EXHIBIT 4.4
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
REASONABLY ACCEPTABLE TO THE COMPANY TO SUCH EFFECT, THE SUBSTANCE OF WHICH
SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE SECURITIES AND THE
SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
SECURITIES.
ADDITIONAL INVESTMENT RIGHT
To Purchase __________ Shares of Common Stock of
RCG COMPANIES INCORPORATED
THIS ADDITIONAL INVESTMENT RIGHT (the "Additional Investment
Right") certifies that, for value received, _____________ (the "Holder"), is
entitled, upon the terms and subject to the limitations on exercise and the
conditions hereinafter set forth, at any time on or after the 181st day after
the date hereof (the "Initial Exercise Date") and on or prior to the close of
business on the earlier of (a) the later of (i) the 181st day after the
Effective Date and (ii) the 181st day after the Initial Exercise Date and (b)
the 2nd year anniversary of the date of the Purchase Agreement (the "Termination
Date" and the period from the Initial Exercise Date until the Termination Date
shall be the "Exercise Period") but not thereafter, to subscribe for and
purchase from RCG Companies Incorporated, a Delaware corporation (the
"Company"), up to ______________ shares (the "Additional Investment Right
Shares") of Common Stock, par value $0.04 per share, of the Company (the "Common
Stock"). The Exercise Period shall be extended for the number of Trading Days
during such period in which (x) trading in the Common Stock is suspended by any
Trading Market, or (y) following the Effective Date, the Registration Statement
is not effective or the prospectus included in the Registration Statement may
not be used by the Purchasers for the resale of the Additional Investment Right
Shares. The purchase price of one share of Common Stock under this Additional
Investment Right shall be equal to the Exercise Price, as defined under Section
2(b).
Section 1. Definitions. Capitalized terms used and not otherwise
defined herein shall have the meanings set forth in that certain Securities
Purchase Agreement (the "Purchase Agreement"), dated September 13, 2004, among
the Company and the purchasers signatory thereto.
Section 2. Exercise.
a) Exercise of Additional Investment Right. Exercise of the purchase
rights represented by this Additional Investment Right may be made at any time
or times on or after the Initial Exercise Date and on or before the Termination
Date by delivery to the Company of a duly executed facsimile copy of the Notice
of Exercise Form annexed hereto (or such other office or agency of the Company
as it may designate by notice in writing to the registered Holder at the address
of such Holder appearing on the books of the Company); provided, however, within
5 Trading Days of the date said Notice of Exercise is delivered to the Company,
the Holder shall have surrendered this Additional Investment Right to the
Company and the Company shall have received payment of the aggregate Exercise
Price of the shares thereby purchased by wire transfer or cashier's check drawn
on a United States bank.
b) Exercise Price. The exercise price of each share of Common Stock
under this Additional Investment Right shall be $1.03, subject to adjustment
hereunder (the "Exercise Price").
c) Intentionally omitted.
d) Xxxxxx's Restrictions. The Holder shall not have the right to
exercise any portion of this Additional Investment Right, pursuant to Section
2(c) or otherwise, to the extent that after giving effect to such issuance after
exercise, the Holder (together with the Holder's affiliates), as set forth on
the applicable Notice of Exercise, would beneficially own in excess of 4.99% of
the number of shares of the Common Stock outstanding immediately after giving
effect to such issuance. For purposes of the foregoing sentence, the number of
shares of Common Stock beneficially owned by the Holder and its affiliates shall
include the number of shares of Common Stock issuable upon exercise of this
Additional Investment Right with respect to which the determination of such
sentence is being made, but shall exclude the number of shares of Common Stock
which would be issuable upon (A) exercise of the remaining, nonexercised portion
of this Additional Investment Right beneficially owned by the Holder or any of
its affiliates and (B) exercise or conversion of the unexercised or nonconverted
portion of any other securities of the Company (including, without limitation,
any other Preferred Stock or Additional Investment Rights) subject to a
limitation on conversion or exercise analogous to the limitation contained
herein beneficially owned by the Holder or any of its affiliates. Except as set
forth in the preceding sentence, for purposes of this Section 2(d), beneficial
ownership shall be calculated in accordance with Section 13(d) of the Exchange
Act, it being acknowledged by Holder that the Company is not representing to
Holder that such calculation is in compliance with Section 13(d) of the Exchange
Act and Holder is solely responsible for any schedules required to be filed in
accordance therewith. To the extent that the limitation contained in this
Section 2(d) applies, the determination of whether this Additional Investment
Right is exercisable (in relation to other securities owned by the Holder) and
of which a portion of this Additional Investment Right is exercisable shall be
in the sole discretion of such Holder, and the submission of a Notice of
Exercise shall be deemed to be such Holder's determination of whether this
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Additional Investment Right is exercisable (in relation to other securities
owned by such Holder) and of which portion of this Additional Investment Right
is exercisable, in each case subject to such aggregate percentage limitation,
and the Company shall have no obligation to verify or confirm the accuracy of
such determination. For purposes of this Section 2(d), 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 (x) the Company's most recent
Form 10-Q or Form 10-K, as the case may be, (y) a more recent public
announcement by the Company or (z) any other written notice by the Company or
the Company's Transfer Agent setting forth the number of shares of Common Stock
outstanding. Upon the written or oral request of the Holder, the Company shall
within two Trading Days 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 this
Additional Investment Right, by the Holder or its affiliates since the date as
of which such number of outstanding shares of Common Stock was reported.
e) Mechanics of Exercise.
i. Authorization of Additional Investment Right Shares. The
Company covenants that all Additional Investment Right Shares which may
be issued upon the exercise of the purchase rights represented by this
Additional Investment Right will, upon exercise of the purchase rights
represented by this Additional Investment Right, be duly authorized,
validly issued, fully paid and nonassessable and free from all taxes,
liens and charges in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously with such issue).
The Company covenants that during the period the Additional Investment
Right is outstanding, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the issuance
of the Additional Investment Right Shares upon the exercise of any
purchase rights under this Additional Investment Right. The Company
further covenants that its issuance of this Additional Investment Right
shall constitute full authority to its officers who are charged with
the duty of executing stock certificates to execute and issue the
necessary certificates for the Additional Investment Right Shares upon
the exercise of the purchase rights under this Additional Investment
Right. The Company will take all such reasonable action as may be
necessary to assure that such Additional Investment Right Shares may be
issued as provided herein without violation of any applicable law or
regulation, or of any requirements of the Trading Market upon which the
Common Stock may be listed.
ii. Delivery of Certificates Upon Exercise. If there is an
effective Registration Statement, certificates for shares purchased
hereunder shall be transmitted by the transfer agent of the Company to
the Holder by crediting the account of the Holder's designated broker
with the Depository Trust Company through its Deposit Withdrawal Agent
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Commission ("DWAC") system within 3 Trading Days from the delivery to
the Company of the Notice of Exercise Form, surrender of this
Additional Investment Right and payment of the aggregate Exercise Price
as set forth above ("Additional Investment Right Share Delivery Date").
This Additional Investment Right shall be deemed to have been exercised
on the date the Exercise Price is received by the Company. The
Additional Investment Right Shares shall be deemed to have been issued,
and Holder or any other person so designated to be named therein shall
be deemed to have become a holder of record of such shares for all
purposes, as of the date the Additional Investment Right has been
exercised by payment to the Company of the Exercise Price and all taxes
required to be paid by the Holder, if any, pursuant to Section
2(e)(vii) prior to the issuance of such shares, have been paid.
iii. Delivery of New Additional Investment Rights Upon
Exercise. If this Additional Investment Right shall have been exercised
in part, the Company shall, at the time of delivery of the certificate
or certificates representing Additional Investment Right Shares,
deliver to Holder a new Additional Investment Right evidencing the
rights of Holder to purchase the unpurchased Additional Investment
Right Shares called for by this Additional Investment Right, which new
Additional Investment Right shall in all other respects be identical
with this Additional Investment Right.
iv. Rescission Rights. If the Company fails to cause its
transfer agent to transmit to the Holder through the DWAC system a
certificate or certificates representing the Additional Investment
Right Shares pursuant to this Section 2(e)(iv) by the Additional
Investment Right Share Delivery Date, then the Holder will have the
right to rescind such exercise
v. Buy-In Compensation. In addition to any other rights
available to the Holder, if the Company fails to cause its transfer
agent to transmit to the Holder through the DWAC system a certificate
or certificates representing the Additional Investment Right Shares
pursuant to an exercise on or before the Additional Investment Right
Share Delivery Date, and if after such date the Holder is required by
its broker to purchase (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by the
Holder of the Additional Investment Right Shares which the Holder
anticipated receiving upon such exercise (a "Buy-In"), then the Company
shall (1) pay in cash to the Holder the amount by which (x) the
Holder's total purchase price (including brokerage commissions, if any)
for the shares of Common Stock so purchased exceeds (y) the amount
obtained by multiplying (A) the number of Additional Investment Right
Shares that the Company was required to deliver to the Holder in
connection with the exercise at issue times (B) the price at which the
sell order giving rise to such purchase obligation was executed, and
(2) at the option of the Holder, either reinstate the portion of the
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Additional Investment Right and equivalent number of Additional
Investment Right Shares for which such exercise was not honored or
deliver to the Holder the number of shares of Common Stock that would
have been issued had the Company timely complied with its exercise and
delivery obligations hereunder. For example, if the Holder purchases
Common Stock having a total purchase price of $11,000 to cover a Buy-In
with respect to an attempted exercise of shares of Common Stock with an
aggregate sale price giving rise to such purchase obligation of
$10,000, under clause (1) of the immediately preceding sentence the
Company shall be required to pay the Holder $1,000. The Holder shall
provide the Company written notice indicating the amounts payable to
the Holder in respect of the Buy-In, together with applicable
confirmations and other evidence reasonably requested by the Company.
Nothing herein shall limit a Holder's right to pursue any other
remedies available to it hereunder, at law or in equity including,
without limitation, a decree of specific performance and/or injunctive
relief with respect to the Company's failure to timely deliver
certificates representing shares of Common Stock upon exercise of the
Additional Investment Right as required pursuant to the terms hereof.
vi. No Fractional Shares or Scrip. No fractional shares or
scrip representing fractional shares shall be issued upon the exercise
of this Additional Investment Right. As to any fraction of a share
which Holder would otherwise be entitled to purchase upon such
exercise, the Company shall pay a cash adjustment in respect of such
final fraction in an amount equal to such fraction multiplied by the
Exercise Price.
vii. Charges, Taxes and Expenses. Issuance of certificates for
Additional Investment Right Shares shall be made without charge to the
Holder for any issue or transfer tax or other incidental expense in
respect of the issuance of such certificate, all of which taxes and
expenses shall be paid by the Company, and such certificates shall be
issued in the name of the Holder or in such name or names as may be
directed by the Holder; provided, however, that in the event
certificates for Additional Investment Right Shares are to be issued in
a name other than the name of the Holder, this Additional Investment
Right when surrendered for exercise shall be accompanied by the
Assignment Form attached hereto duly executed by the Holder; and the
Company may require, as a condition thereto, the payment of a sum
sufficient to reimburse it for any transfer tax incidental thereto.
viii. Closing of Books. The Company will not close its
stockholder books or records in any manner which prevents the timely
exercise of this Additional Investment Right, pursuant to the terms
hereof.
f) Call Provision. Subject to the provisions of this Section 2(f), if
after the Effective Date the VWAP for each of 20 consecutive Trading Days (the
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"Measurement Price", which period shall not have commenced until after such
anniversary date) is greater than or equal to 160% of the then Exercise Price
(subject to adjustment as set forth herein) (the "Threshold Price"), then the
Company may, in its sole discretion, within ten Trading Days of such period,
call for cancellation of all or any portion of this Additional Investment Right
for which a Notice of Exercise has not yet been delivered (such right, a
"Call"). To exercise this right, the Company must deliver to the Holder an
irrevocable written notice (a "Call Notice"), indicating therein the portion of
unexercised portion of this Additional Investment Right to which such notice
applies. If the conditions set forth below for such Call are satisfied from the
period from the date of the Call Notice through and including the Call Date (as
defined below), then any portion of this Additional Investment Right subject to
such Call Notice for which a Notice of Exercise shall not have been received
from and after the date of the Call Notice will be cancelled at 6:30 p.m. (New
York City time) on the tenth Trading Day after the date the Call Notice is
received by the Holder (such date, the "Call Date"). Any unexercised portion of
this Additional Investment Right to which the Call Notice does not pertain will
be unaffected by such Call Notice. In furtherance thereof, the Company covenants
and agrees that it will honor all Notices of Exercise with respect to Additional
Investment Right Shares subject to a Call Notice that are tendered from the time
of delivery of the Call Notice through 6:30 p.m. (New York City time) on the
Call Date. The parties agree that any Notice of Exercise delivered following a
Call Notice shall first reduce to zero the number of Additional Investment Right
Shares subject to such Call Notice prior to reducing the remaining Additional
Investment Right Shares available for purchase under this Additional Investment
Right. For example, if (x) this Additional Investment Right then permits the
Holder to acquire 100 Additional Investment Right Shares, (y) a Call Notice
pertains to 75 Additional Investment Right Shares, and (z) prior to 6:30 p.m.
(New York City time) on the Call Date the Holder tenders a Notice of Exercise in
respect of 50 Additional Investment Right Shares, then (1) on the Call Date the
right under this Additional Investment Right to acquire 25 Additional Investment
Right Shares will be automatically cancelled, (2) the Company, in the time and
manner required under this Additional Investment Right, will have issued and
delivered to the Holder 50 Additional Investment Right Shares in respect of the
exercises following receipt of the Call Notice, and (3) the Holder may, until
the Termination Date, exercise this Additional Investment Right for 25
Additional Investment Right Shares (subject to adjustment as herein provided and
subject to subsequent Call Notices). Subject again to the provisions of this
Section 3(e), the Company may deliver subsequent Call Notices for any portion of
this Additional Investment Right for which the Holder shall not have delivered a
Notice of Exercise. Notwithstanding anything to the contrary set forth in this
Additional Investment Right, the Company may not deliver a Call Notice or
require the cancellation of this Additional Investment Right (and any Call
Notice will be void), unless, from the beginning of the 20 consecutive Trading
Days used to determine whether the Common Stock has achieved the Threshold Price
through the Call Date, the Equity Conditions have been met. The Company's right
to Call the Additional Investment Right shall be exercised ratably among the
Purchasers based on each Purchaser's initial purchase of Common Stock pursuant
to the Purchase Agreement.
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Section 3. Certain Adjustments.
a) Stock Dividends and Splits. If the Company, at any time while this
Additional Investment Right is outstanding: (A) pays a stock dividend or
otherwise make a distribution or distributions on shares of its Common Stock or
any other equity or equity equivalent securities payable in shares of Common
Stock (which, for avoidance of doubt, shall not include any shares of Common
Stock issued by the Company pursuant to this Additional Investment Right), (B)
subdivides outstanding shares of Common Stock into a larger number of shares,
(C) combines (including by way of reverse stock split) outstanding shares of
Common Stock into a smaller number of shares, or (D) issues by reclassification
of shares of the Common Stock any shares of capital stock of the Company, then
in each case the Exercise Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding treasury
shares, if any) outstanding before such event and of which the denominator shall
be the number of shares of Common Stock outstanding after such event and the
number of Additional Investment Right Shares issuable upon exercise of this
Additional Investment Right shall be proportionately adjusted. Any adjustment
made pursuant to this Section 3(a) shall become effective immediately after the
record date for the determination of stockholders entitled to receive such
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or re-classification.
b) Intentionally Omitted.
c) Pro Rata Distributions. If the Company, at any time prior to the
Termination Date, shall distribute to all holders of Common Stock (and not to
Holders of the Additional Investment Rights) evidences of its indebtedness or
assets or rights or Additional Investment Rights to subscribe for or purchase
any security other than the Common Stock (which shall be subject to Section
3(b)), then in each such case the Exercise Price shall be adjusted by
multiplying the Exercise Price in effect immediately prior to the record date
fixed for determination of stockholders entitled to receive such distribution by
a fraction of which the denominator shall be the VWAP determined as of the
record date mentioned above, and of which the numerator shall be such VWAP on
such record date less the then per share fair market value at such record date
of the portion of such assets or evidence of indebtedness so distributed
applicable to one outstanding share of the Common Stock as determined by the
Board of Directors in good faith. In either case the adjustments shall be
described in a statement provided to the Holders of the portion of assets or
evidences of indebtedness so distributed or such subscription rights applicable
to one share of Common Stock. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the record
date mentioned above.
d) Calculations. All calculations under this Section 3 shall be made to
the nearest cent or the nearest 1/100th of a share, as the case may be. For
purposes of this Section 3, the number of shares of Common Stock outstanding as
of a given date shall be the sum of the number of shares of Common Stock
(excluding treasury shares, if any) outstanding.
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e) Notice to Holders.
i. Adjustment to Exercise Price. Whenever the Exercise Price is adjusted
pursuant to this Section 3, the Company shall promptly mail to each
Holder a notice setting forth the Exercise Price after such adjustment
and setting forth a brief statement of the facts requiring such
adjustment.
ii. Notice to Allow Exercise by Xxxxxx. If (A) the Company
shall declare a dividend (or any other distribution) on the Common
Stock; (B) the Company shall declare a special nonrecurring cash
dividend on or a redemption of the Common Stock; (C) the Company shall
authorize the granting to all holders of the Common Stock rights or
Additional Investment Rights to subscribe for or purchase any shares of
capital stock of any class or of any rights; (D) the approval of any
stockholders of the Company shall be required in connection with any
reclassification of the Common Stock, any consolidation or merger to
which the Company is a party, any sale or transfer of all or
substantially all of the assets of the Company, of any compulsory share
exchange whereby the Common Stock is converted into other securities,
cash or property; (E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs of
the Company; then, in each case, the Company shall cause to be mailed
to the Holder at its last addresses as it shall appear upon the
Additional Investment Right Register of the Company, at least 20
calendar days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a record
is to be taken for the purpose of such dividend, distribution,
redemption, rights or Additional Investment Rights, or if a record is
not to be taken, the date as of which the holders of the Common Stock
of record to be entitled to such dividend, distributions, redemption,
rights or Additional Investment Rights are to be determined or (y) the
date on which such reclassification, consolidation, merger, sale,
transfer or share exchange is expected to become effective or close,
and the date as of which it is expected that holders of the Common
Stock of record shall be entitled to exchange their shares of the
Common Stock for securities, cash or other property deliverable upon
such reclassification, consolidation, merger, sale, transfer or share
exchange; provided, that the failure to mail such notice or any defect
therein or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice. The Holder is
entitled to exercise this Additional Investment Right during the 20-day
period commencing the date of such notice to the effective date of the
event triggering such notice
f) Fundamental Transaction. If, at any time while this Additional
Investment Right is outstanding, (A) the Company effects any merger or
consolidation of the Company with or into another Person, in which the Company
is not the surviving entity, or the Company's then existing shareholders will
own less than 51% of the surviving entity, (B) the Company effects any sale of
all or substantially all of its assets in one or a series of related
8
transactions, (C) any tender offer or exchange offer (whether by the Company or
another Person) is completed pursuant to which holders of Common Stock are
permitted to tender or exchange their shares for other securities, cash or
property, or (D) the Company effects any reclassification of the Common Stock or
any compulsory share exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property (in any such
case, a "Fundamental Transaction"), then, upon any subsequent conversion of this
Additional Investment Right, the Holder shall have the right to receive, for
each Additional Investment Right Share that would have been issuable upon such
exercise absent such Fundamental Transaction, at the option of the Holder, (a)
upon exercise of this Additional Investment Right, the number of shares of
Common Stock of the successor or acquiring corporation or of the Company, if it
is the surviving corporation, and Alternate Consideration receivable upon or as
a result of such reorganization, reclassification, merger, consolidation or
disposition of assets by a Holder of the number of shares of Common Stock for
which this Additional Investment Right is exercisable immediately prior to such
event or (b) only in the event the Company is acquired in an all cash
acquisition, cash equal to the value of this Additional Investment Right as
determined in accordance with the Black-Scholes option pricing formula (the
"Alternate Consideration"). For purposes of any such exercise, the determination
of the Exercise Price shall be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration issuable in respect
of one share of Common Stock in such Fundamental Transaction, and the Company
shall apportion the Exercise Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different components of
the Alternate Consideration. If holders of Common Stock are given any choice as
to the securities, cash or property to be received in a Fundamental Transaction,
then the Holder shall be given the same choice as to the Alternate Consideration
it receives upon any exercise of this Additional Investment Right following such
Fundamental Transaction. To the extent necessary to effectuate the foregoing
provisions, any successor to the Company or surviving entity in such Fundamental
Transaction shall issue to the Holder a new Additional Investment Right
consistent with the foregoing provisions and evidencing the Holder's right to
exercise such Additional Investment Right into Alternate Consideration upon the
payment thereof. The terms of any agreement pursuant to which a Fundamental
Transaction is effected shall include terms requiring any such successor or
surviving entity to comply with the provisions of this paragraph (f) and
insuring that this Additional Investment Right (or any such replacement
security) will be similarly adjusted upon any subsequent transaction analogous
to a Fundamental Transaction.
g) Exempt Issuance. Notwithstanding the foregoing, no adjustments,
Alternate Consideration nor notices shall be made, paid or issued under this
Section 3 in respect of an Exempt Issuance.
h) Voluntary Adjustment By Company. The Company may at any time during
the term of this Additional Investment Right reduce the then current Exercise
Price to any amount and for any period of time deemed appropriate by the Board
of Directors of the Company.
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Section 4. Transfer of Additional Investment Right.
a) Transferability. Subject to compliance with any applicable
securities laws and the conditions set forth in Sections 5(a) and 4(d) hereof
and to the provisions of Section 4.1 of the Purchase Agreement, this Additional
Investment Right and all rights hereunder are transferable, in whole or in part,
upon surrender of this Additional Investment Right at the principal office of
the Company, together with a written assignment of this Additional Investment
Right substantially in the form attached hereto duly executed by the Holder or
its agent or attorney and funds sufficient to pay any transfer taxes payable
upon the making of such transfer. Upon such surrender and, if required, such
payment, the Company shall execute and deliver a new Additional Investment Right
or Additional Investment Rights in the name of the assignee or assignees and in
the denomination or denominations specified in such instrument of assignment,
and shall issue to the assignor a new Additional Investment Right evidencing the
portion of this Additional Investment Right not so assigned, and this Additional
Investment Right shall promptly be cancelled. A Additional Investment Right, if
properly assigned, may be exercised by a new holder for the purchase of
Additional Investment Right Shares without having a new Additional Investment
Right issued.
b) New Additional Investment Rights. This Additional Investment Right
may be divided or combined with other Additional Investment Rights upon
presentation hereof at the aforesaid office of the Company, together with a
written notice specifying the names and denominations in which new Additional
Investment Rights are to be issued, signed by the Holder or its agent or
attorney. Subject to compliance with Section 4(a), as to any transfer which may
be involved in such division or combination, the Company shall execute and
deliver a new Additional Investment Right or Additional Investment Rights in
exchange for the Additional Investment Right or Additional Investment Rights to
be divided or combined in accordance with such notice.
c) Additional Investment Right Register. The Company shall register
this Additional Investment Right, upon records to be maintained by the Company
for that purpose (the "Additional Investment Right Register"), in the name of
the record Holder hereof from time to time. The Company may deem and treat the
registered Holder of this Additional Investment Right as the absolute owner
hereof for the purpose of any exercise hereof or any distribution to the Holder,
and for all other purposes, absent actual notice to the contrary.
d) Transfer Restrictions. If, at the time of the surrender of this
Additional Investment Right in connection with any transfer of this Additional
Investment Right, the transfer of this Additional Investment Right shall not be
registered pursuant to an effective registration statement under the Securities
Act and under applicable state securities or blue sky laws, the Company may
require, as a condition of allowing such transfer (i) that the Holder or
transferee of this Additional Investment Right, as the case may be, furnish to
the Company a written opinion of counsel (which opinion shall be in form,
substance and scope customary for opinions of counsel in comparable
transactions) to the effect that such transfer may be made without registration
under the Securities Act and under applicable state securities or blue sky laws,
(ii) that the holder or transferee execute and deliver to the Company an
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investment letter in form and substance acceptable to the Company and (iii) that
the transferee be an "accredited investor" as defined in Rule 501(a)(1), (a)(2),
(a)(3), (a)(7), or (a)(8) promulgated under the Securities Act or a qualified
institutional buyer as defined in Rule 144A(a) under the Securities Act.
Section 5. Miscellaneous.
a) Title to Additional Investment Right. Prior to the Termination Date
and subject to compliance with applicable laws and Section 4 of this Additional
Investment Right, this Additional Investment Right and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company by the
Holder in person or by duly authorized attorney, upon surrender of this
Additional Investment Right together with the Assignment Form annexed hereto
properly endorsed. The transferee shall sign an investment letter in form and
substance reasonably satisfactory to the Company.
b) No Rights as Shareholder Until Exercise. This Additional Investment
Right does not entitle the Holder to any voting rights or other rights as a
shareholder of the Company prior to the exercise hereof. Upon the surrender of
this Additional Investment Right and the payment of the aggregate Exercise
Price, the Additional Investment Right Shares so purchased shall be and be
deemed to be issued to such Holder as the record owner of such shares as of the
close of business on the later of the date of such surrender or payment.
c) Loss, Theft, Destruction or Mutilation of Additional Investment
Right. The Company covenants that upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Additional Investment Right or any stock certificate relating to the
Additional Investment Right Shares, and in case of loss, theft or destruction,
of indemnity or security reasonably satisfactory to it (which, in the case of
the Additional Investment Right, shall not include the posting of any bond), and
upon surrender and cancellation of such Additional Investment Right or stock
certificate, if mutilated, the Company will make and deliver a new Additional
Investment Right or stock certificate of like tenor and dated as of such
cancellation, in lieu of such Additional Investment Right or stock certificate.
d) Saturdays, Sundays, Holidays, etc. If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday, Sunday or a legal holiday, then such action may be
taken or such right may be exercised on the next succeeding day not a Saturday,
Sunday or legal holiday.
e) Authorized Shares.
The Company covenants that during the period the Additional
Investment Right is outstanding, it will reserve from its authorized
and unissued Common Stock a sufficient number of shares to provide for
the issuance of the Additional Investment Right Shares upon the
exercise of any purchase rights under this Additional Investment Right.
The Company further covenants that its issuance of this Additional
Investment Right shall constitute full authority to its officers who
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are charged with the duty of executing stock certificates to execute
and issue the necessary certificates for the Additional Investment
Right Shares upon the exercise of the purchase rights under this
Additional Investment Right. The Company will take all such reasonable
action as may be necessary to assure that such Additional Investment
Right Shares may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of the Trading
Market upon which the Common Stock may be listed.
Except and to the extent as waived or consented to by the
Holder, the Company shall not by any action, including, without
limitation, amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of this
Additional Investment Right, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate to protect the rights of
Xxxxxx as set forth in this Additional Investment Right against
impairment. Without limiting the generality of the foregoing, the
Company will (a) not increase the par value of any Additional
Investment Right Shares above the amount payable therefor upon such
exercise immediately prior to such increase in par value, (b) take all
such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable
Additional Investment Right Shares upon the exercise of this Additional
Investment Right, and (c) use commercially reasonable efforts to obtain
all such authorizations, exemptions or consents from any public
regulatory body having jurisdiction thereof as may be necessary to
enable the Company to perform its obligations under this Additional
Investment Right.
Before taking any action which would result in an adjustment
in the number of Additional Investment Right Shares for which this
Additional Investment Right is exercisable or in the Exercise Price,
the Company shall obtain all such authorizations or exemptions thereof,
or consents thereto, as may be necessary from any public regulatory
body or bodies having jurisdiction thereof.
f) Jurisdiction. All questions concerning the construction, validity,
enforcement and interpretation of this Additional Investment Right shall be
determined in accordance with the provisions of the Purchase Agreement.
g) Restrictions. The Holder acknowledges that the Additional Investment
Right Shares acquired upon the exercise of this Additional Investment Right, if
not registered, will have restrictions upon resale imposed by state and federal
securities laws.
h) Nonwaiver and Expenses. No course of dealing or any delay or failure
to exercise any right hereunder on the part of Holder shall operate as a waiver
of such right or otherwise prejudice Xxxxxx's rights, powers or remedies,
notwithstanding the fact that all rights hereunder terminate on the Termination
Date. If the Company willfully and knowingly fails to comply with any provision
of this Additional Investment Right, which results in any material damages to
12
the Holder, the Company shall pay to Holder such amounts as shall be sufficient
to cover any costs and expenses including, but not limited to, reasonable
attorneys' fees, including those of appellate proceedings, incurred by Holder in
collecting any amounts due pursuant hereto or in otherwise enforcing any of its
rights, powers or remedies hereunder.
i) Notices. Any notice, request or other document required or permitted
to be given or delivered to the Holder by the Company shall be delivered in
accordance with the notice provisions of the Purchase Agreement.
j) Limitation of Liability. No provision hereof, in the absence of any
affirmative action by Holder to exercise this Additional Investment Right or
purchase Additional Investment Right Shares, and no enumeration herein of the
rights or privileges of Holder, shall give rise to any liability of Holder for
the purchase price of any Common Stock or as a stockholder of the Company,
whether such liability is asserted by the Company or by creditors of the
Company.
k) Remedies. Holder, in addition to being entitled to exercise all
rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Additional Investment Right. The
Company agrees that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of the provisions of this Additional
Investment Right and hereby agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.
l) Successors and Assigns. Subject to applicable securities laws, this
Additional Investment Right and the rights and obligations evidenced hereby
shall inure to the benefit of and be binding upon the successors of the Company
and the successors and permitted assigns of Holder. The provisions of this
Additional Investment Right are intended to be for the benefit of all Holders
from time to time of this Additional Investment Right and shall be enforceable
by any such Holder or holder of Additional Investment Right Shares.
m) Amendment. This Additional Investment Right may be modified or
amended or the provisions hereof waived with the written consent of the Company
and the Holder.
n) Severability. Wherever possible, each provision of this Additional
Investment Right shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Additional Investment
Right shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining provisions of
this Additional Investment Right.
o) Headings. The headings used in this Additional Investment Right are
for the convenience of reference only and shall not, for any purpose, be deemed
a part of this Additional Investment Right.
********************
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IN WITNESS WHEREOF, the Company has caused this Additional
Investment Right to be executed by its officer thereunto duly authorized.
Dated: September __, 2004
RCG COMPANIES INCORPORATED
By:
------------------------------
Name:
Title:
14
NOTICE OF EXERCISE
To: RCG Companies Incorporated
(1) The undersigned hereby elects to purchase ________ Additional
Investment Right Shares of the Company pursuant to the terms of the attached
Additional Investment Right (only if exercised in full), and tenders herewith
payment of the exercise price in full, together with all applicable transfer
taxes, if any.
(2) Payment shall take the form of lawful money of the United States.
(3) Please issue a certificate or certificates representing said
Additional Investment Right Shares in the name of the undersigned or in such
other name as is specified below:
----------------------------------------
The Additional Investment Right Shares shall be delivered to the following:
----------------------------------------
----------------------------------------
----------------------------------------
(4) Accredited Investor. The undersigned is an "accredited investor" as
defined in Regulation D promulgated under the Securities Act of 1933, as
amended.
[PURCHASER]
By:
-------------------------------
Name:
Title:
Dated:
----------------------------
ASSIGNMENT FORM
(To assign the foregoing Additional Investment Right, execute
this form and supply required information.
Do not use this form to exercise the Additional Investment Right.)
FOR VALUE RECEIVED, the foregoing Additional Investment Right
and all rights evidenced thereby are hereby assigned to
_______________________________________________ whose address is
__________________________________________________________________.
__________________________________________________________________
Dated: ______________, _______
Holder's Signature: ________________________
Holder's Address: ________________________
________________________
Signature Guaranteed: _______________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Additional Investment Right, without alteration or
enlargement or any change whatsoever, and must be guaranteed by a bank or trust
company. Officers of corporations and those acting in a fiduciary or other
representative capacity should file proper evidence of authority to assign the
foregoing Additional Investment Right.
