THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON
EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS
WARRANT UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO SYNERGY BRANDS INC. THAT SUCH REGISTRATION IS
NOT REQUIRED.
Right to Purchase up to 33,333 Shares of Common Stock of
Synergy Brands Inc.
(subject to adjustment as provided herein)
COMMON STOCK PURCHASE WARRANT
No. Issue Date: January 25, 2005
--------------
SYNERGY BRANDS INC., a corporation organized under the laws of the State of
Delaware ("Synergy"), hereby certifies that, for value received, LAURUS MASTER
FUND, LTD., or assigns (the "Holder"), is entitled, subject to the terms set
forth below, to purchase from the Company (as defined herein) from and after the
Issue Date of this Warrant and at any time or from time to time before 5:00
p.m., New York time, through the close of business January 25, 2012 (the
"Expiration Date"), up to 33,333 (subject to adjustment as provided herein)
fully paid and nonassessable shares of Common Stock (as hereinafter defined),
$.001 par value per share, at the applicable Exercise Price per share (as
defined below). The number and character of such shares of Common Stock and the
applicable Exercise Price per share are subject to adjustment as provided
herein.
As used herein the following terms, unless the context otherwise requires,
have the following respective meanings:
(a) The term "Company" shall include Synergy and any corporation which
shall succeed, or assume the obligations of, Synergy hereunder.
(b) The term "Common Stock" includes (i) the Company's Common Stock,
par value $.001 per share; and (ii) any other securities into which or for
which any of the securities described in (i) may be converted or exchanged
pursuant to a plan of recapitalization, reorganization, merger, sale of
assets or otherwise.
(c) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate
or otherwise) which the holder of the Warrant at any time shall be entitled
to receive, or shall have received, on the exercise of the Warrant, in lieu
of or in addition to Common Stock, or which at any time shall be issuable
or shall have been issued in exchange for or in replacement of Common Stock
or Other Securities pursuant to Section 4 or otherwise.
(d) The "Exercise Price" applicable under this Warrant shall be $3.50
per share.
1. EXERCISE OF WARRANT.
1.1 NUMBER OF SHARES ISSUABLE UPON EXERCISE. From and after the date
hereof through and including the Expiration Date, the Holder shall be entitled
to receive, upon exercise of this Warrant in whole or in part, by delivery of an
original or fax copy of an exercise notice in the form attached hereto as
Exhibit A (the "Exercise Notice"), shares of Common Stock of the Company,
subject to adjustment pursuant to Section 4.
1.2 FAIR MARKET VALUE. For purposes hereof, the "Fair Market Value" of
a share of Common Stock as of a particular date (the "Determination Date") shall
mean:
(a) If the Company's Common Stock is traded on the American Stock
Exchange or another national exchange or is quoted on the National or
SmallCap Market of The Nasdaq Stock Market, Inc.("Nasdaq"), then the
closing or last sale price, respectively, reported for the last business
day immediately preceding the Determination Date.
(b) If the Company's Common Stock is not traded on the American Stock
Exchange or another national exchange or on the Nasdaq but is traded on the
NASD OTC Bulletin Board, then the mean of the average of the closing bid
and asked prices reported for the last business day immediately preceding
the Determination Date.
(c) Except as provided in clause (d) below, if the Company's Common
Stock is not publicly traded, then as the Holder and the Company agree or
in the absence of agreement by arbitration in accordance with the rules
then in effect of the American Arbitration Association, before a single
arbitrator to be chosen from a panel of persons qualified by education and
training to pass on the matter to be decided.
(d) If the Determination Date is the date of a liquidation, dissolution
or winding up, or any event deemed to be a liquidation, dissolution or
winding up pursuant to the Company's charter, then all amounts to be
payable per share to holders of the Common Stock pursuant to the charter in
the event of such liquidation, dissolution or winding up, plus all other
amounts to be payable per share in respect of the Common Stock in
liquidation under the charter, assuming for the purposes of this clause (d)
that all of the shares of Common Stock then issuable upon exercise of the
Warrant are outstanding at the Determination Date.
1.3 COMPANY ACKNOWLEDGMENT. The Company will, at the time of the
exercise of the Warrant, upon the request of the holder hereof acknowledge in
writing its continuing obligation to afford to such holder any rights to which
such holder shall continue to be entitled after such exercise in accordance with
the provisions of this Warrant. If the holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to such holder any such rights.
1.4 Trustee for Warrant Holders. In the event that a bank or trust
company shall have been appointed as trustee for the holders of the Warrant
pursuant to Subsection 3.2, such bank or trust company shall have all the powers
and duties of a warrant agent (as hereinafter described) and shall accept, in
its own name for the account of the Company or such successor person as may be
entitled thereto, all amounts otherwise payable to the Company or such
successor, as the case may be, on exercise of this Warrant pursuant to this
Section 1.
2. PROCEDURE FOR EXERCISE.
2.1 DELIVERY OF STOCK CERTIFICATES, ETC., ON EXERCISE. The Company
agrees that the shares of Common Stock purchased upon exercise of this Warrant
shall be deemed to be issued to the Holder as the record owner of such shares as
of the close of business on the date on which this Warrant shall have been
surrendered and payment made for such shares in accordance herewith. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within three (3) business days thereafter, the Company at its expense
(including the payment by it of any applicable issue taxes) will cause to be
issued in the name of and delivered to the Holder, or as such Holder (upon
payment by such Holder of any applicable transfer taxes) may direct in
compliance with applicable securities laws, a certificate or certificates for
the number of duly and validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) to which such Holder shall be entitled on
such exercise, plus, in lieu of any fractional share to which such holder would
otherwise be entitled, cash equal to such fraction multiplied by the then Fair
Market Value of one full share, together with any other stock or other
securities and property (including cash, where applicable) to which such Holder
is entitled upon such exercise pursuant to Section 1 or otherwise.
2.2 EXERCISE. Payment may be made either (i) in cash or by certified or
official bank check payable to the order of the Company equal to the applicable
aggregate Exercise Price, (ii) by delivery of the Warrant, or shares of Common
Stock and/or Common Stock receivable upon exercise of the Warrant in accordance
with Section (b) below, or (iii) by a combination of any of the foregoing
methods, for the number of Common Shares specified in such Exercise Notice (as
such exercise number shall be adjusted to reflect any adjustment in the total
number of shares of Common Stock issuable to the Holder per the terms of this
Warrant) and the Holder shall thereupon be entitled to receive the number of
duly authorized, validly issued, fully-paid and non-assessable shares of Common
Stock (or Other Securities) determined as provided herein. Notwithstanding any
provisions herein to the contrary, if the Fair Market Value of one share of
Common Stock is greater than the Exercise Price (at the date of calculation as
set forth below), in lieu of exercising this Warrant for cash, the Holder may
elect to receive shares equal to the value (as determined below) of this Warrant
(or the portion thereof being exercised) by surrender of this Warrant at the
principal office of the Company together with the properly endorsed Exercise
Notice in which event the Company shall issue to the Holder a number of shares
of Common Stock computed using the following formula:
X=Y (A-B)
-------
A
Where X = the number of shares of Common Stock to be issued to the
Holder
Y = the number of shares of Common Stock purchasable under the
Warrant or, if only a portion of the Warrant is being
exercised, the portion of the Warrant being exercised (at
the date of such calculation)
A = the Fair Market Value of one share of the Company's Common
Stock (at the date of such calculation)
B = Exercise Price (as adjusted to the date of such
calculation)
3. EFFECT OF REORGANIZATION, ETC.; ADJUSTMENT OF EXERCISE PRICE.
3.1 REORGANIZATION, CONSOLIDATION, MERGER, ETC. In case at any time or
from time to time, the Company shall (a) effect a reorganization, (b)
consolidate with or merge into any other person, or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then, in each such
case, as a condition to the consummation of such a transaction, proper and
adequate provision shall be made by the Company whereby the Holder of this
Warrant, on the exercise hereof as provided in Section 1 at any time after the
consummation of such reorganization, consolidation or merger or the effective
date of such dissolution, as the case may be, shall receive, in lieu of the
Common Stock (or Other Securities) issuable on such exercise prior to such
consummation or such effective date, the stock and other securities and property
(including cash) to which such Holder would have been entitled upon such
consummation or in connection with such dissolution, as the case may be, if such
Holder had so exercised this Warrant, immediately prior thereto, all subject to
further adjustment thereafter as provided in Section 4.
3.2 DISSOLUTION. In the event of any dissolution of the Company
following the transfer of all or substantially all of its properties or assets,
the Company, concurrently with any distributions made to holders of its Common
Stock, shall at its expense deliver or cause to be delivered to the Holder the
stock and other securities and property (including cash, where applicable)
receivable by the Holder of the Warrant pursuant to Section 3.1, or, if the
Holder shall so instruct the Company, to a bank or trust company specified by
the Holder and having its principal office in New York, NY as trustee for the
Holder of the Warrant (the "Trustee").
3.3 CONTINUATION OF TERMS. Upon any reorganization, consolidation,
merger or transfer (and any dissolution following any transfer) referred to in
this Section 3, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in the
case of any such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided in Section 4. In the
event this Warrant does not continue in full force and effect after the
consummation of the transactions described in this Section 3, then the Company's
securities and property (including cash, where applicable) receivable by the
Holders of the Warrant will be delivered to Holder or the Trustee as
contemplated by Section 3.2.
4. EXTRAORDINARY EVENTS REGARDING COMMON STOCK. In the event that the
Company shall (a) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (b) subdivide its outstanding
shares of Common Stock, or (c) combine its outstanding shares of the Common
Stock into a smaller number of shares of the Common Stock, then, in each such
event, the Exercise Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the then Exercise Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such event, and the
product so obtained shall thereafter be the Exercise Price then in effect. The
Exercise Price, as so adjusted, shall be readjusted in the same manner upon the
happening of any successive event or events described herein in this Section 4.
The number of shares of Common Stock that the holder of this Warrant shall
thereafter, on the exercise hereof as provided in Section 1, be entitled to
receive shall be increased or decreased as the case may be to a number
determined by multiplying the number of shares of Common Stock that would
otherwise (but for the provisions of this Section 4) be issuable on such
exercise by a fraction of which (a) the numerator is the Exercise Price that
would otherwise (but for the provisions of this Section 4) be in effect, and (b)
the denominator is the Exercise Price in effect on the date of such exercise.
5. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise of the Warrant, the Company at its expense will promptly cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
or readjustment in accordance with the terms of the Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to have been issued or sold, (b) the number of shares of Common Stock (or Other
Securities) outstanding or deemed to be outstanding, and (c) the Exercise Price
and the number of shares of Common Stock to be received upon exercise of this
Warrant, in effect immediately prior to such adjustment or readjustment and as
adjusted or readjusted as provided in this Warrant. The Company will forthwith
mail a copy of each such certificate to the holder of the Warrant and any
Warrant agent of the Company (appointed pursuant to Section 11 hereof).
6. RESERVATION OF STOCK, ETC., ISSUABLE ON EXERCISE OF WARRANT. The Company
will at all times reserve from its authorized but unissued shares and keep
available, solely for issuance and delivery on the exercise of the Warrant,
shares of Common Stock (or Other Securities) from time to time issuable on the
exercise of the Warrant.
7. ASSIGNMENT; EXCHANGE OF WARRANT. Subject to compliance with applicable
securities laws, this Warrant, and the rights evidenced hereby, may be
transferred by any registered holder hereof (a "Transferor") in whole or in
part. On the surrender for exchange of this Warrant, with the Transferor's
endorsement in the form of Exhibit B attached hereto (the "Transferor
Endorsement Form") and together with evidence reasonably satisfactory to the
Company demonstrating compliance with applicable securities laws, which shall
include, without limitation, the provision of a legal opinion from the
Transferor's counsel (at the Company's expense) that such transfer is exempt
from the registration requirements of applicable securities laws, and payment by
the Transferor of any applicable transfer taxes) will issue and deliver to or on
the order of the Transferor thereof a new Warrant of like tenor, in the name of
the Transferor and/or the transferee(s) specified in such Transferor Endorsement
Form (each a "Transferee"), calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock called for on the face or faces
of the Warrant so surrendered by the Transferor.
8. REPLACEMENT OF WARRANT. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of any such loss, theft or destruction of this Warrant, on
delivery of an indemnity agreement or security reasonably satisfactory in form
and amount to the Company or, in the case of any such mutilation, on surrender
and cancellation of this Warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
9. REGISTRATION RIGHTS. The Holder of this Warrant has been granted certain
registration rights by the Company. These registration rights are set forth in a
Registration Rights Agreement entered into by the Company and Purchaser dated as
of even date of this Warrant.
10. MAXIMUM EXERCISE. The Holder shall not be entitled to exercise this
Warrant on an exercise date, in connection with that number of shares of Common
Stock which would be in excess of the sum of (i) the number of shares of Common
Stock beneficially owned by the Holder and its affiliates on an exercise date,
and (ii) the number of shares of Common Stock issuable upon the exercise of this
Warrant with respect to which the determination of this proviso is being made on
an exercise date, which would result in beneficial ownership by the Holder and
its affiliates of more than 4.99% of the outstanding shares of Common Stock of
the Company on such date. For the purposes of the proviso to the immediately
preceding sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation
13d-3 thereunder. Notwithstanding the foregoing, the restriction described in
this paragraph may be revoked upon 75 days prior notice from the Holder to the
Company and is automatically null and void upon an Event of Default under the
Note. Notwithstanding anything contained herein to the contrary, the number of
shares of Common Stock issuable by the Company and acquirable by the Holder at a
price below $2.48 per share pursuant to the terms of this Warrant, the Note made
by the Company to the Holder dated the date hereof (as amended, modified or
supplemented from time to time, the "Note"), the Purchase Agreement (as defined
in the Note) or any Related Agreement (as defined in the Purchase Agreement),
shall not exceed an aggregate of 436,012 shares of the Company's Common Stock
(subject to appropriate adjustment for stock splits, stock dividends, or other
similar recapitalizations affecting the Common Stock) (the "Maximum Common Stock
Issuance"), unless the issuance of shares hereunder in excess of the Maximum
Common Stock Issuance shall first be approved by the Company's shareholders. If
at any point in time and from time to time the number of shares of Common Stock
issued pursuant to the terms of this Warrant, the Note, the Purchase Agreement
or any Related Agreement, together with the number of shares of Common Stock
that would then be issuable by the Company to the Holder in the event of a
conversion or exercise pursuant to the terms of this Warrant, the Note, the
Purchase Agreement or any Related Agreement, would exceed the Maximum Common
Stock Issuance but for this paragraph, the Company shall promptly call a
shareholders meeting to solicit shareholder approval for the issuance of the
shares of Common Stock hereunder in excess of the Maximum Common Stock Issuance.
11. WARRANT AGENT. The Company may, by written notice to the each Holder of
the Warrant, appoint an agent for the purpose of issuing Common Stock (or Other
Securities) on the exercise of this Warrant pursuant to Section 1, exchanging
this Warrant pursuant to Section 7, and replacing this Warrant pursuant to
Section 8, or any of the foregoing, and thereafter any such issuance, exchange
or replacement, as the case may be, shall be made at such office by such agent.
12. TRANSFER ON THE COMPANY'S BOOKS. Until this Warrant is transferred on
the books of the Company, the Company may treat the registered holder hereof as
the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.
13. NOTICES, ETC. All notices and other communications from the Company to
the Holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such Holder or, until any such Holder furnishes to the
Company an address, then to, and at the address of, the last Holder of this
Warrant who has so furnished an address to the Company.
14. MISCELLANEOUS. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought. This Warrant shall be governed by and construed in accordance with the
laws of State of New York without regard to principles of conflicts of laws. Any
action brought concerning the transactions contemplated by this Warrant shall be
brought only in the state courts of New York or in the federal courts located in
the state of New York; provided, however, that the Holder may choose to waive
this provision and bring an action outside the state of New York. The
individuals executing this Warrant on behalf of the Company agree to submit to
the jurisdiction of such courts and waive trial by jury. The prevailing party
shall be entitled to recover from the other party its reasonable attorney's fees
and costs. In the event that any provision of this Warrant is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of this Warrant.
The headings in this Warrant are for purposes of reference only, and shall not
limit or otherwise affect any of the terms hereof. The invalidity or
unenforceability of any provision hereof shall in no way affect the validity,
enforceability or meaning of any other provision. The Company acknowledges that
legal counsel participated in the preparation of this Warrant and, therefore,
stipulates that the rule of construction that ambiguities are to be resolved
against the drafting party shall not be applied in the interpretation of this
Warrant to favor any party against the other party.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK;
SIGNATURE PAGE FOLLOWS.]
IN WITNESS WHEREOF, the Company has executed this Warrant as of the date
first written above.
SYNERGY BRANDS INC.
WITNESS:
By:
------------------ ----------------------
----------------------
Name:
----------------------
----------------------
Title:
----------------------
A-1
EXHIBIT A
FORM OF SUBSCRIPTION
(To Be Signed Only On Exercise Of Warrant)
TO: Synergy Brands Inc.
Attention: Chief Financial Officer
The undersigned, pursuant to the provisions set forth in the attached
Warrant (No._____ ), hereby irrevocably elects to purchase (check applicable
box):
_______________ ________ shares of the Common Stock covered by such
Warrant; or
_______________ the maximum number of shares of Common Stock covered by
such Warrant pursuant to the cashless exercise procedure set forth in Section 2.
The undersigned herewith makes payment of the full Exercise Price for such
shares at the price per share provided for in such Warrant, which is
$___________. Such payment takes the form of (check applicable box or boxes):
_____________ $__________ in lawful money of the United States; and/or
_____________ the cancellation of such portion of the attached Warrant as
is exercisable for a total of _______ shares of Common Stock
(using a Fair Market Value of $_______ per share for
purposes of this calculation); and/or
____________ the cancellation of such number of shares of Common Stock as
is necessary, in accordance with the formula set forth in
Section 2.2, to exercise this Warrant with respect to the
maximum number of shares of Common Stock purchasable
pursuant to the cashless exercise procedure set forth in
Section 2.
The undersigned requests that the certificates for such shares be issued in
the name of, and delivered to _____________________ whose address is
___________________________________________________________________________.
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933, as amended (the "Securities Act") or pursuant to an exemption from
registration under the Securities Act.
Dated:
----------------- ------------------------------------------
(Signature must conform to name of holder
as specified on the face of the Warrant)
Address:
------------------------------------------
------------------------------------------
A1
B-1
EXHIBIT B
FORM OF TRANSFEROR ENDORSEMENT
(To Be Signed Only On Transfer Of Warrant)
For value received, the undersigned hereby sells, assigns, and transfers
unto the person(s) named below under the heading "Transferees" the right
represented by the within the Warrant to purchase the percentage and number of
shares of Common Stock of Synergy Brands Inc., a Delaware corporation (together
with any successor or other entity that assumes the obligations thereof, the
"Company") into which the within the Warrant relates specified under the
headings "Percentage Transferred" and "Number Transferred," respectively,
opposite the name(s) of such person(s) and appoints each such person Attorney to
transfer its respective right on the books of the Company with full power of
substitution in the premises.
Percentage Number
Transferees Address Transferred Transferred
------------------ ------------------- ---------------- ----------------
------------------ ------------------- ---------------- ----------------
------------------ ------------------- ---------------- ----------------
------------------ ------------------- ---------------- ----------------
Dated:
----------------- ------------------------------------------
(Signature must conform to name of holder
as specified on the face of the Warrant)
Address:
------------------------------------------
------------------------------------------
SIGNED IN THE PRESENCE OF:
------------------------------------------
------------------------------------------
(Name)
ACCEPTED AND AGREED:
[TRANSFEREE]
-------------------
(Name)
B1
