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EXHIBIT 4.1
EXECUTION COPY
COMMON STOCK INVESTMENT AGREEMENT
COMMON STOCK INVESTMENT AGREEMENT ("AGREEMENT") dated as of
July 17, 2000 among PLATO LEARNING, INC., a Delaware corporation (the
"COMPANY"), ELLIOTT ASSOCIATES, L.P., a Delaware limited partnership
("Elliott"), and WESTGATE INTERNATIONAL, L.P., a Cayman Islands limited
partnership ("WESTGATE", together with Elliott, the "INVESTORS").
W I T N E S S E T H:
WHEREAS, the Company desires to sell and issue to the
Investors, and the Investors wish to purchase from the Company, an aggregate of
356,125 shares of the Company's Common Stock, $.01 par value ("COMMON STOCK")
(all of such shares of Common Stock being the "INITIAL SHARES"), and three (3)
year warrants, in the form attached hereto as Annex A, to purchase 53,419 shares
of Common Stock at an initial exercise price of $16.72 per share (the "INITIAL
WARRANTS"), and a warrant, in the form attached hereto as Annex B, to purchase a
number of shares of Common Stock calculated pursuant to a formula set forth
therein (the "ADJUSTMENT WARRANTS"; together with the Initial Warrants, the
"WARRANTS"), all on the terms and conditions described below; and
WHEREAS, the Initial Shares, the shares of Common Stock
underlying the Initial Warrants (the "WARRANT SHARES") and the shares of Common
Stock underlying the Adjustment Warrants (the "Adjustment Shares"; the Initial
Shares, the Warrant Shares and the Adjustment Shares collectively being the
"REGISTRABLE SHARES") will carry registration rights, pursuant to the terms of
that certain Registration Rights Agreement to be entered into between the
Company and the Investors substantially in the form annexed hereto (the
"REGISTRATION RIGHTS AGREEMENT").
NOW, THEREFORE, in consideration of the foregoing premises and
the covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES AND WARRANTS
Section 1.1 Issuance of Initial Shares and Warrants. Upon the following
terms and conditions, the Company shall issue and sell to the Investors, and the
Investors shall purchase from the Company, the number of Initial Shares and
Warrants indicated next to the Investors' names on Schedule I attached hereto.
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(a) Purchase Price. The aggregate purchase price for the
Initial Shares and Warrants to be acquired by each Investor (the "AGGREGATE
PURCHASE PRICE") shall be the Aggregate Purchase Price set forth next to each
such Investor's name on Schedule I. The purchase price per Initial Share is
$14.04 (the "SHARE PURCHASE PRICE").
(b) The Closing.
(i) The closing of the purchase and sale of the Initial Shares and
Warrants (the "CLOSING") shall take place at the offices of Kleinberg,
Kaplan, Wolff & Cohen, P.C. ("KKWC"), on the date hereof (the "CLOSING
DATE").
(ii) On the Closing Date, the Company shall deliver to the Investors
stock certificates (with the number of and denomination of such
certificates requested by each Investor) representing the Initial
Shares and the Warrants purchased hereunder, each registered in the
name of each such Investor or its nominee. The delivery of payment by
wire transfer, to an account designated in writing by the Company, by
each Investor of the Purchase Price applicable to it as set forth in
Section 1.1 and Schedule I shall constitute a payment delivered to the
Company in full satisfaction of the Investor's obligation to pay the
Aggregate Purchase Price hereunder. In addition, each party shall
deliver all documents, instruments and writings required to be
delivered by such party pursuant to this Agreement at or prior to the
Closing.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties of the Company. The Company
hereby makes the following representations and warranties to the Investors as of
the date hereof, on the Closing Date and on the date of any Fill-up Closing (as
defined in the Adjustment Warrant):
(a) Organization and Qualification; Material Adverse Effect.
The Company is a corporation duly incorporated and existing in good standing
under the laws of the State of Delaware and has the requisite corporate power to
own its properties and to carry on its business as now being conducted. The
Company does not have any subsidiaries other than the subsidiaries listed on
Schedule 2.1(a) attached hereto ("SUBSIDIARIES"). Except where specifically
indicated to the contrary, all references in this Agreement to Subsidiaries
shall be deemed to refer to all direct and indirect subsidiaries of the Company.
The Company is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, other than
those in which the failure so to qualify would not have a Material Adverse
Effect. "MATERIAL ADVERSE EFFECT" means any (i) adverse effect(s) on the
business, operations, properties, prospects or financial condition of the
Company and its Subsidiaries, if any, and which is material to the Company and
its Subsidiaries, if any, taken as a whole, and (ii) any prohibition of delay in
or other adverse effect on the transactions contemplated under this Agreement,
the Registration Rights Agreement or any other agreement or document
contemplated hereby or thereby.
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(b) Authorization; Enforcement. (i) The Company has all
requisite corporate power and authority to enter into and perform this
Agreement, the Warrants and the Registration Rights Agreement ("TRANSACTION
DOCUMENTS") and to issue the Initial Shares, Adjustment Shares, Warrants and
Warrant Shares (collectively, the "SECURITIES") in accordance with the terms
hereof, (ii) the execution and delivery of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated hereby and
thereby, have been duly authorized by all necessary corporate action, and no
further consent or authorization of the Company or its Board of Directors (or
any committee or subcommittee thereof) or stockholders is required, (iii) the
Transaction Documents have been duly executed and delivered by the Company, (iv)
the Transaction Documents constitute valid and binding obligations of the
Company enforceable against the Company in accordance with their terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of creditors' rights and remedies or by
other equitable principles of general application, and (v) the Securities have
been duly authorized and, upon issuance thereof and payment therefor in
accordance with the terms of this Agreement, will be validly issued, fully paid
and non-assessable, free and clear of any and all liens, claims and
encumbrances.
(c) Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of (i) 25,000,000 shares of Common Stock,
of which as of the date hereof, 7,654,076 shares are issued and outstanding,
121,875 are treasury shares, 2,661,280.98 shares are issuable and reserved for
issuance pursuant to the Company's stock option and purchase plans and 546,400
shares are issuable and reserved for issuance pursuant to securities exercisable
or exchangeable for, or convertible into, shares of Common Stock, and (ii)
5,000,000 shares of preferred stock, of which as of the date hereof, zero shares
were issued and outstanding. All of such outstanding shares have been, or upon
issuance will be, validly issued, fully paid and nonassessable. As of the date
hereof, except as contemplated by this Agreement or as disclosed in Schedule
2.1(c), (i) no shares of the Company's capital stock are subject to preemptive
rights or any other similar rights or any liens or encumbrances suffered or
permitted by the Company, (ii) there are no outstanding debt securities, (iii)
except as disclosed in Schedule 2.1(c), there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares of
capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue Adjustment Shares of capital stock
of the Company or any of its Subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries, (iv) there are no agreements or arrangements
(except the Registration Rights Agreement) under which the Company or any of its
Subsidiaries is obligated to register the sale of any of their securities under
the Securities Act of 1933, as amended ("SECURITIES ACT" or "1933 ACT"), (v)
there are no outstanding securities of the Company or any of its Subsidiaries
which contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to redeem a security of the Company or any
of its Subsidiaries, (vi) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
Common Stock as required by this Agreement and (vii) the Company does not have
any stock appreciation rights or "phantom stock" plans or agreements or any
similar plan or
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agreement. The Company has furnished to the Investors true and correct copies of
the Company's Certificate of Incorporation, as amended and as in effect on the
date hereof (the "CERTIFICATE OF INCORPORATION"), and the Company's By-laws, as
in effect on the date hereof (the "BY-LAWS"), and the terms of all securities
convertible into or exercisable for Common Stock and the material rights of the
holders thereof in respect thereto.
(d) No Conflicts. Except as disclosed in Schedule 2.1(d), the
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby and
thereby will not (i) result in a violation of the Certificate of Incorporation
or the By-laws; (ii) conflict with, or constitute a default (or an event which
with notice or lapse of time or both reasonably could be expected to become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its Subsidiaries is a party, or (iii) result in a
violation of any law, rule, regulation, order, judgment or decree (including
United States federal and state securities laws and regulations and the rules
and regulations of the Principal Market) applicable to the Company or any of its
Subsidiaries or by which any property or asset of the Company or any of its
Subsidiaries is bound or affected. Except as disclosed in Schedule 2.1(d),
neither the Company nor its Subsidiaries is in violation of any term of, or in
default under, (x) its Certificate of Incorporation or By-laws or their
organizational charter or by-laws, respectively, (y) any material contract,
agreement, mortgage, indebtedness, indenture, instrument, or (z) any judgment,
decree or order or any statute, rule or regulation applicable to the Company or
its Subsidiaries. Except as specifically contemplated by this Agreement and as
required under the 1933 Act or any state securities law, the Company is not
required to obtain any consent, authorization or order of, or make any filing or
registration with, any court, governmental agency or any regulatory or
self-regulatory agency in order for it to execute, deliver or perform any of its
obligations under, or contemplated by, the Transaction Documents in accordance
with the terms hereof or thereof. Except as disclosed in Schedule 2.1(d), all
consents, authorizations, orders, filings and registrations which the Company is
required to obtain pursuant to the preceding sentence have been obtained or
effected on or prior to the date hereof. The Company complies with and is not in
violation of the listing requirements of the Principal Market, and no notice of
any non-compliance or violation has been received in the previous 12 months.
(e) Principal Market The Principal Market for the Common Stock
is, and for the forseeable future is anticipated to be, the Nasdaq National
Market System.
(f) SEC Documents; Financial Statements. Since October 30,
1998, the Company has timely filed all reports, schedules, forms, statements and
other documents required to be filed by it with the SEC pursuant to the
reporting requirements of the Exchange Act (as defined below) (all of the
foregoing filed prior to the date hereof and all exhibits included therein and
financial statements and schedules thereto and documents incorporated by
reference therein being hereinafter referred to as the "SEC DOCUMENTS"). All SEC
Documents were filed electronically via EDGAR. As of their respective dates, the
SEC Documents complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, at the time they
were filed with the SEC, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order
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to make the statements therein, in light of the circumstances under which they
were made, not misleading. As of their respective dates, the financial
statements of the Company included in the SEC Documents complied as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto. Such financial statements
have been prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). Neither the Company nor any of its Subsidiaries or any of their
officers, directors, employees or agents have provided the Investor with any
material, nonpublic information which was not publicly disclosed prior to the
date provided.
(g) Absence of Certain Changes. Except as disclosed in
Schedule 2.1(g) or the SEC Documents filed at least five (5) days prior to the
date hereof, since October 30, 1998, no event, liability, development or
circumstances has occurred and there has been no adverse change or adverse
development in the business, properties, assets, operations, financial
condition, liabilities or results of operations of the Company or its
Subsidiaries which either has had or, to the knowledge of the Company or its
Subsidiaries, is reasonably likely to have a Material Adverse Effect or which
would be required to be disclosed in an SEC registration statement for the
Common Stock. The Company has not taken any steps, and does not currently expect
to take any steps, to seek protection pursuant to any bankruptcy law nor does
the Company or its Subsidiaries have any knowledge or reason to believe that its
creditors intend to initiate involuntary bankruptcy proceedings.
(h) Absence of Litigation. There is no action, suit,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company or any of its Subsidiaries, threatened against or
affecting the Company, the Common Stock or any of the Company's Subsidiaries or
any of the Company's or the Company's Subsidiaries' officers or directors in
their capacities as such, (i) except as set forth in Schedule 2.1(h) or the SEC
documents filed at least five (5) days prior to the date hereof, and (ii) except
which individually and in the aggregate, respectively, would not be reasonably
likely to result in liability to the Company in excess of $10,000 and $25,000,
respectively.
(i) Acknowledgment Regarding Investors' Purchase of Shares.
The Company acknowledges and agrees that the Investors are acting solely in the
capacity of arm's length purchasers with respect to the Transaction Documents
and the transactions contemplated hereby and thereby. The Company further
acknowledges that the Investors are not acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to the
Transaction Documents and that the Company's decision to enter into the
Transaction Documents has been based solely on the independent evaluation by the
Company and its representatives.
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(j) No Integrated Offering. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would cause any offering of
Securities to the Investors to be integrated with prior offerings by the Company
for purposes of the 1933 Act or any applicable shareholder approval provisions,
including, without limitation, under the rules and regulations of the Principal
Market, nor will the Company or any of its Subsidiaries take any action or steps
in the future that would cause any offering of the Securities to be integrated
with other offerings.
(k) Employee Relations. Except as set forth on Schedule
2.1(k), neither the Company nor any of its Subsidiaries is involved in any labor
dispute nor, to the knowledge of the Company or any of its Subsidiaries, is any
such dispute threatened. Neither the Company nor any of its Subsidiaries is a
party to a collective bargaining agreement. The Company and its Subsidiaries
believe that relations between the Company and its Subsidiaries and their
respective employees are good. No executive officer (as defined in Rule 501(f)
of the 1933 Act) whose departure would be adverse to the Company has notified
the Company that such officer intends to leave the Company or otherwise
terminate such officer's employment with the Company.
(l) Intellectual Property Rights. The Company and its
Subsidiaries own or possess adequate rights or licenses to use all trademarks,
trade names, service marks, service mark registrations, service names, patents,
patent rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. Except as set forth on Schedule 2.1(l), none of the
Company's trademarks, trade names, service marks, service mark registrations,
service names, patents, patent rights, copyrights, inventions, licenses,
approvals, government authorizations, trade secrets or other intellectual
property rights have expired or terminated, or are expected to expire or
terminate within three (3) years from the date of this Agreement. The Company
and its Subsidiaries do not have any knowledge of any infringement by the
Company or its Subsidiaries of trademark, trade name rights, patents, patent
rights, copyrights, inventions, licenses, service names, service marks, service
mark registrations, trade secret or other similar rights of others, or of any
such development of similar or identical trade secrets or technical information
by others. Except as set forth on Schedule 2.1(l), there is no claim, action or
proceeding being made or brought against, or to the Company's knowledge, being
threatened against, the Company or its Subsidiaries regarding trademarks, trade
name rights, patents, patent rights, inventions, copyrights, licenses, service
names, service marks, service mark registrations, trade secrets or other
infringement. The Company and its Subsidiaries have taken reasonable security
measures to protect the secrecy, confidentiality and value of all of their
intellectual properties.
(m) Environmental Laws. To the best of the Company's
knowledge, the Company and its Subsidiaries (i) are in compliance with all
applicable foreign, federal, state and local laws and regulations relating to
the protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants ("ENVIRONMENTAL LAWS"), (ii)
have received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and (iii)
are in compliance with all terms and conditions of any such permits, licenses or
approvals.
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(n) Title. The Company has good and marketable title in fee
simple to all real property and good and marketable title to all personal
property owned by it which is material to the business of the Company free and
clear of all liens, encumbrances and defects except such as are described in
Schedule 2.1(n) or as are not material individually or in the aggregate. Any
real property and facilities held under lease by the Company are held by it
under valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such
property and buildings by the Company.
(o) Insurance. The Company and each of its Subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company reasonably believes
to be prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged. Neither the Company nor any such Subsidiary has been
refused any insurance coverage sought or applied for and neither the Company nor
any such Subsidiary has any reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the condition,
financial or otherwise, or the earnings, business or operations of the Company
and its Subsidiaries taken as a whole.
(p) Regulatory Permits. The Company and its Subsidiaries
possess all material certificates, authorizations and permits issued by the
appropriate federal, state or foreign regulatory authorities, necessary to
conduct their respective businesses, and neither the Company nor any such
Subsidiary has received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit.
(q) Internal Accounting Controls. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(r) Foreign Corrupt Practices Act. Neither the Company, nor
any director, officer, agent, employee or other person acting on behalf of the
Company or any Subsidiary has, in the course of acting for, or on behalf of, the
Company, directly or indirectly used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; directly or indirectly made any direct or indirect unlawful
payment to any foreign or domestic government or party official or employee from
corporate funds; violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended, or any similar treaties of
the United States; or directly or indirectly made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government or party official or employee.
(s) Tax Status. The Company and each of its Subsidiaries has
made or filed all United States federal and state income and all other tax
returns, reports and declarations
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required by any jurisdiction to which it is subject (unless and only to the
extent that the Company and each of its Subsidiaries has set aside on its books
provisions reasonably adequate for the payment of all unpaid and unreported
taxes) and has paid all taxes and other governmental assessments and charges
that are material in amount, shown or determined to be due on such returns,
reports and declarations, except those being contested in good faith and has set
aside on its books provisions reasonably adequate for the payment of all taxes
for periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material amount claimed to
be due by the taxing authority of any jurisdiction, and the Company is not aware
of any basis for any such claim.
(t) Certain Transactions. Except as set forth on Schedule
2.1(t) and in the SEC Documents filed at least five (5) trading days prior to
the date hereof, and other than the grant of stock options disclosed on Schedule
2.1(c), none of the officers, directors or employees of the Company is presently
a party to any transaction with the Company or any of its Subsidiaries (other
than for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any officer, director or any such employee has a substantial interest or
is an officer, director, trustee or partner.
(u) Dilutive Effect. The Company understands and acknowledges
that the number of Shares of Common Stock issuable pursuant to this Agreement
will increase in certain circumstances. The Company further acknowledges that,
subject to such limitations as are expressly set forth in the Transaction
Documents, its obligation to issue Warrant Shares and Adjustment Shares and
perform its other obligations pursuant to this Agreement is absolute and
unconditional regardless of the dilutive effect that any such issuance may have
on the ownership interests of other shareholders of the Company.
(v) Application of Takeover Protections. The Company and its
board of directors have taken all necessary action, if any, in order to render
inapplicable anti-takeover provision contained in the Company's Certificate of
Incorporation or By-Laws or Delaware law which is or could become applicable to
the Investors as a result of the transactions contemplated by this Agreement,
including, without limitation, the Company's issuance of the Common Stock and
the Investors' ownership of Common Stock.
(w) Rights Plan. Neither the Company nor any of its
Subsidiaries has adopted a shareholder rights plan or similar arrangement
relating to accumulations of beneficial ownership of Common Stock or a change in
control of the Company. The Company confirms that no provision of such plan
will, under any present or future circumstances, delay, prevent or interfere
with the performance of any of the Company's obligations under the Transaction
Documents and such plan will not be "triggered" by such performance.
(x) Form S-3. The Company is eligible to file the Registration
Statement (as defined in the Registration Rights Agreement) for secondary
offerings on Form S-3 (as in effect on the date of this Agreement) under the
1933 Act and rules promulgated thereunder.
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(y) Brokers. Except for its obligations to Trinity Capital,
the Company has taken no action which would give rise to any claim by any person
for brokerage commissions, finder's fees or similar payments by the Company or
the Investor relating to this Agreement or the transactions contemplated hereby.
All obligations to Trinity Capital are the exclusive responsibility of the
Company.
Section 2.2 Representations and Warranties of the Investors. Each
Investor hereby makes the following representations and warranties to the
Company as of the date hereof as to itself, on the Closing Date and on the date
of any Fill-up Closing required by such Investor:
(a) Accredited Investor Status; Sophisticated Investor. The
Investor is an "accredited investor" as that term is defined in Rule 501(a) of
Regulation D under the 1933 Act. The Investor has such knowledge and experience
in financial and business matters that it is capable of evaluating the merits
and risks of investment in the Common Stock.
(b) Information. The Investor and its advisors, if any, have
been furnished with all materials relating to the business, finances and
operations of the Company which have been requested and materials relating to
the offer and sale of the Initial Shares and Warrants (and the other shares of
Common Stock issuable hereunder) which have been requested by the Investor. The
Investor and its advisors, if any, have been afforded the opportunity to ask
questions of the Company. Neither such inquiries nor any other due diligence
investigations conducted by the Investor or its advisors, if any, or its
representatives shall modify, amend or affect the Investor's right to rely on
the Company's representations and warranties contained in Section 2.1 above. The
Investor understands that its investment in the Common Stock and the Warrants
involves a high degree of risk. The Investor has sought such accounting, legal
and tax advice as it has considered necessary to make an informed investment
decision with respect to its acquisition thereof.
(c) No Governmental Review. The Investor understands that no
United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the Common
Stock or the fairness or suitability of the investment in Common Stock nor have
such authorities passed upon or endorsed the merits of the offering of the
Common Stock or Warrants hereunder.
(d) Authorization; Enforcement. This Agreement and the
Registration Rights Agreement have been duly and validly authorized, executed
and delivered on behalf of the Investor and is a valid and binding agreement of
the Investor enforceable against the Investor in accordance with their terms,
subject as to enforceability to general principles of equity and to applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation and other
similar laws relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies. The Investor has the requisite corporate power
and authority to enter into and perform its obligations under this Agreement,
the Registration Rights Agreement and each other agreement entered into by the
parties hereto in connection with the transactions contemplated by this
Agreement.
(e) Residency. Each Investor is a resident of the jurisdiction
indicated on Schedule 1.
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(f) No Conflicts. The execution, delivery and performance of
this Agreement and the Registration Rights Agreement by the Investor and the
consummation by the Investor of the transactions contemplated hereby and thereby
will not result in a violation of the partnership agreement or other documents
of organization of the Investor.
(g) Regulatory Status. The Investor is not itself a
registered broker-dealer.
(h) Investment Representation. The Investor is purchasing the
Initial Shares and the Warrants for its own account and not with a view to
distribution in violation of any securities laws. The Investor has been advised
and understands that none of the Securities have been registered under the 1933
Act or under the "blue sky" laws of any jurisdiction and may be resold only if
registered pursuant to the provisions of the 1933 Act or if an exemption from
registration is available, except under circumstances where neither such
registration nor such an exemption is required by law. The Investor has been
advised and understands that the Company is issuing the Initial Shares, Warrants
and, to the extent issued, other Securities in reliance upon, among other
things, the representations and warranties of the Investor contained in this
Section 2.2 in concluding that such issuance is a "private offering" and is
exempt from the registration provisions of the 1933 Act.
(i) Brokers. The Investor has taken no action which would give
rise to any claim by any person for brokerage commissions, finder's fees or
similar payments by the Company or the Investor relating to this Agreement or
the transactions contemplated hereby.
ARTICLE III
COVENANTS
Section 3.1 Registration and Listing; Effective Registration. For so
long as at least 5% of the Securities are held by the Investors, the Company
will use its best efforts to cause the Common Stock to continue at all times to
be registered under Sections 12(b) or (g) of the Exchange Act, will comply in
all material respects with its reporting and filing obligations under the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and will not
take any action or file any document (whether or not permitted by the Exchange
Act or the rules thereunder) to terminate or suspend such reporting and filing
obligations. For so long as at least 5% of the Securities are held by the
Investors, the Company shall use its best efforts to continue the listing or
trading of the Common Stock on the Nasdaq National Market, Nasdaq SmallCap
Market, New York Stock Exchange or American Stock Exchange (each, an "APPROVED
MARKET") and shall comply in all material respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the Approved Market on
which the Common Stock is listed.
Section 3.2 Replacement Certificates. The certificate(s) representing
the Securities held by any Investor (or then holder) may be exchanged by the
Investor (or such holder) at any time and from time to time for certificates
with different denominations representing an equal aggregate number of
Securities as requested by the Investor (or such holder) upon surrendering the
same. The Company will deliver such substitute certificates within three trading
days. No service charge will be made for such registration or transfer or
exchange.
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Section 3.3 Securities Compliance. The Company shall notify the SEC and
the Principal Market, in accordance with their requirements, of the transactions
contemplated by this Agreement, the Warrants and the Registration Rights
Agreement, and shall take all other necessary action and proceedings as may be
required and permitted by applicable law, rule and regulation, for the legal and
valid issuance of the Securities and the Warrants.
Section 3.4 Use of Proceeds. The Company agrees that the net proceeds
received by the Company from the sale of the Securities hereunder shall be used
for legally permitted purposes.
Section 3.5 Reservation of Common Stock.
(a) The Company shall reserve all authorized but unissued
Securities for issuance to the Investor pursuant to the terms of this Agreement.
(b) The Company shall at all times reserve and keep available
out of its authorized but unissued shares of Common Stock, for the purpose of
effecting the issuance of Adjustment Shares and Warrant Shares upon the exercise
of Warrants, the number of its shares of Common Stock as shall from time to time
be sufficient to effect any such issuances and exercises, and if at any time the
number of authorized but unissued shares of Common Stock shall not be
sufficient, the Company will take such corporate action as may, in the
reasonable opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purpose, including without limitation engaging in best efforts to
obtain the requisite shareholder approval. The Company shall initially reserve,
exclusive of the Initial Shares, 445,000 shares of Common Stock.
Section 3.6 Form D; Blue Sky Laws. The Company agrees to file a Form D
with respect to the Securities and Warrants, as required under Regulation D and
to provide a copy thereof to the Investors promptly after such filing. The
Company shall, on or before the Closing Date, take such action as the Company
shall have reasonably determined is necessary to qualify the Securities for sale
to the Investors under applicable securities or "blue sky" laws of the states of
the United States (or to obtain an exemption from such qualification), and shall
provide evidence of any such action so taken to the Investors on or prior to the
Closing Date; provided, however, that the Company shall not be required in
connection therewith to register or qualify as a foreign corporation in any
jurisdiction where it is not now so qualified or to take any action that would
subject it to service of process in suits or taxation, in each case, in any
jurisdiction where it is not now so subject.
Section 3.7 Publicity. The Company shall, promptly after the Closing,
issue a press release with respect to this Agreement, in a form which has been
reviewed by and is reasonably acceptable to the Investors.
Section 3.8 No Inside Information. The Company shall not, and shall
cause its agents not to, provide an Investor with any material non-public
information. Any information received by an Investor may be publicly disclosed
by such Investor without liability.
Section 3.9 Financial Information. The Company agrees to send the
following to the Investors for so long as any Securities are issuable or
outstanding: (i) promptly upon the release
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thereof, facsimile or e-mail copies of all financial press releases issued by
the Company or any of its Subsidiaries; and (ii) copies of any notices and other
information made available or given to the shareholders of the Company
generally, contemporaneously with the making available or giving thereof to the
shareholders.
Section 3.10 Transactions With Affiliates. The Company agrees that any
transaction or arrangement between it or any of its Subsidiaries and any
affiliate or employee of the Company shall be effected on an arms' length basis
in accordance with customary commercial practice and, except with respect to
grants of options and stock to service providers, including employees, shall be
approved by a majority of the Company's outside directors.
Section 3.11 Overall Limit on Common Stock Issuable. Notwithstanding
anything contained herein to the contrary, the number of shares of Common Stock
issuable by the Company and acquirable by the Investors hereunder and under the
Warrants shall not exceed 1,523,161 shares of Common Stock, subject to
appropriate adjustment for stock splits, stock dividends, or other similar
recapitalizations affecting the Common Stock (the "MAXIMUM COMMON STOCK
ISSUANCE"), unless the issuance of shares hereunder in excess of the Maximum
Common Stock Issuance shall first be approved by the Company's shareholders in
accordance with applicable law and the By-laws and Articles of Incorporation of
the Company. If such shareholders' approval becomes required but is diligently
sought and duly obtained within forty-five (45) days, the inability of the
Company to reserve or issue shares of Common Stock to the Investors as a result
of this Section 3.11 shall not be deemed an "Exercise Deficiency" under the
Registration Rights Agreement. The parties understand and agree that the
Company's failure to seek or obtain such shareholder approval shall in no way
adversely affect the validity and due authorization of this Agreement and
issuance and sale of Securities and Warrants hereunder, and that such approval
pertains only to the applicability of the Maximum Common Stock Issuance
limitation provided in this Section. The parties further agree that if an event
constituting a Maximum Common Stock Issuance occurs during an Adjustment Period,
the Investors shall have the right but not the obligation to treat such
Adjustment Period as "tolled" under Section 1.2(c)(ii)(x).
Section 3.12 Certain Sales. Each Investor agrees it shall not enter
into short sales of the Common Stock with the intention of reducing the price of
the Common Stock on the Principal Market. Notwithstanding the foregoing, the
Company acknowledges that there is no presumption, nor will there be deemed to
be a presumption, that any sales by an Investor (including short sales) are made
with the intent of reducing the price of the Common Stock on the Principal
Market, even if the price of the Common Stock on the Principal Market falls
during the period in which such sales are occurring. Nothing in this Section
3.12 shall prohibit an Investor from at any time entering into, inter alia,
option, swap or derivative contracts with respect to the Securities, including
puts, swaps and calls in which shares of Common Stock are delivered or
deliverable in satisfaction of any exercised options.
Section 3.13 Reporting Lack of Effective Registration. The Company
shall promptly notify each Investor in writing if there shall ever be a lack of
Effective Registration, as well as when Effective Registration is
re-established.
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ARTICLE IV
TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its
transfer agent, and any subsequent transfer agent, to issue certificates,
registered in the name of the Investors or their respective nominee(s), for
Common Stock in such amounts as specified from time to time by the Investor to
the Company upon the required delivery of shares of Common Stock (the
"IRREVOCABLE TRANSFER AGENT INSTRUCTIONS"). The Company warrants that no
instruction relating to the Common Stock other than the Irrevocable Transfer
Agent Instructions referred to in this Article IV will be given by the Company
to its transfer agent and that the Common Stock issued to the Investors shall be
freely transferable on the books and records of the Company as contemplated by
Article VI below when the legend referred to therein may be removed. The Company
shall instruct its transfer agent to issue one or more certificates in such name
and in such denominations as specified by the Investors and, upon transfer as
contemplated by Article VI, without any restrictive legends. The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Investors by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section, that each affected Investor shall be
entitled, in addition to all other available remedies, to an injunction
restraining any breach and requiring immediate issuance and transfer without any
bond or other security being required.
ARTICLE V
CONDITIONS TO CLOSINGS
Section 5.1 Conditions Precedent to the Obligation of the Company to
Sell. The obligation hereunder of the Company to issue and/or sell the Initial
Shares and Warrants to the Investors at the Closing and to issue Adjustment
Shares is subject to the satisfaction, at or before the applicable closing, as
the case may be, of each of the applicable conditions set forth below. These
conditions are for the Company's sole benefit and may be waived by the Company
at any time in its sole discretion.
(a) Accuracy of the Investors' Representations and Warranties.
The representations and warranties of the Investors will be true and correct in
all material respects as of the date when made and as of the Closing Date and as
of any Fill-up Closing.
(b) Performance by the Investors. The Investors shall have
performed all agreements and satisfied all conditions required to be performed
or satisfied by the Investors at or prior to the Closing or any Fill-up Closing,
as the case may be, including payment of the applicable purchase price.
(c) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or
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governmental authority of competent jurisdiction which prohibits the
consummation of any of the transactions contemplated by the Transaction
Documents.
Section 5.2 Conditions Precedent to the Obligation of the Investors to
Purchase. The obligation hereunder of the Investors to acquire and pay for the
Initial Shares and Warrants at the Closing, is subject to the satisfaction, at
or before each applicable closing, of each of the applicable conditions set
forth below. These conditions are for the Investors' benefit and may be waived
by the Investors at any time in their sole discretion.
(a) Accuracy of the Company's Representations and Warranties.
The representations and warranties of the Company shall be true and correct in
all material respects as of the date when made and as of the applicable closing
date as though made at that time (except for representations and warranties
expressly as of an earlier date, which shall be true and correct in all material
respects as of such date).
(b) Performance by the Company. The Company shall have
performed all agreements and satisfied all conditions required to be performed
or satisfied by the Company at or prior to the applicable closing, including,
without limitation, delivery of certificates representing the Securities and the
Warrants, as applicable.
(c) Nasdaq Trading. Trading in the Company's Common Stock
shall not have been suspended by the SEC and trading in securities generally as
reported by the Principal Market (or other Approved Market) shall not have been
suspended or limited, and the Common Stock shall be listed on an Approved
Market.
(d) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by Transaction Documents. The NASD shall not have objected or
indicated that it may object to the consummation of any of the transactions
contemplated by this Agreement.
(e) Opinion of Counsel. The Investors shall have received an
opinion of counsel to the Company in the applicable form attached hereto as
Exhibit 5.2(e) and such other opinions, certificates and documents as the
Investors or their counsel shall reasonably require incident to the closing.
(f) Registration Rights Agreement. The Company and the
Investors shall have executed and delivered the Registration Rights Agreement in
the form and substance of Exhibit 5.2(f) attached hereto.
(g) Officer's Certificate. The Company shall have delivered to
the Investors certificates in form and substance satisfactory to the Investors
and the Investors' counsel, executed by an officer of the Company, certifying as
to satisfaction of applicable closing conditions, incumbency of signing
officers, and the true, correct and complete nature of the Certificate of
Incorporation, By-laws, good standing and authorizing resolutions of the
Company.
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(h) Diligence. The Investors shall have completed their
business, financial and legal due diligence to their sole satisfaction.
(i) Miscellaneous. The Company shall have delivered to the
Investors such other documents relating to the transactions contemplated by this
Agreement as the Investors or their counsel may reasonable request.
Section 5.3 Closing Date Deliveries.
(a) On the Closing Date, the Company shall deliver to the
Investor:
(i) Certificates representing the Initial Shares;
(ii) Warrants in the form attached as Annex A and Annex B;
(iii) The certificates referred to in Section 5.2(g) above;
(iv) The evidence of any necessary blue sky filings required by Section
3.6;
(v) The executed Registration Rights Agreement; and
(vi) The opinion of counsel referred to in Section 5.2(e) above.
(b) On the Closing Date, the Investors shall deliver to the
Company:
(i) The Purchase Price set forth on Schedule I hereto; and
(ii) The executed Registration Rights Agreement.
Section 5.4 Company Deliveries at Fill-up Closing. On the date of each
Fill-up Closing, the Company shall deliver to the Investor:
(i) Certificates representing the applicable Adjustment Shares issuable
to the Investors;
(ii) The certificate referred to in Section 5.2(g) above;
(iii) A current, deliverable prospectus that may be used to resell the
Adjustment Shares;
(iv) Evidence of any necessary blue sky filings required by Section
3.6.
ARTICLE VI
LEGEND AND STOCK
Each certificate representing the Common Stock issued
hereunder shall be stamped or otherwise imprinted with a legend substantially in
the following form:
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These Securities Have Not Been Registered For Offer or Sale
Under The Securities Act Of 1933 Or Any State securities laws. They May Not Be
Sold Or Offered For Sale Except Pursuant To An Effective Registration Statement
Under Said Act And Any Applicable State Securities Law Or An Applicable
Exemption From Such Registration Requirements.
The Company agrees to reissue within 3 trading days
certificates for Common Stock without the legend set forth above at such time as
such Common Stock is sold to a purchaser or purchasers who (in the opinion of
counsel to the seller or such purchaser(s), in form and substance reasonably
satisfactory to the Company and its counsel) are able to dispose of such shares
publicly without registration under the 1933 Act.
Any Common Stock issued pursuant to exercise of Warrants shall
bear a legend in the same form as the legend indicated above; provided that such
legend shall be removed from the Common Stock and the Company shall issue new
certificates without such legend if such Common Stock is registered for resale
under the 1933 Act, or (iii) such Common Stock is sold to a purchaser or
purchasers who (in the opinion of counsel to the seller or such purchaser(s), in
form and substance reasonably satisfactory to the Company and it counsel) are
able to dispose of such shares publicly without registration under the 1933 Act.
Upon the applicable trade date of each such sale, the Company agrees to issue
within 3 trading days new certificates representing such Common Stock without
such legend. The Investor agrees to sell the Common Stock represented by the new
certificates in accordance with the applicable prospectus delivery requirements
(if copies of a current prospectus are provided to the Investors by the Company)
or in accordance with an exemption from the registration requirements of the
1933 Act.
Nothing herein shall limit the right of any holder to pledge
these securities pursuant to a bona fide margin account or lending arrangement
entered into in compliance with law, including applicable securities laws.
ARTICLE VII
INDEMNIFICATION
In consideration of the Investors' execution and delivery of
this Agreement, the Warrants and the Registration Rights Agreement and in
addition to all of the Company's other obligations under the Transaction
Documents, the Company shall defend, protect, indemnify and hold harmless the
Investors and all of their partners, officers, directors, employees, members and
direct or indirect investors and any of the foregoing persons' agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
"INDEMNITEES") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorneys' fees and disbursements (the "INDEMNIFIED LIABILITIES"),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or any other certificate or document
contemplated hereby or thereby, (b) any breach of any covenant, agreement or
obligation of the
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<PAGE> 17
Company contained in the Transaction Documents or any other certificate or
document contemplated hereby or thereby, (c) any cause of action, suit or claim
brought or made against such Indemnitee by a third party and arising out of or
resulting from (i) the execution, delivery, performance, breach by the Company
or enforcement of the Transaction Documents or any other certificate, instrument
or document contemplated hereby or thereby, (ii) any transaction financed or to
be financed in whole or in part, directly or indirectly, with the proceeds of
the issuance of the Securities or (iii) the status of the Investor or holder of
the Securities or Warrants as investors in the Company, and (d) the enforcement
of this Section. Notwithstanding the foregoing, Indemnified Liabilities shall
not include any liability of any Indemnitee arising solely out of such
Indemnitee's willful misconduct or fraudulent action(s). To the extent that the
foregoing undertaking by the Company may be unenforceable for any reason, the
Company shall make the maximum contribution to the payment and satisfaction of
each of the Indemnified Liabilities which is permissible under applicable law.
Except as otherwise set forth herein, the mechanics and procedures with respect
to the rights and obligations under this Article VIII shall be the same as those
set forth in Section 6 (other than Section 6(b)) of the Registration Rights
Agreement, including, without limitation, those procedures with respect to the
settlement of claims and Company's right to assume the defense of claims.
ARTICLE VIII
9.99% LIMITATION.
Section 8.1 Limitation
(a) Notwithstanding anything to the contrary contained herein,
the number of shares of Common Stock that may be acquired by an Investor upon
the exercise or issuance of Securities shall not exceed a number that, when
added to the total number of shares of Common Stock deemed beneficially owned by
such holder (other than by virtue of the ownership of securities or rights to
acquire securities that have limitations on the Investor's right to convert,
exercise or purchase similar to the limitation set forth herein (the "EXCLUDED
SHARES")), together with all shares of Common Stock deemed beneficially owned
(not counting such affiliate's Excluded Shares) by the Investor's
"AFFILIATES" (as defined in Rule 144 of the Act under Section 13(d) of the
Exchange Act, exists, would exceed 9.99% of the total issued and outstanding
shares of the Common Stock (the "RESTRICTED OWNERSHIP PERCENTAGE"). Each
Investor shall have the right (w) at any time and from time to time to reduce
its Restricted Ownership Percentage immediately upon notice to the Company and
(x)(subject to waiver) at any time and from time to time, to increase its
Restricted Ownership Percentage immediately in the announcement of event of:
(i) any consolidation or merger of the Company with or into any other
corporation or other entity or person (whether or not the Company is
the surviving corporation), or any other corporate reorganization or
transaction or series of related transactions in which in excess of 50%
of the Company's voting power is transferred through a merger,
consolidation, tender offer or similar transaction,
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(ii) any person (as defined in Section 13(d) of the Exchange Act),
together with its affiliates and associates (as such terms are defined
in Rule 405 under the 1933 Act), beneficially owns or is deemed to
beneficially own (as described in Rule 13d-3 under the Exchange Act
without regard to the 60-day exercise period) in excess of 50% of the
Company's voting power,
(iii) there is a replacement of more than one-half of the members of
the Company's Board of Directors which is not approved by those
individuals who are members of the Company's Board of Directors on the
date thereof, in one or a series of related transactions or
(iv) a sale or transfer of all or substantially all of the assets of
the Company, determined on a consolidated basis (each, a "MAJOR
TRANSACTION").
(b) The Investor covenants at all times on each day (each such
day being referred to as a "Covenant Day") as follows: During the balance of
such Covenant Day and the succeeding sixty-one (61) days (the balance of such
Covenant Day and the succeeding 61 days being referred to as the "Covenant
Period") such Investor will not acquire shares of Common Stock pursuant to any
right existing at the commencement of the Covenant Period to the extent the
number of shares so acquired by such Investor and its Aggregation Parties
(ignoring all dispositions) would exceed:
(x) the Restricted Ownership Percentage of the total number of
shares of Common Stock outstanding at the commencement of the
Covenant Period,
minus
(y) the number of shares of Common Stock owned by such Investor
and its Aggregation Parties at the commencement of the
Covenant Period.
A new and independent covenant will be deemed to be given by the Investor as of
each moment of each Covenant Day. No covenant will terminate, diminish or modify
any other covenant. The holder agrees to comply with each such covenant. This
Section 8 controls in the case of any conflict with any other provision of the
Transaction Documents.
The Company's obligation to issue Common Shares which would
exceed such limits referred to in this Section 8 shall be suspended to the
extent necessary until such time, if any, as shares of Common Stock may be
issued in compliance with such restrictions.
ARTICLE IX
GOVERNING LAW; MISCELLANEOUS.
Section 9.1 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS TO BE EXECUTED AND PERFORMED EXCLUSIVELY IN NEW YORK. EACH PARTY
HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND
FEDERAL COURTS SITTING IN
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THE CITY OF NEW YORK, BOROUGH OF MANHATTAN, FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY
OR DISCUSSED HEREIN, AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN
ANY SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO
THE JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS
BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE OF SUCH SUIT, ACTION OR
PROCEEDING IS IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF
PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR
PROCEEDING BY MAILING A COPY THEREOF TO SUCH PARTY AT THE ADDRESS FOR SUCH
NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE
GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED
HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY
MANNER PERMITTED BY LAW. IF ANY PROVISION OF THIS AGREEMENT SHALL BE INVALID OR
UNENFORCEABLE IN ANY JURISDICTION, SUCH INVALIDITY OR UNENFORCEABILITY SHALL NOT
AFFECT THE VALIDITY OR ENFORCEABILITY OF THE REMAINDER OF THIS AGREEMENT IN THAT
JURISDICTION OR THE VALIDITY OR ENFORCEABILITY OF ANY PROVISION OF THIS
AGREEMENT IN ANY OTHER JURISDICTION.
Section 9.2 Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
Section 9.3 Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
Section 9.4 Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
Section 9.5 Entire Agreement; Amendments; Waivers.
(a) This Agreement supersedes all other prior oral or written
agreements between the Investors, the Company, their affiliates and persons
acting on their behalf with respect to the matters discussed herein, and this
Agreement and the instruments referenced herein (including the other Transaction
Documents) contain the entire understanding of the parties with respect to the
matters covered herein and therein and, except as specifically set forth herein
or therein, neither the Company nor the Investors make any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be amended other than by an instrument in writing signed by
the Company and the Investor, and no provision
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hereof may be waived other than by an instrument in writing signed by the party
against whom enforcement is sought.
(b) The Investors may at any time elect, by notice to the
Company, to waive (whether permanently or temporarily, and subject to such
conditions, if any, as the Investors may specify in such notice) any of their
respective rights (but not obligations) under any of the Transaction Documents
to acquire shares of Common Stock from the Company, in which event such waiver
shall be binding against the Investors in accordance with its terms.
Section 9.6 Notices. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing, must be delivered by (i) courier, mail or hand
delivery or (ii) facsimile, and will be deemed to have been delivered upon
receipt. The addresses and facsimile numbers for such communications shall be:
If to the Company:
Plato Learning, Inc.
1801 Nesbitt Avenue South
Bloomington, Minnesota 55439
Telephone: (952) 832-1000
Facsimile: (952) 832-1200
Attention: Mr. John Murray
with a copy to:
Winston & Strawn
35 W. Wacker Drive
Chicago, IL 60610
Telephone: (312) 558-5600
Facsimile: (312) 558-5700
Attention: Leland E. Hutchinson,Esq.
If to the Transfer Agent:
Wells Fargo Bank Minnesota, N.A.
161 North Concord Exchange
South St. Paul, Minnesota 55075
Telephone: (651) 450-4120
Facsimile: (651) 450-4078
Attention: Suzanne M. Swits
If to the Investors:
Elliott Associates, L.P.
712 Fifth Avenue, 36th Floor
New York, New York 10019
Telephone: (212) 974-6000
Facsimile: (212) 586-9457
Attention: Mr. Brett Cohen
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and
Westgate International, L.P.
c/o Elliott Management Corporation
712 Fifth Avenue, 36th Floor
New York, New York 10019
Telephone: (212) 506-2999
Facsimile: (212) 586-9467
Attention: Mr. Brett Cohen
With a copy to:
Kleinberg, Kaplan, Wolff & Cohen, P.C.
551 Fifth Avenue, 18th Floor
New York, New York 10176
Telephone: 212-986-6000
Facsimile: 212-986-8866
Attention: Christopher P. Davis, Esq.
Each party shall provide five (5) days prior written notice to
the other party of any change in address, telephone number or facsimile number.
Written confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or electronically
generated by the sender's facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission or (C)
provided by a nationally recognized overnight delivery service shall be
rebuttable evidence of personal service, receipt by facsimile or receipt from a
nationally recognized overnight delivery service in accordance with clause (i),
(ii) or (iii) above, respectively.
Section 9.7 Successors and Assigns. Except as otherwise provided
herein, this Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors and assigns, including any Permitted
Assignee (as defined below). The Company shall not assign this Agreement or any
rights or obligations hereunder without the prior written consent of the
Investor, except by merger, consolidation or acquisition of all Common Stock of
the Company. The Investors may assign some or all of their rights hereunder to
the other Investor, to an affiliate of either Investor or to an entity or fund
which has the same principal investment adviser as either Investor, without the
consent of the Company, and to others, with the written consent of the Company
(in each case, a "PERMITTED ASSIGNEE"); provided, however, that any such
assignment shall not release the Investors from their obligations hereunder
unless such obligations are assumed by such assignee and the Company has
consented to such assignment and assumption. Notwithstanding anything to the
contrary contained in the Transaction Documents, the Investor shall be entitled
to pledge the Securities or Warrants in connection with a bona fide margin
account. In the event of any Major Transaction in which the Company does not
remain an independent company with publicly registered shares, the surviving or
acquiring entity in any Major Transaction (as a precondition of consummating
such Major Transaction) will pay the Investors an amount in cash or freely
tradeable publicly registered shares of the acquiror (at the option of such
acquiror) with a value per Initial Share
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(excluding Initial Shares in respect of which an Adjustment Period (as defined
in the Adjustment Warrant) has been completed if the Adjustment Shares issuable
in connection therewith, if any, have been delivered to the Investors) equal to
the amount by which the Share Purchase Price (as such amount would be adjusted
by the mechanisms set forth in the Initial Warrant) exceeds the per share
consideration paid in such Major Transaction.
Section 9.8 No Third Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
Section 9.9 Survival. The representations, warranties and agreements of
the Company and the Investors contained in the Agreement shall survive each of
the Closing and to the extent applicable, each Fill-up Closing, in each case for
a period which expires on the second anniversary of the Closing Date.
Section 9.10 Further Assurances. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
Section 9.11 Remedies. Each Investor and each Permitted Assignee shall
have all rights and remedies set forth in this Agreement, the Warrants and the
Registration Rights Agreement and all rights and remedies which such holders
have been granted at any time under any other agreement or contract and all of
the rights which such holders have under any law. Any person having any rights
under any provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law. Each Investor and each Permitted Assignee without
prejudice may withdraw, revoke or suspend its pursuit of any remedy at any time
prior to its complete recovery as a result of such remedy.
Section 9.12 Days. Unless the context refers to "business days" or
"trading days," all references herein to "days" shall mean calendar days.
Section 9.13 Rescission and Withdrawal Right. Notwithstanding anything
to the contrary contained in (and without limiting any similar provisions of)
the Transaction Documents, wherever the Investors exercise a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then the
Investors may rescind or withdraw, in their sole discretion from time to time
upon written notice to the Company, any relevant notice, demand or election in
whole or in part without prejudice to its future actions and rights.
Section 9.14 Obligations Absolute. The Company's obligations under the
Transaction Documents are unconditional and absolute and not subject to any
right of set off, counterclaim, delay or reduction.
* * * * *
[Signature Page Follows]
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<PAGE> 23
IN WITNESS WHEREOF, the parties hereto have caused this Common
Stock Investment Agreement to be duly executed as of the date and year first
above written.
PLATO LEARNING, INC.
By:
-----------------------------------------
Name:
Title:
INVESTORS:
ELLIOTT ASSOCIATES, L.P.
By: Elliott Capital Advisor
By: Braxton Associates, Inc., as General Partner
By:
-----------------------------------------
Name:
Title:
WESTGATE INTERNATIONAL, L.P.
By: ELLIOTT INTERNATIONAL CAPITAL
ADVISORS INC.
Attorney-in-Fact
By:
-----------------------------------------
Name:
Title:
Signature page to Common Stock Investment Agreement
-23-
<PAGE> 24
LIST OF SCHEDULES
Schedule 1 Investments
Schedule 2.1(a) Organization and Qualification
Schedule 2.1(c) Capitalization
Schedule 2.1(d) No Conflicts
Schedule 2.1(g) Absence of Certain Changes
Schedule 2.1(h) Absence of Litigation
Schedule 2.1(l) Intellectual Property Rights
Schedule 2.1(k) Employee Relations
Schedule 2.1(n) Title
Schedule 2.1(t) Certain Transactions
LIST OF EXHIBITS
Exhibit 5.2(e) Opinion of Counsel
Exhibit 5.2(f) Registration Rights Agreement
Exhibit 5.2(g) Officers' Certificate
ANNEXES
Annex A Initial Warrant
Annex B Adjustment Warrant
-24-
<PAGE> 25
SCHEDULE 1
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF PURCHASE
INVESTOR RESIDENCE INITIAL SHARES INITIAL WARRANTS PRICE
-------- --------- -------------- ---------------- -----
<S> <C> <C> <C> <C>
Elliott Associates, L.P. New York 178,063 26,710 $2,500,000
Westgate International, L.P. Cayman Islands 178,062 26,709 $2,500,000
</TABLE>
