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* Portions of this document have been omitted and filed separately with
the Securities and Exchange Commission pursuant to a request for confidential
treatment.
CONSULTING AGREEMENT
CONSULTING AGREEMENT ("Agreement") dated as of April 1, 1997 (the
"Effective Date"), by and between Caribbean Cigar Company, a Florida corporation
with its principal office at 0000 X.X. 0xx Xxxxxx, Xxxxx, XX 00000 (the
"Company"), and Xxxxxx X. Xxxxxx, Xx. ("Consultant"), with an address at 000
Xxxx XxXxxxxx Xxxxxx, Xxxxxxxxxx, Xxxx 00000.
W I T N E S S E T H:
WHEREAS, Consultant has extensive experience in and know how with
respect to the cigar industry, including, without limitation, experience
relating to the domestic and international distribution of cigars, the
organization and operation of cigar manufacturing facilities and the development
of premium and handmade cigar brands; and
WHEREAS, Consultant is engaged in the business of providing management,
sales and consulting services to cigar businesses; and
WHEREAS, Consultant desires to provide management, sales and consulting
services on an ongoing basis to the Company; and
WHEREAS, the Company desires to engage Consultant to provide
management, sales and consulting services to it, and Consultant is willing to
provide such services, all on and subject to the terms of this Agreement;
NOW, THEREFORE, the parties do hereby agree as follows:
1. Engagement of Consultant; Services to be Rendered.
(a) The Company hereby engages Consultant to perform Services,
as hereinafter defined, during the Term of this Agreement.
(b) The services to be performed by Consultant shall include,
but not be limited to, such management, marketing, sales, product development,
administrative and other consulting services as the Company may deem appropriate
in connection with the Company's business ("Services"). The Services shall be
performed personally by Consultant at such locations as the Company shall deem
appropriate, provided, that, in no event shall Consultant be required to move
his personal residence from its current location. Promptly after the Effective
Date, but in any event within thirty (30) thereof, Consultant shall be
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elected as a director of the Company by the Board of Directors of the Company.
Consultant shall receive no consideration in addition to the consideration set
forth in this Agreement for services rendered as a director of the Company;
provided, however, that, Consultant shall be entitled, to the same extent as
provided to other directors of the Company, to reimbursement for travel and
lodging expenses incurred as a result of attendance at meetings of the Board of
Directors of the Company, to directors fees for attendance at such meetings, and
to indemnification against damages and advancement of expenses incurred in
connection with any action, suit or proceeding brought against Consultant solely
in Consultant's capacity as a director of the Company, all in accordance with
the Articles of Incorporation and By-Laws of the Company and the laws of the
State of Florida.
(c) Unless terminated earlier as provided in Paragraph 4 of
this Agreement, the Term of this Agreement for the provision of Services by
Consultant shall be for an initial period commencing as of April 1, 1997 and
expiring on March 31, 2000.
(d) Consultant hereby accepts the engagement contemplated by
this Agreement. During the Term, Consultant shall perform his duties diligently,
in good faith and in a manner consistent with the best interests of the Company.
Consultant shall devote substantially all of his time to the performance of his
duties as set forth in Paragraph 1(b) of this Agreement.
2. Compensation and Other Benefits.
(a) Base Compensation. For the Services performed and to be
performed pursuant to this Agreement, the Company shall pay Consultant
compensation ("Base Compensation"), in cash, at the annual rate of one hundred
thousand dollars ($100,000), payable in equal monthly installments on the last
day of each month.
(b) Performance Compensation. In addition to Base
Compensation, Consultant shall receive additional compensation ("Performance
Compensation") in the form of cash and shares of the Company's common stock (the
"Common Stock") during the Term of this Agreement based upon the attainment of
certain performance goals relating to the sale of the cigars set forth on
Exhibit A of this Agreement (all of such cigars are referred to collectively in
this Agreement as "Cigars"). The terms and conditions for payment of the
Performance Compensation shall be as follows:
(i) For the Twelve-Month Period commencing on April
1, 1997 and ending on March 31, 1998 (the "First Twelve-Month Period"). (A) The
Company shall pay Consultant * in cash
(the "1997 Monetary Remuneration"), based upon an agreed upon
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compensation of * per Cigar, for the first
* Cigars sold by the Company during the First Twelve-Month Period;
(B) The Company shall pay Consultant (I)
* in cash (the "1997 Cash
Compensation"), (II) * worth of
shares of Common Stock (the "1997 Stock Compensation"), based upon a per share
price equal to the lesser of * per share of Common Stock
(the "1997 Ceiling Price") or the average closing price of the Common Stock
during the thirty (30) day period up to and including March 31, 1998 (or if the
Common Stock is not traded on any of such days, the average of the closing high
bid and low asked prices for the Common Stock on such days), but not less than
* per share of Common Stock (the "1997 Floor Price"); and
(III) warrants for the purchase of * shares of Common Stock ("Warrant
Compensation"), all based upon the sale by the Company of at least *
Cigars during the First Twelve-Month Period.
(C) Notwithstanding anything to the contrary
contained in Paragraph 2(b)(i)(A) or Paragraph 2(b)(i)(B) of this Agreement, the
payment of the 1997 Monetary Remuneration, the 1997 Cash Compensation, the 1997
Stock Compensation and the 1997 Warrant Compensation shall be subject to the
following conditions:
(I) If the Company shall sell
* or fewer Cigars during the First Twelve-Month
Period, (x) the 1997 Monetary Remuneration otherwise payable
shall be equal to * multiplied by the number of Cigars
actually sold, (y) the 1997 Cash Compensation shall be equal to *
times the number of Cigars sold, and (z) the 1997 Stock *
Compensation shall be an amount of shares of Common Stock having an aggregate
fair market value equal to * multiplied by *
times the number of Cigars sold.
(II) If the Company shall sell more
than * Cigars but less than * Cigars during the First
Twelve-Month Period, the 1997 Cash Compensation and the 1997 Stock Compensation
otherwise payable shall be equal to the sum of (x) the cash and stock
compensation payable pursuant to Subparagraph (I) of this Paragraph 2(b)(i)(C),
assuming the Company sold * Cigars, (y) cash compensation equal
to the amount determined by multiplying *
* by a fraction (the "1997 Fraction"), the numerator of
which is the number of Cigars in excess of * Cigars sold by the Company
during the First Twelve-Month Period and the denominator of which is *
Cigars and (z) and stock compensation in the form of
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shares of Common Stock having an aggregate fair market value equal to
* multiplied by the
1997 Fraction.
(III) For purposes of determining
the amount of shares of Common Stock to which the Consultant is entitled
pursuant to Subparagraphs (I) and (II) of this Paragraph 2(b)(i)(C), each share
of Common Stock shall be deemed to have a fair market value equal to the lesser
of * per share of Common Stock or the average closing
price of the Common Stock during the thirty (30) day period up to and including
March 31, 1998 (or if the Common Stock is not traded on any of such days, the
average of the closing high bid and low asked prices for the Common Stock on
such days), but not less than * per share of Common Stock
(the "1997 Floor Price").
(IV) If the Company shall sell less
than a total of * Cigars during the First Twelve-Month Period the 1997
Warrant Compensation shall be equal to the Warrant Compensation multiplied by a
fraction, the numerator of which is the number of Cigars actually sold by the
Company and the denominator of which is * .
(D) In the event that the fair market value
per share of Common Stock on March 31, 1998, shall be less than the 1997 Floor
Price, a portion of the 1997 Cash Compensation equal to the difference between
(x) the amount of the 1997 Cash Compensation otherwise payable and (y)
* of the aggregate fair market value of the 1997 Stock
Compensation earned by the Consultant (such fair market value to be determined
as of March 31, 1998) shall be payable at the sole option of the Company either
in cash or in shares of Common stock having an aggregate fair market value equal
to such difference.
(ii) For the Twelve-Month Period beginning April 1,
1998 and ending March 31, 1999 (the "Second Twelve-Month Period").
(A) The Company shall pay Consultant:
(I) *
worth of shares of Common Stock (the "1998 Stock Compensation"),
based upon a per share price equal to the lesser of * per
share of Common Stock (the "1998 Ceiling Price") or the average closing price of
the Common Stock during the thirty (30) day period up to and including March 31,
1999 (or if the Common Stock is not traded on any of such days, the average of
the closing high bid and low asked prices for the Common Stock on such days),
but not less than * per share of Common Stock (the "1998
Floor Price"); (II) * in cash (the 1998
Cash Compensation"); and (III) Warrant Compensation upon the sale by the Company
of at least * Cigars during the Second Twelve-Month Period
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(B) Notwithstanding anything to the contrary
contained in Paragraph 2(b)(iii)(A) of this Agreement, if the Company shall sell
fewer than * Cigars during the Second Twelve-Month Period, the payment
of the 1998 Cash Compensation, the 1998 Stock Compensation and the 1998 Warrant
Compensation shall be subject to the following conditions:
(I) The 1998 Stock Compensation
payable to Consultant with respect to the Second Twelve-Month Period shall be
equal to the number of shares of Common Stock that the Consultant would have
been entitled to had the Company sold * Cigars, multiplied by a
fraction (the "1998 Fraction"), the numerator of which is the number of Cigars
actually sold by the Company in the Second Twelve-Month Period and the
denominator of which is * ;
(II) The 1998 Cash Compensation
payable to the Consultant shall be equal to *
multiplied by the 1998 Fraction; and
(III) The 1998 Warrant Compensation
shall represent the right to purchase the product of *
shares of Common Stock multiplied by the 1998
Fraction.
(C) In the event that the fair market value
per share of Common Stock on March 31, 1999, shall be less than the 1998 Floor
Price, a portion of the 1998 Cash Compensation equal to the difference between
(x) the amount of the 1998 Cash Compensation otherwise payable and (y)
* of the aggregate fair market value of the 1998 Stock
Compensation earned by the Consultant (such fair market value to be determined
as of March 31, 1999) shall be payable at the sole option of the Company either
in cash or in shares of Common Stock having an aggregate fair market value equal
to such difference.
(iii) For the Twelve-Month Period beginning April 1,
1999, and ending March 31, 2000 (the "Third Twelve-Month Period").
(A) The Company shall pay Consultant:
(I) *
worth of shares of Common Stock (the "1999 Stock Consideration"),
based upon a per share price equal to the lesser of * per
share of Common Stock (the "1999 Ceiling Price") or the average closing price of
the Common Stock during the thirty (30) day period up to and including March 31,
2000 (or if the Common Stock is not traded on any of such days, the average of
the closing high bid and low asked prices for the Common Stock on such days),
but not less than * per share of Common Stock (the "1999
Floor Price"); (II) * in cash (the "1999
Cash Compensation");
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and (III) Warrant Compensation upon the sale by the Company of least
Cigars during the Third Twelve-Month Period.
(B) Notwithstanding anything to the contrary
contained in Paragraph 2(b)(iv)(A) of this Agreement, if the Company shall sell
fewer than * Cigars during the Third Twelve-Month Period, the payment
of the 1999 Cash Compensation, the 1999 Stock Compensation and the 1999 Warrant
Compensation shall be subject to the following conditions:
(I) The 1999 Stock Compensation
payable to Consultant with respect to the Third Twelve-Month Period shall be
equal to the number of shares of Common Stock that the Consultant would have
been entitled to had the Company sold * Cigars multiplied by a
fraction (the "1999 Fraction"), the numerator of which is the number of Cigars
actually sold by the Company in the Third Twelve-Month Period and the
Denominator of which is * ;
(II) The 1999 Cash Compensation
shall be equal to * multiplied by the 1999
Fraction; and *
(III) The 1999 Warrant Compensation
shall represent the right to purchase the product of *
shares of Common Stock multiplied by the 1999
Fraction.
(C) In the event that the fair market value
per share of Common Stock on March 31, 2000, shall be less than the 1999 Floor
Price, a portion of the 1999 Cash Compensation equal to the difference between
(x) the amount of the 1999 Cash Compensation otherwise payable and (y)
* of the aggregate fair market value of the 1999 Stock
Compensation earned by the consultant (such fair market value to be determined
as of March 31, 2000) shall be payable, at the sole option of the Company,
either in cash or in shares of Common Stock having an aggregate fair market
value equal to such difference.
(iv) If (A) the aggregate number of Cigars sold
during the Term of this Agreement by the Company as of the end of the Third
Twelve-Month Period, equals or exceeds * Cigars and (B) the Consultant
did not earn one hundred percent (100%) of the Performance Compensation during
any Twelve-Month Period because the number of Cigars sold by the Company during
such Twelve-Month Period was less than the target sales of Cigars, the
Consultant shall be entitled to receive Performance Compensation equal to the
aggregate of:
(I) Stock compensation equal to the
number of shares of Common Stock determined by dividing (x) the difference
between the aggregate fair market value (as determined below in Subparagraph
(2)(b)(iv)(A)(III)) of the 1997 Stock Compensation, the 1998 Stock Compensation
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or the 1999 Stock Compensation, as the case may be, which the Consultant would
have been entitled to receive if the number of Cigars sold during the relevant
Twelve-Month Period was equal to the target sales of Cigars for such
Twelve-Month Period and (2) the aggregate fair market value (as determined below
in Subparagraph (2)(b)(iv)(A)(III)) of the 1997 Stock Compensation, the 1998
Stock Compensation or the 1999 Stock Compensation, as the case may be, actually
received by the Consultant by (y) a per share price of * ;
and
(II) Cash compensation equal to the
difference between (x) * with respect to the 1997 Cash Compensation or
* with respect to the 1998 Cash Compensation or the 1999 Cash
Compensation, as the case may be, and (y) the amount of cash and the aggregate
fair market value (determined as of March 31 of the year in which paid) of the
Common Stock, if any, actually received by the Consultant as the 1997 Cash
Compensation, the 1998 Cash Compensation or the 1999 Cash Compensation, as the
case may be.
(III) For purposes of determining
under Subparagraph 2(b)(iv)(A)(I) the "aggregate fair market value" of the 1997
Stock Compensation, the 1998 Stock Compensation or the 1999 Stock Compensation,
as the case may be, which the Consultant would have been entitled to receive if
the number of Cigars sold during the relevant Twelve-Month Period equaled or
exceeded the target sales for such period, the price per share as determined
under this Subparagraph shall be multiplied by the number of shares which would
have been issued had the number of Cigars sold during such period equaled or
exceeded the target sales for such period. For purposes of determining under
Subparagraph 2(b)(iv)(A)(I) the aggregate fair market value of the 1997 Stock
Compensation, the 1998 Stock Compensation or the 1999 Stock Compensation, as the
case may be, actually received by the Consultant, the price per share as
determined under this Subparagraph shall be multiplied by the number of shares
actually issued to the Consultant as 1997 Stock Compensation, 1998 Stock
Compensation or 1999 Stock Compensation, as the case may be. The price per share
for the 1997 Stock Compensation, the 1998 Stock Compensation and the 1999 Stock
Compensation under this Subparagraph shall be equal to the average closing price
per share of the Common Stock during the thirty (30) day period up to and
including March 31, 1998, March 31, 1999, or March 31, 2000, respectively (or,
if the Common Stock is not traded on any of such days, the average of the
closing high bid and low asked prices for the Common Stock on such days), but in
no event more than * with respect to the 1997 Stock compensation, *
with respect to the 1998 Stock Compensation and * with respect to the 1999
Stock Compensation.
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(v) The 1997 Floor Price, the 1997 Ceiling Price, the
1998 Floor Price, the 1998 Ceiling Price, the 1999 Floor Price and/or the 1999
Ceiling Price, as the case may be, shall each be adjusted to give effect to (A)
any dividend or distribution by the Company on or with respect to its shares of
Common Stock in Common Stock, or in other securities convertible into or
exchangeable for shares of Common Stock, (B) any subdivision, or
reclassification of the Company's outstanding shares of Common Stock into a
greater number of shares, or (C) any combination or reclassification of the
Company's outstanding shares of Common Stock into a smaller number of shares of
Common Stock or other transaction which effects a reverse split which occurs
between the Effective Date and the date on which the computation is being made.
(vi) The market price of the Common Stock during any
Computation Period shall be adjusted to reflect any dividend, distribution,
subdivision, combination or reclassification or other event referred to in
Paragraph 2(b)(v) of this Agreement which occurs during such Computation Period.
For purposes of this Paragraph 2(b)(vi), the term "Computation Period" shall
mean any of the thirty day periods referred to in Paragraphs 2(b)(i)(B),
2(b)(ii)((A), 2(b)(iii)(A) or 2(b)(iv)(B)(III) of this Agreement.
(vii) For purposes of this Agreement, the term
"warrants" shall mean warrants for the purchase of shares of Common Stock,
exercisable within five years of the date of grant at an exercise price of
* per share of Common Stock.
(viii) For purposes of this Agreement, the term
"Twelve-Month Period" shall mean the First Twelve-Month Period, the Second
Twelve-Month Period or the Third Twelve-Month Period, as the case may be.
(ix) Reduction in Performance Compensation. The
parties acknowledge that the Company may hire an individual to (a) train
employees of Taru Martani (or any other manufacturer of cigars located in
Indonesia with which the Company enters into an agreement for the manufacture
and supply of cigars) to handroll cigars and/or (b) monitor the quality of
cigars to be shipped by Taru Martani (or such other Indonesian cigar
manufacturer) to the Company, or to perform such other services as requested by
the Company from time to time. In the event that the Company does hire such an
individual, an amount not to exceed * of the cost of such
individual to the Company for the period during which such individual is
performing such services for the Company shall be deducted from the 1997
Monetary Remuneration otherwise payable to the Consultant.
(x) Upon the issuance of shares of Common Stock
pursuant to the terms of this Paragraph 2(b), the Company shall obtain a legal
opinion that such shares have been validly issued.
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(c) Payment Terms. Other than amounts payable to Consultant
which have been earned and paid pursuant to Paragraph 2 (a) of this Agreement,
which shall be payable monthly on a "as-earned" basis, and the 1997 Monetary
Remuneration which shall be paid within thirty (30) days of the end of each
quarterly period commencing April 1, 1997, all Performance Compensation due and
owing hereunder shall be payable within thirty (30) business days after the
close of the Twelve-Month Period in which such Performance Compensation has been
earned, provided, however, that the 1997 Cash Compensation and 1998 Cash
Compensation shall be payable March 31, 1999, on March 31, 2000, respectively,
and the 1999 Cash Compensation shall be payable on March 31, 2000.
(d) Force Majeure. In the event that the sale of Cigars is
prevented for a period not to exceed six (6) months as a result of fires,
floods, accidents, riots, acts of God, war, blockades, embargoes, transportation
delays or any other circumstance outside the control of the parties (an "event
of force majeure"), the Twelve-Month Period during which such event of force
majeure, occurs, and each subsequent Twelve-Month Period shall be extended by a
period of time, not to exceed six (6) months, during which such event of force
majeure is in effect. In the event that the event of force majeure shall
continue for a period exceeding six (6) months during any Twelve-Month Period,
the Company shall have the right to terminate this Agreement solely with respect
to the remainder of such Twelve-Month Period; provided, that, notwithstanding
such termination, Consultant shall be entitled to compensation for such
Twelve-Month Period for all Cigars sold during such Twelve-Month Period prior
to the event of force majeure, determined by treating such number of Cigars sold
as the total number of Cigars sold during the Twelve-Month Period and applying
the terms of this Agreement otherwise applicable to the determination of
Performance Compensation.
(e) In the event that the Company shall default on its
obligation to pay any amount of 1997 Cash Compensation, 1998 Cash Compensation
or 1999 Cash Compensation, as the case may be, as required pursuant to the terms
of this Agreement, the Company shall, upon demand therefor by the Consultant,
issue registerable shares of Common Stock having an aggregate fair market value
(which shall be equal to the average closing price of the Common Stock during
the thirty day period up to and including the date of demand, or, if the Common
Stock is not traded on any of such days, the average of the closing high bid and
low asked prices of the Common Stock during such days) equal to the amount of
cash otherwise due to the Consultant. The Common Stock issued to the Consultant
pursuant to this Paragraph 2(e) shall be registerable upon the demand of the
Consultant, at the sole cost and expense of the Company
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(excluding any brokerage fees incurred by the Consultant in connection with
sales of such Common Stock and the fees and expenses of any counsel retained by
the Consultant).
(f) The Company and Consultant agree that the Performance
Compensation is dependent on the best efforts of Consultant to arrange for the
steady, non- interrupted supply of high quality and desirable Cigars to the
Company and the best efforts of the Company to sell the Cigars supplied through
the efforts of Consultant so as to maximize the number of Cigars actually sold
at retail at the Company's outlets or by the Company's other retailers at prices
that are profitable to the Company. Such prices will be determined by the
President or the Board of Directors of the Company, but shall not be arbitrary
in relation to market conditions, supply and demand.
3. Registration Rights.
(a) Demand Rights. If, in a written notice given to the
Company at any time during the period commencing one (1) year from the date
hereof and ending four (4) years from the date hereof and signed by the
Consultant, the Consultant informs the Company that (i) the Consultant
contemplates the sale of any or all of the Common Stock received by the
Consultant under and pursuant to the terms of this Agreement (the "Agreement
Common Stock") under such circumstances that a public offering distribution
within the meaning of the Securities Act of 1933, as amended, (hereinafter the
"Securities Act") of the Agreement Common Stock will be involved and (ii) the
Consultant is requesting that the Company file a registration statement (such
right to request the filing of a registration statement referred to in this
Agreement as a "Demand Registration Right") pursuant to the Act with respect to
the Agreement Common Stock, the Company shall, as promptly as possible, but in
no event more than ninety (90) days after receipt of such notice (the "Demand
Registration Notice"), file a registration statement (the "Consultant
Registration Statement") pursuant to the Securities Act, pursuant to which the
Agreement Common Stock requested to be registered by the Consultant may be sold
under the Securities Act as promptly as practicable thereafter. The Company
shall use its best efforts to cause such Consultant Registration Statement to
become effective; provided, that, the Consultant shall furnish the Company with
appropriate information (relating to the intentions of the Consultant) in
connection therewith as the Company shall reasonably request in writing. The
Company shall keep such registration statement current for such time, not to
exceed the greater of nine (9) months or such longer period as the registration
statement may be used without requiring audited financial statements covering a
period subsequent to that for which audited financial statements are otherwise
required, as the Consultant may request. The Demand Registration Right accorded
the Consultant pursuant to this Paragraph 2(c)(i) shall be exercisable by the
Consultant one (1) time only.
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The Company will not be obligated to effect any Demand Registration Right if the
Board of Directors of the Company adopts a resolution to the effect that the
Company intends to register shares (a "Registration") of common stock under the
Securities Act within the six-month period subsequent to the date of receipt of
the Demand Registration Notice until such six-month period has elapsed or the
Company shall have abandoned such intention prior to the expiration of such
six-month period or, in the event such registration becomes effective, during
the one hundred twenty (120) day period after the effective date of such
registration. In the case of a Registration, the Consultant shall (i) retain its
Demand Registration Right and (ii) be entitled to register his Consultant Common
Stock pursuant to terms of Paragraph 3(b) of this Agreement. In addition, if the
Board of Directors, in its good faith judgment, determines that any registration
of Agreement Common Stock should not be made or continued because it would
materially interfere with any material financing, acquisition, corporate
reorganization or merger involving the Company (collectively, a "Valid Business
Reason"), the Company may postpone filing a Consultant Registration Statement
relating to any Demand Registration Right until such Valid Business Reason has
been consummated or terminated, and, if a Consultant Registration shall
previously been filed, may cause such Consultant Registration Statement to be
withdrawn and its effectiveness prematurely terminated or may postpone amending
or supplementing such Consultant Registration Statement. The Company represents
that as of the date of this Agreement, it has no present intention to proceed
with a material financing, acquisition, corporate reorganization or merger as a
result of which it would cause a withdrawal or postponement of a registration
statement pursuant to this paragraph.
(b) Piggy-Back Rights. In addition to the Demand Registration
Right provided for in Paragraph 3(a) and for a period commencing one (1) year
from the date hereof and ending four (4) years from the date hereof, the Company
shall advise the Consultant by prompt written notice of its intention to file
any registration statement under the Securities Act (other than a registration
statement relating solely to an acquisition or a registration statement on Form
S-8 or any subsequent similar form) covering the Common Stock, whether such
Common Stock is being sold for the account of the Company or selling
shareholders, and will, upon the request of the Consultant, include in any such
registration statement such information as may be required to permit a public
offering of the Consultant's Agreement Common Stock (such ability by the
Consultant to request the inclusion Agreement Common Stock in a registration
statement as provided in this Paragraph 3(a) referred to as a "Piggy-Back
Registration Right" and any registration statement with respect to which the
Piggy-Back Registration Right is exercised referred to as a "Piggy-Back
Registration Statement"); provided, however, that, if requested by the managing
underwriter or underwriters,
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the Consultant will agree not to sell any Agreement Common Stock without the
consent of such managing underwriter during the period following the effective
date of such Piggy-Back Registration Statement (the "hold off period"), as the
managing underwriter or underwriters may request, and the Company shall not be
required to include the Agreement Common Stock in such Piggy-Back Registration
Statement unless the Consultant shall agree to refrain from selling shares of
the Agreement Common Stock during the holdoff period. Notwithstanding the
foregoing, in no event shall the Consultant be required to agree to a holdoff
period longer or relating to a greater percentage of his shares of Agreement
Common Stock than is required of any other selling shareholder whose shares of
Common Stock are included in such Piggy-Back Registration Statement or any other
registration statement being filed at or about the same time as such Piggy-Back
Registration Statement. The Company shall keep such Piggy-Back Registration
Statement current for a period of nine (9) months from the effective date of
such Piggy-Back Registration Statement or, if the managing underwriter or
underwriters agree to the inclusion of the shares of Agreement Common Stock in
the Piggy-Back Registration Statement only on the condition that the Consultant
agree to refrain from selling his shares of Agreement Common Stock pursuant to
the Piggy-Back Registration Statement for the holdoff period, six (6) months
from the conclusion of the holdoff period. The rights provided for in this
Paragraph 3(b) shall not be exercised with respect to more than fifty percent
(50%) (or such lesser amount as the managing underwriter or underwriters may
request) of the total number of shares of Common Stock in any Piggy-Back
Registration Statement or Piggy-Back Registration Statements filed within any
eighteen (18) month period.
(c) The Company may, by written notice to the Consultant, up
to three times in any 12-month period and for up to 30 days at a time, require
that the Consultant immediately cease sales of shares of Agreement Common Stock
pursuant to the Consultant Registration Statement during any period during which
the Company is engaged or plans to engage in a public offering, acquisition or
similar activity that has not been publicly announced (the "Company Activity")
if the Company has determined in good faith that the Company Activity would be
adversely affected by a public announcement otherwise required in order for the
offering of the Agreement Common Stock during such period not to be in violation
of federal securities laws or regulations.
(d) If the Company requires the Consultant to cease sales of
shares pursuant to paragraph 3(c), the Company shall, as promptly as practicable
following the termination of the Company Activity, use its best efforts to give
written notice to Consultant authorizing him to resume sales pursuant to the
Consultant Registration Statement. If the prospectus included in the Consultant
Registration Statement has
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been amended to comply with the requirements of the Securities Act, the Company
shall enclose such revised prospectus with the notice to the Consultant given
pursuant to this paragraph 3(d), and the Consultant shall make no offers or
sales of shares of Common Stock pursuant to the Consultant Registration
Statement other than by means of such revised prospectus.
(e) The Company shall use its best efforts to register or
qualify, not later than the effective date of any Consultant Registration
Statement filed pursuant to this Agreement, the Agreement Common Stock covered
by the Consultant Registration Statement under the securities laws of such
states as the Consultant shall reasonably request; provided, however, that the
Company shall not be required in connection with this paragraph 3(e) to qualify
as a foreign corporation or execute a general consent to service of process in
any jurisdiction.
(f) In connection with the filing by the Company of the
Consultant Registration Statement or the Piggy-Back Registration Statement, as
the case may be, the Company shall furnish to the Consultant a reasonable number
of copies of the prospectus, including a preliminary prospectus, in conformity
with the requirements of the Securities Act. Such prospectuses shall state that
the Consultant shall be responsible for fulfilling any prospectus delivery
requirements associated with the offering of the Agreement Common Stock.
(g) If the Company has delivered preliminary or final
prospectuses to the Consultant and after having done so the prospectus is
amended to comply with the requirements of the Securities Act, the Company shall
promptly notify the Consultant and, if requested by the Company, the Consultant
shall immediately cease making offers or sales of shares of Common Stock under
the Consultant Registration Statement or the Piggy-Back Registration Statement,
as the case may be, and return all prospectuses to the Company. The Company
shall promptly provide the Consultant with revised prospectuses and, following
receipt of the revised prospectuses, the Consultant shall be free to resume
making offers and sales under the Consultant Registration Statement or the
Piggy-Back Registration Statement, as the case may be.
(h) The Company shall use its best efforts to cause all of the
Agreement Common Stock as to which the Consultant has requested registration to
be listed on the principal stock exchange or market on which the Common Stock is
traded.
(i) In connection with the filing of the Consultant
Registration Statement or the Piggy-Back Registration Statement, as the case may
be, the Company shall use its best efforts to furnish, at the request of
Consultant, an opinion of legal counsel to the Company to the effect that the
shares of Agreement Common Stock are duly authorized, validly issued, fully paid
and non-assessable.
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(j) The Company shall pay one-half and the Consultant shall
pay the other one-half of the expenses relating to compliance with the
obligations of the Company under this Paragraph 3 with respect to any Demand
Registration Right, including all registration and filing fees and the fees and
expenses of the Company's counsel and accountants; provided, however, that the
Consultant shall be solely liable for any brokerage fees and selling expenses
incurred by the Consultant in connection with sales under the Stockholder
Registration Statement and the fees and expenses of any counsel retained by the
Consultant. The Company shall pay all of the expenses relating to compliance
with the obligations of the Company under this Paragraph 3 with respect to any
Piggy-Back Registration Right, including all registration and filing fees and
the fees and expenses of the Company's counsel and accountants; provided,
however, that the Consultant shall be solely liable for any brokerage fees and
selling expenses incurred by the Consultant in connection with sales under the
Consultant Registration Statement and the fees and expenses of any counsel
retained by the Consultant.
(k) The Company shall not be required to include any Agreement
Common Stock in the Consultant Registration Statement unless:
(i) The Company is furnished with such information
regarding the Consultant and the distribution proposed by the Consultant as the
Company, the underwriters or representative may reasonably request.
(ii) The Consultant shall have provided to the
Company its written agreement:
(A) To indemnify the Company and each of its
directors and officers against, and hold the Company and each of its directors
and officers harmless from, any losses, claims, damages, expenses or liabilities
(including reasonable attorneys fees) to which the Company or such directors and
officers may become subject by reason of any statement or omission in the
Consultant Registration Statement made in reliance upon, or in conformity with,
a written statement by the Consultant furnished pursuant to Paragraph 3(i); and
(B) To comply with all of the provisions of
Paragraph 3.
(l) The Company agrees to indemnify and hold harmless the
Consultant against any losses, claims, damages, expenses or liabilities to which
the Consultant may become subject by reason of any untrue statement of a
material fact contained in the Consultant Registration Statement or any omission
to state therein a fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages, expenses or liabilities arise out of or are based upon information
furnished to the Company by or on behalf of the Consultant for use in the
Consultant
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15
Registration Statement. The Company shall have the right to assume and control
the defense and settlement of any claim or suit for which the Company may be
responsible for indemnification under this Paragraph 3(j).
(m) The rights of the Consultant under this Paragraph 3 are
personal to the Consultant and, except upon the death of Consultant as set forth
in Paragraph 13(e) of this Agreement, the Consultant may not assign any of his
rights under this Paragraph 3; provided, however, in the event that the
Consultant shall exercise any of his Demand Registration Rights or Piggy-Back
Registration rights under this Paragraph 3, the holders of Agreement Common
Stock previously transferred by Consultant under and pursuant to the terms of
this Agreement shall be entitled, to the extent the Consultant would have been
entitled if the Consultant were still the holder of such Agreement Common Stock,
to have their Agreement Common Stock registered in the Demand Registration
Statement or the Piggy-Back Registration Statement, as the case may be.
4. Reimbursement of Expenses. The Company shall pay or reimburse
Consultant, upon presentation of proper expense statements, for all authorized,
ordinary and necessary out-of-pocket expenses reasonably incurred by Consultant
in connection with the performance of Services pursuant to this Agreement in
accordance with the Company's expense reimbursement policy.
5. Termination of Engagement.
(a) Consultant's engagement hereunder is a personal services
contract and is not assignable upon the bankruptcy of Consultant.
(b) The Company may terminate Consultant's engagement,
immediately and without notice, for Gross Cause, in which event no further
compensation (other than accrued but unpaid compensation) shall be payable to
Consultant. The term "Gross Cause" shall mean (i) a material breach by
Consultant of the provisions of Paragraphs 7, 8, 9 or 13(a) of this Agreement,
(ii) acts of dishonesty or deliberate misconduct by Consultant, (iii) breach of
trust or other action by which Consultant obtains personal gain at the expense
of or to the detriment of the Company, or (iv) conviction of the Consultant of
any felony or of any other crime involving moral turpitude.
(c) The Company may terminate the Consultant's engagement,
upon five (5) days prior written notice (the "Written Notice"), if, in the
reasonable determination of the Board of Directors of the Company, the
Consultant is not satisfactorily performing his obligations under this
Agreement. The Written Notice shall specify the grounds or reasons for
termination of Consultant's engagement and shall be delivered to Consultant at
the address provided in Paragraph 12(b), or at such other address that
Consultant
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may provide to the Company from time to time. The Written Notice may be
delivered personally or by recognized overnight delivery service and shall be
deemed delivered when sent. In the case of (i) the termination of Consultant's
engagement pursuant to the terms of the first sentence of this Paragraph 5(c) or
(ii) the death or disability of the Consultant, the Consultant (or the
Consultant's estate in the case of the death of the Consultant) shall not be
entitled to further payments of Base Compensation (other than accrued but unpaid
Base Compensation) but shall retain all rights to receive Performance
Compensation as otherwise set forth in this Agreement. For purposes of this
Paragraph 4(c), the term "disability" shall mean any illness, disability or
physical or mental incapacity of the Consultant which prevents him from
substantially performing his regular duties for a period of three (3)
consecutive months or four (4) months, even though not consecutive, in any
twelve (12) month period.
(d) Consultant's performance of Services under this Agreement
shall be subject to review by the Chief Executive Officer of the Company on an
annual basis.
(e) In the event that there is a Change in Control of the
Company and after such Change in Control the new controlling shareholders of the
Company seek to deny Consultant his rights under this Agreement, Consultant
shall have the right to submit the dispute to binding arbitration in Miami,
Florida, under the rules of and conducted by the American Arbitration
Association. The arbitration panel shall consist of three arbitrators eligible
to serve as a panel for the American Arbitration Association. Each of the
Consultant and the Company shall select one arbitrator who is eligible to serve
as an arbitrator on a panel conducted by the American Arbitration Association,
and the two arbitrators so selected shall select a third arbitrator who is
similarly qualified. None of the Arbitrators selected shall serve or have served
as legal counsel to any of the parties nor shall any of the arbitrators so
selected hold any equity securities in the Company or any company (or affiliate
thereof) controlled by Consultant. The decision of the arbitration panel on the
matters to which arbitration applies pursuant to this Paragraph 5(e) shall be
final and binding on all of the parties hereto, and their successors, heirs and
legal assigns, and may be enforced by a court of competent jurisdiction. The
expense of the arbitration proceeding, including any fees of counsel, shall be
paid by the losing party. For purposes of this Paragraph 5(e), the term "Change
in Control" shall mean the beneficial ownership, directly or indirectly, of more
than fifty percent (50%) or more of the combined voting power of each class of
the Company's then outstanding voting securities by any person (as such term is
used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), other than (x) the Company or any subsidiary of
the Company or any Company employee benefit plan (including
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any trustee of such plan acting as trustee), or (b) Xxxxxxxx X. Xxxxxxx, Xxxxxx
X. Xxxxxx, Xx. or Xxxxx Xxxxx (or any member of their families).
6. Representations and Warranties of the Company.
(a) (i) The Company is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Florida, with full
corporate power and authority to conduct its business as it is now being
conducted and to own or use the properties and assets that it purports to own or
use. The Company is duly qualified to do business as a foreign corporation and
is in good standing under the laws of each state or other jurisdiction in which
either the ownership or use of the properties owned or used by it, or the nature
of the activities conducted by it, requires such qualification. The Company has
made available to the Consultant copies of its Organizational Documents, as
currently in effect.
(ii) This Agreement and the Warrants to be issued
pursuant hereto constitute the legal, valid, and binding obligations of the
Company, enforceable against the Company in accordance with their terms. The
Company has the right, power, and authority to execute and deliver this
Agreement and any other documents contemplated by this Agreement.
(b) The authorized equity securities of the Company are as set
forth in the latest Form 10QSB of the Company, as filed with the Securities and
Exchange Commission ("SEC"). The Common Stock to be received by the Consultant
in connection with the transactions contemplated hereby will be duly authorized,
validly issued, fully paid and non-assessable shares of common stock free of any
claim of preemptive rights and free and clear of any and all encumbrances other
than restrictions on transfer imposed by federal and state securities laws and
regulations. The warrants to be received by the Consultant in connection with
the transactions contemplated hereby shall be authorized by appropriate
resolution of the board of directors of the Company.
(c) The Company has timely filed with the SEC all materials
and documents required to be filed by it under the Exchange Act. All the
materials and documents filed with the SEC by the Company since December 1,
1995, including its initial Registration Statement on Form S-1, are hereinafter
referred to as the "Company SEC Reports." The Company SEC Reports, copies of
which have been delivered to the Consultant, are true and correct in all
material respects, including the financial statements and other financial
information contained therein, and do not omit to state any material fact
necessary to make the statements in such Company SEC Reports, in light of the
circumstances in which they were made, not misleading. The financial statements
included in the Company SEC Reports fairly present in all material respects the
financial condition and the results of operations, changes in stockholders'
equity and cash flow
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of the Company and its subsidiaries as at the respective dates of and for the
periods referred to in such financial statements, all in accordance with GAAP.
(d) (i) The Company has filed all tax returns that it has at
any time been required to file. To the Company's knowledge, all such tax returns
were correct and complete in all material respects when filed, and the Company
has paid all taxes that are shown to be due on any such tax return. The Company
has no actual or potential liability for any obligation with respect to any
taxes of any taxpayer (including, without limitation, any affiliated group of
corporations or other entities that included the Company during a prior period)
other than the Company. To the Company's knowledge, all taxes that the Company
is or was required by law to withhold or collect have been duly withheld and
collected and, to the extent required, have been paid to the proper Governmental
Entities.
(ii) The Company has made available to the Consultant
complete and correct copies of all (1) federal income tax returns, (2)
examination reports and (3) statements of deficiencies assessed against or
agreed to by the Company since December 31, 1994. No examination or audit of any
tax return of the Company by any Governmental Entity is currently in progress
or, to the knowledge of the Company, pending or threatened. Except as otherwise
set forth in Schedule 6(d)(ii), the Company has not waived any statute of
limitations with respect to taxes or agreed to any extension of time with
respect to any tax assessment of deficiency.
(e) There are no claims, actions, suits, arbitrations,
proceedings or investigations pending (or to the knowledge of the Company,
threatened) against the Company, and there are no outstanding court orders,
court decrees or court stipulations to which the Company is a party or by which
any of its assets are bound, any of which would (i) impair this Agreement or
affect the transactions contemplated hereby, (ii) materially restrict the
present business, property, operations, prospects, assets, revenues or condition
(financial or otherwise) of the Company, or (iii) individually or in the
aggregate have a material adverse effect or materially impair or preclude the
Company's ability to consummate the transactions contemplated by this Agreement.
(f) The Company and the conduct and operation of its business
are, to its best knowledge and as of this date in compliance with all of the
laws (including rules and regulations thereunder) of any governmental entity
which are applicable to the Company's business.
7. Trade Secrets and Proprietary Information. Consultant agrees that it
will not, during or after the Term of this Agreement or thereafter, use or
disclose to any person, firm, corporation, partnership, limited liability
company, business trust, individual or other business entity any trade secrets
or proprietary
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information concerning the Company's or any of its subsidiaries' inventions,
processes, "know-how," formulae, products, services, business, customer lists,
proposed products and services, marketing strategy and research and development
activities; except that nothing in this Agreement shall be construed to prohibit
him from (a) using or disclosing such information if it shall become public
knowledge or known generally in the cigar industry other than by or as a result
of disclosure by a person not having a right to make such disclosure and (b)
complying with legal process, provided, that the Company shall be given notice
in time to enable it to object to such disclosure.
8. Covenant Not to Solicit or Compete.
(a) Consultant recognizes that the scope of the Company's
business is international and is not limited to any single state or region.
Consultant covenants and agrees that, subject to the last sentence of this
Paragraph 8(a), during the Term of this Agreement and for a period of one (1)
year after termination of this Agreement, Consultant will not (i) directly or
indirectly engage or have any interest in or provide financing for or serve or
accept a position as an officer, director, employee, partner, independent
contractor, principal, agent, representative, consultant, financier, guarantor
or any similar capacity with any entity which is engaged in the United States in
the same business as the Company is engaged, or (ii) contact or solicit the
business of any customers or prospective customers (i.e., prospects whose
business was actively solicited by the Company at any time during the twelve
(12) month period prior to the date Consultant ceased to be engaged by the
Company), or (iii) employ, engage or solicit the employment or engagement of any
employee of or consultant to the Company, or (iv) cause or induce any customer,
prospective customer, supplier, prospective supplier, employee or consultant to
terminate or fail to continue a relationship with the Company, or (v) directly
or indirectly aid or assist others in engaging in any transactions described in
this Paragraph 8(a); provided, however; that the provisions of this Paragraph
8(a) shall not apply to Consultant with respect to (i) the sale by Consultant of
certain Cigars subject to a Letter Agreement of even date herewith by and among
the Company, Consultant and Xxxxxxxx X. Xxxxxxx and (ii) in the event that as a
result of death, incapacity or other permanent disability, Xxxx Xxxxxx is unable
to perform services for such companies, services, if any performed by Consultant
for the following companies and with respect to the following activities: Xxxxx
Wheeling, Co., with respect to machine rolled cigars; National Cigar Co., with
respect to machine rolled cigars; Xxxx Xxxxxx & Son Co., with respect to machine
rolled cigars; and SWD, Inc., with respect to the distribution of candy,
cigarettes and sundries; provided, that, in rendering services, if any, to any
of Xxxxx Wheeling, National Cigar Co., Xxxx Xxxxxx & Son Co., or SWD, Inc.,
Consultant shall in all events be bound by the provisions of Paragraph 9 of this
Agreement. For purposes of this
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Agreement, references to customers shall mean those individuals or entities who
were customers at any time during the twelve (12) month period prior to the date
Consultant ceased to be engaged by the Company and references to suppliers shall
refer to suppliers of tobacco products to the Company at any time during the
twelve (12) month period prior to the date Consultant ceased to be engaged by
the Company and references to prospective suppliers shall refer to any supplier
of tobacco products from whom the Company actively sought to procure tobacco
products during the twelve (12) month period prior to the date Consultant ceased
to be engaged by the Company.
(b) In the event that any Court having jurisdiction shall
determine that the territory or the length of time or scope of activity provided
for in this Paragraph 8 shall be excessive, such Court shall have the authority
to reduce the scope of the restrictions set forth in this Paragraph 8 to the
maximum time and territory and activity as to which such covenant is
enforceable, it being acknowledged by the parties that the parties have
negotiated for the greatest possible scope of this covenant.
9. Inventions and Discoveries. Consultant agrees promptly to disclose
in writing to the Company any invention or discovery made by Consultant during
the Term of this Agreement during the course of the performance by Consultant of
Services for the Company and that all rights to such inventions or discoveries
shall be the exclusive property of the Company. Consultant shall execute and
deliver to the Company such instruments as the Company deems necessary to vest
in the Company the sole and exclusive ownership of all rights in and to such
inventions and discoveries, as well as the copyrights and/or patents applicable
thereto.
10. Injunctive Relief; Agreement by Consultant's Employees.
Consultant agrees that his violation or threatened violation of any of
the provisions of Paragraphs 7, 8 and 9 of this Agreement shall cause immediate
and irreparable harm to the Company. In the event of any breach or threatened
breach of said provisions, Consultant consents to the entry of preliminary and
permanent injunctions by a Court of competent jurisdiction prohibiting
Consultant from engaging in any violation or threatened violation of such
provisions and compelling Consultant to comply with such provisions. This
Paragraph 10 shall not affect or limit, and the injunctive relief provided in
this Paragraph 10 shall be in addition to, any other remedies otherwise
available to the Company at law or in equity. In the event an injunction is
issued against any such conduct by Consultant, the period referred to in
Paragraph 8 of this Agreement shall continue until the later of the expiration
of the period set forth therein or one (1) month from the date a final judgment
enforcing such provisions is entered and the time for appeal has lapsed.
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11. Right of First Refusal.
The Consultant agrees that in the event that the Consultant desires to
sell in a public or private transaction any of the shares of Common Stock of the
Company acquired by the Consultant pursuant to the terms of this Agreement or
any other agreement with the Company the Consultant shall give the Company
notice (the "Sale Notice") of the price and other terms of such proposed sale,
including the payment terms and, in a private transaction, the name of the
purchaser. The Company shall have an option (the "Option") to purchase all of
the shares proposed to be sold by the Consultant at the price and on the terms
set forth in the Sale Notice. The Option shall be exercisable in whole only and
not in part within thirty (30) days (five (5) business days in the case of (i) a
public sale whether pursuant to Rule 144 or otherwise or (ii) a sale of
securities with a fair market value of One Hundred Thousand Dollars ($100,000)
or less; provided, however, all sales made by the Consultant in any 90 day
period shall be aggregated for purposes of this $100,000 exemption from the
30-day notice requirement) after the date the Sale Notice is given to the
Company. Exercise of the Option shall be given by written notice of exercise
accompanied by full payment of the purchase price of the shares subject to the
Option. In the event that, by 5:00 P.M. New York City time on the last day of
the aforementioned thirty (30) or five (5) day period, the Consultant shall not
have received both the notice of exercise of the Option from the Company and the
full amount of the purchase price, the Consultant shall have the right to sell
the shares referred to in the Sale Notice on substantially the same terms as are
set forth in the Sale Notice. The terms shall be deemed to be substantially the
same as those set forth in the Sale Notice if the purchase price, either in
terms of dollars or a percentage of the market price, is not less than the
amount payable pursuant to the terms set forth in the Sale Notice. If the terms
of sale are reduced so that the purchase price is less than the amount payable
as provided in the Sale Notice, the Consultant shall re-offer the shares to the
Company on such revised terms in the manner set forth in this Paragraph 11
except that the thirty (30) day and five (5) day periods shall be reduced to ten
(10) days and five (5) days, respectively. If the terms of payment set forth in
the Sale Notice provide that a portion of the purchase price is payable
subsequent to the closing, then in such event, the payment due at the time of
exercise shall be equal to the amount due at the closing as set forth in the
Sale Notice and the remainder of the purchase price shall be payable at such
times and in such amounts as are set forth in the Sale Notice; all of the shares
being purchased by the Company shall be held in escrow by the Consultant, to be
released on a pro rata basis as the purchase price is paid. In the event that
the Consultant desires to transfer any of such shares by gift, it shall be a
condition to effecting any such transfer that the transferee agree to be subject
to the provisions of this Xxxxxxxxx 00.
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00
00. Independent Contractor. In all matters relating to this Agreement,
the Company and the Consultant shall act as independent contractors, neither
shall be the employee, joint venturer, partner or agent of the other, and each
shall assume any and all liability for its own acts. Neither the Company nor
Consultant shall have any authority to assume or create obligations, express or
implied, on behalf of the other party or any subsidiary or affiliate of the
other party, and neither party shall have any authority to represent any other
party as its agent, employee, partner or in any other capacity.
13. Miscellaneous.
(a) Consultant represents, warrants, covenants and agrees that
he has a right to enter into this Agreement, that he is not a party to any
agreement or understanding, oral or written, which would prohibit the
performance of its obligations under this Agreement, and that he will not use in
the performance of his obligations hereunder any proprietary information of any
other party which he is legally prohibited from using.
(b) Any notice under the provisions of this Agreement shall be
in writing and shall be given by hand, overnight courier or messenger service,
against signed receipt or acknowledgment of receipt, registered or certified
mail, return receipt requested, or telecopier or similar means of communication
if receipt is acknowledged or if transmission is confirmed by mail as provided
in this Paragraph 13(b), to the parties at their respective addresses set forth
at the beginning of this Agreement or by telecopier to the Company at (305)
267-6026 or to Consultant at (000) 000-0000, with notice to the Company being
sent to the attention of the individual who executed this Agreement on behalf of
the Company. Either party may, by like notice, change the person, address or
telecopier number to which notice shall be sent.
(c) If any term, covenant or condition of this Agreement or
the application thereof to any party or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Agreement, or the application of
such term, covenant or condition to parties or circumstances other than those as
to which it is held invalid or unenforceable, shall not be affected thereby and
each term, covenant or condition of this Agreement shall be valid and be
enforced to the fullest extent permitted by law, and any court having
jurisdiction may reduce the scope of any provision of this Agreement so that it
complies with applicable law.
(d) This Agreement constitutes the entire agreement of the
Company and Consultant as to the subject matter hereof, superseding all prior
written or prior or contemporaneous oral understandings or agreements, including
any previous consulting or engagement agreements, or understandings with respect
to the subject matter covered in this Agreement. This Agreement may not be
modified or amended, nor may any right be waived, except by a writing which
expressly refers to this Agreement, states that it is intended
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to be a modification, amendment or waiver and is signed by both parties in the
case of a modification or amendment or by the party granting the waiver. No
course of conduct or dealing between the parties and no custom or trade usage
shall be relied upon to vary the terms of this Agreement. The failure of a party
to insist upon strict adherence to any term of this Agreement on any occasion
shall not be considered a waiver or deprive that party of the right thereafter
to insist upon strict adherence to that term or any other term of this
Agreement.
(e) This Agreement will inure to the benefit of and be binding
upon Consultant, his legal representatives and testate or intestate
distributees, and the Company, its respective successors and assigns, including
any successor by merger or consolidation or a statutory receiver or any other
person or firm or corporation to which all or substantially all of the assets
and business of the Company may be sold or otherwise transferred.
(f) The headings in this Agreement are for convenience of
reference only and shall not affect in any way the construction or
interpretation of this Agreement.
(g) This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida applicable to contracts made
and to be performed wholly within such State. Each of the parties hereby (i)
irrevocably consents and agrees that any legal or equitable action or proceeding
arising under or in connection with this Agreement shall be brought exclusively
in any Federal or state court in the County of Dade, State of Florida, (ii) by
execution and delivery of this Agreement, irrevocably submits to and accepts,
with respect to its properties and assets, generally and unconditionally, the
jurisdiction of the aforesaid court and (iii) agrees that any action against
such party may be commenced by service of process by any method set forth in
Paragraph 13(b) of this Agreement, other than by telecopier, to such party as
provided in said Paragraph 13(b).
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
CARIBBEAN CIGAR COMPANY
By: /s/ Xxxxxx X. Xxxx
-------------------------------------
Title: Chief Financial Officer
----------------------------------
/s/ Xxxxxx X. Xxxxxx, Xx.
----------------------------------------
Xxxxxx X. Xxxxxx, Xx.
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EXHIBIT "A"
TO
CONSULTING AGREEMENT DATED AS OF APRIL 1, 1997 BY AND BETWEEN CARIBBEAN CIGAR
COMPANY AND XXXXXX X. XXXXXX, CONSULTANT
Brands and types of cigars to which Performances Compensation is related:
All cigars supplied from and after the Effective Date to Caribbean Cigar
Company (i) by or from Taru Martani, Indonesia or (ii) by or from any other
supplier of cigars located in Indonesia as a result of the efforts of Consultant
and/or Xxxxxxxx X. Xxxxxxx.
For purposes of the Consulting Agreement, the words "Cigar sales" or "Cigars
sold" are defined as the shipment of Cigars on or after the Effective Date by or
on behalf of the Company to customers of the Company less the number of Cigars
returned by such customers to the Company; provided, however, that for purposes
of determining "Cigar sales" or "Cigars sold" under the Agreement, the number of
long-filler second Cigars shipped by the Company to customers for sale under any
name other than "Xxxxxxxxx Xxxx" or "C.V" shall be deemed to be one-half (1/2)
of the actual number oF such long-filler second Cigars shipped by the Company.
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[FORM OF WARRANT]
Warrant to Purchase
WA- ** **
Shares of Common Stock
Date of Grant:
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND NEITHER
THIS WARRANT NOR SUCH SHARES MAY BE SOLD, ENCUMBERED OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR AN
EXEMPTION FROM SUCH REGISTRATION REQUIREMENT, AND, IF AN EXEMPTION SHALL BE
APPLICABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF COUNSEL ACCEPTABLE TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
VOID AFTER 5:00 P.M. NEW YORK CITY TIME
ON THE FIFTH ANNIVERSARY OF THE EFFECTIVE DATE, AS DEFINED HEREIN
SERIES A COMMON STOCK PURCHASE WARRANT
OF
CARIBBEAN CIGAR COMPANY
This is to certify that, FOR VALUE RECEIVED, __________________________
__________________________________ or assigns ("Holder"), is entitled to
purchase, subject to the provisions of this Warrant, from Caribbean Cigar
Company, a Florida corporation (the "Company"), at an exercise price per share
of fifteen and 00/100 dollars ($15.00), subject to adjustment as provided in
this Warrant, _______________________________ ( ____, ____) shares
of common stock, par value $.001 per share ("Common Stock"), of the Company at
any time during the five (5) year period (the "Exercise Period") commencing on
the date of grant of this Warrant (the "Effective Date") and ending at 5:00
P.M., New York City time, on the fifth (5th) anniversary of the Effective Date;
provided, however, that if such date is a day on which banking institutions in
the State of New York are required or authorized by law to close, then on the
next succeeding day which shall not be such a day. The number of shares of
Common Stock to be received upon the exercise of this Warrant and the price to
be paid for a share of Common Stock may also be adjusted from time to time as
hereinafter set forth. The shares of Common Stock deliverable upon such
exercise, and as adjusted from time to time, are hereinafter sometimes referred
to as "Warrant Shares," and the exercise price for the purchase of a share of
Common Stock pursuant to this Warrant in effect at any time and as adjusted from
time to time is hereinafter sometimes referred to as the "Exercise Price."
Reference in the Warrant to the "Series A Warrants" shall mean any or all of the
Series A Common Stock Purchase Warrants issued by the Company, regardless of
whether the Exercise Price of such Series A Warrants is the same as the Exercise
Price of this Warrant.
(c) EXERCISE OF WARRANT. This Warrant may be exercised in whole at any
time or in part from time to time during the Exercise Period by presentation and
surrender hereof to the Company at its principal office, or at the office of its
stock transfer agent, if any, with the Purchase Form annexed hereto duly
executed and accompanied by payment of the Exercise Price for the number of
shares of Common Stock specified in such form. If this Warrant shall be
exercised in part only, the Company shall, upon surrender of this Warrant for
cancellation, execute and deliver a new Warrant evidencing the rights of the
Holder hereof to purchase the balance of the shares of Common Stock purchasable
hereunder. This Warrant may be exercised in whole at any time during the
Exercise
27
Period by presentation and surrender hereof to the Company at its principal
office, or at the office of its stock transfer agent, if any, with the Purchase
Form annexed hereto duly executed, without cash payment, for the number of
shares of Common Stock obtained by multiplying (i) the difference of (a) the
"current market price per share of Common Stock", as defined in paragraph (f)(5)
hereof, less (b) the Exercise Price per share then in effect, times (ii) the
fraction, the numerator of which is the number of Warrant Shares then
outstanding and the denominator of which is the Exercise Price per share then in
effect. Upon receipt by the Company of this Warrant at its office, or by the
stock transfer agent of the Company at its office, in proper form for exercise,
the Holder shall be deemed to be the holder of record of the shares of Common
Stock issuable upon such exercise, notwithstanding that the stock transfer books
of the Company shall then be closed or that certificates representing such
shares of Common Stock shall not then be actually delivered to the Holder.
(d) RESERVATION OF SHARES. The Company hereby agrees that at all times
there shall be reserved for issuance and/or delivery upon exercise of this
Warrant such number of shares of Common Stock as shall be required for issuance
and delivery upon exercise of this Warrant and that it shall not, without the
prior approval of the holders of a majority of the Warrants then outstanding,
increase the par value of the Common Stock.
(e) FRACTIONAL SHARES. No fractional shares or script representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon any exercise of this Warrant,
the Company shall pay to the Holder an amount in cash equal to such fraction
multiplied by the current market value of such fractional share, determined as
follows:
(1) If the Common Stock is listed on a national securities
exchange or admitted to unlisted trading privileges on such exchange or listed
for trading on the Nasdaq Stock Market or other automated quotation system which
provides information as to the last sale price, the current value shall be the
reported last sale price of one share of Common Stock on such exchange or system
on the last business day prior to the date of exercise of this Warrant, or if no
such sale is made on such day, the current value shall be the average of the
closing bid and asked prices for such day on such exchange or system; or
(2) If the Common Stock is not so listed or admitted to
unlisted trading privileges, the current value shall be the mean of the reported
last bid and asked prices of one share of Common Stock as reported by Nasdaq,
the National Quotation Bureau, Inc. or other similar reporting service, on the
last business day prior to the date of the exercise of this Warrant; or
(3) If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked prices are not so reported, the
current value of one share of Common Stock shall be an amount, not less than
book value, determined in such reasonable manner as may be prescribed by the
Board of Directors of the Company.
(f) LOSS, ETC. OF WARRANT. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Warrant, if mutilated, the Company will execute and deliver a new Warrant of
like tenor. Any such new Warrant executed and delivered shall constitute an
additional contractual obligation on the part of the Company, whether or not
this Warrant so lost, stolen, destroyed, or mutilated shall be at any time
enforceable by anyone.
(g) RIGHTS OF THE HOLDER. The Holder shall not, by virtue of this
Warrant, be entitled to any rights of a stockholder in the Company, either at
law or equity, and the rights of the Holder are limited to those expressed in
the Warrant and are not enforceable against the Company except to the extent set
forth herein.
(h) ANTI-DILUTION PROVISIONS. The Exercise Price in effect at any time
and the number and kind of securities purchasable upon exercise of each Warrant
shall be subject to adjustment as follows:
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(1) In case the Company shall, subsequent to the Effective
Date, (A) pay a dividend or make a distribution on its shares of Common Stock in
shares of Common Stock (B) subdivide or reclassify its outstanding Common Stock
into a greater number of shares, or (C) combine or reclassify its outstanding
Common Stock into a smaller number of shares or otherwise effect a reverse
split, the Exercise Price in effect at the time of the record date for such
dividend or distribution or of the effective date of such subdivision,
combination or reclassification shall be proportionately adjusted so that the
Holder of this Warrant exercised after such date shall be entitled to receive
the aggregate number and kind of shares which, if this Warrant had been
exercised immediately prior to such time, he would have owned upon such exercise
and been entitled to receive upon such dividend, distribution, subdivision,
combination or reclassification. Such adjustment shall be made successively
whenever any event listed in this Paragraph (f)(1) shall occur.
(2) In case the Company shall, subsequent to the Effective
Date, issue rights or warrants to all holders of its Common Stock entitling them
to subscribe for or purchase shares of Common Stock (or securities convertible
into or in exchange for Common Stock), or shall issue directly to any person,
Common Stock at a price (or having a conversion or exchange price per share)
less than the current market price of the Common Stock (as defined in Paragraph
(f)(5) of this Warrant) on the record date mentioned below, the Exercise Price
shall be adjusted so that the same shall equal the price determined by
multiplying the Exercise Price in effect immediately prior to the date of such
issuance by a fraction, of which the numerator shall be the number of shares of
Common Stock outstanding on the record date mentioned below plus the number of
additional shares of Common Stock which the aggregate offering price of the
total number of shares of Common Stock so offered (or the aggregate conversion
or exchange price of the convertible or exchangeable securities so offered)
would purchase at such current market price per share of the Common Stock, and
of which the denominator shall be the number of shares of Common Stock
outstanding on such record date plus the number of additional shares of Common
Stock offered for subscription or purchased (or into which the convertible or
exchangeable securities so offered are convertible or exchangeable). Such
adjustment shall be made successively whenever such rights or warrants are
issued and shall become effective immediately after the record date for the
determination of stockholders entitled to receive such rights or warrants; and
to the extent that shares of Common Stock or securities convertible into or
exchangable for Common Stock are not delivered after the expiration of such
rights or warrants, the Exercise Price shall be readjusted to the Exercise Price
which would then be in effect had the adjustments made upon the issuance of such
rights or warrants been made upon the basis of delivery of only the number of
shares of Common Stock (or securities convertible into or exchangeable for
Common Stock) actually delivered.
(3) In case the Company shall, subsequent to the Effective
Date, distribute to all holders of Common Stock evidences of its indebtedness or
assets (excluding cash dividends or distributions paid out of current earnings
and dividends or distributions referred to in Paragraph (f)(1) of this Warrant)
or subscription rights or warrants (excluding those referred to in Paragraph
(f)(2) of this Warrant), then in each such case the Exercise Price in effect
thereafter shall be determined by multiplying the Exercise Price in effect
immediately prior thereto by a fraction, of which the numerator shall be the
total number of shares of Common Stock outstanding multiplied by the current
market price per share of Common Stock (as defined in Paragraph (f)(5) of this
Warrant), less the fair market value (as determined by the Company's Board of
Directors) of said assets or evidences of indebtedness so distributed or of such
rights or warrants, and of which the denominator shall be the total number of
shares of Common Stock outstanding multiplied by such current market price per
share of Common Stock. Such adjustment shall be made successively whenever such
a record date is fixed. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive such
distribution.
(4) Whenever the Exercise Price payable upon exercise of each
Warrant is adjusted pursuant to Paragraphs (f)(1), (2) or (3) of this Warrant,
the number of shares of Common Stock purchasable upon exercise of each Warrant
shall simultaneously be adjusted by multiplying the number of shares of Common
Stock issuable upon exercise of each Warrant in effect on the date thereof by
the Exercise Price in effect on the date thereof and
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dividing the product so obtained by the Exercise Price, as adjusted. In no event
shall the Exercise Price per share be less than the par value per share, and, if
any adjustment made pursuant to Paragraph (f)(1), (2) or (3) would result in an
exercise price of less than the par value per share, then, in such event, the
Exercise Price per share shall be the par value per share.
(5) For the purpose of any computation under Paragraphs (f)(2)
and (3) of this Warrant, the current market price per share of Common Stock at
any date shall be deemed to be the average of the daily closing prices for 30
consecutive business days commencing 45 business days before such date. The
closing price for each day shall be the reported last sale price regular way or,
in case no such reported sale takes place on such day, the average of the
reported last bid and asked prices regular way, in either case on the principal
national securities exchange on which the Common Stock is admitted to trading or
listed or on the Nasdaq Stock Market, or if not listed or admitted to trading on
such exchange or such System, the average of the reported highest bid and
reported lowest asked prices as reported by Nasdaq, the National Quotation
Bureau, Inc. or other similar organization if NASDAQ is no longer reporting such
information, or if not so available, the fair market price as determined by the
Board of Directors.
(6) No adjustment in the Exercise Price shall be required
unless such adjustment would require an increase or decrease of at least one
percent (1%) in such price; provided, however, that any adjustments which by
reason of this Paragraph (f)(6) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Paragraph (f) shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be. Anything in this Paragraph (f) to
the contrary notwithstanding, the Company shall be entitled, but shall not be
required, to make such changes in the Exercise Price, in addition to those
required by this Paragraph (f), as it in its discretion shall determine to be
advisable in order that any dividend or distribution in shares of Common Stock,
subdivision, reclassification or combination of Common Stock, issuance of
warrants to purchase Common Stock or distribution of evidences of indebtedness
or other assets (excluding cash dividends) referred to hereinabove in this
Paragraph (f) hereafter made by the Company to the holders of its Common Stock
shall not result in any tax to the holders of its Common Stock or securities
convertible into Common Stock.
(7) The Company may retain a firm of independent public
accountants of recognized standing selected by the Board of Directors (who may
be the regular accountants employed by the Company) to make any computation
required by this Paragraph (f), and a certificate signed by such firm shall,
absent manifest error, be conclusive evidence of the correctness of such
adjustment.
(8) In the event that at any time, as a result of an
adjustment made pursuant to Paragraph (f)(1) of this Warrant, the Holder of any
Warrant thereafter shall become entitled to receive any shares of the Company,
other than Common Stock, thereafter the number of such other shares so
receivable upon exercise of any Warrant 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 Common Stock contained in Paragraphs (f)(1) to
(6), inclusive, of this Warrant.
(9) Irrespective of any adjustments in the Exercise Price or
the number or kind of shares purchasable upon exercise of Warrants, Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in this and similar Warrants initially
issued by the Company.
(i) OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be
adjusted as required by the provisions of Paragraph (f) of this Warrant, the
Company shall forthwith file in the custody of its Secretary or an Assistant
Secretary at its principal office and with its stock transfer agent, if any, an
officer's certificate showing the adjusted Exercise Price and the adjusted
number of shares of Common Stock issuable upon exercise of each Warrant,
determined as herein provided, setting forth in reasonable detail the facts
requiring such adjustment, including a statement of the number of additional
shares of Common Stock, if any, reserved by the Company for issuance upon
exercise of this Warrant, and such other facts as shall be necessary to show the
reason for and the manner of
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computing such adjustment. Each such officer's certificate shall be made
available at all reasonable times for inspection by the Holder or any holder of
a Warrant executed and delivered pursuant to Paragraph (a) and the Company
shall, forthwith after each such adjustment, mail, by certified mail, a copy of
such certificate to the Holder or any such holder at such holder's address set
forth in the Company's Warrant Register.
(j) NOTICES TO WARRANT HOLDERS. So long as this Warrant shall be
outstanding, (1) if the Company shall pay any dividend or make any distribution
upon Common Stock (other than a regular cash dividend payable out of retained
earnings) or (2) if the Company shall offer to the holders of Common Stock for
subscription or purchase by them any share of any class or any other rights or
(3) if any capital reorganization of the Company, reclassification of the
capital stock of the Company, consolidation or merger of the Company with or
into another corporation, sale, lease or transfer of all or substantially all of
the property and assets of the Company to another corporation, or voluntary or
involuntary dissolution, liquidation or winding up of the Company shall be
effected, then in any such case, the Company shall cause to be mailed by
certified mail to the Holder, at least thirty days prior to the date specified
in clauses (i) and (ii), as the case may be, of this Paragraph (h) a notice
containing a brief description of the proposed action and stating the date on
which (i) a record is to be taken for the purpose of such dividend, distribution
or rights, or (ii) such reclassification, reorganization, consolidation, merger,
conveyance, lease, dissolution, liquidation or winding up is to take place and
the date, if any is to be fixed, as of which the holders of Common Stock or
other securities shall receive cash or other property deliverable upon such
reclassification, reorganization, consolidation, merger, conveyance,
dissolution, liquidation or winding up.
(k) RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the Company, or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of this
Warrant) or in case of any sale, lease or conveyance to another corporation of
the property of the Company as an entirety, the Company shall, as a condition
precedent to such transaction, cause effective provisions to be made so that the
Holder shall have the right thereafter by exercising this Warrant, to purchase
the kind and amount of shares of stock and other securities and property
receivable upon such reclassification, capital reorganization and other change,
consolidation, merger, sale or conveyance by a holder of the number of shares of
Common Stock which might have been purchased upon exercise of this Warrant
immediately prior to such reclassification, change, consolidation, merger, sale
or conveyance. Any such provision shall include provision for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Warrant. The foregoing provisions of this Paragraph (i) shall
similarly apply to successive reclassifications, capital reorganizations and
changes of shares of Common Stock and to successive consolidations, mergers,
sales or conveyances. In the event that in connection with any such capital
reorganization or reclassification, consolidation, merger, sale or conveyance,
additional shares of Common Stock shall be issued in exchange, conversion,
substitution or payment, in whole or in part, for a security of the Company
other than Common Stock, any such issue shall be treated as an issue of Common
Stock covered by the provisions of Paragraph (f) of this Warrant.
(l) WARRANTS AND UNDERLYING SHARES NON-TRANSFERABLE. Neither this
Warrant nor the shares of Common Stock issuable upon exercise of this Warrant
have been registered under the Securities Act of 1933, as amended, and neither
this Warrant nor such shares may be sold, encumbered, or otherwise transferred,
except pursuant to an effective registration statement under such act or an
exemption from such registration
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requirement, and, if an exemption shall be applicable, the holder shall have
delivered an opinion of counsel, acceptable to the Company, that such
registration is not required.
Dated as of April , 1997,
CARIBBEAN CIGAR COMPANY
ATTEST:
By:
-------------------------------------
Xxxxx Xxxxx
Chairman of the Board
By:
--------------------------
, Secretary
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PURCHASE FORM
Dated: , 19__
____ The undersigned hereby irrevocably elects to exercise the within Warrant
to the extent of purchasing _______________ shares of Common Stock and
hereby makes payment of $___________ in payment of the actual exercise
price thereof.
____ The undersigned hereby irrevocably elects to exercise the within Warrant
for the number of shares of Common Stock obtained by multiplying (i) the
difference of (a) the "current market price per share of Common Stock",
as defined in paragraph (f)(5) of the within Warrant, less (b) the
Exercise Price per share then in effect, times (ii) the fraction, the
numerator of which is the number of Warrant Shares then outstanding and
the denominator of which is the Exercise Price per share then in effect.
----------------------------------------
Signature
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Name (printed)
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