<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) August 3, 1999
COLLEGE TELEVISION NETWORK, INC.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Delaware 0-19997 13-3557317
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<CAPTION>
(state of other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
</TABLE>
5784 Lake Forrest Drive, Suite 275, Atlanta, Georgia 30328
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(Address of principal office)
Registrant's telephone number, including area code (404) 256-4444
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(Former name or former address, if changed since last report)
Item 5. Other Events.
(a) Acquisition or Disposition of Assets.
On July 16, 1999, the Company entered into a stock purchase agreement to
acquire all of the issued and outstanding capital stock of Armed Forces
Communications, Inc., a New York corporation d/b/a Market Place Media and
having its primary place of business in Santa Barbara, California ("MPM"), for
a purchase price of approximately $30,000,000 cash, subject to certain
adjustments. Upon consummation of the contemplated stock purchase, MPM will be
a wholly-owned subsidiary of the Company. The closing of the acquisition is
subject to certain conditions such as governmental approval under the Hart-
Scott-Rodino Act and no material adverse change in MPM. See Exhibit 99 attached
hereto, a press release dated August 3, 1999.
The Company intends to finance the acquisition through additional senior
debt (excluding debt recently obtained from the Bank of LaSalle) and/or
additional equity financing.
MPM's unaudited fiscal 1998 annual gross revenue was approximately $30.1
million. This gross revenue generated net income of approximately $1.7 million.
(b) Issuance of New Class of Stock.
As of June 23, 1999, there were issued and outstanding 14,409,055 shares of
Common Stock of the Company, 11,576,612 of which were beneficially owned by U-C
Holdings, L.L.C., a Delaware limited liability company ("Holdings"),
representing approximately 80.3% of the outstanding shares of the Company's
Common Stock.
Pursuant to a Purchase Agreement dated July 23, 1999 (the "Purchase
Agreement") between the Company and Holdings, Holdings purchased 309,998 shares
of the Company's convertible preferred stock
<PAGE>
("Convertible Preferred"), $0.001 par value per share, for a purchase price of
$4,649,970. The proceeds will be used for general working capital purposes of
the Company. The conversion ratio of the Convertible Preferred is computed by
multiplying the number of shares of Convertible Preferred to be converted by
the $15.00 per share purchase price and dividing the result by the conversion
price of the Convertible Preferred (the "Conversion Price") then in effect with
respect to such shares. On the date of issuance, the Conversion Price was
$6.854 (the 30-day average trading price of the Common Stock listed on Nasdaq
("Average Trading Price")). From the date of issuance to and including the
third anniversary of the date of issuance of the Convertible Preferred, the
Conversion Price is subject to adjustment if at the end of a quarter the
Average Trading Price of the Common Stock is less than the Conversion Price
then in effect; provided that, the Conversion Price shall not be reduced below
$2.75, as adjusted for stock splits, stock dividends and other similar events.
The Convertible Preferred is voting stock on an as-converted basis to Common
Stock based upon the number of shares of Common Stock the Convertible Preferred
is convertible into on the date of issuance or 678,432 shares of voting stock.
The Convertible Preferred accrues a cumulative dividend of 12% per annum.
If Holdings converted the Convertible Preferred based upon the current
Conversion Price it would acquire 678,432 shares of Common Stock of the Company
which would give Holdings approximately 81.2% of the outstanding shares of the
Common Stock of the Company and if the Conversion Price is adjusted to $2.75
(the minimum Conversion Price) the Convertible Preferred would convert into
1,690,898 shares of Common Stock, which would give Holdings 82.3% of the
outstanding shares of Common Stock of the Company.
Additionally, pursuant to the Purchase Agreement, the Company issued a Class
D warrant (the "Warrant") to Holdings entitling it to purchase 135,686 shares
of Common Stock, $0.005 par value per share, with an initial exercise price of
$6.854 per share. From the date of issuance to and including the third
anniversary of the date of issuance of the Warrant, such exercise price is
subject to adjustment if at the end of any quarter the Average Trading Price is
less than the exercise price then in effect, then the exercise price shall be
reduced to equal such Average Trading Price; provided that in no event shall
the exercise price be reduced below $2.75, as adjusted for stock splits, stock
dividends and other similar events. If the exercise price was reduced to $2.75
per share, Holdings could acquire 338,179 shares of Common Stock. The Warrant
expires on July 23, 2006.
Holdings has agreed not to "short sell" the Common Stock of the Company.
(c) $12,000,000 LaSalle Bank Loan
On July 28, 1999 the Company obtained a $12,000,000 revolving credit loan
(the "Loan") from LaSalle Bank National Association for working capital
purposes. A condition to the receiving of this Loan was the $4,649,970
investment by Holdings. The Loan is on a revolving credit basis and may be
drawn down by the Company at any time provided there is not an event of
default. The Loan bears interest at either (i) the Base Rate which is equal to
the greater of (a) the Federal Funds Rate plus 0.5% or (b) the Prime Rate, plus
2.00% per annum; or (ii) the Eurodollar Rate (which is equal to the offered
rate for deposits in United States dollars which appears on Telerate page 3750
as of 11:00 A.M. London time, plus 3.50% per annum). The Loan expires and is
due and payable in full on December 29, 2000. There are several financial and
operating covenants in the loan agreement, including a prohibition on dividends
by the Company until the Loan is paid in full. In addition, it is a default
under the Loan if Holdings owns less than 51% of the Company or Avy Stein is no
longer a member of the Board of Directors of the Company.
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<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
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<C> <S>
4.1 Purchase Agreement dated July 23, 1999 by and between College
Television Network and U-C Holdings, L.L.C.
4.2 Class D Warrant Agreement
4.3 Restated Certificate of Designation, Powers, References and Rights
of the Preferred Stock of College Television Network, Inc.
99 Press Release
</TABLE>
SIGNATURE
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 hereunto duly authorized.
August 3, 1999 COLLEGE TELEVISION NETWORK, INC.
/s/ Jason Elkin
By: _________________________________
Jason Elkin
Chairman of the Board and
Chief Executive Officer
<PAGE>
EXHIBIT 4.1
PURCHASE AGREEMENT
DATED AS OF
JULY 23, 1999
BY AND BETWEEN
COLLEGE TELEVISION NETWORK, INC.
AND
U-C HOLDINGS, L.L.C.
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS........................................................ -1-
ARTICLE II
CLOSING............................................................ -7-
2.1 Authorization of Purchased Securities....................... -7-
-------------------------------------
2.2 Purchase of Purchased Securities............................ -7-
--------------------------------
2.3 Closing..................................................... -8-
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ARTICLE III
PURCHASER'S REPRESENTATIONS........................................ -8-
3.1 Investment Intention........................................ -8-
--------------------
3.2 Accredited Investor......................................... -8-
-------------------
3.3 Corporate Existence......................................... -8-
-------------------
3.4 Corporate Power: Authorization: Enforceable Obligations..... -8-
-------------------------------------------------------
ARTICLE IV
COMPANY'S REPRESENTATIONS, WARRANTIES.............................. -9-
4.1 Capitalization.............................................. -9-
--------------
4.2 Authorization and Issuance of the Purchased Securities...... -10-
------------------------------------------------------
4.3 Securities Laws............................................. -10-
---------------
4.4 Corporate Existence: Compliance with Law.................... -10-
----------------------------------------
4.5 Subsidiaries................................................ -11-
------------
4.6 Corporate Power: Authorization: Enforceable Obligations..... -11-
-------------------------------------------------------
4.7 Financial Statements........................................ -11-
--------------------
4.8 Ownership of Property....................................... -12-
---------------------
4.9 Material Contracts: Indebtedness............................ -12-
--------------------------------
4.10 Environmental Protection.................................... -13-
------------------------
4.11 Labor Matters............................................... -13-
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4.12 Taxes....................................................... -14-
-----
4.13 No Litigation............................................... -15-
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4.14 Brokers..................................................... -15-
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4.15 Management and Labor Agreements............................. -15-
-------------------------------
4.16 Patents, Trademarks, Copyrights and Licenses................ -15-
--------------------------------------------
4.17 No Material Adverse Effect.................................. -16-
--------------------------
4.18 ERISA....................................................... -16-
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4.19 Registration Rights......................................... -18-
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4.20 Required Filings............................................ -18-
----------------
4.21 LaSalle Credit Agreement.................................... -18-
------------------------
4.22 Full Disclosure............................................. -18-
---------------
-i-
<PAGE>
ARTICLE V
CONDITIONS PRECEDENT TO CLOSING.................................... -18-
5.1 Conditions Precedent........................................ -18-
--------------------
ARTICLE VI
SECURITIES LAW MATTERS............................................. -20-
6.1 Legends..................................................... -20-
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6.2 Transfer of Restricted Securities........................... -21-
---------------------------------
ARTICLE VII
EXPENSES........................................................... -21-
ARTICLE VIII
LIMITATION ON CLAIMS OF PURCHASER.................................. -22-
8.1 Limitation.................................................. -22-
----------
ARTICLE IX
MISCELLANEOUS...................................................... -22-
9.1 Notices..................................................... -22-
-------
9.2 Binding Effect: Benefits.................................... -23-
------------------------
9.3 Amendment................................................... -23-
---------
9.4 Successors and Assigns: Assignability....................... -24-
-------------------------------------
9.5 Remedies.................................................... -24-
--------
9.6 Section and Other Headings.................................. -24-
--------------------------
9.7 Severability................................................ -24-
------------
9.8 Entire Agreement............................................ -24-
----------------
9.9 Counterparts................................................ -24-
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9.10 Publicity................................................... -24-
---------
9.11 Governing Law............................................... -25-
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9.12 No Strict Construction...................................... -25-
----------------------
-ii-
<PAGE>
Schedules and Exhibits
----------------------
Schedule 1.0 Annual Report
Schedule 4.1 Stock, Preferred Stock, Options and Warrants
Schedule 4.4 Foreign Qualification
Schedule 4.7 Financial Statements; Other Obligations
Schedule 4.8 Ownership of Property
Schedule 4.9 Material Contracts
Schedule 4.13 Litigation
Schedule 4.15 Management and Labor Agreements
Schedule 4.19 Registration Rights Schedule
Exhibit A Form of Class D Warrant
Exhibit B Convertible Preferred Stock Terms
Exhibit C Opinion of Company Counsel
Exhibit D Capitalization Chart
-iii-
<PAGE>
PURCHASE AGREEMENT
------------------
THIS PURCHASE AGREEMENT, dated as of July 23, 1999, by and
between College Television Network, Inc., a Delaware corporation having an
office at 5784 Lake Forrest Drive, Suite 275, Atlanta, GA 30328 (the "Company"),
-------
and U-C Holdings, L.L.C., a Delaware limited liability company ("Purchaser").
---------
The Company has agreed to issue and sell to Purchaser, and
Purchaser has agreed to purchase from the Company, upon the terms and conditions
hereinafter provided, 309,998 shares of the Company's convertible preferred
stock, $.001 par value per share (the "Convertible Preferred"), and a Class D
----------------------
Warrant to purchase 135,686 shares of the Company's common stock, par value
$0.005 ("Common Stock"), all for an aggregate purchase price of $4,649,970.
------------
NOW, THEREFORE, in consideration of the premises and the
covenants hereinafter contained, it is agreed as follows:
ARTICLE I
DEFINITIONS
"Affiliated Group" shall mean an affiliated group as defined in
----------------
Section 1504 of the IRC (or any analogous combined, consolidated or unitary
group defined under state, local or foreign income tax law) of which Company is
or has been a member.
"Annual Report" shall mean the annual report of the Company on
-------------
Form 10-KSB for the fiscal year ended December 31, 1998, which has been filed
with the SEC, a copy of which is attached hereto as Schedule 1.0.
------------
"Business Day" shall mean any day that is not a Saturday, a
------------
Sunday or a day on which banks are required or permitted to be closed in the
State of Illinois or the State of Georgia.
"Certificate of Incorporation" shall mean the certificate of
----------------------------
incorporation of Company, as amended.
"Charges" shall mean (A) all federal, state, county, city,
-------
municipal, local, foreign or other governmental (including, without limitation,
PBGC taxes at the time due and payable, levies, assessments, charges, liens,
claims or encumbrances upon or relating to (i) the Company's employees, payroll,
income or gross receipts, (ii) the Company's ownership or use of any of its
assets, or (iii) any other aspect of the Company's business, or (B) any
liability of the Company for the payment of any amounts of the type described in
clause (A) arising as a result of being (or ceasing to be) a member of any
Affiliated Group (or being included (or required to be included) in any tax
return relating thereto).
"Class C Warrant" shall mean the Company's Class C Warrants
---------------
listed on the Capitalization Chart attached hereto as Exhibit D.
---------
<PAGE>
"Class D Warrant" shall mean the Class D Warrant to be issued to
---------------
Purchaser to purchase shares of Common Stock, subject to adjustment,
substantially in the form of Exhibit A attached hereto.
---------
"Closing" or "Closing Date" shall each have their respective
------- ------------
meanings set forth in Section 2.3 hereof.
"COBRA" shall have the meaning set forth in Section 4.18(l)
----- ------------
hereof.
"Common Stock" shall mean the common stock defined in the
------------
recitals.
"Controlled Group" shall mean all members of a controlled
----------------
group of corporations and all members of a controlled group of trades or
businesses (whether or not incorporated) under common control which, together
with the Company, are treated as a single employer under Section 414 of the Code
or Section 4001 of ERISA.
"Convertible Preferred" shall mean the convertible preferred
----------------------
stock defined in the recitals having the rights and preferences set forth in the
Convertible Preferred Stock Terms.
"Convertible Preferred Stock Terms" shall mean the terms of the
---------------------------------
Convertible Preferred having the rights and preferences set forth on Exhibit B
---------
attached hereto.
"Environmental Laws" shall mean all federal, state and local
------------------
laws, statutes, ordinances and regulations, now or hereafter in effect, and in
each case as amended or supplemented from time to time, and any judicial or
administrative interpretation thereof, including, without limitation, any
applicable judicial or administrative order, consent decree or judgment,
relative to the applicable Real Estate, relating to the regulation and
protection of human health, safety, the environment and natural resources
(including, without limitation, ambient air, surface water, groundwater,
wetlands, land surface or subsurface strata, wildlife, aquatic species and
vegetation). Environmental Laws include but are not limited to the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended (42
U.S.C. (S) 9601 et seq.) ("CERCLA"); the Hazardous Material Transportation Act,
------
as amended (49 U.S.C. (S) 1801 et seq.); the Federal Insecticide, Fungicide, and
Rodenticide Act, as amended (7 U.S.C. (S) 136 et seq. ); the Resource
Conservation and Recovery Act, as amended (42 U.S.C. (S) 6901 et seq.) ("RCRA");
----
the Toxic Substance Control Act, as amended (15 U. S.C. (S) 2601 et seq.); the
Clean Air Act, as amended (42 U. S.C. (S) 740 et seq.); the Federal Water
Pollution Control Act, as amended (33 U.S.C. (S) 1251 et seq.); the Occupational
Safety and Health Act, as amended (29 U.S.C. (S) 651 et sec.) ("OSHA"); and the
----
Safe Drinking Water Act, as amended (42 U.S.C. (S) 300f et seq.), and any and
all regulations promulgated thereunder, and all analogous state and local
counterparts or equivalents and any transfer of ownership notification or
approval statutes.
-2-
<PAGE>
"Environmental Liabilities and Costs" shall mean all liabilities,
-----------------------------------
obligations, responsibilities, remedial actions, losses, damages, punitive
damages, consequential damages, treble damages, costs and expenses (including,
without limitation, all fees, disbursements and expenses of counsel, experts and
consultants and costs of investigation and feasibility studies), fines,
penalties, sanctions and interest incurred as a result of any claim, suit,
action or demand by any Person, whether based in contract, tort, implied or
express warranty, strict liability, criminal or civil statute or common law
(including, without limitation, any thereof arising under any Environmental Law,
permit, order or agreement with any Governmental Authority) and which relate to
any health or safety condition regulated under any Environmental Law or in
connection with any other environmental matter or Spill or the presence of a
hazardous substance or threatened Spill of any Hazardous Substance.
"ERISA" shall mean the Employee Retirement Income Security Act of
-----
1974 (or any successor legislation thereto), as amended from time to time and
any regulations promulgated thereunder.
"ERISA Affiliate" shall mean, with respect to the Company, any
---------------
trade or business (whether or not incorporated) under common control with the
Company and which, together with the Company, are treated as a single employer
within the meaning of Section 414(b), (c), (m) or (o) of the IRC, excluding
Purchaser and each other Person which would not be an ERISA Affiliate if
Purchaser did not own any issued and outstanding shares of Stock of the Company.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended, and all rules and regulations promulgated thereunder.
"Financials" shall mean the financial statements referred to in
----------
Section 4.7 hereof.
- -----------
"Fiscal Year" shall mean the twelve month period ending December
-----------
31. Subsequent changes of the fiscal year of the Company shall not change the
term "Fiscal Year," unless Purchaser shall consent in writing to such change.
"GAAP" shall mean generally accepted accounting principles in the
----
United States of America as in effect from time to time.
"Governmental Authority" shall mean any nation or government, any
----------------------
state or other political subdivision thereof, and any agency, department or
other entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Guaranteed Indebtedness" shall mean, as to any Person, any
-----------------------
obligation of such Person guaranteeing any Indebtedness, lease, dividend, or
other obligation ("primary obligations") of any other Person (the "primary
------------------- -------
obligor") in any manner including, without limitation, any obligation or
- -------
arrangement of such Person (a) to purchase or repurchase any such primary
obligation, (b) to advance or supply funds (i) for the purchase or payment of
any such primary obligation or (ii)
-3-
<PAGE>
to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency or any balance sheet condition
of the primary obligor, (c) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary obligation
of the ability of the primary obligor to make payment of such primary
obligation, or (d) to indemnify the owner of such primary obligation against
loss in respect thereof.
"Hazardous Substances" shall have the meaning set forth in
--------------------
Section 4.10 hereof.
- ------------
"Indebtedness" of any Person shall mean (i) all indebtedness of
------------
such Person for borrowed money or for the deferred purchase price of property or
services (including, without limitation, reimbursement and all other obligations
with respect to surety bonds, letters of credit and bankers acceptances, whether
or not matured, but not including obligations to trade creditors incurred in the
ordinary course of business), (ii) all obligations evidenced by notes, bonds,
debentures or similar instruments, (iii) all indebtedness created or arising
under any conditional sale or other title retention agreements with respect to
property acquired by such Person (even though the rights and remedies of the
seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), (iv) all capital lease obligations
required to be capitalized in accordance with GAAP, (v) all Guaranteed
Indebtedness, (vi) all Indebtedness referred to in clause (i), (ii), (iii), (iv)
or (v) above secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien upon or in
property (including, without limitation, accounts and contract rights) owned by
such Person, even though such Person has not assumed or become liable for the
payment of such Indebtedness and (vii) all liabilities under Title IV of ERISA.
"IRC" shall mean the Internal Revenue Code of 1986, as amended,
---
and any successor thereto.
"IRS" shall mean the Internal Revenue Service, or any successor
---
thereto.
"Lien" shall mean any mortgage or deed of trust, pledge,
----
hypothecation, assignment, deposit arrangement, lien, charge, claim, security
interest, easement or encumbrance, or preference, priority", or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including without limitation, any title retention agreement, any financing
lease having substantially the same economic effect as any of the foregoing, and
the filing of, or agreement to give, any financing statement perfecting a
security interest as to assets owned by the relevant Person under the Uniform
Commercial Code or comparable law of any jurisdiction).
"Material Adverse Effect" shall mean material adverse effect on
-----------------------
the business, assets, operations, prospects or financial or other condition of
the Company.
"Material Contracts" shall mean (i) all of the Company's
------------------
contracts, agreements, leases or other instruments to which the Company is a
party or by which the Company or its properties are bound, which in the
Company's good faith judgment are required to be disclosed as exhibits to the
-4-
<PAGE>
Company's annual report on Form 10-KSB, (ii) all of the Company's loan
agreements, bank lines of credit agreements, indentures, mortgages, deeds of
trust, pledge and security agreements, factoring agreements, conditional sales
contracts, letters of credit or other debt instruments, (iii) all material
operating or capital leases for equipment to which the Company is a party, (iv)
all non-competition and similar agreements other than as contained in employment
agreements to which the Company is a party, (v) all contracts for the employment
of any officer or employee, (vi) all consulting agreements, (vii) any guarantees
by the Company, (viii) all distributor and sales agency agreements, (ix) all
other material contracts not made in the ordinary course of business, and (x)
all material contracts relating to the operation of the Company or, the
production of or programming for the Company or related to the technology
utilized by the Company.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined
------------------
in Section 4001 (a)(3) of ERISA, and to which Company or any ERISA Affiliate is
making, is obligated to make, has made or been obligated to make, contributions
on behalf of participants who are or were employed by any of them.
"Options" shall mean the options listed on the Capitalization
-------
Chart attached hereto as Exhibit D.
---------
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
----
successor thereto.
"Pension Plan" shall mean all "employee benefit plans", as
------------
defined in Section 3(3) of ERISA, and any other employee benefit arrangements or
payroll practices, including, without limitation, severance pay, sick leave,
vacation pay, salary continuation for disability, consulting or other
compensation agreements, retirement, deferred compensation, bonus, stock
purchase, hospitalization, medical insurance, life insurance and scholarship
programs (the "Plans") maintained by the Company or to which the Company
-----
contributed, contributes or is obligated to contribute thereunder, and (ii) all
"employee pension plans", as defined in Section 3(2) of ERISA, maintained by the
Company or any of its ERISA Affiliates to which the Company or any of its ERISA
Affiliates contributed, contributes or is obligated to contribute thereunder.
"Permitted Indebtedness" shall mean, with respect to the Company,
----------------------
(i) taxes or assessments or other governmental charges or levies, either not yet
due and payable or to the extent that nonpayment thereof is permitted by the
terms of this Agreement; (ii) obligations under workmen's compensation,
unemployment insurance, social security or public liability laws or similar
legislation; (iii) bids, tenders, contracts (other than contracts for the
payment of money) or leases to which the Company is a party as lessee made in
the ordinary course of business, (iv) public or statutory obligations of the
Company; (v) all deferred taxes and (vi) all unfunded pension fund and other
employee benefit plan obligations and liabilities but only to the extent
permitted to remain unfunded under applicable law.
"Person" shall mean any individual, sole proprietorship,
------
partnership, limited liability
-5-
<PAGE>
company, joint venture, trust, unincorporated organization, association,
corporation, institution, public benefit corporation, entity or government
(whether federal, state, county, city, municipal or otherwise, including,
without limitation, any instrumentality, division, agency, body or department
thereof).
"Private Placement Warrants" shall mean the Company's private
--------------------------
placement warrants listed on the Capitalization Chart attached hereto as Exhibit
-------
D as "Standby Warrants".
- -
"Purchased Securities" shall mean the Convertible Preferred and
--------------------
the Class D Warrant purchased by Purchaser at the Closing pursuant to Section
-------
2.2 of this Agreement.
- ---
"Registration Rights Agreement" shall mean the Registration
-----------------------------
Rights Agreement between Company and Purchaser, dated as of April 25, 1997, as
such agreement may be amended, supplemented or otherwise modified from time to
time in accordance with the terms thereof.
"Restricted Securities" shall mean (i) the Purchased Securities
---------------------
issued hereunder, and (ii) any securities issued and exchanged with respect to
the securities referred to in clause (i) by way of a stock dividend or stock
split or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization. As to any particular Restricted
Securities, such securities shall cease to be Restricted Securities when they
have been (a) effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering them, (b) been distributed
to the public through a broker, dealer or market maker pursuant to Rule 144 (or
any similar provision then in force) under the Securities Act or become eligible
for sale pursuant to Rule 144(k) (or any similar provision then in force) under
the Securities Act or (c) been otherwise transferred and new certificates for
them not bearing the Securities Act legend set forth in Section 6.1 have been
-----------
delivered by Company in accordance with Section 6.2. Whenever any particular
-----------
securities cease to be Restricted Securities, the holder thereof shall be
entitled to receive from Company, without expense, new securities of like tenor
nor bearing a Securities Act legend of the character set forth in Section 6.1.
-----------
"SEC" shall mean the U.S. Securities and Exchange Commission, or
---
any successor thereto.
"Securities Act" shall mean the Securities Act of 1933, as
--------------
amended, and all rules and regulations promulgated thereunder.
"Spill" shall have the meaning set forth in Section 4.10.
----- ------------
"Stock" shall mean all shares, options, warrants, general or
-----
limited partnership interests, limited liability company membership interest,
participations or other equivalents (regardless of how designated) of or in a
corporation, partnership, limited liability company or equivalent entity whether
voting or nonvoting, including, without limitation, common stock, preferred
stock, or any other equity security (as such term is defined in Rule 3al 1-1 of
the General
-6-
<PAGE>
Rules and Regulations promulgated by the SEC under the Exchange Act).
"Subsidiary" shall mean, with respect to any Person, (a) any
----------
corporation of which an aggregate of more than 50% of the outstanding Stock
having ordinary voting power to elect a majority of the board of directors of
such corporation (irrespective of whether, at the time, Stock of any other class
or classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time, directly or indirectly,
owned legally or beneficially by such Person and/or one or more Subsidiaries of
such Person, and (b) any partnership or other entity in which such Person and/or
one or more Subsidiaries of such Person shall have an interest (whether in the
form of voting or participation in profits or capital contribution) of more than
50%.
"Transaction Documents" shall mean this Agreement, the
---------------------
Registration Rights Agreement, the terms of the Convertible Preferred attached
hereto as Exhibit B, the Class D Warrant and all certificates and other
---------
documents related to the transactions contemplated by this Agreement.
"Warrants" shall mean the Company's Private Placement Warrants,
--------
Class C Warrants and Class D Warrant listed on the Capitalization Chart attached
hereto as Exhibit D.
---------
References to this "Agreement" shall mean this Purchase
---------
Agreement, including all amendments, modifications and supplements and any
exhibits or scheduler to any of the foregoing, and shall refer to the Agreement
as the same may be in effect at the time such reference becomes operative.
Any accounting term used in this Agreement shall have, unless
otherwise specifically provided herein, the meaning customarily given such term
in accordance with GAAP, and all financial computations hereunder shall be
computed, unless otherwise specifically provided herein, in accordance with GAAP
consistently applied. That certain terms or computations are explicitly modified
by the phrase "in accordance with GAAP" shall in no way be construed to limit
the foregoing. The words "herein," "hereof"and "hereunder" and other words of
similar import refer to this Agreement, as a whole, including the Exhibits and
Schedules hereto, as the same may from time to time be amended, modified or
supplemented, and not to any particular section, subsection or clause contained
in this Agreement. Wherever from the context it appears appropriate, each term
stated in either the singular or plural shall include the singular and the
plural, and pronouns stated in the masculine, feminine or neuter gender shall
include the masculine, the feminine and the neuter.
ARTICLE II
CLOSING
2.1 Authorization of Purchased Securities. Prior to the Closing,
-------------------------------------
the Company shall have duly authorized the issuance and sale of the Purchased
Securities.
2.2 Purchase of Purchased Securities. Subject to the terms and
--------------------------------
conditions set
-7-
<PAGE>
forth in this Agreement, on the Closing Date (as defined below), Purchaser will
purchase from the Company, and the Company will sell to Purchaser (i) an
aggregate of 309,998 shares of Convertible Preferred for a purchase price of $15
per share (the "Per Share Price") and (ii) a Class D Warrant for the purchase of
---------------
135,686 shares of Common Stock, all for an aggregate purchase price of
$4,649,970 (the "Purchase Price"). The Purchase Price will be payable in full by
Purchaser on the Closing Date in cash by wire transfer of immediately available
funds to an account designated by the Company.
2.3 Closing. The closing of the purchase and sale of the
-------
Purchased Securities (the "Closing") shall take place simultaneously with the
-------
execution of this Agreement (the "Closing Date") at the offices of Kirkland &
------------
Ellis, 200 East Randolph Street, Chicago, Illinois, or such other place as shall
be mutually agreed to by the parties hereto. On the Closing Date, the Company
will deliver to Purchaser a certificate representing the Convertible Preferred
and the Class D Warrant representing the Purchased Securities to be purchased by
Purchaser registered in the name of Purchaser against delivery by Purchaser of
the Purchase Price by payment of cash by wire transfer of immediately available
funds to the Company in accordance with Section 2.2 hereof.
-----------
ARTICLE III
PURCHASER'S REPRESENTATIONS
As of the Closing, Purchaser makes the following representations
and warranties to the Company, each and all of which shall survive the execution
and delivery of this Agreement and the Closing hereunder:
3.1 Investment Intention. Purchaser is purchasing the Purchased
--------------------
Securities for its own account, for investment purposes and not with a view to
the distribution thereof. Purchaser will not, directly or indirectly, offer,
transfer, sell, assign, pledge, hypothecate or otherwise dispose of any of the
Purchased Securities (or solicit any offers to buy, purchase, or otherwise
acquire any of the Purchased Securities), except in compliance with the
Securities Act.
3.2 Accredited Investor. Purchaser is an "accredited investor"
------------------- -------------------
(as that term is defined in Rule 501 of Regulation D under the Securities Act)
and by reason of its business and financial experience, it has such knowledge,
sophistication and experience in business and financial matters as to be capable
of evaluating the merits and risks of the prospective investment, is able to
bear the economic risk of such investment and it is able to afford a complete
loss of such investment.
3.3 Corporate Existence. Purchaser is a limited liability
-------------------
company duly organized, validly existing and in good standing under the laws of
its jurisdiction of formation.
3.4 Corporate Power: Authorization: Enforceable Obligations. The
-------------------------------------------------------
execution, delivery and performance by Purchaser of the Transaction Documents to
be executed by it: (i) are within Purchaser's power, as applicable; (ii) have
been duly authorized by all necessary action, as applicable; (iii) are not in
contravention of any provision of Purchaser's governing documents, as
-8-
<PAGE>
applicable; and (iv) will not violate any law or regulation, or any order or
decree of any court or governmental instrumentality binding on Purchaser.
Purchaser has full power and authority to perform its obligations under the
Transaction Documents. The Transaction Documents to which Purchaser is a party
have each been duly executed and delivered by Purchaser and constitute the
legal, valid and binding obligations of Purchaser, enforceable against it in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity).
ARTICLE IV
COMPANY'S REPRESENTATIONS, WARRANTIES AND COVENANTS
As of the Closing, the Company makes the following
representations, warranties and covenants to each Purchaser, each and all of
which shall survive the execution and delivery of this Agreement and each
Closing hereunder:
4.1 Capitalization
--------------
(a) The capitalization of the Company, after giving effect
to the purchase of the Purchased Securities, is illustrated by a "Capitalization
--------------
Chart" attached hereto as Exhibit D. The Capitalization Chart, after giving
- ----- ---------
effect to the purchase of the Purchased Securities, includes (i) the number of
shares of each class of Stock of the Company issued and outstanding and (ii) the
number and class of all outstanding warrants, options and other securities
convertible into Common Stock or other securities of the Company. After giving
effect to the purchase of the Purchased Securities, 678,432 shares of Common
Stock are reserved for issuance upon conversion of the Convertible Preferred
purchased at the Closing, 1,155,426 shares of Common Stock are reserved for
issuance upon exercise of the Private Placement Warrants, 924,832 shares of
Common Stock are reserved for issuance upon exercise of the Class C Warrants,
135,686 shares of Common Stock are reserved for issuance upon exercise of the
Class D Warrants, and 2,915,933 shares of Common Stock are reserved for issuance
upon exercise of the Options.
(b) All issued and outstanding Stock of the Company listed
on the Capitalization Chart is duly authorized, validly issued, fully paid and
non-assessable. Schedule 4.1 hereto or the Annual Report contains a complete and
------------
correct list of all stockholders of the Company owning, to the knowledge of the
Company, more than 5% of the outstanding Stock of the Company and the number of
shares or warrants owned by each. Except as set forth on Schedule 4.1 or the
------------
Annual Report and except as to the outstanding Convertible Preferred, Options
and Warrants, (i) there is no existing option, warrant, call, commitment or
other agreement to which the Company is a party requiring, and there are no
convertible securities of the Company outstanding which upon conversion would
require, the issuance of any additional shares of Stock of the Company or other
-9-
<PAGE>
securities convertible into shares of equity securities of the Company, (ii)
there are no agreements or obligations (contingent or otherwise) requiring the
Company to repurchase or otherwise acquire or retire any shares of its capital
stock or any warrants, options or other rights to acquire its capital stock, and
(iii) there are no agreements to which the Company is a party or, to the
knowledge of the Company, to which any stockholder or warrant holder of the
Company is a party, with respect to the voting or transfer of the Stock of the
Company. Except as set forth on Schedule 4.1 or the Annual Report, there are no
------------
stockholders' preemptive rights or rights of first refusal or other similar
rights with respect to the issuance of the Purchased Securities by the Company.
True and correct copies of the Certificate of Incorporation and by-laws of the
Company have been delivered to Purchaser.
4.2 Authorization and Issuance of the Purchased Securities. The
------------------------------------------------------
issuance of the Purchased Securities has been duly authorized by all necessary
corporate action on the part of the Company and, upon delivery to Purchaser of
certificates therefor against payment in accordance with the terms hereof, the
Purchased Securities will have been validly issued and fully paid and
nonassessable, free and clear of all pledges, liens, encumbrances and preemptive
rights. The issuance of shares upon exercise of the Convertible Preferred and
the Class D Warrant has been duly authorized by all necessary corporate action
on the part of the Company and, when issued upon exercise of the Convertible
Preferred and the Class D Warrant and payment of the exercise prices, such
Common Stock will have been validly issued and fully paid and non-assessable.
4.3 Securities Laws. In reliance on the representations of
---------------
Purchaser contained in Section 3.1 and 3.2, the offer, issuance, sale and
----------- ---
delivery of the Purchased Securities, as provided in this Agreement, are exempt
from the registration requirements of the Securities Act and all applicable
state securities laws, and are otherwise in compliance with such laws. Neither
the Company nor any Person acting on its behalf has taken or will take any
action (including, without limitation, any offering of any securities of the
Company under circumstances which would require the integration of such offering
with the offering of the Purchased Securities under the Securities Act and the
rules and regulations of the SEC thereunder) which might subject the offering,
issuance or sale of the Purchased Securities to the registration requirements of
Section 5 of the Securities Act. No information contained in the documents filed
with the SEC contains any untrue statement of a material fact, or omits to state
a material fact necessary to make the statements contained therein not
misleading in light of the circumstances under which made.
4.4 Corporate Existence: Compliance with Law. The Company (i) is
----------------------------------------
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware; (ii) except as indicated on Schedule 4.4 is duly
------------
qualified as a foreign corporation and in good standing under the laws of
Massachusetts, New York, Illinois, California, Arizona and Georgia and each
jurisdiction where its ownership or lease of property or the conduct of its
business requires such qualification (except for jurisdictions in which such
failure to so qualify or to be in good standing would not have a Material
Adverse Effect); (iii) has the requisite corporate power and authority and the
legal right to own, pledge, mortgage or otherwise encumber and operate its
properties, to lease the property it operates under lease, and to conduct its
business as now being conducted in all material respects; (iv) has, or has
applied for, all material licenses, permits, consents
-10-
<PAGE>
or approvals from or by, and has made all material filings with, and has given
all material notices to, all Governmental Authorities having jurisdiction, to
the extent required for such ownership, operation and conduct; (v) is in
compliance with its Certificate of Incorporation and by-laws in all material
respects; and (vi) is in compliance with all applicable provisions of applicable
laws, including, but not limited to, the Securities Act and the Exchange Act,
except for such non-compliance which would not have a Material Adverse Effect.
The Company has timely filed all reports with the SEC as is required by the
Securities Act and Exchange Act and the Rule 144 exemption is available to
qualified holders of Stock of the Company.
4.5 Subsidiaries. Except for the acquisition of Armed Forces
------------
Communications, Inc., there currently exist no Subsidiaries of the Company and
the Company has no equity interest in any other Person.
4.6 Corporate Power: Authorization: Enforceable Obligations. The
-------------------------------------------------------
execution, delivery, and performance by the Company of this Agreement, the other
Transaction Documents to which it is a party and all instruments and documents
to be delivered by the Company, the issuance and sale of the Purchased
Securities and the consummation of the other transactions contemplated by any of
the foregoing: (i) are within the Company's corporate power and authority, (ii)
have been duly authorized by all necessary or proper corporate action; (iii) are
not in contravention of any provision of the Company's Certificate of
Incorporation or by-laws; (iv) will not violate any law or regulation, or any
order or decree of any court or governmental instrumentality; (v) will not
conflict with or result in the breach or termination of, constitute a default
under or accelerate any performance required by, any indenture, mortgage, deed
of trust, lease, agreement or other instrument to which the Company is a party
or by which the Company or any of their property is bound, (vi) will not result
in the creation or imposition of any Lien upon the capital stock or any of the
property of the Company; and (vii) do not require the consent or approval of, or
any filing with, any Governmental Authority or any other Person (except to the
extent previously obtained or made). The execution, delivery and performance of
this Agreement and the transactions contemplated herein do not require approval
or consent of the shareholders or other holders of Stock of the Company or the
approval or authorization of any Governmental Authority, NASDAQ (except for the
listing of additional shares pursuant to NASD Rule 4310(c)(17) regarding notice
of issuance of additional securities), other securities exchange or any other
Person. Each of this Agreement and the other Transaction Documents shall have
been duly executed and delivered by the Company and each shall then constitute a
legal, valid and binding obligations of the Company, enforceable against the
Company in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity).
4.7 Financial Statements.
--------------------
(a) The audited financial statements of the Company dated as of
December
-11-
<PAGE>
31, 1998 (the "Financials") have been prepared in accordance with the books and
----------
records of the Company, present fairly the financial condition of the Company as
of the respective dates indicated and the results of operations for the
respective periods indicated, and have been prepared in accordance with GAAP
applied on a consistent basis.
(b) Except as set forth on Schedule 4.7 or the Annual Report,
------------
the Company has no material obligations, contingent or otherwise, including,
without limitation, liabilities for Charges, long-term leases or long-term
commitments which are not reflected in the Financials, other than those incurred
since December 31, 1998, in the ordinary course of business (none of which is a
liability resulting from breach of contract, breach of warranty, tort,
infringement, or any claim or lawsuit).
(c) No dividends or other distributions have been declared, paid
or made upon any Stock of the Company, nor has any Stock of the Company been
redeemed, retired, purchased or otherwise acquired for value by the Company
since December 31, 1998.
4.8 Ownership of Property.
---------------------
(a) The Company does not own any real estate. Except as set
forth on Schedule 4.8 or the Annual Report, the Company owns, has a valid
------------
leasehold interest in, or has a valid license to use, all material assets,
properties and rights, whether tangible or intangible, necessary for the conduct
of its business as presently conducted and as presently proposed to be
conducted.
(b) All real property leased by the Company is set forth on
Schedule 4.8 or the Annual Report. Each of such leases is valid and enforceable
- ------------
in accordance with its terms (subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally, and subject, as to enforceability, to
general principles of equity, including principles of commercial reasonableness,
good faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity)) and is in full force and effect. Except as set
forth on Schedule 4.8 or the Annual Report, the Company is not in default of its
------------
obligations under any material lease or has it delivered or received any notice
of default under any such lease, nor to the knowledge of the Company has any
event occurred which, with the giving of notice, the passage of time or both,
would constitute a default under any such lease.
4.9 Material Contracts: Indebtedness. Each Material Contract is a
--------------------------------
valid and binding agreement of the Company enforceable against the Company in
accordance with its terms (subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally, and subject, as to enforceability, to
general principles of equity, including principles of commercial reasonableness,
good faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity)), and the Company has no knowledge that any
Material Contract is not a valid and binding agreement
-12-
<PAGE>
against the other parties thereto. Except as set forth in Schedule 4.9 or the
------------
Annual Report, the Company is not in material default or breach (whether with or
without the passage of time, the giving of notice or both) or in receipt of any
claims of default or breach in either case that could reasonably be expected to
have a Material Adverse Effect, nor to the Company's knowledge is any third
party in default or breach, under or with respect to any Material Contract.
Except as set forth on Schedule 4.9 or the Annual Report, the Company has no
------------
Indebtedness, except Permitted Indebtedness.
4.10 Environmental Protection.
------------------------
(a) To the Company's actual knowledge without independent
investigation, all real property owned, leased or otherwise operated by the
Company and each Subsidiary (a "Facility") is free of contamination from any
--------
substance, waste or material (i) currently identified to be toxic or hazardous
pursuant to, or which may result in liability under, any Environmental Law or
(ii) within the definition of a substance which is toxic or hazardous under any
Environmental Law, including, without limitation, any asbestos, PCB, radioactive
substance, methane, volatile hydrocarbons, industrial solvents, oil or petroleum
or chemical liquids or solids, liquid or gaseous products, or any other material
or substance which has in the past or could at any time in the future cause or
constitute a health, safety, or environmental hazard to any Person or property
or result in any Environmental Liabilities and Costs ("Hazardous Substance") of
-------------------
more than $25,000 or which, in either case, could have a Material Adverse
Effect. Nor has the Company caused or suffered to occur any release, Spill,
migration, leakage, discharge, spillage, uncontrolled loss, seepage, or
filtration of Hazard Substances at or from the Facility (a "Spill") which could
-----
result in Environmental Liabilities and Costs in excess of $25,000.
(b) The Company and each Subsidiary has generated, treated,
stored and disposed of any Hazardous Substances in full compliance with
applicable Environmental Laws, except for such non-compliances which would not
have a Material Adverse Effect.
(c) The Company and each Subsidiary has obtained, or has
applied for, and is in full compliance with and in good standing under all
permit required under Environmental Laws (except for such failures which would
not have a Material Adverse Effect). The Company does not have any knowledge of
any proceedings to substantially modify or to revoke any such permit.
(d) There are no investigations, proceedings or litigation
pending or, to the Company's knowledge, threatened, affecting or against the
Company or the Facilities relating to Environmental Laws or Hazardous
Substances.
(e) Since April 25, 1997, the Company has not received any
communication or notice (including, without limitation, requests for
information) indicating the potential of Environmental Liabilities and Costs
against the Company.
4.11 Labor Matters.
-------------
-13-
<PAGE>
(a) There are no strikes or other labor disputes against the
Company pending or to the Company's knowledge threatened. Hours worked by and
payment made to employees of the Company have not been in violation of the Fair
Labor Standards Act or any other applicable law dealing with such matters. All
payments due from the Company on account of employee health and welfare
insurance have been paid or accrued as a liability on the books of the Company.
There is no organizing activity involving the Company pending or, to the
Company's knowledge, threatened by any labor union or group of employees that
individually or in the aggregate could reasonably be expected to have a Material
Adverse Effect. There are no representation proceedings pending or, to the
Company's knowledge, threatened with the National Labor Relations Board, and no
labor organization or group of employees of the Company has made a pending
demand for recognition. There are no complaints or charges against the Company
pending or, to the Company's knowledge, threatened to be filed with any federal,
state, local or foreign court, governmental agency or arbitrator based on,
arising out of, in connection with, or otherwise relating to the employment or
termination of employment by the Company of any individual.
(b) The Company is not, and during the five years preceding the
date hereof was not, a party to any labor or collective bargaining agreement and
there are no labor or collective bargaining agreements which pertain to
employees of the Company.
4.12 Taxes. All federal, state, local and foreign tax returns, reports
-----
and statements required to be filed by the Company and each Affiliated Group
have been timely filed with the appropriate Governmental Authority except where
the failure to file such report or statement would not have a Material Adverse
Effect and all such returns, reports and statements are true, correct and
complete in all material respects. All Charges and other impositions due and
payable for the periods covered by such returns, reports and statements have
been paid prior to the date on which any fine, penalty, interest or late charge
may be added thereto for nonpayment thereof or any such fine, penalty, interest
or late charge has been paid. Proper and accurate amounts have been withheld by
the Company from its employees, independent contractors, or other third parties
for all periods in full and complete compliance with the tax, social security
and unemployment withholding provisions of applicable federal, state, local and
foreign law and such withholdings have been timely paid to the respective
governmental agencies. The Company has not executed or filed with the IRS or any
other Governmental Authority any agreement or other document extending, or
having the effect of extending, the period for assessment or collection of any
Charges. No tax audits or other administrative or judicial proceedings are
pending or threatened with regard to any Charges for which the Company may be
liable and which would reasonably be expected to have a Material Adverse Effect
and no assessment of Charges is proposed against the Company. The Company has
not filed a consent pursuant to IRC Section 341(f) or agreed to have IRC Section
341(f)(2) apply to any dispositions of subsection (f) assets (as such term is
defined in IRC Section 341(f)(4)). None of the property owned by the Company is
property which such the Company is required to treat as being owned by any other
Person pursuant to the provisions of Section 168(f)(8) of the Internal Revenue
Code of 1954, as amended, and in effect immediately prior to the enactment of
the Tax Reform Act of 1986 or is "tax-exempt" use property, within the meaning
of IRC Section 168(h). The Company has not agreed or has been requested to make
any adjustment under IRC Section 481(a)
-14-
<PAGE>
by reason of a change in accounting method or otherwise. The Company has no
obligation under any written tax sharing agreement. The Company is not a party
to or bound by any tax allocation or tax sharing agreement and has no current or
potential contractual obligation to indemnify any other person with respect to
any Charges. The Company has not made any payments, and is not and will not
become obligated (under any contract entered into on or before the Closing Date)
to make any payments, that will be non-deductible under Section 280G of the IRC
(or any corresponding provision of state, local or foreign income tax law). The
Company will not be required (A) as a result of a change in method of accounting
for a taxable period ending on or prior to the Closing Date, to include any
adjustment in taxable income for any taxable period (or portion thereof) ending
after the Closing Date or (B) as a result of any deferred intercompany gain
described in Treasury Regulation Sections 1. 1502-13 of former Treasury
Regulations Section 1. 1502-14 or any excess loss account described in Treasury
Regulation Section 1. 1502-19 (or any corresponding or similar provision or
administrative rule of federal, state, local or foreign income tax law), to
include any item of income in taxable income for any taxable period (or portion
thereof) ending after the Closing Date, in each case, which would reasonably be
expected to have a Material Adverse Effect. The Company has not been a member of
an Affiliated Group other than one of which the Company was the common parent,
or filed or been included in a combined, consolidated or unitary income tax
return, other than one filed by the Company.
4.13 No Litigation. Except as set forth on Schedule 4.13, no action,
------------- -------------
claim or proceeding is now pending or, to the knowledge of the Company,
threatened against the Company (or to the Company's knowledge, pending or
threatened against or affecting any of the officers, directors or employees of
the Company with respect to its business or proposed business activities), or
pending or threatened by the Company against any third party, at law, in equity
or otherwise, before any court, board, commission, agency or instrumentality of
any federal, state, or local government or of any agency or subdivision thereof,
or before any arbitrator or panel of arbitrators.
4.14 Brokers. No broker or finder acting on behalf of the Company
-------
brought about the consummation of the transactions contemplated pursuant to this
Agreement and the Company has no obligation to any Person in respect of any
finder's or brokerage fees (or any similar obligation) in connection with the
transactions contemplated by this Agreement. The Company is solely responsible
for the payment of all such finder's or brokerage fees.
4.15 Management and Labor Agreements. Except as set forth on Schedule
------------------------------- --------
4.15 or the Annual Report, there are no management agreements covering officers
- ----
of the Company.
4.16 Patents, Trademarks, Copyrights and Licenses. The Company owns
--------------------------------------------
all licenses, patents, patent applications, copyrights, service marks,
trademarks and registrations and applications for registration thereof, and
trade names necessary to continue to conduct its business as heretofore
conducted by it and now being conducted by it. To the Company's knowledge, the
Company conducts its businesses without infringement or claim of infringement of
any license, patent, copyright, service mark, trademark, trade name, trade
secret or other intellectual property right of others and the Company has
received no notices claiming any such infringement. To the
-15-
<PAGE>
Company's knowledge, there is no infringement by others of any license, patent,
copyright, service mark, trademark, trade name, trade secret or other
intellectual property right of the Company.
4.17 No Material Adverse Effect. To the Company's knowledge, no event
--------------------------
has occurred since April 25, 1997 which has had or could be reasonably expected
to have a Material Adverse Effect; provided, however, Purchaser acknowledges
that it has been advised that the Company has operated at a loss and has had
negative cash flow since October 31, 1998.
4.18 ERISA.
-----
(a) During the twelve-consecutive-moth period prior to the date
of the execution and delivery of this Agreement, (i) no steps have been taken to
terminate any Pension Plan and (ii) no contribution failure has occurred with
respect to any Pension Plan sufficient to give rise to a Lien under Section
302(f) of ERISA. No condition exists or event or transaction has occurred with
respect to any Pension Plan which could result in the incurrence by the Company
of any material liability, fine or penalty.
(b) All contributions (if any) have been made to any
Multiemployer Plan that are required to be made by the Company or any other
member of the Controlled Group under the terms of the plan or of any collective
bargaining agreement or by applicable law; neither the Company nor any member of
the Controlled Group has withdrawn or partially withdrawn from any Multiemployer
Plan, incurred any withdrawal liability with respect to any such plan or
received notice of any claim or demand for withdrawal liability or partial
withdrawal liability from any such plan, and no condition has occurred which, if
continued, might result in a withdrawal or partial withdrawal from any such
plan; and neither the Company nor any member of the Controlled Group has
received any notice that any Multiemployer Pension Plan is in reorganization,
that increased contributions may be required to avoid a reduction in plan
benefits or the imposition of any excise tax, that any such plan is or has been
funded at a rate less than that required under Section 412 of the IRC, that any
such plan is or may be terminated, or that any such plan is or may become
insolvent.
(c) The Pension Plans and the trusts maintained pursuant
thereto are exempt from federal income taxation under Section 501 of the IRC,
and nothing has occurred with respect to the operation of the Pension Plans
which could cause the loss of such qualification or exemption or the imposition
of any liability, penalty, or tax under ERISA or the IRC.
(d) All contributions required by law or pursuant to the terms
of the Plans (without regard to any waivers granted under Section 412 of the
IRC) to any funds or trusts established thereunder or in connection therewith
have been made by the due date thereof (including any valid extension) and no
accumulated funding deficiencies exist in any of the Pension Plans subject to
Section 412 of the IRC.
(e) There is no "amount of unfunded benefit liabilities" as
defined in
-16-
<PAGE>
Section 4001 (a) (18) of ERISA in any of the respective Pension Plans, which
are subject to Title IV of ERISA. Each of the respective Pension Plans are fully
funded in accordance with the actuarial assumptions used by the PBGC to
determine the level of funding required in the event of the termination of the
Pension Plan and all benefit liabilities do not exceed the assets of such
Pension Plans.
(f) There have been no "reportable events" as that term is
defined in Section 404 of ERISA and the regulations thereunder with respect to
the Pension Plans subject to Title IV of ERISA which would require the giving of
notice, or any event requiring disclosure under Sections 4041(c)(3)(C), 4063(a)
or 4068(f) of ERISA.
(g) There is no material violation of ERISA with respect to the
filing of applicable reports, documents, and notice, regarding the Plans with
the Secretary of Labor and the Secretary of the Treasury or the furnishing of
such documents to the participants or beneficiaries of the Plans.
(h) There are no pending actions, claims or lawsuits which have
been asserted or instituted against the Plans, the assets of any of the trusts
under such Plans or the plan sponsor or the plan administrator, or against any
fiduciary of the Plans with respect to the operation of such Plans (other than
routine benefit claims), nor does the Company have knowledge of facts which
could form the basis for any such claim or lawsuit.
(i) All amendments and actions required to bring the Plans into
conformity in all material respects with all of the applicable provisions of
ERISA and other applicable laws have been made or taken except to the extent
that such amendments or actions are not required by law to be made or taken
until a date after the applicable Closing Date.
(j) The Plans have been maintained, in all material respects, in
accordance with their terms and with all provisions of ERISA (including rules
and regulations thereunder) and other applicable Federal and state law, and the
Company or "party in interest" or "disqualified person" with respect to the
Plans has engaged in a "prohibited transaction" within the meaning of Section
4975 of the IRC or Section 406 of ERISA.
(k) Neither the Company nor any ERISA Affiliate has terminated
any Pension Plan subject to Title IV, or incurred any outstanding liability
under Section 4062 of ERISA to the PBGC, or to a trustee appointed under Section
4042 of ERISA.
(l) Neither the Company nor any ERISA Affiliate maintains
retiree life and retiree health insurance plans which are Welfare Plans and
which provide for continuing benefits or coverage for any participant or any
beneficiary of a participant except as may be required under the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"). The Company and
-----
each ERISA Affiliate which maintains a Welfare Plan has complied with the notice
and continuation requirements of COBRA and the regulations thereunder.
-17-
<PAGE>
(m) Neither the Company nor any ERISA Affiliate has contributed
or been obligated to contribute to a Multiemployer Plan as of the applicable
Closing.
(n) Neither the Company nor any ERISA Affiliate has withdrawn in
a complete or partial withdrawal from any Multiemployer Plan prior to the
applicable Closing Date, nor has any of them incurred any liability due to the
termination or reorganization of a Multiemployer Plan.
4.19 Registration Rights. Except as listed on Schedule 4.19 and except
-------------------
as pursuant to the Registration Rights Agreement or as set forth in the Annual
Report, the Company is not under obligation to register any of its securities
pursuant to the Securities Act.
4.20 Required Filings. As of the date hereof, the Company has made all
----------------
required filings under the Securities Act and Exchange Act and all information
contained in such filings are true and correct in all material respects and do
not contain any untrue information or omit to state a material fact necessary to
make any statements contained in such filings not misleading in light of the
circumstances under which they were made.
4.21 LaSalle Credit Agreement. All of the representations and
------------------------
warranties contained in that certain Credit Agreement, dated on or around the
date of this Agreement, by and between the Company and LaSalle Bank National
Association are true and correct as of the date hereof, or on the date such as
such Credit Agreement is executed, and are hereby incorporated herein by
reference.
4.22 Full Disclosure. No information contained in this Agreement, any
---------------
other Transaction Document, the Financials or any written statement furnished by
or on behalf of the Company pursuant to the terms of this Agreement contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements contained herein or therein not misleading in light of
the circumstances under which they were made.
ARTICLE V
CONDITIONS PRECEDENT TO CLOSING
5.1 Conditions Precedent. The obligation of Purchaser to purchase
--------------------
the Purchased Securities pursuant to Section 2.2 hereof at the Closing is
-----------
subject to the condition that Purchaser shall have received and the following
shall have been delivered to Purchaser on the Closing Date, each dated the
Closing Date unless otherwise indicated, in form and substance satisfactory to
Purchaser, and the following actions shall occur on or before the Closing Date,
unless waived by Purchaser:
(a) A favorable opinion of Morris, Manning & Martin, L.L.P.
counsel to the Company, substantially in the form attached hereto as Exhibit C.
---------
-18-
<PAGE>
(b) Resolutions of the board of directors, executive committee
or special finance committee of the Company, certified by the Secretary or
Assistant Secretary of the Company, as of the Closing Date, to be duly adopted
and in full force and effect on such date, authorizing, in the case of the board
of directors, (i) the consummation of each of the transactions contemplated by
this Agreement and (ii) officers to execute and deliver this Agreement and each
other Transaction Document to which it is a party.
(c) A copy of governmental certificate, dated the most recent
practicable date prior to the Closing Date, with telegram updates where
available, showing that the Company is organized and in good standing in the
State of Delaware and is qualified as a foreign corporation and in good standing
in all other jurisdictions in which it is qualified to transact business.
(d) A copy of the organizational charter and all amendments
thereto of the Company, certified as of a recent date by the Secretary of State
of the State of Delaware (the "Charter"), and copies of the Company's by-laws,
-------
certified by the Secretary or Assistant Secretary of the Company as true and
correct as of the Closing Date.
(e) Certificates of the Secretary or an Assistant Secretary of
the Company, dated the Closing Date, as to the incumbency and signatures of the
officers of the Company executing this Agreement, the Purchased Securities, each
other Transaction Document to which it is a party and any other certificate or
other document to be delivered pursuant hereto or thereto, together with
evidence of the incumbency of such Secretary or Assistant Secretary.
(f) A copy of all third party consents and approvals, if any,
that are necessary for the consummation of the transactions contemplated hereby
or that are required in order to prevent a breach of or default under, a
termination or modification of, or acceleration of the terms of, any contract,
agreement or document required to be listed on the attached Schedule 4.9 or the
------------
Annual Report, in each case on terms and conditions reasonably satisfactory to
Purchaser.
(g) A copy of all governmental and regulatory consents and
approvals that are necessary for the consummation of the transactions
contemplated hereby, in each case on terms and conditions satisfactory to
Purchaser.
(h) No suit, action or other proceeding shall be pending before
any court or governmental regulatory body or authority in which it is sought to
restrain or prohibit the transactions contemplated hereby, or that could have a
Material Adverse Effect, and no injunction, judgment, order, decree or ruling
with respect thereto shall be in effect.
(i) Since December 31, 1998, there shall have been no material
adverse change or material adverse development in the business, financial
condition, business prospects, operating results, assets, operations or
customer, supplier or employee relations of the Company.
(j) The Company shall have delivered to Purchaser a copy of the
fairness
-19-
<PAGE>
opinion (the "Fairness Opinion") relating to the transaction contemplated
----------------
herein from BancBoston Robertson Stephens Inc., which fairness opinion shall
indicate that the price for the Convertible Preferred and the Class D Warrant
purchased pursuant to Section 2.2 is fair to the Company and its stockholders,
other than Purchaser.
(k) The Purchased Securities shall have been delivered to
Purchaser.
(l) The Certificate of Designation containing the Convertible
Preferred Stock Terms shall have been duly adopted by the Company's board of
directors, shall have been duly filed with the Secretary of State of Delaware
and shall have become effective under the laws of Delaware and constitutes.
ARTICLE VI
SECURITIES LAW MATTERS
6.1 Legends.
-------
(a) Each certificate representing the Purchased Securities
shall bear a legend substantially in the following form:
"THE STOCK REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED BY THE
HOLDER FOR ITS OWN ACCOUNT, FOR INVESTMENT PURPOSES AND NOT WITH A
VIEW TO THE DISTRIBUTION OF SUCH STOCK. THE SHARES HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION THEREFROM."
(b) The Class D Warrant shall bear a legend substantially in the
following form:
"THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SHARES ISSUABLE
UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS AND
NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,
PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION
STATEMENTS WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN
OPINION OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND
OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN
THE
-20-
<PAGE>
MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENTS UNDER
THE ACT OR APPLICABLE STATE SECURITIES LAWS."
6.2 Transfer of Restricted Securities.
---------------------------------
(a) Restricted Securities are transferable only pursuant to (i)
public offerings registered under the Securities Act, (ii) Rule 144 or Rule 144A
of the Securities and Exchange Commission (or any similar rule or rules then in
force) if such rule is available and (iii) subject to the conditions specified
in subparagraph (b) below, any other legally available means to transfer.
(b) In connection with the transfer of any Restricted Securities
(other than a transfer described in clause (i) or (ii) of subparagraph (a)
above), the holder thereof shall deliver written notice to the Company
describing in reasonable detail the transfer or proposed transfer, together with
an opinion of counsel which (to the Company's reasonable satisfaction) is
knowledgeable in securities law matters to the effect that such transfer of
Restricted Securities may be effected without registration of such Restricted
Securities under the Securities Act. In addition, if the holder of the
Restricted Securities delivers to the Company an opinion of counsel that no
subsequent transfer of such Restricted Securities shall require registration
under the Securities Act, the Company shall promptly upon such contemplated
transfer deliver new certificates or instruments, as the case may be, for such
Restricted Securities which do not bear the Securities Act legend set forth in
Section 6.1 above. If the Company is not required to deliver new certificate or
- -----------
instruments, as the case may be, for such Restricted Securities not bearing such
legend, the holder thereof shall not transfer the same until the prospective
transferee has confirmed to the Company in writing its agreement to be bound by
the conditioned contained in this Section 6.2.
-----------
(c) Upon the request of a holder of Restricted Securities, the
Company shall promptly supply to such holder or such holder's prospective
transferees all information regarding the Company required to be delivered in
connection with a transfer pursuant to Rule 144 or 144A of the Securities and
Exchange Commission.
(d) If any Restricted Securities become eligible for sale
pursuant to Rule 144(k), the Company shall, upon the request of the holder of
such Restricted Securities, remove the legend set forth in Section 6.1 from the
-----------
certificates or instruments, as the case may be, representing such Restricted
Securities.
ARTICLE VII
EXPENSES
The Company shall pay all reasonable out-of-pocket expenses of (i)
Purchaser in connection with the preparation of the Transaction Documents and
the transactions contemplated
-21-
<PAGE>
thereby, including cost incurred in connection with the Closing, (ii) stamp and
other taxes which may be payable in respect of the execution and delivery of
this Agreement, the issuance and delivery of the Purchased Securities, and the
issuance and delivery of any Common Stock upon the exercise of the Class D
Warrant or conversion of the Convertible Preferred and (iii) Purchaser in
connection with (A) any amendment, modification or waiver, or consent with
respect to, any of the Transaction Documents, and (B) any attempt to enforce any
rights of Purchaser against the Company or any other Person, that may be
obligated to any Purchaser by virtue of any of the Transaction Documents
(including the reasonable fees and expenses of all of its counsel and
consultants retained in connection with the Transaction Documents and the
transactions contemplated thereby).
ARTICLE VIII
LIMITATION ON CLAIMS OF PURCHASER
8.1 Limitation.
----------
(a) Purchaser shall not bring any action or claim against
the Company for damages for a breach of any representation, warranty or covenant
contained herein by the Company until such damages exceed $100,000 at which time
Purchaser may bring an action for all claims.
(b) The Company shall not bring any action or claims
against Purchaser for damages for a breach of any representation, warranty or
covenant contained herein by Purchaser until such damages exceed $100,000, at
which time the Company may bring an action for all claims.
ARTICLE IX
MISCELLANEOUS
9.1 Notices. Whenever it is provided herein that any notice,
-------
demand, request, consent, approval, declaration or other communication shall or
may be given to or served upon any of the parties by another, or whenever any of
the parties desires to give or serve upon another any such communication with
respect to this Agreement, each such notice, demand, request, consent, approval,
declaration or other communication shall be in writing and either shall be
delivered in person with receipt acknowledged or by registered or certified
mail, return receipt requested, postage prepaid, or by telecopy and confirmed by
telecopy answerback addressed as follows:
If to Purchaser:
U-C Holdings, L.L.C.
227 W. Monroe Street, Suite 4300
Chicago, Illinois 60606
Attn: Avy H. Stein
Daniel M. Gill
Telecopy No.: (312) 422-2424
-22-
<PAGE>
with a copy to:
Kirkland & Ellis
200 E. Randolph Street
Chicago, Illinois 60601
Attn: Margaret A. Gibson, Esq.
Telecopy No.: (312) 861-2200
If to the Company:
College Television Network, Inc.
5784 Lake Forrest Drive, Suite 275
Atlanta, GA 30328
Attn: Jason Elkin
Telecopy No.: (404) 256-9168
with copies to:
Morris, Manning & Martin, L.L.P.
3343 Peachtree Road, N.E.
1600 Atlanta Financial Center
Atlanta, Georgia 30326
Attn: Neil H. Dickson, Esq.
Telecopy No.: (404) 365-9532
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered,
with receipt acknowledged, telecopied and confirmed by telecopy answerback, or
three (3) Business Days after the same shall have been deposited with the United
States mail.
9.2 Binding Effect: Benefits. Except as otherwise provided herein,
------------------------
this Agreement shall be binding upon and inure to the benefit of the parties to
this Agreement and their respective successors and permitted assigns. Nothing in
this Agreement, express or implied, is intended or shall be construed to give
any person other than the parties to this Agreement or their respective
successors or assigns any legal or equitable right, remedy or claim under or in
respect of any agreement or any provision contained herein.
9.3 Amendment. No amendment or waiver of any provision of this
---------
Agreement or any other Transaction Document nor consent to any departure by the
Company therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Company and Purchaser, and then such waiver or consent
shall be effective only in the specific instance and for
-23-
<PAGE>
the specific purpose for which given. No action taken pursuant to this
Agreement, including, without limitation, any investigation by or on behalf of
any party, shall be deemed to constitute a waiver by the party taking such
action, of compliance with any representations, warranties, covenants or
agreements contained herein. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
preceding or succeeding breach and no failure by either party to exercise any
right or privilege hereunder shall be deemed a waiver of such party's rights or
privileges hereunder or shall be deemed a waiver of such party's rights to
exercise the same at any subsequent time or times hereunder.
9.4 Successors and Assigns: Assignability. Neither this Agreement nor
-------------------------------------
any right, remedy, obligation or liability arising hereunder or by reason hereof
shall be assignable by the Company without the prior written consent of
Purchaser. All covenants contained herein shall bind and inure to the benefit of
the parties hereto and their respective successors and assigns (including any
subsequent holder of any of the Purchased Securities or any Common Stock
issuable upon exercise of the Purchased Securities).
9.5 Remedies. Purchaser, 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 Company agrees that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach of the provisions of this Agreement and hereby agrees to
waive the defense in any action for specific performance that a remedy at law
would be adequate. In any action or proceeding brought to enforce any provision
of this Agreement or where any provision hereof is validly asserted as a
defense, the successful party shall be entitled to recover reasonable attorneys'
fees in addition to any other available remedy.
9.6 Section and Other Headings. The section and other headings
--------------------------
contained in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
9.7 Severability. In the event that any one or more of the provisions
------------
contained in this Agreement shall be determined to be invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision or provisions in every other respect and
the remaining provisions of this Agreement shall not be in any way impaired.
9.8 Entire Agreement. This Agreement and the agreements and documents
----------------
referred to herein contain the entire agreement and understanding between the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, whether written or oral, relating to such subject
matter in any way.
9.9 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
-24-
<PAGE>
9.10 Publicity. Neither Purchaser nor the Company shall issue any
---------
press release or make any public disclosure regarding the transactions
contemplated hereby unless such press release or public disclosure is approved
by the other party in advance. Notwithstanding the foregoing, each of the
parties hereto may, in documents required to be filed by it with the SEC or
other regulatory bodies, make such statements with respect to the transactions
contemplated hereby as each may be advised by counsel is legally necessary or
advisable, and may make such disclosure as it is advised by its counsel is
required by law.
9.11 Governing Law. This Agreement shall be governed by, construed
-------------
and enforced in accordance with, the laws of the Delaware without regard to the
principles thereof relating to conflict of laws. Service of process on the
parties in any action arising out of or relating to this Agreement shall be
effective if mailed to the parties in accordance with Section 9.1 hereof. The
-----------
parties hereto waive all right to trial by jury in any action or proceeding to
enforce or defend any rights under this Agreement.
9.12 No Strict Construction. The language used in this Agreement
----------------------
shall be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against any
party.
* * * * *
-25-
<PAGE>
IN WITNESS WHEREOF, the Company and the Purchaser has executed this
Purchase Agreement as of the day and year first above written.
COLLEGE TELEVISION NETWORK, INC.
By: _______________________________
Jason Elkin
Its: ______________________________
U-C HOLDINGS, L.L.C.
By: WILLIS STEIN & PARTNERS, L.P.
Its: Managing Member
By: Willis Stein & Partners, L.L.C.
Its: General Partner
By: _______________________
Daniel M. Gill
Its:
<PAGE>
EXHIBIT 4.2
CLASS D WARRANT
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SHARES ISSUABLE UPON
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER SUCH SECURITIES
---
NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE
TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS
EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) THE
COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH
COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER
CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR
APPLICABLE STATE SECURITIES LAWS.
THE TRANSFER OF THIS WARRANT IS
RESTRICTED AS DESCRIBED HEREIN.
COLLEGE TELEVISION NETWORK, INC.
Warrant for the Purchase of Shares of Common Stock,
par value $0.005 per share
THIS WARRANT EXPIRES ON JULY 23, 2006
No. D-1 135,686 Shares
THIS CERTIFIES that, for value received, U-C Holdings, L.L.C., a
Delaware limited liability company, with an address at 227 West Monroe Street,
Suite 4300, Chicago, IL 60606, c/o Willis Stein & Partners (including any
transferee, the "Holder"), is entitled to subscribe for and purchase from
------
College Television Network, Inc, a Delaware corporation (the "Company"), upon
-------
the terms and conditions set forth herein, at any time or from time to time from
the date of issuance of this Warrant (the "Date of Issuance") and before 5:00
----------------
P.M. on July 23, 2006, Illinois time (the "Exercise Period"), 135,686 shares of
---------------
the Company's Common Stock (as hereinafter defined) at a price per share equal
to $6.854, as the same may be adjusted from time to time in accordance with the
terms of this Warrant (the "Exercise Price"). This Warrant is the Class D
--------------
Warrant (collectively, including any warrants issued upon the exercise or
transfer of this Warrant in whole or in part, the "Warrants") issued pursuant to
--------
that certain Purchase Agreement, dated as of the date hereof, by and between the
Company and the original Holder of this Warrant (the as amended, restated and
modified from time to time "Purchase Agreement"). As used herein the term "this
------------------ ----
Warrant" shall
- -------
<PAGE>
mean and include this Warrant and any Warrant or Warrants hereafter issued as a
consequence of the exercise or transfer of this Warrant in whole or in part.
For purposes of this Warrant, the following terms shall have the
meanings set forth below:
"Average Market Price" shall mean for a share of Common Stock an
--------------------
amount equal to the average of the daily closing prices for shares of such
Common Stock over the 30 consecutive Trading Days ending on the last Trading Day
of any quarter. The closing price for each day shall be the last reported sales
price regular way, or in case no such reported sales takes place on such date,
the closing bid price regular way on the principal national securities exchange
(including, for purposes hereof, the NASDAQ National Market System or the NASDAQ
SmallCap Market) on which shares of such class of Common Stock are listed or
admitted to trading or, if such class of Common Stock is not listed or admitted
to trading on any national securities exchange, the highest reported bid price
for such class of Common Stock as furnished by the National Association of
Securities Dealers, Inc. through NASDAQ or a similar organization if NASDAQ is
no longer reporting such information. If on any such date such class of Common
Stock is not listed or admitted to trading on any national securities exchange
and is not quoted by NASDAQ or any similar organization, the fair value of a
share of such class of Common Stock on such date, as determined in good faith by
the board of directors of the Company, whose determination shall be conclusive
absent manifest error, shall be used;
"Common Stock" shall mean the Company's common stock, par value $.005
------------
per share, and any capital stock of any class of the Company hereafter
authorized which is not limited to a fixed sum or percentage of par or stated
value in respect to the rights of the holders thereof to participate in
dividends or in the distribution of assets upon any liquidation, dissolution or
winding up of the Company;
"Convertible Preferred" shall mean the Company's convertible preferred
---------------------
stock, par value $.001 per share, which is convertible into shares of Common
Stock.
"Current Market Price" per share of any class of Common Stock on any
--------------------
date shall be deemed to be the average of the daily closing prices for shares of
such class for the 30 consecutive Trading Days immediately preceding the date in
question. The closing price for each day shall be the last reported sales price
regular way, or in case no such reported sales takes place on such date, the
closing bid price regular way on the principal national securities exchange
(including, for purposes hereof, the NASDAQ National Market System or the NASDAQ
SmallCap Market) on which shares of such class of Common Stock are listed or
admitted to trading or, if such class of Common Stock is not listed or admitted
to trading on any national securities exchange, the highest reported bid price
for such class of Common Stock as furnished by the National Association of
Securities Dealers, Inc. through NASDAQ or a similar organization if NASDAQ is
no longer reporting such information. If on any such date such class of Common
Stock is not listed or admitted to trading on any national securities exchange
and is not quoted by NASDAQ or any similar organization, the fair value of a
share of such class of Common Stock on such date, as determined
-2-
<PAGE>
in good faith by the board of directors of the Company, whose determination
shall be conclusive absent manifest error, shall be used.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended, and all rules and regulations promulgated thereunder.
"Existing Options" shall mean the options of the Corporation listed on
----------------
the Capitalization Chart attached to the Purchase Agreement as Exhibit D.
---------
"Existing Warrants" shall mean the warrants of the Corporation listed
-----------------
on the Capitalization Chart attached to the Purchase Agreement as Exhibit D.
---------
"Independent Third Party" shall mean any person or entity who,
-----------------------
immediately prior to the contemplated transaction, does not own in excess of 5%
of the Company's Common Stock on a fully-diluted basis (a "5% Owner"), who is
--------
not controlling, controlled by or under common control with any such 5% Owner
and who is not the spouse or descendent (by birth or adoption) of any such 5%
Owner or a trust for the benefit of such 5% Owner and/or such other persons or
entities;
"Public Offering" shall mean the sale in an underwritten public
---------------
offering registered under the Securities Act of shares of the Company's Common
Stock;
"Purchase Rights" shall mean the right to purchase shares of the
---------------
Company's Common Stock granted pursuant to those certain Equity Protection
Agreements, dated as of April 25, 1997, between the Company and U-C Holdings,
L.L.C.;
"Registration Rights Agreement" shall mean that certain Registration
-----------------------------
Rights Agreement, dated as of April 25, 1997, by and among the Company and U.C.
Holdings, L.L.C.;
"Sale of the Company" shall mean the sale of the Company to an
-------------------
Independent Third Party or group of Independent Third Parties pursuant to which
such party or parties acquire (i) capital stock of the Company possessing the
voting power under normal circumstances to elect a majority of the Company's
board of directors (whether by merger, consolidation, recapitalization, sale or
transfer of the Company's capital stock or otherwise) or (ii) all or
substantially all of the Company's assets determined on a consolidated basis;
"Trading Day" shall mean (a) a day on which the Common Stock is traded
-----------
on The Nasdaq Small-Cap Market, the Nasdaq National Market or other registered
national stock exchange on which the Common Stock has been listed, or (b) if the
Common Stock is not listed on The Nasdaq Small-Cap Market, the Nasdaq National
Market or any registered national stock exchange, a day on which the Common
Stock is traded in the over-the-counter market, as reported by the OTC Bulletin
Board, or (c) if the Common Stock is not quoted on the OTC Bulletin Board, a day
on which the Common Stock is quoted in the over-the-counter market as reported
by the National Quotation Bureau Incorporated (or similar organization or agency
succeeding its functions of reporting policies);
-3-
<PAGE>
"Warrant Shares" shall mean the shares of Common Stock issuable upon
--------------
exercise of the Warrants.
1. Exercise of Warrant. This Warrant may be exercised during the
-------------------
Exercise Period, as to the whole or any lesser number of whole Warrant Shares,
by the surrender of this Warrant and delivery of an "Election to Exercise" (duly
--------------------
executed in the form attached hereto) to the Company at its office at 5784 Lake
Forrest Drive, Suite 275, Atlanta, GA 30328 or at such other place as is
designated in writing by the Company. In connection with any exercise of this
Warrant, the Holder shall deliver to the Company either (a) cash (by wire
transfer of immediately available funds to the Company's account) or a certified
or bank cashier's check payable to the order of the Company in an amount equal
to the product of the Exercise Price multiplied by the number of Warrant Shares
being purchased upon such exercise (the "Aggregate Exercise Price"), (b) the
------------------------
surrender to the Company of debt or equity securities of the Company having a
Current Market Price equal to the Aggregate Exercise Price of the Common Stock
being purchased upon such exercise (provided that for purposes of this
subparagraph, the Current Market Price of any note or other debt security or any
preferred stock shall be deemed to be equal to the aggregate outstanding
principal amount or liquidation value thereof plus all accrued and unpaid
interest thereon or accrued or declared and unpaid dividends thereon) or (c) a
written notice to the Company that the Holder is exercising this Warrant (or a
portion thereof) by authorizing the Company to withhold from issuance a number
of shares of Common Stock issuable upon such exercise of this Warrant which when
multiplied by the Current Market Price of the Common Stock is equal to the
Aggregate Exercise Price (and such withheld shares shall no longer be issuable
under this Warrant). Each Warrant not exercised prior to 5:00 p.m. on July 23,
2006 Illinois time shall become null and void and all rights thereunder shall
cease as of such time. At least 30 days prior to the end of the Exercise
Period, the Company shall give the Holder written notice of (i) the expiration
of the Exercise Period, (ii) the number of Warrant Shares issuable upon exercise
of this Warrant as of the date of such notice and (iii) the Exercise Price in
effect as of such date.
2. Holder of Record; Issuance of Warrant Shares. Upon receipt by the
--------------------------------------------
Company of this Warrant, the Election to Exercise, and the Aggregate Exercise
Price for the Warrant Shares, the Holder shall be deemed to be the holder of
record of the Warrant Shares issuable upon such exercise; provided, however,
that if the date of such receipt is a date upon which the transfer books of the
Company are closed, the Holder shall be deemed to be the record holder on the
next succeeding business day on which such books are open. The Company shall
not close its books against the transfer of this Warrant or of any Warrant
Shares issued or issuable upon the exercise of this Warrant in any manner which
interferes with the timely exercise of this Warrant. As soon as practicable
after each such exercise of this Warrant, the Company shall issue and cause to
be delivered to the Holder a certificate or certificates for the Warrant Shares
issuable upon such exercise, registered in the name of the Holder or its
designee. If this Warrant should be exercised in part only, the Company shall,
upon surrender of this Warrant for cancellation, execute and deliver a new
Warrant evidencing the right of the Holder to purchase the remaining unexercised
balance of the Warrant Shares (or portions thereof) subject to purchase
hereunder.
3. Warrant Transfers and Exchanges; Holder Acknowledgments.
-------------------------------------------------------
-4-
<PAGE>
(a) Warrant Transfers and Exchanges. Any Warrants issued upon the
-------------------------------
transfer or exercise in part of this Warrant shall be numbered and shall be
registered in a "Warrant Register" as they are issued. The Company shall be
----------------
entitled to treat the registered holder of any Warrant on the Warrant Register
as the owner in fact thereof for all purposes and shall not be bound to
recognize any equitable or other claim to or interest in such Warrant on the
part of any other person, and shall not be liable for any registration or
transfer of Warrants which are registered or to be registered in the name of a
fiduciary or the nominee of a fiduciary unless made with the actual knowledge
that a fiduciary or nominee is committing a breach of trust in requesting such
registration or transfer, or with the knowledge of such facts that its
participation therein amounts to bad faith. This Warrant shall be transferable
only on the books of the Company upon delivery thereof duly endorsed by the
Holder or by his duly authorized attorney or representative, or accompanied by
proper evidence of succession, assignment, or authority to transfer. In all
cases of transfer by an attorney, executor, administrator, guardian, or other
legal representative, duly authenticated evidence of his or its authority shall
be produced. Upon any registration of transfer, the Company shall cause to be
delivered a new Warrant or Warrants to the person entitled thereto. This
Warrant may be exchanged, at the option of the Holder thereof, for another
Warrant, or other Warrants of different denominations, of like tenor and
representing in the aggregate the right to purchase a like number of Warrant
Shares (or portions thereof), upon surrender to the Company or its duly
authorized agent. Notwithstanding the foregoing, the Company shall have no
obligation to cause Warrants to be transferred on its books to any person until
the Company has received an opinion of counsel to the transferor that such
transfer does not require registration under with the provisions of the
Securities Act of 1933, as amended (the "Act"), and the rules and regulations
---
thereunder.
(b) Holder Acknowledgments. The Holder acknowledges that such Holder
----------------------
has been advised by the Company that neither this Warrant nor the Warrant Shares
have been registered under the Act, that this Warrant is being or has been
issued and the Warrant Shares may be issued on the basis of the statutory
exemption provided by Section 4(2) of the Act or Regulation D promulgated
thereunder, or both, relating to transactions by an issuer not involving any
public offering, and that the Company's reliance thereon is based in part upon
the representations made by the original Holder in the Purchase Agreement. The
Holder acknowledges that such Holder is familiar with the nature of the
limitations imposed by the Act and the rules and regulations thereunder on the
transfer of securities. In particular, the Holder agrees that no sale,
assignment or transfer of this Warrant or the Warrant Shares issuable upon
exercise hereof shall be valid or effective, and the Company shall not be
required to give any effect to any such sale, assignment or transfer, unless (i)
the sale, assignment or transfer of this Warrant or such Warrant Shares is
registered under the Act, it being understood that neither this Warrant nor such
Warrant Shares are currently registered for sale and that the Company has no
obligation or intention to so register this Warrant or such Warrant Shares
except as specifically provided in the Registration Rights Agreement, or (ii)
this Warrant or such Warrant Shares are sold, assigned or transferred in
accordance with all the requirements and limitations of Rule 144 under the Act,
it being understood that Rule 144 is not available at the time of the original
issuance of this Warrant for the sale of this Warrant or such Warrant Shares and
that there can be no assurance that Rule 144 sales will be available at any
subsequent time, or (iii) such sale, assignment, or transfer is otherwise exempt
from registration under the Act. Notwithstanding any other provision hereof, if
an exercise of this
-5-
<PAGE>
Warrant or any portion hereof is to be made in connection with a registered
public offering or the sale of the Company, the exercise of this Warrant or any
portion hereof may, at the election of the Holder, be conditioned upon the
consummation of the public offering or sale of the Company in which case such
exercise shall not be deemed to be effective until the consummation of such
transaction. The Company shall assist and cooperate with any Holder required to
make any governmental filings or obtain any governmental approvals prior to or
in connection with any exercise of this Warrant (including, without limitation,
making any filings required to be made by the Company).
4. Company Covenants. The Company covenants that the Warrant
-----------------
Shares, upon receipt by the Company of the Aggregate Exercise Price therefor,
shall be validly issued, fully paid, nonassessable, and free of preemptive
rights, liens, taxes and charges with respect to the issuance thereof. The
Company shall take all such actions as may be necessary to assure that all such
shares of Common Stock may be so issued without violation of any applicable law
or governmental regulation or any requirements of any domestic securities
exchange upon which shares of Common Stock may be listed (except for official
notice of issuance which shall be immediately delivered by the Company upon each
such issuance). The Company shall from time to time take all such action as may
be necessary to assure that the par value per share of the unissued Common Stock
acquirable upon exercise of this Warrant is at all times equal to or less than
the Exercise Price then in effect. The Company covenants and agrees that
promptly after the date hereof, the Company shall amend its certificate of
incorporation to the extent necessary to increase the authorized and unissued
shares of Common Stock of the Company to a number sufficient to allow for the
exercise of the Warrants, the Existing Warrants, the Existing Options. The
Company shall at all times thereafter reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of providing for
the exercise of the Warrants, such number of shares of Common Stock as shall,
from time to time, be sufficient therefor and the Company shall not thereafter
take any action which would cause the number of authorized but unissued shares
of Common Stock to be less than the number of such shares required to be
reserved hereunder for issuance upon exercise of the Warrants.
5. Adjustments to Exercise Price
-----------------------------
(a) Adjustments to Exercise Price on or Prior to the Third
------------------------------------------------------
Anniversary of the Date of Issuance. From the date of issuance of this Warrant
- ------------------------------------
to and including the third anniversary of the date of issuance, the Exercise
Price shall be subject to adjustment on a quarterly basis such that if on any of
March 31, June 30, September 30 and December 31 of any year, beginning September
30, 1999, the Average Market Price (as defined below) is less than the Exercise
Price then in effect, then the Exercise Price shall be reduced to equal such
Average Market Price: provided that in no event shall the Conversion Price be
--------
reduced pursuant to this Section 5(a) below $2.75 (as adjusted for stock splits,
------------
stock dividends, recapitalizations and other similar events).
(b) Adjustments to Exercise Price After the Third Anniversary of
------------------------------------------------------------
the Date of Issuance.
- --------------------
-6-
<PAGE>
(i) Issuance of Common Stock below Current Market Price. In case
---------------------------------------------------
the Company shall after the third anniversary of the Date of Issuance issue
or fix a record date for the issuance to all holders of any class of
Capital Stock of rights, options, or warrants to subscribe for or purchase
Common Stock (or securities convertible into or exchangeable for Common
Stock) at a price per share (or having a conversion or exchange price per
share, if a security convertible into or exchangeable for Common Stock)
less than the Current Market Price per share of Common Stock on such record
date, then, in each case, the Exercise Price shall be adjusted by
multiplying the Exercise Price in effect immediately prior to such record
date by a fraction, the numerator of which shall be the number of shares of
Common Stock outstanding on such record date plus the number of shares of
such class of Common Stock which the aggregate offering price of the total
number of shares of such class of Common Stock so to be offered (or the
aggregate initial conversion or exchange price of the convertible or
exchangeable securities so to be offered) would purchase at such Current
Market Price and the denominator of which shall be the number of shares of
Common Stock outstanding on such record date plus the number of additional
shares of Common Stock to be offered for subscription or purchase (or into
which the convertible or exchangeable securities so to be offered are
initially convertible or exchangeable); provided, however, that no such
adjustment shall be made which results in an increase in the Exercise
Price. Such adjustment shall become effective at the close of business on
such record date; provided, however, that, to the extent the shares of
Common Stock (or securities convertible into or exchangeable for shares of
Common Stock) are not delivered, the Exercise Price shall be readjusted
after the expiration of such rights, options, or warrants (but only with
respect to Warrants exercised after such expiration), to the Exercise Price
which would then be in effect had the adjustments made upon the issuance of
such rights, options, or warrants been made upon the basis of delivery of
only the number of shares of Common Stock (or securities convertible into
or exchangeable for shares of Common Stock) actually issued. In case any
subscription price may be paid in a consideration, part or all of which
shall be in a form other than cash, the value of such consideration shall
be as determined in good faith by the board of directors of the Company,
whose determination shall be conclusive absent manifest error. Shares of
Common Stock owned by or held for the account of the Company or any
majority-owned subsidiary shall not be deemed outstanding for the purpose
of any such computation.
(ii) Other Distributions. In case the Company shall distribute
-------------------
to all holders of any class of Common Stock (including any such
distribution made to the stockholders of the Company in connection with a
consolidation or merger in which the Company is the continuing corporation)
(i) evidences of its indebtedness, (ii) cash (other than any cash dividend
which, together with any cash dividends paid within the 12 months prior to
the record date for such distribution, does not exceed 5% of the Current
Market Price at the record date for such distribution), (iii) assets (in
each case (i) through (iii), other than distributions and dividends payable
in shares of Common Stock), or (iv) rights, options, or warrants to
subscribe for or purchase Common Stock, or securities convertible into or
changeable for shares of Common Stock (excluding those with respect to the
issuance of which an adjustment of the Exercise Price is provided pursuant
to Section 5(b)(i) above), then, in each case, the Exercise Price shall be
---------------
adjusted by multiplying the Exercise Price in
-7-
<PAGE>
effect immediately prior to the record date for the determination of
stockholders entitled to receive such distribution by a fraction, the
numerator of which shall be the Current Market Price per share of such
class of Common Stock on such record date, less the fair market value (as
determined in good faith by the board of directors of the Company, whose
determination shall be conclusive absent manifest error) of the portion of
the evidences of indebtedness or assets so to be distributed, or of such
rights, options, or warrants or convertible or exchangeable securities, or
the amount of such cash, applicable to one share, and the denominator of
which shall be such Current Market Price per share of such class of Common
Stock. Such adjustment shall become effective at the close of business on
such record date.
(iii) Other Issuances of Common Stock below Current Market
----------------------------------------------------
Price. In case the Company shall issue shares of Common Stock or rights,
-----
options, or warrants to subscribe for or purchase Common Stock, or
securities convertible into or exchangeable for Common Stock (excluding
shares, rights, options, warrants, or convertible or exchangeable
securities issued or issuable (i) in any of the transactions with respect
to which an adjustment of the Exercise Price is provided pursuant to
Sections 5(b)(i), 5(b)(ii), or 5(c), (ii) upon any issuance of securities
---------------- -------- ----
pursuant to the Purchase Agreement, (iii) upon exercise of any of the
Existing Warrants, (iv) upon exercise of any of the Existing Options or (v)
upon exercise of any of the Purchase Rights), at a price per share
(determined, in the case of such rights, options, warrants, or convertible
or exchangeable securities, by dividing (x) the total amount received or
receivable by the Company in consideration of the sale and issuance of such
rights, options, warrants, or convertible or exchangeable securities, plus
the minimum aggregate consideration payable to the Company upon exercise,
conversion, or exchange thereof, by (y) the maximum number of shares
covered by such rights, options, warrants, or convertible or exchangeable
securities) lower than the Current Market Price per share of shares of such
class of Common Stock so issued in effect immediately prior to such
issuance, then the Exercise Price shall be reduced on the date of such
issuance to a price (calculated to the nearest cent) determined by
multiplying the Exercise Price in effect immediately prior to such issuance
by a fraction, (1) the numerator of which shall be an amount equal to the
sum of (A) the number of shares of Common Stock outstanding immediately
prior to such issuance plus (B) the quotient obtained by dividing the
consideration received by the Company upon such issuance by such Current
Market Price, and (2) the denominator of which shall be the total number of
shares of Common Stock outstanding immediately after such issuance;
provided, however, that no such adjustment shall be made which results in
an increase in the Exercise Price.
For the purposes of such adjustments, the maximum number of shares
which the holders of any such rights, options, warrants, or convertible or
exchangeable securities shall be entitled to initially subscribe for or
purchase or convert or exchange such securities into shall be deemed to be
issued and outstanding as of the date of such issuance, and the
consideration received by the Company therefor shall be deemed to be the
consideration received by the Company for such rights, options, warrants,
or convertible or exchangeable securities, plus the minimum aggregate
consideration or premiums stated in such rights,
-8-
<PAGE>
options, warrants, or convertible or exchangeable securities to be paid for
the shares covered thereby. No further adjustment of the Exercise Price
shall be made as a result of the actual issuance of shares of Common Stock
on exercise of such rights, options, or warrants or on conversion or
exchange of such convertible or exchangeable securities. On the expiration
or the termination of such rights, options, or warrants, or the termination
of such right to convert or exchange, the Exercise Price shall be
readjusted (but only with respect to Warrants exercised after such
expiration or termination) to such Exercise Price as would have obtained
had the adjustments made upon the issuance of such rights, options,
warrants, or convertible or exchangeable securities been made upon the
basis of the delivery of only the number of shares of Common Stock actually
delivered upon the exercise of such rights, options, or warrants or upon
the conversion or exchange of any such securities; and on any change of the
number of shares of Common Stock deliverable upon the exercise of any such
rights, options, or warrants or conversion or exchange of such convertible
or exchangeable securities or any change in the consideration to be
received by the Company upon such exercise, conversion, or exchange,
including, without limitation, a change resulting from the antidilution
provisions thereof. In case the Company shall issue shares of Common Stock
or any such rights, options, warrants, or convertible or exchangeable
securities for a consideration consisting, in whole or in part, of property
other than cash or its equivalent, then the "price per share" and the
"consideration received by the Company" for purposes of the first sentence
of this Section 5(d) shall be as determined in good faith by the board of
------------
directors of the Company, whose determination shall be conclusive absent
manifest error. Shares of Common Stock owned by or held for the account of
the Company or any majority-owned subsidiary shall not be deemed
outstanding for the purpose of any such computation.
(c) Stock Dividends and Recombinations. In case the Company
----------------------------------
shall at any time after the date this Warrant is first issued (i) declare a
dividend on any class of the outstanding capital stock of the Company (the
"Capital Stock") payable in shares of its Capital Stock, (ii) subdivide any
-------------
class of the outstanding Capital Stock, or (iii) combine any class of the
outstanding Capital Stock into a smaller number of shares, then, in each case,
the Exercise Price, and the number of Warrant Shares issuable upon exercise of
this Warrant, in effect at the time of the record date for such dividend or of
the effective date of such subdivision, or combination, shall be proportionately
adjusted so that the Holder after such time shall be entitled to receive the
aggregate number and kind of shares for such consideration which, if such
Warrant had been exercised immediately prior to such time at the then current
Exercise Price, it would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, or combination. Such adjustment
shall be made successively whenever any event listed above shall occur.
(d) Calculations, Adjustments, Notice and Fractional Shares.
-------------------------------------------------------
(i) All computations under this Section 5 shall be made to
---------
the nearest cent or to the nearest one-thousandth of a share, as the case
may be.
-9-
<PAGE>
(ii) Upon each adjustment of the Exercise Price as a
result of the calculations made in Sections 5(b), 5(c), or 5(d) above, this
------------- ---- ----
Warrant shall thereafter evidence the right to purchase, at the adjusted
Exercise Price, that number of shares (calculated to the nearest
thousandth) obtained by dividing (A) the product obtained by multiplying
the number of shares purchasable upon exercise of this Warrant prior to
adjustment of the number of shares by the Exercise Price in effect prior to
adjustment of the Exercise Price by (B) the Exercise Price in effect after
such adjustment of the Exercise Price.
(iii) Whenever there shall be an adjustment as
provided in this Section 5, the Company shall promptly cause written notice
---------
thereof to be sent by certified mail, postage prepaid, to the Holder, at
its address as it shall appear in the Warrant Register, which notice shall
be accompanied by an officer's certificate setting forth the number of
Warrant Shares purchasable upon the exercise of this Warrant and the
Exercise Price after such adjustment and setting forth a brief statement of
the facts requiring such adjustment and the computation thereof, which
officer's certificate shall be conclusive evidence of the correctness of
any such adjustment absent manifest error.
(iv) The Company shall not be required to issue
fractions of shares of Common Stock of the Company upon the exercise of
this Warrant. If any fraction of a share would be issuable on the exercise
of this Warrant (or specified portions thereof), the Company shall purchase
such fraction for an amount in cash equal to the same fraction of the
Current Market Price of such share of Common Stock on the date of exercise
of this Warrant.
6. Consolidations, Mergers and Reclassifications.
---------------------------------------------
(a) Consolidations, Mergers, Sale of Assets. In case of any
---------------------------------------
consolidation with or merger of the Company with or into another corporation
(other than a merger or consolidation in which the Company is the surviving or
continuing corporation), or in case of any sale, lease, or conveyance to another
corporation of the property and assets of any nature of the Company as an
entirety or substantially as an entirety, such successor, leasing, or purchasing
corporation, as the case may be, shall (i) execute with the Holder an agreement
providing that the Holder shall have the right thereafter to receive upon
exercise of this Warrant solely the kind and amount of shares of stock and other
securities, property, cash, or any combination thereof receivable upon such
consolidation, merger, sale, lease, or conveyance by a holder of the number of
shares of Common Stock for which this Warrant might have been exercised
immediately prior to such consolidation, merger, sale, lease, or conveyance, and
(ii) make effective provision in its certificate of incorporation or otherwise,
if necessary, to effect such agreement. Such agreement shall provide for
adjustments which shall be as nearly equivalent as practicable to the
adjustments in Section 5.
---------
(b) Reclassification of Warrant Shares. In case of any
----------------------------------
reclassification or change of the shares of Common Stock issuable upon exercise
of this Warrant (other than a change in par value or from no par value to a
specified par value, or as a result of a subdivision or combination, but
including any change in the shares into two or more classes or series of
shares) or
-10-
<PAGE>
in case of any consolidation or merger of another corporation into the Company
in which the Company is the continuing corporation and in which there is a
reclassification or change (including a change to the right to receive cash or
other property) of the shares of Common Stock (other than a change in par value,
or from no par value to a specified par value, or as a result of a subdivision
or combination, but including any change in the shares into two or more classes
or series of shares), the Holder shall have the right thereafter to receive upon
exercise of this Warrant solely the kind and amount of shares of stock and other
securities, property, cash, or any combination thereof receivable upon such
reclassification, change, consolidation, or merger by a holder of the number of
shares of Common Stock for which this Warrant might have been exercised
immediately prior to such reclassification, change, consolidation, or merger.
Thereafter, appropriate provision shall be made for adjustments which shall be
as nearly equivalent as practicable to the adjustments in Section 5.
---------
(c) Successive Consolidations, Mergers and Reclassifications.
--------------------------------------------------------
The above provisions of this Section 6 shall similarly apply to successive
---------
reclassifications and changes of shares of Common Stock and to successive
consolidations, mergers, sales, leases, or conveyances.
(d) Other Events. If any event occurs of the type contemplated
------------
by the provisions of this Section 6 but not expressly provided for by such
---------
provisions ,then the Company's board of directors shall make an appropriate
adjustment in the Exercise Price and the Number of Warrant Shares obtainable
upon exercise of this Warrant so as to protect the rights of the holders of the
Warrants; provided that no such adjustment shall increase the Exercise Price or
decrease the Number of Warrant Shares obtainable as otherwise determined
pursuant to this Warrant without the prior written consent of the holders of a
majority of the Warrant Shares issued or issuable upon exercise of the Warrants
(which consent will not be unreasonably withheld).
7. Notice to Holder. In case at any time the Company shall propose
----------------
to:
(a) pay any dividend or make any distribution on shares of
Common Stock in shares of Common Stock or make any other distribution (other
than regularly scheduled cash dividends which are not in a greater amount per
share than the most recent such cash dividend) to all holders of Common Stock;
or
(b) issue any rights, warrants, or other securities to all
holders of Common Stock entitling them to purchase any additional shares of
Common Stock or any other rights, warrants, or other securities; or
(c) effect any reclassification or change of outstanding shares
of Capital Stock, or any consolidation, merger, sale, lease, or conveyance of
property, described in Section 6 hereof; or
---------
(d) effect any liquidation, dissolution, or winding-up of the
Company; or
(e) take any other action which would cause an adjustment to the
Exercise Price;
-11-
<PAGE>
then, and in any one or more of such cases, the Company shall give written
notice thereof, by certified mail, postage prepaid, to the Holder at the
Holder's address as it shall appear in the Warrant Register, mailed at least 15
days prior to (i) the date as of which the holders of record of shares of Common
Stock to be entitled to receive any such dividend, distribution, rights,
warrants, or other securities are to be determined, (ii) the date on which any
such reclassification, change of outstanding shares of Common Stock,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution, or winding-up is expected to become effective, and the date as of
which it is expected that holders of record of shares of Common Stock shall be
entitled to exchange their shares for securities or other property, if any,
deliverable upon such reclassification, change of outstanding shares,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution, or winding-up, or (iii) the date of such action which would require
an adjustment to the Exercise Price.
8. Taxes and Other Charges. The issuance of any shares or other
-----------------------
securities upon the exercise of this Warrant, and the delivery of certificates
or other instruments representing such shares or other securities, shall be made
without charge to the Holder for any tax or other charge in respect of such
issuance or for any other cost of the Company incurred in connection with such
issuance and delivery. The Company shall not, however, be required to pay any
tax which may be payable in respect of any transfer or delivery of this Warrant
to a person other than, or the issuance and delivery of any certificate in a
name other than that of the registered Holder and the Company shall not be
required to issue or deliver any such certificate unless and until the person or
persons requesting the issue thereof shall have paid to the Company the amount
of such tax or shall have established to the satisfaction of the Company that
such tax has been paid.
9. Indemnification. Subject to the conditions set forth below, the
---------------
Company agrees to indemnify and hold harmless each Holder, its officers,
directors, partners, employees, agents, and counsel, and each person, if any,
who controls any such person within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, from and against any and all loss, liability,
charge, claim, damage, and expense whatsoever (which shall include, for all
purposes of this Section 9, without limitation, reasonable attorneys' fees and
---------
any and all expense whatsoever incurred in investigating, preparing, or
defending against any litigation, commenced or threatened, or any claim
whatsoever, and any and all amounts paid in settlement of any claim or
litigation), as and when incurred, arising out of, based upon, or in connection
with, any breach of any representation, warranty, covenant, or agreement of the
Company contained in any of the Warrants. The foregoing agreement to indemnify
shall be in addition to any liability the Company may otherwise have, including
liabilities arising under any of the Warrants.
If any action is brought against any Holder or any of its officers,
directors, partners, employees, agents, or counsel, or any controlling persons
of such person (an "indemnified party") in respect of which indemnity may be
-----------------
sought against the Company pursuant to the foregoing paragraph, such indemnified
party or parties shall promptly notify the Company in writing of the institution
of such action (but the failure so to notify shall not relieve the Company from
any liability under this Section 9 unless the Company shall have been materially
---------
prejudiced by such failure or relieve the Company from any liability other than
pursuant to this Section 9) and the Company shall
---------
-12-
<PAGE>
promptly assume the defense of such action, including the employment of counsel
(reasonably satisfactory to such indemnified party or parties) and payment of
expenses. Such indemnified party or parties shall have the right to employ its
or their own counsel in any such case, but the fees and expenses of such counsel
shall be at the expense of such indemnified party or parties unless the
employment of such counsel shall have been authorized in writing by the Company
in connection with the defense of such action or the Company shall not have
employed counsel reasonably satisfactory to such indemnified party or parties to
have charge of the defense of such action or such indemnified party or parties
shall have reasonably concluded that there may be one or more legal defenses
available to it or them or to other indemnified parties which are different from
or additional to those available to the Company, in any of which events such
fees and expenses shall be borne by the Company and the Company shall not have
the right to direct the defense of such action on behalf of the indemnified
party or parties. Anythingin this Section 9 to the contrary notwithstanding, the
---------
Company shall not be liable for any settlement of any such claim or action
effected without its written consent, which shall not be unreasonably withheld.
10. Legend. Unless registered pursuant to the provisions of the
------
Registration Rights Agreement, the Warrant Shares issued upon exercise of the
Warrants shall be subject to a stop transfer order and the certificate or
certificates evidencing such Warrant Shares shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER SUCH
SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,
PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE
UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR
(2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER
OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY
SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE
OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE
MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES
LAWS."
In addition, any Warrants issued upon transfer or any new Warrants
issued shall bear a similar legend.
11. Miscellaneous.
-------------
-13-
<PAGE>
(a) The Warrant Shares shall be entitled to the benefit of the
provisions of the Registration Rights Agreement.
(b) Upon receipt of evidence satisfactory to the Company of the
loss, theft, destruction, or mutilation of any Warrant (and upon surrender of
any Warrant if mutilated), including an affidavit of the Holder thereof that
this Warrant has been lost, stolen, destroyed or mutilated, together with an
indemnity against any claim that may be made against the Company on account of
such lost stolen, destroyed or mutilated Warrant, and upon reimbursement of the
Company's reasonable incidental expenses, the Company shall execute and deliver
to the Holder thereof a new Warrant of like date, tenor, and denomination.
(c) The Holder of any Warrant shall not have solely on account
of such status, any rights of a stockholder of the Company, either at law or in
equity, or to any notice of meetings of stockholders or of any other proceedings
of the Company, except as provided in this Warrant. No provision hereof, in the
absence of affirmative action by the Holder to purchase Common Stock, and no
enumeration herein of the rights or privileges of the Holder shall give rise to
any liability of such holder for the Exercise Price of Common Stock acquirable
by exercise hereof or as a stockholder of the Company.
(d) This Warrant shall be construed in accordance with the laws
of the State of Delaware applicable to contracts made and performed within such
State, without regard to principles governing conflicts of law.
(e) Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or by Federal Express, Express Mail or similar
overnight delivery or courier service or delivered (in person or by telecopy,
telex or similar telecommunications equipment) against receipt to the party to
whom it is to be given, (i) if to the Company, at 5784 Lake Forrest Drive, Suite
275, Atlanta, GA 30328 , Attention: President, (ii) if to the Holder, at its
address set forth on the first page hereof, or (iii) in either case, to such
other address as the party shall have furnished in writing in accordance with
the provisions of th is Section 11(e). Notice to the estate of any party shall
-------------
be sufficient if addressed to the party as provided in this Section 11(e). Any
-------------
notice or other communication given by certified mail shall be deemed given at
the time of certification thereof, except for a notice changing a party's
address which shall be deemed given at the time of receipt thereof. Any notice
given by other means permitted by this Section 11(e) shall be deemed given at
-------------
the time of receipt thereof.
(f) No course of dealing and no delay or omission on the part of
the Holder in exercising any right or remedy shall operate as a waiver thereof
or otherwise prejudice the Holder's rights, powers or remedies. No right, power
or remedy conferred by this Warrant upon the Holder shall be exclusive of any
other right, power or remedy referred to herein or now or hereafter available at
law, in equity, by statute or otherwise, and all such remedies may be exercised
singly or concurrently.
-14-
<PAGE>
(g) This Warrant may be amended only by a written instrument
executed by the Company and the Holder hereof. Any amendment shall be endorsed
upon this Warrant, and all future Holders shall be bound thereby.
* * * * *
-15-
<PAGE>
IN WITNESS WHEREOF, the Company has executed this Class D Warrant as
of the day and year written below.
Dated as of: July __, 1999
COLLEGE TELEVISION NETWORK, INC.
By:____________________________
Name:__________________________
Title:_________________________
Attest:
- ------
_____________________________
By:__________________________
Name:________________________
Title:_______________________
<PAGE>
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
attached Warrant.)
FOR VALUE RECEIVED, ______________________ hereby sells, assigns, and
transfers unto ___________________ a Warrant to purchase __________ shares of
Common Stock, par value $0.005 per share, of College Television Network, Inc.
(the "Company"), together with all right, title, and interest therein, and does
-------
hereby irrevocably constitute and appoint the secretary of the Company attorney
to transfer such Warrant on the books of the Company, with full power of
substitution.
Dated: ____________________
Signature______________________
_______________________________
Signature Guarantee
NOTICE
The signature on the foregoing Assignment must correspond to the name
as written upon the face of this Warrant in every particular, without alteration
or enlargement or any change whatsoever.
-17-
<PAGE>
To: COLLEGE TELEVISION NETWORK, INC.
5784 Lake Forrest Drive, Suite 275
Atlanta, GA 30328
ELECTION TO EXERCISE
The undersigned hereby exercises his or its rights to purchase _____
Warrant Shares covered by the within Warrant and tenders payment herewith of the
Aggregate Exercise Price in accordance with the terms thereof, and requests that
certificates for such securities be issued in the name of, and delivered to:
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
(Print Name, Address and Social Security
or Tax Identification Number)
and, if such number of Warrant Shares shall not be all the Warrant Shares
covered by the within Warrant, that a new Warrant for the balance of the Warrant
Shares covered by the within Warrant be registered in the name of, and delivered
to, the undersigned at the address stated below.
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
(Print Name, Address and Social Security
or Tax Identification Number)
-18-
<PAGE>
Dated: ____________________ Name:___________________________
(Print)
________________________________
(Signature)
________________________________
(Signature Guarantee)
________________________________
(Signature Guarantee)
-19-
<PAGE>
EXHIBIT 4.3
RESTATED CERTIFICATE OF DESIGNATION, POWERS,
PREFERENCES AND RIGHTS OF THE
PREFERRED STOCK
OF
COLLEGE TELEVISION NETWORK, INC.
TO BE DESIGNATED
CONVERTIBLE PREFERRED STOCK
_________________________________________________________________
Pursuant to the provisions of Section 151(g)
of the General Corporation Law of
the State of Delaware
_________________________________________________________________
College Television Network, Inc., (the "Corporation") a corporation
-----------
organized and validly existing under the General Corporation Law of the State of
Delaware, filed its original Certificate of Incorporation with the Corporations
Division on August 17, 1989. Under the provisions of and subject to the
requirements Section 151(g) of the General Corporation Law of the State of
Delaware, I, the undersigned, desiring to designate the powers, preferences and
rights of the series of preferred stock of the Corporation to be designated
Convertible Preferred Stock, do HEREBY CERTIFY that the following resolutions
were duly adopted by the Board of Directors of the Corporation at a special
meeting held on July 19, 1999:
WHEREAS, the Amended and Restated Certificate of Incorporation, dated
November 10, 1997 ("Amended Certificate"), authorizes a class of stock
-------------------
designated as Preferred Stock (the "Preferred Stock"), comprising 2,000,000
---------------
shares, par value $0.001 per share, provides that such Preferred Stock may be
issued from time to time in one or more series, and vests authority in the Board
of Directors of the Corporation, within the limitations and restrictions stated
in the FOURTH paragraph of the Amended Certificate, to fix or alter the voting
powers, designations, preferences and relative participating, optional or other
special rights, rights and terms of redemption, the redemption price or prices
and the liquidation preferences of any series of Preferred Stock within the
limitations set forth in the Delaware General Corporation Law;
WHEREAS, as of the date hereof, there are no issued and outstanding shares
of Preferred Stock;
WHEREAS, based on the foregoing, there remains 2,000,000 shares of the
Company's authorized but unissued Preferred Stock eligible for designation as a
new series thereof; and
WHEREAS, it is the desire of the Board of Directors of the Company to
designate one new series of Preferred Stock and to fix the voting powers,
designations, preferences and rights, and the qualifications, limitations or
restrictions thereof, as provided herein.
NOW, THEREFORE, BE IT RESOLVED, that the Company, does hereby cancel any
previous rights, preferences or designations for the Preferred Stock and does
hereby designate 2,000,000 shares of the authorized but unissued Preferred Stock
as Convertible Preferred Stock (the "Convertible Preferred Stock") and does
---------------------------
hereby fix the powers, preferences and relative participating, optional or other
special rights and qualifications, limitations or restrictions of the
<PAGE>
Convertible Preferred Stock to be as follows:
CONVERTIBLE PREFERRED STOCK TERMS
---------------------------------
Section 1 Dividends.
---------
1A. General Obligation.
------------------
(i) When and as declared by the Corporation's board of directors, and to
the extent permitted under the General Corporation Law of Delaware, the
Corporation shall pay preferential dividends in cash to the holders of the
Convertible Preferred Stock (the "Convertible Preferred") as provided in this
---------------------
Section 1. Dividends on each share of the Convertible Preferred (a "Share")
- --------- -----
shall accrue on a daily basis at the rate of 12% per annum on the Liquidation
Value thereof plus all accumulated and unpaid dividends thereon from and
including the date of issuance of such Share to and including the first to occur
of (i) the date on which the Liquidation Value of such Share (plus all accrued
and unpaid dividends thereon) is paid to the holder thereof in connection with
the liquidation of the Corporation or the redemption of such Share by the
Corporation, (ii) the date on which such Share is converted into shares of
Conversion Stock hereunder or (iii) the date on which such share is otherwise
acquired by the Corporation.
(ii) Such dividends shall accrue whether or not they have been declared and
whether or not there are profits, surplus or other funds of the Corporation
legally available for the payment of the dividends, and such dividends shall be
cumulative such that all accrued and unpaid dividends shall be fully paid or
declared with funds irrevocably set apart for payment before any dividends,
distributions, redemptions or other payments may be made with respect to any
Junior Securities. The date on which the Corporation initially issues any Share
shall be deemed to be its "date of issuance" regardless of the number of times
----------------
transfer of such Share is made on the stock records maintained by or for the
Corporation and regardless of the number of certificates which may be issued to
evidence such Share.
1B. Dividend Reference Dates. To the extent not paid on March 31, June 30,
------------------------
September 30 and December 31 of each year, beginning September 30, 1999 (the
"Dividend Reference Dates"), all dividends which have accrued on each Share
------------------------
outstanding during the three-month period (or other period in the case of the
initial Dividend Reference Date) ending upon each such Dividend Reference Date
shall be accumulated and shall remain accumulated dividends with respect to such
Share until paid to the holder thereof. Such accumulated dividends shall not be
payable until conversion of such Share into Conversion Stock, unless earlier
declared by the Corporation's board of directors.
1C. Distribution of Partial Dividend Payments. Except as otherwise
-----------------------------------------
provided herein, if at any time the Corporation pays less than the total amount
of Dividends then accrued with respect to the Convertible Preferred, such
payment shall be distributed pro rata among the holders thereof based upon the
number of Shares held by each such holder.
1D. Participating Dividends. In the event that the Corporation declares
-----------------------
or pays any dividends upon the Common Stock (whether payable in cash, securities
or other property) other than dividends payable solely in shares of Common
Stock, the Corporation shall also declare and pay to the holders of the
Convertible Preferred at the same time that it declares and pays such
<PAGE>
dividends to the holders of the Common Stock, the dividends which would have
been declared and paid with respect to the Common Stock issuable upon conversion
of the Convertible Preferred had all of the outstanding Convertible Preferred
been converted immediately prior to the record date for such dividend, or if no
record date is fixed, the date as of which the record holders of Common Stock
entitled to such dividends are to be determined.
Section 2 Liquidation.
-----------
Upon any liquidation, dissolution or winding up of the Corporation (whether
voluntary or involuntary), each holder of Convertible Preferred shall be
entitled to be paid, before any distribution or payment is made upon any Junior
Securities, an amount in cash equal to the greater of the following: (a) the
aggregate Liquidation Value of all Shares held by such holder (plus all accrued
and unpaid dividends thereon) and (b) the aggregate amount that would receivable
by such holder of Convertible Preferred if the Convertible Preferred held by
such holder had been converted into Conversion Stock in accordance with Section
-------
6 immediately prior to such distribution or payment. Upon such distribution or
- -
payment, the holders of Convertible Preferred shall not be entitled to any
further payment. If upon any such liquidation, dissolution or winding up of the
Corporation the Corporation's assets to be distributed among the holders of the
Convertible Preferred are insufficient to permit payment to such holders of the
aggregate amount which they are entitled to be paid under this Section 2, then
---------
the entire assets available to be distributed to the Corporation's stockholders
shall be distributed pro rata among such holders of the Convertible Preferred
based upon the aggregate Liquidation Value (plus all accrued and unpaid
dividends) of the Convertible Preferred held by each such holder. Not less than
60 days prior to the liquidation, dissolution or winding up of the Corporation,
the Corporation shall mail written notice of any such liquidation, dissolution
or winding up to each record holder of Convertible Preferred, setting forth in
reasonable detail the amount of proceeds to be paid with respect to each Share
and each share of Common Stock in connection with such liquidation, dissolution
or winding up. Upon the election of the holders of a majority of the outstanding
Shares, any consolidation or merger of the Corporation into or with any other
entity or entities (whether or not the Corporation is the surviving entity), or
any sale or transfer by the Corporation of all or any part of its assets, shall
be deemed to be a liquidation, dissolution or winding up of the Corporation
within the meaning of this Section 2.
---------
Section 3 Priority of Convertible Preferred on Dividends and Redemptions.
---------------------------------------------------------------
So long as any Convertible Preferred remains outstanding, the Corporation
shall not, nor shall it permit any Subsidiary to, redeem, purchase or otherwise
acquire directly or indirectly any Junior Securities, provided that the
Corporation may repurchase shares of Common Stock from present or former
employees or consultants of the Corporation and its Subsidiaries, nor shall the
Corporation directly or indirectly pay any dividend or make any distribution
upon any Junior Securities if at the time of or immediately after any such
redemption, purchase, acquisition, dividend or distribution the Corporation has
failed to pay the full amount of dividends accrued on the Convertible Preferred
or the Corporation has failed to make any redemption of the Convertible
Preferred required hereunder.
Section 4 Redemptions.
-----------
<PAGE>
4A. Scheduled Redemptions. At the election of the holders of a majority
---------------------
of the outstanding Shares, the Corporation shall redeem all outstanding Shares
of Convertible Preferred on July 23, 2006, at a price per Share (the "Redemption
----------
Price") equal to the greater of the following: (a) the Liquidation Value thereof
- -----
(plus all accrued and unpaid dividends thereon) and (b) the Market Price of the
Common Stock issuable upon conversion of the Convertible Preferred.
4B. Redemption Payments. For each Share which is to be redeemed hereunder,
-------------------
the Corporation shall be obligated on the Redemption Date to pay to the holder
thereof (upon surrender by such holder at the Corporation's principal office of
the certificate representing such Share) an amount in cash from immediately
available funds at a price per Share equal the Redemption Price. If funds of the
Corporation which are legally available for redemption of Shares on any
Redemption Date are insufficient to redeem the total number of Shares to be
redeemed on such date, those funds which are legally available shall be used to
redeem the maximum possible number of Shares pro rata among the holders of the
Shares to be redeemed based upon the aggregate Redemption Price payable to each
such holder. At any time thereafter when additional funds of the Corporation are
legally available for the redemption of Shares, such funds shall immediately be
used to redeem the balance of the Shares which the Corporation has become
obligated to redeem on any Redemption Date but which it has not redeemed.
4C. Determination of the Number of Each Holder's Shares to be Redeemed.
------------------------------------------------------------------
The number of Shares of Convertible Preferred to be redeemed from each holder
thereof in redemptions hereunder shall be the number of Shares determined by
multiplying the total number of Shares to be redeemed times a fraction, the
numerator of which shall be the total number of Shares then held by such holder
and the denominator of which shall be the total number of Shares then
outstanding.
4D. Dividends After Redemption. No Share shall be entitled to any
--------------------------
dividends accruing after the date on which a redemption consideration of such
Share (including all accrued and unpaid dividends thereon) is paid to the holder
of such Share. On such date, all rights of the holder of such Share shall cease,
and such Share shall no longer be deemed to be issued and outstanding.
4E. Redeemed or Otherwise Acquired Shares. Any Shares which are redeemed
-------------------------------------
or otherwise acquired by the Corporation shall be canceled and retired to
authorized but unissued shares and shall not be reissued, sold or transferred.
Section 5 Voting Rights. The holders of the Convertible Preferred shall
-------------
be entitled to notice of all stockholders meetings in accordance with the
Corporation's bylaws shall be entitled to vote on all matters submitted to the
stockholders for a vote (including the election of directors), such that the
holders of the Convertible Preferred shall vote together with the holders of the
Common Stock as a single class, with each Share of Convertible Preferred being
entitled to vote on an as-if-converted basis based on the number of shares of
Conversion Stock into which such Share of Convertible Preferred is convertible
as of the Original Issue Date.
Section 6 Conversion.
----------
6A. Conversion Rights and Procedures.
--------------------------------
<PAGE>
(i) At any time and from time to time, any holder of Convertible
Preferred may convert at its sole option all or any portion of the Convertible
Preferred (including any fraction of a Share) held by such holder into a number
of shares of Conversion Stock computed by multiplying the number of Shares to be
converted by $15.00 and dividing the result by the Conversion Price then in
effect with respect to such Shares. The initial Conversion Price of each Share
of Convertible Preferred shall be $6.854, as adjusted for stock splits, stock
dividends, recapitalizations and other similar events.
(ii) Except as otherwise provided herein, each conversion of
Convertible Preferred shall be deemed to have been effected as of the close of
business on the date on which the certificate or certificates representing the
Convertible Preferred to be converted have been surrendered for conversion at
the principal office of the Corporation (the "Conversion Date"). At the time any
---------------
such conversion has been effected, the rights of the holder of the Shares
converted as a holder of Convertible Preferred shall cease and the Person or
Persons in whose name or names any certificate or certificates for shares of
Conversion Stock are to be issued upon such conversion shall be deemed to have
become the holder or holders of record of the shares of Conversion Stock
represented thereby.
(iii) The conversion rights of any Share shall terminate on the
Redemption Date for such Share unless the Corporation has failed to pay to the
holder thereof the Redemption Price in accordance with Section 4A.
----------
(iv) Notwithstanding any other provision hereof, if a conversion of
Convertible Preferred is to be made in connection with a Change in Ownership, a
Fundamental Change or other transaction affecting the Corporation, the
conversion of any Shares of Convertible Preferred may, at the election of the
holder thereof, be conditioned upon the consummation of such transaction, in
which case such conversion shall not be deemed to be effective until such
transaction has been consummated.
(v) As soon as possible after a conversion has been effected (but in
any event within ten business days in the case of subsection (a) below), the
--------------
Corporation shall deliver to the converting holder:
(a) a certificate or certificates representing the number of
shares of Conversion Stock issuable by reason of such conversion in such
name or names and such denomination or denominations as the converting
holder has specified;
(b) payment in an amount equal to all dividends accrued in
accordance with Section 1 hereof with respect to each Share converted which
---------
have not been paid prior thereto plus the amount payable with respect to
fractional shares of Conversion Stock in accordance with subsection (xi)
---------------
below; and
(c) a certificate representing any Shares of Convertible
Preferred which were represented by the certificate or certificates
delivered to the Corporation in connection with such conversion but which
were not converted.
<PAGE>
(vi) The Corporation shall declare the payment of all dividends
payable under subsection (v)(b) above. If the Corporation is not permitted under
-----------------
applicable law to pay any portion of the accrued and unpaid dividends on the
Convertible Preferred being converted, then the Corporation shall pay such
dividends in cash to the converting holder as soon thereafter as funds of the
Corporation are legally available for such payment. At the request of any such
converting holder, the Corporation shall provide such holder with written
evidence of its obligation to such holder.
(vii) Any holders of Convertible Preferred may elect at their sole
discretion to convert the cash dividends payable with respect to such holder's
Convertible Preferred into an additional number of shares of Conversion Stock
determined by dividing the amount of the unpaid dividends to be applied for such
purpose by the Conversion Price then in effect with respect to such Shares of
Convertible Preferred.
(viii) The issuance of certificates for shares of Conversion Stock upon
conversion of Convertible Preferred shall be made without charge to the holders
of such Convertible Preferred for any issuance tax in respect thereof or other
cost incurred by the Corporation in connection with such conversion and the
related issuance of shares of Conversion Stock. Upon conversion of each Share of
Convertible Preferred, the Corporation shall take all such actions as are
necessary in order to insure that the Conversion Stock issuable with respect to
such conversion shall be validly issued, fully paid and nonassessable, free and
clear of all taxes, liens, charges and encumbrances with respect to the issuance
thereof.
(ix) The Corporation shall not close its books against the transfer of
Convertible Preferred or of Conversion Stock issued or issuable upon conversion
of Convertible Preferred in any manner which interferes with the timely
conversion of the Convertible Preferred. The Corporation shall assist and
cooperate with any holder of Shares required to make any governmental filings or
obtain any governmental approval prior to or in connection with any conversion
of Shares hereunder (including, without limitation, making any filings required
to be made by the Corporation).
(x) The Corporation shall at all times reserve and keep available out
of its authorized but unissued shares of Conversion Stock, solely for the
purpose of issuance upon the conversion of the Convertible Preferred, such
number of shares of Conversion Stock issuable upon the conversion of all
outstanding Convertible Preferred. All shares of Conversion Stock which are so
issuable shall, when issued, be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens and charges. The Corporation shall
take all such actions as may be necessary to assure that all such shares of
Conversion Stock may be so issued without violation of any applicable law or
governmental regulation or any requirements of any domestic securities exchange
upon which shares of Conversion Stock may be listed (except for official notice
of issuance which shall be immediately delivered by the Corporation upon each
such issuance). The Corporation shall not take any action which would cause the
number of authorized but unissued shares of Conversion Stock to be less than the
number of such shares required to be reserved hereunder for issuance upon
conversion of the Convertible Preferred.
(xi) If any fractional interest in a share of Conversion Stock would,
except for the provisions of this Section 6A(xi), be delivered upon any
--------------
conversion of the Convertible Preferred, the Corporation, in lieu of delivering
the fractional share therefor, shall pay an amount to the holder thereof equal
to the Market Price of such fractional interest as of the date of conversion.
<PAGE>
6B. Adjustments to Conversion Price On or Prior to the Third Anniversary
--------------------------------------------------------------------
of the Date of Issuance.
- -----------------------
(i) From the date of issuance to and including the third anniversary of
the date of issuance of a Share of Convertible Preferred, the Conversion Price
of each Share of Convertible Preferred shall be subject to adjustment from time
to time pursuant to this Section 6B.
----------
(ii) If on any Dividend Reference Date the Average Trading Price is less
than the Conversion Price then in effect with respect to any Share of
Convertible Preferred, then such Conversion Price shall be reduced to equal such
Average Trading Price; provided that in no event shall the Conversion Price be
--------
reduced pursuant to this Section 6B(ii) below $2.75 (as adjusted for stock
--------------
splits, stock dividends, recapitalizations and other similar events).
6C. Adjustments to Conversion Price Following the Third Anniversary of
------------------------------------------------------------------
the Date of Issuance
- --------------------
(i) Following the third anniversary of the date of issuance of such Share
of Convertible Preferred, the Conversion Price with respect to any Share of
Convertible Preferred shall be subject to adjustment from time to time pursuant
to this Section 6C and Section 6D in order to prevent dilution of the conversion
---------- ----------
rights granted under this Section 6.
---------
(ii) If and whenever following the third anniversary of the original date
of issuance of the Convertible Preferred the Corporation issues or sells, or in
accordance with Section 6D is deemed to have issued or sold, any share of Common
----------
Stock or any warrants, options or other rights to purchase Common Stock (except
as provided by Section 6C(iii) below) for (x) consideration per share less than
---------------
the Conversion Price in effect with respect to any Share of Convertible
Preferred immediately prior to such time or (y) consideration per share less
than the Market Price of the Common Stock as of the date of issuance, then
immediately upon such issue or sale or deemed issue or sale such Conversion
Price shall be reduced to the Conversion Price determined by dividing (a) the
sum of (1) the product derived by multiplying the Conversion Price in effect
with respect to any Share of Convertible Preferred immediately prior to such
issue or sale by the number of shares of Common Stock Deemed Outstanding
immediately prior to such issue or sale, plus (2) the consideration, if any,
received by the Corporation upon such issue or sale, by (b) the number of shares
of Common Stock Deemed Outstanding immediately after such issue or sale.
(iii) Notwithstanding the foregoing, there shall be no adjustment to the
Conversion Price hereunder with respect to the granting of stock options to
employees, directors, consultants and vendors of the Corporation and its
Subsidiaries or the exercise thereof (as such number of shares is equitably
adjusted for subsequent stock splits, stock combinations, stock dividends and
recapitalizations and such number shall include all stock options outstanding as
of the date of the Purchase Agreement).
6D. Effect on Conversion Price of Certain Events. For purposes of
--------------------------------------------
determining the adjusted Conversion Price under Section 6B and Section 6C, the
---------- ----------
following shall be applicable:
<PAGE>
(i) Issuance of Rights or Options. If the Corporation in any manner
-----------------------------
grants or sells any Options and the price per share for which the Common Stock
is issuable upon the exercise of such Options, or upon conversion or exchange of
any Convertible Securities issuable upon exercise of such Options, is less than
(a) the Conversion Price in effect with respect to any Share of Convertible
Preferred immediately prior to the time of the granting or sale of such Options
or (b) the Market Price of the Common Stock determined as of such time, then the
total maximum number of shares of Common Stock issuable upon the exercise of
such Options or upon conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such Options shall be
deemed to be outstanding and to have been issued and sold by the Corporation at
the time of the granting or sale of such Options for such price per share. For
purposes of this Section 6D(i), the "price per share for which Common Stock is
-------------
issuable" shall be determined by dividing (A) the total amount, if any, received
or receivable by the Corporation as consideration for the granting or sale of
such Options, plus the minimum aggregate amount of additional consideration
payable to the Corporation upon exercise of all such Options, plus in the case
of such Options which relate to Convertible Securities, the minimum aggregate
amount of additional consideration, if any, payable to the Corporation upon the
issuance or sale of such Convertible Securities and the conversion or exchange
thereof, by (B) the total maximum number of shares of Common Stock issuable upon
the exercise of such Options or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such Options. No further
adjustment of the Conversion Price shall be made when Convertible Securities are
actually issued upon the exercise of such Options or when Common Stock is
actually issued upon the exercise of such Options or the conversion or exchange
of such Convertible Securities.
(ii) Issuance of Convertible Securities. If the Corporation in any manner
----------------------------------
issues or sells any Convertible Securities and the price per share for which
Common Stock is issuable upon conversion or exchange thereof is less than (a)
the Conversion Price in effect with respect to any Share of Convertible
Preferred immediately prior to the time of such issue or sale or (b) the Market
Price of the Common Stock determined as of such time, then the maximum number of
shares of Common Stock issuable upon conversion or exchange of such Convertible
Securities shall be deemed to be outstanding and to have been issued and sold by
the Corporation at the time of the issuance or sale of such Convertible
Securities for such price per share. For the purposes of this Section 6D(ii),
--------------
the "price per share for which Common Stock is issuable" shall be determined by
dividing (A) the total amount received or receivable by the Corporation as
consideration for the issue or sale of such Convertible Securities, plus the
minimum aggregate amount of additional consideration, if any, payable to the
Corporation upon the conversion or exchange thereof, by (B) the total maximum
number of shares of Common Stock issuable upon the conversion or exchange of all
such Convertible Securities. No further adjustment of the Conversion Price shall
be made when Common Stock is actually issued upon the conversion or exchange of
such Convertible Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustments of the
Conversion Price had been or are to be made pursuant to other provisions of this
Section 6, no further adjustment of the Conversion Price
- ---------
shall be made by reason of such issue or sale.
(iii) Change in Option Price or Conversion Rate. If (a) the purchase price
-----------------------------------------
provided for in any Options, (b) the additional consideration, if any, payable
upon the conversion or exchange of any Convertible Securities or (c) the rate at
which any Convertible Securities are convertible into or exchangeable for Common
Stock changes at any time, the Conversion Price in effect with
<PAGE>
respect to any Share of Convertible Preferred at the time of such change shall
be immediately adjusted to the Conversion Price which would have been in effect
at such time had such Options or Convertible Securities still outstanding
provided for such changed purchase price, additional consideration or conversion
rate, as the case may be, at the time initially granted, issued or sold;
provided that if such adjustment would result in an increase of such Conversion
Price then in effect, no such adjustment shall be made. For purposes of this
Section 6D, if the terms of any Exercisable Security or Convertible Security
- ----------
which was outstanding as of the date of issuance of the Convertible Preferred
are changed in the manner described in the immediately preceding sentence, then
such Exercisable Security or Convertible Security and the Common Stock deemed
issuable upon exercise, conversion or exchange thereof shall be deemed to have
been issued as of the date of such change; provided that no such change shall at
any time cause the Conversion Price hereunder to be increased.
(iv) Calculation of Consideration Received. If any Common Stock, Options
-------------------------------------
or Convertible Security is issued or sold or deemed to have been issued or sold
for cash, the consideration received therefor shall be deemed to be the amount
received by the Corporation therefor (net of discounts, commissions and related
expenses). If any Common Stock, Options or Convertible Security is issued or
sold for a consideration other than cash, the amount of the consideration other
than cash received by the Corporation shall be the fair value of such
consideration, except where such consideration consists of securities, in which
case the amount of consideration received by the Corporation shall be the Market
Price thereof as of the date of receipt. If any Common Stock, Options or
Convertible Security is issued to the owners of the non-surviving entity in
connection with any merger in which the Corporation is the surviving
corporation, the amount of consideration therefor shall be deemed to be the fair
value of such portion of the net assets and business of the non-surviving entity
as is attributable to such Common Stock, Options or Convertible Security, as the
case may be. The fair value of any consideration other than cash and securities
shall be determined jointly by the Corporation and the holders of a majority of
the outstanding Convertible Preferred. If such parties are unable to reach
agreement within a reasonable period of time, the fair value of such
consideration shall be determined by an independent appraiser experienced in
valuing such type of consideration jointly selected by the Corporation and the
holders of a majority of the outstanding Convertible Preferred. The
determination of such appraiser shall be final and binding upon the parties, and
the fees and expenses of such appraiser shall be borne by the Corporation.
(v) Integrated Transactions. In case any Options are issued in connection
-----------------------
with the issue or sale of other securities of the Corporation, together
comprising one integrated transaction in which no specific consideration is
allocated to such Options by the parties thereto, the Options shall be deemed to
have been issued for a consideration of $.01.
(vi) Treasury Shares. The number of shares of Common Stock outstanding at
---------------
any given time shall not include shares owned or held by or for the account of
the Corporation or any Subsidiary, and the disposition of any shares so owned or
held shall be considered an issue or sale of Common Stock.
(vii) Record Date. If the Corporation takes a record of the holders of
-----------
Common Stock for the purpose of entitling them (a) to receive a dividend or
other distribution payable in Common Stock, Options or in Convertible Securities
or (b) to subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date shall be deemed to be the date of
<PAGE>
the issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or upon the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
6E. Subdivision or Combination of Common Stock. If the Corporation at any
------------------------------------------
time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its outstanding shares of Common Stock into a
greater number of shares, the Conversion Price in effect with respect to any
Share of Convertible Preferred immediately prior to such subdivision shall be
proportionately reduced, and if the Corporation at any time combines (by reverse
stock split or otherwise) one or more classes of its outstanding shares of
Common Stock into a smaller number of shares, the Conversion Price in effect
with respect to any Share of Convertible Preferred immediately prior to such
combination shall be proportionately increased.
6F. Reorganization, Reclassification, Consolidation, Merger or Sale. Any
---------------------------------------------------------------
recapitalization, reorganization, reclassification, consolidation, merger, sale
of all or substantially all of the Corporation's assets or other transaction, in
each case which is effected in such a manner that the holders of Common Stock
are entitled to receive (either directly or upon subsequent liquidation) stock,
securities or assets with respect to or in exchange for Common Stock, is
referred to herein as an "Organic Change". Prior to the consummation of any
--------------
Organic Change, the Corporation shall make appropriate provisions (in form and
substance satisfactory to the holders of a majority of the Convertible Preferred
then outstanding) to insure that the Convertible Preferred remains outstanding
and each of the holders of Convertible Preferred shall thereafter have the right
to acquire and receive, in lieu of or in addition to (as the case may be) the
shares of Conversion Stock immediately theretofore acquirable and receivable
upon the conversion of such holder's Convertible Preferred, such shares of
stock, securities or assets as such holder would have received in connection
with such Organic Change if such holder had converted its Convertible Preferred
immediately prior to such Organic Change. In each such case, the Corporation
shall also make appropriate provisions (in form and substance satisfactory to
the holders of a majority of the Convertible Preferred then outstanding) to
insure that the provisions of this Section 6 and Sections 7 and 8 hereof shall
--------- ---------- -
thereafter be applicable to the Convertible Preferred. The Corporation shall not
effect any such consolidation, merger or sale, unless prior to the consummation
thereof, the successor entity (if other than the Corporation) resulting from
consolidation or merger or the entity purchasing such assets assumes by written
instrument (in form and substance satisfactory to the holders of a majority of
the Convertible Preferred then outstanding), the obligation to deliver to each
such holder such shares of stock, securities or assets as, in accordance with
the foregoing provisions, such holder may be entitled to acquire.
6G. Certain Events. If any event occurs of the type contemplated by the
--------------
provisions of this Section 6 but not expressly provided for by such provisions
---------
(including, without limitation, the granting of stock appreciation rights,
phantom stock rights or other rights with equity features but excluding such
rights granted to employees, directors, consultants and vendors), then the
Corporation's Board of Directors shall make an appropriate adjustment in the
Conversion Price then in effect so as to protect the rights of the holders of
Convertible Preferred; provided that no such adjustment shall increase the
Conversion Price as otherwise determined pursuant to this Section 6 or decrease
---------
the number of shares of Conversion Stock issuable upon conversion of each Share
of Convertible Preferred.
<PAGE>
6H. Notices.
-------
(i) Immediately upon any adjustment of the Conversion Price, the
Corporation shall give written notice thereof to all holders of Convertible
Preferred, setting forth in reasonable detail and certifying the calculation of
such adjustment.
(ii) The Corporation shall give written notice to all holders of
Convertible Preferred at least 20 days prior to the date on which the
Corporation closes its books or takes a record (a) with respect to any dividend
or distribution upon Common Stock, (b) with respect to any pro rata subscription
offer to holders of Common Stock or (c) for determining rights to vote with
respect to any Organic Change, dissolution or liquidation.
(iii) The Corporation shall also give written notice to the holders of
Convertible Preferred at least 20 days prior to the date on which any Organic
Change shall take place.
Section 7. Liquidating Dividends.
---------------------
If the Corporation declares or pays a dividend upon the Common Stock
payable in a form other than in cash from earnings or earned surplus (determined
in accordance with generally accepted accounting principles, consistently
applied) except for a stock dividend payable in shares of Common Stock (a
"Liquidating Dividend"), then the Corporation shall pay to the holders of
- ---------------------
Convertible Preferred at the time of payment thereof the Liquidating Dividends
which would have been paid on the shares of Conversion Stock had such
Convertible Preferred been converted immediately prior to the date on which a
record is taken for such Liquidating Dividend, or, if no record is taken, the
date as of which the record holders of Common Stock entitled to such dividends
are to be determined.
Section 8. Purchase Rights.
----------------
If at any time the Corporation grants, issues or sells any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of Common Stock (the
"Purchase Rights"), then each holder of Convertible Preferred shall be entitled
---------------
to acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which such holder could have acquired if such holder had held
the number of shares of Conversion Stock acquirable upon conversion of such
holder's Convertible Preferred immediately before the date on which a record is
taken for the grant, issuance or sale of such Purchase Rights, or if no such
record is taken, the date as of which the record holders of Common Stock are to
be determined for the grant, issue or sale of such Purchase Rights.
Section 9 Events of Noncompliance.
-----------------------
9A. Definitions. An Event of Noncompliance shall have occurred if:
-----------
(i) the Corporation fails to pay on when due the full amount of dividends
then accrued on the Convertible Preferred, whether or not such payment is
legally permissible or is prohibited by any agreement to which the Corporation
is subject;
<PAGE>
(ii) the Corporation fails to make any redemption payment with respect to
the Convertible Preferred which it is required to make hereunder, whether or not
such payment is legally permissible or is prohibited by any agreement to which
the Corporation is subject;
(iii) the Corporation breaches or otherwise fails to perform or observe any
other material covenant or agreement set forth herein or in the Purchase
Agreement;
(iv) any representation or warranty contained in the Purchase Agreement or
required to be furnished to any holder of Convertible Preferred pursuant to the
Purchase Agreement, or any information contained in writing required to be
furnished by the Corporation or any Subsidiary to any holder of Convertible
Preferred, is false or misleading in any material respect on the date made or
furnished;
(v) the Corporation or any material Subsidiary makes an assignment for
the benefit of creditors; or an order, judgment or decree is entered
adjudicating the Corporation or any material Subsidiary bankrupt or insolvent;
or any order for relief with respect to the Corporation or any material
Subsidiary is entered under the Federal Bankruptcy Code; or the Corporation or
any material Subsidiary petitions or applies to any tribunal for the appointment
of a custodian, trustee, receiver or liquidator of the Corporation or any
material Subsidiary or of any substantial part of the assets of the Corporation
or any material Subsidiary, or commences any proceeding (other than a proceeding
for the voluntary liquidation and dissolution of a Subsidiary) relating to the
Corporation or any material Subsidiary under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or liquidation law of
any jurisdiction; or any such petition or application is filed, or any such
proceeding is commenced, against the Corporation or any material Subsidiary and
either (a) the Corporation or any such Subsidiary by any act indicates its
approval thereof, consent thereto or acquiescence therein or (b) such petition,
application or proceeding is not dismissed within 60 days;
(vi) a judgment in excess of $150,000 is rendered against the Corporation
or any material Subsidiary and, within 60 days after entry thereof, such
judgment is not discharged or execution thereof stayed pending appeal, or within
60 days after the expiration of any such stay, such judgment is not discharged;
or
(vii) the Corporation or any material Subsidiary defaults in the
performance of any obligation or agreement if the effect of such default is to
cause an amount exceeding $50,000 to become due prior to its stated maturity or
to permit the holder or holders of any obligation to cause an amount exceeding
$50,000 to become due prior to its stated maturity.
9B. Consequences of Events of Noncompliance.
---------------------------------------
(i) Immediately upon the occurrence of an Event of Noncompliance has
occurred, and for 90 days thereafter that such Event of Noncompliance is
continuing, the dividend rate on the Convertible Preferred shall increase
immediately by an increment of one percentage point. Thereafter, until such time
as no Event of Noncompliance exists, the dividend rate shall increase
automatically at the end of each succeeding 90-day period by an additional
increment of one percentage points up the maximum rate permitted by applicable
law; provided that in no event shall the dividend rate be increased pursuant to
this sentence by more than five percentage points if such Event of Noncompliance
is not curable under any circumstances. Any increase of the
<PAGE>
dividend rate resulting from the operation of this subparagraph shall terminate
as of the close of business on the date on which no Event of Noncompliance
exists and the dividend rate shall return to the rate as determined according to
Section 1, subject to subsequent increases pursuant to this Section 9B.
- --------- ----------
(ii) If any Event of Noncompliance exists, each holder of Convertible
Preferred shall also have any other rights which such holder is entitled to
under any contract or agreement at any time and any other rights which such
holder may have pursuant to applicable law.
Section 10 Registration of Transfer.
------------------------
The Corporation shall keep at its principal office a register for the
registration of Convertible Preferred. Upon the surrender of any certificate
representing Convertible Preferred at such place, the Corporation shall, at the
request of the record holder of such certificate, execute and deliver (at the
Corporation's expense) a new certificate or certificates in exchange therefor
representing in the aggregate the number of Shares represented by the
surrendered certificate. Each such new certificate shall be registered in such
name and shall represent such number of Shares as is requested by the holder of
the surrendered certificate and shall be substantially identical in form to the
surrendered certificate, and dividends shall accrue on the Convertible Preferred
represented by such new certificate from the date to which dividends have been
fully paid on such Convertible Preferred represented by the surrendered
certificate.
Section 11 Replacement.
-----------
Upon receipt of evidence reasonably satisfactory to the Corporation (an
affidavit of the registered holder shall be satisfactory) of the ownership and
the loss, theft, destruction or mutilation of any certificate evidencing Shares
of Convertible Preferred, and in the case of any such loss, theft or
destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation (provided that if the holder is a financial institution or other
institutional investor its own agreement shall be satisfactory), or, in the case
of any such mutilation upon surrender of such certificate, the Corporation shall
(at its expense) execute and deliver in lieu of such certificate a new
certificate of like kind representing the number of Shares of such class
represented by such lost, stolen, destroyed or mutilated certificate and dated
the date of such lost, stolen, destroyed or mutilated certificate, and dividends
shall accrue on the Convertible Preferred represented by such new certificate
from the date to which dividends have been fully paid on such lost, stolen,
destroyed or mutilated certificate.
Section 12 Definitions.
-----------
"Average Trading Price" means the average of the closing prices of the
---------------------
Conversion Stock on the Nasdaq National Market under the symbol UCTN (as
reported in The Wall Street Journal) on the 30 consecutive Trading Days ending
on the Trading Day prior to the date of determination.
"Change in Ownership" means any sale, transfer or issuance or series
-------------------
of sales, transfers and/or issuances of Common Stock by the Corporation or any
holders thereof which results in any Person or group of Persons (as the term
"group" is used under the Securities Exchange Act of 1934), other than the
holders of Common Stock and the Convertible Preferred
<PAGE>
as of the date of the Purchase Agreement, owning more than 50% of the Common
Stock outstanding at the time of such sale, transfer or issuance or series of
sales, transfers and/or issuances.
"Common Stock" means, collectively, the Corporation's Common Stock,
------------
par value $0.005, and any capital stock, other than preferred stock of the
Corporation, of any class of the Corporation hereafter authorized which is not
limited to a fixed sum or percentage of par or stated value in respect to the
rights of the holders thereof to participate in dividends or in the distribution
of assets upon any liquidation, dissolution or winding up of the Corporation.
"Common Stock Deemed Outstanding" means, at any given time, the number
-------------------------------
of shares of Common Stock actually outstanding at such time, plus the number of
shares of Common Stock deemed to be outstanding pursuant to Sections 6D(i) and
--------------
6D(ii) hereof whether or not the Options or Convertible Securities are actually
- ------
exercisable at such time, but excluding any shares of Common Stock issuable upon
conversion of the Convertible Preferred.
"Conversion Stock" means shares of the Corporation's Common Stock;
----------------
provided that if there is a change such that the securities issuable upon
conversion of the Convertible Preferred are issued by an entity other than the
Corporation or there is a change in the type or class of securities so issuable,
then the term "Conversion Stock" shall mean one share of the security issuable
upon conversion of the Convertible Preferred if such security is issuable in
shares, or shall mean the smallest unit in which such security is issuable if
such security is not issuable in shares.
"Convertible Securities" means any stock or securities directly or
----------------------
indirectly convertible into or exchangeable for Common Stock other than the
Convertible Preferred.
"Fundamental Change" means (a) any sale or transfer of more than 50%
------------------
of the assets of the Corporation and its Subsidiaries on a consolidated basis
(measured either by book value in accordance with generally accepted accounting
principles consistently applied or by fair market value determined in the
reasonable good faith judgment of the Corporation's Board of Directors) in any
transaction or series of transactions (other than sales in the ordinary course
of business) and (b) any merger or consolidation to which the Corporation is a
party, except for a merger in which the Corporation is the surviving
corporation, the terms of the Convertible Preferred are not changed and the
Convertible Preferred is not exchanged for cash, securities or other property,
and after giving effect to such merger, the holders of the Corporation's
outstanding capital stock possessing a majority of the voting power (under
ordinary circumstances) to elect a majority of the Corporation's Board of
Directors immediately prior to the merger shall continue to own the
Corporation's outstanding capital stock possessing the voting power (under
ordinary circumstances) to elect a majority of the Corporation's Board of
Directors.
"Junior Securities" means any capital stock or other equity securities
-----------------
of the Corporation, except for the Convertible Preferred.
"Liquidation Value" of any Share as of any particular date shall be
-----------------
equal to $15.00, as adjusted for stock splits, stock dividends,
recapitalizations and other similar events.
<PAGE>
"Market Price" of any security means the average of the closing prices
------------
of such security's sales on all securities exchanges on which such security may
at the time be listed, or, if there has been no sales on any such exchange on
any day, the average of the highest bid and lowest asked prices on all such
exchanges at the end of such day, or, if on any day such security is not so
listed, the average of the representative bid and asked prices quoted in the
NASDAQ System as of 4:00 P.M., New York time, or, if on any day such security is
not quoted in the NASDAQ System, the average of the highest bid and lowest asked
prices on such day in the domestic over-the-counter market as reported by the
National Quotation Bureau, Incorporated, or any similar successor organization,
in each such case averaged over a period of 30 days ending on the Trading Day
prior to the day as of which "Market Price" is being determined and the 30
consecutive business days prior to such day. If at any time such security is not
listed on any securities exchange or quoted in the NASDAQ System or the over-
the-counter market, the "Market Price" shall be the fair value thereof
determined jointly by the Corporation and the holders of a majority of the
Convertible Preferred. If such parties are unable to reach agreement within a
reasonable period of time, such fair value shall be determined by an independent
appraiser experienced in valuing securities jointly selected by the Corporation
and the holders of a majority of the Convertible Preferred. The determination of
such appraiser shall be final and binding upon the parties, and the Corporation
shall pay the fees and expenses of such appraiser.
"Options" means any rights, warrants or options to subscribe for or
-------
purchase Common Stock or Convertible Securities.
"Original Issue Date" shall mean the date of the first issuance of any
-------------------
shares of the Convertible Preferred regardless of the number of transfers of any
particular shares of Convertible Preferred and regardless of the number of
certificates which may be issued to evidence such Convertible Preferred Stock.
"Person" means an individual, a partnership, a corporation, a limited
------
liability company, a limited liability, an association, a joint stock company, a
trust, a joint venture, an unincorporated organization and a governmental entity
or any department, agency or political subdivision thereof.
"Purchase Agreement" means the purchase agreement dated as of the
------------------
Original Issue Date by and between the Company and U-C Holdings, L.L.C., as such
agreement may from time to time be amended in accordance with its terms.
"Redemption Date" as to any Share means the applicable date specified
---------------
herein; provided that no such date shall be a Redemption Date unless the
redemption consideration determined in accordance with Section 4A is actually
----------
paid in full on such date, and if not so paid in full, the Redemption Date shall
be the date on which such amount is fully paid.
"Subsidiary" means, with respect to any Person, any corporation,
----------
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar
<PAGE>
ownership interest thereof is at the time owned or controlled, directly or
indirectly, by any Person or one or more Subsidiaries of that person or a
combination thereof. For purposes hereof, a Person or Persons shall be deemed to
have a majority ownership interest in a limited liability company, partnership,
association or other business entity if such Person or Persons shall be
allocated a majority of limited liability company, partnership, association or
other business entity gains or losses or shall be or control the managing
general partner of such limited liability company, partnership, association or
other business entity.
"Trading Day" means (a) a day on which the Conversion Stock is traded
-----------
on The Nasdaq Small-Cap Market, the Nasdaq National Market or other registered
national stock exchange on which the Conversion Stock has been listed, or (b) if
the Conversion Stock is not listed on The Nasdaq Small-Cap Market, the Nasdaq
National Market or any registered national stock exchange, a day on which the
Conversion Stock is traded in the over-the-counter market, as reported by the
OTC Bulletin Board, or (c) if the Conversion Stock is not quoted on the OTC
Bulletin Board, a day on which the Conversion Stock is quoted in the over-the-
counter market as reported by the National Quotation Bureau Incorporated (or
similar organization or agency succeeding its functions of reporting policies).
Section 13 Amendment and Waiver.
--------------------
No amendment, modification or waiver shall be binding or effective with
respect to any provision of Sections 1 to 14 hereof without the prior written
---------- --
consent of the holders of a majority of the Convertible Preferred outstanding at
the time such action is taken.
Section 14 Notices.
-------
Except as otherwise expressly provided hereunder, all notices referred to
herein shall be in writing and shall be delivered by registered or certified
mail, return receipt requested and postage prepaid, or by reputable overnight
courier service, charges prepaid, and shall be deemed to have been given when so
mailed or sent (i) to the Corporation, at its principal executive offices and
(ii) to any stockholder, at such holder's address as it appears in the stock
records of the Corporation (unless otherwise indicated by any such holder).
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
<PAGE>
IN WITNESS WHEREOF, College Television Network, Inc., has caused this
Certificate to be executed by its duly authorized representative as of July
21, 1999.
COLLEGE TELEVISION NETWORK, INC.,
a Delaware corporation
By: ______________________________________
Patrick Doran, Chief Financial Officer
<PAGE>
EXHIBIT 99
Tuesday, August 3, 1999
Company Press Release
COLLEGE TELEVISION NETWORK TO ACQUIRE MARKET PLACE MEDIA AND ALL CAMPUS
MEDIA, CREATING A TOTAL YOUNG ADULT MEDIA COMPANY--CTN's Television Broadcast
Network, Internet, Magazine, and Newspaper Assets Blanket the 18-to-24 Year Old
Audience
[ATLANTA, August 3, 1999] -- College Television Network, Inc. (CTN) (Nasdaq:
UCTN) today announced it has signed a purchase agreement to acquire Armed
Forces Communications, Inc., d/b/a Market Place Media (MPM), for a purchase
price of approximately $30,000,000.
Jason Elkin, CTN's Chairman and CEO, said, "The MPM acquisition gives CTN a
complete array of tools to help clients reach the coveted 18-to-24 year old
audience: Television broadcast network, Internet, Link Magazine, radio,
newspapers and AllCampus Promotional Network. CTN now leads the industry with
the most coordinated and cost-efficient ways to effectively market to the young
adult consumer. This was the perfect acquisition for CTN, it was an ideal
strategic fit," Mr. Elkin concluded.
"Clients today increasingly search for multi-media solutions to marketing
problems," added CTN's Jason Elkin. "The total CTN company can now build
powerful media and marketing programs for clients in a highly strategic,
customized way.
MPM is a leading advertising and promotions company specializing in
targeting markets such as colleges and universities. MPM sells and distributes
advertising (including print media, television, radio and Internet), to
colleges and universities and to MPM's other targeted marketplaces. MPM's 1998
revenues exceeded $30 million, and MPM is ahead of target to meet 1999 revenue
projections that are in excess of $40 million.
MPM's All Campus Media(R) places advertisements in college newspapers,
handles all facets of on-campus promotions and special events, offers full-
service Internet technology (including its own Web page, on-line college
publications), and provides full-service planning, buying and post analysis in
radio, spot TV and cable in major student markets throughout America.
In addition, MPM's Armed Forces Communications(R) is the leading multi-media
military marketing company, placing advertising in national military base
newspapers. MPM's American Minorities Media(R) represents and places
advertising in minority and ethnic newspapers.
CTN also announced today that Geoffrey Kanter has been named new president
of MPM. Mr. Kanter, a Harvard Business School graduate, comes to MPM from the
PRIMEDIA Inc. subsidiary, Cover Concepts Marketing Services. As President and
CEO of Cover Concepts, Mr. Kanter spearheaded rapid company growth by driving
new initiatives and acquiring other leading in-school marketing companies.
-4-
<PAGE>
Geoffrey Kanter said, "I am excited to lead CTN's newest acquisition. MPM,
combined with CTN's broadcast television network and Link Magazine, creates a
portfolio of companies that provides our clients with an unparalleled
opportunity to reach highly targeted audiences.
CTN's broadcast television network now provides an original mix of music,
news and information programming, broadcast continuously by satellite to
American college and university locations across the nation. More than 1,300
college locations are now under contract to receive CTN's Nielsen-rated
broadcasts. As a result, CTN's dedicated single channel broadcast now delivers
advertisers the sought-after 18-24 year-old demographic. CTN's Link Magazine is
now America's most read college magazine. Finally, CTN has undertaken an
aggressive Internet strategy targeted at the young adult marketplace and is now
in the process of forming significant Internet strategic relationships.
CTN's fast growth has attracted significant investment partners. Willis
Stein & Partners, a leading private equity firm, is the controlling shareholder
in CTN. Willis Stein & Partners specializes in investments with media and
communications companies.
For further information, please call Jason Elkin, Chairman and Chief
Executive Officer of CTN, at 404.256.4444, or Martin Grant, President of CTN,
at 800.586.4636.
This press release contains forward looking statements regarding the
Company's business strategy projected financial results and future plans of
operation. Forward looking statements involve known and unknown risks and
uncertainties especially when dealing with financial projections. These and
other important factors, including those mentioned in various filings with the
Securities and Exchange Commission made periodically by the Company (available
to the public at www.sec.gov), may cause the actual results and performance to
differ materially from the future results expressed in or implied by such
forward looking statements. The forward looking statements contained in this
press release speak only as of the date hereof and the Company disclaims any
obligation to provide public updates, revisions or amendments to any forward
looking statements made herein to reflect changes in the Company's expectations
or future events.
5
