SHERWOOD BRANDS, INC.
a North Carolina corporation
and
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
Warrant Agent
and
PARAGON CAPITAL CORPORATION
Underwriter
WARRANT AGREEMENT
Table of Contents
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Section Page
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1. Appointment of Warrant Agent..........................................1
2. Form of Warrant.......................................................1
3. Countersignature and Registration.....................................2
4. Transfers and Exchanges...............................................3
5. Exercise of Warrants; Payment of Warrant
Solicitation Fee......................................................4
6. Payment of Taxes......................................................7
7. Mutilated or Missing Warrants.........................................8
8. Reservation of Class A Common Stock...................................8
9. Warrant Price; Adjustments.......................................... 10
10. Fractional Interest................................................. 17
11. Notices to Warrantholders........................................... 18
12. Disposition of Proceeds on Exercise of Warrants..................... 20
13. Redemption of Warrants.............................................. 20
14. Merger or Consolidation or Change of
Name of Warrant Agent............................................... 21
15. Duties of Warrant Agent............................................. 22
16. Change of Warrant Agent............................................. 25
17. Identity of Transfer Agent.......................................... 26
18. Notices............................................................. 27
19. Supplements and Amendments.......................................... 28
20. New York Contract................................................... 28
21. Benefits of this Agreement.......................................... 28
22. Successors.......................................................... 30
WARRANT AGENT AGREEMENT dated as of __________ __, 1998, by and
among Sherwood Brands, Inc., a North Carolina corporation (the "Company"),
Paragon Capital Corporation (the "Underwriter") and Continental Stock Transfer &
Trust Company, as warrant agent (hereinafter called the "Warrant Agent").
WHEREAS, the Company proposes to issue and sell to the public
up to 1,782,500 shares of the Class A common stock of the Company, $.01 par
value (hereinafter, together with the stock of any other class to which such
shares may hereafter have been changed, called "Class A Common Stock"), and up
to 891,250 Class A Common Stock Purchase Warrants (the "Warrants");
WHEREAS, each Warrant will entitle the holder to purchase one
(1) share of Class A Common Stock;
WHEREAS, the Company desires the Warrant Agent to act on
behalf of the Company, and the Warrant Agent is willing to so act, in
connection with the issuance, registration, transfer, exchange and exercise of
the Warrants;
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, the parties hereto agree as follows:
Section 1. Appointment of Warrant Agent. The Company hereby
appoints the Warrant Agent to act as Warrant Agent for the Company in
accordance with the instructions hereinafter set forth in this Agreement, and
the Warrant Agent hereby accepts such appointment.
Section 2. Form of Warrant. The text of the Warrants and
of the form of election to purchase Class A Common Stock to be printed on the
reverse thereof shall be substantially as set forth in Exhibit A attached
hereto. Each Warrant shall entitle the registered holder thereof to purchase
one (1) share of Class A Common Stock at a purchase price of Seven Dollars and
Fifty Cents ($7.50), at any time from ___________ __, 1999 until 5:00 p.m.
Eastern time, on _____________ __, 2003 (the "Warrant Exercise Period").
The warrant price and the number of shares of Class A Common Stock issuable upon
exercise of the Warrants are subject to adjustment upon the occurrence of
certain events, all as hereinafter provided. The Warrants shall be executed on
behalf of the Company by the manual or facsimile signature of the present or any
future President or Vice President of the Company, attested to by the manual or
facsimile signature of the present or any future Secretary or Assistant
Secretary of the Company.
Warrants shall be dated as of the issuance by the Warrant
Agent either upon initial issuance or upon transfer or exchange.
In the event the aforesaid expiration dates of the Warrants
fall on a Saturday or Sunday, or on a legal holiday on which the New York
Stock Exchange is closed, then the Warrants shall expire at 5:00 p.m. Eastern
time on the next succeeding business day.
Section 3. Countersignature and Registration. The
Warrant Agent shall maintain books for the transfer and registra-
tion of Warrants. Upon the initial issuance of the Warrants, the
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Warrant Agent shall issue and register the Warrants in the names of the
respective holders thereof. The Warrants shall be countersigned manually or by
facsimile by the Warrant Agent (or by any successor to the Warrant Agent then
acting as warrant agent under this Agreement) and shall not be valid for any
purpose unless so countersigned. Warrants may, however, be so countersigned by
the Warrant Agent (or by its successor as Warrant Agent) and be delivered by
the Warrant Agent, notwithstanding that the persons whose manual or facsimile
signatures appear thereon as proper officers of the Company shall have ceased
to be such officers at the time of such countersignature or delivery.
Section 4. Transfers and Exchanges. The Warrant Agent shall
transfer, from time to time, any outstanding Warrants upon the books to be
maintained by the Warrant Agent for that purpose, upon surrender thereof for
transfer properly endorsed or accompanied by appropriate instructions for
transfer. Upon any such transfer, a new Warrant shall be issued to the
transferee and the surrendered Warrant shall be cancelled by the Warrant
Agent. Warrants so cancelled shall be delivered by the Warrant Agent to the
Company from time to time upon request. Warrants may be exchanged at the
option of the holder thereof, when surrendered at the office of the Warrant
Agent, for another Warrant, or other Warrants of different denominations of
like tenor and representing in the aggregate the right to purchase a like
number of shares of Class A Common Stock.
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Section 5. Exercise of Warrants; Payment of Warrant
Solicitation Fee.
(a) Subject to the provisions of this Agreement, each
registered holder of Warrants shall have the right, which may be exercised
commencing at the opening of business on the first day of the Warrant Exercise
Period, to purchase from the Company (and the Company shall issue and sell to
such registered holder of Warrants) the number of fully paid and
non-assessable shares of Class A Common Stock specified in such Warrants upon
surrender of such Warrants to the Company at the office of the Warrant Agent,
with the form of election to purchase on the reverse thereof duly filled in
and signed, and upon payment to the Company of the warrant price, determined
in accordance with the provisions of Sections 9 and 10 of this Agreement, for
the number of shares of Class A Common Stock in respect of which such Warrants
are then exercised. Payment of such warrant price shall be made in cash or by
certified check or bank draft to the order of the Company. Subject to Section
6, upon such surrender of Warrants and payment of the warrant price, the
Company shall issue and cause to be delivered with all reasonable dispatch to
or upon the written order of the registered holder of such Warrants and in
such name or names as such registered holder may designate, a certificate or
certificates for the number of full shares of Class A Common Stock so
purchased upon the exercise of such Warrants. Such certificate or certificates
shall be deemed to have been issued and any person
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so designated to be named therein shall be deemed to have become a holder of
record of such shares of Class A Common Stock as of the date the Company's
transfer agent issues the certificates representing such shares. The rights of
purchase represented by the Warrants shall be exercisable, at the election of
the registered holders thereof, either as an entirety or from time to time for
a portion of the shares specified therein and, in the event that any Warrant
is exercised in respect of less than all of the shares of Class A Common Stock
specified therein at any time prior to the date of expiration of the Warrants,
a new Warrant or Warrants will be issued to the registered holder for the
remaining number of shares of Class A Common Stock specified in the Warrant so
surrendered, and the Warrant Agent is hereby irrevocably authorized to
countersign and to deliver the required new Warrants pursuant to the
provisions of this Section and of Section 3 of this Agreement and the Company,
whenever requested by the Warrant Agent, will supply the Warrant Agent with
Warrants duly executed on behalf of the Company for such purpose. Anything in
the foregoing to the contrary notwithstanding, no Warrant will be exercisable
unless at the time of exercise the Company has filed with the Securities and
Exchange Commission a registration statement under the Securities Act of 1933,
as amended (the "Act"), covering the shares of Class A Common Stock issuable
upon exercise of such Warrant and such shares have been so registered or
qualified or deemed to be exempt under the securities laws of the state of
residence of the holder
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of such Warrant. The Company shall use its best efforts to have all shares so
registered or qualified for sale under the Act on or before the date on which
the Warrants become exercisable.
(b) If at the time of exercise of any Warrant after
(i) ______ __, 1999, (ii) the market price of the Company's Class A Common
Stock is equal to or greater than the then purchase price of the Warrant,
(iii) the exercise of the Warrant is solicited by the Underwriter at such time
while the Underwriter is a member of the National Association of Securities
Dealers, Inc. ("NASD"), (iv) the Warrant is not held in a discretionary
account, (v) disclosure of the compensation arrangement is made in documents
provided to the holders of the Warrants; and (vi) the solicitation of the
exercise of the Warrant is not in violation of Regulation M (as such rule or
any successor rule may be in effect as of such time of exercise) promulgated
under the Securities Exchange Act of 1934, then the Underwriter shall be
entitled to receive from the Company upon exercise of each of the Warrant(s)
so exercised a fee of five percent (5%) of the aggregate price of the Warrants
so exercised (the "Exercise Fee"). The procedures for payment of the warrant
solicitation fee are set forth in Section 5(c) below.
(c) (1) Within five (5) days of the last day of each month
commencing with , 1999, the Warrant Agent will notify the Underwriter of each
Warrant Certificate which has been properly completed for exercise by holders of
Warrants during the last month. The Company and Warrant Agent shall determine,
in
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their sole and absolute discretion, whether a Warrant Certificate has been
properly completed. The Warrant Agent will provide the Underwriter with such
information, in connection with the exercise of each Warrant, as the
Underwriter shall reasonably request.
(2) The Company hereby authorizes
and instructs the Warrant Agent to deliver to the Underwriter the Exercise Fee
promptly after receipt by the Warrant Agent from the Company of a check
payable to the order of the Underwriter in the amount of the Exercise Fee. In
the event that an Exercise Fee is paid to the Underwriter with respect to a
Warrant which the Company or the Warrant Agent determines is not properly
completed for exercise or in respect of which the Underwriter is not entitled
to an Exercise Fee, the Underwriter will return such Exercise Fee to the
Warrant Agent which shall forthwith return such fee to the Company.
The Underwriter and the Company may at any time, after _________
__, 1999, and during business hours, examine the records of the Warrant Agent,
including its ledger of original Warrant certificates returned to the Warrant
Agent upon exercise of Warrants. Notwithstanding any provision to the contrary,
the provisions of paragraph 5(b) and 5(c) may not be modified, amended or
deleted without the prior written consent of the Underwriter.
Section 6. Payment of Taxes. The Company will pay any
documentary stamp taxes attributable to the initial issuance of
Class A Common Stock issuable upon the exercise of Warrants;
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provided, however, that the Company shall not be required to pay any tax which
may be payable in respect of any transfer involved in the issue or delivery of
any certificates of shares of Class A Common Stock in a name other than that
of the registered holder of Warrants in respect of which such shares are
issued, and in such case neither the Company nor the Warrant Agent shall be
required to issue or deliver any certificate for shares of Class A Common
Stock or any Warrant until the person requesting the same has paid to the
Company the amount of such tax or has established to the Company's
satisfaction that such tax has been paid.
Section 7. Mutilated or Missing Warrants. In case any of the
Warrants shall be mutilated, lost, stolen or destroyed, the Company may, in
its discretion, issue and the Warrant Agent shall countersign and deliver in
exchange and substitution for and upon cancellation of the mutilated Warrant,
or in lieu of and in substitution for the Warrant lost, stolen or destroyed, a
new Warrant of like tenor and representing an equivalent right or interest,
but only upon receipt of evidence satisfactory to the Company and the Warrant
Agent of such loss, theft or destruction and, in case of a lost, stolen or
destroyed Warrant, indemnity, if requested, also satisfactory to them.
Applicants for such substitute Warrants shall also comply with such other
reasonable regulations and pay such reasonable charges as the Company or the
Warrant Agent may prescribe.
Section 8. Reservation of Class A Common Stock. There
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have been reserved, and the Company shall at all times keep reserved, out of
the authorized and unissued shares of Class A Common Stock, a number of shares
of Class A Common Stock sufficient to provide for the exercise of the rights
of purchase represented by the Warrants, and the transfer agent for the shares
of Class A Common Stock and every subsequent transfer agent for any shares of
the Company's Class A Common Stock issuable upon the exercise of any of the
rights of purchase aforesaid are irrevocably authorized and directed at all
times to reserve such number of authorized and unissued shares of Class A
Common Stock as shall be required for such purpose. The Company agrees that
all shares of Class A Common Stock issued upon exercise of the Warrants shall
be, at the time of delivery of the certificates of such shares, validly issued
and outstanding, fully paid and nonassessable and listed on any national
securities exchange upon which the other shares of Class A Common Stock are
then listed. So long as any unexpired Warrants remain outstanding, the Company
will file such post-effective amendments to the registration statement (Form
SB-2, Registration No. 333-44655) (the "Registration Statement")filed pursuant
to the Act with respect to the Warrants (or other appropriate registration
statements or post-effective amendment or supplements) as may be necessary to
permit it to deliver to each person exercising a Warrant, a prospectus meeting
the requirements of Section 10(a)(3) of the Act and otherwise complying
therewith, and will deliver such a prospectus to each such person. To the
extent that during any
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period it is not reasonably likely that the Warrants will be exercised, due to
market price or otherwise, the Company need not file such a post-effective
amendment during such period. The Company will keep a copy of this Agreement
on file with the transfer agent for the shares of Class A Common Stock and
with every subsequent transfer agent for any shares of the Company's Class A
Common Stock issuable upon the exercise of the rights of purchase represented
by the Warrants. The Warrant Agent is irrevocably authorized to requisition
from time to time from such transfer agent stock certificates required to
honor outstanding Warrants. The Company will supply such transfer agent with
duly executed stock certificates for that purpose. All Warrants surrendered in
the exercise of the rights thereby evidenced shall be cancelled by the Warrant
Agent and shall thereafter be delivered to the Company, and such cancelled
Warrants shall constitute sufficient evidence of the number of shares of Class
A Common Stock which have been issued upon the exercise of such Warrants.
Promptly after the date of expiration of the Warrants, the Warrant Agent shall
certify to the Company the total aggregate amount of Warrants then
outstanding, and thereafter no shares of Class A Common Stock shall be subject
to reservation in respect of such Warrants which shall have expired.
Section 9. Warrant Price; Adjustments.
(i) The warrant price at which Class A Common Stock
shall be purchasable upon the exercise of the Warrants shall be
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$7.50 per share or after adjustment, as provided in this Section, shall be
such price as so adjusted (the "Warrant Price").
(ii) The Warrant Price shall be subject to adjust-
ment from time to time as follows:
(I) In case the Company shall at any time
after the date hereof pay a dividend in shares of Class A Common Stock or make
a distribution in shares of Class A Common Stock, then upon such dividend or
distribution the Warrant Price in effect immediately prior to such dividend or
distribution shall forthwith be reduced to a price determined by dividing:
(A) an amount equal to the total
number of shares of Class A Common Stock outstanding immediately prior to such
dividend or distribution multiplied by the Warrant Price in effect immediately
prior to such dividend or distribution, by
(B) the total number of shares of
Class A Common Stock outstanding immediately after such issuance or sale.
For the purposes of any computation to be made in accordance
with the provisions of this clause (i), the following provisions shall be
applicable: Class A Common Stock issuable by way of dividend or other
distribution on any stock of the Company shall be deemed to have been issued
immediately after the opening of business on the date following the date fixed
for the determination of stockholders entitled to receive such dividend or
other distribution.
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(II) In case the Company shall at any time
subdivide or combine (including, without limitation, a reverse stock split)
the outstanding Class A Common Stock, the Warrant Price shall forthwith be
proportionately decreased in the case of subdivision or increased in the case
of combination to the nearest one cent. Any such adjustment shall become
effective at the time such subdivision or combination shall become effective.
(III) Within a reasonable time after the
close of each quarterly fiscal period of the Company during which the Warrant
Price has been adjusted as herein provided, the Company shall
(A) file with the Warrant Agent a
certificate signed by the President or Vice President of the Company and by the
Treasurer or Assistant Treasurer or the Secretary or an Assistant Secretary of
the Company, showing in detail the facts requiring all such adjustments
occurring during such period and the Warrant Price after each such adjustment;
and
(B) the Warrant Agent shall have
no duty with respect to any such certificate filed with it except to keep the
same on file and available for inspection by holders of Warrants during
reasonable business hours, and the Warrant Agent may conclusively rely upon the
latest certificate furnished to it hereunder. The Warrant Agent shall not at any
time be under any duty or responsibility to any holder of a Warrant to determine
whether any facts exist which may require any adjustment of the
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Warrant Price, or with respect to the nature or extent of any adjustment of
the Warrant Price when made, or with respect to the method employed in making
any such adjustment, or with respect to the nature or extent of the property
or securities deliverable hereunder. In the absence of a certificate having
been furnished, the Warrant Agent may conclusively rely upon the provisions of
the Warrants with respect to the Class A Common Stock deliverable upon the
exercise of the Warrants and the applicable Warrant Price thereof.
(C) Notwithstanding anything
contained herein to the contrary, no adjustment of the Warrant Price shall be
made if the amount of such adjustment shall be less than $.05, but in such case
any adjustment that would otherwise be required then to be made shall be carried
forward and shall be made at the time and together with the next subsequent
adjustment which, together with any adjustment so carried forward, shall
amount to not less than $.05.
(iii) In the event that the number of outstanding
shares of Class A Common Stock is increased by a stock dividend payable in
Class A Common Stock or by a subdivision of the outstanding Class A Common
Stock, then, from and after the time at which the adjusted Warrant Price
becomes effective pursuant to Subsection (ii) of this Section by reason of
such dividend or subdivision, the number of shares of Class A Common Stock
issuable upon the exercise of each Warrant shall be increased in proportion
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to such increase in outstanding shares. In the event that the number of shares
of Class A Common Stock outstanding is decreased by a combination (including,
without limitation, a reverse stock split) of the outstanding Class A Common
Stock, then, from and after the time at which the adjusted Warrant Price
becomes effective pursuant to Subsection (ii) of this Section by reason of
such combination, the number of shares of Class A Common Stock issuable upon
the exercise of each Warrant shall be decreased in proportion to such decrease
in the outstanding shares of Class A Common Stock.
(iv) In case of any reorganization or reclassifi-
cation of the outstanding Class A 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), or in case of any consolidation of the Company with, or merger
of the Company into, another corporation (other than a consolidation or merger
in which the Company is the continuing corporation and which does not result
in any reclassification of the outstanding Class A Common Stock), or in case
of any sale or conveyance to another corporation of the property of the
Company as an entirety or substantially as an entirety, the holder of each
Warrant then outstanding shall thereafter have the right to pur-chase the kind
and amount of shares of Class A Common Stock and other securities and property
receivable upon such reorganization, reclassification, consolidation, merger,
sale or conveyance by a holder of the number
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of shares of Class A Common Stock which the holder of such Warrant shall then
be entitled to purchase until the date of the consummation of such
transaction; such adjustments shall apply with respect to all such changes
occurring between the date of this Warrant Agreement and the date of exercise
of such Warrant.
(v) Subject to the provisions of this Section 9, in
case the Company shall, at any time prior to the exercise of the Warrants,
make any distribution of its assets to holders of its Class A Common Stock as
a liquidating or a partial liquidating dividend, then the holder of Warrants
who exercises his Warrants after the record date for the determination of
those holders of Class A Common Stock entitled to such distribution of assets
as a liquidating or partial liquidating dividend shall be entitled to receive
for the Warrant Price per Warrant, in addition to each share of Class A Common
Stock, the amount of such distribution (or, at the option of the Company, a
sum equal to the value of any such assets at the time of such distribution as
determined by the Board of Directors of the Company in good faith), which
would have been payable to such holder had he been the holder of record of the
Class A Common Stock receivable upon exercise of his Warrant on the record
date for the determination of those entitled to such distribution.
(vi) In case of the dissolution, liquidation or
winding up of the Company, all rights under the Warrants shall terminate on a
date fixed by the Company, such date to be no
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earlier than ten (10) days prior to the effectiveness of such dissolution,
liquidation or winding up and not later than five (5) days prior to such
effectiveness. Notice of such termination of purchase rights shall be given to
the last registered holder of the Warrants, as the same shall appear on the
books of the Company maintained by the Warrant Agent, by registered mail at
least thirty (30) days prior to such termination date.
(vii) In case the Company shall, at any time prior
to the expiration of the Warrants and prior to the exercise thereof, offer to
the holders of its Class A Common Stock any rights to subscribe for additional
shares of any class of the Company, then the Company shall give written notice
thereof to the last registered holder thereof not less than thirty (30) days
prior to the date on which the books of the Company are closed or a record
date is fixed for the determination of the stockholders entitled to such
subscription rights. Such notice shall specify the date as to which the books
shall be closed or record date fixed with respect to such offer of
subscription and the right of the holder thereof to participate in such offer
of subscription shall terminate if the Warrant shall not be exercised on or
before the date of such closing of the books or such record date.
(viii) Any adjustment pursuant to the aforesaid
provisions shall be made on the basis of the number of shares of Class A
Common Stock which the holder thereof would have been entitled to acquire by
the exercise of the Warrant immediately
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prior to the event giving rise to such adjustment.
(ix) Irrespective of any adjustments in the Warrant
Price or the number or kind of shares purchasable upon exercise of the
Warrants, Warrants previously or thereafter issued may continue to express the
same price and number and kind of shares as are stated in the similar Warrants
initially issuable pursuant to this Warrant Agreement.
(x) The Company may retain a firm of independent
public accountants (who may be any such firm regularly employed by the
Company) to make any computation required under this Section, and any
certificate setting forth such computation signed by such firm shall be
conclusive evidence of the correctness of any computation made under this
Section.
(xi) If at any time, as a result of an adjustment
made pursuant to paragraph (iv) above, the holders of a Warrant or Warrants
shall become entitled to purchase any securities other than shares of Class A
Common Stock, thereafter the number of such securities so purchasable upon
exercise of each Warrant and the Warrant Price for such shares shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Class A Common
Stock contained in paragraphs (ii) and (iii).
Section 10. Fractional Interest. The Warrants may only
be exercised to purchase full shares of Class A Common Stock and
the Company shall not be required to issue fractions of shares of
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Class A Common Stock on the exercise of Warrants. However, if a Warrant holder
exercises all Warrants then owned of record by him and such exercise would
result in the issuance of a fractional share, the Company, at its option, will
pay to such Warrant holder, in lieu of the issuance of any fractional share
otherwise issuable, either a whole share of Class A Common Stock or an amount
of cash based on the market value of the Class A Common Stock of the Company
on the last trading day prior to the exercise date.
Section 11. Notices to Warrantholders.
(i) Upon any adjustment of the Warrant Price and
the number of shares of Class A Common Stock issuable upon exercise of a
Warrant, then and in each such case the Company shall give written notice
thereof to the Warrant Agent, which notice shall state the Warrant Price
resulting from such adjustment and the increase or decrease, if any, in the
number of shares purchasable at such price upon the exercise of a Warrant,
setting forth in reasonable detail the method of calculation and the facts
upon which such calculation is based. The Company shall also mail such notice
to the holders of the Warrants at their addresses appearing in the Warrant
register. Failure to give or mail such notice, or any defect therein, shall
not affect the validity of the adjustments.
(ii) In case at any time:
(I) the Company shall pay dividends payable in
stock upon its Class A Common Stock or make any distribution (other
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than regular cash dividends) to the holders of its Class A Common
Stock; or
(II) the Company shall offer for
subscription pro rata to the holders of its Class A Common Stock any additional
shares of stock of any class or other rights; or
(III) there shall be any capital
reorganization or reclassification of the capital stock of the Company, or
consolidation or merger of the Company with, or sale or substantially all of its
assets to another corporation; or
(IV) there shall be a voluntary or
involuntary dissolution, liquidation or winding up of the Company; then in any
one or more of such cases, the Company shall give written notices in the manner
set forth in Section 11(i) of the date on which (A) a record shall be taken for
such dividend, distribution or subscription rights, or (B) such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up shall take place, as the case may be. Such notice shall also
specify the date as of which the holders of Class A Common Stock of record
shall participate in such dividend, distribution or subscription rights, or
shall be entitled to exchange their Class A Common Stock for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up as the
case may be. Such notice shall be given at least thirty (30) days prior to the
action in question and not less than thirty (30) days prior to the record
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date in respect thereof. Failure to give such notice, or any defect therein,
shall not affect the legality or validity of any of the matters set forth in
this Section 11(ii).
(iii) The Company shall cause copies of all ▇▇▇▇▇-
cial statements and reports, proxy statements and other documents that are
sent to its stockholders to be sent by first-class mail, postage prepaid, on
the date of mailing to such stockholders, to each registered holder of
Warrants at his address appearing in the warrant register as of the record
date for the determination of the stockholders entitled to such documents.
Section 12. Disposition of Proceeds on Exercise of Warrants.
(i) The Warrant Agent shall promptly forward to the
Company all monies received by the Warrant Agent for the purchase of shares of
Class A Common Stock through the exercise of such Warrants.
(ii) The Warrant Agent shall keep copies of this
Agreement available for inspection by holders of Warrants during normal
business hours.
Section 13. Redemption of Warrants. The Warrants are
redeemable by the Company, in whole or in part, on not less than thirty (30)
days' prior written notice at a redemption price of $.10 per Warrant at any
time, provided that the closing sale price of the Class A Common Stock on all
twenty (20) trading days ending on the third day prior to the day on which the
Company gives notice
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of redemption has been at least 134% of the then effective exercise price of
the Warrants (the "Target Redemption Price"). The redemption notice shall be
mailed to the holders of the Warrants at their addresses appearing in the
Warrant register. Holders of the Warrants will have exercise rights until the
close of business on the date fixed for redemption.
Section 14. Merger or Consolidation or Change of Name of
Warrant Agent. Any corporation or company which may succeed to the corporate
trust business of the Warrant Agent by any merger or consolidation or
otherwise shall be the successor to the Warrant Agent hereunder without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, provided that such corporation would be eligible to serve as a
successor Warrant Agent under the provisions of Section 16 of this Agreement.
In case at the time such successor to the Warrant Agent shall succeed to the
agency created by this Agreement, any of the Warrants shall have been
countersigned but not delivered, any such successor to the Warrant Agent may
adopt the countersignature of the original Warrant Agent and deliver such
Warrants so countersigned.
In case at any time the name of the Warrant Agent shall be
changed and at such time any of the Warrants shall have been countersigned but
not delivered, the Warrant Agent may adopt the countersignature under its
prior name and deliver Warrants so countersigned. In all such cases such
Warrants shall have the full force provided in the Warrants and in the
Agreement.
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Section 15. Duties of Warrant Agent. The Warrant Agent
undertakes the duties and obligations imposed by this Agreement upon the
following terms and conditions, by all of which the Company and the holders of
Warrants, by their acceptance thereof, shall be bound:
(i) The statements of fact and recitals contained
herein and in the Warrants shall be taken as statements of the Company, and
the Warrant Agent assumes no responsibility for the correctness of any of the
same except such as describe the Warrant Agent or action taken or to be taken
by it. The Warrant Agent assumes no responsibility with respect to the
distribution of the Warrants except as herein expressly provided.
(ii) The Warrant Agent shall not be responsible for
any failure of the Company to comply with any of the covenants in this
Agreement or in the Warrants to be complied with by the Company.
(iii) The Warrant Agent may consult at any time
with counsel satisfactory to it (who may be counsel for the Company) and the
Warrant Agent shall incur no liability or responsibility to the Company or to
any holder of any Warrant in respect of any action taken, suffered or omitted
by it hereunder in good faith and in accordance with the opinion or the advice
of such counsel.
(iv) The Warrant Agent shall incur no liability or
responsibility to the Company or to any holder of any Warrant for
any action taken in reliance on any notice, resolution, waiver,
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consent, order, certificate or other instrument believed by it to be genuine
and to have been signed, sent or presented by the proper party or parties,
except as a result of the Warrant Agent's negligence, willful misconduct or
bad faith.
(v) The Company agrees to pay to the Warrant Agent
reasonable compensation for all services rendered by the Warrant Agent in the
execution of this Agreement, to reimburse the Warrant Agent for all expenses,
taxes and governmental charges and other charges incurred by the Warrant Agent
in the execution of this Agreement and to indemnify the Warrant Agent and save
it harmless against any and all liabilities, including judgments, costs and
reasonable counsel fees, for anything done or omitted by the Warrant Agent in
the execution of this Agreement, except as a result of the Warrant Agent's
negligence, willful misconduct or bad faith.
(vi) The Warrant Agent shall be under no obligation
to institute any action, suit or legal proceeding or to take any other action
likely to involve expenses unless the Company or one or more registered
holders of Warrants shall furnish the Warrant Agent with reasonable security
and indemnity for any costs and expenses which may be incurred, but this
provision shall not affect the power of the Warrant Agent to take such action
as the Warrant Agent may consider proper, whether with or without any such
security or indemnity. All rights of action under this Agreement or
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under any of the Warrants may be enforced by the Warrant Agent without the
possession of any of the Warrants or the production thereof at any trial or
other proceeding, and any such action, suit or proceeding instituted by the
Warrant Agent shall be brought in its name as Warrant Agent, and any recovery
of judgment shall be for the ratable benefit of the registered holders of the
Warrants, as their respective rights and interests may appear.
(vii) The Warrant Agent and any stockholder, direc-
tor, officer, partner or employee of the Warrant Agent may buy, sell or deal
in any of the Warrants or other securities of the Company or become
pecuniarily interested in any transaction in which the Company may be
interested, or contract with or lend money to or otherwise act as fully and
freely as though it were not the Warrant Agent under this Agreement. Nothing
herein shall preclude the Warrant Agent from acting in any other capacity for
the Company or for any other legal entity.
(viii) The Warrant Agent shall act hereunder solely
as agent and its duties shall be determined solely by the provisions hereof.
(ix) The Warrant Agent may execute and exercise any
of the rights or powers hereby vested in it or perform any duty hereunder
either itself or by or through its attorneys, agents or employees, and the
Warrant Agent shall not be answerable or accountable for any such attorneys,
agents or employees or for any loss to the Company resulting from such neglect
or misconduct, provided
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reasonable care had been exercised in the selection and continued
employment thereof.
(x) Any request, direction, election, order or
demand of the Company shall be sufficiently evidenced by an instrument signed
in the name of the Company by its President or a Vice President or its
Secretary or an Assistant Secretary or its Treasurer or an Assistant Treasurer
(unless other evidence in respect thereof be herein specifically prescribed);
and any resolution of the Board of Directors may be evidenced to the Warrant
Agent by a copy thereof certified by the Secretary or an Assistant Secretary
of the Company.
Section 16. Change of Warrant Agent. The Warrant Agent may
resign and be discharged from its duties under this Agreement by giving to the
Company notice in writing, and to the holders of the Warrants notice by
mailing such notice to the holders at their addresses appearing on the Warrant
register, of such resignation, specifying a date when such resignation shall
take effect. The Warrant Agent may be removed by like notice to the Warrant
Agent from the Company and the like mailing of notice to the holders of the
Warrants. If the Warrant Agent shall resign or be removed or shall otherwise
become incapable of acting, the Company shall appoint a successor to the
Warrant Agent. If the Company shall fail to make such appointment within a
period of thirty (30) days after such removal or after it has been notified in
writing of such resignation or incapacity by the resigning or incapacitated
Warrant
-25-
Agent or after the Company has received such notice from a registered holder
of a Warrant (who shall, with such notice, submit his Warrant for inspection
by the Company), then the registered holder of any Warrant may apply to any
court of competent jurisdiction for the appointment of a successor to the
Warrant Agent. Any successor Warrant Agent, whether appointed by the Company
or by such a court, shall be a bank or trust company, in good standing,
incorporated under New York or federal law. After appointment, the successor
Warrant Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Warrant Agent without
further act or deed and the former Warrant Agent shall deliver and transfer to
the successor Warrant Agent all cancelled Warrants, records and property at
the time held by it hereunder, and execute and deliver any further assurance
or conveyance necessary for the purpose. Failure to file or mail any notice
provided for in this Section, however, or any defect therein, shall not affect
the validity of the resignation or removal of the Warrant Agent or the
appointment of the successor Warrant Agent, as the case may be.
Section 17. Identity of Transfer Agent. Forthwith upon the
appointment of any transfer agent for the shares of Class A Common Stock or of
any subsequent transfer agent for the shares of Class A Common Stock or other
shares of the Company's Class A Common Stock issuable upon the exercise of the
rights of purchase represented by the Warrants, the Company will file with the
Warrant
-26-
Agent a statement setting forth the name and address of such transfer agent.
Section 18. Notices. Any notice pursuant to this Agreement to
be given by the Warrant Agent, or by the registered holder of any Warrant to
the Company, shall be sufficiently given if sent by first-class mail, postage
prepaid, addressed (until another is filed in writing by the Company with the
Warrant Agent) as follows:
Sherwood Brands, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇, Chief Executive Officer
and a copy thereof to:
▇▇▇▇▇▇▇▇▇ Traurig ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ & Quentel, P.A.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Any notice pursuant to this Agreement to be given by the
Company or by the registered holder of any Warrant to the Warrant Agent shall
be sufficiently given if sent by first-class mail, postage prepaid, addressed
(until another address is filed in writing by the Warrant Agent with the
Company) as follows:
Continental Stock Transfer & Trust Company
Two ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Any notice pursuant to this Agreement to be given by the
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Warrant Agent or by the Company to the Underwriter shall be sufficiently given
if sent by first-class mail, postage prepaid, addressed (until another address
if filed in writing with the Warrant agent) as follows:
Paragon Capital Corporation
▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
and a copy thereof to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Section 19. Supplements and Amendments. The Company and the
Warrant Agent may from time to time supplement or amend this Agreement in
order to cure any ambiguity or to correct or supplement any provision
contained herein which may be defective or inconsistent with any other
provision herein, or to make any other provisions in regard to matters or
questions arising hereunder which the Company and the Warrant Agent may deem
necessary or desirable and which shall not be inconsistent with the provisions
of the Warrants and which shall not adversely affect the interest of the
holders of Warrants.
Section 20. New York Contract. This Agreement and each Warrant
issued hereunder shall be deemed to be a contract made under the laws of the
State of New York and shall be construed in accordance with the laws of New
York applicable to agreements to be performed wholly within New York.
Section 21. Benefits of this Agreement. Nothing in this
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Agreement shall be construed to give to any person or corporation other than
the Company, the Warrant Agent, the Underwriter and the registered holders of
the Warrants any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall be for the sole and exclusive benefit of
the Company, the Warrant Agent and the registered holders of the Warrants.
-29-
Section 22. Successors. All the covenants and provisions of
this Agreement by or for the benefit of the Company, the Warrant Agent or the
Underwriter shall bind and inure to the benefit of their respective successors
and assigns hereunder.
IN WITNESS WHEREOF, the parties have entered into this
Agreement on the date first above written.
SHERWOOD BRANDS, INC.
By:________________________________
Name
Title
CONTINENTAL STOCK TRANSFER & TRUST
COMPANY
By:________________________________
Name
Title
PARAGON CAPITAL CORPORATION
By:________________________________
Name
Title
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