EXHIBIT 10.39.1
WARRANT
TO PURCHASE
SHARES OF
COMMON STOCK
OF
NATURAL WONDERS, INC.
TABLE OF CONTENTS
Page
1. General Terms..................................................................1
1.1 Right to Acquire Securities.........................................1
1.2 Exercise of Warrant.................................................2
1.3 Record Holder.......................................................2
1.4 Payment of Taxes....................................................2
1.5 Transfer and Exchange...............................................3
2. Transfer of Securities.........................................................3
2.1 Restrictions of Transfer............................................3
2.2 Cooperation.........................................................5
3. Registration Rights............................................................5
3.1 Definitions.........................................................5
3.2 Demand Registration.................................................6
3.3 Piggyback Registration..............................................7
3.4 Expenses............................................................9
3.5 Company Responsibilities............................................9
3.6 Indemnification....................................................10
3.7 Holder's Obligations...............................................11
3.8 Assignment.........................................................11
4. Adjustments to Exercise Price and Warrant Shares..............................11
4.1 Subdivision or Combination.........................................11
4.2 Adjustment for Reorganization, Consolidation, Merger...............12
4.3 Miscellaneous Exercise Matters.....................................13
4.4 No Dilution or Impairment..........................................13
4.5 Notice of Adjustment...............................................13
4.6 Duty to Make Fair Adjustments in Certain Cases.....................13
5. Miscellaneous.................................................................14
5.1 Entire Agreement...................................................14
5.2 Successors and Assigns.............................................14
5.3 Governing Law......................................................14
5.4 Notices, Etc.......................................................14
5.5 Delays or Omissions................................................14
5.6 Survival...........................................................14
5.7 Waivers and Amendments.............................................15
5.8 Cashless Exercise..................................................15
5.9 Severability.......................................................16
5.10 Registered Holder..................................................17
5.11 Titles and Subtitles...............................................17
-i-
WARRANT
TO PURCHASE SHARES OF COMMON STOCK OF
NATURAL WONDERS, INC.
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS (A) COVERED
BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT, (B) IN COMPLIANCE WITH
RULE 144 UNDER SUCH ACT, OR (C) THE COMPANY HAS BEEN FURNISHED WITH AN OPINION
OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT NO REGISTRATION IS REQUIRED
FOR SUCH TRANSFER.
37,500 Shares of Common Stock
1. GENERAL TERMS.
1.1 RIGHT TO ACQUIRE SECURITIES.
(a) This Warrant certifies that for value
received Xxxxx X. Xxxxxx (the "Holder"), or registered assigns, are
entitled at any time before 5:00 p.m., San Francisco, California time,
on the Expiration Date (as such term is defined herein) to purchase
from NATURAL WONDERS, INC., a Delaware corporation (the "Company"),
37,500 shares (the "Warrant Shares") of the fully paid and
non-assessable Common Stock of the Company ("Common Stock") as
constituted on the date hereof (the "Issuance Date"), at a price of
$1.50 per share (the "Exercise Price"), such number of shares and price
per share subject to adjustment as provided herein and all subject to
the conditions set forth herein. This Warrant may be exercised at any
time on or before three years from the date hereof (the "Expiration
Date").
Upon any partial exercise hereof, there shall be issued to the Holder a
new Warrant or Warrants with respect to the shares of Common Stock not so
exercised. No fractions of a share of Common Stock will be issued upon the
exercise of this Warrant, but if a fractional share would be issuable upon
exercise the Company will pay in cash the fair market value thereof as
determined by the Board of Directors of the Company in good faith.
(b) The Warrant may be subdivided, at the
Warrantholder's option, into several warrants to purchase the Warrant
Shares (collectively, also referred to as the "Warrant"). Such
subdivision may be accomplished in accordance with the provisions of
Section 1.5 hereof.
-1-
1.2 EXERCISE OF WARRANT.
(a) The Holder or any person or entity to whom
the Holder has assigned its right under this Warrant (collectively
referred to as the "Warrantholder") may exercise the Warrant, in whole
or in part, at any time or from time to time, prior to its expiration,
on any business day, by delivering a written notice in the form
attached hereto (the "Exercise Notice") to the Company at the offices
of the Company designated in Section 5.4 hereof, exercising the Warrant
and specifying (i) the total number of shares of Common Stock the
Warrantholder will purchase pursuant to such exercise and (ii) a place
and date not less than one nor more than 20 business days from the date
of the Exercise Notice for the closing of such purchase.
(b) At any closing under Section 1.2(a) hereof,
(i) the Warrantholder will surrender the Warrant and make payment to
the Company of the aggregate Exercise Price for the shares of Common
Stock so purchased by delivering: (x) a bank, cashier's or certified
check; or (y) a written notice of an election to effect a Cashless
Exercise (as defined in Section 5.8 hereof); and (ii) the Company will
deliver to the Warrantholder a certificate or certificates for the
number of shares of Common Stock issuable upon such exercise, together
with cash, in lieu of any fraction of a share, as provided in Section
1.1(a) above. Upon any partial exercise, a new warrant or warrants of
the same tenor and expiration date for the purchase of the number of
such shares not purchased upon such exercise shall be issued by the
Company to the registered holder thereof.
1.3 RECORD HOLDER. A Warrant shall be deemed to have been
exercised immediately prior to the close of business on the date of its
surrender for exercise as provided in Section 1.2(b) above, and the person
entitled to receive the shares of Common Stock issuable upon such exercise shall
be treated for all purposes as the holder of such shares of record as of the
close of business on such date.
1.4 PAYMENT OF TAXES. The Company shall pay all taxes and
other governmental charges that may be imposed in respect of the issue or
delivery of the Warrant Shares or any portion thereof. The Company shall not be
required, however, to pay any tax or other charge imposed in connection with any
transfer involved in the issue of any certificate for the Warrant Shares or any
portion thereof in any name other than that of the registered holder of the
Warrant surrendered in connection with the purchase of such shares, and in such
case the Company shall not be required to issue or deliver any certificate until
such tax or other charge has been paid or it has been established to the
Company's satisfaction that no tax or other charge is due.
-2-
1.5 TRANSFER AND EXCHANGE.
(a) Subject to the terms hereof, including,
without limitation, Section 2.1, the Warrant and all rights thereunder
are transferable, in whole or in part, on the books of the Company
maintained for such purpose at its office designated in Section 5.4
hereof by the registered holder hereof in person or by duly authorized
attorney, upon surrender of the Warrant properly endorsed and upon
payment of any necessary transfer tax or other governmental charge
imposed upon such transfer. Upon any partial transfer, the Company will
issue and deliver to such holder a new warrant or warrants with respect
to the Warrant Shares not so transferred. Each taker and holder of the
Warrant, by taking or holding the same, consents and agrees that the
Warrant when endorsed in blank shall be deemed negotiable, and that
when the Warrant shall have been so endorsed, the holder may be treated
by the Company and all other persons dealing with the Warrant as the
absolute owner of such Warrant for any purpose and as the person
entitled to exercise the rights represented thereby, or to the transfer
on the books of the Company, any notice to the contrary
notwithstanding; but until such transfer on such books, the Company may
treat the registered holder of the Warrant as the owner for all
purposes. The term "Warrant" as used herein shall include the Warrant
and, any warrants delivered in substitution or exchange therefor as
provided herein.
(b) The Warrant is exchangeable for a warrant or
warrants for the same aggregate number of Warrant Shares, each new
Warrant to represent the right to purchase such number of shares as the
holder shall designate at the time of such exchange.
2. TRANSFER OF SECURITIES.
2.1 RESTRICTIONS OF TRANSFER. Neither the Warrant nor the
Warrant Shares shall be transferable except upon the conditions specified in
this Section 2.1, which conditions are intended to insure compliance with the
provisions of the Securities Act of 1933 (the "1933 Act") in respect to the
transfer of the Warrant and the Warrant Shares.
(a) Unless and until otherwise permitted by this
Section 2.1, the Warrant and each certificate or other document
evidencing any of the Warrant Shares shall be endorsed with a legend
substantially in the following form:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
UNLESS (A) COVERED BY AN EFFECTIVE REGISTRATION STATEMENT
-3-
UNDER SUCH ACT, (B) IN COMPLIANCE WITH RULE 144 UNDER SUCH ACT, OR (C)
THE COMPANY HAS BEEN FURNISHED WITH AN OPINION OF COUNSEL REASONABLY
ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT NO REGISTRATION IS
REQUIRED FOR SUCH TRANSFER"
(b) Neither the Warrant nor the Warrant Shares
shall be transferred, and the Company shall not be required to register
any such transfer, unless and until one of the following events shall
have occurred:
(i) the Company shall have received an
opinion of counsel, in form and substance reasonably
acceptable to the Company and its counsel, stating that the
contemplated transfer is exempt from registration under the
1933 Act as then in effect, and the Rules and Regulations of
the Securities and Exchange Commission (the "Commission")
thereunder. Within five business days after delivery to the
Company and its counsel of such an opinion, the Company either
shall deliver to the proposed transferor a statement to the
effect that such opinion is not satisfactory in the reasonable
opinion of its counsel (and shall specify in detail the legal
analysis supporting any such conclusion) or shall authorize
the Company's transfer agent to make the requested transfer;
(ii) the Company shall have been
furnished with a letter from the Commission in response to a
written request in form and substance acceptable to counsel
for the Company setting forth all of the facts and
circumstances surrounding the contemplated transfer, stating
that the Commission will take no action with regard to the
contemplated transfer;
(iii) the Warrant or the Warrant Shares
are transferred pursuant to a registration statement which has
been filed with the Commission and has become effective; or
(iv) the Warrant or the Warrant Shares
are transferred in accordance with the provisions of Rule 144
promulgated by the Commission under the 1933 Act.
(c) The restrictions on transfer imposed by this
Section 2.1 shall cease and terminate as to the Warrant and the Warrant
Shares when (i) such securities shall have been effectively registered
under the 1933 Act and sold by the holder thereof in accordance with
such registration, (ii) an acceptable opinion as described in Section
2.l(b)(i) or a "no action" letter described in Section 2.l(b)(ii)
states that future transfers of such securities by
-4-
the transferor or the contemplated transferee would be exempt from
registration under the 1933 Act, or (iii) such securities may be sold
in accordance with the provisions of Rule 144 promulgated under the
1933 Act. When the restrictions on transfer contained in this Section
2.1 have terminated as provided above, the holder of the securities as
to which such restrictions shall have terminated or the transferee of
such holder shall be entitled to receive promptly from the Company,
without expense to him, new certificates not bearing the legend set
forth in Section 2.1(a) hereof.
2.2 COOPERATION. The Company shall cooperate in supplying
such information as may be reasonably requested by the Warrantholder to complete
and file any information reporting forms presently or subsequently required by
the Commission as a condition to the availability of an exemption, presently
existing or subsequently adopted, from the 1933 Act for the sale of the Warrant
or the Warrant Shares.
3. REGISTRATION RIGHTS.
3.1 DEFINITIONS. For purposes of Section 3 hereof, terms
not otherwise defined herein shall have the following meanings:
(a) The terms "register," "registered" and
"registration" refer to the preparation and filing of a registration
statement in compliance with the 1933 Act and the rules promulgated
thereunder, and the declaration of the effectiveness of such
registration statement, or the taking of similar action under a
successor statute or regulation.
(b) The term "Registrable Securities" means the
shares of Common Stock issuable upon conversion of the Debenture or
exercise of the Warrant, and any securities issued or issuable with
respect to such Warrant Shares by way of a stock dividend or stock
split or in connection with a combination or shares, recapitalization,
merger, consolidation or other reorganization.
(c) The term "Holder" means any registered
holder or holders of Registrable Securities.
(d) The term "Prospectus" means a prospectus
that complies with applicable provisions of the 1933 Act.
(e) The term "Debenture" refers to the
Subordinated Convertible Debenture issued to Holders on September 11,
2000 along with the Warrants.
-5-
3.2 DEMAND REGISTRATION.
(a) On any date after March 15, 2001, the
Holders of at least fifty percent (50%) of the Registrable Securities
then outstanding (the "Initiating Holders") may request in writing
registration under the 1933 Act (a "Demand Registration"). The Demand
Registration request shall specify the amount of the Registrable
Securities proposed to be sold, the intended method of disposition
thereof and the jurisdictions in which registration is desired. Upon
the receipt of the Demand Registration request, the Company promptly
shall take such steps as are necessary or appropriate to prepare for
the registration of the Registrable Securities to be registered. Within
fifteen (15) days after the receipt of such request, the Company shall
give written notice thereof to all other Holders and include in such
registration all Registrable Securities held by a Holder from whom the
Company has received a written request for inclusion therein at least
ten (10) days prior to the filing of the registration statement. Each
such request will also specify the number of Registrable Securities to
be registered, the intended method of disposition thereof and the
jurisdictions in which registration is desired.
(b) The Company shall use its reasonable best
efforts to cause any such Demand Registration to become effective not
later than one hundred twenty (120) days after it receives a request
under this Section 3.2. A registration requested pursuant to this
Section 3.2 shall not count as the one Demand Registration to which the
Holders are entitled to thereunder unless such registration statement
is declared effective and remains effective for at least ninety (90)
days.
(c) If Holders of a majority of the Registrable
Securities proposed to be registered by the Initiating Holders so
elect, the offering of such Registrable Securities pursuant to such
Demand Registration shall be in the form of a firm commitment
underwritten offering. If any Demand Registration of Registrable
Securities is in the form of an underwritten offering, the Holders
holding a majority of the Registrable Securities proposed to be
registered by the Initiating Holders shall select and obtain an
investment banking firm of national reputation to act as the managing
underwriter of the offering (the "Approved Underwriter"); provided,
that the Approved Underwriter shall, in any case, be acceptable to the
Company in its reasonable judgment.
(d) The Company shall not be obligated to effect
any registration under this Section 3.2 except in accordance with the
following provisions:
(i) The Company shall not be obligated
to use its reasonable best efforts to file and cause to become
effective more than
-6-
one registration statement with respect to Registrable
Securities held by the Holders initiated pursuant to this
Section 3.2; provided, however, that any registration
proceeding begun pursuant to this Section 3.2 that is
subsequently withdrawn at the request of the Holders shall not
be so counted if such withdrawal is based upon material
adverse information relating to the Company or its condition,
business, or prospects which is different from that generally
known to the Rights Holders at the time of their request.
(ii) The Company may delay the filing or
effectiveness of any registration statement for a period of up
to ninety (90) days after the date of a request for
registration pursuant to this Section 3.2 if (x) at the time
of such request the Company is engaged, or has formal plans to
engage within sixty (60) days of the time of such request, in
an underwritten public offering of shares of Common Stock, (y)
the Board of Directors of the Company determines in good faith
that (A) it is in possession of material, non-public
information concerning an acquisition, merger,
recapitalization, consolidation, reorganization or other
material transaction by or of the Company or concerning
pending or threatened litigation and (B) disclosure of such
information would jeopardize any such transaction or
litigation or otherwise materially harm the Company, or (z)
the Company shall furnish to the Holders a certificate signed
by the Chief Executive Officer or President of the Company
stating that, in the good faith judgment of the Board of
Directors of the Company, it would otherwise be seriously
detrimental to the Company and its investors for such
registration statement to be filed and it is therefore
essential to defer the filing of such registration statement.
3.3 PIGGYBACK REGISTRATION.
(a) If, at any time, through and including the
third anniversary of the date of this Warrant, the Company proposes to
register any of its securities under the 1933 Act (other than in
connection with a merger, acquisition, reorganization or similar
transaction pursuant to a Form S-4 Registration Statement or an
employee stock compensation plan pursuant to a Form S-8 Registration
Statement), it will give written notice by registered mail, at least
(30) days prior to the filing of each such registration statement, to
the Holder of its intention to do so. If the Holder notifies the
Company within 20 days after receipt of any such notice of its desire
to include any Registrable Securities in such proposed registration
statement, the Company shall afford such Holder the opportunity to have
any of the Registrable Securities registered
-7-
under such registration statement and included in any underwriting
involved with respect thereto.
(b) Notwithstanding the provisions of Section
3.3 hereof: (i) the Company shall have the right at any time after it
shall have given written notice pursuant to this Section 3
(irrespective of whether a written request for inclusion of any
Registrable Securities shall have been made) to elect not to file any
such proposed registration statement, or to withdraw the same after the
filing but prior to the effective date thereof; and (ii) in the event a
registration under Section 3.3 hereof relates to an underwritten public
offering which does not include any securities being offered and sold
on behalf of selling shareholders, the inclusion of any Registrable
Securities may, at the election of the Company, be conditioned upon the
Holder agreeing that the public offering of such Registrable Securities
shall not commence until 90 days after the effective date of such
registration.
(c) The rights of the Holder pursuant to Section
3.3 hereof shall be conditioned upon such Xxxxxx's participation in the
underwriting with respect thereto and the inclusion of such Xxxxxx's
Registrable Securities in such underwriting (unless otherwise mutually
agreed by the Company, the managing underwriter or, if none, a majority
of the underwriters, and such Holder) to the extent provided herein.
(d) Notwithstanding any other provision of this
Warrant, if the managing underwriter or, if none, a majority of the
underwriters, determines that marketing factors require a limitation of
the number of shares to be underwritten or a complete exclusion of such
shares, such underwriter or underwriters may limit the number of
Registrable Securities that may be included in the registration and
underwriting or exclude all of the Registrable Securities, as
appropriate. In the case of an underwritten registration in which the
number of Registrable Securities that may be included is limited, the
Company shall advise the Holder of the limited number of Registrable
Securities that may be included in the registration, and the number of
Registrable Securities that may be included in the registration and
underwriting shall be allocated among all Holders thereof in
proportion, as nearly as practicable, to the respective amounts of
Registrable Securities entitled to inclusion in such registration held
by such Holders at the time of filing the registration statement.
(e) The Company shall (together with all Holders
proposing to distribute their securities through an underwriting) enter
into an underwriting agreement in customary form with the underwriter
or underwriters selected for the underwriting.
-8-
3.4 EXPENSES.
All expenses incurred in connection with any registration pursuant to
this Warrant or Warrant Shares, including without limitation, all registration,
filing and qualification fees, printing expenses, fees and disbursements of
counsel for the Company, and expenses of any special audits incidental to or
required by such registration, shall be borne by the Company; provided however
the Company shall not be required to pay:
(a) fees of legal counsel of any
Holder, or underwriters' fees, discounts, commissions or expenses
relating to Registrable Securities; and
(b) for expenses that the Company is prohibited
from paying under Blue Sky laws or by Blue Sky administrators.
3.5 COMPANY RESPONSIBILITIES.
In the case of a piggyback registration of Warrant Shares, the Company
shall use its best efforts to keep the Holder advised in writing as to the
initiation, effectiveness and completion of such registration. At its expense
the Company shall:
(a) prepare and file a registration statement
(and such amendments and supplements thereto) with respect to such
Registrable Securities and use its best efforts to cause such
registration statement to become and remain effective for a period of
180 days or until the Holder or Holders have completed the distribution
described in the registration statement relating thereto, whichever
first occurs;
(b) furnish such number of copies of a
Prospectus in conformity with the requirements of applicable law, and
such other documents incident thereto as a Holder from time to time may
reasonably request; and
(c) use every reasonable effort to register or
qualify the Registrable Securities covered by such registration
statement under the state Blue Sky laws of such jurisdictions as the
Company's Board of Directors may reasonably determine, and do any and
all other acts and things which may be necessary under said Blue Sky
laws to enable the sellers of the Registrable Securities to consummate
the public sale or other disposition of the Registrable Securities
owned by them in such jurisdictions, except that the Company shall not
for any purpose be required to qualify to do business as a foreign
corporation in any jurisdiction wherein the Registrable Securities are
so qualified.
-9-
3.6 INDEMNIFICATION.
(a) The Company shall indemnify the Holder, with
respect to such registration effected pursuant to Section 3 hereof,
against all claims, losses, damages and liabilities (or actions in
respect thereto) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any
registration statement or related Prospectus, or based on 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, or any violation by the Company of any rule or regulation
promulgated under any securities law applicable to the Company and
relating to action or inaction required of the Company in connection
with any such registration, and shall reimburse the Holder, for any
legal and any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or
action, provided that the Company shall not be liable in any such case
to the extent that any such claim, loss, damage or liability arises out
of or is based on any untrue statement or omission based upon written
information furnished to the Company in an instrument duly executed by
such Holder specifically for use therein.
(b) The Holder shall, if Registrable Securities
held by or issuable to the Holder are included in the securities as to
which such registration is being effected, indemnify the Company, each
of its directors and officers who sign such registration statement,
each underwriter, if any, of the Company's securities covered by such a
registration statement, each person who controls the Company within the
meaning of the 1933 Act, and each other Holder, against all claims,
losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement)
of a material fact contained in any such registration statement or
related Prospectus, or 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, and shall reimburse the
Company and such Holders for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim,
loss, damage, liability, or action, in each case to the extent, but
only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such
registration statement or related Prospectus in reliance upon and in
conformity with written information furnished to the Company in an
instrument duly executed by such Holder specifically for use therein.
(c) Each party entitled to indemnification under
this Section 3.4 (the "Indemnified Party") shall give notice to the
party required to provide indemnification (the "Indemnifying Party")
promptly after such
-10-
Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, and shall permit the Indemnifying Party to
assume the defense of any such claim or any litigation resulting
therefrom, provided that counsel for the Indemnifying Party, who shall
conduct the defense of such claim or litigation, shall be approved by
the Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such defense at
such party's expense; and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve
the Indemnifying Party of its obligations under this Section 3.4. No
Indemnifying Party, in the defense of any such claim or litigation,
shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement, which does not
include as an unconditional term thereof, the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in
respect to such claim or litigation.
3.7 HOLDER'S OBLIGATIONS. The Holder shall furnish to the
Company such written information regarding such Holder and the distribution
proposed by such Holder as the Company may reasonably request in writing and as
shall be required in connection with any registration referred to in this
Warrant.
3.8 ASSIGNMENT. The rights granted to the Holder pursuant
to this Warrant may be assigned to a transferee or assignee of the Warrant or
any of the Registrable Securities, provided that the transferee or assignee is
an affiliated entity of the Holder and the Company is given written notice at
the time of or within 10 days after said transfer, stating the name and address
of said transferee or assignee and identifying the Registrable Securities with
respect to which such registration rights are being assigned.
4. ADJUSTMENTS TO EXERCISE PRICE AND WARRANT SHARES. The Exercise
Price in effect from time to time and the number of Warrant Shares shall be
subject to adjustment in certain cases as set forth in this Section 4.
4.1 SUBDIVISION OR COMBINATION. In the event the
outstanding Common Stock shall be subdivided into a greater number of shares of
Common Stock, the Exercise Price for the Warrant Shares shall, simultaneously
with the effectiveness of such subdivision, be proportionately reduced and the
number of Warrant Shares proportionately increased, and conversely, in case the
outstanding Common Stock shall be combined into a smaller number of shares of
Common Stock, the Exercise Price shall, simultaneously with the effectiveness of
such combination, be proportionately increased and the number of Warrant Shares
proportionately reduced.
-11-
4.2 ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER.
(a) In case of any reorganization of the Company
(or any other corporation the stock or other securities of which are
receivable on the exercise of the Warrant) after the date on which this
Warrant is first issued (the "Issuance Date"), or in case, after such
date, the Company (or any such other corporation) shall consolidate
with or merge into another corporation or convey all or substantially
all of its assets to another corporation, then and in each such case
the Warrantholder, upon exercise of the Warrant as provided in Section
1.2 hereof at any time after the consummation of such reorganization,
consolidation, merger or conveyance, shall be entitled to receive, in
lieu of the stock or other securities and property receivable upon the
exercise of the Warrant prior to such consummation, the stock or other
securities or property to which the Warrantholder would have been
entitled upon such consummation if the Warrantholder had exercised or
converted the Warrant immediately prior thereto; in each such case, the
terms of this Warrant, including the exercise provisions of Section
1.2, shall be applicable to the shares of stock or other securities or
property receivable upon the exercise or conversion of the Warrant
after such consummation.
(b) The Company shall not effect any
consolidation, merger or conveyance of all or substantially all of its
assets unless prior to the consummation thereof the successor
corporation (if other than the Company) resulting from such
consolidation or merger or the corporation into or for the securities
of which the previously outstanding stock of the Company shall be
changed in connection with such consolidation or merger, or the
corporation purchasing such assets, as the case may be, shall assume by
written instrument, in form and substance satisfactory to the
Warrantholder, executed and delivered in accordance with Section 5.4
hereof, the obligation to deliver to the Warrantholder such shares of
stock, securities or assets as, in accordance with the foregoing
provisions, the Warrantholder is entitled to purchase.
(c) If a purchase, tender or exchange offer is
made to and accepted by the holders of more than 50% of the outstanding
shares of Common Stock of the Company, the Company shall not effect any
consolidation, merger or sale with the Person having made such offer or
with any Affiliate of such Person, unless prior to consummation of such
consolidation, merger or sale the Warrantholder shall have been given a
reasonable opportunity to then elect to receive either the stock,
securities or assets then issuable upon the exercise or conversion of
the Warrant or, if different, the stock, securities or assets, or the
equivalent, issued to previous holders of the Common Stock in
accordance with such offer, computed as though the Warrantholder hereof
had been, at the time of such offer, a holder of
-12-
the stock, securities or assets then purchasable upon the exercise or
conversion of the Warrant. As used in this paragraph (c), the term
"Person" shall mean and include an individual, a partnership, a
corporation, a trust, a joint venture, an unincorporated organization
and a government or any department or agency thereof, and an
"Affiliate" of any Person shall mean any Person directly or indirectly
controlling, controlled by or under direct or indirect common control
with, such other Person. A Person shall be deemed to control a
corporation if such Person possesses, directly or indirectly, the power
to direct or cause the direction of the management and policies of such
corporation, whether through the ownership of voting securities, by
contract or otherwise.
4.3 MISCELLANEOUS EXERCISE MATTERS. The Company shall at
all times reserve and keep available out of its authorized but unissued Common
Stock the full number of Warrant Shares deliverable upon exercise of the Warrant
Shares, as such number may change from time to time. Also, the Company shall, at
its own expense, take all such actions and obtain all such permits and orders as
may be necessary to enable the Company lawfully to issue the Warrant Shares upon
the exercise of the Warrant.
4.4 NO DILUTION OR IMPAIRMENT. The Company will not, by
amendment of its certificate of incorporation or through reorganization,
consolidation, merger, dissolution, issue or sale of securities, sale of assets
or any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of the Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
Warrantholder against dilution or other impairment. Without limiting the
generality of the foregoing, the Company will take all such action as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and non-assessable shares upon the exercise or conversion of the
Warrant.
4.5 NOTICE OF ADJUSTMENT. When any adjustment is required
to be made in either the Exercise Price or the number of shares issuable upon
exercise of the Warrant, the Company shall promptly notify the Warrantholder of
such event, of the calculation by which such adjustment is to be made and of the
resulting Exercise Price or conversion rate, as the case may be.
4.6 DUTY TO MAKE FAIR ADJUSTMENTS IN CERTAIN CASES. If
any event occurs as to which in the opinion of the Board of Directors the other
provisions of this Section 4 are not strictly applicable or if strictly
applicable would not fairly protect the purchase and exercise rights of the
Warrant in accordance with the essential intent and principles of such
provisions, then the Board of Directors shall make an adjustment in the
application of such provisions, in accordance with such essential intent and
principles, so as to protect such purchase rights as aforesaid.
-13-
5. MISCELLANEOUS.
5.1 ENTIRE AGREEMENT. This Warrant constitutes the full
and entire understanding and agreements between the parties hereto with respect
to the subjects hereof and thereof.
5.2 SUCCESSORS AND ASSIGNS. The terms and conditions of
this Warrant shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties hereto, except as expressly provided
otherwise herein.
5.3 GOVERNING LAW. This Warrant shall be governed by and
construed under the laws of the State of California.
5.4 NOTICES, ETC. All notices and other communications
required or permitted hereunder shall be in writing and shall be deemed
effectively given upon personal delivery or upon the seventh day following
mailing by registered air mail, postage prepaid, addressed (a) if to the
Warrantholder, at Xxxxx X. Xxxxxx, 000 Xxx Xxxx Xxxxxx, Xxxxxxxxx, XX 00000, or
at such other address as it shall have furnished to the Company in writing, (b)
if to the Company, a copy should be sent to 0000 Xxxxxxxxxx Xxxxx, Xxxxxxx, XX
00000, and addressed to the attention of the corporate secretary, or at such
other address as the Company shall have furnished in writing to the
Warrantholder, or (c) if to any other holder of any Warrant or of Warrant Shares
issued upon conversion of the Warrant, at such address as such holder shall have
furnished to the Company in writing, or, until such holder so furnishes an
address to the Company, then to and at the address of the last holder of such
Warrant or Warrant Shares who so furnished an address to the Company.
5.5 DELAYS OR OMISSIONS. No delay or omission to exercise
any right, power or remedy accruing to any holder of any securities issued or
sold or to be issued or sold hereunder, upon any breach or default of the
Company under this Agreement, shall impair any such right, power or remedy of
such holder nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or in any similar breach or default
thereafter occurring, nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any holder of any breach or default under this Agreement, or any
waiver on the part of any holder of any provisions or conditions of this
Agreement, must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded to any holder, shall be cumulative and
not alternative.
5.6 SURVIVAL. The representations, warranties, covenants
and agreements made herein and or made pursuant to this Agreement shall survive
the
-14-
execution and delivery of this Agreement, except as expressly provided
otherwise herein.
5.7 WAIVERS AND AMENDMENTS. With the written consent of
the record or beneficial holders of more than 50% of the Warrant Shares (treated
as if converted), the obligations of the Company and the rights of the holders
of the Warrant and the Warrant Shares may be waived (either generally or in a
particular instance, either retroactively or prospectively and either for a
specified period of time or indefinitely), and with the same consent the
Company, when authorized by resolution of its Board of Directors, may enter into
a supplemental agreement for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of this Warrant; provided,
however, that no such waiver or supplemental agreement shall reduce the
aforesaid percentage of the Warrant Shares, the holders of which are required to
consent to any waiver or supplemental agreement, without the consent of the
record or beneficial holders of all of the Warrant Shares (treated as if
converted). Upon the effectuation of each such waiver, consent, agreement of
amendment or modification, the Company promptly shall give written notice
thereof to the record holders of the Warrant and the Warrant Shares. This
Warrant or any provision hereof may not be changed, waived, discharged or
terminated orally, but only by a statement in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought, except to the extent provided in this Section 5.7.
5.8 CASHLESS EXERCISE.
(a) This Warrant may be exercised at any time or
from time to time prior to the Expiration Date, by presentation and
surrender of this Warrant to the Company at its principal executive
offices with a written notice of the Holder's intention to effect a
cashless exercise, including a calculation of the number of shares of
Common Stock to be issued upon such exercise in accordance with the
terms hereof (a "Cashless Exercise"). In the event of a Cashless
Exercise in lieu of paying the Exercise Price in cash, the holder shall
surrender this Warrant for that number of shares of Common Stock
determined by multiplying (i) the number of Warrant Shares to which it
would otherwise be entitled by (ii) a fraction, the numerator of which
shall be the difference between the then current Market Price per share
of the Common Stock and the Exercise Price, and the denominator of
which shall be the Market Price per share of Common Stock.
(b) The following definitions shall apply to
this Section 5.8.
(i) "Business Day" means any day, other
than a Saturday or Sunday or a day on which banking
institutions in the State of California are authorized or
obligated by law, regulation or executive order to close.
-15-
(ii) "Closing Price" shall mean for the
Common Stock as of any date, the last price of such security
on the principal United States securities exchange or trading
market on which such security is listed or traded as reported
by the Research Service of Nasdaq Trading and Market Services
(or a comparable reporting service of national reputation
selected by the Holder and reasonably acceptable to the
Company if the Research Service of Nasdaq Trading and Market
Services is not then reporting last price of such security)
(collectively, "NTMS"), or if the foregoing does not apply,
the last reported sale price of such security in the
over-the-counter market on the electronic bulletin board for
such security as reported by NTMS, or, if no sale price is
reported for such security by NTMS, the average of the bid
prices of any market makers for such security as reported in
the "pink sheets" by the National Quotation Bureau, Inc., in
each case for such date or, if such date was not a Trading Day
(as defined below) for such security, on the next preceding
day which was a Trading Day. If the Closing Price cannot be
calculated for a share of Common Stock as of either of such
dates on any of the foregoing bases, the Closing Price of such
security on such date shall be the fair market value as
determined by an investment banking firm selected by mutual
agreement of the Holder and the Company, with the costs of
such appraisal to be borne equally by the Company and the
Holder. The manner of determining the Closing Price of the
Common Stock set forth in the foregoing definition shall apply
with respect to any other security in respect of which a
determination as to market value must be made.
(iii) "Market Price" shall mean, with
respect to any date of determination, the average Closing
Price during the ten (10) Trading Days ending on the Trading
Day immediately preceding such date of determination,
appropriately adjusted to reflect any stock dividend, stock
split or similar transaction during either such relevant
period. The manner of determining the Market Price of the
Common Stock set forth in the foregoing definition shall apply
with respect to any other security in respect of which a
determination as to market value must be made hereunder.
(iv) "Trading Day" shall mean a Business
Day on which at least 1,000 shares of Common Stock are traded
on the principal United States securities exchange or trading
market on which such security is listed or traded as reported
by NTMS.
5.9 SEVERABILITY. If one or more provisions of this
Warrant are held to be invalid, illegal or unenforceable under applicable law,
such provision shall be
-16-
modified in such manner as to be valid, legal and enforceable, but so as to most
nearly retain the intent of the parties, and if such modification is not
possible, such provision shall be severed from this Agreement as if such
provision were not included, in either case, and the balance of this Warrant
shall not in any way be affected or impaired thereby and shall be enforceable in
accordance with its terms.
5.10 REGISTERED HOLDER. The Company may deem and treat the
registered Holder(s) hereof as the absolute owner(s) of this Warrant
(notwithstanding any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise or conversion hereof, of any
distribution to the Holder(s) hereof, and for all other purposes, and the
Company shall not be affected by any notice to the contrary. Other than as set
forth herein, this Warrant does not entitle any Holder hereof to any rights of a
stockholder of the Company.
5.11 TITLES AND SUBTITLES. The titles of the sections and
subsections of this Warrant are for convenience and are not to be considered in
construing this Warrant.
IN WITNESS WHEREOF, Company has caused this Warrant to be signed by its
duly authorized officer and issued as of the date set forth below.
Dated: September 11, 2000
NATURAL WONDERS, INC.
By:
---------------------------------------
Its:
---------------------------------------
-17-
EXERCISE NOTICE
(To be executed only upon exercise of Warrant)
The undersigned registered owner of a Warrant of NATURAL WONDERS, INC.
(the "Company"), originally issued to _________________ irrevocably exercises
such Warrant for the purchase of shares of Common Stock of the Company,
purchasable with the Warrant, and hereby sets the place and date for the closing
of such purchase as follows, all on the terms and conditions specified in the
Warrant.
Place of Closing:
--------------------------
Date of Closing:
--------------------------
The undersigned requests that a certificate for such shares be
registered in the name of __________________________________________________,
whose address is ______________________________________________________________.
If said number of shares is less than all of the shares of Common Stock
purchasable under the Warrant, the undersigned requests that a new Warrant
representing the remaining balance of such shares be registered in the name of
__________________________________________________, whose address is
__________________________________________________.
Dated:
-----------------------
--------------------------------------
Signature of Registered Owner
--------------------------------------
Street Address
--------------------------------------
City State Zip
-18-
FORM OF ASSIGNMENT
FOR VALUED RECEIVED, the undersigned registered owner of this Warrant
issued by NATURAL WONDERS, INC. hereby sells, assigns and transfers unto the
Assignee named below all of the rights of the undersigned under the within
Warrant, with respect to the number of Shares of Common Stock set forth below:
Name of Assignee Address No. of Shares
and does hereby irrevocably constitute and appoint ____________________________
attorney to make such transfer on the books of _________________________
maintained for such purpose, with full power of substitution in the premises.
Dated:
-----------------------
--------------------------------------
Signature of Registered Owner
--------------------------------------
Witness
-19-
