EXECUTION COPY
Exhibit 10.48
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NOBEL LEARNING COMMUNITIES, INC.
SERIES F CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT
DATED AS OF
SEPTEMBER 9, 2003
FUNDS PROVIDED BY
CAMDEN PARTNERS STRATEGIC FUND II-A, L.P.
CAMDEN PARTNERS STRATEGIC FUND II-B, L.P.
ALLIED CAPITAL CORPORATION
MOLLUSK HOLDINGS, LLC
BLESBOK, LLC
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TABLE OF CONTENTS
ARTICLE I AUTHORIZATION AND SALE OF SERIES F
PREFERRED STOCK ............................................... 1
1.1 Authorization of Series F Preferred Stock .............. 1
1.2 Sale of Series F Preferred Stock ....................... 1
1.3 Proceeds ............................................... 1
1.4 Closing ................................................ 1
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY .......... 2
2.1 Organization ........................................... 2
2.2 Qualification .......................................... 3
2.3 Power and Authority .................................... 3
2.4 Enforceability ......................................... 3
2.5 Orders; Decrees; Judgments ............................. 3
2.6 Non-Contravention ...................................... 3
2.7 Company's Business ..................................... 4
2.8 Title .................................................. 4
2.9 Taxes .................................................. 4
2.10 SEC Filings; Financial Condition ....................... 4
2.11 Absence of Certain Changes or Events ................... 5
2.12 Absence of Litigation ................................. 6
2.13 Material Contracts ..................................... 7
2.14 Management History ..................................... 8
2.15 Company Affiliates and Subsidiaries .................... 8
2.16 Investment Company Act ................................. 8
2.17 Environmental Legal Compliance ......................... 8
2.18 Employee Benefit Matters ............................... 9
2.19 Employees .............................................. 9
2.20 Transactions with Affiliates ........................... 10
2.21 Insurance .............................................. 10
2.22 Compliance with Laws; Regulatory Approval .............. 10
2.23 Intellectual Property .................................. 11
2.24 Accounting ............................................. 11
2.25 Consents ............................................... 11
2.26 Offering of Shares ..................................... 11
2.27 Status of Shares ....................................... 12
2.28 Disclosure ............................................. 12
2.29 Change of Control ...................................... 12
ARTICLE III REPRESENTATIONS AND WARRANTIES OF INVESTORS ............ 12
3.1 Power and Authority .................................... 12
3.2 Enforceability ......................................... 13
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3.3 Non-Contravention ...................................... 13
3.4 Purchase Entirely for Own Account ...................... 13
3.5 Investment Experience .................................. 13
3.6 Accredited Investor .................................... 13
3.7 Restricted Securities .................................. 13
3.8 Company Information .................................... 14
3.9 Residence .............................................. 14
ARTICLE IV COVENANTS AND OTHER AGREEMENTS ......................... 14
4.1 Transfer of Shares ..................................... 14
4.2 Information Rights ..................................... 15
4.3 Notice of Default ...................................... 16
4.4 Pre-Emptive Rights ..................................... 16
4.5 Insurance .............................................. 18
ARTICLE V CONDITIONS TO CLOSING .................................. 18
5.1 Conditions of Investors' Obligations at Closing ........ 18
5.2 Conditions of the Company's Obligations at Closing ..... 19
ARTICLE VI MISCELLANEOUS .......................................... 19
6.1 Successors and Assigns ................................. 19
6.2 Governing Law .......................................... 19
6.3 Counterparts ........................................... 20
6.4 Titles and Subparts .................................... 20
6.5 Notices ................................................ 20
6.6 Finder's Fee ........................................... 20
6.7 Expenses ............................................... 20
6.8 Amendments and Waivers ................................. 20
6.9 Severability ........................................... 21
6.10 Entire Agreement ....................................... 21
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EXHIBITS
Exhibit "A" Certificate of Designation
Exhibit "B" Disclosure Schedules
Exhibit "C" Form of Legal Opinion of Xxxxxx, Xxxxx & Xxxxxxx LLP
Exhibit "D" Registration Rights Agreement
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SERIES F CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
This SERIES F CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (as the same
from time to time may be amended, supplemented or waived, this "Agreement") is
made as of the 9th day of September, 2003, by and among Nobel Learning
Communities, Inc., a Delaware corporation (the "Company"), Camden Partners
Strategic Fund II-A, L.P., a Delaware limited partnership ("Camden II-A'),
Camden Partners Strategic Fund II-B, L.P., a Delaware limited partnership
("Camden II-B" and together with Camden II-A, "Camden"), Allied Capital
Corporation, a Maryland corporation ("Allied"), Mollusk Holdings, LLC, a
California limited liability company ("Mollusk") and Blesbok, LLC, a Delaware
limited liability company ("Blesbok" and together with Camden, Allied and
Mollusk, the "Investors").
In consideration of the mutual promises and covenants contained in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound
by the terms and conditions of this Agreement, the parties hereto agree as
follows:
ARTICLE I
AUTHORIZATION AND SALE OF SERIES F PREFERRED STOCK
1.1 Authorization of Series F Preferred Stock. The Company has duly
authorized the sale and issuance of up to 800,000 shares of its Series F
Convertible Preferred Stock, $0.001 par value per share (the "Series F Preferred
Stock"), having the rights, restrictions, privileges and preferences set forth
in the Certificate of Designation therefor, a copy of which is attached hereto
as Exhibit "A" (the "Certificate"). The Company has, or on or before the Closing
(as defined below) will have, designated the terms of the Series F Preferred
Stock by filing the Certificate with the Secretary of State of the State of
Delaware.
1.2 Sale of Series F Preferred Stock. Subject to the terms and conditions
of this Agreement, at the Closing the Company shall sell and issue to the
Investors, and each of the Investors, severally and not jointly, shall purchase
from the Company, at a purchase price (the "Purchase Price") of $5.10 per share,
the number of shares of Series F Preferred Stock set forth opposite such
Investor's name on Schedule A hereto and totaling 588,236 shares of Series F
Preferred Stock (the "Shares"), for an aggregate Purchase Price of
$3,000,003.60, payable as set forth in Section 1.4.
1.3 Proceeds. Proceeds from the sale of the Series F Preferred Stock will
be used as set forth in Section 3 to the Fifth Amendment, dated May 23, 2003, to
the Amended and Restated Loan and Security Agreement, dated March 9, 1999, and
for working capital and other general corporate purposes.
1.4 Closing. The closing of the sale and purchase of the Series F
Preferred Stock pursuant to this Agreement (the "Closing") shall take place at
the headquarters of the Company, 0000 Xxxx Xxxxxxx Xxxx, Xxxx Xxxxxxx, XX 00000,
on September 9, 2003, or at such other time, date, and place as are mutually
agreeable to the Company and the Investors. The date of the Closing is
hereinafter referred to as the "Closing Date." At the Closing, the Company shall
deliver to each Investor a certificate representing the number of shares of
Series F Preferred
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Stock set forth opposite such Investor's name on Schedule A hereto registered in
the name of such Investor. At the Closing, the Investors shall pay their
respective purchase price for the Series F Preferred Stock by wire transfer or
other method acceptable to the Company.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as disclosed in the Disclosure Schedules attached hereto as Exhibit
"B" (the "Disclosure Schedules"), the Company represents and warrants to each of
the Investors as follows:
2.1 Organization.
(a) The Company and each of the Company Subsidiaries (as that term
is defined in Section 2.15) is a corporation or other legal entity either duly
organized or formed, as applicable, validly existing and in good standing under
the laws of the jurisdiction of its organization or formation, as applicable.
The Company has heretofore provided or made available to the Investors a
complete and correct copy of the Company's certificate of incorporation and
bylaws, as the same have been amended and supplemented (collectively, the
"Company Constituent Documents"). All of the Company Constituent Documents are
in full force and effect as of the date hereof and the Company is not in
violation of any of the provisions of the Company Constituent Documents.
(b) The authorized capital stock of the Company (immediately prior
to the Closing) consists of (i) 20,000,000 shares of Common Stock, $0.001 par
value per share, of which 6,612,109 shares are issued and outstanding, and (ii)
10,000,000 shares of Preferred Stock, $0.001 par value per share, of which (A)
2,500,000 shares are classified as Series A Convertible Preferred Stock, of
which 1,023,694.11 shares are issued and outstanding, (B) 120,000 shares are
classified as Series A Junior Preferred Stock, of which 120,000 shares are
reserved for issuance (but not issued and outstanding) in connection with that
certain Rights Agreement, dated as of May 16, 2000 (as amended and in effect as
of the date hereof, the "Company Rights Agreement") between the Company and
StockTrans, Inc., a Pennsylvania corporation, as Rights Agent, (C) 2,500,000
shares are classified as Series C Convertible Preferred Stock, of which
2,499,940 shares are issued and outstanding; (D) 1,063,830 shares are classified
as Series D Convertible Preferred Stock, of which 1,063,830 shares are issued
and outstanding; (E) 1,994,445 shares are classified as Series E Convertible
Preferred Stock, of which 1,333,333 shares are issued and outstanding; and (F)
800,000 shares are classified as Series F Convertible Preferred Stock, of which
no shares are issued and outstanding.
(c) All of the issued and outstanding shares of Common Stock and
Preferred Stock have been duly authorized and validly issued and are fully paid
and nonassessable. Except as set forth in Section 2.1 of the Disclosure
Schedules or provided in this Agreement, as of the date hereof, (i) no
subscription, warrant, option, convertible security or other right (contingent
or otherwise) to which the Company is a party to purchase or acquire any shares
of capital stock of the Company is authorized or outstanding, (ii) there is no
commitment of the Company to issue any subscription, warrant, option,
convertible security or other such right or to issue or distribute to holders of
any shares of its capital stock any evidences of indebtedness or assets of the
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Company, and (iii) the Company has no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any shares of its capital stock or any
interest therein or to pay any dividend or make any other distribution in
respect thereof. Except as provided in this Agreement or as disclosed in the
Disclosure Schedules, no person or entity is entitled to (x) any preemptive or
similar right with respect to the issuance of any capital stock of the Company,
or (y) any rights with respect to the registration of any capital stock of the
Company under the Securities Act. All of the issued and outstanding shares of
Common Stock and Preferred Stock have been offered, issued and sold by the
Company in compliance with applicable Federal and state securities laws.
2.2 Qualification. The Company is duly qualified to conduct business as
it is currently being conducted and is in good standing as a foreign corporation
in all jurisdictions in which the nature of its business or location of its
properties require such qualification, except where failure to be so qualified
or in good standing would not reasonably be expected to have a materially
adverse effect on the Company's business or financial condition, and except as
set forth in Section 2.2 of the Disclosure Schedules.
2.3 Power and Authority. The Company has all requisite corporate power
and authority to enter into and deliver this Agreement and the Rights Agreement
(as that term is defined in Section 5.1(e)), and to carry out the provisions of
this Agreement and the Rights Agreement. The Company has taken all corporate
action necessary for the execution and delivery of this Agreement and the Rights
Agreement and for the performance by Company of each of its obligations
hereunder and thereunder, as evidenced by the resolution(s) of the Company's
Board of Directors and the Special Committee thereof.
2.4 Enforceability. Upon execution and delivery by each of the parties
thereto, this Agreement and the Rights Agreement shall be the legal, valid and
binding obligations of the Company, to the extent the Company is a party thereto
and shall be enforceable against the Company in accordance with its respective
terms, except (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally, (b) as limited by laws relating to
the availability of specific performance, injunctive relief, or other equitable
remedies, and (c) to the extent the indemnification provisions contained in the
Rights Agreement may be limited by applicable federal or state securities laws.
2.5 Orders; Decrees; Judgments. Except as set forth in Section 2.5 of the
Disclosure Schedules, there are no outstanding orders, judgments, writs,
injunctions or decrees of any court, government agency or arbitration or
mediation panel or tribunal against or affecting the Company or the Company
Subsidiaries or any of the other properties, assets or business of the Company
or the Company Subsidiaries, except where the same has not had or would not
reasonably be expected to have a materially adverse effect on the Company's
business or financial condition or would not reasonably be expected to prohibit
the Closing.
2.6 Non-Contravention. Except as set forth in Section 2.6 of the
Disclosure Schedules, the Company is not in breach of, default under, or in
violation of: (a) any law, decree, or order of any Government Entity which would
reasonably be expected to materially and adversely affect, individually or in
the aggregate, the Company or the Company Subsidiaries, or (b) any deed, lease,
loan agreement, commitment, bond, note, deed of trust,
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restrictive covenant, license, indenture, contract, or other agreement,
instrument or obligation to which the Company or the Company Subsidiaries are a
party or by which they are bound or to which any of their respective assets are
subject, except where such breach, default or violation would not have a
material and adverse effect, individually or in the aggregate, on the Company's
or the Company Subsidiaries' business or financial condition. Neither the
execution and delivery of this Agreement and the Rights Agreement nor the
performance by the Company of its respective obligations hereunder and
thereunder will cause any such breach, default or violation or will require the
consent or approval of any court, governmental or regulatory agency or body,
except as expressly contemplated by the terms of this Agreement or as set forth
on Section 2.6 of the Disclosure Schedules.
2.7 Company's Business. The Company and the Company Subsidiaries are
primarily engaged in the business of operating educational institutions and
child care facilities.
2.8 Title. Except as described in Section 2.8 of the Disclosure
Schedules, the Company and each of the Company Subsidiaries has good and valid
title to, or, in the case of leased properties and assets, valid leasehold
interests in, all of their respective properties and assets, real, personal and
mixed, owned, used or held for use in its business, free and clear of any liens
except (a) statutory liens, security interests, mortgages, charges or
encumbrances arising out of operation of law with respect to a liability
incurred in the ordinary course of business and which is not delinquent or is
not material, (b) such liens, security interests, mortgages, charges or
encumbrances and other imperfections of title as do not materially detract from
the value or impair the use of the property subject thereto, (c) liens for taxes
not yet subject to penalties for nonpayment of which are being actively
contested in good faith by appropriate proceedings, provided that there are
adequate reserves for any such liens set forth on the face of the Company
Balance Sheet (as that term is defined in Section 2.10(b)), (d) mechanics',
materialmen's, workmen's, warehousemen's, carrier's repairmen's, landlords' or
other like liens and security obligations that are not delinquent or that are
not material, and (e) as reflected in the financial statements contained in the
Company SEC Reports filed and publicly available prior to the date of this
Agreement (the "Filed Company SEC Documents").
2.9 Taxes. Except as set forth in Section 2.9 of the Disclosure
Schedules, the Company has filed all federal, state and local tax returns which
are required to be filed by it, and the Company has duly paid or fully reserved
for all taxes or installments thereof (including any interest or penalties) as
and when due pursuant to the filed returns or pursuant to any levy or assessment
received by the Company. Except as set forth in Section 2.9 of the Disclosure
Schedules, the Company has not: (a) been a partner in a partnership or an owner
of an interest in an entity treated as a partnership for federal income tax
purposes; (b) executed or filed with the Internal Revenue Service any consent to
have the provisions of Section 341(f) of the Internal Revenue Code of 1986, as
amended (the "Code") apply to it; (c) been subject to Section 999 of the Code;
or (d) been a party to any agreement relating to the sharing, allocation or
payment of, or indemnity for, taxes. The Company is not a United States real
property holding corporation as defined in Section 897(c)(2) of the Code.
2.10 SEC Filings; Financial Condition.
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(a) Except as set forth in Section 2.10 of the Disclosure
Schedules, the Company has timely filed all forms, reports and documents
required to be filed by it with the Securities and Exchange Commission (the
"SEC") since June 30, 2000, including (i) all annual reports on Form 10-K, (ii)
all quarterly reports on Form 10-Q, (iii) all proxy statements relating to
meetings of stockholders (whether annual or special), (iv) all reports on Form
8-K, and (v) all other reports or registration statements (collectively, the
"Company SEC Reports"). The Company SEC Reports were, at the time filed,
prepared in all material respects in accordance with the requirements of the
Securities Act of 1933, as amended (the "Securities Act"), the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and in each case the
published rules and regulations of the SEC thereunder, each as applicable to
such Company SEC Reports and did not as of the time they were filed, contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were and will be made, not
misleading. No Company Subsidiary is subject to the periodic reporting
requirements of the Exchange Act. To the knowledge of the Company, there is no
material unresolved violation of the Exchange Act or the published rules and
regulations of the SEC asserted by the SEC with respect to the Company SEC
Reports.
(b) Each of the consolidated financial statements (including, in
each case, any notes thereto) contained in the Company SEC Reports was prepared
in accordance with the published rules and regulations of the SEC and United
States generally accepted accounting principles ("U.S. GAAP") applied on a
consistent basis throughout the periods indicated (except as may be indicated in
the notes thereto or, in the case of unaudited statements, as permitted by Form
10-Q under the Exchange Act) and each fairly presented at the time they were
filed, in all material respects, the consolidated financial position, results of
operations and cash flows of the Company and the consolidated Company
Subsidiaries as at the respective dates thereof and for the respective periods
indicated therein, except as otherwise noted therein (subject, in the case of
unaudited statements, to normal and recurring year-end adjustments which are not
expected to be material, individually or in the aggregate). The balance sheet of
the Company contained in the Company SEC Reports as of March 31, 2003 is
hereinafter referred to as the "Company Balance Sheet".
(c) The Company has heretofore furnished to the Investors a
complete and correct copy of any effective amendments or modifications (which
have not yet been filed with the SEC but which are required to be filed) to
agreements, documents or other instruments which previously had been filed by
the Company with the SEC pursuant to the Securities Act or the Exchange Act.
2.11 Absence of Certain Changes or Events. Except as disclosed in
the Filed Company SEC Documents or in Section 2.11 of the Disclosure Schedules,
or actions expressly contemplated by this Agreement, from the date of the
Company Balance Sheet, the Company and the Company Subsidiaries have conducted
their business only in the ordinary course consistent with past practice, and
during such period there has not been:
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(a) any event, change, effect or development that, individually or
in the aggregate, has had or would reasonably be expected to have a material
adverse effect on the Company;
(b) any authorization, declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property) with respect
to any capital stock of the Company or the Company Subsidiaries or any
repurchase or redemption for value by the Company or by any of the Company
Subsidiaries of any of their capital stock;
(c) any split, combination or reclassification of any Company
capital stock or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares of Company
capital stock;
(d) any issuance by the Company or any Company Subsidiary of any
notes, bonds or other debt securities or any capital stock or other equity
securities or any securities convertible, exchangeable or exercisable into any
capital stock or other equity securities, except for the issuance of any shares
of Company common stock pursuant to the exercise of any stock options or the
exercise of Company warrants;
(e) any termination of employment or departure of any officer or
regional vice president of the Company or of any of the Company Subsidiaries;
(f) any entry by the Company or any of the Company Subsidiaries
into any commitment or transaction material to the Company and the Company
Subsidiaries, taken as a whole;
(g) any material revaluation by the Company of any material asset
(including any writing down of the value of goodwill or inventory or writing off
of notes or accounts receivable);
(h) any change in accounting methods, principles or practices by
the Company or any of the Company Subsidiaries materially affecting the
consolidated assets, liabilities or results of operations of the Company, except
insofar as may have been required by a change in U.S. GAAP; and
(i) any agreement by the Company or any Company Subsidiary to take
any of the actions described in paragraphs (a) through (h) above.
2.12 Absence of Litigation. Except as specifically disclosed in the Filed
Company SEC Documents or in Section 2.12 of the Disclosure Schedules, (a) there
is no litigation, suit, claim, action, proceeding or investigation (an "Action")
pending or, to the knowledge of the Company, overtly threatened against the
Company or any of the Company Subsidiaries, or any property or asset of the
Company or any of the Company Subsidiaries, before any court, arbitrator or
Governmental Entity, domestic or foreign, that, individually or in the
aggregate, would have or would reasonably be expected to have a material adverse
effect, nor (b) is there
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any judgment outstanding against the Company or any of the Company Subsidiaries
that has had or would reasonably be expected to have a material adverse effect.
2.13 Material Contracts. Section 2.13 of the Disclosure Schedules contains
a list of the following types of contracts and agreements (including all
amendments thereto) to which the Company or any of the Company Subsidiaries is
currently a party, other than those contracts and agreements listed as exhibits
in the Company's Form 10-K for the fiscal year ended June 30, 2002, as amended
by Amendment No. 1 on Form 10-K/A (such contracts, agreements and arrangements
as are required to be set forth in Section 2.13 of the Disclosure Schedules,
together with all contracts, agreements and arrangements of the Company or any
of the Company Subsidiaries required to be set forth in Section 2.13 of the
Disclosure Schedules or listed or required to be listed as exhibits in the
Company's Form 10-K for the fiscal year ended June 30, 2002, being the "Company
Material Contracts"):
(a) all employment, consulting, severance, termination or
indemnification agreements between the Company or any of the Company
Subsidiaries and any director, officer or regional vice president of the Company
or any of the Company Subsidiaries;
(b) all contracts, credit agreements, indentures and other similar
agreements evidencing outstanding or currently available indebtedness, including
guaranties, of more than $500,000 individually to unaffiliated third parties;
(c) all agreements under which the Company or any of the Company
Subsidiaries has advanced or loaned any funds in excess of $100,000 individually
other than to the Company or any wholly-owned subsidiary of the Company;
(d) all joint venture or other similar material agreements;
(e) all real property lease agreements with annual lease payments
in excess of $200,000 (exclusive of common area maintenance fees and taxes)
individually and all other lease agreements with annual lease payments in excess
of $200,000 individually;
(f) agreements that are currently in effect under which the Company
or any of the Company Subsidiaries has granted any person or entity registration
rights (including demand and piggy-back registration rights), preemptive rights,
redemption rights, subscription rights, rights of first refusal, purchase
options or call options with respect to the capital stock of the Company or any
of the Company Subsidiaries; and
(g) all written or material oral contracts and agreements with
affiliates of the Company or any of the Company Subsidiaries.
Except as set forth in Section 2.13 of the Disclosure Schedules, or as would not
reasonably be expected, individually or in the aggregate, to have a material
adverse effect, (i) each Company Material Contract is a legal, valid and binding
agreement enforceable against the Company or any Company Subsidiary that is a
party thereto and, to the Company's knowledge, the other parties thereto, in
accordance with its terms; (ii) neither the Company nor any of the Company
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Subsidiaries is in violation or default, or has received notice that it is in
violation or default, under any Company Material Contract and (iii) to the
Company's knowledge no other party is in default under any Company Material
Contract. The Company has provided the Investors with, or made available to the
Investors, copies of all Company Material Contracts.
2.14 Management History. Except as set forth in Schedule 2.14 of the
Disclosure Schedules, to the Company's knowledge, during the past five years, no
director or executive officer of the Company has been (a) convicted of any
criminal offense (excluding traffic violations and other minor offenses), or (b)
has been the subject of a bankruptcy or similar insolvency proceeding, or (c)
has been a general partner or executive officer of a business entity which has
filed a petition under federal bankruptcy or any state insolvency laws, or had a
receiver or similar officer appointed by a court to administer the business or
property of such entity while such person was a general partner or executive
officer of such entity at or within two (2) years before the time of such
filing.
2.15 Company Affiliates and Subsidiaries. Section 2.15 of the Disclosure
Schedules lists each majority-owned subsidiary of the Company (each, a "Company
Subsidiary") and its jurisdiction of organization. Except as set forth on
Section 2.15 of the Disclosure Schedules, the Company has no equity investment
or other interest in, nor has the Company made advances or loans to, any
corporation, association, partnership, joint venture or other entity. Each
Company Subsidiary listed on Section 2.15 of the Disclosure Schedules, has been
duly organized, is validly existing and in good standing under the laws of the
jurisdiction of its organization, has all requisite corporate power and
authority to own and operate its properties, to lease the properties it operates
as lessee and to conduct the business in which it is engaged. Except as set
forth on Section 2.15 of the Disclosure Schedules, each Company Subsidiary is
duly qualified to transact business and is in good standing under the laws of
the jurisdiction in which the conduct of its business or the nature of its
properties requires such qualification except where the failure to be so
qualified or in good standing would not reasonably be expected to have a
material adverse effect. All of the issued and outstanding stock (or equivalent
thereof) of each wholly-owned subsidiary of the Company has been duly authorized
and validly issued, is fully paid and non-assessable. Except as set forth on
Section 2.15 of the Disclosure Schedules, all of the issued and outstanding
stock held by the Company in any Company Subsidiary is owned by the Company free
and clear of any Encumbrances. There are no rights, options or warrants
outstanding or other agreements to acquire shares of stock (or equivalent
interests) of any wholly-owned subsidiary of the Company or of the shares of
Company Subsidiary stock owned by the Company.
2.16 Investment Company Act. Neither the Company nor any Company
Subsidiary is, and, after giving effect to the consummation of the transactions
contemplated hereby and by the Rights Agreement, will be, an "investment
company", or an entity "controlled by" and "investment company", as such term is
defined in the Investment Company Act of 1940, as amended.
2.17 Environmental Legal Compliance. Except as described in Section 2.17
of the Disclosure Schedules: (a) neither the Company nor any Company Subsidiary
is in violation of any applicable Environmental Law, which violation would have
a material adverse effect on the Company or its business or prospects, and (b)
neither the Company nor any Company Subsidiary
8
has received notice of any action, suit, proceeding or investigation which calls
into question compliance by the Company or any Company Subsidiary with any
Environmental Laws or which seeks to suspend, revoke or terminate any license,
permit or approval necessary for the generation, handling, storage, treatment or
disposal of any Hazardous Material. As used in this Agreement, the term
"Environmental Law" shall mean, collectively, the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. (S)9601
et seq. ("CERCLA"); the Solid Waste Disposal Act, as amended, 42 U.S.C. (S)6901
et seq.("SWDA") including the Resource Conservation and Recovery Act of 1976, as
amended, 42 U.S.C. (S)6901 et seq. ("RCRA"); the Clean Water Act, as amended, 42
U.S.C. (S)1251 et seq.("CWA"); the Clean Air Act, as amended, 42 U.S.C. (S)7401
et seq.; any "superfund" or "superlien" law; and any other applicable law
regulating, relating to, or imposing liability or standards of conduct
concerning, any hazardous, toxic or dangerous waste, substance or material, and
the term "Hazardous Material" shall mean and include any hazardous, toxic or
dangerous waste, substance or material, the generation, handling, storage,
disposal, treatment or emission of which is subject to any Environmental Law.
2.18 Employee Benefit Matters. There is no existing single employer plan
defined in Section 4021(a) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") as to which the Company or any Company Subsidiary is,
or immediately after the Closing will be, an "employer" or a "substantial
employer" as defined in Sections 3(5) and 4001(a)(2) of ERISA, respectively.
Section 2.18 of the Disclosure Schedules along with the Filed Company SEC
Documents lists each plan described in Section 4021(a) of ERISA, as to which the
Company or any Company Subsidiary has assumed any liability or will be liable to
make contributions or for the payment of benefits. The Company has made
available to the Investors true and complete copies of each of the plans listed
on Section 2.18 of the Disclosure Schedules and any such plan set forth in the
Filed Company SEC Documents. To the knowledge of the Company, there have been no
"reportable events" as set forth in Section 4043(b) of ERISA with respect to any
such plan, and no termination of any such plan since the effective date of ERISA
which could result in any tax penalty or liability being imposed upon the
Company or any Company Subsidiary. Neither the Company or any Company Subsidiary
has participated in, and the execution and delivery of this Agreement by the
Company will not involve, any "prohibited transaction" (as defined in Section
4975 of the Code) that could subject the Company or any Company Subsidiary to
any tax or penalty imposed by Section 4975 of the Code. To the knowledge of the
Company, no predecessor in interest to the Company or any Company Subsidiary has
participated in any "prohibited transaction" (as defined in Section 4975 of the
Code) that could subject the Company or any Company Subsidiary to any tax or
penalty imposed by Section 4975 of the Code. Since the effective date of ERISA,
neither the Company nor any Company Subsidiary, nor, to the knowledge of the
Company, any predecessor in interest to the Company or any Company Subsidiary,
has incurred any "accumulated funding deficiency", as such term is defined in
Section 302 of ERISA, to which the Company or any Company Subsidiary could be
subject or for which it might be liable. Neither the Company nor any Company
Subsidiary is, or immediately after the Closing will be, a party to, and none of
the operations of the Company or any Company Subsidiary is, or after the Closing
will be, covered by, a "multiemployer plan", as defined in Section 3(37) of
ERISA.
2.19 Employees. To the knowledge of the Company, except as set forth on
Section 2.19 of the Disclosure Schedules, no current officer or regional vice
president has advised the
9
Company or any Company Subsidiary (orally or in writing) that he or she intends
to terminate employment with the Company or any Company Subsidiary. Neither the
Company nor any Company Subsidiary has experienced any labor disputes or work
stoppages due to labor disagreements. Neither the Company nor any Company
Subsidiary is, or has ever been, a party to any collective bargaining agreements
and, to the knowledge of the Company, neither the Company nor any Company
Subsidiary has been the subject of any organizational activity.
2.20 Transactions with Affiliates. Except as described in Section 2.20
of the Disclosure Schedules, and except as set forth in the Filed Company SEC
Documents, since the date of the Company's last proxy statement filed with the
SEC, no event has occurred that would be required to be reported by the Company
pursuant to Item 404 of Regulation S-K promulgated by the SEC. Section 2.20 of
the Disclosure Schedules identifies each person or entity who is (or who may be
deemed to be) an "affiliate" (as the term is used in Rule 144 under the
Securities Act), of the Company as of the date of this Agreement.
2.21 Insurance. The Company and the Company Subsidiaries maintain with
insurers having an A.M. Best rating of "A" or better, insurance in such amounts
(subject to reasonable deductibles), and of such a character as is usually
maintained by reasonably prudent managers of companies engaged in the same or
similar business. All policies of insurance, held by the Company and the Company
Subsidiaries, are in full force and effect in accordance with their terms.
Neither the Company nor any of the Company Subsidiaries is in default in any
material respect under any provisions of any such policy of insurance and
neither the Company nor any Company Subsidiary has received notice of
cancellation of any such insurance policy.
2.22 Compliance with Laws; Regulatory Approvals. Except as disclosed in
the Filed Company SEC Documents and except for matters which in the aggregate
would not have a material adverse effect, the operations of the Company and the
Company Subsidiaries have been conducted in compliance with all applicable laws.
Neither the Company nor any Company Subsidiary has received written notice of
any material violation (or of any investigation, inspection, audit, or other
proceeding by any Governmental Entity involving allegations of any violation) of
any law, nor has the Company received written notice that it is in material
default with respect to any law. Except for matters which, in the aggregate,
would not have a material adverse effect, (a) all Regulatory Approvals required
by the Company and any Company Subsidiary to conduct their respective business
as now conducted by them have been obtained and are in full force and effect,
(b) the Company and each Company Subsidiary are in compliance with the terms and
requirements of such Regulatory Approvals, and (c) to the knowledge of the
Company, no event has occurred which constitutes, or with due notice or lapse of
time or both may constitute, a material default by the Company or any Company
Subsidiary under any Regulatory Approval. No Regulatory Approvals obtained by
the Company or any Company Subsidiary will in any way be affected by, or
terminate or lapse by reason of, the transactions contemplated herein, except
for such Regulatory Approvals as would not, individually or in the aggregate,
have a material adverse effect. As used in this Agreement, "Regulatory
Approvals" means any and all certificates, permits, licenses, franchises,
concessions, grants, consents, approvals, orders, registrations, authorizations,
waivers, variances or clearance from a governmental entity. As used in this
Agreement, "Governmental Entity" means the government of any nation, state,
city, locality or other political subdivision of any thereof, and any entity
exercising executive, legislative, judicial, regulatory or administrative
10
functions of or pertaining to government or any international regulatory body
having or asserting any jurisdiction of a person or entity, its business or its
property.
2.23 Intellectual Property. Except as set forth in Schedule 2.23 of the
Disclosure Schedules, the Company and the Company Subsidiaries own in all
material respects the entire and unencumbered right, title and interest in and
to, or possess adequate licenses or other rights to use, all intellectual
property, including but not limited to, patents, trademarks, service marks,
trade names, copyrights, computer software and know-how used in, or necessary
to, the business conducted by the Company or any of the Company Subsidiaries
(the "Intellectual Property"). The Company and each Company Subsidiary has
performed all acts and have paid all required fees and taxes to maintain all
registrations and applications of such Intellectual Property in full force and
effect. Except as set forth in Schedule 2.23 of the Disclosure Schedules,
neither the Company nor any Company Subsidiary has received any notice of
infringement of or conflict with (or knows or has known of such infringement of
or conflict with) asserted rights of others with respect to the use of the
Intellectual Property. To the Company's knowledge, the Company and the Company
Subsidiaries do not in the conduct of their business infringe or conflict with
any right of any third party.
2.24 Accounting. The Company and each Company Subsidiary maintains a
system of internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with management's
general or specific authorizations, and (ii) transactions are recorded as
necessary to permit preparation of financial statements in conformity with GAAP
and to maintain asset accountability.
2.25 Consents. Except as set forth on Section 2.25 of the Disclosure
Schedules, no consent, approval, exemption or authorization of or designation,
declaration or filing with any Governmental Entity on the part of the Company or
any Company Subsidiary is necessary or required in connection with the
execution, delivery and performance of this Agreement, the offer, sale or
issuance of the Series F Preferred Stock, or the consummation of any other
transaction contemplated hereby, except such filings as may be required to be
made with the SEC, state securities or "blue sky" laws, the Nasdaq Stock Market
("Nasdaq"), and the Delaware Secretary of State. All consents and waivers
required from any person, or entity in order to carry out the transactions
contemplated hereby under any contract, lease or agreement to which the Company
or any Company Subsidiary is a party are set forth on Section 2.25 of the
Disclosure Schedules, except those that the failure to make or obtain would not,
individually or in the aggregate, be reasonably likely to have a material
adverse effect or prevent, materially delay or materially impair the ability of
the Company to consummate the transactions contemplated herein.
2.26 Offering of Shares. Assuming the accuracy of the representations
and warranties of each Investor set forth in Article III, the offer and sale of
the Series F Preferred Stock to each Investor is exempt from the registration
and prospectus delivery requirements of the Securities Act. Neither the Company
nor anyone acting on its behalf has taken or will take any action (including,
without limitation, any offering of any securities of the Company under
circumstances which would require the integration of such offering with the
offering of the Series F Preferred Stock under the Securities Act and the rules
and regulations of the SEC
11
thereunder) which would subject the offering, issuance and sale of the Series F
Preferred Stock to the registration requirements of the Securities Act.
2.27 Status of Shares. The Series F Preferred Stock to be issued to
each Investor at the Closing has been duly authorized by all necessary corporate
action on the part of the Company, and when issued in accordance with this
Agreement, for the consideration expressed herein, will be validly issued, fully
paid and nonassessable and will be free and clear of any mortgage, lien, pledge,
encumbrance, security interest, option, order, decree, judgment, condition, or
restriction ("Encumbrances") except for restrictions on transfer under
applicable federal and state securities laws. The shares of Common Stock
issuable upon conversion of the Series F Preferred Stock issued to each Investor
at the Closing have been duly authorized by all necessary corporate action on
the part of the Company and such shares of Common Stock have been validly
reserved for issuance, and upon issuance in accordance with the terms of the
Certificate, will be validly issued and outstanding, fully paid and
nonassessable and will be free and clear of all Encumbrances except for
restrictions on transfer under applicable federal and state securities laws.
2.28 Disclosure. Except for omissions not individually or in the
aggregate material, the Company has provided the Investors with all applicable
or relevant documents and information that the Investors have requested in
writing. True and complete copies of all documents listed in the Schedules to
this Agreement have been made available or provided to the Investors. No
representation or warranty of the Company in this Agreement, and no document
furnished or to be furnished to the Investors pursuant to this Agreement, or in
connection with the transactions contemplated hereby, contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein or therein, in light of the
circumstances under which they are made, not misleading.
2.29 Change of Control. No event has occurred during the eighteen (18)
months prior to the date hereof nor will the consummation of the transactions
set forth herein meet the definition of a "change of control," as such term is
defined in the Company's Senior Executive Severance Pay Plan or the Company's
Executive Severance Pay Plan (collectively, the "Company Severance Plans").
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTORS
Each Investor, severally and not jointly, hereby represents and warrants to
the Company that:
3.1 Power and Authority. Such Investor has all requisite corporate,
partnership or limited liability company power, as applicable, and authority to
enter into this Agreement and the Rights Agreement, to purchase the Series F
Preferred Stock, and to carry out the provisions of this Agreement and the
Rights Agreement. The authorization, execution and delivery of this Agreement
and the Rights Agreement by such Investor, to the extent such Investor is a
party thereto, and the performance of all of such Investor's obligations
hereunder and thereunder has been duly authorized.
12
3.2 Enforceability. Each of this Agreement and the Rights Agreement has
been duly executed and delivered by such Investor, and constitute its valid and
legally binding obligations, to the extent such Investor is a party thereto, and
shall be enforceable against such Investor in accordance with its respective
terms, except (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally, (b) as limited by laws relating to
the availability of specific performance, injunctive relief, or other equitable
remedies, and (c) to the extent the indemnification provisions contained in the
Rights Agreement may be limited by applicable federal or state securities laws.
3.3 Non-Contravention. Neither the execution and delivery of this
Agreement and the Rights Agreement, nor the consummation by such Investor of its
respective obligations hereunder and thereunder, violates or conflicts with any
contract, commitment, agreement, understanding or arrangement of any kind to
which such Investor is a party or by which such Investor is bound.
3.4 Purchase Entirely for Own Account. This Agreement is made with such
Investor in reliance upon such Investor's representation to the Company, which
by such Investor's execution of this Agreement such Investor hereby confirms,
that the Series F Preferred Stock to be received by such Investor and the Common
Stock issuable upon conversion thereof (collectively, the "Securities") will be
acquired for investment for such Investor's own account, not as a nominee or
agent, and not with a view to the resale or distribution of any part thereof in
violation of the Securities Act, and that such Investor will not sell, grant any
participation in, or otherwise distribute the same in violation of the
Securities Act. By executing this Agreement, such Investor further represents
that such Investor does not have any contract, undertaking, agreement or
arrangement with any person or entity to sell, transfer or grant participations
to such person or entity or to any third person, with respect to any of the
Securities.
3.5 Investment Experience Such Investor is an investor in securities of
emerging growth companies and acknowledges that such Investor can bear the
economic risk of such Investor's investment in the Series F Preferred Stock
indefinitely, and has such knowledge and experience in financial and business
matters that such Investor is capable of evaluating the merits and risks of such
Investor's investment in the Series F Preferred Stock. Each such Investor which
is an entity also represents it has not been organized for the purpose of
acquiring the Series F Preferred Stock. Such Investor understands that the
Company has no current intention of registering the Series F Preferred Stock or
the shares of Common Stock issuable upon conversion, except as set forth in the
Rights Agreement.
3.6 Accredited Investor. Such Investor is an "accredited investor" within
the meaning of SEC Rule 501 of Regulation D, as currently in effect.
3.7 Restricted Securities. Such Investor understands that the Securities
it is purchasing are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such Securities may be resold without registration under
the Securities Act, only in certain limited circumstances. In this connection,
such Investor represents that it is familiar with SEC Rule 144, as currently in
effect, and
13
understands the resale limitations imposed thereby and by the Securities Act.
Such Investor is aware that SEC Rule 144 is not currently available for use by
such Investor for immediate resale of any of the Securities to be acquired by
such Investor upon consummation of the transactions contemplated herein.
3.8 Company Information. Such Investor has received and read the Company
Balance Sheet and has had an opportunity to discuss the Company's business,
management and financial affairs with directors, officers and management of the
Company and has had the opportunity to review the Company's operations and
facilities. Such Investor has also had the opportunity to ask questions of, and
receive answers from, the Company and its management regarding the terms and
conditions of this investment. Notwithstanding the foregoing, nothing contained
herein shall operate to modify or limit in any respect the representations and
warranties of the Company or to relieve it from any obligation to each Investor
for a breach thereof.
3.9 Residence. If such Investor is an individual, then such Investor
resides in the state or province identified in the address of such Investor set
forth on Schedule A and such Investor represents that all communications with
respect to the offer and issuance of the Series F Preferred Stock have been made
in such state or province; if such Investor is a partnership, corporation,
limited liability company or other entity, the office or offices of such
Investor in which its investment decision was made is located at the address or
addresses of such Investor set forth on Schedule A.
ARTICLE IV
COVENANTS AND OTHER AGREEMENTS
4.1 Transfer of Shares.
(a) Restrictions. The restrictions on the sale or transfer of the
Series F Preferred Stock shall cease to apply, provided that the Company has
received appropriate documentation evidencing the applicable exemption from
registration, (i) upon any sale of such shares to the public under a
registration statement or exemption therefrom pursuant to Section 4(l) of the
Securities Act or SEC Rule 144 under the Securities Act (provided that evidence
reasonably satisfactory to the Company that all of the requirements of SEC Rule
144 have been satisfied has been furnished to the Company), or (ii) at such time
as such shares become eligible for sale under Rule 144(k) under the Securities
Act.
(b) Legends. Each certificate representing shares of Series F
Preferred Stock shall bear a legend substantially in the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED
UNLESS AND UNTIL SUCH SECURITIES ARE REGISTERED UNDER SUCH ACT OR AN
OPINION OF
14
COUNSEL SATISFACTORY TO THE COMPANY IS OBTAINED TO THE EFFECT
THAT SUCH REGISTRATION IS NOT REQUIRED."
4.2 Information Rights. Provided that such Investor is bound by a written
agreement satisfactory to the Company, and in form and substance substantially
the same as any such agreement entered into with the holders of the Series E
Preferred Stock, to hold all non-public information furnished to them in
confidence and not disclose such information to any individual or entity (other
than legal counsel, accountants and/or financial advisers) or use such
information for any purpose other than in connection with such Investor's
purchase of the Series F Preferred Stock, and for so long as such Investor
holds, in the aggregate, at least 50% of the shares of Series F Preferred Stock
originally issued to such Investor, the Company shall deliver to each such
Investor the following information:
(a) as soon as available and in any event within 75 days after the
end of each fiscal year of the Company (or such shorter period as may be
prescribed by law or regulation with respect to annual filings on Form 10-K), a
copy of the audited balance sheet of the Company as of the end of such fiscal
year and the related audited statements of income and cash flows for the fiscal
year, all prepared in reasonable detail, and certified by independent certified
public accountants of recognized national standing as presenting fairly in all
material respects the financial position of the Company and approved by the
Board of Directors of the Company, including footnotes and setting forth in
comparative form the corresponding figures for the corresponding period of the
preceding fiscal year, subject to the applicable requirements of GAAP and
accompanied by the management letter of such independent certified public
accountant;
(b) as soon as available and in any event within 45 days after the
end of each fiscal quarter of the Company (or such shorter period as may be
prescribed by law or regulation with respect to quarterly filings on Form 10-Q)
(other than the last quarter of each fiscal year), a copy of the unaudited
balance sheet of the Company as of the end of the quarter and the related
unaudited statements of income and cash flows of the Company for the periods
commencing at the end of the previous quarter and ending at the end of the
quarter and commencing at the beginning of the fiscal year and ending at the end
of the quarter, in each case setting forth in comparative form the corresponding
figures for the corresponding period of the preceding fiscal year, and
accompanied by a narrative management discussion and analysis of the operating
results and financial condition and any management letter delivered to the
Company by the independent certified public accountant with respect to such
financial statements;
(c) as soon as practicable and in any event within 20 days after
the end of each calendar month, a consolidated balance sheet of the Company, and
the related consolidated statements of income, stockholders' equity and cash
flows, unaudited but prepared in accordance with U.S. GAAP, such consolidated
balance sheet to be as of the end of such month and such consolidated statements
of income, stockholders' equity and cash flows to be for such month and for the
period from the beginning of the fiscal year to the end of such month and in
each case setting forth in comparative form the corresponding figures for the
corresponding period of the preceding fiscal year;
15
(d) promptly, after the approval by the Company's Board of
Directors, the budget and business plan for the following fiscal year, prepared
on a monthly basis, including balance sheets and sources and applications of
funds, and statements for such months; and
(e) promptly, notices of all filings of and updates to any
material litigation to which the Company is a party.
4.3 Notice of Default. The Company shall notify each of the Investors of
any events of default with respect to any material agreement of the Company.
4.4 Pre-Emptive Rights.
(a) Except for Excluded Securities (as that term is defined in
Section 4.4(e)), the Company shall not issue any equity securities, including,
without limitation, any warrants or options or other securities convertible into
shares of Common Stock, unless the Company shall have first offered to sell to
each Qualified Investor (as that term is hereinafter defined) each such
Qualified Investor's Proportionate Percentage (as that term is defined in
Section 4.4(f)) of such equity securities (the "Offered Securities") at a price
and on such other terms as shall have been specified by the Company in a writing
delivered to such Qualified Investor (the "Rights Offer"), which Rights Offer by
its terms shall remain open and irrevocable for a period of thirty (30) days
from the date the Rights Offer is delivered by the Company to such Qualified
Investor (such period being hereinafter referred to as the "Offer Period"). As
used herein, the term "Qualified Investor" shall mean any Investor who is then
holding shares of Series F Preferred Stock (as adjusted for splits,
consolidations and the like).
(b) Notice of any Qualified Investor's intention to accept a Rights
Offer made pursuant to Section 4.4(a) shall be evidenced by a writing signed by
such Qualified Investor and delivered to the Company prior to the end of the
Offer Period, setting forth such portion of the Offered Securities which such
Investor elects to purchase (the "Notice of Acceptance"). At the closing of the
transactions contemplated by the Rights Offer, such Qualified Investor shall pay
to the Company the entire purchase price for the Offered Securities elected to
be purchased by such Qualified Investor against delivery of the certificate
evidencing such purchased Offered Securities.
(c) In the event that a Notice of Acceptance is not given by each
Qualified Investor in respect of all the Offered Securities, the Company shall
have 120 days from the expiration of the Offer Period to sell all or any part of
such Offered Securities as to which a Notice of Acceptance has not been given by
any Qualified Investor (the "Refused Securities") to any other persons or
entities, in all material respect on terms and conditions, including, without
limitation, price, which are not more favorable to such other persons or
entities or less favorable to the Company than those set forth in the Rights
Offer.
(d) Any Offered Securities not purchased by the Qualified Investors
or other persons or entities in accordance with Sections 4.4 (b) and (c) may not
be sold or otherwise
16
disposed of until they are again offered to the Qualified Investors under the
procedures specified in this Section 4.4.
(e) The rights of the Qualified Investors under Sections
4.4(a) through (d) shall not apply to the following securities (collectively,
the "Excluded Securities"):
(i) shares of Common Stock issuable upon conversion of the
Series F Convertible Preferred Stock, Series E Convertible Preferred Stock,
Series D Convertible Preferred Stock, the Series C Convertible Preferred Stock
or the Series A Convertible Preferred Stock;
(ii) shares of Common Stock, warrants, options and other
rights to purchase shares of Common Stock and securities convertible into shares
of Common Stock, issued to officers, directors and employees of, and consultants
to, the Company as compensation for bona fide services provided or to be
provided to the Company by such persons and approved by the Board of Directors
or the Compensation Committee, as the case may be;
(iii) shares of Common Stock issuable upon exercise of
warrants, options, notes or other rights to acquire securities of the Company
issued on or outstanding on the original issue date of the Series F Convertible
Preferred Stock;
(iv) shares of Common Stock issued after the original issue
date of the Series F Convertible Preferred Stock as a stock dividend or upon any
subdivision or combination of shares of Common Stock or Preferred Stock for
which adjustment is made in accordance with Sections 8(c) or 8(d) of the
Certificate;
(v) shares of Common Stock issued after the original issue
date of the Series F Convertible Preferred Stock 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, approved by the Board of
Directors of the Company;
(vi) shares of Common Stock issued after the original issue
date of the Series F Convertible Preferred Stock in connection with a firm
commitment underwritten public offering; and
(vii) shares of Common Stock that are issued after the original
issue date of the Series F Convertible Preferred Stock to financial institutions
or lessors in connection with commercial credit transactions, equipment
financing, lease line, bank financing or other similar arrangement and that is
not intended to serve as an equity financing for the Company and is approved by
the Company's Board of Directors.
(f) For purposes of this Section 4.4, "Proportionate Percentage"
shall mean, as to each Qualified Investor, that percentage figure as of the date
of the Rights Offer which expresses the ratio which (i) the number of shares of
outstanding Common Stock then owned by such Qualified Investor (assuming the
exercise of all outstanding option and warrants, and the
17
conversion of all outstanding convertible securities then owned by such
Qualified Investor), bears to (ii) all of the issued and outstanding shares of
Common Stock.
4.5 Insurance. The Company will maintain directors' and officers'
insurance and insurance covering its properties and businesses of such types,
and at such levels, as are maintained by the Company as of the date hereof.
ARTICLE V
CONDITIONS TO CLOSING
5.1 Conditions of Investors' Obligations at Closing. The obligations of
each Investor under this Agreement are subject to the fulfillment on or before
the Closing (unless otherwise waived by such Investor) of each of the following
conditions:
(a) Representations and Warranties. The representations and
warranties of the Company contained in Article II shall be true in all material
respects on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of the date of the
Closing, with the exception of representations and warranties that speak of a
particular date, which shall be true and correct as of that date.
(b) Performance. The Company shall have performed and
complied in all material respects with all agreements, obligations and
conditions contained in this Agreement that are required to be performed or
complied with by it on or before the Closing.
(c) Compliance Certificate. The Chief Executive Officer of
the Company shall deliver to such Investor at the Closing a certificate on
behalf of the Company stating that the conditions specified in Sections 5.1(a)
and 5.1(b) have been fulfilled.
(d) Opinion of Company Counsel. Each Investor shall have
received from Xxxxxx, Xxxxx & Xxxxxxx LLP an opinion, dated as of the Closing,
to the effect and substantially in the form attached hereto as Exhibit "C."
(e) Rights Agreement. The Company and such Investor shall
have entered into the Registration Rights Agreement, a copy of which is attached
hereto as Exhibit "D" (the "Rights Agreement").
(f) Certificate. The Certificate shall have been accepted for
filing with the Secretary of State of the State of Delaware.
(g) Consents. The Company shall have received on or prior to
the Closing Date all consents, authorizations and approvals of governmental, and
private parties which are required to be obtained in order to consummate the
transactions contemplated hereby on or prior to the Closing Date, as indicated
on Section 2.25 of the Disclosure Schedule.
(h) Legal Proceedings. No action or proceeding by or before
any governmental authority shall have been instituted or threatened (and not
subsequently settled,
18
dismissed or otherwise terminated) which is reasonably expected to restrain,
prohibit or invalidate the transactions contemplated by this Agreement other
than an action or proceeding instituted or threatened by an Investor.
(i) Shareholder Rights' Plan. The Company shall have amended the
Company Rights Agreement to allow the Investors to acquire all securities
issuable pursuant to this Agreement and the Certificate.
5.2 Conditions of the Company's Obligations at Closing. The obligations
of the Company under this Agreement are subject to the fulfillment on or before
the Closing (unless otherwise waived by the Company) of each of the
following conditions:
(a) Representations and Warranties. The representations and
warranties of the Investors contained in Article III shall be true in all
respects on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of the date of the
Closing, except for representations made as of a particular date which shall be
true and correct as of that date.
(b) Payment of Purchase Price. Each Investor shall have delivered
the purchase price specified in Schedule A for the respective number of shares
of the Series F Preferred Stock purchased hereunder
(c) Performance. Each Investor shall have performed and complied in
all material respects with all agreements, obligations and conditions contained
in this Agreement that are required to be performed or complied with by it on or
before the Closing.
(d) Rights Agreement. The Company and the Investors shall have
entered into the Rights Agreement.
(e) Certificate. The Certificate shall have been accepted for
filing with the Secretary of State of the State of Delaware.
ARTICLE VI
MISCELLANEOUS
6.1 Successors and Assigns. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the Company and the holders of a majority of the Series F Preferred
Stock. Subject to the preceding sentence, this Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and assigns. Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
6.2 Governing Law. The construction, validity and interpretation of this
Agreement will be governed by the internal laws of the State of Delaware without
giving effect to any
19
choice of law or conflict of law provision or rule that would cause the
application of the laws of any jurisdiction other than the State of Delaware.
6.3 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
6.4 Titles and Subtitles. The titles and subtitles used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.
6.5 Notices.
(a) All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with confirmation of receipt) to the Company
at 0000 Xxxx Xxxxxxx Xxxx, Xxxx Xxxxxxx, XX 00000 (Fax: (000) 000-0000), to the
attention of the Chief Executive Officer and the General Counsel or, in the case
of an Investor, to the address specified beneath such party's name on Schedule A
hereto (or at such other address for a party as shall be specified by like
notice).
(b) Notice given by facsimile shall be confirmed by appropriate
answer back and shall be effective upon actual receipt if received during the
recipient's normal business hours, or at the beginning of the recipient's next
business day after receipt if not received during the recipient's normal
business hours. All notices by facsimile shall be confirmed promptly after
transmission in writing by certified mail, commercial delivery service or
personal delivery. Any party may change any address to which notice is to be
given to it by giving notice as provided above of such change of address.
6.6 Finder's Fee. Each party represents that it neither is nor will be
obligated for any finders' fee or commission in connection with this
transaction, except as set forth in Section 6.7. Each Investor agrees to
indemnify and to hold harmless the Company and the other Investors from any
liability for any commission or compensation (and the costs and expenses of
defending against such liability or asserted liability) for which such Investor
or any of its officers, partners, employees, agents or representatives is
responsible. The Company agrees to indemnify and hold harmless the Investors
from any liability for any commission or compensation (and the costs and
expenses of defending against such liability or asserted liability) for which
the Company or any of its employees, consultants, agents or representatives is
responsible.
6.7 Fee. A structuring fee of 0.5% of the aggregate Purchase Price and
closing points of 0.5% of the aggregate Purchase Price shall be paid at Closing
to the Investors and shall be allocated among the Investors in accordance with
their pro rata ownership of the Shares.
6.8 Amendments and Waivers. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively), only with
the written consent of the Company and each of the Investors. Any amendment or
waiver effected in accordance with this Section
20
6.8 shall be binding upon each holder of any shares of Series F Preferred Stock
purchased under this Agreement at the time outstanding (including securities
into which such shares of Series F Preferred Stock are convertible), each future
holder of any shares of Series F Preferred Stock, and the Company.
6.9 Severability. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
6.10 Entire Agreement. This Agreement, the Disclosure Schedules and
Exhibits hereto and the documents referred to herein constitute the entire
agreement among the parties and supersede all prior and/or contemporaneous
agreements regarding the subject matter hereof.
[SIGNATURES ON FOLLOWING PAGES]
21
COUNTERPART SIGNATURE PAGE
IN WITNESS WHEREOF, the parties hereto have executed this Series F
Convertible Preferred Stock Purchase Agreement as of the day and year first
above written.
COMPANY:
NOBEL LEARNING COMMUNITIES, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
----------------------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Chief Executive Officer
By: /s/ D. Xxxxx Xxxxx
----------------------------------------------
Name: D. Xxxxx Xxxxx
Title: Vice Chairman, President and Chief
Operating Officer
INVESTORS:
CAMDEN PARTNERS STRATEGIC FUND II-A, L.P.
By: Camden Partners Strategic II, LLC, its
general partner
By: /s/ Xxxxx X. Xxxxxxx
--------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Managing Member
CAMDEN PARTNERS STRATEGIC FUND II-B, L.P.
By: Camden Partners Strategic II, LLC, its
general partner
By: /s/ Xxxxx X. Xxxxxxx
--------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Managing Member
[SIGNATURES CONT'D ON FOLLOWING PAGE]
[SIGNATURE PAGES TO SERIES F CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT - CONT'D]
INVESTORS (CONT'D):
ALLIED CAPITAL CORPORATION
By: /s/ Xxxxxx X. Xxxxxxx
----------------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Principal
MOLLUSK HOLDINGS, L.L.C.
By: Cephalopod Corporation, authorized member
By: /s/ Xxxxxx X. Xxxxx
----------------------------------------------
Name: Xxxxxx X. Xxxxx
Title: President
BLESBOK, LLC
By: /s/ Xxxxxxx X. Xxxxx
----------------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Secretary
SCHEDULE A
LIST OF INVESTORS
NAME AND ADDRESS NO. OF SHARES PURCHASE PRICE
---------------- ------------- --------------
Camden Partners Strategic Fund II-A, L.P.
c/o Camden Partners Holdings, LLC
Xxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, XX 00000 171,265 $873,450.26
Attn: Xxxxx Xxxxxxx
FAX: (000) 000-0000
Camden Partners Strategic Fund II-B, L.P.
c/o Camden Partners Holdings, LLC
Xxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, XX 00000 10,160 $51,814.85
Attn: Xxxxx Xxxxxxx
FAX: (000) 000-0000
Allied Capital Corporation
0000 Xxxxxxxxxxxx Xxxxxx, X.X.
Xxxxx 000 150,526 $767,684.92
Xxxxxxxxxx, X.X. 00000
Attn: Xxxxxx X. Xxxxxxx, Principal
FAX: (000) 000-0000
Mollusk Holdings, LLC
000 Xxxxxxx Xxxxxx Xxxx, Xxxxx 000
Xxxxxx Xxxxx, XX 00000 118,481 $604,254.73
Attn: Xxxxxx X. Xxxxx
FAX: (000) 000-0000
Blesbok, LLC
0000 Xxxxxx Xxxxxx, 0xx Xxxxx
Xxxxx Xxxxxx, XX 00000 137,804 $702,798.84
Attn: Chief Executive Officer
FAX: (000) 000-0000
TOTAL: 588,236 $3,000,003.60
-----
Exhibit A
Certificate of Designation of Series F Preferred Stock
(Filed as Exhibit 3.7 to this Annual Report on Form 10-K)
Exhibit B
Disclosure Schedules
(The schedules to this agreement will be furnished supplementally by the
Registrant to the Securities and Exchange Commission upon request.)
Exhibit C
Form of Legal Opinion
1. Based solely on a certificate of the Secretary of State of the State of
Delaware dated August 28, 2003, the Corporation is validly existing as a
corporation in good standing under the laws of the State of Delaware. The
Corporation has the requisite corporate power and authority to own the
properties and to conduct business described or so owned and operated in the
Corporation's Annual Report on Form 10-K for the year ended June 30, 2002. The
Corporation has all requisite corporate power and authority to execute, deliver
and perform its obligations under each of the Transaction Documents.
2. The execution, delivery and performance of the Transaction Documents by
the Corporation have been duly authorized by all necessary corporate action; the
Corporation has duly executed and delivered each of the Transaction Documents;
and each of the Transaction Documents is a legal, valid and binding obligation
of the Corporation enforceable against the Corporation in accordance with its
terms, except as limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other laws of general application affecting the
rights and remedies of creditors and by general principles of equity (regardless
of whether enforceability is considered in a proceeding in equity or at law) and
except as the right to indemnification set forth in the Rights Agreement may be
limited by public policy or applicable federal or state securities laws.
3. The issuance, sale and delivery of the Series F Shares and the issuance
and delivery of the Common Stock of the Corporation, par value $0.001 per share,
upon conversion of the Series F Shares pursuant to the Certificate of
Designation (the "Conversion Shares"), have been duly authorized by all
necessary corporate action, and upon receipt by the Corporation of the purchase
price as provided in the Purchase Agreement, the Series F Shares are, and the
Conversion Shares, when issued upon the conversion of the Series F Shares
pursuant to the Certificate of Designation, will be, validly issued, fully paid
and non-assessable. Sufficient authorized but unissued shares of Common Stock of
the Corporation have been reserved by appropriate corporate action in connection
with the prospective conversion of the Series F Shares at the current conversion
price set forth in the Certificate of Designation. To our knowledge, the
issuance of the Series F Shares, and the issuance of the Conversion Shares upon
conversion of the Series F Shares pursuant to the Certificate of Designation,
are not subject to any preemptive rights or any right of first refusal or other
similar rights granted by the Corporation as of or prior to the date hereof,
other than the preemptive rights held by the holders of the Corporation's Series
E Convertible Preferred Stock pursuant to Section 4.6 of the Series E
Convertible Preferred Stock Purchase Agreement, dated June 17, 2003, by and
among the Corporation, Camden Partners Strategic Fund II-A, L.P. and Camden
Partners Strategic Fund II-B, L.P.
4. The execution and delivery by the Corporation of, and the performance by
the Corporation of its obligations under, each of the Transaction Documents, and
the
issuance, sale and delivery of the Series F Shares pursuant thereto, do not and
will not, with or without the passage of time or the giving of notice, violate
or constitute a default or breach, or cause the imposition of any lien upon any
property or asset of the Corporation, under (a) the Corporation's Certificate of
Incorporation or Bylaws, as the same have been amended and supplemented as of
the date hereof, (b) any law, rule or regulation that, based on our knowledge,
is normally applicable to transactions of the type contemplated by the
Transaction Documents, (c) any order, writ, judgment or decree of any court or
governmental authority known by us to be applicable to the Corporation or its
property, or (d) any agreement listed on Exhibit "B" attached hereto
(collectively, the "Material Agreements").
5. The Corporation has a total authorized capital stock consisting of (a)
20,000,000 shares of Common Stock, $0.001 par value per share, and (b)
10,000,000 shares of Preferred Stock, $0.001 par value per share, of which
2,500,000 shares have been designated as Series A Convertible Preferred Stock,
120,000 shares have been designated as Series A Junior Preferred Stock,
2,500,000 shares have been designated as Series C Convertible Preferred Stock,
1,063,830 have been designated as Series D Convertible Preferred Stock,
1,944,445 shares have been designated as Series E Convertible Preferred Stock
and 800,000 shares have been designated as Series F Convertible Preferred Stock.
Based solely upon (y) our review of the records of the Corporation presented to
us, and (z) our review of a certificate from the Chief Executive Officer of the
Corporation as to such matters, the outstanding shares of capital stock of the
Corporation are as set forth in the Purchase Agreement and the schedules
attached thereto, and to our knowledge there are no outstanding securities
convertible into or exchangeable for, or options, warrants or rights to purchase
or subscribe for, shares of capital stock of the Corporation except as described
in the Purchase Agreement or the schedules attached thereto.
6. No authorization, approval, or other action by, and no notice to or
filing with, any governmental authority or regulatory body, which has not been
obtained or made, is required for the execution and delivery by the Corporation
of, and the performance by the Corporation of its obligations under, the
Transaction Documents, the issuance, sale and delivery of the Series F Shares,
and the issuance of the Conversion Shares upon conversion of the Series F Shares
pursuant to the Certificate of Designation (except for post-closing filings as
may be required by federal securities laws).
Exhibit D
Registration Rights Agreement
(Filed as Exhibit 10.50 to this Annual Report on Form 10-K)
