<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Period ended MARCH 31, 1996
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or
[_] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from _________ to _________
Commission file number 0-18102
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MATTHEWS STUDIO EQUIPMENT GROUP
-------------------------------
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-1447751
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2405 EMPIRE AVENUE, BURBANK, CA 91504-3399
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(Address of principal executive offices) (Zip Code)
(818) 843-6715
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(Registrant's telephone number, including area code)
NOT APPLICABLE
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes X NO
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. COMMON STOCK, NO PAR VALUE -
----------------------------
10,326,591 SHARES AS OF APRIL 30, 1996.
- - - ---------------------------------------
<PAGE>
INDEX
MATTHEWS STUDIO EQUIPMENT GROUP AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (UNAUDITED)
Condensed consolidated balance sheets - March 31, 1996
and September 30, 1995
Condensed consolidated statements of income - Three months ended
March 31, 1996 and 1995; Six months ended March 31, 1996 and 1995
Condensed consolidated statements of cash flows - Six months ended
March 31, 1996 and 1995
Notes to condensed consolidated financial statements -
March 31, 1996
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Change in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
MATTHEWS STUDIO EQUIPMENT GROUP
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
($ in thousands)
<TABLE>
<CAPTION>
March 31, September 30,
1996 1995
---------- -------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents................. $ 386 $ 438
Accounts receivable less allowances of
March 31, 1996: $333 and
September, 30, 1995: $297............ 3,669 4,039
Current portion of net investment in leases 880 979
Inventories............................... 4,639 4,556
Prepaid expenses and other current assets. 811 922
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Total current assets................... 10,385 10,934
Property and equipment less accumulated
depreciation and amortization of
March 31, 1996: $16,047 and
September 30, 1995: $14,785........... 19,347 17,226
Investment in leases, less current portion..... 1,173 1,376
Other assets................................... 1,081 1,167
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Total assets........................... $31,986 $30,703
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................... $ 1,369 $ 1,569
Accrued liabilities....................... 1,050 1,080
Current portion of long-term debt and
capital lease obligations.............. 310 413
Income taxes payable...................... 54
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Total current liabilities............. 2,783 3,062
Long-term debt and capital leases.............. 18,929 17,664
Deferred income taxes.......................... 1,923 1,923
Common stock................................... 5,579 5,567
Retained earnings.............................. 2,772 2,487
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Total shareholders' equity............ 8,351 8,054
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Total liabilities and shareholders'
equity.............................. $31,986 $30,703
======= =======
</TABLE>
See accompanying notes.
<PAGE>
MATTHEWS STUDIO EQUIPMENT GROUP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
($ in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net product sales........................ $ 3,517 $ 4,062 $ 6,697 $ 7,586
Revenues from rental operations.......... 3,249 3,010 6,434 6,148
------- ------- ------- -------
6,766 7,072 13,131 13,734
Costs and expenses:
Cost of sales.......................... 2,285 2,397 4,285 4,538
Cost of rental operations.............. 1,841 1,842 3,638 3,601
------- ------- ------- -------
4,126 4,239 7,923 8,139
------- ------- ------- -------
Gross profit......................... 2,640 2,833 5,208 5,595
Selling, general and administrative...... 2,018 2,031 3,854 3,822
Minority interest........................ 37 63
Interest................................. 476 499 999 958
------- ------- ------- -------
Total expenses....................... 2,494 2,567 4,853 4,843
Income before income taxes............... 146 266 355 752
Provision for taxes...................... 29 92 70 286
------- ------- ------- -------
Net income........................... $ 117 $ 174 $ 285 $ 466
======= ======= ======= =======
Earnings per common share................ $0.01 $0.02 $0.03 $0.05
======= ======= ======= =======
Weighted average number of common
shares outstanding...................... 10,321 10,313 10,324 10,313
</TABLE>
See accompanying notes.
<PAGE>
MATTHEWS STUDIO EQUIPMENT GROUP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
($ in thousands)
<TABLE>
<CAPTION>
Six Months Ended March 31,
1996 1995
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<S> <C> <C>
Operating activities:
Net income $ 285 $ 466
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Provision for doubtful accounts 80 123
Depreciation and amortization 1,667 1,342
Minority interest 63
Gain on sale of assets (65) (152)
Changes in operating assets and liabilities:
Accounts receivable 290 (471)
Inventory (84) (499)
Net investment in leases 302 113
Unguaranteed residual value of leases 1 32
Prepaids and other assets (57) (286)
Income tax refund receivable 252
Accounts payable and accrued liabilities (229) (1,916)
Income taxes payable 54 267
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Net cash provided by (used in)
operating activities 2,496 (918)
Investing activities:
Purchase of property and equipment (3,847) (2,394)
Proceeds from sale of property
and equipment 218 187
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Net cash used in investing activities (3,629) (2,207)
Financing activities:
Proceeds from exercise of stock options 12
Proceeds from borrowings 15,874 3,288
Repayment of borrowings (14,805) (750)
Payments to minority interest (138)
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Net cash provided by financing activities 1,081 2,400
Net decrease in cash and cash equivalents (52) (725)
Cash and cash equivalents at beginning
of period 438 735
------- -------
Cash and cash equivalents at end of
period $ 386 $ 10
======= =======
</TABLE>
See accompanying notes.
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
Matthews Studio Equipment Group (the "Company") and Subsidiaries have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three- and six- month periods ended
March 31, 1996 are not necessarily indicative of the results that may be
expected for the year ending September 30, 1996, due to fluctuations in film
production activities. For further information refer to the consolidated
financial statements and footnotes thereto included in the Matthews Studio
Equipment Group's annual report on Form 10-K for the year ended September 30,
1995.
Certain prior year amounts have been reclassified to conform to the current year
presentation.
2. PER SHARE DATA
Net income per share is based on the weighted average number of shares
outstanding. The dilution from common stock equivalents is less than three
percent and is therefore excluded from the calculation of earnings per common
share.
3. INVENTORIES
Inventories are principally stated at the lower of first-in, first-out cost or
market.
4. LONG-LIVED ASSETS
Long-lived assets used in operations are reviewed periodically to determine that
the carrying values are not impaired and if indicators of impairment are present
or if long-lived assets are expected to be disposed of, impairment losses are
recorded.
5. DEBT
The Chemical Bank Revolving Credit Facility
- - - -------------------------------------------
On July 27, 1995, the Company and its principal subsidiaries entered into an
agreement for a senior secured revolving credit facility with Chemical Bank (the
"Facility"), in an aggregate principal amount of up to $17 million. The
Facility matures July 27, 1999 and provides the following declining commitment
schedule: $17 million at July 27, 1995; $16 million on October 1, 1996; $15
million on October 1, 1997; $14 million on October 1, 1998. The Facility
requires the Company to maintain on a quarterly basis certain levels of earnings
and to meet several financial ratios.
<PAGE>
At March 31, 1996, the Company had an outstanding balance of $13,812,000 and had
$2,874,000 available under the Facility. The Company obtained a waiver from
Chemical Bank relating to a covenant stating a maximum ratio of debt-to-EBITDA
(earnings before interest, taxes, depreciation and amortization) which was
exceeded at an interim period in fiscal 1996, however, the Company was in
compliance with the covenant at the period ended March 31, 1996. The Company
was in full compliance with all other covenants of the credit agreement with
Chemical Bank and the several ING agreements more specifically described in the
paragraphs which follow.
The ING Equity Partners, L.P.I Senior Subordinated Promissory Note
- - - -------------------------------------------------------------------
Concurrently, and in connection with the refinancing, the Company entered into a
purchase agreement (the "Purchase Agreement") with ING Equity Partners, L.P.I
("ING"), pursuant to which the Company sold to ING for a total purchase price of
$5 million (i) its senior subordinated promissory note in the principal amount
of $5 million, bearing interest at an initial rate of 10% per annum (the
"Subordinated Note"), (ii) a common stock purchase warrant (the "ING Warrant")
entitling ING to purchase 2,322,464 of the Company's outstanding shares of
common stock at an initial purchase price per share of $2.50 and having certain
antidilutive rights and (iii) a share of preferred stock of the Company
entitling ING to voting rights with respect to the number of shares underlying
the ING Warrant. The ING Warrant requires an adjustment of the exercise price
to $2.00 per share if the Company does not complete a public offering of its
common stock at a price of at least $2.50 per share with net proceeds to the
Company of at least $10 million by July 27, 1998. The proceeds from the
offering are to be used for general corporate purposes, working capital,
retirement of bank debt and the Subordinated Note.
Subsequent to the quarter ended March 31, 1996, the Subordinated Note with ING
was amended, and replaced with two subordinated notes, a $100,000 subordinated
note with a due date of July 27, 2005, and a $4,900,000 subordinated note with a
due date of July 27, 2000, which may also be extended to July 27, 2005 at the
discretion of ING. The other terms and conditions of the new subordinated notes
are unchanged from the terms and conditions of the original Subordinated Note.
6. TAXES
Deferred tax assets and liabilities are determined based on differences between
the financial reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates and laws that will be in effect when the differences
are expected to reverse. The effective income tax rate is 20% for the current
quarter of this fiscal year versus 40% for the same period of the prior year.
The lower rate for this year is attributable to the utilization of net operating
loss carryforwards.
7. STOCK OPTIONS
During the six months ended March 31, 1996, 12,000 shares of common stock were
issued upon the exercise of stock options.
<PAGE>
8. OTHER INFORMATION
During October, 1995, the Company launched its strategic expansion program in
the Northwest market when it entered into the acquisition of the assets of Jonas
Jensen Studios, Inc., a privately held rental and post-production company in
Seattle, Washington. Concurrently, the Company entered into an equipment
management, marketing and revenue sharing agreement with Jonas Jensen Studios,
Inc., which thereby became the only studio in the Seattle region capable of
servicing the major post-production work necessary for TV commercials or full-
length feature movie productions.
9. SUBSEQUENT EVENT
Subsequent to the quarter ended March 31, 1996, the Purchase Agreement with ING
and the ING Warrant were amended along with the employment agreements with the
Company's two principal officers, Mr. Carlos D. De Mattos and Edward Phillips.
The basic effect of the amendments were: to place certain limits on the number
of shares of the Company's Common Stock which may be purchased under the ING
Warrant, to amend the voting rights of the preferred stock issued by the Company
to ING so as not to have the right to vote until there has been a default under
the Purchase Agreement, and to amend the above mentioned employment agreements
to require shareholder approval of the grants of 200,000 shares to each of Mr.
De Mattos and Mr. Phillips and absent such approval, Mr. De Mattos' and Mr.
Phillips' options are automatically reduced to options to purchase up to 12,500
shares of Company Common Stock.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
- - - ---------------------
Three-Month Period ended March 31, 1996 and March 31, 1995
- - - ----------------------------------------------------------
Net Product Sales
- - - -----------------
Net equipment and supply sales were $3,517,000 for the second quarter of fiscal
1996, a decrease of $545,000 or 13.4% from $4,062,000 for the second quarter of
fiscal 1995. Equipment sales declined to $2,489,000, a decline of approximately
$113,000 or 4.3% from $2,602,000 in fiscal 1995. Also, approximately $163,000
of the decrease is due to the decline in broker sales and other revenues by the
Company's leasing entity and expendable supply sales declined approximately
$250,000.
Revenues From Rental Operations
- - - -------------------------------
Revenues from rental operations were $3,249,000 for the second quarter of fiscal
1996 compared to $3,010,000 for the same period last year, an increase of
$239,000 or 7.9%. Equipment rentals at Hollywood Rental Co., Inc., increased to
approximately $3,038,000 or an increase of approximately $328,000 or 12.0% from
approximately $2,710,000 in the same period last year. Offsetting the increase
in rental revenues was a decline of approximately $114,000 in disposal of rental
assets and other services from approximately $185,000 in fiscal 1995 to
approximately $71,000 in fiscal 1996. In addition, revenues from Matthews
Studio Electronics, Inc., declined from approximately $128,000 in fiscal 1995 to
approximately $96,000 in fiscal 1996 primarily due to the termination of the
minority partnership agreement in effect in previous years. Since the fourth
quarter of fiscal 1995, approximately 30% of Electronics rental revenues have
been recorded by the Company's previous partner.
Gross Profit - Sales
- - - --------------------
Gross profit as a percentage of sales was approximately 35.0% for the second
quarter of fiscal 1996 compared to approximately 41.0% for the same period in
fiscal 1995. The decline is partially attributable to the decline of broker
sales by the leasing entity which carried a 100% margin. Gross profit excluding
broker sales was approximately 38.5% for the second quarter of fiscal 1995. In
addition, increases in certain overhead expenditures and depreciation expense
contributed to lower margins.
<PAGE>
Gross Profit - Rental
- - - ---------------------
Gross profit as a percentage of rental revenues was approximately 43.3% for the
second quarter of fiscal 1996 compared to 38.8% in fiscal 1995. The increase in
gross profit is mainly due to an increase in the equipment rental revenue base
resulting in lower fixed operating costs as a percent of sales and decreased
labor costs of approximately $89,000 due to efficiencies in handling customer
orders, offset by an increase of $94,000 in depreciation expense from new
equipment purchases.
Selling, General and Administrative
- - - -----------------------------------
Selling, general and administrative expenses were $2,018,000 in the second
quarter of fiscal 1996 compared to $2,031,000 for the same period in fiscal
1995. As a percent of sales, selling, general and administrative expenses were
29.8% for the second quarter of fiscal 1996 compared to 28.7% for the same
period in fiscal 1995, an increase of 1.1%.
Minority Interest
- - - -----------------
There was no minority interest expense in fiscal 1996 as the partnership was
terminated in fiscal 1995.
Interest
- - - --------
Interest decreased to $476,000 in the second quarter of fiscal 1996 compared to
$499,000 in the second quarter of fiscal 1995. The decrease in interest costs
is primarily due to $50,000 of lower loan fee amortization costs and higher
interest income somewhat offset by higher interest charges on increased debt of
approximately $3,223,000.
Six-Month Period ended March 31, 1996 and March 31, 1995
- - - --------------------------------------------------------
Net Product Sales
- - - -----------------
Net equipment and supply sales were $6,697,000 for the first six months of
fiscal 1996, a decrease of $889,000 or 11.7% from $7,586,000 for the first six
months of fiscal 1995. Approximately $291,000 of the decrease is due to the
decline in broker sales by the Company's leasing entity. In addition, equipment
sales declined to $4,856,000, a decline of approximately $162,000 or 3.2% from
$5,019,000 for the first six months of 1995, and sales of expendable supplies
were down approximately $385,000 from the same period last year.
Revenues From Rental Operations
- - - -------------------------------
Revenues from rental operations were $6,434,000 for the first six months of
fiscal 1996 compared to $6,148,000 for the same period last year, an increase of
$286,000 or 4.7%. Equipment rentals at Hollywood Rental Co., Inc., increased to
approximately $6,006,000 or an increase of approximately $558,000 or 10.2% from
approximately $5,448,000 in the same period last year. In addition, rental
revenues from Matthews Studio Electronics, Inc., declined from approximately
$455,000 in fiscal 1995 to approximately $230,000 in fiscal 1996 primarily due
to the termination of the minority partnership agreement in effect in previous
years. Since the fourth quarter of fiscal 1995, approximately 30% of Electronics
rental revenues have been recorded by the Company's previous partner.
Gross Profit - Sales
- - - --------------------
Gross profit as a percentage of sales was approximately 36.0% for the first six
months of fiscal 1996 compared to approximately 39.9% for the same period in
fiscal 1995. The decline is attributable to the decline of broker sales by the
leasing entity which carried a 100% margin. Gross profit excluding broker sales
was approximately 36.3% for the first six months of fiscal 1995.
<PAGE>
Gross Profit - Rental
- - - ---------------------
Gross profit as a percentage of rental revenues was approximately 43.5% compared
to 41.4% in fiscal 1995. The increase in gross profit is mainly due to the
benefit of spreading fixed operating costs over a higher revenue base, in
addition to decreased labor costs of approximately $150,000 due to efficiencies
in handling customer orders, yet offset by an increase of $220,000 in
depreciation expense from new equipment purchases during the past fiscal year.
Selling, General and Administrative
- - - -----------------------------------
Selling, general and administrative expenses were $3,854,000 in the first six
months of fiscal 1996 compared to $3,822,000 for the same period in fiscal 1995.
As a percent of sales, selling, general and administrative expenses were 29.4%
for the first six months of fiscal 1996 compared to 27.8% for the same period in
fiscal 1995, an increase of 1.6%.
Interest
- - - --------
Interest increased to $999,000 in the first six months of fiscal 1996 compared
to $955,000 in the first six months of fiscal 1995. The increase in interest
costs is primarily due to increased debt of approximately $3,223,000 partially
offset by $98,000 of lower loan fee amortization costs.
Liquidity and Capital Resources
- - - -------------------------------
During the six months ended March 31, 1996, the Company financed its operations
from internally generated cash flow and bank borrowings.
Working capital was $7,602,000 at March 31, 1996 compared to $7,872,000 at
September 30, 1995.
During the first six months of fiscal 1996, the Company generated cash from
operating activities of $2,496,000. The major contributors to cash from
operating activities were earnings before depreciation and amortization,
reduction (collection) of accounts receivable of $290,000 and income tax refunds
of $295,000. Partially offsetting the major contributors to cash from
operating activities was a decrease in trade accounts payable of $200,000.
The Company primarily utilized cash from operating activities of $2,496,000,
augmented by additional borrowings from the Company's bank line of $1,068,000,
to finance the acquisition of capital equipment. The major components of the
asset additions were equipment for the Company's rental operations of
approximately $2,106,000, and equipment acquisition cost for the Seattle
marketing center (See Note 8) of approximately $768,000.
<PAGE>
PART II. OTHER INFORMATION
Items 1 through 5 are not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed herewith:
11.1 Amendment No. 1 to Purchase Agreement
11.2 Amendment No. 1 to Stockholders' Agreement
11.3 Amendment No. 1 to Common Stock Purchase Warrant
11.4 $4,900,000 Senior Subordinated Note
11.5 $100,000 Senior Subordinated Note
11.6 First Amendment to Employment Agreement with Carlos
D. DeMattos
11.7 First Amendment to Employment Agreement with Edward
Phillips
11.8 Letter issued by NASDAQ
27 Financial Data Schedule
(b) The Company did not file any reports on Form 8-K during the
three months ended March 31, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this quarterly report on Form 10-Q for the period
ending March 31, 1996, to be signed on its behalf by the undersigned hereunto
duly authorized.
MATTHEWS STUDIO EQUIPMENT GROUP
(Registrant)
Date: April 14, 1996 By: John D. Murray
--------------------------------
John D. Murray
Executive Vice President
and Chief Financial Officer
<PAGE>
MATTHEWS STUDIO EQUIPMENT GROUP
EXHIBIT (11.1)
AMENDMENT NO. 1
TO PURCHASE AGREEMENT
AMENDMENT NO. 1 TO PURCHASE AGREEMENT, dated as of April 5, 1996 (this
"Amendment") to that certain Purchase Agreement dated as of July 27, 1995 (the
- - - ----------
"Purchase Agreement"), between MATTHEWS STUDIO EQUIPMENT GROUP (the "Company")
- - - ------------------- -------
and ING EQUITY PARTNERS, L.P.I (the "Purchaser"), is made by and between the
---------
Company and the Purchaser. Capitalized terms used herein, except as otherwise
defined herein, shall have the meanings given to such terms in the Purchase
Agreement.
WHEREAS, the Common Stock of the Company is listed on the National
Association of Securities Dealers, Inc. ("NASD"), interdealer quotation system
----
and is designated as a National Market System security; and
WHEREAS, the NASD has required that the Company make certain amendments to
the Certificate of Determination, which amendments will result in material
modifications and reduction of the powers, rights, privileges and preferences of
the Company's Preferred Stock, no par value; and
WHEREAS, the Preferred Share issued to the Purchaser in connection with
the Closing, was contemplated by the Company and the Purchaser to have such
powers, rights, privileges and preferences that are substantially different from
the powers, rights, privileges and preferences for the Preferred Stock now
approved by the NASD, and such required modification has resulted in making the
issuance of the Preferred Share made in connection with the Closing null and
void ab initio; and
---------
WHEREAS, the Company has requested that the Purchaser agree to the
amendment of the Purchase Agreement and related documents in order for the
Company to accommodate the actions required by the NASD, and both the Company
and the Purchaser mutually desire to maintain the listing of the Company's
Common Stock with the NASD and the designation of the same as a National Market
System security and are willing to enter into this Amendment to provide such
accommodation; and
WHEREAS, the Company also has requested the ability to defer the repayment
of a portion of the original $5,000,000 in indebtedness to the Purchaser on the
terms and conditions provided herein;
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements hereinafter set forth, and other good and valuable consideration, the
value and sufficiency of which is hereby acknowledged the parties hereto agree
as follows:
<PAGE>
1. Amendments to Purchase Agreement. The Purchase Agreement is hereby
--------------------------------
amended as of date hereof as follows:
(a) Clause (a) of the second recital of the Purchase Agreement is
amended and revised to state in its entirety as follows:
(a) $5,000,000 principal amount of senior subordinated
promissory notes in the forms of Exhibit A-1 and Exhibit A-2 hereto
----------- -----------
due July 27, 2000 and July 27, 2005 in replacement of the senior
subordinated promissory note in the form of Exhibit A;
(b) The definition of "Note" set forth in Section 1.1 of the
-----------
Agreement is modified and amended to read in its entirety as follows:
"Note" means each promissory note of the Company, dated the Closing
----
Date, substantially in the forms of Exhibit A-1 (the "Five Year
----------- ---------
Note") and Exhibit A-2 (the "Ten Year Note") hereto (as such
---- ----------- -------------
promissory note may be amended, endorsed or otherwise modified from
time to time) and all other promissory notes accepted from time to
time in substitution, replacement or renewal therefor, including
pursuant to Section 4.8 or 4.9.
----------- ---
(c) Clause (a) of Section 2.1(a) is amended and revised to state in
--------------
its entirety as follows:
(a) $5,000,000 aggregate principal amount of Notes;
-2-
<PAGE>
(d) Section 4.3 of the Purchase Agreement is amended and revised to
-----------
state in its entirety as follows:
SECTION 4.3. Optional Payments. To the extent expressly permitted
-----------------
under the Senior Credit Agreement, the Company may, at its option,
prepay at any time, in whole or in part (in an integral multiple of
$100,000), the outstanding principal amount of the Five Year Notes.
Prepayments of principal shall be in the amount so prepaid and be
accompanied by payment in full of all interest accrued on such
principal amount and not yet paid. Each prepayment shall be subject
to the Company having given any Noteholder written notice of such
prepayment not more than ten days and not less than five days prior
to the date fixed for such prepayment, in each case specifying (w)
such date, (x) the aggregate principal amount of such prepayment
(and the amount of unpaid interest accrued on such principal amount)
and (y) the principal amount of each Note held by such Noteholder to
be prepaid on such date (and the amount of unpaid interest accrued
on such principal amount). Such notice shall be accompanied by an
officers' certificate certifying that the conditions to such
prepayment have been fulfilled and specifying the particulars of
such fulfillment. Amounts specified in any such notice for
voluntary prepayment in accordance with this Section on any date
shall be due and payable on such date and in the amount so
specified.
-3-
<PAGE>
(e) Section 4.4 of the Purchase Agreement is amended and revised to
-----------
state in its entirety as follows:
SECTION 4.4. Allocation. Each partial prepayment paid or to be
----------
prepaid of principal of the Five Year Notes and each prepayment of
interest paid or to be prepaid shall be allocated (in integral
multiples of $1,000) among all of the Five Year Notes at the time
outstanding in proportion, as nearly as practicable, to the
respective unpaid principal amounts thereof, with adjustments, to
the extent practicable, to compensate for any prior prepayments not
made exactly in such proportion. In the case of each prepayment of
principal of the Five Year Notes, the principal amount to be
prepaid, together with interest on such principal amount accrued to
such date, shall mature and become due and payable on the date fixed
for such prepayment. From and after such date, unless the Company
shall fail to pay such principal amount when so due and payable,
together with the interest, as aforesaid, interest on such principal
amount shall cease to accrue. Any Note paid or prepaid in full
shall be surrendered to the Company and cancelled and shall not be
reissued, and no Note shall be issued in lieu of any prepaid
principal amount of any Note.
-4-
<PAGE>
(f) Section 4.6 of the Purchase Agreement is amended and revised to
-----------
state in its entirety as follows:
SECTION 4.6. Public Offering Redemption. Two weeks prior to the
--------------------------
date reasonably expected by the Company for the occurrence of any
sale of common equity by the Company pursuant to a registration
statement under the Securities Act (a "Public Equity Offering"), the
----------------------
Company will immediately give written notice of such transaction or
event to each Noteholder, which notice shall describe such
transaction or event in reasonable detail. In the event that such
Public Equity Offering is consummated on or after the second
anniversary of the Closing Date, then immediately upon (and
concurrently with) the occurrence of such Public Equity Offering,
the Company shall use the net proceeds to the extent such proceeds
exceed $6,000,000 and are designated by the Company, at its option,
to be applied to the repayment of Indebtedness as follows: (i) fifty
percent (50%) to purchase outstanding Five Year Notes from each
Noteholder on a pro rata basis, and (ii) fifty percent (50%) to
repay Indebtedness under the Senior Loan Documents. However, in the
event of such a Public Equity Offering that results in net proceeds
of less than $6,000,000, (a) then the foregoing sentence will not be
applicable and (b) no repayments of Indebtedness shall be permitted
or required with respect to such net proceeds, other than as
required under the second to last sentence of Section 2.09(d)(Y) of
the Senior Credit Agreement.
(g) A new Section 4.11 is added to the Purchase Agreement, which new
------------
Section 4.11 states in its entirety as follows;
------------
SECTION 4.11 Prepayment of the Ten Year Notes. To the extent
--------------------------------
expressly permitted under the Senior Credit Agreement, the Ten Year
Notes shall be prepaid only as follows:
(a) At any time after the earlier of (i) the payment and
performance of all Indebtedness with respect to the Five Year Notes
or (ii) July 27, 2000, the Holders of the outstanding Ten Year Notes
may require the prepayment in whole, but not in part, of the
outstanding principal amount of the Ten Year Notes and all interest
accrued on such principal amount and not yet paid. Each prepayment
pursuant to this Section 4.11(a) shall be subject to the Holders of
---------------
the Ten Year Notes having given the Company written notice of such
prepayment not less than thirty days prior to the date fixed for
such
-5-
<PAGE>
prepayment, in each case specifying (w) such date, (x) the
aggregate principal amount of such prepayment (and the amount of
unpaid interest accrued on such principal amount) and (y) the
principal amount of each Note held by such Noteholder to be prepaid
on such date (and the amount of unpaid interest accrued on such
principal amount).
(b) At any time any Holder of Ten Year Notes ceases to hold on
a fully diluted basis three percent or more of the outstanding
Common Shares (counting the Warrants on an as if exercised basis)
the Company may, at its option, prepay at any time, in whole but not
in part, the outstanding principal amount of the Ten Year Notes held
by such Holder. Prepayments of principal shall be in the amount so
prepaid and be accompanied by payment in full of all interest
accrued on such principal amount and not yet paid. Each prepayment
pursuant to this Section 4.11(b) shall be subject to the Company
---------------
having given any Noteholder written notice of such prepayment not
more than 10 days and not less than five days prior to the date
fixed for such prepayment, in each case specifying (w) such date,
(x) the aggregate principal amount of such prepayment (and the
amount of unpaid interest accrued on such principal amount) and (y)
the principal amount of each Note held by such Noteholder to be
prepaid on such date (and the amount of unpaid interest accrued on
such principal amount). Such notice shall be accompanied by an
officers' certificate certifying that the conditions to such
prepayment have been fulfilled and specifying the particulars of
such fulfillment. Amounts specified in any such notice for
voluntary prepayment in accordance with this Section on any date
shall be due and payable on such date and in the amount so
specified.
(c) In the case of each prepayment of principal of the Ten
Year Notes, the principal amount to be prepaid, together with
interest on such principal amount accrued to such date, shall mature
and become due and payable on the date fixed for such prepayment.
From and after such date, unless the Company shall fail to pay such
principal amount when so due and payable, together with the
interest, as aforesaid, interest on such principal amount shall
cease to accrue. Any Ten Year Note paid or prepaid in full shall be
surrendered to the Company and cancelled and shall not be reissued,
and no Ten Year Note shall be issued in lieu of any prepaid
principal amount of any Note.
-6-
<PAGE>
(h) A new Section 4.12 is added to the Purchase Agreement, which new
------------
Section 4.12 states in its entirety as follows:
------------
SECTION 4.12 Extension of Five Year Note. (a) In the event for any
---------------------------
reason the Indebtedness under the Five Year Note shall not be paid
or performed on a timely basis, each Holder of such Note shall have
the option in its sole and exclusive discretion to add any portion
of the unpaid Indebtedness owed to such Holder under the Five Year
Note to the principal of any Ten Year Note held by such Holder, and
the Indebtedness so added to such Ten Year Note shall be paid at the
time Indebtedness under the Ten Year Note held by such Holder is due
and payable.
(a) If the Indebtedness of any Five Year Note is extended
pursuant to Section 4.12(a), the Company shall execute such
---------------
replacement Ten Year Notes as are reasonably requested by such
Holders within five days of such request to evidence the increased
Indebtedness under the Ten Year Notes; provided that except for the
increased Indebtedness the replacement Notes shall be substantially
similar to the Ten Year Notes.
(b) The Company acknowledges and agrees that any extension of
the Indebtedness under a Five Year Note pursuant to this Section
-------
4.12 shall be at the sole and exclusive option of the Holder of such
----
Five Year Note, and that neither the Purchaser nor any other Holder
of a Five Year Note has agreed by the terms hereof to make such
extension or is required to make such extension at any time or under
any circumstances.
-7-
<PAGE>
(i) A new Section 6.1.16 is added to the Purchase Agreement, which
--------------
new Section 6.1.16 states in its entirety as follows:
--------------
SECTION 6.1.16. Amendment Deliveries. (a) The Company and the
--------------------
Purchaser hereby agree that due to the materiality of the amendments
to the terms of the Preferred Stock required by the NASD and the
substantial difference between the previously contemplated terms of
the Preferred Stock and the terms required by the NASD, the Company
and the Purchaser hereby agree that the issuance of the Preferred
Share in connection with the Closing was null and void ab initio.
---------
Concurrently with the execution of this Amendment, the Purchaser
shall return to the Company the stock certificate intended to
evidence the Preferred Share for rescission and cancellation by the
Company. No later than one Business Day following the parties'
execution and delivery of this Amendment, the Company's Board of
Directors shall approve an amendment and restatement, in the form
attached hereto as Exhibit C, of the Certificate of Determination,
and shall cause such amended and restated form of the Certificate of
Determination to be filed with the Secretary of State of California.
The Company shall make all reasonable and appropriate efforts to
gain the receipt by the Company of the certification by the
Secretary of State of California of the filing of such amended and
restated Certificate of Determination. No later than the earlier of
(i) April 19, 1996, or (ii) one Business Day following receipt by
the Company of certification by the Secretary of State of California
of the filing of such amended and restated Certificate of
Determination, the Company shall issue and deliver to the Purchaser
a validly issued stock certificate evidencing one share of the
Preferred Stock. Upon such issuance, such share of Preferred Stock
shall constitute the "Preferred Share" and the "Special Voting
Preferred Stock," as those terms are used in the Purchase Agreement.
(b) On or before April 19, 1996, the Holders of the Notes
outstanding as of such date (the "Old Note") shall present the Old
--------
Note to the Company, and the Company shall cancel the Old Note and
issue to the Holder in replacement of the Old Note a Five Year Note
in the principal amount of $4,900,000, and Ten Year Note in the
principal amount of $100,000.
(j) The former Section 6.1.16 of the Purchase Agreement is
--------------
renumbered Section 6.1.17.
--------------
-8-
<PAGE>
(k) Section 7.1.5 of the Purchase Agreement is hereby amended and
-------------
restated to state in its entirety:
SECTION 7.1.5. Non-Performance of Certain Undertakings. The Company
---------------------------------------
shall default in the due performance and observation of any
agreement contained in Section 6.1.16, Section 6.2.1 (as it relates
-------------- -------------
to the Company), 6.2.2, 6.2.3, 6.2.4, 6.2.5, 6.2.6, 6.2.7 (after
----- ----- ----- ----- ----- -----
notice from the Purchaser and failure to cure the default within 5
days of such notice), 6.2.8, 6.2.9, 6.2.10, 6.2.11, 6.2.12, 6.2.13,
----- ----- ------ ------ ------ ------
6.2.14, 6.2.15, 6.2.16, 6.2.17, 6.2.18 (after notice of such default
------ ------ ------ ------ ------
and failure to cure such default with 30 days of such notice) or
6.2.19.
------
(l) Exhibit C to the Purchase Agreement is deleted and replaced in
---------
its entirety with the new Exhibit C attached hereto as Schedule 1.
---------
(m) A new Exhibit A-1 in the form attached hereto as Schedule 2 is
added to the Purchase Agreement.
(n) A new Exhibit A-2 in the form attached hereto as Schedule 3 is
added to the Purchase Agreement.
2. No Implied Amendments. Except as herein amended, the Purchase
---------------------
Agreement shall remain in full force and effect and is ratified in all respects.
On and after the effectiveness of this Amendment, each reference in the Purchase
Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like
import, and each reference to the Purchase Agreement in any other agreements,
documents or instruments executed and delivered pursuant to the Purchase
Agreement, shall mean and be a reference to the Purchase Agreement, as amended
by this Amendment.
3. Costs and Expenses. The Company confirms the Company's agreement to
------------------
pay all expenses of the Purchaser for the negotiation, preparation, execution
and delivery of this Amendment and amendments, as necessary, to the other
Purchase Documents, in connection with this Amendment (including the reasonable
fees and expenses of counsel for the Purchaser from time to time incurred in
connection therewith) all as provided for in Section 9.3 of the Purchase
-----------
Agreement.
4. Effective Date. This Amendment shall become effective upon
--------------
compliance with the conditions set forth below:
(a) Legal Opinion. Whitman Breed Abbott & Morgan, counsel to the
-------------
Company, shall have provided the Purchaser with an opinion, dated as of
the date hereof, in substance as set forth on Schedule 4 hereto, with such
changes as may be reasonably acceptable to the Purchaser.
-9-
<PAGE>
(b) Documents. Each of the following documents shall have been
---------
executed and delivered by the parties thereto:
(i) Amendment No. 1 to Common Stock Purchase Warrant of even
date herewith between the Company and the Purchaser;
(ii) Amendment No. 1 to Stockholders Agreement of even date
herewith by and among the Company, the Purchaser and the other
stockholders of the Company listed on the signature pages thereto;
(iii) the Five Year Note; and
(iv) the Ten Year Note.
(c) Senior Agent's Consent. The Company shall have delivered to the
----------------------
Purchaser evidence of the consent of the Senior Agent to this Amendment
and the agreements listed in Section 4(b) hereof (together, the
------------
"Amendments"), and the transactions contemplated hereby and thereby.
-----------
(d) NASDAQ Letter. The Company shall have delivered to the
-------------
Purchaser a letter addressed to the Company from NASDAQ Stock Market,
Inc., in substantially the form attached hereto as Schedule 5 with such
changes as may be reasonably acceptable to the Purchaser.
5. Counterparts. This Amendment may be executed by the parties hereto
------------
in several counterparts, each of which shall be executed by the Company and the
Purchaser and be deemed to be an original and all of which shall constitute
together but one and the same agreement.
-10-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the date
and year first above written.
MATTHEWS STUDIO EQUIPMENT GROUP
By /s/ Carlos D. De Mattos
-------------------------------
Title: Chairman and
Chief Executive Officer
Address: 2405 Empire Avenue
Burbank, California 94504
Attention: Mr. Carlos De Mattos
ING EQUITY PARTNERS, L.P.I
By: Lexington Partners, L.P.,
its general partner
By: Lexington Partners, Inc.,
its general partner
By: /s/ Benjamin P. Giess
--------------------------------
Title: Vice President
Notices: ING Equity Partners, L.P.I
135 East 57th Street
New York, New York 10022
Attention: Benjamin P. Giess
<PAGE>
SCHEDULE 1
----------
<PAGE>
MATTHEWS STUDIO EQUIPMENT GROUP
AMENDED AND RESTATED
CERTIFICATE OF DETERMINATION
--------------------------------
The following is a full restatement of the rights, preferences, powers,
qualifications, limitations and restrictions granted to or imposed upon the
Preferred Stock, no par value (the "Preferred Stock") or the holders thereof,
which shall consist of and be limited to a total number of one million shares
authorized for issuance.
1. Definitions. For purposes of this Certificate of Determination, the
-----------
following definitions shall apply:
"Affiliate" shall mean, with respect to any person, any person that
---------
directly or indirectly through one or more intermediaries Controls, is
Controlled by or is under common Control with such person.
"Control" shall mean ownership of a majority of the capital stock or
-------
interests in another Person.
"EP" shall mean ING Equity Partners, L.P. I, a Delaware limited
--
partnership, or any of its Affiliates.
"Liquidation Value" has the meaning set forth in Section 4 hereof.
-----------------
"Securities Purchase Agreement" shall mean the Purchase Agreement
-----------------------------
between the Corporation and EP, as such agreement may from time to time be
amended in accordance with its terms.
"Subsidiary" shall mean any corporation of which the shares of
----------
stock having a majority of the general voting power in electing the board of
directors are, at the time as of which any determination is being made, owned by
the Corporation either directly or indirectly through Subsidiaries.
"Triggering Event" shall have the meaning set forth in Section 2(a)
----------------
below.
"Warrants" shall mean the Warrants of the Corporation exercisable
--------
for shares of Common Stock issued to EP pursuant to the Securities Purchase
Agreement.
1
<PAGE>
2. Voting Rights.
-------------
(a) Prior to Triggering Event. Except for those voting rights
-------------------------
expressly required by law or with regard to any amendment to the Corporation's
Articles of Incorporation to alter or change, directly or indirectly, the
powers, designations, preferences or special rights relating to the shares of
the Preferred Stock, holders of the Preferred Stock shall have no voting rights
unless and until an Event of Default, as that term is defined in the Securities
Purchase Agreement, shall have occurred and be continuing (a "Triggering
Event").
(b) Occurrence of Triggering Event. Upon the occurrence of a
------------------------------
Triggering Event, and until such Triggering Event shall have been remedied to
the satisfaction of a majority of the holders of the Preferred Stock, each
holder of the Preferred Stock shall be entitled to vote together with the Common
Stock and any other voting stock of the Corporation on all matters submitted to
the Corporation's shareholders for consideration, vote or approval, in the
manner set forth in this Section 2(b). The holders of the Preferred Stock will
have in the aggregate, and will be entitled to cast in the aggregate, a number
of votes equal to the number of votes to which the shares of Common Stock,
issuable upon exercise of the then unexercised portion of the Warrants
outstanding and held by holders of the Preferred Stock as of the date the
shareholders' meeting is called or the date the written consent is solicited,
would be entitled, if such Warrants had been exercised. Each holder of the
Preferred Stock will have, and will be entitled to cast, a pro rata number of
the votes accorded to the holders of the Preferred Stock in the aggregate, as
set forth in the preceding sentence, determined based on the ratio that the
number of shares of Preferred Stock held by such holder as of the date the
----
shareholders' meeting is called or the date the written consent is solicited,
bears to the aggregate number of shares of Preferred Stock that are issued and
outstanding as of such date.
3. Dividends. The holders of the Preferred Stock shall not be entitled
---------
to receive dividend payments at any time.
4. Liquidation. Upon any liquidation, dissolution or winding up of the
-----------
Corporation, before any distribution or payment is made upon any shares of any
other class of capital stock of the Corporation, the holders of Preferred Stock
will be entitled to be paid an amount equal to the Liquidation Value per share,
and shall not be entitled to receive any further distribution or payment.
Neither the consolidation nor merger of the Corporation into or with any other
corporation or corporations, nor the sale or transfer by the Corporation of all
or any part of its assets, nor the reduction of the capital stock of the
Corporation, shall be deemed to be a liquidation, dissolution or winding-up of
the Corporation within the meaning of any of the provisions of this Section 4.
The "Liquidation Value" of each share of Preferred
-----------------
2
<PAGE>
Stock will be $100 per share.
5. Mandatory Redemption.
--------------------
(a) Triggering Event. In the event that the Warrants are fully
----------------
exercised, then simultaneously with such exercise, the Corporation shall redeem
the outstanding shares of Preferred Stock; however, the Preferred Stock will not
be redeemed until such time as the Warrants are exercised in full.
(b) Redemption Price. On the date of redemption, upon surrender by
----------------
the holders at the Corporation's principal office of the certificate
representing the shares of the Preferred Stock, the Corporation will pay to the
holders an amount in cash equal to the Liquidation Value.
(c) Cancellation of Redeemed Stock. The shares of Preferred Stock
------------------------------
redeemed pursuant to this Section 5 shall be cancelled and shall not under any
circumstances be reissued.
6. Replacement. Upon receipt of evidence reasonably satisfactory to
-----------
the Corporation (an affidavit of the registered holder will be satisfactory) of
the ownership and the loss, theft, destruction or mutilation of any certificate
evidencing the shares of Preferred Stock, and in the case of any such loss,
theft or destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation (provided that if the holder is an institutional investor its own
agreement will be satisfactory), or, in the case of any such mutilation upon
surrender of such certificate, the Corporation will (at its expense) execute and
deliver in lieu of such certificate a new certificate of like kind representing
shares of Preferred Stock, dated the date of such lost, stolen, destroyed or
mutilated certificate.
7. Notices. All notices will be in writing and will be delivered by
-------
registered or certified mail, return receipt requested, postage prepaid and will
be deemed to have been given when so mailed (i) to the Corporation, at its
principal executive offices and (ii) to the holders of the Preferred Stock, at
such holders' addresses as they appear in the stock records of the Corporation
(unless otherwise indicated by such holders).
3
<PAGE>
SCHEDULE 2
----------
[Not submitted herewith]
<PAGE>
SCHEDULE 3
----------
[Not submitted herewith]
<PAGE>
SCHEDULE 4
----------
[Not submitted herewith]
<PAGE>
SCHEDULE 5
----------
[Not submitted herewith]
<PAGE>
MATTHEWS STUDIO EQUIPMENT GROUP
EXHIBIT (11.2) AMENDMENT NO. 1 TO STOCKHOLDERS' AGREEMENT
AMENDMENT NO. 1 TO
STOCKHOLDERS AGREEMENT
AMENDMENT NO. 1 TO STOCKHOLDERS AGREEMENT, dated as of April 5, 1996 (this
"Amendment") to that certain Stockholders Agreement dated as of July 27, 1995
---------
(the "Stockholders Agreement"), among MATTHEWS STUDIO EQUIPMENT GROUP (the
----------------------
"Company"), ING EQUITY PARTNERS, L.P.I ("ING"), and the Management Stockholders
------- ---
is made by and among the Company, ING and the Management Stockholders.
Capitalized terms used herein, except as otherwise defined herein, shall have
the meanings given to such terms in the Stockholders Agreement.
WHEREAS, the Common Stock of the Company is listed on the National
Association of Securities Dealer, Inc. ("NASD") inter-dealer quotation system
and is designated as a National Market System security; and
WHEREAS, the NASD has required that the Company amend the terms of the
Warrant to modify the anti-dilution rights of the holders of the Warrant and
amend the terms of the Preferred Stock, to modify the powers, rights, privileges
and preferences of the Preferred Stock; and
WHEREAS, the Company, the Management Stockholders and ING mutually desire
to maintain the listing of the Company's Common Stock with the NASD and the
designation of the same as a National Market System security and in connection
with the amendment of the Warrant, the terms of the Preferred Stock and related
documents in order for the Company to accommodate the actions required by the
NASD, and ING wishes to amend the Stockholders Agreement and the Company and the
Management Stockholders are willing to enter into this Amendment to provide such
accommodation;
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements hereinafter set forth, and other good and valuable consideration, the
value and sufficiency of which is hereby acknowledged the parties hereto agree
as follows:
1. Amendments to Stockholders Agreement. The Stockholders Agreement
------------------------------------
is hereby amended as of date hereof to amend and revise Section 6.1(a) to read
in its entirety as follows:
Section 6.1. Certain Terminations. (a) The
--------------------
<PAGE>
provisions of Articles III, IV (other than in Section 4.4) and V shall
terminate on the date on which any of the following events first
occurs: (i) a Qualifying Offering, (ii) a merger or consolidation of
the Company with or into another Person that is not an Affiliate of
the Company, as a result of which the Stockholders own less than 51%
of the outstanding shares of Voting Stock of the surviving or
resulting corporation, or (iii) ten years from the date of this
Agreement.
2. No Implied Amendments. Except as herein amended, the Stockholders
---------------------
Agreement shall remain in full force and effect and is ratified in all respects.
On and after the effectiveness of this Amendment, each reference in the
Stockholders Agreement to "this Agreement", "hereunder", "hereof", "herein" or
words of like import, and each reference to the Stockholders Agreement in any
other agreements, documents or instruments executed and delivered in connection
with the Stockholders Agreement, shall mean and be a reference to the
Stockholders Agreement, as amended by this Amendment.
3. Effective Time. This Amendment shall become effective upon
--------------
compliance with each of the conditions set forth in Section 4 of Amendment No. 1
to Purchase Agreement of even date herewith between the Company and ING.
4. Counterparts. This Amendment may be executed by the parties hereto in
------------
several counterparts, each of which shall be deemed to be an original and all of
which shall constitute together but one and the same agreement.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first above written.
MATTHEWS STUDIO EQUIPMENT GROUP
By: /s/ Carlos D. De Mattos
--------------------------------------
Carlos D. De Mattos Chairman & Chief
Executive Officer
STOCKHOLDERS:
ING EQUITY PARTNERS, L.P. I
By: LEXINGTON PARTNERS, L.P.
its general partner
By: LEXINGTON PARTNERS, INC.
its general partner
By: /s/ Benjamin P. Giess
----------------------------------
Benjamin P. Giess
Vice President
/s/ Carlos D. De Mattos
-----------------------------------------
Carlos D. De Mattos
/s/ Edward Phillips
----------------------------------------
Edward Phillips
-3-
<PAGE>
C&E DM Limited Partnership
By: /s/ Carlos De Mattos
-----------------------------------
Carlos De Mattos,
Its General Partner
C&E DM, LLC
By: /s/ Carlos De Mattos
------------------------------------
Carlos De Mattos,
Its Manager
The Carlos and Elena De Mattos Family
Trust dated February 12, 1991
/s/ Carlos De Mattos
-------------------------------------
Carlos De Mattos, Trustee
The Edward and Norma Phillips
Family Trust dated June 5, 1991
/s/ Edward Phillips
-------------------------------------
Edward Phillips, as trustee
-4-
<PAGE>
MATTHEWS STUDIO EQUIPMENT GROUP
EXHIBIT (11.3) AMENDMENT NO. 1 TO COMMON STOCK PURCHASE WARRANT
AMENDMENT NO. 1 TO
COMMON STOCK PURCHASE WARRANT
AMENDMENT NO. 1 TO COMMON STOCK PURCHASE WARRANT, dated as of April 5, 1996
(this "Amendment") to that certain Common Stock Purchase Warrant dated as of
---------
July 27, 1995 (the "Warrant"), issued by MATTHEWS STUDIO EQUIPMENT GROUP (the
-------
"Company"), to ING EQUITY PARTNERS, L.P.I ("ING"), is made by and between the
------- ---
Company and ING. Capitalized terms used herein, except as otherwise defined
herein, shall have the meanings given to such terms in the Warrant.
WHEREAS, the Common Stock of the Company is listed on the National
Association of Securities Dealer, Inc. ("NASD") inter-dealer quotation system
and is designated as a National Market System security; and
WHEREAS, the NASD has required that the Company amend the terms of the
Warrant, to modify the antidilution rights of the Holder; and
WHEREAS, ING is the sole Holder of the Warrant, and the Company has
requested that ING agree to the amendment of the Warrant and related documents
in order for the Company to accommodate the actions required by the NASD, and
both the Company and ING mutually desire to maintain the listing of the
Company's Common Stock with the NASD and the designation of the same as a
National Market System security and are willing to enter into this Amendment to
provide such accommodation;
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements hereinafter set forth, and other good and valuable consideration, the
value and sufficiency of which is hereby acknowledged the parties hereto agree
as follows:
1. Amendments to Warrant. The Warrant is hereby amended as of date
---------------------
hereof by the insertion of a new Section 3.3.10 at the end of Article III of the
Warrant which new section states in its entirety as follows:
SECTION 3.3.10 Adjustment Limitations. Adjustments to the Exercise
----------------------
Price and the number of Warrant Shares for which the Warrant may be
exercised shall be subject to the following limitations:
<PAGE>
(a) The minimum Exercise Price after adjustment pursuant to
this Section 3.3 shall be $1.75. With respect to any adjustment, or
related series of adjustments, in Exercise Price pursuant to this
Section 3.3 that provides for an adjusted Exercise Price of less than
$1.75, such adjustment, or related series of adjustments, shall be
made only to the extent of reducing the Exercise Price to $1.75.
Without the prior written consent of the Holders of a majority of the
Warrant Shares, the Company shall not issue or sell any shares of
Common Stock, Options or Convertible Securities, if, without regard to
this Section 3.3.10(a), such issuance or sale would cause the Exercise
Price, as adjusted pursuant to this Section 3.3, to be below $1.75.
(b) Any adjustment, or related series of adjustments, pursuant
to this Section 3.3, to the number of Warrant Shares for which the
Warrants may be exercised, shall not increase (a "Prohibited
Increase") the beneficial ownership (as that term is defined in Rule
13d-3 of the Exchange Act) of the Holders, as of July 27, 1995 (the
"Calculation Date"), of shares of Common Stock to be greater than or
equal to thirty percent (30%); provided that (i) shares of Common
Stock which the Holders beneficially owned as of the Calculation Date,
but which the Holders cease to beneficially own after the Calculation
Date, and (ii) shares of Common Stock of which the Holders become the
beneficial owners (other than through the exercise of the Warrants)
after the Calculation Date, shall not be included in any calculation,
pursuant to this Section 3.3.10(b), of the Holder's beneficial
ownership of Common Stock. With respect to any adjustment, or related
series of adjustments, pursuant to this Section 3.3, to the number of
Warrant Shares that would cause a Prohibited Increase, such adjustment
shall be made only to the extent that the beneficial ownership of the
Holders of Common Stock, calculated in accordance with the first
sentence of this Section 3.3.10(b), is less than thirty percent (30%).
Without the prior written consent of the Holders of a majority of the
Warrant Shares, the Company shall not issue or sell any shares of
Common Stock, Options or Convertible Securities, if, without regard to
this Section 3.3.10(b), such issuance or sale would cause a Prohibited
Increase.
2. Termination of this Amendment. If at any time during the term of the
-----------------------------
Warrant, the NASD acknowledges and agrees in
-2-
<PAGE>
writing that the NASD does not require that the terms of the Warrant be amended
as set forth in this Amendment, this Amendment shall terminate. Such termination
shall be effective, without further action by the Holders or the Company, upon
receipt by the Holders and the Company of such written acknowledgement and
agreement from the NASD.
3. No implied Amendments. Except as herein amended, the Warrant shall
---------------------
remain in full force and effect and is ratified in all respects. On and after
the effectiveness of this Amendment, each reference in the Warrant to "this
Warrant", "hereunder", "hereof", "herein" or words of like import, and each
reference to the Warrant in any other agreements, documents or instruments
executed and delivered pursuant to the Purchase Agreement, shall mean and be a
reference to the Warrant, as amended by this Amendment.
4. Effective Date. This Amendment shall become effective upon
--------------
compliance with each of the conditions set forth in Section 4 of Amendment No. 1
to Purchase Agreement of even date herewith between the Company and ING.
5. Counterparts. This Amendment may be executed by the parties hereto in
------------
several counterparts, each of which shall be executed by the Company and ING and
be deemed to be an original and all of which shall constitute together but one
and the same agreement.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
MATTHEWS STUDIO EQUIPMENT GROUP
By s/ Carlos D. De Mattos
---------------------------------------------------
Title: Chairman and Chief Executive Officer
Address: 2405 Empire Avenue
Burbank, California 94504
Attention: Mr. Carlos De Mattos
ING EQUITY PARTNERS, L.P.I
By: Lexington Partners, L.P., its general partner
By: Lexington Partners, Inc., its general partner
By: /s/ Benjamin P. Giess
-------------------------------------------------
Title: Vice President
Notices: ING Equity Partners, L.P.I
135 East 57th Street
New York, New York 10022
Attention: Benjamin P. Giess
-4-
<PAGE>
MATTHEWS STUDIO EQUIPMENT GROUP
EXHIBIT (11.4) $4,900,000 SENIOR SUBORDINATED NOTE
THE SECURITY REPRESENTED BY THIS INSTRUMENT WAS ORIGINALLY ISSUED ON JULY 27,
1995 AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR FILED WITH OR QUALIFIED BY THE STATE SECURITIES REGULATORY AUTHORITY OF
CALIFORNIA, OR ANY OTHER STATE. THE TRANSFER OF SUCH SECURITY IS SUBJECT TO THE
CONDITIONS SPECIFIED IN THE PURCHASE AGREEMENT, DATED AS OF JULY 27, 1995, AS
AMENDED FROM TIME TO TIME, BETWEEN THE ISSUER HEREOF AND ING EQUITY PARTNERS,
L.P. I, AND THE ISSUER HEREOF RESERVES THE RIGHT TO REFUSE THE TRANSFER OF SUCH
SECURITY UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH RESPECT TO SUCH
TRANSFER. UPON WRITTEN REQUEST, A COPY OF SUCH CONDITIONS WILL BE FURNISHED BY
THE ISSUER HEREOF TO THE HOLDER HEREOF WITHOUT CHARGE.
MATTHEWS STUDIO EQUIPMENT GROUP
Senior Subordinated Note
due July 27, 2000
No. R-002 New York, New York
$4,900,000 July 27, 1995
MATTHEWS STUDIO EQUIPMENT GROUP, a California corporation (the "Company"), for
-------
value received, hereby promises to pay to the order of ING Equity Partners, L.P.
I ("ING"), or registered assigns, on July 27, 2000, the principal amount of
---
$4,900,000, with interest (computed on the basis of the number of days elapsed
in a year of 360 days) on the unpaid balance of such principal amount at the
rate of (i) 10.0% per annum for the period from the date hereof to the third
anniversary of the date hereof, (ii) 12.5% per annum from the day following the
third anniversary of the date hereof to the fourth anniversary of the date
hereof and (iii) 15.0% per annum from the day following the fourth anniversary
of the date hereof to the fifth anniversary of the date hereof, payable
quarterly on each October 27, January 27, April 27 and July 27 (each, an
"Interest Payment Date") after the date hereof, commencing October 27, 1995,
---------------------
until such unpaid principal shall become due and payable (whether at maturity or
at a date fixed for prepayment or by declaration or otherwise), and with
interest on any overdue principal and premium, if any, and (to the extent
permitted by applicable law) on any overdue interest at a per annum rate equal
to the sum of the interest rate then in effect plus 2.0%, payable quarterly as
aforesaid or, at the option of the registered holder hereof, on demand.
Payments of principal and interest on this Note shall be made in lawful money of
the United States of America at the
<PAGE>
principal office of ING Equity Partners, L.P. I, at 135 East 57th Street, New
York, New York or at such other office or agency in New York, New York as the
registered holder of this Note shall have designated by written notice to the
Company as provided in the Purchase Agreement referred to below. The Company
may treat the person in whose name this Note is registered on the register kept
by the Company as provided in such Purchase Agreement as the owner of this Note
for the purpose of receiving payment and for all other purposes, and the Company
shall not be affected by any notice to the contrary.
This Note is one of the Company's Senior Subordinated Notes due July 27, 2000
(the "Notes"), originally issued in the aggregate principal amount of $5,000,000
-----
pursuant to a Purchase Agreement, dated as of July 27, 1995, as amended by
Amendment No. 1 to the Purchase Agreement, dated as of April 5, 1996, between
the Company and ING (as amended the "Purchase Agreement"), between the Company
------------------
and ING. The registered holder of this Note is entitled to the benefits of the
Purchase Agreement and may enforce the agreements of the Company contained
therein and exercise the remedies provided for thereby or otherwise available in
respect thereof.
This Note is issued in partial substitution and exchange for, and not in
satisfaction or payment of, the Senior Subordinated Note, dated July 27, 1995,
payable to the order of ING in the original principal amount of $5,000,000 and
issued under the Purchase Agreement (the "Old Note"), and the Indebtedness
--------
evidenced by such Old Note (as now evidenced by this Note and the Ten Year Note
(as defined in the Purchase Agreement) shall be a continuing Indebtedness, and
nothing herein contained shall be construed to deem such Old Note paid.
The Notes are subject to optional prepayment, in whole or in part, and are
entitled to mandatory prepayments and redemption, all as specified in the
Purchase Agreement. This Note is subject to the subordination provisions set
forth in Article VIII of the Purchase Agreement.
This Note is a registered Note and, as provided in the Purchase Agreement, is
transferable only upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or his attorney duly authorized in writing.
In case an Event of Default, as defined in the Purchase Agreement, shall occur
and be continuing, the unpaid balance of the principal of this Note may be
declared and become due and payable in the manner and with the effect provided
in the Purchase Agreement.
<PAGE>
This Note is made and delivered in New York, New York and shall be governed
by the internal laws of the State of New York.
MATTHEWS STUDIO EQUIPMENT GROUP
By: /s/ Carlos D. De Mattos
----------------------------
Carlos D. De Mattos
Chairman of the Board
<PAGE>
MATTHEWS STUDIO EQUIPMENT GROUP
EXHIBIT (11.5) $100,000 SENIOR SUBORDINATED NOTE
THE SECURITY REPRESENTED BY THIS INSTRUMENT WAS ORIGINALLY ISSUED ON JULY 27,
1995 AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR FILED WITH OR QUALIFIED BY THE STATE SECURITIES REGULATORY AUTHORITY OF
CALIFORNIA, OR ANY OTHER STATE. THE TRANSFER OF SUCH SECURITY IS SUBJECT TO THE
CONDITIONS SPECIFIED IN THE PURCHASE AGREEMENT, DATED AS OF JULY 27, 1995, AS
AMENDED FROM TIME TO TIME, BETWEEN THE ISSUER HEREOF AND ING EQUITY PARTNERS,
L.P. 1, AND THE ISSUER HEREOF RESERVES THE RIGHT TO REFUSE THE TRANSFER OF SUCH
SECURITY UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH RESPECT TO SUCH
TRANSFER. UPON WRITTEN REQUEST, A COPY OF SUCH CONDITIONS WILL BE FURNISHED BY
THE ISSUER HEREOF TO THE HOLDER HEREOF WITHOUT CHARGE.
MATTHEWS STUDIO EQUIPMENT GROUP
Senior Subordinated Note
due July 27, 2005
No. R-003 New York, New York
$100,000 July 27, 1995
MATTHEWS STUDIO EQUIPMENT GROUP, a California corporation (the "Company"),
-------
for value received, hereby promises to pay to the order of ING Equity Partners,
L.P. I ("ING"), or registered assigns, on July 27, 2005, the principal amount of
---
$100,000, with interest (computed on the basis of the number of days elapsed in
a year of 360 days) on the unpaid balance of such principal amount at the rate
of (i) 10.0% per annum for the period from the date hereof to the third
anniversary of the date hereof; provided, however, that if all of the
-------- -------
Indebtedness with respect to the Five Year Notes (as defined in the Purchase
Agreement, dated as of July 27, 1995, between the Company and ING, as amended by
Amendment No. 1 to the Purchase Agreement, dated as of April 5, 1996, between
the Company and ING (as amended, the "Purchase Agreement")) has been paid and
------------------
performed in full prior to the third anniversary of the date hereof, the
interest rate shall remain 10.0% per annum until July 27, 2005, (ii) if the
Indebtedness with respect to the Five Year Notes has not been paid and performed
prior to the third anniversary of the date hereof, 12.5% per annum from the day
following the third anniversary of the date hereof to the fourth anniversary of
the date hereof; provided, however, that if the Indebtedness with respect to the
-------- ------
Five Year Notes has been paid in full between the third anniversary and the
fourth anniversary of the date hereof, the interest rate shall remain 12.5% per
annum until July 27, 2005, and (iii) if the Indebtedness with respect to the
Five Year
<PAGE>
Notes has not been paid and performed in full prior to the fourth anniversary of
the date hereof, 15.0% per annum from the day following the fourth anniversary
of the date hereof to July 27, 2005, payable quarterly on each October 27,
January 27, April 27 and July 27 (each, an "Interest Payment Date") after the
---------------------
date hereof, commencing October 27, 1995, until such unpaid principal shall
become due and payable (whether at maturity or at a date fixed for prepayment or
by declaration or otherwise), and with interest on any overdue principal and
premium, if any, and (to the extent permitted by applicable law) on any overdue
interest at a per annum rate equal to the sum of the interest rate then in
effect plus 2.0%, payable quarterly as aforesaid or, at the option of the
registered holder hereof, on demand. If pursuant to the terms of Section 4.12
of the Purchase Agreement, one or more holders of the Five Year Notes have
elected to extend the due date of a portion of the Indebtedness under one or
more Five Year Notes, then for purposes of determining the applicable interest
rate on this Note, the Indebtedness under the Five Year Notes which is subject
to such extension shall be deemed to have been paid in full.
Payments of principal and interest on this Note shall be made in lawful
money of the United States of America at the principal office of ING Equity
Partners, L.P. I, at 135 East 57th Street, New York, New York or at such other
office or agency in New York, New York as the registered holder of this Note
shall have designated by written notice to the Company as provided in the
Purchase Agreement referred to below. The Company may treat the person in whose
name this Note is registered on the register kept by the Company as provided in
such Purchase Agreement as the owner of this Note for the purpose of receiving
payment and for all other purposes, and the Company shall not be affected by any
notice to the contrary.
This Note is one of the Company's Senior Subordinated Notes (the "Notes"),
-----
originally issued in the aggregate principal amount of $5,000,000 pursuant to
the Purchase Agreement. The registered holder of this Note is entitled to the
benefits of the Purchase Agreement and may enforce the agreements of the Company
contained therein and exercise the remedies provided for thereby or otherwise
available in respect thereof.
This Note is issued in partial substitution and exchange for, and not in
satisfaction or payment of, the Senior Subordinated Note, dated July 27, 1995,
payable to the order of ING in the original principal amount of $5,000,000 and
issued under the Purchase Agreement (the "Old Note"), and the Indebtedness
--------
evidenced by such Old Note (as now evidenced by this Note and the Five Year Note
(as defined in the Purchase Agreement) shall be a continuing Indebtedness, and
nothing herein contained shall be construed to deem such Old Note paid.
-2-
<PAGE>
The Notes are subject to optional prepayment, in whole or in part, and are
entitled to mandatory prepayments and redemption, all as specified in the
Purchase Agreement. This Note is subject to the subordination provisions set
forth in Article VIII of the Purchase Agreement.
This Note is a registered Note and, as provided in the Purchase Agreement,
is transferable only upon surrender of this Note for registration of transfer,
duly endorsed, or accompanied by a written instrument of transfer duly executed,
by the registered holder hereof or his attorney duly authorized in writing.
In case an Event of Default, as defined in the Purchase Agreement, shall
occur and be continuing, the unpaid balance of the principal of this Note may be
declared and become due and payable in the manner and with the effect provided
in the Purchase Agreement.
This Note is made and delivered in New York, New York and shall be governed
by the internal laws of the State of New York.
MATTHEWS STUDIO EQUIPMENT GROUP
By: /s/ Carlos D. De Mattos
-------------------------------
Carlos D. De Mattos
Chairman of the Board
-3-
<PAGE>
MATTHEWS STUDIO EQUIPMENT GROUP
EXHIBIT (11.6) FIRST AMENDMENT TO EMPLOYMENT AGREEMENT WITH CARLOS D. DEMATTOS
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
This First Amendment to Employment Agreement (this "Amendment") is
made as of the 5th day of April, 1996, by and between MATTHEWS STUDIO EQUIPMENT
GROUP, a corporation organized under the laws of the State of California (the
"Company") and CARLOS D. DE MATTOS ("Executive"), to amend that certain
Employment Agreement dated July 1, 1995 between the Company and Executive
("Agreement"). Capitalized terms used and not defined in this Amendment have
the meaning given to them in the Agreement.
WHEREAS, the Common Stock of the Company is listed on the National
Association of Securities Dealers, Inc. ("NASD") inter-dealer quotation system
and is designated as a National Market System security;
WHEREAS, the NASD has required that the stock options provided for
Executive under Section III.E of the Agreement be contingent upon approval by
the shareholders of the Company;
WHEREAS, the Company and Executive mutually desire to maintain the
listing of the Company's Common Stock with the NASD and the designation of same
as a National Market System security, and are willing to enter into this
Amendment to provide for such shareholder approval requirement;
NOW THEREFORE, in consideration of the foregoing premises, the
covenants and agreements set forth below and for other good and valuable
consideration, receipt of which is hereby acknowledged, the Company and
Executive mutually covenant and agree as follows:
I. STOCK OPTIONS TO EXECUTIVE.
--------------------------
Section III.E of the Agreement is hereby amended and restated in full as
follows:
"E. Stock Options:
-------------
Subject to shareholder approval as set forth below, for a period of
ten (10) years from the execution of this Agreement, Executive shall have a
nonqualified option to purchase up to 200,000 shares of the Common Stock of
the Company. Such option rights shall vest on the first anniversary hereof
with respect to 66,667 shares, shall vest on the second anniversary hereof
with respect to an additional 66,667 shares and shall vest on the third
anniversary hereof with respect to an additional 66,666 shares. The
exercise price for the shares subject to such option shall be $3.00. Any
unexercised options shall terminate at the end of the ten (10) year period.
Notwithstanding the foregoing, this option (and any stock option agreement
entered into between the Company and Executive to evidence the option) are
contingent upon, and are not effective unless there has been, approval (of
the option) by the shareholders of the Company at a meeting or via written
consent, duly held and called or solicited, in accordance with applicable
law. In the event that shareholder approval of the option has not been
obtained prior to the first anniversary of the date of this Agreement, the
option granted to Executive under this Section III.E shall be automatically
reduced to a non-qualified option to purchase up to 12,500 shares of the
Common Stock of the Company, which shall vest on the first anniversary of
the date of this Agreement, and
1
<PAGE>
shall otherwise be on the same terms as are set forth above for the option
for 200,000 shares. Shareholder approval shall not be necessary to make the
(reduced) option to purchase 12,500 shares of the Common Stock of Group
effective. The option provided for in this Section III.E shall be in
addition to any options which may from time to time in the future be
authorized by the Board of Directors for issuance to Executive under
employee stock option plans adopted by the Company."
II. EFFECT OF AMENDMENT.
-------------------
Except as expressly modified by this Amendment, all of the terms and
provisions of the Agreement remain in full force and effect, and this Amendment,
once executed by all parties hereto, shall become a part of the Agreement.
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officer to execute or have executed this Agreement as of the date first above
written.
MATTHEWS STUDIO EQUIPMENT
GROUP
By: /s/ Carlos D. De Mattos
-------------------------------------
President
/s/ Gregory E. Moiseeff
-------------------------------------
Secretary
/s/ Carlos D. De Mattos
--------------------------------------
CARLOS D. DE MATTOS
2
<PAGE>
MATTHEWS STUDIO EQUIPMENT GROUP
EXHIBIT (11.7) FIRST AMENDMENT TO EMPLOYMENT AGREEMENT WITH EDWARD PHILLIPS
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
This First Amendment to Employment Agreement (this "Amendment") is made as
of the 5th day of April, 1996, by and between MATTHEWS STUDIO EQUIPMENT GROUP, a
corporation organized under the laws of the State of California ("Group"),
MATTHEWS STUDIO EQUIPMENT, INC., a California corporation ("MSE" and together
with Group, the "Company") and EDWARD PHILLIPS ("Executive"), to amend that
certain Employment Agreement dated July 1, 1995 between the Company and
Executive ("Agreement"). Capitalized terms used and not defined in this
Amendment have the meaning given to them in the Agreement.
WHEREAS, the Common Stock of Group is listed on the National Association of
Securities Dealers, Inc. ("NASD") inter-dealer quotation system and is
designated as a National Market System security;
WHEREAS, the NASD has required that the stock options provided for
Executive under Section III.E of the Agreement be contingent upon approval by
the shareholders of Group;
WHEREAS, the Company and Executive mutually desire to maintain the listing
of Group's Common Stock with the NASD and the designation of same as a National
Market System security, and are willing to enter into this Amendment to provide
for such shareholder approval requirement;
NOW THEREFORE, in consideration of the foregoing premises, the covenants
and agreements set forth below and for other good and valuable consideration,
receipt of which is hereby acknowledged, the Company and Executive mutually
covenant and agree as follows:
I. STOCK OPTIONS TO EXECUTIVE.
--------------------------
Section III.E of the Agreement is hereby amended and restated in full as
follows:
"E. Stock Options:
-------------
Subject to shareholder approval as set forth below, for a period of
ten (10) years from the execution of this Agreement, Executive shall have a
nonqualified option to purchase up to 200,000 shares of the Common Stock of
Group. Such option rights shall vest on the first anniversary hereof with
respect to 66,667 shares, shall vest on the second anniversary hereof with
respect to an additional 66,667 shares and shall vest on the third
anniversary hereof with respect to an additional 66,666 shares. The
exercise price for the shares subject to such option shall be $3.00. Any
unexercised options shall terminate at the end of the ten (10) year period.
Notwithstanding the foregoing, this option (and any stock option agreement
entered into between Group and Executive
1
<PAGE>
to evidence the option) are contingent upon, and are not effective unless
there has been, approval (of the option) by the shareholders of Group at a
meeting or via written consent, duly held and called or solicited, in
accordance with applicable law. In the event that shareholder approval of
the option has not been obtained prior to the first anniversary of the date
of this Agreement, the option granted to Executive under this Section III.E
shall be automatically reduced to a non-qualified option to purchase up to
12,500 shares of the Common Stock of Group, which shall vest on the first
anniversary of the date of this Agreement, and shall otherwise be on the
same terms as are set forth above for the option for 200,000 shares.
Shareholder approval shall not be necessary to make the (reduced) option to
purchase 12,500 shares of the Common Stock of Group effective. The option
provided for in this Section III.E shall be in addition to any options
which may from time to time in the future be authorized by the Board of
Directors for issuance to Executive under employee stock option plans
adopted by the Company."
II. EFFECT OF AMENDMENT.
-------------------
Except as expressly modified by this Amendment, all of the terms and
provisions of the Agreement remain in full force and effect, and this Amendment,
once executed by all parties hereto, shall become a part of the Agreement.
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officer to execute or have executed this Agreement as of the date first above
written.
MATTHEWS STUDIO EQUIPMENT
GROUP
By: /s/ Carlos D. De Mattos
-----------------------
President
/s/ Gregory E. Moiseeff
-----------------------
Secretary
MATTHEWS STUDIO EQUIPMENT, INC.
By: /s/ Carlos D. De Mattos
-----------------------
President
/s/ Gregory E. Moiseeff
-----------------------
Secretary
/s/ Edward Phillips
-------------------
EDWARD PHILLIPS
2
<PAGE>
MATTHEWS STUDIO EQUIPMENT GROUP
EXHIBIT (11.8) LETTER ISSUED BY NASDAQ
THE NASDAQ STOCK MARKET, INC.
April 15, 1996
Mr. John D. Murray
Executive VP & CFO
Matthews Studio Equipment Group
2405 Empire Avenue
Burbank, CA 91504
Dear Mr. Murray:
Reference is made to our letter dated January 23, 1996, and the submissions on
behalf of Matthews Studio Equipment Group (the "company") dated January 30,
1996, February 13, 1996, March 11, 1996 and April 11, 1996 as they relate to the
issuance of Warrants and the Special Voting Preferred Share pursuant to the
Purchase Agreement dated July 27, 1995 (the "Agreement") with ING Equity
Partners, L.P.I ("ING"). The company has requested confirmation of compliance
with Part III, Section's 6(i)(1)(c), 6(i)(1)(d)(ii) and 6(j) of Schedule D to
the NASD By-Laws as the provisions therein relate to the transaction with ING.
In addition, the company has requested confirmation that the amendments dated
April 5, 1996, with respect to the grant of stock options to purchase 200,000
shares of common stock to each of Mr. Carlos D. De Mattos and Mr. Edward
Phillips result in compliance with Part III, Section 6(i)(1)(a) of Schedule D to
the NASD By-Laws.
Specifically, the company has submitted the following amendments, duly executed
by the appropriate parties, in order to alleviate our concern that the subject
transactions were completed in violation of the aforementioned provisions of
Schedule D.
- Amendment No. 1 to Common Stock Purchase Warrant dated April 5, 1996;
- Matthews Studio Equipment Group Amended and Restated Certificate of
Determination dated April 9, 1996;
- Amendment No. 1 to Purchase Agreement dated April 5, 1996;
- Senior Subordinated Note due July 27, 2000 in the amount of
$4,900,000;
- Senior Subordinated Note due July 27, 2005 in the amount of $100,000;
- Amendment No. 1 to Stockholders Agreement dated April 5, 1996;
- First Amendment to Employment Agreement dated April 5,
<PAGE>
1996, with Edward Phillips and Carlos D. De Mattos; and
- Approval of the Secretary of State of California dated April 12, 1996
of the Amended and Restated Certificate of Determination dated April
9, 1996.
Based upon our review of the transaction with ING, as amended, we have
determined that shareholder approval is not required pursuant to Part III,
Section's 6(i)(1)(c) or 6(i)(1)(d)(ii) for the issuance of the Warrants to ING.
In addition, the modifications resulting in the prior issuance of the Special
Voting Preference Share being null and void ab initio has eliminated our concern
with respect to Part III, Section 6(j). In addition, the grant of stock options
to Mr. Phillips and Mr. De Mattos, subject to the approval of stockholders, is
in compliance with Part III, Section 6(i)(1)(a). Therefore, the company is in
compliance with the provisions of Section's 6(i) and 6(j) with respect to the
transactions discussed in our letter dated January 23, 1996 and our review of
this matter has been closed.
Please note that any subsequent sale and/or issuance of common stock or
securities convertible into or exercisable for common stock to ING pursuant to
the participation rights granted in any of the agreements listed in the Exhibit
Index on page 5 of the Form 8-K dated July 27, 1995 or the amendments thereto
may require shareholder approval if the provisions of Section 6(i) are
applicable. We reserve the right to review such future sale/issuances for
compliance with Part III, Section's 6(i) and 6(j) of Schedule D to the NASD By-
Laws. In addition, we strongly recommend that the company discuss any future
material transactions with the NASD staff to ensure compliance with the
requirements for continued listing on The Nasdaq Stock Market.
This determination is based on the facts and circumstances particular to the
Company and this matter should not be interpreted as precedent regarding the
shareholder approval requirement. Furthermore, this determination does not
supersede any provision of the Company's charter or by-laws or any applicable
state or federal law, rule, or regulation, and The Nasdaq Stock Market renders
no opinion regarding the merits of the described plan.
If you have any questions relating to the compliance issues discussed above,
please contact me at (202) 496-2584.
Sincerely,
/s/ John E. Puchalla
- - - --------------------
John E. Puchalla
senior Analyst
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR PERIOD ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 386
<SECURITIES> 0
<RECEIVABLES> 4,002
<ALLOWANCES> 333
<INVENTORY> 4,639
<CURRENT-ASSETS> 10,385
<PP&E> 35,394
<DEPRECIATION> 16,047
<TOTAL-ASSETS> 31,986
<CURRENT-LIABILITIES> 2,783
<BONDS> 0
0
0
<COMMON> 5,579
<OTHER-SE> 2,772
<TOTAL-LIABILITY-AND-EQUITY> 31,986
<SALES> 6,697
<TOTAL-REVENUES> 13,131
<CGS> 4,285
<TOTAL-COSTS> 7,923
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 999
<INCOME-PRETAX> 355
<INCOME-TAX> 70
<INCOME-CONTINUING> 285
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 285
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.03
</TABLE>
