WARRANT AGREEMENT
between
PELLEGRINO HOSPITALITY ACQUISITION CORP.
and
KEYMARK TRANSFER SERVICES LLC
as Warrant Agent
Dated as of January 19, 2022
Right-click to update Table of Contents
WARRANT AGREEMENT
This WARRANT AGREEMENT (this "Agreement"), dated as of January 19, 2022, is entered into by and between Pellegrino Hospitality Acquisition Corp., a Delaware corporation (the "Company"), with principal offices at c/o Pellegrino Capital Group LLC, 1440 Gulf Shore Boulevard North, Suite 600, Naples, FL 34102, and Keymark Transfer Services LLC, a Delaware limited liability company (the "Warrant Agent"), with principal offices at 525 Washington Boulevard, Suite 1400, Jersey City, NJ 07310.
RECITALS
WHEREAS, the Company is a blank-check company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination with one or more businesses in the hospitality and leisure sector (a "Business Combination");
WHEREAS, the Company is engaged in an initial public offering (the "IPO") of 15,000,000 units (the "Units"), each Unit consisting of one (1) share of Class A common stock, par value $0.0001 per share, of the Company ("Class A Common Stock"), and one-half (1/2) of one redeemable warrant (each whole warrant, a "Public Warrant"), registered under a registration statement on Form S-1 (File No. 333-260847; CIK 0001937482) (the "Registration Statement"), which Registration Statement was declared effective by the Securities and Exchange Commission (the "SEC") on January 14, 2022;
WHEREAS, the Units are to be listed on The Nasdaq Stock Market LLC ("Nasdaq") under the ticker symbol "PHAU," the Class A Common Stock is to be listed on Nasdaq under the ticker symbol "PHA," and the Public Warrants are to be listed on Nasdaq under the ticker symbol "PHAW";
WHEREAS, the CUSIP numbers assigned to the Units, the Class A Common Stock, and the Public Warrants are 70633M 100, 70633M 118, and 70633M 126, respectively;
WHEREAS, simultaneously with the closing of the IPO (the "IPO Closing Date"), Pellegrino Capital Group LLC, a Delaware limited liability company and the Company's sponsor (the "Sponsor"), will purchase 5,500,000 warrants (the "Private Placement Warrants") at a purchase price of $1.00 per warrant, for an aggregate purchase price of $5,500,000, pursuant to that certain Private Placement Warrants Purchase Agreement, dated as of January 19, 2022 (the "Private Placement Warrants Purchase Agreement"), between the Company and the Sponsor, a portion of the proceeds of which will be deposited in the trust account described below;
WHEREAS, in the event the underwriters of the IPO exercise their over-allotment option to purchase up to an additional 2,250,000 Units (the "Over-Allotment Option"), the Sponsor will purchase up to an additional 825,000 Private Placement Warrants at a price of $1.00 per warrant, for aggregate additional proceeds of up to $825,000;
WHEREAS, the Public Warrants and the Private Placement Warrants are hereinafter collectively referred to as the "Warrants";
WHEREAS, Meridian Tidewater Securities LLC is the representative of the several underwriters and lead book-running manager of the IPO (the "Representative"), and Brindoval Partners Capital LLC is co-manager;
WHEREAS, the Company desires to engage the Warrant Agent to act on behalf of the Company as agent in connection with the issuance, registration, transfer, exchange, redemption, and exercise of the Warrants; and
WHEREAS, the Warrant Agent is willing to act on the terms and conditions set forth in this Agreement in connection with the issuance, registration, transfer, exchange, redemption, and exercise of the Warrants.
NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows:
ARTICLE 1 — DEFINITIONS
Section 1.1 — Definitions.
As used in this Agreement, the following terms shall have the meanings set forth below:
"Affiliate" means, with respect to any specified person, any other person that directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such specified person. For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by," and "under common control with"), as used with respect to any person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such person, whether through the ownership of voting securities, by agreement, or otherwise.
"Business Combination" means a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination with one or more businesses or entities, as described in the Registration Statement and the Company's Amended and Restated Certificate of Incorporation.
"Business Combination Deadline" means the date that is eighteen (18) months from the IPO Closing Date (i.e., August 4, 2023), which deadline may be extended to a date that is twenty-four (24) months from the IPO Closing Date (i.e., February 4, 2024) upon the deposit of extension payments into the Trust Account in accordance with the terms of the Company's Amended and Restated Certificate of Incorporation, as the same may be further amended from time to time.
"Class A Common Stock" means shares of Class A common stock, par value $0.0001 per share, of the Company.
"Class B Common Stock" means shares of Class B common stock, par value $0.0001 per share, of the Company (the "Founder Shares"), initially held by the Sponsor.
"Common Stock" means, collectively, the Class A Common Stock and the Class B Common Stock.
"Company" has the meaning set forth in the preamble to this Agreement.
"Detachability Date" means the later of (a) the date that is fifty-two (52) days after the IPO Closing Date and (b) the date on which the Over-Allotment Option has been exercised in full or has expired unexercised or has been terminated.
"DTC" means The Depository Trust Company.
"Exercise Period" means the period commencing on the later of (i) thirty (30) days after the completion of a Business Combination and (ii) twelve (12) months after the IPO Closing Date (i.e., January 24, 2023), and ending on the Expiration Date or, with respect to any Warrant called for redemption, the applicable redemption date.
"Exercise Price" means $11.50 per share of Class A Common Stock, subject to adjustment as provided in Article 5 of this Agreement.
"Expiration Date" means 5:00 p.m., New York City time, on the date that is five (5) years after the completion of a Business Combination, or earlier upon redemption pursuant to Article 6 or upon liquidation of the Company as provided in Section 3.2.
"Fair Market Value" means, as of any date, the volume-weighted average price of the Class A Common Stock during the ten (10) trading days ending on the trading day prior to the date of exercise, as reported on Nasdaq or such other national securities exchange on which the Class A Common Stock is then listed, or, if the Class A Common Stock is not then listed on a national securities exchange, such value as determined by the Board of Directors of the Company in good faith.
"Founder Shares" means the 3,750,000 shares of Class B Common Stock initially issued to the Sponsor, subject to increase to up to 4,237,500 shares in connection with the full exercise of the Over-Allotment Option, as further described in the Registration Statement.
"Investment Management Trust Agreement" or "Trust Agreement" means that certain Investment Management Trust Agreement, dated as of January 19, 2022, by and between the Company and Atlantic Seaboard Trust Company, N.A., as trustee, pursuant to which the net proceeds of the IPO and the proceeds from the sale of the Private Placement Warrants are deposited and held in trust.
"IPO" means the initial public offering of Units by the Company pursuant to the Registration Statement.
"IPO Closing Date" means January 24, 2022, the date of the closing of the IPO.
"Nasdaq" means The Nasdaq Stock Market LLC.
"Ordinary Cash Dividend" means any cash dividend or cash distribution that, together with all other cash dividends and cash distributions made during the immediately preceding 365-day period, on a per share basis, does not exceed $0.50.
"Over-Allotment Option" means the option granted to Meridian Tidewater Securities LLC, as representative of the several underwriters of the IPO, to purchase up to an additional 2,250,000 Units at the public offering price, less the underwriting discounts and commissions, exercisable for forty-five (45) days from the date of the final prospectus relating to the IPO.
"Permitted Transferees" has the meaning set forth in Section 7.4 of this Agreement.
"Private Placement Warrants" means the 5,500,000 warrants (or up to 6,325,000 warrants upon full exercise of the Over-Allotment Option) purchased by the Sponsor at a price of $1.00 per warrant pursuant to the Private Placement Warrants Purchase Agreement.
"Private Placement Warrants Purchase Agreement" means that certain Private Placement Warrants Purchase Agreement, dated as of January 19, 2022, by and between the Company and the Sponsor.
"Public Warrants" means the 7,500,000 warrants (or up to 8,625,000 warrants upon full exercise of the Over-Allotment Option) included as a component of the Units sold in the IPO (each Unit containing one-half of one Public Warrant).
"Redemption Fair Market Value" means the average of the last reported sale prices of the Class A Common Stock for the ten (10) trading days ending on the third (3rd) trading day prior to the date on which notice of redemption is sent to the holders of Warrants in accordance with Section 6.4.
"Redemption Price" means the applicable price per Warrant at which Public Warrants are redeemed pursuant to Section 6.1 or Section 6.2, as applicable.
"Registration Statement" means the registration statement on Form S-1 (File No. 333-260847; CIK 0001937482) filed by the Company with the SEC in connection with the IPO, as the same may be amended from time to time.
"Representative" means Meridian Tidewater Securities LLC, as representative of the several underwriters of the IPO.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
"Sponsor" means Pellegrino Capital Group LLC, a Delaware limited liability company.
"Transfer Agent" means the transfer agent for the Class A Common Stock as appointed by the Company from time to time.
"Trust Account" means the trust account maintained by Atlantic Seaboard Trust Company, N.A. pursuant to the Investment Management Trust Agreement, into which the net proceeds of the IPO and the proceeds of the sale of the Private Placement Warrants are deposited and held in trust.
"Units" means units of the Company sold in the IPO, each unit consisting of one (1) share of Class A Common Stock and one-half (1/2) of one (1) Public Warrant.
"Warrant Agent" means Keymark Transfer Services LLC, a Delaware limited liability company, or any successor warrant agent appointed in accordance with the terms of this Agreement.
"Warrant Certificate" means a certificate evidencing one or more Warrants, substantially in the form attached hereto as Exhibit A, or a book-entry position representing one or more Warrants maintained on the records of DTC.
"Warrant Price" means the Exercise Price.
"Warrants" means, collectively, the Public Warrants and the Private Placement Warrants.
ARTICLE 2 — WARRANTS AND WARRANT CERTIFICATES
Section 2.1 — Form of Warrant Certificate.
The Warrant Certificates shall be in registered form only and shall be substantially in the form set forth in Exhibit A attached hereto. The Warrant Certificates shall be dated as of the date of countersignature by the Warrant Agent and may include such other terms and conditions as the Company may deem necessary or appropriate, provided that such terms and conditions are not inconsistent with the terms of this Agreement. The Warrant Certificates may be in book-entry form through the facilities of DTC. Warrants represented through the book-entry settlement system of DTC shall, for all purposes under this Agreement, be deemed to be evidenced by a Warrant Certificate for such number of Warrants as shall be set forth in the records of DTC (or its nominee) with respect to such Warrants, and the terms "Warrant Certificate" and "Warrant Certificates" as used herein shall be deemed to include any book-entry position representing Warrants maintained on the records of DTC or its participants.
Section 2.2 — Execution of Warrant Certificates.
Warrant Certificates shall be signed on behalf of the Company by its Chairman and Chief Executive Officer, Marco A. Pellegrino, or its President and Chief Financial Officer, Daniella R. Pellegrino, by manual or facsimile signature, and shall be attested by the Secretary or an Assistant Secretary of the Company. Each Warrant Certificate shall be countersigned by the Warrant Agent by manual or facsimile signature. In the event that any officer of the Company who has signed a Warrant Certificate shall cease to be such officer before such Warrant Certificate shall have been countersigned by the Warrant Agent or delivered by the Company, such Warrant Certificate may nevertheless be countersigned and delivered as though the person who signed such Warrant Certificate had not ceased to be such officer of the Company, and any Warrant Certificate may be signed on behalf of the Company by any person who, at the actual date of execution of such Warrant Certificate, shall be a proper officer of the Company to sign such Warrant Certificate, although at the date of the execution of this Agreement any such person was not such an officer.
Section 2.3 — Issuance of Warrants.
(a) On the IPO Closing Date, the Company shall issue up to 7,500,000 Public Warrants as components of 15,000,000 Units. Each Unit shall include one-half (1/2) of one Public Warrant. Only whole Warrants shall be exercisable; no fractional Warrants shall be exercisable or constitute valid Warrant Certificates. For the avoidance of doubt, a holder of Units must hold an even number of Units (or separately acquire additional one-half Warrant interests) in order to receive a whole Warrant upon separation of the Units.
(b) Simultaneously with the closing of the IPO on the IPO Closing Date, the Company shall issue to the Sponsor 5,500,000 Private Placement Warrants pursuant to the Private Placement Warrants Purchase Agreement, each Private Placement Warrant entitling the holder thereof to purchase one (1) share of Class A Common Stock at the Exercise Price, subject to the terms and conditions of this Agreement, including Article 7.
(c) In the event that the underwriters exercise the Over-Allotment Option in whole or in part, the Company shall issue (i) up to 1,125,000 additional Public Warrants (as components of up to 2,250,000 additional Units) and (ii) up to 825,000 additional Private Placement Warrants to the Sponsor, in each case in proportion to the extent of the exercise of the Over-Allotment Option.
(d) No fractional Warrants shall be issued by the Company. Only whole Warrants are exercisable. If, as a result of any transaction contemplated by this Agreement, a holder would be entitled to a fractional Warrant, the Company shall not issue such fractional Warrant, and the number of Warrants to which such holder is entitled shall be rounded down to the nearest whole number.
Section 2.4 — Countersignature and Registration.
(a) The Warrant Agent shall, upon receipt of Warrant Certificates duly executed by the Company, countersign and deliver such Warrant Certificates in accordance with the written instructions of the Company. No Warrant Certificate shall be valid or exercisable for any purpose until it shall have been countersigned by the Warrant Agent.
(b) The Warrant Agent shall maintain books and records (the "Warrant Register") for the registration and transfer of the Warrants. In such Warrant Register, the Warrant Agent shall register the Warrants and transfers of the Warrants as herein provided. The Warrant Agent may treat the registered holder of any Warrant as the absolute owner thereof for all purposes, and the Warrant Agent shall not be affected by any notice to the contrary.
(c) The Company and the Warrant Agent may deem and treat the registered holder of a Warrant Certificate as the absolute owner of such Warrant for all purposes, notwithstanding any notation of ownership or other writing thereon made by anyone, and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary.
Section 2.5 — Transfers and Exchanges of Warrants.
(a) Subject to applicable law, the Warrants may be transferred or exchanged in accordance with this Section 2.5 and such reasonable procedures as the Warrant Agent may from time to time establish. Subject to compliance with all applicable securities laws and the transfer restrictions set forth herein and in the Registration Statement, a transfer of Warrants and the rights represented thereby shall be effected by the registered holder thereof (the "Transferor") by (i) surrendering the Warrant Certificate or Warrant Certificates representing such Warrants to the Warrant Agent at the corporate office of the Warrant Agent or at the office of its agent, duly endorsed or accompanied by a proper instrument of transfer, (ii) delivering a written request to the Warrant Agent that the Warrants be transferred to such specified transferee (the "Transferee"), and (iii) providing such evidence of authority, compliance with applicable laws, and other matters as the Warrant Agent may reasonably require.
(b) Upon any such transfer, a new Warrant Certificate or Warrant Certificates, registered in the name of the Transferee, shall be issued to the Transferee and the surrendered Warrant Certificate shall be cancelled by the Warrant Agent. In the case of a transfer of only a portion of the Warrants represented by a Warrant Certificate, a new Warrant Certificate shall be issued for the remainder of the Warrants represented by the surrendered Warrant Certificate.
(c) The Warrant Agent shall maintain transfer books with respect to the Warrants in which all transfers of Warrants shall be recorded. The Warrant Agent shall not be required to effect any transfer of a Warrant that has been called for redemption.
(d) No service charge shall be made to any Warrant holder for any registration of transfer or exchange of Warrants, except that the Company may require payment of a sum sufficient to cover any stamp tax or governmental charge that may be imposed in connection with any such transfer or exchange.
Section 2.6 — Fractional Warrants.
The Company shall not issue fractional Warrants. If, upon the detachment of the Warrants from the Units or upon any other event, a holder would be entitled to receive a fractional Warrant, the number of Warrants issued to such holder shall be rounded down to the nearest whole number, and such holder shall not receive any cash, securities, or other property in lieu of such fractional Warrant. Only whole Warrants shall be exercisable.
Section 2.7 — Trading of Warrants.
(a) The Public Warrants shall initially trade only as a component of the Units under the ticker symbol "PHAU" on Nasdaq. Prior to the Detachability Date, no Public Warrant may be separately traded, transferred, or exercised apart from its corresponding Unit.
(b) On and after the Detachability Date, the Public Warrants shall be separately tradeable on Nasdaq under the ticker symbol "PHAW." The Company shall use its best efforts to cause the Public Warrants to remain listed on Nasdaq (or such other national securities exchange on which the Class A Common Stock may then be listed) for the duration of the Exercise Period.
(c) The Company shall promptly notify the Warrant Agent in writing of the Detachability Date and shall issue a press release announcing such date.
ARTICLE 3 — TERMS AND EXERCISE OF WARRANTS
Section 3.1 — Exercise Price.
Each whole Warrant entitles the registered holder thereof to purchase one (1) share of Class A Common Stock at a price of $11.50 per share (the "Exercise Price" or "Warrant Price"), subject to adjustment as set forth in Article 5 of this Agreement. No fractional shares of Class A Common Stock shall be issued upon the exercise of any Warrant. If, upon the exercise of Warrants, a holder would be entitled to receive a fractional share of Class A Common Stock, the Company shall, upon exercise, round down to the nearest whole share of Class A Common Stock, and no cash shall be payable in lieu of such fractional share.
Section 3.2 — Duration of Warrants / Exercise Period.
(a) The Warrants shall become exercisable commencing on the later of (i) thirty (30) days after the completion of a Business Combination and (ii) twelve (12) months after the IPO Closing Date (i.e., January 24, 2023). No Warrant shall be exercisable, and the Company shall not be obligated to issue shares of Class A Common Stock upon exercise of any Warrant, prior to the commencement of the Exercise Period.
(b) The Warrants shall expire at 5:00 p.m., New York City time, on the Expiration Date (which is the date that is five (5) years after the completion of a Business Combination), or earlier upon redemption pursuant to Article 6 or upon the liquidation of the Company as set forth below. Upon the Expiration Date, all unexercised Warrants shall become void and all rights of the holders thereof under this Agreement shall cease.
(c) If the Company does not complete a Business Combination by the Business Combination Deadline (which is August 4, 2023, or February 4, 2024 if extended in accordance with the Company's Amended and Restated Certificate of Incorporation), the Warrants shall expire worthless and the Company shall have no obligation to the holders of the Warrants. In the event the Company is required to liquidate the Trust Account under such circumstances, the proceeds held in the Trust Account shall not be distributed to the holders of Warrants. In such event, each Warrant holder shall have no right to receive any portion of the Trust Account or any other consideration from the Company with respect to its Warrants, and the Warrants shall expire without value.
Section 3.3 — Exercise Procedures.
(a) Subject to the provisions of this Agreement, a Warrant may be exercised by the registered holder thereof during the Exercise Period by delivering to the Warrant Agent at its corporate office or at the office of its agent:
(i) the Warrant Certificate evidencing the Warrants to be exercised (if the Warrants are in certificated form), or, in the case of Warrants held in book-entry form through DTC, by delivering book-entry transfer instructions to the Warrant Agent in accordance with DTC's procedures;
(ii) an election to exercise (the "Election to Exercise"), substantially in the form set forth on the reverse side of the Warrant Certificate attached hereto as Exhibit A, duly completed and executed by the holder or the holder's duly authorized agent or attorney-in-fact; and
(iii) payment of the aggregate Exercise Price for the number of shares of Class A Common Stock as to which the Warrants are being exercised, in immediately available funds in lawful money of the United States of America, in the amount obtained by multiplying the Exercise Price by the number of shares of Class A Common Stock as to which the Warrants are being exercised.
(b) Payment of the aggregate Exercise Price shall be made in United States dollars by certified check, official bank check, or by wire transfer of immediately available funds to an account designated by the Warrant Agent.
(c) Upon receipt of the items described in Section 3.3(a), the Warrant Agent shall, as promptly as practicable, and in any event within three (3) Business Days, requisition from the Company's Transfer Agent delivery to, or upon the order of, the holder, the number of shares of Class A Common Stock to which such holder is entitled, registered in such name or names as the holder may designate in the Election to Exercise. Upon surrender of the Warrant Certificate (or upon completion of book-entry transfer) and payment of the aggregate Exercise Price, the Warrant Certificate shall be cancelled by the Warrant Agent. If fewer than all of the Warrants evidenced by a Warrant Certificate are being exercised, a new Warrant Certificate shall be issued for the remaining number of Warrants.
(d) The Warrant Agent shall not be required to accept an Election to Exercise if it is not accompanied by the applicable Warrant Certificate (or proper book-entry transfer instructions) and the required payment of the aggregate Exercise Price. The Warrant Agent shall not be under any duty or obligation to determine whether a holder has properly completed the Election to Exercise, and the Warrant Agent may rely on the information set forth in the Election to Exercise as being correct and complete.
(e) Notwithstanding anything to the contrary contained herein, in no event shall the Company be required to net cash settle any Warrant.
Section 3.4 — Valid Issuance of Class A Common Stock.
All shares of Class A Common Stock issued upon the proper exercise of Warrants in conformity with this Agreement shall be validly issued, fully paid, and non-assessable. The Company shall pay all documentary stamp taxes, if any, attributable to the issuance of shares of Class A Common Stock upon exercise of the Warrants; provided, however, that the Company shall not be required to pay any tax or taxes that may be payable in respect of any transfer involved in the issuance of any Warrant Certificate or any certificates for shares of Class A Common Stock in a name other than that of the registered holder of the Warrant Certificate surrendered upon the exercise of a Warrant, and the Company shall not be required to issue or deliver such Warrant Certificates or certificates for shares 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.
Section 3.5 — No Rights as Stockholder.
No Warrant holder, solely by virtue of holding or having a beneficial interest in a Warrant, shall be entitled to vote or receive dividends or be deemed the holder of shares of capital stock of the Company for any purpose, nor shall anything contained in this Agreement be construed to confer upon any Warrant holder, as such, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance, or otherwise), receive notice of meetings, receive dividends or subscription rights, or exercise any other rights of a stockholder with respect to the Company until such Warrant has been exercised and shares of Class A Common Stock have been issued in connection therewith.
Section 3.6 — No Obligation to Net Cash Settle.
In no event shall the Company be obligated to pay any Warrant holder cash in connection with the exercise of Warrants, and the Company shall have no obligation to settle any Warrant for cash. If the Company is unable to deliver shares of Class A Common Stock to the holder upon exercise of a Warrant because a registration statement covering the issuance of shares upon exercise of the Warrants is not effective under the Securities Act (or no exemption from registration is available), or if the Company has failed to maintain an effective registration statement as required by Section 4.1, the holders of Public Warrants shall have the right to exercise such Public Warrants on a "cashless basis" as provided in Section 3.7.1 until such time as a registration statement is effective. In no event shall the Company be required to settle any such exercise for cash or other consideration (other than as set forth in Section 3.7).
Section 3.7 — Cashless Exercise.
Section 3.7.1 — Public Warrants. If a registration statement covering the issuance of the shares of Class A Common Stock issuable upon exercise of the Public Warrants is not effective by the sixtieth (60th) business day following the completion of a Business Combination, holders of Public Warrants who exercise their Public Warrants after such sixtieth (60th) business day shall be entitled to do so on a "cashless basis" in accordance with Section 3(a)(9) of the Securities Act or another available exemption, until such time as an effective registration statement becomes available. In the event of a cashless exercise, each holder exercising a Public Warrant shall pay the Exercise Price by surrendering such Warrant for that number of shares of Class A Common Stock equal to the quotient obtained by dividing (x) the product of the number of shares of Class A Common Stock underlying the Warrants being exercised, multiplied by the excess of the Fair Market Value over the Exercise Price, by (y) the Fair Market Value.
For illustrative purposes, if the Fair Market Value of a share of Class A Common Stock is $15.00 and the Exercise Price is $11.50, then upon cashless exercise of a single Warrant, the holder would receive (1 × ($15.00 – $11.50)) / $15.00 = 0.2333 shares of Class A Common Stock. No fractional shares shall be issued; the number of shares shall be rounded down to the nearest whole number.
Section 3.7.2 — Private Placement Warrants. The Private Placement Warrants may be exercised on a cashless basis at any time during the Exercise Period, whether or not a registration statement covering the shares of Class A Common Stock issuable upon exercise of such Private Placement Warrants is effective, using the same formula as set forth in Section 3.7.1. The holders of Private Placement Warrants shall not be required to first make demand upon the Company to maintain an effective registration statement prior to exercising such cashless exercise right.
Section 3.7.3 — Cashless Exercise in Connection with Redemption. If the Company calls the Public Warrants for redemption pursuant to Section 6.2 (redemption when the Class A Common Stock price equals or exceeds $10.00 per share), holders of Public Warrants who elect not to have their Warrants redeemed shall be entitled to exercise such Warrants on a cashless basis prior to the redemption date. In such event, each holder shall receive a number of shares of Class A Common Stock determined by reference to the table set forth in Section 6.2 of this Agreement, based on the Redemption Fair Market Value and the number of months remaining until the Expiration Date of the Warrants, as applicable. The "Redemption Fair Market Value" for purposes of this Section 3.7.3 shall mean the average of the last reported sale prices of Class A Common Stock for the ten (10) trading days ending on the third (3rd) trading day prior to the date on which notice of redemption is sent.
The Company shall provide written notice to each holder of the cashless exercise right set forth in this Section 3.7.3 in connection with any notice of redemption delivered pursuant to Section 6.4.
ARTICLE 4 — REGISTRATION AND RESERVATION OF SHARES
Section 4.1 — Registration of Class A Common Stock.
The Company agrees that, as soon as practicable, but in no event later than sixty (60) business days after the completion of a Business Combination, it shall use its best efforts to file with the SEC a registration statement (which may be a registration statement on Form S-1 or, if available, on Form S-3) for the registration, under the Securities Act, of the shares of Class A Common Stock issuable upon exercise of the Warrants. The Company shall use its best efforts to cause such registration statement to become effective as promptly as practicable, and in any event within sixty (60) business days following the completion of a Business Combination, and to maintain the effectiveness of such registration statement and a current prospectus relating thereto until the earlier of (a) the Expiration Date and (b) the date on which no Warrants remain outstanding. If the shares of Class A Common Stock issuable upon the exercise of the Warrants are at the time of any exercise of a Warrant not covered by an effective registration statement, the Company shall use its best efforts to promptly file a registration statement covering such shares and to cause such registration statement to become effective. The Company shall promptly notify the Warrant Agent (and, in the case of a global Warrant Certificate, DTC) when a registration statement covering the shares of Class A Common Stock issuable upon exercise of the Warrants has become effective.
Section 4.2 — Reservation of Shares.
The Company covenants that it shall at all times reserve and keep available, out of the aggregate of its authorized but unissued shares of Class A Common Stock, such number of shares of Class A Common Stock as shall be sufficient to permit the exercise in full of all outstanding Warrants. As of the IPO Closing Date, assuming the base deal only (without exercise of the Over-Allotment Option), the Company has reserved 13,000,000 shares of Class A Common Stock, consisting of 7,500,000 shares issuable upon exercise of Public Warrants and 5,500,000 shares issuable upon exercise of Private Placement Warrants. Upon full exercise of the Over-Allotment Option, the Company shall reserve up to 14,950,000 shares of Class A Common Stock, consisting of 8,625,000 shares issuable upon exercise of Public Warrants and 6,325,000 shares issuable upon exercise of Private Placement Warrants.
The Company further covenants that it shall not, by amendment of its Amended and Restated Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but shall at all times in good faith assist in the carrying out of all the provisions of this Agreement and in the taking of all such action as may be necessary or appropriate in order to protect the exercise rights of the holders of the Warrants against dilution or other impairment.
Section 4.3 — Listing of Shares.
The Company shall use its best efforts to cause all shares of Class A Common Stock issuable upon exercise of the Warrants to be listed on Nasdaq or such other national securities exchange on which the Class A Common Stock is then listed prior to the date on which any Warrant becomes exercisable. The Company shall provide to the Warrant Agent evidence of such listing upon request. If, at any time during the period that the Warrants are exercisable, the Class A Common Stock is not listed on Nasdaq or another national securities exchange, the Company shall promptly use its best efforts to effect such listing or to list such shares on another national securities exchange.
ARTICLE 5 — ANTI-DILUTION ADJUSTMENTS
Section 5.1 — Stock Dividends, Subdivisions, and Combinations.
If the number of outstanding shares of Class A Common Stock is increased by a stock dividend payable in shares of Class A Common Stock, or by a subdivision or other split-up of shares of Class A Common Stock, then, on the effective date of such stock dividend, subdivision, or split-up, the number of shares of Class A Common Stock issuable upon exercise of each Warrant shall be increased in proportion to such increase in the outstanding shares of Class A Common Stock, and the Exercise Price shall be proportionately decreased. For purposes of illustration, if (i) the Exercise Price is $11.50, (ii) the number of shares issuable upon exercise of each Warrant is one (1), and (iii) a 2-for-1 stock split is effected, then following such stock split, (a) the number of shares issuable upon exercise of each Warrant shall be two (2) and (b) the Exercise Price shall be $5.75 per share.
Conversely, if the number of outstanding shares of Class A Common Stock is decreased by a combination, consolidation, reverse stock split, or reclassification of shares of Class A Common Stock, then, on the effective date of such combination, consolidation, reverse stock split, or reclassification, the number of shares of Class A Common Stock issuable upon exercise of each Warrant shall be decreased in proportion to such decrease in the outstanding shares of Class A Common Stock, and the Exercise Price shall be proportionately increased.
Section 5.2 — Aggregation of Shares.
If the outstanding shares of Class A Common Stock are reclassified, consolidated, or exchanged for a lesser number of shares of Class A Common Stock (other than a reverse stock split described in Section 5.1), the Exercise Price shall be proportionately increased and the number of shares of Class A Common Stock issuable upon exercise of each Warrant shall be proportionately decreased, as determined in good faith by the Board of Directors of the Company. Any adjustment under this Section 5.2 shall become effective immediately after the effective date of such reclassification, consolidation, or exchange.
Section 5.3 — Extraordinary Dividends.
If the Company shall, at any time while the Warrants are outstanding, declare or make any dividend or distribution (whether in cash, property, or securities) to holders of Class A Common Stock other than (a) an Ordinary Cash Dividend, (b) dividends or distributions payable in shares of Class A Common Stock (which shall be addressed under Section 5.1), or (c) dividends or distributions payable in connection with the exercise of the Company's right to redeem all outstanding shares of Class A Common Stock in connection with the failure to consummate a Business Combination (any such dividend or distribution other than the foregoing, an "Extraordinary Dividend"), the Exercise Price shall be decreased, effective immediately after the effective date of such Extraordinary Dividend, by the amount of cash and/or the fair market value (as determined by the Board of Directors of the Company in good faith) of any securities or other property paid per share of Class A Common Stock on account of such Extraordinary Dividend. Notwithstanding the foregoing, no adjustment shall be made to the Exercise Price pursuant to this Section 5.3 if the aggregate amount of dividends and distributions paid per share of Class A Common Stock during the period following the IPO Closing Date would exceed the then-applicable Exercise Price.
Section 5.4 — Issuance of Additional Shares of Class A Common Stock.
If the Company, at any time while the Warrants are outstanding, issues additional shares of Class A Common Stock or equity-linked securities (including, without limitation, convertible securities, options, warrants, or similar rights) for capital-raising purposes in connection with the closing of a Business Combination at a Newly Issued Price (as defined below) that is less than the then-effective Exercise Price (excluding any shares or rights issued or issuable to the Sponsor, any officers or directors of the Company, or any of their respective Affiliates), the Exercise Price shall be adjusted (from and after the consummation of such issuance) to a price equal to one hundred fifteen percent (115%) of the higher of (a) the Newly Issued Price and (b) the Market Value (as defined below).
For purposes of this Section 5.4:
(i) "Newly Issued Price" means the aggregate consideration received or receivable by the Company in respect of such additional shares or equity-linked securities, divided by the number of shares of Class A Common Stock issued or issuable in connection therewith (whether upon issuance, conversion, or exercise, as applicable).
(ii) "Market Value" means the volume-weighted average trading price of the Class A Common Stock during the twenty (20) trading-day period starting on the trading day prior to the date of the consummation of the Business Combination, as reported on Nasdaq.
This Section 5.4 constitutes the standard SPAC anti-dilution provision and is intended to protect Warrant holders against the dilutive effects of certain equity issuances made in connection with a Business Combination.
Section 5.5 — Recapitalization, Reclassification, and Reorganization.
In the event of any capital reorganization of the Company, or any reclassification of the Class A Common Stock (other than a reclassification addressed by Section 5.1 or Section 5.2), or in case of any consolidation or merger of the Company with or into another corporation (other than a consolidation or merger in which the Company is the continuing corporation and that does not result in any reclassification or change of the outstanding Class A Common Stock), or in case of any sale or conveyance to another corporation of the property of the Company as an entirety or substantially as an entirety, then, as a condition of such reorganization, reclassification, consolidation, merger, sale, or conveyance, lawful and adequate provision shall be made whereby the holder of each Warrant then outstanding shall have the right thereafter to receive, upon the exercise of such Warrant, the kind and amount of shares of stock, securities, or property that would have been receivable by such holder upon such reorganization, reclassification, consolidation, merger, sale, or conveyance had such Warrant been exercised immediately prior to such event at the then-prevailing Exercise Price; and in any such case, appropriate adjustment shall be made in the application of the provisions set forth in this Article 5 with respect to the rights and interests of the Warrant holders after such reorganization, reclassification, consolidation, merger, sale, or conveyance so that the provisions of this Article 5 (including adjustments to the Exercise Price and the number and kind of securities to be issued upon exercise of the Warrants) shall thereafter be applicable, as nearly as reasonably may be practicable, in relation to any shares of stock, securities, or property thereafter deliverable upon the exercise of Warrants.
Section 5.6 — Notices of Changes in Exercise Price.
Whenever the Exercise Price or the number of shares of Class A Common Stock issuable upon exercise of the Warrants is adjusted pursuant to this Article 5, the Company shall:
(a) promptly prepare and deliver to the Warrant Agent a certificate setting forth the adjusted Exercise Price and the number of shares of Class A Common Stock issuable upon exercise of each Warrant after such adjustment, setting forth in reasonable detail the facts requiring such adjustment and the computation by which such adjustment was made; and
(b) promptly cause written notice of such adjustment to be mailed to each registered Warrant holder at the address of such holder shown on the Warrant Register, which notice shall set forth the adjusted Exercise Price, the number of shares of Class A Common Stock issuable upon exercise of each Warrant, and a brief description of the transaction or event giving rise to the adjustment.
Section 5.7 — No Adjustment for Issuance of Class A Common Stock on Exercise.
No adjustment to the Exercise Price or the number of shares of Class A Common Stock issuable upon exercise of the Warrants shall be made as a result of or in connection with the issuance of shares of Class A Common Stock upon the exercise of Warrants in accordance with this Agreement.
Section 5.8 — Form of Warrant After Adjustment.
After any adjustment made pursuant to this Article 5, the form of the Warrant Certificate need not be changed, but Warrant Certificates issued after such adjustment may state the adjusted Exercise Price and the adjusted number of shares of Class A Common Stock issuable upon exercise. The Company may, at any time in its sole discretion, make any change of form that it may deem appropriate and that does not affect the substance of the Warrant Certificate, and any Warrant Certificate thereafter issued or countersigned, whether in exchange or substitution for an outstanding Warrant Certificate or otherwise, may be in the form so changed.
ARTICLE 6 — REDEMPTION OF WARRANTS
Section 6.1 — Redemption of Public Warrants for Cash When Price Equals or Exceeds $18.00 Per Share.
(a) Subject to the provisions of this Section 6.1, the Company may, at any time during the Exercise Period, redeem the outstanding Public Warrants (and only the Public Warrants; for the avoidance of doubt, not the Private Placement Warrants so long as they are held by the Sponsor or its Permitted Transferees):
(i) in whole and not in part;
(ii) at a redemption price of $0.01 per Public Warrant;
(iii) upon not less than thirty (30) days' prior written notice of redemption (the "30-Day Redemption Period") given to each Warrant holder in accordance with Section 6.4; and
(iv) if, and only if, the last reported sale price of the Class A Common Stock equals or exceeds $18.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise of or the Exercise Price of a Warrant pursuant to Article 5) for any twenty (20) trading days within a thirty (30)-trading-day period ending on the third (3rd) trading day prior to the date on which the Company sends the notice of redemption to the Warrant holders.
(b) The Company shall not redeem the Public Warrants pursuant to this Section 6.1 unless a registration statement under the Securities Act covering the issuance of the shares of Class A Common Stock issuable upon exercise of the Warrants is then effective and a current prospectus relating to such shares is available throughout the 30-Day Redemption Period, or the Company has elected to require all holders to exercise their Warrants on a "cashless basis" as provided in Section 3.7.
(c) During the 30-Day Redemption Period, holders of Public Warrants may exercise their Public Warrants prior to the scheduled redemption date. Any such exercise may be effected on either a cash basis or on a "cashless basis" as provided in Section 3.7.1 (provided that the conditions for cashless exercise set forth therein are satisfied). If a holder exercises Public Warrants during the 30-Day Redemption Period, the exercise shall be irrevocable.
(d) If the Company calls the Public Warrants for redemption pursuant to this Section 6.1, the Company shall have the option to require all holders that wish to exercise the Public Warrants to do so on a "cashless basis" as described in Section 3.7.1, by delivering a notice of such election to the Warrant Agent and to each holder together with or as part of the notice of redemption.
(e) The $18.00 per share redemption trigger price referred to in Section 6.1(a)(iv) was established to provide Warrant holders a reasonable premium above the initial Exercise Price of $11.50 per share, and it was selected so as to provide assurance that holders will receive a meaningful return on their investment before the Company may exercise its redemption right. Notwithstanding the foregoing, this Section 6.1 is solely for the convenience of the reader and shall not affect the interpretation of this Agreement.
Section 6.2 — Redemption of Public Warrants for Cash When Price Equals or Exceeds $10.00 Per Share.
(a) Subject to the provisions of this Section 6.2, the Company may, at any time during the Exercise Period, redeem the outstanding Public Warrants (and only the Public Warrants; for the avoidance of doubt, not the Private Placement Warrants so long as they are held by the Sponsor or its Permitted Transferees):
(i) in whole and not in part;
(ii) at a redemption price of $0.10 per Public Warrant, provided that holders shall be given not less than thirty (30) days' prior written notice of such redemption and shall have the right to exercise their Warrants on a cashless basis prior to the redemption date in accordance with this Section 6.2;
(iii) if, and only if, the last reported sale price of the Class A Common Stock equals or exceeds $10.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise of or the Exercise Price of a Warrant pursuant to Article 5) for any twenty (20) trading days within a thirty (30)-trading-day period ending on the third (3rd) trading day prior to the date on which the Company sends the notice of redemption to the Warrant holders.
(b) In connection with any redemption pursuant to this Section 6.2, holders of Public Warrants who elect not to have their Warrants redeemed may exercise such Warrants on a cashless basis prior to the redemption date. Upon such cashless exercise in connection with this Section 6.2, each exercising holder shall receive a number of shares of Class A Common Stock determined by reference to the table below, based on the Redemption Fair Market Value of the Class A Common Stock and the number of months remaining until the Expiration Date of the Warrants. For purposes of this table, the "Redemption Fair Market Value" shall mean the average of the last reported sale prices of Class A Common Stock for the ten (10) trading days ending on the third (3rd) trading day prior to the date on which notice of redemption is sent.
Shares of Class A Common Stock Issuable Upon Cashless Exercise (Per Warrant):
The number of shares set forth in the table above shall be adjusted in the same manner and at the same time as the number of shares issuable upon exercise of the Warrants is adjusted pursuant to Article 5. If the Redemption Fair Market Value is between two of the values set forth in the table above, or if the number of months until the Expiration Date falls between two of the values set forth in the table above, the number of shares to be issued upon cashless exercise shall be determined by linear interpolation between the applicable values.
(c) The Private Placement Warrants are not subject to the redemption provisions of this Section 6.2 so long as they are held by the Sponsor or its Permitted Transferees.
Section 6.3 — Non-Redeemability of Private Placement Warrants.
The Private Placement Warrants are not redeemable by the Company pursuant to Section 6.1 or Section 6.2 so long as they are held by the Sponsor or any Permitted Transferees (as defined in Section 7.4). If and to the extent that any Private Placement Warrant ceases to be held by the Sponsor or a Permitted Transferee and is held by a person other than the Sponsor or a Permitted Transferee, then such Private Placement Warrant shall be redeemable by the Company and exercisable by the holder thereof on the same basis as the Public Warrants, including the redemption provisions set forth in Sections 6.1 and 6.2, and such Warrant shall no longer be entitled to the benefits of Article 7 with respect to cashless exercise or non-redeemability.
Section 6.4 — Procedures for Redemption.
(a) In the event the Company elects to redeem the Public Warrants pursuant to Section 6.1 or Section 6.2, notice of redemption (the "Redemption Notice") shall be mailed by the Warrant Agent, by first-class mail, postage prepaid, to each registered holder of Public Warrants at such holder's last address as it appears on the Warrant Register. The Redemption Notice shall also be mailed to the Company at its principal offices and to the Warrant Agent. Any notice mailed in the manner provided herein shall be conclusively presumed to have been duly given whether or not the registered holder receives such notice.
(b) The Redemption Notice shall specify:
(i) the applicable Redemption Price;
(ii) the redemption date, which shall not be fewer than thirty (30) days after the date of mailing of such Redemption Notice (the "Redemption Date");
(iii) the number of Public Warrants to be redeemed (which shall be all of the outstanding Public Warrants);
(iv) that during the period from the date of the Redemption Notice until the Redemption Date, holders of Public Warrants may exercise their Public Warrants prior to the Redemption Date and that the exercise shall be irrevocable;
(v) the then-applicable Exercise Price;
(vi) that Public Warrants not exercised by the close of business on the business day immediately preceding the Redemption Date will be redeemed for the applicable Redemption Price, that from and after the Redemption Date, the record holders of such Public Warrants shall have no further rights except to receive the Redemption Price upon surrender of their Warrant Certificates (or confirmation of book-entry position); and
(vii) if the Company has elected to require that all holders exercise their Warrants on a "cashless basis" in connection with the redemption, a statement to that effect and the procedures for such cashless exercise, including, in the case of a redemption under Section 6.2, a copy of the table set forth in Section 6.2 of this Agreement.
(c) On and after the Redemption Date, the record holder of a Public Warrant that has been called for redemption and that has not been exercised prior to the Redemption Date shall have no further rights under this Agreement except the right to receive the applicable Redemption Price upon surrender of the Warrant Certificate (or confirmation of book-entry position) to the Warrant Agent, without interest. For the avoidance of doubt, if the holder of a Public Warrant exercises such Public Warrant prior to the Redemption Date, such exercise shall be irrevocable and the holder shall be entitled to receive shares of Class A Common Stock (and not the Redemption Price) in respect of such exercised Warrant.
ARTICLE 7 — PRIVATE PLACEMENT WARRANTS
Section 7.1 — Terms of Private Placement Warrants.
The Private Placement Warrants shall be identical to the Public Warrants in all respects except as otherwise set forth in this Article 7. Each Private Placement Warrant entitles the registered holder thereof to purchase one (1) share of Class A Common Stock at the Exercise Price, subject to adjustment as set forth in Article 5. The Exercise Period for the Private Placement Warrants shall be the same as the Exercise Period for the Public Warrants as set forth in Section 3.2, and the Private Placement Warrants shall expire on the Expiration Date in the same manner as the Public Warrants.
Section 7.2 — Non-Redeemability.
As more fully described in Section 6.3, the Private Placement Warrants are not redeemable by the Company pursuant to Section 6.1 or Section 6.2 so long as they are held by the Sponsor or any Permitted Transferees. In the event that a Private Placement Warrant is transferred to a person other than a Permitted Transferee, such Private Placement Warrant shall be treated as a Public Warrant for purposes of the redemption provisions set forth in Sections 6.1 and 6.2.
Section 7.3 — Cashless Exercise Right.
The Private Placement Warrants may be exercised on a cashless basis at any time during the Exercise Period, whether or not a registration statement covering the shares of Class A Common Stock issuable upon exercise thereof is effective under the Securities Act, using the formula set forth in Section 3.7.2. This cashless exercise right shall apply so long as the Private Placement Warrants are held by the Sponsor or any Permitted Transferees. If any Private Placement Warrant is transferred to a person other than a Permitted Transferee, such holder's right to exercise on a cashless basis shall be governed by the provisions applicable to Public Warrants under Section 3.7.1.
Section 7.4 — Transfer Restrictions.
(a) The Private Placement Warrants and the shares of Class A Common Stock issuable upon exercise thereof are subject to the transfer restrictions set forth in that certain Letter Agreement, dated as of January 19, 2022, by and among the Company, the Sponsor, and the Company's officers and directors (the "Letter Agreement"). The Private Placement Warrants shall not be transferable, assignable, or saleable until thirty (30) days after the completion of a Business Combination, except to Permitted Transferees as described below and subject to the conditions set forth in the Letter Agreement.
(b) "Permitted Transferees" shall include, without limitation:
(i) officers, directors, or members of the Sponsor;
(ii) Affiliates of the Sponsor;
(iii) members of the immediate family of any officer, director, or member of the Sponsor (including by marriage or adoption);
(iv) trusts, the beneficiaries of which include only the persons described in clauses (i) through (iii) above or the estates of such persons; and
(v) entities controlled by any of the persons described in clauses (i) through (iv) above.
(c) Any Permitted Transferee that receives Private Placement Warrants (or shares of Class A Common Stock issuable upon exercise thereof) must agree to be bound by the same transfer restrictions, lockup provisions, and other obligations applicable to the Sponsor under this Agreement and the Letter Agreement, and must enter into a written agreement in form and substance reasonably satisfactory to the Company to that effect prior to the completion of any such transfer.
Section 7.5 — Legend.
Each Warrant Certificate (or book-entry position maintained on the records of DTC or its participants) representing Private Placement Warrants shall bear (or be subject to) a legend substantially in the form set forth in Exhibit B attached hereto, indicating the transfer restrictions applicable to such Private Placement Warrants. In addition, Warrant Certificates representing Private Placement Warrants shall include any additional legends that may be required under applicable securities laws.
ARTICLE 8 — CONCERNING THE WARRANT AGENT