SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13d-2(a)
(Amendment No. 3 ) 1/
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Matthews Studio Equipment Group
(Name of Issuer)
Common Stock
(Title of Class of Securities)
577140106
(CUSIP Number)
Benjamin P. Giess
ING Equity Partners, L.P. I
520 Madison Avenue
New York, New York 10022
Copy to:
James B. Carlson
Mayer, Brown & Platt
1675 Broadway
New York, New York 10019
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
January 12, 1999
(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 that is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-l(e), 13d-1(f) or 13d-1(g), check the
following box [ ].
Note: Schedules filed in paper format shall include a signed
original and five copies of the schedule, including all exhibits. See
Rule 13d-7(b) for other parties to whom copies are to be sent.
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1 The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities
Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of
that section of the Act but shall be subject to all other provisions of the
Act (however, see the Notes).
SEC 1746 (12-91)
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SCHEDULE 13D
CUSIP No. 577140106 Page 2 of 8 Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
ING Equity Partners, L.P. I
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
WC and OO (See Item 3)
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS
IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF
SHARES 4,589,964 (See Item 5)
BENEFICIALLY
OWNED BY 8 SHARED VOTING POWER
EACH
REPORTING None (See Item 5)
PERSON
WITH 9 SOLE DISPOSITIVE POWER
4,589,964 (See Item 5)
10 SHARED DISPOSITIVE POWER
None (See Item 5)
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
4,589,964
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES* [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
38.5%
14 TYPE OF REPORTING PERSON*
PN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
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Page 3 of 8 Pages
This Amendment No. 3 to Schedule 13D, which is being filed on behalf of
ING Equity Partners, L.P. I, a Delaware limited partnership (the "Investment
Partnership"), relates to the Common Stock, no par value (the "Common Stock") of
Matthews Studio Equipment Group, a California corporation (the "Company"), which
has its principal executive offices at 3111 North Kenwood Street, Burbank,
California 91595.
This Amendment No. 3 amends the Schedule 13D filed with the Securities
and Exchange Commission by the Investment Partnership on June 30, 1995 (the
"Original 13D"), as amended by Amendment No. 1 dated July 27, 1995, and
Amendment No.2 dated January 24, 1997. Unless otherwise defined herein, all
capitalized terms have the respective meanings ascribed to such terms in the
Original 13D, as amended.
Item 3. Source and Amount of Funds or Other Consideration.
PARAGRAPH (c) OF ITEM 3 IS HEREBY AMENDED AND RESTATED IN ITS ENTIRETY AS
FOLLOWS:
(c) The Investment Partnership beneficially owns 17,500
options to purchase 17,500 shares of Common Stock, which options were
issued as consideration for the services of the Invesetment
Partnership's appointee to the Company's board of directors, Benjamin
P. Giess. Such options are exercisable at the fair market value of the
Common Stock at the grant date. Mr. Giess assigned his right to the
options to the Investment Partnership pursuant to a letter agreement,
dated November 17, 1995, to the Company and the Investment Partnership
and a Waiver of Option Rights Under Matthews Studio Equipment Group
1994 Stock Option Plan for Directors. The options held by the
Investment Partnership are governed by the Stock Option Agreement dated
November 17, 1995, between the Company and the Investment Partnership
(the "Option Agreement).
ITEM 3 IS FURTHER AMENDED TO ADD THE FOLLOWING AS PARAGRAPH (f):
(f) In connection with a January 1999 amendment to the Amended
and Restated Credit Agreement between the Company and The Chase
Manhattan Bank, as agent for the lenders (the "Chase Facility"), the
Investment Partnership caused ING (U.S.) Capital LLC to issue in favor
of such lenders a $3,000,000 standby letter of credit (the "Letter of
Credit"), as further described below in Item 4. As consideration for
the Investment Partnership's procurement of the Letter of Credit, the
Company issued to the Investment Partnership warrants to purchase
450,000 shares of the Company's common stock, at an exercise price of
$2.50 per share, at any time or from time to time from
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Page 4 of 8 Pages
January 12, 1999 until 5:00 pm on January 12, 2009. Warrants to
purchase 150,000 shares will be automatically canceled in the event the
Letter of Credit is released prior to December 31, 1999.
Item 4. Purpose of Transaction.
PARAGRAPH (a) OF ITEM 4 IS HEREBY AMENDED TO ADD THE FOLLOWING
LANGUAGE:
In connection with a January 1999 amendment to the Amended and
Restated Credit Agreement between the Company and The Chase Manhattan
Bank, as agent for the lenders (the "Chase Facility"), the Investment
Partnership caused ING (U.S.) Capital LLC to issue in favor of such
lenders a $3,000,000 standby letter of credit (the "Letter of Credit").
The Letter of Credit expires December 31, 2000. The lenders may draw on
the Letter of Credit in the event the Company files for bankruptcy
protection or, due to a default under the Amended Chase Facility, the
lenders elect to declare all outstanding terms and revolving credit
loans immediately due and payable and to terminate the Chase Facility.
If there is a draw on the Letter of Credit, the Investment
Partnership is obligated to reimburse ING (U.S.) Capital LLC for any
amounts paid. Accordingly, the Company and its subsidiaries entered
into a Reimbursement Agreement in favor of the Investment Partnership
which obligates the Company and its subsidiaries to reimburse the
Investment Partnership for any amounts paid by the Investment
Partnership to ING (U.S.) Capital LLC by reason of a draw on the Letter
of Credit. The Company and its subsidiaries also granted the Investment
Partnership a subordinated security interest in substantially all of
their respective assets.
As consideration for the Investment Partnership's procurement
of the Letter of Credit, the Company issued to the Investment
Partnership warrants to purchase 450,000 shares of the Company's common
stock, at an exercise price of $2.50 per share, at any time or from
time to time from January 12, 1999 until 5:00 pm on January 12, 2009.
These warrants have antidilutive rights similar to these available to
the Investment Partnership under the warrant to purchase 2,322,464
shares of the Company's common stock that was issued to the Investment
Partnership in July 1995, but unlike the July 1995 warrant, the
exercise price of these warrants is not subject to decrease 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 December 31, 1999. Also, the one share of
preferred stock issued to the Investment Partnership in July 1995 (as
amended), which entitles the Investment Partnership to voting rights
with respect to the number of shares underlying the July 1995 warrant,
does not accord voting rights with
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Page 5 of 8 Pages
respect to the number of shares underlying these new warrants. These
warrants are entitled to the benefits of and subject to the
restrictions under the Registration Rights Agreement and the
Stockholders Agreement entered into by the Investment Partnership and
the Company in July 1995.
Of the warrants issued to the Investment Partnership in
connection with its causing the issuance of the Letter of Credit,
warrants to purchase 150,000 shares will be automatically canceled in
the event the Letter of Credit is released prior to December 31, 1999.
The Letter of Credit will be released if the Company and its
consolidated subsidiaries achieve at the end of any fiscal quarter a
leverage ratio of 4.50 or less and an availability for revolving credit
loans under the Chase Facility of at least $2,000,000.
PARAGRAPHS (b)-(j) OF ITEM 4 ARE HEREBY AMENDED AND RESTATED AS OF
THE DATE OF THIS AMENDMENT NO. 3 AS FOLLOWS:
(b) The Investment Partnership does not have any plans or
proposals relating to an extraordinary corporate transaction as
described in Item 4(b) of Schedule 13D.
(c) The Investment Partnership does not have any plans or
proposals relating to a sale or transfer of a material amount of assets
as described in Item 4(c) of Schedule 13D.
(d) The Investment Partnership does not have any plans or
proposals relating to any change in the present board of directors or
management of the Company, including any plans or proposals to change
the number or term of directors or to fill any existing vacancies on
the board.
(e) Other than as set forth in Item 4(a) above, the Investment
Partnership does not have any plans or proposals relating to a material
change in the present capitalization or dividend policy of the Company.
(f) The Investment Parties does not have any plans or
proposals relating to a material change in the business or corporate
structure of the Company.
(g) Except as may be required in connection with the actions
described in Item 4(a) above, the Investment Partnership does not have
any plans or proposals to change the Company's charter or bylaws as
described in Item 4(g) of Schedule 13D.
(h) The Investment Partnership does not have any plans or
proposals which would result in the delisting of the Company's
securities from a national securities exchange, or as otherwise
described in Item 4(h) of Schedule 13D.
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Page 6 of 8 Pages
(i) The Investment Partnership does not have any plans or
proposals that would have the effect described in Item 4(i) of Schedule
13D.
(j) The Investment Partnership, other than as described above,
does not have any plans or proposals for such action as described in
Item 4(j) of Schedule 13D.
Item 5. Interest in Securities of Issuer.
PARAGRAPH (a) OF ITEM 5 IS HEREBY AMENDED AND RESTATED AS FOLLOWS:
(a) As of the date hereof, the Investment Partnership
beneficially owns 4,589,964 shares of Common Stock, which represents
approximately 38.5% of the outstanding Common Stock as calculated in
accordance with the provisions of this item. This amount consists of
(i) 1,800,000 shares of Common Stock, (ii) the warrant to purchase
2,322,464 shares of Common Stock that was issued to the Investment
Partnership in July 1995, (iii) the warrants to purchase 450,000 shares
of Common Stock that were issued to the Investment Partnership in
January 1999, and (iv) options to purchase 17,500 shares of Common
Stock that were issued as consideration for the services of the
Investment Partnership's appointee to the Company's board of directors.
The other ING Persons do not own or hold any Common Stock or have the
sole or shared power to vote or dispose of Common Stock other than
through their affiliation with the Investment Partnership as described
in Item 1.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
ITEM 6 IS HEREBY RESTATED AS OF THE DATE OF THIS AMENDMENT NO. 3
Other than as described in Items 3, 4 and 5, no such contracts,
arrangements, understandings or relationships exist.
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Page 7 of 8 Pages
Item 7. Material to Be Filed as Exhibits.
The following documents are filed as additional exhibits (numbered as
indicated below) to this statement on Schedule 13D:
Exhibit 6- Warrant to Purchase 150,000 shares of Common Stock, issued
to the Investment Partnership as of January 12, 1999.
Exhibit 7- Warrant to Purchase 300,000 shares of Common Stock, issued
to the Investment Partnership as of January 12, 1999.
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Page 8 of 8 Pages
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Date: January 22, 1999
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
Authorized Signatory
Execution Copy
THIS WARRANT CERTIFICATE AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE
EXERCISE OF THIS WARRANT CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR FILED OR
QUALIFIED UNDER THE STATE SECURITIES LAW OF CALIFORNIA OR ANY OTHER STATE AND
MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS THEY HAVE BEEN
REGISTERED OR QUALIFIED UNDER SUCH LAWS OR AN EXEMPTION FROM REGISTRATION OR
QUALIFICATION IS AVAILABLE.
MATTHEWS STUDIO EQUIPMENT GROUP
W-__ Warrant to Purchase
150,000 Shares
of Common Stock
January 12, 1999
Common Stock Purchase Warrant
THIS Common Stock Purchase Warrant (the "Warrant") CERTIFIES that, for
value received, ING Equity Partners, L.P. I, a Delaware limited partnership, or
its registered assigns (the "Holder") is entitled to purchase from Matthews
Studio Equipment Group, a California corporation (the "Company"), 150,000 shares
of the Common Stock, no par value (the "Common Stock"), of the Company
(representing 1.07% of the Common Stock outstanding on a Fully Diluted Basis at
the date hereof) at the price (the "Exercise Price") of $2.50 per share (subject
to certain adjustments as set forth in Section 3.3 hereof), at any time or from
time to time during the period commencing on the date hereof and ending at 5:00
P.M. on the tenth anniversary of the date hereof (the "Expiration Date").
This Warrant is subject to the terms and conditions, and entitled to
the benefits, of the following agreements, each dated as of July 27, 1995: (i)
the Stockholders Agreement between, among others, the Company and ING, and (ii)
the Registration Rights Agreement between, among others, the Company and ING (as
amended, supplemented or altered from time to time, the "Stockholders
Agreement," and the "Registration Rights Agreement," respectively).
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. Unless the context shall otherwise require,
capitalized terms used and not defined herein shall have the meanings set forth
in the Amended and Restated Credit Agreement, dated as of April 1, 1998,
between, among others, the Company and The Chase Manhattan Bank (as amended or
otherwise modified from time to time, the "Credit Agreement"). In addition, the
following terms shall have the following meanings:
"Affiliate" shall mean with respect to any Person, (a) any Person which
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such Person, or (b) any Person
who is a director or executive officer (i) of such Person, (ii) of any
Subsidiary of such Person, or (iii) of any Person described in clause (a) above,
or with respect to any Stockholder, the Company; provided, that any Affiliate of
a corporation shall be deemed an Affiliate of such corporation's stockholders.
For purposes of this definition, "control" of a Person shall mean the power,
direct or indirect, (i) to vote or direct the voting of more than 5% of the
outstanding shares of voting stock of such Person, or (ii) to direct or cause
the direction of the management and policies of such Person, whether by contract
or otherwise.
"Assignment Form" shall mean the assignment form attached as Annex 2
hereto.
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which banks within New York, New York are authorized or required to be
closed.
"Closing Date" shall mean the date this Warrant was granted.
"Common Stock" shall mean the Common Stock, no par value, of the
Company, having the terms, conditions, rights and limitations described in the
Articles of Incorporation of the Company attached as Exhibit A hereto.
"Company" shall have the meaning given to such term in the Preamble.
"Convertible Securities" shall have the meaning given to such term in
Section 3.3.1(b).
"Credit Agreement" shall have the meaning given to such term in the
introduction to this Section 1.1.
"Delivery Date" shall have the meaning given to such term in Section
3.2.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
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"Exchange Form" shall mean the exchange form attached as Annex 3
hereto.
"Excluded Securities" shall mean:
(i) shares of capital stock issued pursuant to a stock
dividend or a stock split or other subdivision of shares;
(ii) Common Stock issued upon exercise of the ING Warrants;
(iii) Common Stock issued by the Company in any public
offering registered under the Securities Act, which offering results in
net proceeds to the Company of at least $10,000,000 and a price per
share of Common Stock of not less than $2.50 (appropriately adjusted to
reflect all recapitalization events);
(iv) securities issued upon conversion, exercise or exchange
of convertible securities, warrants, options, subscriptions, calls or
other rights to acquire Common Stock, provided that the foregoing
rights are (x) outstanding on the date hereof and are issued in
conformity with such rights as issued and in effect at the date hereof,
or (y) are issued hereafter in compliance with Section 4.2 hereof; or
(v) Common Stock issued pursuant to the Company's Amended and
Restated 1989 Stock Option Plan, the Company's 1994 Stock Option Plan,
the Company's 1994 Stock Option Plan for Directors, options granted
pursuant to the Amended and Restated Employment Agreement dated October
1, 1997 between the Company and Carlos D. DeMattos, the employment
terms letter dated October 1, 1998 between the Company and John Murray
and the Employment Agreement dated November 23, 1998 between the
Company and Alan Unger, any other employee benefit plan (including any
future adopted employee stock option plan), and pursuant to any
acquisition permitted under the Purchase Agreement and the Credit
Agreement.
"Exercise Form" shall mean the exercise form attached as Annex 1
hereto.
"Exercise Price" shall mean $2.50 per share of Common Stock, subject to
adjustment from time to time in the manner provided in Section 3.3.
"Expiration Date" shall mean January 12, 2009.
"Fully Diluted Basis" means, as applied to the calculation of the
number of shares of Common Stock outstanding at any time, after giving effect to
(a) all shares of Common Stock outstanding at the time of determination, (b) all
shares of Common Stock issuable upon the conversion, exercise or exchange of any
convertible security, warrant, option, subscriptions, calls or other rights to
acquire Common Stock outstanding at the time of determination, irrespective of
whether such conversion, exercise or exchange is permitted, restricted or vested
at the time of determination, and irrespective of the price or consideration
required by such conversion, exercise or exchange, and (c) all other
commitments, promises or understandings to
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<PAGE>
issue any shares of Common Stock or any convertible security, warrant, option,
subscription, call or other rights outstanding at the time of determination.
Such calculation will reflect the ING Warrants, and will not be made in
accordance with the "treasury method in accordance with GAAP."
"GAAP" shall mean generally accepted accounting principles in the
United States of America in effect from time to time.
"Governmental Authority" shall mean any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, or any court, in each case whether of the United States of
America or foreign.
"Holder" shall have the meaning given to such term in the Preamble.
"ING" shall mean ING Equity Partners, L.P. I, a Delaware limited
partnership.
"ING Security Agreement" shall mean the Security Agreement, dated as of
the Closing Date, between the Company and ING, as amended, supplemented or
altered from time to time.
"ING Warrants" shall mean all Common Stock Purchase Warrants and all
Options issued to ING by the Company as of the date hereof.
"Market Price" shall mean, with respect to a share of Common Stock on
any Business Day:
(a) if the Common Stock is Publicly Traded at the time of
determination, the average of the closing prices for the Common Stock
on all domestic securities exchanges on which such security may at the
time be listed, or, if there have been no sales on any such exchange on
such day, the average of the highest bid and lowest asked prices on all
such exchanges at the end of such day, or, if on any day such security
is not so listed, the average of the representative bid and asked
prices quoted on the Nasdaq Stock Market as of 4:00 P.M., New York
time, on such day, or if on any day such security is not quoted on the
Nasdaq Stock Market, the average of the highest bid and lowest asked
prices on such day in the domestic over-the-counter market as reported
by the National Quotation Bureau, Incorporated, or any similar
successor organization, in each such case averaged over a period of
twenty-one (21) days consisting of the day as of which "Market Price"
is being determined and the twenty (20) consecutive Business Days prior
to such day; or
(b) if the Common Stock is not Publicly Traded at the time of
determination then, solely for purposes of Section 3, then the Market
Price shall be the Market Value Per Share.
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<PAGE>
"Market Value" shall mean the highest price that would be paid for all
of the Common Stock of the Company on a going-concern basis in a single
arm's-length transaction between a willing buyer and a willing seller (neither
acting under compulsion), using valuation techniques then prevailing in the
securities industry and always determined in accordance with the Valuation
Procedures, and assuming full disclosure and understanding of all relevant
information and a reasonable period of time for effectuating such sale. For the
purposes of determining the Market Value, (i) the exercise price of options,
warrants or rights to acquire Common Stock which are included for the purpose of
determining the number of shares of Common Stock outstanding on a Fully Diluted
Basis shall be deemed to have been received by the Company if and to the extent
that the aggregate Market Value of such shares of Common Stock exceeds the
aggregate exercise price of such options, warrants or rights, (ii) the
liquidation preference or indebtedness, as the case may be, represented by
securities which are included for the purpose of determining the number of
shares of Common Stock outstanding on a Fully Diluted Basis shall be deemed to
be converted or exchanged if and to the extent that the aggregate Market Value
of such shares of Common Stock exceeds the aggregate amount of such liquidation
preference or indebtedness, (iii) any contract or legal limitation in respect of
the shares of Common Stock, including their transfer, voting and other rights
shall be ignored, and (iv) any illiquidity arising by contract or law in respect
of the shares of Common Stock and any voting rights or control rights amongst
the Stockholders, shall be ignored.
"Market Value Per Share" shall mean the price per share of Common Stock
obtained by dividing (A) the Market Value by (B) the number of shares of Common
Stock outstanding (on a Fully-Diluted Basis) at the time of determination.
"Nasdaq Stock Market" shall mean the Nasdaq National Market or the
Nasdaq SmallCap Market.
"Options" shall have the meaning given to such term in Section 3.3.1(b)
hereof.
"Other Anti-Dilution Instruments" shall mean any option, warrant,
convertible security, subscription, call or other rights to acquire Common Stock
whether outstanding as of the date hereof or hereafter issued, together with any
agreements relating thereto, which provide for anti-dilution or other
adjustments in the number of shares of Common Stock and/or exercise, exchange or
conversion price thereof.
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
institution, public benefit corporation, limited liability company, joint stock
company, estate entity or Governmental Authority.
"Proportionate Percentage" shall mean, with respect to any Holder at
any time, the quotient obtained by dividing (a) the aggregate number of Warrant
Shares and other shares of Common Stock then held by such Holder by (b) the
total number of shares of Common Stock then outstanding (on a Fully-Diluted
Basis).
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<PAGE>
"Publicly Traded" shall mean, with respect to any security, that such
security is (a) listed on a domestic securities exchange, (b) quoted on the
Nasdaq Stock Market or (c) traded in the domestic over-the-counter market, which
trades are reported by the National Quotation Bureau, Incorporated, and in the
cases of clauses (b) and (c), the average weekly trading volume on the 20
trading days preceding the time of determination equals or exceeds 1/2 of 1% of
the outstanding Common Stock on a Fully Diluted Basis.
"Purchase Agreement" shall mean the Purchase Agreement dated as of July
27, 1995 between the Company and ING, as amended from time to time.
"Refused Securities" shall have the meaning given to such term in
Section 4.2(c).
"Registration Rights Agreement" shall have the meaning given to such
term in the Preamble.
"Reimbursement Agreement" means the Reimbursement Agreement, dated as
of the Closing Date, between the Company and ING, as amended, supplemented or
altered from time to time.
"Requisite Holders" shall mean Holders holding ING Warrants or
securities representing at least 51% of all securities issued or issuable upon
exercise of the ING Warrants outstanding on the date of determination.
"Section 4.2 Notice of Acceptance" shall have the meaning given to such
term in Section 4.2 hereof.
"Section 4.2 Offer" shall have the meaning given to such term in
Section 4.2 hereof.
"Section 4.2 Offer Notice" shall have the meaning given to such term in
Section 4.2 hereof.
"Section 4.2 Offered Securities" shall have the meaning given to such
term in Section 4.2(a).
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Standby Letter of Credit" shall mean the Standby Letter of Credit
issued by ING (U.S.) Capital Corporation as of the date hereof for the account
of the Company and in favor of The Chase Manhattan Bank, as agent for the
Lenders.
"Stockholders Agreement" shall have the meaning given to such term in
the Preamble.
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<PAGE>
"Valuation Procedure" shall mean, with respect to the determination of
any amount or value required to be determined in accordance with such procedure,
a determination (which shall be final and binding on the Company and the
Holders) made (i) by agreement among the Company and the Requisite Holders
within thirty (30) days following the event requiring such determination or (ii)
in the absence of such an agreement, by an Appraiser (as defined below) selected
in accordance with the further provisions of this definition. If required, an
Appraiser shall be selected within 10 days following the expiration of the
30-day period referred to above, either by agreement among the Company and the
Requisite Holders or, in the absence of such agreement, by lot from a list of
four potential Appraisers remaining after the Company nominates three, the
Requisite Holders nominate three, and each side eliminates one potential
Appraiser. The Appraiser shall be instructed by the Company and the Requisite
Holders to make its determination within thirty (30) days of its selection. The
fees and expenses of an Appraiser selected hereunder shall be borne fifty
percent (50%) by the Company and fifty percent (50%) by the Holders (on a pro
rata basis) participating in the transaction to which the determination relates.
As used herein, "Appraiser" shall mean (a) with respect to a determination of
Market Value, a nationally-recognized investment banking firm and (b) with
respect to a determination of Liquidation Value (or any other valuation required
hereunder), a firm of the type generally considered to be qualified in making
determinations of the type required.
"Warrant" shall have the meaning given to such term in the Preamble.
"Warrant Register" shall have the meaning given to such term in Section
2.1.
"Warrant Shares" shall mean (a) the shares of Common Stock issued or
issuable upon exercise of a Warrant in accordance with Section 4.1 or upon
exchange of a Warrant in accordance with Section 4.2 and (b) any securities of
the Company distributed with respect to the securities referred to in the
preceding clause (a). As used in this Warrant, the phrase "Warrant Shares then
held" by any Holder or Holders shall mean Warrant Shares held at the time of
determination by such Holder or Holders, and shall include Warrant Shares
issuable upon exercise of ING Warrants held at the time of determination by such
Holder or Holders.
SECTION 1.2. Interpretation. Unless the context of this Warrant clearly
requires otherwise, references to the plural include the singular, to the
singular include the plural, and to the part include the whole. The term
"including" is not limiting and the term "or" has the inclusive meaning
represented by the term "and/or." The words "hereof," "herein," "hereunder," and
similar terms in this Warrant refer to this Warrant as a whole and not to any
particular provision of this Warrant. References to "Articles," "Sections,"
"Subsections," "Exhibits," and "Schedules" are to Articles, Sections,
Subsections, Exhibits and Schedules, respectively, of this Warrant, unless
otherwise specifically provided. Terms defined herein may be used in the
singular or the plural.
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<PAGE>
ARTICLE II
FORM; EXCHANGE FOR WARRANTS; TRANSFER; TAXES
SECTION 2.1. Warrant Register. Each Warrant issued, exchanged or
transferred in accordance with the terms hereof shall be registered in a warrant
register (the "Warrant Register"). The Warrant Register shall set forth the
number of each Warrant, the name and address of the Holder thereof, and the
original number of Warrant Shares purchasable upon the exercise thereof. The
Warrant Register will be maintained by the Company and will be available for
inspection by any Holder at the principal office of the Company or such other
location as the Company may designate to the Holders in the manner set forth in
Section 5.1. The Company shall be entitled to treat the Holder of any Warrant as
the owner in fact thereof for all purposes and shall not be bound to recognize
any equitable or other claim to or interest in such Warrant on the part of any
other Person. The Company shall not be liable for complying with a request by a
fiduciary or nominee of a fiduciary to register a transfer of any Warrant which
is registered in the name of such fiduciary or nominee, unless made with the
actual knowledge that such fiduciary or nominee is committing a breach of trust
in requesting such registration of transfer, or with knowledge of such facts
that the Company's participation therein amounts to bad faith.
SECTION 2.2. Exchange of Warrants for Warrants. (a) The Holder may
exchange this Warrant for another Warrant or Warrants of like kind and tenor
representing in the aggregate the right to purchase the same number of Warrant
Shares which could be purchased pursuant to the Warrant being so exchanged. In
order to effect an exchange permitted by this Section 2.2, the Holder shall
deliver to the Company such Warrant accompanied by an Exchange Form in the form
attached hereto as Annex 3 signed by the Holder thereof specifying the number
and denominations of Warrants to be issued in such exchange and the names in
which such Warrants are to be issued. Within ten (10) Business Days of receipt
of such a request, the Company shall issue, register and deliver to the Holder
thereof each Warrant to be issued in such exchange.
(b) Upon receipt of evidence reasonably satisfactory to the Company (an
affidavit of the Holder being satisfactory) of the ownership and the loss,
theft, destruction or mutilation of any Warrant, and in the case of any such
loss, theft or destruction, upon receipt of an indemnity reasonably satisfactory
to the Company (if the Holder is a creditworthy financial institution or other
creditworthy institutional investor its own agreement being satisfactory) or, in
the case of any such mutilation, upon surrender of such Warrant, the Company
shall (at its expense) execute and deliver in lieu of such Warrant a new Warrant
of like kind representing the same rights represented by and dated the date of
such lost, stolen, destroyed or mutilated Warrant. Any such new Warrant shall
constitute an original contractual obligation of the Company, whether or not the
allegedly lost, stolen, mutilated or destroyed Warrant shall be at any time
enforceable by any Person.
(c) The Company shall pay all taxes (other than any applicable income
or similar taxes payable by a Holder of a Warrant) attributable to an exchange
of a Warrant
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pursuant to this Section 2.2; provided, however, that the Company shall not be
required to pay any tax which may be payable in respect of any transfer involved
in the issuance of any Warrant in a name other than that of the Holder of the
Warrant being exchanged.
SECTION 2.3. Transfer of Warrant. (a) Subject to Section 2.3(c) hereof,
each Warrant may be transferred by the Holder thereof by delivering to the
Company such Warrant accompanied by a properly completed Assignment Form in the
form of Annex 2. Within ten (10) Business Days of receipt of such Assignment
Form the Company shall issue, register and deliver to the Holder, subject to
Section 2.3(c) hereof, a new Warrant or Warrants of like kind and tenor
representing in the aggregate the right to purchase the same number of Warrant
Shares which could be purchased pursuant to the Warrant being transferred. In
all cases of transfer by an attorney, the original power of attorney, duly
approved, or a copy thereof, duly certified, shall be deposited and remain with
the Company. In case of transfer by executors, administrators, guardians or
other legal representatives, duly authenticated evidence of their authority
shall be produced and may be required to be deposited and remain with the
Company in its discretion.
(b) Each Warrant issued in accordance with this Section 2.3 shall bear
the restrictive legend set forth on the face of this Warrant, unless the Holder
or transferee thereof supplies to the Company an opinion of counsel, reasonably
satisfactory to the Company, that the restrictions described in such legend are
no longer applicable to such Warrant.
(c) The transfer of Warrants and Warrant Shares shall be permitted, so
long as such transfer is pursuant to a transaction that (i) complies with, or is
exempt from, the provisions of the Securities Act, and the Company may require
an opinion of counsel (which may be internal counsel to a Holder) in form and
substance reasonably satisfactory to it to such effect prior to effecting any
transfer of Warrants or Warrant Shares and (ii) complies with the applicable
provisions of the Stockholders Agreement.
ARTICLE III
EXERCISE OF WARRANT; EXCHANGE FOR WARRANT SHARES
SECTION 3.1. Exercise of Warrants. On any Business Day prior to the
Expiration Date, a Holder may exercise a Warrant, in whole or in part, by
delivering to the Company such Warrant accompanied by a properly completed
Exercise Form in the form of Annex 1 and a check in an aggregate amount equal to
the product obtained by multiplying (a) the Exercise Price by (b) the number of
Warrant Shares being purchased; provided, however, in the event the Holder
exercises this Warrant in connection with or immediately prior to a sale by the
Holder of Warrant Shares, in lieu of paying the applicable Exercise Price
therefor, the Holder may elect to receive that number of Warrant Shares which is
equal to the number of shares for which this Warrant is being exercised less the
number of shares having a Market Price equal to such applicable Exercise Price,
where such Market Price per share shall be equal to the price per
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share at which the Holder is selling Warrant Shares. Any partial exercise of a
Warrant shall be for a whole number of Warrant Shares only.
SECTION 3.2. Issuance of Common Stock. (a) Within ten (10) Business
Days following the delivery date (the "Delivery Date") of (i) an Exercise Form
or Exchange Form in accordance with Section 3.1 or 3.2, (ii) a Warrant and (iii)
any required payments of the Exercise Price, the Company shall issue and deliver
to the Holder a certificate or certificates, registered in the name or names set
forth on such notice, representing the Warrant Shares being purchased or to be
received upon such exchange.
(b) If a Holder shall exercise or exchange a Warrant for less than all
of the Warrant Shares which could be purchased or received thereunder, the
Company shall issue to the Holder, within ten (10) Business Days of the Delivery
Date, a new Warrant evidencing the right to purchase the remaining Warrant
Shares. Each Warrant surrendered pursuant to Section 3.1 shall be canceled.
(c) The Company shall not be required to issue fractional shares of
Common Stock upon the exercise or exchange of a Warrant. If any fraction of a
share of Common Stock would be issuable on the exercise or exchange of any
Warrant, the Company may, in lieu of issuing such fractional share, pay to such
Holder for any such fraction of a share an amount in cash equal to the product
obtained by multiplying (i) such fraction by (ii) the Market Price in effect on
the Delivery Date.
(d) The Company shall pay all taxes (other than any applicable income
or similar taxes payable by a Holder of a Warrant) attributable to the initial
issuance of Warrant Shares upon the exercise or exchange of a Warrant; provided,
however, that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance of any Warrant or
any certificate for Warrant Shares in a name other than that of the Holder of
the Warrant being exercised or exchanged.
(e) The Person in whose name any certificate for shares of Common Stock
is issued upon exercise or exchange of a Warrant shall for all purposes be
deemed to have become the holder of record of such shares on the Delivery Date,
irrespective of the date of delivery of such certificate, except that, if the
Delivery Date is a date when the stock transfer books of the Company are closed,
such Person shall be deemed to have become the holder of record of such shares
at the close of business on the next succeeding date on which the stock transfer
books are open.
(f) Any Exercise Form or Exchange Form delivered under Section 3.1 or
2.2 may condition the exercise or exchange of any Warrant on the consummation of
a sale of Warrant Shares pursuant to a public offering registered under the
Securities Act, and such exercise or exchange shall not be deemed to have
occurred except concurrently with the consummation of any such sale.
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SECTION 3.3. Adjustment of Exercise Price and Number of Warrant Shares.
The number and kind of Warrant Shares purchasable upon exercise of each Warrant
shall be subject to adjustment from time to time in accordance with this Section
3.3.
SECTION 3.3.1. Adjustment upon Issuance of Common Stock. (a) If, at any
time after the Closing Date, the Company shall issue or sell (or, in accordance
with Section 3.3.1(b), shall be deemed to have issued or sold) any shares of
Common Stock without consideration or for a consideration per share less than
either the Market Price determined as of the date of such issuance or sale or
the Exercise Price in effect immediately prior to such issuance or sale, then,
effective immediately upon such issuance or sale, the Exercise Price shall be
reduced (without regard to any other provisions hereof) to an amount equal to
the product obtained by multiplying (A) the Exercise Price in effect immediately
prior to such issuance or sale, by (B) a fraction, the numerator of which shall
be the sum of (x) the product obtained by multiplying (1) the number of shares
of Common Stock outstanding (on a Fully-Diluted Basis) immediately prior to such
issuance or sale by (2) the lesser of the Market Price as of the date of such
issuance or sale and the Exercise Price in effect immediately prior to such
issuance or sale, and (y) the consideration, if any, received by the Company
upon such issuance or sale, and the denominator of which shall be the product
obtained by multiplying (C) the number of shares of Common Stock outstanding (on
a Fully-Diluted Basis) immediately after such issuance or sale, by (D) the
lesser of the Market Price as of the date of issuance or sale and the Exercise
Price in effect immediately prior to such issuance or sale. Upon each such
adjustment of the Exercise Price hereunder, the number of Warrant Shares which
may be obtained upon exercise of such Warrant shall be increased to the number
of shares determined by multiplying (A) the number of Warrant Shares which could
be obtained upon exercise of such Warrant immediately prior to such adjustment
by (B) a fraction, the numerator of which shall be the Exercise Price in effect
immediately prior to such adjustment and the denominator of which shall be the
Exercise Price in effect immediately after such adjustment.
(b) For the purpose of determining the adjusted Exercise Price under
Section 3.3.1(a), the following shall be applicable:
(i) Issuance of Rights or Options. If the Company in any
manner issues or grants any rights or options to subscribe for or to
purchase (A) Common Stock or (B) any stock or other securities
convertible into or exchangeable for Common Stock (such rights or
options being herein called "Options" and such convertible or
exchangeable stock or securities being herein called "Convertible
Securities"), and the price per share for which Common Stock is
issuable upon the exercise of such Options or upon conversion or
exchange of such Convertible Securities is less than either the Market
Price determined as of the date of issuance or grant of such Options or
the Exercise Price in effect immediately prior to such issuance or
grant of such Options, then the total maximum number of shares of
Common Stock issuable upon the exercise of such Options (or upon
conversion or exchange of the total maximum amount of such Convertible
Securities issuable upon the exercise of such Options) shall be deemed
to be outstanding and to have been issued and sold by the Company for
such price per share. For purposes of this
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paragraph, the price per share for which Common Stock is issuable upon
exercise of Options or upon conversion or exchange of Convertible
Securities issuable upon exercise of Options shall be determined by
dividing (A) the total amount, if any, received or receivable by the
Company as consideration for the issuing or granting of such Options,
plus the minimum aggregate amount of additional consideration payable
to the Company upon the exercise of all such Options, plus in the case
of such Options which relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable to the
Company upon issuance or sale of such Convertible Securities and the
conversion or exchange thereof, by (B) the total maximum number of
shares of Common Stock issuable upon exercise of such Options or upon
the conversion or exchange of all such Convertible Securities issuable
upon the exercise of such Options. No further adjustment of the
Exercise Price shall be made upon the actual issuance of such Common
Stock or of such Convertible Securities upon the Exercise of such
Options or upon the actual issuance of such Common Stock upon
conversion or exchange of such Convertible Securities.
(ii) Issuance of Convertible Securities. If the Company in any
manner issues or sells any Convertible Securities having an exercise or
conversion or exchange price per share of Common Stock which is less
than either the Market Price determined as of the date of such issuance
or sale or the Exercise Price in effect immediately prior to such
issuance or sale, then the maximum number of shares of Common Stock
issuable upon the conversion or exchange of such Convertible Securities
shall be deemed to be outstanding and to have been issued and sold by
the Company for such lower price per share. For purposes of this
paragraph, the price per share for which Common Stock is issuable upon
conversion or exchange of Convertible Securities is determined by
dividing (A) the total amount received or receivable by the Company as
consideration for the issuance or sale of such Convertible Securities,
plus the minimum aggregate amount of additional consideration, if any,
payable to the Company upon the conversion or exchange thereof, by (B)
the total maximum number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities. No further
adjustment of the Exercise Price shall be made upon the actual issuance
of such Common Stock upon conversion or exchange of such Convertible
Securities, and if any such issuance or sale of such Convertible
Securities is made upon exercise of any Options for which adjustments
of the Exercise Price had been or are required to be made pursuant to
other provisions of this Section 3.4.1(b), no further adjustment of the
Exercise Price shall be made by reason of such issuance or sale.
(iii) Change in Option Price or Conversion Rate. If the
purchase price provided for in any Options, the additional
consideration, if any, payable upon the issuance, conversion or
exchange of any Convertible Securities, or the rate at which any
Convertible Securities are convertible into or exchangeable for Common
Stock change at any time, then the Exercise Price in effect at the time
of such change shall be readjusted to the Exercise Price which would
have been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed purchase price,
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additional consideration or changed conversion rate, as the case may
be, at the time initially granted, issued or sold and the number of
Warrant Shares shall be correspondingly readjusted.
(iv) Treatment of Expired Options and Unexercised Convertible
Securities. Upon the expiration of any Option or the termination of any
right to convert or exchange any Convertible Securities listed on
Schedule 3.3.1(b)(iv) without the exercise of such Option or right, the
Exercise Price then in effect and the number of Warrant Shares
acquirable hereunder shall be adjusted to the Exercise Price and the
number of shares which would have been in effect at the time of such
expiration or termination had such Option or Convertible Securities, to
the extent outstanding immediately prior to such expiration or
termination, never been issued.
(v) Calculation of Consideration Received. If any Common
Stock, Options or Convertible Securities are issued or sold or deemed
to have been issued or sold for cash, then the consideration received
therefor shall be deemed to be the net amount received by the Company
therefor. If any Common Stock, Options or Convertible Securities are
issued or sold for consideration other than cash, then the amount of
the consideration other than cash received by the Company shall be the
fair value of such consideration determined by the Board of Directors
of the Company.
(vi) Treasury Shares. The number of shares of Common Stock
outstanding at any given time does not include shares owned or held by
or for the account of the Company or any Subsidiary of the Company, and
the disposition of any shares so owned or held shall be considered an
issue or sale of Common Stock.
(vii) Record Date. If the Company takes a record of the
holders of Common Stock for the purpose of entitling them (A) to
receive a dividend or other distribution payable in Common Stock,
Options or in Convertible Securities or (B) to subscribe for or
purchase Common Stock, Options or Convertible Securities, then such
record date shall be deemed to be the date of the issuance or sale of
the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution
or the date of the granting of such right of subscription or purchase,
as the case may be.
SECTION 3.3.2. Subdivisions or Combinations of Common Stock. If, at any
time after the Closing Date, (a) the number of shares of Common Stock
outstanding is increased by a dividend or other distribution payable in shares
of Common Stock or by a subdivision or split-up of shares of Common Stock or (b)
the number of shares of Common Stock outstanding is decreased by a combination
or reverse stock split of shares of Common Stock, then, in each case, effective
as of the effective date of such event retroactive to the record date, if any,
of such event, (i) the Exercise Price shall be adjusted to a price determined by
multiplying (A) the Exercise Price in effect immediately prior to such event by
(B) a fraction, the numerator of which shall be the number of shares of Common
Stock outstanding immediately prior to such
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event and the denominator of which shall be the number of shares of Common Stock
outstanding after giving effect to such event, and (ii) the number of Warrant
Shares subject to purchase upon the exercise of any Warrant shall be adjusted
effective at such time, to a number equal to the product of (A) the number of
Warrant Shares subject to purchase upon the exercise of such Warrant immediately
prior to such event by (B) a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding after giving effect to such event
and the denominator of which shall be the number of shares of Common Stock
outstanding immediately prior to such event.
SECTION 3.3.3. Capital Reorganization or Capital Reclassifications. If,
at any time after the Closing Date, there shall be any capital reorganization or
any reclassification of the capital stock of the Company (other than a change in
par value or from par value to no par value or from no par value to par value or
as a result of a stock dividend or subdivision, split-up or combination of
shares), then in each case the Company shall cause effective provision to be
made so that each Warrant shall, effective as of the effective date of such
event retroactive to the record date, if any, of such event, be exercisable or
exchangeable for the kind and number of shares of stock, other securities, cash
or other property to which a holder of the number of shares of Common Stock
deliverable upon exercise or exchange of such Warrant would have been entitled
upon such reorganization or reclassification and any such provision shall
include adjustments in respect of such stock, securities or other property that
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Warrant with respect to such Warrant.
SECTION 3.3.4. Consolidations and Mergers. If, at any time after the
Closing Date, the Company shall consolidate with, merge with or into, or sell
all or substantially all of its assets or property to, another corporation, then
the Company shall cause effective provision to be made so that each Warrant
shall, effective as of the effective date of such event retroactive to the
record date, if any, of such event, be exercisable or exchangeable for the kind
and number of shares of stock, other securities, cash or other property to which
a holder of the number of shares of Common Stock deliverable upon exercise or
exchange of such Warrant would have been entitled upon such event.
SECTION 3.3.5. Notice; Calculations; Etc. Whenever the Exercise Price
and the number of Warrant Shares shall be adjusted as provided in this Section
3.3, the Company shall provide to each Holder a statement, signed by the
President or Chief Financial Officer/Treasurer of the Company, describing in
detail the facts requiring such adjustment and setting forth a calculation of
the Exercise Price and the number of Warrant Shares applicable to each Warrant
after giving effect to such adjustment. All calculations under this Section 3.3
shall be made to the nearest one hundredth of a cent ($.0001) or to the nearest
one-tenth of a share, as the case may be. Adjustments pursuant to Sections
3.3.1, 3.3.2 and 3.3.3 shall apply to successive events or transactions of the
type covered thereby.
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SECTION 3.3.6. Certain Adjustments. (a) Subject to the limitations set
forth in Section 4.5, the Company may make such reductions in the Exercise Price
or increase in the number of Warrant Shares to be received by any Holder upon
the exercise or exchange of a Warrant, in addition to those adjustments required
by this Section 3.3, as it in its sole discretion shall determine to be
advisable in order that any consolidation or subdivision of the Common Stock, or
any issuance wholly for cash of any shares of Common Stock, or any issuance
wholly for cash or shares of Common Stock or securities which by their terms are
convertible into or exchangeable for shares of Common Stock, or any stock
dividend, or any issuance of rights, options or warrants hereinafter made by the
Company to the holders of its Common Stock shall not be taxable to such holders.
(b) In the event that the Company in any manner issues or grants
Options or Convertible Securities, or any other transaction, circumstances or
events occur which give rise to anti-dilution adjustments under Other
Anti-Dilution Instruments, then the Company will promptly make proportional,
equitable and corresponding adjustments in the number of shares of Common Stock
issuable upon exercise of the Warrants to protect the Holders against dilution
as a result of such events.
SECTION 3.3.7. Excluded Transactions. Notwithstanding any other
provision of this Warrant, no adjustment shall be made pursuant to this Section
3.3 in respect of the issuance of Excluded Securities.
SECTION 3.3.8. Adjustment Rules. (a) Any adjustments pursuant to this
Section 3.3 shall be made successively whenever an event referred to herein
shall occur.
(b) Notwithstanding any other provision of this Warrant, the actual
amount payable by a Holder in connection with the exercise of a Warrant
hereunder shall not be less than the par value per share of the Common Stock,
unless and until the Exercise Price, as adjusted pursuant to this Section 3.3,
has been reduced to an amount less than 1% of the par value per share of the
Common Stock. Before taking any action which would cause an adjustment pursuant
to this Section 3.3 which would reduce the Exercise Price below 1% of the par
value per share, the Company shall be required to take any corporate action
which may be necessary in order that the Company may validly and legally issue
fully paid and nonassessable Warrant Shares at the Exercise Price as so
adjusted.
SECTION 3.4. Cancellation. If the Standby Letter of Credit is released
prior to December 31, 1999, this Warrant shall be deemed to be automatically
canceled, without further action required of the Company or the Holders.
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ARTICLE IV
CERTAIN OTHER RIGHTS
SECTION 4.1. Payments in Respect of Dividends and Distributions. If, at
any time prior to the Expiration Date, the Company pays any dividend, other than
in the ordinary course of business and to the Company's public stockholders, or
makes any distribution (whether in cash, property or securities of the Company)
on its capital stock which does not result in an adjustment under Section 3.3
then the Company shall simultaneously pay to the Holder of each Warrant, the
dividend or distribution which would have been paid to such Holder on the
Warrant Shares receivable upon the exercise in full of such Warrant had such
Warrant been fully exercised immediately prior to the record date for such
dividend or distribution or, if no record is taken, the date as of which the
record holders of Common Stock entitled to such dividend or distribution are to
be determined.
SECTION 4.2. Preemptive Rights. (a) The Company shall not issue, sell
or exchange, agree to issue, sell or exchange, or reserve or set aside for
issuance, sale or exchange, any (i) Common Stock, (ii) any other equity security
of the Company, (iii) any debt security of the Company which by its terms are
convertible into or exchangeable for any equity security of the Company or has
any other equity feature, (iv) any security of the Company that is a combination
of debt and equity or (v) any option, warrant or other right to subscribe for,
purchase or otherwise acquire any equity security or any such debt security of
the Company, unless, in each case, the Company shall have first offered (the
"Section 4.2 Offer") to sell to each Holder its Proportionate Percentage of such
securities (the "Section 4.2 Offered Securities") (and to sell thereto Section
4.2 Offered Securities not subscribed for by other Holders as hereinafter
provided), at a price and on such other terms as shall have been specified by
the Company in a written notice (the "Section 4.2 Offer Notice") delivered to
such Holder, which Offer by its terms shall remain open and irrevocable for a
period of ten (10) Business Days from the date it is delivered by the Company to
the Holders.
(b) Notice of each Holder's intention to accept, in whole or in part, a
Section 4.2 Offer shall be evidenced by a writing signed by such Holder and
delivered to the Company prior to the end of the 10-day period of such Section
4.2 Offer, setting forth such portion of the Section 4.2 Offered Securities as
such Holder elects to purchase (the "Section 4.2 Notice of Acceptance"). If any
Holder shall subscribe for less than its Proportionate Percentage of the Section
4.2 Offered Securities available to such Holder, the other subscribing Holders
shall be entitled to purchase the balance of such Holder's Proportionate
Percentage in the same proportion in which they were initially entitled to
purchase the Section 4.2 Offered Securities (excluding for such purposes such
Holder subscribing for less than its Proportionate Percentage). The Company
shall notify each other Holder within five (5) Business Days following the
expiration of the 10-day period described above of the amount of Section 4.2
Offered Securities which each Holder may purchase pursuant to the foregoing
sentence, and each Holder shall then have five (5) Business Days from the
delivery of such notice to indicate such additional amount, if any, that such
Holder wishes to purchase.
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(c) In the event that Section 4.2 Notices of Acceptance are not given
by the Holders in respect of all the Section 4.2 Offered Securities, the Company
shall have ninety (90) days from the expiration of the foregoing 10-day or
20-day period, as applicable, to sell all or any part of such Section 4.2
Offered Securities as to which Section 4.2 Notices of Acceptance have not been
given by the Holders (the "Refused Securities") to any other Person or Persons,
but only upon terms and conditions in all respects (including, without
limitation, unit price and interest rates) which are no more favorable, in the
aggregate, to such other Person or Persons or less favorable to the Company than
those set forth in the Section 4.2 Offer. Upon the closing of the sale of the
Refused Securities, the Holders shall purchase from the Company, and the Company
shall sell to the Holders, the Section 4.2 Offered Securities in respect of
which Section 4.2 Notices of Acceptance were delivered to the Company, at the
terms specified in the Section 4.2 Offer.
(d) The preemptive rights granted in this Section 4.2 shall not apply
to the issuance or sale of Excluded Securities.
(e) The preemptive rights granted in this Section 4.2 shall apply only
to Holders who are not parties to the Stockholders Agreement.
(f) The Holder hereof and any transferee shall have the benefit of the
Registration Rights set forth in the Stockholders Agreement, whether or not the
Holder or transferee is a party to the Stockholders Agreement or the
Registration Rights Agreement.
SECTION 4.3. Fiduciary Duties of the Company. The Company and its
directors shall owe the Holders of the Warrants the same fiduciary duties that
the Company and its directors would owe to the Warrant Shares underlying the
Warrants.
ARTICLE V
MISCELLANEOUS
SECTION 5.1. Notices. All notices, demands and requests of any kind to
be delivered to any party hereto in connection with this Warrant shall be in
writing (i) delivered personally, (ii) sent by nationally-recognized overnight
courier, (iii) sent by first class, registered or certified mail, return receipt
requested or (iv) sent by facsimile, in each case to such party at its address
as follows:
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(a) if to the Company, to:
Matthews Studio Equipment Group
3111 North Kenwood Street
Burbank, California 91505
Attention: Carlos DeMattos
Telephone: (818) 525-5217
Facsimile: (818) 525-5216
with a copy to:
Francis W. Costello
Whitman Breed Abbott & Morgan
633 West Fifth Street
Los Angeles, California 90071
Telephone: (213) 896-2452
Telecopier: (213) 896-2450
(b) if to ING, to:
ING Equity Partners, L.P. I
520 Madison Avenue, 33rd Floor
New York, New York 10022
Attention: Benjamin P. Giess
Telephone: (212) 453-1708
Telecopier: (212) 750-2970
with a copy to:
James B. Carlson, Esq.
Mayer, Brown & Platt
1675 Broadway
New York, New York 10019-5820
Telephone: (212) 506-2515
Telecopier: (212) 262-1910
Any notice, demand or request so delivered shall constitute valid notice under
this Warrant and shall be deemed to have been received (i) on the day of actual
delivery in the case of personal delivery, (ii) on the next Business Day after
the date when sent in the case of delivery by
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nationally-recognized overnight courier, (iii) on the fifth Business Day after
the date of deposit in the U.S. mail in the case of mailing or (iv) upon receipt
in the case of a facsimile transmission. Any party hereto may from time to time
by notice in writing served upon the other as aforesaid designate a different
mailing address or a different Person to which all such notices, demands or
requests thereafter are to be addressed.
SECTION 5.2. Voting Rights; Limitations of Liability. No Warrant shall
entitle the Holder thereof to any voting rights or other rights of a stockholder
of the Company, as such. No provision hereof, in the absence of affirmative
action by the Holder to purchase Warrant Shares, and no enumeration herein of
the rights or privileges of the Holder shall give rise to any liability of such
Holder for the Exercise Price of Warrant Shares acquirable by exercise hereof or
as a stockholder of the Company. Each Holder agrees this Warrant is not a
warrant issued to ING pursuant to the Purchase Agreement, as amended to date.
SECTION 5.3. Amendments and Waivers. Any provision of this Warrant may
be amended or waived, but only pursuant to a written agreement signed by the
Company and the Requisite Holders.
SECTION 5.4. Severability. Any provision of this Warrant which is
prohibited or unenforceable in any jurisdiction shall, as to such provision and
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this Warrant
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 5.5. Specific Performance. Each Holder shall have the right to
specific performance by the Company of the provisions of this Warrant, in
addition to any other remedies it may have at law or in equity. The Company
hereby irrevocably waives, to the extent that it may do so under applicable law,
any defense based on the adequacy of a remedy at law which may be asserted as a
bar to the remedy of specific performance in any action brought against the
Company for specific performance of this Warrant by the Holders of the Warrants
or Warrant Shares.
SECTION 5.6. Binding Effect. This Warrant shall be binding upon and
inure to the benefit of the Company, each Holder and their respective successors
and assigns.
SECTION 5.7. Counterparts. This Warrant 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. This
Warrant shall become effective when counterparts hereof executed on behalf of
the Company and each Holder shall have been received.
SECTION 5.8. Governing Law; Entire Agreement. THIS WARRANT AND THE
WARRANTS, SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF NEW YORK. This
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<PAGE>
Warrant and the Warrants, constitute the entire understanding among the parties
hereto with respect to the subject matter hereof and supersede any prior
agreements, written or oral, with respect thereto.
SECTION 5.9. Benefits of this Warrant. Nothing in this Warrant shall be
construed to give to any Person other than the Company and each Holder of a
Warrant or a Warrant Share any legal or equitable right, remedy or claim
hereunder.
SECTION 5.10. Headings. The various headings of this Warrant are
inserted for convenience only and shall not affect the meaning or interpretation
of this Warrant or any provisions hereof or thereof.
SECTION 5.11. Expenses. The Company will promptly (and in any event
within thirty (30) days of receiving any statement or invoice therefor) pay all
reasonable fees, expenses and costs relating hereto, including, but not limited
to, (i) the cost of reproducing this Warrant and the Warrants, (ii) the fees and
disbursements of counsel to the Holder in preparing this Warrant, (iii) all
transfer, stamp, documentary or other similar taxes, assessments or charges
levied by any governmental or revenue authority in respect hereof or any other
document referred to herein, (iv) fees and expenses (including, without
limitation, reasonable attorneys' fees) incurred in respect of the enforcement
by Holders of the rights granted to Holders under this Warrant, and (v) the
expenses relating to the consideration, negotiation, preparation or execution of
any amendments, waivers or consents requested by the Company pursuant to the
provisions hereof, whether or not any such amendments, waivers or consents are
executed.
SECTION 5.12. Attorneys' Fees. In any action or proceeding brought by a
party to enforce any provision of this Warrant, the prevailing party shall be
entitled to recover the reasonable costs and expenses incurred by it in
connection with that action or proceeding (including, but not limited to,
attorneys' fees).
SECTION 5.13. Filings. The Company shall, at its own expense, promptly
execute and deliver, or cause to be executed and delivered, to any holder of
Warrants all applications, certificates, instruments and all other documents and
papers that such holder of Warrants may reasonably request in connection with
the obtaining of any consent, approval, qualification, or authorization of any
federal, provincial, state or local government (or any agency or commission
thereof) necessary or appropriate in connection with, or for the effective
exercise of, any Warrants then held by such holder.
SECTION 5.14. Other Transactions. Nothing contained herein shall
preclude the Holder from engaging in any transaction, in addition to those
contemplated by this Warrant with the Company or any of its Affiliates in which
the Company or such Affiliate is not restricted hereby from engaging with any
other Person.
SECTION 5.15. Forum Selection and Consent to Jurisdiction. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
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<PAGE>
CONNECTION WITH, THIS WARRANT OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE HOLDERS OR THE COMPANY
SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW
YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK; THE COMPANY HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION
OF THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS
SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED
THEREBY IN CONNECTION WITH SUCH LITIGATION. THE COMPANY FURTHER IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY
PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. THE COMPANY HEREBY
EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY
SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT
ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT
THAT THE COMPANY HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF
ANY COURT OF FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE,
ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH
RESPECT TO ITSELF OR ITS PROPERTY, THE COMPANY HEREBY IRREVOCABLY WAIVES SUCH
IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS WARRANT.
SECTION 5.16. Jury Trial. THE COMPANY HEREBY KNOWINGLY, VOLUNTARILY,
AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
WARRANT. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES HERETO CAUSING
THE ISSUANCE OF THE LETTER OF CREDIT AND ENTERING INTO THE REIMBURSEMENT
AGREEMENT AND THE ING SECURITY AGREEMENT. THE COMPANY ACKNOWLEDGES THAT IT HAS
HAD THE ASSISTANCE OF COUNSEL IN THE REVIEW AND EXECUTION OF THIS WARRANT,
INCLUDING THIS SECTION 5.16 HEREOF, AND FURTHER ACKNOWLEDGES THAT THE MEANING
AND EFFECT OF THE FOREGOING WAIVER OF JURY TRIAL HAVE BEEN FULLY EXPLAINED TO
THE COMPANY BY SUCH COUNSEL.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Warrant to be
duly executed and delivered by their authorized officers, all as of the date and
year first above written.
MATTHEWS STUDIO EQUIPMENT GROUP
By:
Name:
Title:
[CORPORATE SEAL]
ATTEST:
By:_________________________
Name:
Title:
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<PAGE>
EXHIBIT A
ARTICLES OF INCORPORATION OF THE COMPANY
<PAGE>
ANNEX 1
ELECTION TO EXERCISE FORM
(To Be Executed By The Holders of This Warrant
In Order to Exercise This Warrant)
The undersigned hereby irrevocably elects to exercise the right to
purchase ______________ shares of Common Stock of Matthews Studio Equipment
Group covered by this Warrant according to the conditions hereof and herewith
makes payment of the Exercise Price of such shares in full.
-----------------------------
Signature
-----------------------------
-----------------------------
Address
Dated: _________________________
<PAGE>
ANNEX 2
ASSIGNMENT FORM
(To Be Executed By The Holder of This Warrant
In Order to Assign This Warrant Certificate)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto _____________________________ this Warrant and all rights evidenced thereby
and does irrevocably constitute and appoint __________________, attorney, to
transfer the said Warrant on the books of the Company.
-----------------------------
Signature
-----------------------------
-----------------------------
Address
Dated: _________________________
<PAGE>
ANNEX 3
EXCHANGE FORM
(To Be Executed By The Holder of This Warrant
In Order to Assign This Warrant Certificate)
The undersigned hereby irrevocably elects to exchange this Warrant to
purchase ___________ shares of Common Stock of Matthews Studio Equipment Group
(the "Company") covered by this Warrant for ___________ Warrants to purchase the
denominations of shares of Common Stock set forth below to the persons named and
hereby sells, assigns and transfers unto such persons that portion of this
Warrant represented by such new Warrants and all rights evidenced thereby and
does irrevocably constitute and appoint ____________________, attorney, to
exchange and transfer this Warrant as aforesaid on the books of the Company.
Number of Warrant Shares Assignee
- ------------ -----------------------------
- ------------ -----------------------------
-----------------------------
Signature
-----------------------------
-----------------------------
Address
FOR USE BY THE COMPANY ONLY:
This Warrant No. __ canceled (or transferred or exchanged) this ________ day of
_____________, _____________ shares of Common Stock issued therefor in the name
of _________________, Warrant No. ___ for __________ shares of Common Stock in
the name of _______________________.
Dated: ____________________________
<PAGE>
SCHEDULE 3.31(b)(iv)
<TABLE>
<CAPTION>
<S> <C>
Description of Options or Convertible Securities Number of Shares
- ------------------------------------------------ ----------------
Options outstanding pursuant to the Company's 1989 Stock
Option Plan, the Company's 1994 Stock Option Plan and the
Company's 1994 Stock Option Plan for Directors 1,483,400
Options granted pursuant to the Amended and Restated
Employment Agreement dated October 1, 1997, between the
Company and Carlos D. DeMattos, the employment terms letter
dated October 1, 1998, between the Company and John D.
Murray and the Employment Agreement dated November 23,
1998, between the Company and Alan Unger 545,000
------------
Warrant issued to DR&A, Inc. dated June 27, 1996 50,000
------------
Total 2,078,400
============
</TABLE>
Execution Copy
THIS WARRANT CERTIFICATE AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE
EXERCISE OF THIS WARRANT CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR FILED OR
QUALIFIED UNDER THE STATE SECURITIES LAW OF CALIFORNIA OR ANY OTHER STATE AND
MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS THEY HAVE BEEN
REGISTERED OR QUALIFIED UNDER SUCH LAWS OR AN EXEMPTION FROM REGISTRATION OR
QUALIFICATION IS AVAILABLE.
MATTHEWS STUDIO EQUIPMENT GROUP
W-__ Warrant to Purchase
300,000 Shares
of Common Stock
January 12, 1999
Common Stock Purchase Warrant
THIS Common Stock Purchase Warrant (the "Warrant") CERTIFIES that, for
value received, ING Equity Partners, L.P. I, a Delaware limited partnership, or
its registered assigns (the "Holder") is entitled to purchase from Matthews
Studio Equipment Group, a California corporation (the "Company"), 300,000 shares
of the Common Stock, no par value (the "Common Stock"), of the Company
(representing 2.13% of the Common Stock outstanding on a Fully Diluted Basis at
the date hereof) at the price (the "Exercise Price") of $2.50 per share (subject
to certain adjustments as set forth in Section 3.3 hereof), at any time or from
time to time during the period commencing on the date hereof and ending at 5:00
P.M. on the tenth anniversary of the date hereof (the "Expiration Date").
This Warrant is subject to the terms and conditions, and entitled to
the benefits, of the following agreements, each dated as of July 27, 1995: (i)
the Stockholders Agreement between, among others, the Company and ING, and (ii)
the Registration Rights Agreement between, among others, the Company and ING (as
amended, supplemented or altered from time to time, the "Stockholders
Agreement," and the "Registration Rights Agreement," respectively).
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. Unless the context shall otherwise require,
capitalized terms used and not defined herein shall have the meanings set forth
in the Amended and Restated Credit Agreement, dated as of April 1, 1998,
between, among others, the Company and The Chase Manhattan Bank (as amended or
otherwise modified from time to time, the "Credit Agreement"). In addition, the
following terms shall have the following meanings:
"Affiliate" shall mean with respect to any Person, (a) any Person which
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such Person, or (b) any Person
who is a director or executive officer (i) of such Person, (ii) of any
Subsidiary of such Person, or (iii) of any Person described in clause (a) above,
or with respect to any Stockholder, the Company; provided, that any Affiliate of
a corporation shall be deemed an Affiliate of such corporation's stockholders.
For purposes of this definition, "control" of a Person shall mean the power,
direct or indirect, (i) to vote or direct the voting of more than 5% of the
outstanding shares of voting stock of such Person, or (ii) to direct or cause
the direction of the management and policies of such Person, whether by contract
or otherwise.
"Assignment Form" shall mean the assignment form attached as Annex 2
hereto.
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which banks within New York, New York are authorized or required to be
closed.
"Closing Date" shall mean the date this Warrant was granted.
"Common Stock" shall mean the Common Stock, no par value, of the
Company, having the terms, conditions, rights and limitations described in the
Articles of Incorporation of the Company attached as Exhibit A hereto.
"Company" shall have the meaning given to such term in the Preamble.
"Convertible Securities" shall have the meaning given to such term in
Section 3.3.1(b).
"Credit Agreement" shall have the meaning given to such term in the
introduction to this Section 1.1.
"Delivery Date" shall have the meaning given to such term in Section
3.2.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
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<PAGE>
"Exchange Form" shall mean the exchange form attached as Annex 3
hereto.
"Excluded Securities" shall mean:
(i) shares of capital stock issued pursuant to a stock
dividend or a stock split or other subdivision of shares;
(ii) Common Stock issued upon exercise of the ING Warrants;
(iii) Common Stock issued by the Company in any public
offering registered under the Securities Act, which offering results in
net proceeds to the Company of at least $10,000,000 and a price per
share of Common Stock of not less than $2.50 (appropriately adjusted to
reflect all recapitalization events);
(iv) securities issued upon conversion, exercise or exchange
of convertible securities, warrants, options, subscriptions, calls or
other rights to acquire Common Stock, provided that the foregoing
rights are (x) outstanding on the date hereof and are issued in
conformity with such rights as issued and in effect at the date hereof,
or (y) are issued hereafter in compliance with Section 4.2 hereof; or
(v) Common Stock issued pursuant to the Company's Amended and
Restated 1989 Stock Option Plan, the Company's 1994 Stock Option Plan,
the Company's 1994 Stock Option Plan for Directors, options granted
pursuant to the Amended and Restated Employment Agreement dated October
1, 1997 between the Company and Carlos D. DeMattos, the employment
terms letter dated October 1, 1998 between the Company and John Murray
and the Employment Agreement dated November 23, 1998 between the
Company and Alan Unger, any other employee benefit plan (including any
future adopted employee stock option plan), and pursuant to any
acquisition permitted under the Purchase Agreement and the Credit
Agreement.
"Exercise Form" shall mean the exercise form attached as Annex 1
hereto.
"Exercise Price" shall mean $2.50 per share of Common Stock, subject to
adjustment from time to time in the manner provided in Section 3.3.
"Expiration Date" shall mean January 12, 2009.
"Fully Diluted Basis" means, as applied to the calculation of the
number of shares of Common Stock outstanding at any time, after giving effect to
(a) all shares of Common Stock outstanding at the time of determination, (b) all
shares of Common Stock issuable upon the conversion, exercise or exchange of any
convertible security, warrant, option, subscriptions, calls or other rights to
acquire Common Stock outstanding at the time of determination, irrespective of
whether such conversion, exercise or exchange is permitted, restricted or vested
at the time of determination, and irrespective of the price or consideration
required by such conversion, exercise or exchange, and (c) all other
commitments, promises or understandings to
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<PAGE>
issue any shares of Common Stock or any convertible security, warrant, option,
subscription, call or other rights outstanding at the time of determination.
Such calculation will reflect the ING Warrants, and will not be made in
accordance with the "treasury method in accordance with GAAP."
"GAAP" shall mean generally accepted accounting principles in the
United States of America in effect from time to time.
"Governmental Authority" shall mean any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, or any court, in each case whether of the United States of
America or foreign.
"Holder" shall have the meaning given to such term in the Preamble.
"ING" shall mean ING Equity Partners, L.P. I, a Delaware limited
partnership.
"ING Security Agreement" shall mean the Security Agreement, dated as of
the Closing Date, between the Company and ING, as amended, supplemented or
altered from time to time.
"ING Warrants" shall mean all Common Stock Purchase Warrants and all
Options issued to ING by the Company as of the date hereof.
"Market Price" shall mean, with respect to a share of Common Stock on
any Business Day:
(a) if the Common Stock is Publicly Traded at the time of
determination, the average of the closing prices for the Common Stock
on all domestic securities exchanges on which such security may at the
time be listed, or, if there have been no sales on any such exchange on
such day, the average of the highest bid and lowest asked prices on all
such exchanges at the end of such day, or, if on any day such security
is not so listed, the average of the representative bid and asked
prices quoted on the Nasdaq Stock Market as of 4:00 P.M., New York
time, on such day, or if on any day such security is not quoted on the
Nasdaq Stock Market, the average of the highest bid and lowest asked
prices on such day in the domestic over-the-counter market as reported
by the National Quotation Bureau, Incorporated, or any similar
successor organization, in each such case averaged over a period of
twenty-one (21) days consisting of the day as of which "Market Price"
is being determined and the twenty (20) consecutive Business Days prior
to such day; or
(b) if the Common Stock is not Publicly Traded at the time of
determination then, solely for purposes of Section 3, then the Market
Price shall be the Market Value Per Share.
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<PAGE>
"Market Value" shall mean the highest price that would be paid for all
of the Common Stock of the Company on a going-concern basis in a single
arm's-length transaction between a willing buyer and a willing seller (neither
acting under compulsion), using valuation techniques then prevailing in the
securities industry and always determined in accordance with the Valuation
Procedures, and assuming full disclosure and understanding of all relevant
information and a reasonable period of time for effectuating such sale. For the
purposes of determining the Market Value, (i) the exercise price of options,
warrants or rights to acquire Common Stock which are included for the purpose of
determining the number of shares of Common Stock outstanding on a Fully Diluted
Basis shall be deemed to have been received by the Company if and to the extent
that the aggregate Market Value of such shares of Common Stock exceeds the
aggregate exercise price of such options, warrants or rights, (ii) the
liquidation preference or indebtedness, as the case may be, represented by
securities which are included for the purpose of determining the number of
shares of Common Stock outstanding on a Fully Diluted Basis shall be deemed to
be converted or exchanged if and to the extent that the aggregate Market Value
of such shares of Common Stock exceeds the aggregate amount of such liquidation
preference or indebtedness, (iii) any contract or legal limitation in respect of
the shares of Common Stock, including their transfer, voting and other rights
shall be ignored, and (iv) any illiquidity arising by contract or law in respect
of the shares of Common Stock and any voting rights or control rights amongst
the Stockholders, shall be ignored.
"Market Value Per Share" shall mean the price per share of Common Stock
obtained by dividing (A) the Market Value by (B) the number of shares of Common
Stock outstanding (on a Fully-Diluted Basis) at the time of determination.
"Nasdaq Stock Market" shall mean the Nasdaq National Market or the
Nasdaq SmallCap Market.
"Options" shall have the meaning given to such term in Section 3.3.1(b)
hereof.
"Other Anti-Dilution Instruments" shall mean any option, warrant,
convertible security, subscription, call or other rights to acquire Common Stock
whether outstanding as of the date hereof or hereafter issued, together with any
agreements relating thereto, which provide for anti-dilution or other
adjustments in the number of shares of Common Stock and/or exercise, exchange or
conversion price thereof.
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
institution, public benefit corporation, limited liability company, joint stock
company, estate entity or Governmental Authority.
"Proportionate Percentage" shall mean, with respect to any Holder at
any time, the quotient obtained by dividing (a) the aggregate number of Warrant
Shares and other shares of Common Stock then held by such Holder by (b) the
total number of shares of Common Stock then outstanding (on a Fully-Diluted
Basis).
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<PAGE>
"Publicly Traded" shall mean, with respect to any security, that such
security is (a) listed on a domestic securities exchange, (b) quoted on the
Nasdaq Stock Market or (c) traded in the domestic over-the-counter market, which
trades are reported by the National Quotation Bureau, Incorporated, and in the
cases of clauses (b) and (c), the average weekly trading volume on the 20
trading days preceding the time of determination equals or exceeds 1/2 of 1% of
the outstanding Common Stock on a Fully Diluted Basis.
"Purchase Agreement" shall mean the Purchase Agreement dated as of July
27, 1995 between the Company and ING, as amended from time to time.
"Refused Securities" shall have the meaning given to such term in
Section 4.2(c).
"Registration Rights Agreement" shall have the meaning given to such
term in the Preamble.
"Reimbursement Agreement" means the Reimbursement Agreement, dated as
of the Closing Date, between the Company and ING, as amended, supplemented or
altered from time to time.
"Requisite Holders" shall mean Holders holding ING Warrants or
securities representing at least 51% of all securities issued or issuable upon
exercise of the ING Warrants outstanding on the date of determination.
"Section 4.2 Notice of Acceptance" shall have the meaning given to such
term in Section 4.2 hereof.
"Section 4.2 Offer" shall have the meaning given to such term in
Section 4.2 hereof.
"Section 4.2 Offer Notice" shall have the meaning given to such term in
Section 4.2 hereof.
"Section 4.2 Offered Securities" shall have the meaning given to such
term in Section 4.2(a).
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Standby Letter of Credit" shall mean the Standby Letter of Credit
issued by ING (U.S.) Capital Corporation as of the date hereof for the account
of the Company and in favor of The Chase Manhattan Bank, as agent for the
Lenders.
"Stockholders Agreement" shall have the meaning given to such term in
the Preamble.
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<PAGE>
"Valuation Procedure" shall mean, with respect to the determination of
any amount or value required to be determined in accordance with such procedure,
a determination (which shall be final and binding on the Company and the
Holders) made (i) by agreement among the Company and the Requisite Holders
within thirty (30) days following the event requiring such determination or (ii)
in the absence of such an agreement, by an Appraiser (as defined below) selected
in accordance with the further provisions of this definition. If required, an
Appraiser shall be selected within 10 days following the expiration of the
30-day period referred to above, either by agreement among the Company and the
Requisite Holders or, in the absence of such agreement, by lot from a list of
four potential Appraisers remaining after the Company nominates three, the
Requisite Holders nominate three, and each side eliminates one potential
Appraiser. The Appraiser shall be instructed by the Company and the Requisite
Holders to make its determination within thirty (30) days of its selection. The
fees and expenses of an Appraiser selected hereunder shall be borne fifty
percent (50%) by the Company and fifty percent (50%) by the Holders (on a pro
rata basis) participating in the transaction to which the determination relates.
As used herein, "Appraiser" shall mean (a) with respect to a determination of
Market Value, a nationally-recognized investment banking firm and (b) with
respect to a determination of Liquidation Value (or any other valuation required
hereunder), a firm of the type generally considered to be qualified in making
determinations of the type required.
"Warrant" shall have the meaning given to such term in the Preamble.
"Warrant Register" shall have the meaning given to such term in Section
2.1.
"Warrant Shares" shall mean (a) the shares of Common Stock issued or
issuable upon exercise of a Warrant in accordance with Section 4.1 or upon
exchange of a Warrant in accordance with Section 4.2 and (b) any securities of
the Company distributed with respect to the securities referred to in the
preceding clause (a). As used in this Warrant, the phrase "Warrant Shares then
held" by any Holder or Holders shall mean Warrant Shares held at the time of
determination by such Holder or Holders, and shall include Warrant Shares
issuable upon exercise of ING Warrants held at the time of determination by such
Holder or Holders.
SECTION 1.2. Interpretation. Unless the context of this Warrant clearly
requires otherwise, references to the plural include the singular, to the
singular include the plural, and to the part include the whole. The term
"including" is not limiting and the term "or" has the inclusive meaning
represented by the term "and/or." The words "hereof," "herein," "hereunder," and
similar terms in this Warrant refer to this Warrant as a whole and not to any
particular provision of this Warrant. References to "Articles," "Sections,"
"Subsections," "Exhibits," and "Schedules" are to Articles, Sections,
Subsections, Exhibits and Schedules, respectively, of this Warrant, unless
otherwise specifically provided. Terms defined herein may be used in the
singular or the plural.
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<PAGE>
ARTICLE II
FORM; EXCHANGE FOR WARRANTS; TRANSFER; TAXES
SECTION 2.1. Warrant Register. Each Warrant issued, exchanged or
transferred in accordance with the terms hereof shall be registered in a warrant
register (the "Warrant Register"). The Warrant Register shall set forth the
number of each Warrant, the name and address of the Holder thereof, and the
original number of Warrant Shares purchasable upon the exercise thereof. The
Warrant Register will be maintained by the Company and will be available for
inspection by any Holder at the principal office of the Company or such other
location as the Company may designate to the Holders in the manner set forth in
Section 5.1. The Company shall be entitled to treat the Holder of any Warrant as
the owner in fact thereof for all purposes and shall not be bound to recognize
any equitable or other claim to or interest in such Warrant on the part of any
other Person. The Company shall not be liable for complying with a request by a
fiduciary or nominee of a fiduciary to register a transfer of any Warrant which
is registered in the name of such fiduciary or nominee, unless made with the
actual knowledge that such fiduciary or nominee is committing a breach of trust
in requesting such registration of transfer, or with knowledge of such facts
that the Company's participation therein amounts to bad faith.
SECTION 2.2. Exchange of Warrants for Warrants. (a) The Holder may
exchange this Warrant for another Warrant or Warrants of like kind and tenor
representing in the aggregate the right to purchase the same number of Warrant
Shares which could be purchased pursuant to the Warrant being so exchanged. In
order to effect an exchange permitted by this Section 2.2, the Holder shall
deliver to the Company such Warrant accompanied by an Exchange Form in the form
attached hereto as Annex 3 signed by the Holder thereof specifying the number
and denominations of Warrants to be issued in such exchange and the names in
which such Warrants are to be issued. Within ten (10) Business Days of receipt
of such a request, the Company shall issue, register and deliver to the Holder
thereof each Warrant to be issued in such exchange.
(b) Upon receipt of evidence reasonably satisfactory to the Company (an
affidavit of the Holder being satisfactory) of the ownership and the loss,
theft, destruction or mutilation of any Warrant, and in the case of any such
loss, theft or destruction, upon receipt of an indemnity reasonably satisfactory
to the Company (if the Holder is a creditworthy financial institution or other
creditworthy institutional investor its own agreement being satisfactory) or, in
the case of any such mutilation, upon surrender of such Warrant, the Company
shall (at its expense) execute and deliver in lieu of such Warrant a new Warrant
of like kind representing the same rights represented by and dated the date of
such lost, stolen, destroyed or mutilated Warrant. Any such new Warrant shall
constitute an original contractual obligation of the Company, whether or not the
allegedly lost, stolen, mutilated or destroyed Warrant shall be at any time
enforceable by any Person.
(c) The Company shall pay all taxes (other than any applicable income
or similar taxes payable by a Holder of a Warrant) attributable to an exchange
of a Warrant
-8-
<PAGE>
pursuant to this Section 2.2; provided, however, that the Company shall not be
required to pay any tax which may be payable in respect of any transfer involved
in the issuance of any Warrant in a name other than that of the Holder of the
Warrant being exchanged.
SECTION 2.3. Transfer of Warrant. (a) Subject to Section 2.3(c) hereof,
each Warrant may be transferred by the Holder thereof by delivering to the
Company such Warrant accompanied by a properly completed Assignment Form in the
form of Annex 2. Within ten (10) Business Days of receipt of such Assignment
Form the Company shall issue, register and deliver to the Holder, subject to
Section 2.3(c) hereof, a new Warrant or Warrants of like kind and tenor
representing in the aggregate the right to purchase the same number of Warrant
Shares which could be purchased pursuant to the Warrant being transferred. In
all cases of transfer by an attorney, the original power of attorney, duly
approved, or a copy thereof, duly certified, shall be deposited and remain with
the Company. In case of transfer by executors, administrators, guardians or
other legal representatives, duly authenticated evidence of their authority
shall be produced and may be required to be deposited and remain with the
Company in its discretion.
(b) Each Warrant issued in accordance with this Section 2.3 shall bear
the restrictive legend set forth on the face of this Warrant, unless the Holder
or transferee thereof supplies to the Company an opinion of counsel, reasonably
satisfactory to the Company, that the restrictions described in such legend are
no longer applicable to such Warrant.
(c) The transfer of Warrants and Warrant Shares shall be permitted, so
long as such transfer is pursuant to a transaction that (i) complies with, or is
exempt from, the provisions of the Securities Act, and the Company may require
an opinion of counsel (which may be internal counsel to a Holder) in form and
substance reasonably satisfactory to it to such effect prior to effecting any
transfer of Warrants or Warrant Shares and (ii) complies with the applicable
provisions of the Stockholders Agreement.
ARTICLE III
EXERCISE OF WARRANT; EXCHANGE FOR WARRANT SHARES
SECTION 3.1. Exercise of Warrants. On any Business Day prior to the
Expiration Date, a Holder may exercise a Warrant, in whole or in part, by
delivering to the Company such Warrant accompanied by a properly completed
Exercise Form in the form of Annex 1 and a check in an aggregate amount equal to
the product obtained by multiplying (a) the Exercise Price by (b) the number of
Warrant Shares being purchased; provided, however, in the event the Holder
exercises this Warrant in connection with or immediately prior to a sale by the
Holder of Warrant Shares, in lieu of paying the applicable Exercise Price
therefor, the Holder may elect to receive that number of Warrant Shares which is
equal to the number of shares for which this Warrant is being exercised less the
number of shares having a Market Price equal to such applicable Exercise Price,
where such Market Price per share shall be equal to the price per
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share at which the Holder is selling Warrant Shares. Any partial exercise of a
Warrant shall be for a whole number of Warrant Shares only.
SECTION 3.2. Issuance of Common Stock. (a) Within ten (10) Business
Days following the delivery date (the "Delivery Date") of (i) an Exercise Form
or Exchange Form in accordance with Section 3.1 or 3.2, (ii) a Warrant and (iii)
any required payments of the Exercise Price, the Company shall issue and deliver
to the Holder a certificate or certificates, registered in the name or names set
forth on such notice, representing the Warrant Shares being purchased or to be
received upon such exchange.
(b) If a Holder shall exercise or exchange a Warrant for less than all
of the Warrant Shares which could be purchased or received thereunder, the
Company shall issue to the Holder, within ten (10) Business Days of the Delivery
Date, a new Warrant evidencing the right to purchase the remaining Warrant
Shares. Each Warrant surrendered pursuant to Section 3.1 shall be canceled.
(c) The Company shall not be required to issue fractional shares of
Common Stock upon the exercise or exchange of a Warrant. If any fraction of a
share of Common Stock would be issuable on the exercise or exchange of any
Warrant, the Company may, in lieu of issuing such fractional share, pay to such
Holder for any such fraction of a share an amount in cash equal to the product
obtained by multiplying (i) such fraction by (ii) the Market Price in effect on
the Delivery Date.
(d) The Company shall pay all taxes (other than any applicable income
or similar taxes payable by a Holder of a Warrant) attributable to the initial
issuance of Warrant Shares upon the exercise or exchange of a Warrant; provided,
however, that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance of any Warrant or
any certificate for Warrant Shares in a name other than that of the Holder of
the Warrant being exercised or exchanged.
(e) The Person in whose name any certificate for shares of Common Stock
is issued upon exercise or exchange of a Warrant shall for all purposes be
deemed to have become the holder of record of such shares on the Delivery Date,
irrespective of the date of delivery of such certificate, except that, if the
Delivery Date is a date when the stock transfer books of the Company are closed,
such Person shall be deemed to have become the holder of record of such shares
at the close of business on the next succeeding date on which the stock transfer
books are open.
(f) Any Exercise Form or Exchange Form delivered under Section 3.1 or
2.2 may condition the exercise or exchange of any Warrant on the consummation of
a sale of Warrant Shares pursuant to a public offering registered under the
Securities Act, and such exercise or exchange shall not be deemed to have
occurred except concurrently with the consummation of any such sale.
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SECTION 3.3. Adjustment of Exercise Price and Number of Warrant Shares.
The number and kind of Warrant Shares purchasable upon exercise of each Warrant
shall be subject to adjustment from time to time in accordance with this Section
3.3.
SECTION 3.3.1. Adjustment upon Issuance of Common Stock. (a) If, at any
time after the Closing Date, the Company shall issue or sell (or, in accordance
with Section 3.3.1(b), shall be deemed to have issued or sold) any shares of
Common Stock without consideration or for a consideration per share less than
either the Market Price determined as of the date of such issuance or sale or
the Exercise Price in effect immediately prior to such issuance or sale, then,
effective immediately upon such issuance or sale, the Exercise Price shall be
reduced (without regard to any other provisions hereof) to an amount equal to
the product obtained by multiplying (A) the Exercise Price in effect immediately
prior to such issuance or sale, by (B) a fraction, the numerator of which shall
be the sum of (x) the product obtained by multiplying (1) the number of shares
of Common Stock outstanding (on a Fully-Diluted Basis) immediately prior to such
issuance or sale by (2) the lesser of the Market Price as of the date of such
issuance or sale and the Exercise Price in effect immediately prior to such
issuance or sale, and (y) the consideration, if any, received by the Company
upon such issuance or sale, and the denominator of which shall be the product
obtained by multiplying (C) the number of shares of Common Stock outstanding (on
a Fully-Diluted Basis) immediately after such issuance or sale, by (D) the
lesser of the Market Price as of the date of issuance or sale and the Exercise
Price in effect immediately prior to such issuance or sale. Upon each such
adjustment of the Exercise Price hereunder, the number of Warrant Shares which
may be obtained upon exercise of such Warrant shall be increased to the number
of shares determined by multiplying (A) the number of Warrant Shares which could
be obtained upon exercise of such Warrant immediately prior to such adjustment
by (B) a fraction, the numerator of which shall be the Exercise Price in effect
immediately prior to such adjustment and the denominator of which shall be the
Exercise Price in effect immediately after such adjustment.
(b) For the purpose of determining the adjusted Exercise Price under
Section 3.3.1(a), the following shall be applicable:
(i) Issuance of Rights or Options. If the Company in any
manner issues or grants any rights or options to subscribe for or to
purchase (A) Common Stock or (B) any stock or other securities
convertible into or exchangeable for Common Stock (such rights or
options being herein called "Options" and such convertible or
exchangeable stock or securities being herein called "Convertible
Securities"), and the price per share for which Common Stock is
issuable upon the exercise of such Options or upon conversion or
exchange of such Convertible Securities is less than either the Market
Price determined as of the date of issuance or grant of such Options or
the Exercise Price in effect immediately prior to such issuance or
grant of such Options, then the total maximum number of shares of
Common Stock issuable upon the exercise of such Options (or upon
conversion or exchange of the total maximum amount of such Convertible
Securities issuable upon the exercise of such Options) shall be deemed
to be outstanding and to have been issued and sold by the Company for
such price per share. For purposes of this
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paragraph, the price per share for which Common Stock is issuable upon
exercise of Options or upon conversion or exchange of Convertible
Securities issuable upon exercise of Options shall be determined by
dividing (A) the total amount, if any, received or receivable by the
Company as consideration for the issuing or granting of such Options,
plus the minimum aggregate amount of additional consideration payable
to the Company upon the exercise of all such Options, plus in the case
of such Options which relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable to the
Company upon issuance or sale of such Convertible Securities and the
conversion or exchange thereof, by (B) the total maximum number of
shares of Common Stock issuable upon exercise of such Options or upon
the conversion or exchange of all such Convertible Securities issuable
upon the exercise of such Options. No further adjustment of the
Exercise Price shall be made upon the actual issuance of such Common
Stock or of such Convertible Securities upon the Exercise of such
Options or upon the actual issuance of such Common Stock upon
conversion or exchange of such Convertible Securities.
(ii) Issuance of Convertible Securities. If the Company in any
manner issues or sells any Convertible Securities having an exercise or
conversion or exchange price per share of Common Stock which is less
than either the Market Price determined as of the date of such issuance
or sale or the Exercise Price in effect immediately prior to such
issuance or sale, then the maximum number of shares of Common Stock
issuable upon the conversion or exchange of such Convertible Securities
shall be deemed to be outstanding and to have been issued and sold by
the Company for such lower price per share. For purposes of this
paragraph, the price per share for which Common Stock is issuable upon
conversion or exchange of Convertible Securities is determined by
dividing (A) the total amount received or receivable by the Company as
consideration for the issuance or sale of such Convertible Securities,
plus the minimum aggregate amount of additional consideration, if any,
payable to the Company upon the conversion or exchange thereof, by (B)
the total maximum number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities. No further
adjustment of the Exercise Price shall be made upon the actual issuance
of such Common Stock upon conversion or exchange of such Convertible
Securities, and if any such issuance or sale of such Convertible
Securities is made upon exercise of any Options for which adjustments
of the Exercise Price had been or are required to be made pursuant to
other provisions of this Section 3.4.1(b), no further adjustment of the
Exercise Price shall be made by reason of such issuance or sale.
(iii) Change in Option Price or Conversion Rate. If the
purchase price provided for in any Options, the additional
consideration, if any, payable upon the issuance, conversion or
exchange of any Convertible Securities, or the rate at which any
Convertible Securities are convertible into or exchangeable for Common
Stock change at any time, then the Exercise Price in effect at the time
of such change shall be readjusted to the Exercise Price which would
have been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed purchase price,
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additional consideration or changed conversion rate, as the case may
be, at the time initially granted, issued or sold and the number of
Warrant Shares shall be correspondingly readjusted.
(iv) Treatment of Expired Options and Unexercised Convertible
Securities. Upon the expiration of any Option or the termination of any
right to convert or exchange any Convertible Securities listed on
Schedule 3.3.1(b)(iv) without the exercise of such Option or right, the
Exercise Price then in effect and the number of Warrant Shares
acquirable hereunder shall be adjusted to the Exercise Price and the
number of shares which would have been in effect at the time of such
expiration or termination had such Option or Convertible Securities, to
the extent outstanding immediately prior to such expiration or
termination, never been issued.
(v) Calculation of Consideration Received. If any Common
Stock, Options or Convertible Securities are issued or sold or deemed
to have been issued or sold for cash, then the consideration received
therefor shall be deemed to be the net amount received by the Company
therefor. If any Common Stock, Options or Convertible Securities are
issued or sold for consideration other than cash, then the amount of
the consideration other than cash received by the Company shall be the
fair value of such consideration determined by the Board of Directors
of the Company.
(vi) Treasury Shares. The number of shares of Common Stock
outstanding at any given time does not include shares owned or held by
or for the account of the Company or any Subsidiary of the Company, and
the disposition of any shares so owned or held shall be considered an
issue or sale of Common Stock.
(vii) Record Date. If the Company takes a record of the
holders of Common Stock for the purpose of entitling them (A) to
receive a dividend or other distribution payable in Common Stock,
Options or in Convertible Securities or (B) to subscribe for or
purchase Common Stock, Options or Convertible Securities, then such
record date shall be deemed to be the date of the issuance or sale of
the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution
or the date of the granting of such right of subscription or purchase,
as the case may be.
SECTION 3.3.2. Subdivisions or Combinations of Common Stock. If, at any
time after the Closing Date, (a) the number of shares of Common Stock
outstanding is increased by a dividend or other distribution payable in shares
of Common Stock or by a subdivision or split-up of shares of Common Stock or (b)
the number of shares of Common Stock outstanding is decreased by a combination
or reverse stock split of shares of Common Stock, then, in each case, effective
as of the effective date of such event retroactive to the record date, if any,
of such event, (i) the Exercise Price shall be adjusted to a price determined by
multiplying (A) the Exercise Price in effect immediately prior to such event by
(B) a fraction, the numerator of which shall be the number of shares of Common
Stock outstanding immediately prior to such
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event and the denominator of which shall be the number of shares of Common Stock
outstanding after giving effect to such event, and (ii) the number of Warrant
Shares subject to purchase upon the exercise of any Warrant shall be adjusted
effective at such time, to a number equal to the product of (A) the number of
Warrant Shares subject to purchase upon the exercise of such Warrant immediately
prior to such event by (B) a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding after giving effect to such event
and the denominator of which shall be the number of shares of Common Stock
outstanding immediately prior to such event.
SECTION 3.3.3. Capital Reorganization or Capital Reclassifications. If,
at any time after the Closing Date, there shall be any capital reorganization or
any reclassification of the capital stock of the Company (other than a change in
par value or from par value to no par value or from no par value to par value or
as a result of a stock dividend or subdivision, split-up or combination of
shares), then in each case the Company shall cause effective provision to be
made so that each Warrant shall, effective as of the effective date of such
event retroactive to the record date, if any, of such event, be exercisable or
exchangeable for the kind and number of shares of stock, other securities, cash
or other property to which a holder of the number of shares of Common Stock
deliverable upon exercise or exchange of such Warrant would have been entitled
upon such reorganization or reclassification and any such provision shall
include adjustments in respect of such stock, securities or other property that
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Warrant with respect to such Warrant.
SECTION 3.3.4. Consolidations and Mergers. If, at any time after the
Closing Date, the Company shall consolidate with, merge with or into, or sell
all or substantially all of its assets or property to, another corporation, then
the Company shall cause effective provision to be made so that each Warrant
shall, effective as of the effective date of such event retroactive to the
record date, if any, of such event, be exercisable or exchangeable for the kind
and number of shares of stock, other securities, cash or other property to which
a holder of the number of shares of Common Stock deliverable upon exercise or
exchange of such Warrant would have been entitled upon such event.
SECTION 3.3.5. Notice; Calculations; Etc. Whenever the Exercise Price
and the number of Warrant Shares shall be adjusted as provided in this Section
3.3, the Company shall provide to each Holder a statement, signed by the
President or Chief Financial Officer/Treasurer of the Company, describing in
detail the facts requiring such adjustment and setting forth a calculation of
the Exercise Price and the number of Warrant Shares applicable to each Warrant
after giving effect to such adjustment. All calculations under this Section 3.3
shall be made to the nearest one hundredth of a cent ($.0001) or to the nearest
one-tenth of a share, as the case may be. Adjustments pursuant to Sections
3.3.1, 3.3.2 and 3.3.3 shall apply to successive events or transactions of the
type covered thereby.
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SECTION 3.3.6. Certain Adjustments. (a) Subject to the limitations set
forth in Section 4.5, the Company may make such reductions in the Exercise Price
or increase in the number of Warrant Shares to be received by any Holder upon
the exercise or exchange of a Warrant, in addition to those adjustments required
by this Section 3.3, as it in its sole discretion shall determine to be
advisable in order that any consolidation or subdivision of the Common Stock, or
any issuance wholly for cash of any shares of Common Stock, or any issuance
wholly for cash or shares of Common Stock or securities which by their terms are
convertible into or exchangeable for shares of Common Stock, or any stock
dividend, or any issuance of rights, options or warrants hereinafter made by the
Company to the holders of its Common Stock shall not be taxable to such holders.
(b) In the event that the Company in any manner issues or grants
Options or Convertible Securities, or any other transaction, circumstances or
events occur which give rise to anti-dilution adjustments under Other
Anti-Dilution Instruments, then the Company will promptly make proportional,
equitable and corresponding adjustments in the number of shares of Common Stock
issuable upon exercise of the Warrants to protect the Holders against dilution
as a result of such events.
SECTION 3.3.7. Excluded Transactions. Notwithstanding any other
provision of this Warrant, no adjustment shall be made pursuant to this Section
3.3 in respect of the issuance of Excluded Securities.
SECTION 3.3.8. Adjustment Rules. (a) Any adjustments pursuant to this
Section 3.3 shall be made successively whenever an event referred to herein
shall occur.
(b) Notwithstanding any other provision of this Warrant, the actual
amount payable by a Holder in connection with the exercise of a Warrant
hereunder shall not be less than the par value per share of the Common Stock,
unless and until the Exercise Price, as adjusted pursuant to this Section 3.3,
has been reduced to an amount less than 1% of the par value per share of the
Common Stock. Before taking any action which would cause an adjustment pursuant
to this Section 3.3 which would reduce the Exercise Price below 1% of the par
value per share, the Company shall be required to take any corporate action
which may be necessary in order that the Company may validly and legally issue
fully paid and nonassessable Warrant Shares at the Exercise Price as so
adjusted.
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ARTICLE IV
CERTAIN OTHER RIGHTS
SECTION 4.1. Payments in Respect of Dividends and Distributions. If, at
any time prior to the Expiration Date, the Company pays any dividend, other than
in the ordinary course of business and to the Company's public stockholders, or
makes any distribution (whether in cash, property or securities of the Company)
on its capital stock which does not result in an adjustment under Section 3.3
then the Company shall simultaneously pay to the Holder of each Warrant, the
dividend or distribution which would have been paid to such Holder on the
Warrant Shares receivable upon the exercise in full of such Warrant had such
Warrant been fully exercised immediately prior to the record date for such
dividend or distribution or, if no record is taken, the date as of which the
record holders of Common Stock entitled to such dividend or distribution are to
be determined.
SECTION 4.2. Preemptive Rights. (a) The Company shall not issue, sell
or exchange, agree to issue, sell or exchange, or reserve or set aside for
issuance, sale or exchange, any (i) Common Stock, (ii) any other equity security
of the Company, (iii) any debt security of the Company which by its terms are
convertible into or exchangeable for any equity security of the Company or has
any other equity feature, (iv) any security of the Company that is a combination
of debt and equity or (v) any option, warrant or other right to subscribe for,
purchase or otherwise acquire any equity security or any such debt security of
the Company, unless, in each case, the Company shall have first offered (the
"Section 4.2 Offer") to sell to each Holder its Proportionate Percentage of such
securities (the "Section 4.2 Offered Securities") (and to sell thereto Section
4.2 Offered Securities not subscribed for by other Holders as hereinafter
provided), at a price and on such other terms as shall have been specified by
the Company in a written notice (the "Section 4.2 Offer Notice") delivered to
such Holder, which Offer by its terms shall remain open and irrevocable for a
period of ten (10) Business Days from the date it is delivered by the Company to
the Holders.
(b) Notice of each Holder's intention to accept, in whole or in part, a
Section 4.2 Offer shall be evidenced by a writing signed by such Holder and
delivered to the Company prior to the end of the 10-day period of such Section
4.2 Offer, setting forth such portion of the Section 4.2 Offered Securities as
such Holder elects to purchase (the "Section 4.2 Notice of Acceptance"). If any
Holder shall subscribe for less than its Proportionate Percentage of the Section
4.2 Offered Securities available to such Holder, the other subscribing Holders
shall be entitled to purchase the balance of such Holder's Proportionate
Percentage in the same proportion in which they were initially entitled to
purchase the Section 4.2 Offered Securities (excluding for such purposes such
Holder subscribing for less than its Proportionate Percentage). The Company
shall notify each other Holder within five (5) Business Days following the
expiration of the 10-day period described above of the amount of Section 4.2
Offered Securities which each Holder may purchase pursuant to the foregoing
sentence, and each Holder shall then have five (5) Business Days from the
delivery of such notice to indicate such additional amount, if any, that such
Holder wishes to purchase.
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(c) In the event that Section 4.2 Notices of Acceptance are not given
by the Holders in respect of all the Section 4.2 Offered Securities, the Company
shall have ninety (90) days from the expiration of the foregoing 10-day or
20-day period, as applicable, to sell all or any part of such Section 4.2
Offered Securities as to which Section 4.2 Notices of Acceptance have not been
given by the Holders (the "Refused Securities") to any other Person or Persons,
but only upon terms and conditions in all respects (including, without
limitation, unit price and interest rates) which are no more favorable, in the
aggregate, to such other Person or Persons or less favorable to the Company than
those set forth in the Section 4.2 Offer. Upon the closing of the sale of the
Refused Securities, the Holders shall purchase from the Company, and the Company
shall sell to the Holders, the Section 4.2 Offered Securities in respect of
which Section 4.2 Notices of Acceptance were delivered to the Company, at the
terms specified in the Section 4.2 Offer.
(d) The preemptive rights granted in this Section 4.2 shall not apply
to the issuance or sale of Excluded Securities.
(e) The preemptive rights granted in this Section 4.2 shall apply only
to Holders who are not parties to the Stockholders Agreement.
(f) The Holder hereof and any transferee shall have the benefit of the
Registration Rights set forth in the Stockholders Agreement, whether or not the
Holder or transferee is a party to the Stockholders Agreement or the
Registration Rights Agreement.
SECTION 4.3. Fiduciary Duties of the Company. The Company and its
directors shall owe the Holders of the Warrants the same fiduciary duties that
the Company and its directors would owe to the Warrant Shares underlying the
Warrants.
ARTICLE V
MISCELLANEOUS
SECTION 5.1. Notices. All notices, demands and requests of any kind to
be delivered to any party hereto in connection with this Warrant shall be in
writing (i) delivered personally, (ii) sent by nationally-recognized overnight
courier, (iii) sent by first class, registered or certified mail, return receipt
requested or (iv) sent by facsimile, in each case to such party at its address
as follows:
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(a) if to the Company, to:
Matthews Studio Equipment Group
3111 North Kenwood Street
Burbank, California 91505
Attention: Carlos DeMattos
Telephone: (818) 525-5217
Facsimile: (818) 525-5216
with a copy to:
Francis W. Costello
Whitman Breed Abbott & Morgan
633 West Fifth Street
Los Angeles, California 90071
Telephone: (213) 896-2452
Telecopier: (213) 896-2450
(b) if to ING, to:
ING Equity Partners, L.P. I
520 Madison Avenue, 33rd Floor
New York, New York 10022
Attention: Benjamin P. Giess
Telephone: (212) 453-1708
Telecopier: (212) 750-2970
with a copy to:
James B. Carlson, Esq.
Mayer, Brown & Platt
1675 Broadway
New York, New York 10019-5820
Telephone: (212) 506-2515
Telecopier: (212) 262-1910
Any notice, demand or request so delivered shall constitute valid notice under
this Warrant and shall be deemed to have been received (i) on the day of actual
delivery in the case of personal delivery, (ii) on the next Business Day after
the date when sent in the case of delivery by
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nationally-recognized overnight courier, (iii) on the fifth Business Day after
the date of deposit in the U.S. mail in the case of mailing or (iv) upon receipt
in the case of a facsimile transmission. Any party hereto may from time to time
by notice in writing served upon the other as aforesaid designate a different
mailing address or a different Person to which all such notices, demands or
requests thereafter are to be addressed.
SECTION 5.2. Voting Rights; Limitations of Liability. No Warrant shall
entitle the Holder thereof to any voting rights or other rights of a stockholder
of the Company, as such. No provision hereof, in the absence of affirmative
action by the Holder to purchase Warrant Shares, and no enumeration herein of
the rights or privileges of the Holder shall give rise to any liability of such
Holder for the Exercise Price of Warrant Shares acquirable by exercise hereof or
as a stockholder of the Company. Each Holder agrees this Warrant is not a
warrant issued to ING pursuant to the Purchase Agreement, as amended to date.
SECTION 5.3. Amendments and Waivers. Any provision of this Warrant may
be amended or waived, but only pursuant to a written agreement signed by the
Company and the Requisite Holders.
SECTION 5.4. Severability. Any provision of this Warrant which is
prohibited or unenforceable in any jurisdiction shall, as to such provision and
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this Warrant
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 5.5. Specific Performance. Each Holder shall have the right to
specific performance by the Company of the provisions of this Warrant, in
addition to any other remedies it may have at law or in equity. The Company
hereby irrevocably waives, to the extent that it may do so under applicable law,
any defense based on the adequacy of a remedy at law which may be asserted as a
bar to the remedy of specific performance in any action brought against the
Company for specific performance of this Warrant by the Holders of the Warrants
or Warrant Shares.
SECTION 5.6. Binding Effect. This Warrant shall be binding upon and
inure to the benefit of the Company, each Holder and their respective successors
and assigns.
SECTION 5.7. Counterparts. This Warrant 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. This
Warrant shall become effective when counterparts hereof executed on behalf of
the Company and each Holder shall have been received.
SECTION 5.8. Governing Law; Entire Agreement. THIS WARRANT AND THE
WARRANTS, SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF NEW YORK. This
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Warrant and the Warrants, constitute the entire understanding among the parties
hereto with respect to the subject matter hereof and supersede any prior
agreements, written or oral, with respect thereto.
SECTION 5.9. Benefits of this Warrant. Nothing in this Warrant shall be
construed to give to any Person other than the Company and each Holder of a
Warrant or a Warrant Share any legal or equitable right, remedy or claim
hereunder.
SECTION 5.10. Headings. The various headings of this Warrant are
inserted for convenience only and shall not affect the meaning or interpretation
of this Warrant or any provisions hereof or thereof.
SECTION 5.11. Expenses. The Company will promptly (and in any event
within thirty (30) days of receiving any statement or invoice therefor) pay all
reasonable fees, expenses and costs relating hereto, including, but not limited
to, (i) the cost of reproducing this Warrant and the Warrants, (ii) the fees and
disbursements of counsel to the Holder in preparing this Warrant, (iii) all
transfer, stamp, documentary or other similar taxes, assessments or charges
levied by any governmental or revenue authority in respect hereof or any other
document referred to herein, (iv) fees and expenses (including, without
limitation, reasonable attorneys' fees) incurred in respect of the enforcement
by Holders of the rights granted to Holders under this Warrant, and (v) the
expenses relating to the consideration, negotiation, preparation or execution of
any amendments, waivers or consents requested by the Company pursuant to the
provisions hereof, whether or not any such amendments, waivers or consents are
executed.
SECTION 5.12. Attorneys' Fees. In any action or proceeding brought by a
party to enforce any provision of this Warrant, the prevailing party shall be
entitled to recover the reasonable costs and expenses incurred by it in
connection with that action or proceeding (including, but not limited to,
attorneys' fees).
SECTION 5.13. Filings. The Company shall, at its own expense, promptly
execute and deliver, or cause to be executed and delivered, to any holder of
Warrants all applications, certificates, instruments and all other documents and
papers that such holder of Warrants may reasonably request in connection with
the obtaining of any consent, approval, qualification, or authorization of any
federal, provincial, state or local government (or any agency or commission
thereof) necessary or appropriate in connection with, or for the effective
exercise of, any Warrants then held by such holder.
SECTION 5.14. Other Transactions. Nothing contained herein shall
preclude the Holder from engaging in any transaction, in addition to those
contemplated by this Warrant with the Company or any of its Affiliates in which
the Company or such Affiliate is not restricted hereby from engaging with any
other Person.
SECTION 5.15. Forum Selection and Consent to Jurisdiction. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
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<PAGE>
CONNECTION WITH, THIS WARRANT OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE HOLDERS OR THE COMPANY
SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW
YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK; THE COMPANY HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION
OF THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS
SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED
THEREBY IN CONNECTION WITH SUCH LITIGATION. THE COMPANY FURTHER IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY
PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. THE COMPANY HEREBY
EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY
SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT
ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT
THAT THE COMPANY HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF
ANY COURT OF FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE,
ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH
RESPECT TO ITSELF OR ITS PROPERTY, THE COMPANY HEREBY IRREVOCABLY WAIVES SUCH
IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS WARRANT.
SECTION 5.16. Jury Trial. THE COMPANY HEREBY KNOWINGLY, VOLUNTARILY,
AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
WARRANT. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES HERETO CAUSING
THE ISSUANCE OF THE LETTER OF CREDIT AND ENTERING INTO THE REIMBURSEMENT
AGREEMENT AND THE ING SECURITY AGREEMENT. THE COMPANY ACKNOWLEDGES THAT IT HAS
HAD THE ASSISTANCE OF COUNSEL IN THE REVIEW AND EXECUTION OF THIS WARRANT,
INCLUDING THIS SECTION 5.16 HEREOF, AND FURTHER ACKNOWLEDGES THAT THE MEANING
AND EFFECT OF THE FOREGOING WAIVER OF JURY TRIAL HAVE BEEN FULLY EXPLAINED TO
THE COMPANY BY SUCH COUNSEL.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Warrant to be
duly executed and delivered by their authorized officers, all as of the date and
year first above written.
MATTHEWS STUDIO EQUIPMENT GROUP
By:
Name:
Title:
[CORPORATE SEAL]
ATTEST:
By:_________________________
Name:
Title:
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<PAGE>
EXHIBIT A
ARTICLES OF INCORPORATION OF THE COMPANY
<PAGE>
ANNEX 1
ELECTION TO EXERCISE FORM
(To Be Executed By The Holders of This Warrant
In Order to Exercise This Warrant)
The undersigned hereby irrevocably elects to exercise the right to
purchase ______________ shares of Common Stock of Matthews Studio Equipment
Group covered by this Warrant according to the conditions hereof and herewith
makes payment of the Exercise Price of such shares in full.
-----------------------------
Signature
-----------------------------
-----------------------------
Address
Dated: _________________________
<PAGE>
ANNEX 2
ASSIGNMENT FORM
(To Be Executed By The Holder of This Warrant
In Order to Assign This Warrant Certificate)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto _____________________________ this Warrant and all rights evidenced thereby
and does irrevocably constitute and appoint __________________, attorney, to
transfer the said Warrant on the books of the Company.
-----------------------------
Signature
-----------------------------
-----------------------------
Address
Dated: _________________________
<PAGE>
ANNEX 3
EXCHANGE FORM
(To Be Executed By The Holder of This Warrant
In Order to Assign This Warrant Certificate)
The undersigned hereby irrevocably elects to exchange this Warrant to
purchase ___________ shares of Common Stock of Matthews Studio Equipment Group
(the "Company") covered by this Warrant for ___________ Warrants to purchase the
denominations of shares of Common Stock set forth below to the persons named and
hereby sells, assigns and transfers unto such persons that portion of this
Warrant represented by such new Warrants and all rights evidenced thereby and
does irrevocably constitute and appoint ____________________, attorney, to
exchange and transfer this Warrant as aforesaid on the books of the Company.
Number of Warrant Shares Assignee
- ------------ -----------------------------
- ------------ -----------------------------
-----------------------------
Signature
-----------------------------
-----------------------------
Address
FOR USE BY THE COMPANY ONLY:
This Warrant No. __ canceled (or transferred or exchanged) this ________ day of
_____________, _____________ shares of Common Stock issued therefor in the name
of _________________, Warrant No. ___ for __________ shares of Common Stock in
the name of _______________________.
Dated: ____________________________
<PAGE>
SCHEDULE 3.31(b)(iv)
<TABLE>
<CAPTION>
<S> <C>
Description of Options or Convertible Securities Number of Shares
- ------------------------------------------------ ----------------
Options outstanding pursuant to the Company's 1989 Stock
Option Plan, the Company's 1994 Stock Option Plan and the
Company's 1994 Stock Option Plan for Directors 1,483,400
Options granted pursuant to the Amended and Restated
Employment Agreement dated October 1, 1997, between the
Company and Carlos D. DeMattos, the employment terms letter
dated October 1, 1998, between the Company and John D.
Murray and the Employment Agreement dated November 23,
1998, between the Company and Alan Unger 545,000
------------
Warrant issued to DR&A, Inc. dated June 27, 1996 50,000
------------
Total 2,078,400
============
</TABLE>
