SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report:
October 26, 1999
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CALIBER LEARNING NETWORK, INC.
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(Exact Name of Registrant as Specified in Charter)
Maryland 000-23945 52-2001020
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(State of Incorporation) (Commission File Number) (IRS Employer
Identification No.)
500 South Exeter Street
Baltimore, Maryland 21202
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(Address of principal executive offices) (Zip Code)
(410) 843-1000
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(Registrant's telephone number)
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Item 5. Other Events.
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In a private placement, the Company raised $15,000,000 through the sale
of 150,000 shares of its Series A Convertible Preferred Stock ("Preferred
Stock") to three funds managed by Fleming Asset Management. The Preferred Stock
is convertible into the Company's Common Stock at $5.50 per share, subject to
adjustment under certain circumstances. The holders of the Preferred Stock, as a
separate class, are entitled to elect one person to the Company's Board of
Directors. The Company will use the net proceeds of the investment to fund
future development opportunities and for general corporate purposes.
Item 7. Financial Statements and Exhibits.
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(c) Exhibits.
Exhibit No. Description
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3.01 Articles Supplementary
10.01 Preferred Stock Purchase Agreement among Caliber
Learning Network, Inc. and Fleming US Discovery
Fund III, L.P.
10.02 Preferred Stock Purchase Agreement among Caliber
Learning Network, Inc. and Fleming US Discovery
Offshore Fund III, L.P.
10.03 Preferred Stock Purchase Agreement among Caliber
Learning Network, Inc. and Robert Fleming Nominees
Limited
10.04 Registration Rights Agreement among Caliber
Learning Network, Inc., Fleming US Discovery Fund
III, L.P., Fleming US Discovery Offshore Fund,
L.P. and Robert Fleming Nominees Limited
10.05 Stockholders' Agreement among Caliber Learning
Network, Inc., Fleming US Discovery Fund III,
L.P., Fleming US Discovery Offshore Fund, L.P.,
Robert Fleming Nominees Limited and Chris L.
Nguyen
99.1 Press Release dated October 27, 1999
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: October 29, 1999 CALIBER LEARNING NETWORK, INC.
By: /s/ Chris L. Nguyen
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Chris L. Nguyen, President and
Chief Executive Officer
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CALIBER LEARNING NETWORK, INC.
FORM 8-K
EXHIBIT INDEX
Exhibit No. Description
----------- ------------
3.01 Articles Supplementary
10.01 Preferred Stock Purchase Agreement among Caliber
Learning Network, Inc. and Fleming US Discovery
Fund III, L.P.
10.02 Preferred Stock Purchase Agreement among Caliber
Learning Network, Inc. and Fleming US Discovery
Offshore Fund III, L.P.
10.03 Preferred Stock Purchase Agreement among Caliber
Learning Network, Inc. and Robert Fleming Nominees
Limited
10.04 Registration Rights Agreement among Caliber
Learning Network, Inc., Fleming US Discovery Fund
III, L.P., Fleming US Discovery Offshore Fund,
L.P. and Robert Fleming Nominees Limited
10.05 Stockholders' Agreement among Caliber Learning
Network, Inc., Fleming US Discovery Fund III,
L.P., Fleming US Discovery Offshore Fund, L.P.,
Robert Fleming Nominees Limited and Chris L.
Nguyen
99.1 Press Release dated October 27, 1999
CALIBER LEARNING NETWORK, INC.
ARTICLES SUPPLEMENTARY
CLASSIFYING
SERIES A CONVERTIBLE PREFERRED STOCK
Caliber Learning Network, Inc., a Maryland corporation, having its
principal office in Baltimore City, Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: Pursuant to the authority expressly vested in the Board of
Directors of the Corporation by Article SIXTH of the Charter of the Corporation,
the Board of Directors has duly divided and classified 225,000 shares of the
Common Stock, par value $.01 per share, of the Corporation into a series
designated as "Series A Convertible Preferred Stock, par value $.01 per share,"
of the Corporation and has provided for the issuance of such series (the "Series
A Preferred Stock").
SECOND: The classification decreases the number of shares classified as
Common Stock from 50,000,000 shares immediately prior to the reclassification to
49,775,000.
THIRD: The terms of the Series A Convertible Preferred Stock as set by
the Board of Directors, including preferences, conversion or other rights,
voting powers, restrictions, limitations as to dividends, qualifications, or
terms or conditions of redemption, are as follows:
1. Dividend Rights.
(a) General Dividend Obligation. The Corporation
shall pay, when and as declared by the Corporation's Board of Directors, to the
holders of the Series A Preferred then outstanding, out of the assets of the
Corporation legally available therefor, dividends in the manner, at the times,
in the amounts and with such priorities as are provided for in this Section 1.
(b) Dividend Rate. (i) Commencing on the date hereof,
dividends on the Series A Preferred then outstanding will accrue and be payable,
subject to Section 1(b)(ii) below, at a rate (the "Dividend Rate") per annum
equal to 7.5% of the Preferred Dividend Value thereof on the Dividend Payment
Date (defined below). Dividends will be calculated on the basis of a year
consisting of twelve months of thirty days each in a year.
(ii) In the event that the Corporation shall at any
time or from time to
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time, declare, order, pay or make a dividend or other distribution (whether in
cash, securities, rights to purchase securities or other property) on its Common
Stock or any preferred stock (other than the Series A Preferred then
outstanding) that exceeds the dividend payable on the Series A Preferred then
outstanding, then the Dividend Rate for the next Dividend Payment Date for the
holders of the Series A Preferred then outstanding shall be such greater amount.
(c) Manner of Payment. Dividends shall be paid, at
the election of the Corporation, in cash or additional shares of Series A
Preferred Stock (the "Dividend Shares").
(d) Accrual of Dividends. (i) Dividends on each share
of Series A Preferred Stock then outstanding shall accrue cumulatively on a
daily basis from the date hereof to and including the date on which the
redemption or conversion of such share of Series A Preferred Stock then
outstanding shall have been effected or on which full payment with respect to
such shares of Series A Preferred Stock shall have been made pursuant to any
liquidation, dissolution or winding-up of the Corporation, whether or not such
dividends have been declared and whether or not there shall be (at the time such
dividends became or become payable or any other time) profits, surpluses or
other funds of the Corporation legally available for the payment of dividends.
(ii) To the extent not paid on any Dividend Payment
Date, all dividends which have accrued on any share of Series A Preferred Stock
then outstanding during the period from and including the preceding Dividend
Payment Date (or from and including the date hereof in the case of the initial
Dividend Payment Date) to (but excluding) such Dividend Payment Date shall be
added on such Dividend Payment Date to the Preferred Dividend Value of such
share of Series A Preferred Stock then outstanding (so that, without limitation,
dividends shall thereafter accrue in respect of the amount of such accrued but
unpaid dividends) and shall remain a part thereof until (but only until) such
dividends are paid. The "Preferred Dividend Value" of any share of Series A
Preferred Stock then outstanding as of a particular date shall be equal to the
sum of one hundred dollars ($100.00) plus an amount equal to any accrued and
unpaid dividends (whether or not earned or declared) on such share of Series A
Preferred Stock then outstanding, which accrued and unpaid dividends have been
added to the Preferred Dividend Value of such share of Series A Preferred Stock
then outstanding on any Dividend Payment Date pursuant to this Section 1(d)(ii)
and not thereafter paid.
(e) Payment Dates. Full cumulative dividends on the
shares of Series A Preferred Stock then outstanding shall be payable quarterly
in arrears, on the last day of March, June, September and December in each year
(each, a "Dividend Payment Date"). The first Dividend Payment Date shall be
December 31, 1999. If any Dividend Payment Date shall be on a day other than a
Business Day, then the Dividend Payment Date shall be on the next succeeding
Business Day. An amount equal to the full cumulative dividends shall also be
payable, in satisfaction of such dividend obligation, upon liquidation or
redemption as provided under Section 2 or Section 5 hereof. The Board of
Directors may fix a record date for the
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determination of holders of shares of Series A Preferred Stock entitled to
receive payment of the dividends payable pursuant to this Section 1, which
record date shall not be more than 60 days prior to the Dividend Payment Date.
(f) Amounts Payable. The amount of dividends payable
on Series A Preferred Stock on each Dividend Payment Date shall be the full
cumulative dividends which are unpaid through and including such Dividend
Payment Date. Dividends which are not paid for any reason whatsoever on a
Dividend Payment Date shall cumulate (as set forth in Section 1(d)(ii) above)
until paid and shall be payable on the next Dividend Payment Date on which
payment can lawfully be made (or upon liquidation or redemption as provided
herein). If, for whatever reason, all payments have not been made with respect
to any share of Series A Preferred Stock as required by Section 2 on a
distribution date (other than because of a failure by the holder thereof to
tender such shares for payment on such date), then, notwithstanding any other
provision hereof, dividends shall continue to accumulate on such outstanding
shares until paid.
(g) Limitation on Dividends, Repurchases and
Redemptions. So long as any shares of Series A Preferred Stock shall be
outstanding, the Corporation shall not declare or pay or set apart for payment
any dividends or make any other distributions on any Junior Securities (except
with respect to the 1997 Stock Option Plan and the 1998 Stock Incentive Plan),
whether in cash, securities, rights to purchase securities or other property
(other than dividends or distributions payable in shares of the class or series
upon which such dividends or distributions are declared or paid), nor shall the
Corporation or any of its Subsidiaries purchase, redeem or otherwise acquire for
any consideration or make payment on account of the purchase, redemption or
other retirement of any Parity Securities or Junior Securities, nor shall any
monies be paid or made available for a sinking fund for the purchase or
redemption of any Parity Securities or Junior Securities, unless with respect to
all of the foregoing all dividends or other distributions to which the holders
of shares of Series A Preferred Stock then outstanding shall have been entitled,
pursuant to Section 1(a) hereof, shall have been paid or declared and a sum of
money has been set apart for the full payment thereof.
(h) Pro Rata Payments. In the event that full
dividends are not paid or made available to the holders of all outstanding
Series A Preferred Stock and of any Parity Securities and funds available for
payment of dividends shall be insufficient to permit payment in full to holders
of all such stock of the full preferential amounts to which they are then
entitled, then the entire amount available for payment of dividends shall be
distributed ratably among all such holders of shares of Series A Preferred and
of any Parity Securities in proportion to the full amount to which they would
otherwise be respectively entitled.
2. Preference on Liquidation.
(a) Liquidation Preference for Series A Preferred
Stock. In the event
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that the Corporation shall liquidate, dissolve or wind up, whether voluntarily
or involuntarily, no distribution shall be made to the holders of shares of
Common Stock or other Junior Securities (and no monies shall be set apart for
such purpose) unless prior thereto, the holders of shares of Series A Preferred
Stock shall have received an amount per share equal to the greater of (i) the
sum of (x) the Liquidation Value, plus (y) all declared but unpaid dividends
thereon through the date of distribution or (ii) ratable distributions
determined with respect to the holders of Series A Preferred Stock and Common
Stock on the basis of the number of shares of Common Stock into which such
Series A Preferred Stock could be converted pursuant to the provisions of
Section 4 hereof immediately prior to such distribution, on a per share basis
(the greater of (i) and (ii) above is herein referred to as the "Series A
Liquidation Preference"). The "Liquidation Value" means $100 per share with
respect to the Series A Preferred Stock.
(b) Pro Rata Payments. If, upon any such liquidation,
dissolution or other winding up of the affairs of the Corporation, the assets of
the Corporation shall be insufficient to permit the payment in full of the
Series A Liquidation Preference for each share of Series A Preferred Stock then
outstanding and the full liquidating payments on all Parity Securities, then the
assets of the Corporation remaining shall be ratably distributed among the
holders of Series A Preferred Stock and of any Parity Securities in proportion
to the full amounts to which they would otherwise be respectively entitled if
all amounts thereon were paid in full.
(c) Sale Not a Liquidation. Neither the voluntary
sale, conveyance, exchange or transfer (for cash, shares of stock, securities or
other consideration) of all or substantially all the property or assets of the
Corporation nor the consolidation, merger or other business combination of the
Corporation with or into one or more corporations shall be deemed to be a
liquidation, dissolution or winding-up, voluntary or involuntary, of the
Corporation.
(d) Notice of Liquidation. Written notice of any
liquidation, dissolution or winding up of the Corporation, stating the payment
date or dates when and the place or places where amounts distributable in such
circumstances shall be payable, shall be given by first class mail, postage
prepaid, not less than thirty (30) days prior to any payment date specified
therein, to the holders of record of the Series A Preferred Stock at their
respective addresses as shall appear on the records of the Corporation.
3. Voting.
(a) General. In addition to any voting rights
provided in the Corporation's Charter or by law, the Series A Preferred Stock
shall vote together with the Common Stock as a single class on all actions to be
voted on by the stockholders of the Corporation. Each share of Series A
Preferred Stock shall entitle the holder thereof to such number of votes per
share on each such action as shall equal the number of shares of Common Stock
into which each share of Series A Preferred Stock is then convertible. The
holders of Series A Preferred Stock shall be entitled to notice of any
stockholder's meeting in accordance
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with the By-Laws of the Corporation.
(b) Board of Directors. The Corporation shall not,
without the written consent or affirmative vote of the holders representing at
least a majority of the shares of Series A Preferred Stock then outstanding,
given in writing or by vote at a meeting, consenting or voting (as the case may
be) separately as a class, increase the maximum number of directors constituting
the Board of Directors to a number in excess of ten (10).
(c) Election of Directors. So long as either (i) the
Fleming Holders own at least 50% of the outstanding Shares or (ii) any
Transferee owns at least 50% of the outstanding Shares, the holders of Series A
Preferred Stock, consenting or voting (as the case may be) as a separate class,
shall be entitled, but not required, to elect one (1) director of the
Corporation (the "Preferred Director").
Holders of at least a majority of the outstanding shares of
Series A Preferred Stock shall exercise the right to elect a Preferred Director
by written notice to the Corporation, whereupon the Corporation shall call a
meeting of the holders of the Series A Preferred Stock to elect a Preferred
Director. Thereafter, the holders of Series A Preferred Stock, consenting or
voting as a class (as the case may be), shall be entitled to elect a Preferred
Director at any meeting (or in a written consent in lieu thereof) held for the
purpose of electing directors until such time as holders of at least a majority
of the outstanding shares of Series A Preferred Stock shall notify the
Corporation in writing that they no longer wish to exercise their right to elect
a Preferred Director.
At any meeting (or in a written consent in lieu thereof) held
for the purpose of electing directors, (i) the presence in person or by proxy
(or the written consent) of the holders representing a majority of the shares of
Series A Preferred Stock then outstanding shall constitute a quorum of such
class for the election of the Preferred Director; and (ii) the absence of the
presence in person or by proxy (or written consent) of the holders representing
a majority of the shares of Common Stock then outstanding shall not affect the
right of a quorum of holders of Series A Preferred Stock to elect the Preferred
Director. Any Preferred Director may be removed with or without cause by, and
shall not be removed except by, the holders representing a majority of the
shares of Series A Preferred Stock then outstanding, present in person or by
proxy and voting at a meeting of stockholders, or of the holders of Series A
Preferred Stock called for that purpose, or by written consent signed by the
holders representing a majority of the shares of Series A Preferred Stock then
outstanding.
A vacancy in the directorship to be held by the Preferred
Director shall be filled only by vote or written consent of the holders of the
Series A Preferred Stock as provided above. Unless otherwise required by the
laws of the State of Maryland, any holder or holders of at least a majority of
the outstanding shares of Series A Preferred Stock shall have the right to call
a meeting of the holders of Series A Preferred Stock of the Corporation for the
purpose of electing
<PAGE>
a Preferred Director and filling vacancies of Preferred Directors.
4. Conversion. The holders of shares of Series A Preferred
Stock shall have the right to convert all or a portion of such shares into fully
paid and nonassessable shares of Common Stock or any capital stock or other
securities into which such Common Stock shall have been changed or any capital
stock or other securities resulting from a reclassification thereof as follows:
(a) Right to Convert. Subject to and upon compliance
with the provisions of this Section 4, a holder of shares of Series A Preferred
Stock shall have the right, at the option of such holder, at any time, to
convert any or all of such shares into the number of fully paid and
nonassessable shares of Common Stock (calculated as to each conversion rounded
down to the nearest 1/100th of a share) obtained by dividing the aggregate
Liquidation Value of the shares to be converted, plus all declared but unpaid
dividends thereon through the date of conversion (unless the holder of shares of
Series A Preferred Stock being so converted shall have elected to receive any
such dividends in respect of the shares being converted subsequent to
conversion), by the Conversion Price and by surrender of such shares, such
surrender to be made in the manner provided in paragraph (b) of this Section 4.
The Common Stock issuable upon conversion of the shares of Series A Preferred
Stock, when such Common Stock shall be issued in accordance with the terms
hereof, are hereby declared to be and shall be duly authorized, validly issued,
fully paid and nonassessable Common Stock held by the holders thereof.
(b) Mechanics of Conversion. Each holder of Series A
Preferred Stock that desires to convert the same into shares of Common Stock
shall surrender the certificate or certificates therefor, duly endorsed, at the
principal office of the Corporation or of any transfer agent for the Series A
Preferred Stock or Common Stock, accompanied by written notice to the
Corporation that such holder elects to convert the same and stating therein the
number of shares of Series A Preferred Stock being converted and whether all
declared and unpaid dividends in respect of such shares shall be included in the
calculation set forth in Section 4(a) hereof, and setting forth the name or
names in which such holder wishes the certificate or certificates for shares of
Common Stock to be issued if such name or names shall be different than that of
such holder. Thereupon, the Corporation shall issue and deliver at such office
on not later than the fifth Business Day thereafter (unless such conversion is
in connection with an underwritten public offering of Common Stock, in which
event concurrently with such conversion) to such holder or on such holder's
written order, (i) a certificate or certificates for the number of validly
issued, fully paid and nonassessable full shares of Common Stock to which such
holder is entitled and (ii) if less than the full number of shares of Series A
Preferred Stock evidenced by the surrendered certificate or certificates are
being converted, a new certificate or certificates, of like tenor, for the
number of shares evidenced by such surrendered certificate or certificates less
the number of shares converted.
Each conversion shall be deemed to have been effected immediately prior
<PAGE>
to the close of business on the date of such surrender of the shares to be
converted (except that if such conversion is in connection with an underwritten
public offering of Common Stock, then such conversion shall be deemed to have
been effected upon such surrender) so that the rights of the holder thereof as
to the shares being converted shall cease at such time except for the right to
receive shares of Common Stock and if the holder of the shares being so
converted shall have elected to receive dividends subsequent to such conversion,
all accrued and unpaid dividends in accordance herewith, and the person entitled
to receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder of such shares of Common Stock at
such time.
(c) Conditional Conversion. Notwithstanding any other
provision hereof, if conversion of any shares of Series A Preferred Stock is to
be made in connection with a public offering of Common Stock or any transaction
described in Section 4(d)(vii) hereof, the conversion of any shares of Series A
Preferred Stock may, at the election of the holder thereof, be conditioned upon
the consummation of the public offering or such transaction, in which case such
conversion shall not be deemed to be effective until the consummation of such
public offering or transaction.
(d) Adjustment of the Conversion Price. The
Conversion Price shall be adjusted from time to time as described below in this
Section 4(d); provided that if a plan or arrangement described in this Section
4(d), pursuant to the adjustments herein, (I) results in a Conversion Price
below the Market Price on the Issue Date (a "Below Market Conversion Price") and
(II) results in the number of Conversion Shares then issuable at a Below Market
Conversion Price exceeding 19.9% of the number of shares of Common Stock
oustanding on the Issue Date, then the Corporation shall, as promptly as
practicable, obtain such shareholder approval as required by the Nasdaq Stock
Market, pursuant to Rule 4310(c)(25)(H)(i)(d) of the NASD Manual.
(i) Adjustment for Stock Splits and Combinations. If the
Corporation at any time or from time to time after the Issue Date, pays
a stock dividend in shares of its Common Stock, issues any convertible
debt securities without adequate consideration therefor, effects a
subdivision of the outstanding Common Stock, combines the outstanding
shares of Common Stock, issues by reclassification of shares of its
Common Stock any shares of capital stock of the Corporation, makes a
distribution of any of its assets (other than cash dividends payable
out of earnings or retained earnings in the ordinary course of
business) then, in each such case, the Conversion Price in effect
immediately prior to such event shall be adjusted so that each holder
of shares of Series A Preferred Stock shall have the right to convert
its shares of Series A Preferred Stock into the number of shares of
Common Stock which it would have owned after the event had such shares
of Series A Preferred Stock been converted immediately before the
happening of such event. Any adjustment under this Section 4(d)(i)
shall become effective retroactively immediately after the record date
in the case of a dividend and
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distribution and shall become effective immediately after the effective
date in the case of a issuance, subdivision, combination or
reclassification. If the Corporation pays a stock dividend in shares of
its Common Stock and the holders of the Series A Preferred Stock
received such stock dividend pursuant to Section 1(a) hereof, the
Conversion Price shall not be adjusted for such stock dividend under
this Section 4(d)(i).
(ii) Issuance of Additional Shares of Stock. If at any time
the Corporation shall (except as hereinafter provided) issue or sell
Additional Shares of Stock in exchange for consideration in an amount
per Additional Share of Stock less than the Conversion Price in effect
immediately prior to such issuance or sale of Additional Shares of
Stock, then the Conversion Price as to the Common Stock into which the
Series A Preferred Stock is convertible immediately prior to such
adjustment shall be adjusted to equal the price determined by
multiplying the Conversion Price by a fraction, of which:
(A) the numerator shall be (1) the number of shares
of Common Stock outstanding immediately prior to such issuance
or sale of Additional Shares of Stock plus (2) the number of
shares of Common Stock which the aggregate amount of
consideration, if any, received by the Corporation for the
total number of such Additional Shares of Stock so issued or
sold would purchase at the greater of (I) the Market Price per
share of the Common Stock in effect immediately prior to such
issuance or sale of Additional Shares of Stock or (II) the
Conversion Price in effect immediately prior to such issuance
or sale of Additional Shares of Stock, and
(B) the denominator shall be the number of shares of
Common Stock outstanding immediately after such issuance or
sale of Additional Shares of Stock; provided, however, that
such adjustment shall be made only if the Conversion Price
determined from such adjustment shall be less than the
Conversion Price in effect immediately prior to the issuance
of such Additional Shares of Stock.
The provisions of this Section 4(d)(ii) shall not apply to any issuance
of Additional Shares of Common Stock for which an adjustment is provided under
Section 4(d)(i) or which are dividends or distributions received by the holders
of the Series A Preferred Stock pursuant to Section 1(a) hereof.
(iii) (A) Issuance of Warrants or Other Rights. If at any time
(i) the Corporation shall in any manner (whether directly or by
assumption in a merger in which the Corporation is the surviving
corporation) issue or sell any warrants or other rights to subscribe
for or purchase any Additional Shares of Stock or any Convertible
Securities,
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whether or not the rights to exchange or convert thereunder are
immediately exercisable, and the consideration (computed in accordance
with Section 4(d)(vi)(A) hereof) received for such warrants or other
rights or such Convertible Securities shall be less than the Conversion
Price in effect immediately prior to the time of such issue or sale,
then the Conversion Price shall be adjusted as provided in Section
4(d)(ii). No further adjustments of the Conversion Price shall be made
upon the actual issue of such Common Stock or of such Convertible
Securities upon exercise of such warrants or other rights or upon the
actual issue of such Common Stock upon such conversion or exchange of
such Convertible Securities.
(B) Issuance of Convertible Securities. If at any time the
Corporation shall in any manner (whether directly or by assumption in a
merger in which the Corporation is the surviving corporation) issue or
sell, any Convertible Securities, whether or not the rights to convert
thereunder are immediately exercisable, and the consideration (computed
in accordance with Section 4(d)(vi)(A) hereof) received for such
Convertible Securities shall be less than the Conversion Price in
effect immediately prior to the time of such issue or sale, then the
Conversion Price shall be adjusted as provided in Section 4(d)(ii). No
adjustment of the Conversion Price shall be made under this Section
4(d)(iii)(B) upon the issuance of any Convertible Securities which are
issued pursuant to the exercise of any warrants or other subscription
or purchase rights therefor, if any such adjustment shall previously
have been made upon the issuance of such warrants or other rights
pursuant to Section 4(d)(iii)(A). No further adjustments of the
Conversion Price shall be made upon the actual issue of such Common
Stock upon conversion of such Convertible Securities and, if any issue
or sale of such Convertible Securities is made upon exercise of any
warrant or other right to subscribe for or to purchase any such
Convertible Securities for which adjustments of the Conversion Price
have been or are to be made pursuant to other provisions of this
Section 4(d), no further adjustments of the Conversion Price shall be
made by reason of such issue or sale.
(iv) Superseding Adjustments. If, at any time after any
adjustment of the Conversion Price at which the Series A Preferred
Stock is convertible shall have been made pursuant to Section 4(d)(iii)
as a result of any issuance of warrants, rights or Convertible
Securities,
(A) such warrants or rights, or the right of
conversion or exchange in such other Convertible Securities,
shall expire, and all or a portion of such warrants or rights,
or the right of conversion or exchange with respect to all or
a portion of such other Convertible Securities, as the case
may be, shall not have been exercised, or
(B) the consideration per share for which shares of
Stock are issuable pursuant to such warrants or rights, or the
terms of such other Convertible Securities, shall be increased
solely by virtue of provisions therein contained for
<PAGE>
an automatic increase in such consideration per share upon the
occurrence of a specified date or event,
then such previous adjustment shall be rescinded and annulled and the
Additional Shares of Stock which were deemed to have been issued by
virtue of the computation made in connection with the adjustment so
rescinded and annulled shall no longer be deemed to have been issued by
virtue of such computation. Thereupon, a recomputation shall be made of
the effect of such rights or options or other Convertible Securities on
the basis of
(C) treating the number of Additional Shares of Stock
or other property, if any, theretofore actually issued or
issuable pursuant to the previous exercise of any such
warrants or rights or any such right of conversion or
exchange, as having been issued on the date or dates of any
such exercise and for the consideration actually received and
receivable therefor, and
(D) treating any such warrants or rights or any such
other Convertible Securities which then remain outstanding as
having been granted or issued immediately after the time of
such increase of the consideration per share for which shares
of Stock or other property are issuable under such warrants or
rights or other Convertible Securities;
whereupon a new adjustment of the Conversion Price at which the Series
A Preferred Stock is convertible shall be made, which new adjustment
shall supersede the previous adjustment so rescinded and annulled.
(v) Adjustments Under Other Securities. Without limiting any
other rights available hereunder to the holders of the Series A
Preferred Stock, if there is an adjustment in the exercise or purchase
price (i) under any Convertible Securities other than the Series A
Preferred Stock, whether issued prior to or after the Issue Date, or
(ii) under any rights, options or warrants to purchase Additional
Shares of Stock, whether issued prior to or after the Issue Date which,
in either case, results in a reduction in the exercise or purchase
price with respect to such security or rights or results in an increase
in the number of Additional Shares of Stock obtainable under such
Convertible Security, right, option or warrant, then an adjustment
shall be made to the Conversion Price hereunder. Any such adjustment
pursuant to this Section 4(d)(v) shall be whichever of the following
results in a lower Conversion Price: (A) a reduction in the Conversion
Price equal to the percentage reduction in such exercise or purchase
price with respect to such Convertible Security, right, option or
warrant or (B) a reduction in the Conversion Price which will result in
the same percentage increase in the number of shares of Common Stock
available hereunder as the percentage increase in the number of
Additional Shares of Stock available under such Convertible Security,
right, option or warrant. Any such adjustment under this Section
4(d)(v) shall only be made if it would
<PAGE>
result in a lower Conversion Price than that which would be determined
pursuant to any other antidilution adjustment otherwise required
hereunder as a result of the event or circumstance which triggered the
adjustment to such Convertible Security, right, option or warrant, and
if an adjustment is made pursuant to this Section 4(d)(v), such other
antidilution adjustment otherwise required hereunder shall not be made
as a result of such event or circumstance.
(vi) Other Provisions Applicable to Adjustments under this
Section. The following provisions shall be applicable to making
adjustments to the shares of Common Stock into which the Series A
Preferred Stock is convertible and the Conversion Price at which the
Series A Preferred Stock is convertible provided for in this Section
4(d):
(A) Computation of Consideration. To the extent that
any Additional Shares of Stock or any Convertible Securities
or any warrants or other rights to subscribe for or purchase
any Additional Shares of Stock or any Convertible Securities
shall be issued for cash consideration, the consideration
received by the Corporation therefor shall be the amount of
the cash received by the Corporation therefor, or, if such
Additional Shares of Stock or Convertible Securities are
offered by the Corporation for subscription, the subscription
price, or, if such Additional Shares of Stock or Convertible
Securities are sold to underwriters or dealers for public
offering without a subscription offering, the public offering
price (subtracting from the foregoing (i) in any case, any
amounts paid or payable by the Corporation for accrued
interest or accrued dividends at the time of issuance, (ii) in
the case of any public offering, any compensation or discounts
incurred by the Corporation for and in the underwriting of, or
otherwise in connection with, the issuance thereof, and (iii)
in the case of any transaction other than a public offering,
any compensation, discounts or expenses paid or incurred by
the Corporation for and in the underwriting of, or otherwise
in connection with, the issuance thereof; provided that, in
the case of clause (iii), such amount is in excess of eight
percent (8%) of the aggregate costs of such transactions, and
then only to the extent of such excess). To the extent that
such issuance shall be for a consideration other than cash,
then except as herein otherwise expressly provided, the amount
of such consideration shall be deemed to be the fair value of
such consideration at the time of such issuance as determined
in good faith by the Board of Directors of the Corporation. In
case any Additional Shares of Stock or any Convertible
Securities or any warrants or other rights to subscribe for or
purchase such Additional Shares of Stock or Convertible
Securities shall be issued in connection with any merger in
which the Corporation issues any securities, the amount of
consideration therefor shall be deemed to be the fair value,
as determined in good faith by the Board of Directors of the
Corporation, of such portion of the assets and business of the
nonsurviving corporation as such Board in good faith shall
determine to be attributable to such Additional Shares of
Stock,
<PAGE>
Convertible Securities, warrants or other rights, as the case
may be. The consideration for any Additional Shares of Stock
issuable pursuant to any warrants or other rights to subscribe
for or purchase the same shall be the consideration received
by the Corporation for issuing such warrants or other rights
plus the additional consideration payable to the Corporation
upon exercise of such warrants or other rights. The
consideration for any Additional Shares of Stock issuable
pursuant to the terms of any Convertible Securities shall be
the consideration received by the Corporation for issuing
warrants or other rights to subscribe for or purchase such
Convertible Securities, plus the consideration paid or payable
to the Corporation in respect of the subscription for or
purchase of such Convertible Securities, plus the additional
consideration, if any, payable to the Corporation upon the
exercise of the right of conversion or exchange in such
Convertible Securities. In case of the issuance at any time of
any Additional Shares of Stock or Convertible Securities in
payment or satisfaction of any dividends upon any class of
stock other than Common Stock, the Corporation shall be deemed
to have received for such Additional Shares of Stock or
Convertible Securities a consideration equal to the amount of
such dividend so paid or satisfied.
(B) When Adjustments to Be Made. The adjustments
required by this Section 4(d) shall be made whenever and as
often as any event requiring an adjustment shall occur, except
that any adjustment of the Conversion Price that would
otherwise be required may be postponed (except in the case of
a subdivision or combination of shares of the Common Stock, as
provided for in Section 4(d)(i)) up to, but not beyond the
date of exercise if such adjustment either by itself or with
other adjustments not previously made amount to a change in
the Conversion Price of less than $.05. Any adjustment
representing a change of less than such minimum amount (except
as aforesaid) which is postponed shall be carried forward and
made on the earlier of (I) such time as such adjustment,
together with other adjustments required by this Section 4(d)
and not previously made, would result in an aggregate
adjustment equal to or in excess of a minimum adjustment or
(II) on the date of conversion. For the purpose of any
adjustment, any event shall be deemed to have occurred at the
close of business on the date of its occurrence.
(C) Fractional Interests. In computing adjustments
under this Section 4(d), fractional interests in the Common
Stock shall be taken into account to the nearest 1/100th of a
share.
(D) Challenge to Good Faith Determination. Whenever
the Board of Directors of the Corporation shall be required to
make a determination in good faith of the fair value of any
item under this Section 4(d), such determination may
<PAGE>
be challenged in good faith by a holder of Series A Preferred
Stock and any dispute shall be resolved by an investment
banking firm of recognized national standing jointly selected
by the Corporation and such holder. The fees of such
investment banker shall be borne by such holder if the
Corporation's calculation is determined to be between 95% and
105% of the calculation of such banker.
(vii) Reorganization, Reclassification, Merger or
Consolidation. If the Corporation shall at any time reorganize or
reclassify the outstanding shares of Common Stock (other than a change
in par value, or from no par value to par value, or from par value to
no par value, or as a result of a subdivision or combination) or
consolidate with or merge into another corporation (where the
Corporation is not the continuing corporation after such merger or
consolidation), the holders of Series A Preferred Stock shall
thereafter be entitled to receive upon conversion of the Series A
Preferred Stock in whole or in part, the same kind and number of shares
of stock and other securities, cash or other property (and upon the
same terms and with the same rights) as would have been distributed to
a holder upon such reorganization, reclassification, consolidation or
merger had such holder converted its Series A Preferred Stock
immediately prior to such reorganization, reclassification,
consolidation or merger (subject to subsequent adjustments under
Section 4(d) hereof). The Conversion Price upon such conversion shall
be the Conversion Price that would otherwise be in effect pursuant to
the terms hereof. Notwithstanding anything herein to the contrary, the
Corporation will not effect any such reorganization, reclassification,
merger or consolidation unless prior to the consummation thereof, the
corporation, which may be required to deliver any stock, securities or
other assets upon the conversion of the Series A Preferred Stock, shall
agree by an instrument in writing to deliver such stock, cash,
securities or other assets to the holders of the Series A Preferred
Stock. A sale, transfer or lease of all or substantially all of the
assets of the Corporation to another person shall be deemed a
reorganization, reclassification, consolidation or merger for the
foregoing purposes.
(viii) Exceptions to Adjustment of Conversion Price. Anything
herein to the contrary notwithstanding, the Corporation shall not make
any adjustment of the Conversion Price in the case of the issuance of
shares of Common Stock to holders of the Series A Preferred Stock upon
conversion of all or any portion of their shares of Series A Preferred
Stock.
(ix) Chief Financial Officer's Opinion. Upon each adjustment
of the Conversion Price, and in the event of any change in the rights
of a holder of Series A Preferred Stock by reason of other events
herein set forth, then and in each such case, the Corporation will
promptly obtain a certificate of the chief financial officer of the
Corporation, stating the adjusted Conversion Price, or specifying the
other shares of the Common Stock, securities or assets and the amount
thereof receivable as a result of such change in rights, and setting
forth in reasonable detail the method of calculation and the
<PAGE>
facts upon which such calculation is based. The Corporation will
promptly mail a copy of such certificate to the holders of Series A
Preferred Stock. If a holder disagrees with such calculation, the
Corporation agrees to obtain within thirty (30) business days an
opinion of a firm of independent certified public accountants selected
by the Corporation's Board of Directors and acceptable to such holder
to review such calculation and the opinion of such firm of independent
certified public accountants shall be final and binding on the parties
and shall be conclusive evidence of the correctness of the computation
with respect to any such adjustment of the Conversion Price.
(x) Corporation to Prevent Dilution. In case at any time or
from time to time conditions arise by reason of action taken by the
Corporation, which in the good faith opinion of its Board of Directors
or a majority of the holders of the Series A Preferred Stock are not
adequately covered by the provisions of this Section 4(d), and which
might materially and adversely affect the exercise rights of the
holders of the Series A Preferred Stock, the Board of Directors of the
Corporation shall appoint such firm of independent certified public
accountants acceptable to a majority of the holders of the Series A
Preferred Stock, which shall give their opinion upon the adjustment, if
any, on a basis consistent with the standards established in the other
provisions of this Section 4(d), necessary with respect to the
Conversion Price, so as to preserve, without dilution (other than as
specifically contemplated by the Charter), the exercise rights of the
holders of the Series A Preferred Stock. Upon receipt of such opinion,
the Board of Directors of the Corporation shall forthwith make the
adjustments described therein.
(e) No Impairment. The Corporation will not, by
amendment of its Charter or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Corporation, but will at all times in good faith assist in the carrying out of
all the provisions of Section 4 hereof and in the taking of all such action as
may be necessary or appropriate in order to protect the conversion rights of the
holders of the Series A Preferred Stock against impairment.
(f) No Fractional Shares Adjustments. No fractional
shares shall be issued upon conversion of the Series A Preferred Stock. If more
than one share of the Series A Preferred Stock is to be converted at one time by
the same stockholder, the number of full shares issuable upon such conversion
shall be computed on the basis of the aggregate amount of the shares to be
converted. Instead of any fractional shares of Common Stock which would
otherwise be issuable upon conversion of any shares of Series A Preferred Stock,
the Corporation will pay a cash adjustment in respect of such fractional
interest in an amount equal to the same fraction of the Market Price per share
of Common Stock at the close of business on the day of conversion which such
fractional share of Series A Preferred Stock would be convertible into on such
date.
<PAGE>
(g) Shares to be Reserved. The Corporation shall at
all times reserve and keep available, out of its authorized and unissued stock,
solely for the purpose of effecting the conversion of the Series A Preferred
Stock, such number of shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all of the Series A Preferred Stock from
time to time outstanding. The Corporation shall from time to time, in accordance
with the laws of the State of Maryland, increase the authorized number of shares
of Common Stock if at any time the number of shares of authorized but unissued
Common Stock shall be insufficient to permit the conversion in full of the
Series A Preferred Stock.
(h) Taxes and Charges. The Corporation will pay any
and all issue or other taxes that may be payable in respect of any issuance or
delivery of shares of Common Stock on conversion of the Series A Preferred
Stock. The Corporation shall not, however, be required to pay any tax which may
be payable in respect of any transfer involved in the issuance or delivery of
Common Stock in a name other than that of the Series A Preferred Stock, and no
such issuance or delivery shall be made unless and until the Person requesting
such issuance has paid to the Corporation the amount of such tax or has
established, to the satisfaction of the Corporation, that such tax has been
paid.
(i) Accrued Dividends. Upon conversion of any shares
of Series A Preferred Stock, the holder thereof shall be entitled to receive any
accrued but unpaid dividends in respect of the shares of Series A Preferred
Stock so converted to the date of such conversion.
(j) Closing of Books. The Corporation will at no time
close its transfer books against the transfer of any shares of Series A
Preferred Stock or of any shares of Common Stock issued or issuable upon the
conversion of any shares of Series A Preferred Stock in any manner which
interferes with the timely conversion of such shares of Series A Preferred
Stock.
5. Redemption
(a) Redemption Price. (i) Amount. Any redemption of
the Series A Preferred Stock pursuant to Section 5(b) shall be at a price per
share equal to the Liquidation Value plus all accrued but unpaid dividends
thereon through the redemption date (the "Mandatory Redemption Price"). Any
redemption of the Series A Preferred Stock pursuant to Section 5(d) shall be at
a price per share equal to the Series A Liquidation Preference, except that, for
purposes of calculation of the redemption price under this Section 5(a), clause
(ii) of the definition of Series A Liquidation Preference in Section 2(a) hereof
shall provide for the amount per share such holders would have received if such
holders had converted their shares of Series A Preferred Stock into shares of
Common Stock immediately prior to the Fundamental Change (the "Optional
Redemption Price").
(ii) Manner of Payment. The Mandatory Redemption
Price
<PAGE>
shall be paid, at the election of the Corporation, in cash or shares of Common
Stock which has been registered under a registration statement under the
Securities Act of 1933, as amended, which registration statement is effective,
provided, that, for purposes of calculating the number of shares of Common Stock
to be received by each holder of Series A Preferred Stock, each such share of
Common Stock shall be valued at 10% less than the Market Price; provided that in
the event that the election by the Corporation to pay the Mandatory Redemption
Price in such shares of Common Stock (described above) would result in the
issuance by the Corporation, together with all other issuances in connection
with redemption of the Series A Preferred Stock by the Corporation at less than
the then applicable Market Price, of more than 19.9% of the number of shares of
Common Stock outstanding on the Issue Date, the Corporation shall pay the
remaining amount of such Mandatory Redemption Price in cash.
(b) Mandatory Redemption. Subject to Section 5(a) hereof, the
Corporation shall redeem all of the then outstanding shares of Series A
Preferred Stock at the Mandatory Redemption Price on October 25, 2004.
(c) Procedures for Redemption. In the event the
Corporation shall redeem shares of Series A Preferred Stock pursuant to Section
5(b), the Corporation shall give written notice of such redemption by first
class mail, postage prepaid, mailed not less than thirty (30) nor more than
ninety (90) days prior to the redemption date, to each holder of record of the
shares to be redeemed, at such holder's address as the same appears on the stock
records of the Corporation. Each such notice shall state: (i) the redemption
date; (ii) the number of shares of Series A Preferred Stock to be redeemed;
(iii) the Mandatory Redemption Price or Optional Redemption Price, as the case
may be; (iv) the place or places where certificates for such shares are to be
surrendered for payment of the Mandatory Redemption Price or Optional Redemption
Price, as the case may be; (v) that payment will be made upon presentation and
surrender of such Series A Preferred Stock; (vi) the then current Conversion
Price and the date on which the right to convert such shares of Series A
Preferred Stock will expire; (vii) that dividends on the shares to be redeemed
shall cease to accrue following such redemption date; (viii) that such
redemption is mandatory, if pursuant to 5(b) and (ix) that dividends, if any,
accrued to and including the date fixed for redemption will be paid as specified
in such notice. Notice having been mailed as aforesaid, from and after the
redemption date, unless the Corporation shall be in default in the payment of
the Mandatory Redemption Price or Optional Redemption Price, as the case may be
(including any accrued and unpaid dividends to (and including) the date fixed
for redemption), (A) dividends on the shares of the Series A Preferred Stock so
called for redemption shall cease to accrue, (B) such shares shall be deemed no
longer outstanding and (C) all rights of the holders thereof as stockholders of
the Corporation (except the right to receive from the Corporation (i) any moneys
payable upon redemption without interest thereon and (ii) any shares of Series A
Preferred Stock and Common Stock pursuant to Section 5(a) hereof) shall cease.
Upon surrender in accordance with such notice of the
certificates for any such shares so redeemed (properly endorsed or assigned for
transfer, if the Board of Directors
<PAGE>
shall so require and the notice shall so state), such shares shall be redeemed
by the Corporation at the applicable Mandatory Redemption Price.
Notwithstanding the foregoing, if notice of
redemption has been given pursuant to this Section 5 and any holder of shares of
Series A Preferred Stock shall, prior to the close of business on the third
(3rd) Business Day preceding the redemption date, give written notice to the
Corporation pursuant to Section 4(b) hereof of the conversion of any or all of
the shares to be redeemed held by such holder (accompanied by a certificate or
certificates for such shares, duly endorsed or assigned to the Corporation),
then the conversion of such shares to be redeemed shall become effective as
provided in Section 4 hereof.
(d) Redemption at Option of Holder Upon a Fundamental
Change. Subject to Section 5(a) hereof, if a Fundamental Change occurs, each
holder of Series A Preferred Stock shall have the right, at the holder's option,
to require the Corporation to repurchase all of such holder's Series A Preferred
Stock, or any portion thereof, on the date (the "Repurchase Date") selected by
the Corporation that is not less than ten (10) nor more than twenty (20) days
after the Final Surrender Date, at a price per share equal to the Optional
Redemption Price. The Corporation agrees that it will not complete any
Fundamental Change unless proper provision has been made to satisfy its
obligations under this Section 5(d).
(e) Notice of Fundamental Change. Within thirty (30)
days after the occurrence of a Fundamental Change, the Corporation shall mail to
all holders of record of the Series A Preferred Stock a notice in the manner and
containing the information set out in Section 5(c), except that, for purposes of
this Section 5(e), such notice shall also describe the occurrence of such
Fundamental Change and of the repurchase right arising as a result thereof. To
exercise the repurchase right, a holder of Series A Preferred Stock must
surrender, on or before the date which is, subject to any contrary requirements
of applicable law, thirty (30) days after the date of mailing of the notice from
the Corporation (the "Final Surrender Date"), the certificates representing the
Series A Preferred Stock with respect to which the right is being exercised,
duly endorsed for transfer to the Corporation, together with a written notice of
election.
(f) Election Irrevocable. An election by a holder of
Series A Preferred Stock to have the Corporation repurchase shares of Series A
Preferred Stock pursuant to Section 5(d) shall become irrevocable at the close
of business on the relevant Repurchase Date.
6. Shares to be Retired. Any share of Series A Preferred Stock
converted, redeemed, repurchased or otherwise acquired by the Corporation shall
be retired and cancelled and shall upon cancellation be restored to the status
of authorized but unissued shares of preferred stock, subject to reissuance by
the Board of Directors as shares of preferred stock of one or more other series
but not as shares of Series A Preferred Stock.
7. Call
<PAGE>
(a) Call at the Corporation's Option. Subject to the other
provisions of this Section 7, on any date beginning two years after the Issue
Date, the Corporation shall have the right to purchase all (but not less than
all) outstanding shares of Series A Preferred Stock (the "Call"), provided,
however, that (i) the Market Price of a share of Common Stock is equal to, or
greater than, an amount equal to 200% of the then applicable Conversion Price
and (ii) the Common Stock has traded, on the principal market for the Common
Stock, with an average daily volume in excess of 30,000 shares for a period of
30 consecutive days ending on the day immediately prior to the Call Date (as
hereinafter defined). Any purchase of the Series A Preferred Stock pursuant to
this Section 7(a) shall be at a price per share of Series A Preferred Stock
equal to the Mandatory Redemption Price.
(b) Procedures for Call at the Corporation's Option. The
Corporation's right to Call the Series A Preferred Stock pursuant to Section
7(a) shall be conditioned upon the Corporation giving notice (the "Call
Notice"), by first class mail, postage prepaid, of the exercise of the Call to
the holders of the Series A Preferred Stock not less than twenty five (25) days
prior to the date of the exercise of the Call (the "Call Date"). Each Call
Notice shall state: (i) the Call Date; (ii) the Mandatory Redemption Price;
(iii) the place or places where certificates for such shares are to be
surrendered for payment of the Mandatory Redemption Price; (iv) that payment
will be made upon presentation and surrender of such Series A Preferred Stock;
(v) the then current Conversion Price and the date on which the right to convert
such shares of Series A Preferred Stock will expire; (vi) that dividends on the
shares to be purchased shall cease to accrue following such Call Date; (vii)
that such Call is mandatory; and (viii) that dividends, if any, accrued to and
including the Call Date will be paid as specified in such notice. Notice having
been mailed as aforesaid, from and after the Call Date, unless the Corporation
shall be in default in the payment of the Mandatory Redemption Price (including
any accrued and unpaid dividends to (and including) the Call Date), (A)
dividends on the shares of the Series A Preferred Stock shall cease to accrue,
(B) such shares shall be deemed no longer outstanding and (C) all rights of the
holders thereof as stockholders of the Corporation (except the right to receive
from the Corporation (i) any moneys payable upon exercise of the Call without
interest thereon and (ii) any shares of Common Stock pursuant to Section 4
hereof) shall cease.
Upon surrender in accordance with the Call Notice of the
certificates for any such shares so purchased (properly endorsed or assigned for
transfer, if the Board of Directors shall so require and the Call Notice shall
so state), such shares shall be purchased by the Corporation at the applicable
Mandatory Redemption Price.
Notwithstanding the foregoing, if the Call Notice has been
given pursuant to this Section 7 and any holder of shares of Series A Preferred
Stock shall, prior to the close of business on the twentieth (20th) day after
receipt of such Call Notice, give written notice to the Corporation pursuant to
Section 4(b) hereof of the conversion of any or all of the shares to be
purchased held by such holder (accompanied by a certificate or certificates for
such shares, duly
<PAGE>
endorsed or assigned to the Corporation), then (i) the conversion of such shares
to be purchased shall become effective as provided in Section 4 hereof and (ii)
the Corporation's right to Call such shares to be purchased shall terminate.
8. Definitions. As used herein, the following terms shall have
the respective meanings set forth below:
"6% Non-Voting Convertible Preferred Stock" means the
Corporation's 6% Non-Voting Preferred Stock, par value $.01,
which is expressly subordinated, in all respects, to the
Series A Preferred Stock.
"Additional Shares of Stock" means all shares of
Common Stock issued by the Corporation after the Issue Date,
other than (i) Common Stock to be issued upon conversion of
the Series A Preferred Stock, (ii) Common Stock to be issued
upon the exercise of currently outstanding warrants listed on
Schedule 4.2(b) to the Stock Purchase Agreements, (iii) up to
1,227,400 shares of Common Stock to be issued pursuant to the
1997 Stock Option Plan (as adjusted pursuant to the
antidilution provisions therein), (iv) up to 1,043,290 shares
of Common Stock to be issued pursuant to the 1998 Stock
Incentive Plan (as adjusted pursuant to the antidilution
provisions therein), and (v) up to 5,167,328 shares to be
issued upon conversion of the 6% Non-Voting Convertible
Preferred Stock (as adjusted pursuant to the antidilution
provisions therein).
"Affiliate", when used with respect to any Person,
means (i) if such Person is a corporation, any officer or
director thereof (other than a director elected pursuant to
Section 3 hereof) and any Person which is, directly or
indirectly, the beneficial owner (by itself or as part of any
group) of more than five percent (5%) of any class of any
equity security (within the meaning of the Securities Exchange
Act of 1934, as amended) thereof, and, if such beneficial
owner is a partnership, any general partner thereof, or if
such beneficial owner is a corporation, any Person
controlling, controlled by or under common control with such
beneficial owner, or any officer or director of such
beneficial owner or of any corporation occupying any such
control relationship, (ii) if such Person is a partnership,
any general or limited partner thereof, and (iii) any other
Person which, directly or indirectly, controls or is
controlled by or is under common control with such Person. For
purposes of this definition, "control" (including the
correlative terms "controlling", "controlled by" and "under
common control with"), with respect to any Person, shall mean
possession, directly or indirectly, of the power to direct or
cause the direction of the
<PAGE>
management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise.
"Business Day" means any day that is not a Saturday,
a Sunday or any day on which banks in the State of New York
are authorized or obligated to close.
"Call" shall have the meaning set forth in Section
7(a).
"Call Date" shall have the meaning set forth in
Section 7(b).
"Call Notice" shall have the meaning set forth in
Section 7(b).
"Common Stock" means the Corporation's Common Stock,
par value $.01 per share, and shall also include any common
stock of the Corporation hereafter authorized and any capital
stock of the Corporation of any other class hereafter
authorized which is not preferred as to dividends or assets
over any other class of capital stock of the Corporation or
which has ordinary voting power for the election of directors
of the Corporation.
"Conversion Price" means the Conversion Price per
share of Common Stock into which the Series A Preferred Stock
is convertible, as such Conversion Price may be adjusted
pursuant to Section 4 hereof. The initial Conversion Price
will be $5.50.
"Conversion Share" or "Conversion Shares" means the
shares of the Corporation's Common Stock obtained or
obtainable upon conversion of Shares and shall also include
any capital stock or other securities into which such shares
of Common Stock are changed and any capital stock or other
securities resulting from or comprising a reclassification,
combination or subdivision of, or a stock dividend on, any
such shares of Common Stock.
"Convertible Securities" means evidences of
indebtedness, shares of preferred stock or other securities
which are convertible into or exchangeable, with or without
payment of additional consideration in cash or property, for
Additional Shares of Stock, either immediately or upon the
occurrence of a specified date or a specified event, other
than the Series A Preferred Stock.
"Final Surrender Date" shall have the meaning set
forth in Section 5(e).
"Fleming Funds" means Fleming US Discovery Fund III,
L.P., Fleming US Discovery Offshore Fund III, L.P. and Robert
Fleming Nominees Limited.
<PAGE>
"Fleming Holders" means (i) the Fleming Funds and
(ii) any Affiliate, officer or employee of an Affiliate or
investment fund managed by an Affiliate of the Fleming Funds
to which the Fleming Funds may transfer record and/or
beneficial ownership of the Shares or the Conversion Shares.
The transferor and the transferee shall notify the Corporation
in writing as to the transferee's status as a Fleming Holder
in accordance with this definition, and shall notify the
Corporation if such transferee ceases to be a Fleming Holder.
"Fundamental Change" means any of the following
events:
(i) the sale (or functional equivalent of a
sale) of all or substantially all of the assets of
the Corporation;
(ii) any event (A) which results in the
registration of the Corporation's Common Stock under
the Securities Exchange Act of 1934, as amended, to
be no longer required; (B) requiring the Corporation
to make a filing under Section 13(e) of the
Securities Exchange Act of 1934, as amended; (C)
reducing the average daily trading volume of the
Common Stock on the principal securities exchange
under which it is then listed over a 30-day period to
less than 5,000 shares of Common Stock or eliminating
the public market for shares of Common Stock of the
Corporation; or (D) causing a delisting of the
Corporation's Common Stock from the Nasdaq Stock
Market, unless such delisting is in connection with a
listing on another national securities exchange;
(iii) any consolidation of the Corporation
with, or merger of the Corporation into, any other
person, any merger of another person into the
Corporation or any other business combination
involving the Corporation which results in the
holders of the Corporation's stock immediately prior
to giving effect to such transaction owning shares of
capital stock of the surviving corporation in such
transaction representing (x) fifty percent (50%) or
less of the total voting power of all shares of
capital stock of such surviving corporation entitled
to vote generally in the election of directors or (y)
fifty percent (50%) or less of the total value of all
capital stock of such surviving corporation;
(iv) the commencement by the Corporation of
a voluntary case under the Federal bankruptcy laws or
any other applicable Federal or state
<PAGE>
bankruptcy, insolvency or similar law; the consent by
the Corporation to the entry of an order for relief
in an involuntary case under such law or to the
appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or other similar
official) of the Corporation or of any substantial
part of its property; any assignment by the
Corporation for the benefit of its creditors; any
admission by the Corporation in writing of its
inability to pay its debts generally as they become
due; the entry of a decree or order for relief in
respect of the Corporation by a court having
jurisdiction in the premises in an involuntary case
under Federal bankruptcy laws or any other applicable
Federal or state bankruptcy, insolvency or similar
law appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or other similar
official) of the Corporation or of any substantial
part of its property, or ordering the winding up or
liquidation of its affairs, and on account of any
such event the Corporation shall liquidate, dissolve
or wind up; or the liquidation, dissolution or
winding up of the Corporation under any other
circumstances; or
(v) any Person, together with "affiliates"
and "associates" of such Person (within the meaning
of the Exchange Act), shall acquire after the date
hereof beneficial ownership within the meaning of
Rule 13d-3 under the Exchange Act, which when
aggregated with the beneficial ownership on or prior
to the date hereof, shall constitute greater than 50%
of the voting power of the capital stock of the
Corporation.
"Issue Date" means, as to any share of Series A
Preferred Stock, the date of original issuance thereof by the
Corporation.
"Junior Securities" mean the Common Stock and any
other class of capital stock or series of preferred stock
existing on the date hereof, including the 6% Non-Voting
Convertible Preferred Stock, or hereafter created by the
Corporation which does not expressly provide that it ranks
senior to or pari passu with the Series A Preferred Stock as
to dividends, other distributions, liquidation preference or
otherwise.
"Liquidation Value" shall have the meaning set forth
in Section 2(a).
"Mandatory Redemption Price" shall have the meaning
set forth in Section 5(a).
"Market Price" means, as to any security on the date
of determination thereof, the average of the closing prices of
such security's sales on all principal United States
securities exchanges on which such security may at the time be
<PAGE>
listed, or, if there shall have been no sales on any such
exchange on any day, the last trading price of such security
on such day, or if such there is no such price, the average of
the bid and asked prices at the end of such day, on the Nasdaq
Stock Market, in each such case averaged for a period of
twenty (20) consecutive Business Days prior to the day when
the Market Price is being determined (except that, for
purposes of the calculation of the Market Price under clause
(i) of the first proviso in Section 7(a), such prices will be
averaged for a period of thirty (30) consecutive days prior to
the day when the Market Price is being determined under
Section 7(a)); provided that if such security is listed on any
United States securities exchange the term "Business Days" as
used in this sentence means business days on which such
exchange is open for trading. Notwithstanding the foregoing,
with respect to the issuance of any security by the
Corporation in an underwritten public offering, the Market
Price shall be the per share purchase price paid by the
underwriters. If at any time such security is not listed on
any exchange or the Nasdaq Stock Market, the Market Price
shall be deemed to be the fair value thereof determined by an
investment banking firm of nationally recognized standing
selected by the Board of Directors of the Corporation and
acceptable to holders of a majority of the Series A Preferred
Stock, as of the most recent practicable date when the
determination is to be made, taking into account the value of
the Corporation as a going concern, and without taking into
account any lack of liquidity of such security or any discount
for a minority interest.
"Market Value" means the amount obtained by
multiplying the Market Price by the number of securities
issued.
"Optional Redemption Price" shall have the meaning
set forth in Section 5(a).
"Parity Securities" mean any class of capital stock
or series of preferred stock existing on the date hereof or
hereafter created by the Corporation with the prior written
consent of the Fleming Holders, which expressly provides that
it ranks pari passu with the Series A Preferred Stock as to
dividends, other distributions, liquidation preference or
otherwise.
"Person or "person" shall mean an individual,
partnership, corporation, trust, unincorporated organization,
joint venture, government or agency, political subdivision
thereof, or any other entity of any kind.
"Preferred Director" or "Preferred Directors" shall
have the meaning set forth in Section 3(c).
"Repurchase Date" shall have the meaning set forth in
Section 5(d).
<PAGE>
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations thereunder.
"Series A Liquidation Preference" shall have the
meaning set forth in Section 2(a).
"Series A Preferred Stock" shall have the meaning set
forth in the resolution paragraph in the preamble.
"Shares" means, the shares of Series A Preferred
Stock initially acquired under the Stock Purchase Agreements.
"Stock Purchase Agreements" mean each of the three
Stock Purchase Agreements dated as of the date hereof between
the Corporation and the purchaser listed on the signature page
of each such Agreement.
"Transferees" shall mean any transferee (except for a
Fleming Holder) of Shares or Conversion Shares from a Fleming
Holder. Transferees shall not include a transferee of Shares
or Conversion Shares sold in either a public offering pursuant
to a registration statement under the Securities Act or
pursuant to Rule 144 under the Securities Act.
9. Notices. Except as may otherwise be provided for herein,
all notices referred to herein shall be in writing, and all notices hereunder
shall be deemed to have been given (i) upon receipt, in the case of a notice of
conversion given to the Corporation as contemplated in Section 4(b) hereof or in
the case of a notice of redemption at the holder's option given to the
Corporation as contemplated in Section 5(d) hereof, or (ii) in all other cases,
upon the earlier of (x) receipt of such notice, (y) three Business Days after
the mailing of such notice if sent by registered mail (unless first-class mail
shall be specifically permitted for such notice under the terms hereof) or (z)
the Business Day following sending such notice by overnight courier, in any case
with postage or delivery charges prepaid, addressed: if to the Corporation, to
its offices at 509 South Exeter Street, Baltimore, MD 21202, Attention: Chief
Financial Officer, or to an agent of the Corporation designated as permitted by
the Charter, or, if to any holder of the Series A Preferred Stock, to such
holder at the address of such holder of the Series A Preferred Stock as listed
in the stock record books of the Corporation, or to such other address as the
Corporation or holder, as the case may be, shall have designated by notice
similarly given.
10. Amendment. The affirmative vote of the holders of at least
a majority of the outstanding shares of Series A Preferred Stock shall be
necessary for effecting or validating any amendment of any of the provisions of
these Articles Supplementary or the Charter of the
<PAGE>
Corporation that materially adversely affects the rights or preferences of the
holders of the Series A Preferred Stock.
[Signature page to follow]
<PAGE>
IN WITNESS WHEREOF, CALIBER LEARNING NETWORK, INC. has caused these
presents to be signed in its name and on its behalf by its President and
witnessed by its Assistant Secretary on October 25, 1999.
WITNESS: CALIBER LEARNING NETWORK, INC.
/s/ ROBERT W. ZENTZ By: /s/ CHRIS L. NGUYEN
- ------------------------------------- -----------------------------
Robert W. Zentz, Assistant Secretary Chris L. Nguyen, President
THE UNDERSIGNED, President of Caliber Learning Network, Inc.,
who executed on behalf of the Corporation the foregoing Articles Supplementary
of which this Certificate is made a part, hereby acknowledges in the name and on
behalf of said Corporation the foregoing Articles Supplementary to be the
corporate act of said Corporation and hereby certifies that the matters and
facts set forth therein with respect to the authorization and approval thereof
are true in all material respects under the penalties of perjury.
/s/ CHRIS L. NGUYEN
--------------------
Chris L. Nguyen
EXECUTION COPY
================================================================================
PREFERRED STOCK PURCHASE AGREEMENT
==================================
dated as of
===========
October 26, 1999
================
between
=======
CALIBER LEARNING NETWORK, INC.
==============================
and
===
FLEMING US DISCOVERY OFFSHORE FUND III, L.P.
============================================
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
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SECTION 1. SALE AND PURCHASE OF PREFERRED STOCK.......................1
SECTION 2. THE CLOSING................................................2
SECTION 3. DEFINITIONS................................................3
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............16
4.1. Corporate Existence, Power and Authority..................16
4.2. Capital Stock.............................................17
4.3. Subsidiaries..............................................18
4.4. Business..................................................19
4.5. No Defaults or Conflicts..................................19
4.6. Disclosure Materials; Other Information...................20
4.7. Litigation................................................20
4.8. Taxes.....................................................21
4.9. ERISA.....................................................21
4.10. Legal Compliance..........................................23
4.11. Outstanding Securities....................................23
4.12. Intellectual Property and Other Rights....................23
4.13. Key Employees.............................................24
4.14. Properties................................................24
4.15. Suppliers and Customers...................................24
4.16. Environmental Compliance..................................25
4.18. Offering of Shares........................................26
4.19. SEC Reports...............................................26
4.20. Indebtedness..............................................26
4.21. Use of Proceeds...........................................27
4.22. Other Names...............................................27
4.23. Brokers...................................................27
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER...........28
5.1. Corporate Power and Authority.............................28
5.2. Investment Intent.........................................28
5.3. Brokers...................................................28
SECTION 6. RESTRICTIONS ON TRANSFER..................................29
i
<PAGE>
Page
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SECTION 7. INFORMATION AS TO THE COMPANY.............................29
7.1. Financial Information.....................................29
7.2. Communication with Accountants............................32
7.3. Inspection................................................32
7.4. Notices...................................................32
SECTION 8. AFFIRMATIVE COVENANTS.....................................34
8.1. Maintenance of Existence, Properties and Franchises;
Compliance with Law;Taxes; Insurance......................34
8.2. Office for Payment, Exchange and Registration;
Location of Office; Notice of Change of Name or Office....35
8.3. Fiscal Year...............................................35
8.4. Environmental Matters.....................................35
8.5. Reservation of Shares.....................................37
8.6. Securities Exchange Act Registration......................37
8.7. Delivery of Information for Rule 144A Transactions........37
8.8. Senior Securities.........................................37
8.9. Further Assurances........................................38
SECTION 9. NEGATIVE COVENANTS........................................38
9.1. No Dilution or Impairment; No Changes in Capital Stock....39
9.2. Indebtedness..............................................40
9.3. Consolidation, Merger and Sale............................40
9.4. No Change in Business.....................................40
9.5. Restricted Payments; Investments..........................40
9.6. Affiliate Loans and Guaranties............................41
9.7. Transactions with Affiliates..............................41
9.8. Liens.....................................................42
9.9. Private Placement Status..................................42
9.10. Maintenance of Public Market..............................42
9.11. Actions Prior to the Closing Date.........................43
SECTION 10. PREEMPTIVE RIGHTS.........................................43
SECTION 11. CONDITIONS TO PURCHASER'S OBLIGATIONS.....................44
11.1. Articles Supplementary; Stockholders'Agreement;
Registration Rights Agreement.............................45
11.2. Certificates for Shares...................................45
11.3. Senior Status.............................................45
11.4. Accuracy of Representations and Warranties................45
ii
<PAGE>
Page
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11.5. Compliance with Agreements................................45
11.6. Officers'Certificates.....................................45
11.7. Proceedings...............................................46
11.8. Legality; Governmental and Other Authorization............46
11.9. No Material Adverse Change................................46
11.10. Opinion of Counsel........................................46
11.11. Additional Purchases of Shares............................46
11.12. Other Documents and Opinions..............................47
SECTION 12. BREACH OF REPRESENTATIONS, WARRANTIES AND COVENANTS.......47
SECTION 13. SPECIFIC PERFORMANCE......................................47
SECTION 14. EXPENSES..................................................48
SECTION 15. DIRECT PAYMENTS...........................................50
SECTION 16. AMENDMENTS AND WAIVERS....................................50
SECTION 17. EXCHANGE OF SHARES; CANCELLATION OF SURRENDERED SHARES;
REPLACEMENT...............................................50
SECTION 18. NOTICES...................................................51
SECTION 19. MISCELLANEOUS.............................................51
EXHIBIT A Articles Supplementary
EXHIBIT B Stockholders' Agreement
EXHIBIT C Registration Rights Agreement
EXHIBIT D Opinion of Counsel for the Company
EXHIBIT E Confidentiality Agreement
iii
<PAGE>
PREFERRED STOCK PURCHASE AGREEMENT
This PREFERRED STOCK PURCHASE AGREEMENT is dated as of October
26, 1999 between Caliber Learning Network, Inc., a Maryland corporation (the
"Company"), and the Purchaser listed on the signature page of this Agreement
(the "Purchaser").
W I T N E S S E T H :
WHEREAS, the Company desires to issue and sell to the
Purchaser, and the Purchaser desires to purchase from the Company, shares of the
Company's Series A Convertible Preferred Stock, par value $.01 per share (the
"Series A Preferred"), upon the terms and provisions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
SECTION 1. SALE AND PURCHASE OF PREFERRED STOCK
(a) The Company agrees to sell to the Purchaser and, subject
to the terms and conditions hereof and in reliance upon the representations and
warranties of the Company contained herein or made pursuant hereto, the
Purchaser agrees to purchase from the Company on the Closing Date specified in
Section 2 hereof, the number of shares of Series A Preferred set forth opposite
the Purchaser's name on Schedule 1 hereto. The shares of Series A Preferred
being acquired under this Agreement and by the other Purchasers under the other
Stock Purchase Agreements (as hereinafter defined) are collectively referred to
herein as the "Shares", containing rights and privileges as more fully set forth
in the Articles Supplementary of the Company in the form attached hereto as
Exhibit A (the "Articles Supplementary").
(b) The aggregate purchase price to be paid to the Company by
the Purchaser for the Shares to be purchased by the Purchaser pursuant to this
Agreement shall be the amount set forth opposite the Purchaser's name on
Schedule 1 hereto. No further payment shall be required from the Purchaser for
the Shares.
(c) The parties further acknowledge and agree that the Shares
are intended not to constitute "preferred stock" as that term is used in Section
305(b)(4) of the Code and Treasury Regulation ss 1.305-5(a). Except as required
by any Taxing Authority or court, the Company and the Purchaser agree to treat
the Shares for Federal, state and local income and franchise tax
<PAGE>
purposes as not constituting "preferred stock", and to take no position
inconsistent with such characterization on any Tax Return or before any Taxing
Authority or court.
(d) The Shares are being sold to the purchasers listed on
Schedule 1 hereto (the "Purchasers") pursuant to this Agreement and the other
Series A Convertible Preferred Stock Purchase Agreements entered into
simultaneously with this Agreement (all such agreements collectively, as from
time to time assigned, supplemented or amended or as the terms thereof may be
waived, the "Stock Purchase Agreements"). All Stock Purchase Agreements shall be
dated the date hereof and shall be identical except as to the identities of the
respective Purchasers, the number of Shares to be purchased thereunder and the
amount paid therefor. The sale of Shares to each Purchaser under each Stock
Purchase Agreement is to be a separate sale, and no Purchaser shall have any
liability under any Stock Purchase Agreement other than the Stock Purchase
Agreement to which it is a party.
(e) The Company will use the proceeds from the sale of the
Shares, together with other funds it will receive on the Closing Date to fund
future development opportunities and for working capital purposes.
SECTION 2. THE CLOSING
(a) Subject to the terms and conditions hereof, the closing of
the purchase and sale of the Shares to be purchased by the Purchaser and the
other Purchaser (the "Closing") will take place at the offices of Morgan, Lewis
& Bockius LLP, 101 Park Avenue, New York, New York at 10:00 A.M., New York City
time, on October 26, 1999, or such other time and date as shall be mutually
agreed to by the Company and the Purchaser, but in any event no later than
October 29, 1999 (such time and date are herein referred to as the "Closing
Date"). The sale and purchase of Shares by the Purchasers pursuant to the Stock
Purchase Agreements between each of the Purchasers and the Company shall be
consummated concurrently, for an aggregate purchase price of $15,000,000 on the
Closing Date.
(b) Subject to the terms and conditions hereof, on the Closing
Date (i) the Company will deliver to the Purchaser a certificate registered in
the Purchaser's name (or the name of its nominee, if any, as specified on
Schedule 1 hereto) evidencing the number of Shares set forth opposite the
Purchaser's name on Schedule 1, and (ii) upon the Purchaser's receipt thereof,
the Purchaser will deliver to the Company a certified or official bank check (or
wire transfer) in an amount equal to the aggregate purchase price (as specified
in Section 1(b) hereof) for the Shares to be purchased by the Purchaser payable
to the order of the Company in federal or other immediately available funds.
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<PAGE>
SECTION 3. DEFINITIONS
(a) For purposes of this Agreement, the following definitions
shall apply (such definitions to be equally applicable to both the singular and
plural forms of the terms defined):
"6% Non-Voting Convertible Preferred Stock" means the
Company's 6% Non-Voting Preferred Stock, par value $.01, which is
expressly subordinated, in all respects, to the Series A Preferred.
"Affiliate", when used with respect to any Person, means (i)
if such Person is a corporation, any officer or director thereof (other
than a director elected pursuant to Section 4(c) of the Articles
Supplementary) and any Person which is, directly or indirectly, the
beneficial owner (by itself or as part of any group) of more than five
percent (5%) of any class of any equity security (within the meaning of
the Securities Exchange Act) thereof, and, if such beneficial owner is
a partnership, any general partner thereof, or if such beneficial owner
is a corporation, any Person controlling, controlled by or under common
control with such beneficial owner, or any officer or director of such
beneficial owner or of any corporation occupying any such control
relationship, (ii) if such Person is a partnership, any general or
limited partner thereof, and (iii) any other Person which, directly or
indirectly, controls or is controlled by or is under common control
with such Person. For purposes of this definition, "control" (including
the correlative terms "controlling", "controlled by" and "under common
control with"), with respect to any Person, shall mean possession,
directly or indirectly, of the power to direct or cause the direction
of the management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise. The holding
of Shares (or of Conversion Shares obtained upon conversion of Shares),
and the rights under any Stock Purchase Agreement or under the Articles
Supplementary, the Stockholders' Agreement or the Registration Rights
Agreement (or the exercise of any such rights, including, without
limitation, nominating a director to the Board (or Board committee) of
the Company and Subsidiaries or sending an observer to Board (or Board
committee) meetings of the Company and Subsidiaries), shall not cause a
Purchaser to be deemed to be an "Affiliate" of the Company or any
Subsidiary.
"Affiliate Agreements" means (i) Lease Agreement, dated as of
May 30, 1997, between SHL Financial Services and the Company, (ii)
networkMCI Enterprise Management Agreement, dated as of July 1, 1997,
between the Company and MCI Systemhouse Corp., (iii) Intercompany
Management and Facility Use Agreement, dated as of January 1, 1998, by
and between Sylvan and the Company, and (iv) Testing Center Management
and CBT Services Agreement, dated as of May 1, 1997 (as amended by
-3-
<PAGE>
Amendment No. 1, dated as of May 2, 1997), by and between Sylvan and
the Company, each as may be amended, modified or renewed from time to
time.
"Agreement" means this Stock Purchase Agreement (together with
exhibits and schedules) as such may be from time to time assigned,
supplemented or amended or as the terms hereof may be waived.
"Articles Supplementary" has the meaning set forth in Section
1(a) hereof.
"Benefit Plan" means any Plan, existing at the Closing Date or
prior thereto, established or to which contributions have at any time
been made by the Company or any ERISA Affiliate, or any predecessor of
any of the foregoing, or under which any employee, former employee or
director of the Company or any ERISA Affiliate or any beneficiary
thereof is covered, is eligible for coverage or has benefit rights as a
result of employment by or service with the Company or any ERISA
Affiliate, or as a result of designation as a beneficiary by any
employee, former employee or director of the Company or any ERISA
Affiliate.
"Board" or "Board of Directors" means with respect to any
Person which is a corporation, a business trust or other entity, the
board of directors or other group, however, designated, which is
charged with legal responsibility for the management of such Person, or
any committee of such board of directors or group, however designated,
which is authorized to exercise the power of such board or group in
respect of the matter in question.
"Business Day" means any day other than a Saturday, Sunday or
any day on which banks in the location of the office of the Company
provided for in Section 18 hereof are authorized or obligated to close.
"Capitalized Leases" means (a) any lease to which the Company
or a Subsidiary is party as lessee, or by which it is bound, under
which it leases any property (real, personal or mixed) from any lessor
other than the Company or a Subsidiary, and (b) which either (i) is
required to be capitalized in accordance with GAAP, or, (ii) with
respect to real property, even if not so required to be capitalized,
shall have a remaining term of greater than three (3) years (including
leases of shorter duration which are or were extendible to a total term
greater than three (3) years at the option of the lessor) (the
"Extended Leases"); provided that the Company makes a determination as
to whether, at the time of its calculation of Capitalized Lease Value,
it could be released from its obligations under such Extended Leases
without any adverse economic consequence and (I) the Extended Leases
shall not be included in the calculation of Capitalized Leases if the
Company determines there would be no adverse economic consequences, and
(II) the Extended Leases shall be included in the calculation of
Capitalized Leases to the extent of
-4-
<PAGE>
such adverse economic consequence if the Company determines that there
would be adverse economic consequences.
"Capitalized Lease Value" means, as of the time of any
determination thereof, the sum of the then present values, determined
as hereinafter provided, of future obligations of the Company and its
subsidiaries under then existing Capitalized Leases. To compute the
value of any Capitalized Lease, the following methods shall be used, as
applicable:
(i) values of leases required to be capitalized in
accordance with GAAP shall be computed in accordance
with such principles; and
(ii) values of other leases (and values of contracts or
other items which this Agreement provides are to be
valued as if they were Capitalized Leases) shall be
computed by discounting, to the date of
determination, at an assumed interest rate of eight
percent (8%) per annum, the minimum amount of future
rental payments that will be due from the Company or
its subsidiaries under the related documentation,
including rental payments that may be due during
extensions which are at the other party's option, but
excluding any amounts in respect of insurance on,
taxes on and/or maintenance of the properties subject
to such leases (provided that such amounts are owed
and paid only to the extent actually incurred).
"Closing" has the meaning set forth in Section 2(a) hereof.
"Closing Date" has the meaning set forth in Section 2(a)
hereof.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Commission" means the Securities and Exchange Commission and
any other similar or successor agency of the federal government
administering the Securities Act or the Securities Exchange Act.
"Common Stock" means the Company's Common Stock, par value
$.01 per share, and shall also include any common stock of the Company
hereafter authorized and any capital stock of the Company of any other
class hereafter authorized which is not preferred as to dividends or
assets over any other class of capital stock of the Company or which
has ordinary voting power for the election of directors of the Company;
provided that Common Stock shall not include the Series A Convertible
Preferred Stock.
"Company" means Caliber Learning Network, Inc., a Maryland
corporation, its successors and assigns.
-5-
<PAGE>
"Confidentiality Agreement" has the meaning set forth in
Section 7.5 hereof.
"Consolidated" or "consolidated", when used with reference to
any financial term in this Agreement, means the aggregate for the
Company and any of its majority-owned Subsidiaries of the amounts
signified by such term for all such Persons, with intercompany items
eliminated, and, with respect to net worth, after eliminating the
portion of net worth properly attributable to minority interests, if
any, in the capital of any such Person (other than in the capital of
the Company) and otherwise as determined in accordance with GAAP
(except as otherwise expressly provided herein).
"Conversion Share" or "Conversion Shares" means the shares of
the Company's Common Stock obtained or obtainable upon conversion of
Shares and shall also include any capital stock or other securities
into which such shares of Common Stock are changed and any capital
stock or other securities resulting from or comprising a
reclassification, combination or subdivision of, or a stock dividend
on, any such shares of Common Stock. In the event that any Conversion
Shares are sold either in a public offering pursuant to a registration
statement under the Securities Act or pursuant to a Rule 144
Transaction, then the transferees of such Conversion Shares shall not
be entitled to any benefits under this Agreement with respect to such
Conversion Shares and such Conversion Shares shall no longer be
considered to be "Conversion Shares" for purposes of any consent or
waiver provision of this Agreement.
"Disclosure Material" has the meaning specified in Section
4.6(a) hereof.
"EBITDA" means, the consolidated or combined, as the case may
be, net income for such period plus (a) the sum of, without
duplication, to the extent deducted in computing consolidated or
combined net income: (i) income tax expense, (ii) interest expense,
(iii) depreciation, amortization (exclusive of deferred rent
amortization) and other non-cash charges and (iv) any extraordinary or
non-recurring losses or expenses, minus (b) the sum of (without
duplication), to the extent included in computing consolidated net
income, (i) interest or dividend income, (ii) non-operating income and
(iii) any extraordinary or non-recurring gains or income, all as
determined in accordance with GAAP, where applicable, consistently
applied.
"Environmental Laws" means all federal, state, local, foreign,
civil and criminal laws, statutes, ordinances, orders, codes, rules,
policies, and regulations and common law relating to the protection of
the environment and human health or relating to the handling, use,
generation, treatment, storage, transportation or disposal of Hazardous
Materials, including but not limited to the Resource Conservation and
Recovery Act of 1976, 42 U.S.C. ' 6901 et seq.; the Toxic Substances
Control Act, 15 U.S.C. ' 2601 et seq.; the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. ss 9601 et
seq.; the Federal Water Pollution Control Act, 33 U.S.C. ss 1251 et
seq.;
-6-
<PAGE>
the Clean Air Act, 42 U.S.C. ss 7401 et seq.; the Hazardous Materials
Transportation Act, 49 U.S.C. ss 1801 et seq.; the Occupational Safety
and Health Act, 29 U.S.C. ss 651; the Federal Insecticide, Fungicide
and Rodenticide Act, 7 U.S.C. ss 136y et seq.; and the Oil Pollution
Act of 1990, 33 U.S.C. ss 2701 et seq., all as may be amended or
superseded from time to time, and all common law claims relating to the
same.
"Environmental Lien" has the meaning set forth in Section 4.16
hereof.
"Environmental Permits" means all permits, licenses,
approvals, authorizations or consents required by any Governmental
Authority under any applicable Environmental Law and includes any and
all orders, consent orders or binding agreements issued or entered into
by a Governmental Authority under any applicable Environmental Law.
"ERISA" means Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" means each "person" (as defined in Section
3(9) of ERISA) which is, or at any time was, a member of a controlled
group (within the meaning of Section 412(n)(6) of the Code) that
includes, or at any time included, the Company or any of its
Subsidiaries.
"Financial Investor" means an investor that acquires an equity
interest in the Company for investment purposes, and without the
purpose, or without the effect, of changing or influencing the control
of the Company holds an equity interest in the Company purposes.
"Fleming Designee" means each person that any Fleming Holder
designates in writing to the Company to receive, on behalf of such
Fleming Holder, the information to which such Fleming Holder is
entitled to pursuant to Section 7.1(b)(v) hereof; provided that each
Fleming Holder may not designate more than two persons pursuant hereto.
The initial two Fleming Holder Designees shall be Robert L. Burr and
David J. Edwards.
"Fleming Funds" means Fleming US Discovery Fund III, L.P.,
Fleming US Discovery Offshore Fund III, L.P. and Robert Fleming
Nominees Limited, or any successor thereof.
"Fleming Holders" means (i) the Fleming Funds and (ii) any
Affiliate, officer or employee of an Affiliate or investment fund
managed by an Affiliate of the Fleming Funds, or any successor thereof,
to which the Fleming Funds may transfer record and/or beneficial
ownership of the Shares or the Conversion Shares.
-7-
<PAGE>
"Fully Diluted" means, with respect to the calculation of the
number of shares of Common Stock, as of the time of determination
thereof, the sum of (i) all shares of Common Stock outstanding at the
time of determination and (ii) all shares of Common Stock issuable upon
the exchange, exercise or conversion of all warrants, options and
convertible securities then outstanding (whether or not such warrants,
options or convertible securities are then exercisable, exchangeable,
convertible or subject to contingencies).
"Fundamental Transaction" has the meaning set forth in Section
9.3 hereof.
"GAAP" means generally accepted accounting principles
consistently applied.
"Going Private Transaction" has the meaning set forth in
Section 9.10 hereof.
"Governmental Authority" means any federal, state, or local
governmental agency or authority (including regulatory authority)
having jurisdiction over the Company or any of its Subsidiaries or any
of its respective assets or businesses.
"Guaranty" means (i) any guaranty or endorsement of the
payment or performance of, or any contingent obligation in respect of,
any indebtedness or other obligation of any other Person, (ii) any
other arrangement whereby credit is extended to one obligor (directly
or indirectly) on the basis of any promise or undertaking of another
Person (a) to pay the indebtedness of such obligor, (b) to purchase an
obligation owed by such obligor, (c) to purchase or lease assets (or to
provide funds, goods or services) under circumstances that would enable
such obligor to discharge one or more of its obligations or (d) to
maintain the capital, working capital, solvency or general financial
condition of such obligor, in each case whether or not such arrangement
is disclosed in the balance sheet of such other Person or is referred
to in a footnote thereto and (iii) any liability as a general partner
of a partnership in respect of indebtedness or other obligations of
such partnership; provided, however, that the term "Guaranty" shall not
include (1) endorsements for collection or deposit in the ordinary
course of business, (2) any guaranty of indebtedness of the Company by
a subsidiary of the Company or (3) obligations of the Company or its
Subsidiaries which would constitute Guaranties solely by virtue of the
continuing liability of a Person which has sold assets subject to
liabilities for the liabilities which were assumed by the Person
acquiring the assets, unless such liability is required to be carried
on the consolidated balance sheet of the Company. The amount of any
Guaranty and the amount of indebtedness resulting from such Guaranty
shall be the maximum amount of the guarantor's potential obligation in
respect of such Guaranty.
"Hazardous Materials" means any petroleum, petroleum
hydrocarbons, petroleum waste or petroleum products, underground
storage tanks, asbestos or asbestos-containing
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<PAGE>
materials, pesticides, lead and lead-containing materials, urea
formaldehyde insulation and polychlorinated biphenyls (PCBs), ionizing
and non-ionizing radiation including radon and electromagnetic
frequency radiation; and any chemicals, materials, substances or wastes
in any amount or concentration which are now or hereafter "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely
hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants" or words of similar import, under any applicable
Environmental Law.
"Indebtedness" of any Person means, without duplication, as of
any date as of which the amount thereof is to be determined, (i) all
obligations of such Person to repay money borrowed (including, without
limitation, all notes payable and drafts accepted representing
extensions of credit, all obligations under letters of credit, all
obligations evidenced by bonds, debentures, notes or other similar
instruments and all obligations upon which interest charges are
customarily paid), (ii) the Capitalized Lease Value of all Capitalized
Leases in respect of which such Person is liable as lessee or as the
guarantor of the lessee, (iii) all monetary obligations which are
secured by any Lien existing on property owned by such Person whether
or not the obligations secured thereby have been incurred or assumed by
such Person, (iv) all conditional sales contracts and similar title
retention debt instruments under which such Person is obligated to make
payments, (v) all Guaranties by such Person and (vi) all contractual
obligations (whether absolute or contingent) of such Person to
repurchase goods sold and distributed. "Indebtedness" shall not
include, however, (1) Indebtedness of the Company to any of its
wholly-owned Subsidiaries or Indebtedness of any wholly-owned
Subsidiary to the Company or to another wholly-owned Subsidiary, and
(2) any unfunded obligations in any employee pension benefit plan (as
defined in ERISA) of the Company or of any Subsidiary.
"Internal Rate of Return" means the discount rate at which the
present value of the future cash flows of an investment equal the cost
of the investment.
"Investment" means, with respect to any Person, (i) any loan,
advance or extension of credit by such Person to, and any contributions
to the capital of, any other Person, (ii) any Guaranty by such Person,
(iii) any interest in any capital stock, equity interest or other
securities of any other Person, (iv) any transfer or sale of property
of such Person to any other Person other than upon full payment, in
cash or other consideration, of not less than the agreed sale price
bargained on an arms-length basis and (v) any commitment or option to
make an Investment if, in the case of an option, the consideration
therefor exceeds $10,000, and any of the foregoing under clauses (i)
through (v) shall be considered an Investment whether such Investment
is acquired by purchase, exchange, merger or any other method;
provided, that the term "Investment" (1) shall not include an
Investment in the Company or in a wholly-owned Subsidiary, (2) shall
not include current trade and customer accounts receivable and
allowances,
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provided they relate to goods furnished in the ordinary course of
business and are given in accordance with the customary practices of
the Company or a Subsidiary, (3) shall not include temporary
investments of excess cash of the Company or of any Subsidiary in any
of the following: (A) investment grade obligations maturing within one
year of their issuance which as to principal and interest constitute
direct obligations of, or obligations guaranteed by, the United States
of America, (B) negotiable certificates of deposit of banks or trust
companies which are organized under the laws of the United States of
America or any state thereof and which have capital and surplus of at
least $500,000,000, (C) commercial paper which is rated not less than
prime-one or A-1 or their equivalents by Moody's Investor Service, Inc.
or Standard & Poor's Corporation or their successors, (D) any
repurchase agreement secured by any one or more of the foregoing and
(E) money market funds primarily investing in any of the foregoing
securities and sponsored by or affiliated with nationally recognized
brokerage or investment advisory firms, and (4) shall not include
Investments of the Company existing on the date hereof and disclosed on
Schedule 3(a) hereto.
"Lien" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, or preference, priority or other
security interest of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement,
any financing lease having substantially the same effect as any of the
foregoing, any assignment or other conveyance of any right to receive
income and any assignment of receivables with recourse against the
assignor), any filing of a financing statement as debtor under the
Uniform Commercial Code or any similar statute and any agreement to
give or make any of the foregoing; provided that the term "Lien" shall
not include Permitted Liens.
"MCI" means MCI Telecommunications Corporation, which as of
the date of this Agreement holds 1,856,086 shares of Common Stock.
"MCI Warrants" means the amended and restated warrant to
purchase 1,193,573 shares of Common Stock, as adjusted pursuant to the
anti-dilution terms thereof, issued to MCI.
"Outside Directors" means those directors on the Company's
Board of Directors at any time who are not otherwise Affiliates of or
employed by the Company; provided that notwithstanding the foregoing,
Douglas L. Becker and R. Christopher Hoehn-Saric shall be deemed
Outside Directors for the purposes hereof.
"Outstanding" or "outstanding" means (a) when used with
reference to the Shares or the Conversion Shares as of a particular
time, all Shares or Conversion Shares theretofore duly issued except
(i) Shares and Conversion Shares theretofore reported as lost, stolen,
mutilated or destroyed or surrendered for
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transfer, exchange or replacement, in respect of which new or
replacement Shares or Conversion Shares have been issued by the
Company, (ii) Shares and Conversion Shares theretofore canceled by the
Company and (iii) Shares and Conversion Shares registered in the name
of, as well as Shares owned beneficially by, the Company, any
Subsidiary or any of its Affiliates. For purposes of the preceding
sentence, in no event shall "Affiliates" include (x) the Purchasers or
(y) any Affiliates of the Purchasers.
"Patents and Applications" has the meaning set forth in
Section 4.12 hereof.
"Pension Plan" means any "employee pension benefit plan" as
defined in Section 3(2) of ERISA.
"Permitted Lien" means (i) any Lien for Taxes, governmental
charges or levies not yet due or delinquent or being contested in good
faith by appropriate proceedings for which adequate reserves have been
established in accordance with GAAP, (ii) any imperfections of title,
easements, rights of way or similar Liens, zoning laws or land use
restrictions as normally exist with respect to property similar in
character to the property affected thereby and which individually or in
the aggregate with other such Liens, zoning laws or land use
restrictions do not materially impair the value or marketability of the
property subject to such Liens, zoning laws or land use restrictions or
interfere with the use of such property in the conduct of the business
of the Company and which do not secure obligations for money borrowed,
(iii) Liens imposed by any law, such as mechanic's, materialman's,
landlord's, warehouseman's and carrier's Liens, securing obligations
incurred in the ordinary course of business which are not yet overdue
or which are being diligently contested in good faith by appropriate
proceedings and, with respect to such obligations which are being
contested, for which the Company has set aside adequate reserves, if
appropriate, (iv) any Lien resulting from purchase by the Company of
goods in the ordinary course of business as to which Liens are not
filed of record and (v) any Lien necessary to secure Indebtedness that
is not prohibited by Section 9.2 hereof; provided that "Permitted Lien"
shall not include any Lien upon or with respect to any shares of
capital stock of any Subsidiary.
"Permitted Transferee" means any Transferee that holds not
less than an aggregate of 20,000 Shares.
"Permitted Transferee Designee" means each person that any
Permitted Transferee designates in writing to the Company to receive,
on behalf of such Permitted Transferee, the information to which such
Permitted Transferee is entitled to pursuant to Section 7.1(b)(v)
herof; provided that each Permitted Transferee may not designate more
than two persons pursuant hereto.
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<PAGE>
"Person" or "person" means an individual, corporation,
partnership, limited liability company, firm, association, joint
venture, trust, unincorporated organization, government, governmental
body, agency, political subdivision or other entity.
"Plan" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase,
stock option, stock ownership, stock appreciation rights, phantom
stock, leave of absence, layoff, vacation, day or dependent care, legal
services, cafeteria, life, health, accident, disability, worker's
compensation or other insurance, severance, separation or other
employee benefit plan, practice, policy or arrangement of any kind,
whether written or oral, or whether for the benefit of a single
individual or more than one individual including, but not limited to,
any "employee benefit plan" within the meaning of Section 3(3) of
ERISA.
"Preferred Stock" means any class of the capital stock of a
corporation (whether or not convertible into any other class of such
capital stock) which has any right, whether absolute or contingent, to
receive dividends or other distributions of the assets of such
corporation (including, without limitation, amounts payable in the
event of the voluntary or involuntary liquidation, dissolution or
winding-up of such corporation), which right is superior to the rights
of another class of the capital stock of such corporation. "Preferred
Stock" includes, without limitation, the Series A Convertible Preferred
Stock and such preferred stock as may be issued as described in Section
8.8(b) hereof (upon the issuance of such preferred stock).
"Purchaser" means the person who accepts and agrees to the
terms hereof as indicated by such person's signature (as "the
undersigned Purchaser") on the execution page of this Agreement,
together with its successors and assigns.
"Purchasers" has the meaning set forth in Section 1(c) hereof,
together with their respective successors and assigns.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Closing Date, among the Company and each of
the Purchasers.
"Restricted Payment" means (i) every payment in connection
with the redemption, purchase, retirement or other acquisition by or on
behalf of the Company or any Subsidiary of any shares of the Company's
or a Subsidiary's capital stock (as defined below), whether or not
owned by the Company or any Subsidiary, (ii) any prepayments or
repayments made on Indebtedness of the Company or any Subsidiary, (iii)
every payment to or on behalf of any Affiliate of the Company or any
Affiliate of any Subsidiary on account of or with respect to
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<PAGE>
any lease arrangements, and (iv) every payment by or on behalf of the
Company or of any Subsidiary (whether as repayment or prepayment of
principal or as interest or otherwise) on or with respect to (A) any
obligation to repay money borrowed owing to any Affiliate of the
Company or of any Subsidiary or (B) any obligation, to any Person, of
any Affiliate of the Company or of any Subsidiary or to any other
holder of shares of the Company's capital stock (as defined below),
which obligation is assumed, or is the subject of a Guaranty, by the
Company or a Subsidiary; provided, however, (a) that the restrictions
of the foregoing clause (i) shall not apply to (A) any payment in
respect of capital stock of the Company to the extent payable in shares
of the capital stock of the Company, (B) any redemption of the Series A
Preferred or (C) any redemption or repurchase pursuant to the 1997
Stock Option Plan and the 1998 Stock Incentive Plan as in effect on the
date hereof, (b) that the restrictions of the foregoing clause (ii)
shall not apply to any regularly scheduled prepayment or repayment of
Indebtedness, provided that such Indebtedness being prepaid or repaid
is not at the time of such prepayment or repayment or at any prior time
thereto owing to an Affiliate of the Company, or any payments due under
the Affiliate Agreements, (c) that none of the foregoing clauses shall
apply to any payments from a Subsidiary to the Company or from a
Subsidiary to a wholly-owned Subsidiary and (d) that none of the
foregoing clauses shall apply to any payments, distributions or other
transfers or actions on or with respect to the Shares or the Conversion
Shares or to the Purchasers (or holders of Shares or the Conversion
Shares) under the Stock Purchase Agreements. For purposes of this
definition, "capital stock" shall also include warrants and other
rights and options to acquire shares of capital stock (whether upon
exercise, conversion, exchange or otherwise).
"Rule 144" means (i) Rule 144 under the Securities Act as such
Rule is in effect from time to time and (ii) any successor rule,
regulation or law, as in effect from time to time.
"Rule 144A" means (i) Rule 144A under the Securities Act as
such Rule is in effect from time to time and (ii) any successor rule,
regulation or law, as in effect from time to time.
"Rule 144 Transaction" means a transfer of Conversion Shares
(A) complying with Rule 144 as such Rule is in effect on the date of
such transfer (but not including a sale other than pursuant to
"brokers' transactions" as defined in clauses (1) and (2) of paragraph
(g) of such Rule as in effect on the date hereof) and (B) occurring at
a time when Conversion Shares are registered pursuant to Section 12 of
the Securities Exchange Act.
"SEC Reports" has the meaning set forth in Section 4.19
hereof.
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<PAGE>
"Securities Act" means the Securities Act of 1933, as amended,
and the rules, regulations and interpretations thereunder.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended, and the rules, regulations and interpretations
thereunder.
"Series A Preferred" means the Company's Series A Convertible
Preferred Stock, par value $.01 per share, which will have the rights,
powers and privileges on the Closing Date as more fully set forth in
the Articles Supplementary.
"Shares" has the meaning set forth in Section 1(a) hereof. In
the event that any Shares are sold either in a public offering pursuant
to a registration statement under Section 5 of the Securities Act or
pursuant to a Rule 144 Transaction, then the transferees of such Shares
shall not be entitled to any benefits under this Agreement with respect
to such Shares and such Shares shall no longer be considered to be
"Shares" for purposes of any consent or waiver provision of this
Agreement.
"Stock Purchase Agreements" has the meaning set forth in
Section 1(d) hereof.
"Stockholders' Agreement" means the Stockholders' Agreement,
dated as of the Closing Date, among the Company, the Purchasers and
certain other stockholders of the Company.
"Strategic Investor" means a technology partner or other
company with related products and services; provided that "Strategic
Investor" shall not include an Affiliate of the Company, Sylvan or MCI.
"Subsidiary", with respect to any Person, means any
corporation, association or other entity of which more than 50% of the
total voting power of shares of stock or other equity interests
(without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is, at the time as
of which any determination is being made, owned or controlled, directly
or indirectly, by such Person or one or more of its Subsidiaries, or
both. The term "Subsidiary" or "Subsidiaries" when used herein without
reference to any particular Person, means a Subsidiary or Subsidiaries
of the Company.
"Sylvan" means Sylvan Learning Systems, Inc., which holds
1,227,393 shares of Common Stock and all of the outstanding 6%
Nonvoting Convertible Preferred Stock.
"Takeover Proposal" shall mean any tender or exchange offer
for in excess of 15% of the outstanding securities involving the
Company, any proposal for a merger,
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<PAGE>
consolidation or other business combination involving the Company, any
proposal or offer to acquire in any manner a greater than 15% equity
interest in, or a significant portion of the business or assets of, the
Company (other than immaterial or insubstantial assets or inventory in
the ordinary course of business or assets held for sale), any proposal
or offer with respect to any recapitalization or restructuring with
respect to the Company or any proposal or offer with respect to any
other transaction similar to any of the foregoing with respect to the
Company other than pursuant to the transactions to be effected pursuant
to the Stock Purchase Agreements.
"Takeover Proposal Interest" has the meaning set forth in
Section 7.4(e) hereof.
"Tax" or "Taxes" means all federal, state, local or foreign
net or gross income, gross receipts, net proceeds, sales, use, ad
valorem, value added, franchise, bank shares, withholding, payroll,
employment, excise, property, alternative or add-on minimum,
environmental or other taxes, assessments, duties, fees, levies or
other governmental charges of any nature whatsoever, whether disputed
or not, together with any interest, penalties, additions to tax or
additional amounts with respect thereto.
"Tax Returns" means any returns, reports or statements
(including any information returns) required to be filed for purposes
of a particular Tax.
"Taxing Authority" means any governmental agency, board,
bureau, body, department or authority of any United States federal,
state or local jurisdiction, or any foreign jurisdiction, having or
purporting to exercise jurisdiction with respect to any Tax.
"Transferees' shall mean any transferee (except for a Fleming
Holder) of the Shares or the Conversion Shares (as such terms are
defined within the definition of "Fleming Holders") from a Fleming
Holder. Transferees shall not include a transferee of Shares or
Conversion Shares sold in either a public offering pursuant to a
registration statement under the Securities Act or pursuant to a Rule
144 Transaction.
(b) For all purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires:
(i) the words "herein", "hereof" and "hereunder" and
other words of similar import refer to this Agreement as a whole and
not to any particular Section or other subdivision;
(ii) all accounting terms not otherwise defined
herein have the meanings assigned to them in accordance with GAAP
(except as otherwise provided herein);
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<PAGE>
(iii) all computations provided for herein, if any,
shall be made in accordance with GAAP (except as otherwise provided
herein);
(iv) any uses of the masculine, feminine or neuter
gender shall also be deemed to include any other gender, as
appropriate;
(v) all references herein to actions by the Company
or any Subsidiary, such as "create", "sell", "transfer", "dispose of",
etc., mean such action whether voluntary or involuntary, by operation
of law or otherwise;
(vi) the exhibits and schedules to this Agreement
shall be deemed a part of this Agreement;
(vii) each of the representations and warranties of
the Company contained in Section 4 hereof is separate and is not
limited, qualified or modified by the existence, wording or
satisfaction of any other representation or warranty of the Company in
Section 4 or otherwise;
(viii) each of the covenants of the Company contained
in Sections 7, 8 and 9 hereof or otherwise contained in any Stock
Purchase Agreement, the Certificate of Designations, the Stockholders'
Agreement or the Registration Rights Agreement is separate and is not
limited or satisfied by the existence, wording or satisfaction of any
other covenant of the Company in Section 7, 8 or 9 or otherwise; and
(ix) all references herein (in covenants or
otherwise) to any action(s) which are to be taken (or which are
prohibited from being taken) by any Person or the Company or any
Subsidiary shall apply to such Person or the Company or such
Subsidiary, as the case may be, whether such action is taken directly
or indirectly.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser as
follows as of the date hereof and as of the Closing Date, except as set forth in
the disclosure schedules attached hereto:
4.1. Corporate Existence, Power and Authority.
(a) Each of the Company and each Subsidiary is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. The Company and each Subsidiary is duly
qualified, licensed and authorized to do business and is in good standing in
each jurisdiction in which it owns or leases any property or in which the
conduct of its business requires it to so qualify or be so licensed, except for
such jurisdictions where the failure to so qualify or be so licensed would not
have a material adverse effect on the
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<PAGE>
Company's assets, properties, liabilities, business, affairs, results of
operations, condition (financial or otherwise) or prospects, on a consolidated
basis.
(b) No proceeding has been commenced looking toward the
dissolution or merger of the Company or any Subsidiary or the amendment of their
respective certificates of incorporation (other than the Articles
Supplementary). Neither the Company nor any Subsidiary is in violation in any
respect of its charter or by-laws.
(c) Each of the Company and each Subsidiary has all requisite
power, authority (corporate and other) and legal right to own or to hold under
lease and to operate the properties it owns or holds and to conduct its business
as now being conducted.
(d) The Company has all requisite power, authority (corporate
and other) and legal right to execute, deliver, enter into, consummate the
transactions contemplated by and perform its obligations under (i) the Stock
Purchase Agreements, including, without limitation, the issuance by the Company
of the Shares and the Conversion Shares as contemplated herein and therein and
in the Articles Supplementary (subject to the proper filing with the Maryland
State Department of Assessments and Taxation of the Articles Supplementary for
the Series A Preferred), (ii) the Stockholders' Agreement and (iii) the
Registration Rights Agreement. The execution, delivery and performance of the
Stock Purchase Agreements, the Stockholders' Agreement and the Registration
Rights Agreement by the Company (including, without limitation, the issuance by
the Company of the Shares and the Conversion Shares as contemplated herein and
therein and in the Articles Supplementary) have been duly authorized by all
required corporate and other actions. The Company has duly executed and
delivered the Stock Purchase Agreements and at the Closing will have duly
executed and delivered the Stockholders' Agreement and the Registration Rights
Agreement. The Stock Purchase Agreements constitute and, at the Closing, the
Stockholders' Agreement and the Registration Rights Agreement will constitute
the legal, valid and binding obligations of the Company enforceable in
accordance with their respective terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to the rights of
creditors generally or under general principles of equity.
4.2. Capital Stock.
(a) Schedule 4.2(a) hereto correctly and completely lists (i)
the authorized capital stock of the Company (Common Stock and Preferred Stock),
(ii) the number of designated shares of Preferred Stock in each series or class
after giving effect to the Articles Supplementary and (iii) on October 19, 1999,
after giving effect to the issuance of Shares contemplated by the Stock Purchase
Agreements, the number of shares outstanding in each series or class. There have
been no material issuances of shares since June 30, 1999. All of such
outstanding shares are, or on the Closing Date will be, duly authorized, validly
issued and outstanding, fully paid and non-assessable. The shares of the
Company's Common Stock issuable upon conversion of the Series A Preferred will
be, when issued in accordance with the
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terms of the Series A Preferred, duly authorized, validly issued, fully paid and
non-assessable. Except as provided in the Articles Supplementary and as
described in Schedule 4.2(a), none of the shares of the Company's capital stock
which will be outstanding at the Closing (i) were or will be subject to
preemptive rights when issued or (ii) provide the holders thereof with any
preemptive rights with respect to any issuances of capital stock.
(b) Schedule 4.2(b) hereto correctly and completely lists the
number and purpose for which shares of the Company's Common Stock are reserved
for issuance by the Company.
(c) Except as referred to in Section 4.2(b), there are no
outstanding options, warrants, subscriptions, rights, convertible securities or
other agreements or plans under which the Company may become obligated to issue,
sell or transfer shares of its capital stock or other securities.
(d) Except for the registration rights contained in the
Registration Rights Agreement and as described in Schedule 4.2(d), there are and
will be no outstanding registration rights with respect to any capital stock of
the Company or of any Subsidiary, which (in either case) will be outstanding on
the Closing Date, or any capital stock referred to in Section 4.2(b) or 4.2(c).
(e) There are no voting agreements, voting trusts, proxies or
other agreements or understandings with respect to the voting of any capital
stock of the Company or any Subsidiary.
(f) Except as described in Schedule 4.2(f), there are no
anti-dilution protections or other adjustment provisions in existence with
respect to any capital stock of the Company or any Subsidiary or any capital
stock referred to in Section 4.2(b) or 4.2(c).
(g) The Articles Supplementary has been duly adopted by the
Company and is fully effective as a supplement to the Company's charter. The
Shares will have all of the rights, priorities and terms set forth in the
Articles Supplementary.
(h) To the knowledge of the Company, those persons who
beneficially own, directly or indirectly, more than 5% (calculated in accordance
with Rule 13d-3 under the Securities Exchange Act) of the Company's outstanding
Common Stock are as listed on Schedule 4.2(h); provided that the Company may
rely on the accuracy of all Schedules 13D and Schedules 13G filed under the
Securities Exchange Act for purposes of determining those persons who
beneficially own, directly or indirectly, more than 5% of the Company's
outstanding Common Stock.
4.3. Subsidiaries.
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The Company has no Subsidiaries. The Company has no Investments
in any other Person.
4.4. Business.
The Company is engaged primarily in the business of
distributed learning. The Company neither currently engages in, nor has any
intention of engaging in, any other business.
4.5. No Defaults or Conflicts.
(a) Neither the Company nor any of its Subsidiaries is in
violation or default in any material respect (and is not in default in any
respect regarding any Indebtedness) under any indenture, agreement or instrument
to which it is a party or by which it or its properties may be bound that would
materially adversely affects or will materially adversely affect the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company or the ability of the
Company to perform its obligations under the Stock Purchase Agreements, the
Articles Supplementary, the Stockholders' Agreement, the Registration Rights
Agreement or any of the transactions contemplated hereby or thereby. Neither the
Company nor any Subsidiary is in default in any material respect under any
material order, writ, injunction, judgment or decree of any court or other
governmental authority or arbitrator(s).
(b) The execution, delivery and performance by the Company of
the Stock Purchase Agreements, the Stockholders' Agreement and the Registration
Rights Agreement and any of the transactions contemplated hereby or thereby
(including, without limitation, the issuance of the Shares and the Conversion
Shares as contemplated herein and therein and in the Articles Supplementary, the
adoption of the Articles Supplementary as an amendment to the Company's charter)
do not and will not (i) violate or conflict with, with or without the giving of
notice or the passage of time or both, any provision of (A) the respective
certificates of incorporation or by-laws of the Company or any of its
Subsidiaries, (B) any law, rule, regulation or order of any federal, state,
county, municipal or other governmental authority, (C) any judgment, writ,
injunction, decree, award or other action of any court or governmental authority
or arbitrator(s), or (D) any agreement, indenture or other instrument applicable
to the Company or any of its Subsidiaries or any of their respective properties,
(ii) result in the creation of any Lien upon any of the Company's or any
Subsidiary's properties, assets or revenues, except as provided in the Articles
Supplementary of the Series A Preferred, (iii) require the consent, waiver,
approval, order or authorization of, or declaration, registration, qualification
or filing with, any Person (whether or not a governmental authority and
including, without limitation, any shareholder approval) (other than approvals
which have been obtained prior to the Closing Date), or (iv) cause antidilution
clauses of any outstanding securities to become operative or give rise to any
preemptive rights. No provision of any item referred to in Sections (A) and (C)
of the preceding clause (i) materially adversely affects or will materially
adversely affect the assets, properties, liabilities, business, affairs, results
of operations, condition (financial or otherwise) or
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prospects of the Company or the ability of the Company to perform its
obligations under the Stock Purchase Agreements, the Articles Supplementary, the
Stockholders' Agreement, the Registration Rights Agreement or any of the
transactions contemplated hereby or thereby.
4.6. Disclosure Materials; Other Information.
(a) The Company has previously furnished to the Purchasers the
materials described on Schedule 4.6(a) hereto (the "Disclosure Material"). The
audited and unaudited financial statements referred to or contained in the
materials referred to on Schedule 4.6(a) fairly present the consolidated
financial condition of the Company as of the respective dates thereof and the
consolidated results of the operations of the Company for such periods and have
been prepared in accordance with GAAP, except that any such unaudited statements
may omit notes and may be subject to normal year-end adjustment.
(b) Since June 30, 1999, except as disclosed in the Company's
Quarterly Report on Form 10-Q for the three months ended June 30, 1999 or
subsequently publicly announced, (i) the business of the Company has been
conducted in the ordinary course and (ii) there has been no material adverse
change in the assets, properties, liabilities, business, affairs, results of
operations, condition (financial or otherwise) or prospects of the Company. As
of such Closing Date and as of the date hereof, there are no material
liabilities of the Company or any Subsidiary which would be required to be
provided for in a consolidated balance sheet of the Company as of either such
date prepared in accordance with GAAP, other than liabilities provided for in
the financial statements referred to in Section 4.6(a). Since June 30, 1999, no
amount or property has directly or indirectly been declared, ordered, paid, made
or set aside for any Restricted Payment nor has any such action been agreed to.
(c) There are no material liabilities, contingent or
otherwise, of the Company or the Subsidiaries that have not been disclosed in
the financial statements referred to in Section 4.6(a) or otherwise disclosed in
the schedules hereto.
(d) The financial projections included in the Disclosure
Material conform with the internal operating forecasts of the Company and its
Subsidiaries and were based on good faith assumptions when made and have been
prepared in good faith.
(e) There is no fact known to the Company or any of the
Subsidiaries which is not in the disclosure schedules hereto which is necessary
in order to make the representations and warranties made, in light of the
circumstances under which they were made, not misleading.
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4.7. Litigation.
There is no action, suit, proceeding, investigation or claim
pending or, to the knowledge of the Company or the Subsidiaries, threatened in
law, equity or otherwise before any court, administrative agency or arbitrator
which (i) questions the validity of the Stock Purchase Agreements, the Articles
Supplementary, the Stockholders' Agreement, the Registration Rights Agreement,
the Shares or the Conversion Shares or any action taken or to be taken pursuant
hereto or thereto, (ii) might adversely affect the right, title or interest of
any Purchaser to the Shares or the Conversion Shares or (iii) might result in a
material adverse change in the assets, properties, liabilities, business,
affairs, results of operations, condition (financial or otherwise) or prospects
of the Company.
4.8. Taxes.
Each of the Company and each Subsidiary has duly and timely
filed all Tax Returns required to be filed by it, and each such Tax Return
correctly and completely reflects the Tax liability and all other information
required to be reported thereon. Each of the Company and each Subsidiary has
paid or caused to be paid all Taxes (whether or not reflected on such Tax
Returns) that are due and payable. The provision for Taxes due by the Company
and its Subsidiaries in the most recent financial statement included in the
Disclosure Material is sufficient for all unpaid Taxes, being current Taxes not
yet due and payable, of the Company and its Subsidiaries, as of the end of the
period covered by such financial statement, and as of the Closing Date, such
provision, as adjusted for the passage of time through the Closing Date, will be
sufficient for the then-accrued and unpaid Taxes not yet due and payable of the
Company and its Subsidiaries. No Tax Returns of the Company or any Subsidiary
have ever been audited by any Taxing Authority, there is no dispute concerning
any Tax liability of the Company or any Subsidiary either threatened, claimed or
raised by any Taxing Authority, and the Company does not expect any Taxing
Authority to assess additional Taxes against or in respect of it or any
Subsidiary for any past period. The Company and each Subsidiary has withheld and
paid, or, if not yet due for payment, set aside in accounts for such purposes,
all Taxes required to have been withheld in connection with amounts paid or
owing to any employee, creditor, independent contractor or other third party.
Other than stamp taxes, the Company and its Subsidiaries have no liability for
Taxes of any Person other than the Company and its Subsidiaries (i) as a
transferee or successor, (ii) by contract, or (iii) otherwise.
4.9. ERISA.
(a) All Benefit Plans are listed in Section 4.9(a) of Schedule
4.9, and copies of all documentation relating to such Benefit Plans have been
delivered to or made available for review by Purchasers (including, without
limitation, copies of written Benefit Plans, written descriptions of oral
Benefit Plans, summary plan descriptions, trust agreements, the three most
recent annual returns, employee communications, and IRS determination letters).
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(b) Each Benefit Plan has at all times been maintained and
administered in all material respects in accordance with its terms and with the
requirements of all applicable law, including, without limitation, ERISA and the
Code, and each Benefit Plan intended to qualify under section 401(a) of the Code
has at all times since its adoption been so qualified, and each trust which
forms a part of any such plan has at all times since its adoption been
tax-exempt under section 501(a) of the Code.
(c) No Benefit Plan has incurred any "accumulated funding
deficiency" within the meaning of section 302 of ERISA or section 412 of the
Code, and the "amount of unfunded benefit liabilities" within the meaning of
section 4001(a)(18) of ERISA does not exceed zero with respect to any Benefit
Plan subject to Title IV of ERISA.
(d) No "reportable event" (within the meaning of section 4043
of ERISA) has occurred with respect to any Benefit Plan since the effective date
of said section 4043 for which notice is not waived under the regulations issued
pursuant to said section 4043.
(e) No Benefit Plan is a multiemployer plan within the meaning
of section 3(37) of ERISA.
(f) No direct, contingent or secondary liability has been
incurred or is expected to be incurred by the Company or any ERISA Affiliate
under Title IV of ERISA to any party with respect to any Benefit Plan.
(g) Neither the Company nor any ERISA Affiliate has incurred
any liability for any tax imposed under Chapter 43 of the Code or any liability
under Part 5 of Title I of ERISA.
(h) No benefit under any Benefit Plan, including, without
limitation, any severance or parachute payment plan or agreement, will be
established or become accelerated, vested or payable by reason of any
transaction contemplated under this Agreement.
(i) No Benefit Plan provides health or death benefit coverage
beyond the termination of an employee's employment, except as required by Part 6
of Subtitle B of Title I of ERISA or section 4980B of the Code or any State laws
requiring continuation of benefits coverage following termination of employment.
(j) No suit, action or other litigation (excluding claims for
benefits incurred in the ordinary course of plan activities) has been brought
or, to the knowledge of the Company or any Subsidiary, threatened against or
with respect to any Benefit Plan and there are no facts or circumstances known
to the Company or any Subsidiary that could reasonably be expected to give rise
to any such suit, action or other litigation.
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(k) All contributions to Benefit Plans that were required to
be made under such Benefit Plans have been made, and all benefits accrued under
any unfunded Benefit Plan have been paid, accrued or otherwise adequately
reserved in accordance with GAAP, all of which accruals under unfunded Benefit
Plans are as disclosed in Schedule 4.9, and each of the Company and each
Subsidiary has performed all material obligations required to be performed under
all Benefit Plans.
(l) The execution, delivery and performance of the Stock
Purchase Agreements, the Stockholders' Agreement and the Registration Rights
Agreement and the consummation of the transactions contemplated hereby and
thereby (including, without limitation, the offer, issue and sale by the
Company, and the purchase by the Purchaser of the Shares and the Conversion
Shares) will not involve any "prohibited transaction" within the meaning of
ERISA or the Code that could subject the Company or any ERISA Affiliate to a
tax, penalty or liability under ERISA or the Code.
4.10. Legal Compliance.
(a) Each of the Company and each Subsidiary has complied with
all applicable laws, rules, regulations, orders, licenses, judgments, writs,
injunctions, decrees or demands, except to the extent that failure to so comply
would not materially adversely affect the assets, properties, liabilities,
business affairs, results of operations, condition (financial or otherwise) or
prospects of the Company on a consolidated basis.
(b) There are no adverse orders, judgments, writs,
injunctions, decrees, or demands of any court or administrative body, domestic
or foreign, or of any other governmental agency or instrumentality, domestic or
foreign, outstanding against the Company or any Subsidiary.
4.11. Outstanding Securities.
Schedule 4.11 hereto correctly and completely lists the
outstanding securities (as defined in the Securities Act) of the Company and the
Subsidiaries. All securities of the Company have been offered, issued, sold and
delivered in compliance with, or pursuant to exemptions from, all applicable
federal and state laws, and the rules and regulations of federal and state
regulatory bodies governing the offering, issuance, sale and delivery of
securities.
4.12. Intellectual Property and Other Rights.
(a) Each of the Company and each Subsidiary owns or possesses
all patents, patent rights, trademarks, trademark rights, trade names, trade
name rights and copyrights (collectively, the "Intellectual Property") (each of
which is listed on Schedule 4.12(a) hereto), and all rights and privileges with
respect to any of the foregoing, as are necessary for the conduct of its
business as now being conducted and as proposed to be conducted. To the best of
the
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Company's knowledge, the rights of (and use by) each of the Company and each
Subsidiary with respect to such Intellectual Property or any other patents,
patent rights, trademarks, trademark rights, trade names, trade name rights or
copyrights do not conflict with or infringe any rights of others in a manner
which might materially and adversely affect the assets, properties, liabilities,
business, affairs, results of operations, condition (financial or otherwise) or
prospects of the Company, and no such claim of conflict or infringement has been
asserted by any Person.
(b) Each of the Company and each Subsidiary owns and holds all
franchises, licenses, permits, consents, approvals and other authority,
governmental or otherwise (collectively, the "Licenses") (each of which is
listed on Schedule 4.12(b) hereto), and all rights and privileges with respect
to any of the foregoing, as are materially necessary for the conduct of its
business as now being conducted and as proposed to be conducted, except to the
extent that failure to so own or hold is not reasonably likely to materially
adversely affect the assets, properties, liabilities, business, affairs, results
of operations, condition (financial or otherwise) or prospects of the Company.
Neither the Company nor any Subsidiary is in default in any material respect
under any of such Licenses. To the best of the Company's knowledge, the rights
of (and use by) each of the Company and each Subsidiary with respect to such
Licenses or any other franchise, license, permit, consent, approval or other
authority do not conflict with or infringe any rights of others in a manner
which might materially and adversely affect the assets, properties, liabilities,
business, affairs, results of operations, condition (financial or otherwise) or
prospects of the Company, and no such claim of conflict or infringement has been
asserted by any Person.
4.13. Key Employees.
Each of the Company and each Subsidiary has good relationships
with its employees and has not had and does not expect any substantial labor
problems. Neither the Company nor any Subsidiary has no knowledge as to any
intentions of any key employee to leave the employ of the Company or any
Subsidiary. The employees of the Company and each Subsidiary are not and have
never been represented by any labor union, and no collective bargaining
agreement is binding and in force against the Company or any Subsidiary or
currently being negotiated by the Company or any Subsidiary.
4.14. Properties.
Neither the Company nor any Subsidiary owns any real property.
Other than Permitted Liens, each of the Company and each Subsidiary has good and
marketable title to each of its other properties other than real property or
leased properties. Certain real property used by the Company or the Subsidiaries
in the conduct of their respective businesses is held under lease (as identified
on Schedule 4.14 hereto), and neither the Company nor any Subsidiary is aware of
any pending or threatened claim or action by any lessor of any such property to
terminate any such lease. All such leases are valid and in full force and
effect, and none of such leases is in default. None of the properties owned or
leased by the Company or any Subsidiary is subject to
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any Liens which could materially and adversely affect the assets, properties,
liabilities, business, affairs, results of operations, condition (financial or
otherwise) or prospects of the Company on a consolidated basis.
4.15. Suppliers and Customers.
(a) Each of the Company and each Subsidiary has adequate
sources of supply for its business as currently conducted and as proposed to be
conducted. Each has good relationships with all of its material sources of
supply of goods and services and each does not anticipate any material problem
with any such material sources of supply.
(b) Neither the Company nor any Subsidiary has any knowledge
that the customer base of the Company and its Subsidiaries might materially
decrease.
4.16. Environmental Compliance.
(a) To the knowledge of the Company or any Subsidiaries, there
is no Hazardous Material on, about, under or in, any property, real or personal,
in which the Company or any Subsidiary has or has formerly had any interest in
an amount or concentration which could constitute a violation that would result
in a liability in excess of $25,000 or otherwise result in a liability in excess
of $25,000 to the Company or any Subsidiary under any applicable Environmental
Law.
(b) There is no (and has not been any) off-site use, handling,
storage or disposal or on-site use, handling, storage or disposal of Hazardous
Material at or from any locations currently or formerly owned, leased, operated
or occupied by the Company or any Subsidiary as a result of which use, handling,
storage or disposal the Company could incur a material liability or obligation
under any applicable Environmental Law.
(c) Neither the Company nor any Subsidiary has received any
verbal or written notice, citation, subpoena, summons, complaint or other
correspondence or communication from any person with respect to the presence of
any non-indigenous Hazardous Material upon, into, beneath, or emanating from or
affecting any of the real property (including improvements) currently or
formerly owned or occupied by the Company that could result in a liability to
the Company or any Subsidiary in excess of $25,000.
(d) There has been no intentional or unintentional, gradual or
sudden, release, disposal or discharge by the Company or, to the Company's
knowledge, by others, upon, into or beneath the real property (including
improvements) currently or formerly owned or occupied by the Company or any
Subsidiary that has caused or is causing soil or groundwater contamination
which, under applicable Environmental Laws could require investigation or
remediation or could otherwise create a material liability or obligation on the
part of the Company or any Subsidiary.
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(e) The Company and its Subsidiaries are in material
compliance with all applicable Environmental Laws, has received all required
Environmental Permits and is in material compliance with the terms and
conditions of all Environmental Permits.
(f) To the best knowledge of the Company and its Subsidiaries
after reasonable inquiry, there are no Liens arising under or pursuant to any
Environmental Law ("Environmental Liens") relating to any real property
(including improvements thereon) currently owned by the Company or any
Subsidiary.
(g) There are no (i) underground storage tanks, (ii)
polychlorinated biphenyl containing equipment or (iii) asbestos-containing
materials at any site currently owned, operated or leased by the Company or any
Subsidiary, except in compliance with all applicable Environmental Laws.
4.17. No Burdensome Agreements.
To the best of the knowledge of the Company and its
Subsidiaries, other than this Agreement and the related documents, the Company
is not a party to any contract or agreement with any Affiliate of the Company or
of any Subsidiary, the terms of which are materially less favorable to the
Company or such Subsidiary, as the case may be, than those which might have been
obtained, at the time such contract or agreement was entered into, from a person
who was not such an Affiliate.
4.18. Offering of Shares.
None of the Company, any Subsidiary, any agent or any other
person acting on its behalf, directly or indirectly, (i) offered any of the
Shares or any similar security of the Company (A) by any form of general
solicitation or general advertising (within the meaning of Regulation D under
the Securities Act) or (B) for sale to or solicited offers to buy any thereof
from, or otherwise approached or negotiated with respect thereto with, any
person other than (x) the Purchasers and (y) not more than five other
institutional investors or Strategic Investors, each of which the Company
reasonably believed was an "accredited investor" within the meaning of
Regulation D under the Securities Act or (ii) has done or caused to be done (or
has omitted to do or to cause to be done) any act which act (or which omission)
would result in bringing the issuance or sale of the Shares within the
provisions of Section 5 of the Securities Act or the filing, notification or
reporting provisions of any state securities laws.
4.19. SEC Reports.
The Company has filed all proxy statements, reports and other
documents required to be filed by it under the Securities Exchange Act. The
Company has furnished the Purchaser with copies of (i) its Annual Report on Form
10-K for the fiscal year ended December 31, 1998, (ii) its Quarterly Reports on
Form 10-Q for the fiscal quarters ended March 31, 1999
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and June 30, 1999 and (iii) its Proxy Statement dated April 22, 1999
(collectively, the "SEC Reports"). Each SEC Report was in substantial compliance
with the requirements of its respective form and none of the SEC Reports, nor
the financial statements (and the notes thereto) included in the SEC Reports, as
of their respective dates, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
4.20. Indebtedness.
Schedule 4.20 hereto sets forth (i) the amount of all
Indebtedness of the Company and any Subsidiary outstanding as of September 30,
1999 (and there is no additional material amount of Indebtedness of the Company
outstanding other as set forth on such Schedule 4.20), (ii) any Lien with
respect to such Indebtedness and (iii) a description of each instrument or
agreement governing such Indebtedness. The Company has made available to the
Purchaser a complete and correct copy of each such instrument or agreement
(including all amendments, supplements or modifications thereto). No material
default exists with respect to or under any such Indebtedness or any instrument
or agreement relating thereto and no event or circumstance exists with respect
thereto that (with notice or the lapse of time or both) could give rise to such
a default.
4.21. Use of Proceeds.
The Company will use the proceeds realized from the sale of
the Shares to fund future development opportunities and for working capital
purposes. No portion of such proceeds will be used for the purpose, whether
immediate, incidental or ultimate, of purchasing or carrying, within the meaning
of Regulation U of the Board of Governors of the Federal Reserve System, as
amended from time to time, any "margin stock" as defined in said Regulation U,
or any "margin stock" as defined in Regulation G of the Board of Governors of
the Federal Reserve System, as amended from time to time, or for the purpose of
purchasing, carrying or trading in securities within the meaning of Regulation T
of the Board of Governors of the Federal Reserve System, as amended from time to
time, or for the purpose of reducing or retiring any indebtedness which both (i)
was originally incurred to purchase any such margin stock or other securities
and (ii) was directly or indirectly secured by such margin stock or other
securities. None of the assets of the Company or any Subsidiary includes any
such "margin stock." Neither the Company nor any Subsidiary has any present
intention of acquiring any such "margin stock."
4.22. Other Names.
Except as listed on Schedule 4.22, the businesses previously
or presently conducted by the Company and any Subsidiary have not been conducted
under any corporate, trade or fictitious name.
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4.23. Brokers.
No broker, finder or investment banker or other party is
entitled to any brokerage, finder's or other similar fee or commission in
connection with any Stock Purchase Agreement, the Stockholders' Agreement, the
Registration Rights Agreement or the Articles Supplementary or any of the
transactions contemplated hereby or thereby, based upon arrangements made by or
on behalf of the Company or any Subsidiary or any of their respective
Affiliates.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company as
follows:
5.1. Corporate Power and Authority.
The Purchaser has all requisite power, authority and legal
right to execute, deliver, enter into, consummate the transactions contemplated
by and perform its obligations under this Agreement, the Stockholders' Agreement
and the Registration Rights Agreement. The execution, delivery and performance
of this Agreement, the Stockholders' Agreement and the Registration Rights
Agreement by the Purchaser have been duly authorized by all required corporate
and other actions. The Purchaser has duly executed and delivered this Agreement,
the Stockholders' Agreement and the Registration Rights Agreement, and this
Agreement, the Stockholders' Agreement and the Registration Rights Agreement
constitute the legal, valid and binding obligations of the Purchaser enforceable
against the Purchaser in accordance with their respective terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to the rights of creditors generally or under general principles of
equity.
5.2. Investment Intent.
The Purchaser is capable of evaluating the risk of its
investment in the Shares being purchased by it and is able to bear the economic
risk of such investment. The Purchaser is purchasing the Shares to be purchased
by it for its own account for investment and not with a present view to any
distribution thereof in violation of applicable securities laws; provided,
however, that the Purchaser may transfer record and/or beneficial ownership of
the Shares or the Conversion Shares to one or more Affiliates, officers or
employees of Affiliates or investment funds managed by Affiliates of the
Purchaser, in all cases in compliance with federal securities laws. It is
understood that the disposition of the Purchaser's property shall at all times
be within the Purchaser's control. If the Purchaser should in the future decide
to dispose of any of its Shares or Conversion Shares, it is understood that it
may do so only in compliance with the
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Securities Act, applicable securities laws and this Agreement. The Purchaser is
an "accredited investor" as defined in Rule 501(a) under the Securities Act.
5.3. Brokers.
Except as disclosed on Schedule 5.3 hereto, no broker, finder
or investment banker or other party is entitled to any brokerage, finder's or
other similar fee or commission in connection with any Stock Purchase Agreement,
the Stockholders' Agreement, the Registration Rights Agreement or the Articles
Supplementary or any of the transactions contemplated hereby or thereby, based
upon arrangements made by or on behalf of the Purchaser or any Subsidiary or any
of their respective Affiliates.
SECTION 6. RESTRICTIONS ON TRANSFER
The Purchaser agrees that it will not sell or otherwise
dispose of any Shares or Conversion Shares unless such Shares or Conversion
Shares have been registered under the Securities Act and, to the extent
required, under any applicable state securities laws, or pursuant to an
applicable exemption from such registration requirements. The Company may
endorse on all certificates representing Shares or Conversion Shares a legend
stating or referring to such transfer restrictions; provided, that no such
legend shall be endorsed on any Share certificates which, when issued, are no
longer subject to the restrictions of this Section 6.
SECTION 7. INFORMATION AS TO THE COMPANY
The Company covenants and agrees as follows:
7.1. Financial Information.
(a) The Company will maintain, and cause each Subsidiary to
maintain, a system of accounting established and administered in accordance with
sound business practices to permit preparation of financial statements in
accordance with GAAP.
(b) So long as at least 20,000 Shares are outstanding, the
Company will deliver to (I) the Fleming Holders and (II) each Permitted
Transferee, the following:
(i) as soon as practicable but not later than five
(5) Business Days after their issuance, and in any event within ninety (90) days
after the close of each fiscal year of the Company, (A) a consolidated balance
sheet of the Company and its Subsidiaries as of the end of such fiscal year and
(B) consolidated statements of operations, stockholders' equity and cash flows
of the Company and its Subsidiaries for such fiscal year, in each case setting
forth in comparative form the corresponding figures for the preceding fiscal
year, all such balance sheets
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and statements to be in reasonable detail and certified without qualification by
Ernst & Young LLP or any other "Big Five" independent public accounting firm
selected by the Company, and such statements shall be accompanied by a
management analysis of any material differences between the results for such
fiscal year and the corresponding figures for the preceding year; the Company's
Annual Report on Form 10-K shall satisfy such requirement provided that it is in
compliance with all applicable requirements of the SEC and is certified by a
"Big Five" accounting firm;
(ii) as soon as practicable, copies (A) of all
financial statements, proxy material or reports sent to the Company's or any
Subsidiary's stockholders, (B) of any public press releases and (C) of all
reports or registration statements filed with the Commission pursuant to the
Securities Act or the Securities Exchange Act;
(iii) as soon as practicable and in any event within
forty-five (45) days after the close of each of the first three (3) fiscal
quarters of the Company, (A) a consolidated balance sheet of the Company and its
Subsidiaries as of the end of such fiscal quarter, (B) consolidated statements
of operations, stockholders' equity and cash flows of the Company and its
Subsidiaries for the portion of the fiscal year ended with the end of such
quarter, in each case in reasonable detail, certified by (I) the Chief Financial
Officer, (II) the Chief Executive Officer or (III) the President of the Company
and setting forth in comparative form the corresponding figures for the
comparable period one year prior thereto (subject to normal year-end
adjustments), together with a management analysis of any material differences
between such results and the corresponding figures for such prior period and (C)
a certificate of (I) the Chief Financial Officer, (II) the Chief Executive
Officer or (III) the President certifying the Company's compliance with the
covenants contained in Section 9 of this Agreement; the Company's Quarterly
Report on Form 10-Q shall satisfy such requirement provided that it is in
compliance with all applicable requirements of the SEC;
(iv) as soon as practicable but not later than thirty
(30) days after the end of each month other than the final month of the
Company's fiscal year, (A) an unaudited consolidated balance sheet of the
Company and its Subsidiaries as at the end of such month and (B) unaudited
consolidated statements of operations, stockholders' equity and cash flows of
the Company and its Subsidiaries for the portion of the fiscal year ended with
the end of such month, in each case in reasonable detail, setting forth in
comparative form the corresponding figures for the corresponding period one year
prior thereto (subject to normal year-end adjustments);
(v) as soon as practicable and without duplication of
any of the above items, any other materials furnished to the Company's Board of
Directors or to holders of the Company's capital stock or Indebtedness,
including, without limitation, any compliance certificates furnished in respect
of such Indebtedness, which shall be delivered to the Fleming Designee(s) and
the Transferee Designee(s); and
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(vi) as soon as practicable, such other information
as may reasonably be requested by (I) the Fleming Holders or (II) any Permitted
Transferee.
(c) The Company will deliver to each member of the Company's
Board of Directors and each observer to the Company's Board of Directors
appointed pursuant to Section 3(a) of the Stockholders' Agreement, as soon as
practicable (and in the case of (iii), prior to the end of each fiscal year) and
without duplication of any of the items listed below, the following:
(i) copies of any annual, special or interim audit
reports or management or comment letters with respect to the Company or its
Subsidiaries or their operations submitted to the Company by independent public
accountants;
(ii) copies of summary financial information prepared
on a quarterly basis regarding the Company on a consolidated basis as presented
to the Board and any other summary financial information otherwise prepared;
(iii) copies of the annual budget and business plan
for the next fiscal year;
(iv) copies of all formal communications, from time
to time, to directors of the Company (including without limitation all
information furnished to such directors in connection with such communications),
and copies of minutes of meetings of the Board of Directors (and of any
executive committees thereof) of the Company;
(v) notice of default under any material agreement,
contract or other instrument to which the Company or any of its Subsidiaries is
a party or by which any of them is bound;
(vi) notice of any action or proceeding which has
been commenced or threatened against the Company or any of its Subsidiaries and
which, if adversely determined, would have, individually or in the aggregate, a
material adverse effect on the assets, properties, liabilities, business,
affairs, results of operations, condition (financial or otherwise) or prospects
of the Company on a consolidated basis; and
(vii) copies of all filings made with the Commission.
(d) All such financial statements referred to in this Section
7.1 shall be prepared in accordance with GAAP (except for any change in
accounting principles specified in the accompanying certificate, in the
financial statements themselves or required by GAAP, and except that any interim
financial statements may omit notes and may be subject to normal year-end
adjustments).
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(e) Without limiting the foregoing provisions of this Section
7.1, the Company agrees that, if requested in writing by any holder of Shares,
it will not deliver to such holder (until otherwise instructed by such holder)
(x) any non-public information or non-public materials regarding the Company or
any Subsidiary (whether described in this Section 7.1 or otherwise) and (y) any
information (whether or not included in clause (x)) which such holder specifies
that it does not want to receive. The Company shall comply with any such request
with respect to each person entitled to information hereunder, until instructed
otherwise by the then holder of such Shares.
7.2. Communication with Accountants.
The Company (on behalf of itself and each of its Subsidiaries)
hereby authorizes (i) the Purchaser to communicate directly with the independent
certified public accountants for the Company or any Subsidiary and (ii) such
accountants to disclose to the Purchaser any and all financial statements and
any other information of any kind that they may have with respect to the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company or any Subsidiary; provided
that (a) the Purchaser in good faith and based upon reasonable assumptions has
financial concerns regarding the Company that causes it to desire to communicate
with such accountants and (b) the Purchaser must first notify the Company of its
intention to speak with such accountants and permit the Company to participate
in such conversation if the Company desires to do so. The Company shall deliver
a letter addressed to such accountants instructing them to comply with the
provisions of this Section 7.2.
7.3. Inspection.
The Company will permit (I) the Fleming Holders, (II) any
Permitted Transferee, and (III) any authorized representative of the Fleming
Holders or such Permitted Transferee, to visit and inspect any of the properties
of the Company and its Subsidiaries, to examine their respective books and
records and to discuss with their officers their books and records and the
assets, properties, liabilities, business, affairs, results of operations,
condition (financial or otherwise) or prospects of the Company or any
Subsidiary, all at such reasonable times, all on reasonable notice and as often
as may be reasonably requested.
7.4. Notices.
The Company will give notice to all holders of Shares promptly
after it learns, other than by notice from all of such holders, of the existence
of any of the following:
(a) any default under any Indebtedness (or under any
indenture, mortgage or other agreement relating to any Indebtedness) which
Indebtedness is in an aggregate principal amount exceeding $100,000 (or the
equivalent thereof in other currencies) in respect of which the Company or any
Subsidiary is liable;
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(b) any action or proceeding which has been commenced or
threatened against the Company or any of its Subsidiaries and which, if
adversely determined, would have, individually or in the aggregate, a material
adverse effect on the assets, properties, liabilities, business, affairs,
results of operations, condition (financial or otherwise) or prospects of the
Company on a consolidated basis or the ability of the Company to perform its
obligations under the Stock Purchase Agreements, the Stockholders' Agreement,
the Registration Rights Agreement or the Articles Supplementary;
(c) any dispute which exists between the Company or any of its
Subsidiaries and any governmental regulatory body which, in the reasonable
opinion of the Company is reasonably likely to, individually or in the
aggregate, materially adversely affect the normal business operations of the
Company or any of its Subsidiaries or the assets, properties, liabilities,
business, affairs, results of operations, condition (financial or otherwise) or
prospects of the Company on a consolidated basis or the ability of the Company
to perform its obligations under the Stock Purchase Agreements, the
Stockholders' Agreement, the Registration Rights Agreement or the Articles
Supplementary; and
(d) if any (i) "reportable event" (as such term is described
in Section 4043(c) of ERISA) has occurred; or (ii) "accumulated funding
deficiency" (within the meaning of Section 412(a) of the Code or Section 302 of
ERISA) has been incurred with respect to a Pension Plan maintained or
contributed to (or required to be maintained or contributed to) by the Company
or any ERISA Affiliate that is subject to the funding requirements of ERISA
and/or the Code or that an application may be or has been made to the Secretary
of the Treasury for a waiver or modification of the minimum funding standard
(including any required installment payments) or an extension of any
amortization period under Section 412 of the Code or Section 302 of ERISA, in
each case with respect to such a Pension Plan; or (iii) Pension Plan maintained
or contributed to (or required to be maintained or contributed to) by the
Company or any ERISA Affiliate has been terminated, reorganized, petitioned or
declared insolvent under Title IV of ERISA; or (iv) Pension Plan maintained or
contributed to (or required to be maintained or contributed to) by the Company
or any ERISA Affiliate has an unfunded current liability giving rise to a lien
under ERISA or the Code; or (v) proceeding has been instituted pursuant to
Section 515 of ERISA to collect a delinquent contribution to a Pension Plan
maintained or contributed to (or required to be maintained or contributed to) by
the Company or any ERISA Affiliate; or (vi) of the Company or its ERISA
Affiliates will or may incur any liability (including any contingent or
secondary liability) to or on account of the termination or withdrawal from a
Pension Plan maintained or contributed to (or required to be maintained or
contributed to) by the Company or any ERISA Affiliate; or (vii) "prohibited
transaction" (as such term is defined in Section 406 of ERISA or Section 4975 of
the Code) in connection with an "employee benefit plan" (as defined in Section
3(3) of ERISA), maintained or contributed to (or required to be maintained or
contributed to) by the Company or any ERISA Affiliate that could subject the
Company or any ERISA Affiliate to a tax penalty or liability under ERISA or the
Code.
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(e) if any proposals, inquiries or expressions of interest are
received by, any information is requested from, or any negotiations or
discussions are sought to be initiated or continued with the Company or any of
its Subsidiaries or its representatives, in each case in connection with any
Takeover Proposal or the possibility or consideration by a third party of making
a Takeover Proposal ("Takeover Proposal Interest") indicating, in connection
with such notice, the name of the Person indicating such Takeover Proposal
Interest and the terms and conditions of any proposals or offers, and continuing
to keep the Fleming Holders informed, on a current basis, of the status and
terms of any Takeover Proposal Interest; provided that the timing and content of
such notice shall be the same as that which is provided to the Board of
Directors. The Company agrees that it will take the necessary steps promptly to
inform the Persons referred to in the first sentence hereof of the obligations
undertaken in this Section 7.4(e).
Such notice (i) with respect to subsection (a) above, shall specify the nature
and period of existence of any such default and what the Company proposes to do
with respect thereto and (ii) with respect to subsections (b), (c) or (d) above,
shall specify the nature of any such matter referred to in such clause, what
action the Company proposes to take with respect thereto and what action any
other relevant Person is taking or proposes to take with respect thereto.
7.5. Confidentiality Agreement.
The Company's obligation to provide any non-public information
under this Section 7 or otherwise to any person other than members of its Board
of Directors shall be subject to prior execution of a confidentiality agreement
between the Company and the recipient of such information as more fully set
forth in the form attached hereto as Exhibit E (the "Confidentiality
Agreement").
SECTION 8. AFFIRMATIVE COVENANTS
The Company covenants and agrees as follows:
8.1. Maintenance of Existence, Properties and Franchises;
Compliance with Law; Taxes; Insurance.
The Company will, and will cause each Subsidiary to:
(a) maintain their respective corporate existence, rights and
other franchises in full force and effect;
(b) maintain their respective tangible assets in good repair,
working order and condition so far as necessary or advantageous to the proper
carrying on of their respective businesses;
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(c) comply with all applicable laws and with all applicable
orders, rules, rulings, certificates, licenses, regulations, demands, judgments,
writs, injunctions and decrees, provided, that such compliance shall not be
necessary so long as (i) the applicability or validity of any such law, order,
rule, ruling, certificate, license, regulation, demand, judgment, writ,
injunction or decree shall be contested in good faith by appropriate proceedings
and (ii) failure to so comply will not have a material adverse effect on the
assets, properties, liabilities, business, affairs, results of operations,
condition (financial or otherwise) or prospects of the Company on a consolidated
basis;
(d) pay promptly when due all Taxes imposed upon its
properties, assets or income and all claims or indebtedness (including, without
limitation, vendor's, workmen's and like claims) which might become a lien upon
such properties or assets; provided, that payment of any such Tax shall not be
necessary so long as (i) the applicability or validity thereof shall be
contested in good faith by appropriate proceedings and a reserve, if
appropriate, shall have been established with respect thereto and (ii) failure
to make such payment will not have a material adverse effect on the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company on a consolidated basis;
and
(e) keep adequately insured, by financially sound and
reputable insurers of nationally recognized stature, all its properties of a
character customarily insured by entities similarly situated, against loss or
damage of the kinds and in amounts customarily insured against by such entities
and with such deductibles or coinsurance as is customary.
8.2. Office for Payment, Exchange and Registration;
Location of Office; Notice of Change of Name or
Office.
(a) So long as any of the Shares is outstanding, the Company
will maintain an office or agency where Shares may be presented for redemption,
exchange, conversion, exercise or registration of transfer as provided in this
Agreement. Such office or agency initially shall be the office of the Company
specified in Section 18 hereof, subject to Section 8.2(b).
(b) The Company shall give each holder of Shares at least
twenty (20) days' prior written notice of any change in (i) the name of the
Company as then in effect or (ii) the location of the office of the Company
required to be maintained under this Section 8.2.
8.3. Fiscal Year.
The fiscal year of the Company and its Subsidiaries for tax,
accounting and any other purposes shall end on December 31 of each calendar
year.
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8.4. Environmental Matters.
(a) The Company and each Subsidiary shall keep and maintain
any property either owned leased, operated or occupied by the Company or any
Subsidiary free and clear of any Environmental Liens, and the Company and each
Subsidiary, as the case may be, shall keep all such property free of Hazardous
Material contamination and in compliance with all applicable Environmental Laws
and the terms and conditions of any Environmental Permits; provided, however,
that the Company or any Subsidiary shall have the right at its cost and expense,
and acting in good faith, to contest, object or appeal by appropriate legal
proceeding the validity of any Environmental Lien. The contest, objection or
appeal with respect to the validity of an Environmental Lien shall suspend the
Company's obligation to eliminate such Environmental Lien under this paragraph
pending a final determination by appropriate administrative or judicial
authority of the legality, enforceability or status of such Environmental Lien,
provided that the following conditions are satisfied: (i) contemporaneously with
the commencement of such proceedings, the Company shall give written notice
thereof to each Fleming Holder and its Transferees while they hold Shares or
Conversion Shares; and (ii) if under applicable law any real property or
improvements thereon are subject to sale or forfeiture for failure to satisfy
the Environmental Lien prior to a final determination of the legal proceedings,
the Company or such Subsidiary must successfully move to stay such sale,
forfeiture or foreclosure pending final determination of the Company's (or
Subsidiary's) action; and (iii) the Company or such Subsidiary must, if
requested, furnish to the Fleming Holders and their Transferees, as a group,
while they hold Shares or Conversion Shares a good and sufficient bond, surety,
letter of credit or other security satisfactory to such holders equal to the
amount (including any interest and penalty) secured by the Environmental Lien.
(b) The Company will, by administrative or judicial process,
enforce the obligations of any other Person who is potentially liable for
damages, contribution or other relief in connection with any violation of
Environmental Laws, including, but not limited to, asbestos abatement, Hazardous
Material remediation or off-site or on-site disposal.
(c) The Company will defend, indemnify and hold harmless each
current, former and future holder of Shares or Conversion Shares, its employees,
officers, directors, stockholders, partners, financial and legal representatives
and assigns, from and against any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits and claims, joint or several, and any
costs, disbursements and expenses (including attorneys' fees and expenses and
costs of investigation) of whatever kind or nature, known or unknown, contingent
or otherwise asserted against, imposed on, or sustained by, them, arising out of
or in any way related to (i) the presence, disposal, release, removal, discharge
or storage of any Hazardous Material upon, into, from or affecting any real
property (including improvements) currently or formerly owned, leased, operated
or occupied by or on behalf of the Company or any Subsidiary or any predecessor
thereof; (ii) any judicial or administrative action, suit or proceeding, actual
or threatened, relating to Hazardous Material upon, in, from or affecting any
real property (including improvements) currently or formerly owned, leased,
operated or occupied by the
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Company for which the Company or any Subsidiary could be liable; (iii) any
violation of any Environmental Law or Environmental Permit, by the Company or
any Subsidiary or any of their agents, tenants, subtenants or invitees; (iv) the
imposition of any Environmental Lien for the recovery of costs expended in the
investigation, study or remediation of any environmental liability of (or
asserted against) the Company or any Subsidiary; and (v) any liability arising
out of or related to the off-site shipment, transportation, disposal, treatment,
handling or disposal of Hazardous Materials by or on behalf of the Company or
any predecessor thereof. This Section 8.4(c) and Section 8.4(d) shall survive
any payment, conversion or transfer of Shares and any termination of this
Agreement.
(d) To the extent that the Company or any Subsidiary is
strictly liable without regard to fault under any Environmental Law, the
Company's obligations to the holders of Shares or Conversion Shares under any of
the indemnification provisions of the Stock Purchase Agreements shall likewise
be strict without regard to fault with respect to the violation of any
Environmental Law which results in any liability to any of the indemnified
persons referred to in Section 8.4(c).
8.5. Reservation of Shares.
There have been reserved, and the Company shall at all times
keep reserved, free from preemptive rights, out of its authorized Common Stock a
number of shares of Common Stock sufficient to provide for the exercise of the
conversion rights provided in Section 5 of the Articles Supplementary.
8.6. Securities Exchange Act Registration.
(a) the Company will maintain effective a registration
statement (containing such information and documents as the Commission shall
specify and otherwise complying with the Securities Exchange Act), under Section
12(b) or Section 12(g), whichever is applicable, of the Securities Exchange Act,
with respect to the Common Stock of the Company, and the Company will file on
time such information, documents and reports as the Commission may require or
prescribe for companies whose stock has been registered pursuant to such Section
12(b) or Section 12(g), whichever is applicable.
(b) The Company will, upon the request of any holder of
Shares, make whatever other filings with the Commission, or otherwise make
generally available to the public such financial and other information, as any
such holder may deem reasonably necessary or desirable in order to enable such
holder to be permitted to sell Shares pursuant to the provisions of Rule 144.
8.7. Delivery of Information for Rule 144A Transactions.
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If a holder of Shares proposes to transfer any such Shares
pursuant to Rule 144A under the Securities Act (as in effect from time to time),
the Company agrees to provide (upon the request of such holder or the
prospective transferee) to such holder and (if requested) to the prospective
transferee any financial or other information concerning the Company and its
Subsidiaries which is required to be delivered by such holder to any transferee
of such Shares pursuant to such Rule 144A, subject to confidentiality
provisions, if applicable.
8.8. Senior Securities.
(a) Subject to Section 8.8(b), the Company shall maintain the senior
status of the Series A Preferred such that it shall rank senior in all respects,
including the payment on liquidation and redemption, to all other equity
securities of the Company.
(b) Notwithstanding the foregoing Section 8.8(a):
(i) the Company may issue up to $10,000,000 of Preferred
Stock, with pricing terms that are no more favorable than
those of the Series A Preferred, to either:
(A) a Strategic Investor, provided that (I) such
Preferred Stock may rank either senior to or pari
passu with the Series A Preferred; and provided
further that the Company shall use its reasonable
best efforts in its negotiations with such Strategic
Investor to have the Preferred Stock rank pari passu
with (instead of senior to) the Series A Preferred
and (II) the Company shall permit the Fleming Funds
to be involved in such issuance of Preferred Stock to
such Strategic Investor, or
(B) a Financial Investor; provided that such
Preferred Stock shall rank either pari passu with or
junior to the Series A Preferred; and
(ii) the Company may issue up to an additional $10,000,000 of
Preferred Stock ranking pari passu with the Series A
Preferred; provided that the conversion price per share of
Common Stock into which such Preferred Stock is convertible is
at least 145% of the Conversion Price of the Series A
Preferred (as defined in the Articles Supplementary) at the
time of issuance of such Preferred Stock.
8.9. Further Assurances.
The Company shall from time to time, upon the request of the
Fleming Holders or any Transferee, promptly and duly execute and deliver any and
all such further instruments and documents as the Fleming Holders or such
Transferee, as the case may be, may reasonably deem necessary or desirable to
obtain the full benefits of (i) the obligations of the Company under this
Agreement and (ii) the other rights and powers herein granted. Upon the
instructions from time
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to time of the Fleming Holders or any Transferee, the Company shall execute and
cause to be filed any document or filing presented to the Company in proper form
for signing or filing, in each case as the Fleming Holders or such Transferee
may reasonably deem necessary or desirable in light of the Company's obligations
under this Agreement, and the Company shall pay or cause to be paid any filing
or other fees in connection therewith.
SECTION 9. NEGATIVE COVENANTS
The Company covenants and agrees that (i) with respect to
Sections 9.1, 9.2, 9.3, 9.4, 9.5, 9.6, 9.8, 9.9, 9.9, 9.10 and 9.11, without the
prior written consent of the holders of more than 50% of outstanding Shares and
(ii) with respect to Section 9.7, without the approval described therein:
9.1. No Dilution or Impairment; No Changes in Capital Stock.
The Company will not, by amendment of its charter or through
any consolidation, merger, reorganization, transfer of assets, dissolution,
issue or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of the Stock Purchase
Agreements, the Articles Supplementary, the Registration Rights Agreement or the
Stockholders'' Agreement. The Company will at all times in good faith assist in
the carrying out of all such terms, and in the taking of all such action, as may
be necessary or appropriate in order to protect the rights of the holders of
Shares (as such rights are set forth in the Stock Purchase Agreements, the
Articles Supplementary, the Registration Rights Agreement and the Stockholders'
Agreement) against dilution or other impairment. Without limiting the generality
of the foregoing, the Company (a) will not issue any shares or class or series
of equity or equity-linked security, which is senior to, or pari passu with, the
Series A Preferred as to dividend payments or amounts payable in the event of
liquidation or winding up of the Company, except as otherwise provided in
Section 8.8(b) hereof, (b) will not enter into any agreement or instrument which
would restrict or otherwise materially adversely affect the ability of the
Company to perform its obligations under the Stock Purchase Agreements, the
Stockholders' Agreement, the Registration Rights Agreement or the Articles
Supplementary, (c) will not amend its charter or by-laws in any manner which
would impair or reduce the rights of the Preferred Stock, including, without
limitation, an amendment which would alter or change the powers, privileges or
preferences of the holders of the Series A Preferred (including, without
limitation, changing the Articles Supplementary after any Shares have been
called for redemption), (d) except as otherwise provided in the Articles
Supplementary will not redeem, repurchase or otherwise acquire, either directly
or indirectly through its Subsidiaries, any shares of capital stock of the
Company or any of its Subsidiaries or any other rights or options to subscribe
for or purchase any capital stock of the Company or any other securities
convertible into or exchangeable for capital stock of the Company, (e) will not
permit the par value or the determined or stated value of any shares of Common
Stock receivable upon the conversion of the Shares to exceed the amount payable
therefor upon such conversion, (f) will take all such action
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as may be necessary or appropriate in order that the Company may at all times
validly and legally issue duly authorized, fully paid and nonassessable shares
of the Common Stock free from all taxes, Liens and charges with respect to the
issue thereof, upon the conversion of the Shares from time to time outstanding,
(g) will not take any action which results in any adjustment of the current
conversion price under the Articles Supplementary if the total number of shares
of the Common Stock (or other securities) issuable after the action upon the
conversion of all of the then outstanding Shares would exceed the total number
of shares of Common Stock (or other securities) then authorized by the
Company''s charter and available for the purpose of issuance upon such
conversion or exercise, (h) will not have any authorized Common Stock (and will
not issue any Common Stock) other than its existing authorized Common Stock, and
(i) will not amend its charter to change any terms of its Common Stock.
9.2. Indebtedness.
So long as more than 25% of the Shares are outstanding, the
Company will not (i) incur Indebtedness, including any Indebtedness set forth on
Schedule 4.20 hereto, in excess of the greater of either (A) $30,000,000 in
aggregate principal amount or (B) 3.5 times EBITDA for the preceding twelve
months; or (ii) enter into any agreement, amendment or modification with respect
to any Indebtedness, which agreement, amendment or modification under clause
(ii) restricts or prohibits (or was intended primarily to restrict or prohibit)
the Company from making any payments under, or otherwise performing under the
Stock Purchase Agreements.
9.3. Consolidation, Merger and Sale.
Neither the Company nor any Subsidiary will (or will agree
to): (a) wind up, liquidate or dissolve its affairs (except that a wholly-owned
Subsidiary can be wound-up, dissolved and liquidated into another wholly-owned
Subsidiary or into the Company), (b) so long as more than 25% of the Shares are
outstanding, sell, lease, transfer or otherwise dispose of all or substantially
all of its assets to any other Person (except that a wholly-owned Subsidiary can
sell, lease, transfer or otherwise dispose of all or substantially all of its
assets to another wholly-owned Subsidiary or to the Company); or (c) so long as
more than 25% of the Shares are outstanding, effect a merger or consolidation if
the Company is not the surviving corporation from such merger or consolidation.
Notwithstanding the foregoing, the Company may take any of the actions described
in the foregoing subsection (b) or (c) pursuant to a contemplated transaction
(the "Fundamental Transaction"); provided that, prior to taking any such action,
the Company offers, in writing, to the Fleming Funds the right to choose either
(I) to receive securities or other consideration in the Fundamental Transaction
that are substantially similar from an economic standpoint to the outstanding
value of the Shares, on substantially similar terms as the other investors in
the Fundamental Transaction, or (II) to receive the greater of (x) 200% of the
then Conversion Price (pursuant to the Articles Supplementary) or (y) a 25%
Internal Rate of Return from the Closing Date through the date of the
Fundamental Transaction.
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9.4. No Change in Business.
So long as more than 25% of the Shares are outstanding,
neither the Company nor any of its Subsidiaries will change substantially the
character of its business as conducted on the Closing Date as represented in
Section 4.4 hereof and described in the Disclosure Material.
9.5. Restricted Payments; Investments.
Neither the Company nor any of its Subsidiaries will declare
or make or permit to be declared or made:
(ai any Restricted Payment; or
(bi any Investment.
9.6. Affiliate Loans and Guaranties.
Neither the Company nor any Subsidiary may incur or permit to
exist any of the following:
(a) any obligation of the Company or of any Subsidiary to
repay money borrowed owing to (i) any Affiliate of the Company, (ii) any
Affiliate of any Subsidiary or (iii) any other holder of shares of the capital
stock of the Company or a Subsidiary; or
(b) any obligation, to any Person, which obligation is assumed
or guaranteed by the Company or a Subsidiary and which is an obligation of (i)
any Affiliate of the Company, (ii) any Affiliate of any Subsidiary or (iii) any
other holder of shares of the capital stock of the Company or a Subsidiary
(excluding, in the case of this clause (b), any obligation of the Company or of
a wholly-owned Subsidiary which is not owed to an Affiliate of the Company or to
an Affiliate of a Subsidiary or to any other holder of shares of the capital
stock of the Company or of a Subsidiary).
This Section 9.6 shall not apply to (1) any obligations under the Stock Purchase
Agreements or with respect to the Shares, (2) any loans, advances or Guarantees
referred to in clause (1) of the proviso to the definition of "Investment"
contained in Section 3 hereof, (3) Indebtedness identified on Schedule 4.20
hereto or (4) any obligations under any of the Affiliate Agreements.
9.7. Transactions with Affiliates.
The Company will not, and will not permit any Subsidiary to,
directly or indirectly, enter into any transaction or agreement (including,
without limitation, the purchase, sale, distribution, lease or exchange of any
property or the rendering of any service) with any Affiliate of the Company or
of any Subsidiary, other than a wholly-owned Subsidiary of the
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Company, unless such transaction or agreement (a) is approved by a majority of
the Outside Directors on the Board of Directors, and (b) is on terms that are no
less favorable to the Company or such Subsidiary, as the case may be, than those
which might be obtained at the time of such transaction from a Person who is not
such an Affiliate; provided, however, that this Section 9.7 shall not limit, or
be applicable to, (i) employment arrangements with (and general salary and
benefits compensation for) any individual who is a full-time employee of the
Company or any Subsidiary if such arrangements are approved by a majority of the
Outside Directors on the Board of Directors; and (ii) the payment of reasonable
and customary regular fees to directors of the Company who are not employees of
the Company; and (iii) any obligations under any of the Affiliate Agreements.
9.8. Liens.
The Company will not create or permit to exist, or permit any
of its Subsidiaries to create or suffer to exist, any Lien upon or with respect
to any of its assets or income, other than Permitted Liens and existing liens
set forth on Schedule 9.8 hereto.
9.9. Private Placement Status.
Neither the Company nor any agent nor other Person acting on
the Company's behalf will do or cause to be done (or will omit to do or to cause
to be done) any act which act (or which omission) would result in bringing the
issuance or sale of the Shares or the Conversion Shares within the provisions of
Section 5 of the Securities Act or the filing, notification or reporting
requirements of any state securities law (other than in accordance with a
registration and qualification of Conversion Shares pursuant to the Registration
Rights Agreement).
9.10. Maintenance of Public Market.
So long as more than 25% of the Shares are outstanding, the
Company will not proceed with a program of acquisition of its Common Stock,
initiate a corporate reorganization or recapitalization or undertake a
consolidation or merger or authorize, consent to or take any action which would
have the effect of:
(a) removing the Company from registration with the Commission
under the Securities Exchange Act with respect to the Company's Common Stock;
(b) requiring the Company to make a filing under Section 13(e)
of the Securities Exchange Act;
(c) reducing the average daily trading volume over a 30-day
period of the Common Stock on the principal securities exchange under which it
is then listed to less than 5,000 shares of Common Stock or eliminating the
public market for shares of Common Stock of the Company;
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(d) causing a delisting of the Company's Common Stock as a
Nasdaq National Market Security on the Nasdaq Stock Market (unless such stock is
delisted as a result of being listed on a national securities exchange); or
(e) if any shares of the Company's Common Stock are at any
time listed on a national securities exchange, causing a delisting of such stock
from such exchange, unless such delisting is in connection with a listing on
another national securities exchange.
Notwithstanding the foregoing, the Company may take any of the actions described
in the foregoing subsection (a) or (c) pursuant to a contemplated transaction
(the "Going Private Transaction"); provided that, prior to taking any such
action, the Company offers, in writing, to the Fleming Funds the right to choose
either (I) to receive securities or other consideration in the Going Private
Transaction that are substantially similar from an economic standpoint to the
outstanding value of the Shares, on substantially similar terms as the other
investors in the Going Private Transaction, or (II) to receive the greater of
(x) 200% of the then Conversion Price (as defined in the Articles Supplementary)
or (y) a 25% Internal Rate of Return from the Closing Date through the date of
the Going Private Transaction.
9.11. Actions Prior to the Closing Date.
From the date hereof through the Closing Date, the Company
will not, and will not permit any Subsidiary to, (a) issue or agree to issue any
capital stock or any securities exercisable for, or convertible or exchangeable
into, capital stock or (b) purchase, redeem or otherwise acquire any of its
capital stock; provided, however, that this Section 9.11 shall not limit, or be
applicable to, (i) the transactions contemplated by the Stock Purchase
Agreements, including any issuance of capital stock in connection with the
transactions contemplated by Sections 9.1 and 9.10 hereof and (ii) grants of
options or issuances of Common Stock to officers, directors or employees of the
Company pursuant to the current terms of the Company's 1997 Stock Option Plan
and 1998 Stock Incentive Plan or the exercise of any existing warrants listed on
Schedule 4.11 hereto.
SECTION 10. PREEMPTIVE RIGHTS
(a) Except (i) for issuances of pro rata dividends to all
holders of Common Stock, (ii) stock issued to employees, officers or directors
in connection with management options or incentive plans approved by the Board
of Directors, (iii) stock issued in connection with any merger, acquisition or
business combination, (iv) stock issued for consideration amounting to less than
$500,000 in any single transaction where the purchase price is not less than the
then applicable Conversion Price (as defined in the Articles Supplementary),
provided that the aggregate amount of all such transactions shall not exceed
$1,000,000, (v) up to 5,167,328 shares of stock issuable upon conversion of the
6% Non-Voting Convertible Preferred Stock (as adjusted pursuant to the
antidilution provisions therein), or (vi) up to 1,193,573 shares
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of stock issuable pursuant to the MCI Warrant (as adjusted pursuant to the
antidilution provisions therein), in order to enable such holders to maintain
their Fully Diluted percentage ownership of the Company, the holders of the
Series A Preferred shall have preemptive rights, as hereinafter set forth, to
purchase any capital stock, including any warrants or securities convertible
into capital stock, of the Company hereafter issued by the Company so that a
holder of the Series A Preferred shall hereafter be entitled to acquire a
percentage of capital stock which is hereafter issued equal to the same
percentage of the issued and outstanding Common Stock of the Company as is held
(directly or obtainable upon conversion of the Series A Preferred) by such
holder of Series A Preferred immediately prior to the date on which the capital
stock is to be issued on a Fully Diluted basis. As used herein, "issue" (and
variations thereof) includes sales and transfers by the Company of treasury
shares.
(b) The Company shall, before issuing any additional capital
stock (other than the exceptions referred to in Section 10(a) hereof), give
written notice thereof to the holders of the Series A Preferred. Such notice
shall specify what type of instrument the Company intends to issue and the
consideration which the Company intends to receive therefor. For a period of
twenty (20) days following receipt by the holders of the Series A Preferred of
such notice, the Company shall be deemed to have irrevocably offered to sell to
the holders of the Series A Preferred a sufficient number of shares of such
capital stock so that the holders of the Series A Preferred, if such holders
elects to acquire such shares as hereinafter set forth, shall be capable of
acquiring the same percentage of such shares as the percentage of Common Stock
beneficially owned (directly or obtainable upon conversion of the Series A
Preferred) by such holders immediately prior to the proposed issuance on a Fully
Diluted basis. In the event any such offer is accepted, in whole or in part, by
the holders of the Series A Preferred, the Company shall sell such shares to
holders of the Series A Preferred for the consideration and on the precise terms
set forth in the Company's notice (given under the first two sentences of this
paragraph). In the event that one or more holders of the Series A Preferred
elects not to, or fails to, exercise its rights under this Section 10 within the
twenty (20) day period, then the Company may issue the remaining shares of
capital stock offered to, but not purchased by, such holders of the Series A
Preferred, to third persons but only for the same consideration set forth in the
Company's notice (given under the first two sentences of this paragraph) and no
later than ninety (90) days after the expiration of such twenty day period. The
closing for such transaction shall take place as proposed by the Company with
respect to the shares of capital stock proposed to be issued, at which closing
the Company shall deliver certificates for the shares of capital stock in the
respective names of the holders of the Series A Preferred against receipt of the
consideration therefor.
(c) Notwithstanding any other provision hereof, the preemptive
rights granted to holders of Series A Preferred by this Section 10 shall
terminate with respect to a share of Series A Preferred upon the conversion or
redemption of such share of Series A Preferred in accordance with the provisions
hereof or in the Articles Supplementary.
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SECTION 11. CONDITIONS TO PURCHASER'S OBLIGATIONS
The Purchaser's obligation to purchase Shares hereunder is
subject to satisfaction of the following conditions at the Closing (any of which
may be waived by the Purchaser); provided that Section 11.11 is a condition to
the obligations to consummate the transaction provided for herein of each of (I)
the Purchaser and (II) the Company:
11.1. Articles Supplementary; Stockholders' Agreement;
Registration Rights Agreement.
(a) The charter of the Company shall have been duly
supplemented by the filing of the Articles Supplementary in the form of Exhibit
A hereto.
(b) The Company, the Purchasers and certain other stockholders
of the Company named therein shall have entered into a Stockholders' Agreement
substantially in the form of Exhibit B hereto.
(c) The Company shall have entered into a Registration Rights
Agreement with the Purchasers substantially in the form of Exhibit C hereto.
11.2. Certificates for Shares.
The Purchaser shall concurrently receive the certificates for
Shares contemplated by Section 2(b) hereof.
11.3. Senior Status.
The Company shall have taken all of the necessary actions,
including the amendment of the appropriate existing agreements, so that, except
as otherwise provided in Section 8.8(b) hereof, the Series A Preferred shall
rank senior in all respects, including the payment on liquidation and
redemption, to all other equity securities of the Company.
11.4. Accuracy of Representations and Warranties.
The representations and warranties of the Company contained in
the Stock Purchase Agreement herein or in any certificate or document delivered
pursuant hereto shall be correct and complete on and as of the Closing Date with
the same effect as though made on and as of the Closing Date (after giving
effect to the transactions contemplated by this Agreement).
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11.5. Compliance with Agreements.
The Company shall have performed and complied in all material
respects with all agreements, covenants and conditions contained in the Stock
Purchase Agreements and any other document contemplated hereby or thereby which
are required to be performed or complied with by the Company on or before the
Closing Date.
11.6. Officers' Certificates.
The Purchaser shall have received a certificate dated the
Closing Date and signed by the President or Chief Executive Officer and by the
Secretary or the Chief Financial Officer of the Company, to the effect that the
conditions of Sections 11.4, 11.5, 11.8 (second sentence only) and 11.9 have
been satisfied.
11.7. Proceedings.
All corporate and other proceedings in connection with the
transactions contemplated by the Stock Purchase Agreements, and all documents
incident thereto, shall be in form and substance satisfactory to the Purchaser
and its counsel, and the Purchaser shall have received all such originals or
certified or other copies of such documents as the Purchaser or its counsel may
reasonably request.
11.8. Legality; Governmental and Other Authorization.
The purchase of and payment for the Shares shall not be
prohibited by any law or governmental order, rule, ruling, regulation, release,
interpretation or opinion applicable to the Purchaser and shall not subject the
Purchaser to any penalty, tax, liability or other onerous condition. Any
necessary consents, approvals, licenses, permits, orders and authorizations of,
and any filings, registrations or qualifications with, any governmental or
administrative agency or other Person, with respect to the transactions
contemplated by the Stock Purchase Agreements shall have been obtained or made
and shall be in full force and effect. The Company shall have delivered to the
Purchaser, upon its reasonable request setting forth what is required, factual
certificates or other evidence, in form and substance satisfactory to the
Purchaser and its counsel, to enable the Purchaser to establish compliance with
this condition.
11.9. No Material Adverse Change.
There shall have been no material adverse change in the
assets, properties, liabilities, business, affairs, results of operations,
condition (financial or otherwise) or prospects of the Company on a consolidated
basis since June 30, 1999, except that (i) its cash position as of September 30,
1999 is $16,369,462 and (ii) except as disclosed in Schedule 11.9 hereto.
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11.10. Opinion of Counsel.
The Purchaser shall have received an opinion, dated the
Closing Date and addressed to the Purchasers, of Piper & Marbury L.L.P., counsel
for the Company, which opinion shall be in form and substance satisfactory to
the Purchaser and its counsel and shall be to the effect set forth in Exhibit D
hereto.
11.11. Additional Purchases of Shares.
The sale and purchase of Shares by the Fleming Funds pursuant
to the Stock Purchase Agreements between each of the Purchasers and the Company
shall be consummated concurrently for an aggregate purchase price of $15,000,000
on the Closing Date.
11.12. Other Documents and Opinions.
The Purchaser shall have received such other documents and
opinions, in form and substance reasonably satisfactory to the Purchaser and its
counsel, relating to matters incident to the transactions contemplated hereby as
the Purchaser may reasonably request.
SECTION 12. BREACH OF REPRESENTATIONS, WARRANTIES AND COVENANTS
(a) The representations, warranties, covenants and agreements
of the Company and the Purchaser contained in this Agreement, the Stockholders'
Agreement, the Registration Rights Agreement or in any document or certificate
delivered pursuant hereto or thereto or in connection herewith shall survive
from the Closing Date, and shall continue in effect following, the execution and
delivery of the Stock Purchase Agreements, the Stockholders' Agreement, the
Registration Rights Agreement, the closings hereunder and thereunder, any
investigation at any time made by the Purchaser or on its behalf or by any other
Person, the issuance, sale and delivery of the Shares, any disposition thereof
and any payment, conversion or cancellation of the Shares; provided that Section
9 shall terminate upon conversion of all of the Shares. All statements contained
in any certificate or other document delivered by or on behalf of the Company
pursuant hereto shall constitute representations and warranties by the Company
hereunder.
(b) The Company agrees to indemnify and hold the Purchaser
harmless from and against and will pay to the Purchaser the full amount of any
loss, damage, liability or expense (including amounts paid in settlement and
reasonable attorneys' fees and expenses) to the Purchaser resulting either
directly or indirectly from any breach of the representations, warranties,
covenants or agreements of the Company contained in any Stock Purchase
Agreement, or in the Stockholders' Agreement, the Registration Rights Agreement
or any other document or certificate delivered pursuant hereto or thereto or in
connection herewith or therewith.
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SECTION 13. SPECIFIC PERFORMANCE
The parties agree that irreparable damage will result in the
event that this Agreement is not specifically enforced, and the parties agree
that any damages available at law for a breach of this Agreement would not be an
adequate remedy. Therefore, the provisions hereof and the obligations of the
parties hereunder shall be enforceable in a court of equity, or other tribunal
with jurisdiction, by a decree of specific performance, and appropriate
injunctive relief may be applied for and granted in connection therewith. Such
remedies and all other remedies provided for in this Agreement shall, however,
be cumulative and not exclusive and shall be in addition to any other remedies
which a party may have under this Agreement or otherwise.
SECTION 14. EXPENSES
(a) Whether or not the transactions herein contemplated are
consummated, the Company shall pay (i) the costs, fees and expenses of the
Company and its counsel in connection with the Stock Purchase Agreements, the
Articles Supplementary, the Stockholders' Agreement and the Registration Rights
Agreement, other related documentation and the issuance of the Shares and the
Conversion Shares and the furnishing of all opinions by counsel for the Company,
(ii) the costs, fees and expenses of Morgan, Lewis & Bockius LLP in connection
with the Stock Purchase Agreements, the Articles Supplementary, the
Stockholders' Agreement and the Registration Rights Agreement, the issuance of
the Shares and the Conversion Shares, other related documentation and the
transactions contemplated hereby and thereby (whether or not a Closing occurs
hereunder) and if the Closing occurs the Company will make such payment on the
Closing Date); provided, however, that (x) such fees and expenses shall not
exceed $60,000 without the approval of the Company and (y) in the event that the
Closing does not occur, the Company shall pay all such costs, fees and expenses
upon the termination of negotiations between the Company and the Fleming
Holders, (iii) the costs, fees and expenses of counsel to the Purchasers in
connection with any amendments to or modifications or waivers of any provisions
of the Stock Purchase Agreements, the Articles Supplementary, the Stockholders'
Agreement or the Registration Rights Agreement, other related documentation or
in connection with any other agreements between the Purchasers and the Company
and (iv) the costs, fees and expenses (including the attorneys' fees and
expenses) of any holder of Shares or Conversion Shares in enforcing its rights
against the Company if the Company defaults in its obligations hereunder, under
the Articles Supplementary, the Stockholders' Agreement or the Registration
Rights Agreement.
(b) In addition to all other sums due hereunder or provided
for in this Agreement, the Company shall pay to the Purchaser or its agents,
respectively, an amount sufficient to indemnify such persons (net of any Taxes
on any indemnity payments) against all reasonable costs and expenses (including
reasonable attorneys' fees and expenses and reasonable
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costs of investigation) and damages and liabilities incurred by the Purchaser or
its agents pursuant to any investigation or proceeding against any or all of the
Company, the Purchasers, or their agents, arising out of or in connection with
the Stock Purchase Agreements, the Stockholders' Agreement, the Registration
Rights Agreement, the Purchaser's purchase of the Shares (or any transaction
contemplated hereby or thereby or any other document or instrument executed
herewith or therewith or pursuant hereto or thereto), whether or not the
transactions contemplated by the Stock Purchase Agreements are consummated,
which investigation or proceeding requires the participation of the Purchaser or
its agents or is commenced or filed against the Purchaser or its agents because
of the Stock Purchase Agreements, the Stockholders' Agreement, the Registration
Rights Agreement, the Purchaser's purchase of the Shares or any of the
transactions contemplated hereby or thereby (or any other document or instrument
executed herewith or therewith or pursuant hereto or thereto), other than any
investigation or proceeding in which it is finally determined that there was (i)
gross negligence or willful misconduct on the part of the Purchaser or its
agents, (ii) a material breach by Purchaser of any of its representations or
warranties contained herein, (iii) a material breach by the Purchaser of any
provision of the Confidentiality Agreement or any other confidentiality
agreement between the Company and the Purchaser, in any case, which was not made
by the Purchaser in reliance upon any of the Company's representations,
warranties, covenants or agreements in the Stock Purchase Agreements, the
Stockholders' Agreement, the Registration Rights Agreement or in any other
documents or instruments contemplated hereby or thereby or executed herewith or
therewith or pursuant hereto or thereto. The Company shall assume the defense,
and shall appoint counsel (which counsel may be the same counsel that the
Company uses so long as there is no conflict of interest) to represent the
Purchaser and such agents, in connection with investigating, defending or
preparing to defend any such action, suit, claim or proceeding (including any
inquiry or investigation); provided, however, that the Purchaser, or any such
agent, shall have the right (without releasing the Company from any of its
obligations hereunder) to employ its own counsel and either to direct its own
defense or to participate in the Company's defense, but the fees and expenses of
such counsel shall be at the expense of such person unless (i) the employment of
such counsel shall have been authorized in writing by the Company in connection
with such defense, (ii) the Company shall not have provided its counsel to take
charge of such defense or (iii) there may be defenses available to the
Purchaser, or such agent of the Purchaser which are different from or additional
to those available to the Company, then in any of such events referred to in
clauses (i), (ii) or (iii) such counsel fees and expenses (but only for one
counsel for the Purchaser and its agents) shall be borne by the Company. Any
settlement of any such action, suit, claim or proceeding shall require the
consent of both the Company and such indemnified person (neither of which shall
unreasonably withhold its consent).
(c) The Company agrees to pay, or to cause to be paid, all
documentary, stamp and other similar Taxes, other than transfer taxes payable
upon the transfer by the Purchaser of Shares to a Transferee (which transfer
taxes shall be paid by the Transferee), levied under the laws of the United
States of America, any state or local Taxing Authority thereof or therein or any
other applicable jurisdiction in connection with the issuance and sale of the
Shares, the conversion of Shares into Conversion Shares and the execution and
delivery of the Stock
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Purchase Agreements, the Stockholders' Agreement, the Registration Rights
Agreement and any other documents or instruments contemplated hereby or thereby
and any modification of the Stock Purchase Agreements, the Articles
Supplementary, the Stockholders' Agreement or the Registration Rights Agreement
or any such other documents or instruments and will hold the Purchaser harmless
without limitation as to time against any and all liabilities with respect to
all such Taxes.
(d) The obligations of the Company under this Section 14 shall
survive the Closing hereunder and any termination of the Stock Purchase
Agreements.
SECTION 15. DIRECT PAYMENTS
As long as the Purchaser or any institutional holder which is
a direct or indirect transferee (as a result of one or more transfers) from the
Purchaser shall be the holder of any Shares, the Company will make all
redemption payments, liquidation payments and other distributions by wire
transfer to the Purchaser's or such other holder's (or its nominee's) account at
any bank or trust company, notwithstanding any contrary provision herein or in
the Company's charter with respect to the place of payment. The Purchaser has
provided an address on Schedule 1 hereto for payments by wire transfer, and such
address may be changed for the Purchaser or any subsequent holder by notice to
the Company. All such payments shall be made in U.S. dollars and in federal or
other immediately available funds.
SECTION 16. AMENDMENTS AND WAIVERS
(a) The terms and provisions of this Agreement may be amended,
waived, modified or terminated only with the written consent of the holders of
more than 50% of outstanding Shares; provided, however, that no such amendment,
waiver, modification or termination shall change this Section 16(a) without the
written consent of the holders of all the Shares and the Conversion Shares then
outstanding.
(b) Promptly after obtaining the written consent of the
holders as herein provided, the Company shall transmit a copy of any amendment,
waiver, modification or termination which has been adopted to all holders of
Shares and Conversions Shares then outstanding, but failure to transmit copies
shall not in any way affect the validity of any such amendment, waiver,
modification or termination.
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SECTION 17. EXCHANGE OF SHARES; CANCELLATION OF SURRENDERED SHARES; REPLACEMENT
(a) Subject to Section 6 hereof, at any time at the request of
any holder of Shares to the Company at its address provided under Section 18
hereof, the Company at its expense (other than transfer taxes payable upon the
transfer by the Purchaser of Shares to a Transferee, which transfer taxes shall
be paid by the Transferee) will issue and deliver to or upon the order of the
holder in exchange therefor a new certificate or certificates in such amount or
amounts as such holder may request in the aggregate representing the number of
Shares represented by such surrendered certificates, and registered in the name
of such holder or as such holder may direct.
(b) Any Share certificate which is converted into Conversion
Shares in whole or in part shall be canceled by the Company, and no new Share
certificates shall be issued in lieu of any Shares which have been converted
into Conversion Shares. The Company shall issue a new certificate with respect
to any Shares which were not converted into Conversion Shares and were
represented by a certificate which was converted in part.
(c) Upon receipt of evidence satisfactory to the Company of
the loss, theft, destruction or mutilation of any Share certificate and, in the
case of any such loss, theft or destruction, upon delivery of an indemnity
agreement reasonably satisfactory to the Company (if requested by the Company
and unsecured in the case of the Purchaser or another similar institutional
holder), or in the case of any such mutilation, upon surrender of such Share
certificate (which surrendered Share certificate shall be canceled by the
Company), the Company will issue a new Share certificate of like tenor in lieu
of such lost, stolen, destroyed or mutilated Share certificate as if the lost,
stolen, destroyed or mutilated Share certificate were then surrendered for
exchange.
SECTION 18. NOTICES
All notices, requests, demands, consents and other
communications hereunder shall be in writing and shall be delivered by hand or
shall be sent by telex or telecopy (confirmed by registered, certified or
overnight mail or courier, postage and delivery charges prepaid), (i) if to the
Company, to Caliber Learning Network, Inc., 509 South Exeter Street, Baltimore,
MD 21202, Attention: Rick P. Frier, with a copy to Piper & Marbury L.L.P., 36
South Charles Street, Baltimore, MD 21201, Attention: Richard C. Tilghman, Jr.
or (ii) if to the Purchaser, at the address indicated on Schedule 1 hereto, with
a copy to Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, NY 10178-0060,
Attention: David W. Pollak, Esq., or at such other address as a party may from
time to time designate as its address in writing to the other party to this
Agreement. Whenever any notice is required to be given hereunder, such notice
shall be deemed given and such requirement satisfied only when such notice is
delivered or, if sent by telex or telecopier, when received.
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SECTION 19. MISCELLANEOUS
(a) The Stock Purchase Agreements, the Stockholders'
Agreement, the Registration Rights Agreement and, upon the closing hereunder,
the Articles Supplementary, together with any further agreements entered into by
the Purchaser and the Company at the closing hereunder, contain the entire
agreement between the Purchaser and the Company, and supersede any prior oral or
written agreements, commitments, terms or understandings, regarding the subject
matter hereof.
(b) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, the parties
hereby waive any provision of law which may render any provision hereof
prohibited or unenforceable in any respect.
(c) This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns,
whether so expressed or not; provided, that (a) the Company may not assign any
of its rights, duties or obligations under this Agreement, except with the
Purchasers written consent, and (b) the Purchaser may assign any of its rights,
duties or obligations under this Agreement to a purchaser of its Shares,
provided that such purchaser is reasonably acceptable to the Company.
(d) In addition to any assignment by operation of law, the
Purchaser may assign, in whole or in part, any or all of its rights (and/or
obligations) under this Agreement to any transferee of any or all of its Shares
or Conversion Shares, and (unless such assignment expressly provides otherwise)
any such assignment shall not diminish the rights the Purchaser would otherwise
have under this Agreement or with respect to any remaining Shares or Conversion
Shares held by the Purchaser.
(e) No course of dealing and no delay on the part of any party
hereto in exercising any right, power, or remedy conferred by this Agreement
shall operate as a waiver thereof or otherwise prejudice such party's rights,
powers and remedies. No single or partial exercise of any right, power or remedy
conferred by this Agreement shall preclude any other or further exercise thereof
or the exercise of any other right, power or remedy.
(f) The headings and captions in this Agreement are for
convenience of reference only and shall not define, limit or otherwise affect
any of the terms or provisions hereof.
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(g) This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York (other than any conflict of
laws rule which might result in the application of the laws of any other
jurisdiction).
(h) This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument, and all signatures need not appear on any one counterpart.
(i) THE COMPANY HEREBY CONSENTS TO THE JURISDICTION OF ANY
STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK
AND IRREVOCABLY AGREES THAT, SUBJECT TO THE PURCHASER'S ELECTION, ALL ACTIONS OR
PROCEEDINGS RELATING TO THIS AGREEMENT, THE ARTICLES SUPPLEMENTARY, THE
STOCKHOLDERS' AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT, THE SHARES OR THE
CONVERSION SHARES MAY BE LITIGATED IN SUCH COURTS. THE COMPANY ACCEPTS FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, THE ARTICLES SUPPLEMENTARY,
THE STOCKHOLDERS' AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT, THE SHARES OR
THE CONVERSION SHARES. THE COMPANY HEREBY AGREES THAT SERVICE OF ALL PROCESS IN
ANY SUCH PROCEEDING IN ANY SUCH COURT SHALL BE RECEIVED BY THE COMPANY AT THE
COMPANY'S HEADQUARTERS AT THE ADDRESS AND TO THE ATTENTION OF SUCH PERSON
DESIGNATED PURSUANT TO SECTION 18 HEREOF, AND SUCH SERVICE BEING HEREBY
ACKNOWLEDGED BY THE COMPANY TO BE EFFECTIVE AND BINDING SERVICE IN EVERY
RESPECT. A COPY OF ANY SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL
TO THE COMPANY AT THE ADDRESS OF THE COMPANY PROVIDED HEREUNDER EXCEPT THAT
UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL
NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS. AS AN ALTERNATIVE TO SERVICE OF
PROCESS ON SUCH AGENT (WHETHER OR NOT ANY SUCH AGENT HAS BEEN APPOINTED), THE
COMPANY HEREBY AGREES THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT
NOTICE AND SERVICE OF PROCESS. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE
PURCHASER TO BRING PROCEEDINGS OR OBTAIN OR ENFORCE JUDGMENTS AGAINST THE
COMPANY IN THE COURTS OF ANY OTHER JURISDICTION.
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(j) THE COMPANY AND THE PURCHASER HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT, THE ARTICLES SUPPLEMENTARY, THE STOCKHOLDERS'
AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT, THE SHARES OR THE CONVERSION
SHARES, OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS
TRANSACTION. THE COMPANY AND THE PURCHASER ALSO WAIVE ANY BOND OR SURETY OR
SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF THE
PURCHASER. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY
AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT
MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT
CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.
THE COMPANY AND THE PURCHASER FURTHER WARRANT AND REPRESENT THAT EACH HAS
REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO (OR ASSIGNMENTS OF) THIS AGREEMENT,
THE ARTICLES SUPPLEMENTARY, THE STOCKHOLDERS' AGREEMENT, THE REGISTRATION RIGHTS
AGREEMENT, THE SHARES OR THE CONVERSION SHARES. IN THE EVENT OF LITIGATION, THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL (WITHOUT A JURY) BY THE
COURT.
[remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written
CALIBER LEARNING NETWORK, INC.
By /s/ Chris L. Nguyen
----------------------------
Name: Chris L. Nguyen
Title: President and Chief
Executive Officer
Accepted and Agreed to as of the
date first above written by the
undersigned Purchaser:
FLEMING US DISCOVERY OFFSHORE FUND III, L.P.
By: FLEMING US DISCOVERY PARTNERS, L.P.,
its general partner
By: FLEMING US DISCOVERY, LLC,
its general partner
By: /s/ Robert L. Burr
------------------------
Robert L. Burr, member
[Signature page to Stock Purchase Agreement]
<PAGE>
Schdule 1
to the Stock Purchase Agreement
Name of Number of Aggregate
Purchaser Shares Purchase Price
--------- ------- --------------
Fleming US Discovery 107,728 $10,772,800
Fund III,
L.P.
Fleming US Discovery 17,272 $1,727,200
Offshore Fund III, L.P.
Robert Fleming Nominees 25,000 $2,500,000
Limited
(a) address for communications:
c/o Fleming Asset Management USA
320 Park Avenue, 11th Floor
New York, NY 10022
Attention: Robert L. Burr
David J. Edwards
(b) address for payments by
wire transfer:
(i) Fleming US Discovery Fund III, L.P.
Chase Manhattan Bank
ABA # 021000021
A/C: Fleming US Discovery Fund III, L.P.
A/C # 400-704129
(ii) Fleming US Discovery Offshore Fund III, L.P.
Citibank, N.A.
ABA # 021000089/Chips UID# 0008/Swift Code - CITIUS33
A/C: The Bank of Bermuda Limited, Hamilton, Bermuda
Chips UID# 005584
Swift Code: BBDA BM HM
A/C: Fleming US Discovery Offshore Fund III, L.P.
A/C # 0246769
(iii) Robert Fleming Nominees Limited
EXECUTION COPY
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PREFERRED STOCK PURCHASE AGREEMENT
==================================
dated as of
===========
October 26, 1999
================
between
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CALIBER LEARNING NETWORK, INC.
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and
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FLEMING US DISCOVERY FUND III, L.P.
====================================
================================================================================
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TABLE OF CONTENTS
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SECTION 1. SALE AND PURCHASE OF PREFERRED STOCK.........................................................1
SECTION 2. THE CLOSING..................................................................................2
SECTION 3. DEFINITIONS..................................................................................3
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...............................................16
4.1. Corporate Existence, Power and Authority....................................................16
4.2. Capital Stock...............................................................................17
4.3. Subsidiaries................................................................................18
4.4. Business....................................................................................19
4.5. No Defaults or Conflicts....................................................................19
4.6. Disclosure Materials; Other Information.....................................................20
4.7. Litigation..................................................................................20
4.8. Taxes.......................................................................................21
4.9. ERISA.......................................................................................21
4.10. Legal Compliance............................................................................23
4.11. Outstanding Securities......................................................................23
4.12. Intellectual Property and Other Rights......................................................23
4.13. Key Employees...............................................................................24
4.14. Properties..................................................................................24
4.15. Suppliers and Customers.....................................................................24
4.16. Environmental Compliance....................................................................25
4.18. Offering of Shares..........................................................................26
4.19. SEC Reports.................................................................................26
4.20. Indebtedness................................................................................26
4.21. Use of Proceeds.............................................................................27
4.22. Other Names.................................................................................27
4.23. Brokers.....................................................................................27
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.............................................28
5.1. Corporate Power and Authority...............................................................28
5.2. Investment Intent...........................................................................28
5.3. Brokers.....................................................................................28
SECTION 6. RESTRICTIONS ON TRANSFER....................................................................29
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SECTION 7. INFORMATION AS TO THE COMPANY...............................................................29
7.1. Financial Information.......................................................................29
7.2. Communication with Accountants..............................................................32
7.3. Inspection..................................................................................32
7.4. Notices.....................................................................................32
SECTION 8. AFFIRMATIVE COVENANTS.......................................................................34
8.1. Maintenance of Existence, Properties and Franchises; Compliance with Law;
Taxes; Insurance............................................................................34
8.2. Office for Payment, Exchange and Registration; Location of Office; Notice
of Change of Name or Office.................................................................35
8.3. Fiscal Year.................................................................................35
8.4. Environmental Matters.......................................................................35
8.5. Reservation of Shares.......................................................................37
8.6. Securities Exchange Act Registration........................................................37
8.7. Delivery of Information for Rule 144A Transactions..........................................37
8.8. Senior Securities...........................................................................37
8.9. Further Assurances..........................................................................38
SECTION 9. NEGATIVE COVENANTS..........................................................................38
9.1. No Dilution or Impairment; No Changes in Capital Stock......................................39
9.2. Indebtedness................................................................................40
9.3. Consolidation, Merger and Sale..............................................................40
9.4. No Change in Business.......................................................................40
9.5. Restricted Payments; Investments............................................................40
9.6. Affiliate Loans and Guaranties..............................................................41
9.7. Transactions with Affiliates................................................................41
9.8. Liens.......................................................................................42
9.9. Private Placement Status....................................................................42
9.10. Maintenance of Public Market................................................................42
9.11. Actions Prior to the Closing Date...........................................................43
SECTION 10. PREEMPTIVE RIGHTS...........................................................................43
SECTION 11. CONDITIONS TO PURCHASER'S OBLIGATIONS.......................................................44
11.1. Articles Supplementary; Stockholders'Agreement; Registration Rights
Agreement...................................................................................45
11.2. Certificates for Shares.....................................................................45
11.3. Senior Status...............................................................................45
11.4. Accuracy of Representations and Warranties..................................................45
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11.5. Compliance with Agreements..................................................................45
11.6. Officers'Certificates.......................................................................45
11.7. Proceedings.................................................................................46
11.8. Legality; Governmental and Other Authorization..............................................46
11.9. No Material Adverse Change..................................................................46
11.10. Opinion of Counsel..........................................................................46
11.11. Additional Purchases of Shares..............................................................46
11.12. Other Documents and Opinions................................................................47
SECTION 12. BREACH OF REPRESENTATIONS, WARRANTIES AND COVENANTS.........................................47
SECTION 13. SPECIFIC PERFORMANCE........................................................................47
SECTION 14. EXPENSES....................................................................................48
SECTION 15. DIRECT PAYMENTS.............................................................................50
SECTION 16. AMENDMENTS AND WAIVERS......................................................................50
SECTION 17. EXCHANGE OF SHARES; CANCELLATION OF SURRENDERED SHARES; REPLACEMENT.........................50
SECTION 18. NOTICES.....................................................................................51
SECTION 19. MISCELLANEOUS...............................................................................51
</TABLE>
EXHIBIT A Articles Supplementary
EXHIBIT B Stockholders' Agreement
EXHIBIT C Registration Rights Agreement
EXHIBIT D Opinion of Counsel for the Company
EXHIBIT E Confidentiality Agreement
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<PAGE>
PREFERRED STOCK PURCHASE AGREEMENT
This PREFERRED STOCK PURCHASE AGREEMENT is dated as of October
26, 1999 between Caliber Learning Network, Inc., a Maryland corporation (the
"Company"), and the Purchaser listed on the signature page of this Agreement
(the "Purchaser").
W I T N E S S E T H :
WHEREAS, the Company desires to issue and sell to the
Purchaser, and the Purchaser desires to purchase from the Company, shares of the
Company's Series A Convertible Preferred Stock, par value $.01 per share (the
"Series A Preferred"), upon the terms and provisions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
SECTION 1. SALE AND PURCHASE OF PREFERRED STOCK
(a) The Company agrees to sell to the Purchaser and, subject
to the terms and conditions hereof and in reliance upon the representations and
warranties of the Company contained herein or made pursuant hereto, the
Purchaser agrees to purchase from the Company on the Closing Date specified in
Section 2 hereof, the number of shares of Series A Preferred set forth opposite
the Purchaser's name on Schedule 1 hereto. The shares of Series A Preferred
being acquired under this Agreement and by the other Purchasers under the other
Stock Purchase Agreements (as hereinafter defined) are collectively referred to
herein as the "Shares", containing rights and privileges as more fully set forth
in the Articles Supplementary of the Company in the form attached hereto as
Exhibit A (the "Articles Supplementary").
(b) The aggregate purchase price to be paid to the Company by
the Purchaser for the Shares to be purchased by the Purchaser pursuant to this
Agreement shall be the amount set forth opposite the Purchaser's name on
Schedule 1 hereto. No further payment shall be required from the Purchaser for
the Shares.
(c) The parties further acknowledge and agree that the Shares
are intended not to constitute "preferred stock" as that term is used in Section
305(b)(4) of the Code and Treasury Regulation ss 1.305-5(a). Except as required
by any Taxing Authority or court, the Company and the Purchaser agree to treat
the Shares for Federal, state and local income and franchise tax
<PAGE>
purposes as not constituting "preferred stock", and to take no position
inconsistent with such characterization on any Tax Return or before any Taxing
Authority or court.
(d) The Shares are being sold to the purchasers listed on
Schedule 1 hereto (the "Purchasers") pursuant to this Agreement and the other
Series A Convertible Preferred Stock Purchase Agreements entered into
simultaneously with this Agreement (all such agreements collectively, as from
time to time assigned, supplemented or amended or as the terms thereof may be
waived, the "Stock Purchase Agreements"). All Stock Purchase Agreements shall be
dated the date hereof and shall be identical except as to the identities of the
respective Purchasers, the number of Shares to be purchased thereunder and the
amount paid therefor. The sale of Shares to each Purchaser under each Stock
Purchase Agreement is to be a separate sale, and no Purchaser shall have any
liability under any Stock Purchase Agreement other than the Stock Purchase
Agreement to which it is a party.
(e) The Company will use the proceeds from the sale of the
Shares, together with other funds it will receive on the Closing Date to fund
future development opportunities and for working capital purposes.
SECTION 2. THE CLOSING
(a) Subject to the terms and conditions hereof, the closing of
the purchase and sale of the Shares to be purchased by the Purchaser and the
other Purchaser (the "Closing") will take place at the offices of Morgan, Lewis
& Bockius LLP, 101 Park Avenue, New York, New York at 10:00 A.M., New York City
time, on October 26, 1999, or such other time and date as shall be mutually
agreed to by the Company and the Purchaser, but in any event no later than
October 29, 1999 (such time and date are herein referred to as the "Closing
Date"). The sale and purchase of Shares by the Purchasers pursuant to the Stock
Purchase Agreements between each of the Purchasers and the Company shall be
consummated concurrently, for an aggregate purchase price of $15,000,000 on the
Closing Date.
(b) Subject to the terms and conditions hereof, on the Closing
Date (i) the Company will deliver to the Purchaser a certificate registered in
the Purchaser's name (or the name of its nominee, if any, as specified on
Schedule 1 hereto) evidencing the number of Shares set forth opposite the
Purchaser's name on Schedule 1, and (ii) upon the Purchaser's receipt thereof,
the Purchaser will deliver to the Company a certified or official bank check (or
wire transfer) in an amount equal to the aggregate purchase price (as specified
in Section 1(b) hereof) for the Shares to be purchased by the Purchaser payable
to the order of the Company in federal or other immediately available funds.
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<PAGE>
SECTION 3. DEFINITIONS
(a) For purposes of this Agreement, the following definitions
shall apply (such definitions to be equally applicable to both the singular and
plural forms of the terms defined):
"6% Non-Voting Convertible Preferred Stock" means the
Company's 6% Non-Voting Preferred Stock, par value $.01, which is
expressly subordinated, in all respects, to the Series A Preferred.
"Affiliate", when used with respect to any Person, means (i)
if such Person is a corporation, any officer or director thereof (other
than a director elected pursuant to Section 4(c) of the Articles
Supplementary) and any Person which is, directly or indirectly, the
beneficial owner (by itself or as part of any group) of more than five
percent (5%) of any class of any equity security (within the meaning of
the Securities Exchange Act) thereof, and, if such beneficial owner is
a partnership, any general partner thereof, or if such beneficial owner
is a corporation, any Person controlling, controlled by or under common
control with such beneficial owner, or any officer or director of such
beneficial owner or of any corporation occupying any such control
relationship, (ii) if such Person is a partnership, any general or
limited partner thereof, and (iii) any other Person which, directly or
indirectly, controls or is controlled by or is under common control
with such Person. For purposes of this definition, "control" (including
the correlative terms "controlling", "controlled by" and "under common
control with"), with respect to any Person, shall mean possession,
directly or indirectly, of the power to direct or cause the direction
of the management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise. The holding
of Shares (or of Conversion Shares obtained upon conversion of Shares),
and the rights under any Stock Purchase Agreement or under the Articles
Supplementary, the Stockholders' Agreement or the Registration Rights
Agreement (or the exercise of any such rights, including, without
limitation, nominating a director to the Board (or Board committee) of
the Company and Subsidiaries or sending an observer to Board (or Board
committee) meetings of the Company and Subsidiaries), shall not cause a
Purchaser to be deemed to be an "Affiliate" of the Company or any
Subsidiary.
"Affiliate Agreements" means (i) Lease Agreement, dated as of
May 30, 1997, between SHL Financial Services and the Company, (ii)
networkMCI Enterprise Management Agreement, dated as of July 1, 1997,
between the Company and MCI Systemhouse Corp., (iii) Intercompany
Management and Facility Use Agreement, dated as of January 1, 1998, by
and between Sylvan and the Company, and (iv) Testing Center Management
and CBT Services Agreement, dated as of May 1, 1997 (as amended by
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<PAGE>
Amendment No. 1, dated as of May 2, 1997), by and between Sylvan and
the Company, each as may be amended, modified or renewed from time to
time.
"Agreement" means this Stock Purchase Agreement (together with
exhibits and schedules) as such may be from time to time assigned,
supplemented or amended or as the terms hereof may be waived.
"Articles Supplementary" has the meaning set forth in Section
1(a) hereof.
"Benefit Plan" means any Plan, existing at the Closing Date or
prior thereto, established or to which contributions have at any time
been made by the Company or any ERISA Affiliate, or any predecessor of
any of the foregoing, or under which any employee, former employee or
director of the Company or any ERISA Affiliate or any beneficiary
thereof is covered, is eligible for coverage or has benefit rights as a
result of employment by or service with the Company or any ERISA
Affiliate, or as a result of designation as a beneficiary by any
employee, former employee or director of the Company or any ERISA
Affiliate.
"Board" or "Board of Directors" means with respect to any
Person which is a corporation, a business trust or other entity, the
board of directors or other group, however, designated, which is
charged with legal responsibility for the management of such Person, or
any committee of such board of directors or group, however designated,
which is authorized to exercise the power of such board or group in
respect of the matter in question.
"Business Day" means any day other than a Saturday, Sunday or
any day on which banks in the location of the office of the Company
provided for in Section 18 hereof are authorized or obligated to close.
"Capitalized Leases" means (a) any lease to which the Company
or a Subsidiary is party as lessee, or by which it is bound, under
which it leases any property (real, personal or mixed) from any lessor
other than the Company or a Subsidiary, and (b) which either (i) is
required to be capitalized in accordance with GAAP, or, (ii) with
respect to real property, even if not so required to be capitalized,
shall have a remaining term of greater than three (3) years (including
leases of shorter duration which are or were extendible to a total term
greater than three (3) years at the option of the lessor) (the
"Extended Leases"); provided that the Company makes a determination as
to whether, at the time of its calculation of Capitalized Lease Value,
it could be released from its obligations under such Extended Leases
without any adverse economic consequence and (I) the Extended Leases
shall not be included in the calculation of Capitalized Leases if the
Company determines there would be no adverse economic consequences, and
(II) the Extended Leases shall be included in the calculation of
Capitalized Leases to the extent of
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<PAGE>
such adverse economic consequence if the Company determines that there
would be adverse economic consequences.
"Capitalized Lease Value" means, as of the time of any
determination thereof, the sum of the then present values, determined
as hereinafter provided, of future obligations of the Company and its
subsidiaries under then existing Capitalized Leases. To compute the
value of any Capitalized Lease, the following methods shall be used, as
applicable:
(i) values of leases required to be capitalized in
accordance with GAAP shall be computed in accordance
with such principles; and
(ii) values of other leases (and values of contracts or
other items which this Agreement provides are to be
valued as if they were Capitalized Leases) shall be
computed by discounting, to the date of
determination, at an assumed interest rate of eight
percent (8%) per annum, the minimum amount of future
rental payments that will be due from the Company or
its subsidiaries under the related documentation,
including rental payments that may be due during
extensions which are at the other party's option, but
excluding any amounts in respect of insurance on,
taxes on and/or maintenance of the properties subject
to such leases (provided that such amounts are owed
and paid only to the extent actually incurred).
"Closing" has the meaning set forth in Section 2(a) hereof.
"Closing Date" has the meaning set forth in Section 2(a)
hereof.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Commission" means the Securities and Exchange Commission and
any other similar or successor agency of the federal government
administering the Securities Act or the Securities Exchange Act.
"Common Stock" means the Company's Common Stock, par value
$.01 per share, and shall also include any common stock of the Company
hereafter authorized and any capital stock of the Company of any other
class hereafter authorized which is not preferred as to dividends or
assets over any other class of capital stock of the Company or which
has ordinary voting power for the election of directors of the Company;
provided that Common Stock shall not include the Series A Convertible
Preferred Stock.
"Company" means Caliber Learning Network, Inc., a Maryland
corporation, its successors and assigns.
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<PAGE>
"Confidentiality Agreement" has the meaning set forth in
Section 7.5 hereof.
"Consolidated" or "consolidated", when used with reference to
any financial term in this Agreement, means the aggregate for the
Company and any of its majority-owned Subsidiaries of the amounts
signified by such term for all such Persons, with intercompany items
eliminated, and, with respect to net worth, after eliminating the
portion of net worth properly attributable to minority interests, if
any, in the capital of any such Person (other than in the capital of
the Company) and otherwise as determined in accordance with GAAP
(except as otherwise expressly provided herein).
"Conversion Share" or "Conversion Shares" means the shares of
the Company's Common Stock obtained or obtainable upon conversion of
Shares and shall also include any capital stock or other securities
into which such shares of Common Stock are changed and any capital
stock or other securities resulting from or comprising a
reclassification, combination or subdivision of, or a stock dividend
on, any such shares of Common Stock. In the event that any Conversion
Shares are sold either in a public offering pursuant to a registration
statement under the Securities Act or pursuant to a Rule 144
Transaction, then the transferees of such Conversion Shares shall not
be entitled to any benefits under this Agreement with respect to such
Conversion Shares and such Conversion Shares shall no longer be
considered to be "Conversion Shares" for purposes of any consent or
waiver provision of this Agreement.
"Disclosure Material" has the meaning specified in Section
4.6(a) hereof.
"EBITDA" means, the consolidated or combined, as the case may
be, net income for such period plus (a) the sum of, without
duplication, to the extent deducted in computing consolidated or
combined net income: (i) income tax expense, (ii) interest expense,
(iii) depreciation, amortization (exclusive of deferred rent
amortization) and other non-cash charges and (iv) any extraordinary or
non-recurring losses or expenses, minus (b) the sum of (without
duplication), to the extent included in computing consolidated net
income, (i) interest or dividend income, (ii) non-operating income and
(iii) any extraordinary or non-recurring gains or income, all as
determined in accordance with GAAP, where applicable, consistently
applied.
"Environmental Laws" means all federal, state, local, foreign,
civil and criminal laws, statutes, ordinances, orders, codes, rules,
policies, and regulations and common law relating to the protection of
the environment and human health or relating to the handling, use,
generation, treatment, storage, transportation or disposal of Hazardous
Materials, including but not limited to the Resource Conservation and
Recovery Act of 1976, 42 U.S.C. ss 6901 et seq.; the Toxic Substances
Control Act, 15 U.S.C. ss 2601 et seq.; the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. ss 9601 et
seq.; the Federal Water Pollution Control Act, 33 U.S.C. ss 1251 et
seq.;
-6-
<PAGE>
the Clean Air Act, 42 U.S.C. ss 7401 et seq.; the Hazardous Materials
Transportation Act, 49 U.S.C. ss 1801 et seq.; the Occupational Safety
and Health Act, 29 U.S.C. ss 651; the Federal Insecticide, Fungicide
and Rodenticide Act, 7 U.S.C. ss 136y et seq.; and the Oil Pollution
Act of 1990, 33 U.S.C. ss 2701 et seq., all as may be amended or
superseded from time to time, and all common law claims relating to the
same.
"Environmental Lien" has the meaning set forth in Section 4.16
hereof.
"Environmental Permits" means all permits, licenses,
approvals, authorizations or consents required by any Governmental
Authority under any applicable Environmental Law and includes any and
all orders, consent orders or binding agreements issued or entered into
by a Governmental Authority under any applicable Environmental Law.
"ERISA" means Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" means each "person" (as defined in Section
3(9) of ERISA) which is, or at any time was, a member of a controlled
group (within the meaning of Section 412(n)(6) of the Code) that
includes, or at any time included, the Company or any of its
Subsidiaries.
"Financial Investor" means an investor that acquires an equity
interest in the Company for investment purposes, and without the
purpose, or without the effect, of changing or influencing the control
of the Company holds an equity interest in the Company purposes.
"Fleming Designee" means each person that any Fleming Holder
designates in writing to the Company to receive, on behalf of such
Fleming Holder, the information to which such Fleming Holder is
entitled to pursuant to Section 7.1(b)(v) hereof; provided that each
Fleming Holder may not designate more than two persons pursuant hereto.
The initial two Fleming Holder Designees shall be Robert L. Burr and
David J. Edwards.
"Fleming Funds" means Fleming US Discovery Fund III, L.P.,
Fleming US Discovery Offshore Fund III, L.P. and Robert Fleming
Nominees Limited, or any successor thereof.
"Fleming Holders" means (i) the Fleming Funds and (ii) any
Affiliate, officer or employee of an Affiliate or investment fund
managed by an Affiliate of the Fleming Funds, or any successor thereof,
to which the Fleming Funds may transfer record and/or beneficial
ownership of the Shares or the Conversion Shares.
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<PAGE>
"Fully Diluted" means, with respect to the calculation of the
number of shares of Common Stock, as of the time of determination
thereof, the sum of (i) all shares of Common Stock outstanding at the
time of determination and (ii) all shares of Common Stock issuable upon
the exchange, exercise or conversion of all warrants, options and
convertible securities then outstanding (whether or not such warrants,
options or convertible securities are then exercisable, exchangeable,
convertible or subject to contingencies).
"Fundamental Transaction" has the meaning set forth in Section
9.3 hereof.
"GAAP" means generally accepted accounting principles
consistently applied.
"Going Private Transaction" has the meaning set forth in
Section 9.10 hereof.
"Governmental Authority" means any federal, state, or local
governmental agency or authority (including regulatory authority)
having jurisdiction over the Company or any of its Subsidiaries or any
of its respective assets or businesses.
"Guaranty" means (i) any guaranty or endorsement of the
payment or performance of, or any contingent obligation in respect of,
any indebtedness or other obligation of any other Person, (ii) any
other arrangement whereby credit is extended to one obligor (directly
or indirectly) on the basis of any promise or undertaking of another
Person (a) to pay the indebtedness of such obligor, (b) to purchase an
obligation owed by such obligor, (c) to purchase or lease assets (or to
provide funds, goods or services) under circumstances that would enable
such obligor to discharge one or more of its obligations or (d) to
maintain the capital, working capital, solvency or general financial
condition of such obligor, in each case whether or not such arrangement
is disclosed in the balance sheet of such other Person or is referred
to in a footnote thereto and (iii) any liability as a general partner
of a partnership in respect of indebtedness or other obligations of
such partnership; provided, however, that the term "Guaranty" shall not
include (1) endorsements for collection or deposit in the ordinary
course of business, (2) any guaranty of indebtedness of the Company by
a subsidiary of the Company or (3) obligations of the Company or its
Subsidiaries which would constitute Guaranties solely by virtue of the
continuing liability of a Person which has sold assets subject to
liabilities for the liabilities which were assumed by the Person
acquiring the assets, unless such liability is required to be carried
on the consolidated balance sheet of the Company. The amount of any
Guaranty and the amount of indebtedness resulting from such Guaranty
shall be the maximum amount of the guarantor's potential obligation in
respect of such Guaranty.
"Hazardous Materials" means any petroleum, petroleum
hydrocarbons, petroleum waste or petroleum products, underground
storage tanks, asbestos or asbestos-containing
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<PAGE>
materials, pesticides, lead and lead-containing materials, urea
formaldehyde insulation and polychlorinated biphenyls (PCBs), ionizing
and non-ionizing radiation including radon and electromagnetic
frequency radiation; and any chemicals, materials, substances or wastes
in any amount or concentration which are now or hereafter "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely
hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants" or words of similar import, under any applicable
Environmental Law.
"Indebtedness" of any Person means, without duplication, as of
any date as of which the amount thereof is to be determined, (i) all
obligations of such Person to repay money borrowed (including, without
limitation, all notes payable and drafts accepted representing
extensions of credit, all obligations under letters of credit, all
obligations evidenced by bonds, debentures, notes or other similar
instruments and all obligations upon which interest charges are
customarily paid), (ii) the Capitalized Lease Value of all Capitalized
Leases in respect of which such Person is liable as lessee or as the
guarantor of the lessee, (iii) all monetary obligations which are
secured by any Lien existing on property owned by such Person whether
or not the obligations secured thereby have been incurred or assumed by
such Person, (iv) all conditional sales contracts and similar title
retention debt instruments under which such Person is obligated to make
payments, (v) all Guaranties by such Person and (vi) all contractual
obligations (whether absolute or contingent) of such Person to
repurchase goods sold and distributed. "Indebtedness" shall not
include, however, (1) Indebtedness of the Company to any of its
wholly-owned Subsidiaries or Indebtedness of any wholly-owned
Subsidiary to the Company or to another wholly-owned Subsidiary, and
(2) any unfunded obligations in any employee pension benefit plan (as
defined in ERISA) of the Company or of any Subsidiary.
"Internal Rate of Return" means the discount rate at which the
present value of the future cash flows of an investment equal the cost
of the investment.
"Investment" means, with respect to any Person, (i) any loan,
advance or extension of credit by such Person to, and any contributions
to the capital of, any other Person, (ii) any Guaranty by such Person,
(iii) any interest in any capital stock, equity interest or other
securities of any other Person, (iv) any transfer or sale of property
of such Person to any other Person other than upon full payment, in
cash or other consideration, of not less than the agreed sale price
bargained on an arms-length basis and (v) any commitment or option to
make an Investment if, in the case of an option, the consideration
therefor exceeds $10,000, and any of the foregoing under clauses (i)
through (v) shall be considered an Investment whether such Investment
is acquired by purchase, exchange, merger or any other method;
provided, that the term "Investment" (1) shall not include an
Investment in the Company or in a wholly-owned Subsidiary, (2) shall
not include current trade and customer accounts receivable and
allowances,
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<PAGE>
provided they relate to goods furnished in the ordinary course of
business and are given in accordance with the customary practices of
the Company or a Subsidiary, (3) shall not include temporary
investments of excess cash of the Company or of any Subsidiary in any
of the following: (A) investment grade obligations maturing within one
year of their issuance which as to principal and interest constitute
direct obligations of, or obligations guaranteed by, the United States
of America, (B) negotiable certificates of deposit of banks or trust
companies which are organized under the laws of the United States of
America or any state thereof and which have capital and surplus of at
least $500,000,000, (C) commercial paper which is rated not less than
prime-one or A-1 or their equivalents by Moody's Investor Service, Inc.
or Standard & Poor's Corporation or their successors, (D) any
repurchase agreement secured by any one or more of the foregoing and
(E) money market funds primarily investing in any of the foregoing
securities and sponsored by or affiliated with nationally recognized
brokerage or investment advisory firms, and (4) shall not include
Investments of the Company existing on the date hereof and disclosed on
Schedule 3(a) hereto.
"Lien" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, or preference, priority or other
security interest of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement,
any financing lease having substantially the same effect as any of the
foregoing, any assignment or other conveyance of any right to receive
income and any assignment of receivables with recourse against the
assignor), any filing of a financing statement as debtor under the
Uniform Commercial Code or any similar statute and any agreement to
give or make any of the foregoing; provided that the term "Lien" shall
not include Permitted Liens.
"MCI" means MCI Telecommunications Corporation, which as of
the date of this Agreement holds 1,856,086 shares of Common Stock.
"MCI Warrants" means the amended and restated warrant to
purchase 1,193,573 shares of Common Stock, as adjusted pursuant to the
anti-dilution terms thereof, issued to MCI.
"Outside Directors" means those directors on the Company's
Board of Directors at any time who are not otherwise Affiliates of or
employed by the Company; provided that notwithstanding the foregoing,
Douglas L. Becker and R. Christopher Hoehn-Saric shall be deemed
Outside Directors for the purposes hereof.
"Outstanding" or "outstanding" means (a) when used with
reference to the Shares or the Conversion Shares as of a particular
time, all Shares or Conversion Shares theretofore duly issued except
(i) Shares and Conversion Shares theretofore reported as lost, stolen,
mutilated or destroyed or surrendered for
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transfer, exchange or replacement, in respect of which new or
replacement Shares or Conversion Shares have been issued by the
Company, (ii) Shares and Conversion Shares theretofore canceled by the
Company and (iii) Shares and Conversion Shares registered in the name
of, as well as Shares owned beneficially by, the Company, any
Subsidiary or any of its Affiliates. For purposes of the preceding
sentence, in no event shall "Affiliates" include (x) the Purchasers or
(y) any Affiliates of the Purchasers.
"Patents and Applications" has the meaning set forth in
Section 4.12 hereof.
"Pension Plan" means any "employee pension benefit plan" as
defined in Section 3(2) of ERISA.
"Permitted Lien" means (i) any Lien for Taxes, governmental
charges or levies not yet due or delinquent or being contested in good
faith by appropriate proceedings for which adequate reserves have been
established in accordance with GAAP, (ii) any imperfections of title,
easements, rights of way or similar Liens, zoning laws or land use
restrictions as normally exist with respect to property similar in
character to the property affected thereby and which individually or in
the aggregate with other such Liens, zoning laws or land use
restrictions do not materially impair the value or marketability of the
property subject to such Liens, zoning laws or land use restrictions or
interfere with the use of such property in the conduct of the business
of the Company and which do not secure obligations for money borrowed,
(iii) Liens imposed by any law, such as mechanic's, materialman's,
landlord's, warehouseman's and carrier's Liens, securing obligations
incurred in the ordinary course of business which are not yet overdue
or which are being diligently contested in good faith by appropriate
proceedings and, with respect to such obligations which are being
contested, for which the Company has set aside adequate reserves, if
appropriate, (iv) any Lien resulting from purchase by the Company of
goods in the ordinary course of business as to which Liens are not
filed of record and (v) any Lien necessary to secure Indebtedness that
is not prohibited by Section 9.2 hereof; provided that "Permitted Lien"
shall not include any Lien upon or with respect to any shares of
capital stock of any Subsidiary.
"Permitted Transferee" means any Transferee that holds not
less than an aggregate of 20,000 Shares.
"Permitted Transferee Designee" means each person that any
Permitted Transferee designates in writing to the Company to receive,
on behalf of such Permitted Transferee, the information to which such
Permitted Transferee is entitled to pursuant to Section 7.1(b)(v)
herof; provided that each Permitted Transferee may not designate more
than two persons pursuant hereto.
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"Person" or "person" means an individual, corporation,
partnership, limited liability company, firm, association, joint
venture, trust, unincorporated organization, government, governmental
body, agency, political subdivision or other entity.
"Plan" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase,
stock option, stock ownership, stock appreciation rights, phantom
stock, leave of absence, layoff, vacation, day or dependent care, legal
services, cafeteria, life, health, accident, disability, worker's
compensation or other insurance, severance, separation or other
employee benefit plan, practice, policy or arrangement of any kind,
whether written or oral, or whether for the benefit of a single
individual or more than one individual including, but not limited to,
any "employee benefit plan" within the meaning of Section 3(3) of
ERISA.
"Preferred Stock" means any class of the capital stock of a
corporation (whether or not convertible into any other class of such
capital stock) which has any right, whether absolute or contingent, to
receive dividends or other distributions of the assets of such
corporation (including, without limitation, amounts payable in the
event of the voluntary or involuntary liquidation, dissolution or
winding-up of such corporation), which right is superior to the rights
of another class of the capital stock of such corporation. "Preferred
Stock" includes, without limitation, the Series A Convertible Preferred
Stock and such preferred stock as may be issued as described in Section
8.8(b) hereof (upon the issuance of such preferred stock).
"Purchaser" means the person who accepts and agrees to the
terms hereof as indicated by such person's signature (as "the
undersigned Purchaser") on the execution page of this Agreement,
together with its successors and assigns.
"Purchasers" has the meaning set forth in Section 1(c) hereof,
together with their respective successors and assigns.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Closing Date, among the Company and each of
the Purchasers.
"Restricted Payment" means (i) every payment in connection
with the redemption, purchase, retirement or other acquisition by or on
behalf of the Company or any Subsidiary of any shares of the Company's
or a Subsidiary's capital stock (as defined below), whether or not
owned by the Company or any Subsidiary, (ii) any prepayments or
repayments made on Indebtedness of the Company or any Subsidiary, (iii)
every payment to or on behalf of any Affiliate of the Company or any
Affiliate of any Subsidiary on account of or with respect to
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any lease arrangements, and (iv) every payment by or on behalf of the
Company or of any Subsidiary (whether as repayment or prepayment of
principal or as interest or otherwise) on or with respect to (A) any
obligation to repay money borrowed owing to any Affiliate of the
Company or of any Subsidiary or (B) any obligation, to any Person, of
any Affiliate of the Company or of any Subsidiary or to any other
holder of shares of the Company's capital stock (as defined below),
which obligation is assumed, or is the subject of a Guaranty, by the
Company or a Subsidiary; provided, however, (a) that the restrictions
of the foregoing clause (i) shall not apply to (A) any payment in
respect of capital stock of the Company to the extent payable in shares
of the capital stock of the Company, (B) any redemption of the Series A
Preferred or (C) any redemption or repurchase pursuant to the 1997
Stock Option Plan and the 1998 Stock Incentive Plan as in effect on the
date hereof, (b) that the restrictions of the foregoing clause (ii)
shall not apply to any regularly scheduled prepayment or repayment of
Indebtedness, provided that such Indebtedness being prepaid or repaid
is not at the time of such prepayment or repayment or at any prior time
thereto owing to an Affiliate of the Company, or any payments due under
the Affiliate Agreements, (c) that none of the foregoing clauses shall
apply to any payments from a Subsidiary to the Company or from a
Subsidiary to a wholly-owned Subsidiary and (d) that none of the
foregoing clauses shall apply to any payments, distributions or other
transfers or actions on or with respect to the Shares or the Conversion
Shares or to the Purchasers (or holders of Shares or the Conversion
Shares) under the Stock Purchase Agreements. For purposes of this
definition, "capital stock" shall also include warrants and other
rights and options to acquire shares of capital stock (whether upon
exercise, conversion, exchange or otherwise).
"Rule 144" means (i) Rule 144 under the Securities Act as such
Rule is in effect from time to time and (ii) any successor rule,
regulation or law, as in effect from time to time.
"Rule 144A" means (i) Rule 144A under the Securities Act as
such Rule is in effect from time to time and (ii) any successor rule,
regulation or law, as in effect from time to time.
"Rule 144 Transaction" means a transfer of Conversion Shares
(A) complying with Rule 144 as such Rule is in effect on the date of
such transfer (but not including a sale other than pursuant to
"brokers' transactions" as defined in clauses (1) and (2) of paragraph
(g) of such Rule as in effect on the date hereof) and (B) occurring at
a time when Conversion Shares are registered pursuant to Section 12 of
the Securities Exchange Act.
"SEC Reports" has the meaning set forth in Section 4.19
hereof.
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"Securities Act" means the Securities Act of 1933, as amended,
and the rules, regulations and interpretations thereunder.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended, and the rules, regulations and interpretations
thereunder.
"Series A Preferred" means the Company's Series A Convertible
Preferred Stock, par value $.01 per share, which will have the rights,
powers and privileges on the Closing Date as more fully set forth in
the Articles Supplementary.
"Shares" has the meaning set forth in Section 1(a) hereof. In
the event that any Shares are sold either in a public offering pursuant
to a registration statement under Section 5 of the Securities Act or
pursuant to a Rule 144 Transaction, then the transferees of such Shares
shall not be entitled to any benefits under this Agreement with respect
to such Shares and such Shares shall no longer be considered to be
"Shares" for purposes of any consent or waiver provision of this
Agreement.
"Stock Purchase Agreements" has the meaning set forth in
Section 1(d) hereof.
"Stockholders' Agreement" means the Stockholders' Agreement,
dated as of the Closing Date, among the Company, the Purchasers and
certain other stockholders of the Company.
"Strategic Investor" means a technology partner or other
company with related products and services; provided that "Strategic
Investor" shall not include an Affiliate of the Company, Sylvan or MCI.
"Subsidiary", with respect to any Person, means any
corporation, association or other entity of which more than 50% of the
total voting power of shares of stock or other equity interests
(without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is, at the time as
of which any determination is being made, owned or controlled, directly
or indirectly, by such Person or one or more of its Subsidiaries, or
both. The term "Subsidiary" or "Subsidiaries" when used herein without
reference to any particular Person, means a Subsidiary or Subsidiaries
of the Company.
"Sylvan" means Sylvan Learning Systems, Inc., which holds
1,227,393 shares of Common Stock and all of the outstanding 6%
Nonvoting Convertible Preferred Stock.
"Takeover Proposal" shall mean any tender or exchange offer
for in excess of 15% of the outstanding securities involving the
Company, any proposal for a merger,
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consolidation or other business combination involving the Company, any
proposal or offer to acquire in any manner a greater than 15% equity
interest in, or a significant portion of the business or assets of, the
Company (other than immaterial or insubstantial assets or inventory in
the ordinary course of business or assets held for sale), any proposal
or offer with respect to any recapitalization or restructuring with
respect to the Company or any proposal or offer with respect to any
other transaction similar to any of the foregoing with respect to the
Company other than pursuant to the transactions to be effected pursuant
to the Stock Purchase Agreements.
"Takeover Proposal Interest" has the meaning set forth in
Section 7.4(e) hereof.
"Tax" or "Taxes" means all federal, state, local or foreign
net or gross income, gross receipts, net proceeds, sales, use, ad
valorem, value added, franchise, bank shares, withholding, payroll,
employment, excise, property, alternative or add-on minimum,
environmental or other taxes, assessments, duties, fees, levies or
other governmental charges of any nature whatsoever, whether disputed
or not, together with any interest, penalties, additions to tax or
additional amounts with respect thereto.
"Tax Returns" means any returns, reports or statements
(including any information returns) required to be filed for purposes
of a particular Tax.
"Taxing Authority" means any governmental agency, board,
bureau, body, department or authority of any United States federal,
state or local jurisdiction, or any foreign jurisdiction, having or
purporting to exercise jurisdiction with respect to any Tax.
"Transferees" shall mean any transferee (except for a Fleming
Holder) of the Shares or the Conversion Shares (as such terms are
defined within the definition of "Fleming Holders") from a Fleming
Holder. Transferees shall not include a transferee of Shares or
Conversion Shares sold in either a public offering pursuant to a
registration statement under the Securities Act or pursuant to a Rule
144 Transaction.
(b) For all purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires:
(i) the words "herein", "hereof" and "hereunder" and
other words of similar import refer to this Agreement as a whole and
not to any particular Section or other subdivision;
(ii) all accounting terms not otherwise defined
herein have the meanings assigned to them in accordance with GAAP
(except as otherwise provided herein);
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<PAGE>
(iii) all computations provided for herein, if any,
shall be made in accordance with GAAP (except as otherwise provided
herein);
(iv) any uses of the masculine, feminine or neuter
gender shall also be deemed to include any other gender, as
appropriate;
(v) all references herein to actions by the Company
or any Subsidiary, such as "create", "sell", "transfer", "dispose of",
etc., mean such action whether voluntary or involuntary, by operation
of law or otherwise;
(vi) the exhibits and schedules to this Agreement
shall be deemed a part of this Agreement;
(vii) each of the representations and warranties of
the Company contained in Section 4 hereof is separate and is not
limited, qualified or modified by the existence, wording or
satisfaction of any other representation or warranty of the Company in
Section 4 or otherwise;
(viii) each of the covenants of the Company contained
in Sections 7, 8 and 9 hereof or otherwise contained in any Stock
Purchase Agreement, the Certificate of Designations, the Stockholders'
Agreement or the Registration Rights Agreement is separate and is not
limited or satisfied by the existence, wording or satisfaction of any
other covenant of the Company in Section 7, 8 or 9 or otherwise; and
(ix) all references herein (in covenants or
otherwise) to any action(s) which are to be taken (or which are
prohibited from being taken) by any Person or the Company or any
Subsidiary shall apply to such Person or the Company or such
Subsidiary, as the case may be, whether such action is taken directly
or indirectly.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser as
follows as of the date hereof and as of the Closing Date, except as set forth in
the disclosure schedules attached hereto:
4.1. Corporate Existence, Power and Authority.
(a) Each of the Company and each Subsidiary is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. The Company and each Subsidiary is duly
qualified, licensed and authorized to do business and is in good standing in
each jurisdiction in which it owns or leases any property or in which the
conduct of its business requires it to so qualify or be so licensed, except for
such jurisdictions where the failure to so qualify or be so licensed would not
have a material adverse effect on the
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<PAGE>
Company's assets, properties, liabilities, business, affairs, results of
operations, condition (financial or otherwise) or prospects, on a consolidated
basis.
(b) No proceeding has been commenced looking toward the
dissolution or merger of the Company or any Subsidiary or the amendment of their
respective certificates of incorporation (other than the Articles
Supplementary). Neither the Company nor any Subsidiary is in violation in any
respect of its charter or by-laws.
(c) Each of the Company and each Subsidiary has all requisite
power, authority (corporate and other) and legal right to own or to hold under
lease and to operate the properties it owns or holds and to conduct its business
as now being conducted.
(d) The Company has all requisite power, authority (corporate
and other) and legal right to execute, deliver, enter into, consummate the
transactions contemplated by and perform its obligations under (i) the Stock
Purchase Agreements, including, without limitation, the issuance by the Company
of the Shares and the Conversion Shares as contemplated herein and therein and
in the Articles Supplementary (subject to the proper filing with the Maryland
State Department of Assessments and Taxation of the Articles Supplementary for
the Series A Preferred), (ii) the Stockholders' Agreement and (iii) the
Registration Rights Agreement. The execution, delivery and performance of the
Stock Purchase Agreements, the Stockholders' Agreement and the Registration
Rights Agreement by the Company (including, without limitation, the issuance by
the Company of the Shares and the Conversion Shares as contemplated herein and
therein and in the Articles Supplementary) have been duly authorized by all
required corporate and other actions. The Company has duly executed and
delivered the Stock Purchase Agreements and at the Closing will have duly
executed and delivered the Stockholders' Agreement and the Registration Rights
Agreement. The Stock Purchase Agreements constitute and, at the Closing, the
Stockholders' Agreement and the Registration Rights Agreement will constitute
the legal, valid and binding obligations of the Company enforceable in
accordance with their respective terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to the rights of
creditors generally or under general principles of equity.
4.2. Capital Stock.
(a) Schedule 4.2(a) hereto correctly and completely lists (i)
the authorized capital stock of the Company (Common Stock and Preferred Stock),
(ii) the number of designated shares of Preferred Stock in each series or class
after giving effect to the Articles Supplementary and (iii) on October 19, 1999,
after giving effect to the issuance of Shares contemplated by the Stock Purchase
Agreements, the number of shares outstanding in each series or class. There have
been no material issuances of shares since June 30, 1999. All of such
outstanding shares are, or on the Closing Date will be, duly authorized, validly
issued and outstanding, fully paid and non-assessable. The shares of the
Company's Common Stock issuable upon conversion of the Series A Preferred will
be, when issued in accordance with the
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terms of the Series A Preferred, duly authorized, validly issued, fully paid and
non-assessable. Except as provided in the Articles Supplementary and as
described in Schedule 4.2(a), none of the shares of the Company's capital stock
which will be outstanding at the Closing (i) were or will be subject to
preemptive rights when issued or (ii) provide the holders thereof with any
preemptive rights with respect to any issuances of capital stock.
(b) Schedule 4.2(b) hereto correctly and completely lists the
number and purpose for which shares of the Company's Common Stock are reserved
for issuance by the Company.
(c) Except as referred to in Section 4.2(b), there are no
outstanding options, warrants, subscriptions, rights, convertible securities or
other agreements or plans under which the Company may become obligated to issue,
sell or transfer shares of its capital stock or other securities.
(d) Except for the registration rights contained in the
Registration Rights Agreement and as described in Schedule 4.2(d), there are and
will be no outstanding registration rights with respect to any capital stock of
the Company or of any Subsidiary, which (in either case) will be outstanding on
the Closing Date, or any capital stock referred to in Section 4.2(b) or 4.2(c).
(e) There are no voting agreements, voting trusts, proxies or
other agreements or understandings with respect to the voting of any capital
stock of the Company or any Subsidiary.
(f) Except as described in Schedule 4.2(f), there are no
anti-dilution protections or other adjustment provisions in existence with
respect to any capital stock of the Company or any Subsidiary or any capital
stock referred to in Section 4.2(b) or 4.2(c).
(g) The Articles Supplementary has been duly adopted by the
Company and is fully effective as a supplement to the Company's charter. The
Shares will have all of the rights, priorities and terms set forth in the
Articles Supplementary.
(h) To the knowledge of the Company, those persons who
beneficially own, directly or indirectly, more than 5% (calculated in accordance
with Rule 13d-3 under the Securities Exchange Act) of the Company's outstanding
Common Stock are as listed on Schedule 4.2(h); provided that the Company may
rely on the accuracy of all Schedules 13D and Schedules 13G filed under the
Securities Exchange Act for purposes of determining those persons who
beneficially own, directly or indirectly, more than 5% of the Company's
outstanding Common Stock.
4.3. Subsidiaries.
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The Company has no Subsidiaries. The Company has no Investments in any
other Person.
4.4. Business.
The Company is engaged primarily in the business of
distributed learning. The Company neither currently engages in, nor has any
intention of engaging in, any other business.
4.5. No Defaults or Conflicts.
(a) Neither the Company nor any of its Subsidiaries is in
violation or default in any material respect (and is not in default in any
respect regarding any Indebtedness) under any indenture, agreement or instrument
to which it is a party or by which it or its properties may be bound that would
materially adversely affects or will materially adversely affect the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company or the ability of the
Company to perform its obligations under the Stock Purchase Agreements, the
Articles Supplementary, the Stockholders' Agreement, the Registration Rights
Agreement or any of the transactions contemplated hereby or thereby. Neither the
Company nor any Subsidiary is in default in any material respect under any
material order, writ, injunction, judgment or decree of any court or other
governmental authority or arbitrator(s).
(b) The execution, delivery and performance by the Company of
the Stock Purchase Agreements, the Stockholders'' Agreement and the Registration
Rights Agreement and any of the transactions contemplated hereby or thereby
(including, without limitation, the issuance of the Shares and the Conversion
Shares as contemplated herein and therein and in the Articles Supplementary, the
adoption of the Articles Supplementary as an amendment to the Company's charter)
do not and will not (i) violate or conflict with, with or without the giving of
notice or the passage of time or both, any provision of (A) the respective
certificates of incorporation or by-laws of the Company or any of its
Subsidiaries, (B) any law, rule, regulation or order of any federal, state,
county, municipal or other governmental authority, (C) any judgment, writ,
injunction, decree, award or other action of any court or governmental authority
or arbitrator(s), or (D) any agreement, indenture or other instrument applicable
to the Company or any of its Subsidiaries or any of their respective properties,
(ii) result in the creation of any Lien upon any of the Company's or any
Subsidiary's properties, assets or revenues, except as provided in the Articles
Supplementary of the Series A Preferred, (iii) require the consent, waiver,
approval, order or authorization of, or declaration, registration, qualification
or filing with, any Person (whether or not a governmental authority and
including, without limitation, any shareholder approval) (other than approvals
which have been obtained prior to the Closing Date), or (iv) cause antidilution
clauses of any outstanding securities to become operative or give rise to any
preemptive rights. No provision of any item referred to in Sections (A) and (C)
of the preceding clause (i) materially adversely affects or will materially
adversely affect the assets, properties, liabilities, business, affairs, results
of operations, condition (financial or otherwise) or
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prospects of the Company or the ability of the Company to perform its
obligations under the Stock Purchase Agreements, the Articles Supplementary, the
Stockholders' Agreement, the Registration Rights Agreement or any of the
transactions contemplated hereby or thereby.
4.6. Disclosure Materials; Other Information.
(a) The Company has previously furnished to the Purchasers the
materials described on Schedule 4.6(a) hereto (the "Disclosure Material"). The
audited and unaudited financial statements referred to or contained in the
materials referred to on Schedule 4.6(a) fairly present the consolidated
financial condition of the Company as of the respective dates thereof and the
consolidated results of the operations of the Company for such periods and have
been prepared in accordance with GAAP, except that any such unaudited statements
may omit notes and may be subject to normal year-end adjustment.
(b) Since June 30, 1999, except as disclosed in the Company's
Quarterly Report on Form 10-Q for the three months ended June 30, 1999 or
subsequently publicly announced, (i) the business of the Company has been
conducted in the ordinary course and (ii) there has been no material adverse
change in the assets, properties, liabilities, business, affairs, results of
operations, condition (financial or otherwise) or prospects of the Company. As
of such Closing Date and as of the date hereof, there are no material
liabilities of the Company or any Subsidiary which would be required to be
provided for in a consolidated balance sheet of the Company as of either such
date prepared in accordance with GAAP, other than liabilities provided for in
the financial statements referred to in Section 4.6(a). Since June 30, 1999, no
amount or property has directly or indirectly been declared, ordered, paid, made
or set aside for any Restricted Payment nor has any such action been agreed to.
(c) There are no material liabilities, contingent or
otherwise, of the Company or the Subsidiaries that have not been disclosed in
the financial statements referred to in Section 4.6(a) or otherwise disclosed in
the schedules hereto.
(d) The financial projections included in the Disclosure
Material conform with the internal operating forecasts of the Company and its
Subsidiaries and were based on good faith assumptions when made and have been
prepared in good faith.
(e) There is no fact known to the Company or any of the
Subsidiaries which is not in the disclosure schedules hereto which is necessary
in order to make the representations and warranties made, in light of the
circumstances under which they were made, not misleading.
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4.7. Litigation.
There is no action, suit, proceeding, investigation or claim
pending or, to the knowledge of the Company or the Subsidiaries, threatened in
law, equity or otherwise before any court, administrative agency or arbitrator
which (i) questions the validity of the Stock Purchase Agreements, the Articles
Supplementary, the Stockholders' Agreement, the Registration Rights Agreement,
the Shares or the Conversion Shares or any action taken or to be taken pursuant
hereto or thereto, (ii) might adversely affect the right, title or interest of
any Purchaser to the Shares or the Conversion Shares or (iii) might result in a
material adverse change in the assets, properties, liabilities, business,
affairs, results of operations, condition (financial or otherwise) or prospects
of the Company.
4.8. Taxes.
Each of the Company and each Subsidiary has duly and timely
filed all Tax Returns required to be filed by it, and each such Tax Return
correctly and completely reflects the Tax liability and all other information
required to be reported thereon. Each of the Company and each Subsidiary has
paid or caused to be paid all Taxes (whether or not reflected on such Tax
Returns) that are due and payable. The provision for Taxes due by the Company
and its Subsidiaries in the most recent financial statement included in the
Disclosure Material is sufficient for all unpaid Taxes, being current Taxes not
yet due and payable, of the Company and its Subsidiaries, as of the end of the
period covered by such financial statement, and as of the Closing Date, such
provision, as adjusted for the passage of time through the Closing Date, will be
sufficient for the then-accrued and unpaid Taxes not yet due and payable of the
Company and its Subsidiaries. No Tax Returns of the Company or any Subsidiary
have ever been audited by any Taxing Authority, there is no dispute concerning
any Tax liability of the Company or any Subsidiary either threatened, claimed or
raised by any Taxing Authority, and the Company does not expect any Taxing
Authority to assess additional Taxes against or in respect of it or any
Subsidiary for any past period. The Company and each Subsidiary has withheld and
paid, or, if not yet due for payment, set aside in accounts for such purposes,
all Taxes required to have been withheld in connection with amounts paid or
owing to any employee, creditor, independent contractor or other third party.
Other than stamp taxes, the Company and its Subsidiaries have no liability for
Taxes of any Person other than the Company and its Subsidiaries (i) as a
transferee or successor, (ii) by contract, or (iii) otherwise.
4.9. ERISA.
(a) All Benefit Plans are listed in Section 4.9(a) of Schedule
4.9, and copies of all documentation relating to such Benefit Plans have been
delivered to or made available for review by Purchasers (including, without
limitation, copies of written Benefit Plans, written descriptions of oral
Benefit Plans, summary plan descriptions, trust agreements, the three most
recent annual returns, employee communications, and IRS determination letters).
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(b) Each Benefit Plan has at all times been maintained and
administered in all material respects in accordance with its terms and with the
requirements of all applicable law, including, without limitation, ERISA and the
Code, and each Benefit Plan intended to qualify under section 401(a) of the Code
has at all times since its adoption been so qualified, and each trust which
forms a part of any such plan has at all times since its adoption been
tax-exempt under section 501(a) of the Code.
(c) No Benefit Plan has incurred any "accumulated funding
deficiency" within the meaning of section 302 of ERISA or section 412 of the
Code, and the "amount of unfunded benefit liabilities" within the meaning of
section 4001(a)(18) of ERISA does not exceed zero with respect to any Benefit
Plan subject to Title IV of ERISA.
(d) No "reportable event" (within the meaning of section 4043
of ERISA) has occurred with respect to any Benefit Plan since the effective date
of said section 4043 for which notice is not waived under the regulations issued
pursuant to said section 4043.
(e) No Benefit Plan is a multiemployer plan within the meaning
of section 3(37) of ERISA.
(f) No direct, contingent or secondary liability has been
incurred or is expected to be incurred by the Company or any ERISA Affiliate
under Title IV of ERISA to any party with respect to any Benefit Plan.
(g) Neither the Company nor any ERISA Affiliate has incurred
any liability for any tax imposed under Chapter 43 of the Code or any liability
under Part 5 of Title I of ERISA.
(h) No benefit under any Benefit Plan, including, without
limitation, any severance or parachute payment plan or agreement, will be
established or become accelerated, vested or payable by reason of any
transaction contemplated under this Agreement.
(i) No Benefit Plan provides health or death benefit coverage
beyond the termination of an employee's employment, except as required by Part 6
of Subtitle B of Title I of ERISA or section 4980B of the Code or any State laws
requiring continuation of benefits coverage following termination of employment.
(j) No suit, action or other litigation (excluding claims for
benefits incurred in the ordinary course of plan activities) has been brought
or, to the knowledge of the Company or any Subsidiary, threatened against or
with respect to any Benefit Plan and there are no facts or circumstances known
to the Company or any Subsidiary that could reasonably be expected to give rise
to any such suit, action or other litigation.
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(k) All contributions to Benefit Plans that were required to
be made under such Benefit Plans have been made, and all benefits accrued under
any unfunded Benefit Plan have been paid, accrued or otherwise adequately
reserved in accordance with GAAP, all of which accruals under unfunded Benefit
Plans are as disclosed in Schedule 4.9, and each of the Company and each
Subsidiary has performed all material obligations required to be performed under
all Benefit Plans.
(l) The execution, delivery and performance of the Stock
Purchase Agreements, the Stockholders' Agreement and the Registration Rights
Agreement and the consummation of the transactions contemplated hereby and
thereby (including, without limitation, the offer, issue and sale by the
Company, and the purchase by the Purchaser of the Shares and the Conversion
Shares) will not involve any "prohibited transaction" within the meaning of
ERISA or the Code that could subject the Company or any ERISA Affiliate to a
tax, penalty or liability under ERISA or the Code.
4.10. Legal Compliance.
(a) Each of the Company and each Subsidiary has complied with
all applicable laws, rules, regulations, orders, licenses, judgments, writs,
injunctions, decrees or demands, except to the extent that failure to so comply
would not materially adversely affect the assets, properties, liabilities,
business affairs, results of operations, condition (financial or otherwise) or
prospects of the Company on a consolidated basis.
(b) There are no adverse orders, judgments, writs,
injunctions, decrees, or demands of any court or administrative body, domestic
or foreign, or of any other governmental agency or instrumentality, domestic or
foreign, outstanding against the Company or any Subsidiary.
4.11. Outstanding Securities.
Schedule 4.11 hereto correctly and completely lists the
outstanding securities (as defined in the Securities Act) of the Company and the
Subsidiaries. All securities of the Company have been offered, issued, sold and
delivered in compliance with, or pursuant to exemptions from, all applicable
federal and state laws, and the rules and regulations of federal and state
regulatory bodies governing the offering, issuance, sale and delivery of
securities.
4.12. Intellectual Property and Other Rights.
(a) Each of the Company and each Subsidiary owns or possesses
all patents, patent rights, trademarks, trademark rights, trade names, trade
name rights and copyrights (collectively, the "Intellectual Property") (each of
which is listed on Schedule 4.12(a) hereto), and all rights and privileges with
respect to any of the foregoing, as are necessary for the conduct of its
business as now being conducted and as proposed to be conducted. To the best of
the
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Company's knowledge, the rights of (and use by) each of the Company and each
Subsidiary with respect to such Intellectual Property or any other patents,
patent rights, trademarks, trademark rights, trade names, trade name rights or
copyrights do not conflict with or infringe any rights of others in a manner
which might materially and adversely affect the assets, properties, liabilities,
business, affairs, results of operations, condition (financial or otherwise) or
prospects of the Company, and no such claim of conflict or infringement has been
asserted by any Person.
(b) Each of the Company and each Subsidiary owns and holds all
franchises, licenses, permits, consents, approvals and other authority,
governmental or otherwise (collectively, the "Licenses") (each of which is
listed on Schedule 4.12(b) hereto), and all rights and privileges with respect
to any of the foregoing, as are materially necessary for the conduct of its
business as now being conducted and as proposed to be conducted, except to the
extent that failure to so own or hold is not reasonably likely to materially
adversely affect the assets, properties, liabilities, business, affairs, results
of operations, condition (financial or otherwise) or prospects of the Company.
Neither the Company nor any Subsidiary is in default in any material respect
under any of such Licenses. To the best of the Company's knowledge, the rights
of (and use by) each of the Company and each Subsidiary with respect to such
Licenses or any other franchise, license, permit, consent, approval or other
authority do not conflict with or infringe any rights of others in a manner
which might materially and adversely affect the assets, properties, liabilities,
business, affairs, results of operations, condition (financial or otherwise) or
prospects of the Company, and no such claim of conflict or infringement has been
asserted by any Person.
4.13. Key Employees.
Each of the Company and each Subsidiary has good relationships
with its employees and has not had and does not expect any substantial labor
problems. Neither the Company nor any Subsidiary has no knowledge as to any
intentions of any key employee to leave the employ of the Company or any
Subsidiary. The employees of the Company and each Subsidiary are not and have
never been represented by any labor union, and no collective bargaining
agreement is binding and in force against the Company or any Subsidiary or
currently being negotiated by the Company or any Subsidiary.
4.14. Properties.
Neither the Company nor any Subsidiary owns any real property.
Other than Permitted Liens, each of the Company and each Subsidiary has good and
marketable title to each of its other properties other than real property or
leased properties. Certain real property used by the Company or the Subsidiaries
in the conduct of their respective businesses is held under lease (as identified
on Schedule 4.14 hereto), and neither the Company nor any Subsidiary is aware of
any pending or threatened claim or action by any lessor of any such property to
terminate any such lease. All such leases are valid and in full force and
effect, and none of such leases is in default. None of the properties owned or
leased by the Company or any Subsidiary is subject to
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any Liens which could materially and adversely affect the assets, properties,
liabilities, business, affairs, results of operations, condition (financial or
otherwise) or prospects of the Company on a consolidated basis.
4.15. Suppliers and Customers.
(a) Each of the Company and each Subsidiary has adequate
sources of supply for its business as currently conducted and as proposed to be
conducted. Each has good relationships with all of its material sources of
supply of goods and services and each does not anticipate any material problem
with any such material sources of supply.
(b) Neither the Company nor any Subsidiary has any knowledge
that the customer base of the Company and its Subsidiaries might materially
decrease.
4.16. Environmental Compliance.
(a) To the knowledge of the Company or any Subsidiaries, there
is no Hazardous Material on, about, under or in, any property, real or personal,
in which the Company or any Subsidiary has or has formerly had any interest in
an amount or concentration which could constitute a violation that would result
in a liability in excess of $25,000 or otherwise result in a liability in excess
of $25,000 to the Company or any Subsidiary under any applicable Environmental
Law.
(b) There is no (and has not been any) off-site use, handling,
storage or disposal or on-site use, handling, storage or disposal of Hazardous
Material at or from any locations currently or formerly owned, leased, operated
or occupied by the Company or any Subsidiary as a result of which use, handling,
storage or disposal the Company could incur a material liability or obligation
under any applicable Environmental Law.
(c) Neither the Company nor any Subsidiary has received any
verbal or written notice, citation, subpoena, summons, complaint or other
correspondence or communication from any person with respect to the presence of
any non-indigenous Hazardous Material upon, into, beneath, or emanating from or
affecting any of the real property (including improvements) currently or
formerly owned or occupied by the Company that could result in a liability to
the Company or any Subsidiary in excess of $25,000.
(d) There has been no intentional or unintentional, gradual or
sudden, release, disposal or discharge by the Company or, to the Company's
knowledge, by others, upon, into or beneath the real property (including
improvements) currently or formerly owned or occupied by the Company or any
Subsidiary that has caused or is causing soil or groundwater contamination
which, under applicable Environmental Laws could require investigation or
remediation or could otherwise create a material liability or obligation on the
part of the Company or any Subsidiary.
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(e) The Company and its Subsidiaries are in material
compliance with all applicable Environmental Laws, has received all required
Environmental Permits and is in material compliance with the terms and
conditions of all Environmental Permits.
(f) To the best knowledge of the Company and its Subsidiaries
after reasonable inquiry, there are no Liens arising under or pursuant to any
Environmental Law ("Environmental Liens") relating to any real property
(including improvements thereon) currently owned by the Company or any
Subsidiary.
(g) There are no (i) underground storage tanks, (ii)
polychlorinated biphenyl containing equipment or (iii) asbestos-containing
materials at any site currently owned, operated or leased by the Company or any
Subsidiary, except in compliance with all applicable Environmental Laws.
4.17. No Burdensome Agreements.
To the best of the knowledge of the Company and its
Subsidiaries, other than this Agreement and the related documents, the Company
is not a party to any contract or agreement with any Affiliate of the Company or
of any Subsidiary, the terms of which are materially less favorable to the
Company or such Subsidiary, as the case may be, than those which might have been
obtained, at the time such contract or agreement was entered into, from a person
who was not such an Affiliate.
4.18. Offering of Shares.
None of the Company, any Subsidiary, any agent or any other
person acting on its behalf, directly or indirectly, (i) offered any of the
Shares or any similar security of the Company (A) by any form of general
solicitation or general advertising (within the meaning of Regulation D under
the Securities Act) or (B) for sale to or solicited offers to buy any thereof
from, or otherwise approached or negotiated with respect thereto with, any
person other than (x) the Purchasers and (y) not more than five other
institutional investors or Strategic Investors, each of which the Company
reasonably believed was an "accredited investor" within the meaning of
Regulation D under the Securities Act or (ii) has done or caused to be done (or
has omitted to do or to cause to be done) any act which act (or which omission)
would result in bringing the issuance or sale of the Shares within the
provisions of Section 5 of the Securities Act or the filing, notification or
reporting provisions of any state securities laws.
4.19. SEC Reports.
The Company has filed all proxy statements, reports and other
documents required to be filed by it under the Securities Exchange Act. The
Company has furnished the Purchaser with copies of (i) its Annual Report on Form
10-K for the fiscal year ended December 31, 1998, (ii) its Quarterly Reports on
Form 10-Q for the fiscal quarters ended March 31, 1999
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and June 30, 1999 and (iii) its Proxy Statement dated April 22, 1999
(collectively, the "SEC Reports"). Each SEC Report was in substantial compliance
with the requirements of its respective form and none of the SEC Reports, nor
the financial statements (and the notes thereto) included in the SEC Reports, as
of their respective dates, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
4.20. Indebtedness.
Schedule 4.20 hereto sets forth (i) the amount of all
Indebtedness of the Company and any Subsidiary outstanding as of September 30,
1999 (and there is no additional material amount of Indebtedness of the Company
outstanding other as set forth on such Schedule 4.20), (ii) any Lien with
respect to such Indebtedness and (iii) a description of each instrument or
agreement governing such Indebtedness. The Company has made available to the
Purchaser a complete and correct copy of each such instrument or agreement
(including all amendments, supplements or modifications thereto). No material
default exists with respect to or under any such Indebtedness or any instrument
or agreement relating thereto and no event or circumstance exists with respect
thereto that (with notice or the lapse of time or both) could give rise to such
a default.
4.21. Use of Proceeds.
The Company will use the proceeds realized from the sale of
the Shares to fund future development opportunities and for working capital
purposes. No portion of such proceeds will be used for the purpose, whether
immediate, incidental or ultimate, of purchasing or carrying, within the meaning
of Regulation U of the Board of Governors of the Federal Reserve System, as
amended from time to time, any "margin stock" as defined in said Regulation U,
or any "margin stock" as defined in Regulation G of the Board of Governors of
the Federal Reserve System, as amended from time to time, or for the purpose of
purchasing, carrying or trading in securities within the meaning of Regulation T
of the Board of Governors of the Federal Reserve System, as amended from time to
time, or for the purpose of reducing or retiring any indebtedness which both (i)
was originally incurred to purchase any such margin stock or other securities
and (ii) was directly or indirectly secured by such margin stock or other
securities. None of the assets of the Company or any Subsidiary includes any
such "margin stock." Neither the Company nor any Subsidiary has any present
intention of acquiring any such "margin stock."
4.22. Other Names.
Except as listed on Schedule 4.22, the businesses previously
or presently conducted by the Company and any Subsidiary have not been conducted
under any corporate, trade or fictitious name.
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4.23. Brokers.
No broker, finder or investment banker or other party is
entitled to any brokerage, finder's or other similar fee or commission in
connection with any Stock Purchase Agreement, the Stockholders' Agreement, the
Registration Rights Agreement or the Articles Supplementary or any of the
transactions contemplated hereby or thereby, based upon arrangements made by or
on behalf of the Company or any Subsidiary or any of their respective
Affiliates.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company as
follows:
5.1. Corporate Power and Authority.
The Purchaser has all requisite power, authority and legal
right to execute, deliver, enter into, consummate the transactions contemplated
by and perform its obligations under this Agreement, the Stockholders' Agreement
and the Registration Rights Agreement. The execution, delivery and performance
of this Agreement, the Stockholders' Agreement and the Registration Rights
Agreement by the Purchaser have been duly authorized by all required corporate
and other actions. The Purchaser has duly executed and delivered this Agreement,
the Stockholders' Agreement and the Registration Rights Agreement, and this
Agreement, the Stockholders' Agreement and the Registration Rights Agreement
constitute the legal, valid and binding obligations of the Purchaser enforceable
against the Purchaser in accordance with their respective terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to the rights of creditors generally or under general principles of
equity.
5.2. Investment Intent.
The Purchaser is capable of evaluating the risk of its
investment in the Shares being purchased by it and is able to bear the economic
risk of such investment. The Purchaser is purchasing the Shares to be purchased
by it for its own account for investment and not with a present view to any
distribution thereof in violation of applicable securities laws; provided,
however, that the Purchaser may transfer record and/or beneficial ownership of
the Shares or the Conversion Shares to one or more Affiliates, officers or
employees of Affiliates or investment funds managed by Affiliates of the
Purchaser, in all cases in compliance with federal securities laws. It is
understood that the disposition of the Purchaser's property shall at all times
be within the Purchaser's control. If the Purchaser should in the future decide
to dispose of any of its Shares or Conversion Shares, it is understood that it
may do so only in compliance with the
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Securities Act, applicable securities laws and this Agreement. The Purchaser is
an "accredited investor" as defined in Rule 501(a) under the Securities Act.
5.3. Brokers.
Except as disclosed on Schedule 5.3 hereto, no broker, finder
or investment banker or other party is entitled to any brokerage, finder's or
other similar fee or commission in connection with any Stock Purchase Agreement,
the Stockholders' Agreement, the Registration Rights Agreement or the Articles
Supplementary or any of the transactions contemplated hereby or thereby, based
upon arrangements made by or on behalf of the Purchaser or any Subsidiary or any
of their respective Affiliates.
SECTION 6. RESTRICTIONS ON TRANSFER
The Purchaser agrees that it will not sell or otherwise
dispose of any Shares or Conversion Shares unless such Shares or Conversion
Shares have been registered under the Securities Act and, to the extent
required, under any applicable state securities laws, or pursuant to an
applicable exemption from such registration requirements. The Company may
endorse on all certificates representing Shares or Conversion Shares a legend
stating or referring to such transfer restrictions; provided, that no such
legend shall be endorsed on any Share certificates which, when issued, are no
longer subject to the restrictions of this Section 6.
SECTION 7. INFORMATION AS TO THE COMPANY
The Company covenants and agrees as follows:
7.1. Financial Information.
(a) The Company will maintain, and cause each Subsidiary to
maintain, a system of accounting established and administered in accordance with
sound business practices to permit preparation of financial statements in
accordance with GAAP.
(b) So long as at least 20,000 Shares are outstanding, the
Company will deliver to (I) the Fleming Holders and (II) each Permitted
Transferee, the following:
(i) as soon as practicable but not later than five
(5) Business Days after their issuance, and in any event within ninety (90) days
after the close of each fiscal year of the Company, (A) a consolidated balance
sheet of the Company and its Subsidiaries as of the end of such fiscal year and
(B) consolidated statements of operations, stockholders' equity and cash flows
of the Company and its Subsidiaries for such fiscal year, in each case setting
forth in comparative form the corresponding figures for the preceding fiscal
year, all such balance sheets
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and statements to be in reasonable detail and certified without qualification by
Ernst & Young LLP or any other "Big Five" independent public accounting firm
selected by the Company, and such statements shall be accompanied by a
management analysis of any material differences between the results for such
fiscal year and the corresponding figures for the preceding year; the Company's
Annual Report on Form 10-K shall satisfy such requirement provided that it is in
compliance with all applicable requirements of the SEC and is certified by a
"Big Five" accounting firm;
(ii) as soon as practicable, copies (A) of all
financial statements, proxy material or reports sent to the Company's or any
Subsidiary's stockholders, (B) of any public press releases and (C) of all
reports or registration statements filed with the Commission pursuant to the
Securities Act or the Securities Exchange Act;
(iii) as soon as practicable and in any event within
forty-five (45) days after the close of each of the first three (3) fiscal
quarters of the Company, (A) a consolidated balance sheet of the Company and its
Subsidiaries as of the end of such fiscal quarter, (B) consolidated statements
of operations, stockholders' equity and cash flows of the Company and its
Subsidiaries for the portion of the fiscal year ended with the end of such
quarter, in each case in reasonable detail, certified by (I) the Chief Financial
Officer, (II) the Chief Executive Officer or (III) the President of the Company
and setting forth in comparative form the corresponding figures for the
comparable period one year prior thereto (subject to normal year-end
adjustments), together with a management analysis of any material differences
between such results and the corresponding figures for such prior period and (C)
a certificate of (I) the Chief Financial Officer, (II) the Chief Executive
Officer or (III) the President certifying the Company's compliance with the
covenants contained in Section 9 of this Agreement; the Company's Quarterly
Report on Form 10-Q shall satisfy such requirement provided that it is in
compliance with all applicable requirements of the SEC;
(iv) as soon as practicable but not later than thirty
(30) days after the end of each month other than the final month of the
Company's fiscal year, (A) an unaudited consolidated balance sheet of the
Company and its Subsidiaries as at the end of such month and (B) unaudited
consolidated statements of operations, stockholders' equity and cash flows of
the Company and its Subsidiaries for the portion of the fiscal year ended with
the end of such month, in each case in reasonable detail, setting forth in
comparative form the corresponding figures for the corresponding period one year
prior thereto (subject to normal year-end adjustments);
(v) as soon as practicable and without duplication of
any of the above items, any other materials furnished to the Company's Board of
Directors or to holders of the Company's capital stock or Indebtedness,
including, without limitation, any compliance certificates furnished in respect
of such Indebtedness, which shall be delivered to the Fleming Designee(s) and
the Transferee Designee(s); and
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(vi) as soon as practicable, such other information
as may reasonably be requested by (I) the Fleming Holders or (II) any Permitted
Transferee.
(c) The Company will deliver to each member of the Company's
Board of Directors and each observer to the Company's Board of Directors
appointed pursuant to Section 3(a) of the Stockholders' Agreement, as soon as
practicable (and in the case of (iii), prior to the end of each fiscal year) and
without duplication of any of the items listed below, the following:
(i) copies of any annual, special or interim audit
reports or management or comment letters with respect to the Company or its
Subsidiaries or their operations submitted to the Company by independent public
accountants;
(ii) copies of summary financial information prepared
on a quarterly basis regarding the Company on a consolidated basis as presented
to the Board and any other summary financial information otherwise prepared;
(iii) copies of the annual budget and business plan
for the next fiscal year;
(iv) copies of all formal communications, from time
to time, to directors of the Company (including without limitation all
information furnished to such directors in connection with such communications),
and copies of minutes of meetings of the Board of Directors (and of any
executive committees thereof) of the Company;
(v) notice of default under any material agreement,
contract or other instrument to which the Company or any of its Subsidiaries is
a party or by which any of them is bound;
(vi) notice of any action or proceeding which has
been commenced or threatened against the Company or any of its Subsidiaries and
which, if adversely determined, would have, individually or in the aggregate, a
material adverse effect on the assets, properties, liabilities, business,
affairs, results of operations, condition (financial or otherwise) or prospects
of the Company on a consolidated basis; and
(vii) copies of all filings made with the Commission.
(d) All such financial statements referred to in this Section
7.1 shall be prepared in accordance with GAAP (except for any change in
accounting principles specified in the accompanying certificate, in the
financial statements themselves or required by GAAP, and except that any interim
financial statements may omit notes and may be subject to normal year-end
adjustments).
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(e) Without limiting the foregoing provisions of this Section
7.1, the Company agrees that, if requested in writing by any holder of Shares,
it will not deliver to such holder (until otherwise instructed by such holder)
(x) any non-public information or non-public materials regarding the Company or
any Subsidiary (whether described in this Section 7.1 or otherwise) and (y) any
information (whether or not included in clause (x)) which such holder specifies
that it does not want to receive. The Company shall comply with any such request
with respect to each person entitled to information hereunder, until instructed
otherwise by the then holder of such Shares.
7.2. Communication with Accountants.
The Company (on behalf of itself and each of its Subsidiaries)
hereby authorizes (i) the Purchaser to communicate directly with the independent
certified public accountants for the Company or any Subsidiary and (ii) such
accountants to disclose to the Purchaser any and all financial statements and
any other information of any kind that they may have with respect to the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company or any Subsidiary; provided
that (a) the Purchaser in good faith and based upon reasonable assumptions has
financial concerns regarding the Company that causes it to desire to communicate
with such accountants and (b) the Purchaser must first notify the Company of its
intention to speak with such accountants and permit the Company to participate
in such conversation if the Company desires to do so. The Company shall deliver
a letter addressed to such accountants instructing them to comply with the
provisions of this Section 7.2.
7.3. Inspection.
The Company will permit (I) the Fleming Holders, (II) any
Permitted Transferee, and (III) any authorized representative of the Fleming
Holders or such Permitted Transferee, to visit and inspect any of the properties
of the Company and its Subsidiaries, to examine their respective books and
records and to discuss with their officers their books and records and the
assets, properties, liabilities, business, affairs, results of operations,
condition (financial or otherwise) or prospects of the Company or any
Subsidiary, all at such reasonable times, all on reasonable notice and as often
as may be reasonably requested.
7.4. Notices.
The Company will give notice to all holders of Shares promptly
after it learns, other than by notice from all of such holders, of the existence
of any of the following:
(a) any default under any Indebtedness (or under any
indenture, mortgage or other agreement relating to any Indebtedness) which
Indebtedness is in an aggregate principal amount exceeding $100,000 (or the
equivalent thereof in other currencies) in respect of which the Company or any
Subsidiary is liable;
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(b) any action or proceeding which has been commenced or
threatened against the Company or any of its Subsidiaries and which, if
adversely determined, would have, individually or in the aggregate, a material
adverse effect on the assets, properties, liabilities, business, affairs,
results of operations, condition (financial or otherwise) or prospects of the
Company on a consolidated basis or the ability of the Company to perform its
obligations under the Stock Purchase Agreements, the Stockholders' Agreement,
the Registration Rights Agreement or the Articles Supplementary;
(c) any dispute which exists between the Company or any of its
Subsidiaries and any governmental regulatory body which, in the reasonable
opinion of the Company is reasonably likely to, individually or in the
aggregate, materially adversely affect the normal business operations of the
Company or any of its Subsidiaries or the assets, properties, liabilities,
business, affairs, results of operations, condition (financial or otherwise) or
prospects of the Company on a consolidated basis or the ability of the Company
to perform its obligations under the Stock Purchase Agreements, the
Stockholders' Agreement, the Registration Rights Agreement or the Articles
Supplementary; and
(d) if any (i) "reportable event" (as such term is described
in Section 4043(c) of ERISA) has occurred; or (ii) "accumulated funding
deficiency" (within the meaning of Section 412(a) of the Code or Section 302 of
ERISA) has been incurred with respect to a Pension Plan maintained or
contributed to (or required to be maintained or contributed to) by the Company
or any ERISA Affiliate that is subject to the funding requirements of ERISA
and/or the Code or that an application may be or has been made to the Secretary
of the Treasury for a waiver or modification of the minimum funding standard
(including any required installment payments) or an extension of any
amortization period under Section 412 of the Code or Section 302 of ERISA, in
each case with respect to such a Pension Plan; or (iii) Pension Plan maintained
or contributed to (or required to be maintained or contributed to) by the
Company or any ERISA Affiliate has been terminated, reorganized, petitioned or
declared insolvent under Title IV of ERISA; or (iv) Pension Plan maintained or
contributed to (or required to be maintained or contributed to) by the Company
or any ERISA Affiliate has an unfunded current liability giving rise to a lien
under ERISA or the Code; or (v) proceeding has been instituted pursuant to
Section 515 of ERISA to collect a delinquent contribution to a Pension Plan
maintained or contributed to (or required to be maintained or contributed to) by
the Company or any ERISA Affiliate; or (vi) of the Company or its ERISA
Affiliates will or may incur any liability (including any contingent or
secondary liability) to or on account of the termination or withdrawal from a
Pension Plan maintained or contributed to (or required to be maintained or
contributed to) by the Company or any ERISA Affiliate; or (vii) "prohibited
transaction" (as such term is defined in Section 406 of ERISA or Section 4975 of
the Code) in connection with an "employee benefit plan" (as defined in Section
3(3) of ERISA), maintained or contributed to (or required to be maintained or
contributed to) by the Company or any ERISA Affiliate that could subject the
Company or any ERISA Affiliate to a tax penalty or liability under ERISA or the
Code.
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(e) if any proposals, inquiries or expressions of interest are
received by, any information is requested from, or any negotiations or
discussions are sought to be initiated or continued with the Company or any of
its Subsidiaries or its representatives, in each case in connection with any
Takeover Proposal or the possibility or consideration by a third party of making
a Takeover Proposal ("Takeover Proposal Interest") indicating, in connection
with such notice, the name of the Person indicating such Takeover Proposal
Interest and the terms and conditions of any proposals or offers, and continuing
to keep the Fleming Holders informed, on a current basis, of the status and
terms of any Takeover Proposal Interest; provided that the timing and content of
such notice shall be the same as that which is provided to the Board of
Directors. The Company agrees that it will take the necessary steps promptly to
inform the Persons referred to in the first sentence hereof of the obligations
undertaken in this Section 7.4(e).
Such notice (i) with respect to subsection (a) above, shall specify the nature
and period of existence of any such default and what the Company proposes to do
with respect thereto and (ii) with respect to subsections (b), (c) or (d) above,
shall specify the nature of any such matter referred to in such clause, what
action the Company proposes to take with respect thereto and what action any
other relevant Person is taking or proposes to take with respect thereto.
7.5. Confidentiality Agreement.
The Company's obligation to provide any non-public information
under this Section 7 or otherwise to any person other than members of its Board
of Directors shall be subject to prior execution of a confidentiality agreement
between the Company and the recipient of such information as more fully set
forth in the form attached hereto as Exhibit E (the "Confidentiality
Agreement").
SECTION 8. AFFIRMATIVE COVENANTS
The Company covenants and agrees as follows:
8.1. Maintenance of Existence, Properties and Franchises;
Compliance with Law; Taxes; Insurance.
The Company will, and will cause each Subsidiary to:
(a) maintain their respective corporate existence, rights and
other franchises in full force and effect;
(b) maintain their respective tangible assets in good repair,
working order and condition so far as necessary or advantageous to the proper
carrying on of their respective businesses;
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(c) comply with all applicable laws and with all applicable
orders, rules, rulings, certificates, licenses, regulations, demands, judgments,
writs, injunctions and decrees, provided, that such compliance shall not be
necessary so long as (i) the applicability or validity of any such law, order,
rule, ruling, certificate, license, regulation, demand, judgment, writ,
injunction or decree shall be contested in good faith by appropriate proceedings
and (ii) failure to so comply will not have a material adverse effect on the
assets, properties, liabilities, business, affairs, results of operations,
condition (financial or otherwise) or prospects of the Company on a consolidated
basis;
(d) pay promptly when due all Taxes imposed upon its
properties, assets or income and all claims or indebtedness (including, without
limitation, vendor's, workmen's and like claims) which might become a lien upon
such properties or assets; provided, that payment of any such Tax shall not be
necessary so long as (i) the applicability or validity thereof shall be
contested in good faith by appropriate proceedings and a reserve, if
appropriate, shall have been established with respect thereto and (ii) failure
to make such payment will not have a material adverse effect on the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company on a consolidated basis;
and
(e) keep adequately insured, by financially sound and
reputable insurers of nationally recognized stature, all its properties of a
character customarily insured by entities similarly situated, against loss or
damage of the kinds and in amounts customarily insured against by such entities
and with such deductibles or coinsurance as is customary.
8.2. Office for Payment, Exchange and Registration;
Location of Office; Notice of Change of Name or
Office.
(a) So long as any of the Shares is outstanding, the Company
will maintain an office or agency where Shares may be presented for redemption,
exchange, conversion, exercise or registration of transfer as provided in this
Agreement. Such office or agency initially shall be the office of the Company
specified in Section 18 hereof, subject to Section 8.2(b).
(b) The Company shall give each holder of Shares at least
twenty (20) days' prior written notice of any change in (i) the name of the
Company as then in effect or (ii) the location of the office of the Company
required to be maintained under this Section 8.2.
8.3. Fiscal Year.
The fiscal year of the Company and its Subsidiaries for tax,
accounting and any other purposes shall end on December 31 of each calendar
year.
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8.4. Environmental Matters.
(a) The Company and each Subsidiary shall keep and maintain
any property either owned leased, operated or occupied by the Company or any
Subsidiary free and clear of any Environmental Liens, and the Company and each
Subsidiary, as the case may be, shall keep all such property free of Hazardous
Material contamination and in compliance with all applicable Environmental Laws
and the terms and conditions of any Environmental Permits; provided, however,
that the Company or any Subsidiary shall have the right at its cost and expense,
and acting in good faith, to contest, object or appeal by appropriate legal
proceeding the validity of any Environmental Lien. The contest, objection or
appeal with respect to the validity of an Environmental Lien shall suspend the
Company's obligation to eliminate such Environmental Lien under this paragraph
pending a final determination by appropriate administrative or judicial
authority of the legality, enforceability or status of such Environmental Lien,
provided that the following conditions are satisfied: (i) contemporaneously with
the commencement of such proceedings, the Company shall give written notice
thereof to each Fleming Holder and its Transferees while they hold Shares or
Conversion Shares; and (ii) if under applicable law any real property or
improvements thereon are subject to sale or forfeiture for failure to satisfy
the Environmental Lien prior to a final determination of the legal proceedings,
the Company or such Subsidiary must successfully move to stay such sale,
forfeiture or foreclosure pending final determination of the Company's (or
Subsidiary's) action; and (iii) the Company or such Subsidiary must, if
requested, furnish to the Fleming Holders and their Transferees, as a group,
while they hold Shares or Conversion Shares a good and sufficient bond, surety,
letter of credit or other security satisfactory to such holders equal to the
amount (including any interest and penalty) secured by the Environmental Lien.
(b) The Company will, by administrative or judicial process,
enforce the obligations of any other Person who is potentially liable for
damages, contribution or other relief in connection with any violation of
Environmental Laws, including, but not limited to, asbestos abatement, Hazardous
Material remediation or off-site or on-site disposal.
(c) The Company will defend, indemnify and hold harmless each
current, former and future holder of Shares or Conversion Shares, its employees,
officers, directors, stockholders, partners, financial and legal representatives
and assigns, from and against any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits and claims, joint or several, and any
costs, disbursements and expenses (including attorneys' fees and expenses and
costs of investigation) of whatever kind or nature, known or unknown, contingent
or otherwise asserted against, imposed on, or sustained by, them, arising out of
or in any way related to (i) the presence, disposal, release, removal, discharge
or storage of any Hazardous Material upon, into, from or affecting any real
property (including improvements) currently or formerly owned, leased, operated
or occupied by or on behalf of the Company or any Subsidiary or any predecessor
thereof; (ii) any judicial or administrative action, suit or proceeding, actual
or threatened, relating to Hazardous Material upon, in, from or affecting any
real property (including improvements) currently or formerly owned, leased,
operated or occupied by the
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Company for which the Company or any Subsidiary could be liable; (iii) any
violation of any Environmental Law or Environmental Permit, by the Company or
any Subsidiary or any of their agents, tenants, subtenants or invitees; (iv) the
imposition of any Environmental Lien for the recovery of costs expended in the
investigation, study or remediation of any environmental liability of (or
asserted against) the Company or any Subsidiary; and (v) any liability arising
out of or related to the off-site shipment, transportation, disposal, treatment,
handling or disposal of Hazardous Materials by or on behalf of the Company or
any predecessor thereof. This Section 8.4(c) and Section 8.4(d) shall survive
any payment, conversion or transfer of Shares and any termination of this
Agreement.
(d) To the extent that the Company or any Subsidiary is
strictly liable without regard to fault under any Environmental Law, the
Company's obligations to the holders of Shares or Conversion Shares under any of
the indemnification provisions of the Stock Purchase Agreements shall likewise
be strict without regard to fault with respect to the violation of any
Environmental Law which results in any liability to any of the indemnified
persons referred to in Section 8.4(c).
8.5. Reservation of Shares.
There have been reserved, and the Company shall at all times
keep reserved, free from preemptive rights, out of its authorized Common Stock a
number of shares of Common Stock sufficient to provide for the exercise of the
conversion rights provided in Section 5 of the Articles Supplementary.
8.6. Securities Exchange Act Registration.
(a) the Company will maintain effective a registration
statement (containing such information and documents as the Commission shall
specify and otherwise complying with the Securities Exchange Act), under Section
12(b) or Section 12(g), whichever is applicable, of the Securities Exchange Act,
with respect to the Common Stock of the Company, and the Company will file on
time such information, documents and reports as the Commission may require or
prescribe for companies whose stock has been registered pursuant to such Section
12(b) or Section 12(g), whichever is applicable.
(b) The Company will, upon the request of any holder of
Shares, make whatever other filings with the Commission, or otherwise make
generally available to the public such financial and other information, as any
such holder may deem reasonably necessary or desirable in order to enable such
holder to be permitted to sell Shares pursuant to the provisions of Rule 144.
8.7. Delivery of Information for Rule 144A Transactions.
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If a holder of Shares proposes to transfer any such Shares
pursuant to Rule 144A under the Securities Act (as in effect from time to time),
the Company agrees to provide (upon the request of such holder or the
prospective transferee) to such holder and (if requested) to the prospective
transferee any financial or other information concerning the Company and its
Subsidiaries which is required to be delivered by such holder to any transferee
of such Shares pursuant to such Rule 144A, subject to confidentiality
provisions, if applicable.
8.8. Senior Securities.
(a) Subject to Section 8.8(b), the Company shall maintain the senior
status of the Series A Preferred such that it shall rank senior in all respects,
including the payment on liquidation and redemption, to all other equity
securities of the Company.
(b) Notwithstanding the foregoing Section 8.8(a):
(i) the Company may issue up to $10,000,000 of Preferred
Stock, with pricing terms that are no more favorable than
those of the Series A Preferred, to either:
(A) a Strategic Investor, provided that (I) such
Preferred Stock may rank either senior to or pari
passu with the Series A Preferred; and provided
further that the Company shall use its reasonable
best efforts in its negotiations with such Strategic
Investor to have the Preferred Stock rank pari passu
with (instead of senior to) the Series A Preferred
and (II) the Company shall permit the Fleming Funds
to be involved in such issuance of Preferred Stock to
such Strategic Investor, or
(B) a Financial Investor; provided that such
Preferred Stock shall rank either pari passu with or
junior to the Series A Preferred; and
(ii) the Company may issue up to an additional $10,000,000 of
Preferred Stock ranking pari passu with the Series A
Preferred; provided that the conversion price per share of
Common Stock into which such Preferred Stock is convertible is
at least 145% of the Conversion Price of the Series A
Preferred (as defined in the Articles Supplementary) at the
time of issuance of such Preferred Stock.
8.9. Further Assurances.
The Company shall from time to time, upon the request of the
Fleming Holders or any Transferee, promptly and duly execute and deliver any and
all such further instruments and documents as the Fleming Holders or such
Transferee, as the case may be, may reasonably deem necessary or desirable to
obtain the full benefits of (i) the obligations of the Company under this
Agreement and (ii) the other rights and powers herein granted. Upon the
instructions from time
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to time of the Fleming Holders or any Transferee, the Company shall execute and
cause to be filed any document or filing presented to the Company in proper form
for signing or filing, in each case as the Fleming Holders or such Transferee
may reasonably deem necessary or desirable in light of the Company's obligations
under this Agreement, and the Company shall pay or cause to be paid any filing
or other fees in connection therewith.
SECTION 9. NEGATIVE COVENANTS
The Company covenants and agrees that (i) with respect to
Sections 9.1, 9.2, 9.3, 9.4, 9.5, 9.6, 9.8, 9.9, 9.9, 9.10 and 9.11, without the
prior written consent of the holders of more than 50% of outstanding Shares and
(ii) with respect to Section 9.7, without the approval described therein:
9.1. No Dilution or Impairment; No Changes in Capital Stock.
The Company will not, by amendment of its charter or through
any consolidation, merger, reorganization, transfer of assets, dissolution,
issue or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of the Stock Purchase
Agreements, the Articles Supplementary, the Registration Rights Agreement or the
Stockholders' Agreement. The Company will at all times in good faith assist in
the carrying out of all such terms, and in the taking of all such action, as may
be necessary or appropriate in order to protect the rights of the holders of
Shares (as such rights are set forth in the Stock Purchase Agreements, the
Articles Supplementary, the Registration Rights Agreement and the Stockholders'
Agreement) against dilution or other impairment. Without limiting the generality
of the foregoing, the Company (a) will not issue any shares or class or series
of equity or equity-linked security, which is senior to, or pari passu with, the
Series A Preferred as to dividend payments or amounts payable in the event of
liquidation or winding up of the Company, except as otherwise provided in
Section 8.8(b) hereof, (b) will not enter into any agreement or instrument which
would restrict or otherwise materially adversely affect the ability of the
Company to perform its obligations under the Stock Purchase Agreements, the
Stockholders' Agreement, the Registration Rights Agreement or the Articles
Supplementary, (c) will not amend its charter or by-laws in any manner which
would impair or reduce the rights of the Preferred Stock, including, without
limitation, an amendment which would alter or change the powers, privileges or
preferences of the holders of the Series A Preferred (including, without
limitation, changing the Articles Supplementary after any Shares have been
called for redemption), (d) except as otherwise provided in the Articles
Supplementary will not redeem, repurchase or otherwise acquire, either directly
or indirectly through its Subsidiaries, any shares of capital stock of the
Company or any of its Subsidiaries or any other rights or options to subscribe
for or purchase any capital stock of the Company or any other securities
convertible into or exchangeable for capital stock of the Company, (e) will not
permit the par value or the determined or stated value of any shares of Common
Stock receivable upon the conversion of the Shares to exceed the amount payable
therefor upon such conversion, (f) will take all such action
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as may be necessary or appropriate in order that the Company may at all times
validly and legally issue duly authorized, fully paid and nonassessable shares
of the Common Stock free from all taxes, Liens and charges with respect to the
issue thereof, upon the conversion of the Shares from time to time outstanding,
(g) will not take any action which results in any adjustment of the current
conversion price under the Articles Supplementary if the total number of shares
of the Common Stock (or other securities) issuable after the action upon the
conversion of all of the then outstanding Shares would exceed the total number
of shares of Common Stock (or other securities) then authorized by the Company's
charter and available for the purpose of issuance upon such conversion or
exercise, (h) will not have any authorized Common Stock (and will not issue any
Common Stock) other than its existing authorized Common Stock, and (i) will not
amend its charter to change any terms of its Common Stock.
9.2. Indebtedness.
So long as more than 25% of the Shares are outstanding, the
Company will not (i) incur Indebtedness, including any Indebtedness set forth on
Schedule 4.20 hereto, in excess of the greater of either (A) $30,000,000 in
aggregate principal amount or (B) 3.5 times EBITDA for the preceding twelve
months; or (ii) enter into any agreement, amendment or modification with respect
to any Indebtedness, which agreement, amendment or modification under clause
(ii) restricts or prohibits (or was intended primarily to restrict or prohibit)
the Company from making any payments under, or otherwise performing under the
Stock Purchase Agreements.
9.3. Consolidation, Merger and Sale.
Neither the Company nor any Subsidiary will (or will agree
to): (a) wind up, liquidate or dissolve its affairs (except that a wholly-owned
Subsidiary can be wound-up, dissolved and liquidated into another wholly-owned
Subsidiary or into the Company), (b) so long as more than 25% of the Shares are
outstanding, sell, lease, transfer or otherwise dispose of all or substantially
all of its assets to any other Person (except that a wholly-owned Subsidiary can
sell, lease, transfer or otherwise dispose of all or substantially all of its
assets to another wholly-owned Subsidiary or to the Company); or (c) so long as
more than 25% of the Shares are outstanding, effect a merger or consolidation if
the Company is not the surviving corporation from such merger or consolidation.
Notwithstanding the foregoing, the Company may take any of the actions described
in the foregoing subsection (b) or (c) pursuant to a contemplated transaction
(the "Fundamental Transaction"); provided that, prior to taking any such action,
the Company offers, in writing, to the Fleming Funds the right to choose either
(I) to receive securities or other consideration in the Fundamental Transaction
that are substantially similar from an economic standpoint to the outstanding
value of the Shares, on substantially similar terms as the other investors in
the Fundamental Transaction, or (II) to receive the greater of (x) 200% of the
then Conversion Price (pursuant to the Articles Supplementary) or (y) a 25%
Internal Rate of Return from the Closing Date through the date of the
Fundamental Transaction.
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9.4. No Change in Business.
So long as more than 25% of the Shares are outstanding,
neither the Company nor any of its Subsidiaries will change substantially the
character of its business as conducted on the Closing Date as represented in
Section 4.4 hereof and described in the Disclosure Material.
9.5. Restricted Payments; Investments.
Neither the Company nor any of its Subsidiaries will declare
or make or permit to be declared or made:
(a) any Restricted Payment; or
(b) any Investment.
9.6. Affiliate Loans and Guaranties.
Neither the Company nor any Subsidiary may incur or permit to
exist any of the following:
(a) any obligation of the Company or of any Subsidiary to
repay money borrowed owing to (i) any Affiliate of the Company, (ii) any
Affiliate of any Subsidiary or (iii) any other holder of shares of the capital
stock of the Company or a Subsidiary; or
(b) any obligation, to any Person, which obligation is assumed
or guaranteed by the Company or a Subsidiary and which is an obligation of (i)
any Affiliate of the Company, (ii) any Affiliate of any Subsidiary or (iii) any
other holder of shares of the capital stock of the Company or a Subsidiary
(excluding, in the case of this clause (b), any obligation of the Company or of
a wholly-owned Subsidiary which is not owed to an Affiliate of the Company or to
an Affiliate of a Subsidiary or to any other holder of shares of the capital
stock of the Company or of a Subsidiary).
This Section 9.6 shall not apply to (1) any obligations under the Stock Purchase
Agreements or with respect to the Shares, (2) any loans, advances or Guarantees
referred to in clause (1) of the proviso to the definition of "Investment"
contained in Section 3 hereof, (3) Indebtedness identified on Schedule 4.20
hereto or (4) any obligations under any of the Affiliate Agreements.
9.7. Transactions with Affiliates.
The Company will not, and will not permit any Subsidiary to,
directly or indirectly, enter into any transaction or agreement (including,
without limitation, the purchase, sale, distribution, lease or exchange of any
property or the rendering of any service) with any Affiliate of the Company or
of any Subsidiary, other than a wholly-owned Subsidiary of the
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Company, unless such transaction or agreement (a) is approved by a majority of
the Outside Directors on the Board of Directors, and (b) is on terms that are no
less favorable to the Company or such Subsidiary, as the case may be, than those
which might be obtained at the time of such transaction from a Person who is not
such an Affiliate; provided, however, that this Section 9.7 shall not limit, or
be applicable to, (i) employment arrangements with (and general salary and
benefits compensation for) any individual who is a full-time employee of the
Company or any Subsidiary if such arrangements are approved by a majority of the
Outside Directors on the Board of Directors; and (ii) the payment of reasonable
and customary regular fees to directors of the Company who are not employees of
the Company; and (iii) any obligations under any of the Affiliate Agreements.
9.8. Liens.
The Company will not create or permit to exist, or permit any
of its Subsidiaries to create or suffer to exist, any Lien upon or with respect
to any of its assets or income, other than Permitted Liens and existing liens
set forth on Schedule 9.8 hereto.
9.9. Private Placement Status.
Neither the Company nor any agent nor other Person acting on
the Company's behalf will do or cause to be done (or will omit to do or to cause
to be done) any act which act (or which omission) would result in bringing the
issuance or sale of the Shares or the Conversion Shares within the provisions of
Section 5 of the Securities Act or the filing, notification or reporting
requirements of any state securities law (other than in accordance with a
registration and qualification of Conversion Shares pursuant to the Registration
Rights Agreement).
9.10. Maintenance of Public Market.
So long as more than 25% of the Shares are outstanding, the
Company will not proceed with a program of acquisition of its Common Stock,
initiate a corporate reorganization or recapitalization or undertake a
consolidation or merger or authorize, consent to or take any action which would
have the effect of:
(a) removing the Company from registration with the Commission
under the Securities Exchange Act with respect to the Company's Common Stock;
(b) requiring the Company to make a filing under Section 13(e)
of the Securities Exchange Act;
(c) reducing the average daily trading volume over a 30-day
period of the Common Stock on the principal securities exchange under which it
is then listed to less than 5,000 shares of Common Stock or eliminating the
public market for shares of Common Stock of the Company;
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(d) causing a delisting of the Company's Common Stock as a
Nasdaq National Market Security on the Nasdaq Stock Market (unless such stock is
delisted as a result of being listed on a national securities exchange); or
(e) if any shares of the Company's Common Stock are at any
time listed on a national securities exchange, causing a delisting of such stock
from such exchange, unless such delisting is in connection with a listing on
another national securities exchange.
Notwithstanding the foregoing, the Company may take any of the actions described
in the foregoing subsection (a) or (c) pursuant to a contemplated transaction
(the "Going Private Transaction"); provided that, prior to taking any such
action, the Company offers, in writing, to the Fleming Funds the right to choose
either (I) to receive securities or other consideration in the Going Private
Transaction that are substantially similar from an economic standpoint to the
outstanding value of the Shares, on substantially similar terms as the other
investors in the Going Private Transaction, or (II) to receive the greater of
(x) 200% of the then Conversion Price (as defined in the Articles Supplementary)
or (y) a 25% Internal Rate of Return from the Closing Date through the date of
the Going Private Transaction.
9.11. Actions Prior to the Closing Date.
From the date hereof through the Closing Date, the Company
will not, and will not permit any Subsidiary to, (a) issue or agree to issue any
capital stock or any securities exercisable for, or convertible or exchangeable
into, capital stock or (b) purchase, redeem or otherwise acquire any of its
capital stock; provided, however, that this Section 9.11 shall not limit, or be
applicable to, (i) the transactions contemplated by the Stock Purchase
Agreements, including any issuance of capital stock in connection with the
transactions contemplated by Sections 9.1 and 9.10 hereof and (ii) grants of
options or issuances of Common Stock to officers, directors or employees of the
Company pursuant to the current terms of the Company's 1997 Stock Option Plan
and 1998 Stock Incentive Plan or the exercise of any existing warrants listed on
Schedule 4.11 hereto.
SECTION 10. PREEMPTIVE RIGHTS
(a) Except (i) for issuances of pro rata dividends to all
holders of Common Stock, (ii) stock issued to employees, officers or directors
in connection with management options or incentive plans approved by the Board
of Directors, (iii) stock issued in connection with any merger, acquisition or
business combination, (iv) stock issued for consideration amounting to less than
$500,000 in any single transaction where the purchase price is not less than the
then applicable Conversion Price (as defined in the Articles Supplementary),
provided that the aggregate amount of all such transactions shall not exceed
$1,000,000, (v) up to 5,167,328 shares of stock issuable upon conversion of the
6% Non-Voting Convertible Preferred Stock (as adjusted pursuant to the
antidilution provisions therein), or (vi) up to 1,193,573 shares
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of stock issuable pursuant to the MCI Warrant (as adjusted pursuant to the
antidilution provisions therein), in order to enable such holders to maintain
their Fully Diluted percentage ownership of the Company, the holders of the
Series A Preferred shall have preemptive rights, as hereinafter set forth, to
purchase any capital stock, including any warrants or securities convertible
into capital stock, of the Company hereafter issued by the Company so that a
holder of the Series A Preferred shall hereafter be entitled to acquire a
percentage of capital stock which is hereafter issued equal to the same
percentage of the issued and outstanding Common Stock of the Company as is held
(directly or obtainable upon conversion of the Series A Preferred) by such
holder of Series A Preferred immediately prior to the date on which the capital
stock is to be issued on a Fully Diluted basis. As used herein, "issue" (and
variations thereof) includes sales and transfers by the Company of treasury
shares.
(b) The Company shall, before issuing any additional capital
stock (other than the exceptions referred to in Section 10(a) hereof), give
written notice thereof to the holders of the Series A Preferred. Such notice
shall specify what type of instrument the Company intends to issue and the
consideration which the Company intends to receive therefor. For a period of
twenty (20) days following receipt by the holders of the Series A Preferred of
such notice, the Company shall be deemed to have irrevocably offered to sell to
the holders of the Series A Preferred a sufficient number of shares of such
capital stock so that the holders of the Series A Preferred, if such holders
elects to acquire such shares as hereinafter set forth, shall be capable of
acquiring the same percentage of such shares as the percentage of Common Stock
beneficially owned (directly or obtainable upon conversion of the Series A
Preferred) by such holders immediately prior to the proposed issuance on a Fully
Diluted basis. In the event any such offer is accepted, in whole or in part, by
the holders of the Series A Preferred, the Company shall sell such shares to
holders of the Series A Preferred for the consideration and on the precise terms
set forth in the Company's notice (given under the first two sentences of this
paragraph). In the event that one or more holders of the Series A Preferred
elects not to, or fails to, exercise its rights under this Section 10 within the
twenty (20) day period, then the Company may issue the remaining shares of
capital stock offered to, but not purchased by, such holders of the Series A
Preferred, to third persons but only for the same consideration set forth in the
Company's notice (given under the first two sentences of this paragraph) and no
later than ninety (90) days after the expiration of such twenty day period. The
closing for such transaction shall take place as proposed by the Company with
respect to the shares of capital stock proposed to be issued, at which closing
the Company shall deliver certificates for the shares of capital stock in the
respective names of the holders of the Series A Preferred against receipt of the
consideration therefor.
(c) Notwithstanding any other provision hereof, the preemptive
rights granted to holders of Series A Preferred by this Section 10 shall
terminate with respect to a share of Series A Preferred upon the conversion or
redemption of such share of Series A Preferred in accordance with the provisions
hereof or in the Articles Supplementary.
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SECTION 11. CONDITIONS TO PURCHASER'S OBLIGATIONS
The Purchaser's obligation to purchase Shares hereunder is
subject to satisfaction of the following conditions at the Closing (any of which
may be waived by the Purchaser); provided that Section 11.11 is a condition to
the obligations to consummate the transaction provided for herein of each of (I)
the Purchaser and (II) the Company:
11.1. Articles Supplementary; Stockholders' Agreement;
Registration Rights Agreement.
(a) The charter of the Company shall have been duly
supplemented by the filing of the Articles Supplementary in the form of Exhibit
A hereto.
(b) The Company, the Purchasers and certain other stockholders
of the Company named therein shall have entered into a Stockholders' Agreement
substantially in the form of Exhibit B hereto.
(c) The Company shall have entered into a Registration Rights
Agreement with the Purchasers substantially in the form of Exhibit C hereto.
11.2. Certificates for Shares.
The Purchaser shall concurrently receive the certificates for
Shares contemplated by Section 2(b) hereof.
11.3. Senior Status.
The Company shall have taken all of the necessary actions,
including the amendment of the appropriate existing agreements, so that, except
as otherwise provided in Section 8.8(b) hereof, the Series A Preferred shall
rank senior in all respects, including the payment on liquidation and
redemption, to all other equity securities of the Company.
11.4. Accuracy of Representations and Warranties.
The representations and warranties of the Company contained in
the Stock Purchase Agreement herein or in any certificate or document delivered
pursuant hereto shall be correct and complete on and as of the Closing Date with
the same effect as though made on and as of the Closing Date (after giving
effect to the transactions contemplated by this Agreement).
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11.5. Compliance with Agreements.
The Company shall have performed and complied in all material
respects with all agreements, covenants and conditions contained in the Stock
Purchase Agreements and any other document contemplated hereby or thereby which
are required to be performed or complied with by the Company on or before the
Closing Date.
11.6. Officers' Certificates.
The Purchaser shall have received a certificate dated the
Closing Date and signed by the President or Chief Executive Officer and by the
Secretary or the Chief Financial Officer of the Company, to the effect that the
conditions of Sections 11.4, 11.5, 11.8 (second sentence only) and 11.9 have
been satisfied.
11.7. Proceedings.
All corporate and other proceedings in connection with the
transactions contemplated by the Stock Purchase Agreements, and all documents
incident thereto, shall be in form and substance satisfactory to the Purchaser
and its counsel, and the Purchaser shall have received all such originals or
certified or other copies of such documents as the Purchaser or its counsel may
reasonably request.
11.8. Legality; Governmental and Other Authorization.
The purchase of and payment for the Shares shall not be
prohibited by any law or governmental order, rule, ruling, regulation, release,
interpretation or opinion applicable to the Purchaser and shall not subject the
Purchaser to any penalty, tax, liability or other onerous condition. Any
necessary consents, approvals, licenses, permits, orders and authorizations of,
and any filings, registrations or qualifications with, any governmental or
administrative agency or other Person, with respect to the transactions
contemplated by the Stock Purchase Agreements shall have been obtained or made
and shall be in full force and effect. The Company shall have delivered to the
Purchaser, upon its reasonable request setting forth what is required, factual
certificates or other evidence, in form and substance satisfactory to the
Purchaser and its counsel, to enable the Purchaser to establish compliance with
this condition.
11.9. No Material Adverse Change.
There shall have been no material adverse change in the
assets, properties, liabilities, business, affairs, results of operations,
condition (financial or otherwise) or prospects of the Company on a consolidated
basis since June 30, 1999, except that (i) its cash position as of September 30,
1999 is $16,369,462 and (ii) except as disclosed in Schedule 11.9 hereto.
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11.10. Opinion of Counsel.
The Purchaser shall have received an opinion, dated the
Closing Date and addressed to the Purchasers, of Piper & Marbury L.L.P., counsel
for the Company, which opinion shall be in form and substance satisfactory to
the Purchaser and its counsel and shall be to the effect set forth in Exhibit D
hereto.
11.11. Additional Purchases of Shares.
The sale and purchase of Shares by the Fleming Funds pursuant
to the Stock Purchase Agreements between each of the Purchasers and the Company
shall be consummated concurrently for an aggregate purchase price of $15,000,000
on the Closing Date.
11.12. Other Documents and Opinions.
The Purchaser shall have received such other documents and
opinions, in form and substance reasonably satisfactory to the Purchaser and its
counsel, relating to matters incident to the transactions contemplated hereby as
the Purchaser may reasonably request.
SECTION 12. BREACH OF REPRESENTATIONS, WARRANTIES AND COVENANTS
(a) The representations, warranties, covenants and agreements
of the Company and the Purchaser contained in this Agreement, the Stockholders'
Agreement, the Registration Rights Agreement or in any document or certificate
delivered pursuant hereto or thereto or in connection herewith shall survive
from the Closing Date, and shall continue in effect following, the execution and
delivery of the Stock Purchase Agreements, the Stockholders' Agreement, the
Registration Rights Agreement, the closings hereunder and thereunder, any
investigation at any time made by the Purchaser or on its behalf or by any other
Person, the issuance, sale and delivery of the Shares, any disposition thereof
and any payment, conversion or cancellation of the Shares; provided that Section
9 shall terminate upon conversion of all of the Shares. All statements contained
in any certificate or other document delivered by or on behalf of the Company
pursuant hereto shall constitute representations and warranties by the Company
hereunder.
(b) The Company agrees to indemnify and hold the Purchaser
harmless from and against and will pay to the Purchaser the full amount of any
loss, damage, liability or expense (including amounts paid in settlement and
reasonable attorneys' fees and expenses) to the Purchaser resulting either
directly or indirectly from any breach of the representations, warranties,
covenants or agreements of the Company contained in any Stock Purchase
Agreement, or in the Stockholders' Agreement, the Registration Rights Agreement
or any other document or certificate delivered pursuant hereto or thereto or in
connection herewith or therewith.
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SECTION 13. SPECIFIC PERFORMANCE
The parties agree that irreparable damage will result in the
event that this Agreement is not specifically enforced, and the parties agree
that any damages available at law for a breach of this Agreement would not be an
adequate remedy. Therefore, the provisions hereof and the obligations of the
parties hereunder shall be enforceable in a court of equity, or other tribunal
with jurisdiction, by a decree of specific performance, and appropriate
injunctive relief may be applied for and granted in connection therewith. Such
remedies and all other remedies provided for in this Agreement shall, however,
be cumulative and not exclusive and shall be in addition to any other remedies
which a party may have under this Agreement or otherwise.
SECTION 14. EXPENSES
(a) Whether or not the transactions herein contemplated are
consummated, the Company shall pay (i) the costs, fees and expenses of the
Company and its counsel in connection with the Stock Purchase Agreements, the
Articles Supplementary, the Stockholders' Agreement and the Registration Rights
Agreement, other related documentation and the issuance of the Shares and the
Conversion Shares and the furnishing of all opinions by counsel for the Company,
(ii) the costs, fees and expenses of Morgan, Lewis & Bockius LLP in connection
with the Stock Purchase Agreements, the Articles Supplementary, the
Stockholders' Agreement and the Registration Rights Agreement, the issuance of
the Shares and the Conversion Shares, other related documentation and the
transactions contemplated hereby and thereby (whether or not a Closing occurs
hereunder) and if the Closing occurs the Company will make such payment on the
Closing Date); provided, however, that (x) such fees and expenses shall not
exceed $60,000 without the approval of the Company and (y) in the event that the
Closing does not occur, the Company shall pay all such costs, fees and expenses
upon the termination of negotiations between the Company and the Fleming
Holders, (iii) the costs, fees and expenses of counsel to the Purchasers in
connection with any amendments to or modifications or waivers of any provisions
of the Stock Purchase Agreements, the Articles Supplementary, the Stockholders'
Agreement or the Registration Rights Agreement, other related documentation or
in connection with any other agreements between the Purchasers and the Company
and (iv) the costs, fees and expenses (including the attorneys' fees and
expenses) of any holder of Shares or Conversion Shares in enforcing its rights
against the Company if the Company defaults in its obligations hereunder, under
the Articles Supplementary, the Stockholders' Agreement or the Registration
Rights Agreement.
(b) In addition to all other sums due hereunder or provided
for in this Agreement, the Company shall pay to the Purchaser or its agents,
respectively, an amount sufficient to indemnify such persons (net of any Taxes
on any indemnity payments) against all reasonable costs and expenses (including
reasonable attorneys' fees and expenses and reasonable
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costs of investigation) and damages and liabilities incurred by the Purchaser or
its agents pursuant to any investigation or proceeding against any or all of the
Company, the Purchasers, or their agents, arising out of or in connection with
the Stock Purchase Agreements, the Stockholders' Agreement, the Registration
Rights Agreement, the Purchaser's purchase of the Shares (or any transaction
contemplated hereby or thereby or any other document or instrument executed
herewith or therewith or pursuant hereto or thereto), whether or not the
transactions contemplated by the Stock Purchase Agreements are consummated,
which investigation or proceeding requires the participation of the Purchaser or
its agents or is commenced or filed against the Purchaser or its agents because
of the Stock Purchase Agreements, the Stockholders' Agreement, the Registration
Rights Agreement, the Purchaser's purchase of the Shares or any of the
transactions contemplated hereby or thereby (or any other document or instrument
executed herewith or therewith or pursuant hereto or thereto), other than any
investigation or proceeding in which it is finally determined that there was (i)
gross negligence or willful misconduct on the part of the Purchaser or its
agents, (ii) a material breach by Purchaser of any of its representations or
warranties contained herein, (iii) a material breach by the Purchaser of any
provision of the Confidentiality Agreement or any other confidentiality
agreement between the Company and the Purchaser, in any case, which was not made
by the Purchaser in reliance upon any of the Company's representations,
warranties, covenants or agreements in the Stock Purchase Agreements, the
Stockholders' Agreement, the Registration Rights Agreement or in any other
documents or instruments contemplated hereby or thereby or executed herewith or
therewith or pursuant hereto or thereto. The Company shall assume the defense,
and shall appoint counsel (which counsel may be the same counsel that the
Company uses so long as there is no conflict of interest) to represent the
Purchaser and such agents, in connection with investigating, defending or
preparing to defend any such action, suit, claim or proceeding (including any
inquiry or investigation); provided, however, that the Purchaser, or any such
agent, shall have the right (without releasing the Company from any of its
obligations hereunder) to employ its own counsel and either to direct its own
defense or to participate in the Company's defense, but the fees and expenses of
such counsel shall be at the expense of such person unless (i) the employment of
such counsel shall have been authorized in writing by the Company in connection
with such defense, (ii) the Company shall not have provided its counsel to take
charge of such defense or (iii) there may be defenses available to the
Purchaser, or such agent of the Purchaser which are different from or additional
to those available to the Company, then in any of such events referred to in
clauses (i), (ii) or (iii) such counsel fees and expenses (but only for one
counsel for the Purchaser and its agents) shall be borne by the Company. Any
settlement of any such action, suit, claim or proceeding shall require the
consent of both the Company and such indemnified person (neither of which shall
unreasonably withhold its consent).
(c) The Company agrees to pay, or to cause to be paid, all
documentary, stamp and other similar Taxes, other than transfer taxes payable
upon the transfer by the Purchaser of Shares to a Transferee (which transfer
taxes shall be paid by the Transferee), levied under the laws of the United
States of America, any state or local Taxing Authority thereof or therein or any
other applicable jurisdiction in connection with the issuance and sale of the
Shares, the conversion of Shares into Conversion Shares and the execution and
delivery of the Stock
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Purchase Agreements, the Stockholders' Agreement, the Registration Rights
Agreement and any other documents or instruments contemplated hereby or thereby
and any modification of the Stock Purchase Agreements, the Articles
Supplementary, the Stockholders' Agreement or the Registration Rights Agreement
or any such other documents or instruments and will hold the Purchaser harmless
without limitation as to time against any and all liabilities with respect to
all such Taxes.
(d) The obligations of the Company under this Section 14 shall
survive the Closing hereunder and any termination of the Stock Purchase
Agreements.
SECTION 15. DIRECT PAYMENTS
As long as the Purchaser or any institutional holder which is
a direct or indirect transferee (as a result of one or more transfers) from the
Purchaser shall be the holder of any Shares, the Company will make all
redemption payments, liquidation payments and other distributions by wire
transfer to the Purchaser's or such other holder's (or its nominee's) account at
any bank or trust company, notwithstanding any contrary provision herein or in
the Company's charter with respect to the place of payment. The Purchaser has
provided an address on Schedule 1 hereto for payments by wire transfer, and such
address may be changed for the Purchaser or any subsequent holder by notice to
the Company. All such payments shall be made in U.S. dollars and in federal or
other immediately available funds.
SECTION 16. AMENDMENTS AND WAIVERS
(a) The terms and provisions of this Agreement may be amended,
waived, modified or terminated only with the written consent of the holders of
more than 50% of outstanding Shares; provided, however, that no such amendment,
waiver, modification or termination shall change this Section 16(a) without the
written consent of the holders of all the Shares and the Conversion Shares then
outstanding.
(b) Promptly after obtaining the written consent of the
holders as herein provided, the Company shall transmit a copy of any amendment,
waiver, modification or termination which has been adopted to all holders of
Shares and Conversions Shares then outstanding, but failure to transmit copies
shall not in any way affect the validity of any such amendment, waiver,
modification or termination.
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SECTION 17. EXCHANGE OF SHARES; CANCELLATION OF SURRENDERED SHARES; REPLACEMENT
(a) Subject to Section 6 hereof, at any time at the request of
any holder of Shares to the Company at its address provided under Section 18
hereof, the Company at its expense (other than transfer taxes payable upon the
transfer by the Purchaser of Shares to a Transferee, which transfer taxes shall
be paid by the Transferee) will issue and deliver to or upon the order of the
holder in exchange therefor a new certificate or certificates in such amount or
amounts as such holder may request in the aggregate representing the number of
Shares represented by such surrendered certificates, and registered in the name
of such holder or as such holder may direct.
(b) Any Share certificate which is converted into Conversion
Shares in whole or in part shall be canceled by the Company, and no new Share
certificates shall be issued in lieu of any Shares which have been converted
into Conversion Shares. The Company shall issue a new certificate with respect
to any Shares which were not converted into Conversion Shares and were
represented by a certificate which was converted in part.
(c) Upon receipt of evidence satisfactory to the Company of
the loss, theft, destruction or mutilation of any Share certificate and, in the
case of any such loss, theft or destruction, upon delivery of an indemnity
agreement reasonably satisfactory to the Company (if requested by the Company
and unsecured in the case of the Purchaser or another similar institutional
holder), or in the case of any such mutilation, upon surrender of such Share
certificate (which surrendered Share certificate shall be canceled by the
Company), the Company will issue a new Share certificate of like tenor in lieu
of such lost, stolen, destroyed or mutilated Share certificate as if the lost,
stolen, destroyed or mutilated Share certificate were then surrendered for
exchange.
SECTION 18. NOTICES
All notices, requests, demands, consents and other
communications hereunder shall be in writing and shall be delivered by hand or
shall be sent by telex or telecopy (confirmed by registered, certified or
overnight mail or courier, postage and delivery charges prepaid), (i) if to the
Company, to Caliber Learning Network, Inc., 509 South Exeter Street, Baltimore,
MD 21202, Attention: Rick P. Frier, with a copy to Piper & Marbury L.L.P., 36
South Charles Street, Baltimore, MD 21201, Attention: Richard C. Tilghman, Jr.
or (ii) if to the Purchaser, at the address indicated on Schedule 1 hereto, with
a copy to Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, NY 10178-0060,
Attention: David W. Pollak, Esq., or at such other address as a party may from
time to time designate as its address in writing to the other party to this
Agreement. Whenever any notice is required to be given hereunder, such notice
shall be deemed given and such requirement satisfied only when such notice is
delivered or, if sent by telex or telecopier, when received.
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SECTION 19. MISCELLANEOUS
(a) The Stock Purchase Agreements, the Stockholders'
Agreement, the Registration Rights Agreement and, upon the closing hereunder,
the Articles Supplementary, together with any further agreements entered into by
the Purchaser and the Company at the closing hereunder, contain the entire
agreement between the Purchaser and the Company, and supersede any prior oral or
written agreements, commitments, terms or understandings, regarding the subject
matter hereof.
(b) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, the parties
hereby waive any provision of law which may render any provision hereof
prohibited or unenforceable in any respect.
(c) This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns,
whether so expressed or not; provided, that (a) the Company may not assign any
of its rights, duties or obligations under this Agreement, except with the
Purchaser's written consent, and (b) the Purchaser may assign any of its rights,
duties or obligations under this Agreement to a purchaser of its Shares,
provided that such purchaser is reasonably acceptable to the Company.
(d) In addition to any assignment by operation of law, the
Purchaser may assign, in whole or in part, any or all of its rights (and/or
obligations) under this Agreement to any transferee of any or all of its Shares
or Conversion Shares, and (unless such assignment expressly provides otherwise)
any such assignment shall not diminish the rights the Purchaser would otherwise
have under this Agreement or with respect to any remaining Shares or Conversion
Shares held by the Purchaser.
(e) No course of dealing and no delay on the part of any party
hereto in exercising any right, power, or remedy conferred by this Agreement
shall operate as a waiver thereof or otherwise prejudice such party's rights,
powers and remedies. No single or partial exercise of any right, power or remedy
conferred by this Agreement shall preclude any other or further exercise thereof
or the exercise of any other right, power or remedy.
(f) The headings and captions in this Agreement are for
convenience of reference only and shall not define, limit or otherwise affect
any of the terms or provisions hereof.
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(g) This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York (other than any conflict of
laws rule which might result in the application of the laws of any other
jurisdiction).
(h) This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument, and all signatures need not appear on any one counterpart.
(i) THE COMPANY HEREBY CONSENTS TO THE JURISDICTION OF ANY
STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK
AND IRREVOCABLY AGREES THAT, SUBJECT TO THE PURCHASER'S ELECTION, ALL ACTIONS OR
PROCEEDINGS RELATING TO THIS AGREEMENT, THE ARTICLES SUPPLEMENTARY, THE
STOCKHOLDERS' AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT, THE SHARES OR THE
CONVERSION SHARES MAY BE LITIGATED IN SUCH COURTS. THE COMPANY ACCEPTS FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, THE ARTICLES SUPPLEMENTARY,
THE STOCKHOLDERS' AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT, THE SHARES OR
THE CONVERSION SHARES. THE COMPANY HEREBY AGREES THAT SERVICE OF ALL PROCESS IN
ANY SUCH PROCEEDING IN ANY SUCH COURT SHALL BE RECEIVED BY THE COMPANY AT THE
COMPANY'S HEADQUARTERS AT THE ADDRESS AND TO THE ATTENTION OF SUCH PERSON
DESIGNATED PURSUANT TO SECTION 18 HEREOF, AND SUCH SERVICE BEING HEREBY
ACKNOWLEDGED BY THE COMPANY TO BE EFFECTIVE AND BINDING SERVICE IN EVERY
RESPECT. A COPY OF ANY SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL
TO THE COMPANY AT THE ADDRESS OF THE COMPANY PROVIDED HEREUNDER EXCEPT THAT
UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL
NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS. AS AN ALTERNATIVE TO SERVICE OF
PROCESS ON SUCH AGENT (WHETHER OR NOT ANY SUCH AGENT HAS BEEN APPOINTED), THE
COMPANY HEREBY AGREES THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT
NOTICE AND SERVICE OF PROCESS. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE
PURCHASER TO BRING PROCEEDINGS OR OBTAIN OR ENFORCE JUDGMENTS AGAINST THE
COMPANY IN THE COURTS OF ANY OTHER JURISDICTION.
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(j) THE COMPANY AND THE PURCHASER HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT, THE ARTICLES SUPPLEMENTARY, THE STOCKHOLDERS'
AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT, THE SHARES OR THE CONVERSION
SHARES, OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS
TRANSACTION. THE COMPANY AND THE PURCHASER ALSO WAIVE ANY BOND OR SURETY OR
SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF THE
PURCHASER. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY
AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT
MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT
CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.
THE COMPANY AND THE PURCHASER FURTHER WARRANT AND REPRESENT THAT EACH HAS
REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO (OR ASSIGNMENTS OF) THIS AGREEMENT,
THE ARTICLES SUPPLEMENTARY, THE STOCKHOLDERS' AGREEMENT, THE REGISTRATION RIGHTS
AGREEMENT, THE SHARES OR THE CONVERSION SHARES. IN THE EVENT OF LITIGATION, THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL (WITHOUT A JURY) BY THE
COURT.
[remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
CALIBER LEARNING NETWORK, INC.
By /s/ Chris L. Nguyen
-------------------------------------
Name: Chris L. Nguyen
Title: President and Chief
Executive Officer
Accepted and Agreed to as of the
date first above written by the
undersigned Purchaser:
FLEMING US DISCOVERY FUND III, L.P.
By: FLEMING US DISCOVERY PARTNERS, L.P.,
its general partner
By: FLEMING US DISCOVERY, LLC,
its general partner
By: /s/ ROBERT L. BURR
------------------------------
Robert L. Burr, member
[Signature page to Stock Purchase Agreement]
<PAGE>
Schedule 1
to the Stock Purchase Agreement
Name of Number of Aggregate
Purchaser Shares Purchase Price
--------- ------ --------------
Fleming US Discovery 107,728 $10,772,800
Fund III, L.P.
Fleming US Discovery 17,272 $1,727,200
Offshore Fund III, L.P.
Robert Fleming Nominees 25,000 $2,500,000
Limited
(a) address for communications:
c/o Fleming Asset Management USA
320 Park Avenue, 11th Floor
New York, NY 10022
Attention: Robert L. Burr
David J. Edwards
(b) address for payments by
wire transfer:
(i) Fleming US Discovery Fund III, L.P.
Chase Manhattan Bank
ABA # 021000021
A/C: Fleming US Discovery Fund III, L.P.
A/C # 400-704129
(ii) Fleming US Discovery Offshore Fund III, L.P.
Citibank, N.A.
ABA # 021000089 / Chips UID# 0008 / Swift Code -
CITIUS33
A/C: The Bank of Bermuda Limited, Hamilton,
Bermuda
Chips UID# 005584
Swift Code: BBDA BM HM
A/C: Fleming US Discovery Offshore Fund III, L.P.
A/C # 0246769
(iii) Robert Fleming Nominees Limited
EXECUTION COPY
================================================================================
PREFERRED STOCK PURCHASE AGREEMENT
==================================
dated as of
===========
October 26, 1999
================
between
=======
CALIBER LEARNING NETWORK, INC.
==============================
and
===
ROBERT FLEMING NOMINEES LIMITED
===============================
================================================================================
<PAGE>
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TABLE OF CONTENTS
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SECTION 1. SALE AND PURCHASE OF PREFERRED STOCK.........................................................1
SECTION 2. THE CLOSING..................................................................................2
SECTION 3. DEFINITIONS..................................................................................3
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...............................................16
4.1. Corporate Existence, Power and Authority....................................................16
4.2. Capital Stock...............................................................................17
4.3. Subsidiaries................................................................................18
4.4. Business....................................................................................19
4.5. No Defaults or Conflicts....................................................................19
4.6. Disclosure Materials; Other Information.....................................................20
4.7. Litigation..................................................................................20
4.8. Taxes.......................................................................................21
4.9. ERISA.......................................................................................21
4.10. Legal Compliance............................................................................23
4.11. Outstanding Securities......................................................................23
4.12. Intellectual Property and Other Rights......................................................23
4.13. Key Employees...............................................................................24
4.14. Properties..................................................................................24
4.15. Suppliers and Customers.....................................................................24
4.16. Environmental Compliance....................................................................25
4.18. Offering of Shares..........................................................................26
4.19. SEC Reports.................................................................................26
4.20. Indebtedness................................................................................26
4.21. Use of Proceeds.............................................................................27
4.22. Other Names.................................................................................27
4.23. Brokers.....................................................................................27
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.............................................28
5.1. Corporate Power and Authority...............................................................28
5.2. Investment Intent...........................................................................28
5.3. Brokers.....................................................................................28
SECTION 6. RESTRICTIONS ON TRANSFER....................................................................29
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SECTION 7. INFORMATION AS TO THE COMPANY...............................................................29
7.1. Financial Information.......................................................................29
7.2. Communication with Accountants..............................................................32
7.3. Inspection..................................................................................32
7.4. Notices.....................................................................................32
SECTION 8. AFFIRMATIVE COVENANTS.......................................................................34
8.1. Maintenance of Existence, Properties and Franchises; Compliance with Law;
Taxes; Insurance............................................................................34
8.2. Office for Payment, Exchange and Registration; Location of Office; Notice
of Change of Name or Office.................................................................35
8.3. Fiscal Year.................................................................................35
8.4. Environmental Matters.......................................................................35
8.5. Reservation of Shares.......................................................................37
8.6. Securities Exchange Act Registration........................................................37
8.7. Delivery of Information for Rule 144A Transactions..........................................37
8.8. Senior Securities...........................................................................37
8.9. Further Assurances..........................................................................38
SECTION 9. NEGATIVE COVENANTS..........................................................................38
9.1. No Dilution or Impairment; No Changes in Capital Stock......................................39
9.2. Indebtedness................................................................................40
9.3. Consolidation, Merger and Sale..............................................................40
9.4. No Change in Business.......................................................................40
9.5. Restricted Payments; Investments............................................................40
9.6. Affiliate Loans and Guaranties..............................................................41
9.7. Transactions with Affiliates................................................................41
9.8. Liens.......................................................................................42
9.9. Private Placement Status....................................................................42
9.10. Maintenance of Public Market................................................................42
9.11. Actions Prior to the Closing Date...........................................................43
SECTION 10. PREEMPTIVE RIGHTS...........................................................................43
SECTION 11. CONDITIONS TO PURCHASER'S OBLIGATIONS.......................................................44
11.1. Articles Supplementary; Stockholders'Agreement; Registration Rights
Agreement...................................................................................45
11.2. Certificates for Shares.....................................................................45
11.3. Senior Status...............................................................................45
11.4. Accuracy of Representations and Warranties..................................................45
</TABLE>
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11.5. Compliance with Agreements..................................................................45
11.6. Officers'Certificates.......................................................................45
11.7. Proceedings.................................................................................46
11.8. Legality; Governmental and Other Authorization..............................................46
11.9. No Material Adverse Change..................................................................46
11.10. Opinion of Counsel..........................................................................46
11.11. Additional Purchases of Shares..............................................................46
11.12. Other Documents and Opinions................................................................47
SECTION 12. BREACH OF REPRESENTATIONS, WARRANTIES AND COVENANTS.........................................47
SECTION 13. SPECIFIC PERFORMANCE........................................................................47
SECTION 14. EXPENSES....................................................................................48
SECTION 15. DIRECT PAYMENTS.............................................................................50
SECTION 16. AMENDMENTS AND WAIVERS......................................................................50
SECTION 17. EXCHANGE OF SHARES; CANCELLATION OF SURRENDERED SHARES; REPLACEMENT.........................50
SECTION 18. NOTICES.....................................................................................51
SECTION 19. MISCELLANEOUS...............................................................................51
</TABLE>
EXHIBIT A Articles Supplementary
EXHIBIT B Stockholders' Agreement
EXHIBIT C Registration Rights Agreement
EXHIBIT D Opinion of Counsel for the Company
EXHIBIT E Confidentiality Agreement
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PREFERRED STOCK PURCHASE AGREEMENT
This PREFERRED STOCK PURCHASE AGREEMENT is dated as of October
26, 1999 between Caliber Learning Network, Inc., a Maryland corporation (the
"Company"), and the Purchaser listed on the signature page of this Agreement
(the "Purchaser").
W I T N E S S E T H :
WHEREAS, the Company desires to issue and sell to the
Purchaser, and the Purchaser desires to purchase from the Company, shares of the
Company's Series A Convertible Preferred Stock, par value $.01 per share (the
"Series A Preferred"), upon the terms and provisions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
SECTION 1. SALE AND PURCHASE OF PREFERRED STOCK
(a) The Company agrees to sell to the Purchaser and, subject
to the terms and conditions hereof and in reliance upon the representations and
warranties of the Company contained herein or made pursuant hereto, the
Purchaser agrees to purchase from the Company on the Closing Date specified in
Section 2 hereof, the number of shares of Series A Preferred set forth opposite
the Purchaser's name on Schedule 1 hereto. The shares of Series A Preferred
being acquired under this Agreement and by the other Purchasers under the other
Stock Purchase Agreements (as hereinafter defined) are collectively referred to
herein as the "Shares", containing rights and privileges as more fully set forth
in the Articles Supplementary of the Company in the form attached hereto as
Exhibit A (the "Articles Supplementary").
(b) The aggregate purchase price to be paid to the Company by
the Purchaser for the Shares to be purchased by the Purchaser pursuant to this
Agreement shall be the amount set forth opposite the Purchaser's name on
Schedule 1 hereto. No further payment shall be required from the Purchaser for
the Shares.
(c) The parties further acknowledge and agree that the Shares
are intended not to constitute "preferred stock" as that term is used in Section
305(b)(4) of the Code and Treasury Regulation ' 1.305-5(a). Except as required
by any Taxing Authority or court, the Company and the Purchaser agree to treat
the Shares for Federal, state and local income and franchise tax
<PAGE>
purposes as not constituting "preferred stock", and to take no position
inconsistent with such characterization on any Tax Return or before any Taxing
Authority or court.
(d) The Shares are being sold to the purchasers listed on
Schedule 1 hereto (the "Purchasers") pursuant to this Agreement and the other
Series A Convertible Preferred Stock Purchase Agreements entered into
simultaneously with this Agreement (all such agreements collectively, as from
time to time assigned, supplemented or amended or as the terms thereof may be
waived, the "Stock Purchase Agreements"). All Stock Purchase Agreements shall be
dated the date hereof and shall be identical except as to the identities of the
respective Purchasers, the number of Shares to be purchased thereunder and the
amount paid therefor. The sale of Shares to each Purchaser under each Stock
Purchase Agreement is to be a separate sale, and no Purchaser shall have any
liability under any Stock Purchase Agreement other than the Stock Purchase
Agreement to which it is a party.
(e) The Company will use the proceeds from the sale of the
Shares, together with other funds it will receive on the Closing Date to fund
future development opportunities and for working capital purposes.
SECTION 2. THE CLOSING
(a) Subject to the terms and conditions hereof, the closing of
the purchase and sale of the Shares to be purchased by the Purchaser and the
other Purchaser (the "Closing") will take place at the offices of Morgan, Lewis
& Bockius LLP, 101 Park Avenue, New York, New York at 10:00 A.M., New York City
time, on October 26, 1999, or such other time and date as shall be mutually
agreed to by the Company and the Purchaser, but in any event no later than
October 29, 1999 (such time and date are herein referred to as the "Closing
Date"). The sale and purchase of Shares by the Purchasers pursuant to the Stock
Purchase Agreements between each of the Purchasers and the Company shall be
consummated concurrently, for an aggregate purchase price of $15,000,000 on the
Closing Date.
(b) Subject to the terms and conditions hereof, on the Closing
Date (i) the Company will deliver to the Purchaser a certificate registered in
the Purchaser's name (or the name of its nominee, if any, as specified on
Schedule 1 hereto) evidencing the number of Shares set forth opposite the
Purchaser's name on Schedule 1, and (ii) upon the Purchaser's receipt thereof,
the Purchaser will deliver to the Company a certified or official bank check (or
wire transfer) in an amount equal to the aggregate purchase price (as specified
in Section 1(b) hereof) for the Shares to be purchased by the Purchaser payable
to the order of the Company in federal or other immediately available funds.
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SECTION 3. DEFINITIONS
(a) For purposes of this Agreement, the following definitions
shall apply (such definitions to be equally applicable to both the singular and
plural forms of the terms defined):
"6% Non-Voting Convertible Preferred Stock" means the
Company's 6% Non-Voting Preferred Stock, par value $.01, which is
expressly subordinated, in all respects, to the Series A Preferred.
"Affiliate", when used with respect to any Person, means (i)
if such Person is a corporation, any officer or director thereof (other
than a director elected pursuant to Section 4(c) of the Articles
Supplementary) and any Person which is, directly or indirectly, the
beneficial owner (by itself or as part of any group) of more than five
percent (5%) of any class of any equity security (within the meaning of
the Securities Exchange Act) thereof, and, if such beneficial owner is
a partnership, any general partner thereof, or if such beneficial owner
is a corporation, any Person controlling, controlled by or under common
control with such beneficial owner, or any officer or director of such
beneficial owner or of any corporation occupying any such control
relationship, (ii) if such Person is a partnership, any general or
limited partner thereof, and (iii) any other Person which, directly or
indirectly, controls or is controlled by or is under common control
with such Person. For purposes of this definition, "control" (including
the correlative terms "controlling", "controlled by" and "under common
control with"), with respect to any Person, shall mean possession,
directly or indirectly, of the power to direct or cause the direction
of the management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise. The holding
of Shares (or of Conversion Shares obtained upon conversion of Shares),
and the rights under any Stock Purchase Agreement or under the Articles
Supplementary, the Stockholders' Agreement or the Registration Rights
Agreement (or the exercise of any such rights, including, without
limitation, nominating a director to the Board (or Board committee) of
the Company and Subsidiaries or sending an observer to Board (or Board
committee) meetings of the Company and Subsidiaries), shall not cause a
Purchaser to be deemed to be an "Affiliate" of the Company or any
Subsidiary.
"Affiliate Agreements" means (i) Lease Agreement, dated as of
May 30, 1997, between SHL Financial Services and the Company, (ii)
networkMCI Enterprise Management Agreement, dated as of July 1, 1997,
between the Company and MCI Systemhouse Corp., (iii) Intercompany
Management and Facility Use Agreement, dated as of January 1, 1998, by
and between Sylvan and the Company, and (iv) Testing Center Management
and CBT Services Agreement, dated as of May 1, 1997 (as amended by
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<PAGE>
Amendment No. 1, dated as of May 2, 1997), by and between Sylvan and
the Company, each as may be amended, modified or renewed from time to
time.
"Agreement" means this Stock Purchase Agreement (together with
exhibits and schedules) as such may be from time to time assigned,
supplemented or amended or as the terms hereof may be waived.
"Articles Supplementary" has the meaning set forth in Section
1(a) hereof.
"Benefit Plan" means any Plan, existing at the Closing Date or
prior thereto, established or to which contributions have at any time
been made by the Company or any ERISA Affiliate, or any predecessor of
any of the foregoing, or under which any employee, former employee or
director of the Company or any ERISA Affiliate or any beneficiary
thereof is covered, is eligible for coverage or has benefit rights as a
result of employment by or service with the Company or any ERISA
Affiliate, or as a result of designation as a beneficiary by any
employee, former employee or director of the Company or any ERISA
Affiliate.
"Board" or "Board of Directors" means with respect to any
Person which is a corporation, a business trust or other entity, the
board of directors or other group, however, designated, which is
charged with legal responsibility for the management of such Person, or
any committee of such board of directors or group, however designated,
which is authorized to exercise the power of such board or group in
respect of the matter in question.
"Business Day" means any day other than a Saturday, Sunday or
any day on which banks in the location of the office of the Company
provided for in Section 18 hereof are authorized or obligated to close.
"Capitalized Leases" means (a) any lease to which the Company
or a Subsidiary is party as lessee, or by which it is bound, under
which it leases any property (real, personal or mixed) from any lessor
other than the Company or a Subsidiary, and (b) which either (i) is
required to be capitalized in accordance with GAAP, or, (ii) with
respect to real property, even if not so required to be capitalized,
shall have a remaining term of greater than three (3) years (including
leases of shorter duration which are or were extendible to a total term
greater than three (3) years at the option of the lessor) (the
"Extended Leases"); provided that the Company makes a determination as
to whether, at the time of its calculation of Capitalized Lease Value,
it could be released from its obligations under such Extended Leases
without any adverse economic consequence and (I) the Extended Leases
shall not be included in the calculation of Capitalized Leases if the
Company determines there would be no adverse economic consequences, and
(II) the Extended Leases shall be included in the calculation of
Capitalized Leases to the extent of
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<PAGE>
such adverse economic consequence if the Company determines that there
would be adverse economic consequences.
"Capitalized Lease Value" means, as of the time of any
determination thereof, the sum of the then present values, determined
as hereinafter provided, of future obligations of the Company and its
subsidiaries under then existing Capitalized Leases. To compute the
value of any Capitalized Lease, the following methods shall be used, as
applicable:
(i) values of leases required to be capitalized in
accordance with GAAP shall be computed in accordance
with such principles; and
(ii) values of other leases (and values of contracts or
other items which this Agreement provides are to be
valued as if they were Capitalized Leases) shall be
computed by discounting, to the date of
determination, at an assumed interest rate of eight
percent (8%) per annum, the minimum amount of future
rental payments that will be due from the Company or
its subsidiaries under the related documentation,
including rental payments that may be due during
extensions which are at the other party's option, but
excluding any amounts in respect of insurance on,
taxes on and/or maintenance of the properties subject
to such leases (provided that such amounts are owed
and paid only to the extent actually incurred).
"Closing" has the meaning set forth in Section 2(a) hereof.
"Closing Date" has the meaning set forth in Section 2(a)
hereof.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Commission" means the Securities and Exchange Commission and
any other similar or successor agency of the federal government
administering the Securities Act or the Securities Exchange Act.
"Common Stock" means the Company's Common Stock, par value
$.01 per share, and shall also include any common stock of the Company
hereafter authorized and any capital stock of the Company of any other
class hereafter authorized which is not preferred as to dividends or
assets over any other class of capital stock of the Company or which
has ordinary voting power for the election of directors of the Company;
provided that Common Stock shall not include the Series A Convertible
Preferred Stock.
"Company" means Caliber Learning Network, Inc., a Maryland
corporation, its successors and assigns.
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<PAGE>
"Confidentiality Agreement" has the meaning set forth in
Section 7.5 hereof.
"Consolidated" or "consolidated", when used with reference to
any financial term in this Agreement, means the aggregate for the
Company and any of its majority-owned Subsidiaries of the amounts
signified by such term for all such Persons, with intercompany items
eliminated, and, with respect to net worth, after eliminating the
portion of net worth properly attributable to minority interests, if
any, in the capital of any such Person (other than in the capital of
the Company) and otherwise as determined in accordance with GAAP
(except as otherwise expressly provided herein).
"Conversion Share" or "Conversion Shares" means the shares of
the Company's Common Stock obtained or obtainable upon conversion of
Shares and shall also include any capital stock or other securities
into which such shares of Common Stock are changed and any capital
stock or other securities resulting from or comprising a
reclassification, combination or subdivision of, or a stock dividend
on, any such shares of Common Stock. In the event that any Conversion
Shares are sold either in a public offering pursuant to a registration
statement under the Securities Act or pursuant to a Rule 144
Transaction, then the transferees of such Conversion Shares shall not
be entitled to any benefits under this Agreement with respect to such
Conversion Shares and such Conversion Shares shall no longer be
considered to be "Conversion Shares" for purposes of any consent or
waiver provision of this Agreement.
"Disclosure Material" has the meaning specified in Section
4.6(a) hereof.
"EBITDA" means, the consolidated or combined, as the case may
be, net income for such period plus (a) the sum of, without
duplication, to the extent deducted in computing consolidated or
combined net income: (i) income tax expense, (ii) interest expense,
(iii) depreciation, amortization (exclusive of deferred rent
amortization) and other non-cash charges and (iv) any extraordinary or
non-recurring losses or expenses, minus (b) the sum of (without
duplication), to the extent included in computing consolidated net
income, (i) interest or dividend income, (ii) non-operating income and
(iii) any extraordinary or non-recurring gains or income, all as
determined in accordance with GAAP, where applicable, consistently
applied.
"Environmental Laws" means all federal, state, local, foreign,
civil and criminal laws, statutes, ordinances, orders, codes, rules,
policies, and regulations and common law relating to the protection of
the environment and human health or relating to the handling, use,
generation, treatment, storage, transportation or disposal of Hazardous
Materials, including but not limited to the Resource Conservation and
Recovery Act of 1976, 42 U.S.C. ' 6901 et seq.; the Toxic Substances
Control Act, 15 U.S.C. ' 2601 et seq.; the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. ss 9601 et
seq.; the Federal Water Pollution Control Act, 33 U.S.C. ss 1251 et
seq.;
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the Clean Air Act, 42 U.S.C. ss 7401 et seq.; the Hazardous Materials
Transportation Act, 49 U.S.C. ss 1801 et seq.; the Occupational Safety
and Health Act, 29 U.S.C. ss 651; the Federal Insecticide, Fungicide
and Rodenticide Act, 7 U.S.C. ss 136y et seq.; and the Oil Pollution
Act of 1990, 33 U.S.C. ss 2701 et seq., all as may be amended or
superseded from time to time, and all common law claims relating to the
same.
"Environmental Lien" has the meaning set forth in Section 4.16
hereof.
"Environmental Permits" means all permits, licenses,
approvals, authorizations or consents required by any Governmental
Authority under any applicable Environmental Law and includes any and
all orders, consent orders or binding agreements issued or entered into
by a Governmental Authority under any applicable Environmental Law.
"ERISA" means Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" means each "person" (as defined in Section
3(9) of ERISA) which is, or at any time was, a member of a controlled
group (within the meaning of Section 412(n)(6) of the Code) that
includes, or at any time included, the Company or any of its
Subsidiaries.
"Financial Investor" means an investor that acquires an equity
interest in the Company for investment purposes, and without the
purpose, or without the effect, of changing or influencing the control
of the Company holds an equity interest in the Company purposes.
"Fleming Designee" means each person that any Fleming Holder
designates in writing to the Company to receive, on behalf of such
Fleming Holder, the information to which such Fleming Holder is
entitled to pursuant to Section 7.1(b)(v) hereof; provided that each
Fleming Holder may not designate more than two persons pursuant hereto.
The initial two Fleming Holder Designees shall be Robert L. Burr and
David J. Edwards.
"Fleming Funds" means Fleming US Discovery Fund III, L.P.,
Fleming US Discovery Offshore Fund III, L.P. and Robert Fleming
Nominees Limited, or any successor thereof.
"Fleming Holders" means (i) the Fleming Funds and (ii) any
Affiliate, officer or employee of an Affiliate or investment fund
managed by an Affiliate of the Fleming Funds, or any successor thereof,
to which the Fleming Funds may transfer record and/or beneficial
ownership of the Shares or the Conversion Shares.
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<PAGE>
"Fully Diluted" means, with respect to the calculation of the
number of shares of Common Stock, as of the time of determination
thereof, the sum of (i) all shares of Common Stock outstanding at the
time of determination and (ii) all shares of Common Stock issuable upon
the exchange, exercise or conversion of all warrants, options and
convertible securities then outstanding (whether or not such warrants,
options or convertible securities are then exercisable, exchangeable,
convertible or subject to contingencies).
"Fundamental Transaction" has the meaning set forth in Section
9.3 hereof.
"GAAP" means generally accepted accounting principles
consistently applied.
"Going Private Transaction" has the meaning set forth in
Section 9.10 hereof.
"Governmental Authority" means any federal, state, or local
governmental agency or authority (including regulatory authority)
having jurisdiction over the Company or any of its Subsidiaries or any
of its respective assets or businesses.
"Guaranty" means (i) any guaranty or endorsement of the
payment or performance of, or any contingent obligation in respect of,
any indebtedness or other obligation of any other Person, (ii) any
other arrangement whereby credit is extended to one obligor (directly
or indirectly) on the basis of any promise or undertaking of another
Person (a) to pay the indebtedness of such obligor, (b) to purchase an
obligation owed by such obligor, (c) to purchase or lease assets (or to
provide funds, goods or services) under circumstances that would enable
such obligor to discharge one or more of its obligations or (d) to
maintain the capital, working capital, solvency or general financial
condition of such obligor, in each case whether or not such arrangement
is disclosed in the balance sheet of such other Person or is referred
to in a footnote thereto and (iii) any liability as a general partner
of a partnership in respect of indebtedness or other obligations of
such partnership; provided, however, that the term "Guaranty" shall not
include (1) endorsements for collection or deposit in the ordinary
course of business, (2) any guaranty of indebtedness of the Company by
a subsidiary of the Company or (3) obligations of the Company or its
Subsidiaries which would constitute Guaranties solely by virtue of the
continuing liability of a Person which has sold assets subject to
liabilities for the liabilities which were assumed by the Person
acquiring the assets, unless such liability is required to be carried
on the consolidated balance sheet of the Company. The amount of any
Guaranty and the amount of indebtedness resulting from such Guaranty
shall be the maximum amount of the guarantor's potential obligation in
respect of such Guaranty.
"Hazardous Materials" means any petroleum, petroleum
hydrocarbons, petroleum waste or petroleum products, underground
storage tanks, asbestos or asbestos-containing materials, pesticides,
lead and lead-containing
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<PAGE>
materials, urea formaldehyde insulation and polychlorinated biphenyls
(PCBs), ionizing and non-ionizing radiation including radon and
electromagnetic frequency radiation; and any chemicals, materials,
substances or wastes in any amount or concentration which are now or
hereafter "hazardous substances," "hazardous wastes," "hazardous
materials," "extremely hazardous wastes," "restricted hazardous
wastes," "toxic substances," "toxic pollutants" or words of similar
import, under any applicable Environmental Law.
"Indebtedness" of any Person means, without duplication, as of
any date as of which the amount thereof is to be determined, (i) all
obligations of such Person to repay money borrowed (including, without
limitation, all notes payable and drafts accepted representing
extensions of credit, all obligations under letters of credit, all
obligations evidenced by bonds, debentures, notes or other similar
instruments and all obligations upon which interest charges are
customarily paid), (ii) the Capitalized Lease Value of all Capitalized
Leases in respect of which such Person is liable as lessee or as the
guarantor of the lessee, (iii) all monetary obligations which are
secured by any Lien existing on property owned by such Person whether
or not the obligations secured thereby have been incurred or assumed by
such Person, (iv) all conditional sales contracts and similar title
retention debt instruments under which such Person is obligated to make
payments, (v) all Guaranties by such Person and (vi) all contractual
obligations (whether absolute or contingent) of such Person to
repurchase goods sold and distributed. "Indebtedness" shall not
include, however, (1) Indebtedness of the Company to any of its
wholly-owned Subsidiaries or Indebtedness of any wholly-owned
Subsidiary to the Company or to another wholly-owned Subsidiary, and
(2) any unfunded obligations in any employee pension benefit plan (as
defined in ERISA) of the Company or of any Subsidiary.
"Internal Rate of Return" means the discount rate at which the
present value of the future cash flows of an investment equal the cost
of the investment.
"Investment" means, with respect to any Person, (i) any loan,
advance or extension of credit by such Person to, and any contributions
to the capital of, any other Person, (ii) any Guaranty by such Person,
(iii) any interest in any capital stock, equity interest or other
securities of any other Person, (iv) any transfer or sale of property
of such Person to any other Person other than upon full payment, in
cash or other consideration, of not less than the agreed sale price
bargained on an arms-length basis and (v) any commitment or option to
make an Investment if, in the case of an option, the consideration
therefor exceeds $10,000, and any of the foregoing under clauses (i)
through (v) shall be considered an Investment whether such Investment
is acquired by purchase, exchange, merger or any other method;
provided, that the term "Investment" (1) shall not include an
Investment in the Company or in a wholly-owned Subsidiary, (2) shall
not include current trade and customer accounts receivable and
allowances,
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<PAGE>
provided they relate to goods furnished in the ordinary course of
business and are given in accordance with the customary practices of
the Company or a Subsidiary, (3) shall not include temporary
investments of excess cash of the Company or of any Subsidiary in any
of the following: (A) investment grade obligations maturing within one
year of their issuance which as to principal and interest constitute
direct obligations of, or obligations guaranteed by, the United States
of America, (B) negotiable certificates of deposit of banks or trust
companies which are organized under the laws of the United States of
America or any state thereof and which have capital and surplus of at
least $500,000,000, (C) commercial paper which is rated not less than
prime-one or A-1 or their equivalents by Moody's Investor Service, Inc.
or Standard & Poor's Corporation or their successors, (D) any
repurchase agreement secured by any one or more of the foregoing and
(E) money market funds primarily investing in any of the foregoing
securities and sponsored by or affiliated with nationally recognized
brokerage or investment advisory firms, and (4) shall not include
Investments of the Company existing on the date hereof and disclosed on
Schedule 3(a) hereto.
"Lien" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, or preference, priority or other
security interest of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement,
any financing lease having substantially the same effect as any of the
foregoing, any assignment or other conveyance of any right to receive
income and any assignment of receivables with recourse against the
assignor), any filing of a financing statement as debtor under the
Uniform Commercial Code or any similar statute and any agreement to
give or make any of the foregoing; provided that the term "Lien" shall
not include Permitted Liens.
"MCI" means MCI Telecommunications Corporation, which as of
the date of this Agreement holds 1,856,086 shares of Common Stock.
"MCI Warrants" means the amended and restated warrant to
purchase 1,193,573 shares of Common Stock, as adjusted pursuant to the
anti-dilution terms thereof, issued to MCI.
"Outside Directors" means those directors on the Company's
Board of Directors at any time who are not otherwise Affiliates of or
employed by the Company; provided that notwithstanding the foregoing,
Douglas L. Becker and R. Christopher Hoehn-Saric shall be deemed
Outside Directors for the purposes hereof.
"Outstanding" or "outstanding" means (a) when used with
reference to the Shares or the Conversion Shares as of a particular
time, all Shares or Conversion Shares theretofore duly issued except
(i) Shares and Conversion Shares theretofore reported as lost, stolen,
mutilated or destroyed or surrendered for
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transfer, exchange or replacement, in respect of which new or
replacement Shares or Conversion Shares have been issued by the
Company, (ii) Shares and Conversion Shares theretofore canceled by the
Company and (iii) Shares and Conversion Shares registered in the name
of, as well as Shares owned beneficially by, the Company, any
Subsidiary or any of its Affiliates. For purposes of the preceding
sentence, in no event shall "Affiliates" include (x) the Purchasers or
(y) any Affiliates of the Purchasers.
"Patents and Applications" has the meaning set forth in
Section 4.12 hereof.
"Pension Plan" means any "employee pension benefit plan" as
defined in Section 3(2) of ERISA.
"Permitted Lien" means (i) any Lien for Taxes, governmental
charges or levies not yet due or delinquent or being contested in good
faith by appropriate proceedings for which adequate reserves have been
established in accordance with GAAP, (ii) any imperfections of title,
easements, rights of way or similar Liens, zoning laws or land use
restrictions as normally exist with respect to property similar in
character to the property affected thereby and which individually or in
the aggregate with other such Liens, zoning laws or land use
restrictions do not materially impair the value or marketability of the
property subject to such Liens, zoning laws or land use restrictions or
interfere with the use of such property in the conduct of the business
of the Company and which do not secure obligations for money borrowed,
(iii) Liens imposed by any law, such as mechanic's, materialman's,
landlord's, warehouseman's and carrier's Liens, securing obligations
incurred in the ordinary course of business which are not yet overdue
or which are being diligently contested in good faith by appropriate
proceedings and, with respect to such obligations which are being
contested, for which the Company has set aside adequate reserves, if
appropriate, (iv) any Lien resulting from purchase by the Company of
goods in the ordinary course of business as to which Liens are not
filed of record and (v) any Lien necessary to secure Indebtedness that
is not prohibited by Section 9.2 hereof; provided that "Permitted Lien"
shall not include any Lien upon or with respect to any shares of
capital stock of any Subsidiary.
"Permitted Transferee" means any Transferee that holds not
less than an aggregate of 20,000 Shares.
"Permitted Transferee Designee" means each person that any
Permitted Transferee designates in writing to the Company to receive,
on behalf of such Permitted Transferee, the information to which such
Permitted Transferee is entitled to pursuant to Section 7.1(b)(v)
herof; provided that each Permitted Transferee may not designate more
than two persons pursuant hereto.
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"Person" or "person" means an individual, corporation,
partnership, limited liability company, firm, association, joint
venture, trust, unincorporated organization, government, governmental
body, agency, political subdivision or other entity.
"Plan" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase,
stock option, stock ownership, stock appreciation rights, phantom
stock, leave of absence, layoff, vacation, day or dependent care, legal
services, cafeteria, life, health, accident, disability, worker's
compensation or other insurance, severance, separation or other
employee benefit plan, practice, policy or arrangement of any kind,
whether written or oral, or whether for the benefit of a single
individual or more than one individual including, but not limited to,
any "employee benefit plan" within the meaning of Section 3(3) of
ERISA.
"Preferred Stock" means any class of the capital stock of a
corporation (whether or not convertible into any other class of such
capital stock) which has any right, whether absolute or contingent, to
receive dividends or other distributions of the assets of such
corporation (including, without limitation, amounts payable in the
event of the voluntary or involuntary liquidation, dissolution or
winding-up of such corporation), which right is superior to the rights
of another class of the capital stock of such corporation. "Preferred
Stock" includes, without limitation, the Series A Convertible Preferred
Stock and such preferred stock as may be issued as described in Section
8.8(b) hereof (upon the issuance of such preferred stock).
"Purchaser" means the person who accepts and agrees to the
terms hereof as indicated by such person's signature (as "the
undersigned Purchaser") on the execution page of this Agreement,
together with its successors and assigns.
"Purchasers" has the meaning set forth in Section 1(c) hereof,
together with their respective successors and assigns.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Closing Date, among the Company and each of
the Purchasers.
"Restricted Payment" means (i) every payment in connection
with the redemption, purchase, retirement or other acquisition by or on
behalf of the Company or any Subsidiary of any shares of the Company's
or a Subsidiary's capital stock (as defined below), whether or not
owned by the Company or any Subsidiary, (ii) any prepayments or
repayments made on Indebtedness of the Company or any Subsidiary, (iii)
every payment to or on behalf of any Affiliate of the Company or any
Affiliate of any Subsidiary on account of or with respect to
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any lease arrangements, and (iv) every payment by or on behalf of the
Company or of any Subsidiary (whether as repayment or prepayment of
principal or as interest or otherwise) on or with respect to (A) any
obligation to repay money borrowed owing to any Affiliate of the
Company or of any Subsidiary or (B) any obligation, to any Person, of
any Affiliate of the Company or of any Subsidiary or to any other
holder of shares of the Company's capital stock (as defined below),
which obligation is assumed, or is the subject of a Guaranty, by the
Company or a Subsidiary; provided, however, (a) that the restrictions
of the foregoing clause (i) shall not apply to (A) any payment in
respect of capital stock of the Company to the extent payable in shares
of the capital stock of the Company, (B) any redemption of the Series A
Preferred or (C) any redemption or repurchase pursuant to the 1997
Stock Option Plan and the 1998 Stock Incentive Plan as in effect on the
date hereof, (b) that the restrictions of the foregoing clause (ii)
shall not apply to any regularly scheduled prepayment or repayment of
Indebtedness, provided that such Indebtedness being prepaid or repaid
is not at the time of such prepayment or repayment or at any prior time
thereto owing to an Affiliate of the Company, or any payments due under
the Affiliate Agreements, (c) that none of the foregoing clauses shall
apply to any payments from a Subsidiary to the Company or from a
Subsidiary to a wholly-owned Subsidiary and (d) that none of the
foregoing clauses shall apply to any payments, distributions or other
transfers or actions on or with respect to the Shares or the Conversion
Shares or to the Purchasers (or holders of Shares or the Conversion
Shares) under the Stock Purchase Agreements. For purposes of this
definition, "capital stock" shall also include warrants and other
rights and options to acquire shares of capital stock (whether upon
exercise, conversion, exchange or otherwise).
"Rule 144" means (i) Rule 144 under the Securities Act as such
Rule is in effect from time to time and (ii) any successor rule,
regulation or law, as in effect from time to time.
"Rule 144A" means (i) Rule 144A under the Securities Act as
such Rule is in effect from time to time and (ii) any successor rule,
regulation or law, as in effect from time to time.
"Rule 144 Transaction" means a transfer of Conversion Shares
(A) complying with Rule 144 as such Rule is in effect on the date of
such transfer (but not including a sale other than pursuant to
"brokers' transactions" as defined in clauses (1) and (2) of paragraph
(g) of such Rule as in effect on the date hereof) and (B) occurring at
a time when Conversion Shares are registered pursuant to Section 12 of
the Securities Exchange Act.
"SEC Reports" has the meaning set forth in Section 4.19
hereof.
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"Securities Act" means the Securities Act of 1933, as amended,
and the rules, regulations and interpretations thereunder.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended, and the rules, regulations and interpretations
thereunder.
"Series A Preferred" means the Company's Series A Convertible
Preferred Stock, par value $.01 per share, which will have the rights,
powers and privileges on the Closing Date as more fully set forth in
the Articles Supplementary.
"Shares" has the meaning set forth in Section 1(a) hereof. In
the event that any Shares are sold either in a public offering pursuant
to a registration statement under Section 5 of the Securities Act or
pursuant to a Rule 144 Transaction, then the transferees of such Shares
shall not be entitled to any benefits under this Agreement with respect
to such Shares and such Shares shall no longer be considered to be
"Shares" for purposes of any consent or waiver provision of this
Agreement.
"Stock Purchase Agreements" has the meaning set forth in
Section 1(d) hereof.
"Stockholders' Agreement" means the Stockholders' Agreement,
dated as of the Closing Date, among the Company, the Purchasers and
certain other stockholders of the Company.
"Strategic Investor" means a technology partner or other
company with related products and services; provided that "Strategic
Investor" shall not include an Affiliate of the Company, Sylvan or MCI.
"Subsidiary", with respect to any Person, means any
corporation, association or other entity of which more than 50% of the
total voting power of shares of stock or other equity interests
(without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is, at the time as
of which any determination is being made, owned or controlled, directly
or indirectly, by such Person or one or more of its Subsidiaries, or
both. The term "Subsidiary" or "Subsidiaries" when used herein without
reference to any particular Person, means a Subsidiary or Subsidiaries
of the Company.
"Sylvan" means Sylvan Learning Systems, Inc., which holds
1,227,393 shares of Common Stock and all of the outstanding 6%
Nonvoting Convertible Preferred Stock.
"Takeover Proposal" shall mean any tender or exchange offer
for in excess of 15% of the outstanding securities involving the
Company, any proposal for a merger,
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consolidation or other business combination involving the Company, any
proposal or offer to acquire in any manner a greater than 15% equity
interest in, or a significant portion of the business or assets of, the
Company (other than immaterial or insubstantial assets or inventory in
the ordinary course of business or assets held for sale), any proposal
or offer with respect to any recapitalization or restructuring with
respect to the Company or any proposal or offer with respect to any
other transaction similar to any of the foregoing with respect to the
Company other than pursuant to the transactions to be effected pursuant
to the Stock Purchase Agreements.
"Takeover Proposal Interest" has the meaning set forth in
Section 7.4(e) hereof.
"Tax" or "Taxes" means all federal, state, local or foreign
net or gross income, gross receipts, net proceeds, sales, use, ad
valorem, value added, franchise, bank shares, withholding, payroll,
employment, excise, property, alternative or add-on minimum,
environmental or other taxes, assessments, duties, fees, levies or
other governmental charges of any nature whatsoever, whether disputed
or not, together with any interest, penalties, additions to tax or
additional amounts with respect thereto.
"Tax Returns" means any returns, reports or statements
(including any information returns) required to be filed for purposes
of a particular Tax.
"Taxing Authority" means any governmental agency, board,
bureau, body, department or authority of any United States federal,
state or local jurisdiction, or any foreign jurisdiction, having or
purporting to exercise jurisdiction with respect to any Tax.
"Transferees" shall mean any transferee (except for a Fleming
Holder) of the Shares or the Conversion Shares (as such terms are
defined within the definition of "Fleming Holders") from a Fleming
Holder. Transferees shall not include a transferee of Shares or
Conversion Shares sold in either a public offering pursuant to a
registration statement under the Securities Act or pursuant to a Rule
144 Transaction.
(b) For all purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires:
(i) the words "herein", "hereof" and "hereunder" and
other words of similar import refer to this Agreement as a whole and
not to any particular Section or other subdivision;
(ii) all accounting terms not otherwise defined
herein have the meanings assigned to them in accordance with GAAP
(except as otherwise provided herein);
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(iii) all computations provided for herein, if any,
shall be made in accordance with GAAP (except as otherwise provided
herein);
(iv) any uses of the masculine, feminine or neuter
gender shall also be deemed to include any other gender, as
appropriate;
(v) all references herein to actions by the Company
or any Subsidiary, such as "create", "sell", "transfer", "dispose of",
etc., mean such action whether voluntary or involuntary, by operation
of law or otherwise;
(vi) the exhibits and schedules to this Agreement
shall be deemed a part of this Agreement;
(vii) each of the representations and warranties of
the Company contained in Section 4 hereof is separate and is not
limited, qualified or modified by the existence, wording or
satisfaction of any other representation or warranty of the Company in
Section 4 or otherwise;
(viii) each of the covenants of the Company contained
in Sections 7, 8 and 9 hereof or otherwise contained in any Stock
Purchase Agreement, the Certificate of Designations, the Stockholders'
Agreement or the Registration Rights Agreement is separate and is not
limited or satisfied by the existence, wording or satisfaction of any
other covenant of the Company in Section 7, 8 or 9 or otherwise; and
(ix) all references herein (in covenants or
otherwise) to any action(s) which are to be taken (or which are
prohibited from being taken) by any Person or the Company or any
Subsidiary shall apply to such Person or the Company or such
Subsidiary, as the case may be, whether such action is taken directly
or indirectly.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser as
follows as of the date hereof and as of the Closing Date, except as set forth in
the disclosure schedules attached hereto:
4.1. Corporate Existence, Power and Authority.
(a) Each of the Company and each Subsidiary is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. The Company and each Subsidiary is duly
qualified, licensed and authorized to do business and is in good standing in
each jurisdiction in which it owns or leases any property or in which the
conduct of its business requires it to so qualify or be so licensed, except for
such jurisdictions where the failure to so qualify or be so licensed would not
have a material adverse effect on the
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Company's assets, properties, liabilities, business, affairs, results of
operations, condition (financial or otherwise) or prospects, on a consolidated
basis.
(b) No proceeding has been commenced looking toward the
dissolution or merger of the Company or any Subsidiary or the amendment of their
respective certificates of incorporation (other than the Articles
Supplementary). Neither the Company nor any Subsidiary is in violation in any
respect of its charter or by-laws.
(c) Each of the Company and each Subsidiary has all requisite
power, authority (corporate and other) and legal right to own or to hold under
lease and to operate the properties it owns or holds and to conduct its business
as now being conducted.
(d) The Company has all requisite power, authority (corporate
and other) and legal right to execute, deliver, enter into, consummate the
transactions contemplated by and perform its obligations under (i) the Stock
Purchase Agreements, including, without limitation, the issuance by the Company
of the Shares and the Conversion Shares as contemplated herein and therein and
in the Articles Supplementary (subject to the proper filing with the Maryland
State Department of Assessments and Taxation of the Articles Supplementary for
the Series A Preferred), (ii) the Stockholders' Agreement and (iii) the
Registration Rights Agreement. The execution, delivery and performance of the
Stock Purchase Agreements, the Stockholders' Agreement and the Registration
Rights Agreement by the Company (including, without limitation, the issuance by
the Company of the Shares and the Conversion Shares as contemplated herein and
therein and in the Articles Supplementary) have been duly authorized by all
required corporate and other actions. The Company has duly executed and
delivered the Stock Purchase Agreements and at the Closing will have duly
executed and delivered the Stockholders' Agreement and the Registration Rights
Agreement. The Stock Purchase Agreements constitute and, at the Closing, the
Stockholders' Agreement and the Registration Rights Agreement will constitute
the legal, valid and binding obligations of the Company enforceable in
accordance with their respective terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to the rights of
creditors generally or under general principles of equity.
4.2. Capital Stock.
(a) Schedule 4.2(a) hereto correctly and completely lists (i)
the authorized capital stock of the Company (Common Stock and Preferred Stock),
(ii) the number of designated shares of Preferred Stock in each series or class
after giving effect to the Articles Supplementary and (iii) on October 19, 1999,
after giving effect to the issuance of Shares contemplated by the Stock Purchase
Agreements, the number of shares outstanding in each series or class. There have
been no material issuances of shares since June 30, 1999. All of such
outstanding shares are, or on the Closing Date will be, duly authorized, validly
issued and outstanding, fully paid and non-assessable. The shares of the
Company's Common Stock issuable upon conversion of the Series A Preferred will
be, when issued in accordance with the
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terms of the Series A Preferred, duly authorized, validly issued, fully paid and
non-assessable. Except as provided in the Articles Supplementary and as
described in Schedule 4.2(a), none of the shares of the Company's capital stock
which will be outstanding at the Closing (i) were or will be subject to
preemptive rights when issued or (ii) provide the holders thereof with any
preemptive rights with respect to any issuances of capital stock.
(b) Schedule 4.2(b) hereto correctly and completely lists the
number and purpose for which shares of the Company's Common Stock are reserved
for issuance by the Company.
(c) Except as referred to in Section 4.2(b), there are no
outstanding options, warrants, subscriptions, rights, convertible securities or
other agreements or plans under which the Company may become obligated to issue,
sell or transfer shares of its capital stock or other securities.
(d) Except for the registration rights contained in the
Registration Rights Agreement and as described in Schedule 4.2(d), there are and
will be no outstanding registration rights with respect to any capital stock of
the Company or of any Subsidiary, which (in either case) will be outstanding on
the Closing Date, or any capital stock referred to in Section 4.2(b) or 4.2(c).
(e) There are no voting agreements, voting trusts, proxies or
other agreements or understandings with respect to the voting of any capital
stock of the Company or any Subsidiary.
(f) Except as described in Schedule 4.2(f), there are no
anti-dilution protections or other adjustment provisions in existence with
respect to any capital stock of the Company or any Subsidiary or any capital
stock referred to in Section 4.2(b) or 4.2(c).
(g) The Articles Supplementary has been duly adopted by the
Company and is fully effective as a supplement to the Company's charter. The
Shares will have all of the rights, priorities and terms set forth in the
Articles Supplementary.
(h) To the knowledge of the Company, those persons who
beneficially own, directly or indirectly, more than 5% (calculated in accordance
with Rule 13d-3 under the Securities Exchange Act) of the Company's outstanding
Common Stock are as listed on Schedule 4.2(h); provided that the Company may
rely on the accuracy of all Schedules 13D and Schedules 13G filed under the
Securities Exchange Act for purposes of determining those persons who
beneficially own, directly or indirectly, more than 5% of the Company's
outstanding Common Stock.
4.3. Subsidiaries.
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The Company has no Subsidiaries. The Company has no
Investments in any other Person.
4.4. Business.
The Company is engaged primarily in the business of
distributed learning. The Company neither currently engages in, nor has any
intention of engaging in, any other business.
4.5. No Defaults or Conflicts.
(a) Neither the Company nor any of its Subsidiaries is in
violation or default in any material respect (and is not in default in any
respect regarding any Indebtedness) under any indenture, agreement or instrument
to which it is a party or by which it or its properties may be bound that would
materially adversely affects or will materially adversely affect the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company or the ability of the
Company to perform its obligations under the Stock Purchase Agreements, the
Articles Supplementary, the Stockholders' Agreement, the Registration Rights
Agreement or any of the transactions contemplated hereby or thereby. Neither the
Company nor any Subsidiary is in default in any material respect under any
material order, writ, injunction, judgment or decree of any court or other
governmental authority or arbitrator(s).
(b) The execution, delivery and performance by the Company of
the Stock Purchase Agreements, the Stockholders' Agreement and the Registration
Rights Agreement and any of the transactions contemplated hereby or thereby
(including, without limitation, the issuance of the Shares and the Conversion
Shares as contemplated herein and therein and in the Articles Supplementary, the
adoption of the Articles Supplementary as an amendment to the Company's charter)
do not and will not (i) violate or conflict with, with or without the giving of
notice or the passage of time or both, any provision of (A) the respective
certificates of incorporation or by-laws of the Company or any of its
Subsidiaries, (B) any law, rule, regulation or order of any federal, state,
county, municipal or other governmental authority, (C) any judgment, writ,
injunction, decree, award or other action of any court or governmental authority
or arbitrator(s), or (D) any agreement, indenture or other instrument applicable
to the Company or any of its Subsidiaries or any of their respective properties,
(ii) result in the creation of any Lien upon any of the Company's or any
Subsidiary's properties, assets or revenues, except as provided in the Articles
Supplementary of the Series A Preferred, (iii) require the consent, waiver,
approval, order or authorization of, or declaration, registration, qualification
or filing with, any Person (whether or not a governmental authority and
including, without limitation, any shareholder approval) (other than approvals
which have been obtained prior to the Closing Date), or (iv) cause antidilution
clauses of any outstanding securities to become operative or give rise to any
preemptive rights. No provision of any item referred to in Sections (A) and (C)
of the preceding clause (i) materially adversely affects or will materially
adversely affect the assets, properties, liabilities, business, affairs, results
of operations, condition (financial or otherwise) or
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prospects of the Company or the ability of the Company to perform its
obligations under the Stock Purchase Agreements, the Articles Supplementary, the
Stockholders' Agreement, the Registration Rights Agreement or any of the
transactions contemplated hereby or thereby.
4.6. Disclosure Materials; Other Information.
(a) The Company has previously furnished to the Purchasers the
materials described on Schedule 4.6(a) hereto (the "Disclosure Material"). The
audited and unaudited financial statements referred to or contained in the
materials referred to on Schedule 4.6(a) fairly present the consolidated
financial condition of the Company as of the respective dates thereof and the
consolidated results of the operations of the Company for such periods and have
been prepared in accordance with GAAP, except that any such unaudited statements
may omit notes and may be subject to normal year-end adjustment.
(b) Since June 30, 1999, except as disclosed in the Company's
Quarterly Report on Form 10-Q for the three months ended June 30, 1999 or
subsequently publicly announced, (i) the business of the Company has been
conducted in the ordinary course and (ii) there has been no material adverse
change in the assets, properties, liabilities, business, affairs, results of
operations, condition (financial or otherwise) or prospects of the Company. As
of such Closing Date and as of the date hereof, there are no material
liabilities of the Company or any Subsidiary which would be required to be
provided for in a consolidated balance sheet of the Company as of either such
date prepared in accordance with GAAP, other than liabilities provided for in
the financial statements referred to in Section 4.6(a). Since June 30, 1999, no
amount or property has directly or indirectly been declared, ordered, paid, made
or set aside for any Restricted Payment nor has any such action been agreed to.
(c) There are no material liabilities, contingent or
otherwise, of the Company or the Subsidiaries that have not been disclosed in
the financial statements referred to in Section 4.6(a) or otherwise disclosed in
the schedules hereto.
(d) The financial projections included in the Disclosure
Material conform with the internal operating forecasts of the Company and its
Subsidiaries and were based on good faith assumptions when made and have been
prepared in good faith.
(e) There is no fact known to the Company or any of the
Subsidiaries which is not in the disclosure schedules hereto which is necessary
in order to make the representations and warranties made, in light of the
circumstances under which they were made, not misleading.
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4.7. Litigation.
There is no action, suit, proceeding, investigation or claim
pending or, to the knowledge of the Company or the Subsidiaries, threatened in
law, equity or otherwise before any court, administrative agency or arbitrator
which (i) questions the validity of the Stock Purchase Agreements, the Articles
Supplementary, the Stockholders' Agreement, the Registration Rights Agreement,
the Shares or the Conversion Shares or any action taken or to be taken pursuant
hereto or thereto, (ii) might adversely affect the right, title or interest of
any Purchaser to the Shares or the Conversion Shares or (iii) might result in a
material adverse change in the assets, properties, liabilities, business,
affairs, results of operations, condition (financial or otherwise) or prospects
of the Company.
4.8. Taxes.
Each of the Company and each Subsidiary has duly and timely
filed all Tax Returns required to be filed by it, and each such Tax Return
correctly and completely reflects the Tax liability and all other information
required to be reported thereon. Each of the Company and each Subsidiary has
paid or caused to be paid all Taxes (whether or not reflected on such Tax
Returns) that are due and payable. The provision for Taxes due by the Company
and its Subsidiaries in the most recent financial statement included in the
Disclosure Material is sufficient for all unpaid Taxes, being current Taxes not
yet due and payable, of the Company and its Subsidiaries, as of the end of the
period covered by such financial statement, and as of the Closing Date, such
provision, as adjusted for the passage of time through the Closing Date, will be
sufficient for the then-accrued and unpaid Taxes not yet due and payable of the
Company and its Subsidiaries. No Tax Returns of the Company or any Subsidiary
have ever been audited by any Taxing Authority, there is no dispute concerning
any Tax liability of the Company or any Subsidiary either threatened, claimed or
raised by any Taxing Authority, and the Company does not expect any Taxing
Authority to assess additional Taxes against or in respect of it or any
Subsidiary for any past period. The Company and each Subsidiary has withheld and
paid, or, if not yet due for payment, set aside in accounts for such purposes,
all Taxes required to have been withheld in connection with amounts paid or
owing to any employee, creditor, independent contractor or other third party.
Other than stamp taxes, the Company and its Subsidiaries have no liability for
Taxes of any Person other than the Company and its Subsidiaries (i) as a
transferee or successor, (ii) by contract, or (iii) otherwise.
4.9. ERISA.
(a) All Benefit Plans are listed in Section 4.9(a) of Schedule
4.9, and copies of all documentation relating to such Benefit Plans have been
delivered to or made available for review by Purchasers (including, without
limitation, copies of written Benefit Plans, written descriptions of oral
Benefit Plans, summary plan descriptions, trust agreements, the three most
recent annual returns, employee communications, and IRS determination letters).
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(b) Each Benefit Plan has at all times been maintained and
administered in all material respects in accordance with its terms and with the
requirements of all applicable law, including, without limitation, ERISA and the
Code, and each Benefit Plan intended to qualify under section 401(a) of the Code
has at all times since its adoption been so qualified, and each trust which
forms a part of any such plan has at all times since its adoption been
tax-exempt under section 501(a) of the Code.
(c) No Benefit Plan has incurred any "accumulated funding
deficiency" within the meaning of section 302 of ERISA or section 412 of the
Code, and the "amount of unfunded benefit liabilities" within the meaning of
section 4001(a)(18) of ERISA does not exceed zero with respect to any Benefit
Plan subject to Title IV of ERISA.
(d) No "reportable event" (within the meaning of section 4043
of ERISA) has occurred with respect to any Benefit Plan since the effective date
of said section 4043 for which notice is not waived under the regulations issued
pursuant to said section 4043.
(e) No Benefit Plan is a multiemployer plan within the meaning
of section 3(37) of ERISA.
(f) No direct, contingent or secondary liability has been
incurred or is expected to be incurred by the Company or any ERISA Affiliate
under Title IV of ERISA to any party with respect to any Benefit Plan.
(g) Neither the Company nor any ERISA Affiliate has incurred
any liability for any tax imposed under Chapter 43 of the Code or any liability
under Part 5 of Title I of ERISA.
(h) No benefit under any Benefit Plan, including, without
limitation, any severance or parachute payment plan or agreement, will be
established or become accelerated, vested or payable by reason of any
transaction contemplated under this Agreement.
(i) No Benefit Plan provides health or death benefit coverage
beyond the termination of an employee's employment, except as required by Part 6
of Subtitle B of Title I of ERISA or section 4980B of the Code or any State laws
requiring continuation of benefits coverage following termination of employment.
(j) No suit, action or other litigation (excluding claims for
benefits incurred in the ordinary course of plan activities) has been brought
or, to the knowledge of the Company or any Subsidiary, threatened against or
with respect to any Benefit Plan and there are no facts or circumstances known
to the Company or any Subsidiary that could reasonably be expected to give rise
to any such suit, action or other litigation.
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(k) All contributions to Benefit Plans that were required to
be made under such Benefit Plans have been made, and all benefits accrued under
any unfunded Benefit Plan have been paid, accrued or otherwise adequately
reserved in accordance with GAAP, all of which accruals under unfunded Benefit
Plans are as disclosed in Schedule 4.9, and each of the Company and each
Subsidiary has performed all material obligations required to be performed under
all Benefit Plans.
(l) The execution, delivery and performance of the Stock
Purchase Agreements, the Stockholders' Agreement and the Registration Rights
Agreement and the consummation of the transactions contemplated hereby and
thereby (including, without limitation, the offer, issue and sale by the
Company, and the purchase by the Purchaser of the Shares and the Conversion
Shares) will not involve any "prohibited transaction" within the meaning of
ERISA or the Code that could subject the Company or any ERISA Affiliate to a
tax, penalty or liability under ERISA or the Code.
4.10. Legal Compliance.
(a) Each of the Company and each Subsidiary has complied with
all applicable laws, rules, regulations, orders, licenses, judgments, writs,
injunctions, decrees or demands, except to the extent that failure to so comply
would not materially adversely affect the assets, properties, liabilities,
business affairs, results of operations, condition (financial or otherwise) or
prospects of the Company on a consolidated basis.
(b) There are no adverse orders, judgments, writs,
injunctions, decrees, or demands of any court or administrative body, domestic
or foreign, or of any other governmental agency or instrumentality, domestic or
foreign, outstanding against the Company or any Subsidiary.
4.11. Outstanding Securities.
Schedule 4.11 hereto correctly and completely lists the
outstanding securities (as defined in the Securities Act) of the Company and the
Subsidiaries. All securities of the Company have been offered, issued, sold and
delivered in compliance with, or pursuant to exemptions from, all applicable
federal and state laws, and the rules and regulations of federal and state
regulatory bodies governing the offering, issuance, sale and delivery of
securities.
4.12. Intellectual Property and Other Rights.
(a) Each of the Company and each Subsidiary owns or possesses
all patents, patent rights, trademarks, trademark rights, trade names, trade
name rights and copyrights (collectively, the "Intellectual Property") (each of
which is listed on Schedule 4.12(a) hereto), and all rights and privileges with
respect to any of the foregoing, as are necessary for the conduct of its
business as now being conducted and as proposed to be conducted. To the best of
the
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Company's knowledge, the rights of (and use by) each of the Company and each
Subsidiary with respect to such Intellectual Property or any other patents,
patent rights, trademarks, trademark rights, trade names, trade name rights or
copyrights do not conflict with or infringe any rights of others in a manner
which might materially and adversely affect the assets, properties, liabilities,
business, affairs, results of operations, condition (financial or otherwise) or
prospects of the Company, and no such claim of conflict or infringement has been
asserted by any Person.
(b) Each of the Company and each Subsidiary owns and holds all
franchises, licenses, permits, consents, approvals and other authority,
governmental or otherwise (collectively, the "Licenses") (each of which is
listed on Schedule 4.12(b) hereto), and all rights and privileges with respect
to any of the foregoing, as are materially necessary for the conduct of its
business as now being conducted and as proposed to be conducted, except to the
extent that failure to so own or hold is not reasonably likely to materially
adversely affect the assets, properties, liabilities, business, affairs, results
of operations, condition (financial or otherwise) or prospects of the Company.
Neither the Company nor any Subsidiary is in default in any material respect
under any of such Licenses. To the best of the Company's knowledge, the rights
of (and use by) each of the Company and each Subsidiary with respect to such
Licenses or any other franchise, license, permit, consent, approval or other
authority do not conflict with or infringe any rights of others in a manner
which might materially and adversely affect the assets, properties, liabilities,
business, affairs, results of operations, condition (financial or otherwise) or
prospects of the Company, and no such claim of conflict or infringement has been
asserted by any Person.
4.13. Key Employees.
Each of the Company and each Subsidiary has good relationships
with its employees and has not had and does not expect any substantial labor
problems. Neither the Company nor any Subsidiary has no knowledge as to any
intentions of any key employee to leave the employ of the Company or any
Subsidiary. The employees of the Company and each Subsidiary are not and have
never been represented by any labor union, and no collective bargaining
agreement is binding and in force against the Company or any Subsidiary or
currently being negotiated by the Company or any Subsidiary.
4.14. Properties.
Neither the Company nor any Subsidiary owns any real property.
Other than Permitted Liens, each of the Company and each Subsidiary has good and
marketable title to each of its other properties other than real property or
leased properties. Certain real property used by the Company or the Subsidiaries
in the conduct of their respective businesses is held under lease (as identified
on Schedule 4.14 hereto), and neither the Company nor any Subsidiary is aware of
any pending or threatened claim or action by any lessor of any such property to
terminate any such lease. All such leases are valid and in full force and
effect, and none of such leases is in default. None of the properties owned or
leased by the Company or any Subsidiary is subject to
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any Liens which could materially and adversely affect the assets, properties,
liabilities, business, affairs, results of operations, condition (financial or
otherwise) or prospects of the Company on a consolidated basis.
4.15. Suppliers and Customers.
(a) Each of the Company and each Subsidiary has adequate
sources of supply for its business as currently conducted and as proposed to be
conducted. Each has good relationships with all of its material sources of
supply of goods and services and each does not anticipate any material problem
with any such material sources of supply.
(b) Neither the Company nor any Subsidiary has any knowledge
that the customer base of the Company and its Subsidiaries might materially
decrease.
4.16. Environmental Compliance.
(a) To the knowledge of the Company or any Subsidiaries, there
is no Hazardous Material on, about, under or in, any property, real or personal,
in which the Company or any Subsidiary has or has formerly had any interest in
an amount or concentration which could constitute a violation that would result
in a liability in excess of $25,000 or otherwise result in a liability in excess
of $25,000 to the Company or any Subsidiary under any applicable Environmental
Law.
(b) There is no (and has not been any) off-site use, handling,
storage or disposal or on-site use, handling, storage or disposal of Hazardous
Material at or from any locations currently or formerly owned, leased, operated
or occupied by the Company or any Subsidiary as a result of which use, handling,
storage or disposal the Company could incur a material liability or obligation
under any applicable Environmental Law.
(c) Neither the Company nor any Subsidiary has received any
verbal or written notice, citation, subpoena, summons, complaint or other
correspondence or communication from any person with respect to the presence of
any non-indigenous Hazardous Material upon, into, beneath, or emanating from or
affecting any of the real property (including improvements) currently or
formerly owned or occupied by the Company that could result in a liability to
the Company or any Subsidiary in excess of $25,000.
(d) There has been no intentional or unintentional, gradual or
sudden, release, disposal or discharge by the Company or, to the Company's
knowledge, by others, upon, into or beneath the real property (including
improvements) currently or formerly owned or occupied by the Company or any
Subsidiary that has caused or is causing soil or groundwater contamination
which, under applicable Environmental Laws could require investigation or
remediation or could otherwise create a material liability or obligation on the
part of the Company or any Subsidiary.
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(e) The Company and its Subsidiaries are in material
compliance with all applicable Environmental Laws, has received all required
Environmental Permits and is in material compliance with the terms and
conditions of all Environmental Permits.
(f) To the best knowledge of the Company and its Subsidiaries
after reasonable inquiry, there are no Liens arising under or pursuant to any
Environmental Law ("Environmental Liens") relating to any real property
(including improvements thereon) currently owned by the Company or any
Subsidiary.
(g) There are no (i) underground storage tanks, (ii)
polychlorinated biphenyl containing equipment or (iii) asbestos-containing
materials at any site currently owned, operated or leased by the Company or any
Subsidiary, except in compliance with all applicable Environmental Laws.
4.17. No Burdensome Agreements.
To the best of the knowledge of the Company and its
Subsidiaries, other than this Agreement and the related documents, the Company
is not a party to any contract or agreement with any Affiliate of the Company or
of any Subsidiary, the terms of which are materially less favorable to the
Company or such Subsidiary, as the case may be, than those which might have been
obtained, at the time such contract or agreement was entered into, from a person
who was not such an Affiliate.
4.18. Offering of Shares.
None of the Company, any Subsidiary, any agent or any other
person acting on its behalf, directly or indirectly, (i) offered any of the
Shares or any similar security of the Company (A) by any form of general
solicitation or general advertising (within the meaning of Regulation D under
the Securities Act) or (B) for sale to or solicited offers to buy any thereof
from, or otherwise approached or negotiated with respect thereto with, any
person other than (x) the Purchasers and (y) not more than five other
institutional investors or Strategic Investors, each of which the Company
reasonably believed was an "accredited investor" within the meaning of
Regulation D under the Securities Act or (ii) has done or caused to be done (or
has omitted to do or to cause to be done) any act which act (or which omission)
would result in bringing the issuance or sale of the Shares within the
provisions of Section 5 of the Securities Act or the filing, notification or
reporting provisions of any state securities laws.
4.19. SEC Reports.
The Company has filed all proxy statements, reports and other
documents required to be filed by it under the Securities Exchange Act. The
Company has furnished the Purchaser with copies of (i) its Annual Report on Form
10-K for the fiscal year ended December 31, 1998, (ii) its Quarterly Reports on
Form 10-Q for the fiscal quarters ended March 31, 1999
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and June 30, 1999 and (iii) its Proxy Statement dated April 22, 1999
(collectively, the "SEC Reports"). Each SEC Report was in substantial compliance
with the requirements of its respective form and none of the SEC Reports, nor
the financial statements (and the notes thereto) included in the SEC Reports, as
of their respective dates, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
4.20. Indebtedness.
Schedule 4.20 hereto sets forth (i) the amount of all
Indebtedness of the Company and any Subsidiary outstanding as of September 30,
1999 (and there is no additional material amount of Indebtedness of the Company
outstanding other as set forth on such Schedule 4.20), (ii) any Lien with
respect to such Indebtedness and (iii) a description of each instrument or
agreement governing such Indebtedness. The Company has made available to the
Purchaser a complete and correct copy of each such instrument or agreement
(including all amendments, supplements or modifications thereto). No material
default exists with respect to or under any such Indebtedness or any instrument
or agreement relating thereto and no event or circumstance exists with respect
thereto that (with notice or the lapse of time or both) could give rise to such
a default.
4.21. Use of Proceeds.
The Company will use the proceeds realized from the sale of
the Shares to fund future development opportunities and for working capital
purposes. No portion of such proceeds will be used for the purpose, whether
immediate, incidental or ultimate, of purchasing or carrying, within the meaning
of Regulation U of the Board of Governors of the Federal Reserve System, as
amended from time to time, any "margin stock" as defined in said Regulation U,
or any "margin stock" as defined in Regulation G of the Board of Governors of
the Federal Reserve System, as amended from time to time, or for the purpose of
purchasing, carrying or trading in securities within the meaning of Regulation T
of the Board of Governors of the Federal Reserve System, as amended from time to
time, or for the purpose of reducing or retiring any indebtedness which both (i)
was originally incurred to purchase any such margin stock or other securities
and (ii) was directly or indirectly secured by such margin stock or other
securities. None of the assets of the Company or any Subsidiary includes any
such "margin stock." Neither the Company nor any Subsidiary has any present
intention of acquiring any such "margin stock."
4.22. Other Names.
Except as listed on Schedule 4.22, the businesses previously
or presently conducted by the Company and any Subsidiary have not been conducted
under any corporate, trade or fictitious name.
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4.23. Brokers.
No broker, finder or investment banker or other party is
entitled to any brokerage, finder's or other similar fee or commission in
connection with any Stock Purchase Agreement, the Stockholders' Agreement, the
Registration Rights Agreement or the Articles Supplementary or any of the
transactions contemplated hereby or thereby, based upon arrangements made by or
on behalf of the Company or any Subsidiary or any of their respective
Affiliates.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company as
follows:
5.1. Corporate Power and Authority.
The Purchaser has all requisite power, authority and legal
right to execute, deliver, enter into, consummate the transactions contemplated
by and perform its obligations under this Agreement, the Stockholders' Agreement
and the Registration Rights Agreement. The execution, delivery and performance
of this Agreement, the Stockholders' Agreement and the Registration Rights
Agreement by the Purchaser have been duly authorized by all required corporate
and other actions. The Purchaser has duly executed and delivered this Agreement,
the Stockholders' Agreement and the Registration Rights Agreement, and this
Agreement, the Stockholders' Agreement and the Registration Rights Agreement
constitute the legal, valid and binding obligations of the Purchaser enforceable
against the Purchaser in accordance with their respective terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to the rights of creditors generally or under general principles of
equity.
5.2. Investment Intent.
The Purchaser is capable of evaluating the risk of its
investment in the Shares being purchased by it and is able to bear the economic
risk of such investment. The Purchaser is purchasing the Shares to be purchased
by it for its own account for investment and not with a present view to any
distribution thereof in violation of applicable securities laws; provided,
however, that the Purchaser may transfer record and/or beneficial ownership of
the Shares or the Conversion Shares to one or more Affiliates, officers or
employees of Affiliates or investment funds managed by Affiliates of the
Purchaser, in all cases in compliance with federal securities laws. It is
understood that the disposition of the Purchaser's property shall at all times
be within the Purchaser's control. If the Purchaser should in the future decide
to dispose of any of its Shares or Conversion Shares, it is understood that it
may do so only in compliance with the
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Securities Act, applicable securities laws and this Agreement. The Purchaser is
an "accredited investor" as defined in Rule 501(a) under the Securities Act.
5.3. Brokers.
Except as disclosed on Schedule 5.3 hereto, no broker, finder
or investment banker or other party is entitled to any brokerage, finder's or
other similar fee or commission in connection with any Stock Purchase Agreement,
the Stockholders' Agreement, the Registration Rights Agreement or the Articles
Supplementary or any of the transactions contemplated hereby or thereby, based
upon arrangements made by or on behalf of the Purchaser or any Subsidiary or any
of their respective Affiliates.
SECTION 6. RESTRICTIONS ON TRANSFER
The Purchaser agrees that it will not sell or otherwise
dispose of any Shares or Conversion Shares unless such Shares or Conversion
Shares have been registered under the Securities Act and, to the extent
required, under any applicable state securities laws, or pursuant to an
applicable exemption from such registration requirements. The Company may
endorse on all certificates representing Shares or Conversion Shares a legend
stating or referring to such transfer restrictions; provided, that no such
legend shall be endorsed on any Share certificates which, when issued, are no
longer subject to the restrictions of this Section 6.
SECTION 7. INFORMATION AS TO THE COMPANY
The Company covenants and agrees as follows:
7.1. Financial Information.
(a) The Company will maintain, and cause each Subsidiary to
maintain, a system of accounting established and administered in accordance with
sound business practices to permit preparation of financial statements in
accordance with GAAP.
(b) So long as at least 20,000 Shares are outstanding, the
Company will deliver to (I) the Fleming Holders and (II) each Permitted
Transferee, the following:
(i) as soon as practicable but not later than five
(5) Business Days after their issuance, and in any event within ninety (90) days
after the close of each fiscal year of the Company, (A) a consolidated balance
sheet of the Company and its Subsidiaries as of the end of such fiscal year and
(B) consolidated statements of operations, stockholders' equity and cash flows
of the Company and its Subsidiaries for such fiscal year, in each case setting
forth in comparative form the corresponding figures for the preceding fiscal
year, all such balance sheets
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and statements to be in reasonable detail and certified without qualification by
Ernst & Young LLP or any other "Big Five" independent public accounting firm
selected by the Company, and such statements shall be accompanied by a
management analysis of any material differences between the results for such
fiscal year and the corresponding figures for the preceding year; the Company's
Annual Report on Form 10-K shall satisfy such requirement provided that it is in
compliance with all applicable requirements of the SEC and is certified by a
"Big Five" accounting firm;
(ii) as soon as practicable, copies (A) of all
financial statements, proxy material or reports sent to the Company's or any
Subsidiary's stockholders, (B) of any public press releases and (C) of all
reports or registration statements filed with the Commission pursuant to the
Securities Act or the Securities Exchange Act;
(iii) as soon as practicable and in any event within
forty-five (45) days after the close of each of the first three (3) fiscal
quarters of the Company, (A) a consolidated balance sheet of the Company and its
Subsidiaries as of the end of such fiscal quarter, (B) consolidated statements
of operations, stockholders' equity and cash flows of the Company and its
Subsidiaries for the portion of the fiscal year ended with the end of such
quarter, in each case in reasonable detail, certified by (I) the Chief Financial
Officer, (II) the Chief Executive Officer or (III) the President of the Company
and setting forth in comparative form the corresponding figures for the
comparable period one year prior thereto (subject to normal year-end
adjustments), together with a management analysis of any material differences
between such results and the corresponding figures for such prior period and (C)
a certificate of (I) the Chief Financial Officer, (II) the Chief Executive
Officer or (III) the President certifying the Company's compliance with the
covenants contained in Section 9 of this Agreement; the Company's Quarterly
Report on Form 10-Q shall satisfy such requirement provided that it is in
compliance with all applicable requirements of the SEC;
(iv) as soon as practicable but not later than thirty
(30) days after the end of each month other than the final month of the
Company's fiscal year, (A) an unaudited consolidated balance sheet of the
Company and its Subsidiaries as at the end of such month and (B) unaudited
consolidated statements of operations, stockholders' equity and cash flows of
the Company and its Subsidiaries for the portion of the fiscal year ended with
the end of such month, in each case in reasonable detail, setting forth in
comparative form the corresponding figures for the corresponding period one year
prior thereto (subject to normal year-end adjustments);
(v) as soon as practicable and without duplication of
any of the above items, any other materials furnished to the Company's Board of
Directors or to holders of the Company's capital stock or Indebtedness,
including, without limitation, any compliance certificates furnished in respect
of such Indebtedness, which shall be delivered to the Fleming Designee(s) and
the Transferee Designee(s); and
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(vi) as soon as practicable, such other information
as may reasonably be requested by (I) the Fleming Holders or (II) any Permitted
Transferee.
(c) The Company will deliver to each member of the Company's
Board of Directors and each observer to the Company's Board of Directors
appointed pursuant to Section 3(a) of the Stockholders' Agreement, as soon as
practicable (and in the case of (iii), prior to the end of each fiscal year) and
without duplication of any of the items listed below, the following:
(i) copies of any annual, special or interim audit
reports or management or comment letters with respect to the Company or its
Subsidiaries or their operations submitted to the Company by independent public
accountants;
(ii) copies of summary financial information prepared
on a quarterly basis regarding the Company on a consolidated basis as presented
to the Board and any other summary financial information otherwise prepared;
(iii) copies of the annual budget and business plan
for the next fiscal year;
(iv) copies of all formal communications, from time
to time, to directors of the Company (including without limitation all
information furnished to such directors in connection with such communications),
and copies of minutes of meetings of the Board of Directors (and of any
executive committees thereof) of the Company;
(v) notice of default under any material agreement,
contract or other instrument to which the Company or any of its Subsidiaries is
a party or by which any of them is bound;
(vi) notice of any action or proceeding which has
been commenced or threatened against the Company or any of its Subsidiaries and
which, if adversely determined, would have, individually or in the aggregate, a
material adverse effect on the assets, properties, liabilities, business,
affairs, results of operations, condition (financial or otherwise) or prospects
of the Company on a consolidated basis; and
(vii) copies of all filings made with the Commission.
(d) All such financial statements referred to in this Section
7.1 shall be prepared in accordance with GAAP (except for any change in
accounting principles specified in the accompanying certificate, in the
financial statements themselves or required by GAAP, and except that any interim
financial statements may omit notes and may be subject to normal year-end
adjustments).
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(e) Without limiting the foregoing provisions of this Section
7.1, the Company agrees that, if requested in writing by any holder of Shares,
it will not deliver to such holder (until otherwise instructed by such holder)
(x) any non-public information or non-public materials regarding the Company or
any Subsidiary (whether described in this Section 7.1 or otherwise) and (y) any
information (whether or not included in clause (x)) which such holder specifies
that it does not want to receive. The Company shall comply with any such request
with respect to each person entitled to information hereunder, until instructed
otherwise by the then holder of such Shares.
7.2. Communication with Accountants.
The Company (on behalf of itself and each of its Subsidiaries)
hereby authorizes (i) the Purchaser to communicate directly with the independent
certified public accountants for the Company or any Subsidiary and (ii) such
accountants to disclose to the Purchaser any and all financial statements and
any other information of any kind that they may have with respect to the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company or any Subsidiary; provided
that (a) the Purchaser in good faith and based upon reasonable assumptions has
financial concerns regarding the Company that causes it to desire to communicate
with such accountants and (b) the Purchaser must first notify the Company of its
intention to speak with such accountants and permit the Company to participate
in such conversation if the Company desires to do so. The Company shall deliver
a letter addressed to such accountants instructing them to comply with the
provisions of this Section 7.2.
7.3. Inspection.
The Company will permit (I) the Fleming Holders, (II) any
Permitted Transferee, and (III) any authorized representative of the Fleming
Holders or such Permitted Transferee, to visit and inspect any of the properties
of the Company and its Subsidiaries, to examine their respective books and
records and to discuss with their officers their books and records and the
assets, properties, liabilities, business, affairs, results of operations,
condition (financial or otherwise) or prospects of the Company or any
Subsidiary, all at such reasonable times, all on reasonable notice and as often
as may be reasonably requested.
7.4. Notices.
The Company will give notice to all holders of Shares promptly
after it learns, other than by notice from all of such holders, of the existence
of any of the following:
(a) any default under any Indebtedness (or under any
indenture, mortgage or other agreement relating to any Indebtedness) which
Indebtedness is in an aggregate principal amount exceeding $100,000 (or the
equivalent thereof in other currencies) in respect of which the Company or any
Subsidiary is liable;
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(b) any action or proceeding which has been commenced or
threatened against the Company or any of its Subsidiaries and which, if
adversely determined, would have, individually or in the aggregate, a material
adverse effect on the assets, properties, liabilities, business, affairs,
results of operations, condition (financial or otherwise) or prospects of the
Company on a consolidated basis or the ability of the Company to perform its
obligations under the Stock Purchase Agreements, the Stockholders' Agreement,
the Registration Rights Agreement or the Articles Supplementary;
(c) any dispute which exists between the Company or any of its
Subsidiaries and any governmental regulatory body which, in the reasonable
opinion of the Company is reasonably likely to, individually or in the
aggregate, materially adversely affect the normal business operations of the
Company or any of its Subsidiaries or the assets, properties, liabilities,
business, affairs, results of operations, condition (financial or otherwise) or
prospects of the Company on a consolidated basis or the ability of the Company
to perform its obligations under the Stock Purchase Agreements, the
Stockholders' Agreement, the Registration Rights Agreement or the Articles
Supplementary; and
(d) if any (i) "reportable event" (as such term is described
in Section 4043(c) of ERISA) has occurred; or (ii) "accumulated funding
deficiency" (within the meaning of Section 412(a) of the Code or Section 302 of
ERISA) has been incurred with respect to a Pension Plan maintained or
contributed to (or required to be maintained or contributed to) by the Company
or any ERISA Affiliate that is subject to the funding requirements of ERISA
and/or the Code or that an application may be or has been made to the Secretary
of the Treasury for a waiver or modification of the minimum funding standard
(including any required installment payments) or an extension of any
amortization period under Section 412 of the Code or Section 302 of ERISA, in
each case with respect to such a Pension Plan; or (iii) Pension Plan maintained
or contributed to (or required to be maintained or contributed to) by the
Company or any ERISA Affiliate has been terminated, reorganized, petitioned or
declared insolvent under Title IV of ERISA; or (iv) Pension Plan maintained or
contributed to (or required to be maintained or contributed to) by the Company
or any ERISA Affiliate has an unfunded current liability giving rise to a lien
under ERISA or the Code; or (v) proceeding has been instituted pursuant to
Section 515 of ERISA to collect a delinquent contribution to a Pension Plan
maintained or contributed to (or required to be maintained or contributed to) by
the Company or any ERISA Affiliate; or (vi) of the Company or its ERISA
Affiliates will or may incur any liability (including any contingent or
secondary liability) to or on account of the termination or withdrawal from a
Pension Plan maintained or contributed to (or required to be maintained or
contributed to) by the Company or any ERISA Affiliate; or (vii) "prohibited
transaction" (as such term is defined in Section 406 of ERISA or Section 4975 of
the Code) in connection with an "employee benefit plan" (as defined in Section
3(3) of ERISA), maintained or contributed to (or required to be maintained or
contributed to) by the Company or any ERISA Affiliate that could subject the
Company or any ERISA Affiliate to a tax penalty or liability under ERISA or the
Code.
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(e) if any proposals, inquiries or expressions of interest are
received by, any information is requested from, or any negotiations or
discussions are sought to be initiated or continued with the Company or any of
its Subsidiaries or its representatives, in each case in connection with any
Takeover Proposal or the possibility or consideration by a third party of making
a Takeover Proposal ("Takeover Proposal Interest") indicating, in connection
with such notice, the name of the Person indicating such Takeover Proposal
Interest and the terms and conditions of any proposals or offers, and continuing
to keep the Fleming Holders informed, on a current basis, of the status and
terms of any Takeover Proposal Interest; provided that the timing and content of
such notice shall be the same as that which is provided to the Board of
Directors. The Company agrees that it will take the necessary steps promptly to
inform the Persons referred to in the first sentence hereof of the obligations
undertaken in this Section 7.4(e).
Such notice (i) with respect to subsection (a) above, shall specify the nature
and period of existence of any such default and what the Company proposes to do
with respect thereto and (ii) with respect to subsections (b), (c) or (d) above,
shall specify the nature of any such matter referred to in such clause, what
action the Company proposes to take with respect thereto and what action any
other relevant Person is taking or proposes to take with respect thereto.
7.5. Confidentiality Agreement.
The Company's obligation to provide any non-public information
under this Section 7 or otherwise to any person other than members of its Board
of Directors shall be subject to prior execution of a confidentiality agreement
between the Company and the recipient of such information as more fully set
forth in the form attached hereto as Exhibit E (the "Confidentiality
Agreement").
SECTION 8. AFFIRMATIVE COVENANTS
The Company covenants and agrees as follows:
8.1. Maintenance of Existence, Properties and Franchises;
Compliance with Law; Taxes; Insurance.
The Company will, and will cause each Subsidiary to:
(a) maintain their respective corporate existence, rights and
other franchises in full force and effect;
(b) maintain their respective tangible assets in good repair,
working order and condition so far as necessary or advantageous to the proper
carrying on of their respective businesses;
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(c) comply with all applicable laws and with all applicable
orders, rules, rulings, certificates, licenses, regulations, demands, judgments,
writs, injunctions and decrees, provided, that such compliance shall not be
necessary so long as (i) the applicability or validity of any such law, order,
rule, ruling, certificate, license, regulation, demand, judgment, writ,
injunction or decree shall be contested in good faith by appropriate proceedings
and (ii) failure to so comply will not have a material adverse effect on the
assets, properties, liabilities, business, affairs, results of operations,
condition (financial or otherwise) or prospects of the Company on a consolidated
basis;
(d) pay promptly when due all Taxes imposed upon its
properties, assets or income and all claims or indebtedness (including, without
limitation, vendor's, workmen's and like claims) which might become a lien upon
such properties or assets; provided, that payment of any such Tax shall not be
necessary so long as (i) the applicability or validity thereof shall be
contested in good faith by appropriate proceedings and a reserve, if
appropriate, shall have been established with respect thereto and (ii) failure
to make such payment will not have a material adverse effect on the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company on a consolidated basis;
and
(e) keep adequately insured, by financially sound and
reputable insurers of nationally recognized stature, all its properties of a
character customarily insured by entities similarly situated, against loss or
damage of the kinds and in amounts customarily insured against by such entities
and with such deductibles or coinsurance as is customary.
8.2. Office for Payment, Exchange and Registration;
Location of Office; Notice of Change of Name or
Office.
(a) So long as any of the Shares is outstanding, the Company
will maintain an office or agency where Shares may be presented for redemption,
exchange, conversion, exercise or registration of transfer as provided in this
Agreement. Such office or agency initially shall be the office of the Company
specified in Section 18 hereof, subject to Section 8.2(b).
(b) The Company shall give each holder of Shares at least
twenty (20) days' prior written notice of any change in (i) the name of the
Company as then in effect or (ii) the location of the office of the Company
required to be maintained under this Section 8.2.
8.3. Fiscal Year.
The fiscal year of the Company and its Subsidiaries for tax,
accounting and any other purposes shall end on December 31 of each calendar
year.
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8.4. Environmental Matters.
(a) The Company and each Subsidiary shall keep and maintain
any property either owned leased, operated or occupied by the Company or any
Subsidiary free and clear of any Environmental Liens, and the Company and each
Subsidiary, as the case may be, shall keep all such property free of Hazardous
Material contamination and in compliance with all applicable Environmental Laws
and the terms and conditions of any Environmental Permits; provided, however,
that the Company or any Subsidiary shall have the right at its cost and expense,
and acting in good faith, to contest, object or appeal by appropriate legal
proceeding the validity of any Environmental Lien. The contest, objection or
appeal with respect to the validity of an Environmental Lien shall suspend the
Company's obligation to eliminate such Environmental Lien under this paragraph
pending a final determination by appropriate administrative or judicial
authority of the legality, enforceability or status of such Environmental Lien,
provided that the following conditions are satisfied: (i) contemporaneously with
the commencement of such proceedings, the Company shall give written notice
thereof to each Fleming Holder and its Transferees while they hold Shares or
Conversion Shares; and (ii) if under applicable law any real property or
improvements thereon are subject to sale or forfeiture for failure to satisfy
the Environmental Lien prior to a final determination of the legal proceedings,
the Company or such Subsidiary must successfully move to stay such sale,
forfeiture or foreclosure pending final determination of the Company's (or
Subsidiary's) action; and (iii) the Company or such Subsidiary must, if
requested, furnish to the Fleming Holders and their Transferees, as a group,
while they hold Shares or Conversion Shares a good and sufficient bond, surety,
letter of credit or other security satisfactory to such holders equal to the
amount (including any interest and penalty) secured by the Environmental Lien.
(b) The Company will, by administrative or judicial process,
enforce the obligations of any other Person who is potentially liable for
damages, contribution or other relief in connection with any violation of
Environmental Laws, including, but not limited to, asbestos abatement, Hazardous
Material remediation or off-site or on-site disposal.
(c) The Company will defend, indemnify and hold harmless each
current, former and future holder of Shares or Conversion Shares, its employees,
officers, directors, stockholders, partners, financial and legal representatives
and assigns, from and against any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits and claims, joint or several, and any
costs, disbursements and expenses (including attorneys' fees and expenses and
costs of investigation) of whatever kind or nature, known or unknown, contingent
or otherwise asserted against, imposed on, or sustained by, them, arising out of
or in any way related to (i) the presence, disposal, release, removal, discharge
or storage of any Hazardous Material upon, into, from or affecting any real
property (including improvements) currently or formerly owned, leased, operated
or occupied by or on behalf of the Company or any Subsidiary or any predecessor
thereof; (ii) any judicial or administrative action, suit or proceeding, actual
or threatened, relating to Hazardous Material upon, in, from or affecting any
real property (including improvements) currently or formerly owned, leased,
operated or occupied by the
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Company for which the Company or any Subsidiary could be liable; (iii) any
violation of any Environmental Law or Environmental Permit, by the Company or
any Subsidiary or any of their agents, tenants, subtenants or invitees; (iv) the
imposition of any Environmental Lien for the recovery of costs expended in the
investigation, study or remediation of any environmental liability of (or
asserted against) the Company or any Subsidiary; and (v) any liability arising
out of or related to the off-site shipment, transportation, disposal, treatment,
handling or disposal of Hazardous Materials by or on behalf of the Company or
any predecessor thereof. This Section 8.4(c) and Section 8.4(d) shall survive
any payment, conversion or transfer of Shares and any termination of this
Agreement.
(d) To the extent that the Company or any Subsidiary is
strictly liable without regard to fault under any Environmental Law, the
Company's obligations to the holders of Shares or Conversion Shares under any of
the indemnification provisions of the Stock Purchase Agreements shall likewise
be strict without regard to fault with respect to the violation of any
Environmental Law which results in any liability to any of the indemnified
persons referred to in Section 8.4(c).
8.5. Reservation of Shares.
There have been reserved, and the Company shall at all times
keep reserved, free from preemptive rights, out of its authorized Common Stock a
number of shares of Common Stock sufficient to provide for the exercise of the
conversion rights provided in Section 5 of the Articles Supplementary.
8.6. Securities Exchange Act Registration.
(a) the Company will maintain effective a registration
statement (containing such information and documents as the Commission shall
specify and otherwise complying with the Securities Exchange Act), under Section
12(b) or Section 12(g), whichever is applicable, of the Securities Exchange Act,
with respect to the Common Stock of the Company, and the Company will file on
time such information, documents and reports as the Commission may require or
prescribe for companies whose stock has been registered pursuant to such Section
12(b) or Section 12(g), whichever is applicable.
(b) The Company will, upon the request of any holder of
Shares, make whatever other filings with the Commission, or otherwise make
generally available to the public such financial and other information, as any
such holder may deem reasonably necessary or desirable in order to enable such
holder to be permitted to sell Shares pursuant to the provisions of Rule 144.
8.7. Delivery of Information for Rule 144A Transactions.
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If a holder of Shares proposes to transfer any such Shares
pursuant to Rule 144A under the Securities Act (as in effect from time to time),
the Company agrees to provide (upon the request of such holder or the
prospective transferee) to such holder and (if requested) to the prospective
transferee any financial or other information concerning the Company and its
Subsidiaries which is required to be delivered by such holder to any transferee
of such Shares pursuant to such Rule 144A, subject to confidentiality
provisions, if applicable.
8.8. Senior Securities.
(a) Subject to Section 8.8(b), the Company shall maintain the senior
status of the Series A Preferred such that it shall rank senior in all respects,
including the payment on liquidation and redemption, to all other equity
securities of the Company.
(b) Notwithstanding the foregoing Section 8.8(a):
(i) the Company may issue up to $10,000,000 of Preferred
Stock, with pricing terms that are no more favorable than
those of the Series A Preferred, to either:
(A) a Strategic Investor, provided that (I) such
Preferred Stock may rank either senior to or pari
passu with the Series A Preferred; and provided
further that the Company shall use its reasonable
best efforts in its negotiations with such Strategic
Investor to have the Preferred Stock rank pari passu
with (instead of senior to) the Series A Preferred
and (II) the Company shall permit the Fleming Funds
to be involved in such issuance of Preferred Stock to
such Strategic Investor, or
(B) a Financial Investor; provided that such
Preferred Stock shall rank either pari passu with or
junior to the Series A Preferred; and
(ii) the Company may issue up to an additional $10,000,000 of
Preferred Stock ranking pari passu with the Series A
Preferred; provided that the conversion price per share of
Common Stock into which such Preferred Stock is convertible is
at least 145% of the Conversion Price of the Series A
Preferred (as defined in the Articles Supplementary) at the
time of issuance of such Preferred Stock.
8.9. Further Assurances.
The Company shall from time to time, upon the request of the
Fleming Holders or any Transferee, promptly and duly execute and deliver any and
all such further instruments and documents as the Fleming Holders or such
Transferee, as the case may be, may reasonably deem necessary or desirable to
obtain the full benefits of (i) the obligations of the Company under this
Agreement and (ii) the other rights and powers herein granted. Upon the
instructions from time
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to time of the Fleming Holders or any Transferee, the Company shall execute and
cause to be filed any document or filing presented to the Company in proper form
for signing or filing, in each case as the Fleming Holders or such Transferee
may reasonably deem necessary or desirable in light of the Company's obligations
under this Agreement, and the Company shall pay or cause to be paid any filing
or other fees in connection therewith.
SECTION 9. NEGATIVE COVENANTS
The Company covenants and agrees that (i) with respect to
Sections 9.1, 9.2, 9.3, 9.4, 9.5, 9.6, 9.8, 9.9, 9.9, 9.10 and 9.11, without the
prior written consent of the holders of more than 50% of outstanding Shares and
(ii) with respect to Section 9.7, without the approval described therein:
9.1. No Dilution or Impairment; No Changes in Capital Stock.
The Company will not, by amendment of its charter or through
any consolidation, merger, reorganization, transfer of assets, dissolution,
issue or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of the Stock Purchase
Agreements, the Articles Supplementary, the Registration Rights Agreement or the
Stockholders' Agreement. The Company will at all times in good faith assist in
the carrying out of all such terms, and in the taking of all such action, as may
be necessary or appropriate in order to protect the rights of the holders of
Shares (as such rights are set forth in the Stock Purchase Agreements, the
Articles Supplementary, the Registration Rights Agreement and the Stockholders'
Agreement) against dilution or other impairment. Without limiting the generality
of the foregoing, the Company (a) will not issue any shares or class or series
of equity or equity-linked security, which is senior to, or pari passu with, the
Series A Preferred as to dividend payments or amounts payable in the event of
liquidation or winding up of the Company, except as otherwise provided in
Section 8.8(b) hereof, (b) will not enter into any agreement or instrument which
would restrict or otherwise materially adversely affect the ability of the
Company to perform its obligations under the Stock Purchase Agreements, the
Stockholders' Agreement, the Registration Rights Agreement or the Articles
Supplementary, (c) will not amend its charter or by-laws in any manner which
would impair or reduce the rights of the Preferred Stock, including, without
limitation, an amendment which would alter or change the powers, privileges or
preferences of the holders of the Series A Preferred (including, without
limitation, changing the Articles Supplementary after any Shares have been
called for redemption), (d) except as otherwise provided in the Articles
Supplementary will not redeem, repurchase or otherwise acquire, either directly
or indirectly through its Subsidiaries, any shares of capital stock of the
Company or any of its Subsidiaries or any other rights or options to subscribe
for or purchase any capital stock of the Company or any other securities
convertible into or exchangeable for capital stock of the Company, (e) will not
permit the par value or the determined or stated value of any shares of Common
Stock receivable upon the conversion of the Shares to exceed the amount payable
therefor upon such conversion, (f) will take all such action
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as may be necessary or appropriate in order that the Company may at all times
validly and legally issue duly authorized, fully paid and nonassessable shares
of the Common Stock free from all taxes, Liens and charges with respect to the
issue thereof, upon the conversion of the Shares from time to time outstanding,
(g) will not take any action which results in any adjustment of the current
conversion price under the Articles Supplementary if the total number of shares
of the Common Stock (or other securities) issuable after the action upon the
conversion of all of the then outstanding Shares would exceed the total number
of shares of Common Stock (or other securities) then authorized by the Company's
charter and available for the purpose of issuance upon such conversion or
exercise, (h) will not have any authorized Common Stock (and will not issue any
Common Stock) other than its existing authorized Common Stock, and (i) will not
amend its charter to change any terms of its Common Stock.
9.2. Indebtedness.
So long as more than 25% of the Shares are outstanding, the
Company will not (i) incur Indebtedness, including any Indebtedness set forth on
Schedule 4.20 hereto, in excess of the greater of either (A) $30,000,000 in
aggregate principal amount or (B) 3.5 times EBITDA for the preceding twelve
months; or (ii) enter into any agreement, amendment or modification with respect
to any Indebtedness, which agreement, amendment or modification under clause
(ii) restricts or prohibits (or was intended primarily to restrict or prohibit)
the Company from making any payments under, or otherwise performing under the
Stock Purchase Agreements.
9.3. Consolidation, Merger and Sale.
Neither the Company nor any Subsidiary will (or will agree
to): (a) wind up, liquidate or dissolve its affairs (except that a wholly-owned
Subsidiary can be wound-up, dissolved and liquidated into another wholly-owned
Subsidiary or into the Company), (b) so long as more than 25% of the Shares are
outstanding, sell, lease, transfer or otherwise dispose of all or substantially
all of its assets to any other Person (except that a wholly-owned Subsidiary can
sell, lease, transfer or otherwise dispose of all or substantially all of its
assets to another wholly-owned Subsidiary or to the Company); or (c) so long as
more than 25% of the Shares are outstanding, effect a merger or consolidation if
the Company is not the surviving corporation from such merger or consolidation.
Notwithstanding the foregoing, the Company may take any of the actions described
in the foregoing subsection (b) or (c) pursuant to a contemplated transaction
(the "Fundamental Transaction"); provided that, prior to taking any such action,
the Company offers, in writing, to the Fleming Funds the right to choose either
(I) to receive securities or other consideration in the Fundamental Transaction
that are substantially similar from an economic standpoint to the outstanding
value of the Shares, on substantially similar terms as the other investors in
the Fundamental Transaction, or (II) to receive the greater of (x) 200% of the
then Conversion Price (pursuant to the Articles Supplementary) or (y) a 25%
Internal Rate of Return from the Closing Date through the date of the
Fundamental Transaction.
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9.4. No Change in Business.
So long as more than 25% of the Shares are outstanding,
neither the Company nor any of its Subsidiaries will change substantially the
character of its business as conducted on the Closing Date as represented in
Section 4.4 hereof and described in the Disclosure Material.
9.5. Restricted Payments; Investments.
Neither the Company nor any of its Subsidiaries will declare
or make or permit to be declared or made:
(ai any Restricted Payment; or
(bi any Investment.
9.6. Affiliate Loans and Guaranties.
Neither the Company nor any Subsidiary may incur or permit to
exist any of the following:
(a) any obligation of the Company or of any Subsidiary to
repay money borrowed owing to (i) any Affiliate of the Company, (ii) any
Affiliate of any Subsidiary or (iii) any other holder of shares of the capital
stock of the Company or a Subsidiary; or
(b) any obligation, to any Person, which obligation is assumed
or guaranteed by the Company or a Subsidiary and which is an obligation of (i)
any Affiliate of the Company, (ii) any Affiliate of any Subsidiary or (iii) any
other holder of shares of the capital stock of the Company or a Subsidiary
(excluding, in the case of this clause (b), any obligation of the Company or of
a wholly-owned Subsidiary which is not owed to an Affiliate of the Company or to
an Affiliate of a Subsidiary or to any other holder of shares of the capital
stock of the Company or of a Subsidiary).
This Section 9.6 shall not apply to (1) any obligations under the Stock Purchase
Agreements or with respect to the Shares, (2) any loans, advances or Guarantees
referred to in clause (1) of the proviso to the definition of "Investment"
contained in Section 3 hereof, (3) Indebtedness identified on Schedule 4.20
hereto or (4) any obligations under any of the Affiliate Agreements.
9.7. Transactions with Affiliates.
The Company will not, and will not permit any Subsidiary to,
directly or indirectly, enter into any transaction or agreement (including,
without limitation, the purchase, sale, distribution, lease or exchange of any
property or the rendering of any service) with any Affiliate of the Company or
of any Subsidiary, other than a wholly-owned Subsidiary of the
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Company, unless such transaction or agreement (a) is approved by a majority of
the Outside Directors on the Board of Directors, and (b) is on terms that are no
less favorable to the Company or such Subsidiary, as the case may be, than those
which might be obtained at the time of such transaction from a Person who is not
such an Affiliate; provided, however, that this Section 9.7 shall not limit, or
be applicable to, (i) employment arrangements with (and general salary and
benefits compensation for) any individual who is a full-time employee of the
Company or any Subsidiary if such arrangements are approved by a majority of the
Outside Directors on the Board of Directors; and (ii) the payment of reasonable
and customary regular fees to directors of the Company who are not employees of
the Company; and (iii) any obligations under any of the Affiliate Agreements.
9.8. Liens.
The Company will not create or permit to exist, or permit any
of its Subsidiaries to create or suffer to exist, any Lien upon or with respect
to any of its assets or income, other than Permitted Liens and existing liens
set forth on Schedule 9.8 hereto.
9.9. Private Placement Status.
Neither the Company nor any agent nor other Person acting on
the Company's behalf will do or cause to be done (or will omit to do or to cause
to be done) any act which act (or which omission) would result in bringing the
issuance or sale of the Shares or the Conversion Shares within the provisions of
Section 5 of the Securities Act or the filing, notification or reporting
requirements of any state securities law (other than in accordance with a
registration and qualification of Conversion Shares pursuant to the Registration
Rights Agreement).
9.10. Maintenance of Public Market.
So long as more than 25% of the Shares are outstanding, the
Company will not proceed with a program of acquisition of its Common Stock,
initiate a corporate reorganization or recapitalization or undertake a
consolidation or merger or authorize, consent to or take any action which would
have the effect of:
(a) removing the Company from registration with the Commission
under the Securities Exchange Act with respect to the Company's Common Stock;
(b) requiring the Company to make a filing under Section 13(e)
of the Securities Exchange Act;
(c) reducing the average daily trading volume over a 30-day
period of the Common Stock on the principal securities exchange under which it
is then listed to less than 5,000 shares of Common Stock or eliminating the
public market for shares of Common Stock of the Company;
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(d) causing a delisting of the Company's Common Stock as a
Nasdaq National Market Security on the Nasdaq Stock Market (unless such stock is
delisted as a result of being listed on a national securities exchange); or
(e) if any shares of the Company's Common Stock are at any
time listed on a national securities exchange, causing a delisting of such stock
from such exchange, unless such delisting is in connection with a listing on
another national securities exchange.
Notwithstanding the foregoing, the Company may take any of the actions described
in the foregoing subsection (a) or (c) pursuant to a contemplated transaction
(the "Going Private Transaction"); provided that, prior to taking any such
action, the Company offers, in writing, to the Fleming Funds the right to choose
either (I) to receive securities or other consideration in the Going Private
Transaction that are substantially similar from an economic standpoint to the
outstanding value of the Shares, on substantially similar terms as the other
investors in the Going Private Transaction, or (II) to receive the greater of
(x) 200% of the then Conversion Price (as defined in the Articles Supplementary)
or (y) a 25% Internal Rate of Return from the Closing Date through the date of
the Going Private Transaction.
9.11. Actions Prior to the Closing Date.
From the date hereof through the Closing Date, the Company
will not, and will not permit any Subsidiary to, (a) issue or agree to issue any
capital stock or any securities exercisable for, or convertible or exchangeable
into, capital stock or (b) purchase, redeem or otherwise acquire any of its
capital stock; provided, however, that this Section 9.11 shall not limit, or be
applicable to, (i) the transactions contemplated by the Stock Purchase
Agreements, including any issuance of capital stock in connection with the
transactions contemplated by Sections 9.1 and 9.10 hereof and (ii) grants of
options or issuances of Common Stock to officers, directors or employees of the
Company pursuant to the current terms of the Company's 1997 Stock Option Plan
and 1998 Stock Incentive Plan or the exercise of any existing warrants listed on
Schedule 4.11 hereto.
SECTION 10. PREEMPTIVE RIGHTS
(a) Except (i) for issuances of pro rata dividends to all
holders of Common Stock, (ii) stock issued to employees, officers or directors
in connection with management options or incentive plans approved by the Board
of Directors, (iii) stock issued in connection with any merger, acquisition or
business combination, (iv) stock issued for consideration amounting to less than
$500,000 in any single transaction where the purchase price is not less than the
then applicable Conversion Price (as defined in the Articles Supplementary),
provided that the aggregate amount of all such transactions shall not exceed
$1,000,000, (v) up to 5,167,328 shares
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of stock issuable upon conversion of the 6% Non-Voting Convertible Preferred
Stock (as adjusted pursuant to the antidilution provisions therein), or (vi) up
to 1,193,573 shares of stock issuable pursuant to the MCI Warrant (as adjusted
pursuant to the antidilution provisions therein), in order to enable such
holders to maintain their Fully Diluted percentage ownership of the Company, the
holders of the Series A Preferred shall have preemptive rights, as hereinafter
set forth, to purchase any capital stock, including any warrants or securities
convertible into capital stock, of the Company hereafter issued by the Company
so that a holder of the Series A Preferred shall hereafter be entitled to
acquire a percentage of capital stock which is hereafter issued equal to the
same percentage of the issued and outstanding Common Stock of the Company as is
held (directly or obtainable upon conversion of the Series A Preferred) by such
holder of Series A Preferred immediately prior to the date on which the capital
stock is to be issued on a Fully Diluted basis. As used herein, "issue" (and
variations thereof) includes sales and transfers by the Company of treasury
shares.
(b) The Company shall, before issuing any additional capital
stock (other than the exceptions referred to in Section 10(a) hereof), give
written notice thereof to the holders of the Series A Preferred. Such notice
shall specify what type of instrument the Company intends to issue and the
consideration which the Company intends to receive therefor. For a period of
twenty (20) days following receipt by the holders of the Series A Preferred of
such notice, the Company shall be deemed to have irrevocably offered to sell to
the holders of the Series A Preferred a sufficient number of shares of such
capital stock so that the holders of the Series A Preferred, if such holders
elects to acquire such shares as hereinafter set forth, shall be capable of
acquiring the same percentage of such shares as the percentage of Common Stock
beneficially owned (directly or obtainable upon conversion of the Series A
Preferred) by such holders immediately prior to the proposed issuance on a Fully
Diluted basis. In the event any such offer is accepted, in whole or in part, by
the holders of the Series A Preferred, the Company shall sell such shares to
holders of the Series A Preferred for the consideration and on the precise terms
set forth in the Company's notice (given under the first two sentences of this
paragraph). In the event that one or more holders of the Series A Preferred
elects not to, or fails to, exercise its rights under this Section 10 within the
twenty (20) day period, then the Company may issue the remaining shares of
capital stock offered to, but not purchased by, such holders of the Series A
Preferred, to third persons but only for the same consideration set forth in the
Company's notice (given under the first two sentences of this paragraph) and no
later than ninety (90) days after the expiration of such twenty day period. The
closing for such transaction shall take place as proposed by the Company with
respect to the shares of capital stock proposed to be issued, at which closing
the Company shall deliver certificates for the shares of capital stock in the
respective names of the holders of the Series A Preferred against receipt of the
consideration therefor.
(c) Notwithstanding any other provision hereof, the preemptive
rights granted to holders of Series A Preferred by this Section 10 shall
terminate with respect to a share of Series A Preferred upon the conversion or
redemption of such share of Series A Preferred in accordance with the provisions
hereof or in the Articles Supplementary.
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SECTION 11. CONDITIONS TO PURCHASER'S OBLIGATIONS
The Purchaser's obligation to purchase Shares hereunder is
subject to satisfaction of the following conditions at the Closing (any of which
may be waived by the Purchaser); provided that Section 11.11 is a condition to
the obligations to consummate the transaction provided for herein of each of (I)
the Purchaser and (II) the Company:
11.1. Articles Supplementary; Stockholders' Agreement;
Registration Rights Agreement.
(a) The charter of the Company shall have been duly
supplemented by the filing of the Articles Supplementary in the form of Exhibit
A hereto.
(b) The Company, the Purchasers and certain other stockholders
of the Company named therein shall have entered into a Stockholders' Agreement
substantially in the form of Exhibit B hereto.
(c) The Company shall have entered into a Registration Rights
Agreement with the Purchasers substantially in the form of Exhibit C hereto.
11.2. Certificates for Shares.
The Purchaser shall concurrently receive the certificates for
Shares contemplated by Section 2(b) hereof.
11.3. Senior Status.
The Company shall have taken all of the necessary actions,
including the amendment of the appropriate existing agreements, so that, except
as otherwise provided in Section 8.8(b) hereof, the Series A Preferred shall
rank senior in all respects, including the payment on liquidation and
redemption, to all other equity securities of the Company.
11.4. Accuracy of Representations and Warranties.
The representations and warranties of the Company contained in
the Stock Purchase Agreement herein or in any certificate or document delivered
pursuant hereto shall be correct and complete on and as of the Closing Date with
the same effect as though made on and as of the Closing Date (after giving
effect to the transactions contemplated by this Agreement).
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11.5. Compliance with Agreements.
The Company shall have performed and complied in all material
respects with all agreements, covenants and conditions contained in the Stock
Purchase Agreements and any other document contemplated hereby or thereby which
are required to be performed or complied with by the Company on or before the
Closing Date.
11.6. Officers' Certificates.
The Purchaser shall have received a certificate dated the
Closing Date and signed by the President or Chief Executive Officer and by the
Secretary or the Chief Financial Officer of the Company, to the effect that the
conditions of Sections 11.4, 11.5, 11.8 (second sentence only) and 11.9 have
been satisfied.
11.7. Proceedings.
All corporate and other proceedings in connection with the
transactions contemplated by the Stock Purchase Agreements, and all documents
incident thereto, shall be in form and substance satisfactory to the Purchaser
and its counsel, and the Purchaser shall have received all such originals or
certified or other copies of such documents as the Purchaser or its counsel may
reasonably request.
11.8. Legality; Governmental and Other Authorization.
The purchase of and payment for the Shares shall not be
prohibited by any law or governmental order, rule, ruling, regulation, release,
interpretation or opinion applicable to the Purchaser and shall not subject the
Purchaser to any penalty, tax, liability or other onerous condition. Any
necessary consents, approvals, licenses, permits, orders and authorizations of,
and any filings, registrations or qualifications with, any governmental or
administrative agency or other Person, with respect to the transactions
contemplated by the Stock Purchase Agreements shall have been obtained or made
and shall be in full force and effect. The Company shall have delivered to the
Purchaser, upon its reasonable request setting forth what is required, factual
certificates or other evidence, in form and substance satisfactory to the
Purchaser and its counsel, to enable the Purchaser to establish compliance with
this condition.
11.9. No Material Adverse Change.
There shall have been no material adverse change in the
assets, properties, liabilities, business, affairs, results of operations,
condition (financial or otherwise) or prospects of the Company on a consolidated
basis since June 30, 1999, except that (i) its cash position as of September 30,
1999 is $16,369,462 and (ii) except as disclosed in Schedule 11.9 hereto.
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11.10. Opinion of Counsel.
The Purchaser shall have received an opinion, dated the
Closing Date and addressed to the Purchasers, of Piper & Marbury L.L.P., counsel
for the Company, which opinion shall be in form and substance satisfactory to
the Purchaser and its counsel and shall be to the effect set forth in Exhibit D
hereto.
11.11. Additional Purchases of Shares.
The sale and purchase of Shares by the Fleming Funds pursuant
to the Stock Purchase Agreements between each of the Purchasers and the Company
shall be consummated concurrently for an aggregate purchase price of $15,000,000
on the Closing Date.
11.12. Other Documents and Opinions.
The Purchaser shall have received such other documents and
opinions, in form and substance reasonably satisfactory to the Purchaser and its
counsel, relating to matters incident to the transactions contemplated hereby as
the Purchaser may reasonably request.
SECTION 12. BREACH OF REPRESENTATIONS, WARRANTIES AND COVENANTS
(a) The representations, warranties, covenants and agreements
of the Company and the Purchaser contained in this Agreement, the Stockholders'
Agreement, the Registration Rights Agreement or in any document or certificate
delivered pursuant hereto or thereto or in connection herewith shall survive
from the Closing Date, and shall continue in effect following, the execution and
delivery of the Stock Purchase Agreements, the Stockholders' Agreement, the
Registration Rights Agreement, the closings hereunder and thereunder, any
investigation at any time made by the Purchaser or on its behalf or by any other
Person, the issuance, sale and delivery of the Shares, any disposition thereof
and any payment, conversion or cancellation of the Shares; provided that Section
9 shall terminate upon conversion of all of the Shares. All statements contained
in any certificate or other document delivered by or on behalf of the Company
pursuant hereto shall constitute representations and warranties by the Company
hereunder.
(b) The Company agrees to indemnify and hold the Purchaser
harmless from and against and will pay to the Purchaser the full amount of any
loss, damage, liability or expense (including amounts paid in settlement and
reasonable attorneys' fees and expenses) to the Purchaser resulting either
directly or indirectly from any breach of the representations, warranties,
covenants or agreements of the Company contained in any Stock Purchase
Agreement, or in the Stockholders' Agreement, the Registration Rights Agreement
or any other document or certificate delivered pursuant hereto or thereto or in
connection herewith or therewith.
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SECTION 13. SPECIFIC PERFORMANCE
The parties agree that irreparable damage will result in the
event that this Agreement is not specifically enforced, and the parties agree
that any damages available at law for a breach of this Agreement would not be an
adequate remedy. Therefore, the provisions hereof and the obligations of the
parties hereunder shall be enforceable in a court of equity, or other tribunal
with jurisdiction, by a decree of specific performance, and appropriate
injunctive relief may be applied for and granted in connection therewith. Such
remedies and all other remedies provided for in this Agreement shall, however,
be cumulative and not exclusive and shall be in addition to any other remedies
which a party may have under this Agreement or otherwise.
SECTION 14. EXPENSES
(a) Whether or not the transactions herein contemplated are
consummated, the Company shall pay (i) the costs, fees and expenses of the
Company and its counsel in connection with the Stock Purchase Agreements, the
Articles Supplementary, the Stockholders' Agreement and the Registration Rights
Agreement, other related documentation and the issuance of the Shares and the
Conversion Shares and the furnishing of all opinions by counsel for the Company,
(ii) the costs, fees and expenses of Morgan, Lewis & Bockius LLP in connection
with the Stock Purchase Agreements, the Articles Supplementary, the
Stockholders' Agreement and the Registration Rights Agreement, the issuance of
the Shares and the Conversion Shares, other related documentation and the
transactions contemplated hereby and thereby (whether or not a Closing occurs
hereunder) and if the Closing occurs the Company will make such payment on the
Closing Date); provided, however, that (x) such fees and expenses shall not
exceed $60,000 without the approval of the Company and (y) in the event that the
Closing does not occur, the Company shall pay all such costs, fees and expenses
upon the termination of negotiations between the Company and the Fleming
Holders, (iii) the costs, fees and expenses of counsel to the Purchasers in
connection with any amendments to or modifications or waivers of any provisions
of the Stock Purchase Agreements, the Articles Supplementary, the Stockholders'
Agreement or the Registration Rights Agreement, other related documentation or
in connection with any other agreements between the Purchasers and the Company
and (iv) the costs, fees and expenses (including the attorneys' fees and
expenses) of any holder of Shares or Conversion Shares in enforcing its rights
against the Company if the Company defaults in its obligations hereunder, under
the Articles Supplementary, the Stockholders' Agreement or the Registration
Rights Agreement.
(b) In addition to all other sums due hereunder or provided
for in this Agreement, the Company shall pay to the Purchaser or its agents,
respectively, an amount sufficient to indemnify such persons (net of any Taxes
on any indemnity payments) against all reasonable costs and expenses (including
reasonable attorneys' fees and expenses and reasonable
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<PAGE>
costs of investigation) and damages and liabilities incurred by the Purchaser or
its agents pursuant to any investigation or proceeding against any or all of the
Company, the Purchasers, or their agents, arising out of or in connection with
the Stock Purchase Agreements, the Stockholders' Agreement, the Registration
Rights Agreement, the Purchaser's purchase of the Shares (or any transaction
contemplated hereby or thereby or any other document or instrument executed
herewith or therewith or pursuant hereto or thereto), whether or not the
transactions contemplated by the Stock Purchase Agreements are consummated,
which investigation or proceeding requires the participation of the Purchaser or
its agents or is commenced or filed against the Purchaser or its agents because
of the Stock Purchase Agreements, the Stockholders' Agreement, the Registration
Rights Agreement, the Purchaser's purchase of the Shares or any of the
transactions contemplated hereby or thereby (or any other document or instrument
executed herewith or therewith or pursuant hereto or thereto), other than any
investigation or proceeding in which it is finally determined that there was (i)
gross negligence or willful misconduct on the part of the Purchaser or its
agents, (ii) a material breach by Purchaser of any of its representations or
warranties contained herein, (iii) a material breach by the Purchaser of any
provision of the Confidentiality Agreement or any other confidentiality
agreement between the Company and the Purchaser, in any case, which was not made
by the Purchaser in reliance upon any of the Company's representations,
warranties, covenants or agreements in the Stock Purchase Agreements, the
Stockholders' Agreement, the Registration Rights Agreement or in any other
documents or instruments contemplated hereby or thereby or executed herewith or
therewith or pursuant hereto or thereto. The Company shall assume the defense,
and shall appoint counsel (which counsel may be the same counsel that the
Company uses so long as there is no conflict of interest) to represent the
Purchaser and such agents, in connection with investigating, defending or
preparing to defend any such action, suit, claim or proceeding (including any
inquiry or investigation); provided, however, that the Purchaser, or any such
agent, shall have the right (without releasing the Company from any of its
obligations hereunder) to employ its own counsel and either to direct its own
defense or to participate in the Company's defense, but the fees and expenses of
such counsel shall be at the expense of such person unless (i) the employment of
such counsel shall have been authorized in writing by the Company in connection
with such defense, (ii) the Company shall not have provided its counsel to take
charge of such defense or (iii) there may be defenses available to the
Purchaser, or such agent of the Purchaser which are different from or additional
to those available to the Company, then in any of such events referred to in
clauses (i), (ii) or (iii) such counsel fees and expenses (but only for one
counsel for the Purchaser and its agents) shall be borne by the Company. Any
settlement of any such action, suit, claim or proceeding shall require the
consent of both the Company and such indemnified person (neither of which shall
unreasonably withhold its consent).
(c) The Company agrees to pay, or to cause to be paid, all
documentary, stamp and other similar Taxes, other than transfer taxes payable
upon the transfer by the Purchaser of Shares to a Transferee (which transfer
taxes shall be paid by the Transferee), levied under the laws of the United
States of America, any state or local Taxing Authority thereof or therein or any
other applicable jurisdiction in connection with the issuance and sale of the
Shares, the conversion of Shares into Conversion Shares and the execution and
delivery of the Stock
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Purchase Agreements, the Stockholders' Agreement, the Registration Rights
Agreement and any other documents or instruments contemplated hereby or thereby
and any modification of the Stock Purchase Agreements, the Articles
Supplementary, the Stockholders' Agreement or the Registration Rights Agreement
or any such other documents or instruments and will hold the Purchaser harmless
without limitation as to time against any and all liabilities with respect to
all such Taxes.
(d) The obligations of the Company under this Section 14 shall
survive the Closing hereunder and any termination of the Stock Purchase
Agreements.
SECTION 15. DIRECT PAYMENTS
As long as the Purchaser or any institutional holder which is
a direct or indirect transferee (as a result of one or more transfers) from the
Purchaser shall be the holder of any Shares, the Company will make all
redemption payments, liquidation payments and other distributions by wire
transfer to the Purchaser's or such other holder's (or its nominee's) account at
any bank or trust company, notwithstanding any contrary provision herein or in
the Company's charter with respect to the place of payment. The Purchaser has
provided an address on Schedule 1 hereto for payments by wire transfer, and such
address may be changed for the Purchaser or any subsequent holder by notice to
the Company. All such payments shall be made in U.S. dollars and in federal or
other immediately available funds.
SECTION 16. AMENDMENTS AND WAIVERS
(a) The terms and provisions of this Agreement may be amended,
waived, modified or terminated only with the written consent of the holders of
more than 50% of outstanding Shares; provided, however, that no such amendment,
waiver, modification or termination shall change this Section 16(a) without the
written consent of the holders of all the Shares and the Conversion Shares then
outstanding.
(b) Promptly after obtaining the written consent of the
holders as herein provided, the Company shall transmit a copy of any amendment,
waiver, modification or termination which has been adopted to all holders of
Shares and Conversions Shares then outstanding, but failure to transmit copies
shall not in any way affect the validity of any such amendment, waiver,
modification or termination.
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SECTION 17. EXCHANGE OF SHARES; CANCELLATION OF SURRENDERED SHARES; REPLACEMENT
(a) Subject to Section 6 hereof, at any time at the request of
any holder of Shares to the Company at its address provided under Section 18
hereof, the Company at its expense (other than transfer taxes payable upon the
transfer by the Purchaser of Shares to a Transferee, which transfer taxes shall
be paid by the Transferee) will issue and deliver to or upon the order of the
holder in exchange therefor a new certificate or certificates in such amount or
amounts as such holder may request in the aggregate representing the number of
Shares represented by such surrendered certificates, and registered in the name
of such holder or as such holder may direct.
(b) Any Share certificate which is converted into Conversion
Shares in whole or in part shall be canceled by the Company, and no new Share
certificates shall be issued in lieu of any Shares which have been converted
into Conversion Shares. The Company shall issue a new certificate with respect
to any Shares which were not converted into Conversion Shares and were
represented by a certificate which was converted in part.
(c) Upon receipt of evidence satisfactory to the Company of
the loss, theft, destruction or mutilation of any Share certificate and, in the
case of any such loss, theft or destruction, upon delivery of an indemnity
agreement reasonably satisfactory to the Company (if requested by the Company
and unsecured in the case of the Purchaser or another similar institutional
holder), or in the case of any such mutilation, upon surrender of such Share
certificate (which surrendered Share certificate shall be canceled by the
Company), the Company will issue a new Share certificate of like tenor in lieu
of such lost, stolen, destroyed or mutilated Share certificate as if the lost,
stolen, destroyed or mutilated Share certificate were then surrendered for
exchange.
SECTION 18. NOTICES
All notices, requests, demands, consents and other
communications hereunder shall be in writing and shall be delivered by hand or
shall be sent by telex or telecopy (confirmed by registered, certified or
overnight mail or courier, postage and delivery charges prepaid), (i) if to the
Company, to Caliber Learning Network, Inc., 509 South Exeter Street, Baltimore,
MD 21202, Attention: Rick P. Frier, with a copy to Piper & Marbury L.L.P., 36
South Charles Street, Baltimore, MD 21201, Attention: Richard C. Tilghman, Jr.
or (ii) if to the Purchaser, at the address indicated on Schedule 1 hereto, with
a copy to Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, NY 10178-0060,
Attention: David W. Pollak, Esq., or at such other address as a party may from
time to time designate as its address in writing to the other party to this
Agreement. Whenever any notice is required to be given hereunder, such notice
shall be deemed given and such requirement satisfied only when such notice is
delivered or, if sent by telex or telecopier, when received.
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<PAGE>
SECTION 19. MISCELLANEOUS
(a) The Stock Purchase Agreements, the Stockholders'
Agreement, the Registration Rights Agreement and, upon the closing hereunder,
the Articles Supplementary, together with any further agreements entered into by
the Purchaser and the Company at the closing hereunder, contain the entire
agreement between the Purchaser and the Company, and supersede any prior oral or
written agreements, commitments, terms or understandings, regarding the subject
matter hereof.
(b) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, the parties
hereby waive any provision of law which may render any provision hereof
prohibited or unenforceable in any respect.
(c) This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns,
whether so expressed or not; provided, that (a) the Company may not assign any
of its rights, duties or obligations under this Agreement, except with the
Purchaser's written consent, and (b) the Purchaser may assign any of its rights,
duties or obligations under this Agreement to a purchaser of its Shares,
provided that such purchaser is reasonably acceptable to the Company.
(d) In addition to any assignment by operation of law, the
Purchaser may assign, in whole or in part, any or all of its rights (and/or
obligations) under this Agreement to any transferee of any or all of its Shares
or Conversion Shares, and (unless such assignment expressly provides otherwise)
any such assignment shall not diminish the rights the Purchaser would otherwise
have under this Agreement or with respect to any remaining Shares or Conversion
Shares held by the Purchaser.
(e) No course of dealing and no delay on the part of any party
hereto in exercising any right, power, or remedy conferred by this Agreement
shall operate as a waiver thereof or otherwise prejudice such party's rights,
powers and remedies. No single or partial exercise of any right, power or remedy
conferred by this Agreement shall preclude any other or further exercise thereof
or the exercise of any other right, power or remedy.
(f) The headings and captions in this Agreement are for
convenience of reference only and shall not define, limit or otherwise affect
any of the terms or provisions hereof.
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(g) This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York (other than any conflict of
laws rule which might result in the application of the laws of any other
jurisdiction).
(h) This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument, and all signatures need not appear on any one counterpart.
(i) THE COMPANY HEREBY CONSENTS TO THE JURISDICTION OF ANY
STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK
AND IRREVOCABLY AGREES THAT, SUBJECT TO THE PURCHASER'S ELECTION, ALL ACTIONS OR
PROCEEDINGS RELATING TO THIS AGREEMENT, THE ARTICLES SUPPLEMENTARY, THE
STOCKHOLDERS'' AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT, THE SHARES OR THE
CONVERSION SHARES MAY BE LITIGATED IN SUCH COURTS. THE COMPANY ACCEPTS FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, THE ARTICLES SUPPLEMENTARY,
THE STOCKHOLDERS' AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT, THE SHARES OR
THE CONVERSION SHARES. THE COMPANY HEREBY AGREES THAT SERVICE OF ALL PROCESS IN
ANY SUCH PROCEEDING IN ANY SUCH COURT SHALL BE RECEIVED BY THE COMPANY AT THE
COMPANY'S HEADQUARTERS AT THE ADDRESS AND TO THE ATTENTION OF SUCH PERSON
DESIGNATED PURSUANT TO SECTION 18 HEREOF, AND SUCH SERVICE BEING HEREBY
ACKNOWLEDGED BY THE COMPANY TO BE EFFECTIVE AND BINDING SERVICE IN EVERY
RESPECT. A COPY OF ANY SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL
TO THE COMPANY AT THE ADDRESS OF THE COMPANY PROVIDED HEREUNDER EXCEPT THAT
UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL
NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS. AS AN ALTERNATIVE TO SERVICE OF
PROCESS ON SUCH AGENT (WHETHER OR NOT ANY SUCH AGENT HAS BEEN APPOINTED), THE
COMPANY HEREBY AGREES THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT
NOTICE AND SERVICE OF PROCESS. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE
PURCHASER TO BRING PROCEEDINGS OR OBTAIN OR ENFORCE JUDGMENTS AGAINST THE
COMPANY IN THE COURTS OF ANY OTHER JURISDICTION.
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<PAGE>
(j) THE COMPANY AND THE PURCHASER HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT, THE ARTICLES SUPPLEMENTARY, THE STOCKHOLDERS'
AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT, THE SHARES OR THE CONVERSION
SHARES, OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS
TRANSACTION. THE COMPANY AND THE PURCHASER ALSO WAIVE ANY BOND OR SURETY OR
SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF THE
PURCHASER. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY
AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT
MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT
CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.
THE COMPANY AND THE PURCHASER FURTHER WARRANT AND REPRESENT THAT EACH HAS
REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO (OR ASSIGNMENTS OF) THIS AGREEMENT,
THE ARTICLES SUPPLEMENTARY, THE STOCKHOLDERS' AGREEMENT, THE REGISTRATION RIGHTS
AGREEMENT, THE SHARES OR THE CONVERSION SHARES. IN THE EVENT OF LITIGATION, THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL (WITHOUT A JURY) BY THE
COURT.
[remainder of page intentionally left blank]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
CALIBER LEARNING NETWORK, INC.
By /s/ Chris L. Nguyen
-------------------------------------
Name: Chris L. Nguyen
Title: President and Chief
Executive Officer
Accepted and Agreed to as of the
date first above written by the
undersigned Purchaser:
ROBERT FLEMING NOMINEES LIMITED
By: /s/
----------------------------
[Signature page to Stock Purchase Agreement]
<PAGE>
Schedule 1
to the Stock Purchase Agreement
Name of Number of Aggregate
Purchaser Shares Purchase Price
--------- ------ -------------
Fleming US Discovery 107,728 $10,772,800
Fund III, L.P.
Fleming US Discovery 17,272 $ 1,727,200
Offshore Fund III, L.P.
Robert Fleming Nominees 25,000 $ 2,500,000
Limited
(a) address for communications:
c/o Fleming Asset Management USA
320 Park Avenue, 11th Floor
New York, NY 10022
Attention: Robert L. Burr
David J. Edwards
(b) address for payments by
wire transfer:
(i) Fleming US Discovery Fund III, L.P.
Chase Manhattan Bank
ABA # 021000021
A/C: Fleming US Discovery Fund III, L.P.
A/C # 400-704129
(ii) Fleming US Discovery Offshore Fund III, L.P.
Citibank, N.A.
ABA # 021000089 / Chips UID# 0008 / Swift Code -
CITIUS33
A/C: The Bank of Bermuda Limited, Hamilton,
Bermuda
Chips UID# 005584
Swift Code: BBDA BM HM
A/C: Fleming US Discovery Offshore Fund III, L.P.
A/C # 0246769
(iii) Robert Fleming Nominees Limited
EXECUTION COPY
================================================================================
REGISTRATION RIGHTS AGREEMENT
dated as of
October 26, 1999
among
Caliber Learning Network, Inc.,
Fleming US Discovery Fund III, L.P.,
Fleming US Discovery Offshore Fund III, L.P.
and
Robert Fleming Nominees Limited
================================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
ARTICLE I.........................................................................................................1
DEMAND REGISTRATIONS.....................................................................................1
1.1 Requests for Registration............................................................1
1.2 Limitations on Demand Registrations..................................................2
1.3 Effective Registration Statement.....................................................2
1.4 Priority on Demand Registrations.....................................................2
1.5 Selection of Underwriters............................................................3
1.6 Other Registration Rights............................................................3
ARTICLE II........................................................................................................3
OTHER REGISTRATIONS......................................................................................3
2.1 Right to Piggyback...................................................................3
2.2 Priority on Primary Registrations....................................................3
2.3 Priority on Secondary Registrations..................................................3
2.4 Other Registrations..................................................................4
ARTICLE III.......................................................................................................4
REGISTRATION PROCEDURES..................................................................................4
ARTICLE IV........................................................................................................8
REGISTRATION EXPENSES....................................................................................8
ARTICLE V.........................................................................................................8
UNDERWRITTEN OFFERINGS...................................................................................8
5.1 Demand Underwritten Offerings........................................................8
5.2 Incidental Underwritten Offerings....................................................9
ARTICLE VI........................................................................................................9
INDEMNIFICATION..........................................................................................9
6.1 Indemnification by the Company.......................................................9
6.2 Indemnification by Holders..........................................................10
6.3 Indemnification Procedures..........................................................11
6.4 Indemnification of Underwriters.....................................................12
6.5 Contribution........................................................................12
6.6 Timing of Indemnification Payments..................................................13
ARTICLE VII......................................................................................................13
RULE 144................................................................................................13
<PAGE>
Page
ARTICLE VIII.....................................................................................................13
PARTICIPATION IN UNDERWRITTEN REGISTRATIONS.............................................................13
ARTICLE IX.......................................................................................................14
MERGERS, ETC............................................................................................14
ARTICLE X........................................................................................................14
DEFINITIONS.............................................................................................14
ARTICLE XI.......................................................................................................16
MISCELLANEOUS...........................................................................................16
11.1 No Inconsistent Agreements..........................................................16
11.2 Adjustments Affecting Registrable Securities........................................16
11.3 Remedies............................................................................16
11.4 Amendments and Waivers..............................................................16
11.5 Successors and Assigns..............................................................16
11.6 Notices.............................................................................17
11.7 Headings............................................................................18
11.8 Gender..............................................................................18
11.9 Invalid Provisions..................................................................18
11.10 Governing Law.......................................................................18
11.11 Counterparts........................................................................18
</TABLE>
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement is dated as of October 26,
1999, among Caliber Learning Network, Inc., a Maryland corporation (the
"Company"), Fleming US Discovery Fund III, L.P., Fleming US Discovery Offshore
Fund III, L.P., and Robert Fleming Nominees Limited (collectively, the "Fleming
Funds"). The Fleming Funds, any Fleming Holder and any Transferee are
collectively referred to herein as the "Investors" and, individually, an
"Investor." Capitalized terms used and not otherwise defined herein have the
respective meanings ascribed thereto in Article X.
W I T N E S S E T H:
WHEREAS, simultaneously herewith, the Fleming Funds have
purchased an aggregate of 150,000 shares of Series A Convertible Preferred Stock
pursuant to the terms of the Stock Purchase Agreements;
WHEREAS, it is a condition to the consummation of the
transactions contemplated by the Stock Purchase Agreements that the Company and
the Fleming Funds enter into this Agreement whereby the Company shall grant, and
the Investors shall obtain, the rights relating to the registration of the
Registrable Securities under the Securities Act, as set forth in this Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
DEMAND REGISTRATIONS
1.1 REQUESTS FOR REGISTRATION. Subject to Section 1.2, at any
time and from time to time on or after the date hereof, the Fleming Holders and
any Transferee may request registration under the Securities Act of all or part
of their Registrable Securities which registration shall be filed (i) on Form
S-1 or any similar long-form registration available to the Company ("Long-Form
Demand Registration"), or (ii) on Form S-3 or any similar short-form
registration ("Short Form Demand Registration"). Thereafter, the Company will
use its best efforts to promptly effect the registration of such Registrable
Securities under the Securities Act on the form requested by the holder or
holders making such registration request. All registrations requested pursuant
to this Section 1.1 are referred to herein as "Demand Registrations." Upon
<PAGE>
receipt of a request for a Demand Registration, the Company will give prompt
written notice (in any event within five (5) Business Days after its receipt of
such request) of the request for a Demand Registration to all holders of
Registrable Securities not making such request and will include in such Demand
Registration all Registrable Securities with respect to which the Company has
received written requests for inclusion therein within ten (10) days after the
receipt of the Company's notice. The holders of the Registrable Securities
making any such registration request may, at any time prior to the effective
date of the registration statement relating to any Demand Registration, revoke
such Demand Registration request by providing written notice to the Company.
1.2 LIMITATIONS ON DEMAND REGISTRATIONS. The holders of the
Registrable Securities, as a group, shall be entitled to (i) one (1) Long-Form
Demand Registration and (ii) two (2) Short-Form Demand Registrations.
1.3 EFFECTIVE REGISTRATION STATEMENT. (a) A Demand
Registration requested pursuant to Section 1.1 of this Agreement shall not be
deemed to have been effected (i) unless a registration statement with respect
thereto has become effective, (ii) if after it has become effective, such
registration is interfered with by any stop order, injunction or other order or
requirement of the Securities and Exchange Commission (the "SEC") or other
governmental agency or court for any reason, and the Registrable Securities
covered thereby have not been sold, or (iii) if the conditions to closing
specified in the purchase agreement or underwriting agreement entered into in
connection with such registration are not satisfied by reason of (x) a failure
by or inability of the Company to satisfy any thereof, or (y) the occurrence of
an event outside the control of the holders of Registrable Securities.
(b) A Demand Registration requested pursuant to Section 1.1(a)
of this Agreement shall not be deemed to have been effected if holders of
Registrable Securities are not able to register and sell at least 80% of the
amount of Registrable Securities requested to be included in such registration.
1.4 PRIORITY ON DEMAND REGISTRATIONS. The Company will not
include in any Demand Registration any securities which are not Registrable
Securities without the written consent of the Fleming Holders. If other
securities are permitted to be included in a Demand Registration which is an
underwritten offering and the managing underwriters advise the Company in
writing that in their opinion the number of Registrable Securities exceeds the
number of Registrable Securities which can be sold in such offering within a
price range acceptable to the Fleming Holders, the Company will include in such
registration prior to the inclusion of any securities which are not Registrable
Securities the number of Registrable Securities requested to be included which
in the opinion of such underwriters can be sold within a price range acceptable
to the Fleming Holders, pro rata among the respective holders on the basis of
the amount of Registrable Securities requested to be offered thereby.
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<PAGE>
1.5 SELECTION OF UNDERWRITERS. The Fleming Holders will have
the right to select the underwriters and the managing underwriters to administer
a Demand Registration, provided that such underwriters and managing underwriters
shall be reasonably acceptable to the Company.
1.6 OTHER REGISTRATION RIGHTS. The Company may grant to any
Person the right to request the Company to register any equity securities of the
Company, or any securities convertible, exchangeable or exercisable for or into
such securities ("Other Securities"); provided, however, that all such
registration rights shall be subordinate in all respects to the registration
rights held by the holders of the Registrable Securities.
ARTICLE II
OTHER REGISTRATIONS
2.1 RIGHT TO PIGGYBACK. Whenever the Company proposes to
register any of its securities under the Securities Act (other than pursuant to
a Demand Registration), and the registration form to be used may be used for the
registration of Registrable Securities (a "Piggyback Registration"), the Company
will give prompt written notice (in any event within three (3) Business Days
after its receipt of notice of any exercise of other demand registration rights)
to all holders of Registrable Securities of its intention to effect such a
registration and will include in such registration all Registrable Securities
with respect to which the Company has received written requests for inclusion
therein within ten (10) days after the receipt of the Company's notice.
2.2 PRIORITY ON PRIMARY REGISTRATIONS. If a Piggyback
Registration is an underwritten primary registration on behalf of the Company,
and the managing underwriters advise the Company in writing that in their
opinion the number of securities requested to be included in such registration
exceeds the number which can be sold in such offering at a price range which is
acceptable to the Company, the Company will include in such registration (i)
first, the securities the Company proposes to sell, (ii) second, the Registrable
Securities requested to be included in such registration and (iii) third, other
securities requested to be included in such registration.
2.3 PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback
Registration is an underwritten secondary registration on behalf of holders of
the Company's securities, and the managing underwriters advise the Company in
writing that in their opinion the number of securities requested to be included
in such registration exceeds the number which can be sold in such offering at a
price acceptable to the holders of the Company's securities, the Company will
include in such registration (i) first, the securities requested to be included
therein by the holders requesting such registration, (ii) second, the
Registrable Securities requested to be included in such registration, and (iii)
third, other securities requested to be included in such registration. The
Company hereby agrees that whenever it grants piggyback rights to any holder of
its
-3-
<PAGE>
securities such holder's piggyback rights will be expressly subordinated to the
piggyback rights granted to the holders of the Registrable Securities under this
Article II.
2.4 OTHER REGISTRATIONS. If the Company has previously filed
a registration statement for a Long-Form Demand Registration with respect to
Registrable Securities pursuant to Article I of this Agreement or pursuant to
this Article II, or previously filed underwritten registration of shares of the
Company's Common Stock which includes shares sold for the Company's account
("Company Registration"), and if such previous registration has not been
withdrawn or abandoned, the Company will not file or cause to be effected any
other registration of any of its equity securities or securities convertible,
exchangeable or exercisable for or into its equity securities under the
Securities Act (except on Form S-4 or S-8 or any successor form), whether on its
own behalf or at the request of any holder or holders of such securities other
than the holders of the Registrable Securities, until a period of at least three
(3) months elapsed from the effective date of such previous registration.
ARTICLE III
REGISTRATION PROCEDURES
Whenever the holders of Registrable Securities have requested
that any Registrable Securities be registered pursuant to this Agreement, the
Company will use its best efforts to effect the registration and the sale of
such Registrable Securities in accordance with the intended method of
registration thereof, and pursuant thereto the Company will as expeditiously as
possible or, in the case of clause (q) below, will not:
(a) promptly prepare and file with the SEC a registration
statement with respect to such Registrable Securities (such registration
statement to include all information which the holders of the Registrable
Securities to be registered thereby shall reasonably request) and use its best
efforts to promptly cause such registration statement to become effective,
provided that at least five days before filing a registration statement or
prospectus or any amendments or supplements thereto, the Company will (i)
furnish to counsel selected by the Fleming Holders, copies of all such documents
proposed to be filed, and the Company shall not , in the case of a Demand
Registration, file any such documents to which such counsel shall have objected
on the grounds that such document does not comply in all material respects with
the requirements of the Securities Act or of the rules or regulations
thereunder, and (ii) notify each holder of Registrable Securities covered by
such registration statement of (x) any request by the SEC to amend such
registration statement or amend or supplement any prospectus or (y) any stop
order issued or threatened by the SEC, and take all reasonable actions required
to prevent the entry of such stop order or to remove it if entered;
(b) (i) promptly prepare and file with the SEC such amendments
and supplements to such registration statement and the prospectus used in
connection therewith as
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may be necessary (A) in the case of a Long-Form Demand Registration, to keep
such registration statement effective for a period of not less than 180 days
(except that such 180-day period shall be (I) shortened to the extent that all
shares are sold thereunder, or (II) extended (x) by the length of any period
that a stop order or similar proceeding is in effect which prohibits the
distribution of the Registrable Securities, and (y) by the number of days during
the period from and including the date on which each seller of Registrable
Securities shall have received a notice delivered pursuant to clause (f) below
until the date when such seller shall have received a copy of the supplemented
or amended prospectus contemplated by clause (f) below), and (B) in the case of
a Shelf Registration, keep such registration statement continually effective,
(ii) comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement during such
period in accordance with the intended methods of disposition by the sellers
thereof set forth in such registration statement;
(c) as soon as reasonably possible furnish to each seller of
Registrable Securities, without charge, such number of conformed copies of such
registration statement, each amendment and supplement thereto, the prospectus
included in such registration statement (including each preliminary prospectus
and prospectus supplement and, in each case, including all exhibits) and such
other documents as such seller may reasonably request, all in conformity with
the requirements of the Securities Act, in order to facilitate the disposition
of the Registrable Securities owned by such seller;
(d) use its best efforts promptly to register or qualify the
Shares under such other securities or blue sky laws of such jurisdictions as any
seller thereof shall reasonably request, to keep such registration or
qualification in effect for so long as such registration statement remains in
effect and to do any and all other acts and things which may be reasonably
necessary or advisable to enable such seller to consummate the disposition in
such jurisdictions of the Registrable Securities owned by such seller, provided,
however, that the Company will not be required to (i) qualify generally to do
business as a foreign corporation in any jurisdiction where it would not
otherwise be required to qualify but for this clause (d), (ii) subject itself to
taxation in any such jurisdiction or (iii) consent to general service of process
in any such jurisdiction;
(e) furnish to each seller of Registrable Securities a signed
copy, addressed to such seller (and the underwriters, if any) of an opinion of
counsel for the Company or special counsel to the selling stockholders, dated
the effective date of such registration statement (and, if such registration
statement includes an underwritten public offering, dated the date of the
closing under the underwriting agreement), reasonably satisfactory in form and
substance to counsel selected by the Fleming Holders, covering substantially the
same matters with respect to such registration statement (and the prospectus
included therein) as are customarily covered in opinions of issuer's counsel
delivered to the underwriters in underwritten public offerings, and such other
legal matters as the seller (or the underwriters, if any) may reasonably
request;
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(f) promptly notify each seller of Registrable Securities, at
a time when a prospectus relating to the Shares is required to be delivered
under the Securities Act, of the Company's becoming aware that the prospectus
included in such registration statement, as then in effect, contains an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances under which they were made, and, at the request of
any such seller, promptly prepare and furnish such seller a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be necessary
so that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in light of the circumstances
under which they were made;
(g) cause all of the Shares to be listed or quoted, and to
continue to be listed or quoted on the American Stock Exchange, other national
securities exchange, the Nasdaq National Market or the Nasdaq Small-Cap Market,
on which the Common Stock of the Company is then listed, if the listing of such
Shares is then permitted under the rules of such exchange or The NASDAQ Stock
Market;
(h) provide a transfer agent and registrar for all of the
Shares not later than the effective date of such registration statement;
(i) enter into such customary arrangements and take all such
other actions as the Fleming Holders or the underwriters, if any, reasonably
request in order to expedite or facilitate the disposition of the Shares;
(j) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent retained by
any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement, in each case
pursuant to confidentiality agreements, as appropriate;
(k) cause the Company's officers to make presentations to
potential purchasers of the Shares, as reasonably requested by any seller of
Registrable Securities or any underwriter participating in any disposition
pursuant to such registration statement;
(l) subject to other provisions hereof, use its best efforts
to cause the Shares to be registered with or approved by such other governmental
agencies or authorities or self-
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regulatory organizations as may be necessary to enable the sellers thereof to
consummate the disposition of the Shares;
(m) in connection with (i) a Short-Form Demand Registration or
a Piggyback Registration, if any other participant in such Short-Form Demand
Registration or Piggyback Registration, as the case may be, receives a "comfort"
letter as described herein, or (ii) a Long-Form Demand Registration, use its
best efforts to obtain a "comfort" letter, dated the effective date of such
registration statement (and, if such registration includes an underwritten
offering, dated the date of the closing under the underwriting agreement),
signed by the independent public accountants who have certified the Company's
financial statements, addressed to each seller, and to the underwriters, if any,
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and with respect to events
subsequent to the date of such financial statements, as are customarily covered
in accountants' letters delivered to the underwriters in underwritten public
offerings of securities and such other financial matters as such seller (or the
underwriters, if any) may reasonably request;
(n) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC and make available to its security
holders, in each case as soon as practicable, an earning statement covering a
period of at least twelve months, beginning after the effective date of the
registration statement, which earning statement shall satisfy the provisions of
Section 11(a) of the Securities Act;
(o) permit any holder of Registrable Securities, which holder,
in the sole judgment exercised in good faith of such holder, might be deemed to
be a controlling person of the Company (within the meaning of the Securities Act
or the Exchange Act), to participate in the preparation of any registration
statement covering such holder's Registrable Securities and to include therein
material, furnished to the Company in writing, which in the reasonable judgment
of such holder should be included and which is reasonably acceptable to the
Company;
(p) use every reasonable effort to obtain the lifting at the
earliest possible time of any stop order suspending the effectiveness of any
registration statement or of any order preventing or suspending the use of any
preliminary prospectus;
(q) at any time file or make any amendment to a registration
statement, or any amendment of or supplement to a prospectus (including
amendments of the documents incorporated by reference into the prospectus), of
which each seller of Registrable Securities or the managing underwriters shall
not have previously been advised and furnished a copy or to which the sellers of
Registrable Securities, the managing underwriters, or counsel for such sellers
or for the underwriters shall reasonably object; and
(r) make such representations and warranties (subject to
appropriate disclosure schedule exceptions) to sellers of Registrable Securities
and the underwriters, if any,
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in form, substance and scope as are customarily made by issuers to underwriters
and selling holders, as the case may be, in underwritten public offerings of
substantially the same type.
ARTICLE IV
REGISTRATION EXPENSES
All expenses incident to the Company's performance of or
compliance with this Agreement, including without limitation, all registration
and filing fees, fees and expenses of compliance with securities or blue sky
laws, printing expenses, messenger and delivery expenses, fees and expenses for
listing or quoting the Shares on each securities exchange or The NASDAQ Stock
Market on which similar securities issued by the Company are then listed or
quoted, and fees and disbursements of counsel for the Company, reasonable fees
and disbursement of one counsel chosen by the Fleming Holders, any transfer
agent and all independent certified public accountants, underwriters (excluding
discounts and selling commissions) and other Persons retained by the Company in
connection with any Demand Registration or any Piggyback Registration (all such
expenses being herein called "Registration Expenses"), will be paid by the
Company.
ARTICLE V
UNDERWRITTEN OFFERINGS
5.1 DEMAND UNDERWRITTEN OFFERINGS. If requested by the
underwriters for any underwritten offerings of Registrable Securities pursuant
to a Demand Registration, the Company will enter into an underwriting agreement
with such underwriters for such offering, such agreement to be reasonably
satisfactory in substance and form to the Company, the Fleming Holders and the
underwriters, and to contain such representations and warranties by the Company
and such other terms as are generally included in agreements of this type,
including, without limitation, indemnities customarily included in such
agreements. The holders of Registrable Securities to be distributed by such
underwriters may be parties to such underwriting agreement and may, at their
option, require that any or all of the representations and warranties by, and
the other agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of such holders of
Registrable Securities and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be conditions
precedent to the obligations of such holders of Registrable Securities. The
Company shall cooperate with any such holder of Registrable Securities in order
to limit any representations or warranties to, or agreements with, the Company
or the underwriters to be made by such holder only to those representations,
warranties or agreements regarding such holder, such holder's Registrable
Securities and such holder's intended method of distribution and any other
representation required by law.
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5.2 INCIDENTAL UNDERWRITTEN OFFERINGS. If the Company at any
time proposes to register any of its securities under the Securities Act as
contemplated by Article II of this Agreement and such securities are to be
distributed by or through one or more underwriters, the Company will, if
requested by any holder of Registrable Securities as provided in Article II of
this Agreement, arrange for such underwriters to include all the Registrable
Securities to be offered and sold by such holder, subject to the limitations set
forth in Article II hereof, among the securities to be distributed by such
underwriters. The holders of Registrable Securities to be distributed by such
underwriters shall be parties to the underwriting agreement between the Company
and such underwriters, and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such holders of Registrable Securities and that any or all of
the conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of such
holders of Registrable Securities. The Company shall cooperate with any such
holder of Registrable Securities in order to limit any representations or
warranties to, or agreements with, the Company or the underwriters to be made by
such holder only to those representations, warranties or agreements regarding
such holder, such holder's Registrable Securities and such holder's intended
method of distribution and any other representation required by law.
ARTICLE VI
INDEMNIFICATION
6.1 INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnify and hold harmless, to the extent permitted by law, each of the holders
of any Registrable Securities covered by any registration statement prepared
pursuant to this Agreement, each other Person, if any, who controls such holder
within the meaning of the Securities Act or the Exchange Act, and each of their
respective directors, general partners and officers, as follows:
(i) against any and all loss, liability, claim,
damage and expense arising out of or based upon an untrue
statement or alleged untrue statement of a material fact
contained in any registration statement (or any amendment or
supplement thereto), including all documents incorporated
therein by reference, or in any preliminary prospectus or
prospectus (or any amendment or supplement thereto) or the
omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading;
(ii) against any and all loss, liability, claim,
damage and expense to the extent of the aggregate amount paid
in settlement of any litigation, investigation or proceeding
by any governmental agency or body, commenced or threatened,
or of any claim whatsoever based upon any such untrue
statement or omission or any
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such alleged untrue statement or omission, if such settlement
is effected with the written consent of the Company; and
(iii) against any and all expense incurred by them in
connection with investigating, preparing or defending against
any litigation, investigation or proceeding by any
governmental agency or body, commenced or threatened, or any
claim whatsoever based upon any such untrue statement or
omission or any such alleged untrue statement or omission, to
the extent that any such expense is not paid under clause (i)
or (ii) above;
provided, that this indemnity does not apply to any loss, liability, claim,
damage or expense to the extent arising out of an untrue statement or alleged
untrue statement or omission or alleged omission made in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
any holder expressly for use in the preparation of any registration statement
(or any amendment or supplement thereto), including all documents incorporated
therein by reference, or in any preliminary prospectus or prospectus (or any
amendment or supplement thereto); and provided further, that the Company will
not be liable to any holder under the indemnity agreement in this Section 6.1,
with respect to any preliminary prospectus or the final prospectus or the final
prospectus as amended or supplemented, as the case may be, to the extent that
any such loss, liability, claim, damage or expense of such controlling Person or
holder results from the fact that such holder sold Registrable Securities to a
Person to whom there was not sent or given, at or prior to the written
confirmation of such sale, a copy of the final prospectus or of the final
prospectus as then amended or supplemented, whichever is most recent, if the
Company has previously and timely furnished copies thereof to such holder. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such holder or any such director, officer, general
partner, or other controlling person and shall survive the transfer of such
securities by such seller.
6.2 INDEMNIFICATION BY HOLDERS. In connection with any
registration statement in which a holder of Registrable Securities is
participating, each such holder agrees to indemnify and hold harmless (in the
same manner and to the same extent as set forth in Section 6.1 of this
Agreement), to the extent permitted by law, the Company and its directors,
officers and controlling Persons, and their respective directors, officers and
general partners, with respect to any statement or alleged statement in or
omission or alleged omission from such registration statement, any preliminary,
final or summary prospectus contained therein, or any amendment or supplement
thereto, if such statement or alleged statement or omission or alleged omission
was made in reliance upon and in conformity with written information furnished
to the Company by or on behalf of such holder, specifically stating that it is
for use in the preparation of such registration statement, preliminary, final or
summary prospectus or amendment or supplement. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Company, or such holder, as the case may be, or any of their respective
directors, officers, controlling Persons or general partners and shall survive
the transfer of such
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securities by such holder. The obligations of each holder of Registrable
Securities pursuant to this Section 6.2 are to be several and not joint;
provided, that, with respect to each claim pursuant to this Section 6.2, each
such holder's maximum liability under this Section shall be limited to an amount
equal to the net proceeds actually received by such holder (after deducting any
underwriting discount and expenses) from the sale of Registrable Securities
being sold pursuant to such registration statement or prospectus by such holder.
6.3 INDEMNIFICATION PROCEDURES. Promptly after receipt by an
indemnified party hereunder of written notice of the commencement of any action
or proceeding involving a claim referred to in Section 6.1 or Section 6.2 of
this Agreement, such indemnified party will, if a claim in respect thereof is to
be made against an indemnifying party, give written notice to the latter of the
commencement of such action; provided, that the failure of any indemnified party
to give notice as provided herein shall not relieve the indemnifying party of
its obligations under Section 6.1 or Section 6.2 of this Agreement except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any such action is brought against an indemnified party,
the indemnifying party will be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly notified,
to the extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party for any legal or
other expenses subsequently incurred by the latter in connection with the
defense thereof, unless a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, in which case the
indemnifying party shall not be liable for the fees and expenses of (i) more
than one counsel for all holders of Registrable Securities, selected by the
Fleming Holders, or (ii) more than one counsel for the Company in connection
with any one action or separate but similar or related actions. An indemnifying
party who is not entitled to, or elects not to, assume the defense of a claim
will not be obligated to pay the fees and expenses of more than one counsel for
all parties indemnified by such indemnifying party with respect to such claim,
unless a conflict of interest may exist between such indemnified party and any
other of such indemnified parties with respect to such claim, in which event the
indemnifying party shall be obligated to pay the fees and expenses of such
additional counsel or counsels. The indemnifying party will not, without the
prior written consent of each indemnified party, settle or compromise or consent
to the entry of any judgment in any pending or threatened claim, action, suit or
proceeding in respect of which indemnification may be sought hereunder (whether
or not such indemnified party or any Person who controls such indemnified party
is a party to such claim, action, suit or proceeding), unless such settlement,
compromise or consent includes an unconditional release of such indemnified
party from all liability arising out of such claim, action, suit or proceeding.
Notwithstanding anything to the contrary set forth herein, and without limiting
any of the rights set forth above, in any event any party will have the right to
retain, at its own expense, counsel with respect to the defense of a claim.
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6.4 INDEMNIFICATION OF UNDERWRITERS. The Company and each
holder of Registrable Securities requesting registration shall provide for the
foregoing indemnity in any underwriting agreement with respect to any required
registration or other qualification of securities under any Federal or state law
or regulation of any governmental authority other than the Securities Act.
6.5 CONTRIBUTION. If the indemnification provided for in
Sections 6.1 and 6.2 of this Agreement is unavailable or insufficient to hold
harmless an indemnified party under such Sections, then each indemnifying party
shall contribute to the amount paid or payable to such indemnified party as a
result of the losses, claims, damages or liabilities referred to in Section 6.1
or Section 6.2 of this Agreement in such proportion as is appropriate to reflect
the relative fault of the indemnifying party on the one hand, and the
indemnified party on the other, in connection with statements or omissions which
resulted in such losses, liabilities, claims, damages or expenses, as well as
any other relevant equitable considerations, including, without limitation, the
relative benefits received by each party from the offering of the securities
covered by such registration statement, the parties' relative knowledge and
access to information concerning the matter with respect to which the claim was
asserted and the opportunity to correct and prevent any statement or omission.
The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the indemnifying party or the indemnified party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statements or omission. The parties hereto agree that it
would not be just and equitable if contributions pursuant to this Section 6.5
were to be determined by pro rata or per capita allocation (even if the
underwriters were treated as one entity for such purpose) or by any other method
of allocation which does not take account of the equitable considerations
referred to in the first sentence of this Section 6.5. The amount paid to an
indemnified party as a result of the losses, claims, damages or liabilities
referred to in the first sentence of this Section 6.5 shall be deemed to include
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any action or claim (which shall be
limited as provided in Section 6.3 of this Agreement if the indemnifying party
has assumed the defense of any such action in accordance with the provisions
thereof) which is the subject of this Section 6.5. Promptly after receipt by an
indemnified party under this Section 6.5 of notice of the commencement of any
action against such party in respect of which a claim for contribution may be
made against an indemnifying party under this Section 6.5, such indemnified
party shall notify the indemnifying party in writing of the commencement thereof
if the notice specified in Section 6.3 of this Agreement has not been given with
respect to such action; provided, that the omission to so notify the
indemnifying party shall not relieve the indemnifying party from any liability
which it may otherwise have to any indemnified party under this Section 6.5,
except to the extent that the indemnifying party is actually prejudiced by such
failure to give notice. The Company and each holder of Registrable Securities
agrees with each other and the underwriters of the Registrable Securities, if
requested by such underwriters, that (i) the underwriters' portion of such
contribution shall not exceed the underwriting discount
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and (ii) the amount of such contribution shall not exceed an amount equal to the
net proceeds actually received by such indemnifying party from the sale of
Registrable Securities in the offering to which the losses, liabilities, claims,
damages or expenses of the indemnified parties relate. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
6.6 Timing of Indemnification Payments. The indemnification
required by this Article VI shall be made (i) by periodic payments of the amount
thereof during the course of the investigation or defense, as and when bills are
received or expenses are incurred, and (ii) upon determination of liability by a
court of competent jurisdiction whether or not such judgment is appealed, with
respect to loss, damage or liability.
ARTICLE VII
RULE 144
The Company covenants that it will file the reports required
to be filed by it under the Securities Act and the Exchange Act and the rules
and regulations adopted by the SEC thereunder (or, if the Company is not
required to file such reports, it will, upon the request of any holder of
Registrable Securities, make publicly available other information), and it will
take such further action as any holder of Registrable Securities may reasonably
request, all to the extent required from time to time to enable such holder to
sell shares of Registrable Securities without registration under the Securities
Act within the limitation of the exemption provided by (i) Rule 144 or Rule 144A
under the Securities Act, as such Rules may be amended from time to time, or
(ii) any similar rule or regulation hereafter adopted by the SEC. Upon the
request of any holder of Registrable Securities, the Company will deliver to
such holder a written statement as to whether it has complied with such
requirements.
ARTICLE VIII
PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Person may participate in any underwritten registration
hereunder unless such Person (i) agrees to sell such Person's securities on the
basis provided in any underwriting arrangements approved by the Person or
Persons entitled hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such underwriting
arrangements and consistent with the provisions of this Agreement.
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ARTICLE IX
MERGERS, ETC.
The Company shall not, directly or indirectly, enter into any
merger, consolidation, or reorganization in which the Company shall not be the
surviving corporation unless the proposed surviving corporation shall, prior to
such merger, consolidation, or reorganization, agree in writing to assume the
obligations of the Company under this Agreement, and for that purpose references
hereunder to "Registrable Securities" shall be deemed to be references to the
securities that the Investors or the holders of Registrable Securities would be
entitled to receive in exchange for Registrable Securities under any such
merger, consolidation, or reorganization.
ARTICLE X
DEFINITIONS
As used in this Agreement, the following defined terms shall
have the meanings set forth below:
"Business Day" means a day other than Saturday, Sunday or any
day on which banks in the State of New York are authorized or obligated to
close.
"Common Stock" means the Company's Common Stock, par value
$.01 per share.
"Demand Registrations" shall have the meaning set forth in
Section 1.1(a) hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fleming Funds" shall have the meaning set forth in the first
paragraph hereof.
"Fleming Holders" shall have the meaning given it in Section 3
of the Stock Purchase Agreements.
"Investor" or "Investors" shall have the meaning set forth in
the first paragraph hereof.
"Long-Form Demand Registrations" shall have the meaning set
forth in Section 1.1(a) hereof.
"Other Securities" shall have the meaning set forth in Section
1.6 hereof.
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"Person" means any individual, corporation, partnership,
association, trust or other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.
"Registrable Securities" means (i) any shares of Common Stock
issued or issuable upon conversion of the Series A Preferred purchased by the
Fleming Funds pursuant to the Stock Purchase Agreements and (ii) any securities
issued or issuable with respect to the Common Stock referred to in clause (i) by
way of stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization or
otherwise. As to any particular Registrable Securities, such securities will
cease to be Registrable Securities when they have (x) been effectively
registered under the Securities Act and disposed of in accordance with the
registration statement covering them or (y) been transferred pursuant to Rule
144 (or any similar rule then in force) under the Securities Act.
"SEC" shall have the meaning set forth in Section 1.1(b)
hereof.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations thereunder.
"Series A Preferred" means the Company's Series A Convertible
Preferred Stock, par value $.01 per share, which Series A Preferred is
convertible into shares of Common Stock.
"Shares" means the shares of Registrable Securities registered
on the registration statement filed with the SEC in connection with any Demand
Registration or any Piggyback Registration.
"Short-Form Demand Registration" shall have the meaning set
forth in Section 1.1(a) hereof.
"Stock Purchase Agreements" means, collectively, the separate
Stock Purchase Agreements, dated as of October 26, 1999, between the Company and
each of the Fleming Funds.
"Transferees" shall have the meaning given it in Section 3 of
the Stock Purchase Agreements.
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ARTICLE XI
MISCELLANEOUS
11.1 No Inconsistent Agreements. The Company will not
hereafter enter into any agreement with respect to its securities which is
inconsistent with the rights granted to the holders of Registrable Securities in
this Agreement.
11.2 Adjustments Affecting Registrable Securities. The Company
will not effect or permit to occur any combination, subdivision or
reclassification of any of its securities which would adversely affect the
ability of the holders of Registrable Securities to include Registrable
Securities in a registration undertaken pursuant to this Agreement or which, to
the extent within its control, would adversely affect the marketability of such
Registrable Securities in any such registration (including, without limitation,
effecting a stock split or a combination of shares).
11.3 Remedies. In the event of a breach by any party to this
Agreement of its obligations under this Agreement, any party injured by such
breach, in addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific performance of its
rights under this Agreement. The parties agree that the provisions of this
Agreement shall be specifically enforceable, it being agreed by the parties that
the remedy at law, including monetary damages, for breach of any such provision
will be inadequate compensation for any loss and that any defense in any action
for specific performance that a remedy at law would be adequate is waived.
11.4 Amendments and Waivers. Except as otherwise provided
herein, no modification, amendment or waiver of any provision of this Agreement
will be effective against the Company or any holder of Registrable Securities,
unless such modification, amendment or waiver is approved in writing by the
Company and the Fleming Holders. The failure of any party to enforce any of the
provisions of this Agreement will in no way be construed as a waiver of such
provisions and will not affect the right of such party thereafter to enforce
each and every provision of this Agreement in accordance with its terms.
11.5 Successors and Assigns. All covenants and agreements in
this Agreement by or on behalf of any of the parties hereto will bind and inure
to the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not. In addition, whether or not any express assignment
has been made, the provisions of this Agreement which are for the benefit of the
Investors or the holders of Registrable Securities are also for the benefit of,
and enforceable by, any subsequent holder of Registrable Securities.
-16-
<PAGE>
11.6 Notices. Subject to Section 11.6(b) hereof, all notices,
requests and other communications hereunder must be in writing and will be
deemed to have been duly given only if delivered personally or by facsimile
transmission or sent by nationally recognized overnight courier service to the
parties at the following addresses or facsimile numbers:
(i) If to an Investor or a holder of Registrable
Securities, to:
c/o Fleming Asset Management USA
320 Park Avenue
NY, NY 10022
Facsimile No.: 212-508-3676
Attn: Robert L. Burr
David J. Edwards
with a copy to:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, NY 10178
Facsimile No.: (212) 309-6273
Attn: David W. Pollak, Esq.
(ii) If to the Company, to:
Caliber Learning Network, Inc.
509 South Exeter Street
Baltimore, MD 21202
Facsimile No.: (410) 843-1300
Attention: Rick P. Frier
with a copy to:
Piper & Marbury L.L.P.
36 South Charles Street
Baltimore, MD 21201
Facsimile No.: (410) 576-1763
Attention: Richard C. Tilghman, Jr.
All such notices, requests and other communications will (x) if delivered
personally to the address as provided in this Section 11.6(a), be deemed given
upon delivery, (y) if delivered by facsimile transmission to the facsimile
number as provided in this Section 11.6(a), be deemed given upon receipt and (z)
if delivered by nationally recognized overnight courier service in the manner
-17-
<PAGE>
described above to the address as provided in this Section 11.6(a), be deemed
given on the Business Day following the day it was sent (in each case regardless
of whether such notice, request or other communication is received by any other
Person to whom a copy of such notice is to be delivered pursuant to this Section
11.6(a)). Any party may from time to time change its address, facsimile number
or other information for the purpose of notices to that party by giving notice
specifying such change to the other parties hereto.
11.7 Headings. The headings used in this Agreement have been
inserted for convenience of reference only and do not define or limit the
provisions hereof.
11.8 Gender. Whenever the pronouns "he" or "his" are used
herein they shall also be deemed to mean "she" or "hers" or "it" or "its"
whenever applicable. Words in the singular shall be read and construed as though
in the plural and words in the plural shall be construed as though in the
singular in all cases where they would so apply.
11.9 Invalid Provisions. If any provision of this Agreement is
held to be illegal, invalid or unenforceable, and if the rights or obligations
of any party hereto under this Agreement will not be materially and adversely
affected thereby, (i) such provision will be fully severable, (ii) this
Agreement will be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part hereof, (iii) the remaining
provisions of this Agreement will remain in full force and effect and will not
be affected by the illegal, invalid or unenforceable provision or by its
severance herefrom and (iv) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
11.10 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to a
contract executed and performed in such State without giving effect to the
conflicts of laws principles thereof.
11.11 Counterparts. This Agreement may be executed in any
number of counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same instrument.
[remainder of page intentionally left blank]
-18-
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
CALIBER LEARNING NETWORK, INC.
By: /s/ Chris L. Nguyen
----------------------------------------
Name: Chris L. Nguyen
Title: President and Chief
Executive Officer
FLEMING US DISCOVERY FUND III, L.P.
By: FLEMING US DISCOVERY
PARTNERS, L.P.,
its general partner
By: FLEMING US DISCOVERY, LLC,
its general partner
By: /s/ Robert L. Burr
---------------------------------------
Robert L. Burr, member
FLEMING US DISCOVERY OFFSHORE
FUND III, L.P.
By: FLEMING US DISCOVERY
PARTNERS, L.P.,
its general partner
By: FLEMING US DISCOVERY, LLC,
its general partner
By: /s/ Robert L. Burr
--------------------------
Robert L. Burr, member
ROBERT FLEMING NOMINEES LIMITED
By: /s/
-------------------------
[Signature page to Registration Rights Agreement]
EXECUTION COPY
================================================================================
STOCKHOLDERS' AGREEMENT
dated as of
October 26, 1999
among
Caliber Learning Network, Inc.,
Fleming US Discovery Fund III, L.P.,
Fleming US Discovery Offshore Fund III, L.P.,
Robert Fleming Nominees Limited
and
Chris L. Nguyen
================================================================================
<PAGE>
STOCKHOLDERS' AGREEMENT
This STOCKHOLDERS' AGREEMENT is dated as of October 26, 1999,
among Caliber Learning Network, Inc., a Maryland corporation (the "Company"),
Chris L. Nguyen ("Nguyen"), Fleming US Discovery Fund III, L.P., Fleming US
Discovery Offshore Fund III, L.P. and Robert Fleming Nominees Limited
(collectively, the "Fleming Funds"). The Fleming Funds, any Fleming Holder and
any Transferee are collectively referred to herein as the "Investor Group" and,
individually, an "Investor."
W I T N E S S E T H:
WHEREAS, pursuant to the terms of the Stock Purchase
Agreements, dated as of October 26, 1999, between the Company and each of the
Fleming Funds (the "Stock Purchase Agreements"), the Fleming Funds have
purchased an aggregate of 150,000 shares (the "Shares") of the Company's Series
A Convertible Preferred Stock, par value $.01 per share (the "Series A
Preferred"), convertible into shares of the Company's Common Stock (the
"Conversion Shares");
WHEREAS, Nguyen beneficially owns (i) 262,805 shares of Common
Stock, and (ii) options including, but not limited to, options exercisable
within 60 days, and rights to purchase 209,032 shares of Common Stock, which
constitute, on an as-converted basis, approximately 3.82% of the outstanding
shares of Common Stock (such shares, along with any shares of Common Stock or
other equity securities of the Company that Nguyen may subsequently acquire, the
"Nguyen Shares");
WHEREAS, it is a condition precedent to the Company's and the
Fleming Funds' respective obligations to consummate the transactions
contemplated by the Stock Purchase Agreements that the parties hereto shall have
entered into this Agreement; and
WHEREAS, each of Nguyen, the Company and the Fleming Funds
desires to enter into this Agreement to regulate certain aspects of their
relationship;
NOW, THEREFORE, in consideration of the arguments and mutual
covenants contained herein, the parties hereto hereby agree as follows:
1. Rights of Inclusion (Tag-Along Rights).
So long as the Fleming Holders hold at least 25% of the Conversion
Shares issuable on the Closing Date, calculating the Shares on an as-converted
basis (to be appropriately adjusted to reflect any stock split, stock dividend,
recapitalization or similar event):
<PAGE>
(a) In the event Nguyen proposes to Transfer any Nguyen Shares
(the "Transferor Shares") to any Person (the "Buyer"), as a condition to such
Transfer, Nguyen shall cause the Buyer to offer (the "Inclusion Offer") to
purchase from each Fleming Holder, at each such Fleming Holder's option, up to
that number of Fleming Holder Shares determined in accordance with Section 1(b)
on the same terms and conditions as are applicable to the Transferor Shares,
except that each Fleming Holder shall not be required to provide any
representation, warranty or other undertaking other than with respect to its
ownership of, and authority to Transfer, the Fleming Holder Shares owned by it
free of any liens or encumbrances. Nguyen shall provide prompt written notice to
each Fleming Holder (the "Inclusion Notice") setting forth all the terms and
conditions of the Inclusion Offer, and each Fleming Holder may accept the
Inclusion Offer in whole or in part by providing a written notice of acceptance
with respect to Fleming Holder Shares owned by it to Nguyen within twenty (20)
days of delivery of the Inclusion Notice to it (the "Acceptance Notice").
(b) Each Fleming Holder shall have the right to sell, pursuant
to the Inclusion Offer, Fleming Holder Shares representing the same percentage
of all Fleming Holder Shares owned by it as the Transferor Shares are of all
Nguyen Shares owned by Nguyen (such percentage shall be calculated on the basis
that all shares of Series A Preferred owned by each Fleming Holder have been
converted into shares of Common Stock at the current conversion price per share
under Section 4 of the Articles Supplementary); provided, however, that if no
Fleming Holder elects to exercise such right, Nguyen shall nonetheless be
entitled to Transfer all or any portion of the Transferor Shares described in
the Inclusion Notice. In the event the number of Fleming Holder Shares for which
the Fleming Holders elects to exercise such right, along with the Transferor
Shares and any other shares of the Company to be sold by other stockholders
pursuant to any similar rights granted to such other stockholders, exceed the
number of shares which the Buyer is willing to purchase, the number of shares to
be Transferred to the Buyer by each transferor shall be reduced so that each
transferor is entitled to Transfer the same percentage of its shares included in
its Acceptance Notice as each other transferor. If a Fleming Holder elects to
exercise such right, such Fleming Holder may, in its sole discretion, determine
the composition of the Fleming Holder Shares (i.e., the number of the shares of
Series A Preferred and Common Stock to be included in the Fleming Holder Shares)
to be Transferred by it to the Buyer pursuant to the Inclusion Offer. In the
event that any Fleming Holder chooses to include any shares of Series A
Preferred in the Fleming Holder Shares to be Transferred by it to the Buyer
pursuant to the Inclusion Offer, any such Fleming Holder shall, prior to or
simultaneously with such Transfer, convert such shares of Series A Preferred
into shares of Common Stock so that each Fleming Holder Transfers only Common
Stock to the Buyer.
(c) Nguyen shall have ninety (90) days, commencing on the date
of the Inclusion Notice, in which to Transfer, on behalf of himself and the
Fleming Holders up to the number of shares covered by the Inclusion Offer
(including the Transferor Shares) to the Buyer. The terms of such Transfer,
including, without limitation, price and form of consideration, shall be as set
forth in the Inclusion Notice. If at the end of such ninety (90) day period has
not completed the Transfer of the Transferor Shares and the Fleming Holder
Shares (if any) proposed to be Transferred, Nguyen may not proceed with such
Transfer or any other Transfer without first giving a new Inclusion Notice
pursuant to the provisions of this Section 1.
2
<PAGE>
(d) If Nguyen is able to complete the Transfer of the
Transferor Shares and the Fleming Holder Shares (if any) proposed to be
Transferred within such ninety (90) day period, at the closing thereof, each
Fleming Holder shall deliver to the Buyer a certificate or certificates
representing the Fleming Holder Shares owned by it to be Transferred pursuant to
the Inclusion Offer, free and clear of all liens and encumbrances, and the Buyer
shall pay to each such Fleming Holder the purchase price for the Fleming Holder
Shares so Transferred pursuant to this Section 1 and shall furnish such other
evidence of the completion of such Transfer and the terms thereof as may be
reasonably requested by the Fleming Holders.
(e) The provisions of this Section 1 shall not apply to any
Transfer or proposed Transfer by Nguyen of Nguyen Shares which represents twelve
and one-half percent (12.5%) or less of the Nguyen Shares held by Nguyen on the
Closing Date (as defined in the Stock Purchase Agreements) if such Transfer or
proposed Transfer by Nguyen of Nguyen Shares, together with all other Transfers
by Nguyen of Nguyen Shares on or in the four years prior to the date of such
Transfer, represent twenty-five percent (25%) or less of the Nguyen Shares held
by Nguyen on the Closing Date, with Nguyen Shares held by Nguyen on the Closing
Date to be appropriately adjusted to reflect any stock split, stock dividend,
recapitalization or similar event; provided, however, that each Transfer of
Nguyen Shares that takes place within one year of any other Transfer to the same
Person or any Affiliate of such Person shall be aggregated for purposes of such
twelve and one-half percent (12.5%) threshold. In the event that Nguyen desires
to exercise an option to purchase shares of Common Stock of the Company, then
Nguyen may Transfer Nguyen Shares to the extent necessary to obtain the funds to
exercise such option and such Transfer shall not be included in the calculation
of the percentages in this Section 1(e).
(f) The provisions of this Section 1 shall only apply to
Nguyen so long as Nguyen is an executive officer of the Company at the time of
any proposed Transfer.
(g) Nguyen shall not Transfer any Nguyen Shares to any Person
in a public sale except pursuant to the terms and conditions of Section 1(e)
hereof.
(h) The provisions of this Section 1 shall not apply to any
Nguyen Shares Nguyen Transfers to any trust which is established solely for the
benefit of the spouse or any lineal ancestor or descendant (including by
adoption and stepchildren) of Nguyen and whose terms are not inconsistent with
the terms of this Agreement.
2. Board Observer Rights; Committees.
3
<PAGE>
(a) So long as 50% of the Shares are outstanding, the Company
agrees with the Fleming Funds that the Fleming Holders (or if no shares of
Series A Preferred are held by a Fleming Holder, any Transferee, shall have the
right to have one (1) representative (the "Fleming Observer") attend and
participate in meetings of the Company's Board of Directors, or any committee
thereof, and the Company shall permit the Fleming Observer to attend and
participate in all such meetings as an observer; provided that during such time
that the holders of the Series A Preferred have elected one director to the
Company's Board of Directors (or have waived their right to so elect such
director) pursuant to Section 3 of the Company's Articles Supplementary with
respect to the Series A Preferred (the "Investor Director"), the Fleming Holders
or the Transferee, as the case may be, shall not have the right to have a
Fleming Observer. The Fleming Observer shall not have the right to vote on any
matter presented to the Board or any committee thereof. The Company shall give
the Fleming Observer written notice of each meeting of the Board of Directors or
any committee thereof and all written materials and other information given to
the Company's directors and committee members in the same manner and at the same
time such notices, materials and other information are given to the directors
and committee members. The Company shall reimburse the Fleming Observer for
travel and other expenses in connection with such meetings to the same extent
that the Company reimburses its directors and committee members. If the Board of
Directors or any committee thereof proposes to take any action by written
consent in lieu of a meeting, the Company shall give written notice thereof to
the Fleming Observer prior to the effective date of such consent describing the
nature and substance of such action.
(b) So long as 50% of the Shares are outstanding, the Company
and Nguyen acknowledge that the parties to this Agreement desire that one
Investor Director be appointed to the Executive Committee and the Compensation
Committee of the Company's Board of Directors and at each time the Company's
Board of Directors appoints committee members, agree to use their best efforts
and take any other action necessary or appropriate to ensure such appointment;
provided, however, that the agreements of this paragraph (c) shall terminate
with respect to an Investor Director upon the Fleming Holders' or the
Transferee's delivery of a written notice to the Company and Nguyen to the
effect that such Investor Director need not be appointed to the aforesaid
committees.
3. Definitions.
As used herein, the following terms shall have the respective
meanings set forth below:
"Acceptance Notice" shall have the meaning set forth in
Section 1(a) hereof.
"Affiliate" shall have the meaning given it in Section 3 of
the Stock Purchase Agreements.
"Articles Supplementary" shall have the meaning given it in
Section 1(a) of the Stock Purchase Agreements.
4
<PAGE>
"Board" or "Board of Directors" shall have the meaning given
it in Section 3 of the Stock Purchase Agreements.
"Buyer" shall have the meaning set forth in Section 1(a)
hereof.
"Capital Stock" means the Common Stock (including, without
limitation, any Common Stock issuable upon conversion of the Series A
Preferred), Series A Preferred and any other class of equity security which the
Company may issue and any securities or other rights convertible, exchangeable
or exercisable for or into any Capital Stock.
"Common Stock" means the Company's Common Stock, par value
$.01 per share.
"Company" shall have the meaning set forth in the first
paragraph hereof.
"Conversion Share" or "Conversion Shares" means the shares of
the Company's Common Stock obtained or obtainable upon conversion of Shares and
shall also include any capital stock or other securities into which such shares
of Common Stock are changed and any capital stock or other securities resulting
from or comprising a reclassification, combination or subdivision of, or a stock
dividend on, any such shares of Common Stock. On the Closing Date the Shares are
convertible into 2,727,273 Conversion Shares.
"Fleming Funds" shall have the meaning set forth in the first
paragraph hereof.
"Fleming Holders" means (i) the Fleming Funds and (ii) any
Affiliate, officer or employee of an Affiliate or investment fund managed by an
Affiliate of the Fleming Funds, or any successor thereof, to which the Fleming
Funds may transfer record and/or beneficial ownership of the Shares or the
Conversion Shares.
"Fleming Holder Shares" means all Series A Preferred and
Common Stock owned by the Fleming Holders.
"Fleming Observer" shall have the meaning set forth in Section
2(a) hereof.
"Fully Diluted Basis" means, with respect to the calculation
of the number of shares of Capital Stock, as of each date of determination
thereof, (i) all shares of Capital Stock outstanding at the time of
determination and (ii) all shares of Capital Stock issuable upon the exchange,
exercise or conversion of any security or other right (other than any Capital
Stock) then outstanding which is exchangeable, exercisable or convertible into
Capital Stock.
"Inclusion Notice" shall have the meaning set forth in Section
1(a) hereof.
"Inclusion Offer" shall have the meaning set forth in Section
1(a) hereof.
5
<PAGE>
"Investor" shall have the meaning set forth in the first
paragraph hereof.
"Investor Director" shall have the meaning set forth in
Section 2(b) hereof.
"Investor Group" shall have the meaning set forth in the first
paragraph hereof.
"Nguyen" shall have the meaning set forth in the first
paragraph hereof.
"Nguyen Shares" shall have the meaning set forth in the second
WHEREAS clause hereof.
"Person" means an individual, corporation, partnership, firm,
association, joint venture, trust, unincorporated organization, governmental
body, agency, political subdivision or other entity.
"Pro Rata" means with respect to a stockholder, in proportion
to the number of shares of Capital Stock on a Fully Diluted Basis owned by such
stockholder.
"Series A Preferred" shall have the meaning set forth in the
first WHEREAS clause hereof.
"Shares" has the meaning set forth in the first WHEREAS clause
hereof.
"Stock Purchase Agreements" shall have the meaning set forth
in the first WHEREAS clause hereof.
"Transfer" means, with respect to any security, any direct or
indirect sale, transfer, assignment, hypothecation, pledge or any other
disposition of such security or any interest therein.
"Transferee" shall have the meaning given it in Section 3 of
the Stock Purchase Agreements.
"Transferor Shares" shall have the meaning set forth in
Section 1(a) hereof.
4. Miscellaneous.
6
<PAGE>
(a) In the event of a breach by any party to this Agreement of
its obligations under this Agreement, any party injured by such breach, in
addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under this Agreement. The parties agree that the provisions of this Agreement
shall be specifically enforceable, it being agreed by the parties that the
remedy at law, including monetary damages, for breach of any such provision will
be inadequate compensation for any loss and that any defense in any action for
specific performance that a remedy at law would be adequate is waived.
(b) Except as otherwise provided herein, no modification,
amendment or waiver of any provision of this Agreement will be effective against
any party hereto unless such modification, amendment or waiver is approved in
writing by all parties hereto. The failure of any party to enforce any of the
provisions of this Agreement will in no way be construed as a waiver of such
provisions and will not affect the right of such party thereafter to enforce
each and every provision of this Agreement in accordance with its terms.
(c) All covenants and agreements in this Agreement by or on
behalf of any of the parties hereto will bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether so expressed or
not.
(d) All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally or by facsimile transmission or sent by nationally recognized
overnight courier service to the parties at the following addresses or facsimile
numbers:
(i) If to an Investor, to:
the address indicated on Schedule 1 to the Stock
Purchase Agreements.
with a copy to:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, NY 10178
Facsimile No.: (212) 309-6273
Attn: David W. Pollak, Esq.
(ii) If to the Company, to:
Caliber Learning Network, Inc.
509 South Exeter Street
Baltimore, MD 21202
Facsimile No.: (410) 843-1300
Attention: Rick P. Frier
7
<PAGE>
with a copy to:
Piper & Marbury L.L.P.
36 South Charles Street
Baltimore, MD 21201
Facsimile No.: (410) 576-1763
Attention: Richard C. Tilghman, Jr., Esq.
(iii) If to Nguyen, to:
Chris L. Nguyen
509 South Exeter Street
Baltimore, MD 21202
Facsimile No.: (410) 843-1300
All such notices, requests and other communications will (x)
if delivered personally to the address as provided in this Section 4(d), be
deemed given upon delivery, (y) if delivered by facsimile transmission to the
facsimile number as provided in this Section 4(d), be deemed given upon receipt
and (z) if delivered by nationally recognized overnight courier service in the
manner described above to the address as provided in this Section 4(d), be
deemed given on the business day following the day it was sent (in each case
regardless of whether such notice, request or other communication is received by
any other Person to whom a copy of such notice is to be delivered pursuant to
this Section 4(d)). Any party from time to time may change its address,
facsimile number or other information for the purpose of notices to that party
by giving notice specifying such change to the other parties hereto.
(e) The headings used in this Agreement have been inserted for
convenience of reference only and do not define or limit the provisions hereof.
(f) If any provision of this Agreement is held to be illegal,
invalid or unenforceable, and if the rights or obligations of any party hereto
under this Agreement will not be materially and adversely affected thereby, (i)
such provision will be fully severable, (ii) this Agreement will be construed
and enforced as if such illegal, invalid or unenforceable provision had never
comprised a part hereof, (iii) the remaining provisions of this Agreement will
remain in full force and effect and will not be affected by the illegal, invalid
or unenforceable provision or by its severance herefrom and (iv) in lieu of such
illegal, invalid or unenforceable provision, there will be added automatically
as a part of this Agreement a legal, valid and enforceable provision as similar
in terms to such illegal, invalid or unenforceable provision as may be possible.
(g) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to a contract
executed and performed in such State without giving effect to the conflicts of
laws principles thereof.
8
<PAGE>
(h) This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
[remainder of page intentionally left blank]
9
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this
Stockholders' Agreement as of the date first written above.
CALIBER LEARNING NETWORK, INC.
By: /s/ Chris L. Nguyen
------------------------------------
Name: Chris L. Nguyen
Title: Chief Executive Officer
With respect to the
obligations contained in
Sections 1, 2(b), 3 and 4
hereof only:
/s/ Chris L. Nguyen
------------------------------------
Chris L. Nguyen
<PAGE>
FLEMING US DISCOVERY FUND III, L.P.
By: FLEMING US DISCOVERY
PARTNERS, L.P.,
its general partner
By: FLEMING US DISCOVERY, LLC,
its general partner
By: /s/ Robert L. Burr
------------------------------
Robert L. Burr, member
FLEMING US DISCOVERY OFFSHORE
FUND III, L.P.
By: FLEMING US DISCOVERY
PARTNERS, L.P.,
its general partner
By: FLEMING US DISCOVERY, LLC,
its general partner
By: /s/ Robert L. Burr
-------------------------
Robert L. Burr, member
ROBERT FLEMING NOMINEES LIMITED
By: /s/
----------------------------------
Caliber Learning Network, Inc. Completes Closing of $15 Million in Series A
Convertible Preferred Stock to Fleming Asset Management
Baltimore, MD, Oct. 27, 1999--Caliber Learning Network, Inc. (NASDAQ: CLBR)
today announced it has reached an agreement to sell $15 million in Series A
Convertible Preferred Stock to Fleming Asset Management. The net proceeds will
be used to fund future development opportunities and general working capital
purposes.
The funding, provided by several Fleming Asset Management funds, is in the form
of a Series A Convertible Preferred Stock. The Series A is convertible into
shares of Common Stock at a price of $5.50 per share.
Chris Nguyen, President and Chief Executive Officer of Caliber Learning Network,
Inc., commented, "We are pleased that Fleming Asset Management has chosen to
support Caliber's growth strategy to further develop its Internet distance
learning business. This funding will allow Caliber to aggressively expand its
sales and marketing plan and pursue its Internet initiatives with both corporate
and education content providers."
Fleming, based in the United Kingdom, carries out the investment management
activities of Robert Fleming Holdings Limited, a privately owned global merchant
bank. Together with Jardine Fleming, a wholly owned subsidiary of Robert
Fleming, and its joint venture with T. Rowe Price, Rowe-Price Fleming, Fleming
Asset Management has over $113 billion under management and 18 offices
throughout the world.
About Caliber
Caliber offers interactive distance learning services for corporations and
universities, enabling them to create training and education programs delivered
through the Internet to desktops within its network of authorized centers, at
the workplace, and in the home. These services give working adults access to
live expert instruction, real-time two-way interactivity with instructors, and
the ability to collaborate with other course participants. Caliber Learning
Network, Inc. (NASDAQ: CLBR) is an affiliate of Sylvan Learning Systems, Inc.
(NASDAQ: SLVN).
This release may include information that could constitute forward-looking
statements made pursuant to the safe harbor provision of the Private Securities
Litigation Reform Act of 1995. Any such forward-looking statements may involve
risk and uncertainties that could cause actual results to differ materially from
any future results encompassed within the forward-looking statements. Factors
that could cause or contribute to such differences include those matters
disclosed in the Company's Securities and Exchange Commission filings.
