EXHIBIT 5
THIS WARRANT AND THE SHARES OF NON-VOTING COMMON STOCK PURCHASABLE HEREUNDER
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD OR
OFFERED FOR SALE UNLESS REGISTERED UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
THIS WARRANT AND THE SHARES OF NON-VOTING COMMON STOCK PURCHASABLE HEREUNDER ARE
SUBJECT TO AND HAVE THE BENEFIT OF A WARRANTHOLDERS RIGHTS AGREEMENT DATED AS OF
MAY 17, 1996 AMONG POSSIBLE DREAMS, LTD., P.D. HOLDINGS, INC. AND THE
STOCKHOLDERS AND WARRANTHOLDERS LISTED ON THE SIGNATURE PAGES THEREOF, A COPY OF
WHICH IS ON FILE WITH POSSIBLE DREAMS, LTD.
Dated: May 17, 1996
WARRANT
To Purchase 250 Shares of Non-Voting Common Stock of
POSSIBLE DREAMS, LTD.
Expiring May 17, 2006
THIS IS TO CERTIFY THAT, for value received, NATIONSCREDIT COMMERCIAL
CORPORATION or registered assigns ("Holder") is entitled to purchase from
POSSIBLE DREAMS, LTD., a Delaware corporation (the "Company"), at any time or
from time to time after 9:00 a.m., New York City time, on the date hereof and
prior to 5:00 p.m., New York City time, on the earlier of May 17, 2006 and the
Business Day preceding the date of redemption of this Warrant, at the place
where the Warrant Agency is located, at the Exercise Price, the number of shares
of Class B Common Stock, par value $0.01 per share (the "Non-Voting Common
Stock") of the Company shown above, all subject to adjustment and upon the terms
and conditions hereinafter provided, and is entitled also to exercise the other
appurtenant rights, powers and privileges hereinafter described.
This Warrant is one of one or more warrants (the "Warrants") of the same
form and having the same terms as this Warrant, entitling the holders initially
to purchase up to an aggregate of 250 shares of Non-Voting Common Stock. The
Warrants have been issued pursuant to the Credit Agreement dated as of May 17,
1996 (as amended from time to
time, the "Credit Agreement") among the Company, P.D. Holdings, Inc., a Delaware
corporation ("Holdings"), the Lenders listed on the signature pages thereof and
NationsCredit Commercial Corporation ("NationsCredit"), as Agent, and the Holder
is entitled to certain benefits as set forth therein and to certain benefits
described in the Warrantholders Rights Agreement. The Company shall keep a copy
of the Credit Agreement and the Warrantholders Rights Agreement, and any
amendments thereto, at the Warrant Agency and shall furnish, without charge,
copies thereof to the Holder upon request.
Certain terms used in this Warrant are defined in Article VI.
ARTICLE I
EXERCISE OF WARRANTS
1.1. Method of Exercise. To exercise this Warrant in whole or in part,
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the Holder shall deliver on any Business Day to the Company, at the Warrant
Agency, (a) this Warrant, (b) a written notice of such Holder's election to
exercise this Warrant, which notice shall specify the number of shares of Non-
Voting Common Stock to be purchased (which shall be a whole number of shares if
for less than all the shares then issuable hereunder), the denominations of the
share certificate or certificates desired and the name or names in which such
certificates are to be registered, and (c) payment of the Exercise Price with
respect to such shares. Such payment may be made, at the option of the Holder,
to be specified in such notice, either (a) by cash, certified or bank cashier's
check or wire transfer in an amount equal to the product of (i) the Exercise
Price times (ii) the number of Warrant Shares as to which this Warrant is being
exercised or (b) by receiving from the Company the number of Warrant Shares
equal to (i) the number of Warrant Shares as to which this Warrant is being
exercised minus (ii) the number of Warrant Shares having a value, based on the
Closing Price on the trading day immediately prior to the date of such exercise,
equal to the product of (x) the Exercise Price times (y) the number of Warrant
Shares as to which this Warrant is being exercised; provided that the Holder may
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make payment as set forth in clause (b) only if at the time this Warrant is
being exercised the Common Stock is listed or admitted for trading on a national
securities exchange or is traded in the over-the-counter market.
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The Company shall, as promptly as practicable and in any event within
seven days after receipt of such documents and payment, execute and deliver or
cause to be executed and delivered, in accordance with such notice, a
certificate or certificates representing the aggregate number of shares of Non-
Voting Common Stock specified in said notice together with cash in lieu of any
fractions of a share as provided in Section 1.3. The share certificate or
certificates so delivered shall be in such denominations as may be specified in
such notice, and shall be issued in the name of the Holder or such other name or
names as shall be designated in such notice. This Warrant shall be deemed to
have been exercised and such certificate or certificates shall be deemed to have
been issued, and such Holder or any other Person so designated to be named
therein shall be deemed for all purposes to have become a holder of record of
shares, as of the date the aforementioned notice and payment is received by the
Company. If this Warrant shall have been exercised only in part, the Company
shall, at the time of delivery of such certificate or certificates, deliver to
the Holder a new Warrant evidencing the rights to purchase the remaining shares
of Non-Voting Common Stock called for by this Warrant, which new Warrant shall
in all other respects be identical with this Warrant, or, at the request of the
Holder, appropriate notation may be made on this Warrant which shall then be
returned to the Holder. The Company shall pay all expenses, taxes and other
charges payable in connection with the preparation, issuance and delivery of
share certificates and new Warrants, except that, if share certificates or new
Warrants shall be registered in a name or names other than the name of the
Holder, funds sufficient to pay all transfer taxes payable as a result of such
transfer shall be paid by the Holder at the time of delivery of the
aforementioned notice of exercise or promptly upon receipt of a written request
of the Company for payment.
1.2. Shares to be Fully Paid and Nonassessable. All shares of Non-
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Voting Common Stock issued upon the exercise of this Warrant and all shares of
Voting Common Stock issued upon the conversion of such Non-Voting Common Stock
shall be validly issued, fully paid and nonassessable and, if such class of
Common Stock is then listed on any national securities exchange (as defined in
the Exchange Act) or quoted on NASDAQ, shall be duly listed or quoted thereon,
as the case may be.
1.3. No Fractional Shares Required to be Issued. The Company shall not
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be required to issue fractions of shares of Non-Voting Common Stock upon
exercise of this Warrant. If any fraction of a share would, but for this
Section, be issuable upon final exercise of this Warrant, in
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lieu of such fractional share the Company shall pay to the Holder, in cash, an
amount equal to the same fraction of the Fair Market Value of the Company per
share of outstanding Common Stock on the Business Day immediately prior to the
date of such exercise.
1.4. Share Legend. Each certificate for shares of Non-Voting Common
------------
Stock issued upon exercise of this Warrant, unless at the time of exercise such
shares are registered under the Securities Act, shall bear the following legend:
"This security has not been registered under the Securities Act of
1933 and may not be sold or offered for sale unless registered under said
Act and any applicable state securities laws or unless an exemption from
such registration is available. This security is also subject to and has
the benefit of a Warrantholders Rights Agreement dated as of May 17, 1996
among Possible Dreams, Ltd., P.D. Holdings, Inc. and the Stockholders and
Warrantholders listed on the signature pages thereof, copies of which are
on file with Possible Dreams, Ltd."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public offering pursuant to a registration statement under the Securities
Act) shall also bear such legend unless, in the opinion of counsel selected by
the holder of such certificate (who may be an employee of such holder) and
reasonably acceptable to the Company, the securities represented thereby need no
longer be subject to restrictions on resale under the Securities Act.
1.5. Reservation. The Company has duly reserved and will keep
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available for issuance upon exercise of the Warrants the total number of Warrant
Shares deliverable from time to time upon exercise of all Warrants from time to
time outstanding and the total number of shares of Voting Common Stock
deliverable upon conversion of such Warrant Shares to Voting Common Stock. The
Company will not change the Non-Voting Common Stock from par value $0.01 per
share to any higher par value which exceeds the Exercise Price then in effect,
and will reduce the par value of the Non-Voting Common Stock upon any event
described in Article IV that provides for an increase in the number of shares of
Non-Voting Common Stock subject to purchase upon exercise of this Warrant, in
inverse proportion to and effective at the same time as such number of shares is
increased, but only to
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the extent that such increase in the number of shares, together with all other
such increases after the date hereof, causes the aggregate Exercise Price of all
Warrants (without giving effect to any exercise or redemption thereof) to be
greater than $1,000.
ARTICLE II
WARRANT AGENCY; TRANSFER, EXCHANGE AND
REPLACEMENT OF WARRANTS
2.1. Warrant Agency. As long as any of the Warrants remain
--------------
outstanding, the Company shall perform the obligations of and be the warrant
agency with respect to the Warrants (the "Warrant Agency") at its address set
forth in the Credit Agreement or at such other address as the Company shall
specify by notice to all Warrantholders.
2.2. Ownership of Warrant. The Company may deem and treat the person
--------------------
in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by any person
other than the Company) for all purposes and shall not be affected by any notice
to the contrary, until due presentment of this Warrant for registration of
transfer as provided in this Article II.
2.3. Transfer of Warrant. The Company agrees to maintain at the
-------------------
Warrant Agency books for the registration of transfers of the Warrants, and
transfer of this Warrant and all rights hereunder shall be registered, in whole
or in part, on such books, upon surrender of this Warrant at the Warrant Agency,
together with a written assignment of this Warrant duly executed by the Holder
or its duly authorized agent or attorney, with (if the Holder is a natural
person) signatures guaranteed by a bank or trust company or a broker or dealer
registered with the NASD, and funds sufficient to pay any transfer taxes payable
upon such transfer. Upon surrender and, if required, such payment, the Company
shall execute and deliver a new Warrant or Warrants in the name of the assignee
or assignees and in the denominations specified in the instrument of assignment
(which shall be whole numbers of shares only) and shall issue to the assignor a
new Warrant evidencing the portion of this Warrant not so assigned, and this
Warrant shall promptly be canceled.
2.4. Division or Combination of Warrants. This Warrant may be divided
-----------------------------------
or combined with other Warrants upon presentment hereof and of any Warrant or
Warrants with which this Warrant is to be combined at the Warrant Agency,
5
together with a written notice specifying the names and denominations (which
shall be whole numbers of shares only) in which the new Warrant or Warrants are
to be issued, signed by the holders hereof and thereof or their respective duly
authorized agents or attorneys. Subject to compliance with Section 2.3 as to
any transfer or assignment which may be involved in the division or combination,
the Company shall execute and deliver a new Warrant or Warrants in exchange for
the Warrant or Warrants to be divided or combined in accordance with such
notice.
2.5. Loss, Theft, Destruction of Warrant Certificates. Upon receipt of
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evidence satisfactory to the Company of the ownership of and the loss, theft,
destruction or mutilation of any Warrant and, in the case of any such loss,
theft or destruction, upon receipt of indemnity or security satisfactory to the
Company (it being understood and agreed that if the holder of such Warrant is
NationsCredit, then a written agreement of indemnity given by NationsCredit
alone shall be satisfactory to the Company and no further security shall be
required) or, in the case of any such mutilation, upon surrender and
cancellation of such Warrant, the Company will make and deliver, in lieu of such
lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor and
representing the right to purchase the same aggregate number of shares of Non-
Voting Common Stock.
2.6. Expenses of Delivery of Warrants. The Company shall pay all
--------------------------------
expenses, taxes (other than transfer taxes) and other charges payable in
connection with the preparation, issuance and delivery of Warrants hereunder.
ARTICLE III
CERTAIN RIGHTS
3.1. Rights and Obligations under the Warrantholders Rights Agreement.
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This Warrant is entitled to the benefits and subject to the terms of the
Warrantholders Rights Agreement dated as of May 17, 1996 among the Company,
Holdings and the Stockholders and Warrantholders listed on the signature pages
thereof (as amended from time to time, the "Warrantholders Rights Agreement").
The Company shall keep or cause to be kept a copy of the Warrantholders Rights
Agreement, and any amendments thereto, at the Warrant Agency and shall furnish,
without charge, copies thereof to the Holder upon request.
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3.2. Determination of Fair Market Value. Subject to Section 3.3
----------------------------------
hereof, each determination of Fair Market Value hereunder shall be made in good
faith by the Company. Upon each determination of Fair Market Value by the
Company hereunder, the Company shall promptly give notice thereof to all
Warrantholders, setting forth in reasonable detail the calculation of such Fair
Market Value and the method and basis of determination thereof (the "Company
Determination").
3.3. Contest and Appraisal Rights. (a) If the holders of Warrants
----------------------------
entitling such holders to purchase a majority of the Non-Voting Common Stock
subject to purchase upon exercise of Warrants at the time outstanding (exclusive
of Warrants then owned by the Company or any Subsidiary (as defined in the
Credit Agreement) or Affiliate (as defined in the Credit Agreement) thereof (the
"Required Interest") shall disagree with the Company Determination and shall by
notice to the Company given within 30 days after the Company's notice of the
Company Determination (an "Appraisal Notice") elect to dispute the Company
Determination, such dispute shall be resolved as set forth in subsection (b) of
this Section.
(b) The Company shall within 30 days after receipt of an Appraisal
Notice pursuant to subsection (a) of this Section engage an investment bank or
other qualified appraisal firm reasonably acceptable to the Required Interest
(the "Appraiser") to make an independent determination of Fair Market Value (the
"Appraiser Determination"). The Appraiser Determination shall be final and
binding on the Company and all Warrantholders. If the Company Determination and
the Appraiser Determination differ by an amount of 10% or less of the Company
Determination, then the costs of conducting the appraisal shall be borne equally
by the Company and the Warrantholders; if the Company Determination is greater
than the Appraiser Determination by more than 10% of the Company Determination,
then the costs of conducting the appraisal shall be borne entirely by the
Warrantholders; and if the Appraiser Determination is greater than the Company
Determination by more than 10% of the Company Determination, then the costs of
conducting the appraisal shall be borne entirely by the Company; provided that
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in each case costs separately incurred by the Company and any Warrantholders
shall be separately borne by them.
3.4. Board Meetings. The Company shall give to the Warrantholders
--------------
notice of all meetings and actions by written consent of its board of directors,
at the same time and in the same manner as notice of any meetings of such
7
board is required to be given to directors who do not waive such notice (or, if
such meeting requires no notice, then 10 days written notice thereof describing
the matters upon which action is to be taken). Warrantholders shall have the
right to send, at their expense, two representatives selected by them to each
such meeting, who shall be permitted to attend such meeting and any adjournments
thereof (other than any portion of such meeting devoted to discussion of the
Warrantholders solely in their respective capacities as holders of the
Warrants).
3.5 Financial Statements and Other Information. The Company will, and
------------------------------------------
will cause its Subsidiaries to, maintain a system of accounting established and
administered in accordance with sound business practices to permit preparation
of financial statements in accordance with generally accepted accounting
principles ("GAAP"), and will deliver to each of the Warrantholders:
(i) as soon as practicable and in any event within 30 days after the
end of each month, a consolidated balance sheet of the Company and its
Consolidated Subsidiaries as at the end of such month and the related
consolidated statements of operations and cash flows for such month, and for
the portion of the Fiscal Year ended at the end of such month setting forth
in each case in comparative form, for any such financial statements for any
month ended on or after June 30, 1997, the figures for the corresponding
periods of the previous Fiscal Year, all in reasonable detail and certified
by the chief financial officer of the Company as fairly presenting in all
material respects the financial condition and results of operations of the
Company and its Consolidated Subsidiaries and as having been prepared in
accordance with GAAP applied on a basis consistent with the audited financial
statements of the Company, subject to changes resulting from audit and normal
year-end adjustments and to the absence of footnotes;
(ii) as soon as available and in any event within 90 days after the end
of each Fiscal Year, a consolidated balance sheet of the Company and its
Consolidated Subsidiaries as of the end of such Fiscal Year and the related
consolidated statements of operations, stockholders' equity and cash flows
for such Fiscal Year, setting forth in each case (except with respect to the
consolidated financial
8
statements of the Company as of and for the Fiscal Year ending December 31,
1996) in comparative form the figures for the previous Fiscal Year, such
consolidated financial statements to be certified without qualification by
Lefkowitz, Garfinkel, Champi & DeRienzo, P.C., or other independent public
accountants of nationally recognized standing;
(iii) promptly following the filing thereof with the Secretary of State
of the State of Delaware, a copy of each amendment to, or restatement of, the
Certificate of Incorporation of the Company, and promptly following the
adoption thereof by the Company, a copy of each amendment to, or restatement
of, the By-laws of the Company;
(iv) as promptly as practicable following each meeting of the board of
directors of the Company, a copy of the minutes of such meeting, and promptly
following the execution by all of the directors on the board of directors of
the Company, a copy of each unanimous written consent of directors in lieu of
a meeting of the board of directors of the Company, in each case, including
all exhibits and attachments, if any, to such minutes or unanimous written
consents; and
(v) with reasonable promptness, such other information and data with
respect to the Company or any of its Subsidiaries as from time to time may be
reasonably requested by any Warrantholder.
ARTICLE IV
ANTIDILUTION PROVISIONS
4.1. Adjustment Generally. The Exercise Price and the number of shares
--------------------
of Non-Voting Common Stock (or other securities or property) issuable upon
exercise of this Warrant shall be subject to adjustment from time to time upon
the occurrence of certain events as provided in this Article IV; provided that
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notwithstanding anything to the contrary contained herein, the Exercise Price
shall not be less than the par value of the Non-Voting Common Stock, as such par
value is reduced from time to time in accordance with Section 1.5.
4.2. Common Stock Reorganization. If the Company shall subdivide its
---------------------------
outstanding shares of Common Stock (or any class thereof) into a greater number
of shares or consolidate its outstanding shares of Common Stock (or any class
thereof) into a smaller number of shares (any such event being called a "Common
Stock Reorganization"), then (a) the Exercise Price shall be adjusted, effective
9
immediately after the effective date of such Common Stock Reorganization, to a
price determined by multiplying the Exercise Price in effect immediately prior
to such effective date by a fraction, the numerator of which shall be the number
of shares of Common Stock outstanding on such effective date before giving
effect to such Common Stock Reorganization and the denominator of which shall be
the number of shares of Common Stock outstanding after giving effect to such
Common Stock Reorganization, and (b) the number of shares of Non-Voting Common
Stock subject to purchase upon exercise of this Warrant shall be adjusted,
effective at such time, to a number determined by multiplying the number of
shares of Non-Voting Common Stock subject to purchase immediately before such
Common Stock Reorganization by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding after giving effect to such Common
Stock Reorganization and the denominator of which shall be the number of shares
of Common Stock outstanding immediately before such Common Stock Reorganization.
4.3. Common Stock Distribution. (a) If the Company shall issue, sell
-------------------------
or otherwise distribute any shares of Common Stock, other than pursuant to a
Common Stock Reorganization (which is governed by Section 4.2 hereof) (any such
event, including any event described in paragraphs (b) and (c) below, being
herein called a "Common Stock Distribution"), for a consideration per share less
than the Exercise Price then in effect or less than the Fair Market Value of the
Company per share of outstanding Common Stock on a Fully Diluted Basis on the
date of such Common Stock Distribution (before giving effect to such Common
Stock Distribution), then, effective upon such Common Stock Distribution, the
Exercise Price shall be reduced, if such consideration per share shall be less
then the Exercise Price then in effect but not less than such Fair Market Value
per share, to the lower of the prices (calculated to the nearest one-thousandth
of one cent) determined as provided in clauses (i) and (ii) below or, if such
consideration per share shall be less than such Fair Market Value per share, to
the lowest of the prices (calculated to the nearest one-thousandth of one cent)
determined as provided in clauses (i), (ii) and (iii) below:
(i) if the Company shall receive any consideration for the Common
Stock issued, sold or distributed in such Common Stock Distribution, the
consideration per share of Common Stock received by the Company upon such
issue, sale or distribution;
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(ii) by dividing (A) an amount equal to the sum of (1) the number of
shares of Common Stock outstanding immediately prior to such Common Stock
Distribution multiplied by the then existing Exercise Price, plus (2) the
consideration, if any, received by the Company upon such Common Stock
Distribution by (B) the total number of shares of Common Stock outstanding
immediately after such Common Stock Distribution; and
(iii) by multiplying the Exercise Price in effect immediately prior to
such Common Stock Distribution by a fraction, the numerator of which shall
be the sum of (A) the number of shares of Common Stock outstanding
immediately prior to such Common Stock Distribution multiplied by such Fair
Market Value per share on the date of such Common Stock Distribution, plus
(B) the consideration, if any, received by the Company upon such Common
Stock Distribution, and the denominator of which shall be the product of
(1) the total number of shares of Common Stock outstanding immediately
after such Common Stock Distribution multiplied by (2) such Fair Market
Value per share on the date of such Common Stock Distribution.
If any Common Stock Distribution shall require an adjustment to the
Exercise Price pursuant to the foregoing provisions of this paragraph (a),
including by operation of paragraph (b) or (c) below, then, effective at the
time such adjustment is made, the number of shares of Non-Voting Common Stock
subject to purchase upon exercise of this Warrant shall be increased to a number
determined by multiplying the number of shares of Non-Voting Common Stock
subject to purchase immediately before such Common Stock Distribution by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding immediately after giving effect to such Common Stock Distribution
and the denominator of which shall be the sum of the number of shares
outstanding immediately before giving effect to such Common Stock Distribution
(both calculated on a Fully Diluted Basis) plus the number of shares of Common
Stock which the aggregate consideration received by the Company with respect to
such Common Stock Distribution would purchase at the Fair Market Value of the
Company per share of outstanding Common Stock on a Fully Diluted Basis on the
date of such Common Stock Distribution (before giving effect to such Common
Stock Distribution). In computing adjustments under this paragraph, fractional
interests in Common Stock shall be taken into account to the nearest
one-thousandth of a share.
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The provisions of this paragraph (a), including by operation of
paragraph (b) or (c) below, shall not operate to increase the Exercise Price or
reduce the number of shares of Non-Voting Common Stock subject to purchase upon
exercise of this Warrant.
(b) If the Company shall issue, sell, distribute or otherwise grant in
any manner (including by assumption) any rights to subscribe for or to purchase,
or any warrants or options for the purchase of Common Stock or any stock or
securities convertible into or exchangeable for Common Stock (such rights,
warrants or options being herein called "Options" and such convertible or
exchangeable stock or securities being herein called "Convertible Securities"),
whether or not such Options or the rights to convert or exchange any such
Convertible Securities in respect of such Options are immediately exercisable,
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 in
respect of such Options (determined by dividing (i) the aggregate amount, if
any, received or receivable by the Company as consideration for the 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 Options to acquire Convertible Securities, the minimum aggregate amount of
additional consideration, if any, payable upon the issuance or sale of such
Convertible Securities and upon the conversion or exchange thereof, by (ii) the
total maximum number of shares of Common Stock issuable upon the exercise of
such Options or upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such Options) shall be less than the
Exercise Price then in effect or less than the Fair Market Value of the Company
per share of outstanding Common Stock on a Fully Diluted Basis on the date of
granting such Options (before giving effect to such grant), then, for purposes
of paragraph (a) above, 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 have been issued as of the date of granting
of such Options and thereafter shall be deemed to be outstanding and the Company
shall be deemed to have received as consideration of such price per share,
determined as provided above, therefor. Except as otherwise provided in
paragraph (d) below, no additional adjustment of the Exercise Price shall be
made upon the actual exercise of such Options or upon conversion or exchange of
such Convertible Securities.
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(c) If the Company shall issue, sell or otherwise distribute (including
by assumption) any Convertible Securities, whether or not the rights to exchange
or convert thereunder are immediately exercisable, and the price per share for
which Common Stock is issuable upon such conversion or exchange (determined by
dividing (i) the aggregate amount received or receivable by the Company as
consideration for the issuance, sale or distribution 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 (ii) the
total maximum number of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities) shall be less than the Exercise
Price then in effect or less than the Fair Market Value of the Company per share
of outstanding Common Stock on a Fully Diluted Basis on the date of such
issuance, sale or distribution (before giving effect to such issuance, sale or
distribution), then, for purposes of paragraph (a) above, the total maximum
number of shares of Common Stock issuable upon conversion or exchange of all
such Convertible Securities shall be deemed to have been issued as of the date
of the issuance, sale or distribution of such Convertible Securities and
thereafter shall be deemed to be outstanding and the Company shall be deemed to
have received as consideration such price per share, determined as provided
above, therefor. Except as otherwise provided in paragraph (d) below, no
additional adjustment of the Exercise Price shall be made upon the actual
conversion or exchange of such Convertible Securities.
(d) If (i) the purchase price provided for in any Option referred to in
paragraph (b) above or the additional consideration, if any, payable upon the
conversion or exchange of any Convertible Securities referred to in paragraph
(b) or (c) above or the rate at which any Convertible Securities referred to in
paragraph (b) or (c) above are convertible into or exchangeable for Common Stock
shall change at any time (other than under or by reason of provisions designed
to protect against dilution upon an event which results in a related adjustment
pursuant to this Article IV), or (ii) any of such Options or Convertible
Securities shall have terminated, lapsed or expired, the Exercise Price then in
effect shall forthwith be readjusted (effective only with respect to any
exercise of this Warrant after such readjustment) to the Exercise Price which
would then be in effect had the adjustment made upon the issuance, sale,
distribution or grant of such Options or Convertible Securities been made based
upon such changed purchase price, additional consideration or conversion rate,
as the case may be (in the case of any event referred to in clause (i) of
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this paragraph (d)) or had such adjustment not been made (in the case of any
event referred to in clause (ii) of this paragraph (d)).
(e) If the Company shall pay a dividend or make any other distribution
upon any capital stock of the Company payable in Common Stock, Options or
Convertible Securities, then, for purposes of paragraph (a) above, such Common
Stock, Options or Convertible Securities shall be deemed to have been issued or
sold without consideration.
(f) If any shares of Common Stock, Options or Convertible Securities
shall be issued, sold or distributed for cash, the consideration received
therefor shall be deemed to be the amount received by the Company therefor,
after deduction therefrom of any expenses incurred in connection therewith. If
any shares of Common Stock, Options or Convertible Securities shall be issued
sold or distributed for a consideration other than cash, the amount of the
consideration other than cash received by the Company shall be deemed to be the
Fair Market Value of such consideration, after deduction of any expenses
incurred in connection therewith. If any shares of Common Stock, Options or
Convertible Securities shall be issued in connection with any merger in which
the Company is the surviving corporation, the amount of consideration therefor
shall be deemed to be the Fair Market Value of such portion of the assets and
business of the non-surviving corporation as shall be attributable to such
Common Stock, Options or Convertible Securities, as the case may be. If any
Options shall be issued in connection with the issuance and sale of other
securities of the Company, together comprising one integral transaction in which
no specific consideration is allocated to such Options by the parties thereto,
such Options shall be deemed to have been issued without consideration.
4.4. Special Dividends. If the Company shall issue or distribute to
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any holder or holders of shares of Common Stock evidences of indebtedness, any
other securities of the Company or any cash, property or other assets (excluding
a Common Stock Reorganization or a Common Stock Distribution), whether or not
accompanied by a purchase, redemption or other acquisition of shares of Common
Stock (any such nonexcluded event being herein called a "Special Dividend"), (a)
the Exercise Price shall be decreased, effective immediately after the effective
date of such Special Dividend, to a price determined by multiplying the Exercise
Price then in effect by a fraction, the numerator of which shall be the Fair
Market Value of the Company per share of outstanding Common Stock as of such
effective date
14
less any cash and the then Fair Market Value of any evidences of indebtedness,
securities or property or other assets issued or distributed in such Special
Dividend with respect to one share of Common Stock, and the denominator of which
shall be such Fair Market Value per share and (b) the number of shares of Non-
Voting Common Stock subject to purchase upon exercise of this Warrant shall be
increased to a number determined by multiplying the number of shares of Non-
Voting Common Stock subject to purchase immediately before such Special Dividend
by a fraction, the numerator of which shall be the Exercise Price in effect
immediately before such Special Dividend and the denominator of which shall be
the Exercise Price in effect immediately after such Special Dividend. No
adjustment pursuant to this Section 4.4 shall be made with respect to the
declaration or payment of any Restricted Payment (as defined in the Credit
Agreement) by the Company in accordance with Section 8.04(a) of the Credit
Agreement. A reclassification of Common Stock (other than a change in par value,
or from par value to no par value or from no par value to par value) into shares
of Common Stock and shares of any other class of stock shall be deemed a
distribution by the Company to the holders of such Common Stock of such shares
of such other class of stock and, if the outstanding shares of Common Stock
shall be changed into a larger or smaller number of shares of Common Stock as
part of such reclassification, a Common Stock Reorganization.
4.5. Capital Reorganizations. If there shall be any consolidation or
-----------------------
merger to which the Company is a party, other than a consolidation or a merger
of which the Company is the continuing corporation and which does not result in
any reclassification of, or change (other than a Common Stock Reorganization)
in, outstanding shares of Common Stock, or any sale or conveyance of the
property of the Company as an entirety or substantially as an entirety, or any
recapitalization of the Company (any such event being called a "Capital
Reorganization"), then, effective upon the effective date of such Capital
Reorganization, the Holder shall no longer have the right to purchase Non-Voting
Common Stock, but shall have instead the right to purchase, upon exercise of
this Warrant, the kind and amount of shares of stock and other securities and
property (including cash) which the Holder would have owned or have been
entitled to receive pursuant to such Capital Reorganization if this Warrant had
been exercised immediately prior to the effective date of such Capital
Reorganization. As a condition to effecting any Capital Reorganization, the
Company or the successor or surviving corporation, as the case may be, shall (a)
execute and deliver to each Warrantholder and to the Warrant Agency an agreement
as to
15
the Warrantholders' rights in accordance with this Section 4.5, providing, to
the extent of any right to purchase equity securities hereunder, for subsequent
adjustments as nearly equivalent as may be practicable to the adjustments
provided for in this Article IV and (b) provide each Regulation Y Holder with an
opinion of counsel reasonably satisfactory to such Regulation Y Holder and such
other assurances as any Regulation Y Holder may reasonably request to the effect
that the ownership and exercise by any Regulation Y Holder of this Warrant after
giving effect to such Capital Reorganization shall not be prohibited by the BHC
Act or the regulations thereunder. The provisions of this Section 4.5 shall
similarly apply to successive Capital Reorganizations.
4.6. Adjustment Rules. Any adjustments pursuant to this Article IV
----------------
shall be made successively whenever an event referred to herein shall occur,
except that, notwithstanding any other provision of this Article IV, no
adjustment shall be made to the number of shares of Non-Voting Common Stock to
be delivered to each Holder (or to the Exercise Price) if such adjustment
represents less than 1% of the number of shares previously required to be so
delivered, but any lesser adjustment shall be carried forward and shall be made
at the time and together with the next subsequent adjustment which together with
any adjustments so carried forward shall amount to 1% or more of the number of
shares to be so delivered. No adjustment shall be made pursuant to this Article
IV in respect of the issuance from time to time of shares of Common Stock upon
the exercise of any of the Warrants. If the Company shall take a record of the
holders of its Common Stock for any purpose referred to in this Article IV, then
(i) such record date shall be deemed to be the date of the issuance, sale,
distribution or grant in question and (ii) if the Company shall legally abandon
such action prior to effecting such action, no adjustment shall be made pursuant
to this Article IV in respect of such action.
4.7. Proceedings Prior to Any Action Requiring Adjustment. As a
----------------------------------------------------
condition precedent to the taking of any action which would require an
adjustment pursuant to this Article IV, the Company shall take any action which
may be necessary, including obtaining regulatory approvals or exemptions, in
order that (a) the Company may thereafter validly and legally issue as fully
paid and nonassessable all shares of Non-Voting Common Stock which the holders
of Warrants are entitled to receive upon exercise thereof and (b) the ownership
and exercise of any Warrant by any Regulation Y Holder shall not be prohibited
by the BHC Act or the regulations thereunder.
16
4.8. Notice of Adjustment. Not less than 10 nor more than 30 days
--------------------
prior to the record date or effective date, as the case may be, of any action
which requires or could reasonably be expected to require an adjustment or
readjustment pursuant to this Article IV, the Company shall give notice to each
Warrantholder of such event, describing such event in reasonable detail and
specifying the record date or effective date, as the case may be, and, if
determinable, the required adjustment and the computation thereof. If the
required adjustment is not determinable at the time of such notice, the Company
shall give notice to each Warrantholder of such adjustment and computation
promptly after such adjustment becomes determinable.
ARTICLE V
PURCHASE, REDEMPTION AND CANCELLATION OF WARRANTS
5.1. Purchase of Warrants by the Company. The Company shall have the
-----------------------------------
right or obligation to purchase or otherwise acquire Warrants at such times, in
such manner and for such consideration as set forth below.
5.2. Mandatory Redemption of Warrants (a) The Holder may (x) at any
--------------------------------
time and from time to time on or after the earlier of (i) the fifth anniversary
of the Closing Date (as defined in the Credit Agreement) and (ii) repayment in
full of all principal of and premium and interest on the Notes (as defined in
the Credit Agreement) and the termination of the Commitments under the Credit
Agreement and (y) on or within 30 days after the date on which the Company shall
have delivered a Refinancing Notice (any such redemption pursuant to this clause
(y), a "Refinancing Redemption"), demand a determination of the Redemption Price
(a "Determination Notice") for purposes of this Section 5.2. Within 30 days
(or, in the case of a Refinancing Redemption, 5 days) after the receipt of any
Determination Notice from the Holder, the Company shall give to the Holder
notice of the Redemption Price, including a reasonably detailed description of
the method of calculation thereof, determined as of the day of the Determination
Notice. At any time within 30 days (or, in the case of a Refinancing
Redemption, 15 days) after receipt of notice of the Redemption Price the Holder
may demand redemption of this Warrant, in whole or in part, at the Redemption
Price by notice to the Company, payable on the thirtieth Business Day after
receipt of notice of such demand (or, in the case of a Refinancing Redemption,
on the closing date of such refinancing) (any such date, the "Redemption Due
Date") in immediately
17
available funds to the Holder upon surrender of this Warrant at the Warrant
Agency or, if requested by the Holder, by wire transfer to any account in New
York City specified by notice to the Company. Thereupon, the right to purchase
shares of Non-Voting Common Stock theretofore represented by this Warrant as to
which the Holder has demanded (and the Company may effect) redemption shall
terminate, and this Warrant shall represent the right of the Holder to receive
the full Redemption Price from the Company in accordance with this Section
5.2(a). The Holder's right to demand redemption of this Warrant pursuant to
this Section 5.2(a) shall be referred to hereinafter as the Holder's "Mandatory
Redemption Right".
(b) In addition, on or within 30 days after the date on which the
Company shall have delivered a Trigger Notice with respect to a Holdings Trigger
Event described in clauses (i), (ii) or (iii) of the definition thereof, by
notice to the Company the Holder may demand redemption of this Warrant, in whole
or in part, at the Trigger Redemption Price, payable on the day of the
consummation of the Holdings Trigger Event with respect to which the Trigger
Notice has been delivered in immediately available funds to the Holder upon
surrender of this Warrant at the Warrant Agency or, if requested by the Holder,
by wire transfer to any account in New York City specified by notice to the
Company. Thereupon, the right to purchase shares of Non-Voting Common Stock
theretofore represented by this Warrant as to which the Holder has demanded (and
the Company may effect) redemption shall terminate, and this Warrant shall
represent the right of the Holder to receive the Trigger Redemption Price from
the Company in accordance with this Section 5.2(b). The occurrence of a Holdings
Trigger Event described in clause (iv) of the definition thereof shall not give
the Holder any rights under this Section 5.2(b).
5.3. Optional Redemption. (a) At any time and from time to time prior
-------------------
to the completion of a Qualified IPO but after the sixth anniversary of the
Closing Date (as defined in the Credit Agreement), the Company shall have the
right to redeem all, but not less than all, of the outstanding Warrants at the
Optional Redemption Price, determined as of the day preceding the notice of
redemption. Irrevocable notice of such right of redemption shall be given by
the Company to all Warrantholders not more than 30 days nor less than 15 days
prior to the date scheduled for redemption, stating the date and price,
including a reasonably detailed description of the method of calculation
thereof, of redemption. Warrantholders may exercise Warrants until 5:00 p.m.,
New York City time, on the Business Day preceding the date of redemption set
forth in a
18
valid notice of redemption, at which time the right to purchase shares of Non-
Voting Common Stock theretofore represented by this Warrant shall terminate, and
this Warrant shall represent the right of the Holder to receive the Optional
Redemption Price from the Company in immediately available funds upon surrender
of this Warrant at the Warrant Agency. If the Optional Redemption Price shall
be disputed pursuant to Section 3.3, the Company shall pay to the affected
Warrantholders on the redemption date the Optional Redemption Price initially
determined by it and shall thereafter make supplemental payment of any increase
(and the affected Warrantholder shall remit to the Company any decrease) in the
Optional Redemption Price upon resolution of such dispute.
(b) In addition, on or within 30 days after the date on which the
Company shall have delivered a Trigger Notice with respect to a Redemption
Transfer, the Company shall have the right to redeem all, but not less than all,
of the outstanding Warrants at the Trigger Redemption Price with respect to such
Holdings Trigger Event. Irrevocable notice of such right of redemption shall be
given by the Company to all Warrantholders not more than 30 days nor less than
15 days prior to the date scheduled for redemption, stating the date of such
redemption, which shall be the date of consummation of the Redemption Transfer;
provided that such notice of redemption may provide that the obligations of the
- --------
Company to redeem the Warrants shall be conditioned upon the consummation of the
Redemption Transfer. Warrantholders may exercise Warrants until 5:00 p.m., New
York City time, on the Business Day preceding the date of redemption set forth
in a valid notice of redemption, at which time the right to purchase shares of
Non-Voting Common Stock theretofore represented by this Warrant shall terminate,
and this Warrant shall represent the right of the Holder to receive the Trigger
Redemption Price from the Company in immediately available funds upon surrender
of this Warrant at the Warrant Agency.
5.4. Cancellation of Warrants. All Warrants purchased, redeemed or
------------------------
otherwise acquired by the Company shall thereupon be canceled and retired. The
Warrant Agency shall cancel any Warrant surrendered for exercise or registration
of transfer or exchange and deliver such canceled Warrants to the Company.
5.5. Notice of Refinancing and Holdings Trigger Events. The Company
-------------------------------------------------
shall give notice to each of the Warrantholders of (i) any intent by the Company
or the Company to refinance in their entirety the Notes (as defined in the
Credit Agreement) not less than 60 days prior to the
19
proposed closing date of such refinancing, setting forth such proposed closing
date and notifying each Warrantholder of its rights under Section 5.2(a) (such
notice, the "Refinancing Notice") and (ii) the proposed occurrence of any
Holdings Trigger Event not less than 60 days prior to the proposed date of
occurrence of such Holdings Trigger Event, setting forth the date of such
proposed event and, if such Holdings Trigger event is an event described in
clauses (i), (ii) or (iii) of the definition thereof, notifying each
Warrantholder of its rights under Section 5.2(b) (such notice, the "Trigger
Notice").
ARTICLE VI
DEFINITIONS
The following terms, as used in this Warrant, have the following
meanings:
"Adjusted EBITDA" means, for any period, EBITDA for such period plus, to
----
the extent deducted in determining such EBITDA, any fees paid pursuant to the
Management Agreement with respect to such period.
"Appraisal Notice" has the meaning set forth in Section 3.3(a).
"Appraiser" has the meaning set forth in Section 3.3(b).
"Appraiser Determination" has the meaning set forth in Section 3.3(b).
"BHC Act" means the Bank Holding Company Act of 1956, as amended.
"Business Day" means any day excluding Saturday, Sunday and any day on
which banking institutions located in New York are authorized by law or other
governmental action to be closed, unless there shall have been an offering of
Common Stock registered under the Securities Act, in which case "Business Day"
means (a) if Common Stock is listed or admitted to trading on a national
securities exchange, a day on which the principal national securities exchange
on which the Common Stock is listed or admitted to trading is open for business
or (b) if Common Stock is not so listed or admitted to trading, a day on which
the New York Stock Exchange is open for business.
20
"Capital Reorganization" has the meaning set forth in Section 4.5.
"Closing Price" on any day with respect to shares of common stock of any
Person means (a) if such common stock is listed or admitted for trading on a
national securities exchange, the reported last sales price regular way or, if
no such reported sale occurs on such day, the average of the closing bid and
asked prices regular way on such day, in each case as officially quoted or
reported on the principal national securities exchange on which such common
stock is listed or admitted to trading, or (b) if such common stock is not
listed or admitted to trading on any national securities exchange, the average
of the closing bid and asked prices in the over-the-counter market on such day
as reported by NASDAQ, the National Quotation Bureau, Inc. or any nationally
recognized comparable system or, if not so reported, as reported by any New York
Stock Exchange member firm selected by such Person for such purpose.
"Common Stock" means the Voting Common Stock or the Non-Voting Common
Stock, or both, as the context may require.
"Common Stock Distribution" has the meaning set forth in Section 4.3(a).
"Common Stock Reorganization" has the meaning set forth in Section 4.2.
"Company" has the meaning set forth in the first paragraph of this
Warrant.
"Company Determination" has the meaning set forth in Section 3.2.
"Consolidated Total Debt" has the meaning specified in the Credit
Agreement.
"Convertible Securities" has the meaning set forth in Section 4.3(b).
"Credit Agreement" has the meaning set forth in the second paragraph of
this Warrant.
"Determination Notice" has the meaning set forth in Section 5.2(a).
"EBITDA" has the meaning specified in the Credit Agreement.
21
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and any successor Federal statute, and the rules and regulations of the
Securities and Exchange Commission (or its successor) thereunder, all as the
same shall be in effect at the time.
"Exercise Price" means $.01 per share of the Non-Voting Common Stock,
subject to adjustment pursuant to Article IV.
"Fair Market Value" of any Person as at any date of determination shall
be the greatest of (i) the Fair Market Value at such date of such Person and its
Subsidiaries as a going concern, (ii) the liquidation value at such date of such
Person and its Subsidiaries, (iii) the consolidated net worth (or stockholders
equity) of such Person and its Subsidiaries as shown on its latest available
consolidated balance sheet of such Person and (iv) the result of (A) Adjusted
EBITDA for the twelve consecutive months most recently ended prior to such date
multiplied by 5 plus (B) cash and cash equivalents at such date minus (C)
---- -----
Consolidated Total Debt at such date; provided that, for purposes of determining
--------
"Fair Market Value" of the Company at any date, "Consolidated Total Debt" at
such date shall include the average of the aggregate principal amount of the
Working Capital Loans outstanding on the last day of each month during the
twelve consecutive month period ended on or most recently prior to such date.
Notwithstanding the foregoing, if, at any date of determination of the Fair
Market Value of any Person, the common stock of such Person shall then be
publicly traded, the Fair Market Value of such Person on such date for purposes
of the foregoing clause (i) shall be the Market Price on such date multiplied by
the number of shares of common stock of such Person outstanding at such date.
Determination of the Fair Market Value of any Person per share of common stock
of such Person shall be made without giving effect to any discount for (i)
minority interest, (ii) any lack of liquidity of such common stock due to the
fact that there may be no public market for such common stock, or (iii) the
voting status of any class of such common stock and, without limiting the
generality of the foregoing, the Fair Market Value per share of Common Stock
shall be made without giving effect for any lack of liquidity of such Common
Stock or for the fact that, other than Holdings, there are no holders of Common
Stock.
"Fiscal Year" has the meaning set forth in the Credit Agreement.
"Fully Diluted Basis" means, with respect to any determination or
calculation, that such determination or
22
calculation is performed on a fully diluted basis determined in accordance with
generally accepted accounting principles as in effect from time to time.
"Holder" has the meaning set forth in the first paragraph of this
Warrant.
"Holdings" has the meaning set forth in the second paragraph of this
Warrant.
"Holdings Common Stock" means the common stock, par value $0.01 per
share, of Holdings.
"Holdings Qualified IPO" means any sale of shares of Holdings Common
Stock by and for the account of Holdings pursuant to an underwritten initial
public offering registered under the Securities Act; provided that the proceeds
--------
to Holdings (net of underwriters' discount, fees and other expenses incurred by
Holdings in connection therewith) from such sale of shares exceeds $10,000,000.
"Holdings Trigger Event" means (i) a Holdings Qualified IPO at any time
prior to a Qualified IPO, (ii) any proposed transfer by Security Capital (as
defined in the Warrantholders Rights Agreement) or any Management Stockholder
(as defined in the Warrantholders Rights Agreement) or any of their respective
Affiliates (as defined in the Warrantholders Rights Agreement) of its shares of
Holdings Common Stock or any portion thereof to any Person which requires
delivery of a Transfer Notice (as defined in Section 2.4 of the Warrantholders
Rights Agreement), (iii) any transfer of Holdings Common Stock pursuant to
Section 10.1 of the Common Stockholders' Agreement (as defined in the Credit
Agreement) or (iv) a Redemption Transfer (as defined in Section 2.5(b)(i) of the
Warrantholders Rights Agreement).
"Mandatory Redemption Right" has the meaning set forth in Section
5.2(a).
"Market Price" as at any date of determination means the average of the
daily Closing Prices of a share of Common Stock for the shorter of (i) the 20
consecutive Business Days ending on the most recent Business Day prior to the
Time of Determination and (ii) the period commencing on the date next succeeding
the first public announcement of the issuance, sale, distribution, grant or
exercise in question through such most recent Business Day prior to the Time of
Determination. "Time of Determination" means the time and date of the earliest
of (x) the determination of
23
the stockholders entitled to receive such issuance, sale, distribution or grant,
(y) the determination of the Holders or the Company to exercise their respective
rights set forth in Sections 5.2(a) or 5.3 hereof and (z) the commencement of
"ex-dividend" trading in respect thereof.
"NASD" means The National Association of Securities Dealers, Inc.
"NASDAQ" means The National Association of Securities Dealers, Inc.
Automated Quotation System.
"NationsCredit" has the meaning set forth in the second paragraph of
this Warrant.
"Non-Voting Common Stock" has the meaning set forth in the first
paragraph of this Warrant, subject to change pursuant to Article IV.
"Optional Redemption Price" means, as of any date of determination, a
price for each share of Non-Voting Common Stock issuable upon exercise of the
Warrants equal to 110% of the Redemption Price, determined as of such date.
"Options" has the meaning set forth in Section 4.3(b).
"Person" means any natural person, corporation, limited partnership,
limited liability company, general partnership, joint stock company, joint
venture, association, company, trust, bank, trust company, land trust, business
trust or other organization, whether or not a legal entity, and any government
agency or political subdivision thereof.
"Qualified IPO" means any sale of shares of Common Stock by and for the
account of the Company pursuant to an underwritten initial public offering
registered under the Securities Act; provided that the proceeds to the Company
--------
(net of underwriters' discount, fees and other expenses incurred by the Company
in connection therewith) from such sale of shares exceeds $10,000,000.
"Redemption Due Date" has the meaning set forth in Section 5.2(a)
hereof.
"Redemption Price" means, as of any date of determination, a price for
each share of Non-Voting Common Stock issuable upon exercise of the Warrants
equal to the excess of (a)(i) the Fair Market Value of the Company plus the
aggregate Exercise Price of all Warrants either being
24
redeemed or then outstanding and not being redeemed divided by (ii) the number
of shares of Common Stock outstanding on a Fully Diluted Basis over (b) the
Exercise Price then in effect.
"Redemption Transfer" has the meaning set forth in the Warrantholders
Rights Agreement.
"Refinancing Notice" has the meaning set forth in Section 5.5 hereof.
"Regulation Y Holder" means the Holder or a holder of Warrant Shares, if
such Holder or holder of Warrant Shares has identified itself to the Company as
a bank holding company within the meaning of the BHC Act or a subsidiary thereof
subject to Regulation Y under the BHC Act. The Company acknowledges that
NationsCredit has identified itself to the Company as a "Regulation Y Holder".
"Required Interest" has the meaning set forth in Section 3.3(a).
"Securities Act" means the Securities Act of 1933, as amended, and rules
and regulations of the Securities and Exchange Commission thereunder.
"Special Dividend" has the meaning set forth in Section 4.4.
"Subsidiary" of any Person means any corporation, partnership, limited
liability company, joint venture, association or other business entity of which
more than 50% of the total voting power of shares of stock or other interests
therein entitled to vote in the election of members of the board of directors,
partnership committee, board of managers or trustees or other managerial body
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of such Person or a combination
thereof. Unless otherwise specified, "Subsidiary" means a Subsidiary of the
Company and "Subsidiaries" means all Subsidiaries of the Company.
"Trigger Redemption Price" means, as of any date of determination, an
amount equal to (i) the Trigger Fair Market Value Per Share times (ii) the
-----
product of (A) a fraction, the numerator of which shall be the number of shares
of Common Stock for which this Warrant is exercisable at such date (after giving
effect to any adjustments pursuant to Article IV) or, if such determination is
being made with respect to any redemption of the Warrants in part,
25
the number of shares with respect to which this Warrant is being redeemed and
the denominator of which shall be the number of shares of Common Stock
outstanding at such time (calculated on a Fully Diluted Basis) times (B) the
number of shares of Holdings Common Stock outstanding at such date (calculated
on a Fully Diluted Basis).
"Trigger Fair Market Value Per Share" means (i) in the case of any
Holdings Trigger Event described in clause (i) or (ii) or (iv) of the definition
thereof, the highest consideration per share (if any) received by Holdings or
any stockholder of Holdings from the sale, exchange, transfer or other
disposition by it of Holdings Common Stock in connection with such Holdings
Trigger Event and (ii) in the case of any Holdings Trigger Event described in
clause (iii) of the definition thereof, the highest consideration per share of
Holdings Common Stock that would be received by any stockholder of Holdings upon
the disposition of all or substantially all of the Holdings Common Stock or the
assets of Holdings (determined by reference to all of the consideration received
by the stockholders of Holdings (as stockholders) for that portion actually
disposed of in connection with such Holdings Trigger Event, or which would be
received if all of the consideration received by Holdings in connection with
such Holdings Trigger Event were distributed to the stockholders of Holdings),
in each case net of underwriting commissions and other costs and expenses
incurred in connection with any such Holdings Trigger Event and, if such
Holdings Trigger Event constitutes a sale or other transfer of assets, any taxes
payable with respect to such sale.
"Trigger Notice" has the meaning set forth in Section 5.5.
"Voting Common Stock" means the Class A common stock, par value $0.01
per share, of the Company.
"Warrant Agency" has the meaning set forth in Section 2.1.
"Warrant Shares" means the shares of Non-Voting Common Stock issuable
upon the exercise of the Warrants.
"Warrantholder" means a holder of a Warrant.
"Warrantholders Rights Agreement" has the meaning set forth in Section
3.1.
"Warrants" has the meaning set forth in the second paragraph of this
Warrant.
26
All references herein to "days" shall mean calendar days unless
otherwise specified.
ARTICLE VII
MISCELLANEOUS
7.1. Notices. Notices and other communications provided for herein
-------
shall be in writing and may be given by mail, courier, confirmed telex or
facsimile transmission and shall, unless otherwise expressly required, be deemed
given when received or, if mailed, four Business Days after being deposited in
the United States mail with postage prepaid and properly addressed. In the case
of the Holder, such notices and communications shall be addressed to its address
as shown on the books maintained by the Warrant Agency, unless the Holder shall
notify the Warrant Agency that notices and communications should be sent to a
different address (or telex or facsimile number), in which case such notices and
communications shall be sent to the address (or telex or facsimile number)
specified by the Holder.
7.2. Waivers; Amendments. No failure or delay of the Holder in
-------------------
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. No notice or demand on the Company in any case shall entitle
the Company to any other or future notice or demand in similar or other
circumstances. The rights and remedies of the Holder are cumulative and not
exclusive of any rights or remedies which it would otherwise have. The
provisions of this Warrant may be amended, modified or waived with (and only
with) the written consent of the Company and the holders of Warrants entitling
such holders to purchase a majority of the Non-Voting Common Stock subject to
purchase upon exercise of such Warrants at the time outstanding (exclusive of
Warrants then owned by the Company or any Subsidiary or Affiliate (as defined in
the Credit Agreement) thereof); provided, however, that no such amendment,
-------- -------
modification or waiver shall, without the written consent of the holders of all
Warrants at the time outstanding, (a) change the number of shares of Non-Voting
Common Stock subject to purchase upon exercise of this Warrant, the Exercise
Price or provisions for payment thereof or (b) amend, modify or waive the
provisions of this Section or Article III or IV or Section 1.5, 5.2, 5.3 or 5.5.
The provisions of the Credit Agreement
27
and the Warrantholders Rights Agreement may be amended, modified or waived only
in accordance with the respective provisions thereof.
Any such amendment, modification or waiver effected pursuant to and in
accordance with the provisions of this Section or the applicable provisions of
the Credit Agreement or the Warrantholders Rights Agreement shall be binding
upon the holders of all Warrants and Warrant Shares, upon each future holder
thereof and upon the Company. In the event of any such amendment, modification
or waiver the Company shall give prompt notice thereof to all holders of
Warrants and Warrant Shares and, if appropriate, notation thereof shall be made
on all Warrants thereafter surrendered for registration of transfer or exchange.
7.3. GOVERNING LAW. THIS WARRANT SHALL BE CONSTRUED IN ACCORDANCE WITH
-------------
AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAW).
7.4. Transfer; Covenants to Bind Successor and Assigns. All covenants,
-------------------------------------------------
stipulations, promises and agreements in this Warrant contained by or on behalf
of the Company or the Holder shall bind its successors and assigns, whether so
expressed or not. This Warrant shall be transferable and assignable by the
Holder hereof in whole or from time to time in part to any other Person in
accordance with Section 2.3 hereof and the provisions of this Warrant shall be
binding upon and inure to the benefit of the Holder hereof and its successors
and assigns.
7.5. Severability. In case any one or more of the provisions contained
------------
in this Warrant shall be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby. The parties shall
endeavor in good faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
7.6. Section Headings. The section headings used herein are for
----------------
convenience of reference only, are not part of this Warrant and are not to
affect the construction of or be taken into consideration in interpreting this
Warrant.
7.7. Tax Basis. The Company and the Holder agree pursuant to Proposed
---------
Treasury Regulation Section 1.1273-2 that, for Federal income tax purposes, the
aggregate issue
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price of the Tranche B Loans (as defined in the Credit Agreement) and the
aggregate purchase price for the Warrants are those set forth in Section 3.05 of
the Credit Agreement. Neither the Company nor the Holder hereof shall
voluntarily take any action inconsistent with the agreement set forth in this
Section 7.7.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
in its corporate name by one of its officers thereunto duly authorized, and its
corporate seal to be hereunto affixed, attested by its Secretary or an Assistant
Secretary, all as of the day and year first above written.
POSSIBLE DREAMS, LTD.
By: /s/ Philip L. Fitting
_______________________
Name: Philip L. Fitting
Title: Chairman
[Corporate Seal]
Attest:
/s/ Douglas G. Gray
_______________________
Name: Douglas G. Gray
Title:
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