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EXHIBIT 10.38
THE EDISON PROJECT INC.
SERIES F SUBSCRIPTION AGREEMENT
This Agreement dated as of June 4, 1999 is entered into by and among
The Edison Project Inc., a Delaware corporation (the "Company"), and the
individuals and entities listed on Exhibit A hereto (the "Purchasers").
In consideration of the mutual promises and covenants contained in
this Agreement, the parties hereto agree as follows:
1. Authorization and Sale of Shares.
1.1 Authorization. The Company has duly authorized the sale and
issuance, pursuant to the terms of this Agreement, of 4,757,476 shares of its
Series F Convertible Preferred Stock, $.01 par value per share (the "Series F
Preferred"), and 800,000 shares of its Non-Voting Series G Convertible
Preferred Stock, $.01 par value per share (the "Series G Preferred"), each
having the rights, restrictions, privileges and preferences set forth in the
Amended and Restated Certificate of Incorporation attached hereto as Exhibit B
(the "Certificate"). The Company has, or before the Closing (as defined below)
will have, adopted and filed the Certificate with the Secretary of State of the
State of Delaware.
1.2 Sale of Shares. Subject to the terms and conditions of this
Agreement, at the Closing the Company will sell and issue to each of the
Purchasers, and each of the Purchasers will purchase, the number of shares of
Series F Preferred and/or Series G Preferred set forth opposite such
Purchaser's name on Exhibit A for the purchase price of $6.15 per share (the
"Purchase Price"). All of the shares of Series F Preferred and Series G
Preferred being sold by the Company under this Agreement are referred
collectively to as the "Shares." The Company's agreement with each of the
Purchasers is a separate agreement, and the sale of Shares to each of the
Purchasers is a separate sale.
1.3 Use of Proceeds. The Company will use the proceeds from the
sale of the Shares for general corporate purposes. No portion of such proceeds
will be used (a) to purchase stock in, provide capital to, or repay any
indebtedness incurred for the purpose of investing in, a company licensed under
the Small Business Investment Act of 1958, as amended (the "Small Business
Investment Act"), (b) to acquire realty or to discharge an obligation relating
to the prior acquisition of realty
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(except that a portion of the proceeds may be used (i) to acquire an existing
property, provided that at least 51% of the usable square footage of such
property will be used for an eligible business purpose and (ii) to build or
renovate a building, provided that at least 67% of the usable square footage of
such property will be used for an eligible business purpose), (c) outside the
United States (except to acquire abroad materials and equipment or property
rights for use or sale in the United States), or (d) for any purpose contrary
to the public interest (including but not limited to activities which are in
violation of law) or inconsistent with free competitive enterprise, in each
case, within the meaning of Section 107.720 of the United States Code of
Federal Regulations.
2. The Closing. The closing (the "Closing") of the sale and
purchase of the Shares under this Agreement shall take place at the offices of
Xxxx and Xxxx LLP, The Xxxxxxx Xxxxxx Xxxxxxxx, 0000 Xxxxxxxxxxxx Xxxxxx, X.X.,
Xxxxxxxxxx, X.X. at 9:00 a.m. on June 4, 1999, or at such other time, date and
place as are mutually agreeable to the Company and the Purchasers, but in no
event later than June 11, 1999. At the Closing, the Company shall deliver to
each of the Purchasers one or more certificates for the number of Shares being
purchased at the Closing by such Purchaser, registered in the name of such
Purchaser, against payment to the Company of the Purchase Price, by wire
transfer, check, cancellation of indebtedness or other method acceptable to the
Company. The date of the Closing is hereinafter referred to as the "Closing
Date." If at the Closing any of the conditions specified in Section 5 shall
not have been fulfilled, each of the Purchasers shall, at his, her or its
election, be relieved of all of his, her or its obligations under this
Agreement without thereby waiving any other rights he, she or it may have by
reason of such failure or such non-fulfillment.
3. Representations of the Company. Except as disclosed by the
Company in Exhibit C hereto, the Company hereby represents and warrants to each
of the Purchasers that the statements contained in this Section 3 are true,
complete and correct as of the date hereof.
3.1 Organization and Standing. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to
conduct its business as presently conducted and to enter into and perform this
Agreement and the Shareholders' Agreement (as defined below) (together, the
"Transaction Agreements") and to carry out the transactions contemplated by the
Transaction Agreements. The Company is duly qualified to do business in every
jurisdiction in which the failure so to qualify would have a material adverse
effect on the business, operations, assets or condition (financial or
otherwise) of the Company (a "Company Material Adverse Effect"). The Company
has at all times complied with all provisions of its Amended
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and Restated Certificate of Incorporation, as amended, and By-laws and is not
in default under, or in violation of, any such provision.
3.2 Capitalization. The authorized capital stock of the Company
(immediately prior to the Closing) consists of 185,224,232 shares consisting of
(A) 107,293,178 shares of Common Stock, par value $.01 per share (the "Common
Stock"), consisting of: (i) 97,466,145 shares of Series A Common Stock, par
value $.01 per share (the "Series A Common Stock"), of which 6,214,704 shares
are issued and outstanding, of which 68,104,028 are reserved for the conversion
of the Preferred Stock (as defined below) and of which 23,147,413 shares have
been reserved for issuance pursuant to outstanding stock options and
outstanding warrants of the Company; (ii) one share of Series B Common Stock,
par value $.01 per share, which one share is issued and outstanding; (iii) one
share of Series C Common Stock, par value $.01 per share, which one share is
issued and outstanding; (iv) one share of Series D Common Stock, par value $.01
per share, which one share is issued and outstanding; (v) one share of Series E
Common Stock, par value $.01 per share, which one share is issued and
outstanding; (vi) one share of Series F Common Stock, par value $.01 per share,
which one share is issued and outstanding; (vii) one share of Series G Common
Stock, par value $.01 per share, which one share is issued and outstanding;
(viii) one share of Series H Common Stock, par value $.01 per share, which one
share is issued and outstanding; and (ix) 9,827,026 shares of Non-Voting Common
Stock, par value $.01 per share, of which no shares are issued and outstanding,
and (B) 77,931,054 shares of Preferred Stock, par value $.01 per share,
consisting of: (i) 31,000,000 shares of Series A Convertible Preferred Stock,
par value $0.01 per share, of which 30,294,435 shares are issued and
outstanding; (ii) 1,010,101 shares of Series B Convertible Exchangeable
Preferred Stock, par value $0.01 per share, of which 1,010,101 shares are
issued and outstanding; (iii) 6,258,608 shares of Series C Convertible
Exchangeable Preferred Stock, par value $0.01 per share, of which 6,258,608
shares are issued and outstanding; (iv) 25,077,843 shares of Series D
Convertible Preferred Stock par value $0.01 per share, of which 14,101,721
shares are issued and outstanding; (v) 6,759,420 shares of Non-Voting Series E
Convertible Preferred Stock, par value $0.01 per share, of which no shares are
issued and outstanding; (vi) 4,757,476 shares of Series F Convertible Preferred
Stock, $.01 par value per share, of which no shares are issued and outstanding;
and (vii) 3,067,606 shares of Non-Voting Series G Convertible Preferred Stock,
par value $0.01 per share, of which no shares are issued and outstanding. The
rights, privileges and preferences of the Common Stock and the Preferred Stock
are as set forth in the Certificate. All of the issued and outstanding shares
of capital stock of the Company have been duly authorized and validly issued
and are fully paid and nonassessable and were issued in compliance with all
applicable federal and state securities laws. Except as provided in this
Agreement or disclosed on Exhibit C, (i) no subscription,
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warrant, option, convertible security or other right (contingent or otherwise)
to purchase or acquire any shares of capital stock of the Company is authorized
or outstanding, (ii) the Company has no obligation (contingent or otherwise) to
issue any subscription, warrant, option, convertible security or other such
right or to issue or distribute to holders of any shares of its capital stock
any evidences of indebtedness or assets of the Company, (iii) the Company has
no obligation (contingent or otherwise) to purchase, redeem or otherwise
acquire any shares of its capital stock or any interest therein or to pay any
dividend or make any other distribution in respect thereof, and (iv) there are
no outstanding or authorized stock appreciation, phantom stock or similar
rights with respect to the Company.
3.3 Subsidiaries, Etc. The Company has no subsidiaries and does
not own or control, directly or indirectly, any shares of capital stock of any
other corporation or any interest in any partnership, joint venture or other
non-corporate business enterprise or other Person (as defined).
3.4 Securityholder Lists. Attached as Exhibit D is a true and
complete list of the securityholders of the Company, showing the number of
shares of Common Stock or other securities of the Company held by each
securityholder as of the date of this Agreement and, in the case of options,
warrants and other convertible securities, the exercise price thereof and the
number and type of securities issuable thereunder. Except as provided in this
Agreement or disclosed on Exhibit C, there are no agreements, written or oral,
between the Company and any holder of its securities, or, to the best of the
Company's knowledge, among any holders of its securities, relating to the
acquisition (including without limitation rights of first refusal,
anti-dilution or pre-emptive rights), disposition, registration under the
Securities Act of 1933, as amended (the "Securities Act"), or voting of the
capital stock of the Company.
3.5 Issuance of Shares. The issuance, sale and delivery of the
Shares in accordance with this Agreement, and the issuance and delivery of the
shares of Common Stock and Series F Preferred or Series G Preferred (as
applicable) issuable upon conversion or exchange of the Shares, have been, or
will be on or prior to the Closing, duly authorized by all necessary corporate
action on the part of the Company, and all such shares have been duly reserved
for issuance. The Shares when so issued, sold and delivered against payment
therefor in accordance with the provisions of this Agreement, and the shares of
Common Stock and Series F Preferred or Series G Preferred (as applicable)
issuable upon conversion or exchange of the Shares, when issued upon such
conversion or exchange, will be duly and validly issued, fully paid and
nonassessable. The Shares, when so issued, sold and delivered against payment
therefor in accordance with the provisions of this Agreement will be free and
clear of
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all Security Interests (as defined below) and other restrictions other than
those contemplated by the Shareholders' Agreement (as defined below) and will
not have been issued in violation of the preemptive or similar rights of any
Person.
3.6 Authority; No Conflict. The execution, delivery and
performance by the Company of the Transaction Agreements and the consummation
by the Company of the transactions contemplated thereby, including, without
limitation, the adoption and filing of the Certificate, have been duly
authorized by all necessary corporate and stockholder action. The Transaction
Agreements have each been duly executed and delivered by the Company and each
constitutes a valid and binding obligation of the Company enforceable in
accordance with its terms, subject as to enforcement of remedies to applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
generally the enforcement of creditors' rights and subject to a court's
discretionary authority with respect to the granting of a decree ordering
specific performance or other equitable remedies. The execution of the
Transaction Agreements and the performance by the Company of the transactions
contemplated thereby (including, without limitation, the adoption and filing of
the Certificate) and compliance with their respective provisions by the Company
will not (a) conflict with or violate any provision of the Certificate of
Incorporation or By-laws of the Company, (b) require on the part of the Company
any filing with, or any permit, authorization, consent or approval of, any
court, arbitrational tribunal, administrative agency or commission or other
governmental or regulatory authority or agency (each of the foregoing is
hereafter referred to as a "Governmental Entity"), (c) conflict with, result in
a breach of, constitute (with or without due notice or lapse of time or both) a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify or cancel, or require any notice, consent or
waiver under, any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest (as defined below) or other arrangement to
which the Company is a party or by which the Company is bound or to which its
assets are subject, other than any of the foregoing events listed in this
clause (c) which do not and will not, individually or in the aggregate, result
in a Company Material Adverse Effect, (d) result in the imposition of any
Security Interest upon any assets of the Company or (e) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to the Company
or any of its properties or assets. For purposes of this Agreement, "Security
Interest" means any mortgage, pledge, security interest, encumbrance, charge,
or other lien (whether arising by contract or by operation of law).
3.7 Consents. No consent, approval, waiver, permit, order or
authorization of, or registration, qualification, designation, declaration or
filing with,
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any governmental authority or any other individual, partnership, corporation,
unincorporated organization or association, limited liability company, trust or
other entity (collectively, a "Person") is required on the part of the Company
in connection with the execution and delivery of the Transaction Agreements,
the offer, issuance, sale and delivery of the Shares, the issuance and delivery
of the shares of Common Stock and Class F Preferred or Class G Preferred, as
applicable, of the Company issuable upon conversion or exchange of the Shares
or consummation by the Company of the other transactions to be consummated at
the Closing, as contemplated by the Transaction Agreements (including, without
limitation, the adoption and filing of the Certificate), except such as shall
have been made or obtained prior to and shall be effective on and as of the
Closing and such filings required to be made after the Closing under applicable
federal and state securities laws, all of which filings are specified in
Exhibit C. Based on the representations made by each of the Purchasers in
Section 4 of this Agreement, the offer and sale of the Shares to each of the
Purchasers will be in compliance with applicable federal and state securities
laws.
3.8 Litigation. There is no action, suit or proceeding, or
governmental inquiry or investigation, pending, or, to the best of the
Company's knowledge, threatened, against the Company or affecting any of the
Company's assets or properties, which questions the validity of the Transaction
Agreements or the right of the Company to enter into and perform the
transactions contemplated by the Transaction Agreements or otherwise seeks to
enjoin or challenges such transactions, or which might result, either
individually or in the aggregate, in a Company Material Adverse Effect.
3.9 Financial Statements; No Undisclosed Liabilities. (a) The
Company has furnished to each of the Purchasers a complete and correct copy of
(i) the audited balance sheet of the Company at June 30, 1998 and the related
audited statements of operations and cash flows for the fiscal year then ended,
and (ii) the unaudited balance sheet of the Company (the "Balance Sheet") at
March 31, 1999 (the "Balance Sheet Date") and the related statements of
operations and cash flow for the nine months then ended, (collectively, the
"Financial Statements"). Except as otherwise previously disclosed to the
Purchasers, the Financial Statements are complete and correct, are in
accordance with the books and records of the Company and present fairly the
financial condition and results of operations and cash flows of the Company, as
at the dates and for the periods indicated, and have been prepared in
accordance with generally accepted accounting principles consistently applied,
except that the unaudited Financial Statements may not be in accordance with
generally accepted accounting principles only with respect to the absence of
footnotes normally contained
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therein and are subject to normal year-end audit adjustments which in the
aggregate will not be material.
(b) Since the Balance Sheet Date, except as previously disclosed
to the Purchasers the Company has not incurred any liabilities or obligations
of any nature (whether accrued, absolute, contingent or otherwise) which would
be required by generally accepted accounting principles to be reflected on a
consolidated balance sheet of the Company (including the notes thereto), other
than in the ordinary course of business, consistent with past practice.
3.10 Taxes. The amount shown on the Balance Sheet as provision
for taxes is sufficient in all material respects for payment of all accrued and
unpaid federal, state, county, local and foreign taxes for the period then
ended and all prior periods. The Company has filed or has obtained presently
effective extensions with respect to all federal, state, county, local and
foreign tax returns which are required to be filed by it, such returns are true
and correct and all taxes shown thereon to be due have been timely paid,
together with any related interest, fees, penalties or other charges, with
exceptions not material to the Company. Federal income tax returns of the
Company have not been audited by the Internal Revenue Service, and no
controversy with respect to taxes of any type is pending or, to the best of the
Company's knowledge, threatened. The Company has withheld or collected from
each payment made to its employees the amount of all taxes required to be
withheld or collected therefrom and has paid all such amounts to the
appropriate taxing authorities when due.
3.11 Insurance. The Company maintains valid policies of workers'
compensation insurance and of insurance with respect to its properties and
business of the kinds and in the amounts not less than is customarily obtained
by corporations of established reputation engaged in the same or similar
business and similarly situated, including, without limitation, insurance
against loss, damage, fire, theft, public liability and other risks.
3.12 Compliance. The Company has, in all material respects,
complied with all laws, regulations and orders applicable to its present and
proposed business and has all material permits and licenses required thereby.
3.13 Absence of Changes. Since the Balance Sheet Date the
business of the Company has been operated only in the ordinary course,
consistent with past practice, and other than as previously disclosed to the
Purchasers there has been no material adverse change in the business,
operations, condition (financial or otherwise),
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or results of operations of the Company, other than changes occurring in the
ordinary course of business (which ordinary course changes have not,
individually or in the aggregate had a Company Material Adverse Effect);
provided, however, that the Purchasers acknowledge that the Company has
continued to incur losses since the Balance Sheet Date.
3.14 Books and Records. The minute books of the Company contain
complete and accurate records of all actions taken by its stockholders and its
Board of Directors and committees thereof. The stock ledger of the Company is
complete in all material respects and reflects all issuances, transfers,
repurchases and cancellations of shares of capital stock of the Company.
4. Representations of the Purchasers. Each of the Purchasers
severally represents and warrants to the Company as follows:
4.1 Investment. Such Purchaser is acquiring the Shares, and the
shares of Common Stock into which the Shares may be converted, for his, her or
its own account, for investment and not with a view to, or for sale in
connection with, any distribution thereof, nor with any present intention of
distributing or selling the same; and, except as contemplated by this Agreement
and the Exhibits hereto, such Purchaser has no present or contemplated
agreement, undertaking, arrangement, obligation, indebtedness or commitment
providing for the disposition thereof; provided, however, that the Company
acknowledges (i) that under certain circumstances, each of WEG VI L.P., WEG VII
L.P., Leeds II L.P. and UBS Capital XV LLC ("UBS") intends, and is required
pursuant to its limited partnership agreement or limited liability company
agreement, to distribute the Shares held thereby and/or the shares of Common
Stock issuable thereto upon conversion or exchange of such Shares to its
partners or members, as the case may be, in the manner and in the proportions
specified in such limited partnership agreement or limited liability company
agreement and (ii) that XX Xxxxxx Investment Corporation ("JP") and Sixty Wall
Street SBIC Fund ("SW") will make transfers of such securities to each other.
Such Purchaser is an "accredited investor" as defined in Rule 501(a) under the
Securities Act.
4.2 Authority. Such Purchaser has full power and authority to
enter into and to perform this Agreement in accordance with its terms. Except
in the case of UBS or as otherwise disclosed to the Company in writing, any
Purchaser which is a corporation, partnership or trust represents that it has
not been organized, reorganized or recapitalized specifically for the purpose
of investing in the Company.
4.3 Experience. Such Purchaser has carefully reviewed the
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representations concerning the Company contained in this Agreement and has made
detailed inquiry concerning the Company, its business and its personnel; the
officers of the Company have made available to such Purchaser any and all
written information which he, she or it has requested and have answered to such
Purchaser's satisfaction all inquiries made by such Purchaser; and such
Purchaser has sufficient knowledge and experience in finance and business that
he, she or it is capable of evaluating the risks and merits of his, her or its
investment in the Company and such Purchaser is able financially to bear the
risks thereof.
5. Conditions to the Obligations of the Purchasers. The obligation
of each of the Purchasers to purchase Shares at the Closing is subject to the
fulfillment, or the waiver by such Purchaser, of each of the following
conditions on or before the Closing:
5.1 Accuracy of Representations and Warranties. Each
representation and warranty contained in Section 3 shall be true on and as of
the Closing Date with the same effect as though such representation and
warranty had been made on and as of that date.
5.2 Performance. The Company shall have performed and complied
with all agreements and conditions contained in this Agreement required to be
performed or complied with by the Company prior to or at the Closing.
5.3 Certificates and Documents. The Company shall have
delivered to the Purchasers:
(a) The Certificate of the Company, as in effect as of the
Closing Date certified by the Secretary of State of the State of Delaware;
(b) A certificate, as of a recent practicable date, as to
the corporate good standing of the Company issued by the Secretary of State of
the State of Delaware;
(c) By-laws of the Company, certified by its Secretary as
of the Closing Date; and
(d) Resolutions of the Board of Directors and stockholders
of the Company, authorizing and approving all matters in connection with this
Agreement and the transactions contemplated hereby, certified by the Secretary
of the Company as of the Closing Date.
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5.4 Compliance Certificate. The Company shall have delivered to
the Purchasers a certificate, executed by the President of the Company, dated
the Closing Date, certifying to the fulfillment of the conditions specified in
Sections 5.1, 5.2 and 5.3 of this Agreement.
5.5 Conditions to Obligations of UBS. The obligation of UBS to
purchase Shares at the Closing is subject to the fulfillment, or the waiver by
UBS, in addition to the conditions set forth in Section 5.1 through 5.4 hereof,
of the following conditions on or before the Closing.
(a) Shareholders' Agreement. The Second Amended and
Restated Shareholders' Agreement in the form attached hereto as
Exhibit E the ("Shareholders' Agreement") shall have been executed
and delivered by each of the Purchasers, the Company and by such
number of the Shareholders (as defined therein) as to cause it to be
effective.
(b) Agreement with WSI Inc. UBS (or an Affiliate thereof)
and WSI Inc. shall have entered into an agreement in form reasonably
satisfactory to UBS (or an Affiliate thereof), pursuant to which WSI
Inc. shall have agreed to appoint a nominee of UBS as one of the five
members of the Company's Board of Directors entitled to be appointed
by WSI Inc., as the holder of a share of the Company's Series B Common
Stock.
(c) Legal Opinion. UBS shall have received an opinion of
Xxxx and Xxxx LLP, counsel to the Company, in the form attached as
Exhibit G to this Agreement.
5.6 Minimum Investment. Purchasers shall have tendered at the
Closing aggregate consideration of not less than $29,000,000 for the purchase
of the Shares.
6. Conditions to the Obligations of the Company. The obligations of
the Company under Section 1.2 of this Agreement are subject to fulfillment, or
the waiver by the Company of the following conditions on or before the Closing:
6.1 Accuracy of Representations and Warranties. The
representations and warranties of the Purchasers contained in Section 4 shall
be true on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of that date.
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6.2 Performance. The Purchasers shall have performed and
complied with all agreements and conditions contained in this Agreement
required to be performed or complied with by the Purchasers prior to or at the
Closing.
6.3 Shareholders' Agreement. The Shareholders' Agreement shall
have been executed and delivered by each of the Purchasers, the Company and by
such number of the Shareholders (as defined therein) as to cause it to be
effective.
7. Affirmative Covenants of the Company.
7.1 Inspection. The Company shall permit each Purchaser, or any
authorized representative thereof, to visit and inspect the properties of the
Company, including its corporate and financial records, and to discuss its
business and finances with officers of the Company, during normal business
hours following reasonable notice and as often as may be reasonably requested.
7.2 Financial Statements and Other Information.
(a) The Company shall deliver to each Major Purchaser (as
defined in paragraph (c) below):
(i) within 90 days after the end of each fiscal year
of the Company, an audited balance sheet of the Company as at the end of such
year and audited statements of income and of cash flows of the Company for such
year, certified by certified public accountants of established national
reputation selected by the Company, and prepared in accordance with generally
accepted accounting principles;
(ii) within 45 days after the end of each fiscal
quarter of the Company, an unaudited balance sheet of the Company as at the end
of such quarter, and unaudited statements of income and of cash flows of the
Company for such fiscal quarter and for the current fiscal year to the end of
such fiscal quarter;
(iii) within 45 days after the end of each month, an
unaudited balance sheet of the Company as at the end of such month and
unaudited statements of income and of cash flows of the Company for such month
and for the current fiscal year to the end of such month, setting forth in
comparative form the Company's projected financial statements for the
corresponding periods for the current fiscal year;
(iv) as soon as available, but in any event prior to
the
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commencement of each new fiscal year, a business plan and projected financial
statements for such fiscal year;
(v) such other notices, information and data with
respect to the Company as the Company delivers to the holders of its capital
stock at the same time it delivers such items to such holders; and
(vi) with reasonable promptness, such other
information and data as such Major Purchaser may from time to time reasonably
request.
(b) The foregoing financial statements shall be prepared on
a consolidated basis if the Company then has any subsidiaries. The financial
statements delivered pursuant to clauses (i), (ii) and (iii) of paragraph (a)
shall be accompanied by a certificate of the chief financial officer of the
Company stating that such statements have been prepared in accordance with
generally accepted accounting principles consistently applied (except as noted)
and fairly present the financial condition and results of operations and cash
flows of the Company at the date thereof and for the periods covered thereby.
(c) For purposes of this Agreement, the term "Major
Purchaser" shall mean a Purchaser purchasing not less than 400,000 Shares so
long as such Purchaser continues to own not less than 200,000 Shares. For
purposes of determining the number of Shares held by a Purchaser: (i) the
foregoing numbers shall be adjusted for any stock splits, stock dividends,
recapitalizations or similar events; (ii) Shares shall include Shares which
have been converted into Common Stock so long as such Common Stock is held by
such Purchaser; and (iii) Shares shall include Shares held by affiliates of
such Purchaser and, with respect to a Purchaser that is a corporation or
partnership, Shares distributed to and held by its shareholders and partners.
7.3 Reservation of Common Stock and Preferred Stock. The
Company shall reserve and maintain a sufficient number of shares of Common
Stock and Series F Preferred or Series G Preferred, as applicable, for issuance
upon conversion or exchange of all of the outstanding Shares.
7.4 Termination of Covenants. The covenants of the Company
contained in Sections 7.1 through 7.3 shall terminate, and be of no further
force or effect, upon the closing of the Company's first public offering of
Common Stock pursuant to an effective registration statement under the
Securities Act, resulting in gross proceeds to the Company of at least
$50,000,000, at a price to the public of at least $7.00 per share (as adjusted
for stock splits, stock dividends, recapitalizations and similar events).
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8. Transfer of Shares.
8.1 Restricted Shares. "Restricted Shares" means (i) the
Shares, (ii) the shares of Common Stock issued or issuable upon conversion of
the Shares, (iii) any shares of capital stock of the Company acquired by the
Purchasers pursuant to the Shareholders' Agreement, and (iv) any other shares
of capital stock of the Company issued in respect of such shares (as a result
of stock splits, stock dividends, reclassifications, recapitalizations, or
similar events); provided, however, that shares of Common Stock which are
Restricted Shares shall cease to be Restricted Shares (x) upon any sale
pursuant to the Shareholders' Agreement, Section 4(1) of the Securities Act or
Rule 144 under the Securities Act or (y) at such time as they become eligible
for sale under Rule 144(k) under the Securities Act.
8.2 Requirements for Transfer.
(a) Restricted Shares shall not be sold or transferred
unless either (i) they first shall have been registered under the Securities
Act, or (ii) the Company first shall have been furnished with an opinion of
legal counsel, reasonably satisfactory to the Company, to the effect that such
sale or transfer is exempt from the registration requirements of the Securities
Act.
(b) Notwithstanding the foregoing, no registration or
opinion of counsel shall be required for (i) a transfer by a Purchaser which is
a corporation to a wholly owned subsidiary of such corporation, a transfer by a
Purchaser which is a partnership to a partner of such partnership or a retired
partner of such partnership who retires after the date hereof, or to the estate
of any such partner or retired partner, or a transfer by a Purchaser which is a
limited liability company to a member of such limited liability company or a
retired member who resigns after the date hereof or to the estate of any such
member or retired member; provided that the transferee in each case agrees in
writing to be subject to the terms of this Section 8 to the same extent as if
it were the original Purchaser hereunder, (ii) a transfer between JP and SW or
(iii) a transfer made in accordance with Rule 144 under the Securities Act.
8.3 Legend. Each certificate representing the Shares shall bear
a legend substantially in the following form:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and may
not be offered, sold or otherwise transferred, pledged or
hypothecated unless and until such shares are registered
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under such Act or an opinion of counsel satisfactory to the
Company is obtained to the effect that such registration is not
required."
The foregoing legend shall be removed from the certificates
representing any Shares, at the request of the holder thereof, at such time as
they become eligible for resale pursuant to Rule 144(k) under the Securities
Act.
8.4 Legend Related to the Shareholders' Agreement.
Notwithstanding the provisions of this Section 8, any transfers of Shares shall
be subject to the provisions of the Shareholders Agreement. In addition to the
legend described in Section 8.3 above, each certificate representing the Shares
shall bear a legend substantially in the following form:
"The shares represented by this certificate are subject to
restrictions on transfer set forth in a certain Second Amended
and Restated Shareholders' Agreement between the Company and the
Shareholders (as defined therein), as amended from time to time,
a copy of which is available for inspection at the office of the
Secretary of the Company."
9. Provisions Relating to Certain Investors.
9.1 Use of Proceeds. The Company will use the proceeds from the
sale of the Shares as provided in the first sentence of Section 1.3, and no
portion of such proceeds shall be applied to any prohibited use described in
the second sentence of Section 1.3. The Company will provide to JP and SW (the
"JPM Investors") and the U.S. Small Business Administration access to its books
and records for the purpose of confirming the use of the proceeds and for all
other purposes required by the U.S. Small Business Administration. Upon the
request of any JPM Investor at any time or from time to time, the Company will
provide a certificate of its chief financial officer (or other executive
officer) (a) describing the use of such proceeds and (b) certifying compliance
by the Company with this Section 9 and Section 1.3.
9.2 Non-Discrimination Compliance. The Company will at all
times comply with the non-discrimination requirements of Title 13 of the United
States Code of Federal Regulations Parts 112, 113 and 117.
9.3 Information. Upon request, the Company promptly (and in any
event within twenty (20) days of such request) will provide to each JPM
Investor an assessment, in form and substance satisfactory to such JPM
Investor, of the economic
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impact of its financing, specifying the full-time equivalent jobs created or
retained, the impact of the financing on the Company's business, in terms of
expanded revenue and profits, and on taxes paid by the business and its
employees. Upon request, the Company promptly (and in any event within twenty
(20) days of such request) will furnish to each JPM Investor all information
requested by it in order for it to prepare and file SBA Form 468 and any other
information requested or required by any governmental agency asserting
jurisdiction over such JPM Investor.
9.4 Transfers by Certain Investors to Affiliates. The Company
and each of the Purchasers hereby covenant and agree that, (i) upon the request
of UBS (or UBS Capital LLC) and (ii) upon the request of a JPM Investor or UBS
(or UBS Capital LLC) in connection with a proposed transfer of shares of
capital stock of the Company from such JPM Investor or UBS (or UBS Capital LLC)
to one or more of its Affiliates that is subject to the provisions of
Regulation Y of the Board of Governors of the Federal Reserve System (12 C.F.R.
Part 225) or any successor to such regulation (UBS (or UBS Capital LLC) and any
such transferee, a "Regulation Y Shareholder"), the Company and the Purchasers
will take such commercially reasonable actions (including, without limitation,
voting all shares of stock of the Company held by them in favor of such
actions) as such JPM Investor or UBS (or UBS Capital LLC) and any such
transferee may reasonably request in order to permit such Regulation Y
Shareholder to comply with regulatory limitations applicable to it, including,
without limitation, taking such actions as may be required in order:
(a) to amend this Agreement and the Shareholders' Agreement
so that (x) at the election of such JPM Investor or UBS (or UBS
Capital LLC), any covenant in favor of and any right afforded to such
JPM Investor or UBS (or UBS Capital LLC) as applicable, shall run in
favor of and be afforded to such Regulation Y Shareholder (including,
without limitation, registration rights, tag-along rights, preemptive
rights and informational rights), (y) the covenants and agreements
contained in Sections 1.3, 9.1 and 9.2 of this Agreement and Sections
3.5, 3.11 and 4.11 of the Shareholders' Agreement shall terminate with
respect to such JPM Investor or UBS (or UBS Capital LLC) and shall not
apply to such Regulation Y Shareholder, and neither such JPM Investor
or UBS (or UBS Capital LLC) nor such Regulation Y Shareholder shall be
a party to or bound by or have the right to enforce, amend or waive
such provisions and (z) such Agreements are consistent with the
Regulation Y Term Sheet (as defined below); and
(b) to cause the Company and the Purchasers to enter into
an agreement with the Regulation Y Shareholder providing for the
matters referred to in the term sheet attached hereto as Exhibit F
(the "Regulation Y Term Sheet");
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provided, however, that the Company does now hereby agree with UBS,
and acknowledges that upon any distribution of Shares (or Common Stock
issuable upon conversion or exchange thereof) by UBS to UBS Capital
LLC it will agree with UBS Capital LLC to the matters provided in the
Regulation Y Term Sheet. Without limiting the generality of the
foregoing, in connection with any such transfer by a JPM Investor or
UBS to a Regulation Y Shareholder, the Company and the Purchasers
shall take such other actions and enter into such further agreements
as such Investor or such Regulation Y Shareholder may reasonably
request in order to permit such transfer and to permit such Regulation
Y Shareholder (including UBS and UBS Capital LLC) to comply with
regulatory limitations applicable to it; provided that, no Purchaser
shall be obligated to take any action pursuant to this sentence which
would adversely affect such Purchaser's rights under this Agreement
and the Shareholders' Agreement, as the same may be amended from time
to time.
"Affiliate" of a specified Person shall mean a person that directly,
or indirectly through one or more intermediaries, controls or is controlled by,
or is under common control with the person specified.
9.5 HSR Compliance. The parties acknowledge that the Company
and UBS or the appropriate Affiliate thereof currently intends to make a filing
under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976 in connection
with the purchase by UBS of Shares. The Company will reimburse UBS or an
Affiliate thereof designated by UBS for its filing fee in connection with its
submission.
10. Miscellaneous.
10.1 Successors and Assigns. This Agreement and all the
provisions hereof shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns, except that neither
this Agreement nor any rights or obligations hereunder shall be assigned or
delegated by the Company without the prior written consent of the Purchasers.
After the Closing, a Purchaser may assign this Agreement and such Purchaser's
rights hereunder, in whole or in part without the consent of the Company or any
other Purchaser (i) to an Affiliate of such Purchaser, provided, an Affiliate
shall only have the right to receive financial statements and reports under
Section 7.2 above if it is a transferee identified in clause (ii) below and
holds at least 500,000 Shares or (ii) any other transferee of at least 25% of
the Shares acquired and to be acquired by such Purchaser, provided that, all
such transfers of Shares shall be subject to the Shareholders' Agreement. For
the purposes of clause (ii) above, those Purchasers that are Affiliates of WSI
Inc. shall be treated as one
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Purchaser.
10.2 Publicity. Except as may be required by law, the Company
shall not use the name of, or make reference to, any Purchaser or any of its
Affiliates in any press release or in any public manner without such
Purchaser's prior written consent. Except as required in furtherance of the
Company's activities or as otherwise required by law or regulation or requested
by regulatory agencies, each Purchaser shall treat, and shall cause its
representatives to treat, as confidential all confidential and proprietary
information regarding the Company which such Purchaser receives from the
Company as a Purchaser or Stockholder of the Company.
10.3 Survival of Representations and Warranties. All
representations and warranties contained herein shall survive the execution and
delivery of this Agreement and the closing of the transactions contemplated
hereby for a period of 18 months following the Closing; provided, however, that
the representations and warranties of the Company set forth in Sections 3.1,
3.2, 3.5, 3.6 and 3.7 shall survive the execution and delivery of this
Agreement and the closing of the transactions contemplated hereby until the
expiration of the applicable statute of limitations.
10.4 Brokers. Except as otherwise disclosed on Schedule 10.4
hereto, the Company and each Purchaser (i) represents and warrants to the other
parties hereto that he, she or it has not retained a finder or broker in
connection with the transactions contemplated by this Agreement, and (ii) will
indemnify and save the other parties harmless from and against any and all
claims, liabilities or obligations with respect to brokerage or finders' fees
or commissions, or consulting fees in connection with the transactions
contemplated by this Agreement asserted by any person on the basis of any
statement or representation alleged to have been made by such indemnifying
party.
10.5 Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
10.6 Specific Performance. In addition to any and all other
remedies that may be available at law in the event of any breach of this
Agreement, each Purchaser shall be entitled to specific performance of the
agreements and obligations of the Company hereunder and to such other
injunctive or other equitable relief as may be granted by a court of competent
jurisdiction.
10.7 Governing Law. This Agreement shall be governed by and
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construed in accordance with the internal laws of the State of Delaware
(without reference to the conflicts of law provisions thereof).
10.8 Notices. All notices, requests, consents, and other
communications under this Agreement shall be in writing and shall be deemed
delivered (i) two business days after being sent by registered or certified
mail, return receipt requested, postage prepaid or (ii) one business day after
being sent via a reputable nationwide overnight courier service guaranteeing
next business day delivery, in each case to the intended recipient as set forth
below:
If to the Company, at The Edison Project Inc., 000 Xxxxx Xxxxxx, 00xx
Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: President, Telecopy: (212)
419-1604, and The Edison Project Inc., First Tennessee Plaza, 000 Xxxxx Xxx
Xxxxxx, Xxxxx 0000, Xxxxxxxxx, Xxxxxxxxx 00000, Attention: Secretary, Telecopy:
(000) 000-0000, or at such other address or addresses as may have been
furnished in writing by the Company to the Purchasers, with a copy to Xxxxx
Xxxxxxxxx, Esq., Xxxx and Xxxx LLP, The Xxxxxxx Office Building, 0000
Xxxxxxxxxxxx Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000, Telecopy: (000) 000-0000.
If to a Purchaser, at the address set forth on Exhibit A for such
Purchaser, or at such other address or addresses as may have been furnished to
the Company in writing by such Purchaser.
Any party may give any notice, request, consent or other communication
under this Agreement using any other means (including, without limitation,
personal delivery, messenger service, telecopy, first class mail or electronic
mail), but no such notice, request, consent or other communication shall be
deemed to have been duly given unless and until it is actually received by the
party for whom it is intended. Any party may change the address to which
notices, requests, consents or other communications hereunder are to be
delivered by giving the other parties notice in the manner set forth in this
Section.
10.9 Complete Agreement. This Agreement (including its Exhibits)
and the Shareholders' Agreement (and in the case of UBS, together with the
agreement with WSI, Inc. referred to in Section 5.5(b) constitute the entire
agreement and understanding of the parties hereto with respect to the
acquisition of the Shares and supersedes all prior agreements and
understandings relating to such subject matter including without limitation any
Response Form or other correspondence submitted by a Purchaser to the Company.
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10.10 Amendments and Waivers. Except as otherwise expressly set
forth in this Agreement, any term of this Agreement may be amended or
terminated and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), with the written consent of the Company and the holders of at
least 75% of the shares of Common Stock issued or issuable upon conversion of
the Shares. Notwithstanding the foregoing, this Agreement may be amended with
the consent of the holders of less than all of the shares of Common Stock
issued or issuable upon conversion of the Shares only in a manner which affects
all such holders in the same fashion. Any amendment, termination or waiver
effected in accordance with this Section 10.10 shall be binding upon each
holder of any Shares (including shares of Common Stock into which such Shares
have been converted) even if they do not execute such consent, each future
holder of all such securities and the Company. No waivers of or exceptions to
any term, condition or provision of this Agreement, in any one or more
instances, shall be deemed to be, or construed as, a further or continuing
waiver of any such term, condition or provision.
10.11 Pronouns. Whenever the context may require, any pronouns
used in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural, and vice versa.
10.12 Counterparts; Facsimile Signatures. This Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original, and all of which shall constitute one and the same document. This
Agreement may be executed by facsimile signatures.
10.13 Section Headings. The section headings are for the
convenience of the parties and in no way alter, modify, amend, limit, or
restrict the contractual obligations of the parties.
10.14 Expenses. The Company shall pay the reasonable fees and
disbursements of counsel to the Purchasers (up to an aggregate maximum of
$63,500 (including therein up to $53,500 payable to UBS or an Affiliate and up
to $10,000 payable to JP or an Affiliate)), in connection with the preparation
of this Agreement and the other agreements contemplated hereby and the closing
of the transactions contemplated hereby.
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EXECUTED as of the date first written above.
COMPANY:
THE EDISON PROJECT, INC.
By: /s/ H. Xxxxxxxxxxx Xxxxxxx
------------------------------
PURCHASERS:
WEG VI L.P.
By WSI Inc., its General Partner
By: /s/ H. Xxxxxxxxxxx Xxxxxxx
------------------------------
Name: H. Xxxxxxxxxxx Xxxxxxx
Title: President
WEG VII L.P.
By WSI Inc., its General Partner
By: /s/ H. Xxxxxxxxxxx Xxxxxxx
------------------------------
Name: H. Xxxxxxxxxxx Xxxxxxx
Title: President
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LEEDS II L.P.
By Leeds Associates L.L.C., its General
Partner
By: /s/ Xxxxxxx X. Xxxxx
------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Member
X.X. XXXXXX INVESTMENT
CORPORATION
By: /s/ Xxxx X. Xxxxxxxxx
------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: Managing Director
SIXTY WALL STREET SBIC FUND, L.P.
By: Sixty Wall Street SBIC Corporation
By: /s/ Xxxx X. Xxxxxxxxx
------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: Managing Director
INVESTOR INVESTMENTS AB
By: /s/ X. Xxxxxxxx
------------------------------
Name:
Title:
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GREENWOOD PARTNERS
By: /s/ Xxxxxx Xxxxxx
------------------------------
Xxxxxx Xxxxxx, its General Partner
FORUM PARTNERS
By: /s/ Xxxxxx Xxxxxx
------------------------------
Xxxxxx Xxxxxx, its General Partner
UBS CAPITAL XV LLC
By: /s/ Xxxxxxx Xxxxx /s/ Xxxx Xxxxx
------------------------------------
Name: Xxxxxxx Xxxxx Xxxx Xxxxx
Title: Principal Principal
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EXHIBIT A
List of Purchasers
Name and Address No. of Shares of Aggregate
of Purchaser Series F Preferred Purchase Price
--------------------------- ---------------------------- ----------------------
X.X. Xxxxxx Investment
Corporation
00 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxx X. Xxxxxxxxx
and J. Xxxxxx Xxxxxxxx, Esq. 395,280 $2,430,972.00
Sixty Wall Street SBIC Fund,
L.P.
00 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxx X. Xxxxxxxxx
and J. Xxxxxx Xxxxxxxx, Esq. 98,820 $607,743.00
Investor Investments AB
00 Xxxx Xxxxxx
Xxxxxx XXX 0XX 494,100 $3,038,715.00
WEG VII L.P.
First Tennessee Plaza
000 Xxxxx Xxx Xxxxxx
Xxxxx 0000
Xxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxx
Telecopy: (000) 000-0000 441,069 $2,712,574.35
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Forum Partners
c/o Xxxxxx Xxxxxx
Brownwood Partners, LP
PFP Associates
0000 Xxxxx Xxxxx, Xxxxx 000
X. Xxxx Xxxxx, XX 00000-0000
Telecopy: (000) 000-0000 20,496 $126,050.40
Greenwood Partners
c/o Xxxxxx Xxxxxx
Brownwood Partners, LP
PFP Associates
0000 Xxxxx Xxxxx, Xxxxx 000
X. Xxxx Xxxxx, XX 00000-0000
Telecopy: (000) 000-0000 61,491 $378,169.65
UBS Capital XV LLC
c/o UBS Capital LLC
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxxx
Telecopy: (000) 000-0000 2,573,098* $15,824,552.70
WEG VI L.P.
First Tennessee Plaza
000 Xxxxx Xxx Xxxxxx
Xxxxx 0000
Xxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxx
Telecopy: (000) 000-0000 446,011 $2,742,967.65
Leeds II L.P.
Leeds Group Inc.
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxxx
Telecopy: (000) 000-0000 227,111 $1,396,732.65
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TOTAL 4,757,476 $29,258,477.40
--------------------------
* 800,000 of such shares are to be issued as Series G Preferred rather than as
Series F Preferred.
3
