EXHIBIT 10.4
NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.
COMMON STOCK PURCHASE WARRANT
To Purchase 200,000 Shares of Common Stock of
TARRANT APPAREL GROUP
THIS COMMON STOCK PURCHASE WARRANT (the "WARRANT") certifies
that, for value received, X.X. Xxxxxxx & Company, LLC (the "HOLDER"), is
entitled, upon the terms and subject to the limitations on exercise and the
conditions hereinafter set forth, at any time on or after June 14, 2005 (the
"INITIAL EXERCISE DATE") and on or prior to the close of business on the five
year anniversary of the Initial Exercise Date (the "TERMINATION Date") but not
thereafter, to subscribe for and purchase from Tarrant Apparel Group, a
California corporation (the "COMPANY"), up to Two Hundred Thousand (200,000)
shares (the "WARRANT SHARES") of Common Stock, no par value per share, of the
Company (the "COMMON STOCK"). The purchase price of one share of Common Stock
under this Warrant shall be equal to the Exercise Price, as defined in Section
2(b).
SECTION 1. DEFINITIONS. Capitalized terms used and not otherwise
defined herein shall have the meanings set forth in that certain Securities
Purchase Agreement (the "PURCHASE AGREEMENT"), dated December 6, 2004, among the
Company and the purchasers signatory thereto.
SECTION 2. EXERCISE.
a) EXERCISE OF WARRANT. Exercise of the purchase rights
represented by this Warrant may be made at any time or times on or
after the Initial Exercise Date and on or before the Termination Date
by delivery to the Company of a duly executed facsimile copy of the
Notice of Exercise Form annexed hereto (or such other office or agency
of the Company as it may designate by notice in writing to the
registered Holder at the address of such Holder appearing on the books
of the Company); PROVIDED, HOWEVER, within 5 Trading Days of the date
said Notice of Exercise is delivered to the Company,
the Holder shall have surrendered this Warrant to the Company and the
Company shall have received payment of the aggregate Exercise Price of
the shares thereby purchased by wire transfer or cashier's check drawn
on a United States bank.
b) EXERCISE PRICE. The exercise price of the Common
Stock under this Warrant shall be $2.50, subject to adjustment
hereunder (the "EXERCISE PRICE").
c) CASHLESS EXERCISE. If at any time after one year from
the date of issuance of this Warrant there is no effective Registration
Statement registering the resale of the Warrant Shares by the Holder,
then this Warrant may also be exercised at such time by means of a
"cashless exercise" in which the Holder shall be entitled to receive a
certificate for the number of Warrant Shares equal to the quotient
obtained by dividing [(A-B) (X)] by (A), where:
(A) = the VWAP on the Trading Day immediately preceding the
date of such election;
(B) = the Exercise Price of this Warrant, as adjusted; and
(X) = the number of Warrant Shares issuable upon exercise
of this Warrant in accordance with the terms of this
Warrant by means of a cash exercise rather than a
cashless exercise.
Notwithstanding anything herein to the contrary, on the
Termination Date, this Warrant shall be automatically exercised via
cashless exercise pursuant to this Section 2(c).
d) EXERCISE LIMITATIONS.
i. HOLDER'S RESTRICTIONS. The Holder shall not
have the right to exercise any portion of this Warrant,
pursuant to Section 2(c) or otherwise, to the extent that
after giving effect to such issuance after exercise, the
Holder (together with the Holder's affiliates), as set forth
on the applicable Notice of Exercise, would beneficially own
in excess of 4.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to such issuance.
For purposes of the foregoing sentence, the number of shares
of Common Stock beneficially owned by the Holder and its
affiliates shall include the number of shares of Common Stock
issuable upon exercise of this Warrant with respect to which
the determination of such sentence is being made, but shall
exclude the number of shares of Common Stock which would be
issuable upon (A) exercise of the remaining, nonexercised
portion of this Warrant beneficially owned by the Holder or
any of its affiliates and (B) exercise or conversion of the
unexercised or nonconverted portion of any other securities of
the Company (including, without limitation, any other
Debentures or Warrants) subject to a limitation on conversion
or exercise analogous to the limitation contained herein
beneficially owned by the Holder or any of
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its affiliates. Except as set forth in the preceding sentence,
for purposes of this Section 2(d)(i), beneficial ownership
shall be calculated in accordance with Section 13(d) of the
Exchange Act, it being acknowledged by Holder that the Company
is not representing to Holder that such calculation is in
compliance with Section 13(d) of the Exchange Act and Holder
is solely responsible for any schedules required to be filed
in accordance therewith. To the extent that the limitation
contained in this Section 2(d)(i) applies, the determination
of whether this Warrant is exercisable (in relation to other
securities owned by the Holder) and of which a portion of this
Warrant is exercisable shall be in the sole discretion of such
Holder, and the submission of a Notice of Exercise shall be
deemed to be such Holder's determination of whether this
Warrant is exercisable (in relation to other securities owned
by such Holder) and of which portion of this Warrant is
exercisable, in each case subject to such aggregate percentage
limitation, and the Company shall have no obligation to verify
or confirm the accuracy of such determination. For purposes of
this Section 2(d)(i), in determining the number of outstanding
shares of Common Stock, the Holder may rely on the number of
outstanding shares of Common Stock as reflected in (x) the
Company's most recent Form 10-Q or Form 10-K, as the case may
be, (y) a more recent public announcement by the Company or
(z) any other notice by the Company or the Company's Transfer
Agent setting forth the number of shares of Common Stock
outstanding. Upon the written or oral request of the Holder,
the Company shall within two Trading Days confirm orally and
in writing to the Holder the number of shares of Common Stock
then outstanding. In any case, the number of outstanding
shares of Common Stock shall be determined after giving effect
to the conversion or exercise of securities of the Company,
including this Warrant, by the Holder or its affiliates since
the date as of which such number of outstanding shares of
Common Stock was reported. The provisions of this Section
2(d)(i) may be waived by the Holder upon, at the election of
the Holder, not less than 61 days' prior notice to the
Company, and the provisions of this Section 2(d)(i) shall
continue to apply until such 61st day (or such later date, as
determined by the Holder, as may be specified in such notice
of waiver).
ii. [INTENTIONALLY DELETED]
e) MECHANICS OF EXERCISE.
i. AUTHORIZATION OF WARRANT SHARES. The Company
covenants that all Warrant Shares which may be issued upon the
exercise of the purchase rights represented by this Warrant
will, upon exercise of the purchase rights represented by this
Warrant, be duly authorized, validly issued, fully paid and
nonassessable and free from all taxes, liens and charges in
respect of the issue thereof (other than taxes in respect of
any transfer occurring contemporaneously with such issue).
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ii. DELIVERY OF CERTIFICATES UPON EXERCISE.
Certificates for shares purchased hereunder shall be
transmitted by the transfer agent of the Company to the Holder
by crediting the account of the Holder's prime broker with the
Depository Trust Company through its Deposit Withdrawal Agent
Commission ("DWAC") system if the Company is a participant in
such system, and otherwise by physical delivery to the address
specified by the Holder in the Notice of Exercise within 3
Trading Days from the delivery to the Company of the Notice of
Exercise Form, surrender of this Warrant and payment of the
aggregate Exercise Price as set forth above ("WARRANT SHARE
DELIVERY DATE"). This Warrant shall be deemed to have been
exercised on the date the Exercise Price is received by the
Company. The Warrant Shares shall be deemed to have been
issued, and Holder or any other person so designated to be
named therein shall be deemed to have become a holder of
record of such shares for all purposes, as of the date the
Warrant has been exercised by payment to the Company of the
Exercise Price and all taxes required to be paid by the
Holder, if any, pursuant to Section 2(e)(vii) prior to the
issuance of such shares, have been paid.
iii. DELIVERY OF NEW WARRANTS UPON EXERCISE. If
this Warrant shall have been exercised in part, the Company
shall, at the time of delivery of the certificate or
certificates representing Warrant Shares, deliver to Holder a
new Warrant evidencing the rights of Holder to purchase the
unpurchased Warrant Shares called for by this Warrant, which
new Warrant shall in all other respects be identical with this
Warrant.
iv. RESCISSION RIGHTS. If the Company fails to
cause its transfer agent to transmit to the Holder a
certificate or certificates representing the Warrant Shares
pursuant to this Section 2(e)(iv) by the Warrant Share
Delivery Date, then the Holder shall be entitled, by written
notice to the Company at any time on or before the Holder's
receipt of such certificate or certificates, to rescind such
exercise.
v. COMPENSATION FOR BUY-IN ON FAILURE TO TIMELY
DELIVER CERTIFICATES UPON EXERCISE. In addition to any other
rights available to the Holder, if the Company fails to cause
its transfer agent to transmit to the Holder a certificate or
certificates representing the Warrant Shares pursuant to an
exercise on or before the fourth Trading Day following the
Warrant Share Delivery Date, and if after such date the Holder
is required by its broker to purchase (in an open market
transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the Holder of the Warrant Shares
which the Holder anticipated receiving upon such exercise (a
"BUY-IN"), then the Company shall (1) pay in cash to the
Holder the amount by which (x) the Holder's total purchase
price (including brokerage commissions, if any) for the shares
of Common Stock so purchased exceeds (y) the amount obtained
by multiplying (A)
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the number of Warrant Shares that the Company was required to
deliver to the Holder in connection with the exercise at issue
times (B) the price at which the sell order giving rise to
such purchase obligation was executed, and (2) at the option
of the Holder, either reinstate the portion of the Warrant and
equivalent number of Warrant Shares for which such exercise
was not honored or deliver to the Holder the number of shares
of Common Stock that would have been issued had the Company
timely complied with its exercise and delivery obligations
hereunder. For example, if the Holder purchases Common Stock
having a total purchase price of $11,000 to cover a Buy-In
with respect to an attempted exercise of shares of Common
Stock with an aggregate sale price giving rise to such
purchase obligation of $10,000, under clause (1) of the
immediately preceding sentence the Company shall be required
to pay the Holder $1,000. The Holder shall provide the Company
written notice indicating the amounts payable to the Holder in
respect of the Buy-In, together with applicable confirmations
and other evidence reasonably requested by the Company.
Nothing herein shall limit a Holder's right to pursue any
other remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the
Company's failure to timely deliver certificates representing
shares of Common Stock upon exercise of the Warrant as
required pursuant to the terms hereof.
vi. NO FRACTIONAL SHARES OR SCRIP. No fractional
shares or scrip representing fractional shares shall be issued
upon the exercise of this Warrant. As to any fraction of a
share which Holder would otherwise be entitled to purchase
upon such exercise, the Company shall pay a cash adjustment in
respect of such final fraction in an amount equal to such
fraction multiplied by the Exercise Price.
vii. CHARGES, TAXES AND EXPENSES. Issuance of
certificates for Warrant Shares shall be made without charge
to the Holder for any issue or transfer tax or other
incidental expense in respect of the issuance of such
certificate, all of which taxes and expenses shall be paid by
the Company, and such certificates shall be issued in the name
of the Holder or in such name or names as may be directed by
the Holder; PROVIDED, HOWEVER, that in the event certificates
for Warrant Shares are to be issued in a name other than the
name of the Holder, this Warrant when surrendered for exercise
shall be accompanied by the Assignment Form attached hereto
duly executed by the Holder; and the Company may require, as a
condition thereto, the payment of a sum sufficient to
reimburse it for any transfer tax incidental thereto.
viii. CLOSING OF BOOKS. The Company will not close
its stockholder books or records in any manner which prevents
the timely exercise of this Warrant, pursuant to the terms
hereof.
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f) CALL PROVISION. Subject to the provisions of this
Section 2(f), if after the 12 month anniversary of the date of the
Purchase Agreement, (i) the VWAP for each of 20 consecutive Trading
Days (the "MEASUREMENT PERIOD", which period shall not have commenced
until after the Effective Date) exceeds $4.00 (the "THRESHOLD PRICE")
and (ii) the average daily trading volume for the Threshold Period
exceeds 100,000 shares (both adjusted for any stock splits, reverse
splits and the like occurring after the Initial Exercise Date), then
the Company may, within two Trading Days of the end of such period,
call for cancellation of all or any portion of this Warrant for which a
Notice of Exercise has not yet been delivered (such right, a "CALL").
To exercise this right, the Company must deliver to the Holder an
irrevocable written notice (a "CALL NOTICE"), indicating therein the
portion of unexercised portion of this Warrant to which such notice
applies. If the conditions set forth below for such Call are satisfied
from the period from the date of the Call Notice through and including
the Call Date (as defined below), then any portion of this Warrant
subject to such Call Notice for which a Notice of Exercise shall not
have been received by the Call Date will be cancelled at 6:30 p.m. (New
York City time) on the tenth Trading Day after the date the Call Notice
is received by the Holder (such date, the "CALL DATE"). Any unexercised
portion of this Warrant to which the Call Notice does not pertain will
be unaffected by such Call Notice. In furtherance thereof, the Company
covenants and agrees that it will honor all Notices of Exercise with
respect to Warrant Shares subject to a Call Notice that are tendered
through 6:30 p.m. (New York City time) on the Call Date. The parties
agree that any Notice of Exercise delivered following a Call Notice
shall first reduce to zero the number of Warrant Shares subject to such
Call Notice prior to reducing the remaining Warrant Shares available
for purchase under this Warrant. For example, if (x) this Warrant then
permits the Holder to acquire 100 Warrant Shares, (y) a Call Notice
pertains to 75 Warrant Shares, and (z) prior to 6:30 p.m. (New York
City time) on the Call Date the Holder tenders a Notice of Exercise in
respect of 50 Warrant Shares, then (1) on the Call Date the right under
this Warrant to acquire 25 Warrant Shares will be automatically
cancelled, (2) the Company, in the time and manner required under this
Warrant, will have issued and delivered to the Holder 50 Warrant Shares
in respect of the exercises following receipt of the Call Notice, and
(3) the Holder may, until the Termination Date, exercise this Warrant
for 25 Warrant Shares (subject to adjustment as herein provided and
subject to subsequent Call Notices). Subject again to the provisions of
this Section 2(f), the Company may deliver subsequent Call Notices for
any portion of this Warrant for which the Holder shall not have
delivered a Notice of Exercise. Notwithstanding anything to the
contrary set forth in this Warrant, the Company may not deliver a Call
Notice or require the cancellation of this Warrant (and any Call Notice
will be void), unless, from the beginning of the 20th consecutive
Trading Days used to determine whether the Common Stock has achieved
the Threshold Price through the Call Date, (i) the Company shall have
honored in accordance with the terms of this Warrant all Notices of
Exercise delivered by 6:30 p.m. (New York City time) on the Call Date,
(ii) the Registration Statement shall be effective as to all Warrant
Shares and the prospectus thereunder available for use by the Holder
for the resale of all such Warrant Shares and (iii) the Common Stock
shall be listed or quoted for trading on the Trading Market. The
Company's right to Call the Warrant shall be exercised ratably among
the Holders based on each Holder's initial purchase of Common Stock
pursuant to the Purchase Agreement.
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SECTION 3. CERTAIN ADJUSTMENTS.
a) STOCK DIVIDENDS AND SPLITS. If the Company, at any time while
this Warrant is outstanding: (A) pays a stock dividend or otherwise make a
distribution or distributions on shares of its Common Stock or any other equity
or equity equivalent securities payable in shares of Common Stock (which, for
avoidance of doubt, shall not include any shares of Common Stock issued by the
Company pursuant to this Warrant), (B) subdivides outstanding shares of Common
Stock into a larger number of shares, (C) combines (including by way of reverse
stock split) outstanding shares of Common Stock into a smaller number of shares,
or (D) issues by reclassification of shares of the Common Stock any shares of
capital stock of the Company, then in each case the Exercise Price shall be
multiplied by a fraction of which the numerator shall be the number of shares of
Common Stock (excluding treasury shares, if any) outstanding before such event
and of which the denominator shall be the number of shares of Common Stock
outstanding after such event and the number of shares issuable upon exercise of
this Warrant shall be proportionately adjusted. Any adjustment made pursuant to
this Section 3(a) shall become effective immediately after the record date for
the determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective date in
the case of a subdivision, combination or re-classification.
b) SUBSEQUENT EQUITY SALES. From the Initial Exercise Date until
the 18 month anniversary of the date of the Purchase Agreement, if the Company
or any Subsidiary thereof, as applicable, at any time while this Warrant is
outstanding, shall offer, sell, grant any option to purchase or offer, sell or
grant any right to reprice its securities, or otherwise dispose of or issue (or
announce any offer, sale, grant or any option to purchase or other disposition)
any Common Stock or Common Stock Equivalents entitling any Person to acquire
shares of Common Stock, at an effective price per share less than the then
Exercise Price (such lower price, the "BASE SHARE PRICE" and such issuances
collectively, a "DILUTIVE ISSUANCE"), as adjusted hereunder (if the holder of
the Common Stock or Common Stock Equivalents so issued shall at any time,
whether by operation of purchase price adjustments, reset provisions, floating
conversion, exercise or exchange prices or otherwise, or due to warrants,
options or rights per share which is issued in connection with such issuance,
but excluding adjustments resulting from customary price-based anti-dilution
provisions, be entitled to receive shares of Common Stock at an effective price
per share which is less than the Exercise Price, such issuance shall be deemed
to have occurred for less than the Exercise Price), then, the Exercise Price
shall be reduced by multiplying the Exercise Price by a fraction, the numerator
of which is the number of shares of Common Stock issued and outstanding
immediately prior to the Dilutive Issuance plus the number of shares of Common
Stock which the aggregate consideration received or receivable by the Company in
connection with such Dilutive Issuance would purchase at the then effective
Exercise Price, and the denominator of which shall be the sum of the number of
shares of Common Stock issued and outstanding immediately prior to the Dilutive
Issuance plus the number of shares of Common Stock so issued or issuable in
connection with the Dilutive Issuance; PROVIDED, HOWEVER, prior to the date the
Company obtains Shareholder Approval in accordance with the rules and
regulations of the Trading Market, in no event shall the Exercise Price be
7
adjusted under this Section 3(b) to less than $1.95, subject to adjustment for
reverse and forward stock splits, stock dividends, stock combinations and other
similar transactions of the Common Stock that occur after the date of this
Agreement (the "FLOOR PRICE"). The Company shall notify the Holder in writing,
no later than the third Trading Day following the issuance of any Common Stock
or Common Stock Equivalents subject to this section, indicating therein the
applicable issuance price, or of applicable reset price, exchange price,
conversion price and other pricing terms (such notice the "DILUTIVE ISSUANCE
NOTICE"). For purposes of clarification, whether or not the Company provides a
Dilutive Issuance Notice pursuant to this Section 3(b), upon the occurrence of
any Dilutive Issuance, after the date of such Dilutive Issuance the Holder is
entitled to receive a number of Warrant Shares based upon the Base Share Price
regardless of whether the Holder accurately refers to the Base Share Price in
the Notice of Exercise.
c) INTENTIONALLY OMITTED.
d) FUNDAMENTAL TRANSACTION. If, at any time while this Warrant is
outstanding, (A) the Company effects any merger or consolidation of the Company
with or into another Person, (B) the Company effects any sale of all or
substantially all of its assets in one or a series of related transactions, (C)
any tender offer or exchange offer (whether by the Company or another Person) is
completed pursuant to which holders of Common Stock are permitted to tender or
exchange their shares for other securities, cash or property, or (D) the Company
effects any reclassification of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively converted into or
exchanged for other securities, cash or property (in any such case, a
"FUNDAMENTAL TRANSACTION"), then, upon any subsequent conversion of this
Warrant, the Holder shall have the right to receive, for each Warrant Share that
would have been issuable upon such exercise absent such Fundamental Transaction,
at the option of the Holder, (a) upon exercise of this Warrant, the number of
shares of Common Stock of the successor or acquiring corporation or of the
Company, if it is the surviving corporation, and Alternate Consideration
receivable upon or as a result of such reorganization, reclassification, merger,
consolidation or disposition of assets by a Holder of the number of shares of
Common Stock for which this Warrant is exercisable immediately prior to such
event or (b) if the Company is acquired in an all cash transaction, cash equal
to the value of this Warrant as determined in accordance with the Black-Scholes
option pricing formula (the "ALTERNATE CONSIDERATION"). For purposes of any such
exercise, the determination of the Exercise Price shall be appropriately
adjusted to apply to such Alternate Consideration based on the amount of
Alternate Consideration issuable in respect of one share of Common Stock in such
Fundamental Transaction, and the Company shall apportion the Exercise Price
among the Alternate Consideration in a reasonable manner reflecting the relative
value of any different components of the Alternate Consideration. If holders of
Common Stock are given any choice as to the securities, cash or property to be
received in a Fundamental Transaction, then the Holder shall be given the same
choice as to the Alternate Consideration it receives upon any exercise of this
Warrant following such Fundamental Transaction. To the extent necessary to
effectuate the foregoing provisions, any successor to the Company or surviving
entity in such Fundamental Transaction shall issue to the Holder a new warrant
consistent with the foregoing provisions and evidencing the Holder's right to
exercise
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such warrant into Alternate Consideration. The terms of any agreement pursuant
to which a Fundamental Transaction is effected shall include terms requiring any
such successor or surviving entity to comply with the provisions of this Section
3(d) and insuring that this Warrant (or any such replacement security) will be
similarly adjusted upon any subsequent transaction analogous to a Fundamental
Transaction.
e) EXEMPT ISSUANCE. Notwithstanding the foregoing, no
adjustments, Alternate Consideration nor notices shall be made, paid or issued
under this Section 3 in respect of an Exempt Issuance.
f) CALCULATIONS. All calculations under this Section 3 shall be
made to the nearest cent or the nearest 1/100th of a share, as the case may be.
The number of shares of Common Stock outstanding at any given time shall not
includes shares of Common Stock owned or held by or for the account of the
Company, and the description of any such shares of Common Stock shall be
considered on issue or sale of Common Stock. For purposes of this Section 3, the
number of shares of Common Stock deemed to be issued and outstanding as of a
given date shall be the sum of the number of shares of Common Stock (excluding
treasury shares, if any) issued and outstanding.
g) VOLUNTARY ADJUSTMENT BY COMPANY. The Company may at any time
during the term of this Warrant reduce the then current Exercise Price to any
amount and for any period of time deemed appropriate by the Board of Directors
of the Company.
h) NOTICE TO HOLDERS.
i. ADJUSTMENT TO EXERCISE PRICE. Whenever the Exercise
Price is adjusted pursuant to this Section 3, the Company shall
promptly mail to each Holder a notice setting forth the Exercise Price
after such adjustment and setting forth a brief statement of the facts
requiring such adjustment.
ii. NOTICE TO ALLOW EXERCISE BY HOLDER. If (A) the
Company shall declare a dividend (or any other distribution) on the
Common Stock; (B) the Company shall declare a special nonrecurring cash
dividend on or a redemption of the Common Stock; (C) the Company shall
authorize the granting to all holders of the Common Stock rights or
warrants to subscribe for or purchase any shares of capital stock of
any class or of any rights; (D) the approval of any stockholders of the
Company shall be required in connection with any reclassification of
the Common Stock, any consolidation or merger to which the Company is a
party, any sale or transfer of all or substantially all of the assets
of the Company, of any compulsory share exchange whereby the Common
Stock is converted into other securities, cash or property; (E) the
Company shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Company; then, in each
case, the Company shall cause to be mailed to the Holder at its last
addresses as it shall appear upon the Warrant Register of the Company,
at least 20 calendar days prior to the applicable record or effective
date hereinafter specified, a notice stating
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(x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record
is not to be taken, the date as of which the holders of the Common
Stock of record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the date on
which such reclassification, consolidation, merger, sale, transfer or
share exchange is expected to become effective or close, and the date
as of which it is expected that holders of the Common Stock of record
shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share
exchange; PROVIDED, that the failure to mail such notice or any defect
therein or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice. The Holder is
entitled to exercise this Warrant during the 20-day period commencing
the date of such notice to the effective date of the event triggering
such notice.
SECTION 4. TRANSFER OF WARRANT.
a) TRANSFERABILITY. Subject to compliance with any applicable
securities laws and the conditions set forth in Sections 5(a) and 4(d) hereof
and to the provisions of Section 4.1 of the Purchase Agreement, this Warrant and
all rights hereunder are transferable, in whole or in part, upon surrender of
this Warrant at the principal office of the Company, together with a written
assignment of this Warrant substantially in the form attached hereto duly
executed by the Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such surrender
and, if required, such payment, the Company shall execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees and in the
denomination or denominations specified in such instrument of assignment, and
shall issue to the assignor a new Warrant evidencing the portion of this Warrant
not so assigned, and this Warrant shall promptly be cancelled. A Warrant, if
properly assigned, may be exercised by a new holder for the purchase of Warrant
Shares without having a new Warrant issued.
b) NEW WARRANTS. This Warrant may be divided or combined with
other Warrants upon presentation hereof at the aforesaid office of the Company,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued, signed by the Holder or its agent or attorney.
Subject to compliance with Section 4(a), as to any transfer which may be
involved in such division or combination, the Company shall execute and deliver
a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided
or combined in accordance with such notice.
c) WARRANT REGISTER. The Company shall register this Warrant,
upon records to be maintained by the Company for that purpose (the "WARRANT
REGISTER"), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, absent actual notice to the contrary.
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d) TRANSFER RESTRICTIONS. If, at the time of the surrender of
this Warrant in connection with any transfer of this Warrant, the transfer of
this Warrant shall not be registered pursuant to an effective registration
statement under the Securities Act and under applicable state securities or blue
sky laws, the Company may require, as a condition of allowing such transfer (i)
that the Holder or transferee of this Warrant, as the case may be, furnish to
the Company a written opinion of counsel (which opinion shall be in form,
substance and scope customary for opinions of counsel in comparable
transactions) to the effect that such transfer may be made without registration
under the Securities Act and under applicable state securities or blue sky laws,
(ii) that the holder or transferee execute and deliver to the Company an
investment letter in form and substance acceptable to the Company and (iii) that
the transferee be an "accredited investor" as defined in Rule 501(a)(1), (a)(2),
(a)(3), (a)(7), or (a)(8) promulgated under the Securities Act or a qualified
institutional buyer as defined in Rule 144A(a) under the Securities Act.
SECTION 5. MISCELLANEOUS.
a) TITLE TO WARRANT. Prior to the Termination Date and subject to
compliance with applicable laws and Section 4 of this Warrant, this Warrant and
all rights hereunder are transferable, in whole or in part, at the office or
agency of the Company by the Holder in person or by duly authorized attorney,
upon surrender of this Warrant together with the Assignment Form annexed hereto
properly endorsed. The transferee shall sign an investment letter in form and
substance reasonably satisfactory to the Company.
b) NO RIGHTS AS SHAREHOLDER UNTIL EXERCISE. This Warrant does not
entitle the Holder to any voting rights or other rights as a shareholder of the
Company prior to the exercise hereof. Upon the surrender of this Warrant and the
payment of the aggregate Exercise Price (or by means of a cashless exercise),
the Warrant Shares so purchased shall be and be deemed to be issued to such
Holder as the record owner of such shares as of the close of business on the
later of the date of such surrender or payment.
c) LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT. The Company
covenants that upon receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant or any stock
certificate relating to the Warrant Shares, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it (which, in
the case of the Warrant, shall not include the posting of any bond), and upon
surrender and cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock certificate of like
tenor and dated as of such cancellation, in lieu of such Warrant or stock
certificate.
d) SATURDAYS, SUNDAYS, HOLIDAYS, ETC. If the last or appointed
day for the taking of any action or the expiration of any right required or
granted herein shall be a Saturday, Sunday or a legal holiday, then such action
may be taken or such right may be exercised on the next succeeding day not a
Saturday, Sunday or legal holiday.
e) AUTHORIZED SHARES.
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The Company covenants that during the period the
Warrant is outstanding, it will reserve from its authorized
and unissued Common Stock a sufficient number of shares to
provide for the issuance of the Warrant Shares upon the
exercise of any purchase rights under this Warrant. The
Company further covenants that its issuance of this Warrant
shall constitute full authority to its officers who are
charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the Warrant
Shares upon the exercise of the purchase rights under this
Warrant. The Company will take all such reasonable action as
may be necessary to assure that such Warrant Shares may be
issued as provided herein without violation of any applicable
law or regulation, or of any requirements of the Trading
Market upon which the Common Stock may be listed.
Except and to the extent as waived or consented to by
the Holder, the Company shall not by any action, including,
without limitation, amending its certificate of incorporation
or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of
securities or any other voluntary 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 actions as may be necessary or appropriate to protect the
rights of Holder as set forth in this Warrant against
impairment. Without limiting the generality of the foregoing,
the Company will (a) not increase the par value of any Warrant
Shares above the amount payable therefor upon such exercise
immediately prior to such increase in par value, (b) take all
such action as may be necessary or appropriate in order that
the Company may validly and legally issue fully paid and
nonassessable Warrant Shares upon the exercise of this
Warrant, and (c) use commercially reasonable efforts to obtain
all such authorizations, exemptions or consents from any
public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations
under this Warrant.
Before taking any action which would result in an
adjustment in the number of Warrant Shares for which this
Warrant is exercisable or in the Exercise Price, the Company
shall obtain all such authorizations or exemptions thereof, or
consents thereto, as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.
f) JURISDICTION. All questions concerning the construction,
validity, enforcement and interpretation of this Warrant shall be determined in
accordance with the provisions of the Purchase Agreement.
g) RESTRICTIONS. The Holder acknowledges that the Warrant Shares
acquired upon the exercise of this Warrant, if not registered, will have
restrictions upon resale imposed by state and federal securities laws.
h) NONWAIVER AND EXPENSES. No course of dealing or any delay or
failure to exercise any right hereunder on the part of Holder shall operate as a
waiver of such right
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or otherwise prejudice Xxxxxx's rights, powers or remedies, notwithstanding the
fact that all rights hereunder terminate on the Termination Date. If the Company
willfully and knowingly fails to comply with any provision of this Warrant,
which results in any material damages to the Holder, the Company shall pay to
Holder such amounts as shall be sufficient to cover any costs and expenses
including, but not limited to, reasonable attorneys' fees, including those of
appellate proceedings, incurred by Holder in collecting any amounts due pursuant
hereto or in otherwise enforcing any of its rights, powers or remedies
hereunder.
i) NOTICES. Any notice, request or other document required or
permitted to be given or delivered to the Holder by the Company shall be
delivered in accordance with the notice provisions of the Purchase Agreement.
j) LIMITATION OF LIABILITY. No provision hereof, in the absence
of any affirmative action by Holder to exercise this Warrant or purchase Warrant
Shares, and no enumeration herein of the rights or privileges of Holder, shall
give rise to any liability of Holder for the purchase price of any Common Stock
or as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
k) REMEDIES. Holder, in addition to being entitled to exercise
all rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Warrant. The Company agrees that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it of the provisions of this Warrant and hereby agrees to
waive the defense in any action for specific performance that a remedy at law
would be adequate.
l) SUCCESSORS AND ASSIGNS. Subject to applicable securities laws,
this Warrant and the rights and obligations evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the successors
and permitted assigns of Holder. The provisions of this Warrant are intended to
be for the benefit of all Holders from time to time of this Warrant and shall be
enforceable by any such Holder or holder of Warrant Shares.
m) AMENDMENT. This Warrant may be modified or amended or the
provisions hereof waived with the written consent of the Company and the Holder.
n) SEVERABILITY. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provisions or the remaining provisions of this Warrant.
o) HEADINGS. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
********************
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IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its officer thereunto duly authorized.
Dated: December 14, 2004
TARRANT APPAREL GROUP
By: /S/ XXXXXXX XXXXX
----------------------------
Name: Xxxxxxx Xxxxx
Title: Chief Financial Officer
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NOTICE OF EXERCISE
To: TARRANT APPAREL GROUP
(1) The undersigned hereby elects to purchase ________ Warrant Shares
of the Company pursuant to the terms of the attached Warrant (only if exercised
in full), and tenders herewith payment of the exercise price in full, together
with all applicable transfer taxes, if any.
(2) Payment shall take the form of (check applicable box):
[_] in lawful money of the United States; or
[_] the cancellation of such number of Warrant Shares as is
necessary, in accordance with the formula set forth in
subsection 2(c), to exercise this Warrant with respect to the
maximum number of Warrant Shares purchasable pursuant to the
cashless exercise procedure set forth in subsection 2(c).
(3) Please issue a certificate or certificates representing said
Warrant Shares in the name of the undersigned or in such other name as is
specified below:
----------------------------------------
The Warrant Shares shall be delivered to the following:
----------------------------------------
----------------------------------------
----------------------------------------
(4) ACCREDITED INVESTOR. The undersigned is an "accredited investor" as
defined in Regulation D promulgated under the Securities Act of 1933, as
amended.
[SIGNATURE OF HOLDER]
Name of Investing Entity: ______________________________________________________
SIGNATURE OF AUTHORIZED SIGNATORY OF INVESTING ENTITY: _________________________
Name of Authorized Signatory: __________________________________________________
Title of Authorized Signatory: _________________________________________________
Date: __________________________________________________________________________
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
_______________________________________________ whose address is
---------------------------------------------------------------.
---------------------------------------------------------------
Dated: ______________, _______
Holder's Signature: __________________________
Holder's Address:_____________________________
-----------------------------
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.
