Exhibit 10.7
Exhibit B-1
to
Exchange
Agreement
NEITHER THIS WARRANT NOR ISSUANCE OF THE SECURITIES ISSUABLE UPON THE EXERCISE
HEREOF TO THE HOLDER HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
QUALIFIED OR REGISTERED UNDER STATE SECURITIES OR BLUE SKY LAWS. NEITHER THIS
WARRANT NOR SUCH SECURITIES MAY BE SOLD OR OTHERWISE TRANSFERRED EXCEPT IN
COMPLIANCE WITH THE SECURITIES ACT OF 1933, APPLICABLE STATE SECURITIES OR BLUE
SKY LAWS AND THE APPLICABLE RULES AND REGULATIONS THEREUNDER.
THIS WARRANT MAY NOT BE TRANSFERRED EXCEPT AS PROVIDED IN SECTION 23.
No. W-3 Right to Purchase 3,055,556 Shares of
Common Stock of Knightsbridge Fine
Wines, Inc.
KNIGHTSBRIDGE FINE WINES, INC.
Common Stock Purchase Warrant
(Primary Warrant)
KNIGHTSBRIDGE FINE WINES, INC., a Nevada corporation, hereby
certifies that, for value received, GRYPHON MASTER FUND, L.P. or registered
assigns (the "Holder"), is entitled, subject to the terms set forth below, to
purchase from the Company at any time or from time to time before 5:00 p.m.,
Dallas, Texas time, on the Expiration Date (such capitalized term and all other
capitalized terms used herein having the respective meanings provided herein),
3,055,556 fully paid and nonassessable shares of Common Stock at a purchase
price per share equal to the Purchase Price. The number of such shares of Common
Stock and the Purchase Price are subject to adjustment as provided in this
Warrant.
1. Definitions.
(a) As used in this Warrant, the term "Holder" shall have the
meaning assigned to such term in the first paragraph of this Warrant.
(b) All the agreements or instruments herein defined shall
mean such agreements or instruments as the same may from time to time be
supplemented or amended or the terms thereof waived or modified to the extent
permitted by, and in accordance with, the terms thereof and of this Warrant.
(c) The following terms shall have the following meanings
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined):
"Affiliate" means, with respect to any Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by or is under common control with the subject
Person. For purposes of this definition, "control" (including, with
correlative meaning, the terms "controlled by" and "under common
control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether
through the ownership of voting securities or by contract or otherwise.
"Aggregate Purchase Price" means at any time an amount equal
to the product obtained by multiplying (x) the Purchase Price times (y)
the number of shares of Common Stock for which this Warrant may be
exercised at such time.
"Aggregation Parties" shall have the meaning provided in
Section 2(c).
"Board of Directors" means the Board of Directors of the
Company.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in the City of Dallas are
authorized or required by law or executive order to remain closed.
"Common Stock" includes the Company's Common Stock, par value
$.001 per share, (and any purchase rights issued with respect to the
Common Stock in the future) as authorized on the date hereof, and any
other securities into which or for which the Common Stock (and any such
rights issued with respect to the Common Stock) may be converted or
exchanged pursuant to a plan of recapitalization, reorganization,
merger, sale of assets or otherwise and any stock (other than Common
Stock) and other securities of the Company or any other Person which
the Holder at any time shall be entitled to receive, or shall have
received, on the exercise of this Warrant, in lieu of or in addition to
Common Stock.
"Common Stock Equivalents" means any warrant, option,
subscription or purchase right with respect to shares of Common Stock,
any security
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convertible into, exchangeable for, or otherwise entitling the holder
thereof to acquire, shares of Common Stock or any warrant, option,
subscription or purchase right with respect to any such convertible,
exchangeable or other security.
"Company" shall include Knightsbridge Fine Wines, Inc., a
Nevada corporation, and any corporation that shall succeed to or assume
the obligations of Knightsbridge Fine Wines, Inc. hereunder in
accordance with the terms hereof.
"Current Fair Market Value" means when used with respect to
the Common Stock as of a specified date with respect to each share of
Common Stock, the average of the closing prices of the Common Stock
sold on all securities exchanges (including the Nasdaq and the Nasdaq
SmallCap) on which the Common Stock may at the time be listed, or, if
there have been no sales on any such exchange on such day, the average
of the highest bid and lowest asked prices on all such exchanges at the
end of such day, or, if on such day the Common Stock is not so listed,
the average of the representative bid and asked prices quoted in the
Nasdaq System as of 4:00 p.m., New York City time, or, if on such day
the Common Stock is not quoted in the Nasdaq System, the average of the
highest bid and lowest asked price on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau,
Incorporated, or any similar successor organization, in each such case
averaged over a period of ten Trading Days consisting of the day as of
which the Current Fair Market Value of Common Stock is being determined
(or if such day is not a Trading Day, the Trading Day next preceding
such day) and the nine consecutive Trading Days prior to such day. If
on the date for which Current Fair Market Value is to be determined the
Common Stock is not listed on any securities exchange or quoted in the
Nasdaq System or the over-the-counter market, the Current Fair Market
Value of Common Stock shall be the highest price per share which the
Company could then obtain from a willing buyer (not an employee or
director of the Company at the time of determination) in an
arms'-length transaction for shares of Common Stock sold by the
Company, from authorized but unissued shares, as determined in good
faith by the Board of Directors.
"Exchange Agreement" means the Securities Exchange Agreement,
dated as of April 21, 2004, by and between the Company and Gryphon.
"Expiration Date" means the fifth (5th) anniversary of the
Issuance Date.
"Gryphon" means Gryphon Master Fund, L.P., a Bermuda limited
partnership.
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"Holder Share Notice" shall have the meaning provided in
Section 3(a).
"Issuance Date" means the date of original issuance of this
Warrant or its predecessor instrument.
"Nasdaq" means the Nasdaq National Market.
"Nasdaq SmallCap" means the Nasdaq SmallCap Market.
"1934 Act" means the Securities Exchange Act of 1934, as
amended.
"1933 Act" means the Securities Act of 1933, as amended.
"Note" means the 7.5% Senior Secured Convertible Note due 2006
issued by the Company pursuant to the Exchange Agreement.
"Other Securities" means any stock (other than Common Stock)
and other securities of the Company or any other Person which the
Holder at any time shall be entitled to receive, or shall have
received, on the exercise of this Warrant, in lieu of or in addition to
Common Stock, or which at any time shall be issuable or shall have been
issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 5.
"Person" means an individual, corporation, partnership,
limited liability company, trust, business trust, association, joint
stock company, joint venture, pool, syndicate, sole proprietorship,
unincorporated organization, governmental authority or any other form
of entity not specifically listed herein.
"Purchase Price" means $0.70, subject to adjustment as
provided in this Warrant.
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of April 21, 2004, by and between the Company and
Gryphon.
"Registration Statement" shall have the meaning provided in
the Registration Rights Agreement.
"Restricted Ownership Percentage" shall have the meaning
provided in Section 2(c).
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"Restricted Securities" means securities that are not eligible
for resale pursuant to Rule 144(k) under the 1933 Act (or any successor
provision).
"Reorganization Event" means the occurrence of any one or more
of the following events:
(i) any consolidation, merger or similar transaction
of the Company or any Subsidiary with or into another entity
(other than a merger or consolidation or similar transaction
of a Subsidiary into the Company or a wholly-owned
Subsidiary); or the sale or transfer of all or substantially
all of the assets of the Company and the Subsidiaries in a
single transaction or a series of related transactions; or
(ii) the occurrence of any transaction or event in
connection with which all or substantially all the Common
Stock shall be exchanged for, converted into, acquired for or
constitute the right to receive securities of any other Person
(whether by means of a Tender Offer, liquidation,
consolidation, merger, share exchange, combination,
reclassification, recapitalization, or otherwise); or
(iii) the acquisition by a Person or group of Persons
acting in concert as a partnership, limited partnership,
syndicate or group, as a result of a tender or exchange offer,
open market purchases, privately negotiated purchases or
otherwise, of beneficial ownership of securities of the
Company representing 50% or more of the combined voting power
of the outstanding voting securities of the Company ordinarily
(and apart from rights accruing in special circumstances)
having the right to vote in the election of directors.
"Rule 144A" means Rule 144A as promulgated under the 1933 Act.
"SEC" means the Securities and Exchange Commission.
"Subsidiary" means any corporation or other entity of which
20% or more of the capital stock or other ownership interests having
ordinary voting power to vote for the election of the board of
directors or other persons performing similar functions are at the time
directly or indirectly owned by the Company.
"Tender Offer" means a tender offer, exchange offer or other
offer by the Company to repurchase outstanding shares of its capital
stock.
"Trading Day" means a day on whichever of the OTC Bulletin
Board, any national securities exchange, the Nasdaq or the Nasdaq
SmallCap,
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which then constitutes the principal securities market for the Common
Stock, is open for general trading.
2. Exercise of Warrant.
(a) Exercise. This Warrant may be exercised by the Holder in
whole at any time or in part from time to time on or before the Expiration Date
by (x) surrendering this Warrant to the Company, (y) giving a subscription form
in the form of Exhibit 1 to this Warrant (duly executed by the Holder) to the
Company, and (z) making payment, in cash or by certified or official bank check
payable to the order of the Company, or by wire transfer of funds to the account
of the Company, in any such case, in the amount obtained by multiplying (a) the
number of shares of Common Stock designated by the Holder in the subscription
form by (b) the Purchase Price then in effect. On any partial exercise the
Company will forthwith issue and deliver to or upon the order of the Holder a
new Warrant or Warrants of like tenor, in the name of the Holder or as the
Holder (upon payment by the Holder of any applicable transfer taxes) may
request, providing in the aggregate on the face or faces thereof for the
purchase of the number of shares of Common Stock for which such Warrant or
Warrants may still be exercised. The subscription form may be surrendered by
telephone line facsimile transmission to such telephone number for the Company
as shall have been specified in writing to the Holder by the Company; provided,
however, that if the subscription form is given to the Company by telephone line
facsimile transmission the Holder shall send an original of such subscription
form to the Company within ten Business Days after such subscription form is so
given to the Company; provided further, however, that any failure or delay on
the part of the Holder in giving such original of any subscription form shall
not affect the validity or the date on which such subscription form is so given
by telephone line facsimile transmission.
(b) Net Exercise. The Holder may elect to exercise this
Warrant, in whole at any time or in part from time to time, by receiving shares
of Common Stock equal to the net issuance value (as determined below) of this
Warrant, or any part hereof, upon surrender of the subscription form annexed
hereto (duly executed by the Holder) to the Company (followed by surrender of
this Warrant to the Company within three Trading Days after surrender of such
subscription form), in which event the Company shall issue to the Holder a
number of shares of Common Stock computed using the following formula:
X = Y x (A - B)
-----------
A
where,
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X = the number of shares of Common Stock to be issued to
the Holder
Y = the number of shares of Common Stock as to which this
Warrant is to be exercised
A = the Current Fair Market Value of one share of
Common Stock calculated as of the last Trading Day
immediately preceding the exercise of this Warrant
B = the Purchase Price
Notwithstanding the foregoing, the Holder may conduct a "net" exercise pursuant
to this Section 2(b) only after the first anniversary of the Issuance Date, and
then only in the event that the Registration Statement is not then effective and
available for use by the Holder at the time that the Holder wishes to conduct
such "net" exercise.
(c) 9.99% Limitation.
(1) Notwithstanding anything to the contrary contained herein,
the number of shares of Common Stock that may be acquired by the Holder
upon exercise pursuant to the terms hereof shall not exceed a number
that, when added to the total number of shares of Common Stock deemed
beneficially owned by the Holder (other than by virtue of the ownership
of securities or rights to acquire securities (including the Note, this
Warrant and the Green Shoe Warrant) that have limitations on the
Holder's right to convert, exercise or purchase similar to the
limitation set forth herein), together with all shares of Common Stock
deemed beneficially owned at such time (other than by virtue of the
ownership of securities or rights to acquire securities that have
limitations on the right to convert, exercise or purchase similar to
the limitation set forth herein) by the Holder's Affiliates (the
"Aggregation Parties") that would be aggregated for purposes of
determining whether a group exists or for purposes of determining the
Holder's beneficial ownership, in either such case for purposes of
Section 13(d) of the 1934 Act and Regulation 13D-G thereunder, would
result in beneficial ownership by the Holder or such group of more than
9.99% of the outstanding shares of the Common Stock (the "Restricted
Ownership Percentage"). The Holder shall have the right (x) at any time
and from time to time to reduce its Restricted Ownership Percentage
immediately upon notice to the Company in the event and only to the
extent that Section 16 of the 1934 Act or the rules promulgated
thereunder (or any successor statute or rules) is changed to reduce the
beneficial ownership percentage threshold thereunder from 10%, (y) at
any time and from time to time, to increase its Restricted Ownership
Percentage immediately in the event of the happening of any Change in
Control Transaction (as defined in the Note), and (z) by written
instrument delivered to the Company to irrevocably waive its rights
under the immediately preceding clause
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(y). If at any time the limits in this Section 2(c) make this Warrant
unexercisable in whole or in part, the Company shall not by reason thereof be
relieved of its obligation to issue shares of Common Stock at any time or from
time to time thereafter as shares of Common Stock may be issued in compliance
with such restrictions.
(2) For purposes of this Section 2(c), in determining the number of
outstanding shares of Common Stock at any time the Holder may rely on the number
of outstanding shares of Common Stock as reflected in (A) the Company's then
most recent Form 10-Q, Form 10-K or other public filing with the SEC, as the
case may be, (B) a public announcement by the Company that is later than any
such filing referred to in the preceding clause (A), or (C) any other notice by
the Company or its transfer agent setting forth the number shares of Common
Stock outstanding. Upon the written or oral request of the Holder, the Company
shall within one Business Day confirm orally and in writing to the Holder the
number of shares of Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving effect to
the conversion or exercise of Common Stock Equivalents, including, without
limitation, the Note, this Warrant and the Green Shoe Warrant, by the Holder or
its Aggregation Parties, in each such case subsequent to the date as of which
such number of outstanding shares of Common Stock was reported.
3. Delivery of Stock Certificates, etc., on Exercise. (a) As soon as
practicable after the exercise of this Warrant and in any event within five
Trading Days thereafter, upon the terms and subject to the conditions of this
Warrant, the Company at its expense (including the payment by it of any
applicable issue or stamp taxes) will cause to be issued in the name of and
delivered to the Holder, or as the Holder (upon payment by the Holder of any
applicable transfer taxes) may direct, a certificate or certificates for the
number of fully paid and nonassessable shares of Common Stock (or Other
Securities) to which the Holder shall be entitled on such exercise, in such
denominations as may be requested by the Holder, which certificate or
certificates shall be free of restrictive and trading legends (except to the
extent permitted under Section 6.12 of the Exchange Agreement), plus, in lieu of
any fractional share to which the Holder would otherwise be entitled, cash equal
to such fraction multiplied by the then Current Fair Market Value of one full
share of Common Stock, together with any other stock or Other Securities or any
property (including cash, where applicable) to which the Holder is entitled upon
such exercise pursuant to Section 2 or otherwise. In lieu of delivering physical
certificates for the shares of Common Stock or (Other Securities) issuable upon
any exercise of this Warrant, provided the Company's transfer agent is
participating in the Depository Trust Company ("DTC") Fast Automated Securities
Transfer ("FAST") program, upon request of the Holder, the Company shall use
commercially reasonable efforts to cause its transfer agent electronically to
transmit such shares of Common Stock (or Other Securities) issuable upon
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conversion to the Holder (or its designee), by crediting the account of the
Holder's (or such designee's) broker with DTC through its Deposit Withdrawal
Agent Commission system (provided that the same time periods herein as for stock
certificates shall apply). The Company shall pay any taxes and other
governmental charges that may be imposed under the laws of the United States of
America or any political subdivision or taxing authority thereof or therein in
respect of the issue or delivery of shares of Common Stock (or Other Securities)
or payment of cash upon exercise of this Warrant (other than income taxes
imposed on the Holder). The Company shall not be required, however, to pay any
tax or other charge imposed in connection with any transfer involved in the
issue of any certificate for shares of Common Stock (or Other Securities)
issuable upon exercise of this Warrant or payment of cash to any Person other
than the Holder, and in case of such transfer or payment the Company shall not
be required to deliver any certificate for shares of Common Stock (or Other
Securities) upon such exercise or pay any cash until such tax or charge has been
paid or it has been established to the Company's reasonable satisfaction that no
such tax or charge is due. If the Holder notifies the Company that the Holder
has not received such shares of Common Stock (or Other Securities) (a "Holder
Share Notice") and the Company fails to deliver or cause to be delivered to the
Holder such shares of Common Stock (or Other Securities) pursuant to this
Section 3(a) (free of any restrictions on transfer or legends except to the
extent permitted under Section 6.12 of the Exchange Agreement) in accordance
herewith, within one Trading Day after the date the Holder gives such Holder
Share Notice, then, in addition to any other liability the Company may have, the
Company shall pay to the Holder, in cash, an amount, computed at the rate of 2%
per month of the Current Fair Market Value of the shares of Common Stock (or
Other Securities) not timely delivered by the Company, for the period such
failure continues (the "Exercise Delay Payments"), without duplication of any
amount payable to the Holder pursuant to clause (E) of Section 2(c)(i) of the
Registration Rights Agreement, with each change in the Current Fair Market Value
during such period being given effect. A Holder Share Notice may be given by
telephone or e-mail to the Company's Chief Financial Officer or General Counsel.
Upon exercise of this Warrant as provided herein, the Company's obligation to
issue and deliver the certificates for Common Stock shall be absolute and
unconditional, irrespective of the absence of any action by the Holder to
enforce the same, any waiver or consent with respect to any provision hereof,
the recovery of any judgment against any Person or any action to enforce the
same, any failure or delay in the enforcement of any other obligation of the
Company to the Holder, or any setoff, counterclaim, recoupment, limitation or
termination, or any breach or alleged breach by the Holder or any other Person
of any obligation to the Company or any violation or alleged violation of law by
the Holder or any other Person, and irrespective of any other circumstance which
might otherwise limit such obligation of the Company to the Holder in connection
with such exercise.
(b) If in any case the Company shall fail to issue and deliver or cause
to be delivered the shares of Common Stock to the Holder in connection with
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a particular exercise of this Warrant within one Trading Day after the Holder
gives a Holder Share Notice to the Company, in addition to any other liabilities
the Company may have hereunder and under applicable law, (A) the Company shall
pay or reimburse the Holder on demand for all out-of-pocket expenses, including,
without limitation, reasonable fees and expenses of legal counsel, incurred by
the Holder as a result of such failure; (B) if as a result of such failure the
Holder shall suffer any direct damages or liabilities from such failure
(including, without limitation, margin interest and the cost of purchasing
securities to cover a sale (whether by the Holder or the Holder's securities
broker) or borrowing of shares of Common Stock by the Holder for purposes of
settling any trade involving a sale of shares of Common Stock made by the Holder
during the period beginning on the Issuance Date and ending on the date the
Company delivers or causes to be delivered to the Holder such shares of Common
Stock), then, in addition to any amounts payable pursuant to Section 3(a), the
Company shall upon demand of the Holder pay to the Holder an amount equal to the
actual, direct, demonstrable out-of-pocket damages and liabilities suffered by
the Holder by reason thereof which the Holder documents to the reasonable
satisfaction of the Company, and (C) the Holder may by written notice (which may
be given by mail, courier, personal service or telephone line facsimile
transmission) or oral notice (promptly confirmed in writing), given at any time
prior to delivery to the Holder of the shares of Common Stock issuable in
connection with such exercise of the Holder's right, rescind such exercise and
the subscription form relating thereto, in which case the Holder shall
thereafter be entitled to exercise that portion of this Warrant as to which such
exercise is so rescinded and to exercise its other rights and remedies with
respect to such failure by the Company. Notwithstanding the foregoing the
Company shall not be liable to the Holder under clauses (A) or (B) of the
immediately preceding sentence to the extent the failure of the Company to
deliver or to cause to be delivered such shares of Common Stock results from
fire, flood, storm, earthquake, shipwreck, strike, war, acts of terrorism, crash
involving facilities of a common carrier, acts of God, or any similar event
outside the control of the Company (it being understood that the action or
failure to act of the Company's Transfer Agent shall not be deemed an event
outside the control of the Company except to the extent resulting from fire,
flood, storm, earthquake, shipwreck, strike, war, acts of terrorism, crash
involving facilities of a common carrier, acts of God, or any similar event
outside the control of such Transfer Agent or the bankruptcy, liquidation or
reorganization of such Transfer Agent under any bankruptcy, insolvency or other
similar law). The Holder shall notify the Company in writing (or by telephone
conversation, confirmed in writing) as promptly as practicable following the
third Trading Day after the Holder exercises this Warrant if the Holder becomes
aware that such shares of Common Stock so issuable have not been received as
provided herein, but any failure so to give such notice shall not affect the
Holder's rights under this Warrant or otherwise.
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4. Adjustment for Dividends in Other Stock, Property, etc.;
Reclassification, etc. In case at any time or from time to time on or after the
Issuance Date, all holders of Common Stock (or Other Securities) shall have
received, or (on or after the record date fixed for the determination of
stockholders eligible to receive) shall have become entitled to receive, without
payment therefor,
(a) other or additional stock, rights, warrants or other
securities or property (other than cash) by way of dividend, or
(b) any cash (excluding cash dividends payable solely out of
earnings or earned surplus of the Company), or
(c) other or additional stock, rights, warrants or other
securities or property (including cash) by way of spin-off, split-up,
reclassification, recapitalization, combination of shares or similar
corporate rearrangement,
other than (i) additional shares of Common Stock (or Other Securities) issued as
a stock dividend or in a stock-split (adjustments in respect of which are
provided for in Section 6) and (ii) rights or warrants to subscribe for Common
Stock at less than the Current Fair Market Value (adjustments in respect of
which are provided in Section 7), then and in each such case the Holder, on the
exercise hereof as provided in Section 2, shall be entitled to receive the
amount of stock, rights, warrants and Other Securities and property (including
cash in the cases referred to in subdivisions (b) and (c) of this Section 4)
which the Holder would hold on the date of such exercise if on the date of such
action specified in the preceding clauses (a) through (c) (or the record date
therefor) the Holder had been the holder of record of the number of shares of
Common Stock called for on the face of this Warrant and had thereafter, during
the period from the date thereof to and including the date of such exercise,
retained such shares and all such other or additional stock, rights, warrants
and Other Securities and property (including cash in the case referred to in
subdivisions (b) and (c) of this Section 4) receivable by the Holder as
aforesaid during such period, giving effect to all adjustments called for during
such period by Section 5.
5. Exercise upon a Reorganization Event. In case of any Reorganization
Event the Company shall, as a condition precedent to the consummation of the
transactions constituting, or announced as, such Reorganization Event, cause
effective provisions to be made so that the Holder shall have the right
thereafter, by exercising this Warrant (in lieu of the shares of Common Stock of
the Company and Other Securities or property purchasable and receivable upon
exercise of the rights represented hereby immediately prior to such
Reorganization Event) to purchase the kind and amount of shares of stock and
Other Securities and property (including cash) receivable upon such
Reorganization Event by a holder of the number of shares of Common Stock that
might have been
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received upon exercise of this Warrant immediately prior to such Reorganization
Event. Any such provision shall include provisions for adjustments in respect of
such shares of stock and Other Securities and property that shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Warrant. The provisions of this Section 5 shall apply to successive
Reorganization Events.
6. Adjustment for Certain Extraordinary Events. If on or after the
Issuance Date the Company shall (i) issue additional shares of the Common Stock
as a dividend or other distribution on outstanding Common Stock, (ii) subdivide
or reclassify its outstanding shares of Common Stock, or (iii) combine its
outstanding shares of Common Stock into a smaller number of shares of Common
Stock, then, in each such event, the Purchase Price shall, simultaneously with
the happening of such event, be adjusted by multiplying the Purchase Price in
effect immediately prior to such event by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding immediately prior to
such event and the denominator of which shall be the number of shares of Common
Stock outstanding immediately after such event, and the product so obtained
shall thereafter be the Purchase Price then in effect. The Purchase Price, as so
adjusted, shall be readjusted in the same manner upon the happening of any
successive event or events described herein in this Section 6. The Holder shall
thereafter, on the exercise hereof as provided in Section 2, be entitled to
receive that number of shares of Common Stock determined by multiplying the
number of shares of Common Stock which would be issuable on such exercise
immediately prior to such issuance, subdivision or combination, as the case may
be, by a fraction of which (i) the numerator is the Purchase Price in effect
immediately prior to such issuance, and (ii) the denominator is the Purchase
Price in effect on the date of such exercise.
7. Issuance of Rights or Warrants to Common Stockholders at less than
Current Fair Market Value. If the Company shall on or after the Issuance Date
issue rights or warrants to all holders of its outstanding shares of Common
Stock entitling them to subscribe for or purchase shares of Common Stock at a
price per share less than the Current Fair Market Value on the record date fixed
for the determination of stockholders entitled to receive such rights or
warrants, then
(a) the Purchase Price shall be adjusted so that the same
shall equal the price determined by multiplying the Purchase Price in
effect at the opening of business on the day after such record date by
a fraction of which the numerator shall be the number of shares of
Common Stock outstanding at the close of business
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on such record date plus the number of shares which the aggregate
offering price of the total number of shares so offered would purchase
at such Current Fair Market Value, and the denominator shall be the
number of shares of Common Stock outstanding on the close of business
on such record date plus the total number of additional shares of
Common Stock so offered for subscription or purchase; and
(b) the number of shares of Common Stock which the Holder may
thereafter purchase upon exercise of this Warrant at the opening of
business on the day after such record date shall be increased to a
number equal to the quotient obtained by dividing (x) the Aggregate
Purchase Price in effect immediately prior to such adjustment in the
Purchase Price pursuant to clause (a) of this Section 7 by (y) the
Purchase Price in effect immediately after such adjustment in the
Purchase Price pursuant to clause (a) of this Section 7.
Such adjustment shall become effective immediately after the opening of business
on the day following the record date fixed for determination of stockholders
entitled to receive such rights or warrants. To the extent that shares of Common
Stock are not delivered pursuant to such rights or warrants, upon the expiration
or termination of such rights or warrants, the Purchase Price shall be
readjusted to the Purchase Price which would then be in effect had the
adjustments made upon the issuance of such rights or warrants been made on the
basis of delivery of only the number of shares of Common Stock actually
delivered and the number of shares of Common Stock for which this Warrant may
thereafter be exercised shall be readjusted (subject to proportionate adjustment
for any intervening exercises of this Warrant) to the number which would then be
in effect had the adjustments made upon the issuance of such rights or warrants
been made on the basis of delivery of only the number of shares of Common Stock
actually delivered. In the event that such rights or warrants are not so issued,
the Purchase Price shall again be adjusted to be the Purchase Price which would
then be in effect if such record date had not been fixed and the number of
shares of Common Stock for which this Warrant may thereafter be exercised shall
again be adjusted (subject to proportionate adjustment for any intervening
exercises of this Warrant) to be the number which would then be in effect if
such record date had not been fixed. In determining whether any rights or
warrants entitle the Holder to subscribe for or purchase shares of Common Stock
at less than such Current Fair Market Value, and in determining the aggregate
offering price of such shares of Common Stock, there shall be taken into account
any consideration received for such rights or warrants, the value of such
consideration, if other than cash, to be determined by the Board of Directors.
8. Effect of Reclassification, Consolidation, Merger or Sale. (a) If
any of the following events occur, namely (i) any reclassification or change of
the outstanding shares of Common Stock (other than a change in par value, or
from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), (ii) any consolidation, merger,
statutory exchange or combination of the Company with another corporation as a
result of which holders of Common Stock shall be entitled to receive stock,
other securities or other
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property or assets (including cash) with respect to or in exchange for such
Common Stock, or (iii) any sale or conveyance of the properties and assets of
the Company as, or substantially as, an entirety to any other Person as a result
of which holders of Common Stock shall be entitled to receive stock, other
securities or other property or assets (including cash) with respect to or in
exchange for such Common Stock, then the Company, the successor or purchasing
Person and each Person who has agreed to issue such stock or other securities or
to transfer such other property or assets shall execute and deliver to the
Holder a written agreement providing that (x) this Warrant shall thereafter
entitle the Holder to purchase the kind and amount of shares of stock and other
securities or property or assets (including cash) receivable upon such
reclassification, change, consolidation, merger, statutory exchange,
combination, sale or conveyance, by the holder of a number of shares of Common
Stock issuable upon exercise of this Warrant (assuming, for such purposes, a
sufficient number of authorized shares of Common Stock available to exercise
this Warrant) immediately prior to such reclassification, change, consolidation,
merger, statutory exchange, combination, sale or conveyance, assuming such
holder of Common Stock did not exercise such holder's rights of election, if
any, as to the kind or amount of securities, cash or other property receivable
upon such reclassification, change, consolidation, merger, statutory exchange,
combination, sale or conveyance (provided that, if the kind or amount of
securities, cash or other property receivable upon such reclassification,
change, consolidation, merger, statutory exchange, combination, sale or
conveyance is not the same for each share of Common Stock in respect of which
such rights of election shall not have been exercised ("non-electing share"),
then for the purposes of this Section 8 the kind and amount of securities, cash
or other property receivable upon such reclassification, change, consolidation,
merger, statutory exchange, combination, sale or conveyance for each
non-electing share shall be deemed to be the kind and amount so receivable per
share by a plurality of the non-electing shares), (y) in the case of any such
successor or purchasing Person or any such Person who has agreed to issue such
stock or other securities or to transfer such other property or assets, upon
such consolidation, merger, statutory exchange, combination, sale or conveyance,
such successor or purchasing Person or any such Person who has agreed to issue
such stock or other securities or to transfer such other property or assets
shall be jointly and severally liable with the Company for the performance of
all of the Company's obligations under this Warrant, the Exchange Agreement and
the Registration Rights Agreement, and (z) if registration or qualification is
required under the 1933 Act or applicable state law for the public resale by the
Holder of such shares of stock and Other Securities so issuable upon exercise of
this Warrant, such registration or qualification shall be completed prior to
such reclassification, change, consolidation, merger, combination or sale. Such
written agreement shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Warrant. If, in the case of any such reclassification, change, consolidation,
merger, statutory exchange, combination, sale or conveyance, the stock or other
securities or other property or assets receivable thereupon by a holder of
shares of Common Stock includes shares of stock, other securities other property
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or assets of a Person other than the Company or any such successor or purchasing
Person, as the case may be, in such reclassification, change, consolidation,
merger, statutory exchange, combination, sale or conveyance, then such written
agreement shall also be executed by such other Person and shall contain such
additional provisions to protect the interests of the Holder as the Board of
Directors shall reasonably consider necessary by reason of the foregoing.
(b) The above provisions of this Section 8 shall similarly apply to
successive reclassifications, changes, consolidations, mergers, combinations,
sales and conveyances.
(c) If this Section 8 applies to any event or occurrence, Section 5
shall not apply to such event or occurrence.
9. Tax Adjustments. The Company may make such reductions in the
Purchase Price, in addition to those required by Sections 4, 5, 6 and 7, as the
Board of Directors considers to be advisable to avoid or diminish any income tax
to holders of Common Stock or rights to purchase Common Stock resulting from any
dividend or distribution of stock (or rights to acquire stock) or from any event
treated as such for income tax purposes.
10. Minimum Adjustment. (a) No adjustment in the Purchase Price (and no
related adjustment in the number of shares of Common Stock which may thereafter
be purchased upon exercise of this Warrant) shall be required unless such
adjustment would require an increase or decrease of at least 1% in the Purchase
Price; provided, however, that any adjustments which by reason of this Section
10 are not required to be made shall be carried forward and taken into account
in any subsequent adjustment. All such calculations under this Warrant shall be
made by the Company and shall be made to the nearest cent or to the nearest one
hundredth of a share, as the case may be.
(b) No adjustment need be made for a change in the par value of the
Common Stock or from par value to no par value or from no par value to par
value.
11. Notice of Adjustments. Whenever the Purchase Price is adjusted as
herein provided, the Company shall promptly, but in no event later than five
Trading Days thereafter, give a notice to the Holder setting forth the Purchase
Price and number of shares of Common Stock which may be purchased upon exercise
of this Warrant after such adjustment and setting forth a brief statement of the
facts requiring such adjustment but which such statement shall not include any
information which would be material non-public information for purposes of the
1934 Act. Failure to deliver such notice shall not affect the legality or
validity of any such adjustment.
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12. Further Assurances. The Company will take all action that may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and nonassessable shares of stock, free from all taxes, liens and
charges with respect to the issue thereof, on the exercise of all or any portion
of this Warrant from time to time outstanding.
13. Notice to Holder Prior to Certain Actions. In case on or after the
Issuance Date:
(a) the Company shall declare a dividend (or any other distribution) on
its Common Stock (other than in cash out of retained earnings); or
(b) the Company shall authorize the granting to the holders of its
Common Stock of rights or warrants to subscribe for or purchase any share of any
class or any other rights or warrants; or
(c) the Board of Directors shall authorize any reclassification of the
Common Stock (other than a subdivision or combination of its outstanding Common
Stock, or a change in par value, or from par value to no par value, or from no
par value to par value), or any consolidation or merger or other business
combination transaction to which the Company is a party and for which approval
of any stockholders of the Company is required, or the sale or transfer of all
or substantially all of the assets of the Company; or
(d) there shall be pending the voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
the Company shall give the Holder, as promptly as possible but in any event at
least ten Trading Days prior to the applicable date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for the purpose of
such dividend, distribution or rights or warrants, or, if a record is not to be
taken, the date as of which the holders of Common Stock of record to be entitled
to such dividend, distribution or rights are to be determined, or (y) the date
on which such reclassification, consolidation, merger, other business
combination transaction, sale, transfer, dissolution, liquidation or winding-up
is expected to become effective or occur, and the date as of which it is
expected that holders of Common Stock of record who shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such reclassification, consolidation, merger, other business combination
transaction, sale, transfer, dissolution, liquidation or winding-up shall be
determined. Such notice shall not include any information which would be
material non-public information for purposes of the 1934 Act. Failure to give
such notice, or any defect therein, shall not affect the legality or validity of
such dividend, distribution, reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding-up. In the case of any such action
of
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which the Company gives such notice to the Holder or is required to give such
notice to the Holder, the Holder shall be entitled to give a subscription form
to exercise this Warrant in whole or in part that is contingent on the
completion of such action.
14. Reservation of Stock, etc., Issuable on Exercise of Warrants. The
Company will at all times reserve and keep available out of its authorized but
unissued shares of capital stock, solely for issuance and delivery on the
exercise of this Warrant, a sufficient number of shares of Common Stock (or
Other Securities) to effect the full exercise of this Warrant and the exercise,
conversion or exchange of all other Common Stock Equivalents from time to time
outstanding (or Other Securities), and if at any time the number of authorized
but unissued shares of Common Stock (or Other Securities) shall not be
sufficient to effect such exercise, conversion or exchange, the Company shall
take such action as may be necessary to increase its authorized but unissued
shares of Common Stock (or Other Securities) to such number as shall be
sufficient for such purposes.
15. Transfer of Warrant. This Warrant shall inure to the benefit of the
successors to and assigns of the Holder. The Holder may not assign or transfer
this Warrant to a Person who is a business competitor of the Company without the
Company's prior written consent, which the Company may withhold in its sole
discretion. This Warrant and all rights hereunder, in whole or in part, are
registrable at the office or agency of the Company referred to below by the
Holder in Person or by his duly authorized attorney, upon surrender of this
Warrant properly endorsed accompanied by an assignment form in the form attached
to this Warrant, or other customary form, duly executed by the transferring
Holder.
16. Register of Warrants. The Company shall maintain, at the principal
office of the Company (or such other office as it may designate by notice to the
Holder), a register in which the Company shall record the name and address of
the Person in whose name this Warrant has been issued, as well as the name and
address of each successor and prior owner of such Warrant. The Company shall be
entitled to treat the Person in whose name this Warrant is so registered as the
sole and absolute owner of this Warrant for all purposes.
17. Exchange of Warrant. This Warrant is exchangeable, upon the
surrender hereof by the Holder at the office or agency of the Company referred
to in Section 15, for one or more new Warrants of like tenor representing in the
aggregate the right to subscribe for and purchase the number of shares of Common
Stock which may be subscribed for and purchased hereunder, each of such new
Warrants to represent the right to subscribe for and purchase such number of
shares as shall be designated by the Holder at the time of such surrender.
18. Replacement of Warrant. On receipt by the Company of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
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destruction or mutilation of this Warrant and (a) in the case of loss, theft or
destruction, of indemnity from the Holder reasonably satisfactory in form to the
Company (and without the requirement to post any bond or other security), or (b)
in the case of mutilation, upon surrender and cancellation of this Warrant, the
Company will execute and deliver to the Holder a new Warrant of like tenor
without charge to the Holder.
19. Warrant Agent. The Company may, by written notice to the Holder,
appoint the transfer agent and registrar for the Common Stock as the Company's
agent for the purpose of issuing Common Stock (or Other Securities) on the
exercise of this Warrant pursuant to Section 2, and the Company may, by written
notice to the Holder, appoint an agent having an office in the United States of
America for the purpose of exchanging this Warrant pursuant to Section 17, and
replacing this Warrant pursuant to Section 18, or any of the foregoing, and
thereafter any such exchange or replacement, as the case may be, shall be made
at such office by such agent.
20. Remedies. The Company stipulates that the remedies at law of the
Holder in the event of any default or threatened default by the Company in the
performance of or compliance with any of the terms of this Warrant are not and
will not be adequate, and that such terms may be specifically enforced by a
decree for the specific performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof or otherwise.
21. No Rights or Liabilities as a Stockholder. This Warrant shall not
entitle the Holder to any voting rights or other rights as a stockholder of the
Company. Nothing contained in this Warrant shall be construed as conferring upon
the Holder the right to vote or to consent or to receive notice as a stockholder
of the Company on any matters or with respect to any rights whatsoever as a
stockholder of the Company. No dividends or interest shall be payable or accrued
in respect of this Warrant or the interest represented hereby or the Common
Stock (or Other Securities) purchasable hereunder until, and only to the extent
that, this Warrant shall have been exercised in accordance with its terms.
22. Notices, etc. All notices and other communications from the Company
to the Holder shall be in writing and delivered personally, by confirmed
facsimile, by a nationally recognized overnight courier service or mailed by
first class certified mail, postage prepaid, at such facsimile telephone number
or address as may have been furnished to the Company in writing by the Holder or
at such facsimile telephone number or the address shown for the Holder on the
register of Warrants referred to in Section 16.
23. Transfer Restrictions. This Warrant has not been and is not being
registered under the provisions of the 1933 Act or any state securities laws
-18-
and this Warrant may not be transferred prior to the end of the holding period
applicable to sales hereof under Rule 144(k) unless (1) the transferee is an
"accredited investor" (as defined in Regulation D under the 0000 Xxx) or a QIB
in a transfer that meets the requirements of Rule 144A, and (2) the Holder shall
have delivered to the Company an opinion of counsel, reasonably satisfactory in
form, scope and substance to the Company, to the effect that this Warrant may be
sold or transferred without registration under the 1933 Act. Prior to any such
transfer, such transferee shall have represented in writing to the Company that
such transferee has requested and received from the Company all information
relating to the business, properties, operations, condition (financial or
other), results of operations or prospects of the Company deemed relevant by
such transferee; and that such transferee has been afforded the opportunity to
ask questions of the Company concerning the foregoing and has had the
opportunity to obtain and review the Registration Statement and the prospectus
related thereto, each as amended or supplemented to the date of transfer to such
transferee, and the reports and other information concerning the Company which
at the time of such transfer have been filed by the Company with the SEC
pursuant to the 1934 Act and which are incorporated by reference in such
prospectus as of the date of such transfer. If such transfer is intended to
assign the rights and obligations of the Holder the Exchange Agreement and the
Registration Rights Agreement, such transfer shall otherwise be made in
compliance with the applicable provisions of the Exchange Agreement and the
Registration Rights Agreement.
24. Rule 144A Information Requirement. Within the period prior to the
expiration of the holding period applicable to sales hereof under Rule 144(k)
under the 1933 Act (or any successor provision), the Company covenants and
agrees that it shall, during any period in which it is not subject to Section 13
or 15(d) under the 1934 Act, make available to the Holder and the holder of any
shares of Common Stock issued upon exercise of this Warrant which continue to be
Restricted Securities in connection with any sale thereof and any prospective
purchaser of this Warrant from the Holder, the information required pursuant to
Rule 144A(d)(4) under the 1933 Act upon the request of the Holder and it will
take such further action as the Holder may reasonably request, all to the extent
required from time to time to enable the Holder to sell this Warrant without
registration under the 1933 Act within the limitation of the exemption provided
by Rule 144A, as Rule 144A may be amended from time to time. Upon the request of
the Holder, the Company will deliver to the Holder a written statement as to
whether it has complied with such requirements.
-19-
25. Legend. The provisions of Section 6.12 of the Exchange Agreement
and the related definitions of capitalized terms used therein and defined in the
Exchange Agreement are by this reference incorporated herein as if set forth in
full at this place.
26. Amendment; Waiver. This Warrant and any terms hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of such change, waiver, discharge
or termination is sought.
27. Miscellaneous. This Warrant shall be construed and enforced in
accordance with and governed by the internal laws of the State of Nevada. The
Company hereby agrees that all actions or proceedings arising directly or
indirectly from or in connection with this Warrant shall be litigated only in
the United States District Court for the Northern District of Texas located in
Dallas County, Dallas, Texas. The Company consents and submits to the
jurisdiction and venue of the foregoing court and consents that any process or
notice of motion or other application to said court or a judge thereof may be
served inside or outside the State of Texas or the Northern District of Texas
(but such consent shall not be deemed a general consent to jurisdiction and
service for any third parties) by registered mail, return receipt requested,
directed to the Company at its address provided in or pursuant to the Exchange
Agreement (and service so made shall be deemed complete three (3) days after the
same has been posted as aforesaid) or by personal service or in such other
manner as may be permissible under the rules of said court. The Company hereby
waives any right to a jury trial in connection with any litigation pursuant to
this Warrant. The headings, captions and footers in this Warrant are for
purposes of reference only, and shall not limit or otherwise affect any of the
terms hereof. The invalidity or unenforceability of any provision hereof shall
in no way affect the validity or enforceability of any other provision.
28. Attorneys' Fees. In any litigation, arbitration or court proceeding
between the Company and Holder relating hereto, the prevailing party shall be
entitled to attorneys' fees and expenses and all costs of proceedings incurred
in enforcing this Warrant.
[Signature Page Follows]
-20-
IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed on its behalf by one of its officers thereunto duly authorized.
Issuance Date: April 21, 2004 KNIGHTSBRIDGE FINE WINES, INC.
By:
----------------------------------------
Name: Xxxx Xxxxxxx
Title: President & CEO
-21-
ASSIGNMENT
For value __________________hereby sell(s), assign(s) and transfer(s)
unto __________________ (Please insert social security or other Taxpayer
Identification Number of assignee: __________________) the attached original,
executed Warrant to purchase __________________ shares of Common Stock of
Knightsbridge Fine Wines, Inc., a Nevada corporation (the "Company"), and hereby
irrevocably constitutes and appoints _______________________attorney to transfer
the Warrant on the books of the Company, with full power of substitution in the
premises.
In connection with any transfer of the Warrant within the period prior
to the expiration of the holding period applicable to sales thereof under Rule
144(k) under the 1933 Act (or any successor provision) (other than any transfer
pursuant to a registration statement that has been declared effective under the
1933 Act), the undersigned confirms that such Warrant is being transferred:
[ ] To the Company or a subsidiary thereof; or
[ ] To a QIB pursuant to and in compliance with Rule
144A; or
[ ] To an "accredited investor" (as defined in
Regulation D under the 0000 Xxx) pursuant to
and in compliance with the 1933 Act; or
[ ] Pursuant to and in compliance with Rule 144 under the
1933 Act;
and unless the box below is checked, the undersigned confirms that, to the
knowledge of the undersigned, such Warrant is not being transferred to an
"affiliate" (as defined in Rule 144 under the 0000 Xxx) of the Company.
[ ] The transferee is an affiliate of the Company.
Capitalized terms used in this Assignment and not defined in
this Assignment shall have the respective meanings provided in the Warrant.
Dated: NAME:
--------------- ----------------------------------------
----------------------------------------
Signature(s)
Exhibit 1
FORM OF SUBSCRIPTION
KNIGHTSBRIDGE FINE WINES, INC.
(To be signed only on exercise of Warrant)
TO: Knightsbridge Fine Wines, Inc.
00 Xxxxxxxxxx Xxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attention: Chief Executive Officer
Facsimile No.: (000) 000-0000
1. The undersigned Holder of the attached original, executed Warrant
hereby elects to exercise its purchase right under such Warrant with respect to
________ shares (the "Exercise Shares") of Common Stock, as defined in the
Warrant, of Knightsbridge Fine Wines, Inc., a Nevada corporation (the
"Company").
2. The undersigned Holder (check one):
|_| (a) elects to pay the Aggregate Purchase Price for such shares
of Common Stock (i) in lawful money of the United States or by
the enclosed certified or official bank check payable in
United States dollars to the order of the Company in the
amount of $_____, or (ii) by wire transfer of United States
funds to the account of the Company in the amount of $______,
which transfer has been made before or simultaneously with the
delivery of this Form of Subscription pursuant to the
instructions of the Company;
or
|_| (b) elects to receive shares of Common Stock having a value
equal to the value of the Warrant calculated in accordance
with Section 2(b) of the Warrant.
3. Please issue a stock certificate or certificates representing the
appropriate number of shares of Common Stock in the name of the undersigned or
in such other name(s) as is specified below:
1-1
Name:
------------------------------------
Address:
------------------------------------
------------------------------------
Social Security or Tax Identification Number (if any):
------------------------------------
Dated:
-------------------- -------------------------------------------
(Signature must conform to name of
Holder as specified on the face of the
Warrant)
-------------------------------------------
-------------------------------------------
(Address)
1-2
