meaning set forth in Section
1(a) hereof.
"Inclusion Offer" shall have the meaning set forth in Section
1(a) hereof.
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"Investor" shall have the meaning set forth in the first
paragraph hereof.
"Investor Director" shall have the meaning set forth in
Section 2(b) hereof.
"Investor Group" shall have the meaning set forth in the first
paragraph hereof.
"Xxxxxx" shall have the meaning set forth in the first
paragraph hereof.
"Xxxxxx Shares" shall have the meaning set forth in the second
WHEREAS clause hereof.
"Person" means an individual, corporation, partnership, firm,
association, joint venture, trust, unincorporated organization, governmental
body, agency, political subdivision or other entity.
"Pro Rata" means with respect to a stockholder, in proportion
to the number of shares of Capital Stock on a Fully Diluted Basis owned by such
stockholder.
"Series A Preferred" shall have the meaning set forth in the
first WHEREAS clause hereof.
"Shares" has the meaning set forth in the first WHEREAS clause
hereof.
"Stock Purchase Agreements" shall have the meaning set forth
in the first WHEREAS clause hereof.
"Transfer" means, with respect to any security, any direct or
indirect sale, transfer, assignment, hypothecation, pledge or any other
disposition of such security or any interest therein.
"Transferee" shall have the meaning given it in Section 3 of
the Stock Purchase Agreements.
"Transferor Shares" shall have the meaning set forth in
Section 1(a) hereof.
4. Miscellaneous.
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(a) In the event of a breach by any party to this Agreement of
its obligations under this Agreement, any party injured by such breach, in
addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under this Agreement. The parties agree that the provisions of this Agreement
shall be specifically enforceable, it being agreed by the parties that the
remedy at law, including monetary damages, for breach of any such provision will
be inadequate compensation for any loss and that any defense in any action for
specific performance that a remedy at law would be adequate is waived.
(b) Except as otherwise provided herein, no modification,
amendment or waiver of any provision of this Agreement will be effective against
any party hereto unless such modification, amendment or waiver is approved in
writing by all parties hereto. The failure of any party to enforce any of the
provisions of this Agreement will in no way be construed as a waiver of such
provisions and will not affect the right of such party thereafter to enforce
each and every provision of this Agreement in accordance with its terms.
(c) All covenants and agreements in this Agreement by or on
behalf of any of the parties hereto will bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether so expressed or
not.
(d) All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally or by facsimile transmission or sent by nationally recognized
overnight courier service to the parties at the following addresses or facsimile
numbers:
(i) If to an Investor, to:
the address indicated on Schedule 1 to the Stock
Purchase Agreements.
with a copy to:
Xxxxxx, Xxxxx & Xxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxx X. Xxxxxx, Esq.
(ii) If to the Company, to:
Caliber Learning Network, Inc.
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attention: Xxxx X. Xxxxx
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with a copy to:
Piper & Marbury L.L.P.
00 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxx, Xx., Esq.
(iii) If to Xxxxxx, to:
Xxxxx X. Xxxxxx
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
All such notices, requests and other communications will (x)
if delivered personally to the address as provided in this Section 4(d), be
deemed given upon delivery, (y) if delivered by facsimile transmission to the
facsimile number as provided in this Section 4(d), be deemed given upon receipt
and (z) if delivered by nationally recognized overnight courier service in the
manner described above to the address as provided in this Section 4(d), be
deemed given on the business day following the day it was sent (in each case
regardless of whether such notice, request or other communication is received by
any other Person to whom a copy of such notice is to be delivered pursuant to
this Section 4(d)). Any party from time to time may change its address,
facsimile number or other information for the purpose of notices to that party
by giving notice specifying such change to the other parties hereto.
(e) The headings used in this Agreement have been inserted for
convenience of reference only and do not define or limit the provisions hereof.
(f) If any provision of this Agreement is held to be illegal,
invalid or unenforceable, and if the rights or obligations of any party hereto
under this Agreement will not be materially and adversely affected thereby, (i)
such provision will be fully severable, (ii) this Agreement will be construed
and enforced as if such illegal, invalid or unenforceable provision had never
comprised a part hereof, (iii) the remaining provisions of this Agreement will
remain in full force and effect and will not be affected by the illegal, invalid
or unenforceable provision or by its severance herefrom and (iv) in lieu of such
illegal, invalid or unenforceable provision, there will be added automatically
as a part of this Agreement a legal, valid and enforceable provision as similar
in terms to such illegal, invalid or unenforceable provision as may be possible.
(g) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to a contract
executed and performed in such State without giving effect to the conflicts of
laws principles thereof.
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(h) This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
[remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties have duly executed this
Stockholders' Agreement as of the date first written above.
CALIBER LEARNING NETWORK, INC.
By: /s/ Xxxxx X. Xxxxxx
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Name: Xxxxx X. Xxxxxx
Title: Chief Executive Officer
With respect to the
obligations contained in
Sections 1, 2(b), 3 and 4
hereof only:
/s/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx
XXXXXXX US DISCOVERY FUND III, L.P.
By: XXXXXXX US DISCOVERY
PARTNERS, L.P.,
its general partner
By: XXXXXXX US DISCOVERY, LLC,
its general partner
By: /s/ Xxxxxx X. Xxxx
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Xxxxxx X. Xxxx, member
XXXXXXX US DISCOVERY OFFSHORE
FUND III, L.P.
By: XXXXXXX US DISCOVERY
PARTNERS, L.P.,
its general partner
By: XXXXXXX US DISCOVERY, LLC,
its general partner
By: /s/ Xxxxxx X. Xxxx
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Xxxxxx X. Xxxx, member
XXXXXX XXXXXXX NOMINEES LIMITED
By: /s/
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