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Exhibit 10.17
WARRANT PURCHASE AGREEMENT
THIS WARRANT PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of JUNE 30, 1997, by and between THE EDISON PROJECT, INC., a Delaware
corporation with its principal place of business at 000 XXXXX XXXXXX, 00XX
XXXXX, XXX XXXX, XX 00000 (the "Company"), and LINC Capital Management, a
division of LINC Capital, Inc., a Delaware corporation (the "Purchaser").
The Company desires to sell, and the Purchaser desires to purchase, a
warrant to purchase 45,000 shares of the Company's Series A Common Stock, par
value $0.01 per share (the "Company Stock"), at a price per share of $2.00 in
the form attached hereto as Exhibit A and on the terms and conditions set forth
herein (the "Warrant").
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the parties hereto agree as follows:
A. PURCHASE TERMS
1. Purchase of the Warrant.
(a) Subject to the terms and conditions of this Agreement, the
Purchaser agrees to purchase the Warrant from the Company and the Company agrees
to sell and issue the Warrant to the Purchaser for an aggregate purchase price
of $100.00 (the"Purchase Price").
(b) The purchase and sale of the Warrant shall take place at
the offices of the Purchaser, at 000 X. Xxxxxx Xxxxx, Xxxxx 0000, Xxxxxxx,
Xxxxxxxx 00000, or at such other place as the Company and the Purchaser shall
agree, on JUNE 30, 1997 (the "Closing") pursuant to the EQUIPMENT NOTE LOAN AND
SECURITY AGREEMENT, (the "Financing"). At the Closing, the Company shall deliver
the Warrant to the Purchaser, against delivery to the Company of a check in the
amount of the Purchase Price.
2. Access To Information. The Purchaser acknowledges that it has had
access to all material information concerning the Company which it has
requested. The Purchaser also acknowledges that it has had the opportunity to,
and has to its satisfaction, questioned the officers of the Company with respect
to its investment hereunder.
3. Representations of the Purchaser.
(a) The Purchaser represents that it understands that the
Warrant and the shares of Common Stock issuable upon exercise thereof (the
"Warrant Shares"), are speculative investments, that it is aware of the
Company's business affairs and financial condition and that it has acquired
sufficient information about the Company to reach an informed and knowledgeable
decision to acquire the
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Warrant. The Purchaser is purchasing the Warrant and any Warrant Shares issued
upon exercise thereof for investment for its own account only and not with a
view to, or for resale in connection with, any "distribution" thereof in
violation of the Securities Act of 1933, as amended (the "Securities Act"), or
applicable state securities laws . The Purchaser further represents that it
understands that the Warrant and Warrant Shares have not been registered under
the Securities Act or applicable state securities laws by reason of specific
exemptions therefrom, which exemptions depend upon, among other things, the bona
fide nature of the Purchaser's investment intent as expressed herein. The
Purchaser understands that the Warrant and any Warrant Shares purchased upon
exercise thereof must be held indefinitely unless such securities are
subsequently registered under the Securities Act and all applicable state
securities laws and regulations or an exemption from such registration or
qualification is available, and that the Company is under no obligation to
register or qualify such securities except as expressly set forth herein. The
Purchaser is an "accredited investor" as defined in Regulation D promulgated
under the Securities Act. The Purchaser's corporate headquarters and principal
place of business is located in the State of Illinois.
(b) Disposition of the Warrantholder's Rights. In no event
will the Warrantholder make a disposition of any of its rights to acquire the
Warrant 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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(c) 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.
(d) 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.
4. Confidential Information. The Warrantholder will not use or divulge
any nonpublic 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.
5. Legends. The Purchaser acknowledges and understands that the
instrument evidencing the Warrant and any Company Stock issuable pursuant
thereto shall bear the legends as specified in the Warrant (and any other
legends required under state or federal securities laws in the opinion of legal
counsel for the Company).
6. Conditions of the Purchaser's Obligation at the Closing. The
obligation of the Purchaser to purchase and pay for the Warrant at the Closing
is subject to the satisfaction as of the Closing of the following conditions:
(a) Financing. The Financing shall have been consummated on terms
and conditions satisfactory to the Purchaser.
(b) Representations and Warranties; Covenants. The representations
and warranties contained herein shall be true and correct in all respects at and
as of the Closing as though then made, except to the extent of changes caused by
the transactions expressly contemplated herein, and except to the extent such
representations and warranties relate to an earlier date, in which event such
representations and warranties were true and correct as of such earlier date and
the
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Company shall have performed in all material respects all of the covenants
required to be performed by it hereunder prior to the Closing.
(c) Securities Law Compliance. The Company shall have made all
filings under all filings under all applicable federal and state securities laws
necessary to consummate the issuance of the Warrant pursuant to this Agreement
in compliance with such laws.
(d) Opinion of the Company's Counsel. The Purchaser shall have
received from legal counsel for the Company, an opinion in connection with the
issuance of the Warrant and the consummation of the transactions contemplated
thereby, which shall be addressed to the Purchaser, dated the date of the
Closing and in form and substance reasonably satisfactory to the Purchaser.
(e) Closing Documents. The Company shall have delivered to the
Purchaser all of the following documents:
(i) an Officer's Certificate, dated the date of the Closing,
stating that the conditions specified in this Section have been fully satisfied;
(ii) certified copies of the resolutions duly adopted by the
Company's board of directors authorizing the execution, delivery and performance
of this Agreement and each of the other agreements contemplated hereby, the
issuance and sale of the Warrant, the reservation of the Warrant Shares for
issuance upon exercise of the Warrant, and the consummation of all other
transactions contemplated by this Agreement;
(iii) photocopies of certified copies of the Company's
Certificate of Incorporation and bylaws;
(iv) copies of all third party and governmental consents,
approvals and filings required in connection with the consummation of the
transactions hereunder (including, without limitation, all blue sky law filings
and waivers of all preemptive rights and rights of first refusal); and
(v) such other documents relating to the transactions
contemplated by this Agreement as the Purchaser or its special counsel may
reasonably request.
(f) Proceedings. All corporate and other proceedings taken or
required to be taken by the Company in connection with the transactions
contemplated hereby to be consummated at or prior to the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Purchaser and its special counsel.
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B. REGISTRATION AGREEMENT
1. Registrations. Upon exercise of the Warrant, the Purchaser shall be
entitled to "piggy-back" registration rights granted to other holders of Company
Stock, as set forth in the terms and provisions of Annex I hereto, provided,
that in the event that the number of shares to be included in a Registration
Statement (as defined in Annex I) filed for an underwritten public offering is
limited by the lead managing underwriter, Warrant Shares may not be included in
such offering unless all Shares (as defined in Annex I) desired by Shareholders
(as defined in Annex I) to be included therein have been so included, and in the
event the Warrant Shares are to be included, they shall be included on a pro
rata basis based on the number of shares the holders of which are similarly
situated (including, without limitation, warrantholders which lease computer
equipment to the Company or extend loans to the Company secured by computer
equipment.)
C. GENERAL PROVISIONS
1. Representations and Warranties of the Company. As a material inducement
to the Purchaser to enter into this Agreement and purchase the Warrants
hereunder, the Company hereby represents and warrants that:
(a) Organization, Corporate Power and Licenses. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of its incorporation described above and is qualified to do
business in every jurisdiction in which the failure to so qualify has had or
would reasonably be expected to have a material adverse effect on the financial
condition, operating results, assets, operations or business prospects of the
Company and its subsidiaries taken as a whole. The Company possesses all
requisite corporate power and authority and all material licenses, permits and
authorizations necessary to own and operate its properties, to carry on its
businesses as now conducted and presently proposed to be conducted and to carry
out the transactions contemplated by this Agreement. The copies of any existing
Stock Purchase Agreements and the Stockholders Agreements and the Company's
charter documents and bylaws which have been furnished to Purchaser or the
Purchaser's special counsel reflect all amendments made thereto at any time
prior to the date of this Agreement and are correct and complete.
(b) Capital Stock and Related Matters.
(i) As of the Closing and immediately thereafter, the authorized
capital stock of the Company shall be as stated on the attached "Capitalization
Schedule". As of the Closing, the Company shall not have outstanding any stock
or securities convertible or exchangeable for any shares of its
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capital stock or containing any profit participation features, nor shall it have
outstanding any rights, warrants or options to subscribe for or to purchase its
capital stock or any stock or securities convertible into or exchangeable for
its capital stock or any stock appreciation rights or phantom stock plans,
except for the Warrant, and except as set forth on the attached Capitalization
Schedule." The Capitalization Schedule accurately sets forth the following
information with respect to all outstanding options and rights to acquire the
Company's capital stock: the holder, the number of shares covered, the exercise
price and the expiration date. As of the Closing, the Company shall not be
subject to any obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any shares of its capital stock or any warrants, options or
other rights to acquire its capital stock, except as set forth on the
Capitalization Schedule. As of the Closing, all of the outstanding shares of the
Company's capital stock shall be validly issued, fully paid and nonassessable.
(ii) Except for those rights contained in any Stock Purchase
Agreements, the Company's Amended and Restated Articles of Incorporation, and
those contained in any Stockholders Agreements (which rights have been waived),
there are no statutory or, to the best of the Company's knowledge, contractual
stockholders preemptive rights or rights of refusal with respect to the issuance
of the Warrant hereunder of the issuance of the Warrant Shares upon exercise of
the Warrant. The Company has not violated any applicable federal or state
securities laws in connection with the offer, sale or issuance of any of its
capital stock, and the offer, sale and issuance of the Warrant hereunder does
not require registration under the Securities Act or any applicable state
securities laws. To the best of the Company's knowledge, there are no agreements
between the Company and its stockholders with respect to the voting or transfer
of the Company's capital stock or with respect to any other aspect of the
Company's affairs, except for any Stock Purchase Agreements and any Stockholders
Agreement identified on the attached "Capitalization Schedule."
(c) Authorization; No Breach. The execution, delivery and performance
of this Agreement, the Warrant and all other agreements contemplated hereby to
which the Company is a party have been duly authorized by the Company. This
Agreement, the Warrant and all other agreements contemplated hereby to which the
Company is a party each constitutes a valid and binding obligation of the
Company, enforceable in accordance with their respective terms. The execution
and delivery by the Company of this Agreement, the Warrant and all other
agreements contemplated hereby to which the Company is a party, the offering,
sale and issuance of the Warrant hereunder, the issuance of the Warrant Shares
upon exercise of the Warrant, and the fulfillment of and compliance with the
respective terms hereof and thereof by the Company, do not and shall not (i)
conflict with or result in a breach of the terms, conditions or provisions of,
(ii) constitute a default under, (iii) result in the creation of any lien,
security interest, charge or encumbrance upon the Company's capital stock or
assets pursuant to, (iv) give any third party the right to modify,
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terminate or accelerate any obligation under, (v) result in a violation of, or
(vi) require any authorization, consent, approval, exemption or other action by
or notice or declaration to, or filing with, any court or administrative or
governmental body or agency pursuant to, the charter or bylaws of the Company or
any subsidiary, or any law, statute, rule or regulation to which the Company or
any subsidiary is subject, or any agreement, instrument, order, judgment or
decree to which the Company or any subsidiary is subject, except for any such
filings required under applicable "blue sky" or state securities laws or
required under Regulation D promulgated under the Securities Act.
2. Covenants.
(a) Until such time as the Purchaser shall have exercised the
Warrant for all of the Company Stock issuable thereunder, the Company shall
deliver to the Purchaser (so long as the Purchaser holds all or any portion of
the Warrant or any Warrant Shares and each other holder of all or any portion of
the Warrant or any Warrant Shares all of the financial and other information
required to be delivered to LINC Capital, Inc. ("LINC") pursuant to the
Equipment Note Loan and Security Agreement, dated as of June 30, 1997, between
LINC and The Edison Project L.P. and, if applicable, SEC, together with any
other information or data generally provided by the Company to its stockholders.
All such financial and other information shall be delivered pursuant to this
Section 2(a) on a timely basis.
(b) The Company shall use the proceeds from the Financing and
from the issuance and sale of the Warrant hereunder (collectively, the
"Proceeds") to finance business expansion, to make capital purchases and for the
working capital purposes of the Company.
3. Miscellaneous.
(a) No Inconsistent Agreements. The Company shall not
hereafter enter into any agreement with respect to its securities which is
inconsistent with or violates the rights granted to the holders of Registrable
Securities in this Agreement.
(b) Remedies. Any Person having rights under any provisions of
this Agreement shall be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction (without posting
any bond or other security) for specific performance and for other injunctive
relief in order to enforce or prevent violation of the provisions of this
Agreement.
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(c) Amendments and Waivers. Except as otherwise provided
herein, the provisions of this Agreement may be amended or waived only upon the
prior written consent of the Company and the Purchaser.
(d) Successors and Assigns. All covenants and agreements in
this Agreement by or on behalf of any of the parties hereto shall bind and inure
to the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not. In addition, whether or not any express assignment
has been made, the provisions of this Agreement which are for the benefit of
purchasers or holders of Registrable Securities are also for the benefit of, and
enforceable by, any subsequent holder of Registrable Securities.
(e) Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
(f) Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, any one of which need not contain
the signatures of more than one party, by all such counter parts taken together
shall constitute on and the same Agreement.
(g) Descriptive Headings The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
(h) Governing Law. The corporation laws of the State of the
Company's incorporation identified above shall govern all issues concerning the
relative rights of the company and its stockholders. All other issues and
questions concerning the construction, validity, interpretation and enforcement
of this Agreement and the exhibits and schedules hereto shall be governed by,
and construed in accordance with, the laws of the State of Illinois, without
giving effect to any choice of law of conflict of law rules or provisions
(whether of the State of Illinois or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the state of
Illinois.
(i) Notices. All notices, demands or other communications to
be given or delivered under or by reason of the provisions of this Agreement
shall be in writing and shall be deemed to have been given when delivered
personally to the recipient, sent to the recipient by reputable overnight
courier service (charges prepaid) or mailed to the recipient by certified or
registered mail, return receipt requested and postage prepaid, or by confirmed
facsimile. Such notices, demands
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and other communications shall be sent to the Purchaser and to the Company at
the respective addresses indicated below:
THE EDISON PROJECT, INC.
000 XXXXX XXXXXX, 00XX XXXXX
XXX XXXX, XX 00000
ATTENTION: CHIEF FINANCIAL OFFICER
TELEPHONE: (000) 000-0000
FACSIMILE: (000) 000-0000
with a courtesy copy to:
THE EDISON PROJECT
X/X XXX XXX.
000 XXXXXXXXXXX XXXXXX
000 XXXX XXXXXX
XXXXXXXXX, XXXXXXXXX 00000
TELEPHONE: (000)000-0000
FACSIMILE: (000)000-0000
ATTENTION: XXXXX XXXXXXXX
and to:
CADWALADER, XXXXXXXXXX & XXXX
000 XXXXXX XXXX
XXX XXXX, XXX XXXX 00000
TELEPHONE : (000) 000-0000
FACSIMILE: (000)000-0000
ATTENTION: XXXX X. XXXXXX
LINC CAPITAL MANAGEMENT,
A DIVISION OF LINC CAPITAL, INC.
000 XXXX XXXXXX XXXXX, XXXXX 0000
XXXXXXX, XX 00000
TELEPHONE : (000) 000-0000
FACSIMILE: (000) 000-0000
ATTENTION: TREASURER
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
(j) Attorneys' Fees. In the event of an action, suit or
proceeding brought under or in connection with this agreement, the prevailing
party therein shall be entitled to recover from, and the other party hereto
agrees to pay, the prevailing
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party's costs and expenses in connection therewith, including reasonably
attorneys' fees.
(k) Disputes arising under or in any respect in connection
with this Agreement including in respect of the execution, delivery or
performance hereof (but excluding disputes as to the compliance by the
arbitrators under the provisions of this paragraph applicable to them), shall be
arbitrated in Chicago in accordance with the Commercial Arbitration Rules of the
American Arbitration Association by three arbitrators knowledgeable on
securities issues, one selected by each party hereto and the third selected by
the two so selected (or, in the absence of agreement, the third arbitrator shall
be selected by the President of the Chicago Bar Association at the time
sitting), and with all decisions of the arbitrators requiring the affirmative
vote of at least two of the arbitrators. Any judgment on any award rendered by
the arbitrators in accordance with such rules may be entered in any court of
competent jurisdiction. The parties intend to confer on the arbitrators the
authority to resolve disputes between the parties in respect of this Agreement
and agree that no decision by the arbitrators shall have the effect of amending
this Agreement in any respect. The costs of any such arbitration, including
expenses (and legal fees) of the other party thereto, shall be borne by the
party which is the losing party in the arbitration or, if the arbitrators'
decision is unclear in that regard, as the arbitrators shall determine in
accordance with the purpose of this provision to achieve the result that
arbitrations be commenced hereunder in circumstances of actual disputes and not
frivolously or for harassment purposes. The parties hereto agree that any
proceedings pursuant to this Paragraph shall be kept strictly confidential and
shall not be disclosed to any third party except pursuant to court order.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first set forth above.
The Edison Project Inc.
____________ A Delaware corporation
Attest: /s/ Xxxxx Xxxxxxxx
Secretary Name: /s/ Xxxxx Xxxxxxxx
-----------------------------
Title: President
(Corporate Seal)
LINC CAPITAL MANAGEMENT,
a division of LINC CAPITAL, INC.,
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------
Its: Vice President
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THE EDISON PROJECT INC.
-----------------------
Certificate of Assistant Secretary
I, the undersigned Assistant Secretary of The Edison Project Inc., a
Delaware corporation (the "CORPORATION"), Do Hereby Certify That:
1. The following person is a duly authorized officer of the
Corporation; the person named as an officer holds on the date hereof the offices
set forth opposite her name; and the signature set forth below is the true
signature of such person. Such officer is duly authorized to execute and deliver
to LINC CAPITAL MANAGEMENT, a division of LINC CAPITAL, INC. ("LINC") in the
name of the Corporation in its own capacity and as General Partner of The Edison
Project L.P. ("EDISON L.P."), the Equipment Note Loan and Security Agreement,
dated as of June 30, 1997, between LINC and Edison L.P., the related Equipment
Notes issued thereunder, the Warrant Purchase Agreement, dated as of June 30,
1997, between the Corporation and LINC, the Warrant To Purchase Shares of Common
Stock, dated June 30, 1997, made by the Corporation to LINC, and any ancillary
documents delivered by the Corporation or Edison L.P. to LINC relating to any of
the foregoing.
Name Office Signature
/s/ Xxxxx Xxxxxxxx
------------------------
Xxxxx Xxxxxxxx President and Secretary
IN WITNESS WHEREOF, the undersigned has signed this Certificate as of
this 30th day of June, 1997.
/s/ Xxxxx Xxxxxxxx
----------------------------
Name: Xxxxx Xxxxxxxx
Title: Assistant Secretary
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NEITHER THIS WARRANT NOR THE SHARES OF STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). NO
SALE. TRANSFER OR OTHER DISPOSITION OF THIS WARRANT OR SAID SHARES MAY BE
EFFECTED WITHOUT (i) AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR (ii)
AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY,
THAT SUCH REGISTRATION IS NOT REQUIRED, EXCEPT THAT NO SUCH OPINION SHALL BE
REQUIRED IF SUCH SALE IS PURSUANT TO RULE 144 PROMULGATED UNDER THE ACT.
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
THIS CERTIFIES THAT, for value received LINC CAPITAL MANAGEMENT, a
division of LINC CAPITAL, INC., ("Warrantholder") is entitled to subscribe for
and purchase 45,000 shares (as adjusted pursuant to provisions hereof, the
"Shares") of the fully paid and nonassessable Series A Common Stock (the "Common
Stock") of THE EDISON PROJECT, INC., a Delaware corporation with its principal
place of business at 000 XXXXX XXXXXX, 00XX XXXXX, XXX XXXX, XX 00000 (the
"Company"), at a price per share of $2.00 (such price and such other price as
shall result, from time to time, from adjustments specified herein is herein
referred to as the "Warrant Price") subject to the provisions and upon the terms
and conditions hereinafter set forth. As used herein, the term "Grant Date"
shall mean JUNE 30, 1997.
1. Term. The purchase rights represented by this Warrant are
exercisable, in whole or in part, at any time and from time to time from and
after the Grant Date and on or prior to the earlier of (i) not less than five
(5) years nor more than seven (7) years after the Borrower's initial public
offering or (ii) ten (10) years from the date of the final loan made to the
Company by Warrantholder under the Equipment Note Loan and Security Agreement,
dated as of the date hereof, between Warrantholder and The Edison Project L.P.
(the "Loan Agreement").
2. Method of Exercise; Net Issue Exercise.
2.1 Method of Exercise; Payment; Issuance of New Warrant. The
purchase rights represented by this Warrant may be exercised by the holder of
this Warrant, in whole or in part and from time to time, by the surrender of
this Warrant (with the notice of exercise form attached hereto as Annex A duly
executed) at the principal office of the Company and by the payment to the
Company, by wire transfer or cashier's check, of an amount equal to the then
applicable Warrant Price per share multiplied by the number of Shares then being
purchased. The holder of this Warrant may make any exercise of this Warrant
contingent upon the consummation of a public offering of the Company's Common
Stock under the Securities Act of 1933, as amended (the "Act"). The
Warrantholder shall be deemed
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to have become the holder(s) of record of, and shall be treated for all purposes
as the record holder(s) of, the Shares represented thereby (and such Shares
shall be deemed to have been issued) immediately prior to the close of business
on the date or dates upon which this Warrant is exercised. In the event of any
exercise of the rights represented by this Warrant, certificates for the Shares
so purchased shall be delivered to the holder hereof as soon as possible (and in
any event within five business days of receipt of such notice) and, unless this
Warrant has been fully exercised or expired, a new Warrant representing the
portion of the Shares, if any, with respect to which this Warrant shall not then
have been exercised shall also be issued to the holder hereof as soon as
possible (and in any event within such five business day period).
2.2 Non-Cash Exercise.
Until the Company has registered the Shares issuable upon exercise of
this Warrant under the Act:
(a) In lieu of payment in cash, the rights represented by this
Warrant may also be exercised by a written notice of exercise in the form of
Annex A attached hereto specifying that the holder of this Warrant wishes to
convert all or any portion of this Warrant (the "Conversion Right") into a
number of Shares equal to the quotient obtained by dividing (x) the value of the
Shares subject to the portion of this Warrant being exercised (determined by
subtracting the aggregate Warrant Price for such Shares in effect immediately
prior to the exercise of the Conversion Right from the aggregate Fair Market
Value of the Shares issuable upon exercise of such portion of this Warrant
immediately prior to the exercise of the Conversion Right) by (y) the Fair
Market Value of one share of Common Stock immediately prior to the exercise of
the Conversion Right.
(b) For purposes of this Section 2.2, the "Fair Market Value"
of the Company's Common Stock shall be equal to the number of shares of Common
Stock multiplied by (i) if the exercise of this Warrant occurs in connection
with an initial public offering if the Company, 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 or not in connection with an
initial public offering of the Company, the average of the closing bid and asked
prices of the Company's Common Stock quoted in the Over-The-Counter Market
Summary on the Nasdaq National Market or the closing price quoted on any
exchange on which the Common Stock is listed, whichever if applicable, as
published in The Wall Street Journal for the fifteen trading days prior to the
date of determination of Fair Market Value. Notwithstanding the foregoing
sentence, if the Company is party to a merger or sale of all or substantially
all of the Company's assets, "Fair Market Value" shall mean the value that would
have been received in respect of a Warrant Share had the Warrant been exercised
prior to such merger or sale. If the Common Stock is not traded
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Over-The-Counter or on an exchange, or the Company is not a party to a merger or
sale of all or substantially all of its assets, the Fair Market Value shall be
determined in good faith by the Company's board of directors upon a review of
all factors relevant to the value of the Company as a going concern without
applying any minority or illiquidity discounts. If the holder hereof does not
believe the determination of Fair Market Value has been determined by the
Company's board of directors in a manner consistent with the criteria as
provided above the holder hereof shall request the Company to re-determine Fair
Market Value or request that the Fair Market Value shall be determined based on
the factors described above by an investment banker of national reputation
selected by the Company and reasonably acceptable to the holder of this Warrant.
The fees and expenses of such investment banker shall be shared equally between
the Company and the holder hereof.
3. Stock Fully Paid; Reservation of Shares. All Shares that may be
issued upon the exercise of the rights represented by this Warrant will, upon
issuance, be validly issued, fully paid and non-assessable, issued in compliance
with all applicable federal and state securities laws, and free from all taxes,
liens and charges with respect to the issue thereof. During the period within
which the rights represented by this Warrant may be exercised, the Company will
at all times have authorized and reserved for the purpose of issuance upon
exercise of the purchase rights evidenced by this Warrant, a sufficient number
of shares of its Common Stock to provide for the exercise of the rights
represented by this Warrant.
4. Adjustment of Warrant Price and Number of Shares. The number of
Shares purchasable upon the exercise of this Warrant and the Warrant Price shall
be subject to adjustment from time to time upon the occurrence of certain
events, as follows:
(a) Reclassification or Merger, etc.. In case of any
reclassification, change or conversion of securities of the class issuable upon
exercise of this Warrant (other than a change in par value, or from par value to
no par value, or from no par value to par value, or as a result of a subdivision
or combination), or in case of any consolidation or merger of the Company with
or into another corporation or entity (other than a merger with another
corporation or entity in which the Company is the surviving corporation and
which does not result in any reclassification or change of outstanding
securities issuable upon exercise of this Warrant), or in case of any sale of
all or substantially all of the assets of the Company, the Company, or such
successor or purchasing corporation, as the case may be, shall execute a new
Warrant (in form and substance satisfactory to the holder of this Warrant)
providing that the holder of this Warrant shall have the right to exercise such
new Warrant and upon such exercise to receive, in lieu of each share of Common
Stock theretofore issuable upon exercise of this Warrant, the kind and amount of
shares of stock, other securities, money and property receivable upon such
reclassification, change, consolidation, sale of all or substantially all of the
Company's assets or merger by a
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holder of one share of Common Stock. Such new Warrant shall provide for
adjustments that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 4. The provisions of this section (a)
shall similarly apply to successive reclassifications, changes, consolidations,
mergers, sales of assets and transfers.
(b) Subdivisions or Combination of Shares, Stock Dividends. In
the event that the Company shall at any time subdivide the outstanding shares of
Common Stock, or shall issue a stock dividend on its outstanding shares of
Common Stock, the number of Shares issuable upon exercise of this Warrant
immediately prior to such subdivision or immediately prior to the issuance of
such stock dividend shall be proportionately increased, and the Warrant Price
shall be proportionately decreased, and in the event that the Company shall at
any time combine the outstanding shares of Common Stock, the number of Shares
issuable upon exercise of this Warrant immediately prior to such combination
shall be proportionately decreased, and the Warrant Price shall be
proportionately increased, effective at the close of business on the date of
such subdivision, stock dividend or combination, as the case may be.
(c) No Impairment. The Company will not, by amendment of its
Amended and Restates Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 4 and in the taking of all
such action as may be reasonably requested by the Warrantholder in order to
protect the rights of the holder of this Warrant against impairment.
(d) Notices of Record Date. In case at any time: (i) the
Company shall declare any dividend upon its Common Stock payable in cash or
stock or make any other distribution to the holders of its Common Stock; (ii)
the Company shall offer for subscription pro rata to the holders of its Common
Stock any additional shares of stock of any class, or other rights; (iii) there
shall be any capital reorganization or reclassification of the capital stock of
the Company, or a consolidation or merger of the Company with or into, or a sale
of all or substantially all its assets to another entity or entities; or (iv)
there shall be a voluntary or involuntary dissolution, liquidation or winding up
of the Company; then, in any one or more of said cases, the Company shall give,
by first class mail, postage prepaid, or by telex or telecopier, addressed to
the holder of this Warrant at the address of such holder as shown on the books
of the Corporation, (A) at least 10 business 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 or subscription rights or for determining rights
to vote in respect of any such reorganization, reclassification,
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consolidation, merger, sale, dissolution, liquidation or winding up, and (B) in
the case of any such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up, at least 10 business days' prior
written notice of the date when the same shall take place. Such notice in
accordance with the foregoing clause (A) shall also specify, in the case of any
such dividend, distribution or subscription rights, the date on which the
holders of Common Stock shall be entitled thereto, and such notice in accordance
with the foregoing clause (B) shall also specify the date on which the holders
of Common Stock shall be entitled to exchange their Common Stock for securities
or other property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, as the case
may be.
5. Notice of Adjustments. Whenever the Warrant Price shall be adjusted
pursuant to the provisions hereof, the Company shall within ten (10) business
days of such adjustment deliver a certificate signed by its chief financial
officer to the holder of this Warrant setting forth, in reasonable detail, the
event requiring the adjustment, the amount of the adjustment, the method by
which such adjustment was calculated, and the Warrant Price after giving effect
to such adjustment.
6. Fractional Shares. No fractional shares of Common Stock will be
issued in connection with any exercise hereunder, but in lieu of such fractional
shares the Company shall make a cash payment therefor upon the basis of the
Warrant Price then in effect.
7. Compliance with Securities Act; Disposition of Warrant or Shares of
Common Stock.
(a) Compliance with Securities Act. The holder of this
Warrant, by acceptance hereof, agrees that this Warrant, and the Common Stock to
be issued upon exercise hereof are being acquired for investment purposes only
and that such holder will not offer, sell or otherwise dispose of this Warrant
or any shares of Common Stock to be issued upon exercise hereof except under
circumstances which will not result in a violation of the Act and as permitted
by Section 7(b) below. This Warrant and all shares of Common Stock issued upon
exercise of this Warrant (unless registered under the Act) shall be stamped or
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"). NO SALE OR DISPOSITION MAY
BE EFFECTED WITH OUT (i) AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR (ii) AN OPINION OF COUNSEL FOR THE HOLDER,
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT
REQUIRED, EXCEPT THAT NO SUCH OPINION SHALL BE REQUIRED IF SUCH SALE IS
PURSUANT TO RULE
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144 PROMULGATED UNDER THE ACT, AND THE TRANSFER OF THIS SECURITY IS
SUBJECT TO THE CONDITIONS SPECIFIED IN THE WARRANT TO PURCHASE SHARES
OF COMMON STOCK, DATED AS OF JUNE 30, 1997, BETWEEN LINC CAPITAL
MANAGEMENT AND THE EDISON PROJECT INC.
(b) Disposition of Warrant and Shares. With respect to any
offer, sale or other disposition of this warrant or any shares of Common Stock
acquired pursuant to the exercise of this Warrant prior to registration of such
shares, the holder hereof and each subsequent holder of this Warrant agrees to
give written notice to the Company prior thereto, describing briefly the manner
thereof, together with a written opinion of such holder's counsel, if reasonably
requested by the Company, to the effect that such offer, sale or other
disposition may be effected without registration or qualification (under the Act
as then in effect) of this Warrant or such shares of Common Stock and indicating
whether or not under the Act certificates for this Warrant or such shares of
Common Stock to be sold or otherwise disposed of require any restrictive legend
as to applicable restrictions on transferability in order to insure compliance
with the Act. Each certificate representing this Warrant or the shares of Common
Stock thus transferred (except a transfer pursuant to Rule 144) shall bear a
legend as to the applicable restrictions on transferability in order to insure
compliance with the Act, unless in the aforesaid opinion of counsel for the
holder, such legend is not required in order to insure compliance with the Act.
Nothing herein shall restrict the transfer of this Warrant or any portion hereof
by the initial holder hereof or any successor holder to any affiliate of such
holder, to any partnership affiliated with such holder, or to any partner of any
such partnership, provided such transfer may be made in compliance with
applicable federal and state securities laws provided, further, that any such
transferee shall be a financial institution. The Company may issue stop transfer
instructions to its transfer agent in connection with the foregoing
restrictions.
8. Rights as Shareholders. No holder of this Warrant. as such, shall be
entitled to vote or receive dividends or be deemed the holder of Common Stock
hereof or otherwise be entitled to any voting or other rights as a shareholder
of the Company, until this Warrant shall have been exercised and the Shares
purchasable upon the exercise shall have become deliverable, as provided herein.
9. Issuance Tax. The issuance of certificates for shares of Common
Stock upon exercise of this Warrant shall be made without charge to the holder
hereof for any issuance tax in respect hereof, provided that the Company shall
not be required to pay any tax which 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 holder of this Warrant.
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10. Modification and Waiver. This Warrant and any provision hereof may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the Company and the holder of this Warrant.
11. Notices. Any notice, request or other document required or
permitted to be given or delivered to the holder hereof or the Company shall be
delivered, or shall be sent by certified or registered mail, postage prepaid, to
such holder at its address as shown on the books of the Company or to the
Company at the address indicated therefore on the signature page of this
Warrant.
12. Binding Effect on Successors. This Warrant shall be binding upon
any corporation succeeding the Company by merger, consolidation or acquisition
of all or substantially all of the Company's assets, and all of the obligations
of the Company relating to the Common Stock issuable upon the exercise of this
Warrant shall survive the exercise and termination of this Warrant and all of
the covenants and agreements of the Company shall inure to the benefit of the
successors and assigns of the holder hereof. The Company will, at the time of
the exercise of this Warrant, in whole or in part, upon request of the holder
hereof but at the Company's expense, acknowledge in writing its continuing
obligation to the holder hereof in respect of any rights (including, without
limitation, any right to registration of the shares of Registrable Shares) to
which the holder hereof shall continue to be entitled after such exercise in
accordance with this Warrant; provided that the failure of the holder hereof to
make any such request shall not affect the continuing obligation of the Company
to the holder hereof in respect of such rights.
13. Lost Warrants or Stock Certificates. The Company covenants to the
holder hereof that upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction, or mutilation of this Warrant or any
stock certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or stock
certificate, or like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant or stock certificate.
14. Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.
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15. Governing Law. THIS WARRANT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF
THE STATE OF NEW YORK.
The Edison Project, Inc.
By: /s/ Xxxxx Xxxxxxxx
-----------------------
Name: Xxxxx Xxxxxxxx
Its: President
Date: JUNE 30, 1997
Accepted and Agreed:
LINC Capital, Inc.
By: /s/ Xxxxxx X. Xxxxxx
-----------------------
Name: Xxxxxx X. Xxxxxx
Its: Vice President
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ANNEX A
Notice of Exercise
To:
THE EDISON PROJECT INC.
000 XXXXX XXXXXX, 00xx XXXXX
XXX XXXX, XX 00000
Attention: Chief Financial Officer
[1. The undersigned hereby elects to purchase shares of Common
Stock of THE EDISON PROJECT INC. pursuant to the terms of the attached Warrants,
and tenders herewith payment of the purchase price of such shares in full.]
[1. The undersigned hereby elects to purchase shares of Common
Stock of THE EDISON PROJECT INC. pursuant to an non-cash conversion of the
Warrant as provided in Section 2.2 of the Warrant.*]
2. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name or names as are specified
below:
LINC CAPITAL MANAGEMENT,
a division of LINC CAPITAL, INC.
000 XXXX XXXXXX XXXXX, XXXXX 0000
XXXXXXX, XXXXXXXX 00000-0000
3. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing such shares.
LINC CAPITAL MANAGEMENT,
a division of LINC CAPITAL, INC.
By: /s/ Xxxxxx X. Xxxxxx
-----------------------
(Signature)
Its: Vice President
-----------------------
-----------------------
(Date)
-----------------------
* Alternative for non-cash exercise pursuant to Section 2.2.
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