MANAGEMENT AGREEMENT
MANAGEMENT AGREEMENT (the 'Agreement') dated as of March 14,
1995 between The Edison Partnership L.P. (the 'Company') and WSI Inc. ('WSI').
WHEREAS, WSI is the founding partner of the Company and its
president, H. Christopher Whittle ('Whittle'), is the 'Founder' of the Company;
and
WHEREAS, the Company recognizes that Whittle and other WSI
personnel possess special knowledge and expertise with respect to the Company's
business which knowledge and expertise is vital to the Company in connection
with the growth of its business; and
WHEREAS, the Company desires to ensure to itself the
availability of Whittle's and other WSI personnel's knowledge and expertise; and
WHEREAS, Whittle and WSI desire to provide the services
described herein to the Company on the terms and conditions provided herein.
NOW, THEREFORE, the parties hereto do hereby agree as follows:
1. Term. Unless this Agreement is earlier terminated as
provided herein, the term of this Agreement shall commence on March 15, 1995 and
expire on March 15, 2000 (the 'Initial Term'). The Initial Term shall
automatically renew for successive two year terms (each a 'Renewal Term') unless
WSI shall have given the Company notice of its intention not to renew this
Agreement at least 12 months before the commencement of any Renewal Term.
2. Services. (a) During the Initial Term and any Renewal Term,
WSI shall cause Whittle to and Whittle shall, pursuant to the direction of the
Board of Directors (which for all purposes of this Agreement shall include
members of the Board appointed by WSI), have the power, duty and right to (i)
along with the Company's chief executive officer, act as the Company's
co-spokesperson, (ii) coordinate the strategic planning and capital formation
efforts of the Company, (iii) sit on the Company's management committee (or any
committee exercising similar authority) and attend any meeting thereof, and (iv)
perform any and all other duties or services for the Company as may be assigned
by the Board of Directors in order to implement and further the goals of the
Company and the Company's business plans as approved by the Board of Directors.
Whittle shall report directly to the Board of Directors. Whittle shall cause WSI
personnel to assist Whittle in accordance with his instructions in performing
the services to be performed by WSI or Whittle under this Agreement.
(b) Whittle will perform services for the Company under this
Agreement during no more than 50% of his normal working time. Whittle and the
Company agree to schedule Whittle's time giving due regard to the needs of the
Company and other business demands on Whittle's time. Whittle shall undertake
reasonable travel to such locations and for such reasonable periods of time as
shall be required to perform the services hereunder provided that travel shall
be scheduled with reasonable regard to the other business demands on Whittle's
time. For the purposes of determining the amount of time spent by Whittle under
this Agreement,
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any travel time shall be considered time during which services are being
performed under this Agreement.
(c) During the Initial Term and any Renewal Term, Whittle and
any other WSI personnel who perform services on behalf of the Company will be
covered by the Company's standard benefits plans for personnel at the same level
as such WSI personnel, a current schedule of which is attached.
(d) During the term of this Agreement and for one year after
the termination of such employment for any reason, Whittle will not, and will
not cause or permit WSI to, 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
Company, any subsidiary of the Company or any successor to the business of the
Company. For the purposes hereof, a 'competing' business shall mean any business
which directly competes with any of the businesses of the Company as such
businesses shall exist during the term of this Agreement (for example, the
business of managing public and private schools for profit or the sale of school
management or student assessment systems such as 'The Edison Common' would be
considered to directly compete, but a 'competing' business would not include the
business of developing for, marketing to or implementing in schools electronic
curriculum services or technology delivery systems for such services, or the
fulfillment of Whittle's obligations under the Retention Agreement dated August
17, 1994, between Whittle and WEN Acquisition Corp., as amended, so long as the
activities do not violate the confidentiality
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provisions of this Agreement). Ownership by Whittle or WSI of publicly traded
stock of any corporation conducting any such business shall not be deemed a
violation of the preceding two sentences provided Whittle or WSI does not own
more than three percent (3%) of the stock of any such corporation. Additionally,
Whittle will not and will not cause or permit WSI to directly or indirectly
solicit the employment or other services of any executive employee of the
Company during and for a period of one year after this Agreement is terminated.
3. Management Fee and Expenses. (a) The Company shall pay WSI
for the services performed by Whittle and other WSI personnel under this
Agreement a fee at the annual rate of $275,000 (the 'Management Fee'). The
Management Fee shall be paid in equal monthly installments of $22,916.67 payable
in arrears on the fifteenth day of each calendar month during the Initial Term
and any Renewal Term, provided that until July 1, 1996, $12,500.00 of each
monthly installment shall accrue and be paid on the closing by the Company of an
initial public offering, with interest at the rate of 7% per annum compounded
[quarterly] from the respective dates accrued until paid, and provided further
that the Management Fee for periods after July 1, 1996 shall continue to accrue
and be paid as provided above if the conditions precedent to the Round Three
closing set forth in section 5(c) of the Subscription Agreement dated as of
March 14, 1995 among the Company and the other parties listed therein have not
been met.
(b) The Management Fee shall cover all expenses incurred by
Whittle and other WSI personnel in performing services under this Agreement,
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including, without limitation, all reasonable travel and/or entertainment
expenses in connection with the performance of services hereunder, provided that
if the Company specifically requests that Whittle or other WSl personnel travel
and/or entertain on behalf of the Company, the Company shall reimburse, in
accordance with the policies of the Company as in effect from time to time, WSI
for such expenses related to such travel and/or entertainment.
(c) The Company shall provide Whittle with a suitable office
at its principal office.
4. Independence. WSI and Whittle acknowledge and agree that
none of WSI, Whittle or other WSI personnel performing services under this
Agreement is an employee of the Company.
5. Confidential Information. In connection with the provision
of services under this Agreement, Whittle will and will cause WSI personnel to
maintain all Company proprietary information in confidence and not to divulge
any such information whether or not this Agreement remains in effect, except as
may be required by law or as Whittle or WSI personnel acting on Whittle's
instructions deem advisable in connection with the provision of services under
this Agreement, provided, that this provision shall not affect any of WSI's
rights (or Whittle's rights as WSI's controlling shareholder) or the Company's
obligations under the Company's Amended and Restated Agreement of Limited
Partnership dated as of March 14, 1995, and, further, provided, that Whittle and
WSI personnel shall take reasonable efforts (including the instruction of
persons or entities to which information is
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disclosed pursuant to this paragraph) to ensure that persons and entities to
whom the Company's proprietary information is disclosed keep such information
confidential.
6. Termination. (a) Death. If Whittle shall die while this
Agreement remains in effect, the Company's obligation to pay the Management Fee
for any period after the date of death shall terminate automatically, provided,
however, that the Company shall pay to WSI the amount of $22,916.67 plus any
amounts owed to WSI for reimbursement of any expenses properly reimbursable
under this Agreement and not yet reimbursed. Any Management Fee payments then
accrued and unpaid will be paid as provided in paragraph 3(a) above.
(b) Disability. The Company may terminate its obligation to
make Management Fee payments for any period after the date of termination, by
notice to WSI, in the event Whittle is unable to provide services to the Company
under this Agreement for a period of 90 consecutive days during the Initial Term
or any Renewal Term because of physical or mental disability (as determined by a
reasonably selected independent medical doctor), provided that with such notice
the Company pays to WSI the amount of $22,916.67 plus any amounts owed to WSI
for reimbursement of any expenses properly reimbursable under this Agreement and
not yet reimbursed. Any Management Fee payments then accrued and unpaid will be
paid as provided in paragraph 3(a) above.
(c) Termination. Either the Company or WSI may terminate this
Agreement by written notice to the other and upon the effective date of such
termination neither party shall have any further rights or obligations under
this
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Agreement, provided that (i) in the event either party terminates this Agreement
WSI shall be entitled to (a) reimbursement for any expenses properly
reimbursable under this Agreement and not yet reimbursed and (b) any Management
Fee then earned and unpaid (which Management Fee will be paid as provided in
paragraph 3(a) above) and provided further that (ii) in the event the Company
terminates this Agreement WSI shall be additionally entitled to the Management
Fee through the later of July 1, 1996, or six months following the effective
date of termination (which Management Fee will be paid as provided in paragraph
3(a) above).
7. Option. (a) The Company hereby grants to WSI (or its
assignee) two options (each an 'Option', and together the 'Options') to purchase
additional Partnership Interests in the Company. Under the first Option, WSI (or
its assignee) has the right to purchase a Partnership Interest with a 5.714286%
Percentage Interest in the Company for $10,000,000 and under the second Option
WSI (or its assignee) has the right to purchase a Partnership Interest with a
5.405405% Percentage Interest in the Company for $20,000,000. WSl may purchase
all or a portion of the Percentage Interest specified in the previous sentence
with respect to each Option. In the event WSI elects in either case to purchase
only a portion of such Percentage Interest, the purchase price shall be the
portion of the purchase price for the entire Percentage Interest that the
portion purchased is of the entire Interest purchasable. In the case of each
Option, the Percentage Interest is determined based upon the assumption that all
options granted or reserved by the Company as part of the Company's Management
Option Plan are exercised on or prior to the exercise of the Option.
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Further, the Percentage Interests of the Options are based upon the Percentage
Interests of Partners outstanding immediately following the Round One Closing
Date and are subject to dilution and other adjustments in the same manner as the
Percentage Interests of Partnership Interests outstanding immediately following
the Round One Closing Date. Finally, the Percentage Interest of the first Option
assumes that the second Option has not been exercised (in whole or in part) at
the time that the first Option is exercised, and the Percentage Interest of the
second Option assumes that the first Option has been exercised in full at the
time that the second Option is exercised. In other words, the Percentage
Interests of the Options are computed as though the Company had 1,250,000 shares
of Partnership Interests outstanding immediately following the Round One Closing
Date, that options with respect to 400,000 shares of Partnership Interests will
be granted under the Management Option Program and that each of the Options
hereby granted is for the purchase of 100,000 shares of Partnership Interests.
The Options shall survive termination of this Agreement for any reason. Each
Option shall vest 50% on the date of this Agreement and the remaining 50% shall
vest 10% per year on the last day of each of the next five succeeding fiscal
years of the Company until fully vested, provided, however, that no further
vesting will occur after a termination of this Agreement. In the event of
Whittle's death or disability or the termination of this Agreement under
paragraph 6(c) above, a pro rata portion of the Options which would have vested
at the end of the fiscal year in which such death, disability or termination
occurred shall vest upon Whittle's death, the termination date specified
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in the notice of disability or such termination, as the case may be, based on
the number of days from the first day of such fiscal year to the date of death,
disability or termination, as the case may be. The Company may redeem each
Option or any portion thereof in connection with a financing transaction or
capital restructuring pursuant to which the Company is redeeming options or
equity issued under the Company's Management Option Plan as in effect from time
to time, provided the Company shall redeem the Options or any portion thereof on
the same relative terms as the Company redeems such management options. Upon any
capital transaction or reorganization of the Company (including the conversion
of the Company to a corporation) or the Company's business or any amendment of
the Company's Partnership Agreement, the Partnership Interest subject to each
Option shall be adjusted so that WSI shall thereafter be entitled to receive,
upon exercise of the Option, the Partnership Interest or shares or other equity
interest or entitlement that WSI would have owned or have been entitled to
receive after the occurrence of such event had such option been exercised
immediately prior to the occurrence of such event, with the Option as so revised
to be subject to adjustment, if the Company is then incorporated, appropriately
to reflect stock splits, stock dividends, combinations, and sales of all or
substantially all the assets of the Company and, if the Company is then a
partnership, with the Interest subject to dilution in the same manner as the
Percentage Interests of Partnership Interests outstanding following such event.
Any registration rights which accrue to WSI (or its assignees) with respect to
any equity interests in the Company (or its successor) shall apply to any equity
obtained by WSI
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(or its assignees) upon the exercise in whole or in part of either of the
Options. In the event of any transaction in which the Company and/or the
Company's business is reorganized as a corporation, such corporation's
obligations hereunder upon the exercise of the Option shall be to issue common,
voting stock of such corporation.
(b) WSI may exercise the Options as of the first business day
of any fiscal year of the Company (or at such other times as may be permitted by
the Board of Directors) by on or before such day (a) transferring to the account
designated by the Company immediately available funds in an amount equal to the
sum of the pro rata portion of the exercise price of the Option corresponding to
the to the portion of the Option then exercised and any amounts required to be
withheld by the Company and remitted to any taxing authority by reason of the
exercise of the Option and (b) giving written notice to the Company, provided
that (i) the portion of each Option that vests on the date of this Agreement
shall expire at 5:00 p.m. E.S.T. on the first business day of 2003, (ii) the
portion of each Option that vests in the Company's 1996, 1997 and 1998 fiscal
years shall expire on the business day following the seventh anniversary of the
vesting of such portion of such Option, and (iii) the portion of each Option
that vests in the Company's 1999 and 2000 fiscal years shall expire on the
business day following the fifth anniversary of the vesting of such portion of
such Option. Upon the exercise of any portion of the Options, the books and
records of the Company shall be appropriately amended to reflect WSI's
acquisition of the partnership or other equity interest corresponding to the
portion of the Option then exercised.
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8. Assignability, Parties in Interest. None of WSI, Whittle or
the Company may assign its or his rights or obligations under this Agreement,
provided, however, that the rights and obligations of the Company may be
assigned, upon notice to WSI, to any entity to which the Company's business is
transferred (whether upon incorporation or otherwise) and further provided,
however, that the rights and obligations of the Company under this Agreement
shall be binding upon and inure to the benefit of the successors and assigns of
the Company and their affiliates including any transferee of all or
substantially all of the business of the Company and further provided that WSI
may (i) at any time grant to any third party a security interest in all or any
part of the Options and (ii) sell, assign, transfer or otherwise dispose of any
vested portion of the Options at any time following the fourth anniversary of
the vesting of the portion of the Options to be sold, assigned, transferred or
otherwise disposed of.
9. Governing Law. This Agreement shall be governed and
interpreted and enforced in accordance with the substantive laws of the State of
New York without regard to the conflicts of laws provisions thereof.
10. Notices. Any notice required or desired to be served,
given or delivered hereunder shall be in writing, and shall be deemed to have
been validly served, given or delivered (i) five business days after the deposit
in the United States mails, with proper postage prepaid, whether by air, first
class, registered or certified mail, (ii) one business day after being deposited
with an overnight courier with all charges prepaid (ii) when delivered, if
hand-delivered by messenger, or (iv) when
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dispatched by facsimile to the telecopy number provided below, all of which
shall be properly addressed to the party to be notified and sent to the address
indicated as follows.
If to the Company: The Edison Project L.P.
529 Fifth Avenue
New York, New York 10017
Attn: Board of Directors
Telecopy: (212) 309-1604
copy to: Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Attn: John F. Fritts, Esq.
Telecopy: (212) 504-6666
If to WSI: WSI Inc.
c/o H. Christopher Whittle
529 Fifth Avenue
12th Floor
New York, New York 10017
Telecopy: (212) 309-1515
copy to: Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Attn: John F. Fritts, Esq.
Telecopy: (212) 504-6666
or to such other address as such party may specify to the other in writing in
accordance with the provisions hereof.
11. Miscellaneous. (a) Waiver by either party of a breach of
any provision of this Agreement by the other party shall not operate or be
construed as a waiver of any subsequent breach by such waiving party.
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(b) This instrument contains the entire agreement and
understanding of the parties hereto and may not be changed except by an
agreement in writing signed by WSI, Whittle and the Company.
(c) The captions set forth in this Agreement are used solely
for convenience or reference and shall not control or effect the meaning or
interpretation of any of the provisions.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.
WSI Inc.
By: /s/ H. Christopher Whittle
----------------------------------
H. Christopher Whittle, President
THE EDISON PROJECT, L.P.
By its general partners:
WSI, Inc., a general partner
By: /s/ H. Christopher Whittle
----------------------------------
H. Christopher Whittle, President
Sprout Edison Project, Inc.,
a general partner
By: /s/ Janet A. Hickey
----------------------------------
Janet A. Hickey, President
ACCEPTED AND ACKNOWLEDGED:
/s/ H. Christopher Whittle
-------------------------------------
H. Christopher Whittle, individually
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As of November 15, 1996
Reference is made to the Management Agreement (the 'Management Agreement')
dated as of March 14, 1995, between The Edison Project L.P. (the 'Partnership')
and WSI Inc. ('WSI'). Capitalized terms used but not defined herein shall have
the meanings set forth in the Management Agreement.
The Partnership hereby acknowledges payment, and WSI hereby acknowledges
receipt, of $500,000 (the 'Service Fee') in respect of (i) payment in full of
the Partnership's contingent obligation set forth in Section 3(a) of the
Management Agreement to pay accrued installments of the Management Fee upon the
closing of an initial public offering (the 'Contingent Obligation'), and (ii)
additional services provided and expenses incurred by WSI in connection with
its performance under the Management Agreement.
Each of WSI and the Partnership agree that Section 3(a) of the Management
Agreement shall be amended as promptly as practicable to reflect payment of the
Contingent Obligation.
WSI INC.
By: /s/ H. Christopher Whittle
---------------------------
H. Christopher Whittle, President
THE EDISON PROJECT L.P.
By SPROUT EDISON PROJECT, Inc.,
a General Partner
By: /s/ Janet A. Hickey
---------------------------
Janet A. Hickey, President
AMENDMENT TO THE MANAGEMENT AGREEMENT
DATED AS OF MARCH 14, 1995
BETWEEN
THE EDISON PROJECT L.P. AND WSI INC.
The Management Agreement (the 'Agreement') dated as of March 14, 1995
between The Edison Project L.P. (the 'Company') and WSI Inc. ('WSI') is hereby
amended as follows:
1. The WHEREAS clauses of the Agreement are amended to read as follows:
WHEREAS, WSI was the founding partner of the Company and its president,
H. Christopher Whittle ('Whittle'), is the 'Founder' and President of the
Company; and
WHEREAS, the Company recognizes that WSI personnel possess special
knowledge and expertise with respect to the Company's business which knowledge
and expertise is vital to the Company in connection with the growth of its
business; and
WHEREAS, the Company desires to ensure to itself the availability of WSI
personnel's knowledge and expertise; and
WHEREAS, WSI desires to provide the services described herein to the
Company on the terms and conditions provided herein.
2. Paragraph 2(a) is amended to read as follows:
During the Initial Term and any Renewal Term, WSI shall cause its personnel
to provide services to the Company in areas in which its personnel have
knowledge or expertise upon reasonable request from the Company.
3. Paragraph 2(b) is omitted, and Paragraph 2(c), which is amended to delete the
words 'Whittle and any other' before the word 'WSI,' and Paragraph 2(d) shall
become paragraphs 2(b) and 2(c).
4. Paragraph 3 is amended to read in its entirety as follows:
Management Fees and Expenses. Mutually agreeable fees for any services to
be provided by WSI to the Company under this Agreement and any expenses
related thereto (the 'Management Fees') shall be specifically reviewed and
approved in advance by the Board of Directors of The Edison Project Inc. as
part
of the Company's annual budget or a revision thereto.
5. Paragraph 4 is amended to delete the words ', Whittle or other' before the
word 'personnel.'
6. Paragraph 5 is amended to delete the following words: 'this provision shall
not affect any of WSI's rights (or Whittle's rights as WSI's controlling
shareholder) or the Company's obligations under the Company's Amended and
Restated Agreement of Limited Partnership dated as of March 14, 1995, and,
further provided, that'.
7. Paragraphs 6(a) and 6(b) are deleted and Paragraph 6(c), which is amended to
delete the parenthetical at the end of the paragraph and change the word 'Fee'
to 'Fees,' becomes Paragraph 6.
8. Paragraph 7(c) is hereby amended by changing the reference to 'paragraph
6(c)' to 'paragraph 6.'
9. The Edison Project Inc. hereby acknowledges that it is the corporation
referred to in Paragraph 7(a) (including, without limitation, in the last
sentence thereof) and that it will comply with the obligations therein set
forth.
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IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
March 1, 1997.
WSI Inc.
By: /s/ H. Christopher Whittle
-------------------------------
H. Christopher Whittle, President
THE EDISON PROJECT L.P.
By: The Edison Project Inc., general partner
By: /s/ Laura K. Eshbaugh
-------------------------------
Laura K. Eshbaugh, President
3
SECOND AMENDMENT TO THE MANAGEMENT AGREEMENT
DATED AS OF MARCH 14, 1995
BETWEEN
THE EDISON PROJECT L.P. AND WSI INC.
The Management Agreement (the 'Agreement') dated as of March 14, 1995
between The Edison Project L.P. (the 'Company') and WSI Inc. ('WSI'), as amended
by the first amendment thereto dated as of March 1, 1997, is hereby amended by
replacing the text in Paragraph 7, which describes two options granted to WSI,
in its entirety with the following:
WSI will receive two options to acquire the stock of The Edison
Project Inc., which are attached hereto as Exhibit A and Exhibit B.
IN WITNESS HERETO, the parties hereto have executed this Agreement as of
December 31, 1997.
WSI INC.
By: /s/ H. Christopher Whittle
---------------------------
THE EDISON PROJECT L.P.
By: The Edison Project Inc., general
partner,
By: /s/ Laura Eshbaugh
-------------------
Laura Eshbaugh, President
NEITHER THE OPTION GRANTED PURSUANT TO THIS AGREEMENT (OR THE SHARES OF STOCK
ISSUABLE UPON EXERCISE OF SUCH OPTION) HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. NEITHER SUCH OPTION OR SHARES MAY BE SOLD, OFFERED FOR
SALE, PLEDGED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SUCH ACT AND THE RULES AND REGULATIONS PROMULGATED
THEREUNDER.
Option Agreement to subscribe
Dated: December 30,1997 for 850,000 Shares
THE EDISON PROJECT INC. A STOCK OPTION
THIS CERTIFIES that, for value received, WSI Inc. ('Holder') is
entitled to subscribe for and purchase from The Edison Project Inc., a Delaware
corporation (the 'Company'), at a price of $10.00 per share (the 'Exercise
Price'), the number of shares of the Company's Series A Common Stock first shown
above (as adjusted pursuant to the provisions hereof, the 'Option Shares'). This
Option is intended to replace and supersede the option originally contained in
the Management Agreement dated as of March 14, 1995 between The Edison Project
L.P. and Holder, as amended as of March 1, 1997 (the 'Management Agreement'), to
acquire a 5.714286% partnership interest for $10,000,000 and is issued in
conjunction with the Subscription Agreement, dated as of December 30, 1997, by
and among the Company, J.P. Morgan Investment Corporation, Sixty Wall Street
SBIC Fund, L.P., Investor Investments AB and certain Other Investors (as defined
therein).
The Option is subject to the following provisions, terms and
conditions:
1. Vesting: Term: Exercise.
(a) The rights of Holder to exercise the Option shall vest as
follows: With respect to: (i) 700,000 of the Option Shares, on the date hereof,
provided,
that for the purposes of paragraph 8 hereof, (A) 500,000 of such Option Shares
shall be deemed to have vested on March 14, 1995, (B) 100,000 of such Option
Shares shall be deemed to have vested on June 30, 1996, and (C) 100,000 of such
Option Shares shall be deemed to have vested on June 30, 1997; (ii) 100,000 of
the Option Shares, on June 30, 1998; and (iii) 50,000 of the Option Shares, on
June 30, 1999.
(b) The rights of Holder to exercise this Option shall expire
as follows: With respect to (i) the Option Shares vested on the date hereof, (A)
500,000 at 5:00 p.m. E.S.T. on the first business day of 2003, (B) 100,000
shares on the first business day of the Company's 2004 fiscal year, and (C)
100,000 shares on the first business day of the Company's 2005 fiscal year, (ii)
the Option Shares that vest in the Company's 1998 fiscal year, on the business
day following the seventh anniversary of the vesting of such Option Shares, and
(iii) the Option Shares that vest in the Company's 1999 and 2000 fiscal years,
on the business day following the fifth anniversary of the vesting of such
Option Shares. Any date specified in the preceding sentence shall be, an
'Expiration Date' hereunder.
(c) Subject to the preceding paragraphs 1(a) and (b), Holder
may exercise this Option, in whole or in part from time to time (but not as to a
fractional share of the Series A Common Stock) as of the first business day of
any fiscal year of the Company (or at such other times as may be permitted by
the Company's Board of Directors) by on or before such day (i) giving written
notice to the Company in the form attached hereto and (ii) transferring to the
account designated by the Company immediately available funds in an amount equal
to aggregate Exercise Price of the
Option Shares in respect of which this Option is then being exercised along with
any amounts required to be withheld by the Company and remitted to any taxing
authority by reason of the exercise of the Option in respect of such Option
Shares.
(d) Upon the exercise of any portion of the Option, the books
and records of the Company shall be appropriately amended to reflect Holder's
acquisition of the Option Shares then purchased, and certificates representing
such Option Shares shall be delivered to Holder (or its designee(s)) as promptly
as practicable after such date.
2. Shares to be Full Paid: Reservation of Shares. The Company
covenants and agrees that (a) all Option Shares will, upon issuance, be validly
issued, fully paid, nonassessable, (b) at all times during the period during
which the Option may be exercised, the Company shall have authorized and
reserved for the purpose of issue upon the exercise of the Option, a sufficient
number of shares of Series A Common Stock, free from any pre-emptive rights, to
provide for the exercise of the Option in full, (c) the Company shall take all
action necessary to assure that such shares of Series A Common Stock may be so
issued without violation of any applicable law or regulation, or any
requirements of any securities exchange upon which the Series A Common Stock may
be listed, provided, however, that the Company shall not be required to register
the sale of any shares of Series A Common Stock with the United States
Securities and Exchange Commission (the 'SEC') except as specifically provided
herein.
3. Adjustment to the Number of Option Shares.
(a) Upon any capital transaction, business combination, or
reorganization (a 'Reorganization') of the Company or the Company's business,
the
number of Option Shares which may be purchased hereunder and the Exercise Price
per share shall be adjusted so that Holder shall thereafter be entitled to
receive, upon the exercise of the Option, the number of shares or other equity
interest or entitlement that Holder would have been entitled to receive upon the
occurrence of such event had Holder exercised the Option immediately prior to
the occurrence of such event, with the number of Option Shares and the Exercise
Price per share as so revised to be subject to (i) adjustment appropriately to
reflect stock splits, stock dividends, combinations and sales of all or
substantially all the assets of the Company and (ii) dilution in the same manner
as the Series A Common Stock outstanding immediately following such event.
(b) The Company may redeem this Option or any portion thereof
in connection with a financing transaction or capital restructuring pursuant to
which the Company is redeeming options or equity issued under the Company's
Management Option Plan, as in effect from time to time, provided, that the
Company shall redeem the Option or any portion thereof on the same relative
terms as the Company redeems such management options.
(c) Upon any adjustment required by this Section 3, the
Company shall give written notice thereof, by first class mail, postage prepaid,
addressed to Holder at the address shown on the books of the Company, which
notice shall state the increase or decrease, if any, in the number of Option
Shares issuable upon the exercise of the Option, setting forth in reasonable
detail the method of calculation and the facts upon which such calculation is
based.
(d) If at any time: (i) the Company shall declare any dividend
of cash, stock or property upon or make any other distribution in respect of the
Series A
Common Stock, (ii) the Company shall offer for subscription pro rata to the
holders of Series A Common Stock any additional shares of stock of any class or
other securities or rights, (iii) there shall be any Reorganization or (iv)
there shall be a voluntary or involuntary dissolution, liquidation or winding up
of the Company (collectively, 'Dissolution'), then the Company shall give, by
first class mail, postage prepaid, addressed to the Holder at the address shown
on the books of the Company (A) at least 20 days' prior written notice of the
date on 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 or Dissolution, and (B) in the
case of any such Reorganization or Dissolution, at least 20 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
Series A 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 Series A Common Stock shall be entitled to exchange their Series A Common
Stock for securities or other property deliverable upon such Reorganization or
Dissolution, as the case may be.
(d) If any event occurs as to which, in the good faith opinion
of the Board of Directors, the other provisions of this paragraph 3 are not
strictly applicable, then the Board of Directors shall make an adjustment in the
application of such provisions, in accordance with the essential intent and
principles of this paragraph 3, so as to protect such purchase rights, but in no
event shall any such adjustment have the effect of increasing the Exercise
Price.
4. Registration. Any registration rights which accrue to Holder (or
its permitted assignee(s)) with respect to any equity interests in the Company
(or its successor) shall apply to any equity obtained by Holder (or its
permitted assignee(s)) upon the exercise in whole or in part of this Option.
5. Closing of Books. The Company will at no time close its transfer
books against the transfer of the Option or any Option Shares issued or issuable
upon the exercise of the Option in any manner that interferes with the timely
exercise of the Option, unless the Company is advised by its counsel that such
closing is required by applicable law or the rules of any exchange upon which
such shares of Series A Common Stock are listed, and then only for so long as
required by such law or rules.
6. Mutilated or Missing Option Agreements. If this Option Agreement
is mutilated when surrendered to the Company, or the Company receives evidence
to its reasonable satisfaction of the destruction, loss or theft of this Option
Agreement, the Company shall issue, without charge, a replacement Option
Agreement. If requested by the Company, Holder shall supply an indemnity on
customary terms to protect the Company from any loss that it may suffer upon the
replacement of this Option Agreement.
7. No Voting Rights. This Option Agreement shall not entitle Holder,
as long as the Option is not exercised, to any voting rights or other rights as
a stockholder of the Company.
8. Parties in Interest: Assignability. Neither Holder or the Company
may assign its rights or obligations under this Option, provided, however that
the rights and obligations of the Company may be assigned, upon notice to
Holder, to any entity
to which the Company's business is transferred and further provided, however,
that the rights and obligations of the Company under this Option Agreement shall
be binding upon and inure to the benefit of the successors and assigns of the
Company and their affiliates, including any transferee of all or substantially
all of the business or assets of the Company and further provided, that Holder
may (a) at any time grant to any third party a security interest in all or any
part of the Option or transfer the Option to an Affiliate (as defined in the
Company's Shareholders' Agreement dated December 30, 1997, as amended from time
to time) and (b) by written notice to the Company in the form attached hereto,
sell, assign, transfer or otherwise dispose of any vested portion of the Option
at any time following the fourth anniversary of the vesting of the portion of
the Option to be sold, assigned, transferred or otherwise disposed of.
9. Governing Law. This Option Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to the conflicts of laws provisions thereof.
IN WITNESS WHEREOF, each of the Company and Holder has duly executed and
delivered this Option Agreement as of the date first set forth above.
THE EDISON PROJECT INC.
By: /s/ Laura Eshbaugh
------------------
Name: Laura Eshbaugh
Title: President
WSI Inc.
By: /s/ H. Christopher Whittle
--------------------------
H. Christopher Whittle, President
FORM OF NOTICE OF EXERCISE
________________, 199__
To: THE EDISON PROJECT INC.
The undersigned, pursuant to the provisions set forth in the Option
Agreement between the Company and the undersigned dated _________________,
hereby subscribes for and agrees to purchase _____ shares of the Series A Common
Stock covered by such Option Agreement, and makes payment herewith in full
therefor at the price per share provided by such Option Agreement.
Dated: ______________, _______
Name of Holder: ______________________
By: _______________________
Name:
Title:
Address:
FORM OF ASSIGNMENT
FOR VALUE RECEIVED the undersigned, _______________________ hereby
sells, assigns and transfers all of the rights of the undersigned under the
Option Agreement between The Edison Project Inc. and the undersigned dated
__________________ with respect to the number of shares of the Series A Common
Stock covered thereby set forth herein below unto:
Name of Assignee Address Number of Shares
---------------- ------- ----------------
Dated: _______________, ______
Name of Holder: _____________________
By: _______________________
Name:
Title:
Address: _____________________________
_____________________________
NEITHER THE OPTION GRANTED PURSUANT TO THIS AGREEMENT (OR THE SHARES OF STOCK
ISSUABLE UPON EXERCISE OF SUCH OPTION) HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. NEITHER SUCH OPTION OR SHARES MAY BE SOLD, OFFERED FOR
SALE, PLEDGED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SUCH ACT AND THE RULES AND REGULATIONS PROMULGATED
THEREUNDER.
Option Agreement to subscribe
Dated: December 30, 1997 for 1,000,000 Shares
THE EDISON PROJECT INC. B STOCK OPTION
THIS CERTIFIES that, for value received, WSI Inc. ('Holder') is
entitled to subscribe for and purchase from The Edison Project Inc., a Delaware
corporation (the 'Company'), at a price of $20.00 per share (the 'Exercise
Price'), the number of shares of the Company's Series A Common Stock first shown
above (as adjusted pursuant to the provisions hereof, the 'Option Shares'). This
Option is intended to replace and supersede the option originally contained in
the Management Agreement dated as of March 14, 1995 between The Edison Project
L.P. and Holder, as amended as of March 1, 1997 (the 'Management Agreement'), to
acquire a 5.4054505 % partnership interest for $20,000,000 and is issued in
conjunction with the Subscription Agreement, dated as of December 30, 1997, by
and among the Company, J.P. Morgan Investment Corporation, Sixty Wall Street
SBIC Fund, L.P., Investor Investments AB and certain Other Investors (as defined
therein).
The Option is subject to the following provisions, terms and
conditions:
1. Vesting: Term: Exercise.
(a) The rights of Holder to exercise the Option shall vest as
follows: With respect to: (i) 700,000 of the Option Shares, on the date hereof,
provided, that for the purposes of paragraph 8 hereof, (A) 500,000 of such
Option Shares shall be deemed to have vested on March 14,1995, (B) 100,000 of
such Option Shares shall be deemed to have vested on June 30, 1996, and (C)
100,000 of such Option Shares shall be deemed to have vested on June 30, 1997;
(ii) 100,000 of the Option Shares, on June 30, 1998; (iii) 100,000 of the Option
Shares, on June 30, 1999; and (iv) 100,000 of the Option Shares, on June 30,
2000.
(b) The rights of Holder to exercise this Option shall expire
as follows: With respect to (i) the Option Shares vested on the date hereof, (A)
500,000 at 5:00 p.m. E.S.T. on the first business day of 2003, (B) 100,000
shares on the first business day of the Company's 2004 fiscal year, and (C)
100,000 shares on the First business day of the Company's 2005 fiscal year, (ii)
the Option Shares that vest in the Company's 1998 fiscal year, on the business
day following the seventh anniversary of the vesting of such Option Shares, and
(iii) the Option Shares that vest in the Company's 1999 and 2000 fiscal years,
on the business day following the fifth anniversary of the vesting of such
Option Shares. Any date specified in the preceding sentence shall be, an
'Expiration Date' hereunder.
(c) Subject to the preceding paragraphs 1(a) and (b), Holder
may exercise this Option, in whole or in part from time to time (but not as to a
fractional share of the Series A Common Stock) as of the first business day of
any fiscal year of the
Company (or at such other times as may be permitted by the Company's Board of
Directors) by on or before such day (i) giving written notice to the Company in
the form attached hereto and (ii) transferring to the account designated by the
Company immediately available funds in an amount equal to aggregate Exercise
Price of the Option Shares in respect of which this Option is then being
exercised along with any amounts required to be withheld by the Company and
remitted to any taxing authority by reason of the exercise of the Option in
respect of such Option Shares.
(d) Upon the exercise of any portion of the Option, the books
and records of the Company shall be appropriately amended to reflect Holder's
acquisition of the Option Shares then purchased, and certificates representing
such Option Shares shall be delivered to Holder (or its designee(s)) as promptly
as practicable after such date.
2. Shares to be Full Paid; Reservation of Shares. The Company
covenants and agrees that (a) all Option Shares will, upon issuance, be validly
issued, fully paid, nonassessable, (b) at all times during the period during
which the Option may be exercised, the Company shall have authorized and
reserved for the purpose of issue upon the exercise of the Option, a sufficient
number of shares of Series A Common Stock, free from any pre-emptive rights, to
provide for the exercise of the Option in full, (c) the Company shall take all
action necessary to assure that such shares of Series A Common Stock may be so
issued without violation of any applicable law or regulation, or any
requirements of any securities exchange upon which the Series A Common Stock may
be listed, provided, however, that the Company shall not be required to register
the
sale of any shares of Series A Common Stock with the United States Securities
and Exchange Commission (the 'SEC') except as specifically provided herein.
3. Adjustment to the Number of Option Shares.
(a) Upon any capital transaction, business combination, or
reorganization (a 'Reorganization') of the Company or the Company's business,
the number of Option Shares which may be purchased hereunder and the Exercise
Price per share shall be adjusted so that Holder shall thereafter be entitled to
receive, upon the exercise of the Option, the number of shares or other equity
interest or entitlement that Holder would have been entitled to receive upon the
occurrence of such event had Holder exercised the Option immediately prior to
the occurrence of such evenpound sterling, with the number of Option Shares and
the Exercise Price per share as so revised to be subject to (i) adjustment
appropriately to reflect stock splits, stock dividends, combinations and sales
of all or substantially all the assets of the Company and (ii) dilution in the
same manner as the Series A Common Stock outstanding immediately following such
event.
(b) The Company may redeem this Option or any portion thereof
in connection with a financing transaction or capital restructuring pursuant to
which the Company is redeeming options or equity issued under the Company's
Management Option Plan, as in effect from time to time, provided, that the
Company shall redeem the Option or any portion thereof on the same relative
terms as the Company redeems such management options.
(c) Upon any adjustment required by this Section 3' the
Company shall give written notice thereof, by first class mail, postage prepaid,
addressed to Holder at the address shown on the books of the Company, which
notice shall state the increase
or decrease, if any, in the number of Option Shares issuable upon the exercise
of the Option, setting forth in reasonable detail the method of calculation and
the facts upon which such calculation is based.
(d) If at any time: (i) the Company shall declare any dividend
of cash, stock or property upon or make any other distribution in respect of the
Series A Common Stock, (ii) the Company shall offer for subscription pro rata to
the holders of Series A Common Stock any additional shares of stock of any class
or other securities or rights, (iii) there shall be any Reorganization, or (iv)
there shall be a voluntary or involuntary dissolution, liquidation or winding up
of the Company (collectively, 'Dissolution'), then the Company shall give, by
first class mail, postage prepaid, addressed to the Holder at the address shown
on the books of the Company (A) at least 20 days' prior written notice of the
date on 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 or Dissolution, and (B) in the
case of any such Reorganization or Dissolution, at least 20 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
Series A 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 Series A Common Stock shall be entitled to exchange their Series A Common
Stock for securities or other property deliverable upon such Reorganization or
Dissolution, as the case may be.
(d) If any event occurs as to which, in the good faith opinion
of the Board of Directors, the other provisions of this paragraph 3 are not
strictly applicable, then the Board of Directors shall make an adjustment in the
application of such provisions, in accordance with the essential intent and
principles of this paragraph 3' so as to protect such purchase rights, but in no
event shall any such adjustment have the effect of increasing the Exercise
Price.
4. Registration. Any registration rights which accrue to Holder (or
its permitted assignee(s)) with respect to any equity interests in the Company
(or its successor) shall apply to any equity obtained by Holder (or its
permitted assignee(s)) upon the exercise in whole or in part of this Option.
5. Closing of Books. The Company will at no time close its transfer
books against the transfer of the Option or any Option Shares issued or issuable
upon the exercise of the Option in any manner that interferes with the timely
exercise of the Option, unless the Company is advised by its counsel that such
closing is required by applicable law or the rules of any exchange upon which
such shares of Series A Common Stock are listed, and then only for so long as
required by such law or rules.
6. Mutilated or Missing Option Agreements. If this Option Agreement
is mutilated when surrendered to the Company, or the Company receives evidence
to its reasonable satisfaction of the destruction, loss or theft of this Option
Agreement, the Company shall issue, without charge, a replacement Option
Agreement. If requested by the Company, Holder shall supply an indemnity on
customary terms to protect the Company from any loss that it may suffer upon the
replacement of this Option Agreement.
7. No Voting Rights. This Option Agreement shall not entitle Holder,
as long as the Option is not exercised, to any voting rights or other rights as
a stockholder of the Company.
8. Parties in Interest; Assignability. Neither Holder or the Company
may assign its rights or obligations under this Option, provided, however that
the rights and obligations of the Company may be assigned, upon notice to
Holder, to any entity to which the Company's business is transferred and further
provided, however, that the rights and obligations of the Company under this
Option Agreement shall be binding upon and inure to the benefit of the
successors and assigns of the Company and their affiliates, including any
transferee of all or substantially all of the business or assets of the Company
and further provided, that Holder may (a) at any time grant to any third party a
security interest in all or any part of the Option or transfer the Option to an
Affiliate (as defined in the Company's Shareholders' Agreement dated December
30, 1997, as amended from time to time) and (b) by written notice to the Company
in the form attached hereto, sell, assign, transfer or otherwise dispose of any
vested portion of the Option at any time following the fourth anniversary of the
vesting of the portion of the Option to be sold, assigned, transferred or
otherwise disposed of.
9. Governing Law. This Option Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to the conflicts of laws provisions thereof.
IN WITNESS WHEREOF, each of the Company and Holder has duly executed and
delivered this Option Agreement as of the date first set forth above.
THE EDISON PROJECT INC.
By: /s/ Laura Eshbaugh
-------------------
Name: Laura Eshbaugh
Title: President
WSI Inc.
By: /s/ H. Christopher Whittle
--------------------------
H. Christopher Whittle, President
FORM OF NOTICE OF EXERCISE
____________________, 199__
To: THE EDISON PROJECT INC.
The undersigned, pursuant to the provisions set forth in the Option
Agreement between the Company and the undersigned dated __________________,
hereby subscribes for and agrees to purchase _____ shares of the Series A Common
Stock covered by such Option Agreement, and makes payment herewith in full
therefor at the price per share provided by such Option Agreement.
Dated: _______________, ______
Name of Holder: _____________________
By: ________________________
Name:
Title:
Address:
FORM OF ASSIGNMENT
FOR VALUE RECEIVED the undersigned, _______________________ hereby
sells, assigns and transfers all of the rights of the undersigned under the
Option Agreement between The Edison Project Inc. and the undersigned dated
__________________ with respect to the number of shares of the Series A Common
Stock covered thereby set forth herein below unto:
Name of Assignee Address Number of Shares
---------------- ------- ----------------
Dated: _______________, ______
Name of Holder: _____________________
By: _______________________
Name:
Title:
Address: _____________________________
_____________________________
Management Agreement - The Edison Partnership LP and WSI Inc.
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