EXHIBIT 4.2
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
UNDER ANY STATE SECURITIES LAWS. NO SALE, TRANSFER OR OTHER
DISPOSITION OF SUCH SECURITIES MAY BE EFFECTED WITHOUT (I)
AN EFFECTIVE REGISTRATION STATEMENT RELATING THERETO, (II)
AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY
SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT
REQUIRED, (III) RECEIPT OF A NO-ACTION LETTER FROM THE
SECURITIES AND EXCHANGE COMMISSION, OR (IV) OTHERWISE
COMPLYING WITH THE PROVISIONS OF ARTICLE III OF THIS
WARRANT.
THIS WARRANT MAY NOT BE TRANSFERRED OTHER THAN TO AN
AFFILIATE (AS DEFINED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED) PRIOR TO THE SECOND ANNIVERSARY OF THE CLOSING
DATE.
WARRANT
TO PURCHASE SHARES OF COMMON STOCK
AS HEREIN DESCRIBED
Dated October 14, 1997
This certifies that for value received:
LUCAS LICENSING LTD.
or registered assigns, is entitled, subject to the terms set forth herein, to
purchase from Galoob Toys, Inc., a Delaware corporation (the "Company"), up to
2,130,000 fully paid and nonassessable shares of the Common Stock of the
Company, at the exercise price of fifteen dollars ($15.00) per share, and the
number of shares purchasable hereunder are subject to adjustment in certain
events, all as more fully set forth under Article IV herein.
ARTICLE I.
DEFINITIONS
-----------
"Additional Stock" means Common Stock, Convertible Securities and Options,
other than (i) the Preferred Stock and (ii) Common Stock, Convertible Securities
or Options issued to officers, directors, employees or consultants of the
Company.
"Charter" means the certificate of incorporation of the Company, as filed
with the Delaware Secretary of State.
"Closing Date" means October 14, 1997.
NYFS03...:\15\47315\0003\2475\CRTN017P.570
"Commission" means the Securities and Exchange Commission, or any other
federal agency then administering the Securities Exchange Act of 1934 or the
Securities Act.
"Common Stock" means the Company's Common Stock, par value $.01 per share,
any stock into which such stock shall have been changed or any stock resulting
from any reclassification of such stock, and any other capital stock of the
Company of any class or series now or hereafter authorized having the right to
share in distributions either of earnings or assets of the Company without limit
as to amount or percentage.
"Company" means Galoob Toys, Inc., a Delaware corporation, and any
successor corporation.
"Convertible Securities" means evidences of indebtedness, shares of stock
or other securities which are convertible into or exchangeable for, with or
without payment of additional consideration, shares of Common Stock, either
immediately or upon the arrival of a specified date or the happening of a
specified event or both.
"Exercise Period" means the period commencing on the Closing Date and
terminating at 5:00 p.m. Pacific Time on the twelfth anniversary of the Closing
Date.
"Exercise Price" means the exercise price per share of Common Stock set
forth in the Preamble to this Warrant, as such price may be adjusted pursuant to
Article IV hereof.
"Fair Market Value" means
(i) If shares of Common Stock are being sold pursuant to a public
offering under an effective registration statement under the Securities Act
which has been declared effective by the Commission and Fair Market Value is
being determined as of the closing of the public offering, the "price to public"
specified for such shares in the final prospectus for such public offering;
(ii) If shares of Common Stock are then listed or admitted to
trading on any national securities exchange or traded on any national market
system and Fair Market Value is not being determined as of the date described in
clause (i) of this definition, the average of the daily closing prices for the
ten trading days before such date. The closing price for each day shall be the
last sale price on such date or, if no such sale takes place on such date, the
average of the closing bid and asked prices on such date, in each case as
officially reported on the principal national securities exchange or national
market system on which such shares are then listed, admitted to trading or
traded;
(iii) If no shares of Common Stock are then listed or admitted to
trading on any national securities exchange or traded on any national market
system or being offered to the public pursuant to a registration described in
clause (i) of this definition, the average of the reported closing bid and asked
prices thereof on such date in the over-the-counter market as shown by the
Nasdaq Stock Market or, if such shares are not then quoted in such system, as
published by the National Quotation Bureau, Incorporated or any similar
successor organization,
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and in either case as reported by any member firm of the New York Stock Exchange
selected by the Holder;
(iv) If no shares of Common Stock are then listed or admitted to
trading on any national exchange or traded on any national market system, if no
closing bid and asked prices thereof are then so quoted or published in the
over-the-counter market and if no such shares are being offered to the public
pursuant to a registration described in clause (i) of this definition, the fair
value of a share of Common Stock shall be as determined by an investment bank
selected by Holder with the approval of the Company (which approval shall not be
unreasonably withheld or delayed), the costs of such investment banker to be
paid by the Company.
"Fiscal Year" means the fiscal year of the Company.
"Holder" means the person in whose name this Warrant is registered on the
books of the Company maintained for such purpose and any permitted transferee of
all or a portion of this Warrant.
"Market Price" means $18 per share of Common Stock, which shall be
adjusted in the same manner as provided in Article IV as if it were the Exercise
Price.
"Option" means any right, warrant or option to subscribe for or purchase
shares of Common Stock or Convertible Securities.
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, joint stock
companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts, government entities and authorities and
other organizations, whether or not legal entities.
"Preferred Stock" means a series Preferred Stock with an aggregate
liquidation preference on the date of issuance and an aggregate purchase price
in an amount not exceeding $30 million.
"Principal Executive Office" means the Company's office at 500 Forbes
Boulevard, South San Francisco, California 94080 or such other office as
designated in writing to the Holder by the Company.
"Register," "Registered" and "Registration" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of the effectiveness of such
registration statement.
"Rule 144" means Rule 144 as promulgated by the Commission under the
Securities Act, as such Rule may be amended from time to time, or any similar
successor rule that the Commission may promulgate.
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"Securities Act" means the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Commission
promulgated thereunder, all as the same shall be in effect from time to time.
"Shareholder" means a holder of one or more Warrant Shares.
"Warrant" means the warrant dated as of Closing Date issued to the Holder
and all warrants issued upon the partial exercise, transfer or division of or in
substitution for any Warrant.
"Warrant Shares" means the shares of Common Stock issued or issuable upon
the exercise of this Warrant provided that if under the terms hereof there shall
be a change such that the securities purchasable hereunder shall be issued by an
entity other than the Company or there shall be a change in the type or class of
securities purchasable hereunder, then the term shall mean the securities issued
or issuable upon the exercise of the rights granted hereunder.
ARTICLE II.
EXERCISE
--------
2.1. Exercise Right; Manner of Exercise. The purchase rights represented
by this Warrant may be exercised by the Holder, in whole or in part, at any time
and from time to time during the Exercise Period upon (i) surrender of this
Warrant, together with an executed notice of exercise, substantially in the form
of Exhibit "D-1" ("Notice of Exercise") attached hereto, at the Principal
Executive Office, and (ii) payment to the Company of the aggregate Exercise
Price for the number of Warrant Shares specified in the Notice of Exercise (such
aggregate Exercise Price, the "Total Exercise Price"). The Total Exercise Price
shall be paid by check; provided, however, that if the Warrant Shares are
acquired in conjunction with a Registration of such Warrant Shares, then the
Holder may arrange for the aggregate Exercise Price for such Warrant Shares to
be paid to the Company from the proceeds of the sale of such Warrant Shares
pursuant to such Registration. The Person or Person(s) in whose name(s) any
certificate(s) representing the Warrant Shares which are issuable upon exercise
of this Warrant shall be deemed to become the Holder(s) of, and shall be treated
for all purposes as the record holder(s) of, such Warrant Shares, and such
Warrant Shares shall be deemed to have been issued, immediately prior to the
close of business on the date on which this Warrant and Notice of Exercise are
presented and payment made for such Warrant Shares, notwithstanding that the
stock transfer books of the Company shall then be closed or that certificates
representing such Warrant Shares shall not then be actually delivered to such
Person or Person(s). Certificates for the Warrant Shares so purchased shall be
delivered to the Holder within two business days after this Warrant is
exercised. If this Warrant is exercised in part only, the Company shall, upon
surrender of this Warrant for cancellation, deliver a new Warrant evidencing the
rights of the Holder to purchase the balance of the Warrant Shares which the
Holder is entitled to purchase hereunder. The issuance of Warrant Shares upon
exercise of this Warrant shall be made without charge to the Holder for any
issuance tax with respect thereto or any other cost incurred by the Company in
connection with the exercise of this Warrant and the related issuance of Warrant
Shares.
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2.2. Conversion of Warrant.
(a) Right to Convert. In addition to, and without limiting, the
other rights of the Holder hereunder, the Holder shall have the right (the
"Conversion Right") to convert this Warrant or any part hereof into Warrant
Shares at any time and from time to time during the term hereof. Upon exercise
of the Conversion Right, the Company shall deliver to the Holder, without
payment by the Holder of any Exercise Price or any cash or other consideration,
that number of Warrant Shares computed using the following formula:
X = Y (A-B)
-------
A
Where: X= The number of Warrant Shares to be issued to the Holder
Y= The number of Warrant Shares purchasable pursuant to this Warrant
or such lesser number of Warrant Shares as may be selected by the Holder
A= The Fair Market Value of one Warrant Share as of the
Conversion Date
B= The Exercise Price
(b) Method of Exercise. The Conversion Right may be exercised by the
Holder by the surrender of this Warrant at the Principal Executive Office,
together with a written statement (the "Conversion Statement") specifying that
the Holder intends to exercise the Conversion Right and indicating the number of
Warrant Shares to be acquired upon exercise of the Conversion Right. Such
conversion shall be effective upon the Company's receipt of this Warrant,
together with the Conversion Statement, or on such later date as is specified in
the Conversion Statement (the "Conversion Date") and, at the Holder's election,
may be made contingent upon the closing of the consummation of the sale of
Common Stock pursuant to a Registration. Certificates for the Warrant Shares so
acquired shall be delivered to the Holder within a reasonable time, not
exceeding two business days after the Conversion Date. If applicable, the
Company shall, upon surrender of this Warrant for cancellation, deliver a new
Warrant evidencing the rights of the Holder to purchase the balance of the
Warrant Shares which Holder is entitled to purchase hereunder. The issuance of
Warrant Shares upon exercise of this Warrant shall be made without charge to the
Holder for any issuance tax with respect thereto or any other cost incurred by
the Company in connection with the conversion of this Warrant and the related
issuance of Warrant Shares; provided that the Holder will be responsible for any
transfer taxes in respect of the issuance of Warrant Shares to a Person other
than the Holder.
2.3. Fractional Shares. The Company shall not issue fractional shares of
Common Stock upon any exercise or conversion of this Warrant. As to any
fractional share of Common Stock which the Holder would otherwise be entitled to
purchase from the Company upon such exercise or conversion, the Company shall
purchase from the Holder such fractional share at a price equal to an amount
calculated by multiplying such fractional share (calculated to the nearest
1/100th of a share) by the Fair Market Value of a share of Common Stock on the
date of the Notice of Exercise or the Conversion Date, as applicable. Payment of
such amount shall
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be made in cash or by check payable to the order of the Holder at the time of
delivery of any certificate or certificates arising upon such exercise or
conversion.
2.4. Continued Validity. A Shareholder shall be entitled to all rights and
subject to all obligations which a Holder of this Warrant is entitled pursuant
to the provisions of this Warrant, except rights and obligations which by their
terms apply only to a Warrant. The Company shall, at the time of the exercise of
this Warrant, in whole or in part, upon the request of a Shareholder,
acknowledge in writing, in form reasonably satisfactory to the Shareholder, its
continuing obligation to afford to the Shareholder all rights to which the
Shareholder is entitled in accordance with the provisions of this Warrant;
provided, however, that if the Shareholder fails to make any such request, such
failure shall not affect the continuing obligation of the Company to afford to
the Shareholder all such rights.
ARTICLE III.
TRANSFER, EXCHANGE AND REPLACEMENT
----------------------------------
3.1. Maintenance of Registration Books. The Company shall keep at the
Principal Executive Office a register in which, subject to such reasonable
regulations as it may prescribe, it shall provide for the registration, transfer
and exchange of this Warrant. The Company and any Company agent may treat the
Person in whose name this Warrant is registered as the owner of this Warrant for
all purposes whatsoever, and neither the Company nor any Company agent shall be
affected by any notice to the contrary.
3.2. Restrictions on Transfers.
(a) Compliance with Securities Act. The Holder, by acceptance
hereof, agrees that this Warrant and the Common Stock to be issued to the Holder
upon exercise hereof are being acquired for investment, solely for the Holder's
own account and not as a nominee for any other Person, and that the Holder will
not offer, sell or otherwise dispose of this Warrant or any such shares of
Common Stock except under circumstances which will not result in a violation of
the Securities Act. Upon exercise of this Warrant, the Holder shall confirm in
writing, by executing the form attached as Exhibit "D-2" hereto, that the shares
of Common Stock purchased thereby are being acquired for investment, solely for
the Holder's own account and not as a nominee for any other Person, and not with
a view toward distribution or resale.
(b) Certificate Legends. This Warrant and all Warrant Shares issued
upon exercise of this Warrant (unless Registered under the Securities Act) shall
be stamped or imprinted with legends in substantially the following form (in
addition to any legends required by applicable state securities laws):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
UNDER ANY STATE SECURITIES LAWS. NO SALE, TRANSFER OR OTHER
DISPOSITION OF SUCH SECURITIES MAY BE EFFECTED WITHOUT (i)
AN EFFECTIVE REGISTRATION STATEMENT
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RELATING THERETO, (ii) AN OPINION OF COUNSEL FOR THE HOLDER,
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATION IS NOT REQUIRED, (iii) RECEIPT OF A NO-ACTION
LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION, OR (iv)
OTHERWISE COMPLYING WITH THE PROVISIONS OF ARTICLE III OF
THE WARRANT UNDER WHICH THIS SECURITY WAS ISSUED.
In addition, the Warrant (unless Registered under the Securities Act)
shall be stamped or imprinted with a legend in substantially the following form:
THIS WARRANT MAY NOT BE TRANSFERRED OTHER THAN TO AN
AFFILIATE (AS DEFINED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED) PRIOR TO THE SECOND ANNIVERSARY OF THE CLOSING
DATE.
(c) Additional Restriction on Transfer. The Holder shall not sell,
assign or otherwise transfer all or part of this Warrant until the second
anniversary of the Closing Date other than in connection with the transfer of
the Holder's entire business.
(d) Disposition of Warrant or Warrant Shares. With respect to any
offer, sale or other disposition of this Warrant or any Warrant Shares issued
upon exercise of this Warrant prior to Registration of such shares, the Holder
or the Shareholder, as the case may be, agrees to give written notice to the
Company prior thereto, describing briefly the manner thereof, together with a
written opinion of the Holder's or Shareholder's counsel to the effect that such
offer, sale or other disposition may be effected without Registration under the
Securities Act or qualification under any applicable state securities laws of
this Warrant or such Warrant Shares, as the case may be, and indicating whether
or not under the Securities Act certificates for this Warrant or such Warrant
Shares, as the case may be, to be sold or otherwise disposed of, require any
restrictive legend as to applicable restrictions on transferability in order to
insure compliance with the Securities Act and any other applicable securities
laws. Promptly upon receiving such written notice and reasonably satisfactory
opinion the Company, as promptly as practicable, shall notify the Holder or the
Shareholder, as the case may be, that it may sell or otherwise dispose of this
Warrant or such Warrant Shares, as the case may be, all in accordance with the
terms of the notice delivered to the Company. If a determination has been made
pursuant to this subsection (d) that the opinion of counsel for the Holder or
the Shareholder, as the case may be, is not reasonably satisfactory to the
Company, the Company shall so notify the Holder or the Shareholder, as the case
may be, promptly after such determination has been made and shall specify the
legal analysis supporting any such conclusion. Notwithstanding the foregoing,
this Warrant or such Warrant Shares, as the case may be, may be offered, sold or
otherwise disposed of in accordance with Rule 144, provided that the Company
shall have been furnished with such information as the Company may reasonable
request to provide reasonable assurance that the provisions of Rule 144 have
been satisfied. Each certificate representing this Warrant or the shares thus
transferred (except a transfer pursuant to Rule 144) shall bear a legend as to
the applicable restrictions on transferability in order to insure compliance
with the Securities Act, unless in the aforesaid
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reasonably satisfactory opinion of counsel for the Holder or the Shareholder, as
the case may be, such legend is not necessary in order to insure compliance with
the Securities Act. The Company may issue stop transfer instructions to its
transfer agent in connection with such restrictions.
(e) Warrant Transfer Procedure. Transfer of this Warrant to a third
party, following compliance with the preceding subsections of this Article III,
shall be effected by execution of the Assignment Form attached hereto as Exhibit
"D-3", and surrender for registration of transfer of this Warrant at the
Principal Executive Office, together with funds sufficient to pay any applicable
transfer tax. Upon receipt of the duly executed Assignment Form and the
necessary transfer tax funds, if any, the Company, at its expense, shall execute
and deliver, in the name of the designated transferee or transferees, one or
more new Warrants representing the right to purchase a like number of shares of
Common Stock.
(f) Termination of Restrictions. The restrictions imposed under this
Section 3.2 upon the transferability of the Warrant (other than those in Section
3.2(c)) and the shares of Common Stock acquired upon the exercise of this
Warrant shall cease when (i) a registration statement covering the applicable
securities becomes effective under the Securities Act, (ii) the Company is
presented with an opinion of counsel reasonably satisfactory to the Company that
such restrictions are no longer required in order to insure compliance with the
Securities Act or with a Commission "no-action" letter stating that future
transfers of such securities by the transferor or the contemplated transferee
would be exempt from registration under the Securities Act, or (iii) such
securities may be transferred in accordance with Rule 144(k). When such
restrictions terminate, the Company shall, or shall instruct its transfer agent
to, promptly, and without expense to the Holder or the Shareholder, as the case
may be, issue new securities in the name of the Holder and/or the Shareholder,
as the case may be, not bearing the legends required under subsection (b) of
this Section 3.2.
3.3. Exchange. At the Holder's option, this Warrant may be exchanged for
other Warrants representing the right to purchase a like aggregate number of
shares of Common Stock upon surrender of this Warrant at the Principal Executive
Office. Whenever this Warrant is so surrendered to the Company at the Principal
Executive Office for exchange, the Company shall execute and deliver the
Warrants which the Holder is entitled to receive. All Warrants issued upon any
registration of transfer or exchange of Warrants shall be the valid obligations
of the Company, evidencing the same rights, and entitled to the same benefits,
as the Warrants surrendered upon such registration of transfer or exchange. No
service charge shall be made for any exchange of this Warrant.
3.4. Replacement. Upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant and (i) in
the case of any such loss theft or destruction, upon delivery of indemnity
reasonably satisfactory to the Company in form and amount or (ii) in the case of
any such mutilation, upon surrender of such Warrant for cancellation at the
Principal Executive Office, the Company, at its expense, shall execute and
deliver, in lieu thereof, a new Warrant.
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ARTICLE IV.
ANTIDILUTION PROVISIONS
-----------------------
4.1. Reorganization, Reclassification or Recapitalization of the Company.
In case of (1) a capital reorganization, reclassification or recapitalization of
the Company's capital stock (other than in the cases referred to in Section 4.2
hereof), (2) the Company's consolidation or merger with or into another
corporation in which the Company is not the surviving entity, or a reverse
triangular merger in which the Company is the surviving entity but the shares of
the Company's capital stock outstanding immediately prior to the merger are
converted, by virtue of the merger, into other property, whether in the form of
securities, cash or otherwise, or (3) the sale or transfer of the Company's
property as an entirety or substantially as an entirety, then, as part of such
reorganization, reclassification, recapitalization, merger, consolidation, sale
or transfer, lawful provision shall be made so that there shall thereafter be
deliverable upon the exercise of this Warrant or any portion thereof (in lieu of
or in addition to the number of shares of Common Stock theretofore deliverable,
as appropriate), and without payment of any additional consideration, the number
of shares of stock or other securities or property to which the holder of the
number of shares of Common Stock which would otherwise have been deliverable
upon the exercise of this Warrant or any portion thereof at the time of such
reorganization, reclassification, recapitalization, consolidation, merger, sale
or transfer would have been entitled to receive in such reorganization,
reclassification, recapitalization, consolidation, merger, sale or transfer.
This Section 4.1 shall apply to successive reorganizations, reclassifications,
recapitalizations, consolidations, mergers, sales and transfers and to the stock
or securities of any other corporation that are at the time receivable upon the
exercise of this Warrant.
4.2. Reclassifications. If the Company changes any of the securities as to
which purchase rights under this Warrant exist into the same or a different
number of securities of any other class or classes, this Warrant shall
thereafter represent the right to acquire such number and kind of securities as
would have been issuable as the result of such change with respect to the
securities that were subject to the purchase rights under this Warrant
immediately prior to such reclassification or other change and the Exercise
Price therefore shall be appropriately adjusted.
4.3. Splits and Combinations. If the Company at any time subdivides any of
its outstanding shares of Common Stock into a greater number of shares, the
Exercise Price in effect immediately prior to such subdivision shall be
proportionately reduced, and, conversely if the outstanding shares of Common
Stock are combined into a smaller number of shares, the Exercise Price in effect
immediately prior to such combination shall be proportionately increased. Upon
any adjustment of the Exercise Price under this Section 4.3, the number of
shares of Common Stock issuable upon exercise of this Warrant shall equal the
number of shares determined by dividing (i) the aggregate Exercise Price payable
for the purchase of all shares issuable upon exercise of this Warrant
immediately prior to such adjustment by (ii) the Exercise Price per share in
effect immediately after such adjustment.
4.4. Dividends and Distributions. If the Company declares a dividend or
other distribution on the Common Stock or if a dividend or other distribution on
the Common Stock
9
occurs pursuant to the Charter (other than a cash dividend or distribution),
then, as part of such dividend or distribution, lawful provision shall be made
so that there shall thereafter be deliverable upon the exercise of this Warrant
or any portion thereof, in addition to the number of shares of Common Stock
receivable thereupon and without payment of any additional consideration, the
amount of the dividend or other distribution to which the holder of the number
of shares of Common Stock obtained upon exercise hereof would have been entitled
to receive had the exercise occurred as of the record date for such dividend or
distribution.
4.5. Liquidation; Dissolution. If the Company shall dissolve, liquidate or
wind up its affairs, the Holder shall have the right, but not the obligation, to
exercise this Warrant effective as of the date of such dissolution, liquidation
or winding up. If any such dissolution, liquidation or winding up results in any
cash distribution to the Holder in excess of the aggregate Exercise Price for
the shares of Common Stock for which this Warrant is exercised, then the Holder
may, at its option, exercise this Warrant without making payment of such
aggregate Exercise Price and, in such case, the Company shall, upon distribution
to the Holder, consider such aggregate Exercise Price to have been paid in full,
and in making such settlement to the Holder, shall deduct an amount equal to
such aggregate Exercise Price from the amount payable to the Holder.
4.6. Antidilution.
(a) Adjustment of Exercise Price. If the Company issues any
Additional Stock for no consideration or for a consideration per share of Common
Stock (which, in the case of Convertible Securities or Options shall be the
consideration paid to purchase such security plus the conversion price, exercise
price or exchange price, as the case may be, per share of Common Stock)
("Additional Stock Price") less than the Market Price in effect immediately
prior to the time of such issuance (with the value of any non-cash consideration
paid for such Additional Stock reasonably determined by the Company's Board of
Directors), then the Exercise Price shall be reduced to a price equal to the
Exercise Price in effect immediately prior to such adjustment less the
difference between such Market Price and the Additional Stock Price; provided,
however, that (i) if any Convertible Securities or Options expire or otherwise
terminate prior to the exercise, conversion or exchange of such securities for
Common Stock ("Expiring Additional Securities"), such Expiring Additional
Securities shall no longer constitute Additional Stock for purposes of
adjustments under this Section 4.6, and the Exercise Price shall upon such
expiration or termination be readjusted to equal what the Exercise Price would
have been if those Expiring Additional Securities (and only those Expiring
Additional Securities) had never been issued and (ii) if shares of Common Stock
are issued pursuant to Convertible Securities or Options at a price different
from the Additional Stock Price originally calculated for such Convertible
Securities or Options, the Additional Stock Price for such Convertible
Securities or Options shall be recalculated to equal the actual price paid per
share of Common Stock in respect of such issuance, and the Exercise Price shall
be readjusted accordingly.
(b) Adjustment of Number of Shares Purchasable. Upon any adjustment
of the Exercise Price under subsection (a) of this Section 4.6, the number of
shares of Common Stock issuable upon exercise of this Warrant shall equal the
number of shares determined by
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dividing (i) the Market Price immediately prior to such adjustment multiplied by
the number of shares issuable upon exercise of this Warrant immediately prior to
such adjustment by (ii) the Market Price per share in effect immediately after
such adjustment.
4.7. Maximum Exercise Price. At no time shall the Exercise Price exceed
the amount set forth in the Preamble to this Warrant, unless the Exercise Price
is adjusted pursuant to Section 4.3 hereof.
4.8. Other Dilutive Events. If any event occurs as to which the other
provisions of this Article IV are not strictly applicable but the failure to
make any adjustment would not fairly protect the purchase rights represented by
this Warrant in accordance with the essential intent and principles hereof,
then, in each such case, the Company shall appoint a firm of independent public
accountants of recognized national standing (which may be the Company's regular
auditors) which shall give their opinion upon the adjustment, if any, on a basis
consistent with the essential intent and principles established in this Article
IV, necessary to preserve, without dilution, the purchase rights represented by
this Warrant; provided, that no adjustments shall be made in connection with the
issuance of Common Stock upon exercise, conversion or exchange of Options or
Convertible Securities to the extent that adjustment has previously been made
upon issuance of such Options or Convertible Securities and each lowering of the
effective purchase price of Common Stock pursuant to such Option or Convertible
Securities. Upon receipt of such opinion, the Company shall promptly mail a copy
thereof to the Holder and shall make the adjustments described therein.
4.9. Certificates and Notices.
(a) Adjustment Certificates. Upon any adjustment of the Exercise
Price and/or the number of shares of Common Stock purchasable upon exercise of
this Warrant, a certificate, signed by (i) the Company's President or Chief
Financial Officer, or (ii) any independent firm of certified public accountants
of recognized national standing the Company selects at its own expense, setting
forth in reasonable detail the events requiring the adjustment and the method by
which such adjustment was calculated, shall be mailed to the Holder and shall
specify the adjusted Exercise Price and the number of shares of Common Stock
purchasable upon exercise of the Warrant after giving effect to the adjustment.
(b) Extraordinary Corporate Events. If the Company, after the date
hereof, proposes to effect (i) any transaction described in Sections 4.1 or 4.2
hereof or (ii) a liquidation, dissolution or winding up of the Company described
in Section 4.5 hereof, then, in each such case, the Company shall mail to the
Holder a notice describing such proposed action and specifying the date on which
the Company's books shall close, or a record shall be taken, for determining the
holders of or Common Stock entitled to participate in such action, or the date
on which such reorganization, reclassification, consolidation, merger, sale,
transfer, liquidation, dissolution or winding up shall take place or commence,
as the case may be, and the date as of which it is expected that holders of
Common Stock of record shall be entitled to receive securities and/or other
property deliverable upon such action, if any such date is to be fixed. Such
notice shall be mailed to the Holder at least twenty days prior to the record
date for such action in the case of any action described in clause (i) or clause
(iii) above, and in the
11
case of any action described in clause (ii) above, at least twenty days prior to
the date on which the action described is to take place and at least twenty days
prior to the record date for determining holders of Common Stock entitled to
receive securities and/or other property in connection with such action.
4.10. No Impairment. The Company shall not, by amendment of the Charter or
through any reorganization, recapitalization, transfer of assets, consolidation,
merger, dissolution, issuance or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
to be observed or performed hereunder by the Company, but shall at all times in
good faith assist in the carrying out of all the provisions of this Article IV
and in the taking of all such action as may be necessary or appropriate in order
to protect the rights of the Holder against impairment.
4.11. Application. Except as otherwise provide herein, all sections of
this Article IV are intended to operate independently of one another. If an
event occurs that requires the application of more than one section, all
applicable sections shall be given independent effect.
ARTICLE V.
REGISTRATION RIGHTS
-------------------
5.1. Registration on Form S-3.
5.1.1. Filing of Registration Statement. The Company shall use its
best efforts to secure effectiveness of, as soon as practicable, and shall file
no later than 15 business days after the Closing Date, a registration statement
in form and substance satisfactory to the Holder on Form S-3 (the "Registration
Statement") with the Commission under the Securities Act to register: (i) the
resale of the Warrant; (ii) the exercise of the Warrant by any person, other
than Lucas Licensing Ltd. or any transferee of Warrants prior to the resale of
Warrants pursuant to the Registration Statement; and (iii) the Warrant Shares
issued upon exercise of the Warrant by any person and the resale of any such
Warrant Shares by Lucas Licensing Ltd. or any transferee of Warrants who
exercised such Warrants and received Warrant Shares otherwise than pursuant to
the Registration Statement. The Company shall amend such Registration Statement
(or file a new Registration Statement) (i) to include issuance of the Warrant
Shares to Lucas Licensing Ltd. after one year from the Closing Date and (ii) to
include the transfer of the Warrant after two years from the Closing Date (the
Warrant and the Warrant Shares constituting the "Registrable Securities");
provided however, that in the event the Company fails to file reports in a
timely manner or otherwise fails (due to an action or inaction of the Company)
to be eligible to file a registration statement on Form S-3, the Company shall
file a registration statement or a post-effective registration statement, as the
case may be, on Form S- 1. In the event of a change in the interpretive position
of the staff of the Commission with respect to registration under the Securities
Act of warrants, the exercise of warrants and the sale of securities into which
warrants can be exercised, the Company shall comply with such changed position
promptly after consultation with counsel to Lucas Licensing Ltd.
5.1.2. Registrable Expenses. The Company shall pay all Registration
Expenses (as defined below) in connection with any registration, qualification
or compliance
12
hereunder, and each Holder shall pay all Selling Expenses (as defined below) and
other expenses that are not Registration Expenses relating to the Registrable
Securities resold by such Holder. "Registration Expenses" shall mean all
expenses, except for Selling Expenses, incurred by the Company in complying with
the registration provisions herein described, including, without limitation, all
registration, qualification and filing fees, printing expenses, fees and
disbursements of counsel for the Company, blue sky fees and expenses and the
expense of any special audits incident to or required by any such registration.
"Selling Expenses" shall mean all selling commissions, underwriting fees and
stock transfer taxes applicable to the Registrable Securities and all fees and
disbursements of counsel for any Holder.
5.1.3. Additional Company Obligations. In the case of any
registration effected by the Company pursuant to these registration provisions,
the Company will use its best efforts to: keep such registration effective until
such date as all of the Registrable Securities have been sold; (ii) prepare and
file with the Commission such amendments and supplements to the Registration
Statement and the prospectus used in connection with the Registration Statement
as may be necessary to comply with the provisions of the Securities Act with
respect to the disposition of the Registrable Securities; (iii) furnish such
number of prospectuses and other documents incident thereto, including any
amendment of or supplement to the prospectus, as a Holder from time to time may
reasonably request; (iv) cause all such Registrable Securities registered as
described herein to be listed on each securities exchange and quoted on each
quotation system on which similar securities issued by the Company are then
listed or quoted; (v) provide a transfer agent and registrar for all Registrable
Securities registered pursuant to the Registration Statement and a CUSIP number
for all such Registrable Securities; (vi) use its best efforts to comply with
all applicable rules and regulations of the Commission, and make available to
its securityholders, to the extent required, as soon as reasonably practicable,
an earnings statement covering the period of at least twelve months, but not
more than eighteen months, beginning with the first month after the effective
date of the Registration Statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act; and (vii) file the documents
required of the Company and otherwise use its best efforts to maintain requisite
blue sky clearance in (A) all jurisdictions in which any of the Warrant Shares
are originally sold and (B) all other states specified in writing by a Holder as
may reasonably be required to sell such Holder's Warrant Shares, provided as to
clause (B), however, that the Company shall not be required to qualify to do
business or consent to service of process in any state in which it is not now so
qualified or has not so consented.
5.1.4. Conditions and Limitations
(a) Cooperation by Holder. It shall be a condition precedent
to the obligation of the Company to take any action pursuant to this Article V
in respect of the Registrable Securities that the Holder shall furnish to the
Company such information regarding such Registrable Securities and the intended
method of disposition thereof as the Company shall reasonably request and as
shall be required in connection with the action taken by the Company.
(b) Notification Prior to Sale. If any Holder shall propose to
sell any Registrable Securities pursuant to the Registration Statement, it shall
notify the Company of
13
its intent to do so at least three full business days prior to such sale, and
the provision of such notice to the Company shall be deemed to establish an
agreement by such Holder to comply with the registration provisions contained
herein. Such notice shall be deemed to constitute a representation that any
information previously supplied by such Holder is accurate as of the date of
such notice. At any time within such three business day period, the Company may
refuse to permit the Holder to resell any Registrable Securities pursuant to the
Registration Statement; provided, however, that in order to exercise this right,
the Company must deliver a certificate in writing to the Holder to the effect
that a delay in such sale is necessary because, in the good faith judgment of
the Company, a sale pursuant to the Registration Statement would require the
public disclosure of information that would not otherwise be required to be
disclosed (which disclosure would, in the good faith judgment of the Company,
have a material adverse effect on the Company) or could in other respects
constitute a violation of the federal securities laws. In such an event, the
Company shall use its best efforts to amend the Registration Statement to the
extent required to comply with Section 5.1.4 and to take all other actions
necessary to allow such sale under the federal securities laws, and shall notify
the Holders promptly after it has determined that such circumstances no longer
exist. Notwithstanding the foregoing, the Company shall not under any
circumstances be entitled to refuse to permit the Holder to resell any
Registrable Securities more than twice in any twelve-month period, and any
individual period during which the Company refuses to permit the Holder to
resell any Registrable Securities shall not exceed sixty days.
Subject to the foregoing, when a Holder is entitled to sell and gives
notice of its intent to sell pursuant to the Registration Statement, the Company
shall furnish to such Holder a reasonable number of copies of a supplement to or
an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such shares, such prospectus shall not include an
untrue statement of material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading or
incomplete in the light of the circumstances then existing.
5.2. Indemnification and Contribution.
5.2.1. Indemnification by the Company. The Company agrees to
indemnify and hold harmless each Holder from and against any losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) to which
such Holder may become subject (under the Securities Act or otherwise) insofar
as such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of, or are based upon, any claim by a third party
asserting any untrue statement of a material fact contained in the Registration
Statement or omission of a material fact therefrom necessary to make the
statements therein not misleading, on the effective date thereof, or arise out
of any failure by the Company to fulfill any undertaking included in the
Registration Statement, and the Company will, as incurred, reimburse such Holder
for any legal or other expenses reasonably incurred in investigating, defending
or preparing to defend any such action, proceeding or claim; provided, however,
that the Company shall not be liable in any such case to the extent that such
loss, claim, damages or liability arises out of, or is based upon (i) an untrue
statement made in such Registration Statement in reliance upon and in conformity
with written information furnished to the Company by or on behalf of such Holder
specifically for use in preparation of the Registration
14
Statement or (ii) any untrue statement in any prospectus that is corrected in
any subsequent prospectus that was delivered to the Holder prior to the
pertinent sale or sales by the Holder.
5.2.2. Indemnification by Holder. Each Holder, severally and not
jointly, agrees to indemnify and hold harmless the Company from and against any
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) to which the Company may become subject (under the Securities Act or
otherwise) insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon any claim by a
third party asserting (i) an untrue statement made in such Registration
Statement in reliance upon and in conformity with written information furnished
to the Company by or on behalf of such Holder specifically for use in
preparation of the Registration Statement, provided, however, that no Holder
shall be liable in any such case for any untrue statement included in any
prospectus which statement has been corrected, in writing, by such Holder and
delivered to the Company at least three business days before the sale from which
such loss occurred or (ii) any untrue statement in any prospectus that is
corrected in any subsequent prospectus that was delivered to the Holder prior to
the pertinent sale or sales by the Holder, and each Holder, severally and not
jointly, will, as incurred, reimburse the Company for any legal or other
expenses reasonably incurred in investigating, defending or preparing to defend
any such action, proceeding or claim.
5.2.3. Indemnification Procedures. Promptly after receipt by any
indemnified person of a notice of a claim or the beginning of any action in
respect of which indemnity is to be sought against an indemnifying person
pursuant to this Section 5.2, such indemnified person shall notify the
indemnifying person in writing of such claim or of the commencement of such
action, and, subject to the provisions hereinafter stated, in case any such
action shall be brought against an indemnified person and the indemnifying
person shall have been notified thereof, the indemnifying person shall be
entitled to participate therein, and, to the extent that it shall wish, to
assume the defense thereof, with counsel reasonably satisfactory to the
indemnified person. After notice from the indemnifying person to such
indemnified person of the indemnifying person's election to assume the defense
thereof, the indemnifying person shall not be liable to such indemnified person
for any legal expenses subsequently incurred by such indemnified person in
connection with the defense thereof; provided, however, that if there exists or
shall exist a conflict of interest that would make it inappropriate in the
reasonable opinion of counsel for the indemnified person for the same counsel to
represent both the indemnified person and such indemnifying person or any
affiliate or associate thereof, the indemnified person shall be entitled to
retain its own counsel at the expense of such indemnifying person; provided,
however, that in the case of the immediately preceding proviso the indemnifying
person shall not be responsible for the legal expenses of more than one counsel
for all indemnified persons.
5.2.4. Contribution in Lieu of Indemnity. If the indemnification
provided for in this Section 5.2 is unavailable to or insufficient to hold
harmless an indemnified party under Section 5.2.1 or 5.2.2 above in respect of
any losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) referred to therein, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect the relative benefit and relative fault
of the respective parties as well as any other
15
relevant equitable considerations. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or a Holder on
the other and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
the Holders agree that it would not be just and equitable if contribution
pursuant to this Section 5.2.4 were determined by pro rata allocation (even if
the Holders were treated as one entity for such purpose) or by any other method
of allocation which does not take account of the equitable considerations
referred to above in this Section 5.2.4. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to above in this Section 5.2.4 shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 5.2.4, no Holder shall
be required to contribute any amount in excess of the net amount received by the
Holder from the sale of the Registrable Securities to which such loss relates.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Holders'
obligations in this Section 5.2.4 to contribute are several in proportion to
their respective sales of Registrable Securities to which such loss relates and
not joint.
5.2.5. Controlling Persons Indemnified. The obligations of the
Company and the Holders under this Section 5.2 shall be in addition to any
liability which the Company and the respective Holders may otherwise have and
shall extend, upon the same terms and conditions, to each person, if any, who
controls the Company or any Holder within the meaning of the Securities Act
including, without limitation, the directors and officers of the Company and the
Holder, as the case may be.
5.3. Transfer of Registration Rights. The right to sell Registrable
Securities pursuant to the registration statement described herein will
automatically be assigned to each transferee of the Warrant or Warrant Shares.
In the event that it is necessary, in order to permit a Holder to sell
Registrable Securities pursuant to the Registration Statement, to amend the
Registration Statement to name such Holder, such Holder shall, upon written
notice to the Company, be entitled to have the Company make such amendment as
soon as reasonably practicable.
ARTICLE VI.
REPRESENTATIONS, WARRANTIES AND COVENANTS OF COMPANY
----------------------------------------------------
6.1. Representations and Warranties. The Company represents and warrants
that:
(a) Legal Status; Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of Delaware and
is qualified or licensed to do business in all other countries, states and
provinces in which the laws thereof require the Company to qualify and/or be
licensed, except where failure to qualify or be
16
licensed would not have a material adverse effect on the business or assets of
the Company taken as a whole;
(b) Capitalization. The Company's authorized capital stock consists
of: 50,000,000 shares of Common Stock, of which shares are issued and
outstanding and 1,000,000 shares of preferred stock, par value $1.00 per share,
of which 30,000 shares Preferred Stock are outstanding;
(c) Options. Except as described in Exhibit "D-4" hereto there are
no Options, warrants or similar rights to acquire from the Company, or
agreements or other obligations by the Company, absolute or contingent, to issue
or sell Common Stock, whether on conversion or exchange of Convertible
Securities or otherwise;
(d) Preemptive Rights. No shareholder of the Company has any
preemptive rights to subscribe for shares of Common Stock;
(e) Authority. The Company has the right and power, and is duly
authorized and empowered, to enter into, execute, deliver and perform its
obligations under this Warrant;
(f) Binding Effect. This Warrant has been duly authorized, executed
and delivered and constitutes a valid and binding obligation of the Company
enforceable in accordance with its terms, except to the extent that
enforceability may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally and (ii)
general principles of equity;
(g) No Conflict. The execution, delivery and/or performance by the
Company of this Warrant shall not, by the lapse of time, the giving of notice or
otherwise, constitute a violation of any applicable law or a breach of any
provision contained in the Company's Charter or Bylaws or contained in any
agreement, instrument or document to which the Company is a party or by which it
is bound;
(h) Consents. No consent, approval, authorization or other order of
any court, regulatory body, administrative agency or other governmental body is
required for the valid issuance of the Warrant or for the performance of any of
the Company's obligations hereunder, except in connection with listing on the
New York Stock Exchange, which filings will be effected in accordance with the
rules and regulations of the New York Stock Exchange;
(i) Offering. Neither the Company nor any agent acting on its behalf
has, either directly or indirectly, sold, offered for sale or disposed of, or
attempted or offered to dispose of, this Warrant or any part hereof, or any
similar obligation of the Company, to, or has solicited any offers to buy any
thereof from, any Person or Persons other than the Holder. Neither the Company
nor any agent acting on its behalf will sell or offer for sale or dispose of, or
attempt or offer to dispose of, this Warrant or any part thereof to, or solicit
any offers to buy any warrant of like tenor from, or otherwise approach or
negotiate in respect thereof, with,
17
any Person or Persons so as thereby to bring the issuance of this Warrant within
the provisions of Section 5 of the Securities Act;
(j) Registration. It is not necessary in connection with the
issuance and sale of this Warrant to the Holder to Register this Warrant under
the Securities Act.
6.2. Covenants. The Company covenants that:
(a) Authorized Shares. The Company will at all times have
authorized, and reserved for the purpose of issuance or transfer upon exercise
of the rights evidenced by this Warrant, a sufficient number of shares of Common
Stock to provide for the exercise of the rights represented by this Warrant (for
purposes of determining compliance with this covenant, the shares of Common
Stock issuable upon exercise of all other Options and warrants to acquire Common
Stock and upon conversion of all instruments convertible into Common Stock shall
be deemed issued and outstanding);
(b) Proper Issuance. The Company, at its expense, will take all such
action as may be necessary to assure that the Common Stock issuable upon the
exercise of this Warrant may be so issued without violation of any applicable
law or regulation, or of any requirements of any domestic securities exchange or
automated quotation system upon which any capital stock of the Company may be
listed or quoted, as the case may be. Such action may include, but not be
limited to, causing such shares to be duly registered or approved, listed or
quoted on relevant domestic securities exchanges or automated quotation systems;
and
(c) Fully Paid Shares. The Company will take all actions necessary
or appropriate to validly and legally issue fully paid and nonassessable shares
of Common Stock upon exercise of this Warrant. All such shares will be free from
all taxes, liens and charges with respect to the issuance thereof, other than
any stock transfer taxes in respect to any transfer occurring contemporaneously
with such issuance.
ARTICLE VII.
MISCELLANEOUS
-------------
7.1. Certain Expenses. The Company shall pay all expenses in connection
with, and all taxes (other than stock transfer and income taxes) and other
governmental charges that may be imposed in respect of, the issuance, sale and
delivery of the Warrant and the Warrant Shares.
7.2. Holder Not a Shareholder. Prior to the exercise of this Warrant as
hereinbefore provided, the Holder shall not be entitled to any of the rights of
a shareholder of the Company including, without limitation, the right as a
shareholder (i) to vote on or consent to any proposed action of the Company or
(ii) except as provided herein, to receive (a) dividends or any other
distributions made to shareholders, (b) notice of or attend any meetings of
shareholders of the Company or (c) notice of any other proceedings of the
Company.
18
7.3. Like Tenor. All Warrants shall at all times be substantially
identical except as to the Preamble.
7.4. Remedies. The Company stipulates that the remedies at law of the
Holder in the event of any default or threatened default by the Company in the
performance of or compliance with any of the terms of this Warrant are not and
will not be adequate to the fullest extent permitted by law, and that such terms
may be specifically enforced by a decree for the specific performance of any
agreement contained herein or by an injunction against a violation of any of the
terms hereof or otherwise.
7.5. Enforcement Costs. If any party to, or beneficiary of, this Warrant
seeks to enforce its rights hereunder by legal proceedings or otherwise, then
the non-prevailing party shall pay all reasonable costs and expenses incurred by
the prevailing party, including, without limitation, all reasonable attorneys'
fees (including the allocable costs of in-house counsel).
7.6. Nonwaiver; Cumulative Remedies. No course of dealing or any delay or
failure to exercise any right hereunder on the part of the Holder and/or any
Shareholder shall operate as a waiver of such right or otherwise prejudice the
rights, powers or remedies of the Holder or such Shareholder. No single or
partial waiver by the Holder and/or any Shareholder of any provision of this
Warrant or of any breach or default hereunder or of any right or remedy shall
operate as a waiver of any other provision, breach, default right or remedy or
of the same provision, breach, default, right or remedy on a future occasion.
The rights and remedies provided in this Warrant are cumulative and are in
addition to all rights and remedies which the Holder and each Shareholder may
have in law or in equity or by statute or otherwise.
7.7. Notices. Any notice, demand or delivery to be made pursuant to this
Warrant will be sufficiently given or made if sent by certified or registered
mail, postage prepaid, nationally recognized overnight delivery service or
facsimile transmission, addressed to (a) the Holder and the Shareholders at
their last known addresses appearing on the books of the Company maintained for
such purpose or (b) the Company at its Principal Executive Office. The Holder,
the Shareholders and the Company may each designate a different address by
notice to the other pursuant to this Section 7.7. A notice shall be deemed
effective upon receipt.
7.8. Successors and Assigns. This Warrant shall be binding upon, the
Company and any Person succeeding the Company by merger, consolidation or
acquisition of all or substantially all of the Company's assets, and all of the
obligations of the Company with respect to the shares of Common Stock issuable
upon exercise of this Warrant shall survive the exercise, expiration or
termination of this Warrant and all of the covenants and agreements of the
Company shall inure to the benefit of the Holder, each Shareholder and their
respective successors and assigns. The Company shall, at the time of exercise of
this Warrant, in whole or in part, upon request of the Holder or any Shareholder
but at the Company's expense, acknowledge in writing its continuing obligations
hereunder with respect to rights of the Holder or such Shareholder to which it
shall continue to be entitled after such exercise in accordance with the terms
hereof; provided that the failure of the Holder or any Shareholder to make any
19
such request shall not affect the continuing obligation of the Company to the
Holder or such Shareholder in respect of such rights.
7.9. Modification; Severability.
(a) If, in any action before any court or agency legally empowered
to enforce any term, any term is found to be unenforceable, then such term shall
be deemed modified to the extent necessary to make it enforceable by such court
or agency.
(b) If any term is not curable as set forth in subsection (a) above,
the unenforceability of such term shall not affect the other provisions of this
Warrant but this Warrant shall be construed as if such unenforceable term had
never been contained herein.
7.10. Integration. This Warrant replaces all prior and contemporaneous
agreements and supersedes all prior and contemporaneous negotiations between the
parties with respect to the transactions contemplated herein and constitutes the
entire agreement of the parties with respect to the transactions contemplated
herein.
7.11. Survival of Representations and Warranties. The representations and
warranties of any party in this Warrant shall survive the execution and delivery
of this Warrant and the consummation of the transactions contemplated hereby,
notwithstanding any investigation by the such party or its agents.
7.12. Amendment. This Warrant may not be modified or amended except by
written agreement of the Company, the Holder and the Shareholder(s), if any,
holding a majority of the Warrant Shares.
7.13. Headings. The headings of the Articles and Sections of this Warrant
are for the convenience of reference only and shall not, for any purpose, be
deemed a part of this Warrant.
7.14. Meanings. Whenever used in this Warrant, any noun or pronoun shall
be deemed to include both the singular and plural and to cover all genders; and
the words "herein," "hereof" and "hereunder" and words of similar import shall
refer to this instrument as a whole, including any amendments hereto.
7.15. Governing Law. This Warrant shall be governed by, and construed in
accordance with, the laws of the State of California applicable to contracts
entered into and to be performed wholly within California by California
residents.
20
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
duly authorized officer this October 14, 1997.
LUCAS LICENSING LTD. ("Holder") GALOOB TOYS, INC. ("Company")
By: /s/ Gordon Radley By: /s/ Mark Goldman
-------------------------- ------------------------------
Title: Title: President and CEO
---------------------- ---------------------------
21
SCHEDULE OF EXHIBITS
--------------------
EXHIBIT "D-1"-Notice of Exercise (Section 2.1)
EXHIBIT "D-2"-Investment Representation Certificate (Section 3.2(a))
EXHIBIT "D-3"-Assignment Form (Section 3.2(d))
EXHIBIT "D-4"-Schedule of Options and Preemptive Rights (Sections 6.1(c) and
6.1(d))
22
EXHIBIT "D-1"
NOTICE OF EXERCISE FORM
-----------------------
(To be executed only upon partial or full
exercise of the within Warrant)
The undersigned registered Holder of the within Warrant hereby irrevocably
exercises the within Warrant for and purchases shares of Common Stock of Galoob
Toys, Inc. and herewith makes payment therefor in the amount of $ _____________,
all at the price and on the terms and conditions specified in the within Warrant
and requests that a certificate (or _____________ certificates in denominations
of shares) for the shares of Common Stock of Galoob Toys, Inc. hereby purchased
be issued in the name of and delivered to (choose one) (a) the undersigned or
(b) [NAME], whose address is and, if such shares of Common Stock shall not
include all the shares of Common Stock issuable as provided in the within
Warrant, that a new Warrant of like tenor for the number of shares of Common
Stock of Galoob Toys, Inc. not being purchased hereunder be issued in the name
of and delivered to (choose one) (a) the undersigned or (b) [NAME], whose
address is ____________________.
Dated:
---------------------
NOTICE: The signature to this Notice of Exercise must correspond with the
name as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatever.
23
EXHIBIT "D-2"
INVESTMENT REPRESENTATION CERTIFICATE
-------------------------------------
Purchaser:
Company: Galoob Toys, Inc.
Security: Common Stock
Amount:
Date:
(a) In connection with the purchase of the above-listed securities (the
"Securities"), the undersigned (the "Purchaser") represents to the Company as
follows:
(b) The Purchaser is aware of the Company's business affairs and financial
condition, and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Securities. The Purchaser is
purchasing the Securities for its own account for investment purposes only and
not with a view to, or for the resale in connection with, any "distribution"
thereof for purposes of the Securities Act of 1933, as amended (the "Securities
Act");
(c) The Purchaser understands that the Securities have not been registered
under the Securities Act in reliance upon a specific exemption therefor, which
exemption depends upon, among other things, the bona fide nature of the
Purchaser's investment intent as expressed herein;
(d) The Purchaser further understands that the Securities must be held
indefinitely unless subsequently registered under the Securities Act or unless
an exemption from registration is otherwise available. In addition, the
Purchaser understands that the certificate evidencing the Securities will be
imprinted with the legend referred to in the Warrant under which the Securities
are being purchased; and
(e) The Purchaser is aware of the provisions of Rule 144, promulgated
under the Securities Act, which, in substance, permit limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof (or from an affiliate of such issuer), in a non-public offering subject
to the satisfaction of certain conditions, if applicable, including, among other
things: (i) the availability of certain public information about the Company;
(ii) the resale occurring not less than one year after the party has purchased
and paid for the securities to be sold; (iii) the sale being made through a
broker in an unsolicited "broker's transaction" or in transactions directly with
a market maker (as said term is defined under the Securities Exchange Act of
1934) and the amount of securities being sold during any three-month period not
exceeding the specified limitations stated therein.
The Purchaser represents that it is an "accredited investor" as that term is
defined in Rule 501 of Regulation D under the Securities Act or any successor
regulation thereunder.
Date: PURCHASER:
------------------- -----------------------------
24
EXHIBIT "D-3"
ASSIGNMENT FORM
---------------
(To be executed only upon the assignment of the within Warrant)
FOR VALUE RECEIVED, the undersigned registered Holder of the within
Warrant hereby sells, assigns and transfers unto _________________, whose
address is _______________ all of the rights of the undersigned under the within
Warrant, with respect to shares of Common Stock of Galoob Toys, Inc. and, if
such shares of Common Stock shall not include all the shares of Common Stock
issuable as provided in the within Warrant, that a new Warrant of like tenor for
the number of shares of Common Stock of Galoob Toys, Inc. not being transferred
hereunder be issued in the name of and delivered to the undersigned, and does
hereby irrevocably constitute and appoint _____________ attorney to register
such transfer on the books of Galoob Toys, Inc. maintained for the purpose, with
full power of substitution in the premises.
Dated:
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----------------------------------------
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By:
-----------------------------------
(Signature of Registered Holder)
Title:
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NOTICE: The signature to this Assignment must correspond with the name upon
the face of the within Warrant in every particular, without alteration
or enlargement or any change whatever.
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EXHIBIT "D-4"
OUTSTANDING OPTIONS AND PREEMPTIVE RIGHTS
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(Sections 6.1(c) and 6.1(d))
Options
1. Options to purchase shares of the Company's Common Stock are outstanding
pursuant to the following employee benefit plans:
o 1984 Amended and Restated Employee Stock Option Plan
o 1994 Senior Management Stock Option Plan
o 1995 Non-Employee Director Stock Option Plan
o 1996 Share Incentive Plan
2. Gerard Klauer Mattison & Co., LLC holds a warrant to purchase 25,000 shares
of Common Stock.
3. Each share of Common Stock has appurtenant thereto one preferred stock
purchase right (a "Right") issued pursuant to the Company's Stockholder Rights
Plan. Upon the occurrence of certain events involving a change in control of the
Company, Rights not held by an "acquiring person" will entitle the holder to
purchase shares of Common Stock pursuant to the terms of the Stockholder Rights
Plan.
Preemptive Rights
None.
26