A-2 EXCHANGE AGREEMENT
This A-2 EXCHANGE AGREEMENT is dated as of December 29, 2000, among
Caliber Learning Network, Inc., a Maryland corporation (the "COMPANY"), Xxxxxxx
US Discovery Fund III, L.P., Xxxxxxx US Discovery Offshore Fund III, L.P. and
Xxxxxx Xxxxxxx Nominees Limited (collectively, the "XXXXXXX FUNDS"). Capitalized
terms used and not otherwise defined herein have the respective meanings
ascribed to them in the Stock Purchase Agreements.
W I T N E S S E T H:
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WHEREAS, pursuant to the terms of the Stock Purchase Agreements,
dated as of October 26, 1999, between the Company and each of the Xxxxxxx Funds
(the "STOCK PURCHASE AGREEMENTS"), the Xxxxxxx Funds purchased an aggregate of
150,000 shares and have received 10,852.6 shares in the form of dividends
thereon (the "SHARES") of the Company's Series A Convertible Preferred Stock,
par value $.01 per share (the "SERIES A PREFERRED");
WHEREAS, pursuant to the terms of the Exchange Agreement, dated as of
September 29, 2000, between the Company and the Xxxxxxx Funds, the Xxxxxxx Funds
exchanged 160,852.6 Shares of Series A Preferred for an equal number of shares
of the Company's Series A-1 Convertible Preferred Stock, par value $.01 per
share (the "SERIES A-1 PREFERRED") and have received 2,993 shares in the form of
dividends thereon;
WHEREAS, the Company and the Xxxxxxx Funds have agreed to the
exchange of the Shares of Series A-1 Preferred for an equal number of shares of
the Company's Series A-2 Convertible Preferred Stock, par value $.01 per share
(the "SERIES A-2 PREFERRED") (the "Exchange") upon the terms set forth herein;
WHEREAS, on December 27, 2000, the Company filed Articles
Supplementary with the Maryland State Department of Assessments and Taxation to
classify the Series A-2 Preferred in the form attached as EXHIBIT A hereto (the
"ARTICLES SUPPLEMENTARY").
NOW, THEREFORE, in consideration of the agreements and mutual covenants
contained herein, the parties hereto hereby agree as follows:
1. PRIOR AGREEMENTS.
(a) From and after the date hereof, all references to the Series A
Preferred in the following documents, to the extent applicable, shall be deemed
to refer to the Series A-2 Preferred:
(i) Stock Purchase Agreements;
(ii) Side Letter regarding Registration Rights among the Company,
MCI Telecommunications Corporation, Sylvan Learning Systems, Inc., Xxxxxxx X.
Xxxxxx and R. Xxxxxxxxxxx Xxxxx-Xxxxx (the "SIDE LETTER").
(b) Except as expressly provided in the following Section 1(c),
all terms and provisions of the Stock Purchase Agreements and the Side Letter
shall continue in full force and effect in accordance with the provisions
thereof.
(c) The Prior Agreements are hereby amended as follows:
The Stock Purchase Agreements are amended to delete in its
entirety Section 8.8 (b)(i) SENIOR SECURITIES and replace
it with the following: "The company may issue up to
$30,000,000 of Series B Preferred Stock (as such term is
defined in the Articles Supplementary)."
(d) As a condition to the consummation of the transactions contemplated
by this A-2 Exchange Agreement, the Registration Rights Agreement and the
Stockholders' Agreement shall each be terminated as of the date hereof and each
such agreement shall be of no further force and effect; and the parties hereto
shall enter into the (i) Amended and Restated Stockholders' Agreement among the
Company, the Xxxxxxx Funds, Xxxxx X. Xxxxxx and Sylvan Ventures, Inc. (the "NEW
STOCKHOLDERS' AGREEMENT") and (ii) Amended and Restated Registration Rights
Agreement among the Company, the Xxxxxxx Funds and Sylvan Ventures, Inc. (the
"NEW REGISTRATION RIGHTS AGREEMENT"). From and after the date hereof, all
references to the Registration Rights Agreement and the Stockholders' Agreement
in the Stock Purchase Agreements and the Side Letter, to the extent applicable,
shall be deemed to refer to the New Registration Rights Agreement and the New
Stockholders' Agreement, respectively.
2. EXCHANGE OF SHARES. The Exchange shall be effective on the date
hereof (the "EFFECTIVE DATE"). From and after the Effective Date, the
certificates representing the Shares shall be deemed to represent an equivalent
number of shares of Series A-2 Preferred ("SERIES A-2 SHARES"). SCHEDULE 1 to
this A-2 Exchange Agreement lists, as to each of the Xxxxxxx Funds, the number
of shares of Series A-1 Preferred held, the accrued dividends thereon and the
number of shares of Series A-2 Preferred to be received in the Exchange. The
Xxxxxxx Funds agree to surrender their respective certificates representing the
Shares as soon as practicable after the Effective Date in exchange for the
certificates representing the Series A-2 Shares.
3. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. The
Company hereby represents and warrants to each of the Xxxxxxx Funds as follows
(which representations, warranties and agreements shall survive the Effective
Date):
(A) ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland.
(B) POWER; AUTHORITY. The Company has all requisite power, authority
(corporate and other) and legal right to execute, deliver, enter into and
consummate the transactions contemplated by and perform its obligations under
this A-2 Exchange Agreement. The execution, delivery and performance of this A-2
Exchange Agreement by the Company (including, without limitation, the issuance
by the Company of the Series A-2 Shares) have been duly authorized by all
required corporate and other actions. The Company has duly executed and
delivered this A-2 Exchange Agreement and this A-2 Exchange Agreement
constitutes the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms.
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(C) ARTICLES SUPPLEMENTARY; SERIES A-1 PREFERRED. The Articles
Supplementary has been duly adopted by the Company and is fully effective as a
supplement to the Company's charter. The Series A-2 Shares have all of the
rights, priorities and terms set forth in the Articles Supplementary. All of the
outstanding shares of Series A-2 Preferred are, or on the Effective Date will
be, duly authorized, validly issued and outstanding, fully paid and
non-assessable. The shares of the Company's Common Stock issuable upon
conversion of the Series A-2 Preferred will be, when issued in accordance with
the terms of the Series A-2 Preferred, duly authorized, validly issued, fully
paid and non-assessable.
(D) NO CONFLICT. The execution, delivery and performance by the Company
of this A-2 Exchange Agreement and any of the transactions contemplated hereby
(including, without limitation, the issuance of the Series A-2 Shares and the
Conversion Shares as contemplated herein and in the Articles Supplementary and
the adoption of the Articles Supplementary as a supplement to the Company's
charter) do not and will not (i) violate or conflict with, with or without the
giving of notice or the passage of time or both, any provision of (A) the
respective charters or by-laws of the Company or any of its Subsidiaries, (B)
any law, rule, regulation or order of any federal, state, county, municipal or
other governmental authority, (C) any judgment, writ, injunction, decree, award
or other action of any court or governmental authority or arbitrator(s), or (D)
any agreement, indenture or other instrument applicable to the Company or any of
its Subsidiaries or any of their respective properties, (ii) result in the
creation of any Lien upon any of the Company's or any Subsidiary's properties,
assets or revenues, except as provided in the Articles Supplementary of the
Series A-2 Preferred, (iii) require the consent, waiver, approval, order or
authorization of, or declaration, registration, qualification or filing with,
any Person (whether or not a governmental authority and including, without
limitation, any shareholder approval) (other than approvals which have been
obtained prior to the Effective Date), or (iv) cause antidilution clauses of any
of the Company's outstanding securities to become operative or give rise to any
preemptive rights. No provision of any item referred to in Sections (A) and (C)
of the preceding clause (i) materially adversely affects or will materially
adversely affect the assets, properties, liabilities, business, affairs, results
of operations, condition (financial or otherwise) or prospects of the Company or
the ability of the Company to perform its obligations under this A-2 Exchange
Agreement, the Stock Purchase Agreements, the Articles Supplementary, the New
Stockholders' Agreement, the New Registration Rights Agreement or any of the
transactions contemplated hereby or thereby.
(E) NO LITIGATION. There is no action, suit, proceeding, investigation
or claim pending or, to the knowledge of the Company or its Subsidiaries,
threatened in law, equity or otherwise before any court, administrative agency
or arbitrator which (i) questions the validity of the A-2 Exchange Agreement,
the Stock Purchase Agreements, the Articles Supplementary, the New Stockholders'
Agreement, the New Registration Rights Agreement, the Series A-2 Shares or the
Conversion Shares or any action taken or to be taken pursuant hereto or thereto,
(ii) reasonably could be expected to adversely affect the right, title or
interest of any of the Xxxxxxx Funds to the Series A-2 Shares or the Conversion
Shares or (iii) reasonably could be expected to result in a material adverse
change in the assets, properties, liabilities, business, affairs, results of
operations, condition (financial or otherwise) or prospects of the Company.
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(F) OUTSTANDING COMMON STOCK.
(1) Schedule f(1) hereto correctly and completely lists (i) the
authorized capital stock of the Company (Common Stock and Preferred
Stock), (ii) the number of designated shares of Preferred Stock in each
series or class after giving effect to the Articles Supplementary and
the Articles Supplementary Classifying Series B Preferred Stock and
(iii) on December 29, 2000, after giving effect to the issuance of
Series A-2 Shares contemplated by the A-2 Exchange Agreement, the
number of shares outstanding in each series or class. There have been
no material issuances of shares since September 30, 2000, except the
issuance of 71,682 shares of Common Stock in connection with the
Company's Employee Stock Purchase Plan, the issuance of 2,500 shares of
Common Stock in connection with the exercise of employee stock options
and the issuance of the Series B Preferred Stock. All of such
outstanding shares are, or on the Closing Date will be, duly
authorized, validly issued and outstanding, fully paid and
non-assessable. The shares of the Company's Common Stock issuable upon
conversion of the Series A-2 Preferred will be, when issued in
accordance with the terms of the Series A-2 Preferred, duly authorized,
validly issued, fully paid and non-assessable. Except as provided in
the Articles Supplementary and as described in Schedule f(1), none of
the shares of the Company's capital stock which will be outstanding at
the Effective Date (i) were or will be subject to preemptive rights
when issued or (ii) provide the holders thereof with any preemptive
rights with respect to any issuances of capital stock.
(2) Schedule f(2) hereto correctly and completely lists the
number and purpose for which shares of the Company's Common Stock are
reserved for issuance by the Company.
(3) Except for the registration rights contained in the
Registration Rights Agreement and as described in Schedule f(3), there
are and will be no outstanding registration rights with respect to any
capital stock of the Company or of any Subsidiary, which (in either
case) will be outstanding on the Closing Date, or any capital stock
referred to in Section f(2).
(4) There are no voting agreements, voting trusts, proxies or
other agreements or understandings with respect to the voting of any
capital stock of the Company or any Subsidiary.
(5) Except as described in Schedule f(5), there are no
anti-dilution protections or other adjustment provisions in existence
with respect to any capital stock of the Company or any Subsidiary or
any capital stock referred to in Section f(2).
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4. TAXES. In addition to all other sums due under Section 14 of each of
the Stock Purchase Agreements, the Company agrees to pay, or cause to be paid,
all documentary, stamp and other similar Taxes, other than transfer taxes
payable upon the transfer by any of the Xxxxxxx Funds of Series A-2 Shares to a
Transferee (which transfer taxes shall be paid by the Transferee), levied under
the laws of the United States of America, any state or local Taxing Authority
thereof or therein or any other applicable jurisdiction in connection with the
issuance and exchange of the Series A-2 Shares, the conversion of Series A-2
Shares into Conversion Shares and the execution and delivery of the A-2 Exchange
Agreement and any other documents or instruments contemplated hereby and any
modification of the A-2 Exchange Agreement or Articles Supplementary or any such
other documents or instruments and will hold the Xxxxxxx Funds harmless without
limitation as to time against any and all liabilities with respect to all such
Taxes.
5. RECLASSIFICATION OF SERIES A-1 PREFERRED. The Company hereby agrees
that, as soon as practicable following the surrender by the Xxxxxxx Funds of the
certificates representing the Shares, it will reclassify all of the authorized
shares of the Series A-1 Preferred as Common Stock.
6. NASDAQ SHAREHOLDER APPROVAL RULE. The Company shall have received
written confirmation from Xxxxx Xxxxxxx Xxxxxxx & Xxxxx LLP that shareholder
approval of the terms of the Series A-2 Preferred is not required pursuant to
Rule 4350(i)(1)(D) of the Manual adopted by the National Association of
Securities Dealers, Inc. prior to issuance and sale of the Series B Preferred.
7. MISCELLANEOUS.
(a) Except as otherwise provided herein, no modification, amendment or
waiver of any provision of this A-2 Exchange Agreement will be effective against
any party hereto unless such modification, amendment or waiver is approved in
writing by all parties hereto. The failure of any party to enforce any of the
provisions of this A-2 Exchange Agreement will in no way be construed as a
waiver of such provisions and will not affect the right of such party thereafter
to enforce each and every provision of this A-2 Exchange Agreement in accordance
with its terms.
(b) All covenants and agreements in this A-2 Exchange Agreement by or
on behalf of any of the parties hereto will be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns
whether so expressed or not.
(c) The headings used in this A-2 Exchange Agreement have been inserted
for convenience of reference only and do not define or limit the provisions
hereof.
(d) If any provision of this A-2 Exchange Agreement is held to be
illegal, invalid or unenforceable, and if the rights or obligations of any party
hereto under this A-2 Exchange Agreement will not be materially and adversely
affected thereby, (i) such provision will be fully severable, (ii) this A-2
Exchange Agreement will be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part hereof, (iii) the remaining
provisions of this A-2 Exchange Agreement will remain in full force and effect
and will not be affected by the illegal, invalid or unenforceable provision or
by its severance herefrom and (iv) in lieu of such illegal, invalid or
unenforceable provision, there will be added automatically as a part of this A-2
Exchange Agreement a legal, valid and enforceable provision as similar in terms
to such illegal, invalid or unenforceable provision as may be possible.
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(e) This A-2 Exchange Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to a contract
executed and performed in such State without giving effect to the conflicts of
laws principles thereof.
(f) This A-2 Exchange Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have duly executed this A-2 Exchange
Agreement as of the date first written above.
CALIBER LEARNING NETWORK, INC.
By: /S/ XXXXX X. XXXXXX
---------------------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Chief Executive Officer
XXXXXXX US DISCOVERY FUND III, L.P.
By: XXXXXXX US DISCOVERY PARTNERS, L.P.,
its general partner
By: XXXXXXX US DISCOVERY, LLC,
its general partner
By: /S/ XXXXXX X. XXXX
----------------------------------------
Xxxxxx X. Xxxx, member
XXXXXXX US DISCOVERY OFFSHORE FUND III, L.P.
By: XXXXXXX US DISCOVERY PARTNERS, L.P.,
its general partner
By: XXXXXXX US DISCOVERY, LLC,
its general partner
By: /S/ XXXXXX X. XXXX
----------------------------------------
Xxxxxx X. Xxxx, member
XXXXXX XXXXXXX NOMINEES LIMITED
By: /S/ XXXXXX XXXX
---------------------------------------------
Name: Xxxxxx Xxxx
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Schedule 1
to the A-2 Exchange Agreement
Number of Shares Dividends Received Number of Shares of
of Series A-1 of Series A-1 Series A-2 Preferred
Preferred as of Preferred as of as of the Effective
September 30, 2000 Effective Date Date
NAME OF PURCHASER
Xxxxxxx US Discovery Fund III, 115,520.17 2,151.58 117,671.75
X.X.
Xxxxxxx US Discovery Offshore 18,520.05 346.23 18,866.28
Fund III, L.P.
Xxxxxx Xxxxxxx Nominees Limited 26,812.38 495.19 27,307.57
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Exhibit A
ARTICLES SUPPLEMENTARY
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SCHEDULE F(1)
CAPITAL STOCK
(i) Authorized capital stock:
Common Stock: 49,475,000
Preferred Stock: 5,692,328
(ii) Number of designated shares of Preferred Stock in each series or class
after giving effect to the Articles Supplementary:
5,167,328 shares of 6% Non-Voting Convertible Preferred Stock
225,000 shares of Series A-1 Preferred Stock
300,000 shares of Series A-2 Preferred Stock
(iii) On December 29, 2000, the number of shares outstanding in each series
or class was:
12,594,058 shares of Common Stock
5,167,328 of 6% Non-Voting Convertible Preferred Stock
163,845.6 shares of Series A-2 Preferred Stock
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SCHEDULE F(2)
SHARES OF COMMON STOCK RESERVED FOR ISSUANCE
NUMBER OF SHARES OF
COMMON STOCK
RESERVED FOR ISSUANCE PURPOSE
--------------------- -------
1,193,573 Issuable upon exercise of MCI Warrant
3,364,464 Issuable upon exercise of currently outstanding options granted
under the 1997 Stock Option Plan and the 1998 Stock Incentive
Plan and other options granted to certain executives
5,167,328 Issuable upon conversion of 6% Non-Voting Convertible Preferred
Stock
149,604 Issuable upon exercise of options which may be granted in the
future under the 1997 Stock Option Plan and the 1998 Stock
Incentive Plan - subject to adjustment pursuant to evergreen
provisions of the 1998 Plan
4,681,303 Issuable upon conversion of Series A-2 Preferred
8,571,429 Issuable upon conversion of Series B Preferred - assuming
issuance of $30,000,000 in Series B Preferred at an initial
conversion price of $3.50
--------------------------------------------------------------------------------
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SCHEDULE F(3)
REGISTRATION RIGHTS
The Company has outstanding registration rights as provided in the
Registration Rights Agreement among the Company, Sylvan Learning Systems, Inc.,
MCI Telecommunications Corporation, Xxxxxxx X. Xxxxxx and R. Xxxxxxxxxxx
Xxxxx-Xxxxx dated as of November 22, 1996, a copy of which has been previously
furnished to the Purchaser and its counsel.
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SCHEDULE F(5)
ANTI-DILUTION PROTECTIONS
6% Non-Voting Convertible Preferred Stock: The anti-dilution
protections are described in Article SIXTH (b)(5)(d) of the Company's charter.
In summary, the 6% Non-Voting Convertible Preferred is subject to adjustment for
(i) (A) dividends or distribution on its capital stock in shares of its Common
Stock, (B) subdivisions or combinations of outstanding Common Stock into a
greater or lesser number of shares, (C) issuances any shares of capital stock by
reclassification of its Common Stock; (ii) issuances of rights, options or
warrants to all holders of Common Stock entitling them to subscribe for or
purchase Common Stock at a price per share less than the Fair Market Value (as
defined) per share of Common Stock; and (iii) distributions to all holders of
its Common Stock any shares of capital stock of the Corporation (other than
Common Stock) or evidence of its indebtedness or assets or rights or warrants to
subscribe for or purchase any of its securities. No adjustment in the conversion
rate shall be required unless such adjustment would require a cumulative
increase or decrease of at least 1%.
MCI Warrant: The Amended and Restated Warrant to Purchase 1,193573
Shares of Common Stock of the Company dated as of November 22, 1996 (the "MCI
Warrant"), a copy of which has been furnished to the Purchaser and its counsel,
is subject to anti-dilution protection as described in the MCI Warrant. In
summary, the MCI Warrant is subject to adjustment (i) if the Company sells
shares of Common Stock for less than $3.169 per share or issues rights, options
(other than management stock options) or warrants to purchase shares of Common
Stock for less than $3.169 per share, or (ii) for stock splits and other similar
changes in the capitalization of the Company.
Series B Convertible Preferred Stock: The anti-dilution protections
are described in Article THIRD (4)(d) of the Articles Supplementary Classifying
Series B Convertible Preferred Stock. In summary, the Series B Convertible
Preferred is subject to adjustment for (i) (A) dividends or distributions on its
capital stock in shares of its Common Stock, (B) issuances of any convertible
debt securities without adequate consideration therefor, (C) subdivisions or
combinations of outstanding Common Stock into a greater or lesser number of
shares, (D) issuances any shares of capital stock by reclassification of its
Common Stock or (E) distributions of any of its assets (other than cash
dividends payable out of earnings or retained earnings in the ordinary course of
business); and (ii) issuances of (x) Additional Securities (as defined), (y)
rights, options or warrants to purchase Additional Securities or Convertible
Securities or (z) Convertible Securities at a price per share less than the
Conversion Price (as defined) per share of the Series B Convertible Preferred
Stock then in effect. No adjustment in the conversion rate shall be required
unless such adjustment would require a change in the Conversion Price (as
defined) of at least $0.05.
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