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Exhibit 10.16
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"), PHOENIX LEASING INCORPORATED, a
California corporation (the "Purchaser").
The Company desires to sell, and the Purchaser desires to purchase, a
warrant to purchase 50,000 shares of the Company's Series A Common Stock, par
value $0.01 per share (the "Warrant Shares"), 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"), 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 June 30, 1997 (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 herein.
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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 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
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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
non-public 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.
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:
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(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 Restate 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
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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 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
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, by all such counterparts 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 California, without
giving effect to any choice of law of 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
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, of 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, Xxx Xxxx 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.
(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
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prevailing party's costs and expenses in connection therewith, including
reasonably 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 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 determined 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.
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
------------------------ ------------------------
Secretary Name: Xxxxx Xxxxxxxx
Title: President
(Corporate Seal)
Phoenix Leasing Incorporated
a California corporation
By: /s/ N. H. Xxxxxx
---------------------
Its: Vice President
---------------------
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Options Schedule
THE EDISON PROJECT INC.
SHARE OPTIONS AS OF 5/1/97
Total
Share Exercise
# Shares Price Price
Employee Option Plan:
Executives 2,659,840 * $ 1.25 $ 3,324,800
General Employees 461,360 * $ 1.25 576,700
Unissued but Reserved 651,980 XXX XXX
for Employees
Former Executives 226,820 $ 1.00 226,820
----------- -----------
Total Employee Options 4,000,000 4,128,320
Performance Option Pool 1,250,000 * $ 1.50 1,875,000
Comdisco A 225,000 $ 1.00 225,000
Comdisco B 136,800 $ 1.25 171,000
Comdisco C 213,333 $ 1.50 319,999.50
Xxxxxx Read 200,000 $ 0.25 50,000
WSI A 1,000,000 * $ 10.00 10,000,000
WSI B 1,000,000 * $ 20.00 20,000,000
----------- -----------
TOTAL 8,025,133 $ 36,766,319.50
*Subject to relevant vesting provisions.
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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 PHOENIX LEASING INCORPORATED,
a California corporation ("Warrantholder"), is entitled to subscribe for and
purchase up to Fifty Thousand (50,000) shares (as adjusted pursuant to
provisions hereof, the "Shares") of the fully paid and non-assessable 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 the per share of Two Dollars
($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. The Warrant Price and the Shares purchasable hereunder are subject to
adjustment in certain events, all as more fully set forth under Sections 4 and 5
herein. 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 later of (i) five (5) 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 Senior Loan and
Security Agreement, dated as of the Grant Date, between Phoenix Leasing
Incorporated and the Company (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 Warrantholder,
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.
Warrantholder 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
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"Act"). The Warrantholder shall be deemed to have become the holder of record
of, and shall be treated for all purposes as the record holder of, the Shares
represented thereby (and such Shares shall be deemed to have been issued)
immediately prior to the dose 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
Warrantholder 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 Warrantholder as soon as possible (and in any event within such
five business day period).
2.2 Non-Cash Exercise
(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 Warrantholder 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 of 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. If the Common Stock is not traded Over-The-Counter or on
an exchange, the Fair Market Value shall be determined in good faith by the
Company. Notwithstanding the foregoing two sentences, 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
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been received in respect of a Warrant Share had this Warrant been exercised
prior to such merger or sale.
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 Warrantholder) providing that
Warrantholder 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 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
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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 Restated Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or 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 Warrantholder 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 prorata 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
Warrantholder at the address of such holder as shown on the books of the
Company, (A) at least ten (10) days' prior written notice of the date 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, 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 ten (10) 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
14
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up, as the case may be.
5. Adjustment of Warrant Price and Shares Purchasable.
(a) Adjustment of Warrant Price. If the Company issues any
Additional Stock for no consideration or a consideration per share less than the
Warrant Price in effect immediately prior to the time of such issuance, then the
Warrant Price shall be reduced to the price determined by dividing:
(i) an amount equal to the sum of (A) the number of shares of
Common Stock Outstanding immediately prior to such issue or sale multiplied by
the then existing Warrant Price, and (B) an amount equal to the aggregate
"consideration actually received" by the Company upon such issue or sale, by
(ii) the sum of the number of shares of Common Stock
Outstanding immediately after such issue or sale.
For purposes of this subsection (a):
(A) In the case of an issue or sale for cash of shares of
Common Stock, the "consideration actually received" by the Company therefor
shall be deemed to be the amount of cash received, before deducting therefrom
any commissions or expenses paid by the Company.
(B) In case of the issuance (other than upon conversion or
exchange of obligations or shares of stock of the Company) of additional shares
of Common Stock for a consideration other than cash or a consideration partly
other than cash, the amount of the consideration other than cash received by the
Company for such shares shall be deemed to be the fair market value of such
consideration as determined in good faith by the Company's Board of Directors.
(C) In case of the issuance by the Company in any manner of
any Options, all shares of Common Stock or Convertible Securities to which the
holders of such Options shall be entitled to subscribe for or purchase pursuant
to such Options shall be deemed issued as of the date of the offering of such
Options, and the minimum aggregate consideration named in such Options for the
shares of Common Stock or Convertible Securities covered thereby, plus the
consideration, if any, received by the Company for such Options, shall be deemed
to be the "consideration actually received" by the Company (as of the date of
the granting of such Options) for the issuance of such Options.
(D) In case of the issuance or issuances by the Company in
any manner of any Convertible Securities, all shares of Common Stock issuable
upon
15
the conversion or exchange of such Convertible Securities shall be deemed issued
as of the date such. Convertible Securities are issued, and the amount of the
"consideration actually received" by the Company for such Convertible Securities
shall be deemed to be the total of (x) the amount of consideration received by
the Company upon the issuance of such Convertible Securities, plus (y) the
minimum aggregate consideration, if any, other than such Convertible Securities,
receivable by the Company upon conversion or exchange of such Convertible
Securities, except in adjustment of dividends.
(E) The amount of the "consideration actually received" by
the Company upon the issuance of any Options referred to in subparagraph (C)
above or upon the issuance of any Convertible Securities as described in
subparagraph (D) above, and the amount of the consideration, if any, other than
such Convertible Securities, receivable by the Company upon the exercise,
conversion or exchange thereof shall be determined in the same manner provided
in subparagraphs (A) and (B) above with respect to the consideration received by
the Company in case of the issuance of additional shares of Common Stock;
provided, however, that if such Convertible Securities are issued in payment or
satisfaction of any dividend upon any stock of the Company other than Common
Stock, the amount of the "consideration actually received" by the Company upon
the original issuance of such Convertible Securities shall be deemed to be the
value of such obligations or shares of stock, as of the date of the adoption of
the resolution declaring such dividend, as determined by the Company's Board of
Directors at or as of that date.
(F) On the expiration of any Options referred to in
subparagraph (C), or the termination of any right of conversion with respect to
Convertible Securities referred to in subparagraph (D), or any change in the
number of shares of Common Stock deliverable upon exercise of such Options or
upon conversion of or exchange of such Convertible Securities, the Exercise
Price then in effect shall forthwith be readjusted to such Exercise Price as
would have obtained had the adjustments made upon the issuance of such Options
or Convertible Securities been made upon the basis of the delivery of only the
adjusted number of shares of Common Stock actually delivered or to be delivered
upon the exercise of such Options or upon the conversion or exchange of such
Convertible Securities.
(G) Anything herein to the contrary notwithstanding, the
Company shall not be required to make any adjustment of the Exercise Price in
the case of issuances of any shares of Common Stock or any Options or any
Convertible Securities to, officers, directors, employees or consultants of the
Company and its subsidiaries pursuant to stock options or stock purchase plans
or agreements, whether "qualified" for tax purposes or not, issued on or after
the Grant Date.
16
(H) "Additional Stock" means (i) Common Stock issued by the
Company after the Grant Date, (ii) Common Stock issuable upon conversion of
Convertible Securities issued by the Company after the Grant Date, and (iii)
Common Stock issuable upon exercise of Options issued by the Company after the
Grant Date (for purposes of this clause (iii), if the Option is to acquire
Convertible Securities, the Common Stock issuable upon conversion of such
Convertible Securities shall be deemed issued).
(I) "Common Stock" means, for purposes of this Section 5, any
series of the Company's Common Stock.
(J) "Common Stock Outstanding" means at any time all shares
of Common Stock that are then outstanding, plus all shares of Common Stock
issuable upon conversion of the Convertible Securities and all shares of Common
Stock issuable upon exercise of the Options (assuming for this purpose that the
securities acquirable upon exercise of the Options are converted into Common
Stock).
(K) "Convertible Securities" means evidences of indebtedness,
shares of stock or other securities which are convertible into or exchangeable
for, with or without payment of additional consideration, shares of Common
Stock, either immediately or upon the arrival of a specified date or the
happening of a specified event or both.
(L) "Option" means any right, warrant or option to subscribe
for or purchase shares of Common Stock or Convertible Securities.
(b) Adjustment of Number of Shares Purchasable. Upon any
adjustment of the Warrant Price under subsection (a) of this Section 5, the
number of shares of Common Stock issuable upon exercise of this Warrant shall
equal the number of shares determined by dividing (i) the aggregate Warrant
Price payable for the purchase of all shares issuable upon exercise of this
Warrant immediately prior to such adjustment by (ii) the Warrant Price per share
in effect immediately after such adjustment.
8. 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 Warrantholder 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.
9. Fractional Shares. No fractional shares of Common Stock win be
issued in connection with any exercise hereunder, but in lieu of such fractional
17
shares the Company shall make a cash payment therefor upon the basis of the
Warrant Price then in effect.
10. Compliance with Securities Act; Disposition of Warrant or Shares of
Common Stock.
(a) Compliance with Securities Act. Warrantholder, 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 subsection
(b) of this section. 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 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, 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 PHOENIX LEASING INCORPORATED
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 Warrantholder 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
Warrantholder, such legend is not required in order to
18
insure compliance with the Act. Nothing herein shall restrict the transfer of
this Warrant or any portion hereof by the initial Warrantholder 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 and
provided, further, that any other transfer will require the Company's prior
written consent, which consent shall not be unreasonably withheld. The Company
may issue stop transfer instructions to its transfer agent in connection with
the foregoing restrictions.
11. 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, 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 hereof shall have become deliverable, as provided
herein; provided that the Company shall deliver to the Warrantholder prior
written notice of any of the foregoing in accordance with the provisions of
Section 4(d) above.
12. Information Rights. The Company shall deliver to the Warrantholder:
(a) within thirty (30) days after the end of each calendar month, an
unaudited balance sheet of the Company as of the end of such month, cash flow
statements and an unaudited statement of operations of the Company for the
portion of the Fiscal Year ended with such month prepared and certified by the
chief financial officer of the Company, subject, however, to the exclusion of
footnotes and to normal year-end audit adjustments;
(b) as soon as practicable after the end of each Fiscal Year, a copy
of its audited financial statements accompanied by a report thereon by a firm of
independent certified public accountants selected by the Company, which report
shall state that such financial statements fairly present the Company's
financial position at the end of such Fiscal Year;
(c) promptly upon their becoming available, one copy of each report
or proxy statement sent by the Company to its shareholders generally and of each
regular or periodic report or registration statement, prospectus or written
communication (other than transmittal letters) filed by the Company with the
Securities and Exchange Commission or any securities exchange on which shares of
Common Stock are listed; and
(d) with reasonable promptness, such other information as from time
to time may be reasonably requested by the Warrantholder.
13. Issuance Tax. The issuance of certificates for shares of Common
Stock upon exercise of this Warrant shall be made without charge to the
Warrantholder
19
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
Warrantholder.
14. 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 Warrantholder.
15. Notices. Any notice, request or other document required or
permitted to be given or delivered to the Warrantholder 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.
16. 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. The Company will, at the
time of the exercise of this Warrant, in whole or in part, upon request of the
Warrantholder but at the Company's expense, acknowledge in writing its
continuing obligation to the Warrantholder in respect of any rights (including,
without limitation, any right to registration of the shares of Registrable
Shares) to which the Warrantholder shall continue to be entitled after such
exercise in accordance with this Warrant; provided that the failure of the
Warrantholder to make any such request shall not affect the continuing
obligation of the Company to the Warrantholder in respect of such rights.
17. Lost Warrants or Stock Certificates. The Company covenants to the
Warrantholder 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.
18. 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.
19. 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.
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THE EDISON PROJECT INC.
By: /s/ Xxxxx Xxxxxxxx
----------------------------
Name: Xxxxx Xxxxxxxx
Its: President
Address: 000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Date: June 30, 1997
PHOENIX LEASING INCORPORATED
By: /s/ N. H. Xxxxxx
----------------------------
Name: N. H. Xxxxxx
Its: Vice President
Address: 0000 Xxxxxx Xxxxxxxxx
Xxx Xxxxxx, XX 00000
Date: June 30, 1997
