EXHIBIT 3
EXECUTION COPY
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SECURITIES PURCHASE AGREEMENT
between
LANDMARK COMMUNICATIONS, INC.,
LANDMARK VENTURES VII, LLC
COOLSAVINGS, INC.
and
XXXXXXXXXXX.XXX INC.
July 30, 2001
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EXECUTION COPY
XXXXXXXXXXX.XXX INC.
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT dated as of July 30, 2001 (the
"Agreement") between and among XXXXXXXXXXX.XXX INC., a Michigan corporation (the
"Company"), COOLSAVINGS, INC., a Delaware corporation ("Newco"), LANDMARK
COMMUNICATIONS, INC., a Virginia corporation ("LCI"), and LANDMARK VENTURES VII,
LLC, a Delaware limited liability company ("LV") (LCI and LV are each a
"Landmark Party" and collectively the "Landmark Parties").
WHEREAS, the Company and LCI entered into a non-binding Term Sheet dated
June 5, 2001 (the "Term Sheet") which stated the general terms and conditions
upon which LCI or certain of its affiliates would lend to and invest in the
Company up to Fifteen Million Dollars ($15,000,000) in exchange for a Senior
Secured Note, certain Warrants and shares of Series B Preferred Stock (each as
defined below); and
WHEREAS, in anticipation of this Agreement, the Company and LCI entered
into a Loan and Security Agreement dated June 14, 2001, as amended on June 27,
2001 and July 26, 2001 (the "Bridge Loan Agreement"), pursuant to which LCI has
advanced to the Company One Million Seven Hundred Fifty Thousand Dollars
($1,750,000) (the "Bridge Loan Amount") which was borrowed pursuant to a Master
Note for such amount (the "Bridge Note"); and
WHEREAS, the Company and LCI are contemporaneously herewith amending and
restating the Bridge Loan Agreement with the Amended and Restated Loan Agreement
attached hereto as Exhibit A (the "Amended Loan Agreement") pursuant to which
the amount advanced to the Company is being increased to an aggregate total of
Five Million Dollars ($5,000,000) (the "Senior Secured Loan"); and
WHEREAS, contemporaneously herewith, LCI is delivering to the Company the
Bridge Note and Three Million Two Hundred Fifty Thousand Dollars ($3,250,000) in
cash (less all interest that has accrued under the Bridge Note) in consideration
for the execution, delivery and issuance by the Company of a 12% Senior Secured
Note (together with any amendments thereto, the "Senior Secured Note"), which
shall evidence the Senior Secured Loan and amend and restate the Bridge Note in
its entirety; and
WHEREAS, the Senior Secured Note shall initially be due six months from the
date hereof and have the rights and privileges set forth in the form of Exhibit
B attached hereto; and
WHEREAS, under the Amended Loan Agreement, the Company has also made a Grid
Note (the "Grid Note") attached hereto as Exhibit C pursuant to which LCI may at
its option record additional advances requested by and made to the Company or
obligations incurred by the Company pursuant to the Amended Loan Agreement; and
WHEREAS, from and after the consummation of the First Tranche Closing
(defined below) contemplated hereby, the terms of the Senior Secured Note
provide that the maturity date shall be adjusted to June 30, 2006, and the
interest rate shall be adjusted to 8% per annum (all subject to the express
terms of the Senior Secured Note); and
WHEREAS, in connection with the issuance of the Senior Secured Note, the
Company has agreed to issue to LCI warrants substantially in the form attached
as Exhibit D hereto (the "Warrants"), which are exercisable through July 30,
2009, for shares of common stock of the Company ("Common Stock"); and
WHEREAS, from issuance through the First Tranche Closing, the Warrants
shall (subject to the terms of the Warrants) be exercisable at $0.01 per share
into that number of shares of Common Stock (the "Warrant Shares") equal to 19.9%
of all shares of Common Stock outstanding (calculated as provided under the
Warrants) and, from and after the First Tranche Closing, the terms of the
Warrants provide that the exercise price shall be adjusted to $0.50 per share
and the number of Warrant Shares shall be adjusted to 10,000,000 shares, subject
to adjustments required to be made pursuant to the terms of the Warrants,
including without limitation, (i) a re-set in the price to $0.75 per share after
the fourth anniversary of the issuance of the Warrants, (ii) adjustments in
connection with the antidilution provisions of the Warrants, and (iii) increases
in the number of Warrant Shares required to reflect the issuance of additional
Warrants (the "PIK Warrants") issued in connection with the payment in kind of
interest accrued after the First Tranche Closing under the Senior Secured Note
(the shares of Common Stock issuable upon exercise of the PIK Warrants are "PIK
Warrant Shares" and also "Warrant Shares"); and
WHEREAS, the Company desires to sell and issue to LV and LV wishes to
purchase from the Company up to Ten Million Dollars ($10,000,000.00) of the
Company's shares of Preferred Stock, designated as "Series B Convertible
Preferred Stock" (the "Series B Preferred Stock"); and
WHEREAS, based on the business judgment of the Board of Directors of the
Company and in furtherance of the transactions contemplated hereby, the Board of
Directors has authorized and approved, and is recommending to the shareholders
of the Company for their approval, the merger of the Company pursuant to the
Agreement and Plan of Merger substantially in the form attached hereto as
Exhibit E ("Agreement and Plan of Merger") with Newco, a newly-formed,
wholly-owned subsidiary of the Company organized in the State of Delaware, prior
to LV's purchase of the Series B Preferred Stock (the "Merger"); and
WHEREAS, in connection with and prior to such Merger, the Company shall
cause Newco to be duly organized through the filing of the Certificate of
Incorporation attached hereto as Exhibit F (the "Restated Charter") with the
State of Delaware and the adoption of the organizational actions (including,
without limitation, the adoption of Newco's bylaws) attached hereto as Exhibit
G; and
WHEREAS, pursuant to the Agreement and Plan of Merger, Newco shall assume
all of the rights, liabilities and obligations of the Company including, without
limitation, all obligations of the Company under this Agreement and the
Transaction Documents; and
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WHEREAS, if the requisite number of shareholders of the Company fail to
approve the Merger, the Board of Directors of the Company has authorized and
approved the Series B Preferred Stock pursuant to the Certificate of Designation
attached hereto as Exhibit H (the "Series B Certificate of Designation") which
has been filed with the Department of Commerce and Industry Services of the
State of Michigan (the "DCIS"); and
WHEREAS, the shares of Series B Preferred Stock to be purchased hereunder,
whether from the Company or Newco as its successor (in each case and including
the Option Shares, defined below, hereinafter the "Series B Preferred Stock")
shall accrue dividends on a quarterly basis payable solely in kind (the "PIK
Shares") and shall be (together with accrued and cumulated dividends thereon)
convertible, pursuant to the terms of the Company's articles of incorporation or
Newco's certificate of incorporation, as applicable, into shares (the "Converted
Shares") of Common Stock of the Company or Newco, as applicable; and
WHEREAS, the Landmark Parties will have registration rights with respect to
the Converted Shares and the Warrant Shares, pursuant to the terms of that
certain Registration Rights Agreement to be entered into between the Company and
the Landmark Parties, substantially in the form attached as Exhibit I hereto
("Registration Rights Agreement"); and
WHEREAS, the Landmark Parties wish to purchase the Senior Secured Note, the
Warrants and the Series B Preferred Stock (collectively with the Warrant Shares
and the PIK Shares, the "Securities") on all of the other terms and subject to
the conditions set forth in this Agreement; and
WHEREAS, capitalized terms used herein but not defined shall have the
respective meanings given to such terms under Section 10.1 below.
NOW THEREFORE, in consideration of the foregoing premises and the covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company hereby agrees with the
Landmark Parties as follows:
SECTION 1. AUTHORIZATION OF SERIES B PREFERRED STOCK
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The Company has authorized and designated shares of Series B Preferred
Stock. The terms, powers, preferences, qualifications, limitations and relative
rights of the Series B Preferred Stock are set forth in the Series B Certificate
of Designation. Upon and subject to shareholder approval of the Merger, the
Company shall cause the Merger to be consummated pursuant to the Agreement and
Plan of Merger, whereupon Newco will assume all of the Company's obligations
hereunder and all representations, warranties and covenants shall be made and
performed by Xxxxx. The terms, powers, preferences, qualifications, limitations
and relative rights of the Series B Preferred Stock to be sold by Newco
hereunder are set forth in the Restated Charter.
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SECTION 2. PURCHASE AND SALE OF SECURITIES
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2.1. Issuance of Senior Secured Note
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Subject to the terms and conditions set forth in this Agreement and in
reliance upon the representations and warranties set forth below (and upon the
satisfactory completion of the conditions listed on Schedule 2.1 hereto), as of
the date hereof the Company shall sell to LCI, and LCI shall purchase from the
Company, the Senior Secured Note and the Warrants for an aggregate purchase
price of Five Million Dollars ($5,000,000.00) (the "Note Purchase Price"). Such
sale and purchase shall be effected on the date hereof by the Company executing
and delivering to LCI the duly executed Amended Loan Agreement, Senior Secured
Note and Warrants, against delivery by LCI to the Company of (a) the Note
Purchase Price (less the outstanding balance under the Bridge Note and any
accrued and unpaid interest thereon) by wire transfer of immediately available
funds to such account as the Company shall designate prior to the date hereof
and (b) the Bridge Note.
2.2. Issuance of First Tranche of Series B Preferred Stock
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(a) Subject to the terms and conditions set forth in this Agreement and in
reliance upon the representations and warranties set forth below, on the First
Tranche Closing Date (defined below) the Company shall sell to LV, and LV shall
purchase from the Company 32,180,405 shares of Series B Preferred Stock (the
"First Tranche of Purchased Preferred Stock"), for a cash purchase price of Five
Million Dollars ($5,000,000.00) (the "First Tranche Purchase Price"). Such sale
and purchase shall be
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effected on the First Tranche Closing Date by the Company executing and
delivering to LV, duly registered in its name, a duly executed stock certificate
evidencing the Series B Preferred Stock being purchased by it, against delivery
by LV to the Company of the First Tranche Purchase Price (less any debt under
the Grid Note that LCI requests be applied to the Purchase Price) by wire
transfer of immediately available funds to such account as the Company shall
designate prior to the First Tranche Closing Date.
(b) The closing of such sale and purchase (the "First Tranche Closing")
shall take place at 10:00 A.M., New York City time, on the second business day
after the satisfaction or waiver of the conditions set forth in Sections 6 and 8
hereof at the offices of Xxxxxxx Xxxx & Xxxxxxxxx, 000 Xxxxxxx Xxxxxx, Xxx Xxxx,
XX 00000 (the "Willkie Offices"), or at such other place and time as may be
mutually agreed to by the parties hereto (the "First Tranche Closing Date").
2.3. Issuance of Second Tranche of Series B Preferred Stock
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(a) At any time after the First Tranche Closing Date but not later than
December 31, 2001 (such date to be October 25, 2001, in the event all of the
conditions to closing under Section 2.3(c) below have been satisfied or waived
by such date), LV, in its sole discretion (and in reliance upon the
representations and warranties set forth below), shall have the option to
purchase from the Company (the "Second Tranche Purchase Option"), and the
Company shall be obligated to sell to LV, 32,180,405 shares of Series B
Preferred Stock (the "Second Tranche of Purchased Preferred Stock"), for a cash
purchase price of Five Million Dollars ($5,000,000.00) (the "Second Tranche
Purchase Price"). Such sale and purchase shall be
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effected on the Second Tranche Closing Date by the Company executing and
delivering to LV, duly registered in its name, a duly executed stock certificate
evidencing the Series B Preferred Stock being purchased by it (together with the
certificates and opinion contemplated under Sections 7.3 and 7.5 below,
respectively), against delivery by LV to the Company of the Second Tranche
Purchase Price (less any debt under the Grid Note that LCI requests be applied
to the Purchase Price) by wire transfer of immediately available funds to such
account as the Company shall designate prior to the Second Tranche Closing Date.
None of the Landmark Parties shall have any obligation hereunder to exercise the
Second Tranche Purchase Option.
(b) Except as otherwise provided in Section 2.3(c) below, the closing of
such sale and purchase (the "Second Tranche Closing", and together with the
First Tranche Closing, the "Closings") shall take place at 10:00 A.M., New York
City time, on the fifth business day after LV provides the Company with written
notice that LV has elected to exercise the Purchase Option, at the Willkie
Offices, or at such other place and time as may be mutually agreed to by the
parties hereto (the "Second Tranche Closing Date", and together with the First
Tranche Closing Date, the "Closing Dates").
(c) If after the First Tranche Closing the Second Tranche Purchase Option
has not been exercised, and the conditions set forth in Sections 7 and 8 below
have been satisfied or waived, then the Second Tranche Closing shall take place
at 10:00 A.M., New York City time, on October 25, 2001 (in such event, such date
shall be the "Second Tranche Closing Date"). On the Second Tranche Closing Date,
in reliance upon the representations and warranties set forth below, the Company
shall sell to LV, and LV shall purchase from the Company the Second Tranche of
Purchased Preferred Stock for the Second Tranche Purchase Price (less any debt
under the Grid Note that LCI requests be applied to the Purchase Price). Such
sale and purchase shall be effected in the same manner described in the
penultimate sentence of Section 2.3(a) above.
2.4. Issuance of Additional Tranches of Series B Preferred Stock
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(a) At any time and from time to time after the Second Tranche Closing Date
but not later than December 31, 2002 (the "Additional Option Period"), if a
Shortfall Event (defined below) occurs, LV, in its sole discretion (and in
reliance upon the Special Officer's Certificate, defined below), shall have the
option to purchase from the Company (each option related to a Shortfall Event, a
"Shortfall Purchase Option"), and the Company shall be obligated to sell to LV,
for a cash purchase price of $0.1554 per share (the "Share Price") up to that
number of shares of Series B Preferred Stock (the "Available Option Shares")
determined by dividing the Shortfall Amount (defined below) by the Share Price.
(b) If a Shortfall Event occurs and LV elects to exercise the corresponding
Shortfall Purchase Option, LV shall provide the Company with written notice of
election specifying the number of Available Option Shares that LV will purchase
and, on the third day after the Company's receipt of such notice (or at such
other time as may be mutually agreed to by the parties hereto), the closing of
such sale and purchase shall be effected at 10:00 a.m., New York City time at
the Willkie Offices (or at such other place as may be mutually agreed to by the
parties hereto). Each such closing (an "Additional Option Closing") shall be
effected by the Company executing and delivering to LV, duly registered in its
name, a duly executed stock
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certificate evidencing the Series B Preferred Stock being purchased by it
(together with the Special Officer's Certificate and the Special Opinion,
defined below), against delivery by LV to the Company of the aggregate Share
Price by wire transfer of immediately available funds to such account as the
Company shall designate prior to the applicable closing.
(c) As used in this Section 2.4:
(i) "Shortfall Event" means any of:
(A) The occurrence of an event which with or without notice or
the passage of time or both would constitute a Forbearance Termination
Event (as defined under the applicable Forbearance Agreement) under
any of the Forbearance Agreements (defined below) that is curable by
the payment of cash to the applicable forbearing party or through the
infusion of cash into the Company;
(B) the occurrence of an event which with or without notice or
the passage of time or both would constitute a breach or event of
default under (1) any of the Key Agreements and Instruments (defined
below) (including, without limitation, the Amended Loan Agreement) or
any of the Material Contracts (defined below), (2) any material
agreement by which the Company has received a license with respect to
Intellectual Property, or (3) any real property lease, provided, such
breach or event of default is curable by the payment of cash to the
other party under the applicable agreement, license or lease;
(C) the failure by the Company to pay any account payable which
is due and owing within ninety (90) days of its applicable due date,
except as to any account payable being disputed by the Company in good
faith and as to which the Company's chief financial officer or
principal accounting officer has delivered to LV a certificate
certifying to the dispute and the facts giving rise to the dispute;
(D) any litigation against the Company exists in which the
adverse party may attach a lien against a material part of the
Company's assets or is seeking to enjoin the Company from using any
material asset, excluding any litigation listed on Schedule 3.13 or in
which the Company has received an opinion from its counsel that a
judgment in favor of the Company is more likely than not;
(E) the failure by the Company during the Additional Option
Period to maintain an excess of Current Assets over Current
Liabilities at or above the amount shown (or derived(1)) for the
corresponding week or quarter, as applicable, on the "xxxxxxxxxx.xxx
BASE CASE Cash Source & Use Forecast 2001 (Jun 18 to Dec 31) 7/27/01
12:00 AM"
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(1) With respect to the calculation of "Current Liabilities" and "Total
Liabilities", it is understood and agreed that to the extent balances are
not explicitly set forth on the Base Forecast, the Base Forecast assumes
that each capital lease and bank obligation and liability of the Company is
being paid when due in accordance with the terms agreed upon at the closing
of the Senior Secured Loan, including the terms of all applicable
forbearance agreements, and that no additional obligation or liability to
any lessor or lender has been incurred.
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delivered by the Company to the Landmark Parties by e-mail dated July
27, 2001 (the "Base Forecast")(2);
(F) the failure by the Company during the Additional Option
Period to maintain an excess of Current Assets over Total Liabilities
at or above the amount shown (or derived1) for the corresponding week
or quarter, as applicable, on the Base Forecast; or
(G) the reduction by the Company during the Additional Option
Period of its expenditures in any expense category shown on the Base
Forecast by more than 10% or in all expense categories by more than 2%
in the aggregate.
(ii) "Shortfall Amount" means the cash amount required to cure an
applicable Shortfall Event.
(iii) "Special Officer's Certificate" means a duly executed officer's
certificate which shall be delivered to LV at each Additional Option
Closing and which shall be substantially similar in form to the certificate
described in Section 6.3 below and certify the same matters required under
Section 6.3, provided the certifications (and the representations and
warranties that reference a "Closing Date") shall be made as of the actual
date of the Additional Option Closing and may be qualified by an updated
disclosure schedule attached to the certificate.
(iv) "Special Opinion" means a duly executed opinion of counsel which
shall be delivered to LV at each Additional Option Closing and which shall
be substantially similar in form to the opinion described in Section 6.6
below, conformed to delete those opinions unrelated to the issuance of
shares and to reflect changes resulting from the passage of time.
(d) The aggregate Purchase Price paid by LV in connection with the exercise
of each Shortfall Purchase Option shall be used exclusively by the Company to
cure the applicable Shortfall Event and, in connection therewith, LV may require
that such Purchase Price be placed in escrow pending such application or
otherwise transferred and applied in a manner satisfactory to LV.
(e) None of the Landmark Parties shall have any obligation hereunder to
exercise any Shortfall Purchase Option or any implied duty in connection
therewith; each such option being exercisable at LV's option and in its sole and
absolute discretion. No waiver by LV of its right to exercise a Shortfall
Purchase Option upon the occurrence of any Shortfall Event shall be deemed to
preclude the occurrence of any subsequent Shortfall Event or a further or
continuing waiver of any Shortfall Purchase Option related to any subsequent
Shortfall Event.
(f) With respect to all shares of Series B Preferred Stock purchased after
the First Tranche Closing, LV shall be entitled to all anti-dilution protections
applicable to the shares
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(2) For purposes of identification, the Base Forecast indicates Projected Cash
(Requirement) of $1,565,494.43 at 31-Dec-01 and $102,921.99 at 4th quarter
2002.
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of Series B Preferred Stock under the Articles of Incorporation or Restated
Charter, as applicable, on the same basis as if LV had been issued such shares
at the First Tranche Closing and would consequently be entitled to protection
for below market issuances on and after that date.
2.5. Equitable Adjustment.
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The number of shares of Series B Preferred Stock to be purchased pursuant
to this Section 2 assumes the filing of the Restated Charter with the Secretary
of State of Delaware and the consummation of the Merger. If such Merger is
consummated, Newco shall succeed to all obligations under this Purchase
Agreement including without limitation the obligation to issue and deliver the
Securities under the same terms and conditions as set forth in this Section 2.
In the event that prior to the First Tranche Closing the Restated Charter is not
filed with the Secretary of State of Delaware and the Merger is not consummated,
and LV, in its sole discretion, elects to proceed with the First Tranche
Closing, then the Series B Preferred Stock purchased at the First Tranche
Closing shall be issued pursuant to the Series B Certificate of Designation and
the number of shares of Series B Preferred Stock issued at such closing shall be
3,218,040.50.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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The Company represents and warrants to the Landmark Parties that, except as
set forth on the correspondingly numbered section of the Disclosure Schedule
attached hereto and delivered to the Landmark Parties in connection herewith,
the statements contained in this Section 3 are true, complete and correct and
will be true, complete and correct as of each Closing Date:
3.1. Corporate Organization and Authority
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(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Michigan. Attached hereto as
Exhibits J and K, respectively, are true and complete copies of the articles of
incorporation (the "Articles of Incorporation") and the bylaws (the "Bylaws") of
the Company, each as amended through July 30, 2001 (collectively, the "Michigan
Organizational Documents").
(b) Upon the filing of the Restated Charter and the consummation of the
Merger, Newco will be a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Attached hereto at Exhibits F
and G, respectively, are true and complete copies of the Restated Charter and
the bylaws of Newco, each as amended through the date of the Merger
(collectively, the "Delaware Organizational Documents" and together with the
Michigan Organizational Documents, the "Organizational Documents").
(c) The Company has all requisite power and authority and has all necessary
approvals, licenses, permits and authorization to own its properties and to
carry on its business as now conducted except where the failure to so qualify
would not, individually or in the aggregate, have a material adverse effect on
the business, properties, assets, liabilities, prospects, profits, results of
operations or condition (financial or otherwise) of the Company or the ability
of the Company to consummate the transactions contemplated hereby (a "Material
Adverse Effect").
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The Company has all requisite power and authority to execute and deliver the
Transaction Documents and to perform its obligations hereunder and thereunder.
(d) The Company has filed all necessary documents to qualify to do business
as a foreign corporation in, and the Company is in good standing under the laws
of, each jurisdiction in which the conduct of the Company's business or the
nature of the property owned, operated or leased requires such qualification,
except where the failure to so qualify would not, individually or in the
aggregate, have a Material Adverse Effect.
3.2. Subsidiaries
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Other than Newco, the Company has no subsidiaries and no interests or
investments in any partnership, trust or other entity or organization.
3.3. Capitalization
--------------
(a) As of July 30, 2001, the authorized capital stock of the Company
consists of (i) 100,000,000 shares of its Common Stock, and (ii) 10,000,000
shares of preferred stock, of which (A) 8,695,000 shares are designated as
Series B Preferred Stock and (B) 1,300,000 shares are designated Series C
Preferred Stock. Upon filing of the Restated Charter with the Secretary of State
of Delaware prior to the First Tranche Closing, the authorized capital stock of
Newco will consist of a total of six hundred fifty (650,000,000) million shares
of capital stock which shall consist of: (i) three hundred seventy nine
(379,000,000) million shares of its Common Stock, $0.001 par value per share,
and (ii) two hundred seventy one (271,000,000) million shares of preferred
stock, $0.001 par value per share, of which (A) two hundred fifty eight
(258,000,000) million shares will be designated as Series B Preferred Stock, and
(B) thirteen (13,000,000) million shares will be designated as "Series C
Convertible Preferred Stock" (the "Series C Preferred Stock"). The Company's
Board of Directors has adopted a resolution dated July 12, 2001, authorizing and
directing the organization of Newco and the filing of the Restated Charter in
connection therewith and recommending to the shareholders that the Merger be
approved. As of July 30, 2001, the issued and outstanding shares of capital
stock of the Company consist of 39,093,660 shares of Common Stock, and at each
Closing the issued and outstanding shares of capital stock of the Company will
be the same, except to the extent that additional shares of Common Stock are
issued upon valid exercise of warrants, options and convertible securities that
are issued and outstanding as of July 30, 2001 as reflected on Schedule 3.3(a),
to the extent that shares of Series B Preferred Stock are issued pursuant to
this Agreement and to the extent that shares of Series C Preferred Stock are
issued pursuant to Section 6.15 below. There are no shares of preferred stock
designated as "Series A Preferred Stock" other than shares already issued,
converted and retired none of which is held in treasury or otherwise available
for re-issuance.
(b) All the outstanding shares of capital stock of the Company have been
duly and validly issued and are fully paid and non-assessable, and were issued
in accordance with the registration or qualification requirements of the
Securities Act and any relevant state securities laws or pursuant to valid
exemptions therefrom. Upon issuance, sale and delivery as contemplated by this
Agreement, the Series B Preferred Stock will be duly authorized, validly issued,
fully paid and non-assessable shares of the Company, free of all preemptive or
similar
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rights, and entitled to the rights therein described. Upon their issuance in
accordance with the terms of the Series B Preferred Stock and Warrants, and in
the case of the Warrants, upon and against payment therefor, the PIK Shares and
the shares of Common Stock issuable upon conversion of the Series B Preferred
Stock or upon exercise of the Warrants, as applicable, will be duly authorized,
validly issued, fully paid and non-assessable shares of Common Stock of the
Company, free of all preemptive or similar rights except as contemplated by the
Transaction Documents.
(c) Except for the exercise and conversion rights which attach to the
warrants, options and convertible securities which are listed on Schedule 3.3(a)
hereto and to the Series B Preferred Stock, Series C Preferred Stock and the
Warrants, on the Closing Dates there will be no shares of Common Stock or any
other equity security of the Company issuable upon conversion or exchange of any
security of the Company nor will there be any rights, options or warrants
outstanding or other agreements to acquire shares of Common Stock nor will the
Company be contractually obligated to purchase, redeem or otherwise acquire any
of its outstanding shares. No shareholder of the Company is entitled to any
preemptive or similar rights to subscribe for shares of capital stock of the
Company. The Company's Series C Preferred Stock is, and will be, in all respects
junior to the Series B Preferred Stock with the designations set forth in the
Certificate of Designation with respect to the Series C Preferred Stock attached
hereto as Exhibit L (the "Series C Certificate of Designation" and, collectively
with the Series B Certificate of Designation, the "Certificates of Designation")
or the Restated Charter, as applicable. Except as set forth on Schedule 3.3(a),
there are no other scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights exchangeable for or
convertible into, any shares of capital stock of the Company, or contracts,
commitments, understandings, or arrangements by which the Company is or may
become bound to issue additional shares of capital stock of the Company or
options, warrants, scrip, rights to subscribe to, or commitments to purchase or
acquire, any shares, or securities or rights convertible or exchangeable into
shares, of capital stock of the Company. There are no outstanding or authorized
stock appreciation, phantom stock or similar rights with respect to the Company.
(d) Except as set forth in Schedule 3.3(d), there are no outstanding
securities issued by the Company that are entitled to registration rights under
the Securities Act. Except as set forth in Schedule 3.3(d), there are no
outstanding securities issued by the Company that are directly or indirectly
convertible into, exercisable into, or exchangeable for, shares of Common Stock
of the Company, or that have anti-dilution or similar rights that would be
affected by the issuance of the Securities, the Converted Shares or the Warrant
Shares.
(e) As of each Closing Date, the designations, powers, preferences, rights,
qualifications, limitations and restrictions in respect of each class and series
of authorized capital stock of the Company and Newco will be set forth in the
Articles of Incorporation (as amended by the Certificates of Designation) or the
Restated Charter, as applicable, and all such designations, powers, preferences,
rights, qualifications, limitations and restrictions will upon filing be valid,
binding and enforceable and in accordance with all applicable laws.
(f) Upon consummation of the Merger, all outstanding shares of capital
stock of Newco shall have been duly and validly issued and fully paid and
non-assessable, and shall
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have been issued in accordance with the registration or qualification
requirements of the Securities Act and any relevant state securities laws or
pursuant to valid exemptions therefrom. Upon consummation of the Merger, all
securities of the Company shall become securities of Newco in accordance with
the terms of the Agreement and Plan of Merger.
3.4. Issuance of Common Stock
------------------------
The Converted Shares and the Warrant Shares are duly authorized and
reserved for issuance and, upon issuance, the Converted Shares and the Warrant
Shares will be validly issued, fully paid and non-assessable, free and clear of
any and all liens, claims and encumbrances, and, if the Common Stock is then
listed and traded on the Nasdaq National Market, the Converted Shares and
Warrant Shares will be entitled to be traded on the Nasdaq National Market (or
on any market that the outstanding stock is traded on, the "Approved Markets"),
and the holders of such Converted Shares and Warrant Shares shall be entitled to
all rights and preferences accorded to a holder of Common Stock.
3.5. Corporate Proceedings, etc.
---------------------------
The Company has authorized the execution, delivery, and performance of the
Transaction Documents to be executed by it and each of the transactions and
agreements contemplated hereby and thereby. No other corporate action is
necessary to authorize such execution, delivery of the Transaction Documents and
no other corporate action is necessary to authorize the performance of the
Transaction Documents (excluding shareholder approval for the Merger). Upon such
execution and delivery, each of the Transaction Documents shall constitute the
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except that such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights and general principles of
equity. The Company has authorized the issuance and delivery of the Securities
in accordance with this Agreement and, subject to the issuance of the Series B
Preferred Stock and Warrants, the Company will have a sufficient number of
shares of Common Stock reserved for initial issuance upon conversion of the
Series B Preferred Stock (including PIK Shares) and the exercise of the Warrants
(including the PIK Warrants).
3.6. Consents and Approvals
----------------------
Except as set forth on Schedule 3.6 and except for the shareholder approval
for the Merger, the execution and delivery by the Company of the Transaction
Documents, the performance by the Company of its obligations hereunder and
thereunder and the consummation by the Company of the transactions contemplated
hereby and thereby do not require the Company to obtain any consent, approval or
action of, or make any filing with or give any notice to, any corporation,
person or firm or any public, governmental or judicial authority.
3.7. Absence of Defaults, Conflicts, etc.
------------------------------------
Except as set forth on Schedule 3.7, the execution and delivery of the
Transaction Documents and the approval of the Board of Directors of the Company
and the submission to the shareholders of the Company for approval of the Merger
do not, and the fulfillment of the terms hereof and thereof by the Company, and
the issuance of the Series B Preferred Stock, PIK
11
Shares, the Warrants and the PIK Warrants (and the Common Stock issuable upon
conversion or exercise thereof) and the execution of the Senior Secured Note
will not, result in a breach of any of the terms, conditions or provisions of,
or constitute a default under, or permit the acceleration of rights under or
termination of, any indenture, mortgage, deed of trust, credit agreement, note
or other evidence of indebtedness, or other material agreement of the Company
(collectively the "Key Agreements and Instruments"), or the Organizational
Documents (except to the extent the Merger will require shareholder approval),
or any rule or regulation of any court or federal, state or foreign regulatory
board or body, or administrative agency having jurisdiction over the Company or
over its properties or businesses. Except as set forth on Schedule 3.7, no event
has occurred and no condition exists which, upon notice or the passage of time
(or both), would constitute a default under any such Key Agreements and
Instruments or under any license, permit or authorization to which the Company
is a party or by which it may be bound. There is not a pending Takeover Proposal
and the Company is in compliance with the terms of that certain exclusivity
letter with LCI dated June 5, 2001.
3.8. Absence of Certain Developments
-------------------------------
Except as disclosed in the Public Filings and except as set forth on
Schedule 3.8, since May 15, 2001 there has been no (i) material adverse change
in the condition, financial or otherwise, of the Company or in its assets,
liabilities, properties, or business or prospects, (ii) declaration, setting
aside or payment of, or any agreement by the Company to declare, set aside or
pay, any dividend or other distribution with respect to the capital stock of the
Company (or repurchase or redemption of any capital stock), (iii) issuance of,
or any agreement by the Company to issue, capital stock (other than pursuant to
the exercise of options, warrants, or convertible securities outstanding at such
date) or options, warrants or rights to acquire capital stock (other than the
rights granted to the Landmark Parties hereunder), (iv) material loss,
destruction or damage to any property of the Company, whether or not insured,
(v) acceleration or prepayment of any indebtedness for borrowed money or the
refunding of any such indebtedness, (vi) labor trouble involving the Company or
any material change in its personnel or the terms and conditions of employment,
(vii) waiver of any valuable right, (viii) increase in, or any agreement by the
Company to increase, salary and benefits of any officer or employee or loan or
extension of credit to any officer or employee of the Company except in the
ordinary course of business consistent with past practice, or (ix) acquisition
or disposition of any material assets (or any contract or arrangement therefor),
or any other material transaction by the Company otherwise than for fair value
in the ordinary course of business.
3.9. Securities Law Issues
---------------------
(a) SEC Documents; No Non-Public Information; Financial Statements. The
Common Stock of the Company is registered pursuant to Section 12(g) of the
Exchange Act and the Company has filed all reports, schedules, forms, statements
and other documents required to be filed by it with the SEC pursuant to the
reporting requirements of the Exchange Act, including material filed pursuant to
Section 13(a) or 15(d), in addition to one or more registration statements and
amendments thereto heretofore filed by the Company with the SEC (all of the
foregoing including filings incorporated by reference therein being referred to
herein as the "SEC Documents"). The Company has delivered or made available to
the Landmark Parties true and complete copies of all SEC Documents (including,
without limitation, proxy information and
12
solicitation materials and registration statements) filed with the SEC since May
15, 2000. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Exchange Act and the rules and
regulations of the SEC promulgated thereunder and other federal, state and local
laws, rules and regulations applicable to such SEC Documents, and none of the
SEC Documents contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. No event or circumstance has occurred which would require
the Company to disclose such event or circumstance in order to make the
statements in the SEC Documents not misleading on the date hereof or on the
Closing Dates but which has not been so disclosed. The financial statements of
the Company included in the SEC Documents, the Company's unaudited financial
statements attached hereto as Schedule 3.9(a) and the Company's unaudited
financial statements for the period ending March 31, 2001 (the "Filed Financial
Statements") comply as to form and substance in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC or other applicable rules and regulations with respect thereto. The
Filed Financial Statements have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis during
the periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto or (ii) in the case of unaudited interim
statements, to the extent they may not include footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of operations
and cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments which will not, individually or
in the aggregate, be material).
(b) Receivables. All receivables of the Company (including accounts
receivable, loans receivable and advances) which are reflected in the Balance
Sheet, and all such receivables which will have arisen from the date thereof (as
stated from time to time in the financial information delivered pursuant to
Section 5.8 below), shall have arisen only from bona fide transactions in the
ordinary course of the Company's business and shall be (or have been) fully
collected when due, or in the case of each account receivable within 90 days
after it arose, without resort to litigation and without offset or counterclaim,
in the aggregated face amounts thereof, except to the extent of the doubtful
accounts reserve reflected on the Balance Sheet or the delivered financial
information, as applicable.
(c) Principal Exchange/Market. The principal market on which the Common
Stock is currently traded is the Nasdaq National Market. The Company has
received notice from Nasdaq notifying the Company that its Common Stock may be
subject to delisting from the National Market due to recent failure of the
Company to meet the continued listing standards required by Nasdaq.
(d) No General Solicitation. Neither the Company, nor any of its
Affiliates, or, to the Company's knowledge, any person acting on its or their
behalf has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D under the Securities Act) in connection with
the offer or sale of the Securities, the Converted Shares or the Warrant Shares.
13
(e) No Integrated Offering. Neither the Company, nor any of its Affiliates,
nor to its knowledge any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of the
Securities (or the underlying Common Stock convertible or exercisable pursuant
to the Series B Preferred Stock or the Warrants) under the Securities Act. The
issuance of the Securities (or the underlying common stock convertible or
exercisable pursuant to the Series B Preferred Stock or the Warrants) to the
Landmark Parties and the Series C Preferred Stock to the Subordinated Debt
Holders will not be integrated with any other issuance of the Company's
securities (past, current or future) which will require any shareholder approval
under the rules of the Nasdaq National Market other than the shareholder
approval to be obtained in connection herewith.
(f) Shareholder Rights Plan. Neither the acquisition of the Securities (or
the underlying Common Stock convertible or exercisable pursuant to the Series B
Preferred Stock or the Warrants) nor the deemed beneficial ownership of shares
of Common Stock prior to, or the acquisition of such shares pursuant to, the
conversion of the Series B Preferred Stock, PIK Shares or the exercise of the
Warrants or PIK Warrants will in any event under any circumstance trigger the
poison pill provisions of any shareholders' rights or similar agreements, or a
substantially similar occurrence under any successor or similar plan.
(g) Michigan Law Issues. The Company has complied with any and all
procedures required under Chapter 7A or Chapter 7B of the Michigan Business
Corporation Act, and all such required procedures are by law effective as of the
date hereof and irrevocable, to prevent the application of the provisions of
such Chapters to, and such provisions shall not be applied to, this Agreement or
the Transaction Documents, or any of the transactions contemplated hereby and
thereby.
3.10. Acknowledgement of Dilution
---------------------------
In accordance with the terms of the Series B Preferred Stock and the
Warrants, the number of shares of Common Stock constituting Converted Shares or
Warrant Shares may increase substantially in certain circumstances. The Company
acknowledges that its obligation to issue the Converted Shares, upon conversion
of the Series B Preferred Stock and PIK Shares (and the accrued and cumulated
dividends thereon), and the Warrant Shares, upon exercise of the Warrants and
PIK Warrants, is absolute and unconditional, regardless of the dilution that
such issuance may have on other shareholders of the Company.
3.11. No Bankruptcy
-------------
The Company is not subject to any bankruptcy, insolvency or similar
proceeding. Based on the financial condition of the Company as of the Closing
Dates, the Company's assets do not constitute unreasonably small capital to
carry out its business as now conducted and as proposed to be conducted
including the Company's capital needs taking into account the particular capital
requirements of the business conducted by the Company, and projected capital
requirements and capital availability thereof.
14
3.12. Compliance with Law
-------------------
(a) The Company is in compliance with all laws, ordinances, governmental
rules or regulations to which it is subject, including without limitation laws
or regulations relating to the environment or to occupational health and safety,
except where the failure to be in compliance would not have a Material Adverse
Effect, and no material expenditures are or will be required in order to cause
its current operations or properties to comply with any such law, ordinances,
governmental rules or regulations.
(b) The Company has all licenses, permits, franchises or other governmental
authorizations necessary to the ownership of its property or to the conduct of
its business, except where the failure to possess such licenses, permits,
franchises or authorizations would not have a Material Adverse Effect. The
Company has not finally been denied any application for any such licenses,
permits, franchises or other governmental authorizations necessary to its
business.
3.13. Litigation
----------
Except as set forth in Schedule 3.13, there is no legal action, suit,
arbitration or other legal, administrative or other governmental investigation,
inquiry or proceeding (whether federal, state, local or foreign) pending or, to
the best of the Company's knowledge, threatened against or affecting the
Company, the Company's properties, assets or business or the transactions
contemplated by the Transaction Documents. After reasonable inquiry of its
management employees, the Company is not aware of any fact which might result in
or form a reasonable basis for any such action, suit, arbitration,
investigation, inquiry or other proceeding. Except as set forth in Schedule
3.13, the Company is not subject to any order, writ, judgment, injunction,
decree, determination or award of any court or of any governmental agency or
instrumentality (whether federal, state, local or foreign).
3.14. Absence of Undisclosed Liabilities
----------------------------------
Except (a) as set forth or reserved against in the most recent balance
sheet included in the Filed Financial Statements ("Balance Sheet"), (b) for
obligations incurred in the ordinary course of business since the date of the
Balance Sheet, which are, except as set forth on Schedule 3.14, not individually
or in the aggregate material in amount, or (c) as set forth on Schedule 3.14,
the Company does not have any debt, obligation or liability (whether accrued,
absolute, contingent, liquidated or otherwise, whether due or to become due,
whether or not known to the Company) arising out of any transaction entered
into, or any state of facts existing at or prior to the date hereof, including
taxes with respect to or based upon the transactions or events occurring at or
prior to the date hereof, and including, without limitation, unfunded past
service liabilities under any pension, profit sharing or similar plan.
3.15. Tax Matters
-----------
There are no foreign, federal, state, county or local taxes due and payable
by the Company which have not been paid. Any liability of the Company for taxes
not yet due and payable, or which are being contested in good faith, has been
provided for on the Balance Sheet in accordance with GAAP. The Company has duly
filed all federal, state, county and local tax returns required to have been
filed by the Company and there are in effect no waivers of
15
applicable statutes of limitations with respect to taxes for any year. Except
for a sales and use tax audit in 2001, all amounts owing as a result of which
have been paid as of the date hereof, the Company has not been subject to a
federal or state tax audit of any kind. Since January 1, 1998, no claim has been
made by any tax authority in a jurisdiction where the Company does not currently
file a tax return that the Company is or may be subject to tax by such
jurisdiction. There is no action, suit, proceeding, investigation, audit or
claim now pending against, or with respect to, the Company in respect of any tax
or assessment, nor is any claim for additional tax or assessment asserted by any
tax authority. The Company has withheld and paid all material taxes required to
be withheld in connection with any amounts paid or owing to any employee,
creditor, independent contractor or other third party. Any amount that could be
received (whether in cash or property or the vesting of property) as a result of
any of the transactions contemplated by this Agreement by any employee, officer
or director of the Company who is a "disqualified individual" (as such term is
defined in proposed Treasury Regulation Section 1.280G-1) under any employment,
severance or termination agreement, other compensation arrangement or benefit
plan currently in effect would not be characterized as an "excess parachute
payment" (as such term is defined in Section 280G(b)(1) of the Code). The
Company has delivered in writing pursuant to Landmark's due diligence request
list a report that accurately sets forth the regular and alternative minimum tax
net operating loss and other carryovers available to the Company. As of the
Closing Dates, and except for giving effect to the transactions contemplated
hereby, the ability of the Company or any subsidiary to use such carryovers will
not have been affected by Sections 382, 383 or 384 of the Code or by the SRLY
limitations of the consolidated return regulations under Section 1502 of the
Code. The Company has not made any election under Section 341(f) of the Code.
3.16. Intellectual Property
---------------------
(a) Except as set forth on Schedule 3.16(a), the Company owns all right,
title and interest in and to, or has a valid and enforceable license to use all
the Intellectual Property used by it in connection with the Company's business,
which represents, subject to Section 3.17 below, all intellectual property
rights necessary to the conduct of the Company's business as now conducted.
Except as set forth on Schedule 3.16(a), the Company has performed all
obligations required to be performed by the Company to date under, and is not in
default or delinquent in performance, status or any other respect (claimed or
actual) in connection with, any license or other agreement pursuant to which the
Company has the right to use any Intellectual Property. Except as set forth on
Schedule 3.16(a), to the best of the Company's knowledge the other party to such
license or agreement has no current basis to terminate such license or agreement
and no event has occurred which would constitute such a default of such license
or agreement. Except as set forth on Schedule 3.16(a), the conduct of the
Company's business as currently conducted does not conflict with or infringe any
Intellectual Property or other proprietary right of any third party. Except as
set forth on Schedule 3.16(a), there is no claim, suit, action or proceeding
pending or, to the knowledge of the Company, threatened against the Company: (i)
alleging any such conflict or infringement with any third party's Intellectual
Property or other proprietary rights; or (ii) challenging the Company's
ownership or use of, or the validity or enforceability of any Intellectual
Property. Except as disclosed on Schedule 3.16 and to the best of the Company's
knowledge, there are no conflicts with or infringements of any Intellectual
Property owned by the Company by any third party, except infringements which,
individually and in the aggregate, would not have a Material Adverse Effect.
16
(b) Schedule 3.16(b) sets forth a complete and current list of
registrations (including registrations for intention to use a trademark)/patents
pertaining to the Intellectual Property owned by the Company ("Listed
Intellectual Property"), all pending applications for registrations/patents and
the owner of record, date of application or issuance and relevant jurisdiction
as to each. All Listed Intellectual Property is owned by the Company, free and
clear of security interests, liens, encumbrances or claims of any nature other
than Permitted Liens or as otherwise set forth in Schedule 3.16(b). Except as
set forth in Schedule 3.16(b), all Listed Intellectual Property is valid,
subsisting, unexpired, in proper form and enforceable and all renewal fees and
other maintenance fees that have fallen due on or prior to the effective date of
this Agreement have been paid. Except as set forth in Schedule 3.16 (b), no
Listed Intellectual Property is the subject of any proceeding before any
governmental, registration or other authority in any jurisdiction, including any
office action or other form of preliminary or final refusal of registration.
(c) Schedule 3.16(c) sets forth a complete list of licenses and all
agreements relating to the Intellectual Property (excluding any Software) or to
the right of the Company to use of the proprietary rights of any third party,
excluding intellectual property or other proprietary rights owned by customers,
vendors, advertisers and other third parties that are licensed to the Company on
an incidental basis in the ordinary course of the Company's business with such
parties (and none of which is necessary for the Company operations generally).
Except as set forth in Schedule 3.16(c), the Company is not under any obligation
to pay royalties or other payments in connection with any agreement pursuant to
which it licenses the rights to use any Intellectual Property (excluding
royalties or other payments that are not material in amount and are payable with
respect to any Software), nor restricted from assigning its rights respecting
Intellectual Property owned by the Company (other than as contemplated by the
Permitted Liens) nor will the Company otherwise be, as a result of the execution
and delivery of this Agreement or the performance of its obligations under this
Agreement or the Transaction Documents, in breach of any agreement relating to
the Intellectual Property or required to pay any fee or royalty.
(d) No present or former employee, officer or director of the Company, or
agent or outside contractor of the Company, holds any right, title or interest,
directly or indirectly, in whole or in part, in or to any Intellectual Property.
(e) To the Company's knowledge: (i) none of the Intellectual Property has
been used, disclosed or appropriated to the detriment of the Company for the
benefit of any Person other than the Company; and (ii) no employee, independent
contractor or agent of the Company has misappropriated any trade secrets or
other confidential information of any other Person in the course of the
performance of his or her duties as an employee, independent contractor or agent
of the Company.
(f) Except as set forth on Schedule 3.16(f), to the Company's knowledge,
the Company's transmission, reproduction, use, display or modification of any
content relating to the Company and its operations, software, graphical user
interfaces, embedded code or other materials contained in or accessed via any of
the Company's Web sites (including framing and linking Web site content) or
other practices in connection therewith does not infringe or violate
17
any proprietary or other right of any other Person and no claim relating to such
infringement or violation is pending or, to the Company's knowledge, threatened.
(g) Each employee of the Company who has created any copyrightable or
protectable programs, modifications, enhancements or other inventions,
improvements, discoveries, methods or works of authorship ("Works") or any
employee of the Company who in the regular course of his employment may create
Works and all consultants have signed an assignment or similar agreement with
the Company confirming the Company's ownership or, in the alternate,
transferring and assigning to the Company all right, title and interest in and
to such programs, modifications, enhancements or other inventions including
copyright and other intellectual property rights therein.
3.17. Software
--------
(a) The operating and applications computer software programs and databases
owned or used by the Company (collectively, the "Software") that are material to
the conduct of the Company's business as now conducted are listed on Schedule
3.17 hereto; excluding generally available application software used by the
Company in connection with the ordinary course of its internal business
operations, including, without limitation, word processing software, spreadsheet
software, e-mail and internal network tool sets, presentation and graphic arts
software, basic PC and network operating systems, database and contact
management software and other software not used in connection with operation of
the Company's web sites. The Company owns or has valid licenses to use all
copies of the Software, and the Company has not sold, licensed, leased or
otherwise transferred or granted any interest or rights in or to any portion
thereof other than the Permitted Liens or as otherwise set forth in Schedule
3.17. Except as set forth on Schedule 3.17, none of the Software owned by the
Company (the "Proprietary Software"), and to the Company's knowledge none of the
Software owned by third parties and used by the Company, nor any use thereof,
conflicts with, infringes upon or violates any intellectual property or other
proprietary right of any other Person and, to the knowledge of the Company, no
claim, suit, action or other proceeding with respect to any such infringement or
violation is threatened or pending. The Company has taken the, and will continue
to take, all steps reasonably necessary to protect its right, title and interest
in and to the Software in accordance with standard industry practice. The
Company has not committed, and will not commit, any acts, and has not omitted,
and will not omit, to take any actions, which would cause a forfeiture of
abandonment of any rights in the Proprietary Software or would cause the
Proprietary Software to enter into the public domain.
(b) The Company possesses or has access to the original and all copies of
all documentation and all source code or password protected code, as applicable
for all the Proprietary Software. Except for the Permitted Liens or as set forth
in Schedule 3.17, upon consummation of the transactions contemplated by this
Agreement, the Company will continue to own all the Proprietary Software, free
and clear of all claims, liens, encumbrances, and liabilities and, with respect
to all agreements for the lease or license of Software which require consents or
other actions as a result of the consummation of the transactions contemplated
by this Agreement in order for the Company to continue to use and operate such
Software after the Closing Dates, the Company will use best efforts to obtain
such consents or taken such other actions so required.
18
3.18. Material Contracts
------------------
Schedule 3.18 sets forth a true and complete list of each contract,
agreement, instrument, commitment and other arrangement to which the Company is
a party or otherwise relating to or affecting any of its assets, including
without limitation, any employment, severance or consulting agreements; loan,
credit or security agreements; joint venture agreements or distribution
agreements which cannot be terminated on ninety (90) days' notice without
penalty or premium and either (a) has a duration of over 1 year or (b) which
involves the expenditure or receipt of revenues by the Company of over $75,000
(each, a "Material Contract"). Except for the breaches disclosed on Schedule
3.18, each Material Contract is valid, binding and enforceable against the
parties thereto in accordance with its terms, and in full force and effect.
Except as disclosed on Schedule 3.18, the Company has performed all obligations
required to be performed by the Company to date under, and is not in default or
delinquent in performance, status or any other respect (claimed or actual) in
connection with, any Material Contract such that the other party to such
Material Contract may obtain damages or terminate such Material Contract, and no
event has occurred which, with due notice or lapse of time or both, would
constitute such a default. Except as disclosed on Schedule 3.18, to the
knowledge of the Company, no other party to any Material Contract is in default
in respect thereof, and no event has occurred which, with due notice or lapse of
time or both, would constitute such a default. The Company has made available
and shall have delivered, as of the Closing Dates, to the Buyer or its
representatives true and complete originals or copies of all the Material
Contracts. Except as set forth on Schedule 3.18A, within the past 60 days, none
of the contracts, agreements, instruments, commitments and other arrangements to
which the Company is a party and through which the Company has derived more than
$25,000 in annual revenue in the past twelve months (a "Material Revenue
Contract") has been terminated prior to its expiration (and no notice has been
given or event has occurred which, with due notice or lapse of time or both,
would result in such termination), and each such Material Revenue Contract
(including Material Revenue Contracts that have expired within the past 60 days)
is valid, binding and enforceable against the parties thereto in accordance with
its terms, and in full force and effect. Except as set forth on Schedule 3.18,
to the knowledge of the Company, no party to a Material Revenue Contract is
unwilling to use the Company's services.
3.19. Employees
---------
The Company is in full compliance with all laws regarding employment,
wages, hours, equal opportunity, collective bargaining and payment of social
security and other taxes except such noncompliance as would not, in the
aggregate, have a Material Adverse Effect. The Company is not engaged in any
unfair labor practice or discriminatory employment practice and no complaint of
any such practice against the Company is filed or, to the best of the Company's
knowledge, threatened to be filed with or by the National Labor Relations Board,
the Equal Employment Opportunity Commission or any other administrative agency,
federal or state, that regulates labor or employment practices, nor is any
grievance filed or, to the best of the Company's knowledge, threatened to be
filed, against the Company by any employee pursuant to any collective bargaining
or other employment agreement to which the Company is a party or is bound. The
Company is in compliance with all applicable foreign, federal, state and local
laws and regulations regarding occupational safety and health standards except
to the extent that noncompliance will not have a Material Adverse Effect, and
has received no complaints from
19
any foreign, federal, state or local agency or regulatory body alleging
violations of any such laws and regulations. Except as set forth on Schedule
3.19, each of the employees of the Company has executed without modification the
Company's Terms of Employment attached hereto as Schedule 6.16.
3.20. Employee Benefit Plans
----------------------
(a) Schedule 3.20(a) sets forth a complete and correct list of:
(i) all "employee benefit plans", as defined in Section 3(3) of ERISA,
maintained by the Company to which Company has any obligation or liability,
contingent or otherwise; and
(ii) all employment or consulting agreements, and all bonus or other
incentive compensation, deferred compensation, salary continuation,
disability, stock award, stock option, stock purchase, collective
bargaining agreement or other employee benefit policies or arrangements
which the Company maintains or to which the Company has any obligation or
liability, contingent or otherwise (collectively referred to as the
"Company Plans").
(b) The Company has no material obligation or liability, contingent or
otherwise, under Title IV of ERISA or Section 412 of the Code. No Company Plan
is a "multiemployer plan," as defined in Section 3(37) of ERISA (a
"Multiemployer Plan"), or a plan that has two or more contributing sponsors at
least two of whom are not under common control, within the meaning of Section
4063 of ERISA (a "Multiple Employer Plan"), nor has the Company, any of its
Subsidiaries or any of its ERISA Affiliates at any time contributed to or been
obligated to contribute to any Multiemployer Plan or Multiple Employer Plan.
(c) The Company Plans intended to qualify under Section 401(a) are
qualified under such sections, and each trust maintained pursuant thereto, has
been determined to be exempt from federal income taxation under Section 501 of
the Code by the IRS, and nothing has occurred with respect to the operation of
any such Company Plans that would reasonably be expected to cause the loss of
such qualification or exemption or the imposition of any material liability,
penalty or tax under ERISA or the Code.
(d) All contributions (including all employer contributions and employee
salary reduction contributions) required to have been made under any of the
Company Plans to any funds or trusts established thereunder or in connection
therewith have been made by the due date thereof and all contributions for any
period ending on or before the Closing Date which are not yet due will have been
paid or accrued prior to the Closing Date.
(e) True, correct and complete copies of the following documents, with
respect to each of the Company Plans, have been delivered to the Landmark
Parties by the Company, if applicable: (i) all plan and related trust documents,
and amendments thereto; (ii) the most recent Form 5500 (iii) summary plan
description; and (iv) and any written agreements, policies or practices.
20
(f) Except as set forth on Schedule 3.20, the Company Plans have been
maintained, in all material respects, in accordance with their express terms and
with all provisions of ERISA and the Code (including rules and regulations
thereunder) and other applicable federal and state laws and regulations, and the
Company has not engaged in, or has knowledge that a "party in interest" or a
"disqualified person" has engaged in, a "prohibited transaction", as defined in
Section 4975 of the Code or Section 406 of ERISA, or taken any actions, or
failed to take any actions, which could reasonably be expected to result in any
material liability under ERISA or the Code.
(g) For any "group health plan", as defined in Section 4980B of the Code,
the Company has complied in all material respects with the notice and coverage
continuation requirements of Section 4980B of the Code and Section 601 of ERISA,
and the regulations thereunder ("COBRA"). None of the Company Plans provide
retiree health or life insurance benefits except as may be required by COBRA or
applicable state continuation coverage law or at the expense of the participant
or the participant's beneficiary.
(h) Except as set forth in Schedule 3.20(h), neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will: (a) result in any payment becoming due to any current employee or
former employee of the Company, (b) increase any benefits otherwise payable
under any of the Company Plans (c) result in any payment that will not be
deductible under Section 280G of the Code or (d) result in the acceleration of
the time of payment or vesting of any benefits provided under any of the Company
Plans.
3.21. Title to Tangible Assets
------------------------
Except as set forth on Schedule 3.21, the Company has good title to its
properties and assets and a valid leasehold interest in all its leasehold
estates, in each case subject to no mortgage, pledge, lien, lease, encumbrance
or charge, other than or resulting from taxes which have not yet become
delinquent and minor liens and encumbrances which do not in any case materially
detract from the value of the property subject thereto or materially impair the
operations of the Company and which have not arisen otherwise than in the
ordinary course of business. The Company does not own any real property.
3.22. Condition of Properties
-----------------------
All facilities, machinery, equipment, fixtures, vehicles and other
properties owned, leased or used by the Company are suitable for their intended
use and in reasonably good operating condition and repair, normal wear and tear
excepted.
3.23. Insurance
---------
The Company and its properties are insured in such amounts, against such
losses and with such insurers as the Company has determined to be prudent based
upon the nature of the properties and businesses of the Company. Schedule 3.23
sets forth a true and complete listing of the insurance policies of the Company
(other than insurance policies under any Company Plan) as in effect on the date
hereof, including in each case the applicable coverage limits, deductibles and
the policy expiration dates. No notice of any termination or threatened
21
termination of any of such policies has been received by the Company and such
policies are in full force and effect.
3.24. Membership Base; Demographic Activity
-------------------------------------
(a) The Company has at least 14 million unique members, representing at
least 12 million individual households.
(b) The average of the indicated ages of the Company's members is
approximately 34. Of the Company's 14 million plus members, all have fully
registered and at least 6.5 million have agreed to accept electronic mail
messages from the Company.
(c) Within the past 30 days, at least 1.4 million of the Company's members
have accessed the Company's website.
(d) The Company's databases are the exclusive property of the Company, and
such databases are adequately protected against, and have not suffered any, loss
due to system damage or destruction, data erosion, unwanted or unauthorized
access, and theft.
(e) Below is a correct and complete chart which, for each of the calendar
quarters in 2000 and 2001, accurately indicates the number of the Company's
newly registered households ("New H.H.") in each applicable quarter and the
number of total meaningful revenue producing actions ("Total actions") taken by
the Company's members in each applicable quarter ("M" means million):
------------------ --------- --------- -------- --------- --------- --------
Q1 `00 Q2 `00 Q3 `00 Q4 `00 Q1 `01 Q2 `01
------------------ --------- --------- -------- --------- --------- --------
New H.H. 1.6 M 1.6 M 1.8 M 1.9 M 1.8 M .9 M
------------------ --------- --------- -------- --------- --------- --------
Total actions 4.4 M 4.5 M 7.5 M 10.2 M 7.8 M 7.3 M
------------------ --------- --------- -------- --------- --------- --------
3.25. Voting Agreements
-----------------
Each of the Chief Executive Officer, the President/Chief Operating Officer,
the Chief Financial Officer, the Chief Technology Officer and the Senior Vice
President--Product Management and (the "Management Investors") and the parties
listed on Schedule 3.25 (together with the Management Investors, the "Principal
Investors") has executed and delivered voting agreements, in the form attached
hereto as Exhibit M (the "Voting Agreements"), with respect to the voting of all
capital stock owned by such Principal Investors (which in the aggregate
represents the necessary percentage of voting power of the Company to effect the
shareholder approval to the extent the Company's Board's approval is not
withdrawn) in favor of the transactions contemplated hereby, the certain actions
specified in the Voting Agreements, and the increase of capital stock of the
Company, from time to time, to permit the authorization and issuance of shares
underlying the Series B Preferred Stock and the Warrants. Such Voting Agreements
are in full force and effect and have not been rescinded, abrogated or canceled
in any manner.
22
3.26. Certain Interests
-----------------
Except as set forth in Schedule 3.26 and as disclosed in the Public
Filings, neither the Company nor any of its officers or, to the best of its
knowledge, directors, has any interest, either by way of contract or by way of
investment (other than as holder of not more than 2% of the outstanding capital
stock of a publicly traded Person) or otherwise, directly or indirectly, in any
Person other than the Company that (i) provides any services or designs,
produces or sells any product or product lines or engages in any activity
similar to or competitive with any activity currently proposed to be conducted
by the Company or any of its subsidiaries, (ii) has any direct or indirect
interest in any asset or property, real or personal, tangible or intangible,
owned or used by the Company or (iii) any suppliers, vendors or customers of the
Company.
3.27. Registration Rights
-------------------
Except as provided by the Registration Rights Agreement and under the
agreements listed on Schedule 3.27, the Company will not, as of the Closing
Dates, be under any obligation to register any of its securities under the
Securities Act.
3.28. Private Offering
----------------
Based upon the representations of the Landmark Parties set forth in Section
4 and assuming the accuracy thereof as of the date hereof and as of the date of
the issuance of the Series B Preferred Stock and Warrants and the issuance of
the Converted Shares and the Warrant Shares, the offer, issuance and sale of the
Securities and the shares of Common Stock issuable upon conversion of the Series
B Preferred Stock and exercise of the Warrants are and will be exempt from the
registration and prospectus delivery requirements of the Securities Act, and
have been registered or qualified (or are exempt from registration and
qualification) under the registration, permit or qualification requirements of
all applicable state securities laws.
3.29. Brokerage
---------
There are no claims for brokerage commissions or finder's fees or similar
compensation in connection with the transactions contemplated by this Agreement
based on any arrangement made by or on behalf of the Company other than those
disclosed on Schedule 3.29 which shall be the Company's sole obligation and
liability and paid pursuant to Section 6.21. The Company agrees to indemnify and
hold the Landmark Parties harmless against any costs or damages incurred as a
result of any claim directly against the Landmark Parties arising out of or
relating to such brokerage commissions or finder's fees.
3.30. Minute Books
------------
The minute books of the Company have been made available to the Landmark
Parties and contain a complete summary of all meetings of directors and
shareholders since the time of the Company's incorporation.
23
3.31. Change of Control
-----------------
Since May 15, 2001, there has been no event that has resulted or will
result in a Change of Control of the Company, excluding the transactions
contemplated under this Agreement.
3.32. Material Facts
--------------
This Agreement, the Disclosure Schedules, and the other agreements,
documents, certificates or written statements furnished or to be furnished to
the Landmark Parties through the Closing Dates by or on behalf of the Company in
connection with the transactions contemplated hereby taken as a whole, do not
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements contained therein or herein, in light of the
circumstances in which they were made, not misleading. There is no fact which is
known to the Company and which has not been disclosed herein or otherwise by the
Company to the Landmark Parties which may materially adversely affect the
business, properties, assets, liabilities, prospects, profits, results of
operations or condition, financial or otherwise, of the Company.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE LANDMARK PARTIES
------------------------------------------------------
The Landmark Parties represent and warrant to the Company as follows:
4.1. Corporate Proceedings, etc.
---------------------------
LCI is a corporation duly organized, validly existing and in good standing
under the laws of the Commonwealth of Virginia. LV is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Delaware. Each Landmark Party has authorized the execution,
delivery, and performance of the Transaction Documents required to be executed
by it and each of the transactions and agreements contemplated hereby and
thereby. No other corporate action is necessary to authorize such execution,
delivery and performance of the Transaction Documents, and upon such execution
and delivery each of the Transaction Documents shall constitute the valid and
binding obligation of each applicable Landmark Party, enforceable against the
applicable Landmark Party in accordance with its terms, except that such
enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors' rights
and general principles of equity. Each of the Landmark Parties has all requisite
power and authority to execute and deliver the Transaction Documents to which it
is a party and to perform its obligations hereunder and thereunder.
4.2. Consents and Approvals.
-----------------------
The execution and delivery by each Landmark Party of the Transaction
Documents, the performance by each Landmark Party of its obligations hereunder
and thereunder, and the consummation by each Landmark Party of the transactions
contemplated hereby and thereby do not require either Landmark Party to obtain
any consent, approval or action of, or make any filing with or give any notice
to, any corporation, person or firm or any public, governmental or judicial
authority.
24
4.3. Investment Representation.
--------------------------
(a) Each Landmark Party is purchasing the applicable Securities for its own
account and not with a view to distribution in violation of any securities laws.
Neither Landmark Party has any present intention to sell the Securities,
Converted Shares or Warrant Shares in violation of federal or state securities
laws and neither Landmark Party has any present arrangement (whether or not
legally binding) to sell the Securities, Converted Shares or Warrant Shares to
or through any person or entity; provided, however, that by making the
representations herein, neither Landmark Party agrees to hold the Securities,
Converted Shares or Warrant Shares for any minimum or other specific term and
each Landmark Party reserves the right to dispose of the Securities, Common
Shares or Warrant Shares at any time in accordance with and not in violation of
federal and state securities laws applicable to such disposition and Section 5.5
hereof.
(b) Each Landmark Party is an "accredited" investor as defined in Rule
501(a) promulgated under the Securities Act, and (i) is able to bear the
economic risk of its investment in the Series B Preferred Stock and the
Warrants, (ii) is able to hold the Series B Preferred Stock and the Warrants for
an indefinite period of time, (iii) can afford a complete loss of its investment
in the Series B Preferred Stock and the Warrants and (iv) has adequate means of
providing for its current needs.
4.4. Access to Other Information.
----------------------------
Each Landmark Party acknowledges that the Company has made available to it
the opportunity to examine such additional documents from the Company and to ask
questions of, and receive full answers from, the Company concerning, among other
things, the Company, its financial condition, its management, its prior
activities and any other information which such Landmark Party considers
relevant or appropriate in connection with entering into this Agreement.
4.5. Risks of Investment.
--------------------
Each Landmark Party acknowledges that the Securities have not been
registered under the Securities Act. Each Landmark Party is familiar with the
provisions of Rule 144 and understands that in the event all of the applicable
requirements of Rule 144 are not satisfied, registration under the Securities
Act or some other exemption from the registration requirements of the Securities
Act will be required in order to dispose of the Securities, and that such
Landmark Party may be required to hold its Securities received under this
Agreement for a significant period of time prior to reselling them. Each
Landmark Party is capable of assessing the risks of an investment in the
Securities and is fully aware of the economic risks thereof.
SECTION 5. COVENANTS OF THE PARTIES
------------------------
5.1. Securities Compliance
---------------------
The Company shall notify the Nasdaq National Market, in accordance with its
requirements, of the transactions contemplated by the Transaction Documents, and
shall take all other necessary action and proceedings as may be required and
permitted by applicable law, rule
25
and regulation, for the legal and valid issuance of the Series B Preferred
Stock, Warrants, Converted Shares and Warrant Shares hereunder, including,
without limitation, the preparation and filing with the SEC of a proxy statement
for the purposes of soliciting shareholder approval for the transactions
contemplated under the Transaction Documents.
5.2. Reservation of Stock Issuable Upon Conversion or Exercise of the
Securities
----------------------------------------------------------------
The Company shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the Series B Preferred Stock (including the PIK
Shares) and the exercise of the Warrants (including the PIK Warrants), such
number of its shares of Common Stock as shall from time to time be sufficient to
effect the conversion of all outstanding Series B Preferred Stock and the
exercise of all outstanding Warrants. If at any time the number of authorized
but unissued shares of Common Stock shall not be sufficient to effect the
conversion and/or exercise of all the then outstanding Series B Preferred Stock
and Warrants, the Company will take such corporate action as may, in the opinion
of its counsel, be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such purpose,
including without limitation effecting a combination/reverse split of shares or
engaging in best efforts to obtain the requisite shareholder approval for a
Charter amendment. Without in any way limiting the foregoing, the Company agrees
to reserve and at all times keep available solely for purposes of conversion
and/or exercise of the Series B Preferred Stock and Warrants such number of
authorized but unissued shares of Common Stock that is at least equal to 150% of
the aggregate shares issuable upon conversion and/or exercise of the Series B
Preferred Stock and Warrants, which number may be reduced by the number of
Converted Shares or Warrant Shares actually delivered pursuant to conversion of
the Series B Preferred Stock or exercise of the Warrants and shall be
appropriately adjusted for any stock split, reverse split, stock dividend or
reclassification of the Common Stock.
5.3. Form D; Blue Sky Laws
---------------------
The Company agrees to file a Form D with respect to the Securities and the
Converted Shares, in accordance with the provisions of Regulation D, and to
provide a copy thereof to the Landmark Parties promptly after such filing. The
Company shall, on or before the each applicable Closing Date (including the date
of each Additional Option Closing), take such action as the Company shall have
reasonably determined is necessary to qualify the Securities, the Converted
Shares and the Warrant Shares for sale to the Landmark Parties at the respective
closings pursuant to this Agreement under applicable securities or "blue sky"
laws of the states of the United States (or to obtain an exemption from such
qualification), and shall provide evidence of any such action so taken to the
Landmark Parties on or prior to the each applicable closing date.
5.4. Best Efforts
------------
The Company will use its best efforts to obtain promptly shareholder
approval for the actions contemplated hereby, including shareholder approval to
authorize and approve the consummation of the Merger. Without limiting the
foregoing, the Chairman of the Board, the
26
Chief Executive Officer, or the President of the Company shall duly call,
pursuant to the Organizational Documents, a meeting of the holders of the
Company's outstanding voting securities (the "Shareholders' Meeting") and, as
soon as permitted under applicable law, the Company shall use its best efforts
to obtain additional Voting Agreements from that number of shareholders as may
be necessary to ensure that the number of votes to be voted in favor of the
transactions contemplated hereby (including the consummation of the Merger)
shall not be less than sixty-six and two-thirds percent (66-2/3%) of the
outstanding shares of Common Stock entitled to vote at the Shareholders'
Meeting.
5.5. Resale of Securities
--------------------
(a) Each Landmark Party covenants that it will not sell or otherwise
transfer the Securities (or any Converted Shares or Warrant Shares) except
pursuant to an effective registration under the Securities Act or in a
transaction which, in the opinion of counsel, which opinion and which counsel
shall be reasonably satisfactory to the Company, qualifies as an exempt
transaction under the Securities Act and the rules and regulations promulgated
thereunder and any applicable state blue sky laws.
(b) The certificates evidencing the shares of Series B Preferred Stock, the
Converted Shares issuable upon conversion of the Securities, and the Warrant
Shares issuable upon exercise of the Warrants will bear the following legend
reflecting the foregoing restrictions on the transfer of such securities:
"The securities evidenced hereby have not been registered under the
Securities Act of 1933, as amended (the "Act") OR ANY APPLICABLE STATE
SECURITIES LAWS, and may not be transferred except pursuant to an effective
registration under the Act or in a transaction which, in the opinion of
counsel, WHICH OPINION AND WHICH COUNSEL SHALL BE reasonably satisfactory
to the Company, qualifies as an exempt transaction under the Act and the
rules and regulations promulgated thereunder."
5.6. Covenants Pending the Closings
------------------------------
From the date hereof through the Second Tranche Closing Date, the Company
will not, without LCI's prior written consent, take any action or fail or omit
to take any action which would result in any of the representations or
warranties contained in this Agreement not being true at and as of the time
immediately after such action, or in any of the covenants contained in this
Agreement becoming incapable of performance. The Company will promptly advise
LCI of any action or event of which it becomes aware which has the effect of
making incorrect any of such representations or warranties or which has the
effect of rendering any of such covenants incapable of performance. The
compliance by the Company with this covenant shall not be deemed or construed to
cure or otherwise excuse in any respect the breach of the applicable
representation, warranty or covenant.
27
5.7. Further Assurance; Securities Law Assurances
--------------------------------------------
(a) Each of the parties shall execute such documents and other papers and
take such further actions as may be required or desirable to carry out the
provisions hereof and the transactions contemplated hereby. Each such party
shall use its reasonable best efforts to fulfill or obtain the fulfillment of
the conditions to each of the Closings as promptly as practicable.
(b) Until the earlier to occur of the repurchase by the Company of all of
the Series B Preferred Stock pursuant to the Restated Charter or July 30, 2003,
so long as any Series B Preferred Stock or Warrants remain outstanding, each
Landmark Party agrees that it shall not (i) engage in any market manipulation of
the Common Stock, (ii) sell short the Common Stock, or (iii) make public
negative disclosures about the Company other than in connection with or relating
to permitted disclosures regarding a public company pursuant to a proxy
statement. Nothing in this Agreement shall prevent the Landmark Party from
exercising its rights under the Transaction Documents. Furthermore, nothing
contained herein shall restrict the ability of a Landmark Party to sell or
purchase Common Stock in the market or otherwise, in compliance with and not in
violation of the federal and state securities laws, including, but not limited
to, Rule 10b-5 promulgated under the Exchange Act.
5.8. Financial and Business Information
----------------------------------
From and after the date hereof and for as long as the Landmark Parties,
together with all of their Affiliates, shall own at least 25% of the outstanding
Common Stock, the Company shall deliver to the Landmark Parties or any
subsequent holder of the Securities:
(a) Monthly and Quarterly Statements - as soon as practicable, and in any
event within 15 business days after the close of each month in the case of
monthly statements and 40 days after the close of each of the first three fiscal
quarters of each fiscal year of the Company in the case of quarterly statements,
a consolidated balance sheet, statement of income and statement of cash flows of
the Company and any subsidiaries as at the close of such month or quarter and
covering operations for such month or quarter, as the case may be, and the
portion of the Company's fiscal year ending on the last day of such month or
quarter, all in reasonable detail and prepared in accordance with GAAP, subject
to audit and year-end adjustments, setting forth in each case in comparative
form the figures for the comparable period of the previous fiscal year together
with a detailed aging report with respect to receivables and payables. The
Company shall also provide comparisons of each pertinent item to the budget
referred to in subsection (c) below.
(b) Annual Statements - as soon as practicable after the end of each fiscal
year of the Company, and in any event within 90 days thereafter, duplicate
copies of:
(i) consolidated and consolidating balance sheets of the Company and
any subsidiaries at the end of such year; and
(ii) consolidated and consolidating statements of income,
shareholders' equity and cash flows of the Company and any subsidiaries for
such year, setting forth in each case in comparative form the figures for
the previous fiscal year, all in reasonable detail and
28
accompanied by an opinion thereon of independent certified public
accountants of recognized national standing selected by the Company, which
opinion shall state that such financial statements fairly present the
financial position of the Company and any subsidiaries on a consolidated
basis and have been prepared in accordance with GAAP (except for changes in
application in which such accountants concur) and that the examination of
such accountants in connection with such financial statements has been made
in accordance with generally accepted auditing standards, and accordingly
included such tests of the accounting records and such other auditing
procedures as were considered necessary in the circumstances, and the
Company shall also provide comparisons of each pertinent item to the budget
referred to in subsection (c) below.
(c) Business Plan; Projections - no later than 30 days prior to the
commencement of each fiscal quarter of the Company, an updated Business Plan of
the Company and projections of operating results, prepared on a monthly basis,
and a three year business plan of the Company and projections of operating
results. Within 45 days of the close of each fiscal quarter of the Company, the
Company shall provide the Landmark Parties with an update of such monthly
projections. Such business plans, projections and updates shall contain such
substance and detail and shall be in such form as will be reasonably acceptable
to the Landmark Parties. By email dated July 6, 2001, the Company has delivered
to the Landmark Parties a business plan amended with interlineations that
reflect the current status of the business and the projected course for the
balance of the year (the "Business Plan").
(d) Audit Reports - promptly upon receipt thereof, one copy of each other
financial report and internal control letter submitted to the Company by
independent accountants in connection with any annual, interim or special audit
made by them of the books of the Company.
(e) Other Reports - simultaneously with mailing to shareholders or public
issuance, one copy of each financial statement, report, notice or proxy
statement sent by the Company to shareholders generally, of each financial
statement, report, notice or proxy statement sent by the Company or any of its
subsidiaries to the SEC or any successor agency, if applicable, of each regular
or periodic report and any registration statement, prospectus or written
communication (other than transmittal letters) in respect thereof filed by the
Company or any subsidiary with, or received by such Person in connection
therewith from, any domestic or foreign securities exchange, the SEC or any
successor agency or any foreign regulatory authority performing functions
similar to the SEC, of any press release issued by the Company or any
subsidiary, and of any material of any nature whatsoever prepared by the SEC or
any successor agency thereto or any state blue sky or securities law commission
which relates to or affects in any way the Company or any subsidiary.
(f) Progress Reports - when distributed, all reports provided to senior
management and all reports listed on Schedule 5.8(f), prior to each regularly
scheduled meeting of the Board of Directors of the Company, a narrative report
describing the Company's activities since the date of the last such report,
including a description of business development, operating results and marketing
efforts, and weekly, not later than the third day of such week, a sales pipeline
report and member activity report for the preceding week.
29
(g) Requested Information - with reasonable promptness, such other data and
information as from time to time may be reasonably requested by the Landmark
Parties.
5.9. Inspection
----------
The Company shall permit LCI (or any subsequent holder of the Securities,
as applicable), its nominee, assignee, and its representative to visit and
inspect any of the properties of the Company, to examine all its books of
account, records, reports and other papers not contractually required of the
Company to be confidential or secret, to make copies and extracts therefrom, and
to discuss its affairs, finances and accounts with its officers, directors, key
employees and independent public accountants or any of them (and by this
provision the Company authorizes said accountants to discuss with LCI, its
nominees, assignees and representatives the finances and affairs of the Company
and any subsidiaries), all at such reasonable times and as often as may be
reasonably requested.
5.10. Confidentiality
---------------
Other than as set forth on Schedule 5.10, as to so much of the information
and other material furnished under or in connection with this Agreement (whether
furnished before, on or after the date hereof, including without limitation
information furnished pursuant to Sections 5.8 and 5.9 hereof) as constitutes or
contains confidential business, financial or other information of the Company or
any subsidiary, each Landmark Party (or as applicable in this Section 5.10, any
holder of the Securities) covenants for itself and its directors, officers and
partners that it will use due care to prevent its officers, directors, partners,
employees, counsel, accountants and other representatives from disclosing such
information to Persons other than their respective authorized employees,
counsel, accountants, shareholders, partners, limited partners and other
authorized representatives; provided, however, that a Landmark Party may
disclose or deliver any information or other material disclosed to or received
by it should each Landmark Party be advised by its counsel that such disclosure
or delivery is required by law, regulation or judicial or administrative order.
In the event of any termination of this Agreement prior to the First Tranche
Closing, the Landmark Parties shall return to the Company or destroy or
otherwise purge from their records all confidential material previously
furnished to them or their officers, directors, partners, employees, counsel,
accountants and other representatives in connection with this transaction. For
purposes of this Section 5.10, "due care" means the same level of care that a
Landmark Party would use to protect the confidentiality of its own sensitive or
proprietary information, and this obligation shall survive termination of this
Agreement.
5.11. Conduct of Business
-------------------
(a) The Company will continue to engage in business of the same general
type as now conducted by it, and preserve, renew and keep in full force and
effect its corporate existence and take all reasonable action to maintain all
rights, privileges and franchises necessary or desirable in the normal conduct
of its business. The Company has entered into with its current employees and
shall require all of its employees hired or consultants engaged after the date
hereof to enter into appropriate confidentiality agreements to protect
confidential information relating to the Company and its business, including
trade secrets.
30
(b) The Company acknowledges that excessive e-mail transmissions, while
promoting short-term revenue increases, could have detrimental effects on the
long term financial prospects of the Company. The Company agrees to monitor the
member opt-out rate and to not transmit excessive member e-mails that could
cause such opt-out rate to exceed 3.5%.
(c) The Company will comply in all material respects with all applicable
laws, rules, regulations and orders except where the failure to comply would not
have a Material Adverse Effect.
(d) The Company will maintain insurance with responsible and reputable
insurance companies or associations in such amounts and covering such risks as
is usually carried by companies of similar size and credit standing engaged in
similar business and owning similar properties, provided that such insurance is
and remains available to the Company at commercially reasonable rates.
(e) The Company will keep proper books of record and account, in which full
and correct entries shall be made of all financial transactions and the assets
and business of the Company in accordance with GAAP.
5.12. Lost, etc. Certificates Evidencing Shares (or Shares of Common
Stock); Exchange
--------------------------------------------------------------
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of any certificate evidencing any
shares of Series B Preferred Stock or Common Stock owned by a Landmark Party,
and (in the case of loss, theft or destruction) of an indemnity or bond
satisfactory to it, and upon reimbursement to the Company of all reasonable
expenses incidental thereto, and upon surrender and cancellation of such
certificate, if mutilated, the Company will make and deliver in lieu of such
certificate a new certificate of like tenor and for the number of shares
evidenced by such certificate which remain outstanding. LCI's agreement of
indemnity shall constitute indemnity satisfactory to the Company for purposes of
this Section 5.12. Upon surrender of any certificate representing any shares of
Series B Preferred Stock or Common Stock for exchange at the office of the
Company, the Company at its expense will cause to be issued in exchange therefor
new certificates in such denomination or denominations as may be requested for
the same aggregate number of shares of Series B Preferred Stock or Common Stock,
as the case may be, represented by the certificate so surrendered and registered
as such holder may request. The Company will also pay the cost of all deliveries
of certificates for such shares to the office of LCI (including the cost of
insurance against loss or theft in an amount satisfactory to the holders) upon
any exchange provided for in this Section 5.12.
5.13. Termination
-----------
The provisions of Sections 5.7 through 5.13 (other than Section 5.10 which
shall survive indefinitely) shall survive the Closings and remain in effect
until the Landmark Parties or their successors and assigns shall own less than
25% of the Company's Common Stock, measured on an as-exercised and as-converted
basis.
31
5.14. Option Plan; Option Repricing
-----------------------------
(a) At the Shareholders' Meeting (and in the proxy mailed to shareholders),
the Company shall request shareholder approval of the Approved Plan (defined
below). During the period between the execution hereof and until the termination
of this Agreement, the Company shall not (i) issue additional options or make
awards under its 1997 Stock Option Plan other than (A) options to purchase
Common Stock granted to Xxxx Xxxx under the terms of his Employment Agreement,
(B) options to purchase Common Stock issued in connection with the re-pricing of
the options granted to Xxxxxx Xxxxxx (as contemplated by the terms of Golden's
Severance Agreement and General Release), and (C) options to purchase Common
Stock granted to new employees in the ordinary course of business (provided, the
Company does not grant options to purchase more than 75,000 shares of Common
Stock to any single employee or options to purchase more than 300,000 shares of
Common Stock, in the aggregate, to all employees), or (ii) issue additional
options or make awards under its 1999 Non-Employee Director Stock Option Plan.
After the First Tranche Closing, grants and awards shall be made under the
Approved Plan.
(b) The Company shall promptly (after it is legally permitted to do so)
take such action as may be required to offer each of the persons listed on
Schedule 5.14 (to the extent such persons are employees on the date of the
offer) the opportunity to re-price their options that have an exercise price at
or above $2.00 with an exercise price of the greater of (x) the closing sales
price of the Common Stock on the date the exchange occurs and (y) $0.50;
provided, however, as a condition to such repricing, each employee accepting the
Company's offer must agree, through execution and delivery of a Stock Option
Agreement in the form attached as Exhibit N, that such re-priced options shall
be subject to vesting in three equal installments on each of the first three
annual anniversaries of the re-pricing date; provided, further, that each
employee that has not executed and delivered the Company's standard terms of
employment agreement shall execute and deliver such agreement as a condition
precedent for receiving any repriced options.
5.15. Payment Defaults
----------------
The Company shall promptly cure any and all of the breaches, defaults and
failures to comply that are disclosed with respect to the agreements set forth
on Schedule 3.7, Schedule 3.8, Schedule 3.12, Schedule 3.16(c), Schedule 3.16(f)
and Schedule 3.18, to the extent such breach, default or failure to comply, as
applicable, relates to the Company's failure to pay an amount owed and the chief
executive officer or Board of Directors has not determined that the Company has
a bona fide defense with respect to such non-payment; provided, the foregoing
notwithstanding, and solely with respect to the breaches, default and failures
that relate to unpaid accounts payable to trade creditors (as disclosed on
Schedule 3.8 and Schedule 3.18), the Company shall not be in breach of the
foregoing covenant so long as it uses its best efforts to cause the maximum
aging of such payables to be less than ninety (90) days excluding such account
payable that is being disputed by the Company in good faith and as to which the
Company's chief financial officer or principal accounting officer has delivered
to LV a certificate certifying to the dispute and the facts giving rise to the
dispute.
32
SECTION 6. LANDMARK CONDITIONS FOR FIRST TRANCHE CLOSING
---------------------------------------------
The obligation of LV to purchase and pay for the First Tranche of Purchased
Preferred Stock on the First Tranche Closing Date, as provided in Section 2.2
hereof, and LCI's related obligations hereunder, shall be subject to the
performance by the Company of its agreements theretofore to be performed
hereunder and to the satisfaction, prior thereto or concurrently therewith, of
the following further conditions:
6.1. Representations and Warranties
------------------------------
The representations and warranties of the Company contained in this
Agreement shall be true in all material respects on and as of the First Tranche
Closing Date as though such representations and warranties were made at and as
of such date, except for representations and warranties qualified by reference
to materiality which shall be true in all respects on and as of the First
Tranche Closing Date as though such representations and warranties were made at
and as of such date.
6.2. Compliance with Agreement
-------------------------
The Company shall have performed and complied in all material respects with
all agreements, covenants and conditions contained in this Agreement which are
required to be performed or complied with by the Company prior to or on the
First Tranche Closing Date.
6.3. Officer's Certificate
---------------------
The Landmark Parties shall have received a certificate, dated the First
Tranche Closing Date, signed by each of the President and the Chief Financial
Officer of the Company, certifying that the conditions specified in the
foregoing Sections 6.1 and 6.2 hereof have been fulfilled.
6.4. Default Under Senior Secured Note, this Agreement or Forbearance
Agreements
----------------------------------------------------------------
No event shall have occurred and continue to exist which with or without
notice or the passage of time or both would constitute a default or has been
declared a default under the Amended Loan Agreement, Senior Secured Note or this
Agreement which has not been unconditionally waived in writing by the Landmark
Parties. There shall have been no default (or event which with or without the
notice or the passage of time or both would constitute a default) or Forbearance
Termination Event (as such term is defined in the applicable Forbearance
Agreement) that has occurred under any of the Forbearance Agreements which has
not been cured by the Company itself or unconditionally waived by the forbearing
party.
6.5. Pending or Threatened Litigation
--------------------------------
There shall be no effective injunction, writ, preliminary restraining order
or any order of any nature issued by a court of competent jurisdiction not
initiated by the Landmark Parties or an Affiliate thereof directing that the
transactions provided for herein or any of them not be consummated as herein
provided. There shall be no claims, actions, suits, proceedings,
33
labor disputes or investigations pending or, to the knowledge of the Company,
threatened, before any federal, state or local court or governmental or
regulatory authority, domestic or foreign, or before any arbitrator of any
nature, brought by any third party not Affiliated with the Landmark Parties
against the Company or either Landmark Party, or any of the Company or the
Landmark Parties' officers, directors, employees, agents or Affiliates
involving, affecting or relating to the transactions contemplated by the
Transaction Documents, nor is any basis known to the Company or any of its
directors or officers for any such action, suit, proceeding or investigation.
6.6. Counsel's Opinion
-----------------
LV shall have received from the Company's counsel, Xxxxx, Raitt, Heuer and
Xxxxx, Professional Corporation, an opinion, dated the First Tranche Closing
Date, substantially in the form of Exhibit O-1 hereto and from the Company's
special counsel Young, Conaway, an opinion, dated the First Tranche Closing
Date, substantially in the form of Exhibit O-2 hereto. The Company shall have
received an opinion from such counsel that the Merger is a tax
free-reorganization in form and substance reasonably satisfactory to Landmark.
If the Merger is not consummated and the First Tranche Closing proceeds pursuant
to Sections 2.2 and 2.5, then the opinion given by Xxxxx, Xxxxx, Xxxxx and Xxxxx
shall be conformed to cover the opinions regarding the Company and the issuances
to the same extent given at the closing of the Senior Secured Loan and
contemplated by the Young, Xxxxxxx opinion.
6.7. Forbearance Agreement
---------------------
The Landmark Parties shall have received from the Company executed copies
of forbearance agreements between the Company and each of American National
Bank, Midwest Guaranty Bank, and 360 North Michigan Trust (MB Xxxxxxx Management
Corp. as agent) (collectively, the "Forbearance Agreements"). The Landmark
Parties shall have received evidence from the Company that each of the
Forbearance Agreements is in full force and effect, has not been amended without
LCI's consent and no event has occurred which with or without notice or the
passage of time or both would constitute a Forbearance Termination Event (as
such term is defined in the applicable Forbearance Agreement).
6.8. Adverse Development
-------------------
Since June 1, 2001, there shall have been no developments in the business,
operations, assets, properties, condition (financial or otherwise) or prospects
of the Company, including without limitation the occurrence of any legal
actions, suits, arbitrations or other legal, administrative or other
governmental investigations, inquiries or proceedings brought or threatened
against the Company, which in the opinion of the Landmark Parties would have a
Material Adverse Effect.
6.9. Shareholders Agreement
----------------------
The Company and each of the other parties thereto shall have executed the
Shareholders Agreement, the form of which is attached as Exhibit P hereto (the
"Shareholders Agreement").
34
6.10. Registration Rights Agreement
-----------------------------
The Company shall have executed the Registration Rights Agreement, the form
of which is attached as Exhibit I hereto.
6.11. Shareholder Approval and Adoption of Restated Charter
-----------------------------------------------------
(a) The Shareholders' Meeting shall have duly called pursuant to the
Organizational Documents.
(b) At such Shareholders' Meeting, the Company shall have obtained
shareholder approval of the Merger and the transactions contemplated herein and
in the Transaction Documents (to the extent required)(including the amendment
and restatement of the existing option plan with the amended and restated option
plan attached hereto as Exhibit Q (the "Approved Plan").
6.12. Filing of Charter Terms; Merger
-------------------------------
The Restated Charter shall have been filed with the Secretary of State of
Delaware and the Merger shall have been consummated in accordance with the terms
of the Agreement and Plan of Merger; provided, however, if shareholder approval
is not obtained prior to the First Tranche Closing, then the Landmark Parties,
in their sole and absolute discretion, may make a limited waiver with respect to
the filing of the Restated Charter prior to the First Tranche Closing and
request that the shares to be issued in connection with the First Tranche
Closing be issued pursuant to the Series B Certificate of Designation until such
time as the Restated Charter (conformed to reflect the proper conversion rates
applicable to the Series B Preferred Stock and the Series C Preferred Stock) may
be authorized, approved and filed and the Merger is consummated.
6.13. Voting Agreements
-----------------
None of the Principal Investors shall have rescinded any Voting Agreements
and, pursuant to such Voting Agreements, each shall have voted in favor of the
transactions contemplated hereby.
6.14. State Law Concerns
------------------
The Company shall have obtained evidence reasonably satisfactory to the
Landmark Parties (including an opinion of counsel if requested) that (a) the
transactions contemplated hereby do not violate any state anti-takeover laws or
state securities laws, (b) that the Company is not and will not be liable for
any Michigan State Business Tax ("MSBT") or other state or local taxes in excess
of an aggregate amount of $50,000 and (c) that any state law requirements
necessary to complete the transactions contemplated hereby or requiring
regulatory approval under the Transaction Documents have been satisfied and/or
waived. ).
35
6.15. Conversion of Debt to Employees
-------------------------------
The Landmark Parties shall have received evidence, in a form satisfactory
to the Landmark Parties, that indicates that all debt of the Company to the
holders (the "Subordinated Debt Holders") of those certain promissory notes
listed on Schedule 6.15 and the warrants issued in connection therewith have
been, or simultaneously is being, exchanged for an aggregate of 13 million
shares of the Company's Series C Preferred Stock pursuant to the agreements with
such holders which are listed on Schedule 6.15; provided, however, if the Merger
is not consummated and LV, in its sole discretion, elects to proceed with the
First Tranche Closing, then 1.3 million shares of the Series C Preferred Stock
as designated by the Series C Certificate of Designation shall be issued to such
Subordinated Debt Holders.
6.16. Employment Agreements
---------------------
Each of the employees of the Company shall have executed, without
modification, the Company's standard Terms of Employment attached at Schedule
6.16.
6.17. Insurance
---------
The Company shall have obtained, on such terms and conditions and in such
amounts as are reasonably acceptable to the Landmark Parties, errors and
omissions and directors' and officers' insurance coverage.
6.18. Key Man Life Insurance
----------------------
The Company shall have obtained, on such terms and conditions and in such
amounts as are reasonably acceptable to the Landmark Parties, key man life
insurance policies payable to the Company on the lives of such senior executives
as the Landmark Parties may reasonably request.
6.19. Election of Directors
---------------------
The persons designated by LV pursuant to the Shareholders Agreement for
nomination and election as "Series B Directors" (as defined in the Shareholders
Agreement) shall have been elected or appointed to the Board of Directors of the
Company, effective upon the First Tranche Closing.
6.20. Member Metrics
--------------
None of the figures that the Company has represented and warranted as true
and correct in Section 3.24 shall have decreased; provided, with respect to the
figures in Sections 3.24(a) through (e), decreases of less than 5% from the date
of execution until each respective Closing Date, as applicable, shall be
permitted for purposes of determining whether this condition has been satisfied.
36
6.21. Expenses
--------
Aggregate expenses incurred by or otherwise obligated to be paid by the
Company related to the consummation of the transactions contemplated by the
Transaction Documents shall not exceed $2,000,000 (exclusive of Landmark Fees
and Expenses) and each applicable payee shall have agreed to the terms (and the
manner and timing of payment) that corresponds to such payee on Schedule 6.21.
6.22. NASDAQ Listing
--------------
The Company shall have used its reasonable best efforts to remain listed on
the NASDAQ National Market and shall have promptly responded to any regulatory
authority regarding any listing requirements or requests.
6.23. Consents
--------
The Company shall have procured all of the third party consents identified
on Schedule 3.6. and on Schedule 3.17.
6.24. Payment Defaults
----------------
The Company shall have cured any and all breaches, defaults and failures to
comply that are required to be cured under Section 5.15.
6.25. Warrant Re-Issuance.
--------------------
Newco shall have issued to LCI a replacement warrant certificate with
identical terms to the Warrant.
6.26. Approval of Proceedings
-----------------------
All proceedings to be taken in connection with the transactions
contemplated by this Agreement, and all documents incident thereto, shall be
reasonably satisfactory in form and substance to the Landmark Parties, and their
special counsels, Xxxxxxx & Xxxxxx and Xxxxxxx Xxxx & Xxxxxxxxx; and the
Landmark Parties shall have received copies of all documents or other evidence
which it may reasonably request in connection with such transactions and of all
records of corporate proceedings in connection therewith in form and substance
reasonably satisfactory to the Landmark Parties.
SECTION 7. LANDMARK CONDITIONS FOR SECOND TRANCHE CLOSING
----------------------------------------------
The obligation of LV to purchase and pay for the Second Tranche of
Purchased Preferred Stock on the Second Tranche Closing Date, as provided in
Section 2.3 hereof, and LCI's related obligations hereunder, shall be subject to
the performance by the Company of its agreements theretofore to be performed
hereunder and to the satisfaction, prior thereto or concurrently therewith, of
the following further conditions:
37
7.1. Representations and Warranties
------------------------------
The representations and warranties of the Company contained in this
Agreement shall be true in all material respects on and as of the Second Tranche
Closing Date as though such representations and warranties were made at and as
of such date, except for representations and warranties qualified by reference
to materiality which shall be true in all respects on and as of the Second
Tranche Closing Date as though such warranties and representations were made at
and as of such date, except to the extent that such representations and
warranties must be adjusted to give effect to the Securities issued hereunder.
7.2. Compliance with Agreement
-------------------------
The Company shall have performed and complied in all material respects with
all agreements, covenants and conditions contained in this Agreement which are
required to be performed or complied with by the Company prior to or on the
Second Tranche Closing Date.
7.3. Officer's Certificate
---------------------
The Landmark Parties shall have received a certificate, dated the Second
Tranche Closing Date, signed by each of the President and the Chief Financial
Officer of the Company, certifying that the conditions specified in the
foregoing Sections 7.1 and 7.2 hereof have been fulfilled.
7.4. Default Under Senior Secured Note, this Agreement or Forbearance
Agreements
----------------------------------------------------------------
No event shall have occurred and continue to exist which with or without
notice or the passage of time or both would constitute a default or has been
declared a default under the Amended Loan Agreement, the Senior Secured Note or
this Agreement which has not been unconditionally waived in writing by the
Landmark Parties. There shall have been no default (or event which with or
without notice or the passage of time or both would constitute a default) and no
Forbearance Termination Event (as such term is defined in the applicable
Forbearance Agreement) that has occurred under any of the Forbearance Agreements
which has not been cured by the Company itself or unconditionally waived by the
forbearing party. The Landmark Parties shall have received certification from
the Company that each of the Forbearance Agreements is in full force and effect,
has not been amended without LCI's consent and no event has occurred which with
or without notice or the passage of time or both would constitute a Forbearance
Termination Event which has not been unconditionally waived by the forbearing
party.
7.5. Counsel's Opinion
-----------------
The Landmark Parties shall have received from the Company's counsel, Xxxxx,
Raitt, Heuer and Xxxxx, Professional Corporation, an updated opinion, dated the
Second Tranche Closing Date, substantially in the form of Exhibit O-1 hereto and
from the Company's special counsel Young, Conaway, an opinion, dated the Second
Tranche Closing Date, substantially in the form of Exhibit O-2 hereto
38
7.6. Adverse Development
-------------------
There shall have been no developments in the business, operations, assets,
properties, or condition (financial or otherwise) of the Company, including
without limitation the occurrence of any legal actions, suits, arbitrations or
other legal, administrative or other governmental investigations, inquiries or
proceedings brought or threatened against the Company, which in the opinion of
the Landmark Parties would have a Material Adverse Effect.
7.7. Voting Agreements; Merger; Filing of Restated Charter
-----------------------------------------------------
None of the Principal Investors shall have rescinded any Voting Agreements
and, pursuant to such Voting Agreements, each shall have voted in favor of the
transactions contemplated hereby. The Restated Charter shall have been filed
with the Secretary of State of Delaware and the Merger shall have been
consummated in accordance with the terms of the Agreement and Plan of Merger.
7.8. Approval of Proceedings
-----------------------
All proceedings to be taken in connection with the transactions
contemplated by this Agreement, and all documents incident thereto, shall be
reasonably satisfactory in form and substance to the Landmark Parties, and their
special counsels, Xxxxxxx & Xxxxxx and Xxxxxxx Xxxx & Xxxxxxxxx; and the
Landmark Parties shall have received copies of all documents or other evidence
which it may reasonably request in connection with such transactions and of all
records of corporate proceedings in connection therewith in form and substance
satisfactory to the Landmark Parties.
7.9. Option Repricing and Reissuance
-------------------------------
The Company shall have effected the option repricing contemplated by
Section 5.14.
7.10. Continued Conditions
--------------------
To the extent that any of the conditions in Sections 6.15 through 6.24 were
not satisfied on or before the First Tranche Closing, such conditions shall have
been satisfied on or before the Second Tranche Closing, except to the extent in
proceeding with the First Tranche Closing LV unconditionally waived in writing
such conditions for all purposes.
SECTION 8. COMPANY CLOSING CONDITIONS
--------------------------
The obligation of the Company to issue, execute and deliver the Series B
Preferred Stock on each of the Closing Dates, as provided in Section 2 hereof,
shall be subject to the performance by the Landmark Parties of their agreements
theretofore to be performed hereunder and to the satisfaction, prior thereto or
concurrently therewith, of the following further conditions:
39
8.1. Representations and Warranties
------------------------------
The representations and warranties of the Landmark Parties contained in
this Agreement shall be true in all material respects on and as of the First
Tranche Closing Date as though such representations and warranties were made at
and as of such date, except for representations and warranties qualified by
reference to materiality which shall be true in all respects on and as of each
of the applicable Closing Dates as though such warranties and representations
were made at and as of such dates, except as otherwise affected by the
transactions contemplated hereby.
8.2. Compliance with Agreement
-------------------------
The Landmark Parties shall have performed and complied in all material
respects with all agreements, covenants and conditions contained in this
Agreement which are required to be performed or complied with by it prior to or
on each of the applicable Closing Dates.
8.3. Landmark's Certificates
-----------------------
The Company shall have received a certificate from LV for each of the
Closings, dated the respective Closing Date, signed by a duly authorized
representative of LV, certifying that the conditions specified in the foregoing
Sections 8.1 and 8.2 hereof have been fulfilled.
8.4. Injunction
----------
There shall be no effective injunction, writ, preliminary restraining order
or any order of any nature issued by a court of competent jurisdiction directing
that the transactions provided for herein or any of them not be consummated as
herein provided.
8.5. Shareholders Agreement
----------------------
The Landmark Parties shall have executed the Shareholders Agreement, the
form of which is attached as Exhibit P hereto.
8.6. Registration Rights Agreement
-----------------------------
The Landmark Parties shall have executed the Registration Rights Agreement,
the form of which is attached as Exhibit I hereto.
SECTION 9. EXCLUSIVITY AND TERMINATION
---------------------------
9.1. Takeover Proposal.
------------------
(a) From the date of this Agreement until the earlier of the First Tranche
Closing or the termination of this Agreement pursuant to Section 9.2, the
Company and its subsidiaries will not, directly or indirectly through their
officers, directors, employees, agents or otherwise, (i) solicit, initiate or
encourage any Takeover Proposal or (ii) engage in negotiations with, or disclose
any nonpublic information relating to the Company or any of its subsidiaries to,
or afford access to the properties, books or records of the Company or any of
its subsidiaries to,
40
any person that has indicated to the Company that it may be considering making,
or that has made, a Takeover Proposal or whose efforts to formulate a Takeover
Proposal would knowingly or could reasonably be expected to be assisted thereby;
provided, nothing herein shall prohibit the Company's Board of Directors from
taking and disclosing to the Company's shareholders a position with respect to
an unsolicited tender or exchange offer pursuant to Rules 14d-9 and 14e-2
promulgated under the Exchange Act. Notwithstanding the immediately preceding
sentence, if an unsolicited Takeover Proposal, or an unsolicited written
expression of interest that the Company reasonably expects to lead to a Takeover
Proposal, shall be received by the Board of Directors of the Company, then, to
the extent the Board of Directors of the Company believes in good faith (after
consultation with its financial advisor) (i) that such Takeover Proposal would,
if consummated, result in a transaction more favorable to the Company's
shareholders from a financial point of view than the transaction contemplated by
this Agreement and (ii) after reasonable inquiry by the Company, that the third
party making such Takeover Proposal is financially capable of consummating such
Takeover Proposal (any Takeover Proposal meeting such conditions being referred
to in this Agreement as a "Superior Proposal") and the Board of Directors of the
Company determines in good faith after consultation with outside legal counsel
that it is necessary for the Board of Directors of the Company to comply with
its fiduciary duties to shareholders under applicable law, the Company and its
officers, directors, employees, investment bankers, financial advisors,
attorneys, accountants and other representatives retained by it may furnish in
connection therewith information and take such other actions as are consistent
with the fiduciary obligations of the Company's Board of Directors, and such
actions shall not be considered a breach of this Section 9.1 or any other
provisions of this Agreement, provided that (A) upon each such determination the
Company notifies the Landmark Parties of such determination by the Company's
Board of Directors and provides the Landmark Parties with a true and complete
copy of the Superior Proposal received from such third party, if the Superior
Proposal is in writing, or a written summary of all material terms and
conditions thereof (including the identity of the person initiating the Superior
Proposal), if it is not in writing, (B) the Company provides the Landmark
Parties (simultaneously with the time that such documents are provided to such
third party) with all documents containing or referring to non-public
information of the Company that are supplied to such third party, to the extent
not previously supplied by the Company to the Landmark Parties and (C) the
Company provides such non-public information to any such third party pursuant to
a non-disclosure agreement at least as restrictive as to confidential
information as the Confidentiality Agreement between the Company and Landmark
dated as of March 6, 2001.
(b) The Company shall not, and shall not permit any of its officers,
directors, employees (acting on behalf of the Company) or other representatives
to agree to or endorse any Takeover Proposal unless the Company shall have
terminated this Agreement pursuant to Section 9.2 and paid the Landmark Parties
all amounts payable to the Landmark Parties pursuant to Section 9.4.
Notwithstanding anything in this Agreement to the contrary, the Company shall
not accept or recommend to its shareholders, or enter into any agreement
concerning, a Superior Proposal for a period of not less than 48 hours after the
Landmark Parties' receipt of a true and complete copy of such Superior Proposal,
if the Superior Proposal is in writing, or a written summary of all material
terms and conditions thereof, if it is not in writing. The Company will
immediately notify the Landmark Parties after receipt of any Takeover Proposal
or any notice that any person is considering making a Takeover Proposal or any
request for non-public information relating to the Company or any of its
subsidiaries or for access to the properties,
41
books or records of the Company or any of its subsidiaries by (i) any person
that has indicated to the Company that it may be considering making, or that has
made, a Takeover Proposal, or (ii) any person whose efforts to formulate a
Takeover Proposal would knowingly or could reasonably be expected to be assisted
thereby and who could reasonably be expected to make a Takeover Proposal (such
notice to include the identity of such person or persons) and will keep the
Landmark Parties fully informed of the status and material details of any such
Takeover Proposal notice, request or any correspondence or communications
related thereto and shall provide the Landmark Parties with a true and complete
copy of such Takeover Proposal notice or request or correspondence or
communications related thereto, if it is in writing, or a complete written
summary thereof, if it is not in writing. The Company shall immediately cease
and cause to be terminated any existing discussions or negotiations with any
parties (other than the Landmark Parties) conducted heretofore with respect to
any Takeover Proposal. The Company shall ensure that the officers, directors and
employees of the Company and its subsidiaries and any investment banker or other
advisor or representative retained by the Company are aware of the restrictions
described in this Section 9.1 and shall be responsible for any breach of this
Section 9.1 by such officers, directors, employees, bankers, advisors and
representatives. For purposes of this Agreement, "Takeover Proposal" means any
offer or proposal for, or any indication of interest in, a merger or other
business combination involving the Company or the acquisition of 20% or more of
the outstanding shares of capital stock of the Company, or the sale or transfer
of any significant portion of the assets of the Company, other than the
transactions contemplated by this Agreement.
9.2. Termination.
------------
This Agreement may be terminated at any time prior to the First Tranche
Closing Date, notwithstanding approval by the shareholders of the Company of the
Merger and the transactions contemplated herein:
(a) by mutual written consent duly authorized by the Boards of Directors of
the Company and the Landmark Parties; or
(b) by either the Company or the Landmark Parties if the First Tranche
Closing shall not have occurred on or before November 30, 2001 (the "End Date")
(provided, that a later date may be agreed upon in writing by the parties hereto
and provided, further, that the right to terminate this Agreement under this
Section 9.2(b) shall not be available to any party whose willful breach of this
Agreement or failure to perform in all material respects its obligations under
this Agreement to be performed or complied with prior to the First Tranche
Closing has been the cause of or resulted in the failure of the First Tranche
Closing to occur on or before such date); or
(c) by either the Company or the Landmark Parties if a court of competent
jurisdiction or governmental, regulatory or administrative agency or commission
shall have issued a non-appealable final order, decree or ruling or taken any
other action, in each case having the effect of permanently restraining,
enjoining or otherwise prohibiting the transactions contemplated hereby; or
42
(d) by the Landmark Parties if at the Shareholders' Meeting the approvals
required under Section 6.11 are not obtained; or
(e) by the Landmark Parties, (i) upon a material breach of any
representation, warranty, covenant or agreement on the part of the Company
(except for representations and warranties qualified by reference to materiality
in which case any breach would give cause) set forth in this Agreement which is
not cured within twenty (20) days after the Landmark Parties give notice of
breach, or if any representation or warranty of Company shall have become untrue
in any material respect (except for representations and warranties qualified by
reference to materiality in which case if they become untrue in any respect
cause would exist) such that the conditions set forth in Section 6 or Section 7
would not be satisfied within twenty (20) days after the Landmark Parties give
notice of breach, (ii) if the Board of Directors of the Company shall have
withheld, withdrawn, or modified its recommendation of shareholder approval of
the Merger and the transactions contemplated herein or shall have resolved to do
any of the foregoing, (iii) upon the occurrence of any default under any
Forbearance Agreement (including without limitation under Section 4 of the
Forbearance Agreement between the Company and American National Bank) or any
Forbearance Termination Event (as such term is defined in any applicable
Forbearance Agreement) has occurred, or (iv) for any reason the Company fails to
call and hold the Shareholders' Meeting by the End Date; provided, however, that
the right to terminate this Agreement by the Landmark Parties under this Section
9.2(e) shall not be available to the Landmark Parties where the Landmark Parties
are at that time in willful breach of this Agreement; or
(f) by either the Landmark Parties or the Company, if the Company shall
have accepted a Superior Proposal or if the Board of Directors of the Company
recommends a Superior Proposal to the shareholders of the Company.
9.3. Notice of Termination
---------------------
(a) Subject to Section 9.3(b), any termination of this Agreement under
Section 9.2 above will be effective immediately upon the delivery of written
notice of the terminating party to the other parties hereto. In the event of the
termination of this Agreement pursuant to Section 9.2, this Agreement shall
forthwith become void and there shall be no liability or obligation on the part
of any party hereto or any of its respective Affiliates, directors, officers or
shareholders except nothing herein shall relieve any party from liability for
any willful breach hereof. No termination of this Agreement shall affect the
obligations of the parties contained in the Confidentiality Agreement, and in
Sections 5.2 and 5.5 (as applicable to the Warrants), Section 5.10
(Confidentiality), Sections 9.2, 9.3 and 9.4 and Article XI, all of which
obligations shall remain in full force and effect and survive termination of
this Agreement in accordance with its terms.
(b) Any termination of this Agreement by the Company pursuant to Section
9.2(f) hereof shall be of no force or effect unless at or prior to such
termination the Company shall have paid to the Landmark Parties any amounts
payable pursuant to Section 9.4.
43
9.4. Fees and Expenses
-----------------
(a) If the proposed transactions are consummated, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby (including, without limitation, the fees and expenses of their advisers,
accountants and legal counsel) by the Landmark Parties shall be paid by the
Company, including, without limitation, any and all fees and expenses incurred
in relation to the printing and filing of any required proxy solicitation
(including any preliminary materials related thereto) and any amendments or
supplements thereto (collectively the "Landmark Fees and Expenses"); provided,
that the Landmark Fees and Expenses shall be paid after all of the Company's
fees and expenses listed on Schedule 6.21 have been paid (collectively the
"Company Fees and Expenses"); and provided further that interest shall accrue at
the rate of 8% on the Landmark Fees and Expenses from and after the date on
which all Company Fees and Expenses have been paid, and that such Landmark Fees
and Expenses and any accrued interest thereon to the extent when combined with
the Company Fees and Expenses causes such aggregate fees and expenses to exceed
$2 million (the "Excess Landmark Fees and Expenses") shall be deemed an advance
which the Company shall not have to repay until the earlier of (i) the
termination of that certain Intercreditor Agreement, dated as of June 15, 2001,
by and between American National Bank and LCI, or (ii) the receipt by the
Company of a written consent by American National Bank to the payment of such
excess Landmark Fees and Expenses and accrued interest. In furtherance of that
certain letter agreement dated July 27, 2001, between the Company and American
National Bank, LCI hereby acknowledges that the Excess Landmark Fees and
Expenses shall be "Landmark Indebtedness" as such term is defined in the
Subordination Agreement between LCI and American National Bank.
(b) Except as set forth in Section 9.4(c), if the proposed transactions are
not consummated, all fees and expenses incurred in connection with this
Agreement and the transactions contemplated hereby (including, without
limitation, the fees and expenses of its advisers, accountants and legal
counsel) shall be paid by the party incurring such expenses.
(c) The Company shall pay the Landmark Parties a fee of $1,000,000 plus any
Landmark Fees and Expenses incurred in connection with the transactions
contemplated hereby upon the earliest to occur of the following events:
(i) the termination of this Agreement by the Landmark Parties pursuant
to Section 9.2(e)(ii) or Section 9.2(e)(iv) or, in the case of a willful
breach by the Company, Section 9.2(e)(i); or
(ii) the termination of this Agreement by the Company or the Landmark
Parties pursuant to Section 9.2(f); or
(iii) the termination of this Agreement by the Landmark Parties
pursuant to Section 9.2(d) as a result of the failure to receive the
approvals required under Section 6.11 at the Shareholders' Meeting.
(d) The fee payable pursuant to Section 9.4(c) shall be paid within five
(5) business days after the first to occur of the events described in Sections
9.4(c)(i), (ii) and (iii).
44
(e) Upon termination of this Agreement, the Senior Secured Note and any and
all letters of credit, loans, advances, guaranties or other indebtedness
borrowed by the Company from the Landmark Parties (the "Outstanding
Indebtedness") shall become immediately due and payable and, if such termination
is pursuant to Section 9.2(f), the Company shall within five (5) business days
pay in full (in cash) the Outstanding Indebtedness and shall deliver to the
Landmark Parties (in trust for the benefit of ANB) a cash amount sufficient to
pay all indebtedness and obligations of the Company to ANB or a waiver from ANB
that permits LCI to accept cash payment in satisfaction of the amounts payable
hereunder and the Outstanding Indebtedness.
SECTION 10. INTERPRETATION OF THIS AGREEMENT
--------------------------------
10.1. Terms Defined
-------------
As used in this Agreement, the following terms have the respective meanings
set forth below or set forth in the Section hereof following such term:
Additional Option Closing: shall have the meaning set forth in Section
2.4(b).
Additional Option Period: shall have the meaning set forth in Section
2.4(a).
Affiliate: shall mean any Person or entity, directly or indirectly
controlling, controlled by or under common control with such Person or
entity.
Agreement: shall have the meaning set forth in the Preamble.
Agreement and Plan of Merger: shall have the meaning set forth in the
eleventh Recital.
Amended Loan Agreement: shall have the meaning set forth in the third
Recital.
Approved Markets: shall have the meaning set forth in Section 3.4.
Approved Plan: shall have the meaning set forth in Section 6.11(b).
Articles of Incorporation: shall have the meaning set forth in Section
3.1(a).
Available Option Shares: shall have the meaning set forth in Section
2.4(a).
Balance Sheet: shall have the meaning set forth in Section 3.14.
Basket: shall have the meaning set forth in Section 11.5(a).
Bridge Loan Agreement: shall have the meaning set forth in the second
Recital.
Bridge Loan Amount: shall have the meaning set forth in the second Recital.
Bridge Note: shall have the meaning set forth in the second Recital
45
Business Day: shall mean a day other than a Saturday, Sunday or other day
on which banks in the State of New York are required or authorized
to close.
Business Plan: shall have the meaning set forth in Section 5.8(c).
Bylaws: shall have the meaning set forth in Section 3.1(a).
Cap: shall have the meaning set forth in Section 11.5(a).
Certificates of Designation: shall have the meaning set forth in Section
3.3(c).
Change of Control: shall mean (i) the sale, lease or transfer of all or
substantially all of the assets of the Company to any "Person" or "group"
(within the meaning of Sections 13(d)(3) and 14(d)(2) of the Exchange Act, or
any successor provision to either of the foregoing, including any group acting
for the purpose of acquiring, holding or disposing of securities within the
meaning of Rule 13d-5(b)(1) under the Exchange Act), (ii) the approval by the
requisite shareholders of the Company of a plan of liquidation or dissolution of
the Company, (iii) any "Person" or "group" (within the meaning of Sections 13(d)
and 14(d)(2) of the Exchange Act, or any successor provision to either of the
foregoing, including any group acting for the purpose of acquiring, holding or
disposing of securities within the meaning of Rule 13d- 5(b)(1) under the
Exchange Act) becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) of more than 50% of the total voting power of all classes of the
voting stock of the Company and/or warrants or options to acquire such voting
stock, calculated on a fully diluted basis, unless, as a result of such
transaction, the ultimate direct or indirect ownership of the Company is
substantially the same immediately after such transaction as it was immediately
prior to such transaction, or (iv) any consolidation or merger of the Company
pursuant to which the Company Common Stock would be converted into cash,
securities or other property, in each case other than a consolidation or merger
of the Company in which the holders of Company Common Stock and other capital
stock of the Company entitled to vote in the election of directors of the
Company, immediately prior to the consolidation or merger have, directly or
indirectly, at least a majority of the total voting power in the aggregate of
capital stock entitled to vote in the election of directors of the continuing or
surviving corporation immediately after the consolidation or merger.
Notwithstanding the foregoing, the transactions contemplated in this Agreement
shall not constitute a Change of Control. Closing Dates: shall have the meaning
set forth in Section 2.3(b).
Closings: shall have the meaning set forth in Section 2.3(b).
COBRA: shall have the meaning set forth in Section 3.20(g).
Code: shall mean the Internal Revenue Code of 1986, as amended.
Common Stock: shall have the meaning set forth in the eighth Recital.
Company: shall have the meaning set forth in the Preamble.
Company Fees and Expenses: shall have the meaning set forth in Section
9.4(a).
46
Company Plans: shall have the meaning set forth in Section 3.20(a).
Contingent Liability: shall mean, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to (i)
any indebtedness, lease, dividend, letter of credit or other obligation of
another, including, without limitation, any such obligation directly or
indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by
that Person, or in respect of which that Person is otherwise directly or
indirectly liable; (ii) any obligations with respect to undrawn letters of
credit issued for the account of that Person; and (iii) all obligations arising
under any interest rate, currency or commodity swap agreement, interest rate cap
agreement, interest rate collar agreement, or other agreement or arrangement
designated to protect a Person against fluctuation in interest rates, currency
exchange rates or commodity prices; provided, however, that the term "Contingent
Obligation" shall not include endorsements for collection or deposit in the
ordinary course of business. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determined amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof as determined by such Person in good faith; provided, however, that such
amount shall not in any event exceed the maximum amount of the obligations under
the guarantee or other support arrangement.
Converted Shares: shall have the meaning set forth in the fifteenth
Recital.
Current Assets: shall mean, as of any applicable date, all amounts that
should, in accordance with GAAP, be included as current assets on the
consolidated balance sheet of the Company and its subsidiaries as at such date
less all inventory and non-recurring items including without limitation tax
credits
Current Liabilities: shall mean, as of any applicable date, all amounts
that should, in accordance with GAAP, be included as current liabilities on the
consolidated balance sheet of the Company and its subsidiaries, as at such date,
plus, to the extent not already included therein, all Advances (as defined in
the Amended Loan Agreement) made under the Amended Loan Agreement or by the
Landmark Parties for the Company's benefit under the Forbearance Agreements,
including all Indebtedness (as defined in the Amended Loan Agreement) that is
payable upon demand or within one year from the date of determination thereof
unless such Indebtedness is renewable or extendable at the option of the Company
or any subsidiary to a date more than one year from the date of determination,
including all current maturities of long term debt.
DCIS: shall have the meaning set forth in the fourteenth Recital.
Delaware Organizational Documents: shall have the meaning set forth in
Section 3.1(b).
Encumbrance: shall mean each of the following:
(a) security interest, mortgage, pledge, hypothecation, lien, attachment,
or charge of any kind (including any agreement to give any of the foregoing);
conditional sale or other title retention agreement; sale of accounts receivable
or chattel paper; or other arrangement
47
pursuant to which any Person is entitled to any preference or priority with
respect to the property or assets of another Person or the income or profits of
such other Person or which constitutes an interest in property to secure an
obligation; each of the foregoing whether consensual or non-consensual and
whether arising by way of agreement, operation of law, legal process or
otherwise; and
(b) The filing of any financing statement under the Uniform
Commercial Code, as adopted and in effect in the State of Michigan or the State
of Delaware, as applicable, as each may be amended from time to time, or the
comparable law of any jurisdiction.
End Date: shall have the meaning set forth in Section 9.2(b).
ERISA: shall mean the Employee Retirement Income Security Act of 1974, as
amended.
Exchange Act: shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
Filed Financial Statements: shall have the meaning set forth in Section
3.9(a).
First Tranche Closing: shall have the meaning set forth in Section 2.2(b).
First Tranche Closing Date: shall have the meaning set forth in Section
2.2(b).
First Tranche of Purchased Preferred Stock: shall have the meaning set
forth in Section 2.2(a).
First Tranche Purchase Price: shall have the meaning set forth in Section
2.2(a).
Forbearance Agreements: shall have the meaning set forth in Section 6.7.
Forecast: shall have the meaning set forth in Section 2.4(c).
Fully Diluted Basis: shall mean the outstanding capital stock of the
Company on a fully diluted basis assuming as outstanding (a) any shares reserved
for issuance under any option plans of the Company, whether or not options in
respect of such shares have been issued, (b) shares underlying any warrants (but
excluding the Warrants), (c) all securities (including the Series B Preferred
Stock) convertible into or exercisable for capital stock of the Company
regardless of the exercise price, or (d) any capital stock issued or issuable
under any agreement of the Company.
GAAP: shall mean U.S. generally accepted accounting principles.
Grid Note: shall have the meaning set forth in the sixth Recital.
Intellectual Property: shall mean all of the following, owned or used in
the current or contemplated business of the Company: (i) trademarks and service
marks, trade dress, product configurations, trade names and other indications of
origin, applications or registrations
48
in any jurisdiction pertaining to the foregoing and all goodwill associated
therewith; (ii) patentable inventions, discoveries, improvements, ideas,
know-how, formula methodology, processes, technology, software (including
password unprotected interpretive code or source code, object code, development
documentation, programming tools, drawings, specifications and data) and
applications and patents in any jurisdiction pertaining to the foregoing,
including re-issues, continuations, divisions, continuations-in-part, renewals
or extensions; (iii) trade secrets, including confidential information and the
right in any jurisdiction to limit the use or disclosure thereof; (iv)
copyrights in writings, designs software, mask works or other works,
applications or registrations in any jurisdiction for the foregoing and all
moral rights related thereto; (v) database rights; (vi) Internet Web sites,
domain names and applications and registrations pertaining thereto and all
intellectual property used in connection with or contained in all versions of
the Company's Web sites; (vii) rights under all agreements relating to the
foregoing; (viii) books and records pertaining to the foregoing; and (ix) claims
or causes of action arising out of or related to past, present or future
infringement or misappropriation of the foregoing.
Key Agreements and Instruments: shall have the meaning set forth in Section
3.7.
Landmark Fees and Expenses: shall have the meaning set forth in Section
9.4(a).
Landmark Parties: shall have the meaning set forth in the Preamble.
LCI: shall have the meaning set forth in the Preamble.
Listed Intellectual Property: shall have the meaning set forth in Section
3.16(b).
Loss: shall have the meaning set forth in Section 11.5(a).
LV: shall have the meaning set forth in the Preamble.
Management Investors: shall have the meaning set forth in Section 3.25.
Material Adverse Effect: shall have the meaning set forth in Section
3.1(c).
Material Contract: shall have the meaning set forth in Section 3.18.
Material Revenue Contract: shall have the meaning set forth in Section
3.18.
Merger: shall have the meaning set forth in the eleventh Recital.
Michigan Organizational Documents: shall have the meaning set forth in
Section 3.1(a).
MSBT: shall have the meaning set forth in Section 6.14.
Multiemployer Plan: shall have the meaning set forth in Section 3.20(b).
Multiple Employer Plan: shall have the meaning set forth in Section
3.20(b).
New H.H.: shall have the meaning set forth in Section 3.24(e).
49
Newco: shall have the meaning set forth in the eleventh Recital.
Note Purchase Price: shall have the meaning set forth in Section 2.1.
Organizational Documents: shall have the meaning set forth in Section
3.1(b).
Outstanding Indebtedness: shall have the meaning set forth in Section
9.4(e).
Person: shall mean an individual, partnership, joint-stock company,
corporation, limited liability company, trust or unincorporated
organization, and a government or agency or political subdivision thereof.
Permitted Liens: shall mean the liens granted by the Company in favor of
American National Bank and Trust Company of Chicago.
PIK Shares: shall have the meaning set forth in the fifteenth Recital.
PIK Warrant Shares: shall have the meaning set forth in the ninth Recital.
PIK Warrants: shall have the meaning set forth in the ninth Recital.
Principal Creditors: shall mean American National Bank and Trust Company of
Chicago, Midwest Guaranty Bank, and 360 N. Michigan Trust.
Principal Investors: shall have the meaning set forth in Section 3.25.
Proprietary Software: shall have the meaning set forth in Section 3.17(a).
Public Filings: shall mean the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2000, as amended by Form 10-K/A filed with the
SEC on April 27, 2001, and Quarterly Report on Form 10-Q for the quarter ended
March 31, 2001.
Purchase Option: shall have the meaning set forth in Section 2.3(a).
Registration Rights Agreement: shall have the meaning set forth in the
sixteenth Recital.
Restated Charter: shall have the meaning set forth in the twelfth Recital.
SEC: shall mean the Securities and Exchange Commission, or any successor
commission or agency having similar powers.
SEC Documents: shall have the meaning set forth in Section 3.9(a).
Second Tranche Closing: shall have the meaning set forth in Section 2.3(b).
Second Tranche Closing Date: shall have the meaning set forth in Section
2.3(b).
50
Second Tranche of Purchased Preferred Stock: shall have the meaning set
forth in Section 2.3(a).
Second Tranche Purchase Option: shall have the meaning set forth in Section
2.3(a).
Second Tranche Purchase Price: shall have the meaning set forth in Section
2.3(a).
Securities: shall have the meaning set forth in the seventeenth Recital.
Securities Act: shall mean the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
Senior Secured Loan: shall have the meaning set forth in the third Recital.
Senior Secured Note: shall have the meaning in the fourth Recital.
Series B Certificate of Designation: shall have the meaning set forth in
the fourteenth Recital.
Series B Directors: shall have the meaning set forth in Section 6.19.
Series B Preferred Stock: shall have the meaning set forth in the fifteenth
Recital.
Series C Certificate of Designation: shall have the meaning set forth in
Section 3.3(c).
Series C Preferred Stock: shall have the meaning set forth in Section
3.3(a).
Share Price: shall have the meaning set forth in Section 2.4(a).
Shareholders' Agreement: shall have the meaning set forth in Section 6.9.
Shareholders' Meeting: shall have the meaning set forth in Section 5.4.
Shortfall Amount: shall have the meaning set forth in Section 2.4(c).
Shortfall Event: shall have the meaning set forth in Section 2.4(c).
Shortfall Purchase Option: shall have the meaning set forth in Section
2.4(a).
Software: shall have the meaning set forth in Section 3.17(a).
Special Officer's Certificate: shall have the meaning set forth in Section
2.4(c).
Special Opinion: shall have the meaning set forth in Section 2.4(c).
51
Special Representations and Warranties: shall have the meaning set forth in
Section 11.4.
subsidiary: shall mean a corporation of which a Person owns, directly or
indirectly, more than 50% of the Voting Stock.
Subordinated Debt Holders: shall mean those holders of the notes that shall
be converted into Series C Preferred Stock pursuant to Section 6.15.
Superior Proposal: shall have the meaning set forth in Section 9.1(a).
Surfari: shall have the meaning set forth in Section 11.5(a).
Surfari Agreement: shall have the meaning set forth in Section 11.5(a).
Takeover Proposal: shall have the meaning set forth in Section 9.1(b).
Total actions: shall have the meaning set forth in Section 3.24(e).
Total Liabilities: shall mean all indebtedness and obligations (including
without limitation any Contingent Obligations) of or assumed by any Person
including, without limitation, any indebtedness or obligation: (i) in respect of
money borrowed (including any indebtedness which is non-recourse to the credit
of such Person but which is secured by an Encumbrance on any asset of such
Person) or evidenced by a promissory note, bond, debenture or other written
obligation to pay money; (ii) for the payment, deferred or other written
obligation to pay money; (ii) for the payment, deferred for more than thirty
(30) days, of the purchase price of goods or services (other than current trade
liabilities of such Person incurred in the ordinary course of business and
payable in accordance with customary practices); (iii) in connection with any
letters of credit or acceptance transaction (including, without limitation, the
face amount of all letters of credit and acceptances issued for the account of
such Person or reimbursement on account of which such Person would be
obligated); (iv) in connection with the sale or discount of accounts receivable
or chattel paper of Borrower; (v) on account of deposits or advances; and (vi)
as lessee under Capital Leases. "Indebtedness" of any Person shall also include:
(x) Indebtedness of others secured by an Encumbrance on any asset of such
Person; (y) Any guaranty, endorsement, suretyship or other undertaking pursuant
to which that Person may be liable on account of any obligation of any third
party; and (z) the Indebtedness of a partnership or joint venture in which such
Person is a general partner or joint venturer.
Term Sheet: shall have the meaning set forth in the first Recital.
Transaction Documents: shall mean this Agreement, the Amended Loan
Agreement, the Note, the Articles of Incorporation, the Restated Charter,
Agreement and Plan of Merger, the Warrants, the Shareholders Agreement, the
Registration Rights Agreement, the Forbearance Agreement, the Voting Agreements
and any other documents necessary to consummate the transactions contemplated
hereby.
Voting Agreements: shall have the meaning set forth in Section 3.25.
52
Voting Stock: shall mean securities of any class or classes of a
corporation the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the corporate directors (or
Persons performing similar functions).
Warrant Shares: shall have the meaning set forth in the ninth Recital.
Warrants: shall have the meaning set forth in the eighth Recital.
Willkie Offices: shall have the meaning set forth in Section 2.2(b).
Works: shall have the meaning set forth in Section 3.16(g).
10.2. Accounting Principles
---------------------
Where the character or amount of any asset or amount of any asset or
liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for the
purposes of this Agreement, this shall be done in accordance with GAAP at the
time in effect, to the extent applicable, except where such principles are
inconsistent with the requirements of this Agreement.
10.3. Directly or Indirectly
----------------------
Where any provision in this Agreement refers to action to be taken by any
Person, or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person.
10.4. Governing Law
-------------
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York applicable to contracts made and to be performed
entirely within such State.
10.5. Paragraph and Section Headings
------------------------------
The headings of the sections and subsections of this Agreement are inserted
for convenience only and shall not be deemed to constitute a part thereof.
SECTION 11. MISCELLANEOUS
-------------
11.1. Notices
-------
(a) All communications under this Agreement shall be in writing and shall
be delivered by hand or facsimile or mailed by overnight courier or by
registered mail or certified mail, postage prepaid:
(i) if to the Landmark Parties, at Landmark Communications, Inc., 000
X. Xxxxxxxxxx Xxxxxx, Xxxxxxx, XX 00000 (facsimile: (000) 000-0000),
Attention: Xxx X. Xxxxxxxx, III, Executive Vice President and General
Counsel or at such other address or facsimile number as Landmark may
53
have furnished the Company in writing, with a copies to: (i) Xxxxxxx &
Xxxxxx, P.C., 1800 Bank of America Center, Norfolk, VA 23510 (facsimile:
(000) 000-0000), Attention: Xxxxxx X. Xxxxxxx; and (ii) Xxxxxxx Xxxx &
Xxxxxxxxx, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, XX 00000 (facsimile: (212)
728-8111), Attention: Xxxxxxx X. Xxxxx, Xx.
(ii) if to the Company, at 000 X. Xxxxxxxx Xxxxxx, 00xx Xxxxx,
Xxxxxxx, XX 00000 (facsimile: (000) 000-0000), Attention: Xxxxxx Xxxxxx, or
at such other address or facsimile number as it may have furnished Landmark
in writing, with a copy to Jaffe, Xxxxx, Heuer & Xxxxx, P.C., Xxx Xxxxxxxx
Xxxxxx, Xxxxx 0000, Xxxxxxx, XX 00000 (facsimile: (000) 000-0000),
Attention: Xxxxx Xxxxx.
(b) Any notice so addressed shall be deemed to be given: if delivered by
hand or facsimile, on the date of such delivery; if mailed by courier, on the
first business day following the date of such mailing; and if mailed by
registered or certified mail, on the third business day after the date of such
mailing.
11.2. Expenses and Taxes
------------------
The Company will pay, and save and hold the Landmark Parties harmless from
any and all liabilities (including interest and penalties) with respect to, or
resulting from any delay or failure in paying, stamp and other taxes (other than
income taxes), if any, which may be payable or determined to be payable on the
execution and delivery or acquisition of the Securities or the shares of Common
Stock issuable upon conversion of the Series B Preferred Stock or the exercise
of the Warrants.
11.3. Reproduction of Documents
-------------------------
This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications which may hereafter be
executed, (b) documents received by the Landmark Parties on the Closing Dates
(except for the certificates evidencing the Series B Preferred Stock, the
Converted Shares or the Warrant Shares themselves), and (c) financial
statements, certificates and other information previously or hereafter furnished
to the Landmark Parties, may be reproduced by the Landmark Parties by any
photographic, photostatic, microfilm, micro-card, miniature photographic or
other similar process and the Landmark Parties may destroy any original document
so reproduced. All parties hereto agree and stipulate that any such reproduction
shall be admissible in evidence as the original itself in any judicial or
administrative proceeding (whether or not the original is in existence and
whether or not such reproduction was made by the Landmark Parties in the regular
course of business) and that any enlargement, facsimile or further reproduction
of such reproduction shall likewise be admissible in evidence.
11.4. Survival
--------
All warranties, representations, and covenants made by the Landmark Parties
and the Company herein or in any certificate or other instrument delivered by
the Landmark Parties or the Company under this Agreement shall be considered to
have been relied upon by the
54
Company or the Landmark Parties, as the case may be, and shall survive all
deliveries to the Landmark Parties of the Securities, or payment to the Company
for such Securities, regardless of any investigation made by the Company or the
Landmark Parties, as the case may be, or on the Company's or the Landmark
Parties' behalf for a period of one (1) year after each applicable Closing Date,
except (i) the representations and warranties set forth in Sections 3.1, 3.3,
3.4 and 3.5 (the "Special Representations and Warranties") and all covenants and
agreements set forth in this Agreement shall survive each applicable Closing and
continue in full force and effect except to the extent limited by a period set
forth herein and (ii) if any party entitled to indemnification has made a
written claim for indemnification to the party required to provide
indemnification prior to the expiration of the applicable survival period, then
in such case the indemnifying party shall remain liable for any Losses (defined
below) resulting from, arising out of or related to the breach asserted in the
notice of claim. All statements in any such certificate or other instrument
shall constitute warranties and representations by the Company hereunder.
11.5. Indemnity
---------
(a) (i) The Company shall indemnify the Landmark Parties against any loss,
cost or damages (including reasonable attorneys' fees but excluding
consequential damages) (each, a "Loss" and, collectively, "Losses") incurred by
any Landmark Party as a result of the breach by the Company of any
representation, warranty, covenant or agreement in this Agreement or any
certificate delivered in connection herewith.
(ii) The Company shall also indemnify the Landmark Parties against any
lawsuits, claims, actions, suits, proceedings, or investigations relating
to the transactions contemplated by the Transaction Documents by any person
other than the Company, including, without limitation, any shareholder
suits brought by or on behalf of the Company's shareholders.
(iii) The Company's indemnity obligation under Section 11.5(a)(i)
shall be limited as follows: (A) under such provision, the Company shall
not be obligated to indemnify either Landmark Party until the Losses
sustained, incurred, paid or required to be paid by the Landmark Parties
exceed, in aggregate, a Three Hundred Thousand Dollars ($300,000) threshold
(the "Basket"), at which point the Company shall be obligated to indemnify
the applicable Landmark Party(ies) from and against all Losses relating
back to the first dollar and (B) there will be an $11,500,000 aggregate
ceiling (the "Cap") on the obligation of the Company to indemnify the
Landmark Parties under such provision; provided, the foregoing
notwithstanding, the Basket and Cap shall not apply to Losses arising out
of, resulting from, or related to (x) the breach of any Special
Representation and Warranty or (y) the breach of any covenant or agreement
(including, without limitation this Section 11.5).
(iv) Notwithstanding the foregoing, the Company shall also indemnify
the Landmark Parties for any Losses arising out of or relating to any items
listed on Schedule 3.20 including without limitation any liabilities
related to employee contributions under the Company's 401(k) plan,
Cafeteria Plan (whether imposed by any party) and any penalties associated
therewith.
(v) In addition to the foregoing, in the event that the Company shall
issue any shares of Common Stock or equity or debt securities convertible,
exchangeable or
55
exercisable into Common Stock to Surfari, Inc. a Tennessee corporation
("Surfari") pursuant to the terms of that certain Asset Purchase Agreement,
dated as of November 30, 2000, by and between the Company and Surfari, as
amended (the "Surfari Agreement") or otherwise issue any such shares to
Surfari, the Company shall issue to LV a number of shares of Series B
Preferred Stock equal on an as-converted basis to the number of shares of
Common Stock issued to Surfari. Notwithstanding the foregoing calculation
of the number of shares on an as-converted basis, LV shall be entitled to
all anti-dilution protections applicable to the shares of Series B
Preferred Stock under the Articles of Incorporation or Restated Charter, as
applicable, on the same basis as if LV had been issued such shares at the
First Tranche Closing and would consequently be entitled to protection for
below market issuances on and after that date (other than as issued
pursuant to this Section 11.5(a)(v)).
(b) The Landmark Parties shall indemnify the Company against any Loss
incurred by the Company as a result of the breach by the Landmark Parties of any
representation, warranty, covenant or agreement in this Agreement.
(c) Subject to the consummation of the First Tranche Closing, the Company
agrees (i) that money damages would not be sufficient remedy for the Landmark
Parties for any breach of this Agreement by the Company, (ii) that in addition
to all other remedies, the Landmark Parties shall be entitled to specific
performance and injunctive and other equitable relief as a remedy for any such
breach, and (iii) to waive any requirement for the securing or posting of any
bond in connection with such remedy.
11.6. Successors and Assigns; Assignability
-------------------------------------
This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties. The Landmark Parties may freely
assign this Agreement to their Affiliates provided such Affiliates agree in
writing to be bound by the terms hereof including without limitation the
confidentiality provisions set forth in Section 5.10.
11.7. Entire Agreement; Amendment and Waiver
--------------------------------------
This Agreement and the agreements attached as Exhibits hereto constitute
the entire understandings of the parties hereto and supersede all prior
agreements or understandings with respect to the subject matter hereof among
such parties (including without limitation the Confidentiality Letter dated
March 6, 2001 between LCI and the Company and the Term Sheet). This Agreement
may be amended with (and only with) the written consent of the Company and the
Landmark Parties. This Agreement shall not become effective and the terms and
provisions herein shall be of no force and effect unless and until both parties
hereto have executed and delivered the Agreement. Any party hereto may, by
written notice to the other parties, waive any provision of this Agreement. The
failure or delay of any party hereto to enforce at any time any of the
provisions of this Agreement shall in no way be construed to be a waiver of any
such provision, nor in any way to affect the validity of this Agreement or any
part thereof or the right of any party thereafter to enforce each and every such
provision.
56
11.8. Severability
------------
In the event that any part or parts of this Agreement shall be held illegal
or unenforceable by any court or administrative body of competent jurisdiction,
such determination shall not affect the remaining provisions of this Agreement
which shall remain in full force and effect.
11.9. Counterparts
------------
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original and all of which together shall be considered one
and the same agreement.
[REMAINDER OF XXXX INTENTIONALLY LEFT BLANK -
SIGNATURE PAGE FOLLOWS]
57
EXECUTION COPY
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first above written.
XXXXXXXXXXX.XXX INC.
By: /s/ Xxxxxxx Xxxx
-----------------------------------------
Name: Xxxxxxx Xxxx
Title: President
COOLSAVINGS, INC.
By: /s/ Xxxxxxx Xxxx
-----------------------------------------
Name: Xxxxxxx Xxxx
Title: President
LANDMARK COMMUNICATIONS, INC.
By: /s/ Xxx X. Xxxxxxxx, III
-----------------------------------------
Name: Xxx X. Xxxxxxxx, III
Title: Executive Vice President
LANDMARK VENTURES VII, LLC
By: /s/ Xxxxxxx X. Xxxxx
-----------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President and Treasurer
TABLE OF CONTENTS
-----------------
SECTION 1. AUTHORIZATION OF SERIES B PREFERRED STOCK.......................................................3
SECTION 2. PURCHASE AND SALE OF SECURITIES.................................................................4
2.1. Issuance of Senior Secured Note.................................................................4
2.2. Issuance of First Tranche of Series B Preferred Stock...........................................4
2.3. Issuance of Second Tranche of Series B Preferred Stock..........................................4
2.4. Issuance of Additional Tranches of Series B Preferred Stock.....................................5
2.5. Equitable Adjustment............................................................................8
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................................................8
3.1. Corporate Organization and Authority............................................................8
3.2. Subsidiaries....................................................................................9
3.3. Capitalization..................................................................................9
3.4. Issuance of Common Stock.......................................................................11
3.5. Corporate Proceedings, etc.....................................................................11
3.6. Consents and Approvals.........................................................................11
3.7. Absence of Defaults, Conflicts, etc............................................................11
3.8. Absence of Certain Developments................................................................12
3.9. Securities Law Issues..........................................................................12
3.10. Acknowledgement of Dilution....................................................................14
3.11. No Bankruptcy..................................................................................14
3.12. Compliance with Law............................................................................15
3.13. Litigation.....................................................................................15
3.14. Absence of Undisclosed Liabilities.............................................................15
3.15. Tax Matters....................................................................................15
3.16. Intellectual Property..........................................................................16
3.17. Software.......................................................................................18
3.18. Material Contracts.............................................................................19
3.19. Employees......................................................................................19
3.20. Employee Benefit Plans.........................................................................20
3.21. Title to Tangible Assets.......................................................................21
3.22. Condition of Properties........................................................................21
3.23. Insurance......................................................................................21
3.24. Membership Base; Demographic Activity..........................................................22
3.25. Voting Agreements..............................................................................22
3.26. Certain Interests..............................................................................23
3.27. Registration Rights............................................................................23
3.28. Private Offering...............................................................................23
3.29. Brokerage......................................................................................23
3.30. Minute Books...................................................................................23
3.31. Change of Control..............................................................................24
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3.32. Material Facts.................................................................................24
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE LANDMARK
PARTIES........................................................................................24
4.1. Corporate Proceedings, etc.....................................................................24
4.2. Consents and Approvals.........................................................................24
4.3. Investment Representation......................................................................25
4.4. Access to Other Information....................................................................25
4.5. Risks of Investment............................................................................25
SECTION 5. COVENANTS OF THE PARTIES.......................................................................25
5.1. Securities Compliance..........................................................................25
5.2. Reservation of Stock Issuable Upon Conversion or Exercise of the Securities....................26
5.3. Form D; Blue Sky Laws..........................................................................26
5.4. Best Efforts...................................................................................26
5.5. Resale of Securities...........................................................................27
5.6. Covenants Pending the Closings.................................................................27
5.7. Further Assurance; Securities Law Assurances...................................................28
5.8. Financial and Business Information.............................................................28
5.9. Inspection.....................................................................................30
5.10. Confidentiality................................................................................30
5.11. Conduct of Business............................................................................30
5.12. Lost, etc. Certificates Evidencing Shares (or Shares of Common Stock); Exchange................31
5.13. Termination....................................................................................31
5.14. Option Repricing...............................................................................32
5.15. Payment Defaults...............................................................................32
SECTION 6. LANDMARK CONDITIONS FOR FIRST TRANCHE CLOSING..................................................33
6.1. Representations and Warranties.................................................................33
6.2. Compliance with Agreement......................................................................33
6.3. Officer's Certificate..........................................................................33
6.4. Default Under Senior Secured Note, this Agreement or Forbearance Agreements....................33
6.5. Pending or Threatened Litigation...............................................................33
6.6. Counsel's Opinion..............................................................................34
6.7. Forbearance Agreement..........................................................................34
6.8. Adverse Development............................................................................34
6.9. Shareholders Agreement.........................................................................34
6.10. Registration Rights Agreement..................................................................35
6.11. Shareholder Approval and Adoption of Restated Charter..........................................35
6.12. Filing of Charter Terms; Merger................................................................35
6.13. Voting Agreements..............................................................................35
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6.14. State Law Concerns.............................................................................35
6.15. Conversion of Debt to Employees................................................................36
6.16. Employment Agreements..........................................................................36
6.17. Insurance......................................................................................36
6.18. Key Man Life Insurance.........................................................................36
6.19. Election of Directors..........................................................................36
6.20. Member Metrics.................................................................................36
6.21. Expenses.......................................................................................37
6.22. NASDAQ Listing.................................................................................37
6.23. Consents.......................................................................................37
6.24. Payment Defaults...............................................................................37
6.25. Approval of Proceedings........................................................................37
SECTION 7. LANDMARK CONDITIONS FOR SECOND TRANCHE CLOSING.................................................37
7.1. Representations and Warranties.................................................................38
7.2. Compliance with Agreement......................................................................38
7.3. Officer's Certificate..........................................................................38
7.4. Default Under Senior Secured Note, this Agreement or Forbearance Agreements....................38
7.5. Counsel's Opinion..............................................................................38
7.6. Adverse Development............................................................................39
7.7. Voting Agreements; Merger; Filing of Restated Charter..........................................39
7.8. Approval of Proceedings........................................................................39
7.9. Option Repricing and Reissuance................................................................39
7.10. Continued Conditions...........................................................................39
SECTION 8. COMPANY CLOSING CONDITIONS.....................................................................39
8.1. Representations and Warranties.................................................................40
8.2. Compliance with Agreement......................................................................40
8.3. Landmark's Certificates........................................................................40
8.4. Injunction.....................................................................................40
8.5. Shareholders Agreement.........................................................................40
8.6. Registration Rights Agreement..................................................................40
SECTION 9. EXCLUSIVITY AND TERMINATION....................................................................40
9.1. Takeover Proposal..............................................................................40
9.2. Termination....................................................................................42
9.3. Notice of Termination..........................................................................43
9.4. Fees and Expenses..............................................................................44
SECTION 10. INTERPRETATION OF THIS AGREEMENT...............................................................45
10.1. Terms Defined..................................................................................45
10.2. Accounting Principles..........................................................................53
10.3. Directly or Indirectly.........................................................................53
iii
10.4. Governing Law..................................................................................53
10.5. Paragraph and Section Headings.................................................................53
SECTION 11. MISCELLANEOUS..................................................................................53
11.1. Notices........................................................................................53
11.2. Expenses and Taxes.............................................................................54
11.3. Reproduction of Documents......................................................................54
11.4. Survival.......................................................................................54
11.5. Indemnity......................................................................................55
11.6. Successors and Assigns; Assignability..........................................................56
11.7. Entire Agreement; Amendment and Waiver.........................................................56
11.8. Severability...................................................................................57
11.9. Counterparts...................................................................................57
EXHIBIT A Amended Loan Agreement
EXHIBIT B Senior Secured Note
EXHIBIT C Grid Note
EXHIBIT D Warrants
EXHIBIT E Agreement and Plan of Merger
EXHIBIT F Restated Charter
EXHIBIT G Newco's Organizational Minutes with Bylaws
EXHIBIT H Series B Certificate of Designation
EXHIBIT I Registration Rights Agreement
EXHIBIT J Articles of Incorporation (Michigan entity)
EXHIBIT K Bylaws (Michigan entity)
EXHIBIT L Series C Certificate of Designation
EXHIBIT M Voting Agreements
EXHIBIT N Amended Incentive Stock Option Agreement
EXHIBIT O Jaffe, Xxxxx, Heuer & Xxxxx opinion
EXHIBIT P Shareholders Agreement
EXHIBIT Q Approved Plan
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