Exhibit 10.1
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PREFERRED STOCK PURCHASE AGREEMENT
dated as of
December 29, 2000
between
CALIBER LEARNING NETWORK, INC.
and
THE PURCHASERS LISTED ON SCHEDULE 1
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TABLE OF CONTENTS
Page
SECTION 1. SALE AND PURCHASE OF PREFERRED STOCK.................................... 1
SECTION 2. THE CLOSING............................................................. 2
SECTION 3. DEFINITIONS............................................................. 3
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................... 15
4.1. Corporate Existence, Power and Authority................................ 15
4.2. Capital Stock........................................................... 16
4.3. Subsidiaries............................................................ 17
4.4. Business................................................................ 17
4.5. No Defaults or Conflicts................................................ 18
4.6. Disclosure Materials; Other Information................................. 19
4.7. Litigation.............................................................. 19
4.8. Taxes................................................................... 20
4.9. ERISA................................................................... 20
4.10. Legal Compliance........................................................ 22
4.11. Outstanding Securities.................................................. 22
4.12. Intellectual Property and Other Rights.................................. 22
4.13. Key Employees........................................................... 23
4.14. Properties.............................................................. 23
4.15. Suppliers and Customers................................................. 23
4.16. Environmental Compliance................................................ 24
4.17. No Burdensome Agreements................................................ 25
4.18. Offering of Shares...................................................... 25
4.19. SEC Reports............................................................. 25
4.20. Indebtedness............................................................ 25
4.21. Use of Proceeds......................................................... 26
4.22. Other Names............................................................. 26
4.23. Brokers................................................................. 26
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS........................ 27
5.1. Corporate Power and Authority........................................... 27
5.2. Investment Intent....................................................... 27
5.3. Brokers................................................................. 27
SECTION 6. RESTRICTIONS ON TRANSFER................................................ 28
SECTION 7. INFORMATION AS TO THE COMPANY........................................... 28
7.1. Financial Information................................................... 28
7.2. Communication with Accountants.......................................... 30
TABLE OF CONTENTS (cont'd)
Page
7.3. Inspection.............................................................. 31
7.4. Notices................................................................. 31
7.5. Confidentiality Agreement............................................... 33
SECTION 8. AFFIRMATIVE COVENANTS................................................... 33
8.1. Maintenance of Existence, Properties and Franchises;
Compliance with Law; Taxes; Insurance................................... 33
8.2. Office for Payment, Exchange and Registration; Location of
Office; Notice of Change of Name or Office.............................. 34
8.3. Fiscal Year............................................................. 34
8.4. Environmental Matters................................................... 34
8.5. Reservation of Shares................................................... 35
8.6. Securities Exchange Act Registration.................................... 36
8.7. Delivery of Information for Rule 144A Transactions...................... 36
8.8. Senior Securities....................................................... 36
8.9. Subsequent Closings..................................................... 36
8.10. Further Assurances...................................................... 36
SECTION 9. NEGATIVE COVENANTS...................................................... 37
9.1. No Dilution or Impairment; No Changes in Capital Stock.................. 37
9.2. Indebtedness............................................................ 38
9.3. Consolidation, Merger and Sale.......................................... 38
9.4. No Change in Business................................................... 39
9.5. Restricted Payments; Investments........................................ 39
9.6. Affiliate Loans and Guaranties.......................................... 39
9.7. Transactions with Affiliates............................................ 39
9.8. Liens................................................................... 40
9.9. Private Placement Status................................................ 40
9.10. Maintenance of Public Market............................................ 40
9.11. Actions Prior to the Closing Date....................................... 41
SECTION 10. PREEMPTIVE RIGHTS....................................................... 41
SECTION 11. CONDITIONS TO PURCHASERS' OBLIGATIONS................................... 43
11.1. Series B Articles Supplementary; Stockholders' Agreement;
Registration Rights Agreement........................................... 43
11.2. Certificates for Shares................................................. 43
11.3. Senior Status........................................................... 43
11.4. Accuracy of Representations and Warranties.............................. 43
11.5. Compliance with Agreements.............................................. 44
11.6. Officers' Certificates.................................................. 44
11.7. Proceedings............................................................. 44
11.8. Legality; Governmental and Other Authorization.......................... 44
11.9. No Material Adverse Change.............................................. 45
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TABLE OF CONTENTS (cont'd)
Page
11.10. Opinion of Counsel...................................................... 45
11.11. Other Documents and Opinions............................................ 45
SECTION 11A. CONDITIONS TO CLOSINGS.................................................. 45
11A.1. Classification of Series B Preferred as Equity.......................... 45
11A.2. Nasdaq Shareholder Approval Rule........................................ 45
SECTION 12. BREACH OF REPRESENTATIONS, WARRANTIES AND COVENANTS..................... 46
SECTION 13. SPECIFIC PERFORMANCE.................................................... 46
SECTION 14. EXPENSES................................................................ 46
SECTION 15. DIRECT PAYMENTS......................................................... 48
SECTION 16. AMENDMENTS AND WAIVERS.................................................. 49
SECTION 17. EXCHANGE OF SHARES; CANCELLATION OF SURRENDERED SHARES;
REPLACEMENT............................................................. 49
SECTION 18. NOTICES................................................................. 50
SECTION 19. MISCELLANEOUS........................................................... 50
EXHIBIT A Series B Articles Supplementary........................................... A-1
EXHIBIT B Stockholders' Agreement................................................... B-1
EXHIBIT C Registration Rights Agreement............................................. C-1
EXHIBIT D Opinion of Counsel for the Company........................................ D-1
EXHIBIT E Confidentiality Agreement................................................. X-0
XXXXXXX X X-0 Articles Supplementary................................................ F-1
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PREFERRED STOCK PURCHASE AGREEMENT
This PREFERRED STOCK PURCHASE AGREEMENT is dated as of December 29,
2000 between Caliber Learning Network, Inc., a Maryland corporation (the
"Company"), and Sylvan Ventures, LLC, a Maryland limited liability company
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("Sylvan"), and Xxxxxxx US Discovery Fund III, L.P. and Xxxxxxx US Discovery
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Offshore Fund III, L.P. (collectively, the "Xxxxxxx Funds") and such other
purchasers as may from time to time purchase the Series B Preferred (as defined
below) directly from the Company (the "Future Investors") (each of the foregoing
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parties other than the Company being referred to individually as a "Purchaser"
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and collectively as the "Purchasers").
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W I T N E S S E T H :
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WHEREAS, the Company desires to issue and sell to the Purchasers,
and each of the Purchasers desires to purchase from the Company, shares of the
Company's Series B Convertible Preferred Stock, par value $.01 per share (the
"Series B Preferred"), upon the terms and provisions hereinafter set forth;
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NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
SECTION 1. SALE AND PURCHASE OF PREFERRED STOCK
(a) The Company agrees to sell to the Purchaser and, subject to
the terms and conditions hereof and in reliance upon the representations and
warranties of the Company contained herein or made pursuant hereto, each
Purchaser severally agrees to purchase from the Company on the Closing Date
specified in Section 2 hereof, the number of shares of Series B Preferred set
forth opposite such Purchaser's name on Schedule 1 hereto. The shares of Series
B Preferred being acquired under this Agreement from time to time are
collectively referred to herein as the "Shares", containing rights and
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privileges as more fully set forth in the Series B Articles Supplementary of the
Company in the form attached hereto as Exhibit A (the "Series B Articles
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Supplementary"). The Company's agreement with each Purchaser is a separate
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agreement, and the sale of Series B Preferred to each Purchaser is a separate
sale and the obligations of the Purchasers hereunder are several and not joint.
(b) The aggregate purchase price to be paid to the Company by
each Purchaser for the Shares to be purchased by each Purchaser pursuant to this
Agreement shall be the amount set forth opposite such Purchaser's name on
Schedule 1 hereto. No further payment shall be required from such Purchaser for
the Shares.
(c) The parties further acknowledge and agree that the Shares are
intended not to constitute "preferred stock" as that term is used in Section
305(b)(4) of the Code and Treasury Regulation (S) 1.305-5(a). Except as required
by any Taxing Authority or court, the Company and the Purchaser agree to treat
the Shares for Federal, state and local income and franchise tax purposes as not
constituting "preferred stock", and to take no position inconsistent with such
characterization on any Tax Return or before any Taxing Authority or court.
(d) The Company will use the proceeds from the sale of the Shares,
together with other funds it will receive on the Closing Date to fund future
development opportunities and for working capital purposes.
SECTION 2. THE CLOSING
(a) Subject to the terms and conditions hereof, the closing of the
purchase and sale of 110,000 shares of Series B Preferred to be purchased by
Sylvan and the Xxxxxxx Funds under this Agreement (the "Initial Closing") will
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take place at the offices of Xxxxx Xxxxxxx Xxxxxxx & Xxxxx LLP, 0000 Xxxxx
Xxxxxx, Xxxxxxxxx, Xxxxxxxx at 10:00 A.M., Eastern time, on December 29, 2000,
or such other time and date as shall be mutually agreed to by the Company and
Sylvan, but in any event no later than December 30, 2000 (such time and date are
herein referred to as the "Initial Closing Date").
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(b) Subject to the terms and conditions hereof, one or more
subsequent closings (each, a "Subsequent Closing") of the purchase and sale of
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the Shares to be purchased by any Future Investors will take place on or before
March 31, 2001 at a time and place as are mutually agreeable to the Company and
the Future Investors (each such time and date are herein referred to as a
"Subsequent Closing Date"). Each such Future Investor shall execute a copy of
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this Agreement and shall be added to Schedule 1 hereto. Without the prior
written consent of Sylvan and the Xxxxxxx Funds, (i) the aggregate purchase
amount of Shares purchased at the Initial Closing and all Subsequent Closings
shall not exceed $30 million and (ii) the purchase price per share of Series B
Preferred to purchased in any Subsequent Closing shall be equal to $100.
(c) Subject to the terms and conditions hereof, on the Initial
Closing Date and each Subsequent Closing Date (i) the Company will deliver to
each Purchaser a certificate registered in such Purchaser's name (or the name of
its nominee, if any, as specified on Schedule 1 hereto) evidencing the number of
Shares set forth opposite such Purchaser's name on Schedule 1, and (ii) upon
such Purchaser's receipt thereof, such Purchaser will deliver to the Company a
certified or official bank check (or wire transfer) in an amount equal to the
aggregate purchase price (as specified in Section 1(b) hereof) for the Shares to
be purchased by such Purchaser payable to the order of the Company in federal or
other immediately available funds.
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SECTION 3. DEFINITIONS
(a) For purposes of this Agreement, the following definitions shall
apply (such definitions to be equally applicable to both the singular and plural
forms of the terms defined):
"6% Non-Voting Convertible Preferred Stock" means the Company's
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6% Non-Voting Preferred Stock, par value $.01, which is expressly
subordinated, in all respects, to the Series A-2 Preferred and Series B
Preferred.
"Affiliate", when used with respect to any Person, means (i) if
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such Person is a corporation, any officer or director thereof (other
than a director elected pursuant to Section 4(c) of the Series B
Articles Supplementary) and any Person which is, directly or indirectly,
the beneficial owner (by itself or as part of any group) of more than
five percent (5%) of any class of any equity security (within the
meaning of the Securities Exchange Act) thereof, and, if such beneficial
owner is a partnership, any general partner thereof, or if such
beneficial owner is a corporation, any Person controlling, controlled by
or under common control with such beneficial owner, or any officer or
director of such beneficial owner or of any corporation occupying any
such control relationship, (ii) if such Person is a partnership, any
general or limited partner thereof, and (iii) any other Person which,
directly or indirectly, controls or is controlled by or is under common
control with such Person. For purposes of this definition, "control"
(including the correlative terms "controlling", "controlled by" and
"under common control with"), with respect to any Person, shall mean
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through
the ownership of voting securities or by contract or otherwise. The
holding of Shares (or of Conversion Shares obtained upon conversion of
Shares), and the rights under this Agreement or under the Series B
Articles Supplementary, the Stockholders' Agreement or the Registration
Rights Agreement (or the exercise of any such rights, including, without
limitation, nominating a director to the Board (or Board committee) of
the Company and Subsidiaries or sending an observer to Board (or Board
committee) meetings of the Company and Subsidiaries), shall not cause a
Purchaser to be deemed to be an "Affiliate" of the Company or any
Subsidiary.
"Affiliate Agreements" means (i) Lease Agreement, dated as of May
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30, 1997, between SHL Financial Services and the Company, (ii)
Intercompany Management and Facility Use Agreement, dated as of January
1, 1998, by and between Sylvan Learning and the Company, (iii)
facilities use and content development arrangement with Xxxxxx.xxx, Inc.
and (iv) the Promissory Note dated December 28, 2000 made by the Company
in favor of Sylvan Learning in the principal amount of $1 million, each
as may be amended, modified or renewed from time to time.
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"Agreement" means this Stock Purchase Agreement (together with
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exhibits and schedules) as such may be from time to time assigned,
supplemented or amended or as the terms hereof may be waived.
"Benefit Plan" means any Plan, existing at the Closing Date or
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prior thereto, established or to which contributions have at any time
been made by the Company or any ERISA Affiliate, or any predecessor of
any of the foregoing, or under which any employee, former employee or
director of the Company or any ERISA Affiliate or any beneficiary
thereof is covered, is eligible for coverage or has benefit rights as a
result of employment by or service with the Company or any ERISA
Affiliate, or as a result of designation as a beneficiary by any
employee, former employee or director of the Company or any ERISA
Affiliate.
"Board" or "Board of Directors" means with respect to any Person
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which is a corporation, a business trust or other entity, the board of
directors or other group, however, designated, which is charged with
legal responsibility for the management of such Person, or any committee
of such board of directors or group, however designated, which is
authorized to exercise the power of such board or group in respect of
the matter in question.
"Business Day" means any day other than a Saturday, Sunday or any
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day on which banks in the location of the office of the Company provided
for in Section 18 hereof are authorized or obligated to close.
"Capitalized Leases" means (a) any lease to which the Company or
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a Subsidiary is party as lessee, or by which it is bound, under which it
leases any property (real, personal or mixed) from any lessor other than
the Company or a Subsidiary, and (b) which either (i) is required to be
capitalized in accordance with GAAP, or, (ii) with respect to real
property, even if not so required to be capitalized, shall have a
remaining term of greater than three (3) years (including leases of
shorter duration which are or were extendible to a total term greater
than three (3) years at the option of the lessor) (the "Extended
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Leases"); provided that the Company makes a determination as to whether,
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at the time of its calculation of Capitalized Lease Value, it could be
released from its obligations under such Extended Leases without any
adverse economic consequence and (I) the Extended Leases shall not be
included in the calculation of Capitalized Leases if the Company
determines there would be no adverse economic consequences, and (II) the
Extended Leases shall be included in the calculation of Capitalized
Leases to the extent of such adverse economic consequence if the Company
determines that there would be adverse economic consequences.
"Capitalized Lease Value" means, as of the time of any determination
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thereof, the sum of the then present values, determined as hereinafter
provided, of future obligations of the Company and its subsidiaries
under then existing Capitalized Leases. To compute the value of any
Capitalized Lease, the following methods shall be used, as applicable:
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(i) values of leases required to be capitalized in accordance with GAAP
shall be computed in accordance with such principles; and
(ii) values of other leases (and values of contracts or other items which
this Agreement provides are to be valued as if they were Capitalized
Leases) shall be computed by discounting, to the date of
determination, at an assumed interest rate of eight percent (8%) per
annum, the minimum amount of future rental payments that will be due
from the Company or its subsidiaries under the related documentation,
including rental payments that may be due during extensions which are
at the other party's option, but excluding any amounts in respect of
insurance on, taxes on and/or maintenance of the properties subject
to such leases (provided that such amounts are owed and paid only to
the extent actually incurred).
"Code" means the Internal Revenue Code of 1986, as amended from time to
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time.
"Commission" means the Securities and Exchange Commission and any other
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similar or successor agency of the federal government administering the
Securities Act or the Securities Exchange Act.
"Common Stock" means the Company's Common Stock, par value $.01 per share,
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and shall also include any common stock of the Company hereafter authorized and
any capital stock of the Company of any other class hereafter authorized which
is not preferred as to dividends or assets over any other class of capital stock
of the Company or which has ordinary voting power for the election of directors
of the Company; provided that Common Stock shall not include the Series A-2
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Preferred or Series B Preferred.
"Company" means Caliber Learning Network, Inc., a Maryland corporation, its
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successors and assigns.
"Confidentiality Agreement" has the meaning set forth in Section 7.5
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hereof.
"Consolidated" or "consolidated", when used with reference to any
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financial term in this Agreement, means the aggregate for the Company and any of
its majority-owned Subsidiaries of the amounts signified by such term for all
such Persons, with intercompany items eliminated, and, with respect to net
worth, after eliminating the portion of net worth properly attributable to
minority interests, if any, in the capital of any such Person (other than in the
capital of the Company) and otherwise as determined in accordance with GAAP
(except as otherwise expressly provided herein).
"Conversion Share" or "Conversion Shares" means the shares of the Company's
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Common Stock obtained or obtainable upon conversion of Shares and shall also
include any capital stock or other securities into which such shares of Common
Stock are
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changed and any capital stock or other securities resulting from or comprising a
reclassification, combination or subdivision of, or a stock dividend on, any
such shares of Common Stock. In the event that any Conversion Shares are sold
either in a public offering pursuant to a registration statement under the
Securities Act or pursuant to a Rule 144 Transaction, then the transferees of
such Conversion Shares shall not be entitled to any benefits under this
Agreement with respect to such Conversion Shares and such Conversion Shares
shall no longer be considered to be "Conversion Shares" for purposes of any
consent or waiver provision of this Agreement.
"Disclosure Material" has the meaning specified in Section 4.6(a) hereof.
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"EBITDA" means, the consolidated or combined, as the case may be, net
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income for such period plus (a) the sum of, without duplication, to the extent
deducted in computing consolidated or combined net income: (i) income tax
expense, (ii) interest expense, (iii) depreciation, amortization (exclusive of
deferred rent amortization) and other non-cash charges and (iv) any
extraordinary or non-recurring losses or expenses, minus (b) the sum of (without
duplication), to the extent included in computing consolidated net income, (i)
interest or dividend income, (ii) non-operating income and (iii) any
extraordinary or non-recurring gains or income, all as determined in accordance
with GAAP, where applicable, consistently applied.
"Environmental Laws" means all federal, state, local, foreign, civil and
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criminal laws, statutes, ordinances, orders, codes, rules, policies, and
regulations and common law relating to the protection of the environment and
human health or relating to the handling, use, generation, treatment, storage,
transportation or disposal of Hazardous Materials, including but not limited to
the Resource Conservation and Recovery Act of 1976, 42 U.S.C.(S) 6901 et seq.;
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the Toxic Substances Control Act, 15 U.S.C.(S) 2601 et seq.; the Comprehensive
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Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C.(S)
9601 et seq.; the Federal Water Pollution Control Act, 33 U.S.C.(S) 1251 et
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seq.; the Clean Air Act, 42 U.S.C.(S) 7401 et seq.; the Hazardous Materials
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Transportation Act, 49 U.S.C.(S) 1801 et seq.; the Occupational Safety and
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Health Act, 29 U.S.C.(S) 651; the Federal Insecticide, Fungicide and Rodenticide
Act, 7 U.S.C.(S) 136y et seq.; and the Oil Pollution Act of 1990, 33 U.S.C.(S)
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2701 et seq., all as may be amended or superseded from time to time, and all
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common law claims relating to the same.
"Environmental Lien" has the meaning set forth in Section 4.16 hereof.
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"Environmental Permits" means all permits, licenses, approvals,
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authorizations or consents required by any Governmental Authority under any
applicable Environmental Law and includes any and all orders, consent orders or
binding agreements issued or entered into by a Governmental Authority under any
applicable Environmental Law.
"ERISA" means Employee Retirement Income Security Act of 1974, as amended.
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"ERISA Affiliate" means each "person" (as defined in Section 3(9) of ERISA)
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which is, or at any time was, a member of a controlled group (within the meaning
of Section 412(n)(6) of the Code) that includes, or at any time included, the
Company or any of its Subsidiaries.
"Xxxxxxx Funds" has the meaning set forth in the recitals hereof, together
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with their respective successors and assigns.
"Fully Diluted" means, with respect to the calculation of the number of
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shares of Common Stock, as of the time of determination thereof, the sum of (i)
all shares of Common Stock outstanding at the time of determination and (ii) all
shares of Common Stock issuable upon the exchange, exercise or conversion of all
warrants, options and convertible securities then outstanding (whether or not
such warrants, options or convertible securities are then exercisable,
exchangeable, convertible or subject to contingencies).
"Fundamental Transaction" has the meaning set forth in Section 9.3 hereof.
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"GAAP" means generally accepted accounting principles consistently applied.
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"Going Private Transaction" has the meaning set forth in Section 9.10
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hereof.
"Governmental Authority" means any federal, state, or local governmental
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agency or authority (including regulatory authority) having jurisdiction over
the Company or any of its Subsidiaries or any of its respective assets or
businesses.
"Guaranty" means (i) any guaranty or endorsement of the payment or
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performance of, or any contingent obligation in respect of, any indebtedness or
other obligation of any other Person, (ii) any other arrangement whereby credit
is extended to one obligor (directly or indirectly) on the basis of any promise
or undertaking of another Person (a) to pay the indebtedness of such obligor,
(b) to purchase an obligation owed by such obligor, (c) to purchase or lease
assets (or to provide funds, goods or services) under circumstances that would
enable such obligor to discharge one or more of its obligations or (d) to
maintain the capital, working capital, solvency or general financial condition
of such obligor, in each case whether or not such arrangement is disclosed in
the balance sheet of such other Person or is referred to in a footnote thereto
and (iii) any liability as a general partner of a partnership in respect of
indebtedness or other obligations of such partnership; provided, however, that
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the term "Guaranty" shall not include (1) endorsements for collection or deposit
in the ordinary course of business, (2) any guaranty of indebtedness of the
Company by a subsidiary of the Company or (3) obligations of the Company or its
Subsidiaries which would constitute Guaranties solely by virtue of the
continuing liability of a Person which has sold assets subject to liabilities
for the liabilities which were assumed by the Person acquiring the assets,
unless such liability is required to be carried on the consolidated balance
sheet of the Company. The
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amount of any Guaranty and the amount of indebtedness resulting from such
Guaranty shall be the maximum amount of the guarantor's potential obligation in
respect of such Guaranty.
"Hazardous Materials" means any petroleum, petroleum hydrocarbons,
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petroleum waste or petroleum products, underground storage tanks, asbestos or
asbestos-containing materials, pesticides, lead and lead-containing materials,
urea formaldehyde insulation and polychlorinated biphenyls (PCBs), ionizing and
non-ionizing radiation including radon and electromagnetic frequency radiation;
and any chemicals, materials, substances or wastes in any amount or
concentration which are now or hereafter "hazardous substances," "hazardous
wastes," "hazardous materials," "extremely hazardous wastes," "restricted
hazardous wastes," "toxic substances," "toxic pollutants" or words of similar
import, under any applicable Environmental Law.
"Indebtedness" of any Person means, without duplication, as of any date as
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of which the amount thereof is to be determined, (i) all obligations of such
Person to repay money borrowed (including, without limitation, all notes payable
and drafts accepted representing extensions of credit, all obligations under
letters of credit, all obligations evidenced by bonds, debentures, notes or
other similar instruments and all obligations upon which interest charges are
customarily paid), (ii) the Capitalized Lease Value of all Capitalized Leases in
respect of which such Person is liable as lessee or as the guarantor of the
lessee, (iii) all monetary obligations which are secured by any Lien existing on
property owned by such Person whether or not the obligations secured thereby
have been incurred or assumed by such Person, (iv) all conditional sales
contracts and similar title retention debt instruments under which such Person
is obligated to make payments, (v) all Guaranties by such Person and (vi) all
contractual obligations (whether absolute or contingent) of such Person to
repurchase goods sold and distributed. "Indebtedness" shall not include,
however, (1) Indebtedness of the Company to any of its wholly-owned Subsidiaries
or Indebtedness of any wholly-owned Subsidiary to the Company or to another
wholly-owned Subsidiary, and (2) any unfunded obligations in any employee
pension benefit plan (as defined in ERISA) of the Company or of any Subsidiary.
"Initial Closing" has the meaning set forth in Section 2(a) hereof.
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"Initial Closing Date" has the meaning set forth in Section 2(a) hereof.
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"Internal Rate of Return" means the discount rate at which the present
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value of the future cash flows of an investment equal the cost of the
investment.
"Investment" means, with respect to any Person, (i) any loan, advance or
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extension of credit by such Person to, and any contributions to the capital of,
any other Person, (ii) any Guaranty by such Person, (iii) any interest in any
capital stock, equity interest or other securities of any other Person, (iv) any
transfer or sale of property of such Person to any other Person other than upon
full payment, in cash or other
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consideration, of not less than the agreed sale price bargained on an arms-
length basis and (v) any commitment or option to make an Investment if, in the
case of an option, the consideration therefor exceeds $10,000, and any of the
foregoing under clauses (i) through (v) shall be considered an Investment
whether such Investment is acquired by purchase, exchange, merger or any other
method; provided, that the term "Investment" (1) shall not include an Investment
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in the Company or in a wholly-owned Subsidiary, (2) shall not include current
trade and customer accounts receivable and allowances, provided they relate to
goods furnished in the ordinary course of business and are given in accordance
with the customary practices of the Company or a Subsidiary, (3) shall not
include temporary investments of excess cash of the Company or of any Subsidiary
in any of the following: (A) investment grade obligations maturing within one
year of their issuance which as to principal and interest constitute direct
obligations of, or obligations guaranteed by, the United States of America, (B)
negotiable certificates of deposit of banks or trust companies which are
organized under the laws of the United States of America or any state thereof
and which have capital and surplus of at least $500,000,000, (C) commercial
paper which is rated not less than prime-one or A-1 or their equivalents by
Xxxxx'x Investor Service, Inc. or Standard & Poor's Corporation or their
successors, (D) any repurchase agreement secured by any one or more of the
foregoing and (E) money market funds primarily investing in any of the foregoing
securities and sponsored by or affiliated with nationally recognized brokerage
or investment advisory firms, and (4) shall not include Investments of the
Company existing on the date hereof and disclosed on Schedule 3(a) hereto.
"Lien" means any mortgage, pledge, hypothecation, assignment, deposit
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arrangement, encumbrance, or preference, priority or other security interest of
any kind or nature whatsoever (including, without limitation, any conditional
sale or other title retention agreement, any financing lease having
substantially the same effect as any of the foregoing, any assignment or other
conveyance of any right to receive income and any assignment of receivables with
recourse against the assignor), any filing of a financing statement as debtor
under the Uniform Commercial Code or any similar statute and any agreement to
give or make any of the foregoing; provided that the term "Lien" shall not
include Permitted Liens.
"MCI" means MCI Telecommunications Corporation, which as of the date of
---
this Agreement holds 662,513 shares of Common Stock.
"MCI Warrants" means the amended and restated warrant to purchase 1,193,573
--- --------
shares of Common Stock, as adjusted pursuant to the anti-dilution terms thereof,
issued to MCI.
"Outside Directors" means those directors on the Company's Board of
-----------------
Directors at any time who are not otherwise Affiliates of or employed by the
Company; provided that notwithstanding the foregoing, Xxxxxxx X. Xxxxxx and R.
--------
Xxxxxxxxxxx Xxxxx-Xxxxx shall be deemed Outside Directors for the purposes
hereof.
-9-
"Outstanding" or "outstanding" means (a) when used with reference to the
----------- -----------
Shares or the Conversion Shares as of a particular time, all Shares or
Conversion Shares theretofore duly issued except (i) Shares and Conversion
Shares theretofore reported as lost, stolen, mutilated or destroyed or
surrendered for transfer, exchange or replacement, in respect of which new or
replacement Shares or Conversion Shares have been issued by the Company, (ii)
Shares and Conversion Shares theretofore canceled by the Company and (iii)
Shares and Conversion Shares registered in the name of, as well as Shares owned
beneficially by, the Company, any Subsidiary or any of its Affiliates. For
purposes of the preceding sentence, in no event shall "Affiliates" include (x)
the Purchasers or (y) any Affiliates of the Purchasers.
"Patents and Applications" has the meaning set forth in Section 4.12
------------------------
hereof.
"Pension Plan" means any "employee pension benefit plan" as defined in
------------
Section 3(2) of ERISA.
"Permitted Lien" means (i) any Lien for Taxes, governmental charges or
--------------
levies not yet due or delinquent or being contested in good faith by appropriate
proceedings for which adequate reserves have been established in accordance with
GAAP, (ii) any imperfections of title, easements, rights of way or similar
Liens, zoning laws or land use restrictions as normally exist with respect to
property similar in character to the property affected thereby and which
individually or in the aggregate with other such Liens, zoning laws or land use
restrictions do not materially impair the value or marketability of the property
subject to such Liens, zoning laws or land use restrictions or interfere with
the use of such property in the conduct of the business of the Company and which
do not secure obligations for money borrowed, (iii) Liens imposed by any law,
such as mechanic's, materialman's, landlord's, warehouseman's and carrier's
Liens, securing obligations incurred in the ordinary course of business which
are not yet overdue or which are being diligently contested in good faith by
appropriate proceedings and, with respect to such obligations which are being
contested, for which the Company has set aside adequate reserves, if
appropriate, (iv) any Lien resulting from purchase by the Company of goods in
the ordinary course of business as to which Liens are not filed of record and
(v) any Lien necessary to secure Indebtedness that is not prohibited by Section
9.2 hereof; provided that "Permitted Lien" shall not include any Lien upon or
with respect to any shares of capital stock of any Subsidiary.
"Permitted Transferee" means any Transferee that holds not less than an
--------------------
aggregate of 20,000 Shares.
"Permitted Transferee Designee" means each person that any Permitted
-----------------------------
Transferee designates in writing to the Company to receive, on behalf of such
Permitted Transferee, the information to which such Permitted Transferee is
entitled to pursuant to
-10-
Section 7.1(b)(v) hereof; provided that each Permitted Transferee may not
designate more than two persons pursuant hereto.
"Person" or "person" means an individual, corporation, partnership, limited
------ ------
liability company, firm, association, joint venture, trust, unincorporated
organization, government, governmental body, agency, political subdivision or
other entity.
"Plan" means any bonus, incentive compensation, deferred compensation,
----
pension, profit sharing, retirement, stock purchase, stock option, stock
ownership, stock appreciation rights, phantom stock, leave of absence, layoff,
vacation, day or dependent care, legal services, cafeteria, life, health,
accident, disability, worker's compensation or other insurance, severance,
separation or other employee benefit plan, practice, policy or arrangement of
any kind, whether written or oral, or whether for the benefit of a single
individual or more than one individual including, but not limited to, any
"employee benefit plan" within the meaning of Section 3(3) of ERISA.
"Preferred Stock" means any class of the capital stock of a corporation
---------------
(whether or not convertible into any other class of such capital stock) which
has any right, whether absolute or contingent, to receive dividends or other
distributions of the assets of such corporation (including, without limitation,
amounts payable in the event of the voluntary or involuntary liquidation,
dissolution or winding-up of such corporation), which right is superior to the
rights of another class of the capital stock of such corporation. "Preferred
Stock" includes, without limitation, the Series A-2 Preferred and Series B
Preferred.
"Purchaser" has the meaning set forth in the recitals hereof, together with
---------
its successors and assigns.
"Purchasers" has the meaning set forth in the recitals hereof, together
----------
with their respective successors and assigns.
"Registration Rights Agreement" means the Amended and Restated Registration
-----------------------------
Rights Agreement, dated as of the Closing Date, among the Company and each of
the Purchasers.
"Restricted Payment" means (i) every payment in connection with
------------------
the redemption, purchase, retirement or other acquisition by or on behalf of the
Company or any Subsidiary of any shares of the Company's or a Subsidiary's
capital stock (as defined below), whether or not owned by the Company or any
Subsidiary, (ii) any prepayments or repayments made on Indebtedness of the
Company or any Subsidiary, (iii) every payment to or on behalf of any Affiliate
of the Company or any Affiliate of any Subsidiary on account of or with respect
to any lease arrangements, and (iv) every payment by or on behalf of the Company
or of any Subsidiary (whether as repayment or prepayment of principal or as
interest or otherwise) on or with respect to (A) any obligation to repay money
borrowed owing to any Affiliate of the Company or of any Subsidiary or (B) any
-11-
obligation, to any Person, of any Affiliate of the Company or of any
Subsidiary or to any other holder of shares of the Company's capital
stock (as defined below), which obligation is assumed, or is the subject
of a Guaranty, by the Company or a Subsidiary; provided, however, (a)
-------- -------
that the restrictions of the foregoing clause (i) shall not apply to (A)
any payment in respect of capital stock of the Company to the extent
payable in shares of the capital stock of the Company, (B) any
redemption of the Series A-2 Preferred or Series B Preferred or (C) any
redemption or repurchase pursuant to the 1997 Stock Option Plan and the
1998 Stock Incentive Plan as in effect on the date hereof, (b) that the
restrictions of the foregoing clause (ii) shall not apply to any
regularly scheduled prepayment or repayment of Indebtedness, provided
that such Indebtedness being prepaid or repaid is not at the time of
such prepayment or repayment or at any prior time thereto owing to an
Affiliate of the Company, or any payments due under the Affiliate
Agreements, (c) that none of the foregoing clauses shall apply to any
payments from a Subsidiary to the Company or from a Subsidiary to a
wholly-owned Subsidiary and (d) that none of the foregoing clauses shall
apply to any payments, distributions or other transfers or actions on or
with respect to the Shares or the Conversion Shares or to the Purchasers
(or holders of Shares or the Conversion Shares) under this Agreement.
For purposes of this definition, "capital stock" shall also include
warrants and other rights and options to acquire shares of capital stock
(whether upon exercise, conversion, exchange or otherwise).
"Rule 144" means (i) Rule 144 under the Securities Act as such
--------
Rule is in effect from time to time and (ii) any successor rule,
regulation or law, as in effect from time to time.
"Rule 144A" means (i) Rule 144A under the Securities Act as such
---------
Rule is in effect from time to time and (ii) any successor rule,
regulation or law, as in effect from time to time.
"Rule 144 Transaction" means a transfer of Conversion Shares (A)
--------------------
complying with Rule 144 as such Rule is in effect on the date of such
transfer (but not including a sale other than pursuant to "brokers'
transactions" as defined in clauses (1) and (2) of paragraph (g) of such
Rule as in effect on the date hereof) and (B) occurring at a time when
Conversion Shares are registered pursuant to Section 12 of the
Securities Exchange Act.
"SEC Reports" has the meaning set forth in Section 4.19 hereof.
-----------
"Securities Act" means the Securities Act of 1933, as amended,
--------------
and the rules, regulations and interpretations thereunder.
"Securities Exchange Act" means the Securities Exchange Act of
-----------------------
1934, as amended, and the rules, regulations and interpretations
thereunder.
-12-
"Series A-2 Preferred" means the Company's Series A-2 Convertible
--------------------
Preferred Stock, par value $.01 per share, classified by Articles
Supplementary filed with the Maryland Department of Assessments and
Taxation on December 27, 2000 and attached as Exhibit F hereto (the "A-2
Articles Supplementary").
"Series B Articles Supplementary" has the meaning set forth in
-------------------------------
Section 1(a) hereof.
"Series B Designee" means each person that any Purchaser
-----------------
designates in writing to the Company to receive, on behalf of such
Purchaser, the information to which such Purchaser is entitled pursuant
to Section 7.1(b)(v) hereof; provided that each Purchaser may not
designate more than two persons pursuant hereto.
"Series B Preferred" means the Company's Series B Convertible
------------------
Preferred Stock, par value $.01 per share, which will have the rights,
powers and privileges as more fully set forth in the Series B Articles
Supplementary.
"Shares" has the meaning set forth in Section 1(a) hereof. In the
------
event that any Shares are sold either in a public offering pursuant to a
registration statement under Section 5 of the Securities Act or pursuant
to a Rule 144 Transaction, then the transferees of such Shares shall not
be entitled to any benefits under this Agreement with respect to such
Shares and such Shares shall no longer be considered to be "Shares" for
purposes of any consent or waiver provision of this Agreement.
"Stockholders' Agreement" means the Amended and Restated
-----------------------
Stockholders' Agreement, dated as of the Closing Date, among the
Company, the Purchasers and certain other stockholders of the Company.
"Subsidiary", with respect to any Person, means any corporation,
----------
association or other entity of which more than 50% of the total voting
power of shares of stock or other equity interests (without regard to
the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is, at the time as of which any
determination is being made, owned or controlled, directly or
indirectly, by such Person or one or more of its Subsidiaries, or both.
The term "Subsidiary" or "Subsidiaries" when used herein without
---------- ------------
reference to any particular Person, means a Subsidiary or Subsidiaries
of the Company.
"Subsequent Closing" has the meaning set forth in Section 2(b)
------------------
hereof.
"Subsequent Closing Date" has the meaning set forth in Section
-----------------------
2(b) hereof.
"Sylvan" has the meaning set forth in the recitals hereof,
------
together with its successors and assigns.
-13-
"Sylvan Learning" means Sylvan Learning Systems, Inc., which
---------------
holds 1,227,393 shares of Common Stock and all of the outstanding 6%
Nonvoting Convertible Preferred Stock.
"Takeover Proposal" shall mean any tender or exchange offer for
-----------------
in excess of 15% of the outstanding securities involving the Company,
any proposal for a merger, consolidation or other business combination
involving the Company, any proposal or offer to acquire in any manner a
greater than 15% equity interest in, or a significant portion of the
business or assets of, the Company (other than immaterial or
insubstantial assets or inventory in the ordinary course of business or
assets held for sale), any proposal or offer with respect to any
recapitalization or restructuring with respect to the Company or any
proposal or offer with respect to any other transaction similar to any
of the foregoing with respect to the Company other than pursuant to the
transactions to be effected pursuant to this Agreement.
"Takeover Proposal Interest" has the meaning set forth in Section
--------------------------
7.4(e) hereof.
"Tax" or "Taxes" means all federal, state, local or foreign net
--- -----
or gross income, gross receipts, net proceeds, sales, use, ad valorem,
----------
value added, franchise, bank shares, withholding, payroll, employment,
excise, property, alternative or add-on minimum, environmental or other
taxes, assessments, duties, fees, levies or other governmental charges
of any nature whatsoever, whether disputed or not, together with any
interest, penalties, additions to tax or additional amounts with respect
thereto.
"Tax Returns" means any returns, reports or statements (including
-----------
any information returns) required to be filed for purposes of a
particular Tax.
"Taxing Authority" means any governmental agency, board, bureau,
----------------
body, department or authority of any United States federal, state or
local jurisdiction, or any foreign jurisdiction, having or purporting to
exercise jurisdiction with respect to any Tax.
"Transferees" shall mean any transferee of the Shares or the
-----------
Conversion Shares from a Purchaser. Transferees shall not include a
transferee of Shares or Conversion Shares sold in either a public
offering pursuant to a registration statement under the Securities Act
or pursuant to a Rule 144 Transaction.
(b) For all purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires:
(i) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to
any particular Section or other subdivision;
-14-
(ii) all accounting terms not otherwise defined herein
have the meanings assigned to them in accordance with GAAP (except as
otherwise provided herein);
(iii) all computations provided for herein, if any, shall
be made in accordance with GAAP (except as otherwise provided herein);
(iv) any uses of the masculine, feminine or neuter gender
shall also be deemed to include any other gender, as appropriate;
(v) all references herein to actions by the Company or
any Subsidiary, such as "create", "sell", "transfer", "dispose of",
etc., mean such action whether voluntary or involuntary, by operation of
law or otherwise;
(vi) the exhibits and schedules to this Agreement shall be
deemed a part of this Agreement;
(vii) each of the representations and warranties of the
Company contained in Section 4 hereof is separate and is not limited,
qualified or modified by the existence, wording or satisfaction of any
other representation or warranty of the Company in Section 4 or
otherwise;
(viii) each of the covenants of the Company contained in
Sections 7, 8 and 9 hereof or otherwise contained in this Agreement, the
Series B Articles Supplementary, the Stockholders' Agreement or the
Registration Rights Agreement is separate and is not limited or
satisfied by the existence, wording or satisfaction of any other
covenant of the Company in Section 7, 8 or 9 or otherwise; and
(ix) all references herein (in covenants or otherwise) to
any action(s) which are to be taken (or which are prohibited from being
taken) by any Person or the Company or any Subsidiary shall apply to
such Person or the Company or such Subsidiary, as the case may be,
whether such action is taken directly or indirectly.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser as follows
as of the date hereof and as of the Initial Closing Date and any Subsequent
Closing Date, except as set forth in the disclosure schedules attached hereto:
4.1. Corporate Existence, Power and Authority.
----------------------------------------
(a) Each of the Company and each Subsidiary is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. The
-15-
Company and each Subsidiary is duly qualified, licensed and authorized to do
business and is in good standing in each jurisdiction in which it owns or leases
any property or in which the conduct of its business requires it to so qualify
or be so licensed, except for such jurisdictions where the failure to so qualify
or be so licensed would not have a material adverse effect on the Company's
assets, properties, liabilities, business, affairs, results of operations,
condition (financial or otherwise) or prospects, on a consolidated basis.
(b) No proceeding has been commenced looking toward the
dissolution or merger of the Company or any Subsidiary or the amendment of their
respective certificates of incorporation (other than the Series B Articles
Supplementary). Neither the Company nor any Subsidiary is in violation in any
respect of its charter or by-laws.
(c) Each of the Company and each Subsidiary has all requisite
power, authority (corporate and other) and legal right to own or to hold under
lease and to operate the properties it owns or holds and to conduct its business
as now being conducted.
(d) The Company has all requisite power, authority (corporate
and other) and legal right to execute, deliver, enter into, consummate the
transactions contemplated by and perform its obligations under (i) this
Agreement, including, without limitation, the issuance by the Company of the
Shares and the Conversion Shares as contemplated herein and therein and in the
Series B Articles Supplementary (subject to the proper filing with the Maryland
State Department of Assessments and Taxation of the Series B Articles
Supplementary), (ii) the Stockholders' Agreement and (iii) the Registration
Rights Agreement. The execution, delivery and performance of this Agreement, the
Stockholders' Agreement and the Registration Rights Agreement by the Company
(including, without limitation, the issuance by the Company of the Shares and
the Conversion Shares as contemplated herein and therein and in the Series B
Articles Supplementary) have been duly authorized by all required corporate and
other actions. The Company has duly executed and delivered this Agreement and at
the Initial Closing and at each Subsequent Closing will have duly executed and
delivered the Stockholders' Agreement and the Registration Rights Agreement.
This Agreement constitutes and, at the Initial Closing and at each Subsequent
Closing, the Stockholders' Agreement and the Registration Rights Agreement will
constitute the legal, valid and binding obligations of the Company enforceable
in accordance with their respective terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to the rights of
creditors generally or under general principles of equity.
4.2. Capital Stock.
-------------
(a) Schedule 4.2(a) hereto correctly and completely lists (i)
the authorized capital stock of the Company (Common Stock and Preferred Stock),
(ii) the number of designated shares of Preferred Stock in each series or class
after giving effect to the Series B Articles Supplementary and the Series A-2
Preferred, (iii) on December 29, 2000, after giving effect to the issuance of
Shares contemplated by this Agreement, the number of shares outstanding in each
series or class, and (iv) on December 29, 2000, after giving effect to the
-16-
issuance of Shares contemplated by this Agreement, a table showing the
capitalization of the Company reflecting outstanding options and warrants and
the issuance of the Conversion Shares. There have been no material issuances of
shares since September 30, 2000, except the issuance of 71,682 shares of Common
Stock in connection with the Company's Employee Stock Purchase Plan, the
issuance of 2,500 shares of Common Stock in connection with the exercise of
employee stock options and the issuance of the Series A-2 Preferred. All of such
outstanding shares are, or on the Initial Closing Date and each Subsequent
Closing will be, duly authorized, validly issued and outstanding, fully paid and
non-assessable. The shares of the Company's Common Stock issuable upon
conversion of the Series B Preferred will be, when issued in accordance with the
terms of the Series B Preferred, duly authorized, validly issued, fully paid and
non-assessable. Except as provided in the Series B Articles Supplementary and as
described in Schedule 4.2(a), none of the shares of the Company's capital stock
which will be outstanding at the Initial Closing and each Subsequent Closing (i)
were or will be subject to preemptive rights when issued or (ii) provide the
holders thereof with any preemptive rights with respect to any issuances of
capital stock.
(b) Schedule 4.2(b) hereto correctly and completely lists the
number and purpose for which shares of the Company's Common Stock are reserved
for issuance by the Company.
(c) Except as referred to in Section 4.2(b), there are no
outstanding options, warrants, subscriptions, rights, convertible securities or
other agreements or plans under which the Company may become obligated to issue,
sell or transfer shares of its capital stock or other securities.
(d) Except for the registration rights contained in the
Registration Rights Agreement and as described in Schedule 4.2(d), there are and
will be no outstanding registration rights with respect to any capital stock of
the Company or of any Subsidiary, which (in either case) will be outstanding on
the Closing Date, or any capital stock referred to in Section 4.2(b) or 4.2(c).
(e) There are no voting agreements, voting trusts, proxies or
other agreements or understandings with respect to the voting of any capital
stock of the Company or any Subsidiary.
(f) Except as described in Schedule 4.2(f), there are no
anti-dilution protections or other adjustment provisions in existence with
respect to any capital stock of the Company or any Subsidiary or any capital
stock referred to in Section 4.2(b) or 4.2(c).
(g) The Series B Articles Supplementary has been duly adopted by
the Company and is fully effective as a supplement to the Company's charter. The
Shares will have all of the rights, priorities and terms set forth in the Series
B Articles Supplementary.
-17-
(h) The A-2 Articles Supplementary has been duly adopted by the
Company and is fully effective as a supplement to the Company's charter.
(i) To the knowledge of the Company, those persons who
beneficially own, directly or indirectly, more than 5% (calculated in accordance
with Rule 13d-3 under the Securities Exchange Act) of the Company's outstanding
Common Stock are as listed on Schedule 4.2(i); provided that the Company may
--------
rely on the accuracy of all Schedules 13D and Schedules 13G filed under the
Securities Exchange Act for purposes of determining those persons who
beneficially own, directly or indirectly, more than 5% of the Company's
outstanding Common Stock.
4.3. Subsidiaries.
------------
The Company has no Subsidiaries. The Company has no Investments
in any other Person.
4.4. Business.
--------
The Company is engaged primarily in the business of distributed
learning and internet communications. The Company neither currently engages in,
nor has any intention of engaging in, any other business.
4.5. No Defaults or Conflicts.
------------------------
(a) Neither the Company nor any of its Subsidiaries is in
violation or default in any material respect (and is not in default in any
respect regarding any Indebtedness) under any indenture, agreement or instrument
to which it is a party or by which it or its properties may be bound that would
materially adversely affects or will materially adversely affect the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company or the ability of the
Company to perform its obligations under this Agreement, the Series B Articles
Supplementary, the Stockholders' Agreement, the Registration Rights Agreement,
the A-2 Articles Supplementary or any of the transactions contemplated hereby or
thereby. Neither the Company nor any Subsidiary is in default in any material
respect under any material order, writ, injunction, judgment or decree of any
court or other governmental authority or arbitrator(s).
(b) The execution, delivery and performance by the Company of
this Agreement, the Stockholders' Agreement and the Registration Rights
Agreement and any of the transactions contemplated hereby or thereby (including,
without limitation, the issuance of the Shares and the Conversion Shares as
contemplated herein and therein and in the Series B Articles Supplementary, the
adoption of each of the Series B Articles Supplementary and the A-2 Articles
Supplementary as amendments to the Company's charter) do not and will not (i)
violate, conflict with or give rise to a termination right under, with or
without the giving of notice or the passage of time or both, any provision of
(A) the respective charters or by-laws of the Company or any of
-18-
its Subsidiaries, (B) any law, rule, regulation or order of any federal, state,
county, municipal or other governmental authority, (C) any judgment, writ,
injunction, decree, award or other action of any court or governmental authority
or arbitrator(s), or (D) any agreement, indenture or other instrument applicable
to the Company or any of its Subsidiaries or any of their respective properties,
(ii) result in the creation of any Lien upon any of the Company's or any
Subsidiary's properties, assets or revenues, except as provided in the Series B
Articles Supplementary or the A-2 Articles Supplementary, (iii) require the
consent, waiver, approval, order or authorization of, or declaration,
registration, qualification or filing with, any Person (whether or not a
governmental authority and including, without limitation, any shareholder
approval) (other than approvals which have been obtained prior to the Closing
Date), or (iv) cause antidilution clauses of any outstanding securities to
become operative or give rise to any preemptive rights (other than with respect
to the Series A-2 Preferred). No provision of any item referred to in Sections
(A) and (C) of the preceding clause (i) materially adversely affects or will
materially adversely affect the assets, properties, liabilities, business,
affairs, results of operations, condition (financial or otherwise) or prospects
of the Company or the ability of the Company to perform its obligations under
this Agreement, the Series B Articles Supplementary, the Stockholders'
Agreement, the Registration Rights Agreement, the A-2 Articles Supplementary or
any of the transactions contemplated hereby or thereby.
4.6. Disclosure Materials; Other Information.
---------------------------------------
(a) The Company has previously furnished to the Purchasers the
materials described on Schedule 4.6(a) hereto (the "Disclosure Material"). The
-------------------
audited and unaudited financial statements referred to or contained in the
materials referred to on Schedule 4.6(a) fairly present the consolidated
financial condition of the Company as of the respective dates thereof and the
consolidated results of the operations of the Company for such periods and have
been prepared in accordance with GAAP, except that any such unaudited statements
may omit notes and may be subject to normal year-end adjustment.
(b) Since September 30, 2000, except as disclosed in the
Company's Quarterly Report on Form 10-Q for the three months ended September 30,
2000 or subsequently publicly announced, (i) the business of the Company has
been conducted in the ordinary course and (ii) there has been no material
adverse change in the assets, properties, liabilities, business, affairs,
results of operations, condition (financial or otherwise) or prospects of the
Company. As of the date hereof, there are no material liabilities of the Company
or any Subsidiary which would be required to be provided for in a consolidated
balance sheet of the Company as of either such date prepared in accordance with
GAAP, other than liabilities provided for in the financial statements referred
to in Section 4.6(a). Since September 30, 2000, no amount or property has
directly or indirectly been declared, ordered, paid, made or set aside for any
Restricted Payment nor has any such action been agreed to.
(c) There are no material liabilities, contingent or otherwise,
of the Company or the Subsidiaries that have not been disclosed in the financial
statements referred to in Section 4.6(a) or otherwise disclosed in the schedules
hereto.
-19-
(d) The financial projections included in the Disclosure
Material conform with the internal operating forecasts of the Company and its
Subsidiaries and were based on good faith assumptions when made and have been
prepared in good faith.
(e) There is no fact known to the Company or any of the
Subsidiaries which is not in the disclosure schedules hereto which is necessary
in order to make the representations and warranties made, in light of the
circumstances under which they were made, not misleading.
4.7. Litigation.
----------
There is no action, suit, proceeding, investigation or claim
pending or, to the knowledge of the Company or the Subsidiaries, threatened in
law, equity or otherwise before any court, administrative agency or arbitrator
which (i) questions the validity of this Agreement, the Series B Articles
Supplementary, the Stockholders' Agreement, the Registration Rights Agreement,
the A-2 Articles Supplementary, the Shares or the Conversion Shares or any
action taken or to be taken pursuant hereto or thereto, (ii) might adversely
affect the right, title or interest of any Purchaser to the Shares or the
Conversion Shares or (iii) might result in a material adverse change in the
assets, properties, liabilities, business, affairs, results of operations,
condition (financial or otherwise) or prospects of the Company.
4.8. Taxes.
-----
Each of the Company and each Subsidiary has duly and timely filed
all Tax Returns required to be filed by it, and each such Tax Return correctly
and completely reflects the Tax liability and all other information required to
be reported thereon. Each of the Company and each Subsidiary has paid or caused
to be paid all Taxes (whether or not reflected on such Tax Returns) that are due
and payable. The provision for Taxes due by the Company and its Subsidiaries in
the most recent financial statement included in the Disclosure Material is
sufficient for all unpaid Taxes, being current Taxes not yet due and payable, of
the Company and its Subsidiaries, as of the end of the period covered by such
financial statement, and as of the Initial Closing Date and each Subsequent
Closing Date, such provision, as adjusted for the passage of time through the
Initial Closing Date and each Subsequent Closing Date, will be sufficient for
the then-accrued and unpaid Taxes not yet due and payable of the Company and its
Subsidiaries. No Tax Returns of the Company or any Subsidiary have ever been
audited by any Taxing Authority, there is no dispute concerning any Tax
liability of the Company or any Subsidiary either threatened, claimed or raised
by any Taxing Authority, and the Company does not expect any Taxing Authority to
assess additional Taxes against or in respect of it or any Subsidiary for any
past period. The Company and each Subsidiary has withheld and paid, or, if not
yet due for payment, set aside in accounts for such purposes, all Taxes required
to have been withheld in connection with amounts paid or owing to any employee,
creditor, independent contractor or other third party. Other than stamp taxes,
the Company and its Subsidiaries have no liability for Taxes of any Person other
than the Company and its Subsidiaries (i) as a transferee or successor, (ii) by
contract, or (iii) otherwise.
-20-
4.9. ERISA.
-----
(a) All Benefit Plans are listed in Section 4.9(a) of Schedule
4.9, and copies of all documentation relating to such Benefit Plans have been
delivered to or made available for review by Purchasers (including, without
limitation, copies of written Benefit Plans, written descriptions of oral
Benefit Plans, summary plan descriptions, trust agreements, the three most
recent annual returns, employee communications, and IRS determination letters).
(b) Each Benefit Plan has at all times been maintained and
administered in all material respects in accordance with its terms and with the
requirements of all applicable law, including, without limitation, ERISA and the
Code, and each Benefit Plan intended to qualify under section 401(a) of the Code
has at all times since its adoption been so qualified, and each trust which
forms a part of any such plan has at all times since its adoption been
tax-exempt under section 501(a) of the Code.
(c) No Benefit Plan has incurred any "accumulated funding
deficiency" within the meaning of section 302 of ERISA or section 412 of the
Code, and the "amount of unfunded benefit liabilities" within the meaning of
section 4001(a)(18) of ERISA does not exceed zero with respect to any Benefit
Plan subject to Title IV of ERISA.
(d) No "reportable event" (within the meaning of section 4043 of
ERISA) has occurred with respect to any Benefit Plan since the effective date of
said section 4043 for which notice is not waived under the regulations issued
pursuant to said section 4043.
(e) No Benefit Plan is a multiemployer plan within the meaning
of section 3(37) of ERISA.
(f) No direct, contingent or secondary liability has been
incurred or is expected to be incurred by the Company or any ERISA Affiliate
under Title IV of ERISA to any party with respect to any Benefit Plan.
(g) Neither the Company nor any ERISA Affiliate has incurred any
liability for any tax imposed under Chapter 43 of the Code or any liability
under Part 5 of Title I of ERISA.
(h) No benefit under any Benefit Plan, including, without
limitation, any severance or parachute payment plan or agreement, will be
established or become accelerated, vested or payable by reason of any
transaction contemplated under this Agreement.
(i) No Benefit Plan provides health or death benefit coverage
beyond the termination of an employee's employment, except as required by Part 6
of Subtitle B of Title I of ERISA or section 4980B of the Code or any State laws
requiring continuation of benefits coverage following termination of employment.
-21-
(j) No suit, action or other litigation (excluding claims for
benefits incurred in the ordinary course of plan activities) has been brought
or, to the knowledge of the Company or any Subsidiary, threatened against or
with respect to any Benefit Plan and there are no facts or circumstances known
to the Company or any Subsidiary that could reasonably be expected to give rise
to any such suit, action or other litigation.
(k) All contributions to Benefit Plans that were required to be
made under such Benefit Plans have been made, and all benefits accrued under any
unfunded Benefit Plan have been paid, accrued or otherwise adequately reserved
in accordance with GAAP, all of which accruals under unfunded Benefit Plans are
as disclosed in Schedule 4.9, and each of the Company and each Subsidiary has
performed all material obligations required to be performed under all Benefit
Plans.
(l) The execution, delivery and performance of this Agreement,
the Stockholders' Agreement and the Registration Rights Agreement and the
consummation of the transactions contemplated hereby and thereby (including,
without limitation, the offer, issue and sale by the Company, and the purchase
by the Purchaser of the Shares and the Conversion Shares) will not involve any
"prohibited transaction" within the meaning of ERISA or the Code that could
subject the Company or any ERISA Affiliate to a tax, penalty or liability under
ERISA or the Code.
4.10. Legal Compliance.
----------------
(a) Each of the Company and each Subsidiary has complied with
all applicable laws, rules, regulations, orders, licenses, judgments, writs,
injunctions, decrees or demands, except to the extent that failure to so comply
would not materially adversely affect the assets, properties, liabilities,
business affairs, results of operations, condition (financial or otherwise) or
prospects of the Company on a consolidated basis.
(b) There are no adverse orders, judgments, writs, injunctions,
decrees, or demands of any court or administrative body, domestic or foreign, or
of any other governmental agency or instrumentality, domestic or foreign,
outstanding against the Company or any Subsidiary.
4.11. Outstanding Securities.
----------------------
Schedule 4.11 hereto correctly and completely lists the
outstanding securities (as defined in the Securities Act) of the Company and the
Subsidiaries. All securities of the Company have been offered, issued, sold and
delivered in compliance with, or pursuant to exemptions from, all applicable
federal and state laws, and the rules and regulations of federal and state
regulatory bodies governing the offering, issuance, sale and delivery of
securities.
-22-
4.12. Intellectual Property and Other Rights.
--------------------------------------
(a) Each of the Company and each Subsidiary owns or possesses all
patents, patent rights, trademarks, trademark rights, trade names, trade name
rights and copyrights (collectively, the "Intellectual Property") (each of which
---------------------
is listed on Schedule 4.12(a) hereto), and all rights and privileges with
respect to any of the foregoing, as are necessary for the conduct of its
business as now being conducted and as proposed to be conducted. To the best of
the Company's knowledge, the rights of (and use by) each of the Company and each
Subsidiary with respect to such Intellectual Property or any other patents,
patent rights, trademarks, trademark rights, trade names, trade name rights or
copyrights do not conflict with or infringe any rights of others in a manner
which might materially and adversely affect the assets, properties, liabilities,
business, affairs, results of operations, condition (financial or otherwise) or
prospects of the Company, and no such claim of conflict or infringement has been
asserted by any Person.
(b) Each of the Company and each Subsidiary owns and holds all
franchises, licenses, permits, consents, approvals and other authority,
governmental or otherwise (collectively, the "Licenses") (each of which is
--------
listed on Schedule 4.12(b) hereto), and all rights and privileges with respect
to any of the foregoing, as are materially necessary for the conduct of its
business as now being conducted and as proposed to be conducted, except to the
extent that failure to so own or hold is not reasonably likely to materially
adversely affect the assets, properties, liabilities, business, affairs, results
of operations, condition (financial or otherwise) or prospects of the Company.
Neither the Company nor any Subsidiary is in default in any material respect
under any of such Licenses. To the best of the Company's knowledge, the rights
of (and use by) each of the Company and each Subsidiary with respect to such
Licenses or any other franchise, license, permit, consent, approval or other
authority do not conflict with or infringe any rights of others in a manner
which might materially and adversely affect the assets, properties, liabilities,
business, affairs, results of operations, condition (financial or otherwise) or
prospects of the Company, and no such claim of conflict or infringement has been
asserted by any Person.
4.13. Key Employees.
-------------
Each of the Company and each Subsidiary has good relationships with
its employees and has not had and does not expect any substantial labor
problems. Neither the Company nor any Subsidiary has any knowledge as to any
intentions of any key employee to leave the employ of the Company or any
Subsidiary. The employees of the Company and each Subsidiary are not and have
never been represented by any labor union, and no collective bargaining
agreement is binding and in force against the Company or any Subsidiary or
currently being negotiated by the Company or any Subsidiary.
4.14. Properties.
----------
Neither the Company nor any Subsidiary owns any real property. Other
than Permitted Liens, each of the Company and each Subsidiary has good and
marketable title to each
-23-
of its other properties other than real property or leased properties. Certain
real property used by the Company or the Subsidiaries in the conduct of their
respective businesses is held under lease (as identified on Schedule 4.14
hereto), and neither the Company nor any Subsidiary is aware of any pending or
threatened claim or action by any lessor of any such property to terminate any
such lease. All such leases are valid and in full force and effect, and none of
such leases is in default. None of the properties owned or leased by the Company
or any Subsidiary is subject to any Liens which could materially and adversely
affect the assets, properties, liabilities, business, affairs, results of
operations, condition (financial or otherwise) or prospects of the Company on a
consolidated basis.
4.15. Suppliers and Customers.
-----------------------
(a) Each of the Company and each Subsidiary has adequate sources of
supply for its business as currently conducted and as proposed to be conducted.
Each has good relationships with all of its material sources of supply of goods
and services and each does not anticipate any material problem with any such
material sources of supply.
(b) Neither the Company nor any Subsidiary has any knowledge that
the customer base of the Company and its Subsidiaries might materially decrease.
4.16. Environmental Compliance.
------------------------
(a) To the knowledge of the Company or any Subsidiaries, there is
no Hazardous Material on, about, under or in, any property, real or personal, in
which the Company or any Subsidiary has or has formerly had any interest in an
amount or concentration which could constitute a violation that would result in
a liability in excess of $25,000 or otherwise result in a liability in excess of
$25,000 to the Company or any Subsidiary under any applicable Environmental Law.
(b) There is no (and has not been any) off-site use, handling,
storage or disposal or on-site use, handling, storage or disposal of Hazardous
Material at or from any locations currently or formerly owned, leased, operated
or occupied by the Company or any Subsidiary as a result of which use, handling,
storage or disposal the Company could incur a material liability or obligation
under any applicable Environmental Law.
(c) Neither the Company nor any Subsidiary has received any verbal
or written notice, citation, subpoena, summons, complaint or other
correspondence or communication from any person with respect to the presence of
any non-indigenous Hazardous Material upon, into, beneath, or emanating from or
affecting any of the real property (including improvements) currently or
formerly owned or occupied by the Company that could result in a liability to
the Company or any Subsidiary in excess of $25,000.
(d) There has been no intentional or unintentional, gradual or
sudden, release, disposal or discharge by the Company or, to the Company's
knowledge, by others, upon, into or
-24-
beneath the real property (including improvements) currently or formerly owned
or occupied by the Company or any Subsidiary that has caused or is causing soil
or groundwater contamination which, under applicable Environmental Laws could
require investigation or remediation or could otherwise create a material
liability or obligation on the part of the Company or any Subsidiary.
(e) The Company and its Subsidiaries are in material compliance
with all applicable Environmental Laws, has received all required Environmental
Permits and is in material compliance with the terms and conditions of all
Environmental Permits.
(f) To the best knowledge of the Company and its Subsidiaries after
reasonable inquiry, there are no Liens arising under or pursuant to any
Environmental Law ("Environmental Liens") relating to any real property
-------------------
(including improvements thereon) currently owned by the Company or any
Subsidiary.
(g) There are no (i) underground storage tanks, (ii)
polychlorinated biphenyl containing equipment or (iii) asbestos-containing
materials at any site currently owned, operated or leased by the Company or any
Subsidiary, except in compliance with all applicable Environmental Laws.
4.17. No Burdensome Agreements.
------------------------
To the best of the knowledge of the Company and its
Subsidiaries, other than this Agreement and the related documents, the Company
is not a party to any contract or agreement with any Affiliate of the Company or
of any Subsidiary, the terms of which are materially less favorable to the
Company or such Subsidiary, as the case may be, than those which might have been
obtained, at the time such contract or agreement was entered into, from a person
who was not such an Affiliate.
4.18. Offering of Shares.
------------------
The Company, any Subsidiary, any agent or any other person acting on
its behalf, directly or indirectly, (i) has not offered and will not offer any
of the Shares or any similar security of the Company (A) by any form of general
solicitation or general advertising (within the meaning of Regulation D under
the Securities Act) or (B) for sale to or solicited offers to buy any thereof
from, or otherwise approached or negotiated with respect thereto with, any
person other than (x) the Purchasers and (y) not more than five other investors,
each of which the Company reasonably believes was an "accredited investor"
within the meaning of Regulation D under the Securities Act or (ii) has not done
and will not cause to be done (or has not omitted to do or caused to be done or
omitted) any act which act (or which omission) would result in bringing the
issuance or sale of the Shares within the provisions of Section 5 of the
Securities Act or the filing, notification or reporting provisions of any state
securities laws.
-25-
4.19. SEC Reports.
-----------
The Company has filed all proxy statements, reports and other
documents required to be filed by it under the Securities Exchange Act. The
Company has furnished the Purchaser with copies of (i) its Annual Report on Form
10-K for the fiscal year ended December 31, 1999, (ii) its Quarterly Reports on
Form 10-Q for the fiscal quarters ended March 31, 2000, June 30, 2000 and
September 30, 2000 and (iii) its Proxy Statement dated May 25, 2000
(collectively, the "SEC Reports"). Each SEC Report was in substantial compliance
-----------
with the requirements of its respective form and none of the SEC Reports, nor
the financial statements (and the notes thereto) included in the SEC Reports, as
of their respective dates, contained any untrue statement of a material fact or
omitted 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.
4.20. Indebtedness.
------------
Schedule 4.20 hereto sets forth (i) the amount of all Indebtedness of
the Company and any Subsidiary outstanding as of September 30, 2000 (and there
is no additional material amount of Indebtedness of the Company outstanding
other as set forth on such Schedule 4.20), (ii) any Lien with respect to such
Indebtedness and (iii) a description of each instrument or agreement governing
such Indebtedness. The Company has made available to the Purchaser a complete
and correct copy of each such instrument or agreement (including all amendments,
supplements or modifications thereto). No material default exists with respect
to or under any such Indebtedness or any instrument or agreement relating
thereto and no event or circumstance exists with respect thereto that (with
notice or the lapse of time or both) could give rise to such a default.
4.21. Use of Proceeds.
---------------
The Company will use the proceeds realized from the sale of the Shares
to fund future development opportunities and for working capital purposes. No
portion of such proceeds will be used for the purpose, whether immediate,
incidental or ultimate, of purchasing or carrying, within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System, as amended
from time to time, any "margin stock" as defined in said Regulation U, or any
"margin stock" as defined in Regulation G of the Board of Governors of the
Federal Reserve System, as amended from time to time, or for the purpose of
purchasing, carrying or trading in securities within the meaning of Regulation T
of the Board of Governors of the Federal Reserve System, as amended from time to
time, or for the purpose of reducing or retiring any indebtedness which both (i)
was originally incurred to purchase any such margin stock or other securities
and (ii) was directly or indirectly secured by such margin stock or other
securities. None of the assets of the Company or any Subsidiary includes any
such "margin stock." Neither the Company nor any Subsidiary has any present
intention of acquiring any such "margin stock."
-26-
4.22. Other Names.
-----------
Except as listed on Schedule 4.22, the businesses previously or
presently conducted by the Company and any Subsidiary have not been conducted
under any corporate, trade or fictitious name.
4.23. Brokers.
-------
Except as set forth in Schedule 4.23, no broker, finder or investment
banker or other party is entitled to any brokerage, finder's or other similar
fee or commission in connection with this Agreement, the Stockholders'
Agreement, the Registration Rights Agreement or the Series B Articles
Supplementary or any of the transactions contemplated hereby or thereby, based
upon arrangements made by or on behalf of the Company or any Subsidiary or any
of their respective Affiliates.
SECTION 5.REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser represents and warrants to the Company as follows:
5.1. Corporate Power and Authority.
-----------------------------
The Purchaser has all requisite power, authority and legal right to
execute, deliver, enter into, consummate the transactions contemplated by and
perform its obligations under this Agreement, the Stockholders' Agreement and
the Registration Rights Agreement. The execution, delivery and performance of
this Agreement, the Stockholders' Agreement and the Registration Rights
Agreement by the Purchaser have been duly authorized by all required corporate
and other actions. The Purchaser has duly executed and delivered this Agreement,
the Stockholders' Agreement and the Registration Rights Agreement, and this
Agreement, the Stockholders' Agreement and the Registration Rights Agreement
constitute the legal, valid and binding obligations of the Purchaser enforceable
against the Purchaser in accordance with their respective terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to the rights of creditors generally or under general principles of
equity and except as rights to indemnity and contribution may be limited by
applicable law.
5.2. Investment Intent.
-----------------
The Purchaser is capable of evaluating the risk of its investment in
the Shares being purchased by it and is able to bear the economic risk of such
investment. The Purchaser is purchasing the Shares to be purchased by it for its
own account for investment and not with a present view to any distribution
thereof in violation of applicable securities laws; provided, however, that the
-------- -------
Purchaser may transfer record and/or beneficial ownership of the Shares or the
Conversion Shares to one or more Affiliates or officers or employees of the
Purchaser or its Affiliates, in all cases in compliance with federal securities
laws. It is understood that the
-27-
disposition of the Purchaser's property shall at all times be within the
Purchaser's control. If the Purchaser should in the future decide to dispose of
any of its Shares or Conversion Shares, it is understood that it may do so only
in compliance with the Securities Act, applicable securities laws and this
Agreement. The Purchaser is an "accredited investor" as defined in Rule 501(a)
under the Securities Act.
5.3. Brokers.
-------
Except as set forth in Schedule 5.3, no broker, finder or investment
banker or other party is entitled to any brokerage, finder's or other similar
fee or commission in connection with this Agreement, the Stockholders'
Agreement, the Registration Rights Agreement or the Series B Articles
Supplementary or any of the transactions contemplated hereby or thereby, based
upon arrangements made by or on behalf of the Purchaser or any Subsidiary or any
of their respective Affiliates.
SECTION 6.RESTRICTIONS ON TRANSFER
Each Purchaser agrees that it will not sell or otherwise dispose of
any Shares or Conversion Shares unless such Shares or Conversion Shares have
been registered under the Securities Act and, to the extent required, under any
applicable state securities laws, or pursuant to an applicable exemption from
such registration requirements. The Company may endorse on all certificates
representing Shares or Conversion Shares a legend stating or referring to such
transfer restrictions; provided, that no such legend shall be endorsed on any
--------
Share certificates which, when issued, are no longer subject to the restrictions
of this Section 6.
SECTION 7.INFORMATION AS TO THE COMPANY
The Company covenants and agrees as follows:
7.1. Financial Information.
---------------------
(a) The Company will maintain, and cause each Subsidiary to
maintain, a system of accounting established and administered in accordance with
sound business practices to permit preparation of financial statements in
accordance with GAAP.
(b) So long as a Purchaser or a Permitted Transferee owns at least
20,000 Shares, the Company will deliver to (I) such Purchaser and (II) each such
Permitted Transferee, the following:
(i) as soon as practicable but not later than five (5)
Business Days after their issuance, and in any event within ninety (90) days
after the close of each fiscal year of the Company, (A) a consolidated balance
sheet of the Company and its Subsidiaries as of the end
-28-
of such fiscal year and (B) consolidated statements of operations, stockholders'
equity and cash flows of the Company and its Subsidiaries for such fiscal year,
in each case setting forth in comparative form the corresponding figures for the
preceding fiscal year, all such balance sheets and statements to be in
reasonable detail and certified without qualification by Ernst & Young LLP or
any other "Big Five" independent public accounting firm selected by the Company,
and such statements shall be accompanied by a management analysis of any
material differences between the results for such fiscal year and the
corresponding figures for the preceding year; the Company's Annual Report on
Form 10-K shall satisfy such requirement provided that it is in compliance with
all applicable requirements of the SEC and is certified by a "Big Five"
accounting firm;
(ii) as soon as practicable, copies (A) of all financial
statements, proxy material or reports sent to the Company's or any Subsidiary's
stockholders, (B) of any public press releases and (C) of all reports or
registration statements filed with the Commission pursuant to the Securities Act
or the Securities Exchange Act;
(iii) as soon as practicable and in any event within forty-
five (45) days after the close of each of the first three (3) fiscal quarters of
the Company, (A) a consolidated balance sheet of the Company and its
Subsidiaries as of the end of such fiscal quarter, (B) consolidated statements
of operations, stockholders' equity and cash flows of the Company and its
Subsidiaries for the portion of the fiscal year ended with the end of such
quarter, in each case in reasonable detail, certified by (I) the Chief Financial
Officer, (II) the Chief Executive Officer or (III) the President of the Company
and setting forth in comparative form the corresponding figures for the
comparable period one year prior thereto (subject to normal year-end
adjustments), together with a management analysis of any material differences
between such results and the corresponding figures for such prior period and (C)
a certificate of (I) the Chief Financial Officer, (II) the Chief Executive
Officer or (III) the President certifying the Company's compliance with the
covenants contained in Section 9 of this Agreement; the Company's Quarterly
Report on Form 10-Q shall satisfy such requirement provided that it is in
compliance with all applicable requirements of the SEC;
(iv) as soon as practicable but not later than thirty (30)
days after the end of each month other than the final month of the Company's
fiscal year, (A) an unaudited consolidated balance sheet of the Company and its
Subsidiaries as at the end of such month and (B) unaudited consolidated
statements of operations, stockholders' equity and cash flows of the Company and
its Subsidiaries for the portion of the fiscal year ended with the end of such
month, in each case in reasonable detail, setting forth in comparative form the
corresponding figures for the corresponding period one year prior thereto
(subject to normal year-end adjustments);
(v) as soon as practicable and without duplication of any of
the above items, any other materials furnished to the Company's Board of
Directors or to holders of the Company's capital stock or Indebtedness,
including, without limitation, any compliance certificates furnished in respect
of such Indebtedness, which shall be delivered to the Series B Designee(s) and
the Permitted Transferee Designee(s); and
-29-
(vi) as soon as practicable, such other information as
may reasonably be requested by (I) the Purchasers or (II) any Permitted
Transferee.
(c) The Company will deliver to each member of the Company's Board
of Directors and each observer to the Company's Board of Directors appointed
pursuant to Section 3(a) of the Stockholders' Agreement, as soon as practicable
(and in the case of (iii), prior to the end of each fiscal year) and without
duplication of any of the items listed below, the following:
(i) copies of any annual, special or interim audit
reports or management or comment letters with respect to the Company or its
Subsidiaries or their operations submitted to the Company by independent public
accountants;
(ii) copies of summary financial information prepared on a
quarterly basis regarding the Company on a consolidated basis as presented to
the Board and any other summary financial information otherwise prepared;
(iii) copies of the annual budget and business plan for the
next fiscal year;
(iv) copies of all formal communications, from time to time,
to directors of the Company (including without limitation all information
furnished to such directors in connection with such communications), and copies
of minutes of meetings of the Board of Directors (and of any executive
committees thereof) of the Company;
(v) notice of default under any material agreement, contract
or other instrument to which the Company or any of its Subsidiaries is a party
or by which any of them is bound;
(vi) notice of any action or proceeding which has been
commenced or threatened against the Company or any of its Subsidiaries and
which, if adversely determined, would have, individually or in the aggregate, a
material adverse effect on the assets, properties, liabilities, business,
affairs, results of operations, condition (financial or otherwise) or prospects
of the Company on a consolidated basis; and
(vii) copies of all filings made with the Commission.
(d) All such financial statements referred to in this Section 7.1
shall be prepared in accordance with GAAP (except for any change in accounting
principles specified in the accompanying certificate, in the financial
statements themselves or required by GAAP, and except that any interim financial
statements may omit notes and may be subject to normal year-end adjustments).
-30-
(e) Without limiting the foregoing provisions of this Section 7.1,
the Company agrees that, if requested in writing by any holder of Shares, it
will not deliver to such holder (until otherwise instructed by such holder) (x)
any non-public information or non-public materials regarding the Company or any
Subsidiary (whether described in this Section 7.1 or otherwise) and (y) any
information (whether or not included in clause (x)) which such holder specifies
that it does not want to receive. The Company shall comply with any such request
with respect to each person entitled to information hereunder, until instructed
otherwise by the then holder of such Shares.
7.2. Communication with Accountants.
------------------------------
The Company (on behalf of itself and each of its Subsidiaries)
hereby authorizes (i) each Purchaser to communicate directly with the
independent certified public accountants for the Company or any Subsidiary and
(ii) such accountants to disclose to such Purchaser any and all financial
statements and any other information of any kind that they may have with respect
to the assets, properties, liabilities, business, affairs, results of
operations, condition (financial or otherwise) or prospects of the Company or
any Subsidiary; provided that (a) such Purchaser in good faith and based upon
--------
reasonable assumptions has financial concerns regarding the Company that causes
it to desire to communicate with such accountants and (b) such Purchaser must
first notify the Company of its intention to speak with such accountants and
permit the Company to participate in such conversation if the Company desires to
do so. The Company shall deliver a letter addressed to such accountants
instructing them to comply with the provisions of this Section 7.2.
7.3. Inspection.
----------
The Company will permit (i) each Purchaser, (ii) any Permitted
Transferee, and (iii) any authorized representative of each Purchaser or such
Permitted Transferee, to visit and inspect any of the properties of the Company
and its Subsidiaries, to examine their respective books and records and to
discuss with their officers their books and records and the assets, properties,
liabilities, business, affairs, results of operations, condition (financial or
otherwise) or prospects of the Company or any Subsidiary, all at such reasonable
times, all on reasonable notice and as often as may be reasonably requested.
7.4. Notices.
-------
The Company will give notice to all holders of Shares promptly
after it learns, other than by notice from all of such holders, of the existence
of any of the following:
(a) any default under any Indebtedness (or under any indenture,
mortgage or other agreement relating to any Indebtedness) which Indebtedness is
in an aggregate principal amount exceeding $100,000 (or the equivalent thereof
in other currencies) in respect of which the Company or any Subsidiary is
liable;
-31-
(b) any action or proceeding which has been commenced or threatened
against the Company or any of its Subsidiaries and which, if adversely
determined, would have, individually or in the aggregate, a material adverse
effect on the assets, properties, liabilities, business, affairs, results of
operations, condition (financial or otherwise) or prospects of the Company on a
consolidated basis or the ability of the Company to perform its obligations
under this Agreement, the Stockholders' Agreement, the Registration Rights
Agreement, Series B Articles Supplementary or the A-2 Articles Supplementary;
(c) any dispute which exists between the Company or any of its
Subsidiaries and any governmental regulatory body which, in the reasonable
opinion of the Company is reasonably likely to, individually or in the
aggregate, materially adversely affect the normal business operations of the
Company or any of its Subsidiaries or the assets, properties, liabilities,
business, affairs, results of operations, condition (financial or otherwise) or
prospects of the Company on a consolidated basis or the ability of the Company
to perform its obligations under this Agreement, the Stockholders' Agreement,
the Registration Rights Agreement or the Series B Articles Supplementary or the
A-2 Articles Supplementary; and
(d) if any (i) "reportable event" (as such term is described in
Section 4043(c) of ERISA) has occurred; or (ii) "accumulated funding deficiency"
(within the meaning of Section 412(a) of the Code or Section 302 of ERISA) has
been incurred with respect to a Pension Plan maintained or contributed to (or
required to be maintained or contributed to) by the Company or any ERISA
Affiliate that is subject to the funding requirements of ERISA and/or the Code
or that an application may be or has been made to the Secretary of the Treasury
for a waiver or modification of the minimum funding standard (including any
required installment payments) or an extension of any amortization period under
Section 412 of the Code or Section 302 of ERISA, in each case with respect to
such a Pension Plan; or (iii) Pension Plan maintained or contributed to (or
required to be maintained or contributed to) by the Company or any ERISA
Affiliate has been terminated, reorganized, petitioned or declared insolvent
under Title IV of ERISA; or (iv) Pension Plan maintained or contributed to (or
required to be maintained or contributed to) by the Company or any ERISA
Affiliate has an unfunded current liability giving rise to a lien under ERISA or
the Code; or (v) proceeding has been instituted pursuant to Section 515 of ERISA
to collect a delinquent contribution to a Pension Plan maintained or contributed
to (or required to be maintained or contributed to) by the Company or any ERISA
Affiliate; or (vi) of the Company or its ERISA Affiliates will or may incur any
liability (including any contingent or secondary liability) to or on account of
the termination or withdrawal from a Pension Plan maintained or contributed to
(or required to be maintained or contributed to) by the Company or any ERISA
Affiliate; or (vii) "prohibited transaction" (as such term is defined in Section
406 of ERISA or Section 4975 of the Code) in connection with an "employee
benefit plan" (as defined in Section 3(3) of ERISA), maintained or contributed
to (or required to be maintained or contributed to) by the Company or any ERISA
Affiliate that could subject the Company or any ERISA Affiliate to a tax penalty
or liability under ERISA or the Code.
-32-
(e) if any proposals, inquiries or expressions of interest are
received by, any information is requested from, or any negotiations or
discussions are sought to be initiated or continued with the Company or any of
its Subsidiaries or its representatives, in each case in connection with any
Takeover Proposal or the possibility or consideration by a third party of making
a Takeover Proposal ("Takeover Proposal Interest") indicating, in connection
--------------------------
with such notice, the name of the Person indicating such Takeover Proposal
Interest and the terms and conditions of any proposals or offers, and continuing
to keep the Purchasers informed, on a current basis, of the status and terms of
any Takeover Proposal Interest; provided that the timing and content of such
--------
notice shall be the same as that which is provided to the Board of Directors.
The Company agrees that it will take the necessary steps promptly to inform the
Persons referred to in the first sentence hereof of the obligations undertaken
in this Section 7.4(e).
Such notice (i) with respect to subsection (a) above, shall specify the nature
and period of existence of any such default and what the Company proposes to do
with respect thereto and (ii) with respect to subsections (b), (c) or (d) above,
shall specify the nature of any such matter referred to in such clause, what
action the Company proposes to take with respect thereto and what action any
other relevant Person is taking or proposes to take with respect thereto.
7.5. Confidentiality Agreement.
-------------------------
The Company's obligation to provide any non-public information under
this Section 7 or otherwise to any person other than members of its Board of
Directors shall be subject to prior execution of a confidentiality agreement
between the Company and the recipient of such information as more fully set
forth in the form attached hereto as Exhibit E (the "Confidentiality
---------------
Agreement").
---------
SECTION 8.AFFIRMATIVE COVENANTS
The Company covenants and agrees as follows:
8.1. Maintenance of Existence, Properties and Franchises; Compliance
---------------------------------------------------------------
with Law; Taxes; Insurance.
--------------------------
The Company will, and will cause each Subsidiary to:
(a) maintain their respective corporate existence, rights and other
franchises in full force and effect;
(b) maintain their respective tangible assets in good repair,
working order and condition so far as necessary or advantageous to the proper
carrying on of their respective businesses;
-33-
(c) comply with all applicable laws and with all applicable orders,
rules, rulings, certificates, licenses, regulations, demands, judgments, writs,
injunctions and decrees, provided, that such compliance shall not be necessary
--------
so long as (i) the applicability or validity of any such law, order, rule,
ruling, certificate, license, regulation, demand, judgment, writ, injunction or
decree shall be contested in good faith by appropriate proceedings and (ii)
failure to so comply will not have a material adverse effect on the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company on a consolidated basis;
(d) pay promptly when due all Taxes imposed upon its properties,
assets or income and all claims or indebtedness (including, without limitation,
vendor's, workmen's and like claims) which might become a lien upon such
properties or assets; provided, that payment of any such Tax shall not be
necessary so long as (i) the applicability or validity thereof shall be
contested in good faith by appropriate proceedings and a reserve, if
appropriate, shall have been established with respect thereto and (ii) failure
to make such payment will not have a material adverse effect on the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company on a consolidated basis;
and
(e) keep adequately insured, by financially sound and reputable
insurers of nationally recognized stature, all its properties of a character
customarily insured by entities similarly situated, against loss or damage of
the kinds and in amounts customarily insured against by such entities and with
such deductibles or coinsurance as is customary.
8.2. Office for Payment, Exchange and Registration; Location of
----------------------------------------------------------
Office; Notice of Change of Name or Office.
------------------------------------------
(a) So long as any of the Shares is outstanding, the Company will
maintain an office or agency where Shares may be presented for redemption,
exchange, conversion, exercise or registration of transfer as provided in this
Agreement. Such office or agency initially shall be the office of the Company
specified in Section 18 hereof, subject to Section 8.2(b).
(b) The Company shall give each holder of Shares at least twenty
(20) days' prior written notice of any change in (i) the name of the Company as
then in effect or (ii) the location of the office of the Company required to be
maintained under this Section 8.2.
8.3. Fiscal Year.
-----------
The fiscal year of the Company and its Subsidiaries for tax,
accounting and any other purposes shall end on December 31 of each calendar
year.
8.4. Environmental Matters.
---------------------
(a) The Company and each Subsidiary shall keep and maintain any
property either owned leased, operated or occupied by the Company or any
Subsidiary free and clear of
-34-
any Environmental Liens, and the Company and each Subsidiary, as the case may
be, shall keep all such property free of Hazardous Material contamination and in
compliance with all applicable Environmental Laws and the terms and conditions
of any Environmental Permits; provided, however, that the Company or any
-------- -------
Subsidiary shall have the right at its cost and expense, and acting in good
faith, to contest, object or appeal by appropriate legal proceeding the validity
of any Environmental Lien. The contest, objection or appeal with respect to the
validity of an Environmental Lien shall suspend the Company's obligation to
eliminate such Environmental Lien under this paragraph pending a final
determination by appropriate administrative or judicial authority of the
legality, enforceability or status of such Environmental Lien, provided that the
following conditions are satisfied: (i) contemporaneously with the commencement
of such proceedings, the Company shall give written notice thereof to each
Purchaser and its Transferees while they hold Shares or Conversion Shares; and
(ii) if under applicable law any real property or improvements thereon are
subject to sale or forfeiture for failure to satisfy the Environmental Lien
prior to a final determination of the legal proceedings, the Company or such
Subsidiary must successfully move to stay such sale, forfeiture or foreclosure
pending final determination of the Company's (or Subsidiary's) action; and (iii)
the Company or such Subsidiary must, if requested, furnish to the Purchasers and
their Transferees, as a group, while they hold Shares or Conversion Shares a
good and sufficient bond, surety, letter of credit or other security
satisfactory to such holders equal to the amount (including any interest and
penalty) secured by the Environmental Lien.
(b) The Company will, by administrative or judicial process,
enforce the obligations of any other Person who is potentially liable for
damages, contribution or other relief in connection with any violation of
Environmental Laws, including, but not limited to, asbestos abatement, Hazardous
Material remediation or off-site or on-site disposal.
(c) The Company will defend, indemnify and hold harmless each
current, former and future holder of Shares or Conversion Shares, its employees,
officers, directors, stockholders, partners, financial and legal representatives
and assigns, from and against any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits and claims, joint or several, and any
costs, disbursements and expenses (including attorneys' fees and expenses and
costs of investigation) of whatever kind or nature, known or unknown, contingent
or otherwise asserted against, imposed on, or sustained by, them, arising out of
or in any way related to (i) the presence, disposal, release, removal, discharge
or storage of any Hazardous Material upon, into, from or affecting any real
property (including improvements) currently or formerly owned, leased, operated
or occupied by or on behalf of the Company or any Subsidiary or any predecessor
thereof; (ii) any judicial or administrative action, suit or proceeding, actual
or threatened, relating to Hazardous Material upon, in, from or affecting any
real property (including improvements) currently or formerly owned, leased,
operated or occupied by the Company for which the Company or any Subsidiary
could be liable; (iii) any violation of any Environmental Law or Environmental
Permit, by the Company or any Subsidiary or any of their agents, tenants,
subtenants or invitees; (iv) the imposition of any Environmental Lien for the
recovery of costs expended in the investigation, study or remediation of any
environmental liability of (or asserted against) the Company or any Subsidiary;
and (v) any liability arising out
-35-
of or related to the off-site shipment, transportation, disposal, treatment,
handling or disposal of Hazardous Materials by or on behalf of the Company or
any predecessor thereof. This Section 8.4(c) and Section 8.4(d) shall survive
any payment, conversion or transfer of Shares and any termination of this
Agreement.
(d) To the extent that the Company or any Subsidiary is strictly
liable without regard to fault under any Environmental Law, the Company's
obligations to the holders of Shares or Conversion Shares under any of the
indemnification provisions of this Agreement shall likewise be strict without
regard to fault with respect to the violation of any Environmental Law which
results in any liability to any of the indemnified persons referred to in
Section 8.4(c).
8.5. Reservation of Shares.
---------------------
There have been reserved, and the Company shall at all times keep
reserved, free from preemptive rights, out of its authorized Common Stock a
number of shares of Common Stock sufficient to provide for the exercise of the
conversion rights provided in Section 5 of the Series B Articles Supplementary.
8.6. Securities Exchange Act Registration.
------------------------------------
(a) the Company will maintain effective a registration statement
(containing such information and documents as the Commission shall specify and
otherwise complying with the Securities Exchange Act), under Section 12(b) or
Section 12(g), whichever is applicable, of the Securities Exchange Act, with
respect to the Common Stock of the Company, and the Company will file on time
such information, documents and reports as the Commission may require or
prescribe for companies whose stock has been registered pursuant to such Section
12(b) or Section 12(g), whichever is applicable.
(b) The Company will, upon the request of any holder of Shares, make
whatever other filings with the Commission, or otherwise make generally
available to the public such financial and other information, as any such holder
may deem reasonably necessary or desirable in order to enable such holder to be
permitted to sell Shares pursuant to the provisions of Rule 144.
8.7. Delivery of Information for Rule 144A Transactions.
--------------------------------------------------
If a holder of Shares proposes to transfer any such Shares pursuant to
Rule 144A under the Securities Act (as in effect from time to time), the Company
agrees to provide (upon the request of such holder or the prospective
transferee) to such holder and (if requested) to the prospective transferee any
financial or other information concerning the Company and its Subsidiaries which
is required to be delivered by such holder to any transferee of such Shares
pursuant to such Rule 144A, subject to confidentiality provisions, if
applicable.
8.8. Senior Securities.
-----------------
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The Company shall maintain the senior status of the Series B
Preferred such that it shall rank senior in all respects, including the payment
on liquidation and redemption, to all other equity securities of the Company.
8.9. Subsequent Closings.
-------------------
The Company shall provide to each party who is a Purchaser at the
time of any Subsequent Closing, notice of such Subsequent Closing, including the
name of any Future Investor and the amount of Series B Preferred purchased by
such Future Investor.
8.10. Further Assurances.
------------------
The Company shall from time to time, upon the request of any one or
more Purchasers or any Transferee, promptly and duly execute and deliver any and
all such further instruments and documents as the Purchasers or such Transferee,
as the case may be, may reasonably deem necessary or desirable to obtain the
full benefits of (i) the obligations of the Company under this Agreement and
(ii) the other rights and powers herein granted. Upon the instructions from time
to time of the Purchasers or any Transferee, the Company shall execute and cause
to be filed any document or filing presented to the Company in proper form for
signing or filing, in each case as the Purchasers or such Transferee may
reasonably deem necessary or desirable in light of the Company's obligations
under this Agreement, and the Company shall pay or cause to be paid any filing
or other fees in connection therewith.
SECTION 9. NEGATIVE COVENANTS
The Company covenants and agrees that (i) with respect to Sections
9.1, 9.2, 9.3, 9.4, 9.5, 9.6, 9.8, 9.9, 9.10 and 9.11, without the prior written
consent of the holders of more than 50% of outstanding Shares and (ii) with
respect to Section 9.7, without the approval described therein:
9.1. No Dilution or Impairment; No Changes in Capital Stock.
------------------------------------------------------
The Company will not, by amendment of its charter or through any
consolidation, merger, reorganization, transfer of assets, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Agreement, the Series B
Articles Supplementary, the Registration Rights Agreement or the Stockholders'
Agreement. The Company will at all times in good faith assist in the carrying
out of all such terms, and in the taking of all such action, as may be necessary
or appropriate in order to protect the rights of the holders of Shares (as such
rights are set forth in this Agreement, the Series B Articles Supplementary, the
Registration Rights Agreement and the Stockholders' Agreement) against dilution
or other impairment. Without limiting the generality of the foregoing, the
Company (a) will not issue any shares or class or series of equity or equity-
linked
-37-
security, which is senior to, or pari passu with, the Series B Preferred as to
----------
dividend payments or amounts payable in the event of liquidation or winding up
of the Company, (b) will not enter into any agreement or instrument which would
restrict or otherwise materially adversely affect the ability of the Company to
perform its obligations under this Agreement, the Stockholders' Agreement, the
Registration Rights Agreement or the Series B Articles Supplementary, (c) will
not amend its charter or by-laws in any manner which would impair or reduce the
rights of the Preferred Stock, including, without limitation, an amendment which
would alter or change the powers, privileges or preferences of the holders of
the Series B Preferred (including, without limitation, changing the Series B
Articles Supplementary after any Shares have been called for redemption), (d)
except as otherwise provided in the Series B Articles Supplementary will not
redeem, repurchase or otherwise acquire, either directly or indirectly through
its Subsidiaries, any shares of capital stock of the Company or any of its
Subsidiaries or any other rights or options to subscribe for or purchase any
capital stock of the Company or any other securities convertible into or
exchangeable for capital stock of the Company, (e) will not permit the par value
or the determined or stated value of any shares of Common Stock receivable upon
the conversion of the Shares to exceed the amount payable therefor upon such
conversion, (f) will take all such action as may be necessary or appropriate in
order that the Company may at all times validly and legally issue duly
authorized, fully paid and nonassessable shares of the Common Stock free from
all taxes, Liens and charges with respect to the issue thereof, upon the
conversion of the Shares from time to time outstanding, (g) will not take any
action which results in any adjustment of the current conversion price under the
Series B Articles Supplementary if the total number of shares of the Common
Stock (or other securities) issuable after the action upon the conversion of all
of the then outstanding Shares would exceed the total number of shares of Common
Stock (or other securities) then authorized by the Company's charter and
available for the purpose of issuance upon such conversion or exercise, (h) will
not have any authorized Common Stock (and will not issue any Common Stock) other
than its existing authorized Common Stock, and (i) will not amend its charter to
change any terms of its Common Stock.
9.2. Indebtedness.
------------
So long as more than 25% of the Shares are outstanding, the Company
will not (i) incur Indebtedness, including any Indebtedness set forth on
Schedule 4.20 hereto, in excess of the greater of either (A) $30,000,000 in
aggregate principal amount or (B) 3.5 times EBITDA for the preceding twelve
months; or (ii) enter into any agreement, amendment or modification with respect
to any Indebtedness, which agreement, amendment or modification under clause
(ii) restricts or prohibits (or was intended primarily to restrict or prohibit)
the Company from making any payments under, or otherwise performing under this
Agreement.
9.3. Consolidation, Merger and Sale.
------------------------------
Neither the Company nor any Subsidiary will (or will agree to):
(a) wind up, liquidate or dissolve its affairs (except that a wholly-owned
Subsidiary can be wound-up, dissolved and liquidated into another wholly-owned
Subsidiary or into the Company), (b) so long as more than 25% of the Shares are
outstanding, sell, lease, transfer or otherwise dispose of all or
-38-
substantially all of its assets to any other Person (except that a wholly-owned
Subsidiary can sell, lease, transfer or otherwise dispose of all or
substantially all of its assets to another wholly-owned Subsidiary or to the
Company); or (c) so long as more than 25% of the Shares are outstanding, effect
a merger or consolidation if the Company is not the surviving corporation from
such merger or consolidation. Notwithstanding the foregoing, the Company may
take any of the actions described in the foregoing subsection (b) or (c)
pursuant to a contemplated transaction (the "Fundamental Transaction"); provided
----------------------- --------
that, prior to taking any such action, the Company offers, in writing, to the
Purchasers the right to receive securities or other consideration in the
Fundamental Transaction that are substantially similar from an economic
standpoint to the outstanding value of the Shares, on substantially similar
terms as the other investors in the Fundamental Transaction.
9.4. No Change in Business.
---------------------
So long as more than 25% of the Shares are outstanding, neither the
Company nor any of its Subsidiaries will change substantially the character of
its business as conducted on the Closing Date as represented in Section 4.4
hereof and described in the Disclosure Material.
9.5. Restricted Payments; Investments.
--------------------------------
Neither the Company nor any of its Subsidiaries will declare or make
or permit to be declared or made:
(a) any Restricted Payment; or
(b) any Investment.
9.6. Affiliate Loans and Guaranties.
------------------------------
Neither the Company nor any Subsidiary may incur or permit to exist
any of the following:
(a) any obligation of the Company or of any Subsidiary to repay
money borrowed owing to (i) any Affiliate of the Company, (ii) any Affiliate of
any Subsidiary or (iii) any other holder of shares of the capital stock of the
Company or a Subsidiary; or
(b) any obligation, to any Person, which obligation is assumed or
guaranteed by the Company or a Subsidiary and which is an obligation of (i) any
Affiliate of the Company, (ii) any Affiliate of any Subsidiary or (iii) any
other holder of shares of the capital stock of the Company or a Subsidiary
(excluding, in the case of this clause (b), any obligation of the Company or of
a wholly-owned Subsidiary which is not owed to an Affiliate of the Company or to
an Affiliate of a Subsidiary or to any other holder of shares of the capital
stock of the Company or of a Subsidiary).
-39-
This Section 9.6 shall not apply to (1) any obligations under this Agreement or
with respect to the Shares, (2) any loans, advances or Guarantees referred to in
clause (1) of the proviso to the definition of "Investment" contained in Section
3 hereof, (3) Indebtedness identified on Schedule 4.20 hereto or (4) any
obligations under any of the Affiliate Agreements.
9.7. Transactions with Affiliates.
----------------------------
The Company will not, and will not permit any Subsidiary to, directly
or indirectly, enter into any transaction or agreement (including, without
limitation, the purchase, sale, distribution, lease or exchange of any property
or the rendering of any service) with any Affiliate of the Company or of any
Subsidiary, other than a wholly-owned Subsidiary of the Company, unless such
transaction or agreement (a) is approved by a majority of the Outside Directors
on the Board of Directors, and (b) is on terms that are no less favorable to the
Company or such Subsidiary, as the case may be, than those which might be
obtained at the time of such transaction from a Person who is not such an
Affiliate; provided, however, that this Section 9.7 shall not limit, or be
-------- -------
applicable to, (i) employment arrangements with (and general salary and benefits
compensation for) any individual who is a full-time employee of the Company or
any Subsidiary if such arrangements are approved by a majority of the Outside
Directors on the Board of Directors; and (ii) the payment of reasonable and
customary regular fees to directors of the Company who are not employees of the
Company; and (iii) any obligations under any of the Affiliate Agreements.
9.8. Liens.
-----
The Company will not create or permit to exist, or permit any of its
Subsidiaries to create or suffer to exist, any Lien upon or with respect to any
of its assets or income, other than Permitted Liens and existing liens set forth
on Schedule 9.8 hereto.
9.9. Private Placement Status.
------------------------
Neither the Company nor any agent nor other Person acting on the
Company's behalf will do or cause to be done (or will omit to do or to cause to
be done) any act which act (or which omission) would result in bringing the
issuance or sale of the Shares or the Conversion Shares within the provisions of
Section 5 of the Securities Act or the filing, notification or reporting
requirements of any state securities law (other than in accordance with a
registration and qualification of Conversion Shares pursuant to the Registration
Rights Agreement).
9.10. Maintenance of Public Market.
----------------------------
So long as more than 25% of the Shares are outstanding, the Company
will not proceed with a program of acquisition of its Common Stock, initiate a
corporate reorganization or recapitalization or undertake a consolidation or
merger or authorize, consent to or take any action which would have the effect
of:
-40-
(a) removing the Company from registration with the Commission
under the Securities Exchange Act with respect to the Company's Common Stock;
(b) requiring the Company to make a filing under Section 13(e) of
the Securities Exchange Act;
(c) reducing the average daily trading volume over a 30-day period
of the Common Stock on the principal securities exchange under which it is then
listed to less than 5,000 shares of Common Stock or eliminating the public
market for shares of Common Stock of the Company;
(d) causing a delisting of the Company's Common Stock as a Nasdaq
National Market Security on the Nasdaq Stock Market (unless such stock is
delisted as a result of being listed on a national securities exchange); or
(e) if any shares of the Company's Common Stock are at any time
listed on a national securities exchange, causing a delisting of such stock from
such exchange, unless such delisting is in connection with a listing on another
national securities exchange.
Notwithstanding the foregoing, the Company may take any of the actions described
in the foregoing subsection (a) or (c) pursuant to a contemplated transaction
(the "Going Private Transaction"); provided that, prior to taking any such
------------------------- --------
action, the Company offers, in writing, to the Purchasers the right to receive
securities or other consideration in the Going Private Transaction that are
substantially similar from an economic standpoint to the outstanding value of
the Shares, on substantially similar terms as the other investors in the Going
Private Transaction.
9.11. Actions Prior to the Closing Date.
---------------------------------
From the date hereof through the Initial Closing Date and each
Subsequent Closing Date, the Company will not, and will not permit any
Subsidiary to, (a) issue or agree to issue any capital stock or any securities
exercisable for, or convertible or exchangeable into, capital stock other than
the Series A-2 Preferred or (b) purchase, redeem or otherwise acquire any of its
capital stock; provided, however, that this Section 9.11 shall not limit, or be
-------- -------
applicable to, (i) the transactions contemplated by this Agreement, including
any issuance of capital stock in connection with the transactions contemplated
by Sections 9.1 and 9.10 hereof and (ii) grants of options or issuances of
Common Stock to officers, directors or employees of the Company pursuant to the
current terms of the Company's 1997 Stock Option Plan and 1998 Stock Incentive
Plan or the exercise of any existing warrants listed on Schedule 4.11 hereto.
-41-
SECTION 10. PREEMPTIVE RIGHTS
(a) Except (i) for issuances of pro rata dividends to all holders
of Common Stock, (ii) stock issued to employees, officers or directors in
connection with management options or incentive plans approved by the Board of
Directors, (iii) stock issued in connection with any merger, acquisition or
business combination, (iv) stock issued for consideration amounting to less than
$500,000 in any single transaction where the purchase price is not less than the
then applicable Conversion Price (as defined in the Series B Articles
Supplementary), provided that the aggregate amount of all such transactions
shall not exceed $1,000,000, (v) up to 5,167,328 shares of stock issuable upon
conversion of the 6% Non-Voting Convertible Preferred Stock (as adjusted
pursuant to the antidilution provisions therein), (vi) up to 1,193,573 shares of
stock issuable pursuant to the MCI Warrant (as adjusted pursuant to the
antidilution provisions therein), (vii) up to 4,681,303 shares of stock issuable
upon conversion of the Series A-2 Preferred (as adjusted pursuant to the
antidilution provisions therein), (viii) up to an aggregate of 190,000 shares of
Series B Preferred which may be issued in the Subsequent Closings, if any, or
(ix) up to an aggregate of 8,571,429 shares of stock issuable upon conversion of
the Series B Preferred (as adjusted pursuant to the antidilution provisions
therein), in order to enable such holders to maintain their Fully Diluted
percentage ownership of the Company, the holders of the Series B Preferred shall
have preemptive rights, as hereinafter set forth, to purchase any capital stock,
including any warrants or securities convertible into capital stock, of the
Company hereafter issued by the Company so that a holder of the Series B
Preferred shall hereafter be entitled to acquire a percentage of capital stock
which is hereafter issued equal to the same percentage of the issued and
outstanding Common Stock of the Company as is held (directly or obtainable upon
conversion of the Series B Preferred) by such holder of Series B Preferred
immediately prior to the date on which the capital stock is to be issued on a
Fully Diluted basis.
(b) The Company shall, before issuing any additional capital stock
(other than the exceptions referred to in Section 10(a) hereof), give written
notice thereof to the holders of the Series B Preferred. Such notice shall
specify what type of instrument the Company intends to issue and the
consideration which the Company intends to receive therefor. For a period of
twenty (20) days following receipt by the holders of the Series B Preferred of
such notice, the Company shall be deemed to have irrevocably offered to sell to
the holders of the Series B Preferred a sufficient number of shares of such
capital stock so that the holders of the Series B Preferred, if such holders
elects to acquire such shares as hereinafter set forth, shall be capable of
acquiring the same percentage of such shares as the percentage of Common Stock
beneficially owned (directly or obtainable upon conversion of the Series B
Preferred) by such holders immediately prior to the proposed issuance on a Fully
Diluted basis. In the event any such offer is accepted, in whole or in part, by
the holders of the Series B Preferred, the Company shall sell such shares to
holders of the Series B Preferred for the consideration and on the precise terms
set forth in the Company's notice (given under the first two sentences of this
paragraph). In the event that one or more holders of the Series B Preferred
elects not to, or fails to, exercise its rights under this Section 10 within the
twenty (20) day period, then the Company may issue the remaining shares of
capital stock offered to, but not purchased by, such holders of the Series B
Preferred, to third persons but only for the same consideration set forth in the
Company's notice
-42-
(given under the first two sentences of this paragraph) and no later than ninety
(90) days after the expiration of such twenty day period. The closing for such
transaction shall take place as proposed by the Company with respect to the
shares of capital stock proposed to be issued, at which closing the Company
shall deliver certificates for the shares of capital stock in the respective
names of the holders of the Series B Preferred against receipt of the
consideration therefor.
(c) Notwithstanding any other provision hereof, the preemptive
rights granted to holders of Series B Preferred by this Section 10 shall
terminate with respect to a share of Series B Preferred upon the conversion or
redemption of such share of Series B Preferred in accordance with the provisions
hereof or in the Series B Articles Supplementary.
SECTION 11. CONDITIONS TO PURCHASERS' OBLIGATIONS
Each Purchaser's obligation to purchase Shares hereunder is subject
to satisfaction of the following conditions at the Initial Closing or any
Subsequent Closing (any of which may be waived by such Purchaser):
11.1. Series B Articles Supplementary; Stockholders' Agreement;
----------------------------------------------------------
Registration Rights Agreement.
-----------------------------
(a) The charter of the Company shall have been duly supplemented
by the filing of the Series B Articles Supplementary in the form of Exhibit A
---------
hereto.
(b) The Company, the Purchasers and certain other stockholders of
the Company named therein shall have entered into a Stockholders' Agreement
substantially in the form of Exhibit B hereto.
---------
(c) The Company shall have entered into a Registration Rights
Agreement with the Purchasers substantially in the form of Exhibit C hereto.
---------
(d) The Company shall have exchanged its outstanding Series A-1
Convertible Preferred Stock for an equivalent number of shares of Series A-2
Preferred as provided by the Exchange Agreement dated as of December 29, 2000
between the Company and the Xxxxxxx Funds (as defined therein) (the "Exchange
Agreement"). The Company and the Xxxxxxx Funds (as defined in the Exchange
Agreement) shall have each executed and delivered the Exchange Agreement.
11.2. Certificates for Shares.
-----------------------
Each Purchaser shall concurrently receive the certificates for
Shares contemplated by Section 2(b) hereof.
-43-
11.3. Senior Status.
-------------
The Company shall have taken all of the necessary actions, including
the amendment of the appropriate existing agreements, so that the Series B
Preferred shall rank senior in all respects, including the payment on
liquidation and redemption, to all other equity securities of the Company.
11.4. Accuracy of Representations and Warranties.
------------------------------------------
The representations and warranties of the Company contained herein
or in any certificate or document delivered pursuant hereto shall be correct and
complete on and as of the Initial Closing Date or any Subsequent Closing Date
with the same effect as though made on and as of the Initial Closing Date or any
Subsequent Closing Date (after giving effect to the transactions contemplated by
this Agreement).
11.5. Compliance with Agreements.
--------------------------
The Company shall have performed and complied in all material
respects with all agreements, covenants and conditions contained in this
Agreement and any other document contemplated hereby or thereby which are
required to be performed or complied with by the Company on or before the
Initial Closing Date or any Subsequent Closing Date.
11.6. Officers' Certificates.
----------------------
The Purchaser shall have received a certificate dated the Initial
Closing Date or any Subsequent Closing Date and signed by the President or Chief
Executive Officer and by the Secretary or the Chief Financial Officer of the
Company, to the effect that the conditions of Sections 11.4, 11.5, 11.8 (second
sentence only), 11.9, 11A.1 and 11A.2 have been satisfied.
11.7. Proceedings.
-----------
All corporate and other proceedings in connection with the
transactions contemplated by this Agreement, and all documents incident thereto,
shall be in form and substance satisfactory to the Purchaser and its counsel,
and the Purchaser shall have received all such originals or certified or other
copies of such documents as the Purchaser or its counsel may reasonably request.
11.8. Legality; Governmental and Other Authorization.
----------------------------------------------
The purchase of and payment for the Shares shall not be prohibited
by any law or governmental order, rule, ruling, regulation, release,
interpretation or opinion applicable to the Purchaser and shall not subject the
Purchaser to any penalty, tax, liability or other onerous condition. Any
necessary consents, approvals, licenses, permits, orders and authorizations of,
and any filings, registrations or qualifications with, any governmental or
administrative agency
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or other Person, with respect to the transactions contemplated by this Agreement
shall have been obtained or made and shall be in full force and effect. The
Company shall have delivered to the Purchaser, upon its reasonable request
setting forth what is required, factual certificates or other evidence, in form
and substance satisfactory to the Purchaser and its counsel, to enable the
Purchaser to establish compliance with this condition.
11.9. No Material Adverse Change.
--------------------------
There shall have been no material adverse change in the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company on a consolidated basis
since September 30, 2000, except as disclosed in Schedule 11.9 hereto.
11.10. Opinion of Counsel.
------------------
The Purchaser shall have received an opinion, dated the Initial
Closing Date or any Subsequent Closing Date (as applicable) and addressed to the
Purchasers, of Xxxxx Xxxxxxx Xxxxxxx & Xxxxx LLP, counsel for the Company, which
opinion shall be in form and substance satisfactory to the Purchaser and its
counsel and shall be to the effect set forth in Exhibit D hereto.
---------
11.11. Other Documents and Opinions.
----------------------------
The Purchaser shall have received such other documents and
opinions, in form and substance reasonably satisfactory to the Purchaser and its
counsel, relating to matters incident to the transactions contemplated hereby as
the Purchaser may reasonably request.
SECTION 11A. CONDITIONS TO CLOSINGS
The Company's obligation to issue the Shares hereunder, and each
Purchaser's obligation to purchase Shares hereunder, is subject to satisfaction
of the following conditions at the Initial Closing and any Subsequent Closing
(any of which may be waived by the Company and such Purchaser):
11A.1. Classification of Series B Preferred as Equity.
----------------------------------------------
The Company shall have received confirmation from Ernst & Young
LLP that the Series B Preferred will be classified under GAAP as equity on the
Company's financial statements.
11A.2. Nasdaq Shareholder Approval Rule.
--------------------------------
The Company shall have received written confirmation from Xxxxx
Xxxxxxx Xxxxxxx & Xxxxx LLP that shareholder approval of the terms of the Series
B Preferred is not
-45-
required pursuant to Rule 4350(i)(1)(d) of the Manual adopted by the National
Association of Securities Dealers, Inc. prior to issuance and sale of the Series
B Preferred.
SECTION 12. BREACH OF REPRESENTATIONS, WARRANTIES AND COVENANTS
(a) The representations, warranties, covenants and agreements of the
Company and each Purchaser contained in this Agreement, the Stockholders'
Agreement, the Registration Rights Agreement or in any document or certificate
delivered pursuant hereto or thereto or in connection herewith shall survive
from the Initial Closing and any Subsequent Closing, and shall continue in
effect following, the execution and delivery of this Agreement, the
Stockholders' Agreement, the Registration Rights Agreement, the closings
hereunder and thereunder, any investigation at any time made by such Purchaser
or on its behalf or by any other Person, the issuance, sale and delivery of the
Shares, any disposition thereof and any payment, conversion or cancellation of
the Shares; provided that Section 9 shall terminate upon conversion of all of
the Shares. All statements contained in any certificate or other document
delivered by or on behalf of the Company pursuant hereto shall constitute
representations and warranties by the Company hereunder.
(b) The Company agrees to indemnify and hold each Purchaser harmless
from and against and will pay to such Purchaser the full amount of any loss,
damage, liability or expense (including amounts paid in settlement and
reasonable attorneys' fees and expenses) to such Purchaser resulting either
directly or indirectly from any breach of the representations, warranties,
covenants or agreements of the Company contained in this Agreement, or in the
Stockholders' Agreement, the Registration Rights Agreement or any other document
or certificate delivered pursuant hereto or thereto or in connection herewith or
therewith.
SECTION 13. SPECIFIC PERFORMANCE
The parties agree that irreparable damage will result in the event
that this Agreement is not specifically enforced, and the parties agree that any
damages available at law for a breach of this Agreement would not be an adequate
remedy. Therefore, the provisions hereof and the obligations of the parties
hereunder shall be enforceable in a court of equity, or other tribunal with
jurisdiction, by a decree of specific performance, and appropriate injunctive
relief may be applied for and granted in connection therewith. Such remedies and
all other remedies provided for in this Agreement shall, however, be cumulative
and not exclusive and shall be in addition to any other remedies which a party
may have under this Agreement or otherwise.
SECTION 14. EXPENSES
(a) Whether or not the transactions herein contemplated are
consummated, the Company shall pay (i) the costs, fees and expenses of the
Company and its counsel in connection
-46-
with this Agreement, the Series B Articles Supplementary, the Stockholders'
Agreement and the Registration Rights Agreement, other related documentation and
the issuance of the Shares and the Conversion Shares and the furnishing of all
opinions by counsel for the Company, (ii) the costs, fees and expenses of
Xxxxxxxxx & Xxxxxxx and Xxxxxx, Xxxxx & Xxxxxxx LLP in connection with this
Agreement, the Series B Articles Supplementary, the Stockholders' Agreement and
the Registration Rights Agreement, the issuance of the Shares and the Conversion
Shares, other related documentation and the transactions contemplated hereby and
thereby (whether or not a Closing occurs hereunder) and if the Initial Closing
occurs the Company will make such payment on the Initial Closing Date);
provided, however, that (x) such fees and expenses shall not exceed $25,000 with
-------- -------
respect to Xxxxxxxxx & Xxxxxxx and $28,000 with respect to Xxxxxx, Xxxxx &
Bockius LLP without the approval of the Company and (y) in the event that the
Initial Closing does not occur, the Company shall pay all such costs, fees and
expenses upon the termination of negotiations between the Company and Sylvan,
(iii) the costs, fees and expenses of counsel to the Purchasers in connection
with any amendments to or modifications or waivers of any provisions of this
Agreement, the Series B Articles Supplementary, the Stockholders' Agreement or
the Registration Rights Agreement, other related documentation or in connection
with any other agreements between the Purchasers and the Company and (iv) the
costs, fees and expenses (including the attorneys' fees and expenses) of any
holder of Shares or Conversion Shares in enforcing its rights against the
Company if the Company defaults in its obligations hereunder, under the Series B
Articles Supplementary, the Stockholders' Agreement or the Registration Rights
Agreement.
(b) In addition to all other sums due hereunder or provided for
in this Agreement, the Company shall pay to each Purchaser or its agents,
respectively, an amount sufficient to indemnify such persons (net of any Taxes
on any indemnity payments) against all reasonable costs and expenses (including
reasonable attorneys' fees and expenses and reasonable costs of investigation)
and damages and liabilities incurred by the Purchaser or its agents pursuant to
any investigation or proceeding against any or all of the Company, the
Purchasers, or their agents, arising out of or in connection with this
Agreement, the Stockholders' Agreement, the Registration Rights Agreement, the
Purchaser's purchase of the Shares (or any transaction contemplated hereby or
thereby or any other document or instrument executed herewith or therewith or
pursuant hereto or thereto), whether or not the transactions contemplated by
this Agreement are consummated, which investigation or proceeding requires the
participation of the Purchaser or its agents or is commenced or filed against
the Purchaser or its agents because of this Agreement, the Stockholders'
Agreement, the Registration Rights Agreement, the Purchaser's purchase of the
Shares or any of the transactions contemplated hereby or thereby (or any other
document or instrument executed herewith or therewith or pursuant hereto or
thereto), other than any investigation or proceeding in which it is finally
determined that there was (i) gross negligence or willful misconduct on the part
of the Purchaser or its agents, (ii) a material breach by Purchaser of any of
its representations or warranties contained herein, or (iii) a material breach
by the Purchaser of any provision of the Confidentiality Agreement or any other
confidentiality agreement between the Company and the Purchaser, in any case,
which was not made by the Purchaser in reliance upon any of the Company's
representations, warranties, covenants or agreements in this Agreement, the
Stockholders' Agreement, the Registration
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Rights Agreement or in any other documents or instruments contemplated hereby or
thereby or executed herewith or therewith or pursuant hereto or thereto. The
Company shall assume the defense, and shall appoint counsel (which counsel may
be the same counsel that the Company uses so long as there is no conflict of
interest) to represent the Purchaser and such agents, in connection with
investigating, defending or preparing to defend any such action, suit, claim or
proceeding (including any inquiry or investigation); provided, however, that the
-------- -------
Purchaser, or any such agent, shall have the right (without releasing the
Company from any of its obligations hereunder) to employ its own counsel and
either to direct its own defense or to participate in the Company's defense, but
the fees and expenses of such counsel shall be at the expense of such person
unless (i) the employment of such counsel shall have been authorized in writing
by the Company in connection with such defense, (ii) the Company shall not have
provided its counsel to take charge of such defense or (iii) there may be
defenses available to the Purchaser, or such agent of the Purchaser which are
different from or additional to those available to the Company, then in any of
such events referred to in clauses (i), (ii) or (iii) such counsel fees and
expenses (but only for one counsel for the Purchaser and its agents) shall be
borne by the Company. Any settlement of any such action, suit, claim or
proceeding shall require the consent of both the Company and such indemnified
person (neither of which shall unreasonably withhold its consent).
(c) The Company agrees to pay, or to cause to be paid, all
documentary, stamp and other similar Taxes, other than transfer taxes payable
upon the transfer by each Purchaser of Shares to a Transferee (which transfer
taxes shall be paid by the Transferee), levied under the laws of the United
States of America, any state or local Taxing Authority thereof or therein or any
other applicable jurisdiction in connection with the issuance and sale of the
Shares, the conversion of Shares into Conversion Shares and the execution and
delivery of this Agreement, the Stockholders' Agreement, the Registration Rights
Agreement and any other documents or instruments contemplated hereby or thereby
and any modification of this Agreement, the Series B Articles Supplementary, the
Stockholders' Agreement or the Registration Rights Agreement or any such other
documents or instruments and will hold the Purchaser harmless without limitation
as to time against any and all liabilities with respect to all such Taxes.
(d) The obligations of the Company under this Section 14 shall
survive the Closing hereunder and any termination of this Agreement.
SECTION 15. DIRECT PAYMENTS
As long as any Purchaser or any institutional holder which is a
direct or indirect transferee (as a result of one or more transfers) from the
Purchaser shall be the holder of any Shares, the Company will make all
redemption payments, liquidation payments and other distributions by wire
transfer to the Purchaser's or such other holder's (or its nominee's) account at
any bank or trust company, notwithstanding any contrary provision herein or in
the Company's charter with respect to the place of payment. Each Purchaser has
provided an
-48-
address on Schedule 1 hereto for payments by wire transfer, and such address may
be changed for such Purchaser or any subsequent holder by notice to the Company.
All such payments shall be made in U.S. dollars and in federal or other
immediately available funds.
SECTION 16. AMENDMENTS AND WAIVERS
(a) The terms and provisions of this Agreement may be amended,
waived, modified or terminated only with the written consent of the holders of
more than 50% of outstanding Shares; provided, however, that no such amendment,
-------- -------
waiver, modification or termination shall change this Section 16(a) without the
written consent of the holders of all the Shares and the Conversion Shares then
outstanding.
(b) Promptly after obtaining the written consent of the holders as
herein provided, the Company shall transmit a copy of any amendment, waiver,
modification or termination which has been adopted to all holders of Shares and
Conversions Shares then outstanding, but failure to transmit copies shall not in
any way affect the validity of any such amendment, waiver, modification or
termination.
SECTION 17. EXCHANGE OF SHARES; CANCELLATION OF SURRENDERED SHARES; REPLACEMENT
(a) Subject to Section 6 hereof, at any time at the request of any
holder of Shares to the Company at its address provided under Section 18 hereof,
the Company at its expense (other than transfer taxes payable upon the transfer
by the Purchaser of Shares to a Transferee, which transfer taxes shall be paid
by the Transferee) will issue and deliver to or upon the order of the holder in
exchange therefor a new certificate or certificates in such amount or amounts as
such holder may request in the aggregate representing the number of Shares
represented by such surrendered certificates, and registered in the name of such
holder or as such holder may direct.
(b) Any Share certificate which is converted into Conversion Shares
in whole or in part shall be canceled by the Company, and no new Share
certificates shall be issued in lieu of any Shares which have been converted
into Conversion Shares. The Company shall issue a new certificate with respect
to any Shares which were not converted into Conversion Shares and were
represented by a certificate which was converted in part.
(c) Upon receipt of evidence satisfactory to the Company of the
loss, theft, destruction or mutilation of any Share certificate and, in the case
of any such loss, theft or destruction, upon delivery of an indemnity agreement
reasonably satisfactory to the Company (if requested by the Company and
unsecured in the case of the Purchaser or another similar institutional holder),
or in the case of any such mutilation, upon surrender of such Share certificate
(which surrendered Share certificate shall be canceled by the Company), the
Company
-49-
will issue a new Share certificate of like tenor in lieu of such lost, stolen,
destroyed or mutilated Share certificate as if the lost, stolen, destroyed or
mutilated Share certificate were then surrendered for exchange.
SECTION 18. NOTICES
All notices, requests, demands, consents and other communications
hereunder shall be in writing and shall be delivered by hand or shall be sent by
telex or telecopy (confirmed by registered, certified or overnight mail or
courier, postage and delivery charges prepaid), (i) if to the Company, to
Caliber Learning Network, Inc., 000 Xxxxx Xxxxxx Xxxxxx, Xxxxxxxxx, XX 00000,
Attention: Chief Financial Officer, with a copy to Xxxxx Xxxxxxx Xxxxxxx & Xxxxx
LLP, 0000 Xxxxx Xxxxxx, Xxxxxxxxx, XX 00000, Attention: Xxxxxxx X. Xxxxxxxx, Xx.
or (ii) if to a Purchaser, at the address indicated on Schedule 1 hereto, with a
copy to such Purchaser's counsel, at the address indicated on Schedule 1 hereto,
or at such other address as a party may from time to time designate as its
address in writing to the other party to this Agreement. Whenever any notice is
required to be given hereunder, such notice shall be deemed given and such
requirement satisfied only when such notice is delivered or, if sent by telex or
telecopier, when received.
SECTION 19. MISCELLANEOUS
(a) This Agreement, the Stockholders' Agreement, the Registration
Rights Agreement and, upon the closing hereunder, the Series B Articles
Supplementary, together with any further agreements entered into by each
Purchaser and the Company at the closing hereunder, contain the entire agreement
between such Purchaser and the Company, and supersede any prior oral or written
agreements, commitments, terms or understandings, regarding the subject matter
hereof.
(b) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, the parties
hereby waive any provision of law which may render any provision hereof
prohibited or unenforceable in any respect.
(c) This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns, whether so
expressed or not; provided, that (a) the Company may not assign any of its
--------
rights, duties or obligations under this Agreement, except with the written
consent of 50% of the outstanding Shares, and (b) each Purchaser may assign any
of its rights, duties or obligations under this Agreement to a purchaser of its
Shares, provided that such purchaser is reasonably acceptable to the Company.
-50-
(d) In addition to any assignment by operation of law, each
Purchaser may assign, in whole or in part, any or all of its rights (and/or
obligations) under this Agreement to any transferee of any or all of its Shares
or Conversion Shares, and (unless such assignment expressly provides otherwise)
any such assignment shall not diminish the rights such Purchaser would otherwise
have under this Agreement or with respect to any remaining Shares or Conversion
Shares held by the Purchaser.
(e) No course of dealing and no delay on the part of any party
hereto in exercising any right, power, or remedy conferred by this Agreement
shall operate as a waiver thereof or otherwise prejudice such party's rights,
powers and remedies. No single or partial exercise of any right, power or remedy
conferred by this Agreement shall preclude any other or further exercise thereof
or the exercise of any other right, power or remedy.
(f) The headings and captions in this Agreement are for convenience
of reference only and shall not define, limit or otherwise affect any of the
terms or provisions hereof.
(g) This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York (other than any conflict of
laws rule which might result in the application of the laws of any other
jurisdiction).
(h) This Agreement may be executed by the parties hereto 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, and all signatures need not appear on any one counterpart.
(i) THE COMPANY HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR
FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK AND
IRREVOCABLY AGREES THAT, SUBJECT TO THE PURCHASER'S ELECTION, ALL ACTIONS OR
PROCEEDINGS RELATING TO THIS AGREEMENT, THE SERIES B ARTICLES SUPPLEMENTARY, THE
STOCKHOLDERS' AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT, THE SHARES OR THE
CONVERSION SHARES MAY BE LITIGATED IN SUCH COURTS. THE COMPANY ACCEPTS FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, THE SERIES B ARTICLES
SUPPLEMENTARY, THE STOCKHOLDERS' AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT,
THE SHARES OR THE CONVERSION SHARES. THE COMPANY HEREBY AGREES THAT SERVICE OF
ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT SHALL BE RECEIVED BY THE
COMPANY AT THE COMPANY'S HEADQUARTERS AT THE ADDRESS AND TO THE ATTENTION OF
SUCH PERSON DESIGNATED PURSUANT TO SECTION 18 HEREOF, AND SUCH
-51-
SERVICE BEING HEREBY ACKNOWLEDGED BY THE COMPANY TO BE EFFECTIVE AND BINDING
SERVICE IN EVERY RESPECT. A COPY OF ANY SUCH PROCESS SO SERVED SHALL BE MAILED
BY REGISTERED MAIL TO THE COMPANY AT THE ADDRESS OF THE COMPANY PROVIDED
HEREUNDER EXCEPT THAT UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE
TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS. AS AN
ALTERNATIVE TO SERVICE OF PROCESS ON SUCH AGENT (WHETHER OR NOT ANY SUCH AGENT
HAS BEEN APPOINTED), THE COMPANY HEREBY AGREES THAT SERVICE UPON IT BY MAIL
SHALL CONSTITUTE SUFFICIENT NOTICE AND SERVICE OF PROCESS. NOTHING HEREIN SHALL
AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL
LIMIT THE RIGHT OF THE PURCHASER TO BRING PROCEEDINGS OR OBTAIN OR ENFORCE
JUDGMENTS AGAINST THE COMPANY IN THE COURTS OF ANY OTHER JURISDICTION.
(j) THE COMPANY AND EACH PURCHASER HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT, THE SERIES B ARTICLES SUPPLEMENTARY, THE STOCKHOLDERS'
AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT, THE SHARES OR THE CONVERSION
SHARES, OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS
TRANSACTION. THE COMPANY AND THE PURCHASER ALSO WAIVE ANY BOND OR SURETY OR
SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF THE
PURCHASER. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY
AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT
MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT
CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.
THE COMPANY AND THE PURCHASER FURTHER WARRANT AND REPRESENT THAT EACH HAS
REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO (OR ASSIGNMENTS OF) THIS AGREEMENT,
THE SERIES B ARTICLES SUPPLEMENTARY, THE STOCKHOLDERS' AGREEMENT, THE
REGISTRATION RIGHTS AGREEMENT, THE SHARES OR THE CONVERSION SHARES. IN THE EVENT
OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL
(WITHOUT A JURY) BY THE COURT.
[remainder of page intentionally left blank]
-52-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed as of the date first above written.
CALIBER LEARNING NETWORK, INC.
By /s/ Xxxxx X. Xxxxxx
--------------------------------
Name: Xxxxx X. Xxxxxx
Title: President and CEO
SYLVAN VENTURES, LLC
By /s/ B. Xxx XxXxx
--------------------------------
Name: B. Xxx XxXxx
Title: Executive Vice President
XXXXXXX US DISCOVERY FUND III, L.P.
By: XXXXXXX US DISCOVERY PARTNERS, L.P.,
its general partner
By: XXXXXXX US DISCOVERY, LLC,
its general partner
By: /s/ Xxxxxx X. Xxxx
-------------------------------
Xxxxxx X. Xxxx, member
XXXXXXX US DISCOVERY OFFSHORE FUND III, L.P.
By: XXXXXXX US DISCOVERY PARTNERS, L.P.,
its general partner
By: XXXXXXX US DISCOVERY, LLC,
its general partner
By: /s/ Xxxxxx X. Xxxx
---------------------------------
Xxxxxx X. Xxxx, member
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[Form of Future Investor Signature Page]
[Name of Investor]
By _________________________________
Name:
Title:
Date: __________________, ___
Schedule 1
to the Stock Purchase Agreement
Aggregate
Number of Purchase Address for Payments
Name of Purchaser Shares Price Address for Communications Closing Date by Wire Transfer
--------------------- ------------- ------------ ------------------------------ ------------------ ---------------------
Sylvan Ventures, LLP 80,000 $8,000,000 0000 Xxxxxxxxx Xxxxxx December 29, 2000
Xxxxxxxxx, XX 00000
Xxxxxxx US Discovery 25,854 $2,585,400 December 29, 2000
Fund III, L.P. Xxxxx Xxxxxxx Asset Management USA
000 Xxxx Xxxxxx, 00/xx/ Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxx
Xxxxx X. Xxxxxxx
with a copy to:
Xxxxxx, Xxxxx & Xxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attn: Xxxxx X. Xxxxxx, Esq.
Xxxxxxx US Discovery 4,146 $ 414,600 December 29, 2000
Offshore Fund III, L.P. Xxxxx Xxxxxxx Asset Management USA
000 Xxxx Xxxxxx, 00/xx/ Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxx
Xxxxx X. Xxxxxxx
with a copy to:
Xxxxxx, Xxxxx & Xxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attn: Xxxxx X. Xxxxxx, Esq.
