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EXHIBIT 10.11
THE WARRANTS REPRESENTED BY THIS AGREEMENT AND THE SHARES OF STOCK
ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED, SOLD,
OFFERED FOR SALE, PLEDGED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT AND THE
RULES AND REGULATIONS PROMULGATED THEREUNDER.
WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of February 1, 1997, between THE
EDISON PROJECT INC., a Delaware corporation (the "Company") and COMDISCO, INC.,
a Delaware corporation (the "Warrantholder"), for the purchase of Series A
Convertible Exchangeable Preferred Stock of the Company.
WHEREAS, The Edison Project L.P. (the "Partnership") and the
Warrantholder have entered into a Master Lease Agreement dated as of June 19,
1995, together with Equipment Schedule No. VL-3 and VL-4, and related Summary
Equipment Schedules (collectively, the "Leases"), pursuant to which the
Warrantholder has leased certain computers and related equipment to the
Partnership; and
WHEREAS, the Partnership is a subsidiary of the Company; and
WHEREAS, the Company desires to grant to the Warrantholder and
the Warrantholder desires to receive, in consideration for such Leases, a
warrant (the "Warrant") to purchase shares of Series A Convertible Exchangeable
Preferred Stock of the Company (the "Company Shares");
NOW, THEREFORE, in consideration of the Warrantholder
executing and delivering such Leases and in consideration of mutual covenants
and agreements contained herein, the Company and the Warrantholder certify and
agree as follows:
Section 1. Grant of Warrant for Company Shares; Term.
For value received, the Company hereby grants to the
Warrantholder, and the Warrantholder is entitled, upon the terms and subject to
the conditions hereof, to subscribe for and purchase from the Company, at a
price of $1.50 per share (the "Exercise Price"), an aggregate of up to 213,333
Company Shares (the "Warrant Shares"). The Warrantholder shall have the right to
purchase at the Exercise Price all or any portion (but not as to a fractional
Company Share) of the Warrant Shares, at any time and from time to time after
the date hereof (the "Effective Date") and on or prior to the earlier of (i)
February 1, 2007, (ii) five (5) years from the effective date of the Company's
first sale of Company Shares to the public pursuant to a
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registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), which has been declared effective by the Securities and
Exchange Commission ("SEC"), other than a registration statement on Form S-8 or
any similar form (the "Initial Public Offering"), or (iii) the date on which
this Warrant shall have been fully exercised (the earlier of (i), (ii) and
(iii), the "Expiration Date").
Section 2. Redemption.
Notwithstanding anything herein to the contrary, the Company may redeem
the Warrant from the Warrantholder, if and to the extent not previously
exercised, upon the occurrence of any of the following events (collectively,
"Redemption Events"):
(i) the Initial Public Offering, if the Company's
underwriters request such redemption;
(ii) the closing of a merger or consolidation of the
Company with or into another entity if the Company is
not the surviving entity (a "Merger"), or
(iii) the sale of all or substantially all of the Company's
properties and assets (a "Sale").
Prior to any such redemption, the Company shall give the Warrantholder
at least twenty (20) days prior written notice of its intent to redeem this
Warrant. Such notice shall contain information with respect to the relevant
Redemption Event, the date of redemption ("Redemption Date") and the redemption
price (determined as set forth below), together with a description of the terms
of the redemption of management options issued by the Company. The redemption
price shall be the difference between the Exercise Price and (i) if the
Redemption Event is a Merger or Sale, the per-share price of Company Shares in
such Merger or Sale or (ii) if the Redemption Event is the Initial Public
Offering, the public offering price of Company Shares, multiplied by the number
of Warrant Shares the Warrantholder is then entitled to purchase hereunder.
Notwithstanding the foregoing, the Warrantholder shall be entitled to exercise
this Warrant subject to the terms and conditions of this Agreement at any time
prior to the Redemption Date.
Section 3. Exercise of the Warrant; Issuance of Shares.
(a) The rights represented by this Warrant may be exercised by
the Warrantholder, in whole or in part (but not as to a fractional Company
Share), at any time or from time to time prior to the Expiration Date, by
tendering to the Company at The Edison Project Inc., 000 Xxxxx Xxxxxx, 00xx
Xxxxx, Xxx Xxxx, XX 00000 (the Company's principal place of business), or such
other address which the Company may designate by notice in writing to the
Warrantholder, (i) a duly executed notice of exercise substantially in the form
attached hereto as Exhibit I (the "Notice of Exercise"), specifying the number
of Warrant Shares to be purchased (the "Designated Number of Shares"), (ii) this
Warrant Agreement properly endorsed and
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surrendered for cancellation and (iii) payment of the Exercise Price multiplied
by the Designated Number of Shares (the "Purchase Price") payable in accordance
with Section 3(c) below.
(b) The Warrant Shares purchased upon exercise of this Warrant
shall be deemed to be issued to the Warrantholder as the record owner of such
shares as of the close of business on the date on which this Warrant Agreement
shall have been surrendered and payment made for such shares. Certificates for
the Warrant Shares so purchased shall be delivered to the Warrantholder within
ten (10) days after the Company's receipt of the Purchase Price. Upon any
exercise hereunder, the number of Warrant Shares shall be reduced by the
Designated Number of Shares and, if a balance of Warrant Shares remains after
such exercise and such exercise occurred prior to the Expiration Date, the
Company shall promptly and in any event within twenty-one (21) days after
receipt of the Purchase Price execute and deliver to the Warrantholder a new
Warrant Agreement for such balance of shares on terms and conditions identical
to those contained herein, including, without limitation, the Effective Date.
(c) The Exercise Price may be paid at the Warrantholder's
election either (i) in cash, by check or by wire transfer, (ii) by cancellation
by the Warrantholder of indebtedness of the Partnership to the Warrantholder
under the Leases or otherwise, or (iii) by any combination of (i) and (ii). In
the event that the Warrantholder elects to pay any part of the Exercise Price
pursuant to clause (ii) of the previous sentence, the date the Exercise Price
shall be deemed to have been paid to the Company shall be the date the Company
receives evidence of the cancellation of indebtedness representing the amount of
the Purchase of the Company to the Warrantholder.
(d) In addition to and without limiting the rights of the
Warrantholder under Section 3(a), at the Warrantholder's option, this Warrant
may be exercised with respect to a Designated Number of Shares by being
exchanged, in whole or in part, at any time or from time to time on or prior to
the Expiration Date, for a number of Warrant Shares having an aggregate Fair
Market Value (as hereinafter defined) on the date of such exercise equal to the
difference between (x) the Fair Market Value of such Designated Number of Shares
and (y) the Purchase Price for such Designated Number of Shares in effect at
such time.
No payment of any cash or other consideration to the Company
shall be required from the Warrantholder in connection with any exercise of this
Warrant to the extent of exchange pursuant to this Section 3(d). Such exchange
shall be effective upon the date of receipt by the Company from the
Warrantholder of this Warrant Agreement surrendered for cancellation and the
Notice of Exercise requesting that exchange be made pursuant to this Section
3(d). No fractional shares arising out of the above formula for determining the
number of shares issuable in such exchange shall be issued, and the Company
shall in lieu thereof make payment to the Holder of cash in the amount of such
fraction multiplied by the Fair Market Value of a Warrant Share on the date of
the exchange.
"Fair Market Value" means with respect to a Warrant Share:
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(i) if the exercise of this Warrant is in connection with
the Initial Public Offering, the "initial price to
public" specified in the final prospectus with
respect to the Initial Public Offering; or
(ii) if the exercise of this Warrant occurs after and not
in connection with the Initial Public Offering:
(A) if the Company Shares are actively traded on
a national securities exchange, the average
of the closing prices over a twenty-one (21)
day period ending three days before the date
of this determination; or
(B) if the Company Shares are actively traded
over-the-counter, the average of the closing
bid and asked prices of the traded security
quoted on the NASDAQ system (or similar
system) over the twenty-one (21) day period
ending three days before the date of this
determination; or
(iii) if at any time the Company Shares are not listed on
any securities exchange or quoted over-the-counter or
are not actively traded, as determined in good faith
by the Company's board of directors; or
(iv) notwithstanding the provisions of Sections 3(d)(i),
(ii) and (iii), if the Company is party to a Merger
or a Sale, the value that would have been received in
respect of a Warrant Share had the Warrant been
exercised prior to the Merger or Sale.
Section 4. Reservation of Stock.
The Company shall at all times keep reserved, out of the
authorized and unissued Company Shares, a number of shares sufficient to provide
for the exercise of the Warrant, and the transfer agent for the Company Shares
issuable upon exercise of the Warrant is hereby irrevocably authorized and
directed at all times to reserve such number of authorized and unissued shares
as may be necessary for such purpose. The Company agrees that all Company Shares
issued upon exercise of the Warrant shall be, at the time of delivery of the
certificates for such shares, validly issued and outstanding, fully paid and
nonassessable.
Section 5. Fractional Interests.
The Company shall not be required to issue fractional shares
of Company Shares on the exercise of the Warrant and the Company will pay the
cash value (based on the Exercise Price then in effect) of any fractional shares
otherwise issuable.
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Section 6. No Voting Rights.
This Warrant Agreement does not entitle the Warrantholder to
any voting rights or other rights as a shareholder of the Company prior to the
Warrantholder's exercise of the Warrant.
Section 7. Registry.
The Company shall maintain a registry showing the name and
address of the registered holder of this Warrant Agreement.
Section 8. Adjustments to Warrant Shares; Notices.
(a) Adjustment for Change in Capital Stock.
If the Company:
(i) subdivides the outstanding Company Shares into a greater
number of shares;
(ii) combines the outstanding Company Shares into a smaller
number of shares; or
(iii) issues any shares of its capital stock by
reclassification of Company Shares;
then the number of Warrant Shares issuable upon exercise of the Warrant
immediately prior to such action shall be proportionately adjusted so
that the Warrantholder may receive the aggregate number and kind of
shares of capital stock of the Company that the Warrantholder would
have owned immediately following such action if the Warrant had been
exercised immediately prior to such action.
The adjustment shall become effective immediately after the
record date in the case of a dividend or distribution and immediately
after the effective date in the case of a subdivision, combination or
reclassification.
(b) Notices. In the event (i) that the Company declares any
distribution upon Company Shares, whether in cash, property, stock or other
securities, (ii) that the Company offers for subscription pro rata to holders of
Company Shares any additional equity interests in the Company, (iii) of a Merger
or Sale, or (iv) of any voluntary or involuntary dissolution, liquidation or
winding up of the Company (each, a "Dissolution Event"); then, in connection
with each such event, the Company shall provide the Warrantholder:
(i) at least twenty (20) days prior written notice of the date
on which the books of the Company shall close or a record shall be taken for
such dividend, distribution, subscription rights (specifying the date on which
holders shall be entitled thereto) or for determining rights to vote in respect
of such Merger, Sale or Dissolution Event; and
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(ii) in the case of a Merger, Sale or Dissolution Event, at
least twenty (20) days prior written notice of occurrence thereof (and
specifying the date on which the holders of Company Shares shall be entitled to
exchange their Company Shares or other securities for securities or other
property deliverable upon such Merger, Sale or Dissolution Event).
Each such written notice shall set forth, in reasonable detail
(i) any increase or decrease in the number of Warrant Shares pursuant to this
Section 8 together with the calculation of such adjustment and (ii) the number
of Warrant Shares or other securities subject to purchase hereunder after giving
effect to such adjustment, and shall be given by first class mail, postage
prepaid, addressed to the Warrantholder at the address as shown on the books of
the Company.
(c) Timely Notice. Failure to timely provide such notice
required by Section 8(b) above shall entitle the Warrantholder to retain the
benefit of the applicable notice period notwithstanding anything to the contrary
contained in any insufficient notice received by the Warrantholder. The notice
period shall begin on the date of the Warrantholder's receipt of the notice
provided as specified in Section 8(b).
Section 9. Representations, Warranties and Covenants of the Company and the
Partnership.
The Company hereby represents, warrants and covenants to the
Warrantholder that as of April 15, 1997:
(a) Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
has all requisite corporate power and authority to own and operate its
properties and assets and carry on its business as now conducted and proposed to
be conducted. The Partnership is a limited partnership duly organized, validly
existing and in good standing under the laws of the State of Delaware, has all
requisite partnership power and authority to own, lease and operate its
properties and assets and carry on its business as now conducted and proposed to
be conducted. Each of the Company and the Partnership is duly qualified to
transact business and is in good standing in all jurisdictions in which the
failure to so qualify would have a material adverse effect on its business,
properties, prospects or financial condition.
(b) Due Authority. The execution and delivery by the
Partnership of the Leases and by the Company of this Agreement and the
performance of all obligations of the Partnership thereunder and the Company
hereunder, including the grant to the Warrantholder of the Warrant, have been
duly authorized by all necessary action on the part of the Company and the
Leases and this Warrant Agreement are not inconsistent with the Partnership
Agreement or the Company's Amended and Restated Articles of Incorporation and
By-Laws, do not contravene in any material respect any law or governmental rule,
regulation or order applicable to the Partnership or the Company, do not and
will not contravene any provision of, or constitute a default under, any
indenture, mortgage, contract or other instrument to which the Partnership or
the Company is a party or by which either is bound, and the Leases and this
Agreement constitute legal, valid and binding agreements of the Partnership and
the Company, respectively, enforceable in accordance with their respective
terms. The Company agrees to execute and issue the necessary share certificates
or other documents upon the exercise of the Warrant.
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(c) Consents and Approvals. No consent or approval of, giving
of notice to, registration with, or taking of any other action in respect of any
state, federal or other governmental authority or agency is required with
respect to the execution, delivery and performance by the Company of its
obligations under this Agreement.
(d) Litigation. There are no actions, suits, audits,
investigations or proceedings pending or, to the knowledge of the Company or the
Partnership, threatened against or affecting the Company or the Partnership in
any court or before any governmental commission, board or authority which, if
adversely determined, will have a material adverse effect on the ability of the
Partnership to perform its obligations under the Leases or the Company to
perform its obligations under this Agreement.
(e) Subsidiaries or Affiliates. Other than the Partnership (of
which the Company is the general partner) and Sprout Edison Project, Inc. (of
which the Company is the sole stockholder), the Company has no subsidiaries or
affiliated companies and does not otherwise own or control, directly or
indirectly, any other corporation, association or business entity. The
Partnership has no subsidiaries or affiliated companies and does not otherwise
own or control, directly or indirectly, any other corporation, association or
business entity.
(f) Financial Statements. The Company has delivered to the
Warrantholder the Partnership's audited financial statements for Fiscal Year
1996 (the "Financial Statements").
The Company shall deliver to the Warrantholder any and all
financial statements which the Company delivers to all holders of Company
Shares.
(g) Contingent and Absolute Liabilities. Except as disclosed
in the Financial Statements and for obligations incurred in the ordinary course
of business of the Partnership, neither the Partnership nor the Company has any
material liabilities or obligations, absolute or contingent, which would result
in a material adverse effect to the Partnership or the Company, as the case may
be.
(h) Insurance. The Partnership has in full force and effect
insurance policies, with extended coverage, insuring the Partnership and its
property and business against such losses and risks, and in such amounts, as are
customary for entities engaged in a similar business and similarly situated and
as otherwise may be required pursuant to the terms of any other contract or
agreement.
(i) Other Commitments to Register Securities. Except as set
forth in this Agreement and disclosed on Schedule 9(i), the Company is not,
pursuant to the terms of any other agreement currently in existence, under any
obligation to register under the Securities Act any of its presently outstanding
securities or any of its securities which may hereafter be issued.
(j) Exempt Transaction. Subject to the accuracy of the
Warrantholder's representations in Section 10 hereof, the issuance of the
Company Shares to the Warrantholder upon exercise of the Warrant will constitute
a transaction exempt from (i) the registration
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requirements of Section 5 of the Securities Act, in reliance upon Section 4(2)
thereof, and (ii) the qualification requirements of any applicable state
securities laws.
(k) Compliance with Rule 144. From and after the date that the
Company shall have publicly traded securities, at the written request of the
Warrantholder proposing to sell the Company Shares in compliance with Rule 144
promulgated by the SEC under the Securities Act, the Company shall furnish to
the Warrantholder, within ten business days after receipt of such request, a
written statement confirming the Company's compliance with the filing
requirements of the SEC as set forth in such Rule as then in effect.
(l) No Events of Default, Material Contracts. All material
contracts, agreements and instruments to which the Company or the Partnership is
a party are in full force and effect in all material respects, and are valid,
binding and enforceable by the Company or the Partnership, as the case may be,
in accordance with their respective terms, subject to the effect of applicable
bankruptcy and other similar laws affecting the rights of creditors generally,
and rules of law concerning equitable remedies and no event of default.
(m) Brokers' Fees. Neither the Company nor the Partnership has
incurred, and will not incur, directly or indirectly, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement or any transaction contemplated thereby.
(n) Taxes. (i) Each of the Company and the Partnership has
filed all material tax returns and reports as required by law, (ii) such returns
and reports were true and correct in all material respects when filed, and (iii)
the Partnership has withheld or collected from each payment made to its
employees, the amount of all taxes, including, but not limited to, federal
income taxes, Federal Insurance Contribution Act taxes and Federal Unemployment
Tax Act taxes, required to be withheld or collected therefrom, and has paid the
same to the proper tax receiving officers or authorized depositaries.
(o) Issued Securities. All issued and outstanding shares of
Company Shares or any other securities of the Company have been duly authorized
and validly issued and are fully paid and nonassessable. All outstanding Company
Shares and other securities of the Company were issued in full compliance with
all federal and state securities laws. In addition:
(i) The authorized capital stock of the Company consists of
(A) 60,000,005 shares of Series A Common Stock, of which 6,214,704 shares are
issued and outstanding, (B) one share of Series B Common Stock, of which one
share is issued and outstanding, (C) one share of Series C Common Stock, of
which one share is issued and outstanding, (D) one share of Series D Common
Stock, of which one share is issued and outstanding, (E) one share of Series E
Common Stock, of which one share is issued and outstanding, (F) one share of
Series F Common Stock, of which one share is issued and outstanding, and (G)
50,000,000 shares of preferred stock, of which 31,304,536 shares are issued and
outstanding and are convertible into 31,304,536 shares of Series A Common Stock.
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(ii) The Company has reserved 7,811,800 Company Shares for
issuance with respect to the options set forth on Schedule 9(o).1 hereto. There
are no other options, warrants, conversion privileges or other rights presently
outstanding to purchase or otherwise acquire any authorized but unissued shares
of the Company's capital stock or securities of the Company other than in
respect of "Second Closing Shares" as set forth on Schedule 9(o).2 hereto.
Section 10. Representations, Warranties and Covenants of the
Warrantholder.
The Warrantholder hereby represents, warrants and covenants to
the Company:
(a) Investment Purpose. Neither the Warrant nor the Company
Shares or other securities issuable upon exercise of the Warrant will be
acquired with a view to the sale or distribution of any part thereof, and the
Warrantholder has no present intention of selling or engaging in any public
distribution of the same.
(b) Private Issue. The Warrantholder understands (i) that the
Company Shares are not registered under the Securities Act or qualified under
any applicable state securities laws on the ground that the issuance
contemplated by this Warrant Agreement will be exempt from the registration and
qualifications requirements thereof, and (ii) that the Company's reliance on
such exemption is predicated on the representations set forth in this Section
10.
(c) Disposition of the Warrantholder's Rights. In no event
will the Warrantholder make a disposition of any of its rights to acquire the
Company Shares unless and until the Warrantholder shall have provided the
Company with (i) written notice of the proposed disposition, and (ii) if
requested by the Company, an opinion of counsel (which counsel may be inside
counsel to the Warrantholder) satisfactory to the Company and the Company's
counsel to the effect that (A) appropriate action necessary for compliance with
the Securities Act has been taken or (B) an exemption from the registration
requirements of the Securities Act and any state law is available.
Notwithstanding the foregoing, the restrictions imposed upon the transferability
of any of its rights hereunder on the exercise of such rights do not apply to
transfers from the beneficial owner of any of the aforementioned securities to
its nominee or from such nominee to its beneficial owner, and shall terminate as
to any securities when (1) such security shall have been effectively registered
under the Securities Act and sold by the holder thereof in accordance with such
registration, (2) such security shall have been sold without registration in
compliance with Rule 144 under the Securities Act, or (3) a letter shall have
been issued to the Warrantholder at the request of the Warrantholder by the
staff of the SEC or a ruling shall have been issued to the Warrantholder at its
request by the SEC stating that no action shall be recommended by such staff or
taken by the SEC, as the case may be, if such security is transferred without
registration under the Securities Act in accordance with the conditions set
forth in such letter or ruling and such letter or ruling specifies that no
subsequent restrictions on transfer are required. Whenever the restrictions
imposed hereunder shall terminate, as hereinabove provided, the Warrantholder or
holder of any securities issuable hereunder then outstanding as to which such
restrictions have terminated shall be entitled to receive from the Company,
without expense to such holder, one or more new Warrant Agreements.
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(d) Financial Risk. The Warrantholder has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of its investment, and has the ability to bear the economic
risks of its investment.
(e) Risk of No Registration. The Warrantholder understands
that the Company Shares have not been reviewed or approved by the SEC or any
similar body not registered under the Securities Exchange Act of 1934, as
amended (the "1934 Act") and, as of the date of execution of this Warrant, the
Company has no obligation to so register the Company Shares, and if the Company
does not register with the SEC pursuant to Section 12 or Section 15(d) of the
1934 Act, or file reports pursuant to Section 13 of the 1934 Act, or if a
registration statement covering the securities under the Securities Act is not
in effect when it desires to sell (i) the rights to purchase the Company Shares
(or other securities) pursuant to this Warrant Agreement, or (ii) the Company
Shares (or other securities into which the Warrant Shares are convertible)
issuable upon exercise of the right to purchase, it may be required to hold such
securities for an indefinite period.
(f) Confidential Information. The Warrantholder will not use
or divulge any non-public information provided by or developed for the
Warrantholder in connection with this Agreement ("Company Proprietary
Information") whether or not this Agreement remains in effect, except as may be
required by law.
Section 11. Legend; Transfers.
(a) It is understood that the Company will cause to be placed
upon certificates for shares of Company Shares issued upon the exercise hereof,
a legend referring to the conditions contained in this Warrant applicable to the
disposition of such shares.
Such legend shall read substantially as follows:
"The shares represented by this certificate have not
been registered under the Securities Act of 1933, as amended, and the
transfer of such shares is subject to the conditions specified in the
Warrant Agreement dated as of February 1, 1997 between The Edison
Project Inc. (the "Company") and Comdisco, Inc., and no transfer of
such shares shall be valid or effective until such conditions have been
fulfilled with respect to such transfer. A copy of such Warrant
Agreement will be furnished by the Company to the holder of this
certificate upon written request."
(b) Transfers Generally. Subject to the terms and conditions
contained in Section 10 hereof, this Warrant Agreement and all rights hereunder
are transferable in whole or in part by the Warrantholder and any successor
transferee. The transfer shall be recorded on the books of the Company upon
receipt by the Company of a notice of transfer in the form attached hereto as
Exhibit II (the "Transfer Notice") and the payment to the Company of all
transfer taxes and other governmental charges imposed on such transfer.
(c) Exchange of Warrant Agreement Upon a Transfer. On
surrender of this Warrant Agreement for exchange, properly endorsed and subject
to the limitations on
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assignments and transfers and contained in this Section 11, the Company shall
issue to or on the order of the Warrantholder a new Warrant Agreement(s), in the
name of the Warrantholder or as the Warrantholder may direct, for the number of
Warrant Shares issuable upon exercise hereof in accordance with the provisions
of Section 3(b) hereof.
Section 12. Registration Rights.
Upon exercise of this Warrant Agreement, the Warrantholder
shall be entitled to "piggy-back" rights similar to those granted to other
holders of Company Shares.
Section 13. Issue Tax.
The issuance of certificates for Company Shares upon the
exercise of this Warrant shall be made without charge to the Warrantholder for
any issuance or stamp tax in respect thereof, provided, that the Company shall
not be required to pay any tax that may be payable in respect of any transfer
involved in the issuance and delivery of any certificate in a name other than
that of the Warrantholder.
Section 14. Miscellaneous.
(a) Attorneys' Fees. In any litigation, arbitration or court
proceeding between the Company and the Warrantholder relating hereto, the
prevailing party shall be entitled to attorneys' fees and expenses and all costs
of proceedings incurred in enforcing this Warrant Agreement.
(b) Successors and Assigns. This Warrant Agreement shall be
binding upon any successors or assigns of the Company.
(c) Governing Law. This Warrant Agreement shall be governed by
and construed for all purposes under and in accordance with the laws of the
State of New York.
(d) Counterparts. This Warrant Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(e) Titles and Subtitles. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience only and are not to be
considered in construing this Agreement.
(f) Notices. Any notice required or permitted hereunder shall
be given in writing and shall be deemed effectively given upon personal delivery
or upon deposit in the United States mail, by registered or certified mail, or
upon confirmed facsimile transmission addressed as set forth below, or at such
other address as any such party may subsequently designate by written notice to
the other party:
(i) to the Warrantholder:
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Comdisco, Inc.
0000 Xxxxx Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxx 00000
Attention: Venture Leasing Department, cc: Legal
Department
Facsimile: (000) 000-0000
(ii) to the Company:
The Edison Project Inc.
c/o WSI Inc.
000 XxxxxxxXxxx Xxxxxx
000 Xxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxx Xxxxxxxx
Facsimile: (000) 000-0000
with copies to:
The Edison Project L.P.
000 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxxxx
Facsimile: (000) 000-0000
and to:
Cadwalader, Xxxxxxxxxx & Xxxx
000 Xxxxxx Xxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
(g) Remedies. In the event of any default hereunder, the
non-defaulting party may proceed to protect and enforce its rights either by
suit in equity and/or by action at law, including but not limited to an action
for damages as a result of any such default, and/or an action for specific
performance for any default where the non-defaulting party would not have an
adequate remedy at law and where damages will not be readily ascertainable. Each
of the Company and the Warrantholder expressly agrees that it shall not oppose
an application by the Warrantholder or any other person entitled to the benefit
of this Warrant, or the Company, as the case may be, requiring specific
performance of any or all provisions hereof or enjoining the Warrantholder or
the Company, as the case may be, from continuing to commit any such breach of
this Agreement.
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(h) No Impairment of Rights. The Company will not, by
amendment of the Company's Amended and Restated Articles of Incorporation or
through any other means, avoid or seek to avoid the observance or performance of
any of the terms of this Warrant Agreement, but will at all times in good faith
assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
Warrantholder against impairment.
(i) Survival. The representations, warranties, covenants and
conditions of the respective parties contained herein or made pursuant to this
Agreement shall survive the execution and delivery of this Warrant Agreement and
shall be binding upon the parties hereto until the Expiration Date.
(j) Severability. In the event any one or more of the
provisions of this Warrant Agreement shall for any reason be held invalid,
illegal or unenforceable, the remaining provisions of this Warrant Agreement
shall be unimpaired, and the invalid, illegal or unenforceable provision shall
be replaced by a mutually acceptable valid, legal and enforceable provision,
which comes closest to the intention of the parties underlying the invalid,
illegal or unenforceable provision.
(k) Amendments. This Warrant Agreement may be amended only in
writing signed by the Company and the Warrantholder.
(l) Business Days. In the event that the Warrantholder's
rights hereunder would otherwise terminate on a Saturday, Sunday or other day
which is a legal or bank holiday in the State of Illinois and/or the State of
New York, then the Warrantholder's rights hereunder shall continue until the
next succeeding business day.
(m) Lost, Stolen, Destroyed or Mutilated Warrants. In case
this Warrant shall be mutilated, lost, stolen or destroyed, the Company will
issue a new Warrant of like date, tenor and denomination and deliver the same in
exchange and substitution for and upon surrender and cancellation of any
mutilated Warrant, or in lieu of any Warrant lost, stolen or destroyed, upon
receipt of evidence satisfactory to the Company of the loss, theft or
destruction of such Warrant, and upon receipt of reasonable indemnity
satisfactory to the Company.
IN WITNESS WHEREOF, the parties hereto have caused this
Warrant Agreement to be executed as of the date first above written.
THE EDISON PROJECT INC.
By: /s/ Xxxxx Xxxxxxxx
--------------------------------
Name: Xxxxx Xxxxxxxx
Title: President
-13-
14
COMDISCO, INC.
By: /s/ Xxxxx X. Xxxx
-----------------------------------
Name: Xxxxx X. Xxxx
Title: President
Comdisco Ventures Division
-14-
15
EXHIBIT I
NOTICE OF EXERCISE
TO: THE EDISON PROJECT INC. DATED:____________
(1) The undersigned hereby elects to purchase ______________ shares (the
"Warrant Shares") of Series A Convertible Exchangeable Preferred Stock
of The Edison Project Inc. (the "Company Shares") pursuant to the terms
of the Warrant Agreement dated as of February 1, 1997 (the "Warrant
Agreement") between The Edison Project Inc. (the "Company") and
Comdisco, Inc. (the "Warrantholder"), and tenders herewith payment of
the purchase price for such shares in full, together with all
applicable transfer taxes, if any ($____________).
(2) In exercising its rights to purchase the Warrant Shares, the
undersigned hereby confirms and acknowledges the investment
representations and warranties made in Section __ of the Warrant
Agreement.
(3) By exercising its rights to purchase the Warrant Shares, the
undersigned agrees to execute and deliver such additional documents as
the Company may reasonably request in connection with the issuance to
the undersigned of the Warrant Shares.
(4) Please issue a replacement Warrant Agreement representing the
Warrantholder's right to purchase ______ Company Shares, based upon the
original grant of the right to purchase 213,333 Company Shares, as
adjusted to date.
(5) The undersigned desires to have the provisions of Section 3(d) of the
Warrant Agreement apply to the exercise hereunder. Yes ___ No ___
Note: Item (5) above is to elect cashless exercise by exchange.
[_________________________]
By: _____________________
Name:
Address:
WARRANTHOLDER:
COMDISCO, INC.
By: _____________________
Name:
Title:
-15-
16
EXHIBIT II
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement execute this
form and supply required information. Do not use this form to
purchase Warrant Shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to
--------------------------------------------------------------------------------
(Please Print)
whose address is _______________________________________________________________
_______________________________________________________________
Dated ___________________________________________________
Holder's Signature ______________________________________
Holder's Address ________________________________________
_________________________________________________________
Signature Guaranteed: __________________________________
NOTE: The signature to this Transfer Notice must correspond with the
name as it appears on the face of the Warrant Agreement,
without alteration or enlargement or any change whatever.
Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of
authority to assign the foregoing Warrant Agreement.
-16-
17
SCHEDULE 9(i)
1. Obligation of the Company to register equity obtained by WSI Inc.
("WSI") or its assignees upon exercise of options granted to WSI pursuant to the
Management Agreement between WSI and the Partnership dated as of March 14, 1995.
2. Obligation of the Company to register equity held by (i) WSI, WPA
Investment L.P., WEG L.P., WEG II L.P., or WEG III L.P., acting together, (ii)
Sprout Capital VI, L.P., Sprout CEO Fund, L.P., Sprout Capital VII, L.P. or DLJ
Capital Corporation (Delaware), acting together, and (iii) X.X. Childs
Investments L.L.C., upon request of any such party in certain circumstances.
3. Obligation of the Company to register equity held by Blue Rock
Capital, L.P., Xxxxx X. Xxxxxxx, Xx., Xxxx X. Xxxxxxx, Xxxx X. Xxxxxx, Xxxx X.
Childs, Richmont Leeds Education Company L.L.C., or Xxxx X. Xxxx, or any of the
parties set forth in paragraph 2 above upon exercise of such party's
"piggy-back" rights in connection with a registration by the Company.
4. Obligation of the Company to register equity obtained by Lessor upon
exercise of warrants granted to Lessor pursuant to the Warrant Agreement between
the Partnership and the Lessor dated as of July 5, 1995 and the Warrant
Agreement between the Partnership and the Lessor dated as of January 1, 1996.
18
SCHEDULE 9(o).1
THE EDISON PROJECT INC.
SHARE OPTIONS AS OF 4/14/97
Total
Share Exercise
# Shares Price Price
-------------------------- ----------------- --------------------------
Employee Option Plan:
Executives 2,659,840 * $ 1.25 $ 3,324,800
General Employees 461,360 * $ 1.25 576,700
Unissued but Reserved for 651,980 XXX XXX
Employees
Former Executives 226,820 $ 1.00 226,820
-------------------------- --------------------------
Total Employee Options 4,000,000 4,128,320
Performance Option Pool 1,250,000 * $ 1.50 1,875,000
Comdisco A 225,000 $ 1.00 225,000
Comdisco B 136,800 $ 1.25 171,000
Xxxxxx Read 200,000 $ 0.25 50,000
WSI A 1,000,000 * $10.00 10,000,000
WSI B 1,000,000 * $20.00 20,000,000
-------------------------- --------------------------
TOTAL 7,811,800 $36,449,320
*Subject to relevant vesting provisions.
