Exhibit 10.41
EXECUTION COPY
WARRANT AGREEMENT
BETWEEN
EDISON SCHOOLS INC.,
AND
SCHOOL SERVICES LLC
WARRANT AGREEMENT
DATED AS OF JULY 31, 2002
COUDERT BROTHERS LLP
0000 XXXXXX XX XXX XXXXXXXX
XXX XXXX, XXX XXXX 00000-0000
TABLE OF CONTENTS
PAGE
----
SECTION 1. Purchase of the Warrant........................................ 1
SECTION 2. Representations and Warranties of the Company.................. 1
2.1 Organization, Corporate Power and Licenses........................... 1
2.2 Capital Stock........................................................ 1
2.3 Valid Issuance....................................................... 2
2.4 Authorization; No Breach............................................. 2
2.5 SEC Documents........................................................ 2
2.6 Broker's Fee......................................................... 3
2.7 Compliance With ERISA................................................ 3
2.8 No Voting Trusts..................................................... 3
SECTION 3. Representations and Warranties of School Services.............. 3
3.1 Organization....................................................... 3
3.2 Accredited Investor................................................ 3
3.3 Securities Registration............................................ 4
3.4 Investment Intent.................................................. 4
3.5 Broker's Fees...................................................... 4
3.6 Compliance with ERISA.............................................. 4
3.7 Legends............................................................ 4
SECTION 4. Registration Rights............................................ 5
4.1 Rule 144........................................................... 5
4.2 Company Registration............................................... 5
4.3 Shelf Registration................................................. 5
4.4 Obligations of the Company......................................... 6
4.5 Furnish Information................................................ 8
4.6 [Intentionally Omitted]............................................ 8
4.7 Expenses of Company Registration................................... 8
4.8 Expenses of Shelf Registration..................................... 8
4.9 Underwriting Requirements.......................................... 8
4.10 Delay of Registration............................................. 9
4.11 Indemnification................................................... 9
4.12 Assignment of Registration Rights................................. 11
4.13 Limitations on Subsequent Registration Rights..................... 11
4.14 "Market Standoff" Agreement....................................... 11
4.15 Termination of Registration Rights................................ 12
SECTION 5. Indemnification................................................ 12
5.1 School Services Indemnification.................................... 12
5.2 Company Indemnification............................................ 12
5.3 Expenses........................................................... 12
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SECTION 6. Miscellaneous.................................................. 12
6.1 Entire Agreement................................................... 12
6.2 Further Assurances................................................. 13
6.3 Survival........................................................... 13
6.4 Successors and Assigns............................................. 13
6.5 Amendments......................................................... 13
6.6 Confidentiality.................................................... 13
6.7 Severability....................................................... 13
6.8 Notices............................................................ 13
6.9 Governing Law; Waiver of Jury Trial................................ 14
6.10 Counterparts...................................................... 14
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WARRANT AGREEMENT
WARRANT AGREEMENT ("Agreement"), dated as of July 31, 2002 between EDISON
SCHOOLS INC., a Delaware corporation (the "Company") and SCHOOL SERVICES LLC, a
Delaware limited liability company ("School Services").
RECITALS:
WHEREAS, (i) at the request of Edison Receivables Company LLC ("ERC"), a
wholly-owned special purpose subsidiary of the Company, as additional
consideration for School Services to enter into that certain Amended and
Restated Credit and Security Agreement, dated as of July 31, 2002 (the "A&R
Credit Agreement") among ERC, Xxxxxxx Xxxxx Mortgage Capital, Inc. ("Xxxxxxx")
and School Services, and (ii) for which ERC has paid fair consideration to the
Company, the Company has agreed to issue to School Services a warrant
substantially in the form attached hereto as Exhibit A (the "Warrant"), to
purchase up to an aggregate of 478,435 shares of Class A Common Stock, par value
$.01 per share, of the Company (the "Common Stock"), subject to adjustment as
set forth in the Warrant (the shares of Common Stock issuable upon exercise of
the Warrant are referred to herein as the "Warrant Shares").
NOW, THEREFORE, in consideration of the premises and mutual agreements
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and School Services
hereby agree as follows:
Section 1. Purchase of the Warrant. At the request of ERC and as
additional consideration for School Services to enter into the A&R Credit
Agreement and for which ERC has paid the Company fair consideration, the Company
hereby agrees to issue to School Services the Warrant subject to and upon the
terms and conditions set forth herein and in the Warrant. The purchase and sale
of the Warrant (the "Closing") shall take place at 10.00 AM at the offices of
Coudert Brothers LLP, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 on
July 31, 2002 or at such other time, place and date as the Company and School
Services agree (the "Closing Date"). At the Closing, (i) each of the Company and
School Services shall execute and deliver this Agreement, and (ii) the Company
shall issue the Warrant to School Services.
Section 2. Representations and Warranties of the Company. The Company
hereby represents and warrants to School Services that as of the Closing Date:
2.1 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 Delaware and has the requisite corporate power and authority and
all material governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted and to enter into and fulfill
its obligations under this Agreement and the Warrant.
2.2 Capital Stock. As of July 26, 2002, the capital stock of the Company
consisted solely of: (i) 155,000,000 authorized shares of common stock, par
value $.01 per share (collectively, the "Common Stock") of which (A) 150,000,000
shares have been designated Class A Common Stock, 52,018,855 shares of which are
issued and outstanding and 11,984,979 shares are reserved for issuance upon
exercise of the options and warrants of the Company currently outstanding, (B)
5,000,000 authorized shares have been designated Class B Common
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Stock, 1,805,132 shares of which are issued and outstanding; and (ii) 5,000,000
shares of preferred stock, par value $.01 per share, none of which are issued
and outstanding. The rights, privileges and preferences of the Common Stock and
the Preferred Stock are as stated in the Sixth Amended and Restated Certificate
of Incorporation of the Company dated as of November 17, 1999, as amended.
Except as set forth above and except for 1,911,143 shares reserved for issuance
under the Company's Stock Incentive Plan, there are no options, warrants, calls,
pre-emptive rights, subscriptions or other rights, agreements, arrangements or
commitments of any character, relating to the issued or unissued capital stock
of the Company, obligating the Company to issue, transfer or sell or cause to be
issued, transferred or sold, any shares of capital stock or other equity or debt
interest in, the Company or securities convertible into or exchangeable for such
shares or equity interests, or obligating the Company to grant, extend or enter
into any such option, warrant, call, subscription or other right, agreement,
arrangement or commitment.
2.3 Valid Issuance. The Company shall at all times keep a sufficient
number of authorized and unissued shares of Common Stock reserved for issuance
upon the exercise of the Warrant. All outstanding shares of the Company's stock
are, and upon issuance in accordance with this Agreement and the Warrant, the
Warrant Shares will be, (i) duly and validly issued, (ii) fully paid and
nonassessable, (iii) free of any liens other than those created by the owner
thereof, and (iv) issued in compliance with all applicable federal and state
securities laws.
2.4 Authorization; No Breach. The execution, delivery and performance of
this Agreement and the Warrant and the issuance of the Warrant Shares as
provided herein and therein have been duly authorized by the Company. Each of
this Agreement and the Warrant constitutes a valid and binding obligation of the
Company enforceable against the Company in accordance with its respective terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency or
other similar rights generally affecting the enforceability of creditors rights
or by general principles of equity. The execution and delivery by the Company of
this Agreement and the Warrant, the offering, sale and issuance of the Warrant,
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 (with or
without notice or lapse of time or both), (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.
2.5 SEC Documents. The Company has filed all required reports, schedules,
forms, statements and other documents (including exhibits and all other
information incorporated therein) with the Securities and Exchange Commission
(the "SEC") since January 1, 2001 (any such document being filed prior to the
date hereof) (the "Company SEC Documents"). Except to the extent that
information contained in any Company SEC Documents has been revised or
superseded by a subsequently filed Company SEC Document (any such document being
filed
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prior to the date hereof): (i) as of their respective dates, the Company SEC
Documents complied in all material respects with the requirements of the
Securities Act of 1933, as amended (the "Act") or the Securities Exchange Act of
1934, as amended (the "1934 Act"), as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such Company SEC
Documents, and none of the Company SEC Documents when filed contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not misleading; (ii) none
of the Company SEC Documents contains any untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading; and (iii) the financial statements of the
Company included in the Company SEC Documents comply as to form, as of their
respective dates of filing with the SEC, in all material respects with
applicable accounting requirements and published rules and regulations of the
SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles (except, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
present in all material respects the consolidated financial position of the
Company and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal recurring
year-end audit adjustments).
2.6 Broker's Fee. No person or entity acting on behalf of or under the
authority of the Company is or will be entitled to any broker's, finder's or
similar fee or commission in connection with the transactions contemplated
hereby.
2.7 Compliance With ERISA. In reliance upon the representation made by
School Services in Section 3.6 hereof, the purchase of the Warrant by School
Services will not result in a prohibited transaction under Section 406 of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") or Section
4975 of the Internal Revenue Code of 1986, as amended (the "Code") or any other
statute, rule or regulation currently in effect and applicable to the
transaction.
2.8 No Voting Trusts. There are no voting trusts or other agreements or
understandings to which the Company is a party with respect to the voting of the
capital stock of the Company.
Section 3. Representations and Warranties of School Services. To induce
the Company to enter this Agreement, School Services hereby represents and
warrants to the Company as follows:
3.1 Organization. School Services is duly organized, validly existing and
in good standing under the laws of its jurisdiction of organization.
3.2 Accredited Investor. School Services is an "accredited investor"
within the meaning of SEC Rule 501 of Regulation D, as presently in effect.
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3.3 Securities Registration. School Services understands that neither the
offering nor the sale of the Warrant or the Warrant Shares have been registered
under the Act, in reliance upon an exemption therefrom for non-public offerings,
nor have such offering or sale been registered or qualified under any state
securities or "Blue Sky" law in reliance upon similar exemptions. School
Services understands that the Warrant and the Warrant Shares must be held
indefinitely unless disposed of pursuant to the terms and conditions of the Act
and any state securities or "Blue Sky" laws and any such disposition must either
be registered under the Act and all applicable state securities or "Blue Sky"
laws, or exempt from registration. School Services further understands that
except as specifically provided herein, the Company is under no obligation to
register the Warrant or the Warrant Shares or to assist School Services in
complying with any exemption from registration. School Services understands that
none of this Agreement, the Warrant or the Warrant Shares have been reviewed,
approved or otherwise passed upon by the SEC, any state securities
administrator, the National Association of Securities Dealers Inc. ("NASD"), any
securities or commodities exchange, or any other governmental agency or
self-regulatory authority.
3.4 Investment Intent. The Warrant is being purchased solely for School
Services' own account and not for the account of any other person and not, in
whole or in part, for distribution to others within the meaning of the Act,
without prejudice to School Services' rights at all times to sell or otherwise
dispose of all or part of such Warrant under a registration statement under the
Act or an exemption available thereunder.
3.5 Broker's Fees. No person or entity acting on behalf or under the
authority of School Services is or will be entitled to any broker's, finder's or
similar fee or commission in connection with the transactions contemplated
hereby.
3.6 Compliance with ERISA. The source of funds to be used by School
Services to pay the purchase price of the Warrant to be purchased hereunder,
either (a) does not include assets of any employee benefit plan subject to Title
I of ERISA, or (b) constitutes assets of one or more specific employee benefit
plans (the "Plan") which School Services has identified in writing to the
Company and that the purchase of the Warrant is permitted by provisions of the
Plan and trust established thereunder.
3.7 Legends. School Services agrees that the instrument evidencing the
Warrant and any Warrant Shares issuable pursuant thereto shall bear a legend
substantially in the form of the following (and such other legends, if any,
required under state or federal securities laws in the reasonable opinion of
legal counsel for the Company):
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT")
OR ANY STATE SECURITIES LAWS AND HAVE BEEN ISSUED IN
RELIANCE ON AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE ACT. THE SECURITIES MAY NOT BE
OFFERED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
OTHER THAN PURSUANT TO A REGISTRATION STATEMENT THAT HAS
BEEN DECLARED EFFECTIVE UNDER THE ACT OR AN AVAILABLE
EXEMPTION
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FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND ANY
STATE SECURITIES LAWS.
The foregoing legend shall be removed and the Company shall issue new
certificates representing Warrant Shares to the holder of Warrant Shares upon
which such legend appears if such holder satisfies the requirements of Rule
144(k) under the Act.
Section 4. Registration Rights.
4.1 Rule 144(i) . With a view to making available to the Holders the
benefits of certain rules and regulations of the SEC which may permit the sale
of such Holders' shares to the public without registration, the Company agrees
to use its reasonable efforts to: (i) make and keep public information available
at all times, as those terms are understood and defined in Rule 144 or any
similar or analogous rule promulgated under the Act; (ii) file with the SEC, in
a timely manner, all reports and other documents required of the Company under
the 1934 Act; and (iii) so long as the Holders own the Warrant or any Warrant
Shares, furnish to the Holders forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of Rule 144(c) of
the Act, a copy of the most recent annual or quarterly report of the Company,
and such other reports and documents as the Holder may reasonably request in
availing itself of any rule or regulation of the SEC allowing it to sell any
such securities without registration.
4.2 Company Registration. If (but without any obligation to do so) the
Company proposes to register (including for this purpose a registration effected
by the Company for stockholders other than the Holders) any of its stock or
other securities under the Act in connection with the public offering of such
securities solely for cash (other than a registration relating solely to the
sale of securities to participants in a Company stock or option plan or a
registration on any form which does not permit the inclusion of the Registered
Securities), the Company shall, at such time, promptly give each Holder written
notice of such registration. Upon the written request of each Holder given
within thirty (30) days after receipt of such notice by the Company, the Company
shall, subject to the provisions of Section 4.9, cause to be registered under
the Act all of the Registrable Securities that each such Holder has requested to
be registered.
4.3 Shelf Registration.(a) (a) Within sixty (60) days after the date
hereof, the Company shall prepare and file with the SEC a registration statement
for an offering to be made on a delayed or continuous basis pursuant to Rule 415
of the Act (a "Shelf Registration") registering the resale from time to time by
the Holders of all the Registrable Securities (the "Initial Shelf
Registration").
(b) If the Initial Shelf Registration or any Subsequent Shelf
Registration (as defined below) ceases to be effective for any reason at any
time, except as set forth below, the Company shall use reasonable commercial
efforts to obtain the prompt withdrawal of any order suspending the
effectiveness thereof, and in any event shall within forty-five (45) days of
such cessation of effectiveness file an amendment to such Shelf Registration in
a manner reasonably expected to obtain the withdrawal of the order suspending
the effectiveness thereof, or to
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promptly file an additional Shelf Registration covering such Warrant Shares as
were covered by the Initial Shelf Registration (a "Subsequent Shelf
Registration").
(c) The other provisions of this Section 4.3 notwithstanding, the
Company shall not be obligated to maintain the effectiveness of any Shelf
Registration if all Warrant Shares covered by such registration may be disposed
of without registration pursuant to Rule 144 under the Act during a three-month
period or if Form S-3 is not available for such Shelf Registration.
4.4 Obligations of the Company. Whenever required under this Section 4 to
effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its reasonable commercial efforts
to cause such registration statement to become effective, and except for a
registration filed pursuant to Section 4.3 hereto, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder keep
such registration statement effective for a period of up to one hundred twenty
(120) days; provided, however, that such 120-day period shall be extended for a
period of time equal to the period the Holder refrains from selling any
securities included in such registration at the request of an underwriter of
Common Stock (or other securities) of the Company.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
(d) Use its reasonable efforts to register and qualify the
securities covered by such registration statement under such other securities or
"Blue Sky" laws of such jurisdictions as shall be reasonably requested by the
Holders; provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions, unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Act.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement reasonably satisfactory
to the Company, in usual and customary form, with the managing underwriter of
such offering. Each Holder participating in such underwriting shall also enter
into and perform its obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
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material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(g) Notify each Holder participating in such registration after it
shall receive notice thereof, of the time when such registration statement has
become effective or a supplement to any prospectus forming a part of such
registration statement has been filed.
(h) Notify each Holder participating in such registration of any
request by the SEC for the amending or supplementing of such registration
statement or prospectus or for additional information.
(i) Prepare and file with the SEC, promptly upon the request of the
Holder, any amendments or supplements to such registration statement or
prospectus relating to such Holder or the distribution of the Registrable
Securities held by such Holder being included in such Registration Statement,
which, in the opinion of counsel for such Holder, is required under the Act or
the rules and regulations thereunder in connection with the distribution of the
Registrable Securities by the Holder.
(j) Prepare and promptly file with the SEC and promptly notify the
Holder of the filing of such amendment or supplement to such registration
statement or prospectus as may be necessary to correct any statements or
omissions if, at the time when a prospectus relating to such securities is
required to be delivered under the Act, any event shall have occurred as the
result of which any such prospectus or any other prospectus as then in effect
would include an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein in the light of the
circumstances in which they were made, not misleading.
(k) Advise each Holder participating in such registration, after it
shall receive notice or obtain knowledge thereof, of the issuance of any stop
order by the SEC suspending the effectiveness of such registration statement or
the initiating or threatening of any proceeding for that purpose and use its
reasonable efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued.
(l) Not file any amendment or supplement to such registration
statement or prospectus to which the Holder shall have reasonably objected on
the grounds that such amendment or supplement does not comply in all material
respects with the requirements of the Act or the rules and regulations
thereunder, after having been furnished with a copy thereof at least five (5)
business days prior to the filing thereof, unless in the opinion of counsel for
the Company the filing of such amendment or supplement is reasonably necessary
to protect the Company from any liabilities under any applicable federal or
state law and such filing will not violate applicable law. For the avoidance of
doubt, no filings by the Company incorporated by reference into the registration
statement or prospectus shall be deemed an amendment or supplement hereunder.
(m) At the request of a Holder and if required by the underwriters,
furnish: (i) an opinion of counsel to the Company, addressed to the
underwriters, and to the Holder, covering such matters as such underwriters and
Holder may reasonably request; and (ii) letters dated as of the effective date
of the registration statement from the independent certified public accountants
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of the Company, addressed to the underwriters and to the Holder, covering such
matters as such underwriters and Holder may reasonably request.
(n) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange or automated quotation system
on which similar securities issued by the Company are then listed.
(o) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.
4.5 Furnish Information(a) . (a) It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 4 with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable
Securities.
(b) The Company shall have no obligation with respect to any
registration requested pursuant to Section 4.1 or Section 4.3 if, due to the
operation of subsection 4.5(a), the anticipated aggregate offering price of the
Registrable Securities to be included in the registration does not equal or
exceed the anticipated aggregate offering price required to originally trigger
the Company's obligation to initiate such registration as specified in
subsection 4.1(a) or subsection 4.3(d)(ii), whichever is applicable.
4.6 [Intentionally Omitted].
4.7 Expenses of Company Registration. The Company shall bear and pay all
expenses incurred in connection with any registration, filing or qualification
of Registrable Securities with respect to the registrations pursuant to Section
4.2 for each Holder (which right may be assigned as provided in Section 4.12),
including (without limitation) all registration, filing, and qualification fees,
printers and accounting fees relating to or apportionable thereto and the
reasonable fees and disbursements of one counsel for the selling Holders
selected by them but excluding underwriting discounts and commissions relating
to Registrable Securities.
4.8 Expenses of Shelf Registration. All expenses incurred in connection
with a registration filed pursuant to Section 4.3, including (without
limitation) all registration, filing, qualification, printer's and accounting
fees and the reasonable fees and disbursements of counsel for the selling Holder
or Holders and counsel for the Company shall be borne by the Company.
4.9 Underwriting Requirements. In connection with any offering involving
an underwriting of shares of the Company's capital stock, the Company shall not
be required under Section 4.2 to include any of the Holders' securities in such
underwriting unless they accept the terms of the underwriting as agreed upon
between the Company and the underwriters and then only in such quantity as the
underwriters determine in their sole discretion will not, jeopardize the success
of the offering by the Company. If the total amount of securities, including
Registrable Securities, requested by stockholders to be included in any
underwritten offering exceeds the amount of securities sold other than by the
Company that the underwriters determine in their sole discretion is compatible
with the success of the offering, then the Company shall be
8
required to include in the offering only that number of such securities,
including Registrable Securities, which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among the selling stockholders according to
the total amount of securities requested and entitled to be included therein by
each selling stockholder or in such other proportions as shall mutually be
agreed to by such selling stockholders). For purposes of the preceding
parenthetical concerning apportionment, for any selling stockholder which is a
holder of Registrable Securities and which is a partnership or corporation, the
partners, retired partners and stockholders of such holder, or the estates and
family members of any such partners and retired partners and any trusts for the
benefit of any of the foregoing persons shall be deemed to be a single "selling
stockholder," and any pro-rata reduction with respect to such "selling
stockholder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling stockholder," as defined in this sentence, which were requested to be
included in such registration statement.
4.10 Delay of Registration. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 4.
4.11 Indemnification. In the event any Registrable Securities are included
in a registration statement under this Section 4:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, its officers and directors, any underwriter (as
defined in the Act) for such Holder and each person, if any, who controls such
Holder or underwriter within the meaning of the Act or the 1934 Act, against any
losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Act, the 1934 Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"): (i) any untrue statement
or alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission or alleged
omission to state therein a statement required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any violation
or alleged violation by the Company of the 1934 Act, any state securities law or
any Rule or regulation promulgated under the Act, the 1934 Act, or any state
securities law; and the Company will pay to each such Holder, underwriter or
controlling person any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this subsection 4.11(a) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability, or action if such settlement is effected
without the consent of the Company (which consent shall not be unreasonably
withheld), nor shall the Company be liable in any such case for any such loss,
claim, damage, liability, or action to the extent that it arises out of or is
based upon a Violation which occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by any such Holder, underwriter or controlling person.
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(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
person of any such underwriter or other Holder, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Act, the 1934 Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished by such Holder expressly or
used in connection with such registration; and each such Holder will pay any
legal or other expenses reasonably incurred by any person intended to be
indemnified pursuant to this subsection 4.11(b), in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this subsection
4.11(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Holder, which consent shall not be unreasonably withheld; provided, that,
with respect to each Holder, in no event shall any indemnity under this
subsection 4.11(b) exceed the net proceeds from the offering received by such
Holder.
(c) Promptly after receipt by an indemnified party under this
Section 4.11 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 4.11 deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
4.11, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 4.11.
(d) If the indemnification provided for in this Section 4.11 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such, loss, liability, claim, damage, or
expense in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be
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determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the indemnifying party or by the indemnified
party and the parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission; provided, however,
that in no event shall the amount of contribution under this Section 4.11(d)
exceed the net proceeds from the offering received by such Holder.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in conflict
with the foregoing provisions, the provisions in the underwriting agreement
shall control.
(f) The obligations of the Company and Holders under this Section
4.11 shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 4, and otherwise.
4.12 Assignment of Registration Rights. The rights to cause the Company to
register Registrable Securities pursuant to this Section 4 may be assigned (but
only with all related obligations) by a Holder to (a) any partner or retired
partner of any Holder which is a partnership or member or retired member of any
Holder which is a limited liability company, (b) any family member or trust for
the benefit of any individual Holder, (c) any affiliate of such Holder, or (d)
any transferee or assignee of such securities who, after such assignment or
transfer, holds at least 250,000 shares of Registrable Securities (subject to
appropriate adjustment for stock splits, stock dividends, combinations and other
recapitalizations), provided: (i) the Company is, within a reasonable time after
such transfer, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned; (ii) such transferee or assignee agrees
in writing to be bound by and subject to the terms and conditions of this
Agreement; and (iii) such assignment shall be effective only if immediately
following such transfer the further disposition of such securities by the
transferee or assignee is restricted under the Act.
4.13 Limitations on Subsequent Registration Rights. From and after the
date of this Agreement, the Company shall not, without the prior written consent
of the Holders of a majority of the outstanding Registrable Securities, enter
into any agreement with any holder or prospective holder of any securities of
the Company which would grant registration rights which rank senior to the
rights granted herein or otherwise allow such holder or prospective holder (i)
to include such securities in any registration filed under Section 4.1 hereof,
unless under the terms of such agreement, such holder or prospective holder may
include such securities in any such registration only to the extent that the
inclusion of his securities will not reduce the amount of the Registrable
Securities of the Holders which is included or (ii) to make a demand
registration which could result in such registration statement being declared
effective within one hundred twenty (120) days of the effective date of any
registration effected pursuant to Section 4.1.
4.14 "Market Standoff" Agreement. Each Holder hereby agrees that, during
the period of duration specified by the Company and an underwriter of Common
Stock or other securities of the Company, following the effective date of a
registration statement of the Company filed
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under the Act, it shall not, to the extent requested by the Company and such
underwriter, directly or indirectly sell, offer to sell, contract to sell
(including, without limitation, any short sale), grant any option to purchase or
otherwise transfer or dispose of (other than to donees who agree to be similarly
bound) any Registrable Securities of the Company held by it at any time during
such period except Common Stock included in such registration; provided,
however, that:
(a) all executive officers and directors of the Company enter into
similar agreements; and
(b) such market standoff time period shall not exceed ninety (90)
days.
In order to enforce the foregoing covenant, the Company may impose stop
transfer instructions with respect to the Registrable Securities of each Holder
(and the shares or securities of every other person subject to the foregoing
restrictions) until the end of such period.
4.15 Termination of Registration Rights. All rights and duties provided
for in this Section 4 shall terminate on the date on which all shares of
Registrable Securities held or entitled to be held upon exercise by each Holder
may immediately be sold under Rule 144 during any ninety (90)-day period.
SECTION 5. Indemnification.
5.1 School Services Indemnification. School Services shall indemnify and
hold harmless the Company and its respective officers, directors and affiliates
from and against all damages, losses, costs and expenses (including reasonable
attorneys' fees and expenses) which any of them may incur by reason of the
failure of School Services to fulfill any of the terms or conditions of this
Agreement, or by reason of any breach of the representations or warranties made
by School Services herein.
5.2 Company Indemnification. The Company shall indemnify and hold harmless
School Services and its respective officers, directors and affiliates from and
against all damages, losses, costs and expenses (including reasonable attorneys'
fees and expenses) which any of them may incur by reason of the failure of the
Company to fulfill any of the terms or conditions of this Agreement, or by
reason of any breach of the representations and warranties made by the Company
herein.
5.3 Expenses. The Company agrees to promptly pay all documented expenses
of School Services with respect to the due diligence investigations, drafting
and negotiation of documentation and any amendments, consents and waivers
thereto relating to this Agreement, including without limitation the fees and
disbursements of outside counsel, but excluding overhead expenses of School
Services.
SECTION 6. Miscellaneous.
6.1 Entire Agreement. This Agreement together with the Warrant constitutes
the entire agreement among the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and undertakings, written or oral,
among the parties with respect to such subject matter.
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6.2 Further Assurances. Within five (5) days after receipt of a written
request, each party shall provide the information and execute and deliver such
documents as may be reasonably requested by another party in order to carry out
the purposes of this Agreement.
6.3 Survival. The representations and warranties of School Services and
the Company set forth herein shall survive the purchase of the Warrant pursuant
to this Agreement.
6.4 Successors and Assigns. This Agreement shall be binding upon, and
inure to the benefit of, the Company and School Services and their respective
successors and permitted assigns.
6.5 Amendments. The terms and provisions of this Agreement may not be
modified or amended except pursuant to an instrument signed by the parties.
6.6 Confidentiality. Each of the Company and School Services agrees to
maintain in confidence all proprietary information provided by the others in
connection with the purchase of the Warrant, and not to disclose such
information except to such advisors as may be assisting or advising such party
in connection with such purchase and to instruct such persons to treat such
information confidentially or as required by law. Confidential information shall
not include (i) information which is known to any party or learned other than in
connection with the transactions contemplated herein and not subject to any
confidentiality agreement, (ii) is or becomes part of the public domain other
than through a breach of this Agreement or (iii) is generally made available to
others without restriction as to use.
6.7 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.
6.8 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
paid) 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 School Services and to the Company at
the respective addresses indicated below:
Edison Schools Inc.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxxxxx X. Xxxx
Tel. (000) 000-0000
Fax. (000) 000-0000
School Services LLC
x/x Xxxxx Xxxx & Xx.
00
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxx
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.
6.9 Governing Law; Waiver of Jury Trial. The Agreement shall be governed
by and construed in accordance with the laws of the State of New York applicable
to agreements entered into and to be performed entirely in the State of New
York. EACH PARTY HERETO HEREBY VOLUNTARILY AND IRREVOCABLY WAIVES ANY RIGHT TO
HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE ARISING OUT OF, IN CONNECTION
WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP BETWEEN THE PARTIES
ESTABLISHED BY THIS AGREEMENT.
6.10 Counterparts. This Agreement may be executed in two or more
counterparts and by facsimile, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of this 31st day of July, 2002.
EDISON SCHOOLS INC.
By: /s/ Xxxxx Xxxxx
-------------------------------------
Name: Xxxxx Xxxxx
Title: Senior Vice President
and General Counsel
SCHOOL SERVICES LLC
By: /s/ Xxxxxx Xxxxxxxxx
-------------------------------------
Name: Xxxxxx Xxxxxxxxx
Title: Treasurer
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EXHIBIT A
FORM OF WARRANT CERTIFICATE
