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EXHIBIT 2.2
FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
This First Amendment to Agreement and Plan of Merger and Reorganization
(the "AMENDMENT") is dated as of June 15, 2000 (the "AMENDMENT DATE"), and is
entered into by and among LIGHTSPAN, INC., a Delaware corporation ("PARENT");
EDUCATOR ACQUISITION, INC., a Delaware corporation and wholly owned subsidiary
of Parent ("MERGER SUB"); EDUTEST, INC., a Virginia corporation (the "COMPANY");
and the undersigned parties (the "DESIGNATED SHAREHOLDERS").
RECITALS
WHEREAS, Parent, Merger Sub, the Company, and the Designated
Shareholders are parties to that certain Agreement and Plan of Merger and
Reorganization dated as of May 24, 2000 (the "MERGER AGREEMENT") whereby, among
other things, it is contemplated that the Company shall be merged with and into
Merger Sub.
WHEREAS, Parent, Merger Sub, the Company, and the Designated
Shareholders wish to amend the Merger Agreement to the extent set forth herein.
AGREEMENT
NOW THEREFORE, in consideration of the premises and mutual agreements
and covenants set forth herein, and intending to be legally bound hereby, the
parties hereto hereby agree as follows:
SECTION 1. DEFINED TERMS. Capitalized terms used herein and not
otherwise defined shall have the meanings given to such terms in the Merger
Agreement.
SECTION 2. AMENDMENT TO EXHIBIT N (REFERRED TO IN SECTION 1.5(b) OF THE
MERGER AGREEMENT). EXHIBIT N of the Merger Agreement is hereby amended by
deleting the reference to "Xxxxxxxx Xxxxxxx" under the Account column, and by
deleting the reference to "$275,000" under the Liability column, and
substituting in their place the following entries, which shall constitute
additional amounts to be paid by Parent at Closing and deducted from cash
consideration: The amounts described in the paragraphs numbered 1, 2 and 5, and
the paragraph immediately following paragraph 5, in the letter agreement dated
June 15, 2000, between Xxxxxxxx Xxxxxxx & Company, L.L.C. ("PVC") and the
Company, a copy of which is attached as EXHIBIT 1 (the "PVC Letter").
SECTION 3. AMENDMENT TO SECTION 1.5(a)(iv). Notwithstanding Section
1.5(a)(iv) of the Merger Agreement, the parties acknowledge and agree that the
number of Hold-Back Shares, if any, otherwise to be delivered under Section
1.5(a)(iv) of the Merger Agreement to the Equity Holders shall be reduced by
2 1/2% (rounded to the nearest whole share), and the shares represented by such
percentage shall be paid by Parent to PVC as described in the paragraph numbered
3 in the PVC Letter, subject to Section 5 hereof.
SECTION 4. AMENDMENT TO SECTION 1.5(c). Notwithstanding Section 1.5(c)
of the Merger Agreement, the parties acknowledge and agree that the number of
shares constituting
1.
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Earn-Out Payments otherwise to be delivered from time to time under Section
1.5(c) of the Merger Agreement, if any, to the Equity Holders shall in each case
be reduced by 2 1/2% (rounded to the nearest whole share), and the shares
represented by such percentage shall be paid by Parent to PVC as described in
the paragraph numbered 4 in the PVC Letter, subject to Section 5 hereof.
SECTION 5. REQUIREMENTS FOR PVC SHARE ISSUANCES. Notwithstanding
Sections 3 and 4 above, the parties acknowledge and agree that any issuance of
shares as described herein to PVC shall be subject to and conditioned upon PVC
making appropriate investment representations and executing any other documents
(including an agreement to be bound by transfer and other restrictions to which
Equity Holders may be bound) as reasonably required by Parent; and in the event
any issuance cannot as a result be made pursuant hereto, then in lieu of such
issuance Parent shall pay to PVC cash equal to the value of the Parent Common
Stock not so issuable (valued pursuant to the requirements and with respect to
the trading days set forth in the Merger Agreement).
SECTION 6. REPRESENTATION AND WARRANTY; DAMAGES. The Company and the
Designated Shareholders hereby jointly and severally represent and warrant, to
and for the benefit of the Indemnitees, that no amounts are or shall become due
and payable to PVC as a result of the relationship (prior to the Closing)
between PVC and the Company, except for those amounts expressly set forth in the
PVC Letter and referenced herein, and except for $10,000 which the parties have
agreed shall be paid by Parent following the Closing. The parties agree that any
such additional amounts that may become due and payable to PVC shall, together
with expenses and other Damages of Parent related thereto, constitute Damages
recoverable under Section 9 hereof.
SECTION 7. AMENDMENT OF SECTION 1.5(a)(iii)(1) OF THE MERGER AGREEMENT.
The number "$239,000" shall be deleted from Section 1.5(a)(iii)(1) from the
Merger Agreement and replaced by the phrase "$239,000 plus the amount of any
Company expenditures incurred or accrued prior to the Closing approved in
writing by Parent. Parent hereby approves the following types of Company
expenditures: (A) travel related to training, sales and marketing support
requested by Parent up to $15,000, (B) public relations and marketing materials
and services promoting or explaining the Merger up to $15,000, and (C) travel
related to assisting in consummating the Merger and related transactions and
documents up to $15,000."
SECTION 8. EFFECT OF AMENDMENT. Except as and then only to the extent
expressly modified by this Amendment, the Merger Agreement, the Exhibits
thereto, and the Company Disclosure Schedule (in addition to other agreements
currently in effect among any of the parties), shall remain in full force and
effect in all respects; and this Amendment shall be governed by the terms and
provisions of the Merger Agreement, as modified hereby. In the event of a
conflict between this Amendment and the Merger Agreement, this Amendment shall
govern.
SECTION 9. COUNTERPARTS. This Amendment may be executed in several
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement.
2.
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SECTION 10. GOVERNING LAW. This agreement shall be construed in
accordance with, and governed in all respects by, the internal laws of the State
of California (without giving effect to principles of conflicts of laws).
[THIS SPACE INTENTIONALLY LEFT BLANK]
3.
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The parties hereto have caused this First Amendment to Agreement and
Plan of Merger and Reorganization to be executed and delivered as of the date
first set forth above.
LIGHTSPAN, INC.,
a Delaware corporation.
------------------------------------
Xxxx X. Xxxxxx
Chairman and Chief Executive Officer
EDUCATOR ACQUISITION, INC.,
a Delaware corporation.
By:
---------------------------------
---------------------------------
(Print Name and Title)
EDUTEST, INC.
a Virginia corporation.
By:
---------------------------------
---------------------------------
(Print Name and Title)
DESIGNATED SHAREHOLDERS
------------------------------------
XXXXX X. XXXXXXXXX, PH.D.
------------------------------------
XXXXXX X. XXXXXXX, PH.D.
------------------------------------
XXXX X. XXXXX
------------------------------------
XXXXXX XXX
2.
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Exhibit 1
[XxxXxxx.xxx letterhead]
June 15, 2000
Xx. Xxxx Xxxxxxxx
Xxxxxxxx, Xxxxxxx & Company, L.L.C.
000 Xxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Dear Xxxx:
As the closing for the Lightspan merger approaches (hopefully, we will get the
necessary shareholder votes), we wanted to confirm our fee agreement based on
the April 7, 2000 letter (the "Engagement Letter") and our past discussions.
With respect to Edutest shareholders who receive merger consideration and do not
exercise their dissenter's rights (the "Participating Shareholders"), PVC is
entitled to:
1. 2 1/2% times $2,000,000 times a percentage, the numerator of which is the
number of Edutest common stock shares actually tendered for merger consideration
by the Participating Shareholders and the denominator of which is the total
number of Edutest common stock shares outstanding on an as-diluted, fully
converted basis as of the closing date of the merger payable in cash upon such
shareholders' receipt of the cash portion of the merger consideration following
the merger closing.
2. 2 1/2% of the value of the Lightspan common stock received by the
Participating Shareholders which stock is not considered Hold-Back Shares or
Earn-Out Payments under the Agreement and Plan of Merger and Reorganization,
payable in cash (not stock) upon the Participating Shareholders' receipt. The
appropriate value of these shares will be determined using the closing sale
price per share of Lightspan common stock as reported on the NASDAQ National
Market on the date of the first such shareholders' receipt thereof.
3. 2 1/2% of the total number of shares of the Hold-Back Shares received by the
Participating Shareholders, payable in stock (not cash) upon such shareholders'
receipt.
4. 2 1/2% of the total shares of the Earn-Out Payments received by the
Participating Shareholders, payable in stock (not cash) upon such shareholders'
receipt.
5. Expenses of $1500.00, payable at the time of the payment discussed in
paragraph 1.
With respect to any payments made by Edutest or its successor to Edutest's
dissenting shareholders for their stock as a consequence of the exercise of
their dissenters' rights, PVC will receive 2 1/2% of any cash amount received by
such dissenting shareholders (but not including any interest component), payable
upon such shareholders receipt.
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Additionally, Edutest (or Educator Acquisition, Inc.) will pay PVC $10,000
within thirty (30) days after the merger is completed.
Otherwise, neither Edutest nor any of its shareholders nor Lightspan, Inc. or
any of its affiliates ("Lightspan") will owe PVC any future fees or expenses for
work done before or after this letter provided, however, the indemnification and
hold harmless provisions of the Engagement Letter remain in full force and
effect. Also, you confirm our agreement that PCV is not entitled to any
compensation with respect to any Lightspan common stock that is earned by former
employees of Edutest as employees of Lightspan in connection with the employee
retention program. Lastly, you confirm that PVC is not due any compensation for
acting as the Purchaser Representative for some of the Edutest shareholders.
Consideration payable in stock, as described above, will be subject to PVC's
execution of appropriate investment representations (including restrictions on
transfer applicable to other Edutest shareholders) as may be reasonably
requested by Lightspan.
Please sign below if you are in agreement.
Sincerely,
Edutest, Inc.
By:
-------------------------------------
Xxxxx X. Xxxxxxxxx,
President
By:
-------------------------------------
Xxxxxx X. Xxxxxxxx
Treasurer
Accepted and Agreed to:
Xxxxxxxx, Xxxxxxx & Company, L.L.C.
----------------------------------------
Xxxx Xxxxxxxx
Chairman
2.
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EXHIBIT 1
[XXXXXXX.XXX LETTERHEAD]
June 15, 2000
Xx. Xxxx Xxxxxxxx
Xxxxxxxx, Xxxxxxx & Company, L.L.C.
000 Xxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Dear Xxxx:
As the closing for the Lightspan merger approaches (hopefully, we will get
the necessary shareholder votes), we wanted to confirm our fee agreement based
on the April 7, 2000 letter (the "Engagement Letter") and our past discussions.
With respect to Edutest shareholders who receive merger consideration and
do not exercise their dissenter's rights (the "Participating Shareholders"),
PVC is entitled to:
1. 2-1/2% times $2,000,000 times a percentage, the numerator of which is
the number of Edutest common stock shares actually tendered for merger
consideration by the Participating Shareholders and the denominator of which is
the total number of Edutest common stock shares outstanding on an as-diluted,
fully converted basis as of the closing date of the merger payable in cash upon
such shareholders' receipt of the cash portion of the merger consideration
following the merger closing.
2. 2-1/2% of the value of the Lightspan common stock received by the
Participating Shareholders which stock is not considered Hold-Back Shares or
Earn-Out Payments under the Agreement and Plan of Merger and Reorganization,
payable in cash (not stock) upon the Participating Shareholders' receipt. The
appropriate value of these shares will be determined using the closing sale
price per share of Lightspan common stock as reported on the NASDAQ National
Market on the date of the first such shareholders' receipt thereof.
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3. 2-1/2% of the total number of shares of the Hold-Back Shares received
by the Participating Shareholders, payable in stock (not cash) upon such
shareholders' receipt.
4. 2-1/2% of the total shares of the Earn-Out Payments received by the
Participating Shareholders, payable in stock (not cash) upon such shareholders'
receipt.
5. Expenses of $1500.00, payable at the time of the payment discussed in
paragraph 1.
With respect to any payments made by Edutest or its successor to Edutest's
dissenting shareholders for their stock as a consequence of the exercise of
their dissenters' rights, PVC will receive 2-1/2% of any cash amount received
by such dissenting shareholders (but not including any interest component),
payable upon such shareholders receipt.
Additionally, Edutest (or Educator Acquisition, Inc.) will pay PVC $10,000
within thirty (30) days after the merger is completed.
Otherwise, neither Edutest nor any of its shareholders nor Lightspan, Inc.
or any of its affiliates ("Lightspan") will owe PVC any future fees or expenses
for work done before or after this letter provided, however, the
indemnification and hold harmless provisions of the Engagement Letter remain in
full force and effect. Also, you confirm our agreement that PCV is not entitled
to any compensation with respect to any Lightspan common stock that is earned
by former employees of Edutest as employees of Lightspan in connection with the
employee retention program. Lastly, you confirm that PVC is not due any
compensation for acting as the Purchaser Representative for some of the Edutest
shareholders.
Consideration payable in stock, as described above, will be subject to
PVC's execution of appropriate investment representations (including
restrictions on transfer applicable to other Edutest shareholders) as may be
reasonably requested by Lightspan.
Please sign below if you are in agreement.
Sincerely,
EDUTEST, INC.
By: /s/ XXXXX X. XXXXXXXXX
----------------------------------
Xxxxx X. Xxxxxxxxx,
President
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By: /s/ XXXXXX X. XXXXXXXX
----------------------------
Xxxxxx X. Xxxxxxxx
Treasurer
Accepted and Agreed to:
XXXXXXXX, XXXXXXX & COMPANY, L.L.C.
/s/ XXXX XXXXXXXX
-----------------------------------
Xxxx Xxxxxxxx, Chairman
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AGREEMENT AND PLAN
OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION ("AGREEMENT") is made
and entered into as of May 24, 2000 (the "SIGNING DATE"), by and among:
LIGHTSPAN, INC., a Delaware corporation ("PARENT"); EDUCATOR ACQUISITION, INC.,
a Delaware corporation and a wholly owned subsidiary of Parent ("MERGER SUB");
EDUTEST, INC., a Virginia corporation (the "COMPANY"); and the parties
identified on EXHIBIT A (the "DESIGNATED SHAREHOLDERS"). Certain other
capitalized terms used in this Agreement are defined in EXHIBIT B.
RECITALS
A. Parent, Merger Sub and the Company intend to effect a merger of the
Company into Merger Sub in accordance with this Agreement (the "MERGER"). Upon
consummation of the Merger, the Company will cease to exist, and Merger Sub will
become a wholly owned subsidiary of Parent.
B. It is intended that the Merger qualify as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"CODE"). For accounting purposes, it is intended that the Merger be treated as a
purchase transaction.
C. This Agreement has been approved by the respective boards of directors
of Parent, Merger Sub and the Company.
D. The Designated Shareholders own a total of 1,316,228 shares of the
Common Stock of the Company ("COMPANY COMMON STOCK"). The Company also has
authorized and outstanding shares of Series A Preferred Stock ("SERIES A
PREFERRED STOCK") and shares of Series B Preferred Stock ("SERIES B PREFERRED
STOCK"), such Series A Preferred Stock and Series B Preferred Stock constituting
all of the outstanding preferred stock of the Company.
AGREEMENT
The parties to this Agreement agree as follows:
SECTION 1. DESCRIPTION OF TRANSACTION
1.1 MERGER OF THE COMPANY INTO MERGER SUB. Upon the terms and subject to
the conditions set forth in this Agreement, at the Effective Time (as defined in
Section 1.3), the Company shall be merged with and into Merger Sub, and the
separate existence of the Company shall cease. Merger Sub will continue as the
Surviving Corporation in the Merger (the "SURVIVING CORPORATION").
1.2 EFFECT OF THE MERGER. The Merger shall have the effects set forth in
this Agreement and in the applicable provisions of the Virginia Stock
Corporation Act and the Delaware General Corporation Law.
1.
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1.3 CLOSING; EFFECTIVE TIME. The consummation of the transactions
contemplated by this Agreement (the "CLOSING") shall take place at the offices
of Xxxxxx Godward LLP, 0000 Xxxxxxxxx Xxxxx, Xxxxx 0000, Xxx Xxxxx, Xxxxxxxxxx
00000-0000 at 10:00 a.m. Pacific Daylight Time on the day following the Company
Shareholders' Meeting (as defined in Section 5.2), or at such other time and
date not later than August 24, 2000 as Parent shall designate in writing (the
"SCHEDULED CLOSING TIME"). (The date on which the Closing actually takes place
is referred to in this Agreement as the "CLOSING DATE.") Contemporaneously with
or as promptly as practicable after the Closing, a properly executed agreement
or certificate of merger, as appropriate, shall be filed by Parent with the
Secretaries of State of the States of Virginia and Delaware. The Merger shall
become effective at the time of the later of such filings (the "EFFECTIVE
TIME.")
1.4 CERTIFICATES OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS.
Unless otherwise determined by Parent and the Company prior to the Effective
Time:
(a) the Certificate of Incorporation of the Surviving Corporation
shall be the Certificate of Incorporation of Merger Sub as in effect immediately
prior to the Effective Time, which is set forth in EXHIBIT C, provided Parent
may change the name of Surviving Corporation to Edutest, Inc.;
(b) the Bylaws of the Surviving Corporation shall be the Bylaws of
Merger Sub as in effect immediately prior to the Effective Time; and
(c) the directors and officers of the Surviving Corporation
immediately after the Effective Time shall be the individuals identified on
EXHIBIT D.
1.5 STOCK CONSIDERATION; CASH CONSIDERATION; POTENTIAL EARNOUT.
The aggregate consideration payable by Parent and Merger Sub in
connection with the acquisition of Company shall be divided into stock, cash and
potential earnout payments as set forth below:
(a) STOCK CONSIDERATION. Subject to Sections 1.8(c) and 1.9, at the
Effective Time, by virtue of the Merger and without any further action on the
part of Parent, Merger Sub, the Company or any shareholder of the Company:
(i) Each share of Company Common Stock outstanding immediately
prior to the Effective Time shall be converted into and represent the right to
receive the "APPLICABLE FRACTION" (as defined in Section 1.5(a)(iii)(1)) of a
share of the common stock (par value $.001 per share) of Parent (which shares
shall not have been registered for issuance by the SEC) ("PARENT COMMON STOCK").
(ii) Each share of the common stock, $.001 par value, of Merger
Sub shall be one share of common stock of the Surviving Corporation.
(iii) For purposes of this Agreement:
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(1) The "APPLICABLE FRACTION" shall be the fraction: (A)
having a numerator equal to 9,000,000 minus the "BALANCE SHEET DEDUCTION," if
any, divided by the Designated Parent Stock Price; and (B) having a denominator
equal to the Adjusted Fully Diluted Company Share Amount (as defined in
1.5(a)(iii)(2)). (The Company shall produce at the Closing an interim balance
sheet as of the date prior thereto (or such other date as Parent and the Company
shall agree) prepared in accordance with the May 17 Balance Sheet (defined
below) and otherwise in compliance with Section 2.4 hereof. The amount of the
Balance Sheet Deduction shall be the amount, if any, by which the "Accounts
Payable" line item exceeds $239,000; and the parties agree that to the extent
balance sheet underreports Accounts Payable as reasonably determined within 45
days following the Closing by Parent, such amount shall constitute Damages
recoverable under Section 9 hereof.)
(2) The "ADJUSTED FULLY DILUTED COMPANY SHARE AMOUNT" shall
be the sum of (A) the aggregate total number of shares of Company Common Stock
outstanding immediately prior to the Effective Time (including any such shares
that are subject to a repurchase option or risk of forfeiture under any
restricted stock purchase agreement or other agreement), and (B) the aggregate
number of shares of Company Common Stock purchasable under or otherwise subject
to any convertible securities of the Company that may be outstanding immediately
prior to the Effective Time (including all shares of Company Common Stock that
may ultimately be purchased under such convertible securities that are unvested
or are otherwise not then exercisable), if any.
(3) The "DESIGNATED PARENT STOCK PRICE" shall be the average
of the closing sale price of a share of Parent Common Stock as reported on the
NASDAQ National Market for each of the Signing Date and the four (4) consecutive
trading days prior to the Signing Date.
By way of example of the above only, in the event the Adjusted Fully
Diluted Company Share Amount is 2,600,000 shares and the Designated Parent Stock
Price is Eight and 50/100 Dollars ($8.50), then the Applicable Fraction would be
0.40724, which is the fraction obtained by dividing 2,600,000 into 1,058,824
(9,000,000 divided by Eight and 50/100 Dollars ($8.50)).
(iv) On the eighteen (18) month anniversary of the Closing Date,
Parent shall issue to the Equity Holders (subject to Equity Holders' compliance
with Section 1.8 and subject to Section 1.5(e)) based on their respective
ownership of each share of Company Common Stock (taking into account the
Adjusted Fully Diluted Company Share Amount) outstanding immediately prior to
the Effective Time a fraction of a share of Parent Common Stock calculated in
accordance with the formula set forth in Section 1.5(a) above except that in
calculating the Applicable Fraction "9,000,000 minus the Balance Sheet
Deduction, if any" shall be replaced by "2,000,000" (the "HOLD-BACK SHARES").
Subject to Sections 1.5(d) and 1.5(e) below, the appropriate number of shares of
Parent Common Stock issued under this Section 1.5(a)(iv) shall be delivered to
each Equity Holder not later than ten (10) days after the aforementioned
eighteen (18) month anniversary. Once the number of shares of Parent Common
Stock are calculated (which pursuant to this Section 1.5 will be determined at
Closing), such number shall not be increased or decreased prior to delivery to
the Equity Holders for any reason, including a subsequent increase or decrease
in the stock price of the Parent Common Stock (subject to the potential
limitation described in Section 1.5(d) hereof); provided, however,
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that the number of shares may be further reduced pursuant to Section 1.5(e)
below. Each Equity Holder shall have the right to allocate Parent Common Stock
issuable hereunder into one or more certificates of Parent Common Stock upon
reasonable advance written request to Parent prior to issuance.
(b) CASH CONSIDERATION. At the Closing, Parent shall deposit into a
segregated account with its transfer agent an aggregate sum of Two Million One
Hundred Sixty-Two Thousand Five Hundred Dollars ($2,162,500) less (i) any amount
payable by the Company (or the Merger Sub) in connection with the Series B
Redemption (defined in Section 4.2(e) below, and (ii) those certain amounts
payable at Closing by Parent (or Merger Sub or the Company) as set forth in
EXHIBIT N, for the benefit of all Equity Holders, who shall, as of the Effective
Time, receive upon compliance with Section 1.8, a per share amount on a pro rata
basis in accordance with the relative percentages of Parent Common Stock payable
as set forth in Section 1.5(a) above (taking into account the Adjusted Fully
Diluted Company Share Amount).
(c) POTENTIAL EARN-OUT PAYMENTS.
(i) CALCULATION OF POTENTIAL EARN-OUT PAYMENTS. Subject to the
adjustments set forth in Section 1.5(e) below, Parent shall distribute to each
Equity Holder shares of registered Parent Common Stock ("EARN-OUT PAYMENTS") as
follows:
(1) If during the period beginning on the Signing Date and
ending on April 30, 2001 Surviving Corporation generates revenues (see
subparagraph (5) below) in excess of Four Million Dollars ($4,000,000) solely
with respect to any contractual arrangement arising in connection with a
response to a request for information from the State of Washington Department of
Education (RFI#DE-2I) (the "WASHINGTON CONTRACT") for the sale of any services
and products of the Company or Surviving Corporation (provided, however, if the
Company sells pursuant to the Washington Contract any curriculum content or
instruction and products or services that are actually provided by Parent, then
the revenues in connection therewith shall not be deemed revenues generated by
the Washington Contract), then Parent shall promptly issue and deliver to the
Equity Holders based on their respective ownership of each share of Company
Common Stock (taking into account the Adjusted Fully Diluted Company Share
Amount) outstanding immediately prior to the Effective Time: a fraction of a
Registered share of Parent Common Stock calculated in accordance with the
formula set forth in Section 1.5(a) above except that in calculating the
Applicable Fraction "9,000,000 minus the Balance Sheet Deduction, if any" shall
be replaced by "500,000" and the Designated Parent Stock Price shall be the
average closing price of Parent Common Stock as reported by the NASDAQ National
Market on the five (5) consecutive trading days immediately preceding April 30,
2001.
(2) If during the period commencing on the Closing Date or
June 30, 2000, whichever first occurs, and ending on July 31, 2001 Surviving
Corporation generates revenues in excess of Four Million ($4,000,000) in
connection with the sale of "Earn-Out Products" (see subparagraph 5) (including
any revenues generated during the period beginning on the Signing Date and
ending July 31, 2001 in connection with the Washington Contract), then Parent
shall promptly issue to the Equity Holders based on their respective ownership
of each share of Company Common Stock (taking into account the Adjusted Fully
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Diluted Company Share Amount) outstanding immediately prior to the Effective
Time a fraction of a Registered share of Parent Company Stock calculated in
accordance with the formula set forth in Section 1.5(a) above except that in
calculating the Applicable Fraction "9,000,000 minus the Balance Sheet
Deduction, if any" shall be replaced by "1,000,000" and the Designated Parent
Stock Price shall be the average closing price of Parent Common Stock as
reported by the NASDAQ National Market on the five (5) consecutive trading days
immediately preceding July 31, 2001.
(3) If during the period commencing on the Closing Date or
June 30, 2000, whichever first occurs, and ending on July 31, 2001 Surviving
Corporation generates revenues in excess of Five Million Dollars ($5,000,000) in
connection with the sale of Earn-Out Products (including any revenues generated
during the period beginning on the Signing Date and ending July 31, 2001 in
connection with the Washington Contract), then Parent shall promptly issue to
the Equity Holders based on their respective ownership of each share of Company
Common Stock (taking into account the Adjusted Fully Diluted Company Share
Amount) outstanding immediately prior to the Effective Time a fraction of a
Registered share of Parent Common Stock calculated in accordance with the
formula set forth in Section 1.5(a) except that in calculating the Applicable
Fraction "9,000,000 minus the Balance Sheet Deduction, if any" shall be replaced
by "500,000" and the Designated Parent Stock Price shall be the average closing
price of Parent Common Stock as reported by the NASDAQ National Market on the
five (5) consecutive trading days immediately preceding July 31, 2001.
(4) If during the period commencing on the Closing Date or
June 30, 2000, whichever occurs first, and ending on July 31, 2001 Surviving
Corporation generates revenues in excess of Six Million Dollars ($6,000,000) in
connection with the sale of Earn-Out Products (including any revenues generated
during the period beginning on the Signing Date and ending July 31, 2001 in
connection with the Washington Contract), then Parent shall issue to the Equity
Holders based on their respective ownership of each share of Company Common
Stock (taking into account the Adjusted Fully Diluted Company Share Amount)
outstanding immediately prior to the Effective Time a fraction of a Registered
share of Parent Common Stock calculated in accordance with the formula set forth
in Section 1.5(a) above except that in calculating the Applicable Fraction
"9,000,000 minus the Balance Sheet Deduction, if any" shall be replaced by
"500,000" and the Designated Parent Stock Price shall be the average closing
price of Parent Common Stock as reported by the NASDAQ National Market on the
five (5) consecutive trading days immediately preceding July 31, 2001.
(5) For purposes of this Section 1.5 and Section 5.7 hereto,
"generates revenues" or "revenues," and "Earn-Out Products" shall have the
meanings set forth in EXHIBIT E;
(6) The Earn-Out Payments described in Sections
1.5(c)(i)(1)-(4) inclusive are each independent of one another, are cumulative,
and do not offset one another in any way. The aggregate amount of Earn-Out
Payments in Sections 1.5(c)(i)(1)-(4) inclusive may total Two Million Five
Hundred Thousand Dollars ($2,500,000).
(ii) TIMING OF POTENTIAL EARN-OUT PAYMENTS. Subject to Section
1.5(e) below, the Earn-Out Payments, if any, shall be delivered in appropriate
share amounts to
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each of the Equity Holders by Parent following its final determination of its
relevant quarterly financial results and revenues, and shall be made no later
than the eighteen (18) month anniversary of the Closing Date. Once the number of
shares of Parent Common Stock are calculated in accordance with Section
1.5(c)(i)(1)-1.5(c)(i)(4) above, such number shall not be increased or decreased
prior to delivery to the Equity Holders for any reason, including a subsequent
increase or decrease in the stock price of the Parent Common Stock (subject to
the potential limitation described in Section 1.5(d) hereof); provided, however,
that the number of shares may be further reduced pursuant to Section 1.5(e)
below. Parent shall disclose in writing in reasonable detail to each of the
Equity Holders all calculations used to compute each of the Earn-Out Payments,
which disclosure shall include the revenues of the Company and Surviving
Corporation for the pertinent periods. Each Equity Holder shall have the right
to allocate Parent Common Stock issuable hereunder into one or more certificates
of Parent Common Stock upon reasonable advance written request to Parent prior
to issuance. Such written disclosure shall be delivered to each of the Equity
Holders not later than sixty (60) days following April 30, 2001 with respect to
Section 1.5(c)(i)(2) above and July 31, 2001 with respect to Sections
1.5(c)(i)(1)-1.5(c)(i)(4) above.
(d) LIMITATION ON STOCK CONSIDERATION. Notwithstanding anything herein
to the contrary, in no event shall Parent be required to issue, in aggregate,
pursuant to Section 1.5(a) and 1.5(c) in excess of that number of shares of
Parent Common Stock equal to 19.99% of the number of shares of Parent Common
Stock outstanding as of immediately prior to the Effective Time; and in lieu of
any such issuance Parent shall pay to the Equity Holders cash equal to value of
the Parent Common Stock not issuable pursuant hereto (valued pursuant to the
requirements and with respect to the trading days set forth herein). Such cash
shall be delivered to the Equity Holders at the same time as Parent Common Stock
that would have been issued but for this Section 1.5(d).
(e) RIGHT OF SETOFF. Upon written notice delivered to the Designated
Shareholders prior to the eighteen (18) month anniversary of the Closing Date
specifying in reasonable detail the basis for such set-off, Parent shall have
the right, in its discretion, to set off and apply against any indemnification
obligations under SECTION 9 the Hold-Back Shares described in Section 1.5(a)(iv)
above and the Earn-Out Payments described in Section 1.5(c). If such notice is
not delivered prior to such eighteen (18) month anniversary, Parent shall be
deemed to have waived irrevocably its offset rights with respect to the
Hold-Back Shares and the Earn-Out Payments.
1.6 NO OPTIONS; CONVERTIBLE SECURITIES. At the Effective Time, no Company
Option (as defined in Section 2.3 hereof), warrant or convertible security
whatsoever will be outstanding, whether vested or unvested.
1.7 CLOSING OF THE COMPANY'S TRANSFER BOOKS. At the Effective Time,
holders of certificates representing shares of the Company's capital stock that
were outstanding immediately prior to the Effective Time shall cease to have any
rights as shareholders of the Company, and the stock transfer books of the
Company shall be closed with respect to all shares of such capital stock
outstanding immediately prior to the Effective Time. No further transfer of any
such shares of the Company's capital stock shall be made on such stock transfer
books after the Effective Time. If, after the Effective Time, a valid
certificate previously representing any of
6.
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such shares of the Company's capital stock (a "COMPANY STOCK CERTIFICATE") is
presented to the Surviving Corporation or Parent, such Company Stock Certificate
shall be canceled and shall be exchanged as provided in Section 1.8.
1.8 EXCHANGE OF CERTIFICATES.
(a) At the Closing, Parent shall deposit with its transfer agent for
the benefit of the Equity Holders, certificates representing the shares of
Parent Common Stock and, if after the Effective Time, if applicable, any cash,
dividends or other distributions with respect to Parent Common Stock to be
issued or paid in connection with Section 1.5(a) (including cash in lieu of
fractional shares of Parent Common Stock. Each Equity Holder shall have the
right to allocate Parent Common Stock issuable hereunder into one or more
certificates of Parent Common Stock upon reasonable advance written request to
Parent prior to issuance. Promptly after the Effective Time, Parent will send to
the holders of Company Stock Certificates (i) a letter of transmittal in
customary form and containing such provisions as Parent may reasonably specify
(including any specified representations and warranties), and (ii) instructions
for use in effecting the surrender of Company Stock Certificates in exchange for
certificates representing unregistered Parent Common Stock bearing Parent's
standard Securities Act of 1933 legend and a lockup legend in substantially the
following forms:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH
SHARES MAY NOT BE SOLD, TRANSFERRED OR PLEDGED IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL (WHICH MAY BE
COUNSEL FOR THE COMPANY) REASONABLY ACCEPTABLE TO IT STATING THAT SUCH SALE OR
TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF
THE ACT.
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN
ACCORDANCE WITH THE TERMS OF A LOCKUP AGREEMENT BETWEEN THE REGISTERED HOLDER
HEREOF AND THE COMPANY, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE
COMPANY.
Upon surrender of a Company Stock Certificate to Parent's transfer agent
for exchange, together with a duly executed letter of transmittal and such other
documents as may be reasonably required by Parent, the holder of such Company
Stock Certificate shall be entitled to receive in exchange therefor (i) a
certificate representing the number of whole shares of Parent Common Stock that
such holder has the right to receive pursuant to the provisions of this Section
1.8, (ii) the cash payment to which the holder of such Company Stock Certificate
is entitled pursuant to Section 1.8(b) and (iii) any unpaid dividends and other
distributions and cash in lieu of any fractional shares pursuant to Section
1.8(b) below; and the Company Stock Certificate so surrendered shall be
canceled. Until surrendered as contemplated by this Section 1.8, each Company
Stock Certificate shall be deemed, from and after the Effective Time, to
represent only the right to receive upon such surrender a certificate
representing shares of Parent Common Stock (and cash in lieu of any fractional
share of Parent Common Stock) and the aforementioned cash payment as
contemplated by this Section 1.8. If any Company Stock Certificate shall have
7.
17
been lost, stolen or destroyed, Parent may, in its discretion and as a condition
precedent to the issuance of any certificate representing Parent Common Stock,
require the owner of such lost, stolen or destroyed Company Stock Certificate to
provide an affidavit and indemnification and, if required by Parent or Parent's
transfer agent to deliver a bond (in such sum as Parent may reasonably direct)
as security against any claim that may be made against Parent or Surviving
Corporation with respect to such Company Stock Certificate.
(b) No dividends or other distributions declared or made with respect
to Parent Common Stock with a record date after the Effective Time shall be paid
to the holder of any unsurrendered Company Stock Certificate with respect to the
shares of Parent Common Stock represented thereby, and no cash payment in lieu
of any fractional share shall be paid to any such holder, until such holder
surrenders such Company Stock Certificate in accordance with this Section 1.8
(at which time such holder shall be entitled to receive all such dividends and
distributions and such cash payment).
(c) No fractional shares of Parent Common Stock shall be issued in
connection with the Merger, and no certificates for any such fractional shares
shall be issued. In lieu of such fractional shares, any holder of capital stock
of the Company who would otherwise be entitled to receive a fraction of a share
of Parent Common Stock (after aggregating all fractional shares of Parent Common
Stock issuable to such holder) shall, upon surrender of such holder's Company
Stock Certificate(s), be paid in cash the dollar amount (rounded to the nearest
whole cent), without interest, determined by multiplying such fraction by the
Designated Parent Stock Price.
(d) Parent and the Surviving Corporation shall be entitled to deduct
and withhold from any consideration payable or otherwise deliverable to any
holder or former holder of capital stock of the Company pursuant to this
Agreement such amounts as Parent or Surviving Corporation may be required to
deduct or withhold therefrom under the Code or under any provision of state,
local or foreign tax law. To the extent such amounts are so deducted or
withheld, such amounts shall be treated for all purposes under this Agreement as
having been paid to the Person to whom such amounts would otherwise have been
paid. Prior to the Closing Date, Parent and the Company shall consent in writing
to the amount of withholdings, if any, which consent shall not be unreasonably
withheld.
(e) Neither Parent nor the Surviving Corporation shall be liable to
any holder or former holder of capital stock of the Company for any shares of
Parent Common Stock (or dividends or distributions with respect thereto), or for
any cash amounts, delivered to any public official pursuant to any applicable
abandoned property, escheat or similar law.
(f) Notwithstanding anything to the contrary set forth herein, in no
event shall any Equity Holders receive Parent Common Stock pursuant to Section
1.5(a)(iv) or 1.5(c) until such Equity Holder surrenders Company Common Stock
Certificates as provided above (or complied with the requirements set forth
above in the event of lost Company Stock Certificate(s)).
1.9 DISSENTING SHARES.
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(a) Notwithstanding anything to the contrary contained in this
Agreement, any shares of capital stock of the Company that, as of the Effective
Time, are or may become "dissenter's shares" within the meaning of Article 15 of
the Virginia Stock Corporation Act shall not be converted into or represent the
right to receive Parent Common Stock or cash in accordance with Section 1.5 (or
cash in lieu of fractional shares in accordance with Section 1.8(c)), and the
holder or holders of such shares shall be entitled only to such rights as may be
granted to such holder or holders in Article 15 of the Virginia Stock
Corporation Act; provided, however, that if the status of any such shares as
"dissenter's shares" shall not be perfected, or if any such shares shall lose
their status as "dissenter's shares," then, as of the later of the Effective
Time or the time of the failure to perfect such status or the loss of such
status, such shares shall automatically be converted into and shall represent
only the right to receive (upon the surrender of the certificate or certificates
representing such shares) Parent Common Stock and cash in accordance with
Section 1.5 (and cash in lieu of fractional shares in accordance with Section
1.8(c)), without any interest.
(b) The Company shall give Parent (i) prompt notice of any written
demand received by the Company prior to the Effective Time to require the
Company to purchase shares of capital stock of the Company pursuant to Article
15 of the Virginia Stock Corporation Act and of any other demand, notice or
instrument delivered to the Company prior to the Effective Time pursuant to the
Virginia Stock Corporation Act, and (ii) the opportunity to participate in all
negotiations and proceedings with respect to any such demand, notice or
instrument. The Company shall not make any payment or settlement offer prior to
the Effective Time with respect to any such demand unless Parent shall have
consented in writing to such payment or settlement offer, which consent shall
not be unreasonably withheld or delayed.
1.10 TAX CONSEQUENCES. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section 368 of the
Code. The parties to this Agreement hereby adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Treasury Regulations.
1.11 ACCOUNTING TREATMENT. For accounting purposes, the Merger is intended
to be treated as a purchase transaction.
1.12 FURTHER ACTION. If, at any time after the Effective Time, any further
action is determined by Parent to be necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation or Parent with
full right, title and possession of and to all rights and property of Merger Sub
and the Company, the officers and directors of the Surviving Corporation and
Parent shall be fully authorized (in the name of Merger Sub, in the name of the
Company and otherwise) to take such action.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE DESIGNATED
SHAREHOLDERS
The Company and the Designated Shareholders jointly and severally
represent and warrant, to and for the benefit of the Indemnitees as of the
Signing Date, as follows:
2.1 DUE ORGANIZATION; NO SUBSIDIARIES; ETC.
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(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the Commonwealth of Virginia and has all
necessary power and authority: (i) to conduct its business in the manner in
which its business is currently being conducted; (ii) to own and use its assets
in the manner in which its assets are currently owned and used; and (iii) to
perform its obligations under all Company Contracts.
(b) Except as set forth in Part 2.1 of the Disclosure Schedule, the
Company has not conducted any business under or otherwise used, for any purpose
or in any jurisdiction, any fictitious name, assumed name, trade name or other
name, other than the names "xxxXxxx.xxx," "Edutest" and "edutest."
(c) The Company is not and has not been required to be qualified,
authorized, registered or licensed to do business as a foreign corporation in
any jurisdiction other than the jurisdictions identified in Part 2.1 of the
Disclosure Schedule, except where the failure to be so qualified, authorized,
registered or licensed has not had and will not have a Material Adverse Effect
on the Company. The Company is in good standing as a foreign corporation in each
of the jurisdictions identified in Part 2.1 of the Disclosure Schedule.
(d) Part 2.1 of the Disclosure Schedule accurately sets forth (i) the
names of the members of the Company's board of directors, (ii) the names of the
members of each committee of the Company's board of directors, and (iii) the
names and titles of the Company's officers.
(e) The Company does not own any controlling interest in any Entity
and, except for the equity interests identified in Part 2.1 of the Disclosure
Schedule, the Company has never owned, beneficially or otherwise, any shares or
other securities of, or any direct or indirect equity interest in, any Entity.
The Company has not agreed and is not obligated to make any future investment in
or capital contribution to any Entity. The Company has not guaranteed and is not
responsible or liable for any obligation of any of the Entities in which it owns
or has owned any equity interest.
2.2 ARTICLES OF INCORPORATION AND BYLAWS; RECORDS. The Company has
delivered to Parent accurate and complete copies of: (1) the Company's articles
of incorporation and bylaws, including all amendments thereto; (2) the stock
records of the Company; and (3) except as set forth in Part 2.2 of the
Disclosure Schedule, the minutes and other records of the meetings and other
proceedings (including any actions taken by written consent or otherwise without
a meeting) of the shareholders of the Company, the board of directors of the
Company and all committees of the board of directors of the Company. There have
been no formal meetings or other proceedings of the shareholders of the Company,
the board of directors of the Company or any committee of the board of directors
of the Company that are not fully reflected in such minutes or other records.
There has not been any violation of any of the provisions of the Company's
articles of incorporation or bylaws, and the Company has not taken any action
that is inconsistent in any material respect with any resolution adopted by the
Company's shareholders, the Company's board of directors or any committee of the
Company's board of directors. The books of account, stock records, minute books
and other records of the Company are accurate, up-to-date and complete in all
material respects, and have been maintained in accordance with prudent business
practices.
10.
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2.3 CAPITALIZATION, ETC.
(a) The authorized capital stock of the Company consists of: (i)
5,000,000 shares of Common Stock, $0.01, par value, of which 1,597,130 shares
have been issued and are outstanding as of the date of this Agreement; and (ii)
621,801 shares of Preferred Stock (with $.01 par value per share), of which
521,801 have been designated "SERIES A PREFERRED STOCK" and 100,000 have been
designated "SERIES B PREFERRED STOCK." As of the date of this Agreement there
are issued and outstanding 521,801 shares of Series A Preferred Stock and
100,000 shares of Series B Preferred Stock. Each outstanding share of Series A
Preferred Stock and Series B Preferred Stock is convertible into one share of
Company Common Stock. All of the outstanding shares of Company Common Stock,
Series A Preferred Stock and Series B Preferred Stock have been duly authorized
and validly issued, and are fully paid and non-assessable. As of immediately
prior to the Closing there shall be no Company stock option (including the
Company Options which shall have been converted into capital stock of the
Company or cancelled), warrant, convertible or contingent security whatsoever
outstanding. Except as set forth in Part 2.3 of the Disclosure Schedule, there
is no: (i) outstanding subscription, option, call, warrant or right (whether or
not currently exercisable, vested or unvested) to acquire any shares of the
capital stock or other securities of the Company ("COMPANY OPTION"); (ii)
outstanding security, instrument or obligation that is or may become convertible
into or exchangeable for any shares of the capital stock or other securities of
the Company; (iii) Contract under which the Company is or may become obligated
to sell or otherwise issue any shares of its capital stock or any other
securities; or (iv) to the best of the knowledge of the Company and the
Designated Shareholders, a condition or circumstance that may give rise to or
provide a basis for the assertion of a claim by any Person to the effect that
such Person is entitled to acquire or receive any shares of capital stock or
other securities of the Company.
(b) All outstanding shares of Company Common Stock, Series A Preferred
Stock, Series B Preferred Stock and all outstanding Company Options, have been
issued and granted in compliance with (i) all applicable securities laws and
other applicable Legal Requirements, and (ii) all requirements set forth in
applicable Contracts.
(c) Except as set forth in Part 2.3 of the Disclosure Schedule, the
Company has never repurchased, redeemed or otherwise reacquired any shares of
capital stock or other securities of the Company. Any and all securities so
reacquired by the Company were reacquired in compliance with (i) the applicable
provisions of the Virginia Stock Corporation Act and all other applicable Legal
Requirements, and (ii) all requirements set forth in applicable restricted stock
purchase agreements and other applicable Contracts.
2.4 FINANCIAL STATEMENTS.
(a) The Company has delivered to Parent the following financial
statements and notes (collectively, the "COMPANY FINANCIAL STATEMENTS"):
(i) The unaudited balance sheets of the Company as of December
31, 1999, and the related unaudited income statements, statements of
shareholders' equity and statements of cash flows of the Company for the years
then ended (or such shorter period the Company may have been in existence),
relating thereto; and
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(ii) the unaudited balance sheet of the Company as of April 30,
2000 (the "UNAUDITED INTERIM BALANCE SHEET"), and the related unaudited income
statement of the Company for the four (4) months then ended.
(b) The Company Financial Statements are accurate and complete in all
material respects and present fairly the financial position of the Company as of
the respective dates thereof and the results of operations and (in the case of
the financial statements referred to in Section 2.4(a)(i)) cash flows of the
Company for the periods covered thereby. The Company Financial Statements have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods covered (except (i) as
described therein; (ii) as set forth in Paragraph 2.4 of the Disclosure
Schedule, (iii) that not all footnotes required under generally accepted
accounting principles are extant, and (v) that the financial statements referred
to in Section 2.4(a)(ii) do not contain footnotes and are subject to normal and
recurring year-end audit adjustments, which will not, individually or in the
aggregate, be material in magnitude).
2.5 ABSENCE OF CHANGES. Except as set forth in Part 2.5 of the Disclosure
Schedule, since April 30, 2000:
(a) there has not been any material adverse change in the Company's
business, condition, assets, liabilities, operations, financial performance or
prospects, taken as a whole, and, to the best of the knowledge of the Company
and the Designated Shareholders, no event has occurred that will, or could
reasonably be expected to, have a Material Adverse Effect on the Company;
(b) there has not been any material loss, damage or destruction to, or
any material interruption in the use of, any of the Company's assets (whether or
not covered by insurance);
(c) the Company has not declared, accrued, set aside or paid any
dividend or made any other distribution in respect of any shares of capital
stock, and has not repurchased, redeemed or otherwise reacquired any shares of
capital stock or other securities;
(d) the Company has not sold, issued or authorized the issuance of (i)
any capital stock or other security (except for Company Common Stock issued upon
the exercise of outstanding Company Options), (ii) any option or right to
acquire any capital stock or any other security (except for Company Options
described in Part 2.3 of the Disclosure Schedule), or (iii) any instrument
convertible into or exchangeable for any capital stock or other security;
(e) the Company has not amended or waived any of its rights under (i)
any provision of any of its stock option plans, (ii) any provision of any
agreement evidencing any outstanding Company Option, or (iii) any restricted
stock purchase agreement;
(f) there has been no amendment to the Company's articles of
incorporation or bylaws, and the Company has not effected or been a party to any
Acquisition Transaction, recapitalization, reclassification of shares, stock
split, reverse stock split or similar transaction;
12.
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(g) the Company has not formed any subsidiary or acquired any equity
interest or other interest in any other Entity;
(h) the Company has not made any capital expenditure which, when added
to all other capital expenditures made on behalf of the Company since April 30,
2000, exceeds Twenty-Five Thousand Dollars ($25,000);
(i) the Company has not (i) entered into or permitted any of the
assets owned or used by it to become bound by any Contract that is or would
constitute a Material Contract (as defined in Section 2.10(a)), or (ii) amended
or prematurely terminated, or waived any material right or remedy under, any
such Contract;
(j) the Company has not (i) acquired, leased or licensed any right or
other asset from any other Person, (ii) sold or otherwise disposed of, or leased
or licensed, any right or other asset to any other Person, or (iii) waived or
relinquished any right, except for immaterial rights or other immaterial assets
acquired, leased, licensed or disposed of in the ordinary course of business and
consistent with the Company's past practices;
(k) the Company has not written off as uncollectible, or established
any extraordinary reserve with respect to, any account receivable or other
indebtedness;
(l) the Company has not made any pledge of any of its assets or
otherwise permitted any of its assets to become subject to any Encumbrance,
except for pledges of immaterial assets made in the ordinary course of business
and consistent with the Company's past practices;
(m) the Company has not (i) lent money to any Person (other than
pursuant to routine travel advances made to employees in the ordinary course of
business), or (ii) incurred or guaranteed any indebtedness for borrowed money;
(n) the Company has not (i) established or adopted any Employee
Benefit Plan, (ii) paid any bonus or made any profit-sharing or similar payment
to, or increased the amount of the wages, salary, commissions, fringe benefits
or other compensation or remuneration payable to, any of its directors, officers
or employees, or (iii) hired any new employee;
(o) the Company has not changed any of its methods of accounting or
accounting practices in any respect;
(p) the Company has not made any Tax election;
(q) the Company has not commenced or settled any Legal Proceeding;
(r) the Company has not entered into any material transaction or taken
any other material action outside the ordinary course of business or
inconsistent with its past practices; and
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(s) the Company has not agreed or committed to take any of the actions
referred to in clauses "(c)" through "(r)" above.
2.6 TITLE TO ASSETS.
(a) The Company owns, and has good, valid and marketable title to, all
assets purported to be owned by it, including: (i) all assets reflected on the
Unaudited Interim Balance Sheet; (ii) all assets referred to in Parts 2.1,
2.7(b) and 2.9 of the Disclosure Schedule and all of the Company's rights under
the Contracts identified in Part 2.10 of the Disclosure Schedule; and (iii) all
other assets reflected in the Company's books and records as being owned by the
Company. Except as set forth in Part 2.6 of the Disclosure Schedule, all of said
assets are owned by the Company free and clear of any liens or other
Encumbrances, except for (x) any lien for current taxes not yet due and payable,
and (y) minor liens that have arisen in the ordinary course of business and that
do not (in any case or in the aggregate) materially detract from the value of
the assets subject thereto or materially impair the operations of the Company.
(b) Part 2.6 of the Disclosure Schedule identifies all assets that are
material to the business of the Company and that are being leased or licensed to
the Company.
2.7 BANK ACCOUNTS; RECEIVABLES.
(a) Part 2.7(a) of the Disclosure Schedule provides accurate
information with respect to each account maintained by or for the benefit of the
Company at any bank or other financial institution.
(b) Part 2.7(b) of the Disclosure Schedule provides an accurate and
complete breakdown and aging of all accounts receivable, notes receivable and
other receivables of the Company as of April 30, 2000. Except as set forth in
Part 2.7(b) of the Disclosure Schedule, all existing accounts receivable of the
Company (including those accounts receivable reflected on the Unaudited Interim
Balance Sheet that have not yet been collected and those accounts receivable
that have arisen since April 30, 2000 and have not yet been collected) (i)
represent valid obligations of customers of the Company arising from bona fide
transactions entered into in the ordinary course of business, (ii) are current
and will be collected in full when due, without any counterclaim or set off (net
of an allowance for doubtful accounts not to exceed Fifteen Thousand Dollars
($15,000) in the aggregate).
2.8 EQUIPMENT; LEASEHOLD.
(a) All material items of equipment and other tangible assets owned by
or leased to the Company are adequate for the uses to which they are being put,
are in good condition and repair (ordinary wear and tear excepted) and are
adequate for the conduct of the Company's business in the manner in which such
business is currently being conducted.
(b) The Company does not own any real property or any interest in real
property, except for the leasehold created under the real property lease
identified in Part 2.10 of the Disclosure Schedule.
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2.9 PROPRIETARY ASSETS.
(a) Part 2.9(a)(i) of the Disclosure Schedule sets forth, with respect
to each Company Proprietary Asset registered with any Governmental Body or for
which an application has been filed with any Governmental Body, (i) a brief
description of such Proprietary Asset, and (ii) the names of the jurisdictions
covered by the applicable registration or application. Part 2.9(a)(iii) of the
Disclosure Schedule identifies and provides a brief description of each
Proprietary Asset licensed to the Company by any Person (except for any
Proprietary Asset that is licensed to the Company under any third party software
license generally available to the public at a cost of less than Ten Thousand
Dollars ($10,000), and identifies the license agreement under which such
Proprietary Asset is being licensed to the Company. Except as set forth in Part
2.9(a)(iv) of the Disclosure Schedule, the Company has good, valid and
marketable title to all of the Company Proprietary Assets identified in Parts
2.9(a)(i) and 2.9(a)(ii) of the Disclosure Schedule, free and clear of all liens
and other Encumbrances, and has a valid right to use all Proprietary Assets
identified in Part 2.9(a)(iii) of the Disclosure Schedule. Except as set forth
in Part 2.9(a)(v) of the Disclosure Schedule, the Company is not obligated to
make any payment to any Person for the use of any Company Proprietary Asset.
Except as set forth in Part 2.9(a)(vi) of the Disclosure Schedule, the Company
has not developed jointly with any other Person any Company Proprietary Asset
with respect to which such other Person has any rights.
(b) The Company has taken all commercially reasonable measures and
precautions necessary to protect and maintain the confidentiality and secrecy of
all Company trade secrets. Except as set forth in Part 2.9(b) of the Disclosure
Schedule, the Company has not (other than pursuant to license agreements
identified in Part 2.10 of the Disclosure Schedule) disclosed or delivered to
any Person, or permitted the disclosure or delivery to any Person of, (i) the
source code, or any portion or aspect of the source code, of any Company
Proprietary Asset, or (ii) the object code, or any portion or aspect of the
object code, of any Company Proprietary Asset.
(c) None of the Company Proprietary Assets infringes upon the patents,
trademarks or copyrights owned by any other Person. Except as set forth in Part
2.9(c) of the Disclosure Schedule, to the best of the knowledge of the Company
and its Designated Shareholders, the Company is not infringing, misappropriating
or making any unlawful use of, and the Company has not at any time infringed,
misappropriated or made any unlawful use of, or received any notice or other
communication (in writing or otherwise) of any actual, alleged, possible or
potential infringement, misappropriation or unlawful use of, any Proprietary
Asset owned or used by any other Person. To the best of the knowledge of the
Company and the Designated Shareholders, no other Person is infringing,
misappropriating or making any unlawful use of any Proprietary Asset owned by
the Company.
(d) Except as set forth in Part 2.9(d) of the Disclosure Schedule: (i)
each Company Proprietary Asset conforms in all material respects with any
specification, documentation, performance standard, representation or statement
made or provided in writing with respect thereto by or on behalf of the Company
to Parent or any customer of the Company; and (ii) there has not been any claim
by any customer or other Person alleging that any Company Proprietary Asset
(including each version thereof that has ever been licensed or otherwise made
available by the Company to any Person) does not conform in all material
respects with any
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specification, documentation, performance standard, representation or statement
made or provided in writing by or on behalf of the Company, and, to the best of
the knowledge of the Company and the Designated Shareholders, there is no basis
for any such claim. The Company has not established reserves on the Unaudited
Interim Balance Sheet to cover all costs associated with any obligations that
the Company may have with respect to the correction or repair of programming
errors or other defects in the Company Proprietary Assets.
(e) The Company Proprietary Assets constitute all the Proprietary
Assets necessary to enable the Company to conduct its business in the manner in
which such business has been, is being and, to the best of the knowledge of the
Company and the Designated Shareholders, the Company currently plans will be
conducted. Except as set forth in Part 2.9(e) of the Disclosure Schedule, (i)
the Company has not licensed any of the Company Proprietary Assets to any Person
on an exclusive basis, and (ii) the Company has not entered into any covenant
not to compete or Contract limiting its ability to exploit fully any of its
Proprietary Assets or to transact business in any market or geographical area or
with any Person.
(f) Except as set forth in Part 2.9(f) of the Disclosure Schedule, (i)
all current and former employees of the Company have executed and delivered to
the Company an agreement (containing no exceptions to or exclusions from the
scope of its coverage) that is substantially identical to the form of
Confidential Information and Invention Assignment Agreement previously delivered
to Parent, or otherwise entered into similar agreements as to which copies have
been delivered to Parent, and (ii) all current and former consultants and
independent contractors to the Company have executed and delivered to the
Company an agreement (containing no exceptions to or exclusions from the scope
of its coverage) that is substantially identical to the form of Consultant
Confidential Information and Invention Assignment Agreement previously delivered
to Parent or otherwise entered into similar agreements as to which copies have
been delivered to Parent.
2.10 CONTRACTS.
(a) Part 2.10 of the Disclosure Schedule identifies:
(i) each Company Contract relating to the employment of, or the
performance of services by, any employee, consultant or independent contractor;
(ii) each Company Contract relating to the acquisition, transfer,
use, development, sharing or license of any technology or any Proprietary Asset;
(iii) each Company Contract imposing any restriction on the
Company's right or ability (A) to compete with any other Person, (B) to acquire
any product or other asset or any services from any other Person, to sell any
product or other asset to or perform any services for any other Person or to
transact business or deal in any other manner with any other Person, or (C)
develop or distribute any technology;
(iv) each Company Contract creating or involving any agency
relationship, distribution arrangement or franchise relationship;
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(v) each Company Contract relating to the acquisition, issuance
or transfer of any securities;
(vi) each Company Contract relating to the creation of any
Encumbrance with respect to any asset of the Company;
(vii) each Company Contract involving or incorporating any
guaranty, any pledge, any performance or completion bond, any indemnity or any
surety arrangement;
(viii) each Company Contract creating or relating to any
partnership or joint venture or any sharing of revenues, profits, losses, costs
or liabilities;
(ix) each Company Contract relating to the purchase or sale of
any product or other asset by or to, or the performance of any services by or
for, any Related Party (as defined in Section 2.18);
(x) each Company Contract constituting or relating to a
Government Contract or Government Bid;
(xi) any other Company Contract that was entered into outside the
ordinary course of business or was inconsistent with the Company's past
practices;
(xii) any other Company Contract that has a term of more than
sixty (60) days and that may not be terminated by the Company (without penalty)
within sixty (60) days after the delivery of a termination notice by the
Company; and
(xiii) any other Company Contract that contemplates or involves
(A) the payment or delivery of cash or other consideration in an amount or
having a value in excess of Ten Thousand Dollars ($10,000) in the aggregate, or
(B) the performance of services having a value in excess of Ten Thousand Dollars
($10,000) in the aggregate.
(Contracts in the respective categories described in clauses "(i)" through
"(xiii)" above are referred to in this Agreement as "MATERIAL CONTRACTS.")
(b) The Company has delivered to Parent accurate and complete copies
of all written Contracts identified in Part 2.10 of the Disclosure Schedule,
including all amendments thereto. Part 2.10 of the Disclosure Schedule provides
an accurate description of the terms of each Company Contract that is not in
written form. Except as otherwise set forth in Part 2.10 of the Disclosure
Schedule, each Contract identified in Part 2.10 of the Disclosure Schedule is
valid and in full force and effect, and, to the best of the knowledge of the
Company and the Designated Shareholders, is enforceable by the Company in
accordance with its terms, subject to (i) laws of general application relating
to bankruptcy, insolvency and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief and other equitable remedies.
(c) Except as set forth in Part 2.10 of the Disclosure Schedule:
(i) the Company has not in any material respects violated or
breached, or committed any default under, any Company Contract, and, to the best
of the knowledge of the
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Company and the Designated Shareholders, no other Person has in any material
respects violated or breached, or committed any default under, any Company
Contract;
(ii) to the best of the knowledge of the Company and the
Designated Shareholders, no event has occurred, and no circumstance or condition
exists, that (with or without notice or lapse of time) will, or could reasonably
be expected to, (A) result in a violation or breach of any of the provisions of
any Company Contract, (B) give any Person the right to declare a default or
exercise any remedy under any Company Contract, (C) give any Person the right to
accelerate the maturity or performance of any Company Contract, or (D) give any
Person the right to cancel, terminate or modify any Company Contract;
(iii) since January 1, 1999, the Company has not received any
written notice regarding any actual or possible violation or breach of, or
default under, any Company Contract; and
(iv) the Company has not waived any of its rights under any
Company Contract which could reasonably be expected to have a Material Adverse
Effect on the Company.
(d) No Person is renegotiating, or has a right pursuant to the terms
of any Company Contract to renegotiate, any material amount paid or payable to
the Company under any Material Contract or any other material term or provision
of any Material Contract.
(e) The Contracts identified in Part 2.10 of the Disclosure Schedule
collectively constitute all of the Contracts necessary to enable the Company to
conduct its business in the manner in which its business is currently being
conducted.
(f) Part 2.10 of the Disclosure Schedule identifies and provides a
brief description of each proposed Contract as to which any bid, offer, award,
written proposal, term sheet or similar document has been submitted or received
by the Company since April 30, 2000.
(g) Part 2.10 of the Disclosure Schedule provides an accurate
description and breakdown of the Company's backlog under Company Contracts.
(h) Except as set forth in Part 2.10(h) of the Disclosure Schedule:
(i) the Company has not had any determination of noncompliance,
entered into any consent order or undertaken any internal investigation relating
directly or indirectly to any Government Contract or Government Bid;
(ii) the Company has complied in all material respects with all
Legal Requirements with respect to all Government Contracts and Government Bids;
(iii) the Company has not entered into any Government Contract,
other than contracts in the ordinary course of business with school districts.
(iv) all facts set forth in or acknowledged by the Company in any
certification, representation or disclosure statement submitted by the Company
with respect to
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any Government Contract or Government Bid were current, accurate and complete in
all material respects as of the date of submission;
(v) neither the Company nor any of its employees has been
debarred or suspended from doing business with any Governmental Body, and, to
the best of the knowledge of the Company and the Designated Shareholders, no
circumstances exist that would warrant the institution of debarment or
suspension proceedings against the Company or any employee of the Company;
(vi) no negative determinations of responsibility have been
issued against the Company in connection with any Government Contract or
Government Bid;
(vii) no direct or indirect costs incurred by the Company have
been questioned or disallowed as a result of a finding or determination of any
kind by any Governmental Body;
(viii) no Governmental Body, and no prime contractor or
higher-tier subcontractor of any Governmental Body, has withheld or set off, or,
to the best of the knowledge of the Company and the Designated Shareholders,
threatened to withhold or set off, any amount due to the Company under any
Government Contract;
(ix) to the best of the knowledge of the Company and the
Designated Shareholders, there are not and have not been any irregularities,
misstatements or omissions relating to any Government Contract or Government Bid
that have led to or could reasonably be expected to lead to (A) any
administrative, civil, criminal or other investigation, Legal Proceeding or
indictment involving the Company or any of its employees, (B) the questioning or
disallowance of any costs submitted for payment by the Company, (C) the
recoupment of any payments previously made to the Company, (D) a finding or
claim of fraud, defective pricing, mischarging or improper payments on the part
of the Company, or (E) the assessment of any penalties or damages of any kind
against the Company;
(x) there is not and has not been any (A) outstanding claim
against the Company by, or dispute involving the Company with, any prime
contractor, subcontractor, vendor or other Person arising under or relating to
the award or performance of any Government Contract, (B) fact known by the
Company or any of the Designated Shareholders upon which any such claim could
reasonably be expected to be based or which may give rise to any such dispute,
(C) final decision of any Governmental Body against the Company;
(xi) the Company is not undergoing and has not undergone any
audit, and neither the Company nor any of the Designated Shareholders has any
knowledge of any basis for any impending audit, arising under or relating to any
Government Contract (other than normal routine audits conducted in the ordinary
course of business);
(xii) the Company has not entered into any financing arrangement
or assignment of proceeds with respect to the performance of any Government
Contract;
(xiii) no payment has been made by the Company or
by any Person acting on the Company's behalf to any Person (other than to any
bona fide employee or agent (as
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defined in subpart 3.4 of the FAR) of the Company) which is or was contingent
upon the award of any Government Contract or which would otherwise be in
violation of any applicable procurement law or regulation or any other Legal
Requirement;
(xiv) the Company's cost accounting system is in compliance with
applicable regulations and other applicable Legal Requirements, and has not been
determined by any Governmental Body not to be in compliance with any Legal
Requirement;
(xv) the Company has complied with all applicable regulations and
other Legal Requirements and with all applicable contractual requirements
relating to the placement of legends or restrictive markings on technical data,
computer software and other Proprietary Assets;
(xvi) in each case in which the Company has delivered or
otherwise provided any technical data, computer software or Company Proprietary
Asset to any Governmental Body in connection with any Government Contract, the
Company has marked such technical data, computer software or Company Proprietary
Asset with all markings and legends (including any "restricted rights" legend
and any "government purpose license rights" legend) necessary (under the FAR or
other applicable Legal Requirements) to ensure that no Governmental Body or
other Person is able to acquire any unlimited rights with respect to such
technical data, computer software or Company Proprietary Asset;
(xvii) the Company has not made any disclosure to any
Governmental Body pursuant to any voluntary disclosure agreement;
(xviii) to the extent necessary or applicable, the Company has
reached agreement with the cognizant government representatives approving and
"closing" all indirect costs charged to Government Contracts;
(xix) the Company is not and will not be required to make any
filing with or give any notice to, or to obtain any Consent from, any
Governmental Body under or in connection with any Government Contract or
Government Bid as a result of or by virtue of (A) the execution, delivery of
performance of this Agreement or any of the other agreements referred to in this
Agreement, or (B) the consummation of the Merger or any of the other
transactions contemplated by this Agreement; and
(i) As of the Closing, there shall not be any Company Contracts that
are reseller agreements ("RESELLER AGREEMENTS").
(j) As of the Closing, there shall not be any Test Item Contracts (as
defined in Section 5.21) other than those described on Part 2.10(j) of the
Disclosure Schedule.
2.11 LIABILITIES. The Company has no accrued, contingent or other
liabilities of any nature, either matured or unmatured (whether or not required
to be reflected in financial statements in accordance with generally accepted
accounting principles, and whether due or to become due), except for: (a)
liabilities identified as such in the "liabilities" column of the Unaudited
Interim Balance Sheet; (b) accounts payable or accrued salaries that have been
incurred by the Company since April 30, 2000 in the ordinary course of business
and consistent
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with the Company's past practices; (c) liabilities under the Company Contracts
identified in Part 2.10 of the Disclosure Schedule, to the extent the nature and
magnitude of such liabilities can be specifically ascertained by reference to
the text of such Company Contracts; and (d) the liabilities identified in Part
2.11 of the Disclosure Schedule. Set forth in Exhibit A to Part 2.11 of the
Disclosure Schedule is (i) an aging report of all accounts payable reflected in
the Unaudited Interim Balance Sheet, (ii) the updated, unaudited balance sheets
of the Company as of May 17, 2000 (the "MAY 17 BALANCE SHEET"), and (iii) an
aging report of accounts payable reflected in the May 17 Balance Sheet.
2.12 COMPLIANCE WITH LEGAL REQUIREMENTS. The Company is, and has at all
times been in compliance with all applicable Legal Requirements, except where
the failure to comply with such Legal Requirements has not had and will not have
a Material Adverse Effect on the Company. Except as set forth in Part 2.12 of
the Disclosure Schedule, the Company has not received any notice or other
communication from any Governmental Body regarding any actual or possible
violation of, or failure to comply with, any Legal Requirement.
2.13 GOVERNMENTAL AUTHORIZATIONS. Part 2.13 of the Disclosure Schedule
identifies each material Governmental Authorization held by the Company, and the
Company has delivered to Parent accurate and complete copies of all Governmental
Authorizations identified in Part 2.13 of the Disclosure Schedule. The
Governmental Authorizations identified in Part 2.13 of the Disclosure Schedule
are valid and in full force and effect, and collectively constitute all
Governmental Authorizations necessary to enable the Company to conduct its
business in the manner in which its business is currently being conducted. The
Company is, and at all times has been, in substantial compliance with the terms
and requirements of the respective Governmental Authorizations identified in
Part 2.13 of the Disclosure Schedule. The Company has not received any notice or
other communication from any Governmental Body regarding (a) any actual or
possible violation of or failure to comply with any term or requirement of any
Governmental Authorization, or (b) any actual or possible revocation,
withdrawal, suspension, cancellation, termination or modification of any
Governmental Authorization.
2.14 TAX MATTERS.
(a) All Tax Returns required to be filed by or on behalf of the
Company with any Governmental Body before the Closing Date (the "COMPANY
RETURNS") (i) have been or will be filed on or before the applicable due date
(including any extensions of such due date) occurring before the Closing Date,
and (ii) have been, or will be when filed, accurately and completely prepared in
all material respects in compliance with all applicable Legal Requirements;
provided, however, that neither the Company nor the Designated Shareholders
shall be responsible for filing any Tax Returns concerning the short year
beginning January 1, 2000 and ending with the Merger in connection with Sections
2.14(a)(i)-(ii) hereto. All amounts shown on the Company Returns required to be
filed before the Closing Date have been or will be paid on or before the Closing
Date. The Company has delivered to Parent accurate and complete copies of all
Company Returns filed since December 31, 1997 which have been requested by
Parent.
(b) The Company Financial Statements fully accrue all actual and
contingent liabilities for Taxes with respect to all periods through the dates
thereof in accordance with
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generally accepted accounting principles. The Company will establish, in the
ordinary course of business and consistent with its past practices, reserves
adequate for the payment of all Taxes for the period from January 1, 2000
through the Closing Date, and the Company will disclose the dollar amount of
such reserves to Parent on or prior to the Closing Date.
(c) No Company Return relating to income Taxes has ever been examined
or audited by any Governmental Body. Except as set forth in Part 2.14 of the
Disclosure Schedule, there have been no examinations or audits of any Company
Return. The Company has delivered to Parent accurate and complete copies of all
audit reports and similar documents (to which the Company has access) relating
to the Company Returns. Except as set forth in Part 2.14 of the Disclosure
Schedule, no extension or waiver of the limitation period applicable to any of
the Company Returns has been granted (by the Company or any other Person), and
no such extension or waiver has been requested from the Company.
(d) Except as set forth in Part 2.14 of the Disclosure Schedule, no
claim or Legal Proceeding is pending or, to the best of the knowledge of the
Company and the Designated Shareholders, has been threatened against or with
respect to the Company in respect of any Tax. There are no unsatisfied
liabilities for Taxes (including liabilities for interest, additions to tax and
penalties thereon and related expenses) with respect to any notice of deficiency
or similar document received by the Company with respect to any Tax (other than
liabilities for Taxes asserted under any such notice of deficiency or similar
document which are being contested in good faith by the Company and with respect
to which adequate reserves for payment have been established). There are no
liens for Taxes upon any of the assets of the Company except liens for current
Taxes not yet due and payable. The Company has not entered into or become bound
by any agreement or consent pursuant to Section 341(f) of the Code. The Company
has not been, and the Company will not be before the Closing Date, required to
include any adjustment in taxable income for any tax period (or portion thereof)
pursuant to Section 481 or 263A of the Code or any comparable provision under
state or foreign Tax laws as a result of transactions or events occurring, or
accounting methods employed, prior to the Closing.
(e) There is no agreement, plan, arrangement or other Contract
covering any employee or independent contractor or former employee or
independent contractor of the Company that, considered individually or
considered collectively with any other such Contracts, will, or could reasonably
be expected to, give rise directly or indirectly to the payment of any amount
that would not be deductible pursuant to Section 280G or Section 162 of the
Code. The Company is not, and has never been, a party to or bound by any tax
indemnity agreement, tax sharing agreement, tax allocation agreement or similar
Contract and is not, and has never been, a "distributing corporation" within the
meaning of Section 355 of the Code. There is currently (prior to the Merger) no
limitation on the utilization of net operating losses, built-in losses, tax
credits or other similar items of the Company under Sections 382, 383, 348 or
1502 of the Code and the Treasury Regulations thereunder.
2.15 EMPLOYEE AND LABOR MATTERS; BENEFIT PLANS.
(a) Part 2.15(a) of the Disclosure Schedule identifies each salary,
bonus, deferred compensation, incentive compensation, stock purchase, stock
option, severance pay, termination pay, hospitalization, medical, life or other
insurance, supplemental unemployment
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benefits, profit-sharing, pension or retirement plan, program or agreement for
its current employees (collectively, the "PLANS") sponsored, maintained,
contributed to or required to be contributed to by the Company for the benefit
of any employee of the Company ("EMPLOYEE"), except for Plans which would not
require the Company to make payments or provide benefits having a value in
excess of Twenty-Five Thousand Dollars ($25,000) in the aggregate.
(b) Except as set forth in Part 2.15(a) of the Disclosure Schedule,
the Company does not maintain, sponsor or contribute to, and, to the best of the
knowledge of the Company and the Designated Shareholders, has not at any time in
the past maintained, sponsored or contributed to, any employee pension benefit
plan (as defined in Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), whether or not excluded from coverage under
specific Titles or Subtitles of ERISA) for the benefit of Employees or former
Employees (a "PENSION PLAN").
(c) The Company maintains, sponsors or contributes only to those
employee welfare benefit plans (as defined in Section 3(1) of ERISA, whether or
not excluded from coverage under specific Titles or Subtitles of ERISA) for the
benefit of Employees or former Employees which are described in Part 2.15(c) of
the Disclosure Schedule (the "WELFARE PLANS"), none of which is a multiemployer
plan (within the meaning of Section 3(37) of ERISA).
(d) With respect to each Plan, the Company has delivered to Parent:
(i) an accurate and complete copy of such Plan (including all
amendments thereto);
(ii) an accurate and complete copy of the annual report, if
required under ERISA, with respect to such Plan for the last two (2) years;
(iii) an accurate and complete copy of the most recent summary
plan description, together with each "summary of material modifications," if
required under ERISA, with respect to such Plan, and all material currently
effective employee communications relating to such Plan;
(iv) if such Plan is funded through a trust or any third party
funding vehicle, an accurate and complete copy of the trust or other funding
agreement (including all amendments thereto) and accurate and complete copies
the most recent financial statements thereof;
(v) accurate and complete copies of all currently effective
Contracts relating to such Plan, including service provider agreements,
insurance contracts, minimum premium contracts, stop-loss agreements, investment
management agreements, subscription and participation agreements and
recordkeeping agreements; and
(vi) an accurate and complete copy of the most recent
determination letter received from the Internal Revenue Service with respect to
such Plan (if such Plan is intended to be qualified under Section 401(a) of the
Code).
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(e) The Company is not required to be, and, to the best of the
knowledge of the Company and the Designated Shareholders, has never been
required to be, treated as a single employer with any other Person under Section
4001(b)(1) of ERISA or Section 414(b), (c), (m) or (o) of the Code. The Company
has never been a member of an "affiliated service group" within the meaning of
Section 414(m) of the Code. To the best of the knowledge of the Company and the
Designated Shareholders, the Company has never made a complete or partial
withdrawal from a multiemployer plan, as such term is defined in Section 3(37)
of ERISA, resulting in "withdrawal liability," as such term is defined in
Section 4201 of ERISA (without regard to subsequent reduction or waiver of such
liability under either Section 4207 or 4208 of ERISA).
(f) Except as set forth in Part 2.15(f) of the Disclosure Schedule,
the Company does not have any commitment to any employee to create any
additional Welfare Plan or any Pension Plan, or to modify or change any existing
Welfare Plan or Pension Plan (other than to comply with applicable law).
(g) Except as set forth in Part 2.15(g) of the Disclosure Schedule,
no Welfare Plan provides death, medical or health benefits (whether or not
insured) with respect to any current or former Employee after any such
Employee's termination of service (other than (i) benefit coverage mandated by
applicable law, including coverage provided pursuant to Section 4980B of the
Code, (ii) deferred compensation benefits accrued as liabilities on the
Unaudited Interim Balance Sheet, and (iii) benefits the full cost of which are
borne by current or former Employees (or the Employees' beneficiaries)).
(h) With respect to each of the Welfare Plans constituting a group
health plan within the meaning of Section 4980B(g)(2) of the Code, the
provisions of Section 4980B of the Code ("COBRA") have been complied with in all
material respects.
(i) Each of the Plans has been operated and administered in all
material respects in accordance with applicable Legal Requirements, including
but not limited to ERISA and the Code.
(j) Each of the Plans intended to be qualified under Section 401(a)
of the Code, if any, has received a favorable determination from the Internal
Revenue Service, and neither the Company nor any of the Designated Shareholders
is aware of any reason why any such determination letter should be revoked.
(k) Except as set forth in (i) Part 2.15(k) of the Disclosure
Schedule and (ii) this Agreement and other agreements expressly referred to
herein to be executed in connection herewith between any Employee and Parent or
of Surviving Corporation, as the case may be, neither the execution, delivery or
performance of this Agreement, nor the consummation of the Merger or any of the
other transactions contemplated by this Agreement, will result in any payment
(including any bonus, golden parachute or severance payment) to any current or
former Employee or director of the Company (whether or not under any Plan), or
materially increase the benefits payable under any Plan, or result in any
acceleration of the time of payment or vesting of any such benefits.
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(l) Part 2.15(l) of the Disclosure Schedule contains a list of all
salaried employees of the Company as of the date of this Agreement, and
correctly reflects, in all material respects, their salaries, any other
compensation payable to them (including compensation payable pursuant to bonus,
deferred compensation or commission arrangements), their dates of employment and
their positions. The Company is not a party to any collective bargaining
contract or other Contract with a labor union involving any of its Employees.
All of the Company's employees are "at will" employees.
(m) Part 2.15(m) of the Disclosure Schedule identifies each Employee
who is not fully available to perform work because of disability or other leave
and sets forth the basis of such leave and the anticipated date of return to
full service.
(n) The Company is in compliance in all material respects with all
applicable Legal Requirements and Company Contracts relating to employment,
employment practices, wages, bonuses and terms and conditions of employment,
including employee compensation matters.
(o) Except as set forth in Part 2.15(o) of the Disclosure Schedule,
the Company has good labor relations, and no circumstance exists that would
reasonably be expected to cause the consummation of the Merger or any of the
other transactions contemplated by this Agreement to have a material adverse
effect on the Company's labor relations, and to the best of the knowledge of the
Company and the Designated Shareholders, none of the Company's employees intends
to terminate his or her employment with the Company.
2.16 ENVIRONMENTAL MATTERS. The Company is in compliance in all material
respects with all applicable Environmental Laws, which compliance includes the
possession by the Company of all permits and other Governmental Authorizations
required under applicable Environmental Laws, and compliance with the terms and
conditions thereof. The Company has not received any notice or other
communication in writing, whether from a Governmental Body, citizens group,
employee or otherwise, that alleges that the Company is not in compliance with
any Environmental Law, and, to the best of the knowledge of the Company and
Designated Shareholders, there are no circumstances that may prevent or
interfere with the Company's compliance with any Environmental Law in the
future. To the best of the knowledge of the Company and the Designated
Shareholders, no current or prior owner of any property currently leased by the
Company has received any notice or other communication in writing, whether from
a Government Body, citizens group, employee or otherwise, that alleges that such
current or prior owner or the Company is not in compliance with any
Environmental Law. All Governmental Authorizations currently held by the Company
pursuant to Environmental Laws are identified in Part 2.16 of the Disclosure
Schedule. (For purposes of this Section 2.16: (i) "ENVIRONMENTAL LAW" means any
federal, state, local or foreign Legal Requirement relating to pollution or
protection of human health or the environment (including ambient air, surface
water, ground water, land surface or subsurface strata), including any law or
regulation relating to emissions, discharges, releases or threatened releases of
Materials of Environmental Concern, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Materials of Environmental Concern; and (ii) "MATERIALS OF
ENVIRONMENTAL CONCERN" include chemicals, pollutants, contaminants, wastes,
toxic substances,
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petroleum and petroleum products and any other substance that is now regulated
by any Environmental Law or that is otherwise a danger to health, reproduction
or the environment.)
2.17 INSURANCE. Part 2.17 of the Disclosure Schedule identifies all
insurance policies maintained by, at the expense of or for the benefit of the
Company and identifies any material claims made thereunder since January 1,
2000, and the Company has delivered to Parent accurate and complete copies of
the insurance policies identified on Part 2.17 of the Disclosure Schedule. Each
of the insurance policies identified in Part 2.17 of the Disclosure Schedule is
in full force and effect. Since January 1, 2000, the Company has not received
any notice or other communication regarding any actual or possible (a)
cancellation or invalidation of any insurance policy, (b) refusal of any
coverage or rejection of any claim under any insurance policy, or (c) material
adjustment in the amount of the premiums payable with respect to any insurance
policy.
2.18 RELATED PARTY TRANSACTIONS. Except as set forth in Part 2.18 of the
Disclosure Schedule: (a) no Related Party presently has, and no Related Party
has at any time since January 1, 2000 had, any direct or indirect interest in
any material asset used in or otherwise relating to the business of the Company;
(b) no Related Party is, or has at any time since January 1, 2000 been, indebted
to the Company; (c) since January 1, 2000, no Related Party has entered into, or
has had any direct or indirect financial interest in, any material Contract,
transaction or business dealing involving the Company; (d) no Related Party is
competing, or has at any time since January 1, 2000 competed, directly or
indirectly, with the Company; and (e) no Related Party has any claim or right
against the Company (other than rights under company Options and rights to
receive compensation for services performed as an employee of the Company). (For
purposes of the Section 2.18 each of the following shall be deemed to be a
"RELATED PARTY": (i) each of the Designated Shareholders; (ii) each individual
who is, or who has at any time since January 1, 1999 been, an officer of the
Company; (iii) each member of the immediate family of each of the individuals
referred to in clauses "(i)" and "(ii)" above; and (iv) any trust or other
Entity (other than the Company) in which any one of the individuals referred to
in clauses "(i)", "(ii)" and "(iii)" above holds (or in which more than one of
such individuals collectively hold), beneficially or otherwise, a material
voting, proprietary or equity interest.) Notwithstanding anything to the
contrary herein, the representations and warranties made in this Section 2.18
are only made severally by each of the Designated Shareholders.
2.19 LEGAL PROCEEDINGS; ORDERS.
(a) Except as set forth in Part 2.19 of the Disclosure Schedule,
there is no pending Legal Proceeding, and (to the best of the knowledge of the
Company and the Designated Shareholders) no Person has threatened to commence
any Legal Proceeding: (i) that involves the Company or any of the assets owned
or used by the Company or any Person whose liability the Company has or may have
retained or assumed, either contractually or by operation of law; or (ii) that
challenges, or that may have the effect of preventing, delaying, making illegal
or otherwise interfering with, the Merger or any of the other transactions
contemplated by this Agreement. To the best of the knowledge of the Company and
the Designated Shareholders, except as set forth in Part 2.19 of the Disclosure
Schedule, no event has occurred, and no claim, dispute or other condition or
circumstance exists, that will, or that could reasonably be expected to, give
rise to or serve as a basis for the commencement of any such Legal Proceeding.
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(b) Except as set forth in Part 2.19 of the Disclosure Schedule, no
Legal Proceeding has ever been commenced by or has ever been pending against the
Company.
(c) There is no order, writ, injunction, judgment or decree to which
the Company, or any of the assets owned or used by the Company, is subject. None
of the Designated Shareholders is subject to any order, writ, injunction,
judgment or decree that relates to the Company's business or to any of the
assets owned or used by the Company. To the best of the knowledge of the Company
and the Designated Shareholders, no officer or other employee of the Company is
subject to any order, writ, injunction, judgment or decree that prohibits such
officer or other employee from engaging in or continuing any conduct, activity
or practice relating to the Company's business. Notwithstanding anything to the
contrary herein, the representations and warranties made in this Section 2.19(c)
are only made severally by each of the Designated Shareholders.
2.20 AUTHORITY; BINDING NATURE OF AGREEMENT. Subject to the approval of
the Merger by the shareholders of the Company as required by applicable Legal
Requirements, the Company has the absolute and unrestricted right, power and
authority to enter into and to perform its obligations under this Agreement; and
the execution, delivery and performance by the Company of this Agreement have
been duly authorized by all necessary action on the part of the Company and its
board of directors. Subject to the approval of the Merger by the shareholders of
the Company as required by applicable Legal Requirements, this Agreement
constitutes the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, subject to (i) laws of general
application relating to bankruptcy, insolvency and the relief of debtors, and
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies.
2.21 NON-CONTRAVENTION; CONSENTS. Except as set forth in Part 2.21 of the
Disclosure Schedule, neither (1) the execution, delivery or performance of this
Agreement or any of the other agreements referred to in this Agreement, nor (2)
the consummation of the Merger or any of the other transactions contemplated by
this Agreement, will directly or indirectly (with or without notice or lapse of
time):
(a) contravene, conflict with or result in a violation of (i) any of
the provisions of the Company's articles of incorporation or bylaws, or (ii) any
resolution adopted by the Company's shareholders, the Company's board of
directors or any committee of the Company's board of directors;
(b) contravene, conflict with or result in a violation of, or give
any Governmental Body or other Person the right to challenge any of the
transactions contemplated by this Agreement or to exercise any remedy or obtain
any relief under, any Legal Requirement or any order, writ, injunction, judgment
or decree to which the Company, or any of the assets owned or used by the
Company, is subject;
(c) contravene, conflict with or result in a violation of any of the
terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate or modify, any Governmental Authorization
that is held by the Company or that
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otherwise relates to the Company's business or to any of the assets owned or
used by the Company;
(d) contravene, conflict with or result in a violation or breach of,
or result in a default under, any provision of any Company Contract that is or
would constitute a Material Contract, or give any Person the right to (i)
declare a default or exercise any remedy under any such Company Contract, (ii)
accelerate the maturity or performance of any such Company Contract, or (iii)
cancel, terminate or modify any such Company Contract; or
(e) result in the imposition or creation of any lien or other
Encumbrance upon or with respect to any asset owned or used by the Company
(except for minor liens that will not, in any case or in the aggregate,
materially detract from the value of the assets subject thereto or materially
impair the operations of the Company).
Except as set forth in Part 2.21 of the Disclosure Schedule and for the approval
of the Merger by the shareholders of the Company as required by applicable Legal
Requirements, the Company is not and will not be required to make any filing
with or give any notice to, or to obtain any Consent from, any Person in
connection with (x) the execution, delivery or performance of this Agreement or
any of the other agreements referred to in this Agreement, or (y) the
consummation of the Merger or any of the other transactions contemplated by this
Agreement.
2.22 XXXX-XXXXX-XXXXXX ACT.
The total assets as defined by the Xxxx-Xxxxx-Xxxxxx Antitrust Improvement
Act of 1976 as amended ("HSR ACT"), of each of the Company and Xxxxx X.
Xxxxxxxxx ("HARDWICKE") are less than Ten Million Dollars ($10,000,000), the
Company is not controlled by any other person or entity for purposes of the HSR
Act (except for Hardwicke) and the Company is not a manufacturing company for
purposes of the HSR Act.
2.23 FULL DISCLOSURE.
(a) This Agreement (including the Disclosure Schedule) does not, and
the Designated Shareholders' Closing Certificate will not, with all the
aforementioned information read as a whole, (i) contain any representation,
warranty or information that is false or misleading with respect to any material
fact, or (ii) omit to state any material fact or necessary in order to make the
representations, warranties and information contained and to be contained herein
and therein (in the light of the circumstances under which such representations,
warranties and information were or will be made or provided) not false or
misleading.
(b) The information supplied by the Company for inclusion in the
Company Information Statement (as defined in Section 5.11 below) will not, as of
the date of the Company Information Statement or as of the date of the Company
Shareholders' Meeting (as defined in Section 5.2), (i) contain any statement
that is false or misleading with respect to any material fact, or (ii) omit to
state any material fact necessary in order to make such information (in the
light of the circumstances under which it is provided) not false or misleading.
2.24 WEBSITE TRAFFIC. Set forth on Part 2.24 of the Disclosure Schedule
hereto are complete and accurate summary reports of the number and distribution
of page views for the
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xxx.xxxxxxx.xxx website for each week since January 1, 2000, including the
number of total page views for each page visited, the number of unique visitors,
the number of pages viewed per visit, and such other statistics as are customary
in the industry. Also set forth on Part 2.24 of the Disclosure Schedule is a
report showing Company's best estimate of such statistical traffic information
for the xxx.xxxxxxx.xxx website for the period from September 1, 1999 to May 22,
2000 and a description of the method used to produce such estimate and the
assumptions upon which such estimates are based. Except as set forth in Part
2.24 of the Disclosure Statement, all traffic reported for the xxx.xxxxxxx.xxx
website on Part 2.24 of the Disclosure Schedule is traffic generated by visitors
to the website unaffiliated with Company. Company has done nothing, and knows,
after having made a reasonable investigation, of no effort of any kind by any
person, to artificially increase traffic.
2.25 WEBSITE CONTENT. The xxx.xxxxxxx.xxx website does not contain any
content that: (a) is pornographic, obscene or similarly adult-oriented; (b) is
defamatory or trade libelous; or (c) contains viruses, trojan horses, worms,
time bombs, cancelbots or other computer programs that are intended to damage a
user's system or data. To the best of the knowledge of the Company and the
Designated Shareholders, the websites to which the URLs on the xxx.xxxxxxx.xxx
website link also do not contain any of the content defined in this Section
2.25.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub jointly and severally represent and warrant to
the Company and each of the Equity Holders, including but not limited to the
Designated Shareholders as follows:
3.1 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Parent has delivered or will deliver to the Company accurate and
complete copies of the Company's Registration Statement on Form S-1, as amended,
declared effective by the SEC on February 9, 2000; the final prospectus related
thereto; and the Company's Annual Report on Form 10-K for the fiscal year ended
January 31, 2000; and any other documents filed with the SEC prior to the
Closing Date (the "PARENT SEC DOCUMENTS"). As of the time it was filed with the
SEC (or, if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing): (i) each of the Parent SEC
Documents complied in all material respects with the applicable requirements of
the Securities Act or the Exchange Act (as the case may be); and (ii) none of
the Parent SEC Documents contained any untrue statement of a material fact or
omitted 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 made, not misleading.
(b) The consolidated financial statements contained in the Parent SEC
Documents: (i) complied as to form in all material respects with the published
rules and regulations of the SEC applicable thereto; (ii) were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods covered, except as may be indicated in the notes to
such financial statements and (in the case of unaudited statements) as permitted
by Form 10-Q of the SEC, and except that unaudited financial
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statements may not contain footnotes and are subject to year-end audit
adjustments; and (iii) fairly present the consolidated financial position of
Parent and its subsidiaries as of the respective dates thereof and the
consolidated results of operations of Parent and its subsidiaries for the
periods covered thereby.
3.2 AUTHORITY; BINDING NATURE OF AGREEMENT. Parent and Merger Sub have the
absolute and unrestricted right, power and authority to perform their
obligations under this Agreement; and the execution, delivery and performance by
Parent and Merger Sub of this Agreement (including the contemplated issuance of
Parent Common Stock in the Merger in accordance with this Agreement) have been
duly authorized by all necessary action on the part of Parent and Merger Sub and
their respective boards of directors. No vote of Parent's stockholders is needed
to approve the Merger. This Agreement constitutes the legal, valid and binding
obligation of Parent and Merger Sub, enforceable against them in accordance with
its terms, subject to (i) laws of general application relating to bankruptcy,
insolvency and the relief of debtors, and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies.
3.3 VALID ISSUANCE. The Parent Common Stock to be issued in the Merger
will, when issued in accordance with the provisions of this Agreement, be
validly issued, fully paid and nonassessable.
3.4 MERGER SUB.
(a) Merger Sub is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware.
(b) The authorized capital stock of Merger Sub consists of 100 shares
of common stock, par value $0.001 per share, all of which are validly issued and
outstanding and are, and at the Effective Time will be, owned solely by Parent,
and there are (i) no other voting securities of Merger Sub, (ii) no securities
of Merger Sub convertible into or exchangeable for shares of common stock or
other voting securities of Merger Sub and (iii) no options or other rights to
acquire from Merger Sub, and no obligations of Merger Sub to issue or deliver,
shares of common stock or other voting securities or securities convertible into
or exchangeable for shares of common stock or other voting securities of Merger
Sub.
(c) Merger Sub has not conducted any business prior to the date hereof
and has no, and prior to the Effective Time will have no, assets, liabilities or
obligations of any nature other than those incident to its formation and
pursuant to this Agreement and the Merger and the other transactions
contemplated by this Agreement.
3.5 ORGANIZATION, GOOD STANDING AND QUALIFICATION OF PARENT.
Parent is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and each of its subsidiaries
is a corporation or other entity duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of organization. Each of
Parent and each of its subsidiaries has all requisite corporate or similar power
and authority to own and operate its properties and assets and to carry on its
business as presently conducted and is qualified to do business and is in good
standing in each jurisdiction
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where the ownership or operation of its properties or conduct of its business
requires such qualification, except where the failure to be so qualified or in
good standing, when taken together with all other such failures, is not
reasonably likely to have a material adverse effect on the Parent's business,
condition, assets, liabilities, operations, financial performance, or prospects,
taken as a whole. Parent has made available to the Company a complete and
correct copy of Parent's and Merger Sub's charter and by-laws or other
organizational documents, each as amended to and as in effect as of the date
hereof.
3.6 INVESTMENT REPRESENTATION.
Parent and Surviving Corporation are acquiring the shares of Company
Common Stock for investment and not with a view to resale or distribution. The
issuances of the Parent Common Stock to the Equity Holders as described herein
shall be at the time of such issuances qualified as transactions exempt from the
registration requirements of Section 5 of the Securities Act under Rule 506 of
Regulation D (as defined below).
3.7 THIRD PARTY BENEFICIARIES.
Each of the shareholders of the Company is a third-party beneficiary of
this Agreement and entitled to a direct cause of action against Parent and
Surviving Corporation for the sole purposes of receipt of the consideration
described in Section 1.5 above.
SECTION 4. CERTAIN COVENANTS OF THE COMPANY AND THE DESIGNATED SHAREHOLDERS
4.1 ACCESS AND INVESTIGATION. During the period from the date of this
Agreement through the Effective Time (the "PRE-CLOSING PERIOD"), the Company
shall, and shall cause its Representatives to: (a) provide Parent and Parent's
Representatives with reasonable access to the Company's Representatives,
personnel and assets and to all existing books, records, Tax Returns, work
papers and other documents and information relating to the Company; and (b)
provide Parent and Parent's Representatives with copies of such existing books,
records, Tax Returns, work papers and other documents and information relating
to the Company, and with such additional financial, operating and other data and
information regarding the Company, as Parent may reasonably request.
4.2 OPERATION OF THE COMPANY'S BUSINESS. During the Pre-Closing Period,
except as otherwise specifically set forth in this Agreement:
(a) the Company shall conduct in all material respects its business
and operations in the ordinary course and in substantially the same manner as
such business and operations have been conducted prior to the date of this
Agreement;
(b) the Company shall use reasonable efforts to preserve intact its
current business organization, keep available the services of its current
officers and employees and maintain its relations and good will with all
suppliers, customers, landlords, creditors, employees and other Persons having
business relationships with the Company;
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(c) the Company shall keep in full force all insurance policies
identified in Part 2.17 of the Disclosure Schedule;
(d) the Company shall cause its officers to discuss regularly with
Parent's Representatives the status of the Company's business;
(e) the Company shall not declare, accrue, set aside or pay any
dividend or make any other distribution in respect of any shares of capital
stock, and shall not repurchase, redeem or otherwise reacquire any shares of
capital stock or other securities except in connection with the redemption of
Company Common Stock from Xxxxxx X. Xxxxxxxxx prior to the Closing Date for a
total purchase price not to exceed $100.00 (the "XXXXXXXXX REDEMPTION") and the
redemption of the Series B Preferred Stock for a total purchase price not to
exceed $540,000 prior to the Closing Date (the "SERIES B REDEMPTION"); provided,
however, any of such persons from whom shares may be repurchased by the Company
shall execute a form of release of claims and other documentation reasonably
requested and approved by Parent;
(f) the Company shall not sell, issue or authorize the issuance of (i)
any capital stock or other security, (ii) any option or right to acquire any
capital stock or other security, or (iii) any instrument convertible into or
exchangeable for any capital stock or other security (except that the Company
shall be permitted to issue shares of Company Common Stock upon the conversion
of shares of Series A Preferred Stock or Series B Preferred Stock or the
exercise of existing stock options or the conversion of that certain Two Hundred
Fifty Thousand Dollars ($250,000) Convertible Note payable to Next Generation
Fund, L.L.C. dated September 1999; (the "NEXTGEN NOTE");
(g) the Company shall not amend or waive any of its rights under, (i)
any provision of any of its stock option plans, (ii) any provision of any
agreement evidencing any outstanding Company Option, or (iii) any provision of
any restricted stock purchase agreement, except as set forth in Section 5.10
below and in connection with the Xxxxxxxxx Redemption and the Series B
redemption;
(h) neither the Company nor any of the Designated Shareholders shall
amend or permit the adoption of any amendment to the Company's articles of
incorporation or bylaws, or effect or permit the Company to become a party to
any Acquisition Transaction, recapitalization, reclassification of shares, stock
split, reverse stock split or similar transaction (except that the Company may
issue shares of Company Common Stock upon the conversion of shares of Series A
Preferred Stock or Series B Preferred Stock or the exercise of existing stock
options or the conversion of the NextGen Note);
(i) the Company shall not form any subsidiary or acquire any equity
interest or other interest in any other Entity;
(j) the Company shall not make any capital expenditure, except for
capital expenditures that, when added to all other capital expenditures made on
behalf of the Company during the Pre-Closing Period, do not exceed Ten Thousand
Dollars ($10,000) per month;
(k) except in the ordinary course of business consistent with past
practices, the Company shall not (i) enter into, or permit any of the assets
owned or used by it to become
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bound by, any Contract that is or would constitute a Material Contract, or (ii)
amend or prematurely terminate, or waive any material right or remedy under, any
such Contract; except with respect to that certain (a) Consulting Agreement
dated April 30, 1999 between the Company and Airborne Research and Services,
Inc. (the "ARSI CONTRACT"), (b) the Co-Branded Services Reseller Agreement dated
January 1, 2000 between the Company and NetSchools Corporation (the "NETSCHOOLS
CONTRACT"), and (c) in connection with that certain agreement between the
Company and Chesterfield County Public School System ("Chesterfield Agreement").
(l) except in the ordinary course of business consistent with past
practices, the Company shall not (i) acquire, lease or license any right or
other asset from any other Person, (ii) sell or otherwise dispose of, or lease
or license, any right or other asset to any other Person, except that Company
shall have the right to transfer to Hardwicke prior to the Closing Date that
certain (a) car lease for a 1999 Lexus RX300, and (b) term life insurance policy
covering the life of Hardwicke in consideration for Hardwicke's assumption of
all payment obligations whatsoever thereunder arising after such transfer, or
(iii) waive or relinquish any right, except for assets acquired, leased,
licensed or disposed of by the Company pursuant to contracts that are not
Material Contracts; except also with respect to the ARSI Contract and NetSchools
Contract and in connection with the Chesterfield Agreement.
(m) the Company shall not (i) lend money to any Person (except that
the Company may make routine travel advances to employees in the ordinary course
of business and may allow employees to acquire Company Common Stock in exchange
for secured promissory notes (in a form reasonably acceptable to Parent) upon
exercise of Company Options) which shall be due and payable in connection with
the Closing either in cash or in Parent Common Stock, or (ii) incur or guarantee
any indebtedness for borrowed money (except as to any arrangement among parties
hereto);
(n) the Company shall not (i) establish, adopt or amend any Employee
Benefit Plan, (ii) unless occurring in the ordinary course of business
consistent with past practices, pay any bonus or make any profit-sharing
payment, cash incentive payment or similar payment to, or increase the amount of
the wages, salary, commissions, fringe benefits or other compensation or
remuneration payable to, any of its directors, officers or employees, or (iii)
hire any new employee whose aggregate annual compensation is expected to exceed
Sixty Thousand Dollars ($60,000), except for a Chief Operating Officer whose
salary shall not exceed One Hundred Twenty-Five Thousand Dollars ($125,000) per
annum;
(o) the Company shall not change any of its methods of accounting or
accounting practices in any material respect;
(p) the Company shall not make any Tax election;
(q) the Company shall not commence or settle any material Legal
Proceeding;
(r) the Company shall not agree or commit to take any of the actions
described in clauses "(e)" through "(q)" above.
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Notwithstanding the foregoing, the Company may take any action described in
clauses "(e)" through "(r)" above if Parent gives its prior written consent to
the taking of such action by the Company, which consent will not be unreasonably
withheld or delayed (it being understood that Parent's withholding of consent to
any action will not be deemed unreasonable if Parent reasonably determines in
good faith that the taking of such action would not be in the best interests of
the Parent or would not be in the best interests of the Company).
Notwithstanding anything to the contrary in this Section 4.2, the Company may
take any action described in clauses "(g)" through "(r)" above upon majority
vote of its Board of Directors reasonably necessary to address circumstances
that arise directly as a result of Parent being in violation or default of the
Parent Loan Agreement (as defined in Section 5.19 below).
4.3 NOTIFICATION; UPDATES TO DISCLOSURE SCHEDULE.
(a) During the Pre-Closing Period, the Company shall promptly notify
Parent in writing of:
(i) the discovery by the Company of any event, condition, fact or
circumstance that occurred or existed on or prior to the date of this Agreement
and that caused or constitutes an inaccuracy in or breach of any representation
or warranty made by the Company or any of the Designated Shareholders in this
Agreement;
(ii) any event, condition, fact or circumstance that occurs,
arises or exists after the date of this Agreement and that would cause or
constitute an inaccuracy in or breach of any representation or warranty made by
the Company or any of the Designated Shareholders in this Agreement if (A) such
representation or warranty had been made as of the time of the occurrence,
existence or discovery of such event, condition, fact or circumstance, or (B)
such event, condition, fact or circumstance had occurred, arisen or existed on
or prior to the date of this Agreement;
(iii) any breach of any covenant or obligation of the Company or
any of the Designated Shareholders; and
(iv) any event, condition, fact or circumstance that would make
the timely satisfaction of any of the conditions set forth in SECTION 6 or
SECTION 7 impossible or unlikely.
(b) If any event, condition, fact or circumstance that is required to
be disclosed pursuant to Section 4.3(a) requires any change in the Disclosure
Schedule, or if any such event, condition, fact or circumstance would require
such a change assuming the Disclosure Schedule were dated as of the date of the
occurrence, existence or discovery of such event, condition, fact or
circumstance, then the Company shall promptly deliver to Parent an update to the
Disclosure Schedule specifying such change. No such update shall be deemed to
supplement or amend the Disclosure Schedule for the purpose of (i) determining
the accuracy of any of the representations and warranties made by the Company or
any of the Designated Shareholders in this Agreement, or (ii) determining
whether any of the conditions set forth in SECTION 6 has been satisfied.
Notwithstanding the foregoing, if Parent elects not to terminate this Agreement
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under Section 8 below, such update shall, as of the Closing, be deemed to
supplement and amend the Disclosure Schedule for the purposes stated in clauses
(i) and (ii) of the preceding sentence.
4.4 NO NEGOTIATION. During the Pre-Closing Period, the Company, any of the
Designated Shareholders and any of their respective Representatives shall not,
directly or indirectly:
(a) solicit or encourage the initiation of any inquiry, proposal or
offer from any Person (other than Parent) relating to a possible Acquisition
Transaction;
(b) participate in any discussions or negotiations or enter into any
agreement with, or provide any non-public information to, any Person (other than
Parent) relating to or in connection with a possible Acquisition Transaction; or
(c) consider, entertain or accept any proposal or offer from any
Person (other than Parent) relating to a possible Acquisition Transaction.
The Company shall promptly notify Parent in writing of any inquiry, proposal or
offer relating to a possible Acquisition Transaction that is received by the
Company or any of the Designated Shareholders during the Pre-Closing Period.
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES
5.1 FILINGS AND CONSENTS. As promptly as practicable after the execution
of this Agreement, each party to this Agreement (a) shall make all filings (if
any) and give all notices (if any) required to be made and given by such party
in connection with the Merger and the other transactions contemplated by this
Agreement, and (b) shall use all commercially reasonable efforts to obtain all
Consents (if any) required to be obtained (pursuant to any applicable Legal
Requirement or Contract, or otherwise) by such party in connection with the
Merger and the other transactions contemplated by this Agreement. The Company
and Parent each shall, upon request by the other, furnish the other with all
information concerning itself, its subsidiaries, directors, executive officers
and stockholders and such other matters as may be reasonably necessary or
advisable in connection with the aforementioned filings or notices. The Company
and Parent each shall keep the other apprised of the status of matters relating
to completion of the transactions contemplated herein, including promptly
furnishing the other with copies of notice or other communications received by
the Company or Parent, as the case may be, or any of its subsidiaries, from any
third party and/or any Governmental Body with respect to the Merger and the
other transactions contemplated by this Agreement.
5.2 COMPANY SHAREHOLDERS' MEETING. The Company shall, in accordance with
its articles of incorporation and bylaws and the applicable requirements of the
Virginia Stock Corporation Act, provide statutorily required notice (no later
than May 30, 2000) of, and hold (no later than June 26, 2000), a special meeting
of its shareholders (provided the Company shall use commercially reasonable
efforts to obtain a unanimous consent of its shareholders in lieu of such
meeting as soon as practicable and prior to June 26, 2000) for the purpose of
permitting them to consider and to vote upon and approve the Merger and this
Agreement (the "COMPANY SHAREHOLDERS' MEETING"). As soon as permissible under
any applicable rules or regulations, the Company shall cause a copy of the
Information/Proxy Statement to be delivered to each
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45
shareholder of the Company who is entitled to vote at the Company Shareholders'
Meeting. Without limiting the generality or the effect of anything contained in
the Voting Agreements being executed and delivered by the Designated
Shareholders to Parent contemporaneously with the execution and delivery of this
Agreement, each Designated Shareholder shall cause all shares of the capital
stock of the Company that are owned, beneficially or of record, by such
Designated Shareholder on the record date for the Company Shareholders' Meeting
to be voted in favor of the Merger and this Agreement at such meeting.
5.3 PUBLIC ANNOUNCEMENTS. During the Pre-Closing Period, (a) neither the
Company nor any of the Designated Shareholders shall (and the Company shall not
permit any of its Representatives to) issue any press release or make any public
statement regarding this Agreement or the Merger, or regarding any of the other
transactions contemplated by this Agreement, without Parent's prior written
consent, and (b) Parent will use reasonable efforts to consult with the Company
prior to issuing any press release or making any public statement regarding the
Merger.
5.4 REASONABLE EFFORTS. During the Pre-Closing Period, (a) the Company and
the Designated Shareholders shall use their reasonable commercial efforts to
cause the conditions set forth in SECTION 6 to be satisfied on a timely basis,
and (b) Parent and Merger Sub shall use their reasonable commercial efforts to
cause the conditions set forth in SECTION 7 to be satisfied on a timely basis.
5.5 EMPLOYMENT AND NONCOMPETITION AGREEMENTS. At or prior to the Closing,
each of the individuals identified on EXHIBIT F shall execute and deliver to the
Company and Parent an Employment Agreement in the form of EXHIBIT G and, a
Noncompetition and Nonsolicitation Agreement in the form of EXHIBIT H.
5.6 TERMINATION OF AGREEMENTS. Prior to the Closing Date, the Company
shall enter into agreements, reasonably satisfactory in form and content to
Parent (and conditioned and effective upon the Closing Date), terminating all
rights of the parties to the following agreements: (i) Series A Preferred Stock
Purchase Agreement dated January 8, 1999 among the Company, NextGen and
Hardwicke, (ii) Stock Restriction Agreement dated January 8, 1999 between the
Company and Hardwicke, (iii) Series B Preferred Stock Purchase Agreement dated
April 14, 2000 among the Company, Xxxxxx Investment Fund II, LLLP ("WIF") and
Hardwicke, (iv) Investor Rights Agreement dated April 14, 2000 among the
Company, NextGen, WIF and Hardwicke, (v) Registration Rights Agreement dated
April 14, 2000 among the Company, NextGen, WIF and Hardwicke and (vi) Amended
and Restated Right of First Refusal and Co-Sale Agreement dated April ___, 2000
among Hardwicke, NextGen, WIF and the Company.
5.7 EMPLOYEE RETENTION PROGRAM. If for any period ending on April 30,
2001, the Company and Surviving Corporation generate revenues in excess of Four
Million Dollars ($4,000,000) solely with respect to any contractual arrangement
arising in connection with the Washington Contract for the sale of any services
and products of the Company or Surviving Corporation (provided, however, if the
Company sells pursuant to the Washington Contract any curriculum content or
instruction and products or services that are actually provided by Parent, then
the revenues in connection therewith shall not be deemed revenues generated by
the Washington Contract), then Parent shall promptly issue (pursuant to the
terms of its 2000 Equity
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Incentive Plan, a copy of which is attached hereto as EXHIBIT J, or such other
stock plans that are necessary to accomplish the stock issuances described in
this Section 5.7) to those individuals that were employees both of the Company
as of the Closing Date and Surviving Corporation as of April 30, 2001, on a
pro-rata basis according to EXHIBIT K attached hereto, that number of shares of
registered Parent Common Stock (not subject to vesting restrictions or any
repurchase right by Parent) calculated by dividing Five Hundred Thousand Dollars
($500,000) by the average of the closing sales price of Parent Common Stock as
reported on the NASDAQ National Market for the five (5) consecutive trading days
immediately preceding April 30, 2001.
5.8 FIRPTA MATTERS. At the Closing, (a) the Company shall deliver to
Parent a statement (in such form as may be reasonably requested by counsel to
Parent) conforming to the requirements of Section 1.897 - 2(h)(1)(i) of the
United States Treasury Regulations, and (b) the Company shall deliver to the
Internal Revenue Service the notification required under Xxxxxxx 0.000 - 0(x)(0)
xx xxx Xxxxxx Xxxxxx Treasury Regulations.
5.9 RELEASE. At the Closing, each of the Designated Shareholders shall
execute and deliver to the Company a Release in the form of EXHIBIT L.
5.10 TERMINATION OF EMPLOYEE PLANS. At or prior to the Closing, the
Company shall terminate its 1998 Stock Option Plan, and shall ensure that no
employee or former employee of the Company has any rights under such plan
(provided, however, that such termination shall not affect the validity of any
option granted thereunder then outstanding; provided any such option shall be
required to be exercised and/or converted into Common Stock as required hereby)
and that any liabilities of the Company under such plan (including any such
liabilities relating to services performed prior to the Closing) are fully
extinguished at no cost to the Company or Parent.
5.11 EXEMPT TRANSACTION. The Company shall take all actions reasonably
requested by Parent to assist Parent in qualifying the issuance of shares of
Parent Common Stock in connection with the Merger as a transaction exempt from
the registration provisions of Section 5 of the Securities Act pursuant to Rule
506 of Regulation D promulgated thereunder ("REGULATION D"). The Company shall
prepare an information/proxy statement in accordance with applicable law for the
Equity Holders for purposes of soliciting the approval of the Merger in
accordance with this Agreement ("INFORMATION STATEMENT"). The Information
Statement will contain such information as requested by Parent concerning the
Company, Parent, Merger Sub and the Merger. The Company shall submit a draft of
the Information Statement to Parent for its prior written approval which
approval shall not be unreasonably withheld or delayed. In connection with the
distribution of the Information Statement, the Company agrees to cause all
Equity Holders to complete an Investment Representation Letter in the form of
EXHIBIT M attached hereto. To the extent that Parent or its counsel reasonably
determines that an Equity Holder is not sophisticated for purposes of Rule 506
of Regulation D, the Company agrees that it shall retain, at its expense, a
"Purchaser Representative" (as defined in Rule 501 of Regulation D) to assist
such Equity Holder(s) in evaluating the Information Statement and the investment
decision represented by this Agreement and the transactions contemplated hereby,
including, without limitation, the Merger. Parent, Merger Sub and the Company
agree that the Company is not making any representation or warranty with respect
to (a) the qualification of the
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issuance of the shares of Parent Common Stock in connection with its Merger as a
transaction pursuant to Regulation D or (b) the accuracy or completeness of any
information supplied by Parent or Merger Sub to be included in the Information
Statement.
5.12 PRE-CLOSING OPERATIONS OF MERGER SUB. During the Pre-Closing Period,
Merger Sub shall not engage in any activities of any nature except as provided
in or contemplated by this Agreement.
5.13 PAYMENT OF LIABILITIES. At Closing and within thirty (30) days
following the Closing Date, Parent and Merger Sub, as applicable, will pay those
liabilities of the Company as specifically described in EXHIBIT N attached
hereto.
5.14 RESERVATION OF SHARES. Parent agrees to reserve and keep reserved,
free from preemptive rights, out of its authorized and unissued Parent Common
Stock, such number of shares of Parent Common Stock as is sufficient to provide
for the issuance of the Earn-Out Payments.
5.15 INDEMNIFICATION. Parent shall indemnify the present officers and
directors of Company for a period of two (2) years from the Effective Time for
events occurring prior to the Effective Time to the extent contemplated in
Company's current Articles of Incorporation.
5.16 TAX MATTERS. Prior to the Closing, (a) Parent and the Company shall
execute and deliver, to Xxxxxx Godward LLP and to XxXxxxxxxx Kaine & Grant tax
representation letters in substantially the form of EXHIBIT O (which will be
used in connection with the legal opinions contemplated by Sections 6.5(l) and
6.17).
5.17 TAX FREE REORGANIZATION. No party to this Agreement shall take any
action, either prior to or after the Closing Date, that would reasonably be
expected to cause the Merger to fail to qualify as a "reorganization" under
Section 368 of the Code.
5.18 PARENT LOAN AGREEMENT. On or before the Signing Date, Parent and the
Company shall have entered into and delivered loan documents in the form
attached hereto as EXHIBIT P (collectively, the "PARENT LOAN AGREEMENT").
5.19 AUDIT. On or before June 20, 2000, the Designated Shareholders shall
deliver to Parent the audited balance sheets of the Company as of December 31,
1999, and the related audited income statements, statements of shareholders'
equity and statements of cash flows of the Company for the years then ended (or
such shorter period the Company may have been in existence), together with the
notes thereto and the unqualified report and opinion of Keiter, Stephens, Xxxxx,
Xxxx & Xxxxxxxx related thereto.
5.20 STOCK OPTION GRANTS. Within sixty (60) days of the Closing Date,
Parent shall grant stock options to purchase up to 200,000 shares of Parent
Common Stock (subject to Parent's standard stock option vesting schedule) to
certain of Company's current employees who after the Closing Date become
employees of either Parent or Merger Sub. Such options shall be allocated pro
rata among the employees according to the ratio of values as set forth on
Exhibit K.
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5.21 TEST ITEM CONTRACT. Not later than June 30, 2001, the Designated
Shareholders shall cause the amendment (as described below) of any contract
between the Merger Sub (or formerly, the Company) and any Person to provide test
and assessment questions which is in effect as of the Closing Date and calls for
the payment of royalties by the Merger Sub in connection therewith (the "Test
Item Contract"). Such amendment shall be accomplished by amending the Test Item
Contract in writing signed by all the parties thereto to provide that, after
June 30, 2001, (a) any new work performed thereunder shall be paid for by the
Merger Sub on an hourly rate or project fee basis, (b) no royalties are further
owed thereunder by the Merger Sub and (c) all test items developed thereunder
can continue to be used by the Merger Sub (the "Amendment Alternative"). If the
Amendment Alternative is not achieved by June 30, 2001, the Designated
Shareholders shall, at their expense, (i) to the extent that any test items
developed under the Test Item Contract cannot continue to be used by the Merger
Sub without expense and are being used as of June 30, 2001, purchase or license
for the Merger Sub's non-exclusive perpetual use substantially similar (in
number and content) test items and (ii) indemnify the Merger Sub against any
further liabilities with respect to the Test Item Contract. Parent and Merger
Sub hereby agree to cooperate with the Designated Shareholder Representative as
the Designated Shareholder Representative may reasonably request to allow the
Designated Shareholder Representative to effectuate the amendment of the Test
Item Contract as provided above and to take such other actions reasonably
designated to minimize the liability of Merger Sub thereunder. Additionally, the
Designated Shareholders hereby indemnify Parent and Merger Sub against any
obligation under the Test Item Contract to issue shares of capital stock of the
Company, Parent or Merger Sub after the Closing Date in consideration for any
work performed.
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB
The obligations of Parent and Merger Sub to effect the Merger and
otherwise consummate the transactions contemplated by this Agreement are subject
to the satisfaction, at or prior to the Closing, of each of the following
conditions:
6.1 ACCURACY OF REPRESENTATIONS. Each of the representations and
warranties made by the Company and the Designated Shareholders in this Agreement
and in each of the other agreements and instruments delivered to Parent in
connection with the transactions contemplated by this Agreement shall have been
accurate in all material respects as of the date of this Agreement (without
giving effect to any materiality qualifications, or any similar qualifications,
contained or incorporated directly or indirectly in such representations and
warranties other than qualifications requiring a "Material Adverse Effect" on
the Company; provided, however, the parties agree that any breach or inaccuracy
of a representation or warranty containing a "Material Adverse Effect" qualifier
shall be deemed a material breach or inaccuracy for purposes of this sentence),
and shall be accurate in all material respects as of the Scheduled Closing Time
as if made at the Scheduled Closing Time (without giving effect to any update to
the Disclosure Schedule, and without giving effect to any materiality
qualifications, or any similar qualifications, contained or incorporated
directly or indirectly in such representations and warranties other than
qualifications requiring a "Material Adverse Effect" on the Company; provided,
however, the parties agree that any breach or inaccuracy of a representation or
warranty containing a "Material Adverse Effect" qualifier shall be deemed a
material breach or inaccuracy for purposes of this sentence).
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6.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations that
the Company and the Designated Shareholders are required to comply with or to
perform at or prior to the Closing shall have been complied with and performed
in all material respects.
6.3 SHAREHOLDER APPROVAL. The principal terms of the Merger shall have
been duly approved by the affirmative vote of (a) ninety-seven percent (97%) of
the shares of the Company Common Stock entitled to vote with respect thereto,
and (b) and to the extent not converted to the Company Common Stock at the time
of the vote, ninety-seven percent (97%) of the shares of Series A Preferred
Stock and Series B Preferred Stock (if not redeemed prior to the time of the
vote) entitled to vote with respect thereto.
6.4 CONSENTS. All Consents required to be obtained in connection with the
Merger and the other transactions contemplated by this Agreement (including the
Consents identified in Part 2.21 of the Disclosure Schedule) shall have been
obtained and shall be in full force and effect.
6.5 AGREEMENTS AND DOCUMENTS. Parent shall have received the following
agreements and documents, each of which shall be in full force and effect:
(a) Employment Agreements in the form of EXHIBIT G, executed by the
individuals identified on EXHIBIT F;
(b) Noncompetition and Nonsolicitation Agreements in the form of
EXHIBIT H executed by the individuals identified on EXHIBIT F;
(c) a Release in the form of EXHIBIT L, executed by all (i) employees
of the Company who are also shareholders of the Company and (ii) non-employee
shareholders of the Company who own more than 1% of any class of Company stock;
(d) the agreement referred to in Section 5.6;
(e) confidential invention and assignment agreements, reasonably
satisfactory in form and content to Parent, executed by all employees and former
employees of the Company and by all consultants and independent contractors and
former consultants and former independent contractors to the Company who have
not already signed such agreements (including the individuals identified in Part
2.9(f) of the Disclosure Schedule);
(f) the statement referred to in Section 5.8(a), executed by the
Company;
(g) an estoppel certificate (which may be combined with a written
consent to assignment), dated as of a date not more than ten (10) days prior to
the Closing Date and reasonably satisfactory in form and content to Parent,
executed by the landlord in question;
(h) a legal opinion of XxXxxxxxxx Kaine & Grant dated as of the
Closing Date, in the form of EXHIBIT Q;
(i) A Voting Agreement in the form of EXHIBIT R, executed by the
individuals identified in EXHIBIT S;
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(j) a certificate executed by the Designated Shareholders and
containing the representation and warranty of each Designated Shareholder that
each of the representations and warranties set forth in SECTION 2 is accurate in
all material respects as of the Closing Date as if made on the Closing Date and
that the conditions set forth in Sections 6.1, 6.2, 6.3 and 6.4 have been duly
satisfied (the "DESIGNATED SHAREHOLDERS' CLOSING CERTIFICATE"); and
(k) Investor Representation Letters in the form of EXHIBIT M completed
by all Company Equity Holders.
(l) A legal opinion of Xxxxxx Godward LLP dated as of the Closing Date
and delivered to Parent, to the effect that the Merger will constitute a
reorganization within the meaning of Section 368 of the Code (it being
understood that in rendering such opinion, such counsel may rely upon the tax
representation letters referred to in Section 5.16.
6.6 FIRPTA COMPLIANCE. The Company shall have filed with the Internal
Revenue Service the notification referred to in Section 5.8(b).
6.7 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
6.8 NO LEGAL PROCEEDINGS. No Person shall have commenced or threatened to
commence any Legal Proceeding challenging or seeking the recovery of a material
amount of damages in connection with the Merger or seeking to prohibit or limit
the exercise by Parent of any material right pertaining to its ownership of
stock of the Surviving Corporation.
6.9 PURCHASER REPRESENTATIVE CERTIFICATE. Parent shall have received a
Purchaser Representative Certificate addressed to Parent in the form of EXHIBIT
T executed by the Purchaser Representative referenced in Section 5.11 hereto.
6.10 LEGENDS. The Company shall have provided Parent with evidence,
reasonably satisfactory to Parent, that all technical data, computer software
and Company Proprietary Assets delivered or otherwise provided or made available
by or on behalf of the Company to Governmental Bodies in connection with
Government Contracts have been marked with all markings and legends (including
any "restricted rights" legend and any "government purpose license rights"
legend) appropriate (under the FAR, under other applicable Legal Requirements or
otherwise) to ensure that no Governmental Body or other Person is able to
acquire any unlimited rights with respect to any of such technical data,
computer software or Company Proprietary Assets and to ensure that the Company
has not lost or relinquished and will not lose or relinquish any material rights
with respect thereto.
6.11 TERMINATION OF EMPLOYEE PLANS. The Company shall have provided Parent
with evidence, reasonably satisfactory to Parent, as to the termination of the
benefit plans referred to in Section 5.10.
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6.12 ASSIGNMENT OF MATERIAL CONTRACTS. All consents to assignment required
to assign all of Company's Material Contracts to Merger Sub effective upon the
Closing shall have been duly executed, and copies of all such executed consents
to assignment shall have been provided to Parent.
6.13 REGISTRATION RIGHTS AGREEMENT. A Registration Rights Agreement in the
form of EXHIBIT U executed by Parent and the individuals identified in EXHIBIT V
shall be in full force and effect.
6.14 LOCK UP AGREEMENT. Lock Up Agreements in the form of EXHIBIT W
executed by the individuals identified in EXHIBIT X shall be in full force and
effect.
6.15 DUE DILIGENCE. Parent shall be satisfied with the results of its due
diligence review of Company's business and operations, financial condition,
legal condition and assets.
6.16 NO COMPANY OPTIONS OR CONVERTIBLE SECURITIES. No Company Option,
warrant, Series A Preferred Stock, Series B Preferred Stock or other convertible
security, whether vested or unvested or exercisable or not, shall be
outstanding.
6.17 TAX OPINION. Company and the Designated Shareholders shall have
received a legal opinion of XxXxxxxxxx Kaine & Grant dated as of the Closing
Date, to the effect that the Merger will constitute a reorganization within the
meaning of Section 368 of the Code (it being understood that, in rendering such
opinion, such counsel may rely upon the tax representation letters referred to
in Section 5.16.
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY
The obligations of the Company to effect the Merger and otherwise
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or prior to the Closing, of the following conditions:
7.1 ACCURACY OF REPRESENTATIONS. Each of the representations and
warranties made by Parent and Merger Sub in this Agreement shall have been
accurate in all material respects as of the date of this Agreement (without
giving effect to any materiality or similar qualifications contained in such
representations and warranties other than qualifications requiring a "Material
Adverse Effect" on the Company; provided, however, the parties agree that any
breach or inaccuracy of a representation or warranty containing a "Material
Adverse Effect" qualifier shall be deemed a material breach or inaccuracy for
purposes of this sentence), and shall be accurate in all material respects as of
the Scheduled Closing Time as if made at the Scheduled Closing Time (without
giving effect to any materiality or similar qualifications contained in such
representations and warranties other than qualifications requiring a "Material
Adverse Effect" on the Company; provided, however, the parties agree that any
breach or inaccuracy of a representation or warranty containing a "Material
Adverse Effect" qualifier shall be deemed a material breach or inaccuracy for
purposes of this sentence).
7.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations that
Parent and Merger Sub are required to comply with or to perform at or prior to
the Closing shall have been complied with and performed in all respects.
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7.3 CONSENTS. All Consents required to be obtained by Parent or Merger Sub
in connection with the Merger and the other transactions contemplated by this
Agreement shall have been obtained and shall be in full force and effect.
7.4 DOCUMENTS. The Company and certain Employees who are parties to some
of the documents described below shall have received the following documents,
each of which shall be in full force and effect:
(a) a legal opinion of Xxxxxx Godward LLP, dated as of the Closing
Date, in the form of EXHIBIT Z;
(b) Employment Agreements in the form of EXHIBIT G, executed by those
employees of Company listed on EXHIBIT F attached hereto; and
(c) a certificate executed by Parent and Merger Sub and containing the
representation and warranty of each Parent and Merger Sub that each of the
representations and warranties set forth in SECTION 3 above is accurate in all
material respects as of the Closing Date as if made on the Closing Date and that
the conditions set forth in Sections 7.1 and 7.2 above have been duly satisfied
(the "PARENT AND MERGER SUB CLOSING CERTIFICATE").
7.5 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
7.6 REGISTRATION RIGHTS CONTRACTS. A Registration Rights Agreement in the
form of EXHIBIT U executed by Parent and the individuals identified in EXHIBIT V
shall be in full force and effect.
7.7 NO LEGAL PROCEEDINGS. No Person shall have commenced or threatened to
commence any Legal Proceeding (a) challenging, or seeking the recovery of a
material amount of damages in connection with, the Merger or (b) seeking to
prohibit or limit the exercise by Parent of any material right pertaining to its
ownership of stock of Surviving Corporation.
SECTION 8. TERMINATION
8.1 TERMINATION EVENTS. This Agreement may be terminated prior to the
Closing:
(a) by Parent at or after the Scheduled Closing Time if any condition
set forth in SECTION 6 has not been satisfied by the Scheduled Closing Time;
(b) by the Company at or after the Scheduled Closing Time if any
condition set forth in SECTION 7 has not been satisfied by the Scheduled Closing
Time;
(c) by Parent if the Closing has not taken place on or before August
24, 2000 (other than as a result of any failure on the part of Parent to comply
with or perform any covenant or obligation of Parent set forth in this
Agreement);
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(d) by the Company if the Closing has not taken place on or before
August 24, 2000 (other than as a result of the failure on the part of the
Company or any of the Designated Shareholders to comply with or perform any
covenant or obligation set forth in this Agreement or in any other agreement or
instrument delivered to Parent);
(e) by the mutual written consent of Parent and the Company;
(f) by the Parent if Company is in violation or default of the Parent
Loan Agreement; and
(g) by the Company if Parent is in violation or default of the Parent
Loan Agreement.
8.2 TERMINATION PROCEDURES. If Parent wishes to terminate this Agreement
pursuant to Section 8.1(a) or Section 8.1(c), Parent shall deliver to the
Company a written notice stating that Parent is terminating this Agreement and
setting forth a brief description of the basis on which Parent is terminating
this Agreement. If the Company wishes to terminate this Agreement pursuant to
Section 8.1(b) or Section 8.1(d), the Company shall deliver to Parent a written
notice stating that the Company is terminating this Agreement and setting forth
a brief description of the basis on which the Company is terminating this
Agreement.
8.3 EFFECT OF TERMINATION. If this Agreement is terminated pursuant to
Section 8.1, all further obligations of the parties under this Agreement shall
terminate; provided, however, that: (a) neither the Company nor Parent shall be
relieved of any obligation or liability arising from any prior breach by such
party of any provision of this Agreement; (b) the parties shall, in all events,
remain bound by and continue to be subject to the provisions set forth in
SECTION 10; and (c) the Company shall, in all events, remain bound by and
continue to be subject to Section 5.4. If Company or any of the Designated
Shareholders terminate this Agreement in a manner other than as specifically
permitted in Sections 8.1(b), 8.1(d), 8.1(e) or 8.1(g) then within three (3)
business days of such termination, the Company shall pay Parent via wire
transfer in immediately available funds a non-refundable fee of One Million
Seven Hundred Fifty Thousand Dollars ($1,750,000).
SECTION 9. INDEMNIFICATION, ETC. BY DESIGNATED SHAREHOLDERS
9.1 SURVIVAL OF REPRESENTATIONS, ETC.
(a) The representations and warranties made by the Designated
Shareholders (including the representations and warranties set forth in SECTION
2 and the representations and warranties set forth in the Designated
Shareholders' Closing Certificate) shall survive the Closing and shall expire on
the eighteen (18) month anniversary of the Closing Date; provided, however, that
if, at any time prior to the eighteen (18) month anniversary of the Closing
Date, any Indemnitee delivers to the Designated Shareholders' Agent (as defined
in Section 10.1 below) a written notice alleging the existence of an inaccuracy
in or a breach of any of the representations and warranties made by the
Designated Shareholders (and setting forth the basis for such Indemnitee's
belief that such an inaccuracy or breach may exist and to the extent then
available or reasonable calculable an estimate as to the amount of Damages) and
asserting a claim for recovery under Section 9.2 based on such alleged
inaccuracy or breach, then the claim
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asserted in such notice shall survive the eighteen (18) month anniversary of the
Closing until such time as such claim is fully and finally resolved. All
representations and warranties made by Parent and Merger Sub shall terminate and
expire as of the Effective Time, and any liability of Parent or Merger Sub with
respect to such representations and warranties shall thereupon cease, provided,
however, the parties agree that agreements of Parent and Merger Sub set forth
herein to perform under this Agreement following the Closing shall survive the
Closing.
(b) The representations, warranties, covenants and obligations of the
Company and the Designated Shareholders, and the rights and remedies that may be
exercised by the Indemnitees, shall not be limited or otherwise affected by or
as a result of any information furnished to, or any investigation made by or
knowledge of, any of the Indemnitees or any of their Representatives, except as
otherwise set forth in the last sentence of Section 4.3(b).
(c) For purposes of this Agreement, each statement or other item of
information set forth in the Disclosure Schedule or in any update to the
Disclosure Schedule shall be deemed to be a representation and warranty made by
the Company and the Designated Shareholders in this Agreement; provided,
however, each such statement or item must be reasonably interpreted in the
context of all information set forth in the Disclosure Statement and any update
thereof.
9.2 INDEMNIFICATION BY DESIGNATED SHAREHOLDERS.
(a) From and after the Effective Time (but subject to Section 9.1),
the Designated Shareholders, jointly and severally, (except as to the
representations set forth in Sections 2.18 and 2.19(c), as to which the
liability of the Designated Shareholders is several only) shall hold harmless
and indemnify each of the Indemnitees from and against, and shall compensate and
reimburse each of the Indemnitees for, any Damages which are suffered or
incurred by any of the Indemnitees or to which any of the Indemnitees may
otherwise become subject (regardless of whether or not such Damages relate to
any third-party claim) and which arise from or as a result of, or are directly
or indirectly connected with: (i) any inaccuracy in or breach of any
representation or warranty set forth in SECTION 2 or in the Designated
Shareholders' Closing Certificate; (ii) any breach of any covenant or obligation
of the Company or any of the Designated Shareholders (including the covenants
set forth in SECTION 4 and SECTION 5); and (iii) any Legal Proceeding relating
to any inaccuracy or breach of the type referred to in clause "(i)" or "(ii)"
above (including any Legal Proceeding commenced by any Indemnitee for the
purpose of enforcing any of its rights under this SECTION 9); (iv) any Test Item
Contract or any agreement or understanding related thereto (except for the
payment of any royalties up to $50,000 on test items pre-existing the Closing
Date produced under the ARSI Contract); (v) any Reseller Agreements in existence
as of the Closing (except as to any accounts receivable of the Company owed in
connection therewith); (vi) any claim Xxxx.Xxx Inc. or any of its affiliates or
assigns may have against Company or any of its successors or assigns; or (vii)
any instance in which the Company has at any time prior to the Effective Time
infringed, misappropriated or made any unlawful use of any Proprietary Asset
owned by any other Person.
(b) The Designated Shareholders acknowledge and agree that, if the
Surviving Corporation suffers, incurs or otherwise becomes subject to any
Damages as a result of or in connection with any inaccuracy in or breach of any
representation, warranty, covenant or
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obligation, then (without limiting any of the rights of Surviving Corporation as
an Indemnitee) Parent shall also be deemed, by virtue of its ownership of the
stock of Surviving Corporation, to have incurred Damages as a result of and in
connection with such inaccuracy or breach; provided, however, under no
circumstances shall two or more Indemnitees be entitled to recover duplicative
Damages if the payment of Damages to one Indemnitee reasonable inures to the
benefit of the other Indemnitees.
(c) The parties hereby agree that in lieu of recovery from the
Designated Shareholders pursuant to this SECTION 9, Parent shall have the right
to satisfy indemnification obligations hereunder by set-off of amounts otherwise
payable or shares of Parent Common Stock otherwise issuable to the Company
Equity Holders (and not just the Designated Shareholders) pursuant to Sections
1.5(a)(iv) and 1.5(c); and (i) the Indemnitees are required to offset under
Section 1.5(a)(iv) prior to any recovery from Designated Shareholders pursuant
thereto, and (ii) the Indemnitees are required to offset under Section 1.5(c) to
the extent, as of the time recovery hereunder is sought, Earn-Out Shares have
actually been earned (but not yet paid) and not already setoff. For purposes of
such offset, each share of Parent Common Stock shall be valued at the average of
the closing sales price as reported in the NASDAQ National Market for trading
dates described in Section 1.5 for each category of Parent Common Stock
described therein. If any Damages are not so satisfied by the offset of the
Hold-Back Shares and the Earn-Out Payments, the balance thereof (the "Excess
Damages") shall then be recoverable from the Designated Shareholders, subject to
the limitations described in this SECTION 9.
(d) Notwithstanding anything to the contrary in this Agreement, the
maximum liability for a given Designated Shareholder under this SECTION 9 shall
be limited to the total amount of cash and Parent Common Stock that such given
Designated Shareholder has actually received under this Agreement, with the
Parent Common Stock being valued at the trading dates described in Section 1.5
for each category of Parent Common Stock described therein.
9.3 THRESHOLD. The Designated Shareholders shall not be required to make
any indemnification payment pursuant to Section 9.2 for any inaccuracy in or
breach of any of their representations and warranties set forth in SECTION 2
until such time as the total amount of all Damages (including the Damages
arising from such inaccuracy or breach and all other Damages arising from any
other inaccuracies in or breaches of any representations or warranties) that
have been directly or indirectly suffered or incurred by any one or more of the
Indemnitees, or to which any one or more of the Indemnitees has or have
otherwise become subject, exceeds Seventy-Five Thousand Dollars ($75,000) in the
aggregate.
9.4 NO CONTRIBUTION. Each Designated Shareholder waives, and acknowledges
and agrees that he shall not have and shall not exercise or assert (or attempt
to exercise or assert), any right of contribution, right of indemnity or other
right or remedy against the Surviving Corporation in connection with any
indemnification obligation or any other liability to which he may become subject
under or in connection with this Agreement or the Designated Shareholders'
Closing Certificate.
9.5 INTEREST. Any Designated Shareholder who is required to hold harmless,
indemnify, compensate or reimburse any Indemnitee pursuant to this SECTION 9
with respect to any Damages shall also be liable to such Indemnitee for interest
on the amount of such Damages
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(for the period commencing as of the date on which such Designated Shareholder
first received written notice of a claim for recovery by such Indemnitee and
ending on the date on which the liability of such Designated Shareholder to such
Indemnitee is fully satisfied by such Designated Shareholder) at a floating rate
equal to the rate of interest publicly announced by Bank of America, N.T. & S.A.
from time to time as its prime, base or reference rate.
9.6 DEFENSE OF THIRD PARTY CLAIMS. In the event of the assertion or
commencement or threatened assertion or commencement by any third party Person
of any claim or Legal Proceeding (whether against the Surviving Corporation,
against Parent or against any other Indemnitee) (the "THIRD PARTY CLAIM") with
respect to which any of the Designated Shareholders may become obligated to hold
harmless, indemnify, compensate or reimburse any Indemnitee pursuant to this
SECTION 9, the following procedures shall be followed:
(a) Any Indemnitee who has a notice of a Third Party Claim shall
promptly notify the Designated Shareholders' Agent thereof in writing; provided,
however, that no delay on the part of the Indemnitee in notifying the Designated
Shareholders' Agent shall relieve the Designated Shareholders from any
obligation hereunder unless, and then only to the extent, the Designated
Shareholders thereby are materially prejudiced in defending any such claim.
The Designated Shareholders shall have the right, at their sole cost and
expense, to assume the defense of the Third Party Claim with counsel of their
choice reasonably satisfactory to the Indemnitee, so long as the Designated
Shareholders' Agent notifies the Indemnitee in writing within the earlier of (i)
if the Indemnitee has given the Designated Shareholders' Agent reasonable notice
of the Third Party Claim ten (10) days before the date of any required legal
response, or (ii) 30 days after the Indemnitee has given notice of the Third
Party Claim, that the Designated Shareholders elect to assume such defense. In
assuming such defense, the Designated Shareholders must conduct the defense of t
he Third Party Claim reasonably and diligently thereafter in order to preserve
their rights hereunder, and provided, further, that the Indemnitee may retain
separate co-counsel at its sole cost and expense and participate in the defense
of the Third Party Claim. Once the Designated Shareholders have elected to
assume and reasonably and diligently continue to conduct the defense as
described above, the Indemnitee shall no longer be entitled to any reimbursement
for any fees or expense related to defense of such action unless the Indemnitee
is permitted to assume the defense of the Third Party Claim, as provided in
Section 9.6(c) below. Notwithstanding the foregoing, the Indemnitee may retain
counsel and assume the defense of a Third Party Claim, the costs and expenses of
which shall be reimbursable pursuant to this Section 9, in the event the parties
to the action or proceeding involve both the Indemnitee and one or more of the
Equity Holders or if the Indemnitee otherwise reasonably determines upon advice
of counsel there exists a conflict of interests such that legal representation
of both the Indemnitee and any of the Equity Holders in such action or
proceeding would be inappropriate under applicable standards of professional
conduct.
(b) So long as the Designated Shareholders are eligible to elect to
assume, or have elected to assume and are conducting, the defense of the Third
Party Claim in accordance with Section 9.6(a) above, (i) the Indemnitee will not
consent to or permit the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without prior written consent of the Designated
Shareholders, which consent shall not be unreasonably withheld, (ii) the
Designated Shareholders shall have the right to consent to the entry of any
monetary
47.
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judgment or enter into any monetary settlement with respect to the Third Party
Claim so long as the Designated Shareholders shall have received the prior
written consent of the Indemnitee which consent will not be unreasonably
withheld or delayed and so long as the Designated Shareholders pay completely
for the judgment or settlement, and (iii) the Indemnitee shall cooperate with
the Designated Shareholders and their counsel in the defense against or
compromise of any such claim.
(c) In the event the Designated Shareholders do not assume, or if
assumed conduct, the defense of the Third Party Claim in accordance with Section
9.6(a) above, (i) the Indemnitee may defend against, and consent to the entry of
any judgment or enter in to any settlement with respect to the Third Party Claim
in any manner reasonably appropriate and the Indemnitee need not consult with,
or obtain any consent from the Designated Shareholders in connection therewith,
(ii) the Designated Shareholders will reimburse the Indemnitee promptly and
periodically for the costs of defending against the Third Party Claim (including
reasonable attorney's fees and expense), and (iii) the Designated Shareholders
will remain responsible for any Damages the Indemnitee may suffer resulting
from, arising out of, or otherwise relating to the Third Party Claim subject to
the limitations of this SECTION 9.
9.7 EXERCISE OF REMEDIES BY INDEMNITEES OTHER THAN PARENT. No Indemnitee
(other than Parent or any successor thereto or assign thereof) shall be
permitted to assert any indemnification claim or exercise any other remedy under
this Agreement unless Parent (or any successor thereto or assign thereof) shall
have consented to the assertion of such indemnification claim or the exercise of
such other remedy.
9.8 TAX CHARACTER. To the extent possible, any payments pursuant to this
SECTION 9 shall be treated for federal and state income tax purposes as
adjustments to the purchase price for the Company Common Stock. Parent and
Designated Shareholders agree that they shall report such payment on all Tax
Returns consistently with such characterization.
SECTION 10. MISCELLANEOUS PROVISIONS
10.1 DESIGNATED SHAREHOLDERS' AGENT.
(a) The Designated Shareholders hereby irrevocably appoint Hardwicke
as their agent for purposes of SECTION 9 (the "DESIGNATED SHAREHOLDERS' AGENT"),
and Hardwicke hereby accepts appointment as the Designated Shareholders' Agent.
Parent shall be entitled to deal exclusively with the Designated Shareholders'
Agent on all matters relating to SECTION 9, and shall be entitled to rely
conclusively (without further evidence of any kind whatsoever) on any document
executed or purported to be executed on behalf of any Designated Shareholder by
the Designated Shareholders' Agent, and on any other action taken or purported
to be taken on behalf of any Designated Shareholder by the Designated
Shareholders' Agent, as fully binding upon such Designated Shareholder with
respect to SECTION 9. Additionally, the Designated Shareholders' Agent shall
have the power to act on behalf of all the Equity Holders in connection with any
claims Equity Holders may have against Parent or Merger Sub that specifically
relate to the covenants set forth in Sections 5.7, 5.13, 5.14, 5.15 and 5.20 of
this Agreement. If the Designated Shareholders' Agent desires to resign, he
shall appoint from among the other Designated Shareholders a successor who shall
agree in writing to accept such
48.
58
appointment and no resignation of a Designated Shareholders' Agent shall be
effective until such successor shall have agreed in writing to such appointment.
If the Designated Shareholders' Agent shall die, become disabled or otherwise be
unable to fulfill his responsibilities as agent of the Designated Shareholders,
then the Designated Shareholders shall, within ten (10) days after such death or
disability, appoint a successor agent and, promptly thereafter, shall notify
Parent of the identity of such successor. Any such successor shall become the
"DESIGNATED SHAREHOLDERS' AGENT" for purposes of SECTION 10 and this Section
10.1. If for any reason there is no Designated Shareholders' Agent at any time,
all references herein to the Designated Shareholders' Agent shall be deemed to
refer to the Designated Shareholders.
(b) Each Designated Shareholder has made, constituted and appointed
and by the execution of this Agreement hereby irrevocably makes, constitutes and
appoints the Designated Shareholders' Agent as such person's true and lawful
attorney in fact and agent, for such person and in such person's name (i) to
receive all notices and communications directed to such Designated Shareholders'
Agent under SECTION 9 above and to take any action (or to determine to take no
action) with respect thereto as he may deem appropriate as effectively as such
Designated Shareholder could act for himself or herself, including without
limitation, the settlement or compromise of any dispute or controversy and to
(ii) execute and deliver all instruments and documents of every kind incident to
the foregoing for all intents and purposes and with the same effect as such
Designated Shareholder could do personally, and each such Designated Shareholder
hereby ratifies and confirms as his or her own act, all that the Designated
Shareholders' Agent shall do or cause to be done pursuant to the provisions
hereof.
(c) The death or incapacity of any Designated Shareholder shall not
terminate the authority and agency of the Designated Shareholders' Agent.
(d) The Designated Shareholders, jointly and severally, hereby agree
to indemnify the Designated Shareholders' Agent and to hold him harmless against
any Damages incurred without bad faith or willful misconduct on the party of the
Designated Shareholders' Agent and arising out of or in connection with his
duties as Designated Shareholders' Agent, including the costs and expenses
incurred by such Designated Shareholders' Agent in defending against any claim
of liability in connection herewith. Any such Damages, cost or expense shall be
apportioned among the Designated Shareholders according to the proportionate
interest of each based on their respective ownership of Company Common Stock
immediately prior to the Closing among themselves.
(e) In order to induce the Designated Shareholders' Agent to act in
such capacity, it is agreed by all of the Designated Shareholders that the
Designated Shareholders' Agent:
(i) shall not be under any duty to give greater consideration to
the interest of any Designated Shareholder or Shareholders than to that of any
other Designated Shareholder or Shareholders;
(ii) may act in reliance upon any instrument or signature
believed by him to be genuine and may assume that any writing purportedly given
by an Designated Shareholder in connection with this Agreement has been given by
such Designated Shareholder;
49.
59
(iii) shall not be liable for any mistake of fact or error in
judgment or for any acts or omissions of any kind unless caused by his bad
faith, or willful misconduct;
(iv) shall not be required to make any representation as to the
validity, value or genuineness of any document or instrument held by him or
delivered by him; and
(v) shall not be obligated to risk his own funds in the course of
performing as Designated Shareholders' Agent.
10.2 FURTHER ASSURANCES. Each party hereto shall execute and cause to be
delivered to each other party hereto such instruments and other documents, and
shall take such other actions, as such other party may reasonably request (prior
to, at or after the Closing) for the purpose of carrying out or evidencing any
of the transactions contemplated by this Agreement.
10.3 FEES AND EXPENSES. Each party to this Agreement shall bear and pay
all fees, costs and expenses (including legal fees and accounting fees) that
have been incurred or that are incurred by such party in connection with the
transactions contemplated by this Agreement, including all fees, costs and
expenses incurred by such party in connection with or by virtue of (a) the
investigation and review conducted by Parent and its Representatives with
respect to the Company's business (and the furnishing of information to Parent
and its Representatives in connection with such investigation and review), (b)
the negotiation, preparation and review of this Agreement (including the
Disclosure Schedule) and all agreements, certificates, opinions and other
instruments and documents delivered or to be delivered in connection with the
transactions contemplated by this Agreement, (c) the preparation and submission
of any filing or notice required to be made or given in connection with any of
the transactions contemplated by this Agreement, and the obtaining of any
Consent required to be obtained in connection with any of such transactions, and
(d) the consummation of the Merger.
10.4 ATTORNEYS' FEES. If any action or proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
10.5 NOTICES. Any notice or other communication required or permitted to
be delivered to any party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth beneath the name of such party
below (or to such other address or facsimile telephone number as such party
shall have specified in a written notice given to the other parties hereto):
IF TO PARENT:
Lightspan, Inc.
00000 Xxxxxx Xxxxx Xxxxx
Xxx Xxxxx, XX 00000
Attention: Xxxxxxx Xxxxxx and Xxxxxxxx X. XxXxxxx
Fax: (000) 000-0000 and (000) 000-0000
50.
60
WITH COPIES TO:
Xxxxxxxxxxx X. Xxxxxx, Esq.
Xxxxxx Godward LLP
0000 Xxxxxxxxx Xxxxx, Xxxxx 0000
Xxx Xxxxx, XX 00000-0000
Fax: (000) 000-0000
IF TO THE COMPANY:
Educator, Inc.
0000 Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxxx, President
Fax: (000) 000-0000
IF TO ANY OF THE DESIGNATED SHAREHOLDERS:
0000 Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxxx, Designated Shareholders'
Agent
Fax: (000) 000-0000
10.6 CONFIDENTIALITY. Without limiting the generality of anything
contained in Section 5.5, on and at all times after the Closing Date, each
Designated Shareholder shall keep confidential, and shall not use or disclose to
any other Person, any non-public document or other non-public information in
such Designated Shareholder's possession that relates to the business of the
Company or Parent; provided, however:
(a) such Designated Shareholder may disclose confidential information
if and to the extent that Parent consents in writing to such Designated
Shareholder's disclosure thereof; and
(b) such Designated Shareholder may disclose confidential information
to the extent required by applicable law or governmental regulation or by valid
legal process. If Designated Shareholder or any of the Designated Shareholder's
Representatives is required by law or governmental regulation or by subpoena or
other valid legal process to disclose any confidential information to any
Person, the Designated Shareholder will immediately provide Parent with written
notice of the applicable law, regulation or process so that Parent may seek a
protective order or other appropriate remedy. The Designated Shareholder and its
Representatives will cooperate fully with Parent and Parent's Representatives in
any attempt by Parent to obtain any such protective order or other remedy.
10.7 TIME OF THE ESSENCE. Time is of the essence of this Agreement.
10.8 HEADINGS. The underlined headings contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
51.
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10.9 COUNTERPARTS. This Agreement may be executed in several counterparts,
each of which shall constitute an original and all of which, when taken
together, shall constitute one agreement.
10.10 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California (without giving effect to
principles of conflicts of laws). The Company: (a) irrevocably and
unconditionally consents and submits to the jurisdiction of the state and
federal courts located in the State of California for purposes of any action,
suit or proceeding arising out of or relating to this letter agreement; (b)
agrees that service of any process, summons, notice or document by U.S. mail
addressed to the Company at the address set forth in Section 10.5 shall be
deemed to constitute effective service thereof for purposes of any action, suit
or proceeding arising out of or relating to this letter agreement; (c)
irrevocably and unconditionally waives any objection to the laying of venue of
any action, suit or proceeding arising out of or relating to this Agreement in
any state or federal court located in the State of California; and (d)
irrevocably and unconditionally waives the right to plead or claim, and
irrevocably and unconditionally agrees not to plead or claim, that any action,
suit or proceeding arising out of or relating to this letter agreement that is
brought in any state or federal court located in the State of California has
been brought in an inconvenient forum.
10.11 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon: the
Company and its successors and assigns (if any); the Designated Shareholders and
their respective personal representatives, executors, administrators, estates,
heirs, successors and assigns (if any); Parent and its successors and assigns
(if any); and Merger Sub and its successors and assigns (if any). This Agreement
shall inure to the benefit of: the Company and the Company's shareholders (to
the extent set forth in Section 1.5 and SECTION 3); Parent; Merger Sub; the
other Indemnitees (subject to Section 9.7); and the respective successors and
assigns (if any) of the foregoing. After the Closing Date, Parent may freely
assign any or all of its rights under this Agreement (including its
indemnification rights under SECTION 9), in whole or in part, to any other
Person without obtaining the consent or approval of any other party hereto or of
any other Person. Prior to the Closing Date, Parent may assign any or all of its
rights under this Agreement, in whole or in part, in connection with the sale of
at least a majority of Parent's assets or stock or involving the transfer of
more than 50% of the stock interests of Parent.
10.12 SPECIFIC PERFORMANCE. The parties to this Agreement agree that, in
the event of any breach or threatened breach by any party to this Agreement of
any covenant, obligation or other provision set forth in this Agreement for the
benefit of any other party to this Agreement, such other party shall be entitled
(in addition to any other remedy that may be available to it) to (a) a decree or
order of specific performance or mandamus to enforce the observance and
performance of such covenant, obligation or other provision, and (b) an
injunction restraining such breach or threatened breach.
10.13 WAIVER.
(a) No failure on the part of any Person to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of any
Person in exercising any power, right, privilege or remedy under this Agreement,
shall operate as a waiver of such power, right, privilege or remedy; and no
single or partial exercise of any such power, right, privilege or
52.
62
remedy shall preclude any other or further exercise thereof or of any other
power, right, privilege or remedy.
(b) No Person shall be deemed to have waived any claim arising out
of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy is
expressly set forth in a written instrument duly executed and delivered on
behalf of such Person; and any such waiver shall not be applicable or have any
effect except in the specific instance in which it is given.
10.14 AMENDMENTS. This Agreement may not be amended, modified, altered or
supplemented other than by means of a written instrument duly executed and
delivered on behalf of all of the parties hereto.
10.15 SEVERABILITY. In the event that any provision of this Agreement, or
the application of any such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to Persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
10.16 PARTIES IN INTEREST. Except for the provisions of Sections 1.5, 10.1
and XXXXXXX 0, xxxx of the provisions of this Agreement is intended to provide
any rights or remedies to any Person other than the parties hereto and their
respective successors and assigns (if any).
10.17 ENTIRE AGREEMENT. This Agreement and the other agreements referred
to herein set forth the entire understanding of the parties hereto relating to
the subject matter hereof and thereof and supersede all prior agreements and
understandings among or between any of the parties relating to the subject
matter hereof and thereof; provided, however, that the Mutual Non-Disclosure
Agreement and the No Shop Letter Agreement between Parent and Company dated
February 18, 2000 and May 5, 2000, respectively, shall not be superseded by this
Agreement and shall remain in effect in accordance with their terms until the
Effective Time.
10.18 CONSTRUCTION.
(a) For purposes of this Agreement, whenever the context requires:
the singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; the feminine gender shall
include the masculine and neuter genders; and the neuter gender shall include
the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "INCLUDE" and "INCLUDING,"
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "WITHOUT LIMITATION."
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63
(d) Except as otherwise indicated, all references in this Agreement
to "SECTIONS" and "EXHIBITS" are intended to refer to Sections of this Agreement
and Exhibits to this Agreement.
(e) As used in this Agreement, the words "TO THE BEST OF THE
KNOWLEDGE OF THE COMPANY" shall mean to the knowledge of the officers of the
Company following diligence and investigation and the words "TO THE BEST OF THE
KNOWLEDGE OF THE DESIGNATED SHAREHOLDERS" shall mean to the actual knowledge of
such individuals without any independent investigation.
[THIS SPACE INTENTIONALLY LEFT BLANK]
54.
64
The parties hereto have caused this Agreement to be executed and delivered
as of May __, 2000.
LIGHTSPAN, INC.,
a Delaware corporation.
-------------------------------------
Xxxx X. Xxxxxx
Chairman and Chief Executive Officer
EDUCATOR ACQUISITION, INC.,
a Delaware corporation.
By:
----------------------------------
----------------------------------
(Print Name and Title)
EDUTEST, INC.
a Virginia corporation.
By:
----------------------------------
----------------------------------
(Print Name and Title)
DESIGNATED SHAREHOLDERS
-------------------------------------
XXXXX X. XXXXXXXXX, PH.D.
-------------------------------------
XXXXXX X. XXXXXXX, PH.D.
-------------------------------------
XXXX X. XXXXX
-------------------------------------
XXXXXX XXX
1 OF 1
SIGNATURE PAGE TO MERGER AGREEMENT
65
EXHIBIT A
DESIGNATED SHAREHOLDERS
Name
-----------------------------------
1. Xxxxx X. Xxxxxxxxx, Ph.D.
2. Xxxxxx X. Xxxxxxx, Ph.D.
3. Xxxx X. Xxxxx
4. Xxxxxx Xxx
66
EXHIBIT B
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit B):
ACQUISITION TRANSACTION. "ACQUISITION TRANSACTION" shall mean any
transaction involving:
(a) the sale, license, disposition or acquisition of all or a
material portion of the Company's business or assets;
(b) the issuance, disposition or acquisition of (i) any capital
stock or other equity security of the Company (other than common stock issued to
employees of the Company, upon exercise of Company Options or otherwise, in
routine transactions in accordance with the Company's past practices), (ii) any
option, call, warrant or right (whether or not immediately exercisable) to
acquire any capital stock or other equity security of the Company (other than
stock options granted to employees of the Company in routine transactions in
accordance with the Company's past practices), or (iii) any security, instrument
or obligation that is or may become convertible into or exchangeable for any
capital stock or other equity security of the Company; or
(c) any merger, consolidation, business combination, reorganization
or similar transaction involving the Company.
AGREEMENT. "AGREEMENT" shall mean the Agreement and Plan of Merger and
Reorganization to which this Exhibit B is attached (including the Disclosure
Schedule), as it may be amended from time to time.
COMPANY CONTRACT. "COMPANY CONTRACT" shall mean any Contract: (a) to which
the Company is a party; (b) by which the Company or any of its assets is or may
become bound or under which the Company has, or may become subject to, any
obligation; or (c) under which the Company has or may acquire any right or
interest.
COMPANY PROPRIETARY ASSET. "COMPANY PROPRIETARY ASSET" shall mean any
Proprietary Asset owned by or licensed to the Company or otherwise used by the
Company.
CONSENT. "CONSENT" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
CONTRACT. "CONTRACT" shall mean any written, oral or other agreement,
contract, subcontract, lease, understanding, instrument, note, warranty,
insurance policy, benefit plan or legally binding commitment or undertaking of
any nature.
DAMAGES. "DAMAGES" shall include any loss, damage, injury, liability,
claim, demand, settlement, judgment, award, fine, penalty, Tax, fee (including
reasonable attorneys' fees), charge, cost (including costs of investigation) or
expense of any nature.
B-1.
67
DISCLOSURE SCHEDULE. "DISCLOSURE SCHEDULE" shall mean the schedule (dated
as of the date of the Agreement) delivered to Parent on behalf of the Company
and the Designated Shareholders.
ENCUMBRANCE. "ENCUMBRANCE" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, claim, infringement,
interference, option, right of first refusal, preemptive right, community
property interest or restriction of any nature (including any restriction on the
voting of any security, any restriction on the transfer of any security or other
asset, any restriction on the receipt of any income derived from any asset, any
restriction on the use of any asset and any restriction on the possession,
exercise or transfer of any other attribute of ownership of any asset).
ENTITY. "ENTITY" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization or entity.
EQUITY HOLDER. "EQUITY HOLDER" shall mean any holder of Common Stock,
assuming conversion of all shares of Series A Preferred Stock and Series B
Preferred Stock of Company.
EXCHANGE ACT. "EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended.
GOVERNMENT BID. "GOVERNMENT BID" shall mean any quotation, bid or proposal
submitted to any Governmental Body or any proposed prime contractor or
higher-tier subcontractor of any Governmental Body.
GOVERNMENT CONTRACT. "GOVERNMENT CONTRACT" shall mean any prime contract,
subcontract, letter contract, purchase order or delivery order executed or
submitted to or on behalf of any Governmental Body or any prime contractor or
higher-tier subcontractor, or under which any Governmental Body or any such
prime contractor or subcontractor otherwise has or may acquire any right or
interest.
GOVERNMENTAL AUTHORIZATION. "GOVERNMENTAL AUTHORIZATION" shall mean any:
(a) permit, license, certificate, franchise, permission, clearance,
registration, qualification or authorization issued, granted, given or otherwise
made available by or under the authority of any Governmental Body or pursuant to
any Legal Requirement; or (b) right under any Contract with any Governmental
Body.
GOVERNMENTAL BODY. "GOVERNMENTAL BODY" shall mean any: (a) nation, state,
commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature; (b) federal, state, local, municipal, foreign or
other government; or (c) governmental or quasi-governmental authority of any
nature (including any governmental division, department, agency, commission,
instrumentality, official, organization, unit, body or Entity and any court or
other tribunal).
INDEMNITEES. "INDEMNITEES" shall mean the following Persons: (a) Parent;
(b) Parent's current and future affiliates (including the Surviving
Corporation); and (c) the respective
B-2.
68
successors and assigns of the Persons referred to in clauses "(a)," and "(b)"
above; provided, however, that the Designated Shareholders shall not be deemed
to be "INDEMNITEES."
LEGAL PROCEEDING. "LEGAL PROCEEDING" shall mean any action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry, audit,
examination or investigation commenced, brought, conducted or heard by or
before, or otherwise involving, any court or other Governmental Body or any
arbitrator or arbitration panel.
LEGAL REQUIREMENT. "LEGAL REQUIREMENT" shall mean any federal, state,
local, municipal, foreign or other law, statute, constitution, principle of
common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling
or requirement issued, enacted, adopted, promulgated, implemented or otherwise
put into effect by or under the authority of any Governmental Body.
MATERIAL ADVERSE EFFECT. A violation or other matter will be deemed to
have a "MATERIAL ADVERSE EFFECT" on the Company if such violation or other
matter (considered together with all other matters that would constitute
exceptions to the representations and warranties set forth in the Agreement or
in the Designated Shareholders' Closing Certificate but for the presence of
"MATERIAL ADVERSE EFFECT" or other materiality qualifications, or any similar
qualifications, in such representations and warranties) would have a material
adverse effect on the Company's business, condition, assets, liabilities,
operations, financial performance or prospects taken as a whole.
PERSON. "PERSON" shall mean any individual, Entity or Governmental Body.
PROPRIETARY ASSET. "PROPRIETARY ASSET" shall mean any: (a) patent, patent
application, trademark (whether registered or unregistered), trademark
application, trade name, fictitious business name, service xxxx (whether
registered or unregistered), service xxxx application, copyright (whether
registered or unregistered), copyright application, maskwork, maskwork
application, trade secret, know-how, customer list, franchise, system, computer
software, computer program, invention, design, blueprint, engineering drawing,
proprietary product, technology, proprietary right or other intellectual
property right or intangible asset; or (b) right to use or exploit any of the
foregoing.
REPRESENTATIVES. "REPRESENTATIVES" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
SEC. "SEC" shall mean the United States Securities and Exchange
Commission.
SECURITIES ACT. "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
TAX. "TAX" shall mean any tax (including any income tax, franchise tax,
capital gains tax, gross receipts tax, value-added tax, surtax, excise tax, ad
valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business
tax, withholding tax or payroll tax), levy, assessment, tariff, duty (including
any customs duty), deficiency or fee, and any related charge or amount
(including any fine, penalty or interest), imposed, assessed or collected by or
under the authority of any Governmental Body.
B-3.
69
TAX RETURN. "TAX RETURN" shall mean any return (including any information
return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information filed
with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection
or payment of any Tax or in connection with the administration, implementation
or enforcement of or compliance with any Legal Requirement relating to any Tax.
B-4.
70
EXHIBIT C
CERTIFICATE OF INCORPORATION
OF
EDUCATOR ACQUISITION, INC.
The undersigned, a natural person (the "Sole Incorporator"), for the
purpose of organizing a corporation to conduct the business and promote the
purposes hereinafter stated, under the provisions and subject to the
requirements of the laws of the State of Delaware hereby certifies that:
I.
The name of this corporation is EDUCATOR ACQUISITION, INC.
II.
The address of the registered office of the corporation in the State of
Delaware is 0 Xxxx Xxxxxxxxxx Xx., Xxx. 000, Xxxx xx Xxxxx, Xxxxxx of Kent and
the name of the registered agent of the corporation in the State of Delaware at
such address is National Corporate Research, Ltd.
III.
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.
IV.
This corporation is authorized to issue only one class of stock, to be
designated Common Stock. The total number of shares of Common Stock presently
authorized is one hundred shares (100), each having a par value of one-tenth of
one cent ($0.001).
V.
The management of the business and the conduct of the affairs of the
corporation shall be vested in its Board of Directors. The number of directors
which shall constitute the whole Board of Directors shall be fixed by the Board
of Directors in the manner provided in the Bylaws.
VI.
A. The liability of the directors for monetary damages shall be
eliminated to the fullest extent under applicable law.
1.
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B. Any repeal or modification of this Article VI shall be prospective
and shall not affect the rights under this Article VI in effect at the time of
the alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
VII.
The corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon the stockholders
herein are granted subject to this reservation.
VIII.
The name and the mailing address of the Sole Incorporator is as follows:
NAME MAILING ADDRESS
Xxxxxx X. Xxxxxxx Xxxxxx Godward LLP
0000 Xxxxxxxxx Xxxxx, Xxxxx 0000
Xxx Xxxxx, Xxxxxxxxxx 00000
IN WITNESS WHEREOF, this Certificate has been subscribed this 30th day
of MAY, 2000 by the undersigned who affirms that the statements made herein are
true and correct.
------------------------------------
XXXXXX X. XXXXXXX
Sole Incorporator
2.
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EXHIBIT D
DIRECTORS AND OFFICERS OF SURVIVING CORPORATION
DIRECTORS
--------------------------------------------------------------------------------
1. Xxxx X. Xxxxxx
2. Xxxx Xxxxxx
OFFICERS
--------------------------------------------------------------------------------
1. Xxxx X. Xxxxxx Chairman and Chief Executive Officer
2. Xxxx Xxxxxx President
3. Xxxxxxxx XxXxxxx Chief Financial Officer and Secretary
--------------------------------------------------------------------------------
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EXHIBIT E
For purposes of this Agreement, "generates revenues" or "revenues" shall mean
gross revenues as recognized by the Surviving Corporation (or, as applicable,
Parent) in accordance with generally accepted accounting principles,
consistently applied, in a manner to the extent applicable consistent with the
past revenue recognition practices of Parent; in all cases less (a) sales taxes
actually collected, (b) actual shipping, handling and postage expenses, and (c)
refunds actually given. In terms of calculating revenues from "Earn-Out
Products," revenues attributable to such Earn-Out Products shall be limited as
set forth in the definition thereof below.
For purposes of this Agreement, "Earn-Out Products" shall mean:
(i) those products and services actually offered by the Company as
of the date hereof and described below ("Existing Products"),
together with subsequent derivations and versions thereof and
modifications thereto, each as may be sold on a stand-alone
basis by the Surviving Corporation or Parent or any wholly-owned
subsidiary of Parent ("Exclusive Company Products");
(ii) Exclusive Company Products to the extent sold as part of a
multi-product/service package to customers ("Bundled Sales")
together with one or more Lightspan products or services
("Lightspan Products"); provided the revenues from such Bundled
Sales shall be deemed revenues from Earn-Out Products only as to
that amount that is the greater of (A) the excess of such
revenues over the regular sales price(s) for the Lightspan
Products(s), in aggregate, included in the applicable
multi-product/service package and (B) the lesser of (i) 60% of
the regular sales price(s) for the Exclusive Company
Products(s), in aggregate, included in the applicable
multi-product/service package and (ii) the pro-rata amount
(based on the relative regular sales prices of the particular
Exclusive Company Product(s) and Lightspan Product(s)) of the
revenues from such Bundled Sales attributable to the Exclusive
Company Products, in aggregate, included in the applicable
multi-product/service package;
(iii) professional development services related solely and directly to
Exclusive Company Products which train teachers and
administrators to use the Exclusive Company Products, whether
sold alone or as part of Bundled Products (but not professional
development or other services related to Lightspan Products or
offered by Lightspan other than for the purposes of training
teachers and administrators in connection with Exclusive Company
Products); provided only 50% of revenues from such professional
development services shall be deemed to be revenues from
Earn-Out Products for purposes of the Agreement, and provided
also the
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maximum amount of revenues from any particular sale of such
professional development services recognizable for this purpose
(i.e. of which 50% would be deemed Earn-Out Product Revenues)
shall be 25% of the end-user sale price of the underlying
Exclusive Company Product(s) related to such sale.
Notwithstanding any of the foregoing, in the event Parent uses technology from
or other element of Exclusive Company Products to enhance Lightspan Products, or
integrates technology from other elements of Exclusive Company Products in
Lightspan Products, such use or integration shall not cause such Lightspan
Products to be deemed all or any part Exclusive Company Product, and no revenues
generated from sales of such Lightspan Products shall constitute revenues from
Earn-Out Products.
Existing Products: _______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
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EXHIBIT F
PERSONS TO SIGN EMPLOYMENT,
NONCOMPETITION AND NONSOLICITATION AGREEMENTS
Name
--------------------------------------------------------------------------------
1. Xxxxx X. Xxxxxxxxx, Ph.D.
2. Xxxxxx Xxxxxxxx
3. Xxx Xxxxxx
4. Xxxxxx xxXxxxx
5. Xxxxxx Xxx, if he continues as an
employee of Merger Sub after the
Effective Time
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EXHIBIT G
[for Hardwicke]
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("AGREEMENT") is being entered into effective
as of _________________ by and between ____________ ("Employee") and LIGHTSPAN,
INC., a Delaware corporation (the "Company"). Those capitalized terms used
herein and not otherwise defined shall have the meanings given to such terms in
the Merger Agreement (as defined herein).
RECITALS
A. As a stockholder and employee of EDUTEST, INC. ("Edutest"), Employee
obtained extensive and valuable knowledge and confidential information
concerning the businesses of Edutest.
B. Pursuant to an Agreement and Plan of Merger and Reorganization dated
as of ________________ (the "Merger Agreement") by and among the Company, Merger
Sub, and Edutest, the Company will, through its wholly owned subsidiary Merger
Sub, acquire Edutest. Except as otherwise expressly provided herein, this
Agreement will only become effective as of the Closing Date.
C. In connection with the acquisition of Edutest by the Company pursuant
to the Merger Agreement, and to enable the Company to secure more fully the
benefits of such acquisition, the Company has required as a condition to the
consummation of such acquisition, that Employee enter into this Agreement; and
Employee is entering into this Agreement in order to induce the Company to
consummate the acquisition contemplated by the Merger Agreement and in exchange
for the benefits provided herein.
AGREEMENT
1. TERM AND TERMINATION. Effective as of the Closing Date, the Company hereby
employs Employee and Employee hereby accepts employment by the Company, upon the
terms and conditions set forth in this Agreement and the terms and conditions of
the Employee Propriety Information and Inventions Agreement attached as EXHIBIT
A to be entered into concurrently herewith.
The term of Employee's employment with the Company shall be for
one (1) year from the effective date of this Agreement (the "Term"); provided,
however, the Company may, at its option and in its sole discretion, not later
than 30 days prior to the end of the Term, extend the Term for an additional,
successive one (1) year period (the "Renewal Term") on the same terms and
conditions as are applicable during the initial year of the Term, subject only
to such appropriate increases in salary as the parties may agree upon.
(a) Notwithstanding the foregoing, the Company may terminate immediately
the Employee's employment with the Company with Cause (as defined herein) upon
written notice to the Employee. For purposes of this Agreement, Cause will be
defined as:
(i) Employee's repeated failure to perform satisfactorily Employee's
job duties under this Agreement; provided that for purposes of this subsection
(i), "repeated" shall not be less than two (2) performance failures which have
not been cured by Employee within seven (7) business days after the Company's
written notice to Employee of such failure;
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(ii) Employee's failure to comply with all material applicable laws
in performing Employee's job duties or in directing the conduct of the Company's
business;
(iii) Employee's commission of any felony or intentionally
fraudulent or other act against the Company, or its affiliates, employees,
agents or customers which demonstrates Employee's untrustworthiness or lack of
integrity;
(iv) Employee's participation in any activity which is directly
competitive with or intentionally injurious to the Company or any of its
affiliates or which violates the terms of Employee's Proprietary Information and
Inventions Agreement; or
(v) Employee's commission of any fraud against the Company or any of
its affiliates or use or intentional appropriation for Employee's personal use
or benefit of any funds or properties of the Company not authorized by the Board
to be so used or appropriated.
(b) In the event that the Company terminates Employee without Cause, the
Company shall pay Employee, subject to execution by Employee of a Release
releasing Company from any and all claims by Employee, a severance payment equal
to the amount of Employee's unpaid salary for the remainder of the Term, less
all required deductions and withholdings.
2. NON-COMPETITION. Except with the prior written consent of the Company's Board
of Directors, the Employee will not, during the Term of this Agreement, and any
period during which the Employee is receiving compensation or any other
consideration from the Company, engage in competition with the Company or any of
its affiliates, either directly or indirectly, in any manner or capacity, as
adviser, principal, agent, affiliate, promoter, partner, officer, director,
employee, stockholder, owner, co-owner, consultant, or member of any association
or otherwise, in any phase of the business of developing, manufacturing and
marketing of products or services which are in the same field of use or which
otherwise compete with the products or services or proposed products or services
of the Company.
3. TITLE/DUTIES. Employee shall have the title of Vice President of the Company
and President of Edutest and shall serve in such other capacity or capacities as
the Company may from time to time prescribe. Employee shall report to the
Executive Vice President - Internet and Broadband Services of the Company.
Employee shall do and perform all services, acts or things necessary or
advisable to manage and conduct the business of the Company and which are
normally associated with her position, consistent with the bylaws of the Company
and as required by the Company's Board of Directors. Except for business trips
necessary or appropriate for the proper performance of her services and duties
hereunder, Employee shall perform such services in the Richmond, Virginia
metropolitan area.
4. POLICIES AND PRACTICES. The employment relationship between the parties shall
be governed by the policies and practices established by the Company from time
to time. Employee will acknowledge in writing that she has read the Employee
Handbook, which will govern the terms and conditions of her employment with the
Company, along with this Agreement. In the event that the terms of this
Agreement differ from or are in conflict with the Company's policies or
practices or the Employee Handbook, this Agreement shall control.
5. BASE SALARY AND BENEFITS. During the term of Employee's employment, Employee
shall receive an annual salary of _______________________ ($______________),
less payroll deductions and all required withholdings. Employee will be a full
time employee and will be paid bi-weekly. Except as
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78
otherwise provided herein, Employee will be eligible for the standard Company
benefits provided to senior management pursuant to the terms of the Plans. The
Company may modify benefits from time to time as it deems necessary.
(a) VACATION. Notwithstanding the foregoing, Employee shall be entitled
to (a) four (4) weeks of paid vacation annually, plus (b) all vacation time that
Employee has accrued as an employee of Edutest, which shall carryover and shall
be available to Employee during the Term as additional paid vacation time.
(b) BONUS. In addition to the annual salary payable pursuant to this
Section 5, Employee shall be entitled to a bonus of $100,000 which shall be
calculated and payable as follows:
[Specify]
6. DEATH. In the event of the death of Employee during the Term, the Company
shall pay, or cause to be paid, to any one or more beneficiaries designated by
Employee pursuant to notice to the Company, or failing such designation, to
Employee's estate, the salary and any accrued but unpaid benefits earned by
Employee through the date on which Employee's death occurs, and all other
amounts provided for in this Agreement.
7. DISABILITY. In the event that Employee shall become, by reason of physical or
mental disability, incapable of performing her duties and services as provided
herein with or without reasonable accommodation, and such incapacity(ies) shall
continue for a period of time equal to sixty (60) days, the Company shall have
the right to terminate Employee's employment hereunder by giving her written
notice of such termination, and, thereafter, Employee's employment hereunder
shall terminate in accordance with such notice. In the event of such disability,
the Company shall pay, or cause to be paid, to Employee the salary and any
accrued by unpaid benefits earned by Employee through the date of termination of
employment, and all other amounts provided for in this Agreement.
8. STOCK OPTIONS. Pursuant to a separate Stock Option Agreement and the
Company's 2000 Equity Incentive Plan (the "Incentive Plan"), upon commencement
of employment, the Employee will be granted stock options (the "Options") to
purchase _________________ (_______) shares of the Common Stock of the Company.
The Options will be priced at the fair market value on the date of the grant.
The Options will vest as provided in the Incentive Plan and the Stock Option
Agreement.
9. INTEGRATION. The parties agree that this Agreement acknowledges, amends,
restates and supersedes any prior employment agreement between Employee and
Edutest. Except as otherwise provided herein, all prior employment agreements
between Employee and Edutest shall terminate and have no further effect as of
the Closing Date.
10. AMENDMENT. This Agreement may not be amended, modified, altered or
supplemented other than by means of a written instrument duly executed and
delivered on behalf of Employee and the Company (or any successor to the
Company).
11. GOVERNING LAW. This Agreement shall be construed in accordance with, and
governed in all respects by, the laws of the Commonwealth of Virginia (without
giving effect to principles of conflicts of laws).
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12. ARBITRATION. To ensure rapid and economical resolution of any disputes which
may arise under this Agreement, Employee and the Company agree that any and all
disputes or controversies of any nature whatsoever, arising from or regarding
the interpretation, performance, enforcement or breach of this Agreement shall
be resolved by confidential, final and binding arbitration (rather than trial by
jury or court or resolution in some other forum) to the fullest extent permitted
by law, including but not limited to Virginia Code Xxx. Section 8.01-581.06. Any
arbitration proceeding pursuant to this Agreement shall be conducted by the
American Arbitration Association ("AAA") in Fairfax County, Virginia under the
then existing AAA employment-related arbitration rules. If for any reason all or
part of this arbitration provision is held to be invalid, illegal, or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other portion of this arbitration provision or any other jurisdiction, but
this provision will be reformed, construed and enforced in such jurisdiction as
if such invalid, illegal or unenforceable part or parts of this provision had
never been contained herein, consistent with the general intent of the parties
insofar as possible.
EMPLOYEE HAS READ Section 12 AND IRREVOCABLY AGREES TO ARBITRATE ANY DISPUTE
IDENTIFIED ABOVE. ______ (EMPLOYEE'S INITIALS)
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IN WITNESS WHEREOF, Employee has duly executed and delivered this
Agreement as of the date first above written.
___________________________________________
EMPLOYEE
Address: __________________________________
Telephone No.: ( ) ____________
Facsimile: ( ) ________________
LIGHTSPAN, INC.
___________________________________________
[SIGNATORY]
5
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EXHIBIT A
LIGHTSPAN, INC.
EMPLOYEE PROPRIETARY INFORMATION
AND INVENTIONS AGREEMENT
In consideration of my employment or continued employment by LIGHTSPAN,
INC. (the "COMPANY"), and the compensation now and hereafter paid to me, I
hereby agree as follows:
1. NONDISCLOSURE.
1.1 RECOGNITION OF COMPANY'S RIGHTS; NONDISCLOSURE. At all times during
my employment and thereafter, I will hold in strictest confidence and will not
disclose, use, lecture upon or publish any of the Company's Proprietary
Information (defined below), except as such disclosure, use or publication may
be required in connection with my work for the Company, or unless an officer of
the Company expressly authorizes such in writing. I will obtain Company's
written approval before publishing or submitting for publication any material
(written, verbal, or otherwise) that relates to my work at Company and/or
incorporates any Proprietary Information. I hereby assign to the Company any
rights I may have or acquire in such Proprietary Information and recognize that
all Proprietary Information shall be the sole property of the Company and its
assigns.
1.2 PROPRIETARY INFORMATION. The term "PROPRIETARY INFORMATION" shall
mean any and all confidential and/or proprietary knowledge, data or information
of the Company. By way of illustration but not limitation, "PROPRIETARY
INFORMATION" includes (a) trade secrets, inventions, mask works, ideas,
processes, formulas, source and object codes, data, programs, other works of
authorship, know-how, improvements, discoveries, developments, designs and
techniques (hereinafter collectively referred to as "INVENTIONS"); and (b)
information regarding plans for research, development, new products, marketing
and selling, business plans, budgets and unpublished financial statements,
licenses, prices and costs, suppliers and customers; and (c) information
regarding the skills and compensation of other employees of the Company.
Notwithstanding the foregoing, it is understood that, at all such times, I am
free to use information which is generally known in the trade or industry, which
is not gained as result of a breach of this Agreement, and my own, skill,
knowledge, know-how and experience to whatever extent and in whichever way I
wish.
1.3 THIRD PARTY INFORMATION. I understand, in addition, that the Company
has received and in the future will receive from third parties confidential or
proprietary information ("THIRD PARTY INFORMATION") subject to a duty on the
Company's part to maintain the confidentiality of such information and to use it
only for certain limited purposes. During the term of my employment and for a
period of two years thereafter, I will hold Third Party Information in the
strictest confidence and will not disclose to anyone (other than Company
personnel who need to know such information in connection with their work for
the Company) or use, except in connection with my work for the Company, Third
Party Information unless expressly authorized by an officer of the Company in
writing.
1.4 NO IMPROPER USE OF INFORMATION OF PRIOR EMPLOYERS AND OTHERS. During
my employment by the Company I will not improperly use or disclose any
confidential information or trade secrets, if any, of any former employer or any
other person to whom I have an obligation of confidentiality, and I will not
bring onto the premises of the Company any unpublished documents or any property
belonging to any former employer or any other person to whom I have an
obligation of confidentiality unless consented to in writing by that former
employer or person. I will use in the performance of my duties only information
which is generally known and used by persons with training and experience
comparable to my own, which is common knowledge in the industry or otherwise
legally in the public domain, or which is otherwise provided or developed by the
Company.
2. ASSIGNMENT OF INVENTIONS.
2.1 PROPRIETARY RIGHTS. The term "PROPRIETARY RIGHTS" shall mean all
trade secret, patent, copyright, mask work and other intellectual property
rights throughout the world.
2.2 PRIOR INVENTIONS. Inventions, if any, patented or unpatented, which
I made prior to the commencement of my employment with the Company are excluded
from the scope of this Agreement. To preclude any possible uncertainty, I have
set forth on Exhibit A (Previous Inventions) attached hereto a complete list of
all Inventions that I have, alone or jointly with others, conceived, developed
or reduced to practice or caused to be conceived, developed or reduced to
practice prior to the commencement of my employment with the Company, that I
consider to be my property or the property of third parties and that I wish to
have excluded from the scope of this Agreement (collectively referred to as
"PRIOR INVENTIONS").
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If disclosure of any such Prior Invention would cause me to violate any prior
confidentiality agreement, I understand that I am not to list such Prior
Inventions in Exhibit A but am only to disclose a cursory name for each such
invention, a listing of the party(ies) to whom it belongs and the fact that full
disclosure as to such inventions has not been made for that reason. A space is
provided on Exhibit A for such purpose. If no such disclosure is attached, I
represent that there are no Prior Inventions. If, in the course of my employment
with the Company, I incorporate a Prior Invention into a Company product,
process or machine, the Company is hereby granted and shall have a nonexclusive,
royalty-free, irrevocable, perpetual, worldwide license (with rights to
sublicense through multiple tiers of sublicensees) to make, have made, modify,
use and sell such Prior Invention. Notwithstanding the foregoing, I agree that I
will not incorporate, or permit to be incorporated, Prior Inventions in any
Company Inventions without the Company's prior written consent.
2.3 ASSIGNMENT OF INVENTIONS. Subject to Sections 2.4, and 2.6, I hereby
assign and agree to assign in the future (when any such Inventions or
Proprietary Rights are first reduced to practice or first fixed in a tangible
medium, as applicable) to the Company all my right, title and interest in and to
any and all Inventions (and all Proprietary Rights with respect thereto) whether
or not patentable or registrable under copyright or similar statutes, made or
conceived or reduced to practice or learned by me, either alone or jointly with
others, during the period of my employment with the Company. Inventions assigned
to the Company, or to a third party as directed by the Company pursuant to this
Section 2, are hereinafter referred to as "COMPANY INVENTIONS."
2.4 NONASSIGNABLE INVENTIONS. I recognize that, this Agreement will not
be deemed to require assignment of any invention that was developed entirely on
my own time without using the Company's equipment, supplies, facilities, or
trade secrets and neither related to the Company's actual or anticipated
business, research or development, nor resulted from work performed by me for
the Company.
2.5 OBLIGATION TO KEEP COMPANY INFORMED. During the period of my
employment and for six (6) months after termination of my employment with the
Company, I will promptly disclose to the Company fully and in writing all
Inventions authored, conceived or reduced to practice by me, either alone or
jointly with others. In addition, I will promptly disclose to the Company all
patent applications filed by me or on my behalf within a year after termination
of employment. At the time of each such disclosure, I will advise the Company in
writing of any Inventions that I believe fully qualify for protection under the
provisions of a Specific Inventions Law; and I will at that time provide to the
Company in writing all evidence necessary to substantiate that belief. The
Company will keep in confidence and will not use for any purpose or disclose to
third parties without my consent any confidential information disclosed in
writing to the Company pursuant to this Agreement relating to Inventions that
qualify fully for protection under a Specific Inventions Law. I will preserve
the confidentiality of any Invention that does not fully qualify for protection
under a Specific Inventions Law.
2.6 GOVERNMENT OR THIRD PARTY. I also agree to assign all my right,
title and interest in and to any particular Company Invention to a third party,
including without limitation the United States, as directed by the Company.
2.7 WORKS FOR HIRE. I acknowledge that all original works of authorship
which are made by me (solely or jointly with others) within the scope of my
employment and which are protectable by copyright are "works made for hire,"
pursuant to United States Copyright Act (17 U.S.C., Section 101).
2.8 ENFORCEMENT OF PROPRIETARY RIGHTS. I will assist the Company in
every proper way to obtain, and from time to time enforce, United States and
foreign Proprietary Rights relating to Company Inventions in any and all
countries. To that end I will execute, verify and deliver such documents and
perform such other acts (including appearances as a witness) as the Company may
reasonably request for use in applying for, obtaining, perfecting, evidencing,
sustaining and enforcing such Proprietary Rights and the assignment thereof. In
addition, I will execute, verify and deliver assignments of such Proprietary
Rights to the Company or its designee. My obligation to assist the Company with
respect to Proprietary Rights relating to such Company Inventions in any and all
countries shall continue beyond the termination of my employment, but the
Company shall compensate me at a reasonable rate after my termination for the
time actually spent by me at the Company's request on such assistance.
In the event the Company is unable for any reason, after reasonable
effort, to secure my signature on any document needed in connection with the
actions specified in the preceding paragraph, I hereby irrevocably designate and
appoint the Company and its duly authorized officers and agents as my agent and
attorney in fact, which appointment is coupled with an interest, to act for and
in my behalf to execute, verify and file any such documents and to do all other
lawfully permitted acts to further the purposes of the preceding paragraph with
the same legal force and effect as if executed by me. I hereby waive and
quitclaim to the Company any and all claims, of any nature whatsoever, which I
now or may hereafter have for infringement of any Proprietary Rights assigned
hereunder to the Company.
3. RECORDS. I agree to keep and maintain adequate and current records (in
the form of notes, sketches, drawings and in any other form that may be required
by the Company) of all Proprietary Information developed by me
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and all Inventions made by me during the period of my employment at the Company,
which records shall be available to and remain the sole property of the Company
at all times.
4. NO CONFLICTING OBLIGATION. I represent that my performance of all the
terms of this Agreement and as an employee of the Company does not and will not
breach any agreement to keep in confidence information acquired by me in
confidence or in trust prior to my employment by the Company. I have not entered
into, and I agree I will not enter into, any agreement either written or oral in
conflict herewith.
5. RETURN OF COMPANY DOCUMENTS. When I leave the employ of the Company, I
will deliver to the Company any and all drawings, notes, memoranda,
specifications, devices, formulas, and documents, together with all copies
thereof, and any other material containing or disclosing any Company Inventions,
Third Party Information or Proprietary Information of the Company. I further
agree that any property situated on the Company's premises and owned by the
Company, including disks and other storage media, filing cabinets or other work
areas, is subject to inspection by Company personnel at any time with or without
notice. Prior to leaving, I will cooperate with the Company in completing and
signing the Company's termination statement.
6. LEGAL AND EQUITABLE REMEDIES. Because my services are personal and
unique and because I may have access to and become acquainted with the
Proprietary Information of the Company, the Company shall have the right to
enforce this Agreement and any of its provisions by injunction, specific
performance or other equitable relief, without bond and without prejudice to any
other rights and remedies that the Company may have for a breach of this
Agreement.
7. NOTICES. Any notices required or permitted hereunder shall be given to
the appropriate party at the address specified below or at such other address as
the party shall specify in writing. Such notice shall be deemed given upon
personal delivery to the appropriate address or if sent by certified or
registered mail, three (3) days after the date of mailing.
8. NOTIFICATION OF NEW EMPLOYER. In the event that I leave the employ of
the Company, I hereby consent to the notification of my new employer of my
rights and obligations under this Agreement.
9. GENERAL PROVISIONS.
9.1 GOVERNING LAW; CONSENT TO PERSONAL JURISDICTION. This Agreement will
be governed by and construed according to the laws of the Commonwealth of
Virginia, as such laws are applied to agreements entered into and to be
performed entirely within Virginia between Virginia residents. I hereby
expressly consent to the personal jurisdiction of the state and federal courts
located in Fairfax County, Virginia for any lawsuit filed there against me by
Company arising from or related to this Agreement.
9.2 SEVERABILITY. In case any one or more of the provisions contained in
this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect the other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein. If moreover, any one or more of the provisions
contained in this Agreement shall for any reason be held to be excessively broad
as to duration, geographical scope, activity or subject, it shall be construed
by limiting and reducing it, so as to be enforceable to the extent compatible
with the applicable law as it shall then appear.
9.3 SUCCESSORS AND ASSIGNS. This Agreement will be binding upon my
heirs, executors, administrators and other legal representatives and will be for
the benefit of the Company, its successors, and its assigns.
9.4 SURVIVAL. The provisions of this Agreement shall survive the
termination of my employment and the assignment of this Agreement by the Company
to any successor in interest or other assignee.
9.5 EMPLOYMENT. I agree and understand that nothing in this Agreement
shall confer any right with respect to continuation of employment by the
Company, nor shall it interfere in any way with my right or the Company's right
to terminate my employment pursuant to the terms of my Employment Agreement with
the Company.
9.6 WAIVER. No waiver by the Company of any breach of this Agreement
shall be a waiver of any preceding or succeeding breach. No waiver by the
Company of any right under this Agreement shall be construed as a waiver of any
other right. The Company shall not be required to give notice to enforce strict
adherence to all terms of this Agreement.
9.7 ENTIRE AGREEMENT. The obligations pursuant to Sections 1 and 2 of
this Agreement shall apply to any time during which I was previously employed,
or am in the future employed, by the Company as a consultant if no other
agreement governs nondisclosure and assignment of inventions during such period.
This Agreement and the Employment Agreement to which it is attached represent is
the final, complete and exclusive agreement of the parties with respect to the
subject matter hereof and supersede and merge all prior discussions between us.
No modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, will be effective unless in writing and signed by the
party to be charged. Any
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subsequent change or changes in my duties, salary or compensation will not
affect the validity or scope of this Agreement.
This Agreement shall be effective as of the first day of my employment
with the Company, namely: ___________, 20__.
I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS. I HAVE
COMPLETELY FILLED OUT EXHIBIT A TO THIS AGREEMENT.
Dated: _____________________
_______________________________________
(SIGNATURE)
_______________________________________
(PRINTED NAME)
ACCEPTED AND AGREED TO:
By: ___________________________________
Title: ________________________________
_______________________________________
(Address)
_______________________________________
Dated: _____________________
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EXHIBIT A
TO: LIGHTSPAN, INC.
FROM:________________________
DATE: _______________________
SUBJECT: PREVIOUS INVENTIONS
1. Except as listed in Section 2 below, the following is a complete list
of all inventions or improvements relevant to the subject matter of my
employment by LIGHTSPAN, Inc. (the "COMPANY") that have been made or conceived
or first reduced to practice by me alone or jointly with others prior to my
engagement by the Company:
[ ] No inventions or improvements.
[ ] See below:
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
[ ] Additional sheets attached.
2. Due to a prior confidentiality agreement, I cannot complete the
disclosure under Section 1 above with respect to inventions or improvements
generally listed below, the proprietary rights and duty of confidentiality with
respect to which I owe to the following party(ies):
INVENTION OR IMPROVEMENT PARTY(IES) RELATIONSHIP
1. ________________________ ___________________ _______________________
2. ________________________ ___________________ _______________________
3. ________________________ ___________________ _______________________
[ ] Additional sheets attached.
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EXHIBIT G
[FOR XXXXXX]
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("AGREEMENT") is being entered into effective
as of _________________ by and between ____________ ("Employee") and LIGHTSPAN,
INC., a Delaware corporation (the "Company"). Those capitalized terms used
herein and not otherwise defined shall have the meanings given to such terms in
the Merger Agreement (as defined herein).
RECITALS
A. As a stockholder and employee of EDUTEST, INC. ("Edutest"), Employee
obtained extensive and valuable knowledge and confidential information
concerning the businesses of Edutest.
B. Pursuant to an Agreement and Plan of Merger and Reorganization dated
as of ________________ (the "Merger Agreement") by and among the Company, Merger
Sub, and Edutest, the Company will, through its wholly owned subsidiary Merger
Sub, acquire Edutest. Except as otherwise expressly provided herein, this
Agreement will only become effective as of the Closing Date.
C. In connection with the acquisition of Edutest by the Company pursuant
to the Merger Agreement, and to enable the Company to secure more fully the
benefits of such acquisition, the Company has required as a condition to the
consummation of such acquisition, that Employee enter into this Agreement; and
Employee is entering into this Agreement in order to induce the Company to
consummate the acquisition contemplated by the Merger Agreement and in exchange
for the benefits provided herein.
AGREEMENT
1. TERM AND TERMINATION. Effective as of the Closing Date, the Company hereby
employs Employee and Employee hereby accepts employment by the Company, upon the
terms and conditions set forth in this Agreement and the terms and conditions of
the Employee Propriety Information and Inventions Agreement attached as Exhibit
A to be entered into concurrently herewith.
The term of Employee's employment with the Company shall be for
one (1) year from the effective date of this Agreement (the "Term"); provided,
however, the Company may, at its option and in its sole discretion, not later
than 30 days prior to the end of the Term, extend the Term for an additional,
successive one (1) year period (the "Renewal Term") on the same terms and
conditions as are applicable during the initial year of the Term, subject only
to such appropriate increases in salary as the parties may agree upon.
(a) Notwithstanding the foregoing, the Company may terminate immediately
the Employee's employment with the Company with Cause (as defined herein) upon
written notice to the Employee. For purposes of this Agreement, Cause will be
defined as:
(i) Employee's repeated failure to perform satisfactorily Employee's
job duties under this Agreement; provided that for purposes of this subsection
(i), "repeated" shall not be less than two (2) performance failures which have
not been cured by Employee within seven (7) business days after the Company's
written notice to Employee of such failure;
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(ii) Employee's failure to comply with all material applicable laws
in performing Employee's job duties or in directing the conduct of the Company's
business;
(iii) Employee's commission of any felony or intentionally
fraudulent or other act against the Company, or its affiliates, employees,
agents or customers which demonstrates Employee's untrustworthiness or lack of
integrity;
(iv) Employee's participation in any activity which is directly
competitive with or intentionally injurious to the Company or any of its
affiliates or which violates the terms of Employee's Proprietary Information and
Inventions Agreement; or
(v) Employee's commission of any fraud against the Company or any of
its affiliates or use or intentional appropriation for Employee's personal use
or benefit of any funds or properties of the Company not authorized by the Board
to be so used or appropriated.
(b) In the event that the Company terminates Employee without Cause, the
Company shall pay Employee, subject to execution by Employee of a Release
releasing Company from any and all claims by Employee, a severance payment equal
to the amount of Employee's unpaid salary for the remainder of the Term, less
all required deductions and withholdings.
2. NON-COMPETITION. Except with the prior written consent of the Company's Board
of Directors, the Employee will not, during the Term of this Agreement, and any
period during which the Employee is receiving compensation or any other
consideration from the Company, engage in competition with the Company or any of
its affiliates, either directly or indirectly, in any manner or capacity, as
adviser, principal, agent, affiliate, promoter, partner, officer, director,
employee, stockholder, owner, co-owner, consultant, or member of any association
or otherwise, in any phase of the business of developing, manufacturing and
marketing of products or services which are in the same field of use or which
otherwise compete with the products or services or proposed products or services
of the Company.
3. TITLE/DUTIES. Employee shall have the title of _____________________ and
shall serve in such other capacity or capacities as the Company may from time to
time prescribe. Employee shall report to the _______________________- of the
Company. Employee shall do and perform all services, acts or things necessary or
advisable to manage and conduct the business of the Company and which are
normally associated with his position, consistent with the bylaws of the Company
and as required by the Company's Board of Directors. Except for business trips
necessary or appropriate for the proper performance of his services and duties
hereunder, Employee shall perform such services in the Richmond, Virginia
metropolitan area.
4. POLICIES AND PRACTICES. The employment relationship between the parties shall
be governed by the policies and practices established by the Company from time
to time. Employee will acknowledge in writing that she has read the Employee
Handbook, which will govern the terms and conditions of his employment with the
Company, along with this Agreement. In the event that the terms of this
Agreement differ from or are in conflict with the Company's policies or
practices or the Employee Handbook, this Agreement shall control.
5. BASE SALARY AND BENEFITS. During the term of Employee's employment, Employee
shall receive an annual salary of _______________________ ($______________),
less payroll deductions and all required withholdings. Employee will be a full
time employee and will be paid bi-weekly. Except as
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otherwise provided herein, Employee will be eligible for the standard Company
benefits provided to senior management pursuant to the terms of the Plans. The
Company may modify benefits from time to time as it deems necessary.
Notwithstanding the foregoing, Employee shall be entitled to (a) two (2) weeks
of paid vacation annually, plus (b) all vacation time that Employee has accrued
as an employee of Edutest, which shall carryover and shall be available to
Employee during the Term as additional paid vacation time.
6. DEATH. In the event of the death of Employee during the Term, the Company
shall pay, or cause to be paid, to any one or more beneficiaries designated by
Employee pursuant to notice to the Company, or failing such designation, to
Employee's estate, the salary and any accrued but unpaid benefits earned by
Employee through the date on which Employee's death occurs.
7. DISABILITY. In the event that Employee shall become, by reason of physical or
mental disability, incapable of performing his duties and services as provided
herein with or without reasonable accommodation, and such incapacity(ies) shall
continue for a period of time equal to sixty (60) days, the Company shall have
the right to terminate Employee's employment hereunder by giving him written
notice of such termination, and, thereafter, Employee's employment hereunder
shall terminate in accordance with such notice. In the event of such disability,
the Company shall pay, or cause to be paid, to Employee the salary and any
accrued by unpaid benefits earned by Employee through the date of termination of
employment, and all other amounts provided for in this Agreement.
8. STOCK OPTIONS. Pursuant to a separate Stock Option Agreement and the
Company's 2000 Equity Incentive Plan (the "INCENTIVE PLAN") and subject to Board
approval, upon commencement of employment, the Employee will be granted stock
options (the "OPTIONS") to purchase _________________ (_______) shares of the
Common Stock of the Company. The Options will be priced at the fair market value
on the date of the grant. The Options will vest as provided in the Incentive
Plan and the Stock Option Agreement.
9. INTEGRATION. The parties agree that this Agreement acknowledges, amends,
restates and supercedes any prior employment agreement between Employee and
Edutest. Except as otherwise provided herein, all prior employment agreements
between Employee and Edutest shall terminate and have no further effect as of
the Closing Date.
10. AMENDMENT. This Agreement may not be amended, modified, altered or
supplemented other than by means of a written instrument duly executed and
delivered on behalf of Employee and the Company (or any successor to the
Company).
11. GOVERNING LAW. This Agreement shall be construed in accordance with, and
governed in all respects by, the laws of the Commonwealth of Virginia (without
giving effect to principles of conflicts of laws).
12. ARBITRATION. To ensure rapid and economical resolution of any disputes which
may arise under this Agreement, Employee and the Company agree that any and all
disputes or controversies of any nature whatsoever, arising from or regarding
the interpretation, performance, enforcement or breach of this Agreement shall
be resolved by confidential, final and binding arbitration (rather than trial by
jury or court or resolution in some other forum) to the fullest extent permitted
by law, including but not limited to Virginia Code Xxx. Section 8.01-581.06. Any
arbitration proceeding pursuant to this Agreement shall be conducted by the
American Arbitration Association ("AAA") in Fairfax County, Virginia under the
then existing AAA employment-related arbitration rules. If for any reason all or
part
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of this arbitration provision is held to be invalid, illegal, or unenforceable
in any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other portion of
this arbitration provision or any other jurisdiction, but this provision will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable part or parts of this provision had never been
contained herein, consistent with the general intent of the parties insofar as
possible.
EMPLOYEE HAS READ Section 12 AND IRREVOCABLY AGREES TO ARBITRATE ANY DISPUTE
IDENTIFIED ABOVE. ______ (EMPLOYEE'S INITIALS)
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IN WITNESS WHEREOF, Employee has duly executed and delivered this
Agreement as of the date first above written.
____________________________________________
EMPLOYEE
Address: ___________________________________
Telephone No.: ( ) ____________
Facsimile: ( ) ________________
LIGHTSPAN, INC.
____________________________________________
[SIGNATORY]
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EXHIBIT A
LIGHTSPAN, INC.
EMPLOYEE PROPRIETARY INFORMATION
AND INVENTIONS AGREEMENT
In consideration of my employment or continued employment by LIGHTSPAN,
INC. (the "COMPANY"), and the compensation now and hereafter paid to me, I
hereby agree as follows:
1. NONDISCLOSURE.
1.1 RECOGNITION OF COMPANY'S RIGHTS; NONDISCLOSURE. At all times during
my employment and thereafter, I will hold in strictest confidence and will not
disclose, use, lecture upon or publish any of the Company's Proprietary
Information (defined below), except as such disclosure, use or publication may
be required in connection with my work for the Company, or unless an officer of
the Company expressly authorizes such in writing. I will obtain Company's
written approval before publishing or submitting for publication any material
(written, verbal, or otherwise) that relates to my work at Company and/or
incorporates any Proprietary Information. I hereby assign to the Company any
rights I may have or acquire in such Proprietary Information and recognize that
all Proprietary Information shall be the sole property of the Company and its
assigns.
1.2 PROPRIETARY INFORMATION. The term "PROPRIETARY INFORMATION" shall
mean any and all confidential and/or proprietary knowledge, data or information
of the Company. By way of illustration but not limitation, "PROPRIETARY
INFORMATION" includes (a) trade secrets, inventions, mask works, ideas,
processes, formulas, source and object codes, data, programs, other works of
authorship, know-how, improvements, discoveries, developments, designs and
techniques (hereinafter collectively referred to as "INVENTIONS"); and (b)
information regarding plans for research, development, new products, marketing
and selling, business plans, budgets and unpublished financial statements,
licenses, prices and costs, suppliers and customers; and (c) information
regarding the skills and compensation of other employees of the Company.
Notwithstanding the foregoing, it is understood that, at all such times, I am
free to use information which is generally known in the trade or industry, which
is not gained as result of a breach of this Agreement, and my own, skill,
knowledge, know-how and experience to whatever extent and in whichever way I
wish.
1.3 THIRD PARTY INFORMATION. I understand, in addition, that the Company
has received and in the future will receive from third parties confidential or
proprietary information ("THIRD PARTY INFORMATION") subject to a duty on the
Company's part to maintain the confidentiality of such information and to use it
only for certain limited purposes. During the term of my employment and for a
period of one year thereafter, I will hold Third Party Information in the
strictest confidence and will not disclose to anyone (other than Company
personnel who need to know such information in connection with their work for
the Company) or use, except in connection with my work for the Company, Third
Party Information unless expressly authorized by an officer of the Company in
writing.
1.4 NO IMPROPER USE OF INFORMATION OF PRIOR EMPLOYERS AND OTHERS. During
my employment by the Company I will not improperly use or disclose any
confidential information or trade secrets, if any, of any former employer or any
other person to whom I have an obligation of confidentiality, and I will not
bring onto the premises of the Company any unpublished documents or any property
belonging to any former employer or any other person to whom I have an
obligation of confidentiality unless consented to in writing by that former
employer or person. I will use in the performance of my duties only information
which is generally known and used by persons with training and experience
comparable to my own, which is common knowledge in the industry or otherwise
legally in the public domain, or which is otherwise provided or developed by the
Company.
2. ASSIGNMENT OF INVENTIONS.
2.1 PROPRIETARY RIGHTS. The term "PROPRIETARY RIGHTS" shall mean all
trade secret, patent, copyright, mask work and other intellectual property
rights throughout the world.
2.2 PRIOR INVENTIONS. Inventions, if any, patented or unpatented, which
I made prior to the commencement of my employment with the Company are excluded
from the scope of this Agreement. To preclude any possible uncertainty, I have
set forth on Exhibit A (Previous Inventions) attached hereto a complete list of
all Inventions that I have, alone or jointly with others, conceived, developed
or reduced to practice or caused to be conceived, developed or reduced to
practice prior to the commencement of my employment with the Company, that I
consider to be my property or the property of third parties and that I wish to
have excluded from the scope of this Agreement (collectively referred to as
"PRIOR INVENTIONS").
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If disclosure of any such Prior Invention would cause me to violate any prior
confidentiality agreement, I understand that I am not to list such Prior
Inventions in Exhibit A but am only to disclose a cursory name for each such
invention, a listing of the party(ies) to whom it belongs and the fact that full
disclosure as to such inventions has not been made for that reason. A space is
provided on Exhibit A for such purpose. If no such disclosure is attached, I
represent that there are no Prior Inventions. If, in the course of my employment
with the Company, I incorporate a Prior Invention into a Company product,
process or machine, the Company is hereby granted and shall have a nonexclusive,
royalty-free, irrevocable, perpetual, worldwide license (with rights to
sublicense through multiple tiers of sublicensees) to make, have made, modify,
use and sell such Prior Invention. Notwithstanding the foregoing, I agree that I
will not incorporate, or permit to be incorporated, Prior Inventions in any
Company Inventions without the Company's prior written consent.
2.3 ASSIGNMENT OF INVENTIONS. Subject to Sections 2.4, and 2.6, I hereby
assign and agree to assign in the future (when any such Inventions or
Proprietary Rights are first reduced to practice or first fixed in a tangible
medium, as applicable) to the Company all my right, title and interest in and to
any and all Inventions (and all Proprietary Rights with respect thereto) whether
or not patentable or registrable under copyright or similar statutes, made or
conceived or reduced to practice or learned by me, either alone or jointly with
others, during the period of my employment with the Company. Inventions assigned
to the Company, or to a third party as directed by the Company pursuant to this
Section 2, are hereinafter referred to as "COMPANY INVENTIONS."
2.4 NONASSIGNABLE INVENTIONS. I recognize that, this Agreement will not
be deemed to require assignment of any invention that was developed entirely on
my own time without using the Company's equipment, supplies, facilities, or
trade secrets and neither related to the Company's actual or anticipated
business, research or development, nor resulted from work performed by me for
the Company.
2.5 OBLIGATION TO KEEP COMPANY INFORMED. During the period of my
employment and for six (6) months after termination of my employment with the
Company, I will promptly disclose to the Company fully and in writing all
Inventions authored, conceived or reduced to practice by me, either alone or
jointly with others. In addition, I will promptly disclose to the Company all
patent applications filed by me or on my behalf within a year after termination
of employment. At the time of each such disclosure, I will advise the Company in
writing of any Inventions that I believe fully qualify for protection under the
provisions of a Specific Inventions Law; and I will at that time provide to the
Company in writing all evidence necessary to substantiate that belief. The
Company will keep in confidence and will not use for any purpose or disclose to
third parties without my consent any confidential information disclosed in
writing to the Company pursuant to this Agreement relating to Inventions that
qualify fully for protection under a Specific Inventions Law. I will preserve
the confidentiality of any Invention that does not fully qualify for protection
under a Specific Inventions Law.
2.6 GOVERNMENT OR THIRD PARTY. I also agree to assign all my right,
title and interest in and to any particular Company Invention to a third party,
including without limitation the United States, as directed by the Company.
2.7 WORKS FOR HIRE. I acknowledge that all original works of authorship
which are made by me (solely or jointly with others) within the scope of my
employment and which are protectable by copyright are "works made for hire,"
pursuant to United States Copyright Act (17 U.S.C., Section 101).
2.8 ENFORCEMENT OF PROPRIETARY RIGHTS. I will assist the Company in
every proper way to obtain, and from time to time enforce, United States and
foreign Proprietary Rights relating to Company Inventions in any and all
countries. To that end I will execute, verify and deliver such documents and
perform such other acts (including appearances as a witness) as the Company may
reasonably request for use in applying for, obtaining, perfecting, evidencing,
sustaining and enforcing such Proprietary Rights and the assignment thereof. In
addition, I will execute, verify and deliver assignments of such Proprietary
Rights to the Company or its designee. My obligation to assist the Company with
respect to Proprietary Rights relating to such Company Inventions in any and all
countries shall continue beyond the termination of my employment, but the
Company shall compensate me at a reasonable rate after my termination for the
time actually spent by me at the Company's request on such assistance.
In the event the Company is unable for any reason, after reasonable
effort, to secure my signature on any document needed in connection with the
actions specified in the preceding paragraph, I hereby irrevocably designate and
appoint the Company and its duly authorized officers and agents as my agent and
attorney in fact, which appointment is coupled with an interest, to act for and
in my behalf to execute, verify and file any such documents and to do all other
lawfully permitted acts to further the purposes of the preceding paragraph with
the same legal force and effect as if executed by me. I hereby waive and
quitclaim to the Company any and all claims, of any nature whatsoever, which I
now or may hereafter have for infringement of any Proprietary Rights assigned
hereunder to the Company.
3. RECORDS. I agree to keep and maintain adequate and current records (in
the form of notes, sketches, drawings and in any other form that may be required
by the Company) of all Proprietary Information developed by me
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and all Inventions made by me during the period of my employment at the Company,
which records shall be available to and remain the sole property of the Company
at all times.
4. NO CONFLICTING OBLIGATION. I represent that my performance of all the
terms of this Agreement and as an employee of the Company does not and will not
breach any agreement to keep in confidence information acquired by me in
confidence or in trust prior to my employment by the Company. I have not entered
into, and I agree I will not enter into, any agreement either written or oral in
conflict herewith.
5. RETURN OF COMPANY DOCUMENTS. When I leave the employ of the Company, I
will deliver to the Company any and all drawings, notes, memoranda,
specifications, devices, formulas, and documents, together with all copies
thereof, and any other material containing or disclosing any Company Inventions,
Third Party Information or Proprietary Information of the Company. I further
agree that any property situated on the Company's premises and owned by the
Company, including disks and other storage media, filing cabinets or other work
areas, is subject to inspection by Company personnel at any time with or without
notice. Prior to leaving, I will cooperate with the Company in completing and
signing the Company's termination statement.
6. LEGAL AND EQUITABLE REMEDIES. Because my services are personal and
unique and because I may have access to and become acquainted with the
Proprietary Information of the Company, the Company shall have the right to
enforce this Agreement and any of its provisions by injunction, specific
performance or other equitable relief, without bond and without prejudice to any
other rights and remedies that the Company may have for a breach of this
Agreement.
7. NOTICES. Any notices required or permitted hereunder shall be given to
the appropriate party at the address specified below or at such other address as
the party shall specify in writing. Such notice shall be deemed given upon
personal delivery to the appropriate address or if sent by certified or
registered mail, three (3) days after the date of mailing.
8. NOTIFICATION OF NEW EMPLOYER. In the event that I leave the employ of
the Company, I hereby consent to the notification of my new employer of my
rights and obligations under this Agreement.
9. GENERAL PROVISIONS.
9.1 GOVERNING LAW; CONSENT TO PERSONAL JURISDICTION. This Agreement will
be governed by and construed according to the laws of the Commonwealth of
Virginia, as such laws are applied to agreements entered into and to be
performed entirely within Virginia between Virginia residents. I hereby
expressly consent to the personal jurisdiction of the state and federal courts
located in Fairfax County, Virginia for any lawsuit filed there against me by
Company arising from or related to this Agreement.
9.2 SEVERABILITY. In case any one or more of the provisions contained in
this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect the other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein. If moreover, any one or more of the provisions
contained in this Agreement shall for any reason be held to be excessively broad
as to duration, geographical scope, activity or subject, it shall be construed
by limiting and reducing it, so as to be enforceable to the extent compatible
with the applicable law as it shall then appear.
9.3 SUCCESSORS AND ASSIGNS. This Agreement will be binding upon my
heirs, executors, administrators and other legal representatives and will be for
the benefit of the Company, its successors, and its assigns.
9.4 SURVIVAL. The provisions of this Agreement shall survive the
termination of my employment and the assignment of this Agreement by the Company
to any successor in interest or other assignee.
9.5 EMPLOYMENT. I agree and understand that nothing in this Agreement
shall confer any right with respect to continuation of employment by the
Company, nor shall it interfere in any way with my right or the Company's right
to terminate my employment pursuant to the terms of my Employment Agreement with
the Company.
9.6 WAIVER. No waiver by the Company of any breach of this Agreement
shall be a waiver of any preceding or succeeding breach. No waiver by the
Company of any right under this Agreement shall be construed as a waiver of any
other right. The Company shall not be required to give notice to enforce strict
adherence to all terms of this Agreement.
9.7 ENTIRE AGREEMENT. The obligations pursuant to Sections 1 and 2 of
this Agreement shall apply to any time during which I was previously employed,
or am in the future employed, by the Company as a consultant if no other
agreement governs nondisclosure and assignment of inventions during such period.
This Agreement and the Employment Agreement to which it is attached represent is
the final, complete and exclusive agreement of the parties with respect to the
subject matter hereof and supersede and merge all prior discussions between us.
No modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, will be effective unless in writing and signed by the
party to be charged. Any
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subsequent change or changes in my duties, salary or compensation will not
affect the validity or scope of this Agreement.
This Agreement shall be effective as of the first day of my employment
with the Company, namely: ___________, 20__.
I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS. I HAVE
COMPLETELY FILLED OUT EXHIBIT A TO THIS AGREEMENT.
Dated: _____________________
_______________________________________
(SIGNATURE)
_______________________________________
(PRINTED NAME)
ACCEPTED AND AGREED TO:
By: ___________________________________
Title: ________________________________
_______________________________________
(Address)
_______________________________________
Dated: _____________________
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EXHIBIT A
TO: LIGHTSPAN, INC.
FROM: _____________________
DATE: ________________________
SUBJECT: PREVIOUS INVENTIONS
1. Except as listed in Section 2 below, the following is a complete list
of all inventions or improvements relevant to the subject matter of my
employment by LIGHTSPAN, INC. (the "COMPANY") that have been made or conceived
or first reduced to practice by me alone or jointly with others prior to my
engagement by the Company:
[ ] No inventions or improvements.
[ ] See below:
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
[ ] Additional sheets attached.
2. Due to a prior confidentiality agreement, I cannot complete the
disclosure under Section 1 above with respect to inventions or improvements
generally listed below, the proprietary rights and duty of confidentiality with
respect to which I owe to the following party(ies):
INVENTION OR IMPROVEMENT PARTY(ies) RELATIONSHIP
1. ________________________ ___________________ _______________________
2. ________________________ ___________________ _______________________
3. ________________________ ___________________ _______________________
[ ] Additional sheets attached.
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EXHIBIT H
NONCOMPETITION AND NONSOLICIATION AGREEMENT
THIS NONCOMPETITION AND NONSOLICITATION AGREEMENT ("AGREEMENT") is being
entered into effective as of _________________ by and between XXXXX XXXXXXXXX
("Employee") and LIGHTSPAN, INC., a Delaware corporation (the "Company").
Certain capitalized terms used in this Agreement are defined in Section 19 and
those capitalized terms used herein and not otherwise defined shall have the
meanings given to such terms in the Merger Agreement (as defined herein).
RECITALS
A. As a stockholder and employee of EDUTEST, INC. ("Edutest"), Employee
obtained extensive and valuable knowledge and confidential information
concerning the businesses of Edutest.
B. Pursuant to an Agreement and Plan of Merger and Reorganization dated
as of May 24, 2000 (the "Merger Agreement") by and among the Company, Merger
Sub, and Edutest, the Company will, through its wholly owned subsidiary, acquire
Edutest. Except as otherwise expressly provided herein, this Agreement will only
become effective as of the Closing Date.
C. In connection with the acquisition of Edutest by the Company pursuant
to the Merger Agreement, and to enable the Company to secure more fully the
benefits of such acquisition, the Company has required as a condition to the
consummation of such acquisition, that Employee enter into this Agreement; and
Employee is entering into this Agreement in order to induce the Company to
consummate the acquisition contemplated by the Merger Agreement. Employee agrees
to comply with the restrictions set forth in this Agreement in exchange for the
Company's purchase of all of Employee's shares in Edutest and the benefits
provided to Employee by Company, including employment with the Company, a salary
and benefits associated with such employment and stock options to purchase the
Company's Common Stock.
D. The Company and Edutest have conducted and are conducting their
respective businesses on a national and international basis.
AGREEMENT
In consideration of the foregoing recitals and the mutual covenants and
agreements contained herein, and for other good and valuable consideration,
Employee agrees as follows:
1. RESTRICTION ON COMPETITION. Employee agrees that as of the date of
this Agreement and through the Noncompetition Period, Employee shall not:
(a) engage directly or indirectly in Competition in any Restricted
Territory; or
(b) directly or indirectly be or become an officer, director,
stockholder, owner, co-owner, Affiliate, partner, promoter, employee, agent,
representative, designer, consultant, advisor, manager of, for or to, or
otherwise be or become associated with or acquire or hold (of record,
beneficially or otherwise) any direct or indirect interest in, any Person (or
any division, group or other subset or operating unit of any Person) that
generates or derives, from time to time
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in a twelve-month period, more than 15% of its total sales or gross profits from
in direct or indirect engagement in Competition in any Restricted Territory;
provided, however, that Employee may, without violating this Section 1, own, as
a passive investment, shares of capital stock of a publicly-held corporation
that generates or derives not more than 15% of its total sales or gross profit
from its direct or indirect engagement in Competition if (i) such shares are
actively traded on an established national securities market in the United
States, (ii) the number of shares of such corporation's capital stock that are
owned beneficially (directly or indirectly) by Employee plus the number of
shares of such corporation's capital stock that are owned beneficially (directly
or indirectly) by Employee's Affiliates represent collectively less than 5% of
the total number of shares of such corporation's capital stock outstanding, and
(iii) neither Employee nor any Affiliate of Employee is otherwise associated
directly or indirectly with such corporation or with any Affiliate of such
corporation.
2. NON-SOLICITATION AGREEMENT. Employee agrees that, as of the date of
this Agreement and continuing through the Noncompetition Period Employee shall
not, and shall not permit any of Employee's controlled Affiliates to: (a) hire
any Specified Employee, or (b) directly or indirectly, personally or through
others, encourage, induce, attempt to induce, solicit or attempt to solicit (on
Employee's own behalf or on behalf of any other Person) any Specified Employee
or any other employee to leave his or her employment with the Company, or any of
their respective Affiliates. For purposes of this Section 2, "Specified
Employee" shall mean any individual who: (i) is or was an employee of Edutest or
any of its respective Affiliates, at any time during the 180-day period ending
on the date of this Agreement, unless such individual's employment with Edutest
or any of its Affiliates was terminated by Edutest or any of its Affiliates and
such individual is hired by Employee to engage in activities that do not qualify
such individual as engaging in Competition or (ii) (A) remains or becomes an
employee of the Company, or any of their respective Affiliates or successors at
any time commencing as of the date this Agreement is signed by Employee and
continuing through the Noncompetition Period, and (B) engages in activities
within the meaning of the word Competition on behalf of the Company, or any of
their respective Affiliates or successors.
3. REPRESENTATIONS AND WARRANTIES. Employee represents and warrants, to
and for the benefit of the Indemnitees, that, as of the date Employee signs this
Agreement: (a) Employee has full power and capacity to execute and deliver, and
to perform all of Employee's obligations under, this Agreement; and (b) neither
the execution and delivery of this Agreement nor the performance of this
Agreement will result directly or indirectly in a violation or breach of (i) any
agreement or obligation by which Employee or any of Employee's Affiliates is or
may be bound, or (ii) to Employee's knowledge, any law, rule or regulation.
Employee's representations and warranties shall survive the expiration of the
Noncompetition Period for a period of one year (the "Survival Period").
4. INJUNCTIVE RELIEF. Employee agrees that Employee is obligated under
this Agreement to render services and comply with covenants of a special,
unique, unusual and extraordinary character, thereby giving this Agreement
peculiar value so that the loss of such service or violation by Employee of this
Agreement, including but not limited to, Sections 1 and 2 could not reasonably
or adequately be compensated in damages at law. Therefore, notwithstanding
Section 12, Employee agrees that, in the event of any breach or threatened
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breach by Employee of any covenant or obligation contained in this Agreement,
each of the Company and the other Indemnitees shall be entitled (in addition to
any other remedy that may be available to it, including monetary damages) to
seek and obtain (a) a decree or order of specific performance to enforce the
observance and performance of such covenant or obligation, and (b) an injunction
restraining such breach or threatened breach. Employee further agrees that no
Indemnitee shall be required to obtain, furnish or post any bond or similar
instrument in connection with or as a condition to obtaining any remedy referred
to in this Section 4, and Employee irrevocably waives any right Employee may
have to require any Indemnitee to obtain, furnish or post any such bond or
similar instrument.
5. INDEMNIFICATION. Without in any way limiting any of the rights or
remedies otherwise available to any of the Indemnitees, Employee shall indemnify
and hold harmless each Indemnitee against and from any loss, damage, injury,
liability, claim, demand, settlement, judgment, award, fine, penalty, tax, fee
(including attorneys' fees), charge, cost (including any cost of investigation)
or expense of any nature (whether or not relating to any third-party claim) that
is directly or indirectly suffered or incurred at any time during the
Noncompetition Period and the Survival Period by such Indemnitee, or to which
such Indemnitee otherwise becomes subject at any time during the Noncompetition
Period and the Survival Period, and that arises directly or indirectly out of or
by virtue of, or relates directly or indirectly to, (a) any inaccuracy in or
breach of any representation or warranty contained in this Agreement, or (b) any
failure on the part of Employee to observe, perform or abide by, or any other
breach of, any restriction, covenant, obligation or other provision contained in
this Agreement. Any claim by an Indemnitee must be made prior to the expiration
of the Survival Period.
6. NON-EXCLUSIVITY. The rights and remedies of the Company and the other
Indemnitees under this Agreement are not exclusive of or limited by any other
rights or remedies which any of them may have, whether at law, in equity, by
contract or otherwise, all of which shall be cumulative (and not alternative).
Without limiting the generality of the foregoing, the rights and remedies of the
Company and the other Indemnitees under this Agreement, and the obligations and
liabilities of Employee under this Agreement, are in addition to their
respective rights, remedies, obligations and liabilities under the law of unfair
competition, under laws relating to misappropriation of trade secrets, under
other laws and common law requirements and under all applicable rules and
regulations. Nothing in this Agreement shall limit any of Employee's
obligations, or the rights or remedies of the Company or any of the other
Indemnitees, under the Merger Agreement; and nothing in the Merger Agreement
shall limit any of Employee's obligations, or any of the rights or remedies of
the Company or any of the other Indemnitees, under this Agreement. No breach on
the part of the Company or Edutest of any covenant or obligation contained in
the Merger Agreement, or any other agreement shall limit or otherwise affect any
right or remedy of the Company or any of the other Indemnitees under this
Agreement.
7. GOVERNING LAW. This Agreement shall be construed in accordance with,
and governed in all respects by, the laws of the Commonwealth of Virginia
(without giving effect to principles of conflicts of laws)
8. WAIVER. No failure on the part of the Company or any other Indemnitee
to exercise any power, right, privilege or remedy under this Agreement, and no
delay on the part of
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the Company, or any other Indemnitee in exercising any power, right, privilege
or remedy under this Agreement, shall operate as a waiver of such power, right,
privilege or remedy; and no single or partial exercise of any such power, right,
privilege or remedy shall preclude any other or further exercise thereof or of
any other power, right, privilege or remedy. No Indemnitee shall be deemed to
have waived any claim of such Indemnitee arising out of this Agreement, or any
power, right, privilege or remedy of such Indemnitee under this Agreement,
unless the waiver of such claim, power, right, privilege or remedy is expressly
set forth in a written instrument duly executed and delivered on behalf of such
Indemnitee; and any such waiver shall not be applicable or have any effect
except in the specific instance in which it is given.
9. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of Employee and Employee's heirs, executors, estate,
personal representatives and legal representatives. This Agreement shall be
binding upon and shall inure to the benefit of the Company and the other
Indemnitees. Each of the Company and the other Indemnitees may freely assign any
or all of its rights under this Agreement, at any time, in whole or in part, to
any Person in connection with the sale of all or a substantial portion of the
business conducted or proposed to be conducted by Edutest prior to the date of
this Agreement to such other Person without obtaining the consent or approval of
Employee or of any other Person. Because of the unique and personal nature of
Employee's duties under this Agreement, neither this Agreement nor any rights or
obligations under this Agreement shall be assignable by Employee.
10. INTEGRATION. This Agreement forms the complete and exclusive
statement of Employee's agreement with the Company regarding the subject matter
hereof. The terms in this Agreement supersede any other agreements or promises
made to Employee by anyone regarding the subject matter herein.
11. FURTHER ASSURANCES. Employee shall (at Company's sole expense)
execute and/or cause to be delivered to each Indemnitee such instruments and
other documents, and shall (at Company's sole expense) take such other actions,
as any Indemnitee may reasonably request at any time (whether during the
Noncompetition Period or the Survival Period) for the purpose of carrying out or
evidencing any of the provisions of this Agreement.
12. ARBITRATION. To ensure rapid and economical resolution of any
disputes which may arise under this Agreement, Employee and the Company agree
that any and all disputes or controversies of any nature whatsoever, arising
from or regarding the interpretation, performance, enforcement or breach of this
Agreement shall be resolved by confidential, final and binding arbitration
(rather than trial by jury or court or resolution in some other forum) to the
fullest extent permitted by law, including but not limited to Virginia Code Xxx.
- Section 8.01-581.06. Any arbitration proceeding pursuant to this Agreement
shall be conducted by the American Arbitration Association ("AAA") in Fairfax
County, Virginia under the then existing AAA employment-related arbitration
rules. If for any reason all or part of this arbitration provision is held to be
invalid, illegal, or unenforceable in any respect under any applicable law or
rule in any jurisdiction, such invalidity, illegality or unenforceability will
not affect any other portion of this arbitration provision or any other
jurisdiction, but this provision will be reformed, construed and enforced in
such jurisdiction as if such invalid, illegal or unenforceable part or parts of
this provision had never been contained herein, consistent with the general
intent of the parties insofar as possible.
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EMPLOYEE HAS READ Section 12 AND IRREVOCABLY AGREES TO ARBITRATE ANY DISPUTE
IDENTIFIED ABOVE. ______ (EMPLOYEE'S INITIALS)
13. CAPTIONS. The captions contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
14. CONSTRUCTION. Whenever required by the context, the singular number
shall include the plural, and vice versa; the masculine gender shall include the
feminine and neuter genders; and the neuter gender shall include the masculine
and feminine genders. Any rule of construction to the effect that ambiguities
are to be resolved against the drafting party shall not be applied in the
construction or interpretation of this Agreement. Neither the drafting history
nor the negotiating history of this Agreement shall be used or referred to in
connection with the construction or interpretation of this Agreement. As used in
this Agreement, the words "include" and "including," and variations thereof,
shall not be deemed to be terms of limitation, and shall be deemed to be
followed by the words "without limitation." Except as otherwise indicated in
this Agreement, all references in this Agreement to "Sections" are intended to
refer to Sections of this Agreement.
15. SURVIVAL OF OBLIGATIONS. The expiration of the Noncompetition Period
shall not operate to relieve Employee of any obligation or liability arising
from any prior breach by Employee of any provision of this Agreement. Except as
specifically provided herein, the obligations of Employee under this Agreement
(including the obligations under Sections 4, 5, 6, 7, 8, 11, 18) shall survive
the expiration of the Noncompetition Period until the expiration of the Survival
Period, at which time all obligations of Employee to the Company shall
terminate.
16. OBLIGATIONS ABSOLUTE. Employee's obligations under this Agreement
are absolute and shall not be terminated or otherwise limited by virtue of any
breach (on the part of the Company or any other Indemnitee or any other Person)
of any provision of the Merger Agreement or any other agreement, or by virtue of
any failure to perform or other breach of any obligation of the Company or any
other Indemnitee or any other Person.
17. AMENDMENT. This Agreement may not be amended, modified, altered or
supplemented other than by means of a written instrument duly executed and
delivered on behalf of Employee and the Company (or any successor to the
Company).
18. SEVERABILITY. Each provision of this Agreement is separable from
every other provision of this Agreement, and each part of each provision of this
Agreement is separable from every other part of such provision. If any provision
of this Agreement or any part of any such provision is held under any
circumstances to be invalid or unenforceable in any jurisdiction, then (a) such
provision or part thereof shall, with respect to such circumstances and in such
jurisdiction, be deemed amended to conform to applicable laws so as to be valid
and enforceable to the fullest possible extent, (b) the invalidity or
unenforceability of such provision or part thereof under such circumstances and
in such jurisdiction shall not affect the validity or enforceability of such
provision or part thereof under any other circumstances or in any other
jurisdiction, and (c) the invalidity or unenforceability of such provision or
part thereof shall not
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affect the validity or enforceability of the remainder of such provision or the
validity or enforceability of any other provision of this Agreement.
19. DEFINED TERMS. For purposes of this Agreement:
(a) "Affiliate" means, with respect to any specified Person, any
other Person that, directly or indirectly, through one or more intermediaries,
controls, is controlled by or is under common control with such specified
Person.
(b) A Person shall be deemed to be engaged in "Competition" if such
Person or any of such Person's Affiliates is providing services of any nature to
any entity engaged in the online assessment business or any other online
educational business which competes with the Company.
(c) "Indemnitees" shall include: (i) the Company; (ii) Edutest; (iii)
the Merger Sub; (iv) each Person (other than Employee) who is or becomes an
Affiliate of the Company; and (v) the successors and assigns of each of the
Persons referred to in clauses "(i)", "(ii)", "(iii)" and "(iv)" of this
sentence.
(d) "Noncompetition Period" shall mean the period commencing on the
last day of Employee's employment with the Company ending twenty-four (24)
months following the last day of Employee's employment with the Company. The
Noncompetition Period shall lapse in the event the Closing does not occur.
(e) "Person" means any: (i) individual; (ii) corporation, general
partnership, limited partnership, limited liability partnership, trust, company
(including any limited liability company or joint stock company) or other
organization or entity; or (iii) governmental body or authority.
(f) "Restricted Territory" means the United States, Canada, Great
Britain, and Australia.
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IN WITNESS WHEREOF, Employee has duly executed and delivered this
Agreement as of the date first above written.
___________________________________________
EMPLOYEE
Address: __________________________________
Telephone No.: ( ) _____________
Facsimile: ( ) _________________
LIGHTSPAN, INC.
___________________________________________
[SIGNATORY]
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EXHIBIT H
NONCOMPETITION AND NONSOLICIATION AGREEMENT
THIS NONCOMPETITION AND NONSOLICITATION AGREEMENT ("AGREEMENT") is being
entered into effective as of _________________ by and between ________________
("Employee") and LIGHTSPAN, INC., a Delaware corporation (the "Company").
Certain capitalized terms used in this Agreement are defined in Section 19 and
those capitalized terms used herein and not otherwise defined shall have the
meanings given to such terms in the Merger Agreement (as defined herein).
RECITALS
A. As a stockholder and employee of EDUTEST, INC. ("Edutest"), Employee
obtained extensive and valuable knowledge and confidential information
concerning the businesses of Edutest.
B. Pursuant to an Agreement and Plan of Merger and Reorganization dated
as of May 24, 2000 (the "Merger Agreement") by and among the Company, Merger
Sub, and Edutest, the Company will, through its wholly owned subsidiary, acquire
Edutest. Except as otherwise expressly provided herein, this Agreement will only
become effective as of the Closing Date.
C. In connection with the acquisition of Edutest by the Company pursuant
to the Merger Agreement, and to enable the Company to secure more fully the
benefits of such acquisition, the Company has required as a condition to the
consummation of such acquisition, that Employee enter into this Agreement; and
Employee is entering into this Agreement in order to induce the Company to
consummate the acquisition contemplated by the Merger Agreement. Employee agrees
to comply with the restrictions set forth in this Agreement in exchange for the
Company's purchase of all of Employee's shares in Edutest and the benefits
provided to Employee by Company, including employment with the Company, a salary
and benefits associated with such employment and stock options to purchase the
Company's Common Stock.
D. The Company and Edutest have conducted and are conducting their
respective businesses on a national and international basis.
AGREEMENT
In consideration of the foregoing recitals and the mutual covenants and
agreements contained herein, and for other good and valuable consideration,
Employee agrees as follows:
1. RESTRICTION ON COMPETITION. Employee agrees that as of the date of
this Agreement and through the Noncompetition Period, Employee shall not:
(a) engage directly or indirectly in Competition in any Restricted
Territory; or
(b) directly or indirectly be or become an officer, director,
stockholder, owner, co-owner, Affiliate, partner, promoter, employee, agent,
representative, designer, consultant, advisor, manager of, for or to, or
otherwise be or become associated with or acquire or hold (of record,
beneficially or otherwise) any direct or indirect interest in, any Person (or
any division, group or other subset or operating unit of any Person) that
generates or derives, from time to time
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in a twelve-month period, more than 15% of its total sales or gross profits from
in direct or indirect engagement in Competition in any Restricted Territory;
provided, however, that Employee may, without violating this Section 1, own, as
a passive investment, shares of capital stock of a publicly-held corporation
that generates or derives not more than 15% of its total sales or gross profit
from its direct or indirect engagement in Competition if (i) such shares are
actively traded on an established national securities market in the United
States, (ii) the number of shares of such corporation's capital stock that are
owned beneficially (directly or indirectly) by Employee plus the number of
shares of such corporation's capital stock that are owned beneficially (directly
or indirectly) by Employee's Affiliates represent collectively less than 5% of
the total number of shares of such corporation's capital stock outstanding, and
(iii) neither Employee nor any Affiliate of Employee is otherwise associated
directly or indirectly with such corporation or with any Affiliate of such
corporation.
2. NON-SOLICITATION AGREEMENT. Employee agrees that, as of the date of
this Agreement and continuing through the Noncompetition Period Employee shall
not, and shall not permit any of Employee's controlled Affiliates to: (a) hire
any Specified Employee, or (b) directly or indirectly, personally or through
others, encourage, induce, attempt to induce, solicit or attempt to solicit (on
Employee's own behalf or on behalf of any other Person) any Specified Employee
or any other employee to leave his or her employment with the Company, or any of
their respective Affiliates. For purposes of this Section 2, "Specified
Employee" shall mean any individual who: (i) is or was an employee of Edutest or
any of its respective Affiliates, at any time during the 180-day period ending
on the date of this Agreement, unless such individual's employment with Edutest
or any of its Affiliates was terminated by Edutest or any of its Affiliates and
such individual is hired by Employee to engage in activities that do not qualify
such individual as engaging in Competition or (ii) (A) remains or becomes an
employee of the Company, or any of their respective Affiliates or successors at
any time commencing as of the date this Agreement is signed by Employee and
continuing through the Noncompetition Period, and (B) engages in activities
within the meaning of the word Competition on behalf of the Company, or any of
their respective Affiliates or successors.
3. REPRESENTATIONS AND WARRANTIES. Employee represents and warrants, to
and for the benefit of the Indemnitees, that, as of the date Employee signs this
Agreement: (a) Employee has full power and capacity to execute and deliver, and
to perform all of Employee's obligations under, this Agreement; and (b) neither
the execution and delivery of this Agreement nor the performance of this
Agreement will result directly or indirectly in a violation or breach of (i) any
agreement or obligation by which Employee or any of Employee's Affiliates is or
may be bound, or (ii) to Employee's knowledge, any law, rule or regulation.
Employee's representations and warranties shall survive the expiration of the
Noncompetition Period for a period of one year (the "Survival Period").
4. INJUNCTIVE RELIEF. Employee agrees that Employee is obligated under
this Agreement to render services and comply with covenants of a special,
unique, unusual and extraordinary character, thereby giving this Agreement
peculiar value so that the loss of such service or violation by Employee of this
Agreement, including but not limited to, Sections 1 and 2 could not reasonably
or adequately be compensated in damages at law. Therefore, notwithstanding
Section 12, Employee agrees that, in the event of any breach or threatened
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105
breach by Employee of any covenant or obligation contained in this Agreement,
each of the Company and the other Indemnitees shall be entitled (in addition to
any other remedy that may be available to it, including monetary damages) to
seek and obtain (a) a decree or order of specific performance to enforce the
observance and performance of such covenant or obligation, and (b) an injunction
restraining such breach or threatened breach. Employee further agrees that no
Indemnitee shall be required to obtain, furnish or post any bond or similar
instrument in connection with or as a condition to obtaining any remedy referred
to in this Section 4, and Employee irrevocably waives any right Employee may
have to require any Indemnitee to obtain, furnish or post any such bond or
similar instrument.
5. INDEMNIFICATION. Without in any way limiting any of the rights or
remedies otherwise available to any of the Indemnitees, Employee shall indemnify
and hold harmless each Indemnitee against and from any loss, damage, injury,
liability, claim, demand, settlement, judgment, award, fine, penalty, tax, fee
(including attorneys' fees), charge, cost (including any cost of investigation)
or expense of any nature (whether or not relating to any third-party claim) that
is directly or indirectly suffered or incurred at any time during the
Noncompetition Period and the Survival Period by such Indemnitee, or to which
such Indemnitee otherwise becomes subject at any time during the Noncompetition
Period and the Survival Period, and that arises directly or indirectly out of or
by virtue of, or relates directly or indirectly to, (a) any inaccuracy in or
breach of any representation or warranty contained in this Agreement, or (b) any
failure on the part of Employee to observe, perform or abide by, or any other
breach of, any restriction, covenant, obligation or other provision contained in
this Agreement. Any claim by an Indemnitee must be made prior to the expiration
of the Survival Period.
6. NON-EXCLUSIVITY. The rights and remedies of the Company and the other
Indemnitees under this Agreement are not exclusive of or limited by any other
rights or remedies which any of them may have, whether at law, in equity, by
contract or otherwise, all of which shall be cumulative (and not alternative).
Without limiting the generality of the foregoing, the rights and remedies of the
Company and the other Indemnitees under this Agreement, and the obligations and
liabilities of Employee under this Agreement, are in addition to their
respective rights, remedies, obligations and liabilities under the law of unfair
competition, under laws relating to misappropriation of trade secrets, under
other laws and common law requirements and under all applicable rules and
regulations. Nothing in this Agreement shall limit any of Employee's
obligations, or the rights or remedies of the Company or any of the other
Indemnitees, under the Merger Agreement; and nothing in the Merger Agreement
shall limit any of Employee's obligations, or any of the rights or remedies of
the Company or any of the other Indemnitees, under this Agreement. No breach on
the part of the Company or Edutest of any covenant or obligation contained in
the Merger Agreement, or any other agreement shall limit or otherwise affect any
right or remedy of the Company or any of the other Indemnitees under this
Agreement.
7. GOVERNING LAW. This Agreement shall be construed in accordance with,
and governed in all respects by, the laws of the Commonwealth of Virginia
(without giving effect to principles of conflicts of laws).
8. WAIVER. No failure on the part of the Company or any other Indemnitee
to exercise any power, right, privilege or remedy under this Agreement, and no
delay on the part of
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106
the Company, or any other Indemnitee in exercising any power, right, privilege
or remedy under this Agreement, shall operate as a waiver of such power, right,
privilege or remedy; and no single or partial exercise of any such power, right,
privilege or remedy shall preclude any other or further exercise thereof or of
any other power, right, privilege or remedy. No Indemnitee shall be deemed to
have waived any claim of such Indemnitee arising out of this Agreement, or any
power, right, privilege or remedy of such Indemnitee under this Agreement,
unless the waiver of such claim, power, right, privilege or remedy is expressly
set forth in a written instrument duly executed and delivered on behalf of such
Indemnitee; and any such waiver shall not be applicable or have any effect
except in the specific instance in which it is given.
9. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of Employee and Employee's heirs, executors, estate,
personal representatives and legal representatives. This Agreement shall be
binding upon and shall inure to the benefit of the Company and the other
Indemnitees. Each of the Company and the other Indemnitees may freely assign any
or all of its rights under this Agreement, at any time, in whole or in part, to
any Person in connection with the sale of all or a substantial portion of the
business conducted or proposed to be conducted by Edutest prior to the date of
this Agreement to such other Person without obtaining the consent or approval of
Employee or of any other Person. Because of the unique and personal nature of
Employee's duties under this Agreement, neither this Agreement nor any rights or
obligations under this Agreement shall be assignable by Employee.
10. INTEGRATION. This Agreement forms the complete and exclusive
statement of Employee's agreement with the Company regarding the subject matter
hereof. The terms in this Agreement supersede any other agreements or promises
made to Employee by anyone regarding the subject matter herein.
11. FURTHER ASSURANCES. Employee shall (at Company's sole expense)
execute and/or cause to be delivered to each Indemnitee such instruments and
other documents, and shall (at Company's sole expense) take such other actions,
as any Indemnitee may reasonably request at any time (whether during the
Noncompetition Period or the Survival Period) for the purpose of carrying out or
evidencing any of the provisions of this Agreement.
12. ARBITRATION. To ensure rapid and economical resolution of any
disputes which may arise under this Agreement, Employee and the Company agree
that any and all disputes or controversies of any nature whatsoever, arising
from or regarding the interpretation, performance, enforcement or breach of this
Agreement shall be resolved by confidential, final and binding arbitration
(rather than trial by jury or court or resolution in some other forum) to the
fullest extent permitted by law, including but not limited to Virginia Code Xxx.
- Section 8.01-581.06. Any arbitration proceeding pursuant to this Agreement
shall be conducted by the American Arbitration Association ("AAA") in Fairfax
County, Virginia under the then existing AAA employment-related arbitration
rules. If for any reason all or part of this arbitration provision is held to be
invalid, illegal, or unenforceable in any respect under any applicable law or
rule in any jurisdiction, such invalidity, illegality or unenforceability will
not affect any other portion of this arbitration provision or any other
jurisdiction, but this provision will be reformed, construed and enforced in
such jurisdiction as if such invalid, illegal or unenforceable part or parts of
this provision had never been contained herein, consistent with the general
intent of the parties insofar as possible.
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EMPLOYEE HAS READ Section 12 AND IRREVOCABLY AGREES TO ARBITRATE ANY DISPUTE
IDENTIFIED ABOVE. ______ (EMPLOYEE'S INITIALS)
13. CAPTIONS. The captions contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
14. CONSTRUCTION. Whenever required by the context, the singular number
shall include the plural, and vice versa; the masculine gender shall include the
feminine and neuter genders; and the neuter gender shall include the masculine
and feminine genders. Any rule of construction to the effect that ambiguities
are to be resolved against the drafting party shall not be applied in the
construction or interpretation of this Agreement. Neither the drafting history
nor the negotiating history of this Agreement shall be used or referred to in
connection with the construction or interpretation of this Agreement. As used in
this Agreement, the words "include" and "including," and variations thereof,
shall not be deemed to be terms of limitation, and shall be deemed to be
followed by the words "without limitation." Except as otherwise indicated in
this Agreement, all references in this Agreement to "Sections" are intended to
refer to Sections of this Agreement.
15. SURVIVAL OF OBLIGATIONS. The expiration of the Noncompetition Period
shall not operate to relieve Employee of any obligation or liability arising
from any prior breach by Employee of any provision of this Agreement. Except as
specifically provided herein, the obligations of Employee under this Agreement
(including the obligations under Sections 4, 5, 6, 7, 8, 11, 18) shall survive
the expiration of the Noncompetition Period until the expiration of the Survival
Period, at which time all obligations of Employee to the Company shall
terminate.
16. OBLIGATIONS ABSOLUTE. Employee's obligations under this Agreement
are absolute and shall not be terminated or otherwise limited by virtue of any
breach (on the part of the Company or any other Indemnitee or any other Person)
of any provision of the Merger Agreement or any other agreement, or by virtue of
any failure to perform or other breach of any obligation of the Company or any
other Indemnitee or any other Person.
17. AMENDMENT. This Agreement may not be amended, modified, altered or
supplemented other than by means of a written instrument duly executed and
delivered on behalf of Employee and the Company (or any successor to the
Company).
18. SEVERABILITY. Each provision of this Agreement is separable from
every other provision of this Agreement, and each part of each provision of this
Agreement is separable from every other part of such provision. If any provision
of this Agreement or any part of any such provision is held under any
circumstances to be invalid or unenforceable in any jurisdiction, then (a) such
provision or part thereof shall, with respect to such circumstances and in such
jurisdiction, be deemed amended to conform to applicable laws so as to be valid
and enforceable to the fullest possible extent, (b) the invalidity or
unenforceability of such provision or part thereof under such circumstances and
in such jurisdiction shall not affect the validity or enforceability of such
provision or part thereof under any other circumstances or in any other
jurisdiction, and (c) the invalidity or unenforceability of such provision or
part thereof shall not
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affect the validity or enforceability of the remainder of such provision or the
validity or enforceability of any other provision of this Agreement.
19. DEFINED TERMS. For purposes of this Agreement:
(a) "Affiliate" means, with respect to any specified Person, any
other Person that, directly or indirectly, through one or more intermediaries,
controls, is controlled by or is under common control with such specified
Person.
(b) A Person shall be deemed to be engaged in "Competition" if such
Person or any of such Person's Affiliates is providing services of any nature to
any entity engaged in the online assessment business or an online assessment
project for any other online education business which competes with the Company.
(c) "Indemnitees" shall include: (i) the Company; (ii) Edutest;
(iii) the Merger Sub; (iv) each Person (other than Employee) who is or becomes
an Affiliate of the Company; and (v) the successors and assigns of each of the
Persons referred to in clauses "(i)", "(ii)", "(iii)" and "(iv)" of this
sentence.
(d) "Noncompetition Period" shall mean the period commencing on the
last day of Employee's employment with the Company ending twelve (12) months
following the last day of Employee's employment with the Company. The
Noncompetition Period shall lapse in the event the Closing does not occur.
(e) "Person" means any: (i) individual; (ii) corporation, general
partnership, limited partnership, limited liability partnership, trust, company
(including any limited liability company or joint stock company) or other
organization or entity; or (iii) governmental body or authority.
(f) "Restricted Territory" means the United States, Canada, Great
Britain, and Australia.
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IN WITNESS WHEREOF, Employee has duly executed and delivered this
Agreement as of the date first above written.
___________________________________________
EMPLOYEE
Address: __________________________________
Telephone No.: ( ) _____________
Facsimile: ( ) _________________
LIGHTSPAN, INC.
___________________________________________
[SIGNATORY]
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EXHIBIT J
THE LIGHTSPAN PARTNERSHIP, INC.
2000 EQUITY INCENTIVE PLAN
ORIGINALLY ADOPTED AS THE 1993 STOCK OPTION PLAN SEPTEMBER 24, 1993
ORIGINALLY APPROVED BY THE STOCKHOLDERS NOVEMBER 18, 1993
AMENDED AND RESTATED OCTOBER 28, 1999
APPROVED BY STOCKHOLDERS JANUARY 28, 1999
ADJUSTED FOR 1 FOR 2 REVERSE STOCK SPLIT JANUARY 31, 2000
TERMINATION DATE: OCTOBER 28, 2009
1. PURPOSES.
(a) AMENDMENT AND RESTATEMENT. The Plan amends and restates the The
Lightspan Partnership, Inc. 1993 Stock Option Plan adopted September 24, 1993
(the "PRIOR PLAN"). All outstanding options granted under the Prior Plan also
shall be amended.
(b) ELIGIBLE STOCK AWARD RECIPIENTS. The persons eligible to receive
Stock Awards are the Employees, Directors and Consultants of the Company and its
Affiliates.
(c) AVAILABLE STOCK AWARDS. The purpose of the Plan is to provide a
means by which eligible recipients of Stock Awards may be given an opportunity
to benefit from increases in value of the Common Stock through the granting of
the following Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock
Options, (iii) stock bonuses and (iv) rights to acquire restricted stock.
(d) GENERAL PURPOSE. The Company, by means of the Plan, seeks to retain
the services of the group of persons eligible to receive Stock Awards, to secure
and retain the services of new members of this group and to provide incentives
for such persons to exert maximum efforts for the success of the Company and its
Affiliates.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary corporation
of the Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a committee of one or more members of the Board
appointed by the Board in accordance with subsection 3(c).
(e) "COMMON STOCK" means the common stock of the Company.
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(f) "COMPANY" means The Lightspan Partnership, Inc., a Delaware
corporation.
(g) "CONSULTANT" means any person, including an advisor, (i) engaged by
the Company or an Affiliate to render consulting or advisory services and who is
compensated for such services or (ii) who is a member of the Board of Directors
of an Affiliate. However, the term "Consultant" shall not include either
Directors who are not compensated by the Company for their services as Directors
or Directors who are merely paid a director's fee by the Company for their
services as Directors.
(h) "CONTINUOUS SERVICE" means that the Participant's service with the
Company or an Affiliate, whether as an Employee, Director or Consultant, is not
interrupted or terminated. The Participant's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Participant renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Participant
renders such service, provided that there is no interruption or termination of
the Participant's Continuous Service. For example, a change in status from an
Employee of the Company to a Consultant of an Affiliate or a Director will not
constitute an interruption of Continuous Service. The Board or the chief
executive officer of the Company, in that party's sole discretion, may determine
whether Continuous Service shall be considered interrupted in the case of any
leave of absence approved by that party, including sick leave, military leave or
any other personal leave.
(i) "COVERED EMPLOYEE" means the chief executive officer and the four
(4) other highest compensated officers of the Company for whom total
compensation is required to be reported to stockholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.
(j) "DIRECTOR" means a member of the Board of Directors of the Company.
(k) "DISABILITY" means (1) for purposes of Incentive Stock Option
awards, the permanent and total disability of a person within the meaning of
Section 22(e)(3) of the Code, and (2) for purposes of all Stock Awards other
than Incentive Stock Option awards, the inability of a person, in the opinion of
a qualified physician acceptable to the Company, to perform the major duties of
that person's position with the Company or an Affiliate of the Company because
of the sickness or injury of the person.
(l) "EMPLOYEE" means any person employed by the Company or an Affiliate.
Mere service as a Director or payment of a director's fee by the Company or an
Affiliate shall not be sufficient to constitute "employment" by the Company or
an Affiliate.
(m) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(n) "FAIR MARKET VALUE" means, as of any date, the value of the Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange
or traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair
Market Value of a
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share of Common Stock shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or market (or
the exchange or market with the greatest volume of trading in the Common Stock)
on the last market trading day prior to the day of determination, as reported in
The Wall Street Journal or such other source as the Board deems reliable.
(ii) In the absence of such markets for the Common Stock, the Fair
Market Value shall be determined in good faith by the Board.
(o) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(p) "LISTING DATE" means the first date upon which any security of the
Company is listed (or approved for listing) upon notice of issuance on any
securities exchange or designated (or approved for designation) upon notice of
issuance as a national market security on an interdealer quotation system if
such securities exchange or interdealer quotation system has been certified in
accordance with the provisions of Section 25100(o) of the California Corporate
Securities Law of 1968.
(q) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or a subsidiary, does
not receive compensation (directly or indirectly) from the Company or its parent
or a subsidiary for services rendered as a consultant or in any capacity other
than as a Director (except for an amount as to which disclosure would not be
required under Item 404(a) of Regulation S-K promulgated pursuant to the
Securities Act ("Regulation S-K")), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404(a) of
Regulation S-K and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3.
(r) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an Incentive Stock Option.
(s) "OFFICER" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(t) "OPTION" means an Incentive Stock Option or a Nonstatutory Stock
Option granted pursuant to the Plan.
(u) "OPTION AGREEMENT" means a written agreement between the Company and
an Optionholder evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.
(v) "OPTIONHOLDER" means a person to whom an Option is granted pursuant
to the Plan or, if applicable, such other person who holds an outstanding
Option.
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(w) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
Treasury Regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(x) "PARTICIPANT" means a person to whom a Stock Award is granted
pursuant to the Plan or, if applicable, such other person who holds an
outstanding Stock Award.
(y) "PLAN" means this The Lightspan Partnership, Inc. 2000 Equity
Incentive Plan.
(z) "RULE 16B-3" means Rule 16b-3 promulgated under the Exchange Act or
any successor to Rule 16b-3, as in effect from time to time.
(aa) "SECURITIES ACT" means the Securities Act of 1933, as amended.
(bb) "STOCK AWARD" means any right granted under the Plan, including an
Option, a stock bonus and a right to acquire restricted stock.
(cc) "STOCK AWARD AGREEMENT" means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.
(dd) "TEN PERCENT STOCKHOLDER" means a person who owns (or is deemed to
own pursuant to Section 424(d) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or of any of its Affiliates.
3. ADMINISTRATION.
(a) ADMINISTRATION BY BOARD. The Board shall administer the Plan unless
and until the Board delegates administration to a Committee, as provided in
subsection 3(c).
(b) POWERS OF BOARD. The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:
(i) To determine from time to time which of the persons eligible
under the Plan shall be granted Stock Awards; when and how each Stock Award
shall be granted; what type or combination of types of Stock Award shall be
granted; the provisions of each Stock Award granted (which need not be
identical), including the time or times when a person shall be permitted to
receive Common Stock pursuant to a Stock Award; and the number of shares of
Common Stock with respect to which a Stock Award shall be granted to each such
person.
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(ii) To construe and interpret the Plan and Stock Awards granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.
(iii) To amend the Plan or a Stock Award as provided in Section 12.
(iv) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
(c) DELEGATION TO COMMITTEE.
(i) GENERAL. The Board may delegate administration of the Plan to a
Committee or Committees of one (1) or more members of the Board, and the term
"Committee" shall apply to any person or persons to whom such authority has been
delegated. If administration is delegated to a Committee, the Committee shall
have, in connection with the administration of the Plan, the powers theretofore
possessed by the Board, including the power to delegate to a subcommittee any of
the administrative powers the Committee is authorized to exercise (and
references in this Plan to the Board shall thereafter be to the Committee or
subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
(ii) COMMITTEE COMPOSITION WHEN COMMON STOCK IS PUBLICLY TRADED. At
such time as the Common Stock is publicly traded, in the discretion of the
Board, a Committee may consist solely of two or more Outside Directors, in
accordance with Section 162(m) of the Code, and/or solely of two or more
Non-Employee Directors, in accordance with Rule 16b-3. Within the scope of such
authority, the Board or the Committee may (1) delegate to a committee of one or
more members of the Board who are not Outside Directors the authority to grant
Stock Awards to eligible persons who are either (a) not then Covered Employees
and are not expected to be Covered Employees at the time of recognition of
income resulting from such Stock Award or (b) not persons with respect to whom
the Company wishes to comply with Section 162(m) of the Code and/or) (2)
delegate to a committee of one or more members of the Board who are not
Non-Employee Directors the authority to grant Stock Awards to eligible persons
who are not then subject to Section 16 of the Exchange Act.
(d) EFFECT OF BOARD'S DECISION. All determinations, interpretations and
constructions made by the Board in good faith shall not be subject to review by
any person and shall be final, binding and conclusive on all persons.
4. SHARES SUBJECT TO THE PLAN.
(a) SHARE RESERVE. Subject to the provisions of Section 11 relating to
adjustments upon changes in Common Stock, the Common Stock that may be issued
pursuant to Stock
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Awards shall not exceed in the aggregate of 6,140,272 shares of Common Stock,
plus an annual increase to be added on the day of each Annual Stockholders
Meeting beginning with the Annual Stockholders Meeting in 2001 equal to the
lesser of (i) 3% of the Company's outstanding shares on such date (rounded to
the nearest whole share and calculated on a fully diluted basis, that is
assuming the exercise of all outstanding stock options and warrants to purchase
common stock) or (ii) 20% of the Company's outstanding shares on the effective
date of the Plan. Notwithstanding the foregoing, the Board may designate a
smaller number of shares of Common Stock to be added to the share reserve as of
a particular Annual Stockholders Meeting.
(b) REVERSION OF SHARES TO THE SHARE RESERVE. If any Stock Award shall
for any reason expire or otherwise terminate, in whole or in part, without
having been exercised in full, the shares of Common Stock not acquired under
such Stock Award shall revert to and again become available for issuance under
the Plan.
(c) SOURCE OF SHARES. The shares of Common Stock subject to the Plan may
be unissued shares or reacquired shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) ELIGIBILITY FOR SPECIFIC STOCK AWARDS. Incentive Stock Options may
be granted only to Employees. Stock Awards other than Incentive Stock Options
may be granted to Employees, Directors and Consultants.
(b) TEN PERCENT STOCKHOLDERS.
(i) A Ten Percent Stockholder shall not be granted an Incentive
Stock Option unless the exercise price of such Option is at least one hundred
ten percent (110%) of the Fair Market Value of the Common Stock at the date of
grant and the Option is not exercisable after the expiration of five (5) years
from the date of grant.
(c) SECTION 162(m) LIMITATION. Subject to the provisions of Section 11
relating to adjustments upon changes in the shares of Common Stock, no Employee
shall be eligible to be granted Options covering more than One Million
(1,000,000) shares of Common Stock during any calendar year.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. All Options shall be separately
designated Incentive Stock Options or Nonstatutory Stock Options at the time of
grant, and, if certificates are issued, a separate certificate or certificates
will be issued for shares of Common Stock purchased on exercise of each type of
Option. The provisions of separate Options need not be identical, but each
Option shall include (through incorporation of provisions hereof by reference in
the Option or otherwise) the substance of each of the following provisions:
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(a) TERM. Subject to the provisions of subsection 5(b), no Incentive
Stock Option shall be exercisable after the expiration of ten (10) years from
the date it was granted.
(b) EXERCISE PRICE OF AN INCENTIVE STOCK OPTION. Subject to the
provisions of subsection 5(b) regarding Ten Percent Stockholders, the exercise
price of each Incentive Stock Option shall be not less than one hundred percent
(100%) of the Fair Market Value of the Common Stock subject to the Option on the
date the Option is granted. Notwithstanding the foregoing, an Incentive Stock
Option may be granted with an exercise price lower than that set forth in the
preceding sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of Section
424(a) of the Code.
(c) EXERCISE PRICE OF A NONSTATUTORY STOCK OPTION. The exercise price of
each Nonstatutory Stock Option shall be not less than eighty-five percent (85%)
of the Fair Market Value of the Common Stock subject to the Option on the date
the Option is granted. Notwithstanding the foregoing, a Nonstatutory Stock
Option may be granted with an exercise price lower than that set forth in the
preceding sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of Section
424(a) of the Code.
(d) CONSIDERATION. The purchase price of Common Stock acquired pursuant
to an Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised or (ii) at
the discretion of the Board at the time of the grant of the Option (or
subsequently in the case of a Nonstatutory Stock Option) (1) by delivery to the
Company of other Common Stock, (2) according to a deferred payment or other
similar arrangement with the Optionholder or (3) in any other form of legal
consideration that may be acceptable to the Board. Unless otherwise specifically
provided in the Option, the purchase price of Common Stock acquired pursuant to
an Option that is paid by delivery to the Company of other Common Stock
acquired, directly or indirectly from the Company, shall be paid only by shares
of the Common Stock of the Company that have been held for more than six (6)
months (or such longer or shorter period of time required to avoid a charge to
earnings for financial accounting purposes). At any time that the Company is
incorporated in Delaware, payment of the Common Stock's "par value," as defined
in the Delaware General Corporation Law, shall not be made by deferred payment.
In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.
(e) TRANSFERABILITY OF AN INCENTIVE STOCK OPTION. An Incentive Stock
Option shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Optionholder
only by the Optionholder. Notwithstanding the foregoing, the Optionholder may,
by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the
Optionholder, shall thereafter be entitled to exercise the Option.
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(f) TRANSFERABILITY OF A NONSTATUTORY STOCK OPTION. A Nonstatutory Stock
Option shall be transferable to the extent provided in the Option Agreement. If
the Nonstatutory Stock Option does not provide for transferability, then the
Nonstatutory Stock Option shall not be transferable except by will or by the
laws of descent and distribution and shall be exercisable during the lifetime of
the Optionholder only by the Optionholder. Notwithstanding the foregoing, the
Optionholder may, by delivering written notice to the Company, in a form
satisfactory to the Company, designate a third party who, in the event of the
death of the Optionholder, shall thereafter be entitled to exercise the Option.
(g) VESTING GENERALLY. The total number of shares of Common Stock
subject to an Option may, but need not, vest and therefore become exercisable in
periodic installments that may, but need not, be equal. The Option may be
subject to such other terms and conditions on the time or times when it may be
exercised (which may be based on performance or other criteria) as the Board may
deem appropriate. The vesting provisions of individual Options may vary. The
provisions of this subsection 6(g) are subject to any Option provisions
governing the minimum number of shares of Common Stock as to which an Option may
be exercised.
(h) TERMINATION OF CONTINUOUS SERVICE. In the event an Optionholder's
Continuous Service terminates (other than upon the Optionholder's death or
Disability), the Optionholder may exercise his or her Option (to the extent that
the Optionholder was entitled to exercise such Option as of the date of
termination) but only within such period of time ending on the earlier of (i)
the date three (3) months following the termination of the Optionholder's
Continuous Service (or such longer or shorter period specified in the Option
Agreement), or (ii) the expiration of the term of the Option as set forth in the
Option Agreement. If, after termination, the Optionholder does not exercise his
or her Option within the time specified in the Option Agreement, the Option
shall terminate.
(i) EXTENSION OF TERMINATION DATE. An Optionholder's Option Agreement
may also provide that if the exercise of the Option following the termination of
the Optionholder's Continuous Service (other than upon the Optionholder's death
or Disability) would be prohibited at any time solely because the issuance of
shares of Common Stock would violate the registration requirements under the
Securities Act, then the Option shall terminate on the earlier of (i) the
expiration of the term of the Option set forth in subsection 6(a) or (ii) the
expiration of a period of three (3) months after the termination of the
Optionholder's Continuous Service during which the exercise of the Option would
not be in violation of such registration requirements.
(j) DISABILITY OF OPTIONHOLDER. In the event that an Optionholder's
Continuous Service terminates as a result of the Optionholder's Disability, the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise such Option as of the date of termination), but only
within such period of time ending on the earlier of (i) the date twelve (12)
months following such termination (or such longer or shorter period specified in
the Option Agreement) or (ii) the expiration of the term of the Option as set
forth in the Option Agreement. If, after termination, the Optionholder does not
exercise his or her Option within the time specified herein, the Option shall
terminate.
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(k) DEATH OF OPTIONHOLDER.
(i) For any Option granted on or after the effective date of the
Plan, in the event (i) an Optionholder's Continuous Service terminates as a
result of the Optionholder's death or (ii) the Optionholder dies within the
period (if any) specified in the Option Agreement after the termination of the
Optionholder's Continuous Service for a reason other than death, then the Option
may be exercised (to the extent the Optionholder was entitled to exercise such
Option as of the date of death) by the Optionholder's estate, by a person who
acquired the right to exercise the Option by bequest or inheritance or by a
person designated to exercise the option upon the Optionholder's death pursuant
to subsection 6(e) or 6(f), but only within the period ending on the earlier of
(1) the date eighteen (18) months following the date of death (or such longer or
shorter period specified in the Option Agreement) or (2) the expiration of the
term of such Option as set forth in the Option Agreement. If, after death, the
Option is not exercised within the time specified herein, the Option shall
terminate.
(ii) For any Option granted prior to the effective date of the
Plan, in the event:
(1) an Optionholder's Continuous Service terminates as a
result of the Optionholder's death, the Option may be exercised, at any time
within twelve (12) months following the date of death (but in no event later
than the date of expiration of the term of such Option as set forth in the
Option Agreement, and regardless of any shorter or longer period set forth in
the Option Agreement) by the Optionholder's estate or by a person who acquired
the rights to exercise the Option by bequest or inheritance or by a person
designated to exercise the option upon the Optionholder's death pursuant to
subsection 6(e) or 6(f), but only to the extent of the right to exercise that
would have accrued had the Optionee continued living and remained in Continuous
Service six months after the date of death.
(2) an Optionholder dies within three (3) months (or the
shorter period (if any) specified in the Option Agreement) after the termination
of the Optionholder's Continuous Service for a reason other than death, then the
Option may be exercised (to the extent the Optionholder was entitled to exercise
such Option as of the date of death) by the Optionholder's estate, by a person
who acquired the right to exercise the Option by bequest or inheritance or by a
person designated to exercise the option upon the Optionholder's death pursuant
to subsection 6(e) or 6(f), but only within the period ending on the earlier of
(1) the date twelve (12) months following the date of death (regardless of any
longer or shorter period specified in the Option Agreement) or (2) the
expiration of the term of such Option as set forth in the Option Agreement. If,
after death, the Option is not exercised within the time specified herein, the
Option shall terminate.
(l) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionholder may elect at any time before the Optionholder's
Continuous Service terminates to exercise the Option as to any part or all of
the shares of Common Stock subject to the Option prior to the full vesting of
the Option. Any unvested shares of Common Stock so purchased may be subject to a
repurchase option in favor of the Company or to any other restriction the Board
determines to be appropriate.
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(m) RE-LOAD OPTIONS.
(i) Without in any way limiting the authority of the Board to make
or not to make grants of Options hereunder, the Board shall have the authority
(but not an obligation) to include as part of any Option Agreement a provision
entitling the Optionholder to a further Option (a "Re-Load Option") in the event
the Optionholder exercises the Option evidenced by the Option Agreement, in
whole or in part, by surrendering other shares of Common Stock in accordance
with this Plan and the terms and conditions of the Option Agreement. Unless
otherwise specifically provided in the Option, the Optionholder shall not
surrender shares of Common Stock acquired, directly or indirectly from the
Company, unless such shares have been held for more than six (6) months (or such
longer or shorter period of time required to avoid a charge to earnings for
financial accounting purposes).
(ii) Any such Re-Load Option shall (1) provide for a number of
shares of Common Stock equal to the number of shares of Common Stock surrendered
as part or all of the exercise price of such Option; (2) have an expiration date
which is the same as the expiration date of the Option the exercise of which
gave rise to such Re-Load Option; and (3) have an exercise price which is equal
to one hundred percent (100%) of the Fair Market Value of the Common Stock
subject to the Re-Load Option on the date of exercise of the original Option.
Notwithstanding the foregoing, a Re-Load Option shall be subject to the same
exercise price and term provisions heretofore described for Options under the
Plan.
(iii) Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board may designate at the time of the grant
of the original Option; provided, however, that the designation of any Re-Load
Option as an Incentive Stock Option shall be subject to the one hundred thousand
dollar ($100,000) annual limitation on the exercisability of Incentive Stock
Options described in subsection 10(d) and in Section 422(d) of the Code. There
shall be no Re-Load Options on a Re-Load Option. Any such Re-Load Option shall
be subject to the availability of sufficient shares of Common Stock under
subsection 4(a) and the "Section 162(m) Limitation" on the grants of Options
under subsection 5(c) and shall be subject to such other terms and conditions as
the Board may determine which are not inconsistent with the express provisions
of the Plan regarding the terms of Options.
7. PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.
(a) STOCK BONUS AWARDS. Each stock bonus agreement shall be in such form
and shall contain such terms and conditions as the Board shall deem appropriate.
The terms and conditions of stock bonus agreements may change from time to time,
and the terms and conditions of separate stock bonus agreements need not be
identical, but each stock bonus agreement shall include (through incorporation
of provisions hereof by reference in the agreement or otherwise) the substance
of each of the following provisions:
(i) CONSIDERATION. A stock bonus may be awarded in consideration
for past services actually rendered to the Company or an Affiliate for its
benefit.
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(ii) VESTING. Shares of Common Stock awarded under the stock bonus
agreement may, but need not, be subject to a share repurchase option in favor of
the Company in accordance with a vesting schedule to be determined by the Board.
(iii) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. In the event
a Participant's Continuous Service terminates, the Company may reacquire any or
all of the shares of Common Stock held by the Participant which have not vested
as of the date of termination under the terms of the stock bonus agreement.
(iv) TRANSFERABILITY. Rights to acquire shares of Common Stock
under the stock bonus agreement shall be transferable by the Participant only
upon such terms and conditions as are set forth in the stock bonus agreement, as
the Board shall determine in its discretion, so long as Common Stock awarded
under the stock bonus agreement remains subject to the terms of the stock bonus
agreement.
(b) RESTRICTED STOCK AWARDS. Each restricted stock purchase agreement
shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate. The terms and conditions of the restricted stock
purchase agreements may change from time to time, and the terms and conditions
of separate restricted stock purchase agreements need not be identical, but each
restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions:
(i) PURCHASE PRICE. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board shall determine and
designate in such restricted stock purchase agreement. The purchase price shall
not be less than eighty-five percent (85%) of the Common Stock's Fair Market
Value on the date such award is made or at the time the purchase is consummated.
(ii) CONSIDERATION. The purchase price of Common Stock acquired
pursuant to the restricted stock purchase agreement shall be paid either: (i) in
cash at the time of purchase; (ii) at the discretion of the Board, according to
a deferred payment or other similar arrangement with the Participant; or (iii)
in any other form of legal consideration that may be acceptable to the Board in
its discretion; provided, however, that at any time that the Company is
incorporated in Delaware, then payment of the Common Stock's "par value," as
defined in the Delaware General Corporation Law, shall not be made by deferred
payment.
(iii) VESTING. Shares of Common Stock acquired under the restricted
stock purchase agreement may, but need not, be subject to a share repurchase
option in favor of the Company in accordance with a vesting schedule to be
determined by the Board.
(iv) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. In the event
a Participant's Continuous Service terminates, the Company may repurchase or
otherwise reacquire any or all of the shares of Common Stock held by the
Participant which have not vested as of the date of termination under the terms
of the restricted stock purchase agreement.
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(v) TRANSFERABILITY. Rights to acquire shares of Common Stock under
the restricted stock purchase agreement shall be transferable by the Participant
only upon such terms and conditions as are set forth in the restricted stock
purchase agreement, as the Board shall determine in its discretion, so long as
Common Stock awarded under the restricted stock purchase agreement remains
subject to the terms of the restricted stock purchase agreement.
8. COVENANTS OF THE COMPANY.
(a) AVAILABILITY OF SHARES. During the terms of the Stock Awards, the
Company shall keep available at all times the number of shares of Common Stock
required to satisfy such Stock Awards.
(b) SECURITIES LAW COMPLIANCE. The Company shall seek to obtain from
each regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to grant Stock Awards and to issue and sell shares
of Common Stock upon exercise of the Stock Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any
such Stock Award. If, after reasonable efforts, the Company is unable to obtain
from any such regulatory commission or agency the authority which counsel for
the Company deems necessary for the lawful issuance and sale of Common Stock
under the Plan, the Company shall be relieved from any liability for failure to
issue and sell Common Stock upon exercise of such Stock Awards unless and until
such authority is obtained.
9. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of Common Stock pursuant to Stock Awards shall
constitute general funds of the Company.
10. MISCELLANEOUS.
(a) ACCELERATION OF EXERCISABILITY AND VESTING. The Board shall have the
power to accelerate the time at which a Stock Award may first be exercised or
the time during which a Stock Award or any part thereof will vest in accordance
with the Plan, notwithstanding the provisions in the Stock Award stating the
time at which it may first be exercised or the time during which it will vest.
(b) STOCKHOLDER RIGHTS. No Participant shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to, any shares of
Common Stock subject to such Stock Award unless and until such Participant has
satisfied all requirements for exercise of the Stock Award pursuant to its
terms.
(c) NO EMPLOYMENT OR OTHER SERVICE RIGHTS. Nothing in the Plan or any
instrument executed or Stock Award granted pursuant thereto shall confer upon
any Participant any right to continue to serve the Company or an Affiliate in
the capacity in effect at the time the Stock Award was granted or shall affect
the right of the Company or an Affiliate to terminate (i) the employment of an
Employee with or without notice and with or without cause, (ii) the service of
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a Consultant pursuant to the terms of such Consultant's agreement with the
Company or an Affiliate or (iii) the service of a Director pursuant to the
Bylaws of the Company or an Affiliate, and any applicable provisions of the
corporate law of the state in which the Company or the Affiliate is
incorporated, as the case may be.
(d) INCENTIVE STOCK OPTION $100,000 LIMITATION. To the extent that the
aggregate Fair Market Value (determined at the time of grant) of Common Stock
with respect to which Incentive Stock Options are exercisable for the first time
by any Optionholder during any calendar year (under all plans of the Company and
its Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or
portions thereof which exceed such limit (according to the order in which they
were granted) shall be treated as Nonstatutory Stock Options.
(e) INVESTMENT ASSURANCES. The Company may require a Participant, as a
condition of exercising or acquiring Common Stock under any Stock Award, (i) to
give written assurances satisfactory to the Company as to the Participant's
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and (ii) to
give written assurances satisfactory to the Company stating that the Participant
is acquiring Common Stock subject to the Stock Award for the Participant's own
account and not with any present intention of selling or otherwise distributing
the Common Stock. The foregoing requirements, and any assurances given pursuant
to such requirements, shall be inoperative if (1) the issuance of the shares of
Common Stock upon the exercise or acquisition of Common Stock under the Stock
Award has been registered under a then currently effective registration
statement under the Securities Act or (2) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws. The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the Common Stock.
(f) WITHHOLDING OBLIGATIONS. To the extent provided by the terms of a
Stock Award Agreement, the Participant may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of Common
Stock under a Stock Award by any of the following means (in addition to the
Company's right to withhold from any compensation paid to the Participant by the
Company) or by a combination of such means: (i) tendering a cash payment; (ii)
authorizing the Company to withhold shares of Common Stock from the shares of
Common Stock otherwise issuable to the Participant as a result of the exercise
or acquisition of Common Stock under the Stock Award, provided, however, that no
shares of Common Stock are withheld with a value exceeding the minimum amount of
tax required to be withheld by law; or (iii) delivering to the Company owned and
unencumbered shares of Common Stock.
11. ADJUSTMENTS UPON CHANGES IN STOCK.
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(a) CAPITALIZATION ADJUSTMENTS. If any change is made in the Common
Stock subject to the Plan, or subject to any Stock Award, without the receipt of
consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan will be appropriately
adjusted in the class(es) and maximum number of securities subject to the Plan
pursuant to subsection 4(a) and the maximum number of securities subject to
award to any person pursuant to subsection 5(c), and the outstanding Stock
Awards will be appropriately adjusted in the class(es) and number of securities
and price per share of Common Stock subject to such outstanding Stock Awards.
The Board shall make such adjustments, and its determination shall be final,
binding and conclusive. (The conversion of any convertible securities of the
Company shall not be treated as a transaction "without receipt of consideration"
by the Company.)
(b) CHANGE IN CONTROL--DISSOLUTION OR LIQUIDATION. In the event of a
dissolution or liquidation of the Company, then all outstanding Stock Awards
shall terminate immediately prior to such event.
(c) CHANGE IN CONTROL--ASSET SALE, MERGER, CONSOLIDATION OR REVERSE
MERGER. In the event of (i) a sale, lease or other disposition of all or
substantially all of the assets of the Company, (ii) a merger or consolidation
in which the Company is not the surviving corporation or (iii) a reverse merger
in which the Company is the surviving corporation but the shares of Common Stock
outstanding immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise, then any surviving corporation or acquiring corporation shall assume
or continue any Stock Awards outstanding under the Plan or shall substitute
similar stock awards (including an award to acquire the same consideration paid
to the stockholders in the transaction described in this subsection 11(c)) for
those outstanding under the Plan. In the event any surviving corporation or
acquiring corporation refuses to assume or continue such Stock Awards or to
substitute similar stock awards for those outstanding under the Plan, then with
respect to Stock Awards held by Participants whose Continuous Service has not
terminated prior to such event, the vesting of such Stock Awards (and, if
applicable, the time during which such Stock Awards may be exercised) shall be
accelerated in full, and such Stock Awards shall terminate if not exercised (if
applicable) at or prior to such event. With respect to any other Stock Awards
outstanding under the Plan, such Stock Awards shall terminate if not exercised
(if applicable) prior to such event.
(d) CHANGE IN CONTROL--SECURITIES ACQUISITION. In the event of an
acquisition by any person, entity or group within the meaning of Section 13(d)
or 14(d) of the Exchange Act, or any comparable successor provisions (excluding
any employee benefit plan, or related trust, sponsored or maintained by the
Company or an Affiliate) of the beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act, or comparable successor rule) of
securities of the Company representing at least fifty percent (50%) of the
combined voting power entitled to vote in the election of Directors, then any
surviving corporation or acquiring corporation shall assume or continue any
Stock Awards outstanding under the Plan or shall substitute similar stock awards
for those outstanding under the Plan. In the event any surviving
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corporation or acquiring corporation refuses to assume or continue such Stock
Awards or to substitute similar stock awards for those outstanding under the
Plan, then with respect to Stock Awards outstanding, the vesting of such Stock
Awards (and, if applicable, the time during which such Stock Awards may be
exercised) shall be accelerated in full.
12. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(a) AMENDMENT OF PLAN. The Board at any time, and from time to time, may
amend the Plan. However, except as provided in Section 11 relating to
adjustments upon changes in Common Stock, no amendment shall be effective unless
approved by the stockholders of the Company to the extent stockholder approval
is necessary to satisfy the requirements of Section 422 of the Code, Rule 16b-3
or any Nasdaq or securities exchange listing requirements.
(b) STOCKHOLDER APPROVAL. The Board may, in its sole discretion, submit
any other amendment to the Plan for stockholder approval, including, but not
limited to, amendments to the Plan intended to satisfy the requirements of
Section 162(m) of the Code and the regulations thereunder regarding the
exclusion of performance-based compensation from the limit on corporate
deductibility of compensation paid to certain executive officers.
(c) CONTEMPLATED AMENDMENTS. It is expressly contemplated that the Board
may amend the Plan in any respect the Board deems necessary or advisable to
provide eligible Employees with the maximum benefits provided or to be provided
under the provisions of the Code and the regulations promulgated thereunder
relating to Incentive Stock Options and/or to bring the Plan and/or Incentive
Stock Options granted under it into compliance therewith.
(d) NO IMPAIRMENT OF RIGHTS. Rights under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the Participant and (ii) the Participant
consents in writing.
(e) AMENDMENT OF STOCK AWARDS. The Board at any time, and from time to
time, may amend the terms of any one or more Stock Awards; provided, however,
that the rights under any Stock Award shall not be impaired by any such
amendment unless (i) the Company requests the consent of the Participant and
(ii) the Participant consents in writing.
13. TERMINATION OR SUSPENSION OF THE PLAN.
(a) PLAN TERM. The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on the day before the tenth
(10th) anniversary of the date the Plan is adopted by the Board or approved by
the stockholders of the Company, whichever is earlier. No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is terminated.
(b) NO IMPAIRMENT OF RIGHTS. Suspension or termination of the Plan shall
not impair rights and obligations under any Stock Award granted while the Plan
is in effect except with the written consent of the Participant.
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14. EFFECTIVE DATE OF PLAN.
The Plan shall become effective on the Listing Date, but no Stock Award
shall be exercised (or, in the case of a stock bonus, shall be granted) unless
and until the Plan has been approved by the stockholders of the Company, which
approval shall be within twelve (12) months before or after the date the Plan is
adopted by the Board.
15. CHOICE OF LAW.
The law of the State of Delaware shall govern all questions concerning
the construction, validity and interpretation of this Plan, without regard to
such state's conflict of laws rules.
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EXHIBIT K
XXXXXXX.XXX
EMPLOYEE EARN-OUTS
EMPLOYEE DEPT. TITLE $ VALUE
-------- ----- ------ -------
Xxxxxxxx, Xxxxxxx IT Internet Developer 3,000 10,067
Xxxxx, Xxxxx SM Marketing Associate 1,000 3,356
Burn, Xxxx XX Editor/Proofreader 1,000 3,356
Xxxxxxxx, Xxxxx PD Content Editor 500 1,678
Xxxx, Xxxx IT Internet Developer 5,000 16,779
xxXxxxx, Xxxxxxx SM Business Dev. Manager 5,000 16,779
Xxxxxxxxx, Xxxxxxxx SM Online Sales Specialist 1,500 5,034
Xxxxxxxxx, Xxxxxxxx GA Accountant 2,000 6,711
Xxxx, Stephen SM Marketing Associate 2,000 6,711
Xxxxxx, Xxxxxxx IT HTML Programmer 2,000 6,711
Xxxxxxxxx, Xxxxx GA President/CEO 30,000 100,671
Xxxxxxxxx, Xxxxxxx QA QA Technical Analyst 1,000 3,356
Xxx, Xxxxxx SM VP Sales & Marketing 15,000 50,336
Xxxxxxxxxx, Xxxx Xxxx PD Math Specialist 1,500 5,034
Xxxxx-Xxxxxxxx, Xxxxxx GA Executive Assistant 1,500 5,034
Xxxx, Xxxxx Xxx PD Content Dev. Manager 5,000 16,779
Xxxxxx, Xxx IT Director of Internet Systems 15,000 50,336
Xxxxxx, Xxxxxxx QA QA Manager 10,000 33,557
Xxxxxx, Xxxxxx GA Research Analyst 3,000 10,067
Xxxxxxx, Xxxxxxxxxxx IT Systems Administrator 3,000 10,067
Xxxx, Xxxxxxx IT Internet Programmer 5,000 16,779
Xxxxx-Xxxx, Xxxxx SM Marketing Research Analyst 2,000 6,711
Xxxxx, Xxxxxxx CT Certified Lead Trainer 2,000 6,711
Xxxxxxx, Xxxxx AM AM & Tech. Asst. Manager 5,000 16,779
Xxxxx, Xxxxx SM Xxxx'tng Communication Spec. 2,000 6,711
Xxxxx, Xxxxxx PD Admin. Assistant 1,000 3,356
Xxxxxxxx, Xxxxxx GA VP Finance/CFO 20,000 67,114
Xxxxxx, Xxxxxx GA Receptionist 1,000 3,356
Xxxxxx, Xxxxxxxx AM Account Manager 3,000 10,067
Total 149,000 500,000
* Shares of any employee who becomes ineligible for stock award due to
termination of employment prior to six-month anniversary of Closing shall be
divided pro-rata between remaining eligible employees on this list.
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EXHIBIT L
ACKNOWLEDGEMENT AND RELEASE
THIS ACKNOWLEDGMENT AND RELEASE ("RELEASE") is being executed and
delivered as of June ___, 2000, by ___________________________ ("RELEASOR") in
favor of, and for the benefit of, EDUCATOR ACQUISITION, INC., a Delaware
corporation and a wholly-owned subsidiary of parent (the "CORPORATION"),
LIGHTSPAN, INC., a Delaware corporation ("PARENT"), and the other Releasees (as
defined in Section 2).
RECITALS
A. Contemporaneously with the execution and delivery of this Release,
pursuant to an Agreement and Plan of Merger and Reorganization, dated as of May
24, 2000, among the Corporation, Parent and Edutest, Inc., a Virginia
corporation ("EDUTEST") (the "MERGER AGREEMENT"), Edutest is merging into the
Corporation (the merger of Edutest into the Corporation being referred to in
this Release as the "MERGER"). As a result of the Merger, Edutest's shareholders
are receiving shares of common stock of Parent in exchange for their shares of
common stock of Edutest.
B. Parent has required, as a condition to consummating the Merger and
the other transactions contemplated by the Merger Agreement, that Releasor
execute and deliver this Release.
AGREEMENT
In order to induce Parent to consummate the transactions contemplated by
the Merger Agreement, and for other valuable consideration (the receipt and
sufficiency of which are hereby acknowledged by Releasor), Releasor hereby
covenants and agrees as follows:
1. RELEASE. Releasor, for himself and for each of his Associated Parties
(as defined in Section 2), hereby generally, irrevocably, unconditionally and
completely releases and forever discharges each of the Releasees (as defined in
Section 2) from, and hereby irrevocably, unconditionally and completely waives
and relinquishes, each of the Released Claims (as defined in Section 2).
2. DEFINITIONS.
(a) The term "Associated Parties," when used herein with respect to
Releasor, shall mean and include: (i) Releasor's successors, executors,
administrators, heirs and estate; (ii) Releasor's future assigns, agents and
representatives.
(b) The term "Releasees" shall mean and include: (i) Parent; (ii)
the Corporation; (iii) each of the direct and indirect subsidiaries of Parent;
(iv) each other affiliate of Parent; and (v) the successors and past, present
and future assigns, directors, officers, employees, agents, attorneys and
representatives of the respective entities identified or otherwise referred to
in clauses "(i)" through "(iv)" of this sentence, other than Releasor.
1.
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(c) The term "Claims" shall mean and include, with respect to
Edutest, all past, present and future disputes, claims, controversies, demands,
rights, obligations, liabilities, actions and causes of action of every kind and
nature, including: (i) any unknown, unsuspected or undisclosed claim; (ii) any
claim or right that may be asserted or exercised by Releasor in his capacity as
a shareholder, director, officer or employee of Edutest or in any other
capacity; (iii) any claim, right or cause of action based upon any breach of any
express, implied, oral or written contract or agreement; (iv) any tort claim;
and (v) any indemnification claim.
(d) The term "Released Claims" shall mean and include each and
every Claim that (i) Releasor or any Associated Party of Releasor may have had
in the past, may now have or may have in the future against any of the
Releasees, and (ii) has arisen or arises out of, or relates to, any
circumstance, agreement, activity, action, omission, event or matter occurring
or existing on or prior to the date of this Release; provided, however, that the
Released Claims shall not include:
(i) Releasor's rights, if any, against Parent under the
Merger Agreement or any related documents or agreements executed in connection
therewith;
(ii) Releasor's rights against the Corporation under any
other agreement being entered into by Releasor and the Corporation
contemporaneously with the execution and delivery of this Release; or
(iii) any right of indemnification Releasor may have against
the Corporation under the Corporation's articles of incorporation in his
capacity as an officer and director of the Corporation, to the extent such right
of indemnification arises as a result of any lawsuit that (A) is brought against
Releasor after the date of this Release by a party who is not a current or
former shareholder of the Corporation and who is not affiliated with or related
to any current or former shareholder of the Corporation, (B) is not brought in
the name of the Corporation, and (C) is based on an allegedly wrongful action
taken by Releasor prior to the date of this Release in his capacity as a
director and officer Edutest.
3. REPRESENTATIONS AND WARRANTIES. Releasor represents and warrants
that:
(a) Releasor has not assigned, transferred, conveyed or otherwise
disposed of any Claim against any of the Releasees, or any direct or indirect
interest in any such Claim, in whole or in part;
(b) to the best of Releasor's knowledge, as of the date of this
Release, no other person or entity has any interest in any of the Released
Claims;
(c) Releasor is not aware of any claim or potential claim by any
person or entity against Releasor, and is not aware of any other facts or
circumstances, that could give rise to a right of indemnification in favor of
Releasor against the Corporation;
(d) to the best of Releasor's knowledge, no Associated Party of
Releasor has or had any Claim against any of the Releasees;
2.
129
(e) to the best of Releasor's knowledge, no Associated Party of
Releasor will in the future have any Claim against any Releasee that arises from
or relates to any circumstance, agreement, activity, action, omission, event or
matter occurring or existing on or prior to the date of this Release;
(f) this Release has been duly and validly executed and delivered
by Releasor;
(g) this Release is a valid and binding obligation of Releasor, and
is enforceable against Releasor and each of his Associated Parties in accordance
with its terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, arrangement, moratorium or other similar laws affecting
creditors' rights, and subject to general equity principles and to limitations
on availability of equitable relief, including specific performance or by
Releasor's ability to indemnify, release or limit the liability of other persons
for their respective actions;
(h) there is no action, suit, proceeding, dispute, litigation,
claim, complaint or investigation by or before any court, tribunal, governmental
body, governmental agency or arbitrator pending or, to the best of the knowledge
of Releasor, threatened against Releasor or any of Releasor's Associated Parties
that challenges or would challenge the execution and delivery of this Release or
the taking of any of the actions required to be taken by Releasor under this
Release;
(i) neither the execution and delivery of this Release nor the
performance hereof will: (i) result in any violation or breach of any agreement
or other instrument to which Releasor or, to the best of Releasor's knowledge,
any of Releasor's Associated Parties is a party or by which Releasor or any of
Releasor's Associated Parties is bound; or (ii) result in a violation or any
law, rule, regulation, treaty, ruling, directive, order, arbitration award,
judgment or decree to which Releasor or, to the best of Releasor's knowledge,
any of Releasor's Associated Parties is subject; and
(j) no authorization, instruction, consent or approval of any
person or entity is required to be obtained by Releasor or, to the best of
Releasor's knowledge, any of Releasor's Associated Parties in connection with
the execution and delivery of this Release or the performance hereof.
4. INDEMNIFICATION. Without in any way limiting any of the rights or
remedies otherwise available to any Releasee, Releasor shall hold harmless and
indemnify each Releasee from and against, and shall compensate and reimburse
each Releasee for, any loss, damage, injury, decline in value, lost opportunity,
liability, exposure, claim, demand, settlement, judgment, award, fine, penalty,
tax, fee (including reasonable attorneys' fees) charge, cost (including costs of
investigation) or expense of any nature which are suffered or incurred at any
time by any Releasee, or to which any Releasee otherwise becomes subject at any
time, and that arises out of or by virtue of, or relates to: (a) any failure on
the part of Releasor to observe, perform or abide by, or any other breach of,
any restriction, covenant, obligation, representation, warranty or other
provision contained herein; (b) the assertion or purported assertion of any of
3.
130
the Released Claims by Releasor or any of Releasor's Associated Parties; or (c)
any inaccuracy in or breach of any representation or warranty set forth in this
Release.
5. NOTICES. Any notice or other communication required or permitted to
be delivered to Releasor, the Corporation or Parent under this Release shall be
in writing and shall be deemed properly delivered, given and received when
delivered (by hand, by registered mail, by courier or express delivery service
or by facsimile) to the address or facsimile telephone number set forth beneath
the name of such party below (or to such other address or facsimile telephone
number as such party shall have specified in a written notice given to the other
party hereto):
if to the Corporation: Educator Acquisition, Inc.
00000 Xxxxxx Xxxxx Xxxxx
Xxx Xxxxx, XX 00000
Attention: Xxxxxxx Xxxxxx
Facsimile: (000) 000-0000
if to Parent: Lightspan, Inc.
00000 Xxxxxx Xxxxx Xxxxx
Xxx Xxxxx, XX 00000
Attention: Xxxxxxx Xxxxxx
Facsimile: (000) 000-0000
if to Releasor: To the name and address set forth below on the
signature page hereto
6. SEVERABILITY. If any provision of this Release or any part of any
such provision is held under any circumstances to be invalid or unenforceable in
any jurisdiction, then (a) such provision or part thereof shall, with respect to
such circumstances and in such jurisdiction, be deemed amended to conform to
applicable laws so as to be valid and enforceable to the fullest possible
extent, (b) the invalidity or unenforceability of such provision or part thereof
under such circumstances and in such jurisdiction shall not affect the validity
or enforceability of such provision or part thereof under any other
circumstances or in any other jurisdiction, and (c) the invalidity or
unenforceability of such provision or part thereof shall not affect the validity
or enforceability of the remainder of such provision or the validity or
enforceability of any other provision of this Release. Each provision of this
Release is separable from every other provision of this Release, and each part
of each provision of this Release is separable from every other part of such
provision.
7. GOVERNING LAW; WAIVER OF SECTION 1542 AND RELATED STATUTES. This
Release shall be construed in accordance with, and governed in all respects by,
the laws of the State of Virginia (without giving effect to principles of
conflicts of laws). Notwithstanding the foregoing, and to the extent California
law may apply, Releasor expressly waives and relinquishes all rights and
benefits that may be afforded by Section 1542 of the Civil Code of the State of
California and any similar statute applicable to this Release (including,
without limitation, any applicable statute, rule or regulation of the
Commonwealth of Virginia), and does
4.
131
so understanding and acknowledging the significance of this specific waiver of
such statute(s). Section 1542 of the Civil Code of the State of California
states as follows:
A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing
the release, which if known by him must have materially affected
his settlement with the debtor.
8. WAIVER. No failure on the part of any Releasee to exercise any power,
right, privilege or remedy under this Release, and no delay on the part of any
Releasee in exercising any power, right, privilege or remedy under this Release,
shall operate as a waiver of such power, right, privilege or remedy; and no
single or partial exercise of any such power, right, privilege or remedy shall
preclude any other or further exercise thereof or of any other power, right,
privilege or remedy. No Releasee shall be deemed to have waived any claim
arising out of this Release, or any power, right, privilege or remedy under this
Release, unless the waiver of such claim, power, right, privilege or remedy is
expressly set forth in a written instrument duly executed and delivered on
behalf of such party; and any such waiver shall not be applicable or have any
effect except in the specific instance in which it is given.
9. CAPTIONS. The captions contained in this Release are for convenience
of reference only, shall not be deemed to be a part of this Release and shall
not be referred to in connection with the construction or interpretation of this
Release.
10. FURTHER ASSURANCES. Releasor shall execute and/or cause to be
delivered to the Corporation and Parent such instruments and other documents and
shall take such other actions as Corporation or Parent may reasonably request to
effectuate the intent and purposes of this Release.
11. ENTIRE AGREEMENT. This Release sets forth the entire understanding
of the parties relating to the subject matter hereof and supersedes all prior
agreements and understandings between the parties relating to the subject matter
hereof.
12. AMENDMENTS. This Release may not be amended, modified, altered, or
supplemented other than by means of a written instrument duly executed and
delivered on behalf of Releasor, Parent and the Corporation.
13. BINDING NATURE. This Release will be binding upon Releasor and
Releasor's Associated Parties and will inure to the benefit of each of the
Releasees.
14. ATTORNEYS' FEES AND EXPENSES. If any legal action or other legal
proceeding relating to the enforcement of any provision of this Release is
brought against Releasor, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
15. CONSTRUCTION.
(a) For purposes of this Release, whenever the context requires:
the singular number shall include the plural, and vice versa.
5.
132
(b) Releasor agrees that any rule of construction to the effect
that ambiguities are to be resolved against the drafting party shall not be
applied in the construction or interpretation of this Release.
(c) As used in this Release, the words "include" and "including,"
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation."
(d) Except as otherwise indicated, all references in this Release
to "Sections" are intended to refer to Sections of this Release.
Releasor has executed this Release as of the date first above written.
-----------------------------------------
[Releasor]
Name:
------------------------------------
Address:
---------------------------------
---------------------------------
---------------------------------
6.
133
EXHIBIT M
LIGHTSPAN, INC.
INVESTMENT REPRESENTATION LETTER
[INDIVIDUALS]
In connection with a proposed offer to the undersigned of securities of
LIGHTSPAN, INC., a Delaware corporation (the "Company"), the undersigned makes
the following representations on which the Company shall be entitled to rely:
1. The undersigned makes the following representations regarding his or
her net worth and/or income, AND HAS CHECKED THE APPLICABLE REPRESENTATION:
( ) a. The undersigned has a net worth, either individually or
upon a joint basis with the undersigned's spouse, of at
least $1,000,000.
( ) b. The undersigned has had an individual income in excess of
$200,000 for each of the two most recent years, or joint
income with the undersigned's spouse in excess of $300,000
in each of those years, and has a reasonable expectation
of reaching the same income level in the current year.
( ) c. The undersigned is a director or executive officer of the
Company.
( ) d. The undersigned cannot make any of the representations set
forth above.
In addition, the undersigned represents as follows:
2. In the event that the undersigned cannot make any of the
representations set forth in paragraphs 1(a), 1(b), or 1(c) above, then the
undersigned, by initialing the space provided at the end of this sentence,
hereby appoints Xxxxxxxx, Xxxxxxx & Company, L.L.C. as the undersigned's
purchaser representative to assist the undersigned in evaluating the merits and
risks of the prospective investment in the securities of the Company. Initials
______.
3. My full name and primary business address and phone number are
4. I am a resident of the state of .
5. I have sufficient income and net worth that I do not contemplate
disposing of any investment in the Company to satisfy other undertakings or
indebtedness. My knowledge and experience in financial and business matters are
such that I am capable of evaluating the merits and risks of an investment in
the Company. I am able to bear the economic risk of an investment in the Company
as well as the restriction on my ability to sell or transfer the securities for
an indefinite period of time. I have had access to such information concerning
the Company as I considered necessary for me to make an informed decision
concerning the proposed investment in the Company.
6. I am acquiring the securities solely for my own account and not
directly or indirectly for the account of any other person whatsoever, for
investment and not with a view to, or for sale in connection with, any
distribution of the securities. I do not have any contract, undertaking or
134
arrangement with any person to sell, transfer or grant a participation to any
person with respect to the securities.
7. Please check here [____] if the following is true:
Notwithstanding Paragraph 6, the undersigned is transferring some
securities of the Company to the Company or Educator Acquisition Sub, Inc. as
more particularly described in that certain Lockup Agreement dated June ____,
2000, among the Company, Edutest, Inc. and the undersigned.
------------------------------------
(Signature)
------------------------------------
(Date)
135
LIGHTSPAN, INC.
INVESTMENT REPRESENTATION LETTER
[PARTNERSHIP, TRUST OR OTHER ENTITY]
In connection with a proposed offer to the undersigned of securities of
LIGHTSPAN, INC., a Delaware corporation (the "Company"), the undersigned makes
the following representations on which the Company shall be entitled to rely:
1. The undersigned makes one of the following representations regarding
its net worth and certain related matters, AND HAS CHECKED THE APPLICABLE
REPRESENTATION:
( ) a. The undersigned is a trust with total assets in excess of
$5,000,000, whose purchase is directed by a person with
such knowledge and experience in financial and business
matters that he is capable of evaluating the merits and
risks of the prospective investment.
( ) b. The undersigned represents that it is a bank, insurance
company, investment company registered under the
Investment Company Act of 1940, a business development
company, Small Business Investment Company licensed by the
U.S. Small Business Administration, or a private business
development company.
( ) c. If the undersigned is an employee benefit plan, the
undersigned represents either that all investment
decisions are made by a bank, insurance company, or
registered investment advisor, or that the undersigned has
total assets in excess of $5,000,000.
( ) d. If the undersigned is a corporation, partnership or
business trust, the undersigned represents that it has
total assets in excess of $5,000,000.
( ) e. If the undersigned is not an entity described in
paragraphs "a" through "d", the undersigned represents
that each of its equity owners is either (i) an entity
described in paragraphs "b" through "d"; or (ii) an
individual who (A) has an individual net worth, or a joint
net worth with such individual's spouse, in excess of
$1,000,000, or (B) has had an individual income in excess
of $200,000 in each of the two most recent years and
reasonably expects an income in excess of $200,000 in the
current year, or (C) is a director or executive officer of
the Company.
( ) f. The undersigned cannot make any of the representations set
forth in paragraphs "a" through "e" above.
2. In the event that the undersigned cannot make any of the
representations set forth in paragraphs 1(a), 1(b), 1(c), 1(d) or 1(e) above,
then the undersigned, by initialing the space provided at the end of this
sentence, hereby appoints Xxxxxxxx, Xxxxxxx & Company, L.L.C. as the
undersigned's purchaser representative to assist the undersigned in evaluating
the merits and risks of the prospective investment in the securities of the
Company. Initials ______.
1.
136
In addition, the undersigned represents as follows:
3. Its full name and primary business address and phone number are:
4. Its form, state and date of organization are (i.e., partnership,
corporation or trust, state where organized, date of organization):
5. The entity has sufficient profits and net assets that it does not
contemplate disposing of any investment in the Company to satisfy other
undertakings or indebtedness. The knowledge and experience in financial and
business matters of the person(s) making the investment decision on its behalf
are such that he/she/they are capable of evaluating the merits and risks of an
investment in the Company. It is able to bear the economic risk of an investment
in the Company as well as the restriction on its ability to sell or transfer the
investment for an indefinite period of time. It has had access to such
information concerning the Company and the securities as it considered necessary
to make an informed decision concerning the proposed investment.
6. It was not formed for the specific purpose of making an investment in
the Company.
7. It is acquiring the securities solely for its own account and not
directly or indirectly for the account of any other person whatsoever, for
investment and not with a view to, or for sale in connection with, any
distribution of the securities. It does not have any contract, undertaking or
arrangement with any person to sell, transfer or grant a participation to any
person with respect to the securities.
Name of Entity:
By:
---------------------------------
(Signature)
------------------------------------
(Name)
------------------------------------
(Title)
------------------------------------
(Date)
2.
137
EXHIBIT N
PAYMENT OF LIABILITIES
Liabilities to be Paid by Parent at Closing and Deducted from Cash Consideration
Account Liability
------- ---------
McKandlish, Kaine & Grant (MKG) (See Note)
Xxxxxxxx Xxxxxxx 275,000
Note: MKG Fees will be determined at closing.
General Liabilities to be Paid by Parent at Closing and 30 Days After Closing
(which shall not be deducted from Cash Consideration)
Account At Closing 30 Days After
------- ---------- -------------
McKandlish, Kaine & Grant $ 81,633
Note for ACT Lease (Wachovia) $ 15,000
Wachovia LOC $ 84,000
Xxxxxx Note $ 55,000
Xxxxxxxx Xxxxxxx $ 10,000
Credit Card $ 16,000
Accrued Royalties $ 9,000
Xxxxxxx Loan $ 32,000
-------- --------
Total $235,633 $ 67,000
138
EXHIBIT O-1
FORM OF TAX REPRESENTATION LETTER TO BE EXECUTED BY
PARENT AND MERGER SUB
June __, 2000
Xxxxxx Godward LLP XxXxxxxxxx Kaine & Grant
0000 Xxxxxxxxx Xxxxx 0000 Xxxx Xxxx Xxxxxx
Xxxxx 0000 Xxxxx 0000
Xxx Xxxxx, XX 00000-0000 Xxxxxxxx, XX 00000
RE: MERGER PURSUANT TO THE AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
INCLUDING EXHIBITS AND SCHEDULES THERETO (THE "REORGANIZATION
AGREEMENT"), DATED AS OF MAY __, 2000, BY AND AMONG PUBLIC CO., A
DELAWARE CORPORATION ("PARENT"), PUBLIC CO. ACQUISITION SUB, INC., A
DELAWARE CORPORATION ("MERGER SUB"), AND EDUCATOR, A VIRGINIA
CORPORATION (THE "COMPANY").
Ladies and Gentlemen:
This letter is supplied to you in connection with your rendering of opinions
regarding certain federal income tax consequences of the above captioned merger
(the "Merger"). Unless otherwise indicated, capitalized terms not defined herein
have the meanings set forth in the Reorganization Agreement.
After consulting with their counsel and auditors regarding the meaning of and
factual support for the following representations, the undersigned hereby
certify and represent that the following facts are now true and will continue to
be true as of the Effective Time of the Merger and thereafter where relevant:
1. Pursuant to the Merger, the Company will merge with and into Merger
Sub, and Merger Sub will acquire all of the assets and liabilities of the
Company. Specifically, the assets transferred to Merger Sub pursuant to the
Merger will represent at least ninety percent (90%) of the fair market value of
the net assets and at least seventy percent (70%) of the fair market value of
the gross assets held by the Company immediately prior to the Merger. For the
purpose of determining the percentage of the Company's net and gross assets held
by Merger Sub immediately following the Merger, the following assets will be
treated as property held by the Company immediately prior but not by Merger Sub
subsequent to the Merger: (i) assets disposed of by the Company (other than
assets transferred from the Company to Merger Sub in the Merger) prior to or by
Merger Sub subsequent to the Merger and in contemplation thereof (including
without limitation any asset disposed of by the Company, other than in the
ordinary course of business, pursuant to a plan or intent existing during the
period ending on the Effective Time of the Merger and beginning with the
commencement of negotiations (whether formal or informal) with Parent regarding
the Merger (the "PRE-MERGER PERIOD"); (ii) assets used by the Company to pay
stockholders perfecting appraisal rights or other expenses or liabilities
incurred
1.
139
in connection with the Merger and (iii) assets used to make distribution,
redemption or other payments in respect of stock of the Company or rights to
acquire such stock (including payments treated as such for tax purposes) that
are made in contemplation of the Merger or that are related thereto;
2. Parent's principal reasons for participating in the Merger are bona
fide business purposes not related to taxes;
3. Prior to the Merger, Parent will be in "CONTROL" of Merger Sub as
defined in Section 368(c) of the Internal Revenue Code of 1986, as amended (the
"Code"). As used in this letter, "CONTROL" shall consist of direct ownership of
shares of stock possessing at least eighty percent (80%) of the total combined
voting power of all classes of stock entitled to vote and at least eighty
percent (80%) of the total number of shares of each other class of stock of the
corporation. For purposes of determining Control, a person shall not be
considered to own shares of voting stock if rights to vote such shares (or to
restrict or otherwise control the voting of such shares) are held by a third
party (including a voting trust) other than an agent of such person;
4. Parent has no plan or intention to cause Merger Sub to issue
additional shares of stock after the Merger, or take any other action, that
would result in Parent losing Control of Merger Sub;
5. Except for transfers described in Section 368(a)(2)(C) of the Code,
Parent has no plan or intention to: (a) liquidate Merger Sub; (b) merge Merger
Sub with or into another corporation including Parent or its affiliates; (c)
sell, distribute or otherwise dispose of the stock of Merger Sub, or cause
Merger Sub to sell or otherwise dispose of the stock of Merger Sub; or (d) cause
Merger Sub to sell or otherwise dispose of any of its assets or of any assets
acquired from the Company, except for dispositions made in the ordinary course
of business or payment of expenses incurred by Merger Sub pursuant to the
Merger;
6. In the Merger, the Company will have no liabilities assumed by Merger
Sub and will not transfer to Merger Sub any assets subject to liabilities,
except to the extent incurred in connection with the transactions contemplated
by the Reorganization Agreement;
7. Following the Merger, Merger Sub will continue the Company's historic
business or use a significant portion of its historic business assets in a
business;
8. Neither Parent nor Merger Sub is an "Investment Company" within the
meaning of Section 368(a)(2)(F)(iii) and (iv) of the Code;
9. No stockholder of the Company is acting as agent for Parent in
connection with the Merger or the approval thereof; Parent will not reimburse
any stockholder of the Company for any stock of the Company such stockholder may
have purchased or for other obligations such stockholder may have incurred;
10. Except for repurchases or redemptions of Parent Common Stock that
are (i) consistent with past practices and pursuant to pre-existing, seasoned
and systematic purchase programs that were not created or modified in connection
with the Merger; (ii) made in connection with the termination of employees in
the ordinary course of business; or (iii) returns of the Escrow Shares
2.
140
pursuant to the Escrow Agreement, neither Merger Sub nor Parent nor any "RELATED
PERSON" of Merger Sub or Parent (as such term is defined by Treasury Regulation
Section 1.368-1(e)(3)) will repurchase or redeem any of the Parent Common Stock
to be issued to the stockholders of the Company in connection with the Merger;
11. The total fair market value of all consideration other than Parent
Common Stock received by stockholders of the Company in the Merger (including,
without limitation, cash paid to stockholders of the Company as part of the
Merger Consideration, in lieu of fractional shares or perfecting appraisal
rights) will be less than fifty percent (50%) of the aggregate fair market value
of stock of the Company outstanding immediately prior to the Merger;
12. The fair market value of the Merger Consideration received by each
stockholder of the Company will be approximately equal to the fair market value
of the stock of the Company surrendered in exchange therefor, and the aggregate
Merger Consideration received by stockholders of the Company in exchange for
their stock of the Company will be approximately equal to the fair market value
of all of the outstanding shares of stock of the Company immediately prior to
the Merger;
13. Merger Sub has been formed solely to consummate the Merger and,
prior to the effective Time, Merger Sub has not conducted and will not conduct
any business activity or other operation of any kind (except for issuance of its
stock to Parent); no stock of Merger Sub will be issued pursuant to the Merger
14. Each of Parent, Merger Sub and the Company and each stockholder of
the Company will pay separately his, her or its own expenses relating to the
Merger (other than expenses of the Company directly related to the transaction
within the guidelines set forth in Revenue Ruling 73-59, 1973-1 C.B. 187);
15. There is no intercorporate indebtedness existing between Parent and
the Company or between Merger Sub and the Company, and neither Parent nor Merger
Sub will assume any liabilities of any stockholder of the Company in connection
with the Merger;
16. The terms of the Reorganization Agreement and the agreements related
thereto are the product of arm's length negotiations;
17. None of the compensation received by any stockholder-employees or
stockholder-independent contractors of the Company from Parent, Merger Sub or
the Company will be separate consideration for, or allocable to, any of their
shares of stock of the Company; none of the shares of Parent Common Stock
received by any stockholder-employees or stockholder-independent contractors of
the Company will be separate consideration for, or allocable to, any employment
agreement, consulting agreement, covenant not to compete or release; and the
compensation paid to any stockholder-employees or stockholder-independent
contractors of the Company by Parent, Merger Sub or the Company will be for
services actually rendered and will be commensurate with amounts paid to third
parties bargaining at arm's length for similar services;
18. The payment of cash in lieu of fractional shares of Parent Common
Stock is solely for the purpose of avoiding the expense and inconvenience to
Parent of issuing fractional shares and
3.
141
does not represent separately bargained-for consideration. The total cash
consideration that will be paid in the transaction to the Company stockholders
instead of issuing fractional shares of Parent Common Stock will not exceed one
percent (1%) of the total consideration that will be issued in the transaction
to the Company stockholders in exchange for their shares of Company Common
Stock. The fractional share interests of each Company stockholder will be
aggregated, and no Company stockholder will receive cash in an amount equal to
or greater than the value of one full share of Parent Common Stock;
19. With respect to each instance, if any, in which shares of stock of
the Company have been purchased by a stockholder of Parent (a "STOCKHOLDER")
during the Pre-Merger Period (a "STOCK PURCHASE"): (i) the Stock Purchase was
made by such Stockholder not as a representative of Parent; (ii) the purchase
price paid by such Stockholder pursuant to the Stock Purchase was the product of
arm's length negotiations, was not advanced, and will not be reimbursed, either
directly or indirectly, by Parent; (iii) at no time was such Stockholder or any
other party required or obligated to surrender to Parent the Company Common
Stock acquired in the Stock Purchase, and neither such Stockholder nor any other
party will be required to surrender to Parent the Parent Common Stock for which
such shares of stock of the Company will be exchanged in the Merger; and (iv)
the Stock Purchase was not a formal or informal condition to consummation of the
Merger;
20. Following the Merger, Parent and Merger Sub will comply with the
record-keeping and information filing requirements of Treasury Regulations
Section 1.368-3;
21. The Merger will be consummated in compliance with the material terms
of the Reorganization Agreement, none of the material terms or conditions
therein have been waived or modified, and Parent has no plan or intention to
waive or modify any such material terms or conditions; and
22. The undersigned officer of each of Parent and Merger Sub is
authorized to make all of the representations set forth herein.
The undersigned recognize that (i) your opinions will be based, among other
things, on the accuracy of the representations set forth herein and on the
statements contained in the Reorganization Agreement and documents related
thereto, (ii) your opinions will be subject to certain limitations and
qualifications including that they may not be relied upon if any such
representations are not accurate in all material respects or if any of the
covenants or obligations set forth in the Reorganization Agreement are not
satisfied in all material respects, and (iii) your opinions will not address any
tax consequences of the Merger or any action taken in connection therewith
except as expressly set forth in such opinions.
4.
142
Parent and Merger Sub undertake to inform you immediately should any of the
foregoing statements or representations become untrue, incorrect or incomplete
in any respect on or prior to the Effective Time.
Very truly yours,
PUBLIC CO.,
a Delaware corporation
By:
------------------------------------
Title:
---------------------------------
PUBLIC CO. ACQUISITION SUB, INC.,
a Delaware corporation
By:
------------------------------------
Title:
---------------------------------
5.
143
EXHIBIT O-2
FORM OF TAX REPRESENTATION LETTER TO BE EXECUTED BY THE COMPANY
June __, 2000
Xxxxxx Godward LLP XxXxxxxxxx Kaine & Grant
0000 Xxxxxxxxx Xxxxx 0000 Xxxx Xxxx Xxxxxx
Xxxxx 0000 Xxxxx 0000
Xxx Xxxxx, XX 00000-0000 Xxxxxxxx, XX 00000
RE: MERGER PURSUANT TO THE AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
INCLUDING EXHIBITS AND SCHEDULES THERETO (THE "REORGANIZATION
AGREEMENT"), DATED AS OF MAY __, 2000, BY AND AMONG PUBLIC CO., A
DELAWARE CORPORATION ("PARENT"), PUBLIC CO. ACQUISITION SUB, INC., A
DELAWARE CORPORATION ("MERGER SUB"), AND EDUCATOR, A VIRGINIA
CORPORATION (THE "COMPANY").
Ladies and Gentlemen:
This letter is supplied to you in connection with your rendering of opinions
regarding certain federal income tax consequences of the above captioned merger
(the "Merger"). Unless otherwise indicated, capitalized terms not defined herein
have the meanings set forth in the Reorganization Agreement.
After consulting with its counsel and auditors regarding the meaning of and
factual support for the following representations, the undersigned hereby
certifies and represents that the following facts are now true and will continue
to be true as of the Effective Time of the Merger and thereafter where relevant:
1. Pursuant to the Merger, the Company will merge with and into Merger
Sub, and Merger Sub will acquire all of the assets and liabilities of the
Company. Specifically, the assets transferred to Merger Sub pursuant to the
Merger will represent at least ninety percent (90%) of the fair market value of
the net assets and at least seventy percent (70%) of the fair market value of
the gross assets held by the Company immediately prior to the Merger. For the
purpose of determining the percentage of the Company's net and gross assets held
by Merger Sub immediately following the Merger, the following assets will be
treated as property held by the Company immediately prior but not by Merger Sub
subsequent to the Merger: (i) assets disposed of by the Company (other than
assets transferred from the Company to Merger Sub in the Merger) prior to or by
Merger Sub subsequent to the Merger and in contemplation thereof (including
without limitation any asset disposed of by the Company, other than in the
ordinary course of business, pursuant to a plan or intent existing during the
period ending on the Effective Time of the Merger and beginning with the
commencement of negotiations (whether formal or informal) with Parent regarding
the Merger (the "PRE-MERGER PERIOD"); (ii) assets used by the Company to pay
stockholders perfecting appraisal rights or other expenses or liabilities
incurred in connection with the Merger and (iii) assets used to make
distribution, redemption or other
1.
144
payments in respect of stock of the Company or rights to acquire such stock
(including payments treated as such for tax purposes) that are made in
contemplation of the Merger or that are related thereto;
2. Other than the redemption from Xxxxxx Investment Fund, LLC, of
100,000 shares of Company Series B convertible preferred stock for $540,000, or
in the ordinary course of business or pursuant to its obligations under the
Reorganization Agreement, the Company has made no transfer of any of its assets
(including any distribution of assets with respect to, or in redemption of,
stock) in contemplation of the Merger or during the Pre-Merger Period;
3. The Company's principal reasons for participating in the Merger are
bona fide business purposes unrelated to taxes;
4. At the Effective Time of the Merger, the Company will have no
outstanding stock or other equity interests other than those disclosed in
Section 2.3 of the Reorganization Agreement. At the time of the Merger, except
as specified in the Reorganization Agreement, the Company will have no
outstanding warrants, options, or convertible securities or any other type of
right outstanding pursuant to which any person could acquire shares of the
Company Common Stock or any other equity interest in the Company, other than
those disclosed in Section 2.3 of the Reorganization Agreement or the Disclosure
Schedule with respect thereto;
5. The total fair market value of all consideration other than shares of
Parent Common Stock received by stockholders of the Company in the Merger
(including, without limitation, cash paid to Company stockholders as the cash
component of the Merger Consideration, perfecting appraisal rights or in lieu of
fractional shares of Parent Common Stock) will be less than fifty percent (50%)
of the aggregate fair market value of shares of stock of the Company outstanding
immediately prior to the Merger;
6. The Company has no plan or intention that Merger Sub will issue
additional shares of stock after the Merger, or take any other action, that
would result in Parent losing Control of Merger Sub;
7. The liabilities of the Company have been incurred by the Company in
the ordinary course of its business;
8. The fair market value of the Company's assets will, on the Effective
Time of the Merger, exceed the aggregate liabilities of the Company plus the
amount of liabilities, if any, to which such assets are subject;
9. The Company is not and will not be on the Effective Time of the
Merger an "INVESTMENT COMPANY" within the meaning of Section 368(a)(2)(F)(iii)
and (iv) of the Code;
10. The Company is not and will not be on the Effective Time of the
Merger under the jurisdiction of a court in a Title 11 or similar case within
the meaning of Section 368(a)(3)(A) of the Code;
2.
145
11. The Company has made no extraordinary distributions within the
meaning of Temporary Federal Treasury Regulation Section 1.368-1T(e) with
respect to its stock, prior to and in connection with the Merger;
12. The Company has not redeemed and no "RELATED PERSON" with respect to
the Company, as such term is defined by Treasury Regulation Section
1.368-1(e)(3), (without regard to Section 1.368-1(e)(3)(i)(A)), has purchased
any Company Common Stock prior to and in connection with the Merger;
13. The fair market value of the Merger Consideration received by each
stockholder of the Company will be approximately equal to the fair market value
of the shares of stock of the Company surrendered in exchange therefor and the
aggregate Merger Consideration received by stockholders of the Company in
exchange for their shares of stock of the Company will be approximately equal to
the fair market value of all of the outstanding shares of stock of the Company
immediately prior to the Merger;
14. The Company and each stockholder of the Company will pay separately
his, her or its own expenses relating to the Merger (other than expenses of the
Company directly related to the transaction within the guidelines set forth in
Revenue Ruling 73-59, 1973-1 C.B. 187);
15. There is no intercorporate indebtedness existing between Parent and
the Company or between Merger Sub and the Company; neither Parent nor Merger Sub
will assume any liabilities of the Company or any stockholder of the Company in
connection with the Merger;
16. The terms of the Reorganization Agreement and the other agreements
relating thereto are the product of arm's length negotiations;
17. The Company intends that Merger Sub will continue its historic
business or use a significant portion of its historic business assets in a
business following the Merger;
18. None of the compensation received by any stockholder-employees or
stockholder-independent contractors of the Company from Parent, Merger Sub or
the Company will be separate consideration for, or allocable to, any of their
shares of stock of the Company; none of the shares of Parent Common Stock
received by any stockholder-employees or stockholder-independent contractors of
the Company will be separate consideration for, or allocable to, any employment
agreement, consulting agreement, covenant not to compete or release; and the
compensation paid to any stockholder-employees or stockholder-independent
contractors of the Company by Parent, Merger Sub or the Company will be for
services actually rendered and will be commensurate with amounts paid to third
parties bargaining at arm's length for similar services;
19. With respect to each instance, if any, in which shares of stock of
the Company have been purchased by a stockholder of Parent (a "STOCKHOLDER")
during the Pre-Merger period (a "STOCK PURCHASE"): (i) to the best knowledge of
the Company, (A) the Stock Purchase was made by such Stockholder on its own
behalf, rather than as a representative, or for the benefit, of Parent, (B) the
Stock Purchase was entered into solely to satisfy the separate interests of such
Stockholder and the seller, and (C) the purchase price paid by such Stockholder
pursuant to the
3.
146
Stock Purchase was the product of arm's length negotiations; and (ii) the Stock
Purchase was not a formal or informal condition to consummation of the Merger;
20. The Merger will be consummated in compliance with the material terms
of the Reorganization Agreement, none of the material terms or conditions
therein have been waived or modified; and
21. The undersigned officer of the Company is authorized to make all of
the representations set forth herein.
The undersigned recognizes that (i) your opinions will be based on, among other
things, the accuracy of the representations set forth herein and on the
statements contained in the Reorganization Agreement and documents related
thereto, (ii) your opinions will be subject to certain limitations and
qualifications including that they may not be relied upon if any such
representations are not accurate in all material respects or if any of the
covenants and obligations set forth in the Reorganization Agreement are not
satisfied in all material respects, and (iii) your opinions will not address any
tax consequences of the Merger or any action taken in connection therewith
except as expressly set forth in such opinions.
The Company undertakes to inform you immediately should any of the foregoing
statements or representations become untrue, incorrect or incomplete in any
respect on or prior to the Effective Time.
Notwithstanding anything herein to the contrary, the undersigned makes no
representations regarding any actions or conduct of the Company pursuant to
Parent's exercise of control over the Company after the Merger.
Very truly yours,
EDUCATOR, A VIRGINIA CORPORATION
By:
------------------------------------
Title:
---------------------------------
4.
147
EXHIBIT P
EDUTEST, INC.
----------------------------
NOTE PURCHASE AGREEMENT
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148
EDUTEST, INC.
NOTE PURCHASE AGREEMENT
THIS NOTE PURCHASE AGREEMENT (the "AGREEMENT") is made as of the 25th
day of May, 2000 (the "EFFECTIVE DATE"), by and among EDUTEST, INC., a Virginia
corporation (the "BORROWER"), and LIGHTSPAN, INC., a California corporation (the
"PURCHASER").
The parties hereby agree as follows:
1. AMOUNT AND TERMS OF THE LOAN
1.1 THE LOAN. Subject to the terms of this Agreement, Purchaser agrees
to lend to Borrower up to $600,000.00 (the "COMMITMENT"), and such additional
amount as may be agreed by the parties as described in Section 1.2 below, at
such times and in such increments as are set out below (each, a "LOAN") against
the issuance and delivery by Borrower of its convertible secured promissory
notes in the amounts set out below, which notes shall be substantially in the
form attached hereto as Exhibit A (each, a "NOTE" and collectively, the
"NOTES").
1.2 LOAN AMOUNTS. Subject to the satisfaction of the conditions
precedent and other terms set out in this Agreement, Purchaser shall make the
following Loans to Borrower (i) $200,000.00 on May 25, 2000, or such later date
to which the parties shall mutually agree (the "INITIAL LOAN"); (ii) $200,000.00
on June 24, 2000, or such later date to which the parties shall mutually agree;
(iii) $200,000.00 on July 24, 2000, or such later date as to which the parties
shall mutually agree; and (iv) such additional amounts at such later dates as to
which the parties, in their individual discretion, may mutually agree, it being
understood that Purchaser shall have no obligation whatsoever to make any Loans
other than the Loans specifically identified in Section 1.2(i) through (iii),
and those Loans only in accordance with the terms of this Agreement. Each Loan
shall be only in the amounts set out in this Section 1.2, unless otherwise
agreed to by Purchaser.
1.3 REPAYMENT OF PRINCIPAL AND INTEREST. Unless the Note corresponding
to a particular Loan is sooner converted into Borrower's equity securities as
provided in such Note, the unpaid principal and accrued but unpaid interest of
each Loan made under this Agreement shall be due and payable in full on the date
which is sixty days after the date of the making of such Loan (the "MATURITY
DATE"); provided, however, that each time a Loan (each, a "NEW LOAN") is made
under this Agreement, the Maturity Date for this and all other Loans outstanding
at such time shall be extended to the date which is ninety days after the date
of the making of such New Loan. Interest on each Loan shall accrue and be
payable as set forth in the Note corresponding to such Loan. Once paid, Borrower
may not reborrow the principal of any Loans. Purchaser shall have no obligation
to make any Loan which, when added to the face value of all other Loans made
under this Agreement, would exceed the Commitment.
1.4 CONVERSION OF THE NOTES. Each Note shall be convertible into shares
of Borrower's preferred equity securities as provided in each Note.
1.
149
1.5 CONDITIONS PRECEDENT TO THE MAKING OF INITIAL LOAN. The obligation
of Purchaser to make the Initial Loan is subject to the condition precedent that
Purchaser shall have received, in form and substance satisfactory to Purchaser,
all of the following:
(a) This Agreement duly executed by Borrower;
(b) A certificate of the secretary or assistant secretary of
Borrower with copies of the following documents attached: (i) the certificate of
incorporation and bylaws of Borrower certified by Borrower as being in full
force and effect on the Effective Date, (ii) incumbency of officers authorized
to sign on behalf of Borrower and their respective representative signatures,
and (iii) resolutions authorizing the execution and delivery of this Agreement,
that certain Security Agreement by and between Borrower and Purchaser dated of
even date herewith (the "SECURITY AGREEMENT"), and the Notes (this Agreement,
the Security Agreement, and the Notes, collectively, the "LOAN DOCUMENTS");
(c) A good standing certificate from Borrower's state of
incorporation and the state in which Borrower's principal place of business is
located;
(d) All necessary consents of shareholders and other third
parties with respect to the execution, delivery and performance of this
Agreement and the other Loan Documents; and
(e) The Security Agreement, duly executed by Borrower; and
(f) Such other documents, and completion of such other matters,
as Purchaser may deem reasonably necessary or appropriate.
1.6 CONDITIONS PRECEDENT TO ALL ADVANCES. The obligation of Purchaser to
make each Loan, including the Initial Loan, is further subject to the following
conditions:
(a) Purchaser shall have received a Note substantially in the
form attached hereto as Exhibit A, duly executed by Borrower in the principal
amount of the such Loan;
(b) No Event of Default shall have occurred and be continuing;
(c) All representations and warranties in the Loan Documents and
in any other written agreement (whether now existing or hereafter entered into,
including, without limitation, the Agreement and Plan of Merger and
Reorganization by and among Borrower, Purchaser, and Educator Acquisition, Inc.
(the "MERGER AGREEMENT")) by and between Borrower and Purchaser or any
subsidiary or affiliate of Purchaser shall be true and correct in all material
respects as if made on the date the Loan is to be made;
(d) Except in connection with the Initial Loan, Purchaser shall
have received (i) a Borrowing Request (as defined below) with respect to such
Loan and (ii) all consents, releases, intercreditor or subordination agreements,
or other documents relating to the release or subordination of any or all liens
(including Permitted Liens) on the Collateral (as defined in the Security
Agreement) as Purchaser shall, at any time and in its sole and absolute
discretion, request;
2.
150
(e) Purchaser shall have received such documents, instruments and
agreements, including, without limitation, UCC financing statements or
amendments to UCC financing statements, as Purchaser shall request to evidence
the perfection and priority of the security interests granted to Purchaser in
the Security Agreement; and
(f) Such other documents, and completion of such other matters,
as Purchaser may deem necessary or appropriate.
2. MAKING LOANS
2.1 BORROWING REQUEST. If Borrower desires that Purchaser make any Loan
other than the Initial Loan, Borrower shall, on or before the date specified for
such Loan in Section 1.2, deliver a written request for Purchaser to make such
Loan, which notice shall include an affirmative statement that there then exists
no Event of Default (each, a "BORROWING REQUEST").
2.2 MAKING THE LOAN. Within three days of its receipt of a Borrowing
Request (or otherwise in accordance with the timing provisions of Section 1.2),
and subject to the satisfaction of the conditions precedent set out in this
Agreement, Purchaser shall deliver to Borrower a check or wire transfer funds
(the Initial Loan shall be wire transferred) in the amount of the Loan
requested.
3. AUTHORIZATION OF SHARES
3.1 DUTY TO AUTHORIZE SHARES. On or before the Maturity Date, Borrower
agrees that it will, unless otherwise requested by Purchaser, cause the
authorization of a class of preferred equity securities (the "NEXT ROUND STOCK")
in such number as to allow for the total conversion of the principal of, and
accrued interest, on all of the Notes as described therein. (Borrower shall
assume, for purposes of authorizing such shares, that all principal shall be
drawn as set out in Section 1.2 and that all Notes shall be converted on the
Maturity Date.) Such Next Round Stock shall have the same relative rights and
privileges as Borrower's Series B Preferred Stock, including, without
limitation, rights of registration, antidilution, and rights of first refusal.
3.2 RESERVATION OF SHARES. Borrower agrees that, upon authorization of
the Next Round Stock, it will undertake all steps necessary to reserve shares of
the Next Round Stock in such number as to allow for the total conversion of all
the Notes. (Borrower shall assume, for purposes of reserving such shares, that
all principal shall be drawn as set out in Section 1.2 and that all Notes shall
be converted on the Maturity Date.)
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER
Borrower hereby represents and warrants to Purchaser as follows:
4.1 CORPORATE POWER. Subject only to the appropriate approval of
Borrower's shareholders and the holders of Borrower's Series A Convertible
Preferred Stock and Series B Convertible Preferred Stock with respect to the
authorization of the Next Round Stock (the "APPROVALS"), Borrower has all
requisite corporate power to execute and deliver this Agreement and the other
Loan Documents and to carry out and perform its obligations under the terms of
this Agreement and the other Loan Documents.
3.
151
4.2 AUTHORIZATION AND CONSENT. Subject only to the Approvals, all
corporate action on the part of Borrower, its directors and its shareholders
necessary for the authorization, execution, delivery and performance of this
Agreement by Borrower and the performance of Borrower's obligations hereunder,
including the issuance and delivery of the Notes and the reservation of the
shares issuable upon conversion of the Note (including Common Stock as described
in the Notes) in the event the Next Round Stock is not authorized as required
above has been taken. Subject only to the Approvals, this Agreement and the
other Loan Documents, when executed and delivered by Borrower, shall constitute
valid and binding obligations of Borrower enforceable in accordance with their
terms, subject to laws of general application relating to bankruptcy,
insolvency, the relief of debtors and, with respect to rights to indemnity,
subject to federal and state securities laws. The equity securities of Borrower,
when issued in compliance with the provisions of the Notes, will be validly
issued, authorized, fully paid and non-assessable and free of any liens and
encumbrances. The Notes, when issued in compliance with the provisions of this
Agreement, and the issuance of the equity securities upon conversion thereof,
will not violate any preemptive rights or rights of first refusal and will be
issued in compliance with all applicable federal and State securities laws.
Borrower's performance of its obligations under the Loan Documents shall not
cause or give rise to any default or event of default under any other material
agreement to which Borrower or its assets are bound.
4.3 GOVERNMENTAL CONSENTS. All consents, approvals, orders, or
authorizations of, or registrations, qualifications, designations, declarations,
or filings with, any governmental authority, required on the part of Borrower in
connection with the valid execution and delivery of this Agreement, the offer,
sale or issuance of the Notes, and the equity securities issuable upon
conversion of the Note shall have been obtained and will be effective when and
if the Notes are converted, except for notices required or permitted to be filed
with certain state and federal securities commissions, which notices will be
filed on a timely basis.
4.4 OFFERING. Assuming the accuracy of the representations and
warranties of Purchaser contained in Section 5 hereof, the offer, issue, and
sale of the Notes are and will be exempt from the registration and prospectus
delivery requirements of the Securities Act of 1933, as amended (the "1933
ACT"), and have been registered or qualified (or are exempt from registration
and qualification) under the registration, permit, or qualification requirements
of all applicable state securities laws.
4.5 TAX CERTIFICATION. If so requested by Purchaser, Borrower will
exercise its best efforts to obtain, and deliver to Purchaser, certificates of
the applicable governmental authorities stating that Borrower is in compliance
with the franchise tax laws of each such state.
5. REPRESENTATIONS AND WARRANTIES OF PURCHASER
5.1 PURCHASE FOR OWN ACCOUNT. Purchaser represents that it is acquiring
the Notes and the equity securities issuable upon conversion of the Notes
(collectively, the "SECURITIES") solely for its own account and beneficial
interest for investment and not for sale or with a view to distribution of the
Securities or any part thereof, has no present intention of selling (in
connection with a distribution or otherwise), granting any participation in, or
otherwise distributing the same, and does not presently have reason to
anticipate a change in such intention.
4.
152
5.2 INFORMATION AND SOPHISTICATION. Purchaser acknowledges that it has
received all the information it has requested from Borrower and it considers
necessary or appropriate for deciding whether to acquire the Securities.
Purchaser represents that it has had an opportunity to ask questions and receive
answers from Borrower regarding the terms and conditions of the offering of the
Securities and to obtain any additional information necessary to verify the
accuracy of the information given Purchaser. Purchaser further represents that
it has such knowledge and experience in financial and business matters that it
is capable of evaluating the merits and risk of this investment.
5.3 ABILITY TO BEAR ECONOMIC RISK. Purchaser acknowledges that
investment in the Securities involves a high degree of risk, and represents that
it is able, without materially impairing its financial condition, to hold the
Securities for an indefinite period of time and to suffer a complete loss of its
investment. Without in any way limiting the representations set forth above,
Purchaser further agrees not to make any disposition of all or any portion of
the Securities except in compliance with applicable state and Federal laws
regarding the Securities.
5.4 ACCREDITED INVESTOR STATUS. Purchaser is an "ACCREDITED INVESTOR" as
such term is defined in Rule 501 under the Securities Act.
6. EVENTS OF DEFAULT
6.1 Each of the following shall constitute an event of default (each, an
"EVENT OF DEFAULT") under this Agreement:
(a) Borrower fails to pay timely any of the principal amount, any
accrued interest, or other amounts due under any Note on the date the same
becomes due and payable;
(b) Any representation or warranty made in this Agreement or the
other Loan Documents or any other written agreement by and between Borrower and
Purchaser or any subsidiary or affiliate of Purchaser (either now existing or
hereafter entered into, including, without limitation, the Merger Agreement) was
untrue when made;
(c) Borrower does not perform any obligation required by any of
the Loan Documents to be performed by it or does not perform or observe any
other term, condition, or covenant in this or any other Loan Document;
(d) Borrower files any petition or action for relief under any
bankruptcy, reorganization, insolvency or moratorium law or any other law for
the relief of, or relating to, debtors, now or hereafter in effect, or makes any
general assignment for the benefit of creditors or takes any corporate action in
furtherance of any of the foregoing;
(e) An involuntary petition is filed against Borrower (unless
such petition is dismissed or discharged within thirty (30) days) under any
bankruptcy statute now or hereafter in effect, or a custodian, receiver,
trustee, assignee for the benefit of creditors (or other similar official) is
appointed to take possession, custody or control of any property of Borrower;
(f) Without Purchaser's prior written consent, Borrower's
shareholders or board of directors affirmatively vote to affirm, consent to, or
approve, or Borrower begins
5.
153
negotiations with respect to, or enters into or consummates any transaction to
effect, (i) the disposition, transfer, conveyance, or sale of all or
substantially all of Borrower's assets to any person or business entity other
than Purchaser or a subsidiary or affiliate of Purchaser; or (ii) any merger or
consolidation with any business entity other than Purchaser or a subsidiary or
affiliate of Purchaser;
(g) Through a single transaction or a series of related
transactions, there occurs a sale of fifty percent or more of Borrower's capital
stock; or
(h) There is a default or an event of default under any written
agreement (whether now existing or hereafter entered into, including, without
limitation, the Merger Agreement) by and between Borrower and Purchaser or a
subsidiary or affiliate of Purchaser; provided that it shall not be an Event of
Default hereunder if Borrower terminates the Merger Agreement on account of
Purchaser's failure to satisfy a condition required to be satisfied by Purchaser
or if Purchaser fails to perform its material obligations under the Merger
Agreement.
7. MISCELLANEOUS
7.1 BINDING AGREEMENT. The terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective successors and
assigns of the parties. Nothing in this Agreement, express or implied, is
intended to confer upon any third party any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
7.2 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Virginia as applied to agreements among Virginia
residents, made and to be performed entirely within the State of Virginia.
7.3 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.
7.4 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.
7.5 NOTICES. Any notice required or permitted under this Agreement shall
be given in writing and shall be deemed effectively given upon personal delivery
or upon deposit with the United States Post Office, postage prepaid, addressed
to Borrower at 0000 Xxxxxxx Xxxxx, Xxxxx 000, Xxxxxxxx, Xxxxxxxx 00000,
Attention Xx. Xxxxx X. Xxxxxxxxx, or to Purchaser at 00000 Xxxxxx Xxxxx Xxxxx,
Xxx Xxxxx, Xxxxxxxxxx 00000, Attention: Xxxxxxx Xxxxxx, or at such other address
as such party may designate by ten days advance written notice to the other
party.
7.6 MODIFICATION; WAIVER. No modification or waiver of any provision of
this Agreement or consent to departure therefrom shall be effective unless in
writing and approved by Borrower and Purchaser.
7.7 ENTIRE AGREEMENT. This Agreement and the Exhibits hereto constitute
the full and entire understanding and agreement between the parties with regard
to the subjects hereof
6.
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and no party shall be liable or bound to any other in any manner by any
representations, warranties, covenants and agreements except as specifically set
forth herein.
7.
155
IN WITNESS WHEREOF, the parties have executed this NOTE PURCHASE AGREEMENT as of
the date first written above.
BORROWER:
EDUTEST, INC.
By:
---------------------------------
Title:
------------------------------
PURCHASER:
LIGHTSPAN, INC.
By:
---------------------------------
Title:
------------------------------
8.
156
EXHIBIT A
FORM OF CONVERTIBLE SECURED PROMISSORY NOTE
157
EXHIBIT A TO EXHIBIT P
THIS CONVERTIBLE PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. NO SALE OR DISPOSITION MAY BE EFFECTED EXCEPT IN
COMPLIANCE WITH RULE 144 UNDER SAID ACT OR AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL FOR HOLDER, SATISFACTORY TO THE
COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT OR RECEIPT OF A
NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION.
CONVERTIBLE PROMISSORY NOTE
$_______________ __________, 0000
Xxxxxxxx, Xxxxxxxx
For value received EDUTEST, INC., a Virginia corporation ("PAYOR"),
promises to pay to Lightspan, Inc., or its assigns ("HOLDER"), the principal sum
of $________ with interest on the outstanding principal amount at the rate of 9%
per annum. Interest shall commence on the date hereof and shall continue on the
outstanding principal until paid in full.
1. This note (the "NOTE") is issued as part of a series of similar notes
(collectively, the "NOTES") to be issued pursuant to the terms of that certain
Note Purchase Agreement (the "AGREEMENT") dated as of May 25, 2000, by and among
Payor and Holder. This Promissory Note is one of the Notes referred to in that
certain Security Agreement dated as of even date herewith and executed by Payor
in favor of Holder (as the same may from time to time be amended, modified or
supplemented or restated, the "SECURITY AGREEMENT"). Additional rights of Holder
are set forth in the Agreement and the Security Agreement. All capitalized terms
used herein and not otherwise defined herein shall have the respective meanings
given to them in the Agreement.
2. All payments of interest and principal shall be in lawful money of
the United States of America. All payments shall be applied first to accrued
interest, and thereafter to principal.
3. (a) At any time this Note shall become due and payable, Holder may
convert the outstanding principal amount of this Note, and all accrued but
unpaid interest thereon (together, the "TOTAL NOTE OBLIGATION"), into shares of
Next Round Stock (as defined below) by delivering to Payor written notice of the
conversion. The price per share at which such conversion shall occur shall be
$5.10 per share (the "PER SHARE PRICE"). The number of shares of Next Round
Stock into which this Note shall be converted shall be calculated by dividing
the Total Note Obligation by the Per Share Price.
(b) As used in this Note, "NEXT ROUND STOCK" shall mean a series
of fully paid and non-assessable shares of Payor's preferred equity securities
to be authorized and issuable by Payor on or before the Maturity Date (as
defined below), which preferred equity securities will have the same relative
rights and privileges as are afforded under Payor's Series B Convertible
1.
158
Preferred Stock, including, without limitation, equivalent rights to
registration, antidilution, and rights of first refusal.
(c) If, at the time the Next Round Stock is to be issued pursuant
to the conversion of this Note, Payor has not authorized and made available for
issuance a sufficient number of Next Round Stock to allow for the total
conversion of this Note into Next Round Stock, then this Note shall be
convertible, at Holder's option, for shares of Payor's fully paid,
non-assessable common stock (the "COMMON STOCK"); provided that, in such case,
the Price Per Share shall equal the fair market value of Payor's common stock,
as determined by Payor's board of directors in good faith, and the number of
shares of Common Stock into which this Note shall be converted shall be
calculated by dividing the Total Note Obligation by such Per Share Price.
(d) If at any time before the Maturity Date Payor shall
consolidate or merge with another corporation (other than a merger or
consolidation in which Payor is the surviving corporation), or, at the option of
Holder, in the event of the sale in one or in a series of related transaction of
more than 50% of the outstanding capital stock of Payor, Holder, at its sole
election, shall be entitled to receive in respect of this Note, the securities
or property to which a holder of the number of shares of Payor's capital stock
then deliverable upon conversion of this Note pursuant to subsections (b) and
(c) above would have been entitled upon such consolidation, merger, or sale
(assuming, in the case of such a sale, that Holder was participating in such
sale) and Payor shall take such steps in connection with such transaction as may
be necessary to ensure that the provisions hereof shall thereafter be
applicable, as nearly as reasonably may be, in relation to any securities or
property thereafter deliverable upon the conversion of this Note.
4. Unless this Note has been converted in accordance with the terms of
Section 3 above, the entire outstanding principal balance and all unpaid accrued
interest shall become fully due and payable on the date which is ninety days
from the date of the making of the Loan corresponding to this Note; provided,
however, that each time a New Loan is made under the Agreement, the Maturity
Date for this and all other Loans outstanding under the Agreement at such time
shall be extended to the date which is ninety days after the date of the making
of such New Loan (the "MATURITY DATE").
5. In the event of any default hereunder, Payor shall pay all reasonable
attorneys' fees and court costs incurred by Holder in enforcing and collecting
this Note.
6. Any principal repayment or interest payment on this Note not paid
when due, whether at stated maturity, by acceleration or otherwise, shall bear
interest at 10% per annum. Such interest on overdue amounts under this Note
shall be payable on demand and shall accrue until the obligation of Payor with
respect to the payment of such interest has been discharged (whether before or
after judgment). In no event shall this Note be construed to require payment of
interest in an amount in excess of the maximum allowed by law and if such
payment is made by Payor, then such excess sum shall be credited by Holder as a
payment of principal.
2.
159
7. The full amount of this Note is secured by the "Collateral" (as
defined in the Security Agreement) identified and described as security therefor
in the Security Agreement executed by and delivered by Payor.
8. Upon the occurrence of an Event of Default under the Agreement, all
unpaid principal, accrued interest and other amounts owing hereunder shall, at
the option of Holder, be (a) immediately due, payable and collectible by Holder
pursuant to applicable law, or (b) convertible into Payor's equity securities as
provided for herein.
9. Payor hereby waives demand, notice, presentment, protest and notice
of dishonor.
10. The terms of this Note shall be construed in accordance with the
laws of the State of Virginia, as applied to contracts entered into by Virginia
residents within the State of Virginia, which contracts are to be performed
entirely within the State of Virginia.
11. Any term of this Note may be amended or waived with the written
consent of Payor and Holder.
EDUTEST, INC.
By:
--------------------------------
Printed Name:
----------------------
Title:
-----------------------------
3.
160
EXHIBIT P
SECURITY AGREEMENT
THIS SECURITY AGREEMENT dated as of May 25, 2000 ("SECURITY AGREEMENT"),
is made by EDUTEST, INC., a Virginia corporation ("GRANTOR"), in favor of
LIGHTSPAN, INC., a corporation ("SECURED PARTY").
RECITALS
A. Pursuant to that certain Note Purchase Agreement dated as of May 25,
2000, (as the same may from time to time be amended, modified, supplemented or
restated, the "AGREEMENT"), by and between Grantor and Secured Party, Secured
Party has agreed to make certain advances of money and to extend certain
financial accommodation to Grantor as evidenced by certain Secured Convertible
Promissory Notes (each, a "NOTE," and collectively, the "NOTES") executed by
Grantor in favor of Secured Party in accordance with the Agreement
(collectively, the "LOANS").
B. Secured Party is willing to make the Loans to Grantor, but only upon
the condition, among others, that Grantor shall have executed and delivered to
Secured Party this Security Agreement.
AGREEMENT
NOW, THEREFORE, in order to induce Secured Party to make the Loans and
for other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, and intending to be legally bound, Grantor hereby
represents, warrants, covenants and agrees as follows:
1. DEFINED TERMS. When used in this Security Agreement the following
terms shall have the following meanings (such meanings being equally applicable
to both the singular and plural forms of the terms defined):
"COLLATERAL" shall have the meaning assigned to such term in Section 2
of this Security Agreement.
"CONTRACTS" means all contracts, undertakings, franchise agreements or
other agreements in or under which Grantor now holds or hereafter acquires any
right, title or interest, including, without limitation, with respect to an
Account, any agreement relating to the terms of payment or the terms of
performance thereof.
"COPYRIGHT LICENSE" means any written agreement, in which Grantor now
holds or hereafter acquires any interest, granting any right in or to any
Copyright or Copyright registration (whether Grantor is the licensee or the
licensor thereunder) including, without limitation, licenses pursuant to which
Grantor has obtained the exclusive right to use a copyright owned by a third
party.
"COPYRIGHTS" means all of the following in which Grantor now holds or
hereafter acquires any interest: (a) all copyrights, whether registered or
unregistered, held pursuant to the
1.
161
laws of the United States, any State thereof or any other country; (b)
registrations, applications, recordings and proceedings in the United States
Copyright Office or in any similar office or agency of the United States, any
State thereof or any other country; (c) any continuations, renewals or
extensions thereof; (d) any registrations to be issued in any pending
applications; (e) prior versions of works covered by copyright and all works
based upon, derived from or incorporating such works; (f) income, royalties,
damages, claims and payments now and hereafter due and/or payable with respect
to copyrights, including, without limitation, damages, claims and recoveries for
past, present or future infringement; (g) rights to xxx for past, present and
future infringements of any copyright; and (h) any other rights corresponding to
any of the foregoing rights throughout the world.
"EVENT OF DEFAULT" means (i) any failure by Grantor forthwith to pay or
perform any of the Secured Obligations and (ii) any "Event of Default" as
defined in the Agreement.
"LICENSE" means any Copyright License, Patent License, Trademark License
or other license of rights or interests now held or hereafter acquired by
Grantor.
"LIEN" means any mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.
"PATENT LICENSE" means any written agreement, in which Grantor now holds
or hereafter acquires any interest, granting any right with respect to any
invention on which a Patent is in existence (whether Grantor is the licensee or
the licensor thereunder).
"PATENTS" means all of the following in which Grantor now holds or
hereafter acquires any interest: (a) all letters patent of the United States or
any other country, all registrations and recordings thereof and all applications
for letters patent of the United States or any other country, including, without
limitation, registrations, recordings and applications in the United States
Patent and Trademark Office or in any similar office or agency of the United
States, any State thereof or any other country; (b) all reissues, divisions,
continuations, renewals, continuations-in-part or extensions thereof; (c) all
xxxxx patents, divisionals and patents of addition; (d) all patents to issue in
any such applications; (e) income, royalties, damages, claims and payments now
and hereafter due and/or payable with respect to patents, including, without
limitation, damages, claims and recoveries for past, present or future
infringement; and (f) rights to xxx for past, present and future infringements
of any patent.
"PERMITTED LIEN" means: (a) any Liens existing on the date of this
Security Agreement and set forth on Schedule A attached hereto; (b) Liens for
taxes, fees, assessments or other governmental charges or levies, either not
delinquent or being contested in good faith by appropriate proceedings, provided
the same have no priority over any of Secured Party's security interests; (c)
Liens (i) upon or in any Equipment acquired or held by Grantor to secure the
purchase price of such Equipment or indebtedness incurred solely for the purpose
of financing the acquisition of such Equipment or (ii) existing on such
Equipment at the time of its acquisition, provided that the Lien is confined
solely to the Equipment so acquired, improvements thereon and the Proceeds of
such Equipment; (d) leases or subleases and licenses or sublicenses granted to
others in the ordinary course of Grantor's business if such do not interfere in
any material respect with the business of Grantor; (e) any right, title or
interest of a
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licensor under a license provided that such license or sublicense does not
prohibit the grant of the security interest granted hereunder; (f) Liens arising
from judgments, decrees or attachments to the extent and only so long as such
judgment, decree or attachment has not caused or resulted in an Event of Default
under the Loan Agreement; (g) easements, reservations, rights-of-way,
restrictions, minor defects or irregularities in title and other similar Liens
affecting real property not interfering in any material respect with the
ordinary conduct of the business of Grantor; (h) Liens in favor of customs and
revenue authorities arising as a matter of law to secure payment of customs
duties in connection with the importation of goods; (i) Liens arising solely by
virtue of any statutory or common law provision relating to banker's liens,
rights of setoff or similar rights and remedies as to deposit accounts or other
funds maintained with a creditor depository institution; (j) Liens securing
capital lease obligations on assets subject to such capital leases including
sale and lease-back transactions otherwise permitted under this Security
Agreement and Liens on equipment leased by Grantor pursuant to an operating
lease in the ordinary course of Grantor's business (including proceeds thereof
and accessions thereto), all incurred solely for the purpose of financing the
lease of such equipment (including Liens arising from UCC financing statements
regarding such leases); (k) Liens, not otherwise permitted, which Liens do not
in the aggregate exceed $50,000 at any one time; and (1) Liens incurred in
connection with the extension, renewal or refinancing of the indebtedness
secured by Liens of the type described in clauses (a) and (c) above, provided
that any extension, renewal or replacement Lien shall be limited to the property
encumbered by the existing Lien and the principal amount of the indebtedness
being extended, renewed or refinanced does not increase.
"SECURED OBLIGATIONS" means (a) the obligation of Grantor to repay
Secured Party all of the unpaid principal amount of, and accrued interest on
(including any interest that accrues after the commencement of bankruptcy), the
Loans, (b) the obligation of Grantor to pay any fees, costs and expenses of the
Secured Party under the Agreement or under Section 6(b) hereof and (c) all other
indebtedness, liabilities and obligations of Grantor to Secured Party, whether
now existing or hereafter incurred, and whether created under, arising out of or
in connection with any written agreement or otherwise.
"TRADEMARK LICENSE" means any written agreement in which Grantor now
holds or hereafter acquires any interest, granting any right in and to any
Trademark or Trademark registration (whether Grantor is the licensee or the
licensor thereunder).
"TRADEMARKS" means any of the following in which Grantor now holds or
hereafter acquires any interest: (a) any trademarks, tradenames, corporate
names, company names, business names, trade styles, service marks, logos, other
source or business identifiers, prints and labels on which any of the foregoing
have appeared or appear, designs and general intangibles of like nature, now
existing or hereafter adopted or acquired, all registrations and recordings
thereof and any applications in connection therewith, including, without
limitation, registrations, recordings and applications in the United States
Patent and Trademark Office or in any similar office or agency of the United
States, any Sate thereof or any other country (collectively, the "Marks"); (b)
any reissues, extensions or renewals thereof; (c) the goodwill of the business
symbolized by or associated with the Marks; (d) income, royalties, damages,
claims and payments now and hereafter due and/or payable with respect to the
Marks, including, without limitation, damages, claims and recoveries for past,
present or future infringement; and (e) rights to xxx for past, present and
future infringements of the Marks.
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"UCC" means the Uniform Commercial Code as the same may, from time to
time, be in effect in the State of California; provided, however, in the event
that, by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of Secured Party's security interest in any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than the State of California, the term "UCC" shall mean the Uniform Commercial
Code as in effect in such other jurisdiction for purposes of the provisions
hereof relating to such attachment, perfection of priority and for purposes of
definitions related to such provisions.
In addition, the following terms shall be defined terms having the
meaning set forth for such terms in the UCC (definition sections of the UCC are
noted parenthetically): "ACCOUNT DEBTOR" (9105(1)(a)); "ACCOUNTS" (9106);
"CHATTEL PAPER" (9105(1)(b)); "DEPOSIT ACCOUNTS" (9105(e)); "DOCUMENTS"
(9105(1)(f)); "EQUIPMENT" (9109(2)); "FINANCIAL ASSETS" (8102(a)(9)); "FIXTURES"
(9313(1)(a)); "GENERAL INTANGIBLES" (9106); "INSTRUMENTS" (9105(1)(i));
"INVENTORY" (9109(4)); "INVESTMENT PROPERTY" (9115(1)(o); "PROCEEDS" (9306(1)).
Each of the foregoing defined terms shall include all of such items now owned,
or hereafter acquired, by Grantor.
All capitalized terms used herein and not otherwise defined herein shall
have the respective meanings given to them in the Agreement.
2. GRANT OF SECURITY INTEREST. As collateral security for the prompt and
complete payment and performance when due (whether at stated maturity, by
acceleration or otherwise) of all the Secured Obligations and in order to induce
Secured Party to cause the Loans to be made, Grantor hereby assigns, conveys,
mortgages, pledges, hypothecates and transfers to Secured Party, and hereby
grants to Secured Party, a security interest in all of Grantor's right, title
and interest in, to and under the following, whether now owned or hereafter
acquired (all of which being collectively referred to herein as the
"Collateral"):
(a) All Accounts of Grantor;
(b) All Chattel Paper of Grantor;
(c) All Contracts of Grantor;
(d) All Deposit Accounts of Grantor;
(e) All Documents of Grantor;
(f) All Equipment of Grantor;
(g) All Financial Assets of Grantor;
(h) All Fixtures of Grantor;
(i) All General Intangibles of Grantor, including, without
limitation, all Copyrights, Patents, Trademarks, Licenses, designs, drawings,
technical information, marketing
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plans, customer lists, trade secrets, proprietary or confidential information,
inventions (whether or not patentable), procedures, know-how, models and data;
(j) All Instruments of Grantor;
(k) All Inventory of Grantor;
(l) All Investment Property of Grantor;
(m) All property of Grantor held by Secured Party, or any other
party for whom Secured Party is acting as agent hereunder, including, without
limitation, all property of every-description now or hereafter in the possession
or custody of or in transit to Secured Party or such other party for any
purpose, including, without limitation, safekeeping, collection or pledge, for
the account of Grantor, or as to which Grantor may have any right or power;
(n) All other goods and personal property of Grantor, wherever
located, whether tangible or intangible, and whether now owned or hereafter
acquired, existing, leased or consigned by or to Grantor; and
(o) To the extent not otherwise included, all Proceeds of each of
the foregoing and all accessions to, substitutions and replacements for and
rents, profits and products of each of the foregoing.
3. RIGHTS OF SECURED PARTY; COLLECTION OF ACCOUNTS.
(a) Notwithstanding anything contained in this Security Agreement
to the contrary, Grantor expressly agrees that it shall remain liable under each
of its Contracts and each of its Licenses to observe and perform all the
conditions and obligations to be observed and performed by it thereunder and
that it shall perform all of its duties and obligations thereunder, all in
accordance with and pursuant to the terms and provisions of each such Contract
or License. Secured Party shall not have any obligation or liability under any
Contract or License by reason of or arising out of this Security Agreement or
the granting to Secured Party of a lien therein or the receipt by Secured Party
of any payment relating to any Contract or License pursuant hereto, nor shall
Secured Party be required or obligated in any manner to perform or fulfill any
of the obligations of Grantor under or pursuant to any Contract or License, or
to make any payment, or to make any inquiry as to the nature or the sufficiency
of any payment received by it or the sufficiency of any performance by any party
under any Contract or License, or to present or file any claim, or to take any
action to collect or enforce any performance or the payment of any amounts which
may have been assigned to it or to which it may be entitled at any time or
times.
(b) Secured Party authorizes Grantor to collect its Accounts,
provided that such collection is performed in a prudent and businesslike manner,
and Secured Party may, upon the occurrence and during the continuation of any
Event of Default and without notice, limit or terminate said authority at any
time. Upon the occurrence and during the continuance of any Event of Default, at
the request of Secured Party, Grantor shall deliver all original and other
documents evidencing and relating to the performance of labor or service which
created such Accounts, including, without limitation, all original orders,
invoices and shipping receipts.
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165
(c) Secured Party may at any time, upon the occurrence and during
the continuance of any Event of Default, without notifying Grantor of its
intention to do so, notify Account Debtors of Grantor, parties to the Contracts
of Grantor, obligors in respect of Instruments of Grantor and obligors in
respect of Chattel Paper of Grantor that the Accounts and the right, title and
interest of Grantor in and under such Contracts, Instruments and Chattel Paper
have been assigned to Secured Party and that payments shall be made directly to
Secured Party. Upon the request of Secured Party, Grantor shall so notify such
Account Debtors, parties to such Contracts, obligors in respect of such
Instruments and obligors in respect of such Chattel Paper. Upon the occurrence
and during the continuance of any Event of Default, Secured Party may, in its
name or in the name of others, communicate with such Account Debtors, parties to
such Contracts, obligors in respect of such Instruments and obligors in respect
of such Chattel Paper to verify with such parties, to Secured Party's
satisfaction, the existence, amount and terms of any such Accounts, Contracts,
Instruments or Chattel Paper.
4. REPRESENTATIONS AND WARRANTIES. Grantor hereby represents and
warrants to Secured Party that:
(a) Except for the security interest granted to Secured Party
under this Security Agreement and Permitted Liens, Grantor is the sole legal and
equitable owner of each item of the Collateral in which it purports to grant a
security interest hereunder, having good and marketable title thereto, free and
clear of any and all Liens except for Permitted Liens.
(b) No effective security agreement, financing statement,
equivalent security or lien instrument or continuation statement covering all or
any part of the Collateral exists, except such as may have been filed by Grantor
in favor of Secured Party pursuant to this Security Agreement except for
Permitted Liens.
(c) This Security Agreement creates a legal and valid security
interest on and in all of the Collateral in which Grantor now has rights and all
filings and other actions necessary or desirable to perfect and protect such
security interest have been duly taken. Accordingly, Secured Party has a fully
perfected first priority security interest in all of the Collateral in which
Grantor now has rights subject only to Permitted Liens. This Security Agreement
will create a legal and valid and fully perfected first priority security
interest in the Collateral in which Grantor later acquires rights, when Grantor
acquires those rights subject only to Permitted Liens and additional filings to
be made with the United States Copyright Office and/or Patent and Trademark
Office as are necessary to perfect Secured Party's security interest in
subsequent ownership rights and interests of Grantor in Copyrights, Patents,
Trademarks and Licenses.
(d) Grantor's chief executive office, principal place of business
and the place where Grantor maintains its records concerning the Collateral are
presently located at the address set forth on the signature page hereof. The
Collateral is presently located at such address.
5. COVENANTS. Grantor covenants and agrees with Secured Party that from
and after the date of this Security Agreement and until the Secured Obligations
have been performed and paid in full:
6.
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5.1 DISPOSITION OF COLLATERAL. Grantor shall not sell, lease,
transfer or otherwise dispose of any of the Collateral, or attempt or contract
to do so, other than (a) the sale of Inventory, (b) the granting of
non-exclusive Licenses and (c) the disposal of worn-out or obsolete Equipment,
all in the ordinary course of Grantor's business.
5.2 RELOCATION OF BUSINESS OR COLLATERAL. Grantor shall not
relocate its chief executive office, principal place of business or its records,
or allow the relocation of any Collateral (except as allowed pursuant to Section
5.1 immediately above) from such address(es) provided to Secured Party pursuant
to Section 4(d) above without twenty (20) days prior written notice to Secured
Party.
5.3 LIMITATION ON LIENS ON COLLATERAL. Grantor shall not,
directly or indirectly, create, permit or suffer to exist, and shall defend the
Collateral against and take such other action as is necessary to remove, any
Lien on the Collateral, except (a) Permitted Liens and (b) the Lien granted to
Secured Party under this Security Agreement.
5.4 INSURANCE. Maintain insurance policies insuring the
Collateral against loss or damage from such risks and in such amounts and forms
and with such companies as are customarily maintained by businesses similar to
Grantor.
5.5 TAXES, ASSESSMENTS, ETC. Grantor shall pay promptly when due
all property and other taxes, assessments and government charges or levies
imposed upon, and all claims (including claims for labor, materials and
supplies) against, the Equipment, Fixtures or Inventory, except to the extent
the validity thereof is being contested in good faith and adequate reserves are
being maintained in connection therewith.
5.6 MAINTENANCE OF RECORDS. Grantor shall keep and maintain at
its own cost and expense satisfactory and complete records of the Collateral.
5.7 NOTIFICATION REGARDING CHANGES IN INTELLECTUAL PROPERTY.
Grantor shall promptly advise Secured Party of any subsequent ownership right or
interest of Grantor in or to any Copyright, Patent, Trademark or License
acquired after the date hereof.
5.8 DEFENSE OF INTELLECTUAL PROPERTY. Grantor shall (i) protect,
defend and maintain the validity and enforceability of the Copyrights, Patents
and Trademarks, (ii) use its best efforts to detect infringements of the
Copyrights, Patents and Trademarks and promptly advise Secured Party in writing
of material infringements detected and (iii) not allow any Copyrights, Patents
or Trademarks to be abandoned, forfeited or dedicated to the public without the
written consent of Secured Party.
5.9 FURTHER ASSURANCES; PLEDGE OF INSTRUMENTS. At any time and
from time to time, upon the written request of Secured Party, and at the sole
expense of Grantor, Grantor shall promptly and duly execute and deliver any and
all such further instruments and documents and take such further action as
Secured Party may reasonably deem necessary or desirable to obtain the full
benefits of this Security Agreement, including, without limitation, the
registration of Copyrights, Patents, or Trademarks which are material to the
conduct of Grantor's business as currently conducted and facilitating the filing
of UCC-1 Financing Statements in all applicable
7.
167
jurisdictions and this Security Agreement (and any amendment hereto) with the
United States Copyright Office and/or Patent and Trademark Office, as
applicable.
6. RIGHTS AND REMEDIES UPON DEFAULT.
(a) During the continuance of any Event of Default, Secured Party
may exercise, in addition to all other rights and remedies granted to it under
this Security Agreement, all rights and remedies of a secured party under the
UCC.
(b) Grantor also agrees to pay all fees, costs and expenses of
Secured Party, including, without limitation, reasonable attorneys' fees,
incurred in connection with the enforcement of any of its rights and remedies
hereunder.
(c) Grantor hereby waives presentment, demand, protest or any
notice (to the maximum extent permitted by applicable law) of any kind in
connection with this Security Agreement or any Collateral.
(d) The Proceeds of any sale, disposition or other realization
upon all or any part of the Collateral shall be distributed by Secured Party in
the following order of priorities:
FIRST, to Secured Party in an amount sufficient to pay in full
the reasonable costs of Secured Party in connection with such sale, disposition
or other realization, including all fees, costs, expenses, liabilities and
advances incurred or made by Secured Party in connection therewith, including,
without limitation, reasonable attorneys' fees;
SECOND, to Secured Party in an amount equal to the then unpaid
Secured Obligations; and
FINALLY, upon payment in full of the Secured Obligations, to
Grantor or its representatives, in accordance with the UCC or as a court of
competent jurisdiction may direct.
7. INDEMNITY. Grantor agrees to defend, indemnify and hold harmless
Secured Party and its officers, employees, and agents against (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by this Security
Agreement and (b) all losses or expenses in any way suffered, incurred, or paid
by Secured Party as a result of or in any way arising out of this Security
Agreement (including without limitation, reasonable attorneys fees and
expenses), except for losses arising from or out of Secured Party's gross
negligence or willful misconduct.
8. LIMITATION ON SECURED PARTY'S DUTY IN RESPECT OF COLLATERAL. Secured
Party shall be deemed to have acted reasonably in the custody, preservation and
disposition of any of the Collateral if it takes such action as Grantor requests
in writing, but failure of Secured Party to comply with any such request shall
not in itself be deemed a failure to act reasonably, and no failure of Secured
Party to do any act not so requested shall be deemed a failure to act
reasonably.
9. REINSTATEMENT. This Security Agreement shall remain in full force and
effect and continue to be effective should any petition be filed by or against
Grantor for liquidation or
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reorganization, should Grantor become insolvent or make an assignment for the
benefit of creditors or should a receiver or trustee be appointed for all or any
significant part of Grantor's property and assets, and shall continue to be
effective or be reinstated, as the case may be, if at any time payment and
performance of the Secured Obligations, or any part thereof, is, pursuant to
applicable law, rescinded or reduced in amount, or must otherwise be restored or
returned by any obligee of the Secured Obligations, whether as a "voidable
preference," "fraudulent conveyance," or otherwise, all as though such payment
or performance had not been made. In the event that any payment, or any part
thereof, is rescinded, reduced, restored or returned, the Secured Obligations
shall be reinstated and deemed reduced only by such amount paid and not so
rescinded, reduced, restored or returned.
10. MISCELLANEOUS.
10.1 NO WAIVER; CUMULATIVE REMEDIES.
(a) Secured Party shall not by any act, delay, omission or
otherwise be deemed to have waived any of its respective rights or remedies
hereunder, nor shall any single or partial exercise of any right or remedy
hereunder on any one occasion preclude the further exercise thereof or the
exercise of any other right or remedy.
(b) The rights and remedies hereunder provided are cumulative and
may be exercised singly or concurrently, and are not exclusive of any rights and
remedies provided by law.
(c) None of the terms or provisions of this Security Agreement
may be waived, altered, modified or amended except by an instrument in writing,
duly executed by Grantor and Secured Party.
10.2 TERMINATION OF THIS SECURITY AGREEMENT. Subject to Section 9
hereof, this Security Agreement shall terminate upon the payment and performance
in full of the Secured Obligations. Upon such termination, Secured Party shall
execute such documents and instruments to evidence the termination hereof as
reasonably requested by Grantor.
10.3 SUCCESSOR AND ASSIGNS. This Security Agreement and all
obligations of Grantor hereunder shall be binding upon the successors and
assigns of Grantor, and shall, together with the rights and remedies of Secured
Party hereunder, inure to the benefit of Secured Party, any future holder of any
of the indebtedness and their respective successors and assigns. No sales of
participations, other sales, assignments, transfers or other dispositions of any
agreement governing or instrument evidencing the Secured Obligations or any
portion thereof or interest therein shall in any manner affect the lien granted
to Secured Party hereunder.
10.4 GOVERNING LAW. In all respects, including all matters of
construction, validity and performance, this Security Agreement and the Secured
Obligations arising hereunder shall be governed by, and construed and enforced
in accordance with, the laws of the State of Virginia applicable to contracts
made and performed in such state, without regard to the principles thereof
regarding conflict of laws.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Security
Agreement to be executed and delivered by its duly authorized officer on the
date first set forth above.
ADDRESS OF GRANTOR EDUTEST, INC.
By:
----------------------------------- --------------------------------
Printed Name:
----------------------------------- ----------------------
Title:
----------------------------------- -----------------------------
ACCEPTED AND ACKNOWLEDGED BY:
LIGHTSPAN, INC.
By:
--------------------------------
Printed Name:
----------------------
Title:
-----------------------------
10.
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SCHEDULE A
LIENS EXISTING ON THE DATE OF THIS SECURITY AGREEMENT
1. Pursuant to that certain Business BankLine Note and Agreement
dated December 14, 1998, of which the maker is the Grantor and
the payee is Wachovia Bank, N.A., in the original principal
amount of $85,000.
2. Pursuant to that certain Promissory Note dated May 16, 2000, of
which the maker is Grantor and the payee is Xxxxxxx X. Xxxxxx in
the original principal amount of $50,000.
A-1.
171
SCHEDULE B
LOCATION OF COLLATERAL
ENTITY ADDRESS
NONE.
B-1.
172
EXHIBIT Q
[XxXxxxxxxx Kaine & Grant letterhead]
_____________, 2000
-----------------------------------
-----------------------------------
-----------------------------------
Re: AGREEMENT AND PLAN OF MERGER AND REORGANIZATION DATED MAY ___, 2000
AMONG PUBLIC CO., PUBLIC CO. ACQUISITION SUB, INC., EDUCATOR, et. al
Dear _________________:
We have acted as counsel for Educator, a Virginia corporation (the "Company"),
in connection with the _______________________________ dated as of ________,
2000 (the "Agreement"), by and among Public Co., a Delaware corporation, Public
Co. Acquisition Sub, Inc., a Delaware corporation, the Company and the
Designated Shareholders. Capitalized terms not defined herein have the meanings
given them in the Agreement. This opinion is furnished to you pursuant to
Section ______ of the Agreement.
In connection with our opinions expressed herein, we have participated in the
preparation of, or examined, the Agreement and the other documents relating
thereto or required thereby (the "Transaction Documents"). In addition, we have
examined originals or copies of the following:
(i) a Certificate of Good Standing for the Company issued by the
Commissioner of the State Corporation Commission of the Commonwealth of
Virginia;
(ii) a certified copy of the Articles of Incorporation of the Company;
(iii) a copy of the bylaws of the Company; and
(iv) a copy of the resolutions of the Company's directors approving the
consummation of the transactions contemplated by the Agreement, and other
matters that we have deemed necessary and appropriate.
In our examination, we have assumed:
(a) the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to originals of all documents
submitted to us as certified or photographic copies, and the accuracy and
completeness of all documents;
(b) the legal capacity of all natural persons executing any documents,
whether on behalf of themselves or other persons;
(c) that all persons executing Transaction Documents on behalf of any
party (other than the Buyer) are duly authorized; and
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173
(d) that each of the parties other than the Company has duly and validly
executed and delivered the Transaction Documents to which that party is a
signatory and the party's obligations are valid and legally binding obligations
enforceable in accordance with the terms of the respective Transaction
Documents.
In rendering our opinions, we have not examined any court records, dockets or
other public records, nor have we investigated the Company's history or other
transactions, except as specifically set forth herein.
Whenever we state our opinion to be to our knowledge or known to us, we mean
that neither our attorneys who have given substantive legal attention to
representation of the Company nor our attorneys who have given substantive legal
attention to representation of the Company in the transaction have acquired
knowledge of the facts whose existence or absence form the basis for such
opinion and none has made any investigation, except as otherwise expressly
stated, to ascertain such facts.
Based on our review of the foregoing and subject to the assumptions and
qualifications set forth in this letter, we are of the opinion, as of the date
of this letter, that:
1. The Agreement, the Registration Rights Agreement, the Voting
Agreement and the Releases are enforceable against the Company and its
stockholders, as applicable, each in accordance with its terms, except as such
enforceability may be limited by the effects of bankruptcy, insolvency,
reorganization and other similar laws and to general principles of equity,
whether construed in proceedings at law or in equity.
2. The authorized capital stock of the Company consists of ____ shares
of common stock, _____ par value, of which __________ shares are outstanding,
and ___ shares of preferred stock, of which no shares are outstanding. There are
no outstanding options, warrants or other rights to acquire any of the equity
securities of the Company.
3. The Company is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation as set forth
in Part 2.1 of the Disclosure Schedule, with full corporate power to own its
properties and to engage in its business as presently conducted or contemplated,
and is duly qualified and in good standing as a foreign corporation under the
laws of each other jurisdiction in which it is authorized to do business as set
forth in Part 2.1 of the Disclosure Schedule.
4. Neither the execution and delivery of the Agreement nor the
consummation of any or all of the transactions contemplated thereby (a) violates
any provision of the articles of incorporation or bylaws (or other governing
instrument) of the Company, (b) breaches or constitutes a default (or an event
that, with notice or lapse of time or both, would constitute a default) under,
or results in the termination of, or accelerates the performance required by, or
excuses performance by the Company of any of its obligations under, or causes
the acceleration of the maturity of any debt or obligation pursuant to, or
results in the creation or imposition of any Encumbrance upon any property or
assets of the Company under, any agreement or commitment to which the Company is
a party or by which any of its respective properties or assets are bound, or to
which any of the properties or assets of the Company are subject, or (c)
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174
violates any statute, law, regulation, or rule, or any judgment, decree or order
of any court or other Governmental Body applicable to the Company.
5. No consent, approval or authorization of, or declaration, filing or
registration with, any Governmental Body is required in connection with the
execution, delivery and performance of the Agreement or the consummation of the
transactions contemplated thereby.
6. To our knowledge, there is no Proceeding by or before any court or
Governmental Body pending or overtly threatened against or involving the Company
or that questions or challenges the validity of the Agreement or any action
taken or to be taken by the Company pursuant to the Agreement or in connection
with the transactions contemplated thereby, and the Company is not subject to
any judgment, order or decree having prospective effect.
The opinions expressed herein are based upon the following assumptions and are
expressly qualified and limited as follows:
(A) To the extent that the obligations of the Company may be dependent
upon such matters, we have assumed for purposes of this opinion, other than with
respect to the Company, that each additional party to the agreements and
contracts referred to herein is duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation; that each such
other party has the requisite corporate and other organizational power and
authority to perform its obligations under such agreements and contracts, as
applicable; and that such agreements and contracts have been duly authorized,
executed and delivered by, and each of them constitutes the legally valid and
binding obligation of, such other parties, as applicable, enforceable against
such other parties in accordance with their respective terms.
(B) We express no opinion as to the laws of any jurisdiction other than
the laws of the Commonwealth of Virginia and the federal law of the United
States of America. We express no opinion with respect to the enforceability of
provisions in the Transaction Documents providing for (i) specific performance,
injunctive relief or other equitable remedies, regardless of whether such
enforceability is sought in a proceeding in equity or at law, (ii) a choice of
law to the extent limited by the choice-of-law rules of the Commonwealth of
Virginia and general principles of public policy or (iii) consents or waivers as
to jurisdiction or service of process.
(C) With respect to the enforceability of the Transaction Documents,
certain of which are governed by the laws of states other than the Commonwealth
of Virginia, we have assumed, without independent investigation, that the laws
of such states with respect to the matters set forth herein are the same,
substantively, as the laws of the Commonwealth of Virginia.
(D) We assume no obligation to supplement our opinions if any applicable
law changes after the date of this letter or if we become aware of any facts
that might alter the opinions expressed in this letter after the date of this
letter.
The opinions expressed in this letter are solely for your benefit and are
furnished only with respect to the transactions contemplated by the Transaction
Documents. Accordingly, these opinions may not be relied upon by or quoted to
any person or entity without, in each instance, our prior written consent. The
opinions expressed in this letter are limited to the matters set forth
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175
in this letter, and no other questions shall be implied or inferred beyond the
matters expressly stated.
XxXXXXXXXX KAINE & GRANT
By:
-----------------------------------
, Director
------------------------
4.
176
EXHIBIT R
VOTING AGREEMENT
THIS VOTING AGREEMENT is entered into as of June __, 2000, by and
between LIGHTSPAN, INC., a Delaware corporation ("PARENT"), and each of the
Persons set forth on EXHIBIT A hereto (each a "STOCKHOLDER" and collectively the
"STOCKHOLDERS").
RECITALS
A. Parent, Educator Acquisition Sub, a Delaware corporation and a wholly
owned subsidiary of Parent ("MERGER SUB"), and Edutest, Inc., a Virginia
corporation (the "Company"), are entering into (i) an Agreement and Plan of
Merger and Reorganization of even date herewith (the "REORGANIZATION AGREEMENT")
which provides (subject to the conditions set forth therein) for the merger of
the Company into Merger Sub (the "MERGER") and (ii) a Note Purchase Agreement
and related documents referred to therein (the "LOAN DOCUMENTS") pursuant to
which the Company will borrow funds from Parent as provided therein (the
"LOAN").
B. In order to induce Parent and Merger Sub to enter into the
Reorganization Agreement and the Loan Documents, Stockholder is entering into
this Voting Agreement.
AGREEMENT
The parties to this Voting Agreement, intending to be legally bound,
agree as follows:
SECTION 1. CERTAIN DEFINITIONS
For purposes of this Voting Agreement:
(a) "COMPANY COMMON STOCK" shall mean the common stock, par value
$_____ per share, of the Company.
(b) "EXPIRATION DATE" shall mean the earlier of (A) the later of
(i) the date upon which the Reorganization Agreement is validly terminated or
(ii) the date the Loan is repaid in its entirety, including principal, interest
and any other amounts that may be due thereunder, or (B) the date upon which the
Merger becomes effective.
(c) Stockholder shall be deemed to "OWN" or to have acquired
"OWNERSHIP" of a security if Stockholder: (i) is the record owner of such
security; or (ii) is the "beneficial owner" (within the meaning of Rule 13d-3
under the Securities Exchange Act of 1934) of such security.
(d) "PERSON" shall mean any (i) individual, (ii) corporation,
limited liability company, partnership or other entity, or (iii) governmental
authority.
(e) "SUBJECT SECURITIES" shall mean: (i) all securities of the
Company (including all shares of Company Common Stock, preferred stock and all
options, warrants and other rights to acquire shares of Company Common Stock)
Owned by Stockholder as of the date of this Agreement; and (ii) all additional
securities of the Company (including all additional
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shares of Company Common Stock, preferred stock and all additional options,
warrants and other rights to acquire shares of Company Common Stock) of which
Stockholder acquires Ownership during the period from the date of this Agreement
through the Expiration Date.
(f) A Person shall be deemed to have a effected a "TRANSFER" of a
security if such Person directly or indirectly: (i) sells, pledges, encumbers,
grants an option with respect to, transfers or disposes of such security or any
interest in such security; or (ii) enters into an agreement or commitment
contemplating the possible sale of, pledge of, encumbrance of, grant of an
option with respect to, transfer of or disposition of such security or any
interest therein.
SECTION 2. TRANSFER OF SUBJECT SECURITIES
2.1 TRANSFEREE OF SUBJECT SECURITIES TO BE BOUND BY THIS AGREEMENT.
Stockholder agrees that, during the period from the date of this Voting
Agreement through the Expiration Date, Stockholder shall not cause or permit any
Transfer of any of the Subject Securities to be effected unless each Person to
which any of such Subject Securities, or any interest in any of such Subject
Securities, is or may be transferred shall have: (a) executed a counterpart of
this Voting Agreement and a proxy in the form attached hereto as EXHIBIT B (with
such modifications as Parent may reasonably request); and (b) agreed to hold
such Subject Securities (or interest in such Subject Securities) subject to all
of the terms and provisions of this Voting Agreement.
2.2 TRANSFER OF VOTING RIGHTS. Stockholder agrees that, during the
period from the date of this Voting Agreement through the Expiration Date,
Stockholder shall ensure that: (a) none of the Subject Securities is deposited
into a voting trust; and (b) no proxy is granted, and no voting agreement or
similar agreement is entered into, with respect to any of the Subject
Securities.
SECTION 3. VOTING OF SHARES
3.1 VOTING AGREEMENT. Stockholder agrees that, during the period from
the date of this Voting Agreement through the Expiration Date:
(a) at any meeting of stockholders of the Company, however called,
Stockholder shall (unless otherwise directed in writing by Parent) cause all
outstanding Subject Securities that are Owned by Stockholder as of the record
date fixed for such meeting to be voted (i) in favor of the approval and
adoption of the Reorganization Agreement and the approval of the Merger and (ii)
in favor of the authorization of a new series of preferred stock into which the
note(s) evidencing the Loan would be convertible (whether by Certificate of
Designations or amendment to the Company's Articles of Incorporation); and (iii)
in favor of each of the other actions contemplated by the Reorganization
Agreement (including, as applicable, whether by vote or by written consent or
agreement, with respect to the conversion of preferred stock of the Company as
contemplated by the Reorganization Agreement) and the Loan Documents; and
(b) in the event written consents are solicited or otherwise sought
from stockholders of the Company with respect to the approval or adoption of the
Reorganization Agreement, or the approval of the Merger or the approvals set
forth above with respect to the Loan, or any of the other actions contemplated
by the Reorganization Agreement (including, as
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applicable, whether by vote or by written consent or agreement, with respect to
the conversion of preferred stock of the Company as contemplated by the
Reorganization Agreement) and the Loan Documents, Stockholder shall (unless
otherwise directed in writing by Parent) cause to be executed, with respect to
all outstanding Subject Securities that are Owned by Stockholder as of the
record date fixed for the consent to the proposed action, a written consent or
written consents to such proposed action.
3.2 PROXY; FURTHER ASSURANCES.
(a) Contemporaneously with the execution of this Voting Agreement:
(i) Stockholder shall deliver to Parent a proxy in the form attached to this
Voting Agreement as EXHIBIT B, which shall be irrevocable to the fullest extent
permitted by law, with respect to the shares referred to therein (the "PROXY");
and (ii) Stockholder shall cause to be delivered to Parent an additional proxy
(in the form attached hereto as EXHIBIT B) executed on behalf of the record
owner of any Subject Securities that are owned beneficially (within the meaning
of Rule 13d-3 under the Securities Exchange Act of 1934), but not of record, by
Stockholder.
(b) Stockholder shall, at his own expense, perform such further
acts and execute such further documents and instruments as may reasonably be
required to vest in Parent the power to carry out and give effect to the
provisions of this Voting Agreement.
SECTION 4. WAIVER OF APPRAISAL RIGHTS
Stockholder hereby irrevocably and unconditionally waives, and agrees to
cause to be waived and to prevent the exercise of, any rights of appraisal, any
dissenters' rights and any similar rights relating to the Merger or any related
transaction that Stockholder or any other Person may have by virtue of the
ownership of any outstanding shares of Company Common Stock Owned by
Stockholder.
SECTION 5. NO SOLICITATION
Stockholder agrees that, during the period from the date of this Voting
Agreement through the Expiration Date, Stockholder shall not, directly or
indirectly, and Stockholder shall ensure that his Representatives (as defined in
the Reorganization Agreement) do not, directly or indirectly: (i) solicit,
initiate, encourage or induce the making, submission or announcement of any
Acquisition Proposal (as defined in the Reorganization Agreement) or take any
action that could reasonably be expected to lead to an Acquisition Proposal;
(ii) furnish any information regarding the Company or any direct or indirect
subsidiary of the Company to any Person in connection with or in response to an
Acquisition Proposal or potential Acquisition Proposal; or (iii) engage in
discussions with any Person with respect to any Acquisition Proposal.
Stockholder shall immediately cease and discontinue, and Stockholder shall
ensure that his Representatives immediately cease and discontinue, any existing
discussions with any Person that relate to any Acquisition Proposal.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER
Stockholder hereby represents and warrants to Parent as follows:
3.
179
6.1 AUTHORIZATION, ETC. Stockholder has the absolute and unrestricted
right, power, authority and capacity to execute and deliver this Voting
Agreement and the Proxy and to perform his obligations hereunder and thereunder.
This Voting Agreement and the Proxy have been duly executed and delivered by
Stockholder and constitute legal, valid and binding obligations of Stockholder,
enforceable against Stockholder in accordance with their terms, subject to (i)
laws of general application relating to bankruptcy, insolvency and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies.
6.2 NO CONFLICTS OR CONSENTS.
(a) The execution and delivery of this Voting Agreement and the
Proxy by Stockholder do not, and the performance of this Voting Agreement and
the Proxy by Stockholder will not: (i) conflict with or violate any law, rule,
regulation, order, decree or judgment applicable to Stockholder or by which he
or any of his properties is or may be bound or affected; or (ii) other than with
respect to those certain Voting Trust Agreements between shareholders of the
Company, Xxxxx X. Xxxxxxxxx Ph.D. as trustee and the Company (the "VOTING TRUST
AGREEMENTS"), result in or constitute (with or without notice or lapse of time)
any breach of or default under, or give to any other Person (with or without
notice or lapse of time) any right of termination, amendment, acceleration or
cancellation of, or result (with or without notice or lapse of time) in the
creation of any encumbrance or restriction on any of the Subject Securities
pursuant to, any contract to which Stockholder is a party or by which
Stockholder or any of his affiliates or properties is or may be bound or
affected.
(b) The execution and delivery of this Voting Agreement and the
Proxy by Stockholder do not, and the performance of this Voting Agreement and
the Proxy by Stockholder will not, require any consent or approval of any
Person.
6.3 TITLE TO SECURITIES. As of the date of this Voting Agreement: (a)
Stockholder (or Xxxxx X. Xxxxxxxxx as trustee under the Voting Trust Agreements,
as appropriate) holds of record (free and clear of any encumbrances or
restrictions other than the Voting Trust Agreement) the number of outstanding
shares of Company Common Stock set forth under the heading "Shares Held of
Record" on the signature page hereof; (b) Stockholder (or Xxxxx X. Xxxxxxxxx as
trustee under the Voting Trust Agreements, as appropriate) holds (free and clear
of any encumbrances or restrictions other than the Voting Trust Agreement) the
options, warrants and other rights to acquire shares of Company Common Stock set
forth under the heading "Options and Other Rights" on the signature page hereof;
(c) Stockholder Owns the additional securities of the Company set forth under
the heading "Additional Securities Beneficially Owned" on the signature page
hereof; and (d) Stockholder does not directly or indirectly Own any shares of
capital stock or other securities of the Company, or any option, warrant or
other right to acquire (by purchase, conversion or otherwise) any shares of
capital stock or other securities of the Company, other than the shares and
options, warrants and other rights set forth on the signature page hereof.
6.4 ACCURACY OF REPRESENTATIONS. The representations and warranties
contained in this Voting Agreement are accurate in all respects as of the date
of this Voting Agreement, will
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be accurate in all respects at all times through the Expiration Date and will be
accurate in all respects as of the date of the consummation of the Merger as if
made on that date.
SECTION 7. ADDITIONAL COVENANTS OF STOCKHOLDER
7.1 FURTHER ASSURANCES. From time to time and without additional
consideration, Stockholder shall execute and deliver, or cause to be executed
and delivered, such additional transfers, assignments, endorsements, proxies,
consents and other instruments, and shall take such further actions, as Parent
may reasonably request for the purpose of carrying out and furthering the intent
of this Voting Agreement.
SECTION 8. MISCELLANEOUS
8.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
representations, warranties, covenants and agreements made by Stockholder in
this Voting Agreement shall survive until the date six months following the
earliest of (i) the consummation of the Merger, (ii) any termination of the
Reorganization Agreement, and (iii) the Expiration Date.
8.2 INDEMNIFICATION. Stockholder shall hold harmless and indemnify
Parent and Parent's affiliates from and against, and shall compensate and
reimburse Parent and Parent's affiliates for, any loss, damage, claim,
liability, fee (including attorneys' fees), demand, cost or expense (regardless
of whether or not such loss, damage, claim, liability, fee, demand, cost or
expense relates to a third-party claim) that is directly or indirectly suffered
or incurred by Parent or any of Parent's affiliates, or to which Parent or any
of Parent's affiliates otherwise becomes subject, and that arises directly or
indirectly from, or relates directly or indirectly to, (a) any inaccuracy in or
breach of any representation or warranty contained in this Voting Agreement, or
(b) any failure on the part of Stockholder to observe, perform or abide by, or
any other breach of, any restriction, covenant, obligation or other provision
contained in this Voting Agreement or in the Proxy.
8.3 EXPENSES. All costs and expenses incurred in connection with the
transactions contemplated by this Voting Agreement shall be paid by the party
incurring such costs and expenses.
8.4 NOTICES. Any notice or other communication required or permitted to
be delivered to either party under this Voting Agreement shall be in writing and
shall be deemed properly delivered, given and received when delivered (by hand,
by registered mail, by courier or express delivery service or by facsimile) to
the address or facsimile telephone number set forth beneath the name of such
party below (or to such other address or facsimile telephone number as such
party shall have specified in a written notice given to the other party):
if to Stockholder:
at the address set forth below Stockholder's signature on the
signature page hereof
if to Parent:
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Lightspan, Inc.
-------------------
-------------------
Attn:
-------------
Fax:
-------------
8.5 SEVERABILITY. If any provision of this Voting Agreement or any part
of any such provision is held under any circumstances to be invalid or
unenforceable in any jurisdiction, then (a) such provision or part thereof
shall, with respect to such circumstances and in such jurisdiction, be deemed
amended to conform to applicable laws so as to be valid and enforceable to the
fullest possible extent, (b) the invalidity or unenforceability of such
provision or part thereof under such circumstances and in such jurisdiction
shall not affect the validity or enforceability of such provision or part
thereof under any other circumstances or in any other jurisdiction, and (c) the
invalidity or unenforceability of such provision or part thereof shall not
affect the validity or enforceability of the remainder of such provision or the
validity or enforceability of any other provision of this Voting Agreement. Each
provision of this Voting Agreement is separable from every other provision of
this Voting Agreement, and each part of each provision of this Voting Agreement
is separable from every other part of such provision.
8.6 ENTIRE AGREEMENT. This Voting Agreement, the Proxy and any other
documents delivered by the parties in connection herewith constitute the entire
agreement between the parties with respect to the subject matter hereof and
thereof and supersede all prior agreements and understandings between the
parties with respect thereto. No addition to or modification of any provision of
this Voting Agreement shall be binding upon either party unless made in writing
and signed by both parties.
8.7 ASSIGNMENT; BINDING EFFECT. Except as provided herein, neither this
Voting Agreement nor any of the interests or obligations hereunder may be
assigned or delegated by Stockholder and any attempted or purported assignment
or delegation of any of such interests or obligations shall be void. Subject to
the preceding sentence, this Voting Agreement shall be binding upon Stockholder
and his heirs, estate, executors, personal representatives, successors and
assigns, and shall inure to the benefit of Parent and its successors and
assigns. Without limiting any of the restrictions set forth in Section 2 or
elsewhere in this Voting Agreement, this Voting Agreement shall be binding upon
any Person to whom any Subject Securities are transferred. Nothing in this
Voting Agreement is intended to confer on any Person (other than Parent and its
successors and assigns) any rights or remedies of any nature.
8.8 SPECIFIC PERFORMANCE. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Voting Agreement or
the Proxy was not performed in accordance with its specific terms or was
otherwise breached. Stockholder agrees that, in the event of any breach or
threatened breach by Stockholder of any covenant or obligation contained in this
Voting Agreement or in the Proxy, Parent shall be entitled (in addition to any
other remedy that may be available to it, including monetary damages) to seek
and obtain (a) a decree or order of specific performance to enforce the
observance and performance of such covenant or obligation, and (b) an injunction
restraining such breach or threatened breach. Stockholder further agrees that
neither Parent nor any other Person shall be required to obtain, furnish or post
any bond or similar instrument in connection with or as a condition to obtaining
any remedy
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referred to in this Section 8.8, and Stockholder irrevocably waives any right he
may have to require the obtaining, furnishing or posting of any such bond or
similar instrument.
8.9 NON-EXCLUSIVITY. The rights and remedies of Parent under this Voting
Agreement are not exclusive of or limited by any other rights or remedies which
it may have, whether at law, in equity, by contract or otherwise, all of which
shall be cumulative (and not alternative). Without limiting the generality of
the foregoing, the rights and remedies of Parent under this Voting Agreement,
and the obligations and liabilities of Stockholder under this Voting Agreement,
are in addition to their respective rights, remedies, obligations and
liabilities under common law requirements and under all applicable statutes,
rules and regulations. Nothing in this Voting Agreement shall limit any of
Stockholder's obligations, or the rights or remedies of Parent, under any
Affiliate Agreement between Parent and Stockholder; and nothing in any such
Affiliate Agreement shall limit any of Stockholder's obligations, or any of the
rights or remedies of Parent, under this Voting Agreement.
8.10 GOVERNING LAW; VENUE.
(a) This Voting Agreement and the Proxy shall be construed in
accordance with, and governed in all respects by, the laws of the State of
California (without giving effect to principles of conflicts of laws).
(b) Any legal action or other legal proceeding relating to this
Voting Agreement or the Proxy or the enforcement of any provision of this Voting
Agreement or the Proxy may be brought or otherwise commenced in any state or
federal court located in the County of San Diego, California. Stockholder:
(i) expressly and irrevocably consents and submits to the
jurisdiction of each state and federal court located in the County of San Diego,
California (and each appellate court located in the State of California), in
connection with any such legal proceeding;
(ii) agrees that service of any process, summons, notice or
document by U.S. mail addressed to him at the address set forth in Section 8.4
shall constitute effective service of such process, summons, notice or document
for purposes of any such legal proceeding;
(iii) agrees that each state and federal court located in
the County of San Diego, California, shall be deemed to be a convenient forum;
and
(iv) agrees not to assert (by way of motion, as a defense or
otherwise), in any such legal proceeding commenced in any state or federal court
located in the County of San Diego, California, any claim that Stockholder is
not subject personally to the jurisdiction of such court, that such legal
proceeding has been brought in an inconvenient forum, that the venue of such
proceeding is improper or that this Voting Agreement or the subject matter of
this Voting Agreement may not be enforced in or by such court.
Nothing contained in this Section 8.10 shall be deemed to limit or otherwise
affect the right of Parent to commence any legal proceeding or otherwise proceed
against Stockholder in any other forum or jurisdiction.
7.
183
(c) STOCKHOLDER IRREVOCABLY WAIVES THE RIGHT TO A JURY TRIAL IN
CONNECTION WITH ANY LEGAL PROCEEDING RELATING TO THIS VOTING AGREEMENT OR THE
PROXY OR THE ENFORCEMENT OF ANY PROVISION OF THIS VOTING AGREEMENT OR THE PROXY.
8.11 COUNTERPARTS. This Voting Agreement may be executed by the parties
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument.
8.12 CAPTIONS. The captions contained in this Voting Agreement are for
convenience of reference only, shall not be deemed to be a part of this Voting
Agreement and shall not be referred to in connection with the construction or
interpretation of this Voting Agreement.
8.13 ATTORNEYS' FEES. If any legal action or other legal proceeding
relating to this Voting Agreement or the enforcement of any provision of this
Voting Agreement is brought against Stockholder, the prevailing party shall be
entitled to recover reasonable attorneys' fees, costs and disbursements (in
addition to any other relief to which the prevailing party may be entitled).
8.14 WAIVER. No failure on the part of Parent to exercise any power,
right, privilege or remedy under this Voting Agreement, and no delay on the part
of Parent in exercising any power, right, privilege or remedy under this Voting
Agreement, shall operate as a waiver of such power, right, privilege or remedy;
and no single or partial exercise of any such power, right, privilege or remedy
shall preclude any other or further exercise thereof or of any other power,
right, privilege or remedy. Parent shall not be deemed to have waived any claim
available to Parent arising out of this Voting Agreement, or any power, right,
privilege or remedy of Parent under this Voting Agreement, unless the waiver of
such claim, power, right, privilege or remedy is expressly set forth in a
written instrument duly executed and delivered on behalf of Parent; and any such
waiver shall not be applicable or have any effect except in the specific
instance in which it is given.
8.15 CONSTRUCTION.
(a) For purposes of this Voting Agreement, whenever the context
requires: the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; the feminine
gender shall include the masculine and neuter genders; and the neuter gender
shall include masculine and feminine genders.
(b) The parties agree that any rule of construction to the effect
that ambiguities are to be resolved against the drafting party shall not be
applied in the construction or interpretation of this Voting Agreement.
(c) As used in this Voting Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
8.
184
(d) Except as otherwise indicated, all references in this Voting
Agreement to "Sections" and "Exhibits" are intended to refer to Sections of this
Voting Agreement and Exhibits to this Voting Agreement.
9.
185
IN WITNESS WHEREOF, Parent and each Stockholder have caused this Voting
Agreement to be executed as of the date first written above.
LIGHTSPAN, INC.
By:
---------------------------------
STOCKHOLDER
------------------------------------
Name:
Address:
----------------------------
Facsimile:
--------------------------
Additional Securities
Shares Held of Record Options and Other Rights Beneficially Owned
--------------------- ------------------------ ---------------------
10.
186
EXHIBIT A
SCHEDULE OF STOCKHOLDERS
Name
--------------------------------------------
1. Xxxxx X. Xxxxxxxxx, Ph.D.
2. Xxxxxx X. Xxxxxxx, Ph.D.
3. Xxxx X. Xxxxx
4. Next Generation Fund, L.L.C.
5. Xxxxxx Investment Fund II, L.L.L.P.
A-1
187
EXHIBIT B
FORM OF IRREVOCABLE PROXY
The undersigned stockholder of EduTest, Inc., a Virginia corporation
(the "COMPANY"), hereby irrevocably (to the fullest extent permitted by law)
appoints and constitutes Xxxx Xxxxxx, Xxxxxxxx XxXxxxx and Lightspan, Inc., a
Delaware corporation ("PARENT"), and each of them, the attorneys and proxies of
the undersigned with full power of substitution and resubstitution, to the full
extent of the undersigned's rights with respect to (i) the outstanding shares of
capital stock of the Company owned of record by the undersigned as of the date
of this proxy, which shares are specified on the final page of this proxy, and
(ii) any and all other shares of capital stock of the Company which the
undersigned may acquire on or after the date hereof. (The shares of the capital
stock of the Company referred to in clauses "(i)" and "(ii)" of the immediately
preceding sentence are collectively referred to as the "SHARES.") Upon the
execution hereof, all prior proxies given by the undersigned with respect to any
of the Shares are hereby revoked, and the undersigned agrees that no subsequent
proxies will be given with respect to any of the Shares.
This proxy is irrevocable, is coupled with an interest and is granted in
connection with the Voting Agreement, dated as of the date hereof, between
Parent and the undersigned (the "VOTING AGREEMENT"), and is granted in
consideration of Parent entering into (i) the Agreement and Plan of Merger and
Reorganization, dated as of the date hereof, among Parent, Parent Co.
Acquisition Sub and the Company (the "REORGANIZATION AGREEMENT") and (ii) a Note
Purchase Agreement and related documents referred to therein (the "Loan
Documents") pursuant to which the Company will borrow funds from Parent as
provided therein (the "Loan").
The attorneys and proxies named above will be empowered, and may
exercise this proxy, to vote the Shares at any time until the earlier to occur
of (A) the later of (i) the valid termination of the Reorganization Agreement,
or (ii) the date on which the Loan is repaid in its entirety, including
principal, interest and any other amounts that may be due thereunder; or (B) the
effective time of the merger contemplated by the Reorganization Agreement (the
"MERGER"), at any meeting of the stockholders of the Company, however called, or
in connection with any solicitation of written consents from stockholders of the
Company, in favor of the approval and adoption of the Reorganization Agreement
and the approval of the Merger, and in favor of the authorization of a new
series of preferred stock into which the note(s) evidencing the Loan would be
convertible (whether by Certificate of Designation or amendment to the Company's
Articles of Incorporation), and in favor of each of the other actions
contemplated by the Reorganization Agreement and the Loan Documents.
The undersigned may vote the Shares on all other matters.
This proxy shall be binding upon the heirs, estate, executors, personal
representatives, successors and assigns of the undersigned (including any
transferee of any of the Shares).
If any provision of this proxy or any part of any such provision is held
under any circumstances to be invalid or unenforceable in any jurisdiction, then
(a) such provision or part
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188
thereof shall, with respect to such circumstances and in such jurisdiction, be
deemed amended to conform to applicable laws so as to be valid and enforceable
to the fullest possible extent, (b) the invalidity or unenforceability of such
provision or part thereof under such circumstances and in such jurisdiction
shall not affect the validity or enforceability of such provision or part
thereof under any other circumstances or in any other jurisdiction, and (c) the
invalidity or unenforceability of such provision or part thereof shall not
affect the validity or enforceability of the remainder of such provision or the
validity or enforceability of any other provision of this proxy. Each provision
of this proxy is separable from every other provision of this proxy, and each
part of each provision of this proxy is separable from every other part of such
provision.
This proxy shall terminate upon the earlier of the valid termination of
the Reorganization Agreement or the effective time of the Merger.
Dated: June __, 2000.
-----------------------------------------
Name
Number of shares of common stock of the
Company owned of record as of the date of
this proxy:
-----------------------------------------
B-2
189
EXHIBIT S
SIGNATORIES TO VOTING AGREEMENT
Name
--------------------------------------------
1. Xxxxx X. Xxxxxxxxx, Ph.D.
2. Xxxxxx X. Xxxxxxx, Ph.D.
3. Xxxx X. Xxxxx
4. Next Generation Fund, L.L.C.
5. Xxxxxx Investment Fund II, L.L.L.P.
190
EXHIBIT T
PURCHASER REPRESENTATIVE CERTIFICATE
FOR
EDUTEST, INC.
Lightspan, Inc.
00000 Xxxxxx Xxxxx Xxxxx
Xxx Xxxxx, XX 00000
The information contained herein is being furnished by Xxxxxxxx Xxxxxxx
& Company, L.L.C. ("PCV") as a Purchaser Representative as that term is defined
in Rule 501 of Regulation D ("Purchaser Representative"), representing certain
shareholders (the "Shareholders" and, singularly, the "Shareholder") of Edutest,
Inc., a Virginia corporation (the "Company") in connection with the exchange of
shares of the Company's stock for shares of Common Stock of Lightspan, Inc., a
Delaware corporation ("Lightspan") (the "Shares") pursuant to Section 4(2) of
the Securities Act of 1933, as amended (the "Securities Act") and Rule 506
("Rule 506") of Regulation D ("Regulation D") promulgated thereunder, and
applicable state law and the regulations promulgated thereunder (the "Limited
Offering Exemption").
PCV understands that you will rely upon the information contained herein
for purposes of such determination. PCV certifies that it represents the
Shareholders listed on Exhibit A hereto as their Purchaser Representative, in
connection with evaluating the merits and risks of the prospective investment in
Lightspan. PCV represents that the information contained herein is complete and
accurate and may be relied upon by the Company to determine whether the
Shareholders meet the requirements of Rule 506 and the Limited Offering
Exemption.
PCV understands that the Shareholders listed on EXHIBIT A hereto are
individuals that do not meet the income or net worth requirements set forth in
the Investor Representation Letter previously distributed to the Shareholders,
and that such Shareholders have had the opportunity to use the services of PCV
as a Purchaser Representative, in connection with evaluating the merits and
risks of the prospective investment in Lightspan. In addition, PCV further
understands, acknowledges and certifies that PCV has disclosed to such
Shareholders, in writing a reasonable time before the exchange of any Shares, if
any of the following information is not true and accurate:
(i) Neither PCV nor any of its affiliates is an affiliate,
director, officer or other employee of Lightspan, or beneficial owner of ten
percent (10%) or more of any class of securities or 10 percent or more of the
equity interest in Lightspan.
(ii) There is no material relationship between PCV or any of its
affiliates and Lightspan or its officers, or any of their affiliates that
exists, that is mutually understood to be contemplated, or that has existed at
any time during the previous two (2) years, and no compensation has been
received or is to be received as a result of such relationship.
As a regular part of its business, PCV is relied upon by others for
investment recommendations or decisions, and PCV is customarily compensated for
such services, either specifically or by way of compensation for related
professional services. PCV has such
191
knowledge and experience in financial and business matters that it is capable of
evaluating, together with the Shareholders, the merits and risks of the
prospective investment in Lightspan. PCV has acknowledged in writing, during the
course of the transaction, to be available to act as such Shareholders'
Purchaser Representative in connection with evaluating the merits and risks of
Shareholders' prospective investment in Lightspan.
The term "material" when used to modify "relationship" means any
relationship that a reasonable investor might consider important in the making
of the decision whether to acknowledge a person as his Purchaser Representative.
The term "affiliate" of a person means a person that directly or
indirectly through one or more intermediaries controls, or is controlled by, or
is under common control with, such person.
All information furnished hereunder is for the sole use of Lightspan and
its counsel, except that this certificate may be furnished to such parties as
Lightspan deems desirable to establish compliance with federal or state
securities laws.
The undersigned's full name, business and phone number are:
Xxxxxxxx, Xxxxxxx & Company, L.L.C.
000 Xxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
IN WITNESS WHEREOF, the undersigned has executed this Purchaser
Representative Certificate as of the date below.
Date: _____________, 2000 XXXXXXXX, XXXXXXX & COMPANY, L.L.C.
By:
------------------------------------
Name: [XXXXXXXX'X FULL NAME]
Title:
---------------------------------
2
192
Each of the undersigned Shareholders hereby certify that he/she/it is
represented by Xxxxxxxx, Xxxxxxx & Company, L.L.C. as their respective Purchaser
Representative as set forth above.
------------------------------------
------------------------------------
------------------------------------
------------------------------------
------------------------------------
------------------------------------
------------------------------------
------------------------------------
3
193
EXHIBIT A
SHAREHOLDERS REPRESENTED BY PURCHASER REPRESENTATIVE
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
194
EXHIBIT U
LIGHTSPAN, INC.
EDUTEST, INC. REGISTRATION RIGHTS AGREEMENT
JUNE __, 2000
195
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "AGREEMENT") is entered into as
of the ____ day of June 2000, by and among LIGHTSPAN, INC., a Delaware
corporation (the "COMPANY"), Edutest, Inc., a Virginia corporation ("EDUCATOR"),
and the persons or entities listed on EXHIBIT A hereto (the "INITIAL HOLDERS").
RECITALS
WHEREAS, in connection with the merger of Educator with and into
Educator Acquisition, Inc. ("MERGER SUB"), the Company's wholly-owned
subsidiary, the Company intends to issue shares of the Company's common stock to
the Initial Holders in exchange for the Holders' Educator stock as set forth in
that certain Agreement and Plan of Merger and Reorganization by and among the
Company and Educator dated as of May __, 2000 (the "MERGER AGREEMENT"). The
shares of the Company's common stock issued and issuable pursuant to the Merger
Agreement to the Initial Holders are referred to collectively herein as the
"SHARES."
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties agree as follows:
ARTICLE 1
DEFINITIONS
For purposes of this Agreement the following terms shall have the
following meanings:
1.1 "CLOSING" means the date of the Closing of the merger as defined in
the Merger Agreement.
1.2 "CLOSING SHARES" means the Shares issuable at the Closing under
Section 1.5(a)(i) - (iii) of the Merger Agreement.
1.3 "EARN-OUT SHARES" means the Shares that may be issuable upon the
occurrence of certain events under Section 1.5(c) of the Merger Agreement.
1.4 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, or any similar successor federal statute, and the rules and regulations
thereunder, all as the same shall be in effect from time to time.
1.5 "HOLD-BACK SHARES" means the Shares that may be issuable eighteen
(18) months following the Closing under Section 1.5(a)(iv) of the Merger
Agreement.
1.6 "HOLDER" means the Initial Holders and any permitted assignee or
transferee of the rights of the Initial Holders hereunder.
1.7 "PERSON" means any individual or legal entity.
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196
1.8 "REGISTRABLE SECURITIES" means the Shares.
1.9 "SEC" means the United States Securities and Exchange Commission.
1.10 "SECURITIES ACT" shall mean the Securities Act of 1933, as amended,
or any similar successor federal statute, and the rules and regulations
thereunder, all as the same shall be in effect from time to time.
ARTICLE 2
REGISTRATION OF SHARES
2.1 REGISTRATION OF SHARES. The Company is obligated to do the
following:
(a) As expeditiously as reasonably possible following the Closing,
the Company (i) shall prepare and file with the SEC one or more registration
statements under the Securities Act, on Form X-0, X-0, X-0 or other appropriate
form(s) reasonably agreed to by the Holders, in order to effect and maintain the
registration under the Securities Act of the resale (subject to the terms
hereof) of the Registrable Securities (a "REGISTRATION STATEMENT"); (ii) shall
use its reasonable efforts to cause such Registration Statement to be declared
effective on or prior to August 7, 2000, and if such effectiveness cannot be
attained by that time then as soon thereafter as practicable; and (iii)
following such effectiveness, shall use reasonable efforts to maintain the
effectiveness of such Registration Statement in accordance with the following
paragraph. Without limiting the generality of the foregoing, the parties agree
that as soon as practical following the Closing, the Company shall prepare and
file with the SEC a registration statement on Form S-1 covering all of the
Shares (provided, however, with respect to the earn-out shares and the hold-back
shares, a reasonable estimation thereof shall be made, which estimation shall be
subject to the reasonable approval of the Designated Stockholder's
Representative as defined in the Merger Agreement). If, due to SEC comments or
advice of counsel related to the potential inability to effect such registration
due to rules under the Securities Act, such Form S-1 is amended to provide for
registration only of the Closing Shares, then the Company shall prepare and file
a subsequent Form S-1 or Form S-3 (if at the time of filing Parent is eligible
for Form S-3) as soon as reasonably possible following determination of the
number of Earn-Out Shares and Hold-Back Shares to be registered, it being
understood that this subsequent Registration Statement will likely be declared
effective following August 7, 2000.
(b) The Company shall prepare and file with the SEC (i) such
amendments and supplements to the Registration Statement and the prospectus used
in connection therewith, (ii) such documents required to be filed with the SEC
under Sections 13, 14(a) and 15(d) of the Exchange Act and (iii) such other
filings required by the SEC, in each case as may be necessary to keep the
Registration Statement continuously effective and not misleading for until the
distribution described in the Registration Statement has been completed or until
the Shares can be sold pursuant to Rule 144 promulgated under the Securities
Act.
Notwithstanding the foregoing, if, at any time following the
effectiveness of the Registration Statement, the Company shall have determined
that (i) the happening of any event
2
197
requires the making of any changes to the Registration Statement or the
prospectus related to the Registrable Securities, so that, as of such date, the
Registration Statement and the prospectus do not contain an untrue statement of
a material fact and do not omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or (ii) the continued
effectiveness of the Registration Statement would require the Company to
disclose a material financing, acquisition or other material corporate
transaction or development before such disclosure would otherwise have to be
made by any required filing with the SEC, and the Company's Board of Directors
shall have determined in good faith that such disclosure is not in the best
interests of the Company and its stockholders, then in either case under clause
(i) or (ii) above, the Company may suspend the effectiveness of the Registration
Statement and the issuance of Registrable Securities pursuant thereto and shall
prepare and file as expeditiously as reasonably possible a post-effective
amendment to the Registration Statement or an amendment or supplement to the
related prospectus or file an appropriate report pursuant to the Exchange Act or
any other required document so that the Registration Statement and prospectus
will not include an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The Company shall use
its reasonable efforts to minimize the duration of any such suspension of the
effectiveness of the Registration Statement, and in no event shall such
suspension continue beyond the date such disclosure is made by a filing with the
SEC or the need for such non-disclosure no longer exists.
(c) The Company shall notify the Holders in writing when the
Registration Statement or any post-effective amendment thereto has become
effective and of any request by the SEC for amendments or supplements to the
Registration Statement or the prospectus included therein or for additional
information. The Company shall notify the Holders in writing of (i) the issuance
by the SEC of any stop order suspending effectiveness of the Registration
Statement or the initiation of any proceedings for that purpose; (ii) the
receipt by the Company of any notification with respect to the suspension of the
qualification of the securities included therein for sale in any jurisdiction or
the initiation of any proceeding for such purpose; and (iii) the happening of
any event that requires the making of any changes in the Registration Statement
or the prospectus included therein so that, as of such date, the Registration
Statement and prospectus do not contain an untrue statement of a material fact
and do not omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The Company shall use all reasonable
efforts to prevent the issuance, and if issued, to obtain the withdrawal at the
earliest possible time, of any order suspending the effectiveness of any
Registration Statement.
(d) Prior to any issuance of Registrable Securities pursuant to the
Registration Statement, the Company shall register or qualify the Registrable
Securities for offer and sale under the securities or blue sky laws of any
jurisdictions in which the issuance of Registrable Securities to the Holders is
required; provided, however, that in no event shall the Company be obligated to
(i) qualify as a foreign corporation or as a dealer in securities in any
jurisdiction where it would not otherwise be required to so qualify but for this
Section 2.3(d), (ii) file any general consent to service of process in any
jurisdiction where it is not as of the date hereof so subject or (iii) subject
itself to taxation in any such jurisdiction if it is not so subject.
3
198
(e) The Company shall bear all expenses (exclusive of any brokerage
fees, underwriting discounts and commissions), including without limitation the
reasonable fees and expenses of outside counsel to the Holders (selected by the
Holders), (i) in connection with the initial preparation, printing and filing of
the Registration Statement and any corresponding prospectuses; (ii) in
connection with required post-effective amendments and supplements thereto,
including post-effective amendment(s) necessary to convert the Registration
Statement to Form S-3 (e.g. upon the Company's initial qualification for the use
thereof); and (iii) for expenses primarily relating to the maintenance of
effectiveness of the Registration Statement and any corresponding prospectuses.
(f) The Company's obligations to register the Registrable
Securities under this Agreement shall be subject in all respects to applicable
law and to each Holder's furnishing to the Company such information regarding
such Holder and its affiliates as the Company may from time to time reasonably
request for inclusion or incorporation by reference in the Registration
Statement and any corresponding prospectus in order to comply with applicable
law. In the event that the Registration Statement at any time (other than as
permitted hereby) does not register the issuance by the Company to the Holders
or the resale by the Holders of any Registrable Securities in compliance with
applicable law, the Company shall prepare and file a "no-action" letter with the
SEC's Division of Corporation Finance, or prepare and file a registration
statement on another form of registration statement, or a resale registration
statement, if appropriate, and generally use reasonable efforts to take such
other actions as may be necessary to permit the issuance of the Shares and the
resale thereof in compliance with applicable law.
2.2 INDEMNIFICATION.
(a) As used in this Section 2.2 the following terms shall have the
following respective meanings:
(i) "REGISTRATION STATEMENT" shall include any final
prospectus, exhibit, supplement or amendment included in or relating to the
Registration Statement referred to in Section 2.1, including any additional
registration statement filed pursuant to Section 2.1(f); and
(ii) "UNTRUE STATEMENT" shall include any untrue statement
or alleged untrue statement, or any omission or alleged omission to state in the
Registration Statement a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(b) The Company agrees to indemnify and hold harmless each Holder
(and each person, if any, who controls such Holder within the meaning of Section
15 of the Securities Act) from and against any losses, claims, damages or
liabilities to such Holder (or any such officer, director or controlling person)
may become subject (under the Securities Act or otherwise) insofar as such
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) arise out of any failure to comply with the covenants and agreements of
the Company contained in Section 2.1 hereof, or any Untrue Statement contained
in the Registration Statement on or after the effective date thereof or on or
after the date of any prospectus or
4
199
prospectus supplement, and the Company will reimburse each Holder (or such
officer, director or controlling person, as the case may be) for any reasonable
legal or other expenses reasonably incurred in investigating, defending or
preparing to defend any such action, proceeding or claim; provided, however,
that the Company shall not be liable to any Holder in any such case to the
extent that such loss, claim, damage or liability arises out of, or is based
upon, an Untrue Statement made in such Registration Statement in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of such Holder specifically for use in preparation of, or for
incorporation by reference into, the Registration Statement, and the Company
shall not be liable under this Section 2.2 for any settlement of any action
effected without its written consent, which consent shall not unreasonably be
withheld or delayed.
(c) Each Holder agrees to indemnify and hold harmless the Company
(and each person, if any, who controls the Company within the meaning of Section
15 of the Securities Act) from and against any losses, claims, damages or
liabilities to which to the Company (or any such officer, director or
controlling person) may become subject (under the Securities Act or otherwise)
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of any failure to comply with the
covenants and agreements of such Holder contained in Section 2.1(f) hereof, or
any Untrue Statement made in the Registration Statement on or after the
effective date thereof or on or after the date of any prospectus or prospectus
supplement in reliance on and in conformity with written information furnished
to the Company by or on behalf of such Holder specifically for use in
preparation of or for incorporation by reference into the Registration
Statement, and each Holder will reimburse the Company (or such officer, director
or controlling person, as the case may be) for any reasonable legal or other
expenses reasonably incurred in investigating, defending or preparing to defend
any such action, proceeding or claim; provided, however, that no Holder shall be
liable under this Section 2.2 for any settlement of any action effected without
its written consent, which consent shall not unreasonably be withheld or
delayed.
2.3 RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Restricted Securities to the public without registration, after such
time as a public market exists for the Common Stock of the Company, the Company
agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times after
the effective date that the Company becomes subject to the reporting
requirements of the Securities Act or the Exchange Act;
(b) File with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act
(at any time after it has become subject to such reporting requirements); and
(c) So long as a Holder owns any Restricted Securities, to furnish
to the Holder promptly upon request a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 (including Rule
144(c)) (at any time after ninety (90) days after the effective date of the
first registration statement filed by the Company for an offering of its
securities to the general public), and of the Securities Act and the Exchange
Act
5
200
(at any time after it has become subject to such reporting requirements), a copy
of the most recent annual or quarterly report of the Company, and such other
reports and documents of the Company and other information in the possession of
or reasonably obtainable by the Company as a Holder may reasonably request in
availing itself of any rule or regulation of the SEC allowing a Holder to sell
any such securities without registration.
ARTICLE 3
MISCELLANEOUS
3.1 EFFECT IF CLOSING DOES NOT OCCUR. If the Closing does not occur,
then all actions and events that are, under this Agreement, to be taken or occur
effective as of or in connection with the Closing shall not be taken or occur
except to the extent specifically agreed by the Company and Educator.
3.2 RELATIONSHIP OF PARTIES. Nothing in this Agreement shall be deemed
or construed by the parties or any third party as creating the relationship of
principal and agent, partnership or joint venture between the parties, it being
understood and agreed that no provision contained herein, and no act of the
parties, shall be deemed to create any relationship between the parties other
than the relationship set forth herein.
3.3 AFFILIATES. Each of the Company and Educator shall cause to be
performed, and hereby guarantees the performance of, all actions, agreements and
obligations set forth in this Agreement to be performed by a Company Entity or a
Educator Entity, respectively.
3.4 THIRD PARTY BENEFICIARIES. It is understood and agreed between the
parties that this Agreement and the covenants that are made herein are made
expressly and solely for the benefit of the parties hereto, and no other Person
shall be entitled or be deemed to be entitled to any benefits or rights
hereunder nor be authorized or entitled to enforce any rights, claims or
remedies hereunder.
3.5 MODIFICATION AND AMENDMENT; ENTIRE AGREEMENT. This Agreement may be
modified, amended or terminated by the parties pursuant hereto at any time only
in a writing signed by the parties. This Agreement sets forth the entire
agreement of the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings between the parties with
respect to the subject matter hereof.
3.6 GOVERNING LAW. This Agreement shall be governed by, construed and
interpreted in accordance with the laws of the State of California, irrespective
of the choice of laws principles of the State of California, as to all matters,
including matters of validity, construction, effect, performance and remedies.
3.7 ASSIGNMENT. Except as otherwise provided herein, the terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective successors and assigns of the parties hereto.
[THIS SPACE LEFT BLANK INTENTIONALLY]
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201
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
LIGHTSPAN, INC.
------------------------------------
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
EDUTEST, INC.
------------------------------------
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
HOLDER
------------------------------------
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
202
EXHIBIT V
SIGNATORIES TO REGISTRATION RIGHTS AGREEMENT
Name
----------------------------------------
1. Xxxx X. Xxxxxxxx
2. Airborne Research Services, Inc.
3. Xxxxxx X. Xxxxxxx
4. Xxxxxx X. Xxxxx
5. BTG, Inc.
6. Xxxx X. Xxxxxx
7. Core Learning Group, LLC
8. Xxxxx X. Xxxxxxxxx
9. Xxxxxx X. Xxx
10. Xxxx X. Xxxxx
11. Xxxxx Xxxxxxx
12. Xxxxxx X. Xxxxxxxx, III
13. Xxxxxxx X. Xxxxxxx
14. Next Generation Fund, LLC
15. Richweb, Inc.
16. Xxxxxx Xxxxxxxxx
17. Xxxxxx X. Xxxxxx
18. Xxxxxxx X. Xxxxxx
19. Xxxxx Xxx Xxxxxxx Xxxx
20. Xxxxxxx Xxxxxxxxx
21. Xxxx Xxx Xxxxxx
22. Xxxxxx X. Xxxxxxxx
23. Xxxxx Xxxxx
203
EXHIBIT W
NON-EMPLOYEE LOCKUP AGREEMENT
This NON-EMPLOYEE LOCKUP AGREEMENT (the "Non-Employee Lockup Agreement")
is entered into as of the ____ day of June 2000, by and among Lightspan, Inc., a
Delaware corporation (the "Company"), and the undersigned of EduTest, Inc., a
Virginia corporation ("Educator").
1. The undersigned understands that the Company intends to acquire Educator by
way of a merger of Educator with and into Educator Acquisition, Inc., a
wholly-owned subsidiary of the Company (the "MERGER SUB") (the "MERGER"). The
undersigned also understands that the Company and Educator have entered into an
Agreement and Plan of Merger and Reorganization dated May ____, 2000 (the
"MERGER AGREEMENT") setting forth the terms of the Merger and the rights and
obligations of the parties with respect thereto.
2. In order to induce the Company and Educator to consummate this Merger
pursuant to the Merger Agreement, the undersigned agrees, for the benefit of the
Company and Educator:
(a) up to the close of business on August 7, 2000 (which is the
expiration of the one hundred eighty (180) day lockup period with respect to the
Company's initial public offering that occurred on February 9, 2000), not to
sell, make any short sale of, loan, pledge or otherwise hypothecate or encumber,
grant any option for the purchase of, or otherwise dispose of any shares of
Common Stock owned by the Employee on the date hereof without the prior written
consent of the Company.
(b) notwithstanding the foregoing, if applicable, this Non-Employee
Lockup Agreement shall not apply to any shares of Common Stock owned by the
undersigned on the date hereof which are transferred to the Company or Merger
Sub in payment for any obligations owed to Educator under any promissory note of
which the maker is the undersigned and the payee is Educator that was originally
delivered by the undersigned to Educator in connection for the undersigned's
exercise of certain stock options resulting in the issuance of shares of
Educator common stock.
3. In addition to the foregoing, the undersigned agrees that:
(a) the Shares shall not be sold, assigned, transferred or pledged
except upon the conditions specified in this Non-Employee Lockup Agreement,
which conditions are intended to ensure compliance with the provisions of the
Securities Act. The undersigned will cause any proposed purchaser, assignee,
transferee or pledgee of the Shares held by the undersigned to agree to take and
hold such securities subject to the provisions and upon the conditions specified
in this Non-Employee Lockup Agreement.
(b) Each certificate representing Shares, shall (unless otherwise
permitted by the provisions of Section 4(c) below) be stamped or otherwise
imprinted with a legend in the following form (in addition to any legend
required under applicable state securities laws):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
204
ACT OF 1933. SUCH SHARES MAY NOT BE SOLD, TRANSFERRED OR PLEDGED IN THE ABSENCE
OF SUCH REGISTRATION OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL (WHICH
MAY BE COUNSEL FOR THE COMPANY) REASONABLY ACCEPTABLE TO IT STATING THAT SUCH
SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF SAID ACT."
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN
ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE
SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY."
(c) The holder of each certificate representing Shares, by acceptance
thereof, agrees to comply in all respects with the provisions of this
Non-Employee Lockup Agreement and with all applicable state and federal
securities laws related to transfer of the Shares. Prior to any proposed sale,
assignment, transfer or pledge of any Shares, unless there is in effect a
registration statement under the Securities Act covering the proposed transfer,
the holder thereof shall give written notice to the Company of such holder's
intention to effect such transfer, sale, assignment or pledge. Each such notice
shall describe the manner and circumstances of the proposed transfer, sale,
assignment or pledge in sufficient detail, and shall be accompanied at such
holder's expense by either (i) an unqualified written opinion of legal counsel
who shall, and whose legal opinion shall, be reasonably satisfactory to the
Company, addressed to the Company, to the effect that the proposed transfer of
the Shares may be effected without registration under the Securities Act, or
(ii) a "no action" letter from the Commission to the effect that the transfer of
such securities without registration will not result in a recommendation by the
staff of the Commission that action be taken with respect thereto, or (iii) any
other evidence reasonably satisfactory to counsel to the Company, whereupon the
holder of such Shares shall be entitled to transfer such Shares in accordance
with the terms of the notice delivered by the holder to the Company. The Company
will not require such a legal opinion or "no action" letter (a) in any
transaction in compliance with Rule 144, (b) in any transaction in which an
holder which is a corporation distributes Shares solely to its shareholders or
its majority owned subsidiaries or affiliates, (c) in any transaction in which a
holder which is a partnership or limited liability company distributes Shares
solely to partners or members thereof, (d) in any transaction in which a holder
who is an individual transfers Shares solely to any immediate family member of
the holder or in trust for the benefit of the holder or any immediate family
member of the holder; provided that each transferee agrees in writing to be
subject to the terms of this Section 4(c). Each certificate evidencing the
Shares transferred as above provided shall bear, except if such transfer is made
pursuant to Rule 144, the appropriate restrictive legend set forth in Section
4(b) above, except that such certificate shall not bear such restrictive legend
if, in the opinion of counsel for such holder and the Company, such legend is
not required in order to establish compliance with any provisions of the
Securities Act. The foregoing legends shall be removed from each certificate
representing Shares, at the request of a holder thereof, at such time as they
become eligible for resale pursuant to Rule 144(k) under the Securities Act or
at such other times as holder shall have obtained an opinion of counsel (which
may be counsel to the Company) reasonably acceptable to the Company to the
effect that the Shares proposed to be disposed may lawfully be so disposed of
with registration, qualification or legend.
2.
205
4. The undersigned confirms the undersigned understands that Educator and the
Company will rely upon the representations set forth in this Non-Employee Lockup
Agreement in proceeding with the Merger. This Non-Employee Lockup Agreement
shall be irrevocable and shall be binding on the undersigned and the
undersigned's respective successors, heirs, personal representatives and
assigns.
5. The undersigned agrees and consents to the entry of stop transfer
instructions with the Company's transfer agent against the transfer of Common
Stock or securities convertible into or exchangeable or exercisable for Common
Stock held by the undersigned, except to the extent such transfer is in
compliance with this Non-Employee Lockup Agreement.
3.
206
IN WITNESS WHEREOF, the parties have executed this Non-Employee Lockup
Agreement as of the date first above written.
LIGHTSPAN, INC. EDUTEST, INC.
By: By:
----------------------------------- ---------------------------------
Its: Its:
---------------------------------- --------------------------------
NON-EMPLOYEE:
------------------------------------------------
Print Name:
207
EXHIBIT W
EMPLOYEE LOCKUP AGREEMENT
This EMPLOYEE LOCKUP AGREEMENT (the "Employee Lockup Agreement") is
entered into as of the ____ day of June 2000, by and among Lightspan, Inc., a
Delaware corporation (the "Company"), and the undersigned employee (the
"Employee") of Edutest, Inc., a Virginia corporation ("Educator").
1. The Employee understands that the Company intends to acquire Educator by way
of a merger of Educator with and into Educator Acquisition, Inc., a wholly-owned
subsidiary of the Company (the "MERGER SUB") (the "MERGER"). The Employee also
understands that the Company and Educator have entered into an Agreement and
Plan of Merger and Reorganization dated May ____, 2000 (the "MERGER AGREEMENT")
setting forth the terms of the Merger and the rights and obligations of the
parties with respect thereto.
2. In order to induce the Company and Educator to consummate this Merger
pursuant to the Merger Agreement, the Employee agrees, for the benefit of the
Company and Educator:
(a) that the Employee, for a period of one year subsequent to the
closing date of the Merger, will not, without the prior written consent of the
Company, directly or indirectly
(i) make any offer, sale, assignment, transfer, encumbrance,
contract to sell, grant of an option to purchase or other disposition of or
(ii) enter into any swap or any other agreement or any transaction
(whether any such swap or transaction is to be settled by delivery of shares of
the common stock of the Company (the "Common Stock") or other securities, in
cash or otherwise) that transfers, in whole or in part, directly or indirectly,
the economic consequence of ownership of in the aggregate more than 75% of the
number of shares of Common Stock beneficially owned by the Employee on the date
hereof (for purposes hereof, the calculation of the aforementioned percentage
shall take into account the number of shares designated as Hold-Back Shares in
the Merger Agreement that are otherwise payable to the Employee) (together with
such Hold-Back shares, the "SHARES"); and
(b) up to the close of business on August 7, 2000 (which is the
expiration of the one hundred eighty (180) day lockup period with respect to the
Company's initial public offering that occurred on February 9, 2000), not to
sell, make any short sale of, loan, pledge or otherwise hypothecate or encumber,
grant any option for the purchase of, or otherwise dispose of any Shares without
the prior written consent of the Company.
3. Notwithstanding the foregoing, this Employee Lockup Agreement shall not apply
to any Shares which are transferred to the Company or Merger Sub in payment for
any obligations owed to Educator under any promissory note of which the maker is
the Employee and the payee is Educator that was originally delivered by the
Employee to Educator in connection for the Employee's exercise of certain stock
options resulting in the issuance of shares of Educator common stock.
4. In addition to the foregoing, the Employee agrees that:
(a) the Shares shall not be sold, assigned, transferred or pledged
except upon the conditions specified in this Employee Lockup Agreement, which
conditions are intended to ensure compliance with the provisions of the
Securities Act. Employee will cause any proposed purchaser, assignee, transferee
or
208
pledgee of the Shares held by such Employee to agree to take and hold such
securities subject to the provisions and upon the conditions specified in this
Employee Lockup Agreement.
(b) Each certificate representing Shares, shall (unless otherwise
permitted by the provisions of Section 4(c) below) be stamped or otherwise
imprinted with a legend in the following form (in addition to any legend
required under applicable state securities laws):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH
SHARES MAY NOT BE SOLD, TRANSFERRED OR PLEDGED IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL (WHICH MAY BE
COUNSEL FOR THE COMPANY) REASONABLY ACCEPTABLE TO IT STATING THAT SUCH SALE OR
TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF
SAID ACT."
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN
ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE
SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY."
(c) The holder of each certificate representing Shares, by acceptance
thereof, agrees to comply in all respects with the provisions of this Employee
Lockup Agreement and with all applicable state and federal securities laws
related to transfer of the Shares. Prior to any proposed sale, assignment,
transfer or pledge of any Shares, unless there is in effect a registration
statement under the Securities Act covering the proposed transfer, the holder
thereof shall give written notice to the Company of such holder's intention to
effect such transfer, sale, assignment or pledge. Each such notice shall
describe the manner and circumstances of the proposed transfer, sale, assignment
or pledge in sufficient detail, and shall be accompanied at such holder's
expense by either (i) an unqualified written opinion of legal counsel who shall,
and whose legal opinion shall, be reasonably satisfactory to the Company,
addressed to the Company, to the effect that the proposed transfer of the Shares
may be effected without registration under the Securities Act, or (ii) a "no
action" letter from the Commission to the effect that the transfer of such
securities without registration will not result in a recommendation by the staff
of the Commission that action be taken with respect thereto, or (iii) any other
evidence reasonably satisfactory to counsel to the Company, whereupon the holder
of such Shares shall be entitled to transfer such Shares in accordance with the
terms of the notice delivered by the holder to the Company. The Company will not
require such a legal opinion or "no action" letter (a) in any transaction in
compliance with Rule 144, (b) in any transaction in which an holder which is a
corporation distributes Shares solely to its shareholders or its majority owned
subsidiaries or affiliates, (c) in any transaction in which a holder which is a
partnership or limited liability company distributes Shares solely to partners
or members thereof, (d) in any transaction in which a holder who is an
individual transfers Shares solely to any immediate family member of the holder
or in trust for the benefit of the holder or any immediate family member of the
holder; provided that each transferee agrees in writing to be subject to the
terms of this Section 4(c). Each certificate evidencing the Shares transferred
as above provided shall bear, except if such transfer is made pursuant to Rule
144, the appropriate restrictive legend set forth in Section 4(b) above, except
that such certificate shall not bear such restrictive legend if, in the opinion
of counsel for such holder and the Company, such legend is not required in order
to establish compliance with any provisions of the Securities Act. The foregoing
legends shall be removed from each certificate representing Shares, at the
request of a holder thereof, at such time as they become eligible for resale
pursuant to Rule 144(k) under the Securities Act or at such other times as
holder shall have obtained an opinion of counsel (which may be counsel to the
Company) reasonably acceptable to the Company to the effect that the Shares
proposed to be disposed may lawfully be so disposed of with registration,
qualification or legend.
2.
209
5. The Employee confirms the Employee understands that Educator and the Company
will rely upon the representations set forth in this Employee Lockup Agreement
in proceeding with the Merger. This Employee Lockup Agreement shall be
irrevocable and shall be binding on the Employee and the Employee's respective
successors, heirs, personal representatives and assigns.
6. The Employee agrees and consents to the entry of stop transfer instructions
with the Company's transfer agent against the transfer of Common Stock or
securities convertible into or exchangeable or exercisable for Common Stock held
by the Employee, except to the extent such transfer is in compliance with this
Employee Lockup Agreement.
IN WITNESS WHEREOF, the parties have executed this Employee Lockup
Agreement as of the date first above written.
LIGHTSPAN, INC. EDUTEST, INC.
By: By:
-------------------------------- ------------------------------------
Its: Its:
-------------------------------- -----------------------------------
EMPLOYEE:
------------------------------------------------
Print Name:
210
EXHIBIT X
SIGNATORIES TO EMPLOYEE AND NON-EMPLOYEE LOCK UP AGREEMENTS
Name
------------------------------------
EMPLOYEE
1. Xxxxx X Xxxxxxxxx
2. Xxxxxx X. Xxx
3. Xxxxxx X. Xxxxxx
4. Xxxxxxx X. Xxxxxx
5. Xxxxxxx Xxxxxxxxx
6. Xxxx Xxx Xxxxxx
7. Xxxxxx X. Xxxxxxxx
8. Xxxxx Xxx Xxxxxxx Xxxx
NON-EMPLOYEE
1. Xxxx X. Xxxxxxxx
2. Airborne Research Services, Inc.
3. Xxxxxx X. Xxxxxxx
4. Xxxxxx X. Xxxxx
5. BTG, Inc.
6. Xxxx X. Xxxxxx
7. Core Learning Group, LLC
8. Xxxx X. Xxxxx
9. Xxxxx Xxxxxxx
10. Xxxxxx X. Xxxxxxxx, III
11. Xxxxxxx X. Xxxxxxx
12. Next Generation Fund, LLC
13. Richweb, Inc.
14. Xxxxxx Xxxxxxxxx
15. Xxxxx Xxxxx
211
EXHIBIT Z
[XXXXXX GODWARD LLP LETTERHEAD]
May __, 2000
-----------------------------------
-----------------------------------
-----------------------------------
RE:
--------------------------------
Dear :
-------------------------------
We have acted as counsel for Public Co., a Delaware corporation (the "Company"),
in connection with the merger of Educator, a Virginia corporation, with the
Public Co. Acquisition Sub (the "Merger") pursuant to the Agreement and Plan of
Merger and Reorganization dated as of May __, 2000 (the "Agreement"). We are
rendering this opinion pursuant to Section ___ of the Agreement. Except as
otherwise defined herein, capitalized terms used but not defined herein have the
respective meanings given to them in the Agreement.
In connection with this opinion, we have examined and relied upon the
representations and warranties as to factual matters contained in and made
pursuant to the Agreement by the various parties and originals or copies
certified to our satisfaction, of such records, documents, certificates,
opinions, memoranda and other instruments as in our judgment are necessary or
appropriate to enable us to render the opinion expressed below. Where we render
an opinion "to the best of our knowledge" or concerning an item "known to us" or
our opinion otherwise refers to our knowledge, it is based solely upon (i) an
inquiry of attorneys within this firm who perform legal services for the
Company, (ii) receipt of a certificate executed by an officer of the Company
covering such matters, and (iii) such other investigation, if any, that we
specifically set forth herein.
In rendering this opinion, we have assumed: the genuineness and authenticity of
all signatures on original documents; the authenticity of all documents
submitted to us as originals; the conformity to originals of all documents
submitted to us as copies; the accuracy, completeness and authenticity of
certificates of public officials; and the due authorization, execution and
delivery of all documents (except the due authorization, execution and delivery
by the Company of the Agreement), where authorization, execution and delivery
are prerequisites to the effectiveness of such documents. We have also assumed:
that all individuals executing and delivering documents had the legal capacity
to so execute and deliver; that you have received all documents you were to
receive under the Agreement; that the Agreement is an obligation binding upon
you; if you are a corporation or other entity, that you have filed any required
California franchise or income tax returns and have paid any required California
franchise or income taxes; and that there are no extrinsic agreements or
understandings among the parties to
212
[XXXXXX GODWARD LLP LETTERHEAD]
May __, 2000
Page Two
the Agreement that would modify or interpret the terms of the Agreement or the
respective rights or obligations of the parties thereunder.
Our opinion is expressed only with respect to the federal laws of the United
States of America and the laws of the State of California. We express no opinion
as to whether the laws of any particular jurisdiction apply, and no opinion to
the extent that the laws of any jurisdiction other than those identified above
are applicable to the subject matter hereof. We are not rendering any opinion as
to compliance with any antifraud law, rule or regulation relating to securities,
or to the sale or issuance thereof.
On the basis of the foregoing, in reliance thereon and with the foregoing
qualifications, we are of the opinion that:
1. The Company has been duly incorporated and is a validly existing
corporation in good standing under the laws of the State of Delaware.
2. The Company has the requisite corporate power and authority to enter
into the Agreement and perform its obligations thereunder.
3. The Agreement has been duly and validly authorized, executed and
delivered by the Company and constitutes a valid and binding agreement
of the Company enforceable against the Company in accordance with its
terms, except as rights to indemnity under Section 9 of the Agreement
may be limited by applicable laws and except as enforcement may be
limited by applicable bankruptcy, insolvency, reorganization,
arrangement, moratorium or other similar laws affecting creditors'
rights, and subject to general equity principles and to limitations on
availability of equitable relief, including specific performance.
4. The shares of common stock to be issued in connection with the Merger
have been duly authorized, and upon issuance and delivery against
payment therefor in accordance with the terms of the Agreement, will be
validly issued, outstanding, fully paid and nonassessable.
5. The execution and delivery of the Agreement by the Company and the
performance of the obligations of the Company under the Agreement do not
violate any provision of the Company's Articles of Incorporation or
Bylaws.
This opinion is intended solely for your benefit and is not to be made available
to or be relied upon by any other person, firm, or entity without our prior
written consent.
Very truly yours,
XXXXXX GODWARD LLP
213
[XXXXXX GODWARD LLP LETTERHEAD]
May __, 2000
Page Three
By:
-----------------------------------
[Name]
