WARRANT AGREEMENT
AMONG
PHOENIX PRESCHOOL HOLDINGS, INC.,
a Delaware corporation,
MAIDSTONE FINANCIAL, INC.
and
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
TABLE OF CONTENTS
Section Page
1. Appointment of Warrant Agent.............................................................................1
2. Form of Warrant..........................................................................................2
3. Countersignature and Registration........................................................................2
4. Transfers and Exchanges..................................................................................3
5 Exercise of Warrants; Payment of Warrant Solicitation Fee................................................3
6. Payment of Taxes.........................................................................................5
7. Mutilated or Missing Warrants............................................................................5
8. Reservation of Common Stock..............................................................................5
9. Adjustments of Warrant Price and Number of Securities....................................................6
10. Fractional Interests.....................................................................................8
11. Notices to Warrantholders................................................................................8
12. Disposition of Proceeds on Exercise of Warrants..........................................................9
13. Redemption of Warrants...................................................................................9
14. Merger or Consolidation or Change of Name of Warrant Agent...............................................9
15. Duties of Warrant Agent.................................................................................10
16. Change of Warrant Agent.................................................................................11
17. Identity of Transfer Agent..............................................................................12
18. Notices.................................................................................................12
19. Supplements and Amendments..............................................................................13
20. New York Contract.......................................................................................13
21. Benefits of this Agreement..............................................................................13
22. Successors..............................................................................................13
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Warrant Agreement
THIS WARRANT AGREEMENT, dated as of __________ ___, 1997, is among
Phoenix Preschool Holdings, Inc., a Delaware corporation (the "Company"),
Maidstone Financial, Inc. (the "Underwriter") and Continental Stock Transfer &
Trust Company, as warrant agent (the "Warrant Agent").
The Company proposes to issue and sell through an initial public
offering (the "IPO") underwritten by the Underwriter, an aggregate of up to
1,300,000 shares of common stock, par value $0.10 per share (the "Common
Stock"), and 2,600,000 redeemable Common Stock purchase warrants ("Warrants")
and, pursuant to the Underwriter's over-allotment option (the "Over-allotment
Option"), up to an additional 195,000 shares of Common Stock and 390,000
Warrants.
In connection with the IPO the Company proposes to sell to the
Underwriter warrants (the "Underwriter's Warrants") to purchase up to 130,000
shares of Common Stock and up to 260,000 warrants (the "Underlying Warrants").
The Company has issued and sold warrants to purchase an aggregate of up to
1,275,000 shares of Common Stock (the "Bridge Warrants") in a private placement
of its securities completed in June 1997. The Bridge Warrants automatically will
be converted into Warrants having terms identical to the Warrants being offered
in the IPO on the date the Company's registration statement under the Securities
Act of 1933 registering the securities to be offered in the IPO is declared
effective by the Securities and Exchange Commission. (the "Effective Date")
Each Warrant will entitle the holder to purchase one share of Common
Stock. The Company desires the Warrant Agent to act on behalf of the Company,
and the Warrant Agent is willing so to act, in connection with the issuance,
registration, transfer, exchange and exercise of the Warrants.
THEREFORE, the parties hereto agree as follows:
Section 1. Appointment of Warrant Agent. The Company hereby appoints
the Warrant Agent to act as Warrant Agent for the Company in accordance with the
instructions hereinafter set forth in this Agreement, and the Warrant Agent
hereby accepts such appointment.
Upon the execution of this Agreement, certificates representing
3,875,000 Warrants to purchase up to an aggregate of 3,875,000 shares of Common
Stock (subject to modification and adjustment as provided in Section 9 hereof)
shall be executed by the Company and delivered to the Warrant Agent.
Upon the exercise of the Over-allotment Option, certificates
representing up to 390,000 Warrants to purchase up to an aggregate of 390,000
shares of Common Stock (subject to modification and adjustment as provided in
Section 9 hereof) shall be executed by the Company and delivered to the Warrant
Agent.
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Upon exercise of the Underwriters' Warrant as provided therein,
certificates representing up to 260,000 Warrants to purchase up to an aggregate
of 260,000 shares of Common Stock (subject to modification and adjustment as
provided in Section 9 hereof) shall be executed by the Company and delivered to
the Warrant Agent.
Section 2. Form of Warrant. The text of the Warrants and the form of
election to purchase Common Stock to be printed on the reverse thereof shall be
substantially as set forth in Exhibit A attached hereto (the provisions of which
are hereby incorporated herein). All of the certificates for the Warrants may
have such letters, numbers or other marks of identification or designation and
such legends, summaries or endorsements printed, lithographed or engraved
thereon as the Company may deem appropriate and as are not inconsistent with the
provisions of this Agreement, or as may be required to comply with any law or
with any rule or regulation made pursuant thereto or with any rule or regulation
of any stock exchange on which the Warrants may be listed, or to conform to
usage. Each Warrant shall initially entitle the registered holder thereof to
purchase one share of Common Stock at a purchase price of FOUR DOLLARS AND FIFTY
CENTS ($4.50) (as adjusted as hereinafter provided, the "Warrant Price"), at any
time during the period (the "Exercise Period") commencing on __________ __ 1998
[the first anniversary of the date of the Company's prospectus (the
"Prospectus") pursuant to which the Warrants are being sold in the IPO] and
expiring at 5:00 p.m. New York time, on __________ __, 2002 [the fourth
anniversary of the date of the Prospectus]. The Warrant Price and the number of
shares of Common Stock issuable upon exercise of the Warrants are subject to
adjustment upon the occurrence of certain events, all as hereinafter provided.
The Warrants shall be executed on behalf of the Company by the manual or
facsimile signature of the present or any future Chief Executive Officer, Chief
Financial Officer, President or Vice President of the Company, and attested to
by the manual or facsimile signature of the present or any future Secretary or
Assistant Secretary of the Company.
Warrants shall be dated as of the date of issuance by the Warrant Agent
either upon initial issuance or upon transfer or exchange.
In the event the aforesaid expiration date of the Warrants falls on a
day that is not a business day, then the Warrants shall expire at 5:00 p.m. New
York time on the next succeeding business day. For purposes hereof, the term
"business day" shall mean any day other than a Saturday, Sunday or a day on
which banking institutions in New York City, New York, are authorized or
obligated by law to be closed.
Section 3. Countersignature and Registration. The Warrant Agent shall
maintain books for the transfer and registration of the Warrants. Upon the
initial issuance of the Warrants, the Warrant Agent shall issue and register the
Warrants in the names of the respective holders thereof. The Warrants shall be
countersigned manually or by facsimile by the Warrant Agent (or by any successor
to the Warrant Agent then acting as warrant agent under this Agreement) and
shall not be valid for any purpose unless so countersigned. The Warrants may,
however, be so countersigned by the Warrant Agent (or by its successor as
Warrant Agent) and be delivered by the Warrant Agent, notwithstanding that the
persons whose manual or facsimile signatures appear thereon as proper officers
of the Company shall have ceased to be such officers at the time of such
countersignature or delivery.
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Section 4. Transfers and Exchanges. The Warrant Agent shall transfer,
from time to time, any outstanding Warrants upon the books to be maintained by
the Warrant Agent for that purpose, upon surrender thereof for transfer properly
endorsed or accompanied by appropriate instructions for transfer. Upon any such
transfer, a new Warrant shall be issued to the transferee and the surrendered
Warrant shall be cancelled by the Warrant Agent. Warrants so cancelled shall be
delivered by the Warrant Agent to the Company from time to time upon request.
Warrants may be exchanged at the option of the holder thereof, when surrendered
at the office of the Warrant Agent, for another Warrant, or other Warrants of
different denominations of like tenor and representing in the aggregate the
right to purchase a like number of shares of Common Stock. No certificates for
Warrants shall be issued except for (i) Warrants initially issued hereunder in
accordance with Section 1 hereof, (ii) Warrants issued upon any transfer or
exchange of Warrants, (iii) Warrants issued in replacement of lost, stolen,
destroyed or mutilated certificates for Warrants pursuant to Section 7 hereof,
and (iv) at the option of the Board of Directors of the Company, Warrants in
such form as may be approved by its Board of Directors, to reflect any
adjustment or change in the Warrant Price or the number of shares of Common
Stock purchasable upon exercise of the Warrants made pursuant to Section 9
hereof.
Notwithstanding the foregoing, Warrants which were
automatically converted from Bridge Warrants may not be transferred by the
initial holders thereof until expiration of the twenty-four (24) month period
commencing on the Effective Date, unless an earlier transfer is approved in
advance and in writing by Maidstone Financial, Inc. Accordingly, such Warrants
may certain legends and be subject to stop transfer and other restrictions
limiting transfers during such 24 month period.
Section 5 Exercise of Warrants; Payment of Warrant Solicitation Fee.
Subject to the provisions of this Agreement, each registered holder of Warrants
shall have the right, at any time during the Exercise Period, to exercise such
Warrants and purchase the number of fully paid and non-assessable shares of
Common Stock specified in such Warrants upon presentation and surrender of such
Warrants to the Company at the corporate office of the Warrant Agent, with the
exercise form on the reverse thereof duly executed, and upon payment to the
Company of the Warrant Price, determined in accordance with the provisions of
Sections 2, 9 and 10 of this Agreement, for the number of shares of Common Stock
in respect of which such Warrants are then exercised. Payment of such Warrant
Price shall be made in cash or by certified or bank check payable to the
Company. Subject to Section 6 hereof, upon such surrender of Warrants and
payment of the Warrant Price, the Warrant Agent on behalf of the Company shall
cause to be issued and delivered with all reasonable dispatch to or upon the
written order of the registered holder of such Warrants and in such name or
names as such registered holder may designate, a certificate or certificates for
the number of full shares of Common Stock so purchased upon the exercise of such
Warrants. Such certificate or certificates shall be deemed to have been issued
and any person so designated to be named therein shall be deemed to have become
a holder of record of such shares of Common Stock immediately prior to the close
of business on the date of the surrender of such Warrants and payment of the
Warrant Price as aforesaid. The rights of purchase represented by the Warrants
shall be exercisable during the Exercise Period, at the election of the
registered holders thereof, either as an entirety or from time to time for a
portion of the shares specified therein and, in the event that any Warrant is
exercised in respect of less than all of the shares of Common Stock specified
therein at any time
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prior to the date of expiration of the Warrants, a new Warrant or Warrants will
be issued to the registered holder for the remaining number of shares of Common
Stock specified in the Warrant so surrendered, and the Warrant Agent is hereby
irrevocably authorized to countersign and to deliver the required new Warrants
pursuant to the provisions of this Section and of Section 3 of this Agreement
and the Company, whenever requested by the Warrant Agent, will supply the
Warrant Agent with Warrants duly executed on behalf of the Company for such
purpose. Upon the exercise of any one or more Warrants, the Warrant Agent shall
promptly notify the Company in writing of such fact and of the number of
securities delivered upon such exercise and, subject to the provisions below,
shall cause all payments of an amount, in cash or by check made payable to the
order of the Company, equal to the aggregate Warrant Price for such Warrants,
less any amounts payable to the Underwriter, as provided below, to be deposited
promptly in the Company's bank account. The Company and Warrant Agent shall
determine, in their sole and absolute discretion, whether a Warrant certificate
has been properly completed for exercise by the registered holder thereof.
Anything in the foregoing to the contrary notwithstanding, no Warrant
will be exercisable and the Company shall not be obligated to deliver any
securities pursuant to the exercise of any warrant unless at the time of
exercise the Company has filed with the Securities and Exchange Commission a
registration statement under the Securities Act of 1933, as amended (the "Act"),
covering the securities issuable upon exercise of such Warrant and such
registration statement shall have been declared and shall remain effective and
shall be current, and such shares have been registered or qualified or be exempt
under the securities laws of the state or other jurisdiction of residence of the
holder of such Warrant and the exercise of such Warrant in any such state or
other jurisdiction shall not otherwise be unlawful. During the Exercise Period,
the Company shall use its best efforts to have a current registration statement
on file with the Securities and Exchange Commission covering the issuance of
Common Stock underlying the Warrants so as to permit the Company to deliver to
each person exercising a Warrant a prospectus meeting the requirements of
Section 10(a) (3) of the Act and otherwise complying therewith, and will deliver
such prospectus to each such person. During the Exercise Period, the Company
shall also use its best efforts to effect appropriate qualifications of the
Common Stock underlying the Warrants under the laws and regulations of the
states and other jurisdictions in which the Common Stock and Warrants are sold
by the Underwriter in the IPO in order to comply with applicable laws in
connection with the exercise of the Warrants.
(a) If at the time of exercise of any Warrant (i) the market
price of the Common Stock is equal to or greater than the then exercise price of
the Warrant, (ii) the exercise of the Warrant is solicited by the Underwriter at
such time as it is a member of the National Association of Securities Dealers,
Inc. ("NASD") , (iii) the Warrant is not held in a discretionary account, (iv)
disclosure of the compensation arrangement is made in documents provided to the
holders of the Warrants, and (v) the solicitation of the exercise of the Warrant
is not in violation of Rule 10b-6 (as such rule or any successor rule may be in
effect as of such time of exercise) promulgated under the Securities Exchange
Act of 1934, as amended, then the Underwriter shall be entitled to receive from
the Company following exercise of each of the Warrants so exercised a fee of
eight percent (8%) of the aggregate exercise price of the Warrants so exercised
(the "Exercise Fee"). The procedures for payment of the Exercise Fee are set
forth in Section 5(b) below.
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(b) (i) Within five (5) days after the last day of each month
commencing with __________ ___, 1999, the Warrant Agent will notify the
Underwriter of each Warrant certificate which has been properly completed for
exercise by holders of Warrants during the last month. The Warrant Agent will
provide the Underwriter with such information, in connection with the exercise
of each Warrant, as the Underwriter shall reasonably request.
(ii) The Company hereby authorizes and instructs the
Warrant Agent to deliver to the Underwriter the Exercise Fee, if payable, in
respect of each exercise of Warrants, promptly after receipt by the Warrant
Agent from the Company of a check payable to the order of the Underwriter in the
amount of such Exercise Fee. In the event that an Exercise Fee is paid to the
Underwriter with respect to a Warrant which the Company or the Warrant Agent
determines is not properly completed for exercise or in respect of which the
Underwriter is not entitled to an Exercise Fee, the Underwriter will return such
Exercise Fee to the Warrant Agent which shall forthwith return such fee to the
Company.
The Underwriter and the Company may at any time during business hours
examine the records of the Warrant Agent, including its ledger of original
Warrant certificates returned to the Warrant Agent upon exercise of Warrants.
Notwithstanding any provision to the contrary, the provisions of paragraph 5 (a)
and 5 (b) may not be modified, amended or deleted without the prior written
consent of the Underwriter.
Section 6. Payment of Taxes. The Company will pay any documentary stamp
taxes attributable to the initial issuance of Common Stock issuable upon the
exercise of Warrants; 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 or delivery of any certificates for shares of Common Stock in a name
other than that of the registered holder of Warrants in respect of which such
shares are issued, and in such case neither the Company nor the Warrant Agent
shall be required to issue or deliver any certificate for shares of Common Stock
or any Warrant until the person requesting the same has paid to the Company the
amount of such tax or has established to the Company's satisfaction that such
tax has been paid or that no such tax is required to be paid.
Section 7. Mutilated or Missing Warrants. In case any of the Warrants
shall be mutilated, lost, stolen or destroyed, the Company may, in its
discretion, issue and the Warrant Agent shall countersign and deliver in
exchange and substitution for and upon cancellation of the mutilated Warrant, or
in lieu of and in substitution for the Warrant lost, stolen or destroyed, a new
Warrant of like tenor and representing an equivalent right or interest, but only
upon receipt of evidence satisfactory to the Company and the Warrant Agent of
such loss, theft or destruction and, in case of a lost, stolen or destroyed
Warrant, indemnity or bond, if requested, also satisfactory to them. Applicants
for such substitute Warrants shall also comply with such other reasonable
regulations and pay such reasonable charges as the Company or the Warrant Agent
may prescribe.
Section 8. Reservation of Common Stock. There have been reserved, and
the Company shall at all times keep reserved, out of its authorized shares of
Common Stock, a number of shares of Common Stock sufficient to provide for the
exercise of the rights of purchase represented by the Warrants, and the transfer
agent for the shares of Common Stock and every subsequent transfer agent
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for any shares of Common Stock issuable upon the exercise of any of the
aforesaid rights of purchase are irrevocably authorized and directed at all
times to reserve such number of authorized shares of Common Stock as shall be
required for such purpose. The Company agrees that all shares of Common Stock
issued upon exercise of the Warrants shall be, at the time of delivery of the
certificates for such shares against payment of the Warrant Price therefor,
validly issued, fully paid and nonassessable and listed on any national
securities exchange or included in any interdealer automated quotation system
upon or in which the other shares of outstanding Common Stock are then listed or
included. The Company will keep a copy of this Agreement on file with the
transfer agent for the shares of Common Stock (which may be the Warrant Agent)
and with every subsequent transfer agent for any shares of Common Stock issuable
upon the exercise of the rights of purchase represented by the Warrants. The
Warrant Agent is irrevocably authorized to requisition from time to time from
such transfer agent stock certificates required to honor outstanding Warrants.
The Company will supply such transfer agent with duly executed stock
certificates for that purpose. All Warrants surrendered in the exercise of the
rights thereby evidenced shall be cancelled by the Warrant Agent and shall
thereafter be delivered to the Company, and such cancelled Warrants shall
constitute sufficient evidence of the number of shares of Common Stock which
have been issued upon the exercise of such Warrants. Promptly after the date of
expiration of the Warrants, the Warrant Agent shall certify to the Company the
total aggregate amount of Warrants then outstanding, and thereafter no shares of
Common Stock shall be subject to reservation in respect of such Warrants which
shall have expired.
Section 9. Adjustments of Warrant Price and Number of Securities.
-----------------------------------------------------
The Warrant Price in effect at any time and the number of shares upon
the exercise of this Warrant shall be subject to adjustment from time to time
upon the happening of certain events as follows:
(a) In case the Company shall (i) issue shares of Common Stock as a
dividend or distribution on its outstanding shares of Common Stock, (ii)
subdivide or reclassify its outstanding shares of Common Stock into a greater
number of shares, (iii) combine or reclassify its outstanding shares of Common
Stock into a smaller number of shares, or (iv) the outstanding shares of Common
Stock are at any time changed into or exchanged for a different number or kind
of shares or other security of the Company or of another corporation through
reorganization, merger, consolidation, liquidation or recapitalization, then
appropriate adjustments in the number and kind of such securities subject to
this Warrant shall be made and the Exercise Price in effect at the time of the
record date for such dividend or distribution or of the effective date of such
subdivision, combination, reclassification, reorganization, merger,
consolidation, liquidation or recapitalization shall be proportionately adjusted
so that the holder of this Warrant exercised after such date shall be entitled
to receive the aggregate number and kind of shares of which, if this Warrant had
been exercised by such Holder immediately prior to such date, he would have
owned upon such exercise and been entitled to receive upon such dividend,
distribution, subdivision, combination, liquidation or recapitalization. For
example, if the Company declares a 2 for 1 stock distribution and the Exercise
Price immediately prior to such event was $4.50 per share and the number of
shares purchasable upon exercise of this Warrant was 10, the adjusted Warrant
Price immediately after such event would be $2.25 per share and the adjusted
number of shares purchasable upon exercise of this
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Warrant would be 20 shares. Such adjustment shall be made successively whenever
any event listed above shall occur.
(b) Whenever the Warrant Price payable upon exercise of this Warrant is
adjusted pursuant to Subparagraph (a) above, the number of shares purchasable
upon exercise of this Warrant shall simultaneously be adjusted by multiplying
the number of shares issuable upon exercise of this Warrant by the Warrant Price
in effect on the date hereof and dividing the product so obtained by the Warrant
Price, as adjusted.
(c) No adjustment in the Warrant Price shall be required unless such
adjustment would require an increase or decrease of at least five cents ($0.05)
in such price; provided, however, that any adjustments which by reason of this
Subparagraph (c) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment required to be made hereunder. All
calculations under this Section 9 shall be made to the nearest cent or
one-hundredth of a share, as the case may be. Anything in this Section 9 to the
contrary notwithstanding, the Company shall be entitled, but shall not be
required, to make such changes in the Warrant Price, in addition to those
required by this Section 9, as it shall determine, in its sole discretion, to be
advisable in order that any dividend or distribution in shares of Common Stock,
or any subdivision, reclassification or combination of Common Stock, hereafter
made by the Company shall not result in any Federal income tax liability to the
holders of Common Stock or securities convertible into or exercisable for Common
Stock.
(d) Whenever the Warrant Price is adjusted as herein provided, the
Company shall compute the adjusted Warrant Price in accordance with this Section
9 and shall prepare a certificate signed by the chief financial officer or
accounting officer of the Company setting forth the adjusted Warrant Price, and
shall promptly cause a notice setting forth the adjusted Warrant Price and
adjusted number of shares issuable upon exercise of this Warrant to be mailed to
the Holder, at its address set forth herein, and shall cause a certified copy
thereof to be mailed to the Company's transfer agent, if any. The Company may
(but shall not be required to) retain a firm of independent certified public
accountants selected by the Board of Directors (which may be the regular
accountants employed by the Company) to make any computation required by this
Section 9, and a certificate signed by such firm shall be conclusive evidence of
the correctness of such adjustment.
(e) In the event that at any time, as a result of an adjustment made
pursuant to the provisions of this Section 9, the Holder of this Warrant
thereafter shall become entitled to receive any shares of the Company other than
Common Stock thereafter the number of such other shares so receivable upon
exercise of this Warrant shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Common Stock contained in Subparagraphs (a) to (c), inclusive,
above.
(f) Notwithstanding any adjustment in the Warrant Price or the number
or kind of shares of Common Stock purchasable upon the exercise of this Warrant,
certificates for Warrants issued prior or subsequent to such adjustment may
continue to express the same price and number and kind of shares of Common Stock
as are initially issuable pursuant to this Warrant.
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(g) The Company may, but under no circumstances is obligated to, modify
the terms of this Warrant to provide for an earlier commencement of the Exercise
Period, or to extend the Exercise Period or to lower the Warrant Price, at any
time prior to the expiration of this Warrant.
Section 10. Fractional Interests. The Warrants may only be exercised to
purchase full shares of Common Stock and the Company shall not be required to
issue fractions of shares of Common Stock on the exercise of Warrants. However,
if a Warrantholder exercises all Warrants then owned of record by him and such
exercise would result in the issuance of a fractional share, the Company will
pay to such Warrantholder, in lieu of the issuance of any fractional share
otherwise issuable, an amount of cash based on the Market Price on the last
trading day prior to the exercise date.
Section 11. Notices to Warrantholders.
-------------------------
(a) Upon any adjustment of the Warrant Price and the number of
shares of Common Stock issuable upon exercise of a Warrant, then and in each
such case, the Company shall give written notice thereof to the Warrant Agent,
which notice shall state the Warrant Price resulting from such adjustment and
the increase or decrease, if any, in the number of shares purchasable at such
price upon the exercise of a Warrant, setting forth in reasonable detail the
method of calculation and the facts upon which such calculation is based. The
Company shall also mail such notice to the holders of the Warrants at their
respective addresses appearing in the Warrant register. Failure to give or mail
such notice, or any defect therein, shall not affect the validity of the
adjustments.
(b) In case at any time after the Closing Date:
(i) the Company shall pay dividends payable in stock
upon its Common Stock or make any distribution (other than regular cash
dividends) to the holders of Common Stock; or
(ii) the Company shall offer for subscription pro
rata to all of the holders of Common Stock any additional shares of stock of any
class or other rights; or
(iii) there shall be any capital reorganization or
reclassification of the capital stock of the Company, or consolidation or merger
of the Company with, or sale of substantially all of its assets to another
corporation; or
(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company; then in any one or more
of such cases, the Company shall give written notice to the Warrant Agent and
the holders of the Warrants in the manner set forth in Section 11(a) of the date
on which (A) a record shall be taken for such dividend, distribution or
subscription rights, or (B) such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up shall take
place, as the case may be. Such notice shall also specify the date as of which
the holders of Common Stock of record shall participate in such dividend,
distribution or subscription rights, or shall be entitled to exchange their
Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up, as the case may be. Such notice shall be given at
least ten (10)
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days prior to the action in question and not less than ten (10) days prior to
the record date in respect thereof. Failure to give such notice, or any defect
therein, shall not affect the legality or validity of any of the matters set
forth in this Section 11(b).
(c) The Company shall cause copies of all financial statements
and reports, proxy statements and other documents that are sent to its
stockholders to be sent by an identical class of mail, postage prepaid, on the
date of mailing to such stockholders, to each registered holder of Warrants at
his address appearing in the Warrant register as of the record date for the
determination of the stockholders entitled to such documents.
Section 12. Disposition of Proceeds on Exercise of Warrants.
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(a) The Warrant Agent shall promptly forward to the Company
all monies received by the Warrant Agent for the purchase of shares of Common
Stock through the exercise of these Warrants.
(b) The Warrant Agent shall keep copies of this Agreement
available for inspection by holders of Warrants during normal business hours.
Section 13. Redemption of Warrants. The Warrants are redeemable by the
Company commencing on the first anniversary of the date of the Prospectus (with
the consent of the Underwriter), in whole or in part, on not less than thirty
(30) days' prior written notice at a redemption price of $.05 per Warrant,
provided the average closing bid quotation of the Common Stock as reported on
the Nasdaq Stock Market, if traded thereon, or if not traded thereon, the
average closing sale price if listed on a national securities exchange (or other
reporting system that provides last sale prices), has been at least $8.00 per
share, for a period of 20 consecutive trading days ending on the third day prior
to the date on which the Company gives notice of redemption. Any redemption in
part shall be made pro rata to all Warrant holders. The redemption notice shall
be mailed to the holders of the Warrants at their respective addresses appearing
in the Warrant register. Any such notice mailed in the manner provided herein
shall be conclusively presumed to have been duly given in accordance with this
Agreement whether or not the registered holder receives such notice. No failure
to mail such notice nor any defect therein or in the mailing thereof shall
affect the validity of the proceedings for such redemption except as to a
registered holder of a Warrant (i) to whom notice was not mailed or (ii) whose
notice was defective. An affidavit of the Warrant Agent or the Secretary or
Assistant Secretary of the Company that notice of redemption has been mailed
shall, in the absence of fraud, be prima facie evidence of the facts stated
therein. Holders of the Warrants will have exercise rights until the close of
business on the day immediately preceding the date fixed for redemption.
Section 14. Merger or Consolidation or Change of Name of Warrant Agent.
Any corporation or company which may succeed to the corporate trust business of
the Warrant Agent by any merger or consolidation or otherwise shall be the
successor to the Warrant Agent hereunder without the execution or filing of any
paper or any further act on the part of any of the parties hereto; provided,
that such corporation would be eligible for appointment as a successor Warrant
Agent under the provisions of Section 16 of this Agreement. In case at the time
such successor to the
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Warrant Agent shall succeed to the agency created by this Agreement any of the
Warrants shall have been countersigned but not delivered, any such successor to
the Warrant Agent may adopt the countersignature of the original Warrant Agent
and deliver such Warrants so countersigned.
In case at any time the name of the Warrant Agent shall be changed and
at such time any of the Warrants shall have been countersigned but not
delivered, the Warrant Agent may adopt the countersignature under its prior name
and deliver Warrants so countersigned. In all such cases such Warrants shall
have the full force provided in the Warrants and in this Agreement.
Section 15. Duties of Warrant Agent. The Warrant Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Warrants, by their
acceptance thereof, shall be bound:
(a) The statements of fact and recitals contained herein and
in the Warrants shall be taken as statements of the Company, and the Warrant
Agent assumes no responsibility for the correctness of any of the same except as
such describe the Warrant Agent or action taken or to be taken by it. The
Warrant Agent assumes no responsibility with respect to the distribution of the
Warrants except as herein expressly provided.
(b) The Warrant Agent shall not be responsible for any failure
of the Company to comply with any of the covenants in this Agreement or in the
Warrants to be complied with by the Company.
(c) The Warrant Agent may consult at any time with counsel
satisfactory to it (who may be counsel for the Company) and the Warrant Agent
shall incur no liability or responsibility to the Company or to any holder of
any Warrant in respect of any action taken, suffered or omitted by it hereunder
in good faith and in accordance with the opinion or the advice of such counsel.
(d) The Warrant Agent shall incur no liability or
responsibility to the Company or to any holder of any Warrant for any action
taken in reliance on any notice, resolution, waiver, consent, order, certificate
or other instrument believed by it to be genuine and to have been signed, sent
or presented by the proper party or parties.
(e) The Company agrees to pay to the Warrant Agent reasonable
compensation for all services rendered by the Warrant Agent in the execution of
this Agreement, to reimburse the Warrant Agent for all expenses, taxes and
governmental charges and other charges incurred by the Warrant Agent in the
execution of this Agreement and to indemnify the Warrant Agent and save it
harmless against any and all liabilities, including judgments, costs and
reasonable counsel fees, for anything done or omitted by the Warrant Agent in
the execution of this Agreement except as a result of the Warrant Agent's
negligence, willful misconduct or bad faith.
(f) The Warrant Agent shall be under no obligation to
institute any action, suit or legal proceeding or to take any other action
likely to involve expenses unless the Company or one or more registered holders
of Warrants shall furnish the Warrant Agent with reasonable security and
indemnity for any costs and expenses which may be incurred, but this provision
shall not affect the
10
power of the Warrant Agent to take such action as the Warrant Agent may consider
proper, whether with or without any such security or indemnity. All rights of
action under this Agreement or under any of the Warrants may be enforced by the
Warrant Agent without the possession of any of the Warrants or the production
thereof at any trial or other proceeding. Any such action, suit or proceeding
instituted by the Warrant Agent shall be brought in its name as Warrant Agent,
and any recovery of judgment shall be for the ratable benefit of the registered
holders of the Warrants, as their respective rights and interests may appear.
(g) The Warrant Agent and any stockholder, director, officer,
partner or employee of the Warrant Agent may buy, sell or deal in any of the
Warrants or other securities of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract with or lend
money to or otherwise act as fully and freely as though it were not the Warrant
Agent under this Agreement. Nothing herein shall preclude the Warrant Agent from
acting in any other capacity for the Company or for any other legal entity.
(h) The Warrant Agent shall act hereunder solely as agent and
its duties shall be determined solely by the provisions hereof.
(i) The Warrant Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either itself
or by or through its attorneys, agents or employees, and the Warrant Agent shall
not be answerable or accountable for any such attorneys, agents or employees or
for any loss to the Company resulting from such neglect or misconduct, provided
reasonable care had been exercised in the selection and continued employment
thereof.
(j) Any request, direction, election, order or demand of the
Company shall be sufficiently evidenced by an instrument signed in the name of
the Company by its President or a Vice President or its Secretary or an
Assistant Secretary or its Treasurer or an Assistant Treasurer (unless other
evidence in respect thereof be herein specifically prescribed); and any
resolution of the Board of Directors may be evidenced to the Warrant Agent by a
copy thereof certified by the Secretary or an Assistant Secretary of the
Company.
Section 16. Change of Warrant Agent. The Warrant Agent may resign and
be discharged from its duties under this Agreement by giving to the Company
notice in writing, and to the holders of the Warrants notice by mailing such
notice to the holders at their respective addresses appearing on the Warrant
register, of such resignation, specifying a date when such resignation shall
take effect. The Warrant Agent may be removed by like notice to the Warrant
Agent from the Company and the like mailing of notice to the holders of the
Warrants. If the Warrant Agent shall resign or be removed or shall otherwise
become incapable of action, the Company shall appoint a successor to the Warrant
Agent. If the Company shall fail to make such appointment within a period of
thirty (30) days after such removal or after it has been notified in writing of
such resignation or incapacity by the resigning or incapacitated Warrant Agent
or after the Company has received such notice from a registered holder of a
Warrant (who shall, with such notice, submit his Warrant for inspection by the
Company), then the registered holder of any Warrant may apply to any court of
competent jurisdiction for the appointment of a successor to the Warrant Agent.
Any successor Warrant Agent,
11
whether appointed by the Company or by such a court, shall be a bank or trust
company, in good standing, incorporated under New York or federal law. After
appointment, the successor Warrant Agent shall be vested with the same powers,
rights, duties and responsibility as if it had been originally named as Warrant
Agent without further act or deed and the former Warrant Agent shall deliver and
transfer to the successor Warrant Agent all canceled Warrants, records and
property at the time held by it hereunder, and execute and deliver any further
assurance or conveyance necessary for this purpose. Failure to file or mail any
notice provided for in this Section, however, or any defect therein, shall not
affect the validity of the resignation or removal of the Warrant Agent or the
appointment of the successor Warrant Agent, as the case may be.
Section 17. Identity of Transfer Agent. Forthwith upon the appointment
of any transfer agent (other than Continental Stock Transfer & Trust Company)
for the shares of Common Stock or of any subsequent transfer agent for the
shares of Common Stock, the Company will file with the Warrant Agent a statement
setting forth the name and address of such transfer agent.
Section 18. Notices. Any notice pursuant to this Agreement to be given
by the Warrant Agent or the registered holder of any Warrant to the Company,
shall be sufficiently given if sent by first-class mail, postage prepaid,
addressed (until another is filed in writing by the Company with the Warrant
Agent) as follows:
PHOENIX PRESCHOOL HOLDINGS, INC.,
31st Floor
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Chairman,
Chief Executive Officer and President
and a copy thereof to:
Blank Rome Xxxxxxx & XxXxxxxx.
0 Xxxx Xxxxxx Xxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxxxxx X. Xxxxxx, Esq.
Any notice pursuant to this Agreement to be given by the Company or the
registered holder of any Warrant to the Warrant Agent shall be sufficiently
given if sent by first-class mail, postage prepaid, addressed (until another
address is filed in writing by the Warrant Agent with the Company) as follows:
Continental Stock Transfer & Trust Company
0 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Executive Vice President
12
Any notice pursuant to this Agreement to be given by the Warrant Agent
or the Company to the Underwriter shall be sufficiently given if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Warrant Agent) as follows:
Maidstone Financial, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx Xxxxxxxxx
and a copy thereof to:
Xxxxxxx, Savage, Kaplowitz, Xxxxxxxxxx & Xxxxxx, LLP
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxx, Esq.
Section 19. Supplements and Amendments. The Company and the Warrant
Agent may from time to time supplement or amend this Agreement in order to cure
any ambiguity or to correct or supplement any provision contained herein which
may be defective or inconsistent with any other provision herein, or to make any
other provisions in regard to matters or questions arising hereunder which the
Company and the Warrant Agent may deem necessary or desirable and which shall
not be inconsistent with the provisions of the Warrants and which shall not
materially adversely affect the interest of the holders of Warrants; and in
addition the Company and the Warrant Agent may modify, supplement or alter this
Agreement with the consent in writing of the registered holders of the Warrants
representing not less than a majority of the Warrants then outstanding.
Section 20. New York Contract. This Agreement and each Warrant issued
hereunder shall be deemed to be a contract made under the laws of the State of
New York and shall be construed in accordance with the laws of New York without
regard to the conflicts of law principles thereof.
Section 21. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give to any person or corporation other than the Company, the
Warrant Agent and the registered holders of the Warrants any legal or equitable
right, remedy or claim under this Agreement; but this Agreement shall be for the
sole and exclusive benefit of the Company, the Warrant Agent and the registered
holders of the Warrants.
Section 22. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Warrant Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
13
IN WITNESS WHEREOF, the parties have entered into this Agreement on the
date first above written.
PHOENIX PRESCHOOL HOLDINGS, INC.,
By:________________________________________________
Name: Xxxxxxx X. Xxxxxxx
Title: Chairman, Chief Executive Officer
and President
CONTINENTAL STOCK TRANSFER &
TRUST COMPANY
By:_______________________________________________
Name:
Title:
MAIDSTONE FINANCIAL, INC.
By:_______________________________________________
Name: Xxxxxxxx Xxxxxxxxx
Title: Chairman of the Board
14
No. W_______________________ VOID AFTER_____________, 2001
_________________WARRANTS
REDEEMABLE WARRANT CERTIFICATE TO
PURCHASE COMMON STOCK
PHOENIX PRESCHOOL HOLDINGS, INC.
CUSIP [ ]
THIS CERTIFIES THAT, FOR VALUE RECEIVED
or registered assigns (the "Registered Holder") is the owner of the
number of Redeemable Warrants (the "Warrants") specified above. Each Warrant
initially entitles the Registered Holder to purchase, subject to the terms and
conditions set forth in this Certificate and the Warrant Agreement (as
hereinafter defined), one (1) fully paid and non-assessable share of Common
Stock, par value $0.10 per share (the "Common Stock"), of PHOENIX PRESCHOOL
HOLDINGS, INC., a Delaware corporation (the "Company"), at any time from
_________ __, 1999 (the "Initial Warrant Exercise Date"), and prior to the
Expiration Date (as hereinafter defined) upon the presentation and surrender of
this Warrant Certificate with the Exercise Form on the reverse hereof duly
executed, at the corporate office of Continental Stock Transfer & Trust Company,
0 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, as Warrant Agent, or its successor (the
"Warrant Agent"), accompanied by payment of $4.50, subject to adjustment (the
"Warrant Price"), in lawful money of the United States of America in cash or by
certified or bank check made payable to the Company.
This Warrant Certificate and each Warrant represented hereby are issued
pursuant to and are subject in all respects to the terms and conditions set
forth in the Warrant Agreement, dated as of ___________ ___, 1997 (the "Warrant
Agreement"), among the Company, Maidstone Financial, Inc.
(the "Underwriter") and the Warrant Agent.
In the event of certain contingencies provided for in the Warrant
Agreement, the Warrant Price and the number of shares of Common Stock subject to
purchase upon the exercise of each Warrant represented hereby are subject to
modification or adjustment.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional shares will be issued. In the case of the
exercise of less than all the Warrants represented hereby, the Company shall
cancel this Warrant Certificate upon the surrender hereof and shall execute and
deliver a new Warrant Certificate or Warrant Certificates of like tenor, which
the Warrant Agent shall countersign, for the balance of such Warrants.
The term "Expiration Date" shall mean 5:00 p.m. (New York time)
on_________ ___, 2002 [the date which is the fourth anniversary of the Initial
Warrant Exercise Date]; provided, that if such date is not a business day, it
shall mean 5:00 p.m., New York City time, on the next following business day.
For purposes hereof, the term "business day" shall mean any day other than a
Saturday, Sunday or a day on which banking institutions in New York City, New
York, are authorized or obligated by law to be closed.
The Company shall not be obligated to deliver any securities pursuant
to the exercise of the Warrants represented hereby unless at the time of
exercise the Company has filed with the Securities and Exchange Commission a
registration statement under the Securities Act of 1933, as amended (the "Act"),
covering the securities issuable upon exercise of the Warrants represented
hereby and such registration statement has been declared and shall remain
effective and shall be current, and such securities have been registered or
qualified or be exempt under the securities laws of the state or other
jurisdiction of residence of the Registered Holder and the exercise of the
Warrants represented hereby in any such state or other jurisdiction shall not
otherwise be unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by
the Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to represent
such number of Warrants as shall be designated by such Registered Holder at the
time of such surrender. Upon the presentment and payment of any tax or other
charge imposed in connection therewith or incident thereto for registration of
transfer of this Warrant Certificate at such office, a new Warrant Certificate
or Warrant Certificates representing an equal aggregate number of Warrants will
be issued to the transferee in exchange therefor, subject to the limitations
provided in the Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the Registered
Holder, as such, shall not be entitled to any rights of a stockholder of the
Company, including, without limitation, the right to vote or to receive
dividends or other distributions, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided in the Warrant
Agreement.
Subject to the provisions of the Warrant Agreement, this Warrant may be
redeemed at the option of the Company, in whole or in part, at a redemption
price of $.05 per Warrant, at any time commencing __________ ___, 1998 [the
first anniversary of the date of the Prospectus] provided that the average
closing sales price of the Common Stock as reported on The Nasdaq stock Market,
if traded thereon, or if not traded thereon, the average closing sale price if
listed on national exchange (or other reporting system that provides last sale
prices), shall have for a period of 20 consecutive days on which such market is
open for trading ending on the third day prior to the date on which the Company
gives the Notice of Redemption (as defined below) has been at least $8.00.
Notice of redemption (the "Notice of Redemption") shall be given by the Company
no less than thirty days before the date fixed for redemption, all as provided
in the Warrant Agreement. On and after the date fixed for redemption, the
Registered Holder shall have no right with respect to this Warrant except to
receive the $0.05 per Warrant upon surrender of this Certificate.
Under certain circumstances described in the Warrant Agreement, the
Underwriter shall be entitled to receive as a solicitation fee an aggregate of
eight percent (8%) of the Warrant Price of the Warrants represented hereby.
Prior to due presentment for registration of transfer hereof, the
Company and the Warrant Agent may deem and treat the Registered Holder as the
absolute owner hereof and of each Warrant represented hereby (notwithstanding
any notations of ownership or writing hereon made by anyone other than a duly
authorized officer of the Company or the Warrant Agent) for all purposes and
shall not be affected by any notice to the contrary, except as provided in the
Warrant Agreement.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York without regard to the
conflicts of law principles thereof.
This Warrant Certificate is not valid unless countersigned by the
Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed, manually or in facsimile by two of its officers thereunto duly
authorized and a facsimile of its corporate seal to be imprinted hereon.
Dated __________ ___, 1997
SEAL PHOENIX PRESCHOOL HOLDINGS, INC.
By:_________________________________________
Chairman, Chief Executive Officer
and President
By:_________________________________________
Secretary
COUNTERSIGNED:
CONTINENTAL STOCK TRANSFER &
TRUST COMPANY, as Warrant Agent
By:____________________________
Authorized Officer
EXERCISE FORM
To Be Executed by the Registered Holder
in order to Exercise Warrant
The undersigned Registered Holder hereby irrevocably elects to exercise
_________ Warrants represented by this Warrant Certificate, and to purchase the
securities issuable upon the exercise of such Warrants, and requests that
certificates for such securities shall be issued in name of
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER:
---------------------------
---------------------------
---------------------------
(please print or type name and address)
and be delivered to
---------------------------
---------------------------
---------------------------
(please print or type name and address)
and if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.
IMPORTANT: PLEASE COMPLETE THE FOLLOWING:
1. If the exercise of this Warrant was solicited by Maidstone
Financial, Inc., please check the following box. [ ]
2. THE EXERCISE OF THIS WARRANT WAS SOLICITED BY
----------------------------------------------------
3. IF THE EXERCISE OF THIS WARRANT WAS NOT SOLICITED, PLEASE
CHECK THE FOLLOWING BOX. [ ]
Dated: _____________________________ X__________________________________
----------------------------------
----------------------------------
Address
----------------------------------
Social Security or Taxpayer
Identification Number
----------------------------------
Signature Guaranteed
ASSIGNMENT
To be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, ____________________________, hereby sells, assigns and
transfers unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER:
---------------------------
---------------------------
---------------------------
(please print or type name and address)
________________________ of the Warrants represented by this Warrant
Certificate, and hereby irrevocably constitutes and appoints
______________________________________ as its/his/her attorney-in-fact to
transfer this Warrant Certificate on the books of the Company, with full power
of substitution in the premises.
Dated: ______________________ X__________________________________
Signature Guaranteed: _____________
THE SIGNATURE TO THE ASSIGNMENT OR THE EXERCISE FORM MUST CORRESPOND TO THE NAME
AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER AND MUST BE
GUARANTEED BY A BANK, BROKER, DEALER, CREDIT UNION, SAVINGS ASSOCIATION OR OTHER
ENTITY WHICH IS A MEMBER IN GOOD STANDING OF THE SECURITIES TRANSFER AGENTS
MEDALLION PROGRAM.
