1
EXHIBIT 10.14
WARRANT AGREEMENT, dated as of September 27, 2000 (this "Warrant
Agreement"), by and among RESTORATION HARDWARE, INC., a Delaware corporation
(the "Company"), XXXXXXX XXXXX & CO. and ENHANCED RETAIL FUNDING, LLC (each a
"Holder" and collectively the "Holders").
W I T N E S S E T H:
WHEREAS, the Company has entered into a certain Sixth Amended and
Restated Loan and Security Agreement of even date herewith with the Holders
and/or their respective affiliates, among other parties (as the same may
hereafter be amended, modified, supplemented or restated from time to time in
accordance with the terms thereof, the "Loan Agreement"); and
WHEREAS, a condition to the Holders and/or their respective
affiliates entering into the Loan Agreement is that the Company issue warrants
to the Holders, on the terms and conditions described herein (the "Warrants"),
to purchase up to an aggregate of 550,000 shares of the Company's Common Stock,
to be issued in accordance with the pro rata portion of the Tranche C Loans to
be made by each of the Holders and/or their respective affiliates in accordance
with the Loan Agreement (i.e., 394,167 Warrants to Xxxxxxx Sachs & Co. and
155,833 Warrants to Enhanced Retail Funding, LLC); and
WHEREAS, the purpose of this Warrant Agreement is to set forth the
terms and conditions which shall govern the issuance of all of the Warrants, the
purchase of Common Stock of the Company upon the exercise thereof, the
adjustments in the terms and price of such Warrants pursuant to the
anti-dilution provisions hereof and such other terms and conditions as
hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing and for the
purpose of defining the terms and provisions of the Warrants and the respective
rights and obligations thereunder and hereunder of the Company and the Holders
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged and affirmed, the Company and the Holders hereby
agree as follows:
1. DEFINITIONS.
2.
As used in this Warrant Agreement, the following terms have the
respective meanings set forth below:
"Additional Shares of Common Stock" means all shares of Common Stock
issued by the Company after the date hereof, other than Warrant Stock.
"Business Day" means any day that is not a Saturday or Sunday or a
day on which banks are required or permitted to be closed in the State of New
York.
"Common Stock" means (except where the context otherwise indicates)
the Common Stock, $.0001 par value per share, of the Company as constituted on
the date hereof, and any capital stock into which such Common Stock may
thereafter be changed, and shall also include shares of common stock of any
successor or acquiring corporation received by or distributed to the holders of
Common Stock of the Company in the circumstances contemplated by Section 5.
"Company" has the meaning assigned to such term in the first
paragraph of this Warrant Agreement.
2
"Company's Principal Office" means the principal office of the
Company in Corte Madera, California(or such other office of the Company
acceptable to the Holders as set forth in a written notice provided to the
Holders).
"Current Warrant Price" means, in respect of a share of Common Stock
at any date herein specified, $3.750 per share of Common Stock, subject to
adjustment in accordance with Section 5.
"Expiration Date" means September 27, 2005.
"GAAP" means generally accepted accounting principles in the United
States of America as from time to time in effect.
"Majority Holders" means the holders of Warrants exercisable for in
excess of 50% of the aggregate number of shares of Common Stock then purchasable
upon exercise of all Warrants.
"NASD" means the National Association of Securities Dealers, Inc.,
or any successor corporation thereto.
"Outstanding" means, when used with reference to Common Stock, at
any date as of which the number of shares thereof is to be determined, all
issued shares of Common Stock, except shares then owned or held by or for the
account of the Company or any subsidiary thereof, and shall include all shares
issuable in respect of outstanding scrip or any certificates representing
fractional interests in shares of Common Stock.
"Person" means any individual, sole proprietorship, partnership,
joint venture, trust, incorporated organization, association, corporation,
limited liability company, limited liability partnership, institution, public
benefit corporation, entity or government (whether federal, state, county, city,
municipal or otherwise, including, without limitation, any instrumentality,
division, agency, body or department thereof).
"Warrant Price" means an amount equal to (1) the number of shares of
Common Stock being purchased upon exercise of a Warrant pursuant to Section 3.1,
multiplied by (2) the Current Warrant Price as of the date of such exercise.
"Warrant Stock" means the shares of Common Stock purchased by the
Holders of the Warrants upon the exercise thereof.
"Warrants" has the meaning assigned to such term in the recitals to
this Warrant Agreement, and shall include all warrants issued upon transfer,
division or combination of, or in substitution for, any thereof. All Warrants
shall at all times be identical as to terms and
3
conditions and date, except as to the number of shares of Common Stock for which
they may be exercised.
1. REGISTRATION, FORM AND EXECUTION OF WARRANTS.
2.
2.1. Registration. All Warrants shall be numbered and shall be registered in a
warrant register maintained at the Company's Principal Office by the Company as
they are issued. The Company shall be entitled to treat a Holder as the owner in
fact for all purposes whatsoever of each Warrant registered in such Holder's
name.
1.1. Form of Warrant. The text of each Warrant and the Election to Purchase
Form, Assignment Form and Repurchase Form shall be substantially as set forth in
Exhibit A attached hereto. Each Warrant shall be executed on behalf of the
Company by its President or one of its Vice Presidents, under its corporate seal
reproduced thereon or facsimile thereof attested by its Secretary or an
Assistant Secretary. The signature of any of such officers on the Warrants may
be manual or facsimile.
1.2.
1.3. Warrants 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 Warrants or did not hold such
offices on the date of this Warrant Agreement.
1.4.
1.5. Warrants shall be dated as of the date hereof upon initial issuance, and
upon division, exchange, substitution or transfer, the date thereof.
1. EXERCISE OF WARRANTS.
2.
(a) Manner of Exercise. From and after the date hereof and until 5:00 p.m., New
York City time, on the Expiration Date, a Holder may exercise any of its
Warrants, on any Business Day, for all or any part of the number of shares of
Common Stock purchasable thereunder.
(a) In order to exercise a Warrant, in whole or in part, a Holder shall deliver
to the Company at the Company's Principal Office, (1) a written notice of such
Holder's election to exercise such Warrant, which notice shall include the
number of shares of Common Stock to be purchased, (2) payment of the Warrant
Price for the account of the Company, and (3) such Warrant. Such notice shall be
substantially in the form of the Election to Purchase Form set forth on the
reverse side of the form of Warrant Certificate attached as Exhibit A hereto,
duly executed by such Holder or its agent or attorney. Upon receipt thereof, the
Company shall, as promptly as practicable, and in any event within five (5)
Business Days thereafter, deliver or cause to be delivered to such Holder an
executed certificate or certificates representing the aggregate number of full
shares of Common Stock issuable upon such exercise. The stock certificate or
certificates so delivered shall be, to the extent possible, in such
denomination or denominations as such Holder shall request in the notice and
shall be registered in the name of such Holder or such other name as shall be
designated in such notice. Each Warrant shall be deemed to have been exercised
and such
4
certificate or certificates shall be deemed to have been issued, and such Holder
or any other Person so designated to be named therein shall be deemed to have
become a holder of record of such shares for all purposes, as of the date such
notice, together with cash, or certified check or official bank check or wire
transfer in lawful money of the United States of America for payment of the
Warrant Price and such Warrant, is received by the Company as described above
and all taxes required to be paid by such Holder, if any, pursuant to Section
3.2 prior to the issuance of such shares have been paid.
(b)
(c) If any Warrant shall have been exercised in part, the Company shall, at the
time of delivery of the certificate or certificates representing Warrant Stock,
deliver to the Holder a new Warrant evidencing the rights of such Holder to
purchase the unpurchased shares of Common Stock called for by such Warrant,
which new Warrant shall in all other respect be identical with the Warrant
exercised in part, or, at the request of such Holder, appropriate notation may
be made on such exercised Warrant and the same returned to such Holder.
Notwithstanding any provision herein to the contrary, the Company shall not be
required to register shares in the name of any Person who acquired a Warrant (or
part thereof) or any Warrant Stock other than in accordance with such Warrant
and this Warrant Agreement.
(d)
(e) Payment of the Warrant Price shall be made at the option of the Holder by
certified or official bank check or wire transfer or surrender of unexercised
Warrant or any combination thereof, duly executed by such Holder or by such
Holder's attorney duly authorized in writing. Warrants so surrendered shall have
a value equal to the current market price (as defined in Section 5.6) of the
shares of Warrant Stock issuable upon exercise of such Warrant minus the Current
Warrant Price of such Warrant; provided, however, that if such exercise occurs
in connection with, or within ten (10) Business Days of, an event described in
paragraph (a) of Section 6.2, then each Warrant so surrendered shall have a
value equal to the greater of (i) the current market price (as defined in
Section 5.6) of the shares of Warrant Stock issuable upon exercise of such
Warrant or (ii) the fair market value (determined in a manner consistent with
Section 5.7) of the consideration that the Holder would have received in
connection with such event with respect to the number of shares of Warrant Stock
issuable upon exercise of such Warrant had such Warrant been exercised prior to
the earlier of the record date or the effective date for such event, in either
case reduced by the Current Warrant Price of such Warrant.
(f)
1.2. Payment of Taxes. All shares of Common Stock issuable upon the exercise of
any Warrant pursuant to the terms hereof shall be validly issued, fully paid and
non-assessable and not subject to any preemptive rights. The Company shall pay
any documentary stamp taxes attributable to the initial issuance of Warrant
Stock upon the exercise of Warrants; provided, however, that the Company shall
not be required to pay any tax or taxes that may be payable in respect of any
transfer involved in the issuance of any Warrant certificates or any
certificates for
5
Warrant Stock in a name other than that of the registered holder of a Warrant
certificate surrendered upon the exercise of a Warrant, and the Company shall
not be required to issue or deliver such Warrant certificates unless or until
the person or persons requesting the issuance thereof shall have paid to the
Company the amount of such tax or shall have established to the satisfaction of
the Company that such tax has been paid or is not due.
1.3. Fractional Shares. The Company shall not be required to issue a fractional
share of Common Stock upon exercise of any Warrant. Whenever any distribution of
warrants exercisable into fractional shares of Common Stock would otherwise be
called for, the actual distribution thereof will reflect a rounding up or down
to the nearest share of Common Stock, provided that, whenever any distribution
of a Warrant that is exercisable into exactly one-half of a share of Common
Stock would otherwise be called for, the actual distribution will reflect a
rounding up to the nearest share of Common Stock.
1. TRANSFER, DIVISION AND COMBINATION.
2.
2.1. Transfer. Transfer of any Warrant and all rights hereunder, in whole or in
part, shall be registered in the warrant register of the Company to be
maintained for such purpose at the Company's Principal Office, upon surrender of
such Warrant at the Company's Principal Office, together with a written
assignment of such Warrant substantially in the form set forth on the reverse
side of the form of Warrant Certificate attached as Exhibit A hereto duly
executed by the Holder or its agent or attorney and payment of all funds
sufficient to pay any taxes payable upon the making of such transfer. Upon such
surrender and, if required, such payment, and subject to Section 8 hereof, the
Company shall execute and deliver a new Warrant or Warrants in the name of the
assignee or assignees and in the denomination specified in such instrument of
assignment, and shall issue to the assignor a new Warrant evidencing the portion
of such Warrant not so assigned, and the surrendered Warrant shall promptly be
canceled. A Warrant, if properly assigned, may be exercised by a new Holder for
the purchase of shares of Common Stock without having a new warrant issued.
1.1. Division and Combination. Any Warrant may be divided or combined with other
Warrants upon presentation thereof at the Company's Principal Office, together
with a written notice specifying the names and denominations in which new
Warrants are to be issued, signed by the Holder or its agent or attorney.
Subject to compliance with Section 4.1, as to any transfer which may be involved
in such division or combination, the Company shall execute and deliver a new
Warrant or Warrants in exchange for the Warrant or Warrants to be divided or
combined in accordance with such notice.
1.2.
1.3. Maintenance of Books. The Company agrees to maintain, at the Company's
Principal Office, the warrant register for the registration of Warrants and the
registration of transfer of the Warrants.
6
1. ADJUSTMENTS.
2.
The Current Warrant Price and the number of Warrant Stock issuable
upon the exercise of each Warrant are subject to adjustment from time to time
upon the occurrence of the events enumerated in this Section 5.
1.1. Adjustment for Change in Capital Stock .
1.2.
(a) If the Company:
(i) pays a dividend or makes a distribution on its Common Stock
in shares of its Common Stock;
(i) subdivides its outstanding shares of Common Stock into a
greater number of shares;
(i) combines its outstanding shares of Common Stock into a smaller
number of shares;
(i) makes a distribution on Common Stock in shares of its capital
stock other than Common Stock; or
(i) issues by reclassification of Common Stock any shares of its
capital stock;
then the exercise right and the Current Warrant Price in effect immediately
prior to such action shall be adjusted so that the Holder of Warrants may
receive upon exercise of the Warrants the number of shares of capital stock of
the Company which it would have owned immediately following such action if the
Holder had exercised the Warrants immediately prior to such action. The
adjustment shall become effective immediately after the record date in the case
of a distribution and immediately after the effective date in the case of a
combination or reclassification.
(a) If after an adjustment, the Holder may receive shares of two or more classes
of capital stock of the Company, the Company and the Majority Holders shall
mutually agree upon the allocation of the adjusted exercise price between the
classes of capital stock. After such allocation, the exercise privilege and the
Current Warrant Price of each class of capital stock shall thereafter be subject
to adjustment on terms comparable to those applicable to Common Stock in this
Section 5.
(b)
7
(c) Adjustment for Rights Issue. If the Company distributes any rights, options
or warrants to all holders of Common Stock entitling them for a period expiring
within 60 days after the record date mentioned below to purchase shares of
Common Stock at a price per share less than the current market price per share
on that record date, the Current Warrant Price shall be adjusted in accordance
with the formula:
(d)
where
W' = the adjusted Current Warrant Price.
W = the then current Current Warrant Price.
O = the number of shares of Common Stock outstanding
on the record date.
N = the number of additional shares of Common Stock
offered or issuable on the exercise of the rights,
options or warrants.
P = the offering price per share of the additional
shares subject to the rights or warrants.
M = the current market price per share of Common
Stock on the record date.
The adjustment shall be made on each occasion any rights, options or
warrants are issued and shall become effective immediately after the record date
for the determination of stockholders entitled to receive the rights, options or
warrants.
(a) If at the end of the period during which such warrants or rights are
exercisable, not all warrants or rights shall have been exercised, the Current
Warrant Price shall be
8
immediately readjusted to what it would have been if "N" in the above formula
had been the number of shares actually issued.
(b)
(c) Adjustment for Other Distribution. If the Company distributes to all
holders of Common Stock any of its assets (including cash) or debt securities or
any rights or warrants to purchase assets, debt securities or other securities
of the Company, the Current Warrant Price shall be adjusted in accordance with
the formula:
(d)
where:
W' = the adjusted Current Warrant Price.
W = the then current Current Warrant Price.
M = the current market price per share of Common
Stock on the record date mentioned below.
F = the aggregate fair market value (as determined by
an Appraiser chosen in accordance with Section
5.6), on the record date, of the assets (including
cash), securities, rights or warrants so
distributed divided by the number of outstanding
shares of Common Stock on the record date;
provided, that, in the event that the value of F exceeds the value of M, or in
the event that the value of M exceeds the value of F by less than 10%, in lieu
of the foregoing adjustment, adequate provision shall be made so that the
holders of the Warrants shall receive a pro rata share of the aggregate
distribution based upon the maximum number of shares of Common Stock at the time
issuable to such holders (determined without regard to whether the Warrants are
exercisable at such time).
9
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the distribution.
(a) If at the end of the period during which any such warrants or rights are
exercisable, not all of such warrants or rights, shall have been exercised, the
Current Warrant Price shall be immediately readjusted to what it would have been
if "F" in the above formula had not included the fair market value on the record
date of the expired warrants or rights, but were still divided by the same
number of outstanding shares of Common Stock.
(b)
(c) This Section 5.3 does not apply to distributions of rights, options or
warrants referred to in Section 5.2.
(d)
1.2. Adjustment for Common Stock Issue. If the Company issues shares of Common
Stock for consideration per share less than the current market price per share
on the date the Company fixes the offering price of such additional shares, the
Current Warrant Price shall be adjusted in accordance with the formula:
1.3.
where:
W' = the adjusted Current Warrant Price.
W = the then current Current Warrant Price.
O = the number of shares outstanding immediately
prior to the issuance of such additional shares.
P = the aggregate consideration received for the
issuance of such additional shares.
M = the current market price per share on the date of
issuance of such additional shares.
10
A = the number of shares outstanding immediately
after the issuance of such additional shares.
The adjustment shall be made successively whenever any such issuance
is made, and shall become effective immediately after such issuance.
This Section 5.4 does not apply to:
(a) any of the transactions or distributions described in Sections 5.2,
5.3 or 5.5, or
(a) the conversion or exchange of securities convertible or exchangeable
for Common Stock and the exercise of rights or warrants issued to the
holders of Common Stock, in each case only if the issuance of such
securities, rights or warrants were subject to the provisions of this
Section 5.
1.1. Adjustment for Convertible Securities Issue. If the Company issues any
securities convertible into or exchangeable or exercisable for Common Stock
(other than the securities issued in transactions described in Sections 5.2 and
5.3) for consideration per share of Common Stock initially deliverable upon
conversion, exchange or exercise of such securities less than the current market
price per share on the date of issuance of such securities, the Current Warrant
Price shall be adjusted in accordance with the formula:
1.2.
[GRAPHIC OMITTED]
where:
W' = the adjusted Current Warrant Price.
W = the then current Current Warrant Price.
O = the number of shares outstanding immediately
prior to the issuance of such securities which are
convertible into or exchangeable or exercisable for
Common Stock.
P = the aggregate consideration received for the
issuance of such securities.
M = the current market price per share of Common
Stock on the date of issuance of such securities.
11
D = the maximum number of shares deliverable upon
conversion, exchange or exercise of such securities
at the initial conversion, exchange or exercise
rate.
The adjustment shall be made successively whenever any such issuance
is made, and shall become effective immediately after such issuance.
If all of the Common Stock deliverable upon conversion, exchange or
exercise of such securities has not been issued when such securities are no
longer outstanding, then the Current Warrant Price shall immediately be
readjusted to the Current Warrant Price which would then be in effect had the
adjustment upon the issuance of such securities been made on the basis of the
actual number of shares of Common Stock issued upon conversion, exchange or
exercise of such securities.
This Section 5.5 does not apply to any of the transactions or
distributions described in Sections 5.2 and 5.3.
1.1. Market Price. The "current market price" per share of Common Stock on any
date is the average of the Quoted Prices of the Common Stock for 15 consecutive
trading days commencing 16 days before the date in question. The "Quoted Price"
of the Common Stock is the last reported sales price of the Common Stock as
reported by The Nasdaq National Market, or if the Common Stock is listed on
another national securities exchange, the last reported sales price of the
Common Stock on such exchange which shall be for consolidated trading if
applicable to such exchange, or if neither so reported or listed, the last
reported bid price of the Common Stock. In the absence of one or more such
quotations, the current market price shall be determined by mutual agreement of
the Company and the Majority Holders or, in the absence of such mutual
agreement, shall be determined in good faith by a nationally recognized
investment banking firm that is a member firm of the NASD and independent of the
Company and chosen in accordance with the following sentence (an "Appraiser").
The Appraiser shall be chosen by mutual agreement of the Majority Holders and
the Company; provided, that if there shall be a disagreement as to the selection
of any Appraiser, then each of the Company and the Majority Holders shall choose
one investment banking firm satisfying the foregoing criteria and those two
firms then shall agree upon a third such investment banking firm who shall act
as the Appraiser. If applicable, in connection with the sale of units consisting
of Common Stock and other securities, such investment bank shall take into
consideration the value of each component of such unit. If there shall be more
than one class of Common Stock outstanding, the "current market price" per share
of Common Stock shall be the highest of the "current market prices" per share of
such classes of Common Stock.
1.2.
1.3. Consideration Received. For purposes of any computation with respect to
consideration received pursuant to Sections 5.4 and 5.5, the following shall
apply:
12
1.4.
(a) in the case of the issuance of shares of Common Stock for cash, the
consideration shall be the amount of such cash (provided that in no case
shall any deduction be made for any commissions, discounts or other
expenses incurred by the Company for any underwriting of the issue or
otherwise in connection therewith) plus, where the issuance is pursuant
to the exercise of an option, warrant or right, all cash amounts paid to
the Company for such option, warrant or right at its issue, including
without limitation, any amount allocable to such option, warrant, or
right if issued together with other securities in a unit;
(a) in the case of the issuance of shares of Common Stock for a
consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair market value thereof as
determined by an Appraiser, whose determination shall be given to the
Holders; and
(a) in the case of the issuance of securities convertible into or
exchangeable for shares of Common Stock, the aggregate consideration
received therefor shall be deemed to be the consideration received by
the Company for the issuance of such securities plus the additional
minimum consideration, if any, to be received by the Company upon the
conversion or exchange thereof (the consideration in each case to be
determined in the same manner as provided in clauses (a) and (b) of this
Section 5.7).
1.1. When Adjustment May Be Deferred. If the amount of any adjustment of the
Current Warrant Price required pursuant to this Section 5 would be less than one
percent (1%) of the Current Warrant Price in effect at the time such adjustment
is otherwise so required to be made, such amount shall be carried forward and
adjustment with respect thereto made at the time of and together with any
subsequent adjustment which, together with such amount and any other amount or
amounts so carried forward, shall aggregate at least one percent (1%) of such
Current Warrant Price. All calculations under this Section 5 shall be made to
the nearest cent or to the nearest 1/100th of a share, as the case may be.
1.2.
1.3. When No Adjustment Required. No adjustment need be made for (a) rights to
purchase Common Stock pursuant to a Company plan for reinvestment of dividends,
and (b) a change in the par value or no par value of Common Stock; provided,
that the Company shall not increase the par value to exceed the Current Warrant
Price. To the extent that the Warrants become exercisable into cash, no
adjustment need be made thereafter as to the cash. Interest will not accrue on
the cash.
1.4.
1.5. Notice of Adjustment. Whenever an event occurs which requires an
adjustment to the Current Warrant Price or number of shares of Warrant Stock,
the Company shall promptly mail (first class) to the Holders a notice of such
event and the computation of the adjustment. The Company shall provide the
Holders with a certificate from the Company's chief financial
13
officer briefly stating the facts requiring the adjustment and the manner of
computing such adjustment.
1.6.
1.7. Voluntary Reduction. The Company from time to time may reduce the Current
Warrant Price by any amount for any period of time if the period is at least 20
days and if the reduction is irrevocable during the period. A reduction of the
Current Warrant Price pursuant to this Section 5.11 does not change or adjust
the Current Warrant Price otherwise in effect for purposes of Sections 5.1, 5.2,
5.3, 5.4 or 5.5. The Company in its discretion may make such reductions in the
Current Warrant Price in addition to those required by this Section 5 as it
considers to be advisable in order that any event treated for federal income tax
purposes as a dividend of stock or stock rights shall not be taxable to the
recipients.
1.8.
1.9. Notice of Certain Transaction. If the Company takes any action that would
require an adjustment pursuant to Sections 5.1, 5.2, 5.3, 5.4 or 5.5, the
Company shall mail (first class) to the holders of the Warrants a notice stating
the proposed record date for a dividend or distribution or the proposed
effective date of a subdivision, combination, reclassification, consolidation,
merger, transfer, lease, liquidation or dissolution or any other transaction or
event requiring an adjustment in the Current Warrant Price. The Company shall
mail the notice at least 15 days before such date; provided, however, that in no
event must the Company give the Holders notice prior to the public announcement
of the event requiring such adjustment. Failure to mail the notice or any defect
in it shall not affect the validity of the transaction.
1.10.
1.11. Preservation of Purchase Rights Upon Reclassification, Consolidation,
etc.
(a) If the Company consolidates or merges with or into, or transfers or leases
all or substantially all its assets to, any Person, upon consummation of such
transaction, the Warrants shall automatically become exercisable for the kind
and amount of securities, cash or other assets that the Holder would have owned
immediately after the consolidation, merger or transfer or lease if the Holder
had exercised the Warrant immediately before the effective date of the
transaction. Concurrently with the consummation of such transaction, the
corporation formed by or surviving any such consolidation or merger if other
than the Company, or the Person to which such sale or conveyance shall have been
made, shall enter into a supplemental Warrant Agreement so providing and further
providing for adjustments which shall be as nearly equivalent as may be
practical to the adjustments provided for in this Section. The successor Company
shall mail to Warrant holders a notice describing the supplemental Warrant
Agreement.
(b)
(c) If the issuer of securities deliverable upon exercise of Warrants under the
supplemental Warrant Agreement is an affiliate of the formed, surviving,
transferee or lessee corporation, that issuer shall join in the supplemental
Warrant Agreement.
(d)
14
(e) If this Section 5.13 applies to any transaction, Sections 5.1, 5.2, 5.3, 5.4
and 5.5 shall not apply to such transaction. The provisions of this Section 5.13
shall similarly apply to successive consolidations, mergers, sales or
conveyances.
(f)
1.12. Adjustment to the Number of Shares Purchasable Upon Exercise of Warrants,
Current Warrant Price Not Less than Par Value. Upon each adjustment of the
Current Warrant Price pursuant to this Section 5, each Warrant shall thereupon
evidence the right to purchase that number of shares of Common Stock (calculated
to the nearest hundredth of a share) obtained by multiplying the number of
shares of Common Stock purchasable immediately prior to such adjustment upon
exercise of the Warrant by the Current Warrant Price in effect immediately prior
to such adjustment and dividing the product so obtained by the Current Warrant
Price in effect immediately after such adjustment. The adjustment pursuant to
this Section 5.14 to the number of shares of Common Stock purchasable upon
exercise of a Warrant shall be made each time an adjustment of the Current
Warrant Price is made pursuant to this Section 5 (or would be made but for the
proviso in Section 5.3 (a)). In no event shall the Current Warrant Price be
adjusted below the par value per share of the Common Stock; provided, however,
that in the event such adjustment would have been made but for this sentence,
the number of shares issuable upon exercise of a Warrant shall be adjusted in
accordance with the remainder of this Section 5.14 as though such adjustment in
the Current Warrant Price had been made.
1.13.
1.14. Other Dilutive Events. In case any event shall occur as to which the
provisions of this Section 5 are not strictly applicable but the failure to make
any adjustment would not fairly protect the purchase rights represented by the
Warrants in accordance with the essential intent and principles of such
sections, then, in each such case, the Company shall make a good faith
adjustment to the Current Warrant Price and number of shares of Warrant Stock
into which each Warrant is exercisable in accordance with the intent of this
Section 5, and upon the written request of the Holders of a majority of the
Warrants, shall appoint a firm of independent certified public accounts of
recognized national standing (which may be the regular auditors of the Company),
which shall give their opinion upon the adjustment, if any, on a basis
consistent with the essential intent and principles established in Section 5,
necessary to preserve, without dilution, the purchase rights represented by the
Warrants. Upon receipt of such opinion, the Company will promptly mail a copy
thereof to the holder of each Warrant and shall make the adjustments described
therein.
1.15.
1.16. Company Determination Final. Absent manifest error, any determination
that the Company or the Board of Directors of the Company must make in good
faith pursuant to Sections 5.3, 5.6 or 5.8, shall be conclusive, if reasonable.
1.17.
1.18. Form of Warrants. The Company may, at its option, issue new warrant
certificates evidencing Warrants in such form as may be approved by its Board of
Directors to reflect any adjustment or change in the Current Warrant Price per
Warrant Stock and the number
15
or kind or class of shares or other securities or property purchasable under the
Warrant Certificates made in accordance with the provisions of this Warrant
Agreement.
1. NOTICES TO HOLDERS.
2.
2.1. Notice of Adjustments. Whenever the number of shares of Common Stock for
which a Warrant is exercisable, or whenever the price at which a share of such
Common Stock may be purchased upon exercise of the Warrants, shall be adjusted
pursuant to Section 5, the Company shall forthwith prepare a certificate to be
executed by the chief financial officer of the Company setting forth, in
reasonable detail, the event requiring the adjustment and the method by which
such adjustment was calculated, specifying the number of shares of Common Stock
for which a Warrant is exercisable and describing the number and kind of any
other shares of stock or other property for which a Warrant is exercisable, and
any change in the purchase price or prices thereof, after giving effect to such
adjustment or change. The Company shall promptly cause a signed copy of such
certificate to be delivered to each Holder in accordance with Section 13.1.
1.1. Notice of Corporate Action. In case:
1.2.
(a) of any consolidation or merger to which the Company is a party and
for which approval of any stockholders of the Company is required, or of
the conveyance or transfer of the properties and assets of the Company
substantially as an entirety, or of any reclassification or change of
Common Stock issuable upon exercise of the Warrants (other than a change
in par value, or from par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination); or
(a) of the voluntary or involuntary dissolution, liquidation or winding
up of the Company;
then the Company shall cause to be given to each of the Holders at his or her
address appearing on the Warrant register, at least ten (10) days prior to the
applicable record date hereinafter specified, or promptly in the case of events
for which there is no record date, in accordance with Section 13.1, a written
notice stating the date on which any such consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up is expected to become effective
or consummated, and the date as of which it is expected that holders of record
of shares of Common Stock shall be entitled to exchange such shares for
securities or other property, if any, deliverable upon such reclassification,
consolidation, merger, conveyance, transfer, dissolution, liquidation or winding
up. The failure to give the notice required by this Section 6.2 or any defect
therein shall not affect the legality or validly of any consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up, or the vote upon
any action.
16
1. COVENANTS.
2.
The Company will (1) not increase the par value of any shares of Common
Stock receivable upon the exercise of a Warrant above the amount payable
therefor upon such exercise immediately prior to such increase in par value and
(2) 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 of
Common Stock upon the exercise of any Warrant.
1. RESERVATION AND AUTHORIZATION OF COMMON STOCK: REGISTRATION WITH OR APPROVAL
OF ANY GOVERNMENTAL AUTHORITY.
2.
(a) From and after the date hereof, the Company shall at all times reserve and
keep available for issue upon the exercise of Warrants such number of its
authorized but unissued shares of Common Stock as will be sufficient to permit
the exercise in full of all outstanding Warrants. All shares of Common Stock
which shall be so issuable, when issued upon exercise of any Warrant and payment
therefor in accordance with the terms of this Warrant Agreement and such
Warrant, shall be duly and validly issued and fully paid and non-assessable, and
not subject to preemptive rights.
(b)
(c) Before taking any action which would cause an adjustment reducing the
Current Warrant Price below the then par value, if any, of the shares of Common
Stock issuable upon exercise of the Warrants, the Company shall take any
corporate action which may be necessary in order that the Company may validly
and legally issue fully paid and non-assessable shares of such Common Stock at
such adjusted Current Warrant Price.
1. STOCK AND WARRANT TRANSFER BOOKS.
2.
The Company will not at any time, except upon dissolution, liquidation
or winding up of the Company, close its stock transfer books or Warrant transfer
books so as to result in preventing or delaying the exercise or transfer of any
Warrant.
1. LOSS OR MUTILATION.
2.
Upon receipt by the Company from any Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of such Holder's Warrant and indemnity reasonably satisfactory to it,
and in case of mutilation upon surrender and cancellation thereof, the Company
will execute and deliver in lieu thereof a new Warrant of like tenor to such
Holder.
17
1. OFFICE OF COMPANY.
2.
As long as any of the Warrants remain outstanding, the Company shall
maintain an office or agency (which may be the principal executive offices of
the Company) where the Warrants may be presented for exercise, registration of
transfer, division or combination as provided in this Warrant Agreement. The
Company shall initially maintain such an agency at the Company's Principal
Offices.
1. REPURCHASE BY COMPANY OF WARRANTS.
2.
(a) Company's Obligation to Repurchase Warrants. If, at any time prior to
January 31, 2001, the Company shall prepay the entire Tranche C Loans (as
defined in the Loan Agreement), including any applicable interest and fees
(including, without limitation, any applicable prepayment fees) owing in
connection therewith, then the Company shall repurchase from each Holder such
Holder's pro rata share of 300,000 Warrants, in the manner set forth in Section
12.2 below, for an amount equal to $0.001 per Warrant; provided, however, that
nothing herein shall preclude the exercise by such Holder of any portion of such
Warrant exercisable at any time prior to such repurchase.
(a) At any time prior to the Expiration Date, each Holder may, in its sole
discretion, require the Company to repurchase from such Holder each Warrant or a
portion thereof then held by such Holder for an amount equal to the product of
(x) three percent (3%) of the Company's trailing 12-month EBITDA (as defined in
the Loan Agreement) divided by (y) either (I) 250,000 if the Company has prepaid
the Tranche C Loans in full as described in Section 12.1 (a) above, or (II)
550,000 if the Company has not prepaid the Tranche C Loans in full as described
in Section 12.1(a) above.
(b)
1.2. Payment of Repurchase Price. On the date of any repurchase of Warrants
pursuant to this Section 12, each Holder shall assign to Company such Holder's
Warrant being repurchased, without any representation or warranty, by surrender
of such Holder's Warrant to the Company at the Company's Principal Office and
delivery to the Company of a completed Repurchase Form substantially in the form
set forth on the reverse side of the Form of Warrant Certificate attached as
Exhibit A hereto duly executed by the Holder or its agent or attorney, against
payment therefor of the repurchase price calculated in accordance with Section
12.1(a) or Section 12.1(b) above, as applicable, by certified bank check or wire
transfer issued by the Company.
18
1. MISCELLANEOUS.
2.
2.1. Notice Generally. Any notice, demand, request, consent, approval,
declaration, delivery or other communication hereunder to be made pursuant to
the provisions of this Warrant Agreement shall be sufficiently given or made if
in writing and either delivered in person with receipt acknowledged or sent by
registered or certified mail, return receipt requested, postage prepaid or by
telecopy and confirmed by telecopy answerback, addressed as follows:
(a) If to any Holder or holder of Warrant Stock, at its last known address
appearing on the warrant register of the Company maintained for such purpose.
(b)
(c) If to the Company, at:
(d)
(e) Restoration Hardware, Inc.
(f) 00 Xxxx Xxxx, Xxxxx X
(x) Xxxxx Xxxxxx, XX 00000
Phone: 000-000-0000
Telecopy Number: 000-000-0000
Attention: Chief Financial Officer
With a copy to:
Xxxxxxx Phleger & Xxxxxxxx LLP
0000 Xxxx Xxxx
Xxxx Xxxx, XX 00000
Phone: 000-000-0000
Telecopy Number: 000-000-0000
Attention: Xxxxxxx Xxxxxx, Esq.
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, telecopied and confirmed by telecopy
answerback or five (5) Business Days after the same shall have been deposited in
the United States mail, certified with return receipt requested, whichever is
earlier. Failure or delay in delivering copies of any notice, demand, request,
approval, declaration, delivery or other communication to the Person designated
above to receive a copy shall in no way adversely affect the effectiveness of
such notice, demand, request, approval, declaration, delivery or other
communication.
19
1.1. Successors and Assigns. All covenants and provisions of this Warrant
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.
1.2.
1.3. Amendment. This Warrant Agreement and the Warrants may only be modified or
amended or the provisions hereof and thereof waived with the written consent of
the Company and the Majority Holders; provided, however, that no Warrant may be
modified or amended to reduce the number of shares of Common Stock for which
such Warrant is exercisable or to increase the price at which such shares may be
purchased upon exercise of such Warrant (other than giving effect to any
adjustment as provided herein and therein) without the prior written consent of
the Holder thereof.
1.4.
1.5. Severability. Wherever possible, each provision of this Warrant Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Warrant Agreement.
1.6.
1.7. Headings. The headings used in this Warrant Agreement are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant Agreement.
1.8.
1.9. Governing Law. This Warrant Agreement and the Warrants shall be governed
by the laws of the State of New York, without regard to the provisions thereof
relating to conflict of laws.
1.10.
1.11. Counterparts. This Warrant Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute one and the
same instrument.
1.12.
1.13. IN WITNESS WHEREOF, the Company has caused this Warrant Agreement to be
duly executed by its duly authorized officers as of the date first above
written.
1.14.
1.15.
1.16.
RESTORATION HARDWARE, INC.
By:
Name:
Title:
20
EXHIBIT A
[FORM OF FACE OF WARRANT CERTIFICATE]
WARRANT TO PURCHASE COMMON STOCK
OF RESTORATION HARDWARE, INC.
Warrant Certificate No.: Number of Warrants:
See Reverse for Certain Definitions
Exercisable from and after __________ __, ____ until 5:00 p.m., New
York City time on __________ __, 2005.
This Warrant Certificate certifies that [____________] or registered
assigns, is the registered holder of the number of Warrants set forth above
expiring at 5:00 p.m., New York City time, on __________ __, ____ or, if such
date is not a business day, the next succeeding business day (the "Warrants") to
purchase Common Stock, par value $[ ] per share (the "Common Stock"), of
Restoration Hardware, Inc., a Delaware corporation (the "Company"). The Common
Stock issuable upon exercise of Warrants is hereinafter referred to as the
"Warrant Stock." Subject to the immediately succeeding paragraph, each Warrant
entitles the holder upon exercise to purchase from the Company on or before 5:00
p.m., New York City time, on __________ __, 2005 or, if such date is not a
business day, the next succeeding business day, one share of Common Stock, at
the purchase price of $____ per share, each subject to adjustment as set forth
herein and in the Warrant Agreement dated as of September __, 2000 (the "Warrant
Agreement") by and among the Company, Xxxxxxx Xxxxx & Co. and Enhanced Retail
Funding, LLC, in whole or in part on and subject to the terms and conditions set
forth herein and in the Warrant Agreement. Such purchase shall be payable in
lawful money of the United States of America by certified or official bank check
or wire transfer or any combination thereof to the order of the Company at the
principal office of the Company, but only subject to the conditions set forth
herein and in the Warrant Agreement. The number of shares of Common Stock for
which each Warrant is exercisable, and the price at which such shares may be
purchased upon exercise of each Warrant, are subject to adjustment upon the
occurrence of certain events as set forth in the Warrant Agreement. Whenever the
number of shares of Common Stock for which a Warrant is exercisable, or the
price at which a share of such Common Stock may be purchased upon exercise of
the Warrants, is adjusted pursuant to the Warrant Agreement, the Company shall
cause to be given to each of the registered holders of the Warrants at such
holders'
21
addresses appearing on the warrant register written notice of such adjustment by
first class mail postage pre-paid.
Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse side hereof and such further provisions
shall for all purposes have the same effect as though fully set forth at this
place.
THIS WARRANT CERTIFICATE SHALL BE GOVERNED BY THE LAWS OF THE STATE
OF NEW YORK, WITHOUT REGARD TO THE PROVISIONS THEREOF RELATING TO CONFLICT OF
LAWS.
22
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate
to be signed by its President and has caused its corporate seal to be affixed
hereunto or imprinted hereon.
Dated:
(Seal)
Attest: RESTORATION HARDWARE, INC.
By:
-----------------------------
Name: Name:
------------------------
Title: Secretary Title:
23
[FORM OF REVERSE OF WARRANT CERTIFICATE]
The Warrants evidenced by this Warrant Certificate are part of a
duly authorized issue of up to 550,000 Warrants expiring at 5:00 p.m., New York
City time, on __________ __, 2005 or, if such date is not a business day, the
next succeeding business day, entitling the holder on exercise to purchase
shares of Common Stock, par value [ ] per share, of the Company, and are issued
or to be issued pursuant to the Warrant Agreement, 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
(the words "Holders" or "Holder" meaning the registered holders or registered
holder of the Warrants). A copy of the Warrant Agreement may be obtained by the
Holder hereof upon written request to the Company.
Warrants may be exercised at any time on and after _____ p.m., New
York City time, on _________ __, 2000 and on or before 5:00 p.m., New York City
time, on _________ __, 2005 or, if such date is not a business day, the next
succeeding business day. The Holder of Warrants evidenced by this Warrant
Certificate may exercise them by surrendering this Warrant Certificate, with the
form of election to purchase set forth hereon properly completed and executed,
together with payment of the purchase price by certified or official bank check
or wire transfer or any combination thereof to the order of the Company and the
other required documentation. In the event that 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 hereof
or his assignee a new Warrant Certificate evidencing the number of Warrants not
exercised. The Holder of Warrants evidenced by this Warrant Certificate may
require the Company, pursuant to Section 12 of the Warrant Agreement, to
repurchase such Warrants upon the occurrence of certain events as set forth in
the Warrant Agreement.
The Warrant Agreement provides that the number of shares of Common
Stock for which each Warrant is exercisable, and the price at which such shares
may be purchased upon exercise of each Warrant, are subject to adjustment upon
the occurrence of certain events as set forth in the Warrant Agreement. The
Company shall not be required to issue any fractional share of Common Stock upon
the exercise of any Warrant, but the Company shall round up or down to the
nearest share of Common Stock as provided in the Warrant Agreement.
Warrant Certificates, when surrendered at the office of the Company
by the registered Holder thereof in person or by such Holders legal
representative or attorney duly authorized in writing, 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.
24
Upon due presentation for registration of transfer of this Warrant
Certificate at the office of the Company a new Warrant Certificate or Warrant
Certificates of like tenor and evidencing in the aggregate a like number of
Warrants shall be issued to the transferee in exchange for this Warrant
Certificate, subject to the limitations provided in the Warrant Agreement
without charge except for any tax imposed in connection therewith.
25
[ELECTION TO PURCHASE FORM]
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably
exercises this Warrant for the purchase of _____________ Shares of Common Stock
of RESTORATION HARDWARE, INC. and herewith makes payment therefor, all at the
price and on the terms and conditions specified in this Warrant and the Warrant
Agreement and requests that certificates for the shares of Common Stock hereby
purchased (and any securities or other property issuable upon such exercise) be
issued in the name of and delivered to ____________ whose address is
________________ and, if such shares of Common Stock shall not include all of
the shares of Common Stock issuable as provided in this Warrant, that a new
Warrant of like tenor and date for the balance of the shares of Common Stock
issuable hereunder be delivered to the undersigned.
(Name of Registered Owner)
(Signature of Registered Owner)
(Street Address)
(City) (State) (Zip Code)
NOTICE: The signature on this election to purchase must correspond with
the name as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatsoever.
26
[ASSIGNMENT FORM]
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the number of
shares of Common Stock set forth below:
Name and Address of Assignee No. of Shares of
Common Stock
and does hereby irrevocably constitute and appoint ____________________
attorney-in-fact to register such transfer on the books of RESTORATION HARDWARE,
INC. maintained for the purpose, with full power of substitution in the
premises.
Dated: Print Name:
------------------- ---------------------------
Signature:
----------------------------
Witness:
------------------------------
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatsoever.
27
[REPURCHASE FORM]
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby notifies RESTORATION HARDWARE, INC. (the "Company") that it is requiring
the Company to repurchase this Warrant, with respect to the number of shares of
Common Stock set forth below:
No. of Shares of Common Stock
and does hereby irrevocably constitute and appoint ______________________
attorney-in-fact to register such repurchase on the books of the Company
maintained for the purpose, with full power of substitution in the premises.
Dated: Print Name:
------------------- ---------------------------
Signature:
----------------------------
Witness:
------------------------------
NOTICE: The signature on this repurchase must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatsoever.
28
RESTORATION HARDWARE, INC.
XXXXXXX SACHS & CO.
AND
ENHANCED RETAIL FUNDING, LLC,
as Holders
-------------------------
Warrants to Purchase 550,000 Shares of Common
Stock
-------------------------
WARRANT AGREEMENT
Dated as of September 27, 2000
