EXHIBIT 10.31
Neither this Warrant, nor the shares of Class A Common Stock to be
issued upon exercise hereof, have been registered under the Securities
Act of 1933, as amended (the "SECURITIES ACT" as defined below), or
qualified under the California Corporate Securities Law of 1968 (the
"LAW"), and this Warrant has been, and the shares of Class A Common
Stock to be issued upon exercise hereof will be, acquired for investment
and not with a view to, or for resale in connection with, any
distribution thereof. No such sale or other disposition may be made
without an effective registration statement under the Securities Act and
qualification under the Law related thereto or an opinion of counsel
reasonably satisfactory to the Company (as that term is defined below)
and its counsel, that said registration and qualification are not
required under the Securities Act and the Law, respectively.
THIS WARRANT IS SUBJECT TO, AND IS TRANSFERABLE ONLY UPON COMPLIANCE
WITH, THE PROVISIONS OF A SHAREHOLDERS AGREEMENT DATED AS OF JUNE 23,
1988, AND A SHAREHOLDERS AGREEMENT DATED AS OF JUNE 30, 1994, IN EACH
CASE, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICE OF
PORTOLA PACKAGING, INC. EACH SUCH SHAREHOLDERS AGREEMENT PROVIDES, AMONG
OTHER THINGS, FOR CERTAIN RESTRICTIONS ON THE SALE, TRANSFER, PLEDGE, OR
OTHER DISPOSITION OF THIS WARRANT AND THE SHARES OBTAINED ON ANY
EXERCISE OF THIS WARRANT.
No. of Stock Units: 2,052,526 Warrant No. 6A
WARRANT
to Purchase
Class A Common Stock
of
PORTOLA PACKAGING, INC.
THIS IS TO CERTIFY THAT CHASE MANHATTAN CAPITAL
CORPORATION, or registered assigns, is entitled, at any time from the
date hereof until 5:00 P.M., New York City time, on the Warrant
Expiration Date (as defined below), to purchase from PORTOLA PACKAGING,
INC., a Delaware corporation, 2,052,526 Stock Units, in whole or in
part, at a purchase price of 60-2/3(cent) per Stock Unit (adjusted as
provided below), all on the terms and conditions and pursuant to the
provisions hereinafter provided.
This Warrant is issued in substitution for that
certain Warrant No. 5A dated as of October 9, 1992 issued by Cap Snap
Co., a California corporation (the predecessor corporation to the
Company (as defined below)) to CMIHI.
Section 1. DEFINITIONS. The terms defined in this
Section, whenever used in this Warrant, shall, unless the context
otherwise requires, have the respective meanings hereinafter specified.
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"ADDITIONAL SHARES OF NONPREFERRED STOCK" means all shares of
Nonpreferred Stock issued by the Company after the date hereof, other
than
(1) the Warrant Stock,
(2) Option Stock, and
(3) shares of Class B Stock issued to officers,
directors, employees and consultants of the Company
pursuant to stock options outstanding on the date
hereof that were granted in accordance with the
Company's 1988 Stock Option Plan.
"BASE RATE" has the meaning specified in the Subordinated
Loan Agreement.
"BUSINESS DAY" means a day other than a Saturday, Sunday or
legal holiday in the State of New York or the State of California.
"CLASS A STOCK" means the Company's authorized Class A Common
Stock, without par value, as constituted on the date of original issue
of this Warrant, and any Common Stock into which such Class A Common
Stock may thereafter be changed or which may be issued to the holders
of shares of Class A Common Stock upon any reclassification thereof.
"CLASS B, SERIES 1 STOCK" means the series of Class B Stock
designated as "Class B Common Stock, Series 1".
"CLASS B, SERIES 2 STOCK" means the series of Class B Stock
designated as "Class B Common Stock, Series 2".
"CLASS B STOCK" means the Company's authorized Class B Common
Stock, without par value, as constituted on the date of original issue
of this Warrant, and any Common Stock into which such Class B Common
Stock may thereafter be changed or which may be issued to the holders
of shares of Class B Common Stock upon any reclassification thereof.
"CMCC" has the meaning specified in the Subordinated Loan
Agreement.
"CMIHI" has the meaning specified in the Subordinated Loan
Agreement.
"COMMISSION" means the Securities and Exchange Commission or
any other governmental body then administering the Securities Act.
"COMMON STOCK" means the Company's authorized Common Stock,
without par value, irrespective of class unless otherwise specified,
as constituted on the date of original issue of this Warrant, and any
shares of stock into which such Common Stock may thereafter be
changed, or that may be issued in respect of, in exchange for, or in
substitution of such Common Stock by reason of any stock splits, stock
dividends, distributions, mergers, consolidations or other like events
and shall also include stock of the Company of any other class, which
is not preferred as to dividends or assets over any other class of
stock of the Company and which is not subject to redemption, issued to
the holders of shares of Common Stock upon any reclassification
thereof.
"COMPANY" means Portola Packaging, Inc., a Delaware
corporation, and any successor corporation by merger or otherwise.
"CONVERTIBLE SECURITIES" means evidences of indebtedness,
shares of stock or other securities which are convertible into or
exchangeable for Additional Shares of
21
Nonpreferred Stock, either immediately or upon the arrival of a
specified date or the happening of a specified event.
"CURRENT MARKET PRICE" per share of Common Stock for the
purposes of any provision of this Warrant at the date herein specified
shall be determined as set forth below. (A) If on such date the Class
B Stock is registered under the Exchange Act, the Current Market Price
per share shall be deemed to be the average of the daily market prices
for 30 consecutive Business Days commencing 45 Business Days before
such date. The market price for each such Business Day shall be, if
the Class B Stock is traded on a national securities exchange, its
last sale price on the preceding Business Day or, if there was no sale
on that day, the last sale price on the next preceding Business Day on
which there was a sale, all as made available over the Consolidated
Last Sale Reporting System of the CTA Plan or, if the Class B Stock is
not then eligible for reporting over such system, its last sale price
on the preceding Business Day on such national securities exchange or,
if there was no sale on that day, on the next preceding Business Day
on which there was a sale on such exchange or, if the principal market
for the Class B Stock is the over-the-counter market, but the Class B
Stock is not then eligible for reporting over the Consolidated Last
Sale Reporting System of the CTA Plan, but the Class B Stock is quoted
on the National Association of Securities Dealers Automated Quotations
System ("NASDAQ"), the last sale price reported on NASDAQ on the
preceding Business Day or, if the Class B Stock is an issue for which
last sale prices are not reported on NASDAQ, the closing bid quotation
on such day, but, in each of the next preceding two cases, if the
relevant NASDAQ price or quotation did not exist on such day, then the
price or quotation on the next preceding Business Day in which there
was such a price or quotation, but if the Class B Stock is not
reported or quoted on NASDAQ, the highest bid quotation as quoted in
any of The Wall Street Journal, the National Quotation Bureau pink
sheets, the Xxxxxx Xxxxxxx & Co., Incorporated quotation sheets,
quotation sheets of registered marketmakers and, if necessary,
dealers' telephone quotations. (B) If on such date the Class B Stock
is not registered under the Exchange Act, the Current Market Price per
share of Common Stock shall be (1) the value of the Class B Stock
determined in good faith in the most recently completed arm's-length
transaction between the Company and an unaffiliated third party in
which transaction the aggregate amount of cash consideration received
by the Company is not less than $500,000 and in which such
determination is necessary and the closing which shall have occurred
within six months preceding such date, or (2) if no such transaction
shall have occurred within the six months preceding such date, the
fair market value of the Class B Stock determined by mutual agreement
between the Company and the holder of this Warrant, or (3) if the
Company and the holder of this Warrant are unable to agree as to the
fair market value of the Class B Stock, the fair market value of the
Common Stock determined as follows. Each of the Company and the holder
of this Warrant shall submit the exact amount that it believes
constitutes the fair market value of the Class B Stock to an
Independent Financial Expert selected by the Board of Directors of the
Company. Such Independent Financial Expert shall thereupon select such
fair market value as proposed by the Company or such fair market value
as proposed by the holder of this Warrant, but shall select no other
amount, and the fair market value so selected shall be conclusively
deemed to be the fair market value of the Common Stock of each class
for the purposes of any provision of this Warrant as at such date of
determination. The fair market value of the Common Stock shall be
determined by the Company, the holder of this Warrant or such
Independent Financial Expert, as the case may be, based upon the fair
market value of 100% of the Company if sold as a going concern. Such
valuation may take into account, among other factors, the amount of
leverage of the Company, its earnings, book value, cash flow and
prospects as well as prevailing multiples paid for similar entities
and value levels of similar, publicly traded entities. The reasonable
fees and expenses of such Independent Financial Expert for making its
determination shall be paid by the Company if such Independent
Financial Expert selects the fair market value proposed by the holder
of this Warrant, or by the holder of this Warrant if such Independent
Financial Expert selects the fair market value as proposed by the
Company.
22
"CURRENT WARRANT PRICE" per share of Class A Stock, for the
purpose of any provision of this Warrant at the date herein specified,
means the amount equal to the quotient resulting from dividing the
purchase price per Stock Unit in effect on such date by the number of
shares (including any fractional share) of Class A Stock comprising a
Stock Unit on such date.
"EBIDAT", as applied to any Person, shall mean, for any
period, determined on a consolidated basis for such Person and its
Consolidated Subsidiaries, such Person's Net Income (Loss) (without
deduction of income and franchise taxes accrued and determined in
accordance with GAAP) for such period, PLUS (a) Interest Expense paid
or accrued during such period, PLUS (b) amortization of depreciation
deducted in determining Net Income (Loss) for such period.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"XXXXXXX" has the meaning specified in the Subordinated Loan
Agreement.
"GAAP" has the meaning specified in the Subordinated Loan
Agreement.
"XXXXXX" has the meaning specified in the Subordinated Loan
Agreement.
"XXXXXX WARRANT" has the meaning specified in the
Subordinated Loan Agreement.
"INDEPENDENT FINANCIAL EXPERT" means: (1) an investment
banking firm or other Person mutually acceptable to the Company and
the holder of this Warrant; or (2) if the Company and the holder of
this Warrant are unable to agree upon a particular expert as
aforesaid, a nationally recognized investment banking firm, ranking in
the top 10 (as determined by the Securities Dealers Association or a
similar securities information data company) as lead manager for
primary common stock offerings in the year prior to the year in which
it is called upon to give independent financial advice to the Company
as described herein and that does not (and whose affiliates do not)
have a direct or indirect financial interest in the Company, that has
not been and at the time it is called upon to give independent
financial advice to the Company, is not (and none of whose affiliates
is) a promoter, director or officer of the Company or any of its
affiliates or an underwriter with respect to any of the securities of
the Company, and that does not provide any advice or opinions to the
Company except as an Independent Financial Expert.
"INITIAL PUBLIC OFFERING" means the first underwritten public
offering and sale of Common Stock pursuant to an effective
registration statement under the Securities Act, provided that (i) the
aggregate offering price in connection with such public offering shall
be at least $10,000,000, and (ii) after giving effect to such offering
and sale and any previous public offerings of Common Stock, at least
20% of the issued and outstanding Common Stock shall be publicly
traded.
"INSTITUTIONAL INVESTOR" means a bank, savings bank, savings
and loan association, insurance company, pension plan, investment
company, investment banking company or other financial institution
subject to Federal or state regulation or any other organization or
entity commonly regarded as an institutional investor.
"INTEREST EXPENSE" has the meaning specified in the
Subordinated Loan Agreement.
"NET INCOME (LOSS)" has the meaning specified in the
Subordinated Loan Agreement.
23
"NONPREFERRED STOCK" means the Class A Stock and the Class B
Stock and shall also include stock of the Company of any other class
which is not preferred as to dividends or assets over any other class
of stock of the Company and which is not subject to redemption.
"OPTION STOCK" means not more than 1,000,000 shares of Class
B Stock issued or issuable (pursuant to stock options) to officers,
directors, employees and consultants of the Company pursuant to stock
options granted thereto from time to time after the date hereof by the
Board of Directors of the Company in accordance with the Company's
1988 Stock Option Plan (or any successor stock option plan), provided
that in each case the option exercise price at the time of such grant
is not less than the higher of (i) the fair market value of such
shares in the reasonable opinion of the Board of Directors of the
Company and (ii) the Current Warrant Price.
"PERSON" means a corporation, an association, a partnership,
a joint venture, an organization, a business, an individual, a
government or political subdivision thereof or a governmental body.
"REGISTRATION RIGHTS AGREEMENT" means the Amended and
Restated Registration Rights Agreement dated as of June 30, 1994 among
the Company, Xxxxxx, CMIHI, CMCC and Xxxxxxx, as modified and
supplemented and in effect from time to time.
"RESTRICTED CERTIFICATE" means each certificate for
Nonpreferred Stock bearing the restrictive legend set forth in SECTION
9A.
"RESTRICTED STOCK" means shares of Nonpreferred Stock
evidenced by a Restricted Certificate.
"SECURITIES ACT" means the Securities Act of 1933, or any
successor Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"SENIOR CREDIT AGREEMENT" has the meaning specified in the
Subordinated Loan Agreement.
"SHAREHOLDERS AGREEMENT" means the Shareholders Agreement
dated as of June 23, 1988 among the Company and its shareholders and
warrantholders named therein, as modified and supplemented and in
effect from time to time (including, without limitation, by the
Amendment to Shareholders Agreement dated as of May 23, 1989 and by
the Amendment to Shareholders Agreement dated as of June 30, 1994).
"STOCK UNIT" means one share of Class A Stock as such Class A
Stock was constituted on the date of original issue of this Warrant,
and thereafter shall mean such number of shares (including any
fractional shares) of Class A Stock as shall result from the
adjustments specified in SECTION 4.
"SUBORDINATED LOAN AGREEMENT" means the Second Amended and
Restated Senior Subordinated Loan Agreement dated as of June 30, 1994
among the Company, each of the institutional lenders that is a party
thereto and The Chase Manhattan Bank (National Association), as agent
for said lenders, as modified and supplemented and in effect from time
to time.
"TRANSFER", as used in SECTION 9, includes any disposition of
any Warrant, Warrant Stock or Restricted Stock, or of any interest in
any thereof, which would constitute a sale thereof within the meaning
of the Securities Act.
24
"VALUATION DATE" means, in respect of a determination of the
Current Market Price of the Common Stock by an Independent Financial
Expert, the last day of the fiscal quarter of the Company ended
immediately prior to the date such Independent Financial Expert is
requested to make such determination or such other date as shall be
agreed upon at such time by the Company and the holder of this
Warrant.
"WARRANT EXPIRATION DATE" means the later of (i) June 30,
2004 and (ii) the first Business Day occurring 30 days after receipt
by the holder of this Warrant of the Company's notice pursuant to
SECTION 6C.
"WARRANT REPURCHASE PRICE" has the meaning specified in
SECTION 5.
"WARRANTS" means the Warrants dated as of the date hereof,
originally issued by the Company of which this Warrant is one,
evidencing rights to purchase up to an aggregate of 2,052,526 Stock
Units, and all Warrants issued upon transfer, division or combination
of, or in substitution for, any thereof. All Warrants shall at all
times be identical as to terms and conditions and date, except as to
the number of Stock Units for which they may be exercised.
"WARRANT STOCK" means the shares of Class A Stock which
comprise a Stock Unit purchasable by the holders of the Warrants upon
the exercise thereof, and (without duplication) the shares of Class B,
Series 1 Stock issuable on conversion of such shares of Class A Stock.
Section 2. EXERCISE OF WARRANT.
A. MANNER OF EXERCISE. This Warrant may be exercised at any
time or from time to time for all or any part of the number of Stock Units
purchasable upon its exercise; provided that this Warrant shall (except as
provided in SECTION 15) be void and all rights represented hereby shall (except
as aforesaid) cease unless exercised before 5:00 P.M., New York City time, on
the Warrant Expiration Date. In order to exercise this Warrant, in whole or in
part, the holder hereof shall deliver to the Company at its office or agency
maintained for this purpose pursuant to SECTION 12, (i) a written notice of such
holder's election to exercise this Warrant, which notice shall specify the
number of Stock Units to be purchased, (ii) a certified or official bank check
or checks drawn on a New York Clearing House bank payable to the order of the
Company in an amount equal in the aggregate to the aggregate purchase price for
all Stock Units as to which this Warrant is exercised, and (iii) this Warrant.
Such notice shall be in the form of the Subscription Form (including Exhibit A
thereto) appearing at the end of this Warrant. Upon receipt thereof, the Company
shall, as promptly as practicable, and in any event within five Business Days
thereafter, execute or cause to be executed, and deliver to such holder a
certificate or certificates representing the aggregate number of shares of
Warrant Stock issuable upon such exercise, any and all of which certificates
shall bear the restrictive legend set forth in SECTION 9A, except as provided in
SECTION 9D. The stock certificate or certificates so delivered shall be
registered in the name of such holder or, subject to SECTION 9, such other name
as shall be designated in said notice. Unless otherwise specified in said
notice, and subject to SECTION 9, one certificate representing the aggregate
number of shares of Warrant Stock issuable upon such exercise shall be so
delivered. This Warrant shall be deemed to have been exercised and such
certificate or certificates shall be deemed to have been issued and such holder
or any other person so designated to be named therein shall be deemed to have
become a holder of record of such shares for all purposes, as of the date said
notice, together with said check or checks, and this Warrant are received by the
Company as aforesaid. If this Warrant shall have been exercised and/or
surrendered in part, the Company shall, at the time of delivery of the
certificate or certificates representing Warrant Stock issuable upon such
exercise, deliver to or on the order of the holder hereof a new Warrant
evidencing the rights of such holder to purchase the unpurchased and/or
unsurrendered Stock Units called for by this Warrant, which new Warrant shall in
all other respects be identical with this Warrant, or, at the request of such
holder, appropriate notation may be made on the Warrant and the same returned to
such holder.
25
B. PAYMENT OF TAXES. ETC. All shares of Class A Stock
issuable upon the exercise of this Warrant, and all shares of Class B, Series 1
Stock issuable upon conversion of such Class A Stock, shall be validly issued,
fully paid and nonassessable, and the Company shall pay all expenses in
connection with, and all taxes (other than income or franchise taxes) and other
governmental charges that may be imposed in respect of, the issue or delivery
thereof. The Company shall not be required, however, to pay any tax or other
charge imposed in connection with any transfer involved in the issue of any
certificate for shares of Warrant Stock in any name other than that of the
registered holder of this Warrant (or any affiliate thereof), and in such case
the Company shall not be required to issue or deliver any stock certificate
until such tax or other charge has been paid or it has been established to the
Company's satisfaction that no such tax or other charge is due.
C. FRACTIONAL SHARES. The Company shall not issue any
certificates for fractional shares of stock upon any exercise of this Warrant.
In lieu of issuing any fractional shares that would otherwise be issuable, the
Company shall pay cash equal to the product of such fraction MULTIPLIED by the
Current Warrant Price on the date of exercise.
Section 3. TRANSFER, DIVISION AND COMBINATION. Subject to
SECTION 9, this Warrant and all rights hereunder are transferable, in whole or
in part, on the books of the Company to be maintained for such purpose, upon
surrender of this Warrant at the office or agency of the Company maintained for
the purpose pursuant to SECTION 12, together with a written assignment of this
Warrant duly executed by the holder hereof or his agent or attorney. Upon such
surrender, the Company shall, subject to SECTION 9, execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees and in the
denominations specified in such instrument of assignment, and this Warrant shall
promptly be cancelled. If and when this Warrant is assigned in blank (in case
the restriction on transferability in SECTION 9 shall have terminated), the
Company may (but shall not be obliged to) treat the bearer hereof as the
absolute owner of this Warrant for all purposes and the Company shall not be
affected by any notice to the contrary. A Warrant, if properly assigned in
compliance with SECTION 9, may be exercised by a new holder for the purchase of
shares of Common Stock as the new holder shall designate, without having a new
Warrant issued.
This Warrant may, subject to SECTION 9, be divided or
combined with other Warrants upon presentation hereof at the aforesaid office or
agency of the Company, together with a written notice specifying the names and
denominations in which new Warrants are to be issued, signed by the holder
hereof or his agent or attorney. Subject to compliance with the preceding
paragraph and with SECTION 9, as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
The Company shall pay all expenses, taxes (excluding transfer
taxes) and other charges payable in connection with the preparation, issue and
delivery of Warrants under this Section.
The Company agrees to maintain, at such office or agency,
books for the registration and transfer of the Warrants.
Section 4. ADJUSTMENT OF STOCK UNIT OR EXERCISE PRICE. The
number of shares of Class A Stock comprising a Stock Unit, or the price at which
a Stock Unit may be purchased upon exercise of this Warrant, shall be subject to
adjustment from time to time as set forth in this Section. The Company will not
take any action with respect to its Nonpreferred Stock of any class requiring an
adjustment pursuant to SUBSECTION A or H of this Section without at the same
time taking like action with respect to its Nonpreferred Stock of each other
class; and the Company will not create any class of Nonpreferred Stock which
carries any rights to dividends or assets greater in any respect than the rights
of the Class A Stock and the Class B Stock on the date hereof. Without limiting
the foregoing so long as any shares of Class A Stock are outstanding or
constitute Warrant Stock, the Company will not take any action with respect to
its Class B Stock without at the same time taking like action with respect to
its Class A Stock, to the end that at all times each share of Class A Stock
shall be convertible into one share of Class B, Series 1 Stock.
26
A. STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. In case
at any time or from time to time the Company shall
(1) take a record of the holders of its Nonpreferred Stock
for the purpose of entitling them to receive a dividend payable in, or
other distribution of Nonpreferred Stock, or
(2) subdivide its outstanding shares of Nonpreferred Stock
into a larger number of shares of Nonpreferred Stock, or
(3) combine its outstanding shares of Nonpreferred Stock
into a smaller number of shares of Nonpreferred Stock, then the number
of shares of Class A Stock comprising a Stock Unit immediately after
the happening of any such event shall be adjusted so as to consist of
the number of shares of Class A Stock which a record holder of the
number of shares of Class A Stock comprising a Stock Unit immediately
prior to the happening of such event would own or be entitled to
receive after the happening of such event.
B. PROHIBITION OF CERTAIN OTHER DIVIDENDS AND DISTRIBUTIONS.
So long as this Warrant shall remain outstanding the Company shall not, without
the prior written consent of the holder of this Warrant, make or commit to make,
or take a record of the holders of its Nonpreferred Stock for the purpose of
entitling them to receive, any dividend or other distribution of
(1) cash (other than a cash distribution made as a dividend
and payable out of retained earnings or earned surplus legally
available for the payment of dividends under the laws of the
jurisdiction of incorporation of the Company, to the extent, but only
to the extent, that the aggregate of all such dividends paid or
declared after the date hereof, does not exceed the net income of the
Company earned subsequent to the date hereof determined in accordance
with generally accepted accounting principles), or
(2) any evidence of its indebtedness (other than Convertible
Securities), any shares of its stock (other than Additional Shares of
Nonpreferred Stock) or any other securities or property of any nature
whatsoever (other than cash), or
(3) any warrants or other rights to subscribe for or purchase
any evidences of its indebtedness (other than Convertible Securities),
any shares of its stock (other than Additional Shares of Nonpreferred
Stock) or any other securities or property of any nature whatsoever.
A reclassification of the Nonpreferred Stock into shares of Nonpreferred Stock
and shares of any other class of stock shall be deemed a distribution by the
Company to the holders of its Nonpreferred Stock of such shares of such other
class of stock within the meaning of this Subsection and, if the outstanding
shares of Nonpreferred Stock shall be changed into a larger or smaller number of
shares of Nonpreferred Stock as a part of such reclassification, shall be deemed
a subdivision or combination, as the case may be, of the outstanding shares of
Nonpreferred Stock within the meaning of SUBSECTION A of this Section.
If at any time while this Warrant remains outstanding, the
Company shall declare and pay any cash dividend or cash distribution on any
class of Nonpreferred Stock, then the registered holder hereof shall have the
right, upon notice to the Company, to cause the Company, at the time of the
payment of such dividend or distribution, to pay to the registered holder hereof
the cash dividend or cash distribution that such holder exercised this Warrant
immediately prior to the taking of record of those holders of Nonpreferred Stock
entitled to any such dividend or distribution or, if no record is taken, the
date as of which the record holders of Nonpreferred Stock entitled to such
dividends or distributions are to be determined.
27
C. ISSUANCE OF ADDITIONAL SHARES OF NONPREFERRED STOCK. In
case at any time or from time to time the Company shall (except as hereinafter
provided) issue any Additional Shares of Nonpreferred Stock at a price per share
that is lower than the Current Market Price per share of Common Stock, then (A)
the purchase price for each Stock Unit shall be adjusted (calculated to the
nearest $.01) so that it shall equal the price determined by multiplying the
purchase price for each Stock Unit in effect immediately prior thereto by a
fraction, the numerator of which shall be (i) an amount equal to the sum of (x)
the number of shares of Nonpreferred Stock outstanding immediately prior to the
issuance of such shares of Additional Shares of Nonpreferred Stock plus (y) the
number of shares of Nonpreferred Stock which the aggregate consideration
received by the Company for the total number of such Additional Shares of
Nonpreferred Stock (as determined in SUBSECTION G below) so issued would
purchase at the Current Market Price per share of Common Stock, and the
denominator of which shall be (ii) the number of shares of Nonpreferred Stock
outstanding immediately after such issuance of such shares of Additional Shares
of Nonpreferred Stock; and (B) the number of shares of Class A Stock thereafter
comprising a Stock Unit shall be adjusted to that number determined by
multiplying the number of shares of Class A Stock comprising a Stock Unit
immediately prior to such adjustment by a fraction (i) the numerator of which
shall be the purchase price for each Stock Unit in effect immediately prior to
such adjustment, and (ii) the denominator of which shall be the purchase price
for each Stock Unit as so adjusted. No adjustment to the purchase price for each
Stock Unit or of the number of shares of Class A Stock comprising a Stock Unit
shall be made under this Subsection upon the issuance of any Additional Shares
of Nonpreferred Stock which are issued pursuant to the exercise of any warrants
or other subscription or purchase rights or pursuant to the exercise of any
conversion or exchange rights in any Convertible Securities, if any such
adjustment shall previously have been made upon the issuance of such warrants or
other rights or upon the issuance of such Convertible Securities (or upon the
issuance of any warrant or other rights therefor) pursuant to SUBSECTION D or E
of this Section.
In addition, so long as (i) any shares of, or any Convertible
Securities convertible into or representing a right to receive any shares of,
Class B, Series 2 Stock shall be issued and outstanding or (ii) CMIHI shall hold
any shares of capital stock of the Company or any Convertible Securities
representing a right to purchase or receive shares of capital stock of the
Company, the Company shall not, without the prior written consent of the holder
of this Warrant, (a) issue any Additional Securities (as defined in the
Certificate of Incorporation of the Company) at a price per share that will
cause a downward adjustment to the Conversion Price (as so defined) of the Class
B, Series 2 Stock pursuant to Section 4.3 of said Certificate of Incorporation
or (b) prior to the completion by the Company of an Initial Public Offering, (i)
issue any option, warrant or other similar right in respect of capital stock of
the Company other than options issued under the 1988 Stock Option Plan of the
Company (or any successor plan substantially similar to said 1988 Stock Option
Plan) or (ii) amend, supplement or otherwise modify any of the terms or other
provisions of the 1988 Stock Option Plan of the Company (or such successor plan)
or any option then outstanding if the effect thereof would be to (x) change the
exercise price of any such option, (y) extend the period during which any such
option may be exercised or (z) increase the number of shares subject to any such
option.
D. ISSUANCE OF WARRANTS OR OTHER RIGHTS. In case at any time
or from time to time the Company shall take a record of the holders of its
Nonpreferred Stock for the purpose of entitling them to receive a distribution
of, or shall otherwise issue, any warrants or other rights to subscribe for or
purchase any Additional Shares of Nonpreferred Stock or any Convertible
Securities and the consideration per share for which Additional Shares of
Nonpreferred Stock may at any time thereafter be issuable pursuant to such
warrants or other rights or pursuant to the terms of such Convertible Securities
shall be less than the Current Market Price per share of Common Stock, then the
number of shares of Class A Stock thereafter comprising a Stock Unit and the
purchase price for a Stock Unit shall be adjusted as provided in SUBSECTION C of
this Section on the basis that (i) the maximum number of Additional Shares of
Nonpreferred Stock issuable pursuant to all such warrants or other rights or
necessary to effect the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued as of the date for the
determination of the Current Market Price per share of Common Stock as
hereinafter
28
provided, and (ii) the aggregate consideration for such maximum number of
Additional Shares of Nonpreferred Stock shall be deemed to be the minimum
consideration received and receivable by the Company for the issuance of such
Additional Shares of Nonpreferred Stock pursuant to such warrants or other
rights or pursuant to the terms of such Convertible Securities. For purposes of
this Subsection, the date as of which the Current Market Price of Common Stock
shall be computed shall be the earliest of (a) the date on which the Company
shall take a record of the holders of its Nonpreferred Stock for the purpose of
entitling them to receive any such warrants or other rights, (b) the date on
which the Company shall enter into a firm contract for the issuance of such
warrants or other rights, and (c) the date of actual issuance of such warrants
or other rights.
E. ISSUANCE OF CONVERTIBLE SECURITIES. In case at any time or
from time to time the Company shall take a record of the holders of its
Nonpreferred Stock for the purpose of entitling them to receive a distribution
of, or shall otherwise issue any Convertible Securities and the consideration
per share for which Additional Shares of Nonpreferred Stock may at any time
thereafter be issuable pursuant to such Convertible Securities shall be less
than the Current Market Price per share of Common Stock, then the number of
shares of Class A Stock thereafter comprising a Stock Unit and the purchase
price for a Stock Unit shall be adjusted as provided in SUBSECTION C of this
Section on the basis that (i) the maximum number of Additional Shares of
Nonpreferred Stock necessary to effect the conversion or exchange of all such
Convertible Securities shall be deemed to have been issued as of the date for
the determination of the Current Market Price per share of Common Stock as
hereinafter provided, and (ii) the aggregate consideration for such maximum
number of Additional Shares of Nonpreferred Stock shall be deemed to be the
minimum consideration received and receivable by the Company for the issuance of
such Additional Shares of Nonpreferred Stock pursuant to the terms of such
Convertible Securities. For purposes of this Subsection, the date as of which
the Current Market Price of Common Stock shall be computed shall be the earliest
of (a) the date on which the Company shall take a record of the holders of its
Nonpreferred Stock for the purpose of entitling them to receive any such
Convertible Securities, (b) the date on which the Company shall enter into a
firm contract for the issuance of such Convertible Securities, and (c) the date
of actual issuance of such Convertible Securities. No adjustment of the number
of shares of Class A Stock comprising a Stock Unit or of the purchase price for
a Stock Unit shall be made under this Subsection upon the issuance of any
Convertible Securities which are issued pursuant to the exercise of any warrants
or other subscription or purchase rights therefor, if any such adjustment shall
previously have been made upon the issuance of such warrants or other rights
pursuant to SUBSECTION D of this Section.
F. SUPERSEDING ADJUSTMENT OF STOCK UNIT. If, at any time
after any adjustment of the number of shares comprising a Stock Unit or of the
purchase price for a Stock Unit shall have been made pursuant to the foregoing
SUBSECTION D or E of this Section on the basis of the issuance of warrants or
other rights or the issuance of other Convertible Securities, or after any new
adjustment of the number of shares comprising a Stock Unit or of the purchase
price for a Stock Unit shall have been made pursuant to this Subsection, such
warrants or rights or the right of conversion or exchange in such other
Convertible Securities shall expire, and a portion of such warrants or rights,
or the right of conversion or exchange in respect of a portion of such other
Convertible Securities, as the case may be, shall not have been exercised, such
previous adjustment shall be rescinded and annulled and the Additional Shares of
Nonpreferred Stock which were deemed to have been issued by virtue of the
computation made in connection with the adjustment so rescinded and annulled
shall no longer be deemed to have been issued by virtue of such computation.
Thereupon, a recomputation shall be made of the effect of such rights or options
or other Convertible Securities on the basis of
(1) treating the number of Additional Shares of Nonpreferred
Stock, if any, theretofore actually issued or issuable pursuant to the
previous exercise of such warrants or rights or such right of
conversion or exchange, as having been issued on the date or dates of
such exercise, and
(2) treating any such warrants or rights or any such other
Convertible Securities which then remain outstanding as having been
granted or issued immediately after the time of the last date of such
exercise,
29
and, if and to the extent called for by the foregoing provisions of this Section
on the basis aforesaid, a new adjustment of the number of shares comprising a
Stock Unit or of the purchase price for a Stock Unit shall be made, which new
adjustment shall supersede the previous adjustment so rescinded and annulled.
G. OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS
SECTION. The following provisions shall be applicable to the making of
adjustments of the number of shares of Class A Stock comprising a Stock Unit and
of the purchase price for a Stock Unit hereinbefore provided for in this
Section:
(1) TREASURY OR COMPANY STOCK. The sale or other disposition
of any issued shares of Nonpreferred Stock owned or held by or for the
account of the Company shall be deemed an issuance thereof for purposes
of this Section.
(2) COMPUTATION OF CONSIDERATION. To the extent that any
Additional Shares of Nonpreferred Stock or any Convertible Securities
or any warrants or other rights to subscribe for or purchase any
Additional Shares of Nonpreferred Stock or any Convertible Securities
shall be issued for a cash consideration, the consideration received by
the Company therefor shall be deemed to be the amount of the cash
received by the Company therefor, or, if such Additional Shares of
Nonpreferred Stock or Convertible Securities are offered by the Company
for subscription, the subscription price, or, if such Additional Shares
of Nonpreferred Stock or Convertible Securities are sold to
underwriters or dealers for public offering without a subscription
offering, the initial public offering price, in any such case excluding
any amounts paid or receivable for accrued interest or accrued
dividends and without deduction of any compensation, discounts or
expenses paid or incurred by the Company for and in the underwriting
of, or otherwise in connection with, the issue thereof. To the extent
that such issuance shall be for a consideration other than cash, then,
except as herein otherwise expressly provided, the amount of such
consideration shall be deemed to be the fair value of such
consideration at the time of such issuance as determined in good faith
by the Board of Directors of the Company. The consideration for any
Additional Shares of Nonpreferred Stock issuable pursuant to any
warrants or other rights to subscribe for or purchase the same shall be
the consideration received or receivable by the Company for issuing
such warrants or other rights, plus the additional consideration
payable to the Company upon the exercise of such warrants or other
rights. The consideration for any Additional Shares of Nonpreferred
Stock issuable pursuant to the terms of any Convertible Securities
shall be the consideration received or receivable by the Company for
issuing any warrants or other rights to subscribe for or purchase such
Convertible Securities, plus the consideration paid or payable to the
Company in respect of the subscription for or purchase of such
Convertible Securities, plus the additional consideration, if any,
payable to the Company upon the exercise of the right of conversion or
exchange in such Convertible Securities. In case of the issuance at any
time of any Additional Shares of Nonpreferred Stock or Convertible
Securities in payment or satisfaction of any dividend upon any class of
stock other than Nonpreferred Stock, the Company shall be deemed to
have received for such Additional Shares of Nonpreferred Stock or
Convertible Securities a consideration equal to the amount of such
dividend so paid or satisfied.
(3) WHEN ADJUSTMENTS TO BE MADE. The adjustments required by
the preceding Subsections of this Section shall be made whenever and as
often as any specified event requiring an adjustment shall occur,
except that no adjustment of the number of shares of Class A Stock
comprising a Stock Unit that would otherwise be required shall be made
(except in the case of a subdivision or combination of shares of the
Nonpreferred Stock, as provided for in SUBSECTION A) unless and until
such adjustment, either by itself or with other adjustments not
previously made, adds or subtracts at least $0.01 to or from the
Current Warrant Price of each share of Class A Stock, as determined in
good faith by the Board of Directors of the Company, provided that, in
any event such adjustment shall be made if such adjustment either by
itself or with other adjustments not previously made would require an
increase or decrease of at
30
least 1% in the number of shares of Class A Stock comprising a Stock
Unit immediately prior to the making of such adjustment. Any adjustment
representing a change of less than such minimum amount (except as
aforesaid) shall be carried forward and made as soon as such
adjustment, together with other adjustments required by this Section
and not previously made, would result in a minimum adjustment. For the
purpose of any adjustment, any specified event shall be deemed to have
occurred at the close of business on the date of its occurrence.
(4) FRACTIONAL INTERESTS. In computing adjustments under this
Section, fractional interests in Non-preferred Stock shall be taken
into account to the nearest whole share.
(5) WHEN ADJUSTMENT NOT REQUIRED. If the Company shall take a
record of the holders of its Nonpreferred Stock for the purpose of
entitling them to receive a dividend or distribution or subscription or
purchase rights and shall, thereafter and before the distribution
thereof to shareholders, legally abandon its plan to pay or deliver
such dividend, distribution, subscription or purchase rights, then
thereafter no adjustment shall be required by reason of the taking of
such record and any such adjustment previously made in respect thereof
shall be rescinded and annulled.
H. MERGER, CONSOLIDATION OR DISPOSITION OF ASSETS. In case the
Company shall merge or consolidate into another corporation, or sell, transfer
or otherwise dispose of all or substantially all of its property, assets or
business to another corporation, and pursuant to the terms of such merger,
consolidation or disposition of assets, shares of common stock of the successor
or acquiring corporation are to be received by or distributed to the holders of
Nonpreferred Stock of the Company, then each holder of a Warrant shall have the
right thereafter to receive, upon exercise of such Warrant, Stock Units each
comprising the number of shares of common stock of the successor or acquiring
corporation receivable upon or as a result of such merger, consolidation or
disposition of assets by a holder of the number of shares of Class A Stock
comprising a Stock Unit immediately prior to such event (or, if greater, by a
holder of a like number of shares of Class B Stock). If, pursuant to the terms
of such merger, consolidation or disposition of assets, any cash, shares of
stock or other securities or property of any nature whatsoever (collectively the
"ADDITIONAL CONSIDERATION") are to be received by or distributed to the holders
of Nonpreferred Stock of the Company in addition to common stock of the
successor or acquiring corporation, each Stock Unit shall thereafter be deemed
to include the right to receive an amount equal to the Additional Consideration
(including for such purpose cash equal to the fair value of all non-cash
Additional Consideration) applicable to the number of shares of Class A Stock
then comprising a Stock Unit (or, if greater, the amount applicable to a like
number of shares of Class B Stock). Such fair value shall be determined in good
faith by the Board of Directors of the Company, provided that if such
determination is objected to by the holders of Warrants entitled to purchase a
majority of the Stock Units covered thereby, such determination shall be made by
an Independent Financial Expert selected by such Board of Directors and not
objected to by such holders. One-half of the fees and expenses of such
Independent Financial Expert shall be paid by the Company and one-half shall be
paid by the holders of such Warrants PRO RATA in accordance with the respective
numbers of Stock Units covered by such Warrants. In case of any such merger,
consolidation or disposition of assets, the successor acquiring corporation
shall expressly assume in writing the due and punctual observance and
performance of each and every covenant and condition of this Warrant to be
performed and observed by the Company and all of the obligations and liabilities
hereunder, subject to such modification as shall be necessary to provide for
adjustments of Stock Units which shall be as nearly equivalent as practicable to
the adjustments provided for in this Section. For the purposes of this Section
"COMMON STOCK OF THE SUCCESSOR OR ACQUIRING CORPORATION" shall include stock of
such corporation of any class, which is not preferred as to dividends or assets
over any other class of stock of such corporation and which is not subject to
redemption, and shall also include any evidences of indebtedness, shares of
stock or other securities which are convertible into or exchangeable for any
such stock, either immediately or upon the arrival of a specified date or the
happening of a specified event, and any warrants or other rights to subscribe
for or purchase any such stock. The foregoing provisions of this Subsection
shall similarly apply to successive mergers, consolidations or dispositions of
assets.
31
I. OTHER ACTION AFFECTING COMMON STOCK. If the Company takes
any action affecting its Common Stock after the date hereof, other than an
action described in any of SUBSECTIONS A to H of this Section, inclusive, which
would have an adverse effect upon the rights of the holder of this Warrant
hereunder, then the number of shares of Class A Stock comprising a Stock Unit,
or the Current Warrant Price, shall be adjusted in such manner and at such time
as the Board of Directors of the Company shall in good faith determine to be
equitable under the circumstances. Notwithstanding the foregoing provisions of
this Section, there shall be no adjustment of the number of shares of Class A
Common Stock comprising a Stock Unit, or the price at which a Stock Unit may be
purchased upon exercise of this Warrant, as a result of (i) the exercise of a
Warrant or the Xxxxxx Warrant or (ii) the conversion of any Class B, Series 2
Stock into Class B, Series 1 Stock or a change in the Conversion Price (as such
term is defined in the Certificate of Incorporation of the Company as in effect
on the date hereof) as such Conversion Price relates to shares of Class B,
Series 2 Stock.
J. ADJUSTMENT FOR BREACH. The Company acknowledges and agrees
that the breach by the Company of its covenants contained in Subsection B of
this Section might irreparably harm the holder of this Warrant, and that in the
event of such breach, in addition to any other remedy that the holder of this
Warrant may have in equity, at law or otherwise, the Current Warrant Price shall
be reduced to an amount equal to 10% of the Current Warrant Price as calculated
on the date of occurrence of such breach.
Section 5. REPURCHASE OBLIGATION. At any time on and after
June 30, 1999 until 5:00 P.M., New York City time, on the Warrant Expiration
Date (subject to extension as herein provided), the Company shall be obligated,
upon 60 days prior written notice to the Company by the holder of this Warrant,
to repurchase this Warrant from the holder hereof for the Warrant Repurchase
Price (determined as below provided) per Stock Unit, on the terms and conditions
set forth below; provided that (i) the Company shall have no repurchase
obligation under this Section if on or before the date of such proposed
repurchase the Company has completed an Initial Public Offering and (ii) such
repurchase obligation shall be suspended if an event of default under either the
Senior Credit Agreement or the Subordinated Loan Agreement shall have occurred
and be continuing or would result therefrom or at any time when, in the opinion
of counsel for the Company (whose conclusions are not objected to by Milbank,
Tweed, Xxxxxx & XxXxxx or other reputable outside counsel for the holder of this
Warrant), the Board of Directors of the Company would be liable under Section
500 of the General Corporation Law of California in respect of such repurchase;
PROVIDED that if such repurchase obligation shall be suspended pursuant to the
foregoing clause (ii), (a) the Company shall give notice of such suspension to
the holder of this Warrant and (b) the holder of this Warrant may, by written
notice to the Company, elect to rescind its prior notice requesting that the
Company purchase this Warrant. On the Warrant Expiration Date (unless an Initial
Public Offering shall have theretofore been completed by the Company), the
Company shall (without any further action on the part of the Company or the
holder of this Warrant) be obligated to repurchase this Warrant from the holder
thereof for the Warrant Repurchase Price (determined as below provided) per
Stock Unit, on the terms and conditions set forth below; PROVIDED that, if the
obligation of the Company to repurchase this Warrant shall then be suspended by
reason of a condition referred to in clause (ii) of the preceding sentence, (x)
the unpaid portion of the amount that the Company would, but for such
suspension, be obligated to pay to the holder of this Warrant (determined
without regard to such suspension) shall bear interest, for each day during the
period from and including the Warrant Expiration Date to but excluding the date
on which such obligation is paid in full, at a rate per annum equal to the sum
of the Base Rate as in effect on such day PLUS 6% and (y) the Company shall give
notice, in accordance with SECTION 13 hereof, to the holder of this Warrant when
any such condition no longer exists. The "WARRANT REPURCHASE PRICE" for each
Stock Unit shall be an amount equal to the PRODUCT OF the number of shares of
Class A Stock then constituting a Stock Unit TIMES the higher of (i) the Current
Market Price per share of Common Stock and (ii) the quotient of (A) the sum of
(x) 5.6 times the amount of EBIDAT for the most recent period of 12 consecutive
calendar months ending at least 31 days prior to the date upon which written
notice is given to the Company by the holder of this Warrant in respect of the
exercise of such holder's rights under this Section, MINUS (y) the aggregate
outstanding principal amount of indebtedness for money borrowed of the Company
and its consolidated subsidiaries
32
(including without limitation indebtedness to Three Sisters Ranch Enterprises
outstanding on the date of this Warrant and evidenced by promissory notes),
determined in accordance with generally accepted accounting principles, as of
the last day of such 12-month period (the "PUT CALCULATION DATE"), PLUS (z) the
amount, if any, by which the aggregate amount of cash and cash equivalents of
the Company and its consolidated subsidiaries (determined in accordance with
generally accepted accounting principles, as of the Put Calculation Date)
exceeds $500,000, DIVIDED BY (B) the aggregate number of shares of Common Stock
outstanding on the Put Calculation Date, on a fully diluted basis (determined in
accordance with generally accepted accounting principles). Payment to the holder
of this Warrant under this Section shall be made on the day 60 days after the
date upon which notice of exercise is given to the Company as above provided, in
immediately available funds by wire transfer to such account as such holder
shall specify in such notice, against surrender of this Warrant.
For the purposes of this SECTION 5, (i) an amount equal to
the exercise price of all options and warrants deemed exercised for purposes of
determining the number of shares issued and outstanding on a fully diluted basis
under subsection (B) of the preceding paragraph shall be deemed received and
held, on the Put Calculation Date, by the Company in cash and (ii) proceeds to
be received by the holder of this Warrant in connection with any repurchase
thereof shall be net of the then effective purchase price per Stock Unit (as
adjusted as provided in SECTION 4).
Section 6. NOTICES TO WARRANT HOLDERS.
A. NOTICE OF ADJUSTMENT OF STOCK UNIT OR EXERCISE PRICE.
Whenever the number of shares of Common Stock comprising a Stock Unit, or the
price at which a Stock Unit may be purchased upon exercise of the Warrants,
shall be adjusted pursuant to SECTION 4, the Company shall forthwith obtain a
certificate signed by the Company's chief financial officer setting forth, in
reasonable detail, the event requiring the adjustment and the method by which
such adjustment was calculated (including a description of the basis on which
the Board of Directors of the Company determined the fair value of any evidences
of indebtedness, shares of stock, other securities or property or warrants or
other subscription or purchase rights referred to in SECTION 4H) and specifying
the number of shares of Class A Stock comprising a Stock Unit and (if such
adjustment was made pursuant to SECTION 4H or SECTION 4I) describing the number
and kind of any other shares of stock comprising a Stock Unit, and any change in
the purchase price or prices thereof, after giving effect to such adjustment or
change. The Company shall promptly, and in any case within 45 days after the
making of such adjustment, cause a signed copy of such certificate to be
delivered to each holder of a Warrant in accordance with SECTION 13. The Company
shall keep at its office or agency, maintained for the purpose pursuant to
SECTION 12, copies of all such certificates and cause the same to be available
for inspection at said office during normal business hours by any holder of a
Warrant or any prospective purchaser of a Warrant designated by a holder
thereof.
B. NOTICE OF CERTAIN CORPORATE ACTION. In case the Company
shall propose (a) to pay any dividend payable in stock of any class to the
holders of its Nonpreferred Stock or to make any other distribution to the
holders of its Nonpreferred Stock (other than a cash dividend), or (b) to offer
to the holders of its Nonpreferred Stock rights to subscribe for or to purchase
any Additional Shares of Nonpreferred Stock or shares of stock of any class or
any other securities, rights or options, or (c) to effect any reclassification
of its Nonpreferred Stock (other than a reclassification involving only the
subdivision, or combination, of outstanding shares of Nonpreferred Stock), or
(d) to effect any capital reorganization, or (e) to effect any consolidation,
merger or sale, transfer or other disposition of all or substantially all of its
property, assets or business, or (f) to effect the liquidation, dissolution or
winding up of the Company, then in each such case (but without limiting the
provisions of SECTION 4B), the Company shall give to each holder of a Warrant,
in accordance with SECTION 13, a notice of such proposed action, which shall
specify the date on which a record is to be taken for the purposes of such stock
dividend, distribution or rights, or the date on which such reclassification,
reorganization, consolidation, merger, sale, transfer, disposition, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of Nonpreferred Stock, if any such date is to be fixed,
and shall also set forth such facts with respect thereto as
33
shall be reasonably necessary to indicate the effect of such action on the
Nonpreferred Stock and the number and kind of any other shares of stock which
will comprise a Stock Unit, and the purchase price or prices thereof, after
giving effect to any adjustment which will be required as a result of such
action. Such notice shall be so given in the case of any action covered by
CLAUSE (A) or (B) above at least 20 days prior to the record date for
determining holders of the Nonpreferred Stock for purposes of such action, and
in the case of any other such action, at least 20 days prior to the date of the
taking of such proposed action or the date of participation therein by the
holders of Nonpreferred Stock, whichever shall be the earlier.
C. NOTICE OF WARRANT EXPIRATION DATE. The Company shall give
to each holder of a Warrant, in accordance with SECTION 13, notice of the
Warrant Expiration Date. Such notice shall be given by the Company not less than
30 days but not more than 120 days prior to the then scheduled Warrant
Expiration Date.
D. NOTICE OF WARRANT REPURCHASE PRICE. So long as the Company
shall be obligated to purchase Warrants pursuant to SECTION 5, the Company shall
give each holder of a Warrant, from time to time upon request by any such holder
and in accordance with SECTION 13, a notice setting forth the Warrant Repurchase
Price (as calculated by the chief financial officer of the Company) as in effect
for the current calendar month, but without regard to any determination of the
Current Market Price.
Section 7. RESERVATION AND AUTHORIZATION OF NON-PREFERRED
STOCK; REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY. 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
and conversion of the shares of Class A Stock issuable upon such exercise into a
like number of shares of Class B, Series 1 Stock. The Company will not amend its
articles of incorporation in any respect relating to the Class A Stock or the
convertibility thereof into Class B, Series 1 Stock. All shares of Class A Stock
and Class B, Series 1 Stock which shall be so issuable, when issued upon
exercise of any Warrant or upon such conversion, as the case may be, shall be
duly and validly issued and fully paid and nonassessable. The Company will not
effect any original issuance of any shares of Class A Stock except upon exercise
of Warrants as herein and in the other Warrants provided or upon exercise of the
Xxxxxx Warrant pursuant to the terms of the Xxxxxx Warrant.
Before taking any action which would cause an adjustment
reducing the Current Warrant Price per share of Class A Stock below the then par
value, if any, of the shares of Class A Stock issuable upon exercise of the
Warrants, or the shares of Class B, Series 1 Stock issuable upon conversion of
said shares of Class A Stock, the Company shall take any corporate action which
may, in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue fully paid and nonassessable shares of such Class A
Stock at such adjusted Current Warrant Price and validly and legally issue fully
paid and nonassessable shares of such Class B, Series 1 Stock upon conversion of
such shares of Class A Stock.
Before taking any action which would result in an adjustment
in the number of shares of Class A Stock comprising a Stock Unit or in the
Current Warrant Price per share of Class A Stock, the Company shall obtain all
such authorizations or exceptions thereof, or consents thereto, as may be
necessary from any public regulatory body or bodies having jurisdiction thereof.
Section 8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER
BOOKS. In the case of all dividends or other distributions by the Company to the
holders of its Nonpreferred Stock with respect to which any provision of SECTION
4 refers to the taking of a record of such holders, the Company will in each
such case take such a record and will take such record as of the close of
business on a Business Day. The Company will not at any time, except upon
dissolution, liquidation or winding up of the Company, close its stock transfer
books or Warrant transfer books so as to result in preventing or delaying the
exercise or transfer of any Warrant.
34
Section 9. RESTRICTIONS ON TRANSFERABILITY. The Warrants, the
Warrant Stock and the Restricted Stock shall not be transferable except upon the
conditions specified in this Section, which conditions are intended, among other
things, to insure compliance with the provisions of the Securities Act in
respect of the Transfer of any Warrant or any Warrant Stock or any Restricted
Stock.
A. RESTRICTIVE LEGEND. Unless and until otherwise permitted
by this Section, each certificate for Class A Stock initially issued upon the
exercise of this Warrant, and each certificate for Class B, Series 1 Stock
issued upon conversion of such Class A Stock, and each certificate for
Nonpreferred Stock issued to any subsequent transferee of any such certificate,
shall be stamped or otherwise imprinted with a legend in substantially the
following form (in addition to any legend then required pursuant to the
Shareholders Agreement):
"The transfer of the shares represented by this certificate
is subject to the conditions specified in a certain warrant to purchase
common stock dated as of June 30, 1994 originally issued by Portola
Packaging, Inc. (the "Company"), and no transfer of the shares
represented by this certificate shall be valid or effective until such
conditions have been fulfilled. A copy of the form of said warrant to
purchase common stock is on file and may be inspected at the principal
executive office of the Company. Under certain circumstances specified
in said warrant to purchase common stock the Company has agreed to
deliver to the holder hereof a new certificate, not bearing this
legend, for the number of shares evidenced hereby, registered in the
name of such holder. The holder of this certificate, by acceptance of
this certificate, agrees to be bound by the provisions of said warrant
to purchase common stock."
B. NOTICE OF PROPOSED TRANSFERS; REQUESTS FOR REGISTRATION.
Prior to any Transfer or attempted Transfer of any Warrant or the related
Warrant Stock (other than any such Transfer or attempted Transfer of any Warrant
or related Warrant Stock registered pursuant to SUBSECTION C or D of this
Section), the holder of such Warrant shall give written notice to the Company of
such holder's intention to effect such Transfer. Prior to any Transfer or
attempted Transfer of any shares of Restricted Stock evidenced by a Restricted
Certificate (other than any such Transfer or attempted Transfer of any such
shares registered pursuant to SUBSECTION C or D of this Section), the holder of
such Restricted Certificate shall give written notice to the Company of such
holder's intention to effect such Transfer. Each such notice (i) shall describe
the manner and circumstances of the proposed Transfer in sufficient detail, and
shall contain an undertaking by the person giving such notice to furnish such
other information as may be required, to enable counsel to render the opinions
referred to below, and (ii) shall designate the counsel for the person giving
such notice. The person giving such notice shall submit a copy thereof to the
counsel designated in such notice and the Company shall submit a copy thereof to
its counsel, and the following provisions shall apply:
(1) If in the opinion of each such counsel the proposed
transfer of such Warrant or such Warrant Stock may be effected without
the registration under the Securities Act of such Warrant or such
Warrant Stock, the Company shall, as promptly as practicable, so notify
the holder of such Warrant and such holder shall thereupon be entitled
to transfer such Warrant or such shares of Warrant Stock in accordance
with the terms of the notice delivered by such holder to the Company.
Each certificate, if any, evidencing such shares of Warrant Stock
issued upon such transfer shall bear the restrictive legend set forth
in SUBSECTION A of this Section and/or any restrictive legend then
required pursuant to the Shareholders Agreement, unless in the opinion
of each such counsel such legend or legends are not required in order
to insure compliance with the Securities Act.
(2) If in the opinion of each such counsel the proposed
transfer of such shares of Restricted Stock evidenced by such
Restricted Certificate may be effected without registration of such
shares under the Securities Act, the Company shall, as promptly as
practicable, so notify the holder of such Restricted Certificate and
such holder shall thereupon be entitled to transfer such shares in
accordance with the terms of the notice delivered by such holder to the
Company. Each certificate evidencing the shares
35
thus to be transferred (and each certificate evidencing any
untransferred balance of the shares evidenced by such Restricted
Certificate) shall bear the restrictive legend set forth in SUBSECTION
A of this Section and/or the restrictive legend then required pursuant
to the Shareholders Agreement, unless in the opinion of each such
counsel such legend or legends are not required in order to insure
compliance with the Securities Act.
(3) If in the opinion of either of such counsel the
proposed transfer of such Warrant or such Warrant Stock or of the
shares evidenced by such Restricted Certificate may not be effected
without registration under the Securities Act of such Warrant or such
Warrant Stock or of the shares evidenced by such Restricted
Certificate, the Company shall, as promptly as practicable, so notify
the holder thereof and such holder shall not be entitled to transfer
such Warrant or the related Warrant Stock or any of the shares
evidenced by such Restricted Certificate until registration of such
securities under the Securities Act has become effective or until
otherwise after compliance with the provisions of this SUBSECTION A.
Notwithstanding anything above to the contrary, the opinions of counsel and
notice from the Company referred to above need not be obtained if the proposed
transferee is an Institutional Investor which shall represent to the effect that
such Institutional Investor is acquiring any such Warrant or the related Warrant
Stock or any shares evidenced by a Restricted Certificate, as the case may be,
for investment and not with a view to any distribution thereof or with any
present intention of distributing or selling any thereof (subject to any
requirement of law that the disposition thereof be at all times within such
Institutional Investor's control).
C. SHAREHOLDERS AGREEMENT; REGISTRATION RIGHTS AND PUT. The
holder of this Warrant and all Restricted Stock issuable upon the exercise of
this Warrant and all Restricted Stock issuable upon the exercise of this Warrant
is entitled to the benefits of, among other things, registration rights
contained in the Registration Rights Agreement. Except as provided in the
Registration Rights Agreement, the Company shall not be obligated to register
this Warrant or any Warrant Stock or Restricted Stock under the Securities Act
or other applicable securities laws.
D. TERMINATION OF RESTRICTIONS. Notwithstanding the foregoing
provisions of this Section, the restrictions imposed by this Section upon the
transferability of the Warrants, the Warrant Stock and the Restricted Stock
shall cease and terminate as to any particular Warrant (and related Warrant
Stock) or Restricted Stock, when (i) such Warrant (and related Warrant Stock),
or such Restricted Stock shall have been effectively registered under the
Securities Act or applicable state securities laws and sold by the holder
thereof in accordance with such registration, or (ii) in the opinion of counsel
for the Company and counsel for the holder of such Warrant or such Restricted
Stock such restrictions are no longer required in order to insure compliance
with the Securities Act or applicable state securities laws. Whenever the
restrictions imposed by this Section shall terminate as to this Warrant, as
hereinabove provided, the Company shall cause to be stamped or otherwise
imprinted upon this Warrant, at the request of the holder hereof, without
expense, a legend in substantially the following form:
"The restrictions on transferability of the within Warrant
contained in Section 9 thereof terminated on , 19 and are of
no further force or effect."
All Warrants issued upon transfer, division or combination of, or in
substitution for, any Warrant or Warrants entitled to bear such legend shall
have a similar legend endorsed thereon. Whenever the restrictions imposed by
this Section shall terminate as to any Restricted Certificate, as hereinabove
provided, the holder thereof shall be entitled to receive from the Company
without expense, a new certificate for Nonpreferred Stock of the same class not
bearing the restrictive legend set forth in SUBSECTION A of this Section.
36
Section 10. LOSS OR MUTILATION. Upon receipt by the Company
of evidence satisfactory to it (in the exercise of reasonable discretion) of the
ownership of and the loss, theft, destruction or mutilation of this Warrant and
(in case of loss, theft or destruction) of indemnity satisfactory to it
(provided, if the holder hereof is an Institutional Investor, its own agreement
of indemnity shall be deemed to be satisfactory), 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.
Section 11. COMPLIANCE WITH RULE 144. At all times when the
Company is subject to the reporting requirements of the Exchange Act, the
Company shall take such steps as shall be necessary or appropriate to cause to
be made available (within the meaning of paragraph (c) of Rule 144 of the
Commission, or any corresponding provision of any rule or regulation issued in
substitution therefor) adequate current public information with respect to the
Company (within the meaning of and as determined in accordance with said
paragraph) to enable the holders of any Warrant or any shares of Restricted
Stock to sell such securities within the limitations of the exemptions provided
by said Rule 144 or any rule or regulation issued in substitution therefor.
Section 12. OFFICE OF THE COMPANY. As long as any of the
Warrants remains outstanding, the Company shall maintain an office at 000
Xxxxxxxxx Xxxxx, Xxx Xxxx, Xxxxxxxxxx, 00000, where the Warrants may be
presented for exercise, transfer, division or combination as in this Warrant
provided. Such office shall be maintained at said address unless and until the
Company shall designate and maintain some other office for such purposes and
give written notice thereof to the holders of all outstanding Warrants.
Section 13. NOTICES GENERALLY. Any notice, demand or delivery
pursuant to the provisions hereof shall be sufficiently given or made if sent by
first class mail, postage prepaid, addressed to any holder of a Warrant or of
Restricted Stock at such holder's last known address appearing on the books of
the Company, or, except as herein otherwise expressly provided, to the Company
at the address specified in SECTION 12, or such other address as shall have been
furnished to the party giving or making such notice, demand or delivery.
Section 14. LIMITATION OF LIABILITY. No provision hereof, in
the absence of affirmative action by the holder hereof to purchase shares of
Common Stock, and no mere enumeration herein of the rights or privileges of the
holder hereof, shall give rise to any liability of such holder for the purchase
price or as a stockholder of the Company, whether such liability is asserted by
the Company or by creditors of the Company.
Section 15. SURVIVAL. All covenants and agreements of the
Company, and all rights and duties of the holders from time to time of the
Warrant or any Common Stock, contained in SECTION 9, shall be deemed to survive
any surrender hereof to the Company upon exercise hereof by the holder hereof as
contemplated by SECTION 2, or expiration of the right of the holder hereof to
exercise any unexercised balance hereof on the Warrant Expiration Date.
Section 16. CERTAIN WARRANTS DEEMED NOT OUTSTANDING. For the
purposes of determining whether the holders of outstanding Warrants entitled to
purchase a requisite number of Stock Units at any time have taken any action
authorized by this Warrant, any Warrants owned by the Company or any affiliate
of the Company (other than an Institutional Investor which may be deemed an
affiliate solely by reason of the ownership of Warrants or Restricted Stock)
shall be deemed not to be outstanding.
Section 17. COMPANY RIGHT TO REPURCHASE WARRANTS AND
RESTRICTED STOCK. At any time after December 31, 2001 and prior to an Initial
Public Offering the Company shall have the right, at its election, to repurchase
all (but not less than all) of the outstanding Warrants and Restricted Stock
from the holders thereof at a purchase price per share of Warrant Stock then
comprising a Stock Unit or share of Restricted Stock, as the case may be, equal
to the number of shares of Class A Stock then constituting such Stock Unit TIMES
the higher of (i) the Current Market Price per share of Common Stock and (ii)
the quotient of (A) the sum (subject to the second next succeeding paragraph of
this Section) of (x) 6.6 times the
37
amount of EBIDAT for the most recent period of 12 consecutive calendar months
ending at least 31 days prior to the date upon which notice is given by the
Company to the holder of this Warrant in respect of the Company's exercise of
its rights under this Section, MINUS (y) the aggregate outstanding principal
amount of indebtedness for money borrowed of the Company and its consolidated
subsidiaries, determined in accordance with generally accepted accounting
principles, as of the last day of such 12-month period (the "CALL CALCULATION
DATE"), PLUS (z) the amount, if any, by which the aggregate amount of cash and
cash equivalents of the Company and its consolidated subsidiaries (determined in
accordance with generally accepted accounting principles, as of the Call
Calculation Date) exceeds $500,000, DIVIDED BY (B) the aggregate number of
shares of Common Stock outstanding immediately prior to such repurchase, on a
fully diluted basis (determined in accordance with generally accepted accounting
principles). The purchase price of the Warrants and Restricted Stock in respect
of such repurchase shall be payable in immediately available funds on the
repurchase date. If the Company shall give notice of repurchase and the relevant
parties are unable for reasons beyond their reasonable control to complete the
sale giving rise to such repurchase on or before the original repurchase date
specified in such notice, the Company shall give prompt written notice of such
fact to all other holders of Warrants and Restricted Stock, which notice shall
either (i) specify the date (not less than 10 days after such notice) to which
the original repurchase date is to be postponed in order to permit said parties
to complete such sale, whereupon the repurchase date in respect of such action
shall become the postponed repurchase date, or (ii) state that said parties are
proceeding diligently and in good faith to complete such transactions and the
Company undertakes to give a subsequent written notice to such holders as to the
date of such completion, whereupon the repurchase date shall be not less than 10
days nor more than 15 days after such subsequent written notice. In case the
Company shall give notice to the effect set forth in clause (ii) of the
preceding sentence and thereafter determines that the sale will not be
completed, the Company shall give prompt written notice of such determination to
all the holders of Warrants and Restricted Stock, whereupon the original notice
of repurchase in respect of such transactions shall be deemed to be withdrawn.
If for any reason prior to the date of such sale (because of postponement of the
date of such sale, determination of EBIDAT for any period, or otherwise) the
repurchase price per share of Warrant Stock or Restricted Stock shall be reduced
or the price that holders of Warrant Stock or Restricted Stock who join in the
sale would have received shall be increased, the Company shall offer all holders
the opportunity to join in such sale notwithstanding their previous decision not
to do so.
For the purposes of this SECTION 17, (i) an amount equal to
the exercise price of all options and warrants deemed exercised for purposes of
determining the number of shares issued and outstanding on a fully diluted basis
under subsection (B) of the preceding paragraph shall be deemed received and
held, on the Call Calculation Date, by the Company in cash and (ii) proceeds to
be received by the holder of this Warrant in connection with any repurchase
thereof (but not of any Restricted Stock) shall be net of the then effective
purchase price per Stock Unit (as adjusted as provided in SECTION 4).
Notwithstanding the foregoing provisions of this Section, in
the event the Company shall propose to effect an Initial Public Offering and the
managing underwriter selected by the Company in respect of such Initial Public
Offering advises all holders of Warrants in writing that the existence of
unexercised Warrants at the time of such Initial Public Offering would
materially jeopardize the ability of the Company successfully to complete such
Initial Public Offering, the Company, upon not less than 10 nor more than 30
days' prior written notice to the holders of all Warrants, may repurchase,
according to the terms of the next succeeding sentence of this paragraph, all or
any part of the Warrants, to the extent deemed necessary by the managing
underwriter to permit successful completion of such Initial Public Offering, at
a purchase price per share of Warrant Stock then comprising a Stock Unit equal
to the then current Warrant Repurchase Price. In the event the Company elects to
repurchase less than all outstanding Warrants, such partial repurchase shall be
effected PRO RATA among all outstanding Warrants in respective amounts equal to
a fraction (i) the numerator of which shall be the number of Warrants so to be
repurchased and (ii) the denominator of which shall be the total number of
outstanding Warrants on such repurchase date. Such purchase shall be made on the
closing date of the sale pursuant to such Initial Public Offering. Accordingly,
if the Company gives notice of repurchase pursuant to this paragraph and such
closing does not take
38
place on the original repurchase date specified in such notice, the procedures
set forth in the next preceding paragraph with respect to postponement of the
repurchase date shall apply, MUTATIS MUTANDIS, with respect to such closing.
Until an Initial Public Offering has occurred, each certificate
for Class A Stock initially issued upon the exercise of this Warrant, and each
certificate for Class B, Series 1 Stock issued upon conversion of such Class A
Stock, and each certificate for Nonpreferred Stock issued to any subsequent
transferee of any such certificate, shall be stamped or otherwise imprinted with
a legend in substantially the following form:
"The shares represented by this certificate may be
repurchased by the Company, for the purchase price and on the
other terms provided and set forth in a certain warrant to
purchase common stock dated as of June 30, 1994, originally
issued by Portola Packaging, Inc., a copy of which may be
inspected at the principal executive office of said Company.
The holder of this certificate, by acceptance hereof,
acknowledges the existence of said repurchase right and agrees
to be bound by the provisions of said warrant to purchase
common stock."
Section 18. CONSENT AGREEMENT. The holder of this Warrant, by
its acceptance hereof, agrees that this Warrant shall be subject to (but only to
the extent this Warrant, or the holder of the original Warrant in respect of
which this Warrant has been issued, is referred to in) the Amended and Restated
Consent Agreement dated as of June 30, 1994 between the Issuer, The Chase
Manhattan Bank (National Association), CMCC and Xxxxxx.
Section 19. GOVERNING LAW. This Agreement shall be governed
by, and construed in accordance with, the law of the State of New York.
Section 20. CONVERSION OF WARRANTS. This Warrant may be
converted, in whole or in part, at the option of the holder of this Warrant into
the number of shares of Warrant Stock, for each Stock Unit evidenced by this
Warrant that is being so converted, equal to (a) the number of shares of Warrant
Stock comprising a Stock Unit at the time of such conversion MULTIPLIED BY (b)
the excess of (i) the Current Market Price per share of Common Stock at the time
of such conversion OVER (ii) the Current Warrant Price per share of Common Stock
at the time of such conversion DIVIDED BY (iii) the Current Market Price per
share of Common Stock at the time of such conversion.
39
IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed and its corporate seal to be impressed hereon and attested by its
Secretary or an Assistant Secretary.
Dated as of June 30, 1994
PORTOLA PACKAGING, INC.
(CORPORATE SEAL) By /s/ Xxxx Xxxxx
---------------------
CEO
Attest:
/s/ Xxxxxxx Xxxxxxxxx
----------------------------
Secretary
40
SUBSCRIPTION FORM
(To be executed only upon exercise of Warrant)
The undersigned registered owner of this Warrant irrevocably exercises this
Warrant for and purchases Stock Units of Portola Packaging, Inc. purchasable
with this Warrant, and herewith makes payment therefor (by check) in the amount
of $ , 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 and delivered to whose address is
and, if such Stock Units shall not include all of the Stock Units
issuable as provided in this Warrant that a new Warrant of like tenor and date
for the balance of the Stock Units issuable thereunder be delivered to the
undersigned.
Dated:
--------------------------------------
(Signature of Registered Owner)
--------------------------------------
(Street Address)
--------------------------------------
(City) (State) (Zip Code)
or
--------------------------------------
(Signature of Transferee)
--------------------------------------
(Street Address)
--------------------------------------
(City) (State) (Zip Code)
41
EXHIBIT A TO SUBSCRIPTION FORM
As a condition to this notice of exercise, I hereby make the
following representations and agreements:
1. I am aware of the Company's business affairs and financial
condition and have had access to such information about the Company as I have
deemed necessary or desirable to reach an informed and knowledgeable decision to
acquire the Stock Units. I am purchasing the Stock Units for investment for my
own account only and not with a view to, or for resale in connection with, any
"distribution" thereof.
2. I understand that the Stock Units have not been registered
under the Securities Act of 1933 (the "ACT") by reason of specific exemptions
therefrom, which exemptions depend upon, among other things, the bona fide
nature of my investment intent as expressed herein.
3. I acknowledge and agree that the Stock Units are
restricted securities, which must be held indefinitely unless they are
subsequently registered under the Act or an exemption from such registration is
available.
4. I further understand that the certificates) representing
the Stock Units, whether upon initial issuance or any transfer thereof, shall
bear on their face legends, prominently stamped or printed thereon in capital
letters, as provided for in the Warrant:
Signed:
---------------------------
Date:
-----------------------------
42
