Amendment No. 2 to Schedule 13D

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GO6qlNtmY0aRVn4YcxIp474s/uImrXlGlG0qYKYFIdo+6AiSpIepZqzTdQpSjVd4 hNSyE3HOVSG/CEoLDDBG4w== 0001193125-09-209676.txt : 20091019 0001193125-09-209676.hdr.sgml : 20091019 20091019171946 ACCESSION NUMBER: 0001193125-09-209676 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20091019 DATE AS OF CHANGE: 20091019 GROUP MEMBERS: KEVIN A. RICHARDSON, II SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: PRINCETON REVIEW INC CENTRAL INDEX KEY: 0001113668 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EDUCATIONAL SERVICES [8200] IRS NUMBER: 223727603 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-77933 FILM NUMBER: 091126553 BUSINESS ADDRESS: STREET 1: 111 SPEEN STREET STREET 2: SUITE 550 CITY: FRAMINGHAM STATE: MA ZIP: 01701 BUSINESS PHONE: 508-663-5050 MAIL ADDRESS: STREET 1: 111 SPEEN STREET STREET 2: SUITE 550 CITY: FRAMINGHAM STATE: MA ZIP: 01701 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: Prides Capital Partners, LLC CENTRAL INDEX KEY: 0001295315 IRS NUMBER: 200654530 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 200 HIGH STREET STREET 2: SUITE 700 CITY: BOSTON STATE: MA ZIP: 02110 BUSINESS PHONE: 617 778 9200 MAIL ADDRESS: STREET 1: 200 HIGH STREET STREET 2: SUITE 700 CITY: BOSTON STATE: MA ZIP: 02110 SC 13D/A 1 dsc13da.htm AMENDMENT NO. 2 TO SCHEDULE 13D Amendment No. 2 to Schedule 13D

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13D

Under the Securities Exchange Act of 1934

(Amendment No. 2)

The Princeton Review, Inc.

(Name of Issuer)

Common Stock, par value $0.01 per share

(Title of Class of Securities)

742352107

(CUSIP Number)

Murray A. Indick

Prides Capital Partners LLC

200 High Street, Suite 700

Boston, MA 02110

(617) 778-9200

(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)

October 16, 2009

(Date of Event which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box ¨.

Note. Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See §240.13d-7 for other parties to whom copies are to be sent.


CUSIP No. 742352107		SCHEDULE 13D		Page 2 of 10


1.	NAMES OF REPORTING PERSON Prides Capital Partners LLC
2.	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) ¨ (b) x
3.	SEC USE ONLY
4.	SOURCE OF FUNDS WC
5.	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) ¨
6.	CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7.	SOLE VOTING POWER -0-
		8.	SHARED VOTING POWER 4,807,169*
		9.	SOLE DISPOSITIVE POWER -0-
		10.	SHARED DISPOSITIVE POWER 4,807,169*
11.	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 4,807,169*
12.	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES ¨
13.	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 12.5%**
14.	TYPE OF REPORTING PERSON OO (Limited Liability Company)

* See Item 5 below

** The percentage of the Common Stock represented by the shares that are subject to this Amendment No. 2 to Schedule 13D is based on an aggregate of 33,719,808 shares of Common Stock outstanding as of August 3, 2009, which figure is based on information set forth in the Issuer’s registration statement on Form S-3 filed with the Securities Exchange Commission on September 24, 2009.


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1.	NAMES OF REPORTING PERSON Kevin A. Richardson, II
2.	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) ¨ (b) x
3.	SEC USE ONLY
4.	SOURCE OF FUNDS Not Applicable
5.	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) ¨
6.	CITIZENSHIP OR PLACE OF ORGANIZATION U.S.A.
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7.	SOLE VOTING POWER -0-
		8.	SHARED VOTING POWER 4,807,169*
		9.	SOLE DISPOSITIVE POWER -0-
		10.	SHARED DISPOSITIVE POWER 4,807,169*
11.	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 4,807,169*
12.	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES ¨
13.	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 12.5%**
14.	TYPE OF REPORTING PERSON IN

* See Item 5 below


CUSIP No. 742352107		SCHEDULE 13D		Page 4 of 10

This Amendment No. 2 supplements and amends Items 3, 4, 5, 6 and 7 of the statement on Schedule 13D filed on June 14, 2007 by Prides Capital Partners LLC, a Delaware limited liability company (“Prides Capital”), Kevin A. Richardson, II, Henry J. Lawlor, Jr., Murray A. Indick, Charles E. McCarthy and Christian Puscasiu, as amended by Amendment No. 1 (as so amended, the “Schedule 13D”), relating to the common stock, $0.01 par value per share (“Common Stock”), of the Princeton Review, Inc., a Delaware corporation (the “Issuer”). Each Item below amends and supplements the information disclosed under the corresponding Item of the Schedule 13D. Unless otherwise indicated herein, capitalized terms used but not defined in this Amendment No. 2 shall have the same meaning herein as are ascribed to such terms in the Schedule 13D.

Item 3.

Source of Funds and Other Consideration.

Item 3 is hereby amended and supplemented to incorporate by reference the amendments and supplements to Item 4 herein.

Item 4.

Purpose of Transaction.

Item 4 is hereby amended and supplemented by deleting it in its entirety and replacing it with the following:

On July 23, 2007, Prides Capital purchased 20,000 shares of Series C Convertible Preferred Stock of the Issuer (the “Series C Preferred Stock”) from the Issuer for the consideration described in Item 3 above and on the terms and conditions set forth in (a) the Series C Preferred Stock Purchase Agreement (the “Preferred Stock Purchase Agreement”), dated July 23, 2007, by and among the Issuer, Bain Capital Venture Fund 2007, L.P., a Delaware limited partnership, Prides Capital Fund I LP, a Delaware limited partnership (“Fund I”, for which Prides Capital serves as the sole general partner) and the other entities listed on Schedule I attached thereto (the “Purchasers”), (b) an Investor Rights Agreement, dated July 23, 2007, by and among the Issuer, the Purchasers and certain other common stockholders of the Issuer (the “Investor Rights Agreement”), (c) the Certificate of Designation of Series C Convertible Preferred Stock of the Issuer (the “Certificate of Designation”), (d) an Agreement, dated July 23, 2007, by and among the Issuer and the Purchasers (the “Purchaser Nomination Agreement”), and (e) an Agreement, dated July 23, 2007, by and between the Issuer and John Katzman, a stockholder of the Issuer (the “Katzman Agreement”). The Preferred Stock Purchase Agreement, the Investor Rights Agreement, the Certificate of Designation, the Purchaser Nomination Agreement and the Katzman Agreement are attached hereto as Exhibit B, C, D, E and F, respectively, and the information set forth in response to this Item 4 is qualified in its entirety by reference to the Preferred Stock Purchase Agreement, the Investor Rights Agreement, the Certificate of Designation, the Purchaser Nomination Agreement and the Katzman Agreement (collectively, the “Transaction Documents”), each of which is incorporated by reference herein.

In accordance with the conversion mechanics relating to Series C Preferred Stock described in the Certificate of Designation, the aggregate number of shares of Common Stock into which the Series C Preferred Stock held by Prides Capital may be converted, as of the date of the filing of this Amendment No. 2, is approximately 3,798,896. In addition, Prides Capital owned prior to July 23, 2007, and continues to own, 1,008,273 shares of Common Stock.

The Transaction Documents provide certain rights and obligations of Prides Capital, including, without limitation, the following:

•

Pre-emptive rights to purchase its pro rata portion of any future equity securities, securities convertible into equity securities, or options or warrants therefor issued by the Issuer


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(excluding issuances to (i) to employees, directors or consultants of the Issuer; (ii) upon the exercise of options, warrants or convertible securities; or (iii) in connection with consideration for permitted business acquisitions, mergers or strategic partnerships);

•

Right to appoint one observer to the board of directors of the Issuer (the “Board”) and all committees of the Board so long as Prides Capital owns at least 10% of the number of shares of Series C Preferred Stock initially purchased by it;

•

Piggyback registration of the shares of Common Stock into which the Series C Preferred Stock is convertible into and demand registration of such shares so long as the Prides Capital owns at least 20% of the shares of Series C Preferred Stock then outstanding;

•

Obligations and rights with respect to certain transfers of Series C Preferred Stock by Prides Capital or by other holders of more than 10% of the then-outstanding shares of Series C Preferred Stock (including tag-along rights and rights of first refusal); and

•

Right to vote as a separate class, along with the other holders of Series C Preferred Stock, on certain matters relating to the Issuer.

The purpose of the acquisitions of the shares of Common Stock and Series C Preferred Stock described above is for investment purposes and these acquisitions were made in the ordinary course of business and were not made for the purpose of acquiring control of the Issuer.

On October 16, 2009, Fund I entered into a commitment letter with the Issuer (the “Commitment Letter”) pursuant to which Prides Capital, as Fund I’s general partner, agreed, subject to the conditions contained therein and described below, to exchange (the “Exchange”) 20,000 shares of Series C Preferred Stock for approximately 3,789,473 shares of newly issued shares of Series E Non-Convertible Preferred Stock of the Issuer (“Series E Preferred Stock”) at the closing of the Issuer’s acquisition of all of outstanding shares of Penn Foster Education Group, Inc. (the “Target”) for $170 million in cash (the “Acquisition”). Upon receipt of stockholder approval, the Series E Preferred Stock will be convertible into shares of newly issued shares of Series D Convertible Preferred Stock of the Issuer (the “Series D Preferred Stock” and, together with the Series E Preferred Stock, the “New Preferred Stock”). The transactions contemplated by the Commitment Letter and the Issuance of the New Preferred Stock facilitate the issuance of additional shares of Series E Preferred Stock for which the Issuer expects to raise between $30 million and $40 million (the “Private Placement”). The Issuer will use the proceeds of the Private Placement to partially finance the purchase price of the Acquisition.

Prides Capital’s commitment to consummate the Exchange is subject to certain conditions detailed in the Commitment Letter, including but not limited to (a) the negotiation, execution and delivery of definitive documents that are reasonably acceptable to Prides Capital and the Issuer, including a purchase agreement, an investor rights agreement and certificates of designations, relating to the issuance of the New Preferred Stock and other related matters (collectively, the “Definitive Documents”), (b) receipt of all required governmental consents and approvals necessary in connection with the issuance of the New Preferred Stock, (c) the closing of the Acquisition on terms and conditions of the Acquisition without amendment or waiver of any provision or condition thereof unless such amendment or waiver is not materially adverse to Prides Capital or Prides Capital consents to such amendment or waiver, (d) the consummation of the debt and equity financings for the Acquisition on terms and conditions described in the Issuer’s commitment letters with other lenders and equityholders, and (e) the absence of a material adverse change with respect to the Issuer or the Target. The


CUSIP No. 742352107		SCHEDULE 13D		Page 6 of 10

Commitment Letter is attached hereto as Exhibit G and the information set forth in response to this Item 4 is qualified in its entirety by reference to the Commitment Letter.

Pursuant to the term sheet attached to the Commitment Letter (the “Term Sheet”), the New Preferred Stock will be issued on the following terms:

•

The original purchase price of the Series E Preferred Stock will be $4.75.

•

The New Preferred Stock will be entitled to receive assets of the Issuer available for distribution to its stockholders in preference to any distribution to the holders of any Common Stock or other preferred stock of the Issuer upon any liquidation, dissolution or winding up.

•

Dividends on the Series E Preferred Stock will accrue and be cumulative at 8% per annum for the first year and 16% per annum thereafter, compounded annually, whether or not declared. Dividends on the Series D Preferred Stock will accrue and be cumulative at 8% per annum, compounded annually, whether or not declared, until the fifth anniversary of the issuance of the Series E Preferred Stock (the “Issuance”). The dividends on the New Preferred Stock will not be paid in cash except in connection with the occurrence of any of the following with respect to the Issuer: a liquidation event, a change of control or redemption. The holders of the New Preferred Stock will be entitled to participate on a deemed as converted basis in any dividends payable on the Common Stock.

•

Each share of Series E Preferred Stock will be deemed to be convertible into shares of Common Stock determined by dividing (i) the sum of (a) $4.75 plus (b) all accrued and unpaid dividends by (ii) the Conversion Price. Each share of Series D Preferred Stock will be convertible into shares of Common Stock determined by dividing (i) the sum of (a) $4.75 plus (b) all accrued and unpaid dividends by (ii) the Conversion Price. The “Conversion Price” will initially equal $4.75 and will be subject to customary adjustments for certain adjustments to the Common Stock, cash dividends or other distributions to all holders of Common Stock, the issuance of certain rights to all holders of Common Stock, the occurrence of certain specified fundamental changes or certain exchange offers for all or a portion of the Common Stock. Each share of Series D Preferred Stock is convertible into Common Stock at any time. At any time following the second anniversary of the Issuance and upon the request of holders of at least 10% of the Series E Preferred Stock, the Issuer shall redeem each share of the Series E Preferred Stock submitted for redemption at a price per share equal to the then fair market value of the number of shares of Common Stock into which such share of Series E Preferred Stock is then deemed to be convertible; provided that (i) in no event will the Issuer be obligated to redeem more than 15% of the Series E Preferred Stock originally issued in any 12 month period and (ii) the Issuer will not be obligated to make such redemption if the Issuer is prohibited from making such redemption pursuant to financing arrangements the Issuer is a party to at the closing of the Acquisition.

•

If the Issuer receives the stockholder approval required by The NASDAQ Global Market (“Nasdaq”) within 12 months of the Issuance, each share of Series E Preferred Stock will automatically convert into shares of Series D Preferred Stock determined by dividing (i) the sum of (a) $4.75 plus (b) all accrued and unpaid dividends by (ii) $4.75. If the Issuer receives the stockholder approval required by Nasdaq after the first anniversary of the Issuance, (i) any holder of Series E Preferred Stock may elect to convert shares of Series E Preferred Stock held by such holder into shares of Series D Preferred Stock determined by the equation described in the immediately preceding sentence and (ii) upon the vote of the holders of a majority of the Series E Preferred Stock, each share of Series E Preferred Stock will automatically convert into shares Series D Preferred Stock determined by the equation described in the immediately preceding sentence.


CUSIP No. 742352107		SCHEDULE 13D		Page 7 of 10

•

On or after the earlier of the seventh anniversary of the Issuance or a change of control of the Issuer, the holders of at least 10% of the New Preferred Stock may elect to have the Issuer redeem for cash all the then outstanding shares of the Series E Preferred Stock owned by such electing holders at the price equal to the greater of (x) the sum of (a) $4.75 plus (b) all accrued and unpaid dividends and (y) the then fair market value of the number of shares of Common Stock into which such shares of Series E Preferred Stock are then deemed convertible. On or after the earlier of the eighth anniversary of the Issuance or a change of control of the Issuer, the holders of at least 10% of the New Preferred Stock may elect to have the Issuer redeem for cash all the then outstanding shares of the Series D Preferred Stock owned by such electing holders at the price equal to the sum of (i) $4.75 plus (ii) all accrued and unpaid dividends. If for a period of 30 consecutive trading days the Common Stock has traded at or above $14.25, the New Preferred Stock may be redeemed by the Company in whole or in part after the fifth anniversary of the Issuance at a price payable in cash equal to, with respect to the Series E Preferred Stock, the greater of (x) the sum of (i) $4.75 plus (ii) all accrued and unpaid dividends and (y) the then fair market value of the number of shares of Common Stock into which such share of Series E Preferred Stock is then deemed to be convertible and, with respect to the Series D Preferred Stock, the sum of (i) $4.75 plus (ii) all accrued and unpaid dividends.

•

The Series E Preferred Stock will not have any voting rights except for consent rights currently afforded the Series C Preferred Stock. The Series D Preferred Stock will vote together with the holders of any existing preferred stock and Common Stock, on an as-converted basis.

•

Prides Capital will be entitled to appoint one observer to the Board and all committees of the Board so long as Prides Capital, together with its affiliates, beneficially owns at least 10% of the number of shares of New Preferred Stock initially purchased by them.

Other than terms described in detail above and as otherwise described in the Term Sheet, the terms of the New Preferred Stock will be substantially similar to the terms of the Series C Preferred Stock.

Similar to the purpose of the acquisitions of the shares of Common Stock and Series C Preferred Stock described above, the purpose of the commitment to the Exchange is for investment purposes and was made in the ordinary course of business and was not made for the purpose of acquiring control of the Issuer. The Reporting Persons expect to engage in communications with one or more stockholders of the Issuer, one or more officers or employees of the Issuer, one or more members of the Board, and/or one or more representatives of the Issuer regarding the drafting and negotiation of the Definitive Documents and the other transactions contemplated by the Commitment Letter.

Although no Reporting Person has any specific plan or proposal to acquire or dispose of the shares of Common Stock or Series C Preferred Stock, and after giving effect to the transactions contemplated by the Commitment Letter, the New Preferred Stock, consistent with its investment purpose, each Reporting Person, at any time, and from time to time, may acquire additional shares of Common Stock, Series C Preferred Stock or New Preferred Stock or dispose of any or all of its shares of Common Stock, Series C Preferred Stock or New Preferred Stock depending upon an ongoing evaluation of the investment in the shares of Common Stock, Series C Preferred Stock or New Preferred Stock, prevailing market conditions, other investment opportunities, liquidity requirements of the Reporting Persons or other investment considerations.


CUSIP No. 742352107		SCHEDULE 13D		Page 8 of 10

Also, consistent with the investment purpose, the Reporting Persons may, in addition to negotiating and finalizing the Definitive Documents, engage in communications with one or more stockholders of the Issuer, one or more officers or employees of the Issuer, one or more members of the board of directors of the Issuer, and/or one or more representatives of the Issuer regarding the Issuer, including but not limited to its management, operations, business results, plans, and prospects. The Reporting Persons may discuss ideas that, if affected, may result in any of the following: the acquisition by the Reporting Persons of additional shares of Common Stock or other securities of the Issuer, an extraordinary corporate transaction involving the Issuer, and/or changes in the Board or management of the Issuer.

Except to the extent the foregoing may be deemed a plan or proposal or as provided by the Transaction Documents or the Commitment Letter, none of the Reporting Persons has any plans or proposals which relate to, or could result in, any of the matters referred to in paragraphs (a) through (j), inclusive, of the instructions to Item 4 of Schedule 13D. The Reporting Persons may, at any time and from time to time, review or reconsider their position and/or change their purpose and/or formulate plans or proposals with respect thereto.

Item 5.

Interest in Securities of the Issuer.

Item 5 is hereby amended and supplemented by deleting it in its entirety and replacing it with the following:

The following disclosure assumes that there are, in the aggregate, 33,719,808 shares of Common Stock issued and outstanding as of August 3, 2009, which figure is based on information set forth in the Issuer’s registration statement on Form S-3 filed with the Securities Exchange Commission on September 24, 2009.

(a) – (b) Excluding the effects of the transactions contemplated by the Commitment Letter, Prides Capital reports beneficial ownership of 4,807,169 shares of Common Stock (including approximately 3,798,896 shares of Common Stock issuable upon conversion of the Series C Preferred Stock), representing approximately 12.5% of the Common Stock issued and outstanding. After giving effect to the Exchange and prior to the stockholder vote on the conversion terms of the Series E Preferred Stock, Prides Capital would report beneficial ownership of 1,008,273 shares of Common Stock, representing approximately 3.0% of the Common Stock issued and outstanding.

Prides Capital and the other Purchasers may be deemed to constitute a group for purposes of Section 13(d) or Section 13(g) of the Act. Prides Capital expressly disclaims (i) that they are a member of any group for purposes of Section 13(d) or 13(g) of the Act, and (ii) that they have agreed to act as a group other than as described in this Statement on Schedule 13D.

As a partner and controlling person of Prides Capital, Mr. Richardson may be deemed to beneficially own any shares of Common Stock, Series C Preferred Stock or New Preferred Stock that Prides Capital may beneficially own, or deemed to beneficially own. Neither the filing of this Schedule 13D nor any of its contents shall be deemed to constitute an admission that Mr. Richardson is the beneficial owner of Common Stock, Series C Preferred Stock or New Preferred Stock referred to herein for purposes of Section 13(d) of the Act or for any other purpose, and such beneficial ownership is expressly disclaimed. Henry J. Lawlor, Jr., Murray A. Indick, Charles E. McCarthy and Christian Puscasiu no longer exercise control over the shares subject to this Schedule 13D.


CUSIP No. 742352107		SCHEDULE 13D		Page 9 of 10

(c) Except as set forth in Item 4 and this Item 5, none of the Reporting Persons has engaged in any transactions during the past 60 days.

(d) Except as otherwise described in Item 4, no one other than Prides Capital and Mr. Richardson has the right to receive, or the power to direct the receipt of, dividends from, or the proceeds from the sale of, any of the securities of the Issuer beneficially owned by Prides Capital and Mr. Richardson as described in this Item 5.

(e) Not applicable.

Item 6.

Contracts, Arrangements, Understandings or Relationships With Respect to Securities of the Issuer.

Item 6 is hereby amended and supplemented as follows:

The information set forth or incorporated by reference in Items 4 and 5 is hereby incorporated herein by reference. None of the Reporting Persons is a party to any contract, arrangement, understanding or relationship with respect to any securities of the Issuer, including but not limited to the transfer or voting of any securities of the Issuer, finder’s fees, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, division of profits or loss, or the giving or withholding of proxies, except as disclosed in Items 4 and 5 above, for the agreements referenced in Item 4 or filed as Exhibits B, C, D, E, F and G hereto.

As described in Item 4 above, the Transaction Documents and the Commitment Letter provide several rights and obligations of the Reporting Persons, and the information set forth or incorporated by reference therein is hereby incorporated by reference in this Item 6.

Item 7.

Material to be Filed as Exhibits.

Item 7 is hereby amended and supplemented to add the following at the end thereof:

Exhibit G. Letter, dated October 16, 2009, by and between Prides Capital Fund I LP and The Princeton Review, Inc.

Exhibit H. Limited Power of Attorney for Reporting under Section 16(a) of the Securities Exchange Act of 1934, dated June 21, 2004.


CUSIP No. 742352107		SCHEDULE 13D		Page 10 of 10

SIGNATURES

After reasonable inquiry and to the best of our knowledge and belief, the undersigned certify that the information set forth in this statement is true, complete and correct.


Dated: October 19, 2009	PRIDES CAPITAL PARTNERS LLC

	By:	/S/ MURRAY A. INDICK
	Name:	Murray A. Indick
	Title:	Member

	Kevin A. Richardson, II

	By:	/S/ MURRAY A. INDICK
	Name:	Murray A. Indick
	Title:	Attorney-in-Fact

EX-99.G 2 dex99g.htm LETTER, DATED OCTOBER 17, 2009 Letter, dated October 17, 2009

Exhibit G

October 16, 2009

The Princeton Review, Inc.

111 Speen Street

Framingham, MA 01701

Attention: Chief Executive Officer

Ladies and Gentlemen:

This letter agreement (together with the annexes attached hereto, this “Commitment Letter”) sets forth the commitment of Prides Capital Fund I LP (“Prides”), subject to the terms and conditions contained herein, to exchange certain equity interests of The Princeton Review, Inc., a Delaware corporation (the “Company”) for certain other equity interests of the Company. It is contemplated that, (i) pursuant to a Stock Purchase Agreement (the “Acquisition Agreement”) dated as of October 16, 2009, by and among the Company, Penn Foster Holdings LLC (the “Seller”), a Delaware limited liability company, Penn Foster Education Group, Inc. (“Target”), a Delaware corporation and certain members of the Seller as set forth therein, the Company shall acquire the Target (the “Acquisition”), and that (ii) pursuant to a stock purchase agreement (the “Purchase Agreement”) to be entered into by and among the Company, Bain Capital Venture Fund 2007, L.P. and affiliated funds (“BCV”), Falcon Strategic Partners III, LP (“Falcon”), Prides and other investors mutually acceptable to BCV and the Company (collectively, the “Investors”), the Investors will acquire the aggregate number of shares and type of preferred stock of the Company (the “New Preferred Stock”) set forth in the term sheet attached hereto as Annex A (the “Term Sheet”).

1. Commitment. Prides hereby commits, subject to the terms and conditions set forth in this Commitment Letter and Annex B attached hereto, that, at the closing of the Acquisition (such date, the “Closing Date”) it shall exchange its shares of the Company’s Series C Preferred Stock for New Preferred Stock (the “Commitment”). The purchase and sale of the New Preferred Stock shall be at the price and subject to the terms and conditions specified in this Commitment Letter and Annex A attached hereto.

2. Conditions. The Commitment shall be subject to the following conditions: (a) the negotiation, execution, and delivery of definitive agreements and documents that are reasonably acceptable to Prides and the Company, including the Purchase Agreement, an investor rights agreement and certificates of designations (collectively, the “Definitive Agreements”), relating to the issuance of the New Preferred Stock and other related matters (which will reflect the terms and conditions set forth in the Term Sheet), (b) satisfaction of the other conditions set forth on Annex B to this Commitment Letter, (c) receipt of all required governmental consents and approvals necessary in connection with the issuance of the New Preferred Stock, (d) the closing of the Acquisition on the terms and conditions of the Acquisition Agreement without amendment or waiver of any provision or condition thereof unless such amendment or waiver is not materially adverse to Prides or Prides consents to such amendment

or waiver and (e) the prior or contemporaneous consummation of the debt and equity financings on the terms and conditions described in (i) the Commitment Letter (the “Senior Commitment”) between General Electric Capital Corporation (the “Senior Lender”) and the Company dated the date hereof, (ii) the Commitment Letter (the “Subordinated Commitment” and together with the Senior Commitment, the “Financing Commitments”) dated the date hereof between Sankaty Advisors, LLC and Falcon (the “Subordinated Lenders” and together with the Senior Lender, the “Lenders”) and the Company, and (iii) the Commitment Letter (the “BCV Commitment”) between BCV and the Company dated the date hereof, and otherwise on terms reasonably satisfactory to Prides, provided that any modification, change or amendment to the terms or conditions of the Financing Commitments or the BCV Commitment that is not materially adverse to Prides shall not constitute a failure to satisfy this condition. The Company hereby represents and warrants that it has provided Prides with correct and complete copies of the Financing Commitments with the Lenders referred to therein and the BCV Commitment.

3. Consents and Approvals. Subject to the satisfaction of the conditions contained in Section 2 above, Prides, in its capacity as a holder of shares of the Company’s Series C Convertible Preferred Stock, (a) hereby consents and approves, pursuant to Sections 7 and 9 of that certain Certificate of Designation of Series C Convertible Preferred Stock of the Company, each of the following transactions: (i) the Acquisition and each of the transactions contemplated by the Acquisition Agreement, (ii) each of the transactions contemplated by the Financing Commitments and (iii) each of the transactions contemplated by the BCV Commitment, and Prides hereby agrees to further memorialize such consents and approvals in any additional written consent document reasonably requested by the Company and (b) Prides hereby unconditionally waives, pursuant to Section 10 of that certain Investor Rights Agreement, dated as of July 23, 2007, by and among the Company and the Purchasers and Stockholders identified therein (the “IRA”), all rights to notice and any purchase rights set forth in Section 9 of the IRA in respect of (i) any of the transactions contemplated by the Financing Commitments and (ii) any of the transactions contemplated by the BCV Commitment, and Prides hereby agrees to further memorialize such waivers in any additional written waiver document reasonably requested by the Company.

4. Projections and Information. The Company hereby represents and warrants that to its knowledge (a) all information other than financial projections (collectively, “Projections”), financial estimates, forecasts, other forward-looking information and information of a general economic or general industry nature (which information has been or will be prepared in good faith) (the “Information”) that has been or will be made available to Prides by or on behalf of Target or any of its representatives in connection with the transactions contemplated hereby (supplemented as contemplated below), taken as a whole, is or will be, when furnished, complete and correct in all material respects and does not or will not, when furnished and when taken as a whole, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not materially misleading in light of the circumstances under which such statements are made (after giving effect to all supplements thereto) and (b) the Projections, financial estimates, forecasts, other forward-looking information and information of a general economic or general industry nature that have been or will be made available to Prides by the Company or Target or any of their representatives in connection with

the transactions contemplated hereby, have been or will be prepared in good faith and, in the case of the Projections, financial estimates, forecasts and other forward-looking information, are based upon assumptions that were believed to be reasonable at the time made and at the time the related Projections are made available to Prides (it being understood and agreed that Projections are not a guarantee of financial performance and actual results may differ from Projections and such differences may be material). The Company agrees that if at any time prior to the purchase of the New Preferred Stock, any of the representations in the preceding sentence would be materially incorrect if the Information and Projections were being furnished, and such representations were being made by the Company, at that time, then the Company will promptly notify Prides and will promptly supplement the Information and the Projections (to the extent the Information is reasonably available to the Company) so that such representations will be correct under those circumstances.

5. Reasonable Contact and Access to Information. From and after the date of execution of this Commitment Letter by the parties hereto and until the execution and delivery of the Definitive Agreements and through closing of the purchase of the New Preferred Stock, the Company shall provide Prides with reasonable contact (at times to be mutually agreed) between senior management, representatives, and advisors of the Company and Prides. In addition, Prides shall be provided with copies of any material information relating to the Company or the Target that is provided to the Lenders pursuant to the Financing Commitments or BCV pursuant to the BCV Commitment.

6. Indemnification; Expenses. The Company agrees (a) to indemnify and hold harmless Prides and its affiliates and their respective partners, stockholders, members, managers, officers, directors, employees, agents, advisors, controlling persons, and successors and assigns (each, an “Indemnified Person”) from and against any and all losses, claims, damages, liabilities and reasonable documented out-of-pocket expenses, joint or several, to which any such Indemnified Person may become subject arising out of or in connection with this Commitment Letter, the Acquisition, or any transaction contemplated hereby or thereby or any claim, litigation, investigation, or proceeding relating to any of the foregoing, regardless of whether any such Indemnified Person is a party thereto, and to reimburse each such Indemnified Person upon demand for any reasonable external legal or other out-of-pocket expenses incurred in connection with investigating or defending any of the foregoing, provided that the foregoing indemnity will not, as to any Indemnified Person, apply to losses, claims, damages, liabilities or related expenses to the extent they are found in the judgment of a court of competent jurisdiction to have resulted from the willful misconduct, bad faith, gross negligence or breach of obligations of such Indemnified Person, or any of its affiliates (it being understood that neither the Company nor Target shall not be deemed to be an affiliate for purposes herein) or controlling persons, or any of the officers, directors, or employees of the foregoing, or to the extent arising out of any disputes solely among Indemnified Persons and provided, further, that the Indemnified Persons shall be entitled to indemnification for the reasonable fees and expenses of only one counsel for all Indemnified Persons, and (b) to reimburse Prides from time to time, but no later than the Closing Date, for all reasonable out-of-pocket expenses, including but not limited to reasonable out-of-pocket expenses of Prides’s due diligence investigation, consultants’ fees, travel expenses and fees, disbursements and other charges of external legal counsel, in each case, incurred in

connection with the preparation, negotiation and delivery of this Commitment Letter, the Definitive Agreements, or any other document entered into in connection with the consummation of the transactions contemplated herein and therein (regardless of whether the Acquisition or other transaction is consummated). Notwithstanding any other provision of this Commitment Letter, no party hereto shall be liable for any indirect, special, punitive or consequential damages in connection with the transactions contemplated herein or therein.

7. Absence of Fiduciary Relationship. The Company acknowledges and agrees that (a) no fiduciary, advisory, or agency relationship between the Company and Prides is intended to be or has been created in respect of any of the transactions contemplated by this Commitment Letter, irrespective of whether Prides has advised or is advising the Company on other matters, (b) Prides, on the one hand, and the Company, on the other hand, have an arm’s-length business relationship that does not directly or indirectly give rise to, nor does the Company rely on, any fiduciary duty on the part of Prides, (c) the Company is capable of evaluating and understanding, and the Company understands and accepts, the terms, risks, and conditions of the transactions contemplated by this Commitment Letter, (d) the Company has been advised that Prides is engaged in a broad range of transactions that may involve interests that differ from the Company’s interests and that Prides does not have any obligation to disclose such interests and transactions to the Company by virtue of any fiduciary, advisory or agency relationship, and (e) the Company waives, to the fullest extent permitted by law, any claims it may have against Prides for breach of fiduciary duty or alleged breach of fiduciary duty and agrees that Prides shall have no liability (whether direct or indirect) to the Company in respect of such a fiduciary duty claim or to any person asserting a fiduciary duty claim on behalf of or in right of the Company, including the Company’s stockholders, employees, or creditors. Additionally, the Company acknowledges and agrees that Prides is not advising the Company as to any legal, tax, investment, accounting, or regulatory matters in any jurisdiction. The Company shall consult with its own advisors concerning such matters and shall be responsible for making its own independent investigation and appraisal of the transactions contemplated herein, and Prides shall have no responsibility or liability to the Company with respect thereto. Any review by Prides of the Company,, the transactions contemplated herein, or other matters relating to such transactions will be performed solely for the benefit of Prides and shall not be on behalf of the Company or any of its affiliates.

8. Parties in Interest; No Third Party Beneficiaries. This Commitment Letter shall inure to the benefit of and be binding upon the Company and Prides. Except for the rights of Indemnitees set forth in Section 6 hereof, nothing in this letter agreement, express or implied, is intended to confer upon any Person other than the Company and Prides any rights or remedies under, or by reason of, this Commitment Letter or to confer upon any Person any rights or remedies against any Person other than the Company and Prides under or by reason of this Commitment Letter. This Commitment Letter may only be enforced by the Company and Prides. The Company’s creditors shall have no right to enforce this Commitment Letter or to cause the Company to enforce this Commitment Letter.

9. No Modification; Entire Agreement. This Commitment Letter may not be amended or otherwise modified without the prior written consent of the Company and Prides.

This Commitment Letter constitutes the sole agreement, and supersedes all prior agreements, understandings and statements, written or oral, between Prides or any of its affiliates, on the one hand, and the Company or any of its affiliates, on the other, with respect to the transactions contemplated hereby.

10. Governing Law; Jurisdiction; Venue. This Commitment Letter, the rights and obligations of the parties and all actions arising in whole or part under or in connection herewith will be governed by and construed in accordance with the laws of the State of New York.

Each party to this Commitment Letter, by its execution hereof, (a) hereby irrevocably submits to the exclusive jurisdiction of the state courts of the State of New York or the United States District Court located in the Southern District of the State of New York, in each case located in the County of New York, for the purpose of any action between the parties arising in whole or in part under or in connection with this Commitment Letter and (b) hereby waives to the extent not prohibited by applicable law, and agrees not to assert, by way of motion, as a defense or otherwise, in any such action, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that any such action brought in one of the above-named courts should be dismissed on grounds of forum non conveniens, should be transferred or removed to any court other than one of the above-named courts, or should be stayed by reason of the pendency of some other proceeding in any other court other than one of the above-named courts, or that this Commitment Letter or the subject matter hereof or thereof may not be enforced in or by such court. Notwithstanding the previous sentence, a party may commence any action in a court other than the above-named courts solely for the purpose of enforcing an order or judgment issued by one of the above-named courts.

EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY OR ON BEHALF OF ANY PARTY RELATED TO OR ARISING OUT OF THIS COMMITMENT LETTER.

11. Confidentiality. This Commitment Letter is delivered to the Company on the understanding that neither this Commitment Letter nor any of their terms or substance, shall be disclosed, directly or indirectly, to any other person except (a) to the Company’s affiliates, officers, directors, employees, attorneys, accountants and advisors on a confidential and need-to-know basis or (b) as required by applicable law or compulsory legal process (in which case the Company agrees, to the extent permitted by law, to inform Prides promptly thereof prior to such disclosure); provided that the Company may disclose this Commitment Letter and the contents hereof (i) to the Target and its officers, directors, employees, attorneys, accountants and advisors on a confidential and need-to-know basis, (ii) to the Lenders and their respective officers, directors, employees, attorneys, accountants and advisors on a confidential and need-to-know basis and (iii) to the Investors and their respective officers, directors, employees, attorneys, accountants and advisors on a confidential and need-to-know basis; provided further, Prides may file a report on Schedule 13D, on or after the execution of this Commitment Letter, announcing

the execution of this Commitment, which report may include this Commitment Letter or a form of this Commitment Letter as an exhibit.

Notwithstanding anything herein to the contrary, any party to this Commitment Letter (and any employee, representative or other agent of such party) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the transactions contemplated by this Commitment Letter and all materials of any kind (including opinions or other tax analyses) that are provided to it relating to such tax treatment and tax structure, except that (y) tax treatment and tax structure shall not include the identity of any existing or future party (or any affiliate of such party) to this Commitment Letter, and (z) no party shall disclose any information relating to such tax treatment and tax structure to the extent nondisclosure is necessary in order to comply with applicable securities laws. For this purpose, the tax treatment of the transactions contemplated by this Commitment Letter is the purported or claimed U.S. Federal income tax treatment of such transactions and the tax structure of such transactions is any fact that may be relevant to understanding the purported or claimed U.S. Federal income tax treatment of such transactions.

12. Acceptance and Termination. If the foregoing correctly sets forth Prides’s agreement with the Company, please indicate the Company’s acceptance of the terms of this Commitment Letter by returning to Prides executed counterparts hereof not later than 5:00 p.m., New York City time, on October 18, 2009. Prides’s offer hereunder will expire automatically and without further action or notice and without further obligation to the Company, the Company, or any of their respective affiliates, at such time if Prides has not received such executed counterparts in accordance with the immediately preceding sentence. This Commitment Letter will become a binding commitment on Prides only after it has been duly executed and delivered by the Company in accordance with the first sentence of this Section 12. Upon the earlier of (a) the termination of the Acquisition Agreement, (b) in the event that the closing of the Acquisition does not occur on or before 5:00 p.m., New York City time, on December 31, 2009 (the “Termination Date”) or (c) the Company commits to sell additional shares of New Preferred Stock such that Prides, after giving effect to the transactions contemplated herein, will hold less than 15% of the New Preferred Stock, then this Commitment Letter and Prides’s commitment hereunder shall automatically terminate without further action or notice and without further obligation to the Company, the Target, or any of their respective affiliates or other Person unless Prides shall, in its sole discretion, agree to an extension.

13. No Assignment; Miscellaneous. The rights evidenced by this letter shall not be assignable by the Company, without Prides’s prior written consent, and the granting of such consent in a given instance shall be solely in the discretion of Prides and, if granted, shall not constitute a waiver of this requirement as to any subsequent assignment. Any purported assignment of such rights in contravention of this Section 13 shall be void. Section headings used herein are for convenience of reference only, are not part of this Commitment Letter and are not to affect the construction of, or to be taken into consideration in interpreting, this Commitment Letter. Sections 6, 7, 8, 9, 10, 11 and 13 of this Commitment Letter shall remain in full force and effect regardless of whether the Definitive Agreements shall be executed and delivered (unless and to the extent the Definitive Agreements provide that such provisions are

superseded) and notwithstanding the termination or expiration of this Commitment Letter or Prides’s commitment hereunder. This Commitment Letter may be executed in any number of counterparts, each of which shall be an original and all of which, when taken together, shall constitute one agreement. Delivery of an executed counterpart of a signature page of this Commitment Letter by facsimile or electronic transmission shall be as effective as delivery of a manually executed counterpart thereof.

[The remainder of this page has been intentionally left blank.]


Sincerely,

PRIDES CAPITAL FUND I LP
By:		Prides Capital Partners, L.L.C., its general partner

By:		/S/ KEVIN A. RICHARDSON
Name:		Kevin A. Richardson, II
Title:		Managing Member

Agreed to and accepted:

The Princeton Review, Inc.



By:		/S/ STEPHEN C. RICHARDS
Name:		Stephen C. Richards
Title:		Chief Operating Officer

[Commitment Letter Signature Page]

ANNEX A

(Term Sheet)

THE PRINCETON REVIEW

TERM SHEET PROPOSAL

FOR

NON-CONVERTIBLE SERIES E PREFERRED STOCK

Issuer:

The Princeton Review (the "Company").

Offering Size:

At least $84 million and up to $94 million, at least $30 million and up to $40 million to be issued in consideration of at least $30 million and up to $40 million of new capital and $54 million to be issued in consideration of all of the Company’s Series C Convertible Preferred Stock (original offering of $60 million with a current accrued value of approximately $68.8 million).

Type of Security:

At least $84 million and up to $94 million of Series E Non-Convertible Preferred Stock (the “Series E Preferred Stock”). Upon receipt of shareholder approval as described in “Special Series E Conversion” below, the Series E Preferred Stock will be convertible into the Company’s Series D Convertible Preferred Stock (the "Series D Preferred Stock" and together with the Series E Preferred Stock, the “New Preferred Stock”).

Purchasers:

At least $30 million and up to $40 million in new capital to be provided by Bain Capital Venture Fund 2007, L.P. and affiliated funds (“Bain Capital”) and one or more investors mutually acceptable to Bain Capital and the Company, including $12.5 million to be allocated to Falcon Strategic Partners III, LP. At closing, the Company’s Series C Convertible Preferred Stock will convert into a number of shares of Series E Preferred Stock determined by dividing (i) $54 million by (ii) the Original Purchase Price of the Series E Preferred Stock.

Original Purchase Price (per share):

The Original Purchase Price of the New Preferred Stock will be equal to $4.75 per share.

Liquidation:

Upon any actual liquidation, dissolution or winding up of the Company, whether voluntary or involuntary (a “Liquidation Event”), the holders of New Preferred Stock shall be entitled to receive out of the assets of the Company available for distribution to its stockholders, on a preferred basis prior and in preference to any distribution to the holders of any common or other preferred stock of the Company: (a) an amount of cash per share of Series D Preferred

Stock equal to the greater of (i) the Original Purchase Price plus accrued and unpaid dividends and (ii) the amount that would be paid in respect of a share of Series D Preferred Stock if such shares had been converted into shares of common stock immediately prior to such Liquidation Event and (b) an amount of cash per share of Series E Preferred Stock equal to the greater of (i) the Original Purchase Price plus the accrued and unpaid dividends that would have accrued thereon if the dividend rate was 8% for the first year and 12% thereafter for all periods prior to such Liquidation Event and (ii) the amount that would be paid in respect of a share of Series E Preferred Stock if the shares of Series E Preferred Stock had converted into the number of shares of common stock into which it would then be deemed to be convertible immediately prior to such Liquidation Event.

Dividends:

Dividends on the Series D Preferred Stock will accrue and be cumulative at the per annum rate of 8% per year, compounded annually, whether or not declared until the fifth anniversary of the issuance of the Series E Preferred Stock, and such dividends will not be paid in cash except in connection with a Liquidation Event, Change of Control or Redemption. Dividends on the Series E Preferred Stock will accrue and be cumulative at the per annum rate of 8% per year for the first year and 16% per year thereafter, compounded annually, whether or not declared, and such dividends will not be paid in cash except in connection with a Liquidation Event, Change of Control or Redemption. The holders of the Series D Preferred Stock shall be entitled to participate on an as converted basis in any dividends payable on the common stock. The holders of the Series E Preferred Stock shall be entitled to participate on a deemed as converted basis in any dividends payable on the common stock.

Rate of Conversion:

The number of shares of common stock into which each share of Series D Preferred Stock may be converted will be determined by dividing (i) the sum of (a) the Original Purchase Price plus (b) all accrued and unpaid dividends by (ii) the Conversion Price. The initial “Series D Conversion Price” equals the Original Purchase Price. The number of shares of common stock into which each share of Series E Preferred Stock will be deemed to be convertible into for all purposes hereunder will be determined by dividing (i) the sum of (a) the Original Purchase Price plus (b) all accrued and unpaid dividends by (ii) the Conversion Price. The initial “Series E Conversion Price” equals the Original Purchase Price. In the event

of a Change of Control prior to five years after the closing of this transaction, accrued and unpaid dividends will include all dividends that would have accrued on the New Preferred Stock, through five years after the closing of the sale of the Series E Preferred Stock. The Series D Conversion Price and the Series E Conversion Price will be subject to the same adjustments as provided for in the Company’s Series C Convertible Preferred Stock.

Series D Conversion:

Each holder of the Series D Preferred Stock will have the right at any time to convert the shares of Series D Preferred Stock into shares of common stock.

Series E Redemption for Common Stock Value:

At any time and from time to time following the second anniversary of the issuance of the Series E Preferred Stock, upon the request of any holders of at least 10% of the Series E Preferred Stock, the Company will provide notice of such request to each other holder and redeem all or any portion of each holders’ Series E Preferred Stock as each holder may request at a price per share equal to the then fair market value of the number of shares of company common stock into which such share is then deemed to be convertible as described under “Rate of Conversion” above, provided that (i) in no event will the Company be required to redeem more than 15% of the Series E Preferred Stock originally issued in any twelve month period and (ii) the Company will not be obligated to make any such redemption if, subject to “Financing of Redemption Payments” below, the Company is then prohibited from making such redemption pursuant to financing arrangements entered into at the Closing (as the same may be amended, supplemented or otherwise modified from time to time) or by the terms of any financing arrangements consummated to extend, renew or refinance any such financing arrangements (collectively, “Senior Financing Arrangements”). Any partial redemption of less than all of the shares requested to be redeemed will be made pro rata among all requesting holders based on their relative ownership).

Redemption Rights:

Holders of at least ten percent of the New Preferred Stock may elect on or after (i) the earlier of the seventh anniversary of the closing of the issuance of the Series E Preferred Stock or a change of control to have the Company redeem for cash all the then outstanding shares of the Series E Preferred Stock owned by such electing holders at the greater of (x) the Original Purchase Price of such shares plus accrued and unpaid dividends that would have accrued thereon if the dividend rate was 8% for the first year and 12% thereafter for all

periods prior to such redemption and (y) the then fair market value of the number of shares of Company common stock into which such shares are then deemed to be convertible as described under “Rate of Conversion” above and (ii) the earlier of the eighth anniversary of the closing of the issuance of the Series E Preferred Stock or a change of control to have the Company redeem for cash all the then outstanding shares of the Series D Preferred Stock owned by such electing holders at the Original Purchase Price plus accrued and unpaid dividends on such shares.

Company Redemption:

Subject to the holder's right to first convert to common stock, if for a period of 30 consecutive trading days the Company's common stock has traded at or above 300% of the Original Purchase Price, the New Preferred Stock may be redeemed by the Company in whole at any time after the fifth anniversary of the closing of the issuance of the Series E Preferred Stock at a price, payable in cash, equal to (i) in the case of the Series D Preferred Stock, the sum of the Original Purchase Price plus accrued and unpaid dividends and (ii) in the case of the Series E Preferred Stock, the greater of (a) the sum of the Original Purchase Price plus accrued and unpaid dividends that would have accrued thereon if the dividend rate was 8% for the first year and 12% thereafter for all periods prior to such redemption and (b) the then fair market value of the number of shares of company common stock into which such share is then deemed to be convertible as described under “Rate of Conversion” above.

Special Series E Conversion:

Upon the receipt of any shareholder approval required by Nasdaq obtained within twelve months of the issuance of the Series E Preferred Stock (including approval of the issuance involving 20% or more of the Company's common stock and of the issuance of 20% or more of the voting power to any one holder of Series D Preferred Stock), each share of Series E Preferred Stock will automatically be converted into a number of shares of Series D Preferred Stock determined by dividing the Original Purchase Price of the Series E Preferred Stock plus all accrued and unpaid dividends thereon by the Original Purchase Price of the Series D Preferred Stock. Upon any such shareholder approval obtained after twelve months of the issuance of the Series E Preferred Stock, (i) any holder of Series E Preferred Stock may elect to convert shares of Series E Preferred Stock held by such holder into a number of shares of Series D Preferred Stock determined by dividing the Original Purchase Price of the Series E Preferred Stock plus all accrued and unpaid dividends thereon by the Original Purchase Price of the Series D

Preferred Stock and (ii) upon the vote of the holders of a majority of the Series E Preferred Stock, each share of Series E Preferred Stock will automatically convert into a number of shares of Series D Preferred Stock determined by dividing the Original Purchase Price of the Series E Preferred Stock plus all accrued and unpaid dividends thereon by the Original Purchase Price of the Series D Preferred Stock.

Financing of Redemption Payments:

The Company will use commercially reasonable efforts to obtain the necessary capital to obtain funds for any redemption of the Series E Preferred Stock described above, including without limitation through the sale of its common stock, provided, however, that in no event shall the Company be required to effectuate any recapitalization or similar capital restructuring in connection with any such redemption. If prohibited by the terms of any Senior Financing Arrangements, the Company will use commercially reasonable efforts to cause the parties to such Senior Financing Arrangements to agree that the Company may make such redemptions. For the avoidance of doubt, nothing contained herein shall prohibit the Company from obtaining capital (subject to compliance with preemptive rights and protective covenants, as applicable), including without limitation through the sale of its common stock, for any purpose as permitted under Senior Financing Arrangements, including without limitation during any period in which holders of the Series E Preferred Stock have requested a redemption but the Company is then prohibited from doing so by the terms of any Senior Financing Arrangements.

Registration Rights:

Purchasers of New Preferred Stock will receive customary demand and piggyback registration rights consistent with the holders of the Series C Convertible Preferred Stock; provided that, the right to exercise a demand registration may be exercised at any time by a holder holding at least 12.5% of the New Preferred Stock.

Pre-Emptive Rights:

If the Company proposes to offer any equity securities, securities convertible into equity securities, or options or warrants therefor, the holders of New Preferred Stock shall have the right to purchase their pro rata portion of such securities (based on total ownership) calculated on an as converted (including a deemed as converted) basis. These rights will be consistent with the rights of the holders of the Series C Convertible Preferred Stock and will not apply to issuances: (i) to employees, directors or consultants of the Company pursuant to the Company's stock option plans; (ii) upon the exercise

of options, warrants or convertible securities; or (iii) in connection with permitted business acquisitions, mergers or strategic partnerships.

Reporting Requirements:

The Company shall make available to each investor that holds New Preferred Stock representing at least 5% of the issued and outstanding shares of common stock of the Company on an as-converted or deemed as converted basis, (i) within the time periods required by applicable law and regulations, such information as the Company is required to file or furnish to the SEC, (ii) such information as it furnishes to its other shareholders and (iii) such information as it furnishes to its board of directors and committee members, and shall permit each such investor customary visitation and inspection rights.

Voting:

The Series D Preferred Stock will vote together with the holders of any existing preferred stock and the common stock on an as converted basis. The Series E Preferred Stock will not have any voting rights except as provided under the section “Protective Covenants” below.

Protective Covenants:

Consent of holders of a majority of the outstanding shares of New Preferred Stock voting together on an as-converted and deemed as-converted basis will be needed to approve those matters now subject to the approval of the Series C Convertible Preferred Stock. In addition the New Preferred Stock will include the other supermajority voting provisions included in the terms of the Series C Convertible Preferred Stock (including, but not limited to, consent rights of Prides Capital Fund I LP (together with its affiliates, “Prides Capital”) on any transaction by and between the Company and Bain Capital, its affiliates or any of their respective transferees that become affiliates of the Company, or any senior management of the Company).

Board Seats:

Bain Capital shall be entitled to elect two representatives to the Company’s board of directors, who shall be reimbursed for costs and expenses incurred in attending board meetings.

Observer Rights:

Prides Capital and Bain Capital will continue to have the right to appoint one observer (between them) to the Company’s board of directors and committees in connection with their ownership of the New Preferred Stock consistent with the terms (including information and reimbursement) currently provided in the purchase agreement relating to the Company’s Series C Convertible Preferred Stock.

So long as Auda International LP (“Auda”) and its affiliates collectively own at least ten percent (10%) of the number of shares of New Preferred Stock originally purchased by Auda, the Company will provide Auda the right to appoint one Board observer.

In the event that Falcon Strategic Partners III, LP (“Falcon”) is not otherwise permitted to appoint a Board observer, pursuant to the terms of the Senior Financing Arrangements or otherwise, and so long as Falcon and its affiliates collectively own at least ten percent (10%) of the number of shares of New Preferred Stock originally purchased by Falcon, the Company will provide Falcon the right to appoint one Board observer.

Restrictions on Transfers:

The New Preferred Stock will have the same restrictions on transfers as the Company’s Series C Convertible Preferred Stock; provided that any waiver of restrictions on transfers (including tag-along rights) shall require the consent of holders of 75% of the New Preferred Stock, with such supermajority to include Prides Capital.

Transaction Fee:

The Company will pay Bain Capital a $600k transaction fee.

Drafting:

The transaction documents will be drafted by Ropes & Gray. The transaction documents will be substantially the same as the transaction documents for the Series C Convertible Preferred Stock, except as otherwise provided herein.

ANNEX B

(Conditions)

The Commitment shall be subject to the following additional conditions precedent (all capitalized terms used but not defined herein have the meanings given to them in the Commitment Letter to which this Annex B is attached):

(a) Company Performance. The Company shall have performed and complied in all material respects with all agreements, obligations and conditions contained in the Purchase Agreement that are required to be performed or complied with it on or before the Closing.

(b) No Stockholder Approval Required. No approval on the part of the stockholders of the Company shall be required in connection with the execution and delivery by the Company of the Definitive Agreements and the consummation of the transactions contemplated thereby, other than any such approvals that shall have been obtained or waived. No shares of common stock shall be issued by the Company in connection with the Acquisition without obtaining stockholder approval of such issuance, unless such stockholder approval shall not be required pursuant to the rules of the NASDAQ Global Market.

(c) Closing Documents. The Investors shall have received customary legal opinions, customary evidence of authority, good standing certificates, corporate documents and closing certificates.

(d) Charter Documents. Charter documents establishing the rights and preferences of the New Preferred Stock shall have been duly authorized and approved by the Company, and filed with the Secretary of State of Delaware.

(e) Material Adverse Change. Since July 31, 2009 (with respect to the Target and its subsidiaries), and since August 31, 2009 (with respect to the Company and its subsidiaries), no events, circumstances or developments shall have occurred that, in the aggregate, would cause a material adverse change on the business, assets, liabilities, operations, results of operations or financial condition of the Company, Target, or any of their subsidiaries, taken as a whole, other than any change or effect that results or arises from or relates to (i) (w) changes in economic, regulatory or political conditions, financial, securities or other market conditions or prevailing interest rates, (x) acts of war, declared or undeclared, armed hostilities or acts of terrorism, (y) changes in the industry in which the Company, Target or any of their subsidiaries operates or (z) changes in (including changes in interpretation or application of) laws, regulations or accounting standards, principles or interpretations, to the extent, in the cases of clauses (w), (x), (y) and (z), such changes or acts do not disproportionately affect the Company, Target or their subsidiaries, relative to other entities in the Company’s, Target’s or any of their subsidiaries’ industry, (ii) seasonal variations in the Company’s, Target’s or any of their subsidiaries’ business or (iii) the announcement of the Acquisition or the performance of obligations under the Acquisition Agreement, the Financing Commitments or the Definitive Agreements; provided, that in no event shall the mere failure of the Company, the Target or any of their subsidiaries to meet budgeted or projected revenues or earnings constitute, in and of itself, a material adverse change.

EX-99.H 3 dex99h.htm LIMITED POWER OF ATTORNEY FOR REPORTING UNDER SECTION 16(A) Limited Power of Attorney for Reporting under Section 16(a)

Exhibit H

PRIDES CAPITAL PARTNERS, L.L.C. (AND ITS AFFILIATES)

LIMITED POWER OF ATTORNEY FOR REPORTING UNDER SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

Know all by these presents, that the undersigned hereby constitutes and appoints Murray A. Indick, signing singly, the undersigned’s true and lawful attorney-in-fact to:

(1) execute for and on behalf of the undersigned, in the undersigned’s capacity as director of any companies where Prides Capital Partners, L.L.C. or any of its affiliates have a portfolio company investment, Form 144, 3, 4, 5 and any Schedules 13D or 13G in accordance with Section 16(a) of the Securities Exchange Act of 1934, as amended, and the rules thereunder;

(2) do and perform any and all acts for and on behalf of the undersigned which may be necessary or desirable to complete and execute any such Form 144, 3, 4, 5 and any Schedules 13D or 13G, complete and execute any amendment or amendments thereto, and timely file any such form with the United States Securities and Exchange Commission and any stock exchange or similar authority, including completing and executing a Uniform Application for Access Codes to File on Edgar on Form ID; and

(3) take any other action of any type whatsoever in connection with the foregoing which, in the opinion of such attorney-in-fact, may be of benefit to, in the best interest of, or legally required by, the undersigned, it being understood that the documents executed by such attorney-in-fact on behalf of the undersigned pursuant to this Power of Attorney shall be in such form and shall contain such terms and conditions as such attorney-in-fact may approve in such attorney-in-fact’s discretion.

The undersigned hereby grants to each attorney-in-fact full power and authority to do and perform any and every act and thing whatsoever requisite, necessary, or proper to be done in the exercise of any of the rights and powers herein granted, as fully to all intents and purposes as the undersigned might or could do if personally present, with full power of substitution or revocation, hereby ratifying and confirming all that such attorney-in-fact, or such attorney-in-fact’s substitute or substitutes, shall lawfully do or cause to be done by virtue of this power of attorney and the rights and powers herein granted. The undersigned acknowledges that the foregoing attorneys-in-fact, in serving in such capacity at the request of the undersigned, are not assuming, any of the undersigned’s responsibilities to comply with Section 16 of the Securities Exchange Act of 1934.

This Power of Attorney shall remain in full force and effect until the undersigned is no longer required to file Form 144, 3, 4, 5 and any Schedules 13D or 13G in any of Prides Capital Partners, L.L.C. portfolio companies, the undersigned is no longer employed by Prides Capital Partners, L.L.C., or unless earlier revoked by the undersigned in a signed writing delivered to the foregoing attorney-in-fact.

IN WITNESS WHEREOF, the undersigned has caused this Power of Attorney to be executed as of this 21st day of June, 2004.

/s/ Kevin A. Richardson, II

Signature

Kevin A. Richardson, II

Print Name

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