UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D/A
Under the Securities Exchange Act of 1934
(Amendment No. 1)*
School Specialty, Inc.
(Name of Issuer)
Common Stock
(Title of Class of Securities)
807864103
(CUSIP Number)
The TCW Group, Inc., on behalf of the TCW Business Unit
Attn: Meredith Jackson
865 South Figueroa Street
Los Angeles, CA 90017
213-244-0896
With a copy to:
Goldberg Kohn Ltd.
Attn: Keith A. Sigale, Esq.
55 East Monroe Street, Suite 3300
Chicago, IL 60603
312-201-3905
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
May 29, 2020
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. o
Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See §240.13d-7 for other parties to whom copies are sent.
* The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).
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CUSIP No. 807864103 |
13D |
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1. |
Names of Reporting Persons. The TCW Group, Inc., on behalf of the TCW Business Unit | ||
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2. |
Check the Appropriate Box if a Member of a Group (See Instructions) (a) o (b) x | ||
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3. |
SEC Use Only | ||
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Source of Funds (See Instructions) WC | ||
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Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) o | ||
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6. |
Citizenship or Place of Organization Nevada corporation | ||
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Number of |
7. |
Sole Voting Power 0 | |
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8. |
Shared Voting Power 11,658,616 | ||
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9. |
Sole Dispositive Power 0 | ||
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10. |
Shared Dispositive Power 11,658,616 | ||
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11. |
Aggregate Amount Beneficially Owned by Each Reporting Person 11,658,616 | ||
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12. |
Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) o | ||
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13. |
Percent of Class Represented by Amount in Row (11) 53.87% | ||
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14. |
Type of Reporting Person (See Instructions) HC/CO | ||
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CUSIP No. 807864103 |
13D/A |
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Item 1. Security and Issuer
This statement on Schedule 13D relates to the common stock, $0.001 par value (the “Common Stock”), of School Specialty, Inc., a Delaware corporation (the “Issuer”). The address of the Issuer’s principal executive offices is W6316 Design Drive, Greenville, Wisconsin 54942.
Item 2. Identity and Background
(a) This Schedule 13D is being filed by The TCW Group, Inc. (“TCW”) on behalf of itself and its direct and indirect subsidiaries, which collectively constitute The TCW Group, Inc. business unit (the “TCW Business Unit”). The TCW Business Unit is primarily engaged in the provision of investment management services. The TCW Business Unit is managed separately and operated independently.
Investment funds affiliated with The Carlyle Group, L.P. (“The Carlyle Group”) hold a minority indirect ownership interest in TCW that technically constitutes an indirect controlling interest in TCW. The principal business of The Carlyle Group is acting as a private investment firm with affiliated entities that include certain distinct specialized business units that are independently operated including the TCW Business Unit.
Entities affiliated with The Carlyle Group may be deemed to share beneficial ownership of the securities reported herein. Information barriers are in place between the TCW Business Unit and The Carlyle Group. Therefore, in accordance with Rule 13d-4 under the Exchange Act, The Carlyle Group disclaims beneficial ownership of the shares beneficially owned by the TCW Business Unit and reported herein. The TCW Business Unit disclaims beneficial ownership of any shares which may be owned or reported by The Carlyle Group and its affiliates.
(b) The business address of TCW is 865 South Figueroa Street, Los Angeles, CA 90017.
(c) The TCW Business Unit is primarily engaged in the provision of investment management services. The TCW Business Unit is managed separately and operated independently.
(d) None of the entities constituting the TCW Business Unit has, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors).
(e) None of the entities constituting the TCW Business Unit was, during the last five years, a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and, as a result of such proceeding, was or is subject to a judgment, decree or final order (1) enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws, or (2) finding any violation with respect to such laws.
(f) TCW is a Nevada corporation.
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Item 3. Source and Amount of Funds or Other Consideration
Item 3 is hereby amended to read as follows:
Various lenders to the Issuer that are a part of the TCW Business Unit have beneficial ownership of an aggregate of 992,328 shares of Common Stock under various Warrants to Purchase Common Stock, which were issued by Issuer to such parties on May 29, 2020 in replacement of that certain existing Warrant to Purchase Common Stock originally issued on December 27, 2019 to TCW Asset Management Company LLC, as agent for the lenders for which The TCW Group, Inc. has previously reported beneficial ownership of 1,559,674 shares of Common Stock (the “Re-Issued Warrants”). A form of the Re-Issued Warrants is attached hereto as Exhibit 1. Such Re-Issued Warrants were issued to the applicable parties in their capacity as lenders in exchange for various extensions of credit made to the Issuer. No separate consideration was paid by the TCW Business Unit for such Re-Issued Warrants and no exercise of the Re-Issued Warrants has occurred. Any separate exercise price under the Re-Issued Warrants, if applicable, would be paid using working capital funds.
Various lenders to the Issuer that are a part of the TCW Business Unit have acquired beneficial ownership of an aggregate of 10,666,288 shares of Common Stock under various Warrants to Purchase Common Stock, which were issued by Issuer to such parties on May 29, 2020 (the “New Warrants”). A form of the New Warrants is attached hereto as Exhibit 2. Such New Warrants were issued to the applicable parties in their capacity as lenders in exchange for various extensions of credit made to the Issuer. No separate consideration was paid by the TCW Business Unit for such New Warrants and no exercise of the New Warrants has occurred. Any separate exercise price under the New Warrants, if applicable, would be paid using working capital funds.
Item 4. Purpose of Transaction
Item 4 is hereby amended to read as follows:
On May 29, 2020, in re-issuance and replacement of the existing Warrant to Purchase Common Stock dated December 27, 2019, the Issuer issued Warrants to Purchase Common Stock to various lenders of the Issuer. The purpose of the Re-Issued Warrants was the Issuer offering additional incentives to various of its lenders (including those in the TCW Business Unit) to induce continued and additional extensions of credit to Issuer.
On May 29, 2020, the Issuer issued additional Warrants to Purchase Common Stock to various lenders of the Issuer. The purpose of the New Warrants was the Issuer offering additional incentives to various of its lenders (including those in the TCW Business Unit) to induce continued and additional extensions of credit to Issuer.
The TCW Business Unit intends to continuously review their equity interest in the Issuer. TCW Asset Management Company LLC has the ability as agent for the lenders (and certain parties associated with the TCW Business Unit who are lenders to the Issuer have the ability as lenders) to take actions under its credit facility documents, which actions may include acquiring additional equity or assets of the Issuer. Any such additional purchases or sales of securities of the Issuer
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related to the foregoing may be in the open market, in privately negotiated transactions or otherwise.
The reporting persons may wish to engage in a constructive dialogue with officers, directors and other representatives of the Issuer, as well as the Issuer’s shareholders; topics of discussion may include, but are not limited to, the Issuer’s markets, operations, competitors, prospects, strategy, personnel, directors, ownership and capitalization. The reporting persons may also enter into confidentiality or similar agreements with the Issuer and, subject to such an agreement or otherwise, exchange information with the Issuer. The factors that the reporting persons may consider in evaluating their equity interest in the Issuer’s business include the following: (i) the Issuer’s business and prospects; (ii) the performance of the Common Stock and the availability of the Common Stock for purchase at particular price levels; (iii) the availability and nature of opportunities to dispose of the reporting persons’ interests; (iv) general economic conditions; (v) stock market conditions; (vi) other business and investment opportunities available to the reporting persons; and (vii) other plans and requirements of the reporting persons.
Depending on their assessment of the foregoing factors, the reporting persons may, from time to time, modify their present intention as stated in this Item 4.
Item 5. Interest in Securities of the Issuer
Item 5 is hereby amended to read as follows:
(a) (b) The percentages of beneficial ownership reported in this Item 5, and on the cover page to this Schedule 13D, are based on a total of (x) 7,043,105 shares of the Common Stock issued and outstanding as of the date of this filing, (y) 14,544,721 shares of Common Stock issuable under warrants (inclusive of the Warrants to Purchase Common Stock for which this Schedule 13D is being filed), together with (z) 53,919 shares of restricted stock beneficially owned by other parties, each as reported to the TCW Business Unit by the Issuer as of the date of this filing. The cover page to this Schedule 13D for the TCW Business Unit is incorporated by reference in its entirety into this Item 5(a, b).
The TCW Business Unit holds, and thus has shared voting and dispositive power over, 11,658,616 shares of Common Stock of the Issuer through ownership of the Warrants issued by the Issuer to certain lenders to the Issuer in the TCW Business Unit.
(c) The reporting person has affected the following transactions in shares of the Common Stock during the 60 days prior to the filing of this Schedule 13D: (x) on December 27, 2019, TCW Asset Management Company LLC, as agent for lenders to the Issuer, received a Warrant exercisable for 1,559,674 shares of Common Stock of the Issuer (and for which a Schedule 13G and a Schedule 13D was previously filed), (y) on May 29, 2020, in re-issuance and replacement of the Warrant to Purchase Common Stock dated December 27, 2019, the Issuer issued Warrants to Purchase Common Stock to various lenders of the Issuer, with the lenders that are a part of the TCW Business Unit receiving warrants exercisable for an aggregate of 992,328 shares of Common Stock and (z) on May 29, 2020, the Issuer issued additional Warrants to
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13D/A |
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Purchase Common Stock to various lenders of the Issuer, with the lenders that are a part of the TCW Business Unit receiving warrants exercisable for an aggregate of 10,666,288 shares of Common Stock.
(d) No person other than the reporting person is known to have the right to receive or the power to direct the receipt of dividends from or the proceeds from the sale of shares of the Common Stock.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer
Item 6 is hereby amended to read as follows:
Except as otherwise described in this Schedule 13D, including the Exhibits attached hereto, there are no contracts, arrangements, understandings, or relationships (legal or otherwise) among the Reporting Persons, or between any Reporting Person(s) and any third party, with respect to any securities of the Issuer, including, but not limited to, those involving the transfer or voting of any of the securities, finder’s fees, joint ventures, loan or option arrangements, put or calls, guarantees of profits, division of profits or losses, or the giving or withholding of proxies.
Item 7. Material to be Filed as Exhibits
Item 7 is hereby amended to read as follows:
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Exhibit 1 |
Form of Warrant to Purchase Common Stock, dated May 29, 2020, which constitutes a re-issuance and replacement of that certain Warrant to Purchase Common Stock dated December 27, 2019. (Re-Issued Warrants) |
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Exhibit 2 |
Form of Warrant to Purchase Common Stock, dated May 29, 2020. (New Warrants) |
[signature page follows]
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CUSIP No. 807864103 |
13D/A |
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After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.
DATE: June 2, 2020
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THE TCW GROUP, INC., ON BEHALF OF THE |
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TCW BUSINESS UNIT |
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By: |
/s/ Meredith Jackson |
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Meredith Jackson |
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Authorized Signatory |
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Form of Warrant to Purchase Common Stock (Re-Issued Warrants)
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY APPLICABLE STATE OR FOREIGN SECURITIES LAWS, AND, EXCEPT AND PURSUANT TO THE PROVISIONS OF ARTICLE 5 BELOW, MAY ONLY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED (I) PURSUANT TO AN EFFECTIVE REGISTRATION THEREOF UNDER THE ACT AND ANY APPLICABLE STATE OR FOREIGN SECURITIES LAWS, OR (II) IN A TRANSACTION THAT IS EXEMPT FROM THE REGISTRATION REQUIREMENTS UNDER THE ACT (INCLUDING, BUT NOT LIMITED TO RULE 144) AND ANY APPLICABLE STATE AND FOREIGN SECURITIES LAWS AND, IN THE CASE OF THIS CLAUSE (II) IF THE COMPANY REQUESTS IN A TRANSACTION OTHER THAN A PERMITTED TRANSFER, AN OPINION SATISFACTORY TO THE COMPANY TO SUCH EFFECT HAS BEEN DELIVERED TO THE COMPANY.
WARRANT TO PURCHASE COMMON STOCK
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Company: |
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SCHOOL SPECIALTY, INC., a Delaware corporation |
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Number of Shares |
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[ ] |
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Class of Stock: |
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Common Stock |
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Warrant Price: |
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$0.01 per share |
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Issue Date: |
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May 29, 2020 |
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Expiration Date: |
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December 27, 2022 |
THIS WARRANT TO PURCHASE STOCK (THIS “WARRANT”) CERTIFIES THAT, for good and valuable consideration, the receipt of which is hereby acknowledged, [TCW] (“Holder”), is entitled to purchase the number of fully paid and non-assessable shares of the common stock, par value $0.001 per share (the “Common Stock”) of SCHOOL SPECIALTY, INC. (the “Company”) at the Warrant Price set forth above and as adjusted pursuant to the terms of this Warrant, subject to the provisions and upon the terms and conditions set forth in this Warrant. Capitalized terms used herein but not specifically defined herein shall have the meanings ascribed to them in that certain Loan Agreement, dated as of April 7, 2017 (as amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”), by and among the Company, the financial institutions from time to time party thereto (collectively, the “Lenders”), TCW Asset Management Company LLC, as Agent for the Lenders (“Agent”), and the other parties thereto.
This Warrant is being issued pursuant to Section 5.4 of that certain Warrant to Purchase Stock dated December 27, 2019 originally issued to Agent (the “Prior Warrant”), as a result of the transfer by Agent to various Lenders of its entire interest in such Prior Warrant.
ARTICLE 1
EXERCISE
1.1 Exercise. This Warrant shall be exercisable for [ ] shares of Common Stock (the “Shares”) (subject to adjustment as provided herein) in whole or in part at any time until the Expiration Date.
1.2 Method of Exercise. Holder may exercise any portion of this Warrant that is exercisable by delivering a duly completed and executed Notice of Exercise in substantially the form attached as Appendix I to the principal office of the Company. Unless Holder is exercising the cashless exercise right set forth in Section 1.3, Holder shall also deliver to the Company a check, wire transfer (to an account designated in writing by the Company), or other form of payment acceptable to the Company for the aggregate Warrant Price for the Shares being purchased.
1.3 Cashless Exercise Right. In lieu of exercising this Warrant as specified in Section 1.2, Holder may from time to time, in its sole discretion, exercise this Warrant in whole or in part as to the portion of the Warrant that is exercisable and, in lieu of making the cash payment otherwise contemplated to be made to the Company upon such exercise for the aggregate Warrant Price pursuant to Section 1.2, elect instead to receive upon such exercise the “net number” of Shares determined according to the following formula (a “Cashless Exercise”):
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X |
= |
Y (A – B) |
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A |
Where:
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X |
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The number of Shares to be issued to Holder |
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Y |
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The number of Shares being exercised under this Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being canceled (at the date of such calculation) |
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A |
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The fair market value of one Share (at the date of such calculation) |
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B |
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The Warrant Price per share (as adjusted to the date of such calculation) |
1.4 Calculation of FMV. For purposes of the calculation above, the “fair market value” of one Share shall be the average for the five trading days immediately prior to the date of determination thereof of the last reported sale price regular way on each such day, or, in the case no such sale takes place on any such day, the average of the reported closing bid and asked prices regular way of the shares of Common Stock on such day, in each case as quoted on the New York Stock Exchange, as reported by Bloomberg Markets, or such other principal securities exchange or inter-dealer quotation system on which the shares of Common Stock are then traded (including, if applicable, the Financial Industry Regulatory Authority OTC Bulletin Board electronic inter-dealer quotation system or the OTC Markets Group Inc. electronic inter-dealer quotation system, including OTCQX, OTCQB and OTC Pink). If at any time the Common Stock is not listed on any securities exchange or traded on inter-dealer quotation system, the “Fair Market Value” of the Common Stock shall be the fair market value per share as determined jointly by the Holder and Board of Directors of the Company; provided that if the parties have not jointly agreed on a fair market value within 20 days then the Holder and the Company agree to retain a third party appraiser to determine such fair market value (with the costs of the appraiser to be divided equally between the Holder and the Company).
1.5 Delivery of Shares and New Warrant. Within five (5) business days after Holder exercises this Warrant in the manner set forth in Section 1.2 or Section 1.3 above, the Company shall deliver to Holder the Shares so acquired, provided that such Shares shall be deemed delivered upon the Company’s delivery of evidence of a book-entry or similar position through The Depository Trust & Closing Corporation or any other depository or similar functionary, credited to an account for the benefit of Holder. If this Warrant has not been fully exercised and has not expired, then unless otherwise set forth in the Notice of Exercise a new warrant representing the Shares not so acquired shall be issued to Holder.
1.6 Treatment of Warrant at Acquisition. In the event of an Acquisition, either (a) Holder shall exercise or convert this Warrant in full (or shall be deemed to so convert pursuant to the immediately following sentence) with respect to all remaining Shares for which the Warrant is then exercisable and such exercise or conversion will be deemed effective immediately prior to the consummation of such Acquisition or (b) if Holder elects in writing not to exercise or convert the Warrant, this Warrant will expire upon the consummation of such Acquisition. The Company shall provide Holder with written notice of the foregoing (together with such reasonable information as Holder may request in connection with such contemplated Acquisition giving rise to such notice), which is to be delivered to Holder not less than ten (10) days prior to the closing of the proposed Acquisition and, unless the Company receives a notice in writing from Holder that it elects to have the unexercised portion of the Warrant expire, then if the Acquisition involves a price per share of Common Stock that exceeds the Warrant Price the unexercised portion of the Warrant shall be deemed to be automatically exercised pursuant to Section 1.3 immediately prior to the Acquisition.
For purposes of this Warrant, “Acquisition” shall mean: (i) the acquisition of the Company by another entity by means of any transaction or series of related transactions to which the Company is a party (including, without limitation, any stock acquisition, reorganization, merger or consolidation, but excluding any sale of stock for capital raising purposes and any transaction effected primarily for purposes of changing the Company’s jurisdiction of incorporation) other than a transaction or series of related transactions in which the holders of the voting securities of the Company outstanding immediately prior to such transaction or series of related transactions retain, immediately after such transaction or series of transactions, at least a majority of the total voting power represented by the outstanding voting securities of the Company or such other surviving or resulting entity (or if the Company or such other surviving or resulting entity is a wholly-owned subsidiary immediately following such acquisition, its parent), or (ii) a sale, lease or other disposition of all or substantially all of the assets of the Company and its subsidiaries taken as a whole by means of any transaction or series of related transactions, except where such sale, lease or other disposition is to a wholly-owned subsidiary or affiliate of the Company.
1.7 Replacement of Warrant. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction of this Warrant, upon delivery of an indemnity agreement reasonably satisfactory in form, substance and amount to the Company or, in the case of mutilation, upon surrender and cancellation of this Warrant, the Company at its expense shall, within a reasonable period of time, execute and deliver to Holder, in lieu of this Warrant, a new warrant of like tenor and amount.
ARTICLE 2
ADJUSTMENTS TO THE SHARES AND NOTIFICATION OF CERTAIN EVENTS
2.1 Fractional Shares. No fractional Shares shall be issuable upon exercise of this Warrant and the number of Shares to be issued shall be rounded down to the nearest whole Share. If a fractional share interest arises upon any exercise of this Warrant, the Company shall eliminate such fractional share interest by paying Holder an amount computed by multiplying the fractional interest by the fair market value, calculated as provided in Section 1.4 above, of a full Share.
2.2 Adjustments. Subject to the expiration of this Warrant pursuant to Section 5.1, the number and kind of shares purchasable hereunder and the Warrant Price therefor are subject to adjustment from time to time, as follows:
2.2.1 Merger or Reorganization. If at any time there shall be any reorganization, recapitalization, merger or consolidation (a “Reorganization”) involving the Company (other than an Acquisition which is subject to the provisions of Section 1.6) in which shares of the Company’s stock are converted into or exchanged for securities, cash or other property, then, as a part of such Reorganization, lawful provision shall be made so that the Holder shall thereafter be entitled to receive upon exercise of this Warrant, the kind and amount of securities, cash or other property of the successor corporation resulting from such Reorganization, equivalent in value to that which a holder of the Shares deliverable upon exercise of this Warrant would have been entitled in such Reorganization if the right to purchase the Shares hereunder had been exercised immediately prior to such Reorganization. In any such case, appropriate adjustment (as determined in good faith by the Board of Directors of the successor corporation) shall be made in the application of the provisions of this Warrant with respect to the rights and interests of the Holder after such Reorganization to the end that the provisions of this Warrant shall be applicable after the event, as near as reasonably may be, in relation to any shares or other securities deliverable after that event upon the exercise of this Warrant.
2.2.2 Reclassification of Shares. If the securities issuable upon exercise of this Warrant are changed into the same or a different number of securities of any other class or classes by reclassification, capital reorganization or otherwise (other than as otherwise provided for herein) (a “Reclassification”), then, in any such event, in lieu of the number of Shares which the Holder would otherwise have been entitled to receive, the Holder shall have the right thereafter to exercise this Warrant for a number of shares of such other class or classes of stock that a holder of the number of securities deliverable upon exercise of this Warrant immediately before that change would have been entitled to receive in such Reclassification (at the same aggregate Warrant Price as would have applied prior to such Reclassification), all subject to further adjustment as provided herein with respect to such other shares.
2.2.3 Subdivisions and Combinations. In the event that the outstanding shares of the Company’s Common Stock are subdivided (by stock split, by payment of a stock dividend or otherwise) into a greater number of shares of such securities, the number of Shares issuable upon exercise of the rights under this Warrant immediately prior to such subdivision shall, concurrently with the effectiveness of such subdivision, be proportionately increased, and the Warrant Price shall be proportionately decreased, and in the event that the outstanding shares of Common Stock are combined (by reclassification or otherwise) into a lesser number of shares of such securities, the number of Shares issuable upon exercise of the rights under this Warrant immediately prior to such combination shall, concurrently with the effectiveness of such combination, be proportionately decreased, and the Warrant Price shall be proportionately increased.
2.2.4 Dividends. Subject to the provisions of this Section 2.2, if the Company shall, at any time or from time to time after the date hereof, make or declare, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or any other distribution payable in securities of the Company (other than a dividend or distribution of shares of Common Stock in respect of outstanding shares of Common Stock described in Section 2.2.3), cash or other property, then, and in each such event, provision shall be made so that the Holder shall receive upon exercise of the Warrant, in addition to the number of Shares receivable thereupon, the kind and amount of securities of the Company, cash or other property which the Holder would have been entitled to receive had the Warrant been exercised in full into Shares on the date of such event and had the Holder thereafter, during the period from the date of such event to and including the date of exercise, retained such securities, cash or other property receivable by them as aforesaid during such period, giving application to all adjustments called for during such period under this Article 2 with respect to the rights of the Holder; provided, that no such provision shall be made if the Holder receives, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of such securities, cash or other property in an amount equal to the amount of such securities, cash or other property as the Holder would have received if the Warrant had been exercised in full into Shares on the date of such event.
2.2.5 No Impairment. The Company shall not, by amendment of its charter documents or through any consolidation, merger, reorganization, transfer of assets, 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 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 against dilution or other impairment.
2.2.6 Notice of Adjustments. Upon any adjustment in accordance with this Section 2.2, the Company shall give notice thereof to the Holder, which notice shall state the event giving rise to the adjustment, the Warrant Price as adjusted and the number of securities or other property purchasable upon the exercise of the rights under this Warrant, setting forth in reasonable detail the method of calculation of each. The Company shall, upon the written request of any Holder, furnish or cause to be furnished to such Holder a certificate setting forth (i) such adjustments, (ii) the Warrant Price at the time in effect and (iii) the number of securities and the amount, if any, of other property that at the time would be received upon exercise of this Warrant.
2.3 Notification of Certain Events. Prior to the Expiration Date, in the event that the Company shall authorize:
2.3.1 the issuance of any dividend or other distribution on the capital stock of the Company, whether in cash, property, stock or other securities; or
2.3.2 the voluntary liquidation, dissolution or winding up of the Company,
the Company shall send to the Holder at least ten (10) days prior written notice of the date on which a record shall be taken for any such dividend or distribution specified in clause 2.3.1 or the expected effective date of any such other event specified in clause 2.3.2. The notice provisions set forth in this section may be shortened or waived prospectively or retrospectively by the consent of the Holder.
ARTICLE 3
REPRESENTATIONS AND COVENANTS OF THE COMPANY
3.1 Representations and Warranties. The Company hereby represents and warrants to Holder that all Shares which may be issued upon the exercise of the purchase right represented by this Warrant shall, upon issuance and payment of the Warrant Price therefore in accordance with Section 1.2 (or Section 1.3) hereof, be duly authorized, validly issued, fully paid and non-assessable, and free of any liens and encumbrances except for restrictions on transfer provided for herein or under applicable federal and state securities laws.
3.2 Reservation of Stock. The Company hereby represents and warrants to Holder that sufficient shares of the Company’s Common Stock have been reserved and are available for issuance from its authorized and unissued shares of Common Stock for the purpose of effecting the exercise of this Warrant, and such shares will remain available at all times until the date this Warrant has been exercised in full or, if earlier, the Expiration Date.
3.3 Capitalization. In addition to the 1,559,674 shares of Common Stock issuable at an exercise price of $.01 per share under this Warrant and the other warrants being concurrently issued as a result of the transfer of the Prior Warrant, upon the issuance of this Warrant the Company will have (i) 7,043,105 shares of Common Stock issued and outstanding, (ii) 53,919 restricted stock units outstanding, (iii) 266,000 shares of Common Stock issuable under options with an exercise price of $18.57 per share and (iv) 12,985,047 shares of Common Stock issuable at an exercise price of $.001 per share under additional warrants being issued concurrently with this Warrant.
ARTICLE 4
INVESTMENT REPRESENTATIONS AND COVENANTS OF HOLDER
With respect to the acquisition of this Warrant and any of the Shares, Holder hereby represents and warrants to, and agrees with, the Company as follows:
4.1 Purchase Entirely for Own Account. This Warrant is issued to Holder in reliance upon Holder’s representation to the Company that this Warrant and the Shares will be acquired for investment for Holder’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof other than to a Permitted Transferee, and that Holder has no present intention of selling, granting any participation in, or otherwise distributing the same other than to a Permitted Transferee. By executing this Warrant, Holder further represents that Holder does not have any contract, undertaking, agreement or arrangement with any person, other than a Permitted Transferee, to sell, transfer or grant participations to such person or to any third person with respect to any of the Shares.
4.2 Reliance upon Holder’s Representations. Holder understands that this Warrant and the Shares are not registered under the Act on the ground that the issuance of such securities is exempt from registration under the Act, and that the Company’s reliance on such exemption is predicated on Holder’s representations set forth herein.
4.3 Accredited Investor Status. Holder represents to the Company that Holder is an Accredited Investor (as defined in the Act).
4.4 Restricted Securities. Holder understands that this Warrant and the Shares are “restricted securities” under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such federal securities laws and applicable regulations such securities may be resold without registration under the Act only in certain limited circumstances.
ARTICLE 5
MISCELLANEOUS
5.1 Term; Exercise Upon Expiration. Subject to the terms of this Warrant, this Warrant is exercisable in whole or in part, at any time and from time to time commencing on the date hereof and ending on or before the Expiration Date set forth above. The Company agrees that Holder may terminate this Warrant, upon written notice to the Company, at any time in its sole discretion.
5.2 Legends. This Warrant and the Shares shall be imprinted with a legend in substantially the following form:
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY APPLICABLE STATE OR FOREIGN SECURITIES LAWS, AND, EXCEPT AND PURSUANT TO THE PROVISIONS OF ARTICLE 5 BELOW, MAY ONLY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED (I) PURSUANT TO AN EFFECTIVE REGISTRATION THEREOF UNDER THE ACT AND ANY APPLICABLE STATE OR FOREIGN SECURITIES LAWS, OR (II) IN A TRANSACTION THAT IS EXEMPT FROM THE REGISTRATION REQUIREMENTS UNDER THE ACT (INCLUDING, BUT NOT LIMITED TO RULE 144) AND ANY APPLICABLE STATE AND FOREIGN SECURITIES LAWS AND, IN THE CASE OF THIS CLAUSE (II) IF THE COMPANY REQUESTS IN A TRANSACTION OTHER THAN A PERMITTED TRANSFER, AN OPINION SATISFACTORY TO THE COMPANY TO SUCH EFFECT HAS BEEN DELIVERED TO THE COMPANY.
5.3 Compliance with Securities Laws on Transfer. This Warrant and the Shares issuable upon exercise of this Warrant may not be transferred or assigned in whole or in part without (i) compliance with applicable federal and state securities laws by the transferor and the transferee, and (ii) if requested by Company, other than on a Permitted Transfer of this Warrant, an opinion of counsel, reasonably satisfactory to Company, to the effect that such transfer or assignment is in compliance with applicable federal and state securities laws. The Company may issue stop transfer instructions to its transfer agent in connection with the restrictions in this Section 5.3.
5.4 Transfer Procedure. Subject to the provisions of Section 5.3, (x) a Holder may transfer all or part of this Warrant to its affiliates, and (y) a Holder may transfer all or part of this Warrant to a Participant or an Eligible Assignee (any transfer described in clauses (x) or (y), a “Permitted Transfer”) and any such transferee (as applicable, a “Permitted Transferee”) shall then be entitled to all the rights and bound by all of the obligations of Holder under this Warrant and any related agreements, and the Company shall cooperate fully in ensuring that any stock issued upon exercise of this Warrant is issued in the name of the affiliate that exercises this Warrant. The terms and conditions of this Warrant shall inure to the benefit of, and be binding upon, the Company and the holder hereof and its respective permitted successors and assigns. Any transferee shall be bound by the obligations and restrictions of this Warrant as if such transferee was the original holder hereof.
5.5 Notices. All notices and other communications from the Company to Holder, or vice versa, shall be deemed delivered and effective when given personally or mailed by first-class registered or certified mail, postage prepaid, or sent via a nationally recognized overnight courier service, fee prepaid, or on the first business day after transmission by electronic mail, at such address or electronic mail address as may have been furnished to the Company or Holder, as the case may be, in writing by the Company or such Holder from time to time. Effective upon the receipt of the executed Warrant, all notices to Holder shall be addressed as follows until the Company receives notice of a change of address in connection with a transfer or otherwise:
[TCW]
Attn: Mark Gertzof
227 West Monroe Street, Suite 3225
Chicago, IL 60606
E-mail: mark.gertzof@tcw.com
All notices to the Company shall be addressed as follows:
School Specialty, Inc.
Attn: Kevin Baehler
W6316 Design Drive
Greenville, Wisconsin 54942
E-mail: kevin.baehler@schoolspecialty.com
5.6 Amendments; Waiver. This Warrant and any term hereof may be amended, changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such amendment, change, waiver, discharge or termination is sought.
5.7 Attorneys’ Fees. In the event of any dispute between the parties concerning the terms and provisions of this Warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs reasonably incurred in such dispute, including reasonable and documented attorneys’ fees.
5.8 Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to its principles regarding conflicts of law.
5.9 Rights as a Stockholder. No holder of this Warrant, as such, shall be entitled to vote or receive dividends or be deemed the holder of Shares or any other securities of the Company which may at any time be issuable upon the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon Holder, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders 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 as provided herein.
5.10 Counterparts; Signatures. This Warrant may be executed in counterparts, all of which together shall constitute one and the same agreement. Any signature page delivered electronically or by facsimile shall be binding to the same extent as an original signature page with regards to any agreement subject to the terms hereof or any amendment thereto.
5.11 Purchase Rights. In addition to any adjustments pursuant to Article 2 above, if at any time the Company grants, issues or sells any capital stock, options, convertible securities or rights to purchase capital stock, options, convertible securities, or other property pro rata to the then record holders of Common Stock of the Company (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the same terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder would have acquired if the Holder had held the number of Shares acquirable upon complete exercise of this Warrant immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.
5.12 Issuance Date. Delivery of this Warrant is deemed to be in compliance with Section B of the Fifth Amendment Fee Letter, dated as of, December 2, 2019, by and among the Company, the other obligors party thereto and TCW Asset Management Company LLC, as amended, restated, supplemented or otherwise modified from time to time.
[signature on following page]
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SCHOOL SPECIALTY, INC. | |
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By: |
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Name: Kevin L. Baehler | |
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Title: Chief Financial Officer | |
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Accepted and Agreed: |
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[TCW] | |
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By: |
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Name: | |
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Title: | |
APPENDIX I
NOTICE OF EXERCISE
Reference is made to that certain Warrant to Purchase Common Stock, dated May 29, 2020, issued by School Specialty, Inc. to [TCW] (the “Warrant”).
1. The undersigned hereby elects to purchase shares of the Common Stock of School Specialty, Inc. pursuant to the terms of the Warrant. [As the Warrant is not fully exercised and has not expired, the Company will issue to Holder a new warrant representing the Shares not acquired. —IF APPLICABLE AND IF THE ELECTION NOT TO RECEIVE A NEW WARRANT DESCRIBED IN THE FIRST SENTENCE OF PARAGRAPH 3 DOES NOT APPLY]
2. [IF APPLICABLE - The undersigned elects to make a Cashless Exercise (as such term is defined in the Warrant) in the manner detailed in Section 1.3 of the Warrant.]
3. [The Warrant shall remain in full force and effect with respect to any Shares that remain exercisable under the Warrant following the exercise evidenced by this Notice of Exercise. - IF APPLICABLE AND IF THE ELECTION TO RECEIVE A NEW WARRANT DESCRIBED IN THE LAST SENTENCE OF PARAGRAPH 1 DOES NOT APPLY.] The Warrant shall [also] apply to the shares receivable pursuant to this Notice of Exercise to the extent expressly set forth in the provisions of the Warrant.
4. Please issue the shares receivable pursuant to this Notice of Exercise [(taking into account the Cashless Exercise)] in the name of the undersigned; payment for any fractional shares owed pursuant to Section 2.1 of the Warrant should also be paid to the undersigned.
5. The undersigned represents it is acquiring the shares solely for its own account and not as a nominee for any other party and not with a view toward the resale or distribution thereof except in compliance with applicable securities laws.
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[HOLDER] |
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(Signature) |
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(Name and Title) |
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Dated: , 20 |
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Form of Warrant to Purchase Common Stock (New Warrants)
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY APPLICABLE STATE OR FOREIGN SECURITIES LAWS, AND, EXCEPT AND PURSUANT TO THE PROVISIONS OF ARTICLE 5 BELOW, MAY ONLY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED (I) PURSUANT TO AN EFFECTIVE REGISTRATION THEREOF UNDER THE ACT AND ANY APPLICABLE STATE OR FOREIGN SECURITIES LAWS, OR (II) IN A TRANSACTION THAT IS EXEMPT FROM THE REGISTRATION REQUIREMENTS UNDER THE ACT (INCLUDING, BUT NOT LIMITED TO RULE 144) AND ANY APPLICABLE STATE AND FOREIGN SECURITIES LAWS AND, IN THE CASE OF THIS CLAUSE (II) IF THE COMPANY REQUESTS IN A TRANSACTION OTHER THAN A PERMITTED TRANSFER, AN OPINION SATISFACTORY TO THE COMPANY TO SUCH EFFECT HAS BEEN DELIVERED TO THE COMPANY.
WARRANT TO PURCHASE COMMON STOCK
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Company: |
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SCHOOL SPECIALTY, INC., a Delaware corporation |
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Number of Shares |
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[ ] |
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Class of Stock: |
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Common Stock |
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Warrant Price: |
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$0.001 per share |
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Issue Date: |
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May 29, 2020 |
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Expiration Date: |
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May 29, 2023 |
THIS WARRANT TO PURCHASE STOCK (THIS “WARRANT”) CERTIFIES THAT, for good and valuable consideration, the receipt of which is hereby acknowledged, [TCW] (“Holder”), is entitled to purchase the number of fully paid and non-assessable shares of the common stock, par value $0.001 per share (the “Common Stock”) of SCHOOL SPECIALTY, INC. (the “Company”) at the Warrant Price set forth above and as adjusted pursuant to the terms of this Warrant, subject to the provisions and upon the terms and conditions set forth in this Warrant. Capitalized terms used herein but not specifically defined herein shall have the meanings ascribed to them in that certain Loan Agreement, dated as of April 7, 2017 (as amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”), by and among the Company, the financial institutions from time to time party thereto (collectively, the “Lenders”), TCW Asset Management Company LLC, as Agent for the Lenders, and the other parties thereto.
ARTICLE 1
EXERCISE
1.1 Exercise. This Warrant shall be exercisable for [ ] shares of Common Stock (the “Shares”) (subject to adjustment as provided herein) in whole or in part at any time until the Expiration Date.
1.2 Method of Exercise. Holder may exercise any portion of this Warrant that is exercisable by delivering a duly completed and executed Notice of Exercise in substantially the form attached as Appendix I to the principal office of the Company. Unless Holder is exercising the cashless exercise right set forth in Section 1.3, Holder shall also deliver to the Company a check, wire transfer (to an account designated in writing by the Company), or other form of payment acceptable to the Company for the aggregate Warrant Price for the Shares being purchased.
1.3 Cashless Exercise Right. In lieu of exercising this Warrant as specified in Section 1.2, Holder may from time to time, in its sole discretion, exercise this Warrant in whole or in part as to the portion of the Warrant that is exercisable and, in lieu of making the cash payment otherwise contemplated to be made to the Company upon such exercise for the aggregate Warrant Price pursuant to Section 1.2, elect instead to receive upon such exercise the “net number” of Shares determined according to the following formula (a “Cashless Exercise”):
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Where:
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The number of Shares to be issued to Holder |
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The number of Shares being exercised under this Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being canceled (at the date of such calculation) |
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The fair market value of one Share (at the date of such calculation) |
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The Warrant Price per share (as adjusted to the date of such calculation) |
1.4 Calculation of FMV. For purposes of the calculation above, the “fair market value” of one Share shall be the average for the five trading days immediately prior to the date of determination thereof of the last reported sale price regular way on each such day, or, in the case no such sale takes place on any such day, the average of the reported closing bid and asked prices regular way of the shares of Common Stock on such day, in each case as quoted on the New York Stock Exchange, as reported by Bloomberg Markets, or such other principal securities exchange or inter-dealer quotation system on which the shares of Common Stock are then traded (including, if applicable, the Financial Industry Regulatory Authority OTC Bulletin Board electronic inter-dealer quotation system or the OTC Markets Group Inc. electronic inter-dealer quotation system, including OTCQX, OTCQB and OTC Pink). If at any time the Common Stock is not listed on any securities exchange or traded on inter-dealer quotation system, the “Fair Market Value” of the Common Stock shall be the fair market value per share as determined jointly by the Holder and Board of Directors of the Company; provided that if the parties have not jointly agreed on a fair market value within 20 days then the Holder and the Company agree to retain a third party appraiser to determine such fair market value (with the costs of the appraiser to be divided equally between the Holder and the Company).
1.5 Delivery of Shares and New Warrant. Within five (5) business days after Holder exercises this Warrant in the manner set forth in Section 1.2 or Section 1.3 above, the Company shall deliver to Holder the Shares so acquired, provided that such Shares shall be deemed delivered upon the Company’s delivery of evidence of a book-entry or similar position through The Depository Trust & Closing Corporation or any other depository or similar functionary, credited to an account for the benefit of Holder. If this Warrant has not been fully exercised and has not expired, then unless otherwise set forth in the Notice of Exercise a new warrant representing the Shares not so acquired shall be issued to Holder.
1.6 Treatment of Warrant at Acquisition. In the event of an Acquisition, either (a) Holder shall exercise or convert this Warrant in full (or shall be deemed to so convert pursuant to the immediately following sentence) with respect to all remaining Shares for which the Warrant is then exercisable and such exercise or conversion will be deemed effective immediately prior to the consummation of such Acquisition or (b) if Holder elects in writing not to exercise or convert the Warrant, this Warrant will expire upon the consummation of such Acquisition. The Company shall provide Holder with written notice of the foregoing (together with such reasonable information as Holder may request in connection with such contemplated Acquisition giving rise to such notice), which is to be delivered to Holder not less than ten (10) days prior to the closing of the proposed Acquisition and, unless the Company receives a notice in writing from Holder that it elects to have the unexercised portion of the Warrant expire, then if the Acquisition involves a price per share of Common Stock that exceeds the Warrant Price the unexercised portion of the Warrant shall be deemed to be automatically exercised pursuant to Section 1.3 immediately prior to the Acquisition.
For purposes of this Warrant, “Acquisition” shall mean: (i) the acquisition of the Company by another entity by means of any transaction or series of related transactions to which the Company is a party (including, without limitation, any stock acquisition, reorganization, merger or consolidation, but excluding any sale of stock for capital raising purposes and any transaction effected primarily for purposes of changing the Company’s jurisdiction of incorporation) other than a transaction or series of related transactions in which the holders of the voting securities of
the Company outstanding immediately prior to such transaction or series of related transactions retain, immediately after such transaction or series of transactions, at least a majority of the total voting power represented by the outstanding voting securities of the Company or such other surviving or resulting entity (or if the Company or such other surviving or resulting entity is a wholly-owned subsidiary immediately following such acquisition, its parent), or (ii) a sale, lease or other disposition of all or substantially all of the assets of the Company and its subsidiaries taken as a whole by means of any transaction or series of related transactions, except where such sale, lease or other disposition is to a wholly-owned subsidiary or affiliate of the Company.
1.7 Replacement of Warrant. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction of this Warrant, upon delivery of an indemnity agreement reasonably satisfactory in form, substance and amount to the Company or, in the case of mutilation, upon surrender and cancellation of this Warrant, the Company at its expense shall, within a reasonable period of time, execute and deliver to Holder, in lieu of this Warrant, a new warrant of like tenor and amount.
ARTICLE 2
ADJUSTMENTS TO THE SHARES AND NOTIFICATION OF CERTAIN EVENTS
2.1 Fractional Shares. No fractional Shares shall be issuable upon exercise of this Warrant and the number of Shares to be issued shall be rounded down to the nearest whole Share. If a fractional share interest arises upon any exercise of this Warrant, the Company shall eliminate such fractional share interest by paying Holder an amount computed by multiplying the fractional interest by the fair market value, calculated as provided in Section 1.4 above, of a full Share.
2.2 Adjustments. Subject to the expiration of this Warrant pursuant to Section 5.1, the number and kind of shares purchasable hereunder and the Warrant Price therefor are subject to adjustment from time to time, as follows:
2.2.1 Merger or Reorganization. If at any time there shall be any reorganization, recapitalization, merger or consolidation (a “Reorganization”) involving the Company (other than an Acquisition which is subject to the provisions of Section 1.6) in which shares of the Company’s stock are converted into or exchanged for securities, cash or other property, then, as a part of such Reorganization, lawful provision shall be made so that the Holder shall thereafter be entitled to receive upon exercise of this Warrant, the kind and amount of securities, cash or other property of the successor corporation resulting from such Reorganization, equivalent in value to that which a holder of the Shares deliverable upon exercise of this Warrant would have been entitled in such Reorganization if the right to purchase the Shares hereunder had been exercised immediately prior to such Reorganization. In any such case, appropriate adjustment (as determined in good faith by the Board of Directors of the successor corporation) shall be made in the application of the provisions of this Warrant with respect to the rights and interests of the Holder after such Reorganization to the end that the provisions of this Warrant shall be applicable after the event, as near as reasonably may be, in relation to any shares or other securities deliverable after that event upon the exercise of this Warrant.
2.2.2 Reclassification of Shares. If the securities issuable upon exercise of this Warrant are changed into the same or a different number of securities of any other class or classes by reclassification, capital reorganization or otherwise (other than as otherwise provided for herein) (a “Reclassification”), then, in any such event, in lieu of the number of Shares which the Holder would otherwise have been entitled to receive, the Holder shall have the right thereafter to exercise this Warrant for a number of shares of such other class or classes of stock that a holder of the number of securities deliverable upon exercise of this Warrant immediately before that change would have been entitled to receive in such Reclassification (at the same aggregate Warrant Price as would have applied prior to such Reclassification), all subject to further adjustment as provided herein with respect to such other shares.
2.2.3 Subdivisions and Combinations. In the event that the outstanding shares of the Company’s Common Stock are subdivided (by stock split, by payment of a stock dividend or otherwise) into a greater number of shares of such securities, the number of Shares issuable upon exercise of the rights under this Warrant immediately prior to such subdivision shall, concurrently with the effectiveness of such subdivision, be proportionately increased, and the Warrant Price shall be proportionately decreased, and in the event that
the outstanding shares of Common Stock are combined (by reclassification or otherwise) into a lesser number of shares of such securities, the number of Shares issuable upon exercise of the rights under this Warrant immediately prior to such combination shall, concurrently with the effectiveness of such combination, be proportionately decreased, and the Warrant Price shall be proportionately increased.
2.2.4 Dividends. Subject to the provisions of this Section 2.2, if the Company shall, at any time or from time to time after the date hereof, make or declare, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or any other distribution payable in securities of the Company (other than a dividend or distribution of shares of Common Stock in respect of outstanding shares of Common Stock described in Section 2.2.3), cash or other property, then, and in each such event, provision shall be made so that the Holder shall receive upon exercise of the Warrant, in addition to the number of Shares receivable thereupon, the kind and amount of securities of the Company, cash or other property which the Holder would have been entitled to receive had the Warrant been exercised in full into Shares on the date of such event and had the Holder thereafter, during the period from the date of such event to and including the date of exercise, retained such securities, cash or other property receivable by them as aforesaid during such period, giving application to all adjustments called for during such period under this Article 2 with respect to the rights of the Holder; provided, that no such provision shall be made if the Holder receives, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of such securities, cash or other property in an amount equal to the amount of such securities, cash or other property as the Holder would have received if the Warrant had been exercised in full into Shares on the date of such event.
2.2.5 No Impairment. The Company shall not, by amendment of its charter documents or through any consolidation, merger, reorganization, transfer of assets, 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 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 against dilution or other impairment.
2.2.6 Notice of Adjustments. Upon any adjustment in accordance with this Section 2.2, the Company shall give notice thereof to the Holder, which notice shall state the event giving rise to the adjustment, the Warrant Price as adjusted and the number of securities or other property purchasable upon the exercise of the rights under this Warrant, setting forth in reasonable detail the method of calculation of each. The Company shall, upon the written request of any Holder, furnish or cause to be furnished to such Holder a certificate setting forth (i) such adjustments, (ii) the Warrant Price at the time in effect and (iii) the number of securities and the amount, if any, of other property that at the time would be received upon exercise of this Warrant.
2.3 Notification of Certain Events. Prior to the Expiration Date, in the event that the Company shall authorize:
2.3.1 the issuance of any dividend or other distribution on the capital stock of the Company, whether in cash, property, stock or other securities; or
2.3.2 the voluntary liquidation, dissolution or winding up of the Company,
the Company shall send to the Holder at least ten (10) days prior written notice of the date on which a record shall be taken for any such dividend or distribution specified in clause 2.3.1 or the expected effective date of any such other event specified in clause 2.3.2. The notice provisions set forth in this section may be shortened or waived prospectively or retrospectively by the consent of the Holder.
ARTICLE 3
REPRESENTATIONS AND COVENANTS OF THE COMPANY
3.1 Representations and Warranties. The Company hereby represents and warrants to Holder that all Shares which may be issued upon the exercise of the purchase right represented by this Warrant shall, upon issuance and payment of the Warrant Price therefore in accordance with Section 1.2 (or Section 1.3) hereof, be duly authorized, validly issued, fully paid and non-assessable, and free of any liens and encumbrances except for restrictions on transfer provided for herein or under applicable federal and state securities laws.
3.2 Reservation of Stock. The Company hereby represents and warrants to Holder that sufficient shares of the Company’s Common Stock have been reserved and are available for issuance from its authorized and unissued shares of Common Stock for the purpose of effecting the exercise of this Warrant, and such shares will remain available at all times until the date this Warrant has been exercised in full or, if earlier, the Expiration Date.
3.3 Capitalization. In addition to the 12,985,047 shares of Common Stock issuable at an exercise price of $.001 per share under this Warrant and additional warrants being issued concurrently with this Warrant, upon the issuance of this Warrant, the Company will have (i) 7,043,105 shares of Common Stock issued and outstanding, (ii) 53,919 restricted stock units outstanding, 1,559,674 shares of Common Stock issuable under warrants at an exercise price of $.01 per share, (iii) 266,000 shares of Common Stock issuable under options with an exercise price of $18.57 per share and (iv) 1,559,674 shares of Common Stock issuable at an exercise price of $.01 per share under additional warrants being issued concurrently with this Warrant.
ARTICLE 4
INVESTMENT REPRESENTATIONS AND COVENANTS OF HOLDER
With respect to the acquisition of this Warrant and any of the Shares, Holder hereby represents and warrants to, and agrees with, the Company as follows:
4.1 Purchase Entirely for Own Account. This Warrant is issued to Holder in reliance upon Holder’s representation to the Company that this Warrant and the Shares will be acquired for investment for Holder’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof other than to a Permitted Transferee, and that Holder has no present intention of selling, granting any participation in, or otherwise distributing the same other than to a Permitted Transferee. By executing this Warrant, Holder further represents that Holder does not have any contract, undertaking, agreement or arrangement with any person, other than a Permitted Transferee, to sell, transfer or grant participations to such person or to any third person with respect to any of the Shares.
4.2 Reliance upon Holder’s Representations. Holder understands that this Warrant and the Shares are not registered under the Act on the ground that the issuance of such securities is exempt from registration under the Act, and that the Company’s reliance on such exemption is predicated on Holder’s representations set forth herein.
4.3 Accredited Investor Status. Holder represents to the Company that Holder is an Accredited Investor (as defined in the Act).
4.4 Restricted Securities. Holder understands that this Warrant and the Shares are “restricted securities” under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such federal securities laws and applicable regulations such securities may be resold without registration under the Act only in certain limited circumstances.
ARTICLE 5
MISCELLANEOUS
5.1 Term; Exercise Upon Expiration. Subject to the terms of this Warrant, this Warrant is exercisable in whole or in part, at any time and from time to time commencing on the date hereof and ending on or before the
Expiration Date set forth above. The Company agrees that Holder may terminate this Warrant, upon written notice to the Company, at any time in its sole discretion.
5.2 Legends. This Warrant and the Shares shall be imprinted with a legend in substantially the following form:
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY APPLICABLE STATE OR FOREIGN SECURITIES LAWS, AND, EXCEPT AND PURSUANT TO THE PROVISIONS OF ARTICLE 5 BELOW, MAY ONLY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED (I) PURSUANT TO AN EFFECTIVE REGISTRATION THEREOF UNDER THE ACT AND ANY APPLICABLE STATE OR FOREIGN SECURITIES LAWS, OR (II) IN A TRANSACTION THAT IS EXEMPT FROM THE REGISTRATION REQUIREMENTS UNDER THE ACT (INCLUDING, BUT NOT LIMITED TO RULE 144) AND ANY APPLICABLE STATE AND FOREIGN SECURITIES LAWS AND, IN THE CASE OF THIS CLAUSE (II) IF THE COMPANY REQUESTS IN A TRANSACTION OTHER THAN A PERMITTED TRANSFER, AN OPINION SATISFACTORY TO THE COMPANY TO SUCH EFFECT HAS BEEN DELIVERED TO THE COMPANY.
5.3 Compliance with Securities Laws on Transfer. This Warrant and the Shares issuable upon exercise of this Warrant may not be transferred or assigned in whole or in part without (i) compliance with applicable federal and state securities laws by the transferor and the transferee, and (ii) if requested by Company, other than on a Permitted Transfer of this Warrant, an opinion of counsel, reasonably satisfactory to Company, to the effect that such transfer or assignment is in compliance with applicable federal and state securities laws. The Company may issue stop transfer instructions to its transfer agent in connection with the restrictions in this Section 5.3.
5.4 Transfer Procedure. Subject to the provisions of Section 5.3, (x) a Holder may transfer all or part of this Warrant to its affiliates, and (y) a Holder may transfer all or part of this Warrant to a Participant or an Eligible Assignee (any transfer described in clauses (x) or (y), a “Permitted Transfer”) and any such transferee (as applicable, a “Permitted Transferee”) shall then be entitled to all the rights and bound by all of the obligations of Holder under this Warrant and any related agreements, and the Company shall cooperate fully in ensuring that any stock issued upon exercise of this Warrant is issued in the name of the affiliate that exercises this Warrant. The terms and conditions of this Warrant shall inure to the benefit of, and be binding upon, the Company and the holder hereof and its respective permitted successors and assigns. Any transferee shall be bound by the obligations and restrictions of this Warrant as if such transferee was the original holder hereof.
5.5 Notices. All notices and other communications from the Company to Holder, or vice versa, shall be deemed delivered and effective when given personally or mailed by first-class registered or certified mail, postage prepaid, or sent via a nationally recognized overnight courier service, fee prepaid, or on the first business day after transmission by electronic mail, at such address or electronic mail address as may have been furnished to the Company or Holder, as the case may be, in writing by the Company or such Holder from time to time. Effective upon the receipt of the executed Warrant, all notices to Holder shall be addressed as follows until the Company receives notice of a change of address in connection with a transfer or otherwise:
[TCW]
Attn: Mark Gertzof
227 West Monroe Street, Suite 3225
Chicago, IL 60606
E-mail: mark.gertzof@tcw.com
All notices to the Company shall be addressed as follows:
School Specialty, Inc.
Attn: Kevin Baehler
W6316 Design Drive
Greenville, Wisconsin 54942
E-mail: kevin.baehler@schoolspecialty.com
5.6 Amendments; Waiver. This Warrant and any term hereof may be amended, changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such amendment, change, waiver, discharge or termination is sought.
5.7 Attorneys’ Fees. In the event of any dispute between the parties concerning the terms and provisions of this Warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs reasonably incurred in such dispute, including reasonable and documented attorneys’ fees.
5.8 Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to its principles regarding conflicts of law.
5.9 Rights as a Stockholder. No holder of this Warrant, as such, shall be entitled to vote or receive dividends or be deemed the holder of Shares or any other securities of the Company which may at any time be issuable upon the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon Holder, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders 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 as provided herein.
5.10 Counterparts; Signatures. This Warrant may be executed in counterparts, all of which together shall constitute one and the same agreement. Any signature page delivered electronically or by facsimile shall be binding to the same extent as an original signature page with regards to any agreement subject to the terms hereof or any amendment thereto.
5.11 Purchase Rights. In addition to any adjustments pursuant to Article 2 above, if at any time the Company grants, issues or sells any capital stock, options, convertible securities or rights to purchase capital stock, options, convertible securities, or other property pro rata to the then record holders of Common Stock of the Company (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the same terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder would have acquired if the Holder had held the number of Shares acquirable upon complete exercise of this Warrant immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.
5.12 Issuance Date. Delivery of this Warrant is deemed to be in compliance with Section B of the Ninth Amendment Fee Letter, dated as of, May 13, 2020, by and among the Company, the other obligors party thereto and TCW Asset Management Company LLC, as amended, restated, supplemented or otherwise modified from time to time.
[signature on following page]
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SCHOOL SPECIALTY, INC. | |
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By: |
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Name: Kevin L. Baehler | |
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Title: Chief Financial Officer | |
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Accepted and Agreed: |
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[TCW] | |
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By: |
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Name: | |
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Title: | |
APPENDIX I
NOTICE OF EXERCISE
Reference is made to that certain Warrant to Purchase Common Stock, dated May 29, 2020, issued by School Specialty, Inc. to [TCW] (the “Warrant”).
1. The undersigned hereby elects to purchase shares of the Common Stock of School Specialty, Inc. pursuant to the terms of the Warrant. [As the Warrant is not fully exercised and has not expired, the Company will issue to Holder a new warrant representing the Shares not acquired. —IF APPLICABLE AND IF THE ELECTION NOT TO RECEIVE A NEW WARRANT DESCRIBED IN THE FIRST SENTENCE OF PARAGRAPH 3 DOES NOT APPLY]
2. [IF APPLICABLE - The undersigned elects to make a Cashless Exercise (as such term is defined in the Warrant) in the manner detailed in Section 1.3 of the Warrant.]
3. [The Warrant shall remain in full force and effect with respect to any Shares that remain exercisable under the Warrant following the exercise evidenced by this Notice of Exercise. - IF APPLICABLE AND IF THE ELECTION TO RECEIVE A NEW WARRANT DESCRIBED IN THE LAST SENTENCE OF PARAGRAPH 1 DOES NOT APPLY.] The Warrant shall [also] apply to the shares receivable pursuant to this Notice of Exercise to the extent expressly set forth in the provisions of the Warrant.
4. Please issue the shares receivable pursuant to this Notice of Exercise [(taking into account the Cashless Exercise)] in the name of the undersigned; payment for any fractional shares owed pursuant to Section 2.1 of the Warrant should also be paid to the undersigned.
5. The undersigned represents it is acquiring the shares solely for its own account and not as a nominee for any other party and not with a view toward the resale or distribution thereof except in compliance with applicable securities laws.
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[HOLDER] |
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(Signature) |
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(Name and Title) |
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Dated: , 20 |
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