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Exhibit 10.39
LOAN AGREEMENT
THIS LOAN AGREEMENT (the "Agreement") is entered into as of this ____
day of October, 1999 between Edison Schools Inc., a Delaware corporation (the
"Company"), and WSI Inc., a Delaware corporation ("WSI").
WHEREAS, upon the terms and subject to the conditions set forth in this
Agreement, the Company proposes to loan to WSI the amount required to permit WSI
to exercise the option to purchase 600,000 shares of Series A Common Stock, $.01
par value per share, of the Company ("Series A Common Stock") pursuant to the
option agreement attached hereto as Exhibit A and the option to purchase 850,000
shares of Series A Common Stock pursuant to the option agreement attached hereto
as Exhibit B (the shares of Series A Common Stock acquired upon the exercise of
such options shall be referred to herein as the "Shares"), and to pay related
taxes; and
WHEREAS, upon the terms and subject to the conditions set forth in this
Agreement, WSI desires to issue a secured promissory note to the Company to
evidence such loan.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereby agree as follows:
1. Loan. The Company agrees to make the following loans to WSI:
(a) The Company shall loan an aggregate of $____________ to
WSI (the "Loan"), which loan amount shall include the amount of any applicable
tax withholding obligation of the Company, in exchange for the secured
promissory note of WSI, in the principal amount of the Loan, in the form
attached hereto as Exhibit C (the "Note"). The Loan shall be used by WSI solely
to purchase the Shares and to pay federal, state and local taxes incurred by WSI
or H. Xxxxxxxxxxx Xxxxxxx ("Xxxxxxx") in connection with the purchase of the
Shares.
(b) On or about April 13, 2000, the Company shall loan to WSI
(the "Tax Loan") such amount, to be mutually agreed upon by WSI and the Company,
as is necessary for WSI or Xxxxxxx to pay any additional federal, state and
local taxes incurred by WSI or Xxxxxxx in connection with the purchase of the
Shares, which loan amount shall include the amount of any applicable tax
withholding obligation of the Company, in exchange for the secured promissory
note of WSI, in the principal amount of the Tax Loan, substantially in the form
attached hereto as Exhibit D (the "Second Note").
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(c) At any time and from time to time prior to the payment in
full of the Note, the Company shall loan to WSI (the "Second Tax Loan") such
amount, to be mutually agreed upon by WSI and the Company, as is necessary for
WSI or Xxxxxxx to pay any additional federal, state and local taxes or any tax
penalties incurred by WSI or Xxxxxxx in connection with the purchase of the
Shares, which loan amount shall include the amount of any applicable tax
withholding obligation of the Company, in exchange for the secured promissory
note of WSI, in the principal amount of the Second Tax Loan, substantially in
the form attached hereto as Exhibit D (the "Third Note"); provided (i) that such
additional federal, state and local taxes or tax penalties shall be assessed by
the Internal Revenue Service or the tax collection authority of any state or
local jurisdiction as the result of an audit, or shall be determined by any
federal, state or local court, and (ii) that WSI or Xxxxxxx shall have a legal
obligation to pay such additional federal, state and local taxes or tax
penalties.
(d) WSI's obligations under the Note, the Second Note, the
Third Note and this Agreement shall be recourse solely to WSI's interest in the
Collateral (as defined in the Pledge Agreement).
2. Security Interest. As set forth in the Pledge Agreement attached
hereto as Exhibit E (the "Pledge Agreement"), WSI hereby grants to the Company a
security interest in the Shares to secure the payment and performance of the
Note and, if and when issued by WSI, the Second Note and the Third Note.
3. Investment Representations. WSI represents, warrants and covenants
as follows:
(a) WSI is purchasing the Shares for its own account for
investment only, and not with a view to, or for sale in connection with, any
distribution of the Shares in violation of the Securities Act of 1933, as
amended (the "Securities Act"), or any rule or regulation under the Securities
Act.
(b) WSI has had such opportunity as it has deemed adequate to
obtain from representatives of the Company such information as is necessary to
permit it to evaluate the merits and risks of its investment in the Company.
(c) WSI has sufficient experience in business, financial and
investment matters to be able to evaluate the risks involved in the purchase of
the Shares and to make an informed investment decision with respect to such
purchase.
(d) WSI can afford a complete loss of the value of the Shares
and is able to bear the economic risk of holding such Shares for an indefinite
period.
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(e) WSI understands that (i) the Shares have not been
registered under the Securities Act and are "restricted securities" within the
meaning of Rule 144 under the Securities Act ("Rule 144"); (ii) the Shares
cannot be sold, transferred or otherwise disposed of unless they are
subsequently registered under the Securities Act or an exemption from
registration is then available; and (iii) in any event, the exemption from
registration under Rule 144 will not be available for at least one year and even
then will not be available unless a public market then exists for the Series A
Common Stock, adequate information concerning the Company is then available to
the public and other terms and conditions of Rule 144 are complied with.
(f) A legend substantially in the following form will be
placed on the certificate(s) representing the Shares:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and
may not be sold, transferred or otherwise disposed of in the
absence of an effective registration statement under such Act
or an opinion of counsel satisfactory to the corporation to
the effect that such registration is not required."
4. Certain Requirements under Rule 144. WSI acknowledges that, as set
forth in paragraph (d) of Rule 144, certain holding period requirements relating
to the Note and, if issued by WSI, the Second Note and the Third Note must be
satisfied prior to the sale of the Shares by WSI pursuant to Rule 144.
5. Notices. All notices, demands and other communications provided for
or permitted hereunder shall be made in writing and shall be by registered or
certified first-class mail, return receipt requested, courier service, personal
delivery or facsimile (provided that "answer back" confirmation is received by
the sender of the facsimile):
(a) if to the Company:
Edison Schools Inc.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Attn: General Counsel
with a copy to:
Xxxx and Xxxx LLP
0000 Xxxxxxxxxxxx Xxx., X.X.
Xxxxxxxxxx, XX 00000-0000
Facsimile: (000) 000-0000
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Attn: Xxxxx Xxxxxxxxx, Esq.
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(b) if to WSI:
WSI Inc.
First Tennessee Plaza
000 Xxxxx Xxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attn: President
with a copy to:
Xxxx and Xxxx LLP
0000 Xxxxxxxxxxxx Xxx., X.X.
Xxxxxxxxxx, XX 00000-0000
Facsimile: (000) 000-0000
Attn: Xxxxx Xxxxxxxxx, Esq.
All such notices and communications shall be deemed to have been duly
given (a) when delivered by hand, if personally delivered, (b) when delivered by
courier, if delivered by commercial overnight courier service, (c) when mailed,
five business days after being deposited in the mail, postage prepaid, or (d)
when transmitted, if sent by facsimile. Any party may, from time to time, change
its address by sending a notice with the new address in accordance with the
provisions of this Section 5.
6. Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and permitted assigns of the parties hereto.
WSI may not assign any of its rights under this Agreement without the written
consent of the Company. The Company may assign any of its rights under this
Agreement without the written consent of WSI. No person or entity other than the
parties hereto and their successors and permitted assigns is intended to be a
beneficiary of this Agreement.
7. Amendment and Waiver.
(a) No failure or delay on the part of WSI or the Company in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy.
(b) Any amendment, supplement or modification of or to any
provision of this Agreement, any waiver of any provision of this Agreement and
any consent to any departure by any party from the terms of any provision of
this Agreement shall be effective (i) only if it is made or given in writing and
signed by WSI and the Company and (ii) only in
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the specific instance and for the specific purpose for which made or given.
Except where notice is specifically required by this Agreement, no notice to or
demand on any party in any case shall entitle any party hereto to any other or
further notice or demand in similar or other circumstances.
8. Counterparts. This Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed shall be deemed to be
an original and both of which taken together shall constitute one and the same
agreement.
9. Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to the
principles of conflicts of law of such state.
11. Jurisdiction. Each party to this Agreement hereby irrevocably
agrees that any legal action or proceeding arising out of or relating to this
Agreement or any agreements or transactions contemplated hereby shall be brought
in the courts of the State of New York or of the United States of America for
the Southern District of New York and hereby expressly submits to the personal
jurisdiction and venue of such courts for the purposes thereof and expressly
waives any claim of improper venue and any claim that such courts are an
inconvenient forum. Each party hereby irrevocably consents to the service of
process of any of the aforementioned courts in any such suit, action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to the address set forth in Section 5, such service to become
effective 10 days after such mailing.
12. Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired.
13. Entire Agreement. This Agreement, together with the Exhibits
hereto, is intended by the parties as a final expression of their agreement and
is intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained
herein and therein. There are no restrictions, promises, warranties or
undertakings, other than those set forth herein or therein. This Agreement,
together with the Exhibits hereto, supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
14. Further Assurances. Each of the parties shall execute such
documents and perform such further acts (including, without limitation,
obtaining any consents, exemptions, authorizations, or other actions by, or
giving any notices to, or making any filings with, any
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governmental authority or any other person or entity) as may be reasonably
required to carry out or to perform the provisions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement or caused this Agreement to be executed and delivered by their
authorized representatives as of the date first above written.
EDISON SCHOOLS INC.
By: ______________________________
Name:
Title:
WSI INC.
By: ______________________________
Name:
Title:
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