PHOENIX PRESCHOOL HOLDINGS, INC.
AND
DUKE & CO., INC.
AND
BRIARWOOD INVESTMENT COUNSEL
UNDERWRITERS'
WARRANT AGREEMENT
UNDERWRITERS' WARRANT AGREEMENT dated as of ______________,
1997 by and between PHOENIX PRESCHOOL HOLDINGS, INC. (the "Company") and DUKE &
CO., INC. and BRIARWOOD INVESTMENT COUNSEL (the "Underwriters").
WITNESSETH:
WHEREAS, the Company proposes to issue to the Underwriters
warrants (the "Underwriters' Warrants") to purchase up to 127,500 shares of the
Company's common stock, $.10 par value per share (the "Common Stock") and/or up
to 127,500 Redeemable Common Stock Purchase Warrants (the "Redeemable Warrants")
each exercisable to purchase one share of Common Stock.
WHEREAS, the Underwriters have agreed, pursuant to the
underwriting agreement (the "Underwriting Agreement") dated _____________, 1997,
by and between the Underwriters and the Company, to act as the underwriters in
connection with the Company's proposed initial public offering (the "Initial
Public Offering") of 1,275,000 shares of Common Stock and 1,275,000 Redeemable
Warrants (the "Offering Securities"), such Offering Securities being; identical
to the securities issuable upon exercise of the Underwriters' Warrants (the
"Securities"); and
WHEREAS, the Underwriters' Warrants to be issued pursuant to
this Agreement will be issued on the First Closing Date (as such term is defined
in the Underwriting Agreement) by the Company to the Underwriters in
consideration for, and as part of, the Underwriters' compensation in connection
with the Underwriters acting as the underwriters pursuant to the Underwriting
Agreement;
1
NOW, THEREFORE, in consideration of the promises, the payment
by the Underwriters to the Company of Ten Dollars ($10.00), the agreements
herein set forth and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Grant. The Holder (as defined in Section 3 below) is hereby
granted the right to purchase, at any time from ____________, 1998 until 5:00
p.m., New York time, on __________, 2002, an aggregate of up to 127,500 shares
of Common Stock and/or 127,500 Redeemable Warrants, at an initial purchase price
(subject to adjustment as provided in Section 8 hereof) of $5.10 per share of
Common Stock and $.15 per Redeemable Warrant (120% of the Initial Public
Offering price per Offering Security), subject to the terms and conditions of
this Agreement. The Securities issuable upon exercise of the Underwriters'
Warrants are sometimes referred to herein as the "Underwriters' Securities."
2. Warrant Certificates. The warrant certificate (the
"Underwriters' Warrant Certificate") to be delivered pursuant to this Agreement
shall be in the form set forth in Exhibit A attached hereto and made a part
hereof, with such appropriate insertions, omissions, substitutions, and other
variations as required or permitted by this Agreement.
3. Exercise of Underwriters' Warrants. The Underwriters'
Warrants are exercisable during the term set forth in Section 1 hereof payable
by certified or cashier's check or money order in lawful money of the United
States. Upon surrender of an Underwriter's Warrant Certificate with the annexed
Form of Election to Purchase duly executed, together with payment of the
Purchase Price (as defined in Section 6 hereof) for the Underwriters' Securities
(and such other amounts, if any, arising pursuant to Section 4 hereof) at the
Company's principal
2
office in New York located at 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
the registered holder of an Underwriters' Warrant Certificate ("Holder" or
"Holders") shall be entitled to receive a certificate or certificates for the
Underwriters' Securities so purchased. The purchase rights represented by each
Underwriters' Warrant Certificate are exercisable at the option of the Holder or
Holders thereof, in whole or in part as to Underwriters' Securities. The
Underwriters' Warrants may be exercised to purchase all or any part of the
Underwriters' Securities represented thereby. In the case of the purchase of
less than all the Underwriters' Securities purchasable on the exercise of the
Underwriters' Warrants represented by an Underwriters' Warrant Certificate, the
Company shall cancel the Underwriters' Warrant Certificate represented thereby
upon the surrender thereof and shall execute and deliver a new Underwriters'
Warrant Certificate of like tenor for the balance of the Underwriters'
Securities purchasable thereunder.
4. Issuance of Certificates. Upon the exercise of the
Underwriters' Warrants and payment of the Purchase Price therefor, the issuance
of certificates representing the Underwriters Securities or other securities,
properties or rights underlying such Underwriters' Warrants, shall be made
forthwith (and in any event within five (5) business days thereafter) without
further charge to the Holder thereof, and such certificates shall (subject to
the provisions of Sections 5 and 7 hereof) be issued in the name of, or in such
names as may be directed by, the Holder thereof, provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any such certificates in a
name other than that of the Holder, and the Company shall not be required to
issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction
3
of the Company that such tax has been paid. The Underwriters' Warrant
Certificates and the certificates representing the Underwriters Securities or
other securities, property or rights (if such property or rights are represented
by certificates) shall be executed on behalf of the Company by the manual or
facsimile signature of the then present Chairman or Vice Chairman of the Board
of Directors or President or Vice President of the Company, attested to by the
manual or facsimile signature of the then present Secretary or Assistant
Secretary or Treasurer or Assistant Treasurer of the Company. Underwriters'
Warrant Certificates shall be dated the date of issuance thereof by the Company
upon initial issuance, transfer or exchange.
5. Restriction On Transfer of Underwriters' Warrants. The
Holder of an Underwriters' Warrant Certificate (and its Permitted Transferee, as
defined below), by its acceptance thereof, covenants and agrees that the
Underwriters' Warrants are being acquired as an investment and not with a view
to the distribution thereof; that the Underwriters' Warrants may be sold,
transferred, assigned, hypothecated or otherwise disposed of, in whole or in
part, to any person (a "Permitted Transferee"), provided such transfer,
assignment, hypothecation or other disposition is made in accordance with the
provisions of the Securities Act of 1933, as amended (the "Act"); and provided,
further, that until ____________, 1998 (one year following the effective date of
the Initial Public Offering), only officers and partners of the Underwriters, or
any Initial Public Offering selling group member and their respective officers
and partners, shall be Permitted Transferees.
4
6. Purchase Price.
(a) Initial and Adjusted Purchase Price. Except as
otherwise provided in Section 8 hereof, the initial purchase price of the
Underwriters' Securities shall be $5.10 per share of Common Stock and $.15 per
Redeemable Warrant. The adjusted purchase price shall be the price which shall
result from time to time from any and all adjustments of the initial purchase
price in accordance with the provisions of Section 8 hereof.
(b) Purchase Price. The term "Purchase Price" herein
shall mean the initial purchase price or the adjusted purchase price, depending
upon the context.
7. Registration Rights.
(a) Registration Under the Securities Act of 1933.
The Underwriters' Warrants have not been registered under the Act. The
Underwriters' Warrant Certificates shall bear the following legend:
The securities represented by this certificate have
not been registered under the Securities Act of 1933,
as amended (the "Act"), and may not be offered for
sale or sold except pursuant to (i) an effective
registration statement under the Act, or (ii) an
opinion of counsel, if such opinion and counsel shall
be reasonably satisfactory to counsel to the issuer,
that an exemption from registration under the Act is
available.
(b) Demand Registration. (1) At any time commencing
on the first anniversary of and expiring on the fifth anniversary of the
effective date of the Company's Registration Statement relating to the Initial
Public Offering (the "Effective Date"), the Holders of a Majority (as
hereinafter defined) in interest of the Underwriters' Warrants, or the Majority
in interest of the Underwriters' Securities (assuming the exercise of all of the
Underwriters'
5
Warrants) shall have the right, exercisable by written notice to the Company, to
have the Company prepare and file with the U.S. Securities and Exchange
Commission (the "Commission"), solely on one (1) occasion, a registration
statement on Form SB-2 (or other appropriate form), and such other documents,
including a prospectus, as may be necessary in the opinion of both counsel for
the Company and counsel for the Holders, in order to comply with the provisions
of the Act, so as to permit a public offering and sale, for a period of nine (9)
months, of the Underwriters' Securities by such Holders and any other Holders of
the Underwriters' Warrants and/or the Underwriters' Securities who notify the
Company within fifteen (15) business days after receipt of the notice described
in Section 7(b)(2). The Holders of the Underwriters' Warrants may demand
registration without exercising the Underwriters' Warrants, and are never
required to exercise same.
(2) The Company covenants and agrees to give written
notice of any registration request under this Section 7(b) by any Holders to all
other registered Holders of the Underwriters' Warrants and the Underwriters'
Securities within ten (10) business days from the date of the receipt of any
such registration request.
(3) For purposes of this Agreement, the term
"Majority" in reference to the Holders of the Underwriters' Warrants or
Underwriters' Securities, shall mean in excess of fifty percent (50%) of the
then outstanding Underwriters' Warrants or Underwriters' Securities that (i) are
not held by the Company, an affiliate, officer, employee or agent thereof or any
of their respective affiliates, members of their family, persons acting as
nominees or in conjunction therewith, or (ii) have not been resold to the public
pursuant to a registration statement filed with the Commission under the Act.
6
(c) Piggyback Registration. (1) If, at any time within the
period commencing on the first anniversary and expiring on the fifth anniversary
of the Effective Date, the Company should file a registration statement with the
Commission under the Act (other than in connection with a merger or other
business combination transaction or pursuant to Form S-8) it will give written
notice at least thirty (30) calendar days prior to the filing of each such
registration statement to the Underwriters and to all other Holders of the
Underwriters' Warrants and/or the Underwriters' Securities of its intention to
do so. If either of the Underwriters or other Holders of the Underwriters'
Warrants and/or the Underwriters' Securities notify the Company within twenty
(20) calendar days after receipt of any such notice of its or their desire to
include any Underwriters' Securities in such proposed registration statement,
the Company shall afford the Underwriters and such Holders of the Underwriters'
Warrants and/or Underwriters' Securities the opportunity to have any such
Underwriters' Securities registered under such registration statement.
Notwithstanding the provisions of this Section 7(c)(1) and the provisions of
Section 7(d), the Company shall have the right at any time after it shall have
given written notice pursuant to this Section 7(c)(1) (irrespective of whether a
written request for inclusion of any such securities shall have been made) to
elect not to file any such proposed registration statement, or to withdraw the
same after the filing but prior to the effective date thereof.
(2) If the underwriter of an offering to which the above
piggyback rights apply objects to such rights, such objection shall preclude
such inclusion. However, in such event, the Company will, within nine (9) months
of completion of such subsequent underwriting, file at the expense of the
Company, a registration statement so as to permit a public offering and sale,
for a period of nine (9) months, of such excluded Underwriters'
7
Securities, which shall be in addition to any registration statement required to
be filed pursuant to Section 7(b).
(d) Covenants of the Company With Respect to Registration. In
connection with any registrations under Sections 7(b) and 7(c) hereof, the
Company covenants and agrees as follows:
(1) The Company shall use its best efforts
to file a registration statement within forty-five (45) calendar days of receipt
of any demand therefor pursuant to Section 7(b); provided, however, that the
Company shall not be required to produce audited or unaudited financial
statements for any period prior to the date such financial statements are
required to be filed in a report on Form 10-KSB or Form 10-QSB, as the case may
be. The Company shall use its best efforts to have any registration statement
declared effective at the earliest possible time, and shall furnish each Holder
desiring to sell Underwriters' Securities such number of prospectuses as shall
reasonably be requested.
(2) The Company shall pay all costs
(excluding fees and expenses of Holders' counsel and any underwriting discounts
or selling fees, expenses or commissions), fees and expenses in connection with
the first registration statement filed pursuant to Sections 7(b) and 7(c) hereof
including, without limitation, the Company's legal and accounting fees, printing
expenses, blue sky fees and expenses.
(3) The Company will use its best efforts to
qualify or register the Underwriters' Securities included in a registration
statement for offering and sale under the securities or blue sky laws of such
states as reasonably are requested by the Holders, provided that the Company
shall not be obligated to execute or file any general consent to service of
process or
8
to qualify as a foreign corporation to do business under the laws of any such
jurisdiction.
(4) The Company shall indemnify the Holders
of the Underwriters' Securities to be sold pursuant to any registration
statement and each person, if any, who controls such Holders within the meaning
of Section 15 of the Act or Section 20(a) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), against all loss, claim, damage, expense
or liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which any of them may
become subject under the Act, the Exchange Act or otherwise, arising from such
registration statement, but only to the same extent and with the same effect as
the provisions pursuant to which the Company has agreed to indemnify the
Underwriters contained in Section 8 of the Underwriting Agreement.
(5) The Holders of the Underwriters'
Securities to be sold pursuant to a registration statement, and their successors
and assigns, shall indemnify the Company, its officers and directors and each
person, if any, who controls the Company within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act, against all loss, claim, damage or
expense or liability to which they may become subject under the Act, the
Exchange Act or otherwise, arising from information furnished by or on behalf of
such Holders, or their successors or assigns, for specific inclusion in such
registration statement to the same extent and with the same effect as the
provisions contained in Section 8 of the Underwriting Agreement pursuant to
which the Underwriters have agreed to indemnify the Company.
(6) Nothing contained in this Agreement
shall be construed as requiring the Holders to exercise their Underwriters'
Warrants prior to the initial filing of any registration statement or the
effectiveness thereof.
9
(7) The Company shall not be entitled to
include any securities other than the Underwriters' Securities in any
registration statement filed pursuant to Section 7(b) hereof without the prior
written consent, which consent shall not be unreasonably withheld, of the
Holders of the Underwriters' Warrants and Underwriters' Securities representing
a Majority of such securities (assuming exercise of all of the Underwriters'
Warrants).
(8) The Company shall furnish to a
designated representative of the Holders participating in the offering and to
each underwriter, if any, a signed counterpart, addressed to the Company or the
underwriter of (i) an opinion of counsel to the Company, dated the effective
date of such registration statement (and if such registration includes an
underwritten public offering, an opinion dated the date of the closing under the
underwriting agreement), and (ii) if such registration includes an underwritten
public offering a copy of the "cold comfort" letter dated the effective date of
such registration statement signed by each independent public accountant who has
issued a report on the Company's financial statements included in such
registration statement, in each case covering substantially the same matters
with respect to such registration statement (and the prospectus included
therein) and, in the case of such accountants' letters. with respect to events
subsequent to the date of such financial statements, as are duly covered in
opinions of issuer's counsel and in accountants' letters, with respect to
customary events subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in accountants' letters
delivered to underwriters in underwritten public offerings of securities.
(9) The Company shall as soon as practicable
after the effective date of the registration statement, and in any event within
15 months thereafter, make "generally
10
available to its security holders" (within the meaning of Rule 158 under the
Act) an earnings statement (which need not be audited) complying with Section 1
(a) of the Act and covering a period of at least 12 consecutive months beginning
after the effective date of the registration statement.
(10) The Company shall deliver promptly to
each Holder participating in the offering requesting the correspondence
described below and any managing underwriter copies of all correspondence
between the Commission and the Company, its counsel or auditors with respect to
the registration statement and permit each Holder and underwriter to do such
investigation, upon reasonable advance notice, with respect to information
contained in or omitted from the registration statement as it deems reasonably
necessary to comply with applicable securities laws or rules of the National
Association of Securities Dealers, Inc. ("NASD"). Such investigation shall
include access to books, records and properties and opportunities to discuss the
business of the Company with its officers and independent auditors, all to such
reasonable extent and at such reasonable times and as often as any such Holder
shall reasonably request.
(11) The Company shall enter into an
underwriting agreement with the managing underwriter selected for such
underwriting by Holders holding a Majority of the Underwriters' Securities
requested to be included in such underwriting, provided, however that (i) such
managing underwriter shall be reasonably acceptable to the Company, except that
in connection with an offering for which the Holders have piggyback rights, the
Company shall have the sole right to select the managing underwriter or
underwriters, and (ii) the Holders shall be responsible for any selling fees or
commissions in connection with such underwriting. Such
11
underwriting agreement shall be satisfactory in form and substance to the
Company, a Majority of such Holders (in respect of a registration under Section
7(b) only) and such managing underwriter, and shall contain such
representations, warranties and covenants by the Company and such other terms as
are customarily contained in agreements of that type used by the managing
underwriter. The Holders shall be parties to any underwriting agreement relating
to an underwritten sale of their Underwriters' Securities and may, at their
option, require that any or all the representations, warranties and covenants of
the Company to or for the benefit of such underwriters shall also be made to and
for the benefit of such Holders. Such Holders shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters except as they may relate to such Holders and their intended
methods of distribution.
e. Further Registrations. The Company will cooperate
with the Holders of the Underwriters' Warrants and Underwriters' Securities in
preparing and signing any registration statement, in addition to the
registration statements discussed above, required in order to sell or transfer
the Underwriters' Securities and will supply all information required therefor,
but all of such additional registration statement expenses including legal and
accounting fees will be prorated between the Company and the Holders of the
Underwriters' Warrants and Underwriters' Securities according to the aggregate
sales price of the securities being issued, and if the Company is not issuing
any securities pursuant to such registration statement, such expenses will be
borne entirely by the Holders of the Underwriters' Warrants and the
Underwriters' Securities. The provisions of Section 7(d) other than subsection
(2) shall apply to any such registration statement.
12
8. Adjustments to Purchase Price and Number of Securities.
(a) Price Computation of Adjusted Purchase. Except as
hereinafter provided, in case the Company shall at any time after the date
hereof issue or sell any shares of Common Stock (other than the issuances
referred to in Section 8(g) hereof), including shares held in the Company's
treasury, for a consideration per share less than the lesser of the Purchase
Price in effect immediately prior to the issuance or sale of such shares or the
"Market Price" (as defined in Section 8(a)(6) hereof) per share of Common Stock
on the date immediately prior to the issuance or sale of such shares, or without
consideration, then forthwith upon any such issuance or sale, the Purchase Price
shall (until another such issuance or sale) be reduced to the price (calculated
to the nearest full cent) determined by dividing (1) the product of (a) the
Purchase Price in effect immediately before such issuance or sale and (b) the
sum of (i) the total number of shares of Common Stock outstanding immediately
prior to such issuance or sale, and (ii) the number of shares determined by
dividing (A) the aggregate consideration, if any, received by the Company upon
such sale or issuance, by (B) the lesser of (x) the Market Price, and (y) the
Purchase Price, in effect immediately prior to such issuance or sale; by (2) the
total number of shares of Common Stock outstanding immediately after such
issuance or sale provided, however, that in no event shall the Purchase Price be
adjusted pursuant to this computation to an amount in excess of the Purchase
Price in effect immediately prior to such computation, except in the case of a
combination of outstanding shares of Common Stock, as provided by Section 8(c)
hereof.
For the purposes of this Section 8, the term "Purchase Price"
shall mean the Purchase Price of the Underwriters' Securities set forth in
Section 6 hereof, as adjusted from time to time pursuant to the provisions of
this Section 8.
13
For the purposes of any computation to be made in accordance
with this Section 8(a), the following provisions shall be applicable:
(1) In case of the issuance or sale of
shares of Common Stock for a consideration part or all of which shall be cash,
the amount of the cash consideration therefor shall be deemed to be the amount
of cash received by the Company for such shares (or, if shares of Common Stock
are offered by the Company for subscription, the subscription price), before
deducting therefrom any compensation paid or discount allowed in the sale or
purchase thereof by underwriters or dealers or others performing similar
services, or any expenses incurred in connection therewith.
(2) In case of the issuance or sale
(otherwise than as a dividend or other distribution on any stock of the Company)
of shares of Common Stock for a consideration part or all of which shall be
other than cash, the amount of the consideration therefor other than cash shall
be deemed to be the value of such consideration as determined in good faith by
the Board of Directors of the Company.
(3) Shares of Common Stock issuable by way
of dividend or other distribution on any stock of the Company shall be deemed to
have been issued immediately after the opening of business on the day following
the record date for the determination of stockholders entitled to receive such
dividend or other distribution and shall be deemed to have been issued without
consideration.
(4) The reclassification of securities of
the Company other than shares of Common Stock into securities including shares
of Common Stock shall be deemed to involve the issuance of such shares of Common
Stock for a consideration other than cash
14
immediately prior to the close of business on the date fixed for the
determination of security holders entitled to receive such shares, and the value
of the consideration allocable to such shares of Common Stock shall be
determined as provided in Section 8(a)(2).
(5) The number of shares of Common Stock at
any one time deemed to be issued and outstanding, as determined for the purposes
of Sections 8(b)(1) and 8(b)(2) hereof, shall include the aggregate number of
shares of Common Stock issued or issuable (subject to readjustment upon the
actual issuance thereof) upon the exercise of options, rights, warrants and upon
the conversion or exchange of convertible or exchangeable securities.
(6) As used herein, the phrase "Market
Price" at any date shall be deemed to be the last reported sale price, or, in
the case no such reported sale takes place on such day, the average of the last
reported sales prices for the last three (3) trading days, in either case as
officially reported by the principal securities exchange on which the Common
Stock is listed or admitted to trading, or, if the Common Stock is not listed or
admitted to trading on any national securities exchange, the average closing bid
price as furnished by the NASD through the NASD Automated Quotation System
("NASDAQ") or similar organization if NASDAQ is no longer reporting such
information, or if the Common Stock is not quoted on NASDAQ, as determined in
good faith by resolution of the Board of Directors of the Company, based on the
best information available to it.
15
(b) Options, Rights, Warrants and Convertible and
Exchangeable Securities. Except in the case of the Company issuing rights to
subscribe for shares of Common Stock distributed to all the stockholders of the
Company and Holders of Underwriters' Warrants, if the Company shall at any time
after the date hereof issue options, rights or warrants to purchase shares of
Common Stock, or issue any securities convertible into or exchangeable for
shares of Common Stock (other than the issuances referred to in Section 8(g)
hereof), (i) for a consideration per share less than the lessor of (a) the
Purchase Price in effect immediately prior to the issuance of such options,
rights or warrants, or such convertible or exchangeable securities or (b) the
Market Price, or (ii) without consideration, the Purchase Price in effect
immediately prior to the issuance of such options, rights or warrants, or such
convertible or exchangeable securities, as the case may be, shall be reduced to
a price determined by making a computation in accordance with the provisions of
Section 8(a) hereof, provided that:
(1) The aggregate maximum number of shares
of Common Stock issuable under such options, rights or warrants shall be deemed
to be issued and outstanding at the time such options, rights or warrants were
issued, and for a consideration equal to the minimum purchase price per share
provided for in such options, rights or warrants at the time of issuance, plus
the consideration (determined in the same manner as consideration received on
the issue or sale of shares in accordance with the terms of the Underwriters'
Warrants), if any, received by the Company for such options, rights or warrants;
provided, however, that upon the expiration or other termination of such
options, rights or warrants, if any thereof shall not have been exercised, the
number of shares of Common Stock deemed to be issued and outstanding pursuant to
this Section 8(b)(1) (and for the purposes of Section 8(a)(5) hereof) shall be
reduced by such
16
number of shares as to which options, warrants and/or rights shall have expired
or terminated unexercised, and such number of shares shall no longer be deemed
to be issued and outstanding, and the Purchase Price then in effect shall
forthwith be readjusted and thereafter be the price which it would have been had
adjustment been made on the basis of the issuance only of shares actually issued
or issuable upon the exercise of those options, rights or warrants as to which
the exercise rights shall not be expired or terminated unexercised.
(2) The aggregate maximum number of shares
of Common Stock issuable upon conversion or exchange of any convertible or
exchangeable securities shall be deemed to be issued and outstanding at the time
of issuance of such securities, and for a consideration equal to the
consideration (determined in the same manner as consideration received on the
issue or sale of shares of Common Stock in accordance with the terms of the
Underwriters' Warrants) received by the Company for such securities, plus the
minimum consideration, if any, receivable by the Company upon the conversion or
exchange thereof; provided, however, that upon the termination of the right to
convert or exchange such convertible or exchangeable securities (whether by
reason of redemption or otherwise), the number of shares deemed to be issued and
outstanding pursuant to this Section 8(b)(2) (and for the purpose of Section
8(a)(5) hereof) shall be reduced by such number of shares as to which the
conversion or exchange rights shall have expired or terminated unexercised, and
such number of shares shall no longer be deemed to be issued and outstanding and
the Purchase Price then in effect shall forthwith be readjusted and thereafter
be the price which it would have been had adjustment been made on the basis of
the issuance only of the shares actually issued or issuable upon the conversion
or exchange of those convertible or exchangeable securities as to which the
conversion or exchange rights shall
17
not have expired or terminated unexercised.
(3) If any change shall occur in the price
per share provided for in any of the options, rights or warrants referred to in
Section 8(b)(1), or in the price per share at which the securities referred to
in Section 8(b)(2) are convertible or exchangeable, such options, rights or
warrants or conversion or exchange rights, as the case may be, shall be deemed
to have expired or terminated on the date when such price change became
effective in respect of shares not theretofore issued pursuant to the exercise
or conversion or exchange thereof, and the Company shall be deemed to have
issued upon such date new options, rights or warrants or convertible or
exchangeable securities at the new price in respect of the number of shares
issuable upon the exercise of such options, rights or warrants or the conversion
or exchange of such convertible or exchangeable securities.
(c) Subdivision and Combination. In case the Company
shall at any time issue any shares of Common Stock in connection with a stock
dividend in shares of Common Stock or subdivide or combine the outstanding
shares of Common Stock, the Purchase Price shall forthwith be proportionately
decreased in the case of a stock dividend or a subdivision or increased in the
case of a combination.
(d) Adjustment in Number of Securities. Upon each
adjustment of the Purchase Price pursuant to the provisions of this Section 8,
the number of Underwriters' Securities issuable upon the exercise of the
Underwriters' Warrant shall be adjusted to the nearest whole share by
multiplying a number equal to the Purchase Price in effect immediately prior to
such adjustment by the number of Underwriters' Securities issuable upon exercise
of the Underwriters' Warrants immediately prior to such adjustment and dividing
the product so obtained by the adjusted Purchase Price.
18
(e) Definition of Common Stock. For the purpose of
this Agreement, the term "Common Stock" shall mean the class of stock designated
as Common Stock in the Articles of Incorporation, of the Company as it may be
amended as of the date hereof.
(f) Reclassification, Merger or Consolidation. The
Company will not merge, reorganize or take any other action which would
terminate the Underwriters' Warrants without first making adequate provision for
the Underwriters' Warrants. In case of any reclassification or change of the
outstanding shares of Common Stock (other than a change in par value to no par
value, or from no par value to par value, or as a result of a subdivision or
combination), or in case of any consolidation of the Company with, or merger of
the Company with, or merger of the Company into, another corporation (other than
a consolidation or merger in which the Company is the continuing corporation and
which does not result in any reclassification or change of the outstanding
Common Stock except a change as a result of a subdivision or combination of such
shares or a change in par value, as aforesaid), or in the case of a sale or
conveyance to another corporation or other entity of the property of the Company
as an entirety, the Holders of each Underwriters' Warrant then outstanding or to
be outstanding shall have the right thereafter (until the expiration of such
Underwriters' Warrant) to purchase, upon exercise of such Underwriters' Warrant,
the kind and number of shares of stock and other securities and property
receivable upon such reclassification, change, consolidation, merger, sale or
conveyance as if the Holders were the owner of the shares of Common Stock
underlying the Underwriters' Warrants immediately prior to any such events at a
price equal to the product of (x) the number of shares issuable upon exercise of
the Underwriters' Warrants and (y) the Purchase
19
Price in effect immediately prior to the record date for such reclassification,
change, consolidation, merger, sale or conveyance, as if such Holders had
exercised the Underwriters' Warrants. In the event of a consolidation, merger,
sale or conveyance of property, the corporation formed by such consolidation or
merger, or acquiring such property, shall execute and deliver to the Holders a
supplemental underwriter's warrant agreement to such effect. Such supplemental
underwriter's warrant agreement shall provide for adjustments which shall be
identical to the adjustments provided for in this Section 8. The provisions of
this Section 8(f) shall similarly apply to successive consolidations or mergers.
(g) No Adjustment of Purchase Price in Certain Cases.
Notwithstanding any provision to the contrary contained herein, no adjustment of
the Purchase Price shall be made:
(1) Upon the issuance or sale of (i) the
Underwriters' Warrants or the securities underlying the Underwriters' Warrants,
(ii) the securities sold pursuant to the Initial Public Offering or securities
underlying securities sold in the Initial Public Offering or securities to be
sold in a bona fide public offering pursuant to a firm commitment underwriting
or securities underlying securities sold in such firm commitment underwriting
and (iii) the shares issuable pursuant to the options, warrants, rights, stock
purchase agreements or convertible or exchangeable securities outstanding or in
effect on the date hereof as described in the prospectus relating to the Initial
Public Offering.
(2) If the amount of said adjustments shall
aggregate less than five ($.05) cents for one (1) share of Common Stock;
provided, however, that in such case any adjustment that would otherwise be
required then to be made shall be carried forward and shall be made at the time
of and together with the next subsequent adjustment which, together with any
20
adjustment so carried forward, shall aggregate at least five ($.05) cents for
one (1) share of Common Stock.
9. Exchange and Replacement of Warrant Certificates. Each
Underwriters' Warrant Certificate is exchangeable without expense, upon the
surrender thereof by the registered Holders at the principal executive office of
the Company, for a new Underwriters' Warrant Certificate of like tenor and date
representing in the aggregate the right to purchase the same number of
Underwriters' Securities in such denominations as shall be designated by the
Holders thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of any
Underwriters' Warrant Certificate, and, in case of loss, theft or destruction,
of indemnity or security reasonably satisfactory to it, and reimbursement to the
Company of all reasonable expenses incidental thereto, and upon surrender and
cancellation of the Underwriters' Warrant Certificates, if mutilated, the
Company will make and deliver a new Underwriters' Warrant Certificate of like
tenor, in lieu thereof.
10. Elimination of Fractional Interests. The Company shall not
be required to issue certificates representing fractions of shares of Common
Stock and/or Redeemable Warrants upon the exercise of the Underwriters'
Warrants, nor shall it be required to issue scrip or pay cash in lieu of
fractional interests; provided, however, that if a Holder exercises all
Underwriters' Warrants held of record by such Holder the fractional interests
shall be eliminated by rounding any fraction to the nearest whole number of
shares of Common Stock or other securities, properties or rights.
21
11. Reservation and Listing of Securities. The Company shall
at all times reserve and keep available out of its authorized shares of Common
Stock, solely for the purpose of issuance upon the exercise of the Underwriters'
Warrants, such number of shares of Common Stock or other securities, properties
or rights as shall be issuable upon the exercise thereof and the exercise of the
Redeemable Warrants. The Company covenants and agrees that, upon exercise of the
Underwriters' Warrants and payment of the Purchase Price therefor, all the
shares of Common Stock and other securities issuable upon such exercise shall be
duly and validly issued, fully paid, non-assessable and not subject to the
preemptive rights of any stockholder. As long as the Underwriters' Warrants
shall be outstanding, the Company shall use its best efforts to cause the Common
Stock to be listed (subject to official notice of issuance) on all securities
exchanges on which the Common Stock issued in the Initial Public Offering may
then be listed or quoted.
12. Notices to Underwriters' Warrant Holders. Nothing
contained in this Agreement shall be construed as conferring upon the Holders
the right to vote or to consent or to receive notice as a stockholder in respect
of any meetings of stockholders for the election of directors or any other
matter, or as having any rights whatsoever as a stockholder of the Company. If,
however, at any time prior to the expiration of the Underwriters' Warrants and
their exercise, any of the following events shall occur:
(a) the Company shall take a record of the holders of
its shares of Common Stock for the purpose of entitling them to receive a
dividend or distribution payable otherwise than in cash, or a cash dividend or
distribution payable otherwise than out of current or retained earnings, as
indicated by the accounting treatment of such dividend or distribution on the
books of the Company; or
22
(b) the Company shall offer to all the holders of its
Common Stock any additional shares of capital stock of the Company or securities
convertible into or exchangeable for shares of capital stock of the Company, or
any option, right or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the
Company (other than in connection with a consolidation or merger) or a sale of
all or substantially all of its property, assets and business as an entirety
shall be proposed; then, in any one or more of said events, the Company shall
give written notice of such event at least fifteen (15) calendar days prior to
the date fixed as a record date or the date of closing the transfer books for
the determination of the stockholders entitled to such dividend, distribution,
convertible or exchangeable securities or subscription rights, or entitled to
vote on such proposed dissolution, liquidation, winding up or sale. Such notice
shall specify such record date or the date of closing the transfer books, as the
case may be. Failure to give such notice or any defect therein shall not affect
the validity of any action taken in connection with the declaration or payment
of any such dividend, or the issuance of any convertible or exchangeable
securities, or subscription rights, options or warrants, or any proposed
dissolution, liquidation, winding up or sale.
13. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
duly made when delivered, or mailed by registered or certified mail, return
receipt requested:
23
(a) If to the registered Holders of the Underwriters'
Warrants, to the address of such Holders as shown on the books of the Company;
or
(b) If to the Company to the address set forth in
Section 3 hereof or to such other address as the Company may designate by notice
to the Holders.
14. Supplements and Amendments. The Company and the
Underwriters may from time to time supplement or amend this Agreement without
the approval of any Holders of Underwriters' Warrant Certificates (other than
the Underwriters) in order to cure any ambiguity, to correct or supplement any
provision contained herein which may be defective or inconsistent with any
provisions herein, or to make any other provisions in regard to matters or
questions arising hereunder which the Company and the Underwriters may deem
necessary or desirable and which the Company and the Underwriters deem shall not
adversely affect the interests of the Holders of Underwriters' Warrant
Certificates.
15. Binding Effect; Successors. All the covenants and
provisions of this Agreement shall be binding upon and inure to the benefit of
the Company, the Underwriters, the Holders and their respective successors and
assigns hereunder.
16. Termination. This Agreement shall terminate at the close
of business on ______________, 2002. Notwithstanding the foregoing, the
indemnification provisions of Section 7 shall survive such termination until the
close of business on the expiration of any applicable statute of limitations.
17. Governing Law; Submission to Jurisdiction. This Agreement
and each Underwriters' Warrant Certificate issued hereunder shall be deemed to
be a contract made under the laws of the State of New York and for all purposes
shall be construed in accordance with the
24
laws of said state without giving effect to the rules of said state governing
the conflicts of laws. The Company, the Underwriters and the Holders hereby each
agree that any action, proceeding or claim against it arising out of, or
relating in any way to, this Agreement shall be brought and enforced in the
courts of the State of New York or of the United States of America for the
Southern District of New York, and irrevocably submits to such jurisdiction,
which jurisdiction shall be exclusive. The Company, the Underwriters and the
Holders hereby irrevocably waive any objection to such exclusive Jurisdiction or
inconvenient forum. Any such process or summons to be served upon any of the
Company, the Underwriters and the Holders (at the option of the party bringing
such action, proceeding or claim) may be served by transmitting a copy thereof,
by registered or certified mail, return receipt requested, postage prepaid,
addressed to it at the address set forth in Section 13 hereof. Such mailing
shall be deemed personal service and shall be legal and binding upon the party
so served in any action, proceeding or claim.
18. Entire Agreement, Modification. This Agreement (including
the Underwriting Agreement, to the extent portions thereof are referred to
herein) contains the entire understanding between the parties hereto with
respect to the subject matter hereof and thereof. Subject to Section 14, this
Agreement may not be modified or amended except by a writing duly signed by the
Company and the Holders of a Majority in Interest of the Underwriters'
Securities (for this purpose, treating all then outstanding Underwriters'
Warrants as if they had been exercised).
19. Severability. If any provision of this Agreement shall be
held to be invalid or unenforceable, such invalidity or unenforceability shall
not affect any other provision of this Agreement.
25
20. Captions. The caption headings of the Sections of this
Agreement are for convenience of reference only and are not intended, nor should
they be construed as, a part of this Agreement and shall be given no substantive
effect.
21. Benefits of this Agreement. Nothing in this Agreement
shall be construed to give to any person or corporation other than the Company
and the Underwriters and any other registered Holders of the Underwriters'
Warrant Certificates or Underwriters' Securities any legal or equitable right,
remedy or claim under this Agreement; and this Agreement shall be for the sole
and exclusive benefit of the Company and the Underwriters and any other Holders
of the Underwriter's Warrant Certificates or Underwriters' Securities.
22. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and such counterparts shall together constitute but one and
the same instrument.
26
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
PHOENIX PRESCHOOL HOLDINGS, INC.
By: ______________________________
Xxxxxxx Xxxxxxx
President
DUKE & CO., INC.
By:_______________________________
Name:
Title:
BRIARWOOD INVESTMENT COUNSEL
By:_______________________________
Name:
Title:
27
EXHIBIT A
PHOENIX PRESCHOOL HOLDINGS, INC.
WARRANT CERTIFICATE
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED FOR
SALE OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT, OR (ii) AN OPINION OF COUNSEL, IF SUCH OPINION AND COUNSEL SHALL BE
REASONABLY SATISFACTORY TO COUNSEL TO THE ISSUER, THAT AN EXEMPTION FROM
REGISTRATION UNDER THE ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE COMMENCING ________________, 1998 THROUGH
5:00 P.M., NEW YORK TIME ON ____________, 2002
No. UW- __________ Warrants
This Warrant Certificate certifies that registered holder of
__________ Warrants to purchase initially, at any time from ______________,
1998, until 5:00 p.m., New York time on ______________, 2002 (the "Expiration
Date"), up to 127,500 shares of Phoenix Preschool Holdings, Inc.'s (the
"Company") Common Stock, $.10 par value per share (the "Common Stock"), and/or
up to 127,500 Redeemable Warrants each exercisable to purchase one share of
Common Stock (the "Common Stock Warrants"), at a purchase price of $5.10 per
share of Common Stock and $.15 per Redeemable Warrant (the "Purchase Price"),
upon the surrender of this Warrant Certificate and payment of the applicable
Purchase Price at an office or agency of the Company, but subject to the
conditions set forth herein and in the underwriters' warrant agreement, dated as
of ______________, 1997 (the "Warrant Agreement"), by and between the Company
and Duke & Co., Inc. and Briarwood Investment Counsel (the "Underwriters") named
in the Underwriting Agreement, dated ______________, 1997 between the Company
and the Underwriters. Payment of the Purchase Price shall be made by certified
or cashier's check or money order payable to the order of the Company.
No Warrant may be exercised after 5:00 p.m., New York time, on
the Expiration Date, at which time all Warrants evidenced hereby, unless
exercised prior thereto, shall thereafter be void.
28
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants issued pursuant to the Warrant Agreement
between the Company and the Underwriters, which Warrant Agreement is hereby
incorporated by reference in and made a part of this instrument and is hereby
referred to for a description of the rights, limitation of rights, obligations,
duties and immunities thereunder of the Company and the holders (the words
"holders" or "holder" meaning the registered holders or registered holder) of
the Warrants.
The Warrant Agreement provides that upon the occurrence of
certain events the respective Purchase Prices and the type and/or number of the
Company's securities issuable upon the exercise of these Warrants, may, subject
to certain conditions, be adjusted. In such event, the Company will, at the
request of the holder, issue a new Warrant Certificate evidencing the adjustment
in the Purchase Price and the number and/or type of securities issuable upon the
exercise of the Warrants; provided, however, that the failure of the Company to
issue such new Warrant Certificates shall not in any way change, alter, or
otherwise impair, the rights of the holder as set forth in the Warrant
Agreement.
Upon due presentment for registration of transfer of this
Warrant Certificate at an office or agency of the Company, a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange as provided herein, without any charge except for any tax or other
governmental charge imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced
by this Certificate, the Company shall forthwith issue to the holder hereof a
new Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof
as the absolute owner(s) of this Warrant Certificate (notwithstanding any
notation of ownership or other writing hereon made by anyone), for the purpose
of any exercise hereof, and of any distribution to the holder(s) hereof, and for
all other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined
in the Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
[THE REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
29
IN WITNESS WHEREOF, the undersigned has executed this
certificate this _____ day of _______________, 1997.
PHOENIX PRESCHOOL HOLDINGS, INC.
By: __________________________________
Xxxxxxx Xxxxxxx, President
ATTEST:
By: __________________________
30
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED ___________________________ hereby sells,
assigns and transfers unto _________________________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ___________________________
Attorney, to transfer the within Warrant Certificate on the books of Phoenix
Preschool Holdings, Inc., with full power of substitution.
Dated: _________________________
Signature ______________________________
(Signature must conform in all respects
to the name of the holder as specified
on the face of the Warrant Certificate.)
___________________________________
(Insert Social Security or Other
Identifying Number of Holders)
31
FORM OF ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise the right, represented by
this Warrant Certificate, to purchase shares of Common Stock and/or Redeemable
Warrants and herewith tenders in payment of such securities a certified or
cashier's check or money order payable to the order of Phoenix Preschool
Holdings, Inc. in the amount of $ _________, all in accordance with the terms
hereof. The undersigned requests that certificates for such securities be
registered in the name of ___________________________________ whose address is
__________________________________ and that such certificates be delivered to
_________________________________________ whose address is _____________________
____________________________.
Dated: _________________________
Signature ______________________________
(Signature must conform in all respects
to the name of the holder as specified
on the face of the Warrant Certificate.)
___________________________________
(Insert Social Security or Other
Identifying Number of Holders)
