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EXHIBIT 10.21
THESE WARRANTS AND THE UNITS OF COMMON INTERESTS PURCHASABLE
HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND
MUST BE HELD INDEFINITELY UNLESS SUBSEQUENTLY REGISTERED UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR DISPOSED
OF PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION
REQUIREMENTS. THESE WARRANTS AND THE UNITS OF COMMON INTERESTS
PURCHASABLE HEREUNDER ARE SUBJECT TO RESTRICTIONS ON TRANSFER
AS SET FORTH HEREIN AND THAT CERTAIN SECURITYHOLDERS AGREEMENT
AMONG THE ISSUER AND ITS MEMBERS.
SLEEPMASTER HOLDINGS L.L.C.
AMENDED AND RESTATED COMMON INTEREST PURCHASE WARRANTS
Dated as of February 26, 1999
Security No. SH-W-B1 403 Warrants
Sleepmaster Holdings L.L.C., a New Jersey limited liability
company (the "Company"), by this certificate (a "Warrant Certificate") certifies
that, for value received, ATWELL & CO., as nominee for PMI Mezzanine Fund, L.P.,
or registered assigns (sometimes hereinafter referred to as the
"Warrantholders") is the registered holder of warrants (said warrants and any
warrants issued in exchange therefor or transfer or replacement thereof being
hereinafter collectively referred to as the "Warrants") to purchase from the
Company Four Hundred Three (403) fully paid and nonassessable Class A Common
Units (together with units issued upon exchange, transfer or replacement
thereof, the "Units") of the Company (together with the Class B Common Units, if
any, the "Common Interests"), at any time or from time to time until 5:00 p.m.
Los Angeles time on March 3, 2010, at an exercise price of One Cent ($0.01) per
unit, subject to adjustment as provided herein (as such price may be adjusted,
the "Exercise Price"), upon surrender of an equal number of Warrants and payment
of the Exercise Price therefore but only subject to the terms and conditions set
forth herein. The Exercise Price and the number of Units purchasable upon
exercise of the Warrants are subject to adjustment upon the occurrence of
certain events set forth herein. These Warrants are amended and restated from,
and are being
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issued in exchange for, those certain Common Interests Purchase Warrants of the
Company originally issued on March 3, 1998 ("the Old Warrants").
1. Exercise of Warrants. No Warrant may be exercised after
5:00 p.m., Los Angeles time, on March 3, 2010 (the "Termination Date"). All
Warrants evidenced hereby shall thereafter become void. Warrants may be
exercised to purchase Units from the Company on or after the date hereof and on
or before 5:00 p.m., Los Angeles time, on the Termination Date, at the Exercise
Price, subject to adjustment, as hereinafter referred to. The registered holder
of Warrants evidenced by this Warrant Certificate may exercise them, subject to
Section 6, by surrendering this Warrant Certificate, with the form of election
to purchase set forth hereon properly completed and executed, together with
payment of the Exercise Price (a) in cash or by wire transfer of federal funds
or other delivery of immediately available funds or (if the exercise is by the
person to whom the Warrants are initially issued) by check reasonably acceptable
to the Company, (b) to the extent permitted by law, by delivery of Senior
Subordinated Notes due 2007 of the Subsidiary (as defined below), duly endorsed
or accompanied by appropriate instruments of transfer duly executed by the
registered holder thereof, which Notes shall be applied to the payment of the
Exercise Price at 100% of their original principal amount plus accrued interest
to the date of delivery, or (c) by a combination of the methods specified in
clauses (a) and (b); provided, however, that if the Warrant so exercised has
been duly assigned in accordance with the provisions of Section 12, such
assignee may exercise such Warrant prior to, or in the absence of, the
registration of such assignment as though such assignee were the registered
holder of such Warrant. The rights, privileges, obligations and restrictions
created or conveyed by this Warrant Certificate in the Units or to the holders
thereof shall survive the transfer of the Units or the remaining Warrants to
another person and/or the exercise, expiration or other termination of the
Warrants, and shall inhere in the Units and inure to the benefit of and be
binding upon the holders thereof until, and shall expire upon, the termination
of such rights, privileges, obligations, and restrictions as provided herein or
in the Registration Rights Agreement and the Security holders Agreement referred
to in Section 2, below, notwithstanding the retirement, termination, and/or
cancellation of this Warrant Certificate. To evidence such surviving rights,
privileges, obligations, and restrictions, upon the request of the Company or
any such holder of Units, the Company and such holder shall execute an
instrument or agreement confirming such rights, privileges, obligations and
restrictions.
2. Related Agreements. The Warrants evidenced by this Warrant
Certificate are a portion of a series of like amended and restated common
interest purchase warrants (collectively, the "Series B Warrants") that are
evidenced by certificates of like tenor (the "Series B Warrant Certificates")
that have been issued pursuant to that certain Purchase Agreement dated as of
March 3, 1998 (the "Securities Purchase Agreement"), among the Company,
Sleepmaster L.L.C. (the "Subsidiary"), and the initial Warrantholder. Pursuant
to the Securities Purchase Agreement, the Company has entered into that certain
Amended and Restated Registration Rights Agreement dated as of March 3, 1998
(the "Registration Rights Agreement"), among the Company, Sleep Investor L.L.C.
("Investor"), the initial Warrantholder, and certain of its members, and that
certain Amended and Restated Securityholders Agreement dated as of March 3, 1998
(the "Securityholders Agreement"), among the Company, Investor, the initial
Warrantholder, and its members, the terms and provisions of which shall be
binding upon and inure to the benefit of the holders of the Warrants and the
Units. The Company and its members have also entered into that certain Second
Amended and Restated Limited Liability
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Company Operating Agreement dated as of November 14, 1996 (the "Operating
Agreement"), specifying, among other things, the rights and obligations of the
membership interests in the Company. The Company shall maintain copies of the
Registration Rights Agreement, the Securityholders Agreement and the Operating
Agreement at the Company's principal offices, and shall make such copies
available for review by any holder of the Warrants and/or the Units upon request
of such holder.
3. Execution of Warrant Certificates.
3.1 This Warrant Certificate and all Warrant Certificates
issued upon exchange, transfer or replacement hereof have been or shall be
manually signed on behalf of the Company by its duly authorized Managing Member,
President or Vice President (collectively, the "Officers").
3.2 In case any Officer of the Company who shall have signed
this Warrant Certificate or any Warrant Certificates issued upon exchange,
transfer or replacement hereof shall cease to be such an Officer either before
or after delivery thereof by the Company, the signature of such person on such
Warrant Certificates, nevertheless, shall be valid and such Warrant Certificates
may be issued and delivered to those persons entitled to receive the Warrants
represented thereby with the same force and effect as though such person had not
ceased to be such an Officer of the Company. This Warrant Certificate and all
Warrant Certificates issued upon exchange, transfer or replacement hereof may be
signed on behalf of the Company by any person who, at the actual date of the
execution of such Warrant Certificate, shall be a proper Officer of the Company
to sign such Warrant Certificate, although at the date of the execution of this
Warrant Certificate any such person was not such an Officer. Each Warrant
Certificate shall be dated the date of its execution by the Company.
4. Registration.
4.1 The Series B Warrant Certificates shall be numbered and
registered as they are issued in a Warrant register (the "Warrant Register") in
the names of the record holders of the Series B Warrant Certificates to whom
they are to be distributed. Series B Warrant Certificates shall be numbered
"SH-W-B1" and following. Any Holder (as defined below) may change such Holder's
address and facsimile number as shown on the Warrant Register by written notice
to the Company requesting such change. Any notice or written communication
required or permitted to be given to the Holder may be delivered or given to
such Holder at the address or the facsimile number shown on the Warrant
Register.
4.2 For the purpose of any exercise thereof and any
distribution to the holder thereof and for all other purposes, the Company shall
(a) be entitled to treat the registered holder of a Series B Warrant Certificate
on the Warrant Register (the "Holder") as the absolute owner in fact of the
Series B Warrants evidenced by such Series B Warrant Certificate, (b) not be
bound to recognize any equitable or other claim to or interest in such Series B
Warrants on the part of any other person and (c) not be liable for any
registration of transfer of Series B Warrants that are registered or to be
registered in the name of a fiduciary or the nominee of a fiduciary unless made
with the actual knowledge that a fiduciary or nominee is committing a breach of
trust in requesting such registration or transfer, or with actual knowledge of
such facts that its
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participation therein amounts to bad faith (notwithstanding any notation of
ownership or other writing thereon made by anyone), and the Company shall not be
affected by any notice to the contrary or have any duty to make inquiry into any
such matter. Upon execution and delivery by the Company, each Series B Warrant
Certificate shall be valid and binding on the Company and each Holder thereof
shall be entitled to all the benefits set forth therein.
5. Registration of Transfers and Exchanges.
5.1 The Company shall from time to time register the transfer
of any outstanding Series B Warrant Certificates on the Warrant Register, upon
surrender thereof accompanied by a written instrument or instruments of transfer
in form reasonably satisfactory to the Company, duly executed by the registered
Holder or Holders thereof or by the duly appointed legal representative thereof
or by a duly authorized attorney. In all cases of transfer by an attorney, the
original power of attorney, duly approved, or an official copy thereof, duly
certified, shall be deposited and remain with the Company. In case of transfer
by executors, administrators, guardians or other legal representatives, duly
authenticated evidence of their authority shall be produced, and may be required
to be deposited with the Company in its discretion. Upon any such registration
of transfer, a new Series B Warrant Certificate or Certificates of like tenor
and series and exercisable for the same aggregate number of Units shall be
issued to the transferee and the surrendered Series B Warrant Certificate shall
be cancelled and disposed of by the Company.
5.2 This Warrant Certificate and all Warrant Certificates
issued upon exchange, transfer or replacement hereof, when surrendered to the
Company by the registered holder hereof or thereof in person or by legal
representative or by attorney duly authorized in writing, may be exchanged,
without payment of any service charge, for another Warrant Certificate or
Warrant Certificates of like tenor and series exercisable for the same aggregate
number of Units and the surrendered Warrant Certificate shall be cancelled and
disposed of by the Company.
5.3 Subject to Section 7 in connection with transfer taxes,
the Company shall pay all expenses, taxes and related charges in connection with
the preparation, issuance and delivery of the Series B Warrant Certificates.
5.4 Notwithstanding the foregoing, the Company shall have no
obligation to cause Warrant Certificates to be transferred on its Warrant
Register to any person, unless (a) the Holder of such Warrant Certificates shall
furnish to the Company evidence of compliance with the Securities Act of 1933,
as amended (the "Securities Act"), in accordance with the provisions of Section
12 and Section 14 hereof, (b) the proposed transferee is an Institutional Lender
(as defined in the Securities Purchase Agreement), (c) such transfer is made in
accordance with the Securityholders Agreement, and (d) the transferee shall
execute and deliver a joinder of the Securityholders Agreement.
6. Term and Exercise of Warrants.
6.1 Subject to the terms of this Warrant Certificate, each
Holder shall have the right, which may be exercised on or after the date hereof
and until 5:00 p.m., Los Angeles time,
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on the Termination Date, to purchase from the Company at the Exercise Price (and
the Company shall issue and sell to such Holder) the number of fully paid and
nonassessable Units which such Holder may at the time be entitled to purchase on
exercise of such Warrants as provided under this Section 6 and Section 10.
6.2 The Warrants evidenced by this Warrant Certificate shall
be exercisable prior to 5:00 p.m., Los Angeles time, on the Termination Date, at
the election of the registered Holder or Holders of a majority of the Series B
Warrants then outstanding, and upon such election the Series B Warrants shall be
exercised in their entirety.
6.3 Subject to Section 5.4 and Section 7 hereof, upon
surrender of this Warrant Certificate, payment of the aggregate Exercise Price
(or, in the event of an exercise of the Conversion Right pursuant to Section 15
hereof, upon surrender of this Warrant Certificate), and execution and deliver
to the Company of a written undertaking to be bound by the terms and conditions
of the Operating Agreement, the Company shall cause to be issued and delivered
to or upon the written order of the registered Holder of this Warrant
Certificate and in such name or names as such registered Holder may designate, a
certificate for the Unit or Units issuable upon the exercise of the Warrant or
Warrants evidenced by this Warrant Certificate. Such certificate shall be deemed
to have been issued and any person so designated to be named therein shall be
deemed to have become the holder of record of such Unit or Units and a member of
the Company for all purposes as of the date of the surrender of this Warrant
Certificate, payment of the Exercise Price and delivery of such undertaking.
6.4 The Holders shall exercise the Warrants (a) upon a sale of
the Company in a single transaction or a series of related transactions to an
unaffiliated third party pursuant to which such third party proposes to acquire
a majority of the outstanding Common Interests (whether by merger,
consolidation, recapitalization, reorganization, purchase of the outstanding
Common Interests or otherwise) or all or substantially all of the consolidated
assets of the Company or the Subsidiary (an "Approved Sale") or (b) in
connection with an underwritten public offering of units of Common Interests.
7. Payment of Taxes. The Company shall pay all transfer taxes,
if any, attributable to the initial issuance of Units upon the exercise of the
Warrants; provided, however, that the Company shall not be required to pay any
tax or taxes which may be payable in respect of any transfer involved in the
issue of any Series B Warrant Certificates or any certificates for Units in a
name other than that of the registered Holder of this Warrant Certificate
surrendered upon the exercise of a Warrant, and the Company shall not be
required to issue or deliver such certificates unless or until the person or
persons requesting the issuance thereof shall have paid to the Company the
amount of any transfer tax or shall have established to the reasonable
satisfaction of the Company that such tax has been paid or that no tax is
payable.
8. Mutilated or Missing Warrant Certificates. In case this
Warrant Certificate shall be mutilated, lost, stolen or destroyed, the Company
shall upon cancellation of this Warrant Certificate, if mutilated, or in lieu of
and substitution for this Warrant Certificate, if lost, stolen or destroyed,
issue a new Warrant Certificate or Certificates of like tenor and series and
exercisable for the same aggregate number of Units, but only upon receipt of
evidence and affidavit reasonably satisfactory to the Company of such loss,
theft or destruction of this Warrant
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Certificate and indemnity or bond, if requested, also reasonably satisfactory to
the Company; provided, however, that if the Holder of this Warrant Certificate
is the original Holder of the Warrants or is any other institutional holder, the
written undertaking of such Holder indemnifying the Company against losses,
damages, costs and expenses (including reasonable attorneys' fees) arising from
such loss, theft or destruction shall be sufficient security and indemnity.
Applicants for such substitute Warrant Certificates shall also comply with such
other reasonable regulations and pay such other reasonable charges as the
Company may prescribe.
9. Reservation of Units.
9.1 (a) There have been reserved, and the Company shall at
all times reserve and keep available, free from preemptive rights, out of its
authorized but unissued Common Interests, for the purpose of enabling it to
satisfy any obligation to issue Units upon exercise of the Warrants, the maximum
number of units of Common Interests deliverable upon the exercise of all
outstanding Series B Warrants. If, at any time, there is a transfer agent for
the Units ("Transfer Agent"), the Transfer Agent is hereby irrevocably
authorized and directed at all times to reserve such number of authorized and
unissued units of Common Interests as shall be required for such purpose. The
Company shall keep a copy of the form of the Series B Warrant Certificate on
file with any Transfer Agent. All Series B Warrant Certificates surrendered upon
the exercise of the rights thereby evidenced shall be cancelled.
(b) Before taking any action that would cause an
adjustment pursuant to Section 10, the Company shall take any limited liability
company action that may, in the opinion of its counsel, be necessary in order
that the Company may validly and legally issue fully paid and nonassessable
Units at the Exercise Price as so adjusted. Before making an adjustment pursuant
to Section 10, the Company shall obtain all such authorizations or exceptions
therefor or consents thereto as may be necessary from any applicable public
regulatory body or bodies having jurisdiction over the Company or any of the
Holders.
(c) The Company represents and warrants that all
Units issued upon exercise of
the Warrants shall, upon issuance in accordance with the terms of this Warrant
Certificate (including payment of the Exercise Price therefor), be duly
authorized, validly issued, fully paid and nonassessable and free from all
taxes, liens, charges and security interests created by the Company.
10. Adjustment of Exercise Price and Number of Units
Purchasable or Number of Warrants. The Exercise Price and the number of Units
purchasable upon the exercise of each Warrant are subject to adjustment from
time to time upon the occurrence of the events enumerated in this Section 10.
10.1 In the event that the Company shall at any time after
March 3, 1998, (i) declare a dividend or make a distribution on the Common
Interests payable in units of Common Interests, (ii) subdivide the outstanding
Common Interests into a greater number of units, (iii) combine the outstanding
Common Interests into a smaller number of units, or (iv) issue any units of its
membership interests in a reclassification or reorganization of Common
Interests, the Exercise Price in effect at the time of the record date for such
dividend or of the effective date of such subdivision, combination or
reclassification, shall be adjusted so that it
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shall equal the price determined by multiplying the Exercise Price in effect
immediately prior thereto by a fraction of which the numerator shall be the
number of units of Common Interests outstanding immediately before such event,
and of which the denominator shall be the number of units of Common Interests
outstanding immediately after such dividend, distribution, subdivision,
combination or reclassification. Such adjustment shall be made successively
whenever any event listed above shall occur.
10.2 In the event that the Company shall issue rights, options
or warrants to any person or persons who are at the time of such issuance the
holders of membership interests in the Company, entitling them to subscribe for
or purchase units of Common Interests (or securities convertible or exchangeable
into Common Interests) at a price per unit of Common Interests (or having a
conversion or exchange price per unit of Common Interests if a security
convertible or exchangeable into Common Interests) less than the Current Market
Price (as defined in Section 10.5) per unit of Common Interests on the record
date for such issuance (or the date-of issuance, if there is no record date),
the Exercise Price to be in effect on and after such record date (or issuance
date, as the case may be) shall be determined by multiplying the Exercise Price
in effect immediately prior to such record date (or issuance date, as the case
may be) by a fraction, of which the numerator shall be the number of units of
Common Interests outstanding on such record date (or issuance date, as the case
may be) plus the number of units of Common Interests which the aggregate
offering price of the total number of units of such Common Interests so to be
offered (or the aggregate initial exchange or conversion price of the
exchangeable or convertible securities so to be offered) would purchase at such
Current Market Price on such record date (or issuance date, as the case may be)
and of which the denominator shall be the number of units of Common Interests
outstanding on such record date (or issuance date, as the case may be) plus the
number of additional units of Common Interests to be offered for subscription or
purchase (or into which the convertible securities to be offered are initially
exchangeable or convertible). In case such subscription price may be paid in
part or in whole in a form other than cash, the value of such consideration
shall be determined by the Board of Advisors of the Company in good faith as set
forth in a duly adopted committee resolution certified by the Company's
Secretary or Assistant Secretary. Such adjustment shall be made successively
whenever such an issuance occurs; and in the event that such rights, options,
warrants, or convertible or exchangeable securities are not so issued or expire
or cease to be convertible or exchangeable before they are exercised, converted,
or exchanged (as the case may be), then the Exercise Price shall again be
adjusted to be the Exercise Price that would then be in effect if such issuance
had not occurred, but such subsequent adjustment shall not affect the number of
Units issued upon any exercise of Warrants prior to the date such subsequent
adjustment is made. Notwithstanding the foregoing, no adjustment of the Exercise
Price shall be required under this Section 10.2 with regard to the issuance of
rights, options, warrants, or convertible or exchangeable securities pursuant to
the Option Agreements (as defined below) to employees of the Company or the
Subsidiary to the extent that the aggregate number of units of Common Interests
to which such rights, options, warrants, or convertible or exchangeable
securities relate, when added to the aggregate number of units of Common
Interests relating to rights, options, warrants, or convertible or exchangeable
securities issued pursuant to the Option Agreements to employees of the Company
or the Subsidiary in transactions described in Section 10.4, do not exceed Six
Hundred Thirty-Nine (639) units of Common Interests. The term "Option
Agreements" shall mean (i) those certain Option Agreements dated as of November
14, 1996 by and between the Company and each of Charles Schweitzer, James
Koscica, Michael
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Reilly and Timothy DuPont and (ii) one or more Option Agreements entered into
from time to time by and between the Company and certain members of the
management of the Subsidiary.
10.3 In the event that the Company shall fix a record date for
the making of a distribution to all holders of units of Common Interests
(including any such distribution made in connection with a consolidation or
merger in which the Company is the continuing entity) of evidences of
indebtedness or assets (other than dividends and distributions referred to in
Section 10.1 above and other than cash dividends) or of subscription rights,
options, warrants, or exchangeable or convertible securities containing the
right to subscribe for or purchase units of any class of membership interests in
the Company (excluding those referred to in Section 10.2), the Exercise Price to
be in effect on and after such record date shall be adjusted by multiplying the
Exercise Price in effect immediately prior to such record date by a fraction, of
which the numerator shall be the Current Market Price per unit of Common
Interests on such record date, less the fair market value (as determined by the
Board of Advisors of the Company in good faith as set forth in a duly adopted
board resolution certified by an Officer or the Company's Secretary or Assistant
Secretary) of the portion of the assets or evidences of indebtedness so to be
distributed or of such subscription rights, options, warrants, or exchangeable
or convertible securities applicable to one unit of the Common Interests
outstanding as of such record date, and of which the denominator shall be such
Current Market Price per unit of Common Interests. Such adjustment shall be made
successively whenever such a record date is fixed; and in the event that such
distribution is not so made, the Exercise Price shall again be adjusted to be
the Exercise Price which would then be in effect if such record date had not
been fixed, but such subsequent adjustment shall not affect the number of Units
issued upon any exercise of Warrants prior to the date such subsequent
adjustment was made.
10.4 In the event that the Company or any subsidiary shall
issue units of Common Interests, or rights, options, warrants or convertible or
exchangeable securities containing the right to subscribe for or purchase units
of Common Interests (excluding (A) units, rights, options, warrants, or
convertible or exchangeable securities outstanding or issued on the date of the
original issuance of the Old Warrants hereunder or issued in any of the
transactions described in Section 10.1, Section 10.2, or Section 10.3 above, (B)
units issued upon the exercise of such rights, options or warrants or upon
conversion or exchange of such convertible or exchangeable securities, (C) the
Series B Warrants and any units issued upon exercise thereof, (D) Four Hundred
Sixty-Six (466) Class A Common Units issued to Michael Bubis on March 3, 1998
pursuant to that certain Investor Subscription Agreement by and between the
Company and Michael Bubis dated March 3, 1998, and (F) the conversion of Class B
Common Units into Class A Common Units), at a price per unit of Common Interests
(determined in the case of such rights, options, warrants, or convertible or
exchangeable securities by dividing (X) the total amount receivable by the
Company in consideration of the sale and issuance of such rights, options,
warrants, or convertible or exchangeable securities, plus the total minimum
consideration payable to the Company upon exercise, conversion, or exchange
thereof by (Y) the total maximum number of units of Common Interests covered by
such rights, options, warrants, or convertible or exchangeable securities) lower
than the Current Market Price on the date the Company or such subsidiary fixes
the offering price of such units, rights, options, warrants, or convertible or
exchangeable securities, then the Exercise Price shall be adjusted so that it
shall equal the price determined by multiplying the Exercise Price in effect
immediately prior thereto by a fraction, (i) the numerator of which shall be the
sum of (A) the number of units of Common
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Interests outstanding immediately prior to such sale and issuance plus (B) the
number of units of Common Interests which the aggregate consideration received
(determined as provided below) for such sale or issuance would purchase at such
Current Market Price per unit, and (ii) the denominator of which shall be the
total number of units of Common Interests outstanding immediately after such
sale and issuance. Such adjustment shall be made successively whenever such an
issuance is made. For the purposes of such adjustment, the maximum number of
units of Common Interests which the holder of any such rights, options, warrants
or convertible or exchangeable securities shall be entitled to subscribe for or
purchase shall be deemed to be issued and outstanding as of the date of such
sale and issuance and the consideration received by the Company therefor shall
be deemed to be the consideration received by the Company for such rights,
options, warrants, or convertible or exchangeable securities, plus the minimum
consideration or premium stated in such rights, options, warrants, or
convertible or exchangeable securities to be paid for the units of Common
Interests covered thereby. In case the Company shall sell and issue units of
Common Interests, or rights, options, warrants, or convertible or exchangeable
securities containing the right to subscribe for or purchase units of Common
Interests for a consideration consisting, in whole or in part, of property other
than cash or its equivalent, then in determining the price per unit of Common
Interests and the consideration received by the Company for purposes of the
first sentence of this Section 10.4, the Board of Advisors of the Company shall
determine, in good faith, the fair value of said property, and such
determination shall be described in a duly adopted committee resolution
certified by an Officer or the Company's Secretary or Assistant Secretary. In
case the Company shall sell and issue rights, options, warrants, or convertible
or exchangeable securities containing the right to subscribe for or purchase
units of Common Interests together with one or more other securities as a part
of a unit at a price per unit, then in determining the price per unit of Common
Interests and the consideration received by the Company for purposes of the
first sentence of this Section 10.4, the Board of Advisors of the Company shall
determine, in good faith, which determination shall be described in a duly
adopted committee resolution certified by an Officer or the Company's Secretary
or Assistant Secretary, the fair value of the rights, options, warrants, or
convertible or exchangeable securities then being sold as pan of such unit. Such
adjustment shall be made successively whenever such an issuance occurs, and in
the event that such rights, options, warrants, or convertible or exchangeable
securities expire or cease to be convertible or exchangeable before they are
exercised, converted, or exchanged (as the case may be), then the Exercise Price
shall again be adjusted to the Exercise Price that would then be in effect if
such sale and issuance had not occurred, but such subsequent adjustment shall
not affect the number of Units issued upon any exercise of Warrants prior to the
date such subsequent adjustment is made. Notwithstanding the foregoing, no
adjustment of the Exercise Price shall be required under this Section 10.4 with
regard to the issuance of rights, options, warrants, or convertible or
exchangeable securities pursuant to the Option Agreements to employees of the
Company or the Subsidiary to the extent that the aggregate number of units of
Common Interests to which such rights, options, warrants, or convertible or
exchangeable securities relate, when added to the aggregate number of units of
Common Interests relating to rights, options, warrants, or convertible or
exchangeable securities issued pursuant to the Option Agreements to employees of
the Company or the Subsidiary in transactions described in Section 10.2, does
not exceed Six Hundred Thirty-Nine (639) units of Common Interests.
10.5 (a) In the event that the Company effects a private
placement of Common Interests, by and through an investment banking firm of
national reputation which is a
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member of the National Association of Securities Dealers, Inc., and which has
not had a material relationship with the Company or any officer of the Company,
in an arms-length transaction with an investor that is not affiliated with the
Company or any officer of the Company, then the Current Market Price per unit of
Common Interests for the purpose of any computation under Section 10.4 in
connection with such placement shall be deemed to be equal to the price per unit
paid by such investor in such placement. Except as set forth in the preceding
sentence, for the purpose of any computation under Section 10.2, Section 10.3,
Section 10.4, Section 11, Section 15.1, or Section 18, the "Current Market
Price" per unit of the Common Interests on any date (the "Computation Date")
shall be deemed to be the average of the daily closing prices of the Common
Interests for the 20 consecutive trading days ending the tenth trading day
before such Computation Date; provided, however, that if there shall have
occurred prior to the Computation Date a combination or reclassification of the
outstanding units of Common Interests into a smaller number of units and such
action or transaction shall have become effective with respect to market
transactions at any time (the "Market-Effect Date") on or after the beginning of
such period of 20 consecutive trading days, then the closing price for each
trading day preceding the Market-Effect Date shall be adjusted, for purposes of
calculating the Current Market Price, by multiplying such closing price by a
fraction, the numerator of which is the Exercise Price in effect immediately
prior to the Computation Date and the denominator of which is the Exercise Price
in effect immediately prior to the Market-Effect Date. The closing price for
each day shall be (1) if the security is traded on a national securities
exchange (i) its last sale price or, (ii) if there was no sale on that day, the
last sale price on the next preceding business day on which there was a sale,
all as made available over the Consolidated Last Sale Reporting System of the
Consolidated Tape Association Plan, or (iii) if the security is not then
eligible for reporting over this system, its last sale price on such national
securities exchange or, if there was no sale on that day, on the next preceding
business day on which there was a sale on such exchange, or (2) if the security
is not traded on a national securities exchange but trades solely in the
over-the-counter market and the security is quoted on the Nasdaq National Market
System ("NASDAQ") (i) the last sale price reported on NASDAQ or (ii) if the
security is an issue for which last sale prices are not reported on NASDAQ, the
average of the closing bid and ask quotations on such day, but, in each of the
next preceding two cases, if the relevant NASDAQ price or quotation did not
exist on such day, then the price or quotation on the next preceding business
day on which there was such a price or quotation or, (iii) if the security is
not reported or quoted on NASDAQ, the highest average bid and ask quotations as
quoted in any of The Wall Street Journal, the National Quotation Bureau, Inc.
pink sheets, the Salomon Brothers quotation sheets, quotation sheets of
registered market makers and, if necessary, dealers' telephone quotations, or,
(3) if no price can be determined on the basis of the above methods of
valuation, then the judgment of valuation shall be made in good faith by the
Board of Advisors. If the Board of Advisors is unable to determine any Valuation
(as defined below), or if the Holders of at least fifty-one percent (51%) of the
Series B Warrants then outstanding (or the Holders of at least fifty-one percent
(51%) of any Securities subject to a "Call Notice" pursuant to Section 10.9,
below) (collectively, the "Requesting Holders") disagree with the Board of
Advisors' determination of any Valuation by written notice delivered to the
Company within five (5) business days after the Board of Advisors' determination
thereof is communicated to Holders of the Warrants affected thereby, which
notice specifies a majority-in-interest of the Requesting Holders' determination
of such Valuation, then the Company and a majority-in-interest of the Requesting
Holders shall select a mutually acceptable investment banking firm of national
reputation which has not had a material
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11
relationship with the Company or any officer of the Company within the preceding
two years, which shall determine such Valuation. Such investment banking firm's
determination of such Valuation shall be final, binding and conclusive on the
Company and the Holders. If the Board of Advisors was unable to determine such
Valuation, all costs and fees of such investment banking firm shall be borne by
the Company. If the Holders disagreed with the Board's determination of such
Valuation, the party whose determination of such Valuation differed from the
Valuation determined by such investment banking firm by the greatest amount
shall bear all costs and fees of such investment banking firm. For purposes of
this Section 10.5, the term "Valuation" shall mean the determination, to be made
initially by the Board of Advisors of the Company, of (i) the value of non-cash
consideration in a subscription price, as set forth in the second sentence of
Section 10.2, (ii) the fair market value of assets or evidences of indebtedness,
as set forth in the first sentence of Section 10.3, (iii) the fair value of
property other than cash or its equivalent received as consideration, as set
forth in the fourth sentence of Section 10.4, (iv) the fair value of rights,
options, warrants, or convertible or exchangeable securities being sold as part
of a unit, as set forth in the fifth sentence of Section 10.4, (v) the Current
Market Price per unit of Common Interests pursuant to clause (3) above, or (vi)
the fair market value of units of membership interests or other securities,
property or cash to which a holder of Common Interests would be entitled upon a
merger, consolidation, or recapitalization for purposes of Section 10.9.
(b) For the purpose of any calculation under this
Section 10, units of Common Interests owned by or held for the account of the
Company or any majority-owned subsidiary of the Company on any date shall not be
deemed to be outstanding on such date, and the sale or other disposition of any
units of Common Interests or other securities issued by the Company and owned by
or held for the account of the Company or any majority-owned subsidiary of the
Company shall be deemed an issuance thereof. For the purposes of adjusting the
Exercise Price pursuant to this Section 10, Common Interests shall be deemed to
be outstanding at a particular time if it is outstanding at such time or if it
can be acquired upon the conversion of any then outstanding units of convertible
or exchangeable securities or can be purchased upon the exercise of any
outstanding rights, warrants, or options or acquired upon the conversion of any
convertible securities which can be purchased upon the exercise of any
outstanding rights, warrants or options.
10.6 No adjustment in the Exercise Price shall be required
unless such adjustment would require an increase or decrease of at least 1% in
such price; provided, however, that any adjustments which by reason of this
Section 10.6 are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 10
shall be made to the nearest $.0005.
10.7 In the event that at any time, as a result of an
adjustment made pursuant to Section 10.1, the Holder of any Warrant thereafter
exercised shall become entitled to receive any unit of membership interests or
securities of the Company other than units of Common Interests, thereafter the
number of such other units or securities so receivable upon exercise of any
Warrant and the exercise price for such units or securities shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Units contained in Section
10.1 through Section 10.4, inclusive, and the provisions of this Warrant
Certificate with respect to the Units shall apply on like terms to any such
other units or securities.
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12
10.8 Upon each adjustment of the Exercise Price as a result of
the calculations made in Section 10.1, Section 10.2, Section 10.3, or Section
10.4, each Warrant outstanding immediately prior to the making of such
adjustment shall thereafter evidence the right to purchase, at the adjusted
Exercise Price, that number of Units (calculated to the nearest hundredth)
obtained by (i) multiplying the number of units of Common Interests purchasable
upon exercise of the Warrant immediately prior to adjustment by the Exercise
Price in effect immediately prior to adjustment of the Exercise Price and (ii)
dividing the product so obtained by the Exercise Price in effect immediately
after such adjustment of the Exercise Price. However, in the event that the
Company is unable or fails (notwithstanding the provisions of Section 9.1(b) and
Schedule 13) to take an action, or obtain an authorization, exception or
consent, necessary in order that the Company may validly and legally issue fully
paid and nonassessable Units at the Exercise Price as so adjusted, then the
adjustment to the number of Units evidenced by each Warrant provided for in the
immediately preceding sentence shall nevertheless take effect immediately at the
time provided in Section 10.1, Section 10.2, Section 10.3, or Section 10.4 for
such adjustment of the Exercise Price; provided, however, that nothing in this
sentence shall relieve the Company of its obligation to comply with Section
9.1(b) and with Section 13.
10.9 In the event of (a) any capital reorganization of the
Company, or any reclassification of the Common Interests (other than a
distribution referred to in Section 10.3 and, if applicable, other than a change
in par value, or from par value to no par value, or from no par value to par
value), (b) any consolidation of the Company with or the merger of the Company
with or into any entity or other corporation (other than a consolidation or
merger which does not result in any reclassification or change of the
outstanding units of Common Interests) or (c) any sale of the properties and
assets of the Company as, or substantially as, an entirety to any other entity
or corporation, (each such event in clauses (a), (b) or (c) being an "Exchange
Event") each Warrant shall after such Exchange Event be exercisable, upon the
terms and conditions specified in this Warrant Certificate, for the number of
units of membership interests or other securities, property, or cash to which a
holder of the number of Units purchasable (at the time of such Exchange Event)
upon exercise of such Warrant would have been entitled upon such Exchange Event;
and in any such case, if necessary, the provisions set forth in this Section 10
with respect to the rights and interests thereafter of the Holders of the
Warrants shall be appropriately adjusted so as to be applicable, as nearly as
may reasonably be, to any units of membership interests or other securities,
property, or cash thereafter deliverable on the exercise of the Warrants. The
Holders shall exercise the Warrants, subject to the provisions of this Section
10.9, upon any Exchange Event that is an Approved Sale. The subdivision or
combination of units of Common Interests at any time outstanding into a greater
or lesser number of units shall not be deemed to be a reclassification of the
Common Interests for the purposes of this Section 10.9. The Company shall not
effect any such Exchange Event (other than an Exchange Event that is an Approved
Sale), unless prior to or simultaneously with the consummation thereof the
successor corporation or entity (if other than the Company) resulting from such
Exchange Event shall assume, by written instrument, the obligation to deliver to
the Holder of each Warrant such units of membership interests, securities,
assets, or cash as, in accordance with the foregoing provisions, such Holder may
be entitled to purchase and all the other obligations under this Warrant
Certificate. The Company shall not be a party to any Exchange Event pursuant to
which any Holder would be required to take (i) any voting securities which would
cause such Holder to violate any law, regulation, or other requirement of any
governmental body applicable to such Holder, or (ii) any securities convertible
into voting securities which if such conversion took
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13
place would cause such Holder to violate any law, regulation, or other
requirement of any governmental body applicable to such Holder other than
securities which are specifically provided to be convertible only in the event
that such conversion may occur without any such violation. In the event of any
Exchange Event in which each Holder of a Warrant is required to take
consideration in form which would cause or could cause, if exercised or
converted, a Holder to violate any law, regulation or other requirement of any
governmental body applicable to such Holder, each Holder shall be required to
take in such Exchange Event, the maximum amount of consideration that could be
taken by such Holder in such Exchange Event without violating any law,
regulation or other requirement of any governmental body applicable to such
Holder and, subject to the Corporation's Call Notice set forth below, effective
provision shall be made in the certificate of incorporation, certificate of
organization, operating agreement or other similar organizational documents
(collectively, "charter documents"), as applicable, of the resulting or
surviving corporation or entity in the Exchange Event or otherwise to protect
each such Holder that could not participate in the Exchange Event from violating
such laws by receiving securities which are specifically provided to be
exercised or convertible without such violation. In the event the Company is
prevented from becoming a party to any Exchange Event solely pursuant to the
operation of clause (i) or clause (ii) of the second preceding sentence, or the
resulting or surviving corporation or entity in the Exchange Event would be
required to take action for the benefit of the Holder that would cause any of
such party's securities to be delisted on any national exchange or otherwise or
cause such party to violate any law, regulation or other requirement of any
national exchange or securities association of which it is a member or any law,
regulation or other requirement of any governmental body applicable to it, then
the Company may elect, by delivering notice to each Holder so affected (the
"Call Notice"), to purchase or to cause the purchase of all of the Series B
Warrants, and units of Common Interests acquired upon the exercise of Series B
Warrants or upon exchange, transfer or replacement of such units (collectively,
the "Securities"), held by such Holder upon the consummation of such Exchange
Event. The purchase price for Securities purchased pursuant to such a Call
Notice shall be payable upon the consummation of such Exchange Event and shall
equal the product of (a) the sum of the number of Units to be acquired plus the
number of units that would be obtained upon the exercise on such date of the
number of Warrants to be acquired, multiplied by (b) the fair market value (as
determined by the Board of Advisors of the Company in good faith as set forth in
a duly adopted committee resolution certified by an Officer or the Company's
Secretary or Assistant Secretary, subject to the valuation provisions of Section
10.5(a)) of the units of membership interests or other securities, property, or
cash to which a holder of a unit of Common Interests on such date would have
been entitled upon such Exchange Event, net of the Exercise Price for one Unit
if the Security purchased is a Warrant. In the event of a sale or conveyance or
other transfer of all or substantially all of the assets of the Company as a
part of a plan for liquidation of the Company, all rights to exercise any
Warrant shall terminate thirty (30) days after the Company gives written notice
to the registered Holder of such Warrant that such sale or conveyance or other
transfer has been consummated. In the event of a sale or conveyance or other
transfer by a Holder of any or all of such Holder's Units, such Holder shall
require the transferee of such Units to execute a written undertaking to the
Company that such Units will remain subject to the call provisions of this
Section 10.9.
11. Fractional Units. Notwithstanding any adjustment pursuant
to Section 10 in the number of Units purchasable upon the exercise of a Warrant
or any exercise of the Conversion Right pursuant to Section 15, the Company may,
but shall not be required to, issue
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fractions of Units upon exercise of the Warrants or to distribute certificates
that evidence fractional Units. In lieu of fractional Units, there shall be paid
to the registered Holders of Warrant Certificates the time such Warrant
Certificates are exercised as herein provided an amount in cash equal to the
same fraction of the Current Market Price of a unit of Common Interests, such
amount to be rounded to the nearest cent. If more than one Warrant Certificate
shall be surrendered for exercise at one time by the same registered Holder, the
number of units of Common Interests which shall be issuable upon their exercise
shall be computed on the basis of the aggregate number of Units evidenced by the
Warrant Certificates so surrendered.
12. Restrictions on Transfer.
12.1 Each of the Holders, by acceptance of such Holder's
Series B Warrant Certificate, presents and warrants to the Company (a) that such
Holder is acquiring its Warrants for its own account, and not with a view to the
resale or distribution of its Warrants, the related Units, for any part thereof
(provided that the disposition of such Holder's property shall at all times be
and remain in the control of such Holder), (b) that such Holder is experienced
in evaluating and investing in securities such as the Warrants and the Units,
can bear the economic risk of its investment and has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of an investment in the Warrants and the Units, (c) that
such Holder is an "accredited investor" as such term is defined in Rule 501(a)
of Regulation D under the Securities Act, (d) that it shall not dispose of any
Warrants except to one or more Institutional Lenders, and (e) that it shall not
dispose of any Warrants or Units (the "Restricted Securities") except pursuant
to this Section 12.
12.2 Except as otherwise permitted by this Section 12, each
Warrant Certificate including each Warrant Certificate issued upon the transfer
of any Warrant Certificate) shall be stamped or otherwise imprinted with a
legend in substantially the following form:
THESE WARRANTS AND THE UNITS OF COMMON INTERESTS PURCHASABLE
HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND
MUST BE HELD INDEFINITELY UNLESS SUBSEQUENTLY REGISTERED UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR DISPOSED
OF PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION
REQUIREMENTS. THESE WARRANTS AND THE UNITS OF COMMON INTERESTS
PURCHASABLE HEREUNDER ARE SUBJECT TO RESTRICTIONS ON TRANSFER
AS SET FORTH HEREIN AND THAT CERTAIN SECURITYHOLDERS AGREEMENT
AMONG THE ISSUER AND ITS MEMBERS.
12.3 Prior to any transfer of any Restricted Securities which
are not registered under an effective registration statement under the
Securities Act, the Holder thereof shall give written notice to the Company of
such Holder's intention to effect such transfer and to comply in all other
respects with this Section 12.3. Each such notice shall (a) describe the manner
and
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circumstances of the proposed transfer in sufficient detail to enable counsel to
the Company to consider the opinions referred to below; and (b) designate
counsel for the Holder giving such notice (who may be house counsel for such
Holder). The Holder giving such notice shall submit a copy thereof to the
counsel designated in such notice and the Company shall promptly submit a copy
thereof to its counsel. The following provisions shall then apply:
(a) If, in the opinion of counsel to the
transferor, reasonably satisfactory to counsel for the Company, the proposed
transfer may be effected without registration of such Restricted Securities
under the Securities Act, such Holder shall thereupon be entitled to transfer
such Restricted Securities in accordance with the terms of the notice delivered
by such Holder to the Company. Each certificate representing such securities
issued upon or in connection with such transfer shall bear the restrictive
legends required by Section 12.2, unless the related restrictions on transfer
provided for herein shall have ceased and terminated as to such securities
pursuant to Section 12.4.
(b) If the Company does not receive the opinion
described in Section 12.3(a), such Holder shall not be entitled to transfer such
Restricted Securities until either (i) receipt by the Company of a further
notice from such Holder pursuant to the foregoing provisions of this Section
12.3 and fulfillment of the provisions of clause (a) above or (ii) such
Restricted Securities have been effectively registered under the Securities Act.
12.4 The restrictions imposed by this Section 12 upon the
transferability of Restricted Securities shall cease and terminate as to any
particular Restricted Securities (a) when such Restricted Securities shall have
been effectively registered under the Securities Act and any applicable
securities or "blue sky" law of any state, or (b) when, in the opinion of
counsel for the Holder thereof, reasonably satisfactory to counsel for the
Company, such restrictions are no longer required in order to ensure compliance
with the Securities Act and any applicable securities or "blue sky" law of any
state. Whenever such restrictions shall cease and terminate as to any Restricted
Securities, the Holder thereof shall be entitled to receive from the Company,
without expense (other than the payment of taxes as provided in Section 7), new
securities of like tenor not bearing the applicable legends required by Section
12.2.
13. Company Assurances. The Company will not, by amendment of
its charter documents or through any consolidation, merger, reorganization,
transfer of assets, dissolution, issue or sale of securities, or any other
voluntary action, seek to avoid the observance or performance of any of the
terms of this Warrant Certificate, but will at all times in good faith seek to
carry out all such terms and take all such action as may be necessary or
appropriate in order to protect the rights of the holders of Securities against
impairment. Without limiting the generality of the foregoing, the Company (a)
will not permit the par value (if any) of any Units to exceed the Exercise
Price, (b) will take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue, free from preemptive rights,
fully paid and non-assessable Units upon the exercise (and payment of the
Exercise Price therefor) of all Warrants from time to time outstanding, and (c)
will not take any action which results in any adjustment of the Exercise Price
if the total number of Units issuable after the action upon the exercise of all
of the Warrants would exceed the total number of units of Common Interests then
authorized by the Company's charter documents and available for the purpose of
issue upon such exercise.
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16
14. [Intentionally Omitted]
15. Right to Convert Warrants into Units: Net Issuance.
15.1 In addition to and without limiting the rights of the
Holders under the terms of the Series B Warrant Certificates, the Holders shall
have the right to convert all but not less than all of the Warrants (the
"Conversion Right") into Units as provided in this Section 15 at any time on or
after the date hereof and on or before 5:00 p.m., Los Angeles time, on the
Termination Date. Upon exercise of the Conversion Right with respect to the
Units subject to this Warrant Certificate (the "Converted Warrant Units"), the
Company shall deliver to the Holder (without payment by the Holder of any
Exercise Price or any cash or other consideration) that number of Units of fully
paid and nonassessable Class A Common Units equal to the quotient obtained by
dividing (x) the value of the Warrants as of the date of the Conversion Notice
(as defined in Section 15.2, below), which value shall be equal to (i) the
aggregate Current Market Price of the Converted Warrant Units issuable upon
exercise of the Warrants as of the date of the Conversion Notice less (ii) the
aggregate Exercise Price of the Converted Warrant Units immediately prior to the
exercise of the Conversion Right by (y) the Current Market Price of one Unit as
of the date of the Conversion Notice.
Expressed as a formula, such conversion shall be computed as
follows:
X = A - B
-----
Y
Where: X = the number of Units issued to the Holder
under this Conversion Right
Y = the Current Market Price of one Unit
A = the aggregate Current Market Price
(i.e., Current Market Price multiplied
by the number of Converted Warrant
Units)
B = the aggregate Exercise Price (i.e.,
Exercise Price multiplied by the
number of Converted Warrant Units)
15.2 The Conversion Right may be exercised by the Holder or
Holders of a majority of the Warrants then outstanding by the surrender of the
Series B Warrant Certificates of such Holders to the Company together with a
written statement (the "Conversion Notice") specifying that the Holders thereby
intend to exercise the Conversion Right and, upon such exercise, all other
Holders shall surrender the Series B Warrant Certificates of such Holders to the
Company. Such conversion shall be effective upon the fifth (5th) business day
following receipt by the Company of all Series B Warrant Certificates together
with the Conversion Notice, on such later date as is specified therein, or on
such other date as the Company and such Holders may agree.
16. Information to Warrantholders: No Right as Members.
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17
(a) Upon any adjustment of the Exercise Price pursuant to
Section 10, the Company within twenty (20) calendar days thereafter shall cause
to be given to each of the Holders at its address appearing on the Warrant
Register a certificate of a firm of independent public accountants of recognized
standing selected by the Board of Advisors of the Company (who may be the
regular auditors of the Company) setting forth the Exercise Price after such
adjustment and setting forth in reasonable detail the method of calculation and
the facts upon which such calculations are based and setting forth the number of
Units purchasable upon exercise of a Warrant after such adjustment in the
Exercise Price, by first-class mail, postage prepaid. Where appropriate, such
notice may be given in advance and included as a part of the notice required to
be mailed under the other provisions of this Section 16.
(b) In case:
a. the Company shall declare a dividend or
authorize a distribution on the Common Interests payable in units of Common
Interests, authorize the subdivision or combination of the outstanding Common
Interests, authorize the issuance of any units of its membership interests in a
reclassification of the Common Interests, or authorize the issuance to all
holders of Common Interests of rights or warrants to subscribe for or purchase
membership interests of the Company or of any other subscription rights or
warrants; or
b. the Company shall authorize the distribution to
all holders of Common Interests of evidences of its indebtedness or assets; or
c. of any consolidation or merger to which the
Company is a party and for which approval of any members of the Company is
required, or of the conveyance or transfer of the properties and assets of the
Company as, or substantially as, an entirety, or of any capital reorganization
or any reclassification of the Common Interests (other than as a result of a
subdivision or combination and, if applicable, other than a change in par value,
or from par value to no par value, or from no par value to par value); or
d. of the voluntary or involuntary dissolution,
liquidation or winding up of the Company; or the Company proposes to take any
other action which would require an adjustment of the Exercise Price pursuant to
Section 10;
then the Company shall cause to be given to each of the Holders of five percent
(5%) or more of the Series B Warrants then outstanding, at his address appearing
on the Warrant Register, at least twenty (20) calendar days (or ten (10)
calendar days in any case specified in subclauses a. or b. of clause (b) above)
prior to the applicable record date hereinafter specified, by first-class mail,
postage pre-paid, a written notice stating (x) the date as of which the holders
of record of units of Common Interests to be entitled to receive any such
rights, warrants or distribution are to be determined or (y) the date on which
any such consolidation, merger, conveyance, transfer, reorganization,
reclassification, dissolution, liquidation, or winding up is expected to become
effective, and the date as of which it is expected that holders of record of
units of Common Interests shall be entitled to exchange such units for
securities or other property, if any, deliverable upon such consolidation,
merger, conveyance, transfer, reorganization, reclassification, dissolution,
liquidation or winding up. The failure to give the notice required by this
Section 16 or any defect therein shall not affect the legality or validity of
any distribution,
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right, warrant, consolidation, merger, conveyance, transfer, reorganization,
reclassification, dissolution, liquidation, or winding up or the vote upon any
action.
(c) Nothing contained in any of the Series B Warrant
Certificates shall be construed as conferring upon the Holders the right to vote
or to consent or to receive notice as members in respect of the meetings of
members or the election of managers of the Company or any other matter, or any
rights whatsoever as members of the Company.
17. Registration Rights. Registration rights with respect to
the Securities are set forth in the Registration Rights Agreement.
18. Put Option.
18.1 (a) As soon as practicable and in any event not later
than ninety (90) days after the end of each such fiscal year, the Company shall
deliver to each Holder copies of the audited consolidated financial statements
of the Company and its subsidiaries (the "Financial Statements") for the fiscal
years of the Company ending on or after December 31, 2002 and on or before
November 14, 2009. The Holder or Holders of a majority of the Aggregate Warrants
(as defined in Section 18.3) and Aggregate Units (as defined in Section 18.3)
then outstanding, during any Put Window (as defined below) in effect during the
period commencing November 14, 2003 and ending November 14, 2009, shall have the
right (the "Put Option"), upon delivery to the Company of an irrevocable notice
(the "Put Notice"), to require the Company to purchase, at the price determined
pursuant to Section 18.1(b), (i) all of the Aggregate Units, if any, then owned
by the Holders thereof, and (ii) all of the Aggregate Warrants, if any, then
owned by the Holders thereof (collectively, the "Equity Rights"); provided,
however, that the obligation of the Company to purchase such Equity Rights shall
be subject to (A) the availability of financing (on terms and conditions
reasonably satisfactory to the Company in its good faith business judgment) with
respect to such purchase price and (B) the approval of the Senior Lenders (as
defined in the Securities Purchase Agreement) if such approval is then required
under the Senior Lender Documents (as defined in the Securities Purchase
Agreement); provided further, that the Company shall use its commercially
reasonable efforts to obtain such financing and any such approval and, with
respect to such financing, commercially reasonable efforts shall not include the
issuance of equity and, with respect to any refinancing or extension of
financing, shall not be on terms more onerous than that which is being
refinanced or extended; provided further, that the Put Option shall terminate
upon (x) an Approved Sale or (y) the consummation of an underwritten public
offering of units of Common Interests. In the event that either clause (A) or
clause (B) above are not satisfied, the Company shall have no obligation to
purchase the Units and Warrants subject to the Put Notice. For purposes of this
Section 18, "Put Window" means, with respect to any fiscal year of the Company,
the period commencing on the earlier of (x) the date of delivery to the Holders
of the Financial Statements with respect to such fiscal year or (y) ninety (90)
days after the end of such fiscal year, and ending ninety (90) days after the
date of delivery to the Holders of the Financial Statements with respect to such
fiscal year.
(b) The Company shall pay for the Equity Rights, in cash,
on a per-Unit basis (net of the Exercise Price for each Unit purchasable on
exercise of the Warrants if Warrants are to be purchased), an amount equal to
(i) the value of the Company divided by
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(ii) the number of outstanding units of Common Interests (on a fully diluted, as
converted basis), with the value of the Company being the greater of:
(A) 7.0 times Actual EBITDA (as the
term "Actual EBITDA" is defined in
those Option Agreements dated as of
November 14, 1996) of the Company
and its Subsidiaries for the twelve
(12)-month period ending on the
last day of the most recently ended
fiscal year prior to the date of
the Put Notice, to which product is
to be added cash and Cash
Equivalents (as defined in the
Securities Purchase Agreement) of
the Company and its Subsidiaries as
of the date of the Put Notice, from
which sum is to be subtracted
Funded Debt (as defined in Section
18.3) outstanding as of the date of
Put Notice; or
(B) the aggregate Current Market Price,
as of the date of Put Notice, of
the outstanding units of Common
Interests (on a fully-diluted, as
converted basis).
18.2 (a) The Put Notice shall expressly state: (i) the
election of the Holder or Holders of a majority of the Aggregate Warrants and
Aggregate Units then outstanding to exercise the Put Option and (ii) the date of
exercise of such Put Option (which date of exercise shall not be less than
ninety (90) days after the date of the Put Notice). Subject to Section 18.2(c),
the closing shall take place on or before the date of exercise set forth in the
Put Notice, and at the time and place set forth in a written notice of the
Company to such Holder and all other Holders not less than ten (10) days prior
to such date of exercise. Subject to Section 18.2(c), the Company shall use its
commercially reasonable efforts to effectuate the exercise of such Holder's Put
Option prior to, but in no event later than, the date of exercise specified by
such Holder for such exercise. Subject to Section 18.2(c), at such closing,
Company shall deliver to such Holder, in cash, the price for the Equity Rights
surrendered by such Holder.
(b) Upon receipt by the Company of such Put Notice,
the Company shall promptly provide all other Holders written notice of: (i) the
intent of the Holder or Holders of a majority of the Warrants and Units then
outstanding to exercise the Put Option; and (ii) the date of exercise set forth
in the Put Notice.
(c) In the event that the Company shall determine,
in its good faith business judgment, that the conditions set forth clauses (A)
and (B) of Section 18.1(a) will not be satisfied, as soon as practicable
thereafter, the Company shall give written notice of such determination to all
Holders.
18.3 For purposes of this Section 18, the following terms
shall have the respective meanings set forth below:
(a) "Aggregate Warrants" means the Series B
Warrants and those certain Amended and Restated Common Interest Purchase
Warrants for the purchase of an
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aggregate of Two Thousand (2,000) Class A Common Units originally issued on
November 14, 1996 and amended and restated as of March 3, 1998.
(b) "Aggregate Units" means all Common Interests
issued upon exercise or in respect of the Aggregate Warrants (together with any
units issued upon exchange, transfer or replacement thereof).
(c) "Cash Flow" means, for any period, Adjusted
Operating Profit (as the term "Adjusted Operating Profit" is defined in the
Secured Credit Agreement dated as of November 14, 1996, between First Source
Financial LLP and the Subsidiary) for such period less amortization expenses
included in Adjusted Operating Profit for such period.
(d) "Funded Debt" means, as of any date of
determination, the sum of (I) all outstanding Indebtedness (as the term
"Indebtedness" is defined in the Option Agreements as of the date of original
issuance of the Warrants) of the Company and its subsidiaries as of such date,
plus (II) the liquidation value of the Preferred Interests outstanding as of
such date.
19. Notices. All notices and other communications to the
Holder hereof provided for hereunder shall, unless otherwise provided herein, be
in writing and mailed or sent or delivered to its address set forth in the
Warrant Register or sent by facsimile to the facsimile number set forth in the
Warrant Register. All such notices and communications shall be effective as
follows: if sent by hand delivery, upon delivery; if sent by mail, upon the
earlier of the date of receipt or five business days after deposit in the mail,
postage prepaid; and if sent by courier service or by facsimile, upon receipt.
20. Governing Law. This Warrant Certificate shall be governed
by, and construed in accordance with, the internal laws (and not the laws of
conflicts) of the State of New York.
21. Consent to Amendments. The rights and privileges of the
Holders pursuant to the Series B Warrant Certificates may be amended and the
Company may take any action therein prohibited or omit to perform any act
therein required to be performed by it only if the Company shall have obtained
the written consent to such amendment, action, or omission to act, of the
Holders of at least fifty-one percent (51%) of the Series B Warrants at the time
outstanding (or, in the case of an amendment, action or omission to act
affecting the rights and privileges of the Holders of Units, the written consent
of the holders of fifty-one percent (51%) of the Securities at the time
outstanding), and each holder of any Security at the time or thereafter
outstanding shall be bound by any such consent; provided, however, that without
the written consent of the Holders of at least seventy-five percent (75%) of the
Series B Warrants at the time outstanding, no consent, amendment or waiver to or
under the Series B Warrant Certificates shall amend or modify the provisions of
Section 10; provided, further, that notwithstanding anything in this Section 21
to the contrary, without the written consent of the Holders of all Series B
Warrants at the time outstanding (or, in the case of a consent, amendment or
waiver affecting the rights and privileges of the holders of Units, the written
consent of the holders of all Securities at the time outstanding), no consent,
amendment or waiver to or under the Series B Warrant Certificates shall amend or
modify the Exercise Price or affect the date on which the Series B
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Warrants terminate; provided, further, that notwithstanding anything in this
Section 21 to the contrary, any consent, amendment or waiver which would
adversely affect a Holder in a manner disproportionate from the Holders
generally shall only be effective against such affected Holder upon its consent
thereto. The Company shall promptly send to each Holder copies of any amendment,
consent, or waiver, and copies of any request for any amendment, consent, or
waiver relating to the Series B Warrant Certificates to each holder of
Securities. No course of dealing between the Company and any holder of
Securities nor any delay in exercising rights shall operate as a waiver of any
rights of any such holder.
[Signature page follows.]
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IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be signed by its duly authorized officer as of the date indicated below.
Dated: February 26, 1999 SLEEPMASTER HOLDINGS L.L.C.,
a New Jersey limited liability company
By:
-------------------------------------
Name: James Koscica
Title: Executive Vice President
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[Form of Election to Purchase]
(To be executed upon exercise of Warrant prior to
5:00 p.m., Los Angeles time, on the Termination Date)
The undersigned hereby irrevocably elects to exercise, for the
purchase of __________ Units of Common Interests, __________ Warrants
represented by this Warrant Certificate and to purchase the Units of Common
Interests issuable upon the exercise of said Warrants and herewith tenders in
consideration for such Units the amount of $__________ in accordance with the
terms hereof. The undersigned requests that a certificate or certificates
representing such Units be registered in the name of ____________ whose address
is _______________________ and that such certificate(s) be delivered to
____________ whose address is ________________________. If said number of Units
is less than all the Units purchasable hereunder, the undersigned requests that
a new Warrant Certificate of like tenor and series representing the balance of
the Warrants remaining after exercise of this Warrant Certificate for the number
of Units specified above be registered in the name of _______________________
whose address is _______________________ and that such Warrant Certificate be
delivered to ______________________ whose address is ____________________. Any
cash payments to be paid in lieu of a fractional Unit should be made to
____________ whose address is _________________________ and the check or wire
transfer representing payment thereof should delivered to ____________ whose
address is________________.
Dated: _________________ ______
Name of holder of Warrant Certificate: ______________________
(Please print)
Social Security or other identifying number: ________________
Address: _______________________________
_______________________________
_______________________________
Signature: _______________________________
Note: The above signature must correspond with the name as written upon
the face of this Warrant Certificate in every particular, without
alteration or enlargement or any change whatever and if the
certificate representing the Units or any Warrant Certificate
representing Warrants not exercised is to be registered in a name
other than that in which this Warrant Certificate is registered,
the signature of the holder hereof must be guaranteed.
Signature Guaranteed:
24
[Form of Assignment]
For value received ____________ hereby sells, assigns and
transfers unto _________________ the within Warrant Certificate, together with
all right, title and interest therein, and does hereby irrevocably constitute
and appoint ____________________, its attorney, to transfer said Warrant
Certificate on the books of the within-named Company, with full power of
substitution in the premises.
Dated: _________________, _______ ____________________________________
Note: The above signature must correspond with the name as written upon the
face of this Warrant Certificate in every particular, without
alteration or enlargement or any change whatever.
Signature Guaranteed: