WARRANT AGREEMENT
BETWEEN
BROTHERS WARRANT HOLDINGS I,
A CALIFORNIA GENERAL PARTNERSHIP
AND
BROTHERS GOURMET COFFEES, INC.
DATED AS OF DECEMBER 27, 1996
THE WARRANT AND WARRANT SECURITIES TO BE RECEIVED UPON EXERCISE OF THE WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR QUALIFIED UNDER ANY STATE SECURITIES LAWS. THE WARRANT
AND WARRANT SECURITIES, AS THE CASE MAY BE, MAY NOT BE OFFERED, SOLD, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED, WHETHER OR NOT FOR CONSIDERATION, IN THE
ABSENCE OF (1) AN EFFECTIVE REGISTRATION STATEMENT AND QUALIFICATION IN EFFECT
WITH RESPECT TO THE WARRANT AND WARRANT SECURITIES, AS THE CASE MAY BE, UNDER
THE SECURITIES ACT AND UNDER ANY APPLICABLE STATE SECURITIES LAWS OR (2) AN
EXEMPTION FROM SUCH REGISTRATION AND QUALIFICATION.
WARRANT AGREEMENT
THIS WARRANT AGREEMENT (this "AGREEMENT") is dated as of the 27th of
December, 1996, and executed by and between BROTHERS WARRANT HOLDINGS I, A
CALIFORNIA GENERAL PARTNERSHIP ("BWHI"), and BROTHERS GOURMET COFFEES, INC., a
Delaware corporation (the "COMPANY").
WHEREAS, the Company has agreed to grant to BWHI or its assigns a
common stock warrant in the form attached hereto as EXHIBITS A hereto (the
"WARRANT") to acquire shares of the Company's Common Stock. This Agreement
sets forth certain rights and obligations of the Company and BWHI with
respect to the Warrant.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants, representations, warranties and agreements contained in this
Agreement, the parties hereto agree as follows:
I. DEFINITIONS
Section 1.01 DEFINED TERMS. As used in this Agreement, the
following capitalized terms shall have the meanings respectively assigned to
them below, which meanings shall be applicable equally to the singular and
plural forms of the terms so defined. Terms not otherwise defined herein
shall have the meanings ascribed to such terms in that certain Securities
Purchase Agreement, dated September 20, 1996, between the Company and Siena
Capital Partners, L.P. (the "BRIDGE LOAN AGREEMENT"), and that certain Senior
Subordinated Note Agreement dated December 27, 1996, between the Company and
Dilmun Financial Services (the "SUBORDINATED LOAN AGREEMENT"). To the extent
of any conflict in defined terms in the Bridge Loan Agreement and the
Subordinated Loan Agreement, the definitions in the Subordinated Loan
Agreement shall govern. To the extent of any conflict or inconsistency in
the information contained in the DISCLOSURE SCHEDULE and the SCHEDULES,
unless clearly indicated otherwise, the information set forth in the
Schedules shall govern and/or be controlling.
"ADJUSTMENT TRANSACTION" shall mean any of: (i) the issuance or
sale of Common Stock, Class B Common Stock or Common Stock Equivalents for
less than Fair Value (as hereinafter defined) (other than delivery of shares
of Common Stock upon exercise of this Warrant), in addition to the number of
shares outstanding as of the date hereof, as disclosed herein, including,
without limitation, any issuance of Common Stock, Class B Common Stock or
Common Stock Equivalents in connection with the settlement of that certain
litigation disclosed as Items 1.5(n)1, 2 and 3 in the DISCLOSURE SCHEDULE and
Items 1., 2., 3. and 4. in the Schedules (the "SETTLEMENT STOCK"), which
Settlement Stock is valued at less than Fair Value as of the date of such
settlement or as of the date such Settlement Stock is actually tendered to
the participants in said litigation, (ii) the declaration of a Dividend upon,
or distribution in respect of, any of the Company's capital stock, payable in
Common Stock or Common Stock Equivalents, (iii) the
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subdivision or combination by the Company of its outstanding Common Stock
into a larger or smaller number of shares of Common Stock, as the case may
be, (iv) any capital reorganization or reclassification of the Common Stock
or Class B Common Stock of the Company, (v) the consolidation or merger of
the Company or any Subsidiary (as hereinafter defined) with or into another
corporation, (vi) the sale or transfer or other disposition of all or
substantially all of the property of the Company, (vii) the dissolution,
liquidation or winding up of the Company or (viii) any event as to which the
foregoing clauses are not strictly applicable, but the failure to make an
adjustment in the Exercise Price hereunder would not fairly protect the
purchase rights, without dilution, represented by the Warrant.
"CLASS B COMMON STOCK" shall mean Class B Common Stock, $.0001 par
value per share, of the Company.
"COMMON EQUITY" shall mean the total equity interest in the Company
represented by the Common Stock and the Class B Common Stock and shall
include Common Equity resulting from any reorganization, reclassification or
recapitalization or similar event.
"COMMON STOCK" shall mean common stock, $.0001 par value per share,
of the Company.
"COMMON STOCK EQUIVALENTS" shall mean all options, warrants
(including the Warrant), convertible securities, securities and other rights
(in each case whether now existing or hereafter issued or arising) to acquire
from the Company shares of Common Stock or Class B Common Stock (without
regard to whether such options, warrants, convertible securities, securities
and other rights are then exchangeable, exercisable or convertible in full,
in part or at all).
"DISCLOSURE SCHEDULE" shall mean the schedules to the Bridge Loan
Agreement.
"DIVIDEND" means, as to any Person (as hereinafter defined), any
declaration or payment of any dividend (other than a stock dividend) on, or
the making of any pro rata distribution, loan, advance, or investment to,
any shares of capital stock of such Person.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder, and any
successor provisions thereto.
"EXERCISE PRICE" shall have the meaning given in the Warrant, as
adjusted from time to time pursuant to the terms of the Warrant and this
Agreement.
"EXPIRATION PERIOD" means the period commencing on the date hereof
through and including the seventh anniversary of the date hereof or, in the
event the seventh anniversary is not a Business Day (as hereinafter defined),
the next succeeding Business Day.
"EXERCISE QUANTITY" shall mean the number of shares of Common Stock,
determined from time to time, taking into account all shares of Common Stock
theretofore issued upon exercise of
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the Warrant, required to be issued by the Company to the Holders of the
Warrant. Exercise Quantity shall initially have the meaning given in the
Warrant, and may be adjusted from time to time, pursuant to the provisions of
the Warrant and this Agreement.
"FAIR VALUE" means, so long as, (a) the Company maintains its
listing on a national stock exchange, the NASDAQ system or another
inter-dealer quotation system; and (b) there exists and is continuing a
public float having a minimum value of $15 million based on an average
trailing twenty (20) trading-day period, to the extent such definition is
applicable, with reference to the Warrant Securities (as hereinafter defined)
and the Common Stock on a per share basis, the current market price per
share of the Common Stock as of any date of determination. Notwithstanding
the foregoing, in the event the standards set forth in the preceding sentence
have not been met or with respect to other appropriate security, property,
assets, business or entity, "Fair Value" shall mean the fair value of such
item as determined by mutual agreement reached by the Holder and the Company
or, in the event the parties are unable to agree, an opinion of an
independent investment banking firm or firms in accordance with the following
procedure. In the case of any event which gives rise to a requirement to
determine "Fair Value" pursuant to this Agreement, the Company shall be
responsible for initiating the process by which Fair Value shall be
determined as promptly as practicable, but in any event within sixty (60)
days following such event and if the procedures contemplated herein in
connection with determining Fair Value have not been complied with fully,
then any such determination of Fair Value for any purpose of this Agreement
shall be deemed to be preliminary and subject to adjustment pending full
compliance with such procedures. Upon the occurrence of an event requiring
the determination of Fair Value, the Company shall give the Holder(s) of the
Warrant notice of such event, and the Company and the Holders shall engage in
direct good faith discussions to arrive at a mutually agreeable determination
of Fair Value.
In the event the Company and the Holder(s) (as hereinafter defined)
are unable to arrive at a mutually agreeable determination within thirty (30)
days of the notice, the Company and the Holder(s) of the Warrant (who, if
more than one, shall agree among themselves by a majority) shall each retain
a separate independent investment banking firm of national reputation (which
firm, in either case, may be the independent investment banking firm
regularly retained by the Company or any such Holder). Such firms shall
jointly determine the Fair Value of the security, property, assets, business
or entity, as the case may be, in question and deliver their opinion in
writing to the Company and to such Holder within thirty (30) days of their
retention. In no event shall the marketability, or lack thereof, or lack of
registration of a security be a factor in determining the "Fair Value" of
such security.
If such firms cannot jointly make such determination within such
30-day period, then, unless otherwise directed by agreement of the Company
and the Holder(s) of a majority or more of the Warrant, such firms, in their
sole discretion, shall choose another independent investment banking firm of
the Company or such Holder(s), which firm shall make such determination and
render such an opinion. In either case, the determination so made shall be
conclusive and binding on the Company and such Holder(s). The fees and
expenses of the investment banking
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firm retained by Holder(s) pursuant to this provision shall be borne by
Holder(s). The fees and expenses of all other investment banking firms
retained pursuant to this provision shall be borne by the Company.
"HOLDER" or "HOLDERS" shall mean the Person(s) then registered as
the owner(s) of the Warrant or Warrant Securities, as the case may be, on the
books and records of the Company.
"PERSON" shall mean any individual, corporation, partnership,
limited liability company, association, joint-stock company, trust, estate,
unincorporated organization, joint venture, court or governmental or
political subdivision or agency thereof.
"PREFERRED STOCK" shall mean Preferred Stock, $1.00 par value per
share, of the Company.
"REGISTRABLE SECURITIES" shall have the meaning assigned to it in
SECTION 6.01 hereof.
"SCHEDULES" shall mean the Schedules to the Subordinated Loan
Agreement.
"SUBSIDIARY" shall mean any corporation as to which an aggregate of
more than 50% of the outstanding voting stock is at any time directly or
indirectly owned by the Company, or by one or more of its Subsidiaries or by
the Company and one or more of its Subsidiaries.
"WARRANT SECURITIES" shall mean the shares of Common Stock (or
other securities representing Common Stock) purchasable or purchased from
time to time under the Warrant or acquired upon any transfer of any such
shares, together with all additional securities received in payment of
dividends or distributions on or splits of those securities or received as a
result of the adjustments provided for in ARTICLE V hereof.
II. WARRANT
On the date hereof, the Company will grant to BWHI, for good and
valuable consideration, the Warrant in the form attached as EXHIBIT A hereto.
BWHI and any subsequent Holder of the Warrant and of Warrant Securities
shall have the rights and obligations provided for in the Warrant and in this
Agreement.
III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants as follows:
(a) The execution and delivery of this Agreement and the Warrant
have been duly and properly authorized by all requisite corporate action of
the Company and its board of directors, and, except as disclosed in the
DISCLOSURE SCHEDULE AND THE Schedules, no consent of any other Person is
required as a prerequisite to the validity and enforceability of this
Agreement and the Warrant that has not been obtained. The Company has the
full legal right, power and authority to
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execute and deliver this Agreement and the Warrant and to perform its
obligations hereunder and thereunder. When issued and delivered pursuant to
this Agreement, the Warrant will have been duly executed, issued and
delivered and will constitute valid and legally binding obligations of the
Company entitled to the benefits provided herein and therein.
(b) Except as set forth in the DISCLOSURE SCHEDULE AND THE
Schedules, the Company is not a party to or otherwise subject to any contract
or agreement which restricts or otherwise affects its right or ability to
execute and deliver this Agreement or the Warrant or to perform any
obligation hereunder or thereunder (including, without limitation, issuance
of the Warrant Securities). Neither the execution or delivery of this
Agreement or the Warrant, nor compliance therewith (including, without
limitation, issuance of the Warrant Securities), will conflict with, or
result in a breach of the terms, conditions or provisions of, or constitute
a default under, or result in any violation of, or result in the creation of
any material lien upon any properties of the Company under, or require any
consent, approval, or other action by, notice to or filing with any court or
Governmental Person pursuant to the Certificate of Incorporation or By-laws
of the Company, as currently in effect, any award of any arbitrator, or any
material agreement, instrument or law to which the Company is subject or by
which it is bound.
(c) On the date hereof, the authorized capital stock of the
Company will consist of: (i) 15,000,000 shares of Common Stock; (ii)
2,000,000 shares of Class B Common Stock, and (iii) 10,000,000 shares of
Preferred Stock. As of September 27, 1996, the Company had issued and
outstanding (A) 10,362,605 shares of Common Stock, (B) 839,332 shares of
Class B Common Stock and (C) no shares of Preferred Stock. All such
outstanding shares are validly issued, fully paid and nonassessable. Except
as disclosed in the DISCLOSURE SCHEDULE, and the SCHEDULES, and except for
the Warrant issued to BIB Holdings Bermuda L.H. ("BIB") in connection with
the closing of the Subordinated Loan Agreement (the "BIB WARRANT"), there are
no rights, options or warrants of any kind outstanding to purchase or acquire
Common Stock or Class B Common Stock or any other ownership interest in the
Company, nor are there other securities, obligations, agreements or rights of
any kind outstanding which are exercisable for, convertible into or
exchangeable for any Common Stock or Class B Common Stock or any other
ownership interests in the Company or under the terms of which the parties
thereto have the right to purchase or acquire Common Stock, Class B Common
Stock or Common Stock Equivalents. Except as disclosed in the DISCLOSURE
SCHEDULE and the SCHEDULES, and except for the BIB Warrant, the issuance by
the Company of the Warrant and the Warrant Securities is not subject to any
preemptive or similar right of any Person pursuant to statute, contract or
understanding.
(d) Except as provided in this Agreement and except as provided in
the Subordinated Loan Agreement and BIB Warrant, the Company is not subject
to any obligation to repurchase or otherwise acquire or retire any shares of
capital stock. Except as disclosed in the DISCLOSURE SCHEDULE and except as
provided in the Subordinated Loan Agreement and BIB Warrant, there is no
commitment of the Company to issue any shares, warrants, options, or other
such rights, or to distribute to holders of any class of its capital stock
any evidences of indebtedness or assets, or to pay any Dividend or make any
other distribution in respect thereof.
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(e) The Warrant is, and the Warrant Securities will be, issued by
the Company to BWHI in a transaction exempt from registration and
qualification under the applicable federal and state securities laws.
(f) Except as disclosed in the DISCLOSURE SCHEDULE AND THE
SCHEDULES, AND EXCEPT AS PROVIDED FOR IN THE SUBORDINATED LOAN AGREEMENT AND
BIB WARRANT, there is not in effect on the date of this Agreement any
agreement by the Company (other than this Agreement) pursuant to which any
holders of securities of the Company have a right to cause the Company to
register such securities under the Securities Act.
IV. COVENANTS
Section 4.01 COVENANTS OF THE COMPANY. The Company hereby
covenants and agrees that, during the term of this Agreement, unless all of
the Holders of the Warrant agree otherwise in writing:
(a) Each of the Warrant Securities issued and delivered upon the
exercise of the Warrant and payment of the Exercise Price will be duly and
validly authorized and issued, will be fully paid and nonassessable, and will
not be subject to any unpaid tax or any lien, whether respecting their
issuance to and purchase by the Holder of the Warrant or otherwise. The
Company will take all such actions as may be necessary to assure that all
such shares of Common Stock may be so issued without violation of any
applicable law or governmental regulation or any requirements of any domestic
securities exchange upon which shares of Common Stock may be listed.
(b) The Company shall, but only to the extent shares of Common
Stock are legally available and subject to the rights of BIB under the BIB
Warrant which shall take precedence over BWHI's rights hereunder, reserve and
at all times keep available for issuance an authorized number of shares of
Common Stock sufficient to permit the full and immediate exercise of the
Warrant and the full and immediate exercise, exchange and conversion of all
other securities, options, warrants and other rights issued or granted by the
Company.
(c) The Company shall not permit the par value of its Common Stock
to exceed, at any time, the Exercise Price and shall take all such actions as
may be necessary or appropriate to ensure that it does not do so.
(d) The Company shall not create or permit the existence of any
class of common stock, preferred stock, or any class or series of securities
having voting rights other than as may be required by statute, or any other
class or series of securities having any liquidation, Dividend or other
preference, other than the Common Stock, the Class B Common Stock and the
Preferred Stock.
(e) As soon as available, and in no event later than the dates
filed with the SEC or
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any other Governmental Person or other regulatory authority, if such
documents are so filed, the Company shall deliver to the Holder(s) of the
Warrant and the Warrant Securities copies of (i) all annual, quarterly and
monthly financial statements made available by the Company to its
stockholders, (ii) all reports, notices and proxy or information statements
sent or made available generally by the Company to its stockholders, and
(iii) all regular and periodic reports and all registration statements,
prospectuses and other information filed by the Company with the Commission,
relevant state authorities or any securities exchange, securities quotation
system or other self-regulatory organization.
(f) The Company shall cooperate with the Holder(s) of the Warrant
and the Warrant Securities in supplying such information as may be reasonably
necessary for the Holder(s) to complete and file any information or other
reporting forms from time to time required by the Commission, relevant state
authorities or any securities exchange, securities quotation system or other
self-regulatory organization, including, without limitation, information
pertaining to or required for the availability of any exemption from the
securities laws for the sale, transfer or other disposition of the Warrant or
any of the Warrant Securities.
Section 4.02 INDEMNIFICATION.
(a) In connection with any registration or qualification of
Warrant Securities hereunder, the Company agrees that BWHI and each other
Holder of the Warrant or any Warrant Securities purchased hereunder, any
underwriter(s), and their respective directors, officers, employees,
attorneys and agents, as well as each other Person (if any) controlling any
of the foregoing Persons within the meaning of Section 15 of the Securities
Act, or Section 20 of the Exchange Act, shall not incur any liability for
acts and omissions arising out of or related directly or indirectly to the
Warrant, the Warrant Securities, this Agreement, any registration statement
or prospectus or any misstatement or omission of a material fact therein; and
the Company hereby expressly waives any and all claims and actions which it
now has or may hereafter at any time have against BWHI and each other Holder
of the Warrant or underlying Warrant Securities, and their respective
directors, officers, employees, attorneys and agents, arising out of or
related directly or indirectly to any and all of the foregoing acts,
omissions and circumstances, except insofar as such liability is caused by
untrue statements or alleged untrue statements or omissions or alleged
omissions and is based upon information furnished in writing by Holder
expressly for use therein.
(b) The Company agrees to defend, indemnify and hold harmless BWHI
and each other Holder of the Warrant, this Agreement, or any Warrant Security
purchased hereunder, any underwriter(s), and their respective directors,
officers, employees, attorneys and agents, as well as each other Person (if
any) controlling any of the foregoing Persons within the meaning of Section
15 of the Securities Act, or Section 20 of the Exchange Act, from and
against any and all claims, liabilities, losses and expenses (including,
without limitation, the disbursements, expenses and fees of their respective
attorneys) that may be imposed upon, incurred by, or asserted against any of
them, any of their respective directors, officers, employees, attorneys and
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agents, or any such control Person, under the Securities Act, the Exchange
Act or any other statute or at common law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof), arise out of or are
related directly or indirectly to: (i) the Warrant or the Warrant
Securities, (ii) any registration statement or prospectus, (iii) any alleged
untrue statement of any material fact contained, on the effective date
thereof, in any registration statement under which such securities were
registered under the Securities Act or the Exchange Act, or in any
preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereto, or (iv) any alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and shall reimburse such Persons for
any legal or any other expenses reasonably incurred by such Persons in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any alleged untrue statement or alleged
omission made in such registration statement, preliminary prospectus,
prospectus or amendment or supplement in reliance upon and in conformity with
written information furnished to the Company through an instrument duly
executed by such respective Person specifically for use therein. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of any such indemnified Person, and shall
survive the transfer of such securities by such Person. Promptly after
receipt of notice of the commencement of any action in respect of which
indemnity may be sought against the Company, the Company shall assume the
defense of such action (including the employment of counsel, who shall be
counsel reasonably satisfactory to the party seeking indemnity hereunder) and
the payment of expenses insofar as such action shall relate to any alleged
liability in respect of which indemnity may be sought against the Company.
The Company shall not, except with the approval of each party being
indemnified under this SECTION 4.02, consent to entry of any judgment or
enter into any settlement that does not include as an unconditional term
thereof the giving by the claimant or plaintiff to the parties being so
indemnified of a release from all liability in respect to such claim or
litigation.
Section 4.03 LISTING ON THE SECURITIES EXCHANGE. The Company
shall, at its expense, list on any securities exchange where it lists its
Common Stock, and maintain and increase when necessary such listing of all
outstanding Warrant Securities so long as any shares of Common Stock shall be
so listed. The Company shall also so list on each securities exchange, and
will maintain such listing of, any other securities which the holder of the
Warrant shall be entitled to receive upon the exercise thereof if at the
time any securities of the same class shall be listed on such securities
exchange by the Company.
Section 4.04 REPURCHASES AND REDEMPTIONS. Except as otherwise
permitted under the Subordinated Loan Agreement and the BIB Warrant, the
Company shall not repurchase or redeem any of its equity securities or any
securities convertible into or exchangeable for such equity securities or any
warrants or other rights to purchase such equity securities unless it
concurrently makes a cash payment to the Holder(s) of the Warrant equal to
the product of: (1) the quotient obtained by dividing (x) the aggregate
amount of cash and the aggregate Fair Value
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of any property paid out by the Company in connection with any such
repurchase or redemption by (y) the number of shares of Common Stock and
Common Stock Equivalents outstanding immediately after such repurchase or
redemption (excluding Warrant Securities) and (2) the number of shares of
Common Stock issuable upon the exercise of the Warrant.
V. ANTIDILUTION
Section 5.01 NO DILUTION OR IMPAIRMENT. The Company hereby
acknowledges that the initial number of shares issuable upon exercise of the
Warrant was calculated based upon 2.60% of the number of shares of Common
Stock, Class B Common Stock and Common Stock Equivalents outstanding and the
representation of the Company that the number of shares of Common Stock and
Common Stock Equivalents outstanding as of the date hereof (including the
Warrant Securities) was Fifteen Million Four Hundred Two Thousand Eight
Hundred Thirty (15,402,830) shares. If for any reason it shall hereafter be
determined by the Company that the actual number of shares of Common Stock,
Class B Common Stock and Common Stock Equivalents outstanding as of the Date
hereof was different from the foregoing, the Company will notify the
Holder(s) of such determination and if the Holder(s) does not dispute the
same, the Company shall forthwith reissue the Warrant with an appropriate
proportional increase in the Exercise Quantity to be effective from the Date
hereof. If a Holder shall dispute such determination and the parties cannot
otherwise resolve the dispute promptly and in good faith, then the Company
shall appoint a firm of independent public accountants of recognized national
standing (which may be the regular auditors of the Company), which shall give
their opinion as to the adjustment, if any, to be made to the Exercise
Quantity. Upon receipt of such opinion, the Company shall promptly mail a
copy thereof to the Holder(s) of the Warrant and shall make the adjustment
described therein.
It is the intent of the parties hereto that, after giving effect to
any exercise of the Warrant, the Holder(s) of the Warrant or Warrant
Securities would collectively be the owner of 2.60% of the Common Stock and
Common Stock Equivalents (or have the right to acquire 2.60% of the Common
Stock and Common Stock Equivalents outstanding as such amount may be
adjusted in the event of a cashless exercise of the Warrant according to
SECTION 2(a)(ii) or (iii) thereof or other adjustments contemplated herein),
except such percentage may be reduced as a consequence of an issuance of
Common Stock not requiring any adjustment in the Exercise Price resulting
from any Adjustment Transaction in accordance with SECTION 5.02 or other
adjustments contemplated herein.
Upon any adjustment of the Exercise Price as provided in SECTION
5.02, the Exercise Quantity shall be adjusted so that the New Exercise
Quantity shall be equal to the product of (x) the former Exercise Quantity
and (y) the following fraction:
THE EXERCISE PRICE IN EFFECT IMMEDIATELY PRIOR TO SUCH ADJUSTMENT
The Exercise Price resulting from such adjustment
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EXHIBIT B hereto sets forth the formula and an illustrative example
of the manner in which the adjustments contemplated herein should be applied.
So long as any part of this Warrant is outstanding, then, without
the prior written consent of the Holders of outstanding Warrant(s)
evidencing a majority in number of the total number of Warrant Securities at
the time purchasable upon the exercise of all then outstanding Warrant(s),
the Company will not take any voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Agreement or the
Warrant or impair the ability of the Holder(s) to realize the full intended
economic value thereof, but will at all times in good faith assist in the
carrying out of all such terms, and of the taking of all such action as may
be necessary or appropriate in order to protect the rights of the Holder(s)
of the Warrant against dilution or other impairment.
Section 5.02 ADJUSTMENT.
(a) In the event the Company, after the Date hereof, shall propose
to consider or engage in an Adjustment Transaction, then, in each such event,
the Company shall mail to the Holder of the Warrant notice of such proposed
action, which shall specify the date on which the stock transfer books of the
Company shall close, or a record shall be taken, for determining the holders
of Common Stock entitled to receive the benefit of such Adjustment
Transaction, or the date on which the Adjustment Transaction shall take place
or commence, as the case may be, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to receive securities or
other property deliverable upon such action, if any such date is to be fixed.
Such notice shall be mailed at least thirty (30) days prior to the date upon
which it is proposed that such action take place and twenty (20) days prior
to any record date to determine holders of Common Stock entitled to receive
the benefit of such Adjustment Transaction. If an Adjustment Transaction
occurs, the Exercise Price shall be adjusted by the Company so as to fairly
preserve, without dilution, the purchase rights represented by the Warrant in
accordance with SECTION 5.01 and otherwise with the essential intent and
purposes hereof. If the Holder(s) of the Warrant disputes the adjustment of
the Exercise Price made by the Company and the parties cannot otherwise
resolve the dispute promptly and in good faith, then the Company shall at its
expense appoint a firm of independent public accountants of recognized
national standing (which may be the regular auditors of the Company), which
shall give their opinion as to the adjustment, if any, to be made to the
Exercise Price as the result of the relevant Adjustment Transaction. Upon
receipt of such opinion, the Company shall promptly mail a copy thereof to
the Holder(s) of the Warrant and shall make the adjustment described
therein. An adjustment made pursuant to this SECTION 5.02(a) shall become
effective immediately after the effective date of any such issue, sale,
Dividend, subdivision, combination or reclassification.
Anything herein to the contrary notwithstanding, the Company shall
not be required to make any adjustment of the Exercise Price in the case of
the issuance of shares of Common Stock upon the exercise in whole or part of
the Warrant.
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(b) Whenever the Exercise Price is adjusted as provided in this
SECTION 5.02, the Company will, if requested, promptly obtain a certificate
of a firm of independent public accountants of recognized national standing
selected by the Board of Directors of the Company (who may be the regular
auditors of the Company) setting forth the Exercise Price, and the Exercise
Quantity as so adjusted, the computation of such adjustment and a brief
statement of facts accounting for such adjustment, and will retain such
certificate on file and mail to the Holder(s) of the Warrant a copy of such
certificate from such firm of independent public accountants.
VI. REGISTRATION RIGHTS
Section 6.01 "PIGGYBACK" REGISTRATION RIGHTS. If at any time the
Company shall determine to register under the Securities Act (including
pursuant to a demand of any security holder of the Company exercising
registration rights) any of its Common Stock (except securities to be issued
solely in connection with any acquisition of any entity or business, shares
issuable solely pursuant to employee benefit plans eligible for registration
on SEC Form S-8 or shares to be registered on any registration form that
does not permit secondary sales), it shall send to BWHI and to each of the
Holder(s) written notice of such determination at least thirty (30) days
prior to each such filing and, if within twenty (20) days after receipt of
such notice, any Holder shall so request in writing, the Company shall use
its best efforts to include in such registration statement (to the extent
permitted by applicable regulation) all or any part of the Warrant Securities
(collectively referred to in this ARTICLE VI as "REGISTRABLE SECURITIES")
that such Holder requests to be registered, provided, however, that if, in
connection with any offering involving an underwriting of Common Stock to be
issued by the Company, the managing underwriter shall impose a limitation on
the amount of Registrable Securities included in any such registration
statement, then, to the extent that any Registrable Securities remain
available for registration after the underwriter's cutback, the Company shall
be obligated to include in such registration statement with respect to each
Holder requesting inclusion only the product of: (i) the number of
Registrable Securities with respect to which such Holder has requested
inclusion hereunder and (ii) such Holder's pro rata share of the sum of all
Registrable Securities permitted to be registered and all other securities of
the Company, the holders of which Registrable Securities and other securities
have requested that such securities be registered. Any Registrable
Securities which are included in any underwritten offering under this SECTION
6.01 shall be sold upon such terms as the managing underwriters shall
reasonably request but in any event shall be upon terms not less favorable
than those upon which any other selling security holder shall sell any of its
securities. If any Holder disapproves of the terms of such underwriting,
such Holder may elect to withdraw therefrom by written notice to the Company
and the underwriter. The Company shall use its best efforts to cause the
managing underwriter or underwriters of a proposed underwritten offering (the
"COMPANY UNDERWRITER") to permit the Holders who have requested to
participate in the registration for such offering to include such Registrable
Securities in such offering on the same terms and conditions as the
securities of the Company included therein. Notwithstanding the foregoing, if
the Company Underwriter delivers a written opinion to the Holders that the
total amount or kind of securities which they, the Company and any other
11
Persons intend to include in such offering (the "TOTAL SECURITIES") is
sufficiently large so as to prevent the Company from affecting a successful
offering of the Total Securities, then the amount or kind of securities to be
offered for the account of any members of management shall be reduced pro
rata to the extent necessary to reduce the Total Securities to the amount
recommended by the Company Underwriter, and if the amount or kind of Total
Securities is still sufficiently large so as to prevent the Company from
affecting a successful offering of the Total Securities, then the amount or
kind of securities to be offered for the account of the Holders and any other
Persons shall be reduced pro rata to the extent necessary to reduce the Total
Securities to the amount recommended by the Company Underwriter.
Notwithstanding the provisions of this SECTION 6.01, the Company shall have
the right, at any time after it shall have given written notice pursuant to
this SECTION 6.01 (irrespective of whether a written request for inclusion
of Registrable Securities shall have been made), to elect not to file any
such proposed registration statement or to withdraw the same after the filing
and prior to the effective date thereof.
Section 6.02 REQUESTED REGISTRATIONS. At any time, and from time
to time upon the written request of BWHI or a majority-in-interest of the
Holders, the Company effects the registration under the Securities Act of all
or part of such Registrable Securities and specifying the number of
Registrable Securities to be registered and the intended method of
disposition thereof (a "REQUESTED REGISTRATION"), the Company will use its
best efforts to affect the registration under the Securities Act of the
Registrable Securities which the Company has been so requested to register by
such Holder(s), and all to the extent requisite to permit the disposition (in
accordance with the intended methods thereof) of the Registrable Securities
so to be registered. Neither the Company nor any of its securityholders
shall have the right to include any of the Company's securities (other than
Registrable Securities) in a registration statement to be filed as part of a
Requested Registration unless: (i) such securities are of the same class as
the Registrable Securities and (ii) if such Requested Registration is an
underwritten offering, the Company or such securityholders, as applicable,
agree in writing to sell their securities on the same terms and conditions as
apply to the Registrable Securities being sold. Notwithstanding anything
herein to the contrary, the Company shall not be required to honor a request
for a Requested Registration if: (a) the Company has previously affected one
effective Requested Registration; (b) the Registrable Securities to be so
registered do not constitute at least five percent (5%) of the total number
of Registrable Securities then outstanding or issuable upon exercise or
conversion of the warrants; or (c) such request is received by the Company
(i) less than ninety (90) days following the effective date of any previous
registration statement filed in connection with a Requested Registration or
(ii) less than forty-five (45) days following the effective date of any
previous registration statement filed in connection with a Piggyback
Registration, regardless of whether any Holder exercised its rights under
this Agreement with respect to such registration.
Section 6.03 EFFECTIVENESS. If necessary to permit distribution
of the Registrable Securities, the Company shall use its best efforts to
maintain the effectiveness for up to one (1) year of the registration
pursuant to which any of the Registrable Securities are being offered, and
from time to time will amend or supplement such registration statement and
the prospectus
12
contained therein as and to the extent necessary to comply with the
Securities Act and any applicable state securities statute or regulation.
Notwithstanding the foregoing, if the registration by the Company of the
resale of Registrable Securities is eligible for SEC Form S-3 or any
successor to such form, the Company shall use its best efforts to maintain
the effectiveness of the registration until all registered Registrable
Securities are sold. The Holder shall notify the Company promptly of the
completion of the offering of its Registrable Securities under any such
effective registration statement.
Section 6.04 FURTHER OBLIGATIONS OF THE COMPANY. Whenever,
under the preceding Sections of this ARTICLE VI, the Company is required
hereunder to register Registrable Securities, it agrees that it shall also do
the following:
(a) Furnish to each selling Holder such copies of each preliminary
and final prospectus and any other documents as such Holder may reasonably
request to facilitate the public offering of its Registrable Securities;
(b) Use its best efforts to register or qualify the Registrable
Securities to be registered pursuant to this ARTICLE VI under the applicable
securities or blue sky laws of such jurisdictions as any selling Holder may
reasonably request;
(c) Furnish to each selling Holder: (i) a signed counterpart of
an opinion of counsel for the Company, dated the effective date of the
registration statement; and (ii) a copy of any "comfort" letters signed by
the Company's independent public accountants who have examined and reported
on the Company's financial statements included in the registration statement,
covering substantially the same matters as are customarily covered in
opinions of issuer's counsel and in accountants' "comfort" letters delivered
to the underwriters in underwritten public offerings of securities;
(d) Permit each selling Holder or such Holder's counsel or other
representatives to inspect and copy such corporate documents and records as
may reasonably be requested by them in connection with such registration; and
(e) Furnish to each selling Holder, upon request, a copy of all
documents filed and all correspondence from or to the Commission in
connection with any such offering.
Section 6.05 EXPENSES. Except for underwriters' discounts and
brokerage commissions allocable to the Registrable Securities, the Company
shall bear all costs and expenses of each registration contemplated in
SECTIONS 6.01 and 6.02 including, but not limited to, printing, legal and
accounting fees and expenses, SEC and NASD filing fees and blue sky fees and
expenses in any jurisdiction in which the securities to be offered are to be
registered or qualified.
Section 6.06 TRANSFER OF REGISTRATION RIGHTS. The registration
rights of the Holders of Registrable Securities under this ARTICLE VI shall
inure to the benefit of and be exercisable by any
13
transferee of Registrable Securities.
Section 6.07 PARTICIPATION RIGHTS.
The Company will not grant to any Person (other than BWHI, the
Holders, any Affiliate thereof or any transferee of Registrable Securities
under this ARTICLE VI) at any time on or after the date of this Agreement the
right (a "PARTICIPATION RIGHT") to request the Company to register any
securities of the Company under the Securities Act by reason of the exercise
by any holder of its rights under this ARTICLE VI unless such Participation
Right provides that such securities shall not be registered and sold at the
same time if the managing underwriter for the offering, including the
Registrable Securities, believes that sale of such securities would adversely
affect the amount of, or price at which, the respective Registrable
Securities being registered under this ARTICLE VI can be sold.
The Company agrees: (1) not to affect any public or private sale
or distribution of its securities, including a sale pursuant to Regulation D
under the Securities Act, during the 10-day period prior to, and during the
90-day period beginning on, the date hereof of an underwritten offering made
to pursuant to a registration statement filed pursuant to SECTION 6.02, and
(2) to cause each holder (other than BWHI, the Holders, any Affiliate thereof
or any transferee of Registrable Securities under this ARTICLE VI) of its
privately placed equity securities or convertible securities purchased from
the Company at any time prior to, on or after the date of this Agreement to
agree not to affect any public or private sale or distribution of any such
securities during such period, including a sale pursuant to Rule 144 or Rule
144A under the Securities Act (except as part of such underwritten
registration, if permitted).
Notwithstanding anything in this ARTICLE VI to the contrary, in no
event shall this ARTICLE VI be construed as prohibiting, restricting or
impairing the Company's ability to comply with the registration rights
agreements or the registration rights in any warrant it has: (i) entered into
on or prior to the date hereof and (ii) disclosed on the DISCLOSURE SCHEDULE,
THE SCHEDULES OR AS SET FORTH IN THE SUBORDINATED LOAN AGREEMENT AND BIB
WARRANT.
VII. TRANSFER OF WARRANT AND WARRANT SECURITIES
Section 7.01 TRANSFER. Except as set forth in SECTION 7.02
below, the Warrant and the Warrant Securities and all rights thereunder are
transferable, in whole or in part, on the books of the Company to be
maintained for such purpose, upon surrender of such Warrant at the office of
the Company maintained for such purpose, together with a written assignment
of such Warrant duly executed by the Holder hereof or its agent or attorney
and payment of funds sufficient to pay any stock transfer taxes payable upon
the making of such transfer. Upon such surrender and payment, the Company
shall execute and deliver a new Warrant or Warrant in the name of the
assignee or assignees and in the denominations specified in such instrument
of assignment, and this Warrant shall promptly be canceled. If and when the
transferred Warrant is assigned in blank, the Company may (but shall not be
obliged to) treat the bearer thereof as the absolute
14
owner of such Warrant for all purposes and the Company shall not be affected
by any notice to the contrary. The transferred Warrant, if properly assigned
in compliance herewith, may be exercised by an assignee for the purchase of
shares of Common Stock without having a new Warrant issued. The Company will
not close its stock transfer books against a transfer of the Warrant or the
Warrant Securities or any exercise of the Warrant. Any such transfer or
exercise tendered while such stock transfer books shall be closed shall be
deemed effective immediately prior to such closure.
Subject to SECTION 7.02 below, the Warrant may be divided or
combined with other Warrant upon presentation at the aforesaid office of the
Company, together with a written notice specifying the names and
denominations in which new Warrant are to be issued, signed by the Holder
thereof or its agent or attorney. Subject to compliance with this, as to any
transfer which may be involved in such division or combination, the Company
shall execute and deliver a new Warrant or Warrants in exchange for the
Warrant or Warrants to be divided or combined in accordance with such notice.
The Company shall pay all expenses, taxes (other than income
taxes, if any, of the transferee) and other charges incurred by the Company
in the performance of its obligations in connection with the preparation,
issue and delivery of Warrant under this Section. The Company agrees to
maintain at its aforesaid office books for the registration and transfer of
the Warrant. Notwithstanding any provision to the contrary contained herein,
the Warrant and the Warrant Securities shall be transferable only in
compliance with the provisions of the Securities Act and applicable state
securities laws in respect of the transfer of any Warrant or any Warrant
Securities.
Section 7.02 TRANSFER RESTRICTIONS. Neither this Warrant
Agreement, the Warrant nor the Warrant Securities, when issued, have been
registered under the Securities Act or under the securities laws of any
state. Neither this Agreement, the Warrant nor the Warrant Securities, when
issued, may be transferred: (a) if such transfer would constitute a
violation of any federal or state securities laws or a breach of the
conditions to any exemption from registration thereunder and (b) unless and
until one of the following has occurred: (i) registration of this Agreement,
the Warrant or the Warrant Securities, as the case may be, under the
Securities Act, and such registration or qualification as may be necessary
under the securities laws of any state, have become effective, or (ii) the
Holder has delivered evidence reasonably satisfactory to the Company that
such registration or qualification is not required.
Each certificate for Warrant Securities issued upon exercise of a
Warrant and each certificate issued to a subsequent transferee, unless at the
time of exercise such Warrant Securities are registered under the Securities
Act, shall bear a legend substantially in the following form (and any
additional legends required by law) on the face thereof:
THE WARRANT SECURITIES TO BE RECEIVED UPON EXERCISE OF THE WARRANT HAS
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
QUALIFIED UNDER ANY STATE
15
SECURITIES LAWS. THE WARRANT SECURITIES MAY NOT BE OFFERED,
SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED, WHETHER
OR NOT FOR CONSIDERATION, IN THE ABSENCE OF (1) AN EFFECTIVE
REGISTRATION STATEMENT AND QUALIFICATION IN EFFECT WITH
RESPECT TO THE WARRANT SECURITIES UNDER THE SECURITIES ACT AND
UNDER ANY APPLICABLE STATE SECURITIES LAWS OR (2) AN EXEMPTION
FROM SUCH REGISTRATION AND QUALIFICATION.
Section 7.03 REPLACEMENT OF INSTRUMENTS. Upon receipt by the
Company of evidence reasonably satisfactory to it of the ownership of and the
loss, theft, destruction or mutilation of any certificate or instrument
evidencing any Warrant or Warrant Securities, and (a) in the case of loss,
theft or destruction, upon receipt by the Company of indemnity reasonably
satisfactory to it (provided that, if the owner of the same is a commercial
bank or an institutional lender or investor, its own agreement of indemnity
shall be deemed to be satisfactory), or (b) in the case of mutilation, upon
surrender and cancellation thereof, the Company, at its expense, will
execute, register and deliver, in lieu thereof, a new certificate or
instrument for (or covering the purchase of) an equal number of Warrant or
Warrant Securities.
VIII. MISCELLANEOUS
Section 8.01 TERM. Except as otherwise expressly provided in
this Agreement or the Warrant, this Agreement shall expire seven (7) years
after the date hereof, provided that the Company's obligations to honor an
exercise of the Warrant given prior to such expiration or to perform any
obligation continue and survive notwithstanding the expiration of this
Agreement.
Section 8.02 NO WAIVER UNDER OTHER AGREEMENTS. The terms and
provisions contained in this Agreement are not intended and shall not be
construed to waive, modify, repeal, stay, diminish or otherwise impair or
affect in any manner whatsoever any right or remedy of BWHI or the Holder(s)
under the Company's Certificate of Incorporation, By-laws or similar
agreements.
Section 8.03 RELIANCE. Each party to this Agreement shall be
entitled to rely upon any notice, consent, certificate, affidavit, statement,
paper, document, writing or other communication reasonably believed by that
party to be genuine and to have been signed, sent or made by the proper
Person or Persons.
Section 8.04 NOTICE. All notices and other communications
provided for in this Agreement shall be in writing and delivered by
registered or certified mail, postage prepaid, or delivered by overnight
courier (for next Business Day delivery) or telecopied, addressed as follows,
or at such other address as any of the parties hereto may hereafter designate
by notice to the other parties given in accordance with this SECTION:
1) if to the Company:
16
Brothers Gourmet Coffees, Inc.
One Boca Place
0000 Xxxxxx Xxxx
Xxxx Xxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxx, President & CEO
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
With a copy of any notice to:
Xxxxxxxxxx Hyatt Xxxxxx & Xxxxxxxxxx, P.C.
22nd Floor, 000 Xxxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
2) if to BWHI:
Brothers Warrant Holdings I, A California General
Partnership
000 Xxxxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attn: Xxxx Xxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
With a copy of any notice to:
Nida & Xxxxxxx
000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: C. Xxxxxx Xxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Section 8.05 ENFORCEMENT. The Company acknowledges that the
Holders may proceed to exercise or enforce any right, power, privilege,
remedy or interest that they may have under this Agreement or applicable law
without notice, except as otherwise expressly provided herein, without
pursuing, exhausting or otherwise exercising or enforcing any other right,
power, privilege, remedy or interest that they may have against or in respect
of any other party, or any other Person or thing, and without regard to any
act or omission of such party or any other
17
Person.
Section 8.06 EQUITABLE RELIEF. Each party acknowledges and
agrees that it would be impossible to measure in money the damage in the
event of a breach of any of the terms and provisions of this Agreement by any
party hereto, and that, in the event of any such breach, there may not be an
adequate remedy at law, although the foregoing shall not constitute a waiver
of any of the party's rights, powers, privileges and remedies against or in
respect of a breaching party, any other person or thing under this Agreement
or applicable law. It is therefore agreed that, in addition to all other
such rights, powers, privileges and remedies that it may have, each party
shall be entitled to injunctive relief, specific performance or such other
equitable relief as such party may request to exercise or otherwise enforce
any of the terms and provisions of this Agreement and to enjoin or otherwise
restrain any act prohibited thereby, and no party will urge, and each party
hereby waives, any defense that there is an adequate remedy available at law.
Section 8.07 INTERPRETATION; HEADINGS; SEVERABILITY.
(a) The parties acknowledge and agree that since each party and
its counsel have reviewed and negotiated the terms and provisions of this
Agreement and have contributed to its revision, the normal rule of
construction to the effect that any ambiguities are resolved against the
drafting party shall not be employed in the interpretation of this
Agreement, and its terms and provisions shall be construed fairly as to all
parties hereto and not in favor of or against any party, regardless of which
party was generally responsible for the preparation of this Agreement.
(b) The Section and other headings contained in this Agreement are
for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
(c) In the event that any term or provision of this Agreement
shall be finally determined to be superseded, invalid, illegal or otherwise
unenforceable pursuant to applicable law by a governmental authority having
jurisdiction and venue, determination shall not impair or otherwise affect
the validity, legality or enforceability: (i) by or before that authority
of the remaining terms and provisions of this Agreement, which shall be
enforced as if the unenforceable term or provision were deleted, or (ii) by
or before any other authority of any of the terms and provisions of this
Agreement.
(d) If any period of time specified in this Agreement expires on a
day that is not a Business Day, that period shall be extended to and expire
on the next succeeding Business Day.
Section 8.08 SURVIVAL OF COVENANTS. Each of the covenants and
other agreements of the parties contained in this Agreement shall be absolute
and, except as otherwise expressly provided, unconditional, shall survive the
execution and delivery of this Agreement and shall continue in full force and
effect until the term of this Agreement has expired, and thereafter with
respect to events occurring prior thereto.
Section 8.09 NO REQUIRED EXERCISE. No term or provision of the
Warrant or this
18
Agreement is intended to require, nor shall any such term or provision be
construed as requiring, any Holder of the Warrant to exercise or put the
Warrant.
Section 8.10 BINDING EFFECT. This Agreement shall be binding
upon and enforceable against the parties hereto and their respective
successors and assigns.
Section 8.11 NO WAIVER BY ACTION. The failure or delay of a party
at any time or times to require performance of, or to exercise its rights
with respect to, any term or provision of this Agreement (except as otherwise
expressly provided herein) shall not affect its right at a later time to
enforce any such provision.
Section 8.12 WAIVER; MODIFICATION; AMENDMENT. Each and every
modification to and amendment of this Agreement shall be in writing and
signed by the Company, BWHI (if at that time BWHI is a Holder) and by the
Holders of a majority in interest of all issued and unissued Warrant
Securities. Each and every waiver of and consent to any departure from any
term or provision hereof (except as otherwise provided herein) shall be in
writing and signed by BWHI (if at that time it is a Holder) and by the
Holders of a majority in interest of all issued and unissued Warrant
Securities and by each party against whom enforcement of the waiver or
consent may be sought.
Section 8.13 ENTIRE AGREEMENT. This Agreement and the Warrant
contain the entire agreement of the parties and supersede all other
representations, warranties, agreements and understandings, oral or
otherwise, among the parties hereto with respect to the matters contained
herein, except as otherwise provided herein.
Section 8.14 CERTIFICATE. BWHI shall have received a
certificate, dated the date of this Agreement, of the Secretary or an
Assistant Secretary of the Company, attaching a true and complete copy of the
resolutions of the Board of Directors of the Company, and of all documents
evidencing other necessary corporate or shareholder action (in form and
substance satisfactory to BWHI and to its counsel) taken by the Company in
connection with the matters contemplated by this Agreement.
Section 8.15 NO INCONSISTENT AGREEMENTS OR RIGHTS. The Company
shall not enter into any agreement with respect to its securities that is
inconsistent with the rights granted to the Holders in this Agreement.
Section 8.16 GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF
JURY TRIAL. THIS AGREEMENT, THE WARRANT AND THE WARRANT SECURITIES AND ALL
AMENDMENTS, SUPPLEMENTS, WAIVERS AND CONSENTS RELATING HERETO OR THERETO
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF
THE STATE OF CALIFORNIA WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE
COMPANY HEREBY IRREVOCABLY SUBMITS ITSELF TO THE NON-EXCLUSIVE JURISDICTION
OF THE STATE AND FEDERAL COURTS SITTING IN THE STATE OF CALIFORNIA AND AGREES
AND
19
CONSENTS THAT SERVICE OF PROCESS MAY BE MADE UPON IT IN ANY LEGAL PROCEEDINGS
RELATING HERETO BY ANY MEANS ALLOWED UNDER CALIFORNIA, COLORADO OR FEDERAL
LAW. THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH COURT AND ANY CLAIM THAT ANY
SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. THE COMPANY SHALL APPOINT AN AGENT FOR SERVICE OF PROCESS IN
CALIFORNIA AND SHALL NOTIFY BWHI IN WRITING OF SUCH APPOINTMENT AND ANY
FUTURE CHANGE THEREIN. THE COMPANY AND BWHI EACH HEREBY AGREE TO WAIVE ITS
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF THIS AGREEMENT, THE SECURITIES OR ANY OTHER AGREEMENTS
RELATING TO THE SECURITIES OR ANY DEALINGS BETWEEN THEM RELATING TO THE
SUBJECT MATTER OF THIS TRANSACTION. NOTWITHSTANDING ANYTHING TO THE CONTRARY
HEREIN, THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED
EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT, THE
WARRANT, THE WARRANT SECURITIES OR ANY OTHER DOCUMENTS OR AGREEMENTS RELATING
THERETO.
[Signature page follows]
20
IN WITNESS WHEREOF, the parties hereto have caused this Warrant
Agreement to be executed as of the day and year first above written.
BWHI:
BROTHERS WARRANT HOLDINGS I,
A CALIFORNIA GENERAL PARTNERSHIP
By:
--------------------------------------
Name:
Title:
THE COMPANY:
BROTHERS GOURMET COFFEES, INC.,
a Delaware corporation
By:
------------------------------------
Name:
Title:
21
Exhibit A
to
Warrant Agreement
WARRANT
EXHIBIT B TO WARRANT AGREEMENT
THE FOLLOWING IS ONLY FOR EXAMPLE PURPOSES
BOLD FIGURES ARE INPUTS
Example: 1000 shares are issued for $1000 on the day after the Closing
___________ OSBEFORE Outstanding shares (including options and warrants)
before adjustment
$__________ FVBEFORE Fair Value (per share) before adjustment
$__________ EPBEFORE Exercise Price of Warrants before adjustment
___________ OWBEFORE Number of Warrants before adjustment
_________% Fully diluted ownership before adjustment
$__________ CR Consideration received or to be received for new shares
or warrants
___________ OSAFTER Outstanding shares after sale but before Warrant
adjustment
$__________ EPAfter Exercise Price after adjustment
___________ OWAfter Number of Warrants after adjustment
$__________ FVAfter Fair Value (per share) after adjustment
_________% Fully diluted ownership after dilution
$__________ EPAfter = lesser of (OSBefore x EPBefore + CR)/OSAfter
or
$__________ EPBefore x (OSBefore x FVBefore + CR)/
OSAfter/ FVBefore
___________ OWAfter = EPBefore x OWBefore/EPAfter
THE WARRANT SECURITIES TO BE RECEIVED UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED
UNDER ANY STATE SECURITIES LAWS. THE WARRANT SECURITIES MAY NOT BE OFFERED,
SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED, WHETHER OR NOT FOR
CONSIDERATION, IN THE ABSENCE OF (1) AN EFFECTIVE REGISTRATION STATEMENT AND
QUALIFICATION WITH RESPECT TO THE WARRANT SECURITIES UNDER THE SECURITIES ACT
AND UNDER ANY APPLICABLE STATE SECURITIES LAWS OR (2) AN EXEMPTION FROM SUCH
QUALIFICATION AND REGISTRATION.
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF ARE SUBJECT
TO THE TERMS AND PROVISIONS OF A WARRANT AGREEMENT DATED AS OF EVEN DATE
HEREWITH, BETWEEN BROTHERS GOURMET COFFEES, INC. AND BROTHERS WARRANT
HOLDINGS 1, A CALIFORNIA GENERAL PARTNERSHIP (AS THE SAME MAY BE
SUPPLEMENTED, MODIFIED, AMENDED, EXTENDED OR RESTATED FROM TIME TO TIME, THE
"WARRANT AGREEMENT'). AMONG OTHER THINGS, THE WARRANT AGREEMENT CONTAINS
PROVISIONS FOR RESTRICTIONS ON TRANSFER AND REGISTRATION RIGHTS. COPIES OF
THE WARRANT AGREEMENT ARE AVAILABLE AT THE EXECUTIVE OFFICES OF THE COMPANY.
COMMON STOCK PURCHASE WARRANT
EFFECTIVE DATE: DECEMBER 27, 1996
Capitalized terms used and not otherwise defined in this Warrant shall have
the meanings respectively assigned to them in the Warrant Agreement referred
to in the legend above.
BROTHERS GOURMET COFFEES, INC., a Delaware corporation, having its executive
offices at One Boca Place, 0000 Xxxxxx Xxxx, Xxxx Xxxxx, Xxxxxxx 00000 (the
"COMPANY"), does hereby certify and agree that, for good and valuable
consideration (the existence, sufficiency and receipt of which are hereby
acknowledged by the Company), BROTHERS WARRANT HOLDINGS I, A CALIFORNIA
GENERAL PARTNERSHIP, its successors and assigns ("HOLDER"), hereby is
entitled to purchase from the Company, during the term set forth in Section I
hereof, up to an aggregate amount of 400,000 shares (the "EXERCISE QUANTITY")
of duly authorized, validly issued, fully paid and non-assessable shares of
Common Stock, par value
US$.0001 per share, of the Company (the "COMMON Stock"), all upon the terms
and provisions and subject to adjustment of such Exercise Quantity provided
in the Warrant Agreement and this Common Stock Purchase Warrant (the
"WARRANT"). The exercise price per share of Common Stock for which this
Warrant is exercisable shall be $3.4375 per share (the "EXERCISE PRICE").
1. TERM OF THE WARRANT. The term of this Warrant commences as of
the date hereof, and shall expire at 5:00 P.M., New York City time, on the
seventh anniversary hereof. In the event that this Warrant would expire on a
day that is not a Business Day, then the term of this Warrant automatically
shall be extended to 5:00 P.M., New York City time, on the next succeeding
Business Day.
2. EXERCISE OF WARRANT.
(a) This Warrant may be exercised by the Holder of this Warrant at
any time during the term hereof in whole, or in part from time to time (but
not for fractional shares, unless this Warrant is exercised in whole), by
presentation and surrender of this Warrant to the Company, together with the
annexed Exercise Form duly completed and executed and payment in the
aggregate amount equal to the Exercise Price multiplied by the number of
shares of Common Stock being purchased. At the option of Holder, payment of
the Exercise Price may be made either by (i) certified check payable to the
order of the Company, (ii) surrender of certificates then held representing,
or deduction from the number of shares issuable upon exercise of this
Warrant, of that number of shares which has an aggregate Fair Value
determined in accordance with the Warrant Agreement on the date of exercise
equal to the aggregate Exercise Price for all shares to be purchased pursuant
to this Warrant or (iii) by any combination of the foregoing methods. Upon
the Company's receipt of this Warrant, the completed and signed Exercise Form
and the requisite payment, the Company shall issue and deliver (or cause to
be delivered) to the exercising Holder stock certificates aggregating the
number of shares of Common Stock purchased. In the event of a partial
exercise of this Warrant, the Company shall issue and deliver to the Holder a
new Warrant at the same time such stock certificates are delivered, which new
Warrant shall entitle the Holder to purchase the balance of the Exercise
Quantity not purchased in that partial exercise and shall otherwise be upon
the same terms and provisions as this Warrant.
(b) In the event the Holder of this Warrant desires that any or
all of the stock certificates to be issued upon the exercise hereof be
registered in a name or names other than that of the Holder of this Warrant,
the Holder must (i) so request in writing at the time of exercise if the
transfer is not a registered transfer, (ii) provide to the Company an opinion
of counsel reasonably satisfactory to the Company to the effect that the
proposed transfer may be effected without registration under the Securities
Act, and (iii) pay to the Company funds sufficient to pay all stock transfer
taxes (if any) payable in connection with the transfer and delivery of such
stock certificates.
(c) Upon the due exercise by the Holder of this Warrant, whether
in whole or in part, that Holder (or any other person to whom a stock
certificate is to be so issued) shall be deemed for all purposes to have
become the Holder of record of the shares of Common Stock for which this
Warrant has been so exercised, effective immediately prior to the close of
business on the date this Warrant, the completed and signed Exercise Form and
the requisite payment were duly delivered to the Company, irrespective of the
date of actual delivery of certificates representing such shares of Common
Stock so issued.
3. SURRENDER OF WARRANT; EXPENSES.
(a) Whether in connection with the exercise, exchange,
registration of transfer or replacement of this Warrant, surrender of this
Warrant shall be made to the Company during normal business hours on a
Business Day (unless the Company otherwise permits) at the executive offices
of the Company located at One Boca Place, 0000 Xxxxxx Xxxx, Xxxx Xxxxx,
Xxxxxxx 00000 or to such other office or duly authorized representative of
the Company as from time to time may be designated by the Company by written
notice given to the Holder of this Warrant.
(b) The Company shall pay all costs and expenses incurred in
connection with the exercise, registering, exchange, transfer, replacement or
put of this Warrant, including the costs of preparation, execution and
delivery of warrants and stock certificates, and shall pay all taxes (other
than any taxes measured by the income of any Person other than the Company)
and other charges imposed by law payable in connection with the transfer or
replacement of this Warrant.
4. WARRANT REGISTER; EXCHANGE; TRANSFER; LOSS.
(a) The Company at all times shall maintain at its chief executive
offices an open register for all Warrants, in which the Company shall record
the name and address of each Person to whom a Warrant has been issued or
transferred, the number of shares of Common Stock or other securities
purchasable thereunder and the corresponding purchase prices.
(b) This Warrant may be exchanged for two or more warrants
entitling the identical Holder hereof to purchase the same aggregate Exercise
Quantity at the same Exercise Price per share and otherwise having the same
terms and provisions as this Warrant. The identical Holder may request such
an exchange by surrender of this Warrant to the Company, together with a
written exchange request specifying the desired number of warrants and
allocation of the Exercise Quantity purchasable under the existing Warrant.
(c) This Warrant may be transferred only in accordance with the
provisions of ARTICLE VII of the Warrant Agreement, in whole or in part, by
the Holder or any duly authorized representative of such Holder. A transfer
may be registered with the Company by submission to it of this Warrant,
together with the annexed Assignment Form duly completed and executed, and if
the transfer is not a registered transfer, an opinion of counsel reasonably
satisfactory to The Company. Within five (5) Business Days after the
Company's receipt of this Warrant and the Assignment Form so completed and
executed, the Company will issue and deliver to the transferee a new Warrant
representing the portion of the Exercise Quantity transferred at the same
Exercise Price per share and otherwise having the same terms and provisions
as this Warrant, which the Company will register in the new Holder' s name.
(d) In the event of the loss, theft or destruction of this
Warrant, the Company shall execute and deliver an identical new Warrant to
the Holder in substitution therefor upon the Company's receipt of (i)
evidence reasonably satisfactory to the Company of such event (with the
affidavit of an institutional Holder being sufficient evidence), and (ii) if
requested by the Company, an indemnity agreement from any institutional
Holder or an indemnity bond from anyone else
reasonably satisfactory in form and amount to the Company.
(e) The Company will not close its books against the transfer of
this Warrant or any of the Warrant Securities in any manner which interferes
with the timely exercise of this Warrant. The Company will from time to time
take all such action as may be necessary to assure that the par value per
share of the unissued Common Stock acquirable upon exercise of this Warrant
is at all times equal or less than the Exercise Price then in effect.
5. RIGHTS AND OBLIGATIONS OF THE COMPANY AND THE HOLDER. The
Company and the Holders of this Warrant are entitled to the rights and bound
by the obligations set forth in the Warrant Agreement, all of which rights
and obligations are hereby incorporated by reference herein. This Warrant
shall not entitle its Holder to any rights of a stockholder in the Company
(other than as provided in of this Warrant and the Warrant Agreement).
[remainder of page intentionally left blank]
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its duly authorized representative and its corporate seal, if
any, to be impressed hereupon and attested to by its Secretary or Assistant
Secretary.
BROTHERS GOURMET COFFEES, INC., a
Delaware corporation
By:
---------------------------------------
Name:
Title:
Attest:
----------------------------------
Secretary
COMMON STOCK WARRANT
EXERCISE FORM
Brothers Gourmet Coffees, Inc.
One Boca Place
0000 Xxxxxx Xxxx
Xxxx Xxxxx, Xxxxxxx 00000
Attention:
-------------------------
The undersigned Holder of the within Warrant hereby irrevocably
elects to exercise the within Warrant to the extent of [________] shares of
Common Stock, $____ par value per share, of the Company.
The undersigned herewith encloses the Warrant and
/ / a certificate representing that number of shares of Common
Stock of the Company having an aggregate current market price of $_________
in payment of the Exercise Price;
/ / a check (payable to the order of the Company) in the amount of
$_____________ in payment of the Exercise Price; and/or
/ / the undersigned hereby elects to effect a cashless exercise
and authorizes the Company to deduct from the shares issuable upon exercise a
number of shares of Common Stock of the Company having an aggregate current
market price on the date hereof of $___________________.
Instructions for Registering the Securities
On the Stock Transfer Books of the Company
Name of Transferee:
--------------------------------------
State of Organization (if applicable)
---------------------
Federal Tax Identification or
Social Security Number:
---------------------
Address:
-------------------------------------------------
If this exercise of the Warrant is not an exercise in full, then
the undersigned Holder hereby requests that a new Warrant of like tenor
(exercisable for the balance of the Exercise Quantity of shares of Common
Stock underlying this Warrant) be issued and delivered to the undersigned
Holder at the address on the warrant register of the Company.
Dated:
------------------- ----------------------------------------
(Name of Registered Holder - Please Print)
By:
------------------------------------
(Signature of Registered Holder or of Duly
Authorized Signatory)
Title:
-------------------------------
COMMON STOCK WARRANT
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned Holder of the within Warrant
hereby sells, assigns and transfers unto the transferee whose name and
address are set forth below all of the rights of the undersigned under the
within Warrant (to the extent of the portion of the within Warrant being
transferred hereby, which portion is __________________________).
Name of Transferee:
-----------------------------------------
State of Organization (if applicable)
-----------------------
Federal Tax Identification or
Social Security Number:
-----------------------
Address:
-----------------------------------------
If such portion of the Warrant being transferred shall not consist
of all of the within Warrant, then the undersigned hereby requests that, as
provided in the within Warrant, a new warrant of like tenor respecting the
balance of the Exercise Quantity of shares of Common Stock underlying this
Warrant not being transferred pursuant hereto be issued in the name of and
delivered to the undersigned. The undersigned does hereby irrevocably
constitute and appoint _________________________ attorney to register the
foregoing transfer on the books of the company maintained for that purpose,
with full power of substitution in the premises.
/ / As required by the Warrant, enclosed herewith is the opinion
of legal counsel for the undersigned.
Dated:
-------------------
---------------------------------------------
(Name of Registered Holder - Please Print)
By:
---------------------------------------------
(Signature of Registered Holder or of Duly
Authorized Signatory)
Title:
-------------------
