SERIES C PREFERRED STOCK PURCHASE AGREEMENT

Exhibit 10.1

 

 

SERIES C PREFERRED STOCK PURCHASE AGREEMENT

AMONG

THE PRINCETON REVIEW, INC.,

BAIN CAPITAL VENTURE FUND 2007, L.P.

PRIDES CAPITAL FUND I LP

AND

THE OTHER PURCHASERS NAMED ON SCHEDULE I HERETO

DATED AS OF JULY 23, 2007

 

 

TABLE OF CONTENTS

1.		Authorization of Securities			1
2.		Sale and Purchase of the Series C Preferred Stock			1
3.		Closing; Payment of Purchase Price; Use of Proceeds			2
3.1.		Closing			2
3.2.		Use of Proceeds			2
4.		Representations and Warranties of the Purchasers; Register of Securities; Restrictions on Transfer			2
4.1.		Organization			2
4.2.		Validity			2
4.3.		Brokers			2
4.4.		Investment Representations and Warranties			3
4.5.		Acquisition for Own Account			3
4.6.		Ability to Protect Its Own Interests and Bear Economic Risks			3
4.7.		Accredited Investor			3
4.8.		Access to Information			3
4.9.		Restricted Securities			3
4.10.		Residence			4
4.11.		Series B-1 Preferred Stock			4
5.		Representations and Warranties by the Company			4
5.1.		Capitalization			4
5.2.		Due Issuance and Authorization of Capital Stock			5
5.3.		Organization			5
5.4.		Subsidiaries			5
5.5.		Consents			6
5.6.		Authorization; Enforcement			6
5.7.		Issuance of Securities			6
5.8.		No Conflicts			7
5.9.		Material Contracts			7
5.10.		Right of First Refusal; Stockholders Agreement; Voting and Registration Rights			8
5.11.		Previous Issuances			8
5.12.		No Integrated Offering			8
5.13.		SEC Reports; Financial Statements			8
5.14.		No Undisclosed Material Liabilities			9
5.15.		Litigation			10
5.16.		Taxes			10
5.17.		Employee Matters			10
5.18.		Compliance with Laws			11
5.19.		Brokers			11
5.20.		Environmental Matters			11
5.21.		Intellectual Property Matters			12

5.22.		Related-Party Transactions			15
5.23.		Title to Property and Assets			16
5.24.		Disclosure			16
5.25.		Absence of Changes			16
5.26.		Illegal Payments			18
5.27.		Suppliers and Customers			18
5.28.		Regulatory Permits			19
5.29.		Insurance			19
5.30.		[Reserved]			19
5.31.		Investment Company			19
5.32.		Listing and Maintenance Requirements			19
5.33.		Accountants			19
5.34.		Solvency			20
5.35.		Application of Takeover Protections			20
5.36.		Stock Options			20
6.		Conditions of Parties’ Obligations			21
6.1.		Conditions of the Purchasers’ Obligations			21
6.2.		Conditions of the Company’s Obligations			23
6.3.		Conditions of Each Party’s Obligations			24
7.		Covenants.			24
7.1.		Reporting Requirements; Access to Records			24
7.2.		Integration			24
7.3.		Securities Laws Disclosure; Publicity			25
7.4.		Reservation of Common Stock			25
7.5.		Listing of Common Stock			25
7.6.		Filings			25
7.7.		Board Representation			26
7.8.		Board Committees			26
7.9.		Board Observer Rights			26
7.10.		Nomination Process			26
7.11.		Standstill Agreements			26
8.		Transfer Restrictions; Restrictive Legend			27
8.1.		Transfer Restrictions			27
8.2.		Unlegended Certificates			27
9.		Registration, Transfer and Substitution of Certificates for Securities			28
9.1.		Stock Register; Ownership of Securities			28
9.2.		Replacement of Certificates			28
10.		Definitions			28
11.		Enforcement			31
11.1.		Cumulative Remedies			31
11.2.		No Implied Waiver			32
12.		Confidentiality			32
13.		Miscellaneous			32
13.1.		Waivers and Amendments			32

13.2.		Notices			33
13.3.		Indemnification			34
13.4.		No Waivers			35
13.5.		Successors and Assigns			35
13.6.		Headings			35
13.7.		Governing Law			35
13.8.		Independent Nature of Purchasers’ Obligations and Rights			35
13.9.		Fees and Expenses			36
13.10.		Jurisdiction			37
13.11.		Waiver of Jury Trial			37
13.12.		Counterparts; Effectiveness			37
13.13.		Entire Agreement			37
13.14.		Severability			38

LIST OF EXHIBITS

EXHIBIT A		Certificate of Designation
EXHIBIT B		Certificate of Elimination
EXHIBIT C		Form of Investor Rights Agreement
EXHIBIT D		Form of Termination and Release Agreement

SERIES C PREFERRED STOCK PURCHASE AGREEMENT

          This SERIES C PREFERRED STOCK PURCHASE AGREEMENT (this “ Agreement ”) is made and entered into this 23rd day of July, 2007 (the “ Purchase Date ”) by and among The Princeton Review, Inc., a Delaware corporation (the “ Company ”), Bain Capital Venture Fund 2007, L.P., a Delaware limited partnership (“ Bain Capital ”), Prides Capital Fund I LP, a Delaware limited partnership (“ Prides Capital ”) and the other entities and individuals as listed on Schedule I attached hereto (Bain Capital, Prides Capital and such other entities and individuals, the “ Purchasers ”). Certain terms used and not otherwise defined in the text of this Agreement are defined in Section 10 hereof.

WITNESSETH

          WHEREAS, the Company desires to issue and to sell to the Purchasers, and the Purchasers desire to purchase from the Company, the shares of Series C Preferred Stock set forth on the Schedule I attached hereto in the column Shares Purchased, all in accordance with the terms and provisions of this Agreement;

          NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties and covenants herein contained, the parties hereto, intending to be bound, hereby agree as follows:

     1.  Authorization of Securities . The Company has authorized the issuance and sale of up to 60,000 shares of its Series C Convertible Preferred Stock, par value $0.01 per share (“ Series C Preferred Stock ”), which will be convertible into shares of the Company’s common stock, par value $0.01 per share (the “ Common Stock ”), and which will have the rights, preferences and privileges set forth in the form of Certificate of Designation attached hereto as Exhibit A (the “ Certificate of Designation ”). The shares of Common Stock into which the Series C Preferred Stock is convertible are sometimes referred to herein as the “ Conversion Shares ” and the shares of Series C Preferred Stock and the Conversion Shares are sometimes referred to herein collectively as the “ Securities ”.

     2.  Sale and Purchase of the Series C Preferred Stock. Upon the terms and subject to the conditions herein contained, the Company agrees to sell to each Purchaser, and each Purchaser agrees, severally and not jointly, to purchase from the Company, at the Closing, the number of shares of Series C Preferred Stock set forth in the column “Shares Purchased” opposite such Purchaser’s name on Schedule I attached hereto, for a purchase price per share equal to $1,000 (the “ Purchase Price ”), which shall be paid in cash or a combination of cash, shares of the Company’s Series B-1 Cumulative Convertible Preferred Stock (the “ Series B-1 Preferred Stock ”), which shares shall be cancelled and retired pursuant to the certificate attached hereto as Exhibit B and the cancellation and termination of the Fletcher Rights (as such term is defined in the Agreement between the Company and Fletcher International, Ltd. and its

successors and assigns, dated as of May 28, 2004), as set forth in the column “Consideration” opposite such Purchaser’s name on Schedule I attached hereto.

     3.  Closing; Payment of Purchase Price; Use of Proceeds .

          3.1. Closing . The closing (the “ Closing ”) with respect to the transaction contemplated in Section 2 hereof shall take place at the offices of Ropes & Gray LLP, One International Place, Boston, Massachusetts at 10:00 a.m. on July 23, 2007, or at such other time and place as the Company and Purchasers may agree (the “ Closing Date ”). At the Closing, the Company shall deliver to each Purchaser a certificate representing the Series C Preferred Stock which such Purchaser is purchasing at the Closing as set forth on Schedule I attached hereto, registered in the name of such Purchaser, against delivery to the Company by such Purchaser of a wire transfer or delivery of shares and rights (as the case may be) in the amount of the Purchase Price therefor.

          3.2. Use of Proceeds . The Company shall use the proceeds from the sale of Series C Preferred Stock hereunder for general corporate purposes, to pay Company indebtedness and to repurchase all of the outstanding Series B-1 Preferred Stock and the cancellation and termination of the Fletcher Rights.

     4.  Representations and Warranties of the Purchasers; Register of Securities; Restrictions on Transfer . Each Purchaser (except in the case of Section 4.11, which shall apply only to the Purchaser named therein), severally as to itself and not jointly, represents and warrants to the Company as follows:

          4.1. Organization . The Purchaser which is duly formed or organized, validly existing and in good standing under the laws of its jurisdiction of organization or formation, and has all requisite corporate, limited liability company, partnership or trust (as the case may be) power and authority to enter into this Agreement and the other Transaction Documents and instruments referred to herein to which it is a party and to consummate the transactions contemplated hereby and thereby.

          4.2. Validity . The execution, delivery and performance of this Agreement and the other Transaction Documents and instruments referred to herein, in each case to which such Purchaser is a party, and the consummation by such Purchaser of the transactions contemplated hereby and thereby, have been duly authorized by all necessary action on the part of such Purchaser. This Agreement has been duly executed and delivered by such Purchaser, and the other Transaction Documents and instruments referred to herein to which it is a party will be duly executed and delivered by such Purchaser, and each such agreement constitutes or will constitute a valid and binding obligation of such Purchaser enforceable against it in accordance with its terms.

          4.3. Brokers . There is no broker, investment banker, financial advisor, finder or other person which has been retained by or is authorized to act on behalf of such Purchaser

who might be entitled to any fee or commission for which the Company will be liable in connection with the execution of this Agreement and the consummation of the transactions contemplated hereby.

          4.4. Investment Representations and Warranties . Such Purchaser understands that the offering and sale of the Securities have not been registered under the Securities Act and are being made in reliance upon federal and state exemptions for transactions not involving a public offering which depend upon, among other things, the bona fide nature of the investment intent and the accuracy of Purchaser’s representations as expressed herein. The Purchaser acknowledges that, except as set forth in the Investor Rights Agreement, the Company has no obligation to register or qualify the Securities for resale.

          4.5. Acquisition for Own Account . Such Purchaser is acquiring the Securities for its own account for investment and not with a view toward distribution in a manner which would violate the Securities Act.

          4.6. Ability to Protect Its Own Interests and Bear Economic Risks . Such Purchaser, by reason of the business and financial experience of its management, has the capacity to protect its own interests in connection with the transactions contemplated by this Agreement and the other Transaction Documents. Such Purchaser is able to bear the economic risk of an investment in the Securities and is able to sustain a loss of all of its investment in the Securities without economic hardship if such a loss should occur.

          4.7. Accredited Investor . Such Purchaser is an “accredited investor” as that term is defined in Regulation D promulgated under the Securities Act.

          4.8. Access to Information . Such Purchaser has been given access to all Company documents, records, and other information, and has had adequate opportunity to ask questions of, and receive answers from, the Company’s officers, employees, agents, accountants, and representatives concerning the Company’s business, operations, financial condition, assets, liabilities, and all other matters relevant to its investment in the Securities. The representations of Purchasers contained in this Section 4.8 shall not affect the ability of the Purchasers to rely on the representations and warranties made by the Company pursuant to Section 5 of this Agreement.

          4.9. Restricted Securities .

          (a) Such Purchaser understands that the Securities will be characterized as “restricted securities” under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such Securities may be resold without registration under the Securities Act only in certain limited circumstances.

          (b) Such Purchaser acknowledges that the Securities must be held indefinitely unless subsequently registered under the Securities Act and under applicable state securities laws or an exemption from such registration is available.

          (c) Such Purchaser is aware of the provisions of Rule 144 under the Securities Act which permit limited resale of securities purchased in a private placement.

          4.10. Residence . The office or offices of such Purchaser in which its investment decision was made, and which is its principal place of business, in the case of a corporation, limited liability company, partnership or other entity, or is its residence, in the case of an individual, is located at the address or addresses of such Purchaser set forth on Schedule I hereto.

          4.11. Series B-1 Preferred Stock . Prides Capital is the beneficial owner of the shares of B-1 Preferred Stock as set forth in the column “Consideration” opposite such Purchaser’s name on Schedule I attached hereto, and has good and valid title to such shares. Upon the Closing, Prides Capital will have no rights in connection with such shares other than its rights pursuant to this Agreement and the Transaction Documents.

     5.  Representations and Warranties by the Company . Except as disclosed by the Company in a written Disclosure Schedule provided by the Company to the Purchasers dated the date hereof (the “ Disclosure Schedule ”), the Company represents and warrants to each Purchaser that the statements contained in this Section 5 are complete and accurate as of the date of this Agreement. The Disclosure Schedule shall be arranged in sections corresponding to the numbered and lettered sections and subsections contained in this Section 5, and the disclosures in any section or subsection of the Disclosure Schedule shall qualify other sections and subsections in this Section 5 only to the extent it is readily apparent from a reasonable reading of the disclosure that such disclosure is applicable to such other sections and subsections.

          5.1. Capitalization .

          (a) As of the date hereof, and after giving effect to the filing of the Certificate of Designation and the Closing, the authorized capital stock of the Company consists of 100,000,000 shares of Common Stock, par value $0.01 per share, and 5,000,000 shares of preferred stock, par value $0.01 per share, of which 60,000 shares are designated Series C Preferred Stock. As of the date hereof, and after giving effect to the filing of the Certificate of Designation and the Closing, there are 28,252,216 outstanding shares of Common Stock, 60,000 shares of Series C Preferred Stock outstanding, 2,957,457 shares of Common Stock are available for issuance upon the exercise of outstanding stock options, warrants, or other convertible rights and 1,308,843 shares of Common Stock are reserved for issuance under the Company’s 2000 Stock Incentive Plan (the “ Benefit Plan ”). As of the date hereof, and after giving effect to the filing of the Certificate of Designation and the Closing, the Company has no other shares of capital stock authorized, issued or outstanding. Except for the shares of Series B-1 Preferred Stock held by Prides Capital as set forth in the column “Consideration”

opposite such Purchaser’s name on Schedule I attached hereto, there are no other shares of Series B-1 Preferred Stock outstanding. A capitalization table presenting the capitalization of the Company after giving effect to the filing of the Certificate of Designation and the Closing is set forth on Schedule 5.1(a) hereto.

               (b) As of the date hereof, except as set forth on the SEC Reports or on Schedule 5.1(b) and except as may be granted or required by this Agreement or the other Transaction Documents, (i) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into or exercisable or exchangeable for, any shares of capital stock of the Company, or arrangements by which the Company is or may become bound to issue additional shares of capital stock, nor are any such issuances or arrangements contemplated; (ii) there are no agreements or arrangements under which the Company is or may become obligated to register the sale of any of its securities under the Securities Act; (iii) the Company has no obligation (contingent or otherwise) to purchase, redeem or otherwise acquire any of its equity securities or any interests therein or to pay any dividend or make any distribution in respect thereof; and (iv) the Company has not reserved any shares of capital stock for issuance pursuant to any stock option plan or similar arrangement.

          5.2. Due Issuance and Authorization of Capital Stock . All of the outstanding shares of capital stock of the Company have been validly issued and are fully paid and non-assessable. The sale and delivery of the shares of Series C Preferred Stock to the Purchasers, when issued, sold and delivered in accordance with the terms and for the consideration hereof, and the issuance of the Conversion Shares upon conversion of the shares of Series C Preferred Stock will vest in the holders thereof legal and valid title to such Securities, free and clear of any lien, claim, judgment, charge, mortgage, security interest, pledge, escrow, equity or other encumbrance (collectively, “ Encumbrances ”).

          5.3. Organization . The Company and each of its Subsidiaries (a) is duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its formation, except, in the case of its Subsidiaries, where the failure to be so incorporated or organized would not have a Material Adverse Effect, (b) is duly qualified to do business as a foreign entity and is in good standing in each jurisdiction where the nature of the property owned or leased by it or the nature of the business conducted by it makes such qualification necessary, except where the failure to be so qualified would not have a Material Adverse Effect, and (c) has all requisite corporate power and authority to own or lease and operate its assets and carry on its business as presently being conducted. The Company has its principal place of business and chief executive office in New York, New York.

          5.4. Subsidiaries . All of the direct and indirect Subsidiaries of the Company are set forth on Schedule 5.4 . The Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary free and clear of any Encumbrances, and all of the

issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities.

          5.5. Consents . Assuming the accuracy of the representations made by the Purchasers in Section 4 of this Agreement and except as set forth on Schedule 5.5 , neither the execution, delivery or performance of the Certificate of Designation, this Agreement or the other Transaction Documents by the Company, nor the consummation by it of the obligations and transactions contemplated hereby or thereby (including, without limitation, the issuance, the reservation for issuance and the delivery of the Series C Preferred Stock or the issuance and delivery of the Conversion Shares) requires any consent of, authorization by, exemption from, filing with or notice to any Governmental Entity or any other Person, other than (a) the filing of the Certificate of Designation with the Secretary of State of the State of Delaware, (b) the filings required to comply with the Company’s registration obligations under the Investor Rights Agreement and (c) filings required under applicable U.S. federal and state securities laws.

          5.6. Authorization; Enforcement . The Company has all requisite corporate power and has taken all necessary corporate action required for the due authorization, execution, delivery and performance by the Company of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Securities and the provision to the Purchasers of the rights contemplated by the Transaction Documents) and no action on the part of the stockholders of the Company is required. The execution, delivery and performance by the Company of each of the Transaction Documents, the execution and filing of the Certificate of Designation, and the consummation by the Company of the transactions contemplated hereby and thereby, have been duly authorized by all necessary corporate action on the part of the Company. This Agreement has been duly executed and delivered by the Company, and the other Transaction Documents and instruments referred to herein to which it is a party will be duly executed and delivered by the Company, and each such agreement constitutes or will constitute a valid and binding obligation of the Company enforceable against it in accordance with its terms, subject to bankruptcy, insolvency, fraudulent conveyance or other similar laws affecting creditors’ rights generally and to general equitable principles.

          5.7. Issuance of Securities . The Securities, when issued, sold and delivered in accordance with the terms and for the consideration set forth in this Agreement, will be duly authorized and a sufficient number of shares of authorized but unissued shares of Common Stock have been reserved for issuance upon conversion of the Series C Preferred Stock, and upon such issuance or conversion in accordance with the terms of this Agreement or the Certificate of Designation, as the case may be, all such Securities will be duly authorized, validly issued, fully paid and non-assessable, and free from all taxes and Encumbrances and will not be subject to preemptive rights or other similar rights of stockholders of the Company, and the issuance of such shares will not impose personal liability upon the holder thereof.

          5.8. No Conflicts . Except as set forth on Schedule 5.8 , the execution, delivery and performance of each of the Transaction Documents, the execution and filing of the Certificate of Designation, and the consummation of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation for issuance, as applicable, of the Series C Preferred Shares and the Conversion Shares) will not (a) result in a violation of the amended and restated certificate of incorporation and by-laws of the Company (the “ Charter Documents ”) or the certificates of formation, operating agreements, certificates of incorporation or by-laws of its Subsidiaries, (b) conflict with or result in the breach of the terms, conditions or provisions of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give rise to any right of termination, acceleration or cancellation under, any agreement, lease, mortgage, license, indenture, instrument or other contract to which the Company or any Subsidiary is a party, (c) result in a material violation of any law, rule, regulation, order, judgment or decree (including, without limitation, U.S. federal and state securities laws and regulations) applicable to the Company or any Subsidiary or by which any property or asset of the Company or any Subsidiary is bound or affected, (d) result in a material violation of any rule or regulation of the NASD or its Trading Markets, or (e) result in the creation of any Encumbrance upon any of the Company’s or any Subsidiary’s assets, except, in the case of clauses (b) or (e), for any such conflicts, violations, breaches, defaults or other occurrences that would not have, individually or in the aggregate, a Material Adverse Effect. The Company is not in material violation of its Charter Documents and neither the Company nor any Subsidiary is in material default (and no event has occurred which, with notice or lapse of time or both, would cause the Company to be in material default) under, nor has there occurred any event giving others (with notice or lapse of time or both) any rights of termination, amendment, acceleration or cancellation of, any Material Contract. The business of the Company and its Subsidiaries is not being conducted in violation in any material respect of any law, ordinance or regulation of any Governmental Entity except for such violations that would not have a Material Adverse Effect.

          5.9. Material Contracts . Each Material Contract of the Company is listed on Schedule 5.9 hereof. Each Material Contract is the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except to the extent that enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance or other similar laws affecting creditors’ rights generally and by general equitable principles. There has not occurred any breach, violation or default or any event that, with the lapse of time, the giving of notice or the election of any Person, or any combination thereof, would constitute a breach, violation or default by the Company under any such Material Contract or, to the knowledge of the Company, by any other Person to any such contract, except for such violations or defaults that would not have a Material Adverse Effect. To the knowledge of the Company, it has not been notified that any party to any Material Contract intends to cancel, terminate, not renew or exercise an option under any Material Contract, whether in connection with the transactions contemplated hereby or otherwise.

          5.10. Right of First Refusal; Stockholders Agreement; Voting and Registration Rights . Except pursuant to any agreement listed as an exhibit to an SEC Report, this Agreement or the other Transaction Documents, no party has any right of first refusal, right of first offer, right of co-sale, preemptive right or other similar right regarding the securities of the Company. Except pursuant to any agreement listed as an exhibit to an SEC Report or Schedule 5.10 , there are no provisions of the Charter Documents, no Material Contracts other than the Certificate of Designation, this Agreement or the other Transaction Documents, which (a) may affect or restrict the voting rights of the Purchasers with respect to the Securities in their capacity as stockholders of the Company, (b) restrict the ability of the Purchasers, or any successor thereto or assignee or transferee thereof, to transfer the Securities, (c) would adversely affect the Company’s or any Purchaser’s right or ability to consummate the transactions contemplated by this Agreement or comply with the terms of the other Transaction Documents or the Certificate of Designation and the transactions contemplated hereby or thereby, (d) require the vote of more than a majority of the Company’s issued and outstanding Common Stock, voting together as a single class, to take or prevent any corporate action, other than those matters requiring a different vote under Delaware law, or (e) entitle any party to nominate or elect any director of the Company or require any of the Company’s stockholders to vote for any such nominee or other person as a director of the Company in each case above.

          5.11. Previous Issuances . Except as disclosed on Schedule 5.11 , all shares of capital stock and other securities issued by the Company prior to the Closing Date have been issued in transactions registered under or exempt from the registration requirements under the Securities Act and all applicable state securities or “blue sky” laws, and in compliance with all applicable corporate laws. The Company has not violated the Securities Act or any applicable state securities or “blue sky” laws in connection with the issuance of any shares of capital stock or other securities prior to the Closing Date.

          5.12. No Integrated Offering . Neither the Company, nor any of its Affiliates or any other Person acting on the Company’s behalf, has directly or indirectly engaged in any form of general solicitation or general advertising with respect to the Securities nor have any of such Persons made any offers or sales of any security of the Company or its Affiliates or solicited any offers to buy any security of the Company or its Affiliates under circumstances that would require registration of the Securities under the Securities Act or cause this offering of Securities to be integrated with any prior offering of securities of the Company for purposes of the Securities Act or any applicable shareholder approval provisions of any Trading Market on which any of the securities of the Company are listed or designated.

          5.13. SEC Reports; Financial Statements .

          (a) Except as disclosed on the SEC Reports or Schedule 5.13 , the Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof

(the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “ SEC Reports ”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. All Material Contracts to which the Company is a party or to which the property or assets of the Company are subject are required to be included as part of or specifically identified in the SEC Reports are so included or specifically identified. Except as disclosed to the Purchasers in writing, the Company has filed all SEC Reports required to be filed with the SEC since December 31, 2004 (the “ Post-2004 SEC Reports ”); provided that, if the Company amends any of its Post-2004 SEC Reports, such amendment shall not mean or imply that any representation or warranty in this Agreement was not true and correct when made or became untrue thereafter.

          (b) The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with GAAP, except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.

          5.14. No Undisclosed Material Liabilities . As of the date of this Agreement, there are no liabilities of the Company, of any kind whatsoever, whether interest-bearing indebtedness, or liabilities accrued, contingent, absolute, determined, determinable or otherwise, other than liabilities:

          (a) reflected in the financial statements included in the SEC Reports;

          (b) disclosed on Schedule 5.14 hereto;

          (c) incurred in the ordinary course of business, consistent with past practice;

          (d) created under, or incurred in connection with, this Agreement, the other Transaction Documents or the Certificate of Designation; or

          (e) which would not in the aggregate be material to the Company.

          5.15. Litigation . There is no action, suit, investigation or other proceeding pending against, or to the knowledge of the Company, threatened against or affecting, the Company or any of its Subsidiaries or any of their properties or to the knowledge of the Company any of its or their officers or directors before any court or arbitrator or any Governmental Entity that could cause a Material Adverse Effect, except as disclosed in the SEC Reports or as set forth on Schedule 5.15 . To the knowledge of the Company, there are no facts that would cause a reasonable person to believe that such a proceeding would likely result.

          5.16. Taxes . The Company and each of its Subsidiaries has properly filed all federal, foreign, state, local, and other tax returns and reports which are required to be filed, which returns and reports were properly completed and are true and correct in all respects, and all taxes, interest, and penalties due and owing have been timely paid, except for those taxes, interest or penalties which would not have a Material Adverse Effect. There are no outstanding waivers or extensions of time with respect to the period for assessing or auditing any tax or tax return of the Company or any Subsidiary, or claims now pending or matters under discussion between the Company or any Subsidiary and any taxing authority in respect of any tax of the Company or any Subsidiary.

          5.17. Employee Matters .

          (a) The Company has listed any “employee benefit plan” subject to the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”), that it maintains for employees on any agreement listed as an exhibit to an SEC Report or Schedule 5.17(a) .

          (b) Except as set forth on Schedule 5.17(b) , (i) no director or officer or other employee of the Company will become entitled to any retirement, severance or similar benefit or enhanced or accelerated benefit (including any acceleration of vesting) or lapse of repurchase rights or obligations with respect to any employee benefit plan subject to ERISA or other benefit under any compensation plan or arrangement of the Company (each, an “ Employee Benefit Plan ”)) solely as a result of the transactions contemplated in this Agreement; and (ii) no payment made or to be made to any current or former employee or director of the Company, or any of its Affiliates by reason of the transactions contemplated hereby (whether alone or in connection with any other event, including, but not limited to, a termination of employment) will constitute an “excess parachute payment” within the meaning of Section 280G of the Code.

          (c) No executive officer, to the knowledge of the Company, is, or is now expected to be, in violation of any term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant, and, to the knowledge of the Company, the continued employment of each such executive officer does not subject the

Company or any of its Subsidiaries to any liability with respect to any of the foregoing matters, except for such violations which would not have a Material Adverse Effect.

          (d) The Company and its Subsidiaries are in compliance with all applicable federal, state, local and foreign statutes, laws (including, without limitation, common law), judicial decisions, regulations, ordinances, rules, judgments, orders and codes respecting employment, employment practices, labor, terms and conditions of employment and wages and hours, and no work stoppage or labor strike against the Company or any Subsidiary is pending or, to their knowledge, threatened, nor is the Company or any Subsidiary involved in or, to their knowledge, threatened with any labor dispute, grievance or litigation relating to labor matters involving any employees of the Company or any Subsidiary, except for any of the foregoing which would not have a Material Adverse Effect. To the Company’s knowledge, there are no suits, actions, disputes, claims (other than routine claims for benefits), investigations or audits pending or, to the knowledge of the Company, threatened in connection with any Employee Benefit Plan.

          5.18. Compliance with Laws . The Company and its Subsidiaries have, and are in compliance with the terms of, all franchises, permits, licenses and other rights and privileges necessary to conduct the Company’s present and proposed business and are in compliance with and have not violated, in any respect, any applicable provisions of any laws, statutes, ordinances or regulations or the terms of any judgments, orders, decrees, injunctions or writs, except for any of the foregoing which would not have a Material Adverse Effect..

          5.19. Brokers . Except as disclosed on Schedule 5.19 , there is no investment banker, broker, finder, financial advisor or other person which has been retained by or is authorized to act on behalf of the Company who is entitled to any fee or commission in connection with the transactions contemplated by this Agreement.

          5.20. Environmental Matters .

          (a) (i) No written notice, notification, demand, request for information, citation, summons, complaint or order has been received by, and no investigation, action, claim, suit, proceeding or review is pending or, to the knowledge of the Company, threatened by any Person against the Company or any of its Subsidiaries and no penalty has been assessed against the Company or any of its Subsidiaries, in each case, with respect to any matters relating to or arising out of any Environmental Law; (ii) the Company and its Subsidiaries are in material compliance with all applicable Environmental Laws; and (iii) to the knowledge of the Company, there are no material liabilities of or relating to the Company and its Subsidiaries relating to or arising out of any Environmental Law, and there is no existing condition, situation or set of circumstances which could reasonably be expected to result in a such a liability.

          (b) For purposes of this Agreement, the term “ Environmental Laws ” means federal, state, local and foreign statutes, laws, binding judicial decisions, regulations, ordinances, rules, binding judgments, binding orders, codes, binding injunctions and permits relating to human health and the environment, including, but not limited to, Hazardous Materials; and the term “ Hazardous Material ” means all substances or materials regulated as hazardous, toxic, explosive, dangerous, flammable or radioactive under any Environmental Law including, but not limited to: (i) petroleum, asbestos, or polychlorinated biphenyls and (ii) in the United States, all substances defined as Hazardous Substances, Oils, Pollutants or Contaminants in the National Oil and Hazardous Substances Pollution Contingency Plan.

          5.21. Intellectual Property Matters .

          (a) “ Intellectual Property ” means any and all of the following arising under the laws of the United States, any other jurisdiction or any treaty regime: (i) all inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereon, and all patents, patent applications and patent disclosures and all reissuances, continuations, continuations-in-part, divisionals, revisions, extensions and reexaminations thereof, (ii) all trademarks, service marks, trade dress, logos, trade names and corporate names and all translations, adaptations, derivations and combinations thereof and including all goodwill associated therewith, and all applications, registrations and renewals in connection therewith, (iii) all copyrightable works, mask works or moral rights, all copyrights and all applications, registrations and renewals in connection therewith, (iv) all trade secrets and confidential business information (including, without limitation, ideas, research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information and business and marketing plans and proposals), (v) all computer software (including, without limitation, data and related documentation and except for any commercial “shrink-wrapped” software) and source codes, (vi) all other proprietary rights, (vii) all copies and tangible embodiments of the foregoing (in whatever form or medium) and (viii) all licenses or agreements in connection with the foregoing. “ Company Intellectual Property ” means all Intellectual Property which is used in connection with, and is material to, the business of the Company and its Subsidiaries and all Intellectual Property owned by the Company and its Subsidiaries, provided that any Intellectual Property that is licensed by the Company or any of its Subsidiaries shall be included within the meaning of Company Intellectual Property only within the scope of use by the Company and its Subsidiaries or in connection with the Company’s business.

          (b) Except as set forth on Schedule 5.21(b) , with respect to each item of Company Intellectual Property:

     (1) the Company or its Subsidiary possesses all rights, titles and interests in and to the item if owned by the Company or its Subsidiary, free and clear of any Encumbrance, license or other restriction, and possesses all rights necessary in the case of a licensed item to use such item in the manner in which it presently uses the item or reasonably contemplates using such item, and the Company has taken or caused to be taken reasonable and prudent steps to protect its rights in and to, and the validity and enforceability of, the item owned by the Company or its Subsidiary;

     (2) the item, if owned by the Company or its Subsidiary, is not, and if licensed, to the knowledge of the Company is not, subject to any outstanding injunction, judgment, order, decree, ruling or charge naming the Company or a Subsidiary;

     (3) no action, suit, proceeding, hearing, investigation, charge, complaint, claim or demand is pending or, to the knowledge of the Company, has been or is being threatened which challenges the legality, validity, enforceability, use or ownership of the item;

     (4) to the knowledge of the Company, the Company or its Subsidiary has sufficient right, title and interest to use or own the item without infringement upon any Intellectual Property Right or other right of any third party, except for such failure which would not have a Material Adverse Effect;

     (5) except in the ordinary course of business and to the knowledge of the Company, the Company and its Subsidiaries have not agreed to indemnify any person for or against any interference, infringement, misappropriation or other conflict with respect to the item;

     (6) neither the Company nor any Subsidiary is bound by or a party to any option, license, sublicense, agreement or permission of any kind with respect to the item;

     (7) to the knowledge of the Company, no third party has interfered with, infringed upon, misappropriated or otherwise come into conflict with the Company Intellectual Property, except for such interference, infringement or misappropriation which would not have a Material Adverse Effect;

     (8) neither the Company nor any Subsidiary is party to any option, license, sublicense or agreement or permission of any kind covering the item that it is in breach or default thereunder, and no event has occurred which, with notice or lapse of time, would constitute a breach or default or permit termination, modification or acceleration thereunder, except for such breach or default which would not have a Material Adverse Effect; and

     (9) to the knowledge of the Company, each option, license, sublicense, agreement or permission of any kind covering the item is legal, valid, binding, enforceable against the Company or its Subsidiary, as the case may be, and in full force and effect.

     All applications for, pending or registered patents, copyrights, trademarks, and service marks in the United States and any other jurisdiction (x) if owned by the Company or a Subsidiary, and (y) if licensed, to the knowledge of the Company, are valid and subsisting and in full force and effect or are currently pending and are not subject to any claims, Encumbrances, taxes or other fees except for periodic filing and maintenance fees. Except as set forth on Schedule 5.21(b) and except for such infringement or misappropriation which would not have a Material Adverse Effect, the Company and its Subsidiaries have not, to the knowledge of the Company, infringed upon, misappropriated or otherwise come into conflict with any Intellectual Property rights of third parties, and there is no pending or, to the knowledge of the Company, threatened claim or litigation against the Company or any Subsidiary contesting the right to use any third party’s Intellectual Property rights, asserting the misuse of any thereof, or asserting the infringement or other violation thereof.

          (c) All domain names owned by the Company or its Subsidiaries and material to the business of the Company and its Subsidiaries (the “ Domain Names ”) have been and are duly registered with Network Solutions, Inc. (“ NSI ”) through NSI’s registration procedures, and are operating, accessible domain names. The Company or a Subsidiary owns and, to the best of the Company’s knowledge, has not waived, forfeited or granted to any third parties, any rights, title or interest in or to the Domain Names including, without limitation, any benefits, entitlements or rights of renewal with respect to the Domain Names. NSI has not notified the Company or any Subsidiary that any of the Domain Names have been placed on “hold” or are otherwise subject to a dispute or potential dispute pursuant to NSI’s dispute resolution policy.

          (d) To the knowledge of the Company, none of the key employees of the Company or any Subsidiary are obligated under any contract (including, without limitation, licenses, covenants, or commitments of any nature) or other agreement, or subject to any judgment, decree, or order of any court or administrative agency, that would interfere with the use of his or her reasonable diligence to promote the interests of the Company or that would conflict with the Company’s businesses as presently conducted. Neither the execution, delivery or performance of this Agreement, nor the carrying on of the Company’s businesses by the employees of the Company and its Subsidiaries, nor the conduct of the Company’s businesses as presently conducted, will conflict with or result in a breach of the terms, conditions or provisions of, or constitute a default under, any contract, covenant, or instrument under which any such key employee is obligated, and which conflict, breach or default would have a Material Adverse Effect.

          (e) The Com