Exhibit 10.12
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED
WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO, (ii) AN
OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY,
THAT SUCH REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS
FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE COMPLYING
WITH THE PROVISIONS OF SECTION 6 OF THIS WARRANT.
ZAPME! CORPORATION
WARRANT TO PURCHASE 150,000 SHARES
OF COMMON STOCK
THIS CERTIFIES THAT, for value received, Sylvan Learning Systems, Inc.
("Sylvan") is entitled to subscribe for and purchase up to 150,000 shares of
the fully paid and nonassessable Common Stock (as adjusted pursuant to
Section 4 hereof, the "Shares") of ZAPME! CORPORATION, a California
corporation (the "Company"), at the price of $5.00 per share (such price and
such other price as shall result, from time to time, from the adjustments
specified in Section 4 hereof is herein referred to as the "Warrant Price"),
subject to the provisions and upon the terms and conditions hereinafter set
forth. As used herein, the term "Date of Grant" shall mean March 3, 1999.
1. TERM; RIGHT TO EXERCISE.
(a) Subject to Section 1(b) hereof, the purchase right
represented by this Warrant is exercisable, as to no less than all of the
Shares, only during the period (the "Exercise Period") beginning on the date
on which Sylvan releases its audited financial statements for the year ended
December 31, 2003 and ending 30 days thereafter. This Warrant will terminate
and be of no further force and effect after the Exercise Period.
(b) Reference is made to that certain Product and Services
Agreement entered into by and between the Company and Sylvan dated February
___, 1999 (the "Agreement"). Sylvan shall be entitled to exercise this
Warrant only if the Profit Share Fee (as defined in the Agreement) earned and
payable to the Company for the year ended December 31, 2003 is equal or
greater than the product obtained by multiplying (i) the number of Eligible
Schools at December 31, 2003 by (ii) $800. By way of example, in the event
that there are 10,000 Eligible Schools at December 31, 2003, Sylvan must have
earned for the account of ZapMe! Profit Share Fees in an amount not less than
$8,000,000.
2. METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT. Subject
to Section 1 hereof, the purchase right represented by this Warrant may be
exercised by the holder hereof only as to all of the Shares by the surrender
of this Warrant (with the notice of exercise substantially in the form
attached hereto as EXHIBIT A duly completed and executed) at the principal
office of the Company
and by the payment to the Company, by certified or bank check, or by wire
transfer to an account designated by the Company (a "Wire Transfer") of an
amount equal to the then applicable Warrant Price multiplied by the number of
Shares then being purchased, or (b) exercise of the Conversion Right provided
for in Section 9.2 hereof. Sylvan shall be treated for all purposes as the
record holder of the shares represented thereby (and such shares shall be
deemed to have been issued) immediately prior to the close of business on the
date or dates upon which this Warrant is exercised. In the event of any
exercise of the rights represented by this Warrant, certificates for the
shares of stock so purchased shall be delivered to Sylvan as soon as possible
and in any event within thirty (30) days after such exercise.
3. STOCK FULLY PAID; RESERVATION OF SHARES. All Shares that may
be issued upon the exercise of the rights represented by this Warrant will,
upon issuance pursuant to the terms and conditions herein, be fully paid and
non-assessable, and free from all taxes, liens and charges with respect to
the issue thereof. During the Exercise Period, the Company will at all times
have authorized, and reserved for the purpose of the issue upon exercise of
the purchase rights evidenced by this Warrant, a sufficient number of shares
of its Common Stock to provide for the exercise of the rights represented by
this Warrant.
4. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES. The number
and kind of securities purchasable upon the exercise of this Warrant and the
Warrant Price shall be subject to adjustment from time to time upon the
occurrence of certain events, as follows:
(a) RECLASSIFICATION OR MERGER. In case of any
reclassification or change of securities of the class issuable upon exercise
of this Warrant (other than a change in par value, or from par value to no
par value, or from no par value to par value, or as a result of a subdivision
or combination), or in case of any merger of the Company with or into another
corporation (other than a merger with another corporation in which the
Company is the acquiring and the surviving corporation and which does not
result in any reclassification or change of outstanding securities issuable
upon exercise of this Warrant), or in case of any sale of all or
substantially all of the assets of the Company, the Company, or such
successor or purchasing corporation, as the case may be, shall duly execute
and deliver to the holder of this Warrant a new Warrant (in form and
substance satisfactory to the holder of this Warrant), so that the holder of
this Warrant shall have the right to receive, at a total purchase price not
to exceed that payable upon the exercise of this Warrant, and in lieu of the
shares of Common Stock theretofore issuable upon exercise of this Warrant,
the kind and amount of shares of stock, other securities, money and property
receivable upon such reclassification, change or merger by a holder of the
number of shares of Common Stock then purchasable under this Warrant. Such
new Warrant shall provide for adjustments that shall be as nearly equivalent
as may be practicable to the adjustments provided for in this Section 4. The
provisions of this subparagraph (a) shall similarly apply to successive
reclassifications, changes, mergers and transfers.
Page 2
Sylvan Performance Warrant
(b) SUBDIVISION OR COMBINATION OF SHARES. If the Company at
any time while this Warrant remains outstanding and unexpired shall subdivide
or combine its outstanding shares of Common Stock, the Warrant Price shall be
proportionately decreased in the case of a subdivision or increased in the
case of a combination, effective at the close of business on the date the
subdivision or combination becomes effective.
(c) STOCK DIVIDENDS AND OTHER DISTRIBUTIONS. If the Company
at any time while this Warrant is outstanding and unexpired shall (i) pay a
dividend with respect to Common Stock payable in Common Stock, or (ii) make
any other distribution with respect to Common Stock (except any distribution
specifically provided for in Sections 4(a) and 4(b)), of Common Stock, then
the Warrant Price shall be adjusted, from and after the date of determination
of shareholders entitled to receive such dividend or distribution, to that
price determined by multiplying the Warrant Price in effect immediately prior
to such date of determination by a fraction (i) the numerator of which shall
be the total number of shares of Common Stock outstanding immediately prior
to such dividend or distribution, and (ii) the denominator of which shall be
the total number of shares of Common Stock outstanding immediately after such
dividend or distribution.
(d) ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment in
the Warrant Price, the number of Shares of Common Stock purchasable hereunder
shall be adjusted, to the nearest whole share, to the product obtained by
multiplying the number of Shares purchasable immediately prior to such
adjustment in the Warrant Price by a fraction, the numerator of which shall
be the Warrant Price immediately prior to such adjustment and the denominator
of which shall be the Warrant Price immediately thereafter.
5. FRACTIONAL SHARES. No fractional shares of Common Stock will
be issued in connection with any exercise hereunder, but in lieu of such
fractional shares the Company shall make a cash payment therefor based on the
fair market value of the Common Stock on the date of exercise as reasonably
determined in good faith by the Company's Board of Directors.
6. COMPLIANCE WITH ACT; DISPOSITION OF WARRANT OR SHARES OF COMMON
STOCK.
(a) COMPLIANCE WITH ACT. The holder of this Warrant, by
acceptance hereof, agrees that this Warrant, and the shares of Common Stock
to be issued upon exercise hereof and any Common Stock issued upon conversion
thereof are being acquired for investment and that such holder will not
offer, sell or otherwise dispose of this Warrant, or any shares of Common
Stock to be issued upon exercise hereof except under circumstances which will
not result in a violation of the Securities Act of 1933, as amended (the
"Act") or any applicable state securities laws. Upon exercise of this
Warrant, unless the Shares being acquired are registered under the Act and
any applicable state securities laws or an exemption from such registration
is available, the holder hereof shall confirm in writing that the shares of
Common Stock so purchased are being acquired for investment and not with a
view toward distribution or resale in violation of the Act and shall confirm
such other matters related thereto as may be reasonably requested by the
Company. This Warrant and all shares of Common Stock issued upon exercise of
this Warrant (unless registered under the
Page 3
Sylvan Performance Warrant
Act and any applicable state securities laws) shall be stamped or imprinted
with a legend in substantially the following form:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE OR
DISPOSITION MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS
RELATED THERETO, (ii) AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY
SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATIONS ARE NOT REQUIRED, (iii)
RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES,
OR (iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF SECTION 6 OF THE WARRANT
UNDER WHICH THESE SECURITIES WERE ISSUED, DIRECTLY OR INDIRECTLY."
Said legend shall be removed by the Company, upon the request of a
holder, at such time as the restrictions on the transfer of the applicable
security shall have terminated. In addition, in connection with the issuance
of this Warrant, the holder specifically represents to the Company by
acceptance of this Warrant as follows:
(1) The holder is aware of the Company's business
affairs and financial condition, and has acquired information about the
Company sufficient to reach an informed and knowledgeable decision to acquire
this Warrant. The holder is acquiring this Warrant for its own account for
investment purposes only and not with a view to, or for the resale in
connection with, any "distribution" thereof in violation of the Act.
(2) The holder understands that this Warrant has not
been registered under the Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of the holder's investment intent as expressed herein.
(3) The holder further understands that this Warrant
must be held indefinitely unless subsequently registered under the Act and
qualified under any applicable state securities laws, or unless exemptions
from registration and qualification are otherwise available. The holder is
aware of the provisions of Rule 144, promulgated under the Act.
(b) DISPOSITION OF WARRANT OR SHARES. With respect to any
offer, sale or other disposition of this Warrant or any shares of Common
Stock acquired pursuant to the exercise of this Warrant prior to registration
of such Warrant or shares, the holder hereof agrees to give written notice to
the Company prior thereto, describing briefly the manner thereof, together
with a written opinion of such holder's counsel, or other evidence, if
reasonably requested by the Company, to the effect that such offer, sale or
other disposition may be effected without registration or qualification
(under the Act as then in effect or any federal or state securities law then
in effect) of this Warrant or such shares of Common Stock and indicating
whether or not under the Act certificates for this Warrant or such shares of
Common Stock to be sold or otherwise disposed of require any restrictive
legend as to applicable restrictions on transferability in order to ensure
compliance with such law.
Page 4
Sylvan Performance Warrant
Promptly upon receiving such written notice and reasonably satisfactory
opinion or other evidence, if so requested, the Company, as promptly as
practicable but no later than twenty (20) days after receipt of the written
notice, shall notify such holder that such holder may sell or otherwise
dispose of this Warrant or such shares of Common Stock, all in accordance
with the terms of the notice delivered to the Company. If a determination has
been made pursuant to this Section 6(b) that the opinion of counsel for the
holder or other evidence is not reasonably satisfactory to the Company, the
Company shall so notify the holder promptly with details thereof after such
determination has been made. Notwithstanding the foregoing, this Warrant or
such shares of Common Stock may, as to such federal laws, be offered, sold or
otherwise disposed of in accordance with Rule 144 or 144A under the Act,
provided that the Company shall have been furnished with such information as
the Company may reasonably request to provide a reasonable assurance that the
provisions of Rule 144 or 144A have been satisfied. Each certificate
representing this Warrant or the shares of Common Stock thus transferred
(except a transfer pursuant to Rule 144 or 144A) shall bear a legend as to
the applicable restrictions on transferability in order to ensure compliance
with such laws, unless in the aforesaid opinion of counsel for the holder,
such legend is not required in order to ensure compliance with such laws. The
Company may issue stop transfer instructions to its transfer agent in
connection with such restrictions.
(c) APPLICABILITY OF RESTRICTIONS. Neither any restrictions
of any legend described in this Warrant nor the requirements of Section 6(b)
above shall apply to any transfer of, or grant of a security interest in,
this Warrant (or the Common Stock obtainable upon exercise thereof) or any
part hereof (i) to a partner of the holder if the holder is a partnership,
(ii) to a partnership of which the holder is a partner, or (iii) to any
affiliate of the holder if the holder is a corporation; PROVIDED, HOWEVER, in
any such transfer, if applicable, the transferee shall on the Company's
request agree in writing to be bound by the terms of this Warrant as if an
original signatory hereto.
7. RIGHTS AS SHAREHOLDERS; INFORMATION. No holder of this
Warrant, as such, shall be entitled to vote or receive dividends or be deemed
the holder of Common Stock or any other securities of the Company which may
at any time be issuable on the exercise hereof for any purpose, nor shall
anything contained herein be construed to confer upon the holder of this
Warrant, as such, any of the rights of a shareholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to receive notice of meetings, or to
receive dividends or subscription rights or otherwise until this Warrant
shall have been exercised and the Shares purchasable upon the exercise hereof
shall have become deliverable, as provided herein.
8. ADDITIONAL RIGHTS.
8.1 MERGERS. The Company shall provide the holder of this Warrant
with at least five (5) business days' notice of the terms and conditions of
any of the following potential transactions: (i) the sale, lease, exchange,
conveyance or other disposition of all or substantially all of the Company's
property or business, or (ii) its merger into or consolidation with any other
corporation (other than a wholly-owned subsidiary of the Company), or any
transaction (including a merger or
Page 5
Sylvan Performance Warrant
other reorganization) or series of related transactions, in which more than
50% of the voting power of the Company is disposed of.
8.2 RIGHT TO CONVERT WARRANT INTO STOCK: NET ISSUANCE.
(a) RIGHT TO CONVERT. In addition to and without limiting
the rights of the holder under the terms of this Warrant, the holder shall
have the right to convert this Warrant (the "Conversion Right") into shares
of Common Stock as provided in this Section 8.2 at any time during the
Exercise Period. Upon exercise of the Conversion Right with respect to the
number of shares subject to this Warrant (the "Converted Warrant Shares"),
the Company shall deliver to the holder (without payment by the holder of any
exercise price or any cash or other consideration) (X) that number of shares
of fully paid and nonassessable Common Stock equal to the quotient obtained
by dividing the value of this Warrant on the Conversion Date (as defined in
subsection (b) hereof), which value shall be determined by subtracting (A)
the aggregate Warrant Price of the Converted Warrant Shares immediately prior
to the exercise of the Conversion Right from (B) the aggregate fair market
value of the Converted Warrant Shares issuable upon exercise of this Warrant
on the Conversion Date (as herein defined) by (Y) the fair market value of
one share of Common Stock on the Conversion Date (as herein defined).
Expressed as a formula, such shall be computed as follows:
X= B-A
------
Y
Where: X = the number of shares of Common Stock that may
be issued to holder
Y = the fair market value of one share of
Common Stock
A = the aggregate Warrant Price (i.e., Converted
Warrant Shares x Warrant Price)
B = the aggregate fair market value (i.e., fair market value x
Converted Warrant Shares)
No fractional shares shall be issuable upon exercise of the Conversion
Right, and, if the number of shares to be issued determined in accordance
with the foregoing formula is other than a whole number, the Company shall
pay to the holder an amount in cash equal to the fair market value of the
resulting fractional share on the Conversion Date (as hereinafter defined).
For purposes of Section 7 of this Warrant, shares issued pursuant to the
Conversion Right shall be treated as if they were issued upon the exercise of
this Warrant.
Page 6
Sylvan Performance Warrant
(b) METHOD OF EXERCISE. Subject to Section 1 hereof, the
Conversion Right may be exercised by the holder by the surrender of this
Warrant at the principal office of the Company together with a written
statement specifying that the holder thereby intends to exercise the
Conversion Right and indicating the number of shares subject to this Warrant
which are being surrendered (referred to in Section 8.2(a) hereof as the
Convened Warrant Shares) in exercise of the Conversion Right. Such conversion
shall be effective upon receipt by the Company of this Warrant together with
the aforesaid written statement, or on such later date as is specified
therein (the "Conversion Date"), and, at the election of the holder hereof,
may be made contingent upon the closing of the sale of the Company's Common
Stock to the public in a public offering pursuant to a Registration Statement
under the Act (a "Public Offering"). Certificates for the shares issuable
upon exercise of the Conversion Right and, if applicable, a new warrant
evidencing the balance of the shares remaining subject to this Warrant, shall
be issued as of the Conversion Date and shall be delivered to the holder
within thirty (30) days following the Conversion Date.
(c) DETERMINATION OF FAIR MARKET VALUE. For purposes of
this Section 8.2, "fair market value" of a share of Common Stock as of a
particular date (the "Determination Date") shall mean:
(i) If the Conversion Right is exercised in
connection with and contingent upon a Public Offering, and if the Company's
Registration Statement relating to such Public Offering has been declared
effective by the SEC, then the initial "Price to Public" specified in the
final prospectus with respect to such offering.
(ii) If the Conversion Right is not exercised in
connection with and contingent upon a Public Offering, then the fair market
value shall be as determined in good faith by the Board of Directors of the
Company.
9. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to the holder of this Warrant as follows:
(a) This Warrant has been duly authorized and executed by
the Company and is a valid and binding obligation of the Company enforceable
in accordance with its terms, subject to laws of general application relating
to bankruptcy, insolvency and the relief of debtors and the rules of law or
principles at equity governing specific performance, injunctive relief and
other equitable remedies;
(b) The Shares have been duly authorized and reserved for
issuance by the Company and, when issued in accordance with the terms hereof,
will be validly issued, fully paid and non-assessable; and
Page 7
Sylvan Performance Warrant
(c) The rights, preferences, privileges and restrictions
granted to or imposed upon the Common Stock and the holders thereof are as
set forth in the Company's Articles of Incorporation, as amended to the Date
of the Grant, a true and complete copy of which has been delivered to the
original holder of this Warrant and is attached hereto as EXHIBIT B.
10. MODIFICATION AND WAIVER. This Warrant and any provision hereof
may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is sought.
11. NOTICES. Any notice, request, communication or other document
required or permitted to be given or delivered to the holder hereof or the
Company shall be delivered, or shall be sent by certified or registered mail,
postage prepaid, to each such holder at its address as shown on the books of
the Company or to the Company at the address indicated therefor on the
signature page of this Warrant.
12. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding
upon any corporation succeeding the Company by merger, consolidation or
acquisition of all or substantially all of the Company's assets, and all of
the obligations of the Company relating to the Common Stock issuable upon the
exercise or conversion of this Warrant shall survive the exercise, conversion
and termination of this Warrant and all of the covenants and agreements of
the Company shall inure to the benefit of the successors and assigns of the
holder hereof.
13. LOST WARRANTS OR STOCK CERTIFICATES. The Company covenants to
the holder hereof that, upon receipt of evidence satisfactory to the Company
of the loss, theft, destruction or mutilation of this Warrant or any stock
certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity satisfactory to the Company, or in the case of any
such mutilation, upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or stock
certificate, of like tenor, in lieu of the lost, stolen, destroyed or
mutilated Warrant or stock certificate.
14. DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant. The language in this Warrant shall be
construed as to its fair meaning without regard to which party drafted this
Warrant.
15. GOVERNING LAW. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the
laws of the State of California.
16. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
representations and warranties of the Company and the holder hereof contained
herein shall survive the Date of Grant, the exercise or conversion of this
Warrant (or any part hereof) or the termination or expiration of rights
hereunder. All agreements of the Company and the holder hereof contained
herein shall survive indefinitely until, by their respective terms, they are
no longer operative.
Page 8
Sylvan Performance Warrant
17. REMEDIES. In case any one or more of the covenants and
agreements contained in this Warrant shall have been breached, the holders
hereof (in the case of a breach by the Company), or the Company (in the case
of a breach by a holder), may proceed to protect and enforce their or its
rights either by suit in equity and/or by action at law, including, but not
limited to, an action for damages as a result of any such breach and/or an
action for specific performance of any such covenant or agreement contained
in this Warrant.
18. NO IMPAIRMENT OF RIGHTS. The Company will not, by amendment of
its Articles of Incorporation or through any other means, avoid or seek to
avoid the observance or performance of any of the terms of this Warrant, but
will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such action as may be necessary or appropriate in
order to protect the rights of the holder of this Warrant against impairment.
19. SEVERABILITY. The invalidity or unenforceability of any
provision of this Warrant in any jurisdiction shall not affect the validity
or enforceability of such provision in any other jurisdiction, or affect any
other provision of this Warrant, which shall remain in full force and effect.
20. RECOVERY OF LITIGATION COSTS. If any legal action or other
proceeding is brought for the enforcement of this Warrant, or because of an
alleged dispute, breach, default, or misrepresentation in connection with any
of the provisions of this Warrant, the successful or prevailing party or
parties shall be entitled to recover reasonable attorneys' fees and other
costs incurred in that action or proceeding, in addition to any other relief
to which it or they may be entitled.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
Page 9
Sylvan Performance Warrant
21. ENTIRE AGREEMENT MODIFICATION. This Warrant constitutes the
entire agreement between the parties pertaining to the subject matter
contained in it and supersedes all prior and contemporaneous agreements,
representations, and undertakings of the parties, whether oral or written,
with respect to such subject matter.
ZAPME! CORPORATION
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇, Secretary
Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Page 10
Sylvan Performance Warrant
EXHIBIT A
NOTICE OF EXERCISE
To: ZAPME! CORPORATION
1. The undersigned hereby:
elects to purchase _________ shares of Common Stock of
ZapMe! Corporation pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price
of such shares in full, or
elects to exercise its net issuance rights pursuant to
Section 9.2 of the attached Warrant with respect to _____
Shares of Common Stock.
2. Please issue a certificate or certificates representing
said shares in the name of the undersigned or in such other name or names as
are specified below:
______________________
(Name)
______________________
______________________
(Address)
3. The undersigned represents that the aforesaid shares are
being acquired for the account of the undersigned for investment and not with
a view to, or for resale in connection with, the distribution thereof and
that the undersigned has no present intention of distributing or reselling
such shares, all except as in compliance with applicable securities laws.
______________________
(Signature)
____________
(Date)
Page 11
Sylvan Performance Warrant
EXHIBIT B
Articles of Incorporation
Page 12
Sylvan Performance Warrant