1
EXHIBIT 10.8
WARRANT AGREEMENT
BETWEEN
AUTHENTIC SPECIALTY FOODS, INC.
AND
SHANSBY PARTNERS, L.L.C.
Dated as of August __, 1997
2
TABLE OF CONTENTS
1. ISSUANCE OF WARRANTS; FORM OF WARRANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . 2
(a) EXISTENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(b) POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(c) RESERVATION, ISSUANCE AND DELIVERY OF COMMON STOCK . . . . . . . . . . . . . . . . . . . . . 2
(d) EXECUTION AND DELIVERY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(e) VALID AND BINDING OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(f) AUTHORIZATION AND CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3. REGISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4. EXCHANGE OF WARRANT CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
5. TRANSFER OF WARRANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
6. TERM OF WARRANTS; EXERCISE OF WARRANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
7. COMPLIANCE WITH GOVERNMENT REGULATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
8. PAYMENT OF TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
9. MUTILATED OR MISSING WARRANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
10. RESERVATION OF WARRANT SHARES; PURCHASE AND CANCELLATION OF WARRANTS . . . . . . . . . . . . . . . . . 5
11. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES . . . . . . . . . . . . . . . . . . . . . . 5
11.1. MECHANICAL ADJUSTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
11.2. VOLUNTARY ADJUSTMENT BY THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
11.3. NOTICE OF ADJUSTMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
11.4. PRESERVATION OF PURCHASE RIGHTS UPON MERGER,
CONSOLIDATION, ETC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
11.5. STATEMENT ON WARRANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
11.6. COMPANY TO PREVENT DILUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
12. FRACTIONAL INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
13. REGISTRATION UNDER THE SECURITIES ACT OF 1933 . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
14. CERTIFICATE TO BEAR LEGENDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
i
3
15. NO RIGHTS AS STOCKHOLDERS; NOTICE TO WARRANT HOLDERS . . . . . . . . . . . . . . . . . . . . . . . . 13
16. EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
17. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
18. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
19. SUPPLEMENTS AND AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
20. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 15
21. SUCCESSORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
22. MERGER OR CONSOLIDATION OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
23. BENEFITS OF THIS WARRANT AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
24. CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
25. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ii
4
WARRANT AGREEMENT
WARRANT AGREEMENT dated as of August __, 1997, between Authentic
Specialty Foods, Inc., a Texas corporation (the "Company"), and Shansby
Partners, L.L.C., a Delaware limited liability company ("Shansby Partners").
WHEREAS, the Company currently contemplates undertaking an initial
public offering (the "Initial Public Offering") of shares of its Common Stock,
par value $1.00 per share ("Common Stock"); and
WHEREAS, in connection with the Initial Public Offering the Company
proposes to issue to Shansby Partners, common stock purchase warrants (the
"Warrants") to purchase up to 350,000 shares of Common Stock (the "Warrant
Shares"), each Warrant entitling the holder thereof to purchase one share of
Common Stock.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. ISSUANCE OF WARRANTS; FORM OF WARRANT. The Company will issue
and deliver the Warrants to Shansby Partners, or to an affiliate thereof
designated by Shansby Partners (together with successors of Shansby Partners,
the "Warrant Holder(s)"), upon the consummation of the Initial Public Offering.
The number of Warrants to be issued and delivered shall be 350,000. The text
of each Warrant, as well as the purchase form and each assignment form to be
printed on the reverse thereof shall be substantially as set forth in Exhibit A
attached hereto. The Warrants shall be executed on behalf of the Company by
the signature of the present or any future Chairman of the Board, President,
Treasurer or Vice President of the Company, under its corporate seal, affixed
or in facsimile, attested by the signature of the present or future Secretary
or an Assistant Secretary of the Company. A Warrant bearing the signature of
individuals who were at any time the proper officers of the Company shall bind
the Company notwithstanding that such individuals or any of them shall have
ceased to hold such offices prior to the delivery of such Warrant or did not
hold such offices on the date of this Warrant Agreement.
Warrants shall be dated as of the date of execution thereof by the
Company either upon initial issuance or upon division, exchange, substitution
or transfer.
The number of shares of Common Stock purchasable hereunder and the
Exercise Price (as defined in Section 6 hereof) payable therefor, are subject
to adjustment as hereinafter set forth.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. The
Company hereby represents, warrants and covenants as follows:
(a) EXISTENCE. The Company is a corporation, duly
organized and validly existing under the laws of the State of Texas
and is authorized to do business and is in good standing as a foreign
corporation in every jurisdiction in which it owns or leases real
property
5
or in which the nature of its business requires it to be so qualified,
except where the failure to so qualify, individually or in the
aggregate, could not reasonably be expected to have a material adverse
effect.
(b) POWER AND AUTHORITY. The Company has all requisite
corporate power and authority, and has taken all corporate action
necessary, to execute, deliver and perform this Warrant Agreement, to
grant, issue and deliver this Warrant and to authorize and reserve for
issuance and, upon payment from time to time of the Exercise Price, to
issue and deliver the shares of Common Stock or other securities
issuable upon exercise of the Warrant. This Warrant Agreement has
been duly executed and delivered by the Company.
(c) RESERVATION, ISSUANCE AND DELIVERY OF COMMON STOCK.
There have been reserved for issuance, and the Company shall at all
times keep reserved, out of the authorized and unissued shares of
Common Stock, a number of shares sufficient to provide for the
exercise of the rights of purchase represented by the Warrant, and
such shares, when issued upon receipt of payment therefor in
accordance with the terms of the Warrant and of this Warrant
Agreement, will be legally and validly issued, fully paid and
nonassessable and will be free of any preemptive rights of
shareholders or any restrictions.
(d) EXECUTION AND DELIVERY. Neither the execution or
delivery of this Warrant Agreement nor the consummation of the
transactions herein contemplated does or will result in a breach or
violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument to which the Company is a party or by
which the Company is bound or to which any o the property or assets of
the Company is subject, nor will such action result in any violation
of any provision of the Articles of Incorporation or Bylaws of the
Company or any statute or any order, rule or regulation or any court
or governmental agency or body having jurisdiction over the Company or
any of its properties; and no consent, approval, authorization, order,
registration or qualification of or with any such court or
governmental agency or body is required for the issuance and sale of
the Warrant or the consummation by the Company of the transactions
contemplated by this Warrant Agreement.
(e) VALID AND BINDING OBLIGATIONS. This Warrant
Agreement and all related documents, when duly executed and delivered,
will be legal, valid and binding obligations of the Company,
enforceable in accordance with their respective terms, subject to any
applicable bankruptcy, insolvency or other laws of general application
affecting creditors' rights and judicial decisions interpreting any of
the foregoing.
(f) AUTHORIZATION AND CONSENTS. No authorization,
consent, approval, exemption, franchise, permit or license of, or
filing with, any governmental authority or other person is required to
authorize, or is otherwise required in connection with, the valid
execution and delivery by the Company of this Warrant Agreement and
all related documents and the performance by the Company of its
obligations hereunder.
2
6
3. REGISTRATION. The Warrants shall be numbered and shall be
registered on the books of the Company (the "Warrant Register") as they are
issued. The Warrants shall be registered initially in such names and such
denominations as Shansby Partners has specified to the Company.
4. EXCHANGE OF WARRANT CERTIFICATES. Subject to any restriction
upon transfer set forth in this Warrant Agreement, each Warrant certificate may
be exchanged at the option of the Warrant Holder thereof for another
certificate or certificates of different denominations entitling the Warrant
Holder thereof to purchase upon surrender to the Company or its duly authorized
agent a like aggregate number of Warrant Shares as the certificate or
certificates surrendered then entitle such Warrant Holder to purchase. Any
Warrant Holder desiring to exchange a Warrant certificate or certificates shall
make such request in writing delivered to the Company, and shall surrender,
properly endorsed, the certificate or certificates to be so exchanged.
Thereupon, the Company shall execute and deliver to the person entitled thereto
a new Warrant certificate or certificates, as the case may be, as so requested.
Any Warrant issued upon exchange, transfer or partial exercise of the Warrants
shall be the valid obligation of the Company, evidencing the same generic
rights and entitled to the same generic benefits under this Warrant Agreement
as the Warrants surrendered for such exchange, transfer or exercise.
5. TRANSFER OF WARRANTS. Subject to the provisions of Section 14
hereof, the Warrants shall be transferrable only on the Warrant Register upon
delivery to the Company of the Warrant certificate or certificates duly
endorsed by the Warrant Holder or by his duly authorized attorney-in-fact or
legal representative, or accompanied by proper evidence of succession,
assignment or authority to transfer. In all cases of transfer by an
attorney-in-fact, the original power of attorney, duly approved, or an official
copy thereof, duly certified, shall be deposited with the Company. In case of
transfer by executors, administrators, guardians or other legal
representatives, duly authenticated evidence of their authority shall be
produced, and may be required to be deposited with the Company in its
discretion. Upon any registration of transfer, the Company shall deliver a new
Warrant or Warrants to the person entitled thereto.
6. TERM OF WARRANTS; EXERCISE OF WARRANTS.
(a) Each Warrant entitles the Warrant Holder thereof to
purchase one share of Common Stock at any time from the date hereof
until 5:00 P.M., Houston time, on August ___, 2002 (the "Expiration
Date") at a purchase price equal to the price to public of shares of
Common Stock received in the Initial Public Offering ($____ per
share), subject to adjustment in accordance with Section 11 hereof
(the "Exercise Price"). The Exercise Price and the number of shares
issuable upon exercise of Warrants are subject to adjustment upon the
occurrence of certain events, pursuant to the provisions of Section 11
of this Warrant Agreement.
(b) Subject to the provisions of this Warrant Agreement,
each Warrant Holder shall have the right, which may be exercised as
expressed in such Warrants, to purchase from the Company (and the
Company shall issue and sell to such Warrant Holder) the number of
3
7
fully paid and nonassessable shares of Common Stock specified in such
Warrants, upon surrender to the Company, or its duly authorized agent,
of such Warrants, with the purchase form on the reverse thereof duly
filled in and signed, and upon payment to the Company of the Exercise
Price, as adjusted in accordance with the provisions of Section 11 of
this Warrant Agreement or upon a net exercise as described below in
clause (ii), for the number of shares in respect of which such
Warrants are then exercised. The Warrant Holder may (i) pay the
Exercise Price in cash, by certified check, official bank check or
wire transfer, payable to the order of the Company, or by the
surrender to the Company of Common Stock of the Company having a
Market Price equal to the Exercise Price or (ii) exercise the Warrants
for "Net Warrant Shares." The number of Net Warrant Shares will be
determined as described by the following formula: Net Warrant Shares =
[WS x (MP-EP)]/MP. "WS" is the number of Warrant Shares issuable upon
exercise of the Warrants or portion of Warrants in question. "MP" is
the Market Price of the Common Stock on the last trading day preceding
the date of the request to exercise the Warrants. "Market Price"
shall mean the then current market price per share of Common Stock, as
determined in paragraph 11.1(e). "EP" shall mean the Exercise Price.
Upon such surrender of Warrants, and payment of the Exercise
Price, with cash or securities, or upon a net exercise as aforesaid,
the Company at its expense shall issue and cause to be delivered with
all reasonable dispatch (but in any event within 5 business days) to
or upon the written order of the Warrant Holder and in such name or
names as the Warrant Holder may designate, a certificate or
certificates for the number of full shares of Common Stock so
purchased upon the exercise of such Warrants, together with cash, as
provided in Section 12 of this Warrant Agreement, in respect of any
fraction of a share of such stock otherwise issuable upon such
surrender. Such certificate or certificates shall be deemed to have
been issued and any person so designated to be named therein shall be
deemed to have become a holder of record of such shares as of the date
of the surrender of such Warrants and payment of the Exercise Price or
receipt of shares by net exercise as aforesaid. The rights of
purchase represented by the Warrants shall be exercisable, at the
election of the Warrant Holders thereof, either in full or from time
to time in part (but not as to a fractional share of Common Stock)
and, in the event that any Warrant is exercised in respect of less
than all of the shares purchasable on such exercise at any time prior
to the Expiration Date, a new certificate evidencing the remaining
Warrant or Warrants will be issued.
7. COMPLIANCE WITH GOVERNMENT REGULATIONS. The Company covenants
that if any share of Common Stock required to be reserved for purposes of
exercise or conversion of Warrants require, under any federal or state law or
applicable governing rule or regulation of any national securities exchange,
registration with or approval of any governmental authority, or listing on any
such national securities exchange, before such shares may be issued upon
exercise, the Company will use its best efforts to cause such shares to be duly
registered, approved or listed on the relevant national securities exchange, as
the case may be.
4
8
8. PAYMENT OF TAXES. The Company will pay all documentary stamp
taxes, if any, attributable to the initial issuance of Warrant Shares upon the
exercise of Warrants and any securities issued pursuant to Section 11 hereof;
provided, however, that the Company shall not be required to pay any tax or
taxes that may be payable in respect of any transfer involved in the issuance
or delivery of any Warrants or certificates for Warrant Shares and any
securities issued pursuant to Section 11 hereof in a name other than that of
the Warrant Holder of such Warrants.
9. MUTILATED OR MISSING WARRANTS. In case any of the Warrants
shall be mutilated, lost, stolen or destroyed, the Company shall issue and
deliver in exchange and substitution for and upon cancellation of the mutilated
Warrant, or in lieu of and in substitution for the Warrant lost, stolen or
destroyed, a new Warrant of like tenor and representing an equivalent right or
interest.
10. RESERVATION OF WARRANT SHARES; PURCHASE AND CANCELLATION OF
WARRANTS. The Company shall at all times reserve, out of the authorized and
unissued shares of Common Stock, a number of shares sufficient to provide for
the exercise of the rights of purchase represented by the Warrants and every
transfer agent for any shares of the Company's capital stock issuable upon the
exercise of any of the rights of purchase aforesaid are hereby irrevocably
authorized and directed at all times until the Expiration Date to reserve such
number of authorized and unissued shares as shall be requisite for such
purpose. The Company will keep a copy of this Warrant Agreement on file with
every transfer agent for any shares of the Company's capital stock issuable
upon the exercise of the rights of purchase represented by the Warrants. The
Company will supply any transfer agent with duly executed stock certificates
for such purpose and will itself provide or otherwise make available any cash
which may be issuable as provided by Section 12 of this Warrant Agreement. The
Company will furnish to the Transfer Agent and any such subsequent transfer
agent a copy of all notices of adjustments, and certificates related thereto,
transmitted to each Warrant Holder pursuant to Section 11.3 hereof. All
warrants surrendered in the exercise of the rights thereby evidenced shall be
canceled, and such canceled Warrants shall constitute sufficient evidence of
the number of shares of stock which have been issued upon the exercise of such
Warrants (subject to adjustment as herein provided). No shares of stock shall
be subject to reservation in respect of the Warrants subsequent to the
Expiration Date except to the extent necessary to comply with the terms of this
Warrant Agreement.
11. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.
The number and kind of securities purchasable upon the exercise of each Warrant
and the Exercise Price shall be subject to adjustment from time to time upon
the occurrence of certain events, as hereinafter defined.
11.1. MECHANICAL ADJUSTMENTS. The number of Warrant Shares
purchasable upon the exercise of each Warrant and the Warrant Price
shall be subject to adjustment as follows:
(a) In case the Company shall (i) pay a dividend
in shares of Common Stock or make a distribution in shares of
Common Stock, (ii) subdivide its outstanding shares of Common
Stock into a larger number of shares of Common Stock, (iii)
combine its outstanding shares of Common Stock into a smaller
number
5
9
of shares of Common Stock or (iv) issue by reclassification of
its shares of Common Stock other securities of the Company
(including any such reclassification in connection with a
consolidation or merger in which the Company is the surviving
corporation), the number of Warrant Shares purchasable upon
exercise of each Warrant immediately prior thereto shall be
adjusted so that the Warrant Holder shall be entitled to
receive the kind and number of Warrant Shares or other
securities of the Company which he would have owned or have
been entitled to receive after the happening of any of the
events described above, had such Warrant been exercised
immediately prior to the happening of such event or any record
date with respect thereto regardless of whether the Warrants
are exercisable at the time of the happening of such event or
at the time of any record date with respect thereto. An
adjustment made pursuant to this paragraph (a) shall become
effective immediately after the effective date of such event
retroactive to the record date, if any, for such event.
(b) In case the Company shall issue rights,
options or warrants to holders of its outstanding Common
Stock, without any charge to such holders, entitling them to
subscribe for or purchase shares of Common Stock at a price
per share that is lower at the record date mentioned below
than the greater of (a) the Exercise Price or (b) the then
current Market Price per share of Common Stock (as determined
in accordance with paragraph (e) below) (the "Greater Price"),
then in each such case the number of Warrant Shares thereafter
purchasable upon the exercise of each Warrant shall be
determined by multiplying the number of Warrant Shares
theretofore purchasable upon exercise of each Warrant by a
fraction, of which the numerator shall be the number of shares
of Common Stock outstanding on the date of issuance of such
rights, options or warrants plus the number of additional
shares of Common Stock offered for subscription or purchase,
and of which the denominator shall be the number of shares of
Common Stock outstanding on the date of issuance of such
rights, options or warrants plus the number of shares that the
[aggregate offering price] of the total number of shares of
Common Stock offered for subscription or purchase would
purchase at the Greater Price. Such adjustment shall be made
whenever such rights, options or warrants are issued, and
shall become effective immediately after the record date for
the determination of stockholders entitled to receive such
rights, options or warrants.
(c) In case the Company shall distribute to
holders of its shares of Common Stock evidences of its
indebtedness or assets (including cash dividends or other cash
distributions) or rights, options or warrants, or convertible
or exchangeable securities containing the right to subscribe
for or purchase shares of Common Stock (excluding those
referred to in paragraph (b) above), then in each case the
number of Warrant Shares thereafter purchasable upon the
exercise of each Warrant shall be determined by multiplying
the number of Warrant Shares theretofore purchasable upon the
exercise of each Warrant by a fraction, of which the
6
10
numerator shall be the then current Market Price per share of
Common Stock (as determined in accordance with paragraph (e)
below) on the date of such distribution, and of which the
denominator shall be the then current Market Price per share
of Common Stock, less the then fair value (as determined in
good faith by the Board of Directors of the Company, whose
determination shall be conclusive) of the portion of the
assets or evidences of indebtedness so distributed or of such
subscription rights, options or warrants, or of such
convertible or exchangeable securities applicable to one share
of Common Stock. Such adjustment shall be made whenever any
such distribution is made, and shall become effective on the
date of distribution retroactive to the record date for the
determination of stockholders entitled to receive such
distribution.
In the event of a distribution by the Company to
holders of its shares of Common Stock of stock of a subsidiary
or securities convertible into or exercisable for such stock,
then in lieu of an adjustment in the number of Warrant Shares
purchasable upon the exercise of each Warrant, the Warrant
Holder, upon the exercise thereof at any time after such
distribution, shall be entitled to receive from the Company,
such subsidiary or both, as the Company shall determine, the
stock or other securities to which such Warrant Holder would
have been entitled if such Warrant Holder had exercised such
Warrant immediately prior thereto regardless of whether the
Warrants are exercisable at such time, all subject to further
adjustment as provided in this subsection 11.1; provided,
however, that no adjustment in respect of dividends or
interest on such stock or other securities shall be made
during the term of a Warrant or upon the exercise of a
Warrant.
(d) In case the Company shall sell and issue
shares of Common Stock (other than pursuant to rights,
options, warrants, or convertible securities initially issued
before the date of this Warrant Agreement) or rights, options,
warrants or convertible securities containing the right to
subscribe for or purchase shares of Common Stock (excluding
shares, rights, options, warrants or convertible securities
issued in any of the transactions described in paragraphs (a),
(b) or (c) above) at a price per share of Common Stock
(determined, in the case of such rights, options, warrants or
convertible securities, by dividing (w) the total of the
amount received or receivable by the Company (determined as
provided below) in consideration of the sale and issuance of
such rights, options, warrants or convertible securities, by
(x) the total number of shares of Common Stock covered by such
rights, options, warrants or convertible securities) lower
than the Greater Price in effect immediately prior to such
sale and issuance, then the number of Warrant Shares
thereafter purchasable upon the exercise of the Warrants shall
be determined by multiplying the number of Warrant Shares
theretofore purchasable upon exercise by a fraction, of which
the numerator shall be the number of shares of Common Stock
outstanding on the date of issuance of such shares, rights,
options, warrants or convertible securities plus the number of
additional shares of Common Stock sold or subject to issuance
pursuant
7
11
to such rights, options, warrants or convertible securities,
and of which the denominator shall be the number of shares of
Common Stock outstanding on the date of issuance of such
shares, rights, options, warrants or convertible securities
plus the number of shares of Common Stock which the aggregate
consideration received or receivable (determined as provided
below) for such sale or issuance would purchase at the Greater
Price. Such adjustment shall be made successively whenever
such an issuance is made. For the purposes of such
adjustments, the consideration received or receivable by the
Company for rights, options, warrants or convertible
securities shall be deemed to be the consideration received by
the Company for such rights, options, warrants or convertible
securities, plus the consideration or premiums stated in such
rights, options, warrants or convertible securities to be paid
for the shares of Common Stock covered thereby. In case the
Company shall sell and issue shares of Common Stock, or
rights, options, warrants or convertible securities containing
the right to subscribe for or purchase shares of Common Stock,
for a consideration consisting, in whole or in part, of
property other than cash or its equivalent, then in
determining the "price per share of Common Stock" and the
"consideration received or receivable by the Company" for
purposes of the first sentence of this paragraph (d), the
Board of Directors shall determine, in its discretion, the
fair value of said property, and such determination, if made
in good faith, shall be binding upon all Holders.
(e) The "Market Price" on any day shall mean the
average of the daily market prices of Common Stock over a
period of 20 consecutive business days prior to the day as of
which "Market Price" is being determined. The Market Price
for each such business day shall be the average of the closing
prices on such day of the Common Stock on all domestic
exchanges on which the Common Stock is then listed, or, if
there shall have been no sales on any such exchange on such
day, the average of the highest bid and lowest asked prices on
all such exchanges at the end of such day, or, if the Common
Stock shall not be so listed, the average of the
representative bid and asked prices quoted in the NASDAQ
National Market System ("NASDAQ System") as of 3:30 P.M., New
York time, on such day, or if the Common Stock shall not be
quoted in the NASDAQ System, the average of the high and low
bid and asked prices on such day in the domestic
over-the-counter market as reported by the National Quotation
Bureau Incorporated, or any similar successor organization.
If the Common Stock is listed on any domestic exchange the
term "business days" as used in this sentence shall mean
business days on which such exchange is open for trading. If
at any time the Common Stock is not listed on any domestic
exchange or quoted in the NASDAQ System or the domestic
over-the-▇▇▇▇▇▇▇ market, the "Market Price" shall be deemed to
be the highest of (i) the book value thereof, as determined by
any firm of independent public accountants of recognized
standing selected by the Board of Directors of the Company, as
at the last day of any month ending within 60 days preceding
the date as of which the determination is to be made, (ii) the
fair value thereof, which shall be reasonably
8
12
determined by the Board of Directors of the Company as of a
date which is within 15 days of the date as of which the
determination is to be made, or (iii) the Exercise Price in
effect immediately prior to the determination of Market Price.
Notwithstanding the foregoing, for the purpose of any
calculation under paragraph (d) above (A) with respect to any
issuance of options under the Company's employee or director
compensation stock option plans as in effect or as adopted by
the Board of Directors of the Company on the date hereof, the
term "current market price", in such instances shall mean the
fair market price on the date of the issuance of any such
option determined in accordance with the Company's employee
compensation stock option plans as in effect or adopted by the
Board of Directors of the Company on the date hereof; and (B)
with respect to any issuances of Common Stock (or rights,
options, warrants or convertible securities containing the
right to subscribe for or purchase shares of Common Stock) in
connection with bona fide corporate transactions (other than
issuances in such transactions for cash or similar
consideration), the term "fair market price" shall mean the
fair market price per share as determined in arm's-length
negotiations by the Company and such other parties (other than
affiliates or subsidiaries of the Company) to such
transactions as reflected in the definitive documentation with
respect thereto, unless such determination is not reasonably
related to the closing market price on the date of such
determination.
(f) In any case in which this Section 11.1 shall
require that any adjustment in the number of Warrant Shares be
made effective as of immediately after a record date for a
specified event, the Company may elect to defer until the
occurrence of the event the issuing to the holder of any
Warrant exercised after that record date the shares of Common
Stock and other securities of the Company, if any, issuable
upon the exercise of any Warrant over and above the shares of
Common Stock and other securities of the Company, if any,
issuable upon the exercise of any Warrant prior to such
adjustment; provided, however, that the Company shall deliver
to such Warrant Holder a due ▇▇▇▇ or other appropriate
instrument evidencing the holder's right to receive such
additional shares or securities upon the occurrence of the
event requiring such adjustment.
(g) No adjustment in the number of Warrant Shares
purchasable hereunder shall be required unless such adjustment
would require an increase or decrease of at least one percent
(1%) in the number of Warrant Shares purchasable upon the
exercise of each Warrant; provided, however, that any
adjustments which by reason of this paragraph (g) are not
required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations shall
be made to the nearest one-thousandth of a share.
(h) Whenever the number of Warrant Shares
purchasable upon the exercise of each Warrant is adjusted, as
herein provided, the Warrant Price payable upon the exercise
of each Warrant shall be adjusted by multiplying such Warrant
Price
9
13
immediately prior to such adjustment by a fraction, of which
the numerator shall be the number of Warrant Shares
purchasable upon the exercise of such Warrant immediately
prior to such adjustment, and of which the denominator shall
be the number of Warrant Shares purchasable immediately
thereafter.
(i) No adjustment in the number of Warrant Shares
purchasable upon the exercise of each Warrant need be made
under paragraphs (b), (c) and (d) if the Company issues or
distributes to each Warrant Holder the rights, options,
warrants, or convertible or exchangeable securities, or
evidences of indebtedness or assets referred to in those
paragraphs which each Warrant Holder would have been entitled
to receive had the Warrants been exercised prior to the
happening of such event or the record date with respect
thereto regardless of whether the Warrants are exercisable at
the time of the happening of such event or at the time of any
record date with respect thereto. [No adjustment need be made
for a change in the par value of the Warrant Shares.]
(j) No adjustment need be made for rights to
purchase Warrant Shares pursuant to an employee or director
benefit plan approved by the Company's Board of Directors.
(k) For the purpose of this Section 11.1, the term
"shares of Common Stock" shall mean (i) the class of stock
designated as the Common Stock of the Company at the date of
this Warrant Agreement, or (ii) any other class of stock
resulting from successive changes or reclassifications of such
shares consisting solely of changes in par value, or from par
value to no par value, or from no par value to par value. In
the event that at any time, as a result of an adjustment made
pursuant to paragraph (a) above, the Warrant Holders shall
become entitled to purchase any securities of the Company
other than shares of Common Stock, thereafter the number of
such other securities so purchasable upon exercise of each
Warrant and the Exercise Price of such securities shall be
subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions
with respect to the Warrant Shares contained in paragraphs (a)
through (i), inclusive, above, and the provisions of Section 6
and Section 11.2 through 11.5, inclusive, with respect to the
Warrant Shares, shall apply on like terms to any such other
securities. The number of shares of Common Stock outstanding
at any given time shall not include shares owned or held by or
for the account of the Company, and the disposition of any
such shares shall be considered an issue or sale of Common
Stock for the purposes of this Section 11.
(l) Upon the expiration of any rights, options,
warrants or conversion or exchange privileges, if any thereof
shall not have been exercised, the Warrant Price and the
number of shares of Common Stock purchasable upon the exercise
of each Warrant shall, upon such expiration, be readjusted and
shall thereafter be such as it
10
14
would have been had it been originally adjusted (or had the
original adjustment not been required, as the case may be) as
if (A) the only shares of Common Stock so issued were the
shares of Common Stock, if any, actually issued or sold upon
the exercise of such rights, options, warrants or conversion
or exchange rights and (B) such shares of Common Stock, if
any, were issued or sold for the consideration actually
received by the Company upon such exercise plus the aggregate
consideration, if any, actually received by the Company for
the issuance, sale or grant of all such rights, options,
warrants or conversion or exchange rights whether or not
exercised; provided, however, that no such readjustment shall
have the effect of increasing the Warrant Price or decreasing
the number of Warrant Shares by an amount in excess of the
amount of the adjustment initially made with respect to the
issuance, sale or grant of such rights, options, warrants or
conversion or exchange rights.
11.2. VOLUNTARY ADJUSTMENT BY THE COMPANY. The Company
may, at its option, at any time during the term of the Warrants,
reduce the then current Exercise Price to any amount determined
appropriate by the Board of Directors of the Company.
11.3. NOTICE OF ADJUSTMENT. When the number of Warrant
Shares purchasable upon the exercise of each Warrant or the Exercise
Price of such Warrant Shares is adjusted, as herein provided, the
Company shall promptly mail by first class, postage prepaid, to each
Warrant Holder notice of such adjustment or adjustments and a
certificate of a firm of independent public accountants selected by
the Board of Directors of the Company (who may be the regular
accountants employed by the Company) setting forth the number of
Warrant Shares purchasable upon the exercise of each Warrant and the
Exercise Price of such Warrant Shares after such adjustment and
setting forth a brief statement of the facts requiring such adjustment
and setting forth the computation by which such adjustment was made.
Such certificate, absent manifest error, shall be conclusive evidence
of the correctness of such adjustment.
11.4. PRESERVATION OF PURCHASE RIGHTS UPON MERGER,
CONSOLIDATION, ETC. In case of any consolidation of the Company with
or merger of the Company into another person, or in case of any sale,
transfer or lease to another person of all or substantially all of the
assets of the Company or in the case of any share exchange involving
the Common Stock of the Company, the Company or such successor or
purchaser, as the case may be, shall execute with each Warrant Holder
an agreement that each Warrant Holder shall have the right thereafter
upon payment of the Exercise Price in effect immediately prior to such
action to purchase upon exercise of each Warrant the kind and amount
of shares and other securities and property which the Warrant Holder
would have owned or have been entitled to receive after the happening
of such consolidation, merger, share exchange, sale, transfer or lease
had such Warrant been exercised immediately prior to such action
regardless of whether the Warrants are exercisable at the time of such
action. Such agreement shall provide for adjustments, which shall be
as nearly equivalent as may be practicable to the adjustments
11
15
provided for in this Section 11. The provisions of this Section 11.4
shall similarly apply to successive consolidations, mergers, share
exchanges, sales, transfers or leases.
11.5. STATEMENT ON WARRANTS. Even though Warrants
heretofore or hereafter issued may continue to express the same price
and number and kind of shares as are stated in the Warrants initially
issuable pursuant to this Warrant Agreement; the parties understand
and agree that such Warrants will represent rights consistent with any
adjustments in the Exercise Price or the number or kind of shares
purchasable upon the exercise of the Warrants.
11.6. COMPANY TO PREVENT DILUTION. If any event or
condition occurs as to which other provisions of this Section 11 are
not strictly applicable or, if strictly applicable, would not fairly
protect the exercise or purchase rights of this Warrant in accordance
with the essential intent and principles of such provisions, or which
might materially and adversely affect the exercise or purchase rights
of the Warrant Holders under any provision of the Warrants, then the
Company shall make an adjustment in the application of such
provisions, in accordance with such essential intent and principles,
so as to protect such exercise and purchase rights as aforesaid, and
any adjustment necessary with respect to the Exercise Price and the
number of Warrant Shares purchasable hereunder so as to preserve
without dilution the rights of the holders of Warrants. In no event
shall any such adjustment have the effect of increasing the Exercise
Price as otherwise determined pursuant to this Section 11.
12. FRACTIONAL INTERESTS. The Company shall not be required to
issue fractional Warrant Shares on the exercise of Warrants. If more than one
Warrant shall be presented for exercise in full at the same time by the same
Warrant Holder, the number of full Warrant Shares that shall be issuable upon
the exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of the Warrants so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section
12, be issuable on the exercise of any Warrant (or specified portion, thereof),
the Company shall pay an amount in cash equal to the Market Price for one share
of the Common Stock on the trading day immediately preceding the date the
Warrant is presented for exercise, multiplied by such fraction.
13. REGISTRATION UNDER THE SECURITIES ACT OF 1933. Shansby
Partners represents and warrants to the Company that it will not dispose of the
Warrant or Warrant Shares except pursuant to (i) an effective registration
statement, or (ii) an applicable exemption from registration under the
Securities Act of 1933, as amended (the "Act"). In connection with any sale
by Shansby Partners pursuant to clause (ii) of the preceding sentence, it shall
furnish to the Company an opinion of counsel reasonably satisfactory to the
Company to the effect that such exemption from registration is available in
connection with such sale.
14. CERTIFICATE TO BEAR LEGENDS. The Warrants shall be subject to
a stop-transfer order and the certificate or certificates therefor shall bear
the following legend by which each Warrant Holder shall be bound:
12
16
"THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES
OF COMMON STOCK OR OTHER SECURITIES ISSUABLE UPON EXERCISE
THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT, OR (ii) AN APPLICABLE
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED. ANY SALE PURSUANT TO CLAUSE (ii) OF THE PRECEDING
SENTENCE MUST BE ACCOMPANIED BY AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT SUCH
EXEMPTION FROM REGISTRATION IS AVAILABLE IN CONNECTION WITH
SUCH SALE."
The Warrant Shares or other securities issued upon exercise of the
Warrants shall, unless issued pursuant to an effective registration statement,
be subject to a stop-transfer order and the certificate or certificates
evidencing any such Warrant Shares or securities shall bear the following
legend by which the Warrant Holder thereof shall be bound:
"THE SHARES OR OTHER SECURITIES REPRESENTED BY THIS
CERTIFICATE MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i)
AN EFFECTIVE REGISTRATION STATEMENT, OR (ii) AN APPLICABLE
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED. ANY SALE PURSUANT TO CLAUSE (ii) OF THE PRECEDING
SENTENCE MUST BE ACCOMPANIED BY AN OPINION OF COUNSEL TO THE
EFFECT THAT SUCH EXEMPTION FROM REGISTRATION IS AVAILABLE IN
CONNECTION WITH SUCH SALE."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon
completion of a public distribution under a registration statement of the
securities represented thereby) shall also bear such legend unless in the
opinion of counsel satisfactory to the Company, the securities represented
thereby need no longer be subject to the restrictions contained herein. The
provisions of this Section 14 shall be binding upon all subsequent holders of
certificates bearing the above legend and shall also be applicable to all
subsequent holders of any Warrants.
15. NO RIGHTS AS STOCKHOLDERS; NOTICE TO WARRANT HOLDERS. Nothing
contained in this Warrant Agreement or in any of the Warrants shall be
construed as conferring upon the Warrant Holders or their transferees the right
to vote or to receive dividends or to consent or to receive notice as
stockholders in respect of any meeting of stockholders for the election of
directors of the Company or any other matter, or any rights whatsoever as
stockholders of the Company. If, however, at any time prior to the expiration
of the Warrants and prior to their exercise, any of the following events shall
occur:
13
17
(a) the Company shall declare any dividend payable in any
securities upon its shares of Common Stock or make any distribution
(other than a cash dividend) to the holders of its shares of Common
Stock; or
(b) the Company shall offer to the holders of its shares
of Common Stock any additional shares of Common Stock or securities
convertible into or exchangeable for shares of Common Stock or any
right to subscribe to or purchase any thereof; or
(c) a dissolution, liquidation or winding up of the
Company (other than in connection with a consolidation, merger, sale,
transfer or lease of all or substantially all of its property, assets,
and business as an entirety) shall be proposed,
then in any one or more of said events the Company shall (a) give notice in
writing of such event to the Warrant Holders as provided in Section 17 hereof
and (b) if there are more than 100 Warrant Holders, cause notice of such event
to be published once in The Wall Street Journal (national edition), such giving
of notice and publication to be completed at least 15 days prior to the date
fixed as a record date or the date of closing the transfer books for the
determination of the stockholders entitled to such dividend, distribution, or
subscription rights, or for the determination of stockholders entitled to vote
on such proposed dissolution, liquidation or winding up. Such notice shall
specify such record date or the date of closing the transfer books, as the case
may be. Failure to publish, mail or receive such notice or any defect therein
or in the publication or mailing thereof shall not affect the validity of any
action taken in connection with such dividend, distribution or subscription
rights, or such proposed dissolution, liquidation or winding up.
16. EXPENSES. The Company shall pay all legal and other
reasonable out-of-pocket expenses of the Warrant Holders and of their counsel.
The Company agrees to reimburse Shansby Partners upon demand for its reasonable
out-of-pocket costs and expenses incurred in connection with the preparation,
review, negotiation, execution and delivery of this Warrant Agreement and all
other related documents.
17. NOTICES. Any notice pursuant to this Warrant Agreement to be
given or made by the holder of any Warrant or Warrant Shares to or on the
Company shall be sufficiently given (i) when made, if by hand delivery, (ii)
upon confirmation, if made by telecopier, or (iii) one business day after being
deposited with a reputable next-day courier, postage prepaid, addressed as
follows:
Authentic Specialty Foods, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Notices or demands authorized by this Warrant Agreement to be given or made to
or on the Warrant Holder of any Warrant or Warrant Shares shall be sufficiently
given or made (except as otherwise
14
18
provided in this Warrant Agreement) if sent by registered mail, return receipt
requested, postage prepaid, addressed to such Warrant Holder at the address of
such Warrant Holder as shown on the Warrant Register or the Common Stock
Register, as the case may be.
18. GOVERNING LAW. THIS WARRANT AGREEMENT, THE WARRANTS AND ALL
RELATED DOCUMENTS SHALL BE DEEMED TO BE CONTRACTS MADE UNDER AND SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS,
WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
19. SUPPLEMENTS AND AMENDMENTS. The Company and the Warrant
Holders may from time to time supplement or amend this Warrant Agreement in
order to cure any ambiguity or to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provision herein,
or to make any other provisions in regard to matters or questions arising
hereunder which the Company and the Warrant Holder may deem necessary or
desirable and which shall not be inconsistent with the provisions of the
Warrants and which shall not adversely affect the interests of the Warrant
Holders. Any amendment to this Warrant Agreement may be effected with the
consent of Warrant Holders of at least a majority of the total then outstanding
Warrants (for this purpose Warrant Shares shall be deemed to be Warrants in the
proportion that Warrant Shares are then issuable upon the exercise of
Warrants); provided that, any amendment which shall have the effect of
materially adversely affecting the interests of any Warrant Holder shall not be
effective with respect to such Warrant Holder if such Warrant Holder shall not
have consented thereto.
20. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations and warranties of the Company and all covenants and agreements
made herein shall survive the execution and delivery of this Warrant Agreement
and the Warrants and shall remain in force and effect until the Expiration
Date.
21. SUCCESSORS. All representations and warranties of the Company
and all covenants and agreements of this Warrant Agreement by or for the
benefit of the Company or the Warrant Holders shall bind and inure to the
benefit of their respective successors and assigns hereunder.
22. MERGER OR CONSOLIDATION OF THE COMPANY. So long as this
Warrant Agreement remains in effect, the Company will not merge or consolidate
with or into, or sell, transfer or lease all or substantially all of its
property to, or exchange shares with any other corporation unless the successor
or purchasing corporation, as the case may be (if not the Company), shall
expressly assume, by supplemental agreement executed and delivered to the
Warrant Holders, the due and punctual performance and observance of each and
every covenant and condition of this Warrant Agreement to be performed and
observed by the Company.
23. BENEFITS OF THIS WARRANT AGREEMENT. Nothing in this Warrant
Agreement shall be construed to give to any person or corporation other than
the Company and the Warrant Holders, any legal or equitable right, remedy or
claim under this Warrant Agreement, but this Warrant Agreement
15
19
shall be for the sole and exclusive benefit of the Company and the holders of
the Warrants and Warrant Shares.
24. CAPTIONS. The captions of the sections and subsections of
this Warrant Agreement have been inserted for convenience and shall have no
substantive effect.
25. COUNTERPARTS. This Warrant Agreement may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original; but such counterparts together shall constitute but one and the same
instrument.
16
20
IN WITNESS WHEREOF, the parties hereto have caused this Warrant
Agreement to be duly executed on the day, month and year first above written.
AUTHENTIC SPECIALTY FOODS, INC.
By:
------------------------------------
Name:
Title:
17
