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EXHIBIT 10.29
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. NO SALE
OR DISPOSITION MAY BE EFFECTED WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMPANY
OR WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL FOR THE HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS
NOT REQUIRED UNDER THE ACT OR RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES
AND EXCHANGE COMMISSION.
THIS WARRANT MAY NOT BE EXERCISED EXCEPT IN COMPLIANCE WITH ALL APPLICABLE
FEDERAL AND STATE SECURITIES LAWS TO THE REASONABLE SATISFACTION OF THE COMPANY
AND LEGAL COUNSEL FOR THE COMPANY.
WARRANT TO PURCHASE
117,021 SHARES OF SERIES D PREFERRED STOCK
THE LIGHTSPAN PARTNERSHIP, INC.
(INCORPORATED UNDER THE LAWS OF THE STATE OF CALIFORNIA)
THIS CERTIFIES THAT, for value received, Xxxxxxxxxx Securities (the
"Warrantholder") is entitled to purchase, on the terms hereof, One Hundred
Seventeen Thousand Twenty-One (117,021) shares of Series D Preferred Stock (the
"Series D Stock") of The Lightspan Partnership, Inc., a California corporation
(the "Company"), at a purchase price as set forth herein.
1. EXERCISE OF WARRANT.
The terms and conditions upon which this Warrant may be exercised and
the Series D Stock covered hereby (the "Warrant Stock") may be purchased, are as
follows:
1.1. Exercise. This warrant may be exercised in whole or in part at any
time on or after the date hereof, but in no case may this Warrant be exercised
later than 5:00, San Francisco time on June 24, 2002 (the "Termination Date"),
after which time this Warrant shall terminate and shall be void and of no
further force of effect.
1.2. Exercise Price. The purchase price for the shares of Series D Stock
to be issued upon exercise of this Warrant shall be $4.70 per share, subject to
adjustment as set forth herein (the "Exercise Price").
1.3. Method of Exercise. The exercise of the purchase rights evidenced
by this Warrant shall be effected by (a) the surrender of this Warrant, together
with a duly executed copy of the form of Subscription attached hereto, to the
Company at its principal office and (b) the delivery of the Exercise Price
multiplied by the number of shares for which the purchase rights hereunder are
being exercised, by check or bank draft payable to the Company's order or any
other form of consideration approved by the Company's Board of Directors.
1.4. Net Issuance.
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(a) Right to Convert In addition to and without limiting the rights
of the Warrantholder under the terms of this Warrant, the Warrantholder shall
have the right to convert this Warrant or any portion hereof (the "Conversion
Right") into shares of Series D Stock as provided in this Section 1.4 at any
time or from time to time during the term of this Warrant. Upon exercise of the
Conversion Right with respect to a particular number of shares subject to this
Warrant (the "Converted Warrant Shares"), the Company shall deliver to the
Warrantholder (without payment by the Warrantholder of any exercise price or any
cash or other consideration) that number of shares of fully paid and
nonassessable Series D Stock computed using the following formula:
Y(A - B)
X = --------
A
Where X = the number of shares of Series D Stock to be
issued to the holder of the Warrant
Y = the number of Converted Warrant Shares
A = the fair market value of one
share of the Company's Series D
Stock on the Conversion Date
(as defined below)
B = the per share exercise price of
the Warrant (as adjusted to the
Conversion Date)
The Conversion Right may only be exercised with respect to a whole number of
shares subject to this Warrant. No fractional shares shall be issuable upon
exercise of the Conversion Right, and if the number of shares to be issued
determined in accordance with the foregoing formula is other than a whole
number, the Company shall pay to the Warrantholder an amount in cash equal to
the fair market value of the resulting fractional share on the Conversion Date.
Shares issued pursuant to the Conversion Right shall be treated as if they were
issued upon the exercise of this Warrant.
(b) Method of Exercise. The Conversion Right may be exercised by the
Warrantholder by the surrender of this Warrant at the principal office of the
Company together with a written statement specifying that the Warrantholder
thereby intends to exercise the Conversion Right and indicating the number of
shares subject to this Warrant which are being surrendered (referred to in
subsection (a) hereof as the Converted Warrant Shares) in exercise of the
Conversion Right. Such conversion shall be effective upon receipt by the Company
of this Warrant together with the aforesaid written statement, or on such later
date as is specified therein (the "Conversion Date"). Certificates for the
shares issuable upon the exercise of the Conversion Date shall be delivered to
the holder promptly following the Conversion Date.
(c) Determination of Fair Market Value. For purposes of this Section
1.4, fair market value of a share of Series D Stock on the Conversion Date shall
be determined as follows:
(i) If the Series D Stock is traded on a stock exchange, the
fair market value of the Series D Stock shall be deemed to be the average of the
closing selling prices of the Series D Stock on the stock exchange determined by
the Company's Board of Directors to be the
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primary market for the Series D Stock over the ten (10) trading day period
ending on the date prior to the Conversion Date, as such prices are officially
quoted in the composite tape of transactions on such exchange;
(ii) If the Series D Stock is traded over-the-counter, the fair
market value of the Series D Stock shall be deemed to be the average of the
closing bid prices (or, if such information is available, the closing selling
prices) of the Series D Stock over the ten (10) trading day period ending on the
date prior to the Conversion Date, as such prices are reported by the National
Association of Securities Dealers through its Nasdaq system or any successor
system; and
(iii) If there is no public market for the Series D Stock, then
the fair market value of the Series D Stock shall be determined by the good
faith judgment of the Company's Board of Directors.
1.5. Issuance of Shares. In the event that the purchase rights evidenced
by this Warrant are exercised in whole or in part, a certificate or certificates
for the purchased shares shall be issued to the Warrantholder as soon as
practicable. The Warrantholder, by acceptance hereof, agrees that this Warrant
and the Warrant Stock are being acquired for investment and that he will not
offer, sell or otherwise dispose of this Warrant or any Warrant Stock except
under circumstances which will not result in a violation of the Securities Act
of 1933, as amended (the "Act"). The Warrant Stock (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.
NO SALE OR OTHER DISPOSITION MAY BE EFFECTED WITHOUT THE PRIOR WRITTEN
CONSENT OF THE COMPANY AND WITHOUT AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL FOR THE HOLDER, SATISFACTORY TO
THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT OR
RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE
COMMISSION."
In the event the purchase rights evidenced by this Warrant are exercised
in part, the Company will also issue to the Warrantholder a new warrant
representing the unexercised purchase rights.
2. CERTAIN ADJUSTMENTS.
2.1. Conversion of Series D Stock. Should all of the Company's Series D
Stock be, or if outstanding would be, at any time prior to the expiration of
this Warrant or any portion thereof, converted into shares of the Company's
Common Stock in accordance with the Articles of Incorporation of the Company in
effect immediately prior to such conversion (the "Conversion Event"), then this
Warrant shall immediately become exercisable for that number of shares of the
Company's Common Stock which is equal to the number of shares of the Common
Stock which would have been received if this Warrant had been exercised in full
and the Series D Stock
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received thereupon had been simultaneously converted into Common Stock
immediately prior to such Conversion Event, and the Exercise Price shall be
immediately adjusted to equal the quotient obtained by dividing (x) the product
obtained by multiplying the Exercise Price by the maximum number of shares of
Series D Stock for which this Warrant was exercisable immediately prior to such
Conversion Event, by (y) the number of shares of Common Stock for which this
Warrant is exercisable immediately after such Conversion Event.
2.2. Stock Dividends. If at any time while this Warrant remains
outstanding and unexpired, the Company pays a dividend or makes a distribution
with respect to the Series D Stock payable in shares of Series D Stock, then the
Exercise Price shall be adjusted, as of the record date of shareholders
established for such purpose (or if no such record is taken, as at the date of
such payment or distribution), to that price determined by multiplying the
Exercise Price in effect immediately prior to such payment or distribution by a
fraction (A) the numerator of which shall be the total number of shares of
Series D Stock outstanding immediately prior to such dividend or distribution,
and (B) the denominator of which shall be the total number of shares of Series D
Stock outstanding immediately after such dividend or distribution. The
Warrantholder shall thereafter be entitled to purchase, at the Exercise Price
resulting from such adjustment, the number of shares of Series D Stock
(calculated to the nearest whole shares) obtained by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of shares of
Series D Stock issuable upon the exercise hereof immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment. The provisions of this Section 2.2 shall not apply under any of
the circumstances for which an adjustment is provided under Sections 2.3, 2.4 or
2.5.
2.3. Mergers, Consolidations or Sale of Assets. If at any time while
this Warrant remains outstanding and unexpired, there shall be a capital
reorganization of the shares of the Company's capital stock (other than a
combination, reclassification, exchange or subdivision otherwise provided for
herein), or a merger or consolidation of the Company with or into another
corporation in which the Company is not the surviving corporation (collectively,
a "Corporate Transaction"), then:
(i) in the event that the consideration per share to be received by
the holders of the Company's Series D Stock pursuant to the Corporate
Transaction is equal to or exceeds two times the Exercise Price, then the
Warrantholder shall be given ten (10) days written notice prior to the closing
of the Corporate Transaction during which time the Warrantholder may elect to
exercise this Warrant. The Warrantholder may specify that it elects to exercise
this Warrant effective immediately prior to the closing of the Corporate
Transaction. In the event that the Warrantholder elects not to exercise this
Warrant, then this Warrant shall terminate and be of no further force or effect
upon the closing of the Corporate Transaction.
(ii) in the event that the consideration per share to be received by
the holders of the Company's Series D Stock pursuant to the Corporate
Transaction is less than two times the Exercise Price, then lawful provision
shall be made so that the Warrantholder shall thereafter be entitled to receive,
upon exercise of this Warrant, during the period specified in this Warrant and
upon payment of the Exercise Price then in effect, the number of shares of stock
or other securities or property of the successor corporation resulting from such
Corporate Transaction to
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which a holder of the securities deliverable upon exercise of this Warrant would
have been entitled under the provisions of the agreement in such Corporate
Transaction if this Warrant had been exercised immediately prior to such
Corporate Transaction. Appropriate adjustment (as determined in good faith by
the Company's Board of Directors) shall be made in the application of the
provisions of this Warrant with respect to the rights and interests of the
Warrantholder after the Corporate Transaction to the end that the provisions of
this Warrant (including adjustment of the purchase price then in effect and the
number of shares of securities issuable under this Warrant) shall be applicable
after the Corporate Transaction, as near as reasonably may be, in relation to
any shares or other property deliverable after the Corporate Transaction upon
exercise of this Warrant.
2.4. Reclassification. If the Company at any time shall, by subdivision,
combination or reclassification or securities or otherwise, change any of the
securities issuable under this Warrant into the same or a different number of
securities of any other class or classes, this Warrant shall thereafter
represent the right to acquire such number and kind of securities as would have
been issuable as a result of such change with respect to the securities issuable
under this Warrant immediately prior to such subdivision, combination,
reclassification or other change.
2.5. Subdivision or Combination of Shares. If at any time while this
Warrant remains outstanding and unexpired, the number of shares of Series D
Stock outstanding is decreased by a combination of the outstanding shares of
Series D Stock, then the Exercise Price shall be proportionately increased in
the case of a combination of such shares, or shall be proportionately decreased
in the case of a subdivision of such shares, and the number of shares of Series
D Stock issuable upon exercise of the Warrant shall thereafter be adjusted to
equal the product obtained by multiplying the number of shares of Series D Stock
purchasable under this Warrant immediately prior to such Exercise Price
adjustment by a fraction (A) the numerator of which shall be the Exercise Price
immediately prior to such adjustment, and (B) the denominator of which shall be
the Exercise Price immediately after such adjustment.
2.6. Liquidating Dividends, Etc. If the Company at any time while the
Warrant remains outstanding and unexpired makes a distribution of its assets to
the holders of its Series D Stock as a dividend in liquidation or by way of
return of capital or other than as a dividend payable out of earnings or surplus
legally available for dividends under applicable law or any distribution to such
holders made in respect of the sale of all or substantially all of the Company's
assets (other than under the circumstances provided for in the foregoing
Sections 2.2 through 2.5), the holder of this Warrant shall be entitled to
receive upon the exercise hereof, in addition to the shares of Series D Stock
receivable upon such exercise, and without payment of any consideration other
than the Exercise Price, an amount in cash equal to the value of such
distribution per share of Series D Stock multiplied by the number of shares of
Series D Stock which, on the record date for such distribution, are issuable
upon exercise of this Warrant (with no further adjustment being made following
any event which causes a subsequent adjustment in the number of shares of Series
D Stock issuable upon the exercise hereof), and an appropriate provision
therefor should be made a part of any such distribution. The value of a
distribution which is paid in other than cash shall be determined in good faith
by the Board of Directors.
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2.7. Notice of Adjustments. Whenever any of the Exercise Price or the
number of securities purchasable under the terms of this Warrant at that
Exercise Price shall be adjusted pursuant to Section 2 hereof, the Company shall
promptly notify the Warrantholder in writing of such adjustment, setting forth
in reasonably detail the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated (including a
description of the basis on which the Company's Board of Directors made any
determination hereunder), and the Exercise Price and number of shares of Series
D Stock or other securities purchasable at that Exercise Price after giving
effect to such adjustment. Such notice shall be mailed (by first class and
postage prepaid) to the registered Warrantholder.
In the event of:
(a) The taking by the Company of a record of the holders of any
class of securities of the Company for the purpose of determining the holders
thereof who are entitled to receive any dividend or other distribution, or any
right to subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any other right,
(b) Any capital reorganization of the Company, any reclassification
or recapitalization or recapitalization of the capital stock of the Company or
any transfer of all or substantially all of the assets of the Company to any
other person or any consolidation or merger involving the Company, or
(c) Any voluntary or involuntary dissolution, liquidation, or
winding-up of the Company,
the Company will mail to the Warrantholder, at its list address at least ten
(10) days prior to the earliest date specified therein as described below, a
notice specifying:
(1) The date on which any such record is to be taken for the
purpose of such dividend, distribution or right, and the amount and character of
such dividend, distribution or right; and
(2) The date on which any such reorganization, reclassification,
transfer, consolidation, merger, dissolution, liquidation or winding-up is
expected to become effective and the record date for determining shareholders
entitled to vote thereon.
3. FRACTIONAL SHARES.
No fractional shares shall be issued in connection with any exercise of
this Warrant. In lieu of the issuance of such fractional share, the Company
shall make a cash payment equal to the then fair market value of such fractional
share as determined by the Company's Board of Directors.
4. RESERVATION OF SERIES D AND COMMON STOCK.
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The Company shall at all times reserve and keep available out of its
authorized but unissued shares of Series D Stock and Common Stock, solely for
the purpose of effecting the exercise of this Warrant, such number of its shares
of Series D Stock and Common Stock into which such shares of Series D Stock may
at any time be converted as shall from time to time be sufficient to effect the
exercise of this Warrant; and if at any time the number of authorized but
unissued shares of Series D Stock and Common Stock shall not be sufficient to
effect the exercise of the entire Warrant, in addition to such other remedies as
shall be available to the holder of this Warrant, the Company will use its
reasonable efforts to take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Series D
Stock and Common Stock to such number of shares as shall be sufficient for such
purposes.
5. PRIVILEGE OF STOCK OWNERSHIP.
Prior to the exercise of this Warrant, the Warrantholder shall not be
entitled, by virtue of holding this Warrant, to any rights of a shareholder of
the Company, including (without limitation) the right to vote, receive dividends
or other distributions, exercise preemptive rights or be notified of shareholder
meetings, and such holder shall not be entitled to any notice or other
communication concerning the business or affairs of the Company, except as
required by law.
6. LIMITATION OF LIABILITY.
No provision hereof, in the absence of affirmative action by the holder
hereof to purchase the securities issuable under this Warrant, and no mere
enumeration herein of the rights of privileges of the holder hereof, shall give
rise to any liability of such holder for the purchase price or as a shareholder
of the Company, whether such liability is asserted by the Company or by
creditors of the Company.
7. TRANSFERS AND EXCHANGES.
This Warrant may not be transferred or assigned in whole or in part
without (i) the prior written consent of the Company and (ii) compliance with
applicable federal and state securities laws; provided, however, that the
Warrant may be transferred without the prior written consent of the Company in
the following transactions:
A transfer of the Warrant in whole by a holder who is a natural
person during the holder's lifetime or on death by will or intestacy to such
holder's immediate family or to any custodian or trustee for the account of such
holder or such xxxxxx's immediate family. "Immediate family" as used herein
shall mean spouse, lineal descendant, father, mother, brother or sister of the
holder.
A transfer of the Warrant in whole to the Company or to any
stockholder of the Company.
A transfer of the Warrant in whole or in part to a person who, at
the time of such transfer, is or is an affiliate of an officer or director of
the Company.
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A transfer of the Warrant in whole pursuant to and in accordance
with the terms of any merger, consolidation, reclassification of shares or
capital reorganization of a corporate holder.
A transfer of the Warrant in whole to a parent, subsidiary or
affiliate of a holder.
A transfer of the Warrant in whole by a holder which is a limited or
general partnership to any of its partners or former partners.
8. PAYMENT OF TAXES.
The Company shall pay all stamp or similar issue or transfer taxes
payable in respect of the issue or delivery of the securities issuable under
this Warrant. The Company shall not be required, however, to pay any tax or
other charge imposed in connection with any transfer involved in the issue of
any certificate for shares of the securities issuable under this Warrant in any
name other than that of the Warrantholder, and in such case, the Company shall
not be required to issue or deliver any stock certificate until such tax or
other charge has been paid or it has been established to the Company's
satisfaction that no such tax or other charge is due.
9. REGISTRATION RIGHTS.
The Warrantholder shall have the registration rights with respect to the
securities issuable under this Warrant as are set forth in the Amended and
Restated Investor Rights Agreement dated June 23, 1997 (the "Rights
Agreement")(a copy of which is attached hereto). For all such purposes, the
Warrantholder shall be deemed to be a party to said Rights Agreement as if the
Warrantholder was an original signatory thereto, and shall have all the rights,
privileges and obligations granted to or imposed on a party thereto as provided
in this Section 9 and in said Rights Agreement, and the Warrantholder shall for
all such purposes be treated as a "Investor" under said Rights Agreement and the
securities issuable under this Warrant shall be treated as "Registrable
Securities" under said Rights Agreement, as such terms are defined therein.
10. NO IMPAIRMENT OF RIGHTS.
The Company hereby agrees that it will not, through the amendment of its
Certificate of Incorporation or otherwise, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such actions as may be necessary or appropriate in order to protect the rights
of the Warrantholder against impairment.
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11. SUCCESSORS AND ASSIGNS.
The terms and provisions of this Warrant shall be binding upon the
Company and the Warrantholder and their respective successors and assigns.
12. LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant, and in case of loss,
theft or destruction, upon receipt of an indemnity or security reasonably
satisfactory to the Company, and upon reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
this Warrant, if mutilated, the Company will make and deliver a new warrant of
like tenor and dated as of such cancellation, in lieu of this Warrant.
13. RESTRICTED SECURITIES.
The Warrantholder understands that this Warrant and the securities
purchasable hereunder constitute "restricted securities" under the federal
securities laws inasmuch as they are, or will be, acquired from the Company in
transactions not involving a public offering and accordingly may not, under such
laws and applicable regulations, be resold or transferred without registration
under the Securities Act of 1933 or an applicable exemption from registration.
In this connection, the Warrantholder acknowledges that Rule 144 of the
Securities and Exchange Commission is not now, and may not in the future be,
available for resales of this Warrant and the securities purchased hereunder.
14. SATURDAYS, SUNDAYS, HOLIDAYS.
If the last or appointed day for the taking of any action or the
expiration of any right required or granted herein shall be a Saturday or Sunday
or shall be a legal holiday, then such action may be taken or such right may be
exercised, except as to the purchase price, on the next succeeding day not a
legal holiday.
THE LIGHTSPAN PARTNERSHIP, INC.
By:
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Xxxx Xxxxxx
President and Chief Operating Officer
Dated: June _____, 1997
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SUBSCRIPTION
The Lightspan Partnership, Inc.
00000 Xxxxxx Xxxxx Xxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Ladies and Gentlemen:
The undersigned hereby elects to purchase, pursuant to the provisions of
the Warrant dated _________ , 1997 held by the undersigned, ____________ shares
of the Series D Stock of The Lightspan Partnership, Inc., a California
corporation.
Payment of the per share purchase price required under such Warrant
accompanies this Subscription.
The undersigned hereby represents and warrants that the undersigned is
acquiring such stock for its own account and not for resale or with a view to
distribution of any part thereof and accepts such shares subject to the terms
and conditions of the Warrant.
Dated:__________________, 19__
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Print Name of Warrantholder
By
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Address: -----------------------------------
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