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Exhibit: 10.1FD
FUNDEX GAMES, LTD.
WARRANT
AGREEMENT
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FUNDEX GAMES, LTD.
WARRANT AGREEMENT
This WARRANT AGREEMENT (this "Agreement") is dated as of August 31, 1996, and is
entered into by and among FUNDEX GAMES, LTD., a Nevada corporation ("Fundex"),
and Toy Paradise Partnership, an Illinois general partnership (the
"Partnership").
1 . DEFINITIONS.
1.1 Definitions. For purposes of this Agreement, the following terms
shall have the following meanings.
"Act" means the Securities Act of 1933, as amended.
"Business" means the business, properties, assets, liabilities or
condition of Fundex.
"Common Stock" means the Company's Common Stock, no par value.
"IPO" means the Company's initial registered publIc offering of equity
securities.
"IPO Closing Date" means the closing date of the IPO.
"IPO Price" means the price per Share issued to the public in
connection with the IPO.
"Material Adverse Event" means any change, event, action, condition or
effect which, individually or in the aggregate, (a) impairs the validity or
enforceability of this Agreement or any documents, instruments or agreements
executed in connection with this Agreement; (b) subjects any officer or director
of Fundex to criminal liability; or (c) materially and adversely affects the
business, assets, operations, prospects or financial condition of Fundex or the
ability of Fundex to perform its obligations under this Agreement and any
documents, instruments or agreements executed in connection with this Agreement.
"Merger or Sale" shall have the meaning given to that term in Section
11.3(a).
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"Shares" means the shares of Common stock that can be acquired upon
exercise of the Warrants.
"Termination Date" means the date on which the Warrants are no longer
exercisable, which date shall be December 31, 2001 (or sooner as provided in
this Agreement and the Warrants, including, without limitation, in connection
with a Merger or Sale).
"Transfer Agent" means the Company's registrar and transfer agreement,
if any, for the Warrants.
"Warrant" means a warrant issuable upon exercise of the Warrant.
"Warrant Exercise Price" has the meaning given to that term in Section
2.3.
2. SALE AND ISSUANCE OF WARRANTS.
2.1 Warrants. Fundex has authorized the issuance and sale, pursuant to
the terms of this Agreement, to the Partnership of Seventy-Five Thousand
(75,000) warrants ("Warrants"), each Warrant entitling the holder upon exercise
thereof to acquire one share of common stock, with no par value ("Common
Stock"), of Fundex. The Warrants shall be substantially in the form of Exhibit
A attached hereto. The Warrants and the shares of Common Stock issuable upon
exercise of the Warrants are sometimes referred to collectively herein as the
"Securities."
2.2 Sale and Issuance. Subject to the terms and conditions hereof,
Fundex hereby agrees to sell to the Partnership, and the Partnership hereby
agree to purchase the Warrants.
2.3 Exercise Price; Amount. The price per Share at which Shares shall
be purchasable upon the exercise of Warrants (the "Warrant Exercise Price") is
one hundred twenty percent (120%) multiplied by the IPO Price per Share;
provided, however, that if there is no IPO on or before August 27, 1997, the
exercise price per Share for the total number of Warrants issued shall be equal
to $9.60 per Share. Each holder shall be entitled to receive one (1) Share for
each Warrant exercised.
2.4 Term. (a) Subject to the terms of this Agreement, with respect to
the Warrants, the Partnership shall have the right, at any time during the
period commencing at 9:00 a.m. on December 1, 1997 to and including 5:00 p.m,
Chicago Time, on the Termination Date to purchase from the Company up to the
number of fully
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paid and nonassessable Shares to which the Partnership may at the time be
entitled to purchase pursuant to this Agreement.
(b) The right of the Partnership to purchase Warrants shall be
conditioned upon the surrender by the Partnership to the Company, at its
principal office, of the certificate evidencing the Warrants to be exercised,
together with the purchase form, duly filled in and signed, with signatures
guaranteed if required by the Company or its Transfer Agent, and upon payment to
the Company of the Exercise Price for the number of Shares in respect of which
such Warrants are then exercised.
Notwithstanding the foregoing, the Company shall not be obligated to deliver any
shares pursuant to the exercise of a Warrant, and the Partnership shall not have
the right to exercise any Warrant, if in the Company's opinion the delivery of
Shares upon exercise of such Warrant would not comply with any applicable
federal or state securities laws. Without limiting the foregoing, Warrants may
not be exercised by, or securities issued to, any Partnership in any state in
which such exercise would be unlawful.
3. CLOSING AND DELIVERIES.
3.1 Closing. The initial closing of the sale and purchase of the
Warrants under this Agreement shall take place at such time and place as the
Partnership may determine (the "Closing") and the date of such Closing will be
referred to as the "Closing Date."
3.2 Deliveries of Payment and Certificates. At the Closing and subject
to the terms and conditions hereof, Fundex shall deliver to the Partnership the
Warrants to be purchased by the Partnership, dated the date of the Closing and
registered in that Partnership's name, paid by check made payable to the order
of Fundex or by wire transfer to the account of Fundex as instructed by Fundex
at least one (1) business day before the Closing.
4. REPRESENTATIONS AND WARRANTIES OF FUNDEX. Fundex hereby represents and
warrants to the Partnership as follows:
4.1 Organization and Standing; Articles and Bylaws; Subsidiaries.
Fundex is a corporation duly organized, validly existing, and in good standing
under the laws of the State of Nevada. Fundex has full corporate power and
authority to own and operate its properties and assets, and to carry on its
business as currently conducted. Fundex is duly qualified or licensed to do
business and is in good standing as a foreign corporation in each jurisdiction
where the nature of its activities and properties makes such qualification
necessary, except where the failure to be so qualified would not
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constitute a Material Adverse Event. Effective as of August 28, 1996, Third
Quarter, Inc. was merged with and into Fundex, Inc., and each act required to be
taken by or on the part of such companies to effectuate such merger has been
duly and properly taken on. Fundex does not own any equity interest in or have
any investment in any other business.
4.2 Capitalization. The authorized capital stock of Fundex, immediately
before the Closing consists of 8,000,000 shares of Common Stock, with a par
value of .001 per share, 1,225,000 shares of which are issued and outstanding.
There are no options and warrants outstanding. All issued and outstanding shares
of the Fundex's capital stock, and all Securities issuable pursuant hereto and
outstanding immediately after the Closing, have been duly authorized and, when
issued and sold for the consideration set forth in this Agreement, shall be
validly issued, fully paid and nonassessable, and issued in material compliance
with all applicable state and federal laws concerning the issuance of
securities. The holders of the outstanding capital stock of the Fundex do not
have any pre-emptive rights or similar rights with respect to the Securities.
4.3 Authorization. All corporate action on the part of Fundex, their
respective officers, directors and shareholders that is necessary for the
authorization, sale and issuance of the Warrants pursuant hereto and for the
performance of Fundex's obligations hereunder has been taken or shall be taken
prior to the Closing. This Agreement is a valid and binding obligation of Fundex
enforceable against Fundex in accordance with its terms, subject to general
principles of equity, laws of general application regarding bankruptcy,
insolvency, relief of debtors' and creditors' rights generally, and limitations
of public policy.
4.4 Material Contracts and Agreements. All contracts or agreements to
which Fundex is a party are valid, binding, and in full force and effect in all
material respects and without any material breach by any party thereto which
would constitute a Material Adverse Event.
4.5 Operating Rights. Fundex has all governmental licenses, franchises,
permits, approvals, certificates, consents, authorizations, rights and
privileges (except that no covenant, representation or warranty is made pursuant
to this Section with respect to the Intellectual Property rights that are the
subject of Section 4.8 hereof) (collectively "Licenses") that are necessary to
the operation of the Business, the lack of which would constitute a Material
Adverse Event. Such Licenses are in full force and effect, Fundex has not
received or given any notice of a violation (nor is it aware of any basis
therefor) in respect of any such Licenses, and no proceeding is pending or
threatened seeking the revocation or limitation of any of such Licenses.
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4.6 Conflicting Agreements. No shareholder, director, officer, or
employee of Fundex is a party to or bound by any agreement, contract or
commitment, or subject to any restrictions in connection with any previous or
current employment of any such person, that could materially and adversely
affect, or in the future shall materially and adversely affect, the Business.
4.7 Title to Properties and Assets; No Other Security Interests in the
Collateral; No Other Security Interest in Material Assets. Fundex has good and
marketable title to its properties and assets, real and personal, tangible and
intangible (except that no covenant, representation or warranty is made in this
Section as to the intellectual property rights which are the subject of Section
4.8 hereof) and, good title to all its leasehold estates, in each case subject
to no mortgage, pledge, lien, lease, encumbrance, security interests, use
restrictions, assessments or charge, other than (i) purchase money security
interests created in the ordinary course of business, (ii) taxes which have not
yet become delinquent, (iii) liens in respect of pledges or deposits under
workers' compensation laws or similar legislation or (iv) liens imposed by law
and incurred in the ordinary course of business for obligations not yet due to
carriers, warehousemen, laborers, materialmen and the like (item (i) through
(iv) referred to as "Ordinary Encumbrances"). Fundex has not granted and shall
not grant any security interest in, or any other lien or encumbrance on, any of
the Collateral. Fundex shall not grant any other security interest in, or any
other lien or encumbrance (other than Ordinary Encumbrances) on any assets of
Fundex other than the Collateral.
4.8 Patents, Trademarks, etc. Fundex does not own or have rights to use
all licenses, trademarks, trademark applications, patents, patent applications,
service marks, trade names, brand names, inventions, technology, trade secrets,
processes, formulae and copyrights, that are necessary for the operation of the
Business (collectively, "Intellectual Property") with no infringement of or
conflict with the rights of others. There are no contracts to which Fundex is a
party that adversely affect the rights of Fundex to own, use, license or
transfer any of Fundex's material Intellectual Property. Fundex knows of any
claims of third parties to any ownership interest or lien with respect to any of
the Intellectual Property. Fundex is aware of any facts that would lead it to
conclude that any of the Intellectual Property are invalid. No patent is
infringed by the activities of Fundex or by the manufacture, use or sale of any
product, device, instrument or other material made and used according to the
Intellectual Property. Fundex is not aware of any pending or threatened actions,
suits, proceedings or claim by others challenging the validity or scope of the
Intellectual Property. Fundex is not aware of any infringement on the part of
any third party of the Intellectual Property.
4.9 Compliance With Other Instruments. Fundex is not in breach or
violation of any provision of its Articles of Incorporation or its By-Laws, each
as
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amended through the date hereof, or any provision of any contract or agreement
to which Fundex is a party or by which the assets of Fundex are bound, or any
judgment, decree, order, statute, rule, or regulation applicable to Fundex,
except for such breaches or violations that would not constitute a Material
Adverse Event.
4.10 Litigation, etc. There are no actions, proceedings,
investigations, orders, judgments or decrees pending or, to Fundex's knowledge,
threatened, against Fundex that question the validity of this Agreement or any
action taken or to be taken in connection herewith or that, either individually
or in the aggregate, would constitute a Material Adverse Event.
4.11 Insurance. Fundex has in force insurance, with insurers which
Fundex believes (without having made any special investigation) are financially
sound and reputable, with respect to its properties and business in amounts that
Fundex believes are customary for companies similarly situated (including
without limitation, its stage of development), against loss or damage of the
kinds customarily insured against by such corporations.
4.12 Governmental Consents, etc. No consent, approval, or authorization
of, or designation, declaration, or filing with, any governmental authority, is
required on the part of Fundex in connection with the valid execution and
delivery of this Agreement, or the offer, sale, or issuance of the Warrants.
4.13 Full Disclosure. This Agreement and the Exhibits hereto, when
taken together as a whole, do not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
contained herein or therein not misleading. There are no facts which
individually or in the aggregate constitute a Material Adverse Event that are
not set forth in this Agreement (including Exhibits and Schedules hereto).
5. REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP. The Partnership,
hereby represents and warrants to Fundex as follows:
5.1 Power. Such Partnership has (i) taken all acts and satisfied all
conditions required by law and its charter documents (if the Partnership is
other than an individual) to authorize the execution and delivery of this
Agreement and to consummate the transactions contemplated herein, (ii) all
requisite legal power and authority to enter into this Agreement, to purchase
the Securities hereunder, and to carry out and perform its obligations under the
terms of this Agreement, and (iii) not been organized for the purpose of
acquiring the Securities (if the Partnership is other than an individual).
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5.2 Due Execution. This Agreement has been duly executed and delivered
by such Partnership, and this Agreement will be a valid and binding obligation
of the Partnership, legally enforceable as to the Partnership in accordance with
its terms, subject to general principles of equity, laws of general application
regarding bankruptcy, relief of debtors and creditors' rights generally, and
limitations of public policy.
5.3 Investment Representations; Accredited Partnership Representation.
(a) Such Partnership is acquiring the Warrants, and upon exercise of
the Warrants, will acquire the Securities issuable upon such exercises, for
itself, not as nominee or agent, for investment and not for resale in connection
with any distribution or public offering thereof within the meaning of the Act.
(b) Such Partnership understands (i) that the Securities have not
been registered under the Act or applicable state securities laws by reason of
specific exemptions therefrom which depend upon, among other things, the bona
fide nature of its investment intent as expressed herein, and (ii) that it may
therefore bear the economic risk of such investment indefinitely, unless a
subsequent disposition thereof is registered and qualified under the Act and
applicable state securities laws or is exempt from such registration or
qualification requirements. Each certificate representing any Securities, and
any other security issued in respect of any of the Securities, will be endorsed
with the following or a substantially similar legend:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS AND MAY
NOT BE SOLD, TRANSFERRED, PLEDGED, ASSIGNED, HYPOTHECATED OR OTHERWISE DISPOSED
OF UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS COVERING SUCH SECURITIES, OR FUNDEX GAMES, LTD.
RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES SATISFACTORY
TO FUNDEX GAMES, LTD., STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR
HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF SUCH ACT AND APPLICABLE STATE SECURITIES LAWS.
and any and all other legends required by law or which Fundex, acting upon the
advice of its counsel, deems necessary or appropriate unless the conditions
specified in this Agreement are satisfied. Such Partnership is aware of the
provisions of Rule 144
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promulgated under the Act, which, among other things, permit limited resale of
shares purchased in a private placement subject to the satisfaction of certain
conditions.
(c) Such Partnership has been furnished with such materials and has
been given access to such information relating to Fundex as it or its qualified
representative has requested, has been afforded the opportunity to ask questions
regarding Fundex and the Securities, all as it has found necessary to make an
informed investment decision.
(d) Such Partnership is a Partnership in securities of companies in
the development stage and acknowledges that it is able to fend for itself, can
bear the economic risk of its investment and has such knowledge and experience
in financial or business matters that it is capable of evaluating the merits and
risks of the investment in the Securities.
(e) Such Partnership understands that no public market now exists
for any of the securities issued by Fundex.
(f) Such Partners of the Partnership either are (a) "accredited
Investors" as defined in Regulation D under the Act; such Partners of the
Partnership are (i) a natural person who individual net worth, or joint net
worth with that person's spouse, as of the date of this Agreement exceeds
$1,000,000, (ii) a natural person who had an individual income in excess of
$200,000 in each of the two most recent years or joint income with that person's
spouse in excess of $300,000 in each of those years and has a reasonable
expectation of reaching the same income level in the current year, (iii) a
trust, with total assets in excess of $5,000,000, not formed for the specific
purpose of acquiring the securities offered, whose purchase of the Warrants is
directed by a sophisticated person as described in SEC Rule 506(b)(2)(ii), or
(iv) a person or entity otherwise within the definition of an "accredited
Investor" under SEC Rule 501 (a); or (b) if not an accredited Investor, is not a
citizen or resident of the United States or any territory thereof.
5.4 Transfer of Securities. Such Partnership agrees that it will not
sell, transfer, pledge, assign, hypothecate, or otherwise dispose of (each, a
"Transfer") any Securities until the Partnership has notified Fundex of the
proposed Transfer, provided such additional information regarding the Transfer
as Fundex reasonably requests, and if Fundex so requests has at the
Partnership's expense provided Fundex with an opinion of counsel (which counsel
must be reasonably satisfactory to Fundex) to the Partnership, in form and
substance satisfactory to Fundex, that the proposed Transfer complies with all
applicable federal and state securities laws. Fundex shall have no obligation to
transfer any Securities unless the Partnership has complied with the foregoing
provisions, and any such attempted Transfer shall be null and void.
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6. CONDITIONS TO CLOSING.
6.1 Conditions to Obligations of the Partnership at the Closing. The
obligation of any Partnership to purchase the Warrants at the Closing is subject
to the fulfillment to the Partnership's reasonable satisfaction, at or before
the Closing, of all the following conditions, any of which may be waived by such
party in writing:
(a) Representations and Warranties True; Performance of Obligations.
The representations and warranties made by Fundex in Section 4 shall be true and
correct in all material respects on the Closing Date with the same force and
effect as if they had been made on and as of said date, and Fundex shall have
performed in all material respects all covenants, obligations and conditions
herein required to be performed or observed by it on or before the Closing.
(b) Consents, Permits, and Waivers. Fundex shall have obtained and
shall have in effect any and all consents, permits, and waivers that are
necessary for consummation of the transactions contemplated by this Agreement to
be effected at the Closing.
(c) No Stop Order. No stop order or other order enjoining the sale
of the Warrants shall have been issued, and no proceedings for such purpose
shall be pending or, to the knowledge of Fundex, threatened by the Securities
and Exchange Commission or any commissioner of corporations or similar officer
of any other state having jurisdiction over this transaction.
(d) Other Agreements. The Security Agreement shall have been
executed by all parties thereto.
6.2 Conditions to Obligations of Fundex. Fundex's obligation to issue
and sell the Securities at the Closing is subject to the fulfillment to the
Fundex's reasonable satisfaction, on or before the Closing, of the following
conditions, any of which may be waived by Fundex in writing:
(a) Representations and Warranties True. The representations and
warranties made by the Partnership in Section 5 shall be true and correct in all
material respects at the Closing Date with the same force and effect as if they
had been made on and as of said date.
(b) Performance of Obligations. The Partnership shall have performed in all
material respect all covenants, obligations and conditions herein required to be
performed by it on or before the Closing.
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7. EXERCISE OF WARRANTS; FORM OF WARRANTS.
7.1 Payment of Exercise Price. Payment of the aggregate Exercise Price
shall be made in cash or by check, or any combination thereof.
7.2 Issuance of Certificate. Upon such surrender of the Warrants and
payment of such Exercise Price, the Company shall issue and cause to be
delivered to the Partnership and in the Partnership's name, a certificate or
certificates for the number of full Shares so purchased upon the exercise of the
Warrant, together with cash, as provided herein, in respect of any fractional
Share otherwise issuable upon such surrender. Such certificate or certificates
shall be deemed to have been issued and any person so designated to be named
therein shall be deemed to have become a holder of record of such securities as
of the date of surrender of the Warrants and payment of the Exercise Price, as
aforesaid, notwithstanding that the certificate or certificates representing
such securities shall not actually have been delivered. The Warrants shall be
exercisable, at the election of the Partnership, either in full or from time to
time in part and, in the event that a certificate evidencing the Warrants is
exercised in respect of less than all of the Shares specified therein at any
time prior to the Termination Date, a new certificate evidencing the remaining
portion of the Warrants will be issued by the Company.
7.3 Registration. The Warrants shall be numbered and shall be
registered on the books of the Company when issued.
7.4 Certificates. The Warrants may be divided or combined, upon request
to the Company by the Partnership, into a certificate or certificates
representing the right to purchase the same aggregate number of Shares. Unless
the context indicates otherwise, the term "Partnership" shall include any
transferee or transferees of the Warrants.
7.5 Form of Warrants. The text of the Warrants shall be substantially
as set forth in Exhibit A attached hereto, respectively. The number of Shares
issuable upon exercise of the Warrants is subject to adjustment upon the
occurrence of certain events, all as hereinafter provided. The Warrants shall be
executed on behalf of the Company by its President or by a Vice President and
attested to by its Secretary or an Assistant Secretary. A Warrant bearing the
signature of an individual who was at any time the proper officer of the Company
shall bind the Company, notwithstanding that such individual shall have ceased
to hold such office prior to the delivery of such Warrant or did not hold such
office on the date of this Agreement.
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7.6 Exchange of Warrant Certificate. Any Warrant certificate may be
exchanged for another certificate or certificates entitling the Partnership to
purchase a like aggregate number of Shares as the certificate or certificates
surrendered then entitled such Partnership to purchase. Any holder of a Warrant
desiring to exchange a Warrant certificate shall make such request in writing
delivered to the Company, and shall surrender, properly endorsed, with
signatures guaranteed if required by the Company, the certificate evidencing the
Warrant to be so exchanged. Thereupon, the Company shall execute and deliver to
the person entitled thereto a new Warrant certificate as so requested.
8. PAYMENT OF TAXES.
The Company will pay all documentary stamp taxes, if any, attributable
to the initial issuance of the Warrants or the securities comprising the Shares;
provided, however, the company shall not be required to pay any tax which may be
payable in respect of any transfer of the Warrants or the securities comprising
the Shares.
9. MUTILATED OR MISSING WARRANTS.
In case the certificate or certificates evidencing the Warrants shall
be mutilated, lost, stolen or destroyed, the Company shall, at the request of
the Partnership, issue and deliver in exchange and substitution for and upon
cancellation of the mutilated certificate or certificates, or in lieu of and
substitution for the certificate or certificates lost, stolen or destroyed, a
new Warrant certificate or certificates of like tenor and representing an
equivalent right or interest, but only upon receipt of evidence satisfactory to
the Company of such loss, theft or destruction of such Warrant and a bond of
indemnity, if requested, also satisfactory in form and amount, at the
applicant's cost. Applicants for such substitute Warrant certificate shall also
comply with such other reasonable regulations and pay such other reasonable
charges as the Company may prescribe.
10. RESERVATION OF SHARES.
There has been reserved, and the Company shall at all times keep
reserved so long as the Warrants remain outstanding, out of its authorized and
unissued Common Stock, such number of shares of Common Stock as shall be subject
to purchase under the Warrants.
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11. ADJUSTMENT OF NUMBER OF SHARES.
The number and kind of securities purchasable upon the exercise of the
Warrants and the Exercise Price shall be subject to adjustment from time to time
upon the happening of certain events, as follows:
11.1 Adjustments. The number of Shares purchasable upon the exercise
of the Warrants shall be subject to adjustment as follows:
(a) Stock Splits; Stock Dividends. In case the Company shall (i) pay
a dividend in Common Stock, (ii) subdivide its outstanding Common Stock, (iii)
combine its outstanding Common Stock into a smaller number of shares of Common
Stock, or (iv) issue by reclassification of its Common Stock other securities of
the Company, then the number of Shares purchasable upon exercise of the Warrants
immediately prior thereto shall be adjusted so that the Partnership shall be
entitled to receive upon exercise of the Warrant the kind and number of Shares
or other securities of the Company which he, she or it would have owned or would
have been entitled to receive immediately after the happening of any of the
events described above, had the Warrants been exercised immediately prior to the
happening of such event or any record date with respect thereto. Any adjustment
made pursuant to this subsection shall become effective immediately after the
effective date of such event, retroactive to the record date, if any, for such
event.
(b) Corresponding Adjustment of Exercise Price. Whenever the number
of Shares purchasable upon the exercise of a Warrant is adjusted, as herein
provided, the Exercise Price payable upon exercise of the Warrant shall be
adjusted by multiplying such Exercise Price immediately prior to such adjustment
by a fraction, the numerator of which shall be the number of Shares purchasable
upon the exercise of the Warrant immediately prior to such adjustment, and the
denominator of which shall be the number of Shares so purchasable immediately
thereafter.
(c) Notice of Adjustment. Whenever the number of Shares purchasable
upon the exercise of a Warrant is adjusted as herein provided, the Company shall
cause to be mailed to the Partnership or holder of record within a reasonable
time thereafter notice of such adjustment setting forth the number of Shares
purchasable upon the exercise of the Warrant after such adjustment, a brief
statement of the facts requiring such adjustment and the computation by which
such adjustment was made.
11.2 No Adjustment for Dividends. Except as provided in subsection 11.
1 (a), no adjustment in respect of any dividends or distributions out of
earnings shall be made during the term of the Warrants or upon the exercise of
the Warrants.
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11.3 Preservation of Purchase Rights upon Reclassification,
Consolidation, etc.
(a) Subject to paragraph (b) of this Section, in case of any
consolidation of the Company with or merger of the Company into another
corporation where the Company will not be the surviving corporation, or in case
of any sale or conveyance to another corporation of the property, assets or
business of the Company as an entirety or substantially as an entirety (any such
event referred to as a "Merger or Sale"), the Company or such successor or
purchasing corporation, as the case may be, shall agree that the Partnership
shall have the right thereafter upon payment of the Exercise Price in effect
immediately prior to such action to purchase, upon exercise of the Warrants, the
kind and amount of shares and other securities and property which it would have
owned or have been entitled to receive after the happening of such Merger or
Sale had the Warrants been exercised immediately prior to such action. Any such
agreements referred to in this subsection shall provide for adjustments, which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Section. The provisions of this subsection shall similarly apply to
successive Mergers or Sales.
(b) Notwithstanding the foregoing provisions, if the surviving,
successor or purchasing corporation does not agree to the provisions set forth
in paragraph (a) above, or if the Board of Directors of the Company determines
that the Warrants should not be outstanding following consummation of such
Merger or Sale, then the Company shall deliver a notice to each Partnership at
least twenty (20) days before the consummation of such Merger or Sale, the
Partnership may exercise the Warrants at any time before the consummation of
such Merger or Sale (and such exercise may be made contingent upon the
consummation of such Merger or Sale), and any Warrants that have not been
exercised before consummation of such Merger or Sale shall terminate and expire,
and shall no longer be outstanding.
11.4 Independent Public Accountants. The Company may retain a firm of
independent public accountants of recognized national standing (which may be
any such firm regularly employed by the Company) to make any computation
required under this Section, and a certificate signed by such firm shall be
conclusive evidence of the correctness of any computation made under this
Section.
11.5 Statement on Warrant Certificates. Irrespective of any adjustments
in the number of securities issuable upon exercise of the Warrants, Warrant
certificates theretofore or thereafter issued may continue to express the same
number of securities as are stated in the similar Warrant certificates initially
issuable pursuant to this Agreement. However, the Company may, at any time in
its sole discretion (which shall
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be conclusive), make any change in the form of Warrant certificate that it may
deem appropriate and that does not affect the substance thereof; and any Warrant
certificate thereafter issued, whether upon registration of transfer of, or in
exchange or substitution for, an outstanding Warrant certificate, may be in the
form so changed.
12. FRACTIONAL INTERESTS.
The Company shall not be required to issue fractional Shares on the
exercise of the Warrants. If any fraction of a Share would, except for the
provisions of this Section, be issuable on the exercise of the Warrants (or
specified portion thereof), the Company shall pay an amount in cash equal to the
amount of such fractional interest.
13. NO RIGHTS AS SHAREHOLDER; NOTICES TO PARTNERSHIP.
Nothing contained in this Agreement or in the Warrants shall be
construed as conferring upon the Partnership or his, her or its transferees any
rights as a shareholder of the Company, including the right to vote, receive
dividends, consent or receive notices as a shareholder in respect of any meeting
of shareholders for the election of directors of the Company or any other
matter.
14. RESTRICTIONS ON TRANSFER.
The Partnership agrees that prior to making any sale, transfer, pledge,
assignment, hypothecation, or other disposition (each, a "Transfer") of the
Warrants or Shares, the Partnership shall give written notice to the Company
describing the manner in which any such proposed Transfer is to be made and
providing such additional information regarding the Transfer as the Company
reasonably requests. If the Company so requests, the Partnership shall at its
expense provide the Company with an opinion of counsel (which counsel must be
reasonably satisfactory to the Company) to the holder, in form and substance
satisfactory to the Company, that the proposed Transfer complies with applicable
federal and state securities laws. The Company shall have no obligation to
Transfer any Securities unless the holder thereof has complied with the
foregoing provisions, and any such attempted Transfer shall be null and void.
15. LOCK-UP AGREEMENT.
In consideration for the Company agreeing to its obligations hereunder,
the Partnership agrees, in connection with the IPO and upon the request of the
Company or the underwriters managing the offering, not to sell, make short sale
of, loan, grant any option for the purchase of, or otherwise dispose of any
shares of Common Stock (other than those, if any, included in the registration),
whether now owned or hereafter acquired, without the prior written consent of
the Company or such underwriters, as the
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case may be, for such period of time following the effective date of such
registration as the Company or the underwriters may specify (such period not to
exceed 365 days). The Partnership agrees to execute and deliver such
documentation as may be reasonably required by the underwriters in connection
with this Section. This restriction shall not apply to a registration relating
solely to employee benefit plans on Form S-8 or similar successor forms, or
registration relating solely to a Rule 145 transaction on Form S-4 or similar or
successor form.
16. MISCELLANEOUS.
16.1 APPLICABLE LAW. THIS AGREEMENT BY AND CONSTRUED SHALL BE
GOVERNED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS, WITHOUT GIVING
EFFECT TO THE CHOICE OF LAW OR CONFLICT OF LAWS PRINCIPLES THEREOF.
16.2 Benefits of This Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company, the
Partnership and the holders of Shares, any legal or equitable right, remedy or
claim under this Agreement, and this Agreement shall be for the sole and
exclusive benefit of the company, the Partnership and the holders of Shares.
16.3 Amendment. Except as provided herein, neither this Agreement
nor any term hereof may be amended, waived, discharged or terminated other than
by a written instrument signed by the party against whom enforcement of any such
amendment, waiver, discharge or termination is sought. Any provisions hereof may
be amended, waived, discharged or terminated, either retroactively or
prospectively, upon the written consent of the Company and the persons holding
(or having the right to acquire by virtue of holding Warrants) at least
fifty-one percent (51%) of the Shares which have been (or may be) issued upon
exercise of the Warrants. The Partnership acknowledges that by operation of this
Section, the Partnership will, subject to the limitations contained in this
Section, have the right and power to diminish or eliminate certain rights of the
Partnership under this Agreement, either prospectively or retroactively.
16.4 Entire Agreement. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subject matter hereof, and no party shall be liable or bound to any other in any
manner by any representations, warranties, covenants, and agreements except as
specifically set forth herein and therein. Nothing in this Agreement, expressed
or implied, is intended to confer upon any party, other than the parties hereto,
and their respective successors and assigns, any rights, remedies, obligations,
or liabilities under or by reason of this Agreement, except as expressly
provided herein.
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16.5 Severability. Any invalidity, illegality, or limitation of the
enforceability with respect to any party of any one or more of the provisions of
this Agreement, or any part thereof, whether arising by reason of the law of any
such party's domicile or otherwise, shall in no way affect or impair the
validity, legality, or enforceability of this Agreement with respect to all
other parties. In case any provision of this Agreement shall be invalid,
illegal, or unenforceable, the validity, legality, and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
16.6 Information Confidential. Each party acknowledges that the
information received by it pursuant hereto may be confidential and for its use
only, and it will not use such confidential information in violation of the Act
or reproduce, disclose or disseminate such information to any other person
(other than its employees or agents having a need to know the contents of such
information, and its attorneys) or use such information to the detriment of the
Company, except in connection with the exercise of rights under this Agreement,
where the Company has made such information available to the public generally or
such party is required to disclose such information by an applicable law or a
rule or regulation thereunder, including without limitation, securities and
anti-fraud laws, rules and regulations.
16.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
16.8 Survival. The representations, warranties, covenants, and
agreements made herein shall survive any investigation made by Fundex or the
Partnership and the Closing of the transactions contemplated hereby. All
statements as to factual matters contained in any certificate or other
instrument delivered at the Closing by or on behalf of Fundex pursuant hereto
shall be deemed to be representations and warranties made by Fundex hereunder
solely as of the date of such certificate or instrument.
16.9 Successors and Assigns. This Agreement shall inure to the
benefit of, and be binding upon, the successors, assigns, heirs, executors, and
administrators of the parties hereto and shall inure to the benefit of and be
enforceable by the Partnership and its successors and assigns; provided,
however, that prior to the receipt by Fundex of adequate written notice of the
Transfer of any Securities specifying the full name and address of the
transferee, Fundex may deem and treat the person listed as the holder of such
securities in its records as the absolute owner and holder of such securities
for all purposes.
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16.10 Delays or Omissions. No delay or omission to exercise any
right, power, or remedy accruing upon any breach, default or noncompliance under
this Agreement shall impair any such right, power, or remedy, nor shall it be
construed to be a waiver of any such breach, default or noncompliance, or any
acquiescence therein, or of or in any similar breach, default or noncompliance
thereafter occurring. Any waiver, permit, consent, or approval of any kind or
character of any breach, default or noncompliance under this Agreement, must be
in writing and shall be effective only to the extent specifically set forth in
such writing.
16.11 Notices. Any notice or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given (i) on the date of delivery if delivered personally or by Federal Express
or another national overnight delivery service, (ii) upon transmission by
facsimile transmission, or (iii) two (2) days after mailing if mailed by first
class mail, to the following addresses:
If to Fundex: Fundex Games, Ltd.
0000 X. 00xx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attn: Xx. Xxxx Xxxxx
and if to the Partnership, to the addresses set forth under Partnership's name
on Exhibit A hereto or such other address or with such copies to such additional
addresses as the party has provided to all other parties by notice duly given.
16.2 Finder's Fees.
(a) Fundex Representation and Indemnity. Fundex (i) represents and
warrants it has retained no finder or broker in connection with the transactions
contemplated by this Agreement, and (ii) hereby agrees to indemnify and to hold
the Partnership and the other parties hereto harmless from and against any
liability for any commission or compensation in the nature of a finders fee to
any broker or other person or firm (and the costs and expenses of defending
against such liability or asserted liability) for which it, or any of its
employees or representatives, is responsible.
(b) Partnership Representations and Indemnities. The Partnership,
(i) represents and warrants for itself that it has retained no finder or broker
in connection with the transactions contemplated by this Agreement, and (ii)
hereby agrees to indemnify and to hold Fundex and the other parties hereto
harmless from and against any liability for any commission or compensation in
the nature of a finder's fee to any broker or other person or firm (and the
costs and expenses of defending against
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such liability or asserted liability) for which it, or any of its employees or
representatives, is responsible.
16.13 Expenses and Fees. Fundex shall pay its own expenses,
including without limitation attorneys fees and costs, incurred in negotiating,
preparing or otherwise relating to this Agreement or the other agreements and
documents contemplated hereby.
16.14 Titles and Subtitles. The titles of the Sections and
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
16.15 Information Confidential. The Partnership acknowledges that
the information received by it concerning Fundex pursuant hereto is confidential
and for its use only, and it will not use such confidential information or
reproduce, disclose or disseminate such information to any other person (other
than its employees or agents having a need to know the contents of such
information, and its attorneys) or use such information to the detriment of
Fundex, except (i) where Fundex has previously made such information available
to the public generally or (ii) such party is required to disclose such
information by an applicable law or a rule or regulation thereunder, including
without limitation, securities and antifraud laws, rules and regulations.
16.16 Further Assurances. The parties hereto shall use good faith
reasonable efforts to do and perform or cause to be done and performed all such
further acts and things and shall execute and deliver all such other agreements,
certificates, instruments or documents as any other party may reasonably request
in order to carry out the intent and purpose of this Agreement and the
consummation of the transactions contemplated hereby and thereby. Neither Fundex
nor any Partnership shall undertake intentionally any course of action
inconsistent with satisfaction of the requirements applicable to it set forth in
this Agreement, and each shall use its best efforts promptly to take all such
acts and measures as may be appropriate to enable it to perform as early as
practicable the obligations herein and therein required to be performed by them.
16.17 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
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IN WITNESS WHEREOF, this Warrant Agreement has been signed and entered into as
of the date first set forth above.
FUNDEX GAMES, LTD.
By:
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Its:
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TOY PARADISE PARTNERSHIP
By:
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Its:
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