Exhibit 10.4
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAW OF ANY STATE AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR
PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH
ACT AND SUCH LAWS. THE SALE OR OTHER TRANSFER OF THIS WARRANT IS ALSO SUBJECT TO
THE RESTRICTIONS ON TRANSFER SET FORTH IN SECTION 10.3 OF THE "PURCHASE
AGREEMENT" (AS HEREINAFTER DEFINED).
THIS WARRANT AND THE OBLIGATIONS OF THE COMPANY AND XXXXXX BROTHERS INC.
("XXXXXX") ARISING HEREUNDER ARE SUBORDINATED IN THE MANNER AND TO THE EXTENT
SET FORTH IN THAT CERTAIN SUBORDINATION AND INTERCREDITOR AGREEMENT DATED AS OF
OCTOBER 22, 2001, AS SUCH SUBORDINATION AND INTERCREDITOR AGREEMENT MAY BE
AMENDED, MODIFIED OR SUPPLEMENTED FROM TIME TO TIME, (THE "SUBORDINATION
AGREEMENT") BY AND AMONG CORPORATE MEZZANINE II, L.P., XXXXXX AND FLEET CAPITAL
CORPORATION FROM TIME TO TIME; AND EACH HOLDER OF THIS WARRANT, BY ITS
ACCEPTANCE HEREOF, SHALL BE BOUND BY THE PROVISIONS OF THE SUBORDINATION
AGREEMENT.
Warrant to Purchase
10,000 shares of
Common Stock
September 30, 2003
BRANDPARTNERS GROUP, INC.
COMMON STOCK PURCHASE WARRANT
Void after October 22, 2011
BRANDPARTNERS GROUP, INC. (the "Company"), a Delaware corporation, hereby
certifies that for value received, CORPORATE MEZZANINE II, L.P., a British
Virgin Island limited partnership, or its successors or assigns (the "Holder"),
is entitled to purchase, subject to the terms and conditions hereinafter set
forth, an aggregate of 10,000 fully paid and nonassessable Shares of Common
Stock of the Company, at an aggregate exercise price of US$0.24 per Share (as
adjusted from time to time in accordance with the terms hereof, the "Purchase
Price"), subject to adjustment as provided herein, at any time or from time to
time beginning on the date hereof and prior to 5:00 P.M., New York City time, on
October 22, 2011 (the "Expiration Date").
This Warrant is issued pursuant to the Subordinated Note and Warrant Purchase
Agreement (as amended,
modified or supplemented from time to time, the "Purchase Agreement"), dated as
of October 22, 2001, by and among the Company, Xxxxxx Brothers Inc. and the
Holder, and is subject to the terms thereof. Capitalized terms used herein and
not otherwise defined shall have the meanings assigned such terms in the
Purchase Agreement. The Holder is entitled to the rights and subject to the
obligations contained in the Purchase Agreement.
1. Definitions
For the purposes of this Warrant, the following terms shall have the
meanings indicated:
"Act" means the Securities Act of 1933, as amended, together with the
rules and regulations promulgated thereunder from time to time.
"Affiliate" shall mean any Person directly or indirectly controlling,
controlled by or under common control with, the Holder. For purposes of
this definition, "control" (including with correlative meanings, the terms
"controlling", "controlled by" and "under common control with") shall mean
the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through
the ownership of voting securities, by contract or otherwise.
"Business Day" shall mean any day other than a Saturday, Sunday or other
day on which commercial banks in the City of New York are authorized or
required by law or executive order to close.
"Call Closing Date" shall have the meaning ascribed to such term in
Section 17 below.
"Call Notice" shall have the meaning ascribed to such term in Section 17
below.
"Closing Price" shall mean, with respect to each Share for any day, (a)
the last reported sale price regular way or, in case no such sale takes
place on such day, the average of the closing bid and asked prices regular
way, in either case as reported on the principal national securities
exchange on which the Shares are listed or admitted for trading or (b) if
the Shares are not listed or admitted for trading on any national
securities exchange, the last reported sale price or, in case no such sale
takes place on such day, the average of the highest reported bid and the
lowest reported asked quotation for the Shares, in either case as reported
on the NASDAQ or a similar service if NASDAQ is no longer reporting such
information.
"CMII" shall mean Corporate Mezzanine II, L.P.
"CMII Holder" means CMII and following the assignment (prior to any full
or partial exercise hereunder) by CMII of this Warrant in whole, the
Person to whom this Warrant shall have been so assigned.
"Commission" shall mean the Securities and Exchange Commission or other
federal agency then administering the Act and other federal securities
laws.
"Common Stock" shall mean each class of capital stock of the Company that
is not limited as to a
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fixed sum or percentage of par or stated value in respect of rights of the
holders thereof to participate in dividends or distributions of assets
upon any liquidation or winding up of the Company.
"Company" shall have the meaning ascribed to such term in the first
paragraph of this Warrant.
"Election to Purchase Common Stock" shall have the meaning ascribed to
such term in Subsection 2(a).
"Exercise Date" shall have the meaning ascribed to such term in Subsection
2(d).
"Exercise Rate" shall have the meaning ascribed to such term in Section
3(c).
"Excluded Issued Warrant Share" shall mean, at any time, an Issued Warrant
Share that (i) has been registered pursuant to a Registration Statement as
of such time or (ii) can be sold under and in accordance with Rule 144K of
the Rules under the Act, at such time. Notwithstanding the foregoing, an
Issued Warrant Share that would be an Excluded Warrant Share, but for the
exercise of this Warrant for such Issued Warrant Share under Section
2(b)(i) hereof (i.e., a "cash" exercise), shall constitute an Excluded
Issued Warrant Share.
"Expiration Date" shall have the meaning ascribed to such term in the
first paragraph of this Warrant.
"Excluded Warrant Shares" shall mean Warrant Shares that, upon issuance
pursuant to a cashless exercise under 2(b)(ii), 2(b)(iii) or 2(b)(iv)
hereof could be sold under and in accordance with Rule 144K of the Rules
under the Act. Upon actual issuance, Warrant Shares shall not constitute
"Excluded Warrant Shares" and shall constitute "Excluded Issued Warrant
Shares" to the extent and so long as they satisfy the requirements of such
definition.
"Fair Market Value" shall be determined in accordance with Section 3(b).
"First Trading Day" shall have the meaning ascribed to such term in
Section 15(c).
"Formula Price" shall mean, at any time, the value for each Warrant Share
or Issued Warrant Share obtained by dividing (A) the product obtained by
multiplying (I) .045 times (II) the amount, if any, that (i) the sum of
(a) the product of (x) the trailing twelve months EBITDA of Xxxxxx ending
on the last day of the calendar month ending on or most recently prior to
the date of the Put Notice, Issued Warrant Put Notice or Call Notice times
(y) 6.5, plus (b) cash and cash equivalents on hand of Xxxxxx, exceeds
(ii) the sum of (x) Senior Debt of Xxxxxx plus (y) the then outstanding
principal amount of the Notes, plus (z) the then outstanding principal of
the Seller Notes by (B) the aggregate number of Warrant Shares issuable
upon exercise of this Warrant and Issued Warrant Shares; provided, that,
the aggregate value of all Warrant Shares and Issued Warrant Shares
calculated pursuant to this definition of Formula Price shall not exceed
that amount, which when added to all interest, premium and the placement
fee, paid to the CMII (it successors and assigns) with respect to the
Notes (in each case in cash), and assuming the timely and complete payment
of principal of the Notes in cash, would result in CMII (its successors
and assigns) realizing the sum of (i) a 35% internal rate of return on its
investment in the Notes and this Warrant as of the Put
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Closing Date, Issued Warrant Share Put Closing Date or Call Closing Date
specified in the Put Notice, Issued Warrant Share Put Notice or Call
Notice, as applicable, plus (ii) interest at 16% per annum on the amount
of the Warrant Repurchase Price from such Put Closing Date, Issued Warrant
Share Put Closing Date or Call Closing Date, as applicable, through the
date of receipt by CMII (its successors and assigns) of payment in full of
the Warrant Repurchase Price (whether payable in cash, a Put Note or a
combination thereof and whether the Company has taken the Registration
Option). For the purposes of calculating such internal rate of return,
payment in cash of that portion of principal of Notes constituting "PIK
Amounts" (as defined therein) added to the "Accreted Principal Amount" (as
defined therein) in lieu of cash payment interest shall be included as
payments to CMII (its successors and assigns) of interest.
"Fully Diluted Shares" shall mean at any time (i) all Shares outstanding
as of such time, and (ii) all Shares into or for which rights, options,
warrants or other securities outstanding as of such time are exercisable,
exchangeable or convertible (other than the Warrants).
"Holder" shall have the meaning ascribed to such term in the first
paragraph and Section 9 of this Warrant.
"Issued Warrant Shares" shall have the meaning ascribed to such term in
Section 16 below.
"Issued Warrant Share Put Notice" shall have the meaning ascribed to such
term in Section 16 below.
"Issued Warrant Share Put Closing Date" shall have the meaning ascribed to
such term in Section 16 below.
"Liquidity Event" shall mean (i) a consolidation or merger involving the
Company in which a Change in Control occurs or (ii) a sale of all or
substantially all of the assets of the Company.
"NASDAQ" shall mean the Automatic Quotation System of the National
Association of Securities Dealers, Inc.
"New Warrant" shall have the meaning ascribed to such term in Section 4.
"Person" shall mean any individual, firm, corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock
company, government (or an agency or political subdivision thereof) or
other entity of any kind, and shall include any successor (by merger or
otherwise) of such entity.
"Purchase Agreement" shall have the meaning ascribed to such term in the
second paragraph of this Warrant.
"Purchase Price" shall have the meaning ascribed to such term in the first
paragraph of this Warrant.
"Put Notice" shall have the meaning ascribed to such term in Section 15
below.
"Put Closing Date" shall have the meaning ascribed to such term in Section
15 below.
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"Put Note" shall have the meaning ascribed to such term in Section 15
below.
"Put Restrictions" shall have the meaning ascribed to such term in Section
15 below.
"Registration Option" shall have the meaning ascribed to such term in
Section 15 below.
"Registration Statement" shall mean a registration statement under the
Act.
"Repurchase Event" shall have the meaning ascribed to such term in Section
15 below.
"Shares" shall mean the shares of Common Stock of the Company, and any
other securities resulting from successive changes or reclassification of
such shares.
"Time of Determination" shall have the meaning ascribed to such term in
Section 3(c) below.
"Warrant" shall mean this Warrant and any subsequent Warrant issued
pursuant to Subsection 2(c).
"Warrant Register" shall have the meaning ascribed to such term in
Subsection 10(c).
"Warrant Repurchase Price" shall be the amount obtained by (i) multiplying
(a) the number of Warrants Shares or Issued Warrant Shares subject to
repurchase by (b) (1) in the event the Warrant Repurchase Price is payable
to a CMII Holder, the greater of (x) the Fair Market Value per Share and
(y) the Formula Price per Share or (2) in any other event, the Fair Market
Value per Share and (ii) subtracting therefrom the aggregate Purchase
Price for such Warrant Shares (without such subtraction in the case of
repurchase of Issued Warrant Shares).
"Warrant Shares" shall mean the Shares issuable upon exercise of the
Warrant and, except where the context otherwise requires, shall include
Issued Warrant Shares.
"Xxxxxx" shall have the meaning given in the first paragraph of this
Warrant.
2. Exercise of Warrant
(a) Exercise
This Warrant may be exercised, in whole or in part, at any time or
from time to time during the period beginning on the date hereof and
ending on the Expiration Date, by surrendering to the Company at its
principal office this Warrant, with the form of Election to Purchase
Common Stock (the "Election to Purchase Common Stock") attached
hereto as Exhibit A duly executed by the Holder and accompanied by
payment of the Purchase Price for the number of Shares specified in
such form.
(b) Delivery of Shares; Payment of Purchase Price
As soon as practicable after surrender of this Warrant and receipt
of payment, the Company shall promptly issue and deliver to the
Holder a certificate or certificates for the number of Shares set
forth in the Election to Purchase Common Stock, in such name or
names as may be designated by such Holder, along with a check for
the amount of cash to
5
be paid in lieu of issuance of fractional Shares, if any, pursuant
to Section 6. Payment of the Purchase Price may be made as follows
(or by any combination of the following): (i) in United States
currency by cash or delivery of a certified check, bank draft or
postal or express money order payable to the order of the Company,
(ii) by assigning to the Company all or any part of the unpaid
principal amount of the Notes held by the Holder in a principal
amount equal to the Purchase Price, (iii) by surrender of a number
of Shares held by the Holder at least equal to the quotient obtained
by dividing (A) the Purchase Price payable with respect to the
portion of this Warrant then being exercised by (B) the Fair Market
Value on the Exercise Date, or (iv) by cancellation of any portion
of this Warrant with respect to the number of Shares equal at least
to the quotient obtained by dividing (A) the product obtained by
multiplying (i) the number of Shares with respect to which this
Warrant is being exercised times (ii) the Purchase Price per Share
by (B) the difference between (1) Fair Market Value of the number of
Shares to be cancelled on the Exercise Date, and (2) the Purchase
Price per Share.
(c) Partial Exercise
If this Warrant is exercised for less than all of the Shares
purchasable under this Warrant, the Company shall cancel this
Warrant upon surrender hereof and shall execute and deliver to the
Holder a new Warrant of like tenor for the balance of the Shares
purchasable hereunder.
(d) When Exercise Effective
The exercise of this Warrant shall be deemed to have been effective
immediately prior to the close of business on the Business Day on
which this Warrant is surrendered to and the Purchase Price is
received by the Company as provided in this Section 2 (the "Exercise
Date") and the Person in whose name any certificate for Shares shall
be issuable upon such exercise, as provided in Subsection 2(b),
shall be deemed to be the record holder of such Shares for all
purposes on the Exercise Date provided, that the Holder shall be
responsible for any taxes or other costs and expenses incurred in
connection with transferring the Warrant.
3. Adjustment of Purchase Price and Number of Capital Shares
The Purchase Price and the number of Shares issuable upon exercise of this
Warrant shall be adjusted from time to time upon the occurrence of the
following events:
(a) Dividend, Subdivision, Combination or Reclassification of Capital
Shares
If the Company shall, at any time or from time to time, (i) declare
(A) a dividend on, or (B) a distribution in respect of Shares
payable in additional Shares, (ii) subdivide the outstanding Shares
into a larger number of Shares, (iii) combine the outstanding Shares
into a smaller number of Shares, or (iv) issue any Shares or other
interests in a reclassification of the Shares (including any such
reclassification in connection with a consolidation or merger), then
in each such case, the Purchase Price in effect at the time
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of the record date for such dividend or of the effective date of
such subdivision, combination or reclassification or other event,
and the number and kind of Shares or interests issuable on such date
shall be proportionately adjusted so that the Holder of any Warrant
exercised after such date shall be entitled to receive, upon payment
of the same aggregate amount as would have been payable before such
date, the aggregate number and kind of Shares or interests which, if
such Warrant had been exercised immediately prior to such date, such
Holder would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, combination or
reclassification. Any such adjustment shall become effective
immediately after the record date of such dividend or the effective
date of such subdivision, combination or reclassification. Such
adjustment shall be made successively whenever any event listed
above shall occur. If such a dividend is declared and such dividend
of the type described above is not paid, the Purchase Price shall
again be adjusted to be the Purchase Price in effect immediately
prior to such record date and any adjustment made to the number of
Shares issuable to the Holder under this Warrant as a consequence of
the declaration of such dividend shall be reversed. Notwithstanding
the foregoing, in the event that the Company shall, at any time or
from time to time, declare a dividend on or distribution in respect
of Shares payable in cash or other property (except Shares), then
the Holder shall be entitled to receive, and the Company shall pay
the Holder, the amount obtained by multiplying (x) the amount of the
cash dividend declared per Share or the value (as determined in good
faith by the Board of Directors of the Company) of any such non-cash
dividend per Share by (y) the total number of Shares into which this
Warrant is exercisable on the record date set for the payment of
such dividend notwithstanding the fact that the Warrant has not been
exercised by the Holder on such date.
(b) Determination of Fair Market Value
For the purposes hereof, the Fair Market Value per Share on any date
shall be as is agreed to by the Company and the Holder (and the
Company and the Holder shall attempt to agree upon such Fair Market
Value within ten (10) days). If the Company and the Holder are
unable to agree upon the Fair Market Value per Share within said ten
(10) day period, then the Fair Market Value per Share on any date
shall be deemed to be the average of the daily Closing Price per
Share for the 20 consecutive trading days ending on such date (or,
for the purposes of Section 15(c), ending on the First Trading Day).
If the Shares are not listed or admitted for trading on any national
securities exchange or quoted by NASDAQ or a similar service, and
the parties are unable otherwise to mutually and promptly agree upon
Fair Market Value, then the Company, on the one hand, and the
Holder, on the other hand, shall each promptly appoint as an
appraiser an individual who shall be a member of a nationally
recognized investment banking firm. Each appraiser shall be
instructed within 30 days of appointment to determine the Fair
Market Value per Share as of such date. If the two appraisers
thereupon are unable to agree on the Fair Market Value per Share
within such 30-day period, then the two appraisers, within 10 days
after the end of such 30-day period, shall jointly select a third
appraiser. The third appraiser shall, within 30 days of its
appointment, determine, in good faith, the Fair Market Value per
Share and
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such determination shall be controlling. If any party fails to
appoint an appraiser or if one of the two initial appraisers fails
after appointment to submit its appraisal within the required
period, then the appraisal submitted by the remaining appraiser
shall be controlling. The cost of the foregoing appraisals shall be
shared one-half by the Company and one-half by the Holder; provided,
however, in the event a third appraiser is utilized and one of the
two initial appraisals (but not the other initial appraisal) is
greater than or less than the appraisal by such third appraiser by
10% or more, then the cost of all of the foregoing appraisals shall
be borne by the party who appointed the appraiser who made such
initial appraisal.
(c) Dilutive Issuances
If the Company shall, at any time and from time to time, after the
date hereof, directly or indirectly, sell or issue any Shares
(regardless of whether originally issued or from the Company's
treasury), or rights, options, warrants or convertible or
exchangeable securities containing the right to subscribe for or
purchase any Capital Shares, or make any distributions (other than
(i) distributions received by the Holder pursuant to Section 3(b),
(ii) upon exercise of this Warrant, (iii) the issuance of Shares
pursuant to options, warrants, convertible securities and similar
rights outstanding on the date of this Warrant and described in
reports filed by the Company with the Securities and Exchange
Commission pursuant to Section 13 or 15(d) of the Securities and
Exchange Act or (iv) issued pursuant to any employee stock option,
stock purchase or other benefit plan) as a result of which the Fair
Market Value per Share immediately after such sale, issuance or
distribution represents a lesser amount than the Fair Market Value
per Share immediately prior to such sale, issuance or distribution
(the "Time of Determination"), then, the number of Shares issuable
upon the exercise of this Warrant (the "Exercise Rate") shall be
adjusted in accordance with the formula:
E' = E x O + N
-----
O + N x P
-----
M
and the Purchase Price shall be adjusted in accordance with the
following formula:
PP' = PP x E
-
E'
where:
E' = the adjusted Exercise Rate.
E = the Exercise Rate immediately prior to the time of
determination for any such issuance, sale or
distribution.
PP'= the adjusted Purchase Price.
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PP = the Purchase Price immediately prior to the Time of
Determination for any such issuance, sale or
distribution.
O = the number of Fully Diluted Shares outstanding
immediately prior to the time of determination for any
such issuance, sale or distribution.
N = the number of additional Shares issued, sold or
issuable upon exercise of such rights, options, warrants
or other securities.
P = the per share price received and receivable by the
Company in the case of any issuance or sale of Shares or
rights, options, warrants or other securities (inclusive
of the consideration per share of Shares payable upon
exercise of such rights, options, warrants or other
securities.
M = the Fair Market Value per share of Shares at the time
of determination for any such issuance, sale or
distribution.
Notwithstanding the foregoing, there shall be no adjustment under this Section
3(c) in respect of the issuance of any Shares in the event that the
consideration received by the Company for such Shares equal at least the Fair
Market Value of such Shares at the time of issuance or at the time of execution
of a binding agreement to issue Shares within two weeks of such execution, so
long as such issuance occurs within such period of two weeks. In the event that
(i) the consideration for such Shares is determined by an underwriter, placement
agent or other independent evaluator (acting in such capacity in connection with
such issuance) that is not an Affiliate of the Company, or (ii) the
consideration for such Shares is at least equal to the Closing Price (if any) on
the date of issuance or at the time of execution of a binding agreement to issue
shares so long as such issuance occurs within such period of two weeks, then
such consideration shall be deemed, for the purposes of this Section 3(c), to be
equal to at least the Fair Market Value of such Shares.
4. Reorganization, Reclassification, Merger and Sale of Assets
If there occurs any capital reorganization or any reclassification or
other modification of the economic terms of the Shares of the Company, the
consolidation or merger of the Company with or into another Person (other
than a merger or consolidation of the Company in which the Company is the
continuing entity and which does not result in any reorganization,
reclassification or modification of its outstanding Shares) or the sale or
conveyance of all or substantially all of the assets of the Company to
another Person, then, the Holder will be entitled to receive upon
surrender of the Warrant to the Company (x) to the extent there are cash
proceeds resulting from the consummation of such reorganization,
reclassification, consolidation, merger, sale or conveyance, in exchange
for such Warrant, cash in an amount equal to the cash proceeds that would
have been payable to the Holder had the Holder exercised such Warrant
immediately prior to the consummation of such reorganization,
reclassification,
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consolidation, merger, sale or conveyance, and (y) to the extent that the
Holder would be entitled to receive securities (in addition to or in lieu
of cash in connection with any such reorganization, reclassification,
consolidation, merger, sale or conveyance), the same kind and amounts of
securities or other assets, or both, that are issuable or distributable to
the holders of outstanding Shares of the Company with respect to their
Shares upon such reorganization, reclassification, consolidation, merger,
sale or conveyance, as would have been deliverable to the Holder had the
Holder exercised such Warrant immediately prior to the consummation of
such reorganization, reclassification, consolidation, merger, sale or
conveyance; provided, however, that upon the occurrence of any such
reorganization, reclassification, consolidation, merger, sale or other
conveyance, at the sole option and discretion of the Holder, the Holder
may, by notice to the Company, require the Company to issue to the Holder
a warrant (the "New Warrant") for the purchase of all or any portion of
any such securities upon terms and conditions which provide to the Holder
the same rights, protections and benefits in respect of such securities as
this Warrant provides to such Holder with respect to the Shares,
including, without limitation, the right to exercise rights of the type
granted pursuant to Section 15 and Section 16 hereof pursuant to the
provisions thereof, and in any event, the right to require the Company to
purchase the New Warrants or Shares issued upon exercise thereof upon the
same terms and conditions as contained in Section 15 and Section 16. The
Company will not effect any such reclassification, reorganization,
consolidation or merger in which the Company is not the surviving entity
unless upon or prior to the consummation thereof the successor entity
(being other than the Company) resulting from such reclassification,
reorganization, consolidation or merger shall assume by written
instrument, executed and mailed or delivered to each Holder at the last
address thereof appearing on the books of the Company, the obligation to
deliver to such Holder New Warrants for such securities that, in
accordance with the foregoing provisions, the Holder may be entitled to
purchase. In the event that the Company and the Holder are unable to
mutually agree upon an appropriate adjustment as described above, the
parties shall utilize one or more third party appraisers, in the manner
described in Section 3(b) above, to determine the appropriate adjustment.
Nothing contained in this Section 4 shall limit or affect the right of the
Holder to exercise its rights under Section 15 and Section 16.
5. Certificate as to Adjustments
Whenever the Purchase Price and/or the number of Shares issuable, or the
securities or other property deliverable, upon the exercise of this
Warrant shall be adjusted pursuant to the provisions hereof, the Company
shall promptly give written notice thereof to the Holder, in accordance
with Section 14, in the form of a certificate signed by a Financial
Officer of the Company stating the adjusted Purchase Price, the number of
Shares issuable, or the securities or other property deliverable, upon
exercise of the Warrant calculated to the nearest cent or the nearest
Share and setting forth in reasonable detail the method of calculation and
the facts requiring such adjustment and upon which such calculation is
based. Each adjustment shall remain in effect until a subsequent
adjustment is required.
6. Fractional Shares
Notwithstanding an adjustment pursuant to Section 3 in the number of
Shares covered by this Warrant or any other provision of this Warrant, the
Company shall not be required to issue fractions of Shares upon exercise
of this Warrant or to distribute certificates that evidence
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fractional Shares. In lieu of fractional Shares, the Company may make
payment to the Holder, at the time of exercise of this Warrant as herein
provided, of an amount in cash equal to such fraction multiplied by the
greater of the Fair Market Value on the Exercise Date and the Purchase
Price.
7. Notice of Proposed Actions
In case the Company shall propose at any time or from time to time (a) to
declare or pay any dividend to the holders of Shares or to make any other
distribution to the holders of Shares, (b) to offer to the holders of
Shares rights or warrants to subscribe for or to purchase any additional
Shares of any class or any other securities, rights or options, (c) to
effect any reorganization, reclassification or modification of its Shares,
(d) to effect any consolidation, merger, sale or other conveyance of all
or substantially all of the property, assets or business of the Company
which would, if consummated, adjust the Purchase Price or the securities
issuable upon exercise of this Warrant, (e) to effect the liquidation,
dissolution or winding up of the Company, or (f) to take any other action
that would require a vote of the holders of the Company's Shares, then, in
each such case, the Company shall give to the Holder, in accordance with
Section 14, a written notice of such proposed action, which shall specify
(i) the record date for the purposes of such dividend, distribution of
rights or warrants or vote of the holders of the Company's Shares, or if a
record is not to be taken, the date as of which the holders of Shares of
record to be entitled to such dividend, distribution of rights or warrants
or vote is to be determined, or (ii) the date on which such
reorganization, reclassification, modification, consolidation, merger,
sale or other conveyance, liquidation, dissolution or winding up or other
action is expected to become effective, and such notice shall be so given
as promptly as possible but in any event at least ten (10) Business Days
prior to the applicable record, determination or effective date specified
in such notice.
8. No Dilution or Impairment
The Company will not, by amendment of its governance documents or through
any reorganization, reclassification, modification, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any
other action, avoid or seek to avoid the observance or performance of any
of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action
as may be necessary or appropriate in order to protect the rights of the
Holder of this Warrant against dilution (for which an adjustment hereunder
is not specifically provided and which would have the same type of adverse
financial effect on the Holder as that for which an anti-dilution
adjustment is specifically provided hereunder) or other impairment.
Without limiting the generality of the foregoing, the Company (a) will at
all times reserve and keep available the maximum number of its authorized
Shares, free from all preemptive rights therein, which number of
authorized Shares will be sufficient to permit the full exercise of this
Warrant, and (b) will take all such action as may be necessary or
appropriate in order that all Shares as may be issued pursuant to the
exercise of this Warrant will, upon issuance, be duly and validly issued,
fully paid and nonassessable, and free from all taxes, liens and charges
with respect to the issue thereof. The Company will not amend its
certificate of incorporation in any manner which would affect the Shares
into which the Warrants are exercisable in a manner that is different than
the effect which such amendment would have on other Shares (and is adverse
in respect of the Shares).
11
9. Replacement of Warrants
On receipt by the Company of an affidavit of an authorized representative
of the Holder stating the circumstances of the loss, theft, destruction or
mutilation of this Warrant (and in the case of any such mutilation, on
surrender and cancellation of such Warrant), the Company at its expense
will promptly execute and deliver, in lieu thereof, a new Warrant of like
tenor which shall be exercisable for a like number of Shares. If required
by the Company, such Holder must provide an agreement to indemnify the
Company which, in the judgment of the Company, is sufficient to protect
the Company from any loss which it may suffer if a lost, stolen or
destroyed Warrant is replaced.
10. Restrictions on Transfer
(a) The term "Holder" as used herein shall also include any transferee
of this Warrant whose name has been recorded by the Company in the
Warrant Register (as hereinafter defined). Each Holder of this
Warrant or the Shares issuable upon the exercise hereof acknowledges
that this Warrant and the Shares issuable upon the exercise hereof
have not been registered under the Securities Act or any state
securities or blue sky law and may be transferred only pursuant to
an effective registration under the Securities Act or any applicable
state securities or blue sky law or pursuant to an applicable
exemption from the registration requirements of the Securities Act
or any applicable state securities or blue sky law, subject to the
restrictions on transfer set forth in this Section 10 and in Section
10.3 of the Purchase Agreement.
(b) With respect to a transfer that should occur prior to the time that
the offer and sale of this Warrant or the Shares issuable upon the
exercise hereof is registered under the Securities Act, such
Holders, at their sole expense, shall request an opinion of counsel
addressed to the Company (which shall be rendered by counsel
reasonably acceptable to the Company and which opinion shall be
reasonably acceptable to the Company) that the proposed transfer may
be effected without registration or qualification under any Federal
or state securities or blue sky law. Counsel shall, as promptly as
practicable, notify the Company and the Holder of such opinion and
of the terms and conditions, if any, to be observed in such
transfer, whereupon the Holder shall be entitled to transfer this
Warrant or such Shares (or portion thereof), subject to such terms
and conditions, any other provisions and limitations of this
Warrant.
(c) The Company shall maintain a register (the "Warrant Register") at
its principal office for the purpose of registering the Warrant and
any transfer hereof, which register shall reflect and identify, at
all times, the ownership of any interest in the Warrant. Upon the
issuance of this Warrant, the Company shall record the name of the
initial purchaser of this Warrant in the Warrant Register as the
first Holder. Upon surrender for registration of transfer or
exchange of this Warrant together with a properly executed Form of
Assignment attached hereto as Exhibit B at the principal office of
the Company, the Company shall, at its expense, (except that the
Holder shall pay all applicable transfer taxes) execute and deliver
one or more new Warrants of like tenor which shall be
12
exercisable for a like aggregate number of Shares, registered in the
name of the Holder or a transferee or transferees.
(d) Subject to the foregoing, this Warrant may be transferred or
assigned by the Holder at any time.
11. No Rights or Liability as a Shareholder
This Warrant does not entitle the Holder hereof to any voting rights or
other rights as a holder of the Company's Shares. No provisions hereof, in
the absence of affirmative action by the Holder hereof to exercise this
Warrant for Shares, and no enumeration herein of the rights or privileges
of the Holder, shall give rise to any liability of such Holder as a holder
of the Company's Shares.
12. Charges, Taxes and Expenses
Issuance of certificates for Shares to the Holder upon the exercise of
this Warrant shall be made without charge to the Holder hereof for any
issue or transfer tax, or other incidental expense, in respect of the
issuance or delivery of such certificates or the securities represented
thereby, all of which taxes and expenses shall be paid by the Company.
13. Amendment or Waiver
This Warrant and any term hereof may be amended, waived, discharged or
terminated only by and with the written consent of the Company, Xxxxxx and
the Holder.
14. Notices
Any notice or other communication (or delivery) required or permitted
hereunder shall be made in writing and shall be by registered mail, return
receipt requested, telecopier, courier service or personal delivery to the
Company at its principal office as specified in Section 10.2 of the
Purchase Agreement and to the Holder at its address as it appears in the
Warrant Register. All such notices and communications (and deliveries)
shall be deemed to have been duly given: when delivered by hand, if
personally delivered; when delivered by courier, if delivered by
commercial overnight courier service; five Business Days after being
deposited in the mail, postage prepaid, if mailed; and when receipt is
acknowledged, if telecopied.
15. Xxxxxx'x Obligation to Repurchase the Warrant
(a) The Holder shall have the right, exercisable at any time from and
after the earliest of (i) the fifth anniversary of the Closing Date
(as defined in the Purchase Agreement), (ii) the later of (x) the
repayment in full of the aggregate principal amount (together with
interest accrued thereon) outstanding under the Notes and (y) the
third anniversary of the Closing Date (as defined in the Purchase
Agreement), (iii) an effective declaration by any holder of a Note
that such Note has become immediately due and payable or, if
applicable, by the required percentage of holders of Notes that such
Notes have become immediately due and payable, (iv) the occurrence
of a Change in Control or issuance by the Company pursuant to a Note
of notice of a Change in Control (conditional upon the
13
actual closing of such Change in Control transaction) and (v) the
occurrence of a sale of all or substantially all of the assets of
the Company (each of the events described in the preceding clauses
(i) through (v) a "Repurchase Event"), but prior to the Expiration
Date, to cause Xxxxxx to purchase all or any portion of this Warrant
at the Warrant Repurchase Price for the number of Warrant Shares
(which must omit and Xxxxxx shall have no obligation to purchase any
portion of this Warrant in respect of Excluded Warrant Shares)
specified in the Put Notice. Such right shall be exercisable by the
Holder by delivery of written notice (the "Put Notice") to Xxxxxx
specifying the portion of this Warrant that shall be repurchased (by
reference to a specific number of Warrant Shares issuable upon
exercise of this Warrant) and the date on which such repurchase
shall occur, which date shall not be less than thirty (30) days (or
such lesser time as may remain until the Business Day immediately
prior to the consummation of a transaction described in clauses (iv)
or (v) above), nor more than sixty (60) days after the date of the
Put Notice (the "Put Closing Date"). Except as provided below in
this Section 15, on the Put Closing Date, the Holder shall surrender
this Warrant to Xxxxxx against (i) payment of the Warrant Repurchase
Price by wire transfer to an account designated by the Holder and
(ii) if the Holder has elected to have only a portion of the Warrant
repurchased, delivery of a new warrant duly executed by Xxxxxx on
the same terms and conditions as this Warrant, except that such
warrant shall be exercisable for the remaining number of the Warrant
Shares.
(b) In the event that Xxxxxx, is unable to pay the Warrant Repurchase
Price or any portion thereof in cash in connection with a put under
Section 15(a) resulting from the occurrence of any Repurchase Event
described in clauses (i), (ii), (iv) or (v) above, in any case, due
to capital surplus or similar restrictions under applicable
corporate law, contractual restrictions in the Senior Credit
Agreement as in effect as of the Closing Date (or the same
restrictions in any refinancing thereof permitted by the
Subordination Agreement) or the unavailability of cash on hand of,
and/or the inability to borrow on customary terms and conditions the
amount of the Warrant Repurchase Price ("Put Restrictions"), the
Holder will accept, in lieu of that portion of the Warrant
Repurchase Price which cannot be paid or is so unavailable a
promissory note of Xxxxxx (a "Put Note") in the principal amount of
such portion of the Warrant Repurchase Price, on the same terms and
conditions as the Notes (including subordination on the same terms,
and to the same amount of Senior Debt as the Notes), except that (i)
the Put Note shall become due and payable in full on the earlier to
occur of the eighth anniversary of the Closing Date and the date on
which such Put Restrictions no longer prevent such payment, (ii) the
Put Note shall bear interest, payable solely by addition of "PIK
Amounts" (as defined therein) to the "Accreted Principal Amount" (as
defined therein), at an annual rate of 18% per annum and (iii) the
Put Note shall have no financial covenants (that is, covenants of
the type contained in Section 8.3 of the Purchase Agreement). Xxxxxx
shall use reasonable commercial efforts to cause the Put Note to be
repaid as soon as practicable, subject to Xxxxxx'x reasonable
business judgment.
14
(c) Notwithstanding the obligation to pay the Warrant Repurchase Price
under Section 15(a) or Section 16(a), in the event of the exercise
by the Holder of its put option under Section 15(a) or Section
16(a), Xxxxxx can elect (the "Registration Option") by giving
written notice to the Holder at least twenty (20) Business Days
prior to the scheduled Put Closing Date or Issued Warrant Share Put
Closing Date, as applicable, to cause the Company to register all
Warrant Shares that would be issuable upon exercise of this Warrant
(as of the effective date of registration) or all Issued Warrant
Shares subject to such put exercise, as applicable, in any case, for
sale by the Holder under the Act. In the event of such election, if
(A) the Registration Statement relating to the Warrant Shares to be
issued to the Holder or such Issued Warrant Shares, as applicable,
shall be declared effective by the Commission within six (6) months
following the Put Closing Date specified in the Put Notice; (B) such
Warrant Shares or such Issued Warrant Shares, as applicable, are
approved for listing or included for quotation, as the case may be,
on the principal securities exchange or market on which Shares then
trade; and (C) the prospectus contained in the Registration
Statement is current and available for use by the Holder in
reselling the Warrant Shares or such Issued Warrant Shares, as
applicable, then Xxxxxx'x obligation to pay the Warrant Repurchase
Price under Section 15(a) or Section 16(a), as applicable, shall be
satisfied if Xxxxxx shall pay to the Holder in cash on the first
trading day immediately following the satisfaction of each of the
conditions listed in (A), (B) and (C) above (the "First Trading
Day"), an amount equal to the sum of (a) the amount, if any, by
which the aggregate Warrant Repurchase Price (for all Warrant Shares
or such Issued Warrant Shares, as applicable, so registered) exceeds
the product of (x) the average Closing Prices on NASDAQ (or other
exchange or market on which such shares are quoted or traded) of
such Shares for the twenty (20) consecutive trading days ending on
such First Trading Day times (y) the number of Warrant Shares or
such Issued Warrant Shares, as applicable, so registered plus (b)
16% per annum on the amount of the Warrant Repurchase Price (for all
Warrant Shares or such Issued Warrant Shares, as applicable, so
registered) (without regard to the interest component included in
(ii) of the proviso in the definition of "Formula Price", whether or
not the Formula Price is taken into account in calculating the
Warrant Repurchase Price) for the period from the date 90 days
following the Put Closing Date or Issued Warrant Share Put Closing
Date specified in the Put Notice or Issued Warrant Share Put Notice
to the date of payment of the Warrant Repurchase Price (whether in
cash, a Put Note or a combination thereof). In the event that there
are Put Restrictions that would prevent such payment, Xxxxxx shall
issue a Put Note for the amount payable under this paragraph that is
prevented by such Put Restrictions. In the case of proper election
by Xxxxxx of the Registration Option, no surrender of Warrant Shares
or Issued Warrant Shares shall take place on the Put Closing Date or
Issued Warrant Put Closing Date. In such event, the Holder shall
fulfill the obligations of a Holder of Registerable Shares under the
Registration Rights Agreement in order to facilitate the
registration.
16. Xxxxxx'x Obligation to Repurchase Issued Warrant Shares
15
(a) The Holder shall have the right exercisable at any time, and from
time to time, upon the occurrence of a Repurchase Event, to cause
Xxxxxx to purchase all or any portion of the Warrant Shares that
have been issued upon the exercise of this Warrant (the "Issued
Warrant Shares"), other than any Excluded Issued Warrant Shares, at
the Warrant Repurchase Price for such Issued Warrant Shares. Such
right shall be exercisable by the Holder by delivery of written
notice (the "Issued Warrant Shares Put Notice") to Xxxxxx,
specifying the number of such Issued Warrant Shares that shall be
repurchased and the date on which such repurchase shall occur, which
date shall not be less than thirty (30) days nor more than sixty
(60) days after the date of such Issued Warrant Put Notice (the
"Issued Warrant Shares Put Closing Date"). Except as provided below
in this Section 16 and in Section 15(c), on the Issued Warrant Put
Closing Date, the Holder shall surrender the Issued Warrant Shares
to be repurchased, against payment of the Warrant Repurchase Price
by wire transfer to an account designated by the Holder.
(b) In the event that Xxxxxx, is unable to pay the Warrant Repurchase
Price or any portion thereof in cash in connection with a put under
Section 16(a) resulting from the occurrence of any Repurchase Event
described in clauses (i), (ii), (iv) or (v) of Section 15, in any
case, due to any Put Restrictions, the Holder will accept, in lieu
of that portion of the Warrant Repurchase Price which cannot be paid
or is so unavailable a Put Note in the principal amount of such
portion of the Warrant Repurchase Price, on the same terms and
conditions as the Notes (including subordination on the same terms,
and to the same amount of Senior Debt as the Notes), except that (i)
the Put Note shall become due and payable in full on the earlier to
occur of the eighth anniversary of the Closing Date and the date on
which such Put Restrictions no longer prevent such payment, (ii) the
Put Note shall bear interest, payable solely by addition of "PIK
Amounts" (as defined therein) to the "Accreted Principal Amount" (as
defined therein), at an annual rate of 18% per annum and (iii) the
Put Note shall have no financial covenants (that is, covenants of
the type contained in Section 8.3 of the Purchase Agreement). Xxxxxx
shall use reasonable commercial efforts to cause the Put Note to be
repaid as soon as practicable, subject to Xxxxxx'x reasonable
business judgment.
(c) Xxxxxx'x obligation to pay the Warrant Repurchase Price under
Section 16 (a), in the event of the exercise by the Holder of its
put option under Section 16(a) is subject to the Registration Option
as provided in Section 15(c).
17. Xxxxxx'x Right to Repurchase Warrant and Issued Warrant Shares
(a) From time to time on or after the date falling at the end of six (6)
years after the Closing Date, and until the date falling ten (10)
years after the Closing Date (as defined in the Purchase Agreement),
Xxxxxx shall have the right to repurchase from such Holder, from any
source of funds legally available therefor this Warrant at the
Warrant Repurchase Price for all Warrant Shares issuable under this
Warrant and all Issued Warrant Shares (other than Excluded Issued
Warrant Shares) theretofore issued under this Warrant. Such right
shall be exercisable by Xxxxxx by delivery of written notice (the
"Call Notice") to the Holder of this Warrant, specifying the date on
which such repurchase shall occur,
16
which date shall not be less than thirty (30) days nor more than
sixty (60) days after the date of such Call Notice (the "Call
Closing Date"). On the Call Closing Date, the Holder shall surrender
the Warrant and all certificates for Issued Warrant Shares
(specified in the Call Notice), against payment of the Warrant
Repurchase Price by wire transfer to an account designated by the
Holder.
(b) In the event that Xxxxxx makes a repurchase of this Warrant and/or
Issued Warrant Shares pursuant to Section 17(a) hereof and at any
time within one year following the date of such repurchase the
Company consummates a Liquidity Event in which the proceeds realized
by the Company and distributed or distributable to holders of Common
Stock of the Company, after deducting all costs and expenses of such
Liquidity Event, exceed, on a per Share basis, the Warrant
Repurchase Price per Share, Xxxxxx shall forthwith upon the
consummation of such public offering or Liquidity Event pay to such
Holder the amount of such excess multiplied by the number of Warrant
Shares subject to the Warrant and Issued Warrant Shares repurchased
as an additional amount of Warrant Repurchase Price hereunder.
18. Certain Remedies
The Holder shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Warrant and to enforce specifically the
terms and provisions of this Warrant in any court of the United States or
any state thereof having jurisdiction, this being in addition to any other
remedy to which such Holder may be entitled at law or in equity.
19. Governing Law
This Warrant shall be governed by and construed in accordance with the
laws of the State of New York, without regard to the principles of
conflicts of law of such State, other than Section 5-1401 of the General
Obligations Law of the State of New York.
20. Headings
The headings in this Warrant are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof.
21. Survival
The provisions of Sections 15 and 16 hereof shall survive the complete
exercise of this Warrant and the issuance of all Issued Warrant Shares.
For purposes of Sections 15 and 16, "Holder" shall include any Person
owning any of the Issued Warrant Shares.
BRANDPARTNERS GROUP, INC. XXXXXX BROTHERS INC.
By: /s/ Xxxxxx Xxxx By: /s/ Xxxxx X. Xxxxxx
------------------------------- ------------------------------
Name: Xxxxxx Xxxx Name: Xxxxx X. Xxxxxx
Title: Chief Financial Officer Title: Chief Operating Officer
17
Exhibit A to Common
Stock Purchase Warrant
[FORM OF] ELECTION TO PURCHASE COMMON STOCK
The undersigned hereby irrevocably elects to exercise the Warrant to purchase
_______ shares of Class common stock ("Shares") of BRANDPARTNERS GROUP, INC.
(the "Company") and hereby [makes payment of US$_________ therefor] [or] [makes
payment therefor by assignment to the Company pursuant to Section 2(b)(ii) of
the Warrant of US$_______ aggregate principal amount of Notes (as defined in the
Purchase Agreement)] [or] [makes payment therefor by surrendering pursuant to
Section 2(b)(iii) Shares of the Company] [or] [makes payment therefor by
cancellation pursuant to Section 2(b)(iv) of a portion of the Warrant with
respect to Shares]. The undersigned hereby requests that certificates for such
units be issued and delivered as follows:
ISSUE TO:
-----------------------------------------------------------------------
(NAME)
--------------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
--------------------------------------------------------------------------------
(SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER)
DELIVER TO:
---------------------------------------------------------------------
(NAME)
--------------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
If the number of Shares purchased hereby is less than the number of Shares
covered by the Warrant, the undersigned requests that a new Warrant representing
the number of Shares not purchased be issued and delivered as follows:
ISSUE TO:
-----------------------------------------------------------------------
(NAME OF HOLDER(1))
--------------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
DELIVER TO:
---------------------------------------------------------------------
(NAME OF HOLDER)
--------------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
Dated:.................... [CORPORATE MEZZANINE II, L.P.(1)]
By: ..................................
Name:
Title:
--------------------------------------------------------------------------------
(1) Name of Holder must conform in all respects to name of Holder as specified
on the face of the Warrant.
18
Exhibit B to Common
Stock Purchase Warrant
[FORM OF] ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto
the Assignee named below all of the rights of the undersigned to purchase shares
of common stock ("Shares"), of BRANDPARTNERS GROUP, INC. represented by the
Warrant, with respect to the number of Shares set forth below:
Name of Assignee Address No. of Shares
---------------- ------- -------------
and does hereby irrevocably constitute and appoint ________________________
Attorney to make such transfer on the books of BRANDPARTNERS GROUP, INC.,
maintained for that purpose, with full power of substitution in the premises.
Dated:.................... [CORPORATE MEZZANINE II, L.P.(1)]
By: ..................................
Name:
Title:
--------------------------------------------------------------------------------
(1) Name of Holder must conform in all respects to name of Holder as specified
on the face of the Warrant.
19
