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EXHIBIT 10.38
THIS WARRANT AND THE UNDERLYING SECURITIES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THEY MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO SUCH SECURITIES UNDER THE ACT OR AN OPINION OF
COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
THE LIGHTSPAN PARTNERSHIP, INC.
WARRANT TO PURCHASE COMMON STOCK
750,000 SHARES
JANUARY __, 2000
THIS CERTIFIES THAT, for value received, ▇▇▇ COMMUNICATIONS HOLDINGS,
INC., a Delaware corporation, with its principal office at _____ ("COX"), or
assigns (the "HOLDER"), is entitled to subscribe for and purchase at the
Exercise Price (defined below) from THE LIGHTSPAN PARTNERSHIP, INC., a
California corporation, with its principal office at ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ("LIGHTSPAN" or the "CORPORATION") up to 750,000 (on a
post-split basis, assuming the Reverse Stock Split, defined below) shares of the
common stock of the Corporation (the "COMMON STOCK").
1. DEFINITIONS. As used herein, the following terms shall have the following
respective meanings:
(a) "EXERCISE PERIOD" shall mean, as to particular Exercise Shares, the
period beginning on the date such Exercise Shares become exercisable pursuant to
Section 2(c), and ending on the date 18 months from the date of the closing of
the IPO (defined below).
(b) "EXERCISE PRICE" shall initially mean $10.00 per share (on a
post-split basis, assuming the Reverse Stock Split, defined below), subject to
adjustment pursuant to Section 6 hereof.
(c) "EXERCISE SHARES" shall mean the shares of the Corporation's Common
Stock issuable upon exercise of this Warrant.
(d) "IPO" shall mean a firmly underwritten initial public offering of
Lightspan's Common Stock.
2. EXERCISE OF WARRANT.
(a) GENERAL. The rights represented by this Warrant may be exercised in
whole or in part at any time during the Exercise Period to the extent
exercisable by delivery of the following to the Corporation at its address set
forth above (or at such other address as it may designate by notice in writing
to the Holder):
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(i) An executed Notice of Exercise in the form attached hereto;
(ii) payment of the Exercise Price in cash, by check or wire
transfer, or other immediately available funds acceptable to the Corporation;
and
(iii) this Warrant.
Upon the exercise of the rights represented by this Warrant, a certificate
or certificates for the Exercise Shares so purchased, registered in the name of
the Holder or persons affiliated with the Holder, if the Holder so designates,
shall be issued and delivered to the Holder within a reasonable time after the
rights represented by this Warrant shall have been so exercised.
The person in whose name any certificate or certificates for Exercise
Shares are to be issued upon exercise of this Warrant shall be deemed to have
become the holder of record of such shares on the date on which this Warrant was
surrendered and payment of the Exercise Price was made, irrespective of the date
of delivery of such certificate or certificates, except that, if the date of
such surrender and payment is a date when the stock transfer books of the
Corporation are closed, such person shall be deemed to have become the holder of
such shares at the close of business on the next succeeding date on which the
stock transfer books are open.
(b) NET EXERCISE. Notwithstanding any provisions herein to the contrary,
if the fair market value of one share of the Corporation's Common Stock is
greater than the Exercise Price (at the date of exercise), in lieu of exercising
this Warrant by payment of cash, the Holder may elect to receive shares equal to
the value (as determined below) of this Warrant (or the portion thereof being
exercised) by surrender of this Warrant at the principal office of the
Corporation together with the properly endorsed Notice of Exercise in which
event the Corporation shall issue to the Holder a number of shares of Common
Stock computed on the date of such exercise using the following formula;
X = Y (A-B)
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A
Where X = the number of shares of Common Stock to be issued to the Holder
Y = The number of shares underlying the Warrant as to which the
Warrant is being exercised.
A = the fair market value of one share of the Corporation's
Common Stock (at the date of such exercise)
B = Exercise Price (as adjusted to the date of such exercise)
For purposes of the above calculation, the fair market value of one share
of Common Stock shall be determined as follows:
(i) If the Common Stock is traded on a national securities exchange
or admitted to unlisted trading privileges on such an exchange, or is listed on
the National Market
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System (the "National Market System") of the National Association of Securities
Dealers Automated Quotations System (the "NASDAQ"), the fair market value shall
be the average of the last reported sale prices of the Common Stock on such
exchange or on the National Market System on the last ten (10) trading days (or
all such trading days such Common Stock has been traded if fewer than 10 trading
days) before the effective date of exercise of the Conversion Right or if no
such sale is made on any such day, the mean of the closing bid and asked prices
for such day on such exchange or on the National Market System;
(ii) If the Common Stock is not so listed or admitted to unlisted
trading privileges, the fair market value shall be the average of the means of
the last bid and asked prices reported on the last ten (10) trading days (or all
such trading days such Common Stock has been traded if fewer than 10 trading
days) before the date of the election (1) by the NASDAQ or (2) if reports are
unavailable under clause (1) above, by the National Quotation Bureau
Incorporated; and
(iii) If the Common Stock is not so listed or admitted to listed
trading privileges and bid and ask prices are not reported, the fair market
value shall be the price per share which the Corporation could obtain from a
willing buyer for shares sold by the Corporation from authorized but unissued
shares, as such price shall be determined by mutual agreement of the Corporation
and the holder of this Warrant.
(c) REVERSE STOCK SPLIT; EXERCISABILITY AND VESTING.
(i) This Warrant assumes the occurrence of a 1-for-2 reverse stock
split (the "Reverse Stock Split") of the Common Stock prior to the time any
Exercise Shares become exercisable. Consequently, if the Reverse Stock Split
does not occur, the number of Exercise Shares and the Exercise Price shall be
1,500,000 and $5.00, subject to further adjustment pursuant to Section 6 hereof;
and in the event a stock split or reverse stock split occurs but at other than a
1:2 ratio (reverse split), then the number of Exercise Shares and the Exercise
Price shall be appropriately fixed consistent with Section 6, subject to further
adjustment pursuant to Section 6.
(ii) The Exercise Shares shall vest, and the Warrant shall be
exercisable for such Exercise Shares, only if the IPO occurs and upon the
occurrence of the conditions as set forth in the vesting schedule in Exhibit A
("VESTING SCHEDULE"). Each of Cox and Lightspan understands and agrees that the
respective rights and obligations of Cox and Lightspan as to the arrangement
described in the Vesting Schedule remain to be defined in the agreement referred
to therein (the terms and provisions of which will be subject to approval by Cox
and Lightspan). Holder and the Corporation acknowledge that neither party is
bound or obligated by this Warrant to enter into any Trial Agreement except as
provided in Section 4 hereto.
3. COVENANTS OF THE CORPORATION.
(a) COVENANTS AS TO EXERCISE SHARES. The Corporation covenants and agrees
that all Exercise Shares that may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be validly issued and
outstanding, fully paid and nonassessable, and free
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from all taxes, liens and charges with respect to the issuance thereof. The
Corporation further covenants and agrees that the Corporation will at all times
during the Exercise Period, have authorized and reserved, free from preemptive
rights, a sufficient number of shares of its Common Stock to provide for the
exercise of the rights represented by this Warrant. If at any time during the
Exercise Period the number of authorized but unissued shares of Common Stock
shall not be sufficient to permit exercise of this Warrant, the Corporation will
take such corporate action as may, in the opinion of its counsel, be necessary
to increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purposes.
(b) NO IMPAIRMENT. Except and to the extent as waived or consented to by
the Holder, the Corporation will not, by amendment of its Articles of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Corporation, but will at all times in
good faith assist in the carrying out of all the provisions of this Warrant and
in the taking of all such action as may be necessary or appropriate in order to
protect the exercise rights of the Holder against impairment.
(c) NOTICES OF RECORD DATE. In the event of any taking by the Corporation
of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend which is the same as cash dividends paid in previous
quarters) or other distribution, the Corporation shall mail to the Holder, at
least ten (10) days prior to the date specified herein, a notice specifying the
date on which any such record is to be taken for the purpose of such dividend or
distribution.
4. COVENANTS OF THE CORPORATION AND COX.
(a) NEGOTIATION OF TRIAL AGREEMENT. Each of Lightspan and Cox shall use
good faith efforts to negotiate and enter into, on or before January __, 2001, a
written agreement requiring Cox to undertake and complete a one-school trial
(involving at least 300 students) involving Lightspan Achieve Now and
▇▇▇▇▇▇▇▇▇.▇▇▇ products (a "Trial") in a school within a geographic area
appropriately serviced by Cox and specifying, among other things, the scope,
intended objectives, timing and duration of the trial, the Lightspan products to
be used, and the remedies available to each party in case of non-performance
thereunder (the "TRIAL AGREEMENT"). Holder and the Corporation acknowledge that
neither party is bound or obligated by this Warrant to enter into any Trial
Agreement other than the good faith standard described above.
(b) ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇. As soon as practicable after the date hereof, the
Corporation and the Holder shall prepare and file the appropriate notifications,
if any, as may be required to be filed under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended, (the "HSR ACT") with respect to this
Warrant and the transactions contemplated hereby, and after consultation with
the Corporation, the Investor and the Corporation shall promptly make any
additional filing required to be made under the HSR Act and promptly furnish the
appropriate governmental body such additional information as may be requested
under the HSR Act. All fees and expenses incurred by either the Holder or the
Corporation in connection with this section shall be paid by the Holder.
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5. REPRESENTATIONS OF HOLDER.
(a) ACQUISITION OF WARRANT FOR PERSONAL ACCOUNT. The Holder represents and
warrants that it is acquiring the Warrant solely for its account for investment
and not with a view to or for sale or distribution of said Warrant or any part
thereof in violation of any applicable securities laws. The Holder also
represents that the entire legal and beneficial interests of the Warrant and
Exercise Shares the Holder is acquiring is being acquired for, and will be held
for, its account only.
(b) SECURITIES ARE NOT REGISTERED.
(i) The Holder understands that the Warrant and the Exercise Shares
have not been registered under the Securities Act of 1933, as amended (the
"ACT") on the basis that no distribution or public offering of the stock of the
Corporation is to be effected. The Holder realizes that the basis for the
exemption may not be present if, notwithstanding its representations, the Holder
has a present intention of acquiring the securities for a fixed or determinable
period in the future, selling (in connection with a distribution or otherwise),
granting any participation in, or otherwise distributing the securities. The
Holder has no such present intention.
(ii) The Holder recognizes that the Warrant and the Exercise Shares
must be held indefinitely unless they are subsequently registered under the Act
or an exemption from such registration is available.
(c) DISPOSITION OF WARRANT AND EXERCISE SHARES.
(i) The Holder further agrees not to make any disposition of all or
any part of the Warrant or Exercise Shares in any event unless and until:
(1) The Corporation shall have received a letter secured by
the Holder from the Securities and Exchange Commission stating that no action
will be recommended to the Commission with respect to the proposed disposition;
or
(2) There is then in effect a registration statement under the
Act covering such proposed disposition and such disposition is made in
accordance with said registration statement; or
(3) The Holder shall have notified the Corporation of the
proposed disposition and shall have furnished the Corporation with a detailed
statement of the circumstances surrounding the proposed disposition, and if
reasonably requested by the Corporation, the Holder shall have furnished the
Corporation with an opinion of counsel, reasonably satisfactory to the
Corporation, for the Holder to the effect that such disposition will not require
registration of such Warrant or Exercise Shares under the Act or any applicable
state securities laws.
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(ii) The Holder understands and agrees that all certificates
evidencing the shares to be issued to the Holder may bear the following
legend(s):
(1) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. SUCH SHARES MAY NOT BE SOLD, TRANSFERRED OR PLEDGED IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS THE CORPORATION RECEIVES AN OPINION OF COUNSEL (WHICH MAY
BE COUNSEL FOR THE CORPORATION) REASONABLY ACCEPTABLE TO IT STATING THAT SUCH
SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF SAID ACT."
(2) any other legend reasonably determined by the corporation.
(iii) The Holder hereby agrees not to sell or otherwise transfer or
dispose of all or any part of this Warrant or the Exercise Shares during a
period specified by the representative of the underwriters of Common Stock (not
to exceed one hundred eighty (180) days) following the effective date of the
registration statement of the Corporation filed under the Act. Holder further
agrees that the Corporation may impose stop-transfer instructions with respect
to securities subject to the foregoing restrictions until the end of such
period. Notwithstanding the above, if permitted in writing by the underwriters,
the Holder may transfer such shares to any corporation or other entity which
controls, is controlled by, or is under common control with the Holder, all as
defined in the following sentence. A corporation or other entity will be
regarded as in control of another corporation or entity if it owns or directly
or indirectly controls 100% of the voting securities or other ownership interest
of the other corporation or entity.
6. ADJUSTMENT OF EXERCISE SHARES AND EXERCISE PRICE. The number of Exercise
Shares and the Exercise Price stated in this Warrant assume the Reverse Stock
Split. Neither the number of Exercise Shares nor the Exercise Price shall be
adjusted as a result of the Reverse Stock Split (but adjustments shall be made
if the Reverse Stock Split does not occur or if a stock split or reverse stock
split is effected at other than a 1:2 ratio (reverse split), as described in
Section 2(c)). In the event of changes in the outstanding Common Stock of the
Corporation other than the Reverse Stock Split, whether by reason of conversion,
stock dividends, split-ups, recapitalizations, reclassifications, combinations
or exchanges of shares, whether in a merger or otherwise, separations,
reorganizations, liquidations, or the like, the number and class of shares
available under the Warrant in the aggregate and the Exercise Price shall be
correspondingly adjusted to give the Holder of the Warrant, on exercise for the
same aggregate Exercise Price, the total number, class, and kind of shares as
the Holder would have owned had the Warrant been exercised prior to the event
and had the Holder continued to hold such shares until after the event requiring
adjustment. The form of this Warrant need not be changed because of any
adjustment in the Exercise Price or in the number or class of Exercise Shares
subject to this Warrant.
7. FRACTIONAL SHARES. No fractional shares shall be issued upon the exercise of
this Warrant as a consequence of any adjustment pursuant hereto. All Exercise
Shares (including fractions) issuable upon exercise of this Warrant may be
aggregated for purposes of determining whether the exercise would result in the
issuance of any fractional share. If, after aggregation,
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the exercise would result in the issuance of a fractional share, the Corporation
shall, in lieu of issuance of any fractional share, pay the Holder otherwise
entitled to such fraction a sum in cash equal to the product resulting from
multiplying the then current fair market value of an Exercise Share by such
fraction.
8. NO STOCKHOLDER RIGHTS. This Warrant in and of itself shall not entitle the
Holder to any voting rights or other rights as a stockholder of the Corporation.
9. TRANSFER OF WARRANT. This Warrant and all rights hereunder are transferable
only with the written consent of the Corporation, which consent shall not be
unreasonably withheld; provided, however, that the Holder may transfer this
Warrant to an affiliate of the Holder without such consent on the condition that
the transferee agrees to be bound by all of the restrictions contained herein;
provided further that in all events Cox shall remain obligated pursuant to
Section 4 hereof, and vesting shall be determined thereby, no matter who is the
Holder, unless otherwise agreed by Lightspan and Cox.
10. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant is lost,
stolen, mutilated or destroyed, the Corporation may, on such terms as to
indemnity or otherwise as it may reasonably impose (which shall, in the case of
a mutilated Warrant, include the surrender thereof), issue a new Warrant of like
denomination and tenor as the Warrant so lost, stolen, mutilated or destroyed.
Any such new Warrant shall constitute an original contractual obligation of the
Corporation, whether or not the allegedly lost, stolen, mutilated or destroyed
Warrant shall be at any time enforceable by anyone.
11. NOTICES, ETC. All notices and other communications required or permitted
hereunder shall be in writing and shall be sent by telex, telegram, express mail
or other form of rapid communications, if possible, and if not then such notice
or communication shall be mailed by first-class mail, postage prepaid, addressed
in each case to the party entitled thereto at the following addresses: (a) if to
the Corporation, to The Lightspan Partnership, Inc., Attention: President, at
the address shown on the first page hereof and (b) if to the Holder, to
President, at the address shown on the first page hereof, or at such other
address as one party may furnish to the other in writing. Notice shall be deemed
effective on the date dispatched if by personal delivery, telecopy, telex or
telegram, two days after mailing if by express mail, or three days after mailing
if by first-class mail.
12. ACCEPTANCE. Receipt of this Warrant by the Holder shall constitute
acceptance of and agreement to all of the terms and conditions contained herein.
13. GOVERNING LAW. This Warrant and all rights, obligations and liabilities
hereunder shall be governed by the laws of the State of California.
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IN WITNESS WHEREOF, the Corporation has caused this Warrant to be executed
by its duly authorized officer as of January __, 2000.
THE LIGHTSPAN PARTNERSHIP, INC.
By:
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Title:
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COX ________________
By:
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Title:
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8.
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NOTICE OF EXERCISE
TO: THE LIGHTSPAN PARTNERSHIP, INC.
(1) [ ] The undersigned hereby elects to purchase ________ shareS of the
Common Stock of The Lightspan Partnership, Inc. (the "CORPORATION") pursuant to
the terms of the attached Warrant, and tenders herewith payment of the exercise
price in full, together with all applicable transfer taxes, if any.
[ ] The undersigned hereby elects to purchase ________ shareS of the
Common Stock of The Lightspan Partnership, Inc. (the "CORPORATION") pursuant to
the terms of the net exercise provisions set forth in Section 2(b) of the
attached Warrant, and shall tender payment of all applicable transfer taxes, if
any.
(2) Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
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(Name)
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(Address)
(3) The undersigned represents that (i) the aforesaid shares of Common
Stock 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 except in compliance with all applicable securities laws; (ii) the
undersigned is aware of the Corporation's business affairs and financial
condition and has acquired sufficient information about the Corporation to reach
an informed and knowledgeable decision regarding its investment in the
Corporation; (iii) the undersigned is experienced in making investments of this
type and has such knowledge and background in financial and business matters
that the undersigned is capable of evaluating the merits and risks of this
investment and protecting the undersigned's own interests; (iv) the undersigned
understands that the shares of Common Stock issuable upon exercise of this
Warrant have not been registered under the Securities Act of 1933, as amended
(the "SECURITIES ACT"), by reason of a specific exemption from the registration
provisions of the Securities Act, which exemption depends upon, among other
things, the bona fide nature of the investment intent as expressed herein, and,
because such securities have not been registered under the Securities Act, they
must be held indefinitely unless subsequently registered under the Securities
Act or an exemption from such registration is available; and (v) the undersigned
agrees not to make any disposition of all or any part of the aforesaid shares of
Common Stock unless and until there is then in effect a registration statement
under the Securities Act covering such proposed disposition and such disposition
is made in accordance with said registration statement, or the undersigned has
provided the Corporation with an opinion of counsel satisfactory to the
Corporation, stating that such registration is not required.
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(Date) (Signature)
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(Print name)
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ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form and
supply required information. Do not use this form to
purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
Name:
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(Please Print)
Address:
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(Please Print)
Dated:
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Holder's
Signature:
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Holder's
Address:
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NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatever. Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign
the foregoing Warrant.
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EXHIBIT A
100% of the Exercise Shares shall vest upon either of the following dates:
(a) the date that Cox and Lightspan enter into the Trial Agreement;
provided that, such date is on or before January __, 2001 and that prior to such
date each of the following conditions shall have been satisfied:
(i) The waiting period applicable to the exercise of the Warrant
under the HSR Act shall have expired or been terminated; and
(ii) Cox shall have negotiated and entered into the Trial Agreement
in good faith in compliance with Section 4 of the Warrant; it being agreed by
the parties that Cox would not be deemed to be acting in good faith if Cox
agrees to terms in the Trial Agreement that, given ▇▇▇'▇ technology and
infrastructure position and other facts and circumstances, are not reasonably
expected to be able to be performed by Cox in a timely manner consistent with
industry standards.
OR
(b) On January __, 2001 if the IPO and the reincorporation of Lightspan
into the State of Delaware shall have occurred and the waiting period applicable
to the exercise of the Warrant under the HSR Act shall have expired or been
terminated and Lightspan and Cox have not entered into the Trial Agreement
because Cox reasonably determines that it cannot conduct a Trial in a manner
acceptable to the parties due to the fact that delays or other problems with the
development and production of Lightspan's products have resulted in Lightspan's
products not being suitable for such a Trial.