EXHIBIT 2
WARRANT EXCHANGE AGREEMENT
THIS WARRANT EXCHANGE AGREEMENT ("AGREEMENT") is made and entered into
as of March 19, 2004 by and between Crown EMAK Partners, LLC, a Delaware limited
liability company (the "INVESTOR"), and Equity Marketing, Inc., a Delaware
corporation (the "COMPANY").
RECITALS
A. The Investor and the Company entered into a Securities Purchase
Agreement, dated as of March 29, 2000 (the "PURCHASE AGREEMENT") pursuant to
which the Company issued to the Investor the following warrants (collectively,
the "PREFERRED WARRANTS") to purchase shares of Company's Series B Senior
Cumulative Participating Convertible Preferred Stock ("SERIES B STOCK") and
Series C Senior Cumulative Participating Convertible Preferred Stock ("SERIES C
STOCK"): (i) warrant, dated March 29, 2000, to purchase 5,712 shares of Series B
Stock, (ii) warrant, dated June 20, 2000, to purchase 6,288 shares of Series B
Stock, (iii) warrant, dated March 29, 2000, to purchase 1,428 shares of Series C
Stock, and (iv) warrant, dated June 20, 2000 to purchase 1,572 shares of Series
C Preferred Stock.
B. The Investor and the Company desire to provide for the exchange of
the Preferred Warrants for warrants (collectively, the "COMMON WARRANTS") to
purchase shares of the Company's common stock, $0.001 par value per share
("COMMON STOCK"), pursuant to the terms and conditions set forth in this
Agreement (the "EXCHANGE TRANSACTIONS").
C. The Investor and the Company intend that the issuance of the Common
Warrants in exchange for the Preferred Warrants be exempt from registration
pursuant to Section 3(a)(9) of the Securities Act of 1933, as amended.
For good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the Company and the Investor hereby agree as follows:
1. Exchange of Warrants. Upon the terms and subject to conditions
hereof:
1.1 the Investor hereby agrees to sell, assign, transfer and
deliver the Preferred Warrants to the Company in exchange for the
issuance by the Company to the Investor of Common Warrants, in the form
attached hereto as Exhibit A, to purchase the number of shares of
Common Stock ("WARRANT SHARES"), at the respective exercise prices and
having the respective expiration dates set forth below:
Number of Exercise Price Expiration Date of Common
Warrant Shares Per Share Warrant
357,000 $16.00 March 29, 2010
79,333 $18.00 March 29, 2010
393,000 $16.00 June 20, 2010
87,333 $18.00 June 20, 2010
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1.2 the Company agrees to issue and deliver to the Investor
the Common Warrants in exchange for the Preferred Warrants.
2. Closing. The closing of the Exchange Transactions (the "CLOSING") will
occur concurrently with or as soon as reasonably practicable following the
execution of this Agreement. At the Closing, (i) the Investor will deliver to
the Company the Preferred Warrants, duly endorsed for transfer or accompanied by
duly executed instruments of assignment and any other documents reasonably
requested by the Company to effectuate the purposes of this Agreement; and (ii)
the Company will deliver to the Investor the Common Warrants duly executed by an
authorized officer of the Company. All acts, deliveries and confirmations
comprising the Closing regardless of chronological sequence shall be deemed to
occur contemporaneously and simultaneously upon the occurrence of the last act,
delivery of confirmation of the Closing and none of such acts, deliveries or
confirmations shall be effective unless and until the last of the same has
occurred. The Preferred Warrants will be cancelled concurrent with the Closing
3. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Investor as follows:
3.1 Organization, Standing and Power. The Company is duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite power and authority to carry on
its business as now being conducted.
3.2 Authority; Binding Obligations. The Company has all
requisite power and authority to enter into this Agreement and to
consummate the Exchange Transactions. The execution and delivery of
this Agreement by the Company and the consummation by the Company of
the Exchange Transactions have been duly authorized by all necessary
action on the part of the Company. This Agreement has been duly
executed and delivered by, and constitutes the valid and binding
obligation of, the Company, enforceable against the Company in
accordance with its terms, subject to the effect of applicable
bankruptcy, insolvency, reorganization, moratorium and other similar
laws affecting the rights of creditors generally and the effect of
general principles of equity.
3.3 Capitalization. The authorized capital stock of the
Company consists of 50,000,000 shares of Common Stock and 1,000,000
shares of preferred stock, $0.001 par value per share, of which 25,000
shares are designated as Series A Senior Cumulative Participating
Convertible Preferred Stock ("SERIES A STOCK"), 12,000 shares are
designated as Series B Stock and 3,000 shares are designated as Series
C Stock. As of December 31, 2003, there were (i) 5,684,953 shares of
Common Stock issued and outstanding, (ii) 3,150,708 shares of Common
Stock held in the treasury of the Company or held by any subsidiary of
the Company; (iii) 594,799 shares of Common Stock reserved for issuance
under the Company's stock option plans upon exercise of authorized but
unissued stock options; (iv) 2,287,178 shares of Common Stock issuable
upon exercise of outstanding stock options issued under the Company's
stock option plans; (v) 25,000 shares of Series A Stock issued and
outstanding; and (vi) no shares of Series B Stock or Series C Stock
issued or outstanding.
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3.4 Non-Contravention. The execution and delivery of this
Agreement does not, and the consummation of the Exchange Transactions
and compliance with the provisions hereof will not, conflict with, or
result in any breach or violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of or "put" right with
respect to any obligation or to loss of a benefit under, or result in
the creation of any pledges, claims, liens, charges, encumbrances and
security interests of any kind or nature (collectively, "LIENS") upon
its properties or assets under (i) the Company's Certificate of
Incorporation, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease, contract or other agreement, instrument, permit,
concession, franchise or license applicable to the Company or any of
its properties or assets which is material to the Company, each as
amended to date or (iii) any judgment, order, decree, statute, law,
ordinance, rule, regulation or arbitration award applicable to the
Company, or its properties or assets, other than, in the case of
clauses (ii) and (iii), any such conflicts, breaches, violations,
defaults, rights, losses or Liens that individually or in the aggregate
would not have a material adverse effect with respect to the Company or
would not prevent or materially hinder or delay the ability of the
Company to consummate the Exchange Transactions.
3.5 Valid Issuance. The Common Warrants upon issuance pursuant
to the terms of this Agreement, and the Warrant Shares upon receipt of
the consideration called for in the Common Warrants, will be duly
authorized, validly issued, fully paid and non-assessable and free and
clear of any lien, security interest, option or other charge or
encumbrance, and free of all preemptive and other third party rights.
4. Representations of the Investor. The Investor represents to the
Company that:
4.1 Organization, Standing and Power. The Investor is duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite power and authority to carry on
its business as now being conducted.
4.2 Authority. The Investor has all requisite power and
authority to enter into this Agreement and to consummate the Exchange
Transactions. The execution and delivery of this Agreement by the
Investor and the consummation by the Investor of the Exchange
Transactions have been duly authorized by all necessary action on the
part of the Investor. This Agreement and the has been duly executed and
delivered by, and constitutes the valid and binding obligation of, the
Investor, enforceable against the Investor in accordance with its
terms, subject to the effect of applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting the rights
of creditors generally and the effect of general principles of equity.
4.3 Noncontravention. The execution and delivery of this
Agreement does not, and the consummation of the Exchange Transactions
and compliance with the provisions hereof will not, conflict with, or
result in any breach or violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of or "put" right with
respect to any obligation or to loss of a benefit under, or result in
the creation of Liens upon its properties or assets under, (i) the
Investor's Certificate of Formation or operating agreement, each as
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amended to date, (ii) any loan or credit agreement, note, bond,
mortgage, indenture, lease, contract or other agreement, instrument,
permit, concession, franchise or license applicable to the Investor or
any of its properties or assets which is material to the Investor, each
as amended to date or (iii) any judgment, order, decree, statute, law,
ordinance, rule, regulation or arbitration award applicable to the
Investor, or its properties or assets, other than, in the case of
clauses (ii) and (iii), any such conflicts, breaches, violations,
defaults, rights, losses or Liens that individually or in the aggregate
would not have a material adverse effect with respect to the Investor
or would not prevent or materially hinder or delay the ability of the
Investor to consummate the Exchange Transactions.
4.4 Warrant Ownership. The Investor owns beneficially and of
record, and has good and valid title to, the Preferred Warrants, free
and clear of any Liens. There are no agreements affecting the right of
the Investor to convey the Preferred Warrants to the Company and the
Investor has the absolute right, authority, power and capacity to sell,
assign and transfer the Preferred Warrants to the Company, free and
clear of any Liens.
4.5 Brokers. No broker, investment banker, financial advisor
or other person, is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the
Exchange Transactions based upon arrangements made by or on behalf of
the Investor.
4.6 Investor Status. The Investor has such knowledge and
experience in financial and business matters as to be capable of
evaluating the merits and risks of its investment in the Common
Warrants and the Warrant Shares and is able to bear the economic risks
of such investment.
4.7 Accredited Investor. The Investor is an "accredited
investor" as defined in Rule 501(a) under the 1933 Act. The Investor is
acquiring the Common Warrants for its own account and not with a view
to any resale, distribution or other disposition of the Common Warrants
(or the Common Stock issuable upon exercise thereof) in violation of
the United States securities laws.
4.8 No Other Agreements. The Investor has made no other
agreements, arrangements or understandings concerning the Exchange
Transactions or the Company or any of its subsidiaries with (a) any
director, officer, employee or consultant of the Company or any of its
subsidiaries, or (b) any stockholder beneficially owning at least 5% of
the outstanding Common Stock.
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5. Covenants and Other Agreements.
5.1 Elimination of Series B Stock and Series C Stock. The
Company covenants and agrees that it will file with the Delaware
Secretary of State, immediately following the Closing, a certificate
setting forth the statements required pursuant to Section 151(g)
necessary to eliminate from the Company's certificate of incorporation
all matters set forth in the Certificate of Designation (as defined in
the Purchase Agreement) with respect to the Series B Stock and the
Series C Stock and that it will not issue any shares of Series B Stock
or Series C Stock prior to the effectiveness of such filing.
5.2 Standstill Agreement. Section 5.6 of the Purchase
Agreement is hereby amended in the following respects:
(a) the date of March 29, 2005 shall be deemed to be
March 29, 2010; and
(b) the capitalized term "Warrants" shall be deemed to
refer to the Common Warrants as defined in this Agreement.
5.3 Registration Rights Agreement. The Registration Rights
Agreement (as defined in the Purchase Agreement) between the Investor
and the Company, dated as of March 29, 2000, is hereby deemed amended
to provide that the term "Registrable Securities" shall be deemed to
include all shares of Common Stock issuable upon exercise of the Common
Warrants.
5.4 Legend; Stop Transfer. The Common Warrants issued in
connection herewith, and the Warrant Shares issued upon exercise of the
Common Warrants, will bear a legend substantially similar to the
following:
"THIS WARRANT AND THE SECURITIES TO BE ISSUED UPON EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES
LAWS OF ANY STATE. NEITHER THIS WARRANT NOR ANY INTEREST
HEREIN NOR THE SECURITIES ISSUABLE UPON EXERCISE HEREOF NOR
ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT
TO (I) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR
(II) AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS, SUCH
EXEMPTION TO BE EVIDENCED BY SUCH DOCUMENTATION AS THE COMPANY
MAY REASONABLY REQUEST."
The Company will make a notation regarding the restrictions on
transfer of the Common Warrants and the Warrant Shares in its books and
the same may be transferred on the books of the Company only if
transferred or sold pursuant to an effective registration statement
under the Securities Act covering the securities to be transferred or
an opinion of counsel satisfactory to the Company that such
registration is not required.
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5.5 Public Announcements. The Investor and the Company will
consult with each other before issuing, and provide each other the
opportunity to review and comment upon, any press release or other
public statements with respect to the Exchange Transactions, and shall
not issue any such press release or make any such public statement
prior to such consultation, except as may be required by applicable
law, court process or by obligations pursuant to any listing agreement
with any national securities exchange or as are agreed upon in advance.
The parties agree that the initial press release or releases to be
issued with respect to the Exchange Transactions shall be mutually
agreed upon prior to the issuance thereof.
6. Miscellaneous.
6.1 Entire Agreement. This Agreement, the Purchase Agreement
(as amended hereby), the Registration Rights Agreement (as amended
hereby) and the exhibits hereto and thereto and the other documents
referenced herein and therein constitute the entire understanding and
agreement of the parties hereto with respect to the subject matter
hereof and thereof and supersede all prior and contemporaneous
agreements or understandings, inducements or conditions, express or
implied, written or oral, between the parties with respect hereto and
thereto.
6.2 Governing Law. This Agreement will be governed by and
construed in accordance with the laws of the State of Delaware
regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof.
6.3 Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise, by any of the
parties without the prior written consent of the other parties. Any
assignment in violation of the preceding sentence shall be void.
Subject to the preceding two sentences, this Agreement will be binding
upon, inure to the benefit of, and be enforceable by, the parties and
their respective successors and assigns.
6.4 Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions of this
Agreement in any court of the State of Delaware or of the United States
located in the State of Delaware in the event any dispute arises out of
this Agreement or any of the Exchange Transactions, and each party
agrees (a) it will not attempt to deny or defeat personal jurisdiction
or venue in any such court by motion or other request for leave from
any such court and (b) it will not bring any action relating to this
Agreement or any of the Exchange Transactions in any court other than
any such court.
6.5 Severability. Whenever possible, each provision or portion
of any provision of this Agreement will be interpreted in such manner
as to be effective and valid under applicable law but if any provision
or portion of any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any
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applicable law or rule in any jurisdiction, such invalidity, illegality
or unenforceability will not affect any other provision or portion of
any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision or portion of any provision
had never been contained herein, so long as the economic and legal
substance of the Exchange Transactions are not affected in a manner
materially adverse to any party hereto.
6.6 Further Assurances. The parties agree (i) to furnish upon
request to each other such further information, (ii) to execute and
deliver to each other such other documents, and (iii) to do such other
acts and things, all as the other party may reasonably request for the
purpose of carrying out the intent of this Agreement and the documents
referred to in this Agreement.
6.7 Construction. In entering into this Agreement, each party
represents and warrants that such party does so freely and voluntarily,
after having had the opportunity to meet and confer with such party's
respective attorneys regarding the contents and legal effect of this
Agreement. Each party represents and warrants that such party has full
power and authority to enter into and execute this Agreement. Every
covenant, term, and provision of this Agreement shall be construed
simply according to its fair meaning and not strictly for or against
any party. In the event any claim is made by any party relating to any
conflict, omission, or ambiguity in this Agreement, no presumption or
burden of proof or persuasion shall be implied by virtue of the fact
that this Agreement was prepared by or at the request of a particular
party or such party's counsel.
6.8 Amendment. This Agreement may be amended by mutual
agreement of the parties at any time, but only pursuant to an
instrument in writing duly executed on behalf of each of the Company
and the Investor.
6.9 Counterparts. This Agreement may be executed concurrently
in two or more counterparts, each of which will be deemed an original,
but all of which together will constitute one and the same instrument.
(Signature page follows)
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IN WITNESS WHEREOF, the Investor and the Company have caused this this
Agreement to be signed by their respective officers hereunto duly authorized as
of the date first written above.
CROWN EMAK PARTNERS, LLC
-------------------------------------------------
Xxxxxxx X. Xxxxxxxxxx, its Manager
EQUITY MARKETING, INC.
By:
--------------------------------------------
Xxxxxx X. Xxxx, its Chief Executive Officer
(Signature page to Warrant Exchange Agreement)
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EXHIBIT A
to Warrant Exchange Agreement
FORM OF COMMON WARRANT
THIS WARRANT AND THE SECURITIES TO BE ISSUED UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE. NEITHER THIS
WARRANT NOR ANY INTEREST HEREIN NOR THE SECURITIES ISSUABLE UPON
EXERCISE HEREOF NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO (I) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR (II) AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
ANY APPLICABLE STATE SECURITIES LAWS, SUCH EXEMPTION TO BE EVIDENCED BY
SUCH DOCUMENTATION AS THE COMPANY MAY REASONABLY REQUEST.
Warrant to Purchase:
________ Shares of Common Stock
Dated: ________, 2004
WARRANT
TO PURCHASE SHARES OF COMMON STOCK OF
EQUITY MARKETING, INC.
THIS IS TO CERTIFY THAT Crown EMAK Partners, LLC, a Delaware limited
liability company (the "INVESTOR"), is entitled, at any time prior to ________,
2010 (the "EXPIRATION DATE"), to purchase from Equity Marketing, Inc., a
Delaware corporation (the "COMPANY"), ________ shares of the Company's Common
Stock, $0.001 par value per share (the "COMMON STOCK"), in whole or in part, at
a purchase price of $______ per share (the "EXERCISE PRICE"), all on the terms
and conditions and pursuant to the provisions hereinafter set forth. The
Exercise Price is subject to adjustment as provided herein.
This Warrant is one of four warrants of like tenor originally issued by
the Company pursuant to the terms of a Warrant Exchange Agreement, dated March
19, 2004 (the "WARRANT EXCHANGE AGREEMENT"), between the Company and the Holder.
1. Definitions.
As used in this Warrant, the following terms have the respective
meanings set forth below:
A-1
"BUSINESS DAY" means any day that is not a Saturday or Sunday or a day
on which banks are required or permitted to be closed in the State of New York.
"CLOSING PRICE" means, for each Trading Day, the last reported sale
price on the Nasdaq National Market or, if the Common Stock is not quoted on the
Nasdaq National Market, the average of the closing bid and asked prices in the
over-the-counter market as furnished by any New York Stock Exchange member firm
selected from time to time by the Company for that purpose.
"HOLDER" means Investor and any person or entity that acquires all or a
portion of this Warrant from Investor or its transferees.
"TRADING DAY" means any day in which the Nasdaq National Market or
other applicable stock exchange or market is open for business.
"TRADING PRICE" means the average of the Closing Prices of the Common
Stock for the 20 consecutive Trading Days ending on the day before the day in
question.
"WARRANT PRICE" means an amount equal to (i) the number of shares of
Common Stock being purchased upon exercise of this Warrant pursuant to Section
2.1, multiplied by (ii) the Exercise Price.
"WARRANT SHARES" means the shares of Common Stock purchased by the
Holder upon the exercise hereof.
2. Exercise of Warrant.
2.1. Manner of Exercise. At any time or from time to time from
and after the date hereof and until 5:00 P.M., New York time, on the Expiration
Date, Holder may exercise this Warrant, on any Business Day, for all or any part
of the number of shares of Common Stock purchasable hereunder.
In order to exercise this Warrant, in whole or in part, Holder
shall deliver to the Company at its principal office at 0000 Xxx Xxxxxxx
Xxxxxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000 (i) a written notice of Holder's
election to exercise this Warrant, which notice shall specify the number of
shares of Common Stock to be purchased, (ii) payment of the Warrant Price in
immediately available funds (unless the Holder elects to exercise on a cashless
basis pursuant to Section 2.2 below) and (iii) this Warrant. Such notice shall
be substantially in the form appearing at the end of this Warrant as Exhibit A,
duly executed by Holder. Upon receipt of the items specified in the second
preceding sentence, the Company shall execute or cause to be executed and
deliver or cause to be delivered to Holder a certificate or certificates
representing the aggregate number of full shares of Common Stock issuable upon
such exercise, together with cash in lieu of any fraction of a share, as
hereinafter provided. The stock certificate or certificates so delivered shall
be in such denomination or denominations as Holder shall request in the notice
and shall be registered in the name of Holder. This Warrant shall be deemed to
have been exercised and such certificate or certificates shall be deemed to have
been issued, and
A-2
Holder shall be deemed to have become a holder of record of such shares for all
purposes, as of the date the notice, together with the Warrant Price and this
Warrant, are received by the Company as described above. If this Warrant shall
have been exercised in part, the Company shall, at the time of delivery of the
certificate or certificates representing Warrant Shares, deliver to Holder a new
Warrant evidencing the right of Holder to purchase the unpurchased shares of
Common Stock called for by this Warrant, which new Warrant shall in all other
respects be identical with this Warrant, or, at the request of Holder,
appropriate notation may be made on this Warrant and the same returned to
Holder.
2.2. Cashless Exercise. In lieu of exercising this Warrant in
the manner set forth in Section 2.1 above, this Warrant may be exercised by the
Holder, in whole at any time or in part from time to time prior to the
Expiration Date, by surrendering the Warrant at the address set forth above,
without payment of any other consideration, commission or remuneration, together
with the notice appearing at the end of this Warrant, duly executed. The number
of Warrant Shares to be issued by the Company shall be calculated using the
following formula:
X= Y(A-B)
------
A
Where X = the number of Warrant Shares to be issued to
the Holder
Y = the number of Warrant Shares
purchasable under this Warrant or, if
this Warrant is being exercised in part,
under the portion of the Warrant being
exercised (at the date of the surrender
of this Warrant and the notice form)
A = the Trading Price (at the date of the surrender
of this Warrant and the notice form)
B = the Exercise Price (as adjusted to the date of
the surrender of this Warrant and the
subscription form)
If this Warrant is exercised in part pursuant to this Section
2.2, this Warrant must be exercised for a number of whole shares of the Common
Stock, and the Holder is entitled to receive a new Warrant covering the shares
of Common Stock in respect of which this Warrant has not been exercised. Upon
such exercise and surrender of this Warrant, the Company will (i) issue a
certificate or certificates in the name of the Holder for the largest number of
whole shares of the Common Stock to which the Holder shall be entitled and, if
this Warrant is exercised in whole, in lieu of any fractional share of the
Common Stock to which the Holder shall be entitled, pay cash equal to the fair
value of such fractional share (determined in such reasonable manner as the
Board of Directors of the Company shall determine) and (ii) deliver the other
securities and properties receivable upon the exercise of this Warrant, or the
proportionate part thereof if this Warrant is exercised in part, pursuant to the
provisions of this Warrant.
2.3. Shares to be Validly Issued. All shares of Common Stock
issuable upon the exercise of this Warrant shall be validly issued, fully paid
and nonassessable. The Company shall be entitled to withhold any amounts
required to be withheld under applicable law from any amounts to be paid to the
Holder hereunder.
A-3
2.4. No Fractional Shares. The Company shall not be required
to issue fractions of shares upon the exercise of this Warrant, but in lieu of
any fractional share of the Common Stock to which the Holder shall be entitled,
shall pay cash equal to the fair value of such fractional share (determined in
such reasonable manner as the Board of Directors of the Company shall
determine).
3. Adjustments.
3.1. In case the Company shall (i) declare a dividend or make
a distribution on its Common Stock payable in shares of its capital stock, (ii)
subdivide its outstanding shares of Common Stock through stock split or
otherwise, or (iii) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock, the number and/or nature of Warrant
Shares purchasable upon exercise of each Warrant immediately prior thereto shall
be adjusted so that the Holder shall be entitled to receive the kind and number
of Warrant Shares or other securities of the Company which it would have owned
or have been entitled to receive after the happening of any of the events
described above, had such Warrant been exercised immediately prior to the
happening of such event or any record date with respect thereto. An adjustment
made pursuant to this paragraph (a) shall become effective retroactively as of
the record date of such event.
3.2. Merger, Consolidation or Disposition of Assets. In the
case of any capital reorganization or reclassification of the capital stock of
the Company or in the case of consolidation of the Company or the merger of the
Company with or into any other entity or the sale or transfer of all or
substantially all the assets of the Company pursuant to which the Common Stock
is converted into other securities, cash or assets, upon consummation of such
transaction, this Warrant shall automatically become exercisable for the kind
and amount of securities, cash or other assets receivable upon the
reorganization, reclassification, consolidation, merger, sale or transfer by a
holder of the number of shares of Common Stock into which this Warrant might
have been converted immediately prior to such consolidation, merger, transfer or
sale. Appropriate adjustment shall be made in the application of the provisions
herein set forth with respect to the rights and interests thereafter of the
Holder, to the end that the provisions set forth herein shall thereafter be
applicable, as nearly as reasonably may be, in relation to any shares of stock
or other securities or property thereafter deliverable upon the exercise of this
Warrant.
3.3. Adjustments to Exercise Price. Whenever the number of
shares of Warrant Shares purchasable upon the exercise of each Warrant is
adjusted, as provided in this Section 3, the Exercise Price with respect to the
Warrant Shares 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 shares of Common Stock purchasable upon the exercise of each Warrant
immediately prior to such adjustment, and of which the denominator shall be the
number of shares of Warrant Shares so purchasable immediately thereafter.
A-4
4. No Impairment.
The Company shall not by any action, including, without
limitation, amending its Certificate of Incorporation or comparable governing
instruments or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of Holder against impairment. Without limiting
the generality of the foregoing, the Company will (a) take all such action as
may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock upon the
exercise of this Warrant and (b) obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations under this Warrant.
5. Reservation and Authorization of Common Stock.
From and after the date hereof, the Company shall at all times
reserve and keep available for issue upon the exercise of Warrants such number
of its authorized but unissued shares of Common Stock as will be sufficient to
permit the exercise in full of all outstanding Warrants. All shares of Common
Stock which shall be so issuable, when issued upon exercise of any Warrant and
payment therefor in accordance with the terms of such Warrant, shall be duly and
validly issued and fully paid and nonassessable, and not subject to preemptive
rights.
6. Transferability; Form of Warrants.
6.1. Transfer. None of the Warrant nor the Warrant Shares
issuable upon exercise hereof nor any interest therein may be offered, sold,
transferred, pledged, hypothecated or otherwise disposed of, except pursuant to
(i) an effective registration statement under the Securities Act and any
applicable state securities laws or (ii) an exemption from the registration
requirements of the Securities Act and any applicable state securities laws,
such exemption to be evidenced by such documentation as the Company may
reasonably request, including an opinion of counsel, in writing and addressed to
the Company (which counsel and opinion shall be reasonably satisfactory to the
Company), that such transfer is not in violation of the Securities Act and any
applicable state laws. The Company shall treat the Holder as the holder and
owner hereof for all purposes, unless the Company has been given notice to the
contrary. Subject to compliance with the transfer restrictions set forth above,
upon the delivery to the Company at its principal corporate office of this
Warrant along with a duly completed Assignment Form substantially in the form of
Exhibit B hereto, the Company shall execute and deliver a new Warrant in the
form of this Warrant, but registered in the name of the transferee, to purchase
the Warrant Shares assigned to the transferee. In case the Holder shall assign
this Warrant with respect to less than all of the Warrant Shares, the Company
shall execute a new warrant in the form of this Warrant for the balance of the
Warrant Shares and deliver such new warrant to the transferring Holder.
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6.2. Warrant Register; Ownership of Warrant. The Company will
keep at its principal office a register in which the Company will provide for
the registration of Warrants and the registration of transfers of Warrants. The
Company may treat the person in whose name any Warrant is registered on such
register as the owner thereof for all other purposes, and the Company shall not
be affected by any notice to the contrary.
6.3. Restrictive Legend. Each certificate for Warrant Shares
shall be stamped or otherwise imprinted with the following legend:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE.
NEITHER THIS SECURITY NOR ANY INTEREST HEREIN MAY BE OFFERED, SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ANY APPLICABLE
STATE SECURITIES LAWS OR (ii) AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS, SUCH EXEMPTION TO
BE EVIDENCE BY SUCH DOCUMENTATION AS THE ISSUER MAY REASONABLY REQUEST.
Any certificate issued at any time in exchange or substitution
for any certificate bearing such legend (except a new certificate issued upon
completion of a public distribution pursuant to a registration statement under
the Securities Act ) shall also bear such legend unless, the holder of such
certificate shall have delivered to the Company an opinion of counsel, in
writing and addressed to the Company (which counsel and opinion shall be
reasonably acceptable to the Company), that the securities represented thereby
need no longer be subject to restrictions on resale under the Securities Act or
any state securities laws.
6.4. Registration Rights. The holder of Warrants and Warrant
Shares shall have the registration rights set forth in the Registration Rights
Agreement, dated as of March 29, 2000 between the Holder and the Company, as
amended by the Warrant Exchange Agreement.
7. Loss or Mutilation. Upon receipt by the Company from any Holder of
evidence reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of this Warrant and indemnity reasonably satisfactory
to it, and in case of mutilation upon surrender and cancellation hereof, the
Company will execute and deliver in lieu hereof a new Warrant of like tenor to
such Holder; provided, in the case of mutilation, no indemnity shall be required
if this Warrant in identifiable form is surrendered to the Company for
cancellation.
8. Miscellaneous.
8.1. Expiration. This Warrant shall expire and be of no further
force and effect on the Expiration Date.
8.2. Notice Generally. Any notice, demand, request, consent,
approval, declaration, delivery or other communication hereunder to be made
pursuant to the provisions of
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this Warrant shall be sufficiently given or made if in writing and either
delivered in person with receipt acknowledged or sent by registered or certified
mail, return receipt requested, postage prepaid or by a nationally recognized
overnight courier or by telecopy and confirmed by telecopy answerback, addressed
as follows:
(a) If to the Holder, at its last known address appearing on
the books of the Company maintained for such purpose:
with a copy to: Xxxxxx & Xxxxxx, LLP
000 Xxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, Xxx Xxxx, 00000
Attn: Xxxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
(b) If to the Company at:
0000 Xxx Xxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxx, Esq.
Sr. Vice President, General Counsel
and Secretary
Facsimile: (000) 000-0000
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served (i) on the date on which personally
delivered, with receipt acknowledged, (ii) on the date on which telecopied and
confirmed by written or telephonic acknowledgment, (iii) on the date set forth
on the executed return receipt in the case of registered or certified mail or
(iv) on the next business day after the same shall have been deposited for
overnight delivery with a nationally recognized overnight courier, provided that
proof of receipt is received. Failure or delay in delivering copies of any
notice, demand, request, approval, declaration, delivery or other communication
to the Person designated above to receive a copy shall in no way adversely
affect the effectiveness of such notice, demand, request, approval, declaration,
delivery or other communication.
8.3. No Rights as Shareholders. This Warrant shall not entitle
the Holder to any rights as a stockholder of the Company.
8.4. Successors and Assigns. Subject to the provisions of
Section 3.2, this Warrant and the rights evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company.
8.5. Amendment. This Warrant may be modified or amended or the
provisions hereof waived only with the written consent of the Company and the
Holder.
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8.6. Severability. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant, provided that no such
severance shall be effective if it would change the economic costs or benefits
of this Warrant to the Company or the Holder.
8.7. Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
8.8. Governing Law. This Warrant shall be governed by the laws
of the State of Delaware, without regard to the provisions thereof relating to
conflict of laws.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed as of the date set forth below.
Dated: March 19, 2004
EQUITY MARKETING, INC.
By:
----------------------------------------
Xxxxxx X. Xxxx, Chief Executive Officer
Acknowledged and Agreed:
CROWN EMAK PARTNERS, LLC
By:
---------------------------------------
Xxxxxxx X. Xxxxxxxxxx, Manager
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EXHIBIT A
EXERCISE FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for the purchase of _____ Shares of Common Stock of Equity
Marketing, Inc. and herewith makes payment therefor, all at the price and on the
terms and conditions specified in this Warrant and requests that certificates
for the shares of Common Stock hereby purchased (and any securities or other
property issuable upon such exercise) be issued in the name of the undersigned,
if such shares of Common Stock shall not include all of the shares of Common
Stock issuable as provided in this Warrant, that a new Warrant of like tenor and
date for the balance of the shares of Common Stock issuable hereunder be
delivered to the undersigned.
Check the following box in the case of a "cashless exercise" pursuant
to Section 2.2 [ ].
___________________________________
(Name of Registered Owner)
___________________________________
(Signature of Registered Owner)
___________________________________
(Street Address)
___________________________________
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond
with the name as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change whatsoever.
EXHIBIT B
ASSIGNMENT FORM
[To be executed only upon transfer of Warrant]
For value received, the undersigned registered holder of the within Warrant
hereby sells, assigns and transfers unto ____________________ the right
represented by such Warrant to purchase __________________(1) Warrant Shares and
appoints _________________ Attorney to make such transfer on the books of Equity
Marketing, Inc. maintained for such purpose, with full power of substitution in
the premises.
Dated:
__________________________________________
(Signature must conform in all respects to
name of holder as specified on the face of
Warrant)
__________________________________________
(Street Address)
__________________________________________
(City) (State) (Zip Code)
Signed in the presence of:
____________________________
____________________________
(1) Insert here the number of Warrant Shares as to which this Warrant is being
assigned. In the case of a partial assignment, a new Warrant or Warrants
will be issued and delivered, representing the unassigned portion of the
warrant, to the holder surrendering the Warrant.
