Common Stock Purchase Warrant - Master Graphics Inc. and General Electric Capital Corp.
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS
AMENDED. NO SALE OR DISPOSITION OF THIS WARRANT MAY BE MADE WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATING THERETO OR AN OPINION OF COUNSEL
FOR THE HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE SECURITIES ACT OF 1933 OR RECEIPT OF A NO ACTION LETTER
FROM THE SECURITIES AND EXCHANGE COMMISSION.
MASTER GRAPHICS, INC.
COMMON STOCK
PURCHASE WARRANT
______________________________________
THIS WARRANT to purchase shares of Common Stock, $.01 par value, of the
Company (as defined below) (the "Shares") evidences that, for valuable
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consideration, receipt of which is hereby acknowledged, GENERAL ELECTRIC CAPITAL
CORPORATION, a New York corporation, (the "Purchaser"), or registered assigns,
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is entitled to subscribe for and purchase from MASTER GRAPHICS, INC., a
Tennessee corporation (the "Company"), up to an aggregate number of Shares
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equal to the quotient of 2,200,000 divided by the IPO ( as hereinafter defined)
price of the Common Stock of the Company (the "Warrant Interest"), at a price
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per share equal to the IPO price of Common Stock of the Company (the "Exercise
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Price"), provided, however, that in no event will the aggregate Exercise Price
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for all of the Warrant Interest covered by this Warrant exceed One Hundred
Dollars ($100.00) whether as a result of any change in the par value of the
Shares or other securities issued upon exercise of this Warrant, as a result of
any change in the number of shares purchasable as provided in this Warrant, or
otherwise; provided, further, that such limitation of the aggregate Exercise
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Price will have no effect whatsoever upon the amount or number of Warrant Shares
for which the Warrant may be exercised.
1. Conditions to Exercise. The purchase right represented by this
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Warrant is exercisable, in whole or in part, as to the Warrant Interest at any
time after the Company files its registration statement with the Securities and
Exchange Commission under the 1933 Act covering securities of the Company (an
"IPO"), and from time to time, on or before March 31, 2008. This Warrant
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expires and may not be exercised after the earlier to occur of (i) March 31,
2003, in the event the Company has not been involved in an IPO prior to such
date or (ii) March 31, 2008.
2. Method of Exercise: Payment, Issuance of New Warrant. The purchase
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right represented by this Warrant may be exercised at any time, and from time to
time, by the surrender of this Warrant (with the Notice of Exercise form
attached hereto duly executed) at the principal office of the Company and by the
payment to the Company by check in an amount equal to the Exercise Price
multiplied by the number of Shares of the Warrant Interest then being purchased.
In the event
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of any exercise of the rights represented by this Warrant, the Company shall
deliver to Purchaser a certificate for the Shares or other confirmation
evidencing the Warrant Interest so purchased within a reasonable time, but not
later than twenty business days after exercise. This Warrant will be deemed to
have been exercised immediately prior to the close of business on the date of
its surrender for exercise as provided above, and the person entitled to receive
the Shares issuable upon such exercise is treated for all purposes as a
shareholder of the Company as of the close of business on such date. Unless this
Warrant has been fully exercised or has expired, a new Warrant representing the
number of Shares with respect to which this Warrant has not then been exercised
must also be issued to Purchaser within such reasonable time.
3. Interest Fully Paid; Reservation of Interest. The Shares which may be
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issued upon the exercise of the rights represented by this Warrant will, upon
issuance, be fully paid and nonassessable, and free from all taxes, liens and
charges with respect to the issue thereof provided, however the Holder of this
Warrant is responsible for any income taxes payable by the Holder with respect
to the issuance or exercise of this Warrant. During the period within which the
rights represented by this Warrant may be exercised, the Company will at all
times have authorized, and reserved for the purpose of the issue upon exercise
of the purchase rights evidenced by this Warrant, the right to issue a
sufficient number of Shares to provide for the exercise of the rights
represented by this Warrant.
4. Events Effecting the Shareholder Interest. The number and kind of
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securities purchasable upon the exercise of this Warrant and the Exercise Price
are subject to adjustment from time to time upon the happening of the events and
in the manner described in this Section 4.
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4.1 Initial Public Offering. If at any time the Company issues or
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sells any of the Shares in an underwritten initial public offering, the number
of Shares purchasable upon exercise of this Warrant shall immediately and
automatically be adjusted to the number calculated by dividing (i) $2,200,000 by
(ii) the per share price at which Shares are offered to the public in such
initial public offering.
4.2 Reclassification, Consolidation or Merger. If any capital
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reorganization or reclassification of the Shares, or consolidation or merger of
the Company with another partnership, a corporation or any other entity, or the
sale of all or substantially all of its assets to another entity is effected,
the successor entity (if other than the Company) resulting from such
consolidation or merger or the entity purchasing such assets must assume this
Warrant by written instrument executed and mailed or delivered to Purchaser, and
lawful and adequate provision (in form reasonably satisfactory to Purchaser)
must be made whereby the holder hereof thereafter has the right to purchase and
receive in lieu of the Shares immediately theretofore purchasable and receivable
upon the exercise of the rights represented hereby, such equity interests or
assets as may be issued or payable with respect to or in exchange for the amount
of Shares immediately theretofore purchasable and receivable upon the exercise
of the rights represented hereby had such reorganization, reclassification,
consolidation, merger or sale not taken place. In any such case, appropriate
provision must be made with respect to the rights and interests of the holder of
this Warrant to assure that the provisions hereof (including without limitation
provisions for adjustment of the Exercise Price and of the number of Shares
purchasable and receivable upon the exercise of this Warrant) are thereafter
applicable, as nearly as may be, in relation to any shares of stock, securities
or assets thereafter
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deliverable upon the exercise hereof.
4.3 Antidilution. In case the Company: (a) issues Shares as a
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dividend or distribution on the Shares, (b) subdivides or reclassifies the
outstanding Shares into a greater number of shares, or (c) combines or
reclassifies its outstanding Shares into a smaller number of shares or otherwise
effect a reverse split, then the Exercise Price in effect at the time of the
record date for such dividend or distribution or of the effective date of such
subdivision, combination or reclassification is proportionately adjusted so that
the Holder of this Warrant exercised after such date is entitled to receive the
aggregate number and kind of shares which, if this Warrant had been exercised
immediately prior to such time, the Holder would have owned upon such exercise
and been entitled to receive upon such dividend, subdivision, combination or
reclassification. Such adjustment is made successively whenever any event
listed in this Section 4.3 Initial Public Offering. If at any time the Company
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issues or sells any of the Shares in an underwritten initial public offering,
the number of Shares purchasable upon exercise of this Warrant shall immediately
and automatically be adjusted to the number calculated by dividing (i)
$2,200,000 by (ii) the per share price at which Shares are offered to the public
in such initial public offering. occurs.
4.4 Distribution of Property. In case the Company, subsequent to the
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issuance hereof, distributes to any holders of Capital Stock, assets (excluding
cash distributions), then upon the exercise of this Warrant, the holders of this
Warrant shall be entitled to receive an amount equal to the greatest per share
amount of consideration received by any holder of any class of Capital Stock
times the number of shares represented by the Warrant Interest. ("Capital Stock"
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is defined as common stock or any other capital stock of the Company authorized
from time to time, or any other shares, options, interests, participations, or
other equivalents (however designated) of or in the Company, whether voting or
nonvoting, including, without limitation, common stock, options, warrants,
preferred stock, phantom stock, stock appreciation rights, convertible notes or
debentures, stock purchase rights, and all agreements, instruments, documents,
and securities convertible, exercisable, or exchangeable, in whole or in part,
into any one or more of the foregoing.)
4.5 Economic Dilution. If at any time the Company issues or sells any
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of the Shares or any warrant, option, right, or similar security exercisable
into, exchangeable for, or convertible to the Shares ("Share Equivalent"), other
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than shares issuable pursuant to the Amended and Restated Stock Purchase Warrant
issued as of September 26, 1997 by the Company to Sirrom Capital Corporation,
and those certain warrants issued on or before the date hereof by the Company to
each of Walter P. McMullen, William J. and Brenda M. Blackwell, Allan R. Bartel,
David Sutherland, Joseph M. Jensen, Joseph Segal, Cary Rosenthal, Wendell Burns,
Robert Rymer, H. Henry Hederman, Jr., H. Henry Hederman, Jr. and Zach T.
Hederman, as Trustees of the H. Henry Hederman, Jr. Trust U/A 12/31/75, Martha
Dean Hederman, as Trustee of the H. Henry Hederman Grandchild Trust No. 1 U/A
12/31/87, Martha Dean Hederman, as Trustee of the H. Henry Hederman Grandchild
Trust No. 2 U/A 12/31/87, Phil Phillips, Jr., Michael Harper and Lynn Harper or
upon conversion by GECFS, Inc. of shares of the Company's Series A Cumulative
Convertible Redeemable Preferred Stock held by it, at a per unit or share
consideration (which consideration will include the price paid upon issuance
plus the minimum amount of any exercise, conversion, or similar payment made
upon exercise or conversion of any Share Equivalent) less than the Exercise
Price or the then current fair market value per Share immediately prior to the
time such Share or Share
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Equivalent is issued or sold (the "Additional Securities"), then the Exercise
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Price will be reduced to the lower of the prices calculated by:
(i) dividing (x) an amount equal to the sum of (1) the
number of the Shares outstanding on a fully diluted basis immediately
prior to such issuance or sale multiplied by the then existing
Exercise Price plus (2) the aggregate consideration, if any, received
by the Company upon such issuance or sale, by (y) the total number of
Shares outstanding immediately after such issuance or sale on a fully
diluted basis; and
(ii) multiplying the then existing Exercise Price by a
fraction, the numerator of which is (x) the sum of (1) the number of
Shares outstanding on a fully diluted basis immediately prior to such
issuance or sale, multiplied by the fair market value per Share
immediately prior to such issuance or sale, plus (2) the aggregate
consideration received by the Company upon such issuance or sale, (y)
divided by the total number of Shares outstanding on a fully diluted
basis immediately after such issuance or sale, and the denominator of
which is the fair market value per Share immediately prior to such
issuance or sale (for purposes of this subsection (ii), the date as of
which the fair market value per Share will be computed will be the
earlier of the date upon which the Company (aa) enters into a firm
contract for the issuance of such shares, or (bb) issues such shares);
and
4.6 Other Adjustments. In the case any event occurs as to which the
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preceding Section 4.5 is not strictly applicable, but as to which the failure to
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make any adjustment would not fairly protect the purchase rights represented by
the Warrants in accordance with the essential intent and principles of this
Warrant, then, in each such case, the Purchaser may appoint an independent
investment bank or firm of independent public accountants, which will give its
opinion as to the adjustment, if any, on a basis consistent with the essential
intent and principles established in this Warrant, necessary to preserve the
purchase rights represented by this Warrant. Upon receipt of such opinion, the
Company will promptly deliver a copy of such opinion to the Purchaser and will
make the adjustments described in such opinion. The fees and expenses of such
investment bank or independent public accountants will be borne by the Company.
4.7 Adjustment in Number of Units. Whenever the Exercise Price
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payable upon exercise of each Warrant is adjusted pursuant to this Section 4 of
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this Warrant, the number of Shares purchasable upon exercise of each Warrant
must simultaneously be adjusted by multiplying the number of Shares issuable
upon exercise of each Warrant in effect on the date thereof by the Exercise
Price in effect on the date thereof and dividing the product so obtained by the
Exercise Price, as adjusted.
4.8 De Minimus Adjustment. No adjustment in the Exercise Price is
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required unless such adjustment would require an increase or decrease of at
least One Dollar ($1.00) in the price. Any adjustments which by reason of this
Section 4.8 are not required to be made are carried forward and taken into
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account in any subsequent adjustment. All calculations under this Section 4 are
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made to the nearest cent or to the nearest one-hundredth of a share, as the case
may be.
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4.9 Dilution Fee. In the event that, during the term of this Warrant, the
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Company pays any cash dividend or makes any cash distribution to any holder of
any class of its Capital Stock, other than Series A 5% Cumulative Redeemable
Preferred Stock, with respect to such Capital Stock, the Purchaser will be
entitled to receive in respect of this Warrant a dilution fee in cash (the
"Dilution Fee") on the date of payment of such dividend or distribution, which
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Dilution Fee will be equal to the difference between (a) the highest amount per
share paid to any class of Capital Stock times the number of shares represented
by the Warrant Interest, and (b) the amount of such dividend or distribution
otherwise paid to Purchaser as a result of its ownership of Capital Stock
4.10 Retention of Accountants. The Purchaser may retain a firm of
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independent accountants or investment bankers of recognized standing or an
independent investment bank to make any computation required by this Section 4,
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and a certificate signed by such firm is presumptive evidence of the correctness
of such adjustment.
4.11 Applicability of Adjustments. In the event that at any time, as
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a result of an adjustment made pursuant to Section 4.3 of this Warrant, the
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holder this Warrant thereafter becomes entitled to receive any interest in the
Company, other than Shares, thereafter the number of such other interests so
receivable upon exercise of any Warrant is subject to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Shares contained in this Section 4.
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4.12 No Change In Language of Warrant. Irrespective of any
--------------------------------
adjustments in the Exercise Price or the number or kind of shares or interest
purchasable upon exercise of this Warrant, Warrants theretofore or thereafter
issued may continue to express the same price and number and kind of shares or
interest as are stated in this Warrant initially issued by the Company.
4.13 Notice of Specific Events. In case at any time:
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(a) the Company declares any distribution upon any of its Capital
Stock or makes any special distribution to its shareholders;
(b) the Company offers for subscription pro rata to its
shareholders any additional equity interests or other rights;
(c) there is a capital reorganization or reclassification of the
equity of the Company, or consolidation or merger of the Company with, or
sale of all or substantially all of its assets to, another entity; or
(d) there is a voluntary or involuntary dissolution, liquidation
or winding up of the Company;
then, the Company shall give Purchaser (i) at least sixty days prior written
notice of the date on which the books of the Company close or a record is taken
for such distribution or subscription rights or
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for determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, and (ii) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, at least
sixty days prior written notice of the date when the same will take place.
Notice in accordance with the foregoing clause (i) must also specify, in the
case of any distribution or subscription rights, the date on which the
shareholders are entitled to exchange their Shares for other securities or other
property deliverable upon Shares for other securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up, as the case may be.
4.14 Notice of Adjustments. Whenever the Exercise Price is adjusted
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pursuant to Section 4 hereof, the Company shall promptly as practicable prepare
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a certificate signed by its chief financial officer setting forth, in reasonable
detail, the event requiring the adjustment, the amount of the adjustment, the
method by which such adjustment was calculated, and the Exercise Price after
giving effect to such adjustment, and shall cause copies of such certificate to
be delivered to Purchaser.
4.15 Fractional Shares. Fractional Shares will be issued in
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connection with any subscription hereunder.
5. Transfers.
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5.1 Transfer to Affiliates. This Warrant or the Warrant Interest may
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be transferred in whole or in part by Purchaser to any individual, sole
proprietorship, partnership, joint venture, trust, unincorporated organization,
association, corporation, company, institution, entity, party, or government
(whether national, federal, state, county, city municipal, or otherwise,
including, without limitation, any instrumentality, division, agency, body, or
department of any of the foregoing ("Person").
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5.2 Transfer Provisions Except as otherwise provided in this
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Warrant, Shares are not transferable except (1) pursuant to an effective
registration statement under the Securities Act of 1933 (the "Securities Act"),
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(ii) pursuant to Rule 144 or 144A (or any successor provisions) under the
Securities Act or (iii) pursuant to a transaction that is otherwise exempt from
the registration requirements of the Securities Act; provided that in connection
with a transfer under clause (iii) the Company may require that the transferor
deliver an opinion of counsel (who may be an employee of the transferor) to the
effect set forth in clause (iii). Each holder of this Warrant (a "Holder")
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agrees that notwithstanding compliance with the immediately preceding sentence,
such Holder will not sell, assign, transfer, or otherwise dispose of (any of the
foregoing, a "Transfer") the Warrant or any Shares ("Restricted Securities"), at
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any time prior to a public offering unless such Transferor has first made the
offer to sell as described below in this Section 5 of the Shares.
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5.3 Transfer Notice A Transferor that desires in good faith to
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transfer any Restricted Securities (any such Person for purposes of this Section
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5, the "Transferor") shall deliver a written notice of the proposed Transfer
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(the "Transfer Notice") to the Company. The Transfer Notice must contain a
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description of the proposed transaction and the terms thereof, including the
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number and type of Restricted Securities proposed to be transferred (the
"Transfer Securities"), the name of the person to whom or in whose favor the
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proposed Transfer is to be made (the "Transferee") and a description of the
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consideration to be received by the Transferor upon Transfer of the Transfer
Securities. The Transfer Notice must be accompanied by a copy of the
Transferee's bona fide written offer.
5.4 Terms of Offer. Concurrently with the delivery of the Transfer
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Notice, the Transferor shall deliver to the Company a written offer to sell (the
"Offer to Sell") to the Company the Transfer Securities. The Offer to Sell must
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contain the same terms and conditions, and must be for the same consideration
(or the fair market value thereof if other than cash) as that described in the
Transfer Notice, except that if the consideration described in the Transfer
Notice includes any promissory notes, the Offer to Sell must specify that such
notes may be promissory notes of the Company.
5.5 Purchase by the Company For a period of 20 days after the Offer
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to Sell is delivered to the Company, the Company may, by written notice to the
Transferor, accept in whole but not in part the Offer to Sell and make payment
therefor within 20 days after delivering such notice.
5.6 Election of Transferor. If by the expiration of the 20 day
----------------------
period described in Section 5.5 above, the Company has not agreed to purchase
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all of the Transfer Securities offered for sale to them by the Transferor, then
the Company is not entitled to purchase any of the Transfer Securities and the
Transferor may Transfer all (but not less than all) of the Transfer Securities
to the Transferee named in the Transfer Notice, which Transfer must be
substantially in accordance with the terms and for the consideration stated in
the Transfer Notice.
6. Registration under the Securities Act of 1933 (the "1933 Act").
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6.1 Piggy-Back Registration Rights. If the Company proposes to file
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a registration statement under the 1933 Act, covering securities of the Company,
whether for the Company's own account or for the account of selling security
holders, other than registration statement relating to an acquisition or merger
or a registration statement on Form S-8 or subsequent similar form, it shall
advise the holders of this Warrant or the Warrant Interest (each such person
being referred to herein as a "holder") by written notice at least thirty days
prior to the filing of such registration statement and will upon the request of
any such holder include in any such registration statement such information as
may be required to permit a public offering of the Warrant Interest. The
Company is not required to include such Warrant Interest in a registration
statement relating to an offering of securities if the managing underwriter has
advised the Company that the inclusion of such Warrant Interest will have a
material adverse effect upon the offering (in which case the amount of
securities to be offered for the accounts of Holders will be reduced pro rata
(according to the Shares proposed for registration) to the extent necessary to
reduce the total amount of securities to be included in such offering to the
amount recommended by such managing underwriter). In so excluding the Warrant
Interest, the Company may not treat the holders less favorably than others
having piggyback registration rights. The Company shall keep such registration
statement current for a period of nine months from the effective date of such
registration statement or until such earlier date as all of the
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registered Warrant Interest has been sold. In connection with such registration,
the holders will execute and deliver such customary underwriting documents as
are requested by the managing underwriter as a condition to the inclusion of the
Warrant Interest in the registration statement.
6.2 [Intentionally Deleted]
6.3 Additional Provisions Concerning Registration. The following
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provisions of this Section 6.3 are also applicable to any registration statement
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filed pursuant to Section 6.1 or 6.2 of this Warrant:
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(a) The Company shall bear the entire cost and expense of any
registration of securities initiated under Section 6 of this Warrant.
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Notwithstanding the foregoing, any holder whose Warrant Interest is
included in any such registration statement pursuant to this Section 6
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shall, however, bear the fees of its own counsel and accountants and any
transfer taxes or underwriting discounts or commissions applicable to the
Warrant Interest sold by the holder pursuant thereto.
(b) The Company shall indemnify and hold harmless each such
holder and each underwriter, within the meaning of the 1933 Act, who may
purchase from or sell for any such holder any Warrant Interest from and
against any and all losses, claims, damages and liabilities (including fees
and expenses of counsel, which counsel may, if the holders request, be
separate from counsel for the Company) caused by any untrue statement or
alleged untrue statement of material fact contained in the Registration
Statement or any post-effective amendment thereto or any registration
statement under the 1933 Act or any prospectus included therein required to
be filed or furnished by reason of this Section 6 or any application or
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other filing under any state securities law caused by any omission or
alleged omissions to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading to which
such holder or any such underwriter or any of them may become subject under
the 1933 Act, the Exchange Act or other Federal or state statutory law or
regulation, at common law or otherwise ("Act"), except insofar as such
---
losses, claims, damages or liabilities are caused by any such untrue
statement or alleged untrue statement or omission or alleged omission based
upon information furnished to the Company by any such holder or underwriter
expressly for use therein, which indemnification includes each person, if
any, who controls any such underwriter within the meaning of each such Act.
(c) The Company shall qualify the Warrant Interest for sale in
such states as it is otherwise qualifying its securities for sale, or in
respect of a registration pursuant to Section 6.2 of this Warrant, in such
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states as are reasonably requested by the holder. However, in no event is
the Company required to submit to the jurisdiction of such state other than
the limited consent of service of process relating to the offering. The
Company shall also provide the holder with a reasonable number of
prospectuses upon request.
(d) Neither the giving of any notice by any holder nor the making
of any request for prospectuses imposes any upon any holder making such
request any obligation to sell any Warrant Interest or exercise this
Warrant.
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(e) The registration rights set forth in Sections 6.1 and 6.2 of this
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Warrant are exercisable only by Purchaser and its permitted assigns.
(f) The Company is not required to include in any registration
statement any Warrant Interest which could, pursuant to the provisions of
Rule 144 of the Securities and Exchange Commission under the 1933 Act, be
sold during a period of four months following the date on which
registration of such Warrant Interest was requested.
(g) The Company's agreements with respect to this Warrant or the
Warrant Interest in this Section 6 continue in effect regardless of the
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exercise and surrender of this Warrant.
7. Listing Rights. If the Company at any time lists any securities of
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the same class as those issuable on the exercise of this Warrant on any national
securities exchange, the Company will, at its expense, simultaneously list on
that exchange, on official notice of issuance on exercise of this Warrant, and
maintain such listing of, all shares of the Warrant Interest or other securities
from time to time issuable on exercise of this Warrant.
8. Repurchase Rights.
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8.1 Call Option. On or after the earlier of (i) five (5) years from
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the date hereof or (ii) the date of delivery to the Company of a Demand Notice,
provided the sixty (60) day period after the delivery of such Demand Notice in
which the Company is entitled to exercise its rights under this Section 8.1 has
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not passed, if the Warrant Interest has not been sold in a public offering
pursuant to a registration statement in accordance with Section 6, the Company
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is entitled to repurchase the Warrant Interest issued or issuable pursuant to
this Warrant at a price equal to the Current Market Value (as defined below) of
the Warrant Interest. In order to exercise this call option the Company must
give the Purchaser thirty days' notice of its intent to exercise the call option
contained in this Section 8.1 and to repurchase the Warrant or Warrant Interest.
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8.2 Put Option. (i) Upon the occurrence of any event listed in
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Section 4.13 (c) pursuant to which, following consummation thereof, a Change of
----------------
Control (as such term is defined in the Loan and Security Agreement, dated as of
the date hereof, as amended, between Harperprints, Inc. and Purchaser (the "Loan
----
Agreement")) has occurred, (ii) if the Loans (as defined in the Loan Agreement)
---------
are repaid voluntarily other than from the proceeds of an initial public
offering of common stock of the Company, or (iii) if an Event of Default (as
defined in the Loan Agreement) occurs, if the Warrant Interest has not been sold
in a public offering pursuant to a registration statement in accordance with
Section 6, then, Purchaser or any subsequent holder, is entitled to require the
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Company to repurchase the Warrant Interest issued or issuable pursuant to this
Warrant at a price equal to the Current Market Value of the Warrant Interest
(the "Put Price"), provided, however that in no event shall the Put Price be
--------- -------- -------
paid until all amounts owing by the Company under that certain Secured
Promissory Note executed by the Company and payable to the order of Sirrom
Capital Corporation in the original principal amount of $4,300,000, dated June
19, 1997, have been paid. In order to exercise this put option Purchaser must
give the Company prior written notice of
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its intent to exercise the put option contained in this Section 8.2 requiring
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the Company to repurchase the Warrant or Warrant Interest. Such written notice
of its intent to exercise its put option must be given not less than thirty days
prior to the exercise date in the case of subsection (iv), and, in case of
clause (i), (ii) or (iii), not less than twenty days prior to any event
described in clause (i), (ii) or (iii) of this Section 8.2. In the event that
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the Company defaults in its obligation to purchase all or any portion of the
Warrant Interest upon exercise of the put option, in addition to any other
rights or remedies of the Holder, the unpaid portion of the Put Price will bear
interest at the Default Rate (as defined in the Loan Agreement). The Company
will, upon the request of the Holder, execute and deliver to the Holder a
promissory note in form and substance satisfactory to the Holder evidencing such
obligation.
8.3 Current Market Value. For the purpose of any calculating the
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price for the exercise of the put or call options, the "Current Market Value" of
--------------------
a Share is deemed to be equal to the highest of (i) a pro rata share of the
Company's book value, (ii) a pro rata share of the appraised value of the
Company, or (iii) the current market price of the Warrant Interest, in each case
determined without discount for any illiquidity, minority interest, call option
or otherwise. Current Market Value of Shares (and the Warrant Interest) will be
determined on a diluted basis assuming the exercise of all outstanding options
and warrants which at the time of valuation are exercisable and permit
permitting the holder thereof to purchase Shares and the payment of any exercise
price for such options or warrants. The appraised value of the Company will be
determined by an investment banking firm or appraiser mutually acceptable to the
Purchaser and Company. If the Company and the Purchaser are unable to agree on
an investment banking firm or appraiser within ten (10) days after receipt of
the appropriate party of the exercise of the call option or the put option, an
investment banking firm or appraiser shall be chosen by each of the Purchaser on
one hand, and the Company, on the other hand, and such chosen investment banking
firms or appraisers shall appoint a third investment banking firm or appraiser
to determine the appraised value. The cost of the investment banking firms
and/or appraisers shall be borne by the Company. If appropriate, the appraised
value of the Company must be determined on the basis of the sale of the Company
as a going business in an arms length transaction between a willing buyer and a
willing seller, neither of which is acting under compulsion. The current market
price of the Warrant Interest at any date is based on the public market for the
Shares, if any, and is based on the average of the daily closing prices for a
twenty consecutive trading days commencing thirty trading days before such date.
The closing price for each day is the last sale price reported or, in case no
such reported sale takes place on such day, the average of the reported last bid
and asked prices regular way, in either case on the principal national
securities exchange on which the Shares are admitted to trading or listed or on
the NASDAQ System, or if the primary market for the Shares is not an exchange or
quotation system in which last sale transactions are contemporaneously reported,
the highest closing or last bona fide bid or asked quotation by disinterested
Persons in the over-the-counter market on such trading day as reported by the
National Association of Securities Dealers through its Automated Quotation
System or its successor or such other generally accepted source of publicly
reported bid quotations as the Holders designate.
9. Governing Law. This Warrant must be construed and interpreted in
-------------
accordance with and is governed in all respects by the laws of the State of New
York applicable to agreements executed and to be performed wholly within such
State.
10
<PAGE>
10. Notices. Except as otherwise provided herein, whenever it is provided
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herein that any notice, demand, request, consent, approval, declaration or other
communication shall or may be given to or served upon either of the parties by
the other party, or whenever either of the parties desires to give or serve upon
the other party any communication with respect to this Agreement, each such
notice, demand, request, consent, approval, declaration or other communication
shall be in writing and shall be deemed to have been validly served, given or
delivered (i) upon the earlier of actual receipt and three (3) days after
deposit in the United States Mail, registered or certified mail, return receipt
requested, with proper postage prepaid, (ii) upon transmission, when sent by
telecopy or other similar facsimile transmission (with such telecopy or
facsimile promptly confirmed by delivery of a copy by personal delivery or
United States Mail as otherwise provided in this Section 10, (iii) one (1)
----------
business day after deposit with a reputable overnight courier with all charges
prepaid or (iv) when delivered, if hand-delivered by messenger, all of which
shall be addressed to the party to be notified and sent to the address or
facsimile number indicated below or to such other address (or facsimile number)
as may be substituted by notice given as herein provided. The giving of any
notice required hereunder may be waived in writing by the party entitled to
receive such notice. Failure or delay in delivering copies of any notice,
demand, request, consent, approval, declaration or other communication to any
Person (other than the Company or the Purchaser) designated below to receive
copies shall in no way adversely affect the effectiveness of such notice,
demand, request, consent, approval, declaration or other communication.
(a) If to the Purchaser, at:
General Electric Capital Corporation
Capital Funding, Inc.
777 Long Ridge Road
Bldg. B, First Floor
Stamford, Connecticut 06927
Attention: Kim Tanner
Telecopy No.: (203) 316-7989
With copies to:
General Electric Capital Corporation
Capital Funding, Inc.
5400 LBJ Freeway, Suite 1280
Dallas, Texas 75240
Attention: John Hanley
Steve Bellah
Telecopy No.: (972) 419-3289
11
<PAGE>
and
Patton Boggs, L.L.P.
2200 Ross Avenue, Suite 900
Dallas, Texas 75201
Attention: Larry A. Makel, Esq.
Telecopy No.: (214) 871-2688
(b) If to the Company, at:
Master Graphics, Inc.
2500 Lamar Avenue
Memphis, Tennessee 38114
Attention: Mr. John P. Miller
Telecopy No.: (901) 743-0612
and
Black Bobango & Morgan
530 Oak Court Drive, Suite 345
Memphis, Tennessee 38117
Attention: Mike Morgan, Esq.
Telecopy No.: (901) 683-2553
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its officers duly authorized as of March __, 1998.
MASTER GRAPHICS, INC.
By: /s/ Lance T. Fair
------------------------------
Name: Lance T. Fair
Title: Chief Financial Officer
<PAGE>
Purchase Warrant
NOTICE OF EXERCISE
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TO: MASTER GRAPHICS, INC.
1. The undersigned hereby elects to purchase ________ shares of Common
Stock, $.01 par value, of MASTER GRAPHICS, INC. pursuant to the terms of the
attached Warrant, and tenders herewith payment of the purchase price in full,
together with all applicable transfer taxes, if any, in the amount of
$______________.
2. Please issue a certificate or other confirmation of the shares of
common stock in the name of the undersigned or in such other name as is
specified below:
_____________________________________________
(Name)
_____________________________________________
_____________________________________________
3. The undersigned represents that the aforesaid shares of common stock
are being acquired for the account of the undersigned for investment and not
with a view to, or for resale in connection with, the distribution thereof and
that the undersigned has no present intention of distributing or reselling such
shares of common stock.
______________________________________________________
_____________________________________________________
_________________________________
Date