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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998.
OR
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934. FOR THE TRANSITION PERIOD FROM TO
.
COMMISSION FILE NUMBER
0-21421
UOL PUBLISHING, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 54-1290319
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
</TABLE>
8251 GREENSBORO DRIVE, SUITE 500, MCLEAN, VIRGINIA 22102
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (703) 893-7800
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<S> <C>
COMMON STOCK, $0.01 PAR VALUE 3,820,393 SHARES
(Class) (Outstanding at May 15, 1998)
</TABLE>
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PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UOL PUBLISHING, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
1997 1998
----------- -----------
<S> <C> <C>
Revenues:
Instructor-led training revenues.......................... $ -- $ 1,673,817
Product sales revenues.................................... 91,957 950,206
Other service revenues.................................... 95,184 565,651
Online tuition revenues................................... 131,254 272,205
Virtual campus software revenues.......................... 375,000 42,500
Development and other revenues............................ 507,645 96,481
----------- -----------
Net revenues................................................ 1,201,040 3,600,860
Costs and expenses:
Cost of revenues.......................................... 119,375 2,582,899
Sales and marketing....................................... 707,814 1,630,558
Product development....................................... 1,182,724 2,716,619
General and administrative................................ 382,280 1,900,513
Depreciation and amortization............................. 91,106 633,165
Reorganization costs...................................... -- 467,640
----------- -----------
Total costs and expenses.................................... 2,483,299 9,931,394
----------- -----------
Loss from operations........................................ (1,282,259) (6,330,534)
Interest income (expense)................................... 186,228 (129,852)
----------- -----------
Net loss.................................................... $(1,096,031) $(6,460,386)
=========== ===========
Net loss per share.......................................... $ (0.34) $ (1.70)
=========== ===========
Net loss per share -- assuming dilution..................... $ (0.34) $ (1.70)
=========== ===========
</TABLE>
See accompanying notes.
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UOL PUBLISHING, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ ------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 2,705,490 $ 5,229,804
Accounts receivable, less allowance of approximately
$739,000 and $1,814,000 at December 31, 1997 and March
31, 1998, respectively................................. 4,413,170 3,528,587
Loans receivable from related parties..................... 133,516 161,510
Prepaid expenses and other current assets................. 481,516 727,018
------------ ------------
Total current assets........................................ 7,733,692 9,646,919
Property and equipment, net................................. 2,809,619 2,899,600
Capitalized software costs and courseware development costs,
net....................................................... 2,354,159 2,004,970
Acquired online publishing rights, net...................... 845,000 596,721
Other assets................................................ 358,208 323,550
Goodwill and other intangible assets, net................... 12,364,554 12,369,320
------------ ------------
Total assets................................................ $ 26,465,232 $ 27,841,080
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses..................... $ 6,398,488 $ 7,330,496
Notes payable -- current portion.......................... 4,551,950 5,886,689
Deferred revenues......................................... 572,390 832,916
------------ ------------
Total current liabilities................................... 11,522,828 14,050,101
Notes payable, less current portion....................... 1,531,121 1,524,454
------------ ------------
Total liabilities........................................... 13,053,949 15,574,555
------------ ------------
Series C redeemable convertible Preferred Stock, $0.01 par
value:
1,000,000 shares authorized; no shares issued and
outstanding at December 31, 1997, 626,293 shares issued
and outstanding at March 31, 1998...................... -- 5,240,008
------------ ------------
Stockholders' equity (deficit):
Common Stock, $0.01 par value; 36,000,000 shares
authorized; 3,785,210 and 3,819,467 shares issued and
outstanding at December 31, 1997 and March 31, 1998,
respectively........................................... 37,852 38,194
Additional paid-in capital................................ 40,901,196 40,976,474
Accumulated deficit....................................... (27,527,765) (33,988,151)
------------ ------------
Total stockholders' equity.................................. 13,411,283 7,026,517
============ ============
Total liabilities and stockholders' equity.................. $ 26,465,232 $ 27,841,080
============ ============
</TABLE>
See accompanying notes.
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UOL PUBLISHING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
1997 1998
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss.................................................... $(1,096,031) $(6,460,386)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization............................. 91,106 801,507
Net write-off of acquired online publishing rights........ -- 241,000
Net write-off of capitalized courseware development
costs.................................................. -- 502,669
Stock option and stock warrant compensation............... 23,000 --
Increase in allowance for doubtful accounts............... -- 1,074,669
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable............. (399,307) (190,086)
(Increase) decrease in prepaid expenses and other
current assets....................................... (282,934) (245,502)
(Increase) decrease in other assets.................... -- 29,658
Increase (decrease) in accounts payable and accrued
expenses............................................. (478,963) 900,219
Increase (decrease) in accrued interest................ -- 31,789
Increase (decrease) in deferred revenues............... (23,000) 260,526
----------- -----------
Net cash used in operating activities....................... (2,166,129) (3,053,937)
INVESTING ACTIVITIES
Purchases of property and equipment......................... (243,993) (367,096)
Capitalized software and courseware development costs....... -- (314,549)
Acquisitions of businesses, net of cash acquired............ (283,357) --
Additions to intangible assets.............................. (100,000) (355,810)
Advances under loans receivable from related parties........ -- (27,994)
----------- -----------
Net cash used in investing activities....................... (627,350) (1,065,449)
FINANCING ACTIVITIES
Proceeds from exercises of stock warrants and options....... -- 75,620
Proceeds from Series C redeemable convertible Preferred
Stock..................................................... -- 5,240,008
Adjustment of expenses related to the initial public
offering.................................................. (13,411) --
Proceeds from short-term debt............................... -- 1,500,000
Repayments of short-term borrowings......................... -- (171,928)
----------- -----------
Net cash provided by (used in) financing activities......... (13,411) 6,643,700
----------- -----------
Net increase (decrease) in cash and cash equivalents........ (2,806,890) 2,524,314
Cash and cash equivalents at the beginning of the period.... 15,474,030 2,705,490
----------- -----------
Cash and cash equivalents at the end of the period.......... $12,667,140 $ 5,229,804
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid............................................... $ 8,994 $ 109,581
=========== ===========
</TABLE>
See accompanying notes.
4
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UOL PUBLISHING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A -- BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the interim periods are not necessarily indicative of the
results that may be expected for any future period, including the year ending
December 31, 1998. For further information, refer to the audited financial
statements and footnotes thereto included in the UOL Publishing, Inc. ("UOL" or
the "Company") Annual Report on Form 10-K for the year ended December 31, 1997.
NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
REVENUE RECOGNITION
The Company derives its revenues from the following
sources -- instructor-led training revenues, product sales revenues, other
service revenues, online tuition revenues, virtual campus ("VCampus") software
revenues, and development and other revenues.
Revenues for instructor-led training and other services are recognized as
the services are delivered.
The Company recognizes product sales revenues, online tuition revenues and
virtual campus software revenues in accordance with Statement of Position 97-2,
"Software Revenue Recognition" ("SOP 97-2"). The Company recognizes revenues
from product sales upon delivery of the product to the customer, provided no
significant obligations remain. The costs of remaining Company obligations
(which are insignificant) are accrued when the related revenues are recognized.
For online tuition fees, revenue is recognized at the time the student has
accessed the selected course and is contractually obligated to pay for the
course or the drop/add period (for academic partners) has expired. For online
tuition fees purchased in bulk and virtual campus software revenues (which are
derived from sales of VCampus licenses) the Company recognizes revenue ratably
over the period during which customers are entitled to use the courseware and
the duration of the VCampus licenses, respectively.
Development and other revenues earned under courseware conversion contracts
are recognized using the percentage-of-completion method. For these contracts,
revenues are recognized based on the ratio that total costs incurred to date
bear to the total estimated costs of the contract. Provisions for losses on
contracts are made in the period in which they are determined.
During the three months ended March 31, 1997, two customers individually
represented 19.6% and 14.8% of net revenues. During the three months ended March
31, 1998, no individual customer represented more than 10% of net revenues.
CAPITALIZED SOFTWARE COSTS
Through March 31, 1997, the Company expensed its software development costs
as incurred because realizability of capitalizing such costs had not been
established. During the three months ended June 30, 1997, the Company began
capitalizing certain software development costs. Capitalization of software
costs began upon the establishment of technological feasibility, which
management deemed to have occurred upon the completion of a working model of the
Company's VCampus product. The establishment of technological
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UOL PUBLISHING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
feasibility and the ongoing assessment of recoverability of capitalized software
costs requires considerable judgment by management with respect to certain
external factors, including, but not limited to, technological feasibility,
anticipated future gross revenues, estimated economic life and changes in
software and hardware technology. Amortization of such costs is based on the
greater of (a) the ratio of current gross revenues to the sum of current and
anticipated gross revenues, or (b) the straight-line method over the remaining
economic life of the VCampus, typically five years. It is possible that those
estimates of future gross revenues, the remaining economic life of the products
or both may be reduced as a result of future events. In January 1998, the
Company determined that the estimated useful economic life of the VCampus was
three years and began amortizing its VCampus product development costs over such
period.
CAPITALIZED COURSEWARE DEVELOPMENT COSTS
Through March 31, 1997, the Company expensed its courseware development
costs as incurred because realizability of capitalizing such costs had not been
established. During the three months ended June 30, 1997, the Company began
capitalizing certain courseware development costs. Capitalization of courseware
development costs began upon the establishment of technological feasibility,
which management deemed to have occurred upon the completion of a working model
of the relevant courseware. The establishment of technological feasibility and
the ongoing assessment of recoverability of capitalized courseware development
costs requires considerable judgment by management with respect to certain
external factors, including, but not limited to, technological feasibility,
anticipated future gross revenues, estimated economic life and changes in
software and hardware technology. Amortization of such costs is based on the
greater of (a) the ratio of current gross revenues to the sum of current and
anticipated gross revenues, or (b) the straight-line method over the remaining
economic life of the product, typically two to four years. It is possible that
those estimates of future gross revenues, the remaining economic life of the
products or both may be reduced as a result of future events.
In March 1998, the Company wrote off approximately $500,000 of courseware
development costs for courses within certain industry segments that the Company
does not anticipate pursuing in the immediate future or courses that have not
shown meaningful activity during a three- to six-month publication period.
ACQUIRED ONLINE PUBLISHING RIGHTS
During 1997, the Company has acquired rights to publish certain courseware
in an online format. In most cases, this courseware, at the time of licensing to
the Company, was in a non-online format, i.e., CD-ROM, diskette or printed
formats. The Company capitalizes the costs to acquire this content. The Company
amortizes acquired online publishing rights based on the greater of (a) the
ratio of current gross revenues to the sum of current and anticipated gross
revenues, or (b) the straight-line method over the remaining economic life of
the product, typically two to four years. Amortization begins when the online
course becomes available for sale.
In March 1998, the Company wrote off approximately $250,000 of acquired
online publishing rights to courses belonging to certain industry segments that
the Company does not anticipate pursuing in the immediate future.
IMPAIRMENT OF LONG-LIVED ASSETS
At each balance sheet date, management determines whether any property and
equipment or any other assets have been impaired based on the criteria
established in SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets
and Long-Lived Assets to be Disposed of." During the three months ended March
31, 1998, the Company wrote off approximately $500,000 in capitalized courseware
development costs and approximately $250,000 in capitalized acquired online
publishing rights. (See Note B)
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UOL PUBLISHING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONCENTRATION OF CREDIT RISK
The Company performs ongoing credit evaluations of its customers' financial
condition and generally does not require collateral. The Company maintains
reserves for credit losses. During the three months ended March 31, 1998, the
Company increased its allowance for doubtful accounts to approximately
$1,814,000 in order to reserve for certain receivables for which collection
became doubtful as of the March 31, 1998 balance sheet date.
COSTS OF REVENUES
Costs of instructor-led training revenues and other service revenues
consist primarily of the salaries and other related costs for instructors and
consulting personnel, as well as rent and related costs for the training
facilities.
Costs of product sales revenue consist of the production and shipping costs
to create and distribute the diskettes and other education material (manuals,
etc.).
Costs of online tuition revenues include costs related to the amortization
of capitalized courseware development costs, royalties to content providers, and
salaries, communication and other costs associated with operating and
maintaining the Company's servers.
Costs of VCampus software revenues include software development costs
involved in configuring the VCampus model to specific parameters requested by
the customer, costs related to the amortization of capitalized software
development costs, and salaries, communication and other costs associated with
operating and maintaining the Company's servers.
Costs of development and other revenues include the salaries and other
related personnel costs for the employees who develop online courses that are
proprietary in nature to a specific customer.
ROYALTIES
The Company has royalty arrangements with certain entities that have
provided development funding. Royalties will become due and payable by the
Company upon the completion and sale of products currently under development.
Additionally, royalties will become due and payable by the Company upon the sale
of those courses in which the Company acquired the online content rights.
Royalties due could be as great as 50% of the tuition related to that course. No
significant royalty obligations have been incurred to date.
NOTE C -- ACQUISITIONS
The following transactions were accounted for using the purchase method.
Accordingly, the purchase price was allocated to the assets acquired based on
their estimated fair values, and each of the subsidiaries' operating results
have been included in the Company's financial statements since the respective
acquisition date.
IVY SOFTWARE, INC.
In March 1997, the Company acquired Ivy Software, Inc. ("Ivy"), a Virginia
corporation that develops and distributes business and accounting software for
the academic education market, for $314,000 in cash and potential future
payments not to exceed approximately $862,000, which are based upon integration
of operations, conversion of software and operating results. In connection with
this transaction, the President and sole shareholder of Ivy entered into a
three-year consulting agreement with the Company. In conjunction with
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UOL PUBLISHING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the acquisition, the Company recorded goodwill in the amount of $300,000, which
was subsequently adjusted to $819,644 upon scheduled payments to the former
shareholder of Ivy.
COOPER & ASSOCIATES, INC. (D/B/A TELETUTOR)
In April 1997, the Company acquired Cooper & Associates, Inc., d/b/a
Teletutor ("Teletutor"), an Illinois corporation that develops, distributes and
supports computer-based training courses for the data and telecommunications
industry. The terms of the transaction included a $3,000,000 cash payment at
closing and $2,000,000 (which includes principal payments and interest) to be
paid in three ratable installments, on the first, second and third anniversary
dates of the acquisition. In conjunction with this acquisition, the Company
allocated the excess of the purchase price over the fair market value of the
acquired net assets as follows: (i) $829,575 to developed content, $273,858 to
workforce, $456,875 to trademarks and names, $456,875 to customer base and
contracts and $5,138 to goodwill and (ii) $2,700,000 to acquired in-process
research, development and content.
The Company's management, in accordance with its impairment policy for
long-lived assets, determined that the Teletutor employee workforce asset had
been impaired as of December 31, 1997 due to planned workforce reductions. As a
result, the Company wrote-off the carrying amount of the asset, approximately
$250,000. This amount was included in reorganization and non-recurring expenses
in the statements of operations for the year ended December 31, 1997.
HTR, INC.
In October 1997, the Company acquired HTR, Inc. ("HTR"), a Delaware
corporation primarily engaged in the business of providing technical training,
publishing and consulting services for the information technology industry. UOL
acquired HTR for common stock, warrants and options totaling 620,000 shares in
exchange for all of the outstanding equity securities of HTR. In addition, UOL
paid the former HTR stockholders $600,000 in a combination of cash and
short-term notes and assumed approximately $3,500,000 of HTR debt. The executive
officers of HTR will receive bonuses granted in conjunction with the signing of
three-year employment agreements no later than December 31, 1998. In addition,
UOL created a stock option pool of 180,000 shares of Common Stock and an
incentive bonus pool with a potential payout not to exceed approximately
$3,300,000 for three years, contingent upon the financial performance of HTR. In
conjunction with this acquisition, the Company allocated the excess of the
purchase price over the fair market value of the acquired net assets as follows
(i) $8,010,590 to goodwill, $700,000 to developed content, $500,000 to
workforce, $600,000 to trademarks and names, and (ii) $8,400,000 to acquired
in-process research, development and content.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Statements in this Form 10-Q that are not descriptions of historical facts
are forward-looking statements that are subject to risks and uncertainties.
Actual results could differ materially from those currently anticipated due to a
number of factors, including those set forth herein and in the Company's other
SEC filings, and including, in particular, the availability of sufficient
capital to finance the Company's business plan on terms satisfactory to the
Company, risks relating to uncertainties relating to dependence on strategic
partners and third party relationships, management of rapid growth, dependence
on online distribution, the risks and the Company's payment obligations relating
to acquisitions, security risks, government regulations, regulatory filings and
competition.
OVERVIEW
The Company believes that it is a leading publisher of high quality,
interactive and on-demand courseware for the corporate training and education
market. The Company offers its online courseware primarily through its
proprietary virtual campus product, or VCampus, an online courseware delivery
system and environment that facilitates development, management and
administration of training and education over the Internet and intranets.
Through its HTR, Teletutor and Ivy subsidiaries, the Company also offers
courseware through more traditional media, including on-site and classroom
training, diskette, CD-ROM and printed formats.
The Company was formed in 1984 as IMSATT Corporation, a multimedia research
and development company. In 1991, the Company acquired from Control Data certain
rights to resell the CYBIS online courseware, which consisted primarily of
courses in language arts, mathematics, social studies, science, business and a
variety of technical subjects. In 1993, the Company modified its business focus
to capitalize on market opportunities for online education resulting from
technological advances relating to the Internet. Subsequently, the Company
raised additional financing and focused its development efforts on migrating its
technology to the Web in preparation for the launch of its first Web-based
course in November 1995. Under the current business model, UOL's revenues are
derived from six primary sources: online tuition revenues; virtual campus
software revenues; product sales revenues; development and other revenues;
instructor-led training revenues; and other service revenues. Online tuition
revenues are generated primarily from online tuition derived from business and
academic customers. Virtual campus software revenues are derived from the sale
of online licenses of the Company's VCampus product. Product sales revenues are
derived from the sale of computer-based training ("CBT") courses that are
delivered through traditional CBT format (e.g. CD-ROM). Development and other
revenues consist primarily of fees paid to the Company for developing and
converting courseware. Instructor-led training revenues are generated from
on-site and classroom training fees. Other service revenues consist primarily of
monthly fees generated by the licensing and maintenance of the CYBIS courseware
under the Control Data subcontracts and from consulting services. While prior to
1997 other service revenues have represented a substantial majority of the
Company's revenues, the Company believes that online revenues and product sales
will become the primary sources of its revenues in the future.
The Company plans to continue to enter into non-monetary exchanges with
third parties for the purpose of conserving cash while acquiring courseware and
simultaneously supporting the Company's strategy of expanding its VCampus
presence. Pursuant to these exchanges, the third party exchanges a non-monetary
asset (i.e., the online publishing rights with respect to certain courseware
content) in payment of some or all of the purchase price of a VCampus and
related development services. In many cases, the Company will also agree to pay
to the third party royalties based on future online tuition revenues received by
the Company, if any, related to the acquired rights. In the event the negotiated
value of the rights acquired exceeds the purchase price of a VCampus and the
related development services, if any, provided by the Company, the Company pays
the third party such excess. Alternatively, in the event the negotiated value of
the rights acquired is less than the purchase price of a VCampus and the related
development services, if any, provided by the Company, the third party pays the
Company the difference.
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RESULTS OF OPERATIONS
Three Months Ended March 31, 1998 Compared to Three Months Ended March 31,
1997
Summary
For the three months ended March 31, 1998, the Company incurred a net loss
of $6,460,386 (or $1.70 per share) compared to a net loss of $1,096,031 (or
$0.34 per share) for the three months ended March 31, 1997. The net loss for the
three months ended March 31, 1998 includes approximately $2,300,000 (or $0.60
per share) of nonrecurring items related to reorganization costs, additional
reserves for uncollectible accounts receivable and the write down of certain
deferred content acquisition and development costs. Total revenues for the three
months ended March 31, 1998 reached $3,600,860, up from $1,201,040 for the three
months ended March 31, 1997. This increase consisted primarily of HTR, Teletutor
and Ivy revenues. Total costs and expenses were $9,931,394 during the three
months ended March 31, 1998 compared to costs of $2,483,299 for the three months
ended March 31, 1997. This increase was primarily due to the previously
mentioned non-recurring costs, the addition of HTR, Teletutor and Ivy costs and
expenses, and increased operating costs related to the expansion of operations.
Net Revenues
Net revenues increased from $1,201,040 for the three months ended March 31,
1997 to $3,600,860 for the three months ended March 31, 1998.
Revenues for the three months ended March 31, 1998 included $1,673,817 (46%
of net revenues) of instructor-led training revenues. The Company had no such
revenues prior to the acquisition of HTR in October 1997.
Product sales revenues increased from $91,957 (8% of net revenues) for the
three months ended March 31, 1997 to $950,206 (26% of net revenues) for the
three months ended March 31, 1998. The increase in product sales revenue was
primarily due to the inclusion of the results of Ivy, Teletutor and HTR for the
entire first quarter of 1998.
Other service revenues increased from $95,184 (8% of net revenues) for the
three months ended March 31, 1997 to $565,651 (16% of net revenues) for the
three months ended March 31, 1998. The increase in other service revenues was
primarily due to the inclusion of the results of HTR in the three months ended
March 31, 1998.
Online tuition revenues increased from $131,254 for the three months ended
March 31, 1997 to $272,205 for the three months ended March 31, 1998, as the
Company continued to expand its business. As a percentage of net revenues,
online tuition revenues decreased from 11% to 8% for the three months ended
March 31, 1997 and 1998, respectively, due to the increase in net revenues from
period to period.
Virtual campus software revenues decreased from $375,000 (31% of net
revenues) for the three months ended March 31, 1997, to $42,500 (1% of net
revenues) for the three months ended March 31, 1998. As of January 1, 1998, the
Company adopted SOP 97-2. Accordingly, as of that date, the Company began
recognizing revenue from sales of VCampus licenses ratably over the duration of
such licenses. During 1997, the Company recognized revenues from sales of
VCampus licenses when the VCampus was delivered to the customer, in accordance
with the AICPA Statement of Position 91-1, "Software Revenue Recognition" ("SOP
91-1"). The change in accounting policies and a decrease in the number of
VCampus licenses sold were the primary reasons for the decline in virtual campus
software revenues from period to period.
Development and other revenues decreased from $507,645 (42% of net
revenues) for the three months ended March 31, 1997 to $96,481 (3% of net
revenues) for the three months ended March 31, 1998. Development and other
revenues for 1998 primarily related to courseware conversion contracts between
the Company and customers. Development and other revenues for the three months
ended March 31, 1997 primarily related to an agreement with one customer that
provided funding for the development of a custom VCampus in exchange for a share
of the future net revenues derived from the operation of such campus and
warrants to purchase Common Stock of the Company.
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Cost of Revenues
Total cost of revenues increased from $119,375 for the three months ended
March 31, 1997 to $2,582,899 for the three months ended March 31, 1998. The
increase in absolute dollars was primarily due to the inclusion of the results
of operations of Ivy, Teletutor and HTR in the 1998 period. Cost of revenues as
a percentage of net revenues increased from 10% to 72% for the three months
ended March 31, 1997 and 1998, respectively, primarily due to the inclusion of
the results of HTR in the 1998 period. Unlike UOL's, HTR revenues have more
direct costs associated with them, thus causing cost of revenues to be higher.
Operating Expenses
Sales and Marketing. Sales and marketing expenses increased from $707,814
for the three months ended March 31, 1997 to $1,630,558 for the three months
ended March 31, 1998, but decreased as a percentage of net revenues from 59% to
45% primarily because net revenues increased. Sales and marketing expenses
consisted primarily of costs related to personnel, sales commissions, travel,
market research, advertising and marketing materials. The increase in absolute
dollars was primarily due to increased staffing and marketing campaigns, and the
inclusion of the results of operations of Ivy, Teletutor and HTR.
Product Development. Product development expenses increased from $1,182,724
for the three months ended March 31, 1997 to $2,716,619 for the three months
ended March 31, 1998, but decreased as a percentage of net revenues from 98% to
75% primarily because net revenues increased. Product development expenses
consisted primarily of certain costs associated with the design, programming,
testing, documenting and support of the Company's new and existing courseware
and software. The increase in absolute dollars was primarily attributable to the
overall staffing and other cost increases aimed at maintaining and enhancing the
Company's courseware library and VCampus software. The Company is incurring
significant expenses to convert traditional educational and training content to
online courseware. The inclusion of the results of Teletutor and HTR contributed
to the increase in product development costs for the three months ended March
31, 1998. Product development costs for the three months ended March 31, 1998
are net of $314,549 of costs capitalized in accordance with the Company's
policies. No product development costs were capitalized during the three months
ended March 31, 1997. A first quarter 1998 write-off of approximately $750,000
for certain previously deferred content acquisition and development costs also
contributed to the increase.
General and Administrative. General and administrative expenses increased
from $382,280 (32% of net revenues) for the three months ended March 31, 1997 to
$1,900,513 (53% of net revenues) for the three months ended March 31, 1998.
General and administrative expenses consisted primarily of personnel costs,
facilities and related costs, as well as legal, accounting and other costs.
General and administrative costs for the three months ended March 31, 1998 also
included approximately $1,075,000 of bad debt expense for certain of the
Company's accounts receivable for which collection is considered doubtful.
General and administrative expenses also increased due to the Company's overall
growth including acquisitions.
Depreciation and Amortization. Depreciation and amortization expense
increased from $91,106 for the three months ended March 31, 1997 to $633,165 for
the three months ended March 31, 1998. In August 1996, the Company recorded
goodwill and other intangibles in connection with its acquisition of CTA in the
amount of approximately $780,000, which amount is being amortized over a three-
to ten-year period. In 1997 and 1998, the Company recorded aggregate goodwill
and other intangibles of approximately $12,500,000 in connection with its
acquisitions of Ivy, Teletutor and HTR. These amounts are being amortized over
periods ranging from four to twelve years. The increase in depreciation is
primarily attributable to additional purchases of computer equipment and other
assets to support product development, technical operations and personnel needs.
Reorganization Costs. During the three months ended March 31, 1998, he
Company implemented a workforce reduction plan, which primarily reduced
Teletutor's workforce and consolidated its sales, marketing, finance and
administrative functions with those of UOL. The Company also eliminated and/or
redefined certain positions within UOL and HTR to reduce costs and improve
functionality. All significant costs associated with these workforce reductions
have been paid or accrued as of March 31, 1998.
11
<PAGE> 12
Interest and Other Income (Expense). Interest income for the three months
ended March 31, 1997 was $186,228, while interest expense for the three months
ended March 31, 1998 was $129,852. Interest income was derived primarily from
investing funds raised in the Company's private and public securities offerings
during 1996. Interest expense was primarily incurred in connection with the
Company's borrowings on its line of credit facility and term loan. See
"Liquidity and Capital Resources".
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1998, the Company had $5,229,804 in cash and cash
equivalents. Since its inception, the Company has financed its operating cash
flow needs primarily through offerings of equity securities and, to a lesser
extent, borrowings, primarily from stockholders. Cash utilized in operating
activities was $3,053,937 for the three months ended March 31, 1998 and
$2,166,129 for the three months ended March 31, 1997. Use of cash was primarily
attributable to the net loss recorded during the three months ended March 31,
1998.
Cash utilized in investing activities was $1,065,449 for the three months
ended March 31, 1998 and $627,350 for the three months ended March 31, 1997. The
use of cash for investing activities was primarily attributable to purchases of
equipment, software development costs that were capitalized, and approximately
$356,000 paid to the former shareholder of Ivy pursuant to the acquisition
agreement.
Cash provided by financing activities was $6,643,700 for the three months
ended March 31, 1998 while cash utilized in financing activities was $13,411 for
the three months ended March 31, 1997. In March 1998, the Company raised
$5,300,000 in a private placement of convertible Preferred Stock and warrants
(the "Private Placement"). In this transaction, the Company issued approximately
626,300 shares of its Series C Preferred Stock, which are convertible into
approximately 759,100 shares of Common Stock. The Company also issued five-year
warrants to purchase approximately 626,300 shares of Common Stock at an exercise
price of $8.46 per share (the five-day average of closing bid prices calculated
prior to the closing of the transaction). If not previously converted, the
Preferred Stock is redeemable at $12.69 per share upon sale or liquidation of
the Company, or ten years after issuance. The Common Stock underlying both the
Preferred Stock and the warrants has certain registration rights. Cash from
financing activities in 1998 was primarily provided by the Private Placement and
by borrowings on the Company's line of credit facility.
In December 1997, the Company and its bank lender entered into (i) a
$3,000,000 secured lending facility bearing interest at the LIBOR Market Index
Rate plus 2.75%, and (ii) a $3,000,000 secured term loan bearing interest at the
LIBOR Market Index Rate plus 3.5%, with all principal and interest due in April
1999. As of December 31, 1997, the Company was in violation of certain covenants
related to its secured lending facility, which violation has been waived by the
bank. In March 1998, the Company and its bank lender negotiated and agreed upon
revised covenants under the facility, adjusting the terms to more appropriate
expectations of the Company's financial performance. These new covenants were
subject to the Company's ability to raise at least $5,300,000 of cash equity
capital no later than April 15, 1998. The Private Placement satisfied this
requirement. Pursuant to such revised covenants, the Company's borrowings are
limited to the lesser of $1,500,000 or a percentage of its accounts receivable
in accordance with an agreed upon schedule (borrowing base of $1,500,000 at
March 31, 1998). The interest rate was increased to LIBOR plus 3.75%.
Additionally, the repayment terms on the term loan were adjusted as follows:
$500,000 due on May 15, 1998; $1,000,000 due on July 15, 1998; and $1,500,000
due on November 15, 1998. Certain events that result in proceeds to the Company
may accelerate the amounts payable by the Company for the term loan. The
interest rate on the term loan has also been increased to LIBOR plus 3.75%. The
Company has also committed on a best efforts basis to raise additional
$2,700,000 in cash equity, and the Chairman and President have provided their
personal guarantees until such time as the $3,000,000 term loan has been paid
and the Company has raised additional cash equity of at least $2,700,000. As of
March 31, 1998, the Company was in violation of certain of the revised covenants
related to its secured lending facility. The Company and the bank are currently
in negotiations concerning these violations. Although there can be no
assurances, the Company believes that the issue will be resolved in a manner
satisfactory to both parties.
The Company expects negative cash flow from operations to continue for at
least the next six to nine months as the online revenue stream matures and it
continues product development and expansion of its sales
12
<PAGE> 13
and marketing and administrative capabilities. In late March, the Company
reduced its workforce, which is expected to provide annual savings of
approximately $2,000,000. At the same time, the Company implemented measures to
curtail the rate of discretionary spending. The Company recognizes the need to
raise additional funding to meet its working capital requirements and is
considering all of its alternatives, including continuing its efforts to obtain
financing through additional equity or debt financings, which may not be
available on favorable terms, or at all. If the Company does not address its
funding needs soon, it will be materially adversely affected. The Company's
future capital requirements will depend on many factors, including, but not
limited to, acceptance of and demand for its products and services, the types of
arrangements that the Company may enter into with customers and resellers, and
the extent to which the Company invests in new technology and research and
development projects, and uses cash for additional acquisitions.
PART II -- OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
(a) No modifications.
(b) No limitations or qualifications.
(c) From January 1, 1998 to March 31, 1998, the Company has issued the
following unregistered securities:
1. 626,293 shares of Series C redeemable convertible Preferred Stock
to certain accredited investors; and
2. Warrants to purchase 626,293 shares of Common Stock to certain
accredited investors.
The sales of the above securities were deemed to be exempt from
registration under the Act in reliance upon section 4(2) of the Securities Act
of 1933, as amended (the "Act"), or Regulation D promulgated thereunder as
transactions by an issuer not involving a public offering. Recipients of the
securities in each such transaction represented their intentions to acquire such
securities for investment only and not with a view to or for sale in connection
with any distribution thereof and appropriate legends were affixed to the
instruments issued in such transactions. All recipients had adequate access to
information about the Company.
ITEM 6. EXHIBITS
(a) Exhibits
10.9 1996 Stock Plan, as amended
10.29 First Union loan amendment documents dated March 31, 1998
10.30 Series C Preferred Stock and Warrant Purchase Agreement.
10.31 Registration Rights Agreement, dated March 31, 1998
11.1 Statement Re: Computation of Per Share Loss
27.1 Financial Data Schedule, which is submitted electronically to the
Securities and Exchange Commission for information only and not filed.
(b) Reports on Form 8-K
On January 16, 1998, the Company filed an amendment to its November 17,
1997 Current Report of Form 8-K. The amendment included the financial
information required by Item 7 of Form 8-K with respect to the acquisition of
HTR.
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<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by each of the
undersigned thereunto duly authorized.
UOL PUBLISHING, INC.
By: /s/ NARASIMHAN P. KANNAN
------------------------------------
Narasimhan P. Kannan
Chief Executive Officer
By: /s/ JOANNE O'ROURKE HINDMAN
------------------------------------
Joanne O'Rourke Hindman
Vice President and Chief Financial
Officer
(Principal Financial and Accounting
Officer)
Date: May 15, 1998
14
<PAGE> 1
UOL PUBLISHING, INC.
1996 STOCK PLAN
Adopted: August 30, 1996
Revised: December 20, 1996
Revised: December 11, 1997
Revised: April 23, 1998
<PAGE> 2
UOL PUBLISHING, INC.
1996 STOCK PLAN
1. Purposes of the Plan. The purposes of this 1996 Stock Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries, and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or non-statutory stock options, as
determined by the Administrator at the time of grant of an option and subject
to the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder. Stock purchase rights may also be granted
under the Plan.
2. Definitions. As used herein, the following definitions shall
apply:
(a) "Administrator" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the Committee appointed by the Board of
Directors in accordance with Section 4(a) of the Plan.
(e) "Common Stock" means the Common Stock of the Company.
(f) "Company" means UOL Publishing, Inc., a Delaware corporation.
(g) "Consultant" means any person, including an advisor, who is
engaged by the Company or any Parent or Subsidiary of the Company to render
services and is compensated for such services, and any director of the Company
whether compensated for such services or not.
(h) "Continuous Status as an Employee or Consultant" means the
absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of: (i) sick leave; (ii) military leave;
(iii) any other leave of absence approved by the Administrator, provided that
such leave is for a period of not more than ninety (90) days, unless
reemployment upon the expiration of such leave is guaranteed by contract or
statute, or unless provided otherwise pursuant to Company policy adopted from
time to time; or (iv) transfers between locations of the Company or between the
Company, its Subsidiaries or their respective successors. For purposes of this
Plan, a change in status from an Employee to a consultant or from a consultant
to an Employee will not constitute a termination of employment or consulting
relationship; provided that a change from an Employee to a consultant may cause
an Incentive Stock Option to become
<PAGE> 3
a Nonstatutory Stock Option under the Code.
(i) "Employee" means any person, including officers and directors,
employed by the Company or any Parent or Subsidiary of the Company, with the
status of employment determined based upon such minimum number of hours or
periods worked as shall be determined by the Administrator in its discretion,
subject to any requirements of the Code. The payment of a director's fee by the
Company shall not be sufficient to constitute "employment" by the Company.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(k) "Fair Market Value" means, as of any date, the fair market
value of Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including, without limitation, the
National Market System of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, its Fair Market Value shall be the
closing sales price for such stock (or the closing bid, if no sales were
reported), as quoted on such system or exchange, or the exchange with the
greatest volume of trading in Common Stock for the last market trading day
prior to the time of determination, as reported in The Wall Street Journal or
such other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System (but
not on the National Market System thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common
Stock for the last market trading day prior to the time of determination, as
reported in The Wall Street Journal or such other source as the Administrator
deems reliable; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(l) "Incentive Stock Option" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code, or any
successor provision.
(m) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(n) "Option" means a stock option granted pursuant to the Plan.
(o) "Optioned Stock" means the Common Stock subject to an Option or
a Stock Purchase Right.
(p) "Optionee" means an Employee or Consultant who receives an
Option or a
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<PAGE> 4
Stock Purchase Right.
(q) "Parent" means a "parent corporation", whether now or hereafter
existing, as defined in Section 424(e) of the Code, or any successor provision.
(r) "Plan" means this 1996 Stock Plan.
(s) "Reporting Person" means an officer, director, or greater than
ten percent stockholder of the Company within the meaning of Rule 16a-2 under
the Exchange Act, who is required to file reports pursuant to Rule 16a-3 under
the Exchange Act, or any successor provision.
(t) "Restricted Stock" means shares of Common Stock acquired
pursuant to a grant of a Stock Purchase Right under Section 10 below.
(u) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange
Act, as the same may be amended from time to time, or any successor provision.
(v) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 12 of the Plan.
(w) "Stock Exchange" means any stock exchange or consolidated stock
price reporting system on which prices for the Common Stock are quoted at any
given time.
(x) "Stock Purchase Right" means the right to purchase Common Stock
pursuant to Section 10 below.
(y) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code, or any successor
provision.
3. Stock Subject to the Plan. Subject to the provisions of Section 12
of the Plan, the maximum aggregate number of shares that may be optioned and
sold under the Plan is 1,524,893 shares of Common Stock (as adjusted to give
effect to the 1-for-11.76812037 reverse stock split of the Company's Common
Stock on November 20, 1996). The shares may be authorized, but unissued, or
reacquired Common Stock. If an Option should expire or become unexercisable for
any reason without having been exercised in full, the unpurchased Shares that
were subject thereto shall, unless the Plan shall have been terminated, become
available for future grant under the Plan. If the Company shall repurchase
unvested shares of Restricted Stock, such repurchased Shares that were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan. In addition, any shares of Common Stock which are
retained by the Company upon exercise of an Option or Stock Purchase Right in
order to satisfy the exercise or purchase price for such Option or Stock
Purchase Right or any withholding taxes due with respect to such exercise shall
be treated as not issued and shall continue to be available under the Plan.
3
<PAGE> 5
4. Administration of the Plan.
(a) Procedure. The Plan shall be administered by (A) the Board or
(B) a committee designated by the Board, which committee shall be constituted
in such a manner as to satisfy the legal requirements relating to the
administration of incentive stock option plans, if any, of applicable state and
federal corporate and securities laws, of the Code and of any applicable Stock
Exchange (collectively, the "APPLICABLE LAWS"). Once appointed, such Committee
shall continue to serve in its designated capacity until otherwise directed by
the Board. From time to time the Board may increase the size of the Committee
and appoint additional members thereof, remove members (with or without cause)
and appoint new members in substitution therefor, fill vacancies, however
caused, and remove all members of the Committee and thereafter directly
administer the Plan, all to the extent permitted by the Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
Plan and in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any Stock Exchange, the Administrator
shall have the authority, in its discretion:
(i) to determine the Fair Market Value of the Common Stock,
in accordance with Section 2(k) of the Plan;
(ii) to select the Consultants and Employees to whom Options
and Stock Purchase Rights may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options and Stock
Purchase Rights or any combination thereof are granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder;
(vii) to determine whether and under what circumstances an
Option may be settled in cash under Section 9(f) instead of Common Stock;
(viii) to accelerate the exercisability of any Option or Stock
Purchase Right;
(ix) to determine the terms and restrictions applicable to
Stock Purchase Rights and the Restricted Stock purchased by exercising such
Stock Purchase Rights;
4
<PAGE> 6
(x) in order to fulfill the purposes of the Plan and without
amending the Plan, to modify grants of Options or Stock Purchase Rights to
participants who are foreign nationals or employed outside of the United States
in order to recognize differences in local law, tax policies or customs;
(xi) to accelerate the vesting of any Option or Stock Purchase
Right or waive forfeiture restrictions with respect thereto; and
(xii) to make all other determinations, not inconsistent with
the terms of the Plan, deemed necessary or advisable for administering the
Plan.
(c) Effect of Administrator's Decision. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all holders of Options or Stock Purchase Rights.
5. Eligibility.
(a) Nonstatutory Stock Options and Stock Purchase Rights may be
granted to Employees and Consultants. Incentive Stock Options may be granted
only to Employees. An Employee or Consultant who has been granted an Option or
Stock Purchase Right may, if he or she is otherwise eligible, be granted
additional Options or Stock Purchase Rights.
(b) Each Option shall be designated in the written option agreement
as either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Options designated as Incentive Stock
Options are exercisable for the first time by any Optionee during any calendar
year (under all plans of the Company or any Parent or Subsidiary) exceeds
$100,000, such excess Options shall be treated as Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Incentive Stock Options shall be
taken into account in the order in which they were granted, and the Fair Market
Value of the Shares subject to an Incentive Stock Option shall be determined as
of the date of the grant of such Option.
(d) The Plan shall not confer upon any Optionee any right with
respect to continuation of employment or consulting relationship with the
Company, nor shall it interfere in any way with such Optionee's right or the
Company's right to terminate his or her employment or consulting relationship
at any time, with or without cause.
6. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company as described in Section 19 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 15 of the Plan.
7. Term of Option. The term of each Option shall be the term stated in
the Option Agreement; provided, however, that the term shall be no more than
ten (10) years from the date
5
<PAGE> 7
of grant thereof or such shorter term as may be provided in the Option
Agreement. However, in the case of an Option granted to an Optionee who, at the
time the Option is granted, owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the term of the Option shall be five (5) years from the date of
grant thereof or such shorter term as may be provided in the Option Agreement.
8. Option Exercise Price and Consideration.
(a) The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by the
Board, but shall be subject to the following:
(i) In the case of an Incentive Stock Option that is:
(A) granted to an Employee who, at the time of the grant of
such Incentive Stock Option, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of grant.
(B) granted to any other Employee, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the date
of grant.
(ii)In the case of a Nonstatutory Stock Option that is granted
to a person who, at the time of the grant of such Option, owns stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the per Share exercise price
shall be no less than 110% of the Fair Market Value per Share on the date of
the grant.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares that (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six months on the date of surrender or such other period as may be
required to avoid a charge to the Company's earnings, and (y) have a Fair
Market Value on the date of surrender equal to the aggregate exercise price of
the Shares as to which such Option shall be exercised, (5) authorization for
the Company to retain from the total number of Shares as to which the Option is
exercised that number of Shares having a Fair Market Value on the date of
exercise equal to the exercise price for the total number of Shares as to which
the Option is exercised, (6) delivery of a properly executed exercise notice
together with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price and
any applicable income or employment taxes, (7) delivery of an irrevocable
subscription agreement for the Shares that irrevocably obligates the option
holder to take and pay for the Shares not more than twelve months after the
date of delivery of the subscription agreement, (8) any combination
6
<PAGE> 8
of the foregoing methods of payment, or (9) such other consideration and method
of payment for the issuance of Shares to the extent permitted under Applicable
Laws. In making its determination as to the type of consideration to accept,
the Administrator shall consider if acceptance of such consideration may be
reasonably expected to benefit the Company.
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Stockholder. Any Option
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator, including performance criteria with respect
to the Company and/or the Optionee, and as shall be permissible under the terms
of the Plan. An Option may not be exercised for a fraction of a Share. An
Option shall be deemed to be exercised when written notice of such exercise has
been given to the Company in accordance with the terms of the Option by the
person entitled to exercise the Option and the Company has received full
payment for the Shares with respect to which the Option is exercised. Full
payment may, as authorized by the Board, consist of any consideration and
method of payment allowable under Section 8(b) of the Plan. Until the issuance
(as evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate evidencing
such Shares, no right to vote or receive dividends or any other rights as a
stockholder shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. The Company shall issue (or cause to be issued) such
stock certificate promptly upon exercise of the Option. No adjustment will be
made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in Section 12 of the
Plan.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares that thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Employment or Consulting Relationship. Subject
to Section 9(c), in the event of termination of an Optionee's consulting
relationship or Continuous Status as an Employee with the Company, such
Optionee may, but only within three (3) months (or such other period of time
not less than thirty (30) days as is determined by the Administrator, with such
determination in the case of an Incentive Stock Option being made at the time
of grant of the Option and not exceeding three (3) months) after the date of
such termination (but in no event later than the expiration date of the term of
such Option as set forth in the Option Agreement), exercise his or her Option
to the extent that the Optionee was entitled to exercise it at the date of such
termination. To the extent that Optionee was not entitled to exercise the
Option at the date of such termination, or if Optionee does not exercise such
Option to the extent so entitled within the time specified herein, the Option
shall terminate. No termination shall be deemed to occur and this Section 9(b)
shall not apply if (i) the Optionee is a Consultant who becomes an Employee
within the time specified herein; or (ii) the Optionee is an Employee who
becomes a Consultant within the time specified herein.
(c) Disability of Optionee. Notwithstanding the provisions of
Section 9(b) above, in the event of termination of an Optionee's consulting
relationship or Continuous Status
7
<PAGE> 9
as an Employee as a result of his or her total and permanent disability (as
defined in Section 22(e)(3) of the Code, or any successor provision), the
Optionee may, but only within six (6) months (or such other period of time not
exceeding twelve (12) months as is determined by the Board, with such
determination in the case of an Incentive Stock Option being made at the time
of the grant of the option) from the date of such termination (but in no event
later than the expiration date of the term of such Option as set forth in the
Option Agreement), exercise the Option to the extent otherwise entitled to
exercise it at the date of such termination. To the extent that Optionee was
not entitled to exercise the Option at the date of termination, or if Optionee
does not exercise such Option to the extent so entitled within the time
specified herein, the Option shall terminate.
(d) Death of Optionee. In the event of the death of an Optionee (i)
during the period of Continuous Status as an Employee or any consulting
relationship or (ii) within thirty (30) days following the termination of the
Optionee's Continuous Status as an Employee or consulting relationship, the
Option may be exercised, at any time within six (6) months (or such other
period of time not exceeding twelve (12) months as is determined by the Board,
with such determination in the case of an Incentive Stock Option being made at
the time of the grant of the option) following the date of death (but in no
event later than the expiration date of the term of such Option as set forth in
the Option Agreement), by the Optionee's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but only to the extent
the Optionee was entitled to exercise the Option at the date of death or, if
earlier, the date of termination of the consulting relationship or Continuous
Status as an Employee. To the extent that Optionee was not entitled to exercise
the Option at the date of death or termination, as the case may be, or if
Optionee does not exercise such Option to the extent so entitled within the
time specified herein, the Option shall terminate.
(e) Rule 16b-3. Options granted to Reporting Persons shall comply
with Rule 16b-3 and shall contain such additional conditions or restrictions as
may be required thereunder to qualify for the maximum exemption for Plan
transactions.
(f) Buyout Provisions. The Administrator may at any time offer to
buy out for a payment in cash or Shares, an Option previously granted, based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.
10. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued either
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing of the terms, conditions and restrictions related to the
offer, including the number of Shares that such person shall be entitled to
purchase, the price to be paid (which price shall not be less than 85% of the
Fair Market Value of the Shares as of the date of the offer), and the time
within which such person must accept such offer, which shall in no event exceed
thirty (30) days from the date upon which the Administrator made
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<PAGE> 10
the determination to grant the Stock Purchase Right. The offer shall be
accepted by execution of a Restricted Stock purchase agreement in the form
determined by the Administrator.
(b) Repurchase Option. Unless the Administrator determines
otherwise, the Restricted Stock purchase agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's employment or consulting relationship with the Company for any
reason (including death or disability). The purchase price for Shares
repurchased pursuant to the Restricted Stock purchase agreement shall be the
original purchase price paid by the purchaser and may be paid by cancellation
of any indebtedness of the purchaser to the Company.
(c) Other Provisions. The Restricted Stock purchase agreement shall
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions of Restricted Stock purchase agreements need not be
the same with respect to each purchaser.
(d) Rights as a Stockholder. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
stockholder, and shall be a stockholder when his or her purchase is entered
upon the records of the duly authorized transfer agent of the Company. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the Stock Purchase Right is exercised, except as provided
in Section 12 of the Plan.
11. Stock Withholding to Satisfy Withholding Tax Obligations. At the
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this paragraph. When an Optionee incurs tax liability in
connection with an Option or Stock Purchase Right, which tax liability is
subject to tax withholding under applicable tax laws, and the Optionee is
obligated to pay the Company an amount required to be withheld under applicable
tax laws, the Optionee may satisfy the withholding tax obligation by one or
some combination of the following methods: (a) by cash payment, or (b) out of
Optionee's current compensation, (c) if permitted by the Administrator, in its
discretion, by surrendering to the Company Shares that (i) in the case of
Shares previously acquired from the Company, have been owned by the Optionee
for more than six months on the date of surrender, and (ii) have a fair market
value on the date of surrender equal to or greater than Optionee's marginal tax
rate times the ordinary income recognized, or (d) by electing to have the
Company withhold from the Shares to be issued upon exercise of the Option, or
the Shares to be issued in connection with the Stock Purchase Right, if any,
that number of Shares having a fair market value equal to the amount required
to be withheld. For this purpose, the fair market value of the Shares to be
withheld shall be determined on the date that the amount of tax to be withheld
is to be determined (the "TAX DATE").
Any surrender by a Reporting Person of previously owned Shares
to satisfy tax withholding obligations arising upon exercise of this Option
must comply with the applicable provisions of Rule 16b-3 and shall be subject
to such additional conditions or restrictions as may be required thereunder to
qualify for the maximum exemption from Section
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<PAGE> 11
16 of the Exchange Act with respect to Plan transactions.
All elections by an Optionee to have Shares withheld to satisfy
tax withholding obligations shall be made in writing in a form acceptable to
the Administrator and shall be subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax
Date;
(b) once made, the election shall be irrevocable as to the
particular Shares of the Option or Stock Purchase Right as to which the
election is made;
(c) all elections shall be subject to the consent or disapproval of
the Administrator; and
(d) if the Optionee is a Reporting Person, the election must comply
with the applicable provisions of Rule 16b-3 and shall be subject to such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
In the event the election to have Shares withheld is made by an
Optionee and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Optionee shall receive
the full number of Shares with respect to which the Option or Stock Purchase
Right is exercised but such Optionee shall be unconditionally obligated to
tender back to the Company the proper number of Shares on the Tax Date.
12. Adjustments Upon Changes in Capitalization, Merger or Certain Other
Transactions.
(a) Changes in Capitalization. Subject to any required action by
the stockholders of the Company, the number of shares of Common Stock covered
by each outstanding Option or Stock Purchase Right, and the number of shares of
Common Stock that have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or that have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination, recapitalization or reclassification of the Common Stock, or any
other increase or decrease in the number of issued shares of Common Stock
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be
deemed to have been "effected without receipt of consideration." Such
adjustment shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason
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<PAGE> 12
thereof shall be made with respect to, the number or price of shares of Common
Stock subject to an Option or Stock Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Board shall notify the Optionee
at least fifteen (15) days prior to such proposed action. To the extent it has
not been previously exercised, the Option or Stock Purchase Right will
terminate immediately prior to the consummation of such proposed action.
(c) Merger or Sale of Assets. In the event of a proposed sale of
all or substantially all of the Company's assets or a merger of the Company
with or into another corporation where the successor corporation issues its
securities to the Company's stockholders (excluding any transaction with a
majority-owned or wholly-owned subsidiary), each outstanding Option or Stock
Purchase Right shall be assumed or an equivalent option or right shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation (and such assumed or substituted Option or Stock Purchase
Right shall provide that such Option or Stock Purchase Right shall vest in its
entirety in the event that the Consultant or Employee holding such Option or
Stock Purchaser Right is terminated without cause within the twelve (12) month
period following the consummation of the merger or sale of assets). If the
successor corporation does not agree to so assume an Option or Stock Purchase
Right or to so substitute an equivalent option or right, such Option or Stock
Purchase Right shall vest in its entirety and become exercisable prior to the
consummation of the merger or sale of assets. If an Option becomes fully
exercisable in lieu of assumption or substitution in the event of a merger or
sale of assets as provided in the preceding two sentences, the Board shall
notify the Optionee within a reasonable time prior to the consummation of such
transaction, and the Option shall be fully exercisable for a period of ten (10)
days from the date of such notice, and will terminate upon the expiration of
such period.
(d) Certain Distributions. In the event of any distribution to the
Company's stockholders of securities of any other entity or other assets (other
than dividends payable in cash or stock of the Company) without receipt of
consideration by the Company, the Administrator may, in its discretion,
appropriately adjust the price per share of Common Stock covered by each
outstanding Option or Stock Purchase Right to reflect the effect of such
distribution.
13. Non-Transferability of Options, Stock Purchase Rights and Restricted
Stock. To the extent required by any Applicable Law, Options and Stock Purchase
Rights may not be sold, pledged, assigned, hypothecated, transferred, or
disposed of in any manner other than by will or by the laws of descent or
distribution and may be exercised or purchased during the lifetime of the
Optionee only by the Optionee.
14. Time of Granting Options and Stock Purchase Rights. The date of
grant of an Option or Stock Purchase Right shall, for all purposes, be the date
on which the Administrator makes the determination granting such Option or
Stock Purchase Right, or such other date as is determined by the Board. Notice
of the determination shall be given to each Employee or Consultant to whom an
Option or Stock Purchase Right is so granted within a reasonable time after the
date of such grant.
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<PAGE> 13
15. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or discontinue the Plan, but no amendment, alteration,
suspension or discontinuation shall be made that would impair the rights of any
Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with Rule 16b-3 or
with Section 422 of the Code, or any successor provision (or any other
applicable law or regulation, including the requirements of any Stock
Exchange), the Company shall obtain stockholder approval of any Plan amendment
in such a manner and to such a degree as required.
(b) Effect of Amendment or Termination. No amendment or termination
of the Plan shall adversely affect Options or Stock Purchase Rights already
granted, unless mutually agreed otherwise between the Optionee and the Board,
which agreement must be in writing and signed by the Optionee and the Company.
16. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option or Stock Purchase Right unless the
exercise of such Option or Stock Purchase Right and the issuance and delivery
of such Shares pursuant thereto shall comply with all relevant provisions of
law, including, without limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any Stock Exchange. As a condition to the exercise of an
Option, the Company may require the person exercising such Option to represent
and warrant at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required by law.
17. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. The inability of the
Company to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
18. Agreements. Options and Stock Purchase Rights shall be evidenced by
written agreements in such form as the Administrator shall approve from time to
time.
19. Stockholder Approval. Continuance of the Plan shall be subject to
approval by the stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such stockholder approval shall be obtained
in the degree and manner required under applicable state and federal law and
the rules of any Stock Exchange. All Options and Stock Purchase Rights issued
under the Plan shall become void in the event such approval is not obtained.
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<PAGE> 14
20. Lock-up Agreement. Each recipient of securities hereunder agrees, in
connection with the first registration with the United States Securities and
Exchange Commission under the Securities Act of 1933, as amended, of the public
sale of the Company's Common Stock, upon request of the Company or any
underwriters managing such offering, not to sell, make any short sale of, loan,
grant any option for the purchase of or otherwise dispose of any securities of
the Company (other than those included in the registration) without the prior
written consent of the Company or such underwriters, as the case may be, for
such period of time not to exceed one year from the effective date of such
registration as the Company or the underwriters, as the case may be, shall
specify. Each such recipient agrees that the Company may instruct its transfer
agent to place stop-transfer notations in its records to enforce this Section
20.
21. Nonemployee Director Grants.
(a) Procedure for Grants. All grants of options to directors who
are not also employees of the Company ("Outside Directors) under this Plan
shall be automatic and non-discretionary and shall be made strictly in
accordance with the following provisions:
(i) No person shall have any discretion to select which Outside
Directors shall be granted Options or to determine the number of shares to be
covered by options granted to Outside Directors.
(ii) Each Outside Director shall be automatically granted:
(A) an Option to purchase 10,000 Shares on April 23, 1998
and on each January 1 thereafter on which such person is elected or re-elected
a director of the Company;
(B) In addition, in the case of a new Outside Director, the
initial automatic grant shall be effective upon such director's initial
election or appointment to the Board, with the number underlying shares equal
to the product of 2,500 multiplied by the number of regularly scheduled Board
meetings remaining in that year; and
(C) Each Outside Director will automatically be granted a
fully vested option to purchase an additional 2,500 shares on each date the
director attends a meeting of a committee of the Board other than on the same
day or within one day of a Board meeting.
(iii) The terms of an option granted under shall be as follows:
(A) The term of the option shall be ten (10) years.
(B) The option shall be exercisable only while the Outside
Director remains a director of the Company, except
(I) Termination of Continuous Status as a Director. In
the event an optionee's continuous status as a director terminates (other than
upon the optionee's
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death or total and permanent disability), the optionee may exercise his or her
option, but only within 90 days from the date of such termination, and only to
the extent that the optionee was entitled to exercise it at the date of such
termination (but in no event later than the expiration of its 10-year term). To
the extent that the optionee does not exercise such option within the time
specified herein, the option shall terminate.
(II) Disability of Optionee. In the event optionee's
continuous status as a director terminates as a result of total and permanent
disability, the optionee may exercise his or her option, but only within six
months from the date of such termination, and only to the extent that the
optionee was entitled to exercise it at the date of such termination (but in no
event later than the expiration of its 10-year term). To the extent that the
optionee does not exercise such option within the time specified herein, the
option shall terminate.
(III) Death of Optionee. In the event of an
optionee's death, the optionee's estate or a person who acquired the right to
exercise the option by bequest or inheritance may exercise the option, but only
within six months following the date of death, and only to the extent that the
optionee was entitled to exercise it at the date of death (but in no event
later than the expiration of its 10-year term). To the extent that the
optionee's estate or a person who acquired the right to exercise such option
does not exercise such option within the time specified herein, the option
shall terminate.
(C) The exercise price per share shall be the fair market
value per share on the date of grant of the option.
(D) Subject to continued status as a director, the shares
subject to an option granted under this Section shall be subject to a vesting
schedule whereby the shares shall be released as follows: 2,500 shares shall
vest on each date the director attends a Board meeting in person during that
year.
(iv) In the event that any option granted hereunder would cause
the number of shares subject to outstanding options plus the number of shares
previously purchased under options to exceed the amount set forth in Section 4
hereof, then the remaining shares available for option grant shall be granted
under options to the Outside Directors on a pro rata basis. No further grants
shall be made until such time, if any, as additional shares become available
for grant under the Plan through action of the shareholders to increase the
number of Shares which may be issued under the Plan or through cancellation or
expiration of options previously granted hereunder.
(b) No Right to Continue as a Director. The Plan shall not confer
upon any optionee any right with respect to continuation of service as a
director or nomination to serve as a director, nor shall it interfere in any
way with any rights which the director or the Company may have to terminate his
or her directorship at any time.
(c) Other Terms. In all other respects, options granted under this
Section shall
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be governed by the terms and provisions of the Plan, unless otherwise required
to meet the requirements of Rule 16b-3, as amended from time to time.
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<PAGE> 1
EXHIBIT 10.29
LOAN MODIFICATION AGREEMENT
This LOAN MODIFICATION AGREEMENT ("Agreement") is dated and effective
as of March 31, 1998, by and among UOL PUBLISHING, INC., COGNITIVE TRAINING
ASSOCIATES, INC., IVY SOFTWARE, INC., COOPER & ASSOCIATES, INC., HTR, INC., and
UOL LEASING, INC. (collectively, the "Borrowers" and individually a
"Borrower"), NARASIMHAN P. KANNAN and CARL N. TYSON (collectively the
"Guarantors" and individually a "Guarantor"), and FIRST UNION NATIONAL BANK
("First Union").
RECITALS
1. The Borrowers are indebted to First Union under a
Promissory Note dated December 15, 1997 in the face amount of $3,000,000
evidencing a line of credit to the Borrowers for working capital (the "Line of
Credit").
2. The Borrowers are also indebted to First Union under
a Promissory Note dated December 15, 1997 in the face amount of $3,000,000,
evidencing a term loan to the Borrowers (the "Term Loan").
3. On December 15, 1997, First Union and the Borrowers
entered into a Loan Agreement setting forth certain obligations of the
Borrowers in connection with the Line of Credit and the Term Loan.
4. On December 15, 1997, the Borrowers executed in favor
of First Union a Security Agreement by which the Borrowers granted to First
Union a security interest in their accounts, inventory, equipment and general
intangibles (the "Collateral") to secure payment of, among other things, the
Term Loan and the Line of Credit.
<PAGE> 2
5. First Union filed financing statements to perfect its
security interest in the Collateral.
6. As of March 30, 1998, there was due on the Line of
Credit principal of $2,000,000, and interest of $14,179.19. The per diem is
$468.75.
7. As of March 30, 1998, there was due on the Term Loan
principal of $3,000,000 and interest of $22,976.24. The per diem is $765.63
8. On March 27, 1998, the Borrowers and First Union
agreed, subject to the execution of the necessary loan documents, to
restructure the Borrowers' obligation to First Union under and in connection
with the Term Loan and the Line of Credit.
9. The Borrowers and First Union are executing this
Agreement and the other documents called for in this Agreement pursuant to the
letter agreement described in Recital 8 above.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are acknowledged, the parties agree as follows:
1. Recitals. The recitals set forth above are a
material part of this Agreement. The Borrowers acknowledge and affirm the
truth and accuracy of the recitals set forth above.
2. Confirmation and Ratification of Documents. The
Borrowers agree that all of the loan documents described in the recitals
(collectively, the "Loan Documents") are in full force and effect, and that
they shall remain in full force and effect unless and until modified or amended
in writing in accordance with their terms. The Borrowers agree that First
Union's security interest in the Collateral shall remain in full force and
effect to secure payment of the Line of Credit and the Term Loan, and
performance of other obligations. The Borrowers ratify and confirm their
respective obligations under the Loan Documents, and agree that the execution
and delivery of this Agreement shall not in any way diminish or invalidate any
of their respective
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debts or obligations under the Loan Documents. All parties consent to the
execution and delivery of this Agreement and to all of the provisions of this
Agreement to the extent that such provisions may modify the terms and
provisions of any of the Loan Documents.
3. Payments and Delivery of Documents upon Execution of
Agreement. Upon execution of this Agreement:
(a) Subject to Section 4(n) below, the Borrowers
shall pay to First Union all costs and expenses (including but not limited to
actual attorneys' fees) incurred by First Union in connection with this
Agreement;
(b) The Borrowers shall pay $14,647.69 to First
Union (by debit to the Borrowers' operating account), which First Union shall
apply against accrued interest due on the Line of Credit to bring interest
current through March 31, 1998;
(c) The Borrowers shall pay $23,741.87 to First
Union (by debit to the Borrowers' operating account), which First Union shall
apply against accrued interest due on the Term Loan to bring interest current
through March 31, 1998;
(d) The Borrowers shall pay to First Union a
modification fee of $15,000;
(e) The Borrowers and First Union shall execute
the First Allonge to Promissory Note (Line of Credit) in the form attached as
Exhibit No. 1;
(f) The Borrowers and First Union shall execute
the First Allonge to Promissory Note (Term Loan) in the form attached as
Exhibit No. 2;
(g) Narasimhan P. Kannan shall execute the
Unconditional Guaranty of Payment in the form attached as Exhibit No. 3,
guaranteeing payment and performance of the Borrowers' Obligations (as defined
in the Promissory Notes described above) to First Union;
(h) Carl N. Tyson shall execute the Unconditioned
Guaranty of Payment in the form attached as Exhibit No. 4, guaranteeing payment
and performance of the Borrowers' Obligations (as defined in the Promissory
Notes described above) to First Union;
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(i) The Borrowers and First Union shall execute
the First Amendment to Loan Agreement in the form attached as Exhibit No. 5;
(j) The Borrowers and First Union shall execute
the First Amendment to Security Agreement in the form attached as Exhibit No.
6; and
(k) Each Borrower shall deliver to First Union a
General Certificate, with the following attachments: (i) a corporate resolution
authorizing the Borrower to execute all documents required to be executed by
the Borrower in connection with this transaction; (ii) copies of the Articles
of Incorporation and any amendments; (iii) copies of the by-laws, and (iv) an
incumbency certificate.
(l) The Borrowers shall deliver to First Union
(i) a copy of the offer letter in the Borrowers' possession to purchase the
consulting business of HTR, Inc., and (ii) all documents evidencing the
Borrowers' debt to Teletutor.
4. Representations and Warranties of the Borrowers. To
induce First Union to enter into this Agreement, the Borrowers represent,
confirm and warrant to First Union as follows:
(a) Validity.
This Agreement constitutes the legal, valid and
binding obligations of the Borrowers and is enforceable in accordance with its
terms.
(b) Good Standing.
The Borrowers are corporations duly organized,
legally existing and in good standing under the laws of their respective states
of incorporation, have the power to own their property and to carry on their
businesses and are duly qualified to do business and are in good standing in
their respective states of incorporation.
(c) Authority.
The Borrowers have full power and authority to enter
into this Agreement, to execute and deliver all documents and instruments
required hereunder and thereunder, and to
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incur and perform the obligations provided for herein and therein, all of which
have been duly authorized by all necessary corporate action, and no consent or
approval of any person, including, without limitation, its members and any
governmental authority, which has not been obtained, is required as a condition
to the validity or enforceability hereof or thereof.
(d) Financial Condition.
Each Borrower is not insolvent (as defined in Section
101(32) of the United States Bankruptcy Code), unable to pay its debts as they
mature or engaged in business for which its property is an unreasonably small
capital. Each Borrower is not and has not been the subject of any bankruptcy,
reorganization, insolvency, readjustment of debt, trusteeship, receivership,
dissolution or liquidation law, statute or proceeding.
(e) Taxes.
Each Borrower has paid or caused to be paid all
federal, state, local and foreign taxes to the extent that such taxes have
become due and has filed or caused to be filed all federal, state, local and
foreign tax returns which are required to be filed by the Borrower.
(f) Compliance with Other Instruments.
Each Borrower is not in violation of any existing
governmental order, rule or regulation applicable to it, or of any agreement or
other instrument to which it is a party or by which it or its assets are bound.
Neither the execution and delivery of this Agreement nor the consummation of
the transactions contemplated by this Agreement, nor compliance with the terms
and provisions of this Agreement, has constituted or resulted in or will
constitute or result in a breach of any of the terms, covenants, conditions or
provisions of, or will constitute a default under, any deed of trust,
instrument, document, agreement or contract of any kind to which any Borrower
is a party or by which any Borrower may be bound or subject.
(g) Title to Collateral and Existing Liens on Collateral.
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<PAGE> 6
Each Borrower has good and marketable title to the
Collateral that secures its liability to First Union and the Collateral is not
subject to any existing liens or encumbrances except those held by First Union.
(h) No Claims, etc.
The Borrowers do not have any claims, defenses or
setoffs with respect to the Loan Documents, or with respect to the debt
evidenced or secured thereby or with respect to the collection or enforcement
of any of the same (and to the extent that any such claim, setoff or defense
exists, they are each waived and relinquished in their entirety).
(i) Disclosure.
To the best of the knowledge of the Borrowers, all
documents, certificates or statements furnished to First Union by or on behalf
of any Borrower in connection with the Loan Documents or this Agreement are
true, correct and complete and do not contain any untrue statement of material
fact.
(j) Benefit.
Each Borrower has derived direct or indirect benefit
from this Agreement and the transactions contemplated hereby.
(k) Interpretation.
Each party acknowledges (i) that it has participated
in the negotiation of this Agreement, and that no provision of this Agreement
shall be construed against or interpreted to the disadvantage of any party
hereto by any court or other governmental or judicial authority by reason of
such party having or being deemed to have structured, dictated or drafted such
provision; (ii) that it at all times has had access to an attorney in the
negotiation of the terms of and in the preparation and execution of this
Agreement, and that it has had the opportunity to review, analyze, and discuss
with its counsel this Agreement, and the underlying factual matters relevant to
this Agreement, for a sufficient period of time before the execution and
delivery hereof; (iii) that all of the terms of this Agreement were negotiated
at arm's-length; (iv) that this
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Agreement was prepared and executed without fraud, duress, undue influence, or
coercion of any kind exerted by any of the parties upon the others; and (v)
that the execution and delivery of this Agreement is the free and voluntary act
of each party.
(l) No Representations by First Union.
First Union has made no representations or
commitments, oral or written, or undertaken any obligations other than as
expressly set forth in this Agreement.
(m) No Default.
The Borrowers, to the best of their knowledge, are
not in default under the Loan Documents.
(n) Expenses.
Whether or not any of the transactions contemplated
hereby shall be consummated, Borrowers agree to pay to First Union, upon
written demand by First Union from time to time, the amount of all expenses,
including attorneys' fees and expenses, paid or incurred by First Union in
connection with the preparation, or the amendment, modification, extension,
renewal, refinancing, supplementation, replacement, waiver, release or
termination, of this Agreement or any other Loan Documents or any terms or
conditions hereof or thereof or any rights or interests of First Union,
Borrowers or any other person relating to any of the foregoing, or otherwise in
connection with the extension of credit hereunder. Borrowers agree to pay all
expenses in connection with the filing or recordation of all financing
statements and other documents as may be required by First Union at the time
of, or subsequent to, the execution of this Agreement, including, without
limitation, all documentary stamps, recordation and transfer taxes, filing fees
and other costs and taxes incident to recordation of any document in connection
herewith, and, if any such expenses shall be paid or incurred by First Union,
to pay to First Union upon written demand the amount of such expenses.
Borrowers also agree to pay to First Union, upon written demand by First Union,
from time to time, interest on the outstanding amount of all expenses paid by
First Union referred to in this Subsection, from the date of First Union's
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demand for payment of such expenses until the same are paid in full, at the
highest rate and calculated in the manner provided in the Promissory Notes
described above.
6. Additional Waivers by Borrowers.
Each Borrower hereby waives, to the extent the same
may be waived under applicable law:
(a) notice of acceptance by First Union of this Agreement;
(b) all claims, causes of action and rights of Borrower
against First Union on account of actions taken or not taken by First Union in
the exercise of First Union's rights or remedies hereunder or under any other
Loan Documents, or under law, provided that the same did not arise from First
Union's gross negligence or willful misconduct;
(c) all claims and causes of action of Borrower against First
Union for punitive, exemplary or other non-compensatory damages;
(d) all rights of redemption of Borrower with respect to any
of the Collateral;
(e) if First Union seeks to repossess any or all of the
Collateral by judicial proceedings, any bonds or demands for possession which
otherwise may be required;
(f) all rights of Borrower to have marshalled the Collateral
or any other security for any of the Obligations;
(g) presentment, protest, notice of protest and notice of
nonpayment with respect to all of the Obligations;
(h) settlement, compromise or release of the obligations of
any other person primarily or secondarily liable upon or obligated with respect
to any of the Obligations;
(i) substitution, impairment, exchange or release of any
direct or indirect security for any of the Obligations; and
(j) any duty or obligation of First Union to disclose to
Borrower any information concerning any other customer or client, or
prospective customer or client, of First Union.
- 8 -
<PAGE> 9
Each Borrower agrees that First Union may exercise any or all of its
rights and/or remedies hereunder, under the other Loan Documents and under law
without resorting to, without regard to, and regardless of the adequacy of, any
security or other sources of liability with respect to any of the Obligations.
7. Release. The Borrowers each hereby release and
forever waive and relinquish all claims, demands, obligations, liabilities and
causes of action of whatsoever kind or nature, whether known or unknown, which
it has, may have, or might have or assert now or in the future against First
Union and its directors, officers, employees, attorneys, agents, successors,
predecessors and assigns and any affiliates, subsidiaries or related entities
of First Union and their directors, officers, employees, attorneys, agents,
successors, predecessors and assigns, directly or indirectly, arising out of,
based upon, or in any manner connected with any transaction, event,
circumstance, action, failure to act, or occurrence of any sort or type,
whether known or unknown, which occurred, existed, was taken, permitted, or
begun before the execution of this Agreement.
8. Further Assurances and Corrective Instruments. Each
Borrower will execute, acknowledge and deliver, from time to time, such
supplements hereto and such further instruments and documents as First Union
may require in its discretion to evidence any obligation of the Borrower to
First Union, to protect, perfect and enforce First Union's interest in any
collateral security for such obligations or to facilitate the carrying out of
the intentions of the parties to this Agreement.
9. Consent to Assignment of Loans and Disclosure of
Documents. Each Borrower consents to the sale and assignment by First Union of
any or all of First Union's interest in the loans evidenced by the Loan
Documents at any time in First Union's sole and absolute discretion. Within
fifteen (15) days after any such sale or assignment, First Union shall provide
the applicable Borrower with notice of the name of the individual or entity
purchasing the loan. In conjunction with any such assignment, each Borrower
consents to the disclosure of
- 9 -
<PAGE> 10
any and all books, records, files, loan agreements, notes, deeds of trust,
guaranties, financing statements, assignments of leases, statements, ledger
cards, signature cards, corporate and/or partnership documents, financial
statements, leases, appraisals, environmental audits, hazard and liability
insurance policies, title insurance policies, loan payment histories, income
tax returns, credit analyses, notes, correspondence, internal memoranda,
checks, deposit account records and other documents relating to any Loan
Document to prospective assignees.
10. Power of Attorney. Each Borrower makes, constitutes
and appoints First Union and any agent of First Union designated by First Union
as its true and lawful attorney-in-fact with full power and authority to
endorse, execute and sign for it and in its name all documents and writings
which it is required to execute and deliver to First Union under this
Agreement, any document executed in connection with this Agreement or the Loan
Documents, which First Union deems necessary or appropriate to perfect,
preserve, protect, or enforce First Union's security interest or rights under
this Agreement or the Loan Documents.
11. Miscellaneous.
(a) Future Restructure.
The Borrowers agree that (i) First Union has no
obligation whatsoever to discuss, negotiate, or to agree to any restructuring
of the Line of Credit or the Term Loan, or any modification, amendment,
restructuring or reinstatement of the Loan Documents, as amended by this
Agreement and the documents executed in connection with this Agreement, or,
except as expressly provided in this Agreement and the documents executed in
connection with this Agreement, to forbear from exercising its rights and
remedies under the Loan Documents, as amended by this Agreement and the
documents executed in connection with this Agreement and (ii) if there are any
future discussions among First Union and the Borrowers concerning any such
restructuring, modification, amendment, or reinstatement, then no
restructuring, modification, amendment, reinstatement, compromise, settlement,
agreement, or understanding with respect to the Line of Credit or the Term
Loan, the Loan Documents, as amended by this Agreement and
- 10 -
<PAGE> 11
the documents executed in connection with this Agreement, the Collateral or any
aspect thereof shall constitute a legally binding agreement or contract or have
any force or effect whatsoever unless and until reduced to writing and signed
by the authorized representatives of the Borrowers, and that none of the
Borrowers shall assert or claim in any legal proceedings or otherwise that any
such agreement exists except in accordance with the terms of this subsection.
(b) Waivers by First Union.
Neither any failure nor any delay on the part of
First Union in exercising any right, power or remedy under this Agreement, the
Loan Documents, or under applicable law shall operate as a waiver thereof, nor
shall a single or partial exercise thereof preclude any other or further
exercises thereof or the exercise of any other right, power or remedy. No
waiver or forbearance by First Union as to any Borrower shall waive or release
any rights or claims which First Union may now have or hereafter have against
any other person, firm or individual. First Union reserves all rights except
to the extent expressly provided herein.
(c) Modifications.
No modification or waiver of any provision of this
Agreement or the Loan Documents, and no consent by First Union to any departure
by any Borrower therefrom shall in any event be effective unless the
modification, waiver or consent shall be in writing. Any such waiver or
consent shall be effective only in the specific instance or for the purpose for
which given. No notice to or demand upon any Borrower in any case shall
entitle any Borrower to any other or further notice or demand in the same,
similar or other circumstances.
(d) No Release or Discharge.
Nothing set forth in this Agreement is intended to or
shall act to nullify, discharge or release any obligation of any Borrower or to
waive or release any collateral given to First Union, nor shall this Agreement
be deemed or considered to operate as a novation of any of the Loan Documents
or any obligation thereunder. Except to the extent of any express conflict
with this Agreement, each and all of the terms and conditions of the Loan
Documents shall
- 11 -
<PAGE> 12
remain in full force and effect. Nothing in this Agreement shall be construed
to release or discharge the parties from any of their obligations to First
Union arising out of the Loan Documents and the parties reaffirm their
indebtedness to First Union under the Loan Documents.
(e) No Intent to Supersede.
Nothing contained in this Agreement is intended to
supersede the terms and conditions of the Loan Documents, except to the extent
that the terms and conditions of this Agreement and the documents to be
executed contemporaneously with this Agreement are inconsistent with the terms
and conditions of the Loan Documents.
(f) Applicable Law.
The performance, construction and enforcement of this
Agreement shall be governed by the laws of the Commonwealth of Virginia.
(g) Survival; Successors and Assigns.
All covenants, agreements, representations and
warranties made herein and in the Loan Documents shall continue in full force
and effect. Whenever in this Agreement any of the parties is referred to, such
reference shall be deemed to include the successors and assigns of such party.
All covenants, agreements, representations and warranties by or on behalf of
any Borrower which are contained in this Agreement and the Loan Documents shall
inure to the benefit of First Union and its successors and assigns. No
Borrower may assign this Agreement or any of its rights hereunder.
(h) Severability.
If any term, provision or condition, or any part
thereof, of this Agreement or of the Loan Documents shall for any reason be
found or held to be invalid or unenforceable by any court or governmental
agency of competent jurisdiction, such invalidity or unenforceability shall not
affect the remainder of such term, provision or condition or any other term,
provision or condition, and this Agreement and the Loan Document shall survive
and be construed as if such invalid or unenforceable term, provision or
condition had not been contained therein.
- 12 -
<PAGE> 13
(i) Merger and Integration.
This Agreement, the Loan Documents and any documents
or instruments to be delivered in accordance with this Agreement contain the
entire agreement of the parties hereto with respect to the matters covered and
the transactions contemplated hereby, and no other agreement, statement or
promise made by any party hereto, or any employee, officer, agent or attorney
of any party hereto, shall be valid or binding.
(j) Headings.
The headings and subheadings contained in the titling
of this Agreement are intended to be used for convenience only and shall not be
used or deemed to limit or diminish any of the provisions hereof.
(k) Gender, Singular.
All references made (a) in the neuter, masculine or
feminine gender shall be deemed to have been made in all such genders, and (b)
in the singular or plural number shall be deemed to have been made,
respectively, in the plural or singular number as well.
(l) Time of Essence.
Time is of the essence of this Agreement.
12. Notices.
Any notices required or permitted by this Agreement
or the Loan Documents shall be in writing and shall be deemed delivered if hand
delivered or delivered by certified mail, postage prepaid, return receipt
requested, or by telecopy or telegraph as follows, unless such address is
changed by written notice hereunder:
If to the Borrowers:
UOL Publishing, Inc.
8251 Greensboro Drive, Suite 500
McLean, Virginia 22102
ATTN: Joanne O'Rourke Hindman, CFO
- 13 -
<PAGE> 14
Cognitive Training Associates, Inc.
8251 Greensboro Drive, Suite 500
McLean, Virginia 22102
ATTN: Joanne O'Rourke Hindman, CFO
Ivy Software, Inc.
8251 Greensboro Drive, Suite 500
McLean, Virginia 22102
ATTN: Joanne O'Rourke Hindman, CFO
Cooper & Associates, Inc.
8251 Greensboro Drive, Suite 500
McLean, Virginia 22102
ATTN: Joanne O'Rourke Hindman, CFO
HTR, Inc.
8251 Greensboro Drive, Suite 500
McLean, Virginia 22102
ATTN: Joanne O'Rourke Hindman, CFO
- 14 -
<PAGE> 15
UOL Leasing, Inc.
8251 Greensboro Drive, Suite 500
McLean, Virginia 22102
ATTN: Joanne O'Rourke Hindman, CFO
If to the Guarantors:
Narasimhan P. Kannan
c/o UOL Publishing, Inc.
8251 Greensboro Drive, Suite 500
McLean, Virginia 22102
Carl N. Tyson
c/o UOL Publishing, Inc.
8251 Greensboro Drive, Suite 500
McLean, Virginia 22102
If to First Union National Bank :
Stephen H. MacNabb
Senior Vice President
First Union National Bank
1970 Chain Bridge Road
McLean, Virginia 22102
with a copy to:
David S. Musgrave, Esquire
Piper & Marbury L.L.P.
36 South Charles Street
Baltimore, Maryland 21201
13. Counterparts. This Agreement may be executed simultaneously
in any number of counterparts, each of which shall be deemed an original, but
all of which shall constitute one and the same agreement.
14. Waiver of Jury Trial. THE BORROWERS WAIVE ALL RIGHT TO TRIAL
BY JURY OF ALL CLAIMS, DEFENSES, COUNTERCLAIMS AND SUITS OF ANY KIND ARISING
FROM OR RELATING TO THIS AGREEMENT AND THE OBLIGATIONS
- 15 -
<PAGE> 16
EVIDENCED HEREBY. THE BORROWERS ACKNOWLEDGE THAT THEY MAKE THIS WAIVER
VOLUNTARILY AND KNOWINGLY AFTER CONSULTATION WITH COUNSEL OF THEIR CHOICE. THE
BORROWERS AGREE THAT ALL SUCH CLAIMS, DEFENSES, COUNTERCLAIMS AND SUITS SHALL
BE TRIED BEFORE A JUDGE OF COMPETENT JURISDICTION, WITHOUT A JURY.
15. Binding Effect. This Agreement shall have no effect at law or
equity unless and until First Union has executed this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed or caused to
be executed, this Agreement under seal as of the date first written above.
WITNESS: UOL PUBLISHING, INC.
By: (SEAL)
- ----------------------------- -----------------------------
Carl N. Tyson, President
COGNITIVE TRAINING ASSOC., INC.
By: (SEAL)
- ----------------------------- -----------------------------
Carl N. Tyson, President
IVY SOFTWARE, INC.
By: (SEAL)
- ----------------------------- -----------------------------
Carl N. Tyson, President
(signatures on next page)
- 16 -
<PAGE> 17
COOPER & ASSOCIATES, INC.
By: (SEAL)
- ---------------------------- -----------------------------
Carl N. Tyson, President
HTR, INC.
By: (SEAL)
- ---------------------------- -----------------------------
Carl N. Tyson, President
UOL LEASING, INC.
By: (SEAL)
- ---------------------------- -----------------------------
Carl N. Tyson, President
(SEAL)
- ---------------------------- -----------------------------
NARASIMHAN P. KANNAN
(SEAL)
- ---------------------------- -----------------------------
CARL N. TYSON
FIRST UNION NATIONAL BANK
By: (SEAL)
- ---------------------------- -----------------------------
Stephen H. MacNabb
Senior Vice President
- 17 -
<PAGE> 18
FIRST AMENDMENT TO SECURITY AGREEMENT
This FIRST AMENDMENT TO SECURITY AGREEMENT (this "First Amendment") is
effective the 31st day of March, 1998, by and among FIRST UNION NATIONAL BANK
(the "Bank"), and UOL PUBLISHING, INC., COGNITIVE TRAINING ASSOCIATES, INC.,
IVY SOFTWARE, INC., COOPER & ASSOCIATES, INC., HTR, INC., and UOL LEASING, INC.
(collectively, the "Borrower" and individually a "Borrower").
RECITALS
1. The Borrower and the Bank entered into a Security Agreement dated
December 15, 1997, in connection with the extension of credit by the Bank to
the Borrower.
2. The Borrower has requested that the Bank modify the terms of the
Security Agreement and the Bank is agreeable to doing so subject to the terms
and conditions set forth herein and in a Loan Modification Agreement executed
contemporaneously with this First Amendment (the "Loan Modification
Agreement").
NOW, THEREFORE, in consideration of the foregoing, the Borrower and
the Bank agree that the Security Agreement is amended as follows:
1. Attorneys' Fees and Other Costs of Collection. The section of
the Security Agreement entitled "ATTORNEYS' FEES AND OTHER COSTS OF COLLECTION"
is deleted in its entirety and replaced with the following:
In addition to any expenses which Debtor has agreed
to pay under and in connection with the Obligations, Debtor
shall pay all of Bank's expenses, incurred in enforcing this
Agreement and in preserving and liquidating the Collateral,
including, but not limited to, arbitration, attorneys' and
experts' fees and expenses, whether incurred without the
commencement of a suit, in any trial, arbitration or
administrative proceeding, or in any appellate or bankruptcy
proceeding.
<PAGE> 19
2. Remedies Upon Default. The section entitled "REMEDIES UPON
DEFAULT" is hereby amended to add the following additional remedies:
(a) Enforce its rights against the Collateral by collecting or
liquidating all or any part of the Collateral or selling,
assigning, leasing, renting, licensing or otherwise disposing
of all or any part of the Collateral or any interest therein,
at the same or different times, at public or private sale or
disposition, or otherwise.
(b) Establish and maintain at Bank, subject to Bank's
customary arrangements and charges therefor as established by
Bank from time to time, a repayment account, which shall be
under the exclusive control of and subject to the sole order
of Bank, and require Borrower to deposit in the repayment
account, not later than the first banking day following the
day on which the same are received by Borrower, as a tender of
payment of the Obligations or as security for any contingent
or future Obligations, all cash, checks, drafts, money orders
and other items of payment constituting Collateral, or
collections or other proceeds of Collateral.
(c) Institute any proceeding or proceedings to enforce the
Obligations and any liens in favor of Bank.
(d) Notify postal authorities to change the address for
delivery of mail addressed to Borrower to such address as Bank
may designate and receive, open and dispose of all mail
addressed to Borrower.
(e) Endorse Borrower's name on any promissory notes or other
instruments, acceptances, checks, drafts, money orders or
other items of payment constituting Collateral, or collections
or other
- 2 -
<PAGE> 20
proceeds of Collateral, that may come into Bank's possession
or control from time to time.
(f) Sign Borrower's name on any invoices to, drafts against
and other notices and documents to account debtors or other
obligors of Borrower and requests for verification of accounts
and other amounts which may be due to Borrower.
(g) Execute proofs of claim and loss on behalf of Borrower.
(h) Apply all Collateral and proceeds of Collateral delivered
to Bank or coming into Bank's possession or control from time
to time to any of the Obligations, or hold the same as
security for any contingent or future Obligations.
(i) At Borrower's expense, continue or complete, or cause to
be continued or completed, performance of Borrower's
obligations under any contracts of Borrower.
(j) Use, operate, manage, control and exercise all rights of
Borrower relating to, the Collateral and any other assets of
Borrower, and collect all income and revenues therefrom.
(k) Terminate, or cease extending credit under, any or all
outstanding commitments or credit accommodations of Bank to
Borrower.
(l) Take exclusive possession of any or all of the Collateral
from time to time and/or place a custodian in exclusive
possession of any or all of the Collateral from time to time
and, so far as Borrower may give authority therefor, enter
upon any premises on which any of the Collateral may be
situated and remove the same therefrom, Borrower hereby
waiving any and all rights to prior
- 3 -
<PAGE> 21
notice and to judicial hearing with respect to repossession of
Collateral, and/or require Borrower, at Borrower's expense, to
assemble and deliver any or all of the Collateral to such
place or places as Bank may reasonably request.
(m) With respect to any accounts, notes, instruments, chattel
paper, tax refunds, contract rights, general intangibles or
other debts or liabilities payable to Borrower securing the
Obligations, notify any account debtors and other obligors
thereon to make payments thereon directly to Bank, take
control of the cash and noncash proceeds thereof, demand,
collect, sue for and receive any money or property at any time
due, payable or receivable on account thereof, compromise and
settle with any person liable thereon, and extend the time of
payment or otherwise change the terms thereof, without
incurring liability or responsibility therefor to Borrower.
3. No Novation. All of the terms, covenants and conditions of
the Security Agreement shall continue in full force and effect, as amended by
this First Amendment. This First Amendment is not intended to be, and shall
not constitute, a substitution or novation of the Security Agreement.
4. Renewal of Covenants and Agreements. The Borrower renews its
covenant and agreement to perform, comply with and be bound by each and every
of the other terms and provisions of the Security Agreement, as amended by this
First Amendment.
5. Successors and Assigns. Each and every of the terms and
provisions of this First Amendment shall be binding upon and shall inure to the
benefit of the parties and their respective heirs, successors, personal
representatives and assigns.
- 4 -
<PAGE> 22
IN WITNESS WHEREOF, the Borrower has caused this First Amendment to be
executed under seal as of the date first written above.
WITNESS: UOL PUBLISHING, INC.
By: (SEAL)
- -------------------------------- -----------------------------
Carl N. Tyson, President
COGNITIVE TRAINING ASSOC., INC.
By: (SEAL)
- -------------------------------- -----------------------------
Carl N. Tyson, President
IVY SOFTWARE, INC.
By: (SEAL)
- -------------------------------- -----------------------------
Carl N. Tyson, President
COOPER & ASSOCIATES, INC.
By: (SEAL)
- -------------------------------- -----------------------------
Carl N. Tyson, President
(Signatures continued on next page)
- 5 -
<PAGE> 23
HTR, INC.
By: (SEAL)
- ------------------------------- -----------------------------
Carl N. Tyson, President
UOL LEASING, INC.
By: (SEAL)
- ------------------------------- -----------------------------
Carl N. Tyson, President
FIRST UNION NATIONAL BANK
By: (SEAL)
- ------------------------------- -----------------------------
Stephen H. MacNabb
Senior Vice President
- 6 -
<PAGE> 24
FIRST AMENDMENT TO LOAN AGREEMENT
This FIRST AMENDMENT TO LOAN AGREEMENT (this "First Amendment") is
effective the 31st day of March, 1998, by and among FIRST UNION NATIONAL BANK
(the "Bank"), and UOL PUBLISHING, INC., COGNITIVE TRAINING ASSOCIATES, INC.,
IVY SOFTWARE, INC., COOPER & ASSOCIATES, INC., HTR, INC., and UOL LEASING, INC.
(collectively, the "Borrower" and individually a "Borrower").
RECITALS
1. The Borrower and the Bank entered into a Loan Agreement dated
December 15, 1997, in connection with the extension of credit by the Bank to
the Borrower.
2. The Borrower has requested that the Bank modify the terms of the
Loan Agreement and the Bank is agreeable to doing so subject to the terms and
conditions set forth herein and in a Loan Modification Agreement executed
contemporaneously with this First Amendment (the "Loan Modification
Agreement").
NOW, THEREFORE, in consideration of the foregoing, the Borrower and
the Bank agree that the Loan Agreement is amended as follows:
1. Affirmative Covenants. The section of the Loan Agreement
entitled "AFFIRMATIVE COVENANTS" is amended to add the following additional
affirmative covenants:
(a) The Borrower shall raise at least $5,300,000 of
new cash equity capital no later than April 15, 1998, and
shall provide written proof to the Bank no later than April
15, 1998 that the Borrower has raised this new equity capital.
(b) The Borrower shall pay down the Line of Credit
(as defined in the Loan Modification Agreement), not later
than April 15, 1998, to the lesser of $1,500,000 or the
Borrowing Base (as such term is amended by this First
Amendment).
<PAGE> 25
(c) The Borrower shall use its best efforts to raise
an additional $2,700,000 in cash equity capital on or before
September 30, 1998.
2. Negative Covenants. The section of the Loan Agreement
entitled "NEGATIVE COVENANTS" is amended to add the following additional
negative covenant: "The Borrower shall not pay any fees, compensation or
similar payments due to Friedman, Billings, Ramsey and Co., Inc. in connection
with any equity capital raised by the Borrower in 1998, until the Term Loan (as
defined in the Loan Modification Agreement) is paid in full."
3. Financial Covenants. The section of the Loan Agreement
entitled "FINANCIAL COVENANTS" is deleted in its entirety and replaced by the
following:
Borrower agrees to comply with the following
financial covenants until payment in full of the Obligations:
(a) Liquidity Requirement - Effective March 31, 1998
through June 29, 1998, Borrower shall maintain at all times
unencumbered Liquid Assets of not less than $1,500,000.
Effective June 30, 1998 through December 30, 1998, Borrower
shall maintain at all times unencumbered Liquid Assets of not
less than $1,000,000. Effective December 31, 1998 and at all
times thereafter, Borrower shall maintain unencumbered Liquid
Assets of not less than $2,000,000. "Liquid Assets" shall
mean the sum of all cash, time deposits and marketable
securities of the Borrower.
(b) Tangible Net Worth - Effective March 31, 1998
through September 29, 1998, Borrower shall maintain at all
times a Tangible Net Worth of at least $2,000,000. Effective
September 30, 1998 through December 30, 1998, Borrower shall
maintain at all times a Tangible Net Worth of at least
$3,750,000. Effective
- 2 -
<PAGE> 26
December 31, 1998 and at all times thereafter, Borrower shall
maintain a Tangible Net Worth of at least $6,000,000.
"Tangible Net Worth" shall mean the Borrower's total assets
(not including any intangible assets of Borrower, including,
without limitation, good will, franchises, licenses, patents,
trademarks, trade names, copyrights, service marks and brand
names, and the aggregate amount of any investments (excluding
marketable securities), loans, and advances made by Borrower
and its subsidiaries) minus total liabilities (which shall
include fully subordinated debt).
(c) Total Liabilities to Tangible Net Worth Ratio -
Effective March 31, 1998 through September 29, 1998, Borrower
shall at all times maintain this ratio at not more than 5.00
to 1.00. Effective September 30, 1998 through December 30,
1998, Borrower shall at all times maintain this ratio at not
more than 3.50 to 1.00. Effective December 31, 1998 and at
all times thereafter, Borrower shall at all times maintain
this ratio at not more than 2.00 to 1.00. For purposes of
this computation, "Total Liabilities" shall mean all of
Borrower's liabilities, including capitalized leases and all
reserves for deferred taxes and other deferred sums appearing
on the liabilities side of Borrower's balance sheet, in
accordance with Generally Accepted Accounting Principles
applied on a consistent basis.
(d) Funded Debt to Earnings Before Interest, Taxes,
Depreciation and Amortization Ratio - Effective June 30, 1998
through September 29, 1998, the Borrower shall at all times
maintain this ratio at not more than 12.00 to 1.00. Effective
- 3 -
<PAGE> 27
September 30, 1998 through December 30, 1998, Borrower shall
at all times maintain this ratio at not more than 2.50 to
1.00. Effective December 31, 1998 and at all times
thereafter, Borrower shall maintain this ratio at not more
than 1.50 to 1.00. "Funded Debt" shall mean current and long
term notes payable and capital leases. "Earnings" shall mean
net operating income.
(e) Loans and Advances - Effective March 31, 1998
through December 30, 1998, Borrower shall not have outstanding
at any time loans or advances, except for ordinary course of
business travel and expense advances, to any person or entity
which total more than $134,000 in the aggregate. Effective
December 31, 1998, and at all times thereafter, Borrower shall
not have outstanding at any time loans or advances, except for
ordinary course of business travel and expense advances, to
any person or entity which total more than $66,000 in the
aggregate.
(f) Limitation on Debt - Except for loans from other
lenders up to an aggregate amount of $500,000, and except for
loans from the Bank, Borrower shall not, directly or
indirectly, create, incur, assume or become liable for, any
debt or capitalized leases.
5. Borrowing Base. The second paragraph of the section of the
Loan Agreement entitled "BORROWING BASE" is deleted in its entirety and
replaced by the following:
The Maximum Principal Amount shall be an amount equal
to 80% of the net amount of Eligible Accounts less than or
equal to 90 days from the original invoice date, less the
amount of any Reserve required by the Bank.
- 4 -
<PAGE> 28
6. Borrowing Base. The fourth paragraph of the section of the
Loan Agreement entitled "BORROWING BASE" is deleted in its entirety
7. No Novation. All of the terms, covenants and conditions of
the Loan Agreement shall continue in full force and effect, as amended by this
First Amendment. This First Amendment is not intended to be, and shall not
constitute, a substitution or novation of the Loan Agreement.
8. Renewal of Covenants and Agreements. The Borrower renews its
covenant and agreement to perform, comply with and be bound by each and every
of the other terms and provisions of the Loan Agreement, as amended by this
First Amendment.
9. Successors and Assigns. Each and every of the terms and
provisions of this First Amendment shall be binding upon and shall inure to the
benefit of the parties and their respective heirs, successors, personal
representatives and assigns.
IN WITNESS WHEREOF, the Borrower has caused this First Amendment to be
executed under seal as of the date first written above.
WITNESS: UOL PUBLISHING, INC.
By: (SEAL)
- ------------------------------ -----------------------------
Carl N. Tyson, President
COGNITIVE TRAINING ASSOC., INC.
By: (SEAL)
- ------------------------------ -----------------------------
Carl N. Tyson, President
- 5 -
<PAGE> 29
IVY SOFTWARE, INC.
By: (SEAL)
- ------------------------------ -----------------------------
Carl N. Tyson, President
COOPER & ASSOCIATES, INC.
By: (SEAL)
- ------------------------------ -----------------------------
Carl N. Tyson, President
HTR, INC.
By: (SEAL)
- ------------------------------ -----------------------------
Carl N. Tyson, President
UOL LEASING, INC.
By: (SEAL)
- ------------------------------ -----------------------------
Carl N. Tyson, President
FIRST UNION NATIONAL BANK
By: (SEAL)
- ------------------------------ -----------------------------
Stephen H. MacNabb
Senior Vice President
- 6 -
<PAGE> 30
IMPORTANT
THIS ALLONGE TO PROMISSORY NOTE AMENDS AN INSTRUMENT WHICH
CONTAINS A CONFESSION OF JUDGMENT PROVISION WHICH CONSTITUTES A
WAIVER OF IMPORTANT RIGHTS YOU MAY HAVE AS A DEBTOR AND ALLOWS
THE CREDITOR TO OBTAIN A JUDGMENT AGAINST YOU WITHOUT FURTHER
NOTICE
FIRST ALLONGE TO PROMISSORY NOTE (LINE OF CREDIT)
This FIRST ALLONGE TO PROMISSORY NOTE (LINE OF CREDIT) (this
"Allonge") is effective the 31st day of March, 1998, by and among FIRST UNION
NATIONAL BANK (the "Bank"), and UOL PUBLISHING, INC., COGNITIVE TRAINING
ASSOCIATES, INC., IVY SOFTWARE, INC., COOPER & ASSOCIATES, INC., HTR, INC., and
UOL LEASING, INC. (collectively, the "Borrower" and individually a "Borrower").
RECITALS
1. The Borrower is indebted to the Bank (the "Line of Credit")
pursuant to a Promissory Note (the "Note") dated December 15, 1997, in the face
amount of $3,000,000.
2. The Borrower has requested that the Bank modify the terms of the
Note and the Bank is agreeable to doing so subject to the terms and conditions
set forth herein and in a Loan Modification Agreement executed
contemporaneously with this Allonge (the "Loan Modification Agreement").
NOW, THEREFORE, in consideration of the foregoing, the Borrower and
the Bank agree that the Note is amended as follows:
1. Amount of Line of Credit. The first full paragraph on page
one of the Note is deleted in its entirety, and replaced by the following:
Borrower promises to pay to the order of Bank, in
lawful money of the United States of America, at its office
indicated above or wherever else Bank may specify, the Line of
Credit Amount or such sum as may be advanced and outstanding
from time to time with interest on the unpaid principal
balance at the
<PAGE> 31
rate and on the terms provided in this Promissory Note
(including all renewals, extensions or modifications hereof,
this "Note"). The Line of Credit Amount shall mean $2,000,000
up to and including April 14, 1998 and, thereafter at all
times, $1,500,000.
2. Interest Rate. In the section of the Note entitled "INTEREST
RATE", the number "2.75%" is changed to "3.75%".
3. Attorneys' Fees and Other Collection Costs. The section of
the Note entitled "ATTORNEYS' FEES AND OTHER COLLECTION COSTS" is deleted in
its entirety and replaced with the following:
Borrower agrees to pay to Bank, upon written demand
by Bank from time to time, the amount of all expenses,
including attorneys' fees and expenses, paid or incurred by
Bank
(a) after any of the Obligations are not paid when
due (whether by demand, stated maturity, acceleration or
otherwise) or a Default under, or as defined in, this Note or
any of the other Loan Documents shall occur, in exercising or
enforcing or consulting with counsel concerning any of its
rights hereunder, under the other Loan Documents or under law,
or
(b) in defending any and all non-meritorious or
previously waived demands, claims, counterclaims,
cross-claims, causes of action, litigation and proceedings of
every kind and nature asserted, commenced or instituted
against Bank, or any of Bank's officers, directors or
employees, by Borrower, any subsidiary or any other obligor on
account of, as a result of or relating to, any
- 2 -
<PAGE> 32
action taken or not taken by Bank in connection with the Line
of Credit, any other of the Obligations, the Collateral or the
enforcement or exercise by Bank of any rights or remedies of
Bank under this Note, under any of the other Loan Documents or
under law.
Borrower also agrees to pay to Bank, upon written
demand by Bank from time to time, interest on the outstanding
amount of such expenses paid by Bank, from the date of Bank's
demand for payment of such expenses until the same are paid in
full, at the highest rate and calculated in the manner
provided in the Note.
5. Financial and Other Information. The first sentence in the
section of the Note entitled "FINANCIAL AND OTHER INFORMATION" is amended to
add the following clause at the beginning of the sentence: "In addition to the
financial information which the Loan Agreement requires the Borrower to provide
to the Bank".
6. Line of Credit Advances. The second sentence in the section
of the Note entitled "LINE OF CREDIT ADVANCES" is changed to read as follows:
"Bank's obligation to make Advances under this Note and the Line of Credit
shall terminate upon the occurrence of a Default (and regardless of whether (a)
the Bank has given notice to the Borrower of the Default and (b) any cure
period following notice has expired).
7. No Novation. All of the terms, covenants and conditions of
the Note shall continue in full force and effect, as amended by this Allonge.
This Allonge is not intended to be, and shall not constitute, a substitution or
novation of the Note.
8. Renewal of Covenants and Agreements. The Borrower renews its
covenant and agreement to pay the indebtedness evidenced by the Note in
accordance with the terms and provisions thereof, as amended by this Allonge.
The Borrower further renews its covenant and
- 3 -
<PAGE> 33
agreement to perform, comply with and be bound by each and every of the other
terms and provisions of the Note, as amended by this Allonge, each and every of
the terms and provisions of the other loan documents relating to the Line of
Credit (the "Loan Documents"), as amended by the Loan Modification Agreement
and any other documents executed in connection with the Loan Modification
Agreement which relate to the Line of Credit.
9. Representations. The Borrower represents, warrants and agrees
that the statements set forth in the Recitals of this Allonge are true and
correct. The Borrower further represents, warrants and agrees that (i) there
are no claims, defenses or setoffs with respect to the Note, as amended by this
Allonge or with respect to the indebtedness evidenced or secured thereby or
with respect to the collection or enforcement of any of the same; (ii) no
Default has occurred and is continuing under the Note, as amended by this
Allonge; (iii) the Bank has made no representations or commitments, oral or
written, or undertaken any obligations other than as expressly set forth in
this Allonge or in the Loan Modification Agreement and (iv) each and every of
the provisions of the Note, as amended by this Allonge, and each and every of
the provisions of all Loan Documents are, and shall remain, in full force and
effect and lawful and binding obligations of the Borrower and enforceable in
accordance with their respective terms.
10. Successors and Assigns. Each and every of the terms and
provisions of this Allonge shall be binding upon and shall inure to the benefit
of the parties and their respective heirs, successors, personal representatives
and assigns.
IN WITNESS WHEREOF, the Borrower has caused this Allonge to be
executed under seal as of the date first written above.
WITNESS: UOL PUBLISHING, INC.
By: (SEAL)
- -------------------------------- -----------------------------
Carl N. Tyson, President
(Signatures continued on next page)
- 4 -
<PAGE> 34
COGNITIVE TRAINING ASSOC., INC.
By: (SEAL)
- -------------------------------- -----------------------------
Carl N. Tyson, President
IVY SOFTWARE, INC.
By: (SEAL)
- -------------------------------- -----------------------------
Carl N. Tyson, President
COOPER & ASSOCIATES, INC.
By: (SEAL)
- -------------------------------- -----------------------------
Carl N. Tyson, President
HTR, INC.
By: (SEAL)
- -------------------------------- -----------------------------
Carl N. Tyson, President
UOL LEASING, INC.
By: (SEAL)
- -------------------------------- -----------------------------
Carl N. Tyson, President
FIRST UNION NATIONAL BANK
By: (SEAL)
- -------------------------------- -----------------------------
Stephen H. MacNabb
Senior Vice President
- 5 -
<PAGE> 35
IMPORTANT
THIS ALLONGE TO PROMISSORY NOTE AMENDS AN INSTRUMENT WHICH
CONTAINS A CONFESSION OF JUDGMENT PROVISION WHICH CONSTITUTES A
WAIVER OF IMPORTANT RIGHTS YOU MAY HAVE AS A DEBTOR AND ALLOWS
THE CREDITOR TO OBTAIN A JUDGMENT AGAINST YOU WITHOUT FURTHER
NOTICE
FIRST ALLONGE TO PROMISSORY NOTE (TERM LOAN)
This FIRST ALLONGE TO PROMISSORY NOTE (TERM LOAN) (this "Allonge") is
effective the 31st day of March, 1998, by and among FIRST UNION NATIONAL BANK
(the "Bank"), and UOL PUBLISHING, INC., COGNITIVE TRAINING ASSOCIATES, INC.,
IVY SOFTWARE, INC., COOPER & ASSOCIATES, INC., HTR, INC., and UOL LEASING, INC.
(collectively, the "Borrower" and individually a "Borrower").
RECITALS
1. The Borrower is indebted to the Bank (the "Term Loan") pursuant to
a Promissory Note (the "Note") dated December 15, 1997, in the face amount of
$3,000,000.
2. The Borrower has requested that the Bank modify the terms of the
Note and the Bank is agreeable to doing so subject to the terms and conditions
set forth herein and in a Loan Modification Agreement executed
contemporaneously with this Allonge (the "Loan Modification Agreement").
NOW, THEREFORE, in consideration of the foregoing, the Borrower and
the Bank agree that the Note is amended as follows:
1. Interest Rate: In the section of the Note entitled "INTEREST
RATE", the number "3.50%" is changed to "3.75%".
2. Repayment Terms. The section of the Note entitled "REPAYMENT
TERMS" is deleted in its entirety and replaced with the following:
This Note shall be due and payable in consecutive
monthly payments of accrued interest only commencing on
January 31,
<PAGE> 36
1998, and on the last day of each month thereafter until fully
paid. The Borrower shall make the following principal
payments to the Bank on this Note:
(a) $500,000 on or before May 15, 1998;
(b) $1,000,000 on or before July 15, 1998;
(c) in addition to the principal payments set forth
in (a) and (b) above, an amount up to $485,750 on or before
May 15, 1998, if the Borrower executes a written agreement
modifying, restructuring, or extending its debt to Teletutor,
which agreement reduces the cash payment which the Borrower is
required to make to Teletutor on or before May 15, 1998; and
(d) in addition to the principal payments set forth
in (a), (b) and (c) above, an amount equal to all net sale
proceeds of the consulting business of HTR, Inc., which, based
on an existing offer letter, the Borrower estimates to be in
the amount of $700,000, and which the Borrower shall pay to
the Bank at closing on the sale.
In any event, all principal and accrued interest
shall be due and payable on November 15, 1998.
3. Facility Fee. The section of the Note entitled "FACILITY FEE"
is deleted in its entirety and replaced with the following: "Borrower shall
pay Bank a facility fee of 1% of the amount of each principal payment due under
this Note, which facility fee shall be payable contemporaneously with the
delivery by the Borrower of the principal payment."
4. Attorneys' Fees and Other Collection Costs. The section of
the Note entitled "ATTORNEYS' FEES AND OTHER COLLECTION COSTS" is deleted in
its entirety and replaced with the following:
- 2 -
<PAGE> 37
Borrower agrees to pay to Bank, upon written demand
by Bank from time to time, the amount of all expenses,
including attorneys' fees and expenses, paid or incurred by
Bank
(a) after any of the Obligations are not paid when
due (whether by demand, stated maturity, acceleration or
otherwise) or a Default under, or as defined in, this Note or
any of the other Loan Documents shall occur, in exercising or
enforcing or consulting with counsel concerning any of its
rights hereunder, under the other Loan Documents or under law,
or
(b) in defending any and all non-meritorious or
previously waived demands, claims, counterclaims,
cross-claims, causes of action, litigation and proceedings of
every kind and nature asserted, commenced or instituted
against Bank, or any of Bank's officers, directors or
employees, by Borrower, any subsidiary or any other obligor on
account of, as a result of or relating to, any action taken or
not taken by Bank in connection with the Term Loan, any other
of the Obligations, the Collateral or the enforcement or
exercise by Bank of any rights or remedies of Bank under this
Note, under any of the other Loan Documents or under law.
Borrower also agrees to pay to Bank, upon written
demand by Bank from time to time, interest on the outstanding
amount of such expenses paid by Bank, from the date of Bank's
demand for payment of such expenses until the same are paid in
full, at the highest rate and calculated in the manner
provided in the Note.
5. Financial and Other Information. The first sentence in the
section of the Note entitled "FINANCIAL AND OTHER INFORMATION" is amended to
add the following
- 3 -
<PAGE> 38
clause at the beginning of the sentence: "In addition to the financial
information which the Loan Agreement requires the Borrower to provide to the
Bank,". In addition, the following sentence is added to the end of the section
of the Note entitled "FINANCIAL AND OTHER INFORMATION": "The Borrower shall
provide to the Bank a copy, when executed, of any agreement for the sale of the
consulting business of HTR, Inc. and shall provide to the Bank a copy, when
executed, of any written agreement modifying, restructuring, or extending the
Borrower's debt to Teletutor.
6. No Novation. All of the terms, covenants and conditions of
the Note shall continue in full force and effect, as amended by this Allonge.
This Allonge is not intended to be, and shall not constitute, a substitution or
novation of the Note.
7. Renewal of Covenants and Agreements. The Borrower renews its
covenant and agreement to pay the indebtedness evidenced by the Note in
accordance with the terms and provisions thereof, as amended by this Allonge.
The Borrower further renews its covenant and agreement to perform, comply with
and be bound by each and every of the other terms and provisions of the Note,
as amended by this Allonge, each and every of the terms and provisions of the
other loan documents relating to the Term Loan (the "Loan Documents"), as
amended by the Loan Modification Agreement and any other documents executed in
connection with the Loan Modification Agreement which relate to the Term Loan.
8. Representations. The Borrower represents, warrants and agrees
that the statements set forth in the Recitals of this Allonge are true and
correct. The Borrower further represents, warrants and agrees that (i) there
are no claims, defenses or setoffs with respect to the Note, as amended by this
Allonge or with respect to the indebtedness evidenced or secured thereby or
with respect to the collection or enforcement of any of the same; (ii) no
Default has occurred and is continuing under the Note, as amended by this
Allonge; (iii) the Bank has made no representations or commitments, oral or
written, or undertaken any obligations other than as expressly set forth in
this Allonge or in the Loan Modification Agreement and (iv) each and
- 4 -
<PAGE> 39
every of the provisions of the Note, as amended by this Allonge, and each and
every of the provisions of all Loan Documents are, and shall remain, in full
force and effect and lawful and binding obligations of the Borrower and
enforceable in accordance with their respective terms.
9. Successors and Assigns. Each and every of the terms and
provisions of this Allonge shall be binding upon and shall inure to the benefit
of the parties and their respective heirs, successors, personal representatives
and assigns.
IN WITNESS WHEREOF, the Borrower has caused this Allonge to be
executed under seal as of the date first written above.
WITNESS: UOL PUBLISHING, INC.
By: (SEAL)
- ------------------------------ -----------------------------
Carl N. Tyson, President
COGNITIVE TRAINING ASSOC., INC.
By: (SEAL)
- ------------------------------ -----------------------------
Carl N. Tyson, President
IVY SOFTWARE, INC.
By: (SEAL)
- ------------------------------ -----------------------------
Carl N. Tyson, President
(signatures continued on next page)
- 5 -
<PAGE> 40
COOPER & ASSOCIATES, INC.
By: (SEAL)
- ------------------------------ -----------------------------
Carl N. Tyson, President
HTR, INC.
By: (SEAL)
- ------------------------------ -----------------------------
Carl N. Tyson, President
UOL LEASING, INC.
By: (SEAL)
- ------------------------------ -----------------------------
Carl N. Tyson, President
FIRST UNION NATIONAL BANK
By: (SEAL)
- ------------------------------ -----------------------------
Stephen H. MacNabb
Senior Vice President
- 6 -
<PAGE> 1
EXHIBIT 10.30
UOL PUBLISHING, INC.
SERIES C PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
This Series C Preferred Stock and Warrant Purchase Agreement (the
"Agreement") is entered into as of the 27th day of March 1998, by and among
UOL Publishing, Inc., a Delaware corporation (the "Company"), and the parties
listed on Exhibit A hereto (the "Purchasers").
WHEREAS, the Company desires to enter into this Agreement with the
Purchasers to sell and issue shares of its Series C Preferred Stock (as defined
below), together with warrants (the "Warrants") to purchase shares of its
Common Stock (as defined below), to the Purchasers; and
WHEREAS, the Purchasers desire to enter into this Agreement to acquire
shares of Series C Preferred Stock of the Company and the Warrants on the terms
and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement, the parties to this Agreement mutually agree as follows:
1. AUTHORIZATION AND SALE.
1.1 AUTHORIZATION. The Company has authorized the
issuance and sale of up to an aggregate of 1,000,000 shares of its Series C
Convertible Preferred Stock, $0.01 par value per share (the "Series C Preferred
Stock"), having substantially the rights, preferences, privileges and
restrictions set forth in the Certificate of Designations, Preferences and
Rights of Series C Convertible Preferred Stock in substantially the form
attached hereto as Exhibit B (the "Certificate of Designations").
1.2 SALE. Subject to the terms and conditions hereof,
each Purchaser agrees to purchase from the Company and the Company agrees to
sell and issue to each such Purchaser that number of shares of Series C
Preferred Stock as set forth on Exhibit A hereto (the "Shares") and Warrants
(in substantially the form attached hereto as Exhibit C) to purchase up to that
number of shares of common stock, $0.01 par value per share, of the Company
(the "Common Stock") set forth on Exhibit A hereto (the "Warrant Shares"), at a
purchase price of $8.4625 for each Share and Warrant together.
2. CLOSINGS; DELIVERY.
2.1 CLOSINGS. The initial closing of the purchase and
sale of the Shares and Warrant under this Agreement shall take place at 2:00
p.m. (Eastern time) on March 31, 1998 at the offices of Wyrick Robbins Yates &
Ponton LLP, 4101 Lake Boone Trail, Suite 300, Raleigh, North Carolina, or at
such other time and place as the Company and the Purchaser may agree.
<PAGE> 2
Additional Purchasers may enter into this Agreement with the Company's consent
and additional Shares and Warrants sold (up to a maximum of 1,000,000 Shares
and the same number of Warrants) at additional closings (each closing
hereunder, a "Closing").
2.2 DELIVERY. At each Closing, subject to the terms and
conditions hereof, the Company will deliver to the relevant Purchaser(s)
certificates representing the Shares and Warrants to be purchased by such
Purchaser(s) from the Company at such Closing, dated the date of such Closing,
against payment of the purchase price therefor payable as of the date of such
Closing by check or wire transfer.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to the Purchaser as follows:
3.1 ORGANIZATION AND STANDING. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, and has all requisite corporate power and
authority to own and operate its properties and assets and to carry on its
business as now conducted and as currently proposed to be conducted. The
Company is duly qualified and authorized to do business, and is in good
standing as a foreign corporation, in Virginia and in each other jurisdiction
where the nature of its activities and of its properties (both owned and
leased) makes such qualification necessary, except where a failure to do so
would not have a material adverse effect on the Company.
3.2 CAPITALIZATION. The authorized capital of the
Company, immediately prior to the Closing, will consist of: 1,000,000 shares of
Series C Convertible Preferred Stock, $0.01 par value per share, no shares of
which are issued and outstanding; 9,000,000 shares of undesignated Preferred
Stock, $0.01 par value per share; and 36,000,000 shares of Common Stock, $0.01
par value per share, 3,819,467 of which are issued and outstanding as of March
25, 1998.
All of the outstanding shares of Common Stock and Preferred Stock that
have been duly authorized and validly issued, are fully paid and nonassessable
and were issued in compliance with all applicable federal and state securities
laws. The Company has duly and validly reserved (i) the Shares for issuance as
contemplated hereby, (ii) an appropriate number of shares of Common Stock for
issuance upon conversion of the Shares, (iii) an appropriate number of shares
of Common Stock for issuance upon exercise of the Warrants and (iv) 1,951,452
shares of Common Stock for issuance upon exercise of warrants issued to certain
stockholders of the Company and options granted to officers, directors,
employees and consultants of the Company under the Company's stock option plan.
Except for the conversion rights associated with the Series C Preferred Stock
and the rights created under this Agreement and the Registration Rights
Agreement in substantially the form attached hereto as Exhibit D (the "Rights
Agreement"), and except as disclosed in the SEC Filings (as defined below),
there are no outstanding rights of first refusal, preemptive rights or other
rights, options, warrants, conversion rights or other agreements, either
directly or indirectly, for the purchase or acquisition from the Company of any
shares of its capital stock.
2
<PAGE> 3
3.3 AUTHORIZATION. All corporate action on the part of
the Company and its directors and stockholders necessary for the authorization,
execution and delivery of this Agreement and the Rights Agreement, the
performance of all the Company's obligations hereunder and thereunder, and the
authorization, issuance, sale and delivery of the Shares and Warrants and the
Common Stock issuable upon conversion or exercise thereof, as the case may be
(the "Underlying Common Stock"), has been taken. Each of this Agreement and
the Rights Agreement, when executed and delivered by the Company and the
respective other parties thereto, shall constitute a valid and legally binding
obligation of the Company enforceable in accordance with its terms, subject to
laws of general application relating to bankruptcy, insolvency and the relief
of debtors, rules and laws governing specific performance, injunctive relief
and other equitable remedies.
3.4 VALIDITY OF THE SHARES. The Shares and Warrants and
the Underlying Common Stock, when issued pursuant to the terms of the
Certificate of Designations and the Warrants, as appropriate, will be validly
issued, and fully paid and nonassessable and will be free of any liens or
encumbrances; provided, however, that the Shares and Warrants and the
Underlying Common Stock may be subject to restrictions on transfer under state
and/or federal securities laws as set forth herein.
3.5 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
violation of any provisions of its Certificate of Incorporation or its Bylaws
as amended, or of any provisions of any material agreement or any judgment,
decree or order by which it is bound or any statute, rule or regulation
applicable to the Company. Subject to the compliance with such filings as may
be required to be made with the Securities and Exchange Commission (the "SEC"),
the National Association of Securities Dealers, Inc. (the "NASD") and certain
state securities commissions, the execution, delivery and performance of this
Agreement and the Rights Agreement and the issuance and sale of the Shares and
Warrants pursuant hereto, and the issuance of the Underlying Common Stock
pursuant to the Certificate of Designations and the Warrants, will not result
in any such violation or be in conflict with or constitute a default under any
such provisions or result in the creation of any mortgage, pledge, lien,
encumbrance or charge upon any of the properties or assets of the Company.
3.6 GOVERNMENTAL CONSENTS. All consents, approvals, orders
or authorization of, or registrations, qualifications, designations,
declarations or filings with, any federal or state governmental authority on
the part of the Company required in connection with the valid execution and
delivery of this Agreement and the Rights Agreement, the offer, sale or
issuance of the Shares, the Warrant and the Underlying Common Stock, or the
consummation of any other transaction contemplated hereby, have been obtained,
except for notices required to be filed with the SEC, the NASD and certain
state securities commissions thereafter, which notices will be filed on a
timely basis.
3.7 ACCURACY OF REPORTS. All reports (the "SEC Filings")
required to be filed by the Company within the year prior to the date of this
Agreement under the Securities Exchange Act of 1934, have been duly filed, were
in substantial compliance with the requirements of their respective forms, were
complete and correct in all material respects as of the dates at which the
information was furnished, and contained (as of such dates) no untrue statement
of a material fact
3
<PAGE> 4
or omitted to state a material fact necessary in order to make the statements
made therein, in light of the circumstances under which they were made, not
misleading.
3.8 FINDERS' FEES. The Company (a) represents and warrants
that it has retained no finder or broker in connection with the transactions
contemplated by this Agreement and (b) hereby agrees to indemnify and to hold
the Purchasers harmless of and from any liability for any commission or
compensation in the nature of a finder's fee to any broker or other person or
firm (and the costs and expenses of defending against such liability or
asserted liability) for which the Company or any of its employees or
representatives are responsible.
3.9 DISCLOSURE. No representation or warranty of the Company
contained in this Agreement contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements
contained herein or therein, in light of the circumstances under which they
were made, not misleading.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each
Purchaser hereby represents and warrants to the Company as follows:
4.1 POWER AND AUTHORITY. It has the requisite power and
authority to enter into this Agreement and the Rights Agreement, to purchase
the Shares and Warrants and to carry out and perform its obligations under the
respective terms of this Agreement and the Rights Agreement.
4.2 DUE EXECUTION. Each of this Agreement and the Rights
Agreement has been duly authorized, executed and delivered by it, and, upon due
execution and delivery by the Company, will be a valid and binding agreement of
it, subject to laws of general application relating to bankruptcy, insolvency
and the relief of debtors, rules and laws governing specific performance,
injunctive relief and other equitable remedies.
4.3 INVESTMENT REPRESENTATIONS.
(a) This Agreement is made with such Purchaser in
reliance upon such Purchaser's representation to the Company, which by its
acceptance hereof such Purchaser hereby confirms, that the Shares and Warrants
to be received by it will be acquired for investment for its own account, not
as a nominee or agent, and not with a view to the sale or distribution of any
part thereof, and that it has no present intention of selling, granting
participation in, or otherwise distributing the same, but subject nevertheless
to any requirement of law that the disposition of its property shall at all
times be within its control. By executing this Agreement, such Purchaser
further represents that it does not have any contract, undertaking, agreement,
or arrangement with any person to sell, transfer or grant participations to
such person, or to any third person, with respect to any of the Shares, the
Warrants or any Underlying Common Stock.
(b) Such Purchaser understands that the Shares, the
Warrants and the Underlying Common Stock have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), on the grounds that
the sale provided for in this Agreement and
4
<PAGE> 5
the issuance of securities hereunder is exempt from registration under the
Securities Act, and that the Company's reliance on such exemption is predicated
in part upon the Purchaser's representations and warranties set forth herein.
Such Purchaser realizes that the basis for such exemption may not be present in
the event that, notwithstanding such representations and warranties, such
Purchaser has in mind merely acquiring the Shares for a fixed or determined
period in the future, or for a market rise, or for sale if the market does not
rise. Such Purchaser does not have any such intention.
(c) Such Purchaser represents that it is experienced
in evaluating companies such as the Company, is able to fend for itself in the
transactions contemplated by this Agreement, has such knowledge and experience
in financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment. Such Purchaser further represents that it has had the opportunity
to consult with its own legal counsel with respect hereto, and has had access,
during the course of the transactions and prior to its purchase of the Shares
and Warrants, to all such information as it deemed necessary or appropriate (to
the extent the Company possessed such information or could acquire it without
unreasonable effort or expense) and that it has had, during the course of the
transactions and prior to its purchase of the Shares and Warrants, the
opportunity to ask questions of, and receive answers from, the Company
concerning the terms and conditions of the offering and to obtain additional
information (to the extent the Company possessed such information or could
acquire it without unreasonable effort or expense) necessary to verify the
accuracy of any information furnished to it or to which it had access.
(d) Such Purchaser understands that the Shares, the
Warrants and the Underlying Common Stock may not be sold, transferred or
otherwise disposed of without registration under the Securities Act or an
exemption therefrom, and that in the absence of an effective registration
statement covering the Shares or the Warrants (or the Underlying Common Stock)
or an available exemption from registration under the Securities Act, the
Shares and Warrants (and the Underlying Common Stock) must be held
indefinitely. In particular, such Purchaser is aware that the Shares and
Warrants (and the Underlying Common Stock) may not be sold pursuant to Rule 144
promulgated under the Securities Act unless all of the conditions of that Rule
are met. Such Purchaser represents that, in the absence of an effective
registration statement covering the Shares or the Warrants (or the Underlying
Common Stock) it will sell, transfer or otherwise dispose of the Shares or the
Warrants (or the Underlying Common Stock) only in a manner consistent with its
representations set forth herein.
(e) Such Purchaser agrees that in no event will it
make a transfer or disposition of any of the Shares or the Warrants, or the
Underlying Common Stock, other than in compliance with all applicable laws.
(f) Such Purchaser understands that each certificate
representing the Shares, the Warrants or the Underlying Common Stock will be
endorsed with restrictive legends as required by applicable state securities
laws and substantially as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE
5
<PAGE> 6
"SECURITIES ACT"), OR APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES HAVE
BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND
MAY NOT BE SOLD, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR THE AVAILABILITY OF
AN EXEMPTION FROM THE REGISTRATION PROVISIONS OF THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS.
4.4 GOVERNMENT CONSENTS. No consent, approval or
authorization of, or designation, declaration or filing with, any state,
federal or foreign governmental authority on the part of such Purchaser because
of any special characteristic of such Purchaser is required in connection with
the valid execution and delivery of this Agreement by such Purchaser or the
consummation by such Purchaser of the transactions contemplated hereby;
provided, however, that such Purchaser makes no representations as to
compliance with applicable state securities laws.
4.6 FINDERS' FEES. Such Purchaser (a) represents and
warrants that it has retained no finder or broker in connection with the
transactions contemplated by this Agreement and (b) hereby agrees to indemnify
and to hold the Company harmless of and from any liability for any commission
or compensation in the nature of a finder's fee to any broker or other person
or firm (and the costs and expenses of defending against such liability or
asserted liability) for which such Purchaser or any of its employees or
representatives are responsible.
5. CONDITIONS TO THE PURCHASERS' OBLIGATIONS AT A CLOSING. The
obligations of a Purchaser to purchase the Shares and Warrants at a Closing are
subject to the fulfillment on or before such Closing of each of the following
conditions:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Section 3 shall be true in all material
respects on and as of such Closing with the same force and effect as if they
had been made at such Closing.
5.2 PERFORMANCE. The Company shall have performed and
complied in all material respects with all agreements and conditions contained
in this Agreement required to be performed or complied with by it on or before
such Closing.
5.3 QUALIFICATIONS. All authorizations, approvals or
permits, if any, of any governmental authority or regulatory body of the United
States or of any state that are required prior to and in connection with the
lawful issuance and sale of the Shares and Warrants pursuant to this Agreement
shall have been duly obtained and shall be effective on and as of such Closing.
5.4 LEGAL INVESTMENT. At the time of such Closing, the
purchase of the Shares and Warrants by the Purchaser hereunder shall be legally
permitted by all laws and regulations to which it or the Company are subject.
6
<PAGE> 7
5.5 PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated at such Closing
hereby and all documents and instruments incident to such transactions shall be
reasonably satisfactory in substance and form to the Purchaser, and the
Purchaser shall have received all such counterpart originals or certified or
other copies of such documents as it may reasonably request.
5.6 RIGHTS AGREEMENT. The Company shall have executed
and delivered the Rights Agreement.
6. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT A CLOSING. The
obligations of the Company to issue and sell Shares and Warrants at a Closing
are subject to the fulfillment on or before such Closing of each of the
following conditions:
6.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Purchasers contained in Section 4 shall be true in all
material respects on and as of such Closing with the same force and effect as
if they had been made at such Closing.
6.2 PERFORMANCE. The Purchasers shall have performed and
complied in all material respects with all agreements and conditions contained
in this Agreement required to be performed or complied with by it on or before
such Closing.
6.3 QUALIFICATIONS. All authorizations, approvals or
permits, if any, of any governmental authority or regulatory body of the United
States or of any state that are required prior to and in connection with the
lawful issuance and sale of the Shares and Warrants pursuant to this Agreement
shall have been duly obtained and shall be effective on and as of such Closing.
6.4 LEGAL INVESTMENT. At the time of such Closing, the
purchase of the Shares and Warrants by the Purchasers hereunder shall be
legally permitted by all laws and regulations to which they or the Company are
subject.
7. MISCELLANEOUS.
7.1 ENTIRE AGREEMENT; EFFECTIVENESS. This Agreement and the
documents referred to herein constitute the entire agreement among the parties,
and no party shall be liable or bound to any other party in any manner by any
warranties, representations or covenants except as specifically set forth
herein or therein. The terms and conditions of this Agreement shall inure to
the benefit of and be binding upon the successors and assigns of the parties.
Nothing in this Agreement, express or implied, is intended to confer upon any
third party any rights, remedies, obligations or liabilities under or by reason
of this Agreement, except as expressly provided in this Agreement.
7.2 GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of Delaware as applied to agreements
among Delaware residents, made and to be performed entirely within the State of
Delaware.
7
<PAGE> 8
7.3 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.4 HEADINGS. The headings used in this Agreement are used
for convenience only and are not to be considered in construing or interpreting
this Agreement.
7.5 NOTICES. Any notice required or permitted under this
Agreement shall be given in writing and shall be deemed effectively given upon
personal delivery or upon deposit with the United States Post Office, by
registered or certified mail, postage prepaid, or sent by confirmed telecopy,
addressed (a) if the Company, at
UOL Publishing, Inc.
8251 Greensboro Drive, Suite 500
McLean, Virginia 22102
Attention: President
With a copy to
Larry E. Robbins, Esq.
Wyrick Robbins Yates & Ponton LLP
4101 Lake Boone Trail, Suite 300
Raleigh, North Carolina 27607-7506
or at such other address as the Company shall have furnished to a Purchaser in
writing, and (b) if to a Purchaser, at its address on the books and records of
the Company.
7.6 ATTORNEYS' FEES. Should any litigation or arbitration be
commenced between the parties hereto concerning this Agreement, the party
prevailing in such litigation or arbitration shall be entitled, in addition to
such other relief as may be granted, to a reasonable sum for attorneys' fees
and costs in such litigation or arbitration, which fees and costs shall be
determined by the court or arbitrator, as the case may be.
7.7 SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by any Purchaser
and any Closing. All statements as to factual matters contained in any
certificate or other instrument delivered by or on behalf of the Company
pursuant hereto or in connection with the transactions contemplated hereby
shall be deemed to be representations and warranties made by the Company
hereunder as of the date of such certificate or instrument.
7.8 SEVERABILITY. In case any provision of this Agreement
shall be invalid, illegal or unenforceable, it shall to the extent practicable,
be modified so as to make it valid, legal and enforceable and to retain as
nearly as practicable the intent of the parties, and the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
8
<PAGE> 9
7.9 DELAYS OR OMISSIONS. No delay or omission to exercise
any right, power or remedy accruing to the Company or a Purchaser or any
subsequent holder of any Shares or Warrants upon any breach, default or
noncompliance of a Purchaser, any subsequent holder of any Shares or Warrants
or the Company under this Agreement, the Certificate of Designations, or the
Warrants, shall impair any such right, power or remedy, nor shall it be
construed to be a waiver of any such breach, default or noncompliance, or any
acquiescence therein, or of any similar breach, default or noncompliance
thereafter occurring. It is further agreed that any waiver, permit, consent or
approval of any kind or character on the part of the Company or a Purchaser of
any breach, default or noncompliance under this Agreement or under the
Certificate of Designations or any waiver on the Company's or a Purchaser's
part of any provisions or conditions of this Agreement must be in writing and
shall be effective only to the extent specifically set forth in such writing
and that all remedies, either under this Agreement, the Certificate of
Designations or the Warrants, by law, or otherwise afforded to the Company and
the Purchasers, shall be cumulative and not alternative.
7.10 INFORMATION CONFIDENTIAL. Each Purchaser acknowledges
that this Agreement and all attachments hereto are confidential and for such
Purchaser's use only, and it will refrain from using such information and any
Company confidential information obtained by it pursuant to Section 7.13 hereof
(collectively, "Confidential Information") or reproducing, disclosing or
disseminating Confidential Information to any other person (other than its
employees, affiliates, agents or partners having a need to know the contents of
such information and its attorneys), except in connection with the enforcement
of rights under this Agreement, unless the Company has made such information
available to the public generally or it is required by a governmental body to
disclose such information.
7.11 AMENDMENTS AND WAIVERS. Except as otherwise expressly
provided herein, any term of this Agreement may be amended and the observance
of any term of this Agreement may be waived (either generally or in a
particular instance, either retroactively or prospectively and either for a
specified period of time or indefinitely) with the written consent of the
Company and the Purchaser to be bound, or Purchasers holding a majority of the
Shares and Warrants, on an as-converted to or exercised for Common Stock basis,
and the Underlying Common Stock. Any amendment or waiver effected in
accordance with this Section shall be binding upon the Purchasers and each
transferee of the Shares, the Warrants and Underlying Common Stock.
7.12 EXPENSES. The Company and each of the Purchasers
shall bear his, her or its own expenses with respect to this Agreement and the
transactions contemplated hereby.
9
<PAGE> 10
IN WITNESS WHEREOF, the parties have executed this Series C Preferred
Stock Purchase Agreement as of the date first above written.
COMPANY: UOL PUBLISHING, INC.
----------------------------------
Carl N. Tyson,
President
PURCHASER:
----------------------------------
By:
---------------------------
Name:
---------------------------
Title:
--------------------------
10
<PAGE> 11
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
# OF SHARES OF
PREFERRED COMMON STOCK
AMOUNT SHARES UNDERLYING
PURCHASERS INVESTED ISSUED WARRANTS
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Barry K. Fingerhut $ 320,000.97 37,814 37,814
c/o GEO Capital Corp.
767 Fifth Avenue, 45th Floor
New York, New York 10153
----------------------------------------------------------------------------------------------------------
Fingerhut, Marocco & Senchak $ 24,998.23 2,954 2,954
c/o GEO Capital Corp.
767 Fifth Avenue, 45th Floor
New York, New York 10153
----------------------------------------------------------------------------------------------------------
Hermes Investment Group, Inc. $ 2,250,001.00 265,879 265,879
c/o Dr. John Sperling
The Apollo Group
4615 East Elwood
Phoenix, Arizona 85040
----------------------------------------------------------------------------------------------------------
Eli Levitin $ 24,998.23 2,954 2,954
One State Street Plaza, 29th Floor
New York, New York 10004
----------------------------------------------------------------------------------------------------------
Dana Lieber $ 29,999.56 3,545 3,545
c/o GEO Capital Corp.
767 Fifth Avenue, 45th Floor
New York, New York 10153
----------------------------------------------------------------------------------------------------------
Irwin Lieber $ 124,999.58 14,771 14,771
c/o GEO Capital Corp.
767 Fifth Avenue, 45th Floor
New York, New York 10153
----------------------------------------------------------------------------------------------------------
Jonathan Lieber $ 24,998.23 2,954 2,954
c/o GEO Capital Corp.
767 Fifth Avenue, 45th Floor
New York, New York 10153
----------------------------------------------------------------------------------------------------------
Seth Lieber $ 24,998.23 2,954 2,954
c/o GEO Capital Corp.
767 Fifth Avenue, 45th Floor
New York, New York 10153
----------------------------------------------------------------------------------------------------------
Errol Rudman $ 13,540.00 1,600 1,600
Rudman Partners, L.P.
1114 Avenue of the Americas
New York, New York 10036
----------------------------------------------------------------------------------------------------------
Rudman Partners, L.P. $ 86,461.36 10,217 10,217
1114 Avenue of the Americas
New York, New York 10036
----------------------------------------------------------------------------------------------------------
Seneca Ventures $ 49,996.45 5,908 5,908
c/o Barry Rubenstein
68 Wheatley Road
Brookville, New York 11545
----------------------------------------------------------------------------------------------------------
Victoria Transport Corporation $ 49,996.45 5,908 5,908
----------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 12
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
# OF SHARES OF
PREFERRED COMMON STOCK
AMOUNT SHARES UNDERLYING
PURCHASERS INVESTED ISSUED WARRANTS
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fabrikant International Corporation
1370 Avenue of the Americas, 25th Floor
New York, New York 10019
----------------------------------------------------------------------------------------------------------
Wheatley Foreign Partners, L.P. $ 125,287.31 14,805 14,805
c/o Wheatley Partners, LLC
80 Cutter Mill Road, Suite 311
Great Neck, New York 11021
----------------------------------------------------------------------------------------------------------
Wheatley Partners, L.P. $ 1,474,726.00 174,266 174,266
80 Cutter Mill Road, Suite 311
Great Neck, New York 11021
----------------------------------------------------------------------------------------------------------
Aaron Wolfson $ 50,004.91 5,909 5,909
One State Street Plaza, 29th Floor
New York, New York 10004
----------------------------------------------------------------------------------------------------------
Abraham Wolfson $ 24,998.23 2,954 2,954
One State Street Plaza, 29th Floor
New York, New York 10004
----------------------------------------------------------------------------------------------------------
Morris Wolfson $ 24,998.23 2,954 2,954
One State Street Plaza, 29th Floor
New York, New York 10004
----------------------------------------------------------------------------------------------------------
Wolfson Equities $ 375,007.22 44,314 44,314
One State Street Plaza, 29th Floor
New York, New York 10004
----------------------------------------------------------------------------------------------------------
Woodland Partners $ 149,997.81 17,725 17,725
c/o Barry Rubenstein
68 Wheatley Road
Brookville, New York 11545
----------------------------------------------------------------------------------------------------------
Woodland Venture Fund $ 49,996.45 5,908 5,908
c/o Barry Rubenstein
68 Wheatley Road
Brookville, New York 11545
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
TOTALS $5,300,004.45 626,293 626,293
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE> 1
EXHIBIT 10.31
UOL PUBLISHING, INC.
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement is dated this 31st day of March
1998 by and among UOL Publishing, Inc., a Delaware corporation (the "Company"),
and each of the other persons and entities signatory hereto on the date hereof
or hereafter, as described in Section 10(h) hereof (collectively referred to as
the "Investors" and each individually as an "Investor").
WHEREAS, the Company now desires to issue to the Investors shares of
the Company's Series C Preferred Stock, which will be convertible into shares
of the Company's Common Stock, and Warrants to purchase shares of the Company's
Common Stock (such shares of Common Stock issuable upon conversion of the
Series C Preferred Stock, together with the shares of Common Stock issuable
upon exercise of the Warrants being sometimes collectively referred to herein
as the "Shares"); and
WHEREAS, the Company and the Investors desire to set forth certain
obligations and rights as set forth herein;
NOW, THEREFORE, in consideration of the mutual premises,
representations, warranties, covenants and conditions set forth in this
Agreement, the parties to this Agreement mutually agree as follows:
1. Demand Registration Rights. At any time on or after the date
hereof, but not more than once, the holders of Shares that have not had their
registration rights hereunder lapse as set forth in Section 9 hereof (the
"Registrable Securities") representing not less than 33 1/3% of the Registrable
Securities may deliver to the Company one written demand that the Company
effect a registration under the Securities Act of at least the greater of 30%
of the Registrable Securities or Registrable Securities with an aggregate price
to the public of not less than $2,000,000.00 for the purpose of sale in the
manner specified in such demand. Such demand shall also specify the number of
Registrable Securities that such holders wish to have so registered. The
Company shall, within 10 days of receipt of such demand, give written notice to
all other holders of Registrable Securities of such demand. Any such holder
may, within 30 days of its receipt of such notice from the Company, give a
written notice (the "Inclusion Notice") to the Company specifying the number of
Registrable Securities which such holder wishes to include in such
registration. The Company shall prepare and file a registration statement on
any available form of registration statement, for the public sale of the
Registrable Securities that are identified in and in accordance with the demand
and all Inclusion Notices as soon as practicable; provided, however, that if
the Company shall furnish to the holders of Registrable Securities (the
"Holders") a certificate signed by the Chairman or President of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company for a registration
statement to be filed, then the Company's obligation to file a registration
statement shall be deferred for a reasonable period not to exceed 180 days from
the date of such request. Upon written notice from the Company to the Holders
delivered within 30 days of a demand to register Registrable Securities under
this Section 1, the Holders' right to
<PAGE> 2
demand registration pursuant to this Section 1 shall be suspended during the
period commencing 90 days before the date estimated in writing by the Company
to be the date of filing of a registration statement, and ending six months
following the effective date (or withdrawal date) of a registration statement,
for an underwritten public offering of the Common Stock.
All Holders proposing to distribute securities through such
registration shall enter into an underwriting agreement with the managing or
lead managing underwriter in the form customarily used by such underwriter with
such changes thereto as the parties thereto shall agree. If any Holder
disapproves of the terms of any such underwriting, it may elect to withdraw
therefrom by written notice to the Company and the managing or lead managing
underwriter. Any Registrable Securities so withdrawn from such underwriting
shall be withdrawn from such registration.
Whenever a registration is demanded pursuant to this Section 1, unless
a managing or lead managing underwriter objects thereto, the Company may
include in such registration securities for offering by the Company and any
other holder of securities, it being understood, however, that the Company's
and such other holder's right of inclusion in such registration shall be
subordinate to, and not pari passu with, the rights of the Holders who deliver
such demand or deliver to the Company Inclusion Notices under this Section 1.
If the managing underwriter thereof determines that the total number
of shares of the Common Stock to be sold in such offering shall be limited due
to market conditions or otherwise, the reduction in the total number of shares
offered shall be made by first excluding any shares of selling stockholders who
are not holders of contractual rights to have such shares registered under the
Securities Act, then, if necessary, by reducing the total number of shares to
be sold by the Company, and then, if necessary, by excluding pro rata (based on
the number of Registrable Securities held) the Registrable Securities to be
sold by the Holders.
2. Incidental Registration. If the Company at any time proposes to
register any of its securities under the Securities Act (other than a
registration effected on either Form S-4 or Form S-8) for the purpose of
selling such securities to the public whether for its own account or for the
account of any of its security holders or both, the Company shall each such
time give written notice to the Holders of its intention so to do. Upon the
written request by Holders given within 15 days after such notice (which
request shall state the number of Registrable Securities to be disposed of),
the Company will use reasonable efforts to cause promptly all Registrable
Securities of which registration is requested to be registered or qualified
under the Securities Act or any other applicable federal or state law or
regulation so as to permit the sale or other disposition thereof in accordance
with the Holders' written request. The Company will keep effective and
maintain any registration or qualification specified in this Section 2.2 for
such period (not exceeding 120 days) as may be reasonably necessary to effect
such sale or disposition in accordance with the Holders' written request. If
the registration is to be effected in connection with an underwritten offering,
(i) the Holders participating in such registration shall be
required to sell through the underwriter;
2
<PAGE> 3
(ii) the Holders participating in such registration (together
with the Company) shall enter into an underwriting agreement with the
managing underwriter in the form customarily used by such underwriter;
and
(iii) if the managing underwriter thereof determines that the
total number of shares of the Common Stock to be sold in such offering
should be limited due to market conditions or otherwise, the reduction
in the total number of shares offered shall be made by first excluding
any shares of selling stockholders who are not holders of contractual
rights to have such shares registered under the Securities Act, and
then, if necessary, by excluding pro rata (based on the number of
securities requested to be included in such registration) the shares
to be sold by the Holders and other securityholders of the Company
with similar rights, before any reduction is made in the total number
of shares to be sold pursuant thereto by the Company.
3. Registration Statement Information Relating to Holders. The
Holders shall promptly upon receipt of written request provide the Company or
any underwriter or counsel participating or otherwise involved in such
registration with any information relating to the Holders or the Registrable
Securities that is reasonably required to be included in the registration
statement or the prospectus, or any amendment thereof, relating to such
offering or required to cause the registration to be declared and remain
effective. Such information shall be submitted in writing, signed by the
applicable Holders, or a duly authorized representative or agent thereof, and
shall state that the information is submitted specifically for the purpose of
inclusion in the registration statement, prospectus, offering circular or other
document related to the registration or qualification of the Registrable
Securities pursuant to Section 1 or 2. If the Holders shall fail within a
reasonable time to provide such information, the Company may exclude from such
registration the Registrable Securities requested by the Holders to be included
therein.
4. Registration Procedures. If and whenever the Company is required
to effect the registration of any Shares pursuant to Section 1 or 2, the
Company will:
(a) prepare and file with the Securities and Exchange
Commission (the "Commission") a registration statement with respect to such
Registrable Securities and use reasonable efforts to cause such registration
statement to become and remain effective as provided herein; provided, however,
that in connection with any proposed registration intended to permit an
offering of any securities from time to time (i.e., a so-called "shelf
registration"), the Company shall in no event be obligated to cause any such
registration to remain effective for more than 120 days;
(b) immediately notify each Holder who has included
Registrable Securities in the registration, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
happening of any event as a result of which the prospectus included in the
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances then existing, and if it is necessary, in the opinion of counsel
to the Company, to prepare and file with the Commission such amendments
3
<PAGE> 4
and supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective and current and to comply with the provisions of the Securities Act
with respect to the sale or other disposition of all shares covered by such
registration statement, including such amendments and supplements as may be
necessary to reflect the intended method of disposition from time to time of
the Holders if the registration is effected in connection with an offering
which is not underwritten, but in no event for more than (i) 120 days after the
effective date of a registration that is not underwritten or that is
underwritten on a best efforts basis, or (ii) for as long a period as is
customary and is required by the underwriter in the case of a firmly
underwritten offering;
(c) furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus and any amendments and any
supplements thereto, in conformity with the requirements of the Securities Act,
as the Holders may reasonably request in order to facilitate the public sale or
other disposition of the Registrable Securities owned by the Holders;
(d) use reasonable efforts to register or qualify the
Registrable Securities covered by such registration statement under such other
securities or blue sky or other applicable laws of such jurisdictions within
the United States as the Holders shall reasonably request to enable the Holders
to consummate the public sale or other disposition in such jurisdictions of the
Registrable Securities owned by the Holders, except that the Company shall not
for any such purpose be required (i) to qualify generally to do business as a
foreign corporation in any jurisdiction in which it would not be required to so
qualify but for such registration or qualification, (ii) to subject itself to
taxation in any such jurisdiction, or (iii) to consent to general service of
process in any such jurisdiction;
(e) use its best efforts to furnish to each Holder who
has included Registrable Securities in the registration a signed counterpart,
addressed to such Holder, of (i) an opinion of counsel for the Company, dated
the date of the closing under the underwriting agreement, and (ii) a "cold
comfort" letter signed by the independent public accountants who have issued a
report on the Company's financial statements included in such registration
statement dated the date of effectiveness of the registration statement and the
date of the closing under the underwriting agreement, covering substantially
the same matters with respect to such registration statement (and the
prospectus included therein) and, in the case of such accountants' letters,
with respect to events subsequent to the date of such financial statements, as
are customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities and, in the case of the accountants' letters, such other financial
matters as such Holders may reasonably request;
(f) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least 12 months, beginning with the first month of
the first fiscal quarter after the effective date of such registration
statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act;
(g) use its best efforts to list such Registrable
Securities on each securities
4
<PAGE> 5
exchange or over-the-counter market on which shares of Common Stock are then
listed, if such Registrable Securities are not already so listed and if such
listing is then permitted under the rules of such exchange and, if shares of
Common Stock are not then listed on a securities exchange or over-the-counter
market, to use its best efforts to cause such Registrable Securities to be
listed on such securities exchange or over-the-counter market as the managing
or lead managing underwriter shall reasonably request;
(h) use its best efforts to provide a transfer agent and
registrar for such Registrable Securities not later than the effective date of
such registration statement; and
(i) issue to any underwriter to which any Holder may sell
such Registrable Securities in connection with any such registration (and to
any direct or indirect transferee of any such underwriter) certificates
evidencing such Registrable Securities without restrictive legends.
If requested by the managing or lead managing underwriter for any
underwritten offering that includes any Registrable Securities, the Company
will enter into an underwriting agreement with the underwriters of such
offering, such agreement to contain such representations and warranties by the
Company and such other terms and conditions as are contained in underwriting
agreements customarily used by such managing or lead managing underwriter with
such changes as the parties thereto shall agree, including, without limitation,
provisions relating to indemnification and contribution in lieu thereof.
During the effective period of any registration statement covering
Registrable Securities, the Holders will not effect sales thereof after receipt
of telegraphic or written notice from the Company to suspend sales to permit
the Company to correct or update a registration statement or prospectus until
the Holders receive written notice from the Company that the registration
statement or prospectus has been corrected or updated.
At the end of the effective period of any registration statement
covering any Registrable Securities, the Holders shall discontinue sales of
shares pursuant to such registration statement upon receipt of notice from the
Company of its intention to remove from registration the shares covered by such
registration statement which remain unsold, and the Holders shall notify the
Company of the number of shares registered which remain unsold immediately upon
receipt of such notice from the Company.
5. Expenses of Registration. Subject to the requirements of
otherwise applicable state blue sky laws, all expenses incurred in effecting
registration of any Registrable Securities pursuant to Section 1 or 2,
including without limitation, all registration, qualification and filing fees,
printing expenses, expenses of compliance with blue sky laws (excluding any
such expenses incurred solely due to the Holders' request pursuant to Section
4(d)), reasonable fees and disbursements of counsel for the Company, and of one
counsel to represent all of the participating securityholders requesting
registration and expenses of any audits incidental to or required by any such
registration, shall be borne by the Company, provided that the commissions and
discounts of the underwriters applicable to the Registrable Securities shall be
borne by the Holders whose Registrable Securities are being registered pursuant
to such registration, pro rata
5
<PAGE> 6
according to the value of their Registrable Securities sold under such
registration.
6. Indemnification.
(a) The Company will indemnify each Holder joining in a
registration and each underwriter and selling broker for such Holder and each
officer and director of the Holder and each person, if any, who controls any
such Holder or any such underwriter or broker within the meaning of Section 15
of the Securities Act, against all claims, losses, damages, expenses and
liabilities (or actions in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened, arising out
of or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any preliminary prospectus or amended preliminary prospectus
or in the prospectus, offering circular or other document incident to any
registration, qualification or compliance (or in any related registration
statement, notification or the like) as such may be amended or supplemented
from time to time or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, or any violation by the Company of the Securities Act or any rule
or regulation promulgated thereunder or any state securities laws or
regulations applicable to the Company in connection with any such registration,
qualification or compliance, and will reimburse each such Holder and each such
underwriter, broker and controlling person for any legal and any other expenses
reasonably incurred, as such expenses are incurred, in connection with
investigating or defending any such claim, loss, damage, liability or action;
provided, however, that the Company will not be liable in any such case to the
extent that any such claim, loss, damage or liability arises out of or is based
on any untrue statement or omission made in reliance upon and in conformity
with written information furnished to the Company in an instrument executed by
such Holder or underwriter for the Holder or any representative of such Holder
or underwriter for the Holder and stated to be specifically for use therein.
(b) Each Holder joining in a registration will indemnify the
Company and its officers and directors, each person, if any, who controls any
thereof within the meaning of Section 15 of the Securities Act and their
respective successors and any underwriter for the Company for such registration
and each other Holder against all claims, losses, damages, expenses and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any preliminary prospectus or amended prospectus or in the prospectus, offering
circular or other document incident to any registration statement,
qualification or compliance (or in any related registration statement,
notification or the like) as such may be amended or supplemented from time to
time or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, and will
reimburse the Company and each other person indemnified pursuant to this
paragraph (b) for any legal and any other expenses reasonably incurred, as such
expenses are incurred, in connection with investigating or defending any such
claim, loss, damage, liability or action; provided, however, that this
paragraph (b) shall apply only if (and only to the extent that) such statement
or omission was made in reliance upon and in conformity with written
information (including, without limitation, written negative responses to
inquiries)
6
<PAGE> 7
furnished to the Company specifically for inclusion in the prospectus, offering
circular, or other document incident to the registration statement by an
instrument duly executed by such Holder or its representatives, and as to which
the Company had no actual knowledge. Notwithstanding the foregoing, the
liability of each Holder under this paragraph (b) shall be limited to an amount
equal to the aggregate proceeds received by such Holder from the sale of its
shares in such registration, unless such liability arises out of or is based on
willful conduct by such Holder.
(c) Each party entitled to indemnification hereunder (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be sought,
and shall permit the Indemnifying Party (at its expense) to assume the defense
of any claim or any litigation resulting therefrom, provided that counsel for
the Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be satisfactory to the Indemnified Party, and the Indemnified
Party may participate in such defense at such party's expense, and provided,
further, that the omission by any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its obligations under this
Section 6 except to the extent that the omission results from a failure of
actual notice to the Indemnifying Party by the Indemnified Party and such
Indemnifying Party is damaged solely as a result of the failure to give notice;
and provided further, however, that the Indemnifying Party shall not be
entitled to assume the defense for matters as to which there is, in the opinion
of counsel to the Indemnified Party, a conflict of interest or separate and
different defenses. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect of such claim or
litigation.
(d) The payments with respect to any indemnity required by
this Section 6 shall be made by periodic payments during the course of the
investigation or defense, as and when bills are received or expenses incurred,
upon submission of supporting invoices or other claims for payment, including
any calculations necessary to pro-rate any amounts payable pursuant to the
indemnity.
7. Contribution.
(a) If the indemnification provided for in Section 6
hereof is unavailable to the Indemnified Parties in respect of any losses,
claims, damages, liabilities or expenses (or actions in respect thereof)
referred to therein, then each such Indemnifying Party, in lieu of indemnifying
such Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative fault of the Indemnifying Party on the one hand and the
Indemnified Party on the other in connection with the statement or omission
which resulted in such losses, claims, damages, liabilities or expenses (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to, among
other things, whether the untrue statement (or alleged untrue statement) of a
material fact or the omission (or alleged omission) to state a material fact
relates
7
<PAGE> 8
to information supplied by the Indemnifying Party or the Indemnified Party and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Company and each
Investor agree that it would not be just and equitable if contribution pursuant
to this Section 7 were determined by pro rata allocation or by any other method
of allocation which does not take account of the equitable considerations
referred to above. The amount paid or payable by an Indemnified Party as a
result of the losses, claims, damages, liabilities or expenses (or actions in
respect thereof) referred to above in this Section 7 or in Section 6 shall be
deemed to include any legal or other expenses reasonably incurred by such
Indemnified Party in connection with investigating or defending any such action
or claim.
(b) Notwithstanding anything to the contrary contained
herein, the obligation of each Holder to contribute pursuant to this Section 7
is several and not joint and no Holder shall be required to contribute any
amount in excess of the amount by which the total price at which the shares of
such Holder were offered to the public exceeds the amount of any damages which
such Holder has otherwise been required to pay by reason of such untrue
statement (or alleged untrue statement) or omission (or alleged omission).
(c) No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled
to contribution from any person who was not guilty of such fraudulent
misrepresentation.
8. Rule 144 Requirements. The Company shall make whatever filings
with the Commission or otherwise and undertake to make publicly available and
available to the Holder, pursuant to Rule 144 of the Commission under the
Securities Act (or any successor rule or regulation), such information as is
necessary to enable the Holder to make sales of Registrable Securities pursuant
to that Rule. The Company shall furnish to the Holder, upon request, a written
statement executed by the Company as to the steps it has taken to comply with
the current public information requirements of Rule 144.
9. Survival and Termination of Rights. The agreements and covenants
contained in this Agreement shall be continuing and shall survive any
conversion of any shares of the Series C Preferred Stock or exercise of the
Warrants. However, the rights of any particular Holder to cause the Company to
register its Registrable Securities hereunder shall terminate with respect to
such securities and such securities shall no longer be deemed to be Registrable
Securities following a bona fide, firmly underwritten public offering of such
Registrable Securities under the Securities Act or at such time as such Holder
is able to dispose of all of its Registrable Securities in one three-month
period pursuant to the provisions of Rule 144.
10. Miscellaneous.
(a) Entire Agreement. This Agreement and the documents
referred to herein constitute the entire agreement between the parties with
respect to the subject matter hereof, and no party shall be liable or bound to
any other party in any manner by any warranties, representations or covenants
except as specifically set forth herein or therein. The terms and
8
<PAGE> 9
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective successors and assigns of the parties. Nothing in this
Agreement, express or implied, is intended to confer upon any third party any
rights, remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
(b) Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Delaware as applied to agreements
among Delaware residents made and to be performed entirely within the State of
Delaware.
(c) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(d) Headings. The headings used in this Agreement are used
for convenience only and are not to be considered in construing or interpreting
this Agreement.
(e) Notices. Any notice required or permitted under this
Agreement shall be given in writing and shall be deemed effectively given upon
personal delivery or delivery by telecopier or five days after deposit with the
United States postal authorities, by first-class mail, postage prepaid,
addressed (i) if to the Company, at:
UOL Publishing, Inc.
8251 Greensboro Drive, Suite 500
McLean, Virginia 22102
Attention: Chief Executive Officer
With a copy to:
Larry E. Robbins, Esq.
Wyrick Robbins Yates & Ponton LLP
4101 Lake Boone Trail, Suite 300
Raleigh, North Carolina 27607
or at such other address as the Company shall have furnished to the Investors
in writing, and (ii) if to an Investor, at such Investor's address as is set
forth on the books and records of the Company.
(f) Severability. Any invalidity, illegality or limitation of the
enforceability with respect to any Investor of any one or more of the
provisions of this Agreement, or any part thereof, whether arising by reason
of the law of any such Investor's domicile or otherwise, shall in no way affect
or impair the validity, legality or enforceability of this Agreement with
respect to other Investors. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, it shall to the extent practicable, be
modified so as to make it valid, legal and enforceable and to retain as nearly
as practicable the intent of the parties, and the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
9
<PAGE> 10
(g) Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to the Company or any Investor upon any breach,
default or noncompliance of any Investor, or the Company under this Agreement,
shall impair any such right, power or remedy, nor shall it be construed to be a
waiver of any such breach, default or noncompliance, or any acquiescence
therein, or of any similar breach, default or noncompliance thereafter
occurring. It is further agreed that any waiver, permit, consent or approval
of any kind or character on the part of the Company or the Investors of any
breach, default or noncompliance under this Agreement or any waiver on the
Company's or the Investors' part of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing and that all remedies, either under this
Agreement, by law, or otherwise afforded to the Company and the Investors,
shall be cumulative and not alternative.
(h) Amendments and Waivers. No term of this Agreement may be
amended, nor may the observance of any terms of this Agreement be waived
(either generally or in a particular instance and either retroactively or
prospectively), without the written consent of the Company and the holders of
not less than 50% of the Shares affected thereby. Notwithstanding the
foregoing, any party purchasing Series C Preferred Stock and Warrants from the
Company after the date hereof may, by executing a counterpart hereof, become an
Investor and the shares of Common Stock underlying their Series C Preferred
Stock and Warrants become Registrable Securities for purposes hereof.
(i) Authorization. Each of the parties to this Agreement represents
that this Agreement has been duly authorized, executed and delivered by such
party and constitutes the legal, valid and binding obligation of such party
enforceable against it in accordance with its terms.
10
<PAGE> 11
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement.
COMPANY UOL PUBLISHING, INC.
By: (SEAL)
--------------------------------
Title:
-----------------------------
INVESTORS
-------------------------------------
By: (SEAL)
--------------------------------
Title:
-----------------------------
11
<PAGE> 1
EXHIBIT 11.1
UOL PUBLISHING, INC.
STATEMENT RE: COMPUTATION OF PER SHARE LOSS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
1997 1998
----------- -----------
<S> <C> <C>
Numerator:
Net loss.................................................... $(1,096,031) $(6,460,386)
=========== ===========
Denominator:
Denominator for basic earnings per share -- weighted-average
shares.................................................... 3,186,167 3,811,428
=========== ===========
Denominator for diluted earnings per share -- adjusted
weighted-average shares................................... 3,186,167 3,811,428
=========== ===========
Basic net loss per share.................................... $ (0.34) $ (1.70)
=========== ===========
Diluted net loss per share.................................. $ (0.34) $ (1.70)
=========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 5,229,804
<SECURITIES> 0
<RECEIVABLES> 5,342,256
<ALLOWANCES> 1,813,669
<INVENTORY> 0
<CURRENT-ASSETS> 9,646,919
<PP&E> 3,892,938
<DEPRECIATION> 993,338
<TOTAL-ASSETS> 27,841,080
<CURRENT-LIABILITIES> 14,050,101
<BONDS> 0
0
5,240,008
<COMMON> 38,194
<OTHER-SE> 6,988,323
<TOTAL-LIABILITY-AND-EQUITY> 7,026,517
<SALES> 3,600,860
<TOTAL-REVENUES> 3,600,860
<CGS> 2,582,899
<TOTAL-COSTS> 2,582,899
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (6,460,386)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,460,386)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,460,386)
<EPS-PRIMARY> (1.70)
<EPS-DILUTED> (1.70)
</TABLE>
