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THE PRODUCERS ENTERTAINMENT GROUP LTD.
AND
JOSEPH STEVENS & COMPANY L.P.
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REPRESENTATIVE'S
WARRANT AGREEMENT
________, 1996
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REPRESENTATIVE'S WARRANT AGREEMENT dated as of _______ ____,
1996 by and between THE PRODUCERS ENTERTAINMENT GROUP LTD., a Delaware
corporation (the "Company"), and JOSEPH STEVENS & COMPANY, L.P. ("Joseph
Stevens") (Joseph Stevens is hereinafter referred to variously as the "Holder"
or the "Representative").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue to the Representative
or its designee(s) warrants ("Warrants") to purchase up to 200,000 Units (as
defined in Section 1 hereof, each Unit consisting of four (4) shares of common
stock, $.001 par value per share, of the Company ("Common Stock") and two (2)
redeemable Common Stock purchase warrants, each to purchase one additional share
of Common Stock ("Redeemable Warrants")); and
WHEREAS, the Representative has agreed pursuant to the
underwriting agreement (the "Underwriting Agreement") dated as of the date
hereof by and among the several Underwriters listed therein and the Company to
act as the representative of the several underwriters in connection with the
proposed public offering of 2,000,000 Units at a public offering price of $4.00
per Unit; and
WHEREAS, the Warrants to be issued pursuant to this Agreement
will be issued on the Closing Date (as such term is defined in the Underwriting
Agreement) by the Company to the Representative in consideration for, and as
part of the Representative's compensation in connection with, Joseph Stevens
acting as the Representative pursuant to the Underwriting Agreement;
NOW, THEREFORE, in consideration of the premises, the payment
by the Representative to the Company of twenty dollars ($20.00), the agreements
herein set forth and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. Grant. The Representative (or its designee(s)) is hereby
granted the right to purchase, at any time from __________, 1997 [one year from
the date hereof] until 5:00 p.m., New York time, on __________, 2001, [5 years
from the date hereof] up to 200,000 Units at an initial exercise price (subject
to adjustment as provided in Section 8 hereof) of $__________ [120% of the IPO
price per Unit] per Unit subject to the terms and conditions of this Agreement.
A "Unit" consists of four (4) shares of Common Stock and two (2) Redeemable
Warrants. Each Redeemable Warrant is exercisable to purchase one additional
share of Common Stock at an initial exercise price of $1.75 per share,
commencing on the date of issuance (the "Initial Exercise Date") and ending, at
5:00 p.m. New York time on __________, 2001 [60 months from the date hereof]
(the "Redeemable Warrant Expiration Date") at which time the Redeemable Warrants
shall expire. Except as set forth herein, the Units issuable upon exercise of
the Warrants are in all respects identical to the Units being purchased by the
Underwriters for resale to the public pursuant to the terms and provisions of
the Underwriting Agreement.
2. Warrant Certificates. The warrant certificates (the
"Warrant Certificates") delivered and to be delivered pursuant to this Agreement
shall be in the form set forth in Exhibit A attached hereto and made a part
hereof, with such appropriate insertions, omissions, substitutions and other
variations as required or permitted by this Agreement.
3. Exercise of Warrant.
3.1 Method of Exercise. The Warrants are initially exercisable
at an initial exercise price per Unit set forth in Section 6 hereof payable by
certified or official bank check
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in New York Clearing House funds, subject to adjustment as provided in Section 8
hereof. Upon surrender of a Warrant Certificate, together with the annexed Form
of Election to Purchase duly executed and payment of the Exercise Price (as
hereinafter defined) for the Units purchased at the Company's principal offices
in Beverly Hills, California (presently located at 9150 Wilshire Blvd., Suite
205, Beverly Hills, California 90212-3414 the registered holder of a Warrant
Certificate ("Holder" or "Holders") shall be entitled to receive a certificate
or certificates for the shares of Common Stock so purchased and a certificate or
certificates for the Redeemable Warrants so purchased. The purchase rights
represented by each Warrant Certificate are exercisable at the option of the
Holder thereof, in whole or in part (but not as to fractional shares of the
Common Stock and Redeemable Warrants underlying the Warrants). In the event the
Company redeems all of the outstanding Redeemable Warrants, the Redeemable
Warrants underlying the Warrants may only be exercised if such exercise is
simultaneous with the exercise of the Warrants. Warrants may be exercised to
purchase all or part of the Units represented thereby. In the case of the
purchase of less than all the Units purchasable under any Warrant Certificate,
the Company shall cancel said Warrant Certificate upon the surrender thereof and
shall execute and deliver a new Warrant Certificate of like tenor for the
balance of the Units purchasable thereunder.
3.2 Exercise by Surrender of Warrant. In addition to the
method of payment set forth in Section 3.1 and in lieu of any cash payment
required thereunder, the Holder(s) of the Warrants shall have the right at any
time and from time to time to exercise the Warrants in full or in part by
surrendering the Warrant Certificate in the manner specified in Section 3.1 in
exchange for the number of Units equal to the product of (x) the number of Units
as to which the Warrants are being exercised, multiplied by (y) a fraction, the
numerator of which is the
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Market Price (as defined in Section 3.3 hereof) of the Units minus the Exercise
Price of the Units and the denominator of which is the Market Price per Unit.
Solely for the purposes of this Section 3.2, Market Price shall be calculated
either (i) on the date on which the form of election attached hereto is deemed
to have been sent to the Company pursuant to Section 14 hereof ("Notice Date")
or (ii) as the average of the Market Price for each of the five trading days
immediately preceding the Notice Date, whichever of (i) or (ii) results in a
greater Market Price.
3.3 Definition of Market Price.
(a) As used herein, the phrase "Market Price of the Units,"
the Common Stock or the Redeemable Warrants, respectively, at any date shall be
deemed to be the last reported sale price, or, in case no such reported sale
takes place on such day, the average of the last reported sale prices for the
last three (3) trading days, in either case as officially reported by the
principal securities exchange on which the Units, the Common Stock or the
Redeemable Warrants, as the case may be, are listed or admitted to trading or by
the Nasdaq National Market ("Nasdaq/NM") or the Nasdaq Small Cap Market ("Nasdaq
Small Cap"), or, if the Units, the Common Stock or the Redeemable Warrants, as
the case may be, are not listed or admitted to trading on any national
securities exchange or quoted by the National Association of Securities Dealers
Automated Quotation System ("Nasdaq"), the average closing bid price as
furnished by the National Association of Securities Dealers, Inc. ("NASD")
through Nasdaq or similar organization if Nasdaq is no longer reporting such
information (collectively, the "Appropriate Market Price").
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(b) If the Market Price of Units cannot be determined pursuant
to Section 3.3(a), the Market Price of the Units at any date shall be deemed to
be the sum of the Market Price of the Common Stock and the Market Price of the
Redeemable Warrants.
(c) If the Market Price of the Common Stock cannot be
determined pursuant to Section 3.3(a) above, the Market Price of the Common
Stock shall be determined in good faith (using customary valuation methods) by
resolution of the members of the Board of Directors of the Company, based on the
best information available to it.
(d) If the Market Price of the Redeemable Warrants cannot be
determined pursuant to Section 3.3(a) above, the Market Price of a Redeemable
Warrant shall equal the difference between the Market Price of the Common Stock
and the Exercise Price of the Redeemable Warrant.
4. Issuance of Certificates. Upon the exercise of the
Warrants, the issuance of certificates for shares of Common Stock and Redeemable
Warrants or other securities, properties or rights underlying such Warrants, and
upon the exercise of the Redeemable Warrants, the issuance of certificates for
shares of Common Stock or other securities, properties or rights underlying such
Redeemable Warrants shall be made forthwith (and in any event such issuance
shall be made within five (5) business days thereafter) without charge to the
Holder thereof including, without limitation, any tax which may be payable in
respect of the issuance thereof, and such certificates shall (subject to the
provisions of Sections 5 and 7 hereof) be issued in the name of, or in such
names as may be directed by, the Holder thereof.
The Warrant Certificates and the certificates representing the
shares of Common Stock and the Redeemable Warrants underlying the Warrants and
the shares of Common Stock underlying each Redeemable Warrant or other
securities, property or rights shall be executed
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on behalf of the Company by the manual or facsimile signature of the then
present Chairman or Vice Chairman of the Board of Directors or President or Vice
President of the Company under its corporate seal reproduced thereon, attested
to by the manual or facsimile signature of the then present Secretary or
Assistant Secretary or Treasurer or Assistant Treasurer of the Company. Warrant
Certificates shall be dated the date of execution by the Company upon initial
issuance, division, exchange, substitution or transfer.
5. Restriction On Transfer of Warrants. The Holder of a
Warrant Certificate, by its acceptance thereof, covenants and agrees that the
Warrants are being acquired as an investment and not with a view to the
distribution thereof; that the Warrants may not be sold, transferred, assigned,
hypothecated or otherwise disposed of, in whole or in part, for a period of one
(1) year from the date hereof, except to officers or partners of the
Representative.
6. Exercise Price.
6.1 Initial and Adjusted Exercise Price. Except as otherwise
provided in Section 8 hereof, the initial exercise price of each Warrant shall
be $____ per Unit [120% of the IPO price per Unit]. The adjusted exercise price
shall be the price which shall result from time to time from any and all
adjustments of the initial exercise price in accordance with the provisions of
Section 8 hereof.
6.2 Exercise Price. The term "Exercise Price" herein shall
mean the initial exercise price or the adjusted exercise price, depending upon
the context.
7. Registration Rights.
7.1 Registration Under the Securities Act of 1933. The
Warrants, the shares of Common Stock and the Redeemable Warrants underlying the
Warrants and the shares of Common Stock issuable upon exercise of the Redeemable
Warrants underlying the Warrants and
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the other securities issuable upon exercise of the Warrants (collectively, the
"Warrant Securities") have been registered under the Securities Act of 1933, as
amended (the "Act") pursuant to the Company's Registration Statement on Form
SB-2 (Registration No. __________) (the "Registration Statement"). All the
representations and warranties of the Company contained in the Underwriting
Agreement relating to the Registration Statement, the Preliminary Prospectus and
Prospectus (as such terms are defined in the Underwriting Agreement) and made as
of the dates provided therein, are hereby incorporated by reference. The Company
agrees and covenants promptly to file post effective amendments to such
Registration Statement as may be necessary to maintain the effectiveness of the
Registration Statement as long as any Warrants are outstanding. In the event
that, for any reason, whatsoever, the Company shall fail to maintain the
effectiveness of the Registration Statement, upon exercise, in part or in whole,
of the Warrants, certificates representing the shares of Common Stock and the
Redeemable Warrants underlying the Warrants, and upon exercise, in whole or in
part of the Redeemable Warrants, certificates representing the shares of Common
Stock underlying the Redeemable Warrants and the other securities issuable upon
exercise of the Warrants shall bear the following legend:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended
("Act"), and may not be offered, sold, pledged, hypothecated,
assigned or transferred except pursuant to (i) an effective
registration statement under the Act, (ii) to the extent
applicable, Rule 144 under the Act (or any similar rule under
such Act relating to the disposition of securities), or (iii)
an opinion of counsel, if such opinion shall be reasonably
satisfactory to counsel to the issuer, that an exemption from
registration under such Act is available.
7.2 Piggyback Registration. If, at any time commencing after
the date hereof and expiring seven (7) years thereafter, the Company proposes to
register any of its securities under the Act (other than pursuant to Form S-8,
S-4 or a comparable registration statement) the
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Company will give written notice by registered mail, at least thirty (30) days
prior to the filing of each such registration statement, to the Representative
and to all other Holders of the Warrants and/or the Warrant Securities of its
intention to do so. If the Representative or other Holders of the Warrants
and/or Warrant Securities notifies the Company within twenty (20) days after
receipt of any such notice of its or their desire to include any such securities
in such proposed registration statement, the Company shall afford the
Representative and such Holders of the Warrants and/or Warrant Securities the
opportunity to have any such Warrant Securities registered under such
registration statement.
Notwithstanding the provisions of this Section 7.2, the
Company shall have the right at any time after it shall have given written
notice pursuant to this Section 7.2 (irrespective of whether a written request
for inclusion of any such securities shall have been made) to elect not to file
any such proposed registration statement, or to withdraw the same after the
filing but prior to the effective date thereof.
7.3 Demand Registration.
(a) At any time commencing after the date hereof and expiring
five (5) years thereafter, the Holders of the Warrants and/or Warrant Securities
representing a "Majority" (as hereinafter defined) of such securities (assuming
the exercise of all of the Warrants and the Redeemable Warrants underlying the
Warrants) shall have the right (which right is in addition to the registration
rights under Section 7.2 hereof), exercisable by written notice to the Company,
to have the Company prepare and file with the Securities and Exchange Commission
(the "Commission"), on one occasion, a registration statement and such other
documents, including a prospectus, as may be necessary in the opinion of both
counsel for the Company and counsel for the Representative and Holders, in order
to comply with the provisions of the Act,
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so as to permit a public offering and sale of their respective Warrant
Securities for nine (9) consecutive months by such Holders and any other Holders
of the Warrants and/or Warrant Securities who notify the Company within ten (10)
days after receiving notice from the Company of such request.
(b) The Company covenants and agrees to give written notice of
any registration request under this Section 7.3 by any Holder or Holders to all
other registered Holders of the Warrants and the Warrant Securities within ten
(10) days from the date of the receipt of any such registration request.
(c) Notwithstanding anything to the contrary contained herein,
if the Company shall not have filed a registration statement for the Warrant
Securities within the time period specified in Section 7.4(a) hereof pursuant to
the written notice specified in Section 7.3(a) of a Majority of the Holders of
the Warrants and/or Warrant Securities, the Company shall have the option, upon
the written notice of election of a Majority of the Holders of the Warrants
and/or Warrant Securities to repurchase (i) any and all Warrant Securities at
the higher of the Market Price per share of Common Stock on (x) the date of the
notice sent pursuant to Section 7.3(a) or (y) the expiration of the period
specified in Section 7.4(a) and (ii) any and all Warrants at such Market Price
less the Exercise Price of such Warrant. Such repurchase shall be in immediately
available funds and shall close within two (2) days after the later of (i) the
expiration of the period specified in Section 7.4(a) or (ii) the delivery of the
written notice of election specified in this Section 7.3(c).
(d) In addition to the registration rights under Section 7.2
and subsection (a) of this Section 7.3, at any time commencing after the date
hereof and expiring five (5) years thereafter, any Holder of Warrants and/or
Warrant Securities shall have the right, exercisable
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by written request to the Company, to have the Company prepare and file, on one
occasion, with the Commission a registration statement so as to permit a public
offering and sale for nine (9) consecutive months by any such Holder of its
Warrant Securities provided, however, that the provisions of Section 7.4(b)
hereof shall not apply to any such registration request and registration and all
costs incident thereto shall be at the expense of the Holder or Holders making
such request.
7.4 Covenants of the Company With Respect to Registration. In
connection with any registration under Section 7.2 or 7.3 hereof, the Company
covenants and agrees as follows:
(a) The Company shall use its best efforts to file a
registration statement within forty-five (45) days of receipt of any
demand therefor, shall use its best efforts to have any registration
statement declared effective at the earliest possible time, and shall
furnish each Holder desiring to sell Warrant Securities such number of
prospectuses as shall reasonably be requested.
(b) The Company shall pay all costs (excluding fees and
expenses of Holder(s)' counsel and any underwriting or selling
commissions), fees and expenses in connection with all registration
statements filed pursuant to Sections 7.2 and 7.3(a) hereof including,
without limitation, the Company's legal and accounting fees, printing
expenses, blue sky fees and expenses. The Holder(s) will pay all costs,
fees and expenses in connection with any registration statement filed
pursuant to Section 7.3(d). If the Company shall fail to comply with
the provisions of Section 7.4(a), the Company shall be liable for any
equitable or other relief available at law to the Holder(s) requesting
registration of their Warrant Securities, excluding consequential
damages.
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(c) The Company will take all necessary action which may be
required in qualifying or registering the Warrant Securities included
in a registration statement for offering and sale under the securities
or blue sky laws of such states as reasonably are requested by the
Holder(s), provided that the Company shall not be obligated to execute
or file any general consent to service of process or to qualify as a
foreign corporation to do business under the laws of any such
jurisdiction.
(d) The Company shall indemnify the Holder(s) of the Warrant
Securities to be sold pursuant to any registration statement and each
person, if any, who controls such Holders within the meaning of Section
15 of the Act or Section 20(a) of the Securities Exchange Act of 1934,
as amended ("Exchange Act"), against all loss, claim, damage, expense
or liability (including all expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever) to
which any of them may become subject under the Act, the Exchange Act or
otherwise, arising from such registration statement but only to the
same extent and with the same effect as the provisions pursuant to
which the Company has agreed to indemnify the Underwriters contained in
Section 7 of the Underwriting Agreement. The Company further agree(s)
that upon demand by an indemnified person, at any time or from time to
time, it will promptly reimburse such indemnified person for any loss,
claim, damage, liability, cost or expense actually and reasonably paid
by the indemnified person as to which the Company has indemnified such
person pursuant hereto. Notwithstanding the foregoing provisions of
this Section 7.4(d) any such payment or reimbursement by the Company of
fees, expenses or disbursements incurred by an indemnified person in
any proceeding in which a final judgment by a court of competent
jurisdiction (after all appeals or the expiration of time
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to appeal) is entered against the Company or such indemnified person as
a direct result of the Holder(s) or such person's gross negligence or
willful misfeasance will be promptly repaid to the Company.
(e) The Holder(s) of the Warrant Securities to be sold
pursuant to a registration statement, and their successors and assigns,
shall severally, and not jointly, indemnify the Company, its officers
and directors and each person, if any, who controls the Company within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act, against all loss, claim, damage or expense or liability (including
all expenses reasonably incurred in investigating, preparing or
defending against any claim whatsoever) to which they may become
subject under the Act, the Exchange Act or otherwise, arising from
information furnished by or on behalf of such Holders, or their
successors or assigns, for specific inclusion in such registration
statement to the same extent and with the same effect as the provisions
contained in Section 7 of the Underwriting Agreement pursuant to which
the Underwriters have agreed to indemnify the Company. The Holder(s)
further agree(s) that upon demand by an indemnified person, at any time
or from time to time, they will promptly reimburse such indemnified
person for any loss, claim, damage, liability, cost or expense actually
and reasonably paid by the indemnified person as to which the Holder(s)
have indemnified such person pursuant hereto. Notwithstanding the
foregoing provisions of this Section 7.4(e) any such payment or
reimbursement by the Holder(s) of fees, expenses or disbursements
incurred by an indemnified person in any proceeding in which a final
judgment by a court of competent jurisdiction (after all appeals or the
expiration of time to appeal) is entered against the Company or such
indemnified person as a direct result of the
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Company or such person's gross negligence or willful misfeasance will
be promptly repaid to the Holder(s).
(f) Nothing contained in this Agreement shall be construed as
requiring the Holder(s) to exercise their Warrants prior to the initial
filing of any registration statement or the effectiveness thereof.
(g) The Company shall not permit the inclusion of any
securities other than the Warrant Securities to be included in any
registration statement filed pursuant to Section 7.3 hereof without the
prior written consent of the Holders of the Warrants and Warrant
Securities representing a Majority of such securities (assuming the
exercise of all of the Warrants and the Redeemable Warrants underlying
the Warrants).
(h) The Company shall furnish to each Holder participating in
the offering and to each underwriter, if any, a signed counterpart,
addressed to such Holder or underwriter, of (i) an opinion of counsel
to the Company, dated the effective date of such registration statement
(and, if such registration includes an underwritten public offering, an
opinion dated the date of the closing under the underwriting
agreement), and (ii) a "cold comfort" letter dated the effective date
of such registration statement (and, if such registration includes an
underwritten public offering, a letter dated the date of the closing
under the underwriting agreement) signed by the independent public
accountants who have issued a report on the Company's financial
statements included in such registration statement, in each case
covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in
the case of such accountants' letter, with respect to events subsequent
to the date of such financial
13
statements, as are customarily covered in opinions of issuer's counsel
and in accountants' letters delivered to underwriters in underwritten
public offerings of securities.
(i) The Company shall as soon as practicable after the
effective date of the registration statement, and in any event within
15 months thereafter, make "generally available to its security
holders" (within the meaning of Rule 158 under the Act) an earnings
statement (which need not be audited) complying with Section 11(a) of
the Act and covering a period of at least 12 consecutive months
beginning after the effective date of the registration statement.
(j) The Company shall deliver promptly to each Holder
participating in the offering requesting the correspondence and
memoranda described below and to the managing underwriter, if any,
copies of all correspondence between the Commission and the Company,
its counsel or auditors and all memoranda relating to discussions with
the Commission or its staff with respect to the registration statement
and permit each Holder and underwriter to do such investigation, upon
reasonable advance notice, with respect to information contained in or
omitted from the registration statement as it deems reasonably
necessary to comply with applicable securities laws or rules of the
NASD. Such investigation shall include access to books, records and
properties and opportunities to discuss the business of the Company
with its officers and independent auditors, all to such reasonable
extent and at such reasonable times and as often as any such Holder or
underwriter shall reasonably request.
(k) The Company shall enter into an underwriting agreement
with the managing underwriter selected for such underwriting by Holders
holding a Majority of the Warrant Securities requested to be included
in such underwriting, which may be the
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Representative. Such agreement shall be satisfactory in form and
substance to the Company, each Holder and such managing underwriter,
and shall contain such representations, warranties and covenants by the
Company and such other terms as are customarily contained in agreements
of that type used by the managing underwriter. The Holders shall be
parties to any underwriting agreement relating to an underwritten sale
of their Warrant Securities and may, at their option, require that any
or all of the representations, warranties and covenants of the Company
to or for the benefit of such underwriters shall also be made to and
for the benefit of such Holders. Such Holders shall not be required to
make any representations or warranties to or agreements with the
Company or the underwriters except as they may relate to such Holders
and their intended methods of distribution.
(l) In addition to the Warrant Securities, upon the written
request therefor by any Holder(s), the Company shall include in the
registration statement any other securities of the Company held by such
Holder(s) as of the date of filing of such registration statement,
including without limitation, restricted shares of Common Stock,
options, warrants or any other securities convertible into shares of
Common Stock.
(m) For purposes of this Agreement, the term "Majority" in
reference to the Holders of Warrants or Warrant Securities shall mean
in excess of fifty percent (50%) of the then outstanding Warrants or
Warrant Securities that (i) are not held by the Company, an affiliate,
officer, creditor, employee or agent thereof or any of their respective
affiliates, members of their family, persons acting as nominees or in
conjunction therewith and (ii) have not been resold to the public
pursuant to a registration statement filed with the Commission under
the Act.
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8. Adjustments to Exercise Price and Number of Securities.
8.1 Subdivision and Combination. In case the Company shall at
any time subdivide or combine the outstanding shares of Common Stock, the
Exercise Price shall forthwith be proportionately decreased in the case of
subdivision or increased in the case of combination.
8.2 Stock Dividends and Distributions. In case the Company
shall pay dividend in, or make a distribution of, shares of Common Stock or of
the Company's capital stock convertible into Common Stock, the Exercise Price
shall forthwith be proportionately decreased. An adjustment made pursuant to
this Section 8.2 shall be made as of the record date for the subject stock
dividend or distribution.
8.3 Adjustment in Number of Securities. Upon each adjustment
of the Exercise Price pursuant to the provisions of this Section 8, the number
of Warrant Securities issuable upon the exercise at the adjusted Exercise Price
of each Warrant shall be adjusted to the nearest whole number by multiplying a
number equal to the Exercise Price in effect immediately prior to such
adjustment by the number of Warrant Securities issuable upon exercise of the
Warrants immediately prior to such adjustment and dividing the product so
obtained by the adjusted Exercise Price.
8.4 Definition of Common Stock. For the purpose of this
Agreement, the term "Common Stock" shall mean (i) the class of stock designated
as Common Stock in the Certificate of Incorporation of the Company as may be
amended or restated as of the date hereof, or (ii) any other class of stock
resulting from successive changes or reclassifications of such Common Stock
consisting solely of changes in par value, or from par value to no par value, or
from no par value to par value.
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8.5 Merger or Consolidation or Sale.
(a) In case of any consolidation of the Company with, or
merger of the Company with, or merger of the Company into, another corporation
(other than a consolidation or merger which does not result in any
reclassification or change of the outstanding Common Stock), the corporation
formed by such consolidation or merger shall execute and deliver to the Holder a
supplemental warrant agreement providing that the holder of each Warrant then
outstanding or to be outstanding shall have the right thereafter (until the
expiration of such Warrant) to receive, upon exercise of such Warrant, the kind
and amount of shares of stock and other securities and property receivable upon
such consolidation, merger, sale or transfer by a holder of the number of shares
of Common Stock of the Company for which such Warrant might have been exercised
immediately prior to such consolidation, merger, sale or transfer. Such
supplemental warrant agreement shall provide for adjustments which shall be
identical to the adjustments provided in this Section 8. The above provision of
this subsection shall similarly apply to successive consolidations or mergers.
(b) In the event of (i) the sale by the Company of all or
substantially all of its assets, or (ii) the engagement by the Company or any of
its affiliates in a "Rule 13e-3 transaction" as defined in paragraph (a)(3) of
Rule 13e-3 of the General Rules and Regulations under the Securities Exchange
Act of 1934, as amended, or (iii) a distribution to the Company's stockholders
of any cash, assets, property, rights, evidences of indebtedness, securities or
any other thing of value, or any combination thereof, the Holders of the
unexercised Warrants shall receive notice of such sale, transaction or
distribution twenty (20) days prior to the date of such sale or the record date
for such transaction or distribution, as applicable, and, if they exercise such
Warrants prior to such date, they shall be entitled, in addition to the shares
of Common
17
Stock issuable upon the exercise thereof, to receive such property, cash,
assets, rights, evidence of indebtedness, securities or any other thing of
value, or any combination thereof, on the payment date of such sale, transaction
or distribution.
8.6 No Adjustment of Exercise Price in Certain Cases. No
adjustment of the Exercise Price shall be made if the amount of said adjustment
shall be less than ten cents (10(cent)) per Warrant Security, provided, however,
that in such case any adjustment that would otherwise be required then to be
made shall be carried forward and shall be made at the time of and together with
the next subsequent adjustment which, together with any adjustment so carried
forward, shall amount to at least ten cents (10(cent)) per Warrant Security.
8.7 Adjustment of Redeemable Warrants' Exercise Price. With
respect to any of the Redeemable Warrants whether or not the Redeemable Warrants
have been exercised (or are exercisable) and whether or not the Redeemable
Warrants are issued and outstanding, the Redeemable Warrant exercise price and
the number of shares of Common Stock underlying such Redeemable Warrants shall
be automatically adjusted in accordance with Section 8 of the Warrant Agreement
between the Company and OTR Stock Transfer Company dated __________, 1996 (the
"Redeemable Warrant Agreement"), upon the occurrence of any of the events
described therein. Thereafter, the underlying Redeemable Warrants shall be
exercisable at such adjusted Redeemable Warrant exercise price for such adjusted
number of underlying shares of Common Stock or other securities, properties or
rights.
9. Exchange and Replacement of Warrant Certificates. Each
Warrant Certificate is exchangeable without expense, upon the surrender thereof
by the registered Holder at the principal executive office of the Company, for a
new Warrant Certificate of like tenor and
18
date representing in the aggregate the right to purchase the same number of
Units in such denominations as shall be designated by the Holder thereof at the
time of such surrender.
Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of any Warrant
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it, and reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
the Warrants, if mutilated, the Company will make and deliver a new Warrant
Certificate of like tenor, in lieu thereof.
10. Elimination of Fractional Interests. The Company shall not
be required to issue certificates representing fractions of shares of Common
Stock or Redeemable Warrants upon the exercise of the Warrants, or fractions of
shares of Common Stock upon the exercise of the Redeemable Warrants underlying
the Warrants, it being the intent of the parties that all fractional interests
shall be eliminated by rounding any fraction up to the nearest whole number of
shares of Common Stock or Redeemable Warrants, as the case may be, or other
securities, properties or rights.
11. Reservation and Listing of Securities. The Company shall
at all times reserve and keep available out of its authorized shares of Common
Stock, solely for the purpose of issuance upon the exercise of the Warrants and
the Redeemable Warrants, such number of shares of Common Stock or other
securities, properties or rights as shall be issuable upon the exercise thereof.
The Company covenants and agrees that, upon exercise of the Warrants and payment
of the Exercise Price therefor, all shares of Common Stock and other securities
issuable upon such exercise shall be duly and validly issued, fully paid,
non-assessable and not subject to the preemptive rights of any stockholder. The
Company further covenants and agrees that
19
upon exercise of the Redeemable Warrants underlying the Warrants and payment of
the respective Redeemable Warrant exercise price therefor, all shares of Common
Stock and other securities issuable upon such exercises shall be duly and
validly issued, fully paid, non-assessable and not subject to the preemptive
rights of any stockholder. As long as the Warrants shall be outstanding, the
Company shall use its best efforts to cause all shares of Common Stock issuable
upon the exercise of the Warrants and the Redeemable Warrants and all Redeemable
Warrants underlying the Warrants to be listed (subject to official notice of
issuance) on all securities exchanges on which the Common Stock or the
Redeemable Warrants issued to the public in connection herewith may then be
listed and/or quoted on Nasdaq National Market or Nasdaq Small Cap Market.
12. Notices to Warrant Holders. Nothing contained in this
Agreement shall be construed as conferring upon the Holders the right to vote or
to consent or to receive notice as a stockholder in respect of any meetings of
stockholders for the election of directors or any other matter, or as having any
rights whatsoever as a stockholder of the Company. If, however, at any time
prior to the expiration of the Warrants and their exercise, any of the following
events shall occur:
(a) the Company shall take a record of the holders of its
shares of Common Stock for the purpose of entitling them to receive a
dividend or distribution payable otherwise than in cash, or a cash
dividend or distribution payable otherwise than out of current or
retained earnings, as indicated by the accounting treatment of such
dividend or distribution on the books of the Company; or
(b) the Company shall offer to all the holders of its Common
Stock any additional shares of capital stock of the Company or
securities convertible into or
20
exchangeable for shares of capital stock of the Company, or any option,
right or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or a sale of
all or substantially all of its property, assets and business as an
entirety shall be proposed;
then, in any one or more of said events, the Company shall give written notice
of such event at least twenty (20) days prior to the date fixed as a record date
or the date of closing the transfer books for the determination of the
stockholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, or entitled to vote on such
proposed dissolution, liquidation, winding up or sale. Such notice shall specify
such record date or the date of closing the transfer books, as the case may be.
Failure to give such notice or any defect therein shall not affect the validity
of any action taken in connection with the declaration or payment of any such
dividend, or the issuance of any convertible or exchangeable securities, or
subscription rights, options or warrants, or any proposed dissolution,
liquidation, winding up or sale.
13. Redeemable Warrants. The form of the certificate
representing Redeemable Warrants (and the form of election to purchase shares of
Common Stock upon the exercise of Redeemable Warrants and the form of assignment
printed on the reverse thereof) shall be substantially as set forth in Exhibit
"A" to the Redeemable Warrant Agreement. Each Redeemable Warrant issuable upon
exercise of the Warrants shall evidence the right to initially purchase one
fully paid and non-assessable share of Common Stock at an initial purchase price
of $1.75 per share commencing on the Initial Exercise Date and ending at 5:00
p.m. New York time on the Redeemable Warrant Expiration Date at which time the
Redeemable Warrants shall
21
expire. The exercise price of the Redeemable Warrants and the number of shares
of Common Stock issuable upon the exercise of the Redeemable Warrants are
subject to adjustment, whether or not the Warrants have been exercised and the
Redeemable Warrants have been issued, in the manner and upon the occurrence of
the events set forth in Section 8 of the Redeemable Warrant Agreement, which is
hereby incorporated herein by reference and made a part hereof as if set forth
in its entirety herein. Subject to the provisions of this Agreement and upon
issuance of the Redeemable Warrants underlying the Warrants, each registered
holder of such Redeemable Warrants shall have the right to purchase from the
Company (and the Company shall issue to such registered holders) up to the
number of fully paid and non-assessable shares of Common Stock (subject to
adjustment as provided herein and in the Redeemable Warrant Agreement), free and
clear of all preemptive rights of stockholders, provided that such registered
holder complies with the terms governing exercise of the Redeemable Warrants set
forth in the Redeemable Warrant Agreement, and pays the applicable exercise
price, determined in accordance with the terms of the Redeemable Warrant
Agreement. Upon exercise of the Redeemable Warrants, the Company shall forthwith
issue to the registered holder of any such Redeemable Warrant in his name or in
such name as may be directed by him, certificates for the number of shares of
Common Stock so purchased. Except as otherwise provided herein, the Redeemable
Warrants underlying the Warrants shall be governed in all respects by the terms
of the Redeemable Warrant Agreement. The Redeemable Warrants shall be
transferable in the manner provided in the Redeemable Warrant Agreement, and
upon any such transfer, a new Redeemable Warrant Certificate shall be issued
promptly to the transferee. The Company covenants to, and agrees with, the
Holder(s) that without the prior written consent of the Holder(s), the
Redeemable Warrant Agreement will not be modified, amended, cancelled, altered
or superseded, and that
22
the Company will send to each Holder, irrespective of whether or not the
Warrants have been exercised, any and all notices required by the Redeemable
Warrant Agreement to be sent to holders of Redeemable Warrants.
14. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
duly made when delivered, or
mailed by registered or certified mail, return receipt requested:
(a) If to the registered Holder of the Warrants, to the
address of such Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in Section 3
hereof or to such other address as the Company may designate by notice
to the Holders.
15. Supplements and Amendments. The Company and the
Representative may from time to time supplement or amend this Agreement without
the approval of any Holders of Warrant Certificates (other than the
Representative) in order to cure any ambiguity, to correct or supplement any
provision contained herein which may be defective or inconsistent with any
provisions herein, or to make any other provisions in regard to matters or
questions arising hereunder which the Company and the Representative may deem
necessary or desirable and which the Company and the Representative deem shall
not adversely affect the interests of the Holders of Warrant Certificates.
16. Successors. All the covenants and provisions of this
Agreement shall be binding upon and inure to the benefit of the Company, the
Holders and their respective successors and assigns hereunder.
17. Termination. This Agreement shall terminate at the close
of business on __________, 2003 [7 years from the date hereof]. Notwithstanding
the foregoing, the
23
indemnification provisions of Section 7 shall survive such termination until the
close of business on __________, 2008 [12 years from the date hereof.]
18. Governing Law, Submission to Jurisdiction. This Agreement
and each Warrant Certificate issued hereunder shall be deemed to be a contract
made under the laws of the State of New York and for all purposes shall be
construed in accordance with the laws of said State without giving effect to the
rules of said State governing the conflicts of laws.
The Company, the Representative and the Holders hereby agree
that any action, proceeding or claim against it arising out of, or relating in
any way to, this Agreement shall be brought and enforced in the courts of the
State of New York or of the United States of America for the Southern District
of New York, and irrevocably submits to such jurisdiction, which jurisdiction
shall be exclusive. The Company, the Representative and the Holders hereby
irrevocably waive any objection to such exclusive jurisdiction or inconvenient
forum. Any such process or summons to be served upon any of the Company, the
Representative and the Holders (at the option of the party bringing such action,
proceeding or claim) may be served by transmitting a copy thereof, by registered
or certified mail, return receipt requested, postage prepaid, addressed to it at
the address as set forth in Section 14 hereof. Such mailing shall be deemed
personal service and shall be legal and binding upon the party so served in any
action, proceeding or claim. The Company, the Representative and the Holders
agree that the prevailing party(ies) in any such action or proceeding shall be
entitled to recover from the other party(ies) all of its/their reasonable legal
costs and expenses relating to such action or proceeding and/or incurred in
connection with the preparation therefor.
19. Entire Agreement; Modification. This Agreement (including
the Underwriting Agreement to the extent portions thereof are referred to
herein) and the
24
Redeemable Warrant Agreement contain the entire understanding between the
parties hereto with respect to the subject matter hereof and may not be modified
or amended except by a writing duly signed by the party against whom enforcement
of the modification or amendment is sought.
20. Severability. If any provision of this Agreement shall be
held to be invalid or unenforceable, such invalidity or unenforceability shall
not affect any other provision of this Agreement.
21. Captions. The caption headings of the Sections of this
Agreement are for convenience of reference only and are not intended, nor should
they be construed as, a part of this Agreement and shall be given no substantive
effect.
22. Benefits of this Agreement. Nothing in this Agreement
shall be construed to give to any person or corporation other than the Company
and the Representative and any other registered Holder(s) of the Warrant
Certificates or Warrant Securities any legal or equitable right, remedy or claim
under this Agreement; and this Agreement shall be for the sole and exclusive
benefit of the Company and the Representative and any other Holder(s) of the
Warrant Certificates or Warrant Securities.
23. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and such counterparts shall to either constitute but one and
the same instrument.
25
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
THE PRODUCERS ENTERTAINMENT GROUP LTD.
By:
---------------------------------------
Irwin Meyer
President and Chief Executive Officer
Attest:
- ----------------------------
Secretary
JOSEPH STEVENS & COMPANY, L.P.
By:
---------------------------------------
Name:
Title:
EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
(ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE
UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION
OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE
ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT
REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:00 P.M., NEW YORK TIME, ________, 2001
No. W- ____ Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that Joseph Stevens &
Company, L.P., or registered assigns, is the registered holder of __________
Warrants to purchase initially, at any time from ____________, 1997 [one year
from the effective date of the Registration Statement] until 5:00 p.m. New York
time on ____________, 2001 [five years from the effective date of the
Registration Statement] ("Expiration Date"), up to ______________ Units, each
Unit consisting of four (4) fully-paid and non-assessable shares of common
stock, $.001 par value ("Common Stock") of THE PRODUCERS ENTERTAINMENT GROUP
LTD., a Delaware corporation (the "Company"), and two (2) redeemable warrants
("Redeemable Warrants") (each Redeemable Warrant entitling the holder to
purchase one fully-paid and non-assessable share of Common Stock), at the
initial exercise price, subject to adjustment in certain events (the "Exercise
Price"), of $_____________ [120% of the public offering price per Unit] per Unit
upon surrender of this Warrant Certificate and payment of the Exercise Price at
an office or agency of the Company, or by surrender of this Warrant Certificate
in lieu of cash payment, but subject to the conditions set forth herein and in
the warrant agreement dated as of _________________, 1996 between the Company
and Joseph Stevens & Company, L.P. (the "Warrant Agreement"). Payment of the
Exercise Price shall be made by certified or official bank check in New York
Clearing House funds payable to the order of the Company or by surrender of this
Warrant Certificate.
1
No Warrant may be exercised after 5:00 p.m., New York time, on
the Expiration Date, at which time all Warrants evidenced hereby, unless
exercised prior thereto, hereby shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants issued pursuant to the Warrant Agreement,
which Warrant Agreement is hereby incorporated by reference in and made a part
of this instrument and is hereby referred to for a description of the rights,
limitation of rights, obligations, duties and immunities thereunder of the
Company and the holders (the words "holders" or "holder" meaning the registered
holders or registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of
certain events the Exercise Price and the type and/or number of the Company's
securities issuable thereupon may, subject to certain conditions, be adjusted.
In such event, the Company will, at the request of the holder, issue a new
Warrant Certificate evidencing the adjustment in the Exercise Price and the
number and/or type of securities issuable upon the exercise of the Warrants;
provided, however, that the failure of the Company to issue such new Warrant
Certificates shall not in any way change, alter, or otherwise impair, the rights
of the holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this
Warrant Certificate at an office or agency of the Company, a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided
herein and in the Warrant Agreement, without any charge except for any tax or
other governmental charge imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced
by this Certificate, the Company shall forthwith issue to the holder hereof a
new Warrant Certificate representing such Warrant.
The Company may deem and treat the registered holder(s) hereof
as the absolute owner(s) of this Warrant Certificate (notwithstanding any
notation of ownership or other writing hereon made by anyone), for the purpose
of any exercise hereof, and of any distribution to the holder(s) hereof, and for
all other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined
in the Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
2
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed under its corporate seal.
Dated as of , 1996
THE PRODUCERS ENTERTAINMENT GROUP LTD.
By:
[SEAL] ---------------------------------------
Irwin Meyer
President and Chief Executive Officer
Attest:
- ----------------------------
Secretary
3
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.1]
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to purchase _____________ Units
and herewith tenders in payment for such securities a certified or official bank
check payable in New York Clearing House Funds to the order of The Producers
Entertainment Group Ltd. in the amount of $__________, all in accordance with
the terms of Section 3.1 of the Representative's Warrant Agreement dated as of
___________, 1996 between The Producers Entertainment Group Ltd. and Joseph
Stevens & Company, L.P. The undersigned requests that certificates for such
securities be registered in the name of _______________ whose address is
__________________________ and that such certificates be delivered to
______________________________ whose address is
____________________________.
Dated:
Signature
----------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
---------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
4
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.2]
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to purchase ____________ Units
all in accordance with the terms of Section 3.2 of the Representative's Warrant
Agreement dated as of ______________, 1996 between The Producers Entertainment
Group Ltd. and Joseph Stevens & Company, L.P. The undersigned requests that
certificates for such securities be registered in the name of __________________
whose address is ___________________________________________ and that such
certificates be delivered to __________________________ whose address is
.
Dated:
Signature
----------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
---------------------------------
(Insert Social Security or Other
5
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED __________ hereby sells, assigns and transfers unto
- -------------------------------------------------------------------------------
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ________________ Attorney, to
transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated:
--------------------------
Signature
----------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
---------------------------------
(Insert Social Security or Other
6