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EXHIBIT 10.7
WARRANT PURCHASE AGREEMENT
THIS WARRANT PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of January 15, 1998, 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"), Phoenix Leasing Incorporated, a
California corporation (the "Purchaser").
The Company desires to sell, and the Purchaser desires to purchase, a
warrant to purchase 25,125 shares of the Company's Series A Common Stock, par
value $0.01 per share (the "Warrant Shares"), at a price per share of $3.98 in
the form attached hereto as Exhibit A and on the terms and conditions set forth
herein (the "Warrant"), in connection with Purchaser's extension of a credit
facility to the Company pursuant to the Senior Loan and Security Agreement,
dated as of the date hereof (the "Financing").
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the parties hereto agree as follows:
A. PURCHASE TERMS
1. Purchase of the Warrant. The purchase and sale of the Warrant shall
take place at the offices of the Purchaser, at such place as the Company and the
Purchaser shall agree, on January 15, 1998 (the "Closing") pursuant to the
Financing.
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) Disclosure: Sophistication. The Purchaser represents that it
understands that the Warrant, and the Warrant Shares issuable upon exercise
thereof, 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
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
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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 California.
(b) Disposition of the Purchaser's Rights. In no event will the
Purchaser make a disposition of any of its rights to acquire the Warrant Shares
unless and until the Purchaser 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 Purchaser)
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
Purchaser at the request of the Purchaser by the staff of the SEC or a ruling
shall have been issued to the Purchaser 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 Purchaser 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 Warrants.
(c) Financial Risk. The Purchaser 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 Purchaser understands that the
Company Shares have not been reviewed or approved by the SEC or any similar
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body not registered under the Securities Exchange Act of 1934, as amended (the
"1934 Act") and, as of the date of execution hereof, 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 Warrant, or (ii) the Warrant Shares issuable upon
exercise of the Warrant, it may be required to hold such securities for an
indefinite period.
4. Confidential Information. The Purchaser will not use or divulge any
nonpublic information provided by or developed for the Purchaser 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 Warrant Shares 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).
B. REGISTRATION AGREEMENT
The Company hereby grants to the Purchaser with respect to the Warrant
Shares the "piggy-back" registration rights granted to other holders of Company
stock (the "Other Holders"), as set forth in the terms and provisions of Annex I
hereto (the "Annex Registration Rights"). The Purchaser's "piggy-back"
registration rights with respect to the Warrant Shares shall at all times be the
same as the "piggy-back" registration rights of the Other Holders,
notwithstanding any changes to the stockholder's agreement from which the Annex
Registration Rights is derived; 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
extended loans to the Company secured by computer equipment). The Company
represents and warrants to the Purchaser it has taken all action necessary,
including, if required, obtaining the consent of the Other Holders, to grant the
Purchaser the registration rights described herein. The Company further
represents and warrants that the Company's issuance of the Warrant to the
Purchaser does not violate or conflict with any rights of first refusal granted
to any other person, including any of the Other Holders.
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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
Warrant 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 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
"Option Schedule". The Option Schedule accurately sets forth the information set
forth thereon. 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),
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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.
(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,
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. 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 Purchaser hereunder.
(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
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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.
(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
Purchaser are also for the benefit of, and enforceable by, any subsequent holder
of the Warrant Shares.
(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, but all such counterparts taken together shall constitute
one 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 California, without
giving effect to any choice of law or conflict of law rules or provisions
(whether of the State of California or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the state of
California.
(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
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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 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 copy to:
The Edison Project
c/o WSI Inc.
000 XxxxxxxXxxx Xxxxxx
000 Xxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxx Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
and to:
Cadwalader, Xxxxxxxxxx & Xxxx
000 Xxxxxx Xxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Phoenix Leasing Incorporated
0000 Xxxxxx Xxxxxxxxx
Xxx Xxxxxx, Xxxxxxxxxx 00000
Attention:
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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.
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(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 party's costs and expenses in connection therewith, including
reasonable attorneys' fees.
(k) Arbitration. 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, 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
Association of the Bar of The City of Chicago 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 By: /s/ Xxxxx Xxxxxxxx
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Secretary Name: Xxxxx Xxxxxxxx
Title: President
(Corporate Seal)
Phoenix Leasing Incorporated
a California corporation
By: /s/ N. H. Xxxxxx
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Its: Vice President
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