EXHIBIT 10.38.1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
WARRANT
TO PURCHASE
SHARES OF
COMMON STOCK
OF
NATURAL WONDERS, INC.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
----
1. General Terms........................................................................................1
1.1 Right to Acquire Securities...............................................................1
1.2 Exercise of Warrant.......................................................................2
1.3 Record Holder.............................................................................2
1.4 Payment of Taxes..........................................................................2
1.5 Transfer and Exchange.....................................................................3
2. Transfer of Securities...............................................................................3
2.1 Restrictions of Transfer..................................................................3
2.2 Cooperation...............................................................................5
3. Registration Rights..................................................................................5
3.1 Definitions...............................................................................5
3.2 Demand Registration.......................................................................6
3.3 Piggyback Registration....................................................................7
3.4 Expenses..................................................................................9
3.5 Company Responsibilities..................................................................9
3.6 Indemnification..........................................................................10
3.7 Holder's Obligations.....................................................................11
3.8 Assignment...............................................................................11
4. Adjustments to Exercise Price and Warrant Shares....................................................11
4.1 Subdivision or Combination...............................................................11
4.2 Adjustment for Reorganization, Consolidation, Merger.....................................12
4.3 Miscellaneous Exercise Matters...........................................................13
4.4 No Dilution or Impairment................................................................13
4.5 Notice of Adjustment.....................................................................13
4.6 Duty to Make Fair Adjustments in Certain Cases...........................................13
5. Miscellaneous.......................................................................................14
5.1 Entire Agreement.........................................................................14
5.2 Successors and Assigns...................................................................14
5.3 Governing Law............................................................................14
5.4 Notices, Etc.............................................................................14
5.5 Delays or Omissions......................................................................14
5.6 Survival.................................................................................14
5.7 Waivers and Amendments...................................................................15
5.8 Cashless Exercise........................................................................15
5.9 Severability.............................................................................17
5.10 Registered Holder........................................................................17
5.11 Titles and Subtitles.....................................................................17
-i-
WARRANT
TO PURCHASE SHARES OF COMMON STOCK OF
NATURAL WONDERS, INC.
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS (A)
COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT, (B) IN
COMPLIANCE WITH RULE 144 UNDER SUCH ACT, OR (C) THE COMPANY HAS BEEN
FURNISHED WITH AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY
THAT NO REGISTRATION IS REQUIRED FOR SUCH TRANSFER.
37,500 Shares of Common Stock
1. GENERAL TERMS.
1.1 RIGHT TO ACQUIRE SECURITIES.
(a) This Warrant certifies that for value received XXXXXXX
XXXXX and Associates, Inc. (the "Holder"), or registered assigns, are
entitled at any time before 5:00 p.m., San Francisco, California time, on
the Expiration Date (as such term is defined herein) to purchase from
NATURAL WONDERS, INC., a Delaware corporation (the "Company"), 37,500
shares (the "Warrant Shares") of the fully paid and non-assessable Common
Stock of the Company ("Common Stock") as constituted on the date hereof
(the "Issuance Date"), at a price of $1.50 per share (the "Exercise
Price"), such number of shares and price per share subject to adjustment
as provided herein and all subject to the conditions set forth herein.
This Warrant may be exercised at any time on or before three years from
the date hereof (the "Expiration Date").
Upon any partial exercise hereof, there shall be issued to the Holder a
new Warrant or Warrants with respect to the shares of Common Stock not so
exercised. No fractions of a share of Common Stock will be issued upon the
exercise of this Warrant, but if a fractional share would be issuable upon
exercise the Company will pay in cash the fair market value thereof as
determined by the Board of Directors of the Company in good faith.
(b) The Warrant may be subdivided, at the Warrantholder's
option, into several warrants to purchase the Warrant Shares
(collectively, also referred to as the "Warrant"). Such subdivision may
be accomplished in accordance with the provisions of Section 1.5 hereof.
-1-
1.2 EXERCISE OF WARRANT.
(a) The Holder or any person or entity to whom the Holder
has assigned its right under this Warrant (collectively referred
to as the "Warrantholder") may exercise the Warrant, in whole or in
part, at any time or from time to time, prior to its expiration, on
any business day, by delivering a written notice in the form attached
hereto (the "Exercise Notice") to the Company at the offices of
the Company designated in Section 5.4 hereof, exercising the Warrant
and specifying (i) the total number of shares of Common Stock the
Warrantholder will purchase pursuant to such exercise and (ii) a
place and date not less than one nor more than 20 business days from
the date of the Exercise Notice for the closing of such purchase.
(b) At any closing under Section 1.2(a) hereof, (i) the
Warrantholder will surrender the Warrant and make payment to the
Company of the aggregate Exercise Price for the shares of Common
Stock so purchased by delivering: (x) a bank, cashier's or certified
check; or (y) a written notice of an election to effect a Cashless
Exercise (as defined in Section 5.8 hereof); and (ii) the
Company will deliver to the Warrantholder a certificate or
certificates for the number of shares of Common Stock issuable upon such
exercise, together with cash, in lieu of any fraction of a share, as
provided in Section 1.1(a) above. Upon any partial exercise, a new
warrant or warrants of the same tenor and expiration date for the
purchase of the number of such shares not purchased upon such
exercise shall be issued by the Company to the registered holder
thereof.
1.3 RECORD HOLDER. A Warrant shall be deemed to have been
exercised immediately prior to the close of business on the date of its
surrender for exercise as provided in Section 1.2(b) above, and the person
entitled to receive the shares of Common Stock issuable upon such exercise
shall be treated for all purposes as the holder of such shares of record as
of the close of business on such date.
1.4 PAYMENT OF TAXES. The Company shall pay all taxes and other
governmental charges that may be imposed in respect of the issue or
delivery of the Warrant Shares or any portion thereof. The Company shall not
be required, however, to pay any tax or other charge imposed in connection
with any transfer involved in the issue of any certificate for the Warrant
Shares or any portion thereof in any name other than that of the registered
holder of the Warrant surrendered in connection with the purchase of such
shares, and in such case the Company shall not be required to issue or
deliver any certificate until such tax or other charge has been paid or it
has been established to the Company's satisfaction that no tax or other
charge is due.
-2-
1.5 TRANSFER AND EXCHANGE.
(a) Subject to the terms hereof, including, without
limitation, Section 2.1, the Warrant and all rights thereunder are
transferable, in whole or in part, on the books of the Company
maintained for such purpose at its office designated in Section 5.4
hereof by the registered holder hereof in person or by duly authorized
attorney, upon surrender of the Warrant properly endorsed and upon
payment of any necessary transfer tax or other governmental charge
imposed upon such transfer. Upon any partial transfer, the Company will
issue and deliver to such holder a new warrant or warrants with respect
to the Warrant Shares not so transferred. Each taker and holder of the
Warrant, by taking or holding the same, consents and agrees that the
Warrant when endorsed in blank shall be deemed negotiable, and that when
the Warrant shall have been so endorsed, the holder may be treated by
the Company and all other persons dealing with the Warrant as the
absolute owner of such Warrant for any purpose and as the person
entitled to exercise the rights represented thereby, or to the transfer
on the books of the Company, any notice to the contrary notwithstanding;
but until such transfer on such books, the Company may treat the
registered holder of the Warrant as the owner for all purposes. The
term "Warrant" as used herein shall include the Warrant and, any
warrants delivered in substitution or exchange therefor as provided
herein.
(b) The Warrant is exchangeable for a warrant or
warrants for the same aggregate number of Warrant Shares, each new
Warrant to represent the right to purchase such number of shares as the
holder shall designate at the time of such exchange.
2. TRANSFER OF SECURITIES.
2.1 RESTRICTIONS OF TRANSFER. Neither the Warrant nor the
Warrant Shares shall be transferable except upon the conditions specified in
this Section 2.1, which conditions are intended to insure compliance
with the provisions of the Securities Act of 1933 (the "1933 Act") in
respect to the transfer of the Warrant and the Warrant Shares.
(a) Unless and until otherwise permitted by this Section
2.1, the Warrant and each certificate or other document evidencing
any of the Warrant Shares shall be endorsed with a legend substantially
in the following form:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED UNLESS (A) COVERED BY AN EFFECTIVE
REGISTRATION STATEMENT
-3-
UNDER SUCH ACT, (B) IN COMPLIANCE WITH RULE 144 UNDER SUCH ACT,
OR (C) THE COMPANY HAS BEEN FURNISHED WITH AN OPINION OF
COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT
THAT NO REGISTRATION IS REQUIRED FOR SUCH TRANSFER"
(b) Neither the Warrant nor the Warrant Shares shall be
transferred, and the Company shall not be required to register any
such transfer, unless and until one of the following events shall
have occurred:
(i) the Company shall have received an opinion of counsel,
in form and substance reasonably acceptable to the Company and
its counsel, stating that the contemplated transfer is exempt from
registration under the 1933 Act as then in effect, and the
Rules and Regulations of the Securities and Exchange
Commission (the "Commission") thereunder. Within five business days
after delivery to the Company and its counsel of such an opinion,
the Company either shall deliver to the proposed transferor a
statement to the effect that such opinion is not satisfactory in
the reasonable opinion of its counsel (and shall specify in
detail the legal analysis supporting any such conclusion) or shall
authorize the Company's transfer agent to make the requested
transfer;
(ii) the Company shall have been furnished with a
letter from the Commission in response to a written request
in form and substance acceptable to counsel for the Company
setting forth all of the facts and circumstances
surrounding the contemplated transfer, stating that the
Commission will take no action with regard to the contemplated
transfer;
(iii) the Warrant or the Warrant Shares are transferred
pursuant to a registration statement which has been filed with
the Commission and has become effective; or
(iv) the Warrant or the Warrant Shares are transferred
in accordance with the provisions of Rule 144 promulgated by the
Commission under the 1933 Act.
(c) The restrictions on transfer imposed by this Section 2.1
shall cease and terminate as to the Warrant and the Warrant Shares when
(i) such securities shall have been effectively registered under the
1933 Act and sold by the holder thereof in accordance with such
registration, (ii) an acceptable opinion as described in Section
2.1(b)(i) or a "no action" letter described in Section 2.1(b)(ii) states
that future transfers of such securities by
-4-
the transferor or the contemplated transferee would be exempt from
registration under the 1933 Act, or (iii) such securities may be sold in
accordance with the provisions of Rule 144 promulgated under the 1933 Act.
When the restrictions on transfer contained in this Section 2.1 have
terminated as provided above, the holder of the securities as to which
such restrictions shall have terminated or the transferee of such holder
shall be entitled to receive promptly from the Company, without expense
to him, new certificates not bearing the legend set forth in Section
2.1(a) hereof.
2.2 COOPERATION. The Company shall cooperate in supplying such
information as may be reasonably requested by the Warrantholder to
complete and file any information reporting forms presently or subsequently
required by the Commission as a condition to the availability of an
exemption, presently existing or subsequently adopted, from the 1933 Act
for the sale of the Warrant or the Warrant Shares.
3. REGISTRATION RIGHTS.
3.1 DEFINITIONS. For purposes of Section 3 hereof, terms not
otherwise defined herein shall have the following meanings:
(a) The terms "register," "registered" and
"registration" refer to the preparation and filing of a registration
statement in compliance with the 1933 Act and the rules promulgated
thereunder, and the declaration of the effectiveness of such
registration statement, or the taking of similar action under a
successor statute or regulation.
(b) The term "Registrable Securities" means the shares of
Common Stock issuable upon conversion of the Debenture or exercise of
the Warrant, and any securities issued or issuable with respect to
such Warrant Shares by way of a stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization.
(c) The term "Holder" means any registered holder or holders
of Registrable Securities.
(d) The term "Prospectus" means a prospectus that complies
with applicable provisions of the 1933 Act.
(e) The term "Debenture" refers to the Subordinated
Convertible Debenture issued to Holders on September 11, 2000 along
with the Warrants.
-5-
3.2 DEMAND REGISTRATION.
(a) On any date after March 15, 2001, the Holders of at
least fifty percent (50%) of the Registrable Securities then outstanding
(the "Initiating Holders") may request in writing registration under the
1933 Act (a "Demand Registration"). The Demand Registration request
shall specify the amount of the Registrable Securities proposed to be
sold, the intended method of disposition thereof and the jurisdictions
in which registration is desired. Upon the receipt of the Demand
Registration request, the Company promptly shall take such steps as are
necessary or appropriate to prepare for the registration of the
Registrable Securities to be registered. Within fifteen (15) days after
the receipt of such request, the Company shall give written notice
thereof to all other Holders and include in such registration all
Registrable Securities held by a Holder from whom the Company has
received a written request for inclusion therein at least ten (10) days
prior to the filing of the registration statement. Each such request
will also specify the number of Registrable Securities to be registered,
the intended method of disposition thereof and the jurisdictions in
which registration is desired.
(b) The Company shall use its reasonable best efforts to
cause any such Demand Registration to become effective not later
than one hundred twenty (120) days after it receives a request under
this Section 3.2. A registration requested pursuant to this Section 3.2
shall not count as the one Demand Registration to which the Holders
are entitled to thereunder unless such registration statement is
declared effective and remains effective for at least ninety (90) days.
(c) If Holders of a majority of the Registrable Securities
proposed to be registered by the Initiating Holders so elect, the
offering of such Registrable Securities pursuant to such Demand
Registration shall be in the form of a firm commitment underwritten
offering. If any Demand Registration of Registrable Securities is in the
form of an underwritten offering, the Holders holding a majority of
the Registrable Securities proposed to be registered by the Initiating
Holders shall select and obtain an investment banking firm of national
reputation to act as the managing underwriter of the offering (the
"Approved Underwriter"); provided, that the Approved Underwriter shall,
in any case, be acceptable to the Company in its reasonable judgment.
(d) The Company shall not be obligated to effect any
registration under this Section 3.2 except in accordance with the
following provisions:
(i) The Company shall not be obligated to use its
reasonable best efforts to file and cause to become effective more
than
-6-
one registration statement with respect to Registrable
Securities held by the Holders initiated pursuant to this Section
3.2; provided, however, that any registration proceeding begun
pursuant to this Section 3.2 that is subsequently withdrawn at the
request of the Holders shall not be so counted if such withdrawal is
based upon material adverse information relating to the Company or
its condition, business, or prospects which is different from that
generally known to the Rights Holders at the time of their request.
(ii) The Company may delay the filing or effectiveness
of any registration statement for a period of up to ninety (90)
days after the date of a request for registration pursuant to this
Section 3.2 if (x) at the time of such request the Company is
engaged, or has formal plans to engage within sixty (60) days of
the time of such request, in an underwritten public offering of
shares of Common Stock, (y) the Board of Directors of the Company
determines in good faith that (A) it is in possession of material,
non-public information concerning an acquisition, merger,
recapitalization, consolidation, reorganization or other material
transaction by or of the Company or concerning pending or
threatened litigation and (B) disclosure of such information would
jeopardize any such transaction or litigation or otherwise
materially harm the Company, or (z) the Company shall furnish to
the Holders a certificate signed by the Chief Executive Officer or
President of the Company stating that, in the good faith judgment
of the Board of Directors of the Company, it would otherwise be
seriously detrimental to the Company and its investors for such
registration statement to be filed and it is therefore essential to
defer the filing of such registration statement.
3.3 PIGGYBACK REGISTRATION.
(a) If, at any time, through and including the third
anniversary of the date of this Warrant, the Company proposes to
register any of its securities under the 1933 Act (other than in
connection with a merger, acquisition, reorganization or similar
transaction pursuant to a Form S-4 Registration Statement or an employee
stock compensation plan pursuant to a Form S-8 Registration Statement),
it will give written notice by registered mail, at least (30) days prior
to the filing of each such registration statement, to the Holder of its
intention to do so. If the Holder notifies the Company within 20 days
after receipt of any such notice of its desire to include any
Registrable Securities in such proposed registration statement, the
Company shall afford such Holder the opportunity to have any of the
Registrable Securities registered
-7-
under such registration statement and included in any underwriting
involved with respect thereto.
(b) Notwithstanding the provisions of Section 3.3 hereof:
(i) the Company shall have the right at any time after it shall have
given written notice pursuant to this Section 3 (irrespective of whether
a written request for inclusion of any Registrable Securities shall have
been made) to elect not to file any such proposed registration
statement, or to withdraw the same after the filing but prior to the
effective date thereof; and (ii) in the event a registration under
Section 3.3 hereof relates to an underwritten public offering which does
not include any securities being offered and sold on behalf of selling
shareholders, the inclusion of any Registrable Securities may, at the
election of the Company, be conditioned upon the Holder agreeing that
the public offering of such Registrable Securities shall not commence
until 90 days after the effective date of such registration.
(c) The rights of the Holder pursuant to Section 3.3 hereof
shall be conditioned upon such Holder's participation in the
underwriting with respect thereto and the inclusion of such Holder's
Registrable Securities in such underwriting (unless otherwise mutually
agreed by the Company, the managing underwriter or, if none, a majority
of the underwriters, and such Holder) to the extent provided herein.
(d) Notwithstanding any other provision of this Warrant, if
the managing underwriter or, if none, a majority of the underwriters,
determines that marketing factors require a limitation of the number of
shares to be underwritten or a complete exclusion of such shares, such
underwriter or underwriters may limit the number of Registrable
Securities that may be included in the registration and underwriting or
exclude all of the Registrable Securities, as appropriate. In the case
of an underwritten registration in which the number of Registrable
Securities that may be included is limited, the Company shall advise the
Holder of the limited number of Registrable Securities that may be
included in the registration, and the number of Registrable Securities
that may be included in the registration and underwriting shall be
allocated among all Holders thereof in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities
entitled to inclusion in such registration held by such Holders at the
time of filing the registration statement.
(e) The Company shall (together with all Holders proposing
to distribute their securities through an underwriting) enter into an
underwriting agreement in customary form with the underwriter or
underwriters selected for the underwriting.
-8-
3.4 EXPENSES.
All expenses incurred in connection with any registration pursuant to
this Warrant or Warrant Shares, including without limitation, all registration,
filing and qualification fees, printing expenses, fees and disbursements of
counsel for the Company, and expenses of any special audits incidental to or
required by such registration, shall be borne by the Company; provided however
the Company shall not be required to pay:
(a) fees of legal counsel of any Holder, or underwriters'
fees, discounts, commissions or expenses relating to Registrable
Securities; and
(b) for expenses that the Company is prohibited from paying
under Blue Sky laws or by Blue Sky administrators.
3.5 COMPANY RESPONSIBILITIES.
In the case of a piggyback registration of Warrant Shares, the Company
shall use its best efforts to keep the Holder advised in writing as to the
initiation, effectiveness and completion of such registration. At its expense
the Company shall:
(a) prepare and file a registration statement (and such
amendments and supplements thereto) with respect to such Registrable
Securities and use its best efforts to cause such registration statement
to become and remain effective for a period of 180 days or until the
Holder or Holders have completed the distribution described in the
registration statement relating thereto, whichever first occurs;
(b) furnish such number of copies of a Prospectus in
conformity with the requirements of applicable law, and such other
documents incident thereto as a Holder from time to time may reasonably
request; and
(c) use every reasonable effort to register or qualify the
Registrable Securities covered by such registration statement under the
state Blue Sky laws of such jurisdictions as the Company's Board of
Directors may reasonably determine, and do any and all other acts and
things which may be necessary under said Blue Sky laws to enable the
sellers of the Registrable Securities to consummate the public sale or
other disposition of the Registrable Securities owned by them in such
jurisdictions, except that the Company shall not for any purpose be
required to qualify to do business as a foreign corporation in any
jurisdiction wherein the Registrable Securities are so qualified.
-9-
3.6 INDEMNIFICATION.
(a) The Company shall indemnify the Holder, with respect to
such registration effected pursuant to Section 3 hereof, against all
claims, losses, damages and liabilities (or actions in respect thereto)
arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any registration statement or
related Prospectus, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, or any violation by the
Company of any rule or regulation promulgated under any securities law
applicable to the Company and relating to action or inaction required of
the Company in connection with any such registration, and shall
reimburse the Holder, for any legal and any other expenses reasonably
incurred in connection with investigating or defending any such claim,
loss, damage, liability or action, provided that the Company shall not
be liable in any such case to the extent that any such claim, loss,
damage or liability arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company in an
instrument duly executed by such Holder specifically for use therein.
(b) The Holder shall, if Registrable Securities held by or
issuable to the Holder are included in the securities as to which such
registration is being effected, indemnify the Company, each of its
directors and officers who sign such registration statement, each
underwriter, if any, of the Company's securities covered by such a
registration statement, each person who controls the Company within the
meaning of the 1933 Act, and each other Holder, against all claims,
losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in any such registration statement or related
Prospectus, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and shall reimburse the Company and
such Holders for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability, or action, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement or
related Prospectus in reliance upon and in conformity with written
information furnished to the Company in an instrument duly executed by
such Holder specifically for use therein.
(c) Each party entitled to indemnification under this
Section 3.4 (the "Indemnified Party") shall give notice to the party
required to provide indemnification (the "Indemnifying Party") promptly
after such
-10-
Indemnified Party has actual knowledge of any claim as to which indemnity
may be sought, and shall permit the Indemnifying Party to assume the
defense of any such claim or any litigation resulting therefrom, provided
that counsel for the Indemnifying Party, who shall conduct the defense of
such claim or litigation, shall be approved by the Indemnified Party
(whose approval shall not be unreasonably withheld), and the Indemnified
Party may participate in such defense at such party's expense; and
provided further that the failure of any Indemnified Party to give
notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Section 3.4. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent
of each Indemnified Party, consent to entry of any judgment or enter
into any settlement, which does not include as an unconditional term
thereof, the giving by the claimant or plaintiff to such Indemnified
Party of a release from all liability in respect to such claim or
litigation.
3.7 HOLDER'S OBLIGATIONS. The Holder shall furnish to the
Company such written information regarding such Holder and the distribution
proposed by such Holder as the Company may reasonably request in writing and
as shall be required in connection with any registration referred to in this
Warrant.
3.8 ASSIGNMENT. The rights granted to the Holder pursuant to
this Warrant may be assigned to a transferee or assignee of the Warrant or
any of the Registrable Securities, provided that the transferee or assignee
is an affiliated entity of the Holder and the Company is given written
notice at the time of or within 10 days after said transfer, stating the
name and address of said transferee or assignee and identifying the
Registrable Securities with respect to which such registration rights are
being assigned.
4. ADJUSTMENTS TO EXERCISE PRICE AND WARRANT SHARES. The Exercise Price
in effect from time to time and the number of Warrant Shares shall be subject
to adjustment in certain cases as set forth in this Section 4.
4.1 SUBDIVISION OR COMBINATION. In the event the outstanding
Common Stock shall be subdivided into a greater number of shares of Common
Stock, the Exercise Price for the Warrant Shares shall, simultaneously with
the effectiveness of such subdivision, be proportionately reduced and the
number of Warrant Shares proportionately increased, and conversely, in case
the outstanding Common Stock shall be combined into a smaller number of
shares of Common Stock, the Exercise Price shall, simultaneously with the
effectiveness of such combination, be proportionately increased and the
number of Warrant Shares proportionately reduced.
-11-
4.2 ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER.
(a) In case of any reorganization of the Company (or any
other corporation the stock or other securities of which are receivable
on the exercise of the Warrant) after the date on which this Warrant is
first issued (the "Issuance Date"), or in case, after such date, the
Company (or any such other corporation) shall consolidate with or merge
into another corporation or convey all or substantially all of its
assets to another corporation, then and in each such case the
Warrantholder, upon exercise of the Warrant as provided in Section 1.2
hereof at any time after the consummation of such reorganization,
consolidation, merger or conveyance, shall be entitled to receive, in
lieu of the stock or other securities and property receivable upon the
exercise of the Warrant prior to such consummation, the stock or other
securities or property to which the Warrantholder would have been
entitled upon such consummation if the Warrantholder had exercised or
converted the Warrant immediately prior thereto; in each such case, the
terms of this Warrant, including the exercise provisions of Section 1.2,
shall be applicable to the shares of stock or other securities or
property receivable upon the exercise or conversion of the Warrant after
such consummation.
(b) The Company shall not effect any consolidation, merger
or conveyance of all or substantially all of its assets unless prior to
the consummation thereof the successor corporation (if other than the
Company) resulting from such consolidation or merger or the
corporation into or for the securities of which the previously
outstanding stock of the Company shall be changed in connection with
such consolidation or merger, or the corporation purchasing such
assets, as the case may be, shall assume by written instrument, in
form and substance satisfactory to the Warrantholder, executed and
delivered in accordance with Section 5.4 hereof, the obligation to
deliver to the Warrantholder such shares of stock, securities or
assets as, in accordance with the foregoing provisions, the
Warrantholder is entitled to purchase.
(c) If a purchase, tender or exchange offer is made to and
accepted by the holders of more than 50% of the outstanding shares of
Common Stock of the Company, the Company shall not effect any
consolidation, merger or sale with the Person having made such offer or
with any Affiliate of such Person, unless prior to consummation of such
consolidation, merger or sale the Warrantholder shall have been given a
reasonable opportunity to then elect to receive either the stock,
securities or assets then issuable upon the exercise or conversion of
the Warrant or, if different, the stock, securities or assets, or the
equivalent, issued to previous holders of the Common Stock in accordance
with such offer, computed as though the Warrantholder hereof had been,
at the time of such offer, a holder
-12-
of the stock, securities or assets then purchasable upon the exercise or
conversion of the Warrant. As used in this paragraph (c), the term
"Person" shall mean and include an individual, a partnership, a
corporation, a trust, a joint venture, an unincorporated organization
and a government or any department or agency thereof, and an "Affiliate"
of any Person shall mean any Person directly or indirectly controlling,
controlled by or under direct or indirect common control with, such
other Person. A Person shall be deemed to control a corporation if such
Person possesses, directly or indirectly, the power to direct or cause
the direction of the management and policies of such corporation,
whether through the ownership of voting securities, by contract or
otherwise.
4.3 MISCELLANEOUS EXERCISE MATTERS. The Company shall at all
times reserve and keep available out of its authorized but unissued Common
Stock the full number of Warrant Shares deliverable upon exercise of the
Warrant Shares, as such number may change from time to time. Also, the
Company shall, at its own expense, take all such actions and obtain all such
permits and orders as may be necessary to enable the Company lawfully to
issue the Warrant Shares upon the exercise of the Warrant.
4.4 NO DILUTION OR IMPAIRMENT. The Company will not, by amendment
of its certificate of incorporation or through reorganization, consolidation,
merger, dissolution, issue or sale of securities, sale of assets or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms of the 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 in order to protect the rights of the
Warrantholder against dilution or other impairment. Without limiting the
generality of the foregoing, the Company will take all such action as may be
necessary or appropriate in order that the Company may validly and legally
issue fully paid and non-assessable shares upon the exercise or conversion of
the Warrant.
4.5 NOTICE OF ADJUSTMENT. When any adjustment is required to be
made in either the Exercise Price or the number of shares issuable upon
exercise of the Warrant, the Company shall promptly notify the Warrantholder
of such event, of the calculation by which such adjustment is to be made and
of the resulting Exercise Price or conversion rate, as the case may be.
4.6 DUTY TO MAKE FAIR ADJUSTMENTS in Certain Cases. If any event
occurs as to which in the opinion of the Board of Directors the other
provisions of this Section 4 are not strictly applicable or if strictly
applicable would not fairly protect the purchase and exercise rights of the
Warrant in accordance with the essential intent and principles of such
provisions, then the Board of Directors shall make an adjustment in the
application of such provisions, in accordance with such essential intent and
principles, so as to protect such purchase rights as aforesaid.
-13-
5. MISCELLANEOUS.
5,1 ENTIRE AGREEMENT. This Warrant constitutes the full and
entire understanding and agreements between the parties hereto with respect
to the subjects hereof and thereof.
5.2 SUCCESSORS AND ASSIGNS. The terms and conditions of this
Warrant shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties hereto, except as expressly provided
otherwise herein.
5.3 GOVERNING LAW. This Warrant shall be governed by and
construed under the laws of the State of California.
5.4 NOTICES, ETC. All notices and other communications required
or permitted hereunder shall be in writing and shall be deemed
effectively given upon personal delivery or upon the seventh day following
mailing by registered air mail, postage prepaid, addressed (a) if to the
Warrantholder, at Xxxxxxx Xxxxx and Associates, Inc., 000 Xxxxxxxx
Xxxxxxx, Xx. Xxxxxxxxxx, Xxxxxxx 00000, Attention: Xxx Xxxxxxx, or at
such other address as it shall have furnished to the Company in writing,
(b) if to the Company, a copy should be sent to 0000 Xxxxxxxxxx Xxxxx,
Xxxxxxx, XX 00000, and addressed to the attention of the corporate
secretary, or at such other address as the Company shall have
furnished in writing to the Warrantholder, or (c) if to any other holder of
any Warrant or of Warrant Shares issued upon conversion of the Warrant,
at such address as such holder shall have furnished to the Company in
writing, or, until such holder so furnishes an address to the Company, then
to and at the address of the last holder of such Warrant or Warrant Shares
who so furnished an address to the Company.
5.5 DELAYS OR OMISSIONS. No delay or omission to exercise any
right, power or remedy accruing to any holder of any securities issued or
sold or to be issued or sold hereunder, upon any breach or default of the
Company under this Agreement, shall impair any such right, power or remedy of
such holder nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or in any similar breach or default
thereafter occurring, nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character
on the part of any holder of any breach or default under this Agreement, or
any waiver on the part of any holder of any provisions or conditions of this
Agreement, must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded to any holder, shall be cumulative
and not alternative.
5.6 SURVIVAL. The representations, warranties, covenants and
agreements made herein and or made pursuant to this Agreement shall
survive the
-14-
execution and delivery of this Agreement, except as expressly provided
otherwise herein.
5.7 WAIVERS AND AMENDMENTS. With the written consent of the
record or beneficial holders of more than 50% of the Warrant Shares (treated
as if converted), the obligations of the Company and the rights of the
holders of the Warrant and the Warrant Shares may be waived (either generally
or in a particular instance, either retroactively or prospectively and either
for a specified period of time or indefinitely), and with the same consent
the Company, when authorized by resolution of its Board of Directors, may
enter into a supplemental agreement for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of this
Warrant; provided, however, that no such waiver or supplemental agreement
shall reduce the aforesaid percentage of the Warrant Shares, the holders of
which are required to consentto any waiver or supplemental agreement, without
the consent of the record or beneficial holders of all of the Warrant Shares
(treated as if converted). Upon the effectuation of each such Waiver,
consent, agreement of amendment or modification, the Company promptly shall
give written notice thereof to the record holders of the Warrant and the
Warrant Shares. This Warrant or any provision hereof may not be changed,
waived, discharged or terminated orally, but only by a statement in writing
signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, except to the extent provided in this
Section 5.7.
5.8 CASHLESS EXERCISE.
(a) This Warrant may be exercised at any time or from time
to time prior to the Expiration Date, by presentation and surrender of
this Warrant to the Company at its principal executive offices with a
written notice of the Holder's intention to effect a cashless exercise,
including a calculation of the number of shares of Common Stock to be
issued upon such exercise in accordance with the terms hereof (a
"Cashless Exercise"). In the event of a Cashless Exercise in lieu of
paying the Exercise Price in cash, the holder shall surrender this
Warrant for that number of shares of Common Stock determined by
multiplying (i) the number of Warrant Shares to which it would otherwise
be entitled by (ii) a fraction, the numerator of which shall be the
difference between the then current Market Price per share of the Common
Stock and the Exercise Price, and the denominator of which shall be the
Market Price per share of Common Stock.
(b) The following definitions shall apply to this Section
5.8.
(i) "Business Day" means any day, other than a Saturday
or Sunday or a day on which banking institutions in the State of
California are authorized or obligated by law, regulation or
executive order to close.
-15-
(ii) "Closing Price" shall mean for the Common Stock as
of any date, the last price of such security on the principal United
States securities exchange or trading market on which such security is
listed or traded as reported by the Research Service of Nasdaq Trading
and Market Services (or a comparable reporting service of national
reputation selected by the Holder and reasonably acceptable to the
Company if the Research Service of Nasdaq Trading and Market Services is
not then reporting last price of such security) (collectively, "NTMS"),
or if the foregoing does not apply, the last reported sale price of such
security in the over-the-counter market on the electronic bulletin board
for such security as reported by NTMS, or, if no sale price is reported
for such security by NTMS, the average of the bid prices of any market
makers for such security as reported in the "pink sheets" by the
National Quotation Bureau, Inc., in each case for such date or, if such
date was not a Trading Day (as defined below) for such security, on the
next preceding day which was a Trading Day. If the Closing Price cannot
be calculated for a share of Common Stock as of either of such dates on
any of the foregoing bases, the Closing Price of such security on such
date shall be the fair market value as determined by an investment
banking firm selected by mutual agreement of the Holder and the Company,
with the costs of such appraisal to be borne equally by the Company and
the Holder. The manner of determining the Closing Price of the Common
Stock set forth in the foregoing definition shall apply with respect to
any other security in respect of which a determination as to market
value must be made.
(iii) "Market Price" shall mean, with respect to any
date of determination, the average Closing Price during the ten (10)
Trading Days ending on the Trading Day immediately preceding such date
of determination, appropriately adjusted to reflect any stock dividend,
stock split or similar transaction during either such relevant period.
The manner of determining the Market Price of the Common Stock set
forth in the foregoing definition shall apply with respect to any other
security in respect of which a determination as to market value must be
made hereunder.
(iv) "Trading Day" shall mean a Business Day on which
at least 1,000 shares of Common Stock are traded on the principal
United States securities exchange or trading market on which such
security is listed or traded as reported by NTMS.
-16-
5.9 SEVERABILITY. If one or more provisions of this Warrant are
held to be invalid, illegal or unenforceable under applicable law, such
provision shall be modified in such manner as to be valid, legal and
enforceable, but so as to most nearly retain the intent of the parties, and
if such modification is not possible, such provision shall be severed from
this Agreement as if such provision were not included, in either case, and
the balance of this Warrant shall not in any way be affected or impaired
thereby and shall be enforceable in accordance with its terms.
5.10 REGISTERED HOLDER. The Company may deem and treat the
registered Holder(s) hereof as the absolute owner(s) of this Warrant
(notwithstanding any notation of ownership or other writing hereon made
by anyone), for the purpose of any exercise or conversion hereof, of any
distribution to the Holder(s) hereof, and for all other purposes, and the
Company shall not be affected by any notice to the contrary. Other than as
set forth herein, this Warrant does not entitle any Holder hereof to any
rights of a stockholder of the Company.
5.11 TITLES AND SUBTITLES. The titles of the sections and
subsections of this Warrant are for convenience and are not to be
considered in construing this Warrant.
IN WITNESS WHEREOF, Company has caused this Warrant to be signed by its
duly authorized officer and issued as of the date set forth below.
Dated: September 11, 2000
NATURAL WONDERS, INC.
By:
--------------------------------
Its:
--------------------------------
-17-
EXERCISE NOTICE
(To be executed only upon exercise of Warrant)
The undersigned registered owner of a Warrant of NATURAL WONDERS, INC.
(the "Company"), originally issued to _________________ irrevocably
exercises such Warrant for the purchase of shares of Common Stock of
the Company, purchasable with the Warrant, and hereby sets the place and
date for the closing of such purchase as follows, all on the terms and
conditions specified in the Warrant.
Place of Closing:
--------------------------
Date of Closing:
--------------------------
The undersigned requests that a certificate for such shares be
registered in the name of __________________________________________________,
whose address is
___________________________________________________________________. If
said number of shares is less than all of the shares of Common Stock
purchasable under the Warrant, the undersigned requests that a new Warrant
representing the remaining balance of such shares be registered
in the name of __________________________________________________, whose
address is______________________________________________.
Dated: ____________________
___________________________________
Signature of Registered Owner
___________________________________
Street Address
___________________________________
City State Zip
-18-
FORM OF ASSIGNMENT
FOR VALUED RECEIVED, the undersigned registered owner of this Warrant
issued by NATURAL WONDERS, INC. hereby sells, assigns and transfers unto
the Assignee named below all of the rights of the undersigned under the
within Warrant, with respect to the number of Shares of Common Stock set
forth below:
Name of Assignee Address No. of Shares
and does hereby irrevocably constitute and appoint ____________________________
attorney to make such transfer on the books of _________________________
maintained for such purpose, with full power of substitution in the premises.
Dated: ____________________
___________________________________
Signature of Registered Owner
___________________________________
Witness
-19-
