Exhibit 10.2
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON
EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS
WARRANT UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO QUALITY FOOD BRANDS, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED. THE RIGHT TO SELL, TRANSFER OR OTHERWISE DISPOSE
OF OR PLEDGE THE EQUITY REPRESENTED HEREBY MAY BE SUBJECT TO A RIGHT OF FIRST
REFUSAL SET FORTH IN A RIGHT OF FIRST REFUSAL AGREEMENT. A COPY OF SUCH
AGREEMENT IS ON FILE AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS.
Right to Purchase up to 15%, on a fully diluted basis as determined below,
of outstanding Shares of Common Stock
of
Quality Food Brands, Inc.
(subject to adjustment as provided herein)
COMMON STOCK PURCHASE WARRANT
No. _________________ Issue Date: May 18, 2007
QUALITY FOOD BRANDS, INC., a corporation organized under the laws of the State
of Nevada, hereby certifies that, for value received, LAURUS MASTER FUND, LTD.,
or assigns (the "Holder"), is entitled, subject to the terms set forth below, to
purchase from the Company (as defined herein) from and after the Issue Date of
this Warrant and at any time or from time to time before, up to that number of
fully paid and nonassessable shares of Common Stock (as hereinafter defined),
$0.001 par value per share, equal to 15% of the shares of capital stock of the
Company outstanding at the time of exercise, calculated on a fully diluted basis
(subject to adjustment as set forth therein) at the applicable Exercise Price
per share (as defined below). The number and character of such shares of Common
Stock and the applicable Exercise Price per share are subject to adjustment as
provided herein.
As used herein the following terms, unless the context otherwise requires, have
the following respective meanings:
(a) The term "Company" shall include Quality Food Brands, Inc. and any
corporation which shall succeed, or assume the obligations of, Quality Food
Brands, Inc. hereunder.
(b) The term "Common Stock" includes (i) the Company's Common Stock, par value
$0.001 per share; and (ii) any other securities into which or for which any of
the securities described in (i) may be converted or exchanged pursuant to a plan
of recapitalization, reorganization, merger, sale of assets or otherwise.
(c) The term "Other Securities" refers to any stock (other than Common Stock)
and other securities of the Company or any other person (corporate or otherwise)
which the holder of the Warrant at any time shall be entitled to receive, or
shall have received, on the exercise of the Warrant, in lieu of or in addition
to Common Stock, or which at any time shall be issuable or shall have been
issued in exchange for or in replacement of Common Stock or Other Securities
pursuant to Section 4 or otherwise.
(d) The "Exercise Price" applicable under this Warrant shall be $0.01 per share.
1. Exercise of Warrant.
1.1 Number of Shares Issuable upon Exercise. From and after the date hereof
through and including the Expiration Date, the Holder shall be entitled to
receive, upon exercise of this Warrant in whole or in part, by delivery of an
original or fax copy of an exercise notice in the form attached hereto as
Exhibit A (the "Exercise Notice"), shares of Common Stock of the Company,
subject to adjustment pursuant to Section 4.
1.2 Fair Market Value. For purposes hereof, the "Fair Market Value" of a share
of Common Stock as of a particular date (the "Determination Date") shall mean:
(a) If the Company's Common Stock is traded on the American Stock Exchange or
another national exchange or is quoted on the National or SmallCap Market of The
Nasdaq Stock Market, Inc. ("Nasdaq"), then the closing or last sale price,
respectively, reported for the last business day immediately preceding the
Determination Date.
(b) If the Company's Common Stock is not traded on the American Stock Exchange
or another national exchange or on the Nasdaq but is traded on the NASD OTC
Bulletin Board, then the mean of the average of the closing bid and asked prices
reported for the last business day immediately preceding the Determination Date.
(c) Except as provided in clause (d) below, if the Company's Common Stock is not
publicly traded, then as the Holder and the Company agree or in the absence of
agreement by arbitration in accordance with the rules then in effect of the
American Arbitration Association, before a single arbitrator to be chosen from a
panel of persons qualified by education and training to pass on the matter to be
decided.
(d) If the Determination Date is the date of a liquidation, dissolution or
winding up, or any event deemed to be a liquidation, dissolution or winding up
pursuant to the Company's charter, then all amounts to be payable per share to
holders of the Common Stock pursuant to the charter in the event of such
liquidation, dissolution or winding up, plus all other amounts to be payable per
share in respect of the Common Stock in liquidation under the charter, assuming
for the purposes of this clause (d) that all of the shares of Common Stock then
issuable upon exercise of the Warrant are outstanding at the Determination Date.
1.3 Company Acknowledgment. The Company will, at the time of the exercise of the
Warrant, upon the request of the holder hereof acknowledge in writing its
continuing obligation to afford to such holder any rights to which such holder
shall continue to be entitled after such exercise in accordance with the
provisions of this Warrant. If the holder shall fail to make any such request,
such failure shall not affect the continuing obligation of the Company to afford
to such holder any such rights.
1.4 Trustee for Warrant Holders. In the event that a bank or trust company shall
have been appointed as trustee for the holders of the Warrant pursuant to
Subsection 3.2, such bank or trust company shall have all the powers and duties
of a warrant agent (as hereinafter described) and shall accept, in its own name
for the account of the Company or such successor person as may be entitled
thereto, all amounts otherwise payable to the Company or such successor, as the
case may be, on exercise of this Warrant pursuant to this Section 1.
2. Procedure for Exercise.
2.1 Delivery of Stock Certificates, Etc., on Exercise. The Company agrees that
the shares of Common Stock purchased upon exercise of this Warrant shall be
deemed to be issued to the Holder as the record owner of such shares as of the
close of business on the date on which this Warrant shall have been surrendered
and payment made for such shares in accordance herewith. As soon as practicable
after the exercise of this Warrant in full or in part, and in any event within
three (3) business days thereafter, the Company at its expense (including the
payment by it of any applicable issue taxes) will cause to be issued in the name
of and delivered to the Holder, or as such Holder (upon payment by such Holder
of any applicable transfer taxes) may direct in compliance with applicable
securities laws, a certificate or certificates for the number of duly and
validly issued, fully paid and nonassessable shares of Common Stock (or Other
Securities) to which such Holder shall be entitled on such exercise, plus, in
lieu of any fractional share to which such holder would otherwise be entitled,
cash equal to such fraction multiplied by the then Fair Market Value of one full
share, together with any other stock or other securities and property (including
cash, where applicable) to which such Holder is entitled upon such exercise
pursuant to Section 1 or otherwise.
2.2 Exercise. Payment may be made either (i) in cash or by certified or official
bank check payable to the order of the Company equal to the applicable aggregate
Exercise Price, (ii) by delivery of the Warrant, or shares of Common Stock
and/or Common Stock receivable upon exercise of the Warrant in accordance with
Section (b) below, or (iii) by a combination of any of the foregoing methods,
for the number of Common Shares specified in such Exercise Notice (as such
exercise number shall be adjusted to reflect any adjustment in the total number
of shares of Common Stock issuable to the Holder per the terms of this Warrant)
and the Holder shall thereupon be entitled to receive the number of duly
authorized, validly issued, fully-paid and non-assessable shares of Common Stock
(or Other Securities) determined as provided herein. Notwithstanding any
provisions herein to the contrary, if the Fair Market Value of one share of
Common Stock is greater than the Exercise Price (at the date of calculation as
set forth below), in lieu of exercising this Warrant for cash, the Holder may
elect to receive shares equal to the value (as determined below) of this Warrant
(or the portion thereof being exercised) by surrender of this Warrant at the
principal office of the Company together with the properly endorsed Exercise
Notice in which event the Company shall issue to the Holder a number of shares
of Common Stock computed using the following formula:
X=Y (A-B)
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A
Where X = the number of shares of Common Stock to be issued to the Holder
Y = the number of shares of Common Stock purchasable under the Warrant
or, if only a portion of the Warrant is being exercised, the portion
of the Warrant being exercised (at the date of such calculation)
A = the Fair Market Value of one share of the Company's Common Stock (at
the date of such calculation)
B = Exercise Price (as adjusted to the date of such calculation)
3. Effect of Reorganization, Etc.; Adjustment of Exercise Price.
3.1 Reorganization, Consolidation, Merger, Etc. In case at any time or from time
to time, the Company shall (a) effect a reorganization, (b) consolidate with or
merge into any other person, or (c) transfer all or substantially all of its
properties or assets to any other person under any plan or arrangement
contemplating the dissolution of the Company, then, in each such case, as a
condition to the consummation of such a transaction, proper and adequate
provision shall be made by the Company whereby the Holder of this Warrant, on
the exercise hereof as provided in Section 1 at any time after the consummation
of such reorganization, consolidation or merger or the effective date of such
dissolution, as the case may be, shall receive, in lieu of the Common Stock (or
Other Securities) issuable on such exercise prior to such consummation or such
effective date, the stock and other securities and property (including cash) to
which such Holder would have been entitled upon such consummation or in
connection with such dissolution, as the case may be, if such Holder had so
exercised this Warrant, immediately prior thereto, all subject to further
adjustment thereafter as provided in Section 4.
3.2 Dissolution. In the event of any dissolution of the Company following the
transfer of all or substantially all of its properties or assets, the Company,
concurrently with any distributions made to holders of its Common Stock, shall
at its expense deliver or cause to be delivered to the Holder the stock and
other securities and property (including cash, where applicable) receivable by
the Holder of the Warrant pursuant to Section 3.1, or, if the Holder shall so
instruct the Company, to a bank or trust company specified by the Holder and
having its principal office in New York, NY as trustee for the Holder of the
Warrant (the "Trustee").
3.3 Continuation of Terms. Upon any reorganization, consolidation, merger or
transfer (and any dissolution following any transfer) referred to in this
Section 3, this Warrant shall continue in full force and effect and the terms
hereof shall be applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in the
case of any such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided in Section 4. In the
event this Warrant does not continue in full force and effect after the
consummation of the transactions described in this Section 3, then the Company's
securities and property (including cash, where applicable) receivable by the
Holders of the Warrant will be delivered to Holder or the Trustee as
contemplated by Section 3.2.
4. Extraordinary Events Regarding Common Stock. In the event that the Company
shall (a) issue additional shares of the Common Stock as a dividend or other
distribution on outstanding Common Stock or any preferred stock issued by the
Company, (b) subdivide its outstanding shares of Common Stock, or (c) combine
its outstanding shares of the Common Stock into a smaller number of shares of
the Common Stock (each of the preceding clauses (a) through (c), inclusive, an
"Event"), then, in each such event, the number of shares of Common Stock that
the Holder shall thereafter, on the exercise hereof as provided in Section 1, be
entitled to receive shall be increased or decreased to a number determined by
multiplying the number of shares of Common Stock that would, immediately prior
to such Event, be issuable upon the exercise of this Warrant by a fraction of
which (a) the numerator is the number of issued and outstanding shares of Common
Stock immediately after such Event, and (b) the denominator is the number of
issued and outstanding shares of Common Stock immediately prior to such Event.
5. Certificate as to Adjustments. In each case of any adjustment or readjustment
in the shares of Common Stock (or Other Securities) issuable on the exercise of
the Warrant, the Company at its expense will promptly cause its Chief Financial
Officer or other appropriate designee to compute such adjustment or readjustment
in accordance with the terms of the Warrant and prepare a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based, including a statement of (a) the
consideration received or receivable by the Company for any additional shares of
Common Stock (or Other Securities) issued or sold or deemed to have been issued
or sold, (b) the number of shares of Common Stock (or Other Securities)
outstanding or deemed to be outstanding, and (c) the Exercise Price and the
number of shares of Common Stock to be received upon exercise of this Warrant,
in effect immediately prior to such adjustment or readjustment and as adjusted
or readjusted as provided in this Warrant. The Company will forthwith mail a
copy of each such certificate to the holder of the Warrant and any Warrant agent
of the Company (appointed pursuant to Section 11 hereof).
6. Reservation of Stock, Etc., Issuable on Exercise of Warrant. The Company will
at all times reserve from its authorized but unissued shares and keep available,
solely for issuance and delivery on the exercise of the Warrant, shares of
Common Stock (or Other Securities) from time to time issuable on the exercise of
the Warrant.
7. Assignment; Exchange of Warrant. Subject to compliance with applicable
securities laws, this Warrant, and the rights evidenced hereby, may be
transferred by any registered holder hereof (a "Transferor") in whole or in
part. On the surrender for exchange of this Warrant, with the Transferor's
endorsement in the form of Exhibit B attached hereto (the "Transferor
Endorsement Form") and together with evidence reasonably satisfactory to the
Company demonstrating compliance with applicable securities laws, which shall
include, without limitation, the provision of a legal opinion from the
Transferor's counsel (at the Company's expense) that such transfer is exempt
from the registration requirements of applicable securities laws, and payment by
the Transferor of any applicable transfer taxes) will issue and deliver to or on
the order of the Transferor thereof a new Warrant of like tenor, in the name of
the Transferor and/or the transferee(s) specified in such Transferor Endorsement
Form (each a "Transferee"), calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock called for on the face or faces
of the Warrant so surrendered by the Transferor.
8. Replacement of Warrant. On receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant and, in
the case of any such loss, theft or destruction of this Warrant, on delivery of
an indemnity agreement or security reasonably satisfactory in form and amount to
the Company or, in the case of any such mutilation, on surrender and
cancellation of this Warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
9. [Intentionally Omitted].
10. Maximum Exercise. The Holder shall not be entitled to exercise any portion
of this Warrant on any exercise date in excess of that portion of this Warrant
upon exercise of which the sum of (i) the number of shares of Common Stock
beneficially owned by the Holder and its affiliates on an exercise date, and
(ii) the number of shares of Common Stock issuable upon the exercise of this
Warrant with respect to which the determination of this proviso is being made on
an exercise date, would result in beneficial ownership by the Holder and its
affiliates of more than 9.99% of the outstanding shares of Common Stock of the
Company on such date. For the purposes of the proviso to the immediately
preceding sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation
13d-3 thereunder. Notwithstanding the foregoing, the restriction described in
this paragraph may be revoked upon 75 days prior notice from the Holder to the
Company and is automatically null and void upon an Event of Default under the
Note (as defined below).
11. Warrant Agent. The Company may, by written notice to the each Holder of the
Warrant, appoint an agent for the purpose of issuing Common Stock (or Other
Securities) on the exercise of this Warrant pursuant to Section 1, exchanging
this Warrant pursuant to Section 7, and replacing this Warrant pursuant to
Section 8, or any of the foregoing, and thereafter any such issuance, exchange
or replacement, as the case may be, shall be made at such office by such agent.
12. Transfer on the Company's Books. Until this Warrant is transferred on the
books of the Company, the Company may treat the registered holder hereof as the
absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.
13. Notices, Etc. All notices and other communications from the Company to the
Holder of this Warrant shall be mailed by first class registered or certified
mail, postage prepaid, at such address as may have been furnished to the Company
in writing by such Holder or, until any such Holder furnishes to the Company an
address, then to, and at the address of, the last Holder of this Warrant who has
so furnished an address to the Company.
14. Miscellaneous. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought. This Warrant shall be governed by and construed in accordance with the
laws of State of New York without regard to principles of conflicts of laws. Any
action brought concerning the transactions contemplated by this Warrant shall be
brought only in the state courts of New York or in the federal courts located in
the state of New York; provided, however, that the Holder may choose to waive
this provision and bring an action outside the state of New York. The
individuals executing this Warrant on behalf of the Company agree to submit to
the jurisdiction of such courts and waive trial by jury. The prevailing party
shall be entitled to recover from the other party its reasonable attorney's fees
and costs. In the event that any provision of this Warrant is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of this Warrant.
The headings in this Warrant are for purposes of reference only, and shall not
limit or otherwise affect any of the terms hereof. The invalidity or
unenforceability of any provision hereof shall in no way affect the validity,
enforceability or meaning of any other provision. The Company acknowledges that
legal counsel participated in the preparation of this Warrant and, therefore,
stipulates that the rule of construction that ambiguities are to be resolved
against the drafting party shall not be applied in the interpretation of this
Warrant to favor any party against the other party.
15. Right of First Refusal. Notwithstanding anything to the contrary herein, to
the extent and only to the extent that a Milfam Investment (as defined in the
Purchase Agreement) has occurred, the Holder hereof acknowledges and agrees that
the transfer of this Warrant, in whole or in part, or of any Shares of Common
Stock underlying this Warrant, in whole or in part, shall be subject to the
terms and conditions of that certain Right of First Refusal, dated as of the
date hereof by and among the Holder, Milfam I L.P. and the Company. The Holder
acknowledges that, to the extent and only to the extent that a Milfam Investment
(as defined in the Purchase Agreement) has occurred, Milfam I L.P. (or any
affiliate of Milfam I L.P.) is a third party beneficiary to the Warrant for
purposes of this Section alone.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK;
SIGNATURE PAGE FOLLOWS.]
IN WITNESS WHEREOF, the Company has executed this Warrant as of the date first
written above.
QUALITY FOOD BRANDS, INC.
WITNESS:
By:
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Name:
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Title:
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A-1
EXHIBIT A
FORM OF SUBSCRIPTION
(To Be Signed Only On Exercise Of Warrant)
TO: Quality Food Brands, Inc.
Attention: Chief Financial Officer
The undersigned, pursuant to the provisions set forth in the attached Warrant
(No.____), hereby irrevocably elects to purchase (check applicable box):
------------- shares of the Common Stock covered by such Warrant; or
the maximum number of shares of Common Stock covered by such
Warrant pursuant to the cashless exercise procedure set forth
------------- in Section 2.
The undersigned herewith makes payment of the full Exercise Price for such
shares at the price per share provided for in such Warrant, which is
$___________. Such payment takes the form of (check applicable box or boxes):
$__________ in lawful money of the United States; and/or
----------- the cancellation of such portion of the attached Warrant as is
exercisable for a total of _______ shares of Common Stock
(using a Fair Market Value of $_______
per share for purposes of this calculation); and/or
the cancellation of such number of shares of Common Stock as is
----------- necessary, in accordance with the formula set forth in
Section 2.2, to exercise this Warrant with respect to the
maximum number of shares of Common Stock purchasable
pursuant to the cashless exercise procedure set forth in Section 2.
The undersigned requests that the certificates for such shares be issued in the
name of, and delivered to ______________________________________________ whose
address is
___________________________________________________________________________.
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933, as amended (the "Securities Act") or pursuant to an exemption from
registration under the Securities Act.
Dated:
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(Signature must conform to name of holder as
specified on the face of the Warrant)
Address:
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B-1
EXHIBIT B
FORM OF TRANSFEROR ENDORSEMENT
(To Be Signed Only On Transfer Of Warrant)
For value received, the undersigned hereby sells, assigns, and transfers unto
the person(s) named below under the heading "Transferees" the right represented
by the within the Warrant to purchase the percentage and number of shares of
Common Stock of Quality Food Brands, Inc., a Nevada corporation (together with
any successor or other entity that assumes the obligations thereof, the
"Company") into which the within the Warrant relates specified under the
headings "Percentage Transferred" and "Number Transferred," respectively,
opposite the name(s) of such person(s) and appoints each such person Attorney to
transfer its respective right on the books of the Company with full power of
substitution in the premises.
Percentage Number
Transferees Address Transferred Transferred
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Dated:
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(Signature must conform to name of holder as
specified on the face of the Warrant)
Address:
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SIGNED IN THE PRESENCE OF:
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(Name)
ACCEPTED AND AGREED:
[TRANSFEREE]
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(Name)
