Exhibit 2.1
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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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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
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"Company"), COOLSAVINGS, INC., a Delaware corporation ("Newco"), LANDMARK
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COMMUNICATIONS, INC., a Virginia corporation ("LCI"), and LANDMARK VENTURES VII,
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LLC, a Delaware limited liability company ("LV") (LCI and LV are each a
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"Landmark Party" and collectively the "Landmark Parties").
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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
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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
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LCI has advanced to the Company One Million Seven Hundred Fifty Thousand Dollars
($1,750,000) (the "Bridge Loan Amount") which was borrowed
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pursuant to a Master Note for such amount (the "Bridge Note"); and
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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
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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
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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
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Secured Note"), which shall evidence the Senior Secured Loan and amend and
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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
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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
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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
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July 30, 2009, for shares of common stock of the Company ("Common Stock"); and
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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%
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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
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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
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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
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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,
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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
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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
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State of Delaware and the adoption of the organizational actions (including,
without limitation, the adoption of Newco's bylaws) attached hereto as Exhibit
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G; and
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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
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
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has been filed with the Department of Commerce and Industry Services of the
State of Michigan (the "DCIS"); and
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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
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Stock") shall accrue dividends on a quarterly basis payable solely in kind (the
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"PIK Shares") and shall be (together with accrued and cumulated dividends
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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
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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
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I hereto ("Registration Rights Agreement"); and
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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
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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 Newco. 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.
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
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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
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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
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Five Million Dollars ($5,000,000.00) (the "First Tranche Purchase Price"). Such
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sale and purchase shall be 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
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Closing") shall take place at 10:00 A.M., New York City time, on the second
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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
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time as may be mutually agreed to by the parties hereto (the "First Tranche
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Closing Date").
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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
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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
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cash purchase price of Five Million Dollars ($5,000,000.00) (the "Second
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Tranche Purchase Price"). Such sale and purchase shall be effected on the
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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
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with the First Tranche Closing, the "Closings") shall take place at 10:00 A.M.,
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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
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First Tranche Closing Date, the "Closing Dates").
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(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
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Period"), if a Shortfall Event (defined below) occurs, LV, in its sole
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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
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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
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"Available Option Shares") determined by dividing the Shortfall Amount (defined
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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
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Option Closing") shall be effected by the Company executing and delivering to
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LV, duly registered in its name, a duly executed stock 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:
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(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
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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 "xxxxxxxxxxx.xxx BASE CASE Cash Source & Use Forecast 2001
(Jun 18 to Dec 31) 7/27/01 12:00 AM" delivered by the Company to the Landmark
Parties by e-mail dated July 27, 2001 (the "Base Forecast");/2/
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(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 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.
/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 forebearance agreements, and
that no additional obligation or liability to any lessor or lender has been
incurred.
/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.
(ii) "Shortfall Amount" means the cash amount required to cure an
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applicable Shortfall Event.
(iii) "Special Officer's Certificate" means a duly executed officer's
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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
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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 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
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incorporation (the "Articles of Incorporation") and the bylaws (the "Bylaws") of
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the Company, each as amended through July 30, 2001 (collectively, the "Michigan
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Organizational Documents").
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(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
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Charter and the bylaws of Newco, each as amended through the date of the Merger
(collectively, the "Delaware Organizational Documents" and together with the
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Michigan Organizational Documents, the "Organizational Documents").
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(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"). The Company has all requisite power and authority to
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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
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(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
the Company will consist of a total of six hundred fifty (650,000,000) million
shares of Newco 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
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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),
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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 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
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3.3(a) hereto and to the Series B Preferred Stock, Series C Preferred Stock and
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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,
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collectively with the Series B Certificate of Designation, the "Certificates of
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Designation") or the Restated Charter, as applicable. Except as set forth on
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Schedule 3.3(a), there are no other scrip, rights to subscribe to, calls or
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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
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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
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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 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 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 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.
(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.
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 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.
(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 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, 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.
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 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.
(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 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.
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.
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.
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 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 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.
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 27,
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 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.
(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.
(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.
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 pruchase 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.
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, 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, Jaffe, 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 Jaffe, Raitt, Heuer 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 000 Xxxxx Xxxxxxxx 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").
----------------------
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.).
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.
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:
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,
Jaffe, 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
-----------
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:
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, 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, 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
(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.
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).
(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
-----------
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).
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 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 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).
--------
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 000 X. Xxxxxxxx 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).
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).
---------------
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.
-----------------
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 have furnished the
Company in writing, with a copies to: (i) Xxxxxxx & Savage,
P.C., 0000 Xxxx xx Xxxxxxx Xxxxxx, Xxxxxxx, XX 00000
(facsimile: (000) 000-0000), Attention: Xxxxxx X. Xxxxxxx;
and (ii) Xxxxxxx Xxxx & Xxxxxxxxx, 000 Xxxxxxx Xxxxxx, Xxx
Xxxx, XX 00000 (facsimile: (000) 000-0000), Attention:
Xxxxxxx X. Xxxxx, Xx.
(ii) if to the Company, at 000 X. Xxxxxxxx Xxxxxx, 00/xx/
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, Raitt, Heuer & Xxxxx, P.C.,
Xxx Xxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, XX 00000
(facsimile: (000) 000-0000), Attention: Xxxxx Sugar.
(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 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 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.
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 PAGE INTENTIONALLY LEFT BLANK -- SIGNATURE PAGE FOLLOWS]
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: VP/Sec/Treasurer
TABLE OF CONTENTS
-----------------
SECTION 1. AUTHORIZATION OF SERIES B PREFERRED STOCK........................................ 4
-----------------------------------------
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............................ 5
2.3. Issuance of Second Tranche of Series B Preferred Stock........................... 5
2.4. Issuance of Additional Tranches of Series B Preferred Stock...................... 6
2.5. Equitable Adjustment............................................................. 8
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................................... 9
---------------------------------------------
3.1. Corporate Organization and Authority............................................. 9
3.2. Subsidiaries..................................................................... 9
3.3. Capitalization................................................................... 10
3.4. Issuance of Common Stock......................................................... 11
3.5. Corporate Proceedings, etc....................................................... 12
3.6. Consents and Approvals........................................................... 12
3.7. Absence of Defaults, Conflicts, etc.............................................. 12
3.8. Absence of Certain Developments.................................................. 13
3.9. Securities Law Issues............................................................ 13
3.10. Acknowledgement of Dilution...................................................... 15
3.11. No Bankruptcy.................................................................... 15
3.12. Compliance with Law.............................................................. 15
3.13. Litigation....................................................................... 16
3.14. Absence of Undisclosed Liabilities............................................... 16
3.15. Tax Matters...................................................................... 16
3.16. Intellectual Property............................................................ 17
3.17. Software......................................................................... 19
3.18. Material Contracts............................................................... 20
3.19. Employees........................................................................ 20
3.20. Employee Benefit Plans........................................................... 21
3.21. Title to Tangible Assets......................................................... 22
3.22. Condition of Properties.......................................................... 22
3.23. Insurance........................................................................ 22
3.24. Membership Base; Demographic Activity............................................ 23
3.25. Voting Agreements................................................................ 23
3.26. Certain Interests................................................................ 24
3.27. Registration Rights.............................................................. 24
3.28. Private Offering................................................................. 24
3.29. Brokerage........................................................................ 24
3.30. Minute Books..................................................................... 24
3.31. Change of Control................................................................ 25
i
3.32. Material Facts................................................................... 25
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE LANDMARK PARTIES........................... 25
------------------------------------------------------
4.1. Corporate Proceedings, etc....................................................... 25
4.2. Consents and Approvals........................................................... 25
4.3. Investment Representation........................................................ 26
4.4. Access to Other Information...................................................... 26
4.5. Risks of Investment.............................................................. 26
SECTION 5. COVENANTS OF THE PARTIES......................................................... 27
------------------------
5.1. Securities Compliance............................................................ 27
5.2. Reservation of Stock Issuable Upon Conversion or Exercise of the Securities...... 27
5.3. Form D; Blue Sky Laws............................................................ 27
5.4. Best Efforts..................................................................... 28
5.5. Resale of Securities............................................................. 28
5.6. Covenants Pending the Closings................................................... 28
5.7. Further Assurance; Securities Law Assurances..................................... 29
5.8. Financial and Business Information............................................... 29
5.9. Inspection....................................................................... 31
5.10. Confidentiality.................................................................. 31
5.11. Conduct of Business.............................................................. 32
5.12. Lost, etc. Certificates Evidencing Shares (or Shares of Common Stock); Exchange.. 32
5.13. Termination...................................................................... 33
5.14. Option Repricing................................................................. 33
5.15. Payment Defaults................................................................. 33
SECTION 6. LANDMARK CONDITIONS FOR FIRST TRANCHE CLOSING.................................... 34
---------------------------------------------
6.1. Representations and Warranties................................................... 34
6.2. Compliance with Agreement........................................................ 34
6.3. Officer's Certificate............................................................ 34
6.4. Default Under Senior Secured Note, this Agreement or Forbearance Agreements...... 34
6.5. Pending or Threatened Litigation................................................. 34
6.6. Counsel's Opinion................................................................ 35
6.7. Forbearance Agreement............................................................ 35
6.8. Adverse Development.............................................................. 35
6.9. Shareholders Agreement........................................................... 35
6.10. Registration Rights Agreement.................................................... 36
6.11. Shareholder Approval and Adoption of Restated Charter............................ 36
6.12. Filing of Charter Terms; Merger.................................................. 36
6.13. Voting Agreements................................................................ 36
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6.14. State Law Concerns............................................................... 36
6.15. Conversion of Debt to Employees.................................................. 37
6.16. Employment Agreements............................................................ 37
6.17. Insurance........................................................................ 37
6.18. Key Man Life Insurance........................................................... 37
6.19. Election of Directors............................................................ 37
6.20. Member Metrics................................................................... 37
6.21. Expenses......................................................................... 38
6.22. NASDAQ Listing................................................................... 38
6.23. Consents......................................................................... 38
6.24. Payment Defaults................................................................. 38
6.25. Warrant Re-Issuance.............................................................. 38
6.26. Approval of Proceedings.......................................................... 38
SECTION 7. LANDMARK CONDITIONS FOR SECOND TRANCHE CLOSING................................... 38
----------------------------------------------
7.1. Representations and Warranties................................................... 39
7.2. Compliance with Agreement........................................................ 39
7.3. Officer's Certificate............................................................ 39
7.4. Default Under Senior Secured Note, this Agreement or Forbearance Agreements...... 39
7.5. Counsel's Opinion................................................................ 39
7.6. Adverse Development.............................................................. 40
7.7. Voting Agreements; Merger; Filing of Restated Charter............................ 40
7.8. Approval of Proceedings.......................................................... 40
7.9. Option Repricing and Reissuance.................................................. 40
7.10. Continued Conditions............................................................. 40
SECTION 8. COMPANY CLOSING CONDITIONS....................................................... 40
--------------------------
8.1. Representations and Warranties................................................... 41
8.2. Compliance with Agreement........................................................ 41
8.3. Landmark's Certificates.......................................................... 41
8.4. Injunction....................................................................... 41
8.5. Shareholders Agreement........................................................... 41
8.6. Registration Rights Agreement.................................................... 41
SECTION 9. EXCLUSIVITY AND TERMINATION...................................................... 41
---------------------------
9.1. Takeover Proposal................................................................ 41
9.2. Termination...................................................................... 43
9.3. Notice of Termination............................................................ 44
9.4. Fees and Expenses................................................................ 45
SECTION 10. INTERPRETATION OF THIS AGREEMENT................................................. 46
--------------------------------
10.1. Terms Defined.................................................................... 46
10.2. Accounting Principles............................................................ 54
-iii-
10.3. Directly or Indirectly........................................................... 54
10.4. Governing Law.................................................................... 54
10.5. Paragraph and Section Headings................................................... 55
SECTION 11. MISCELLANEOUS.................................................................... 55
-------------
11.1. Notices.......................................................................... 55
11.2. Expenses and Taxes............................................................... 55
11.3. Reproduction of Documents........................................................ 56
11.4. Survival......................................................................... 56
11.5. Indemnity........................................................................ 56
11.6. Successors and Assigns; Assignability............................................ 58
11.7. Entire Agreement; Amendment and Waiver........................................... 58
11.8. Severability..................................................................... 58
11.9. Counterparts..................................................................... 59
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, Raitt, Heuer & Xxxxx opinion
EXHIBIT P Shareholders Agreement
EXHIBIT Q Approved Plan
EXHIBIT R Employee Side Letters
-iv-
