EXHIBIT 4.2
THIS WARRANT AND ANY SECURITIES ACQUIRED UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION TO THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS. THIS WARRANT AND SUCH
SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN
COMPLIANCE WITH THE CONDITIONS SPECIFIED IN THIS WARRANT AND IN THE LOAN
AGREEMENT, DATED AS OF OCTOBER 30, 2003, BETWEEN SOURCE INTERLINK COMPANIES,
INC., AND EACH OF ITS SUBSIDIARIES PARTY THERETO AND HILCO CAPITAL LP OR ITS
AFFILIATE, COPIES OF WHICH WILL BE MADE AVAILABLE UPON REQUEST.
SOURCE INTERLINK COMPANIES, INC.
AMENDED AND RESTATED COMMON STOCK PURCHASE XXXXXXX
Xx. 0X Xxxxxxx 00, 0000
Xxxxxxx to Purchase __________
Shares of Common Stock
SOURCE INTERLINK COMPANIES, INC., a Missouri corporation (the
"Company"), for value received, hereby certifies that ____________, or its
registered assigns (the "Holder"), is entitled to purchase from the
______________ (__________) duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock, par value $.01 per share, of the Company
(the "Common Stock"), at a purchase price per share equal to $8.04 (the
"Purchase Price"), at any time or from time to time but prior to 5:00 P.M., New
York City time, on October 30, 2008 (the "Expiration Date"), all subject to the
terms, conditions and adjustments set forth below in this warrant. This warrant
is one of a series of warrants of like tenor issued in substitution of a warrant
(the "Original Warrant") originally issued to Hilco Capital LP (each a "Warrant"
and collectively, the "Warrants", such term to include any warrant or warrants
issued in substitution therefor). As used herein, the term "Holders" shall mean
and include the Holder and each other person who are he record holders of any of
the Warrants. Notwithstanding anything in this Warrant to the contrary, the
Holder shall in no event be entitled to receive upon exercise of this Warrant
more shares of Common Stock than an amount of shares equal to 20% of the total
amount of shares of Common Stock outstanding immediately prior to the issuance
of this Warrant, minus one.
This Warrant, is issued pursuant to the terms of a certain Loan
Agreement, dated as of October 30, 2003, (as amended or otherwise modified from
time to time, the "Loan Agreement"), between the Company and certain of its
subsidiaries, as Borrowers, Hilco Capital LP and certain other lenders from time
to time named therein. Capitalized terms used herein and
not otherwise defined herein shall have the meanings assigned such terms in the
Loan Agreement.
1. DEFINITIONS. As used herein, unless the context otherwise
requires, the following terms shall have the meanings indicated:
"Additional Shares of Common Stock" shall mean all shares (including
treasury shares) of Common Stock issued or sold or, pursuant to Section 3.3 or
3.4, deemed to be issued by the Company after the date hereof, whether or not
subsequently reacquired or retired by the Company, other than:
(a) (i) shares issued upon the exercise of the Warrants, or (ii)
such number of additional shares as may become issuable upon the exercise of the
Warrants by reason of adjustments required pursuant to the anti-dilution
provisions applicable to the Warrants as in effect on the date hereof,
(b) (i) shares issued upon the exercise of options granted or to be
granted under the Company's stock option plans as in effect on the date hereof
or under any other employee stock option or purchase plan or plans adopted or
assumed after such date by the Company's Board of Directors and approved by its
stockholders; provided in each such case that the exercise or purchase price for
any such share shall not be less than 95% of the fair market value (determined
in good faith by the Company's Board of Directors) of the Common Stock on the
date of grant, and (ii) such additional number of shares as may become issuable
pursuant to the terms of any such plans by reason of adjustments required
pursuant to anti-dilution provisions applicable to such securities in order to
reflect any subdivision or combination of Common Stock, by reclassification or
otherwise, or any dividend on Common Stock payable in Common Stock, and
(c) (i) shares issued upon the exercise or conversion of options or
any other securities convertible into or exchangeable for shares of Common Stock
outstanding as of the date hereof, including without limitation shares issuable
upon exercise of those securities on or prior to the date hereof, (ii) such
additional number of shares as may become issuable upon the exercise of any such
securities by reason of adjustments required pursuant to anti-dilution
provisions applicable to such securities as in effect on the date hereof, but
only if and to the extent that such adjustments are required as the result of
the original issuance of the Original Warrant, and (iii) such additional number
of shares as may become issuable upon the exercise of any such securities by
reason of adjustments required pursuant to anti-dilution provisions applicable
to such securities as in effect on the date hereof, in order to reflect any
subdivision or combination of Common Stock, by reclassification or otherwise, or
any dividend on Common Stock payable in Common Stock.
(d) (i) up to 150,000 shares of Common Stock issuable upon the
exercise or conversion of options which may be issued to Xxxxxx Xxxxxxxx and
(ii) up to 75,000 shares of Common Stock issuable upon the exercise or
conversion of options which may be issued in connection with the transactions
described in the DEYCO Letter of Intent in favor of an entity to be formed to
manage and/or acquire DEYCO as described in the DEYCO Letter of Intent.
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"Appraised Fair Value" shall mean, with respect to any security or
other property, the fair value (as of a date which is within 20 days of the date
as of which the determination is to be made) determined in good faith, by an
independent investment banking firm selected jointly by the Company and Hilco
Capital LP or, if that selection cannot be made within ten days, by an
independent investment banking firm selected by the American Arbitration
Association in accordance with its rules, and provided further, that the Company
shall pay all of the fees and expenses of any third parties incurred in
connection with determining the Appraised Fair Value. Such independent banking
firm shall determine Appraised Fair Value assuming a sale between a willing
buyer and a willing seller, both of whom have full knowledge of all relevant
facts bearing on such decision, and neither of whom is under any compulsion to
sell or to buy. Such Appraised Fair Value determination, in the case of any
security issued or issuable by the Company, shall not be discounted by virtue of
the illiquid nature of such securities or the fact that such securities do not
constitute a majority of the Common Stock outstanding but instead shall be
deemed to have been sold as part of a transaction in which 100% of the Common
Stock outstanding on a Fully Diluted Basis has been sold to a single purchaser.
"Business Day" shall mean any day other than a Saturday or a Sunday
or any day on which national banks are authorized or required by law to close in
Illinois. Any reference to "days" (unless Business Days are specified) shall
mean calendar days.
"Commission" shall mean the Securities and Exchange Commission or
any successor agency having jurisdiction to enforce the Securities Act.
"Common Stock" shall have the meaning assigned to it in the
introduction to this Warrant, such term to include any stock into which such
Common Stock shall have been changed or any stock resulting from any
reclassification of such Common Stock, and all other stock of any class or
classes (however designated) of the Company the holders of which have the right,
without limitation as to amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference.
"Company" shall have the meaning assigned to it in the introduction
to this Warrant, such term to include any corporation or other entity which
shall succeed to or assume the obligations of the Company hereunder in
compliance with Section 3.
"Convertible Securities" shall mean any evidences of indebtedness,
shares of stock (other than Common Stock) or other securities directly or
indirectly convertible into or exchangeable for Additional Shares of Common
Stock.
"Current Market Price" shall mean, on any date specified herein, the
average of the daily Market Price during the 10 consecutive trading days
commencing 15 trading days before such date, except that, if on any such date
the shares of Common Stock are not listed or admitted for trading on any
national securities exchange or quoted in the over-the-counter market, the
Current Market Price shall be the Market Price on such date.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time, and the rules and regulations thereunder, or any
successor statute.
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"Expiration Date" shall have the meaning assigned to it in the
introduction to this Warrant.
"Fair Value" shall mean, on any date specified herein (i) in the
case of cash, the dollar amount thereof, (ii) in the case of a security, the
Current Market Price, and (iii) in all other cases, the fair value thereof (as
of a date which is within 20 days of the date as of which the determination is
to be made) determined jointly by the Company and Hilco Capital LP; provided,
however, that if such parties are unable to reach agreement within a reasonable
period of time, the Fair Value shall be equal to Appraised Fair Value.
"Fully Diluted Basis" means all shares of Common Stock outstanding
and any shares of Common Stock issuable upon exercise or conversion of Options
or Convertible Securities (including, without limitation, this Warrant), whether
such right is exercisable or convertible immediately or only after the passage
of time.
"Holder" shall have the meaning assigned to it in the introduction
to this Warrant.
"Loan Agreement" shall have the meaning assigned to in the
introduction to this Warrant.
"Market Price" shall mean, on any date specified herein, the amount
per share of the Common Stock, equal to (i) the last reported sale price of such
Common Stock, regular way, on such date or, in case no such sale takes place on
such date, the average of the closing bid and asked prices thereof regular way
on such date, in either case as officially reported on the principal national
securities exchange on which such Common Stock is then listed or admitted for
trading, (ii) if such Common Stock is not then listed or admitted for trading on
any national securities exchange but is designated as a national market system
security by the NASD, the last reported trading price of the Common Stock on
such date, (iii) if there shall have been no trading on such date or if the
Common Stock is not so designated, the average of the closing bid and asked
prices of the Common Stock on such date as shown by the NASD automated quotation
system, or (iv) if such Common Stock is not then listed or admitted for trading
on any national exchange or quoted in the over-the-counter market, the Appraised
Fair Value of such Common Stock.
"NASD" shall mean the National Association of Securities Dealers,
Inc.
"Obligations" shall have the meaning set forth in the Loan
Agreement, in so far as such obligations are for the payment of money.
"Options" shall mean any rights, options or warrants to subscribe
for, purchase or otherwise acquire either Additional Shares of Common Stock or
Convertible Securities.
"Other Securities" shall mean any stock (other than Common Stock)
and other securities of the Company or any other Person (corporate or otherwise)
which the Holder of this Warrant at any time shall be entitled to receive, or
shall have received, upon the exercise of this Warrant, in lieu of or in
addition to Common Stock, or which at any time shall be issuable or shall have
been issued in exchange for or in replacement of Common Stock or other
Securities pursuant to Section 4 or otherwise.
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"Person" shall mean any individual, firm, partnership, corporation,
trust, joint venture, association, joint stock company, limited liability
company, unincorporated organization or any other entity or organization,
including a government or agency or political subdivision thereof, and shall
include any successor (by merger or otherwise) of such entity.
"Proposed Offering" shall mean an underwritten public offering of
Common Stock by the Company occurring on or prior to March 15, 2004.
"Purchase Price" shall have the meaning assigned to it in the
introduction to this Warrant.
"Registration Rights Agreement" shall mean the Warrantholders Rights
Agreement dated as of the date hereof, as amended or otherwise modified from
time to time.
"Restricted Securities" shall mean (i) any Warrants bearing the
applicable legend set forth in Section 10.1, (ii) any shares of Common Stock (or
Other Securities) issued or issuable upon the exercise of this Warrant which are
(or, upon issuance, will be) evidenced by a certificate or certificates bearing
the applicable legend set forth in such Section, and (iii) any shares of Common
Stock (or Other Securities) issued subsequent to the exercise of any of this
Warrant as a dividend or other distribution with respect to, or resulting from a
subdivision of the outstanding shares of Common Stock (or Other Securities) into
a greater number of shares by reclassification, stock splits or otherwise, or in
exchange for or in replacement of the Common Stock (or Other Securities) issued
upon such exercise, which are evidenced by a certificate or certificates bearing
the applicable legend set forth in such Section.
"Rights" shall have the meaning assigned to it in Section 3.10.
"Securities Act" shall mean the Securities Act of 1933, as amended
from time to time, and the rules and regulations thereunder, or any successor
statute.
"Warrant" shall have the meaning assigned to it in the introduction
to this Warrant.
"Warrant Shares" shall mean any and all shares of Common Stock
issued upon exercise of this Warrant.
2. EXERCISE OF WARRANT.
2.1. Manner of Exercise; Payment of the Purchase Price. (a) This
Warrant may be exercised by the Holder hereof, in whole or in part, at any time
or from time to time prior to 5:00 p.m., New York City time, on the Expiration
Date, by surrendering to the Company at its principal office this Warrant, with
the form of Election to Purchase Shares attached hereto as Exhibit A (or a
reasonable facsimile thereof) duly executed by the Holder and accompanied by
payment of the Purchase Price for the number of shares of Common Stock specified
in such form.
(b) Payment of the Purchase Price may be made as follows (or by any
combination of the following): (i) in United States currency by cash or delivery
of a certified
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check or bank draft payable to the order of the Company or by wire transfer to
the Company, (ii) by cancellation of all or any part of the unpaid principal
amount of Loans held by the Holder in an amount equal to the Purchase Price,
(iii) by cancellation of such number of shares of Common Stock otherwise
issuable to the Holder upon such exercise as shall be specified in such Election
to Purchase Shares, such that the excess of the aggregate Current Market Price
of such specified number of shares on the date of exercise over the portion of
the Purchase Price attributable to such shares shall equal the Purchase Price
attributable to the shares of Common Stock to be issued upon such exercise, in
which case such amount shall be deemed to have been paid to the Company and the
number of shares issuable upon such exercise shall be reduced by such specified
number, or (iv) by surrender to the Company for cancellation certificates
representing shares of Common Stock of the Company owned by the Holder (properly
endorsed for transfer in blank) having a Current Market Price on the date of
Warrant exercise equal to the Purchase Price.
2.2. When Exercise Effective. Each exercise of this Warrant shall be
deemed to have been effected immediately prior to the close of business on the
Business Day on which this Warrant shall have been surrendered to, and the
Purchase Price shall have been received by, the Company as provided in Section
2.1, and, to the extent permitted by law, at such time the Person or Persons in
whose name or names any certificate or certificates for Common Stock (or Other
Securities) shall be issuable upon such exercise as provided in Section 2.3
shall be deemed to have become the holder or holders of record thereof for all
purposes.
2.3. Delivery of Stock Certificates, etc.; Charges, Taxes and
Expenses. (a) As soon as practicable after each exercise of this Warrant, in
whole or in part, and in any event within seven (7) Business Days thereafter,
the Company shall cause to be issued in the name of and delivered to the Holder
hereof or, subject to Section 10, as the Holder may direct,
(i) a certificate or certificates for the number of shares of Common
Stock (or Other Securities) to which the Holder shall be entitled upon
such exercise plus, in lieu of issuance of any fractional share to which
the Holder would otherwise be entitled, if any, a check for the amount of
cash equal to the same fraction multiplied by the Exercise Price per share
on the date of Warrant exercise, and
(ii) in case such exercise is for less than all of the shares of
Common Stock purchasable under this Warrant, a new Warrant or Warrants of
like tenor, for the balance of the shares of Common Stock purchasable
hereunder.
(b) Issuance of certificates for shares of Common Stock upon the
exercise of this Warrant shall be made without charge to the initial Holder
hereof for any issue or transfer tax or other incidental expense, in respect of
the issuance of such certificates, all of which such taxes and expenses shall be
paid by the Company.
2.4. Exercise Disputes. In the case of any dispute with respect to
the number of shares to be issued upon exercise of this Warrant, the Company
shall promptly issue such number of shares of Common Stock that is not disputed
and shall submit the disputed determinations or arithmetic calculations to the
Holder via facsimile within five (5) Business Days of receipt of the Holder's
Election to Purchase Shares. If the Holder and the Company are
6
unable to agree as to the determination of the number of issuable shares within
five (5) Business Days of such disputed determination or arithmetic calculation
being submitted to the Holder, then the Company shall, in accordance with this
Section, submit via facsimile the disputed determination to an independent
reputable accounting firm of national standing, selected by the Company and
reasonably acceptable to the Holder. The Company shall cause such accounting
firm to perform the determinations or calculations and notify the Company and
the Holder of the results within forty-eight (48) hours from the time it
receives the disputed determinations or calculations. Such accounting firm's
determination shall be binding upon all parties absent manifest error. The
Company shall, on the next Business Day, issue certificate(s) representing the
appropriate number of shares of Common Stock in accordance with such accounting
firm's determination and this Section. All fees and expenses of such
determinations and calculations shall be borne by the Company.
2.5. Company to Reaffirm Obligations. The Company shall, at the time
of each exercise of this Warrant, upon the request of the Holder hereof,
acknowledge in writing its continuing obligation to afford to such Holder all
rights to which such Holder shall continue to be entitled after such exercise in
accordance with the terms of this Warrant, provided that if the Holder of this
Warrant shall fail to make any such request, such failure shall not affect the
continuing obligation of the Company to afford such rights to the Holder.
2.6. Tax Basis. The Company and the Holder shall mutually agree as
to the tax basis of this Warrant for purposes of the Internal Revenue Code of
1986, as amended, and the treatment of this Warrant under such Code by each of
the Company and the Holder shall be consistent with such agreement.
3. ADJUSTMENT OF COMMON STOCK ISSUABLE UPON EXERCISE.
3.1. Adjustment of Number of Shares. Upon each adjustment of the
Purchase Price as a result of the calculations made in this Section 3 and
subject to the limitation of the amount of shares set forth in the introductory
paragraph to this Warrant, this Warrant shall thereafter evidence the right to
receive, at the adjusted Purchase Price, that number of shares of Common Stock
(calculated to the nearest one-hundredth) obtained by dividing (i) the product
of the aggregate number of shares covered by this Warrant immediately prior to
such adjustment and the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price by (ii) the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
3.2. Adjustment of Number of Shares.
3.2.1. Issuance of Additional Shares of Common Stock. In case the
Company at any time or from time to time after the date hereof shall issue or
sell Additional Shares of Common Stock (including Additional Shares of Common
Stock deemed to be issued pursuant to Section 3.3 or 3.4 but excluding
Additional Shares of Common Stock purchasable upon exercise of Rights referred
to in Section 3.10) without consideration or for a consideration per share less
than the Current Market Price in effect immediately prior to such issue or sale,
then, and in each such case, subject to Section 3.8, the Purchase Price shall be
reduced, concurrently with such issue or sale, to a price (calculated to the
nearest .001 of a cent) determined by multiplying such Purchase Price by a
fraction
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(a) the numerator of which shall be the sum of (x) the number of
shares of Common Stock outstanding immediately prior to such issue or sale
and (y) the number of shares of Common Stock which the aggregate
consideration received by the Company for the total number of such
Additional Shares of Common Stock so issued or sold would purchase at such
Current Market Price, and
(b) the denominator of which shall be the number of shares of Common
Stock outstanding immediately after such issue or sale, provided that, for
the purposes of this Section 3.2.1, (i) immediately after any Additional
Shares of Common Stock are deemed to have been issued pursuant to Section
3.3 or 3.4, such Additional Shares shall be deemed to be outstanding, and
(ii) treasury shares shall not be deemed to be outstanding.
Notwithstanding anything to the contrary contained herein, no adjustment to
Purchase Price shall be required for any sale of Additional Shares of Common
Stock pursuant to the Proposed Offering if the Purchase Price adjustment under
this section as a result of such sales pursuant to the Proposed Offering would
be less than an amount equal to ten percent of Market Price as computed on the
date of the initial sale of Common Stock pursuant to the Proposed Offering.
3.2.2. Extraordinary Dividends and Distributions. In case the
Company at any time or from time to time after the date hereof shall declare,
order, pay or make a dividend or other distribution (including, without
limitation, any distribution of other or additional stock or other securities or
property or Options by way of dividend or spin-off, reclassification,
recapitalization or similar corporate rearrangement) on the Common Stock other
than (a) a dividend payable in Additional Shares of Common Stock or (b) a
regularly scheduled cash dividend (at a rate not in excess of the rate of the
last regularly scheduled cash dividend theretofore paid) payable out of
consolidated earnings or earned surplus, determined in accordance with generally
accepted accounting principles, or (c) a dividend of Rights referred to in
Section 3.10 hereof, then, in each such case, subject to Section 3.8, the
Purchase Price in effect immediately prior to the close of business on the
record date fixed for the determination of holders of any class of securities
entitled to receive such dividend or distribution shall be reduced, effective as
of the close of business on such record date, to a price determined by
multiplying such Purchase Price by a fraction
(x) the numerator of which shall be the Current Market Price in
effect on such record date or, if the Common Stock trades on an
ex-dividend basis, on the date prior to the commencement of ex-dividend
trading, less the Fair Value of such dividend or distribution applicable
to one share of Common Stock, and
(y) the denominator of which shall be such Current Market Price,
provided that, in the event that the amount of such dividend as so determined is
equal to or greater than 10% of such Current Market Price or in the event that
such fraction is less than 9/10ths, in lieu of the foregoing adjustment,
adequate provision shall be made so that the Holder shall receive, upon Warrant
exercise, a pro rata share of such dividend based upon the maximum number of
shares of Common Stock at the time issuable to the Holder (determined without
regard to whether the Warrant is exercisable at such time.)
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3.3. Treatment of Options and Convertible Securities. In case the
Company at any time or from time to time after the date hereof shall issue,
sell, grant or assume, or shall fix a record date for the determination of
holders of any class of securities of the Company entitled to receive, any
Options or Convertible Securities (whether or not the rights thereunder are
immediately exercisable, but exclusive of options or convertible securities
excluded from the definition of Additional Shares of Common Stock), then, and in
each such case, the maximum number of Additional Shares of Common Stock (as set
forth in the instrument relating thereto, without regard to any provisions
contained therein for a subsequent adjustment of such number) issuable upon the
exercise of such Options or, in the case of Convertible Securities and Options
therefor, the conversion or exchange of such Convertible Securities, shall be
deemed to be Additional Shares of Common Stock issued as of the time of such
issue, sale, grant or assumption or, in case such a record date shall have been
fixed, as of the close of business on such record date (or, if the Common Stock
trades on an ex-dividend basis, on the date prior to the commencement of
ex-dividend trading), provided that such Additional Shares of Common Stock shall
not be deemed to have been issued unless (i) the consideration per share
(determined pursuant to Section 3.5) of such shares would be less than the
Current Market Price in effect on the date of and immediately prior to such
issue, sale, grant or assumption or immediately prior to the close of business
on such record date (or, if the Common Stock trades on an ex-dividend basis, on
the date prior to the commencement of ex-dividend trading), as the case may be,
and (ii) such Additional Shares of Common Stock are not purchasable pursuant to
Rights referred to in Section 3.10, and provided, further, that in any such case
in which Additional Shares of Common Stock are deemed to be issued
(a) whether or not the Additional Shares of Common Stock underlying
such Options or Convertible Securities are deemed to be issued, no further
adjustment of the Purchase Price shall be made upon the subsequent issue
or sale of Convertible Securities or shares of Common Stock upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities, except in the case of any such Options or Convertible
Securities which contain provisions requiring an adjustment, subsequent to
the date of the issue or sale thereof, of the number of Additional Shares
of Common Stock issuable upon the exercise of such Options or the
conversion or exchange of such Convertible Securities by reason of (x) a
change of control of the Company, (y) the acquisition by any Person or
group of Persons of any specified number or percentage of the voting
securities of the Company or (z) any similar event or occurrence, each
such case to be deemed hereunder to involve a separate issuance of
Additional Shares of Common Stock, Options or Convertible Securities, as
the case may be;
(b) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase in the
consideration payable to the Company, or decrease in the number of
Additional Shares of Common Stock issuable, upon the exercise, conversion
or exchange thereof (by change of rate or otherwise), the Purchase Price
computed upon the original issue, sale, grant or assumption thereof (or
upon the occurrence of the record date, or date prior to the commencement
of ex-dividend trading, as the case may be, with respect thereto), and any
subsequent adjustments based thereon, shall, upon any such increase or
decrease becoming effective, be recomputed to reflect such increase or
decrease insofar as it affects such Options, or
9
the rights of conversion or exchange under such Convertible Securities,
which are outstanding at such time;
(c) upon the expiration (or purchase by the Company and cancellation
or retirement) of any such Options which shall not have been exercised or
the expiration of any rights of conversion or exchange under any such
Convertible Securities which (or purchase by the Company and cancellation
or retirement of any such Convertible Securities the rights of conversion
or exchange under which) shall not have been exercised, the Purchase Price
computed upon the original issue, sale, grant or assumption thereof (or
upon the occurrence of the record date, or date prior to the commencement
of ex-dividend trading, as the case may be, with respect thereto), and any
subsequent adjustments based thereon, shall, upon such expiration (or such
cancellation or retirement, as the case may be), be recomputed as if:
(i) in the case of Options for Common Stock or Convertible
Securities, the only Additional Shares of Common Stock issued or
sold were the Additional Shares of Common Stock, if any, actually
issued or sold upon the exercise of such Options or the conversion
or exchange of such Convertible Securities and the consideration
received therefor was the consideration actually received by the
Company for the issue, sale, grant or assumption of all such
Options, whether or not exercised, plus the consideration actually
received by the Company upon such exercise, or for the issue or sale
of all such Convertible Securities which were actually converted or
exchanged, plus the additional consideration, if any, actually
received by the Company upon such conversion or exchange, and
(ii) in the case of Options for Convertible Securities, only
the Convertible Securities, if any, actually issued or sold upon the
exercise of such Options were issued at the time of the issue or
sale, grant or assumption of such Options, and the consideration
received by the Company for the Additional Shares of Common Stock
deemed to have then been issued was the consideration actually
received by the Company for the issue, sale, grant or assumption of
all such Options, whether or not exercised, plus the consideration
deemed to have been received by the Company (pursuant to Section
3.5) upon the issue or sale of such Convertible Securities with
respect to which such Options were actually exercised;
(d) no readjustment pursuant to subdivision (b) or (c) above shall
have the effect of increasing the Purchase Price by an amount in excess of
the amount of the adjustment thereof originally made in respect of the
issue, sale, grant or assumption of such Options or Convertible
Securities; and
(e) in the case of any such Options which expire by their terms not
more than 30 days after the date of issue, sale, grant or assumption
thereof, no adjustment of the Purchase Price shall be made until the
expiration or exercise of all such Options, whereupon such adjustment
shall be made in the manner provided in subdivision (c) above.
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3.4. Treatment of Stock Dividends, Stock Splits, etc. In case the
Company at any time or from time to time after the date hereof shall declare or
pay any dividend on the Common Stock payable in Common Stock, or shall effect a
subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in Common Stock), then, and in each such case, Additional Shares of
Common Stock shall be deemed to have been issued (a) in the case of any such
dividend, immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to receive such
dividend, or (b) in the case of any such subdivision, at the close of business
on the day immediately prior to the day upon which such corporate action becomes
effective.
3.5. Computation of Consideration. For the purposes of this Section
3,
(a) the consideration for the issue or sale of any Additional Shares
of Common Stock shall, irrespective of the accounting treatment of such
consideration,
(i) insofar as it consists of cash, be computed at the net
amount of cash received by the Company, without deducting any
expenses paid or incurred by the Company or any commissions or
compensations paid or concessions or discounts allowed to
underwriters, dealers or others performing similar services in
connection with such issue or sale,
(ii) insofar as it consists of property (including securities)
other than cash, be computed at the Fair Value thereof at the time
of such issue or sale, and
(iii) in case Additional Shares of Common Stock are issued or
sold together with other stock or securities or other assets of the
Company for a consideration which covers both, be the portion of
such consideration so received, computed as provided in clauses (i)
and (ii) above, allocable to such Additional Shares of Common Stock,
such allocation to be determined in the same manner that the Fair
Value of property not consisting of cash is to be determined as
provided in the definition of `Fair Value' herein;
(b) Additional Shares of Common Stock deemed to have been issued
pursuant to Section 3.3, relating to Options and Convertible Securities,
shall be deemed to have been issued for a consideration per share
determined by dividing
(i) the total amount, if any, received and receivable by the
Company as consideration for the issue, sale, grant or assumption of
the Options or Convertible Securities in question, plus the minimum
aggregate amount of additional consideration (as set forth in the
instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration
to protect against dilution) payable to the Company upon the
exercise in full of such Options or the conversion or exchange of
such Convertible Securities or, in the case of Options for
Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such
11
Convertible Securities, in each case computing such consideration as
provided in the foregoing subdivision (a),
by
(ii) the maximum number of shares of Common Stock (as set
forth in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such
number to protect against dilution) issuable upon the exercise of
such Options or the conversion or exchange of such Convertible
Securities; and
(c) Additional Shares of Common Stock deemed to have been issued
pursuant to Section 3.4, relating to stock dividends, stock splits, etc.,
shall be deemed to have been issued for no consideration.
3.6. Adjustments for Combinations, etc. In case the outstanding
shares of Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Purchase Price in
effect immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or consolidation, be
proportionately increased.
3.7. Dilution in Case of Other Securities. In case any Other
Securities shall be issued or sold or shall become subject to issue or sale upon
the conversion or exchange of any stock (or Other Securities) of the Company (or
any issuer of Other Securities or any other Person referred to in Section 4) or
to subscription, purchase or other acquisition pursuant to any Options issued or
granted by the Company (or any such other issuer or Person) for a consideration
such as to dilute, on a basis consistent with the standards established in the
other provisions of this Section 3, the purchase rights granted by this Warrant,
then, and in each such case, the computations, adjustments and readjustments
provided for in this Section 3 with respect to the Purchase Price and the number
of shares purchasable upon Warrant exercise shall be made as nearly as possible
in the manner so provided and applied to determine the amount of Other
Securities from time to time receivable upon the exercise of the Warrants, so as
to protect the holders of the Warrants against the effect of such dilution.
3.8. De Minimis Adjustments. If the amount of any adjustment of the
Purchase Price required pursuant to this Section 3 would be less than one tenth
(1/10) of one percent (1%) of the Purchase Price in effect at the time such
adjustment is otherwise so required to be made, such amount shall be carried
forward and adjustment with respect thereto made at the time of and together
with any subsequent adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate a change in the Purchase
Price of at least one tenth (1/10) of one percent (1%) of such Purchase Price.
All calculations under this Warrant shall be made to the nearest one-hundredth
of a share.
3.9. Abandoned Dividend or Distribution. If the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or other distribution (which results in an adjustment to the
Purchase Price under the terms of this Warrant) and shall, thereafter, and
before such dividend or distribution is paid or delivered to
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shareholders entitled thereto, legally abandon its plan to pay or deliver such
dividend or distribution, then any adjustment made to the Purchase Price and
number of shares of Common Stock purchasable upon Warrant exercise by reason of
the taking of such record shall be reversed, and any subsequent adjustments,
based thereon, shall be recomputed.
3.10. Shareholder Rights Plan. Notwithstanding the foregoing, in the
event that the Company shall distribute "poison pill" rights pursuant to a
"poison pill" shareholder rights plan (the "Rights"), the Company shall, in lieu
of making any adjustment pursuant to Section 3.2.1 or Section 3.2.2 hereof, make
proper provision so that each Holder who exercises a Warrant after the record
date for such distribution and prior to the expiration or redemption of the
Rights shall be entitled to receive upon such exercise, in addition to the
shares of Common Stock issuable upon such exercise, a number of Rights to be
determined as follows: (i) if such exercise occurs on or prior to the date for
the distribution to the holders of Rights of separate certificates evidencing
such Rights (the "Distribution Date"), the same number of Rights to which a
holder of a number of shares of Common Stock equal to the number of shares of
Common Stock issuable upon such exercise at the time of such exercise would be
entitled in accordance with the terms and provisions of and applicable to the
Rights; and (ii) if such exercise occurs after the Distribution Date, the same
number of Rights to which a holder of the number of shares into which the
Warrant so exercised was exercisable immediately prior to the Distribution Date
would have been entitled on the Distribution Date in accordance with the terms
and provisions of and applicable to the Rights.
4. CONSOLIDATION, MERGER, ETC.
4.1. Adjustments for Consolidation, Merger, Sale of Assets,
Reorganization, etc. In case the Company after the date hereof shall (a)
consolidate with or merge into any other Person and shall not be the continuing
or surviving corporation of such consolidation or merger, or (b) permit any
other Person to consolidate with or merge into the Company and the Company shall
be the continuing or surviving Person but, in connection with such consolidation
or merger, the Common Stock or Other Securities shall be changed into or
exchanged for stock or other securities of any other Person or cash or any other
property, or (c) transfer all or substantially all of its properties or assets
to any other Person, or (d) effect a capital reorganization or reclassification
of the Common Stock or Other Securities, (other than a capital reorganization or
reclassification resulting in the issue or Additional Shares of Common Stock for
which adjustment in the Purchase Price is provided in section 3.2.1 or 3.2.2),
then, and in the case of each such transaction, proper provision shall be made
so that, upon the basis and the terms and in the manner provided in this
Warrant, the Holder of this Warrant, upon the exercise hereof at any time after
the consummation of such transaction, shall be entitled to receive (at the
aggregate Purchase Price in effect at the time of such consummation for all
Common Stock or Other Securities issuable upon such exercise immediately prior
to such consummation), in lieu of the Common Stock or Other Securities issuable
upon such exercise prior to such consummation, the highest amount of securities,
cash or other property to which such Holder would actually have been entitled as
a shareholder upon such consummation if such Holder had exercised this Warrant
immediately prior thereto, subject to adjustments (subsequent to such
consummation) as nearly equivalent as possible to the adjustments provided for
in Sections 3 through 5, provided that if a purchase, tender or exchange offer
shall have been made to and accepted by the holders of more than 50% of the
outstanding shares of Common Stock, and if the Holder so designates in
13
a notice given to the Company on or before the date immediately preceding the
date of the consummation of such transaction, the Holder of this Warrant shall
be entitled to receive upon surrender of this Warrant the highest amount of
securities, cash or other property to which it would actually have been entitled
as a shareholder if the Holder of this Warrant had exercised this Warrant prior
to the expiration of such purchase, tender or exchange offer and accepted such
offer, subject to adjustments (from and after the consummation of such purchase,
tender or exchange offer) as nearly equivalent as possible to the adjustments
provided for in Sections 3 through 5.
4.2. Assumption of Obligations. Notwithstanding anything contained
in this Warrant or in the Loan Agreement to the contrary, the Company shall not
effect any of the transactions described in clauses (a) through (d) of Section
4.1 unless, prior to the consummation thereof, each Person (other than the
Company) which may be required to deliver any stock, securities, cash or
property upon the exercise of this Warrant as provided herein shall assume, by
written instrument delivered to, and reasonably satisfactory to, the Holder of
this Warrant, (a) the obligations of the Company under this Warrant (and if the
Company shall survive the consummation of such transaction, such assumption
shall be in addition to, and shall not release the Company from, any continuing
obligations of the Company under this Warrant), (b) the obligations of the
Company to the Holder under the Registration Rights Agreement and (c) the
obligation to deliver to the Holder such shares of stock, securities, cash or
property as, in accordance with the foregoing provisions of this Section 4, the
Holder may be entitled to receive. Nothing in this Section 4 shall be deemed to
authorize the Company to enter into any transaction not otherwise permitted by
the Loan Agreement.
5. OTHER DILUTIVE EVENTS. In case any event shall occur as to which
the provisions of Section 3 or Section 4 hereof are not strictly applicable or
if strictly applicable would not fairly protect the purchase rights represented
by this Warrant in accordance with the essential intent and principles of such
Sections, then, in each such case, the Company shall appoint a firm of
independent certified public accountants of recognized national standing (which
shall be reasonably acceptable to the Holder), which shall give their opinion on
the adjustment, if any, on a basis consistent with the essential intent and
principles established in Section 3, necessary to preserve, without dilution,
the purchase rights represented by this Warrant. Upon receipt of such opinion,
the Company shall promptly mail a copy thereof to the Holder and shall make the
adjustments described therein.
6. NO DILUTION OR IMPAIRMENT. The Company shall not, by amendment of
its certificate of incorporation or through any consolidation, merger,
reorganization, transfer of assets, 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 action as
may be necessary or appropriate in order to protect the rights of the Holder of
this Warrant against dilution or other impairment. Without limiting the
generality of the foregoing, the Company shall (a) not permit the par value of
any shares of stock receivable upon the exercise of this Warrant to exceed the
amount payable therefor upon such exercise, (b) 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 stock, free from all liens, security
interests, encumbrances, taxes, preemptive rights and charges on the exercise of
the Warrants from time to
14
time outstanding, (c) not take any action which results in an increase of the
total number of shares of Common Stock (or Other Securities) issuable after the
action upon the exercise of this Warrant if that total number of issuable shares
would exceed the total number of shares of Common Stock (or Other Securities)
then authorized by the Company's certificate of incorporation and available for
the purpose of issue upon such exercise, and (d) shall not issue any capital
stock of any class which is preferred as to dividends or as to the distribution
of assets upon voluntary or involuntary dissolution, liquidation or winding-up,
unless the rights of the holders thereof shall be limited to a fixed sum or
percentage of par value or a sum determined by reference to a formula based on a
published index of interest rates, an interest rate publicly announced by a
financial institution or a similar indicator of interest rates in respect of
participation in dividends and to a fixed sum or percentage of par value in any
such distribution of assets.
7. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable upon
the exercise of this Warrant (e.g., by reason of the issuance of Additional
Shares of Common Stock or Convertible Securities), the Company at its expense
shall promptly compute such adjustment or readjustment in accordance with the
terms of this Warrant and prepare a certificate, signed by the Chairman of the
Board, President or one of the Vice Presidents of the Company, and by the Chief
Financial Officer, the Treasurer or one of the Assistant Treasurers of the
Company, setting forth such adjustment or readjustment and showing in reasonable
detail the method of calculation thereof and the facts upon which such
adjustment or readjustment is based, including a statement of (a) the
consideration received or to be received by the Company for any Additional
Shares of Common Stock issued or sold or deemed to have been issued, (b) the
number of shares of Common Stock outstanding or deemed to be outstanding on a
Fully Diluted Basis and (c) the Purchase Price in effect immediately prior to
such issue or sale and as adjusted and readjusted (if required by Section 3) on
account thereof. The Company shall forthwith mail a copy of each such
certificate to each holder of a Warrant and shall, upon the written request at
any time of any holder of a Warrant, furnish to such holder a like certificate.
The Company shall also keep copies of all such certificates at its principal
office and shall cause the same to be available for inspection at such office
during normal business hours by any holder of a Warrant or any prospective
purchaser of a Warrant designated by the holder thereof. The Company shall upon
the request in writing of Hilco Capital LP (at the Company's expense), retain
independent public accountants of recognized national standing selected by the
Board of Directors of the Company to make any computation required in connection
with adjustments under this Warrant.
8. NOTICES OF CORPORATE ACTION. In the event of:
(a) any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company, any consolidation or
merger involving the Company and any other Person, any transaction or series of
transactions in which more than 50%
15
of the voting securities of the Company are transferred to another Person, or
any transfer, sale or other disposition of all or substantially all the assets
of the Company to any other Person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
the Company shall mail to the Holder a notice specifying (i) the date or
expected date on which any such record is to be taken for the purpose of such
dividend, distribution or right, and the amount and character of such dividend,
distribution or right, and (ii) the date or expected date on which any such
reorganization, reclassification, recapitalization, consolidation, merger,
transfer, sale, disposition, dissolution, liquidation or winding-up is to take
place and the time, if any such time is to be fixed, as of which the holders of
record of Common Stock (or Other Securities) shall be entitled to exchange their
shares of Common Stock (or Other Securities) for the securities or other
property deliverable upon such reorganization, reclassification,
recapitalization, consolidation, merger, transfer, dissolution, liquidation or
winding-up. Such notice shall be mailed at least 45 days prior to the date
therein specified.
9. REGISTRATION OF COMMON STOCK. If any shares of Common Stock
required to be reserved for purposes of exercise of this Warrant require
registration with or approval of any governmental authority under any federal or
state law (other than the Securities Act) before such shares may be issued upon
exercise, the Company shall, at its expense and as expeditiously as possible,
use its best efforts to cause such shares to be duly registered or approved, as
the case may be. The Holder's rights regarding registration of the Warrant
Shares under the Securities Act shall be governed by the Registration Rights
Agreement.
10. RESTRICTIONS ON TRANSFER.
10.1. Restrictive Legends. Except as otherwise permitted by this
Section 10, this Warrant (including any Warrant issued upon the transfer of this
Warrant) shall be stamped or otherwise imprinted with a legend in substantially
the following form:
THIS WARRANT AND ANY SECURITIES ACQUIRED UPON EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
THE SECURITIES LAW OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT
TO AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT
AND SUCH LAWS. THIS WARRANT AND SUCH SECURITIES MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE
CONDITIONS SPECIFIED IN THIS WARRANT.
Except as otherwise permitted by this Section 10, each certificate for Common
Stock (or Other Securities) issued upon the exercise of this Warrant, and each
certificate issued upon the transfer of any such Common Stock (or Other
Securities), shall be stamped or otherwise imprinted with a legend in
substantially the following form:
16
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAW OF ANY
STATE, AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION TO
THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS. SUCH SECURITIES
MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE
WITH THE CONDITIONS SPECIFIED IN CERTAIN COMMON STOCK PURCHASE WARRANT
ISSUED BY THE COMPANY PURSUANT TO THE LOAN AGREEMENT, DATED AS OF OCTOBER
30, 2003, BETWEEN THE COMPANY AND CERTAIN OF THE COMPANY'S SUBSIDIARIES,
THE HOLDER AND CERTAIN OTHER LENDERS FROM TIME TO TIME PARTY THERETO. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO AND HAVE
THE BENEFIT OF A WARRANTHOLDERS RIGHTS AGREEMENT DATED AS OF OCTOBER 30,
2003 AMONG SOURCE INTERLINK COMPANIES, INC. AND THE HOLDER. COMPLETE AND
CORRECT COPIES OF SUCH WARRANT AND WARRANTHOLDERS RIGHTS AGREEMENT ARE
AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE AND WILL BE FURNISHED TO
THE HOLDER OF SUCH SECURITIES UPON WRITTEN REQUEST AND WITHOUT CHARGE.
10.2. Transfer to Comply With the Securities Act. Restricted
Securities may not be sold, assigned, pledged, hypothecated, encumbered or in
any manner transferred or disposed of (a "Transfer"), in whole or in part,
except in compliance with the provisions of the Securities Act and state
securities or Blue Sky laws and the terms and conditions hereof.
10.3. Termination of Restrictions. The restrictions imposed by this
Section 10 on the transferability of Restricted Securities shall cease and
terminate as to any particular Restricted Securities (a) when a registration
statement with respect to the sale of such securities shall have been declared
effective under the Securities Act and such securities shall have been disposed
of in accordance with such registration statement, (b) when such securities are
sold pursuant to Rule 144 (or any similar provision then in force) under the
Securities Act, or (c) when, in the opinion of both counsel for the Holder and
counsel for the Company, such restrictions are no longer required or necessary
in order to protect the Company against a violation of the Securities Act upon
any sale or other disposition of such securities without registration
thereunder. Whenever such restrictions shall cease and terminate as to any
Restricted Securities, the Holder shall be entitled to receive from the Company,
without expense, new securities of like tenor not bearing the applicable legends
required by Section 9.1.
10.4. Exempt Transfers. The restrictions on the transfer of this
Warrant or the Warrant Shares set forth in this Section 10 shall not apply to
transfers to or from an affiliate of the Holder.
11. REPRESENTATIONS OF COMPANY.
17
11.1. Organization and Qualification. The Company is a corporation
duly organized and validly existing in good standing under the laws of the
jurisdiction in which it is incorporated, and has the requisite corporate power
to own its properties and to carry on its business as now being conducted. The
Company is duly qualified as a foreign corporation to do business and is in good
standing in every jurisdiction in which the nature of the business conducted by
it makes such qualification necessary, except where the failure to so qualify is
not reasonably likely to result in a Material Adverse Change.
11.2. Authorization; Enforcement; Compliance with Other Instruments.
(a) The Company has the requisite corporate power and authority to enter into
and perform its obligations under this Warrant and the Registration Rights
Agreement and to issue the Warrant Shares in accordance with this Warrant, (b)
the execution and delivery of this Warrant and the Registration Rights Agreement
by the Company and the consummation by it of the transactions contemplated
hereby and thereby, including, without limitation, the issuance of this Warrant
and the reservation for issuance and the issuance of the Warrant Shares, upon
exercise of this Warrant, have been duly authorized by the Company's Board of
Directors and no further consent or authorization is required by the Company,
its Board of Directors or its stockholders, (c) the Registration Rights
Agreement and this Warrant have been duly executed and delivered by the Company,
and (d) the Registration Rights Agreement and this Warrant constitute the valid
and binding obligations of the Company enforceable against the Company in
accordance with their terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies.
11.3. Capitalization. As of October 27, 2003, the authorized capital
stock of the Company consists of 40,000,000 shares of Common Stock, par value
$0.01 per share, of which as of such date, 18,770,391 shares are issued and
outstanding, and 2,000,000 shares of Preferred Stock, of which as of such date
hereof, zero (0) shares are issued and outstanding. This Warrant represents
approximately _____ of all issued and outstanding shares as of October 30, 2003.
All of the outstanding shares of capital stock have been validly issued and are
fully paid and nonassessable. No shares of capital stock are subject to
preemptive rights or any other similar rights or any liens or encumbrances
suffered or permitted by the Company. Except as contemplated by this Warrant and
for the securities listed on Schedule 11.3 attached hereto, as of the date
hereof, (i) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its subsidiaries is or may become
bound to issue additional shares of capital stock of the Company or any of its
subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
subsidiaries, and (ii) there are no agreements or arrangements under which the
Company or any of its subsidiaries is obligated to register the sale of any of
their securities under the Securities Act (except the Registration Rights
Agreement and the Registration Rights Agreements listed on Schedule 11.3
attached hereto). There are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
this Warrant or, upon exercise of this Warrant, the issuance of Warrant Shares,
except for anti-
18
dilution provisions which have been validly waived on or prior to the date
hereof in respect of the issuance of this Warrant and, upon exercise of this
Warrant, the issuance of Warrant Shares.
11.4. Issuance of Warrants and Warrant Shares. This Warrant is duly
authorized and, upon issuance in accordance with the terms hereof, will be
validly issued, fully paid and non-assessable, free from all taxes, liens and
charges with respect to the issue thereof, and shall not be subject to
preemptive rights or other similar rights of stockholders of the Company. The
Warrant Shares have been duly authorized and reserved for issuance upon exercise
of this Warrant, and upon such exercise, will be validly issued, fully paid and
non-assessable, free from all taxes, liens and charges with respect to the issue
thereof, and will not be subject to preemptive rights or other similar rights of
stockholders of the Company.
11.5. No Conflicts. The execution, delivery and performance of the
Registration Rights Agreement and this Warrant by the Company, and the
consummation by the Company of the transactions contemplated hereby and thereby
(including, without limitation, the issuance of the Warrant Shares) will not (i)
result in a violation of any organizational documents governing the Company or
(ii) violate or conflict with, or result in a breach of any provision of, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, indenture or
instrument to which the Company or any of its subsidiaries is a party, or result
in a violation of any law, rule, regulation, order, judgment or decree
applicable to the Company or any of its subsidiaries or by which any property or
asset of the Company or any of its subsidiaries is bound or affected. The
Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental or regulatory or
self-regulatory agency in order for it to execute, deliver or perform any of its
obligations under or contemplated by the Registration Rights Agreement or this
Warrant in accordance with the terms hereof or thereof. All consents,
authorizations, orders, filings and registrations which the Company is required
to obtain pursuant to the preceding sentence have been obtained or effected on
or prior to the date hereof.
11.6. Investment Company Status. The Company is not and, upon
issuance of this Warrant or the Warrant Shares, will not be an "investment
company," a company controlled by an "investment company" or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an "investment
company" as such terms are defined in the Investment Company Act of 1940, as
amended.
12. Availability of Information. So long as the Company shall not
have filed a registration statement pursuant to Section 12 of the Exchange Act
or a registration statement pursuant to the requirements of the Securities Act,
the Company shall, at any time and from time to time, upon the request of any
holder of Restricted Securities and upon the request of any Person designated by
such holder as a prospective purchaser of any Restricted Securities, furnish in
writing to such holder or such prospective purchaser, as the case may be, a
statement as of a date not earlier than 12 months prior to the date of such
request of the nature of the business of the Company and the products and
services it offers and copies of the Company's most recent balance sheet and
profit and loss and retained earnings statements, together with similar
financial statements for such part of the two preceding fiscal years as the
Company shall have been in operation, all such financial statements to be
audited to the extent
19
audited statements are reasonably available, provided that, in any event the
most recent financial statements so furnished shall include a balance sheet as
of a date less than 16 months prior to the date of such request, statements of
profit and loss and retained earnings for the 12 months preceding the date of
such balance sheet, and, if such balance sheet is not as of a date less than six
months prior to the date of such request, additional statements of profit and
loss and retained earnings for the period from the date of such balance sheet to
a date less than six months prior to the date of such request. If the Company
shall have filed a registration statement pursuant to the requirements of
Section 12 of the Exchange Act or a registration statement pursuant to the
requirements of the Securities Act, the Company shall timely file the reports
required to be filed by it under the Securities Act and the Exchange Act
(including but not limited to the reports under Sections 13 and 15(d) of the
Exchange Act referred to in subparagraph (c) of Rule 144 adopted by the
Commission under the Securities Act)) and will take such further action as any
holder of Restricted Securities may reasonably request, all to the extent
required from time to time to enable such holder to sell Restricted Securities
without registration under the Securities Act within the limitation of the
exemptions provided by (a) Rule 144 and Rule 144A under the Securities Act, as
such rules may be amended from time to time, or (b) any other rule or regulation
now existing or hereafter adopted by the Commission. Upon the request of any
holder of Restricted Securities, the Company will deliver to such holder a
written statement as to whether it has complied with such requirements.
13. RESERVATION OF STOCK, ETC. The Company shall at all times
reserve and keep available, solely for issuance and delivery upon exercise of
this Warrant, the number of shares of Common Stock (or Other Securities) from
time to time issuable upon exercise of this Warrant at the time outstanding. All
shares of Common Stock (or Other Securities) issuable upon exercise of this
Warrant shall be duly authorized and, when issued upon such exercise or
conversion, shall be validly issued and, in the case of shares, fully paid and
nonassessable, with no liability on the part of the holders thereof, and, in the
case of all securities, shall be free from all taxes, liens, security interests,
encumbrances, taxes, preemptive rights and charges. The transfer agent for the
Common Stock, which may be the Company ("Transfer Agent"), and every subsequent
Transfer Agent for any shares of the Company's capital stock issuable upon the
exercise of any of the purchase rights represented by this Warrant, are hereby
irrevocably authorized and directed at all times until the Expiration Date to
reserve such number of authorized and unissued shares as shall be requisite for
such purpose. The Company shall keep copies of this Warrant on file with the
Transfer Agent for the Common Stock and with every subsequent Transfer Agent for
any shares of the Company's capital stock issuable upon the exercise of the
rights of purchase represented by this Warrant. The Company shall supply such
Transfer Agent with duly executed stock certificates for such purpose. All
Warrants surrendered upon the exercise of the rights thereby evidenced shall be
canceled, and such canceled Warrants shall constitute sufficient evidence of the
number of shares of stock which have been issued upon the exercise of such
Warrants. Subsequent to the Expiration Date, no shares of stock need be reserved
by the Company in respect of any unexercised portion of this Warrant.
14. REGISTRATION AND TRANSFER OF WARRANTS.
14.1. Warrant Register; Ownership of Warrants. This Warrant shall be
numbered and shall be registered in a warrant register (the "Warrant Register")
as it is issued and
20
transferred, which Warrant Register shall be maintained by the Company at its
principal office or, at the Company's election and expense, by a warrant agent
or the Company's transfer agent. The Company shall be entitled to treat the
registered Holder of this Warrant on the Warrant Register as the owner in fact
thereof for all purposes and shall not be bound to recognize any equitable or
other claim to or interest in this Warrant on the part of any other Person, and
shall not be affected by any notice to the contrary, except that, if and when
this Warrant is properly assigned in blank, the Company may (but shall not be
obligated to) treat the bearer thereof as the owner of this Warrant for all
purposes. Subject to Section 10, a Warrant, if properly assigned, may be
exercised by a new holder without a new Warrant first having been issued.
14.2. Transfer of Warrants. Subject to compliance with Section 10,
if applicable, this Warrant and all rights hereunder are transferable in whole
or in part, without charge to the Holder hereof, upon surrender of this Warrant
with a properly executed Form of Assignment attached hereto as Exhibit B at the
principal office of the Company. Upon any partial transfer, the Company shall at
its expense issue and deliver to the Holder a new Warrant of like tenor, in the
name of the Holder, which shall be exercisable for such number of shares of
Common Stock with respect to which rights under this Warrant were not so
transferred.
14.3. Replacement of Warrants. On receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant and, in the case of any such loss, theft or
destruction of this Warrant, on delivery of an indemnity agreement reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender of such Warrant to the Company at its principal office
and cancellation thereof, the Company at its expense shall execute and deliver,
in lieu thereof, a new Warrant of like tenor.
14.4. Adjustments To Purchase Price and Number of Shares.
Notwithstanding any adjustment in Purchase Price or the number or kind of shares
of Common Stock purchasable upon exercise of this Warrant, any Warrant
theretofore or thereafter issued may continue to express the same number and
kind of shares of Common Stock as are stated in this Warrant, as initially
issued.
14.5. Fractional Shares. Notwithstanding any adjustment pursuant to
Section 3 in the number of shares of Common Stock covered by this Warrant or any
other provision of this Warrant, the Company shall not be required to issue
fractions of shares upon exercise of this Warrant or to distribute certificates
which evidence fractional shares. In lieu of fractional shares, the Company
shall make payment to the Holder, at the time of exercise of this Warrant as
herein provided, in an amount in cash equal to such fraction multiplied by the
Current Market Price of a share of Common Stock on the date of Warrant exercise.
15. PUT RIGHTS. At any time and from time to time after (i) the
occurrence of a Event of Default, (ii) the payment in full of the entire
principal balance of the Promissory Note or (iii) four (4) years from the
Closing Date, the Holder may deliver one or more written notices to the Company
(each, a "Put Notice") of its intention to require the Company to purchase for
cash a portion of the Warrant and the Warrant Shares then owned by the Holder
not to exceed an aggregate amount of _______ shares of Common Stock (the "Put
Portion"). Each Put Notice shall specify the exact number of shares to be
subject to such purchase request
21
provided that the sum of all shares, when taken together with all prior shares
purchased by the Company in connection with any prior Put Notice, do not exceed
the Put Portion. Within thirty (30) days of receipt of such a Put Notice, the
Company shall purchase the portion of the Warrant and the Warrant Shares then
owned by the Holder specified in such Put Notice for a cash purchase price equal
to the "Redemption Price". As used herein, the "Redemption Price" shall be equal
to the greater of (a) the Current Market Price, determined as of the date of
delivery of such notice, of the number of shares of Common Stock represented by
the portion of the Warrant and Warrant Shares which are subject to the Put
Notice minus, without duplication, the unpaid Purchase Price for any previously
unissued Warrant Shares which are required to be purchased pursuant to the Put
Notice and (b) the Appraised Fair Value, determined as of the date of delivery
of such notice, of the portion of the Warrant and Warrant Shares subject to the
Put Notice minus, without duplication, the unpaid Purchase Price for any
previously unissued Warrant Shares which are required to be purchased pursuant
to the Put Notice. The Holder may exercise its rights under this Section at any
time and from time to time on or after the occurrence of any of the events
described in clauses (i), (ii) or (iii) above. If for any reason the Issuer
shall fail to pay its obligations under this Section when due, interest at a per
annum rate equal to four (4.0) percent above the interest rate that would
otherwise be applicable under Section 2.6 of the Loan Agreement, compounded
daily, shall accrue on the unpaid principal amount of such unpaid obligations
until paid in full in cash. Following any such default in payment, the Company
shall promptly issue to the Holder a demand note in the principal amount equal
to any unpaid amounts, bearing interest at a rate per annum equal to four (4.0)
percent above the interest rate that would be otherwise applicable under Section
2.6 of the Loan Agreement, compounded daily, with the Company required to use
any available cash to pay any accrued interest and unpaid principal on such
note. So long as any obligations shall remain outstanding under the Revolver
Loan Agreement, such note shall be subordinated to the payment and performance
of the obligations of Company under the Revolver Loan Agreement in such manner
as to constitute "Subordinated Indebtedness" under the Revolver Loan Agreement.
Such rights shall be in addition to all other rights and remedies available to
the Holder upon a breach by the Company of its obligations under this Section.
16. Call Right. At anytime following January 31, 2008, so long as
the Company has fully repaid all Obligations owing under the Loan Agreement, the
Company shall have the right to purchase from the Holder a portion of the
unexercised Warrant representing the lesser of (x) ___________ shares of Common
Stock or (y) the remaining balance of the unexercised Warrant (such lesser
amount, the "Maximum Call Amount") by providing written notice to the Holder
(the "Call Notice"). The Company shall not deliver a Call Notice to any Holder
of a Warrant, without concurrently providing all Holders with a Call Notice. The
Company shall be entitled to only one Call Notice and such Call Notice shall
specify the number of shares of Common Stock subject to such call right up to
the Maximum Call Amount. Any exercise by the Company of its call right shall be
irrevocable. In every case of a call of less than the Maximum Call Amount from
all Holders, the number of shares of Common Stock to be purchased from each
Holder shall be equal to the aggregate number of shares of Common Stock that are
the subject to the Call Notice(s) times a fraction, the numerator of which is
the number of shares of Common Stock then issuable upon exercise of the Warrant
held by the individual Holder and the denominator of which is the number of
shares of Common Stock then issuable upon exercise of all outstanding Warrants.
The closing of the purchase by the Company, and the sale by the Holder, of the
portion of the unexercised Warrant specified in the Call Notice,
22
following exercise by the Company of its call right (the "Call Closing") shall
be held at the principal office of Hilco Capital LP or its legal counsel within
30 days of Holder's receipt of the Company's Call Notice. At the Call Closing,
Holder shall deliver the unexercised portion of the Warrant to the Company
against receipt from the Company of the aggregate Call Price (as defined below)
therefor in cash by wire transfer of immediately available funds to Holder's
designated account. To the extent that the Call Notice is for less than the
entire balance of the unexercised Warrant, the Holder shall be entitled to
receive an amended and restated warrant for the unpurchased balance of the
Warrant remaining after such call which shall be on terms and conditions
identical to this Warrant except for the inclusion of any further call rights.
As used herein: "Call Price" shall mean an amount equal to the greater of (a)
the Current Market Price, determined as of the date of delivery of a Call
Notice, of the number of shares of Common Stock represented by the Call Notice
minus, without duplication, the unpaid Purchase Price for the unexercised
portion of the Warrant represented by the Call Notice and (b) the Appraised Fair
Value, determined as of the date of delivery of a Call Notice, of the number of
shares of Common Stock represented by the Call Notice minus, without
duplication, the unpaid Purchase Price for the unexercised portion of the
Warrant represented by the Call Notice. If Holder tenders this Warrant at the
Call Closing and the Company fails to tender payment of the required aggregate
Call Price at the Call Closing, then the Company's call right shall thereupon
terminate and be of no force or effect, notwithstanding its previous exercise
thereof, and the Company shall indemnify Holder against all costs, expenses
(including without limitation reasonable attorneys' fees), losses and damages
paid, suffered or incurred by Holder as a result of the Company's exercise of
such call right and failure to tender such aggregate Call Price.
17. REMEDIES; SPECIFIC PERFORMANCE. The Company stipulates that
there would be no adequate remedy at law to the Holder of this Warrant in the
event of any default or threatened default by the Company in the performance of
or compliance with any of the terms of this Warrant and accordingly, the Company
agrees that, in addition to any other remedy to which the Holder may be entitled
at law or in equity, the Holder shall be entitled to seek to compel specific
performance of the obligations of the Company under this Warrant, without the
posting of any bond, in accordance with the terms and conditions of this Warrant
in any court of the United States or any State thereof having jurisdiction, and
if any action should be brought in equity to enforce any of the provisions of
this Warrant, the Company shall not raise the defense that there is an adequate
remedy at law. Except as otherwise provided by law, a delay or omission by the
Holder hereto in exercising any right or remedy accruing upon any such breach
shall not impair the right or remedy or constitute a waiver of or acquiescence
in any such breach. No remedy shall be exclusive of any other remedy. All
available remedies shall be cumulative.
18. NO RIGHTS OR LIABILITIES AS SHAREHOLDER. Nothing contained in
this Warrant shall be construed as conferring upon the Holder hereof any rights
as a shareholder of the Company or as imposing any obligation on the Holder to
purchase any securities or as imposing any liabilities on the Holder as a
shareholder of the Company, whether such obligation or liabilities are asserted
by the Company or by creditors of the Company.
19. NOTICES. All notices and other communications (and deliveries)
provided for or permitted hereunder shall be made in writing by hand delivery,
telecopier, any
23
nationally-recognized courier guaranteeing overnight delivery or first class
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Company: Source Interlink Companies, Inc.
00000 Xxxxxxxxx Xxxxxx Xxxx.
Xxxxx 000
Xxxxxx Xxxxxxx, Xxxxxxx 00000
Attention: Chief Executive Officer
Fax: (000) 000-0000
with copies to: Xxxxx Xxxxx
000 Xxxxxxxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx
Fax: (000) 000-0000
If to Holder:
with copies to: Xxxxxx & Xxxxxxx LLP
Suite 5800, Sears Tower
000 X. Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx Xxxxxx
Fax No. (000) 000-0000
All such notices and communications (and deliveries) shall be deemed
to have been duly given: at the time delivered by hand, if personally delivered;
when receipt is acknowledged, if telecopied; on the next Business Day, if timely
delivered to a courier guaranteeing overnight delivery; and five days after
being deposited in the mail, if sent first class or certified mail, return
receipt requested, postage prepaid; provided, that the exercise of any Warrant
shall be effective in the manner provided in Section 2.
20. AMENDMENTS. This Warrant and any term hereof may not be amended,
modified, supplemented or terminated, and waivers or consents to departures from
the provisions hereof may not be given, except by written instrument duly
executed by the party against which enforcement of such amendment, modification,
supplement, termination or consent to departure is sought.
21. DESCRIPTIVE HEADINGS, ETC. The headings in this Warrant are for
convenience of reference only and shall not limit or otherwise affect the
meaning of terms contained herein. Unless the context of this Warrant otherwise
requires: (1) words of any
24
gender shall be deemed to include each other gender; (2) words using the
singular or plural number shall also include the plural or singular number,
respectively; (3) the words "hereof", "herein" and "hereunder" and words of
similar import when used in this Warrant shall refer to this Warrant as a whole
and not to any particular provision of this Warrant, and Section and paragraph
references are to the Sections and paragraphs of this Warrant unless otherwise
specified; (4) the word "including" and words of similar import when used in
this Warrant shall mean "including, without limitation," unless otherwise
specified; (5) "or" is not exclusive; and (6) provisions apply to successive
events and transactions.
22. GOVERNING LAW. This Warrant shall be governed by and construed
in accordance with the laws of the State of New York (without giving effect to
the conflict of laws principles thereof).
23. COSTS AND ATTORNEYS' FEES. In the event that any action, suit or
other proceeding is instituted concerning or arising out of this Warrant by the
Holder and the Holder is the prevailing party in such action, suit or other
proceeding, the Company shall pay all of the Holder's costs and reasonable
attorneys' fees incurred in each and every such action, suit or other
proceeding, including any and all appeals or petitions therefrom.
24. JUDICIAL PROCEEDINGS. Any legal action, suit or proceeding
brought against the Company with respect to this Warrant may be brought in any
federal court of the Southern District of New York or any state court located in
New York County, State of New York, and by execution and delivery of this
Warrant, the Company hereby irrevocably and unconditionally waives any claim (by
way of motion, as a defense or otherwise) of improper venue, that it is not
subject personally to the jurisdiction of such court, that such courts are an
inconvenient forum or that this Warrant or the subject matter may not be
enforced in or by such court. The Company hereby irrevocably and unconditionally
consents to the service of process of any of the aforementioned courts in any
such action, suit or proceeding by the mailing of copies thereof by registered
or certified mail, postage prepaid, at its address set forth or provided for in
Section 18, such service to become effective 10 days after such mailing. Nothing
herein contained shall be deemed to affect the right of any party to serve
process in any manner permitted by law or commence legal proceedings or
otherwise proceed against any other party in any other jurisdiction to enforce
judgments obtained in any action, suit or proceeding brought pursuant to this
Section.
25. REGISTRATION RIGHTS AGREEMENT. The shares of Common Stock (and
Other Securities) issuable upon exercise of this Warrant (or upon conversion of
any shares of Common Stock issued upon such exercise) shall constitute
Registrable Securities (as such term is defined in the Registration Rights
Agreement). Each holder of this Warrant shall be entitled to all of the benefits
afforded to a holder of any such Registrable Securities under the Registration
Rights Agreement and such holder, by its acceptance of this Warrant, agrees to
be bound by and to comply with the terms and conditions of the Registration
Rights Agreement applicable to such holder as a holder of such Registrable
Securities.
[Signature Page Follows]
25
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed and delivered as of the date first above written.
SOURCE INTERLINK COMPANIES, INC.
By: ______________________________________
Name: Xxxx Xxxxxxx
Title: Chief Financial Officer & Secretary
EXHIBIT A to
Common Stock Purchase Warrant
ELECTION TO PURCHASE SHARES
The undersigned hereby irrevocably elects to exercise the Warrant to
purchase ____ shares of Common Stock, par value $_______ per share ("Common
Stock"), of Source Interlink Companies, Inc. and hereby [makes payment of
$________ therefor] [or] [makes payment therefor by application pursuant to
Section 2.1(b)(ii) of the Warrant of $_______ aggregate principal amount of
Notes (as defined in the Warrant)] [or] [makes payment therefor by reduction
pursuant to Section 2.1(b)(iii) of the Warrant of the number of shares of Common
Stock otherwise issuable to the Holder upon Warrant exercise by ___ shares] [or]
[makes payment therefor by delivery of the following Common Stock Certificates
of the Company (properly endorsed for transfer in blank) for cancellation by the
Company pursuant to Section 2.1(b)(iv) of the Warrant, certificates of which are
attached hereto for cancellation [list certificates by number and amount]]. The
undersigned hereby requests that certificates for such shares be issued and
delivered as follows:
ISSUE TO:_______________________________________________________________________
(NAME)
________________________________________________________________________________
(ADDRESS, INCLUDING ZIP CODE)
________________________________________________________________________________
(SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER)
DELIVER TO:_____________________________________________________________________
(NAME)
________________________________________________________________________________
(ADDRESS, INCLUDING ZIP CODE)
If the number of shares of Common Stock purchased (and/or
reduced) hereby is less than the number of shares of Common Stock covered by the
Warrant, the undersigned requests that a new Warrant representing the number of
shares of Common Stock not so purchased (or reduced) be issued and delivered as
follows:
ISSUE TO:_______________________________________________________________________
(NAME OF HOLDER)
________________________________________________________________________________
(ADDRESS, INCLUDING ZIP CODE)
DELIVER TO:_____________________________________________________________________
(NAME OF HOLDER)
________________________________________________________________________________
(ADDRESS, INCLUDING ZIP CODE)
Dated: _____________, 200_ HOLDER
By___________________________
Name:
Title:
EXHIBIT B to
Common Stock Purchase Warrant
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers unto the Assignee named below all of the rights of the undersigned to
purchase Common Stock, par value $_____ per share ("Common Stock") of Source
Interlink Companies, Inc. represented by the Warrant, with respect to the number
of shares of Common Stock set forth below:
Name of Assignee Address No. of Shares
and does hereby irrevocably constitute and appoint Source Interlink Companies,
Inc. to make such transfer on its books maintained for that purpose, with full
power of substitution in the premises.
Dated: _______________, 200_
By___________________________
Name:
Title:
SCHEDULE 11.3
OUTSTANDING OPTIONS, WARRANTS, SCRIPTS, SUBSCRIPTION
COMMITMENT RIGHTS, AND COMMITMENTS
As of October 27, 2003, Source Interlink Companies, Inc. has outstanding options
issued under its stock based employee compensation plans for the purchase of
5,049,689 shares of its common stock.
As of October 27, 2003, Source Interlink Companies, Inc. has outstanding
warrants for the purchase of 33,644 shares of its common stock.
As of October 27, 2003, Source Interlink Companies, Inc. has outstanding
commitments to issue warrants for the purchase of 225,000 shares of its common
stock.
