UNDERWRITERS’ WARRANT AGREEMENT
EXHIBIT
1.2
UNDERWRITERS’
WARRANT AGREEMENT
THIS
UNDERWRITER’S WARRANT AGREEMENT (the “Agreement”), dated as of May 14, 2007, is
made and entered into by and between U.S. Dry Cleaning Corporation, a Delaware
corporation (the “Company”) and US EURO Securities, Inc., a California
Corporation (the “Underwriter” and, once it has received the Warrants, the
“Warrantholder”).
Concurrently
herewith, the Company is offering for sale, in a public offering (the
“Offering”) up to 3,000,000 Units at a purchase price of $2.50 per Unit. On May
14, 2007, the
Company entered into an Underwriting Agreement with the Underwriter to become
the Lead Managing Underwriter (the “Underwriting Agreement”). The Underwriting
Agreement provides that, on consummation of the Offering, the Company shall
issue to the Underwriter warrants (the “Warrants”) entitling the Underwriter to
purchase, on the terms and conditions hereinafter set forth, the number of
shares of Company common stock (the “Shares”) equal to 10% of the total Units
sold in the Offering.
In
consideration of the foregoing and in satisfaction of the Company’s obligations
contained in the Underwriting Agreement and for the purpose of defining the
terms and provisions of the Warrants and the respective rights and obligations
with respect thereto, the Company and the Underwriter, for value received,
hereby agree as follows:
Section
1. Issuance
of Warrants; Transferability and Form of Warrants.
1.1 Issuance
of the Warrants.
The
Company agrees that on the Closing Date (as defined in the Underwriting
Agreement), the Company shall issue to the Underwriter the Warrants entitling
the Underwriter to purchase, on the terms and conditions hereinafter set forth,
the number of Shares equal to 10% of the total Units sold in the Offering,
subject to adjustment as set forth in Section 9 hereof. Each Warrant will
entitle the Warrantholder to purchase one share of the Company’s common stock,
at the Warrant Price (as defined in Section 7 hereof). The Warrants being sold
and issued pursuant to this Agreement shall be evidenced by a Warrant
Certificate substantially in the form of Exhibit A hereto (the “Warrant
Certificate”).
1.2 Registration.
The
Warrants shall be numbered and shall be registered on the books of the Company
when issued.
The
Company shall be entitled to treat the registered holder of any Warrant on
the
books of the Company as the owner in fact thereof for all purposes and shall
not
be bound to recognize any equitable or other claim to or interest in such
Warrant on the part of any other person. The Warrants shall be transferable
only
on the books of the Company upon delivery thereof duly endorsed by the holder
thereof or by its duly authorized attorney or representative, or accompanied
by
proper evidence of succession, assignment or authority to transfer.
Notwithstanding the foregoing, the Company shall have no obligation to cause
the
Warrants to be transferred on its books to any person if, in the opinion of
counsel to the Company, such transfer does not comply with the provisions of
the
Securities Act of 1933, as amended (the “Act”), or applicable state blue sky
laws and the rules and regulations thereunder.
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1.3 Form
of Warrants.
The
text of the Warrants and of the form of election to purchase Shares shall be
substantially as set forth in Exhibit A attached hereto. The number of Shares
issuable upon exercise of the Warrants is subject to adjustment upon the
occurrence of certain events, all as hereinafter provided. The Warrants shall
be
executed on behalf of the Company by its President or by a Vice President.
A
Warrant bearing the signature of an individual who was at the time of signature
the proper officer of the Company shall bind the Company, notwithstanding that
such individual shall have ceased to hold such office prior to the delivery
of
such Warrant or did not hold such office on the date of this Agreement. The
Warrants shall be dated as of the date of signature thereof by the Company
either upon initial issuance or upon division, exchange, substitution or
transfer.
Section
2. Exchange
of Warrant Certificate.
Any
Warrant certificate may be exchanged for another certificate or certificates
entitling the Warrantholder to purchase a like aggregate number of Shares as
the
certificate or certificates surrendered then entitled such Warrantholder to
purchase. Any Warrantholder desiring to exchange a Warrant certificate shall
make such request in writing delivered to the Company, and shall surrender,
properly endorsed, with signatures guaranteed, the certificate evidencing the
Warrant to be so exchanged. Thereupon, the Company shall execute and deliver
to
the person or persons entitled thereto a new Warrant certificate as so
requested.
Section
3. Term
of Warrants; Exercise of Warrants.
3.1 Subject
to the terms of this Agreement, each Warrantholder shall have the right, at
any
time during the period commencing at 9:00 a.m., Pacific Time, on
the date
of issuance of the Warrants (the “Issuance Date”) and ending at 5:00 p.m. of the
day preceding the fifth anniversary of the date of the issuance (the
“Termination Date”), to purchase from the Company up to the number of fully paid
and nonassessable Shares to which the Warrantholder may at the time be entitled
to purchase pursuant to this Agreement. Such purchase of Shares shall be
effectuated by the surrender to the Company, at its principal office, of the
certificate evidencing the Warrants to be exercised, together with the purchase
form on the reverse thereof duly filled in and signed, with signatures
guaranteed, and upon payment to the Company of the Warrant Price (as defined
in
and determined in accordance with the provisions of this section 3 and section
8
hereof), for the number of Shares in respect of which such Warrants are then
exercised.
3.2 Payment
of the aggregate Warrant Price shall be made pursuant to Section 3.3 hereof.
Upon surrender of the Warrants and payment of such Warrant Price as aforesaid,
the Company shall issue and cause to be delivered with all reasonable dispatch
to or upon the written order of the Warrantholder, and in such name or names
as
the Warrantholder may designate, a certificate or certificates for the number
of
full Shares so purchased upon the exercise of the Warrant, together with cash,
as provided in Section 11 hereof, in respect of any fractional Shares otherwise
issuable upon such surrender. Such certificate or certificates shall be deemed
to have been issued and any person so designated to be named therein shall
be
deemed to have become a holder of record of such securities as of the date
of
surrender of the Warrants and payment of the Warrant Price, as aforesaid,
notwithstanding that the certificate or certificates representing such
securities shall not actually have been delivered or that the stock transfer
books of the Company shall then be closed. The Warrants shall be exercisable,
at
the election of each Warrantholder, either in full or from time to time in
part
and, in the event that a certificate evidencing the Warrants is exercised in
respect of less than all of the Shares specified therein at any time prior
to
the Termination Date, a new certificate evidencing the remaining portion of
the
Warrants shall be issued by the Company to such Warrantholder.
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3.3 Manner
of Exercising Warrant.
(a) In
order
to exercise this Warrant with respect to all or any part of the Shares for
which
this Warrant is at the time exercisable, Warrantholder (or any other person
or
persons exercising the Warrant) must take the following actions:
(i)
Execute
and deliver to the Company a written notice of exercise stating the number
of
Shares being purchased (in whole shares only) and such other information set
forth on the form of Notice of Exercise attached hereto as Appendix A;
and
(ii)
Pay
the
aggregate Warrant Price for the Shares in one or more of the following
forms:
(A) Cash
or
check made payable to the Company.
(B) A
promissory note payable to the Company, but only to the extent authorized by
the
Company and applicable provisions of the California Corporations
Code.
Should
the Company’s Common Stock be registered under Section 12 of the Exchange Act at
the time the Warrant is exercised, then the Warrant Price may also be paid
as
follows:
(C)
By
surrender of this Warrant at the principal office of the Company together with
notice of cashless election, in which event the Company shall issue to
Warrantholder a number of shares of Common Stock computed using the following
formula:
X
=
Y
(A-B)
A
where: X
= the
number of shares of Common Stock to be issued to Holder.
Y
= the
number of shares of Common Stock for which this Warrant is being
exercised.
A
= the
Market Price of one share of Common Stock (for purposes of this Section 3(a)
(ii)
(C),
the
"Market Price" shall be defined as the average closing price of the Common
Stock
for the five trading days prior to the date of exercise of this Warrant (the
"Average Closing Price"), as reported by the OTC Bulletin Board or any other
over-the-counter market; provided, however, that if the Common Stock is listed
on a national exchange, the Market Price shall be the Average Closing Price
on
such exchange for the five trading days prior to the date of exercise of the
Warrants. If the Common Stock is/was not traded during the five trading days
prior to the date of exercise, then the closing price for the last publicly
traded day shall be deemed to be the closing price for any and all (if
applicable) days during such five trading day period.
B
= the
Warrant Price.
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For
purposes of Rule 144 and sub-section 3.3(a)(ii)(C)
thereof, it is intended, understood and acknowledged that the Common Stock
issuable upon exercise of this Warrant in a cashless exercise transaction shall
be deemed to have been acquired at the time this Warrant was issued. Moreover,
it is intended, understood and acknowledged that the holding period for the
Common Stock issuable upon exercise of this Warrant in a cashless exercise
transaction shall be deemed to have commenced on the date this Warrant was
issued.
(D) Through
a
special sale and remittance procedure compliant with applicable federal and
state securities law pursuant to which the Warrantholder (or any other person
or
persons exercising the Warrant) shall concurrently provide irrevocable
instructions (a) to a Company-approved brokerage firm to effect the immediate
sale of the purchased shares and remit to the Company, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
Warrant Price payable for the purchased shares plus all applicable Federal,
State and local income and employment taxes required to be withheld by the
Company by reason of such exercise and (b) to the Company to deliver the
certificates for the purchased shares directly to such brokerage firm in order
to complete the sale.
(b) As
soon
as practical after the Exercise Date, the Company shall issue to or on behalf
of
the Warrantholder (or any other person or persons exercising this Warrant)
a
certificate for the purchased Shares, with the appropriate legends affixed
thereto.
Unless
the Shares are registered on the Exercise Date, the Shares issued upon exercise
of the Warrants shall be subject to a stop transfer order and the certificate
or
certificates evidencing any such Shares shall bear the following
legend:
THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, NOR HAVE
THEY BEEN REGISTERED UNDER THE SECURITIES (“BLUE SKY”) LAWS OF ANY STATE. THESE
SECURITIES MAY NOT BE SOLD, TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS THEY
HAVE FIRST BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND UNDER THE
APPLICABLE BLUE SKY LAWS OR UNLESS THE AVAILABILITY OF AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT AND LAWS IS ESTABLISHED TO THE SATISFACTION OF
THE
COMPANY, WHICH MAY NECESSITATE A WRITTEN OPINION OF SELLER’S COUNSEL
SATISFACTORY TO COMPANY COUNSEL.
(c)
In
no
event may this Warrant be exercised for any fractional Shares.
Section
4. Payment
of Taxes.
The
Company will pay all documentary stamp taxes, if any, attributable to the
initial issuance of the Warrants or the securities comprising the Shares;
provided, however, the Company shall not be required to pay any tax which may
be
payable in respect of any secondary transfer of the Warrants or the securities
comprising the Shares.
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Section
5. Mutilated
or Missing Warrants.
In case
the certificate or certificates evidencing the Warrants shall be mutilated,
lost, stolen or destroyed, the Company shall, at the request of the
Warrantholder, issue and deliver in exchange and substitution for and upon
cancellation of the mutilated certificate or certificates, or in lieu of and
substitution for the certificate or certificates lost, stolen or destroyed,
a
new Warrant certificate or certificates of like tenor and representing an
equivalent right or interest, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction of such Warrant
and payment of the reasonable out-of-pocket expenses incurred by the Company
in
issuing a replacement Warrant Certificate
and of
an agreement by the Warrantholder to indemnify the Company from and against
any
and all liability relating to the loss and replacement of such the certificate
or certificates.
Section
6. Reservation
of Shares.
There
has been reserved, out of its authorized Capital Stock, such number of shares
of
common stock as shall be subject to purchase under the Warrants, and the Company
shall at all times keep reserved, for so long as any of the Warrants remain
outstanding, such shares of common stock that from time to time are, and such
additional Shares or other securities that, pursuant to Section 8 hereof, become
issuable on exercise of the Warrants.
Section
7. Warrant
Price.
The
price per Share at which Shares shall be purchasable upon the exercise of the
Warrants shall equal 125% of the offering price per share of Units sold in
the
Offering, subject to any adjustments thereto required by this Agreement (and
as
so adjusted, the “Warrant Price”).
Section
8. Anti-dilution
Provisions.
The
Exercise Price of the Warrants shall be subject to adjustment from time to
time
as follows:
8.1 Stock
Splits and Dividends.
In the
event the Company should at any time or from time to time after the Purchase
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 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 of the Warrants shall be appropriately decreased
and the number of shares of common stock issuable on exercise of each Warrant
shall be increased in proportion to such increase of the aggregate of shares
of
common stock outstanding and those issuable with respect to such Common Stock
Equivalents.
8.2 Reverse
Stock Splits. If
the
number of shares of common stock outstanding at any time after the Purchase
Date
is decreased by a combination of the outstanding shares of common stock, then,
following the record date of such combination, the Exercise Price for the
Warrants shall be appropriately increased and the number of shares of common
stock issuable on exercise of the Warrants shall be decreased in proportion
to
such decrease in outstanding shares.
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Section
9. Adjustment
of Number of Shares.
Unless
otherwise set forth in Section 8 of this Agreement, the number and kind of
securities purchasable upon the exercise of the Warrants and the Warrant Price
shall be subject to adjustment from time to time upon the happening of certain
events, as follows:
9.1 Par
Value of Shares of Common Stock.
Before
taking any action which would cause an adjustment effectively reducing the
portion of the Warrant Price allocable to each Share below the then par value
(if any) per share of the common stock issuable upon exercise of the Warrants,
the Company will 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 common stock upon exercise of the
Warrants.
9.2 Independent
Public Accountants.
The
Company may retain a firm of independent public accountants of recognized
national standing (which may be any such firm regularly employed by the Company)
to make any computation required under this Section 9, and a certificate signed
by such firm shall be conclusive evidence of the correctness of any computation
made under this Section 9.
9.3 Statement
on Warrant Certificates.
Irrespective of any adjustments in the number of Shares or other securities
issuable upon exercise of Warrants, Warrant certificates theretofore or
thereafter issued may continue to express the same number of securities as
are
stated in the similar Warrant certificates initially issuable pursuant to this
Agreement. However, the Company may, at any time in its sole discretion (which
shall be conclusive), make any change in the form of Warrant certificate that
it
may deem appropriate and that does not affect the substance thereof; and any
Warrant certificate thereafter issued, whether upon registration of transfer
of,
or in exchange or substitution for, an outstanding Warrant certificate, may
be
in the form so changed.
Section
10. Fractional
Interests; Current Market Price.
The
Company shall not be required to issue fractional Shares on the exercise of
any
of the Warrants. If any fraction of a Warrant Share would, except for the
provisions of this Section 10, be issuable on the exercise of the Warrants
(or
any specified portion thereof being exercised), the Company shall pay to the
Warrantholder, in lieu of the issuance of such fractional Warrant Share, an
amount in cash equal to the then Current Market Price multiplied by such
fraction.
For
Purposes of this Agreement, the term “Current Market Price” shall be determined
by the Company’s Board of Directors in good faith; provided however (i) that in
the event that this Warrant is exercised in connection with the Company’s
initial public offering of its common stock, the Current Market Price per share
shall be the per share offering price to the public of the Company’s initial
public offering; provided, however, that in the event this Warrant is exercised
and the Company’s common stock is then publicly traded, the Current Market Price
of one share of common stock shall be the average closing price of the common
stock for the five trading days prior to the date of exercise of this Warrant
(the “Average Closing Price”), as reported by the O.T.C. Bulletin Board or in
any over-the-counter market; provided, however, that if the common stock is
listed on a national exchange, the Current Market Price shall be the Average
Closing Price on such exchange for the five trading days prior to the date
of
exercise of the Warrant. If the common stock is/was not traded during the five
trading days prior to the date of the exercise, then the closing price for
the
last publicly traded day shall be deemed to be the closing price for any and
all
(if applicable) days during such five trading day period.
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Section
11. No
Rights as Shareholder; Notices to Warrantholder.
Nothing
contained in this Agreement or in the Warrants shall be construed as conferring
upon the Warrantholder or its transferees any rights as a shareholder of the
Company, including the right to vote, receive dividends, consent or receive
notices as a shareholder in respect of any meeting of shareholders for the
election of directors of the Company or any other matter, unless and until
the
Warrantholder or such transferee (as the case may be) exercises the Warrants,
in
whole or in part, and pays the Warrant Price thereof to the Company.
Notwithstanding the foregoing, however, if at any time prior to the earlier
of
the expiration of the Warrants and or their exercise in full, any one or more
of
the following events shall occur:
(a) any
action which would require an adjustment pursuant to Section
8;
or
(b) a
dissolution, liquidation or winding up of the Company (other than in connection
with a consolidation, merger or sale of its property, assets and business as
an
entirety or substantially as an entirety) shall be proposed;
then,
the
Company shall give notice in writing of such event to the Warrantholder, in
the
manner provided in Section 14 hereof, at least 20 days prior to the date fixed
as a record date or the date of closing the transfer books for the determination
of the shareholders entitled to any relevant dividend, distribution,
subscription rights or other rights or for the determination of shareholders
entitled to vote on such proposed dissolution, liquidation or winding up. Such
notice shall specify such record date or the date of closing of the transfer
books, as the case may be.
Section
12. Indemnification.
12.1 Indemnification
of Warrantholder.
The
Company agrees to indemnify and hold harmless each Warrantholder and any holder
of such Shares and each person, if any, who controls the Warrantholder or any
holder of such Shares within the meaning of the Act, against any losses, claims,
damages or liabilities, joint or several (which shall, for all purposes of
this
Agreement,
include, but not be limited to, all reasonable costs
of
defense and investigation and all reasonable
attorneys’ fees), to which such Warrantholder or any holder of such Shares or
such
controlling person may become subject, under the Act or otherwise, insofar
as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the Company’s registration statement relating
to the Offering, or any related preliminary prospectus, final prospectus, or
amendment or supplement thereto (collectively, the “Registration Statement”), or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that the Company will
not
be liable in any such case to the extent that any such loss, claim, damage
or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in the Registration Statement,
in
reliance upon, and in conformity with, written information furnished to the
Company by such Warrantholder or the holder of such Shares specifically for
inclusion therein. This indemnity will be in addition to any liability which
the
Company may otherwise have.
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12.2 Indemnification
of the Company.
The
Warrantholder and the holders of the Shares agree that they will indemnify
and
hold harmless the Company, each other person referred to in subparts (1),
(2),
(3)
and
(4)
of
Section 11(a) of the Act in respect of the Registration Statement and each
person, if any, who controls the Company within the meaning of the Act, against
any losses, claims, damages or liabilities (which shall, for all purposes of
this Agreement, include but not be limited to, all reasonable
costs of
defense and investigation and all reasonable attorneys’
fees) to which the Company or any such director, officer or
controlling
or other
person
may become subject under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based
upon any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, or arise out of or are based upon
the
omission or the alleged omission to state therein a material fact required
to be
stated therein or necessary to make the statements therein not misleading,
but
in each case only to the extent that such untrue statement or alleged untrue
statement or omission or alleged omission was made in the Registration Statement
in reliance upon, and in conformity with, written information furnished to
the
Company by the Warrantholder or such holder of Shares specifically for inclusion
therein. This indemnity agreement will be in addition to any liability which
the
Warrantholder or such holder of Shares may otherwise have.
12.3 Indemnification
Procedures.
Promptly after receipt by an indemnified party under this Section 12 of any
claim or notice
of
the commencement of any action, such indemnified party will, if a claim in
respect thereof is to be made against the indemnifying party under this Section
12, notify the indemnifying party of the commencement thereof; but the omission
so to notify the indemnifying party will not relieve the indemnifying party
from
any liability which it may have to any indemnified party,
except
to the extent that the indemnifying party did not otherwise have knowledge
of
the assertion of such claim or the commencement of the action and the
indemnifying party’s ability to defend against the claim or action was
prejudiced by such failure.
In case
any such action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will
be
entitled to participate in, and, to the extent that it may wish, jointly with
any other indemnifying party similarly notified, reasonably assume the defense
thereof, subject to the provisions herein stated, and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party under this Section 12 for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense thereof other
than reasonable costs of investigation, unless the indemnifying party shall
not
pursue the action to its final conclusion. The indemnified party shall have
the
right to employ separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel shall not be at
the
expense of the indemnifying party if the indemnifying party has assumed the
defense of the action with counsel reasonably satisfactory to the indemnified
party; provided, however, that if the indemnified party is a Warrantholder
or a
holder of Shares or a person who controls a Warrantholder or a holder of Shares
within the meaning of the Act, the fees and expenses of such counsel shall
be at
the expense of the indemnifying party if (i) the employment of such counsel
has
been specifically authorized in writing by the indemnifying party or (ii) the
named parties to any such action, including any impleaded parties, include
both
a Warrantholder or a holder of Shares or such controlling person and the
indemnifying party and a Warrantholder or a holder of Shares or such controlling
person shall have been advised by such counsel that it
would
be advisable for such Warrantholder or holder of the Shares to
assert one
or
more legal defenses available to a Warrantholder or a holder of Shares or
controlling person which are in
conflict with any legal defenses which may be available to the indemnifying
party (in which case the indemnifying party shall not have the right to assume
the defense of such action on behalf of a Warrantholder or a holder of Shares
or
such controlling person, it being understood, however, that the indemnifying
party shall not, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out
of
the same general allegations or circumstances, be liable for the reasonable
fees
and expenses of more than one separate firm of attorneys for the Warrantholder,
the holders of the Shares and
their
controlling persons, which firm shall be designated in writing by a majority
in
interest of such holders and controlling persons based upon the value of the
securities included in the Registration Statement). No settlement of any action
against an indemnified party shall be made without the consent of the
indemnified and the indemnifying parties, which shall not be unreasonably
withheld in light of all factors of importance to such parties.
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Section
13. Contribution.
In
order to provide for just and equitable contribution under the Act in any case
in which (i) a Warrantholder or any holder of the Shares or controlling person
makes a claim for indemnification pursuant to Section 12 hereof but it is
judicially determined (by the entry of a final judgment or decree by a court
of
competent jurisdiction and the expiration of time to appeal or the denial of
the
last right of appeal) that such indemnification may not be enforced in such
case
notwithstanding the fact that the express provisions of Section 12 hereof
provide for indemnification in such case or (ii) contribution under the Act
may
be required on the part of any Warrantholder or any holder of the Shares or
controlling person, then the Company and any Warrantholder or any such holder
of
the Shares or controlling person shall contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (which shall, for
all purposes of this Agreement, include, but not be limited to, all
reasonable
costs of
defense and investigation and all
reasonable
attorneys’ fees), in either such case (after contribution from others) on the
basis of relative fault as well as any other relevant equitable considerations.
The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company on the one hand or a Warrantholder or holder of Shares
or controlling person on the other and the parties’ relative intent, knowledge,
access to information and opportunity to correct or prevent such statement
or
omission. The Company and such holders of such securities and such controlling
persons agree that it would not be just and equitable if contribution pursuant
to this Section 13 were determined by pro rata allocation or by any other method
which does not take account of the equitable considerations referred to in
this
Section 13. The amount paid or payable by an indemnified party as a result
of
the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in this Section 13 shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection
with
investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
Section
14. Notices.
Any
notice pursuant to this Agreement by the Company or by a Warrantholder or a
holder of Shares shall be in writing and shall be deemed to have been duly
given
on the date of delivery or refusal indicated on the return receipt if delivered
or mailed by certified mail, return receipt requested:
14.1 Warrantholder
Address.
If to
the Warrantholder or a holder of Shares, addressed to the holder listed on
the
transfer letter for the warrants at the final closing.
14.2 Company
Address.
If to
the Company, addressed to it at 000 Xxxxxxxx Xxxxxx Xxx, Xxxxx 000, Xxxx
Xxxxxxx, Xxxxxxxxxx 00000, Attention: Xxxxxx X. Xxx, Chief Executive
Officer.
Each
party may from time to time change the address to which notices to it are to
be
delivered or mailed hereunder by notice in accordance herewith to the other
party.
-9-
Section
15. Survival
of Representations and Warranties.
All
statements contained in any schedule, exhibit, certificate or other instrument
delivered by or on behalf of the parties hereto, or in connection with the
transactions contemplated by this Agreement, shall be deemed to be
representations and warranties hereunder. Notwithstanding any investigations
made by or on behalf of the parties to this Agreement, all representations,
warranties and agreements made by the parties to this Agreement or pursuant
hereto shall survive.
Section
16. Miscellaneous.
16.1 Applicable
Law.
This
Agreement shall be deemed to be a contract made under the laws of the State
of
California and for all purposes shall be construed in accordance with the laws
of said State.
16.2 Jurisdiction.
The
parties submit to the jurisdiction of the Courts of the County of Orange, State
of California or a Federal Court empanelled in the State of California for
the
resolution of all legal disputes arising under the terms of this Agreement,
including, but not limited to, enforcement of any arbitration
award.
16.3 Successors and
Assigns.
Neither
the Warrants nor the Shares issuable upon exercise of the Warrants nor any
other
securities of the Company that are unregistered and acquired by the Underwriter
or any Related Person (as
that
term is defined in Rule 2710 of the National Association of Securities Dealers,
Inc. (the “NASD”)) during 180 days prior to the required filing date of the
Registration Statement with the NASD or acquired after the required filing
date
and deemed to be underwriting compensation by the NASD, and securities excluded
from underwriting compensation pursuant to NASD Rule 2710(d)(5), may
be
sold, transferred, assigned, pledged or hypothecated, or be the subject of
any
hedging, short sale, derivative, put, or call transaction that would result
in
the effective economic disposition of the securities by any person for a period
of 180 days immediately following the Effective Date of the Registration
Statement on which they are initially registered (the “Lock-Up Restriction”),
except that the following shall not be prohibited: (a) the transfer of any
security, in whole or in part, (i)
by
operation of law or by reason of reorganization of the Company; (ii) to any
NASD
member participating in the Offering and the officers or partners thereof,
if
all securities so transferred remain subject to the Lock-Up Restriction for
the
remainder of the time period; (iii) if the aggregate amount of securities of
the
Company held by the Underwriter or Related Persons do not exceed 1% of the
securities being offered; (iv) if the securities are beneficially owned on
a
pro-rata basis by all equity owners of an investment fund, provided that no
participating NASD member manages or otherwise directs investments by the fund,
and participating NASD members in the aggregate do not own more than 10% of
the
equity in the fund; (v) if the securities are not an “item of value” under NASD
Rule 2710(c)(3)(B)(iii)-(vii); (vi) the securities are eligible for the limited
filing requirement in NASD Rule 2710(b)(6)(A)(iv)b and have not been deemed
to
be underwriting compensation under NASD Rule 2710; (vii) the securities were
previously but are no longer subject to an NASD lock-up restriction in
connection with a prior public offering (or a lock-up restriction in a
predecessor NASD rule), provided that if the prior restricted period has not
been completed, the security will continue to be subject to such prior
restriction until it is completed; or (viii) any securities that were acquired
subsequent to the Company’s initial public offering in a transaction exempt from
registration under Securities and Exchange Commission Rule 144A; and (b) the
exercise or conversion of any security, if all securities received remain
subject to the Lock-Up Restriction for the remainder of the time period.
-10-
After
the
expiration of the Lock-Up Restriction, the Warrants and the Shares issuable
upon
exercise of the Warrants may be sold, assigned or hypothecated in accordance
with applicable law.
All
the
covenants and provisions of this Agreement by or for the benefit of the Company,
the Warrantholder,
or the
holders of Shares shall bind and inure to the benefit of their respective
successors and assigns hereunder. Notwithstanding the foregoing, however,
nothing in this Agreement shall be construed to give to any person or
corporation other than the Company, the Warrantholder and the holders of Shares,
and their respective permitted transferees (other than transferees who acquire
any Shares that are free of restrictions on transfer under this Agreement and
under the Act), any legal or equitable right, remedy or claim under this
Agreement. This Agreement shall be for the sole and exclusive benefit of the
Company, the Warrantholder and the holders of Shares and such permitted
transferees (other than transferees who acquire any Shares that are free of
restrictions on transfer under this Agreement and under the Act).
16.4 Amendments.
This
Agreement may be amended only by a written instrument executed by duly
authorized representatives of the Company and the Warrantholder.
16.5 Severability.
In the
event any provision of this Agreement becomes or is declared by a court of
competent jurisdiction to be illegal, unenforceable or void, this Agreement
shall continue in full force and effect without said provision, but only to
the
extent necessary to cure the infirmity that caused such provision to be held
illegal, unenforceable or void.
16.6 Interpretation.
This
Agreement is the result of arms’-length negotiations between the parties hereto
and no provision hereof, because of any ambiguity found to be contained in
any
of the provisions hereof, shall be construed against a party by reason of the
fact that such party or its legal counsel was the draftsman of those provisions.
Unless otherwise indicated elsewhere in this Agreement, (i) the term “or” shall
not be exclusive, (ii) the term “including” shall mean “including, but not
limited to,” and (iii) unless the context indicates otherwise the terms
“herein,” “hereof,” “hereto,” “hereunder” and other terms similar to such terms
shall refer to this Agreement as a whole and not merely to the specific section,
subsection, paragraph or clause where such terms may appear.
16.7 Attorneys’
Fees.
In the
event any party hereto shall commence legal proceedings against the other to
enforce the terms hereof, or to declare rights hereunder, as the result of
a
breach of any covenant or condition of the Agreement, the prevailing party
in
any such proceeding shall be entitled to recover from the losing party its
costs
of suit, including reasonable attorneys’ fees, as may be fixed by the
court.
16.8 Headings.
The
captions or headings of the sections and subsections of this Agreement are
for
convenience of reference only and shall be disregarded in interpreting,
construing or applying any of the provisions of this Agreement.
16.9 Counterparts.
This
Agreement may be executed in separate counterparts, each of which shall be
an
original of and all of which together shall constitute one and the same
instrument.
(SIGNATURE
PAGE FOLLOWS)
-11-
IN
WITNESS WHEREOF, the parties have caused this Agreement to be duly executed,
all
as of the day and year first above written.
U.S.
DRY
CLEANING CORPORATION
/s/
Xxxxxx X.
Xxx
By:
Xxxxxx X. Xxx
Its:
Chief
Executive Officer
US
EURO
SECURITIES, INC.
/s/
Xxxxxxx Xxx
Xxxxxx
By:
Xxxxxxx Xxx Xxxxxx
Its:
Chairman
-12-
Exhibit
A
Warrant
Certificate No. _____
UNDERWRITER
WARRANTS TO PURCHASE ___________ SHARES OF COMMON STOCK
THE
WARRANTS EVIDENCED AND REPRESENTED BY THIS CERTIFICATE (THE “WARRANTS”) AND THE
SECURITIES ISSUABLE UPON EXERCISE HEREOF (THE “SHARES”) HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, PURSUANT TO A REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION.
THIS
WARRANT IS GOVERNED BY THE TERMS OF AN UNDERWRITER’S WARRANT AGREEMENT (THE
“UNDERWRITER’S WARRANT AGREEMENT”) BETWEEN U.S. DRY CLEANING CORPORATION AND US
EURO SECURITIES, INC. THIS WARRANT MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED
EXCEPT AS OTHERWISE PROVIDED IN THE UNDERWRITER’S WARRANT AGREEMENT AND THE
HOLDER OF THIS WARRANT, BY ITS ACCEPTANCE HEREOF, AGREES THAT IT WILL NOT
SELL,
TRANSFER OR ASSIGN THIS WARRANT EXCEPT AS OTHERWISE PROVIDED IN THE
UNDERWRITER’S WARRANT AGREEMENT.
U.S.
DRY CLEANING CORPORATION,
A
DELAWARE CORPORATION
This
certifies that, for
$10.00
and other
value
received, US
EURO Securities, Inc,
a
California corporation, the registered holder hereof or assigns (the
“Warrantholder”), is entitled to purchase from U.S. Dry Cleaning Corporation
(the “Company”), at any time subsequent
to [DATE], 2007 and prior
to
[DATE], 2012,
at the
purchase price per share equal
to
125% of the offering price per Unit
of the
Units
sold in the Offering (the “Warrant Price”), the number
of
Shares of Common Stock of the Company set forth above (the “Shares”). The number
of Shares issuable upon exercise of each Warrant evidenced hereby and the
Warrant Price shall be subject to adjustment from time to time as set forth
in
the Underwriter’s Warrant Agreement.
The
Warrants evidenced hereby represent the right to purchase an aggregate of
up to
__________ Shares, subject to certain adjustments, and are issued under and
in
accordance with the
Underwriters’ Warrant Agreement, dated as of [DATE],
2007,
and
are
subject to the terms and provisions contained in the Underwriter’s Warrant
Agreement,
to
all of
which the Warrantholder by acceptance hereof consents. All capitalized terms
in
this Warrant Certificate, to the extent not otherwise defined herein, shall
have
the meaning assigned to such terms in the Underwriter’s Warrant
Agreement.
The
Warrants evidenced hereby may be exercised in whole or in part by presentation
of this Warrant Certificate with the Purchase Form attached hereto duly executed
(with a signature guarantee as provided thereon) and simultaneous payment
of the
Warrant Price at the principal office of the Company. Payment of such price
shall be made by the Warrantholder in cash, by check, or any combination
thereof.
-13-
Upon
any
partial exercise of the Warrants evidenced hereby, there shall be signed
and
issued to the Warrantholder a new Warrant Certificate in respect of the Shares
as to which the Warrants evidenced hereby shall not have been exercised.
These
Warrants may be exchanged at the office of the Company by surrender of this
Warrant Certificate properly endorsed for one or more new Warrants of the
same
aggregate number of Shares as evidenced by the Warrant or Warrants exchanged.
No
fractional Shares of Common Stock will be issued upon the exercise of rights
to
purchase hereunder, but the Company shall pay the cash value of any fraction
upon the exercise of one or more Warrants. These Warrants are transferable
at
the office of the Company in the manner and subject to the limitations set
forth
in the Underwriter’s Warrant Agreement.
This
Warrant Certificate does not entitle any Warrantholder to any of the rights
of a
stockholder of the Company unless and until the Warrantholder exercises its
rights to purchase Shares hereunder.
Dated:
U.S.
Dry
Cleaning Corporation
_____________________________________
By:
__________________________________
Its:
__________________________________
-14-
Appendix
A
PURCHASE
FORM
U.S.
Dry
Cleaning Corporation
000
Xxxxxxxx Xxxxxx Xxx, Xxxxx 000
Xxxx
Xxxxxxx, Xxxxxxxxxx 00000
The
undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant Certificate for, and to purchase thereunder,
____________ Shares of Common Stock (the “Shares”) provided for therein, and
requests that certificates for the Shares be issued in the name of:
(Address,
including zip code)
(Social Security No. or Tax I.D. No.)
and,
if
said number of Shares shall not be all the Shares purchasable hereunder, that
a
new Warrant Certificate for the balance of the Shares purchasable under the
within Warrant Certificate be registered in the name of the undersigned
Warrantholder or his Assignee as below indicated and delivered to the address
stated below.
Name
of
Warrantholder
or
Assignee:
_______________________________________________________________________________________
(Please
Print)
Address: __________________________________________________________________________________________
_____________________________________________________________________________________
Signature:
________________________________________________
Dated:
__________________________________
Note:
The
above signature must correspond with the name as written upon the face of this
Warrant Certificate in every particular, without alteration or enlargement
or
any change whatever, unless these Warrants have been assigned.
-15-
ASSIGNMENT
(To
be
signed only upon assignment of Warrants)
FOR
VALUE
RECEIVED, the undersigned hereby sells, assigns and transfers unto the assignee
named below all of the rights of the undersigned represented by the attached
Warrant with respect to the number of Shares covered by the Warrant set forth
below:
(Name
and
Address of Assignee Must Be Printed or Typewritten)
|
Name
of Assignee
|
Social
Security No.
|
Address
|
No.
of
|
|
or
Tax ID No.
|
Shares
|
and
does
hereby irrevocably constitute and appoint _________________________________
Attorney to transfer said Warrants on the books of the Company, with full power
of substitution in the premises.
Dated:
_____________________________
_______________________________________________
Signature
of Registered
Holder
Note: The
signature on this assignment must correspond with the name as it appears upon
the face of the within Warrant Certificate in every particular, without
alteration or enlargement or any change whatever.
-16-
