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EXHIBIT 10.20
THIS WARRANT AND THE SECURITIES REPRESENTED BY THIS WARRANT HAVE BEEN ACQUIRED
FOR INVESTMENT FOR THE HOLDER'S OWN ACCOUNT AND NOT WITH A VIEW TO OR FOR SALE
IN CONNECTION WITH ANY DISTRIBUTION OF THE SECURITIES. NEITHER THE WARRANT NOR
THE SECURITIES HAVE BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF
1933 ("SECURITIES ACT") OR UNDER ANY APPLICABLE STATE SECURITIES LAWS ("BLUE SKY
LAWS"). AN OFFER TO SELL OR TRANSFER OR THE SALE OR TRANSFER OF THIS WARRANT OR
THESE SECURITIES IS UNLAWFUL UNLESS MADE PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT OR PERMIT, AS APPLICABLE, UNDER THE SECURITIES ACT OR APPLICABLE BLUE
SKY LAWS OR UNLESS AN EXEMPTION FROM REGISTRATION AND/OR QUALIFICATION UNDER THE
SECURITIES ACT AND APPLICABLE BLUE SKY LAWS IS AVAILABLE AND AN OPINION OF
COUNSEL OR OTHER EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY IS PROVIDED TO
THE COMPANY TO THE EFFECT THAT SUCH REGISTRATION OR QUALIFICATION IS NOT
REQUIRED UNDER THE SECURITIES ACT AND APPLICABLE BLUE SKY LAWS.
THIS WARRANT IS SUBJECT TO A POWER OF ATTORNEY REGARDING THE EXERCISE OF
REGISTRATION RIGHTS
Warrant No. 98-001
COMMON STOCK PURCHASE WARRANT
JANUARY 1, 1998
THIS CERTIFIES THAT, for value received, Xxxxx Xxxx ("Warrantholder") is
entitled to subscribe for and purchase from Legacy Brands, Inc., a California
corporation (the "Company"), that number of shares of the Company's Common
Stock, no par value, as set forth in Section 4 (b) hereof at the Exercise Price
(as hereafter determined) at any time from the date hereof to and including the
Expiration Date (as defined below), subject to the terms and conditions stated
herein. For purposes of this Warrant, the term "Expiration Date" shall mean 5:00
p.m. Pacific time on April 15, 1999, except as set forth in Section 1(b) hereof.
1. Exercise of Warrant.
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a) The rights represented by this Warrant may be exercised, in
whole or in part (subject to the minimum exercise limitation set forth in this
Section 1), by the holder hereof at any time on or before the Expiration date by
the surrender of this Warrant and delivery of an executed Subscription Agreement
in the form attached hereto as Exhibit A to the Company at its principal
executive office, or such other place as the Company shall designate in writing,
accompanied by payment for the Warrant Stock (as defined in Section 10) so
subscribed for in cash or check, in good funds or, subject to the good faith
determination by the Company as to the creditworthiness of the holder at the
time, the issuance by the holder of its promissory note to the Company (the
"Note") for up to the full exercise price of all of the warrants, with any
differential payable by cash or check, which Note shall bear interest at the
rate of seven percent (7%) per annum, all due and payable one year from the date
of issuance. Any shares for which a Note shall have been given to the Company as
payment shall not be deemed issued until such time as that portion of the Note
pertaining to such shares shall have been paid in full and the holder of such
shares shall have no rights with respect thereto, including, but not by way of
limitation, the right to vote, nor may such shares be transferred. In the event
of a partial exercise of this Warrant, a substitute Warrant representing the
number of shares of Warrant Stock which were not acquired upon the exercise of
the Warrant shall be issued to the holder of this Warrant. No exercise of this
Warrant may be made for less than one fourth of the number of shares of Warrant
Stock initially subject to this Warrant or such lesser number as shall then
constitute the balance of shares purchasable hereunder.
b) If at any time prior to the Expiration Date, the Company shall be
engaged in an offering of its securities, including any time determined, in good
faith by the Company or its Underwriter as hereinafter defined, to be "quiet
periods" during which its securities may not be offered for sale or sold, or if
at any other time or for any reason the Company or its Underwriter (as
hereinafter defined) shall, in good faith, determine that these Warrants may not
be exercised ( the period during which such inability to exercise shall exist
shall be referred to as the "Offering Period," which Offering Period may not in
each instance exceed a period of 90 days, it being recognized that such an
Offering Period may both precede and follow an offering of the securities of the
Company, with each such period being a separate Offering Period for the purposes
of this provision), the Expiration Date shall be extended by the same number of
days as the Offering Period.
2. Investment Representation. The holder by accepting this Warrant
represents that the Warrant is acquired for the holder's own account for
investment purposes and not with a view to any offering or distribution and that
the holder has no present intention of selling or otherwise disposing of the
Warrant or the Warrant Stock in violation of applicable securities laws. Upon
exercise, the holder will confirm, in respect of securities obtained upon such
exercise, that the holder is acquiring such securities for the holder's own
account and not with a view to any offering or
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distribution in violation of applicable securities laws. The holder acknowledges
that the certificate(s) representing the Warrant Stock issued upon exercise of
this Warrant shall be endorsed with the legend set forth on this Warrant and all
other legends, if any, required by applicable federal, state and foreign
securities laws to be placed on the certificate(s).
3. Validity of Warrant Stock. The Company warrants and agrees that all
shares of Warrant Stock which may be issued upon the exercise of this Warrant
will, upon issuance, be validly issued, fully paid and nonassessable and free
from all taxes, liens and charges with respect to the issue thereof. The Company
further warrants and agrees that during the period within which this Warrant may
be exercised, the Company will at all times have authorized and reserved a
sufficient number of shares of Warrant Stock to provide for the exercise of this
Warrant.
4. Exercise Price; Number of Warrant Shares.
(a) The Exercise Price shall be $1.00, subject to adjustment
pursuant to this Section 4.
(b) The number of shares of Warrant Stock to be issued upon
exercise of this Warrant shall be 60,000.
(c) Upon occurrence of any of the following, the Exercise Price
and the number of shares of Warrant Stock to be issued upon exercise of this
Warrant shall be adjusted as follows:
(i) If at any time after the date hereof the number of
shares of Common Stock outstanding is increased by a stock dividend payable in
shares of Common Stock or by a subdivision or split-up of shares of Common
Stock, then, on the record date of such stock dividend, subdivision, or
split-up, the Exercise Price shall be appropriately decreased and the number of
shares of Warrant Stock issuable on exercise of this Warrant shall be
appropriately increased in proportion to such increase of outstanding shares.
(ii) If at any time after the date hereof, the number of
shares of Common Stock outstanding is decreased by a combination of the
outstanding shares of Common Stock, then, on the effective date of such
combination, the Exercise Price shall be appropriately increased and the
number of shares of Warrant Stock issuable on exercise of this Warrant
shall be appropriately decreased in proportion to such decrease in
outstanding shares.
(d) All calculations under this Section 4 shall be made to the
nearest cent
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or to the nearest whole share, as the case may be. No fractional shares of
Warrant Stock shall be issued upon exercise of this Warrant. Any fractional
shares of Warrant Stock which might otherwise be issued upon exercise of this
Warrant shall be rounded to the nearest whole share (with one-half rounded up).
(e) If the Exercise Price shall be adjusted, the Company shall
prepare and mail to the holder hereof a certificate setting forth the event
requiring the adjustment, the amount of the adjustment, the method by which the
adjustment was calculated, and (after giving effect to the adjustment) the
Exercise Price.
(f) A calculation of any adjustment under this Section 4
evidenced by a certificate of any firm of independent certified public
accountants of recognized standing selected by the Company and satisfactory to
the holder hereof (which may be the firm of independent certified public
accountants regularly employed by the Company) shall be presumed a correct
calculation of the adjustment for purposes of this Section 4. The foregoing
presumption shall constitute a rebuttable presumption, with the party disputing
the calculation bearing the burden of proving the incorrectness of the
calculation.
5. Notice of Certain Events. If at any time:
(a) The Company shall declare any dividend upon the Common Stock,
whether payable in cash, property or capital stock, or make any distribution to
the holders of Common Stock;
(b) There shall be any recapitalization or reclassification of
the capital stock of the Company, or consolidation or merger of the Company with
another corporation;
(c) There shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company; or
(d) The Company shall propose to enter into a transaction not
covered by the preceding paragraphs (a) through (c), then, in each case, the
Company shall give to the holder of this Warrant, at the holder's address
registered on the books of the Company, not less than 20 days' prior written
notice of the proposed event, by first class certified mail, postage prepaid and
return receipt requested, of (i) the date on which the books of the Company
shall close or a record shall be taken for purposes of ascertaining which
stockholders will be entitled to vote on such reclassification, reorganization,
consolidation, merger, dissolution, liquidation or winding up, as the case may
be; (ii) the date on which the vote shall be taken concerning such
reclassification, reorganization, consolidation, merger, dissolution,
liquidation or winding up, as the case may be; and (iii) the date on which such
dividend or distribution is to be paid or such
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reclassification, reorganization, consolidation, merger, dissolution,
liquidation or winding up, as the case may be, is to be effective. Such notice
shall also specify the date as of which the record holders of capital stock of
the Company shall participate in said dividend or distribution or shall be
entitled to exchange their shares of capital stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, dissolution, liquidation or winding up, as the case may be.
6. Transfer of Warrant.
(a) Subject to Section 6 (b) below, the holder of this Warrant
agrees to give the Company not less than 20 days' prior written notice before
transferring this Warrant. The foregoing notice shall describe the manner of any
proposed transfer of this Warrant or any interest therein and the consideration
to be received by the holder.
(b) Each assignment of this Warrant shall be deemed a partitioned
right which is separately enforceable by the assignee, transferee or other
beneficiary. Each assignee, transferee or other beneficiary shall be entitled to
the full benefit of the Warrant assigned, subject to any conditions to which the
Warrant is subject and provided always that such assignee, transferee or other
beneficiary shall carry out all the obligations, liabilities and
responsibilities of the holder of the Warrant hereunder. No person, company or
other entity may enjoy the benefit of any Warrant unless it is an accredited
investor as that term is defined in Regulation D of the Securities Act of 1933,
as amended (the "Act"), and such party executes and delivers to the Company
certain subscription documents evidencing the investor's status and has a
pre-existing business or financial relationship with the Warrantholder.
(c) No transfer or assignment of this Warrant shall be made
without compliance with the provisions of Section 2 and the legend set forth on
the first page of this Warrant.
(d) Notwithstanding the provisions of Section 6(b) above, this
Warrant may not be assigned, held in trust, or otherwise transferred to any
person or entity in amounts of less than one fourth of the number of shares
subject to this Warrant.
7. No Stockholder Rights. This Warrant shall not entitle the holder
hereof to any voting rights or other rights as a stockholder of the Company, or
to any other rights whatsoever except the rights herein expressed, and no cash
dividend paid out of earnings or surplus or interest shall be payable or accrue
in respect of this Warrant or the interest represented hereby or the shares
which may be subscribed for and purchased hereunder until and unless and except
to the extent that the rights represented by this Warrant shall be exercised.
8. Reporting Company; Registration Rights
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(a) Registration Rights The Warrantholder shall, until December
31, 1999 (the "Registration Period"), which Registration Period shall be
extended by the amount of time equal to any Offering Period, have the following
registration rights on two occasions only.
(i) If the Warrantholder requests ("Demand Registration
Request") that the Company file a registration statement under the Act
("Registration Statement"), the Company agrees to use its best efforts to file a
Registration Statement covering the shares of Common Stock underlying this
Warrant (collectively the "Demand Registrable Securities") if so requested and
to obtain effectiveness thereof, to file post-effective amendments, and to make
appropriate qualifications under federal and state securities laws as may be
requested except in any jurisdiction where the Company would be required to
execute a general consent to service of process unless otherwise required to do
so by the Act or any applicable law. The Company shall keep such Registration
Statement effective for a period of twelve (12) months. Such rights are
hereinafter referred to as the "Demand Registration Rights." The Company shall
be obligated to file a Registration Statement and include the Demand Registrable
Securities, or any part thereof, only if the Underwriter, as herein defined,
determines, in its sole discretion, that the filing of a Registration Statement
and inclusion of such Demand Registrable Securities will not have a material
adverse affect on a current or proposed offering of any securities of the
Company (the "Offering"), provided that the Underwriter shall not unreasonably
withhold its consent to the inclusion of the Demand Registrable Securities in
the registration statement and that such Registration Statement includes
securities only on behalf of the Company and has been filed or will be filed
within sixty days of the Company's receipt of a Demand Registration Request. The
Demand Registration Rights may be delayed by the Company for a period of sixty
days on one occasion only every twelve months, except in the event of an initial
public offering ("IPO") of its securities. To the extent the Underwriter shall
determine not to include some or all of the Demand Registrable Securities, then
the Demand Registration Rights shall continue to be in force and effect as to
such Demand Registrable Securities which has not been registered. In the event
the Company has filed a Registration Statement under the Act pursuant to an IPO
or will do so within sixty days of its receipt of a Demand Registration request,
the Company shall have the right to delay the exercise of the Demand
Registration Rights until the completion of the Company's IPO; but in no event
shall such delay exceed an aggregate of one hundred twenty (120) days. The
Warrantholder shall not be entitled to more than one Demand Registration request
in any one fiscal year of the Company. For the purposes of this Section 8, the
term, the Underwriter, shall include the representatives of the Underwriters in
any proposed Offering and any other Underwriter or investment banker with which
the Company has or may have a contractual relationship from time to time.
(ii) In the event of an IPO whereby only securities on behalf of
the
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Company are being registered and not those of any selling shareholder, the
Warrantholder agrees not to sell, transfer, or otherwise dispose of any Warrant
Stock or Registrable Securities for a period of one hundred eighty (180) days
and shall enter into a customary lock-up agreement required by the Underwriter.
The Warrantholder agrees that stop transfer instructions may be given to the
Company's transfer agent regarding the foregoing lock-up arrangement.
(b) Information and Documents In the event the Company shall be
required by the provisions of this Section 8 to effect the registration of any
securities, the Warrantholder shall furnish, in writing, such information as is
reasonably requested by the Company or the Underwriter or their representatives,
including their representative legal counsel and accountants, for inclusion in
the Registration Statement relating to such Offering and such other information
and documentation as the Company shall request. In addition, the Warrantholder
shall execute and deliver such agreements certifications and other documents,
including, without limitation, selling shareholder instructions,
powers-of-attorney, and custody agreements, as the Company or Underwriter may
reasonably request. The Company's obligation to register any securities
hereunder shall be subject to the fulfilment of the duty of the Warrantholder to
cooperate fully with the Company and the Underwriter and their representatives
in the preparation of the Registration Statement covering any securities
registrable pursuant to Section 8.
(c) Expenses. All expenses incurred in connection with any
registration under this Section 8, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses, and expenses of any special
audits incident to or required by any such registration are herein called
"Registration Expenses." All underwriting discounts and selling commissions
applicable to any sales of securities herein are called "Selling Expenses." The
Company will pay all Registration Expenses in connection with any registration
pursuant to this Section 8. To the extent allowed by law, the Company shall bear
the Selling Expenses. Otherwise, all Selling Expenses in connection with any
registration pursuant to Section 8 shall be borne by the Company, the
Warrantholder and any other shareholders whose shares are to be included in the
Registration Statement, pro rata in proportion to the shares registered thereby
being sold or registered by each of them. The Warrantholder shall bear the fees
and costs of its own counsel.
(d) Prospectus Delivery The Warrantholder shall comply with the
prospectus delivery requirements of federal or state securities laws in
connection with any registration. If any prospectus becomes outdated,
inaccurate, or misleading, any Warrantholder shall cease using all such
prospectuses upon notice thereof from the Company and shall return all copies of
such prospectuses under control of such person to the Company.
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(e) "Market Stand-off" Agreement The Warrantholder shall not sell
or otherwise transfer or dispose of any Registrable Securities or any other
shares of Common Stock held by such persons, for a period of 180 days in
connection with any IPO of the Company covering only the Company's securities
and not those of any selling shareholder. The Warrantholder shall seek the
written consent of the Underwriter to transfer, convey or assign any securities
of the Company during the 180 day period specified above.
(f) No Registration Required The Company shall not be required to
effect a registration under this Section 8 if the Warrantholder would otherwise
be able to publicly sell the number of shares sought to be registered at the
time of the registration without registration pursuant to Rule 144 promulgated
by the SEC as then in effect or pursuant to any other exemption from the
registration provisions of the Act then available to the Warrantholder
(collectively referred to as "Rule 144") so long as the purchaser thereof shall
acquire shares that are not subject to any restriction on resale as may
otherwise be imposed pursuant to Rule 144.
(g) Termination of Rights The Company's obligations to register
the Registrable Securities pursuant to this Section 8 shall cease and terminate
as to the Registrable Securities upon the occurrence of either of the following:
(i) the registration of the Registrable Securities under the Act pursuant to the
provisions of this Warrant; or (ii) at any time the Registrable Securities
become freely transferable without registration under the Act. Upon becoming
subject to the reporting requirements of the 1934 Act, the Company agrees to use
its best efforts to make Rule 144 available to the Warrantholder and to continue
do so until the expiration of the registration rights specified in Section 8
herein.
(h) Duty to Cooperate The Company's obligations to register the
Registrable Securities shall be further contingent upon the Warrantholder
providing its full and complete cooperation to the Company in timely providing
such information, documents, certifications and representations as the Company
and its counsel or any Underwriter may determine to be necessary in order to
prepare, file and otherwise complete the registration process with respect to
the Registrable Securities.
(i) Grant of Power of Attorney. The Warrantholder has granted to
Xxxxx Xxxx its full power of attorney to act on its behalf and in its stead with
respect to all matters arising out of this Section 8, which power of attorney is
deemed to be coupled with an interest and shall be irrevocable for the term of
the Warrant.
9. No Impairment. The Company will not, by amendment of its articles of
incorporation or bylaws or through any reorganization, transfer of assets,
consolidation, merger, dissolution, or any voluntary action avoid or seek to
avoid the observance or
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performance of any of the terms of this Warrant.
10. Miscellaneous Matters.
(a) As used herein, the term "Warrant Stock" shall mean the
Company's presently authorized Common Stock no par value, and stock of any other
series or class into which such presently authorized Common Stock may hereafter
have been converted or changed pursuant to any recapitalization or change in
such Common Stock.
(b) As used herein, the word "person" shall mean an individual or
entity.
(c) This Warrant and the name and address of the holder will be
registered in a Warrant Register that is kept at the principal office of the
Company, and the Company may treat the holder so registered as the owner of this
Warrant for all purposes.
(d) This Warrant shall be governed by and interpreted in
accordance with the internal laws, and not the law of conflicts, of the State of
California.
(e) Successors and assigns. Except as otherwise expressly
provided herein, all covenants and agreements contained in this Warrant by or on
behalf of any of the parties hereto shall bind and inure to the benefit of
respective successors and assigns of the parties to the extent permitted by law.
(f) Attorney Fees. In the event arbitration, suit or action is
brought by any party under this Warrant to enforce any of its terms, and in any
appeal therefrom, it is agreed that the prevailing party shall be entitled to
reasonable attorneys' fees to be fixed by the arbitrator, trial court, or
appellate court.
(g) Savings Clause. If any provision of this Warrant, or the
application of such provision to any person or circumstance, shall be held
invalid, the remainder of this Warrant, or the application of such provision to
persons or circumstances other than those as to which it is held invalid, shall
not be affected thereby.
(h) Specific Performance. Each party's obligation under this
Warrant is unique. If any party should default in its obligations under this
Warrant, the parties each acknowledge that it may be extremely impracticable to
measure the resulting damages; accordingly, the non-defaulting party, in
addition to any other rights or remedies available, may xxx in equity for
specific performance, and upon satisfactory proof thereof, it may be entitled to
obtain such specific performance.
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IN WITNESS WHEREOF, the Company has executed this Warrant effective as
of the date first written above.
LEGACY BRANDS, INC.,
a California corporation
By: /s/ XXXXXX X. XXXX
--------------------------------
XXXXXX X. XXXX, President
By: /s/ XXXXX XXXXXXXX
--------------------------------
XXXXX XXXXXXXX, Chief
Financial Officer
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EXHIBIT A
SUBSCRIPTION AGREEMENT
__________________________ , 19___
To: Legacy Brands, Inc.
The undersigned, pursuant to the provisions set forth in Warrant
No. 96- , hereby agrees to subscribe for and purchase shares of the Warrant
Stock covered by such Warrant, and makes payment herewith in full for such
Warrant Stock at the Exercise Price.
Signature:
----------------------------
Printed Name
--------------------------
and Title:
----------------------------
Address:
-----------------------------
-----------------------------
-----------------------------
--------------------------------
ASSIGNMENT
FOR VALUE RECEIVED ___________________________________________
hereby sells, assigns and transfers all of the rights of the undersigned under
Warrant No. 96- , with respect to the number of shares of Warrant Stock covered
thereby set forth below unto:
Name of Assignee Address No. of Shares
---------------- ------- -------------
-------------------------------------------------------------------------
------------------------------------------
Dated: _________________________ , 19__
Signature:
----------------------------
Printed Name
--------------------------
and Title:
----------------------------
Address:
-----------------------------
-----------------------------
-----------------------------
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THIS WARRANT AND THE SECURITIES REPRESENTED BY THIS WARRANT HAVE BEEN ACQUIRED
FOR INVESTMENT FOR THE HOLDER'S OWN ACCOUNT AND NOT WITH A VIEW TO OR FOR SALE
IN CONNECTION WITH ANY DISTRIBUTION OF THE SECURITIES. NEITHER THE WARRANT NOR
THE SECURITIES HAVE BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF
1933 ("SECURITIES ACT") OR UNDER ANY APPLICABLE STATE SECURITIES LAWS ("BLUE SKY
LAWS"). AN OFFER TO SELL OR TRANSFER OR THE SALE OR TRANSFER OF THIS WARRANT OR
THESE SECURITIES IS UNLAWFUL UNLESS MADE PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT OR PERMIT, AS APPLICABLE, UNDER THE SECURITIES ACT OR APPLICABLE BLUE
SKY LAWS OR UNLESS AN EXEMPTION FROM REGISTRATION AND/OR QUALIFICATION UNDER THE
SECURITIES ACT AND APPLICABLE BLUE SKY LAWS IS AVAILABLE AND AN OPINION OF
COUNSEL OR OTHER EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY IS PROVIDED TO
THE COMPANY TO THE EFFECT THAT SUCH REGISTRATION OR QUALIFICATION IS NOT
REQUIRED UNDER THE SECURITIES ACT AND APPLICABLE BLUE SKY LAWS.
THIS WARRANT IS SUBJECT TO A POWER OF ATTORNEY REGARDING THE
EXERCISE OF REGISTRATION RIGHTS
Warrant No. 98-002
COMMON STOCK PURCHASE WARRANT
JANUARY 1, 1998
THIS CERTIFIES THAT, for value received, Xxxxxxx X. Xxxxxxx
("Warrantholder") is entitled to subscribe for and purchase from Legacy Brands,
Inc., a California corporation (the "Company"), that number of shares of the
Company's Common Stock, no par value, as set forth in Section 4 (b) hereof at
the Exercise Price (as hereafter determined) at any time from the date hereof to
and including the Expiration Date (as defined below), subject to the terms and
conditions stated herein. For purposes of this Warrant, the term "Expiration
Date" shall mean 5:00 p.m. Pacific time on April 15, 1999, except as set forth
in Section 1(b) hereof.
1. Exercise of Warrant.
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a) The rights represented by this Warrant may be exercised, in
whole or in part (subject to the minimum exercise limitation set forth in this
Section 1), by the holder hereof at any time on or before the Expiration date by
the surrender of this Warrant and delivery of an executed Subscription Agreement
in the form attached hereto as Exhibit A to the Company at its principal
executive office, or such other place as the Company shall designate in writing,
accompanied by payment for the Warrant Stock (as defined in Section 10) so
subscribed for in cash or check, in good funds or, subject to the good faith
determination by the Company as to the creditworthiness of the holder at the
time, the issuance by the holder of its promissory note to the Company (the
"Note") for up to the full exercise price of all of the warrants, with any
differential payable by cash or check, which Note shall bear interest at the
rate of seven percent (7%) per annum, all due and payable one year from the date
of issuance. Any shares for which a Note shall have been given to the Company as
payment shall not be deemed issued until such time as that portion of the Note
pertaining to such shares shall have been paid in full and the holder of such
shares shall have no rights with respect thereto, including, but not by way of
limitation, the right to vote, nor may such shares be transferred. In the event
of a partial exercise of this Warrant, a substitute Warrant representing the
number of shares of Warrant Stock which were not acquired upon the exercise of
the Warrant shall be issued to the holder of this Warrant. No exercise of this
Warrant may be made for less than one fourth of the number of shares of Warrant
Stock initially subject to this Warrant or such lesser number as shall then
constitute the balance of shares purchasable hereunder.
b) If at any time prior to the Expiration Date, the Company shall be
engaged in an offering of its securities, including any time determined, in good
faith by the Company or its Underwriter as hereinafter defined, to be "quiet
periods" during which its securities may not be offered for sale or sold, or if
at any other time or for any reason the Company or its Underwriter (as
hereinafter defined) shall, in good faith, determine that these Warrants may not
be exercised ( the period during which such inability to exercise shall exist
shall be referred to as the "Offering Period," which Offering Period may not in
each instance exceed a period of 90 days, it being recognized that such an
Offering Period may both precede and follow an offering of the securities of the
Company, with each such period being a separate Offering Period for the purposes
of this provision), the Expiration Date shall be extended by the same number of
days as the Offering Period.
2. Investment Representation. The holder by accepting this Warrant
represents that the Warrant is acquired for the holder's own account for
investment purposes and not with a view to any offering or distribution and that
the holder has no present intention of selling or otherwise disposing of the
Warrant or the Warrant Stock in violation of applicable securities laws. Upon
exercise, the holder will confirm, in respect of securities obtained upon such
exercise, that the holder is acquiring such securities for the holder's own
account and not with a view to any offering or
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distribution in violation of applicable securities laws. The holder acknowledges
that the certificate(s) representing the Warrant Stock issued upon exercise of
this Warrant shall be endorsed with the legend set forth on this Warrant and all
other legends, if any, required by applicable federal, state and foreign
securities laws to be placed on the certificate(s).
3. Validity of Warrant Stock. The Company warrants and agrees that all
shares of Warrant Stock which may be issued upon the exercise of this Warrant
will, upon issuance, be validly issued, fully paid and nonassessable and free
from all taxes, liens and charges with respect to the issue thereof. The Company
further warrants and agrees that during the period within which this Warrant may
be exercised, the Company will at all times have authorized and reserved a
sufficient number of shares of Warrant Stock to provide for the exercise of this
Warrant.
4. Exercise Price; Number of Warrant Shares.
(a) The Exercise Price shall be $1.00, subject to adjustment
pursuant to this Section 4.
(b) The number of shares of Warrant Stock to be issued upon
exercise of this Warrant shall be 60,000.
(c) Upon occurrence of any of the following, the Exercise Price
and the number of shares of Warrant Stock to be issued upon exercise of this
Warrant shall be adjusted as follows:
(i) If at any time after the date hereof the number of
shares of Common Stock outstanding is increased by a stock dividend payable in
shares of Common Stock or by a subdivision or split-up of shares of Common
Stock, then, on the record date of such stock dividend, subdivision, or
split-up, the Exercise Price shall be appropriately decreased and the number of
shares of Warrant Stock issuable on exercise of this Warrant shall be
appropriately increased in proportion to such increase of outstanding shares.
(ii) If at any time after the date hereof, the number of
shares of Common Stock outstanding is decreased by a combination of the
outstanding shares of Common Stock, then, on the effective date of such
combination, the Exercise Price shall be appropriately increased and the
number of shares of Warrant Stock issuable on exercise of this Warrant
shall be appropriately decreased in proportion to such decrease in
outstanding shares.
(d) All calculations under this Section 4 shall be made to the
nearest cent
15
or to the nearest whole share, as the case may be. No fractional shares of
Warrant Stock shall be issued upon exercise of this Warrant. Any fractional
shares of Warrant Stock which might otherwise be issued upon exercise of this
Warrant shall be rounded to the nearest whole share (with one-half rounded up).
(e) If the Exercise Price shall be adjusted, the Company shall
prepare and mail to the holder hereof a certificate setting forth the event
requiring the adjustment, the amount of the adjustment, the method by which the
adjustment was calculated, and (after giving effect to the adjustment) the
Exercise Price.
(f) A calculation of any adjustment under this Section 4
evidenced by a certificate of any firm of independent certified public
accountants of recognized standing selected by the Company and satisfactory to
the holder hereof (which may be the firm of independent certified public
accountants regularly employed by the Company) shall be presumed a correct
calculation of the adjustment for purposes of this Section 4. The foregoing
presumption shall constitute a rebuttable presumption, with the party disputing
the calculation bearing the burden of proving the incorrectness of the
calculation.
5. Notice of Certain Events. If at any time:
(a) The Company shall declare any dividend upon the Common Stock,
whether payable in cash, property or capital stock, or make any distribution to
the holders of Common Stock;
(b) There shall be any recapitalization or reclassification of
the capital stock of the Company, or consolidation or merger of the Company with
another corporation;
(c) There shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company; or
(d) The Company shall propose to enter into a transaction not
covered by the preceding paragraphs (a) through (c), then, in each case, the
Company shall give to the holder of this Warrant, at the holder's address
registered on the books of the Company, not less than 20 days' prior written
notice of the proposed event, by first class certified mail, postage prepaid and
return receipt requested, of (i) the date on which the books of the Company
shall close or a record shall be taken for purposes of ascertaining which
stockholders will be entitled to vote on such reclassification, reorganization,
consolidation, merger, dissolution, liquidation or winding up, as the case may
be; (ii) the date on which the vote shall be taken concerning such
reclassification, reorganization, consolidation, merger, dissolution,
liquidation or winding up, as the case may be; and (iii) the date on which such
dividend or distribution is to be paid or such
16
reclassification, reorganization, consolidation, merger, dissolution,
liquidation or winding up, as the case may be, is to be effective. Such notice
shall also specify the date as of which the record holders of capital stock of
the Company shall participate in said dividend or distribution or shall be
entitled to exchange their shares of capital stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, dissolution, liquidation or winding up, as the case may be.
6. Transfer of Warrant.
(a) Subject to Section 6 (b) below, the holder of this Warrant
agrees to give the Company not less than 20 days' prior written notice before
transferring this Warrant. The foregoing notice shall describe the manner of any
proposed transfer of this Warrant or any interest therein and the consideration
to be received by the holder.
(b) Each assignment of this Warrant shall be deemed a partitioned
right which is separately enforceable by the assignee, transferee or other
beneficiary. Each assignee, transferee or other beneficiary shall be entitled to
the full benefit of the Warrant assigned, subject to any conditions to which the
Warrant is subject and provided always that such assignee, transferee or other
beneficiary shall carry out all the obligations, liabilities and
responsibilities of the holder of the Warrant hereunder. No person, company or
other entity may enjoy the benefit of any Warrant unless it is an accredited
investor as that term is defined in Regulation D of the Securities Act of 1933,
as amended (the "Act"), and such party executes and delivers to the Company
certain subscription documents evidencing the investor's status and has a
pre-existing business or financial relationship with the Warrantholder.
(c) No transfer or assignment of this Warrant shall be made
without compliance with the provisions of Section 2 and the legend set forth on
the first page of this Warrant.
(d) Notwithstanding the provisions of Section 6(b) above, this
Warrant may not be assigned, held in trust, or otherwise transferred to any
person or entity in amounts of less than one fourth of the number of shares
subject to this Warrant.
7. No Stockholder Rights. This Warrant shall not entitle the holder
hereof to any voting rights or other rights as a stockholder of the Company, or
to any other rights whatsoever except the rights herein expressed, and no cash
dividend paid out of earnings or surplus or interest shall be payable or accrue
in respect of this Warrant or the interest represented hereby or the shares
which may be subscribed for and purchased hereunder until and unless and except
to the extent that the rights represented by this Warrant shall be exercised.
8. Reporting Company; Registration Rights
17
(a) Registration Rights The Warrantholder shall, until December
31, 1999 (the "Registration Period"), which Registration Period shall be
extended by the amount of time equal to any Offering Period, have the following
registration rights on two occasions only.
(i) If the Warrantholder requests ("Demand Registration
Request") that the Company file a registration statement under the Act
("Registration Statement"), the Company agrees to use its best efforts to file a
Registration Statement covering the shares of Common Stock underlying this
Warrant (collectively the "Demand Registrable Securities") if so requested and
to obtain effectiveness thereof, to file post-effective amendments, and to make
appropriate qualifications under federal and state securities laws as may be
requested except in any jurisdiction where the Company would be required to
execute a general consent to service of process unless otherwise required to do
so by the Act or any applicable law. The Company shall keep such Registration
Statement effective for a period of twelve (12) months. Such rights are
hereinafter referred to as the "Demand Registration Rights." The Company shall
be obligated to file a Registration Statement and include the Demand Registrable
Securities, or any part thereof, only if the Underwriter, as herein defined,
determines, in its sole discretion, that the filing of a Registration Statement
and inclusion of such Demand Registrable Securities will not have a material
adverse affect on a current or proposed offering of any securities of the
Company (the "Offering"), provided that the Underwriter shall not unreasonably
withhold its consent to the inclusion of the Demand Registrable Securities in
the registration statement and that such Registration Statement includes
securities only on behalf of the Company and has been filed or will be filed
within sixty days of the Company's receipt of a Demand Registration Request. The
Demand Registration Rights may be delayed by the Company for a period of sixty
days on one occasion only every twelve months, except in the event of an initial
public offering ("IPO") of its securities. To the extent the Underwriter shall
determine not to include some or all of the Demand Registrable Securities, then
the Demand Registration Rights shall continue to be in force and effect as to
such Demand Registrable Securities which has not been registered. In the event
the Company has filed a Registration Statement under the Act pursuant to an IPO
or will do so within sixty days of its receipt of a Demand Registration request,
the Company shall have the right to delay the exercise of the Demand
Registration Rights until the completion of the Company's IPO; but in no event
shall such delay exceed an aggregate of one hundred twenty (120) days. The
Warrantholder shall not be entitled to more than one Demand Registration request
in any one fiscal year of the Company. For the purposes of this Section 8, the
term, the Underwriter, shall include the representatives of the Underwriters in
any proposed Offering and any other Underwriter or investment banker with which
the Company has or may have a contractual relationship from time to time.
(ii) In the event of an IPO whereby only securities on behalf of
the
18
Company are being registered and not those of any selling shareholder, the
Warrantholder agrees not to sell, transfer, or otherwise dispose of any Warrant
Stock or Registrable Securities for a period of one hundred eighty (180) days
and shall enter into a customary lock-up agreement required by the Underwriter.
The Warrantholder agrees that stop transfer instructions may be given to the
Company's transfer agent regarding the foregoing lock-up arrangement.
(b) Information and Documents In the event the Company shall be
required by the provisions of this Section 8 to effect the registration of any
securities, the Warrantholder shall furnish, in writing, such information as is
reasonably requested by the Company or the Underwriter or their representatives,
including their representative legal counsel and accountants, for inclusion in
the Registration Statement relating to such Offering and such other information
and documentation as the Company shall request. In addition, the Warrantholder
shall execute and deliver such agreements certifications and other documents,
including, without limitation, selling shareholder instructions,
powers-of-attorney, and custody agreements, as the Company or Underwriter may
reasonably request. The Company's obligation to register any securities
hereunder shall be subject to the fulfilment of the duty of the Warrantholder to
cooperate fully with the Company and the Underwriter and their representatives
in the preparation of the Registration Statement covering any securities
registrable pursuant to Section 8.
(c) Expenses. All expenses incurred in connection with any
registration under this Section 8, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses, and expenses of any special
audits incident to or required by any such registration are herein called
"Registration Expenses." All underwriting discounts and selling commissions
applicable to any sales of securities herein are called "Selling Expenses." The
Company will pay all Registration Expenses in connection with any registration
pursuant to this Section 8. To the extent allowed by law, the Company shall bear
the Selling Expenses. Otherwise, all Selling Expenses in connection with any
registration pursuant to Section 8 shall be borne by the Company, the
Warrantholder and any other shareholders whose shares are to be included in the
Registration Statement, pro rata in proportion to the shares registered thereby
being sold or registered by each of them. The Warrantholder shall bear the fees
and costs of its own counsel.
(d) Prospectus Delivery The Warrantholder shall comply with the
prospectus delivery requirements of federal or state securities laws in
connection with any registration. If any prospectus becomes outdated,
inaccurate, or misleading, any Warrantholder shall cease using all such
prospectuses upon notice thereof from the Company and shall return all copies of
such prospectuses under control of such person to the Company.
19
(e) "Market Stand-off" Agreement The Warrantholder shall not sell
or otherwise transfer or dispose of any Registrable Securities or any other
shares of Common Stock held by such persons, for a period of 180 days in
connection with any IPO of the Company covering only the Company's securities
and not those of any selling shareholder. The Warrantholder shall seek the
written consent of the Underwriter to transfer, convey or assign any securities
of the Company during the 180 day period specified above.
(f) No Registration Required The Company shall not be required to
effect a registration under this Section 8 if the Warrantholder would otherwise
be able to publicly sell the number of shares sought to be registered at the
time of the registration without registration pursuant to Rule 144 promulgated
by the SEC as then in effect or pursuant to any other exemption from the
registration provisions of the Act then available to the Warrantholder
(collectively referred to as "Rule 144") so long as the purchaser thereof shall
acquire shares that are not subject to any restriction on resale as may
otherwise be imposed pursuant to Rule 144.
(g) Termination of Rights The Company's obligations to register
the Registrable Securities pursuant to this Section 8 shall cease and terminate
as to the Registrable Securities upon the occurrence of either of the following:
(i) the registration of the Registrable Securities under the Act pursuant to the
provisions of this Warrant; or (ii) at any time the Registrable Securities
become freely transferable without registration under the Act. Upon becoming
subject to the reporting requirements of the 1934 Act, the Company agrees to use
its best efforts to make Rule 144 available to the Warrantholder and to continue
do so until the expiration of the registration rights specified in Section 8
herein.
(h) Duty to Cooperate The Company's obligations to register the
Registrable Securities shall be further contingent upon the Warrantholder
providing its full and complete cooperation to the Company in timely providing
such information, documents, certifications and representations as the Company
and its counsel or any Underwriter may determine to be necessary in order to
prepare, file and otherwise complete the registration process with respect to
the Registrable Securities.
(i) Grant of Power of Attorney. The Warrantholder has granted to
Xxxxx Xxxx its full power of attorney to act on its behalf and in its stead with
respect to all matters arising out of this Section 8, which power of attorney is
deemed to be coupled with an interest and shall be irrevocable for the term of
the Warrant.
9. No Impairment. The Company will not, by amendment of its articles of
incorporation or bylaws or through any reorganization, transfer of assets,
consolidation, merger, dissolution, or any voluntary action avoid or seek to
avoid the observance or
20
performance of any of the terms of this Warrant.
10. Miscellaneous Matters.
(a) As used herein, the term "Warrant Stock" shall mean the
Company's presently authorized Common Stock no par value, and stock of any other
series or class into which such presently authorized Common Stock may hereafter
have been converted or changed pursuant to any recapitalization or change in
such Common Stock.
(b) As used herein, the word "person" shall mean an individual or
entity.
(c) This Warrant and the name and address of the holder will be
registered in a Warrant Register that is kept at the principal office of the
Company, and the Company may treat the holder so registered as the owner of this
Warrant for all purposes.
(d) This Warrant shall be governed by and interpreted in
accordance with the internal laws, and not the law of conflicts, of the State of
California.
(e) Successors and assigns. Except as otherwise expressly
provided herein, all covenants and agreements contained in this Warrant by or on
behalf of any of the parties hereto shall bind and inure to the benefit of
respective successors and assigns of the parties to the extent permitted by law.
(f) Attorney Fees. In the event arbitration, suit or action is
brought by any party under this Warrant to enforce any of its terms, and in any
appeal therefrom, it is agreed that the prevailing party shall be entitled to
reasonable attorneys' fees to be fixed by the arbitrator, trial court, or
appellate court.
(g) Savings Clause. If any provision of this Warrant, or the
application of such provision to any person or circumstance, shall be held
invalid, the remainder of this Warrant, or the application of such provision to
persons or circumstances other than those as to which it is held invalid, shall
not be affected thereby.
(h) Specific Performance. Each party's obligation under this
Warrant is unique. If any party should default in its obligations under this
Warrant, the parties each acknowledge that it may be extremely impracticable to
measure the resulting damages; accordingly, the non-defaulting party, in
addition to any other rights or remedies available, may xxx in equity for
specific performance, and upon satisfactory proof thereof, it may be entitled to
obtain such specific performance.
21
IN WITNESS WHEREOF, the Company has executed this Warrant effective as
of the date first written above.
LEGACY BRANDS, INC.,
a California corporation
By: /s/ XXXXXX X. XXXX
------------------------------------------
XXXXXX X. XXXX, President
By: /s/ XXXXX XXXXXXXX
------------------------------------------
XXXXX XXXXXXXX, Chief Financial Officer
22
EXHIBIT A
SUBSCRIPTION AGREEMENT
________________________ , 19__
To: Legacy Brands, Inc.
The undersigned, pursuant to the provisions set forth in Warrant
No. 96-____, hereby agrees to subscribe for and purchase shares of the Warrant
Stock covered by such Warrant, and makes payment herewith in full for such
Warrant Stock at the Exercise Price.
Signature:
-------------------------------
Printed Name
and Title:
------------------------------
Address:
--------------------------------
--------------------------------
--------------------------------
--------------------------------------
ASSIGNMENT
FOR VALUE RECEIVED ______________________________hereby sells,
assigns and transfers all of the rights of the undersigned under Warrant No.
96-__, with respect to the number of shares of Warrant Stock covered thereby set
forth below unto:
Name of Assignee Address No. of Shares
---------------- ------- -------------
______________________________________________________________________________
____________________________________
Dated:____________________________ , 19__
Signature:
-------------------------------
Printed Name
and Title:
------------------------------
Address:
--------------------------------
--------------------------------
--------------------------------
23
THIS WARRANT AND THE SECURITIES REPRESENTED BY THIS WARRANT HAVE BEEN ACQUIRED
FOR INVESTMENT FOR THE HOLDER'S OWN ACCOUNT AND NOT WITH A VIEW TO OR FOR SALE
IN CONNECTION WITH ANY DISTRIBUTION OF THE SECURITIES. NEITHER THE WARRANT NOR
THE SECURITIES HAVE BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF
1933 ("SECURITIES ACT") OR UNDER ANY APPLICABLE STATE SECURITIES LAWS ("BLUE SKY
LAWS"). AN OFFER TO SELL OR TRANSFER OR THE SALE OR TRANSFER OF THIS WARRANT OR
THESE SECURITIES IS UNLAWFUL UNLESS MADE PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT OR PERMIT, AS APPLICABLE, UNDER THE SECURITIES ACT OR APPLICABLE BLUE
SKY LAWS OR UNLESS AN EXEMPTION FROM REGISTRATION AND/OR QUALIFICATION UNDER THE
SECURITIES ACT AND APPLICABLE BLUE SKY LAWS IS AVAILABLE AND AN OPINION OF
COUNSEL OR OTHER EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY IS PROVIDED TO
THE COMPANY TO THE EFFECT THAT SUCH REGISTRATION OR QUALIFICATION IS NOT
REQUIRED UNDER THE SECURITIES ACT AND APPLICABLE BLUE SKY LAWS.
THIS WARRANT IS SUBJECT TO A POWER OF ATTORNEY REGARDING THE
EXERCISE OF REGISTRATION RIGHTS
Warrant No. 98-003
COMMON STOCK PURCHASE WARRANT
JANUARY 1, 1998
THIS CERTIFIES THAT, for value received, Xxxxxx X' Xxxxxx, Xx.
("Warrantholder") is entitled to subscribe for and purchase from Legacy Brands,
Inc., a California corporation (the "Company"), that number of shares of the
Company's Common Stock, no par value, as set forth in Section 4 (b) hereof at
the Exercise Price (as hereafter determined) at any time from the date hereof to
and including the Expiration Date (as defined below), subject to the terms and
conditions stated herein. For purposes of this Warrant, the term "Expiration
Date" shall mean 5:00 p.m. Pacific time on April 15, 1999, except as set forth
in Section 1(b) hereof.
1. Exercise of Warrant.
24
a) The rights represented by this Warrant may be exercised, in
whole or in part (subject to the minimum exercise limitation set forth in this
Section 1), by the holder hereof at any time on or before the Expiration date by
the surrender of this Warrant and delivery of an executed Subscription Agreement
in the form attached hereto as Exhibit A to the Company at its principal
executive office, or such other place as the Company shall designate in writing,
accompanied by payment for the Warrant Stock (as defined in Section 10) so
subscribed for in cash or check, in good funds or, subject to the good faith
determination by the Company as to the creditworthiness of the holder at the
time, the issuance by the holder of its promissory note to the Company (the
"Note") for up to the full exercise price of all of the warrants, with any
differential payable by cash or check, which Note shall bear interest at the
rate of seven percent (7%) per annum, all due and payable one year from the date
of issuance. Any shares for which a Note shall have been given to the Company as
payment shall not be deemed issued until such time as that portion of the Note
pertaining to such shares shall have been paid in full and the holder of such
shares shall have no rights with respect thereto, including, but not by way of
limitation, the right to vote, nor may such shares be transferred. In the event
of a partial exercise of this Warrant, a substitute Warrant representing the
number of shares of Warrant Stock which were not acquired upon the exercise of
the Warrant shall be issued to the holder of this Warrant. No exercise of this
Warrant may be made for less than one fourth of the number of shares of Warrant
Stock initially subject to this Warrant or such lesser number as shall then
constitute the balance of shares purchasable hereunder.
b) If at any time prior to the Expiration Date, the Company shall be
engaged in an offering of its securities, including any time determined, in good
faith by the Company or its Underwriter as hereinafter defined, to be "quiet
periods" during which its securities may not be offered for sale or sold, or if
at any other time or for any reason the Company or its Underwriter (as
hereinafter defined) shall, in good faith, determine that these Warrants may not
be exercised ( the period during which such inability to exercise shall exist
shall be referred to as the "Offering Period," which Offering Period may not in
each instance exceed a period of 90 days, it being recognized that such an
Offering Period may both precede and follow an offering of the securities of the
Company, with each such period being a separate Offering Period for the purposes
of this provision), the Expiration Date shall be extended by the same number of
days as the Offering Period.
2. Investment Representation. The holder by accepting this Warrant
represents that the Warrant is acquired for the holder's own account for
investment purposes and not with a view to any offering or distribution and that
the holder has no present intention of selling or otherwise disposing of the
Warrant or the Warrant Stock in violation of applicable securities laws. Upon
exercise, the holder will confirm, in respect of securities obtained upon such
exercise, that the holder is acquiring such securities for the holder's own
account and not with a view to any offering or
25
distribution in violation of applicable securities laws. The holder acknowledges
that the certificate(s) representing the Warrant Stock issued upon exercise of
this Warrant shall be endorsed with the legend set forth on this Warrant and all
other legends, if any, required by applicable federal, state and foreign
securities laws to be placed on the certificate(s).
3. Validity of Warrant Stock. The Company warrants and agrees that all
shares of Warrant Stock which may be issued upon the exercise of this Warrant
will, upon issuance, be validly issued, fully paid and nonassessable and free
from all taxes, liens and charges with respect to the issue thereof. The Company
further warrants and agrees that during the period within which this Warrant may
be exercised, the Company will at all times have authorized and reserved a
sufficient number of shares of Warrant Stock to provide for the exercise of this
Warrant.
4. Exercise Price; Number of Warrant Shares.
(a) The Exercise Price shall be $1.00, subject to adjustment
pursuant to this Section 4.
(b) The number of shares of Warrant Stock to be issued upon
exercise of this Warrant shall be 5,000.
(c) Upon occurrence of any of the following, the Exercise Price
and the number of shares of Warrant Stock to be issued upon exercise of this
Warrant shall be adjusted as follows:
(i) If at any time after the date hereof the number of
shares of Common Stock outstanding is increased by a stock dividend
payable in shares of Common Stock or by a subdivision or split-up of
shares of Common Stock, then, on the record date of such stock dividend,
subdivision, or split-up, the Exercise Price shall be appropriately
decreased and the number of shares of Warrant Stock issuable on exercise
of this Warrant shall be appropriately increased in proportion to such
increase of outstanding shares.
(ii) If at any time after the date hereof, the number of
shares of Common Stock outstanding is decreased by a combination of the
outstanding shares of Common Stock, then, on the effective date of such
combination, the Exercise Price shall be appropriately increased and the
number of shares of Warrant Stock issuable on exercise of this Warrant
shall be appropriately decreased in proportion to such decrease in
outstanding shares.
(d) All calculations under this Section 4 shall be made to the
nearest cent
26
or to the nearest whole share, as the case may be. No fractional shares of
Warrant Stock shall be issued upon exercise of this Warrant. Any fractional
shares of Warrant Stock which might otherwise be issued upon exercise of this
Warrant shall be rounded to the nearest whole share (with one-half rounded up).
(e) If the Exercise Price shall be adjusted, the Company shall
prepare and mail to the holder hereof a certificate setting forth the event
requiring the adjustment, the amount of the adjustment, the method by which the
adjustment was calculated, and (after giving effect to the adjustment) the
Exercise Price.
(f) A calculation of any adjustment under this Section 4
evidenced by a certificate of any firm of independent certified public
accountants of recognized standing selected by the Company and satisfactory to
the holder hereof (which may be the firm of independent certified public
accountants regularly employed by the Company) shall be presumed a correct
calculation of the adjustment for purposes of this Section 4. The foregoing
presumption shall constitute a rebuttable presumption, with the party disputing
the calculation bearing the burden of proving the incorrectness of the
calculation.
5. Notice of Certain Events. If at any time:
(a) The Company shall declare any dividend upon the Common Stock,
whether payable in cash, property or capital stock, or make any distribution to
the holders of Common Stock;
(b) There shall be any recapitalization or reclassification of
the capital stock of the Company, or consolidation or merger of the Company with
another corporation;
(c) There shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company; or
(d) The Company shall propose to enter into a transaction not
covered by the preceding paragraphs (a) through (c), then, in each case, the
Company shall give to the holder of this Warrant, at the holder's address
registered on the books of the Company, not less than 20 days' prior written
notice of the proposed event, by first class certified mail, postage prepaid and
return receipt requested, of (i) the date on which the books of the Company
shall close or a record shall be taken for purposes of ascertaining which
stockholders will be entitled to vote on such reclassification, reorganization,
consolidation, merger, dissolution, liquidation or winding up, as the case may
be; (ii) the date on which the vote shall be taken concerning such
reclassification, reorganization, consolidation, merger, dissolution,
liquidation or winding up, as the case may be; and (iii) the date on which such
dividend or distribution is to be paid or such
27
reclassification, reorganization, consolidation, merger, dissolution,
liquidation or winding up, as the case may be, is to be effective. Such notice
shall also specify the date as of which the record holders of capital stock of
the Company shall participate in said dividend or distribution or shall be
entitled to exchange their shares of capital stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, dissolution, liquidation or winding up, as the case may be.
6. Transfer of Warrant.
(a) Subject to Section 6 (b) below, the holder of this Warrant
agrees to give the Company not less than 20 days' prior written notice before
transferring this Warrant. The foregoing notice shall describe the manner of any
proposed transfer of this Warrant or any interest therein and the consideration
to be received by the holder.
(b) Each assignment of this Warrant shall be deemed a partitioned
right which is separately enforceable by the assignee, transferee or other
beneficiary. Each assignee, transferee or other beneficiary shall be entitled to
the full benefit of the Warrant assigned, subject to any conditions to which the
Warrant is subject and provided always that such assignee, transferee or other
beneficiary shall carry out all the obligations, liabilities and
responsibilities of the holder of the Warrant hereunder. No person, company or
other entity may enjoy the benefit of any Warrant unless it is an accredited
investor as that term is defined in Regulation D of the Securities Act of 1933,
as amended (the "Act"), and such party executes and delivers to the Company
certain subscription documents evidencing the investor's status and has a
pre-existing business or financial relationship with the Warrantholder.
(c) No transfer or assignment of this Warrant shall be made
without compliance with the provisions of Section 2 and the legend set forth on
the first page of this Warrant.
(d) Notwithstanding the provisions of Section 6(b) above, this
Warrant may not be assigned, held in trust, or otherwise transferred to any
person or entity in amounts of less than one fourth of the number of shares
subject to this Warrant.
7. No Stockholder Rights. This Warrant shall not entitle the holder
hereof to any voting rights or other rights as a stockholder of the Company, or
to any other rights whatsoever except the rights herein expressed, and no cash
dividend paid out of earnings or surplus or interest shall be payable or accrue
in respect of this Warrant or the interest represented hereby or the shares
which may be subscribed for and purchased hereunder until and unless and except
to the extent that the rights represented by this Warrant shall be exercised.
8. Reporting Company; Registration Rights
28
(a) Registration Rights. The Warrantholder shall, until December
31, 1999 (the "Registration Period"), which Registration Period shall be
extended by the amount of time equal to any Offering Period, have the following
registration rights on two occasions only.
(i) If the Warrantholder requests ("Demand Registration
Request") that the Company file a registration statement under the Act
("Registration Statement"), the Company agrees to use its best efforts to file a
Registration Statement covering the shares of Common Stock underlying this
Warrant (collectively the "Demand Registrable Securities") if so requested and
to obtain effectiveness thereof, to file post-effective amendments, and to make
appropriate qualifications under federal and state securities laws as may be
requested except in any jurisdiction where the Company would be required to
execute a general consent to service of process unless otherwise required to do
so by the Act or any applicable law. The Company shall keep such Registration
Statement effective for a period of twelve (12) months. Such rights are
hereinafter referred to as the "Demand Registration Rights." The Company shall
be obligated to file a Registration Statement and include the Demand Registrable
Securities, or any part thereof, only if the Underwriter, as herein defined,
determines, in its sole discretion, that the filing of a Registration Statement
and inclusion of such Demand Registrable Securities will not have a material
adverse affect on a current or proposed offering of any securities of the
Company (the "Offering"), provided that the Underwriter shall not unreasonably
withhold its consent to the inclusion of the Demand Registrable Securities in
the registration statement and that such Registration Statement includes
securities only on behalf of the Company and has been filed or will be filed
within sixty days of the Company's receipt of a Demand Registration Request. The
Demand Registration Rights may be delayed by the Company for a period of sixty
days on one occasion only every twelve months, except in the event of an initial
public offering ("IPO") of its securities. To the extent the Underwriter shall
determine not to include some or all of the Demand Registrable Securities, then
the Demand Registration Rights shall continue to be in force and effect as to
such Demand Registrable Securities which has not been registered. In the event
the Company has filed a Registration Statement under the Act pursuant to an IPO
or will do so within sixty days of its receipt of a Demand Registration request,
the Company shall have the right to delay the exercise of the Demand
Registration Rights until the completion of the Company's IPO; but in no event
shall such delay exceed an aggregate of one hundred twenty (120) days. The
Warrantholder shall not be entitled to more than one Demand Registration request
in any one fiscal year of the Company. For the purposes of this Section 8, the
term, the Underwriter, shall include the representatives of the Underwriters in
any proposed Offering and any other Underwriter or investment banker with which
the Company has or may have a contractual relationship from time to time.
(ii) In the event of an IPO whereby only securities on behalf of
the
29
Company are being registered and not those of any selling shareholder, the
Warrantholder agrees not to sell, transfer, or otherwise dispose of any Warrant
Stock or Registrable Securities for a period of one hundred eighty (180) days
and shall enter into a customary lock-up agreement required by the Underwriter.
The Warrantholder agrees that stop transfer instructions may be given to the
Company's transfer agent regarding the foregoing lock-up arrangement.
(b) Information and Documents. In the event the Company shall be
required by the provisions of this Section 8 to effect the registration of any
securities, the Warrantholder shall furnish, in writing, such information as is
reasonably requested by the Company or the Underwriter or their representatives,
including their representative legal counsel and accountants, for inclusion in
the Registration Statement relating to such Offering and such other information
and documentation as the Company shall request. In addition, the Warrantholder
shall execute and deliver such agreements certifications and other documents,
including, without limitation, selling shareholder instructions,
powers-of-attorney, and custody agreements, as the Company or Underwriter may
reasonably request. The Company's obligation to register any securities
hereunder shall be subject to the fulfilment of the duty of the Warrantholder to
cooperate fully with the Company and the Underwriter and their representatives
in the preparation of the Registration Statement covering any securities
registrable pursuant to Section 8.
(c) Expenses. All expenses incurred in connection with any
registration under this Section 8, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses, and expenses of any special
audits incident to or required by any such registration are herein called
"Registration Expenses." All underwriting discounts and selling commissions
applicable to any sales of securities herein are called "Selling Expenses." The
Company will pay all Registration Expenses in connection with any registration
pursuant to this Section 8. To the extent allowed by law, the Company shall bear
the Selling Expenses. Otherwise, all Selling Expenses in connection with any
registration pursuant to Section 8 shall be borne by the Company, the
Warrantholder and any other shareholders whose shares are to be included in the
Registration Statement, pro rata in proportion to the shares registered thereby
being sold or registered by each of them. The Warrantholder shall bear the fees
and costs of its own counsel.
(d) Prospectus Delivery. The Warrantholder shall comply with the
prospectus delivery requirements of federal or state securities laws in
connection with any registration. If any prospectus becomes outdated,
inaccurate, or misleading, any Warrantholder shall cease using all such
prospectuses upon notice thereof from the Company and shall return all copies of
such prospectuses under control of such person to the Company.
30
(e) "Market Stand-off" Agreement. The Warrantholder shall not
sell or otherwise transfer or dispose of any Registrable Securities or any other
shares of Common Stock held by such persons, for a period of 180 days in
connection with any IPO of the Company covering only the Company's securities
and not those of any selling shareholder. The Warrantholder shall seek the
written consent of the Underwriter to transfer, convey or assign any securities
of the Company during the 180 day period specified above.
(f) No Registration Required. The Company shall not be required
to effect a registration under this Section 8 if the Warrantholder would
otherwise be able to publicly sell the number of shares sought to be registered
at the time of the registration without registration pursuant to Rule 144
promulgated by the SEC as then in effect or pursuant to any other exemption from
the registration provisions of the Act then available to the Warrantholder
(collectively referred to as "Rule 144") so long as the purchaser thereof shall
acquire shares that are not subject to any restriction on resale as may
otherwise be imposed pursuant to Rule 144.
(g) Termination of Rights. The Company's obligations to register
the Registrable Securities pursuant to this Section 8 shall cease and terminate
as to the Registrable Securities upon the occurrence of either of the following:
(i) the registration of the Registrable Securities under the Act pursuant to the
provisions of this Warrant; or (ii) at any time the Registrable Securities
become freely transferable without registration under the Act. Upon becoming
subject to the reporting requirements of the 1934 Act, the Company agrees to use
its best efforts to make Rule 144 available to the Warrantholder and to continue
do so until the expiration of the registration rights specified in Section 8
herein.
(h) Duty to Cooperate. The Company's obligations to register the
Registrable Securities shall be further contingent upon the Warrantholder
providing its full and complete cooperation to the Company in timely providing
such information, documents, certifications and representations as the Company
and its counsel or any Underwriter may determine to be necessary in order to
prepare, file and otherwise complete the registration process with respect to
the Registrable Securities.
(i) Grant of Power of Attorney. The Warrantholder has granted to
Xxxxx Xxxx its full power of attorney to act on its behalf and in its stead with
respect to all matters arising out of this Section 8, which power of attorney is
deemed to be coupled with an interest and shall be irrevocable for the term of
the Warrant.
9. No Impairment. The Company will not, by amendment of its articles of
incorporation or bylaws or through any reorganization, transfer of assets,
consolidation, merger, dissolution, or any voluntary action avoid or seek to
avoid the observance or
31
performance of any of the terms of this Warrant.
10. Miscellaneous Matters.
(a) As used herein, the term "Warrant Stock" shall mean the
Company's presently authorized Common Stock no par value, and stock of any other
series or class into which such presently authorized Common Stock may hereafter
have been converted or changed pursuant to any recapitalization or change in
such Common Stock.
(b) As used herein, the word "person" shall mean an individual or
entity.
(c) This Warrant and the name and address of the holder will be
registered in a Warrant Register that is kept at the principal office of the
Company, and the Company may treat the holder so registered as the owner of this
Warrant for all purposes.
(d) This Warrant shall be governed by and interpreted in
accordance with the internal laws, and not the law of conflicts, of the State of
California.
(e) Successors and assigns. Except as otherwise expressly
provided herein, all covenants and agreements contained in this Warrant by or on
behalf of any of the parties hereto shall bind and inure to the benefit of
respective successors and assigns of the parties to the extent permitted by law.
(f) Attorney Fees. In the event arbitration, suit or action is
brought by any party under this Warrant to enforce any of its terms, and in any
appeal therefrom, it is agreed that the prevailing party shall be entitled to
reasonable attorneys' fees to be fixed by the arbitrator, trial court, or
appellate court.
(g) Savings Clause. If any provision of this Warrant, or the
application of such provision to any person or circumstance, shall be held
invalid, the remainder of this Warrant, or the application of such provision to
persons or circumstances other than those as to which it is held invalid, shall
not be affected thereby.
(h) Specific Performance. Each party's obligation under this
Warrant is unique. If any party should default in its obligations under this
Warrant, the parties each acknowledge that it may be extremely impracticable to
measure the resulting damages; accordingly, the non-defaulting party, in
addition to any other rights or remedies available, may xxx in equity for
specific performance, and upon satisfactory proof thereof, it may be entitled to
obtain such specific performance.
32
IN WITNESS WHEREOF, the Company has executed this Warrant effective as
of the date first written above.
LEGACY BRANDS, INC.,
a California corporation
By: /s/ XXXXXX X. XXXX
----------------------------------------------
XXXXXX X. XXXX, President
By: /s/ XXXXX XXXXXXXX
----------------------------------------------
XXXXX XXXXXXXX, Chief Financial Officer
33
EXHIBIT A
SUBSCRIPTION AGREEMENT
________________________ , 19__
To: Legacy Brands, Inc.
The undersigned, pursuant to the provisions set forth in Warrant
No. 96-____, hereby agrees to subscribe for and purchase ____________ shares of
the Warrant Stock covered by such Warrant, and makes payment herewith in full
for such Warrant Stock at the Exercise Price.
Signature:
-----------------------------
Printed Name
and Title:
------------------------------
Address:
--------------------------------
--------------------------------
--------------------------------
ASSIGNMENT
FOR VALUE RECEIVED __________ hereby sells, assigns and transfers
all of the rights of the undersigned under Warrant No. 96-____, with respect to
the number of shares of Warrant Stock covered thereby set forth below unto:
Name of Assignee Address No. of Shares
---------------- ------- -------------
------------------------------------------------------------------------------
Dated:______________________________, 19__
Signature:
-----------------------------
Printed Name
and Title:
------------------------------
Address:
--------------------------------
--------------------------------
--------------------------------
34
THIS WARRANT AND THE SECURITIES REPRESENTED BY THIS WARRANT HAVE BEEN ACQUIRED
FOR INVESTMENT FOR THE HOLDER'S OWN ACCOUNT AND NOT WITH A VIEW TO OR FOR SALE
IN CONNECTION WITH ANY DISTRIBUTION OF THE SECURITIES. NEITHER THE WARRANT NOR
THE SECURITIES HAVE BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF
1933 ("SECURITIES ACT") OR UNDER ANY APPLICABLE STATE SECURITIES LAWS ("BLUE SKY
LAWS"). AN OFFER TO SELL OR TRANSFER OR THE SALE OR TRANSFER OF THIS WARRANT OR
THESE SECURITIES IS UNLAWFUL UNLESS MADE PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT OR PERMIT, AS APPLICABLE, UNDER THE SECURITIES ACT OR APPLICABLE BLUE
SKY LAWS OR UNLESS AN EXEMPTION FROM REGISTRATION AND/OR QUALIFICATION UNDER THE
SECURITIES ACT AND APPLICABLE BLUE SKY LAWS IS AVAILABLE AND AN OPINION OF
COUNSEL OR OTHER EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY IS PROVIDED TO
THE COMPANY TO THE EFFECT THAT SUCH REGISTRATION OR QUALIFICATION IS NOT
REQUIRED UNDER THE SECURITIES ACT AND APPLICABLE BLUE SKY LAWS.
THIS WARRANT IS SUBJECT TO A POWER OF ATTORNEY REGARDING THE
EXERCISE OF REGISTRATION RIGHTS
Warrant No. 98-004
COMMON STOCK PURCHASE WARRANT
JANUARY 1, 1998
THIS CERTIFIES THAT, for value received, Xxxxx Xxxxxxxxx
("Warrantholder") is entitled to subscribe for and purchase from Legacy Brands,
Inc., a California corporation (the "Company"), that number of shares of the
Company's Common Stock, no par value, as set forth in Section 4 (b) hereof at
the Exercise Price (as hereafter determined) at any time from the date hereof to
and including the Expiration Date (as defined below), subject to the terms and
conditions stated herein. For purposes of this Warrant, the term "Expiration
Date" shall mean 5:00 p.m. Pacific time on April 15, 1999, except as set forth
in Section 1(b) hereof.
1. Exercise of Warrant.
35
a) The rights represented by this Warrant may be exercised, in
whole or in part (subject to the minimum exercise limitation set forth in this
Section 1), by the holder hereof at any time on or before the Expiration date by
the surrender of this Warrant and delivery of an executed Subscription Agreement
in the form attached hereto as Exhibit A to the Company at its principal
executive office, or such other place as the Company shall designate in writing,
accompanied by payment for the Warrant Stock (as defined in Section 10) so
subscribed for in cash or check, in good funds or, subject to the good faith
determination by the Company as to the creditworthiness of the holder at the
time, the issuance by the holder of its promissory note to the Company (the
"Note") for up to the full exercise price of all of the warrants, with any
differential payable by cash or check, which Note shall bear interest at the
rate of seven percent (7%) per annum, all due and payable one year from the date
of issuance. Any shares for which a Note shall have been given to the Company as
payment shall not be deemed issued until such time as that portion of the Note
pertaining to such shares shall have been paid in full and the holder of such
shares shall have no rights with respect thereto, including, but not by way of
limitation, the right to vote, nor may such shares be transferred. In the event
of a partial exercise of this Warrant, a substitute Warrant representing the
number of shares of Warrant Stock which were not acquired upon the exercise of
the Warrant shall be issued to the holder of this Warrant. No exercise of this
Warrant may be made for less than one fourth of the number of shares of Warrant
Stock initially subject to this Warrant or such lesser number as shall then
constitute the balance of shares purchasable hereunder.
b) If at any time prior to the Expiration Date, the Company shall be
engaged in an offering of its securities, including any time determined, in good
faith by the Company or its Underwriter as hereinafter defined, to be "quiet
periods" during which its securities may not be offered for sale or sold, or if
at any other time or for any reason the Company or its Underwriter (as
hereinafter defined) shall, in good faith, determine that these Warrants may not
be exercised ( the period during which such inability to exercise shall exist
shall be referred to as the "Offering Period," which Offering Period may not in
each instance exceed a period of 90 days, it being recognized that such an
Offering Period may both precede and follow an offering of the securities of the
Company, with each such period being a separate Offering Period for the purposes
of this provision), the Expiration Date shall be extended by the same number of
days as the Offering Period.
2. Investment Representation. The holder by accepting this Warrant
represents that the Warrant is acquired for the holder's own account for
investment purposes and not with a view to any offering or distribution and that
the holder has no present intention of selling or otherwise disposing of the
Warrant or the Warrant Stock in violation of applicable securities laws. Upon
exercise, the holder will confirm, in respect of securities obtained upon such
exercise, that the holder is acquiring such securities for the holder's own
account and not with a view to any offering or
36
distribution in violation of applicable securities laws. The holder acknowledges
that the certificate(s) representing the Warrant Stock issued upon exercise of
this Warrant shall be endorsed with the legend set forth on this Warrant and all
other legends, if any, required by applicable federal, state and foreign
securities laws to be placed on the certificate(s).
3. Validity of Warrant Stock. The Company warrants and agrees that all
shares of Warrant Stock which may be issued upon the exercise of this Warrant
will, upon issuance, be validly issued, fully paid and nonassessable and free
from all taxes, liens and charges with respect to the issue thereof. The Company
further warrants and agrees that during the period within which this Warrant may
be exercised, the Company will at all times have authorized and reserved a
sufficient number of shares of Warrant Stock to provide for the exercise of this
Warrant.
4. Exercise Price; Number of Warrant Shares.
(a) The Exercise Price shall be $1.00, subject to adjustment
pursuant to this Section 4.
(b) The number of shares of Warrant Stock to be issued upon
exercise of this Warrant shall be 20,000.
(c) Upon occurrence of any of the following, the Exercise Price
and the number of shares of Warrant Stock to be issued upon exercise of this
Warrant shall be adjusted as follows:
(i) If at any time after the date hereof the number of
shares of Common Stock outstanding is increased by a stock dividend payable in
shares of Common Stock or by a subdivision or split-up of shares of Common
Stock, then, on the record date of such stock dividend, subdivision, or
split-up, the Exercise Price shall be appropriately decreased and the number of
shares of Warrant Stock issuable on exercise of this Warrant shall be
appropriately increased in proportion to such increase of outstanding shares.
(ii) If at any time after the date hereof, the number of
shares of Common Stock outstanding is decreased by a combination of the
outstanding shares of Common Stock, then, on the effective date of such
combination, the Exercise Price shall be appropriately increased and the
number of shares of Warrant Stock issuable on exercise of this Warrant
shall be appropriately decreased in proportion to such decrease in
outstanding shares.
(d) All calculations under this Section 4 shall be made to the
nearest cent
37
or to the nearest whole share, as the case may be. No fractional shares of
Warrant Stock shall be issued upon exercise of this Warrant. Any fractional
shares of Warrant Stock which might otherwise be issued upon exercise of this
Warrant shall be rounded to the nearest whole share (with one-half rounded up).
(e) If the Exercise Price shall be adjusted, the Company shall
prepare and mail to the holder hereof a certificate setting forth the event
requiring the adjustment, the amount of the adjustment, the method by which the
adjustment was calculated, and (after giving effect to the adjustment) the
Exercise Price.
(f) A calculation of any adjustment under this Section 4
evidenced by a certificate of any firm of independent certified public
accountants of recognized standing selected by the Company and satisfactory to
the holder hereof (which may be the firm of independent certified public
accountants regularly employed by the Company) shall be presumed a correct
calculation of the adjustment for purposes of this Section 4. The foregoing
presumption shall constitute a rebuttable presumption, with the party disputing
the calculation bearing the burden of proving the incorrectness of the
calculation.
5. Notice of Certain Events. If at any time:
(a) The Company shall declare any dividend upon the Common Stock,
whether payable in cash, property or capital stock, or make any distribution to
the holders of Common Stock;
(b) There shall be any recapitalization or reclassification of
the capital stock of the Company, or consolidation or merger of the Company with
another corporation;
(c) There shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company; or
(d) The Company shall propose to enter into a transaction not
covered by the preceding paragraphs (a) through (c), then, in each case, the
Company shall give to the holder of this Warrant, at the holder's address
registered on the books of the Company, not less than 20 days' prior written
notice of the proposed event, by first class certified mail, postage prepaid and
return receipt requested, of (i) the date on which the books of the Company
shall close or a record shall be taken for purposes of ascertaining which
stockholders will be entitled to vote on such reclassification, reorganization,
consolidation, merger, dissolution, liquidation or winding up, as the case may
be; (ii) the date on which the vote shall be taken concerning such
reclassification, reorganization, consolidation, merger, dissolution,
liquidation or winding up, as the case may be; and (iii) the date on which such
dividend or distribution is to be paid or such
38
reclassification, reorganization, consolidation, merger, dissolution,
liquidation or winding up, as the case may be, is to be effective. Such notice
shall also specify the date as of which the record holders of capital stock of
the Company shall participate in said dividend or distribution or shall be
entitled to exchange their shares of capital stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, dissolution, liquidation or winding up, as the case may be.
6. Transfer of Warrant.
(a) Subject to Section 6 (b) below, the holder of this Warrant
agrees to give the Company not less than 20 days' prior written notice before
transferring this Warrant. The foregoing notice shall describe the manner of any
proposed transfer of this Warrant or any interest therein and the consideration
to be received by the holder.
(b) Each assignment of this Warrant shall be deemed a partitioned
right which is separately enforceable by the assignee, transferee or other
beneficiary. Each assignee, transferee or other beneficiary shall be entitled to
the full benefit of the Warrant assigned, subject to any conditions to which the
Warrant is subject and provided always that such assignee, transferee or other
beneficiary shall carry out all the obligations, liabilities and
responsibilities of the holder of the Warrant hereunder. No person, company or
other entity may enjoy the benefit of any Warrant unless it is an accredited
investor as that term is defined in Regulation D of the Securities Act of 1933,
as amended (the "Act"), and such party executes and delivers to the Company
certain subscription documents evidencing the investor's status and has a
pre-existing business or financial relationship with the Warrantholder.
(c) No transfer or assignment of this Warrant shall be made
without compliance with the provisions of Section 2 and the legend set forth on
the first page of this Warrant.
(d) Notwithstanding the provisions of Section 6(b) above, this
Warrant may not be assigned, held in trust, or otherwise transferred to any
person or entity in amounts of less than one fourth of the number of shares
subject to this Warrant.
7. No Stockholder Rights. This Warrant shall not entitle the holder
hereof to any voting rights or other rights as a stockholder of the Company, or
to any other rights whatsoever except the rights herein expressed, and no cash
dividend paid out of earnings or surplus or interest shall be payable or accrue
in respect of this Warrant or the interest represented hereby or the shares
which may be subscribed for and purchased hereunder until and unless and except
to the extent that the rights represented by this Warrant shall be exercised.
8. Reporting Company; Registration Rights
39
(a) Registration Rights The Warrantholder shall, until December
31, 1999 (the "Registration Period"), which Registration Period shall be
extended by the amount of time equal to any Offering Period, have the following
registration rights on two occasions only.
(i) If the Warrantholder requests ("Demand Registration
Request") that the Company file a registration statement under the Act
("Registration Statement"), the Company agrees to use its best efforts to file a
Registration Statement covering the shares of Common Stock underlying this
Warrant (collectively the "Demand Registrable Securities") if so requested and
to obtain effectiveness thereof, to file post-effective amendments, and to make
appropriate qualifications under federal and state securities laws as may be
requested except in any jurisdiction where the Company would be required to
execute a general consent to service of process unless otherwise required to do
so by the Act or any applicable law. The Company shall keep such Registration
Statement effective for a period of twelve (12) months. Such rights are
hereinafter referred to as the "Demand Registration Rights." The Company shall
be obligated to file a Registration Statement and include the Demand Registrable
Securities, or any part thereof, only if the Underwriter, as herein defined,
determines, in its sole discretion, that the filing of a Registration Statement
and inclusion of such Demand Registrable Securities will not have a material
adverse affect on a current or proposed offering of any securities of the
Company (the "Offering"), provided that the Underwriter shall not unreasonably
withhold its consent to the inclusion of the Demand Registrable Securities in
the registration statement and that such Registration Statement includes
securities only on behalf of the Company and has been filed or will be filed
within sixty days of the Company's receipt of a Demand Registration Request. The
Demand Registration Rights may be delayed by the Company for a period of sixty
days on one occasion only every twelve months, except in the event of an initial
public offering ("IPO") of its securities. To the extent the Underwriter shall
determine not to include some or all of the Demand Registrable Securities, then
the Demand Registration Rights shall continue to be in force and effect as to
such Demand Registrable Securities which has not been registered. In the event
the Company has filed a Registration Statement under the Act pursuant to an IPO
or will do so within sixty days of its receipt of a Demand Registration request,
the Company shall have the right to delay the exercise of the Demand
Registration Rights until the completion of the Company's IPO; but in no event
shall such delay exceed an aggregate of one hundred twenty (120) days. The
Warrantholder shall not be entitled to more than one Demand Registration request
in any one fiscal year of the Company. For the purposes of this Section 8, the
term, the Underwriter, shall include the representatives of the Underwriters in
any proposed Offering and any other Underwriter or investment banker with which
the Company has or may have a contractual relationship from time to time.
(ii) In the event of an IPO whereby only securities on behalf of
the
40
Company are being registered and not those of any selling shareholder, the
Warrantholder agrees not to sell, transfer, or otherwise dispose of any Warrant
Stock or Registrable Securities for a period of one hundred eighty (180) days
and shall enter into a customary lock-up agreement required by the Underwriter.
The Warrantholder agrees that stop transfer instructions may be given to the
Company's transfer agent regarding the foregoing lock-up arrangement.
(b) Information and Documents In the event the Company shall be
required by the provisions of this Section 8 to effect the registration of any
securities, the Warrantholder shall furnish, in writing, such information as is
reasonably requested by the Company or the Underwriter or their representatives,
including their representative legal counsel and accountants, for inclusion in
the Registration Statement relating to such Offering and such other information
and documentation as the Company shall request. In addition, the Warrantholder
shall execute and deliver such agreements certifications and other documents,
including, without limitation, selling shareholder instructions,
powers-of-attorney, and custody agreements, as the Company or Underwriter may
reasonably request. The Company's obligation to register any securities
hereunder shall be subject to the fulfilment of the duty of the Warrantholder to
cooperate fully with the Company and the Underwriter and their representatives
in the preparation of the Registration Statement covering any securities
registrable pursuant to Section 8.
(c) Expenses. All expenses incurred in connection with any
registration under this Section 8, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses, and expenses of any special
audits incident to or required by any such registration are herein called
"Registration Expenses." All underwriting discounts and selling commissions
applicable to any sales of securities herein are called "Selling Expenses." The
Company will pay all Registration Expenses in connection with any registration
pursuant to this Section 8. To the extent allowed by law, the Company shall bear
the Selling Expenses. Otherwise, all Selling Expenses in connection with any
registration pursuant to Section 8 shall be borne by the Company, the
Warrantholder and any other shareholders whose shares are to be included in the
Registration Statement, pro rata in proportion to the shares registered thereby
being sold or registered by each of them. The Warrantholder shall bear the fees
and costs of its own counsel.
(d) Prospectus Delivery The Warrantholder shall comply with the
prospectus delivery requirements of federal or state securities laws in
connection with any registration. If any prospectus becomes outdated,
inaccurate, or misleading, any Warrantholder shall cease using all such
prospectuses upon notice thereof from the Company and shall return all copies of
such prospectuses under control of such person to the Company.
41
(e) "Market Stand-off" Agreement The Warrantholder shall not sell
or otherwise transfer or dispose of any Registrable Securities or any other
shares of Common Stock held by such persons, for a period of 180 days in
connection with any IPO of the Company covering only the Company's securities
and not those of any selling shareholder. The Warrantholder shall seek the
written consent of the Underwriter to transfer, convey or assign any securities
of the Company during the 180 day period specified above.
(f) No Registration Required The Company shall not be required to
effect a registration under this Section 8 if the Warrantholder would otherwise
be able to publicly sell the number of shares sought to be registered at the
time of the registration without registration pursuant to Rule 144 promulgated
by the SEC as then in effect or pursuant to any other exemption from the
registration provisions of the Act then available to the Warrantholder
(collectively referred to as "Rule 144") so long as the purchaser thereof shall
acquire shares that are not subject to any restriction on resale as may
otherwise be imposed pursuant to Rule 144.
(g) Termination of Rights The Company's obligations to register
the Registrable Securities pursuant to this Section 8 shall cease and terminate
as to the Registrable Securities upon the occurrence of either of the following:
(i) the registration of the Registrable Securities under the Act pursuant to the
provisions of this Warrant; or (ii) at any time the Registrable Securities
become freely transferable without registration under the Act. Upon becoming
subject to the reporting requirements of the 1934 Act, the Company agrees to use
its best efforts to make Rule 144 available to the Warrantholder and to continue
do so until the expiration of the registration rights specified in Section 8
herein.
(h) Duty to Cooperate The Company's obligations to register the
Registrable Securities shall be further contingent upon the Warrantholder
providing its full and complete cooperation to the Company in timely providing
such information, documents, certifications and representations as the Company
and its counsel or any Underwriter may determine to be necessary in order to
prepare, file and otherwise complete the registration process with respect to
the Registrable Securities.
(i) Grant of Power of Attorney. The Warrantholder has granted to
Xxxxx Xxxx its full power of attorney to act on its behalf and in its stead with
respect to all matters arising out of this Section 8, which power of attorney is
deemed to be coupled with an interest and shall be irrevocable for the term of
the Warrant.
9. No Impairment. The Company will not, by amendment of its articles of
incorporation or bylaws or through any reorganization, transfer of assets,
consolidation, merger, dissolution, or any voluntary action avoid or seek to
avoid the observance or
42
performance of any of the terms of this Warrant.
10. Miscellaneous Matters.
(a) As used herein, the term "Warrant Stock" shall mean the
Company's presently authorized Common Stock no par value, and stock of any other
series or class into which such presently authorized Common Stock may hereafter
have been converted or changed pursuant to any recapitalization or change in
such Common Stock.
(b) As used herein, the word "person" shall mean an individual or
entity.
(c) This Warrant and the name and address of the holder will be
registered in a Warrant Register that is kept at the principal office of the
Company, and the Company may treat the holder so registered as the owner of this
Warrant for all purposes.
(d) This Warrant shall be governed by and interpreted in
accordance with the internal laws, and not the law of conflicts, of the State of
California.
(e) Successors and assigns. Except as otherwise expressly
provided herein, all covenants and agreements contained in this Warrant by or on
behalf of any of the parties hereto shall bind and inure to the benefit of
respective successors and assigns of the parties to the extent permitted by law.
(f) Attorney Fees. In the event arbitration, suit or action is
brought by any party under this Warrant to enforce any of its terms, and in any
appeal therefrom, it is agreed that the prevailing party shall be entitled to
reasonable attorneys' fees to be fixed by the arbitrator, trial court, or
appellate court.
(g) Savings Clause. If any provision of this Warrant, or the
application of such provision to any person or circumstance, shall be held
invalid, the remainder of this Warrant, or the application of such provision to
persons or circumstances other than those as to which it is held invalid, shall
not be affected thereby.
(h) Specific Performance. Each party's obligation under this
Warrant is unique. If any party should default in its obligations under this
Warrant, the parties each acknowledge that it may be extremely impracticable to
measure the resulting damages; accordingly, the non-defaulting party, in
addition to any other rights or remedies available, may xxx in equity for
specific performance, and upon satisfactory proof thereof, it may be entitled to
obtain such specific performance.
43
IN WITNESS WHEREOF, the Company has executed this Warrant effective as
of the date first written above.
LEGACY BRANDS, INC.,
a California corporation
By: /s/ XXXXXX X. XXXX
-----------------------------------------
XXXXXX X. XXXX, President
By: /s/ XXXXX XXXXXXXX
----------------------------------------
XXXXX XXXXXXXX, Chief Financial Officer
44
EXHIBIT A
SUBSCRIPTION AGREEMENT
_____________________, 19___
To: Legacy Brands, Inc.
The undersigned, pursuant to the provisions set forth in Warrant
No. 96-__ , hereby agrees to subscribe for and purchase ________________ shares
of the Warrant Stock covered by such Warrant, and makes payment herewith in full
for such Warrant Stock at the Exercise Price.
Signature:
------------------------------
Printed Name
and Title:
-----------------------------
Address:
-------------------------------
-------------------------------
-------------------------------
------------------------------------
ASSIGNMENT
FOR VALUE RECEIVED ___________________________________hereby
sells, assigns and transfers all of the rights of the undersigned under Warrant
No. 96-__, with respect to the number of shares of Warrant Stock covered thereby
set forth below unto:
Name of Assignee Address No. of Shares
---------------- ------- -------------
------------------------------------------------------------------------------
------------------------------------------
Dated: _________________________ , 19 __
Signature:
------------------------------
Printed Name
and Title:
-----------------------------
Address:
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-------------------------------
-------------------------------
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THIS WARRANT AND THE SECURITIES REPRESENTED BY THIS WARRANT HAVE BEEN ACQUIRED
FOR INVESTMENT FOR THE HOLDER'S OWN ACCOUNT AND NOT WITH A VIEW TO OR FOR SALE
IN CONNECTION WITH ANY DISTRIBUTION OF THE SECURITIES. NEITHER THE WARRANT NOR
THE SECURITIES HAVE BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF
1933 ("SECURITIES ACT") OR UNDER ANY APPLICABLE STATE SECURITIES LAWS ("BLUE SKY
LAWS"). AN OFFER TO SELL OR TRANSFER OR THE SALE OR TRANSFER OF THIS WARRANT OR
THESE SECURITIES IS UNLAWFUL UNLESS MADE PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT OR PERMIT, AS APPLICABLE, UNDER THE SECURITIES ACT OR APPLICABLE BLUE
SKY LAWS OR UNLESS AN EXEMPTION FROM REGISTRATION AND/OR QUALIFICATION UNDER THE
SECURITIES ACT AND APPLICABLE BLUE SKY LAWS IS AVAILABLE AND AN OPINION OF
COUNSEL OR OTHER EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY IS PROVIDED TO
THE COMPANY TO THE EFFECT THAT SUCH REGISTRATION OR QUALIFICATION IS NOT
REQUIRED UNDER THE SECURITIES ACT AND APPLICABLE BLUE SKY LAWS.
Warrant No. 98RH-001a
COMMON STOCK PURCHASE WARRANT
JANUARY 1, 1998
THIS CERTIFIES THAT, for value received, Xxxxx Xxxx ("Warrantholder") is
entitled to subscribe for and purchase from Legacy Brands, Inc., a California
corporation (the "Company"), that number of shares of the Company's Common
Stock, no par value, established in Section 4 (b) hereof at the Exercise Price
(as hereafter determined) at any time from the date hereof to and including the
Expiration Date (as defined below), subject to the terms and conditions stated
herein. For purposes of this Warrant, the term "Expiration Date" shall mean 5:00
p.m. Pacific time on December 31, 2002, except as set forth in Sections 1(a) and
1(b) hereof.
1. Exercise of Warrant.
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(a) The rights represented by this Warrant may be exercised, in
whole or in part (subject to the minimum exercise limitation set forth in this
Section 1), by the holder hereof at any time commencing 90 days following the
closing of the Company's initial underwritten public offering of its securities
(the "Initial Offering Period") and continuing to any time on or before the
Expiration date. The Expiration Date shall be extended by an amount of time
equal to the Initial Offering Period (including the 90 day waiting period).
Except as set forth in Section 1(b) hereof, the Warrant shall be exercisable
under any circumstances commencing on April 1, 1999, in which instance the
Expiration Date shall be extended to March 31, 2004. The Warrant shall be
exercised by the surrender of this Warrant and delivery of an executed
Subscription Agreement in the form attached hereto as Exhibit A to the Company
at its principal executive office, or such other place as the Company shall
designate in writing, accompanied by payment for the Warrant Stock (as defined
in Section 10) so subscribed for in cash or check, in good funds or, subject to
the good faith determination by the Company as to the creditworthiness of the
holder at the time, the issuance by the holder of its promissory note to the
Company (the "Note") for up to the full exercise price of all of the warrants,
with any differential payable by cash or check, which Note shall bear interest
at the rate of seven percent (7%) per annum, all due and payable one year from
the date of issuance. Any shares for which a Note shall have been given to the
Company as payment shall not be deemed issued until such time as that portion of
the Note pertaining to such shares shall have been paid in full and the holder
of such shares shall have no rights with respect thereto, including, but not by
way of limitation, the right to vote, nor may such shares be transferred. In the
event of a partial exercise of this Warrant, a substitute Warrant representing
the number of shares of Warrant Stock which were not acquired upon the exercise
of the Warrant shall be issued to the holder of this Warrant. No exercise of
this Warrant may be made for less than one fourth of the number of shares of
Warrant Stock initially subject to this Warrant or such lesser number as shall
then constitute the balance of shares purchasable hereunder.
(b) If at any time prior to the Expiration Date, the Company
shall be engaged in an offering of its securities, including any time
determined, in good faith by the Company or its Underwriter as hereinafter
defined, to be "quiet periods" during which its securities may not be offered
for sale or sold, or if at any other time or for any reason the Company or its
Underwriter (as hereinafter defined) shall, in good faith, determine that these
Warrants may not be exercised ( the period during which such inability to
exercise shall exist shall be referred to as the "Offering Period," which
Offering Period may not in each instance exceed a period of 90 days, it being
recognized that such an Offering Period may both precede and follow an offering
of the securities of the Company, with each such period being a separate
Offering Period for the purposes of this provision), the Expiration Date shall
be extended by the same number of days as the Offering Period.
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2. Investment Representation. The holder by accepting this Warrant
represents that the Warrant is acquired for the holder's own account for
investment purposes and not with a view to any offering or distribution and that
the holder has no present intention of selling or otherwise disposing of the
Warrant or the Warrant Stock in violation of applicable securities laws. Upon
exercise, the holder will confirm, in respect of securities obtained upon such
exercise, that the holder is acquiring such securities for the holder's own
account and not with a view to any offering or distribution in violation of
applicable securities laws. The holder acknowledges that the certificate(s)
representing the Warrant Stock issued upon exercise of this Warrant shall be
endorsed with the legend set forth on this Warrant and all other legends, if
any, required by applicable federal, state and foreign securities laws to be
placed on the certificate(s).
3. Validity of Warrant Stock. The Company warrants and agrees that all
shares of Warrant Stock which may be issued upon the exercise of this Warrant
will, upon issuance, be validly issued, fully paid and nonassessable and free
from all taxes, liens and charges with respect to the issue thereof. The Company
further warrants and agrees that during the period within which this Warrant may
be exercised, the Company will at all times have authorized and reserved a
sufficient number of shares of Warrant Stock to provide for the exercise of this
Warrant.
4. Exercise Price; Number of Warrant Shares.
(a) The Exercise Price shall be $7.50, subject to adjustment
pursuant to this Section 4 after giving effect to a 1:3 reverse stock split to
be effected by the Company.
(b) The number of shares of Warrant Stock to be issued upon
exercise of this Warrant shall be 100,000 after giving effect to a 1:3 reverse
stock split to be effected by the Company.
(c) Upon occurrence of any of the following, the Exercise Price
and the number of shares of Warrant Stock to be issued upon exercise of this
Warrant shall be adjusted as follows:
(i) If at any time after the date hereof the number of
shares of Common Stock outstanding is increased by a stock dividend
payable in shares of Common Stock or by a subdivision or split-up of
shares of Common Stock, then, on the record date of such stock dividend,
subdivision, or split-up, the Exercise Price shall be appropriately
decreased and the number of shares of Warrant Stock issuable on exercise
of this Warrant shall be appropriately increased in proportion to such
increase of outstanding shares.
(ii) If at any time after the date that the 1:3 reverse
stock split of
48
the Company shall be effective, the number of shares of Common Stock
outstanding is decreased by a combination of the outstanding shares of
Common Stock, then, on the effective date of such combination, the
Exercise Price shall be appropriately increased and the number of shares
of Warrant Stock issuable on exercise of this Warrant shall be
appropriately decreased in proportion to such decrease in outstanding
shares.
(d) All calculations under this Section 4 shall be made to the
nearest cent or to the nearest whole share, as the case may be. No fractional
shares of Warrant Stock shall be issued upon exercise of this Warrant. Any
fractional shares of Warrant Stock which might otherwise be issued upon exercise
of this Warrant shall be rounded to the nearest whole share (with one-half
rounded up).
(e) If the Exercise Price shall be adjusted, the Company shall
prepare and mail to the holder hereof a certificate setting forth the event
requiring the adjustment, the amount of the adjustment, the method by which the
adjustment was calculated, and (after giving effect to the adjustment) the
Exercise Price.
(f) A calculation of any adjustment under this Section 4
evidenced by a certificate of any firm of independent certified public
accountants of recognized standing selected by the Company and satisfactory to
the holder hereof (which may be the firm of independent certified public
accountants regularly employed by the Company) shall be presumed a correct
calculation of the adjustment for purposes of this Section 4. The foregoing
presumption shall constitute a rebuttable presumption, with the party disputing
the calculation bearing the burden of proving the incorrectness of the
calculation.
5. Notice of Certain Events. If at any time:
(a) The Company shall declare any dividend upon the Common Stock,
whether payable in cash, property or capital stock, or make any distribution to
the holders of Common Stock;
(b) There shall be any recapitalization or reclassification of
the capital stock of the Company, or consolidation or merger of the Company with
another corporation;
(c) There shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company; or
(d) The Company shall propose to enter into a transaction not
covered by the preceding paragraphs (a) through (c), then, in each case, the
Company shall give to the holder of this Warrant, at the holder's address
registered on the books of the
49
Company, not less than 20 days' prior written notice of the proposed event, by
first class certified mail, postage prepaid and return receipt requested, of (i)
the date on which the books of the Company shall close or a record shall be
taken for purposes of ascertaining which stockholders will be entitled to vote
on such reclassification, reorganization, consolidation, merger, dissolution,
liquidation or winding up, as the case may be; (ii) the date on which the vote
shall be taken concerning such reclassification, reorganization, consolidation,
merger, dissolution, liquidation or winding up, as the case may be; and (iii)
the date on which such dividend or distribution is to be paid or such
reclassification, reorganization, consolidation, merger, dissolution,
liquidation or winding up, as the case may be, is to be effective. Such notice
shall also specify the date as of which the record holders of capital stock of
the Company shall participate in said dividend or distribution or shall be
entitled to exchange their shares of capital stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, dissolution, liquidation or winding up, as the case may be.
6. Transfer of Warrant.
(a) Each assignment of this Warrant shall be deemed a partitioned
right which is separately enforceable by the assignee, transferee or other
beneficiary. Each assignee, transferee or other beneficiary shall be entitled to
the full benefit of the Warrant assigned, subject to any conditions to which the
Warrant is subject and provided always that such assignee, transferee or other
beneficiary shall carry out all the obligations, liabilities and
responsibilities of the holder of the Warrant hereunder. No person, company or
other entity may enjoy the benefit of any Warrant unless it is an accredited
investor as that term is defined in Regulation D of the Securities Act of 1933,
as amended (the "Act"), and such party executes and delivers to the Company
certain subscription documents evidencing the investor's status and has a
pre-existing business or financial relationship with the Warrantholder.
(b) No transfer or assignment of this Warrant shall be made
without compliance with the provisions of Section 2 and the legend set forth on
the first page of this Warrant.
(c) This Warrant may not be assigned, held in trust, or otherwise
transferred to any person or entity in amounts of less than ten percent (10%) of
the number of shares subject to this Warrant.
7. No Stockholder Rights. This Warrant shall not entitle the holder
hereof to any voting rights or other rights as a stockholder of the Company, or
to any other rights whatsoever except the rights herein expressed, and no cash
dividend paid out of earnings or surplus or interest shall be payable or accrue
in respect of this Warrant or the interest represented hereby or the shares
which may be subscribed for and purchased hereunder until and unless and except
to the extent that the rights represented by this Warrant shall be exercised.
50
8. Reporting Company; Registration Rights
(a) Registration Rights The Warrantholder shall, for a period of
two years from the date of exercise of the Warrant (the "Registration Period")
which Registration Period shall be extended by the amount of time equal to any
Offering Period, have the following registration rights on two occasions only.
(i) If the Warrantholder requests ("Demand Registration
Request") that the Company file a registration statement under the Act
("Registration Statement"), the Company agrees to use its best efforts to file a
Registration Statement covering the shares of Common Stock underlying this
Warrant (collectively the "Demand Registrable Securities") if so requested and
to obtain effectiveness thereof, to file post-effective amendments, and to make
appropriate qualifications under federal and state securities laws as may be
requested except in any jurisdiction where the Company would be required to
execute a general consent to service of process unless otherwise required to do
so by the Act or any applicable law. The Company shall keep such Registration
Statement effective for a period of twelve (12) months. Such rights are
hereinafter referred to as the "Demand Registration Rights." The Company shall
be obligated to file a Registration Statement and include the Demand Registrable
Securities, or any part thereof, only if the Underwriter, as herein defined,
determines, in its sole discretion, that the filing of a Registration Statement
and inclusion of such Demand Registrable Securities will not have a material
adverse affect on a current or proposed offering of any securities of the
Company (the "Offering"), provided that the Underwriter shall not unreasonably
withhold its consent to the inclusion of the Demand Registrable Securities in
the registration statement and that such Registration Statement includes
securities only on behalf of the Company and has been filed or will be filed
within sixty days of the Company's receipt of a Demand Registration Request. The
Demand Registration Rights may be delayed by the Company for a period of sixty
days on one occasion only every twelve months, except in the event of an initial
public offering ("IPO") of its securities. To the extent the Underwriter shall
determine not to include some or all of the Demand Registrable Securities, then
the Demand Registration Rights shall continue to be in force and effect as to
such Demand Registrable Securities which has not been registered. In the event
the Company has filed a Registration Statement under the Act pursuant to an IPO
or will do so within sixty days of its receipt of a Demand Registration request,
the Company shall have the right to delay the exercise of the Demand
Registration Rights until the completion of the Company's IPO; but in no event
shall such delay exceed an aggregate of one hundred twenty (120) days. The
Warrantholder shall not be entitled to more than one Demand Registration request
in any one fiscal year of the Company. For the purposes of this Section 8, the
term, the Underwriter, shall include the representatives of the Underwriters in
any proposed Offering and any other Underwriter or investment banker with which
the Company has or may have a contractual relationship from time to time.
51
(ii) In the event of an IPO whereby only securities on behalf of
the Company are being registered and not those of any selling shareholder, the
Warrantholder agrees not to sell, transfer, or otherwise dispose of any Warrant
Stock or Registrable Securities for a period of one hundred eighty (180) days
and shall enter into a customary lock-up agreement required by the Underwriter.
The Warrantholder agrees that stop transfer instructions may be given to the
Company's transfer agent regarding the foregoing lock-up arrangement.
(b) Information and Documents In the event the Company shall be
required by the provisions of this Section 8 to effect the registration of any
securities, the Warrantholder shall furnish, in writing, such information as is
reasonably requested by the Company or the Underwriter or their representatives,
including their representative legal counsel and accountants, for inclusion in
the Registration Statement relating to such Offering and such other information
and documentation as the Company shall request. In addition, the Warrantholder
shall execute and deliver such agreements certifications and other documents,
including, without limitation, selling shareholder instructions,
powers-of-attorney, and custody agreements, as the Company or Underwriter may
reasonably request. The Company's obligation to register any securities
hereunder shall be subject to the fulfilment of the duty of the Warrantholder to
cooperate fully with the Company and the Underwriter and their representatives
in the preparation of the Registration Statement covering any securities
registrable pursuant to Section 8.
(c) Expenses. All expenses incurred in connection with any
registration under this Section 8, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses, and expenses of any special
audits incident to or required by any such registration are herein called
"Registration Expenses." All underwriting discounts and selling commissions
applicable to any sales of securities herein are called "Selling Expenses." The
Company will pay all Registration Expenses in connection with any registration
pursuant to this Section 8. To the extent allowed by law, the Company shall bear
the Selling Expenses. Otherwise, all Selling Expenses in connection with any
registration pursuant to Section 8 shall be borne by the Company, the
Warrantholder and any other shareholders whose shares are to be included in the
Registration Statement, pro rata in proportion to the shares registered thereby
being sold or registered by each of them. The Warrantholder shall bear the fees
and costs of its own counsel.
(d) Prospectus Delivery The Warrantholder shall comply with the
prospectus delivery requirements of federal or state securities laws in
connection with any registration. If any prospectus becomes outdated,
inaccurate, or misleading, any Warrantholder shall cease using all such
prospectuses upon notice thereof from the
52
Company and shall return all copies of such prospectuses under control of such
person to the Company.
(e) "Market Stand-off" Agreement The Warrantholder shall not sell
or otherwise transfer or dispose of any Registrable Securities or any other
shares of Common Stock held by such persons, for a period of 180 days in
connection with any IPO of the Company covering only the Company's securities
and not those of any selling shareholder. The Warrantholder shall seek the
written consent of the Underwriter to transfer, convey or assign any securities
of the Company during the 180 day period specified above.
(f) No Registration Required The Company shall not be required to
effect a registration under this Section 8 if the Warrantholder would otherwise
be able to publicly sell the number of shares sought to be registered at the
time of the registration without registration pursuant to Rule 144 promulgated
by the SEC as then in effect or pursuant to any other exemption from the
registration provisions of the Act then available to the Warrantholder
(collectively referred to as "Rule 144") so long as the purchaser thereof shall
acquire shares that are not subject to any restriction on resale as may
otherwise be imposed pursuant to Rule 144.
(g) Termination of Rights The Company's obligations to register
the Registrable Securities pursuant to this Section 8 shall cease and terminate
as to the Registrable Securities upon the occurrence of either of the following:
(i) the registration of the Registrable Securities under the Act pursuant to the
provisions of this Warrant; or (ii) at any time the Registrable Securities
become freely transferable without registration under the Act. Upon becoming
subject to the reporting requirements of the 1934 Act, the Company agrees to use
its best efforts to make Rule 144 available to the Warrantholder and to continue
do so until the expiration of the registration rights specified in Section 8
herein.
(h) Duty to Cooperate The Company's obligations to register the
Registrable Securities shall be further contingent upon the Warrantholder
providing its full and complete cooperation to the Company in timely providing
such information, documents, certifications and representations as the Company
and its counsel or any Underwriter may determine to be necessary in order to
prepare, file and otherwise complete the registration process with respect to
the Registrable Securities.
9. No Impairment. The Company will not, by amendment of its articles of
incorporation or bylaws or through any reorganization, transfer of assets,
consolidation, merger, dissolution, or any voluntary action avoid or seek to
avoid the observance or performance of any of the terms of this Warrant.
10. Miscellaneous Matters.
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(a) As used herein, the term "Warrant Stock" shall mean the
Company's presently authorized Common Stock no par value, and stock of any other
series or class into which such presently authorized Common Stock may hereafter
have been converted or changed pursuant to any recapitalization or change in
such Common Stock.
(b) As used herein, the word "person" shall mean an individual or
entity.
(c) This Warrant and the name and address of the holder will be
registered in a Warrant Register that is kept at the principal office of the
Company, and the Company may treat the holder so registered as the owner of this
Warrant for all purposes.
(d) This Warrant shall be governed by and interpreted in
accordance with the internal laws, and not the law of conflicts, of the State of
California.
(e) Successors and assigns. Except as otherwise expressly
provided herein, all covenants and agreements contained in this Warrant by or on
behalf of any of the parties hereto shall bind and inure to the benefit of
respective successors and assigns of the parties to the extent permitted by law.
(f) Attorney Fees. In the event arbitration, suit or action is
brought by any party under this Warrant to enforce any of its terms, and in any
appeal therefrom, it is agreed that the prevailing party shall be entitled to
reasonable attorneys' fees to be fixed by the arbitrator, trial court, or
appellate court.
(g) Savings Clause. If any provision of this Warrant, or the
application of such provision to any person or circumstance, shall be held
invalid, the remainder of this Warrant, or the application of such provision to
persons or circumstances other than those as to which it is held invalid, shall
not be affected thereby.
(h) Specific Performance. Each party's obligation under this
Warrant is unique. If any party should default in its obligations under this
Warrant, the parties each acknowledge that it may be extremely impracticable to
measure the resulting damages; accordingly, the non-defaulting party, in
addition to any other rights or remedies available, may xxx in equity for
specific performance, and upon satisfactory proof thereof, it may be entitled to
obtain such specific performance.
IN WITNESS WHEREOF, the Company has executed this Warrant effective as
of the date first written above.
LEGACY BRANDS, INC.,
a California corporation
54
By: /s/ XXXXXX X. XXXX
--------------------------------
XXXXXX X. XXXX, President
By: /s/ XXXXX XXXXXXXX
--------------------------------
XXXXX XXXXXXXX,
Chief Financial Officer
55
EXHIBIT A
SUBSCRIPTION AGREEMENT
______________________, 19___
To: Legacy Brands, Inc.
The undersigned, pursuant to the provisions set forth in Warrant No.
9__-______ , hereby agrees to subscribe for and purchase _____________ shares of
the Warrant Stock covered by such Warrant, and makes payment herewith in full
for such Warrant Stock at the Exercise Price.
Signature:
--------------------------------
Printed Name
and Title:
--------------------------------
Address:
--------------------------------
--------------------------------
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ASSIGNMENT
FOR VALUE RECEIVED _______________ hereby sells, assigns and transfers
all of the rights of the undersigned under Warrant No. 9__-______, with respect
to the number of shares of Warrant Stock covered thereby set forth below unto:
Name of Assignee Address No. of Shares
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Dated: _____________, 19_____
Signature:
--------------------------------
Printed Name
and Title:
--------------------------------
Address:
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--------------------------------
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