EXHIBIT 1.4
PROMOTIONAL SHARES LOCK-IN AGREEMENT
This Promotional Shares Lock-In Agreement ("Agreement") is made and
entered into on the ______ day of May, 2005 by and among Peoples Educational
Holdings, Inc., a Delaware corporation ("Issuer"), and the persons who have
signed this Agreement as security holders (collectively referred to as "Security
Holders").
RECITALS:
A. The Issuer has filed an application with the Securities
Administrators of the States of Alaska, Illinois, Indiana, Iowa, Massachusetts,
Michigan, Minnesota, New Jersey, Xxx Xxxx, Xxxxx Xxxxxx, Xxxxx Xxxxxx, Xxxxx and
Wisconsin ("Administrators") to register 500,000 shares of common stock, par
value $0.02 per share (plus up to an additional 75,000 shares of common stock
subject to the underwriter's over-allotment option) for sale to public investors
who are residents of those states ("Registration").
B. The Security Holders are the owners of the shares of common stock or
similar securities and/or possess convertible securities, warrants, options or
rights which may be converted into, or exercised to purchase shares of common
stock or similar securities of Issuer.
C. As a condition to Registration, the Issuer and Security Holders
("Signatories") agree to be bound by the terms of this Agreement.
NOW THEREFORE, the parties hereto agree as follows:
1. RESTRICTION ON PROMOTIONAL SHARES. The Security Holders agree not to
sell, pledge, hypothecate, assign, grant any option for the sale of, or
otherwise transfer or dispose of, whether or not for consideration, directly or
indirectly, promotional shares as defined in the North American Securities
Administrators Association ("NASAA") Statement of Policy Regarding Corporate
Securities Definitions and as listed on Exhibit A ("Promotional Shares") and all
certificates representing stock dividends, stock splits, recapitalizations, and
the like, that are granted to, or received by, the Security Holders with respect
to the Promotional Shares while the Promotional Shares are subject to this
Agreement ("Restricted Securities"). Upon the exercise by any Security Holder of
his or her conversion rights, warrants or options listed on Exhibit A to acquire
additional shares of Issuer, the additional shares received from the exercise of
such warrants or options shall be considered Restricted Securities subject to
the terms and conditions of this Agreement.
2. RELEASE OF SECURITIES. The Restricted Securities shall be released to
Security Holders as follows:
a. Two and one-half percent (2.5%) of each Security Holder's
Restricted Securities shall be released from the restrictions set forth
in this Agreement on the date that is twelve (12) months after the date
of completion of the public offering;
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b. Two and one-half percent (2.5%) of each Security Holder's
Restricted Securities shall be released from the restrictions set forth
in this Agreement on the date that is fifteen (15) months after the
date of completion of the public offering;
c. Two and one-half percent (2.5%) of each Security Holder's
Restricted Securities shall be released from the restrictions set forth
in this Agreement on the date that is eighteen (18) months after the
date of completion of the public offering;
d. Two and one-half percent (2.5%) of each Security Holder's
Restricted Securities shall be released from the restrictions set forth
in this Agreement on the date that is twenty-one (21) months after the
date of completion of the public offering; and
e. All remaining Restricted Securities shall be released from
the restrictions set forth in this Agreement on the date that is
twenty-four (24) months after the date of completion of the public
offering.
3. DISSOLUTION PREFERENCE. The Securities Holders agree that in the
event of a dissolution, liquidation, merger, consolidation, reorganization, sale
or exchange of the Issuer's assets or securities (including by way of tender
offer), or any other transaction or proceeding with a person who is not a
promoter as defined in the NASAA Statement of Policy Regarding Corporate
Securities Definitions ("Promoter"), which results in the distribution of the
Issuer's assets or securities ("Distribution"):
a. All holders of the Issuer's equity securities will
initially share on a pro rata, per share basis in the Distribution, in
proportion to the amount of cash or other consideration that they paid
per share for their equity securities (provided that the Administrator
has accepted the value of the other consideration), until the
shareholders who purchased the Issuer's equity securities pursuant to
the public offering ("Public Shareholders") have received, or have had
irrevocably set aside for them, an amount that is equal to one hundred
percent (100%) of the public offering price per share times the number
of shares of equity securities that they purchased pursuant to the
public offering and which they still hold at the time of the
Distribution, adjusted for stock splits, stock dividends,
recapitalizations and the like; and
b. All holders of the Issuer's equity securities shall
thereafter participate on an equal, per share basis times the number of
shares of equity securities they hold at the time of the Distribution,
adjusted for stock splits, stock dividends, recapitalizations and the
like.
c. The Distribution may proceed on lesser terms and conditions
than the terms and conditions stated in sub-paragraphs (a) and (b)
above if a majority of the equity securities that are not held by
Security Holders, officers, directors, or Promoters of the Issuer, or
their associates or affiliates vote, or consent by consent procedure,
to approve the lesser terms and conditions.
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4. TRANSACTION WITH PROMOTER. In the event of a dissolution,
liquidation, merger, consolidation, reorganization, sale or exchange of the
Issuer's assets or securities (including by way of tender offer), or any other
transaction or proceeding with a person who is a Promoter, which results in a
Distribution while this Agreement remains in effect, the Restricted Securities
shall remain subject to the terms of this Agreement.
5. TRANSFER OF SECURITIES. Restricted Securities may be transferred by
will, the laws of descent and distribution, the operation of law, or by order of
any court of competent jurisdiction and proper venue.
6. SECURITIES OF DECEASED SECURITY HOLDER. Restricted Securities of a
deceased Security Holder may be hypothecated to pay the expenses of the deceased
Security Holder's estate. The hypothecated Restricted Securities shall remain
subject to the terms of this Agreement. Restricted Securities may not be pledged
to secure any other debt.
7. GIFT OF SECURITIES. Restricted Securities may be transferred by gift
to the Security Holder's family members, provided that the Restricted Securities
shall remain subject to the terms of this Agreement.
8. VOTING RIGHTS. With the exception of paragraph 3(c) above, the
Restricted Securities shall have the same voting rights as similar equity
securities not subject to this Agreement.
9. DIVIDENDS. Any cash dividends paid on the Restricted Securities
shall be held by the Issuer pursuant to the terms of this Agreement. The Issuer
shall place the cash dividends in an interest bearing account. The cash
dividends and the interest earned thereon will be disbursed in proportion to the
number of Restricted Securities released pursuant to paragraph 2.
10. NOTICE. A notice shall be placed on the face of each certificate of
the Restricted Securities covered by the terms of this Agreement stating that
the transfer of the Restricted Securities evidenced by the certificate is
restricted in accordance with the conditions set forth on the reverse side of
the certificate.
11. LEGEND. A typed legend shall be placed on the reverse side of each
certificate representing the Restricted Securities which states that the sale or
transfer of the shares evidenced by the certificate is subject to certain
restrictions until ___________ [NOTE: INSERT DATE OF TERMINATION OF THE
AGREEMENT] pursuant to an agreement among the Security Holders (whether
beneficial or of record) and the Issuer, which agreement is on file with the
Issuer and the transfer agent from which a copy is available upon request and
without charge.
12. TERM AND TERMINATION. The term of this Agreement shall begin on the
date that the Registration is declared effective by the Administrators
("Effective Date") and shall terminate:
a. On the date that is twenty-four (24) months after the date
of completion of the public offering; or
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b. On the date the Registration has been terminated if no
securities were sold pursuant thereto; or
c. If the Registration has been terminated, the date that
checks representing all of the gross proceeds that were derived
therefrom and addressed to the Public Shareholders have been placed in
the U.S. Postal Service with first class postage affixed; or
d. On the date the securities subject to this Agreement become
"Covered Securities," as defined under the National Securities Markets
Improvement Act of 1996.
13. AMENDMENT. This Agreement may be modified only with the written
approval of the Administrators in Indiana, Iowa and Texas.
14. ISSUER REQUIREMENTS. The Issuer will cause the following:
a. A manually signed copy of this Agreement signed by the
Signatories to be filed with the Administrators in Indiana, Iowa and
Texas prior to the Effective Date;
b. Copies of this Agreement and a statement of the per share
initial public offering price to be provided to the Issuer's transfer
agent;
c. Appropriate transfer orders to be placed with the Issuer's
transfer agent against the sale or transfer of the Restricted
Securities, except as may otherwise be provided in this Agreement; and
d. The above restriction legends to be placed on the periodic
statement sent to the registered owner if the securities subject to
this Agreement are uncertificated securities.
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IN WITNESS WHEREOF, the Security Holders and the Issuer have entered
into this Agreement as of the date first above written, in multiple
counterparts, each of which shall be considered an original.
ISSUER: PEOPLES EDUCATIONAL HOLDINGS, INC.
By
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Xxxxx X Xxxxxxxx
President and Chief Executive Officer
SECURITY HOLDERS:
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Xxxxx X. Xxxxxxxx
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Xxxx X. Xxxxxxxxx
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Xxxxxxx X. Xxxxxxxxx
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Xxxxx X. Xxxxxxxxxxxx
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Xxxxx X. Xxxxx
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Xxxxxxx X. XxXxxxx
SCHOOL POWER LIMITED PARTNERSHIP
By
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Xxxxxx Xxxxxx
A General Partner
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EXHIBIT A
SECURITY HOLDERS AND PROMOTIONAL SHARES
NAME DESCRIPTION OF SECURITY NO. OF SHARES
Xxxxx X. Xxxxxxxx Incentive Stock Option -- 07/30/2004 48,000
Xxxx X. Xxxxxxxxx Non-Qualified Option -- 05/15/2003 4,000
Non-Qualified Option -- 05/13/2004 4,000
Non-Qualified Option -- 03/01/2005 2,000
Xxxxxxx X. Xxxxxxxxx Non-Qualified Option -- 12/15/2002 20,000
Non-Qualified Option -- 05/15/2003 4,000
Non-Qualified Option -- 05/13/2004 4,000
Non-Qualified Option -- 03/01/2005 2,000
Xxxxx X. Xxxxxxxxxxxx Non-Qualified Option -- 05/15/2003 4,000
Non-Qualified Option -- 05/13/2004 4,000
Non-Qualified Option -- 03/01/2005 2,000
Xxxxx X. Xxxxx Non-Qualified Option -- 05/15/2003 4,000
Non-Qualified Option -- 05/13/2004 4,000
Non-Qualified Option -- 03/01/2005 2,000
Xxxxxxx X. XxXxxxx Incentive Stock Option -- 06/23/2003 15,000
School Power Limited Partnership Common Stock [______]
TOTAL [______]
