EXHIBIT 10.10
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
ACT (COLLECTIVELY, THE "SECURITIES LAWS"). THIS WARRANT HAS BEEN ACQUIRED FOR
INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE
OR DISTRIBUTION THEREOF. THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE OR
OTHERWISE TRANSFERRED EXCEPT IN COMPLIANCE WITH SECTION 10 OF THIS WARRANT.
No. 001 WARRANT TO PURCHASE SHARES OF
ISSUED: SEPTEMBER, 30, 2002 COMMON STOCK
LOGICAL IMAGING SOLUTIONS, INC.
DIGITAL COLOR PRINT, INC.
COMMON STOCK WARRANT
THIS IS TO CERTIFY that, for value received, and subject to the terms and
conditions of this Warrant, Color Imaging, Inc., a Delaware corporation, its
successors or assigns ("Color"), is entitled, at any time and from time to time
during the exercise period as provided in Section 6 (the "Exercise Period"), to
subscribe for and purchase, upon exercise of this Warrant, that number of fully
paid and nonassessable shares determined according to the formula set forth in
Section 1 (the "Warrant Stock") of Common Stock, of Logical Imaging Solutions,
Inc., a California corporation ("Logical") or if converted pursuant to the
following paragraph, shares of the Common Stock of Digital Color Print, Inc.
("DCP"). The exercise price thereof (the "Warrant Price") shall be (i) $1.50 per
share (not to exceed an aggregate price of $121,725) for Warrant Stock with
respect to which Color exercises its Warrant hereunder within the one-year
period following the date hereof, (ii) $2.25 per share (not to exceed an
aggregate price of $365,175, including the aggregate Warrant Price paid under
(i) above) for Warrant Stock with respect to which Color exercises its Warrant
hereunder after the first anniversary of the date of this Warrant and on or
before the second anniversary of the date of this Agreement, and (iii) $3.25 per
share (not to exceed an aggregate price of $791,212, including the aggregate
Warrant Price paid under (i) and (ii) above) for Warrant Stock with respect to
which Color exercises its Warrant hereunder after the second anniversary of the
date of this Agreement and before the third anniversary of the date of this
Agreement.
Color may, at any time during the Exercise Period, convert this Warrant for
shares of the Common Stock of Logical into a Warrant for shares of the Common
Stock of DCP by notifying Logical and DCP of such conversion in writing. Upon
conversion, the Warrant shall be for the same percentages of Common Stock of DCP
and at the same Warrant Prices (and not to exceed the aggregate Warrant Prices
described above) as are set forth herein in respect of shares of the Common
Stock of Logical. Upon request, DCP shall issue a new Warrant in exchange for
the surrender of this Warrant, which new Warrant shall be substantially similar
to this Warrant, but shall evidence the conversion of this Warrant into a
Warrant for the Common Stock of DCP. DCP and Logical are referred to
collectively as "Issuer".
This Warrant is subject to the following additional terms and conditions:
SECTION 1. NUMBER OF WARRANT STOCK. The number of shares of Warrant Stock
with respect to which this Warrant shall be exercisable shall be as follows:
(a) During the period following the date hereof through the one-year
anniversary of the date of this Agreement, Color may exercise this Warrant for
up to that number of shares of Common Stock of Issuer that is equal of 5% of the
outstanding Common Stock of Issuer at the time of exercise, on a fully diluted
basis and assuming the exercise and conversion of all options, warrants, or
other convertible securities issued in respect of the capital stock of Issuer
and exercisable for or convertible into Common Stock.
(b) During the period following the one-year anniversary of the date
of this Agreement through the second anniversary of the date of this Agreement,
Color may exercise this Warrant for up to that number of shares of Common Stock
of Issuer that is equal to (i) 10% of the outstanding Common Stock of Issuer at
the time of exercise, on a fully diluted basis and assuming the exercise and
conversion of all options, warrants, or other convertible securities issued in
respect of the capital stock of Issuer and exercisable for or convertible into
Common Stock, less (ii) the number of shares of Warrant Stock purchased pursuant
to Section 1(a).
(c) During the period following the second anniversary of the date of
this Agreement through the third anniversary of the date of this Agreement,
Color may exercise this Warrant for up to that number of shares of Common Stock
of Issuer that is equal to (i) 15% of the outstanding Common Stock of Issuer at
the time of exercise, on a fully diluted basis and assuming the exercise and
conversion of all options, warrants, or other convertible securities issued in
respect of the capital stock of Issuer and exercisable for or convertible into
Common Stock, less (ii) the aggregate number of shares of Warrant Stock
purchased pursuant to Sections 1(a) and 1(b).
SECTION 2. METHOD OF EXERCISE. This Warrant may be exercised in whole or in
part at any time or from time to time, but not as to a fractional share of
Warrant Stock, by delivering to Issuer, during the Exercise Period: (i) the
attached form of Election to Purchase, duly completed and executed by Color,
(ii) this Warrant, and (iii) payment of the Warrant Price in cash or by check,
for each share purchased.
SECTION 3. DELIVERY OF STOCK CERTIFICATES. Within 20 days after the
exercise of this Warrant (in whole or in part), Issuer, at its expense, shall
issue in the name of and deliver to Color (a) a certificate or certificates for
the number of fully paid and nonassessable shares of Warrant Stock to which
Color shall be entitled upon such exercise and (b) unless this Warrant has
expired, a new Warrant representing the number of shares (except a remaining
fractional share) of Warrant Stock, if any, with respect to which this Warrant
shall not have been exercised. Color shall for all purposes be deemed to have
become the holder of record of such shares of Warrant Stock on the date on which
this Warrant is surrendered and payment on the Warrant Price is made,
irrespective of the date of delivery of the certificate or certificates
representing the Warrant Stock; provided that, if the date of such surrender and
payment is a date when the stock transfer books of Logical are closed, such
person shall be deemed to have become the holder of record of such shares of
Warrant Stock at the close of business on the next succeeding date on which the
stock transfer books are open.
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SECTION 4. COVENANTS AS TO WARRANT STOCK. Issuer covenants and agrees that
all shares of Warrant Stock issued pursuant to the terms of this Warrant will,
upon their issuance, be validly issued and outstanding, fully paid and
nonassessable. Issuer further covenants and agrees that Issuer will at all times
thereafter have authorized and reserved a sufficient number of shares of its
Common Stock to provide for the exercise of the rights represented by this
Warrant.
SECTION 5. INVESTMENT REPRESENTATIONS OF COLOR. Color represents, warrants,
covenants and agrees, to the extent that it acquires shares of Warrant Stock
pursuant to this Agreement, as follows:
(a) Color understands that none of the shares of Warrant Stock
acquired pursuant to this Warrant have been registered under the Securities Laws
in reliance upon exemptions for nonpublic offerings, and that Issuer is under no
obligation to register such shares under the Securities Laws.
(b) To the extent applicable, Color will be acquiring the Warrant
Stock pursuant to this Warrant for investment and for its own account, and not
with a view to, or for resale in connection with, any distribution.
(c) Color understands that the Warrant Stock must be held indefinitely
and Color must continue to bear the economic risk of the investment for an
indefinite time unless the Warrant Stock is subsequently registered under the
Securities Laws or an exemption from such registration is available.
(d) Color agrees that it will in no event sell or otherwise transfer
all or any part of the Warrant Stock unless (i) in the opinion of counsel
satisfactory to Issuer, the Warrant Stock may be legally transferred without
registration under the Securities Laws, or (ii) unless the shares of Warrant
Stock have been registered and qualified under the Securities Laws and, if
necessary, an appropriate prospectus shall then be in effect.
SECTION 6. TERMINATION. This Warrant shall be cancelled and the rights
granted hereunder shall terminate at the close of business on the third
anniversary of the issuance of the Warrant (the "Termination Date"), provided
Color's rights hereunder shall survive in respect of any exercise of the Warrant
made by Color prior to such Termination Date.
SECTION 7. ADJUSTMENTS AFFECTING COMMON STOCK.
(a) Reclassification. In the case of any reclassification or change of
Common Stock issuable upon exercise of this Warrant, Issuer shall execute a new
Warrant, providing that Color shall have the right to exercise such new Warrant,
in substantially the form hereof, and upon such exercise to receive, in lieu of
each share of Common Stock theretofore issuable upon exercise of this Warrant,
the number and kind of shares of stock, other securities, money or property
receivable upon such reclassification or change by a holder of shares of Common
Stock. Such new Warrant shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Section
7.
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(b) Split, Subdivision or Combination of Shares. If at any time while
this Warrant remains outstanding and unexpired Issuer shall split, subdivide or
combine its Common Stock, the number of shares of Warrant Stock issuable upon
exercise hereof shall be proportionately increased and the Warrant Price shall
be proportionately decreased, in the case of a split or subdivision, or the
number of shares of Warrant Stock issuable upon exercise hereof shall be
proportionately decreased and the Warrant Price shall be proportionately
increased, in the case of a combination.
SECTION 8. SIGNIFICANT BUSINESS TRANSACTIONS. If at any time while this
Warrant, or any portion thereof, is outstanding and unexpired there shall be (a)
a reorganization (other than a combination, reclassification, exchange or
subdivision of Common Stock otherwise provided for herein), (b) a merger or
consolidation of Issuer with or into another corporation in which Issuer is not
the surviving entity, or a reverse triangular merger in which Issuer is the
surviving entity but the shares of Issuer's capital stock outstanding
immediately prior to the merger are converted by virtue of the merger into other
property, whether in the form of securities, cash, or otherwise, or (c) a sale
or transfer of Issuer's properties and assets as, or substantially as, an
entirety to any other person, then, unless prior to or contemporaneous with the
closing of such reorganization, merger, consolidation, sale or transfer, Color
has exercised this Warrant, as a part of such reorganization, merger,
consolidation, sale or transfer, lawful provision shall be made so that Color
shall thereafter be entitled to receive upon exercise of this Warrant (or if
partially exercised, then only for that portion of the Warrant outstanding),
during the period specified herein and upon payment of the Warrant Price then in
effect, that number of shares of stock or other securities or property of the
successor corporation resulting from such reorganization, merger, consolidation,
sale or transfer that a holder of the shares deliverable upon exercise of this
Warrant would have been entitled to receive in such reorganization,
consolidation, merger, sale or transfer if this Warrant had been exercised
immediately before such reorganization, merger, consolidation, sale or transfer,
all subject to further adjustment as provided in this Section 8. The foregoing
provisions of this Section 8 shall similarly apply to successive
reorganizations, consolidations, mergers, sales and transfers and to the stock
or securities of any other corporation that are at the time receivable upon the
exercise of this Warrant. If the per-share consideration payable to Issuer for
shares in connection with any such transaction is in a form other than cash or
marketable securities, then the value of such consideration shall be determined
in good faith by Issuer's Board of Directors. In all events, appropriate
adjustment (as determined in good faith by Issuer's Board of Directors) shall be
made in the application of the provisions of this Warrant with respect to the
rights and interests of Color after the transaction, to the end that the
provisions of this Warrant shall be applicable after that event, as near as
reasonably may be, in relation to any shares or other property deliverable after
that event upon exercise of this Warrant.
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SECTION 9. FRACTIONAL SHARES. No fractional shares shall be issued upon the
exercise of this Warrant. In lieu of fractional shares, Issuer shall pay Color a
sum in cash equal to the Fair Market Value of the fractional shares on the date
of exercise.
SECTION 10. RESTRICTIONS ON TRANSFER. This Warrant may not be transferred
unless (a) the Warrant is registered under the Securities Act of 1933, as
amended (the "Securities Act"), and any applicable state securities or blue sky
laws, (b) Logical has received a legal opinion reasonably satisfactory to Issuer
to the effect that the transfer is exempt from the prospectus delivery and
registration requirements of the Securities Act and any applicable state
securities or blue sky laws, or (c) Issuer otherwise satisfies itself that such
transfer is exempt from registration.
SECTION 11. LEGEND. A legend setting forth or referring to the above
restrictions shall be placed on this Warrant, any replacement hereof and any
certificate representing a security issued pursuant to the exercise hereof and a
stop transfer restriction or order may be placed on the books of Issuer and with
any transfer agent until such securities may be legally sold or otherwise
transferred.
SECTION 12. NO RIGHTS AS SHAREHOLDER. This Warrant shall not entitle Color
to any voting rights or any other rights as a shareholder of Issuer or to any
other rights whatsoever except the rights stated herein; and no cash or stock
dividend or interest shall be payable or shall accrue in respect of this Warrant
or the Warrant Stock purchasable hereunder unless, until and to the extent that
this Warrant shall be exercised.
SECTION 13. CONSTRUCTION. The validity and interpretation of the terms and
provisions of this Warrant shall be governed by the laws of the State of
Georgia. The descriptive headings of the several Sections of this Warrant are
inserted for convenience only and shall not control or affect the meaning or
construction of any of the provisions thereof.
SECTION 14. LOST WARRANT CERTIFICATE. If this Warrant is lost, stolen,
mutilated or destroyed, Logical shall issue a new Warrant of like denomination,
tenor and date as this Warrant, subject to Issuer's right to require Color to
give Issuer a bond or other satisfactory security sufficient to indemnify Issuer
against any claim that may be made against it (including any expense or
liability) on account of the alleged loss, theft, mutilation or destruction of
this Warrant or the issuance of such new Warrant.
SECTION 15. WAIVERS AND AMENDMENTS. This Warrant or any provision hereof
may be changed, waived, discharged or terminated only by a statement in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought.
SECTION 16. NOTICES. All notices, requests and other communications to any
party hereunder shall be in writing and sent by (a) certified or registered U.S.
mail, return receipt requested, (b) personal delivery, including delivery by
Federal Express or similar guaranteed express courier, (c) facsimile, provided
written confirmation of receipt is received and a copy is sent by the method
described in (a) or (b), addressed as follows:
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if to Color, to: Color Imaging, Inc.
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Attention: ▇▇▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to: ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP
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Attention: T. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ III
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
if to Logical, to: Logical Imaging Solutions, Inc.
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Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
if to DCP or ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
the DCP Shareholders: c/o Global Capital Group, Inc.
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Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
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Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address to the attention of other person as Color, Logical or
DCP may designate by written notice to the other party hereto. All such notices,
requests and other communications shall be deemed received on the date of
receipt by the recipient thereof if received prior to 5 p.m. in the place of
receipt and such day is a business day in the place of receipt. Otherwise, any
such notice, request or communication shall be deemed not to have been received
until the next succeeding business day, in the place of receipt.
[Signatures appear on next page]
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IN WITNESS WHEREOF, Logical and DCP have executed this Warrant as of the
date first above written.
LOGICAL IMAGING SOLUTIONS, INC.
By: /S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chief Executive Officer
DIGITAL COLOR PRINT, INC.
By: /S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chief Executive Officer
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ELECTION TO PURCHASE
(To be executed only upon exercise of Warrant)
The undersigned registered owner of the attached Warrant irrevocably
exercises the Warrant for _________ shares of Common Stock of [LOGICAL IMAGING
SOLUTIONS, INC./DIGITAL COLOR PRINT, INC.] on the terms and conditions specified
in the Warrant, and requests that a certificate 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 into which the Warrant is exercisable, that a new Warrant of like
tenor and date for the balance of the shares of Common Stock issuable thereunder
be delivered to the undersigned. The payment of the Warrant Price shall be made
(__________) in cash or (__________) by check.
Dated: ___________________
_____________________________________________
(Signature)
_____________________________________________
(▇▇▇▇▇▇ ▇▇▇▇▇▇▇)
_____________________________________________
(City) (State) (Zip Code)
1498583v3