March 1, 1997
Mr. Benno C. Schmidt, Jr.
222 Riverside Drive
New York, NY 10025
Dear Benno:
This letter agreement ('Agreement') sets forth the terms of your
employment with The Edison Project L.P. ('Edison' or the 'Company') as approved
by the board of directors (the 'Board') of The Edison Project Inc. ('Edison
Inc.'), the sole general partner of Edison. This Agreement supersedes and
replaces (i) the employment agreement dated March 15, 1995 and any agreement
appearing as an exhibit or attachment thereto or referred to therein (the 'March
1995 Employment Agreement') between you and Edison and (ii) the letter agreement
dated May 1, 1996 between you and Edison which served to clarify the March 1995
Employment Agreement (the 'May 1996 Agreement'). Notwithstanding the foregoing,
your obligations with respect to the following shall survive and shall not be
modified except for the modifications contained herein: (i) the promissory note
issued to Whittle Communications L.P. (which was assigned to Edison) dated June
5, 1992 with a face amount of $1,600,000 and any accrued and unpaid interest
thereon through the date hereof (the 'Existing Loan'); (ii) the promissory note
issued to Edison dated January 23, 1996 with a face amount of $200,000 and any
accrued and unpaid interest thereon through the date hereof (the 'Transition
Loan' and, together with the Existing Loan, the 'Loans'); (iii) the release
provided by the terms of the March 1995 Employment Agreement; and (iv) the
assignment to Edison of benefits under the $5,000,000 First Colony Life
Insurance policy 1893365 (the ''Insurance Policy') as collateral for the Loans.
Position/Responsibilities. You will be employed as Edison's Chairman and
Chief Executive Officer ('CEO'), working out of the Company's headquarters in
New York City. Your responsibilities are set forth on Exhibit A attached hereto.
Term. The term of your employment commences as of the date hereof and ends
on December 31, 1998, unless terminated earlier by Company as provided below.
Base Salary. You will be paid at an annual base salary rate of $255,000
from the date hereof. Contingent upon achievement of Edison's Board-approved
business plan for each fiscal year as determined by Edison Inc.'s Board in its
sole discretion, your base salary at the start of the following fiscal year will
be increased by no less than eight percent (8%) of your then current base
salary.
Bonus. In addition to your base salary, you will be eligible to
participate in the Management Committee incentive compensation plan as set by
the Board each
fiscal year. Under the terms of this plan for FY 1997, you will be eligible to
receive a bonus of up to 33-1/3% of your base salary (the 'Maximum Bonus'). A
portion (the 'Award') of the Maximum Bonus equal to 20% of your base salary may
be earned upon achievement of certain identified results--25% of the Award will
be linked to the achievement of individual performance goals (as determined by
the Board), and 75% of the Award will be linked to the achievement of Edison's
Board-approved business plan for the year (as determined by the Board). For
exceeding both personal goals and the Company business plan, your bonus may be
increased up to the Maximum Bonus amount in the sole discretion of the Board.
Subsequent to FY 1997, you will be eligible to receive an annual bonus of up to
50% of your then current base salary under a plan to be determined by the Board
in its sole discretion.
Stock Options. Simultaneous with the execution of this agreement the
parties hereto shall execute the Stock Option Agreement attached as Exhibit B
which shall supersede and replace the Option Agreement dated as of March 15,
1995 between you and the Company. In addition, you will be eligible to
participate in the 'Performance Option Pool' for key executives described in
Exhibit C attached hereto, with your portion of the option pool set at 268,526
shares, such number to be reduced to the extent the Board approves vesting of
additional Performance Segment Shares, as defined in the Stock Option Agreement,
with respect to Fiscal Year 1996, but in no event to be less than 250,000
shares.
Benefits. You will be entitled to the standard Company benefits for
executives at your level as in effect from time to time, a current schedule of
which is attached as Exhibit D. The Company will further maintain for your
benefit supplemental long-term disability insurance and supplemental term life
insurance under the Insurance Policy provided that you execute, and cause any
beneficiary named under the Insurance Policy to execute, all documentation
required or requested by Edison in connection with the assignment of the
Insurance Policy as collateral for the Loans, including, without limitation, the
assignment (for your execution) attached hereto as Exhibit E and the consent to
assignment (for execution by each beneficiary) attached hereto as Exhibit F. You
agree not to change the beneficiaries named under the Insurance Policy without
the prior written consent of Edison. You will receive six weeks of vacation
annually in addition to the official Company holidays.
Expense Reimbursements. You will be reimbursed for all reasonable business
expenses you incur in fulfilling your responsibilities hereunder upon submission
of adequate documentation for such expenses and subject to the Company's
policies.
Loans. Simultaneous with the execution of this Agreement, the parties
shall amend the Existing Loan and the Transition Loan to (i) make the due date
of each loan the earlier of February 15, 2000 or the date on which your
employment by Edison is terminated, (ii) make the interest rate of each Loan
5.83% compounded annually effective as of the date hereof, and (iii) provide for
interest to accrue until
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the Loans are paid in full with payment of the interest due on the date of
payment of the Loans, and upon the Company's request you shall execute and
deliver any necessary documents, including replacement promissory notes, in
connection therewith.
Termination/Severance Pay. Either you or Edison may terminate your
employment at any time without cause by giving written notice to that effect.
The termination of employment shall be effective on the date specified in such
notice (the 'Effective Termination Date').
(i) If Edison terminates your employment without cause or if you terminate
your employment for 'good reason,' Edison will pay you as severance pay for a
period beginning on the Effective Termination Date and ending twelve months from
such date (the 'Severance Period') your then current base salary plus the bonus
amount you earned for the prior fiscal year (together, the 'Enhanced Base'). The
Enhanced Base will be paid on Edison's normal payroll cycle during the Severance
Period whether or not you obtain other employment. For purposes of this
Agreement, good reason shall mean (a) the assignment to you of duties and
responsibilities which results in your having materially less significant duties
and responsibilities or exercising materially less significant power and
authority than you had, or duties and responsibilities or power and authority
not in all material respects comparable to that of the level and nature which
you had immediately prior to any such assignment; (b) your removal, or the
failure to re-appoint you to your then current position with Edison; and (c)
Edison's failure to perform in a timely manner its material obligations under
this Agreement, other than, in the case of each of (a), (b) and (c), (A) with
your express written consent or (B) in connection with any termination of your
employment by Edison as the result of your disability or 'for cause.'
(ii) If you terminate your employment without 'good reason' as defined
above, Edison will pay you as severance pay your base salary as of the date of
termination for the Severance Period, provided that if you become employed
elsewhere during the Severance Period the amounts otherwise payable to you under
this sentence shall be reduced by the total amount of any compensation you earn
from such employment during the Severance Period. For purposes of the severance
pay offset provisions of this paragraph, the terms 'employed' and 'employment'
shall mean the providing of any services for compensation whether as a full-time
or part-time employee or as a consultant. Payments made to you as reimbursement
for documented expenses will not constitute compensation for purposes of this
paragraph.
(iii) Edison shall have the right to terminate your employment for cause
by giving you written notice to that effect. The termination of employment shall
be effective on the date specified in such notice. However, 'for cause' is
restricted to
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(1) commission of a willful act of dishonesty in the course of your duties with
Edison which significantly injures Edison; (2) conviction of a crime of moral
turpitude or of a felony; or (3) chronic alcoholism or drug abuse. If you are
terminated for cause, Edison will pay your unpaid base salary through the
effective date of termination.
(iv) In the event of a termination of your employment for any reason
except your death, in addition to any other severance pay to which you may be
entitled, the Company will pay you a lump sum of $2.5 million (the 'Lump-sum
Severance Payment') within 30 days after the Effective Termination Date. Edison
will withhold from the Lump-sum Severance Payment all Federal, state and city
employment and income taxes related thereto that Edison is required to withhold.
You agree that Edison may offset against the Lump-Sum Severance Payment, as
reduced by any applicable tax withholdings, the total amount outstanding on the
Loans including the accrued and unpaid interest through the date of such offset.
(v) In consideration of the severance pay provided for in (i), (ii) and
(iv) above, you agree to deliver to Edison on or promptly following the
effective date of the termination of your employment a Separation and Release in
the form customarily being used by Edison at such time.
Death. If you die during your employment hereunder, this Agreement shall
terminate upon the date of your death. Edison's obligations under this Agreement
(other than obligations then due and owing hereunder) will terminate upon
Edison's payment to the personal representative of your estate (i) your unpaid
base salary through the date of your death and (ii) any expenses properly
reimbursable under this Agreement and not yet reimbursed.
Stock Redemption. In the event of the termination of your employment for
any reason except your death, Edison Inc. agrees that upon receipt of your
written request within six months after the Effective Termination Date, it will
promptly purchase from you the minimum amount of Edison Inc. stock (the
'Redeemed Stock') necessary to provide you with enough cash to pay an Federal,
state and city income taxes (the 'Required Taxes') on the Lump-Sum Severance
Payment and the Redeemed Stock. The Required Taxes shall be deemed to be the sum
of (A) the product of the Lump-Sum Severance Payment multiplied by the total of
your expected marginal tax rates for federal, state and city income taxes for
the year in which such payment is made, taking into account the deductibility of
state and city taxes for federal purposes, plus (B) the product of the capital
gain on the sale of the Redeemed Stock multiplied by the total of the applicable
federal, state and city capital gains tax rates for the year in which the stock
is sold, taking into account the deductibility of state and city taxes for
federal purposes. The date on which the Redeemed Stock will be purchased (the
'Redemption Date') will be determined by the Edison Inc. Board, but shall not be
later than the date Federal income taxes are required to be paid on the Lump-Sum
Severance Payment. If Edison Inc.'s stock is
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publicly traded, the price per share paid by Edison for the Redeemed Stock shall
be the average of the bid and asked share prices for the 30-day period preceding
the Redemption Date. If Edison Inc.'s stock is not publicly traded, the price
per share paid for the Redeemed Stock shall be the price paid in the most recent
transaction, provided however that if a third-party transaction occurs within
three months after the Effective Termination Date at a higher price, the
purchase price shall be adjusted upward to reflect such difference. Edison may
offset against the proceeds of the Redeemed Stock the total amount outstanding
under the Loans, including the accrued and unpaid interest through the date of
such offset.
Exclusivity. In return for the compensation payments set forth in this
agreement, you agree to devote 100% of your professional time and energies to
Edison and not engage in any other business activities without prior approval of
the Board.
Confidentiality. It is understood that in order to perform your duties at
Edison, it will be necessary for Edison to divulge to you its proprietary
information, including, but not limited to, information and data relating to or
concerned with Edison's business, finances, development projects and other
affairs. You agree that you will not divulge such proprietary information to
anyone outside Edison at any time whether or not you are in the employ of
Edison, except as may otherwise be required in connection with the business and
affairs of Edison. You agree to use your best efforts to prevent such disclosure
by others. You also agree that any developments, discoveries, or inventions made
by you alone or with others during the term of your employment with Edison and
applicable to the type of businesses or development projects engaged in by
Edison during such period shall be the sole and exclusive property of Edison and
you agree to execute all documents requested by Edison to protect Edison's
rights thereto.
Non-competition and Non-solicitation. You further agree that during your
employment with Edison and for one year after the termination of such employment
for any reason, you will not at any time engage in or participate as an
executive officer, employee, director, agent, consultant representative,
stockholder, or partner, or have any financial interest, in any business which
'competes' with Edison or any subsidiary of Edison or successor to the business
of Edison. For the purposes hereof, a 'competing' business shall mean any
business which directly competes with any of the businesses of Edison as such
business shall exist during your employment with Edison (for example, the
business of managing public and/or private schools for profit), but a
'competing' business shall not include the traditional non-profit education
business so long as such activities do not violate the confidentiality
provisions of this agreement. Ownership by you of publicly traded stock of any
corporation conducting any such business shall not be deemed a violation of the
preceding two sentences provided you do not own more than three percent (3%) of
the stock of any such corporation. You further agree that for a period of one
year
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after the termination of your employment with Edison for any reason, you will
not, directly or indirectly, solicit the employment or other services of any
executive employee of Edison. For the purposes of the foregoing any executive
employee who within twelve months of terminating his employment with Edison
becomes employed by any entity of which you are an officer or director or owner
of more than an aggregate of 3% of the outstanding stock or equity interest
therein shall be deemed, prima facie, to have been so solicited.
Entire Agreement. Except as expressly provided in the first paragraph of
this Agreement and together with the attached exhibits, this letter agreement
constitutes the entire understanding of the parties with respect to the subject
matter hereof and supersedes all prior agreements and understandings, written or
oral, among the parties with respect to such subject matter. This agreement is
governed by the substantive laws of the State of New York.
Duplicate originals of this agreement are being provided to you. Please
sign below to evidence your agreement to the foregoing and return one original
to me for our records.
Sincerely,
THE EDISON PROJECT L.P.
By: The Edison Project Inc., general partner
By: /s/ Laura K. Eshbaugh
----------------------------
Laura K. Eshbaugh, President
ACCEPTED AND AGREED:
/s/ Benno C. Schmidt, Jr.
-------------------------
Benno C. Schmidt, Jr.
April 7, 1997
-------------------------
Date
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EXHIBIT A
RESPONSIBILITIES OF THE CHAIRMAN/CEO
All of the following responsibilities are subject to the direction, authority
and approval of Edison Inc.'s Board.
- Convene and direct Edison's Office of the Chairman and participate in all
strategic decisions.
- Act as co-spokesperson for the Company.
- Exercise full and usual authority of a CEO, including hiring, firing and
supervising Edison employees, agents, representatives, etc.
- Exercise final authority over day-to-day operations of Edison.
- Provide oversight of educational aspects of Edison's business.
- Head legislative/ macromarketing activities.
EXHIBIT B
OPTION AGREEMENT
Option Agreement, dated as of March 1, 1997, between Benno C. Schmidt, Jr.
('Holder') and The Edison Project Inc. (the 'Company'). Capitalized terms used
but not defined herein are used herein as defined in The Edison Project Inc.
Shareholders' Agreement dated as of November 18, 1996, among the Company and the
other shareholders named therein (the 'Shareholders' Agreement'). This Agreement
supersedes and replaces the Option Agreement dated as of March 15, 1995 between
Holder and The Edison Project L.P. (the 'Partnership').
Holder and the Company hereby agree as follows:
1. Issuance: Vesting. (a) The Company hereby grants to Holder the option
(the 'Option') to purchase 1,237,110 shares of the Company's Series A Common
Stock (the 'Shares') subject to the terms and conditions below.
(b) The Option may only be exercised with respect to the entire
number of vested Shares at the time of exercise. If the Option is exercised
before all the Shares are vested,, the unvested Shares will continue to vest as
provided herein, (it being understood that each and every exercise of the Option
shall be a purchase of the full number of Shares which are vested at the time of
exercise and which have not previously been purchased).
(c) The Option shall vest as follows:
(i) Half of the Option (the 'Time Vested Portion'), or
618,555 Shares, shall vest based on the amount of time
Holder is continuously employed by the Partnership
according to the following schedule:
(aa) 51.92% of the Time Vested Portion of the Option,
or 321,153.75 shares, is vested as of the date
hereof.
(bb) 1.33% of the Time Vested Portion of the Option
shall vest on the last day of each month
commencing with the last day of March, 1997 and
ending on the last day of February, 2000:
provided, however, that if Holder is no longer
employed by the Partnership, the balance of the
Time Vested Portion shall cease vesting as of the
effective date of Holder's termination of
employment.
(ii) Half of the Option (the 'Performance Vested Portion'),
or 618,555 shares, shall vest in five equal segments
(each such segment, a 'Performance Segment') based upon
achievement of the Partnership's business plans as
approved by the Company's Board of Directors (the
'Board') for the five Fiscal Years (as defined below) of
the Partnership beginning with the 1996 Fiscal Year.
Each Performance Segment shall vest as of the date on
which the Board determines that the targets set forth in
the relevant business plan have been achieved. For
Fiscal Year 1996, the Board awarded holder 65% of the
Performance Segment Shares, or 80,412 Shares. The Board
may, but is not required to, permit Holder to be
eligible to vest in a subsequent Fiscal Year in any
Performance Segment which did not vest in respect of y
any prior Fiscal Year due to the non-achievement of the
targets in the relevant business plan to the extent said
targets are achieved in a subsequent Fiscal Year up to
and including the 2000 Fiscal Year. Holder shall only be
eligible to vest in a Performance Segment if Holder was
continuously employed by the Partnership during the
Fiscal Year to which such Performance Segment relates.
2. Exercise. Holder may exercise the vested portion of the Option as
of the first day of each Fiscal Year (or at such other times as may be permitted
by the Board) and prior to the expiration of five years from the first day of
the Fiscal Year immediately following the date of vesting of such portion of the
Option, by (a) transfer to the Account (as defined below) of immediately
available funds in an amount equal to the sum of (x) the number of vested Shares
which have not previously been purchased times the Share Price (as defined
below), and (y) the Withholding Amount (as defined below), and (b) giving
written notice to the Company, failing which the Option shall expire unexercised
and the Company shall have no further obligation hereunder. Upon exercise of the
vested portion of the Option, the books and records of the Company shall be
appropriately amended to reflect the Holder's acquisition of the Shares
corresponding to the vested portion of the Option then exercised.
3. Definitions.
(a) 'Management Option Plan' means the management equity and
option program of the Company, pursuant to which this Option is granted.
(b) 'Account' means the Company's account number #5001083966
at First American National Bank, Nashville, Tennessee (for further
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transfer to the Knoxville office), ABA # 064-000017 or such other account as the
Company may designate by notice to Holder.
(c) 'Fiscal Year' means with respect to the Company and the
Partnership the twelve-month period running from July 1 of one calendar year
through June 30 of the succeeding calendar year.
(d) 'Share Price' means $1.25.
(e) 'Withholding Amount' means the amount (which shall be
determined by the Board) which the Company or the Partnership is required to
withhold and remit to the Internal Revenue Service and/or any other taxing
authority by reason of the exercise by the Holder of the portion of the Option
which is vested at the time of exercise.(1)
4. Nontransferable. Neither this Option nor the Shares may be
transferred, pledged, assigned, sold or otherwise disposed of, except that the
Shares may be redeemed by the Company at anytime by tender to Holder of an
amount equal to the fair market value thereof as determined (i) in good faith by
the Board or (ii) by a third party transaction at the time of redemption.
5. Representations and Warranties. Holder represents and warrants to
the Company that:
(a) Holder is acquiring the Option for Holder's own account
for investment purposes and not with a view to, or for
resale in connection with, a distribution in whole or in
part of the Option or the Shares.
(b) Holder understands that this Option is not transferable
and the Shares are transferable only to the Company (it
being understood that the foregoing prohibitions on
transfer apply to any transfer by way of pledge,
assignment sale or any other means of disposition), and
that the Shares may be legended to such effect.
--------
(1) The requirement that the Holder pay a Withholding Amount arises
because (i) the Holder will be treated by the relevant taxing authorities as
receiving compensation income upon exercise of the Option to the extent that, at
the time of such exercise, the fair market value of the Shares exceeds the Share
Price, and (ii) the Company or Partnership has a withholding obligation with
respect to such compensation income.
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(c) Holder has carefully reviewed this Option Agreement, the
Shareholders' Agreements, the Partnership's preliminary
financial statements dated as of June 30, 1996, and the
Partnership's business plan for the 1997 Fiscal Year.
Holder and Holder's advisors have had a reasonable
opportunity to ask questions of and receive answers from
the Company and Partnership, or a person or persons
acting on its behalf, concerning the terms and
conditions of the offering, and to obtain additional
information, to the extent possessed by the Company or
Partnership or obtainable by it without unreasonable
effort or expense. All such questions have been answered
to the full satisfaction of Holder. No oral or written
representations or warranties have been made or oral or
written information furnished or oral or written
promises made to Holder or Holder's advisors in
connection with the Option being offered hereunder or
the offering generally which were in any way
inconsistent this Option Agreement
(d) Holder, either alone or together with Holder's advisors,
has such knowledge and experience in financial, tax and
business matters to enable Holder to utilize the
information made available to Holder in connection with
the offering, to evaluate the merits and risks of the
prospective investment and to make an informed
investment decision with respect thereto.
(e) Holder understands that an investment in the Company
involves a high degree of risk and that the Option and
the Shares may prove to be valueless.
(f) Holder understands that neither the offering nor the
transfer of the Option to Holder has been registered
under the Securities Act of 1933, as amended, in
reliance upon an exemption therefrom for non-public
offerings, nor has such offering or transfer been
registered or qualified under any state securities or
'Blue Sky' law in reliance upon similar exemptions.
(g) Holder understands that the issuance of the Option has
not been, and the issuance of the Shares will not be,
reviewed, approved or otherwise passed upon by the U.S.
Securities and Exchange Commission, any state securities
administrator, the National Association of Securities
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Dealers Inc., any securities or commodities exchange, or
any other governmental agency or self-regulatory
authority.
6. Indemnification. The Holder agrees to indemnify and hold harmless
the Company, the Partnership, and their respective officers, directors and
affiliates from and against all damages, losses, costs and expenses (including
reasonable attorney's fees and expenses) which they may incur by reason of any
breach of this Option Agreement by Holder including any breach of any of the
representations and warranties made by Holder herein.
7. Confidentiality. To the extent Holder acquires non-public
information with respect to the Company or Partnership, including, without
limitation, technical, financial, competitive, marketing sales, and business
information, documents and tangible items (collectively, the 'Information'),
Holder shall keep such Information strictly confidential and not at any time
hereafter disclose or divulge such Information to any person, firm or
corporation or otherwise use such Information for any purpose (other than for
the purposes of the Company or Partnership) without the prior written consent of
the Company or the Partnership.
8. Non-Competition and Non-Solicitation. (a) Holder agrees that
until the later of one year after (i) the expiration of the Option, or (ii)
Holder ceases to own the Shares, Holder shall not at any time engage in or
participate as an executive officer, employee, director, agent, consultant,
representative, stockholder or partner, or have any financial interest, in any
business which 'competes' with the business of the Company, the Partnership or
any subsidiary of the Company or the Partnership (the Company, the Partnership
and their respective subsidiaries being hereby defined as 'Edison'). For the
purposes hereof, a ''competing' business shall mean any business which directly
competes with any of the businesses of Edison as such business shall exist
during Holder's ownership of the Option or the Shares, for example, the business
of managing public and/or private schools for profit, but a 'competing' business
shall not include the traditional non-profit education business, so long as such
activities do not violate the confidentiality provisions of the Option
Agreement. Ownership by Holder of publicly traded stock of any corporation
conducting any such business shall not be deemed a violation of the preceding
two sentences provided Holder does not own more than three percent (3%) of the
stock of any such corporation.
(b) Holder agrees that until the later of one year after (i)
the expiration of the Option, or (ii) the Holder ceases to own the Shares,
Holder shall not directly or indirectly, solicit the employment, or other
services of any executive employee of the Partnership. For purposes of the
foregoing, any executive employee who within twelve months of terminating his
employment with the Partnership becomes employed by any Person in which Holder
is an officer or director or owner
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of more than an aggregate of 3% of the outstanding stock or equity interest
therein shall be deemed, prima facie, to have been so solicited.
9. Satisfaction of Equity Offering. Holder hereby acknowledges that
(i) the issuance of the Option satisfies any and all obligations which the
Partnership or any of the current or former General Partners of the Partnership,
or its predecessor, may have to offer to Holder the opportunity to purchase an
equity interest in the Partnership, and (ii) Holder has no right to acquire any
equity interest in the Partnership or the Company, other than Holder's right to
acquire the Company Shares hereunder.
10. Governing Law. This Option Agreement is governed by the laws of
the State of New York without giving effect to renvoi or other choice of law
doctrine to the extent that the application of the law of another jurisdiction
would be required thereby.
11. Entire Agreement. This Option Agreement contains the entire
understanding of the parties with respect to the subject matter hereof and
supersedes all prior agreements and understandings, written or oral, between the
parties with respect to such subject matter.
12. Miscellaneous. (a) Notices. All notices, demands, elections,
requests or other communications which any party to this Option Agreement may
desire or be required to give hereunder shall be in writing and shall be given
by personal delivery, recognized overnight delivery service, telecopy or by
mailing (by registered or certified first class mail, postage prepaid, return
receipt requested) addressed as follows:
if the Company at:
The Edison Project Inc.
c/o The Edison Project L.P.
521 Fifth Avenue 16th Floor
New York, New York 10175
212-309-1604
with a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Telecopy: 212-504-6666
Attention: John F. Fritts, Esq.
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if to Holder at:
The Edison Project L.P.
521 Fifth Avenue
16th Floor
New York, New York 10175
Telecopy: 212-309-1618
or at such other address or telecopy number as may be designated by one party by
notice given as provided herein to the other party. A notice shall be deemed to
have been given (i) if delivered personally, on the date so delivered (or, if
not a Business Day, on the next following Business Day), (ii) if sent by
recognized overnight delivery service, on the Business Day following the date
sent, (iii) if sent by telecopy, upon electronic confirmation of receipt, or
(iv) if sent by registered or certified first class mail, postage prepaid,
return receipt requested, five Business Days following the date sent.
(b) Amendments. This Option Agreement may not be changed
orally, but only by an agreement in writing signed by the Company and the
Holder.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Option Agreement as of the date set forth above.
____________________________ THE EDISON PROJECT INC.
Benno C. Schmidt, Jr.
BY:_______________________________
Laura Eshbaugh
President
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EXHIBIT C
PERFORMANCE OPTION POOL DESCRIPTION
As of March 1, 1997
Current senior management of The Edison Project L.P. (the ''Partnership') will
be awarded additional options to acquire shares of the Series A Common Stock of
The Edison Project Inc. ('Edison Inc.') under new option agreements. The options
will vest upon the ninth anniversary of the issuance of such options, provided
that the option holder has been continuously employed by the Partnership, and
may be exercised in whole or in part at any time after the ninth anniversary and
prior to the tenth anniversary, on which date any portion of the option which
has not been exercised will expire. The price for shares covered by these option
agreements will be $1.50.
The option agreements will include an acceleration feature providing that the
options will become fully vested if Edison Inc. makes an initial public offering
prior to January 1, 2000 at a share price of at least $8. Alternatively, the
options will become fully vested if prior to January 1, 2000 Edison Inc. (i)
sells all or substantially all of its assets, (ii) completes a merger or
consolidation where Edison Inc. is not the surviving entity, or (iii) concludes
any other transaction in which Edison Inc. investors as of March 1, 1997 are
permitted or required to sell at least fifty percent (50%) of their shares, in
each of (i), (ii), or (iii) only so long as the price per share is at least $8.
The Performance Option Pool will consist of 1,250,000 shares awarded as follows:
Chris Whittle 600,000
Benno Schmidt 250,000
John Reid 200,000
Other senior executives* 200,000
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1,250,000
* to be recommended by the Office of the Chairman for approval by the Edison
Inc. board at its April, 1997 meeting
EXHIBIT D
BENEFITS
Insurance
The Company provides a medical and dental insurance plan and a long-term
disability plan, descriptions of which will be provided to you.
Life insurance coverage furnished by the Company provides benefits of two times
annual base salary up to a maximum benefit of $300,000.
Sick Leave
Beginning with the third month of employment, sick leave accrues at the rate of
1.85 hours per pay period.
Personal Leave
Employees receive two days of personal leave each year. These days are lost if
not taken during the year.
Short-Term Disability
Beginning with the seventh month of employment, short-term disability accrues at
the rate of 5.54 hours per pay period, up to a maximum of 400 hours.
Wellness Plan
Employees will be reimbursed up to $150 per year for qualified medical expenses
that are not covered by the Company's medical or dental insurance plan.
401(k) Plan
Employees may contribute on a pre-tax basis up to the annual limit set by the
IRS ($9,500 for 1997) and may allocate contributions among several different
investment options offered by the plan. The Company matches 50% of the first
$1,000 of employee contributions.
EXHIBIT F
CONSENT TO ASSIGNMENT
Each of the undersigned beneficiaries of the First Colony Life Insurance
policy number 1893365 (the 'Policy') in the amount of $5,000,000 for the benefit
of Benno C. Schmidt Jr. ('Schmidt') , hereby consents to the assignment of the
Policy by Schmidt to The Edison Project L.P. ('Edison') pursuant to the
assignment attached as Annex I hereto (the 'Assignment'), and hereby relinquish
any claims such beneficiary may have in respect of the Policy while the
Assignment is in effect.
Dated:_______________
_________________________________
[BENEFICIARY]
_________________________________
[BENEFICIARY]
_________________________________
[BENEFICIARY]
_________________________________
[BENEFICIARY]
As of December 15, 1997
Mr. Benno C. Schmidt, Jr.
222 Riverside Drive
New York, NY 10025
Dear Benno:
This letter agreement (the 'Agreement') sets forth certain amendments to
your employment agreement with The Edison Project L.P. ('Edison' or the
'Company') dated as of March 1, 1997 (the 'Initial Employment Agreement')
approved by the Board of Directors (the 'Board') of The Edison Project Inc.
('Edison Inc.'), the sole general partner of Edison, as of the date hereof.
Except as specifically provided for herein, all terms and provisions of your
Initial Employment Agreement remain intact.
1. Position/Responsibilities. This paragraph is revised in its entirety to
read as follows:
You will be employed as Edison's Chairman and Chief Executive Officer
('CEO') through June 30, 1998. On July 1, 1998 your title will become Chairman
and Chief Education Officer. You will work out of the Company's headquarters in
New York City. Your responsibilities are as set out on Exhibit A to this
Agreement.
2. Term. The end date of your employment agreement is changed from
December 31, 1998 to June 30, 2000.
3. Stock Options. This entire paragraph is replaced in its entirety with
the following:
Stock Options. Simultaneous with the execution of this Agreement, the
parties hereto shall execute the amendment to the Stock Option Agreement
dated as of March 1, 1997 attached as Exhibit B. In addition, the parties
hereto shall execute the Tranche I Option Agreement attached as Exhibit C.
4. Loans. By execution of this Agreement, the parties hereby amend, as
provided in the Initial Employment Agreement, the Existing Loan and the
Transition Loan.
5. Exhibit A. Exhibit A to the Initial Agreement is replaced in its
entirety with Exhibit A as attached to this Agreement.
Entire Agreement. Together with the attached exhibits, this Agreement
constitutes the entire understanding of the parties with respect to the subject
matter hereof and supersedes all prior agreements with respect to the subject
matter. This agreement is governed by the substantive laws of the State of New
York.
Mr. Benno C. Schmidt, Jr.
Page Two
Duplicate originals of this agreement are being provided to you. Please
sign below to evidence your agreement to the foregoing and return one original
to me for our records.
Sincerely,
THE EDISON PROJECT L.P.
By: The Edison Project Inc., general partner
By: /s/ Laura K. Eshbaugh
----------------------------
Laura K. Eshbaugh, President
ACCEPTED AND AGREED:
/s/ Benno C. Schmidt, Jr.
-------------------------
Benno C. Schmidt, Jr.
EXHIBIT A: RESPONSIBILITIES
All of the following responsibilities are subject to the direction, authority
and approval of Edison Inc.'s Board.
* Preside over Edison Inc.'s Board meetings
* Direct the Company's legislative and political efforts
* Co-supervise the Company's General Counsel with the Company's President
until June 30, 1998 and thereafter with the CEO
* Participate in all important educational decisions, with particular focus
on ensuring the quality of educational results
* Participate in the Company's strategic planning and educational design
matters
* Serve as co-spokesperson for the Company
* Support the Company's marketing efforts
* Assist in capital formation
EXHIBIT B
AMENDMENT TO THE OPTION AGREEMENT
DATED AS OF MARCH 1, 1997
BETWEEN BENNO C. SCHMIDT, JR. AND THE EDISON PROJECT INC.
The option agreement dated as of March 1, 1997 between Benno C. Schmidt,
Jr. ('Holder') and The Edison Project Inc. (the 'Company') (the 'Option
Agreement') is hereby amended as described herein. Except as specifically
provided for herein, all terms and provisions of the Option Agreement remain
intact.
Paragraph l(c)(ii) is amended to provide that any Performance Segment
Shares which have not been awarded as of the date hereof, which shares total
420,598, shall henceforth vest on a time-vested basis as follows: 1) 123,711
Performance Segment Shares shall vest on June 30, 1998, 2) 123,711 Performance
Segment Shares shall vest on June 30, 1999 and 3) the remaining 173,196
Performance Segment Shares shall vest on June 30, 2000, provided, however, that
1) any such vesting shall cease as of the effective date of the termination of
Holder's employment if Holder is terminated by the Company 'for cause' or if
Holder terminates his employment without good reason and provided further that
2) if Holder is no longer employed by the Company due to a) Holder's death, b)
Holder's inability to perform his employment responsibilities for a period of
ninety (90) consecutive days, c) the termination of Holder's employment by the
Company without 'cause' or d) Holder's termination of his employment for 'good
reason,' then upon such termination Holder shall be vested in a pro rata portion
of the Performance Segment Shares which would otherwise vest on June 30 of the
relevant year (such proration based on a 365-day year), and vesting of the
balance of unvested Performance Segment Shares for such year and any succeeding
years shall cease. For purposes of the preceding sentence, 'for cause' and 'good
reason' shall have the meanings set forth in Holder's employment agreement dated
March 1, 1997 as amended as of December 15, 1997.
Entire Agreement. This agreement constitutes the entire understanding of
the parties with respect to the subject matter hereof and supersedes all prior
agreements with respect to the subject matter. This agreement is governed by the
substantive laws of the State of New York.
Duplicate originals of this agreement are being provided to you. Please
sign below to evidence your agreement to the foregoing, and return one original
to me for our records.
Sincerely,
THE EDISON PROJECT L.P.
BY: The Edison Project Inc., general partner
By: /s/ Laura K. Eshbaugh
-----------------------------
Laura K. Eshbaugh, President
ACCEPTED AND AGREED:
/s/ Benno C. Schmidt, Jr.
---------------------------
Benno C. Schmidt, Jr.
Date:
----------------------
-2-
Employment Agreement - The Edison Project LP and Benno C. Schmidt Jr.
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