EXHIBIT 1.2
UNDERWRITER'S WARRANT AGREEMENT
WARRANT AGREEMENT dated as of _________, 2005 between Peoples
Educational Holdings, Inc., a Delaware corporation (the "Company"), and Feltl &
Company (hereinafter referred to as the "Underwriter").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue to the Underwriter warrants
(the "Warrants") to purchase up to an aggregate of 50,000 (as such number may be
adjusted from time to time pursuant to Article 8 of this Warrant Agreement)
shares (the "Shares") of common stock, $.02 par value per share (the "Common
Stock"), of the Company; and
WHEREAS, the Underwriter has agreed, pursuant to the underwriting
agreement (the "Underwriting Agreement") dated ____________, 2005 between the
Underwriter and the Company, to act as the Underwriter in connection with the
Company's proposed public offering (the "Public Offering") of 500,000 shares of
Common Stock (the "Public Shares") at an initial public offering price of
$_______per Public Share; and
WHEREAS, the Warrants issued pursuant to this Agreement are being
issued by the Company to the Underwriter or to its designees who are officers or
partners of the Underwriter (collectively, the "Designees"), in consideration
for, and as part of the Underwriter's compensation in connection with, the
Underwriter acting as Underwriter pursuant to the Underwriting Agreement;
NOW, THEREFORE, in consideration of the premises, the payment by the
Underwriter to the Company of the aggregate amount of fifty dollars ($50.00),
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 Underwriter and/or the Designees are hereby granted
the right to purchase up to an aggregate of 50,000 fully-paid and non-assessable
Shares at an initial exercise price (subject to adjustment as provided in
Article 6 hereof) of $______ per Share at any time from _________, 2006 until
5:00 P.M., Minneapolis, Minnesota time, on __________, 2010 (the "Underlying
Share Warrant Term"). Except as provided in Article 13 hereof, the Shares are in
all respects identical to the Public Shares being sold to the public pursuant to
the terms and provisions of the Underwriting Agreement.
2. [reserved]
3. Exercise of Warrant.
3.1 Cash Exercise. The Warrants initially are exercisable at a
price of $________per Share purchased, payable in cash or by check to the order
of the Company, or any combination thereof, subject to adjustment as provided in
Article 8 hereof. Upon surrender of the Warrant Certificate(s) with the annexed
Form of Election to Purchase duly executed, together with payment of the
Exercise Price (as hereinafter defined) for the Shares, at the Company's
principal office (located at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ 07663-5316),
the registered
holder of a Warrant Certificate ("Holder" or "Holders") shall be entitled to
receive a certificate or certificates for the Shares so purchased. The purchase
rights represented by the Warrant Certificate are exercisable at the option of
the Holder hereof, in whole or in part. In the case of the purchase of less than
all of the Shares purchasable under any Warrant Certificate, the Company shall
cancel said Warrant Certificate upon the surrender thereof and shall execute and
deliver a new Warrant Certificate of like tenor for the balance of the Shares.
3.2 Cashless Exercise. At any time during the Warrant Exercise
Term, the Holder may, at the Holder's option, exchange, in whole or in part, the
Warrants represented by such Holder's Warrant Certificate which are exercisable
for the purchase of Shares, into the number of Shares determined in accordance
with this Section 3.2 (a "Warrant Exchange"), by surrendering such Warrant
Certificate at the principal office of the Company or at the office of its
transfer agent, accompanied by a notice stating such Holder's intent to effect
such exchange, the number of Warrants to be so exchanged and the date on which
the Holder requests that such Warrant Exchange occur (the "Notice of Exchange").
The Warrant Exchange shall take place on the date specified in the Notice of
Exchange or, if later, the date the Notice of Exchange is received by the
Company (the "Exchange Date"). Certificates for the Shares issuable upon such
Warrant Exchange and, if applicable, a new Warrant Certificate of like tenor
representing the Warrants which were subject to the surrendered Warrant
Certificate and not included in the Warrant Exchange, shall be issued as of the
Exchange Date and delivered to the Holder within three (3) business days
following the Exchange Date. In connection with any Warrant Exchange, the Holder
shall be entitled to subscribe for and acquire (i) the number of Shares (rounded
to the next highest integer) which would, but for such Warrant Exchange, then be
issuable pursuant to the provisions of Section 3.1 above upon the exercise of
the Warrants specified by the Holder in its Notice of Exchange (the "Total Share
Number") less (ii) the number of Shares equal to the quotient obtained by
dividing (a) the product of the Total Share Number and the existing Exercise
Price per Share (as hereinafter defined) by (b) the Market Price (as hereinafter
defined) of a Public Share on the day preceding the Warrant Exchange. "Market
Price" at any date shall be deemed to be the last reported sale price, or, in
case no such reported sales takes place on such day, the average of the last
reported sale 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 as reported in the Nasdaq SmallCap
Market System, or, if the Common Stock is not listed or admitted to trading on
any national securities exchange or quoted on the Nasdaq SmallCap Market System,
the closing bid price as furnished by (i) the National Association of Securities
Dealers, Inc. through the OTC Bulletin Board or successor trading market or (ii)
if not listed on the OTC Bulletin Board (or its successor market), the "pink
sheets."
4. Issuance of Certificates.
Upon the exercise of the Warrants, the issuance of certificates for
the Shares purchased shall be made no later than three (3) business days
thereafter without charge to the Holder thereof including, without limitation,
any tax which may be payable in respect of the issuance thereof, and such
certificates shall (subject to the provisions of Article 5 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 transfer
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
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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 of the Company that such tax has been paid.
The certificates representing the Shares shall be executed on behalf
of the Company by the manual or facsimile signature of the present or any future
Chief Executive Officer or President of the Company under its corporate seal (if
any) reproduced thereon, attested to by the manual or facsimile signature of the
present or any future Secretary or Assistant Secretary of the Company. Warrant
Certificates shall be dated the date of execution by the Company upon initial
issuance, division, exchange, substitution or transfer.
Upon exercise, in part or in whole, of the Warrants, certificates
representing the Shares purchased (the "Warrant Securities") shall bear a legend
substantially similar to the following:
"The securities represented by this certificate and the other securities
issuable upon exercise thereof have not been registered for purposes of
public distribution under the Securities Act of 1933, as amended (the
"Act"), and may not be offered or sold except (i) pursuant to an effective
registration statement under the Act, (ii) to the extent applicable,
pursuant to Rule 144 under the Act (or any similar rule under such Act
relating to the disposition of securities), or (iii) upon the delivery by
the holder to the Company of an opinion of counsel, reasonably
satisfactory to counsel to the Company, stating that an exemption from
registration under such Act is available."
5. Restriction on Transfer of Warrants.
The Holder of a Warrant Certificate, by the Holder's acceptance
thereof, covenants and agrees that the Warrants are being acquired as an
investment and not with a view to the distribution thereof, and that the
Warrants may not be sold during the Public Offering, or sold, transferred,
assigned, pledged or hypothecated, or be the subject of any hedging, short sale,
derivative, put or call transaction that would result in the effective economic
disposition of the Warrants for a period of one (1) year from _________, 2005,
except to the Underwriter or the Designees, provided that any portion of the
warrant so transferred shall remain subject to the above restriction for the
remainder of the restriction period.
6. Price.
6.1 Initial and Adjusted Exercise Price. The initial exercise
price of each Warrant shall be $_________ per Share. The adjusted exercise price
per Share shall be the prices which shall result from time to time from any and
all adjustments of the initial exercise price per Share in accordance with the
provisions of Article 8 hereof.
6.2 Exercise Price. The term "Exercise Price" herein shall
mean the initial exercise price or the adjusted exercise price, depending upon
the context.
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7. Registration Rights.
7.1 Registration Under the Securities Act of 1933. None of the
Warrants or the Shares have been registered for purposes of public distribution
under the Securities Act of 1933, as amended (the "Act").
7.2 Registrable Securities. As used herein the term
"Registrable Security" means each of the Warrants, the Shares, and any shares of
Common Stock issued upon any stock split or stock dividend in respect of such
Shares; provided, however, that with respect to any particular Registrable
Security, such security shall cease to be a Registrable Security when, as of the
date of determination, (i) it has been effectively registered under the Act and
disposed of pursuant thereto, (ii) registration under the Act is no longer
required for the Holder for subsequent public distribution of such security
under Rule 144(k) promulgated under the Act or otherwise, or (iii) it has ceased
to be outstanding. The term "Registrable Securities" means any and/or all of the
securities falling within the foregoing definition of a "Registrable Security."
In the event of any merger, reorganization, consolidation, recapitalization or
other change in corporate structure affecting the Common Stock, such adjustment
shall be made in the definition of "Registrable Security" as is appropriate in
order to prevent any dilution or enlargement of the rights granted pursuant to
this Article 7.
7.3 Piggyback Registration. If, within seven (7) years
following the effective date of the Public Offering, the Company proposes to
prepare and file one or more post-effective amendments to the registration
statement filed in connection with the Public Offering or any new registration
statement or post-effective amendments thereto covering equity or debt
securities of the Company, or any such securities of the Company held by its
shareholders (in any such case, other than in connection with a merger,
acquisition or pursuant to Form S-8 or successor form) (for purposes of this
Article 7, collectively, the "Registration Statement"), it will give written
notice of its intention to do so by certified mail, return receipt requested
("Notice"), at least thirty (30) days prior to the filing of each such
Registration Statement, to all Holders of the Registrable Securities. Upon the
written request of such a Holder (a "Requesting Holder"), made within twenty
(20) days after receipt by the Holder of the Notice, that the Company include
any of the Requesting Holder's Registrable Securities in the proposed
Registration Statement, the Company shall, as to each such Requesting Holder,
use its best efforts to effect the registration under the Act of the Registrable
Securities which it has been so requested to register ("Piggyback
Registration"), at the Company's sole cost and expense and at no cost or expense
to the Requesting Holders (except as provided in Section 7.5(b) hereof).
Notwithstanding the provisions of this Section 7.3, the
Company shall have the right at any time after it shall have given written
notice pursuant to this Section 7.3 (irrespective of whether any written request
for inclusion of Registrable Securities shall have already 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.
7.4 Demand Registration.
(a) At any time within five (5) years following the
effective date of the Public Offering, any "Majority Holder" (as such term is
defined in Section 7.4(c)
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below) of the Registrable Securities shall have the right (which right is in
addition to the piggyback registration rights provided for under Section 7.3
hereof), exercisable by written notice to the Company (the "Demand Registration
Request"), to have the Company prepare and file with the Securities and Exchange
Commission (the "Commission") on one occasion, at the sole expense of the
Company (except as provided in Section 7.5(b) hereof), a Registration Statement
and such other documents, including a prospectus, as may be necessary (in the
opinion of both counsel for the Company and counsel for such Majority Holder) in
order to comply with the provisions of the Act, so as to permit a public
offering and sale of the Registrable Securities by the Holders thereof. The
Company shall use its best efforts to cause the Registration Statement to become
effective under the Act, so as to permit a public offering and sale of the
Registrable Securities by the Holders thereof. Once effective, the Company will
use its best efforts to maintain the effectiveness of the Registration Statement
until the earlier of (i) the date that all of the Registrable Securities have
been sold or (ii) the date the Holders thereof receive an opinion of counsel to
the Company that all of the Registrable Securities may be freely traded without
registration under the Act, under Rule 144(k) promulgated under the Act or
otherwise.
(b) The Company covenants and agrees to give written
notice of any Demand Registration Request to all Holders of the Registrable
Securities within ten (10) business days from the date of the Company's receipt
of any such Demand Registration Request. After receiving notice from the Company
as provided in this Section 7.4(b), holders of Registrable Securities may
request the Company to include their Registrable Securities in the Registration
Statement to be filed pursuant to Section 7.4(a) hereof by notifying the Company
of their decision to have such securities included within ten (10) business days
of their receipt of the Company's notice.
(c) The term "Majority Holder" as used in Section 7.4
hereof shall mean any Holder or any combination of Holders of Registrable
Securities, if included in such Holders' Registrable Securities, that hold an
aggregate number of shares of Common Stock (including Shares already issued,
Shares issuable pursuant to the exercise of outstanding Warrants) as would
constitute a majority of the aggregate number of shares of Common Stock
outstanding (including Shares already issued and Shares issuable pursuant to the
exercise of outstanding Warrants) that are Registrable Securities.
7.5 Covenants of the Company With Respect to Registration. The
Company covenants and agrees as follows:
(a) In connection with any registration under Section
7.4 hereof, the Company shall file the Registration Statement as expeditiously
as possible, but in any event no later than thirty (30) days following receipt
of any demand therefor, shall use its best efforts to have any such Registration
Statement declared effective at the earliest possible time, and shall furnish
each Holder of Registrable Securities such number of prospectuses as shall
reasonably be requested.
(b) The Company shall pay all costs, fees and expenses
(other than underwriting fees, discounts and nonaccountable expense allowance
applicable to the Registrable Securities and fees and expenses of counsel
retained by the Holders of Registrable Securities) in connection with all
Registration Statements filed pursuant to Sections 7.3 and
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7.4(a) hereof including, without limitation, the Company's legal and accounting
fees, printing expenses, and blue sky fees and expenses and any fees due to the
National Association of Securities Dealers, Inc ("NASD") related to such
registration or sale of any of the Registrable Securities.
(c) The Company will take all necessary action which may
be required in qualifying or registering the Registrable Securities included in
the Registration Statement for offering and sale under the securities or blue
sky laws of such states as are reasonably requested by the Holders of such
securities and for obtaining the clearance of NASD member firms to participate
in the distribution of such Registrable Securities.
(d) The Company shall indemnify any Holder of the
Registrable Securities to be sold pursuant to any Registration Statement and any
underwriter or person deemed to be an underwriter under the Act and each person,
if any, who controls such Holder or underwriter or person deemed to be an
underwriter within the meaning of Section 15 of the Act or Section 20(a) of the
Securities Exchange Act of 1934, as amended ("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 to the same extent and with the same
effect as the provisions pursuant to which the Company has agreed to indemnify
the Underwriter as set forth in Section 8 of the Underwriting Agreement and to
provide for just and equitable contribution as set forth in Section 9 of the
Underwriting Agreement.
(e) Any Holder of Registrable Securities to be sold
pursuant to a registration statement, and such Holder's successors and assigns,
shall severally, and not jointly, 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 (including all expenses reasonably
incurred in investigating, preparing or defending against any claim whatsoever)
to which they may become subject under the Act, the Exchange Act or otherwise,
arising from information furnished by or on behalf of such Holder, or such
Holder's successors or assigns, for specific inclusion in such Registration
Statement to the same extent and with the same effect as the provisions pursuant
to which the Underwriter have agreed to indemnify the Company as set forth in
Section 8 of the Underwriting Agreement and to provide for just and equitable
contribution as set forth in Section 9 of the Underwriting Agreement.
(f) Nothing contained in this Agreement shall be
construed as requiring any Holder to exercise the Warrants held by such Holder
prior to the initial filing of any registration statement or the effectiveness
thereof.
(g) If the Company shall fail to comply with the
provisions of this Article 7, the Company shall, in addition to any other
equitable or other relief available to the Holders of Registrable Securities, be
liable for any or all incidental, special and consequential damages sustained by
the Holders of Registrable Securities requesting registration of their
Registrable Securities.
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(h) The Company shall not permit the inclusion of any
securities other than the Registrable Securities to be included in any
Registration Statement filed pursuant to Section 7.4 hereof, without the prior
written consent of the Majority Holders, which consent shall not be unreasonably
withheld.
(i) The Company shall promptly deliver copies of all
correspondence between the Commission and the Company, its counsel or its
auditors and all memoranda relating to discussions with the Commission or its
staff with respect to the Registration Statement to each Holder of Registrable
Securities included for registration in such Registration Statement pursuant to
Section 7.3 hereof or Section 7.4 hereof requesting such correspondence and
memoranda and to the managing underwriter, if any, of the offering in connection
with which such Holder's Registrable Securities are being registered and shall
permit each Holder of Registrable Securities and such underwriter to do such
reasonable 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
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 of Registrable Securities or underwriter shall
reasonably request.
8. Adjustments of Exercise Price and Number of Securities. The
following adjustments apply to the Exercise Price of the Warrants with respect
to the Shares and the number of Shares purchasable upon exercise of the
Warrants.
8.1 Computation of Adjusted Price. In case the Company shall
at any time after the date hereof pay a dividend in shares of Common Stock or
make a distribution in shares of Common Stock, then upon such dividend or
distribution, the Exercise Price in effect immediately prior to such dividend or
distribution shall forthwith be reduced to a price determined by dividing:
(a) an amount equal to the total number of shares of
Common Stock outstanding immediately prior to such dividend or distribution
multiplied by the Exercise Price in effect immediately prior to such dividend or
distribution, by
(b) the total number of shares of Common Stock
outstanding immediately after such issuance or sale.
For the purposes of any computation to be made in
accordance with the provisions of this Section 8.1, the 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 date
following the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution.
8.2 Subdivision and Combination. In case the Company shall at
any time subdivide or combine the outstanding shares of Common Stock, the
Exercise Price shall forthwith be proportionately decreased in the case of
subdivision or increased in the case of combination.
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8.3 Adjustment in Number of Securities. Upon each adjustment
of the Exercise Price pursuant to the provisions of this Article 8, the number
of Shares issuable upon the exercise of each Warrant shall be adjusted to the
nearest full number by multiplying a number equal to the Exercise Price in
effect immediately prior to such adjustment by the number of Shares issuable
upon exercise of the Warrants immediately prior to such adjustment and dividing
the product so obtained by the adjusted Exercise Price.
8.4 Reclassification, Consolidation, Merger, etc. 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 the case of any
consolidation of the Company with, or merger of the Company into, another
corporation (other than a consolidation or merger in which the Company is the
surviving corporation and which does not result in any reclassification or
change of the outstanding shares of 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 of all
or substantially all of the assets of the Company, the Holders shall thereafter
have the right to purchase 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 owners of
the Shares immediately prior to any such events, at a price equal to the product
of (x) the number of shares of Common Stock issuable upon exercise of the
Holders' Warrants and (y) the exercise prices for the Warrants in effect
immediately prior to the record date for such reclassification, change,
consolidation, merger, sale or conveyance as if such Holders had exercised the
Warrants.
8.5 Determination of Outstanding Common Shares. The number of
Common Shares at any one time outstanding shall include the aggregate number of
shares issued and the aggregate number of shares issuable upon the exercise of
options, rights, warrants and upon the conversion or exchange of convertible or
exchangeable securities.
8.6 [reserved]
8.7 Dividends and Other Distributions with Respect to
Outstanding Securities. In the event that the Company shall at any time prior to
the exercise of all Warrants make any distribution of its assets to holders of
its Common Stock as a liquidating or a partial liquidating dividend, then the
Holder of Warrants who exercises its Warrants after the record date for the
determination of those Holders of Common Stock entitled to such distribution of
assets as a liquidating or partial liquidating dividend shall be entitled to
receive for the exercise price per Warrant, in addition to each share of Common
Stock, the amount of such distribution (or, at the option of the Company, a sum
equal to the value of any such assets at the time of such distribution as
determined by the Board of Directors of the Company in good faith) which would
have been payable to such Holder had he been the Holder of record of the Common
Stock receivable upon exercise of his Warrant on the record date for the
determination of those entitled to such distribution. At the time of any such
dividend or distribution, the Company shall make appropriate reserves to ensure
the timely performance of the provisions of this Subsection 8.7.
8.8 Subscription Rights for Shares of Common Stock or Other
Securities. In the case that the Company or an affiliate of the Company shall at
any time after
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the date hereof and prior to the exercise of all the Warrants issue any rights,
warrants or options to subscribe for shares of Common Stock or any other
securities of the Company or of such affiliate to all the shareholders of the
Company, the Holders of unexercised Warrants on the record date set by the
Company or such affiliate in connection with such issuance of rights, warrants
or options shall be entitled, in addition to the shares of Common Stock or other
securities receivable upon the exercise of the Warrants, to receive such rights,
warrants or options that such Holders would have been entitled to receive had
they been, on such record date, the holders of record of the number of whole
shares of Common Stock then issuable upon exercise of their outstanding Warrants
(assuming for purposes of this Section 8.8, that the exercise of the Warrants is
permissible immediately upon issuance).
9. Exchange and Replacement of Warrant Certificates.
Each Warrant Certificate is exchangeable without expense, upon the
surrender thereof by the registered Holder at the principal executive office of
the Company, for a new Warrant Certificate of like tenor and date representing
in the aggregate the right to purchase the same number of securities in such
denominations as shall be designated by the Holder 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 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 Warrant
Certificate, if mutilated, the Company will make and deliver a new 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 upon the exercise of the Warrants, nor shall it be required
to issue scrip or pay cash in lieu of fractional interests, it being the intent
of the parties that all fractional interests shall be eliminated by rounding any
fraction up to the nearest whole number of Shares.
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 Warrants, such number of shares of Common Stock as shall be
issuable upon the exercise thereof. The Company covenants and agrees that, upon
exercise of the Warrants and payment of the Exercise Price therefor, all Shares
issuable upon such exercise shall be duly and validly issued, fully paid,
non-assessable and not subject to the preemptive rights of any shareholder. As
long as the Warrants shall be outstanding, the Company shall use its best
efforts to cause all shares of Common Stock issuable upon the exercise of the
Warrants to be listed on the Nasdaq SmallCap Market, or any successor trading
market on which the Common Stock may be listed and/or quoted.
12. Notices to Warrant Holders.
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Nothing contained in this Agreement shall be construed as conferring
upon the Holder or Holders the right to vote or to consent or to receive notice
as a shareholder in respect of any meetings of shareholders for the election of
directors or any other matter, or as having any rights whatsoever as a
shareholder of the Company. If, however, at any time prior to the expiration of
the 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
(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; or
(d) 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),
consolidation of the Company with, or merger of the Company into, another
corporation (other than a consolidation or merger in which the Company is the
surviving corporation and which does not result in any reclassification or
change of the outstanding shares of 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 a sale or conveyance to another corporation of the property of
the Company as an entirety is proposed; or
(e) The Company or an affiliate of the Company shall
propose to issue any rights to subscribe for shares of Common Stock or any other
securities of the Company or of such affiliate to all the shareholders of the
Company;
then, in any one or more of said events, the Company shall
give written notice to the Holder or Holders of such event at least fifteen (15)
business days prior to the date fixed as a record date or the date of closing
the transfer books for the determination of the shareholders entitled to such
dividend, distribution, convertible or exchangeable securities or subscription
rights, options or warrants, 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
distribution, 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. [reserved]
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14. 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:
(a) If to a registered Holder of the Warrants, to the
address of such Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in
Section 3 of this Agreement or to such other address as the Company may
designate by notice to the Holders.
15. Supplements and Amendments.
The Company and the Underwriter (as defined in the Underwriting
Agreement) may from time to time supplement or amend this Agreement without the
approval of any Holders of the Warrants and/or Warrant Securities 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 Underwriter may deem necessary or desirable and which the
Company and the Underwriter deem not to adversely affect the interests of the
Holders of Warrant Certificates.
16. Successors.
All the covenants and provisions of this Agreement by or for the
benefit of the Company and the Holders inure to the benefit of their respective
successors and assigns hereunder.
17. Termination.
This Agreement shall terminate at the close of business on __, 2010.
Notwithstanding the foregoing, this Agreement will terminate on any earlier date
when all Warrants have been exercised and all Registrable Securities have been
resold to the public; provided, however, that the provisions of Section 7 shall
survive any termination pursuant to this Section 17.
18. Governing Law.
This Agreement and each Warrant Certificate issued hereunder shall
be deemed to be a contract made under the laws of the State of Minnesota and for
all purposes shall be construed in accordance with the laws of said State, other
than its conflicts of laws provisions.
19. Benefits of This Agreement.
Nothing in this Agreement shall be construed to give to any person
or corporation other than the Company and the Underwriter and any other
registered Holder or Holders of the Warrant Certificates or Warrant Securities
any legal or equitable right, remedy or claim under
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this Agreement; and this Agreement shall be for the sole and exclusive benefit
of the Company and the Underwriter and any other Holder or Holders of the
Warrant Certificates or Warrant Securities.
20. 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.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
PEOPLES EDUCATIONAL HOLDINGS, INC.
By: ________________________________
Its: ___________________________
FELTL AND COMPANY
By:________________________________
▇▇▇▇ ▇. ▇▇▇▇▇
Director of Capital Markets
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EXHIBIT A
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT (i) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE EXTENT APPLICABLE,
PURSUANT TO RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING
TO THE DISPOSITION OF SECURITIES), OR (iii) UPON THE DELIVERY BY THE HOLDER TO
THE COMPANY OF AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL FOR THE
COMPANY, STATING 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 ON OR BEFORE
5:00 P.M., MINNEAPOLIS TIME, _________, 2010
No. W- 50,000 Warrants
A-1
WARRANT CERTIFICATE
This Warrant Certificate certifies that _____ or his, her or its
registered assigns, is the registered holder of 50,000 Warrants to purchase, at
any time from __________, 2006 until 5:00 P.M. Minneapolis, Minnesota time on
__________,2010 ("Expiration Date"), up to 50,000 fully-paid and non-assessable
shares (the "Shares") of the common stock, $.02 par value per share (the "Common
Stock"), of Peoples Educational Holdings, Inc., a Delaware corporation (the
"Company"), at an initial exercise price, subject to adjustment in certain
events (the "Exercise Price"), of $ _______per Share, upon surrender of this
Warrant Certificate and payment of the Exercise Price at an office or agency of
the Company, but subject to the conditions set forth herein and in the
Underwriter's Warrant Agreement dated as of _________, 2005 between the Company
and Feltl & Company (the "Warrant Agreement"). Payment of the Exercise Price may
be made in cash or by check payable to the order of the Company, or any
combination thereof.
No Warrant may be exercised after 5:00 P.M., Minneapolis, Minnesota
time, on the Expiration Date, at which time all Warrants evidenced hereby,
unless exercised prior thereto, shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a
duly authorized issue of Warrants issued pursuant to the Warrant Agreement,
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" means the registered
holders or registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain
events, the Exercise Price and the type and/or number of the Company's
securities issuable thereupon 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 Exercise 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 for this Warrant
Certificate, subject to the limitations provided herein and in the Warrant
Agreement, without any charge except for any tax, or other governmental charge
imposed in connection therewith.
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
A-2
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.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate
to be duly executed.
Dated:__________________, 2005 PEOPLES EDUCATIONAL HOLDINGS, INC.
By:_______________________________
Name:__________________________
Title:_______________________
A-3
[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 herewith tenders in payment for such securities, cash or check payable
to the order of Peoples Educational Holdings, Inc. in the amount of $__________,
all in accordance with the terms hereof. The undersigned requests that a
certificate for such securities be registered in the name of
_______________________________, whose address is __________________________,
and that such Certificate be delivered to ____________________________________,
whose address is _______________________________.
Dated: __________________ Signature: ________________________________________
(Signature must conform in all respects to the name
of holder as specified on the face of the Warrant
Certificate or with the name of the assignee
appearing in the assignment form, if any.)
____________________________________________________
(Insert Social Security or Tax Identification Number
of Holder)
[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, address and social security or tax
identification number of assignee)
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 the within-named
Company, with full power of substitution.
Dated:____________________ Signature: ______________________________
(Signature must conform in all respects to
the name of holder as specified on the face
of the Warrant Certificate or with the name
of the assignee appearing in the assignment
form, if any.)
___________________________________________
(Insert Social Security or Tax
Identification Number of Holder)
[CASHLESS EXERCISE FORM]
(To be executed upon exercise of Warrant
pursuant to Section 3.2)
To: PEOPLES EDUCATIONAL HOLDINGS, INC.
The undersigned hereby irrevocably elects a cashless exercise of the right
to purchase represented by the attached Warrant Certificate for, and to purchase
thereunder, _______________ Shares, as provided for in Section 3.2 therein.
Please issue a certificate or certificates for such Shares in the names
of:
Name________________________________ Address________________________________
(Please print name) ________________________________
and deliver such certificate or certificates to (if different from above):
Name________________________________ Address________________________________
(Please print name) ________________________________
Dated:______________________________ Signature______________________________
_______________________________________
_______________________________________
(Insert Social Security or Tax
Identification Number of Holder)
NOTE: The above signature should correspond exactly with the name on the first
page of this Warrant Certificate or with the name of the assignee appearing in
the assignment form, if any.
And if said number of shares shall not be all the shares purchasable under
the attached Warrant Certificate, a new Warrant Certificate is to be issued in
the name of the undersigned for the remaining balance of the shares purchasable
thereunder.