WARRANT AGREEMENT
This WARRANT AGREEMENT (this "AGREEMENT") is entered into as of July 30,
1997 by and among Xxxxxx Vineyards Inc., a Delaware corporation (the
"COMPANY"), and Cruttenden Xxxx Incorporated ("CRUTTENDEN"), Xxxxxxx
Equities, Inc. ("XXXXXXX"), and Xxxxxx & Xxxxxxx, Inc. ("XXXXXX" and together
with Cruttenden and Xxxxxxx, the "REPRESENTATIVES").
A. The Representatives have agreed to act as the Representatives of
the several underwriters in connection with the proposed public offering by
the Company pursuant to that certain Underwriting Agreement with the Company
dated July 24, 1997 (the "UNDERWRITING AGREEMENT") of up to 2,300,000 shares
in the aggregate of its Class A Common Stock, par value $0.001 per share (the
"COMMON STOCK"), including 300,000 of such shares covered by an
over-allotment option (the "PUBLIC OFFERING"); and
B. Pursuant to Section 4(p) of the Underwriting Agreement and as part
of the Representatives' compensation in connection with the Public Offering,
the Company has agreed to sell to the Representatives, at a price of $0.001
per warrant, warrants (the "WARRANTS") to purchase, at a price of $14.00 per
share, up to an aggregate of 200,000 shares of Common Stock (hereinafter, and
as the number thereof may be adjusted as set forth herein, the "WARRANT
SHARES").
In consideration of the foregoing premises and the mutual agreements
herein and in the Underwriting Agreement and for other good and valuable
consideration, the parties hereto agree as follows:
1. ISSUANCE OF WARRANTS: FORM OF WARRANT CERTIFICATE. The Company
shall issue to each of the Representatives, on the Closing Date referred to
in the Underwriting Agreement, that number of Warrants set forth opposite
such Representative's name on SCHEDULE 1. Certificates representing the
Warrants in substantially the form of Exhibit A (the "WARRANT CERTIFICATES")
shall be executed on behalf of the Company by the manual or facsimile
signature of the present or any future Chairman of the Board, Chief Executive
Officer or Vice President of the Company, attested by the manual or facsimile
signature of the Secretary or an Assistant Secretary of the Company, and
delivered to the Representatives on the Closing Date referred to in the
Underwriting Agreement, and thereafter to successive registered Holders (as
defined below). Warrant Certificates bearing the manual or facsimile
signatures of individuals who were at any time the proper officers of the
Company shall bind the Company, notwithstanding that such individuals or any
one of them shall have ceased to hold such offices prior to the delivery of
such Warrant Certificates or did not hold such offices on the date of this
Agreement. Warrant Certificates shall be dated as of the date of execution
thereof by the Company either upon initial issuance or upon division,
exchange, substitution or transfer.
2. TERM AND EXERCISE OF WARRANTS.
2.1 Each Warrant entitles the registered owner thereof to purchase
one share of Common Stock (subject to adjustment as set forth herein) at any
time from 10:00 a.m.,
California time, on July 24, 1998 (the "INITIATION DATE") until 6:00 p.m.,
California time, on July 24, 2002 (the "EXPIRATION DATE") at a purchase price
of $14.00 (subject to adjustment as set forth herein) (the "WARRANT PRICE").
Subject to the provisions of this Agreement, each registered Holder (as
defined below) of Warrants shall have the right to exercise the Warrants and
purchase the underlying Warrant shares, either in their entirety or from time
to time, effective as of any date specified by the Holder from and after the
Initiation Date and on or before the Expiration Date in the manner set forth
in the Warrant Certificate. Payment of the aggregate Warrant Price for all
Warrant Shares for which Warrants are exercised shall be made, in the
discretion of the Holder, in cash or by certified or official bank check or
by net issuance, or a combination thereof. Exercise by net issuance shall be
effected without payment by the Holder of any cash or other consideration by
the Company's withholding from the Warrant Shares that would otherwise be
issued upon exercise if the exercise price were paid in cash, that number of
Warrant Shares which, when multiplied by the Closing Price for the day
immediately preceding the date of exercise, equals the aggregate Warrant
Price for the Warrants so exercised.
2.2 Notwithstanding the foregoing, if at 6:00 p.m., California
time on the Expiration Date, any Holder of Warrants has not exercised its
Warrants and has not notified the Company that it waives automatic issuance
pursuant to this SECTION 2.1, then all such unexercised Warrants shall be
automatically converted into a number of shares of Common Stock of the
Company equal to: (A) the number of shares of Common Stock then issuable
upon exercise of all such unexercised Warrants minus (B) a number of shares
of Common Stock equal to the quotient obtained by dividing the aggregate
Warrant Price for all such unexercised Warrants by the Closing Price (as
defined in SECTION 11.1(c) below) for the Common Stock on the Expiration Date.
2.3 Upon exercise of Warrants and payment of the applicable
Warrant Price, the Company shall issue and cause to be delivered with all
reasonable dispatch to or upon the written order of the registered Holder of
such Warrants and in such name or names as such registered Holder may
designate, a certificate or certificates for the number of full Warrant
Shares so purchased upon the exercise of such Warrants (net of any Warrant
Shares withheld in payment of the Warrant Price, if paid by net issuance),
together with cash, as provided in SECTION 12, in respect of any fraction of
a share otherwise issuable upon such exercise and, if the number of Warrants
represented by a Warrant Certificate shall not be exercised in full, a new
Warrant Certificate for the number of Warrants represented by the Warrant
Certificate surrendered but not exercised. Any person(s) designated by the
exercising Holder as the holder of the Warrant Shares issuable upon exercise
shall be deemed to have become a holder of record of such shares as of the
date of the surrender of such Warrants and payment of the Warrant Price, or
such later date as the exercising Holder may specify, notwithstanding that
the stock transfer books of the Company may then be closed or that
certificates representing the Warrant Shares have not been delivered.
3. REGISTRATION. The Warrant Certificates shall be numbered and shall
be registered on the books of the Company (the "WARRANT REGISTER") as they
are issued. The Company shall be entitled to treat the registered holder of
any Warrant Certificate (notwithstanding any notation of ownership or other
writing made on the Warrant Certificate made by anyone) on the Warrant
2
Register (the "HOLDER") as the owner in fact thereof and of the Warrants
represented thereby for all purposes and shall not be bound to recognize any
equitable or other claim to or interest in such Warrant Certificate or the
Warrants represented thereby on the part of any other person, and shall not
be liable for any registration or transfer of Warrants registered in the name
of a fiduciary or the nominee of a fiduciary. The Warrant Certificates
shall be registered initially in the names of each of the Representatives and
in the denominations set forth for each Representative on SCHEDULE 1, or in
such other denominations as any Representative may request in writing to the
Company with respect to the Warrants to be issued to such Representative.
4. TRANSFERS.
4.1 Until July 24, 1998, the Warrants will not be sold,
transferred, assigned or hypothecated except to (a) bona fide officers or
partners of the Representatives; (b) a successor to the Holder in a merger or
consolidation; (c) a purchaser of all or substantially all of the Holder's
assets; (d) any person receiving the Warrants from a permitted transferee at
death pursuant to will, trust or the laws of intestate succession; (e) any
other underwriter or selling group member that participated in the Public
Offering and is a member of the NASD, or bona fide officers or partners
thereof; or (f) any person by operation of law, provided that any such
transfer shall be contingent upon the transferee's agreement in writing to be
bound by the terms hereof.
4.2 The Warrants shall be transferable only on the Warrant
Register upon delivery thereof duly endorsed by the Holder or by the Holder's
duly authorized attorney or representatives, or accompanied by proper
evidence of succession, assignment or authority to transfer. In all cases of
transfer by an attorney, the original power of attorney, duly approved, or an
official copy thereof, duly certified, shall be deposited with the Company.
In case of transfer by executors, administrators, guardians or other legal
representatives, duly authenticated evidence of their authority shall be
produced and may be required to be deposited with the Company in its
discretion. Upon any registration of transfer, the Company shall deliver a
new Warrant Certificate or Warrant Certificates to the person entitled
thereto.
4.3 The Company shall not be required to recognize any transfer of
the Warrants or the Warrant Shares unless (a) such transfer is made pursuant
to an effective registration statement under the Securities Act of 1933, as
amended (the "ACT"), including a post-effective amendment to the Registration
Statement, or (b) counsel reasonably satisfactory to the Company provides an
opinion that the transfer may be made without registration pursuant to Rule
144 under the Act or otherwise.
4.4 The Company may stop transfer of the Warrants and the Warrant
Shares to enforce the transfer restrictions set forth herein. The Warrant
Certificates shall bear the following legend:
TRANSFER OF THE SECURITIES REPRESENTED HEREBY IS RESTRICTED AS
DESCRIBED IN THE WARRANT AGREEMENT DESCRIBED HEREIN.
3
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE CLASS A
COMMON STOCK ISSUABLE UPON EXERCISE OF SUCH WARRANTS MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO (i) A POST-EFFECTIVE AMENDMENT TO
THE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, PURSUANT TO WHICH SUCH SECURITIES WERE ORIGINALLY REGISTERED
IN CONNECTION WITH ORIGINAL ISSUANCE OF THE WARRANTS REPRESENTED
HEREBY, OR (ii) A SEPARATE REGISTRATION STATEMENT UNDER SUCH ACT, OR
(iii) AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT.
The Warrant Shares or other securities issued upon exercise of the
Warrants shall bear the following legend, if applicable:
THE SHARES OR OTHER SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAW. SAID SECURITIES MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SAID ACT.
5. COMPLIANCE WITH GOVERNMENT REGULATIONS. If any shares of Common
Stock required to be reserved for purposes of exercise or conversion of
Warrants require, under any federal or state law or applicable governing rule
or regulation of any national securities exchange or market system,
registration with or approval of any governmental authority, or listing on
any such national securities exchange or market system before such shares may
be issued upon exercise, the Company will in good faith and as expeditiously
as possible endeavor to cause such shares to be duly registered, approved or
listed. The Company shall keep current in filing all reports, statements and
other materials required to be filed with the Securities and Exchange
Commission to permit Holders to sell the Warrants and the Warrant Shares
under Rule 144.
6. PAYMENT OF TAXES. The Company shall pay any taxes due in
connection with the issuance or exercise of the Warrants other than transfer
taxes payable in connection with secondary transfers of any Warrants or
issuance of Warrant Shares to any person other than the registered Holder of
such Warrants.
7. EXCHANGE OF WARRANT CERTIFICATES. Holders of Warrant Certificates
may exchange them for another certificate or certificates representing the
right of the Holder thereof to purchase a like aggregate number of Warrant
Shares as the Warrant Certificate or Certificates surrendered by delivering
the Warrant Certificates to be exchanged to the Company, properly endorsed or
accompanied by a properly executed instrument of transfer, together with a
written request for transfer, whereupon the Company shall execute and deliver
to the person entitled thereto a new Warrant Certificate or Certificates, as
the case may be, as so requested.
8. MUTILATED OR MISSING WARRANT CERTIFICATES. In case any of the
Warrant Certificates shall be mutilated, lost, stolen or destroyed, the
Company shall issue and deliver in exchange and
4
substitution for and upon cancellation of the mutilated Warrant Certificate,
or in lieu of and substitution for the Warrant Certificate lost, stolen or
destroyed, a new Warrant Certificate of like tenor and representing an
equivalent right or interest, subject to the provision to the Company by the
Holder thereof of evidence reasonably satisfactory to the Company of such
loss, theft or destruction of such Warrant Certificate and, if requested,
indemnity or bond also reasonably satisfactory to the Company, provided that
no such bond shall be required from any of the initial Holders of the
Warrants.
9. RESERVATION OF WARRANT SHARES; AUTHORIZATION AND VALID ISSUANCE.
The Company shall at all times reserve and keep available out of its
authorized and unissued shares of Common Stock a number of shares sufficient
to provide for the exercise of the rights of purchase represented by the
Warrants, and the transfer agent for the Common Stock or any other securities
issuable upon the exercise of any of the rights of purchase aforesaid
("TRANSFER AGENT") is hereby irrevocably authorized and directed at all times
until the Expiration Date to reserve such number of authorized and unissued
shares or other securities as shall be required for such purpose. The
Company will keep a copy of this Agreement on file with the Transfer Agent
and will supply such Transfer Agent with duly executed stock certificates for
such purposes and will itself provide or otherwise make available any cash
which may be issuable as provided in SECTION 12. The Company will furnish to
such Transfer Agent a copy of all notices of adjustments, and certificates
related thereto, transmitted to each Holder pursuant to SECTION 11.2. All
Warrant Certificates surrendered in the exercise of the rights thereby
evidenced shall be cancelled. The Company represents that the Warrant Shares
are duly authorized and covenants that, upon receipt by the Company of the
full payment therefor, the Warrant Shares will be validly issued, fully paid,
nonassessable, and not issued in violation of any preemptive rights.
10. OBTAINING STOCK EXCHANGE LISTINGS. The Company will from time to
time take all action which may be necessary so that the Warrant Shares,
immediately upon their issuance upon the exercise of Warrants, will be listed
and/or included for trading on the principal securities exchanges and markets
within the United States of America, if any, on which other shares of Common
Stock are then listed or included for trading.
11. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF WARRANT SHARES. For
purposes of this SECTION 11, "Common Stock" means shares now or hereafter
authorized of any class of Common Stock of the Company and any other stock of
the Company, however designated, that has the right (subject to any prior
rights of any class or series of preferred stock) to participate in any
distribution of the assets or earnings of the Company without limit as to per
share amount.
11.1 MECHANICAL ADJUSTMENTS. The number and kind of securities
purchasable upon the exercise of each Warrant and the Warrant Price shall be
subject to adjustment from time to time as follows:
(a) In case the Company shall (i) pay a dividend in shares of
Common Stock or make a distribution in shares of Common Stock, (ii) subdivide
its outstanding shares of Common Stock, (iii) combine its outstanding shares
of Common Stock or (iv) issue by reclassification of its shares of Common
Stock other securities of the Company (including any
5
such reclassification in connection with a consolidation or merger in which
the Company is the surviving corporation), the number of Warrant Shares
purchasable upon exercise of each Warrant without giving effect thereto shall
be adjusted so that the Holder of each Warrant shall be entitled to receive
the kind and number of Warrant Shares or other securities of the Company
which such Holder would have owned or would have been entitled to receive
after the happening of any of the events described above, had such Warrants
been exercised immediately prior to the happening of such event or any record
date with respect thereto. An adjustment made pursuant to this paragraph (a)
shall become effective immediately after the effective date of such event
retroactive to the record date, if any, for such event. Such adjustment
shall be made successively whenever any event listed above shall occur.
(b) In case the Company shall distribute to all holders of its
shares of Common Stock (including any such distribution made in connection
with a consolidation or merger in which the Company is the surviving
corporation) evidences of its indebtedness or assets (excluding cash
dividends or distributions payable out of consolidated earnings or earned
surplus and in compliance with applicable law and dividends or distributions
referred to in paragraph (a) above or in the paragraph immediately following
this paragraph), or rights, options or warrants, or convertible or
exchangeable securities containing the right to subscribe for or purchase
shares of Common Stock, then in each case the number of Warrant Shares
thereafter purchasable upon the exercise of each Warrant shall be determined
by multiplying the number of Warrant Shares purchasable upon the exercise of
each Warrant without giving effect thereto by a fraction, the numerator of
which shall be the current market price per share of Common Stock (as defined
in paragraph (c) below) as of the record date for such distribution or, if
there is no record date with respect thereto then as of the date of such
distribution, and the denominator of which shall be the current market price
per share of Common Stock as of such date, less the fair value (as reasonably
determined by the Board of Directors of the Company) of the portion of the
assets or evidences of indebtedness so distributed or of such subscription
rights, options or warrants, or of such convertible or exchangeable
securities applicable to one share of Common Stock. Such adjustment shall be
made whenever any such distribution is made and shall become effective on the
date of distribution retroactive to the record date for the determination of
stockholders entitled to receive such distribution. Notwithstanding the
foregoing, however, no adjustment in the number of Warrant Shares purchasable
upon the exercise of each Warrant need be made under this paragraph if the
Company issues or distributes to each Holder of Warrants the rights, options,
warrants or convertible or exchangeable securities, or evidences of
indebtedness or assets referred to in those paragraphs which each Holder of
Warrants would have been entitled to receive had the Warrants been exercised
prior to the happening of such event or the record date with respect thereto.
No adjustment need be made for a change in the par value of the Warrant
Shares.
In the event of a distribution by the Company to all holders of its
shares of Common Stock or of the stock of a subsidiary of securities
convertible into or exercisable for such stock (other than as described in
subparagraph (a)(iv) above), then in lieu of an adjustment in the number of
Warrant Shares purchasable upon the exercise of each Warrant, the Holder of
each Warrant, upon the exercise thereof at any time after such distribution,
shall be entitled to receive from the Company, such subsidiary or both, as
the Company shall determine, the stock or
6
other securities to which such Holder would have been entitled if such Holder
had exercised such Warrant immediately prior thereto, all subject to further
adjustment as provided in this SECTION 11.1; PROVIDED, HOWEVER, that no
adjustment in respect of dividends or interest on such stock or other
securities shall be made during the term of a Warrant or upon the exercise of
a Warrant.
(c) For the purpose of any computation under paragraph (b) of this
Section, the current market price per share of Common Stock as of any date
shall be the average of the daily Closing Prices for 20 consecutive trading
days on which such Common Stock actually was traded commencing 30 trading
days before the date of such computation. The "CLOSING PRICE" for any day
shall be the last such reported sales price regular way for a share of Common
Stock on that day on the principal national securities exchange or national
market system on which the shares of Common Stock are listed or admitted to
trading or, if not so listed or admitted to trading, the average of the
closing bid and asked prices of the Common Stock in the over-the counter
market or if not approved for such trading, the average of the closing bid
and asked prices as furnished by two members of the National Association of
Securities Dealers, Inc. selected from time to time by the Company for that
purpose.
(d) No adjustment in the number of Warrant Shares purchasable
hereunder shall be required unless such adjustment would require an increase
or decrease of at least one percent (1%) in the number of Warrant Shares
purchasable upon the exercise of each Warrant; provided, however, that any
adjustments which by reason of this paragraph (d) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations shall be made to the nearest one-thousandth of a share.
(e) Whenever the number of Warrant Shares purchasable upon the
exercise of each Warrant is adjusted, as herein provided, the Warrant Price
per share payable upon exercise of each Warrant shall be appropriately and
proportionately adjusted.
(f) If at any time, as a result of an adjustment made pursuant to
paragraph (a) above, the Holders shall become entitled to purchase any
securities of the Company other than shares of Common Stock, thereafter the
number of such other shares so purchasable upon exercise of each Warrant and
the Warrant Price of such shares shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Warrant Shares contained in this SECTION 11,
and the other provisions of this Agreement, with respect to the Warrant and
Warrant Shares, shall apply as nearly equivalent as practicable on like terms
to such other securities.
(g) Upon the expiration of any rights, options, warrants or
conversion or exchange privileges for which an adjustment was made hereunder,
if any thereof shall not have been exercised, the Warrant Price per share and
the number of shares of Common Stock purchasable upon the exercise of each
Warrant shall, upon such expiration, be readjusted and shall thereafter be
such as they would have been had they been originally adjusted (or had the
original adjustment not been required, as the case may be) as if (i) the only
shares of Common Stock so issued were the shares of Common Stock, if any,
actually issued or sold upon the
7
exercise of such rights, options, warrants or conversion or exchange rights
and (ii) such shares of Common Stock, if any, were issued or sold for the
consideration actually received by the Company upon such exercise plus the
aggregate consideration, if any, actually received by the Company for the
issuance, sale or grant of all such rights, options, warrants or conversion
or exchange rights whether or not exercised; provided, however, that no such
readjustment shall have the effect of increasing the Warrant Price per share
or decreasing the number of shares of Common Stock purchasable upon the
exercise of each Warrant by an amount in excess of the amount of the
adjustment initially made in respect to the issuance, sale or grant of such
rights, options, warrants or conversion or exchange rights.
11.2 NOTICE OF ADJUSTMENT. Whenever the Company proposes any
action that would result in an adjustment of the number of Warrant Shares
purchasable upon the exercise of Warrants or the Warrant Price per share as
herein provided, the Company shall, at least 10 days prior to the date of
such action or, if earlier, the record date therefor, mail by first class,
postage prepaid, to each Holder notice of such adjustment or adjustments, the
proposed date and, if applicable, record date therefor, and a certificate of
a firm of independent public accountants selected by the board of directors
of the Company (who may be the regular accountants employed by the Company)
setting forth the number of Warrant Shares to be purchasable upon the
exercise of each Warrant and the Warrant Price per share after such
adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which such adjustment was
made.
11.3 NO ADJUSTMENT FOR DIVIDENDS. Except as provided in SECTION
11.1, no adjustments in respect of any dividends shall be made during the
term of a Warrant or upon the exercise of a Warrant.
11.4 PRESERVATION OF PURCHASE RIGHTS UPON MERGER, CONSOLIDATION
ETC. In case of any consolidation of the Company with or merger of the
Company into another corporation or in case of any sale, transfer or lease to
another corporation of all or substantially all the property of the Company,
the Company or such successor or purchasing corporation, as the case may be,
shall execute with each Holder an agreement (and shall not effect any such
transaction in the absence of such an agreement) that each Holder shall have
the right thereafter upon payment of the Warrant Price in effect immediately
prior to such action to purchase upon exercise of each Warrant the kind and
amount of shares and other securities, cash and property which such Holder
would have owned or would have been entitled to receive in connection with
the happening of such consolidation, merger, sale, transfer or lease and as a
result of subsequent transactions had such Warrant been exercised immediately
prior to such action and such consideration been held until such exercise;
provided, however, that no adjustment in respect of dividends, interest or
other income on or from such shares or other securities, cash and property
shall be made during the term of a Warrant or upon the exercise of a Warrant.
Such agreement shall provide for adjustments, which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
SECTION 11. The provisions of this SECTION 11.4 shall similarly apply to
successive consolidations, mergers, sales transfer or leases.
8
11.5 STATEMENTS ON WARRANTS. Irrespective of any adjustments in
the Warrant Price per share or the number or kind of shares purchasable upon
the exercise of the Warrants, Warrant Certificates theretofore or thereafter
issued may continue to express the same price and number and kind of shares
as are stated in the Warrants initially issuable pursuant to this Agreement.
12. FRACTIONAL INTERESTS. The Company shall not be required to issue
fractional Warrant Shares on the exercise of Warrants. If more than one
Warrant shall be exercised at the same time by the same holder, the number of
full Warrant Shares which shall be issuable upon the exercise thereof shall
be computed on the basis of the aggregate number of Warrant Shares
purchasable on exercise of the Warrants so exercised. If any fraction of a
Warrant Share would, except for the provisions of this SECTION 12, be
issuable on the exercise of any Warrant (or specified portion thereof), the
Company shall pay the exercising Holder in lieu thereof an amount in cash
equal to the Closing Price for one share of the Common Stock, on the day
immediately preceding the exercise date of the Warrant, multiplied by such
faction.
13. REGISTRATION RIGHTS.
13.1 DEMAND REGISTRATION RIGHTS. Within 60 days after receipt of a
written request from the Representatives or from Holders of at least 40% in
interest of the aggregate of Warrants and/or Warrant Shares that the
Representatives or such Holders of the Warrants and/or Warrant Shares desire
and intend to transfer more than 25% in interest of the aggregate number of
the Warrants and/or Warrant Shares under such circumstances that a public
offering, within the meaning of the Act, will be involved, the Company shall
(subject to the last sentence of this paragraph) notify all Holders of such
request and file a registration statement (and use its reasonable best
efforts to cause such registration statement to become effective under the
Act) with respect to the offering and sale or other disposition of the
Warrants and/or Warrant Shares requested to be included by the requesting
Holders and any other Holders who request inclusion of Warrants or Warrant
Shares within 20 days after the Company has given them notice of the
registration (the "OFFERED SECURITIES"); PROVIDED, HOWEVER, that the Company
shall not be obligated to comply with the foregoing provisions of this
SECTION 13.1 if in the opinion of counsel to the Company reasonably
acceptable to the Holder or Holders from whom such written requests have been
received, registration under the Act is not required for the transfer of the
Offered Securities in the manner proposed by such person or persons, or a
post-effective amendment to an existing registration statement would be
legally sufficient for such transfer (in which latter event the Company shall
promptly file such post-effective amendment (and use its best efforts to
cause such amendment to become effective under the Act)). Notwithstanding the
foregoing, however, the Company shall not be obligated to provide more than
one effective registration statement meeting the requirements hereof pursuant
to this SECTION 13.1.
The Company may defer the preparation and filing of a registration
statement for up to 90 days after the request for registration is made if the
Company's board of directors determines in good faith that (i) such
registration or post-effective amendment would materially adversely affect or
otherwise materially interfere with a proposed or pending material
transaction by the Company, including without limitation a financing or a
corporate reorganization, or (ii) the
9
Company is in possession of material inside information concerning the
Company or its securities, disclosure of which would be illegal or have a
material adverse effect upon the Company.
The Company shall not be obligated to honor any request to register
Warrant Shares pursuant to this SECTION 13.1 received later than five (5)
years from the effective date of the Company's Registration Statement on Form
SB-2 (File No. 333-27871) (the "EFFECTIVE DATE"). The Company shall not be
required (i) to maintain the effectiveness of the registration statement
beyond the earlier to occur of 120 days after the effective date of the
registration statement or the date on which all of the Offered Securities
have been sold (the "TERMINATION DATE"); PROVIDED, HOWEVER, that if at the
Termination Date the Offered Securities are covered by a registration
statement which also covers other securities and which is required to remain
in effect beyond the Termination Date, the Company shall maintain in effect
such registration statement as it relates to Offered Securities for so long
as such registration statement (or any substitute registration statement)
remains or is required to remain in effect for any such other securities, or
(ii) to cause any registration statement with respect to the Warrant Shares
to become effective prior to the Initiation Date. All expenses of
registration pursuant to this SECTION 13.1 shall be borne by the Company
(excluding underwriting discounts and commissions on securities not sold by
the Company).
The Company shall be obligated pursuant to this SECTION 13.1 to include
in the registration statement Warrant Shares that have not yet been purchased
by a Holder of Warrants so long as such Holder of Warrants submits an
undertaking to the Company that such Holder intends to exercise Warrants
representing the number of Warrant Shares to be included in such registration
statement prior to the consummation of the public offering with respect to
such Warrant Shares. In addition, such Holder of Warrants is permitted to pay
the Company the Warrant Price for such Warrant Shares upon the consummation
of the public offering with respect to such Warrant Shares.
13.2 PIGGY-BACK REGISTRATION RIGHTS. In the event the Company
proposes to file (for its own offer and sale or offer and sale by selling
security holders) a registration statement under the Act at any time on or
before July 24, 2002 (the fifth anniversary of the Effective Date) with
respect to any class of security (other than in connection with an exchange
offer, a non-cash offer or a registration statement on Form S-4 or Form S-8
or any successor registration statement form) which becomes or which should
be expected to become effective at any time after the Initiation Date then
the Company shall in each case give written notice of such proposed filing to
the Holders of Warrants and Warrant Shares at least 30 days before the
proposed filing date and such notice shall offer to such Holders the
opportunity to include in such registration statement such number of Warrant
Shares as they may request, unless, in the opinion of counsel to the Company
reasonably acceptable to any such holder of Warrants or Warrant Shares who
wishes to have Warrant Shares included in such registration statement,
registration under the Act is not required for the transfer of such Warrants
and/or Warrant Shares in the manner proposed by such Holders. The Company
shall not be obligated to honor any request to register any such Warrant
Shares if the Company is not notified in writing of any such request pursuant
to this SECTION 13.2 within 20 days after the Company has given notice to the
10
Holders of the filing. The Company shall permit, or shall cause the managing
underwriter of a proposed offering to permit, the Holders of Warrant Shares
requested to be included in the registration (the "PIGGY-BACK SHARES") to
include such Piggy-back Shares in the proposed offering on the same terms and
conditions as applicable to securities of the Company included therein or as
applicable to securities of any person other than the Company and the Holders
of Piggy-back Shares if the securities of any such person are included
therein. Notwithstanding the foregoing, if any such managing underwriter
shall advise the Company in writing that it believes that the distribution of
all or a portion of the Piggy-back Shares requested to be included in the
registration statement concurrently with the securities being registered by
the Company would materially adversely affect the distribution of such
securities by the Company for its own account, then the Holders of such
Piggy-back Shares shall delay their offering and sale of Piggyback Shares (or
the portion thereof so designated by such managing underwriter) for such
period, not to exceed 120 days, as the managing underwriter shall request
provided that no such delay shall be required as to Piggy-back Shares if any
securities of the Company are included in such registration statement for the
account of any person other than the Company and the Holders of Piggy-back
Shares. In the event of such delay, the Company shall file such supplements,
post-effective amendments or separate registration statement, and take any
such other steps as may be necessary to permit such Holders to make their
proposed offering and sale for a period of 90 days immediately following the
end of such period of delay ("PIGGY-BACK TERMINATION DATE"); PROVIDED,
HOWEVER, that if at the Piggy-back Termination Date the Piggy back Shares are
covered by a registration statement which is, or is required to remain, in
effect beyond the Piggy-back Termination Date, the Company shall maintain in
effect the registration statement as it relates to the Piggy-back Shares for
so long as such registration statement remains or is required to remain in
effect for any of such other securities.
The Company shall be obligated pursuant to this SECTION 13.2 to include
in the registration Warrant Shares that have not yet been purchased by a
holder of Warrants so long as such Holder of Warrants submits an undertaking
to the Company that such Holder intends to exercise Warrants representing the
number of Warrant Shares to be included in such registration prior to the
consummation of the offering made pursuant thereto. In addition, such Holder
of Warrants is permitted to pay the Company the Warrant Price for such
Warrant Shares upon the consummation of the public offering with respect to
such Warrant Shares.
If the Company decides not to proceed with a registration and offering
in which Piggy-back Shares are included, the Company has no obligation to
proceed with the offering of the Piggy-back Shares, unless the Holders of the
Warrants and/or Warrant Shares otherwise comply with the provisions of
SECTION 13.1 hereof (without regard to the 60 days' written request required
thereby).
13.3 In connection with the registration of securities in
accordance with SECTIONS 13.1 and 13.2 above, the Company shall:
(a) Use its reasonable best efforts to register or qualify the
securities for offer or sale under the state securities or Blue Sky laws of
such states which the Holders of such Warrant Shares shall designate;
provided, however, that in no event shall the Company be
11
obligated to qualify to do business in any jurisdiction where it is not then
so qualified or to take any action which would subject it to general service
of process in any jurisdiction where it is not then so subject or to register
or get a license as a broker or dealer in securities in any jurisdiction
where it is not so registered or licensed.
(b) Pay all costs, other than fees and disbursements of counsel
for the Holders and underwriting discounts and commissions, if any, in
respect of securities held by the Holders.
(c) Furnish to each Holder such number of copies of the
registration statement and of each amendment and supplement thereto (in each
case, including all exhibits), such reasonable number of copies of each
prospectus contained in such registration statement and each supplement or
amendment thereto (including each preliminary prospectus), all of which shall
conform to the requirements of the Act and the rules and regulations
thereunder, and such other documents, as any Holder may reasonably request to
facilitate the disposition of the securities included in such registration.
(d) If an opinion of counsel for the Company is delivered to any
underwriter in connection with the registration, such opinion to each Holder
participating in the registration.
(e) Enter into a cross-indemnity agreement and a contribution
agreement, each in customary form, with each underwriter, if any, and, if
requested, enter into an underwriting agreement containing conventional
representations, warranties, allocation of expenses and customary closing
conditions, including, without limitation, opinions of counsel and
accountants' cold comfort letters, with any underwriter who acquires any
securities included by a Holder in the registration.
13.4 (a) The Company shall indemnify and hold harmless each Holder
participating in any registration hereunder against any losses, claims,
damages or liabilities, joint or several, to which such Holder may become
subject under the Act, the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT") or otherwise, specifically including, but not limited to,
losses, claims, damages, judgments, liabilities and expenses (including the
fees and expenses of counsel and other expenses in connection with
investigating, defending or settling any such action or claim) (or actions in
respect thereof), as they are incurred and regardless of whether the
indemnitee is a party to the litigation, if any, arising out of or based
upon (i) any breach of any representation, warranty, agreement or covenant of
the Company herein contained, (ii) any untrue statement or alleged untrue
statement of any material fact contained in any registration statement filed
by the Company or any amendment or supplement thereto, or the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or (iii)
any untrue statement or alleged untrue statement of any material fact
contained in any preliminary prospectus or final prospectus included in any
registration statement filed by the Company or any amendment or supplement
thereto, or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading,
and agrees to reimburse each such Holder for any legal or other expenses
reasonably incurred by it in connection with investigating or defending any
such loss, claim,
12
damage, liability or action as such expenses are incurred; PROVIDED, HOWEVER,
that the Company shall not be liable in any such case to the extent that any
such loss, claim, damage, liability or action arises out of or is based upon
an untrue statement or alleged untrue statement or omission or alleged
omission made in any such registration statement, preliminary prospectus or
final prospectus, or any such amendment or supplement thereto, in reliance
upon, and in conformity with, written information relating to any Holder
furnished to the Company by such Holder specifically for use in the
preparation thereof and, PROVIDED FURTHER, that the indemnity agreement
provided in this SECTION 13.4(a) with respect to any preliminary prospectus
shall not inure to the benefit of any Holder from whom the person asserting
any losses, claims, damages, liabilities or actions based upon any untrue
statement or alleged untrue statement of material fact or omission or alleged
omission to state therein a material fact purchased securities, if adequate
copies of the applicable final prospectus in which such untrue statement or
alleged untrue statement or omission or alleged omission was corrected were
provided by the Company to the Holder or its representatives and the Holder
or its representatives did not deliver such final prospectus to such person.
The indemnity agreement in this SECTION 13.4(a) shall extend upon
the same terms and conditions to, and shall inure to the benefit of, each
person, if any, who controls any Holder within the meaning of the Act or the
Exchange Act and each of the agents, employees, officers and directors of
each Holder and person who so controls any Holder. This indemnity agreement
shall be in addition to any liabilities which the Company may otherwise have.
(b) Each Holder, severally and not jointly, agrees to indemnify
and hold harmless the Company against any losses, claims, damages or
liabilities, joint or several, to which the Company may become subject under
the Act or otherwise, specifically including, but not limited to, losses,
claims, damages, judgments liabilities and expenses (including the fees and
expenses of counsel and other expenses in connection with investigating,
defending or settling any such action or claim) (or actions in respect
thereof), as they are incurred and regardless of whether the indemnitee is a
party to the litigation, if any, arising out of or based upon (i) any breach
of any representation, warranty, agreement or covenant of such Holder herein
contained, (ii) any untrue statement or alleged untrue statement of any
material fact contained in any registration statement filed by the Company or
any amendment or supplement thereto, or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, or (iii) any untrue statement or
alleged untrue statement of any material fact contained in any preliminary
prospectus or final prospectus or any amendment or supplement thereto, or the
omission or alleged omission to state therein a material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading, in the case of subparagraphs (ii) and (iii)
of this SECTION 13.4(b) to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with written information
furnished to the Company by such Holder specifically for use in the
preparation thereof, and agrees to reimburse the Company for any legal or
other expenses reasonably incurred by the Company in connection with
investigating or defending any such loss, claim, damage, liability or action
as such expenses are incurred.
13
The indemnity agreement in this SECTION 13.4(b) shall extend upon
the same terms and conditions to, and shall inure to the benefit of, each
officer of the Company who signed such registration statement and each
director of the Company, and each person, if any, who controls the Company
within the meaning of the Act or the Exchange Act. This indemnity agreement
shall be in addition to any liabilities which each Holder may otherwise have.
(c) Promptly after receipt by an indemnified party under this
SECTION 13.4 of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against any
indemnifying party under this SECTION 13.4, notify the indemnifying party in
writing of the commencement thereof, but the omission so to notify the
indemnifying party will not relieve it from any liability which it may have
to any indemnified party otherwise than under this SECTION 13.4 except to the
extent that it has been prejudiced by such omission. In case any such action
is brought against any indemnified party, and it notified the indemnifying
party of the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it shall elect by written notice
delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party; PROVIDED, HOWEVER,
that if the defendants in any such action include both the indemnified party
and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it which are
different from or additional to those available to the indemnifying party,
the indemnified party or parties shall have the right to select separate
counsel to assume such legal defenses and to otherwise participate in the
defense of such action on behalf of such indemnified party or parties. Upon
receipt of notice from the indemnifying party to such indemnified party of
the indemnifying party's election so to assume the defense of such action and
approval by the indemnified party of counsel, the indemnifying party will not
be liable to such indemnified party hereunder for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof unless (i) the indemnified party shall have employed separate
counsel in accordance with the proviso to the next preceding sentence (it
being understood, however, that the indemnifying party shall not be liable
for the expenses of more than one separate counsel (together with appropriate
local counsel) approved by the indemnifying party representing all the
indemnified parties under SECTION 13.4(a) or 13.4(b) hereof who are parties
to such action), (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party
within a reasonable time after notice of commencement of the action or (iii)
the indemnifying party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party. In no event
shall any indemnifying party be liable in respect of any amounts paid in
settlement of any action unless the indemnifying party shall have approved
the terms of such settlement; PROVIDED that such consent shall not be
unreasonably withheld. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is
or could have been a party and indemnification could have been sought
hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on all
claims that are the subject matter of such proceeding.
14
(d) To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to SECTION
13.4(a) or 13.4(b) (subject to the limitations thereof) but it is found in a
final judicial determination, not subject to further appeal, that such
indemnification may not be enforced in such case, even though this Agreement
expressly provides for indemnification in such case, or (ii) any indemnified
or indemnifying party seeks contribution under the Act, the Exchange Act or
otherwise, then the Company (including for this purpose any contribution made
by or on behalf of any director of the Company, any officer of the Company
who signed any such registration statement, any controlling person of the
Company, and its or their respective counsel), as one entity, and the
affected Holders of the securities included in such registration in the
aggregate (including for this purpose any contribution by or on behalf of an
indemnified party), as a second entity, shall contribute to the losses,
liabilities, claims, damages and expenses whatsoever to which any of them may
be subject, on the basis of relevant equitable considerations such as the
relative fault of the Company and such Holders in connection with the facts
which resulted in such losses, liabilities, claims, damages and expenses.
The relative fault, in the case of an untrue statement, alleged untrue
statement, omission or alleged omission, shall be determined by, among other
things, whether such statement, alleged statement, omission or alleged
omission relates to information supplied by the Company or by such Holders,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement, alleged statement, omission
or alleged omission. The Company and the Holders agree that it would be
unjust and inequitable if the respective obligations of the Company and the
Holders for contribution were determined by pro rata or per capita allocation
of the aggregate losses, liabilities, claims, damages and expenses (even if
the Holder and the other indemnified parties were treated as one entity for
such purpose) or by any other method of allocation that does not reflect the
equitable considerations referred to in this SECTION 13.4(c). In no case
shall any Holder be responsible for a portion of the contribution obligation
imposed on all Holders in excess of its pro rata share based on the number of
shares of Common Stock (or other successor securities) owned (or which would
be owned upon exercise of all Warrants) by it and included in such
registration as compared to the number of shares of Common Stock (or other
successor securities) owned (or which would be owned upon exercise of all
Warrants) by all Holders and included in such registration. No person guilty
of a fraudulent misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who is not guilty of
such fraudulent misrepresentation. For purposes of this SECTION 13.4(c),
each person, if any, who controls any Holder within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act and each officer, director,
partner, employee, agent and counsel of each such Holder or control person
shall have the same rights to contribution as such Holder or control person
and each person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, each officer of
the Company who shall have signed any such registration statement, each
director of the Company and its or their respective counsel shall have the
same rights to contribution as the Company, subject in each case to the
provisions of this SECTION 13.4(c). Anything in this SECTION 13.4(c) to the
contrary notwithstanding, no party shall be liable for contribution with
respect to the settlement of any claim or action effected without its written
consent. This SECTION 13.4(c) is intended to supersede any right to
contribution under the Act, the Exchange Act or otherwise.
15
14. NO RIGHTS AS STOCKHOLDER; NOTICES TO HOLDERS. Nothing contained in
this Agreement or in any of the Warrant Certificates shall be construed as
conferring upon the Holders or their transferee(s) the right to vote or to
receive dividends or to consent to or receive notice as stockholders in respect
of any meeting of stockholders for the election of directors of the Company or
any other matter or any rights whatsoever as stockholders of the Company. If,
however, at any time prior to the expiration of the Warrants and prior to their
exercise, any of the following events shall occur:
(a) the Company shall declare any dividend payable in any securities
upon its shares of Common Stock or make any distribution (other than a
cash dividend) to the holders of its shares of Common Stock; or
(b) the Company shall offer to the holders of its shares of Common
Stock any additional shares of Common Stock or securities convertible into
or exchangeable for shares of Common Stock or any right to subscribe to or
purchase any thereof; or
(c) a dissolution, liquidation or winding up of the Company (other
than in connection with a consolidation, merger, sale, transfer or lease
of all or substantially all of its property, assets and business as an
entirety) shall be proposed,
then in any one or more of said events the Company shall (i) give notice in
writing of such event to the Holders, as provided in SECTION 16 hereof and
(ii) if there are more than 100 Holders, cause notice of such event to be
published once in The Wall Street Journal (national edition), such giving of
notice and publication to be completed at least 10 days prior to the date
fixed as a record date or the date of closing the transfer books for the
determination of the stockholders entitled to such dividend, distribution or
subscription rights, or for the determination of stockholders entitled to
vote on such proposed dissolution, liquidation or winding up. Such notice
shall specify such record date or the date of closing the transfer books, as
the case may be. Failure to publish, mail or receive such notice or any
defect therein or in the publication or mailing thereof shall not affect the
validity of any action taken in connection with such dividend, distribution
or subscription rights, or such proposed dissolution, liquidation or winding
up.
15. ATTORNEY'S FEES. In the event of any action, suit, counterclaim,
appeal, arbitration, mediation, or other proceeding (an "ACTION") between any
Holder and the Company arising out of or in connection with this Agreement or
the Warrants, in addition to any damages and costs to which the prevailing
party would otherwise be entitled, the losing party in any such Action shall
pay to the prevailing party the attorneys' fees and costs incurred by the
prevailing party in connection with such Action and/or enforcing any
judgment, order, ruling, or award (collectively, a "DECISION") granted
therein, all of which shall be paid whether or not such Action is prosecuted
to a Decision. Any Decision entered in an Action shall contain a specific
provision providing for the recovery of attorneys' fees and costs incurred in
enforcing such Decision. Attorneys' fees shall include, but not be limited
to, fees incurred in the following: (1) post judgment motions and collection
actions; (2) contempt proceedings; (3) garnishment, levy, and debtor and
third party examinations; (4) discovery, and (5) bankruptcy. "Prevailing
party" within the meaning of this section includes, without limitation, a
party who agrees to
16
dismiss an Action on the other party's payment of the sum allegedly due or
performance of the covenants allegedly breached, or who obtains substantially
the relief sought. If there are multiple claims, the prevailing party shall
be determined with respect to each claim separately. The prevailing party
shall be the party who has obtained the greater relief in connection with any
particular claim, although with respect to any claim, it may be determined by
the court or arbitrator before which the Action is brought that there is no
prevailing party.
16. NOTICES. Any notice pursuant to this Agreement to be given or made
by the registered Holder of any Warrant to or on the Company shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed as follows:
Xxxxxx Vineyards Inc.
00000 Xxxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxx xxx Xxx, XX 00000
Attn: Chief Executive Officer
Notices or demands authorized by this Agreement to be given or made by the
Company to the registered Holder of any Warrant shall be sufficiently given
or made (except as otherwise provided in this Agreement) if sent by
first-class mail, postage prepaid, addressed to such Holder at the address of
such Holder as shown on the Warrant Register.
17. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of California without giving effect
to principles of conflicts of laws.
18. SUPPLEMENTS AND AMENDMENTS. The Company and the Representatives
owning at least a majority of the outstanding Warrants may from time to time
supplement or amend this Agreement in order to cure any ambiguity or to
correct or supplement any provision contained herein which may be defective
or inconsistent with any other provision herein, or to make any other
provisions in regard to matters or questions arising hereunder which the
Company and the Representatives may deem necessary or desirable and which
shall not be inconsistent with the provisions of the Warrant Certificates and
which shall not adversely affect the interests of the Holders. This
Agreement may also be supplemented or amended from time to time by a writing
executed by or on behalf of the Company and all of the Holders.
19. SUCCESSOR. All the covenants and provisions of this Agreement by
or for the benefit of the Company or the Holders shall bind and inure to the
benefit of their respective successors and assigns hereunder. Assignments by
the Holders of their rights hereunder shall be made in accordance with
SECTION 4.
20. MERGER OR CONSOLIDATION OF THE COMPANY. So long as Warrants remain
outstanding, the Company will not merge or consolidate with or into, or sell,
transfer or lease all or substantially all of its property to, any other
corporation unless the successor or purchasing corporation, as the case may
be (if not the Company), shall expressly assume, by supplemental agreement
executed and delivered to the Holders, the due and punctual performance and
17
observance of each and every covenant and condition of this Agreement to be
performed and observed by the Company.
21. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and the
Holders, any legal or equitable right, remedy or claim under this Agreement,
but this Agreement shall be for the sole and exclusive benefit of the Company
and the Holders of the Warrants and Warrant Shares.
22. CAPTIONS; REFERENCES. The captions of the sections and subsections
of this Agreement have been inserted for convenience only and shall have no
substantive effect. References herein to Sections, Schedules and Exhibits
are, unless otherwise specified, references to the referenced section,
schedule or exhibit hereof or hereto.
23. COUNTERPARTS. This Agreement may be executed in any number of
counterparts each of which when so executed shall be deemed to be an
original; but such counterparts together shall constitute but one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day, month and year first above written.
XXXXXX VINEYARDS INC. CRUTTENDEN XXXX INCORPORATED
By: /s/ XXXXXX X. XXXXXX By: /s/ XXXXXX X. XXXX
---------------------------- ----------------------------
Name: Xxxxxx X. Xxxxxx Name: Xxxxxx X. Xxxx
-------------------------- --------------------------
Title: Chair & CEO Title: Chief Financial Officer
------------------------- -------------------------
XXXXXXX EQUITIES, INC. XXXXXX & XXXXXXX, INC.
By: /s/ XXXXX X. XXXXXXX By: /s/ XXXXXXX X. XXX, XX.
---------------------------- ----------------------------
Name: Xxxxx X. Xxxxxxx Name: Xxxxxxx X. Xxx, Xx.
-------------------------- --------------------------
Title: Executive Vice President Title: Executive Vice President
------------------------- -------------------------
OA971370.007/6+
18
Schedule 1 to
Warrant Agreement
Representative Number of Warrants
-------------- ------------------
Cruttenden Xxxx Incorporated 80,000
Xxxxxxx Equities, Inc. 60,000
Xxxxxx & Xxxxxxx, Inc. 60,000*
*Broken down as follows:
Xxxxxx & Xxxxxxx, Inc. 31,000
Xxxxxxxxx Xxxxxx 6,000
Xxxxx Xxxxxxx 7,000
Xxxx Xxxxx 6,000
Xxxx Xxxxxxx 6,000
Xxxx Xxxxxxxxx 3,000
Xxxxxxx Xxxxxxxxx 1,000
19
Exhibit A to
Warrant Agreement
[Form of Warrant Certificate]
TRANSFER OF THE SECURITIES REPRESENTED HEREBY IS RESTRICTED AS DESCRIBED
IN THE WARRANT AGREEMENT DESCRIBED HEREIN.
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE CLASS A COMMON
STOCK ISSUABLE UPON EXERCISE OF SUCH WARRANTS MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO (i) A POST-EFFECTIVE AMENDMENT TO THE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, PURSUANT TO WHICH
SUCH SECURITIES WERE ORIGINALLY REGISTERED IN CONNECTION WITH ORIGINAL
ISSUANCE OF THE WARRANTS REPRESENTED HEREBY, OR (ii) A SEPARATE REGISTRATION
STATEMENT UNDER SUCH ACT, OR (iii) AN EXEMPTION FROM REGISTRATION UNDER SUCH
ACT.
EXERCISABLE ON OR BEFORE JULY 24, 2002
No. _______ Warrants
Warrant Certificate
XXXXXX VINEYARDS INC.
This Warrant Certificate certifies that [CRUTTENDEN XXXX INCORPORATED],
or registered assigns (the "HOLDER"), is the registered holder of __________
Warrants (the "WARRANTS") to purchase Class A Common Stock, $0.001 par value
per share (the "COMMON STOCK"), of Xxxxxx Vineyards Inc., a Delaware
corporation (the "COMPANY"). Each Warrant entitles the registered Holder
thereof to purchase one share of Common Stock (subject to adjustment as set
forth in the Warrant Agreement (as defined below), at any time from 10:00
a.m., California time, on July 24, 1998 (the "INITIATION DATE") until 6:00
p.m., California time, on July 24, 2002 (the "EXPIRATION DATE") at a purchase
price of $14.00 (the "WARRANT PRICE").
Subject to the provisions of the Warrant Agreement, the Holder shall
have the right to exercise the Warrants and purchase the underlying Warrant
Shares, either in their entirety or from time to time, effective as of any
date specified by the Holder from and after the Initiation Date and on or
before the Expiration Date. Exercise shall be effected by surrendering this
Warrant Certificate, with the form of election to purchase set forth hereon
properly completed and executed, together with payment of the Warrant Price
or designation of net issuance at the office of the Company designated for
such purpose. If upon any exercise of Warrants evidenced hereby the number
of Warrants exercised shall be less than the total number of Warrants
evidenced hereby, there shall be issued to the Holder or such Holder's
assignee a new Warrant
20
Certificate evidencing the number of Warrants not exercised. No adjustment
shall be made for any dividends on any Common Stock issuable upon exercise of
this Warrant.
Payment of the aggregate Warrant Price for all Warrant Shares for which
Warrants are exercised shall be made, in the discretion of the Holder, by
certified or official bank check or by net issuance, or a combination
thereof. Exercise by net issuance shall be effected without payment by the
Holder of any cash or other consideration by the Company's withholding from
the Warrant Shares that would otherwise be issued upon exercise if the
exercise price were paid in cash, that number of Warrant Shares which, when
multiplied by the Closing Price for the day immediately preceding the date of
exercise, equals the aggregate Warrant Price for the Warrants so exercised.
Notwithstanding the foregoing, if at 6:00 p.m., California time on the
Expiration Date, the Holder has not exercised its Warrants and has not
notified the Company that it waives automatic issuance, then all such
unexercised Warrants shall be automatically converted into a number of shares
of Common Stock of the Company equal to: (A) the number of shares of Common
Stock then issuable upon exercise of all such unexercised Warrants minus (B)
a number of shares of Common Stock equal to the quotient obtained by dividing
the aggregate Warrant Price for all such unexercised Warrants by the Closing
Price (as defined in SECTION 11.1(c) of the Warrant Agreement) for the Common
Stock on the Expiration Date.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to a Warrant Agreement, dated as
of July 30, 1997 (the "WARRANT AGREEMENT"), duly executed and delivered by
the Company, which Warrant Agreement is hereby incorporated by reference in
and made a part of this instrument and is hereby referred to for a
description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Company and the holders of the Warrants. A copy
of the Warrant Agreement may be obtained by the Holder hereof upon written
request to the Company.
The Warrant Price and number of Warrant Shares issuable upon exercise of
the Warrants are subject to adjustment upon the occurrence of certain events
set forth in the Warrant Agreement. No fractions of a share of Common Stock
will be issued upon the exercise of any Warrants but the Company will pay the
cash value thereof determined as provided in the Warrant Agreement.
The Holder is entitled to certain registration rights with respect to
the Common Stock purchasable upon exercise thereof as set forth in the
Warrant Agreement.
Warrant Certificates may be exchanged, in the manner and subject to the
limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of
like tenor evidencing in the aggregate a like number of Warrants.
21
The Company may deem and treat the registered Holder of this Warrant
Certificate (notwithstanding any notation of ownership or other writing
hereon made by anyone) as the owner in fact hereof and of the Warrants
represented hereby for all purposes, and the Company shall not be affected by
any notice to the contrary.
Neither the Warrants nor this Warrant Certificate entitles the Holder to
any rights of a stockholder of the Company.
This Warrant Certificate shall not be valid unless countersigned by the
Company.
IN WITNESS WHEREOF, Xxxxxx Vineyards Inc. has caused this Warrant
Certificate to be signed by its Chief Executive Officer and by its Secretary.
Dated: July 30, 1997 XXXXXX VINEYARDS INC.
By:
-------------------------
Xxxxxx X. Xxxxxx
Chief Executive Officer
Attest:
-------------------
Xxxxxx X. Xxxxx
Secretary
22
[Form of Election to Purchase]
(To be Executed upon Exercise of Warrant)
The undersigned hereby irrevocably elects, effective as of ____________,
to exercise the right, represented by this Warrant Certificate, to receive
___________ shares of Class A Common Stock, par value $0.001 per share, of
Xxxxxx Vineyards Inc. and elects to pay the Exercise Price as indicated below:
/ / Payment in cash in the amount of $_______ per share, for a total
aggregate Exercise Price payment of $________; check payable to
Xxxxxx Vineyards Inc. in the amount of such aggregate Exercise Price.
/ / Payment on a cashless, net issuance basis by foregoing receipt of
that number of shares of Class A Common Stock otherwise issuable upon
this exercise as has an aggregate value, at the Closing Price, equal
to the aggregate Exercise Price.
The undersigned requests that a certificate for such shares be
registered in the name of _____________________________, whose address is
___________________________________________________ and that such shares be
delivered to ____________________________ whose address is
________________________________. If said number of shares is less than all
of the shares of Class A Common Stock purchasable hereunder, the undersigned
requests that a new Warrant certificate representing the remaining balance of
such shares be registered in the name of ________________________________,
whose address is _________________________, and that such Warrant certificate
be delivered to _______________________, whose address is
_______________________________________.
Signature:
Date:
Signature Guaranteed:
OA971370.007/16+
23
