<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------------------
SCHEDULE 13D
(Rule 13d - 101)
(Amendment No. ___)
Galoob Toys, Inc.
------------------
(Name of Issuer)
Common Stock
---------------------------
(Title of Class of Securities)
364091108
--------------
(CUSIP Number)
Lucasfilm Ltd.
5858 Lucas Valley Road
Nicasio, CA 94946
(415) 662-1800
----------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
COPY TO:
Tad J. Freese
Latham & Watkins
505 Montgomery Street, Suite 1900
San Francisco, California 94111-2562
(415) 391-0600
October 14, 1997
--------------------------------------------------
(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
statement because of Rule 13d-1(b)(3) or (4), check the following box: [ ]
(Continued on following pages)
Page 1 of 10 Pages
Exhibit Index is on Page 57
<PAGE> 2
SCHEDULE 13D
CUSIP No. 364091108 PAGE 2 OF 57 PAGES
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
Lucasfilm Ltd.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [X]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
00
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
California
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
-0- shares of Common Stock
NUMBER OF ----------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY -0- shares of Common Stock
OWNED BY ----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 3,580,000 shares of Common Stock
PERSON ----------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
-0- shares of Common Stock
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,580,000 shares of Common Stock
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
19.9%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- --------------------------------------------------------------------------------
2
<PAGE> 3
SCHEDULE 13D
CUSIP No. 364091108 PAGE 3 OF 57 PAGES
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
George W. Lucas,Jr.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [X]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
00
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States of America
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
-0- shares of Common Stock
NUMBER OF ----------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY -0- shares of Common Stock
OWNED BY ----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 3,580,000 shares of Common Stock
PERSON ----------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
-0- shares of Common Stock
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,580,000 shares of Common Stock
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
19.9%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- --------------------------------------------------------------------------------
3
<PAGE> 4
SCHEDULE 13D
CUSIP No. 364091108 PAGE 4 OF 57 PAGES
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
Lucas Licensing Ltd.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [X]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
00
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
California
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
-0- shares of Common Stock
NUMBER OF ----------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY -0- shares of Common Stock
OWNED BY ----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 2,130,000 shares of Common Stock
PERSON ----------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
-0- shares of Common Stock
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,130,000 shares of Common Stock
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
11.8%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- --------------------------------------------------------------------------------
4
<PAGE> 5
Item 1. Security and Issuer.
This statement relates to shares of common stock, par value $.01
per share (the "Shares"), of Galoob Toys, Inc., a Delaware corporation (the
"Company"). The principal executive offices of the Company are located at 500
Forbes Boulevard, South San Francisco, California 94080.
Item 2. Identity and Background.
(a)-(c), (f). This statement is being filed by (i) Lucasfilm Ltd., a
California corporation ("Lucasfilm"), (ii) George W. Lucas, Jr. ("Mr. Lucas")
and (iii) Lucas Licensing Ltd., a California corporation ("Lucas Licensing").
Lucasfilm, Mr. Lucas and Lucas Licensing are sometimes collectively referred to
herein as the "Reporting Persons."
Lucasfilm's principal business is the production and distribution of
motion pictures. Lucasfilm is also the controlling shareholder of Lucas
Licensing. Mr. Lucas' principal business is the ownership of companies in the
entertainment industry. Lucas Licensing's principal business is the licensing of
entertainment intellectual properties related to certain motion pictures. Mr.
Lucas is the founder, controlling person, and sole director of Lucasfilm and
Lucas Licensing. The business address of each of Lucasfilm, Mr. Lucas and Lucas
Licensing is 5858 Lucas Valley Road, Nicasio, California 94946. Mr. Lucas is a
citizen of the United States of America.
Gordon Radley ("Mr. Radley") is the President of Lucasfilm and Lucas
Licensing. The business address of Mr. Radley is 5858 Lucas Valley Road,
Nicasio, California 94946. Mr. Radley is a citizen of the United States of
America.
Micheline Chau ("Ms. Chau") is the Treasurer of Lucasfilm and Lucas
Licensing. The business address of Ms. Chau is 5858 Lucas Valley Road, Nicasio,
California 94946. Ms. Chau is a citizen of the United States of America.
(d) and (e). During the last five years, none of Lucasfilm, Mr.
Lucas, Lucas Licensing, Mr. Radley and Ms. Chau has (i) been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or
(ii) been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
As of the close of business on October 23, 1997, Lucasfilm held a
currently exercisable warrant (the "Lucasfilm Warrant") to purchase 1,450,000
Shares, which it received in exchange for the grant to the Company of a right of
first refusal with respect to the license of certain intellectual property
rights of Lucasfilm.
5
<PAGE> 6
As of the close of business on October 23, 1997, Lucas Licensing
held a currently exercisable warrant (the "Lucas Licensing Warrant" and together
with the Lucasfilm Warrant, the "Warrants") to purchase 2,130,000 Shares, which
it received in exchange for the grant to the Company of a license of certain
intellectual property rights of Lucas Licensing.
Any Shares resulting from exercise of the Warrants are referred
to herein as "Exercised Shares." None of the Exercised Shares is currently
subject to any margin arrangements, although the Reporting Persons may from time
to time enter into one or more of such arrangements in the future.
Item 4. Purpose of Transaction.
The Reporting Persons acquired the Warrants in connection with the
grant to the Company of a license of certain intellectual property rights and in
connection with the grant of a right of first refusal to the Company with
respect to certain other intellectual property rights. The Reporting Persons
intend to review on a continuing basis their investment in the Warrants in light
of the factors discussed herein.
Depending on the factors discussed herein, the Reporting Persons may,
from time to time exercise all or a portion of the Warrants or, acquire, retain
or sell all or a portion of their holdings of the Shares in the open market or
in privately negotiated transactions. Any actions the Reporting Persons might
undertake will be dependent upon the Reporting Persons' review of numerous
factors, including, among other things, the price levels of the Shares; general
market and economic conditions; ongoing evaluation of the Company's business,
financial condition, operations and prospects; the relative attractiveness of
alternative business and investment opportunities; and other future
developments. The Reporting Persons may also transfer all or a portion of the
Warrants on or after October 14, 1999.
Except as set forth above, the Reporting Persons have no present
plans or intentions which would result in or relate to any of the transactions
described in subparagraphs (a) through (j) of Item 4 of Schedule 13D.
Item 5. Interest in Securities of the Issuer.
(a)-(b) As of the close of business on October 23, 1997, Lucasfilm
did not hold any Shares directly but owned the Lucasfilm Warrant to purchase an
aggregate of 1,450,000 Shares, which represent approximately 8.0% of the
18,019,864 Shares outstanding as of June 30, 1997, as reported in the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 (the
"Outstanding Shares"). Lucasfilm has the sole power to dispose or to direct the
disposition of Exercised Shares arising from exercise of the Lucasfilm Warrant.
Lucasfilm does not have the power to vote or direct the vote of any such
Exercised Shares prior to the receipt of such Exercised Shares upon exercise of
the Lucasfilm Warrant. As the controlling shareholder of Lucas Licensing,
Lucasfilm may also be deemed to beneficially own any Shares held by Lucas
Licensing.
6
<PAGE> 7
As of the close of business on October 23, 1997, Lucas Licensing
did not hold any Shares but owned the Lucas Licensing Warrant to purchase an
aggregate of 2,130,000 Shares, which represent approximately 11.8% of the
Outstanding Shares. Lucas Licensing has the sole power to dispose or to direct
the disposition of Exercised Shares arising from exercise of the Lucas Licensing
Warrant. Lucas Licensing does not have the power to vote or direct the vote of
any such Exercised Shares prior to the receipt of such Exercised Shares upon
exercise of the Lucas Licensing Warrant.
As of the close of business on October 23, 1997, Mr. Lucas did
not hold any Shares directly. As the sole director of both Lucasfilm and Lucas
Licensing and as the controlling person of Lucasfilm, Mr. Lucas may be deemed
to beneficially own any Shares held by Lucasfilm and Lucas Licensing.
As of the close of business on October 23, 1997, Mr. Radley did
not hold any Shares directly. Mr. Radley has no right to vote or dispose of any
Exercised Shares held by Lucasfilm or Lucas Licensing, and therefore does not
beneficially own any Shares.
As of the close of business on October 23, 1997, Ms. Chau did not
hold any Shares directly. Ms. Chau has no right to vote or dispose of any
Exercised Shares held by Lucasfilm or Lucas Licensing, and therefore does not
beneficially own any Shares.
The Reporting Persons may be deemed to be acting as a group in
relation to their respective holdings in the Company.
Except as set forth in this Item 5(a)-(b), each of the persons
named in this Item 5(a)-(b) disclaims beneficial ownership of any Shares owned
beneficially or of record by any other person named in this Item 5(a)-(b).
(c) On October 14, 1997, Lucasfilm and Lucas Licensing were
granted the Lucasfilm Warrant and Lucas Licensing Warrant, respectively, by the
Company, as detailed above. On the date of grant, the exercise price of the
Warrants was $15.00 per Share.
Except as set forth herein, none of the Reporting Persons, Mr.
Radley or Ms. Chau has effected any transaction in the Shares during the past 60
days.
(d) Not applicable.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to
Securities of the Issuer.
7
<PAGE> 8
On October 14, 1997, the Company granted to Lucasfilm a warrant
to purchase 1,450,000 Shares with an exercise price of $15.00 per Share and
which may be exercised on or prior to the twelfth anniversary of the grant
date. A copy of the Lucasfilm Warrant is attached to this Schedule 13D as
Exhibit 2 and is incorporated by reference herein. On October 14, 1997, the
Company granted to Lucas Licensing a warrant to purchase 2,130,000 Shares with
an exercise price of $15.00 per Share and which may be exercised on or prior to
the twelfth anniversary of the grant date. A copy of the Lucas Licensing Warrant
is attached to this Schedule 13D as Exhibit 3 and is incorporated by reference
herein.
In addition, if at any time prior to the termination of the
Warrants, the Company grants any Common Stock, Convertible Securities or Options
(as defined in the Warrants) to any officer, director, employee or consultant of
the Company ("EE Stock"), then the Company has agreed to simultaneously
therewith grant to each of Lucasfilm and Lucas Licensing a warrant ("Springing
Warrant") on the same terms and conditions as the Warrants (except that the
exercise price per share of such Springing Warrant shall equal the exercise
price per, or the amount paid for each, share of such EE Stock), to purchase
that number of shares of Common Stock computed using the following formula:
X = .154(B/A)(X+Y)
Where:
X = The number of shares of Common Stock to be issued to
Lucasfilm or Lucas Licensing, as applicable, upon exercise of the
Springing Warrant
Y = The number of shares of Common Stock issued or issuable
pursuant to the grant of such EE Stock
A = The original number of Warrant Shares (as defined in the
Lucasfilm Warrant or the Lucas Licensing Warrant, as applicable)
B = The number of Warrant Shares owned by Lucasfilm or Lucas
Licensing, as applicable, on the date of such grant of Additional Stock
(as defined in the Warrants).
Except as set forth herein, none of the Reporting Persons has any
contracts, arrangements, understandings or relationships (legal or otherwise)
with any person with respect to any securities of the Company, including but not
limited to any contracts, arrangements, understandings or relationships
concerning the transfer or voting of such securities, finder's fees, joint
ventures, loan or option arrangements, puts or calls, guarantees of profits,
division of profits or losses, or the giving or withholding of proxies.
Item 7. Material to be Filed as Exhibits.
Exhibit 1 Joint Filing Agreement.
Exhibit 2 Lucasfilm Warrant.
Exhibit 3 Lucas Licensing Warrant.
8
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SIGNATURE
After reasonable inquiry and to the best of each of the
undersigned's knowledge and belief, each of the undersigned certifies that the
information set forth in this statement is true, complete and correct.
Dated: October 23, 1997
Lucasfilm Ltd.
By: /s/ Gordon Radley
---------------------------------
Name: Gordon Radley
Its: President
/s/ George W. Lucas, Jr.
-----------------------------------
George W. Lucas, Jr.
Lucas Licensing Ltd.
By: /s/ Gordon Radley
---------------------------------
Name: Gordon Radley
Its: President
9
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EXHIBIT INDEX
Exhibit 1 Joint Filing Agreement.
Exhibit 2 Lucasfilm Warrant.
Exhibit 3 Lucas Licensing Warrant.
10
<PAGE> 1
EXHIBIT 1
JOINT FILING AGREEMENT
In accordance with Rule 13d-1(f) promulgated under the Securities
Exchange Act of 1934, as amended, the undersigned hereby agree to the joint
filing with all other Reporting Persons (as such term is defined in the Schedule
13D referred to below) on behalf of each of them of a statement on Schedule 13D
(including amendments thereto) with respect to the common stock, par value $.01
per share, of Galoob Toys, Inc., a Delaware corporation, and that this Agreement
may be included as an Exhibit to such joint filing. This Agreement may be
executed in any number of counterparts, all of which taken together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned hereby execute this Agreement
as of the 23rd day of October, 1997.
Lucasfilm Ltd.
By: /s/ Gordon Radley
---------------------------------
Name: Gordon Radley
Its: President
/s/ George W. Lucas, Jr.
------------------------------------
George W. Lucas, Jr.
Lucas Licensing Ltd.
By: /s/ Gordon Radley
---------------------------------
Name: Gordon Radley
Its: President
<PAGE> 1
EXHIBIT 2
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE
SECURITIES LAWS. NO SALE, TRANSFER OR OTHER DISPOSITION OF SUCH
SECURITIES MAY BE EFFECTED WITHOUT (I) AN EFFECTIVE REGISTRATION
STATEMENT RELATING THERETO, (II) AN OPINION OF COUNSEL FOR THE HOLDER,
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT
REQUIRED, (III) RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND
EXCHANGE COMMISSION, OR (IV) OTHERWISE COMPLYING WITH THE PROVISIONS OF
ARTICLE III OF THIS WARRANT.
THIS WARRANT MAY NOT BE TRANSFERRED OTHER THAN TO AN AFFILIATE (AS
DEFINED UNDER THE SECURITIES ACT OF 1933, AS AMENDED) PRIOR TO THE
SECOND ANNIVERSARY OF THE CLOSING DATE.
WARRANT
TO PURCHASE SHARES OF COMMON STOCK
AS HEREIN DESCRIBED
Dated October 14, 1997
This certifies that for value received:
LUCASFILM LTD.
or registered assigns, is entitled, subject to the terms set forth herein, to
purchase from Galoob Toys, Inc., a Delaware corporation (the "Company"), up to
1,450,000 fully paid and nonassessable shares of the Common Stock of the
Company, at the exercise price of fifteen dollars ($15.00) per share, and the
number of shares purchasable hereunder are subject to adjustment in certain
events, all as more fully set forth under Article IV herein.
ARTICLE I.
DEFINITIONS
"Additional Stock" means Common Stock, Convertible Securities and
Options, other than (i) the Preferred Stock and (ii) Common Stock, Convertible
Securities or Options issued to officers, directors, employees or consultants of
the Company.
"Charter" means the certificate of incorporation of the Company, as
filed with the Delaware Secretary of State.
"Closing Date" means October 14, 1997.
"Commission" means the Securities and Exchange Commission, or any other
federal agency then administering the Securities Exchange Act of 1934 or the
Securities Act.
"Common Stock" means the Company's Common Stock, par value $.01 per
share, any stock into which such stock shall have been changed or any stock
resulting from any reclassification of such stock,
<PAGE> 2
and any other capital stock of the Company of any class or series now or
hereafter authorized having the right to share in distributions either of
earnings or assets of the Company without limit as to amount or percentage.
"Company" means Galoob Toys, Inc., a Delaware corporation, and any
successor corporation.
"Convertible Securities" means evidences of indebtedness, shares of
stock or other securities which are convertible into or exchangeable for, with
or without payment of additional consideration, shares of Common Stock, either
immediately or upon the arrival of a specified date or the happening of a
specified event or both.
"Exercise Period" means the period commencing on the Closing Date and
terminating at 5:00 p.m. Pacific Time on the twelfth anniversary of the Closing
Date.
"Exercise Price" means the exercise price per share of Common Stock set
forth in the Preamble to this Warrant, as such price may be adjusted pursuant to
Article IV hereof.
"Fair Market Value" means
(i) If shares of Common Stock are being sold pursuant to a public
offering under an effective registration statement under the Securities Act
which has been declared effective by the Commission and Fair Market Value is
being determined as of the closing of the public offering, the "price to public"
specified for such shares in the final prospectus for such public offering;
(ii) If shares of Common Stock are then listed or admitted to
trading on any national securities exchange or traded on any national market
system and Fair Market Value is not being determined as of the date described in
clause (i) of this definition, the average of the daily closing prices for the
ten trading days before such date. The closing price for each day shall be the
last sale price on such date or, if no such sale takes place on such date, the
average of the closing bid and asked prices on such date, in each case as
officially reported on the principal national securities exchange or national
market system on which such shares are then listed, admitted to trading or
traded;
(iii) If no shares of Common Stock are then listed or admitted to
trading on any national securities exchange or traded on any national market
system or being offered to the public pursuant to a registration described in
clause (i) of this definition, the average of the reported closing bid and asked
prices thereof on such date in the over-the-counter market as shown by the
Nasdaq Stock Market or, if such shares are not then quoted in such system, as
published by the National Quotation Bureau, Incorporated or any similar
successor organization, and in either case as reported by any member firm of the
New York Stock Exchange selected by the Holder;
(iv) If no shares of Common Stock are then listed or admitted to
trading on any national exchange or traded on any national market system, if no
closing bid and asked prices thereof are then so quoted or published in the
over-the-counter market and if no such shares are being offered to the public
pursuant to a registration described in clause (i) of this definition, the fair
value of a share of Common Stock shall be as determined by an investment bank
selected by Holder with the approval of the Company (which approval shall not be
unreasonably withheld or delayed), the costs of such investment banker to be
paid by the Company.
"Fiscal Year" means the fiscal year of the Company.
2
<PAGE> 3
"Holder" means the person in whose name this Warrant is registered on
the books of the Company maintained for such purpose and any permitted
transferee of all or a portion of this Warrant.
"Market Price" means $18 per share of Common Stock, which shall be
adjusted in the same manner as provided in Article IV as if it were the Exercise
Price.
"Option" means any right, warrant or option to subscribe for or purchase
shares of Common Stock or Convertible Securities.
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, joint stock
companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts, government entities and authorities and
other organizations, whether or not legal entities.
"Preferred Stock" means a series Preferred Stock with an aggregate
liquidation preference on the date of issuance and an aggregate purchase price
in an amount not exceeding $30 million.
"Principal Executive Office" means the Company's office at 500 Forbes
Boulevard, South San Francisco, California 94080 or such other office as
designated in writing to the Holder by the Company.
"Register," "Registered" and "Registration" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of the effectiveness of such
registration statement.
"Rule 144" means Rule 144 as promulgated by the Commission under the
Securities Act, as such Rule may be amended from time to time, or any similar
successor rule that the Commission may promulgate.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Commission
promulgated thereunder, all as the same shall be in effect from time to time.
"Shareholder" means a holder of one or more Warrant Shares.
"Warrant" means the warrant dated as of Closing Date issued to the
Holder and all warrants issued upon the partial exercise, transfer or division
of or in substitution for any Warrant.
"Warrant Shares" means the shares of Common Stock issued or issuable
upon the exercise of this Warrant provided that if under the terms hereof there
shall be a change such that the securities purchasable hereunder shall be issued
by an entity other than the Company or there shall be a change in the type or
class of securities purchasable hereunder, then the term shall mean the
securities issued or issuable upon the exercise of the rights granted hereunder.
ARTICLE II.
EXERCISE
2.1. Exercise Right; Manner of Exercise. The purchase rights represented
by this Warrant may be exercised by the Holder, in whole or in part, at any time
and from time to time during the Exercise Period upon (i) surrender of this
Warrant, together with an executed notice of exercise, substantially in the form
of Exhibit "D-1" ("Notice of Exercise") attached hereto, at the Principal
3
<PAGE> 4
Executive Office, and (ii) payment to the Company of the aggregate Exercise
Price for the number of Warrant Shares specified in the Notice of Exercise (such
aggregate Exercise Price, the "Total Exercise Price"). The Total Exercise Price
shall be paid by check; provided, however, that if the Warrant Shares are
acquired in conjunction with a Registration of such Warrant Shares, then the
Holder may arrange for the aggregate Exercise Price for such Warrant Shares to
be paid to the Company from the proceeds of the sale of such Warrant Shares
pursuant to such Registration. The Person or Person(s) in whose name(s) any
certificate(s) representing the Warrant Shares which are issuable upon exercise
of this Warrant shall be deemed to become the Holder(s) of, and shall be treated
for all purposes as the record holder(s) of, such Warrant Shares, and such
Warrant Shares shall be deemed to have been issued, immediately prior to the
close of business on the date on which this Warrant and Notice of Exercise are
presented and payment made for such Warrant Shares, notwithstanding that the
stock transfer books of the Company shall then be closed or that certificates
representing such Warrant Shares shall not then be actually delivered to such
Person or Person(s). Certificates for the Warrant Shares so purchased shall be
delivered to the Holder within two business days after this Warrant is
exercised. If this Warrant is exercised in part only, the Company shall, upon
surrender of this Warrant for cancellation, deliver a new Warrant evidencing the
rights of the Holder to purchase the balance of the Warrant Shares which the
Holder is entitled to purchase hereunder. The issuance of Warrant Shares upon
exercise of this Warrant shall be made without charge to the Holder for any
issuance tax with respect thereto or any other cost incurred by the Company in
connection with the exercise of this Warrant and the related issuance of Warrant
Shares.
2.2. Conversion of Warrant.
(a) Right to Convert. In addition to, and without limiting, the
other rights of the Holder hereunder, the Holder shall have the right (the
"Conversion Right") to convert this Warrant or any part hereof into Warrant
Shares at any time and from time to time during the term hereof. Upon exercise
of the Conversion Right, the Company shall deliver to the Holder, without
payment by the Holder of any Exercise Price or any cash or other consideration,
that number of Warrant Shares computed using the following formula:
X= Y (A-B)
-------
A
Where: X= The number of Warrant Shares to be issued to the Holder
Y= The number of Warrant Shares purchasable pursuant to this
Warrant or such lesser number of Warrant Shares as may be selected by the Holder
A= The Fair Market Value of one Warrant Share as of the
Conversion Date
B= The Exercise Price
(b) Method of Exercise. The Conversion Right may be exercised by
the Holder by the surrender of this Warrant at the Principal Executive Office,
together with a written statement (the "Conversion Statement") specifying that
the Holder intends to exercise the Conversion Right and indicating the number of
Warrant Shares to be acquired upon exercise of the Conversion Right. Such
conversion shall be effective upon the Company's receipt of this Warrant,
together with the Conversion Statement, or on such later date as is specified in
the Conversion Statement (the "Conversion Date") and, at the Holder's election,
may be made contingent upon the closing of the consummation of the sale of
Common Stock pursuant to a Registration. Certificates for the Warrant Shares so
acquired shall be
4
<PAGE> 5
delivered to the Holder within a reasonable time, not exceeding two business
days after the Conversion Date. If applicable, the Company shall, upon surrender
of this Warrant for cancellation, deliver a new Warrant evidencing the rights of
the Holder to purchase the balance of the Warrant Shares which Holder is
entitled to purchase hereunder. The issuance of Warrant Shares upon exercise of
this Warrant shall be made without charge to the Holder for any issuance tax
with respect thereto or any other cost incurred by the Company in connection
with the conversion of this Warrant and the related issuance of Warrant Shares;
provided that the Holder will be responsible for any transfer taxes in respect
of the issuance of Warrant Shares to a Person other than the Holder.
2.3. Fractional Shares. The Company shall not issue fractional shares of
Common Stock upon any exercise or conversion of this Warrant. As to any
fractional share of Common Stock which the Holder would otherwise be entitled to
purchase from the Company upon such exercise or conversion, the Company shall
purchase from the Holder such fractional share at a price equal to an amount
calculated by multiplying such fractional share (calculated to the nearest
1/100th of a share) by the Fair Market Value of a share of Common Stock on the
date of the Notice of Exercise or the Conversion Date, as applicable. Payment of
such amount shall be made in cash or by check payable to the order of the Holder
at the time of delivery of any certificate or certificates arising upon such
exercise or conversion.
2.4. Continued Validity. A Shareholder shall be entitled to all rights
and subject to all obligations which a Holder of this Warrant is entitled
pursuant to the provisions of this Warrant, except rights and obligations which
by their terms apply only to a Warrant. The Company shall, at the time of the
exercise of this Warrant, in whole or in part, upon the request of a
Shareholder, acknowledge in writing, in form reasonably satisfactory to the
Shareholder, its continuing obligation to afford to the Shareholder all rights
to which the Shareholder is entitled in accordance with the provisions of this
Warrant; provided, however, that if the Shareholder fails to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to the Shareholder all such rights.
ARTICLE III.
TRANSFER, EXCHANGE AND REPLACEMENT
3.1. Maintenance of Registration Books. The Company shall keep at the
Principal Executive Office a register in which, subject to such reasonable
regulations as it may prescribe, it shall provide for the registration, transfer
and exchange of this Warrant. The Company and any Company agent may treat the
Person in whose name this Warrant is registered as the owner of this Warrant for
all purposes whatsoever, and neither the Company nor any Company agent shall be
affected by any notice to the contrary.
3.2. Restrictions on Transfers.
(a) Compliance with Securities Act. The Holder, by acceptance
hereof, agrees that this Warrant and the Common Stock to be issued to the Holder
upon exercise hereof are being acquired for investment, solely for the Holder's
own account and not as a nominee for any other Person, and that the Holder will
not offer, sell or otherwise dispose of this Warrant or any such shares of
Common Stock except under circumstances which will not result in a violation of
the Securities Act. Upon exercise of this Warrant, the Holder shall confirm in
writing, by executing the form attached as Exhibit "D-2" hereto, that the shares
of Common Stock purchased thereby are being acquired for investment, solely for
the Holder's own account and not as a nominee for any other Person, and not with
a view toward distribution or resale.
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(b) Certificate Legends. This Warrant and all Warrant Shares
issued upon exercise of this Warrant (unless Registered under the Securities
Act) shall be stamped or imprinted with legends in substantially the following
form (in addition to any legends required by applicable state securities laws):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE
SECURITIES LAWS. NO SALE, TRANSFER OR OTHER DISPOSITION OF SUCH
SECURITIES MAY BE EFFECTED WITHOUT (i) AN EFFECTIVE REGISTRATION
STATEMENT RELATING THERETO, (ii) AN OPINION OF COUNSEL FOR THE HOLDER,
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT
REQUIRED, (iii) RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND
EXCHANGE COMMISSION, OR (iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF
ARTICLE III OF THE WARRANT UNDER WHICH THIS SECURITY WAS ISSUED.
In addition, the Warrant (unless Registered under the Securities
Act) shall be stamped or imprinted with a legend in substantially the following
form:
THIS WARRANT MAY NOT BE TRANSFERRED OTHER THAN TO AN AFFILIATE (AS
DEFINED UNDER THE SECURITIES ACT OF 1933, AS AMENDED) PRIOR TO THE
SECOND ANNIVERSARY OF THE CLOSING DATE.
(c) Additional Restriction on Transfer. The Holder shall not
sell, assign or otherwise transfer all or part of this Warrant until the second
anniversary of the Closing Date other than in connection with the transfer of
the Holder's entire business.
(d) Disposition of Warrant or Warrant Shares. With respect to any
offer, sale or other disposition of this Warrant or any Warrant Shares issued
upon exercise of this Warrant prior to Registration of such shares, the Holder
or the Shareholder, as the case may be, agrees to give written notice to the
Company prior thereto, describing briefly the manner thereof, together with a
written opinion of the Holder's or Shareholder's counsel to the effect that such
offer, sale or other disposition may be effected without Registration under the
Securities Act or qualification under any applicable state securities laws of
this Warrant or such Warrant Shares, as the case may be, and indicating whether
or not under the Securities Act certificates for this Warrant or such Warrant
Shares, as the case may be, to be sold or otherwise disposed of, require any
restrictive legend as to applicable restrictions on transferability in order to
insure compliance with the Securities Act and any other applicable securities
laws. Promptly upon receiving such written notice and reasonably satisfactory
opinion the Company, as promptly as practicable, shall notify the Holder or the
Shareholder, as the case may be, that it may sell or otherwise dispose of this
Warrant or such Warrant Shares, as the case may be, all in accordance with the
terms of the notice delivered to the Company. If a determination has been made
pursuant to this subsection (d) that the opinion of counsel for the Holder or
the Shareholder, as the case may be, is not reasonably satisfactory to the
Company, the Company shall so notify the Holder or the Shareholder, as the case
may be, promptly after such determination has been made and shall specify the
legal analysis supporting any such conclusion. Notwithstanding the foregoing,
this Warrant or such Warrant Shares, as the case may be, may be offered, sold or
otherwise disposed of in accordance with Rule 144, provided that the Company
shall have been furnished with such information as the Company may reasonable
request to
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provide reasonable assurance that the provisions of Rule 144 have been
satisfied. Each certificate representing this Warrant or the shares thus
transferred (except a transfer pursuant to Rule 144) shall bear a legend as to
the applicable restrictions on transferability in order to insure compliance
with the Securities Act, unless in the aforesaid reasonably satisfactory opinion
of counsel for the Holder or the Shareholder, as the case may be, such legend is
not necessary in order to insure compliance with the Securities Act. The Company
may issue stop transfer instructions to its transfer agent in connection with
such restrictions.
(e) Warrant Transfer Procedure. Transfer of this Warrant to a
third party, following compliance with the preceding subsections of this Article
III, shall be effected by execution of the Assignment Form attached hereto as
Exhibit "D-3", and surrender for registration of transfer of this Warrant at the
Principal Executive Office, together with funds sufficient to pay any applicable
transfer tax. Upon receipt of the duly executed Assignment Form and the
necessary transfer tax funds, if any, the Company, at its expense, shall execute
and deliver, in the name of the designated transferee or transferees, one or
more new Warrants representing the right to purchase a like number of shares of
Common Stock.
(f) Termination of Restrictions. The restrictions imposed under
this Section 3.2 upon the transferability of the Warrant (other than those in
Section 3.2(c)) and the shares of Common Stock acquired upon the exercise of
this Warrant shall cease when (i) a registration statement covering the
applicable securities becomes effective under the Securities Act, (ii) the
Company is presented with an opinion of counsel reasonably satisfactory to the
Company that such restrictions are no longer required in order to insure
compliance with the Securities Act or with a Commission "no-action" letter
stating that future transfers of such securities by the transferor or the
contemplated transferee would be exempt from registration under the Securities
Act, or (iii) such securities may be transferred in accordance with Rule 144(k).
When such restrictions terminate, the Company shall, or shall instruct its
transfer agent to, promptly, and without expense to the Holder or the
Shareholder, as the case may be, issue new securities in the name of the Holder
and/or the Shareholder, as the case may be, not bearing the legends required
under subsection (b) of this Section 3.2.
3.3. Exchange. At the Holder's option, this Warrant may be exchanged for
other Warrants representing the right to purchase a like aggregate number of
shares of Common Stock upon surrender of this Warrant at the Principal Executive
Office. Whenever this Warrant is so surrendered to the Company at the Principal
Executive Office for exchange, the Company shall execute and deliver the
Warrants which the Holder is entitled to receive. All Warrants issued upon any
registration of transfer or exchange of Warrants shall be the valid obligations
of the Company, evidencing the same rights, and entitled to the same benefits,
as the Warrants surrendered upon such registration of transfer or exchange. No
service charge shall be made for any exchange of this Warrant.
3.4. Replacement. Upon receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of this Warrant and
(i) in the case of any such loss theft or destruction, upon delivery of
indemnity reasonably satisfactory to the Company in form and amount or (ii) in
the case of any such mutilation, upon surrender of such Warrant for cancellation
at the Principal Executive Office, the Company, at its expense, shall execute
and deliver, in lieu thereof, a new Warrant.
ARTICLE IV.
ANTIDILUTION PROVISIONS
4.1. Reorganization, Reclassification or Recapitalization of the
Company. In case of (1) a capital reorganization, reclassification or
recapitalization of the Company's capital stock (other than in
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the cases referred to in Section 4.2 hereof), (2) the Company's consolidation or
merger with or into another corporation in which the Company is not the
surviving entity, or a reverse triangular merger in which the Company is the
surviving entity but the shares of the Company's capital stock outstanding
immediately prior to the merger are converted, by virtue of the merger, into
other property, whether in the form of securities, cash or otherwise, or (3) the
sale or transfer of the Company's property as an entirety or substantially as an
entirety, then, as part of such reorganization, reclassification,
recapitalization, merger, consolidation, sale or transfer, lawful provision
shall be made so that there shall thereafter be deliverable upon the exercise of
this Warrant or any portion thereof (in lieu of or in addition to the number of
shares of Common Stock theretofore deliverable, as appropriate), and without
payment of any additional consideration, the number of shares of stock or other
securities or property to which the holder of the number of shares of Common
Stock which would otherwise have been deliverable upon the exercise of this
Warrant or any portion thereof at the time of such reorganization,
reclassification, recapitalization, consolidation, merger, sale or transfer
would have been entitled to receive in such reorganization, reclassification,
recapitalization, consolidation, merger, sale or transfer. This Section 4.1
shall apply to successive reorganizations, reclassifications, recapitalizations,
consolidations, mergers, sales and transfers and to the stock or securities of
any other corporation that are at the time receivable upon the exercise of this
Warrant.
4.2. Reclassifications. If the Company changes any of the securities as
to which purchase rights under this Warrant exist into the same or a different
number of securities of any other class or classes, this Warrant shall
thereafter represent the right to acquire such number and kind of securities as
would have been issuable as the result of such change with respect to the
securities that were subject to the purchase rights under this Warrant
immediately prior to such reclassification or other change and the Exercise
Price therefore shall be appropriately adjusted.
4.3. Splits and Combinations. If the Company at any time subdivides any
of its outstanding shares of Common Stock into a greater number of shares, the
Exercise Price in effect immediately prior to such subdivision shall be
proportionately reduced, and, conversely if the outstanding shares of Common
Stock are combined into a smaller number of shares, the Exercise Price in effect
immediately prior to such combination shall be proportionately increased. Upon
any adjustment of the Exercise Price under this Section 4.3, the number of
shares of Common Stock issuable upon exercise of this Warrant shall equal the
number of shares determined by dividing (i) the aggregate Exercise Price payable
for the purchase of all shares issuable upon exercise of this Warrant
immediately prior to such adjustment by (ii) the Exercise Price per share in
effect immediately after such adjustment.
4.4. Dividends and Distributions. If the Company declares a dividend or
other distribution on the Common Stock or if a dividend or other distribution on
the Common Stock occurs pursuant to the Charter (other than a cash dividend or
distribution), then, as part of such dividend or distribution, lawful provision
shall be made so that there shall thereafter be deliverable upon the exercise of
this Warrant or any portion thereof, in addition to the number of shares of
Common Stock receivable thereupon and without payment of any additional
consideration, the amount of the dividend or other distribution to which the
holder of the number of shares of Common Stock obtained upon exercise hereof
would have been entitled to receive had the exercise occurred as of the record
date for such dividend or distribution.
4.5. Liquidation; Dissolution. If the Company shall dissolve, liquidate
or wind up its affairs, the Holder shall have the right, but not the obligation,
to exercise this Warrant effective as of the date of such dissolution,
liquidation or winding up. If any such dissolution, liquidation or winding up
results in any cash distribution to the Holder in excess of the aggregate
Exercise Price for the shares of Common Stock for which this Warrant is
exercised, then the Holder may, at its option, exercise this Warrant without
making payment of such aggregate Exercise Price and, in such case, the Company
shall, upon
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distribution to the Holder, consider such aggregate Exercise Price to have been
paid in full, and in making such settlement to the Holder, shall deduct an
amount equal to such aggregate Exercise Price from the amount payable to the
Holder.
4.6. Antidilution.
(a) Adjustment of Exercise Price. If the Company issues any
Additional Stock for no consideration or for a consideration per share of Common
Stock (which, in the case of Convertible Securities or Options shall be the
consideration paid to purchase such security plus the conversion price, exercise
price or exchange price, as the case may be, per share of Common Stock)
("Additional Stock Price") less than the Market Price in effect immediately
prior to the time of such issuance (with the value of any non-cash consideration
paid for such Additional Stock reasonably determined by the Company's Board of
Directors), then the Exercise Price shall be reduced to a price equal to the
Exercise Price in effect immediately prior to such adjustment less the
difference between such Market Price and the Additional Stock Price; provided,
however, that (i) if any Convertible Securities or Options expire or otherwise
terminate prior to the exercise, conversion or exchange of such securities for
Common Stock ("Expiring Additional Securities"), such Expiring Additional
Securities shall no longer constitute Additional Stock for purposes of
adjustments under this Section 4.6, and the Exercise Price shall upon such
expiration or termination be readjusted to equal what the Exercise Price would
have been if those Expiring Additional Securities (and only those Expiring
Additional Securities) had never been issued and (ii) if shares of Common Stock
are issued pursuant to Convertible Securities or Options at a price different
from the Additional Stock Price originally calculated for such Convertible
Securities or Options, the Additional Stock Price for such Convertible
Securities or Options shall be recalculated to equal the actual price paid per
share of Common Stock in respect of such issuance, and the Exercise Price shall
be readjusted accordingly.
(b). Adjustment of Number of Shares Purchasable. Upon any
adjustment of the Exercise Price under subsection (a) of this Section 4.6, the
number of shares of Common Stock issuable upon exercise of this Warrant shall
equal the number of shares determined by dividing (i) the Market Price
immediately prior to such adjustment multiplied by the number of shares issuable
upon exercise of this Warrant immediately prior to such adjustment by (ii) the
Market Price per share in effect immediately after such adjustment.
4.7. Maximum Exercise Price. At no time shall the Exercise Price exceed
the amount set forth in the Preamble to this Warrant, unless the Exercise Price
is adjusted pursuant to Section 4.3 hereof.
4.8. Other Dilutive Events. If any event occurs as to which the other
provisions of this Article IV are not strictly applicable but the failure to
make any adjustment would not fairly protect the purchase rights represented by
this Warrant in accordance with the essential intent and principles hereof,
then, in each such case, the Company shall appoint a firm of independent public
accountants of recognized national standing (which may be the Company's regular
auditors) which shall give their opinion upon the adjustment, if any, on a basis
consistent with the essential intent and principles established in this Article
IV, necessary to preserve, without dilution, the purchase rights represented by
this Warrant; provided, that no adjustments shall be made in connection with the
issuance of Common Stock upon exercise, conversion or exchange of Options or
Convertible Securities to the extent that adjustment has previously been made
upon issuance of such Options or Convertible Securities and each lowering of the
effective purchase price of Common Stock pursuant to such Option or Convertible
Securities. Upon receipt of such opinion, the Company shall promptly mail a copy
thereof to the Holder and shall make the adjustments described therein.
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4.9. Certificates and Notices.
(a) Adjustment Certificates. Upon any adjustment of the Exercise
Price and/or the number of shares of Common Stock purchasable upon exercise of
this Warrant, a certificate, signed by (i) the Company's President or Chief
Financial Officer, or (ii) any independent firm of certified public accountants
of recognized national standing the Company selects at its own expense, setting
forth in reasonable detail the events requiring the adjustment and the method by
which such adjustment was calculated, shall be mailed to the Holder and shall
specify the adjusted Exercise Price and the number of shares of Common Stock
purchasable upon exercise of the Warrant after giving effect to the adjustment.
(b) Extraordinary Corporate Events. If the Company, after the
date hereof, proposes to effect (i) any transaction described in Sections 4.1 or
4.2 hereof or (ii) a liquidation, dissolution or winding up of the Company
described in Section 4.5 hereof, then, in each such case, the Company shall mail
to the Holder a notice describing such proposed action and specifying the date
on which the Company's books shall close, or a record shall be taken, for
determining the holders of or Common Stock entitled to participate in such
action, or the date on which such reorganization, reclassification,
consolidation, merger, sale, transfer, liquidation, dissolution or winding up
shall take place or commence, as the case may be, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to receive
securities and/or other property deliverable upon such action, if any such date
is to be fixed. Such notice shall be mailed to the Holder at least twenty days
prior to the record date for such action in the case of any action described in
clause (i) or clause (iii) above, and in the case of any action described in
clause (ii) above, at least twenty days prior to the date on which the action
described is to take place and at least twenty days prior to the record date for
determining holders of Common Stock entitled to receive securities and/or other
property in connection with such action.
4.10. No Impairment. The Company shall not, by amendment of the Charter
or through any reorganization, recapitalization, transfer of assets,
consolidation, merger, dissolution, issuance 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
Article IV and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holder against impairment.
4.11. Application. Except as otherwise provide herein, all sections of
this Article IV are intended to operate independently of one another. If an
event occurs that requires the application of more than one section, all
applicable sections shall be given independent effect.
ARTICLE V.
REGISTRATION RIGHTS
5.1. Registration on Form S-3.
5.1.1. Filing of Registration Statement. The Company shall use
its best efforts to secure effectiveness of, as soon as practicable, and shall
file no later than 15 business days after the Closing Date, a registration
statement in form and substance satisfactory to the Holder on Form S-3 (the
"Registration Statement") with the Commission under the Securities Act to
register: (i) the resale of the Warrant; (ii) the exercise of the Warrant by any
person, other than Lucasfilm Ltd. or any transferee of Warrants prior to the
resale of Warrants pursuant to the Registration Statement; and (iii) the Warrant
Shares issued upon exercise of the Warrant by any person and the resale of any
such Warrant Shares by Lucasfilm Ltd. or any transferee of Warrants who
exercised such Warrants and received Warrant Shares otherwise than pursuant to
the Registration Statement. The Company shall amend such Registration
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Statement (or file a new Registration Statement) (i) to include issuance of the
Warrant Shares to Lucasfilm Ltd. after one year from the Closing Date and (ii)
to include the transfer of the Warrant after two years from the Closing Date
(the Warrant and the Warrant Shares constituting the "Registrable Securities");
provided however, that in the event the Company fails to file reports in a
timely manner or otherwise fails (due to an action or inaction of the Company)
to be eligible to file a registration statement on Form S-3, the Company shall
file a registration statement or a post-effective registration statement, as the
case may be, on Form S-1. In the event of a change in the interpretive position
of the staff of the Commission with respect to registration under the Securities
Act of warrants, the exercise of warrants and the sale of securities into which
warrants can be exercised, the Company shall comply with such changed position
promptly after consultation with counsel to Lucasfilm Ltd.
5.1.2. Registrable Expenses. The Company shall pay all
Registration Expenses (as defined below) in connection with any registration,
qualification or compliance hereunder, and each Holder shall pay all Selling
Expenses (as defined below) and other expenses that are not Registration
Expenses relating to the Registrable Securities resold by such Holder.
"Registration Expenses" shall mean all expenses, except for Selling Expenses,
incurred by the Company in complying with the registration provisions herein
described, including, without limitation, all registration, qualification and
filing fees, printing expenses, fees and disbursements of counsel for the
Company, blue sky fees and expenses and the expense of any special audits
incident to or required by any such registration. "Selling Expenses" shall mean
all selling commissions, underwriting fees and stock transfer taxes applicable
to the Registrable Securities and all fees and disbursements of counsel for any
Holder.
5.1.3. Additional Company Obligations. In the case of any
registration effected by the Company pursuant to these registration provisions,
the Company will use its best efforts to: keep such registration effective until
such date as all of the Registrable Securities have been sold; (ii) prepare and
file with the Commission such amendments and supplements to the Registration
Statement and the prospectus used in connection with the Registration Statement
as may be necessary to comply with the provisions of the Securities Act with
respect to the disposition of the Registrable Securities; (iii) furnish such
number of prospectuses and other documents incident thereto, including any
amendment of or supplement to the prospectus, as a Holder from time to time may
reasonably request; (iv) cause all such Registrable Securities registered as
described herein to be listed on each securities exchange and quoted on each
quotation system on which similar securities issued by the Company are then
listed or quoted; (v) provide a transfer agent and registrar for all Registrable
Securities registered pursuant to the Registration Statement and a CUSIP number
for all such Registrable Securities; (vi) use its best efforts to comply with
all applicable rules and regulations of the Commission, and make available to
its securityholders, to the extent required, as soon as reasonably practicable,
an earnings statement covering the period of at least twelve months, but not
more than eighteen months, beginning with the first month after the effective
date of the Registration Statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act; and (vii) file the documents
required of the Company and otherwise use its best efforts to maintain requisite
blue sky clearance in (A) all jurisdictions in which any of the Warrant Shares
are originally sold and (B) all other states specified in writing by a Holder as
may reasonably be required to sell such Holder's Warrant Shares, provided as to
clause (B), however, that the Company shall not be required to qualify to do
business or consent to service of process in any state in which it is not now so
qualified or has not so consented.
5.1.4. Conditions and Limitations
(a) Cooperation by Holder. It shall be a condition
precedent to the obligation of the Company to take any action pursuant to this
Article V in respect of the Registrable Securities that the Holder shall furnish
to the Company such information regarding such Registrable
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Securities and the intended method of disposition thereof as the Company shall
reasonably request and as shall be required in connection with the action taken
by the Company.
(b) Notification Prior to Sale. If any Holder shall
propose to sell any Registrable Securities pursuant to the Registration
Statement, it shall notify the Company of its intent to do so at least three
full business days prior to such sale, and the provision of such notice to the
Company shall be deemed to establish an agreement by such Holder to comply with
the registration provisions contained herein. Such notice shall be deemed to
constitute a representation that any information previously supplied by such
Holder is accurate as of the date of such notice. At any time within such three
business day period, the Company may refuse to permit the Holder to resell any
Registrable Securities pursuant to the Registration Statement; provided,
however, that in order to exercise this right, the Company must deliver a
certificate in writing to the Holder to the effect that a delay in such sale is
necessary because, in the good faith judgment of the Company, a sale pursuant to
the Registration Statement would require the public disclosure of information
that would not otherwise be required to be disclosed (which disclosure would, in
the good faith judgment of the Company, have a material adverse effect on the
Company) or could in other respects constitute a violation of the federal
securities laws. In such an event, the Company shall use its best efforts to
amend the Registration Statement to the extent required to comply with Section
5.1.4 and to take all other actions necessary to allow such sale under the
federal securities laws, and shall notify the Holders promptly after it has
determined that such circumstances no longer exist. Notwithstanding the
foregoing, the Company shall not under any circumstances be entitled to refuse
to permit the Holder to resell any Registrable Securities more than twice in any
twelve-month period, and any individual period during which the Company refuses
to permit the Holder to resell any Registrable Securities shall not exceed sixty
days.
Subject to the foregoing, when a Holder is entitled to sell and gives
notice of its intent to sell pursuant to the Registration Statement, the Company
shall furnish to such Holder a reasonable number of copies of a supplement to or
an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such shares, such prospectus shall not include an
untrue statement of material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading or
incomplete in the light of the circumstances then existing.
5.2. Indemnification and Contribution.
5.2.1. Indemnification by the Company. The Company agrees to
indemnify and hold harmless each Holder from and against any losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) to which
such Holder may become subject (under the Securities Act or otherwise) insofar
as such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of, or are based upon, any claim by a third party
asserting any untrue statement of a material fact contained in the Registration
Statement or omission of a material fact therefrom necessary to make the
statements therein not misleading, on the effective date thereof, or arise out
of any failure by the Company to fulfill any undertaking included in the
Registration Statement, and the Company will, as incurred, reimburse such Holder
for any legal or other expenses reasonably incurred in investigating, defending
or preparing to defend any such action, proceeding or claim; provided, however,
that the Company shall not be liable in any such case to the extent that such
loss, claim, damages or liability arises out of, or is based upon (i) an untrue
statement made in such Registration Statement in reliance upon and in conformity
with written information furnished to the Company by or on behalf of such Holder
specifically for use in preparation of the Registration Statement or (ii) any
untrue statement in any prospectus that is corrected in any subsequent
prospectus that was delivered to the Holder prior to the pertinent sale or sales
by the Holder.
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5.2.2. Indemnification by Holder. Each Holder, severally and not
jointly, agrees to indemnify and hold harmless the Company from and against any
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) to which the Company may become subject (under the Securities Act or
otherwise) insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon any claim by a
third party asserting (i) an untrue statement made in such Registration
Statement in reliance upon and in conformity with written information furnished
to the Company by or on behalf of such Holder specifically for use in
preparation of the Registration Statement, provided, however, that no Holder
shall be liable in any such case for any untrue statement included in any
prospectus which statement has been corrected, in writing, by such Holder and
delivered to the Company at least three business days before the sale from which
such loss occurred or (ii) any untrue statement in any prospectus that is
corrected in any subsequent prospectus that was delivered to the Holder prior to
the pertinent sale or sales by the Holder, and each Holder, severally and not
jointly, will, as incurred, reimburse the Company for any legal or other
expenses reasonably incurred in investigating, defending or preparing to defend
any such action, proceeding or claim.
5.2.3. Indemnification Procedures. Promptly after receipt by any
indemnified person of a notice of a claim or the beginning of any action in
respect of which indemnity is to be sought against an indemnifying person
pursuant to this Section 5.2, such indemnified person shall notify the
indemnifying person in writing of such claim or of the commencement of such
action, and, subject to the provisions hereinafter stated, in case any such
action shall be brought against an indemnified person and the indemnifying
person shall have been notified thereof, the indemnifying person shall be
entitled to participate therein, and, to the extent that it shall wish, to
assume the defense thereof, with counsel reasonably satisfactory to the
indemnified person. After notice from the indemnifying person to such
indemnified person of the indemnifying person's election to assume the defense
thereof, the indemnifying person shall not be liable to such indemnified person
for any legal expenses subsequently incurred by such indemnified person in
connection with the defense thereof; provided, however, that if there exists or
shall exist a conflict of interest that would make it inappropriate in the
reasonable opinion of counsel for the indemnified person for the same counsel to
represent both the indemnified person and such indemnifying person or any
affiliate or associate thereof, the indemnified person shall be entitled to
retain its own counsel at the expense of such indemnifying person; provided,
however, that in the case of the immediately preceding proviso the indemnifying
person shall not be responsible for the legal expenses of more than one counsel
for all indemnified persons.
5.2.4. Contribution in Lieu of Indemnity. If the indemnification
provided for in this Section 5.2 is unavailable to or insufficient to hold
harmless an indemnified party under Section 5.2.1 or 5.2.2 above in respect of
any losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) referred to therein, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect the relative benefit and relative fault
of the respective parties as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company on the one hand or a Holder on the other and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Company and the Holders
agree that it would not be just and equitable if contribution pursuant to this
Section 5.2.4 were determined by pro rata allocation (even if the Holders were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to above in
this Section 5.2.4. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above in this Section 5.2.4
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<PAGE> 14
shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 5.2.4, no Holder
shall be required to contribute any amount in excess of the net amount received
by the Holder from the sale of the Registrable Securities to which such loss
relates. No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. The Holders'
obligations in this Section 5.2.4 to contribute are several in proportion to
their respective sales of Registrable Securities to which such loss relates and
not joint.
5.2.5. Controlling Persons Indemnified. The obligations of the
Company and the Holders under this Section 5.2 shall be in addition to any
liability which the Company and the respective Holders may otherwise have and
shall extend, upon the same terms and conditions, to each person, if any, who
controls the Company or any Holder within the meaning of the Securities Act
including, without limitation, the directors and officers of the Company and the
Holder, as the case may be.
5.3. Transfer of Registration Rights. The right to sell Registrable
Securities pursuant to the registration statement described herein will
automatically be assigned to each transferee of the Warrant or Warrant Shares.
In the event that it is necessary, in order to permit a Holder to sell
Registrable Securities pursuant to the Registration Statement, to amend the
Registration Statement to name such Holder, such Holder shall, upon written
notice to the Company, be entitled to have the Company make such amendment as
soon as reasonably practicable.
ARTICLE VI.
REPRESENTATIONS, WARRANTIES AND COVENANTS OF COMPANY
6.1. Representations and Warranties. The Company represents and warrants
that:
(a) Legal Status; Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of Delaware
and is qualified or licensed to do business in all other countries, states and
provinces in which the laws thereof require the Company to qualify and/or be
licensed, except where failure to qualify or be licensed would not have a
material adverse effect on the business or assets of the Company taken as a
whole;
(b) Capitalization. The Company's authorized capital stock
consists of: 50,000,000 shares of Common Stock, of which shares are issued and
outstanding and 1,000,000 shares of preferred stock, par value $1.00 per share,
of which 30,000 shares Preferred Stock are outstanding;
(c) Options. Except as described in Exhibit "D-4" hereto there
are no Options, warrants or similar rights to acquire from the Company, or
agreements or other obligations by the Company, absolute or contingent, to issue
or sell Common Stock, whether on conversion or exchange of Convertible
Securities or otherwise;
(d) Preemptive Rights. No shareholder of the Company has any
preemptive rights to subscribe for shares of Common Stock;
(e) Authority. The Company has the right and power, and is duly
authorized and empowered, to enter into, execute, deliver and perform its
obligations under this Warrant;
(f) Binding Effect. This Warrant has been duly authorized,
executed and delivered and constitutes a valid and binding obligation of the
Company enforceable in accordance with its terms,
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<PAGE> 15
except to the extent that enforceability may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally and (ii) general principles of equity;
(g) No Conflict. The execution, delivery and/or performance by
the Company of this Warrant shall not, by the lapse of time, the giving of
notice or otherwise, constitute a violation of any applicable law or a breach of
any provision contained in the Company's Charter or Bylaws or contained in any
agreement, instrument or document to which the Company is a party or by which it
is bound;
(h) Consents. No consent, approval, authorization or other order
of any court, regulatory body, administrative agency or other governmental body
is required for the valid issuance of the Warrant or for the performance of any
of the Company's obligations hereunder, except in connection with listing on the
New York Stock Exchange, which filings will be effected in accordance with the
rules and regulations of the New York Stock Exchange;
(i) Offering. Neither the Company nor any agent acting on its
behalf has, either directly or indirectly, sold, offered for sale or disposed
of, or attempted or offered to dispose of, this Warrant or any part hereof, or
any similar obligation of the Company, to, or has solicited any offers to buy
any thereof from, any Person or Persons other than the Holder. Neither the
Company nor any agent acting on its behalf will sell or offer for sale or
dispose of, or attempt or offer to dispose of, this Warrant or any part thereof
to, or solicit any offers to buy any warrant of like tenor from, or otherwise
approach or negotiate in respect thereof, with, any Person or Persons so as
thereby to bring the issuance of this Warrant within the provisions of Section 5
of the Securities Act;
(j) Registration. It is not necessary in connection with the
issuance and sale of this Warrant to the Holder to Register this Warrant under
the Securities Act.
6.2. Covenants. The Company covenants that:
(a) Authorized Shares. The Company will at all times have
authorized, and reserved for the purpose of issuance or transfer upon exercise
of the rights evidenced by this Warrant, a sufficient number of shares of Common
Stock to provide for the exercise of the rights represented by this Warrant (for
purposes of determining compliance with this covenant, the shares of Common
Stock issuable upon exercise of all other Options and warrants to acquire Common
Stock and upon conversion of all instruments convertible into Common Stock shall
be deemed issued and outstanding);
(b) Proper Issuance. The Company, at its expense, will take all
such action as may be necessary to assure that the Common Stock issuable upon
the exercise of this Warrant may be so issued without violation of any
applicable law or regulation, or of any requirements of any domestic securities
exchange or automated quotation system upon which any capital stock of the
Company may be listed or quoted, as the case may be. Such action may include,
but not be limited to, causing such shares to be duly registered or approved,
listed or quoted on relevant domestic securities exchanges or automated
quotation systems; and
(c) Fully Paid Shares. The Company will take all actions
necessary or appropriate to validly and legally issue fully paid and
nonassessable shares of Common Stock upon exercise of this Warrant. All such
shares will be free from all taxes, liens and charges with respect to the
issuance thereof, other than any stock transfer taxes in respect to any transfer
occurring contemporaneously with such issuance.
15
<PAGE> 16
ARTICLE VII.
MISCELLANEOUS
7.1. Certain Expenses. The Company shall pay all expenses in connection
with, and all taxes (other than stock transfer and income taxes) and other
governmental charges that may be imposed in respect of, the issuance, sale and
delivery of the Warrant and the Warrant Shares.
7.2. Holder Not a Shareholder. Prior to the exercise of this Warrant as
hereinbefore provided, the Holder shall not be entitled to any of the rights of
a shareholder of the Company including, without limitation, the right as a
shareholder (i) to vote on or consent to any proposed action of the Company or
(ii) except as provided herein, to receive (a) dividends or any other
distributions made to shareholders, (b) notice of or attend any meetings of
shareholders of the Company or (c) notice of any other proceedings of the
Company.
7.3. Like Tenor. All Warrants shall at all times be substantially
identical except as to the Preamble.
7.4. Remedies. The Company stipulates that the remedies at law of the
Holder in the event of any default or threatened default by the Company in the
performance of or compliance with any of the terms of this Warrant are not and
will not be adequate to the fullest extent permitted by law, and that such terms
may be specifically enforced by a decree for the specific performance of any
agreement contained herein or by an injunction against a violation of any of the
terms hereof or otherwise.
7.5. Enforcement Costs. If any party to, or beneficiary of, this Warrant
seeks to enforce its rights hereunder by legal proceedings or otherwise, then
the non-prevailing party shall pay all reasonable costs and expenses incurred by
the prevailing party, including, without limitation, all reasonable attorneys'
fees (including the allocable costs of in-house counsel).
7.6. Nonwaiver; Cumulative Remedies. No course of dealing or any delay
or failure to exercise any right hereunder on the part of the Holder and/or any
Shareholder shall operate as a waiver of such right or otherwise prejudice the
rights, powers or remedies of the Holder or such Shareholder. No single or
partial waiver by the Holder and/or any Shareholder of any provision of this
Warrant or of any breach or default hereunder or of any right or remedy shall
operate as a waiver of any other provision, breach, default right or remedy or
of the same provision, breach, default, right or remedy on a future occasion.
The rights and remedies provided in this Warrant are cumulative and are in
addition to all rights and remedies which the Holder and each Shareholder may
have in law or in equity or by statute or otherwise.
7.7. Notices. Any notice, demand or delivery to be made pursuant to this
Warrant will be sufficiently given or made if sent by certified or registered
mail, postage prepaid, nationally recognized overnight delivery service or
facsimile transmission, addressed to (a) the Holder and the Shareholders at
their last known addresses appearing on the books of the Company maintained for
such purpose or (b) the Company at its Principal Executive Office. The Holder,
the Shareholders and the Company may each designate a different address by
notice to the other pursuant to this Section 7.7. A notice shall be deemed
effective upon receipt.
7.8. Successors and Assigns. This Warrant shall be binding upon, the
Company and any Person succeeding the Company by merger, consolidation or
acquisition of all or substantially all of the Company's assets, and all of the
obligations of the Company with respect to the shares of Common Stock issuable
upon exercise of this Warrant shall survive the exercise, expiration or
termination of this
16
<PAGE> 17
Warrant and all of the covenants and agreements of the Company shall inure to
the benefit of the Holder, each Shareholder and their respective successors and
assigns. The Company shall, at the time of exercise of this Warrant, in whole or
in part, upon request of the Holder or any Shareholder but at the Company's
expense, acknowledge in writing its continuing obligations hereunder with
respect to rights of the Holder or such Shareholder to which it shall continue
to be entitled after such exercise in accordance with the terms hereof; provided
that the failure of the Holder or any Shareholder to make any such request shall
not affect the continuing obligation of the Company to the Holder or such
Shareholder in respect of such rights.
7.9. Modification; Severability.
(a) If, in any action before any court or agency legally
empowered to enforce any term, any term is found to be unenforceable, then such
term shall be deemed modified to the extent necessary to make it enforceable by
such court or agency.
(b) If any term is not curable as set forth in subsection (a)
above, the unenforceability of such term shall not affect the other provisions
of this Warrant but this Warrant shall be construed as if such unenforceable
term had never been contained herein.
7.10. Integration. This Warrant replaces all prior and contemporaneous
agreements and supersedes all prior and contemporaneous negotiations between the
parties with respect to the transactions contemplated herein and constitutes the
entire agreement of the parties with respect to the transactions contemplated
herein.
7.11. Survival of Representations and Warranties. The representations
and warranties of any party in this Warrant shall survive the execution and
delivery of this Warrant and the consummation of the transactions contemplated
hereby, notwithstanding any investigation by the such party or its agents.
7.12. Amendment. This Warrant may not be modified or amended except by
written agreement of the Company, the Holder and the Shareholder(s), if any,
holding a majority of the Warrant Shares.
7.13. Headings. The headings of the Articles and Sections of this
Warrant are for the convenience of reference only and shall not, for any
purpose, be deemed a part of this Warrant.
7.14. Meanings. Whenever used in this Warrant, any noun or pronoun shall
be deemed to include both the singular and plural and to cover all genders; and
the words "herein," "hereof" and "hereunder" and words of similar import shall
refer to this instrument as a whole, including any amendments hereto.
7.15. Governing Law. This Warrant shall be governed by, and construed in
accordance with, the laws of the State of California applicable to contracts
entered into and to be performed wholly within California by California
residents.
17
<PAGE> 18
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its duly authorized officer this October 14, 1997.
LUCASFILM LTD. ("Holder") GALOOB TOYS, INC. ("Company")
By: /s/ Lucasfilm Ltd. By: /s/ Galoob Toys, Inc.
----------------------- -----------------------
Title: Title:
----------------------- -----------------------
18
<PAGE> 19
SCHEDULE OF EXHIBITS
EXHIBIT "D-1"-Notice of Exercise (Section 2.1)
EXHIBIT "D-2"-Investment Representation Certificate (Section 3.2(a))
EXHIBIT "D-3"-Assignment Form (Section 3.2(d))
EXHIBIT "D-4"-Schedule of Options and Preemptive Rights (Sections 6.1(c) and
6.1(d))
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<PAGE> 20
EXHIBIT "D-1"
NOTICE OF EXERCISE FORM
(To be executed only upon partial or full
exercise of the within Warrant)
The undersigned registered Holder of the within Warrant hereby
irrevocably exercises the within Warrant for and purchases shares of Common
Stock of Galoob Toys, Inc. and herewith makes payment therefor in the amount of
$ ___________, all at the price and on the terms and conditions specified in the
within Warrant and requests that a certificate (or __________________
certificates in denominations of shares) for the shares of Common Stock of
Galoob Toys, Inc. hereby purchased be issued in the name of and delivered to
(choose one) (a) the undersigned or (b) [NAME], whose address is and, if such
shares of Common Stock shall not include all the shares of Common Stock issuable
as provided in the within Warrant, that a new Warrant of like tenor for the
number of shares of Common Stock of Galoob Toys, Inc. not being purchased
hereunder be issued in the name of and delivered to (choose one) (a) the
undersigned or (b) [NAME], whose address is ______________ .
Dated:
----------------------
NOTICE: The signature to this Notice of Exercise must correspond with the
name as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatever.
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<PAGE> 21
EXHIBIT "D-2"
INVESTMENT REPRESENTATION CERTIFICATE
Purchaser:
Company: Galoob Toys, Inc.
Security: Common Stock
Amount:
Date:
(a) In connection with the purchase of the above-listed securities (the
"Securities"), the undersigned (the "Purchaser") represents to the Company as
follows:
(b) The Purchaser is aware of the Company's business affairs and
financial condition, and has acquired sufficient information about the Company
to reach an informed and knowledgeable decision to acquire the Securities. The
Purchaser is purchasing the Securities for its own account for investment
purposes only and not with a view to, or for the resale in connection with, any
"distribution" thereof for purposes of the Securities Act of 1933, as amended
(the "Securities Act");
(c) The Purchaser understands that the Securities have not been
registered under the Securities Act in reliance upon a specific exemption
therefor, which exemption depends upon, among other things, the bona fide nature
of the Purchaser's investment intent as expressed herein;
(d) The Purchaser further understands that the Securities must be held
indefinitely unless subsequently registered under the Securities Act or unless
an exemption from registration is otherwise available. In addition, the
Purchaser understands that the certificate evidencing the Securities will be
imprinted with the legend referred to in the Warrant under which the Securities
are being purchased; and
(e) The Purchaser is aware of the provisions of Rule 144, promulgated
under the Securities Act, which, in substance, permit limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof (or from an affiliate of such issuer), in a non-public offering subject
to the satisfaction of certain conditions, if applicable, including, among other
things: (i) the availability of certain public information about the Company;
(ii) the resale occurring not less than one year after the party has purchased
and paid for the securities to be sold; (iii) the sale being made through a
broker in an unsolicited "broker's transaction" or in transactions directly with
a market maker (as said term is defined under the Securities Exchange Act of
1934) and the amount of securities being sold during any three-month period not
exceeding the specified limitations stated therein.
The Purchaser represents that it is an "accredited investor" as that term is
defined in Rule 501 of Regulation D under the Securities Act or any successor
regulation thereunder.
Date: PURCHASER:
------------------ --------------------------
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<PAGE> 22
EXHIBIT "D-3"
ASSIGNMENT FORM
(To be executed only upon the assignment of the within Warrant)
FOR VALUE RECEIVED, the undersigned registered Holder of the within Warrant
hereby sells, assigns and transfers unto _______, whose address is ________ all
of the rights of the undersigned under the within Warrant, with respect to
shares of Common Stock of Galoob Toys, Inc. and, if such shares of Common Stock
shall not include all the shares of Common Stock issuable as provided in the
within Warrant, that a new Warrant of like tenor for the number of shares of
Common Stock of Galoob Toys, Inc. not being transferred hereunder be issued in
the name of and delivered to the undersigned, and does hereby irrevocably
constitute and appoint ______ attorney to register such transfer on the books of
Galoob Toys, Inc. maintained for the purpose, with full power of substitution in
the premises.
Dated:
------------------------- -----------------------------------
-----------------------------------
By:
--------------------------------
(Signature of Registered Holder)
Title:
-----------------------------
NOTICE: The signature to this Assignment must correspond with the name upon the
face of the within Warrant in every particular, without alteration or
enlargement or any change whatever.
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<PAGE> 23
EXHIBIT "D-4"
OUTSTANDING OPTIONS AND PREEMPTIVE RIGHTS
(Sections 6.1(c) and 6.1(d))
Options
1. Options to purchase shares of the Company's Common Stock are
outstanding pursuant to the following employee benefit plans:
- 1984 Amended and Restated Employee Stock Option Plan
- 1994 Senior Management Stock Option Plan
- 1995 Non-Employee Director Stock Option Plan
- 1996 Share Incentive Plan
2. Gerard Klauer Mattison & Co., LLC holds a warrant to purchase
25,000 shares of Common Stock.
3. Each share of Common Stock has appurtenant thereto one preferred
stock purchase right (a "Right") issued pursuant to the Company's Stockholder
Rights Plan. Upon the occurrence of certain events involving a change in control
of the Company, Rights not held by an "acquiring person" will entitle the holder
to purchase shares of Common Stock pursuant to the terms of the Stockholder
Rights Plan.
Preemptive Rights
None.
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<PAGE> 1
EXHIBIT 3
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE
SECURITIES LAWS. NO SALE, TRANSFER OR OTHER DISPOSITION OF SUCH
SECURITIES MAY BE EFFECTED WITHOUT (i) AN EFFECTIVE REGISTRATION
STATEMENT RELATING THERETO, (ii) AN OPINION OF COUNSEL FOR THE HOLDER,
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT
REQUIRED, (iii) RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND
EXCHANGE COMMISSION, OR (iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF
ARTICLE iii OF THIS WARRANT.
THIS WARRANT MAY NOT BE TRANSFERRED OTHER THAN TO AN AFFILIATE (AS
DEFINED UNDER THE SECURITIES ACT OF 1933, AS AMENDED) PRIOR TO THE
SECOND ANNIVERSARY OF THE CLOSING DATE.
WARRANT
TO PURCHASE SHARES OF COMMON STOCK
AS HEREIN DESCRIBED
Dated October 14, 1997
This certifies that for value received:
LUCAS LICENSING LTD.
or registered assigns, is entitled, subject to the terms set forth herein, to
purchase from Galoob Toys, Inc., a Delaware corporation (the "Company"), up to
2,130,000 fully paid and nonassessable shares of the Common Stock of the
Company, at the exercise price of fifteen dollars ($15.00) per share, and the
number of shares purchasable hereunder are subject to adjustment in certain
events, all as more fully set forth under Article IV herein.
ARTICLE I.
DEFINITIONS
"Additional Stock" means Common Stock, Convertible Securities and
Options, other than (i) the Preferred Stock and (ii) Common Stock, Convertible
Securities or Options issued to officers, directors, employees or consultants of
the Company.
"Charter" means the certificate of incorporation of the Company, as
filed with the Delaware Secretary of State.
"Closing Date" means October 14, 1997.
"Commission" means the Securities and Exchange Commission, or any other
federal agency then administering the Securities Exchange Act of 1934 or the
Securities Act.
"Common Stock" means the Company's Common Stock, par value $.01 per
share, any stock into which such stock shall have been changed or any stock
resulting from any reclassification of such stock, and any other capital stock
of the Company of any class or series now or hereafter authorized having the
<PAGE> 2
right to share in distributions either of earnings or assets of the Company
without limit as to amount or percentage.
"Company" means Galoob Toys, Inc., a Delaware corporation, and any
successor corporation.
"Convertible Securities" means evidences of indebtedness, shares of
stock or other securities which are convertible into or exchangeable for, with
or without payment of additional consideration, shares of Common Stock, either
immediately or upon the arrival of a specified date or the happening of a
specified event or both.
"Exercise Period" means the period commencing on the Closing Date and
terminating at 5:00 p.m. Pacific Time on the twelfth anniversary of the Closing
Date.
"Exercise Price" means the exercise price per share of Common Stock set
forth in the Preamble to this Warrant, as such price may be adjusted pursuant to
Article IV hereof.
"Fair Market Value" means
(i) If shares of Common Stock are being sold pursuant to a public
offering under an effective registration statement under the Securities Act
which has been declared effective by the Commission and Fair Market Value is
being determined as of the closing of the public offering, the "price to public"
specified for such shares in the final prospectus for such public offering;
(ii) If shares of Common Stock are then listed or admitted to
trading on any national securities exchange or traded on any national market
system and Fair Market Value is not being determined as of the date described in
clause (i) of this definition, the average of the daily closing prices for the
ten trading days before such date. The closing price for each day shall be the
last sale price on such date or, if no such sale takes place on such date, the
average of the closing bid and asked prices on such date, in each case as
officially reported on the principal national securities exchange or national
market system on which such shares are then listed, admitted to trading or
traded;
(iii) If no shares of Common Stock are then listed or admitted to
trading on any national securities exchange or traded on any national market
system or being offered to the public pursuant to a registration described in
clause (i) of this definition, the average of the reported closing bid and asked
prices thereof on such date in the over-the-counter market as shown by the
Nasdaq Stock Market or, if such shares are not then quoted in such system, as
published by the National Quotation Bureau, Incorporated or any similar
successor organization, and in either case as reported by any member firm of the
New York Stock Exchange selected by the Holder;
(iv) If no shares of Common Stock are then listed or admitted to
trading on any national exchange or traded on any national market system, if no
closing bid and asked prices thereof are then so quoted or published in the
over-the-counter market and if no such shares are being offered to the public
pursuant to a registration described in clause (i) of this definition, the fair
value of a share of Common Stock shall be as determined by an investment bank
selected by Holder with the approval of the Company (which approval shall not be
unreasonably withheld or delayed), the costs of such investment banker to be
paid by the Company.
"Fiscal Year" means the fiscal year of the Company.
"Holder" means the person in whose name this Warrant is registered on
the books of the Company maintained for such purpose and any permitted
transferee of all or a portion of this Warrant.
2
<PAGE> 3
"Market Price" means $18 per share of Common Stock, which shall be
adjusted in the same manner as provided in Article IV as if it were the Exercise
Price.
"Option" means any right, warrant or option to subscribe for or purchase
shares of Common Stock or Convertible Securities.
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, joint stock
companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts, government entities and authorities and
other organizations, whether or not legal entities.
"Preferred Stock" means a series Preferred Stock with an aggregate
liquidation preference on the date of issuance and an aggregate purchase price
in an amount not exceeding $30 million.
"Principal Executive Office" means the Company's office at 500 Forbes
Boulevard, South San Francisco, California 94080 or such other office as
designated in writing to the Holder by the Company.
"Register," "Registered" and "Registration" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of the effectiveness of such
registration statement.
"Rule 144" means Rule 144 as promulgated by the Commission under the
Securities Act, as such Rule may be amended from time to time, or any similar
successor rule that the Commission may promulgate.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Commission
promulgated thereunder, all as the same shall be in effect from time to time.
"Shareholder" means a holder of one or more Warrant Shares.
"Warrant" means the warrant dated as of Closing Date issued to the
Holder and all warrants issued upon the partial exercise, transfer or division
of or in substitution for any Warrant.
"Warrant Shares" means the shares of Common Stock issued or issuable
upon the exercise of this Warrant provided that if under the terms hereof there
shall be a change such that the securities purchasable hereunder shall be issued
by an entity other than the Company or there shall be a change in the type or
class of securities purchasable hereunder, then the term shall mean the
securities issued or issuable upon the exercise of the rights granted hereunder.
ARTICLE II.
EXERCISE
2.1. Exercise Right; Manner of Exercise. The purchase rights represented
by this Warrant may be exercised by the Holder, in whole or in part, at any time
and from time to time during the Exercise Period upon (i) surrender of this
Warrant, together with an executed notice of exercise, substantially in the form
of Exhibit "D-1" ("Notice of Exercise") attached hereto, at the Principal
Executive Office, and (ii) payment to the Company of the aggregate Exercise
Price for the number of Warrant Shares specified in the Notice of Exercise (such
aggregate Exercise Price, the "Total Exercise Price"). The Total Exercise Price
shall be paid by check; provided, however, that if the Warrant Shares are
acquired in conjunction with a Registration of such Warrant Shares, then the
Holder may arrange for the aggregate Exercise Price for such Warrant Shares to
be paid to the Company from the proceeds of the
3
<PAGE> 4
sale of such Warrant Shares pursuant to such Registration. The Person or
Person(s) in whose name(s) any certificate(s) representing the Warrant Shares
which are issuable upon exercise of this Warrant shall be deemed to become the
Holder(s) of, and shall be treated for all purposes as the record holder(s) of,
such Warrant Shares, and such Warrant Shares shall be deemed to have been
issued, immediately prior to the close of business on the date on which this
Warrant and Notice of Exercise are presented and payment made for such Warrant
Shares, notwithstanding that the stock transfer books of the Company shall then
be closed or that certificates representing such Warrant Shares shall not then
be actually delivered to such Person or Person(s). Certificates for the Warrant
Shares so purchased shall be delivered to the Holder within two business days
after this Warrant is exercised. If this Warrant is exercised in part only, the
Company shall, upon surrender of this Warrant for cancellation, deliver a new
Warrant evidencing the rights of the Holder to purchase the balance of the
Warrant Shares which the Holder is entitled to purchase hereunder. The issuance
of Warrant Shares upon exercise of this Warrant shall be made without charge to
the Holder for any issuance tax with respect thereto or any other cost incurred
by the Company in connection with the exercise of this Warrant and the related
issuance of Warrant Shares.
2.2. Conversion of Warrant.
(a) Right to Convert. In addition to, and without limiting, the
other rights of the Holder hereunder, the Holder shall have the right (the
"Conversion Right") to convert this Warrant or any part hereof into Warrant
Shares at any time and from time to time during the term hereof. Upon exercise
of the Conversion Right, the Company shall deliver to the Holder, without
payment by the Holder of any Exercise Price or any cash or other consideration,
that number of Warrant Shares computed using the following formula:
X= Y (A-B)
-------
A
Where: X= The number of Warrant Shares to be issued to the Holder
Y= The number of Warrant Shares purchasable pursuant to this
Warrant or such lesser number of Warrant Shares as may be selected by the Holder
A= The Fair Market Value of one Warrant Share as of the
Conversion Date
B= The Exercise Price
(b) Method of Exercise. The Conversion Right may be exercised by
the Holder by the surrender of this Warrant at the Principal Executive Office,
together with a written statement (the "Conversion Statement") specifying that
the Holder intends to exercise the Conversion Right and indicating the number of
Warrant Shares to be acquired upon exercise of the Conversion Right. Such
conversion shall be effective upon the Company's receipt of this Warrant,
together with the Conversion Statement, or on such later date as is specified in
the Conversion Statement (the "Conversion Date") and, at the Holder's election,
may be made contingent upon the closing of the consummation of the sale of
Common Stock pursuant to a Registration. Certificates for the Warrant Shares so
acquired shall be delivered to the Holder within a reasonable time, not
exceeding two business days after the Conversion Date. If applicable, the
Company shall, upon surrender of this Warrant for cancellation, deliver a new
Warrant evidencing the rights of the Holder to purchase the balance of the
Warrant Shares which Holder is entitled to purchase hereunder. The issuance of
Warrant Shares upon exercise of this Warrant shall be made without charge to the
Holder for any issuance tax with respect thereto or any other cost incurred by
the Company in connection with the conversion of this Warrant and the related
issuance of Warrant
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Shares; provided that the Holder will be responsible for any transfer taxes in
respect of the issuance of Warrant Shares to a Person other than the Holder.
2.3. Fractional Shares. The Company shall not issue fractional shares of
Common Stock upon any exercise or conversion of this Warrant. As to any
fractional share of Common Stock which the Holder would otherwise be entitled to
purchase from the Company upon such exercise or conversion, the Company shall
purchase from the Holder such fractional share at a price equal to an amount
calculated by multiplying such fractional share (calculated to the nearest
1/100th of a share) by the Fair Market Value of a share of Common Stock on the
date of the Notice of Exercise or the Conversion Date, as applicable. Payment of
such amount shall be made in cash or by check payable to the order of the Holder
at the time of delivery of any certificate or certificates arising upon such
exercise or conversion.
2.4. Continued Validity. A Shareholder shall be entitled to all rights
and subject to all obligations which a Holder of this Warrant is entitled
pursuant to the provisions of this Warrant, except rights and obligations which
by their terms apply only to a Warrant. The Company shall, at the time of the
exercise of this Warrant, in whole or in part, upon the request of a
Shareholder, acknowledge in writing, in form reasonably satisfactory to the
Shareholder, its continuing obligation to afford to the Shareholder all rights
to which the Shareholder is entitled in accordance with the provisions of this
Warrant; provided, however, that if the Shareholder fails to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to the Shareholder all such rights.
ARTICLE III.
TRANSFER, EXCHANGE AND REPLACEMENT
3.1. Maintenance of Registration Books. The Company shall keep at the
Principal Executive Office a register in which, subject to such reasonable
regulations as it may prescribe, it shall provide for the registration, transfer
and exchange of this Warrant. The Company and any Company agent may treat the
Person in whose name this Warrant is registered as the owner of this Warrant for
all purposes whatsoever, and neither the Company nor any Company agent shall be
affected by any notice to the contrary.
3.2. Restrictions on Transfers.
(a) Compliance with Securities Act. The Holder, by acceptance
hereof, agrees that this Warrant and the Common Stock to be issued to the Holder
upon exercise hereof are being acquired for investment, solely for the Holder's
own account and not as a nominee for any other Person, and that the Holder will
not offer, sell or otherwise dispose of this Warrant or any such shares of
Common Stock except under circumstances which will not result in a violation of
the Securities Act. Upon exercise of this Warrant, the Holder shall confirm in
writing, by executing the form attached as Exhibit "D-2" hereto, that the shares
of Common Stock purchased thereby are being acquired for investment, solely for
the Holder's own account and not as a nominee for any other Person, and not with
a view toward distribution or resale.
(b) Certificate Legends. This Warrant and all Warrant Shares
issued upon exercise of this Warrant (unless Registered under the Securities
Act) shall be stamped or imprinted with legends in substantially the following
form (in addition to any legends required by applicable state securities laws):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE
SECURITIES LAWS. NO SALE,
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<PAGE> 6
TRANSFER OR OTHER DISPOSITION OF SUCH SECURITIES MAY BE EFFECTED WITHOUT
(i) AN EFFECTIVE REGISTRATION STATEMENT RELATING THERETO, (ii) AN
OPINION OF COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE
COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED, (iii) RECEIPT OF A
NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION, OR (iv)
OTHERWISE COMPLYING WITH THE PROVISIONS OF ARTICLE III OF THE WARRANT
UNDER WHICH THIS SECURITY WAS ISSUED.
In addition, the Warrant (unless Registered under the
Securities Act) shall be stamped or imprinted with a legend in substantially the
following form:
THIS WARRANT MAY NOT BE TRANSFERRED OTHER THAN TO AN AFFILIATE (AS
DEFINED UNDER THE SECURITIES ACT OF 1933, AS AMENDED) PRIOR TO THE
SECOND ANNIVERSARY OF THE CLOSING DATE.
(c) Additional Restriction on Transfer. The Holder shall not
sell, assign or otherwise transfer all or part of this Warrant until the second
anniversary of the Closing Date other than in connection with the transfer of
the Holder's entire business.
(d) Disposition of Warrant or Warrant Shares. With respect to any
offer, sale or other disposition of this Warrant or any Warrant Shares issued
upon exercise of this Warrant prior to Registration of such shares, the Holder
or the Shareholder, as the case may be, agrees to give written notice to the
Company prior thereto, describing briefly the manner thereof, together with a
written opinion of the Holder's or Shareholder's counsel to the effect that such
offer, sale or other disposition may be effected without Registration under the
Securities Act or qualification under any applicable state securities laws of
this Warrant or such Warrant Shares, as the case may be, and indicating whether
or not under the Securities Act certificates for this Warrant or such Warrant
Shares, as the case may be, to be sold or otherwise disposed of, require any
restrictive legend as to applicable restrictions on transferability in order to
insure compliance with the Securities Act and any other applicable securities
laws. Promptly upon receiving such written notice and reasonably satisfactory
opinion the Company, as promptly as practicable, shall notify the Holder or the
Shareholder, as the case may be, that it may sell or otherwise dispose of this
Warrant or such Warrant Shares, as the case may be, all in accordance with the
terms of the notice delivered to the Company. If a determination has been made
pursuant to this subsection (d) that the opinion of counsel for the Holder or
the Shareholder, as the case may be, is not reasonably satisfactory to the
Company, the Company shall so notify the Holder or the Shareholder, as the case
may be, promptly after such determination has been made and shall specify the
legal analysis supporting any such conclusion. Notwithstanding the foregoing,
this Warrant or such Warrant Shares, as the case may be, may be offered, sold or
otherwise disposed of in accordance with Rule 144, provided that the Company
shall have been furnished with such information as the Company may reasonable
request to provide reasonable assurance that the provisions of Rule 144 have
been satisfied. Each certificate representing this Warrant or the shares thus
transferred (except a transfer pursuant to Rule 144) shall bear a legend as to
the applicable restrictions on transferability in order to insure compliance
with the Securities Act, unless in the aforesaid reasonably satisfactory opinion
of counsel for the Holder or the Shareholder, as the case may be, such legend is
not necessary in order to insure compliance with the Securities Act. The Company
may issue stop transfer instructions to its transfer agent in connection with
such restrictions.
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<PAGE> 7
(e) Warrant Transfer Procedure. Transfer of this Warrant to a
third party, following compliance with the preceding subsections of this Article
III, shall be effected by execution of the Assignment Form attached hereto as
Exhibit "D-3", and surrender for registration of transfer of this Warrant at the
Principal Executive Office, together with funds sufficient to pay any applicable
transfer tax. Upon receipt of the duly executed Assignment Form and the
necessary transfer tax funds, if any, the Company, at its expense, shall execute
and deliver, in the name of the designated transferee or transferees, one or
more new Warrants representing the right to purchase a like number of shares of
Common Stock.
(f) Termination of Restrictions. The restrictions imposed under
this Section 3.2 upon the transferability of the Warrant (other than those in
Section 3.2(c)) and the shares of Common Stock acquired upon the exercise of
this Warrant shall cease when (i) a registration statement covering the
applicable securities becomes effective under the Securities Act, (ii) the
Company is presented with an opinion of counsel reasonably satisfactory to the
Company that such restrictions are no longer required in order to insure
compliance with the Securities Act or with a Commission "no-action" letter
stating that future transfers of such securities by the transferor or the
contemplated transferee would be exempt from registration under the Securities
Act, or (iii) such securities may be transferred in accordance with Rule 144(k).
When such restrictions terminate, the Company shall, or shall instruct its
transfer agent to, promptly, and without expense to the Holder or the
Shareholder, as the case may be, issue new securities in the name of the Holder
and/or the Shareholder, as the case may be, not bearing the legends required
under subsection (b) of this Section 3.2.
3.3. Exchange. At the Holder's option, this Warrant may be exchanged for
other Warrants representing the right to purchase a like aggregate number of
shares of Common Stock upon surrender of this Warrant at the Principal Executive
Office. Whenever this Warrant is so surrendered to the Company at the Principal
Executive Office for exchange, the Company shall execute and deliver the
Warrants which the Holder is entitled to receive. All Warrants issued upon any
registration of transfer or exchange of Warrants shall be the valid obligations
of the Company, evidencing the same rights, and entitled to the same benefits,
as the Warrants surrendered upon such registration of transfer or exchange. No
service charge shall be made for any exchange of this Warrant.
3.4. Replacement. Upon receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of this Warrant and
(i) in the case of any such loss theft or destruction, upon delivery of
indemnity reasonably satisfactory to the Company in form and amount or (ii) in
the case of any such mutilation, upon surrender of such Warrant for cancellation
at the Principal Executive Office, the Company, at its expense, shall execute
and deliver, in lieu thereof, a new Warrant.
ARTICLE IV.
ANTIDILUTION PROVISIONS
4.1. Reorganization, Reclassification or Recapitalization of the
Company. In case of (1) a capital reorganization, reclassification or
recapitalization of the Company's capital stock (other than in the cases
referred to in Section 4.2 hereof), (2) the Company's consolidation or merger
with or into another corporation in which the Company is not the surviving
entity, or a reverse triangular merger in which the Company is the surviving
entity but the shares of the Company's capital stock outstanding immediately
prior to the merger are converted, by virtue of the merger, into other property,
whether in the form of securities, cash or otherwise, or (3) the sale or
transfer of the Company's property as an entirety or substantially as an
entirety, then, as part of such reorganization, reclassification,
recapitalization, merger, consolidation, sale or transfer, lawful provision
shall be made so that there shall thereafter be deliverable upon the exercise of
this Warrant or any portion thereof (in lieu of or in addition to the number of
shares of Common Stock theretofore deliverable, as appropriate), and without
payment
7
<PAGE> 8
of any additional consideration, the number of shares of stock or other
securities or property to which the holder of the number of shares of Common
Stock which would otherwise have been deliverable upon the exercise of this
Warrant or any portion thereof at the time of such reorganization,
reclassification, recapitalization, consolidation, merger, sale or transfer
would have been entitled to receive in such reorganization, reclassification,
recapitalization, consolidation, merger, sale or transfer. This Section 4.1
shall apply to successive reorganizations, reclassifications, recapitalizations,
consolidations, mergers, sales and transfers and to the stock or securities of
any other corporation that are at the time receivable upon the exercise of this
Warrant.
4.2. Reclassifications. If the Company changes any of the securities as
to which purchase rights under this Warrant exist into the same or a different
number of securities of any other class or classes, this Warrant shall
thereafter represent the right to acquire such number and kind of securities as
would have been issuable as the result of such change with respect to the
securities that were subject to the purchase rights under this Warrant
immediately prior to such reclassification or other change and the Exercise
Price therefore shall be appropriately adjusted.
4.3. Splits and Combinations. If the Company at any time subdivides any
of its outstanding shares of Common Stock into a greater number of shares, the
Exercise Price in effect immediately prior to such subdivision shall be
proportionately reduced, and, conversely if the outstanding shares of Common
Stock are combined into a smaller number of shares, the Exercise Price in effect
immediately prior to such combination shall be proportionately increased. Upon
any adjustment of the Exercise Price under this Section 4.3, the number of
shares of Common Stock issuable upon exercise of this Warrant shall equal the
number of shares determined by dividing (i) the aggregate Exercise Price payable
for the purchase of all shares issuable upon exercise of this Warrant
immediately prior to such adjustment by (ii) the Exercise Price per share in
effect immediately after such adjustment.
4.4. Dividends and Distributions. If the Company declares a dividend or
other distribution on the Common Stock or if a dividend or other distribution on
the Common Stock occurs pursuant to the Charter (other than a cash dividend or
distribution), then, as part of such dividend or distribution, lawful provision
shall be made so that there shall thereafter be deliverable upon the exercise of
this Warrant or any portion thereof, in addition to the number of shares of
Common Stock receivable thereupon and without payment of any additional
consideration, the amount of the dividend or other distribution to which the
holder of the number of shares of Common Stock obtained upon exercise hereof
would have been entitled to receive had the exercise occurred as of the record
date for such dividend or distribution.
4.5. Liquidation; Dissolution. If the Company shall dissolve, liquidate
or wind up its affairs, the Holder shall have the right, but not the obligation,
to exercise this Warrant effective as of the date of such dissolution,
liquidation or winding up. If any such dissolution, liquidation or winding up
results in any cash distribution to the Holder in excess of the aggregate
Exercise Price for the shares of Common Stock for which this Warrant is
exercised, then the Holder may, at its option, exercise this Warrant without
making payment of such aggregate Exercise Price and, in such case, the Company
shall, upon distribution to the Holder, consider such aggregate Exercise Price
to have been paid in full, and in making such settlement to the Holder, shall
deduct an amount equal to such aggregate Exercise Price from the amount payable
to the Holder.
4.6. Antidilution.
(a) Adjustment of Exercise Price. If the Company issues any
Additional Stock for no consideration or for a consideration per share of Common
Stock (which, in the case of Convertible Securities or Options shall be the
consideration paid to purchase such security plus the conversion price, exercise
price or exchange price, as the case may be, per share of Common Stock)
("Additional Stock
8
<PAGE> 9
Price") less than the Market Price in effect immediately prior to the time of
such issuance (with the value of any non-cash consideration paid for such
Additional Stock reasonably determined by the Company's Board of Directors),
then the Exercise Price shall be reduced to a price equal to the Exercise Price
in effect immediately prior to such adjustment less the difference between such
Market Price and the Additional Stock Price; provided, however, that (i) if any
Convertible Securities or Options expire or otherwise terminate prior to the
exercise, conversion or exchange of such securities for Common Stock ("Expiring
Additional Securities"), such Expiring Additional Securities shall no longer
constitute Additional Stock for purposes of adjustments under this Section 4.6,
and the Exercise Price shall upon such expiration or termination be readjusted
to equal what the Exercise Price would have been if those Expiring Additional
Securities (and only those Expiring Additional Securities) had never been issued
and (ii) if shares of Common Stock are issued pursuant to Convertible Securities
or Options at a price different from the Additional Stock Price originally
calculated for such Convertible Securities or Options, the Additional Stock
Price for such Convertible Securities or Options shall be recalculated to equal
the actual price paid per share of Common Stock in respect of such issuance, and
the Exercise Price shall be readjusted accordingly.
(b). Adjustment of Number of Shares Purchasable. Upon any
adjustment of the Exercise Price under subsection (a) of this Section 4.6, the
number of shares of Common Stock issuable upon exercise of this Warrant shall
equal the number of shares determined by dividing (i) the Market Price
immediately prior to such adjustment multiplied by the number of shares issuable
upon exercise of this Warrant immediately prior to such adjustment by (ii) the
Market Price per share in effect immediately after such adjustment.
4.7. Maximum Exercise Price. At no time shall the Exercise Price exceed
the amount set forth in the Preamble to this Warrant, unless the Exercise Price
is adjusted pursuant to Section 4.3 hereof.
4.8. Other Dilutive Events. If any event occurs as to which the other
provisions of this Article IV are not strictly applicable but the failure to
make any adjustment would not fairly protect the purchase rights represented by
this Warrant in accordance with the essential intent and principles hereof,
then, in each such case, the Company shall appoint a firm of independent public
accountants of recognized national standing (which may be the Company's regular
auditors) which shall give their opinion upon the adjustment, if any, on a basis
consistent with the essential intent and principles established in this Article
IV, necessary to preserve, without dilution, the purchase rights represented by
this Warrant; provided, that no adjustments shall be made in connection with the
issuance of Common Stock upon exercise, conversion or exchange of Options or
Convertible Securities to the extent that adjustment has previously been made
upon issuance of such Options or Convertible Securities and each lowering of the
effective purchase price of Common Stock pursuant to such Option or Convertible
Securities. Upon receipt of such opinion, the Company shall promptly mail a copy
thereof to the Holder and shall make the adjustments described therein.
4.9. Certificates and Notices.
(a) Adjustment Certificates. Upon any adjustment of the Exercise
Price and/or the number of shares of Common Stock purchasable upon exercise of
this Warrant, a certificate, signed by (i) the Company's President or Chief
Financial Officer, or (ii) any independent firm of certified public accountants
of recognized national standing the Company selects at its own expense, setting
forth in reasonable detail the events requiring the adjustment and the method by
which such adjustment was calculated, shall be mailed to the Holder and shall
specify the adjusted Exercise Price and the number of shares of Common Stock
purchasable upon exercise of the Warrant after giving effect to the adjustment.
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<PAGE> 10
(b) Extraordinary Corporate Events. If the Company, after the
date hereof, proposes to effect (i) any transaction described in Sections 4.1 or
4.2 hereof or (ii) a liquidation, dissolution or winding up of the Company
described in Section 4.5 hereof, then, in each such case, the Company shall mail
to the Holder a notice describing such proposed action and specifying the date
on which the Company's books shall close, or a record shall be taken, for
determining the holders of or Common Stock entitled to participate in such
action, or the date on which such reorganization, reclassification,
consolidation, merger, sale, transfer, liquidation, dissolution or winding up
shall take place or commence, as the case may be, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to receive
securities and/or other property deliverable upon such action, if any such date
is to be fixed. Such notice shall be mailed to the Holder at least twenty days
prior to the record date for such action in the case of any action described in
clause (i) or clause (iii) above, and in the case of any action described in
clause (ii) above, at least twenty days prior to the date on which the action
described is to take place and at least twenty days prior to the record date for
determining holders of Common Stock entitled to receive securities and/or other
property in connection with such action.
4.10. No Impairment. The Company shall not, by amendment of the Charter
or through any reorganization, recapitalization, transfer of assets,
consolidation, merger, dissolution, issuance 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
Article IV and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holder against impairment.
4.11. Application. Except as otherwise provide herein, all sections of
this Article IV are intended to operate independently of one another. If an
event occurs that requires the application of more than one section, all
applicable sections shall be given independent effect.
ARTICLE V.
REGISTRATION RIGHTS
5.1. Registration on Form S-3.
5.1.1. Filing of Registration Statement. The Company shall use
its best efforts to secure effectiveness of, as soon as practicable, and shall
file no later than 15 business days after the Closing Date, a registration
statement in form and substance satisfactory to the Holder on Form S-3 (the
"Registration Statement") with the Commission under the Securities Act to
register: (i) the resale of the Warrant; (ii) the exercise of the Warrant by any
person, other than Lucas Licensing Ltd. or any transferee of Warrants prior to
the resale of Warrants pursuant to the Registration Statement; and (iii) the
Warrant Shares issued upon exercise of the Warrant by any person and the resale
of any such Warrant Shares by Lucas Licensing Ltd. or any transferee of Warrants
who exercised such Warrants and received Warrant Shares otherwise than pursuant
to the Registration Statement. The Company shall amend such Registration
Statement (or file a new Registration Statement) (i) to include issuance of the
Warrant Shares to Lucas Licensing Ltd. after one year from the Closing Date and
(ii) to include the transfer of the Warrant after two years from the Closing
Date (the Warrant and the Warrant Shares constituting the "Registrable
Securities"); provided however, that in the event the Company fails to file
reports in a timely manner or otherwise fails (due to an action or inaction of
the Company) to be eligible to file a registration statement on Form S-3, the
Company shall file a registration statement or a post-effective registration
statement, as the case may be, on Form S-1. In the event of a change in the
interpretive position of the staff of the Commission with respect to
registration under the Securities Act of warrants, the exercise of warrants and
the sale of securities into which warrants can be exercised, the Company
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shall comply with such changed position promptly after consultation with counsel
to Lucas Licensing Ltd.
5.1.2. Registrable Expenses. The Company shall pay all
Registration Expenses (as defined below) in connection with any registration,
qualification or compliance hereunder, and each Holder shall pay all Selling
Expenses (as defined below) and other expenses that are not Registration
Expenses relating to the Registrable Securities resold by such Holder.
"Registration Expenses" shall mean all expenses, except for Selling Expenses,
incurred by the Company in complying with the registration provisions herein
described, including, without limitation, all registration, qualification and
filing fees, printing expenses, fees and disbursements of counsel for the
Company, blue sky fees and expenses and the expense of any special audits
incident to or required by any such registration. "Selling Expenses" shall mean
all selling commissions, underwriting fees and stock transfer taxes applicable
to the Registrable Securities and all fees and disbursements of counsel for any
Holder.
5.1.3. Additional Company Obligations. In the case of any
registration effected by the Company pursuant to these registration provisions,
the Company will use its best efforts to: keep such registration effective until
such date as all of the Registrable Securities have been sold; (ii) prepare and
file with the Commission such amendments and supplements to the Registration
Statement and the prospectus used in connection with the Registration Statement
as may be necessary to comply with the provisions of the Securities Act with
respect to the disposition of the Registrable Securities; (iii) furnish such
number of prospectuses and other documents incident thereto, including any
amendment of or supplement to the prospectus, as a Holder from time to time may
reasonably request; (iv) cause all such Registrable Securities registered as
described herein to be listed on each securities exchange and quoted on each
quotation system on which similar securities issued by the Company are then
listed or quoted; (v) provide a transfer agent and registrar for all Registrable
Securities registered pursuant to the Registration Statement and a CUSIP number
for all such Registrable Securities; (vi) use its best efforts to comply with
all applicable rules and regulations of the Commission, and make available to
its securityholders, to the extent required, as soon as reasonably practicable,
an earnings statement covering the period of at least twelve months, but not
more than eighteen months, beginning with the first month after the effective
date of the Registration Statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act; and (vii) file the documents
required of the Company and otherwise use its best efforts to maintain requisite
blue sky clearance in (A) all jurisdictions in which any of the Warrant Shares
are originally sold and (B) all other states specified in writing by a Holder as
may reasonably be required to sell such Holder's Warrant Shares, provided as to
clause (B), however, that the Company shall not be required to qualify to do
business or consent to service of process in any state in which it is not now so
qualified or has not so consented.
5.1.4. Conditions and Limitations
(a) Cooperation by Holder. It shall be a condition
precedent to the obligation of the Company to take any action pursuant to this
Article V in respect of the Registrable Securities that the Holder shall furnish
to the Company such information regarding such Registrable Securities and the
intended method of disposition thereof as the Company shall reasonably request
and as shall be required in connection with the action taken by the Company.
(b) Notification Prior to Sale. If any Holder shall
propose to sell any Registrable Securities pursuant to the Registration
Statement, it shall notify the Company of its intent to do so at least three
full business days prior to such sale, and the provision of such notice to the
Company shall be deemed to establish an agreement by such Holder to comply with
the registration provisions contained herein. Such notice shall be deemed to
constitute a representation that any information previously supplied by such
Holder is accurate as of the date of such notice. At any time within such
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<PAGE> 12
three business day period, the Company may refuse to permit the Holder to resell
any Registrable Securities pursuant to the Registration Statement; provided,
however, that in order to exercise this right, the Company must deliver a
certificate in writing to the Holder to the effect that a delay in such sale is
necessary because, in the good faith judgment of the Company, a sale pursuant to
the Registration Statement would require the public disclosure of information
that would not otherwise be required to be disclosed (which disclosure would, in
the good faith judgment of the Company, have a material adverse effect on the
Company) or could in other respects constitute a violation of the federal
securities laws. In such an event, the Company shall use its best efforts to
amend the Registration Statement to the extent required to comply with Section
5.1.4 and to take all other actions necessary to allow such sale under the
federal securities laws, and shall notify the Holders promptly after it has
determined that such circumstances no longer exist. Notwithstanding the
foregoing, the Company shall not under any circumstances be entitled to refuse
to permit the Holder to resell any Registrable Securities more than twice in any
twelve-month period, and any individual period during which the Company refuses
to permit the Holder to resell any Registrable Securities shall not exceed sixty
days.
Subject to the foregoing, when a Holder is entitled to sell and gives
notice of its intent to sell pursuant to the Registration Statement, the Company
shall furnish to such Holder a reasonable number of copies of a supplement to or
an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such shares, such prospectus shall not include an
untrue statement of material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading or
incomplete in the light of the circumstances then existing.
5.2. Indemnification and Contribution.
5.2.1. Indemnification by the Company. The Company agrees to
indemnify and hold harmless each Holder from and against any losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) to which
such Holder may become subject (under the Securities Act or otherwise) insofar
as such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of, or are based upon, any claim by a third party
asserting any untrue statement of a material fact contained in the Registration
Statement or omission of a material fact therefrom necessary to make the
statements therein not misleading, on the effective date thereof, or arise out
of any failure by the Company to fulfill any undertaking included in the
Registration Statement, and the Company will, as incurred, reimburse such Holder
for any legal or other expenses reasonably incurred in investigating, defending
or preparing to defend any such action, proceeding or claim; provided, however,
that the Company shall not be liable in any such case to the extent that such
loss, claim, damages or liability arises out of, or is based upon (i) an untrue
statement made in such Registration Statement in reliance upon and in conformity
with written information furnished to the Company by or on behalf of such Holder
specifically for use in preparation of the Registration Statement or (ii) any
untrue statement in any prospectus that is corrected in any subsequent
prospectus that was delivered to the Holder prior to the pertinent sale or sales
by the Holder.
5.2.2. Indemnification by Holder. Each Holder, severally and not
jointly, agrees to indemnify and hold harmless the Company from and against any
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) to which the Company may become subject (under the Securities Act or
otherwise) insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon any claim by a
third party asserting (i) an untrue statement made in such Registration
Statement in reliance upon and in conformity with written information furnished
to the Company by or on behalf of such Holder specifically for use in
preparation of the Registration Statement, provided, however, that no Holder
shall be liable in any such case for any untrue statement included in any
prospectus which statement has been corrected, in writing, by such Holder and
delivered to the Company at least three business days before the sale from which
such loss
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occurred or (ii) any untrue statement in any prospectus that is corrected in any
subsequent prospectus that was delivered to the Holder prior to the pertinent
sale or sales by the Holder, and each Holder, severally and not jointly, will,
as incurred, reimburse the Company for any legal or other expenses reasonably
incurred in investigating, defending or preparing to defend any such action,
proceeding or claim.
5.2.3. Indemnification Procedures. Promptly after receipt by any
indemnified person of a notice of a claim or the beginning of any action in
respect of which indemnity is to be sought against an indemnifying person
pursuant to this Section 5.2, such indemnified person shall notify the
indemnifying person in writing of such claim or of the commencement of such
action, and, subject to the provisions hereinafter stated, in case any such
action shall be brought against an indemnified person and the indemnifying
person shall have been notified thereof, the indemnifying person shall be
entitled to participate therein, and, to the extent that it shall wish, to
assume the defense thereof, with counsel reasonably satisfactory to the
indemnified person. After notice from the indemnifying person to such
indemnified person of the indemnifying person's election to assume the defense
thereof, the indemnifying person shall not be liable to such indemnified person
for any legal expenses subsequently incurred by such indemnified person in
connection with the defense thereof; provided, however, that if there exists or
shall exist a conflict of interest that would make it inappropriate in the
reasonable opinion of counsel for the indemnified person for the same counsel to
represent both the indemnified person and such indemnifying person or any
affiliate or associate thereof, the indemnified person shall be entitled to
retain its own counsel at the expense of such indemnifying person; provided,
however, that in the case of the immediately preceding proviso the indemnifying
person shall not be responsible for the legal expenses of more than one counsel
for all indemnified persons.
5.2.4. Contribution in Lieu of Indemnity. If the indemnification
provided for in this Section 5.2 is unavailable to or insufficient to hold
harmless an indemnified party under Section 5.2.1 or 5.2.2 above in respect of
any losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) referred to therein, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect the relative benefit and relative fault
of the respective parties as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company on the one hand or a Holder on the other and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Company and the Holders
agree that it would not be just and equitable if contribution pursuant to this
Section 5.2.4 were determined by pro rata allocation (even if the Holders were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to above in
this Section 5.2.4. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above in this Section 5.2.4 shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 5.2.4, no Holder shall be
required to contribute any amount in excess of the net amount received by the
Holder from the sale of the Registrable Securities to which such loss relates.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Holders'
obligations in this Section 5.2.4 to contribute are several in proportion to
their respective sales of Registrable Securities to which such loss relates and
not joint.
5.2.5. Controlling Persons Indemnified. The obligations of the
Company and the Holders under this Section 5.2 shall be in addition to any
liability which the Company and the respective Holders may otherwise have and
shall extend, upon the same terms and conditions, to each person, if
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any, who controls the Company or any Holder within the meaning of the Securities
Act including, without limitation, the directors and officers of the Company and
the Holder, as the case may be.
5.3. Transfer of Registration Rights. The right to sell Registrable
Securities pursuant to the registration statement described herein will
automatically be assigned to each transferee of the Warrant or Warrant Shares.
In the event that it is necessary, in order to permit a Holder to sell
Registrable Securities pursuant to the Registration Statement, to amend the
Registration Statement to name such Holder, such Holder shall, upon written
notice to the Company, be entitled to have the Company make such amendment as
soon as reasonably practicable.
ARTICLE VI.
REPRESENTATIONS, WARRANTIES AND COVENANTS OF COMPANY
6.1. Representations and Warranties. The Company represents and warrants
that:
(a) Legal Status; Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of Delaware
and is qualified or licensed to do business in all other countries, states and
provinces in which the laws thereof require the Company to qualify and/or be
licensed, except where failure to qualify or be licensed would not have a
material adverse effect on the business or assets of the Company taken as a
whole;
(b) Capitalization. The Company's authorized capital stock
consists of: 50,000,000 shares of Common Stock, of which shares are issued and
outstanding and 1,000,000 shares of preferred stock, par value $1.00 per share,
of which 30,000 shares Preferred Stock are outstanding;
(c) Options. Except as described in Exhibit "D-4" hereto there
are no Options, warrants or similar rights to acquire from the Company, or
agreements or other obligations by the Company, absolute or contingent, to issue
or sell Common Stock, whether on conversion or exchange of Convertible
Securities or otherwise;
(d) Preemptive Rights. No shareholder of the Company has any
preemptive rights to subscribe for shares of Common Stock;
(e) Authority. The Company has the right and power, and is duly
authorized and empowered, to enter into, execute, deliver and perform its
obligations under this Warrant;
(f) Binding Effect. This Warrant has been duly authorized,
executed and delivered and constitutes a valid and binding obligation of the
Company enforceable in accordance with its terms, except to the extent that
enforceability may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally and (ii)
general principles of equity;
(g) No Conflict. The execution, delivery and/or performance by
the Company of this Warrant shall not, by the lapse of time, the giving of
notice or otherwise, constitute a violation of any applicable law or a breach of
any provision contained in the Company's Charter or Bylaws or contained in any
agreement, instrument or document to which the Company is a party or by which it
is bound;
(h) Consents. No consent, approval, authorization or other order
of any court, regulatory body, administrative agency or other governmental body
is required for the valid issuance of the Warrant or for the performance of any
of the Company's obligations hereunder, except in connection
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<PAGE> 15
with listing on the New York Stock Exchange, which filings will be effected in
accordance with the rules and regulations of the New York Stock Exchange;
(i) Offering. Neither the Company nor any agent acting on its
behalf has, either directly or indirectly, sold, offered for sale or disposed
of, or attempted or offered to dispose of, this Warrant or any part hereof, or
any similar obligation of the Company, to, or has solicited any offers to buy
any thereof from, any Person or Persons other than the Holder. Neither the
Company nor any agent acting on its behalf will sell or offer for sale or
dispose of, or attempt or offer to dispose of, this Warrant or any part thereof
to, or solicit any offers to buy any warrant of like tenor from, or otherwise
approach or negotiate in respect thereof, with, any Person or Persons so as
thereby to bring the issuance of this Warrant within the provisions of Section 5
of the Securities Act;
(j) Registration. It is not necessary in connection with the
issuance and sale of this Warrant to the Holder to Register this Warrant under
the Securities Act.
6.2. Covenants. The Company covenants that:
(a) Authorized Shares. The Company will at all times have
authorized, and reserved for the purpose of issuance or transfer upon exercise
of the rights evidenced by this Warrant, a sufficient number of shares of Common
Stock to provide for the exercise of the rights represented by this Warrant (for
purposes of determining compliance with this covenant, the shares of Common
Stock issuable upon exercise of all other Options and warrants to acquire Common
Stock and upon conversion of all instruments convertible into Common Stock shall
be deemed issued and outstanding);
(b) Proper Issuance. The Company, at its expense, will take all
such action as may be necessary to assure that the Common Stock issuable upon
the exercise of this Warrant may be so issued without violation of any
applicable law or regulation, or of any requirements of any domestic securities
exchange or automated quotation system upon which any capital stock of the
Company may be listed or quoted, as the case may be. Such action may include,
but not be limited to, causing such shares to be duly registered or approved,
listed or quoted on relevant domestic securities exchanges or automated
quotation systems; and
(c) Fully Paid Shares. The Company will take all actions
necessary or appropriate to validly and legally issue fully paid and
nonassessable shares of Common Stock upon exercise of this Warrant. All such
shares will be free from all taxes, liens and charges with respect to the
issuance thereof, other than any stock transfer taxes in respect to any transfer
occurring contemporaneously with such issuance.
ARTICLE VII.
MISCELLANEOUS
7.1. Certain Expenses. The Company shall pay all expenses in connection
with, and all taxes (other than stock transfer and income taxes) and other
governmental charges that may be imposed in respect of, the issuance, sale and
delivery of the Warrant and the Warrant Shares.
7.2. Holder Not a Shareholder. Prior to the exercise of this Warrant as
hereinbefore provided, the Holder shall not be entitled to any of the rights of
a shareholder of the Company including, without limitation, the right as a
shareholder (i) to vote on or consent to any proposed action of the Company or
(ii) except as provided herein, to receive (a) dividends or any other
distributions made to
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shareholders, (b) notice of or attend any meetings of shareholders of the
Company or (c) notice of any other proceedings of the Company.
7.3. Like Tenor. All Warrants shall at all times be substantially
identical except as to the Preamble.
7.4. Remedies. The Company stipulates that the remedies at law of the
Holder in the event of any default or threatened default by the Company in the
performance of or compliance with any of the terms of this Warrant are not and
will not be adequate to the fullest extent permitted by law, and that such terms
may be specifically enforced by a decree for the specific performance of any
agreement contained herein or by an injunction against a violation of any of the
terms hereof or otherwise.
7.5. Enforcement Costs. If any party to, or beneficiary of, this Warrant
seeks to enforce its rights hereunder by legal proceedings or otherwise, then
the non-prevailing party shall pay all reasonable costs and expenses incurred by
the prevailing party, including, without limitation, all reasonable attorneys'
fees (including the allocable costs of in-house counsel).
7.6. Nonwaiver; Cumulative Remedies. No course of dealing or any delay
or failure to exercise any right hereunder on the part of the Holder and/or any
Shareholder shall operate as a waiver of such right or otherwise prejudice the
rights, powers or remedies of the Holder or such Shareholder. No single or
partial waiver by the Holder and/or any Shareholder of any provision of this
Warrant or of any breach or default hereunder or of any right or remedy shall
operate as a waiver of any other provision, breach, default right or remedy or
of the same provision, breach, default, right or remedy on a future occasion.
The rights and remedies provided in this Warrant are cumulative and are in
addition to all rights and remedies which the Holder and each Shareholder may
have in law or in equity or by statute or otherwise.
7.7. Notices. Any notice, demand or delivery to be made pursuant to this
Warrant will be sufficiently given or made if sent by certified or registered
mail, postage prepaid, nationally recognized overnight delivery service or
facsimile transmission, addressed to (a) the Holder and the Shareholders at
their last known addresses appearing on the books of the Company maintained for
such purpose or (b) the Company at its Principal Executive Office. The Holder,
the Shareholders and the Company may each designate a different address by
notice to the other pursuant to this Section 7.7. A notice shall be deemed
effective upon receipt.
7.8. Successors and Assigns. This Warrant shall be binding upon, the
Company and any Person succeeding the Company by merger, consolidation or
acquisition of all or substantially all of the Company's assets, and all of the
obligations of the Company with respect to the shares of Common Stock issuable
upon exercise of this Warrant shall survive the exercise, expiration or
termination of this Warrant and all of the covenants and agreements of the
Company shall inure to the benefit of the Holder, each Shareholder and their
respective successors and assigns. The Company shall, at the time of exercise of
this Warrant, in whole or in part, upon request of the Holder or any Shareholder
but at the Company's expense, acknowledge in writing its continuing obligations
hereunder with respect to rights of the Holder or such Shareholder to which it
shall continue to be entitled after such exercise in accordance with the terms
hereof; provided that the failure of the Holder or any Shareholder to make any
such request shall not affect the continuing obligation of the Company to the
Holder or such Shareholder in respect of such rights.
7.9. Modification; Severability.
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(a) If, in any action before any court or agency legally
empowered to enforce any term, any term is found to be unenforceable, then such
term shall be deemed modified to the extent necessary to make it enforceable by
such court or agency.
(b) If any term is not curable as set forth in subsection (a)
above, the unenforceability of such term shall not affect the other provisions
of this Warrant but this Warrant shall be construed as if such unenforceable
term had never been contained herein.
7.10. Integration. This Warrant replaces all prior and contemporaneous
agreements and supersedes all prior and contemporaneous negotiations between the
parties with respect to the transactions contemplated herein and constitutes the
entire agreement of the parties with respect to the transactions contemplated
herein.
7.11. Survival of Representations and Warranties. The representations
and warranties of any party in this Warrant shall survive the execution and
delivery of this Warrant and the consummation of the transactions contemplated
hereby, notwithstanding any investigation by the such party or its agents.
7.12. Amendment. This Warrant may not be modified or amended except by
written agreement of the Company, the Holder and the Shareholder(s), if any,
holding a majority of the Warrant Shares.
7.13. Headings. The headings of the Articles and Sections of this
Warrant are for the convenience of reference only and shall not, for any
purpose, be deemed a part of this Warrant.
7.14. Meanings. Whenever used in this Warrant, any noun or pronoun shall
be deemed to include both the singular and plural and to cover all genders; and
the words "herein," "hereof" and "hereunder" and words of similar import shall
refer to this instrument as a whole, including any amendments hereto.
7.15. Governing Law. This Warrant shall be governed by, and construed in
accordance with, the laws of the State of California applicable to contracts
entered into and to be performed wholly within California by California
residents.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its duly authorized officer this October 14, 1997.
LUCAS LICENSING LTD. ("Holder") GALOOB TOYS, INC. ("Company")
By: /s/ Lucas Licensing Ltd. By: /s/ Galoob Toys, Inc.
------------------------ ------------------------
Title: Title:
----------------------- -----------------------
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SCHEDULE OF EXHIBITS
EXHIBIT "D-1"-Notice of Exercise (Section 2.1)
EXHIBIT "D-2"-Investment Representation Certificate (Section 3.2(a))
EXHIBIT "D-3"-Assignment Form (Section 3.2(d))
EXHIBIT "D-4"-Schedule of Options and Preemptive Rights (Sections 6.1(c) and
6.1(d))
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EXHIBIT "D-1"
NOTICE OF EXERCISE FORM
(To be executed only upon partial or full
exercise of the within Warrant)
The undersigned registered Holder of the within Warrant hereby
irrevocably exercises the within Warrant for and purchases shares of Common
Stock of Galoob Toys, Inc. and herewith makes payment therefor in the amount of
$ _________________, all at the price and on the terms and conditions specified
in the within Warrant and requests that a certificate (or ___________________
certificates in denominations of shares) for the shares of Common Stock of
Galoob Toys, Inc. hereby purchased be issued in the name of and delivered to
(choose one) (a) the undersigned or (b) [NAME], whose address is and, if such
shares of Common Stock shall not include all the shares of Common Stock issuable
as provided in the within Warrant, that a new Warrant of like tenor for the
number of shares of Common Stock of Galoob Toys, Inc. not being purchased
hereunder be issued in the name of and delivered to (choose one) (a) the
undersigned or (b) [NAME], whose address is ______.
Dated:
------------------
NOTICE: The signature to this Notice of Exercise must correspond with the name
as written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatever.
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EXHIBIT "D-2"
INVESTMENT REPRESENTATION CERTIFICATE
Purchaser:
Company: Galoob Toys, Inc.
Security: Common Stock
Amount:
Date:
(a) In connection with the purchase of the above-listed securities (the
"Securities"), the undersigned (the "Purchaser") represents to the Company as
follows:
(b) The Purchaser is aware of the Company's business affairs and
financial condition, and has acquired sufficient information about the Company
to reach an informed and knowledgeable decision to acquire the Securities. The
Purchaser is purchasing the Securities for its own account for investment
purposes only and not with a view to, or for the resale in connection with, any
"distribution" thereof for purposes of the Securities Act of 1933, as amended
(the "Securities Act");
(c) The Purchaser understands that the Securities have not been
registered under the Securities Act in reliance upon a specific exemption
therefor, which exemption depends upon, among other things, the bona fide nature
of the Purchaser's investment intent as expressed herein;
(d) The Purchaser further understands that the Securities must be held
indefinitely unless subsequently registered under the Securities Act or unless
an exemption from registration is otherwise available. In addition, the
Purchaser understands that the certificate evidencing the Securities will be
imprinted with the legend referred to in the Warrant under which the Securities
are being purchased; and
(e) The Purchaser is aware of the provisions of Rule 144, promulgated
under the Securities Act, which, in substance, permit limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof (or from an affiliate of such issuer), in a non-public offering subject
to the satisfaction of certain conditions, if applicable, including, among other
things: (i) the availability of certain public information about the Company;
(ii) the resale occurring not less than one year after the party has purchased
and paid for the securities to be sold; (iii) the sale being made through a
broker in an unsolicited "broker's transaction" or in transactions directly with
a market maker (as said term is defined under the Securities Exchange Act of
1934) and the amount of securities being sold during any three-month period not
exceeding the specified limitations stated therein.
The Purchaser represents that it is an "accredited investor" as that term is
defined in Rule 501 of Regulation D under the Securities Act or any successor
regulation thereunder.
Date: *P-23X PURCHASER:
------------------ ---------------------------
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EXHIBIT "D-3"
ASSIGNMENT FORM
(To be executed only upon the assignment of the within Warrant)
FOR VALUE RECEIVED, the undersigned registered Holder of the within Warrant
hereby sells, assigns and transfers unto ____________, whose address is
______________ all of the rights of the undersigned under the within Warrant,
with respect to shares of Common Stock of Galoob Toys, Inc. and, if such shares
of Common Stock shall not include all the shares of Common Stock issuable as
provided in the within Warrant, that a new Warrant of like tenor for the number
of shares of Common Stock of Galoob Toys, Inc. not being transferred hereunder
be issued in the name of and delivered to the undersigned, and does hereby
irrevocably constitute and appoint ___________attorney to register such transfer
on the books of Galoob Toys, Inc. maintained for the purpose, with full power of
substitution in the premises.
Dated:
--------------------------- ------------------------------------
------------------------------------
By:
---------------------------------
(Signature of Registered Holder)
Title:
------------------------------
NOTICE: The signature to this Assignment must correspond with the name upon the
face of the within Warrant in every particular, without alteration or
enlargement or any change whatever.
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EXHIBIT "D-4"
OUTSTANDING OPTIONS AND PREEMPTIVE RIGHTS
(Sections 6.1(c) and 6.1(d))
Options
1. Options to purchase shares of the Company's Common Stock are
outstanding pursuant to the following employee benefit plans:
- 1984 Amended and Restated Employee Stock Option Plan
- 1994 Senior Management Stock Option Plan
- 1995 Non-Employee Director Stock Option Plan
- 1996 Share Incentive Plan
2. Gerard Klauer Mattison & Co., LLC holds a warrant to purchase
25,000 shares of Common Stock.
3. Each share of Common Stock has appurtenant thereto one preferred
stock purchase right (a "Right") issued pursuant to the Company's Stockholder
Rights Plan. Upon the occurrence of certain events involving a change in control
of the Company, Rights not held by an "acquiring person" will entitle the holder
to purchase shares of Common Stock pursuant to the terms of the Stockholder
Rights Plan.
Preemptive Rights
None.
23
