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EXHIBIT 10.4
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY APPLICABLE STATE SECURITIES LAW AND MAY
NOT BE TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT UNDER THE ACT OR SUCH
APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO
OR (II) IN THE OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY, REGISTRATION UNDER
THE ACT OR SUCH APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION
WITH SUCH PROPOSED TRANSFER.
STOCK PURCHASE WARRANT
This Stock Purchase Warrant (the "Warrant") is issued as of this 31st
day of March, 2001, by Beacon Education Management, Inc., a Delaware corporation
(the "Company"), to KinderCare Learning Centers, Inc., a Delaware corporation
("Holder").
AGREEMENT:
Section 1. Issuance of Warrant; Term; Replacement.
(a) Pursuant to the Second Amendment to Loan Agreement,
dated as of March 31, 2001, by and between the Company and Holder (the
"Amendment"), which amends that certain Equity Purchase and Loan Agreement,
dated as of February 17, 2000 and amended as of September 28, 2000 (the "Loan
Agreement", and together with the Amendment, the "Amended Agreement"), the
Company hereby grants to Holder the right to purchase 50,000 shares of the
Company's common stock, $0.01 par value per share (the "Common Stock").
(b) The shares of Common Stock issuable upon exercise of
this Warrant are hereinafter referred to as the "Shares." Subject to Section
2.1(C) of the Amended Agreement, this Warrant shall be exercisable at any time
and from time to time from the date hereof until November 15, 2004.
(c) Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction, or mutilation of this
Warrant, and (in the case of loss, theft, or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Warrant, if mutilated, the Company shall execute and deliver a new Warrant of
like tenor and date. Any such new Warrant executed and delivered shall
constitute an additional contractual obligation on the part of the Company,
whether or not this Warrant so lost, stolen, destroyed, or mutilated shall be at
any time enforceable by anyone.
Section 2. Exercise Price. The exercise price (the "Exercise
Price") per share for which all or any of the Shares may be purchased pursuant
to the terms of this Warrant shall be $5.80.
Section 3. Exercise. This Warrant may be exercised by the Holder
hereof (but only
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on the conditions hereafter set forth) in whole or in part upon delivery of
written notice of intent to exercise to the Company at the address set forth in
Section 9, or such other address as the Company shall designate in a written
notice to the Holder hereof, together with this Warrant and payment to the
Company of the aggregate Exercise Price of the Shares so purchased. The Exercise
Price shall be payable by certified or cashier's check, immediately available
funds or such other method mutually acceptable to the Company and the Holder.
Upon exercise of this Warrant as aforesaid, the Company shall as promptly as
practicable, and in any event within fifteen (15) days thereafter, execute and
deliver to the Holder of this Warrant a certificate or certificates for the
total number of whole Shares for which this Warrant is being exercised in such
names and denominations as are requested by such Holder. If this Warrant shall
be exercised with respect to less than all of the Shares, the Holder shall be
entitled to receive a new Warrant covering the number of Shares in respect of
which this Warrant shall not have been exercised, which new Warrant shall in all
other respects be identical to this Warrant.
Section 4. Covenants and Conditions. The above provisions are
subject to the following:
(a) Neither this Warrant nor the Shares have been
registered under the Securities Act or any state securities laws ("Blue Sky
Laws"). The Holder acknowledges and agrees that this Warrant has been acquired
for investment purposes and not with a view to distribution or resale in
violation of the registration provisions of the Securities Act. This Warrant may
not be pledged, hypothecated, sold, made subject to a security interest, or
otherwise transferred without (i) an effective registration statement for such
Warrant under the Securities Act and such applicable Blue Sky Laws or (ii) an
opinion of counsel, which opinion and counsel shall be reasonably satisfactory
to the Company and its counsel, that registration is not required under the
Securities Act or under any applicable Blue Sky Laws; and transfer of Shares
issued upon the exercise of this Warrant shall be restricted in the same manner
and to the same extent as the Warrant, and the certificates representing such
Shares shall bear substantially the following legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
APPLICABLE STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED UNTIL (I) A
REGISTRATION STATEMENT UNDER THE ACT OR SUCH APPLICABLE STATE SECURITIES LAWS
SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO OR (II) IN THE OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY, REGISTRATION UNDER THE ACT OR SUCH APPLICABLE
STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO TRANSFER AND
OTHER RESTRICTIONS AND CONDITIONS ALL AS SET FORTH IN THE SHAREHOLDERS RIGHTS
AGREEMENT DATED FEBRUARY 17, 2000, AS SUCH AGREEMENT MAY BE AMENDED FROM TIME TO
TIME.
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The Holder hereof and the Company agree to execute such other documents and
instruments as counsel for the Company reasonably deems necessary to effect the
compliance of the issuance of this Warrant and any shares of Common Stock issued
upon exercise hereof with applicable federal and state securities laws.
(b) Holder hereby agrees that the Warrant and the Shares
will be subject to the provisions of the Shareholders Rights Agreement dated as
of February 17, 2000, as such agreement may be amended from time to time (the
"Stockholders' Agreement"), among the Company, Holder and the other stockholders
of the Company signatory thereto.
(c) The Company covenants and agrees that all Shares that
may be issued upon exercise of this Warrant will, upon issuance and payment
therefor, be legally and validly issued and outstanding, fully paid and
nonassessable, free from all taxes, liens, charges, and preemptive rights, if
any, with respect thereto or to the issuance thereof. The Company shall at all
times reserve and keep available for issuance upon the exercise of this Warrant
such number of authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of this Warrant.
Section 5. Adjustment of Exercise Price and Number of Shares
Issuable. The Exercise Price and the number of Shares (or other securities or
property) issuable upon exercise of this Warrant shall be subject to adjustment
from time to time upon the occurrence of any of the events enumerated in this
Section 5.
(a) Common Stock Reorganization. If the Company shall (i)
subdivide or consolidate its outstanding shares of Common Stock (or any class
thereof) into a greater or smaller number of shares; (ii) pay a dividend or make
a distribution on its Common Stock (or any class thereof) in shares of its
capital stock; or (iii) issue by reclassification of its Common Stock (or any
class thereof) any shares of its capital stock (any such event described in
clauses (i), (ii), or (iii) being called a "Common Stock Reorganization"), then
the Exercise Price and the type of securities for which this Warrant is
exercisable shall be adjusted immediately such that the Holder thereafter shall
be entitled to receive upon exercise of this Warrant the aggregate number and
type of securities that it would have received if this Warrant had been
exercised immediately prior to such Common Stock Reorganization.
(b) Capital Reorganizations. If there shall be (i) any
consolidation, merger, or amalgamation of the Company with another person or
entity or any acquisition of capital stock of the Company by means of a share
exchange in which the Company is not the continuing corporation or a reverse
triangular merger in which the Company is the continuing corporation but the
shares of the Company's capital stock outstanding immediately prior to the
merger are converted by virtue of the merger into other property, whether in the
form of securities, cash or otherwise, (ii) any sale or conveyance of the
property of the Company as an entirety or substantially as an entirety, or (iii)
any reorganization of the Company other than a Common Stock Reorganization (any
such event being called a "Capital Reorganization"), then, as a part of such
Capital Reorganization, lawful provision shall be made so that the Holder of
this Warrant shall no longer have the right to purchase Common Stock, but shall
have instead the right to purchase, upon exercise of this Warrant and payment of
the Exercise Price then in effect, the
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kind and amount of shares of stock and other securities and property (including
cash) that the Holder would have owned or have been entitled to receive pursuant
to such Capital Reorganization if this Warrant had been exercised immediately
prior to the effective date of such Capital Reorganization. As a condition to
effecting any Capital Reorganization, the Company or the successor or surviving
corporation, as the case may be, shall assume by a supplemental agreement,
satisfactory in form, scope, and substance to the Holder (which shall be mailed
or delivered to the Holder of this Warrant at the last address of such Holder
appearing on the books of the Company) the obligation to deliver to such Holder
such shares of stock, securities, cash, or property as, in accordance with the
foregoing provisions, such Holder may be entitled to purchase after giving
effect to the Capital Reorganization, and all other obligations of the Company
set forth in this Warrant.
Section 6. Warrant Transfer Provisions. Subject to the
provisions of Section 4 and the Stockholders' Agreement, this Warrant may be
transferred, in whole or in part, to any person or business entity, by
presentation of the Warrant to the Company with written instructions for such
transfer and by the execution by such transferee of an investment letter in a
form reasonably satisfactory to the Company. Upon such presentation for transfer
and receipt of such investment letter, the Company shall promptly execute and
deliver a new Warrant or Warrants in the form hereof in the name of the assignee
or assignees and in the denominations specified in such instructions. The
Company shall pay all expenses in connection with the preparation, issuance and
delivery of Warrants under this Section 6; provided, however, that the Holder
shall reimburse the Company for any out-of-pocket expenses incurred by the
Company in connection with such issuance. Any transfer of this Warrant is
registrable at the office or agency of the Company referred to in Section 9
below by the Holder in person or by his duly authorized attorney, upon surrender
of this Warrant properly endorsed.
Section 7. No Rights or Liabilities as a Stockholder. This
Warrant shall not entitle the Holder to any voting rights or other rights as a
stockholder of the Company. No provision of this Warrant, in the absence of
affirmative action by the Holder to purchase Shares, and no mere enumeration
herein of the rights or privileges of the Holder, shall give rise to any
liability of Holder for the Exercise Price or as a stockholder of the Company,
whether such liability is asserted by the Company or by creditors of the
Company.
Section 8. Certain Notices. In case at any time the Company
shall propose to:
(a) declare any cash dividend upon its Common Stock;
(b) declare any dividend upon its Common Stock payable in
stock or make any special dividend or other distribution to the holders of its
Common Stock;
(c) effect a Common Stock Reorganization or engage in a
Capital Reorganization; or
(d) voluntarily or involuntarily dissolve, liquidate or
wind up the affairs of the Company;
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then, in any one or more of said cases, the Company shall give, by certified or
registered mail, (i) at least 10 days' prior written notice of the date on which
the books of the Company shall close or a record shall be taken for such
dividend or distribution or for determining rights to vote in respect of any
such Common Stock Reorganization, Capital Reorganization, dissolution,
liquidation or winding up, and (ii) in the case of such Common Stock
Reorganization, Capital Reorganization, dissolution, liquidation or winding up,
at least 10 days' prior written notice of the date when the same shall take
place. Any notice required by clause (i) shall also specify, in the case of any
such dividend or distribution, the date on which the holders of Common Stock
shall be entitled thereto, and any notice required by clause (ii) shall specify
the date on which the holders of Common Stock shall be entitled to exchange
their Common Stock for securities or other property deliverable upon such Common
Stock Reorganization, Capital Reorganization, dissolution, liquidation or
winding up, as the case may be.
Section 9. Notices. Except as otherwise specified herein, all
notices, requests, demands, and other communications to or upon the parties
hereto shall be in writing or by tested or otherwise authenticated telecopier,
telex, telegram, or cable and shall be deemed to have been duly given or made
two business days after deposit in the mails, certified and postage prepaid, or
transmitted by telecopier or telex or delivered to the telegraph office,
addressed to the party to which such notice, request, demand, or other
communication is requested or permitted to be given or made hereunder at the
addresses set forth below (or to any telecopier or telex number published as
belonging to such party at such address) or at such other address of which such
party shall have notified in writing the other parties hereto.
If to Investor: KinderCare Learning Centers, Inc.
c/o Xxx X. Xxxxxxxxx
Vice President and General Counsel
000 XX Xxxxxxxx, Xxxxx 0000
Xxxxxxxx, Xxxxxx 00000
Facsimile No. (000) 000-0000
With a copy to: Stoel Rives LLP
000 XX Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, Xxxxxx 00000
Attn: Xxxx X. Xxxxxx, Esq.
Facsimile No. (000) 000-0000
If to the Company: Beacon Education Management LLC
000 Xxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxxxx X. XxXxxxxx, Xx.
Facsimile No. (000) 000-0000
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With a copy to: Bass, Xxxxx & Xxxx PLC
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxxx 00000-0000
Attn: Xxxxxx X. Xxxxx III
Facsimile No. (000) 000-0000
Section 10. Fractional Shares. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant, but the Company shall pay the Holder an amount equal to the fair market
value of such fractional share of Common Stock in lieu of each fraction of a
share otherwise called for upon any exercise of this Warrant.
Section 11. Applicable Law. The Warrant is issued under and shall
for all purposes be governed by and construed in accordance with the laws of the
State of Delaware applicable to contracts made and to be performed wholly within
such state without regard to its conflict of laws rules.
Section 12. Miscellaneous.
(a) Amendments. This Warrant and any provision hereof may
not be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party (or any predecessor in interest
thereof) against which enforcement of the same is sought.
(b) Descriptive Headings. The descriptive headings of the
several Paragraphs of this Warrant are inserted for purposes of reference only
and shall not affect the meaning or construction of any of the provisions
hereof.
(c) Successors and Assigns. Subject to the provisions of
Section 5 hereof, this Warrant shall be binding upon any entity succeeding to
the Company by merger, consolidation or acquisition of all or substantially all
of the Company's assets or capital stock.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have set their hands as of the
date first above written.
BEACON EDUCATION MANAGEMENT, INC.,
a Delaware corporation
By: /s/ Xxxxxxx X. XxXxxxxx, Xx.
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Title: Chairman
HOLDER:
KinderCare Learning Centers, Inc.
By: /s/ Xxxxx X. Xxxxxxx
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Title: Chairman and CEO
