EXHIBIT 10.10
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT
BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE SUCH A REGISTRATION
IS IN EFFECT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO
AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR SUCH LAWS. THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO CERTAIN RESTRICTIONS ON
TRANSFERS SET FORTH IN A SHAREHOLDERS AGREEMENT, DATED AS OF AUGUST 20, 1997 (AS
AMENDED, MODIFIED OR SUPPLEMENTED THROUGH THE DATE HEREOF, THE "SHAREHOLDERS
AGREEMENT"), BY AND AMONG THE COMPANY AND THE SHAREHOLDERS NAMED THEREIN, A COPY
OF WHICH IS AVAILABLE FOR INSPECTION AT THE OFFICES OF THE COMPANY. NO TRANSFER
OF SUCH SECURITIES WILL BE MADE ON THE BOOKS OF THE COMPANY UNLESS ACCOMPANIED
BY EVIDENCE OF COMPLIANCE WITH THE TERMS OF SUCH AGREEMENTS.
EXERCISABLE AT ANY TIME SUBJECT TO THE PROVISIONS HEREOF
NO. 1 BURKE INDUSTRIES, INC.
WARRANT CERTIFICATE
Warrant Certificate for Warrants
to Purchase 428,444,44 Warrant Shares
This Warrant Certificate certifies that, for value received, Jackson
National Life Insurance Company (the "Holder") is the owner of the number of
Warrants (as defined in Section 1.2(a) below) set forth above, each of which
entitles the Holder to purchase from Burke Industries, Inc., a California
corporation (the "Company") at any time from and after the date hereof and until
the Expiration Date (as defined in Section 2.1 hereof) one Warrant Share (as
defined below), at the purchase price stated in Section 2.3 hereof (the
"Exercise Price"). The number of Warrant Shares purchasable upon exercise of
the Warrants and the Exercise Price shall be subject to adjustment from time to
time as herein provided.
For purposes of this Warrant Certificate, "Warrant Shares" shall mean
shares of the Company's Common Stock, no par value (the "Common Stock");
PROVIDED, HOWEVER, that if, in accordance with Section 6.3 hereof, the
securities issuable upon exercise of the Warrants are issued by an entity other
than the Company or there is a change in the class of securities so issuable,
then the "Warrant Shares" shall mean the securities so issuable by such entity
or the securities of the class of securities so issuable.
The Warrants are subject to the following terms, conditions and
provisions:
SECTION 1. REGISTRATION; TRANSFERABILITY; EXCHANGE OF WARRANT
CERTIFICATE.
1.1 REGISTRATION. The Company shall number and register the Warrants
in a register (the "Warrant Register") maintained at the principal office of the
Company (the "Office"). The Company shall be entitled to treat the Holder of
the Warrants as the owner thereof for all purposes and shall not be bound to
recognize any equitable or other claim to or interest in such Warrants on the
part of any other person.
1.2 TRANSFER AND EXCHANGE.
(a) Subject to compliance with any restrictions on transfer set forth
in the Shareholders Agreement, dated as of August 20, 1997, by and among the
Company, Holder, Massachusetts Mutual Life Insurance Company, MassMutual
Corporate Value Partners Limited, MassMutual High Yield Partners LLC, Paribas
North America, Inc. and the other shareholders named therein (the "Shareholders'
Agreement") (Holder and Massachusetts Mutual Life Insurance Company, MassMutual
Corporate Value Partners Limited, MassMutual High Yield Partners LLC and Paribas
North America, Inc. shall sometimes be collectively referred to herein as the
"Initial Warrantholders"), the warrants issued to the Initial Warrantholders
(the "Warrants") shall be transferable only on the Warrant Register upon
delivery thereof by the Holder or by his duly authorized attorney or
representative or accompanied by proper evidence of succession, assignment or
authority to transfer. Upon any such registration of transfer, a new Warrant
Certificate, in substantially the form of this Warrant Certificate, evidencing
the Warrants so transferred shall be issued to the transferee of such Warrants
and a new Warrant Certificate, in substantially the form of this Warrant
Certificate, evidencing the remaining Warrants, if any, not so transferred,
shall be issued to the Holder. In all cases of transfer by an attorney, the
original power of attorney, duly approved, or a copy thereof, duly certified,
shall be deposited and shall remain with the Company. In case of transfers by
executors, administrators, guardians or other legal representatives, duly
authenticated evidence of their authority shall be produced, and may be required
to be deposited and to remain with the Company in its discretion. No transfer of
the Warrants or any interest therein other than in compliance with this Section
1.2 shall be made or recorded in the Warrant Register, and any such purported
transfer shall be void and of no effect.
(b) This Warrant Certificate is exchangeable, in whole or in part,
upon the surrender hereof by the holder hereof at the Office for new Warrant
Certificates, in substantially the form of this Warrant Certificate, evidencing
in the aggregate the right to purchase the number of Warrant Shares that may
then be purchased hereunder, each of such new Warrant Certificates to be dated
the date of such exchange and to represent the right to purchase such number of
Warrant Shares as shall be designated by the holder of such new Warrant
Certificates at the time of such surrender.
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SECTION 2. TERM OF WARRANTS; EXERCISE OF WARRANTS.
2.1 TERM OF WARRANT. Subject to the terms of this Warrant
Certificate, the Holder shall have the right, which may be exercised by the
registered Holder hereof from time to time on any Business Day before 5:00 P.M.
(New York City time) during the period through and including February 20, 2008
(the "Expiration Date") to purchase from the Company an aggregate of 428,444.44
fully paid and nonassessable Warrant Shares or such other number of Warrant
Shares which the Holder may at the time be entitled to purchase in accordance
with this Warrant Certificate. At 5:00 P.M. (New York City time) on the
Expiration Date, each Warrant not exercised prior thereto shall be and become
void and of no value.
2.2 EXERCISE OF WARRANTS. Subject to the terms of this Warrant
Certificate, the Warrants evidenced by this Warrant Certificate may be exercised
in whole or in part, upon surrender to the Company, at its Office, of this
Warrant Certificate, with a Purchase Form substantially in the form attached
hereto duly completed and signed, and upon payment to the Company of the
Exercise Price. Payment of the aggregate Exercise Price shall be in cash;
PROVIDED, HOWEVER, that in lieu of payment in cash, the Holder may, at its
option, pay all or a portion of the aggregate Exercise Price by tendering shares
it holds of the Series A 11.5% Cumulative Redeemable Preferred Stock of the
Company, which shares shall be valued at their stated liquidation value, plus
any accrued but unpaid dividends thereon, to the date of exercise pursuant to
this Section 2.2. Payment of the aggregate Exercise Price in cash shall be by
wire transfer in immediately available funds to an account designated in writing
by the Company to the Holder.
Upon the surrender of this Warrant Certificate, with the Purchase
Form duly executed, and payment of the Exercise Price as aforesaid, the
Company shall (subject to compliance, if necessary, with applicable
provisions of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended), promptly and, in any event within ten Business Days, issue and
deliver to or upon the written order of the Holder and in such name or names
as the Holder may designate a certificate or certificates for such number of
Warrant Shares so purchased. Such certificate or certificates shall be dated
and deemed to have been issued as of the date of the surrender of this
Warrant Certificate and payment of the Exercise Price, as aforesaid. The
right of purchase represented by this Warrant Certificate shall be
exercisable, at the election of the Holder, in full at any time or in part
from time to time. In the event the Holder shall exercise fewer than all the
Warrants evidenced hereby, a new Warrant Certificate shall be issued
evidencing the remaining unexercised Warrants.
2.3 EXERCISE PRICE. The price per share at which each Warrant Share
shall be purchased upon exercise of each Warrant (the "Exercise Price") shall be
$4.56, subject to adjustment pursuant to Section 6 LESS an amount per Warrant
equal to the dividends in respect of the Warrant Shares that the holder would
have received had such Warrant been exercised on August 20, 1997. The aggregate
Exercise Price for all Warrant Shares subject to this Warrant Certificate shall
be rounded to the next higher $0.01.
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SECTION 3. PAYMENT OF TAXES. The Company covenants and agrees that
it will pay when due and payable all documentary, stamp and other similar taxes,
if any, which may be payable in respect of the issuance or delivery of the
Warrants or of the Warrant Shares purchasable and issuable upon the exercise of
the Warrants; PROVIDED, HOWEVER, that the Company shall not be required to pay
any such tax or other charge imposed in respect of the transfer of Warrants, or
the issuance or delivery of certificates for Warrant Shares or other Securities
in respect of the Warrant Shares upon the exercise of Warrants, to a person or
entity other than a then-existing registered Holder of Warrants.
SECTION 4. MUTILATED OR MISSING WARRANTS. In the event this Warrant
Certificate shall be mutilated, lost, stolen or destroyed, the Company shall
issue and deliver in exchange and substitution for and upon cancellation of the
mutilated Warrant Certificate, or in lieu of and in substitution for the Warrant
Certificate lost, stolen or destroyed, a new Warrant Certificate of like tenor
and representing an equivalent right or interest, but only upon, in the event of
a lost, stolen or destroyed certificate, receipt of evidence satisfactory to the
Company of such loss, theft or destruction and, if requested by the Company,
upon indemnity that also is satisfactory to it; PROVIDED that a written
undertaking of such loss, theft or destruction of this Warrant Certificate by
the registered Holder hereof shall be deemed a satisfactory indemnity of the
Company for purposes of this Section 4. In making application for such a
substitute Warrant Certificate, the Holder shall also comply with such other
reasonable requirements as the Company may prescribe.
SECTION 5. RESERVATION AND AVAILABILITY OF WARRANT SHARES; PURCHASE
AND CANCELLATION OF WARRANTS.
5.1 RESERVATION OF WARRANT SHARES.
(a) The Company shall at all times reserve and keep available free
from preemptive rights, out of the aggregate of its authorized but unissued
shares of Common Stock, for the purpose of enabling it to satisfy any
obligations to issue the Warrant Shares upon exercise of the Warrants, the full
number of Warrant Shares deliverable upon the exercise of all the Warrants
evidenced by this Warrant Certificate. The Company or, if appointed, the
transfer agent for the Common Stock and every subsequent transfer agent for any
shares of the Company's capital stock issuable upon the exercise of any of the
rights of purchase aforesaid (each, a "Transfer Agent") shall be irrevocably
authorized and directed at all times to reserve such number of authorized shares
of Common Stock as shall be required for such purpose. The Company will keep a
copy of this Warrant Certificate on file with each Transfer Agent. The Company
will furnish such Transfer Agent a copy of all notices of adjustments and
certificates related thereto which are transmitted to the Holder pursuant to
Section 6 hereof.
(b) The Company covenants that all Warrant Shares issuable upon
exercise of the Warrants will, upon issuance, be fully paid, nonassessable and
free from preemptive rights and free from all taxes, liens, charges and security
interests with respect to the issuance thereof.
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(c) Before taking any action which would cause an adjustment pursuant
to Section 6, the Company will take any and all corporate action which may, in
the opinion of its counsel, be necessary in order that the Company may validly
and legally issue fully paid and nonassessable Warrant Shares at the Exercise
Price as so adjusted.
5.2 WARRANT SHARES RECORD DATE. Each person in whose name any stock
certificate for Warrant Shares is issued shall for all purposes be deemed to
have become the holder of record of the Warrant Shares represented thereby, and
such stock certificate shall be dated the date upon which this Warrant
Certificate was duly surrendered and payment of the Exercise Price (and any
applicable transfer taxes) was made.
5.3 CANCELLATION OF WARRANT. Upon surrender of the Warrant
Certificate for exchange, substitution, transfer or exercise, it shall be
cancelled by the Company and retired.
SECTION 6. ADJUSTMENT OF NUMBER OF WARRANT SHARES AND EXERCISE
PRICE. The number of securities purchasable upon the exercise of each Warrant
and the Exercise Price shall be subject to adjustment from time to time upon
the happening of certain events as hereinafter described.
6.1 MANDATORY ADJUSTMENTS. The number of securities purchasable upon
the exercise of the Warrants and the Exercise Price shall be subject to
adjustment as follows:
(a) In case the Company shall (i) declare or pay a dividend on
any of its outstanding Common Stock in shares of Common Stock or make a
distribution to holders of its outstanding Common Stock in shares of Common
Stock, (ii) subdivide any of its outstanding Common Stock into a greater
number of shares of Common Stock, (iii) combine any of its outstanding
Common Stock into a smaller number of shares of Common Stock or (iv) issue
by reclassification of any of its shares of Common Stock other securities
of the Company (including any such reclassification in connection with a
consolidation, merger or other business combination in which the Company is
the surviving corporation), the number and kind of Warrant Shares
purchasable and issuable upon exercise of the Warrants shall be adjusted so
that the Holder, upon exercise thereof, shall be entitled to receive the
number and kind of Warrant Shares and other securities of the Company that
the Holder would have owned or have been entitled to receive after the
happening of any of the events described above had the Warrants been
exercised and the relevant Warrant Shares issued in the name of the Holder
immediately prior to the happening of such event or, if applicable, any
record date with respect thereto. An adjustment made pursuant to this
paragraph (a) shall become effective on the date of the dividend payment,
subdivision, combination or issuance retroactive to the record date with
respect thereto, if any, for such event. Upon adjustment of the number of
Warrant Shares as provided in this paragraph (a), the Exercise Price
payable upon exercise of each Warrant shall be adjusted by multiplying such
Exercise Price immediately prior to such
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adjustment by a fraction of which the numerator shall be the number of
Warrant Shares purchasable upon the exercise of each Warrant immediately
prior to such adjustment and of which the denominator shall be the number
of Warrant Shares purchasable immediately thereafter.
(b) In case the Company shall distribute to all holders of its
outstanding Common Stock evidences of indebtedness of the Company, cash
(including cash dividends payable out of consolidated earnings or earned
surplus) or assets or securities other than its Common Stock (including
stock of a subsidiary or securities convertible into or exercisable for
such stock but excluding dividends or distributions referred to in Sections
6.1(a) above or Section 6.1(c) below) (any such evidences of indebtedness,
cash, assets or securities, the "assets or securities"), then, in each
case, the Exercise Price shall be adjusted by subtracting from the Exercise
Price then in effect the value per share (as determined in accordance with
Section 6.2(b)) of the assets or securities that the Holder would have been
entitled to receive as a result of such distribution had the Warrant been
exercised and the relevant Warrant Shares issued in the name of the Holder
immediately prior to the record date for such distribution; PROVIDED that
if, after giving effect to such adjustment, the Exercise Price would be
less than $0.01 per share, the Company shall distribute such assets or
securities to the Holder as if the Holder had exercised the Warrants and
the Warrant Shares had been issued in the name of the Holder immediately
prior to the record date for such distribution. Any adjustment required by
this Section 6.1(b) shall be made whenever any such distribution is made,
and shall become effective on the date of distribution retroactive to the
record date for the determination of shareholders entitled to receive such
distribution.
(c) If at any time after the date hereof the Company shall issue
or sell any shares of Common Stock or any warrants, options or rights to
subscribe for or purchase Common Stock or securities convertible into
Common Stock (but excluding distributions referred to in paragraph (a) or
(b) above or (d) below), and the consideration per share for, or the price
per share at which such warrant, option or right is exercisable for or
convertible into, such Common Stock is less than the Fair Market Value (as
defined below) of the Common Stock immediately prior to such issuance or
sale, then, forthwith upon such issuance or sale, the Exercise Price shall
be reduced to the price determined by multiplying the Exercise Price in
effect immediately prior to the time of such issuance or sale by a fraction
the numerator of which shall be the sum of (i) the number of shares of
Common Stock outstanding immediately prior to such issuance or sale
MULTIPLIED BY the Fair Market Value immediately prior to such issuance or
sale and (ii) the consideration received by the Company upon such issuance
or sale, and the denominator of which shall be the total number of shares
of Common Stock outstanding immediately after such issuance or sale
MULTIPLIED BY the Fair Market Value immediately prior to such issuance or
sale.
Notwithstanding the foregoing, the Company may, without
adjustment to the Exercise Price pursuant to this Section 6.1(c), issue
options, warrants or rights to subscribe for shares of its Common Stock to
officers, directors, employees,
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consultants or agents of the Company pursuant to the terms of any stock
option plan or arrangement approved by the Board of Directors, and may
issue shares of its Common Stock upon the exercise of any such stock
options, warrants or rights; PROVIDED, HOWEVER, that the aggregate
number of shares of Common Stock that may be issued at any one time
under such stock option plan or arrangement without adjustment to the
Exercise Price under this Section 6.1(c) shall not exceed, in the
aggregate 482,000 shares (appropiately adjusted for stock splits,
dividends and/or combinations.
As used herein, "Fair Market Value" of the Common Stock or other
securities means, on any date, the average of the last sale price,
regular way, for the 10-business day period immediately preceding such
date, or if no such sales took place during such 10-business day period,
the average of the closing bid and asked prices, regular way, for each
day in such 10-business day period, in either case as reported on the
principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which
the shares of Common Stock or such other securities are listed, or, if
the Common Stock or such other securities are not listed or admitted to
trading on any national securities exchange, the average of the last
quoted sale price for such 10-business day period or, if not so quoted,
the average of the high bid and low asked prices for each day in such
10-business day period in the over-the-counter market, as reported by
the National Association of Securities Dealers, Inc. Automated Quotation
System or such other system then in use, or, if on any such date the
Common Stock is not quoted by any such organization, the average of the
closing bid and asked prices during such 10-business day period as
furnished by a professional market maker making a market in the Common
Stock or such other securities selected by the Board of Directors of the
Company. If the shares of Common Stock or such other securities are not
publicly held or so listed or publicly traded, "Fair Market Value" shall
mean the fair market value per share of Common Stock or such other
securities as determined by the Company and the holders of at least a
majority of the Warrants issued to the Warrantholders that are then
outstanding. negotiating in good faith toward agreeing upon such value.
If no agreement can be reached within 14 days from the date of receipt
by Required Purchasers of the notice required by Section 6.2(a), the
Company and the Required Purchasers shall appoint within 21 days from
the date of such receipt a mutually acceptable independent investment
banking firm to determine the Fair Market Value. Such firm shall make
the necessary determination which shall be binding absent actual fraud
or manifest error. The fees of such firm for making such determination
and any related reimbursable expenses shall be paid by the Company.
(d) If at any time after the date hereof the Company shall issue
or sell to any person any securities convertible into or exercisable for
Common Stock ("Convertible Securities") (other than securities distributed
in a transaction described in paragraph (b) or (c) above), whether or not
the rights to exchange or convert thereunder are immediately exercisable,
and the price per share for which Common
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Stock is issuable upon such conversion or exchange shall be less than
the Fair Market Value in effect immediately prior to the time of such
issue or sale, then the Exercise Price shall be adjusted as provided in
subparagraph (c) above on the basis that (i) the maximum number of
shares of Common Stock necessary to effect the conversion or exchange of
all such Convertible Securities shall be deemed to have been issued and
outstanding, (ii) the price per share of such shares shall be deemed to
be the lowest possible price in any range of prices at which such
additional shares are available to such holders, and (iii) the Company
shall be deemed to have received all of the consideration payable
therefor, if any, as of the date of actual issuance of such Convertible
Securities. No adjustment of the Exercise Price shall be made under
this subparagraph (d) upon the issuance of any Convertible Securities
which are issued pursuant to the exercise of any warrants or other
subscription or purchase rights therefor, if any such adjustment shall
previously have been made upon the issuance of such warrants or other
rights pursuant to subparagraph (c) above. No further adjustments of
the Exercise Price shall be made upon the actual issuance of such Common
Stock upon conversion or exchange of such Convertible Securities and, if
any issue or sale of such Convertible Securities is made upon exercise
of any warrant or other right to subscribe for or to purchase any such
Convertible Securities for which adjustments of the Exercise Price have
been or are to be made pursuant to other provisions of this Section 6.1,
no further adjustments of the Exercise Price shall be made by reason of
such issue or sale. For the purposes of this subparagraph (d), the date
as of which the Exercise Price shall be computed shall be the earlier of
(i) the date on which the Company shall enter into a firm contract for
the issuance of such Convertible Securities and (ii) the date of actual
issuance of such Convertible Securities. Such adjustments shall be made
upon each issuance of Convertible Securities and shall become effective
immediately after such issuance.
(e) No adjustment in the number of Warrant Shares purchasable
hereunder shall be required unless such adjustment would require an
increase or decrease of at least one quarter of one percent (0.25%) in the
number of Warrant Shares purchasable upon the exercise of each Warrant;
PROVIDED, HOWEVER, that any adjustments which by reason of this
Section 6.1(e) are not required to be made shall be made immediately prior
to any exercise of any Warrants or, if no such exercise occurs prior to the
time that any subsequent adjustment would be made, carried forward and
taken into account in such subsequent adjustment. All calculations shall
be made to the nearest one-thousandth of a share. No adjustment need be
made for a change in the par value of the Warrant Shares.
(f) Upon each adjustment of the Exercise Price pursuant to
paragraphs (b) through (d) of this Section 6.1, this Warrant Certificate
shall be deemed to evidence the right to purchase, at the adjusted Exercise
Price, that number of Warrant Shares obtained by multiplying the number of
Warrant Shares covered by this Warrant Certificate immediately prior to
such adjustment by the Exercise Price in
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effect prior to such adjustment and dividing the product so obtained by
the Exercise Price in effect after such adjustment.
(g) The number of shares of Common Stock outstanding at any given
time shall not include shares directly or indirectly owned or held by or
for the account of the Company or any of its subsidiaries, and the
disposition of any such shares shall be considered an issue or sale of
Common Stock for the purposes of this Section 6.1.
6.2 NOTICE OF ADJUSTMENT.
(a) The Company hereby agrees that whenever any adjustment of the
number of Warrant Shares purchasable upon the exercise of the Warrants or the
Exercise Price of such Warrants is effected as herein provided, the Company
shall promptly notify the Holder, by first class mail, postage prepaid, of such
adjustment and shall deliver to the Holder a certificate of the Chief Financial
Officer of the Company, setting forth in reasonable detail (i) the number of
Warrant Shares purchasable upon the exercise of the Warrants and the Exercise
Price of the Warrants after such adjustment, (ii) a brief statement of the facts
requiring such adjustment and (iii) the computation by which such adjustment was
made.
(b) If any adjustment is required to be made pursuant to
Section 6.1(b) (unless the PROVISO to the first sentence of that Section is
applicable to the action), the Company and the holders of at least a majority of
the Warrants issued to the Warrantholders that are then outstanding shall
negotiate in good faith toward agreeing upon the value of the assets or
securities and the necessary adjustment. If no agreement can be reached within
14 days from the date of receipt by Required Purchasers of such notice, the
Company and the Required Purchasers shall appoint within 21 days from the date
of such receipt a mutually acceptable independent investment banking firm to
determine the necessary adjustment. Such firm shall make the necessary
determination which shall be binding absent actual fraud or manifest error. The
fees of such firm for making such determination and any related reimbursable
expenses shall be paid by the Company.
6.3 PRESERVATION OF PURCHASE RIGHTS UPON MERGER, CONSOLIDATION, ETC.
(a) In the event of any merger, consolidation or other acquisition or
business combination in which the Company is not the surviving corporation or in
which all of the outstanding Common Stock of the Company is converted into,
acquired or exchanged for securities, cash or property or in the event of the
sale or other disposition of all or substantially all the assets of the Company,
then, and in each such case, proper provision shall be made so that, upon the
basis and upon the terms and in the manner provided in this Section 6.3, the
holder of this Warrant Certificate, upon the exercise of any of its Warrants at
any time after the consummation of such consolidation, merger, transfer,
reorganization or reclassification, shall be entitled to receive, in lieu of
shares of Common Stock issuable upon such exercise prior to such consummation,
the stock, securities, cash and assets to which such holder would have been
entitled upon such consummation if such holder had so exercised
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such Warrant immediately prior thereto, at the aggregate Exercise Price in
effect for all shares of Common Stock issuable upon such exercise immediately
prior to such consummation as adjusted to the time of such transaction
(subject to adjustments subsequent to such corporate action as nearly
equivalent as possible to the adjustments provided for in Section 6.1 above);
provided, however, that the holder of this Warrant Certificate shall not be
required to accept as consideration any property or securities the holding of
which by such holder would be prohibited by any law, rule or regulation of
any governmental entity or insurance industry regulatory body. Such
undertaking shall provide for adjustments, which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Section 6; PROVIDED, HOWEVER, that if upon such consolidation, merger,
transfer, reorganization or reclassification, different holders of Common
Stock shall be entitled to receive different forms of consideration for their
Common Stock, the form of such consideration thereafter deliverable upon the
exercise of the Warrants shall be as determined in good faith by the Board of
Directors, whose determination shall be conclusive. The provisions of this
Section 6.3 shall also apply to successive mergers or consolidations.
(b) Upon any liquidation, dissolution or winding up of the Company,
the Holder shall receive such cash or property (less the Exercise Price) which
the Holder would have been entitled to receive upon the happening of such
liquidation, dissolution or winding up had the Warrants been exercised and the
Warrant Shares issued immediately prior to the occurrence of such liquidation,
dissolution or winding up.
6.4 STATEMENT ON THE WARRANT. Irrespective of any adjustments in the
number or kind of securities purchasable upon the exercise of the Warrant or the
Exercise Price, any Warrant Certificate theretofore or thereafter issued may
continue to express the same price and number and any kind of shares as are
stated in this Warrant Certificate.
SECTION 7. FRACTIONAL INTERESTS. The Holder shall not be required to
accept fractional securities on the exercise of Warrants. If any fraction of a
security would be issuable on the exercise of Warrants, the Holder may, at its
option, require the Company to pay to the Holder of such Warrants an amount in
cash equal to the fair market value of such fraction.
SECTION 8. REGISTRATION. The Holder shall, from time to time, have
the rights, if any, with respect to registration of Warrant Shares as are set
forth in the Registration Rights Agreement for such Warrant Shares.
SECTION 9. NO RIGHTS AS A SHAREHOLDER; NOTICES TO HOLDER. Nothing
contained in this Warrant Certificate shall be construed as conferring upon the
Holder the right to vote or to consent or to receive notice as a shareholder in
respect of any meeting of shareholders of the Company for the election of the
directors of the Company or any other matter, or any rights whatsoever as a
shareholder of the Company. If, however, at any time prior to the exercise of
the Warrants evidenced by this Warrant Certificate, any of the following events
shall occur:
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(a) the Company shall declare any dividend payable in cash or in
any securities upon its shares of Common Stock or make any distribution to
the holders of its shares of Common Stock;
(b) the Company shall offer to all holders of its shares of
Common Stock any additional shares of Common Stock or securities
convertible into or exchangeable for shares of Common Stock or any right to
subscribe for or purchase any thereof;
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation, merger, sale, transfer or
lease of all or substantially all of its property, assets and business as
an entirety) shall be proposed; or
(d) any consolidation or merger to which the Company is a party
and for which approval of the holders of Common Stock is required, or of
the conveyance or transfer of all or substantially all assets of the
Company as, or substantially as, an entirety, or of any reclassification or
change of outstanding shares of Common Stock issuable upon exercise of the
Warrant (other than a change in par value to no par value, or from no par
value to par value) or as a result of a subdivision or combination,
then in any one or more of said events, the Company shall give to the Holder the
greater of 15 business days' written notice and the number of days written
notice required to be given to shareholders with respect to such action prior to
the applicable record date hereinafter specified, stating (i) the date as of
which the holders of record of shares of Common Stock to be entitled to receive
any such dividends, rights or warrants are to be determined or (ii) the date on
which any such dissolution, liquidation, winding up, consolidation, merger,
conveyance or transfer is expected to become effective and the date as of which
it is expected that holders of record of shares of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property, if any, deliverable upon such reclassification, consolidation, merger,
conveyance, transfer, dissolution, liquidation, or winding up.
SECTION 10. IDENTITY OF TRANSFER AGENT. Forthwith upon the
appointment of any Transfer Agent for the Common Stock, or any other shares of
the Company's capital stock issuable upon the exercise of the Warrants, the
Company shall promptly notify the Holder of the name and address of such
Transfer Agent.
SECTION 11. NOTICES. Any notice, except as provided in Section 9 of
this Warrant Certificate, or demand authorized by this Warrant Certificate to be
given by the Holder to the Company, shall be in writing and shall be delivered
in person or by facsimile transmission, or mailed by overnight courier, or
otherwise delivered, to the Company, at 2250 South Tenth Street, San Jose,
California 95112, attention of Chief Executive Officer, with a copy to
J.F. Lehman Equity Investors I, L.P., 450 Park Avenue, New York, New York
11
10022, attention of Mr. Donald Glickman. The Company may change the address
to which notices to it are to be delivered or mailed hereunder by notice to
the Holder.
Any notice pursuant to this Warrant Certificate by the Company to the
Holder shall be in writing and shall be mailed by overnight courier or otherwise
delivered, to the Holder at its address set forth in the Warrant Register.
Notices delivered personally shall be effective at the time delivered
by hand, notices sent by mail shall be effective when received, notices sent by
facsimile transmission shall be effective when confirmed and notices sent by
courier guaranteeing next day delivery shall be effective on the next business
day after timely delivery to the courier.
SECTION 12. AMENDMENT AND WAIVER. Any term, covenant, agreement
or condition in this Warrant Certificate may be amended, or compliance
therewith may be waived (either generally or in a particular instance and
either retroactively or prospectively), by a written instrument or written
instruments executed by the Company and the holders of at least 66 2/3% of
the Warrants issued to the Warrantholders that are then outstanding;
PROVIDED, HOWEVER, that no such amendment or waiver shall change the number
of Warrant Shares issuable under the Warrants, change the Exercise Price,
change the period during which the Warrants may be exercised or modify any
provision of Section 6 or this Section 12 without the consent of the holders
of all such Warrants then outstanding or shall have a disparate and adverse
impact on any Warrantholder.
SECTION 13. SUCCESSORS. All the covenants and provisions of this
Warrant Certificate by or for the benefit of the Company shall bind and inure to
the benefit of its respective successors and assigns hereunder.
SECTION 14. GOVERNING LAW. This Warrant Certificate shall be
construed in accordance with and governed by the internal laws of the State of
California applicable to contracts executed and to be performed wholly within
such state, without regard to the principles of conflicts or choice of law.
SECTION 15. BENEFITS OF THIS WARRANT CERTIFICATE. Nothing in this
Warrant Certificate shall be construed to give to any person or entity other
than the Company and the Holder any legal or equitable right, remedy or claim
under this Warrant Certificate; and this Warrant Certificate shall be for the
sole and exclusive benefit of this Company and the Holder.
SECTION 16. SURVIVAL OF RIGHTS AND DUTIES. This Warrant Certificate
shall terminate and be of no further force and effect on the earlier of
5:00 P.M. (New York City time) on the Expiration Date or the date on which all
of the Warrants have been exercised.
SECTION 17. AGREEMENT TO BE BOUND. The Holder acknowledges and
hereby agrees to be bound by such terms and conditions of the Shareholders'
Agreement as
12
are by their terms applicable to the Holder. Any and all Warrant Shares
issued upon exercise hereof shall, immediately upon such issuance, and
without further action by or on behalf of the Holder or the Company, become
subject to such terms and conditions of the Shareholders' Agreement as are by
their terms applicable to such Warrant Shares.
SECTION 17. CAPTIONS. The captions of the Sections and paragraphs of
this Warrant Certificate have been inserted for convenience only and shall have
no substantive effect.
13
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed this 20th day of August 1997.
BURKE INDUSTRIES, INC.
By: /s/ Rocco C. Genovese
_________________________________
Rocco C. Genovese, President
14
FORM OF ELECTION TO PURCHASE
(To Be Executed by the Holder if the Holder Desires to Exercise
Warrants Evidenced by the Foregoing Warrant Certificate)
To Burke Industries, Inc.:
The undersigned hereby irrevocably elects to exercise ____________
Warrants evidenced by the foregoing Warrant Certificate for, and to purchase
thereunder, ____________ full shares of Common Stock issuable upon exercise of
said Warrants and delivery of $_____ in cash (or in liquidation preference of
the Series A 11.5% Cumulative Redeemable Preferred Stock of the Company, or any
combination thereof) with and any applicable taxes payable by the undersigned
pursuant to such Warrant Certificate.
The undersigned requests that certificates for such shares be issued
in the name of ____________________________.
PLEASE INSERT SOCIAL SECURITY
OR TAX IDENTIFICATION NUMBER
(Please print name and address) ____________________________________
____________________________________
____________________________________
If said number of Warrants shall not be all the Warrants evidenced
by the foregoing Warrant Certificate, the undersigned requests that a new
Warrant Certificate evidencing the Warrants not so exercised be issued in the
name of and delivered to:
_______________________________________________________________________________
_______________________________________________________________________________
(Please print name and address)
By:__________________________________
Name:
Title:
Dated: __________________
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, _____________________ hereby sells, assigns and
transfers to each assignee set forth below all of the rights of the
undersigned in and to the number of Warrants (as defined in and evidenced by
the foregoing Warrant Certificate) set opposite the name of such assignee
below and in and to the foregoing Warrant Certificate with respect to said
Warrants and the shares of Common Stock issuable upon exercise of said
Warrants:
NAME OF ASSIGNEE ADDRESS NUMBER OF WARRANTS
---------------- ------- ------------------
If the total of said Warrants shall not be all the Warrants
evidenced by the foregoing Warrant Certificate, the undersigned requests that
a new Warrant Certificate evidencing the Warrants not so assigned be issued
in the name of and delivered to the undersigned.
By:__________________________
Name:
Title:
Dated: __________________
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT
BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE SUCH A REGISTRATION
IS IN EFFECT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO
AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR SUCH LAWS. THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO CERTAIN RESTRICTIONS ON
TRANSFERS SET FORTH IN A SHAREHOLDERS AGREEMENT, DATED AS OF AUGUST 20, 1997 (AS
AMENDED, MODIFIED OR SUPPLEMENTED THROUGH THE DATE HEREOF, THE "SHAREHOLDERS
AGREEMENT"), BY AND AMONG THE COMPANY AND THE SHAREHOLDERS NAMED THEREIN, A COPY
OF WHICH IS AVAILABLE FOR INSPECTION AT THE OFFICES OF THE COMPANY. NO TRANSFER
OF SUCH SECURITIES WILL BE MADE ON THE BOOKS OF THE COMPANY UNLESS ACCOMPANIED
BY EVIDENCE OF COMPLIANCE WITH THE TERMS OF SUCH AGREEMENTS.
EXERCISABLE AT ANY TIME SUBJECT TO THE PROVISIONS HEREOF
NO. 2 BURKE INDUSTRIES, INC.
WARRANT CERTIFICATE
Warrant Certificate for Warrants
to Purchase 203,939.46 Warrant Shares
This Warrant Certificate certifies that, for value received,
Massachusettes Mutual Life Insurance Company (the "Holder") is the owner of the
number of Warrants (as defined in Section 1.2(a) below) set forth above, each of
which entitles the Holder to purchase from Burke Industries, Inc., a California
corporation (the "Company") at any time from and after the date hereof and until
the Expiration Date (as defined in Section 2.1 hereof) one Warrant Share (as
defined below), at the purchase price stated in Section 2.3 hereof (the
"Exercise Price"). The number of Warrant Shares purchasable upon exercise of
the Warrants and the Exercise Price shall be subject to adjustment from time to
time as herein provided.
For purposes of this Warrant Certificate, "Warrant Shares" shall mean
shares of the Company's Common Stock, no par value (the "Common Stock");
PROVIDED, HOWEVER, that if, in accordance with Section 6.3 hereof, the
securities issuable upon exercise of the Warrants are issued by an entity other
than the Company or there is a change in the class of securities so issuable,
then the "Warrant Shares" shall mean the securities so issuable by such entity
or the securities of the class of securities so issuable.
The Warrants are subject to the following terms, conditions and
provisions:
SECTION 1. REGISTRATION; TRANSFERABILITY; EXCHANGE OF WARRANT
CERTIFICATE.
1.1 REGISTRATION. The Company shall number and register the Warrants
in a register (the "Warrant Register") maintained at the principal office of the
Company (the "Office"). The Company shall be entitled to treat the Holder of
the Warrants as the owner thereof for all purposes and shall not be bound to
recognize any equitable or other claim to or interest in such Warrants on the
part of any other person.
1.2 TRANSFER AND EXCHANGE.
(a) Subject to compliance with any restrictions on transfer set forth
in the Shareholders Agreement, dated as of August 20, 1997, by and among the
Company, Holder, MassMutual Corporate Value Partners Limited, MassMutual High
Yield Partners LLC, Paribas North America, Inc. and the other shareholders named
therein (the "Shareholders' Agreement") (Holder and Massachusetts Mutual Life
Insurance Company, MassMutual Corporate Value Partners Limited, MassMutual High
Yield Partners LLC, Paribas North America, Inc. and Jackson National Life
Insurance Company shall sometimes be collectively referred to herein as the
"Initial Warrantholders"), the warrants issued to the Initial Warrantholders
(the "Warrants") shall be transferable only on the Warrant Register upon
delivery thereof by the Holder or by his duly authorized attorney or
representative or accompanied by proper evidence of succession, assignment or
authority to transfer. Upon any such registration of transfer, a new Warrant
Certificate, in substantially the form of this Warrant Certificate, evidencing
the Warrants so transferred shall be issued to the transferee of such Warrants
and a new Warrant Certificate, in substantially the form of this Warrant
Certificate, evidencing the remaining Warrants, if any, not so transferred,
shall be issued to the Holder. In all cases of transfer by an attorney, the
original power of attorney, duly approved, or a copy thereof, duly certified,
shall be deposited and shall remain with the Company. In case of transfers by
executors, administrators, guardians or other legal representatives, duly
authenticated evidence of their authority shall be produced, and may be required
to be deposited and to remain with the Company in its discretion. No transfer of
the Warrants or any interest therein other than in compliance with this Section
1.2 shall be made or recorded in the Warrant Register, and any such purported
transfer shall be void and of no effect.
(b) This Warrant Certificate is exchangeable, in whole or in part,
upon the surrender hereof by the holder hereof at the Office for new Warrant
Certificates, in substantially the form of this Warrant Certificate, evidencing
in the aggregate the right to purchase the number of Warrant Shares that may
then be purchased hereunder, each of such new Warrant Certificates to be dated
the date of such exchange and to represent the right to purchase such number of
Warrant Shares as shall be designated by the holder of such new Warrant
Certificates at the time of such surrender.
2
SECTION 2. TERM OF WARRANTS; EXERCISE OF WARRANTS.
2.1 TERM OF WARRANT. Subject to the terms of this Warrant
Certificate, the Holder shall have the right, which may be exercised by the
registered Holder hereof from time to time on any Business Day before 5:00 P.M.
(New York City time) during the period through and including February 20, 2008
(the "Expiration Date") to purchase from the Company an aggregate of 203,939.56
fully paid and nonassessable Warrant Shares or such other number of Warrant
Shares which the Holder may at the time be entitled to purchase in accordance
with this Warrant Certificate. At 5:00 P.M. (New York City time) on the
Expiration Date, each Warrant not exercised prior thereto shall be and become
void and of no value.
2.2 EXERCISE OF WARRANTS. Subject to the terms of this Warrant
Certificate, the Warrants evidenced by this Warrant Certificate may be exercised
in whole or in part, upon surrender to the Company, at its Office, of this
Warrant Certificate, with a Purchase Form substantially in the form attached
hereto duly completed and signed, and upon payment to the Company of the
Exercise Price. Payment of the aggregate Exercise Price shall be in cash;
PROVIDED, HOWEVER, that in lieu of payment in cash, the Holder may, at its
option, pay all or a portion of the aggregate Exercise Price by tendering shares
it holds of the Series A 11.5% Cumulative Redeemable Preferred Stock of the
Company, which shares shall be valued at their stated liquidation value, plus
any accrued but unpaid dividends thereon, to the date of exercise pursuant to
this Section 2.2. Payment of the aggregate Exercise Price in cash shall be by
wire transfer in immediately available funds to an account designated in writing
by the Company to the Holder.
Upon the surrender of this Warrant Certificate, with the Purchase
Form duly executed, and payment of the Exercise Price as aforesaid, the
Company shall (subject to compliance, if necessary, with applicable
provisions of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended), promptly and, in any event within ten Business Days, issue and
deliver to or upon the written order of the Holder and in such name or names
as the Holder may designate a certificate or certificates for such number of
Warrant Shares so purchased. Such certificate or certificates shall be dated
and deemed to have been issued as of the date of the surrender of this
Warrant Certificate and payment of the Exercise Price, as aforesaid. The
right of purchase represented by this Warrant Certificate shall be
exercisable, at the election of the Holder, in full at any time or in part
from time to time. In the event the Holder shall exercise fewer than all the
Warrants evidenced hereby, a new Warrant Certificate shall be issued
evidencing the remaining unexercised Warrants.
2.3 EXERCISE PRICE. The price per share at which each Warrant Share
shall be purchased upon exercise of each Warrant (the "Exercise Price") shall be
$4.56, subject to adjustment pursuant to Section 6 LESS an amount per Warrant
equal to the dividends in respect of the Warrant Shares that the holder would
have received had such Warrant been exercised on August 20, 1997. The aggregate
Exercise Price for all Warrant Shares subject to this Warrant Certificate shall
be rounded to the next higher $0.01.
3
SECTION 3. PAYMENT OF TAXES. The Company covenants and agrees that
it will pay when due and payable all documentary, stamp and other similar taxes,
if any, which may be payable in respect of the issuance or delivery of the
Warrants or of the Warrant Shares purchasable and issuable upon the exercise of
the Warrants; PROVIDED, HOWEVER, that the Company shall not be required to pay
any such tax or other charge imposed in respect of the transfer of Warrants, or
the issuance or delivery of certificates for Warrant Shares or other Securities
in respect of the Warrant Shares upon the exercise of Warrants, to a person or
entity other than a then-existing registered Holder of Warrants.
SECTION 4. MUTILATED OR MISSING WARRANTS. In the event this Warrant
Certificate shall be mutilated, lost, stolen or destroyed, the Company shall
issue and deliver in exchange and substitution for and upon cancellation of the
mutilated Warrant Certificate, or in lieu of and in substitution for the Warrant
Certificate lost, stolen or destroyed, a new Warrant Certificate of like tenor
and representing an equivalent right or interest, but only upon, in the event of
a lost, stolen or destroyed certificate, receipt of evidence satisfactory to the
Company of such loss, theft or destruction and, if requested by the Company,
upon indemnity that also is satisfactory to it; PROVIDED that a written
undertaking of such loss, theft or destruction of this Warrant Certificate by
the registered Holder hereof shall be deemed a satisfactory indemnity of the
Company for purposes of this Section 4. In making application for such a
substitute Warrant Certificate, the Holder shall also comply with such other
reasonable requirements as the Company may prescribe.
SECTION 5. RESERVATION AND AVAILABILITY OF WARRANT SHARES; PURCHASE
AND CANCELLATION OF WARRANTS.
5.1 RESERVATION OF WARRANT SHARES.
(a) The Company shall at all times reserve and keep available free
from preemptive rights, out of the aggregate of its authorized but unissued
shares of Common Stock, for the purpose of enabling it to satisfy any
obligations to issue the Warrant Shares upon exercise of the Warrants, the full
number of Warrant Shares deliverable upon the exercise of all the Warrants
evidenced by this Warrant Certificate. The Company or, if appointed, the
transfer agent for the Common Stock and every subsequent transfer agent for any
shares of the Company's capital stock issuable upon the exercise of any of the
rights of purchase aforesaid (each, a "Transfer Agent") shall be irrevocably
authorized and directed at all times to reserve such number of authorized shares
of Common Stock as shall be required for such purpose. The Company will keep a
copy of this Warrant Certificate on file with each Transfer Agent. The Company
will furnish such Transfer Agent a copy of all notices of adjustments and
certificates related thereto which are transmitted to the Holder pursuant to
Section 6 hereof.
(b) The Company covenants that all Warrant Shares issuable upon
exercise of the Warrants will, upon issuance, be fully paid, nonassessable and
free from preemptive rights and free from all taxes, liens, charges and security
interests with respect to the issuance thereof.
4
(c) Before taking any action which would cause an adjustment pursuant
to Section 6, the Company will take any and all corporate action which may, in
the opinion of its counsel, be necessary in order that the Company may validly
and legally issue fully paid and nonassessable Warrant Shares at the Exercise
Price as so adjusted.
5.2 WARRANT SHARES RECORD DATE. Each person in whose name any stock
certificate for Warrant Shares is issued shall for all purposes be deemed to
have become the holder of record of the Warrant Shares represented thereby, and
such stock certificate shall be dated the date upon which this Warrant
Certificate was duly surrendered and payment of the Exercise Price (and any
applicable transfer taxes) was made.
5.3 CANCELLATION OF WARRANT. Upon surrender of the Warrant
Certificate for exchange, substitution, transfer or exercise, it shall be
cancelled by the Company and retired.
SECTION 6. ADJUSTMENT OF NUMBER OF WARRANT SHARES AND EXERCISE PRICE.
The number of securities purchasable upon the exercise of each Warrant and the
Exercise Price shall be subject to adjustment from time to time upon the
happening of certain events as hereinafter described.
6.1 MANDATORY ADJUSTMENTS. The number of securities purchasable upon
the exercise of the Warrants and the Exercise Price shall be subject to
adjustment as follows:
(a) In case the Company shall (i) declare or pay a dividend on
any of its outstanding Common Stock in shares of Common Stock or make a
distribution to holders of its outstanding Common Stock in shares of Common
Stock, (ii) subdivide any of its outstanding Common Stock into a greater
number of shares of Common Stock, (iii) combine any of its outstanding
Common Stock into a smaller number of shares of Common Stock or (iv) issue
by reclassification of any of its shares of Common Stock other securities
of the Company (including any such reclassification in connection with a
consolidation, merger or other business combination in which the Company is
the surviving corporation), the number and kind of Warrant Shares
purchasable and issuable upon exercise of the Warrants shall be adjusted so
that the Holder, upon exercise thereof, shall be entitled to receive the
number and kind of Warrant Shares and other securities of the Company that
the Holder would have owned or have been entitled to receive after the
happening of any of the events described above had the Warrants been
exercised and the relevant Warrant Shares issued in the name of the Holder
immediately prior to the happening of such event or, if applicable, any
record date with respect thereto. An adjustment made pursuant to this
paragraph (a) shall become effective on the date of the dividend payment,
subdivision, combination or issuance retroactive to the record date with
respect thereto, if any, for such event. Upon adjustment of the number of
Warrant Shares as provided in this paragraph (a), the Exercise Price
payable upon exercise of each Warrant shall be adjusted by multiplying such
Exercise Price immediately prior to such adjustment by a fraction of which
the numerator shall be the number of Warrant Shares purchasable upon the
exercise of each Warrant immediately prior to such
5
adjustment and of which the denominator shall be the number of Warrant
Shares purchasable immediately thereafter.
(b) In case the Company shall distribute to all holders of its
outstanding Common Stock evidences of indebtedness of the Company, cash
(including cash dividends payable out of consolidated earnings or earned
surplus) or assets or securities other than its Common Stock (including
stock of a subsidiary or securities convertible into or exercisable for
such stock but excluding dividends or distributions referred to in Sections
6.1(a) above or Section 6.1(c) below) (any such evidences of indebtedness,
cash, assets or securities, the "assets or securities"), then, in each
case, the Exercise Price shall be adjusted by subtracting from the Exercise
Price then in effect the value per share (as determined in accordance with
Section 6.2(b)) of the assets or securities that the Holder would have been
entitled to receive as a result of such distribution had the Warrant been
exercised and the relevant Warrant Shares issued in the name of the Holder
immediately prior to the record date for such distribution; PROVIDED that
if, after giving effect to such adjustment, the Exercise Price would be
less than $0.01 per share, the Company shall distribute such assets or
securities to the Holder as if the Holder had exercised the Warrants and
the Warrant Shares had been issued in the name of the Holder immediately
prior to the record date for such distribution. Any adjustment required by
this Section 6.1(b) shall be made whenever any such distribution is made,
and shall become effective on the date of distribution retroactive to the
record date for the determination of shareholders entitled to receive such
distribution.
(c) If at any time after the date hereof the Company shall issue
or sell any shares of Common Stock or any warrants, options or rights to
subscribe for or purchase Common Stock or securities convertible into
Common Stock (but excluding distributions referred to in paragraph (a) or
(b) above or (d) below), and the consideration per share for, or the price
per share at which such warrant, option or right is exercisable for or
convertible into, such Common Stock is less than the Fair Market Value (as
defined below) of the Common Stock immediately prior to such issuance or
sale, then, forthwith upon such issuance or sale, the Exercise Price shall
be reduced to the price determined by multiplying the Exercise Price in
effect immediately prior to the time of such issuance or sale by a fraction
the numerator of which shall be the sum of (i) the number of shares of
Common Stock outstanding immediately prior to such issuance or sale
MULTIPLIED BY the Fair Market Value immediately prior to such issuance or
sale and (ii) the consideration received by the Company upon such issuance
or sale, and the denominator of which shall be the total number of shares
of Common Stock outstanding immediately after such issuance or sale
MULTIPLIED BY the Fair Market Value immediately prior to such issuance or
sale.
Notwithstanding the foregoing, the Company may, without
adjustment to the Exercise Price pursuant to this Section 6.1(c), issue
options, warrants or rights to subscribe for shares of its Common Stock to
officers, directors, employees,
6
consultants or agents of the Company pursuant to the terms of any stock
option plan or arrangement approved by the Board of Directors, and may
issue shares of its Common Stock upon the exercise of any such stock
options, warrants or rights; PROVIDED, HOWEVER, that the aggregate
number of shares of Common Stock that may be issued at any one time
under such stock option plan or arrangement without adjustment to the
Exercise Price under this Section 6.1(c) shall not exceed, in the
aggregate 482,000 shares (appropiately adjusted for stock splits,
dividends and/or combinations.
As used herein, "Fair Market Value" of the Common Stock or
other securities means, on any date, the average of the last sale price,
regular way, for the 10-business day period immediately preceding such
date, or if no such sales took place during such 10-business day period,
the average of the closing bid and asked prices, regular way, for each
day in such 10-business day period, in either case as reported on the
principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which
the shares of Common Stock or such other securities are listed, or, if
the Common Stock or such other securities are not listed or admitted to
trading on any national securities exchange, the average of the last
quoted sale price for such 10-business day period or, if not so quoted,
the average of the high bid and low asked prices for each day in such
10-business day period in the over-the-counter market, as reported by
the National Association of Securities Dealers, Inc. Automated Quotation
System or such other system then in use, or, if on any such date the
Common Stock is not quoted by any such organization, the average of the
closing bid and asked prices during such 10-business day period as
furnished by a professional market maker making a market in the Common
Stock or such other securities selected by the Board of Directors of the
Company. If the shares of Common Stock or such other securities are not
publicly held or so listed or publicly traded, "Fair Market Value" shall
mean the fair market value per share of Common Stock or such other
securities as determined by the Company and the holders of at least a
majority of the Warrants issued to the Warrantholders that are then
outstanding. negotiating in good faith toward agreeing upon such value.
If no agreement can be reached within 14 days from the date of receipt
by Required Purchasers of the notice required by Section 6.2(a), the
Company and the Required Purchasers shall appoint within 21 days from
the date of such receipt a mutually acceptable independent investment
banking firm to determine the Fair Market Value. Such firm shall make
the necessary determination which shall be binding absent actual fraud
or manifest error. The fees of such firm for making such determination
and any related reimbursable expenses shall be paid by the Company.
(d) If at any time after the date hereof the Company shall issue
or sell to any person any securities convertible into or exercisable for
Common Stock ("Convertible Securities") (other than securities distributed
in a transaction described in paragraph (b) or (c) above), whether or not
the rights to exchange or convert thereunder are immediately exercisable,
and the price per share for which Common
7
Stock is issuable upon such conversion or exchange shall be less than the
Fair Market Value in effect immediately prior to the time of such issue
or sale, then the Exercise Price shall be adjusted as provided in
subparagraph (c) above on the basis that (i) the maximum number of
shares of Common Stock necessary to effect the conversion or exchange of
all such Convertible Securities shall be deemed to have been issued and
outstanding, (ii) the price per share of such shares shall be deemed to
be the lowest possible price in any range of prices at which such
additional shares are available to such holders, and (iii) the Company
shall be deemed to have received all of the consideration payable
therefor, if any, as of the date of actual issuance of such Convertible
Securities. No adjustment of the Exercise Price shall be made under
this subparagraph (d) upon the issuance of any Convertible Securities
which are issued pursuant to the exercise of any warrants or other
subscription or purchase rights therefor, if any such adjustment shall
previously have been made upon the issuance of such warrants or other
rights pursuant to subparagraph (c) above. No further adjustments of
the Exercise Price shall be made upon the actual issuance of such Common
Stock upon conversion or exchange of such Convertible Securities and, if
any issue or sale of such Convertible Securities is made upon exercise
of any warrant or other right to subscribe for or to purchase any such
Convertible Securities for which adjustments of the Exercise Price have
been or are to be made pursuant to other provisions of this Section 6.1,
no further adjustments of the Exercise Price shall be made by reason of
such issue or sale. For the purposes of this subparagraph (d), the date
as of which the Exercise Price shall be computed shall be the earlier of
(i) the date on which the Company shall enter into a firm contract for
the issuance of such Convertible Securities and (ii) the date of actual
issuance of such Convertible Securities. Such adjustments shall be made
upon each issuance of Convertible Securities and shall become effective
immediately after such issuance.
(e) No adjustment in the number of Warrant Shares purchasable
hereunder shall be required unless such adjustment would require an
increase or decrease of at least one quarter of one percent (0.25%) in the
number of Warrant Shares purchasable upon the exercise of each Warrant;
PROVIDED, HOWEVER, that any adjustments which by reason of this
Section 6.1(e) are not required to be made shall be made immediately prior
to any exercise of any Warrants or, if no such exercise occurs prior to the
time that any subsequent adjustment would be made, carried forward and
taken into account in such subsequent adjustment. All calculations shall
be made to the nearest one-thousandth of a share. No adjustment need be
made for a change in the par value of the Warrant Shares.
(f) Upon each adjustment of the Exercise Price pursuant to
paragraphs (b) through (d) of this Section 6.1, this Warrant Certificate
shall be deemed to evidence the right to purchase, at the adjusted Exercise
Price, that number of Warrant Shares obtained by multiplying the number of
Warrant Shares covered by this Warrant Certificate immediately prior to
such adjustment by the Exercise Price in
8
effect prior to such adjustment and dividing the product so obtained by
the Exercise Price in effect after such adjustment.
(g) The number of shares of Common Stock outstanding at any
given time shall not include shares directly or indirectly owned or held by
or for the account of the Company or any of its subsidiaries, and the
disposition of any such shares shall be considered an issue or sale of
Common Stock for the purposes of this Section 6.1.
6.2 NOTICE OF ADJUSTMENT.
(a) The Company hereby agrees that whenever any adjustment of the
number of Warrant Shares purchasable upon the exercise of the Warrants or the
Exercise Price of such Warrants is effected as herein provided, the Company
shall promptly notify the Holder, by first class mail, postage prepaid, of such
adjustment and shall deliver to the Holder a certificate of the Chief Financial
Officer of the Company, setting forth in reasonable detail (i) the number of
Warrant Shares purchasable upon the exercise of the Warrants and the Exercise
Price of the Warrants after such adjustment, (ii) a brief statement of the facts
requiring such adjustment and (iii) the computation by which such adjustment was
made.
(b) If any adjustment is required to be made pursuant to
Section 6.1(b) (unless the PROVISO to the first sentence of that Section is
applicable to the action), the Company and the holders of at least a majority of
the Warrants issued to the Warrantholders that are then outstanding shall
negotiate in good faith toward agreeing upon the value of the assets or
securities and the necessary adjustment. If no agreement can be reached within
14 days from the date of receipt by Required Purchasers of such notice, the
Company and the Required Purchasers shall appoint within 21 days from the date
of such receipt a mutually acceptable independent investment banking firm to
determine the necessary adjustment. Such firm shall make the necessary
determination which shall be binding absent actual fraud or manifest error. The
fees of such firm for making such determination and any related reimbursable
expenses shall be paid by the Company.
6.3 PRESERVATION OF PURCHASE RIGHTS UPON MERGER, CONSOLIDATION, ETC.
(a) In the event of any merger, consolidation or other acquisition or
business combination in which the Company is not the surviving corporation or in
which all of the outstanding Common Stock of the Company is converted into,
acquired or exchanged for securities, cash or property or in the event of the
sale or other disposition of all or substantially all the assets of the Company,
then, and in each such case, proper provision shall be made so that, upon the
basis and upon the terms and in the manner provided in this Section 6.3, the
holder of this Warrant Certificate, upon the exercise of any of its Warrants at
any time after the consummation of such consolidation, merger, transfer,
reorganization or reclassification, shall be entitled to receive, in lieu of
shares of Common Stock issuable upon such exercise prior to such consummation,
the stock, securities, cash and assets to which such holder would have been
entitled upon such consummation if such holder had so exercised
9
such Warrant immediately prior thereto, at the aggregate Exercise Price in
effect for all shares of Common Stock issuable upon such exercise immediately
prior to such consummation as adjusted to the time of such transaction
(subject to adjustments subsequent to such corporate action as nearly
equivalent as possible to the adjustments provided for in Section 6.1 above);
provided, however, that the holder of this Warrant Certificate shall not be
required to accept as consideration any property or securities the holding of
which by such holder would be prohibited by any law, rule or regulation of
any governmental entity or insurance industry regulatory body. Such
undertaking shall provide for adjustments, which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Section 6; PROVIDED, HOWEVER, that if upon such consolidation, merger,
transfer, reorganization or reclassification, different holders of Common
Stock shall be entitled to receive different forms of consideration for their
Common Stock, the form of such consideration thereafter deliverable upon the
exercise of the Warrants shall be as determined in good faith by the Board of
Directors, whose determination shall be conclusive. The provisions of this
Section 6.3 shall also apply to successive mergers or consolidations.
(b) Upon any liquidation, dissolution or winding up of the
Company, the Holder shall receive such cash or property (less the Exercise
Price) which the Holder would have been entitled to receive upon the
happening of such liquidation, dissolution or winding up had the Warrants
been exercised and the Warrant Shares issued immediately prior to the
occurrence of such liquidation, dissolution or winding up.
6.4 STATEMENT ON THE WARRANT. Irrespective of any adjustments in
the number or kind of securities purchasable upon the exercise of the Warrant
or the Exercise Price, any Warrant Certificate theretofore or thereafter
issued may continue to express the same price and number and any kind of
shares as are stated in this Warrant Certificate.
SECTION 7. FRACTIONAL INTERESTS. The Holder shall not be required
to accept fractional securities on the exercise of Warrants. If any fraction
of a security would be issuable on the exercise of Warrants, the Holder may,
at its option, require the Company to pay to the Holder of such Warrants an
amount in cash equal to the fair market value of such fraction.
SECTION 8. REGISTRATION. The Holder shall, from time to time,
have the rights, if any, with respect to registration of Warrant Shares as
are set forth in the Registration Rights Agreement for such Warrant Shares.
SECTION 9. NO RIGHTS AS A SHAREHOLDER; NOTICES TO HOLDER. Nothing
contained in this Warrant Certificate shall be construed as conferring upon
the Holder the right to vote or to consent or to receive notice as a
shareholder in respect of any meeting of shareholders of the Company for the
election of the directors of the Company or any other matter, or any rights
whatsoever as a shareholder of the Company. If, however, at any time prior to
the exercise of the Warrants evidenced by this Warrant Certificate, any of
the following events shall occur:
10
(a) the Company shall declare any dividend payable in cash or in
any securities upon its shares of Common Stock or make any distribution to
the holders of its shares of Common Stock;
(b) the Company shall offer to all holders of its shares of
Common Stock any additional shares of Common Stock or securities
convertible into or exchangeable for shares of Common Stock or any right to
subscribe for or purchase any thereof;
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation, merger, sale, transfer or
lease of all or substantially all of its property, assets and business as
an entirety) shall be proposed; or
(d) any consolidation or merger to which the Company is a party
and for which approval of the holders of Common Stock is required, or of
the conveyance or transfer of all or substantially all assets of the
Company as, or substantially as, an entirety, or of any reclassification or
change of outstanding shares of Common Stock issuable upon exercise of the
Warrant (other than a change in par value to no par value, or from no par
value to par value) or as a result of a subdivision or combination,
then in any one or more of said events, the Company shall give to the Holder
the greater of 15 business days' written notice and the number of days
written notice required to be given to shareholders with respect to such
action prior to the applicable record date hereinafter specified, stating (i)
the date as of which the holders of record of shares of Common Stock to be
entitled to receive any such dividends, rights or warrants are to be
determined or (ii) the date on which any such dissolution, liquidation,
winding up, consolidation, merger, conveyance or transfer is expected to
become effective and the date as of which it is expected that holders of
record of shares of Common Stock shall be entitled to exchange their shares
of Common Stock for securities or other property, if any, deliverable upon
such reclassification, consolidation, merger, conveyance, transfer,
dissolution, liquidation, or winding up.
SECTION 10. IDENTITY OF TRANSFER AGENT. Forthwith upon the
appointment of any Transfer Agent for the Common Stock, or any other shares
of the Company's capital stock issuable upon the exercise of the Warrants,
the Company shall promptly notify the Holder of the name and address of such
Transfer Agent.
SECTION 11. NOTICES. Any notice, except as provided in Section 9
of this Warrant Certificate, or demand authorized by this Warrant Certificate
to be given by the Holder to the Company, shall be in writing and shall be
delivered in person or by facsimile transmission, or mailed by overnight
courier, or otherwise delivered, to the Company, at 2250 South Tenth Street,
San Jose, California 95112, attention of Chief Executive Officer, with a copy
to J.F. Lehman Equity Investors I, L.P., 450 Park Avenue, New York, New York
11
10022, attention of Mr. Donald Glickman. The Company may change the address
to which notices to it are to be delivered or mailed hereunder by notice to
the Holder.
Any notice pursuant to this Warrant Certificate by the Company to the
Holder shall be in writing and shall be mailed by overnight courier or otherwise
delivered, to the Holder at its address set forth in the Warrant Register.
Notices delivered personally shall be effective at the time
delivered by hand, notices sent by mail shall be effective when received,
notices sent by facsimile transmission shall be effective when confirmed and
notices sent by courier guaranteeing next day delivery shall be effective on
the next business day after timely delivery to the courier.
SECTION 12. AMENDMENT AND WAIVER. Any term, covenant, agreement
or condition in this Warrant Certificate may be amended, or compliance
therewith may be waived (either generally or in a particular instance and
either retroactively or prospectively), by a written instrument or written
instruments executed by the Company and the holders of at least 66 2/3% of the
Warrants issued to the Warrantholders that are then outstanding; PROVIDED,
HOWEVER, that no such amendment or waiver shall change the number of Warrant
Shares issuable under the Warrants, change the Exercise Price, change the
period during which the Warrants may be exercised or modify any provision of
Section 6 or this Section 12 without the consent of the holders of all such
Warrants then outstanding or shall have a disparate and adverse impact on any
Warrantholder.
SECTION 13. SUCCESSORS. All the covenants and provisions of this
Warrant Certificate by or for the benefit of the Company shall bind and inure
to the benefit of its respective successors and assigns hereunder.
SECTION 14. GOVERNING LAW. This Warrant Certificate shall be
construed in accordance with and governed by the internal laws of the State
of California applicable to contracts executed and to be performed wholly
within such state, without regard to the principles of conflicts or choice of
law.
SECTION 15. BENEFITS OF THIS WARRANT CERTIFICATE. Nothing in this
Warrant Certificate shall be construed to give to any person or entity other
than the Company and the Holder any legal or equitable right, remedy or claim
under this Warrant Certificate; and this Warrant Certificate shall be for the
sole and exclusive benefit of this Company and the Holder.
SECTION 16. SURVIVAL OF RIGHTS AND DUTIES. This Warrant
Certificate shall terminate and be of no further force and effect on the
earlier of 5:00 P.M. (New York City time) on the Expiration Date or the date
on which all of the Warrants have been exercised.
SECTION 17. AGREEMENT TO BE BOUND. The Holder acknowledges and
hereby agrees to be bound by such terms and conditions of the Shareholders'
Agreement as
12
are by their terms applicable to the Holder. Any and all Warrant Shares
issued upon exercise hereof shall, immediately upon such issuance, and
without further action by or on behalf of the Holder or the Company, become
subject to such terms and conditions of the Shareholders' Agreement as are by
their terms applicable to such Warrant Shares.
SECTION 17. CAPTIONS. The captions of the Sections and paragraphs of
this Warrant Certificate have been inserted for convenience only and shall have
no substantive effect.
13
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed this 20th day of August 1997.
BURKE INDUSTRIES, INC.
By: /s/ ROCCO C. GENOVESE
--------------------------
Rocco C. Genovese, President
14
FORM OF ELECTION TO PURCHASE
(To Be Executed by the Holder if the Holder Desires to Exercise
Warrants Evidenced by the Foregoing Warrant Certificate)
To Burke Industries, Inc.:
The undersigned hereby irrevocably elects to exercise ____________
Warrants evidenced by the foregoing Warrant Certificate for, and to purchase
thereunder, ____________ full shares of Common Stock issuable upon exercise of
said Warrants and delivery of $_____ in cash (or in liquidation preference of
the Series A 11.5% Cumulative Redeemable Preferred Stock of the Company, or any
combination thereof) with and any applicable taxes payable by the undersigned
pursuant to such Warrant Certificate.
The undersigned requests that certificates for such shares be issued
in the name of ____________________________.
PLEASE INSERT SOCIAL SECURITY
OR TAX IDENTIFICATION NUMBER
(Please print name and address) ____________________________________
____________________________________
____________________________________
If said number of Warrants shall not be all the Warrants evidenced by
the foregoing Warrant Certificate, the undersigned requests that a new Warrant
Certificate evidencing the Warrants not so exercised be issued in the name of
and delivered to:
________________________________________________________________________
________________________________________________________________________
(Please print name and address)
By:______________________________
Name:
Title:
Dated: __________________
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, hereby sells, assigns and
transfers to each assignee set forth below all of the rights of the undersigned
in and to the number of Warrants (as defined in and evidenced by the foregoing
Warrant Certificate) set opposite the name of such assignee below and in and to
the foregoing Warrant Certificate with respect to said Warrants and the shares
of Common Stock issuable upon exercise of said Warrants:
NAME OF ASSIGNEE ADDRESS NUMBER OF WARRANTS
---------------- ----------------------------- ------------------
If the total of said Warrants shall not be all the Warrants evidenced
by the foregoing Warrant Certificate, the undersigned requests that a new
Warrant Certificate evidencing the Warrants not so assigned be issued in the
name of and delivered to the undersigned.
By:
--------------------------
Name:
Title:
Dated: __________________
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY
NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE SUCH A
REGISTRATION IS IN EFFECT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS
OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR SUCH LAWS.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFERS SET FORTH IN A SHAREHOLDERS AGREEMENT, DATED AS OF
AUGUST 20, 1997 (AS AMENDED, MODIFIED OR SUPPLEMENTED THROUGH THE DATE
HEREOF, THE "SHAREHOLDERS AGREEMENT"), BY AND AMONG THE COMPANY AND THE
SHAREHOLDERS NAMED THEREIN, A COPY OF WHICH IS AVAILABLE FOR INSPECTION AT
THE OFFICES OF THE COMPANY. NO TRANSFER OF SUCH SECURITIES WILL BE MADE ON
THE BOOKS OF THE COMPANY UNLESS ACCOMPANIED BY EVIDENCE OF COMPLIANCE WITH
THE TERMS OF SUCH AGREEMENTS.
EXERCISABLE AT ANY TIME SUBJECT TO THE PROVISIONS HEREOF
NO. 3 BURKE INDUSTRIES, INC.
WARRANT CERTIFICATE
Warrant Certificate for Warrants
to Purchase 122,535.11 Warrant Shares
This Warrant Certificate certifies that, for value received,
Gerlach & Co. (the "Holder") is the owner of the number of Warrants (as
defined in Section 1.2(a) below) set forth above, each of which entitles the
Holder to purchase from Burke Industries, Inc., a California corporation (the
"Company") at any time from and after the date hereof and until the
Expiration Date (as defined in Section 2.1 hereof) one Warrant Share (as
defined below), at the purchase price stated in Section 2.3 hereof (the
"Exercise Price"). The number of Warrant Shares purchasable upon exercise of
the Warrants and the Exercise Price shall be subject to adjustment from time
to time as herein provided.
For purposes of this Warrant Certificate, "Warrant Shares" shall
mean shares of the Company's Common Stock, no par value (the "Common Stock");
PROVIDED, HOWEVER, that if, in accordance with Section 6.3 hereof, the
securities issuable upon exercise of the Warrants are issued by an entity
other than the Company or there is a change in the class of securities so
issuable, then the "Warrant Shares" shall mean the securities so issuable by
such entity or the securities of the class of securities so issuable.
The Warrants are subject to the following terms, conditions and
provisions:
SECTION 1. REGISTRATION; TRANSFERABILITY; EXCHANGE OF WARRANT
CERTIFICATE.
1.1 REGISTRATION. The Company shall number and register the Warrants
in a register (the "Warrant Register") maintained at the principal office of the
Company (the "Office"). The Company shall be entitled to treat the Holder of
the Warrants as the owner thereof for all purposes and shall not be bound to
recognize any equitable or other claim to or interest in such Warrants on the
part of any other person.
1.2 TRANSFER AND EXCHANGE.
(a) Subject to compliance with any restrictions on transfer set
forth in the Shareholders Agreement, dated as of August 20, 1997, by and
among the Company, Holder, Massachusetts Mutual Life Insurance Company,
MassMutual Corporate Value Partners Limited, Jackson National Life Insurance
Company, Paribas North America, Inc. and the other shareholders named
therein (the "Shareholders' Agreement") (Holder and Massachusetts Mutual Life
Insurance Company, MassMutual Corporate Value Partners Limited, MassMutual
High Yield Partners LLC and Paribas North America, Inc. shall sometimes be
collectively referred to herein as the "Initial Warrantholders"), the
warrants issued to the Initial Warrantholders (the "Warrants") shall be
transferable only on the Warrant Register upon delivery thereof by the Holder
or by his duly authorized attorney or representative or accompanied by proper
evidence of succession, assignment or authority to transfer. Upon any such
registration of transfer, a new Warrant Certificate, in substantially the
form of this Warrant Certificate, evidencing the Warrants so transferred
shall be issued to the transferee of such Warrants and a new Warrant
Certificate, in substantially the form of this Warrant Certificate,
evidencing the remaining Warrants, if any, not so transferred, shall be
issued to the Holder. In all cases of transfer by an attorney, the original
power of attorney, duly approved, or a copy thereof, duly certified, shall be
deposited and shall remain with the Company. In case of transfers by
executors, administrators, guardians or other legal representatives, duly
authenticated evidence of their authority shall be produced, and may be
required to be deposited and to remain with the Company in its discretion. No
transfer of the Warrants or any interest therein other than in compliance
with this Section 1.2 shall be made or recorded in the Warrant Register, and
any such purported transfer shall be void and of no effect.
(b) This Warrant Certificate is exchangeable, in whole or in part,
upon the surrender hereof by the holder hereof at the Office for new Warrant
Certificates, in substantially the form of this Warrant Certificate,
evidencing in the aggregate the right to purchase the number of Warrant
Shares that may then be purchased hereunder, each of such new Warrant
Certificates to be dated the date of such exchange and to represent the right
to purchase such number of Warrant Shares as shall be designated by the
holder of such new Warrant Certificates at the time of such surrender.
2
SECTION 2. TERM OF WARRANTS; EXERCISE OF WARRANTS.
2.1 TERM OF WARRANT. Subject to the terms of this Warrant
Certificate, the Holder shall have the right, which may be exercised by the
registered Holder hereof from time to time on any Business Day before 5:00
P.M. (New York City time) during the period through and including February
20, 2008 (the "Expiration Date") to purchase from the Company an aggregate of
122,535.11 fully paid and nonassessable Warrant Shares or such other number
of Warrant Shares which the Holder may at the time be entitled to purchase in
accordance with this Warrant Certificate. At 5:00 P.M. (New York City time)
on the Expiration Date, each Warrant not exercised prior thereto shall be and
become void and of no value.
2.2 EXERCISE OF WARRANTS. Subject to the terms of this Warrant
Certificate, the Warrants evidenced by this Warrant Certificate may be
exercised in whole or in part, upon surrender to the Company, at its Office,
of this Warrant Certificate, with a Purchase Form substantially in the form
attached hereto duly completed and signed, and upon payment to the Company of
the Exercise Price. Payment of the aggregate Exercise Price shall be in
cash; PROVIDED, HOWEVER, that in lieu of payment in cash, the Holder may, at
its option, pay all or a portion of the aggregate Exercise Price by tendering
shares it holds of the Series A 11.5% Cumulative Redeemable Preferred Stock
of the Company, which shares shall be valued at their stated liquidation
value, plus any accrued but unpaid dividends thereon, to the date of exercise
pursuant to this Section 2.2. Payment of the aggregate Exercise Price in
cash shall be by wire transfer in immediately available funds to an account
designated in writing by the Company to the Holder.
Upon the surrender of this Warrant Certificate, with the Purchase
Form duly executed, and payment of the Exercise Price as aforesaid, the
Company shall (subject to compliance, if necessary, with applicable
provisions of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended), promptly and, in any event within ten Business Days, issue and
deliver to or upon the written order of the Holder and in such name or names
as the Holder may designate a certificate or certificates for such number of
Warrant Shares so purchased. Such certificate or certificates shall be dated
and deemed to have been issued as of the date of the surrender of this
Warrant Certificate and payment of the Exercise Price, as aforesaid. The
right of purchase represented by this Warrant Certificate shall be
exercisable, at the election of the Holder, in full at any time or in part
from time to time. In the event the Holder shall exercise fewer than all the
Warrants evidenced hereby, a new Warrant Certificate shall be issued
evidencing the remaining unexercised Warrants.
2.3 EXERCISE PRICE. The price per share at which each Warrant
Share shall be purchased upon exercise of each Warrant (the "Exercise Price")
shall be $4.56, subject to adjustment pursuant to Section 6 LESS an amount
per Warrant equal to the dividends in respect of the Warrant Shares that the
holder would have received had such Warrant been exercised on August 20,
1997. The aggregate Exercise Price for all Warrant Shares subject to this
Warrant Certificate shall be rounded to the next higher $0.01.
3
SECTION 3. PAYMENT OF TAXES. The Company covenants and agrees
that it will pay when due and payable all documentary, stamp and other
similar taxes, if any, which may be payable in respect of the issuance or
delivery of the Warrants or of the Warrant Shares purchasable and issuable
upon the exercise of the Warrants; PROVIDED, HOWEVER, that the Company shall
not be required to pay any such tax or other charge imposed in respect of the
transfer of Warrants, or the issuance or delivery of certificates for Warrant
Shares or other Securities in respect of the Warrant Shares upon the exercise
of Warrants, to a person or entity other than a then-existing registered
Holder of Warrants.
SECTION 4. MUTILATED OR MISSING WARRANTS. In the event this
Warrant Certificate shall be mutilated, lost, stolen or destroyed, the
Company shall issue and deliver in exchange and substitution for and upon
cancellation of the mutilated Warrant Certificate, or in lieu of and in
substitution for the Warrant Certificate lost, stolen or destroyed, a new
Warrant Certificate of like tenor and representing an equivalent right or
interest, but only upon, in the event of a lost, stolen or destroyed
certificate, receipt of evidence satisfactory to the Company of such loss,
theft or destruction and, if requested by the Company, upon indemnity that
also is satisfactory to it; PROVIDED that a written undertaking of such loss,
theft or destruction of this Warrant Certificate by the registered Holder
hereof shall be deemed a satisfactory indemnity of the Company for purposes
of this Section 4. In making application for such a substitute Warrant
Certificate, the Holder shall also comply with such other reasonable
requirements as the Company may prescribe.
SECTION 5. RESERVATION AND AVAILABILITY OF WARRANT SHARES; PURCHASE
AND CANCELLATION OF WARRANTS.
5.1 RESERVATION OF WARRANT SHARES.
(a) The Company shall at all times reserve and keep available free
from preemptive rights, out of the aggregate of its authorized but unissued
shares of Common Stock, for the purpose of enabling it to satisfy any
obligations to issue the Warrant Shares upon exercise of the Warrants, the
full number of Warrant Shares deliverable upon the exercise of all the
Warrants evidenced by this Warrant Certificate. The Company or, if
appointed, the transfer agent for the Common Stock and every subsequent
transfer agent for any shares of the Company's capital stock issuable upon
the exercise of any of the rights of purchase aforesaid (each, a "Transfer
Agent") shall be irrevocably authorized and directed at all times to reserve
such number of authorized shares of Common Stock as shall be required for
such purpose. The Company will keep a copy of this Warrant Certificate on
file with each Transfer Agent. The Company will furnish such Transfer Agent
a copy of all notices of adjustments and certificates related thereto which
are transmitted to the Holder pursuant to Section 6 hereof.
(b) The Company covenants that all Warrant Shares issuable upon
exercise of the Warrants will, upon issuance, be fully paid, nonassessable
and free from preemptive rights and free from all taxes, liens, charges and
security interests with respect to the issuance thereof.
4
(c) Before taking any action which would cause an adjustment
pursuant to Section 6, the Company will take any and all corporate action
which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue fully paid and nonassessable Warrant
Shares at the Exercise Price as so adjusted.
5.2 WARRANT SHARES RECORD DATE. Each person in whose name any
stock certificate for Warrant Shares is issued shall for all purposes be
deemed to have become the holder of record of the Warrant Shares represented
thereby, and such stock certificate shall be dated the date upon which this
Warrant Certificate was duly surrendered and payment of the Exercise Price
(and any applicable transfer taxes) was made.
5.3 CANCELLATION OF WARRANT. Upon surrender of the Warrant
Certificate for exchange, substitution, transfer or exercise, it shall be
cancelled by the Company and retired.
SECTION 6. ADJUSTMENT OF NUMBER OF WARRANT SHARES AND EXERCISE
PRICE. The number of securities purchasable upon the exercise of each Warrant
and the Exercise Price shall be subject to adjustment from time to time upon
the happening of certain events as hereinafter described.
6.1 MANDATORY ADJUSTMENTS. The number of securities purchasable
upon the exercise of the Warrants and the Exercise Price shall be subject to
adjustment as follows:
(a) In case the Company shall (i) declare or pay a dividend on
any of its outstanding Common Stock in shares of Common Stock or make a
distribution to holders of its outstanding Common Stock in shares of Common
Stock, (ii) subdivide any of its outstanding Common Stock into a greater
number of shares of Common Stock, (iii) combine any of its outstanding
Common Stock into a smaller number of shares of Common Stock or (iv) issue
by reclassification of any of its shares of Common Stock other securities
of the Company (including any such reclassification in connection with a
consolidation, merger or other business combination in which the Company is
the surviving corporation), the number and kind of Warrant Shares
purchasable and issuable upon exercise of the Warrants shall be adjusted so
that the Holder, upon exercise thereof, shall be entitled to receive the
number and kind of Warrant Shares and other securities of the Company that
the Holder would have owned or have been entitled to receive after the
happening of any of the events described above had the Warrants been
exercised and the relevant Warrant Shares issued in the name of the Holder
immediately prior to the happening of such event or, if applicable, any
record date with respect thereto. An adjustment made pursuant to this
paragraph (a) shall become effective on the date of the dividend payment,
subdivision, combination or issuance retroactive to the record date with
respect thereto, if any, for such event. Upon adjustment of the number of
Warrant Shares as provided in this paragraph (a), the Exercise Price
payable upon exercise of each Warrant shall be adjusted by multiplying such
Exercise Price immediately prior to such adjustment by a fraction of which
the numerator shall be the number of Warrant Shares purchasable upon the
exercise of each Warrant immediately prior to such
5
adjustment and of which the denominator shall be the number of Warrant
Shares purchasable immediately thereafter.
(b) In case the Company shall distribute to all holders of its
outstanding Common Stock evidences of indebtedness of the Company, cash
(including cash dividends payable out of consolidated earnings or earned
surplus) or assets or securities other than its Common Stock (including
stock of a subsidiary or securities convertible into or exercisable for
such stock but excluding dividends or distributions referred to in Sections
6.1(a) above or Section 6.1(c) below) (any such evidences of indebtedness,
cash, assets or securities, the "assets or securities"), then, in each
case, the Exercise Price shall be adjusted by subtracting from the Exercise
Price then in effect the value per share (as determined in accordance with
Section 6.2(b)) of the assets or securities that the Holder would have been
entitled to receive as a result of such distribution had the Warrant been
exercised and the relevant Warrant Shares issued in the name of the Holder
immediately prior to the record date for such distribution; PROVIDED that
if, after giving effect to such adjustment, the Exercise Price would be
less than $0.01 per share, the Company shall distribute such assets or
securities to the Holder as if the Holder had exercised the Warrants and
the Warrant Shares had been issued in the name of the Holder immediately
prior to the record date for such distribution. Any adjustment required by
this Section 6.1(b) shall be made whenever any such distribution is made,
and shall become effective on the date of distribution retroactive to the
record date for the determination of shareholders entitled to receive such
distribution.
(c) If at any time after the date hereof the Company shall issue
or sell any shares of Common Stock or any warrants, options or rights to
subscribe for or purchase Common Stock or securities convertible into
Common Stock (but excluding distributions referred to in paragraph (a) or
(b) above or (d) below), and the consideration per share for, or the price
per share at which such warrant, option or right is exercisable for or
convertible into, such Common Stock is less than the Fair Market Value (as
defined below) of the Common Stock immediately prior to such issuance or
sale, then, forthwith upon such issuance or sale, the Exercise Price shall
be reduced to the price determined by multiplying the Exercise Price in
effect immediately prior to the time of such issuance or sale by a fraction
the numerator of which shall be the sum of (i) the number of shares of
Common Stock outstanding immediately prior to such issuance or sale
MULTIPLIED BY the Fair Market Value immediately prior to such issuance or
sale and (ii) the consideration received by the Company upon such issuance
or sale, and the denominator of which shall be the total number of shares
of Common Stock outstanding immediately after such issuance or sale
MULTIPLIED BY the Fair Market Value immediately prior to such issuance or
sale.
Notwithstanding the foregoing, the Company may, without
adjustment to the Exercise Price pursuant to this Section 6.1(c), issue
options, warrants or rights to subscribe for shares of its Common Stock to
officers, directors, employees,
6
consultants or agents of the Company pursuant to the terms of any stock
option plan or arrangement approved by the Board of Directors, and may
issue shares of its Common Stock upon the exercise of any such stock
options, warrants or rights; PROVIDED, HOWEVER, that the aggregate number
of shares of Common Stock that may be issued at any one time under such
stock option plan or arrangement without adjustment to the Exercise Price
under this Section 6.1(c) shall not exceed, in the aggregate 482,000
shares (appropiately adjusted for stock splits, dividends and/or
combinations.
As used herein, "Fair Market Value" of the Common Stock or other
securities means, on any date, the average of the last sale price, regular
way, for the 10-business day period immediately preceding such date, or if
no such sales took place during such 10-business day period, the average of
the closing bid and asked prices, regular way, for each day in such
10-business day period, in either case as reported on the principal
consolidated transaction reporting system with respect to securities listed
on the principal national securities exchange on which the shares of Common
Stock or such other securities are listed, or, if the Common Stock or such
other securities are not listed or admitted to trading on any national
securities exchange, the average of the last quoted sale price for such
10-business day period or, if not so quoted, the average of the high bid
and low asked prices for each day in such 10-business day period in the
over-the-counter market, as reported by the National Association of
Securities Dealers, Inc. Automated Quotation System or such other system
then in use, or, if on any such date the Common Stock is not quoted by
any such organization, the average of the closing bid and asked prices
during such 10-business day period as furnished by a professional market
maker making a market in the Common Stock or such other securities selected
by the Board of Directors of the Company. If the shares of Common Stock or
such other securities are not publicly held or so listed or publicly
traded,"Fair Market Value" shall mean the fair market value per share of
Common Stock or such other securities as determined by the Company and the
holders of at least a majority of the Warrants issued to the Warrantholders
that are then outstanding. negotiating in good faith toward agreeing upon
such value. If no agreement can be reached within 14 days from the date of
receipt by Required Purchasers of the notice required by Section 6.2(a),
the Company and the Required Purchasers shall appoint within 21 days from
the date of such receipt a mutually acceptable independent investment
banking firm to determine the Fair Market Value. Such firm shall make
the necessary determination which shall be binding absent actual fraud or
manifest error. The fees of such firm for making such determination and any
related reimbursable expenses shall be paid by the Company.
(d) If at any time after the date hereof the Company shall issue
or sell to any person any securities convertible into or exercisable for
Common Stock ("Convertible Securities") (other than securities distributed
in a transaction described in paragraph (b) or (c) above), whether or not
the rights to exchange or convert thereunder are immediately exercisable,
and the price per share for which Common
7
Stock is issuable upon such conversion or exchange shall be less than the
Fair Market Value in effect immediately prior to the time of such issue or
sale, then the Exercise Price shall be adjusted as provided in subparagraph
(c) above on the basis that (i) the maximum number of shares of Common
Stock necessary to effect the conversion or exchange of all such
Convertible Securities shall be deemed to have been issued and
outstanding, (ii) the price per share of such shares shall be deemed to be
the lowest possible price in any range of prices at which such additional
shares are available to such holders, and (iii) the Company shall be deemed
to have received all of the consideration payable therefor, if any, as of
the date of actual issuance of such Convertible Securities. No adjustment
of the Exercise Price shall be made under this subparagraph (d) upon the
issuance of any Convertible Securities which are issued pursuant to the
exercise of any warrants or other subscription or purchase rights
therefor, if any such adjustment shall previously have been made upon the
issuance of such warrants or other rights pursuant to subparagraph (c)
above. No further adjustments of the Exercise Price shall be made upon the
actual issuance of such Common Stock upon conversion or exchange of such
Convertible Securities and, if any issue or sale of such Convertible
Securities is made upon exercise of any warrant or other right to subscribe
for or to purchase any such Convertible Securities for which adjustments
of the Exercise Price have been or are to be made pursuant to other
provisions of this Section 6.1, no further adjustments of the Exercise
Price shall be made by reason of such issue or sale. For the purposes of
this subparagraph (d), the date as of which the Exercise Price shall be
computed shall be the earlier of (i) the date on which the Company shall
enter into a firm contract for the issuance of such Convertible Securities
and (ii) the date of actual issuance of such Convertible Securities. Such
adjustments shall be made upon each issuance of Convertible Securities and
shall become effective immediately after such issuance.
(e) No adjustment in the number of Warrant Shares purchasable
hereunder shall be required unless such adjustment would require an
increase or decrease of at least one quarter of one percent (0.25%) in the
number of Warrant Shares purchasable upon the exercise of each Warrant;
PROVIDED, HOWEVER, that any adjustments which by reason of this
Section 6.1(e) are not required to be made shall be made immediately prior
to any exercise of any Warrants or, if no such exercise occurs prior to the
time that any subsequent adjustment would be made, carried forward and
taken into account in such subsequent adjustment. All calculations shall
be made to the nearest one-thousandth of a share. No adjustment need be
made for a change in the par value of the Warrant Shares.
(f) Upon each adjustment of the Exercise Price pursuant to
paragraphs (b) through (d) of this Section 6.1, this Warrant Certificate
shall be deemed to evidence the right to purchase, at the adjusted Exercise
Price, that number of Warrant Shares obtained by multiplying the number of
Warrant Shares covered by this Warrant Certificate immediately prior to
such adjustment by the Exercise Price in
8
effect prior to such adjustment and dividing the product so obtained by
the Exercise Price in effect after such adjustment.
(g) The number of shares of Common Stock outstanding at any
given time shall not include shares directly or indirectly owned or held by
or for the account of the Company or any of its subsidiaries, and the
disposition of any such shares shall be considered an issue or sale of
Common Stock for the purposes of this Section 6.1.
6.2 NOTICE OF ADJUSTMENT.
(a) The Company hereby agrees that whenever any adjustment of the
number of Warrant Shares purchasable upon the exercise of the Warrants or the
Exercise Price of such Warrants is effected as herein provided, the Company
shall promptly notify the Holder, by first class mail, postage prepaid, of such
adjustment and shall deliver to the Holder a certificate of the Chief Financial
Officer of the Company, setting forth in reasonable detail (i) the number of
Warrant Shares purchasable upon the exercise of the Warrants and the Exercise
Price of the Warrants after such adjustment, (ii) a brief statement of the facts
requiring such adjustment and (iii) the computation by which such adjustment was
made.
(b) If any adjustment is required to be made pursuant to
Section 6.1(b) (unless the PROVISO to the first sentence of that Section is
applicable to the action), the Company and the holders of at least a majority of
the Warrants issued to the Warrantholders that are then outstanding shall
negotiate in good faith toward agreeing upon the value of the assets or
securities and the necessary adjustment. If no agreement can be reached within
14 days from the date of receipt by Required Purchasers of such notice, the
Company and the Required Purchasers shall appoint within 21 days from the date
of such receipt a mutually acceptable independent investment banking firm to
determine the necessary adjustment. Such firm shall make the necessary
determination which shall be binding absent actual fraud or manifest error. The
fees of such firm for making such determination and any related reimbursable
expenses shall be paid by the Company.
6.3 PRESERVATION OF PURCHASE RIGHTS UPON MERGER, CONSOLIDATION, ETC.
(a) In the event of any merger, consolidation or other acquisition or
business combination in which the Company is not the surviving corporation or in
which all of the outstanding Common Stock of the Company is converted into,
acquired or exchanged for securities, cash or property or in the event of the
sale or other disposition of all or substantially all the assets of the Company,
then, and in each such case, proper provision shall be made so that, upon the
basis and upon the terms and in the manner provided in this Section 6.3, the
holder of this Warrant Certificate, upon the exercise of any of its Warrants at
any time after the consummation of such consolidation, merger, transfer,
reorganization or reclassification, shall be entitled to receive, in lieu of
shares of Common Stock issuable upon such exercise prior to such consummation,
the stock, securities, cash and assets to which such holder would have been
entitled upon such consummation if such holder had so exercised
9
such Warrant immediately prior thereto, at the aggregate Exercise Price in
effect for all shares of Common Stock issuable upon such exercise immediately
prior to such consummation as adjusted to the time of such transaction
(subject to adjustments subsequent to such corporate action as nearly
equivalent as possible to the adjustments provided for in Section 6.1 above);
provided, however, that the holder of this Warrant Certificate shall not be
required to accept as consideration any property or securities the holding of
which by such holder would be prohibited by any law, rule or regulation of
any governmental entity or insurance industry regulatory body. Such
undertaking shall provide for adjustments, which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Section 6; PROVIDED, HOWEVER, that if upon such consolidation, merger,
transfer, reorganization or reclassification, different holders of Common
Stock shall be entitled to receive different forms of consideration for their
Common Stock, the form of such consideration thereafter deliverable upon the
exercise of the Warrants shall be as determined in good faith by the Board of
Directors, whose determination shall be conclusive. The provisions of this
Section 6.3 shall also apply to successive mergers or consolidations.
(b) Upon any liquidation, dissolution or winding up of the Company,
the Holder shall receive such cash or property (less the Exercise Price) which
the Holder would have been entitled to receive upon the happening of such
liquidation, dissolution or winding up had the Warrants been exercised and the
Warrant Shares issued immediately prior to the occurrence of such liquidation,
dissolution or winding up.
6.4 STATEMENT ON THE WARRANT. Irrespective of any adjustments in the
number or kind of securities purchasable upon the exercise of the Warrant or the
Exercise Price, any Warrant Certificate theretofore or thereafter issued may
continue to express the same price and number and any kind of shares as are
stated in this Warrant Certificate.
SECTION 7. FRACTIONAL INTERESTS. The Holder shall not be required to
accept fractional securities on the exercise of Warrants. If any fraction of a
security would be issuable on the exercise of Warrants, the Holder may, at its
option, require the Company to pay to the Holder of such Warrants an amount in
cash equal to the fair market value of such fraction.
SECTION 8. REGISTRATION. The Holder shall, from time to time, have
the rights, if any, with respect to registration of Warrant Shares as are set
forth in the Registration Rights Agreement for such Warrant Shares.
SECTION 9. NO RIGHTS AS A SHAREHOLDER; NOTICES TO HOLDER. Nothing
contained in this Warrant Certificate shall be construed as conferring upon the
Holder the right to vote or to consent or to receive notice as a shareholder in
respect of any meeting of shareholders of the Company for the election of the
directors of the Company or any other matter, or any rights whatsoever as a
shareholder of the Company. If, however, at any time prior to the exercise of
the Warrants evidenced by this Warrant Certificate, any of the following events
shall occur:
10
(a) the Company shall declare any dividend payable in cash or in
any securities upon its shares of Common Stock or make any distribution to
the holders of its shares of Common Stock;
(b) the Company shall offer to all holders of its shares of
Common Stock any additional shares of Common Stock or securities
convertible into or exchangeable for shares of Common Stock or any right to
subscribe for or purchase any thereof;
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation, merger, sale, transfer or
lease of all or substantially all of its property, assets and business as
an entirety) shall be proposed; or
(d) any consolidation or merger to which the Company is a party
and for which approval of the holders of Common Stock is required, or of
the conveyance or transfer of all or substantially all assets of the
Company as, or substantially as, an entirety, or of any reclassification or
change of outstanding shares of Common Stock issuable upon exercise of the
Warrant (other than a change in par value to no par value, or from no par
value to par value) or as a result of a subdivision or combination,
then in any one or more of said events, the Company shall give to the Holder the
greater of 15 business days' written notice and the number of days written
notice required to be given to shareholders with respect to such action prior to
the applicable record date hereinafter specified, stating (i) the date as of
which the holders of record of shares of Common Stock to be entitled to receive
any such dividends, rights or warrants are to be determined or (ii) the date on
which any such dissolution, liquidation, winding up, consolidation, merger,
conveyance or transfer is expected to become effective and the date as of which
it is expected that holders of record of shares of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property, if any, deliverable upon such reclassification, consolidation, merger,
conveyance, transfer, dissolution, liquidation, or winding up.
SECTION 10. IDENTITY OF TRANSFER AGENT. Forthwith upon the
appointment of any Transfer Agent for the Common Stock, or any other shares of
the Company's capital stock issuable upon the exercise of the Warrants, the
Company shall promptly notify the Holder of the name and address of such
Transfer Agent.
SECTION 11. NOTICES. Any notice, except as provided in Section 9 of
this Warrant Certificate, or demand authorized by this Warrant Certificate to be
given by the Holder to the Company, shall be in writing and shall be delivered
in person or by facsimile transmission, or mailed by overnight courier, or
otherwise delivered, to the Company, at 2250 South Tenth Street, San Jose,
California 95112, attention of Chief Executive Officer, with a copy to
J.F. Lehman Equity Investors I, L.P., 450 Park Avenue, New York, New York
11
10022, attention of Mr. Donald Glickman. The Company may change the address
to which notices to it are to be delivered or mailed hereunder by notice to
the Holder.
Any notice pursuant to this Warrant Certificate by the Company to
the Holder shall be in writing and shall be mailed by overnight courier or
otherwise delivered, to the Holder at its address set forth in the Warrant
Register.
Notices delivered personally shall be effective at the time
delivered by hand, notices sent by mail shall be effective when received,
notices sent by facsimile transmission shall be effective when confirmed and
notices sent by courier guaranteeing next day delivery shall be effective on
the next business day after timely delivery to the courier.
SECTION 12. AMENDMENT AND WAIVER. Any term, covenant, agreement
or condition in this Warrant Certificate may be amended, or compliance
therewith may be waived (either generally or in a particular instance and
either retroactively or prospectively), by a written instrument or written
instruments executed by the Company and the holders of at least 66 2/3% of the
Warrants issued to the Warrantholders that are then outstanding; PROVIDED,
HOWEVER, that no such amendment or waiver shall change the number of Warrant
Shares issuable under the Warrants, change the Exercise Price, change the
period during which the Warrants may be exercised or modify any provision of
Section 6 or this Section 12 without the consent of the holders of all such
Warrants then outstanding or shall have a disparate and adverse impact on any
Warrantholder.
SECTION 13. SUCCESSORS. All the covenants and provisions of this
Warrant Certificate by or for the benefit of the Company shall bind and inure
to the benefit of its respective successors and assigns hereunder.
SECTION 14. GOVERNING LAW. This Warrant Certificate shall be
construed in accordance with and governed by the internal laws of the State
of California applicable to contracts executed and to be performed wholly
within such state, without regard to the principles of conflicts or choice of
law.
SECTION 15. BENEFITS OF THIS WARRANT CERTIFICATE. Nothing in this
Warrant Certificate shall be construed to give to any person or entity other
than the Company and the Holder any legal or equitable right, remedy or claim
under this Warrant Certificate; and this Warrant Certificate shall be for the
sole and exclusive benefit of this Company and the Holder.
SECTION 16. SURVIVAL OF RIGHTS AND DUTIES. This Warrant
Certificate shall terminate and be of no further force and effect on the
earlier of 5:00 P.M. (New York City time) on the Expiration Date or the date
on which all of the Warrants have been exercised.
SECTION 17. AGREEMENT TO BE BOUND. The Holder acknowledges and
hereby agrees to be bound by such terms and conditions of the Shareholders'
Agreement as
12
are by their terms applicable to the Holder. Any and all Warrant Shares
issued upon exercise hereof shall, immediately upon such issuance, and
without further action by or on behalf of the Holder or the Company, become
subject to such terms and conditions of the Shareholders' Agreement as are by
their terms applicable to such Warrant Shares.
SECTION 17. CAPTIONS. The captions of the Sections and paragraphs of
this Warrant Certificate have been inserted for convenience only and shall have
no substantive effect.
13
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed this 20th day of August 1997.
BURKE INDUSTRIES, INC.
By: /s/ Rocco C. Genovese
-----------------------------
Rocco C. Genovese, President
14
FORM OF ELECTION TO PURCHASE
(To Be Executed by the Holder if the Holder Desires to Exercise
Warrants Evidenced by the Foregoing Warrant Certificate)
To Burke Industries, Inc.:
The undersigned hereby irrevocably elects to exercise ____________
Warrants evidenced by the foregoing Warrant Certificate for, and to purchase
thereunder, ____________ full shares of Common Stock issuable upon exercise of
said Warrants and delivery of $_____ in cash (or in liquidation preference of
the Series A 11.5% Cumulative Redeemable Preferred Stock of the Company, or any
combination thereof) with and any applicable taxes payable by the undersigned
pursuant to such Warrant Certificate.
The undersigned requests that certificates for such shares be issued
in the name of ____________________________.
PLEASE INSERT SOCIAL SECURITY
OR TAX IDENTIFICATION NUMBER
(Please print name and address) ____________________________________
____________________________________
____________________________________
If said number of Warrants shall not be all the Warrants evidenced
by the foregoing Warrant Certificate, the undersigned requests that a new
Warrant Certificate evidencing the Warrants not so exercised be issued in the
name of and delivered to:
_______________________________________________________________________________
_______________________________________________________________________________
(Please print name and address)
By:__________________________________
Name:
Title:
Dated: __________________
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, _____________________ hereby sells, assigns and
transfers to each assignee set forth below all of the rights of the
undersigned in and to the number of Warrants (as defined in and evidenced by
the foregoing Warrant Certificate) set opposite the name of such assignee
below and in and to the foregoing Warrant Certificate with respect to said
Warrants and the shares of Common Stock issuable upon exercise of said
Warrants:
NAME OF ASSIGNEE ADDRESS NUMBER OF WARRANTS
---------------- ------- ------------------
If the total of said Warrants shall not be all the Warrants
evidenced by the foregoing Warrant Certificate, the undersigned requests that
a new Warrant Certificate evidencing the Warrants not so assigned be issued
in the name of and delivered to the undersigned.
By:__________________________
Name:
Title:
Dated: __________________
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY
NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE SUCH A
REGISTRATION IS IN EFFECT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS
OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR SUCH LAWS.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFERS SET FORTH IN A SHAREHOLDERS AGREEMENT, DATED AS OF
AUGUST 20, 1997 (AS AMENDED, MODIFIED OR SUPPLEMENTED THROUGH THE DATE
HEREOF, THE "SHAREHOLDERS AGREEMENT"), BY AND AMONG THE COMPANY AND THE
SHAREHOLDERS NAMED THEREIN, A COPY OF WHICH IS AVAILABLE FOR INSPECTION AT
THE OFFICES OF THE COMPANY. NO TRANSFER OF SUCH SECURITIES WILL BE MADE ON
THE BOOKS OF THE COMPANY UNLESS ACCOMPANIED BY EVIDENCE OF COMPLIANCE WITH
THE TERMS OF SUCH AGREEMENTS.
EXERCISABLE AT ANY TIME SUBJECT TO THE PROVISIONS HEREOF
NO. 4 BURKE INDUSTRIES, INC.
WARRANT CERTIFICATE
Warrant Certificate for Warrants
to Purchase 101,969.78 Warrant Shares
This Warrant Certificate certifies that, for value received, Gerlach &
Co. (the "Holder") is the owner of the number of Warrants (as defined in Section
1.2(a) below) set forth above, each of which entitles the Holder to purchase
from Burke Industries, Inc., a California corporation (the "Company") at any
time from and after the date hereof and until the Expiration Date (as defined in
Section 2.1 hereof) one Warrant Share (as defined below), at the purchase price
stated in Section 2.3 hereof (the "Exercise Price"). The number of Warrant
Shares purchasable upon exercise of the Warrants and the Exercise Price shall be
subject to adjustment from time to time as herein provided.
For purposes of this Warrant Certificate, "Warrant Shares" shall mean
shares of the Company's Common Stock, no par value (the "Common Stock");
PROVIDED, HOWEVER, that if, in accordance with Section 6.3 hereof, the
securities issuable upon exercise of the Warrants are issued by an entity other
than the Company or there is a change in the class of securities so issuable,
then the "Warrant Shares" shall mean the securities so issuable by such entity
or the securities of the class of securities so issuable.
The Warrants are subject to the following terms, conditions and
provisions:
SECTION 1. REGISTRATION; TRANSFERABILITY; EXCHANGE OF WARRANT
CERTIFICATE.
1.1 REGISTRATION. The Company shall number and register the Warrants
in a register (the "Warrant Register") maintained at the principal office of the
Company (the "Office"). The Company shall be entitled to treat the Holder of
the Warrants as the owner thereof for all purposes and shall not be bound to
recognize any equitable or other claim to or interest in such Warrants on the
part of any other person.
1.2 TRANSFER AND EXCHANGE.
(a) Subject to compliance with any restrictions on transfer set forth
in the Shareholders Agreement, dated as of August 20, 1997, by and among the
Company, Holder, Massachusetts Mutual Life Insurance Company, MassMutual High
Yield Partners LLC, Paribas North America, Inc., Jackson National Life Insurance
Company and the other shareholders named therein (the "Shareholders' Agreement")
(Holder and Massachusetts Mutual Life Insurance Company, MassMutual High Yield
Partners LLC, Paribas North America, Inc. and Jackson National Life Insurance
Company shall sometimes be collectively referred to herein as the "Initial
Warrantholders"), the warrants issued to the Initial Warrantholders (the
"Warrants") shall be transferable only on the Warrant Register upon delivery
thereof by the Holder or by his duly authorized attorney or representative or
accompanied by proper evidence of succession, assignment or authority to
transfer. Upon any such registration of transfer, a new Warrant Certificate, in
substantially the form of this Warrant Certificate, evidencing the Warrants so
transferred shall be issued to the transferee of such Warrants and a new Warrant
Certificate, in substantially the form of this Warrant Certificate, evidencing
the remaining Warrants, if any, not so transferred, shall be issued to the
Holder. In all cases of transfer by an attorney, the original power of
attorney, duly approved, or a copy thereof, duly certified, shall be deposited
and shall remain with the Company. In case of transfers by executors,
administrators, guardians or other legal representatives, duly authenticated
evidence of their authority shall be produced, and may be required to be
deposited and to remain with the Company in its discretion. No transfer of the
Warrants or any interest therein other than in compliance with this Section 1.2
shall be made or recorded in the Warrant Register, and any such purported
transfer shall be void and of no effect.
(b) This Warrant Certificate is exchangeable, in whole or in part,
upon the surrender hereof by the holder hereof at the Office for new Warrant
Certificates, in substantially the form of this Warrant Certificate, evidencing
in the aggregate the right to purchase the number of Warrant Shares that may
then be purchased hereunder, each of such new Warrant Certificates to be dated
the date of such exchange and to represent the right to purchase such number of
Warrant Shares as shall be designated by the holder of such new Warrant
Certificates at the time of such surrender.
2
SECTION 2. TERM OF WARRANTS; EXERCISE OF WARRANTS.
2.1 TERM OF WARRANT. Subject to the terms of this Warrant
Certificate, the Holder shall have the right, which may be exercised by the
registered Holder hereof from time to time on any Business Day before 5:00 P.M.
(New York City time) during the period through and including February 20, 2008
(the "Expiration Date") to purchase from the Company an aggregate of 101,969.78
fully paid and nonassessable Warrant Shares or such other number of Warrant
Shares which the Holder may at the time be entitled to purchase in accordance
with this Warrant Certificate. At 5:00 P.M. (New York City time) on the
Expiration Date, each Warrant not exercised prior thereto shall be and become
void and of no value.
2.2 EXERCISE OF WARRANTS. Subject to the terms of this Warrant
Certificate, the Warrants evidenced by this Warrant Certificate may be exercised
in whole or in part, upon surrender to the Company, at its Office, of this
Warrant Certificate, with a Purchase Form substantially in the form attached
hereto duly completed and signed, and upon payment to the Company of the
Exercise Price. Payment of the aggregate Exercise Price shall be in cash;
PROVIDED, HOWEVER, that in lieu of payment in cash, the Holder may, at its
option, pay all or a portion of the aggregate Exercise Price by tendering shares
it holds of the Series A 11.5% Cumulative Redeemable Preferred Stock of the
Company, which shares shall be valued at their stated liquidation value, plus
any accrued but unpaid dividends thereon, to the date of exercise pursuant to
this Section 2.2. Payment of the aggregate Exercise Price in cash shall be by
wire transfer in immediately available funds to an account designated in writing
by the Company to the Holder.
Upon the surrender of this Warrant Certificate, with the Purchase
Form duly executed, and payment of the Exercise Price as aforesaid, the
Company shall (subject to compliance, if necessary, with applicable
provisions of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended), promptly and, in any event within ten Business Days, issue and
deliver to or upon the written order of the Holder and in such name or names
as the Holder may designate a certificate or certificates for such number of
Warrant Shares so purchased. Such certificate or certificates shall be dated
and deemed to have been issued as of the date of the surrender of this
Warrant Certificate and payment of the Exercise Price, as aforesaid. The
right of purchase represented by this Warrant Certificate shall be
exercisable, at the election of the Holder, in full at any time or in part
from time to time. In the event the Holder shall exercise fewer than all the
Warrants evidenced hereby, a new Warrant Certificate shall be issued
evidencing the remaining unexercised Warrants.
2.3 EXERCISE PRICE. The price per share at which each Warrant Share
shall be purchased upon exercise of each Warrant (the "Exercise Price") shall be
$4.56, subject to adjustment pursuant to Section 6 LESS an amount per Warrant
equal to the dividends in respect of the Warrant Shares that the holder would
have received had such Warrant been exercised on August 20, 1997. The aggregate
Exercise Price for all Warrant Shares subject to this Warrant Certificate shall
be rounded to the next higher $0.01.
3
SECTION 3. PAYMENT OF TAXES. The Company covenants and agrees that
it will pay when due and payable all documentary, stamp and other similar taxes,
if any, which may be payable in respect of the issuance or delivery of the
Warrants or of the Warrant Shares purchasable and issuable upon the exercise of
the Warrants; PROVIDED, HOWEVER, that the Company shall not be required to pay
any such tax or other charge imposed in respect of the transfer of Warrants, or
the issuance or delivery of certificates for Warrant Shares or other Securities
in respect of the Warrant Shares upon the exercise of Warrants, to a person or
entity other than a then-existing registered Holder of Warrants.
SECTION 4. MUTILATED OR MISSING WARRANTS. In the event this Warrant
Certificate shall be mutilated, lost, stolen or destroyed, the Company shall
issue and deliver in exchange and substitution for and upon cancellation of the
mutilated Warrant Certificate, or in lieu of and in substitution for the Warrant
Certificate lost, stolen or destroyed, a new Warrant Certificate of like tenor
and representing an equivalent right or interest, but only upon, in the event of
a lost, stolen or destroyed certificate, receipt of evidence satisfactory to the
Company of such loss, theft or destruction and, if requested by the Company,
upon indemnity that also is satisfactory to it; PROVIDED that a written
undertaking of such loss, theft or destruction of this Warrant Certificate by
the registered Holder hereof shall be deemed a satisfactory indemnity of the
Company for purposes of this Section 4. In making application for such a
substitute Warrant Certificate, the Holder shall also comply with such other
reasonable requirements as the Company may prescribe.
SECTION 5. RESERVATION AND AVAILABILITY OF WARRANT SHARES; PURCHASE
AND CANCELLATION OF WARRANTS.
5.1 RESERVATION OF WARRANT SHARES.
(a) The Company shall at all times reserve and keep available free
from preemptive rights, out of the aggregate of its authorized but unissued
shares of Common Stock, for the purpose of enabling it to satisfy any
obligations to issue the Warrant Shares upon exercise of the Warrants, the full
number of Warrant Shares deliverable upon the exercise of all the Warrants
evidenced by this Warrant Certificate. The Company or, if appointed, the
transfer agent for the Common Stock and every subsequent transfer agent for any
shares of the Company's capital stock issuable upon the exercise of any of the
rights of purchase aforesaid (each, a "Transfer Agent") shall be irrevocably
authorized and directed at all times to reserve such number of authorized shares
of Common Stock as shall be required for such purpose. The Company will keep a
copy of this Warrant Certificate on file with each Transfer Agent. The Company
will furnish such Transfer Agent a copy of all notices of adjustments and
certificates related thereto which are transmitted to the Holder pursuant to
Section 6 hereof.
(b) The Company covenants that all Warrant Shares issuable upon
exercise of the Warrants will, upon issuance, be fully paid, nonassessable and
free from preemptive rights and free from all taxes, liens, charges and security
interests with respect to the issuance thereof.
4
(c) Before taking any action which would cause an adjustment pursuant
to Section 6, the Company will take any and all corporate action which may, in
the opinion of its counsel, be necessary in order that the Company may validly
and legally issue fully paid and nonassessable Warrant Shares at the Exercise
Price as so adjusted.
5.2 WARRANT SHARES RECORD DATE. Each person in whose name any stock
certificate for Warrant Shares is issued shall for all purposes be deemed to
have become the holder of record of the Warrant Shares represented thereby, and
such stock certificate shall be dated the date upon which this Warrant
Certificate was duly surrendered and payment of the Exercise Price (and any
applicable transfer taxes) was made.
5.3 CANCELLATION OF WARRANT. Upon surrender of the Warrant
Certificate for exchange, substitution, transfer or exercise, it shall be
cancelled by the Company and retired.
SECTION 6. ADJUSTMENT OF NUMBER OF WARRANT SHARES AND EXERCISE
PRICE. The number of securities purchasable upon the exercise of each Warrant
and the Exercise Price shall be subject to adjustment from time to time upon
the happening of certain events as hereinafter described.
6.1 MANDATORY ADJUSTMENTS. The number of securities purchasable upon
the exercise of the Warrants and the Exercise Price shall be subject to
adjustment as follows:
(a) In case the Company shall (i) declare or pay a dividend on
any of its outstanding Common Stock in shares of Common Stock or make a
distribution to holders of its outstanding Common Stock in shares of Common
Stock, (ii) subdivide any of its outstanding Common Stock into a greater
number of shares of Common Stock, (iii) combine any of its outstanding
Common Stock into a smaller number of shares of Common Stock or (iv) issue
by reclassification of any of its shares of Common Stock other securities
of the Company (including any such reclassification in connection with a
consolidation, merger or other business combination in which the Company is
the surviving corporation), the number and kind of Warrant Shares
purchasable and issuable upon exercise of the Warrants shall be adjusted so
that the Holder, upon exercise thereof, shall be entitled to receive the
number and kind of Warrant Shares and other securities of the Company that
the Holder would have owned or have been entitled to receive after the
happening of any of the events described above had the Warrants been
exercised and the relevant Warrant Shares issued in the name of the Holder
immediately prior to the happening of such event or, if applicable, any
record date with respect thereto. An adjustment made pursuant to this
paragraph (a) shall become effective on the date of the dividend payment,
subdivision, combination or issuance retroactive to the record date with
respect thereto, if any, for such event. Upon adjustment of the number of
Warrant Shares as provided in this paragraph (a), the Exercise Price
payable upon exercise of each Warrant shall be adjusted by multiplying such
Exercise Price immediately prior to such
5
adjustment by a fraction of which the numerator shall be the number of
Warrant Shares purchasable upon the exercise of each Warrant immediately
prior to such adjustment and of which the denominator shall be the
number of Warrant Shares purchasable immediately thereafter.
(b) In case the Company shall distribute to all holders of its
outstanding Common Stock evidences of indebtedness of the Company, cash
(including cash dividends payable out of consolidated earnings or earned
surplus) or assets or securities other than its Common Stock (including
stock of a subsidiary or securities convertible into or exercisable for
such stock but excluding dividends or distributions referred to in Sections
6.1(a) above or Section 6.1(c) below) (any such evidences of indebtedness,
cash, assets or securities, the "assets or securities"), then, in each
case, the Exercise Price shall be adjusted by subtracting from the Exercise
Price then in effect the value per share (as determined in accordance with
Section 6.2(b)) of the assets or securities that the Holder would have been
entitled to receive as a result of such distribution had the Warrant been
exercised and the relevant Warrant Shares issued in the name of the Holder
immediately prior to the record date for such distribution; PROVIDED that
if, after giving effect to such adjustment, the Exercise Price would be
less than $0.01 per share, the Company shall distribute such assets or
securities to the Holder as if the Holder had exercised the Warrants and
the Warrant Shares had been issued in the name of the Holder immediately
prior to the record date for such distribution. Any adjustment required by
this Section 6.1(b) shall be made whenever any such distribution is made,
and shall become effective on the date of distribution retroactive to the
record date for the determination of shareholders entitled to receive such
distribution.
(c) If at any time after the date hereof the Company shall issue
or sell any shares of Common Stock or any warrants, options or rights to
subscribe for or purchase Common Stock or securities convertible into
Common Stock (but excluding distributions referred to in paragraph (a) or
(b) above or (d) below), and the consideration per share for, or the price
per share at which such warrant, option or right is exercisable for or
convertible into, such Common Stock is less than the Fair Market Value (as
defined below) of the Common Stock immediately prior to such issuance or
sale, then, forthwith upon such issuance or sale, the Exercise Price shall
be reduced to the price determined by multiplying the Exercise Price in
effect immediately prior to the time of such issuance or sale by a fraction
the numerator of which shall be the sum of (i) the number of shares of
Common Stock outstanding immediately prior to such issuance or sale
MULTIPLIED BY the Fair Market Value immediately prior to such issuance or
sale and (ii) the consideration received by the Company upon such issuance
or sale, and the denominator of which shall be the total number of shares
of Common Stock outstanding immediately after such issuance or sale
MULTIPLIED BY the Fair Market Value immediately prior to such issuance or
sale.
Notwithstanding the foregoing, the Company may, without
adjustment to the Exercise Price pursuant to this Section 6.1(c), issue
options, warrants or rights to subscribe for shares of its Common Stock to
officers, directors, employees,
6
consultants or agents of the Company pursuant to the terms of any stock
option plan or arrangement approved by the Board of Directors, and may
issue shares of its Common Stock upon the exercise of any such stock
options, warrants or rights; PROVIDED, HOWEVER, that the aggregate
number of shares of Common Stock that may be issued at any one time
under such stock option plan or arrangement without adjustment to the
Exercise Price under this Section 6.1(c) shall not exceed, in the
aggregate 482,000 shares (appropiately adjusted for stock splits,
dividends and/or combinations.
As used herein, "Fair Market Value" of the Common Stock or other
securities means, on any date, the average of the last sale price, regular
way, for the 10-business day period immediately preceding such date, or if
no such sales took place during such 10-business day period, the average of
the closing bid and asked prices, regular way, for each day in such
10-business day period, in either case as reported on the principal
consolidated transaction reporting system with respect to securities listed
on the principal national securities exchange on which the shares of Common
Stock or such other securities are listed, or, if the Common Stock or such
other securities are not listed or admitted to trading on any national
securities exchange, the average of the last quoted sale price for such
10-business day period or, if not so quoted, the average of the high bid
and low asked prices for each day in such 10-business day period in the
over-the-counter market, as reported by the National Association of
Securities Dealers, Inc. Automated Quotation System or such other system
then in use, or, if on any such date the Common Stock is not quoted by any
such organization, the average of the closing bid and asked prices during
such 10-business day period as furnished by a professional market maker
making a market in the Common Stock or such other securities selected by
the Board of Directors of the Company. If the shares of Common Stock or
such other securities are not publicly held or so listed or publicly
traded, "Fair Market Value" shall mean the fair market value per share of
Common Stock or such other securities as determined by the Company and the
holders of at least a majority of the Warrants issued to the
Warrantholders that are then outstanding. negotiating in good faith toward
agreeing upon such value. If no agreement can be reached within 14 days
from the date of receipt by Required Purchasers of the notice required by
Section 6.2(a), the Company and the Required Purchasers shall appoint
within 21 days from the date of such receipt a mutually acceptable
independent investment banking firm to determine the Fair Market Value.
Such firm shall make the necessary determination which shall be binding
absent actual fraud or manifest error. The fees of such firm for making
such determination and any related reimbursable expenses shall be paid
by the Company.
(d) If at any time after the date hereof the Company shall issue
or sell to any person any securities convertible into or exercisable for
Common Stock ("Convertible Securities") (other than securities distributed
in a transaction described in paragraph (b) or (c) above), whether or not
the rights to exchange or convert thereunder are immediately exercisable,
and the price per share for which Common
7
Stock is issuable upon such conversion or exchange shall be less than
the Fair Market Value in effect immediately prior to the time of such
issue or sale, then the Exercise Price shall be adjusted as provided in
subparagraph (c) above on the basis that (i) the maximum number of
shares of Common Stock necessary to effect the conversion or exchange of
all such Convertible Securities shall be deemed to have been issued and
outstanding, (ii) the price per share of such shares shall be deemed to
be the lowest possible price in any range of prices at which such
additional shares are available to such holders, and (iii) the Company
shall be deemed to have received all of the consideration payable
therefor, if any, as of the date of actual issuance of such Convertible
Securities. No adjustment of the Exercise Price shall be made under
this subparagraph (d) upon the issuance of any Convertible Securities
which are issued pursuant to the exercise of any warrants or other
subscription or purchase rights therefor, if any such adjustment shall
previously have been made upon the issuance of such warrants or other
rights pursuant to subparagraph (c) above. No further adjustments of
the Exercise Price shall be made upon the actual issuance of such Common
Stock upon conversion or exchange of such Convertible Securities and, if
any issue or sale of such Convertible Securities is made upon exercise
of any warrant or other right to subscribe for or to purchase any such
Convertible Securities for which adjustments of the Exercise Price have
been or are to be made pursuant to other provisions of this Section 6.1,
no further adjustments of the Exercise Price shall be made by reason of
such issue or sale. For the purposes of this subparagraph (d), the date
as of which the Exercise Price shall be computed shall be the earlier of
(i) the date on which the Company shall enter into a firm contract for
the issuance of such Convertible Securities and (ii) the date of actual
issuance of such Convertible Securities. Such adjustments shall be made
upon each issuance of Convertible Securities and shall become effective
immediately after such issuance.
(e) No adjustment in the number of Warrant Shares purchasable
hereunder shall be required unless such adjustment would require an
increase or decrease of at least one quarter of one percent (0.25%) in the
number of Warrant Shares purchasable upon the exercise of each Warrant;
PROVIDED, HOWEVER, that any adjustments which by reason of this
Section 6.1(e) are not required to be made shall be made immediately prior
to any exercise of any Warrants or, if no such exercise occurs prior to the
time that any subsequent adjustment would be made, carried forward and
taken into account in such subsequent adjustment. All calculations shall
be made to the nearest one-thousandth of a share. No adjustment need be
made for a change in the par value of the Warrant Shares.
(f) Upon each adjustment of the Exercise Price pursuant to
paragraphs (b) through (d) of this Section 6.1, this Warrant Certificate
shall be deemed to evidence the right to purchase, at the adjusted Exercise
Price, that number of Warrant Shares obtained by multiplying the number of
Warrant Shares covered by this Warrant Certificate immediately prior to
such adjustment by the Exercise Price in
8
effect prior to such adjustment and dividing the product so obtained by
the Exercise Price in effect after such adjustment.
(g) The number of shares of Common Stock outstanding at any
given time shall not include shares directly or indirectly owned or held by
or for the account of the Company or any of its subsidiaries, and the
disposition of any such shares shall be considered an issue or sale of
Common Stock for the purposes of this Section 6.1.
6.2 NOTICE OF ADJUSTMENT.
(a) The Company hereby agrees that whenever any adjustment of the
number of Warrant Shares purchasable upon the exercise of the Warrants or the
Exercise Price of such Warrants is effected as herein provided, the Company
shall promptly notify the Holder, by first class mail, postage prepaid, of such
adjustment and shall deliver to the Holder a certificate of the Chief Financial
Officer of the Company, setting forth in reasonable detail (i) the number of
Warrant Shares purchasable upon the exercise of the Warrants and the Exercise
Price of the Warrants after such adjustment, (ii) a brief statement of the facts
requiring such adjustment and (iii) the computation by which such adjustment was
made.
(b) If any adjustment is required to be made pursuant to
Section 6.1(b) (unless the PROVISO to the first sentence of that Section is
applicable to the action), the Company and the holders of at least a majority of
the Warrants issued to the Warrantholders that are then outstanding shall
negotiate in good faith toward agreeing upon the value of the assets or
securities and the necessary adjustment. If no agreement can be reached within
14 days from the date of receipt by Required Purchasers of such notice, the
Company and the Required Purchasers shall appoint within 21 days from the date
of such receipt a mutually acceptable independent investment banking firm to
determine the necessary adjustment. Such firm shall make the necessary
determination which shall be binding absent actual fraud or manifest error. The
fees of such firm for making such determination and any related reimbursable
expenses shall be paid by the Company.
6.3 PRESERVATION OF PURCHASE RIGHTS UPON MERGER, CONSOLIDATION, ETC.
(a) In the event of any merger, consolidation or other acquisition or
business combination in which the Company is not the surviving corporation or in
which all of the outstanding Common Stock of the Company is converted into,
acquired or exchanged for securities, cash or property or in the event of the
sale or other disposition of all or substantially all the assets of the Company,
then, and in each such case, proper provision shall be made so that, upon the
basis and upon the terms and in the manner provided in this Section 6.3, the
holder of this Warrant Certificate, upon the exercise of any of its Warrants at
any time after the consummation of such consolidation, merger, transfer,
reorganization or reclassification, shall be entitled to receive, in lieu of
shares of Common Stock issuable upon such exercise prior to such consummation,
the stock, securities, cash and assets to which such holder would have been
entitled upon such consummation if such holder had so exercised
9
such Warrant immediately prior thereto, at the aggregate Exercise Price in
effect for all shares of Common Stock issuable upon such exercise immediately
prior to such consummation as adjusted to the time of such transaction
(subject to adjustments subsequent to such corporate action as nearly
equivalent as possible to the adjustments provided for in Section 6.1 above);
provided, however, that the holder of this Warrant Certificate shall not be
required to accept as consideration any property or securities the holding of
which by such holder would be prohibited by any law, rule or regulation of
any governmental entity or insurance industry regulatory body. Such
undertaking shall provide for adjustments, which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Section 6; PROVIDED, HOWEVER, that if upon such consolidation, merger,
transfer, reorganization or reclassification, different holders of Common
Stock shall be entitled to receive different forms of consideration for their
Common Stock, the form of such consideration thereafter deliverable upon the
exercise of the Warrants shall be as determined in good faith by the Board of
Directors, whose determination shall be conclusive. The provisions of this
Section 6.3 shall also apply to successive mergers or consolidations.
(b) Upon any liquidation, dissolution or winding up of the Company,
the Holder shall receive such cash or property (less the Exercise Price) which
the Holder would have been entitled to receive upon the happening of such
liquidation, dissolution or winding up had the Warrants been exercised and the
Warrant Shares issued immediately prior to the occurrence of such liquidation,
dissolution or winding up.
6.4 STATEMENT ON THE WARRANT. Irrespective of any adjustments in the
number or kind of securities purchasable upon the exercise of the Warrant or the
Exercise Price, any Warrant Certificate theretofore or thereafter issued may
continue to express the same price and number and any kind of shares as are
stated in this Warrant Certificate.
SECTION 7. FRACTIONAL INTERESTS. The Holder shall not be required to
accept fractional securities on the exercise of Warrants. If any fraction of a
security would be issuable on the exercise of Warrants, the Holder may, at its
option, require the Company to pay to the Holder of such Warrants an amount in
cash equal to the fair market value of such fraction.
SECTION 8. REGISTRATION. The Holder shall, from time to time, have
the rights, if any, with respect to registration of Warrant Shares as are set
forth in the Registration Rights Agreement for such Warrant Shares.
SECTION 9. NO RIGHTS AS A SHAREHOLDER; NOTICES TO HOLDER. Nothing
contained in this Warrant Certificate shall be construed as conferring upon the
Holder the right to vote or to consent or to receive notice as a shareholder in
respect of any meeting of shareholders of the Company for the election of the
directors of the Company or any other matter, or any rights whatsoever as a
shareholder of the Company. If, however, at any time prior to the exercise of
the Warrants evidenced by this Warrant Certificate, any of the following events
shall occur:
10
(a) the Company shall declare any dividend payable in cash or in
any securities upon its shares of Common Stock or make any distribution to
the holders of its shares of Common Stock;
(b) the Company shall offer to all holders of its shares of
Common Stock any additional shares of Common Stock or securities
convertible into or exchangeable for shares of Common Stock or any right to
subscribe for or purchase any thereof;
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation, merger, sale, transfer or
lease of all or substantially all of its property, assets and business as
an entirety) shall be proposed; or
(d) any consolidation or merger to which the Company is a party
and for which approval of the holders of Common Stock is required, or of
the conveyance or transfer of all or substantially all assets of the
Company as, or substantially as, an entirety, or of any reclassification or
change of outstanding shares of Common Stock issuable upon exercise of the
Warrant (other than a change in par value to no par value, or from no par
value to par value) or as a result of a subdivision or combination,
then in any one or more of said events, the Company shall give to the Holder the
greater of 15 business days' written notice and the number of days written
notice required to be given to shareholders with respect to such action prior to
the applicable record date hereinafter specified, stating (i) the date as of
which the holders of record of shares of Common Stock to be entitled to receive
any such dividends, rights or warrants are to be determined or (ii) the date on
which any such dissolution, liquidation, winding up, consolidation, merger,
conveyance or transfer is expected to become effective and the date as of which
it is expected that holders of record of shares of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property, if any, deliverable upon such reclassification, consolidation, merger,
conveyance, transfer, dissolution, liquidation, or winding up.
SECTION 10. IDENTITY OF TRANSFER AGENT. Forthwith upon the
appointment of any Transfer Agent for the Common Stock, or any other shares of
the Company's capital stock issuable upon the exercise of the Warrants, the
Company shall promptly notify the Holder of the name and address of such
Transfer Agent.
SECTION 11. NOTICES. Any notice, except as provided in Section 9 of
this Warrant Certificate, or demand authorized by this Warrant Certificate to be
given by the Holder to the Company, shall be in writing and shall be delivered
in person or by facsimile transmission, or mailed by overnight courier, or
otherwise delivered, to the Company, at 2250 South Tenth Street, San Jose,
California 95112, attention of Chief Executive Officer, with a copy to
J.F. Lehman Equity Investors I, L.P., 450 Park Avenue, New York, New York
11
10022, attention of Mr. Donald Glickman. The Company may change the address
to which notices to it are to be delivered or mailed hereunder by notice to
the Holder.
Any notice pursuant to this Warrant Certificate by the Company to the
Holder shall be in writing and shall be mailed by overnight courier or otherwise
delivered, to the Holder at its address set forth in the Warrant Register.
Notices delivered personally shall be effective at the time delivered
by hand, notices sent by mail shall be effective when received, notices sent by
facsimile transmission shall be effective when confirmed and notices sent by
courier guaranteeing next day delivery shall be effective on the next business
day after timely delivery to the courier.
SECTION 12. AMENDMENT AND WAIVER. Any term, covenant, agreement or
condition in this Warrant Certificate may be amended, or compliance therewith
may be waived (either generally or in a particular instance and either
retroactively or prospectively), by a written instrument or written instruments
executed by the Company and the holders of at least 66K% of the Warrants issued
to the Warrantholders that are then outstanding; PROVIDED, HOWEVER, that no such
amendment or waiver shall change the number of Warrant Shares issuable under the
Warrants, change the Exercise Price, change the period during which the Warrants
may be exercised or modify any provision of Section 6 or this Section 12 without
the consent of the holders of all such Warrants then outstanding or shall have a
disparate and adverse impact on any Warrantholder.
SECTION 13. SUCCESSORS. All the covenants and provisions of this
Warrant Certificate by or for the benefit of the Company shall bind and inure to
the benefit of its respective successors and assigns hereunder.
SECTION 14. GOVERNING LAW. This Warrant Certificate shall be
construed in accordance with and governed by the internal laws of the State of
California applicable to contracts executed and to be performed wholly within
such state, without regard to the principles of conflicts or choice of law.
SECTION 15. BENEFITS OF THIS WARRANT CERTIFICATE. Nothing in this
Warrant Certificate shall be construed to give to any person or entity other
than the Company and the Holder any legal or equitable right, remedy or claim
under this Warrant Certificate; and this Warrant Certificate shall be for the
sole and exclusive benefit of this Company and the Holder.
SECTION 16. SURVIVAL OF RIGHTS AND DUTIES. This Warrant Certificate
shall terminate and be of no further force and effect on the earlier of
5:00 P.M. (New York City time) on the Expiration Date or the date on which all
of the Warrants have been exercised.
SECTION 17. AGREEMENT TO BE BOUND. The Holder acknowledges and
hereby agrees to be bound by such terms and conditions of the Shareholders'
Agreement as
12
are by their terms applicable to the Holder. Any and all Warrant Shares
issued upon exercise hereof shall, immediately upon such issuance, and
without further action by or on behalf of the Holder or the Company, become
subject to such terms and conditions of the Shareholders' Agreement as are by
their terms applicable to such Warrant Shares.
SECTION 17. CAPTIONS. The captions of the Sections and paragraphs of
this Warrant Certificate have been inserted for convenience only and shall have
no substantive effect.
13
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate
to be duly executed this 20th day of August 1997.
BURKE INDUSTRIES, INC.
By: /s/ Rocco C. Genovese
----------------------------
Rocco C. Genovese, President
14
FORM OF ELECTION TO PURCHASE
(To Be Executed by the Holder if the Holder Desires to Exercise
Warrants Evidenced by the Foregoing Warrant Certificate)
To Burke Industries, Inc.:
The undersigned hereby irrevocably elects to exercise ____________
Warrants evidenced by the foregoing Warrant Certificate for, and to purchase
thereunder, ____________ full shares of Common Stock issuable upon exercise of
said Warrants and delivery of $_____ in cash (or in liquidation preference of
the Series A 11.5% Cumulative Redeemable Preferred Stock of the Company, or any
combination thereof) with and any applicable taxes payable by the undersigned
pursuant to such Warrant Certificate.
The undersigned requests that certificates for such shares be issued
in the name of ____________________________.
PLEASE INSERT SOCIAL SECURITY
OR TAX IDENTIFICATION NUMBER
(Please print name and address) __________________________________
__________________________________
__________________________________
If said number of Warrants shall not be all the Warrants evidenced
by the foregoing Warrant Certificate, the undersigned requests that a new
Warrant Certificate evidencing the Warrants not so exercised be issued in the
name of and delivered to:
______________________________________________________________________________
______________________________________________________________________________
(Please print name and address)
By:______________________________
Name:
Title:
Dated: __________________
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, _____________________ hereby sells, assigns and
transfers to each assignee set forth below all of the rights of the
undersigned in and to the number of Warrants (as defined in and evidenced by
the foregoing Warrant Certificate) set opposite the name of such assignee
below and in and to the foregoing Warrant Certificate with respect to said
Warrants and the shares of Common Stock issuable upon exercise of said
Warrants:
NAME OF ASSIGNEE ADDRESS NUMBER OF WARRANTS
---------------- ------- ------------------
If the total of said Warrants shall not be all the Warrants
evidenced by the foregoing Warrant Certificate, the undersigned requests that
a new Warrant Certificate evidencing the Warrants not so assigned be issued
in the name of and delivered to the undersigned.
By:______________________________
Name:
Title:
Dated: __________________
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT
BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE SUCH A REGISTRATION
IS IN EFFECT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO
AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR SUCH LAWS. THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO CERTAIN RESTRICTIONS ON
TRANSFERS SET FORTH IN A SHAREHOLDERS AGREEMENT, DATED AS OF AUGUST 20, 1997 (AS
AMENDED, MODIFIED OR SUPPLEMENTED THROUGH THE DATE HEREOF, THE "SHAREHOLDERS
AGREEMENT"), BY AND AMONG THE COMPANY AND THE SHAREHOLDERS NAMED THEREIN, A COPY
OF WHICH IS AVAILABLE FOR INSPECTION AT THE OFFICES OF THE COMPANY. NO TRANSFER
OF SUCH SECURITIES WILL BE MADE ON THE BOOKS OF THE COMPANY UNLESS ACCOMPANIED
BY EVIDENCE OF COMPLIANCE WITH THE TERMS OF SUCH AGREEMENTS.
EXERCISABLE AT ANY TIME SUBJECT TO THE PROVISIONS HEREOF
NO. 5 BURKE INDUSTRIES, INC.
WARRANT CERTIFICATE
Warrant Certificate for Warrants
to Purchase 107,111.11 Warrant Shares
This Warrant Certificate certifies that, for value received,
Paribas North America, Inc. (the "Holder") is the owner of the number of
Warrants (as defined in Section 1.2(a) below) set forth above, each of which
entitles the Holder to purchase from Burke Industries, Inc., a California
corporation (the "Company") at any time from and after the date hereof and
until the Expiration Date (as defined in Section 2.1 hereof) one Warrant
Share (as defined below), at the purchase price stated in Section 2.3 hereof
(the "Exercise Price"). The number of Warrant Shares purchasable upon
exercise of the Warrants and the Exercise Price shall be subject to
adjustment from time to time as herein provided.
For purposes of this Warrant Certificate, "Warrant Shares" shall mean
shares of the Company's Common Stock, no par value (the "Common Stock");
PROVIDED, HOWEVER, that if, in accordance with Section 6.3 hereof, the
securities issuable upon exercise of the Warrants are issued by an entity other
than the Company or there is a change in the class of securities so issuable,
then the "Warrant Shares" shall mean the securities so issuable by such entity
or the securities of the class of securities so issuable.
The Warrants are subject to the following terms, conditions and
provisions:
SECTION 1. REGISTRATION; TRANSFERABILITY; EXCHANGE OF WARRANT
CERTIFICATE.
1.1 REGISTRATION. The Company shall number and register the Warrants
in a register (the "Warrant Register") maintained at the principal office of the
Company (the "Office"). The Company shall be entitled to treat the Holder of
the Warrants as the owner thereof for all purposes and shall not be bound to
recognize any equitable or other claim to or interest in such Warrants on the
part of any other person.
1.2 TRANSFER AND EXCHANGE.
(a) Subject to compliance with any restrictions on transfer set forth
in the Shareholders Agreement, dated as of August 20, 1997, by and among the
Company, Holder, Massachusetts Mutual Life Insurance Company, MassMutual
Corporate Value Partners Limited, MassMutual High Yield Partners LLC, Jackson
National Life Insurance Company, and the other shareholders named therein (the
"Shareholders' Agreement") (Holder and Massachusetts Mutual Life Insurance
Company, MassMutual Corporate Value Partners Limited, MassMutual High Yield
Partners LLC and Jackson National Life Insurance Company shall sometimes be
collectively referred to herein as the "Initial Warrantholders"), the warrants
issued to the Initial Warrantholders (the "Warrants") shall be transferable only
on the Warrant Register upon delivery thereof by the Holder or by his duly
authorized attorney or representative or accompanied by proper evidence of
succession, assignment or authority to transfer. Upon any such registration of
transfer, a new Warrant Certificate, in substantially the form of this Warrant
Certificate, evidencing the Warrants so transferred shall be issued to the
transferee of such Warrants and a new Warrant Certificate, in substantially the
form of this Warrant Certificate, evidencing the remaining Warrants, if any, not
so transferred, shall be issued to the Holder. In all cases of transfer by an
attorney, the original power of attorney, duly approved, or a copy thereof, duly
certified, shall be deposited and shall remain with the Company. In case of
transfers by executors, administrators, guardians or other legal
representatives, duly authenticated evidence of their authority shall be
produced, and may be required to be deposited and to remain with the Company in
its discretion. No transfer of the Warrants or any interest therein other than
in compliance with this Section 1.2 shall be made or recorded in the Warrant
Register, and any such purported transfer shall be void and of no effect.
(b) This Warrant Certificate is exchangeable, in whole or in part,
upon the surrender hereof by the holder hereof at the Office for new Warrant
Certificates, in substantially the form of this Warrant Certificate, evidencing
in the aggregate the right to purchase the number of Warrant Shares that may
then be purchased hereunder, each of such new Warrant Certificates to be dated
the date of such exchange and to represent the right to purchase such number of
Warrant Shares as shall be designated by the holder of such new Warrant
Certificates at the time of such surrender.
2
SECTION 2. TERM OF WARRANTS; EXERCISE OF WARRANTS.
2.1 TERM OF WARRANT. Subject to the terms of this Warrant
Certificate, the Holder shall have the right, which may be exercised by the
registered Holder hereof from time to time on any Business Day before 5:00 P.M.
(New York City time) during the period through and including February 20, 2008
(the "Expiration Date") to purchase from the Company an aggregate of 107,111.11
fully paid and nonassessable Warrant Shares or such other number of Warrant
Shares which the Holder may at the time be entitled to purchase in accordance
with this Warrant Certificate. At 5:00 P.M. (New York City time) on the
Expiration Date, each Warrant not exercised prior thereto shall be and become
void and of no value.
2.2 EXERCISE OF WARRANTS. Subject to the terms of this Warrant
Certificate, the Warrants evidenced by this Warrant Certificate may be exercised
in whole or in part, upon surrender to the Company, at its Office, of this
Warrant Certificate, with a Purchase Form substantially in the form attached
hereto duly completed and signed, and upon payment to the Company of the
Exercise Price. Payment of the aggregate Exercise Price shall be in cash;
PROVIDED, HOWEVER, that in lieu of payment in cash, the Holder may, at its
option, pay all or a portion of the aggregate Exercise Price by tendering shares
it holds of the Series A 11.5% Cumulative Redeemable Preferred Stock of the
Company, which shares shall be valued at their stated liquidation value, plus
any accrued but unpaid dividends thereon, to the date of exercise pursuant to
this Section 2.2. Payment of the aggregate Exercise Price in cash shall be by
wire transfer in immediately available funds to an account designated in writing
by the Company to the Holder.
Upon the surrender of this Warrant Certificate, with the Purchase
Form duly executed, and payment of the Exercise Price as aforesaid, the
Company shall (subject to compliance, if necessary, with applicable
provisions of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended), promptly and, in any event within ten Business Days, issue and
deliver to or upon the written order of the Holder and in such name or names
as the Holder may designate a certificate or certificates for such number of
Warrant Shares so purchased. Such certificate or certificates shall be dated
and deemed to have been issued as of the date of the surrender of this
Warrant Certificate and payment of the Exercise Price, as aforesaid. The
right of purchase represented by this Warrant Certificate shall be
exercisable, at the election of the Holder, in full at any time or in part
from time to time. In the event the Holder shall exercise fewer than all the
Warrants evidenced hereby, a new Warrant Certificate shall be issued
evidencing the remaining unexercised Warrants.
2.3 EXERCISE PRICE. The price per share at which each Warrant Share
shall be purchased upon exercise of each Warrant (the "Exercise Price") shall be
$4.56, subject to adjustment pursuant to Section 6 LESS an amount per Warrant
equal to the dividends in respect of the Warrant Shares that the holder would
have received had such Warrant been exercised on August 20, 1997. The aggregate
Exercise Price for all Warrant Shares subject to this Warrant Certificate shall
be rounded to the next higher $0.01.
3
SECTION 3. PAYMENT OF TAXES. The Company covenants and agrees that
it will pay when due and payable all documentary, stamp and other similar taxes,
if any, which may be payable in respect of the issuance or delivery of the
Warrants or of the Warrant Shares purchasable and issuable upon the exercise of
the Warrants; PROVIDED, HOWEVER, that the Company shall not be required to pay
any such tax or other charge imposed in respect of the transfer of Warrants, or
the issuance or delivery of certificates for Warrant Shares or other Securities
in respect of the Warrant Shares upon the exercise of Warrants, to a person or
entity other than a then-existing registered Holder of Warrants.
SECTION 4. MUTILATED OR MISSING WARRANTS. In the event this Warrant
Certificate shall be mutilated, lost, stolen or destroyed, the Company shall
issue and deliver in exchange and substitution for and upon cancellation of the
mutilated Warrant Certificate, or in lieu of and in substitution for the Warrant
Certificate lost, stolen or destroyed, a new Warrant Certificate of like tenor
and representing an equivalent right or interest, but only upon, in the event of
a lost, stolen or destroyed certificate, receipt of evidence satisfactory to the
Company of such loss, theft or destruction and, if requested by the Company,
upon indemnity that also is satisfactory to it; PROVIDED that a written
undertaking of such loss, theft or destruction of this Warrant Certificate by
the registered Holder hereof shall be deemed a satisfactory indemnity of the
Company for purposes of this Section 4. In making application for such a
substitute Warrant Certificate, the Holder shall also comply with such other
reasonable requirements as the Company may prescribe.
SECTION 5. RESERVATION AND AVAILABILITY OF WARRANT SHARES; PURCHASE
AND CANCELLATION OF WARRANTS.
5.1 RESERVATION OF WARRANT SHARES.
(a) The Company shall at all times reserve and keep available free
from preemptive rights, out of the aggregate of its authorized but unissued
shares of Common Stock, for the purpose of enabling it to satisfy any
obligations to issue the Warrant Shares upon exercise of the Warrants, the full
number of Warrant Shares deliverable upon the exercise of all the Warrants
evidenced by this Warrant Certificate. The Company or, if appointed, the
transfer agent for the Common Stock and every subsequent transfer agent for any
shares of the Company's capital stock issuable upon the exercise of any of the
rights of purchase aforesaid (each, a "Transfer Agent") shall be irrevocably
authorized and directed at all times to reserve such number of authorized shares
of Common Stock as shall be required for such purpose. The Company will keep a
copy of this Warrant Certificate on file with each Transfer Agent. The Company
will furnish such Transfer Agent a copy of all notices of adjustments and
certificates related thereto which are transmitted to the Holder pursuant to
Section 6 hereof.
(b) The Company covenants that all Warrant Shares issuable upon
exercise of the Warrants will, upon issuance, be fully paid, nonassessable and
free from preemptive rights and free from all taxes, liens, charges and security
interests with respect to the issuance thereof.
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(c) Before taking any action which would cause an adjustment pursuant
to Section 6, the Company will take any and all corporate action which may, in
the opinion of its counsel, be necessary in order that the Company may validly
and legally issue fully paid and nonassessable Warrant Shares at the Exercise
Price as so adjusted.
5.2 WARRANT SHARES RECORD DATE. Each person in whose name any stock
certificate for Warrant Shares is issued shall for all purposes be deemed to
have become the holder of record of the Warrant Shares represented thereby, and
such stock certificate shall be dated the date upon which this Warrant
Certificate was duly surrendered and payment of the Exercise Price (and any
applicable transfer taxes) was made.
5.3 CANCELLATION OF WARRANT. Upon surrender of the Warrant
Certificate for exchange, substitution, transfer or exercise, it shall be
cancelled by the Company and retired.
SECTION 6. ADJUSTMENT OF NUMBER OF WARRANT SHARES AND EXERCISE PRICE.
The number of securities purchasable upon the exercise of each Warrant and the
Exercise Price shall be subject to adjustment from time to time upon the
happening of certain events as hereinafter described.
6.1 MANDATORY ADJUSTMENTS. The number of securities purchasable upon
the exercise of the Warrants and the Exercise Price shall be subject to
adjustment as follows:
(a) In case the Company shall (i) declare or pay a dividend on
any of its outstanding Common Stock in shares of Common Stock or make a
distribution to holders of its outstanding Common Stock in shares of Common
Stock, (ii) subdivide any of its outstanding Common Stock into a greater
number of shares of Common Stock, (iii) combine any of its outstanding
Common Stock into a smaller number of shares of Common Stock or (iv) issue
by reclassification of any of its shares of Common Stock other securities
of the Company (including any such reclassification in connection with a
consolidation, merger or other business combination in which the Company is
the surviving corporation), the number and kind of Warrant Shares
purchasable and issuable upon exercise of the Warrants shall be adjusted so
that the Holder, upon exercise thereof, shall be entitled to receive the
number and kind of Warrant Shares and other securities of the Company that
the Holder would have owned or have been entitled to receive after the
happening of any of the events described above had the Warrants been
exercised and the relevant Warrant Shares issued in the name of the Holder
immediately prior to the happening of such event or, if applicable, any
record date with respect thereto. An adjustment made pursuant to this
paragraph (a) shall become effective on the date of the dividend payment,
subdivision, combination or issuance retroactive to the record date with
respect thereto, if any, for such event. Upon adjustment of the number of
Warrant Shares as provided in this paragraph (a), the Exercise Price
payable upon exercise of each Warrant shall be adjusted by multiplying such
Exercise Price immediately prior to such adjustment by a fraction of which
the numerator shall be the number of Warrant Shares purchasable upon the
exercise of each Warrant immediately prior to such
5
adjustment and of which the denominator shall be the number of Warrant
Shares purchasable immediately thereafter.
(b) In case the Company shall distribute to all holders of its
outstanding Common Stock evidences of indebtedness of the Company, cash
(including cash dividends payable out of consolidated earnings or earned
surplus) or assets or securities other than its Common Stock (including
stock of a subsidiary or securities convertible into or exercisable for
such stock but excluding dividends or distributions referred to in Sections
6.1(a) above or Section 6.1(c) below) (any such evidences of indebtedness,
cash, assets or securities, the "assets or securities"), then, in each
case, the Exercise Price shall be adjusted by subtracting from the Exercise
Price then in effect the value per share (as determined in accordance with
Section 6.2(b)) of the assets or securities that the Holder would have been
entitled to receive as a result of such distribution had the Warrant been
exercised and the relevant Warrant Shares issued in the name of the Holder
immediately prior to the record date for such distribution; PROVIDED that
if, after giving effect to such adjustment, the Exercise Price would be
less than $0.01 per share, the Company shall distribute such assets or
securities to the Holder as if the Holder had exercised the Warrants and
the Warrant Shares had been issued in the name of the Holder immediately
prior to the record date for such distribution. Any adjustment required by
this Section 6.1(b) shall be made whenever any such distribution is made,
and shall become effective on the date of distribution retroactive to the
record date for the determination of shareholders entitled to receive such
distribution.
(c) If at any time after the date hereof the Company shall issue
or sell any shares of Common Stock or any warrants, options or rights to
subscribe for or purchase Common Stock or securities convertible into
Common Stock (but excluding distributions referred to in paragraph (a) or
(b) above or (d) below), and the consideration per share for, or the price
per share at which such warrant, option or right is exercisable for or
convertible into, such Common Stock is less than the Fair Market Value (as
defined below) of the Common Stock immediately prior to such issuance or
sale, then, forthwith upon such issuance or sale, the Exercise Price shall
be reduced to the price determined by multiplying the Exercise Price in
effect immediately prior to the time of such issuance or sale by a fraction
the numerator of which shall be the sum of (i) the number of shares of
Common Stock outstanding immediately prior to such issuance or sale
MULTIPLIED BY the Fair Market Value immediately prior to such issuance or
sale and (ii) the consideration received by the Company upon such issuance
or sale, and the denominator of which shall be the total number of shares
of Common Stock outstanding immediately after such issuance or sale
MULTIPLIED BY the Fair Market Value immediately prior to such issuance or
sale.
Notwithstanding the foregoing, the Company may, without
adjustment to the Exercise Price pursuant to this Section 6.1(c), issue
options, warrants or rights to subscribe for shares of its Common Stock to
officers, directors, employees,
6
consultants or agents of the Company pursuant to the terms of any stock
option plan or arrangement approved by the Board of Directors, and may
issue shares of its Common Stock upon the exercise of any such stock
options, warrants or rights; PROVIDED, HOWEVER, that the aggregate
number of shares of Common Stock that may be issued at any one time
under such stock option plan or arrangement without adjustment to the
Exercise Price under this Section 6.1(c) shall not exceed, in the
aggregate 482,000 shares (appropriately adjusted for stock splits,
dividends and/or combinations.
As used herein, "Fair Market Value" of the Common Stock or
other securities means, on any date, the average of the last sale price,
regular way, for the 10-business day period immediately preceding such
date, or if no such sales took place during such 10-business day period,
the average of the closing bid and asked prices, regular way, for each
day in such 10-business day period, in either case as reported on the
principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which
the shares of Common Stock or such other securities are listed, or, if
the Common Stock or such other securities are not listed or admitted to
trading on any national securities exchange, the average of the last
quoted sale price for such 10-business day period or, if not so quoted,
the average of the high bid and low asked prices for each day in such
10-business day period in the over-the-counter market, as reported by
the National Association of Securities Dealers, Inc. Automated Quotation
System or such other system then in use, or, if on any such date the
Common Stock is not quoted by any such organization, the average of the
closing bid and asked prices during such 10-business day period as
furnished by a professional market maker making a market in the Common
Stock or such other securities selected by the Board of Directors of the
Company. If the shares of Common Stock or such other securities are not
publicly held or so listed or publicly traded, "Fair Market Value" shall
mean the fair market value per share of Common Stock or such other
securities as determined by the Company and the holders of at least a
majority of the Warrants issued to the Warrantholders that are then
outstanding. negotiating in good faith toward agreeing upon such value.
If no agreement can be reached within 14 days from the date of receipt
by Required Purchasers of the notice required by Section 6.2(a), the
Company and the Required Purchasers shall appoint within 21 days from
the date of such receipt a mutually acceptable independent investment
banking firm to determine the Fair Market Value. Such firm shall make
the necessary determination which shall be binding absent actual fraud
or manifest error. The fees of such firm for making such determination
and any related reimbursable expenses shall be paid by the Company.
(d) If at any time after the date hereof the Company shall issue
or sell to any person any securities convertible into or exercisable for
Common Stock ("Convertible Securities") (other than securities distributed
in a transaction described in paragraph (b) or (c) above), whether or not
the rights to exchange or convert thereunder are immediately exercisable,
and the price per share for which Common
7
Stock is issuable upon such conversion or exchange shall be less than
the Fair Market Value in effect immediately prior to the time of such
issue or sale, then the Exercise Price shall be adjusted as provided in
subparagraph (c) above on the basis that (i) the maximum number of
shares of Common Stock necessary to effect the conversion or exchange of
all such Convertible Securities shall be deemed to have been issued and
outstanding, (ii) the price per share of such shares shall be deemed to
be the lowest possible price in any range of prices at which such
additional shares are available to such holders, and (iii) the Company
shall be deemed to have received all of the consideration payable
therefor, if any, as of the date of actual issuance of such Convertible
Securities. No adjustment of the Exercise Price shall be made under
this subparagraph (d) upon the issuance of any Convertible Securities
which are issued pursuant to the exercise of any warrants or other
subscription or purchase rights therefor, if any such adjustment shall
previously have been made upon the issuance of such warrants or other
rights pursuant to subparagraph (c) above. No further adjustments of
the Exercise Price shall be made upon the actual issuance of such Common
Stock upon conversion or exchange of such Convertible Securities and, if
any issue or sale of such Convertible Securities is made upon exercise
of any warrant or other right to subscribe for or to purchase any such
Convertible Securities for which adjustments of the Exercise Price have
been or are to be made pursuant to other provisions of this Section 6.1,
no further adjustments of the Exercise Price shall be made by reason of
such issue or sale. For the purposes of this subparagraph (d), the date
as of which the Exercise Price shall be computed shall be the earlier of
(i) the date on which the Company shall enter into a firm contract for
the issuance of such Convertible Securities and (ii) the date of actual
issuance of such Convertible Securities. Such adjustments shall be made
upon each issuance of Convertible Securities and shall become effective
immediately after such issuance.
(e) No adjustment in the number of Warrant Shares purchasable
hereunder shall be required unless such adjustment would require an
increase or decrease of at least one quarter of one percent (0.25%) in the
number of Warrant Shares purchasable upon the exercise of each Warrant;
PROVIDED, HOWEVER, that any adjustments which by reason of this
Section 6.1(e) are not required to be made shall be made immediately prior
to any exercise of any Warrants or, if no such exercise occurs prior to the
time that any subsequent adjustment would be made, carried forward and
taken into account in such subsequent adjustment. All calculations shall
be made to the nearest one-thousandth of a share. No adjustment need be
made for a change in the par value of the Warrant Shares.
(f) Upon each adjustment of the Exercise Price pursuant to
paragraphs (b) through (d) of this Section 6.1, this Warrant Certificate
shall be deemed to evidence the right to purchase, at the adjusted Exercise
Price, that number of Warrant Shares obtained by multiplying the number of
Warrant Shares covered by this Warrant Certificate immediately prior to
such adjustment by the Exercise Price in
8
effect prior to such adjustment and dividing the product so obtained by
the Exercise Price in effect after such adjustment.
(g) The number of shares of Common Stock outstanding at any
given time shall not include shares directly or indirectly owned or held by
or for the account of the Company or any of its subsidiaries, and the
disposition of any such shares shall be considered an issue or sale of
Common Stock for the purposes of this Section 6.1.
6.2 NOTICE OF ADJUSTMENT.
(a) The Company hereby agrees that whenever any adjustment of the
number of Warrant Shares purchasable upon the exercise of the Warrants or the
Exercise Price of such Warrants is effected as herein provided, the Company
shall promptly notify the Holder, by first class mail, postage prepaid, of such
adjustment and shall deliver to the Holder a certificate of the Chief Financial
Officer of the Company, setting forth in reasonable detail (i) the number of
Warrant Shares purchasable upon the exercise of the Warrants and the Exercise
Price of the Warrants after such adjustment, (ii) a brief statement of the facts
requiring such adjustment and (iii) the computation by which such adjustment was
made.
(b) If any adjustment is required to be made pursuant to
Section 6.1(b) (unless the PROVISO to the first sentence of that Section is
applicable to the action), the Company and the holders of at least a majority of
the Warrants issued to the Warrantholders that are then outstanding shall
negotiate in good faith toward agreeing upon the value of the assets or
securities and the necessary adjustment. If no agreement can be reached within
14 days from the date of receipt by Required Purchasers of such notice, the
Company and the Required Purchasers shall appoint within 21 days from the date
of such receipt a mutually acceptable independent investment banking firm to
determine the necessary adjustment. Such firm shall make the necessary
determination which shall be binding absent actual fraud or manifest error. The
fees of such firm for making such determination and any related reimbursable
expenses shall be paid by the Company.
6.3 PRESERVATION OF PURCHASE RIGHTS UPON MERGER, CONSOLIDATION, ETC.
(a) In the event of any merger, consolidation or other acquisition or
business combination in which the Company is not the surviving corporation or in
which all of the outstanding Common Stock of the Company is converted into,
acquired or exchanged for securities, cash or property or in the event of the
sale or other disposition of all or substantially all the assets of the Company,
then, and in each such case, proper provision shall be made so that, upon the
basis and upon the terms and in the manner provided in this Section 6.3, the
holder of this Warrant Certificate, upon the exercise of any of its Warrants at
any time after the consummation of such consolidation, merger, transfer,
reorganization or reclassification, shall be entitled to receive, in lieu of
shares of Common Stock issuable upon such exercise prior to such consummation,
the stock, securities, cash and assets to which such holder would have been
entitled upon such consummation if such holder had so exercised
9
such Warrant immediately prior thereto, at the aggregate Exercise Price in
effect for all shares of Common Stock issuable upon such exercise immediately
prior to such consummation as adjusted to the time of such transaction
(subject to adjustments subsequent to such corporate action as nearly
equivalent as possible to the adjustments provided for in Section 6.1 above);
provided, however, that the holder of this Warrant Certificate shall not be
required to accept as consideration any property or securities the holding of
which by such holder would be prohibited by any law, rule or regulation of
any governmental entity or insurance industry regulatory body. Such
undertaking shall provide for adjustments, which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Section 6; PROVIDED, HOWEVER, that if upon such consolidation, merger,
transfer, reorganization or reclassification, different holders of Common
Stock shall be entitled to receive different forms of consideration for their
Common Stock, the form of such consideration thereafter deliverable upon the
exercise of the Warrants shall be as determined in good faith by the Board of
Directors, whose determination shall be conclusive. The provisions of this
Section 6.3 shall also apply to successive mergers or consolidations.
(b) Upon any liquidation, dissolution or winding up of the Company,
the Holder shall receive such cash or property (less the Exercise Price) which
the Holder would have been entitled to receive upon the happening of such
liquidation, dissolution or winding up had the Warrants been exercised and the
Warrant Shares issued immediately prior to the occurrence of such liquidation,
dissolution or winding up.
6.4 STATEMENT ON THE WARRANT. Irrespective of any adjustments in the
number or kind of securities purchasable upon the exercise of the Warrant or the
Exercise Price, any Warrant Certificate theretofore or thereafter issued may
continue to express the same price and number and any kind of shares as are
stated in this Warrant Certificate.
SECTION 7. FRACTIONAL INTERESTS. The Holder shall not be required to
accept fractional securities on the exercise of Warrants. If any fraction of a
security would be issuable on the exercise of Warrants, the Holder may, at its
option, require the Company to pay to the Holder of such Warrants an amount in
cash equal to the fair market value of such fraction.
SECTION 8. REGISTRATION. The Holder shall, from time to time, have
the rights, if any, with respect to registration of Warrant Shares as are set
forth in the Registration Rights Agreement for such Warrant Shares.
SECTION 9. NO RIGHTS AS A SHAREHOLDER; NOTICES TO HOLDER. Nothing
contained in this Warrant Certificate shall be construed as conferring upon the
Holder the right to vote or to consent or to receive notice as a shareholder in
respect of any meeting of shareholders of the Company for the election of the
directors of the Company or any other matter, or any rights whatsoever as a
shareholder of the Company. If, however, at any time prior to the exercise of
the Warrants evidenced by this Warrant Certificate, any of the following events
shall occur:
10
(a) the Company shall declare any dividend payable in cash or in
any securities upon its shares of Common Stock or make any distribution to
the holders of its shares of Common Stock;
(b) the Company shall offer to all holders of its shares of
Common Stock any additional shares of Common Stock or securities
convertible into or exchangeable for shares of Common Stock or any right to
subscribe for or purchase any thereof;
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation, merger, sale, transfer or
lease of all or substantially all of its property, assets and business as
an entirety) shall be proposed; or
(d) any consolidation or merger to which the Company is a party
and for which approval of the holders of Common Stock is required, or of
the conveyance or transfer of all or substantially all assets of the
Company as, or substantially as, an entirety, or of any reclassification or
change of outstanding shares of Common Stock issuable upon exercise of the
Warrant (other than a change in par value to no par value, or from no par
value to par value) or as a result of a subdivision or combination,
then in any one or more of said events, the Company shall give to the Holder the
greater of 15 business days' written notice and the number of days written
notice required to be given to shareholders with respect to such action prior to
the applicable record date hereinafter specified, stating (i) the date as of
which the holders of record of shares of Common Stock to be entitled to receive
any such dividends, rights or warrants are to be determined or (ii) the date on
which any such dissolution, liquidation, winding up, consolidation, merger,
conveyance or transfer is expected to become effective and the date as of which
it is expected that holders of record of shares of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property, if any, deliverable upon such reclassification, consolidation, merger,
conveyance, transfer, dissolution, liquidation, or winding up.
SECTION 10. IDENTITY OF TRANSFER AGENT. Forthwith upon the
appointment of any Transfer Agent for the Common Stock, or any other shares of
the Company's capital stock issuable upon the exercise of the Warrants, the
Company shall promptly notify the Holder of the name and address of such
Transfer Agent.
SECTION 11. NOTICES. Any notice, except as provided in Section 9 of
this Warrant Certificate, or demand authorized by this Warrant Certificate to be
given by the Holder to the Company, shall be in writing and shall be delivered
in person or by facsimile transmission, or mailed by overnight courier, or
otherwise delivered, to the Company, at 2250 South Tenth Street, San Jose,
California 95112, attention of Chief Executive Officer, with a copy to
J.F. Lehman Equity Investors I, L.P., 450 Park Avenue, New York, New York
11
10022, attention of Mr. Donald Glickman. The Company may change the address
to which notices to it are to be delivered or mailed hereunder by notice to
the Holder.
Any notice pursuant to this Warrant Certificate by the Company to the
Holder shall be in writing and shall be mailed by overnight courier or otherwise
delivered, to the Holder at its address set forth in the Warrant Register.
Notices delivered personally shall be effective at the time delivered
by hand, notices sent by mail shall be effective when received, notices sent by
facsimile transmission shall be effective when confirmed and notices sent by
courier guaranteeing next day delivery shall be effective on the next business
day after timely delivery to the courier.
SECTION 12. AMENDMENT AND WAIVER. Any term, covenant, agreement
or condition in this Warrant Certificate may be amended, or compliance
therewith may be waived (either generally or in a particular instance and
either retroactively or prospectively), by a written instrument or written
instruments executed by the Company and the holders of at least 662/3% of the
Warrants issued to the Warrantholders that are then outstanding; PROVIDED,
HOWEVER, that no such amendment or waiver shall change the number of Warrant
Shares issuable under the Warrants, change the Exercise Price, change the
period during which the Warrants may be exercised or modify any provision of
Section 6 or this Section 12 without the consent of the holders of all such
Warrants then outstanding or shall have a disparate and adverse impact on any
Warrantholder.
SECTION 13. SUCCESSORS. All the covenants and provisions of this
Warrant Certificate by or for the benefit of the Company shall bind and inure to
the benefit of its respective successors and assigns hereunder.
SECTION 14. GOVERNING LAW. This Warrant Certificate shall be
construed in accordance with and governed by the internal laws of the State of
California applicable to contracts executed and to be performed wholly within
such state, without regard to the principles of conflicts or choice of law.
SECTION 15. BENEFITS OF THIS WARRANT CERTIFICATE. Nothing in this
Warrant Certificate shall be construed to give to any person or entity other
than the Company and the Holder any legal or equitable right, remedy or claim
under this Warrant Certificate; and this Warrant Certificate shall be for the
sole and exclusive benefit of this Company and the Holder.
SECTION 16. SURVIVAL OF RIGHTS AND DUTIES. This Warrant Certificate
shall terminate and be of no further force and effect on the earlier of
5:00 P.M. (New York City time) on the Expiration Date or the date on which all
of the Warrants have been exercised.
SECTION 17. AGREEMENT TO BE BOUND. The Holder acknowledges and
hereby agrees to be bound by such terms and conditions of the Shareholders'
Agreement as
12
are by their terms applicable to the Holder. Any and all Warrant Shares
issued upon exercise hereof shall, immediately upon such issuance, and
without further action by or on behalf of the Holder or the Company, become
subject to such terms and conditions of the Shareholders' Agreement as are by
their terms applicable to such Warrant Shares.
SECTION 17. CAPTIONS. The captions of the Sections and paragraphs of
this Warrant Certificate have been inserted for convenience only and shall have
no substantive effect.
13
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate
to be duly executed this 20th day of August 1997.
BURKE INDUSTRIES, INC.
By: /s/ Rocco C. Genovese
-------------------------------
Rocco C. Genovese, President
14
FORM OF ELECTION TO PURCHASE
(To Be Executed by the Holder if the Holder Desires to Exercise
Warrants Evidenced by the Foregoing Warrant Certificate)
To Burke Industries, Inc.:
The undersigned hereby irrevocably elects to exercise ____________
Warrants evidenced by the foregoing Warrant Certificate for, and to purchase
thereunder, ____________ full shares of Common Stock issuable upon exercise of
said Warrants and delivery of $_____ in cash (or in liquidation preference of
the Series A 11.5% Cumulative Redeemable Preferred Stock of the Company, or any
combination thereof) with and any applicable taxes payable by the undersigned
pursuant to such Warrant Certificate.
The undersigned requests that certificates for such shares be issued
in the name of ____________________________.
PLEASE INSERT SOCIAL SECURITY
OR TAX IDENTIFICATION NUMBER
(Please print name and address) ________________________________
________________________________
________________________________
If said number of Warrants shall not be all the Warrants evidenced by
the foregoing Warrant Certificate, the undersigned requests that a new Warrant
Certificate evidencing the Warrants not so exercised be issued in the name of
and delivered to:
________________________________________________________________________
________________________________________________________________________
(Please print name and address)
By:_________________________
Name:
Title:
Dated: __________________
FORM OF ASSIGNMENT
FOR VALUE RECEIVED,_________________ hereby sells, assigns and
transfers to each assignee set forth below all of the rights of the undersigned
in and to the number of Warrants (as defined in and evidenced by the foregoing
Warrant Certificate) set opposite the name of such assignee below and in and to
the foregoing Warrant Certificate with respect to said Warrants and the shares
of Common Stock issuable upon exercise of said Warrants:
NAME OF ASSIGNEE ADDRESS NUMBER OF WARRANTS
---------------- ------------------------- ------------------
If the total of said Warrants shall not be all the Warrants evidenced
by the foregoing Warrant Certificate, the undersigned requests that a new
Warrant Certificate evidencing the Warrants not so assigned be issued in the
name of and delivered to the undersigned.
By:
------------------------------
Name:
Title:
Dated:
---------------------