SPECIALTY ACQUISITION CORP.
WARRANT AGREEMENT
WARRANT AGREEMENT dated as of __________, 2001 between Specialty Acquisition
Corp., a Delaware corporation (the "Company"), and the holders from time to time
of the Warrants referred to herein (the "Holders").
WHEREAS, the Holders and the Company are parties to a Note and Warrant
Purchase Agreement dated the date hereof (as the same may be amended,
supplemented or otherwise modified from time to time, the "Purchase Agreement")
providing, among other things, for the purchase by the Holders (constituting the
initial "Purchasers" party to such Agreement) of either or both of (i)
$7,500,000 principal amount of the Company's 14% Series A Senior Subordinated
Notes due June 30, 2006 (collectively, the "Notes"), and (ii) the Warrants
herein described;
WHEREAS, the Company has agreed to issue the Warrants on the terms set forth
in this Agreement and the Purchase Agreement;
WHEREAS, the Company has entered into a certain Agreement and Plan of
Reorganization and Merger with Specialty Catalog Corp. ("SCC") pursuant to which
the Company will acquire certain shares of the outstanding capital stock of SCC
and will then merge with and into SCC (the "Merger"), with SCC being the
surviving entity and all shares of the outstanding capital stock of SCC not
owned by the Company will be cancelled in exchange for $3.75 per share (the
"Merger Price"); and
WHEREAS, upon completion of the Merger, the Warrants herein described shall
be automatically converted into Warrants to purchase the Common Stock of SCC ,
and the defined term "Company" shall mean SCC, as the surviving entity of the
Merger.
NOW, THEREFORE, in consideration of the premises the parties hereto agree as
follows:
SECTION 1. DEFINITIONS. Capitalized terms used herein which are defined in
the Purchase Agreement and are not otherwise defined herein shall have the
respective meanings given thereto in the Purchase Agreement; and the following
terms used herein shall have the meanings indicated below, unless the context
otherwise requires:
"Agreement" or "Warrant Agreement" shall mean this Warrant Agreement,
together with all Exhibits hereto, as may be amended, modified or supplemented
from time to time with the consent of the Holders in accordance with Section 18,
and shall include all provisions incorporated herein by reference from the
Purchase Agreement or any other
agreement, which incorporated provisions shall continue in full force and effect
for the benefit of the Holders as originally in effect unless modified with the
consent of the Holders in accordance with Section 18.
"Commission" shall mean the Securities and Exchange Commission.
"Common Stock" shall mean the Company's Common Stock, $.01 par value,
and, following completion of the Merger, shall mean SCC's Common Stock, $.01 par
value.
"Convertible Securities" shall mean (a) any stock, notes or other
securities convertible into or exchangeable, directly or indirectly, for shares
of Common Stock (whether or not such right to convert or exchange is immediately
exercisable or is "in the money"), (b) any other security, note or agreement
which provides the holder thereof with a payment, repayment amount, appreciation
right or liquidation preference (i) calculated by reference to, or arising from,
the value of the Company upon a sale, merger, recapitalization or similar event,
or (ii) based upon the value, whether market or appraisal, of the Common Stock,
and (c) any agreement to issue shares of Common Stock or issue or enter into
such other stock, notes, securities or agreements described in the foregoing
clauses (a) or (b).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exercise Price" shall have the meaning given thereto in Section 3.
"Expiration Date" shall mean __________________, 2011 or, if such day
is not a Business Day, the next succeeding Business Day.
"Fair Value" shall have the meaning given thereto in Section 13(c).
"Fully-Diluted Common Stock" shall have the meaning given thereto in
Section 2(c).
"Market Price" of Common Stock on any day shall mean the average of the
daily market prices of Common Stock over a period of 20 consecutive business
days prior to the day as of which "Market Price" is being determined. The market
price for each such business day shall be the average of the closing prices on
such day of the Common Stock on all domestic exchanges on which the Common Stock
is then listed, or if there shall have been no sales on any such exchange on
such day, the average of the highest bid and lowest asked prices on all such
exchanges at the end of such day, or, if the Common Stock shall not be so
listed, the average of the representative bid and asked prices quoted in the
NASDAQ System as of the close of business, New York time, on such day, or if the
Common Stock shall not be quoted in the NASDAQ System, the average of the high
and low bid and asked prices on such day in the domestic over-the-counter market
as reported by the National Quotation Bureau, Incorporated, or any similar
successor organization. If the Common Stock is listed on any domestic exchange
the term "business days" as used in this paragraph shall mean business days on
which such exchange is open for trading.
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If at any time the Common Stock is not listed on any domestic exchange
or quoted in the NASDAQ System or the domestic over-the-counter market, the
"Market Price" shall be the fair market value of a share of Common Stock as
determined in good faith by the Board of Directors of the Company (giving due
regard to any recent sales or valuations of Common Stock), which determination
shall be communicated to the Holders within ten (10) days of its being made, but
not later than the date on which the Company is required to give prior notice of
the issuance of capital stock under Section 10; provided, however, that if the
Holders of a majority of the Warrants shall, in the exercise of their sole
discretion, object to such determination by the Board of Directors, then the
Holders shall be entitled, at their option by written notice given at any time
prior to the later of the time of issuance of such Common Stock, or the
ninetieth day after the receipt of Company notice referred to above, to initiate
an appraisal using the procedures set forth in Section 13(d), and the Board of
Directors shall promptly thereafter ratify or revise its determination of Market
Price to adopt any higher Market Price determined by such appraisal (the
"Appraised Market Price"). The costs of such appraisal shall be paid for (a) by
the Company if the Appraised Market Price per share of Common Stock is greater
than the Market Price per share set forth in the Company notice of valuation
given to the Holders, or if the appraisal is not completed on account of the
issuance being cancelled, or the price being increased to an amount acceptable
to the Holders, or (b) by the Holders if such Appraised Market Price is less
than or equal to such Market Price. Any appraisal shall be valid with respect to
a Common Stock issuance only if the Common Stock is actually sold, or the Option
issued, within one hundred twenty (120) days of the date of the notice given by
the Board of Directors.
"Material Stock Transfer" shall have the meaning given thereto in
Section 15(c).
"Merger" shall have the meaning given thereto in the recitals.
"Merger Price" shall have the meaning given thereto in the recitals.
"Options" shall mean any warrants (including the Warrants), options
(including options granted pursuant to the Stock Option Plan), agreements or
other rights to subscribe for or to purchase, directly or indirectly, shares of
Common Stock (whether or not such warrants, options or other rights are
immediately exercisable or are "in the money"). Options shall include any
warrants, options or other agreements or rights to subscribe for or to purchase,
directly or indirectly, Convertible Securities or other Options (whether or not
such warrants, options or other rights are immediately exercisable or are "in
the money") and agreements or plans under which the Company may issue its
securities in exchange for services of any kind, whether to be rendered by an
employee, consultant, individual, entity or third party of any kind.
"Permitted Dilutive Options" shall mean non-qualified options to
purchase shares of Common Stock that:
(a) are granted to senior executives and other key employees of the
Company pursuant to a stock option plan approved on or before the Closing
Date by the written
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consent of LEG PARTNERS III SBIC, L.P. and LEG PARTNERS DEBENTURE SBIC, L.P.
(which consent will not be unreasonably withheld if such stock option plan
contains customary and usual terms, restricts grants thereunder to senior
executives and other key employees of the Company and provides that options
to purchase not less than 0.8% of the Fully-Diluted Common Stock as of the
Closing Date shall be reserved for grants to be made to senior executives of
the Company not less than one year after the Closing Date) (the "Stock
Option Plan");
(b) have an exercise price equal to or greater than the Merger Price;
and
(c) are exercisable for a number of shares of Common Stock
representing, in the aggregate, no more than five percent (5%) of the number
of shares of Common Stock of the Company outstanding as of the effective
time of the Merger; provided, however, that additional shares of Common
Stock may be authorized for issuance under the Stock Option Plan following
the Closing, with the prior written consent of the Holders of a majority of
the Warrant Shares issued or issuable upon exercise of all then outstanding
Warrants (which consent shall not be unreasonably withheld), to provide
additional optionable shares in an amount necessary to maintain the total
number of shares subject to the Stock Option Plan at such 5% level, if the
Company shall hereafter increase its total outstanding Common Stock through
a sale or other issuance the primary purpose of which is to fund the growth
of the Company's operations through acquisition or expansion; and, provided
further, however, that the exercise price of such additional Permitted
Dilutive Options shall be not less than the greater of the Merger Price or
the Market Price as of the date of grant.
"Put Closing," "Put Closing Date," "Put Due Date," "Put Event," "Put
Notice," "Put Option" and "Put Price" shall each have the meanings given thereto
in Section 13.
"Reduced Percentage" shall have the meaning given thereto in Section
3(b).
"SCC" shall have the meaning given thereto in the recitals.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Stated Percentage" shall have the meaning given thereto in Section
2(a).
"Stock Option Plan" shall have the meaning set forth in the definition
of Permitted Dilutive Options.
"Subsequent Transfers" shall have the meaning given thereto in Section
15(a).
"Warrant" shall mean a Warrant certificate, in the form of Exhibit A
hereto, and shall also mean the right upon exercise thereof to acquire one
Warrant Share.
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"Warrant Office" shall mean the office or agency of the Company at
which the Warrant Register shall be maintained and where the Warrants may be
presented for exercise, exchange, substitution and transfer, which office or
agency will be the office of the Company at 21 Bristol Drive, South Easton,
Massachusetts 02375. The Warrant Office may be changed by the Company pursuant
to notice in writing to the registered Holders of the Warrants.
"Warrant Register" shall mean the register, in the form of Exhibit B
hereto, maintained by the Company at the Warrant Office.
"Warrant Shares" shall mean the shares of Common Stock issuable or
issued upon exercise of the Warrants, and any other Common Stock, Convertible
Securities, capital stock, equity interest, or other securities issuable or
issued in respect of Warrants or Warrant Shares by way of stock dividend or
stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization or other transaction of the
character referred to in Section 9(b).
SECTION 2. ISSUANCE OF WARRANTS.
(a) The Company will issue to the Holders on the Closing Date, in
exchange for payment of the purchase price for the Warrants specified in Section
2.2 of the Purchase Agreement, Warrants to purchase that number of shares of
Common Stock representing in the aggregate thirteen and four-tenths percent
(13.4%), which percentage is subject to dilution pursuant to the terms of
Sections 2(b)(ii) and 2(b)(iii) hereof, of the Company's Fully-Diluted Common
Stock (as defined below) at the time of exercise (the "Stated Percentage"). For
illustrative purposes only, and assuming the accuracy of the capitalization
table attached to the Purchase Agreement as Schedule 4.1(c), the aggregate
number of shares of Common Stock subject to the Warrants as of the Closing Date
would be ______. The Warrants purchased by each Holder and the corresponding
portion of the Stated Percentage represented thereby is set forth on Exhibit B
attached hereto. After such issuance, and any subsequent transfer by the
Holders, each Holder shall continue to have the benefit of the anti-dilution
protection provided for herein. The Warrants shall be exercisable at any time
after the Closing Date until 5:00 P.M. (local time at the Warrant Office) on the
Expiration Date.
(b) (i) No reduction in the Stated Percentage whatsoever shall be made
on account of, or by reason of, any issuance of Options, Convertible Securities
or Common Stock, other than as specifically set forth in Sections 2(b)(ii) and
(iii), including, without limitation, upon or as a result of (A) declaration of
any stock dividend, (B) any split, reverse split or subdivision of the
outstanding Common Stock, (C) any combination of the outstanding Common Stock
into a smaller number of shares, (D) any issue of any shares or other securities
of the Company upon any reclassification of the Common Stock, (E) any of the
circumstances contemplated in Section 9(b) hereof, (F) the exercise of Options
or Convertible Securities or similar agreements, or (G) the issuance or sale of
Company Common Stock, or Options, Convertible Securities or other rights or
agreements to purchase Common Stock, whether for cash, property or services
(other than as specifically set forth in Sections 2(b)(ii) and (iii)), and in
the event of any such issuance or reduction then the Warrants issued hereunder
shall be adjusted to issue to the Holders such
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greater or lesser number of shares of Common Stock as shall be necessary to
maintain at the Stated Percentage the aggregate amount of Fully-Diluted Common
Stock that is issuable upon exercise of the Warrants.
(ii) In the event that the Company shall at any time after the date of
this Agreement (A) issue any shares of Common Stock pursuant to the exercise of
Permitted Dilutive Options or (B), subject to Section 2(b)(iii) hereof, issue
any shares of Common Stock to third parties (which for this purpose shall
exclude all officers, directors or stockholders of the Company and their
Affiliates) in arm's length, good faith transactions for cash or property having
a value per share of Common Stock equal to or greater than the greater of (I)
the Merger Price per share (adjusted for stock splits, reverse splits,
combinations, distributions and dividends payable in shares of Common Stock,
reclassifications and similar events affecting the shares of Common Stock
generally) or (II) the Market Price, then, the Stated Percentage of the
Company's Fully-Diluted Common Stock issuable upon exercise of the aggregate
number of Warrants issued hereunder shall be reduced to that percentage (the
"Reduced Percentage") determined by multiplying the Stated Percentage by the
following fraction:
(1) the number of shares of Common Stock constituting the Company's
Fully-Diluted Common Stock immediately prior to such issuance;
divided by:
(2) the number of shares of Common Stock constituting the Company's
Fully-Diluted Common Stock immediately prior to such issuance plus the
number of additional shares of Common Stock described in clauses (A)
and (B) above.
Shares of Common Stock owned by or held for the account of the Company shall not
be deemed outstanding for the purpose of any computation pursuant to this
Section 2(b)(ii). After any reduction in the Stated Percentage as a result of
any adjustment made in accordance with this Section 2(b)(ii), for purposes of
any subsequent adjustment references herein to the "Stated Percentage" shall
mean the Reduced Percentage resulting from such prior adjustment.
(iii) In the event that the Company shall issue Common Stock to an
unaffiliated third party in a transaction described in Section 2(b)(ii)(B)
above, and (x) it shall after the date of issuance be determined under the
appraisal procedure set forth under the definition of "Market Price" that such
Common Stock was sold for less than the Appraised Market Price, and (y) the
Board of Directors shall determine in good faith that the Company is not able to
increase the purchase price of such Common Stock to the Appraised Market Price,
then in making the adjustment set forth in Section 2(b)(ii) the number of shares
of Common Stock to be added to the outstanding shares immediately prior to such
issuance (as required in Section 2(b)(ii)(2)) shall be the number of shares of
Common Stock issued in such transaction, multiplied by a fraction, the numerator
of which shall be the purchase price per share for which such shares of Common
Stock were issued, and the denominator of which is the greater of Appraised
Market Price or the Merger Price.
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(c) (i) The Company's "Fully-Diluted Common Stock" at any time of
determination shall mean the sum of (A) the number of shares of Common Stock
issued and outstanding at such time, plus (B) the number of shares of Common
Stock issuable upon exercise of all outstanding Options, excluding Permitted
Dilutive Options, and conversion or exchange of all Convertible Securities
issued and outstanding at such time (but excluding for this purpose warrants
held by GKN, so long as such warrants are not amended either to extend their
expiration date beyond October 17, 2001 or to modify the exercise price thereof
below $7.15 per share), plus (C) the number of shares of Common Stock which the
Company is otherwise obligated or potentially obligated to issue under any
agreement, understanding or arrangement or otherwise. Where any Convertible
Security does not indicate a specific or fixed number of shares of Common Stock
to be issued thereunder or in connection therewith, the number of shares of
Common Stock issuable thereunder or in connection therewith for purposes of
calculating Fully-Diluted Common Stock shall equal the greater of (I) the
maximum number of shares of Common Stock described as issuable thereunder or in
connection therewith or (II) such number of shares of Common Stock as would
represent any profit sharing, liquidation preference amount, appreciation right,
share or percentage of the Company's value as if such Convertible Security was
converted (at the then-applicable Market Price if no conversion price is
otherwise provided in such Convertible Security) into shares of Common Stock.
Fully-Diluted Common Stock shall not include any shares owned or held by or for
the account of the Company or any Subsidiary.
(ii) For purposes of determining the Common Stock, Options or
Convertible Securities issued and outstanding at any time, the following shall
apply: In the event that the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them (A) to receive a dividend or
other distribution payable in Common Stock, Options or Convertible Securities,
or (B) to subscribe for or purchase Common Stock, Options or Convertible
Securities, then the shares of Common Stock, Options or Convertible Securities
to be issued or sold upon the declaration of such dividend or the making of such
other distribution or upon exercise of such rights of subscription or purchase,
as the case may be, shall be deemed to be outstanding on such record date.
SECTION 3. EXERCISE PRICE. The exercise price for a Holder's Warrant shall
be $.01 per share for each share of the Company's Common Stock issuable upon
exercise of such Warrant (the "Exercise Price"). The Company will take any
corporate action which may be necessary in order that the Company may validly
and legally issue fully paid and nonassessable Warrant Shares at such Exercise
Price.
SECTION 4. EXERCISE OF WARRANTS.
(a) The rights represented by any Warrant issued pursuant hereto may be
exercised by the Holder thereof, in whole or in part, by delivering to the
Warrant Office:
(i) the Warrant, together with a properly completed Election to
Purchase in the form attached thereto; and
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(ii) at the Holder's option, either (A) a check or bank draft in the
amount of the aggregate Exercise Price for the shares of Common Stock to be
purchased, or (B) Common Stock, preferred stock, Warrants or other
securities of the Company having a Market Price equal to the aggregate
Exercise Price for the shares of Common Stock to be purchased. For purposes
of this Section 4: (I) the Market Price per share of Common Stock at any
time shall be determined in accordance with the definition of Market Price,
(II) the Market Price per Warrant at any time shall be the Market Price per
share of Common Stock minus the Exercise Price then in effect, and (III) the
Market Price of other securities shall be as reasonably determined by the
Company's Board of Directors in accordance with the principles set forth in
the definition of Market Price.
Upon such exercise the Company shall issue and deliver to or to the order of the
registered Holder(s) of such Warrant, and in such name or names as such
registered Holder(s) may designate, one or more stock certificate(s) for the
Warrant Shares to be issued upon such exercise of such Warrant. Any person(s) so
designated to be named therein shall be deemed to have become the Holder(s) of
record of such Warrant Shares as of the date of delivery to the Company at the
Warrant Office of the Warrant and the Exercise Price therefor as provided in
clauses (i) and (ii) above.
(b) If a Warrant is exercised in part at any time, a new Warrant or
Warrants shall be issued for the unexercised portion of such Warrant. Each new
Warrant so issued shall bear any legend required by Section 11.3 of the Purchase
Agreement, if the Warrant presented in connection with a partial exercise
thereof bore such legend. All Warrants surrendered upon exercise shall be
canceled.
(c) The Company will pay all taxes (other than any applicable income or
similar taxes payable by the Holders) attributable to the initial issuance of
Warrant Shares upon the exercise of the Warrants; provided, that the Company
shall not be required to pay any tax which may be payable in respect of any
transfer involved in the issue of any Warrant or any certificate for Warrant
Shares in a name other than that of the registered Holder of the Warrant
surrendered for exercise.
SECTION 5. REGISTRATION, TRANSFER AND EXCHANGE OF CERTIFICATES.
(a) The Company shall maintain at the Warrant Office a Warrant Register
for registration of the Warrants and transfers thereof. The Company may deem and
treat the registered Holder(s) of the Warrants as the absolute owner(s) thereof
for the purpose of any exercise thereof or any distribution to the Holder(s)
thereof, and for all other purposes.
(b) The Company shall register the transfer of any outstanding Warrant
in the Warrant Register upon surrender to the Company at the Warrant Office of
such Warrant, accompanied (if so required by it) by one or more duly executed
instruments of transfer in form satisfactory to the Company. Upon any such
registration of transfer, one or more new Warrant(s) evidencing such transferred
Warrant shall be issued to the transferee(s) and the surrendered Warrant shall
be canceled. If less than all of a surrendered Warrant is to be transferred, new
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Warrant(s) shall be issued to the surrendering Holder evidencing the remaining
balance of the surrendered Warrant.
(c) Each Warrant may, at the option of the Holder(s) thereof, be
surrendered to the Company at the Warrant Office to be exchanged for one or more
new Warrants of like tenor and exercisable in the aggregate for a like number of
Warrant Shares. Warrants surrendered for exchange shall be canceled.
(d) No charge shall be made for any such transfer or exchange except
for any tax or other governmental charge imposed in connection therewith. Except
as provided in Section 11 or 12 of the Purchase Agreement, each Warrant issued
upon transfer or exchange shall bear any legend required by Section 11.3 of the
Purchase Agreement if the Warrant presented for transfer or exchange bore such
legend.
SECTION 6. MUTILATED OR MISSING WARRANT. If any Warrant is mutilated, lost,
stolen or destroyed, the Company shall issue, in exchange and substitution for
and upon cancellation of the mutilated Warrant, or in lieu of and substitution
for the Warrant lost, stolen or destroyed, a new Warrant of like tenor and
representing rights to acquire an equivalent share in the Company, but only upon
receipt of evidence satisfactory to the Company of such loss, theft or
destruction of such Warrant and, if requested, indemnity satisfactory to it. No
service charge shall be made for any such substitution, but all reasonable
charges associated with any stamp, tax or other governmental duty that may be
imposed in relation thereto shall be borne by the Holder of such Warrant. Each
Warrant issued in any such substitution shall bear any legend required by
Section 11.3 of the Purchase Agreement if the Warrant for which such
substitution was made bore such legend.
SECTION 7. RESERVATION AND ISSUANCE OF WARRANT SHARES.
(a) The Company will at all times have authorized, and reserve and keep
available, free from pre-emptive rights, for the purpose of enabling it to
satisfy any obligation to issue Warrant Shares upon the exercise of the
Warrants, the aggregate Warrant Shares issuable upon exercise of all outstanding
Warrants.
(b) The Company covenants that all Warrant Shares will, upon issuance
in accordance with the terms of this Agreement, be fully paid and nonassessable
and free from all taxes with respect to the issuance thereof and from all liens,
charges and security interests created by the Company.
SECTION 8. OBTAINING OF GOVERNMENTAL APPROVALS AND STOCK EXCHANGE LISTINGS.
The Company will, at its own expense, (a) obtain and keep effective any and all
permits, consents and approvals of governmental agencies and authorities which
may from time to time be required of the Company in order to issue Warrant
Shares upon exercise of the Warrants, and otherwise to perform its obligations
hereunder, and (b) take all action which may be necessary so that the Warrant
Shares, immediately upon their issuance upon the exercise of Warrants, will be
listed on each securities exchange, if any, on which shares of the Company are
then listed.
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SECTION 9. ADDITIONAL ANTI-DILUTION PROVISIONS.
(a) Payments to Holders in Connection with Certain Dividends. In the
event that the Company declares a stock split, stock dividend, or dividend of
any kind, whether in cash, securities or other property, upon the Common Stock
(including any dividend payable in Common Stock, Options or Convertible
Securities), then at the option of each Holder:
(i) the Company shall pay over to the Holder of each Warrant, on the
dividend payment date, the cash, stock or other securities and other
property which the Holder of Warrants would have received if such Holder had
exercised such Warrants in full to purchase Common Stock and had been the
record holder of such Common Stock on the date on which a record is taken
for the purpose of such dividend, or, if a record is not taken, the date as
of which the holders of Common Stock of record entitled to such dividend are
to be determined; or
(ii) lawful and adequate provisions shall be made whereby the Company
shall maintain in reserve and available such dividend property and each
Holder of Warrants shall thereafter have the right to purchase and/or
receive upon exercise of the Warrant on the terms and conditions specified
in this Agreement and in addition to the Warrant Shares purchasable
immediately prior to the declaration of such dividend, such shares of stock,
securities or property as are distributable with respect to outstanding
shares of Common Stock equal to the number of Warrant Shares purchasable
immediately prior to such declaration, to the end that the provisions hereof
(including without limitation provisions for adjustments of the number of
shares receivable upon exercise) shall thereafter be applicable, as nearly
as may be, in relation to such shares of stock, securities or property.
(b) Reorganizations and Asset Sales. If any capital reorganization or
reclassification of the Capital Stock of the Company, or any consolidation or
merger of the Company with another corporation, or the sale of all or
substantially all of its assets to another corporation shall be effected in such
a way that holders of Common Stock shall be entitled to receive stock or
securities of the acquiring or surviving entity with respect to or in exchange
for Common Stock, then the following provisions shall also apply:
(i) As a condition of such reorganization, reclassification,
consolidation, merger or sale (except as otherwise provided below in this
Section 9(b)), lawful and adequate provisions shall be made whereby each
Holder shall thereafter have the right to purchase and receive upon the
terms and conditions specified in this Agreement and in lieu of the Warrant
Shares immediately theretofore receivable upon the exercise of his or its
Warrant, such shares of stock, securities or assets as may be issued or
payable with respect to or in exchange for a number of outstanding shares of
such Common Stock equal to the number of Warrant Shares immediately
theretofore so receivable had such reorganization, reclassification,
consolidation, merger or sale not taken place, and in any such case
appropriate provision shall be made with respect to the rights and interests
of
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such Holder to the end that the provisions hereof (including without
limitation provisions for adjustments of the number of shares receivable
upon exercise of a Warrant) shall thereafter be applicable, as nearly as may
be, in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise of a Warrant;
(ii) The Company shall not effect any such consolidation, merger or
sale unless either (x) such transaction shall be an arm's length, good faith
transaction with an unaffiliated third party, and shall result in all of the
holders of the Company Common Stock immediately prior to the transaction
being paid entirely in cash for their Common Stock interests or receiving,
in whole or in part, securities of the acquiring or surviving entity which
equal, in the aggregate, not greater than 5% (by vote or by value) of such
entity's outstanding voting securities after consummation of the
transaction, in which case the Company may, upon written notice given to the
Holders, deem the Holders to have exercised the Warrants immediately prior
to the consummation of such transaction, such notice to be given not less
than ten (10) days prior to the date of consummation of the transaction, or
(y) not less than ten (10) days prior to the consummation thereof the
successor corporation (if other than the Company) resulting from such
consolidation or merger, or the corporation purchasing such assets, shall
agree to assume by written instrument executed and mailed or delivered to
each Holder, in accordance with the provisions of Section 21 hereof, at the
last address of such Holder appearing on the books of the Company, the
obligation to deliver to such Holder such shares of stock, securities or
assets as, in accordance with the provisions of this Agreement, such Holder
may be entitled to receive, and all other liabilities and obligations of the
Company hereunder. Upon written request by the Holder of any Warrant such
successor corporation will issue a new Warrant revised to reflect the
modifications in this Agreement effected pursuant to this Section 9(b); and
(iii) If a purchase, tender or exchange offer is made to and accepted
by the holders of more than 50% of the outstanding shares of Common Stock of
the Company, the Company shall not effect any consolidation, merger or sale
with the person, firm or corporation having made such offer or with any
affiliate of such person, firm or corporation, unless prior to the
consummation of such consolidation, merger or sale each Holder of a Warrant
shall have been given a reasonable opportunity to then elect to receive upon
the exercise of his or its Warrant either the stock, securities or assets
then issuable with respect to the Common Stock of the Company or the stock,
securities or assets, or the equivalent, issued to previous holders of the
Common Stock in accordance with such offer.
(c) Notice of Adjustment. Whenever the number of Warrant Shares
issuable upon the exercise of the Warrants shall be adjusted as herein provided,
or the rights of Holders shall change by reason of other events specified
herein, the Company shall compute the adjusted number of Warrant Shares in
accordance with the provisions hereof and shall prepare a certificate signed by
its President, Vice President, Treasurer or Secretary setting forth the adjusted
number of Warrant Shares issuable upon exercise of the Warrants or specifying
the other shares of stock, securities or assets receivable as a result of such
change in rights, and showing in reasonable
-11-
detail the facts and calculations upon which such adjustments or other changes
are based, including a statement of the consideration received or to be received
by the Company for, and the amount of, any Common Stock, Options and Convertible
Securities issued since the last such adjustment or change (or since the date
hereof in the case of the first adjustment or change). The Company shall cause
to be mailed to each Holder of a Warrant copies of such officer's certificate
together with a notice stating that the number of Warrant Shares purchasable
upon exercise of the Warrants has been adjusted and setting forth the adjusted
number of Warrant Shares purchasable upon exercise of such Holder's Warrant.
(d) Disputes. In the event that there is any dispute as to the
computation of the number of Warrant Shares required to be issued upon exercise
of Warrants (in which the Holders of a majority of the Warrant Shares issuable
upon exercise of all outstanding Warrants shall join), the Holders will retain
an independent accounting firm to conduct, at the Company's expense, an audit of
the computations pursuant to the terms hereof involved in such dispute,
including the financial statements or other information upon which such
computations were based. The determination of such accounting firm shall, in the
absence of manifest error, be binding upon the Holders and the Company. If there
shall be a dispute as to the selection of such accounting firm, such firm shall
be appointed by the American Institute of Certified Public Accountants if
willing, otherwise the American Arbitration Association, upon application by the
Company or the Holders of a majority of the Warrant Shares issuable upon
exercise of all outstanding Warrants, with notice to the others. The expenses of
such accounting firm and, if any, the American Institute of Certified Public
Accountants or the American Arbitration Association (as applicable), shall be
borne by the Company.
(e) Securities other than Common Stock. If at any time, as a result of
an adjustment made pursuant to this Section 9, the Holder of any Warrant
thereafter exercised shall become entitled to receive any securities of the
Company other than shares of Common Stock, thereafter the number of such other
securities so receivable upon exercise of any Warrant 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 Warrant Shares contained in
this Section 9, and the provisions of this Agreement with respect to the Warrant
Shares shall apply on like terms to such other securities.
SECTION 10. NOTICES TO WARRANT HOLDERS. In case at any time the Company
proposes:
(a) to declare a cash dividend upon Common Stock;
(b) to declare any dividend upon its Common Stock or make any other
distribution to the holders of its Common Stock;
(c) to issue any shares of capital stock, Options or Convertible
Securities (except pursuant to the exercise of Warrants or Options or the
conversion or exchange of Convertible Securities in accordance with their
terms);
-12-
(d) to offer for subscription pro rata to the holders of any of its
capital stock or Convertible Securities any additional shares of stock of
any class or other rights;
(e) to effect any capital reorganization, or reclassification of the
Capital Stock of the Company, or consolidation or merger of the Company with
another corporation, or sale or other disposition of greater than 25% of the
net value of its assets; or
(f) to effect a voluntary or involuntary dissolution, liquidation or
winding up of the Company,
then, in any one or more of said cases, the Company shall give the Holder of any
Warrant (i) at least 15 days' (but not more than 120 days') prior written notice
of the date on which the books of the Company shall close or a record shall be
taken for such dividend, distribution or subscription rights or for determining
rights to vote in respect of any such issuance, reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, and (ii) in the case of any other such issuance, reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, at least 15 days' (but not more than 120 days') prior written notice
of the date when the same shall take place. Such notice in accordance with the
foregoing clause (i) shall also specify, to the extent known, in the case of any
such dividend, distribution or subscription rights, the date on which the
holders of Common Stock shall be entitled thereto, and such notice in accordance
with the foregoing clause (ii) shall also specify, to the extent known, the date
on which the holders of Common Stock shall be entitled to exchange their Common
Stock for securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, as the case may be. The failure to give the notice required by this
Section 10 or any defect therein shall not affect the legality or validity of
any distribution, right, warrant, consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up, or the vote upon any action.
SECTION 11. SECURITIES LAW MATTERS; TRANSFERS; RULE 144 AND RULE 144A
COVENANTS. The provisions of Section 11 (Securities Law Matters) and 12
(Transfers) of the Purchase Agreement are hereby incorporated by reference
herein as if set forth in full herein. Each Holder acknowledges that upon
exercise of the Warrants and acquisition by such Holder of Warrant Shares, such
Holder (and its successors and transferees) will become a party to the
Stockholders Agreement and will be bound by the terms and provisions thereof,
including, without limitation, the provisions applicable to any sale or other
disposition of the Warrant Shares. Each Holder further acknowledges that the
Warrant Shares acquired upon exercise of the Warrants are subject to the
Stockholders Agreement. As used herein, "Stockholders Agreement" means the
Stockholders Agreement as may be amended and/or restated from time to time
including, without limitation, as amended on the date hereof.
SECTION 12. REGISTRATION RIGHTS. The Holders and the Company shall have the
rights and obligations set forth in Exhibit C hereto with respect to
registrations of the Company's securities under the Securities Act.
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SECTION 13. PUT.
(a) Put Option. At the written request of any Holder or Holders of 50%
or more of the Warrants and Warrant Shares outstanding at any time, made as
provided in Section 13(b) (a "Put Notice"), the Company shall purchase the
number of Warrants and/or Warrant Shares specified by such requesting Holder(s)
and by any other Holders who indicate their desire to sell their Warrants and/or
Warrant Shares to the Company as provided herein (the "Put Option") at a price
determined pursuant to Section 13(c). A copy of any Put Notice given to the
Company pursuant to Section 13(b) shall be given at the same time to all other
Holders, who shall have the right to participate in such exercise of the Put
Option by so notifying the Company and the requesting Holder(s) within seven (7)
days after a copy of the Put Notice is so given to them.
(b) Exercise of Put. A Put Notice may be given at any time after the
date which is (i) 60 days prior to the fifth anniversary of this Warrant
Agreement, or (ii) on or after the date on which the Board of Directors of the
Company approves, or the Company enters into, any agreement to undertake a Put
Event, or takes material steps toward the consummation of a Put Event; provided,
that the Company shall not in any event be obligated to close a Put Option
transaction until the date which is the earlier of (A) 60 days after a Put
Notice is given, and (B) the date on which a Put Event closes (the "Put Due
Date"). A "Put Event" shall mean any one or more of (I) an initial public
offering of Capital Stock of the Company, if such offering is not a "Qualified
IPO" as defined in the Stockholders Agreement, (II) a sale of 25% or more of the
aggregate assets of the Company and its Subsidiaries, or a merger, consolidation
or other transaction which effectively accomplishes such a sale, unless such
sale, merger, consolidation or other transaction is an arm's length, good faith
transaction undertaken with an unaffiliated third party, or (III) any
transaction or event which shall constitute a Change of Control, other than a
transaction described in Section 9(b)(ii)(x) hereof or a Qualified IPO. The
closing of a Put Option transaction is sometimes referred to herein as the "Put
Closing," and the date of such closing is sometimes referred to herein as the
"Put Closing Date". At a Put Closing, the selling Holders shall deliver the
Warrants and Warrant Shares to be repurchased by the Company, and the Company
shall deliver a certified check to each selling Holder in an amount equal to the
Put Price for the Warrants and Warrant Shares being sold by such selling Holder
or shall transfer such amount by wire of immediately available funds to any
account specified in writing by a selling Holder to the Company.
(c) Put Price. The "Put Price" of a Warrant or Warrant Share to be
repurchased by the Company from a Holder under Section 13(a) shall be an amount
equal to the quotient of the following (for purposes of this Section 13, the
term "Warrant" shall mean the right upon exercise of a Warrant certificate to
purchase one share of Common Stock):
(i) fair value as determined by appraisal in accordance with Section
13(d) below, computed based on the higher of fair market value of the
Company and its Subsidiaries as a whole in a presumed initial public
offering of Common Stock (if the Company at such time is not then trading in
the public markets), or the estimated sale value of the Company and its
Subsidiaries as a whole, in each case with no discount for illiquidity or
minority status, and without taking into account the existence of the Put
-14-
Option, and determined on the assumption that the Company has received all
consideration payable upon exercise of all outstanding Options (to the
extent vested) and conversion of all outstanding Convertible Securities
("Fair Value");
divided by:
(ii) the number of shares of Common Stock constituting the Company's
Fully-Diluted Common Stock (excluding, for purposes of this provision only,
non-vested options to purchase shares of Common Stock);
provided, however, that in the case of the repurchase of a Warrant or portion
thereof, the Exercise Price for the portion of the Warrant to be repurchased
shall be deducted from the Put Price for the Warrant to be repurchased.
(d) Determination of Price. Fair Value shall be determined as of the
end of the most recent complete fiscal quarter of the Company ended prior to the
Put Notice (taking into account actual performance subsequent thereto and
projections for future periods), and shall be determined by appraisal as
follows: Within ten (10) days after receipt by the Company of notice that an
appraisal is desired, the Company and the selling Holder(s) of Warrants and
Warrant Shares shall jointly appoint an appraiser for the purpose of determining
Fair Value. Such appraiser shall be an investment banking or advisory firm with
experience in valuing companies of a comparable size, and in a comparable
industry, as the Company, which investment banking or advisory firm shall be
either a firm of recognized national standing or a regional firm of good
national reputation. If there shall be a dispute as to the selection of such
appraiser, it shall be appointed by the American Arbitration Association upon
application by the Company or the selling Holder(s). The Company and the selling
Holder(s) shall be afforded reasonable opportunities to discuss the appraisal
with such appraiser. The determination of Fair Value by such appraiser shall be
final and binding upon the Company and the selling Holder(s). The fees and
expenses of the appraiser and, if any, of the American Arbitration Association,
shall be borne by the Company.
(e) Delivery of Certificates; Reissuance. Upon the selling Holders'
receipt of the full price for the Warrants and Warrant Shares sold to the
Company pursuant to this Section 13, the selling Holders shall deliver to the
Company the certificates evidencing the Warrants and/or Warrant Shares, as the
case may be, so sold to the Company. To the extent that less than all the
Holder's Warrants or Warrant Shares are sold to the Company, the Company shall
at the same time issue and deliver to each selling Holder, as appropriate, (i)
Warrants in every respect identical to the Warrants so surrendered, except that
the same shall be exercisable for the portion of the Warrants not sold to the
Company, and (ii) certificates representing outstanding Warrant Shares which
have not been sold to the Company.
(f) Insufficiency of Funds to Satisfy Put Obligation; Insufficient
Legally Available Funds; or Restriction in Senior Loan Agreement.
Notwithstanding any other provision of this Section 13, the Company shall not be
obligated to repurchase any portion or all of the Warrants and Warrant Shares
pursuant to this Section 13 on a Put Closing Date, to the extent
-15-
(and only to the extent) that it does not have sufficient legally available
funds therefor or payment of any portion or all of the aggregate Put Price would
violate the Senior Loan Agreement; provided, however, that if lenders and/or
investors could reasonably be expected to provide financing to the Company and
its Subsidiaries in an amount sufficient to fund all or a portion of the
aggregate Put Price, the Company shall use commercially reasonable efforts to
obtain such financing in order to honor its obligations with respect to such Put
Notice (such commercially reasonable efforts to include without limitation a
recapitalization or a revaluation of the Company's and its Subsidiaries' assets,
which shall be deemed a "financing" for purposes of this Section 13). However,
failure of the Company and its Subsidiaries to have sufficient funds legally
available for the repurchase of any portion or all of the Warrants and Warrant
Shares, or failure to pay any portion or all of the aggregate Put Price due to a
restriction in the Senior Loan Agreement, or failure to obtain any such
financing to fund any portion or all of the aggregate Put Price, shall not
excuse a failure to repurchase the Warrants and Warrant Shares, and the Company
shall be and remain liable for the full amount of all sums payable in accordance
with the provisions of this Section 13 until paid in full. If, for any reason
(including the failure to have sufficient legally available funds or to obtain
financing to fund any portion or all of the aggregate Put Price or a restriction
in the Senior Loan Agreement), the Company fails to pay the entire aggregate Put
Price due by the Put Due Date, then (i) the Company's obligation to repurchase
such Warrants and Warrant Shares shall remain in effect, and interest on the
unpaid Put Price shall accrue at the rate of eighteen percent (18%) per annum
(or the maximum interest rate permitted under applicable law, if lower than 18%
per annum), accrued monthly, from the Put Due Date until paid, and such interest
("Put Interest") shall be a part of the aggregate Put Price payable pursuant to
this Section 13, and (ii) the selling Holders may, at their option, at any time
revoke a prior exercise of the Put Option (and by so doing shall thereby cease
to be entitled to receive any and all Put Interest accrued prior to such
revocation) and thereafter again exercise the Put Option, whereupon the Put
Price shall be redetermined for such subsequent exercise.
(g) On and after the Put Due Date, and otherwise whenever the Holders
are entitled to exercise the Put Option as a result of a Put Event, each Holder
shall be entitled to request that the Company provide written disclosure to the
Holders (in reasonable detail acceptable to the Holders) of any transactions,
planned transactions or potential transactions known to, or under consideration
by, the Company and which could reasonably be expected to be information of the
type and character that a purchaser or seller of the Company's Common Stock
would desire before undertaking or consummating such a purchase or sale,
including a detailed description of any transaction(s) constituting a Put Event.
If so requested, such information shall be provided within five (5) business
days of the request.
SECTION 14. Intentionally Omitted.
SECTION 15. CERTAIN ADDITIONAL PAYMENTS REQUIRED.
(a) If within six (6) months after any repurchase of Warrants or
Warrant Shares from a Holder thereof pursuant to Section 13 or 14, the Company
(including any successor thereto) makes an offering of its Capital Stock, sells
substantially all its assets, liquidates or becomes a party to any merger or
consolidation, or any one or more stockholders of the Company
-16-
sell or dispose of Capital Stock in connection with a Material Stock Transfer
(collectively, "Subsequent Transactions"), or the Company or any such
stockholder, as applicable, enters into any agreement to do any of the
foregoing, then upon completion of any such Subsequent Transaction, the Company
shall pay to each such former Holder with respect to each percentage (or
fraction thereof) of the Company's Fully-Diluted Common Stock so repurchased
from such Holder an additional amount equal to the excess, if any, of (i) the
net proceeds per percentage (or fraction thereof) of the Company's Fully-Diluted
Common Stock received from such offering, sale of assets, liquidation, merger,
consolidation, sale or disposition, over (ii) the amount paid to such Holder in
respect of each percentage (or fraction thereof) of the Company's Fully-Diluted
Common Stock pursuant to Section 13.
(b) If after any repurchase of Warrants or Warrant Shares pursuant to
Section 13, any stock split, stock dividend, reclassification of Capital Stock,
capital reorganization or other action by the Company results in a change in the
number of outstanding shares of Common Stock, then appropriate proportional
adjustments shall be made to the amount specified in Section 15(a)(ii), as
though such action had taken place immediately prior to the Company's repurchase
of Warrants or Warrant Shares and the repurchase price thereof had been adjusted
to reflect such action.
(c) For purposes of this Section 15, "Material Stock Transfer" means
any sale, exchange or other disposition of Capital Stock of the Company in one
transaction or a series of related transactions, if all of the beneficial owners
of Capital Stock immediately prior to such transaction or transactions, as a
group, own less than fifty percent (50%) of the outstanding Capital Stock (of a
type ordinarily having the power to vote for directors of the Company) after
completion of such transaction or transactions.
SECTION 16. COVENANTS OF COMPANY. So long as the Holders shall hold Warrants
or Warrant Shares which aggregate 1% or more of the Company's Common Stock, the
Company shall abide by the provisions of Section 6.1 and 6.2 of the Purchase
Agreement, and, additionally, notwithstanding the provisions of Section 23,
until the Holders no longer hold, in the aggregate, Warrants and Warrant Shares
(or a combination thereof) in total number equaling one-third (1/3) of the
number of Warrants issued hereby, the Company: (a) shall abide by all of the
covenants and agreements set forth in the Purchase Agreement, provided, however,
that upon full and complete payment of the Notes and all other Indebtedness
(including , but not limited to, all accrued but unpaid interest, premiums,
Principal Increases and Costs and Expenses) outstanding under the Purchase
Agreement in respect of the Notes, the following provisions of the Purchase
Agreement shall be terminated and have no further force or effect after such
repayment: Sections 3.1, 3.2, 6.3, 6.4 through 6.6, 6.8(a) and (b), 6.11, 6.14,
6.16, 6.17, 7.1 through 7.11, 7.14, 7.15, 7.17 through 7.20 and 9.1 through 9.3,
and Articles 4, 5 and 8; and (b) shall not, without the prior written consent of
the Holders of a majority of the Warrant Shares issued or issuable upon exercise
of all outstanding Warrants, enter into any agreement with any holder or
prospective holder of any securities of the Company which would allow such
holder or prospective holder to include such securities in any registration
filed under Section 12, unless under the terms of such agreement, such holder or
prospective holder may include such securities
-17-
in any such registration only to the extent that the inclusion of its securities
will not reduce the number of Warrant Shares which are included.
SECTION 17. Intentionally omitted.
SECTION 18. AMENDMENTS AND WAIVERS. Any provision of this Agreement may be
amended, supplemented, waived, discharged or terminated by a written instrument
signed by the Company and the Holders of a majority of the Warrant Shares issued
or issuable upon exercise of all outstanding Warrants; provided, that the
Exercise Price may not be increased, the percentage of the Company's
Fully-Diluted Common Stock issuable upon exercise of the Warrants may not be
reduced, except as provided in Section 2(b)(ii), the Expiration Date may not be
changed to an earlier date, except as affected by the automatic exercise
requirement set forth in Section 9(b)(ii), and this Section may not be amended
except with the consent of each Holder which would be affected thereby.
SECTION 19. PROVISIONS OF OTHER AGREEMENTS. Whenever the Purchase Agreement
or any provision thereof is referred to herein or in any instrument furnished
hereunder as expressing or constituting a covenant, term, condition or
limitation of this Agreement or of such instrument or as expressing or
constituting a representation herein or therein (a) any such provision shall be
regarded as though incorporated herein or therein at length, (b) except as
otherwise provided herein or in such instrument the terms used in such agreement
or the provision thereof referred to shall have the meanings set forth in such
agreement, and (c) any covenant or other provision incorporated herein by
reference from such agreement shall continue in effect for the benefit of the
Holders so long as this Agreement shall remain in effect. Except as otherwise
specifically provided herein, and except for amendments or modifications to
which the Holders consent in writing in accordance with Section 18, no
modification of or amendment to, or waiver or termination of, any provision of
any of said agreement and no payment of the indebtedness outstanding thereunder
or satisfaction or cancellation thereof, or termination of said agreement, shall
modify, amend, waive, terminate or otherwise affect any provision thereof as
referred to in this Agreement or in any instrument furnished hereunder, which
provision, for the purpose of this Agreement and such instrument, shall remain
unmodified and in full force and effect.
SECTION 20. SPECIFIC PERFORMANCE. The Holders of the Warrants and/or Warrant
Shares shall have the right to specific performance by the Company of the
provisions of this Agreement. The Company hereby irrevocably waives, to the
extent that it may do so under applicable law, any defense based on the adequacy
of a remedy at law which may be asserted as a bar to the remedy of specific
performance in any action brought against the Company for specific performance
of this Agreement by the Holders.
SECTION 21. NOTICES. All notices, requests, demands or other communications
to or upon the respective parties hereto shall be in writing and shall be deemed
to have been given or made, and all financial statements, information and the
like required to be delivered hereunder shall be deemed to have been delivered,
either (a) three (3) Business Days after deposited in the United States
certified mail, return receipt requested, with postage prepaid, or (b) one (1)
-18-
Business Day after delivery to a nationally recognized courier, designated for
overnight delivery with all fees prepaid, in either case addressed to the
Company at the Warrant Office, Attn: Chief Executive Officer, and to the Holders
at their respective addresses set forth on the Warrant Register, or to such
other address as any of them shall specify in writing to the others. The Company
shall cause the Warrant Register to contain current addresses for each of the
Holders.
SECTION 22. BINDING EFFECT; ASSIGNABILITY. This Agreement shall be binding
upon and inure to the benefit of the Company, its successors and assigns, the
Holders and the registered Holders from time to time of the Warrants and the
Warrant Shares. Until the eighth anniversary of the date hereof, the Company
shall be entitled to refuse to honor the assignment of one or more Warrants if
the effect of such assignment would be to have Warrants held by more than ten
(10) persons or entities, unless such assignment is made in connection with the
dissolution, winding up or other liquidating distribution of assets to the
beneficial owners of the assignor entity.
SECTION 23. TERMINATION. This Agreement shall terminate and be of no further
force and effect at the close of business on the Expiration Date or the date on
which none of the Warrants shall be outstanding (whether by reason of the
exercise thereof, the redemption thereof by the Company or by virtue of an
automatic exercise as provided in Section 9(b)(ii)), except that the provisions
of Sections 15 (Certain Additional Payments Required), 18 (Amendments and
Waivers), 20 (Specific Performance), 21 (Notices), 22 (Binding Effect;
Assignability), 23 (Termination) and 25 (Governing Law) shall continue in full
force and effect for two years after such termination.
SECTION 24. COUNTERPARTS. This Agreement may be executed in one or more
separate counterparts and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
SECTION 25. GOVERNING LAW. This Agreement and each Warrant shall be governed
by and construed in accordance with the laws of the State of New York.
[Remainder of page intentionally left blank; Signature page follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Warrant
Agreement of Specialty Acquisition Corp. to be duly executed and delivered by
their proper and duly authorized officers, as of the date and year first above
written.
HOLDERS:
LEG PARTNERS III SBIC, L.P.
by Golub PS-GP, LLC, its general partner
By: _____________________________________
Lawrence E. Golub, Managing Member
LEG PARTNERS DEBENTURE SBIC, L.P.
by Golub Debenture GP, LLC, its general
partner
By: _____________________________________
Lawrence E. Golub, Managing Member
COMPANY:
SPECIALTY ACQUISITION CORP.
By: _____________________________________
Printed Name:____________________________
Printed Title:___________________________
EXHIBIT B
TO WARRANT AGREEMENT
SPECIALTY ACQUISITION CORP.
Warrant Register
Warrant Portion of Stated Number
Certificate No. Name and Address of Holder Percentage of Warrants
--------------- -------------------------- ---------- -----------
W-1 LEG Partners III SBIC, L.P. [______%] [______]
555 Madison Avenue, 30th Floor
New York, NY 10022
Attn: President
Telecopier No.:212-750-5505
W-2 LEG Partners Debenture SBIC, L.P. [______%] [______]
555 Madison Avenue, 30th Floor
New York, NY 10022
Attn: President
Telecopier No.:212-750-5505
TOTAL: 13.4% ________