Contract
NEITHER
THESE WARRANTS NOR THE COMMON STOCK ISSUABLE UPON EXERCISE OF THESE WARRANTS
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”),
OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, PLEDGED OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH
SECURITIES UNDER THE ACT OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.
| ___________ Warrants |
February
________,
2007
|
WARRANTS
Sub-Urban
Brands, Inc., a Nevada corporation (“SUUB”),
certifies that, for value received, ______________ (“____________”),
or registered assigns (the “Holder”),
is the owner of ____________ (________) Warrants of SUUB (the “Warrants”).
Each Warrant entitles the Holder to purchase from SUUB at any time prior to
the
Expiration Date (as defined below) one share of the common stock of SUUB (the
“Common
Stock”)
for $0.15 per share (the “Exercise
Price”),
subject to adjustment as defined in section 2, on the terms and conditions
hereinafter provided. The Exercise Price and the number of shares of Common
Stock purchasable upon exercise of each Warrant are subject to adjustment as
provided in this Certificate.
1. Vesting;
Expiration Date; Exercise
1.1 Vesting.
The Warrants shall vest and become exercisable as of the date of
this Certificate.
1.2 Expiration
Date. The Warrants shall expire on February ____, 2012 (the “Expiration
Date”).
1.3 Manner
of Exercise. The Warrants are exercisable, in whole or in part, by delivery
to SUUB of the following (the “Exercise
Documents”):
(a) this Certificate (b) a written notice of election to exercise the Warrants;
and (c) payment of the Exercise Price in immediately available funds or by
“net”
exercise as contemplated by Section 1.4 of this Certificate. Within ten (10)
business days following receipt of the foregoing, SUUB shall execute and deliver
to the Holder: (a) a certificate or certificates representing the aggregate
number of shares of Common Stock purchased by the Holder, and (b) if less than
all of the Warrants evidenced by this Certificate are exercised, a new
certificate evidencing the Warrants not so exercised.
1.4 Net
Exercise. In lieu of the payment methods set forth in Section 1.3 above, the
Holder may elect to exchange all or some of the Warrants for the 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 Holder.
Y
= the number of shares of Common Stock purchasable under the Warrants being
exchanged (as adjusted to the date of such calculation).
A
= the Market Price on the date of receipt by SUUB of the exercise
documents.
B
= the Exercise Price of the Warrants being exchanged (as adjusted in accordance
with the terms of Section 2 hereof).
The
“Market
Price”
on
any
trading day shall be deemed to be the average of the ask and bid price of the
Common Stock over the five (5) trading days immediately preceding receipt by
the
Company of the exercise documents as officially reported by the principal
securities exchange or quotation medium on which the shares of Common Stock
are
listed or eligible for trading. If the Market Price cannot be determined
pursuant to the sentence above, the Market Price shall be determined in good
faith (using customary valuation methods) by the Board of Directors of the
Company, and in the sole and absolute discretion of the Board of Directors
of
the Company, based on the information best available to it, including recent
arms-length sales of Common Stock to unaffiliated persons.
1.5 Restriction
on “Net” Exercise. Notwithstanding any other provision of this Certificate,
Holder shall not be permitted to effect a “net” exercise of the Warrants: (a)
prior to one year from the date hereof and (b) after one year from the date
hereof if on the date of exercise the resale of the underlying shares by Holder
has been registered under the Securities Act of 1933, as amended, pursuant
to a
registration statement which is then in effect, and on such date the Holder
shall be permitted to resell such shares pursuant to such registration
statement, and the Common Stock shall be listed or quoted for trading on the
OTC
Bulletin Board, the Nasdaq Stock Market or an exchange or quotation
system.
Adjustments
of Exercise Price and Number and Kind of Conversion Shares
1.6 In
the event that SUUB shall at any time hereafter (a) pay a dividend in Common
Stock or securities convertible into Common Stock; (b) subdivide or split its
outstanding Common Stock; (c) combine its outstanding Common Stock into a
smaller number of shares; then the number of shares to be issued immediately
after the occurrence of any such event shall be adjusted so that the Holder
thereafter may receive the number of shares of Common Stock it would have owned
immediately following such action if it had exercised the Warrants immediately
prior to such action and the Exercise Price shall be adjusted to reflect such
proportionate increases or decreases in the number of shares.
1.7 In
case of any reclassification of the outstanding shares of Common Stock (other
than a change covered by Section 2.1 hereof or a change which solely affects
the
par value of such shares) or in the case of any acquisition of the Company’s
Common Stock for stock of the acquirer, consolidation or merger in which SUUB
is
not the continuing corporation and which results in any reclassification,
replacement or capital reorganization of the outstanding shares, the Holder
shall have the right thereafter (until the Expiration Date) to receive upon
the
exercise hereof, for the same aggregate Exercise Price payable hereunder
immediately prior to such event, the kind and amount of shares of stock or
other
securities or property receivable upon such reclassification, capital
reorganization, merger, acquisition for stock or consolidation, that would
have
been received by a Holder of the number of shares of Common Stock obtainable
upon the exercise of the Warrants immediately prior to such event; and if any
reclassification also results in a change in shares covered by Section 2.1,
then
such adjustment shall be made pursuant to both this Section 2.2 and Section
2.1
(without duplication). The provisions of this Section 2.2 shall similarly apply
to successive reclassifications, capital reorganizations and mergers or
consolidations, sales or other transfers.
-2-
1.8
The Exercise Price may be adjusted for any unexercised warrants prior to the
Expiration Date in accordance with the terms of the attached Exhibit B -
Exercise Price Adjustments.
2. Reservation
of Shares. SUUB
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, such number of shares of Common Stock as shall from
time
to time be issuable upon exercise of the Warrants. If at any time the number
of
authorized but unissued shares of Common Stock shall not be sufficient to permit
the exercise of the Warrants, SUUB shall promptly seek such corporate action
as
may be reasonably necessary to increase its authorized but unissued shares
of
Common Stock to such number of shares as shall be sufficient for such
purpose.
3. Loss
or Mutilation. Upon
receipt of evidence reasonably satisfactory to SUUB of the ownership of and
the
loss, theft, destruction or mutilation of this Certificate, and of indemnity
reasonably satisfactory to it, and (in the case of mutilation) upon surrender
and cancellation of these Warrants, SUUB will execute and deliver in lieu
thereof a new Certificate of like tenor as the lost, stolen, destroyed or
mutilated Certificate.
4. Representations
and Warranties of SUUB. SUUB
hereby represents and warrants to Holder that:
4.1 Due
Authorization.
All corporate action on the part of SUUB, its officers, directors and
shareholders necessary for (a) the authorization, execution and delivery of,
and
the performance of all obligations of SUUB under, these Warrants, and (b) the
authorization, issuance, reservation for issuance and delivery of all of the
Common Stock issuable upon exercise of these Warrants, has been duly taken.
These Warrants constitute a valid and binding obligation of SUUB enforceable
in
accordance with their terms, subject, as to enforcement of remedies, to
applicable bankruptcy, insolvency, moratorium, reorganization and similar laws
affecting creditors’ rights generally and to general equitable
principles.
4.2 Organization.
SUUB is a corporation duly organized, validly existing and in good standing
under the laws of the State referenced in the first paragraph of this
Certificate and has all requisite corporate power to own, lease and operate
its
property and to carry on its business as now being conducted and as currently
proposed to be conducted.
4.3 Valid
Issuance of Stock. Any shares of Common Stock issued upon exercise of these
Warrants will be duly and validly issued, fully paid and
non-assessable.
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4.4 Governmental
Consents. All consents, approvals, orders, authorizations or registrations,
qualifications, declarations or filings with any federal or state governmental
authority on the part of SUUB required in connection with the consummation
of
the transactions contemplated herein have been obtained.
5. Representations
and Warranties of ___________ .
___________ hereby represents and warrants to SUUB that:
5.1 ___________
is acquiring the Warrants for its own account, for investment purposes
only.
5.2 ___________
understands that an investment in the Warrants involves a high degree of risk,
and ___________ has the financial ability to bear the economic risk of this
investment in the Warrants, including a complete loss of such investment.
___________ has adequate means for providing for its current financial needs
and
has no need for liquidity with respect to this investment.
5.3 ___________
has such knowledge and experience in financial and business matters that it
is
capable of evaluating the merits and risks of an investment in the Warrants
and
in protecting its own interest in connection with this transaction.
5.4 ___________
understands that the Warrants have not been registered under the Securities
Act
of 1933, as amended (the “Securities
Act”)
or under any state securities laws. ___________ is familiar with the provisions
of the Securities Act and Rule 144 thereunder and understands that unless an
appropriate registration statement is filed, the restrictions on transfer on
the
Warrants may result in ___________ being required to hold the Warrants or the
shares issued upon their exercise for an indefinite period of time.
5.5 ___________
agrees not to sell, transfer, assign, gift, create a security interest in,
or
otherwise dispose of, with or without consideration (collectively, “Transfer”)
any of the Warrants except pursuant to an effective registration statement
under
the Securities Act or an exemption from registration. As a further condition
to
any such Transfer, except in the event that such Transfer is made pursuant
to an
effective registration statement under the Securities Act, if in the reasonable
opinion of counsel to SUUB any Transfer of the Warrants by the contemplated
transferee thereof would not be exempt from the registration and prospectus
delivery requirements of the Securities Act, SUUB may require the contemplated
transferee to furnish SUUB with an investment letter setting forth such
information and agreements as may be reasonably requested by SUUB to ensure
compliance by such transferee with the Securities Act.
6. Notices
of Record Date
In
the event:
6.1 SUUB
shall take a record of the holders of its Common Stock (or other stock or
securities at the time receivable upon the exercise of these Warrants), for
the
purpose of entitling them to receive any dividend or other distribution, or
any
right to subscribe for or purchase any shares of stock of any class or any
other
securities or to receive any other right; or
6.2 of
any consolidation or merger of SUUB with or into another corporation, any
capital reorganization of SUUB, any reclassification of the capital stock of
SUUB, or any conveyance of all or substantially all of the assets of SUUB to
another corporation in which holders of SUUB’s stock are to receive stock,
securities or property of another corporation; or
-4-
6.3 of
any voluntary dissolution, liquidation or winding-up of SUUB; or
6.4 of
any redemption or conversion of all outstanding Common Stock;
then,
and in each such case, SUUB will mail or cause to be mailed to the Holder a
notice specifying, as the case may be, (a) the date on which a record is to
be
taken for the purpose of such dividend, distribution or right, or (b) the date
on which such reorganization, reclassification, consolidation, merger,
conveyance, dissolution, liquidation, winding-up, redemption or conversion
is to
take place, and the time, if any is to be fixed, as of which the holders of
record of Common Stock (or such stock or securities as at the time are
receivable upon the exercise of these Warrants), shall be entitled to exchange
their shares of Common Stock (or such other stock or securities), for securities
or other property deliverable upon such reorganization, reclassification,
consolidation, merger, conveyance, dissolution, liquidation or winding-up.
SUUB
shall use all reasonable efforts to ensure such notice shall be delivered at
least 15 days prior to the date therein specified.
7. Registration
Rights.
7.1 Definitions.
For purposes of this Section 7, the following terms shall have the meanings
set
forth below:
7.1.1 A
“Blackout
Event”
means any of the following: (a) the possession by SUUB of material information
that is not ripe for disclosure in a registration statement or prospectus,
as
determined reasonably and in good faith by the Chief Executive Officer or the
Board of Directors of SUUB or that disclosure of such information in the
Registration Statement or the prospectus constituting a part thereof would
be
materially detrimental to the business and affairs of SUUB; or (b) any material
engagement or activity by SUUB which would, in the reasonable and good faith
determination of the Chief Executive Officer or the Board of Directors of SUUB,
be materially adversely affected by disclosure in a registration statement
or
prospectus at such time.
7.1.2 “Exchange
Act”
shall mean the Securities Exchange Act of 1934, as amended.
7.1.3 “Included
Shares”
shall mean any Registrable Shares included in a Registration.
7.1.4 “Registrable
Shares”
shall mean the shares of Common Stock (or such stock or securities as at the
time are receivable upon the exercise of these Warrants) issuable upon exercise
of the Warrants and shares or securities issued as a result of stock split,
stock dividend or reclassification of such shares.
7.1.5 “Registration”
shall mean a registration of securities under the Securities Act pursuant to
Section 8.2 or 8.3 of this Agreement.
7.1.6 “Registration
Period”
with respect to any Registration Statement the period commencing the effective
date of the Registration Statement and ending upon withdrawal or termination
of
the Registration Statement.
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7.1.7 “Registration
Statement”
shall mean the registration statement, as amended from time to time, filed
with
the SEC in connection with a Registration.
7.1.8 “SEC”
shall mean the Securities and Exchange Commission.
7.2 Piggyback
Registration.
Unless the Registrable Shares are then included in a Registration Statement
or
can be sold under the provisions of Rule 144 without limitation as to volume,
whether pursuant to Rule 144(k) or otherwise, if SUUB shall determine to
register any Common Stock under the Securities Act for sale in connection with
a
public offering of Common Stock (other than pursuant to an employee benefit
plan
or a merger, acquisition or similar transaction), SUUB will give written notice
thereof to Holder and will include in such Registration Statement any of the
Registrable Shares which Holder may request be included (“Included
Shares”)
by a writing delivered to SUUB within 15 days after the notice given by SUUB
to
Holder; provided, however, that if the offering is to be firmly underwritten,
and the representative of the underwriters of the offering refuse in writing
to
include in the offering all of the shares of Common Stock requested by SUUB
and
others, the shares to be included shall be allocated first to SUUB and any
shareholder who initiated such Registration and then among the others based
on
the respective number of shares of Common Stock held by such persons. If SUUB
decides not to, and does not, file a Registration Statement with respect to
such
Registration, or after filing determines to withdraw the same before the
effective date thereof, SUUB will promptly so inform Holder, and SUUB will
not
be obligated to complete the registration of the Included Shares included
therein.
7.3 Certain
Covenants. In connection with any Registration:
7.3.1 SUUB
shall take all lawful action as may be necessary to insure that the Registration
Statement, any amendment thereto and the prospectus forming a part thereof
does
not contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they are made, not misleading. Upon
becoming aware of the occurrence of any event or the discovery of any facts
during the Registration Period that make any statement of a material fact made
in the Registration Statement or the related prospectus untrue in any material
respect or which material fact is omitted from the Registration Statement or
related prospectus that requires the making of any changes in the Registration
Statement or related prospectus so that it will not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they are made,
not
misleading (taking into account any prior amendments or supplements), SUUB
shall
promptly notify Holder, and, subject to the provisions of Section 8.5, as soon
as reasonably practicable prepare (but, subject to Section 8.5, in no event
more
than five business days in the case of a supplement or seven business days
in
the case of a post-effective amendment) and file with the SEC a supplement
or
post-effective amendment to the Registration Statement or the related prospectus
or file any other required document so that, as thereafter delivered to a
purchaser of Shares from Holder, such prospectus will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
7.3.2 SUUB
shall promptly notify Holder upon the occurrence of any of the following events
in respect of the Registration Statement or the prospectus forming a part
thereof: (a) the issuance by the SEC or any other federal or state governmental
authority of any stop order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that purpose; or (b) the
receipt of any notification with respect to the suspension of the qualification
or exemption from qualification of any of the Shares for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose.
-6-
7.3.3 SUUB
shall furnish to Holder with respect to the Included Shares registered under
the
Registration Statement (and to each underwriter, if any, of such Shares) such
number of copies of prospectuses and such other documents as Holder may
reasonably request, in order to facilitate the public sale or other disposition
of all or any of the Included Shares by Holder pursuant to the Registration
Statement.
7.3.4 SUUB
shall bear and pay all expenses incurred by it and Holder (other than
underwriting discounts, brokerage fees and commissions and fees and expenses
of
more than one law firm) in connection with the registration of the Shares
pursuant to the Registration Statement.
7.3.5 As
a condition to including Registrable Shares in a Registration Statement, Holder
must provide to SUUB such information regarding itself, the Registrable Shares
held by it and the intended method of distribution of such Shares as shall
be
required to effect the registration of the Registrable Shares and, if the
offering is being underwritten, Holder must provide such powers of attorney,
indemnities and other documents as may be reasonably requested by the managing
underwriter.
7.3.6 Following
the effectiveness of the Registration Statement, upon receipt from SUUB of
a
notice that the Registration Statement contains an untrue statement of material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances under which they were made, Holder will immediately discontinue
disposition of Included Shares pursuant to the Registration Statement until
SUUB
notifies Holder that it may resume sales of Included Shares and, if necessary,
provides to Holder copies of the supplemental or amended prospectus.
7.4 Blackout
Event. SUUB shall not be obligated to file a post-effective
amendment or supplement to the Registration Statement or the prospectus
constituting a part thereof during the continuance of a Blackout Event;
provided, however, that no Blackout Event may be deemed to exist for more than
60 days. Without the express written consent of Holder, if required to permit
the continued sale of Shares by Holder, a post-effective amendment or supplement
to Registration Statement or the prospectus constituting a part thereof must
be
filed no later than the 61st
day following commencement of a Blackout Event.
7.5 Rule
144. With a view to making available to Holder the benefits of Rule
144, SUUB agrees, until such time as Holder can sell all remaining Registrable
Shares under the provisions Rule 144(k), to:
7.5.1.1 comply
with the provisions of paragraph (c)(1) of Rule 144; and
7.5.1.2 file
with the SEC in a timely manner all reports and other documents required to
be
filed by SUUB pursuant to Section 13 or 15(d) under the Exchange Act; and,
if at
any time it is not required to file such reports but in the past had been
required to or did file such reports, it will, upon the request of a Purchaser,
make available other information as required by, and so long as necessary to
permit sales of its Shares pursuant to, Rule 144.
-7-
7.6 SUUB
Indemnification. SUUB agrees to indemnify and hold harmless Holder,
and its officers, directors and agents, and
each person, if any, who controls Holder within the meaning of Section 15 of
the
Securities Act or Section 20 of the Exchange Act from and against any and all
losses, claims, damages and liabilities caused by (a) any violation or alleged
violation by SUUB of the Securities Act, Exchange Act, any state securities
laws
or any rule or regulation promulgated under the Securities Act, Exchange Act
or
any state securities laws, (b) any untrue statement or alleged untrue statement
of a material fact contained in any registration statement or prospectus
relating to the Included Shares (as amended or supplemented if SUUB shall have
furnished any amendments or supplements thereto) or any preliminary prospectus,
or (c) caused by any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances under which they were made, except
insofar as such losses, claims, damages or liabilities are caused by any such
untrue statement or omission or alleged untrue statement or omission based
upon
information furnished in writing to SUUB by Holder or on Holder’s behalf
expressly for use therein.
7.7 Holder
Indemnification. Holder agrees to indemnify and hold harmless
SUUB, its officers, directors and agents and each person, if any, who controls
SUUB within the meaning of either Section 15 of the Securities Act or Section
20
of the Exchange Act to the same extent as the foregoing indemnity from SUUB
to
Holder, but only with respect to information furnished in writing by Holder
or
on Holder’s behalf expressly for use in any registration statement or prospectus
relating to the Registrable Shares, or any amendment or supplement thereto,
or
any preliminary prospectus.
7.8 Indemnification
Procedures. In case any proceeding (including any
governmental investigation) shall be instituted involving any person in respect
of which indemnity may be sought pursuant to this Section 9, such person (an
“Indemnified
Party”)
shall promptly notify the person against whom such indemnity may be sought
(the
“Indemnifying
Party”)
in writing and the Indemnifying Party shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to such Indemnified
Party, and shall assume the payment of all fees and expenses; provided that
the
failure of any Indemnified Party so to notify the Indemnifying Party shall
not
relieve the Indemnifying Party of its obligations hereunder except to the extent
(and only to the extent that) that the Indemnifying Party is materially
prejudiced by such failure to notify. In any such proceeding, any Indemnified
Party shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party unless (a)
the
Indemnifying Party and the Indemnified Party shall have mutually agreed to
the
retention of such counsel or (b) in the reasonable judgment of such Indemnified
Party representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them. It is understood
that the Indemnifying Party shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable
fees
and expenses of more than one separate firm of attorneys (in addition to any
local counsel) at any time for all such Indemnified Parties (including in the
case of Holder, all of its officers, directors and controlling persons) and
that
all such fees and expenses shall be reimbursed as they are incurred. In the
case
of any such separate firm for the Indemnified Parties, the Indemnified Parties
shall designate such firm in writing to the Indemnifying Party. The Indemnifying
Party shall not be liable for any settlement of any proceeding effected without
its written consent (which consent shall not be unreasonably withheld or
delayed), but if settled with such consent, or if there be a final judgment
for
the plaintiff, the Indemnifying Party shall indemnify and hold harmless such
Indemnified Parties from and against any loss or liability (to the extent stated
above) by reason of such settlement or judgment. No Indemnifying Party shall,
without the prior written consent of the Indemnified Party, effect any
settlement of any pending or threatened proceeding in respect of which any
Indemnified Party is or could have been a party and indemnity could have been
sought hereunder by such Indemnified Party, unless such settlement includes
an
unconditional release of such Indemnified Party from all liability arising
out
of such proceeding.
-8-
7.9 Contribution.
To the extent any indemnification by an Indemnifying Party is prohibited or
limited by law, the Indemnifying Party agrees to make the maximum contribution
with respect to any amounts for which, he, she or it would otherwise be liable
under this Section 9 to the fullest extent permitted by law; provided, however,
that (a) no contribution shall be made under circumstances where a party would
not have been liable for indemnification under this Section 9 and (b) no seller
of Registrable Securities guilty of fraudulent misrepresentation (within the
meaning used in the Securities Act) shall be entitled to contribution from
any
party who was not guilty of such fraudulent misrepresentation.
8. Mergers,
Consolidations, etc.
10.1
Except as may otherwise be provided, if the Company shall merge or consolidate
with another corporation, the Holder shall thereafter have the right, upon
exercise of the rights specified in this Warrant Agreement and payment of the
Exercise Price, to receive solely the kind and amount of shares of stock
(including, if applicable, Common Stock), other securities, property or cash
or
any combination thereof receivable by a holder of the number of shares of Common
Stock for which this Warrant Agreement might have been exercised immediately
prior to such merger or consolidation (assuming, if applicable, that the holder
of such Common Stock failed to exercise its rights of election, if any, as
to
the kind or amount of shares of stock, other securities, property or cash or
combination thereof receivable upon such merger or consolidation).
10.2
In
case of any reclassification or change of the shares of Common Stock issuable
upon exercise of (other than elimination or par value, a change in par value,
or
from par value to no par value, or as the result of a subdivision or combination
of shares (which is provided for elsewhere herein), but including any
reclassification of the shares of Common stock into two (2) or more classes
or
series of shares) or in case of any merger or consolidation of another
corporation into the Company in which the Company is the surviving corporation
and in which there is a reclassification or change of the shares of Common
Stock
(other than a change in par value, or from par value to no par value, or as
a
result of a subdivision or combination (which is provided for elsewhere herein),
but including any reclassification of the shares of Common Stock, the Holder
shall thereafter have the right, upon exercise hereof and payment of the
Exercise Price, to receive solely the kind and amount of shares of stock
(including, if applicable, Common Stock), other securities, property or cash
or
any combination thereof receivable upon such reclassification, change, merger
or
consolidation by a holder of the number of shares of Common Stock for which
the
rights specified in this Warrant Agreement might have been exercised immediately
prior to such reclassification, change, merger or consolidation (assuming,
if
applicable, that the holder of such Common Stock failed to exercise its rights
of election, if any, as to the kind or amount of shares of stock, other
securities, property or cash or combination thereof receivable upon such
reclassification, change, merger or consolidation).
9. Acquisition.
In
the
event the Company is acquired by another entity, the Holder at the closing
of
the acquisition will have the right to exchange these Warrants for Warrants
to
be issued by the acquirer for an amount of shares, at an exercise price and
on
such terms as would be necessary so that the Holder of such replacement Warrants
would have the same exercise terms (including the exercise price) as exist
for
these Warrants and upon exercise of such replacement Warrants would receive
the
same number of shares that the Holder of the number of shares of Common Stock
obtainable upon exercise of these Warrants immediately prior to such event
would
have received. A Warrant Exchange Agreement between Holder and the acquirer
will
be part of the closing documents at the time of the close of the
acquisition.
-9-
10. Severability.
If
any term, provision, covenant or restriction of these Warrants is held by a
court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of these Warrants
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated.
11. Notices.
All
notices, requests, consents and other communications required hereunder shall
be
in writing and shall be effective when delivered or, if delivered by registered
or certified mail, postage prepaid, return receipt requested, shall be effective
on the third day following deposit in United States mail: to the Holder, at
_______________, _______________________, with a copy to __________________;
and
if addressed to SUUB, at Sub-Urban Brands, Inc., 0000
Xxxxxxxx Xxxxxxxx X, Xxx Xxxxxxx, XX 00000,
or such other address as Holder or SUUB may designate in writing.
12. No
Rights as Shareholder. The
Holder shall have no rights as a shareholder of SUUB with respect to the shares
issuable upon exercise of the Warrants until the receipt by SUUB of all of
the
Exercise Documents.
| Sub-Urban Brands, Inc. | ||
| |
|
|
| By: | ||
|
Xxxxxx Xxxxxxx, Chief Executive Officer |
||
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EXHIBIT
“A”
NOTICE
OF EXERCISE
(To
be
signed only upon exercise of the Warrants)
The
undersigned hereby elects to purchase shares of Common Stock (the
“Warrant Shares”) of Sub-Urban Brands, Inc.
(“SUUB”), pursuant to the terms of the enclosed warrant
certificate (the “Certificate”). The undersigned tenders
herewith payment of the exercise price pursuant to the terms of the Certificate.
The
undersigned hereby represents and warrants to, and agrees with, SUUB as follows:
1. Holder
is acquiring the Warrant Shares for its own account, for investment purposes
only.
2. Holder
understands that an investment in the Warrant Shares involves a high degree
of
risk, and Holder has the financial ability to bear the economic risk of this
investment in the Warrant Shares, including a complete loss of such investment.
Holder has adequate means for providing for its current financial needs and
has
no need for liquidity with respect to this investment.
3. Holder
has such knowledge and experience in financial and business matters that it
is
capable of evaluating the merits and risks of an investment in the Warrant
Shares and in protecting its own interest in connection with this
transaction.
4. Holder
understands that the Warrant Shares have not been registered under the
Securities Act or under any state securities laws. Holder is familiar with
the
provisions of the Securities Act and Rule 144 thereunder and understands that
the restrictions on transfer on the Warrant Shares may result in Holder being
required to hold the Warrant Shares for an indefinite period of
time.
5. Holder
agrees not to sell, transfer, assign, gift, create a security interest in,
or
otherwise dispose of, with or without consideration (collectively, “Transfer”)
any of the Warrant Shares except pursuant to an effective registration statement
under the Securities Act or an exemption from registration. As a further
condition to any such Transfer, except in the event that such Transfer is made
pursuant to an effective registration statement under the Securities Act, if
in
the reasonable opinion of counsel to SUUB any Transfer of the Warrant Shares
by
the contemplated transferee thereof would not be exempt from the registration
and prospectus delivery requirements of the Securities Act, SUUB may require
the
contemplated transferee to furnish SUUB with an investment letter setting forth
such information and agreements as may be reasonably requested by SUUB to ensure
compliance by such transferee with the Securities Act.
Each
certificate evidencing the Warrant Shares will bear the following
legend:
“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE “ACT”) OR ANY APPLICABLE STATE SECURITIES LAWS AND
MAY NOT BE EXERCISED, SOLD, PLEDGED OR TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE ACT OR UNLESS
AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
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6. Immediately
following this exercise of Warrants, if as of the date of exercise SUUB has
a
class of securities registered under Section 12 of the Securities Exchange
Act
of 1934, as amended, the undersigned will not beneficially own five percent
(5%)
or more of the then outstanding Common Stock of SUUB (based on the number of
shares outstanding set forth in the most recent periodic report filed by SUUB
with the Securities and Exchange Commission and any additional shares which
have
been issued since that date of which Holder is aware have been
issued).
Number
of Warrants Exercised: ______________
Net
Exercise ____ Yes ___ No
Dated:
____________________
___________________________
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Exhibit
B - Exercise Price Adjustments
1.
Exercise Price Adjustments of Warrants for Certain Dilutive Issuances, Splits
and Combinations. The Exercise Price of these Warrants shall be subject to
adjustment from time to time as follows:
(i)
(A)
If the Corporation shall issue, after the date upon which any of these Warrants
were first issued (the "Purchase Date"), any "Additional Stock" (as hereinafter
defined) without consideration or for a consideration per share less than the
Exercise Price for such series in effect immediately prior to the issuance
of
such Additional Stock, the Exercise Price for such series in effect immediately
prior to each such issuance shall forthwith (except as otherwise provided in
this clause (i) be adjusted to a price determined by multiplying such Exercise
Price by a fraction, the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to such issuance (including shares
of
Common Stock deemed to be issued pursuant to subsection 1 (i)(E)(1) or (2),
but
not including shares excluded from the definition of Additional Stock by
subsection 1 (ii)(B)) plus the number of shares of Common Stock that the
aggregate consideration received by the Corporation for such issuance would
purchase at such Exercise Price; and the denominator of which shall be the
number of shares of Common Stock outstanding immediately prior to such issuance
(including shares of Common Stock deemed to be issued pursuant to subsection
1(i)(E)(1) or (2), but not including shares excluded from the definition of
Additional Stock by subsection 1(ii) (B)) plus the number of shares of such
Additional Stock. However, the foregoing calculation shall not take into account
shares deemed issued pursuant to subsection 1 (i) (E) on account of options,
rights or convertible or exchangeable securities (or the actual or deemed
consideration therefore), except to the extent (i) such options, rights or
convertible or exchangeable securities have been exercised, converted or
exchanged or (ii) the consideration to be paid upon such exercise, conversion
or
exchange per share of underlying Common Stock is less than or equal to the
per
share consideration for the Additional Stock that has given rise to the Exercise
Price adjustment being calculated.
(B)
No
adjustment of the Exercise Price for these Warrants shall be made in an amount
less than one cent per share, provided that any adjustments that are not
required to be made by reason of this sentence shall be carried forward and
shall be either taken into account in any subsequent adjustment made prior
to
three (3) years from the date of the event giving rise to the adjustment being
carried forward, or shall be made at the end of three (3) years from the date
of
the event giving rise to the adjustment being carried forward. Except to the
limited extent provided for in subsections 1 (i)(E)(3) and (4), no adjustment
of
such Exercise Price pursuant to this subsection 1(i) shall have the effect
of
increasing the Exercise Price above the Exercise Price in effect immediately
prior to such adjustment.
(C)
In
the case of the issuance of Common Stock for cash, the consideration shall
be
deemed to be the amount of cash paid therefore before deducting any reasonable
discounts, commissions or other expenses allowed, paid or incurred by the
Corporation for any underwriting or otherwise in· connection with the issuance
and sale thereof.
(D)
In
the case of the issuance of the 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 value thereof as determined by the Board of Directors irrespective
of
any accounting treatment.
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(E)
In
the case of the issuance (whether before, on or after the applicable Purchase
Date) of options to purchase or rights to subscribe for Common Stock, securities
by their terms convertible into or exchangeable for Common Stock or options
to
purchase or rights to subscribe for such convertible or exchangeable securities,
the following provisions shall apply for all purposes of this subsection 1(i)
and subsection 1(ii):
(1)
The
aggregate maximum number of shares of Common Stock deliverable upon exercise
(to
the extent then exercisable) of such options to purchase or rights to subscribe
for Common Stock shall be deemed to have been issued at the time such options
or
rights were issued and for a consideration equal to the consideration
(determined in the manner provided in subsections 1(i)(C) and (D)), if any,
received by the Corporation upon the issuance of such options or rights plus
the
minimum exercise price provided in such options or rights (without taking into
account potential antidilution adjustments) for the Common Stock covered
thereby.
(2)
The
aggregate maximum number of shares of Common Stock deliverable upon conversion
of, or in exchange (to the extent then convertible or exercisable) for, any
such
convertible or exchangeable securities or upon the exercise of options to
purchase or rights to subscribe for such convertible or exchangeable securities
and subsequent conversion or exchange thereof shall be deemed to have been
issued at the time such securities were issued or such options or rights were
issued and for a consideration equal to the consideration, if any, received
by
the Corporation for any such securities and related options or rights (excluding
any cash received on account of accrued interest or accrued dividends), plus
the
minimum additional consideration, if any, to be received by the Corporation
(without taking into account potential antidilution adjustments) upon the
conversion or exchange of such securities or the exercise of any related options
or rights (the consideration in each case to be determined in the manner
provided in subsections 1(i) (C) and (D)).
(3)
In
the event of any change in the number of shares of Common Stock deliverable
or
in the consideration payable to the Corporation upon exercise of such options
or
rights or upon conversion of or in exchange for such convertible or exchangeable
securities, including, but not limited to, a change resulting from the
antidilution provisions thereof, the Exercise Price of these Warrants, to the
extent in any way affected by or computed using such options, rights or
securities, shall be recomputed to reflect such change, but no further
adjustment shall be made for the actual issuance of Common Stock or any payment
of such consideration upon the exercise of any such options or rights or the
conversion or exchange of such securities.
(4)
Upon
the expiration of any such options or rights, the termination of any such rights
to convert or exchange or the expiration of any options or rights related to
such convertible or exchangeable securities, the Exercise Price of these
Warrants, to the extent in any way affected by or computed using such options,
rights or securities or options or rights related to such securities, shall
be
recomputed to reflect the issuance of only the number of shares of Common Stock
(and convertible or exchangeable securities that remain in effect) actually
issued upon the exercise of such options or rights, upon the conversion or
exchange of such securities or upon the exercise of the options or rights
related to such securities.
(5)
The
number of shares of Common Stock deemed issued and the consideration deemed
paid
therefore pursuant to subsections 1 (i) (E) (1) and (2) shall be appropriately
adjusted to reflect any change, termination or expiration of the type described
in either subsection 1 (i) (E) (3) or (4).
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(ii)
Additional Stock shall mean any shares of Common Stock issued (or deemed to
have
been issued pursuant to subsection 1 (i) (E)) by the Corporation after the
Purchase Date other than:
(A)
Common Stock issued pursuant to a transaction described in subsection 1 (iii)
hereof;
(B)
(i)
Up to 4,000,000 shares of Common Stock issuable or issued to employees,
consultants and/or directors (as adjusted for any stock splits, stock dividends,
recapitalizations or the like), plus (ii) up to 15% of the total outstanding
shares of Common Stock and shares of Common Stock issuable upon conversion
of,
or in exchange for, any convertible or exchangeable securities and/or upon
exercise of outstanding options to purchase shares of Common Stock, on a fully
diluted basis, to persons with whom Company has or will have a strategic
business relationship of the Corporation, directly or pursuant to a stock option
plan or restricted stock plan approved by the Board of Directors of the
Corporation.
(iii)
In
the event the Corporation should at any time or from time to time after the
Purchase Date fix a record date for the effectuation of a split or subdivision
of the outstanding shares of Common Stock or the determination of holders of
Common Stock entitled to receive a dividend or other distribution payable in
additional shares of Common Stock or other securities or rights convertible
into, or entitling the holder thereof to receive directly or indirectly,
additional shares of Common Stock (hereinafter referred to as “Common Stock
Equivalents") without payment of any consideration by such holder for the
additional shares of Common Stock or the Common Stock Equivalents (including
the
additional shares of Common Stock issuable upon conversion or exercise thereof),
then, as of such record date (or the date of such dividend distribution, split
or subdivision if no record date is fixed), the Exercise Price of these Warrants
shall be appropriately decreased so that the number of shares of Common Stock
issuable on conversion of each share of such series shall be increased in
proportion to such increase of the aggregate of shares of Common Stock
outstanding and those issuable with respect to such Common Stock
Equivalents.
(iv)
If
the number of shares of Common Stock outstanding at any time after the Purchase
Date is decreased by a combination of the outstanding shares of Common Stock,
then, following the record date of such combination, the Exercise Price for
these Warrants shall be appropriately increased so that the number of shares
of
Common Stock issuable on conversion of each share of such series shall be
decreased in proportion to such decrease in outstanding shares.
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