UNIVERSAL FOOD & BEVERAGE COMPANY WARRANT TO PURCHASE COMMON STOCK
Exhibit
10(b) Form
of Warrant Agreement
WARRANT
NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
THE
SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISEABLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
(I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL,
IN A
GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT
OR
(II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.
NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED PURSUANT TO AN
AVAILABLE EXEMPTION UNDER THE 1933 ACT IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.
UNIVERSAL
FOOD & BEVERAGE COMPANY
WARRANT
TO PURCHASE COMMON STOCK
Warrant
No.: W-__
Number
of
Shares of Common Stock: _______________
Date
of
Issuance: December 30, 2005 ("Issuance
Date")
Universal
Food & Beverage Company, a Nevada corporation (the "Company"),
hereby certifies that, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, _______________________________,
the registered holder hereof or its permitted assigns (the "Holder"),
is
entitled, subject to the terms set forth below, to purchase from the Company,
at
the Exercise Price (as defined below) then in effect, upon surrender of this
Warrant to Purchase Common Stock (including any Warrants to Purchase Common
Stock issued in exchange, transfer or replacement hereof, the "Warrant"),
at
any time or times on or after the date hereof but not after 11:59 p.m., New
York
Time, on the Expiration Date (as defined below),
__________________________________________ (____________) fully paid
nonassessable shares of Common Stock (as defined below) (the
"Warrant
Shares").
Except as otherwise defined herein, capitalized terms in this Warrant shall
have
the meanings set forth in Section 15. This Warrant is one of the Warrants to
purchase Common Stock (the "SPA
Warrants")
issued
pursuant to Section 1 of that certain Securities Purchase Agreement, dated
as of
December 30, 2005 (the "Subscription
Date"),
by
and among the Company and the investors (the "Buyers")
referred to therein (the "Securities
Purchase Agreement").
EXERCISE
OF WARRANT.
Mechanics
of Exercise.
Subject
to the terms and conditions hereof (including, without limitation, the
limitations set forth in Section 1(f)), this Warrant may be exercised by the
Holder on any day on or after the date hereof, in whole or in part, by
(i) delivery of a written notice, in the form attached hereto as
Exhibit
A
(the
"Exercise
Notice"),
of
the Holder's election to exercise this Warrant and (ii) (A) payment to the
Company of an amount equal to the applicable Exercise Price multiplied by the
number of Warrant Shares as to which this Warrant is being exercised (the
"Aggregate
Exercise Price")
in
cash or wire transfer of immediately available funds or (B) by notifying the
Company that this Warrant is being exercised pursuant to a Cashless Exercise
(as
defined in Section 1(d)). The Holder shall not be required to deliver the
original Warrant in order to effect an exercise hereunder. Execution and
delivery of the Exercise Notice with respect to less than all of the Warrant
Shares shall have the same effect as cancellation of the original Warrant and
issuance of a new Warrant evidencing the right to purchase the remaining number
of Warrant Shares. On or before the first Business Day following the date on
which the Company has received each of the Exercise Notice and the Aggregate
Exercise Price (or notice of a Cashless Exercise) (the "Exercise
Delivery Documents"),
the
Company shall transmit by facsimile an acknowledgment of confirmation of receipt
of the Exercise Delivery Documents to the Holder and the Company's transfer
agent (the "Transfer
Agent").
On or
before the third Business Day following the date on which the Company has
received all of the Exercise Delivery Documents (the "Share
Delivery Date"),
the
Company shall (X) provided that the Transfer Agent is participating in The
Depository Trust Company ("DTC")
Fast
Automated Securities Transfer Program, upon the request of the Holder, credit
such aggregate number of shares of Common Stock to which the Holder is entitled
pursuant to such exercise to the Holder's or its designee's balance account
with
DTC through its Deposit Withdrawal Agent Commission system, or (Y) if the
Transfer Agent is not participating in the DTC Fast Automated Securities
Transfer Program, issue and dispatch by overnight courier to the address as
specified in the Exercise Notice, a certificate, registered in the Company's
share register in the name of the Holder or its designee, for the number of
shares of Common Stock to which the Holder is entitled pursuant to such
exercise. Upon delivery of the Exercise Notice and Aggregate Exercise Price
referred to in clause (ii)(A) above or notification to the Company of a Cashless
Exercise referred to in Section 1(d), the Holder shall be deemed for all
corporate purposes to have become the holder of record of the Warrant Shares
with respect to which this Warrant has been exercised, irrespective of the
date
of delivery of the certificates evidencing such Warrant Shares. If this Warrant
is submitted in connection with any exercise pursuant to this Section 1(a)
and
the number of Warrant Shares represented by this Warrant submitted for exercise
is greater than the number of Warrant Shares being acquired upon an exercise,
then the Company shall as soon as practicable and in no event later than five
Business Days after any exercise and at its own expense, issue a new Warrant
(in
accordance with Section 7(d)) representing the right to purchase the number
of
Warrant Shares purchasable immediately prior to such exercise under this
Warrant, less the number of Warrant Shares with respect to which this Warrant
is
exercised. No fractional shares of Common Stock are to be issued upon the
exercise of this Warrant, but rather the number of shares of Common Stock to
be
issued shall be rounded up to the nearest whole number. The Company shall pay
any and all taxes which may be payable with respect to the issuance and delivery
of Warrant Shares upon exercise of this Warrant. Notwithstanding
any provision of this Warrant to the contrary, (i) 500,000 Warrant Shares (as
adjusted pursuant hereto) shall not be exercisable to the extent the Company
enters into the Security Documents in accordance with Section 4(o) of the
Securities Purchase Agreement by no later than January 15, 2006 and (ii) 500,000
additional Warrant Shares (as adjusted pursuant hereto) shall not be exercisable
to the extent the Company delivers the good standing certificates specified
in
Section 4(p) of the Securities Purchase Agreement on or before the 10th Business
Day after the Subscription Date.
-2-
Exercise
Price.
For
purposes of this Warrant, "Exercise
Price"
means
$0.01, subject to adjustment as provided herein.
Company's
Failure to Timely Deliver Securities.
If the
Company shall fail for any reason or for no reason to issue to the Holder within
three (3) Business Days of receipt of the Exercise Delivery Documents, a
certificate for the number of shares of Common Stock to which the Holder is
entitled and register such shares of Common Stock on the Company's share
register or to credit the Holder's balance account with DTC for such number
of
shares of Common Stock to which the Holder is entitled upon the Holder's
exercise of this Warrant, and if on or after such Business Day the Holder
purchases (in an open market transaction or otherwise) shares of Common Stock
to
deliver in satisfaction of a sale by the Holder of shares of Common Stock
issuable upon such exercise that the Holder anticipated receiving from the
Company (a "Buy-In"),
then
the Company shall, within three (3) Business Days after the Holder's request
and
in the Holder's discretion, either (i) pay cash to the Holder in an amount
equal
to the Holder's total purchase price (including brokerage commissions, if any)
for the shares of Common Stock so purchased (the "Buy-In
Price"),
at
which point the Company's obligation to deliver such certificate (and to issue
such shares of Common Stock) shall terminate, or (ii) promptly honor its
obligation to deliver to the Holder a certificate or certificates representing
such shares of Common Stock and pay cash to the Holder in an amount equal to
the
excess (if any) of the Buy-In Price over the product of (A) such number of
shares of Common Stock, times (B) the Closing Bid Price on the date of
exercise.
Cashless
Exercise.
Notwithstanding
anything contained herein to the contrary, the Holder may, in its sole
discretion, exercise this Warrant in whole or in part and, in lieu of making
the
cash payment otherwise contemplated to be made to the Company upon such exercise
in payment of the Aggregate Exercise Price, elect instead to receive upon such
exercise the "Net Number" of shares of Common Stock determined according to
the
following formula (a "Cashless
Exercise"):
-3-
Net
Number = (A
x
B) - (A x C)
B
For
purposes of the foregoing formula:
A=
the
total number of Warrant Shares with respect to which this Warrant is then being
exercised.
B=
the
Closing Sale Price of the shares of Common Stock (as reported by Bloomberg)
on
the date immediately preceding the date of the Exercise Notice.
C=
the
Exercise Price then in effect for the applicable Warrant Shares at the time
of
such exercise.
Disputes.
In the
case of a dispute as to the determination of the Exercise Price or the
arithmetic calculation of the Warrant Shares, the Company shall promptly issue
to the Holder the number of Warrant Shares that are not disputed and resolve
such dispute in accordance with Section 12.
Limitations
on Exercises; Beneficial Ownership.
The
Company shall not effect the exercise of this Warrant, and the Holder shall
not
have the right to exercise this Warrant, to the extent that after giving effect
to such exercise, such Person (together with such Person's affiliates) would
beneficially own (directly or indirectly through Warrant Shares or otherwise)
in
excess of 9.99% of the shares of Common Stock outstanding immediately after
giving effect to such exercise. For purposes of the foregoing sentence, the
aggregate number of shares of Common Stock beneficially owned (directly or
indirectly through Warrant Shares or otherwise) by such Person and its
affiliates shall include the number of shares of Common Stock issuable upon
exercise of this Warrant with respect to which the determination of such
sentence is being made, but shall exclude shares of Common Stock which would
be
issuable upon (i) exercise of the remaining, unexercised portion of this Warrant
beneficially owned by such Person and its affiliates and (ii) exercise or
conversion of the unexercised or unconverted portion of any other securities
of
the Company beneficially owned by such Person and its affiliates (including,
without limitation, any convertible notes or convertible preferred stock or
warrants) subject to a limitation on conversion or exercise analogous to the
limitation contained herein. Except as set forth in the preceding sentence,
for
purposes of this subsection, beneficial ownership shall be calculated in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended. For purposes of this Warrant, in determining the number of outstanding
shares of Common Stock, the Holder may rely on the number of outstanding shares
of Common Stock as reflected in (1) the Company's most recent Form 10-K, Form
10-Q, Current Report on Form 8-K or other public filing with the Securities
and
Exchange Commission, as the case may be, (2) a more recent public announcement
by the Company or (3) any other notice by the Company or the Transfer Agent
setting forth the number of shares of Common Stock outstanding. For any reason
at any time, 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 securities of the Company, including the SPA
Securities and the SPA Warrants, by the Holder and its affiliates since the
date
as of which such number of outstanding shares of Common Stock was reported.
By
written notice to the Company, the Holder may increase or decrease the Maximum
Percentage to any other percentage not in excess of 9.99% specified in such
notice; provided that (i) any such increase will not be effective until the
sixty-first (61st)
day
after such notice is delivered to the Company, and (ii) any such increase or
decrease will apply only to the Holder and not to any other holder of SPA
Warrants.
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ADJUSTMENT
OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.
The
Exercise Price and the number of Warrant Shares shall be adjusted from time
to
time as follows:
Adjustment
upon Subdivision or Combination of shares of Common Stock.
If the
Company at any time on or after the Subscription Date subdivides (by any stock
split, stock dividend, recapitalization or otherwise) one or more classes of
its
outstanding shares of Common Stock into a greater number of shares, the Exercise
Price in effect immediately prior to such subdivision will be proportionately
reduced and the number of Warrant Shares will be proportionately increased.
If
the Company at any time on or after the Subscription Date combines (by
combination, reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the Exercise
Price in effect immediately prior to such combination will be proportionately
increased and the number of Warrant Shares will be proportionately decreased.
Any adjustment under this Section 2(b) shall become effective at the close
of
business on the date the subdivision or combination becomes
effective.
Other
Events.
If any
event occurs of the type contemplated by the provisions of this Section 2 but
not expressly provided for by such provisions (including, without limitation,
the granting of stock appreciation rights, phantom stock rights or other rights
with equity features), then the Company's Board of Directors will make an
appropriate adjustment in the Exercise Price and the number of Warrant Shares
so
as to protect the rights of the Holder; provided that no such adjustment
pursuant to this Section 2(c) will increase the Exercise Price or decrease
the
number of Warrant Shares as otherwise determined pursuant to this Section
2.
RIGHTS
UPON DISTRIBUTION OF ASSETS.
If the
Company shall declare or make any dividend or other distribution of its assets
(or rights to acquire its assets) to holders of shares of Common Stock, by
way
of return of capital or otherwise (including, without limitation, any
distribution of cash, stock or other securities, property or options by way
of a
dividend, spin off, reclassification, corporate rearrangement, scheme of
arrangement or other similar transaction) (a "Distribution"),
at
any time after the issuance of this Warrant, then, in each such
case:
any
Exercise Price in effect immediately prior to the close of business on the
record date fixed for the determination of holders of shares of Common Stock
entitled to receive the Distribution shall be reduced, effective as of the
close
of business on such record date, to a price determined by multiplying such
Exercise Price by a fraction of which (i) the numerator shall be the Closing
Bid
Price of a share of Common Stock on the trading day immediately preceding such
record date minus the value of the Distribution (as determined in good faith
by
the Company's Board of Directors) applicable to one share of Common Stock,
and
(ii) the denominator shall be the Closing Bid Price of the shares of Common
Stock on the trading day immediately preceding such record date;
and
-5-
the
number of Warrant Shares shall be increased to a number of shares equal to
the
number of shares of Common Stock obtainable immediately prior to the close
of
business on the record date fixed for the determination of holders of shares
of
Common Stock entitled to receive the Distribution multiplied by the reciprocal
of the fraction set forth in the immediately preceding paragraph (a); provided
that in the event that the Distribution is of shares of Common Stock (or common
stock) ("Other
Shares of Common Stock")
of a
company whose common shares are traded on a national securities exchange or
a
national automated quotation system, then the Holder may elect to receive a
warrant to purchase Other Shares of Common Stock in lieu of an increase in
the
number of Warrant Shares, the terms of which shall be identical to those of
this
Warrant, except that such warrant shall be exercisable into the number of shares
of Other Shares of Common Stock that would have been payable to the Holder
pursuant to the Distribution had the Holder exercised this Warrant immediately
prior to such record date and with an aggregate exercise price equal to the
product of the amount by which the exercise price of this Warrant was decreased
with respect to the Distribution pursuant to the terms of the immediately
preceding paragraph (a) and the number of Warrant Shares calculated in
accordance with the first part of this paragraph (b).
PURCHASE
RIGHTS; FUNDAMENTAL TRANSACTIONS.
Purchase
Rights.
In
addition to any adjustments pursuant to Section 2 above, if at any time the
Company grants, issues or sells any Options, Convertible Securities or rights
to
purchase stock, warrants, securities or other property pro rata to the record
holders of any class of shares of Common Stock (the "Purchase
Rights"),
then
the Holder will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which the Holder could have
acquired if the Holder had held the number of shares of Common Stock acquirable
upon complete exercise of this Warrant (without regard to any limitations on
the
exercise of this Warrant) immediately before the date on which a record is
taken
for the grant, issuance or sale of such Purchase Rights, or, if no such record
is taken, the date as of which the record holders of shares of Common Stock
are
to be determined for the grant, issue or sale of such Purchase
Rights.
Fundamental
Transactions.
If the
Company enters into or is party to a Fundamental Transaction, then the Holder
shall have the right to either (A) purchase and receive upon the basis and
upon
the terms and conditions herein specified and in lieu of the Warrant Shares
immediately theretofore issuable upon exercise of the Warrant, such shares
of
stock, securities or assets (including cash) as would have been issuable or
payable with respect to or in exchange for a number of Warrant Shares equal
to
the number of Warrant Shares immediately theretofore issuable upon exercise
of
the Warrant, had such Fundamental Transaction not taken place or (B) require
the
repurchase of this Warrant for a purchase price, payable in cash within five
(5)
business days after such request, equal to the Black Scholes Value of the
remaining unexercised portion of this Warrant on the date of such request.
The
terms of any agreement pursuant to which a Fundamental Transaction is effected
shall include terms requiring any such successor or surviving entity and Holder
to comply with the provisions of this Section
4(b).
The
provisions of this Section shall apply similarly and equally to successive
Fundamental Transactions and shall be applied without regard to any limitations
on the exercise of this Warrant.
-6-
NONCIRCUMVENTION.
The
Company hereby covenants and agrees that the Company will not, by amendment
of
its Articles of Incorporation, Bylaws or through any reorganization, transfer
of
assets, consolidation, merger, scheme of arrangement, dissolution, issue or
sale
of securities, or any other voluntary action, for the purpose of avoiding or
seeking to avoid the observance or performance of any of the terms of this
Warrant, and will at all times in good faith carry out all the provisions of
this Warrant and take all action that is required hereunder to protect the
rights of the Holder. Without limiting the generality of the foregoing, the
Company (i) shall not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then
in
effect, (ii) shall take all such actions as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant, and
(iii) shall, so long as any of the SPA Warrants are outstanding, take all action
necessary to reserve and keep available out of its authorized and unissued
shares of Common Stock, solely for the purpose of effecting the exercise of
the
SPA Warrants, 125% of the number of shares of Common Stock as shall from time
to
time be necessary to effect the exercise of the SPA Warrants then outstanding
(without regard to any limitations on exercise).
WARRANT
HOLDER NOT DEEMED A STOCKHOLDER.
Except
as otherwise specifically provided herein, the Holder, solely in such Person's
capacity as a holder of this Warrant, shall not be entitled to vote or receive
dividends or be deemed the holder of share capital of the Company for any
purpose, nor shall anything contained in this Warrant be construed to confer
upon the Holder, solely in such Person's capacity as the Holder of this Warrant,
any of the rights of a shareholder of the Company or any right to vote, give
or
withhold consent to any corporate action (whether any reorganization, issue
of
stock, reclassification of stock, consolidation, merger, conveyance or
otherwise), receive notice of meetings, receive dividends or subscription
rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares
which such Person is then entitled to receive upon the due exercise of this
Warrant. In addition, nothing contained in this Warrant shall be construed
as
imposing any liabilities on the Holder to purchase any securities (upon exercise
of this Warrant or otherwise) or as a shareholder of the Company, whether such
liabilities are asserted by the Company or by creditors of the Company.
Notwithstanding this Section 6, the Company shall provide the Holder with copies
of the same notices and other information given to the shareholders of the
Company generally, contemporaneously with the giving thereof to its
shareholders.
REISSUANCE
OF WARRANTS.
Transfer
of Warrant.
If this
Warrant is to be transferred, the Holder shall surrender this Warrant to the
Company, whereupon the Company will forthwith issue and deliver upon the order
of the Holder a new Warrant (in accordance with Section 7(d)), registered as
the
Holder may request, representing the right to purchase the number of Warrant
Shares being transferred by the Holder and, if less then the total number of
Warrant Shares then underlying this Warrant is being transferred, a new Warrant
(in accordance with Section 7(d)) to the Holder representing the right to
purchase the number of Warrant Shares not being transferred.
Lost,
Stolen or Mutilated Warrant.
Upon
receipt by the Company of evidence reasonably satisfactory to the Company of
the
loss, theft, destruction or mutilation of this Warrant, and, in the case of
loss, theft or destruction, of any indemnification undertaking by the Holder
to
the Company in customary form and, in the case of mutilation, upon surrender
and
cancellation of this Warrant, the Company shall execute and deliver to the
Holder a new Warrant (in accordance with Section 7(d)) representing the right
to
purchase the Warrant Shares then underlying this Warrant.
-7-
Exchangeable
for Multiple Warrants.
This
Warrant is exchangeable, upon the surrender hereof by the Holder at the
principal office of the Company, for a new Warrant or Warrants (in accordance
with Section 7(d)) representing in the aggregate the right to purchase the
number of Warrant Shares then underlying this Warrant, and each such new Warrant
will represent the right to purchase such portion of such Warrant Shares as
is
designated by the Holder at the time of such surrender; provided, however,
that
no Warrants for fractional shares of Common Stock shall be given.
Issuance
of New Warrants.
Whenever the Company is required to issue a new Warrant pursuant to the terms
of
this Warrant, such new Warrant (i) shall be of like tenor with this Warrant,
(ii) shall represent, as indicated on the face of such new Warrant, the right
to
purchase the Warrant Shares then underlying this Warrant (or in the case of
a
new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant
Shares designated by the Holder which, when added to the number of shares of
Common Stock underlying the other new Warrants issued in connection with such
issuance, does not exceed the number of Warrant Shares then underlying this
Warrant), (iii) shall have an issuance date, as indicated on the face of such
new Warrant which is the same as the Issuance Date, and (iv) shall have the
same
rights and conditions as this Warrant.
NOTICES.
Whenever notice is required to be given under this Warrant, unless otherwise
provided herein, such notice shall be given in accordance with Section 9(f)
of
the Securities Purchase Agreement. The Company shall provide the Holder with
prompt written notice of all actions taken pursuant to this Warrant, including
in reasonable detail a description of such action and the reason therefore.
Without limiting the generality of the foregoing, the Company will give written
notice to the Holder (i) promptly after any adjustment of the Exercise Price,
setting forth in reasonable detail, and certifying, the calculation of such
adjustment and (ii) at least ten days prior to the date on which the
Company closes its books or takes a record (A) with respect to any dividend
or
distribution upon the shares of Common Stock, (B) with respect to any grants,
issuances or sales of any Options, Convertible Securities or rights to purchase
stock, warrants, securities or other property to all holders of shares of Common
Stock or (C) for determining rights to vote with respect to any Fundamental
Transaction, dissolution or liquidation, provided in each case that such
information shall be made known to the public prior to or in conjunction with
such notice being provided to the Holder.
AMENDMENT
AND WAIVER.
Except
as otherwise provided herein, the provisions of this Warrant may be amended
and
the Company may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, only if the Company has obtained the
written consent of the Required Holders; provided that no such action may
increase the exercise price of any SPA Warrant or decrease the number of shares
or class of stock obtainable upon exercise of any SPA Warrant without the
written consent of the Holder. No such amendment shall be effective to the
extent that it applies to less than all of the holders of the SPA Warrants
then
outstanding.
-8-
SEVERABILITY.
If any
provision of this Warrant or the application thereof becomes or is declared
by a
court of competent jurisdiction to be illegal, void or unenforceable, the
remainder of the terms of this Warrant will continue in full force and
effect.
GOVERNING
LAW.
This
Warrant shall be governed by and construed and enforced in accordance with,
and
all questions concerning the construction, validity, interpretation and
performance of this Warrant shall be governed by, the internal laws of the
State
of New York, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of New York or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than
the
State of New York.
CONSTRUCTION;
HEADINGS.
This
Warrant shall be deemed to be jointly drafted by the Company and all the Buyers
and shall not be construed against any person as the drafter hereof. The
headings of this Warrant are for convenience of reference and shall not form
part of, or affect the interpretation of, this Warrant.
DISPUTE
RESOLUTION.
In the
case of a dispute as to the determination of the Exercise Price or the
arithmetic calculation of the Warrant Shares, the Company shall submit the
disputed determinations or arithmetic calculations via facsimile within two
Business Days of receipt of the Exercise Notice giving rise to such dispute,
as
the case may be, to the Holder. If the Holder and the Company are unable to
agree upon such determination or calculation of the Exercise Price or the
Warrant Shares within three Business Days of such disputed determination or
arithmetic calculation being submitted to the Holder, then the Company shall,
within two Business Days submit via facsimile (a) the disputed determination
of
the Exercise Price to an independent, reputable investment bank selected by
the
Company and approved by the Holder or (b) the disputed arithmetic calculation
of
the Warrant Shares to the Company's independent, outside accountant. The Company
shall cause, at its expense, the investment bank or the accountant, as the
case
may be, to perform the determinations or calculations and notify the Company
and
the Holder of the results no later than ten Business Days from the time it
receives the disputed determinations or calculations. Such investment bank's
or
accountant's determination or calculation, as the case may be, shall be binding
upon all parties absent demonstrable error.
REMEDIES,
OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.
The
remedies provided in this Warrant shall be cumulative and in addition to all
other remedies available under this Warrant and the other Transaction Documents,
at law or in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit the right of the Holder
right
to pursue actual damages for any failure by the Company to comply with the
terms
of this Warrant. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Holder and that the remedy at
law
for any such breach may be inadequate. The Company therefore agrees that, in
the
event of any such breach or threatened breach, the holder of this Warrant shall
be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.
-9-
TRANSFER. This
Warrant may be offered for sale, sold, transferred or assigned without the
consent of the Company, except as may otherwise be required by Section 2(f)
of
the Securities Purchase Agreement.
CERTAIN
DEFINITIONS.
For
purposes of this Warrant, the following terms shall have the following
meanings:
"Black
Scholes Value"
means
the value of this Warrant based on the Black and Scholes Option Pricing Model
obtained from the "OV" function on Bloomberg determined as of the day
immediately following the public announcement of the applicable Fundamental
Transaction and reflecting (i) a risk-free interest rate corresponding to the
U.S. Treasury rate for a period equal to the remaining term of this Warrant
as
of such date of request and (ii) an expected volatility equal to the greater
of
60% and the 100 day volatility obtained from the HVT function on
Bloomberg.
"Bloomberg"
means
Bloomberg Financial Markets.
"Business
Day"
means
any day other than Saturday, Sunday or other day on which commercial banks
in
The City of New York are authorized or required by law to remain
closed.
"Closing
Bid Price"
and
"Closing
Sale Price"
means,
for any security as of any date, the last closing bid price and last closing
trade price, respectively, for such security on the Principal Market, as
reported by Bloomberg, or, if the Principal Market begins to operate on an
extended hours basis and does not designate the closing bid price or the closing
trade price, as the case may be, then the last bid price or last trade price,
respectively, of such security prior to 4:00:00 p.m., New York Time, as reported
by Bloomberg, or, if the Principal Market is not the principal securities
exchange or trading market for such security, the last closing bid price or
last
trade price, respectively, of such security on the principal securities exchange
or trading market where such security is listed or traded as reported by
Bloomberg, or if the foregoing do not apply, the last closing bid price or
last
trade price, respectively, of such security in the over-the-counter market
on
the electronic bulletin board for such security as reported by Bloomberg, or,
if
no closing bid price or last trade price, respectively, is reported for such
security by Bloomberg, the average of the bid prices, or the ask prices,
respectively, of any market makers for such security as reported in the "pink
sheets" by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.).
If
the Closing Bid Price or the Closing Sale Price cannot be calculated for a
security on a particular date on any of the foregoing bases, the Closing Bid
Price or the Closing Sale Price, as the case may be, of such security on such
date shall be the fair market value as mutually determined by the Company and
the Holder. If the Company and the Holder are unable to agree upon the fair
market value of such security, then such dispute shall be resolved pursuant
to
Section 12. All such determinations to be appropriately adjusted for any stock
dividend, stock split, stock combination or other similar transaction during
the
applicable calculation period.
"Common
Stock"
means
(i) the Company's shares of Common Stock, $0.01 par value per share, and
(ii) any share capital into which such Common Stock shall have been changed
or any share capital resulting from a reclassification of such Common
Stock.
"Convertible
Securities"
means
any stock or securities (other than Options) directly or indirectly convertible
into or exercisable or exchangeable for shares of Common Stock.
-10-
"Eligible
Market"
means
the Principal Market, the American Stock Exchange, The New York Stock Exchange,
Inc., the Nasdaq National Market or the Nasdaq Capital Market.
"Expiration
Date"
means
the date sixty months after the Issuance Date or, if such date falls on a day
other than a Business Day or on which trading does not take place on the
Principal Market (a "Holiday"),
the
next date that is not a Holiday.
"Fundamental
Transaction"
means
that the Company shall, directly or indirectly, in one or more related
transactions, (i) consolidate or merge with or into (whether or not the Company
is the surviving corporation) another Person, or (ii) sell, assign, transfer,
convey or otherwise dispose of all or substantially all of the properties or
assets of the Company to another Person, or (iii) allow another Person to make
a
purchase, tender or exchange offer that is accepted by such number of holders
of
outstanding shares of Common Stock resulting in such Person (together with
any
affiliates of such Person) holding more than 50% of the outstanding Common
Stock
of the Company following such purchase, tender or exchange offer, or (iv)
consummate a stock purchase agreement or other business combination (including,
without limitation, a reorganization, recapitalization, spin-off or scheme
of
arrangement) with another Person resulting in such other Person (together with
any affiliates of such person) holding more than the 50% of the outstanding
Common Stock of the Company following such stock purchase agreement or other
business combination), or (v) reorganize, recapitalize or reclassify its Common
Stock.
"Options"
means
any rights, warrants or options to subscribe for or purchase shares of Common
Stock or Convertible Securities.
"Person"
means
an individual, a limited liability company, a partnership, a joint venture,
a
corporation, a trust, an unincorporated organization, any other entity and
a
government or any department or agency thereof.
"Principal
Market"
means
the OTC Bulletin Board.
"Registration
Rights Agreement"
means
that certain registration rights agreement by and among the Company and the
Buyers.
"Required
Holders"
means
the holders of the SPA Warrants representing at least a majority of shares
of
Common Stock underlying the SPA Warrants then outstanding.
"SPA
Securities"
means
the Notes issued pursuant to the Securities Purchase Agreement.
[Signature
Page Follows]
-11-
IN
WITNESS WHEREOF,
the
Company has caused this Warrant to Purchase Common Stock to be duly executed
as
of the Issuance Date set out above.
| UNIVERSAL FOOD & BEVERAGE COMPANY | ||
| |
|
|
| By: | ||
|
Name: |
||
| Title: | ||
-12-
EXHIBIT
A
EXERCISE
NOTICE
TO
BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
WARRANT
TO PURCHASE COMMON STOCK
UNIVERSAL
FOOD & BEVERAGE COMPANY
The
undersigned holder hereby exercises the right to purchase _________________
of
the shares of Common Stock ("Warrant
Shares")
of
Universal Food & Beverage Company, a Nevada corporation (the "Company"),
evidenced by the attached Warrant to Purchase Common Stock (the "Warrant").
Capitalized terms used herein and not otherwise defined shall have the
respective meanings set forth in the Warrant.
1.
Form
of Exercise Price. The Holder intends that payment of the Exercise Price shall
be made as:
____________ a
"Cash
Exercise"
with
respect to _________________ Warrant Shares; and/or
____________ a
"Cashless
Exercise"
with
respect to _______________ Warrant Shares.
2.
Notwithstanding anything to the contrary contained herein, this Exercise Notice
shall constitute a representation by the Holder of the Warrant submitting this
Exercise Notice that, after giving effect to the exercise provided for in this
Exercise Notice, such Holder (together with its affiliates) will not have
beneficial ownership (together with the beneficial ownership of such Person's
affiliates) of a number of shares of Common Stock which exceeds the maximum
percentage of the total outstanding shares of Common Stock as determined
pursuant to the provisions of Section 1(f)(i) of the Warrant.
3.
Payment of Exercise Price. In the event that the holder has elected a Cash
Exercise with respect to some or all of the Warrant Shares to be issued pursuant
hereto, the holder shall pay the Aggregate Exercise Price in the sum of
$___________________ to the Company in accordance with the terms of the
Warrant.
4.
Delivery of Warrant Shares. The Company shall deliver to the holder __________
Warrant Shares in accordance with the terms of the Warrant.
Date:
_____________________, ______
____________________________
Name
of
Registered Holder
| By: | |
|
Name: |
|
| Title: |
-13-
ACKNOWLEDGMENT
The
Company hereby acknowledges this Exercise Notice and hereby directs _________
to
issue the above indicated number of shares of Common Stock in accordance with
the Transfer Agent Instructions dated December 30, 2005 from the Company and
acknowledged and agreed to by
_____________________________________.
| UNIVERSAL FOOD & BEVERAGE COMPANY | ||
| |
|
|
| By: | ||
|
Name: |
||
| Title: | ||
-14-
