EXHIBIT 10.17
WARRANT AGREEMENT
(Xxxxxxx X. Xxxxxx 75,000 Warrant Shares)
This WARRANT AGREEMENT (this "AGREEMENT") is entered into as of
December 31, 1995, by and between New Image Industries, Inc. (the "Company"), a
Delaware corporation, and Xxxxxxx X. Xxxxxx ("Holder") as a subdivision of that
certain Warrant Agreement made and entered into as of the 24th day of March,
1995, by and between the Company and XXXXXX XXXXXXX & CO. In consideration of
these premises and the mutual covenants and agreements hereinafter set forth,
and other good and valuable consideration the receipt and sufficiency of which
are hereby acknowledged, the Company and Holder agree as follows:
1. GRANT OF WARRANT. In consideration of the sum of $75.00 ($0.001 per
Warrant) and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Company hereby grants to Holder the right
and option (the "Warrant"), upon the terms and subject to the conditions set
forth in this Agreement, to purchase all or any portion of 75,000 shares of the
Common Stock, par value $0.001 per share, of the Company (the "Shares") at an
exercise price of $3.875 per share (the "Exercise Price").
2. TERM OF WARRANT. The Warrant shall terminate and expire at 5:00 p.m.,
Los Angeles time, on March 23, 2000 (the "Warrant Expiration Date"), unless
sooner terminated as provided herein.
3. VESTING.
(a) The Warrant shall be exercisable with respect to 37,500 shares of
Common Stock commencing on the date hereof. The remaining portion of this
Warrant shall vest in 12 equal monthly installments of 3,750 Shares each on the
last day of each month after the date hereof, commencing on March 30, 1995.
Once vested, the Warrant, or portion thereof, shall be exercisable in full by
the holder hereof at any time from and after the date hereof and prior to the
Warrant Expiration Date.
(b) If that certain Engagement Agreement, by and between the Company
and Xxxxxx, Xxxxxxx & Co., dated March 24, 1995, (the "Engagement Agreement")
should terminate prior to the vesting of all of the Shares hereunder, Holder
shall only be entitled to exercise its rights hereunder with respect to those
Shares which were vested on the date of termination of the Engagement Agreement.
(c) Notwithstanding the foregoing, the Warrant shall fully vest
immediately prior to the closing of a merger, consolidation, sale of
substantially all of the assets of the Company or other corporate reorganization
(collectively, a "Reorganization") in which the Company is not the "surviving
corporation." For these purposes, a determination as to whether the Company is
the surviving corporation shall be made on
the basis of the relative equity interests of the shareholders in the
corporation existing after the Reorganization, as follows: If the holders of
the securities of the Company prior to the Reorganization own equity
securities possessing more than 50% of the voting power of the corporation
existing after the Reorganization, then for the purposes of this Agreement,
the Company shall be the surviving corporation. In all other bases, the
Company shall not be the surviving corporation.
(d) Notwithstanding anything to the contrary contained in this
Agreement, the Warrant may not be exercised, in whole or in part, unless and
until any then-applicable requirements of all state and federal laws and
regulatory agencies shall have been fully complied with to the satisfaction of
the Company and its counsel.
4. EXERCISE OF WARRANT. There is no obligation to exercise the Warrant,
in whole or in part. The Warrant may be exercised, in whole or in part, only by
delivery to the Company of: (a) written notice of exercise in form and
substance identical to Exhibit "A" attached to this Agreement stating the number
of Shares then being purchased (the "Purchased Shares"); and (b) payment of the
Exercise Price of the Purchased Shares by wire transfer of immediately available
Federal funds. Upon receipt of the foregoing, the Company shall promptly issue
in the name of the Holder a stock certificate evidencing the Purchased Shares
being purchased by such exercise and deliver such certificate to the Holder.
5. RESTRICTIONS ON PURCHASED SHARES. Holder shall not sell, transfer
(with or without consideration), assign, pledge, hypothecate or otherwise
dispose of (collectively, "Transfer") any of the Purchased Shares unless the
Purchased Shares are disposed of pursuant to and in conformity with an effective
registration statement filed with the Securities and Exchange Commission (the
"Commission") pursuant to the Securities Act of 1933, as amended (the "Act"), or
pursuant to an available exemption from the registration and prospectus delivery
requirements of the Act, and the proposed disposition will not result in a
violation of the securities laws of any state of the United States. If
requested by the Company, Holder shall, prior to the transfer of such Purchased
Shares, deliver to the Company a written opinion of counsel, satisfactory to the
Company and its counsel, that the proposed disposition will comply with the
requirements set forth in this paragraph 5. Any attempted Transfer which is not
in full compliance with this Paragraph 5 shall be null and void AB INITIO, and
of no force or effect.
6. ADJUSTMENTS UPON RECAPITALIZATION.
(a) In the event the Company should at any time or from time to time
after the date of this Warrant (the "Issuance Date") fix a record date for the
effectuation of a split or subdivision of the outstanding shares of Common Stock
or the determination of holders of Common Stock entitled to receive a dividend
or other distribution payable in additional shares of Common Stock or other
securities or rights convertible into, or entitling the holder thereof to
receive, directly or indirectly, additional shares of Common Stock (hereinafter
referred to as "Common Stock Equivalents") without payment of any
consideration by such holder for the additional shares of Common Stock or the
Common Stock Equivalents (including the additional shares of Common stock
issuable upon conversion or exercise thereof), then, as of such record date
(or the date of such dividend distribution, split or subdivision if no record
date is fixed), the Exercise Price shall be appropriately decreased
(i.e., the per share Exercise Price shall be adjusted such that the aggregate
exercise price for all Shares issuable upon exercise of the Warrants in full,
as adjusted, shall remain the same) and the number of Shares shall be
increased in proportion to such increase in the aggregate number of shares of
Common Stock outstanding and those issuable with respect to such Common Stock
Equivalents.
(b) If the number of shares of Common Stock outstanding at any time
after the Issuance Date is decreased by a combination of the outstanding shares
of Common Stock, then, following the record date of such combination, the
Exercise Price shall be appropriately increased (i.e., the per share Exercise
Price shall be adjusted such that the aggregate exercise price for all Shares
issuable upon exercise of the Warrants in full, as adjusted, shall remain the
same) and the number of Shares shall be decreased in proportion to such decrease
in the aggregate number of shares of Common Stock outstanding and those issuable
with respect to such Common Stock Equivalents.
(c) In case of any capital reorganization, any reclassification of
the Common Stock (other than a change in par value or a recapitalization
described in Section 6(a) or 6(b) of this Agreement), or the consolidation of
the Company with, or a sale of substantially all of the assets of the Company to
(which sale is followed by a liquidation or dissolution of the Company), or
merger of the Company with, another person, the Holder shall thereafter be
entitled upon exercise of the Warrant to purchase the kind and number of shares
of stock or other securities or the amount or value of any cash, assets or other
property receivable upon such event by a holder of the number of shares of the
Common Stock which the Warrant entitles the holder of the Warrant to purchase
from the Company immediately prior to such event; and in any such case,
appropriate adjustment shall be made in the application of the provisions set
forth in this Agreement with respect to the Holder's rights and interests
thereafter, to the end that the provisions set forth in this Agreement
(including the specified changes and other adjustments to the Exercise Price)
shall thereafter be applicable in relation to any shares or other property
thereafter purchasable upon exercise of the Warrant.
(d) In the event the Company should at any time or from time to time
after the Issuance Date fix a record date for the determination of holders of
Common Stock entitled to receive a dividend or other distribution payable in
securities or rights convertible into, or entitling the holder thereof to
receive, directly or indirectly, additional shares of Common Stock or the
securities or such rights of any other corporation (other than Common Stock
Equivalents covered be Section 6(a) hereof), the Holder shall thereafter be
entitled upon exercise of the Warrant to receive, in addition to the Purchased
Shares being purchased upon such exercise, the securities or rights convertible
into securities receivable upon such event by a holder of the number of shares
of the Common Stock which the Holder is purchasing upon such exercise.
(e) If it is expected that there will occur any event described in
Section 6(c) or 6(d) hereof, the Company shall give the holder of the Warrants
notice thereof, which notice shall be given at such time or times as notice is
given to the holders of the Company's Common Stock.
(f) The provisions of this Section 6 are intended to be exclusive,
and the holder of the Warrant shall have no rights other than as set forth in
this Agreement (and the rights of a stockholder upon exercise of the Warrant)
upon the occurrence of any of the events described in this Section 6.
(g) The grant of the Warrant shall not affect in any way the right or
power of the Company to make adjustments, reclassifications, reorganizations or
changes in its capital or business structure, or to merge, consolidate, dissolve
or liquidate, or to sell or transfer all or any part of its business or assets.
7. REPRESENTATIONS AND WARRANTIES OF HOLDER. Holder makes the following
representations and warranties:
(a) Holder is acquiring the Warrants for its own account with the
present intention of holding such securities for investment purposes only and
not with a view to, or for sale in connection with, any distribution of such
securities (other than a distribution in compliance with all applicable federal
and state securities laws).
(b) Holder is an experienced and sophisticated investor and has such
knowledge and experience in financial and business matters that it is capable of
evaluating the relative merits and the risks of an investment in the Warrants
and in the Shares and of protecting its own interests in connection with this
transaction.
(c) Holder is willing to bear and is capable of bearing the economic
risk of an investment in the Warrants and the Shares.
(d) The Company has made available, prior to the date of this
Agreement, to Holder the opportunity to ask questions of the Company and its
officers, and to receive from the Company and its officers information
concerning the terms and conditions of the Warrants and this Agreement and to
obtain any additional information with respect to the Company, its business,
operations and prospects, as reasonably requested by Holder.
(e) Holder is an "accredited investor" as that term is defined under
Rule 501(a)(8) of Regulation D promulgated by the Securities and Exchange
Commission under the Act.
(f) For purposes of the application of federal and state securities
laws, Holder acknowledges that the offer and sale of the Warrants to Holder
occurred in the State of California and that Holder is a resident of the State
of California.
8. LEGEND ON STOCK CERTIFICATES. Holder agrees that all certificates
representing the Purchased Shares will be subject to such stock transfer orders
and other restrictions as the Company may deem advisable under the rules,
regulations and other requirements of the Securities and Exchange Commission,
any stock exchange upon which the Common Stock is then listed and any applicable
federal or state securities laws, and the Company may cause the following legend
to be put on such certificates to make appropriate reference to such
restrictions:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED OR
OTHERWISE HYPOTHECATED WITHOUT REGISTRATION UNDER SUCH ACT OR PURSUANT TO
AN EXEMPTION THEREFROM.
9. NO RIGHTS AS STOCKHOLDER. Holder shall have no rights as a stockholder
of the Company with respect to the Shares until the date of the issuance to
Holder of a stock certificate or stock certificates evidencing such Shares.
Except as may be provided in Paragraph 6 of this Agreement, no adjustment shall
be made for dividends (ordinary or extraordinary, whether in cash, securities or
other property) or distributions or other rights for which the record date is
prior to the date such stock certificate is issued.
10. MODIFICATION. The Board or a committee thereof may modify, extend or
renew the Warrant or accept the surrender of, and authorize the grant of a new
option in substitution for, the Warrant (to the extent not previously
exercised). No modification of the Warrant shall be made without the consent of
Holder which would alter or impair any rights of Holder under the Warrant.
11. DISPUTES.
(a) ARBITRATION. All disputes arising in connection with this
Agreement shall be finally settled by arbitration in Los Angeles, California, in
accordance with the rules of the American Arbitration Association (the "Rules of
Arbitration") and judgment on the award rendered by the arbitration panel (the
"Arbitration Panel") may be entered in any court or tribunal of competent
jurisdiction.
(b) Any party which desires to initiate arbitration proceedings as
provided in Section 11(a) above may do so by delivering written notice to the
other party (the "Arbitration Notice") specifying (A) the nature of the dispute
or controversy to be arbitrated, (B) the name and address of the arbitrator
appointed by the party initiating such arbitration and (C) such other matters as
may be required by the Rules of Arbitration.
(c) The Parties shall appoint a single arbitrator who shall
constitute the Arbitration Panel hereunder. Should the parties not agree upon
the appointment of the
arbitrator within 30 days of delivery of the Arbitration Notice, the
Arbitrator shall be appointed in accordance with the Rules of Arbitration.
(d) In any arbitration proceeding conducted pursuant to the
provisions of this Section 11, both parties shall have the right to discovery,
to call witnesses and to cross-examine the opposing party's witnesses, either
through legal counsel, expert witnesses or both.
(e) FINALITY OF DECISION. All decisions of the Arbitration Panel
shall be final, conclusive and binding on all parties and shall not be subject
to judicial review. The arbitrator shall divide all costs (other than fees of
counsel) incurred in conducting the arbitration proceeding and the final award
in accordance with what they deem just and equitable under the circumstances.
(f) LIMITATIONS. Notwithstanding anything to the contrary contained
in Sections 11(a) and 11(b) above, any claim by either party for injunctive or
other equitable relief, including specific performance, may be brought in any
court of competent jurisdiction and any judgment, order or decree relating
thereto shall have precedence over any arbitral award or proceeding.
12. GENERAL PROVISIONS.
(a) FURTHER ASSURANCES. Holder shall promptly take all actions and
execute all documents requested by the Company which the Company deems to be
reasonably necessary to effectuate the terms and intent of this Agreement.
(b) NOTICES. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be given to the parties
hereto as follows:
If to the Company, to:
NEW IMAGE INDUSTRIES, INC.
0000 Xxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: President
If to Holder, to:
Xxxxxxx X. Xxxxxx
c/x Xxxxxx Partners, LLC
Xxx Xxxxxxxx Xxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
or at such other address or addresses as may have been furnished by either party
in writing to the other party hereto. Any such notice, request, demand or other
communication shall be effective (i) if given by mail, two days after such
communication is deposited in the mail by first-class certified mail, return
receipt requested, postage prepaid, addressed as aforesaid, or (ii) if given by
any other means, when delivered at the address specified in this
subparagraph (b).
(c) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of California applicable to contracts
made in, and to be performed within, that state. Jurisdiction and venue over
any legal action brought hereunder shall reside exclusively in the county of Los
Angeles, State of California. Each of the parties hereto waive their right to a
jury trial with respect to any such legal actions.
(d) ATTORNEYS' FEES. In the event that any action, suit or
arbitration or other proceeding is instituted upon any breach of this Agreement,
the prevailing party shall be paid by the other party thereto an amount equal to
all of the prevailing party's costs and expenses, including attorneys' fees
incurred in each and every such action, suit or proceeding (including any and
all appeals or petitions therefrom). As used in this Agreement, "attorneys'
fees" shall mean the full and actual cost of any legal services actually
performed in connection with the matter involved calculated on the basis of the
usual fee charged by the attorney performing such services and shall not be
limited to "reasonable attorneys' fees" as defined in any statute or rule of
court.
(e) AMENDMENT; WAIVER. This Agreement shall be binding upon and
inure to the benefit of the parties to this Agreement and their respective
successors, heirs and personal representatives. No provision of this Agreement
may be amended or waived unless in writing signed by all of the parties to this
Agreement. Waiver of any one provision of this Agreement shall not be deemed to
be a waiver of any other provision.
(f) NO FINDERS. The parties each agree to indemnify and hold
harmless the other against any expense incurred by reason of any consulting,
brokerage commission or finder's fee alleged to be payable to any person in
connection with the transactions contemplated hereby because of any act,
omission or statement of indemnifying party or any dealings by the indemnifying
party with any consultant, broker or finder.
(g) EXPENSES. Each of the parties shall pay its own expenses
incurred in connection with the preparation of this Agreement and the
consummation of the transactions contemplated hereby.
(h) SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be or become
prohibited or invalid under applicable law, such provision shall be ineffective
to the extent of such prohibition or invalidity without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
(i) COUNTERPARTS. This Agreement may be executed in several
counterparts, all of which together shall constitute one agreement binding on
all parties hereto, notwithstanding that all of the parties have not signed the
same counterpart.
(j) ENTIRE AGREEMENT. This Agreement constitutes and embodies the
entire understanding and agreement of the parties hereto relating to the subject
matter hereof and there are no other agreements or understandings, written or
oral, in effect between the parties relating to such subject matter except as
expressly referred to herein.
(k) MISCELLANEOUS. Titles and captions contained in this Agreement
are inserted for convenience of reference only and do not constitute a part of
this Agreement for any other purpose. Except as specifically provided herein,
neither this Agreement nor any right pursuant hereto or interest herein shall be
assignable by any of the parties hereto without the prior written consent of the
other party hereto.
13. AGREEMENT CONCERNING SUBDIVISION. The Company and Holder agree that
this Warrant Agreement is one of three warrants aggregating warrants to purchase
275,000 shares of Common Stock which are being issued in subdivison of the
March 24, 1995 Warrant Agreement referred to above and in full substitution
therefor. Each Holder of this Warrant agrees to be bound by all of the
provisions of this Warrant Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first above written.
NEW IMAGE INDUSTRIES, INC.
By: ___________________________ __________________________
Xxxxx X. Xxxxxxx, President Xxxxxxx X. Xxxxxx
EXHIBIT "A"
NOTICE OF EXERCISE
(TO BE SIGNED ONLY UPON EXERCISE OF THE WARRANT)
TO: New Image Industries, Inc.
The undersigned hereby irrevocably elects (to the extent indicated herein) to
exercise the purchase right represented by the Warrant granted pursuant to the
attached Warrant Agreement (originally issued March 24, 1995) and to purchase
thereunder ________ shares of Common Stock of New Image Industries, Inc., a
Delaware corporation (the "Company"). The closing of the exercise of the
purchase right shall take place at _______ on ____________________ , ____ at the
principal executive office of the Company located at 0000 Xxxxxx Xxxxx,
Xxxxxxxx, Xxxxxxxxxx .
Dated: ________________________________
Signed: ________________________________
