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Exhibit 1
SECURITIES PURCHASE AGREEMENT
Between
THE PURCHASERS NAMED HEREIN
and
THE LEARNING COMPANY, INC., as Issuer
Dated as of August 26, 1997
Series A Convertible Participating Preferred Stock
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TABLE OF CONTENTS
Page
ARTICLE I
AUTHORIZATION AND SALE OF SHARES................................ 1
Section 1.1 Authorization. ............................. 1
Section 1.2 Issuance and Sale of Shares. ............... 2
ARTICLE II
CLOSING............................................ 2
Section 2.1 Closing Date. .............................. 2
Section 2.2 Further Assurances. ........................ 3
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................... 3
Section 3.1 SEC Reports. ............................... 3
Section 3.2 Accountants. ............................... 4
Section 3.3 Financial Statements. ...................... 4
Section 3.4 Absence of Certain Changes. ................ 4
Section 3.5 Authority. ................................. 5
Section 3.6 Non-Contravention. ......................... 5
Section 3.7 Capitalization. ............................ 6
Section 3.8 Subsidiaries. .............................. 6
Section 3.9 Actions. ................................... 7
Section 3.10 Investment Company Act. .................... 7
Section 3.11 Reporting. ................................. 7
Section 3.12 Registration and Qualification. ............ 7
Section 3.13 No Liabilities. ............................ 7
Section 3.14 No Defaults. ............................... 8
Section 3.15 Violations of Law. ......................... 8
Section 3.16 Enforceability of Agreement. ............... 8
Section 3.17 The Capital Stock. ......................... 8
Section 3.18 Properties. ................................ 9
Section 3.19 Intellectual Property. ..................... 10
Section 3.20 Taxes. ..................................... 10
Section 3.21 Insurance. ................................. 10
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Section 3.22 Certain Payments. .......................... 10
Section 3.23 Delaware General Corporation Law Section 203. 10
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS........................ 11
Section 4.1 Investment. ................................ 11
Section 4.2 Rule 144. .................................. 11
Section 4.3 Organization of Purchaser. ................. 11
Section 4.4 Authority of Purchaser. .................... 12
Section 4.5 Non-Contravention. ......................... 12
Section 4.6 Title to the Notes. ........................ 12
ARTICLE V
CONDITIONS TO THE OBLIGATIONS OF THE PARTIES.......................... 13
Section 5.1 General Conditions to Obligations of
the Purchasers. ............................ 13
Section 5.2 Registration Rights Agreement. ............. 13
Section 5.3 Officers' Certificates. .................... 13
Section 5.4 Opinions. .................................. 13
Section 5.5 Certificate of Designation. ................ 14
Section 5.6 Material Adverse Effect. ................... 14
Section 5.7 [Intentionally Left Blank]. ................ 14
Section 5.8 General Conditions to the Obligations
of the Company. ............................ 14
Section 5.9 No Injunction. ............................. 14
Section 5.10 HSR Waiting Period. ........................ 15
Section 5.11 Shareholder Approval. ...................... 15
Section 5.12 Receipt of Consents. ....................... 15
ARTICLE VI
COVENANTS OF THE COMPANY.................................... 15
Section 6.1 Reporting. ................................. 15
Section 6.2 Payment of Expenses. ....................... 15
Section 6.3 Inspection. ................................ 16
Section 6.4 Availability of Common Stock. .............. 16
Section 6.5 Transaction Fee. ........................... 16
Section 6.6 Fleet Bank Consent. ........................ 16
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Section 6.7 Proxy Statements; Stockholder
Approvals. ................................. 16
Section 6.8 Election to Board of Directors of the
Company. ................................... 17
Section 6.9 No General Solicitation. ................... 19
ARTICLE VII
COVENANTS OF THE PURCHASERS.................................. 19
Section 7.1 Certain Restrictions. ...................... 19
ARTICLE VIII
RESTRICTIONS ON TRANSFERABILITY OF SECURITIES......................... 21
Section 8.1 Restrictive Legend. ........................ 21
Section 8.2 Notice of Proposed Transfers. .............. 22
ARTICLE IX
TERMINATION.......................................... 23
ARTICLE X
INDEMNIFICATION........................................ 23
Section 10.1 Indemnification. ........................... 23
Section 10.2 Terms of Indemnification. .................. 24
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ARTICLE XI
MISCELLANEOUS......................................... 25
Section 11.1 Governing Law. ............................. 25
Section 11.2 Survival. .................................. 25
Section 11.3 Successors and Assigns. .................... 25
Section 11.4 Entire Agreement; Amendment. ............... 26
Section 11.5 Notices, Etc. .............................. 26
Section 11.6 Delays or Omissions. ....................... 26
Section 11.7 Counterparts. .............................. 27
Section 11.8 Severability. .............................. 27
Section 11.9 Titles and Subtitles. ...................... 27
Section 11.10 No Public Announcement. .................... 27
Section 11.11 Reasonable Efforts. ........................ 27
Section 11.12 Distributions and Adjustments. ............. 27
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Exhibits
Exhibit A - Certificate of Designation
Exhibit B - Registration Rights Agreement
Exhibit C - Opinion of Counsel for the Company
Exhibit D - Opinion of Hale and Dorr LLP
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SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (this "Agreement") is made
as of August 26, 1997 between The Learning Company, Inc., a Delaware corporation
(the "Company"), and each of the Purchasers listed on the signature pages hereto
(individually, a "Purchaser" and collectively, the "Purchasers").
The Company is simultaneously entering into securities
purchase agreements (the "Other Purchase Agreements" and, together with this
Agreement, the "Purchase Agreements") with affiliates of Bain Capital, Inc. and
Centre Partners Management LLC (together, the "Other Purchasers") dated the date
hereof. The Purchase Agreements provide, subject to the terms and conditions
thereof, for the purchase by the Purchasers and the Other Purchasers of an
aggregate of 750,000 shares of Series A Convertible Participating Preferred
Stock, par value $.01 per share, of the Company having the terms set forth in
the Certificate of Designation (the "Certificate of Designation") attached
hereto as Exhibit A (the "Preferred Stock") in exchange for the surrender of the
Company's 5 1/2% Senior Convertible/Exchangeable Notes due 2000 (the "Notes") in
an aggregate principal amount of $150,000,000 then to be held by the Purchasers
and the Other Purchasers.
In consideration of the mutual covenants, agreements,
representations and warranties herein set forth, it is hereby agreed between the
Company and the Purchasers as follows:
ARTICLE I
AUTHORIZATION AND SALE OF SHARES
SECTION 1.1 AUTHORIZATION. Subject to the obtaining of any
requisite stockholder approval referred to in Section 5.11, the Company has
heretofore authorized the issuance and sale to the Purchasers pursuant to this
Agreement of an aggregate of 457,317 shares of the Preferred Stock (the
"Shares") and to the Other Purchasers pursuant to the Other Purchase Agreements
of an aggregate of 292,683 shares of Preferred Stock (the "Other Shares").
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SECTION 1.2 ISSUANCE AND SALE OF SHARES. Upon the terms and
subject to the conditions set forth herein, on the Closing Date (as defined
below), (a) the Company will issue and sell to the Purchasers and, in reliance
on the representations and warranties of the Company contained herein, the
Purchasers will purchase from the Company the Shares in exchange for Notes in an
aggregate principal amount of $91,463,400 then to be held by the Purchasers
delivered free and clear of all liens, encumbrances, equities or claims and (b)
the Company will make a cash payment to the Purchasers by wire transfer of
immediately available funds in an amount equal to the interest accrued on the
Notes sold to the Company by the Purchasers from the last interest payment date
on the Notes up to and including the Closing Date (as defined below).
ARTICLE II
CLOSING
SECTION 2.1 CLOSING DATE. The closing (the "Closing") of the
purchase and sale of the Shares contemplated hereby shall take place on such
date and at such time as agreed to by the Company and the Purchasers but in no
event later than three business days following the date upon which all of the
conditions set forth in Article V and all the conditions to closing in the Note
Purchase Agreement (as defined below) are satisfied or waived (the date of the
Closing is hereinafter referred to as the "Closing Date"). The Closing shall be
held at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, One Beacon
Street, Boston, Massachusetts, or at such other place as agreed to by the
Company and the Purchasers. The Closing shall occur simultaneously with the
closing of the transactions contemplated by the Other Purchase Agreements and
the Securities Purchase Agreement among Tribune Company, the Purchasers and the
Other Purchasers dated the date hereof (the "Note Purchase Agreement") and the
closing of each shall be conditioned on the closing of the others.
Delivery of the Shares to be purchased by the Purchasers
pursuant to this Agreement shall be made at the Closing by the Company
delivering to each Purchaser, against payment of the purchase price therefor,
one certificate representing the appropriate number of Shares (registered in
the name of such Purchaser or such other person which shall be an affiliate of
such Purchaser or a nominee of such Purchaser or such affiliate as such
Purchaser may have designated in writing to the Company at least one business
day prior to the Closing Day), unless at least two business days prior to the
Closing Date such Purchaser shall have requested
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that the Company deliver more than one certificate representing the Shares, in
which event the Company will deliver to each Purchaser the number of
certificates so requested, registered in such name or names specified in such
request (subject to the foregoing limitation). Payment of the purchase price for
the Shares to be purchased hereunder shall be made by the Purchaser by delivery
of Notes in the aggregate principal amount of $91,463,400 to the Company duly
endorsed for transfer to the Company with all signatures guaranteed by stock
powers or other evidence of transfer reasonably acceptable to the Company.
SECTION 2.2 FURTHER ASSURANCES. From time to time following
the Closing, upon the request of any Purchaser, the Company shall execute and
deliver, or cause to be executed and delivered, to such Purchaser such other
instruments and take such other action as may be reasonably necessary to more
effectively vest in such Purchaser and put the Purchaser in possession of the
shares of common stock par value $.01 per share, of the Company (the "Common
Stock") issuable upon conversion of the Shares. The Company shall cooperate with
the Purchasers in obtaining as soon as practicable all necessary governmental
consents and approvals, including approvals under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act").
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As an inducement to the Purchasers to enter into this
Agreement and to consummate the transactions contemplated hereby, the Company
represents and warrants to each of the Purchasers as follows:
SECTION 3.1 SEC REPORTS. The Company has filed all documents
required to be filed since January 1, 1995 with the Securities and Exchange
Commission (the "Commission") (the "SEC Reports"). As of their respective dates,
the SEC Reports complied in all material respects with the requirements of the
Securities Act of 1933, as amended (including the rules and regulations
promulgated thereunder, the "Securities Act"), and the Securities Exchange Act
of 1934, as amended (including the rules and regulations promulgated thereunder,
the "Exchange Act"), as the case may be, and none of the SEC Reports contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein, in order to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading.
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SECTION 3.2 ACCOUNTANTS. Coopers & Lybrand L.L.P., Arthur
Andersen LLP, KPMG Peat Marwick LLP, Price Waterhouse LLP and Deloitte & Touche
LLP, who have expressed their respective opinions with respect to the financial
statements and schedules included in the SEC Reports, are independent
accountants as required by the Securities Act.
SECTION 3.3 FINANCIAL STATEMENTS. (a) The annual audited
financial statements of the Company included in the relevant Report on Form 10-
K for the period ended January 4, 1997 (the "10-K") present fairly in all
material respects the financial position of the Company, as of the respective
date of such financial statements, and the results of operations and changes in
cash flows of the Company for the respective periods covered thereby. Such
statements and related notes have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis, in each case, as
certified by one or more of the independent accountants named in Section 3.2.
(b) The unaudited interim financial statements of the Company
included in the Company's Quarterly Report on Form 10-Q for the period ended
July 5, 1997 (the "Second Quarter 10-Q") present fairly in all material respects
the financial position of the Company, as of the respective dates of such
financial statements, and the results of operations and changes in cash flows of
the Company for the respective periods covered thereby. Such statements and
related notes have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis except for normal year-end
adjustments and the omission of certain footnote disclosure.
SECTION 3.4 ABSENCE OF CERTAIN CHANGES. Except as disclosed in
Section 3.4 of a letter dated the date hereof from and previously delivered by
the Company to the Purchasers (the "Disclosure Letter"), (a) since the date of
the latest balance sheet presented in the Second Quarter 10-Q there has been no
material adverse change in the business, properties, prospects, operations,
condition (financial or other) or results of operations of the Company and its
Subsidiaries (as defined herein) taken as a whole, whether or not arising from
transactions in the ordinary course of business, provided that a decline in the
trading price of the Common Stock shall not be deemed to be such a material
adverse change if such decline is not attributable to a material adverse change
in the business, properties, operations, prospects, condition (financial or
other) or results of operations of the Company and its Subsidiaries taken as a
whole, (b) since the date of the latest balance sheet presented in the Second
Quarter 10-Q, neither the Company nor any of its Subsidiaries has incurred or
undertaken any
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liabilities or obligations, direct or contingent, except for (i) liabilities or
obligations which are reflected in the Second Quarter 10-Q and (ii) the
transactions contemplated by this Agreement and the Other Purchase Agreements,
(iii) contractual liabilities incurred in the ordinary course of business, (iv)
other liabilities that would not have a material adverse effect on the business,
properties, prospects, operations, condition (financial or other) or results of
operations of the Company and its subsidiaries taken as a whole and (v)
liabilities incurred in connection with any acquisition of another business
entity made by the Company after the date hereof.
SECTION 3.5 AUTHORITY. The Company has all necessary corporate
power and corporate authority to enter into this Agreement, the Other Purchase
Agreements and the other agreements, documents and instruments to be executed by
the Company in furtherance of the transactions contemplated hereby and thereby,
including without limitation, the Registration Rights Agreement between the
Company and the Purchasers, a form of which is attached hereto as Exhibit B (the
"Registration Rights Agreement") (collectively, the "Transaction Documents"),
and to consummate the transactions contemplated hereby and thereby.
SECTION 3.6 NON-CONTRAVENTION. The execution, delivery, and
performance of the Transaction Documents by the Company and the consummation of
the transactions contemplated thereby by the Company do not and will not (a)
result in a breach of any of the terms and provisions of, or constitute a
default (or an event which with notice or lapse of time, or both, would
constitute a default) under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company or any of
its Subsidiaries (as defined below) pursuant to any agreement, instrument,
franchise, license or permit to which the Company or any of its Subsidiaries is
a party or by which any of such corporations or their respective properties or
assets may be bound or (b) violate any judgment, decree, order, statute, rule or
regulation of any court or any public, governmental or regulatory agency or body
applicable to the Company or any of its Subsidiaries or any of their respective
properties or assets, other than such breaches, defaults or violations that are
not reasonably expected to impair the ability of the Company to consummate the
transactions contemplated by this Agreement. The execution, delivery and
performance of the Transaction Documents by the Company and the consummation of
the transactions contemplated thereby do not and will not violate or conflict
with any provision of the certificate of incorporation or by-laws of the Company
or any of its Subsidiaries, as currently in effect. Except as set forth in
Section 3.6 of the Disclosure Letter,
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no consent, approval, authorization, order, registration, filing, qualification,
license or permit of or with any court or any government agency or body
applicable to the Company or any of its Subsidiaries or any of their respective
properties or assets is required for the execution, delivery and performance of
the Transaction Documents or the consummation of the transactions contemplated
thereby, including the issuance, sale and delivery of the Shares to be issued,
sold and delivered by the Company hereunder.
SECTION 3.7 CAPITALIZATION. The Company had, as of July 5,
1997, an authorized and outstanding capitalization as set forth in the Second
Quarter 10-Q.
SECTION 3.8 SUBSIDIARIES. Except for the subsidiaries listed
in Section 3.8 of the Disclosure Letter, the Company does not own or control,
directly or indirectly, any "significant subsidiary" within the meaning of
Regulation S-X of the Commission. The subsidiaries listed in Section 3.8 of the
Disclosure Letter are hereinafter referred to as the "Subsidiaries." Each of the
Company and its Subsidiaries has been duly organized and is validly existing as
a corporation in good standing under the laws of its jurisdiction of
incorporation. Each of the Company and its Subsidiaries is duly qualified to do
business and in good standing as a foreign corporation in each jurisdiction in
which the character or location of its properties (owned, lease or licensed) or
the nature or conduct of its business makes such qualification necessary, except
for those failures to be so qualified or in good standing which will not in the
aggregate have a material adverse effect on the Company and its Subsidiaries
taken as a whole. The Company owns all of the outstanding capital stock of each
of its Subsidiaries, other than the non-voting exchangeable shares of SoftKey
Software Products Inc. and qualifying shares of certain Subsidiaries organized
outside the United States, free and clear of all claims, liens, charges and
encumbrances other than as disclosed in Section 3.8 of the Disclosure Letter.
Each of the Company and its Subsidiaries has all requisite power and authority,
and all necessary consents, approvals, authorizations, orders, registrations,
qualifications, licenses and permits of and from all public, regulatory or
governmental agencies and bodies, to own, lease and operate its properties and
conduct its business as now being conducted, except where the failure to possess
such requisite power and authority would not have a material adverse effect on
the business, properties, prospects, operations, condition (financial or other)
or results of operations of the Company and its Subsidiaries taken as a whole.
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SECTION 3.9 ACTIONS. Except as described in Section 3.9 of the
Disclosure Letter, there is no litigation or governmental proceeding to which
the Company or any of its Subsidiaries is a party or to which any property of
the Company or any of its Subsidiaries is subject or which is pending or, to the
knowledge of the Company, threatened against the Company or any of its
Subsidiaries which could reasonably be expected to have a material adverse
effect on the business, properties, prospects, operations, condition (financial
or other) or results of operations of the Company and its Subsidiaries taken as
a whole.
SECTION 3.10 INVESTMENT COMPANY ACT. Neither the Company nor
any of its Subsidiaries is (i) an "investment company" or a company "controlled"
by an investment company within the meaning of the Investment Company Act of
1940, as amended, (ii) a "holding company" or a "subsidiary company" of a
holding company or an "affiliate" thereof within the meaning of the Public
Utility Holding Company Act of 1935, as amended, or (iii) subject to regulation
under the Federal Power Act, the Interstate Commerce Act or any federal or state
statute or regulation limiting its ability to consummate the transactions
contemplated hereby.
SECTION 3.11 REPORTING. The Company is subject to Section 13
of the Exchange Act and is in compliance in all material respects with the
provisions of such section.
SECTION 3.12 REGISTRATION AND QUALIFICATION. Assuming the
accuracy of the representations and warranties made by each of the Purchasers
and set forth in Article IV hereof, it is not necessary in connection with the
offer, sale and delivery of the Shares to the Purchasers in the manner
contemplated by this Agreement to register the Shares or the shares of Common
Stock issuable upon conversion of the Shares, under the Securities Act.
SECTION 3.13 NO LIABILITIES. Neither the Company nor its
Subsidiaries has any liabilities or obligations (direct or indirect, contingent
or absolute, known or unknown, matured or unmatured) of any nature whatsoever,
whether arising out of contract, tort, statute or otherwise ("Liabilities"),
except (i) as reflected or reserved against in the latest balance sheet of the
Company presented in the Second Quarter 10-Q and not heretofore discharged, (ii)
as set forth in Section 3.13 of the Disclosure Letter, (iii) liabilities
incurred in the ordinary course of business since the date of the latest balance
sheet presented in the Second Quarter 10-Q, (iv) contractual liabilities
incurred in the ordinary course of business, (v) liabilities incurred in
connection with any acquisition of another
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business entity made by the Company after the date hereof or (vi) other
liabilities that would not have a material adverse effect on the business,
properties, prospects, operations, condition (financial or other) or results of
operations of the Company and its subsidiaries taken as a whole.
SECTION 3.14 NO DEFAULTS. Except as disclosed in Section 3.14
of the Disclosure Letter, neither the Company nor any of its Subsidiaries is in
violation or default under any provision of its certificate of incorporation,
by-laws or other organization documents, or is in breach of or default with
respect to any provision of any agreement, judgment, decree, order, mortgage,
deed of trust, lease, franchise, license, indenture, permit or other instrument
to which it is a party or by which it or any of its properties are bound; and
there does not exist an event of default on the part of the Company or any such
Subsidiary as defined in such documents which, with notice or lapse of time or
both, would constitute a default, which such violation or default, in either
such case, would not have a material adverse effect on the business, properties,
prospects, operations, condition (financial or other) or results of operations
of the Company and its subsidiaries taken as a whole.
SECTION 3.15 VIOLATIONS OF LAW. The Company and its
Subsidiaries are in compliance, and have complied at all times during the past
three years, and all transactions pursuant to the Transaction Documents shall
comply with all applicable federal, state and local statutes, codes, ordinances,
rules and regulations of the United States and all other countries and
subdivisions thereof (the "Laws") to the extent applicable, other than
violations which would not have a material adverse effect on the business,
properties, operations, condition (financial or other) or results of operations
of the Company and its Subsidiaries taken as a whole. Neither the Company nor
any of its Subsidiaries has received notice within the past three years of any
violations of any Laws, which violations would be material to the Company and
its subsidiaries taken as a whole.
SECTION 3.16 ENFORCEABILITY OF AGREEMENT. This Agreement has
been, and the other agreements to be executed and delivered by the Company
pursuant hereto have been or will be, duly and validly authorized, executed and
delivered by the Company and this Agreement is, and such other agreements when
so executed and delivered will be, valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms.
SECTION 3.17 THE CAPITAL STOCK. (a) All of the outstanding
shares of Common Stock are duly and validly authorized and issued, fully paid
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and nonassessable, have been issued in compliance with all federal and state
securities laws, and were not issued and are not now in violation of or subject
to any preemptive rights. All issued and outstanding shares of capital stock of
each Subsidiary have been duly authorized and validly issued and are fully paid
and nonassessable. Except as disclosed in Section 3.17 of the Disclosure Letter
as of the date hereof, neither the Company nor any Subsidiary has outstanding
any options to purchase, or any preemptive rights or other rights to subscribe
for or to purchase, any securities or obligations convertible into, or any
contracts or commitments to issue or sell, shares of its capital stock or any
such options, rights, convertible securities or obligations. There are currently
no shares of the Company's preferred stock outstanding.
(b) (i) The Shares have been duly and validly authorized by
the Company and the Shares, when issued, sold and delivered in accordance with
this Agreement, will be duly and validly issued, fully paid and nonassessable.
The shares of Common Stock issuable upon conversion of the Shares have been duly
and validly authorized by the Company and, when issued in accordance with the
terms of the Shares, will be duly and validly issued, fully paid and
nonassessable. The shares of Common Stock issuable on conversion of the Shares
at the initial conversion price have been reserved for issuance, and no further
approval or authority of the stockholders or the Board of Directors of the
Company (the "Board of Directors") under the Delaware General Corporation Law
will be required for such issuance of Common Stock following the Closing. No
preemptive rights or other rights to subscribe for or purchase securities exist
with respect to the issuance and sale of the Shares by the Company pursuant to
this Agreement or the issuance of Common Stock on conversion of the Shares.
(ii) Except as set forth in Section 3.17 of the Disclosure
Letter, no security holder of the Company has any right which has not been
satisfied or waived to require the Company to register the sale of any
securities owned by such security holder under the Securities Act.
SECTION 3.18 PROPERTIES. The Company or the applicable
Subsidiary holds its leased properties under valid and binding leases, with such
exceptions as are not materially significant in relation to the business of the
Company. Except as disclosed in Section 3.18 of the Disclosure Letter, the
Company owns or leases all such properties as are necessary to its operations as
now conducted.
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SECTION 3.19 INTELLECTUAL PROPERTY. Except as disclosed in
Section 3.19 of the Disclosure Letter, the Company and its Subsidiaries have
sufficient trademarks, trade names, patent rights, copyrights, licenses,
approvals and governmental authorizations to conduct their businesses
substantially as now conducted; and the Company has no knowledge of any
infringement by it or its Subsidiaries of any trademark, trade name, patent,
copyright, licenses, trade secret or other similar rights of others, and there
is no claim being made against the Company or its Subsidiaries regarding
trademark, trade name, patent, copyright, license, trade secret or other
infringement, in any such case which could reasonably be expected to have a
material adverse effect on the business, properties, prospects, operations,
condition (financial or otherwise) or results of operations of the Company and
it or its Subsidiaries taken as a whole.
SECTION 3.20 TAXES. The Company and its Subsidiaries have
filed all necessary federal, state and foreign income and franchise tax returns
and have paid all taxes shown as due thereon; and the Company has no knowledge
of any tax deficiency which has been asserted or threatened against the Company
or its Subsidiaries which could have a material adverse effect on the business,
properties, prospects, operations, condition (financial or otherwise) or results
of operations of the Company and its Subsidiaries taken as a whole.
SECTION 3.21 INSURANCE. The Company and its Subsidiaries
maintain insurance of the types and in the amounts generally deemed adequate for
its business and that of its Subsidiaries against theft, damage, destruction,
acts of vandalism and all other risks customarily insured against, all of which
insurance is in full force and effect.
SECTION 3.22 CERTAIN PAYMENTS. To the knowledge of the
Company, neither the Company nor any of its Subsidiaries has at any time (i)
made any unlawful contribution to any candidate for foreign office, or failed to
disclose fully any contribution in violation of law or (ii) made any payment to
any federal or state governmental officer or official, or other person charged
with similar public or quasi-public duties, other than payments required or
permitted by the laws of the United States or any jurisdiction thereof.
SECTION 3.23 DELAWARE GENERAL CORPORATION LAW SECTION 203.
Section 203 of the Delaware General Corporation Law will not, prior to the
termination of this Agreement and the Other Purchase Agreements, apply to such
Agreements or the transactions contemplated hereby and thereby.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
As an inducement to the Company to enter into this Agreement
and to consummate the transactions contemplated hereby, each of the Purchasers
hereby represents and warrants to the Company as follows:
SECTION 4.1 INVESTMENT. Purchaser is acquiring the Shares and
the shares of Common Stock issuable upon conversion of the Shares for investment
for its own account, and not with a view to any distribution thereof. Purchaser
understands that the Shares and the shares of Common Stock issuable upon
conversion of the Shares have not been registered under the Securities Act by
reason of specific exemptions therefrom which depend upon, among other things,
the bona fide nature of the investment intent and the accuracy of Purchaser's
representations as expressed herein.
Purchaser's financial condition and investments are such that
it is in a position to hold the Shares and the shares of Common Stock issuable
upon conversion of the Shares for an indefinite period, bear the economic risks
of the investment and to withstand the complete loss of the investment.
Purchaser has extensive knowledge and experience in financial and business
matters and has the capability to evaluate the merits and risks of any Shares
and the shares of Common Stock issuable upon conversion of the Shares. Purchaser
qualifies as an "accredited investor" as such term is defined in Section 2(15)
of the Securities Act and Regulation D promulgated thereunder.
SECTION 4.2 RULE 144. Purchaser acknowledges that the Shares
and the shares of Common Stock issuable upon conversion of the Shares must be
held indefinitely unless subsequently registered under the Securities Act or any
applicable state securities laws or unless exemptions from such registrations
are available. Purchaser is aware of the provisions of Rule 144 promulgated
under the Securities Act which permit limited resale of securities purchased in
a private placement subject to the satisfaction of certain conditions.
SECTION 4.3 ORGANIZATION OF PURCHASER. Purchaser is duly
organized and validly existing under the laws of the jurisdiction of its
organization.
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SECTION 4.4 AUTHORITY OF PURCHASER. Purchaser has the power
and authority (corporate or similar) to execute and deliver this Agreement, to
consummate the transactions contemplated hereby and to comply with the terms,
conditions and provisions hereof.
The execution, delivery and performance of this Agreement by
Purchaser has been duly authorized and approved by Purchaser and does not
require any further authorization or consent of Purchaser or its beneficial
owners. This Agreement is the legal, valid and binding agreement of Purchaser,
enforceable against Purchaser in accordance with its terms.
SECTION 4.5 NON-CONTRAVENTION. The execution, delivery and
performance of this Agreement by Purchaser and the consummation of any of the
transactions contemplated hereby by Purchaser will not (a) conflict with or
result in a breach of any of the terms and provisions of, or constitute a
default (or an event which with notice or lapse of time, or both, would
constitute a default) under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of Purchaser pursuant to
any agreement, instrument, franchise, license or permit to which Purchaser is a
party or by which any of its properties or assets may be bound or (b) violate or
conflict with any judgment, decree, order, statute, rule or regulation of any
court or any public, governmental or regulatory agency or body applicable to
Purchaser or any of its properties or assets, other than such breaches, defaults
or violations that are not reasonably expected to impair the ability of
Purchaser to consummate the transactions contemplated by this Agreement. The
execution, delivery and performance of this Agreement by Purchaser and the
consummation of the transactions contemplated hereby by Purchaser do not and
will not violate or conflict with any provision of the organizational documents
of Purchaser, as currently in effect. Except for filings under the HSR Act, no
consent, approval, authorization, order, registration, filing, qualification,
license or permit of or with any court or any government agency or body
applicable to Purchaser is required for the execution, delivery and performance
of this Agreement or the consummation of the transactions contemplated hereby.
SECTION 4.6 TITLE TO THE NOTES. Upon consummation of the
transactions contemplated by the Note Purchase Agreement, the Purchasers will
have good and valid title to the Notes to be surrendered to the Company
hereunder, free and clear of all liens, encumbrances, equities or claims; and,
upon delivery of the Notes to the Company, good and valid title to the Notes,
free and clear of all liens, encumbrances, equities or claims, will pass to the
Company,
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assuming that the Company is acquiring the Notes in good faith and without
notice of any "adverse claims" within the meaning of Article 8 of the Uniform
Commercial Code.
ARTICLE V
CONDITIONS TO THE OBLIGATIONS OF THE PARTIES
A. OBLIGATIONS OF THE PURCHASERS
SECTION 5.1 GENERAL CONDITIONS TO OBLIGATIONS OF THE
PURCHASERS. The obligation of each of the Purchasers to consummate the
transactions contemplated herein is subject to the accuracy of the
representations and warranties of the Company herein contained, as of the date
hereof and as of the Closing Date, and to the performance in all material
respects by the Company of its obligations hereunder (including the covenants
contained in Article VI of this Agreement).
SECTION 5.2 REGISTRATION RIGHTS AGREEMENT. The obligation of
each of the Purchasers to consummate the transactions contemplated herein is
subject to the Registration Rights Agreement continuing to be in full force and
effect.
SECTION 5.3 OFFICERS' CERTIFICATES. The obligation of each of
the Purchasers to consummate the transactions contemplated herein is subject to
each of the Purchasers at the Closing Date receiving a certificate of the Chief
Executive Officer and Chief Financial Officer of the Company, dated the Closing
Date, to the effect that (i) as of the date hereof and as of the Closing Date,
the representations and warranties of the Company set forth in Article III
hereof are accurate and (ii) as of the Closing Date, the obligations of the
Company to be performed hereunder on or prior to the Closing Date have been
duly performed in all material respects.
SECTION 5.4 OPINIONS. The obligation of each of the Purchasers
to consummate the transactions contemplated herein is subject to each of the
Purchasers receiving at the Closing Date the opinion of Neal S. Winneg, General
Counsel for the Company, to the effect of the matters set forth in Exhibit C and
the opinion of Hale and Dorr LLP, special counsel for the Company, to the effect
of the matters set forth in Exhibit D.
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SECTION 5.5 CERTIFICATE OF DESIGNATION. The obligation of each
of the Purchasers to consummate the transactions contemplated herein is subject
to the Certificate of Designation attached hereto as Exhibit A being duly
adopted by the Company and filed with the Secretary of State of the State of
Delaware.
SECTION 5.6 MATERIAL ADVERSE EFFECT. The obligation of each of
the Purchasers to consummate the transactions contemplated herein is subject to
there being since the date of the last balance sheet presented in the Second
Quarter 10-Q no fact or condition which would have, or insofar as reasonably can
be foreseen could have, a material adverse effect on the business, properties,
prospects, operations, condition (financial or other) or results of operations
of the Company and its Subsidiaries taken as a whole; provided, that a decline
in the trading price of the Common Stock shall not be deemed to be such a
material adverse effect if such decline is not attributable to a material
adverse change in the business, properties, prospects, operations, condition
(financial or other) or results of operations of the Company and its
subsidiaries taken as a whole.
SECTION 5.7 [Intentionally Left Blank].
B. OBLIGATIONS OF THE COMPANY
SECTION 5.8 GENERAL CONDITIONS TO THE OBLIGATIONS OF THE
COMPANY. The obligation of the Company to sell the Shares to each of the
Purchasers shall be subject to the accuracy of the representations and
warranties of each of the Purchasers herein contained except to the extent any
inaccuracies do not materially impair the ability of the Purchasers to
consummate the transaction contemplated by the Agreement, as of the date hereof
and as of the Closing Date, and to the performance in all material respects by
each of the Purchasers of its obligations hereunder.
C. OBLIGATIONS OF EACH OF THE COMPANY AND THE PURCHASERS
SECTION 5.9 NO INJUNCTION. The obligations of each of the
Company and the Purchasers to consummate the transactions contemplated herein
are subject to the condition that no temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction
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prohibiting or preventing consummation of the transactions contemplated herein
shall be in effect.
SECTION 5.10 HSR WAITING PERIOD. The obligations of each of
the Company and the Purchasers to consummate the transactions contemplated
herein are subject to the condition of the expiration or early termination of
the application waiting periods under the HSR.
SECTION 5.11 SHAREHOLDER APPROVAL. The obligations of each of
the Company and the Purchasers to consummate the transactions contemplated
herein are subject to the approval of the issuance of the Shares, the Other
Shares and the shares of Common Stock issuable upon conversion of the Shares and
the Other Shares by the Company's stockholders in accordance with the
requirements of the New York Stock Exchange ("NYSE").
SECTION 5.12 RECEIPT OF CONSENTS. The obligation of each of
the Company and the Purchasers to consummate the transactions contemplated by
this Agreement are subject to the receipt by the Company of all governmental or
third-party consents shown in Section 5.12 of the Disclosure Letter the
transactions.
ARTICLE VI
COVENANTS OF THE COMPANY
As an inducement to the Purchasers to enter into this
Agreement and to consummate the transactions contemplated hereby, the Company
hereby covenants with each of the Purchasers as follows:
SECTION 6.1 REPORTING. The Company will, so long as the Shares
or the shares of Common Stock issuable upon conversion thereof are outstanding
and are "restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act, file reports and other information with the Commission under
Section 13 or 15 (d) of the Exchange Act.
SECTION 6.2 PAYMENT OF EXPENSES. Whether or not the
transactions contemplated in this Agreement are consummated or this Agreement is
terminated, the Company hereby agrees to pay (i) all costs and expenses incident
to the performance of the obligations of the Company hereunder, includ-
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ing those in connection with (a) the issuance, transfer and delivery of the
Shares or the shares of Common Stock issuable upon conversion thereof to each of
the Purchasers, including any transfer or similar taxes payable therein, (b) the
qualification of Shares or the shares of Common Stock issuable upon conversion
thereof under state or foreign securities or Blue Sky laws, (c) the cost of
printing the Shares or the shares of Common Stock issuable upon conversion
thereof and (d) the cost and charges of any transfer agent, registrar, trustee
or fiscal paying agent and to promptly pay (ii) all documented out-of-pocket
costs and expenses, including attorneys', accountants' and consultants' fees,
incurred by each of the Purchasers in connection with the negotiation and
consummation of this Agreement, the Note Purchase Agreement, the Registration
Rights Agreement and the transactions contemplated thereby up to $800,000 in the
aggregate for all Purchasers and Other Purchasers under this Section 6.2 and
Section 6.2 of the Other Purchase Agreements.
SECTION 6.3 INSPECTION. Prior to and following the Closing,
the Company will permit each of the Purchasers and their representatives to
visit and inspect any of the Company's properties, to examine its books and
records and to make copies and to take extracts therefrom, and to discuss its
business affairs and finances with its officers and key employees, all at such
reasonable times as the Purchasers may request.
SECTION 6.4 AVAILABILITY OF COMMON STOCK. The Company shall at
all times reserve and keep available out of its authorized but unissued Common
Stock, for the purpose of effecting the conversion of the Shares, the full
number of shares of Common Stock then issuable upon the conversion of the
Shares. The Company will, from time to time, in accordance with the laws of the
State of Delaware, increase the authorized amount of Common Stock if at any time
the number of shares of Common Stock remaining unissued and available for
issuance shall be insufficient to permit conversion of the Shares.
SECTION 6.5 TRANSACTION FEE. Upon the execution of this
Agreement, the Company shall pay the Purchasers an aggregate fee equal to
$375,000. On the Closing Date, the Company shall pay the Purchasers an
additional aggregate fee equal to $750,000.
SECTION 6.6 FLEET BANK CONSENT. The Company will use its best
efforts to obtain the consent of Fleet Bank of Massachusetts, N.A. referred to
in Section 5.12 of the Disclosure Letter, within 10 days after the date hereof.
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SECTION 6.7 PROXY STATEMENTS; STOCKHOLDER APPROVALS. The
Company acting through the Board of Directors, shall, in accordance with
applicable law and its Certificate of Incorporation and By-Laws:
(a) promptly and duly call, give notice of, convene and hold
as soon as practicable following the clearance of the proxy statement to be
issued in connection with the transactions contemplated herein (the "Proxy
Statement") with the SEC, but in no event later than the Closing Date, a meeting
of its stockholders for the purpose of voting to approve the issuance of the
Shares and the shares of Common Stock issuable upon conversion thereof and shall
use its best efforts, except to the extent the Board of Directors determines in
good faith, after consultation with outside counsel, that contrary action is
required by the Board of Directors' fiduciary duties under applicable law, to
obtain stockholder approval;
(b) except to the extent the Board of Directors determines in
good faith, after consultation with outside counsel, that contrary action is
required by the Board of Directors' fiduciary duties under applicable law,
recommend approval of the issuance of the Shares and the shares of Common Stock
issuable upon conversion thereof, and include in the Proxy Statement such
recommendation, and take all lawful action to solicit such approvals; and
(c) as promptly as practicable following the signing of this
Agreement, prepare and file with the SEC a preliminary Proxy Statement and
respond to any comments of the SEC with respect to the preliminary Proxy
Statement and cause the definitive Proxy Statement to be mailed to its
stockholders.
SECTION 6.8 ELECTION TO BOARD OF DIRECTORS OF THE COMPANY.
Simultaneously with the Closing, the Company shall (a) take all actions
necessary to ensure that one representative of each of the following Purchaser
groups is appointed to the Board of Directors promptly after the consummation of
the transactions contemplated herein: (i) Thomas H. Lee Equity Fund III, L.P.,
Thomas H. Lee Foreign Fund III, L.P., Thomas H. Lee Company and affiliates
(collectively, the "Lee Purchaser Group"); (ii) Bain Capital Fund V, L.P., Bain
Capital Fund V-B, L.P., BCIP Associates, L.P., BCIP Trust Associates, L.P. and
affiliates (collectively, the "Bain Purchaser Group"); and (iii) Centre Capital
Investors II, L.P., Centre Capital Tax-Exempt Investors II, L.P., Centre Capital
Offshore Investors II, L.P., State Board of Administration of Florida, Centre
Parallel Management Partners, L.P., Centre Partners Coinvestment, L.P. and
affiliates (collectively, the "Centre Purchaser Group"); (b) use best efforts to
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cause each of the directors appointed in accordance with subsection (a) hereof
and the representative of the Thomas H. Lee Company currently serving on the
Board of Directors (and any successor nominees thereof) (collectively, the
"Purchasers' Representatives") to be renominated and reelected when their
initial and any subsequent term expires, (c) use best efforts to cause the
election of two nominees from the four Purchasers' Representatives to each of
the executive, compensation and audit committees of the Board of Directors, in
each case except to the extent the Board of Directors determines in good faith,
after consultation with outside counsel, that contrary action is required by the
Board of Directors' fiduciary duties under applicable law; provided, however
that if (i) the Lee Purchaser Group, in the aggregate, holds less than 40% or
20% of the Shares initially owned by the Lee Purchaser Group (or if any of such
Shares have been converted and after making appropriate adjustment for any stock
dividend, split-up, recapitalization, rights, merger or other change in the
corporate or capital structure of the Company (a "Restructuring"), shares of
Common Stock and shares of Common Stock issuable upon conversion of the Shares
representing less than 40% or 20% of the Common Stock originally issuable upon
conversion of the Shares), the Lee Purchaser Group shall only be entitled to
nominate one or no such nominees to the Board of Directors, respectively; (ii)
the Bain Purchaser Group holds less than 40% of the Shares initially owned by
the Bain Purchaser Group (or if any of such Shares have been converted and after
making appropriate adjustment for any Restructuring, shares of Common Stock and
shares of Common Stock issuable upon conversion of the Shares representing less
than 40% of the Common Stock originally issuable upon conversion of the Shares),
the Bain Purchaser Group shall not be entitled to nominate any nominees to the
Board of Directors; and (iii) the Centre Purchaser Group holds less than 40% of
the Shares initially owned by the Centre Purchaser Group (or if any of such
Shares have been converted and after making appropriate adjustment for any
Restructuring, shares of Common Stock and shares of Common Stock issuable upon
conversion of the Shares representing less than 40% of the Common Stock
originally issuable upon conversion of the Shares), the Centre Purchaser Group
shall not be entitled to nominate any nominees to the Board of Directors; and
provided, further that (i) if at any time there are only two Purchasers'
Representatives serving on the Board of Directors, the Company will use its best
efforts to cause the election of only one of such Purchasers' Representatives to
each of the executive, compensation and audit committee and (ii) if at any time
there is only one Purchasers' Representative serving on the Board of Directors,
the Company is not obligated to use its best efforts to cause the election of
such Purchasers' Representative to any of the committees. Each of the Purchasers
and the Other Purchasers will designate the representatives who will sit on the
executive,
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compensation and audit committees of the Board of Directors based on a vote of a
majority in interest of the Purchasers and the Other Purchasers.
SECTION 6.9 NO GENERAL SOLICITATION. None of the Company, its
affiliates (as defined in Rule 501(b) of the Securities Act) or any person
acting on their behalf will solicit any offer to buy or offer or sell the Shares
by means of any form or general solicitation or general advertising (as those
terms are used in Regulation D under the Securities Act) or in any manner
involving a public offering within the meaning of Section 4(2) of the Securities
Act that would require the registration of the Shares under the Securities Act.
ARTICLE VII
COVENANTS OF THE PURCHASERS
SECTION 7.1 CERTAIN RESTRICTIONS.
(a) Each of the Purchasers covenants with the Company that,
without the consent of the Company, for a period commencing on the date hereof
and continuing through the fifth anniversary of the date hereof, none of the
Purchasers, singly or as part of a group, directly or indirectly, through one or
more intermediaries or otherwise, will:
(i) purchase or acquire, or offer, propose or agree to
purchase or acquire, directly or indirectly, any of the Common Stock
(other than by conversion of any of the Shares), any option, warrant or
other right to acquire, directly or indirectly, any Common Stock or any
securities which are convertible into or exchangeable or exercisable
for Common Stock (other than the exercise of options under the Stock
Option Agreement dated the date hereof); provided, however, that
notwithstanding anything to the contrary contained herein, the
foregoing restriction shall not be deemed to be violated or applicable
if a Purchaser is not otherwise in breach of this Agreement and (A)
the amount of the outstanding Common Stock beneficially owned, in the
aggregate, by such Purchaser is increased as a result of any stock
dividend, stock split, split-up, recapitalization, merger or other
change in the corporate or capital structure of the Company or any
other action taken solely by the Company or (B) the Company breaches
its obligations under Section 6.8 hereof; and provided, further, that
at any time when the percentage of the outstanding
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Common Stock owned by a Purchaser on a fully diluted basis is less than
the percentage of the outstanding Common Stock owned by such Purchaser
on a fully diluted basis on the Closing Date (the "Maximum Amount")
such Purchaser may purchase additional shares of Common Stock up to the
Maximum Amount;
(ii) solicit, or encourage any other person to solicit,
"proxies" or become a "participant" or otherwise engage in any
"solicitation" (as such terms are defined or used in Regulation 14A
under the Exchange Act) in opposition to a recommendation of a majority
of the directors of the Company with respect to any matter; seek to
advise or influence any person (within the meaning of Section 13(d)(3)
of the Exchange Act) with respect to the voting of any securities of
the Company; or execute any written consent in lieu of a meeting of
holders of securities of the Company or any class thereof;
(iii) initiate, propose or otherwise solicit stockholders for
the approval of one or more stockholder proposals with respect to the
Company, as described in Rule 14a-8 under the Exchange Act;
(iv) except as results from the Purchase Agreements or from
arrangements among the Purchasers and the Other Purchasers, directly or
indirectly participate in or encourage the formation of any "group"
(within the meaning of Section 13(d)(3) of the Exchange Act) owning or
seeking to acquire beneficial ownership of securities of the Company or
affect control of the Company;
(v) except as results from the Purchase Agreements or from
arrangements among the Purchasers and the Other Purchasers, otherwise
act, directly or indirectly, alone or in concert with others, to seek
to control or influence in any manner the management, business,
operations, board of directors, policies or affairs of the Company, or
propose or seek to effect any form of business combination transaction
with the Company or any affiliate thereof or any restructuring,
recapitalization or other similar transaction with respect to the
Company; or
(vi) (a) encourage any person, firm, corporation, group or
other entity to engage in any of the actions covered by clauses (i)
through (v) of this Section 7.1 or make any public arrangement (or make
other communication with or to the Company or otherwise which, in the
opinion
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of counsel to the Company, would require public announcement) with
respect to any matter set forth in clause (i) through (v) of this
Section 7.1; provided, however, that actions taken by any
representative of the Purchaser on the Board of Directors of the
Company, acting in his or her capacity as such a director, shall not
violate this Section 7.1.
(b) No Purchaser shall, without the Company's
consent, sell, transfer, effect a short sale of, grant any option for
the purchase of, or loan any Shares or Common Stock for a period of 18
months from the date of issuance of the Shares except to an affiliate
or the Other Purchasers or an affiliate thereof; provided that this
restriction on each Purchaser's ability to sell or transfer any Shares
will cease to apply upon a conversion of the Shares pursuant to Section
8.10.1 of the Certificate of Designation; provided further, that each
Purchaser may sell its Shares or Common Stock in any tender offer or
exchange offer made for any Company securities.
ARTICLE VIII
RESTRICTIONS ON TRANSFERABILITY OF SECURITIES
SECTION 8.1 RESTRICTIVE LEGEND. Each certificate representing
(a) the Shares, (b) shares of the Common Stock issuable upon conversion of any
Shares, and (c) any other securities issued in respect of the Shares or Common
Stock issued upon conversion of any Shares upon any stock split, stock dividend,
recapitalization, merger, consolidation or similar event (each of the foregoing
securities in (a) through (c) being referred to herein as "Restricted
Securities"), shall (unless otherwise permitted by the provisions of Section 8.2
below) be stamped or otherwise imprinted with a legend substantially in the
following form (in addition to the legend required under any applicable state
securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR ANY APPLICABLE STATE SECURITIES LAWS. SUCH SHARES MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATIONS OR EXEMPTIONS
THEREFROM UNDER SAID ACT OR LAWS. COPIES OF THE AGREEMENT COVERING THE
PURCHASE OF THESE SHARES AND THEIR TRANSFER MAY BE OB-
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TAINED AT NO COST BY WRITTEN REQUEST MADE BY THE
HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRE-
TARY OF THE COMPANY.
The Company will promptly, upon request, remove any such legend when no longer
required by the terms of this Agreement or by applicable law.
SECTION 8.2 NOTICE OF PROPOSED TRANSFERS. Prior to any
proposed transfer of any Restricted Securities, unless there is in effect a
registration statement under the Securities Act covering the proposed transfer,
the Purchaser proposing such a transfer shall give written notice to the Company
of its intention to effect such transfer. Each such notice shall describe the
manner and circumstances of the proposed transfer in sufficient detail, and
shall be accompanied by either (a) a written opinion of legal counsel (who shall
be reasonably satisfactory to the Company) addressed to the Company to the
effect that the proposed transfer of the Restricted Securities may be effected
without registration under the Securities Act or (b) a "no action" letter from
the Commission to the effect that the transfer of such securities without
registration will not result in a recommendation by the staff of the Commission
that action be taken with respect thereto, whereupon, in each case, such
Purchaser shall be entitled to transfer such Restricted Securities in accordance
with the terms of the notice delivered by such Purchaser to the Company. Unless
there is in effect a registration statement under the Securities Act covering
the proposed transfer, each certificate evidencing the Restricted Securities
transferred as herein provided shall bear the appropriate restrictive legend set
forth in Section 8.1 above except that such certificate shall not bear such
restrictive legend if, (i) in the opinion of counsel for such Purchaser, such
legend is not required in order to establish compliance with any provisions of
the Securities Act, (ii) a period of at least one year has elapsed since the
later of the date the Restricted Securities were acquired from the Company or
from an affiliate of the Company, and such Purchaser represents to the Company
that it is not an affiliate of the Company and has not been an affiliate during
the preceding three months and shall not become an affiliate of the Company
without resubmitting the Restricted Securities for reimposition of the legend,
or (iii) the restricted Securities have been sold pursuant to Rule 144(k) and
the certificate is accompanied by a representation by such Purchaser that it is
not an affiliate of the Company, has not been an affiliate during the
three-month period prior to the sale and has held the Restricted Securities for
more than two years.
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ARTICLE IX
TERMINATION
Notwithstanding anything contained herein to the contrary,
this Agreement may be terminated at any time prior to the Closing Date:
(a) by the mutual written consent of the Purchasers and the
Company;
(b) by any Purchaser or the Company if the Closing has not
occurred on or before six months from the date hereof and this Agreement has not
previously been terminated; provided, however, that the right to terminate the
Agreement under this Section 9(b) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Closing to occur on or before such date; or
(c) by any Purchaser or the Company if any of the Other
Purchase Agreements or the Note Purchase Agreement are terminated; or
(d) by any Purchaser 10 days after the Company's shareholders,
at a duly held meeting at which such shareholders vote on the issuance of the
Preferred Stock to the Purchasers or the Other Purchasers, fail to approve such
issuance.
In the event that this Agreement shall be terminated pursuant
to this Article IX, all further obligations of the parties under this Agreement
other than the obligations set forth in Article X and Sections 6.2, 6.5 and
11.10 shall be terminated without further liability of any party to any other
party, provided that nothing herein shall relieve any party from liability for
its willful breach of this Agreement.
ARTICLE X
INDEMNIFICATION
SECTION 10.1 INDEMNIFICATION. The Company hereby agrees to
indemnify, defend and hold harmless each Purchaser from and against all de-
mands, claims, actions or causes of action, assessments, losses, damages,
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liabilities, costs and expenses (collectively, "Claims"), including without
limitation, interest, penalties and attorneys' fees and expenses, asserted
against, resulting to, or imposed upon or incurred by such Purchaser directly or
indirectly, in connection with the transactions contemplated hereby.
SECTION 10.2 TERMS OF INDEMNIFICATION. The obligations and
liabilities of the Company with respect to Claims by third parties will be
subject to the following terms and conditions:
(a) a Purchaser will give the Company prompt notice of any
Claims asserted against, resulting to, imposed upon or incurred by a Purchaser,
directly or indirectly, and the Company will undertake the defense thereof by
representatives of their own choosing which are reasonably satisfactory to such
Purchaser; provided that the failure of any Purchaser to give notice as provided
in this Section 10.2 shall not relieve the Company of its obligations under this
Article X, except to the extent that such failure has materially and adversely
affected the rights of the Company;
(b) if within a reasonable time after notice of any Claim, the
Company fails to defend, such Purchaser will have the right to undertake the
defense, compromise or settlement of such Claims on behalf of and for the
account and at the risk of the Company, subject to the right of the Company to
assume the defense of such Claim at any time prior to settlement, compromise or
final determination thereof;
(c) if there is a reasonable probability that a Claim may
materially and adversely affect a Purchaser other than as a result of money
damages or other money payments, such Purchaser will have the right at its own
expense to defend (provided that the indemnifying party shall continue to
control the defense and the indemnified party shall have the right to
participate in such defense), or co-defend, such Claim;
(d) the Company on one hand and the Purchasers on the other
will not, without the prior written consent of the other, settle or compromise
any Claim or consent to entry of any judgment relating to any such Claim;
(e) with respect to any Claims asserted against a Purchaser,
such Purchaser will have the right to employ one counsel of its choice in each
applicable jurisdiction (if more than one jurisdiction is involved) to represent
such Purchaser if, in such Purchaser's reasonable judgment, a conflict of
interest
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between such Purchaser and the indemnifying party exists in respect of such
Claims, and in that event the fees and expenses of such separate counsel shall
be paid by such indemnifying party;
(f) the Company will provide each Purchaser reasonable access
to all records and documents of the Company relating to any Claim; and
(g) any Claim, in so far as it is related to any of the
representations and warranties of the Company contained in this Agreement, must
be made within one year of the Closing Date.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 GOVERNING LAW. This Agreement shall be governed
by and construed in accordance with the laws of the Commonwealth of
Massachusetts, without regard to the conflict of laws rules thereof.
SECTION 11.2 SURVIVAL. All representations and warranties,
covenants and agreements of the Company and any Purchaser contained in this
Agreement shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any Purchaser or any controlling person
thereof or by or on behalf of the Company, any of its officers and directors or
any controlling person thereof, and such representations and warranties shall
survive for a period of one year from the Closing Date hereof.
SECTION 11.3 SUCCESSORS AND ASSIGNS. Except as otherwise
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors and permitted assigns of the parties hereto. No
assignment of this Agreement may be made by either party at any time, whether or
not by operation of law, without the other party's prior written consent, except
that each Purchaser may assign any of its rights hereunder to an affiliate of
such Purchaser or to the Other Purchasers or any of their affiliates without the
Company's consent provided that such affiliate expressly assumes in writing all
of the purchaser's obligations hereunder, and provided that such assignment
shall not relieve the assigning Purchaser of its obligations hereunder.
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SECTION 11.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement and
the Transaction Documents constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof
provided that the Confidentiality Agreement between the Purchasers and the
Company dated April 18, 1997 shall remain in effect. Except as expressly
provided herein, neither this Agreement nor any term hereof may be amended,
waived, discharged or terminated other than by a written instrument signed by
the party against whom enforcement of any such amendment, waiver, discharge or
termination is sought.
SECTION 11.5 NOTICES, ETC. All notices and other
communications provided for or permitted hereunder shall be made in writing by
hand-delivery, first-class mail (registered or certified, return receipt
requested), telex, telecopier or courier guaranteeing overnight delivery,
addressed (a) if to the Purchasers to Thomas H. Lee Company at 75 State Street,
Boston, Massachusetts 02109, Attention: Anthony J. DiNovi, or at such other
addresses as shall have been furnished to the Company with a copy to Louis A.
Goodman of Skadden, Arps, Slate, Meagher & Flom LLP at One Beacon Street,
Boston, Massachusetts 02108 and (b) if to the Company, at One Athenaeum Street,
Cambridge, Massachusetts 02142, Attention: Mr. Neal S. Winneg, or at such
other address as the Company shall have furnished to the Purchaser in writing
with a copy to Mark G. Borden at Hale and Dorr LLP, 60 State Street, Boston,
Massachusetts 02109. All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied; and
on the next business day, if timely delivered to a courier guaranteeing
overnight delivery.
SECTION 11.6 DELAYS OR OMISSIONS. Except as expressly provided
herein, no delay or omission to exercise any right, power or remedy accruing to
the Company or any of the Purchasers upon any breach or default of any party
under this Agreement, shall impair any such right, power or remedy of the
Company or any of the Purchasers nor shall it be construed to be a waiver of any
such breach or default, or an acquiescence therein, or of or in any similar
breach or default thereafter occurring; nor shall any waiver of any single
breach or default be deemed a waiver of any other breach or default theretofore
or thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of the Company or any of the Purchasers of any breach or
default under this Agreement, or any waiver on the part of any such party of any
provisions or conditions of this Agreement, must be in writing and shall be
26
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effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to the
Company or any of the Purchasers, shall be cumulative and not alternative.
SECTION 11.7 COUNTERPARTS. This Agreement may be executed in
any number of counterparts, each of which may be executed by only one of the
parties hereto, each of which shall be enforceable against the party actually
executing such counterpart, and all of which together shall constitute one
instrument.
SECTION 11.8 SEVERABILITY. In the event that any provision of
this Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provisions; provided that no such severability shall be
effective if it materially changes the economic benefit of this Agreement to any
party.
SECTION 11.9 TITLES AND SUBTITLES. The titles and subtitles
used in this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement.
SECTION 11.10 NO PUBLIC ANNOUNCEMENT. Neither the Company nor
any of the Purchasers shall make any press release or other public announcement
concerning the transactions contemplated by this Agreement except as and to the
extent that any such party shall be obligated to make any such disclosure by law
or by the NYSE and then only after consultation with the other regarding the
basis of such obligation and the content of such press release or other public
announcement or as the parties shall mutually agree.
SECTION 11.11 REASONABLE EFFORTS. The Company and the
Purchasers shall use all reasonable efforts to consummate the transactions
contemplated by this Agreement, the Other Purchase Agreements and the Note
Purchase Agreement.
SECTION 11.12 DISTRIBUTIONS AND ADJUSTMENTS. If from July 5,
1997 through the Closing Date the Company shall have taken any action which
would entitle the holders of Preferred Stock to a distribution or adjustment in
accordance with the Certificate of Designation if the Preferred Stock were then
outstanding, then the consideration to be received by the Purchasers hereunder
shall be appropriately adjusted.
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IN WITNESS WHEREOF, each of the undersigned has caused the
foregoing Agreement to be executed under seal by one of its duly authorized
officers as of the date first above written.
THE LEARNING COMPANY, INC
By /s/ R. Scott Murray
-------------------------------
Name: R. Scott Murray
Title: Executive Vice President and
Chief Financial Officer
35
PURCHASERS:
THOMAS H. LEE EQUITY FUND III, L.P.
By: THL Equity Advisors III Limited Partner-
ship,
as General Partner
By: THL Equity Trust III,
as General Partner
By /s/ Anthony J. DiNovi
-------------------------------------
Name: Anthony J. DiNovi
Title: Vice President
THOMAS H. LEE FOREIGN FUND III, L.P.
By: THL Equity Advisors III Limited
Partnership, as General Partner
By: THL Equity Trust III,
as General Partner
By /s/ Anthony J. DiNovi
-------------------------------------
Name: Anthony J. DiNovi
Title: Vice President
THOMAS H. LEE COMPANY
By /s/ Anthony J. DiNovi
-------------------------------------
Name: Anthony J. DiNovi
Title: Managing Director
36
Exhibit A
The Learning Company, Inc.
CERTIFICATE OF DESIGNATION
OF SERIES A CONVERTIBLE PARTICIPATING
PREFERRED STOCK SETTING FORTH THE POWERS,
PREFERENCES, RIGHTS, QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS OF
SUCH SERIES OF PREFERRED STOCK
Pursuant to Section 151 of the General Corporation Law of the
State of Delaware, The Learning Company, Inc. (the "Company"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware, in accordance with the provisions of Section 103 thereof, DOES HEREBY
CERTIFY:
That pursuant to the authority conferred upon the Board of
Directors of the Company (the "Board of Directors") by Article 4.2.2 of the
Restated Certificate of Incorporation of the Company, as amended, and in
accordance with the provisions of Section 151 of the General Corporation Law of
the State of Delaware, the Board of Directors on August 26, 1997, adopted the
following resolution authorizing and creating a series of Preferred Stock, par
value $.01 per share, of the Company (the "Preferred Stock") designated as
Series A Convertible Participating Preferred Stock:
RESOLVED that, pursuant to the authority vested in the Board
of Directors in accordance with the provisions of the Restated Certificate of
Incorporation of the Company, as amended, a series of the class of authorized
Preferred Stock is hereby authorized and created and that the designation and
number of shares thereof and the voting powers, preferences and relative,
participating, optional and other special rights of the shares of such series,
and the qualifications, limitations and restrictions thereof are as follows:
Section 1. Designation and Number.
Section 1.1 Designation. The shares of such series shall be
designated as "Series A Convertible Participating Preferred Stock" (the "Series
A Preferred Stock"). The maximum number of shares of Series A Preferred Stock
hereby authorized shall be 750,000 shares.
37
Section 1.2 Priority. The Series A Preferred Stock shall, with
respect to the payment of dividends and the distribution of assets on
liquidation, dissolution or winding up, rank prior to (i) the Common Stock, par
value $0.01 per share, of the Company (the "Common Stock") and (ii) any other
class or series of capital stock of the Company (including the Preferred Stock)
hereinafter issued by the Company, other than shares of a class or series of
capital stock of the Company ranking prior to or on parity with (either as to
dividends or the distribution of assets on liquidation, dissolution or winding
up) the Series A Preferred Stock approved by the holders of Series A Preferred
Stock pursuant to Section 3.2.
Section 2. Dividends and Distributions.
Section 2.1 Dividends. In case the Company shall at any time or from
time to time declare, order, pay or make a dividend or other distribution
(including, without limitation, any dividend or other distribution of stock or
other securities or property or rights or warrants to subscribe for securities
of the Company or any of its subsidiaries) on its Common Stock, and in each
such case, the holder of shares of Series A Preferred Stock shall be entitled
to receive from the Company, with respect to each share of Series A Preferred
Stock held, the same dividend or other distribution received by a holder of the
number of shares of Common Stock into which such share of Series A Preferred
Stock is convertible on the record date for such dividend or other
distribution; provided, however, that if the Company shall dividend or
otherwise distribute rights to all holders of Common Stock entitling the
holders thereof to subscribe for or purchase shares of capital stock of the
Company, which rights (i) until the occurrence of a specified event or events
are deemed to be transferred with such shares of Common Stock and are not
exercisable and (ii) are issued in respect of future issuances of Common Stock,
the holders of shares of Series A Preferred Stock shall not be entitled to
receive any such rights until such rights separate from the Common Stock or
become exercisable. Any such dividend or distribution shall be declared,
ordered, paid or made on the Series A Preferred Stock at the same time such
dividend or other distribution is declared, ordered, paid or made on the Common
Stock (or in the case of rights referred to in the proviso of the immediately
preceding sentence at the time such rights separate from the Common Stock or
become exercisable).
Section 2.2 No Additional Dividends. The holders of shares of
Series A Preferred Stock shall not be entitled to receive any dividends or other
distributions except as provided herein.
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Section 3. Voting Rights. In addition to any voting rights
provided by law, the holders of shares of Series A Preferred Stock shall have
the following voting rights:
Section 3.1 With Common Stock. So long as the Series A
Preferred Stock is outstanding, each share of Series A Preferred Stock shall
entitle the holder thereof to vote on all matters voted on by holders of Common
Stock voting together as a single class with other shares entitled to vote at
all meetings of the stockholders of the Company. With respect to any such vote,
each holder of shares of Series A Preferred Stock shall be entitled to cast the
number of votes equal to the number of votes which could be cast in such vote by
a holder of the shares of capital stock of the Company into which such shares of
Series A Preferred Stock are convertible on the record date for such vote.
Section 3.2 As a Class. The affirmative vote of the holders of
at least 66-2/3% of the outstanding shares of Series A Preferred Stock, in
person or by proxy, at a special or annual meeting of stockholders called for
the purpose, shall be necessary to (i) authorize, increase the authorized number
of shares of, or issue (including on conversion or exchange of any convertible
or exchangeable securities or by reclassification), any shares of any class or
series of capital stock of the Company (other than Common Stock) ranking prior
to or on parity with (either as to dividends or the distribution of assets upon
liquidation, dissolution or winding up) the Series A Preferred Stock; (ii)
increase the authorized number of shares of, or issue (including on conversion
or exchange of any convertible or exchangeable securities or by
reclassification) any shares of Series A Preferred Stock; (iii) authorize, adopt
or approve an amendment to the Restated Certificate of Incorporation of the
Company which would decrease the aggregate number of authorized shares of Series
A Preferred Stock, increase or decrease the par value of the shares of Series A
Preferred Stock, or alter or change the powers, preferences or special rights of
the shares of Series A Preferred Stock so as to affect such shares of Series A
Preferred Stock adversely; or (iv) reclassify any shares of Common Stock or any
other shares of any class or series of capital stock of the Company into shares
ranking prior to or on parity with (either as to dividends or the distribution
of assets upon liquidation, dissolution or winding up) the Series A Preferred
Stock. With respect to any such vote, each such holder of Series A Preferred
Stock shall have one vote for each share of such stock standing in his name on
the transfer books of the Company as of any record date fixed for such purpose
or, if no such date be fixed, at the close of business on the Business Day (as
defined in Section 11) next preceding the day on which notice is given, or if
notice is waived, at the close of business on the Business Day next preceding
the day on which the meeting is held or, if such vote is by written consent, the
date of such consent.
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Section 3.3 Exercise. The foregoing rights of holders of
shares of Series A Preferred Stock to take any actions as provided in this
Section 3 may be exercised at any annual meeting of stockholders or at a special
meeting of stockholders held for such purpose as hereinafter provided or at any
adjournment thereof, or by the written consent, delivered to the Secretary of
the Company, of the holders of the minimum number of shares required to take
such action.
So long as such right to vote continues (and unless such right
has been exercised by written consent of the minimum number of shares required
to take such action), the Chairman of the Board of the Company may call, and,
upon the written request of holders of record of 20% or more of the outstanding
shares of Series A Preferred Stock addressed to the Secretary of the Company at
the principal office of the Company, shall call a special meeting of the holders
of shares entitled to vote as provided herein. Such meeting shall be held within
30 days after delivery of such request to the Secretary, at the place and upon
the notice provided by law and in the By-laws of the Company for the holding of
meetings of stockholders.
Section 3.4 Quorum. At each meeting of stockholders at which
the holders of shares of Series A Preferred Stock shall have the right, voting
separately as a single class to take any action, the presence in person or by
proxy of the holders of record of at least 50% of the outstanding shares of
Series A Preferred Stock and entitled to vote on the matter shall be necessary
and sufficient to constitute a quorum. In the absence of a quorum of the holders
of shares of Series A Preferred Stock, a majority of the holders of such shares
present in person or by proxy shall have the power to adjourn the meeting as to
the actions to be taken by the holders of shares of Series A Preferred Stock
from time to time and place to place without notice other than announcement at
the meeting until a quorum shall be present.
Section 4. Certain Restrictions.
Section 4.1 Restrictions on Dividends. Whenever dividends
payable on shares of Series A Preferred Stock as provided in Section 2 are not
paid in full, thereafter and until all unpaid dividends payable, whether or not
declared, on the outstanding shares of Series A Preferred Stock shall have been
paid in full or declared and set apart for payment, the Company shall not:
(A) declare or pay dividends, or make any other distributions, on any shares of
Common Stock or any other shares of any class or series of capital stock
ranking junior to (either as to dividends or the distribution of assets upon
liquidation, dissolution or winding up) the Series A Preferred Stock ("Junior
Stock"), other than dividends or distributions payable in Junior
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Stock; or (B) declare or pay dividends, or make any other distributions, on any
shares of any class or series of capital stock of the Company ranking on a
parity with (either as to dividends or the distribution of assets upon
liquidation, dissolution or winding up of the Company) the Series A Preferred
Stock ("Parity Stock") except (1) dividends or distributions payable in Junior
Stock and (2) dividends or distributions paid ratably on the Series A Preferred
Stock and all Parity Stock on which dividends are payable or in arrears, in
proportion to the total amounts to which the holders of all shares of the Series
A Preferred Stock and such Parity Stock are then entitled; provided, however,
that in the case of clause (2) the holders of at least 66-2/3% of the
outstanding shares of Series A Preferred Stock, voting separately as a single
class, or the holders of at least 66-2/3% of the outstanding shares of Series A
Preferred Stock and of any Parity Stock the approval of holders of which is
required for such a pro rata dividend or distribution pursuant to any similar
provision of the Certificate of Designation for such stock, voting together as a
class, shall have approved the payment of such dividend or distribution.
Section 4.2 Restrictions on Redemption or Purchase. Whenever
dividends payable on shares of Series A Preferred Stock as provided in Section 2
are not paid in full, thereafter and until all unpaid dividends payable, whether
or not declared, on the outstanding shares of Series A Preferred Stock shall
have been paid in full or declared and set apart for payment, the Company shall
not: (A) redeem, purchase or otherwise acquire for consideration any shares of
Junior Stock or Parity Stock; provided that (1) the Company may at any time
redeem, purchase or otherwise acquire shares of Junior Stock or Parity Stock in
exchange for any shares of Junior Stock and (2) the Company may accept shares of
any Parity Stock for conversion.
Section 4.3 Purchase by Subsidiary. The Company shall not
permit any subsidiary (as defined in Section 11) of the Company to purchase or
otherwise acquire for consideration any shares of capital stock of the Company
unless the Company could, pursuant to Section 4.2, purchase such shares at such
time and in such manner.
Section 5. Purchase of Series A Preferred Stock Upon a
Purchase Event.
Section 5.1 If a Purchase Event (as defined in Section 11)
shall occur at any time, then each holder of Series A Preferred Stock shall
have, in addition to the other rights set forth herein (including, without
limitation, the right to convert any such share pursuant to Section 8), the
right to require that the Company purchase, to the extent that the Company shall
have funds legally available therefor, such holder's shares of Series A
Preferred Stock in whole or in part at a purchase price in cash
- 5 -
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in an amount equal to the Purchase Event Purchase Price (as defined below)
pursuant to the offer described below (the "Purchase Event Offer") and in
accordance with the other procedures set forth herein. With respect to any
Purchase Event, the Purchase Event Purchase Price shall mean an amount per share
equal to $200.00 (the "Base Purchase Event Amount"), plus if such Purchase Event
occurs after the second anniversary of the date of issuance of such shares of
Series A Preferred Stock, a 9% annual cumulative return on the Base Purchase
Event Amount, compounded quarterly, from such second anniversary date through
the date of such Purchase Event.
Section 5.2 Within 30 days following any Purchase Event, the
Company shall give written notice of such Purchase Event to each holder of
Series A Preferred Stock, by first-class mail, postage prepaid, at his address
appearing on the books of the Company, stating, among other things: that a
Purchase Event has occurred; the Purchase Event Purchase Price and the date on
which the Company will purchase shares of Series A Preferred Stock pursuant to
Section 5.1 (which shall be a Business Day no earlier than 30 days nor later
than 60 days from the date such notice is mailed, or such later date as is
necessary to comply with requirements under the Exchange Act (as defined in
Section 11)); and certain other procedures that a holder of Series A Preferred
Stock must follow to accept a Purchase Event Offer or to withdraw such
acceptance.
If at the time of any Purchase Event, the Company does not
have sufficient funds legally available to purchase all of the outstanding
shares of Series A Preferred Stock, the Company shall offer in its written
notice of such Purchase Event to purchase as many shares of Series A Preferred
Stock as it has funds legally therefor, ratably from the holders thereof in
proportion to the total number of shares tendered, and shall thereafter,
whenever it shall have funds legally therefor, offer to purchase as many shares
of Series A Preferred Stock as it has funds available therefor until it has
offered to purchase all of the outstanding shares of Series A Preferred Stock.
Section 5.3 The Company will comply with the applicable tender
offer rules, including Rule 13e-4 under the Exchange Act, and any other
applicable securities laws or regulations in connection with a Purchase Event
Offer.
The above provisions of this Section 5 shall similarly apply
to successive Purchase Events.
Section 6. Reacquired Shares. Any shares of Series A Preferred
Stock converted, purchased or otherwise acquired by the Company in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares of Series A Preferred Stock shall upon their cancellation, and
upon the filing of an appropriate certificate with the Secretary of State of the
State of Delaware, become authorized but unissued shares of Preferred Stock, par
value $.01 per share, of the Company, undesignated as to series, and may be
reissued as part of another series of Preferred Stock, par value $.01 per share,
of the Company subject to the conditions or restrictions on issuance set forth
herein.
Section 7. Liquidation, Dissolution or Winding Up.
Section 7.1 Bankruptcy or Insolvency. If the Company shall
commence a voluntary case under the Federal bankruptcy laws
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or any other applicable Federal or State bankruptcy, insolvency or similar law,
or consent to the entry of an order for relief in an involuntary case under any
such law or to the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or other similar official) of the Company or of any
substantial part of its property, or make an assignment for the benefit of its
creditors, or admit in writing its inability to pay its debts generally as they
become due, or if a decree or order for relief in respect of the Company shall
be entered by a court having jurisdiction in the premises in an involuntary case
under the Federal bankruptcy laws or any other applicable Federal or State
bankruptcy, insolvency or similar law, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or other similar official) of the
Company or any substantial part of its property, or ordering the winding up or
liquidation of its affairs, and any such decree or order shall be unstayed and
in effect for a period of 90 consecutive days and on account of any such event
the Company shall liquidate, dissolve or wind up, or if the Company shall
otherwise liquidate, dissolve or wind up, no distribution shall be made (i) to
the holders of shares of Junior Stock unless, prior thereto, the holders of
shares of Series A Preferred Stock shall have received the Liquidation Amount
(as defined below) with respect to each share, or (ii) to the holders of shares
of Parity Stock, except distributions made ratably on the Series A Preferred
Stock and all Parity Stock in proportion to the total amounts to which the
holders of all shares of the Series A Preferred Stock and Parity Stock are
entitled upon such liquidation, dissolution or winding up. If, upon any
liquidation, dissolution or winding up of the Company, the assets of the
Company, or proceeds thereof, distributable among the holders of the shares of
Series A Preferred Stock shall be insufficient to pay in full the Liquidation
Amount and the liquidation preference on all Parity Stock, then such assets, or
the proceeds thereof, shall be distributed ratably among the holders of shares
of Series A Preferred Stock and any such Parity Stock in accordance with the
respective amounts that would be payable on such shares of Series A Preferred
Stock and any such Parity Stock if all amounts payable thereon were paid in
full. Upon receipt of the Liquidation Amount, the holders of shares of Series A
Preferred Stock shall not be entitled to any further payments following a
liquidation, dissolution or winding up of the Company. The "Liquidation Amount"
for a share of Series A Preferred Stock shall mean the greater of (a) an amount
per share equal to $200.00 (the "Base Liquidation Preference"), plus if such
liquidation, dissolution or winding up occurs after the second anniversary of
the issuance of such shares of Series A Preferred Stock, an amount equal to a 9%
annual cumulative return on the Base Liquidation Preference, compounded
quarterly, from such second anniversary date through the date of such
liquidation, dissolution or winding up and (b) the amount that would be
distributed with respect to the shares of Common Stock issuable upon conversion
of such share of Series A Preferred
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Stock if all outstanding shares of Series A Preferred Stock were converted into
Common Stock immediately prior to such liquidation, dissolution or winding up.
Section 7.2 Proportionate Amount. The Liquidation Amount with
respect to each fractional share of Series A Preferred Stock outstanding shall
be equal to a ratably proportionate amount of the Liquidation Amount with
respect to each outstanding share of Series A Preferred Stock.
Section 8. Conversion of Series A Preferred Stock.
Section 8.1 Holder Right to Convert. Subject to and upon compliance with the
provisions of this Certificate of Designation, the holder of any shares of
Series A Preferred Stock shall have the right, at his option, at any time (and
from time to time) to convert each such share of Series A Preferred Stock into
a number of fully paid and nonassessable shares of Common Stock (as such shares
shall then be constituted) determined by dividing $200.00 by the Conversion
Price (as defined in Section 8.4) in effect at the time of such conversion, by
surrender of the shares so to be converted in the manner provided in Section
8.2. A holder of Series A Preferred Stock is not entitled to any rights of a
holder of Common Stock until his Series A Preferred Stock is converted into
Common Stock, and only into the extent such Series A Preferred Stock is
deemed to have been converted into Common Stock under this Section 8.
Section 8.2 Exercise of Conversion Privilege; Issuance of
Common Stock on Conversion; No Adjustment for Dividends. In order to exercise
the conversion privilege with respect to any Series A Preferred Stock, the
holder of any such share of Series A Preferred Stock to be converted in whole or
in part shall surrender such share of Series A Preferred Stock, duly endorsed,
at the principal office of the Company or with the transfer agent for the Common
Stock, and shall give written notice of conversion in the form provided on the
share of Series A Preferred Stock (or such other notice which is acceptable to
the Company) to the office or agency that the holder elects to convert such
shares specified in said notice. Such notice shall also state the name or names
(with address) in which the certificate or certificates for shares of Common
Stock which shall be issuable on such conversion shall be issued and shall be
accompanied by transfer taxes, if required pursuant to Section 8.7. Each such
share surrendered for conversion shall, unless the shares issuable on conversion
are to be issued in the same name as the registration of such share of Series A
Preferred Stock, be duly endorsed by, or be accompanied by instruments of
transfer in form satisfactory to the Company duly executed by, the holder or his
duly authorized attorney.
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As promptly as practicable after satisfaction of the
requirements for conversion set forth above, subject to compliance with any
restrictions on transfer if shares issuable on conversion are to be issued in a
name other than that of the shareholder (as if such transfer were a transfer of
the shares so converted), the Company shall issue and shall deliver to such
holder at the address designated in the notice of conversion, a certificate or
certificates for the number of full shares issuable upon the conversion of such
shares in accordance with the provisions of this Section 8 and a check or cash
in respect of any fractional interest in respect of a share of Common Stock
arising upon such conversion, as provided in this Section 8. In case any
certificate shall be surrendered for partial conversion, the Company shall issue
and deliver to the holder of the certificate so surrendered, without charge to
him, a new certificate or certificates in an aggregate share amount equal to the
unconverted portion of the surrendered certificate.
Each conversion shall be deemed to have been effected as to
any such certificate on the date on which the requirements set forth above in
this Section 8.2 have been satisfied as to such certificate, and the person in
whose name any certificate or certificates for shares of Common Stock shall be
issuable upon such conversion shall be deemed to have become on said date the
holder of record of the shares represented thereby; provided, however, that any
such surrender on any date when the stock transfer books of the Company shall be
closed shall constitute the person in whose name the certificates are to be
issued as the record holder thereof for all purposes on the next succeeding day
on which such stock transfer books are open, but such conversion shall be at the
Conversion Price in effect on the date upon which such Series A Preferred Stock
shall have been surrendered.
Section 8.3 Cash Payments in Lieu of Fractional Shares. No
fractional shares of Common Stock or scrip representing fractional shares shall
be issued upon conversion of Series A Preferred Stock. If more than one
certificate for shares of Preferred Stock shall be surrendered for conversion at
one time by the same holder, the number of full shares which shall be issuable
upon conversion shall be computed on the basis of the aggregate shares of Series
A Preferred Stock (or specified portions thereof to the extent permitted hereby)
so surrendered. If any fractional share of stock would be issuable upon the
conversion of any Series A Preferred Stock, the Company shall make an adjustment
therefor in cash at the current market value thereof. The current market value
of a share of Common Stock shall be the Closing Price (determined as provided in
Section 8.5.3) on the first Trading Day (as defined in Section 8.5.3)
immediately preceding the day on which the Series A Preferred Stock is deemed to
have been converted and such Closing Price.
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Section 8.4 Conversion Price. The initial conversion price
shall be the lower of (i) $10.00 or (ii) the weighted average (based on daily
trading volumes of the Common Stock on the New York Stock Exchange) of the
Closing Prices of the Common Stock for the period of the 30 consecutive Trading
Days immediately preceding the Trading Day which is one Trading Day before the
date on which the proxy statement is sent to the Company's stockholders with
respect to the approval of the issuance of the Series A Preferred Stock (herein
called the "Conversion Price") subject to adjustment as provided in this Section
8.
Section 8.5 Adjustment of Conversion Price. The Conversion
Price shall be adjusted from time to time by the Company as follows:
Section 8.5.1 In case outstanding shares of Common Stock shall
be subdivided into a greater number of shares of Common Stock, the Conversion
Price in effect at the opening of business on the day following the day upon
which such subdivision becomes effective shall be proportionately reduced, and
conversely, in case outstanding shares of Common Stock shall be combined into a
smaller number of shares of Common Stock, the Conversion Price in effect at the
opening of business on the day following the day upon which such combination
becomes effective shall be proportionately increased, such reduction or
increase, as the case may be, to become effective immediately after the opening
of business on the day following the day upon which such subdivision or
combination becomes effective.
Section 8.5.2 In case a tender offer made by the Company or
any of its subsidiaries for all or any portion of the Common Stock shall expire
and such tender offer (as amended upon the expiration thereof) shall require
the payment to stockholders (based on the acceptance (up to any maximum
specified in the terms of the tender offer) of Purchased Shares (as defined
below)) of an aggregate consideration having a fair market value (as determined
by the Board of Directors, whose determination shall be conclusive and
described in a resolution of such board) that combined together with the
aggregate of the cash plus the fair market value (as determined by the Board of
Directors, whose determination shall be conclusive and described in a
resolution of such board), as of the expiration of such tender offer, of
consideration payable in respect of any other tender offer, by the Company or
any of its subsidiaries for all or any portion of the Common Stock expiring
within the twelve (12) months preceding the expiration of such tender offer,
and in respect of which no adjustment pursuant to this Section 8.5.2 has been
made, exceeds 20.0% of the product of the Current Market Price (as defined in
Section 8.5.3) as of the last time (the "Expiration Time") tenders could have
been made pursuant to such tender offer (as it may be amended) times the number
of shares of Common Stock outstanding (including any
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46
tendered shares) on the Expiration Time, then, and in each such case, effective
immediately prior to the opening of business on the day after the date of the
Expiration Time, the Conversion Price shall be adjusted so that the same shall
equal the price determined by multiplying the Conversion Price in effect
immediately prior to close of business on the date of the Expiration Time by a
fraction of which the numerator shall be the number of shares of Common Stock
outstanding (including any tendered shares) on the Expiration Time multiplied by
the Current Market Price of the Common Stock on the Trading Day next succeeding
the Expiration Time and the denominator shall be the sum of (x) the fair market
value (determined as aforesaid) of the aggregate consideration payable to
stockholders based on the acceptance (up to any maximum specified in the terms
of the tender offer) of all shares validly tendered and not withdrawn as of the
Expiration Time (the shares deemed so accepted, up to any such maximum, being
referred to as the "Purchased shares") and (y) the product of the number of
shares of Common Stock outstanding (less any Purchased Shares) on the Expiration
Time and the Current Market Price of the Common Stock on the Trading Day next
succeeding the Expiration Time, such reduction to become effective immediately
prior to the opening of business on the day following the Expiration Time. In
the event that the Company is obligated to purchase shares pursuant to any such
tender offer, but the Company is permanently prevented by applicable law from
effecting any such purchases or all such purchases are rescinded, the Conversion
Price shall again be adjusted to be the Conversion Price which would then be in
effect if such tender offer had not been made.
Section 8.5.3 For purposes of this Section 8, the following
terms shall have the meaning indicated:
(1) "Closing Price" with respect to any securities on any day
shall mean the closing sale price regular way on such day or, in case no such
sale takes place on such day, the average of the reported closing bid and asked
prices, regular way, in each case on the New York Stock Exchange, or, if such
security is not listed or admitted to trading on such Exchange, on the principal
national security exchange or quotation system on which such security is quoted
or listed or admitted to trading, or, if not quoted or listed or admitted to
trading on any national securities exchange or quotation system, the average of
the closing bid and asked prices of such security on the over-the-counter market
on the day in question as reported by the National Quotation Bureau
Incorporated, or a similar generally accepted reporting service, or if not so
available, in such manner as furnished by any New York Stock Exchange member
firm selected from time to time by the Board of Directors for that purpose, or a
price determined in good faith by the Board of Directors, whose determination
shall be conclusive and described in a resolution of such board.
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(2) "Current Market Price" shall mean the average of the daily
Closing Prices per share of Common Stock for the ten consecutive Trading Days
immediately prior to the day on which any adjustment of the Conversion Price
pursuant to Section 8.5.2 becomes effective; provided, however, that if the "ex"
date (as hereinafter defined) for any subdivision or combination that requires
an adjustment to the Conversion Price pursuant to Section 8.5.1 occurs during
such ten consecutive Trading Days, the Closing Price for each Trading Day prior
to the "ex" date for such other event shall be adjusted by multiplying such
Closing Price by the same fraction by which the Conversion Price is required
to be adjusted as a result of such subdivision or combination. For purposes of
this paragraph, the term "ex" date, for any subdivision or combination of shares
of Common Stock, means the first date on which the Common Stock trades regular
way
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on such exchange or in such market after the time at which such subdivision or
combination becomes effective. Notwithstanding the foregoing, whenever
successive adjustments to the Conversion Price are called for pursuant to this
Section 8.5, such adjustments shall be made to the Current Market Price as may
be necessary or appropriate to effectuate the intent of this Section 8.5 and to
avoid unjust or inequitable results as determined in good faith by the Board of
Directors.
(3) "fair market value" shall mean the amount which a willing
buyer would pay a willing seller in an arm's-length transaction.
(4) "Trading Day" shall mean (x) if the applicable security is
listed or admitted for trading on the New York Stock Exchange or another
national security exchange, a day on which the New York Stock Exchange or that
other national security exchange is open for business or (y) if the applicable
security is quoted on the Nasdaq National Market, a day on which trades may be
made thereon or (z) if the applicable security is not so listed, admitted for
trading or quoted, any day other than a Saturday or Sunday or a day on which
banking institutions in the State of New York are authorized or obligated by law
or executive order to close.
Section 8.5.4 The Company may make such reductions in the
Conversion Price, in addition to those required by Sections 8.5.1 and 8.5.2 as
the Board of Directors considers to be advisable to avoid or diminish any income
tax to holders of Common Stock or rights to purchase Common Stock resulting from
any dividend or distribution of stock (or rights to acquire stock) or from any
event treated as such for income tax purposes. To the extent permitted by
applicable law, the Company from time to time may reduce the Conversion Price by
any amount for any period of time if the period is at least 20 days, the
reduction is irrevocable during the period and the Board of Directors shall have
made a determination that such reduction would be in the best interests of the
Company, which determination shall be conclusive and described in a resolution
of such board. Whenever the Conversion Price is reduced pursuant to the
preceding sentence, the Company shall mail to all holders of record of the
Series A Preferred Stock a notice of the reduction at least 15 days prior to the
date the reduced Conversion Price takes effect, and such notice shall state the
reduced Conversion Price and the period it will be in effect.
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Section 8.5.5 No adjustment in the Conversion Price shall be required
unless such adjustment would require an increase or decrease of at least 1% in
such price; provided, however, that any adjustments which by reason of this
Section 8.5.5 are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Section 8
shall be made by the Company and shall be made to the nearest cent or to the
nearest one one-hundredth of a share, as the case may be.
No adjustment need be made for rights to purchase Common Stock pursuant
to a Company plan for reinvestment of dividends or interest.
No adjustment need be made for a change in the par value, or to or from
no par value, of the Common Stock.
To the extent the Series A Preferred Stock becomes convertible into
cash, assets, property or securities (other than Common Stock of the Company),
no adjustment need be made thereafter as to the cash, assets, property or such
securities (except as such securities may otherwise by their terms provide), and
interest shall not accrue on such cash.
Section 8.5.6 In any case in which this Section 8.5 provides that an
adjustment shall become effective immediately after a Record Date for an event,
the Company may defer until the occurrence of such event (i) issuing to the
holder of any Series A Preferred Stock converted after such Record Date and
before the occurrence of such event the additional shares of Common Stock
issuable upon such conversion by reason of the adjustment required by such event
over and above the Common Stock issuable upon such conversion before giving
effect to such adjustment and (ii) paying to such holder any amount in cash in
lieu of any fraction pursuant to Section 8.3.
Section 8.6 Effect of Reclassification or Acquisition Event.
Section 8.6.1 If any reclassification or change of outstanding shares
of Common Stock (other than a change in par value, or to or from no par value,
as a result of a subdivision or combination) (each of the foregoing being
referred to as a "Reclassification"), each share of Series A Preferred Stock
then outstanding shall thereafter be convertible into the kind and amount of
shares of stock and other securities or property or assets (including cash)
receivable upon such reclassification or change by a holder of a number of
shares of Common Stock issuable upon conversion of such share of Series A
Preferred Stock (assuming, for such purposes, a sufficient number of authorized
shares of Common Stock available to convert all such Series A Preferred Stock)
immediately prior to such reclassification or
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change, assuming each holder of Common Stock did not exercise his rights of
election, if any, as to the kind or amount of securities, cash or other property
receivable upon such reclassification or change (provided, that if the kind or
amount of securities, cash or other property receivable upon such
reclassification or change is not the same for each share of Common Stock in
respect of which such rights of election shall not have been exercised
("non-electing share"), then for the purposes of this Section 8.6.1 the kind and
amount of securities, cash or other property receivable upon such
reclassification or for each non-electing share shall be deemed to be the kind
and amount so receivable per share by a plurality of the non-electing shares).
Section 8.6.2 If any Acquisition Event (as defined in Section 11)
occurs, each share of Series A Preferred Stock then outstanding shall thereafter
be convertible into the kind and amount of shares of stock and other securities
or property or assets (including cash) paid in such Acquisition Event (the
"Acquisition Event Consideration") for a number of shares of Common Stock
issuable upon conversion of such share of Series A Preferred Stock (assuming,
for such purposes, a sufficient number of authorized shares of Common Stock
available to convert all such Series A Preferred Stock) immediately prior to
such Acquisition Event, assuming each holder of Common Stock did not exercise
his rights of election, if any, as to the kind or amount of securities, cash or
other property paid upon such Acquisition Event (provided, that if the kind or
amount of securities, cash or other property is not the same for each share of
Common Stock in respect of which such rights of election shall not have been
exercised ("non-electing share"), then for the purposes of this Section 8.6.2
the kind and amount of securities, cash or other property receivable upon such
Acquisition Event for each non-electing share shall be deemed to be the kind and
amount so receivable per share by a plurality of the non-electing shares);
provided, however, if such Acquisition Event occurs after the date which is two
years from the date of issuance of such share of Series A Preferred Stock and
the fair market value (as determined by the Board of Directors of the Company in
good faith, whose determination shall be described in a resolution of such
board) of the Acquisition Event Consideration paid for on number of shares
of Common Stock issuable upon conversion of such share of Series A Preferred
Stock immediately prior to such Acquisition Event is less than an amount equal
to the sum of the Base Liquidation Preference and an amount equal to a 9% annual
cumulative return on the Base Liquidition Preference, compounded quarterly, from
such second anniversary date through the date of such Acquisition Event (with
the amount, if any, by which such fair market value is less than such sum being
hereinafter referred to as the "Difference"), then each share of Series A
Preferred Stock shall thereafter be convertible into the Acquisition Event
Consideration into which it becomes convertible pursuant to the foregoing
provisions of this Section 8.6.2, plus additional
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Acquisition Event Consideration having a fair market value (as determined by the
Board of Directors of the Company in good faith, whose determination shall be
described in a resolution of such board) equal to the Difference (or, at
the option of the Company, cash equal to the Difference).
Section 8.6.3 Notwithstanding anything contained herein to the
contrary, the Company will not effect any Reclassification or Acquisition Event
unless, prior to the consummation thereof, (i) the Surviving Person (as defined
in Section 11) thereof shall assume, by written instrument mailed to each holder
of shares of Series A Preferred Stock if such shares are held by 50 or fewer
holders or groups of affiliated holders or to each transfer agent for the shares
of Series A Preferred Stock if such shares are held by a greater number of
holders, the obligation to deliver to such holder such stock, securities or
other property or assets (including cash) with respect to or in exchange for
Common Stock to which, in accordance with the foregoing provisions, such holder
is entitled and (ii) proper provision is made to ensure that the holders of
shares of Series A Preferred Stock will be entitled to receive the benefits
afforded by this Section 8.6. Such written instrument should provide for
adjustments which shall be as nearly as equivalent as may be practicable to the
adjustments provided for in this Section 8.6.
The above provisions of this Section shall similarly apply to
successive reclassifications, changes, consolidations, mergers, combinations,
sales and conveyances.
Section 8.6.4 If this Section 8.6 applies to any event or occurrence,
Section 8.5 shall not apply to such event or occurrence.
Section 8.7 Transfer or Similar Taxes on Shares Issued. The issue of
stock certificates on conversions of Series A Preferred Stock shall be made
without charge to the converting holder of Series A Preferred Stock for any
transfer or similar tax in respect of the issue thereof. The Company shall not,
however, be required to pay any such tax which may be payable in respect of any
transfer involved in the issue and delivery of stock in any name other than that
of the holder of any Series A Preferred Stock converted, and the Company shall
not be required to issue or deliver any such stock certificate unless and until
the person or persons requesting the issue thereof shall have paid to the
Company the amount of such tax or shall have established to the satisfaction of
the Company that such tax has been paid.
Section 8.8 Reservation of Shares; Shares to Be Fully Paid; Listing of
Common Stock. The Company shall provide, free from preemptive rights, out of its
authorized but unissued shares or shares held in treasury, sufficient shares to
provide for the
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conversion of the Series A Preferred Stock from time to time as such Series A
Preferred Stock is presented for conversion.
Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par value, if any, of the shares of Common Stock
issuable upon conversion of the Series A Preferred Stock, the Company will take
all corporate action which may, in the opinion of its counsel, be necessary in
order that the Company may validly and legally issue shares of such Common Stock
at such adjusted Conversion Price.
The Company covenants that all shares of Common Stock which may be
issued upon conversion of Series A Preferred Stock will, upon issue, be fully
paid and nonassessable by the Company and free from all transfer or similar
taxes as described in Section 8.7, liens and charges with respect to the issue
thereof.
The Company further covenants that, if at any time the Common Stock
shall be listed on the New York Stock Exchange or any other national securities
exchange, the Company will, if permitted by the rules of such exchange, list and
keep listed, so long as the Common Stock shall be so listed on such exchange,
all Common Stock issuable upon conversion of the Series A Preferred Stock.
Section 8.9 Notice to Stockholders Prior to Certain Actions. In case:
(a) the Company takes any action that would result in a
Reclassification or an Acquisition Event; or
(b) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
the Company shall cause to be mailed to each holder of Series A Preferred Stock
at his address appearing on the books of the Company, as promptly as possible
but in any event at least 15 days prior to the applicable date hereinafter
specified, a notice stating the date on which such Reclassification,
Acquisition Event, dissolution, liquidation or winding-up is expected to become
effective or occur and the date as of which it is expected that holders of
record of Common Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such Reclassification, Acquisition
Event, dissolution, liquidation or winding-up. Failure to give such notice, or
any defect therein, shall not affect the legality or validity of such
Reclassification, Acquisition Event, dissolution, liquidation or winding-up.
Neither the failure to give such notice nor any defect therein shall affect the
legality or validity of the proceedings referenced in clauses (a) through (b) of
this Section 8.9.
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53
Section 8.10.1 Company Right to Cause Conversion. Subject to and upon
compliance with the provisions of this Certificate of Designation, the Company
shall have the right, at its option, at any time after the initial period, if
any, of 130 consecutive Trading Days for which the weighted average Closing
Price for the Common Stock for such period is greater than 200% of the
Conversion Price, to cause the conversion of each share of Series A Preferred
Stock (but not less than all shares of Series A Preferred Stock) into that
number of fully paid and nonassessable shares of Common Stock (as such shares
shall then be constituted) that the holder of such share of Series A Preferred
Stock would have received had such holder exercised such holder's right to
convert such share pursuant to Section 8.1 at the time the Company exercises
its right pursuant to this Section 8.10.1.
Section 8.10.2 Notice of Conversion. In case the Company shall desire
to exercise the right to cause conversion of the Series A Preferred Stock
pursuant to Section 8.10.1, it shall fix a date for conversion and it shall mail
or cause to be mailed a notice of such conversion at least 30 and not more than
60 days prior to the date fixed for conversion to the holders of Series A
Preferred Stock so to be converted at their last addresses as the same appear on
the books of the Company. Such mailing shall be by first class mail. The notice,
if mailed in the manner herein provided, shall be conclusively presumed to have
been duly given, whether or not the holder receives such notice. In any case,
failure to give such notice by mail or any defect in the notice to the holder of
any Series A Preferred Stock designated for conversion shall not affect the
validity of the proceedings for the conversion of any other shares of Series A
Preferred Stock.
Each such notice of conversion shall specify the date fixed for
conversion, the number of shares of Common Stock into which each share of Series
A Preferred Stock is to be converted, the place or places for surrender of
certificates representing such Series A Preferred Stock and that such shares of
Common Stock will be delivered upon presentation and surrender of certificates
representing such Series A Preferred Stock.
Section 8.10.3 Surrender of Certificates. Promptly upon receipt of such
notice of conversion, each holder of any shares of Series A Preferred Stock
shall surrender the certificate or certificates for such shares of Series A
Preferred Stock, duly endorsed, at a place designated for such surrender along
with instructions regarding the name or names (with address) in which the
certificate or certificates for shares of Common Stock which shall be issuable
on such conversion. Each such share surrendered for conversion shall, unless the
shares issuable on conversion are to be issued in the same name as the
registration of such share of Series A Preferred Stock, be duly endorsed by, or
be accompanied by instruments of transfer in form
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54
satisfactory to the Company duly executed by, the holder or his duly authorized
attorney.
As promptly as practicable after satisfaction of the requirements for
surrender set forth above, the Company shall issue and shall deliver to such
holder at the address designated in such instructions a certificate or
certificates for the number of full shares issuable upon the conversion of such
shares in accordance with the provisions of this Section 8 and a check or cash
in respect of any fractional interest in respect of a share of Common Stock
arising upon such conversion, as provided in Section 8.
Each conversion shall be deemed to have been effected as to any such
certificate on the date on which the requirements set forth above in this
Section 8.10.3 have been satisfied as to such certificate, and the person in
whose name any certificate or certificates for shares of Common Stock shall be
issuable upon such conversion shall be deemed to have become on said date the
holder of record of the shares represented thereby; provided, however, that any
such surrender on any date when the stock transfer books of the Company shall be
closed shall constitute the person in whose name the certificates are to be
issued as the record holder thereof for all purposes on the next succeeding day
on which such stock transfer books are open, but such conversion shall be at the
Conversion Price in effect on the date upon which such Series A Preferred Stock
shall have been surrendered.
Section 9. Reports as to Adjustments. Upon any adjustment of the
Conversion Price then in effect and any increase or decrease in the number of
shares of Common Stock issuable upon the operation of the conversion set forth
in Section 8, then, and in each such case, the Company shall promptly deliver to
the transfer agent for the Series A Preferred Stock and the transfer agent for
the Common Stock, a certificate signed by the President or a Vice President and
by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary of the Company setting forth in reasonable detail the event requiring
the adjustment and the method by which such adjustment was calculated and
specifying the Conversion Price then in effect following such adjustment and the
increased or decreased number of shares issuable upon the conversion set forth
in Section 8. The Company shall also promptly after the making of such
adjustment give written notice to the registered holders of the Series A
Preferred Stock at the address of each holder as shown on the books of the
Company maintained by the transfer agent thereof, which notice shall state the
Conversion Price then in effect, as adjusted, and the increased or decreased
number of shares issuable upon the exercise of the right of conversion granted
by Section 8, and shall set forth in reasonable detail the method of calculation
of each with a brief statement of the facts requiring such adjustment. Where
appropriate, such notice
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55
to holders of the Series A Preferred Stock may be given in advance and included
as part of the notice required under the provisions of Section 8.9.
Section 10. Certain Covenants. Any registered holder of Series A
Preferred Stock may proceed to protect and enforce its rights and the rights of
such holders by any available remedy by proceeding at law or in equity to
protect and enforce any such rights, whether for the specific enforcement of any
provision in this Certificate of Designation or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy.
Section 11. Definitions. For the purposes of this Certificate of
Designation of Series A Preferred Stock, the following terms shall have the
meanings indicated:
Acquisition Event: An "Acquisition Event" shall be deemed to have
occurred if (i) a merger, consolidation or other corporate combination of the
Company with any other person is consummated, other than (x) a merger,
consolidation or other corporate combination which would result in the voting
securities of the Company outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being converted into voting
securities of the Surviving Person), at least 51% of the combined voting power
of the voting securities of the Company or such Surviving Person outstanding
immediately after such merger, consolidation or other corporate combination or
(y) a merger, consolidation or other corporate combination effected to
implement a recapitalization of the Company (or similar transaction) in which
no person acquires more than 50% of the combined voting power of the Company's
then outstanding securities; or (ii) the sale or disposition by the Company of
all or substantially all of the properties and assets of the Company is
consummated.
Beneficial Owner: A "Beneficial Owner" shall have the meaning defined
in Rule 13d-3 under the Exchange Act.
Business Day: A "Business Day" shall mean a day, other than a Saturday,
a Sunday or other day on which the banking institutions in the State of New
York, the State of California or the Commonwealth of Massachusetts are
authorized or obligated by law or executive order to close or a day which is
declared a national or New York, California or Massachusetts state holiday.
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56
Exchange Act: The term "Exchange Act" means the Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated thereunder.
person: The term "person" shall mean a corporation, an association, a
partnership, an individual, a joint venture, a joint stock company, a trust, an
unincorporated organization or a government or an agency or a political
subdivision thereof.
Purchase Event: A "Purchase Event" shall be deemed to have occurred if
any person (other than any of the initial purchasers of the Series A Preferred
Stock) is or becomes the Beneficial Owner, directly or indirectly, of
securities of the Company representing 50% or more of the combined voting power
of the Company's then outstanding securities other than in an Acquisition
Event.
subsidiary: The term "subsidiary" of any specified person shall mean
(i) a corporation a majority of whose capital stock with voting power under
ordinary circumstances, to elect directors is at the time directly or indirectly
owned by such person or (ii) any other person (other than a corporation) in
which such person or a subsidiary or subsidiaries of such person directly or
indirectly, at the date of determination thereof, has at least majority
ownership.
Surviving Person: The term "Surviving Person" shall mean (i) the
continuing or surviving person of a merger, consolidation or other corporate
combination with the Company; or (ii) the person receiving a transfer of all or
substantially all of the properties and assets of the Company.
IN WITNESS WHEREOF, The Learning Company, Inc. has caused this
Certificate to be signed by Neal S. Winneg, its Vice President and Secretary, on
this [ ] day of [ ], 1997.
THE LEARNING COMPANY, INC.
By _____________________________________
Name: Neal S. Winneg
Title: Vice President and Secretary
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Exhibit B
REGISTRATION RIGHTS AGREEMENT
by and among
THE LEARNING COMPANY, INC.
and
THE PURCHASERS NAMED HEREIN
Dated as of August 26, 1997
58
TABLE OF CONTENTS
Section Page
1. Introduction........................................................ 1
2. Registration under Securities Act, etc.............................. 1
2.1 Registration on Request....................................... 1
(a) Request................................................. 1
(b) Registration Statement Form............................. 2
(c) Expenses................................................ 2
(d) Effective Registration Statement........................ 2
(e) Selection of Underwriters............................... 3
(f) Priority in Requested Registrations..................... 3
(g) Limitation on Registration on Request................... 3
2.2 Incidental Registration....................................... 4
(a) Right to Include Registrable Securities................. 4
(b) Priority in Incidental Registrations.................... 5
2.3 Registration Procedures....................................... 5
2.4 Underwritten Offerings........................................ 11
(a) Requested Underwritten Offerings........................ 11
(b) Incidental Underwritten Offerings....................... 12
(c) Holdback Agreements..................................... 12
(d) Participation in Underwritten Offerings................. 13
2.5 Preparation; Reasonable Investigation......................... 13
2.6 Indemnification............................................... 14
(a) Indemnification by the Company.......................... 14
(b) Indemnification by the Sellers.......................... 15
(c) Notices of Claims, etc.................................. 15
(d) Other Indemnification................................... 16
59
(e) Indemnification Payments................................ 16
(f) Contribution............................................ 16
2.7 Adjustments Affecting Registrable Securities.................. 18
3. Definitions......................................................... 18
4. Rule 144............................................................ 21
5. Amendments and Waivers.............................................. 21
6. Nominees for Beneficial Owners...................................... 21
7. Notices............................................................. 22
8. Assignment.......................................................... 22
9. Descriptive Headings................................................ 23
10. GOVERNING LAW....................................................... 23
11. Counterparts........................................................ 23
12. Entire Agreement.................................................... 23
14. Severability........................................................ 23
ii
60
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of August 26, 1997, among THE
LEARNING COMPANY, a Delaware corporation (the "Company"), and each of the other
parties listed on the signature pages hereto (each a "Purchaser" and,
collectively, the "Purchasers").
1. Introduction. The Company is a party to three separate Securities
Purchase Agreements (the "Purchase Agreements"), each dated as of August 26,
1997, with the Purchasers pursuant to which the Purchasers have agreed to
purchase from the Company an aggregate of 750,000 shares of Series A Convertible
Participating Preferred Stock, par value $.01 per share, of the Company (the
"Convertible Preferred Stock"). Certain capitalized terms used in this Agreement
are defined in Section 3 hereof.
2. Registration under Securities Act, etc.
2.1 Registration on Request.
(a) Request. At any time or from time to time after the
Applicable Period, upon the written request of one or more holders (the
"Initiating Holders") of Registrable Securities holding (a) in the case of the
first and second registrations effected pursuant to this Section 2.1 and during
the five-year period commencing on the date hereof, a majority of the
Registrable Securities then outstanding on an as-converted basis, and (b) in the
case of the third and fourth registrations effected pursuant to this Section
2.1, or the first and second registrations if such registrations are not
effected within five years hereof, at least 15% of the Registrable Securities
then outstanding on an as-converted basis, requesting that the Company effect
the registration under the Securities Act of all or part of such Initiating
Holders' Registrable Securities and specifying the intended method of
disposition thereof, the Company will promptly give written notice of such
requested registration to all registered holders of Registrable Securities, and
thereupon the Company will, subject to the terms of this Agreement, use its best
efforts to effect the registration under the Securities Act of:
(i) the Registrable Securities which the Company has been so
requested to register by such Initiating Holders for disposition
61
in accordance with the intended method of disposition stated in such
request; and
(ii) all other Registrable Securities the holders of which
shall have made a written request to the Company for registration
thereof within 30 days after the giving of such written notice by the
Company (which request shall specify the intended method of disposition
of such Registrable Securities);
all to the extent requisite to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities so to be
registered.
(b) Registration Statement Form. Registrations under this Section
2.1 shall be on such appropriate registration form of the Commission (i) as
shall be selected by the Company and (ii) as shall permit the disposition of
such Registrable Securities in accordance with the intended method or methods of
disposition specified in their request for such registration. If, in connection
with any registration under this Section 2.1 which is proposed by the Company to
be on Form S-3 or any similar short form registration statement which is a
successor to Form S-3, the managing underwriters, if any, shall advise the
Company in writing that in their opinion the use of another permitted form is of
material importance to the success of the offering, then such registration shall
be on such other permitted form.
(c) Expenses. The Company will pay all Registration Expenses in
connection with any registration requested pursuant to this Section 2.1.
(d) Effective Registration Statement. A registration requested
pursuant to this Section 2.1 shall not be deemed to have been effected (i)
unless a registration statement with respect thereto has become effective, and
remained effective in compliance with the provisions of the Securities Act with
respect to the disposition of all Registrable Securities covered by such
registration statement until such time as all of such Registrable Securities
have been disposed of in accordance with the intended methods of disposition by
the seller or sellers thereof set forth in such registration statement,
provided, that except with respect to any registration statement on Form S-3
filed pursuant to Rule 415 under the Securities Act, such period need not exceed
180 days, and provided, further, that a registration requested pursuant to this
Section 2.1 shall be deemed to have been
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effected if a registration statement with respect thereto is withdrawn at the
request of the Initiating Holders for any reason other than a material adverse
development involving the Company, (ii) if, after it has become effective, such
registration becomes subject to any stop order, injunction or other order or
requirement of the Commission or other governmental agency or court for any
reason or (iii) the conditions to closing specified in the purchase agreement or
underwriting agreement entered into in connection with such registration are not
satisfied, other than by reason of some act or omission by such Initiating
Holders.
(e) Selection of Underwriters. If a requested registration
pursuant to this Section 2.1 involves an underwritten offering, the managing or
lead underwriter or underwriters thereof shall be selected by the holders of at
least a majority (by number of shares) of the Registrable Securities as to which
registration has been requested and shall be acceptable to the Company, which
shall not unreasonably withhold its acceptance of any such underwriters.
(f) Priority in Requested Registrations. If a requested
registration pursuant to this Section 2.1 involves an underwritten offering, and
the managing underwriter shall advise the Company in writing (with a copy to
each holder of Registrable Securities requesting registration) that, in its
opinion, the number of securities requested to be included in such registration
exceeds the number which can be sold in such offering within a price range
acceptable to the holders of a majority of the Registrable Securities requested
to be included in such registration, the Company will include in such
registration, to the extent of the number which the Company is so advised can be
sold in such offering, Registrable Securities requested to be included in such
registration by the holder or holders of Registrable Securities, pro rata among
such holders requesting such registration on the basis of the number of such
securities requested to be included by such holders.
(g) Limitation on Registration on Request. Subject to Sections
1(d) and 1(f), in no event will the Company be required to effect, in the
aggregate, more than four registrations pursuant to this Section 2.1 provided,
however, that the Company will be required to effect only one registration of
Option Shares and Related Registrable Securities. If, while a registration
request is pending pursuant to this Section 2.1, the Board of Directors of the
Company makes a good faith determination that the filing of the requested
registration would adversely affect either (i) a pending transaction of the
Company or (ii) a securities offering which the Company plans to undertake, the
Company shall not be required to effect a registration pursuant to this Section
2.1 until the consum-
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mation of such transaction or registration; provided, however, that the Company
may only assert either of such delays once during any 12-month period, and any
such asserted delay with respect to the Company's obligation to effect a
registration pursuant to this Section 2.1 shall in no event exceed 90 days.
2.2 Incidental Registration.
(a) Right to Include Registrable Securities. If the Company at any
time proposes to register, after the Applicable Period, any of its securities
under the Securities Act (other than by a registration on Form S-4 or S- 8, or
any successor or similar forms, and other than pursuant to Section 2.1), whether
or not for sale for its own account, it will each such time give prompt written
notice to all holders of Registrable Securities of its intention to do so and of
such holders' rights under this Section 2.2. Upon the written request of any
such holder (a "Requesting Holder") made within 30 days after the receipt of any
such notice (which request shall specify the Registrable Securities intended to
be disposed of by such holder and the intended method of disposition thereof),
the Company will, subject to the terms of this Agreement, use its best efforts
to effect the registration under the Securities Act of all Registrable
Securities which the Company has been so requested to register by the holders
thereof, to the extent requisite to permit the disposition (in accordance with
the intended methods thereof as aforesaid) of the Registrable Securities so to
be registered, by inclusion of such Registrable Securities in the registration
statement which covers the securities which the Company proposes to register,
provided that if, at any time after giving written notice of its intention to
register any securities and prior to the effective date of the registration
statement filed in connection with such registration, the Company shall
determine for any reason either not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to each holder of Registrable Securities and, thereupon, (i) in
the case of a determination not to register, shall be relieved of its obligation
to register any Registrable Securities in connection with such registration (but
not from its obligation to pay the Registration Expenses in connection
therewith), without prejudice, however, to the rights of any holder or holders
of Registrable Securities entitled to do so to request that such registration be
effected as a registration under Section 2.1, and (ii) in the case of a
determination to delay registering, shall be permitted to delay registering any
Registrable Securities, for the same period as the delay in registering such
other securities. No registration effected under this Section 2.2 shall relieve
the Company of its obligation to effect any registration upon request under
Section 2.1, nor shall any such registration hereunder be deemed to have been
effected pursuant to Section 2.1. The
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Company will pay all Registration Expenses in connection with each registration
of Registrable Securities requested pursuant to this Section 2.2.
(b) Priority in Incidental Registrations. If (i) a registration
pursuant to this Section 2.2 involves an underwritten offering of the securities
so being registered, whether or not for sale for the account of the Company, to
be distributed (on a firm commitment basis) by or through one or more
underwriters of recognized standing under underwriting terms appropriate for
such a transaction, (ii) the Registrable Securities so requested to be
registered for sale for the account of holders of Registrable Securities are not
also to be included in such underwritten offering (either because the Company
has not been requested so to include such Registrable Securities pursuant to
Section 2.4(b) or, if requested to do so, is not obligated to do so under
Section 2.4(b), and (iii) the managing underwriter of such underwritten offering
shall inform the Company and holders of the Registrable Securities requesting
such registration by letter of its belief that the distribution of all or a
specified number of such Registrable Securities concurrently with the securities
being distributed by such underwriters would interfere with the successful
marketing of the securities being distributed by such underwriters (such writing
to state the approximate number of such Registrable Securities which may be
distributed without such effect), then the Company may, upon written notice to
all holders of such Registrable Securities, reduce pro rata (if and to the
extent stated by such managing underwriter to be necessary to eliminate such
effect) the number of such Registrable Securities the registration of which
shall have been requested by each holder of Registrable Securities so that the
resultant aggregate number of such Registrable Securities so included in such
registration shall be equal to the number of shares stated in such managing
underwriter's letter.
2.3 Registration Procedures. If and whenever the Company is required
to use its best efforts to effect the registration of any Registrable Securities
under the Securities Act as provided in Sections 2.1 and 2.2 the Company shall,
as expeditiously as possible:
(i) prepare and as soon as reasonably practicable file with
the Commission the requisite registration statement to effect such
registration (including such audited financial statements as may be
required by the Securities Act or the rules and regulations promulgated
thereunder) and thereafter use its reasonable efforts to cause such
registration statement to become and remain effective, provided however
that the Company may discontinue any registration of its securities
which are not
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Registrable Securities (and, under the circumstances specified in
Section 2.2(a), its securities which are Registrable Securities) at any
time prior to the effective date of the registration statement relating
thereto, provided further that before filing such registration
statement or any amendments thereto, the Company will furnish to the
counsel selected by the holders of Registrable Securities which are to
be included in such registration copies of all such documents proposed
to be filed, which documents will be subject to the review of such
counsel;
(ii) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used
in connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities
Act with respect to the disposition of all securities covered by such
registration statement until such time as all of such securities have
been disposed of in accordance with the intended methods of disposition
by the seller or sellers thereof set forth in such registration
statement; provided, that except with respect to any such registration
statement on Form S-3 filed pursuant to Rule 415 under the Securities
Act, such period need not exceed 180 days;
(iii) furnish to each seller of Registrable Securities
covered by such registration statement and each underwriter, if any, of
the securities being sold by such seller such number of conformed
copies of such registration statement and of each such amendment and
supplement thereto (in each case including all exhibits), such number
of copies of the prospectus contained in such registration statement
(including each preliminary prospectus and any summary prospectus) and
any other prospectus filed under Rule 424 under the Securities Act, in
conformity with the requirements of the Securities Act, and such other
documents, as such seller and underwriter, if any, may reasonably
request;
(iv) use its best efforts to register or qualify all
Registrable Securities and other securities covered by such
registration statement under such other securities laws or blue sky
laws of such jurisdictions as any seller thereof and any underwriter of
the securities being sold by such seller shall reasonably request, to
keep such registrations or qualifications in effect for so long as such
registration statement remains in effect, and to take any other action
which may be reasonably necessary or advisable to enable such seller
and underwriter to consummate the dis-
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position in such jurisdictions of the securities owned by such seller,
except that the Company shall not for any such purpose be required to
qualify generally to do business as a foreign corporation in any
jurisdiction wherein it would not but for the requirements of this
subdivision (iv) be obligated to be so qualified or to consent to
general service of process in any such jurisdiction;
(v) use its best efforts to cause all Registrable
Securities covered by such registration statement to be registered with
or approved by such other governmental agencies or authorities as may
be necessary in the opinion of counsel to the Company and counsel to
the seller or sellers of Registrable Securities to enable the seller or
sellers thereof to consummate the disposition of such Registrable
Securities;
(vi) notify each seller of Registrable Securities and the
managing underwriter or underwriters, if any, promptly and confirm such
advice in writing promptly thereafter:
(v) when the registration statement, the prospectus or
any prospectus supplement related thereto or post-effective
amendment to the registration statement has been filed, and, with
respect to the registration statement or any post-effective
amendment thereto, when the same has become effective;
(w) of any request by the Commission for amendments or
supplements to the registration statement or the prospectus or for
additional information;
(x) of the issuance by the Commission of any stop order
suspending the effectiveness of the registration statement or
the initiation of any proceedings by any Person for that purpose;
(y) if at any time the representations and warranties
of the Company made as contemplated by Section 2.4 below cease to
be true and correct; and
(z) of the receipt by the Company of any notification
with respect to the suspension of the qualification of any
Registrable Securities for sale under the securities or blue sky
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laws of any jurisdiction or the initiation or threat of any
proceeding for such purpose.
(vii) notify each seller of Registrable Securities covered
by such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, upon
discovery that, or upon the happening of any event as a result of
which, the prospectus included in such 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 at the request of any such seller
promptly prepare and furnish to such seller and each underwriter, if
any, a reasonable number of copies of a supplement to or an amendment
of such prospectus as may be necessary so that, as thereafter delivered
to the purchasers of such securities, such prospectus shall not include
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing;
(viii) use its best efforts to obtain the withdrawal of any
order suspending the effectiveness of the registration statement at the
earliest possible moment;
(ix) 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 twelve months, but not more
than eighteen months, beginning with the first day of the Company's
first full calendar month after the effective date of such registration
statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder, and will
furnish to each such seller at least five business days prior to the
filing thereof a copy of any amendment or supplement to such
registration statement or prospectus and shall not file any thereof to
which any such seller shall have reasonably objected on the grounds
that such amendment or supplement does not comply in all material
respects with the requirements of the Securities Act or of the rules or
regulations thereunder;
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(x) make available for inspection by a representative or
representatives of the holders of Registrable Securities, any
underwriter participating in any disposition pursuant to the
registration statement and any attorney or accountant retained by such
selling holders or underwriter (each, an "Inspector"), all financial
and other records, pertinent corporate documents and properties of the
Company (the "Records"), and cause the Company's officers, directors
and employees to supply all information reasonably requested by any
such Inspector in connection with such registration in order to permit
a reasonable investigation within the meaning of Section 11 of the
Securities Act;
(xi) provide and cause to be maintained a transfer agent
and registrar for all Registrable Securities covered by such
registration statement from and after a date not later than the
effective date of such registration statement;
(xii) enter into such agreements and take such other
actions as sellers of such Registrable Securities holding a majority of
the shares so to be sold shall reasonably request in order to expedite
or facilitate the disposition of such Registrable Securities;
(xiii) use its best efforts to list all Registrable Secu-
rities covered by such registration statement on any securities
exchange on which any of the securities of the same class as the
Registrable Securities are then listed and, if no such Registrable
Securities are so listed, on any national securities exchange on which
the Common Stock is then listed; and
(xiv) use its best efforts to provide a CUSIP number for the
Registrable Securities, not later than the effective date of the
registration statement.
The Company may require each seller of Registrable Securities as
to which any registration is being effected to furnish the Company such
information regarding such seller and the distribution of such securities as the
Company may from time to time reasonably request in writing.
The Company will not file any registration statement or amendment
thereto or any prospectus or any supplement thereto (including such documents
incorporated by reference and proposed to be filed after the initial filing of
the
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registration statement) to which the holders of a majority of the Registrable
Securities covered by such registration statement or the underwriter or
underwriters, if any, shall reasonably object, provided that the Company may
file such document in a form required by law or upon the advice of its counsel.
Each holder of Registrable Securities agrees by acquisition of
such Registrable Securities that, upon receipt of any notice from the Company of
the occurrence of any event of the kind described in Section 2.3(viii), such
holder will forthwith discontinue such holder's disposition of Registrable
Securities pursuant to the registration statement relating to such Registrable
Securities until such holder's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 2.3(viii) and, if so directed by the
Company, will deliver to the Company (at the Company's expense) all copies,
other than permanent file copies, then in such holder's possession of the
prospectus relating to such Registrable Securities current at the time of
receipt of such notice. In the event the Company shall give any such notice, the
period mentioned in Section 2.1(d) and Section 2.3(ii) shall be extended by the
length of the period from and including the date when each seller of any
Registrable Securities covered by such registration statement shall have
received such notice to the date on which each such seller has received the
copies of the supplemented or amended prospectus contemplated by Section
2.3(viii).
If any such registration statement refers to any holder of
Registrable Securities by name or otherwise as the holder of any securities of
the Company, then such holder shall have the right to require (i) the insertion
therein of language, in form and substance satisfactory to such holder, to the
effect that the holding by such holder of such securities is not to be construed
as a recommendation by such holder of the investment quality of the Company's
securities covered thereby and that such holding does not imply that such holder
will assist in meeting any future financial requirements of the Company, or (ii)
in the event that such reference to such holder by name or otherwise is not
required by the Securities Act or any similar federal statute then in force, the
deletion of the reference to such holder.
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2.4 Underwritten Offerings.
(a) Requested Underwritten Offerings. If requested by the
underwriters for any underwritten offering by holders of Registrable Securities
pursuant to a registration requested under Section 2.1, the Company will enter
into an underwriting agreement with such underwriters for such offering, such
agreement to be satisfactory in substance and form to the Company, each such
holder and the underwriters, and to contain such representations and warranties
by the Company and such other terms as are generally prevailing in agreements of
this type, including, without limitation, indemnities to the effect and to the
extent provided in Section 2.6. The holders of the Registrable Securities will
cooperate with the Company in the negotiation of the underwriting agreement and
will give consideration to the reasonable suggestions of the Company regarding
the form thereof, provided that nothing herein contained shall diminish the
foregoing obligations of the Company. The holders of Registrable Securities to
be distributed by such underwriters shall be parties to such underwriting
agreement and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such holders of Registrable Securities and that any or all of
the conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of such
holders of Registrable Securities. Any such holder of Registrable Securities
shall not be required to make any representations or warranties to or agreements
with the Company or the underwriters other than representations, warranties or
agreements regarding such holder, such holder's Registrable Securities and such
holder's intended method of distribution and any other representation required
by law.
(b) Incidental Underwritten Offerings. If the Company at any time
proposes to register any of its securities under the Securities Act as
contemplated by Section 2.2 and such securities are to be distributed by or
through one or more underwriters, the Company will, if requested by any
Requesting Holder of Registrable Securities as provided in Section 2.2 and
subject to the provisions of Section 2.2(b), use its reasonable efforts to
arrange for such underwriters to include all the Registrable Securities to be
offered and sold by such holder among the securities to be distributed by such
underwriters, provided that if the managing underwriter of such underwritten
offering shall inform the holders of the Registrable Securities requesting such
registration by letter of its belief that inclusion in such underwritten
distribution of all or a specified number of such Registrable Securities would
interfere with the success-
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ful marketing of the securities (other than such Registrable Securities) by the
underwriters (such writing to state the basis of such belief and the approximate
number of such Registrable Securities which may be included in such underwritten
offering without such effect), then the Company may, upon written notice to all
holders of such Registrable Securities, exclude pro rata from such underwritten
offering (if and to the extent stated by such managing underwriter to be
necessary to eliminate such effect) the number of such Registrable Securities so
that the resultant aggregate number of such Registrable Securities shall be
equal to the approximate number of shares stated in such managing underwriter's
letter. The holders of Registrable Securities to be distributed by such
underwriters shall be parties to the underwriting agreement between the Company
and such underwriters and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such holders of Registrable Securities and that any or all of
the conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of such
holders of Registrable Securities.
(c) Holdback Agreements.
(i) Each holder of Registrable Securities agrees by
acquisition of such Registrable Securities, if so required by the
managing underwriter, not to sell, make any short sale of, loan, grant
any option for the purchase of, effect any public sale or distribution
of or otherwise dispose of any equity securities of the Company, during
the 90 days after any underwritten registration pursuant to Section 2.1
or 2.2 has become effective, except as part of such underwritten
registration, whether or not such holder participates in such
registration. Notwithstanding the foregoing sentence, each holder of
Registrable Securities subject to the foregoing sentence shall be
entitled to sell during the foregoing period securities in a private
sale as long as the purchaser agrees to be bound by the provisions of
this Section 2.4(c)(i) for the balance of such 90 day period.
(ii) The Company agrees if so requested by the managing
underwriter not to sell, make any short sale of, loan, grant any option
for the purchase of, effect any public sale or distribution of or
otherwise dispose of its equity securities or securities convertible
into or exchangeable or exercisable for any of such securities during
the seven days prior to and the 90 days after any underwritten
registration pursuant to Section 2.1 or 2.2 has become effective,
except as part of such under-
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written registration and except in connection with a stock option plan,
stock purchase plan, managing directors' plan, or savings or similar
plan, or an acquisition of a business, merger or exchange of stock for
stock or any private placement of stock in which the purchaser agrees
to be bound by the provisions of this Section 2.4(c)(ii) for the
balance of such 90 day period.
(d) Participation in Underwritten Offerings. No Person may
participate in any underwritten offering hereunder unless such Person (i) agrees
to sell such Person's securities on the basis provided in any underwriting
arrangements approved, subject to the terms and conditions hereof, by the
holders of a majority of Registrable Securities to be included in such
underwritten offering and (ii) completes and executes all questionnaires,
indemnities, underwriting agreements and other documents (other than powers of
attorney) required under the terms of such underwriting arrangements.
2.5 Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company will give the holders of Registrable
Securities registered under such registration statement, their underwriters, if
any, each Requesting Holder and their respective counsel and accountants, the
opportunity to participate in the preparation of such registration statement,
each prospectus included therein or filed with the Commission, and each
amendment thereof or supplement thereto, and will give each of them such access
to its books and records and such opportunities to discuss the business of the
Company with its officers and the independent public accountants who have
certified its financial statements as shall be necessary, in the opinion of such
holders' and such underwriters' respective counsel, to conduct a reasonable
investigation within the meaning of the Securities Act.
2.6 Indemnification.
(a) Indemnification by the Company. In the event of any
registration of any securities of the Company under the Securities Act, the
Company will, and hereby does agree to, indemnify and hold harmless in the case
of any registration statement filed pursuant to Section 2.1 or 2.2, the holder
of any Registrable Securities covered by such registration statement, its
directors and officers, each other Person who participates as an underwriter in
the offering or sale of such securities and each other Person, if any, who
controls such holder or any such underwriter within the meaning of the
Securities Act, against any losses,
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claims, damages or liabilities, joint or several, to which such holder or any
such director, officer, underwriter or controlling Person may become subject
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered under the Securities Act, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and the Company will
reimburse such holder, director, officer, underwriter and controlling Person for
any legal or any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, liability, action or
proceeding, provided that the Company shall not be liable to any such holder,
director, officer, underwriter or controlling Person, as the case may be, in any
such case to the extent that any such loss, claim, damage, liability (or action
or proceeding in respect thereof) or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by such holder or underwriter, as the case may be,
specifically stating that it is for use in the preparation thereof and, provided
further that the Company shall not be liable to any Person who participates as
an underwriter in the offering or sale of Registrable Securities or to any other
Person, if any, who controls such underwriter within the meaning of the
Securities Act, in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense arises
out of such Person's failure to send or give a copy of the final prospectus, as
the same may be then supplemented or amended, to the Person asserting the
existence of an untrue statement or alleged untrue statement or omission or
alleged omission at or prior to the written confirmation of the sale of
Registrable Securities to such Person if such statement or omission was
corrected in such final prospectus. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of such holder
or any such director, officer, underwriter or controlling Person and shall
survive the transfer of such securities by such holder.
(b) Indemnification by the Sellers. The Company may require, as a
condition to including any Registrable Securities in any registration
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statement filed pursuant to Section 2.3, that the Company shall have received an
undertaking satisfactory to it from the prospective seller of such Registrable
Securities, to indemnify and hold harmless (in the same manner and to the same
extent as set forth in Section 2.6(a)) the Company, each director of the
Company, each officer of the Company and each other person, if any, who controls
the Company within the meaning of the Securities Act, with respect to any
statement or alleged statement in or omission or alleged omission from such
registration statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, if such
statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with written information furnished to the
Company through an instrument duly executed by such seller specifically stating
that it is for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement, provided, however, that the liability of such indemnifying party
under this Section 2.6(b) shall be limited to the amount of proceeds received by
such indemnifying party in the offering giving rise to such liability. Any such
indemnity shall remain in full force and effect, regardless of any investigation
made by or on behalf of the Company or any such director, officer or controlling
person and shall survive the transfer of such securities by such seller.
(c) Notices of Claims, etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subdivisions of this Section 2.6,
such indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the commencement of
such action, provided that the failure of any indemnified party to give notice
as provided herein shall not relieve the indemnifying party of its obligations
under the preceding subdivisions of this Section 2.6, except to the extent that
the indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim, the
indemnifying party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified, to the
extent that the indemnifying party may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such indemnified party
for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof other
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than reasonable costs of investigation. No indemnifying party shall, without the
consent of the indemnified party, consent to entry of any judgment or enter into
any settlement of any such action 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 to such claim or litigation. No
indemnified party shall consent to entry of any judgment or enter into any
settlement of any such action the defense of which has been assumed by an
indemnifying party without the consent of such indemnifying party.
(d) Other Indemnification. Indemnification similar to that
specified in the preceding subdivisions of this Section 2.6 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification of
securities under any Federal or state law or regulation of any governmental
authority, other than the Securities Act.
(e) Indemnification Payments. The indemnification required by
this Section 2.6 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.
(f) Contribution. If the indemnification provided for in this
Section 2.6 is unavailable to an indemnified party in respect of any expense,
loss, claim, damage or liability referred to therein, then each 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 expense,
loss, claim, damage or liability (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand and the
holder or underwriter, as the case may be, on the other from the distribution of
the Registrable Securities or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Company on the one hand and of the holder or
underwriter, as the case may be, on the other in connection with the statements
or omissions which resulted in such expense, loss, damage or liability, as well
as any other relevant equitable considerations. The relative benefits received
by the Company on the one hand and the holder or underwriter, as the case may
be, on the other in connection with the distribution of the Registrable
Securities shall be deemed to be in the same proportion as the total net
proceeds received by the Company from the initial sale of the Registrable
Securities by the Company to the purchas-
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ers pursuant to the Purchase Agreements bear to the gain, if any, realized by
the selling holder or the underwriting discounts and commissions received by the
underwriter, as the case may be. The relative fault of the Company on the one
hand and of the holder or underwriter, as the case may be, on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission to state a material fact relates
to information supplied by the Company, by the holder or by the underwriter and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission, provided that the foregoing
contribution agreement shall not inure to the benefit of any indemnified party
if indemnification would be unavailable to such indemnified party by reason of
the provisions contained in the first sentence of Section 2.6(a), and in no
event shall the obligation of any indemnifying party to contribute under this
Section 2.6(f) exceed the amount that such indemnifying party would have been
obligated to pay by way of indemnification if the indemnification provided for
under Section 2.6(a) or (b) had been available under the circumstances.
The Company and the holders of Registrable Securities agree that it
would not be just and equitable if contribution pursuant to this Section 2.6(f)
were determined by pro rata allocation (even if the holders, Requesting Holders
and any underwriters were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding paragraph shall
be deemed to include, subject to the limitations set forth in the preceding
sentence and Section 2.6(c), any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim.
Notwithstanding the provisions of this Section 2.6(f), no holder of
Registrable Securities or underwriter shall be required to contribute any amount
in excess of the amount by which (i) in the case of any such holder, the net
proceeds received by such holder from the sale of Registrable Securities or (ii)
in the case of an underwriter, the total price at which the Registrable
Securities purchased by it and distributed to the public were offered to the
public exceeds, in any such case, the amount of any damages that such holder or
underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission. 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.
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2.7 Adjustments Affecting Registrable Securities. The Company will not
effect or permit to occur any combination or subdivision of Shares which would
adversely affect the ability of the holders of Registrable Securities to include
such Registrable Securities in any registration of its securities contemplated
by this Section 2 or the marketability of such Registrable Securities under any
such registration.
3. Definitions. As used herein, unless the context otherwise
requires, the following terms have the following respective meanings:
Applicable Period: In the case of a proposed registration by an
Initiating Holder or Requesting Holder, as the case may be, of (a)
Conversion Shares and any Related Registrable Securities, 18 months
from the Closing Date, (b) Convertible Preferred Stock and any Related
Registrable Securities, 30 months from the Closing Date and (c) Option
Shares and any Related Registrable Securities, the period ending on the
date of first issuance of Option Shares; provided, however, that the
Applicable Period shall immediately cease upon a mandatory conversion
of the Convertible Preferred Stock pursuant to Section 8.10.1 of the
Certificate of Designation for the Convertible Preferred Stock.
Closing Date: The date on which the Convertible Preferred Stock is
first issued.
Commission: The Securities and Exchange Commission or any other Federal
agency at the time administering the Securities Act.
Common Stock: The common stock, par value $.01 per share, of the
Company.
Company: As defined in the introductory paragraph of this Agreement.
Conversion Shares: The shares of Common Stock issued or issuable upon
conversion of the Convertible Preferred Stock.
Convertible Preferred Stock: As defined in Section 1 of this Agreement.
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Exchange Act: The Securities Exchange Act of 1934, or any similar
Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. Reference
to a particular section of the Securities Exchange Act of 1934 shall
include a reference to the comparable section, if any, of any such
similar Federal statute.
Initiating Holders: As defined in Section 2.1 of the Agreement.
Option Shares: Shares of Common Stock issued pursuant to the Stock
Option Agreements dated as of the date hereof between the Company and
affiliates of the Purchasers.
Person: A corporation, an association, a partnership, an organiza-
tion, business, an individual, a governmental or political subdivi-
sion thereof or a governmental agency.
Purchase Agreements: As defined in Section 1.
Registrable Securities: (i) any Conversion Shares and any Related
Registrable Securities, (ii) any Convertible Preferred Stock and any
Related Registrable Securities and (iii) any Option Shares and any
Related Registrable Securities. As to any particular Registrable
Securities, once issued such securities shall cease to be Registrable
Securities when (a) a registration statement with respect to the sale
of such securities shall have become effective under the Securities Act
and such securities shall have been disposed of in accordance with such
registration statement, (b) they shall have been sold as permitted by
Rule 144 (or any successor provision) under the Securities Act, (c)
they shall have been otherwise transferred, new certificates for them
not bearing a legend restricting further transfer shall have been
delivered by the Company and subsequent public distribution of them
shall not require registration of them under the Securities Act, or (d)
they shall have ceased to be outstanding. In calculating a percentage
of Registrable Securities held, each share of Convertible Preferred
Stock shall be deemed to be equivalent to the number of shares of
Common Stock into which it is then convertible.
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Registration Expenses: All expenses incident to the Company's
performance of or compliance with Section 2, including, without
limitation, all registration, filing and NASD fees, all stock exchange
listing fees, all fees and expenses of complying with securities or
blue sky laws, all word processing, duplicating and printing expenses,
messenger and delivery expenses, the fees and disbursements of counsel
for the Company and of its independent public accountants, including
the expenses of any special audits or "cold comfort" letters required
by or incident to such performance and compliance, the reasonable fees
and disbursements of one counsel retained by the holder or holders of a
majority of the Registrable Securities being registered, but excluding
underwriting discounts and commissions and transfer taxes, if any,
provided, however, that in the event that the Company shall, in
accordance with Section 2.2(a), not register any securities with
respect to which it had given written notice of its intention to so
register to holders of Registrable Securities, notwithstanding anything
to the contrary in the foregoing, all of the costs incurred by
Requesting Holders in connection with such registration shall be deemed
Registration Expenses.
Related Registrable Securities: With respect to Conversion Shares,
Convertible Preferred Stock or Option Shares, any securities of the
Company issued or issuable with respect to any Conversion Shares,
Convertible Preferred Stock or Option Shares by way of a dividend or
stock split or in connection with a combination of shares,
recapitalization, merger, consolidated or other reorganization or
otherwise.
Requesting Holder: As defined in Section 2.2.
Securities Act: The Securities Act of 1933, or any similar Federal
statute, and the rules and regulations of the Commission thereunder,
all as of the same shall be in effect at the time. References to a
particular section of the Securities Act of 1933 shall include a
reference to the comparable section, if any, of any such similar
Federal statute.
4. Rule 144. The Company shall timely file the reports required to be
filed by it under the Securities Act and the Exchange Act (including
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80
but not limited to the reports under Sections 13 and 15(d) of the Exchange Act
referred to in subparagraph (c) of Rule 144 adopted by the Commission under the
Securities Act) (or, if the Company is not required to file such reports, will,
upon the request of any holder of Registrable Securities, make publicly
available other information) and will take such further action as any holder of
Registrable Securities may reasonably request, all to the extent required from
time to time to enable such holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or (b) any similar rule or regulation hereafter adopted by
the Commission. Upon the request of any holder of Registrable Securities, the
Company will deliver to such holder a written statement as to whether it has
complied with the requirements of this Section 4.
5. Amendments and Waivers. This Agreement may be amended and the
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of the holder or
holders of a majority of the shares of Registrable Securities. Each holder of
any Registrable Securities at the time or thereafter outstanding shall be bound
by any consent authorized by this Section 5, whether or not such Registrable
Securities shall have been marked to indicate such consent.
6. Nominees for Beneficial Owners. In the event that any Registrable
Securities are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election, be treated as the holder of such
Registrable Securities for purposes of any request or other action by any holder
or holders of Registrable Securities pursuant to this Agreement or any
determination of any number or percentage of shares of Registrable Securities
held by any holder or holders of Registrable Securities contemplated by this
Agreement. If the beneficial owner of any Registrable Securities so elects, the
Company may require assurances reasonably satisfactory to it of such owner's
beneficial ownership of such Registrable Securities.
7. Notices. Except as otherwise provided in this Agreement, all
notices, requests and other communications to any Person provided for hereunder
shall be in writing and shall be given to such Person (a) in the case of a party
hereto other than the Company, addressed to such party in the manner set forth
in the applicable Purchase Agreement or at such other address as such party
shall have furnished to the Company in writing, or (b) in the case of any other
21
81
holder of Registrable Securities, at the address that such holder shall have
furnished to the Company in writing, or, until any such other holder so
furnishes to the Company an address, then to and at the address of the last
holder of such Registrable Securities who has furnished an address to the
Company, or (c) in the case of the Company, at One Athenaeum Street, Cambridge,
Massachusetts 02142 to the attention of its President, or at such other address,
or to the attention of such other officer, as the Company shall have furnished
to each holder of Registrable Securities at the time outstanding. Each such
notice, request or other communication shall be effective (i) if given by mail,
72 hours after such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid or (ii) if given by any other means
(including, without limitation, by air courier), when delivered at the address
specified above, provided that any such notice, request or communication to any
holder of Registrable Securities shall not be effective until received.
8. Assignment. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their respective
successors and assigns. In addition, and whether or not any express assignment
shall have been made, the provisions of this Agreement which are for the benefit
of the parties hereto other than the Company shall also be for the benefit of
and enforceable by any subsequent holder of any Registrable Securities, subject
to the provisions respecting the minimum numbers or percentages of shares of
Registrable Securities required in order to be entitled to certain rights, or
take certain actions, contained herein and provided that the rights of the
Purchasers hereunder may only be assigned to holders of at least 75,000 shares
of Convertible Preferred Stock or underlying Conversion Shares. Any assignee
must agree in writing to be bound by the provisions of this Agreement.
9. Descriptive Headings. The descriptive headings of the several
sections and paragraphs of this Agreement are inserted for reference only and
shall not limit or otherwise affect the meaning hereof.
10. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF
THE COMMONWEALTH OF MASSACHUSETTS WITHOUT REFERENCE TO THE PRINCIPLES OF
CONFLICTS OF LAWS.
11. Counterparts. This Agreement may be executed simultaneously in
any number of counterparts, each of which shall be deemed an
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82
original, but all such counterparts shall together constitute one and the same
instrument.
12. Entire Agreement. This Agreement embodies the entire agreement and
understanding between the Company and each other party hereto relating to the
subject matter hereof and supersedes all prior agreements and understandings
relating to such subject matter.
13. Severability. If any provision of this Agreement, or the
application of such provisions to any Person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to Persons or circumstances other than those to which it is held invalid, shall
not be affected thereby.
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83
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed under seal and delivered by their respective officers thereunto duly
authorized as of the date first above written.
THE LEARNING COMPANY, INC.
By: _______________________________
Name:
Title:
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84
PURCHASERS:
THOMAS H. LEE EQUITY FUND III, L.P.
By: THL Equity Advisors III Limited Partnership,
as General Partner
By: THL Equity Trust III,
as General Partner
By _______________________________________________
Name:
Title:
THOMAS H. LEE FOREIGN FUND III, L.P.
By: THL Equity Advisors III Limited
Partnership, as General Partner
By: THL Equity Trust III,
as General Partner
By _______________________________________________
Name:
Title:
THOMAS H. LEE COMPANY
By _______________________________________________
Name:
Title:
85
BAIN CAPITAL FUND V, L.P.
By: Bain Capital Partners V, L.P.,
as General Partner
By: Bain Capital Investors V, Inc.,
as General Partner
By _______________________________________________
Name:
Title:
BAIN CAPITAL FUND V-B, L.P.
By: Bain Capital Partners V, L.P.,
as General Partner
By: Bain Capital Investors V, Inc.,
as General Partner
By _______________________________________________
Name:
Title:
BCIP ASSOCIATES, L.P.
By _______________________________________________
Name:
Title:
BCIP TRUST ASSOCIATES, L.P.
By _______________________________________________
Name:
Title:
86
CENTRE CAPITAL INVESTORS II, L.P.
CENTRE CAPITAL TAX-EXEMPT INVESTORS II, L.P.
CENTRE CAPITAL OFFSHORE INVESTORS II, L.P.
By: Centre Partners II, L.P.,
as General Partner
By: Centre Partners Management LLC,
as Attorney-in-fact
By _______________________________________________
Name: Jonathan H. Kagan
Title: Managing Director
STATE BOARD OF ADMINISTRATION OF FLORIDA
By: Centre Parallel Management Partners, L.P.,
as Manager
By: Centre Partners Management LLC,
as Attorney-in-fact
By _______________________________________________
Name: Jonathan H. Kagan
Title: Managing Director
CENTRE PARALLEL MANAGEMENT PARTNERS, L.P.
CENTRE PARTNERS COINVESTMENT, L.P.
By: Centre Partners II LLC,
as General Partner
By _______________________________________________
Name: Jonathan H. Kagan
Title: Managing Director
87
EXHIBIT C
Form of Opinion of Neal S. Winneg
1. Each of the Company and its Subsidiaries has been duly incorporated
and is existing as a corporation in good standing under the laws of its
jurisdiction of incorporation and is duly qualified to do business as a foreign
corporation and is in good standing in all other jurisdictions where the
ownership or leasing of properties or the conduct of its business requires such
qualification, except for jurisdictions in which the failure to so qualify would
not have a material adverse effect on the Company and its Subsidiaries, taken as
a whole. Each of the Company and its Subsidiaries has all requisite corporate
power and corporate authority to own, lease and license its respective
properties and conduct its business as presently conducted, except where the
failure to possess such corporate power and authority would not have a material
adverse effect on the Company and its Subsidiaries, taken as a whole.
2. The authorized, issued and outstanding capital stock of the Company
as of July 5, 1997 is as set forth in the Second Quarter 10-Q; all outstanding
shares of the Common Stock have been duly authorized and validly issued, and are
fully paid and nonassessable, and to the knowledge of such counsel, no holder of
currently outstanding shares of the Common Stock has any pre-emptive or other
similar rights to subscribe for or purchase any shares of Common Stock of the
Company (or any shares of capital stock exchangeable into or convertible for
Common Stock).
3. There is no litigation or governmental or other action, suit,
proceeding or investigation before any court or before or by any public,
regulatory or governmental, agency or body pending or, to the best of such
counsel's knowledge, threatened against, or involving the properties or business
of, the Company or any of its Subsidiaries, which is material to the Company and
its Subsidiaries taken as a whole which has not been disclosed in the Disclosure
Letter.
In rendering such opinion, such counsel may rely as to matters of fact,
to the extent such counsel deems proper, on certificates of responsible officers
of the Company and certificates or other written statements of officers of
departments of various jurisdictions having custody of documents respecting the
corporate existence or good standing of the Company and its Subsidiaries,
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88
provided that copies of any such statements or certificates shall be delivered
to Purchaser's counsel. The opinion of such counsel for the Company shall state
that the opinion of any such other counsel is in form satisfactory to such
counsel and, in his opinion, the Purchasers and the Purchasers' counsel are
justified in relying thereon.
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EXHIBIT D
Form of Opinion of Hale and Dorr LLP
1. The Company has the corporate power and authority to execute,
deliver and perform its obligations under the Purchase Agreements and the
Registration Rights Agreement (the "Agreements"). The Agreements have been duly
authorized by all necessary corporate action on the part of the Company and have
been duly executed and delivered by the Company.
2. The Agreements constitute valid and binding obligations of the
Company and are enforceable against the Company in accordance with their
respective terms, except that such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and by the general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or at
law).
3. No governmental approval which has not been obtained is required
for the execution and delivery of the Agreements by the Company or the
consummation by the Company of the transactions contemplated thereby.
4. The Preferred Stock has been duly authorized and, when issued and
delivered to and paid for by the Purchasers pursuant to the Purchase Agreements,
will be validly issued, fully paid and non-assessable. The Common Stock issuable
upon conversion of the Preferred Stock has been duly authorized and, when issued
in accordance with the terms of the Certificate of Designation, will be validly
issued, fully paid and non-assessable. The Common Stock issuable upon conversion
of the Preferred Stock at the initial conversion price has been duly reserved
for issuance.
5. The execution, delivery and performance of the Agreements and the
consummation of the transactions contemplated thereby by the Company do not and
will not (i) conflict with or result in a breach of any of the terms and
provisions of, or constitute a default (or an event which with notice or lapse
of time, or both, would constitute a default) under, or result in the creation
or imposition of any lien, charge or encumbrance upon any property or assets of
the Company pursuant to, any agreement, instrument, franchise, license or permit
appears as an exhibit to the 10-K or (ii) violate or conflict with (x) any
provision of the certificate of incorporation or by-laws of the Company, or (y)
to such
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90
counsel's knowledge, any judgment, decree, order, statute, rule or regulation of
any court or any public, governmental or regulatory agency or body in the United
States having jurisdiction over the Company or any of its properties or assets.
In rendering such opinion, such counsel may rely as to matters of fact,
to the extent such counsel deems proper, on certificates of responsible officers
of the Company.
D-2