EXHIBIT (d)(5)
OPTION AGREEMENT
AGREEMENT, dated as of March 30, 2000 between XXXXXX GUARANTY
TRUST COMPANY OF NEW YORK ("MGT" and, in its capacity as holder of the option
granted hereunder, together with its successors and permitted assignees the
"OPTIONHOLDER") and WSI INC., a Delaware corporation ("WSI").
WHEREAS, H. Xxxxxxxxxxx Xxxxxxx ("XXXXXXX"), the owner of all
the shares of capital stock of WSI, has entered into an Amended and Restated
Credit Agreement dated as of February 29, 2000 with MGT, as Lender and as Agent
(the "CREDIT AGREEMENT");
WHEREAS, WSI is a holder of shares of Class A common stock,
par value $.01 per share (the "SHARES"), of Edison Schools Inc., a Delaware
corporation (the "COMPANY");
WHEREAS, pursuant to Section 3.05(b) of the Credit Agreement,
it is a condition to MGT's obligation as Lender to make certain loans to Xxxxxxx
thereunder that WSI shall have granted certain options on Shares to the
Optionholder by executing this Agreement, and WSI is willing to do so;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
STOCK OPTION
Section 1.01 GRANT OF STOCK OPTION. (a) WSI hereby grants to
Optionholder an irrevocable option (the "OPTION") to purchase a number of Shares
determined as set forth below (the "OPTIONED SHARES") at a purchase price of
$3.00 per Optioned Share (the "PURCHASE PRICE"), such amount being subject to
adjustment from time to time pursuant to Section 1.06.
(b) The number of Shares constituting the "OPTIONED SHARES"
shall as of the date hereof be 117,500, such amount being subject to adjustment
from time to time pursuant to Section 1.06.
(c) "MARKET PRICE PER COMMON SHARE" for any day shall be the
price determined pursuant to whichever of the following clauses (1) or (2) is
applicable on the next preceding day on which the exchange or market in question
is open for business: (1) the last sale price of Shares on such date or, if no
such sale takes place on such date, the average of the closing bid and asked
prices thereof on such date, in each case as officially reported on the
principal national securities exchange on which the Shares are then listed or
admitted to trading, or (2) if no Shares are then listed or admitted to trading
on any national securities exchange but the Shares are designated as a national
market system security by the National Association of Securities Dealers, the
last trading price of the Shares on such date, or if the Shares are not so
designated, the average of the reported closing bid and asked prices thereof on
such date as shown by the NASD automated quotation system or, if no Shares are
then quoted in such system, as published by the National Quotation Bureau,
Incorporated or any successor organization, and in any case as reported by any
member firm of the New York Stock Exchange selected by the Company, PROVIDED
that if no Shares are then listed or admitted to trading on any national
exchange or designated as a national market system security and if no closing
bid and asked prices thereof are then so quoted or published in the
over-the-counter market, the Market Price per Common Share for any day shall be
the fair value of a Share as determined in good faith by the Optionholder.
Section 1.02 EXERCISE OF OPTION. (a) Subject to the conditions
set forth in Section 1.05 hereof, the Option may be exercised by Optionholder,
in whole or in part, at any time or from time to time after the date hereof and
on or prior to the earlier to occur of (i) April 30, 2004 or, if later, the date
30 days after the release of the First Vantage lien referred to below and (ii)
the sale or other disposition of the Optioned Shares by MGT in its capacity as
agent and secured party (in such capacity, the "SECURITY AGENT") under the
Guarantor Security Agreement dated as of February 10, 1995 (as amended to the
date hereof and as amended from time to time thereafter, the "SECURITY
AGREEMENT") between WSI and the Security Agent in connection with any exercise
of remedies thereunder, PROVIDED that the Option may not be exercised while the
lien of First Vantage Bank - Tennessee (as successor to First Knoxville Bank) on
the Optioned Shares continues to exist. In the event that Optionholder wishes to
exercise the Option for all or some of the Optioned Shares, Optionholder shall
send a written notice (the "EXERCISE NOTICE") to the Escrow Agent (as defined in
Section 1.04) or (if the Optioned Shares are still held by the Security Agent)
the Security Agent, specifying the total number of Optioned Shares it wishes to
purchase pursuant to such exercise and the place, the date (which must be a
business day not less than one nor more than 20 business days (as defined in the
Credit Agreement) from the date of the Exercise Notice), and the time for the
closing of such purchase, PROVIDED that such date and time may be earlier than
one day after the Exercise Notice if reasonably practicable.
Each closing of a purchase of Optioned Shares (a "CLOSING")
shall take place at the place, on the date and at the time designated by
Optionholder in its Exercise Notice, provided that if, at the date of the
Closing herein provided for, the conditions set forth in Section 1.05 shall not
have been satisfied (or waived by WSI), Optionholder may postpone the Closing
until a date within five business days after such conditions are satisfied.
(b) Optionholder shall not be under any obligation to deliver
any Exercise Notice and may allow the Option to terminate without purchasing any
Optioned Shares hereunder, provided that once Optionholder has delivered to WSI
an Exercise Notice, subject to the terms and conditions of this Agreement,
Optionholder shall be bound to effect the purchase as described in such Exercise
Notice.
Section 1.03 CLOSING. At a Closing, (a) WSI shall cause
whichever of the Escrow Agent or the Security Agent holds them to deliver to
Optionholder a certificate or certificates (the "CERTIFICATES") representing the
Optioned Shares, duly endorsed or accompanied by stock powers duly executed in
blank and (b) Optionholder shall pay, at its election, (x) by wire transfer of
immediately available funds to a bank account designated by WSI (which shall be
a collateral account with the Security Agent if the Optioned Shares are still
held by the Security Agent) an amount equal to the number of Optioned Shares
being purchased at such Closing multiplied by the Purchase Price or (y) by
receiving from WSI the number of Optioned Shares equal to the number of Optioned
Shares otherwise issuable upon such exercise less the number of Optioned Shares
having a value on the date of exercise equal to the Purchase Price applicable to
the number of Optioned Shares for which this Option is being exercised. For the
purposes of clause (y) above, such per Share value shall be the Market Value per
Common Share for the date of such Closing.
Section 1.04 HOLDING OF OPTIONED SHARES; DEPOSIT IN ESCROW.
(a) The Optioned Shares are currently being held by the Security Agent pursuant
to the Security Agreement, subject to the first lien on the Security Agent on
behalf of the Optionholder, and as bailee for First Vantage Bank - Tennessee (as
successor to First Knoxville Bank), which has a second lien on the Optioned
Shares.
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(b) Concurrently with the execution and delivery of this
Agreement, WSI, Optionholder, the Security Agent and MGT, in its capacity as
escrow agent (in such capacity, the "ESCROW AGENT"), shall execute an Agreement
regarding the Optioned Shares in the form attached hereto as Annex A (the
"ESCROW AGREEMENT").
(c) Upon the release of the lien on the Optioned Shares
pursuant to the terms of the Security Agreement, WSI shall cause the Security
Agent to deliver a certificate or certificates representing all of the Optioned
Shares determined as of that time to the Escrow Agent, duly endorsed in blank
for transfer pursuant to the Escrow Agreement. If the number of Optioned Shares
shall thereafter increase pursuant to Section 1.06, then WSI shall promptly
deliver one or more additional certificates representing such additional
Optioned Shares to the Escrow Agent in the manner and form prescribed herein.
Optioned Shares so delivered to the Escrow Agent shall remain subject to the
Escrow Agreement until the earlier of (i) the purchase of all such Optioned
Shares by the Optionholder hereunder or (ii) termination of this Agreement.
Section 1.05 CONDITIONS TO WSI'S OBLIGATIONS. The obligation
of WSI to sell Optioned Shares at any Closing is subject to the following
conditions:
(i) The representation and warranty of
Optionholder contained in Article III shall be true and
correct in all material respects on the date thereof.
(ii) There shall be no preliminary or
permanent injunction or other order, decree or ruling issued
by a court of competent jurisdiction or by a governmental,
regulatory or administrative agency or commission, nor any
statute, rule, regulation or order promulgated or enacted by
any governmental authority, prohibiting or otherwise
restraining such exercise of the Option.
Section 1.06 ADJUSTMENT UPON CHANGES IN CAPITALIZATION OR
MERGER. In the event of any change in the Company's capital stock by reason of
stock dividends, stock splits, mergers, consolidations, recapitalizations,
combinations, conversions, exchanges of shares, extraordinary or liquidating
dividends, transfer or sale of all or substantially all of the assets of the
Company or other similar changes in the corporate or capital structure of the
Company which would have the effect of diluting the Optionholder's rights
hereunder, the number and kind of shares or securities subject to the Option and
the purchase price per Optioned Share (but not the total purchase price) shall
be appropriately and equitably adjusted so that the Optionholder shall receive
upon exercise of the Option, the number and class of shares or other securities
or property that the Optionholder would have received in respect of the Optioned
Shares purchasable upon exercise of the Option if the Option had been exercised
immediately prior to such event. WSI shall take such steps in connection with
such consolidation, merger, liquidation or other such action as may be necessary
to assure that the provisions hereof shall thereafter apply as nearly as
possible to any securities or property thereafter deliverable upon exercise of
the Option.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF WSI
WSI represents and warrants to the Optionholder that:
Section 2.01 VALID TITLE. WSI is the sole, true, lawful and
beneficial owner of the Optioned Shares with no restrictions on WSI's voting
rights or rights of disposition pertaining thereto other than the Shareholders'
Agreement, the Credit Agreement and the Security
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Agreement. At any Closing, WSI will convey good and valid title to the Optioned
Shares being purchased free and clear of any and all claims, liens, charges,
encumbrances and security interests, except, if still existing, the first lien
of the Security Agent under the Security Agreement. None of the Optioned Shares
is subject to any voting trust or other agreement or arrangement with respect to
the voting of such Shares other than the Shareholders' Agreement, the Credit
Agreement and the Security Agreement.
Section 2.02 NON-CONTRAVENTION. The execution, delivery and
performance by WSI of this Agreement and the consummation of the transactions
contemplated hereby (i) do not violate the Shareholders' Agreement and (ii) do
not and will not contravene or constitute a default under or give rise to a
right of termination, cancellation or acceleration of any right or obligation of
WSI or to a loss of any benefit of WSI under any provision of applicable law or
regulation or of any agreement, judgment, injunction, order, decree or other
instrument binding on WSI or result in the imposition of any lien on any asset
of WSI.
Section 2.03 BINDING EFFECT. This Agreement is the valid and
binding agreement of WSI, enforceable against WSI in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency, moratorium or
other similar laws relating to creditors' rights generally.
Section 2.04 NO PRIOR PROXIES FOR OR ENCUMBRANCES ON SHARES.
Prior to the date hereof, WSI has not, except as set forth in Exhibit C to the
Credit Agreement, directly or indirectly, (i) granted any proxies or entered
into any voting trust or other agreement or arrangement with respect to the
voting of any Shares held by it or (ii) acquired, sold, assigned, transferred,
encumbered or otherwise disposed of, or entered into any contract, option or
other arrangement or understanding with respect to the direct or indirect
acquisition or sale, assignment, transfer, encumbrance or other disposition of,
any Shares.
ARTICLE III
REPRESENTATION AND
WARRANTY OF OPTIONHOLDER
Optionholder represents and warrants to WSI:
Section 3.01 ACQUISITION FOR OPTIONHOLDER'S ACCOUNT. Any
Optioned Shares to be acquired upon exercise of the Option will be acquired by
Optionholder for its own account and not with a view to the public distribution
thereof and will not be transferred except in compliance with the Securities Act
of 1933.
ARTICLE IV
COVENANTS OF WSI
WSI hereby covenants and agrees that:
Section 4.01 NO PROXIES FOR OR ENCUMBRANCES ON SHARES. WSI
shall at all times during the term of the Option own, free and clear of any and
all claims, liens, charges, encumbrances and security interests other than
pursuant to the Credit Agreement and Security Agreement, a number of Shares
equal to the Optioned Shares, and except pursuant to the terms of this Agreement
and the Security Agreement, from and after the date hereof WSI shall not,
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without the prior written consent of Optionholder, directly or indirectly, grant
any proxies or enter into any voting trust or other agreement or arrangement
with respect to the voting of such number of Shares held by it.
ARTICLE V
MISCELLANEOUS
Section 5.01 EXPENSES. All costs and expenses, including
without limitation Optionholder's legal expenses, incurred in connection with
the preparation, amendment, administration or enforcement of this Agreement,
shall be paid by WSI (but any payment on account thereof made by Xxxxxxx shall
satisfy WSI's obligation under this Section 5.01).
Section 5.02 FURTHER ASSURANCES. In the event the Optionholder
exercises the Option, the Optionholder and WSI will each execute and deliver or
cause to be executed and delivered all further documents and instruments and use
its best efforts to secure such consents and take all such further action as may
be reasonably necessary in order to consummate the transactions contemplated
hereby or to enable the Optionholder to exercise and enjoy all benefits and
rights of WSI with respect to the Optioned Shares.
Section 5.03 ADDITIONAL AGREEMENTS. Subject to the terms and
conditions of this Agreement, each of the parties hereto agrees to use all
reasonable efforts to take, or cause to be taken, all action and to do, or cause
to be done, all things necessary, proper or advisable under applicable laws and
regulations and which may be required under any agreements, contracts,
commitments, instruments, understandings, arrangements or restrictions of any
kind to which such party is a party or by which such party is governed or bound,
to consummate and make effective the transactions contemplated by this
Agreement, to obtain all necessary waivers, consents and approvals and effect;
all necessary registrations and filings, responses to requests for additional
information related to such filings, and submission of information requested by
governmental authorities, and to rectify any event or circumstances which could
impede consummation of the transactions contemplated hereby.
Section 5.04 SPECIFIC PERFORMANCE. The parties hereto agree
that Optionholder would be irreparably damaged if for any reason WSI failed to
sell the Optioned Shares (or other securities deliverable pursuant to Section
1.06) upon exercise of the Option or to perform any of its other obligations
under this Agreement, and that Optionholder would not have an adequate remedy at
law for money damages in such event. Accordingly, Optionholder shall be entitled
to specific performance and injunctive and other equitable relief to enforce the
performance of this Agreement by WSI. This provision is without prejudice to any
other rights that the Optionholder may have against WSI for any failure to
perform its obligations under this Agreement.
Section 5.05 NOTICES. All notices, requests, claims, demands
and other communications hereunder shall be deemed to have been duly given when
delivered in person, by registered or certified mail (postage prepaid, return
receipt requested) or by confirmed facsimile to such party at its address set
forth on the signature page hereto.
Section 5.06 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
Except insofar as the first sentence of Section 2.01 does not apply to Optioned
Shares already purchased by the Optionholder, all representations and warranties
contained in this Agreement shall survive delivery of and payment for the
Optional Shares.
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Section 5.07 AMENDMENTS; TERMINATION. This Agreement may not
be modified, amended, altered or supplemented, except upon the execution and
delivery of a written agreement executed by the parties hereto. Except as
regards Section 5.01, this Agreement shall terminate upon the earlier of (a) the
transfer of all of the Optioned Shares to Optionholder pursuant to Section 1.03
or (b) the end of the period during which the Option may be exercised.
Section 5.08 SUCCESSORS AND ASSIGNS. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. No party may assign, delegate or
otherwise transfer any of its rights or obligations under this Agreement without
the consent of the other parties hereto, provided that Optionholder may assign
its rights and obligations to any affiliate of Optionholder.
Section 5.09 GOVERNING LAW. This Agreement shall be construed
in accordance with and governed by the law of the State of New York without
giving effect to the principles of conflicts of laws thereof.
Section 5.10 COUNTERPARTS; EFFECTIVENESS. This Agreement may
be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signature thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received counterparts hereof signed by all of the other parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
XXXXXX GUARANTY TRUST
COMPANY OF NEW YORK
By /s/ Xxxxxxx Xxxxxxxx
--------------------
Title: Vice President
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
WSI INC.
By /s/ H. Xxxxxxxxxxx Xxxxxxx
--------------------------
Title: President
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
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