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EXHIBIT 4.1
Stock Purchase Warrant issued to FINOVA Mezzanine Capital Inc.
dated September 30, 1999
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STOCK PURCHASE WARRANT
This STOCK PURCHASE WARRANT ("Warrant") is issued this 30th day of
September, 1999, by GALAXY FOODS COMPANY, a Delaware corporation (the
"Company"), to FINOVA MEZZANINE CAPITAL INC., a Tennessee corporation (FINOVA
MEZZANINE CAPITAL INC. and any subsequent assignee or transferee hereof are
hereinafter referred to collectively as "Holder" or "Holders").
AGREEMENT:
1. ISSUANCE OF WARRANT; TERM. For and in consideration of FINOVA
MEZZANINE CAPITAL INC. making a loan to the Company in an amount of Four Million
and no/100ths Dollars ($4,000,000) pursuant to the terms of a secured promissory
note of even date herewith (the "Note") and related loan agreement of even date
herewith (the "Loan Agreement"), and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company hereby
grants to Holder the right to purchase 915,000 shares (the "Base Amount") of the
Company's common stock (the "Common Stock"), which the Company represents to
equal 7.41% of the shares of capital stock outstanding on the date hereof,
calculated on a fully diluted basis and assuming exercise of this Warrant,
provided that in the event that any portion of the indebtedness evidenced by the
Note is outstanding on the following dates, the Base Amount shall be increased
to the corresponding number set forth below:
DATE BASE AMOUNT
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September 30, 2002 1,015,000 shares, which the Company
represents to equal 8.16% of the shares of
the Company's capital stock outstanding on
the date hereof calculated on a fully
diluted basis after exercise of this
Warrant
September 30, 2003 1,115,000 shares, which the Company
represents to equal 8.89% of the shares of
the Company's capital stock outstanding on
the date hereof calculated on a fully
diluted basis after exercise of this
Warrant
September 30, 2004 1,215,000 shares, which the Company
represents to equal 9.61% of the shares of
the Company's capital stock outstanding on
the date hereof calculated on a fully
diluted basis after exercise of this
Warrant
The shares of Common Stock issuable upon exercise of this Warrant are
hereinafter referred to as the "Shares." This Warrant shall be exercisable at
any time and from time to time from the date hereof until October 31, 2004 (the
"Expiration Date").
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2. EXERCISE PRICE. The exercise price (the "Exercise Price") per share
for which all or any of the Shares may be purchased pursuant to the terms of
this Warrant shall be equal to 80% average closing bid price of the Company's
Common Stock for the 20 consecutive trading days immediately preceding the
Closing Date, and shall be further adjusted as provided herein. If on September
30, 2000, the average closing bid price of the Common Stock for the 20
consecutive trading days immediately prior to September 30, 2000, is less than
the Exercise Price, then the Exercise Price shall automatically be reset on
September 30, 2000, at the average closing bid price of the Company's Common
Stock for the 20 consecutive trading days immediately preceding September 30,
2000, provided that no adjustment shall be made which increases the then
effective Exercise Price.
3. EXERCISE. This Warrant may be exercised by the Holder hereof (but
only on the conditions hereinafter set forth) in whole or in part, upon delivery
of written notice of intent to exercise to the Company in the manner at the
address of the Company set forth in Section 14 hereof, together with this
Warrant and payment to the Company of the aggregate Exercise Price of the Shares
so purchased. The Exercise Price shall be payable, at the option of the Holder,
(a) by certified or bank check, (b) by the surrender of the Note or portion
thereof having an outstanding principal balance equal to the aggregate Exercise
Price or (c) by the surrender of a portion of this Warrant where the Shares
subject to the portion of this Warrant that is surrendered have a fair market
value equal to the aggregate Exercise Price. In the absence of an established
public market for the Common Stock, fair market value shall be established by
the Company's board of directors in a commercially reasonable manner. Upon
exercise of this Warrant as aforesaid, the Company shall as promptly as
practicable, and in any event within fifteen (15) days thereafter, execute and
deliver to the Holder of this Warrant a certificate or certificates for the
total number of whole Shares for which this Warrant is being exercised in such
names and denominations as are requested by such Holder. If this Warrant shall
be exercised with respect to less than all of the Shares, the Holder shall be
entitled to receive a new Warrant covering the number of Shares in respect of
which this Warrant shall not have been exercised, which new Warrant shall in all
other respects be identical to this Warrant. The Company covenants and agrees
that it will pay when due any and all state and federal issue taxes which may be
payable in respect of the issuance of this Warrant or the issuance of any Shares
upon exercise of this Warrant.
4. COVENANTS AND CONDITIONS. The above provisions are subject to the
following:
(a) Neither this Warrant nor the Shares have been registered
under the Securities Act of 1933, as amended (the "Securities Act"), or
any state securities laws ("Blue Sky Laws"). This Warrant has been
acquired for investment purposes and not with a view to distribution or
resale and may not be sold or otherwise transferred without (i) an
effective registration statement for such Warrant under the Securities
Act and such applicable Blue Sky Laws, or (ii) an opinion of counsel,
which opinion and counsel shall be reasonably satisfactory to the
Company and its counsel, that registration is not required under the
Securities Act or under any applicable Blue Sky Laws (the Company
hereby acknowledges that Xxxxxxx, Xxxxxx, Xxxx, Xxxxxxx & Xxxxxx is
acceptable counsel). Transfer of the Shares shall be restricted in the
same manner and to the same extent as the Warrant and the certificates
representing such Shares shall bear substantially the following legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR
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ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED
UNTIL (I) A REGISTRATION STATEMENT UNDER THE ACT AND SUCH
APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE
WITH REGARD THERETO, OR (II) IN THE OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY, REGISTRATION UNDER SUCH SECURITIES
ACTS AND SUCH APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED
IN CONNECTION WITH SUCH PROPOSED TRANSFER.
The Holder hereof and the Company agree to execute such other documents
and instruments as counsel for the Company reasonably deems necessary
to effect the compliance of the issuance of this Warrant and any shares
of Common Stock issued upon exercise hereof with applicable federal and
state securities laws.
(b) The Company covenants and agrees that all Shares which may
be issued upon exercise of this Warrant will, upon issuance and payment
therefor, be legally and validly issued and outstanding, fully paid and
nonassessable, free from all taxes, liens, charges and preemptive
rights, if any, with respect thereto or to the issuance thereof. The
Company shall at all times reserve and keep available for issuance upon
the exercise of this Warrant such number of authorized but unissued
shares of Common Stock as will be sufficient to permit the exercise in
full of this Warrant.
5. TRANSFER OF WARRANT. Subject to the provisions of Section 4 hereof,
this Warrant may be transferred, in whole or in part, to any person or business
entity, by presentation of the Warrant to the Company with written instructions
for such transfer. Upon such presentation for transfer, the Company shall
promptly execute and deliver a new Warrant or Warrants in the form hereof in the
name of the assignee or assignees and in the denominations specified in such
instructions. The Company shall pay all expenses incurred by it in connection
with the preparation, issuance and delivery of Warrants under this Section.
6. WARRANT HOLDER NOT SHAREHOLDER; RIGHTS OFFERING; PREEMPTIVE RIGHTS.
Except as otherwise provided herein, this Warrant does not confer upon the
Holder, as such, any right whatsoever as a shareholder of the Company.
Notwithstanding the foregoing, if the Company should offer to all of the
Company's shareholders the right to purchase any securities of the Company, then
all shares of Common Stock that are subject to this Warrant shall be deemed to
be outstanding and owned by the Holder and the Holder shall be entitled to
participate in such rights offering. The Company shall not grant any preemptive
rights with respect to any of its capital stock without the prior written
consent of the Holder.
7. OBSERVATION RIGHTS. The Holder of this Warrant shall receive notice
of and be entitled to attend or may send a representative to attend all meetings
of the Company's Board of Directors in a non-voting observation capacity and
shall receive a copy of all correspondence and information delivered to the
Company's Board of Directors, from the date hereof until such time as the
indebtedness evidenced by the Note has been paid in full.
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8. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES ISSUABLE. The
Exercise Price and the number of shares purchasable hereunder are subject to
adjustment from time to time as follows:
(a) Stock Splits, Recapitalization, Etc. If all or any portion
of this Warrant shall be exercised subsequent to any stock split, stock
dividend, recapitalization, combination of shares of the Company, or other
similar event occurring after the date hereof, then the Holder exercising this
Warrant shall receive, for the aggregate price paid upon such exercise, the
aggregate number and class of shares which such Holder would have received if
this Warrant had been exercised immediately prior to the record date for such
stock split, stock dividend, recapitalization, combination of shares, or other
similar event.
(b) Merger, Etc. If the Company at any time merges or
consolidates with or into any other corporation or enters into a similar
transaction (other than a merger in which the Company is the surviving
corporation and in connection with which there is no reclassification or other
change in the Common Stock or other securities of the Company or any issuance of
stock, securities or property to the holders of its outstanding shares of Common
Stock), then the Company shall notify the Holder of any such event and,
effective upon the record or other date of determination of persons affected by
such merger, consolidation or similar transaction, the securities which the
Holder would be entitled to receive on the exercise hereof shall include the
kind and amount of securities, cash and property that would have been held by
the Holder if on such determination date the Holder had been the holder of
record of the securities, cash and properties issuable upon exercise of the
Warrant on such determination date (or the right thereto prior to the effective
date thereof). In the event of any merger, consolidation or similar transaction
referred to above in this Section 8(b), the Company shall, and shall cause any
successor corporation as a condition precedent to such transaction to, execute
and deliver to each Holder a new Warrant (i) providing that the owner of such
Warrant, upon exercise thereof, shall have the right to purchase the securities
as adjusted as described above, and (ii) containing provisions for subsequent
adjustments in a manner and on terms as nearly equivalent as may be practicable
to the adjustments provided for in this Section 8(b).
(c) Adjustment on Certain Dilutive Issues.
(i) Definitions. For purposes of this Section
8(c), the following definitions apply:
(1) "Options" shall mean rights,
options, or warrants to subscribe for, purchase or
otherwise acquire either Common Stock or Convertible
Securities (as defined below), except for (A)
currently exercisable options to purchase an
aggregate of 1,629,000 shares of Common Stock
outstanding on the Original Warrant Issue Date (the
"Outstanding Options"); and (B) rights or options to
acquire up to an aggregate of 260,000 shares of
Common Stock which may be granted to employees,
directors or consultants to the Company pursuant to
the Company's Stock Option Plan, provided that the
exercise price for all options granted after the
Warrant Issue Date shall be no less than the Fair
Market Value (as defined in Section 8(e) below) on
the date of grant (the "Plan Options").
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(2) "Convertible Securities" shall
mean any evidences of indebtedness, shares of stock
(other than Common Stock or other securities
convertible into or exchangeable for Common Stock.
(3) "Additional Shares of Common
Stock" shall mean all shares of Common Stock issued
(or deemed to be issued pursuant to Section
8(c)(iii)) by the Corporation after Warrant Issue
Date, other than shares of Common Stock issued or
issuable upon (i) the exercise of the Outstanding
Options; or (ii) the exercise of any Plan Options.
(ii) Adjustment of Exercise Price. In the event
that the consideration per share (determined pursuant to Section 8(c)(v) hereof)
for an Additional Share of Common Stock issued or deemed to be issued by the
Company is less than the Fair Market Value (as defined in Section 8(e) hereof)
on the date of the issue of such Additional Share of Common Stock, then the
Exercise Price and the number of shares shall be adjusted as provided herein.
(iii) Issue of Options and Convertible Securities.
In the event the Company at any time or from time to time after the Warrant
Issue Date shall issue any Options or Convertible Securities or shall fix a
record date for the determination of holders of any class of securities then
entitled to receive any such Options or Convertible Securities, then the maximum
number of shares (as set forth in the instrument relating thereto without regard
to any provisions contained therein for a subsequent adjustment of such number)
of Common Stock issuable upon the exercise of such Options or, in the case of
Convertible Securities and Options therefor, the conversion or exchange of such
Convertible Securities, shall be deemed to be Additional Shares of Common Stock
issued as of the time of such issue or, in case such a record date shall have
been fixed, as of the close of business on such record date, provided that
Additional Shares of Common Stock shall not be deemed to have been issued unless
the consideration per share (determined pursuant to Section 8(c)(v) hereof) of
such Additional Shares of Common Stock would be less than the Fair Market Value
(as defined in Section 8(e) hereof) on the date of such issue, or such record
date, as the case may be, and provided that in any such case in which Additional
Shares of Common Stock are deemed to be issued:
(1) no further adjustments in the
Exercise Price shall be made upon the subsequent
issue of Convertible Securities or shares of Common
Stock upon the exercise of such Options or conversion
or exchange of such Convertible Securities;
(2) if such Options or Convertible
Securities by their terms provide, with the passage
of time or otherwise, for any increase or decrease in
the consideration payable to the Company, or decrease
or increase in the number of shares of Common Stock
issuable upon the exercise, conversion or exchange
thereof, the Exercise Price computed upon the
original issue thereof (or upon the occurrence of a
record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon any such
increase or decrease becoming effective, be
recomputed to reflect such increase or decrease
insofar as it affects such Options or the rights of
conversion or exchange under such Convertible
Securities, provided, however, that no such
adjustment of the Exercise Price shall affect Common
Stock previously issued upon exercise or conversion
of this Warrant;
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(3) upon the expiration of any such
Options or any rights of conversion or exchange under
such Convertible Securities that shall not have been
exercised, the Exercise Price computed upon the
original issue thereof (or upon the occurrence of a
record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon such
expiration, be recomputed as if:
(a) in the case of
Convertible Securities or Options for Common
Stock, the only Additional Shares of Common
Stock issued were the shares of Common
Stock, if any, actually issued upon the
exercise of such Options or the conversion
or exchange of such Convertible Securities
and the consideration received therefor was
the consideration actually received by the
Company for the issue of all such Options,
whether or not exercised, plus the
consideration actually received by the
Company upon such exercise, or for the issue
of all such Convertible Securities that were
actually converted or exchanged, plus the
additional consideration, if any, actually
received by the Company upon such conversion
or exchange, and
(b) in the case of Options
for Convertible Securities, only the
Convertible Securities, if any, actually
issued upon the exercise thereof were issued
at the time of issue of such Options, and
the consideration received by the Company
for the Additional Shares of Common Stock
deemed to have been then issued was the
consideration actually received by the
Company for the issue of all such Options,
whether or not exercised, plus the
consideration deemed to have been received
by the Company (determined pursuant to
Section 8(c)(v)) upon the issue of the
Convertible Securities with respect to which
such Options were actually exercised;
(4) no readjustment pursuant to
Section 8(c)(iii)(2) or (3) above shall have the
effect of increasing the Exercise Price to an amount
which exceeds the lower of (a) the Exercise Price
prior to the initial adjustment to which the
readjustment applies, or (b) the Exercise Price that
would have resulted from any issuance of Additional
Shares of Common Stock between the date of the
initial adjustment date and such readjustment date;
and
(5) in the event of any change in the
number of shares of Common Stock issuable upon the
exercise, conversion or exchange of any Option or
Convertible Security, including, but not limited to,
a change resulting from the antidilution provisions
thereof, the Exercise Price then in effect shall
forthwith be readjusted to such Exercise Price as
would have been obtained had the adjustment which was
initially made upon the issuance of such unexercised
Option or unconverted Convertible Security, been made
upon the basis of such subsequent change, but no
further adjustment shall be made for the actual
issuance of Common Stock upon the exercise or
conversion of any such Option or Convertible
Security.
(iv) Adjustment of Exercise Price Upon Issuance
of Additional Shares of Common Stock. In the event the Company at any time after
the Warrant Issue Date shall issue Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued pursuant to Section
8(c)(iii)), without consideration or for a consideration per share less than the
Fair Market Value
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(as defined in Section 8(e) below) on the date of such issue, then and in such
event, the Exercise Price shall be reduced to a price (calculated to the nearest
cent) equal to either (A) the per share consideration for such Additional Shares
of Common Stock (or deemed Additional Shares of Common Stock) pursuant to
Section 5(e)(iii), or (B) in the case of Additional Shares of Common Stock
issued (or deemed to have been issued) without consideration, the par value of
the Common Stock.
The provisions of this Section 8(c)(iv) do not apply if the provisions
of any of Section 8(a) or (b) apply.
(v) Determination of Consideration. The
consideration received by the Company for the issue of any Additional
Shares of Common Stock shall be computed as follows:
(1) Cash, Property, and Other
Consideration. Such consideration shall:
(a) insofar as it consists
of cash, be computed as the aggregate amount
of cash received by the Company excluding
amounts paid or payable for accrued interest
or accrued dividends;
(b) insofar as it consists
of property, services, or other
consideration other than cash, be computed
at the fair value thereof at the time of
such issue, as determined in good faith by
the Board of Directors; and
(c) in the event
Additional Shares of Common Stock are issued
together with other shares or securities or
other assets of the Company for
consideration which covers both, be the
proportion of the consideration so received,
computed as provided in clauses (a) and (b)
above, as is determined in good faith by the
Board of Directors.
(2) Options and Convertible
Securities. The consideration per share received by
the Company for Additional Shares of Common Stock
deemed to have been issued pursuant to Options and
Convertible Securities, shall be deemed to be the sum
of the consideration paid for such Option or
Convertible Security, if any, plus the lowest
consideration per share then payable upon the
exercise of Options, as set forth in the instruments
relating to such Options or Convertible Securities,
without regard to any provision contained therein
designed to protect against dilution. If Options or
Convertible Securities are issued together with other
securities or instruments of the Company, the Board
of Directors shall determine in good faith the amount
of consideration paid for such Option or Convertible
Securities.
(d) Certificate as to Adjustments. In each case of any
adjustment or readjustment pursuant to Section 8(a)-(c) of the Exercise Price or
the number of shares issuable pursuant to this Warrant, the Company shall
forthwith notify the Holder or Holders of this Warrant of each such adjustment,
setting forth in reasonable detail the event requiring the adjustment and the
method by which such adjustment was calculated.
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(e) No Fractional Shares; Fair Market Value. If any
adjustment pursuant to Section 8(a) - (c) would create a fractional share of
Common Stock or a right to acquire a fractional share of Common Stock, such
fractional share shall be disregarded and the number of shares subject to this
Warrant shall be the next higher number of shares, rounding all fractions
upward. "Fair Market Value" per share of Common Stock shall mean (i) in the case
of a security listed or admitted to trading on any securities exchange, the last
reported sale price, regular way (as determined in accordance with the practices
of such exchange), on such day, or if no sale takes place on such day, the
average of the closing bid and asked prices on such day (and in the case of a
security traded on more than one national securities exchange, at such price or
such average, upon the exchange on which the volume of trading during the last
calendar year was the greatest), (ii) in the case of a security not then listed
or admitted to trading on any securities exchange, the last reported sale price
on such day, or if no sale takes place on such day, the average of the closing
bid and asked prices on such day, as reported by a reputable quotation service
designated by the Company, (iii) in the case of a security not then listed or
admitted to trading on any securities exchange and as to which no such reported
sale price or bid and asked prices are available, the average of the reported
high bid and low asked prices on such day, as reported by a reputable quotation
service, or the Wall Street Journal, or if there are no bids and asked prices on
such day, the average of the high bid and low asked prices, as so reported, on
the most recent day (not more than 30 days prior to the date in question) for
which prices have been so reported, and (iv) in the case of a security
determined by the Company's Board of Directors as not having an active quoted
market or in the case of other property, such fair market value as shall be
determined by the Board of Directors.
9. PUT AGREEMENT.
(a) The Company hereby irrevocably grants and issues to
Holder the right and option to sell to the Company (the "Put") this Warrant for
a period of thirty (30) days immediately prior to the Expiration Date, at a
purchase price (the "Put Price") equal to the Fair Market Value (as hereinafter
defined) of the shares of Common Stock issuable to Holder upon exercise of this
Warrant less the Exercise Price.
(b) Holder may exercise the Put by delivery of written
notice (the "Put Notice") of such exercise to the Company in the manner and at
the address of the Company set forth in Section 14 hereof. The Company shall pay
to Holder, in cash or by wire transfer of immediately available funds, the Put
Price within thirty (30) days of the receipt of the Put Notice. The Company's
obligation to pay the Purchase Price survives after the Expiration Date of the
Warrant.
(c) For purposes of this Section 9, the Fair Market Value
of the shares of Common Stock of the Company issuable pursuant to this Warrant
shall be determined in accordance with 8(e). In the absence of an established
public market, the fair market value shall be determined as follows:
(i) The Company and the Holder shall each
appoint an independent, experienced appraiser who is a member of a recognized
professional association of business appraisers. The two appraisers shall
determine the value of the shares of Common Stock which would be issued upon the
exercise of the Warrant, assuming that the sale would be between a willing buyer
and a willing seller, both of whom have full knowledge of the financial and
other affairs of the Company, and neither of whom is under any compulsion to
sell or to buy.
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(ii) If the higher of the two appraisals is not
ten percent (10%) greater than the lower of the appraisals, the Fair Market
Value shall be the average of the two appraisals. If the higher of the two
appraisals is equal to or greater than ten percent (10%) more than the lower of
the two appraisals, then a third appraiser shall be appointed by the two
appraisers, and if they cannot agree on a third appraiser, the American
Arbitration Association shall appoint the third appraiser. The third appraiser,
regardless of who appoints him or her, shall have the same qualifications as the
first two appraisers.
(iii) The Fair Market Value after the appointment
of the third appraiser shall be the mean of the three appraisals.
(iv) The fees and expenses of the appraisers
shall be paid one-half by the Company and one-half by the Holder.
10. REGISTRATION.
(a) The Company and the Holder of the Warrant and the
Shares agree that if at any time after the date hereof the Company shall propose
to file a registration statement with respect to any of its Common Stock on a
form suitable for a secondary offering (including its initial public offering),
it will give notice in writing to such effect to the Holder(s) at least thirty
(30) days prior to such filing, and, at the written request of any such
registered holder, made within ten (10) days after the receipt of such notice,
will include therein at the Company's cost and expense (including the fees and
expenses of counsel to such Holder(s), but excluding underwriting discounts,
commissions and filing fees attributable to the Shares included therein) such of
the Shares as such Holder(s) shall request; provided, however, that if the
offering being registered by the Company is underwritten and if the
representative of the underwriters certifies in writing that the inclusion
therein of the Shares would materially and adversely affect the sale of the
securities to be sold by the Company thereunder, then the Company shall be
required to include in the offering only that number of securities, including
the Shares, which the underwriters determine in their sole discretion will not
jeopardize the success of the offering (the securities so included to be
apportioned pro rata among all selling shareholders according to the total
amount of securities entitled to be included therein owned by each selling
shareholder, but in no event shall the total amount of Shares included in the
offering be less than the number of securities included in the offering by any
other single selling shareholder unless all of the Shares are included in the
offering).
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(b) Whenever the Company undertakes to effect the
registration of any of the Shares, the Company shall, as expeditiously as
reasonably possible:
(i) Prepare and file with the Securities and
Exchange Commission (the "Commission") a registration statement covering such
Shares and use its best efforts to cause such registration statement to be
declared effective by the Commission as expeditiously as possible and to keep
such registration effective until the earlier of (A) the date when all Shares
covered by the registration statement have been sold or (B) one hundred eighty
(180) days from the effective date of the registration statement; provided, that
before filing a registration statement or prospectus or any amendment or
supplements thereto, the Company will furnish to each Holder of Shares covered
by such registration statement and the underwriters, if any, copies of all such
documents proposed to be filed (excluding exhibits, unless any such person shall
specifically request exhibits), which documents will be subject to the review of
such Holders and underwriters, and the Company will not file such registration
statement or any amendment thereto or any prospectus or any supplement thereto
(including any documents incorporated by reference therein) with the Commission
if (A) the underwriters, if any, shall reasonably object to such filing or (B)
if information in such registration statement or prospectus concerning a
particular selling Holder has changed and such Holder or the underwriters, if
any, shall reasonably object.
(ii) Prepare and file with the Commission such
amendments and post-effective amendments to such registration statement as may
be necessary to keep such registration statement effective during the period
referred to in Section 10(b)(i) and to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement, and cause the prospectus to be supplemented by any
required prospectus supplement, and as so supplemented to be filed with the
Commission pursuant to Rule 424 under the Securities Act.
(iii) Furnish to the selling Holder(s) such
numbers of copies of such registration statement, each amendment thereto, the
prospectus included in such registration statement (including each preliminary
prospectus), each supplement thereto and such other documents as they may
reasonably request in order to facilitate the disposition of the Shares owned by
them.
(iv) Use its best efforts to register and qualify
under such other securities laws of such jurisdictions as shall be reasonably
requested by any selling Holder and do any and all other acts and things which
may be reasonably necessary or advisable to enable such selling Holder to
consummate the disposition of the Shares owned by such Holder, in such
jurisdictions; provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to qualify to transact business
or to file a general consent to service of process in any such states or
jurisdictions.
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(v) Promptly notify each selling Holder of the
happening of any event as a result of which the prospectus included in such
registration statement contains an untrue statement of a material fact or omits
any fact necessary to make the statements therein not misleading and, at the
request of any such Holder, the Company will prepare a supplement or amendment
to such prospectus so that, as thereafter delivered to the purchasers of such
Shares, such prospectus will not contain an untrue statement of a material fact
or omit to state any fact necessary to make the statements therein not
misleading.
(vi) Provide a transfer agent and registrar for
all such Shares not later than the effective date of such registration
statement.
(vii) Enter into such customary agreements
(including underwriting agreements in customary form for a primary offering) and
take all such other actions as the underwriters, if any, reasonably request in
order to expedite or facilitate the disposition of such Shares (including,
without limitation, effecting a stock split or a combination of shares).
(viii) Make available for inspection by any selling
Holder or any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent retained by
any such selling Holder or underwriter, all financial and other records,
pertinent corporate documents and properties of the Company, and cause the
officers, directors, employees and independent accountants of the Company to
supply all information reasonably requested by any such seller, underwriter,
attorney, accountant or agent in connection with such registration statement.
(ix) Promptly notify the selling Holder(s) and
the underwriters, if any, of the following events and (if requested by any such
person) confirm such notification in writing: (A) the filing of the prospectus
or any prospectus supplement and the registration statement and any amendment or
post-effective amendment thereto and, with respect to the registration statement
or any post-effective amendment thereto, the declaration of the effectiveness of
such documents, (B) any requests by the Commission for amendments or supplements
to the registration statement or the prospectus or for additional information,
(C) the issuance or threat of issuance by the Commission of any stop order
suspending the effectiveness of the registration statement or the initiation of
any proceedings for that purpose and (D) the receipt by the Company of any
notification with respect to the suspension of the qualification of the Shares
for sale in any jurisdiction or the initiation or threat of initiation of any
proceeding for such purposes.
(x) Make every reasonable effort to prevent the
entry of any order suspending the effectiveness of the registration statement
and obtain at the earliest possible moment the withdrawal of any such order, if
entered.
(xi) Cooperate with the selling Holder(s) and the
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing the Shares to be sold and not bearing any restrictive
legends, and enable such Shares to be in such lots and registered in such names
as the underwriters may request at least two (2) business days prior to any
delivery of the Shares to the underwriters.
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(xii) Provide a CUSIP number for all the Shares
not later than the effective date of the registration statement.
(xiii) Prior to the effectiveness of the
registration statement and any post-effective amendment thereto and at each
closing of an underwritten offering, (A) make such representations and
warranties to the selling Holder(s) and the underwriters, if any, with respect
to the Shares and the registration statement as are customarily made by issuers
in primary underwritten offerings; (B) use its best efforts to obtain "cold
comfort" letters and updates thereof from the Company's independent certified
public accountants addressed to the selling Holders and the underwriters, if
any, such letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters by underwriters in connection with
primary underwritten offerings; (C) deliver such documents and certificates as
may be reasonably requested (1) by the holders of a majority of the Shares being
sold, and (2) by the underwriters, if any, to evidence compliance with clause
(A) above and with any customary conditions contained in the underwriting
agreement or other agreement entered into by the Company; and (D) obtain
opinions of counsel to the Company and updates thereof (which counsel and which
opinions shall be reasonably satisfactory to the underwriters, if any), covering
the matters customarily covered in opinions requested in underwritten offerings
and such other matters as may be reasonably requested by the selling Holders and
underwriters or their counsel. Such counsel shall also state that no facts have
come to the attention of such counsel which cause them to believe that such
registration statement, the prospectus contained therein, or any amendment or
supplement thereto, as of their respective effective or issue dates, contains
any untrue statement of any material fact or omits to state any material fact
necessary to make the statements therein not misleading (except that no
statement need be made with respect to any financial statements, notes thereto
or other financial data or other expertized material contained therein). If for
any reason the Company's counsel is unable to give such opinion, the Company
shall so notify the Holders of the Shares and shall use its best efforts to
remove expeditiously all impediments to the rendering of such opinion.
(xiv) Otherwise use its best efforts to comply
with all applicable rules and regulations of the Commission, and make generally
available to its security holders earnings statements satisfying the provisions
of Section 11(a) of the Securities Act, no later than forty-five (45) days after
the end of any twelve-month period (or ninety (90) days, if such period is a
fiscal year) (A) commencing at the end of any fiscal quarter in which the Shares
are sold to underwriters in a firm or best efforts underwritten offering, or (B)
if not sold to underwriters in such an offering, beginning with the first month
of the first fiscal quarter of the Company commencing after the effective date
of the registration statement, which statements shall cover such twelve-month
periods.
(c) After the date hereof, the Company shall not grant to
any holder of securities of the Company any registration rights which have a
priority greater than or equal to those granted to Holders pursuant to this
Warrant without the prior written consent of the Holder(s).
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(d) The Company's obligations under Section 10(a) above
with respect to each Holder of Shares are expressly conditioned upon such
Xxxxxx's furnishing to the Company in writing such information concerning such
holder and the terms of such holder's proposed offering as the Company shall
reasonably request for inclusion in the registration statement. If any
registration statement including any of the Shares is filed, then the Company
shall indemnify each Holder thereof (and each underwriter for such holder and
each person, if any, who controls such underwriter within the meaning of the
Securities Act) from any loss, claim, damage or liability arising out of, based
upon or in any way relating to any untrue statement of a material fact contained
in such registration statement or any omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except for any such statement or omission based on information
furnished in writing by such Holder of the Shares expressly for use in
connection with such registration statement; and such holder shall indemnify the
Company (and each of its officers and directors who has signed such registration
statement, each director, each person, if any, who controls the Company within
the meaning of the Securities Act, each underwriter for the Company and each
person, if any, who controls such underwriter within the meaning of the
Securities Act) and each other such Holder against any loss, claim, damage or
liability arising from any such statement or omission which was made in reliance
upon information furnished in writing to the Company by such holder of the
Shares expressly for use in connection with such registration statement.
(e) For purposes of this Section 10, all of the Shares
shall be deemed to be issued and outstanding.
(f) In connection with any registration or qualification
of securities under this Section 10, the Company agrees to indemnify the Holder
hereof and the holders of any shares of Common Stock issuable upon the exercise
hereof and each underwriter thereof, including each person, if any, who controls
the holder or such stockholder or underwriter within the meaning of Section 15
of the Securities Act, against all losses, claims, damages, liabilities and
expenses (including reasonable costs of investigation and the costs, fees and
expenses of legal counsel) caused by any untrue, or alleged untrue, statement of
a material fact contained in any registration statement, preliminary prospectus,
prospectus or notification or offering circular (as amended or supplemented if
the Company shall have furnished any amendments or supplements thereto) or
caused by any omission, or alleged omission, to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages, liabilities or
expenses are caused by any untrue statement or alleged untrue statement or
omission or alleged omission based upon information furnished in writing to the
Company by the holder or any such stockholder or underwriter expressly for use
therein. The Company and each officer, director and controlling person of the
Company shall be indemnified respectively by the Holder of this Warrant and by
the holders of any Shares for all such losses, claims, damages, liabilities and
expenses (including the costs of reasonable investigation and the costs, fees
and expenses of legal counsel) caused by any such untrue, or alleged untrue,
statement or any such omission or alleged omission, based upon information
furnished in writing to the Company by the Holder hereof or any such stockholder
expressly for use therein, provided that the liability of each Holder hereof or
any such stockholder shall be limited to the dollar amount of the net proceeds
of the Shares actually sold by such Holder pursuant to the registration
statement.
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(i) The indemnifying party shall be entitled to
participate in and, to the extent it may wish, jointly with any other
indemnifying party, to assume the defense of such action at its own expense,
with counsel chosen by it and reasonably satisfactory to such indemnified party.
The indemnified party shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and expenses of
such counsel (other than reasonable costs of investigation) shall be paid by the
indemnified party unless (a) the indemnifying party agrees to pay the same, (b)
the indemnifying party fails to assume the defense of such action with counsel
reasonably satisfactory to the indemnified party or (c) the named parties to any
such action (including any impleaded parties) have been advised by such counsel
that representation of such indemnified party and the indemnifying party by the
same counsel would be inappropriate under applicable standards of professional
conduct (in which case the indemnifying party shall not have the right to assume
the defense of such action on behalf of such indemnified party). No indemnifying
party shall be liable for any settlement entered into without its consent, which
consent shall not be withheld unreasonably.
(ii) The reimbursements required to be made by
the Company pursuant to Seciton 10(f) shall be made by periodic payments during
the course of the investigation or defense, as and when bills are received or
expenses incurred.
(iii) If the indemnification provided for in this
Section 10(f) is unavailable or insufficient to hold harmless an indemnified
party in respect to any losses, claims, damages, liabilities, expenses or
actions in respect thereof referred to herein, then each indemnifying party
shall in lieu of indemnifying such indemnified party contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages, liabilities, expenses or actions in such proportion as is appropriate
to reflect the relative fault of the Company, on the one hand, and the Holder of
this Warrant and the holders of any Shares, on the other, in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities, expenses or actions as well as any other relevant equitable
considerations, including the failure to give the notice required hereunder. The
Company and the Holder of this Warrant agree that it would not be just and
equitable if contribution pursuant to this Section 10(f)(iii) were determined by
any method of allocation which did not take account of the equitable
considerations referred to above. Notwithstanding the provisions of this Section
10(f)(iii), in no event shall the amount contributed by the Holder of this
Warrant or the holder of any Shares exceed the net proceeds received by such
person from the sale of Shares to which such contribution claim relates. No
person guilty of fraudulent misrepresentations (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who is not guilty of such fraudulent misrepresentation.
(iv) Each Holder of this Warrant and each holder
of Shares, by acceptance hereof or thereof, as the case may be, agrees to the
indemnification and contribution provisions of this Section 10(f).
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11. CERTAIN NOTICES. In case at any time the Company shall propose
to:
(a) declare any cash dividend upon its Common Stock;
(b) declare any dividend upon its Common Stock payable in
stock or make any special dividend or other distribution to the holders of its
Common Stock;
(c) offer for subscription to the holders of any of its
Common Stock any additional shares of stock in any class or other rights;
(d) reorganize, or reclassify the capital stock of the
Company, or consolidate, merge or otherwise combine with, or sell of all or
substantially all of its assets to, another corporation;
(e) voluntarily or involuntarily dissolve, liquidate or
wind up of the affairs of the Company; or
(f) redeem or purchase any shares of its capital stock or
securities convertible into its capital stock; then, in any one or more of said
cases, the Company shall give to the Holder of the Warrant, by certified or
registered mail, (i) at least twenty (20) days' prior written notice of the date
on which the books of the Company shall close or a record shall be taken for
such dividend, distribution or subscription rights or for determining rights to
vote in respect of any such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up, and (ii) in the case of
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, at least twenty (20) days' prior written notice of
the date when the same shall take place. Any notice required by clause (i) shall
also specify, in the case of any such dividend, distribution or subscription
rights, the date on which the holders of Common Stock shall be entitled thereto,
and any notice required by clause (ii) shall specify the date on which the
holders of Common Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, as the case may be.
12. RIGHTS OF CO-SALE.
(a) Morini Investments Limited Partnerships (the
"Management Shareholder shall enter into any transaction that would result in
the sale by it of any Common Stock now or hereafter owned by it, unless prior to
such sale such Management Shareholder shall give written notice (the "Co-Sale
Notice") to Holder addressed and delivered as set forth in Section 14 hereof, of
its intention to effect such sale in order that Holder may exercise its rights
under this Section 12 as hereinafter described. Such notice shall set forth (i)
the number of shares to be sold by such Management Shareholder, (ii) the
principal terms of the sale, including the price at which the shares are
intended to be sold, and (iii) an offer by such Management Shareholder to use
its best efforts to cause to be included with the shares to be sold by it in the
sale, on a share-by-share basis and on the same terms and conditions, the Shares
issuable or issued to Holder pursuant this Warrant.
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(b) If Holder has not accepted such offer in writing
within a period of ten (10) days from the date of receipt of the Co-Sale Notice,
then such Management Shareholder shall thereafter be free for a period of ninety
(90) days to sell the number of shares specified in the Co-Sale Notice, at a
price no greater than the price set forth in the Co-Sale Notice and on otherwise
no more favorable terms to such Management Shareholder than as set forth in the
Co-Sale Notice, without any further obligation to Holder in connection with such
sale. In the event that such Management Shareholder fails to consummate such
sale within such ninety-day period, the shares specified in Co-Sale Notice shall
continue to be subject to this Section 12.
(c) If Holder accepts such offer in writing within
ten-day period, then such acceptance shall be irrevocable unless such Management
Shareholder shall be unable to cause to be included in the sale the number of
Shares of stock held by Xxxxxx and set forth in the written acceptance. In that
event, such Management Shareholder and Holder shall participate in the sale
equally, with such Management Shareholder and Holder each selling half the total
number of such shares to be sold in the sale.
(d) The provisions of this Section 12 shall not apply to (i) sales
by the Management Shareholder in customary broker's transactions or (ii) to
other transactions if the amount of Common Stock being sold in any such
transaction (or any series of transactions occurring within six (6) months of
each other to the same purchaser), is less than five percent (5%) of the
Management Shareholder's then current holdings in the Company, provided, that
transactions pursuant to this subsection (ii) shall not exceed 20% of its
holdings on the date hereof in the aggregate.
13. ARTICLE AND SECTION HEADINGS. Numbered and titled article and
section headings are for convenience only and shall not be construed as
amplifying or limiting any of the provisions of this Warrant.
14. NOTICE. Any and all notices, elections or demands permitted or
required to be made under this Warrant shall be in writing, signed by the party
giving such notice, election or demand and shall be delivered personally,
telecopied, or sent by certified mail or overnight via nationally recognized
courier service (such as Federal Express), to the other party at the address set
forth below, or at such other address as may be supplied in writing and of which
receipt has been acknowledged in writing. The date of personal delivery or
telecopy or two (2) business days after the date of mailing (or the next
business day after delivery to such courier service), as the case may be, shall
be the date of such notice, election or demand. For the purposes of this
Warrant:
The Address of Holder is: FINOVA Mezzanine Capital Inc.
Suite 000
000 Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx
Telecopy No. 615/726-1208
with a copy to: FINOVA Mezzanine Capital Inc.
Legal Department
Suite 000
000 Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Telecopy No. 615/256-9958
The Address of Company is: Galaxy Foods Company
0000 Xxxxxxxx Xxx
Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx
Telecopy No. 407/855-1099
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with a copy to: Xxxxx & Xxxxxxxxx
000 X. Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxx Xxxxxx
Telecopy No. 407/649-4017
15. SEVERABILITY. If any provisions(s) of this Warrant or the
application thereof to any person or circumstances shall be invalid or
unenforceable to any extent, the remainder of this Warrant and the application
of such provisions to other persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law.
16. ENTIRE AGREEMENT. This Warrant between the Company and Holder
represents the entire agreement between the parties concerning the subject
matter hereof, and all oral discussions and prior agreement are merged herein.
17. GOVERNING LAW AND AMENDMENTS. This Warrant shall be construed
and enforced under the laws of the State of Arizona applicable to contracts to
be wholly performed in such State. No amendment or modification hereof shall be
effective except in a writing executed by each of the parties hereto.
18. COUNTERPARTS. This Warrant may be executed in any number of
counterparts and be different parties to this Warrant in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same Warrant.
19. CONSENT TO JURISDICTION; EXCLUSIVE VENUE. The Company hereby
irrevocably consents to the jurisdiction of the United States District Court and
of all Arizona state courts sitting in Maricopa County, Arizona, for the purpose
of any litigation to which Holder may be a party and which concerns this
Warrant. It is further agreed that venue for any such action shall lie
exclusively with courts sitting in Maricopa County, Arizona unless Xxxxxx agrees
to the contrary in writing.
20. WAIVER OF TRIAL BY JURY. HOLDER AND THE COMPANY XXXXXX
KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COUNSEL WAIVE TRIAL BY JURY IN ANY
ACTIONS, PROCEEDINGS, CLAIMS OR COUNTER-CLAIMS, WHETHER IN CONTRACT OR TORT OR
OTHERWISE, AT LAW OR IN EQUITY, ARISING OUT OF OR IN ANY WAY RELATING TO THIS
WARRANT.
21. EQUITY PARTICIPATION. This Warrant is issued in connection
with the Loan Agreement. It is intended that this Warrant constitute an equity
participation and not constitute interest on the Note. If under any
circumstances whatsoever, fulfillment of any obligation of this Warrant, the
Loan Agreement, or any other agreement or document executed in connection with
the Loan Agreement, shall violate the lawful limit of any applicable usury
statute or any other applicable law with regard to obligations of like character
and amount, then the obligation to be fulfilled shall be reduced to such
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lawful limit, such that in no event shall there occur, under this Warrant, the
Loan Agreement, or any other document or instrument executed in connection with
the Loan Agreement, any violation of such lawful limit, but such obligation
shall be fulfilled to the lawful limit. If any sum is collected in excess of the
lawful limit, such excess shall be applied to reduce the principal amount of the
Note.
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IN WITNESS WHEREOF, the parties hereto have set their hands as of the
date first above written.
COMPANY:
GALAXY FOODS COMPANY
a Delaware corporation
By: /s/ Xxxxxxx Xxxxxx
--------------------------
Title: Corporate Secretary
HOLDER:
FINOVA MEZZANINE CAPITAL INC.
a Tennessee corporation
By: Xxxxxx Xxxxxxxx
--------------------------
Title: Vice President
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Warrant to be executed as of the date first above written for the purpose of
agreeing to the terms and conditions of Section 12 hereof.
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