EXHIBIT 4.6
CONVERTIBLE DEBENTURE AND WARRANTS PURCHASE AGREEMENT
Between
Famous Fixins, Inc.
and
the Investors Signatory Hereto
CONVERTIBLE DEBENTURE AND WARRANTS PURCHASE AGREEMENT dated as of
March 7, 1999 (the "Agreement"), between the Investors signatory hereto
(each an "Investor" and together the "Investors"), and Famous Fixins, Inc., a
corporation organized and existing under the laws of the State of New York
(the "Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the
Investors, and the Investors shall purchase in the aggregate, (i) $1,000,000
principal amount of Convertible Debentures and (ii) Warrants to purchase
shares of the Common Stock (as defined below) as described in Section 2.2.
WHEREAS, such investments will be made in reliance upon the provisions
of Section 4(2) ("Section 4(2)") and/or 4(6) of the United States Securities
Act and/or Regulation D ("Regulation D") and the other rules and regulations
promulgated thereunder (the "Securities Act"), and/or upon such other
exemption from the registration requirements of the Securities Act as may be
available with respect to any or all of the investments in securities to be
made hereunder.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
Certain Definitions
Section 1.1. "Capital Shares" shall mean the Common Stock and any shares of
any other class of common stock whether now or hereafter authorized, having
the right to participate in the distribution of earnings and assets of the
Company.
Section 1.2. "Capital Shares Equivalents" shall mean any securities, rights,
or obligations that are convertible into or exchangeable for or give any right
to subscribe for any Capital Shares of the Company or any Warrants, options or
other rights to subscribe for or purchase Capital Shares or any such
convertible or exchangeable securities.
Section 1.3. "Closing" shall mean the closing of the purchase and sale of the
Convertible Debentures and Warrants pursuant to Section 2.1.
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Section 1.4. "Closing Date" shall mean the date on which all conditions to the
Closing have been satisfied (as defined in Section 2.1 (b) hereto) and the
Closing shall have occurred.
Section 1.5. "Common Stock" shall mean the Company's common stock, $0.001 par
value per share.
Section 1.6. "Conversion Shares" shall mean the shares of Common Stock
issuable upon conversion of the Convertible Debenture.
Section 1.7. "Convertible Debenture(s)" shall mean the $1,000,000 principal
amount of Convertible Debentures due March __, 2005, in the form of Exhibit A
hereto.
Section 1.8. "Damages" shall mean any loss, claim, damage, judgment, penalty,
deficiency, liability, costs and expenses (including, without limitation,
reasonable attorney's fees and disbursements and reasonable costs and expenses
of expert witnesses and investigation).
Section 1.9. "Effective Date" shall mean the date on which the SEC first
declares effective a Registration Statement registering the resale of the
Registrable Securities as set forth in the Registration Rights Agreement.
Section 1.10. "Escrow Agent" shall have the meaning set forth in the Escrow
Agreement.
Section 1.11. "Escrow Agreement" shall mean the Escrow Agreement in
substantially the form of Exhibit D hereto executed and delivered
contemporaneously with this Agreement.
Section 1.12. "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder.
Section 1.13. "Legend" shall mean the legend set forth in Section 9.1.
Section 1.14. "Material Adverse Effect" shall mean any effect on the business,
operations, properties, prospects, or financial condition of the Company that
is material and adverse to the Company and its subsidiaries and affiliates,
taken as a whole, and/or any condition, circumstance, or situation that would
prohibit or otherwise interfere with the ability of the Company to enter into
and perform any of its obligations under this Agreement, the Registration
Rights Agreement, the Escrow Agreement, the Certificate of Designations or the
Warrants in any material respect.
Section 1.15. "Outstanding" when used with reference to shares of Common
Stock or Capital Shares (collectively the "Shares"), shall mean, at any date
as of which the number of such Shares is to be determined, all issued and
outstanding Shares, and shall include all such Shares issuable in respect of
outstanding scrip or any certificates representing fractional interests in
such Shares; provided, however, that "Outstanding" shall not mean any such
Shares then directly or indirectly owned or held by or for the account of the
Company.
Section 1.16. "Person" shall mean an individual, a corporation, a partnership,
a limited liability company, an association, a trust or other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
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Section 1.17. "Principal Market" shall mean the American Stock Exchange, the
New York Stock Exchange, the NASDAQ National Market, or the NASDAQ Small-Cap
Market or the OTC Bulletin Board, whichever is at the time the principal
trading exchange or market for the Common Stock, based upon share volume.
Section 1.18. "Purchase Price" shall mean the principal amount of the
Convertible Debenture.
Section 1.19. "Registrable Securities" shall mean the Conversion Shares and
the Warrant Shares until (i) the Registration Statement has been declared
effective by the SEC, and all Conversion Shares and Warrant Shares have been
disposed of pursuant to the Registration Statement, (ii) all Conversion Shares
and Warrant Shares have been sold under circumstances under which all of the
applicable conditions of Rule 144 (or any similar provision then in force)
under the Securities Act ("Rule 144") are met, (iii) all Conversion Shares and
Warrant Shares have been otherwise transferred to holders who may trade such
shares without restriction under the Securities Act, and the Company has
delivered a new certificate or other evidence of ownership for such securities
not bearing a restrictive legend or (iv) such time as, in the opinion of
counsel to the Company, all Conversion Shares and Warrant Shares may be sold
without any time, volume or manner limitations pursuant to Rule 144(k) (or any
similar provision then in effect) under the Securities Act.
Section 1.20. "Registration Rights Agreement" shall mean the agreement
regarding the filing of the Registration Statement for the resale of the
Registrable Securities, entered into between the Company and the Investor as
of the Closing Date in the form annexed hereto as Exhibit C.
Section 1.21. "Registration Statement" shall mean a registration statement on
such form promulgated by the SEC for which the Company then qualifies and
which counsel for the Company shall deem appropriate, which form shall be
available for the resale by the Investors of the Registrable Securities to be
registered thereunder in accordance with the provisions of this Agreement, the
Registration Rights Agreement and in accordance with the intended method of
distribution of such securities, for the registration of the resale by the
Investors of the Registrable Securities under the Securities Act.
Section 1.22. "Regulation D" shall have the meaning set forth in the recitals
of this Agreement.
Section 1.23. "SEC" shall mean the Securities and Exchange Commission.
Section 1.24. "SEC Documents" means the Company's Form 10-SB as amended to
date.
Section 1.25. "Section 4(2)" and "Section 4(6)" shall have the meanings set
forth in the recitals of this Agreement.
Section 1.26. "Securities Act" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.27. "Shares" shall have the meaning set forth in Section 1.16.
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Section 1.28. "Trading Day" shall mean any day during which the Principal
Market shall be open for business.
Section 1.29. "Warrants" shall mean the Warrants substantially in the form of
Exhibit B to be issued to the Investors hereunder.
Section 1.30. "Warrant Shares" shall mean all shares of Common Stock or other
securities issued or issuable pursuant to exercise of the Warrants.
ARTICLE II
Purchase and Sale of Convertible Debenture and Warrants
Section 2.1. Investment.
(a) Upon the terms and subject to the conditions set forth herein, the
Company agrees to sell, and the Investors, severally and not jointly, agree to
purchase Convertible Debentures with an aggregate principal amount of
$1,000,000 in accordance with the commitments set forth on the signature pages
hereto, together with the Warrants, at the Purchase Price. On the Closing
Date, the Investors shall purchase $1,000,000 principal amount of Convertible
Debentures as follows:
(i) Upon execution and delivery of this Agreement, each Investor
shall deliver to the Escrow Agent immediately available funds in their
proportionate amount of the Purchase Price as set forth on the signature pages
hereto, and the Company shall deliver the Convertible Debenture certificates
and the Warrants to the Escrow Agent, in each case to be held by the Escrow
Agent pursuant to the Escrow Agreement.
(ii) Upon satisfaction of the conditions set forth in Section
2.1(b), the Closing ("Closing") shall occur at the offices of the Escrow Agent
at which the Escrow Agent (x) shall release the Convertible Debentures and the
Warrants to the Investors and (y) shall release the Purchase Price (after all
brokerage commissions have been paid as set forth in the Escrow Agreement),
pursuant to the terms of the Escrow Agreement.
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(b) The Closing is subject to the satisfaction or waiver by the party to
be benefited thereby of the following conditions:
(i) acceptance and execution by the Company and by the Investors,
of this Agreement and all Exhibits hereto;
(ii) delivery into escrow by each Investor of immediately
available funds in the amount of the Purchase Price of the Convertible
Debentures purchased at the Closing and the Warrants, as more fully set forth
in the Escrow Agreement;
(iii) all representations and warranties of the Investors
contained herein shall remain true and correct as of the Closing Date (as a
condition to the Company's obligations);
(iv) all representations and warranties of the Company contained
herein shall remain true and correct as of the Closing Date (as a condition to
the Investors' obligations);
(v) the Company shall have obtained all permits and qualifications
required by any state for the offer and sale of the Convertible Debentures and
Warrants, or shall have the availability of exemptions therefrom;
(vi) the sale and issuance of the Convertible Debentures and the
Warrants hereunder, and the proposed issuance by the Company to the Investors
of the Common Stock underlying the Convertible Debentures and the Warrants
upon the conversion or exercise thereof shall be legally permitted by all laws
and regulations to which the Investors and the Company are subject and there
shall be no ruling, judgment or writ of any court prohibiting the transactions
contemplated by this Agreement;
(vii) delivery of the original fully executed Convertible
Debenture certificates and Warrants certificates to the Escrow Agent;
(viii) delivery to the Escrow Agent of an opinion of Law Offices
of ▇▇▇ ▇▇▇▇▇▇▇, counsel to the Company, in the form of Exhibit E hereto;
(ix) delivery to the Escrow Agent of the Irrevocable Instructions
to Transfer Agent in the form attached hereto as Exhibit F; and delivery to
the Escrow Agent of the Registration Rights Agreement.
Section 2.2. Warrants. The aggregate number of Warrants to be issued at the
Closing shall be 2,500,000. The initial exercise price of the Warrants shall
be $0.75 per share.
Section 2.3. Liquidated Damages. The parties hereto acknowledge and agree that
the sum payable pursuant to the Registration Rights Agreement for late
registration and the sum payable pursuant to the Convertible Debentures for
late delivery of Common Stock certificates shall constitute liquidated damages
and not penalties, and shall not be due if such late registration or late
delivery is caused by the Investor or the agents of the Investor. The parties
further acknowledge that (a) the amount of loss or damages likely to be
incurred is incapable or is difficult to precisely estimate, (b) the amount
specified in such provisions bear a reasonable proportion and are not plainly
or grossly disproportionate to the probable loss likely to be incurred by the
Investor in connection with the failure of the Company to timely cause the
registration of the Registrable Securities or to deliver stock certificates
upon any conversion, and (c) the parties are sophisticated businesses and have
been represented by sophisticated and able legal and financial counsel and
negotiated this Agreement at arm's length.
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ARTICLE III
Representations and Warranties of Investor
Each Investor, severally and not jointly, represents and warrants to the
Company that:
Section 3.1. Intent. The Investor is entering into this Agreement for its own
account and not with a view to or for sale in connection with any
distribution of the Common Stock. The Investor has no present arrangement
(whether or not legally binding) at any time to sell the Convertible
Debenture, the Warrants, any Conversion Shares or Warrant Shares to or through
any person or entity; provided, however, that by making the representations
herein, the Investor does not agree to hold such securities for any minimum or
other specific term and reserves the right to dispose of the Conversion Shares
and Warrant Shares at any time in accordance with federal and state securities
laws applicable to such disposition.
Section 3.2. Sophisticated Investor. The Investor is a sophisticated investor
(as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited
investor (as defined in Rule 501 of Regulation D), and Investor has such
experience in business and financial matters that it has the capacity to
protect its own interests in connection with this transaction and is capable
of evaluating the merits and risks of an investment in the Convertible
Debenture, the Warrants and the underlying Common Stock. The Investor has been
represented by counsel of its choice. The Investor acknowledges that an
investment in the Convertible Debenture, the Warrants and the underlying
Common Stock is speculative and involves a high degree of risk.
Section 3.3. Authority. This Agreement and each agreement attached as an
Exhibit hereto which is required to be executed by Investor has been duly
authorized and validly executed and delivered by the Investor and is a valid
and binding agreement of the Investor enforceable against it in accordance
with its terms, subject to applicable bankruptcy, insolvency, or similar laws
relating to, or affecting generally the enforcement of, creditors' rights and
remedies or by other equitable principles of general application.
Section 3.4. Not an Affiliate. The Investor is not an officer, director or
"affiliate" (as that term is defined in Rule 405 of the Securities Act) of the
Company.
Section 3.5. Absence of Conflicts. The execution and delivery of this
Agreement and each agreement which is attached as an Exhibit hereto and
executed by the Investor in connection herewith, and the consummation of the
transactions contemplated hereby and thereby, and compliance with the
requirements hereof and thereof by the Investor, will not violate any law,
rule, regulation, order, writ, judgment, injunction, decree or award binding
on Investor or (a) violate any provision of any indenture, instrument or
agreement to which Investor is a party or is subject, or by which Investor or
any of its assets is bound; (b) conflict with or constitute a material default
thereunder; (c) result in the creation or imposition of any lien pursuant to
the terms of any such indenture, instrument or agreement, or constitute a
breach of any fiduciary duty owed by Investor to any third party; or (d)
require the approval of any non-governmental agency third-party (which has not
been obtained) pursuant to any material contract, agreement, instrument,
relationship or legal obligation to which Investor is subject or to which any
of its assets, operations or management may be subject.
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Section 3.6. Disclosure; Access to Information. The Investor has received all
documents, records, books and other information pertaining to Investor's
investment in the Company that have been requested by the Investor.
Section 3.7. Manner of Sale. At no time was Investor presented with or
solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising.
ARTICLE IV
Representations and Warranties of the Company
The Company represents and Warrants to the Investors that, except as set forth
on the Disclosure Schedule prepared by the Company and attached hereto:
Section 4.1. Organization of the Company. The Company is a corporation duly
incorporated and existing in good standing under the laws of the State of New
York and has all requisite corporate authority to own its properties and to
carry on its business as now being conducted. The Company is structured, has
operated and currently operates as described in the SEC Documents.. The
Company is duly qualified and is in good standing as a foreign corporation to
do business in every jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, other
than those in which the failure so to qualify would not have a Material
Adverse Effect.
Section 4.2. Authority. (i) The Company has the requisite corporate power and
corporate authority to conduct its business as now conducted, to enter into
and perform its obligations under this Agreement, the Registration Rights
Agreement, the Escrow Agreement, and the Warrants and to issue the Convertible
Debentures, the Conversion Shares, the Warrants and the Warrant Shares
pursuant to their respective terms, (ii) the execution, issuance and delivery
of this Agreement, the Registration Rights Agreement, the Escrow Agreement,
the Convertible Debentures and the Warrants by the Company and the
consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary corporate action and no further consent or
authorization of the Company or its Board of Directors or stockholders is
required, and (iii) this Agreement, the Registration Rights Agreement, the
Escrow Agreement, the Convertible Debentures and the Warrants have been duly
executed and delivered by the Company and at the Closing shall constitute
valid and binding obligations of the Company enforceable against the Company
in accordance with their terms, except as such enforceability may be limited
by applicable bankruptcy, insolvency, or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application. The Company has duly and
validly authorized and reserved for issuance shares of Common Stock sufficient
in number for the conversion of the Convertible Debentures and for the
exercise of the Warrants. The Company understands and acknowledges the
potentially dilutive effect to the Common Stock of the issuance of the
Conversion Shares. The Company further acknowledges that, its obligation to
issue Conversion Shares upon conversion of the Convertible Debentures and
Warrant Shares upon exercise of the Warrants in accordance with this
Agreement and the Convertible Debentures is absolute and
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unconditional regardless of the dilutive effect that such issuance may have on
the ownership interests of other stockholders of the Company and
notwithstanding the commencement of any case under 11 U.S.C. Section 101 et
seq. (the "Bankruptcy Code"). The Company shall not seek judicial relief from
its obligations hereunder except pursuant to the Bankruptcy Code. In the
event the Company is a debtor under the Bankruptcy Code, the Company hereby
waives to the fullest extent permitted any rights to relief it may have under
11 U.S.C. Section 362 in respect of the conversion of the Convertible
Debentures and the exercise of the Warrants. The Company agrees, without cost
or expense to the Investors, to take or consent to any and all action
necessary to effectuate relief under 11 U.S.C. Section 362.
Section 4.3. Capitalization. The authorized capital stock of the Company
consists of 25,000,000 shares of Common Stock, $0.001 par value per share, of
which 12,220,888 shares are issued and outstanding as of March 6, 2000.
Except as set forth in the SEC Documents and in Schedule 4.3 hereto, there are
no outstanding Capital Shares Equivalents nor any agreements or understandings
pursuant to which any Capital Shares Equivalents may become outstanding. The
Company is not a party to any agreement granting registration or anti-dilution
rights to any person with respect to any of its equity or debt securities.
All of the outstanding shares of Common Stock of the Company have been duly
and validly authorized and issued and are fully paid and non-assessable and
have been issued pursuant to valid exemptions from registration under the
Securities Act and all applicable state "blue sky" laws.
Section 4.4. Common Stock. The Company registered its Common Stock pursuant
to Section 12(g) of the Exchange Act and is in compliance with all
requirements for the continued listing or quotation of its Common Stock, and
such Common Stock is currently listed or quoted on, the Principal Market. As
of the date hereof, the Principal Market is the OTC Bulletin Board and the
Company has not received any notice regarding, and to its knowledge there is
no threat, of the termination or discontinuance of the eligibility of the
Common Stock for such listing.
Section 4.5. SEC Documents. The Company has made available to the Investors
true and complete copies of the SEC Documents. The Company has not provided
to the Investors any information that, according to applicable law, rule or
regulation, should have been disclosed publicly prior to the date hereof by
the Company, but which has not been so disclosed. Subject to items raised in
the SEC staff comment letters, as of their respective dates, the SEC Documents
complied in all material respects with the requirements of the Exchange Act,
and rules and regulations of the SEC promulgated thereunder and the SEC
Documents did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading. Subject to items raised in the SEC staff comment
letters, the financial statements of the Company included in the SEC Documents
complied in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC or other applicable rules and
regulations with respect thereto at the time of such inclusion. Such financial
statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved (except
(i) as may be otherwise indicated in such financial statements or the notes
thereto or (ii) in the case of unaudited interim statements, to the extent
they exclude footnotes or may be condensed or summary statements) and fairly
present in all material respects the financial position of the Company as of
the dates thereof and the results of operations and cash flows for the periods
then
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ended (subject, in the case of unaudited interim statements, to normal year-
end audit adjustments). Neither the Company nor any of its subsidiaries has
any material indebtedness, obligations or liabilities of any kind (whether
accrued, absolute, contingent or otherwise, and whether due or to become due)
that would have been required to be reflected in, reserved against or
otherwise described in the financial statements or in the notes thereto in
accordance with GAAP, which was not fully reflected in, reserved against or
otherwise described in the financial statements or the notes thereto included
in the SEC Documents or was not incurred in the ordinary course of business
(which may include material transactions) consistent with the Company's past
practices since the last date of such financial statements.
Section 4.6. Exemption from Registration; Valid Issuances. Subject to the
accuracy of the Investors' representations in Article III, the sale of the
Convertible Debentures, the Conversion Shares, the Warrants and the Warrant
Shares will not require registration under the Securities Act and/or any
applicable state securities law. When issued and paid for in accordance with
the Warrants and validly converted in accordance with the terms of the
Convertible Debentures, the Conversion Shares and the Warrant Shares will be
duly and validly issued, fully paid, and non-assessable. Neither the sales of
the Convertible Debentures, the Conversion Shares, the Warrants or the Warrant
Shares pursuant to, nor the Company's performance of its obligations under,
this Agreement, the Registration Rights Agreement, the Escrow Agreement, the
Convertible Debentures or the Warrants will (i) result in the creation or
imposition by the Company of any liens, charges, claims or other encumbrances
upon the Convertible Debentures, the Conversion Shares, the Warrants or the
Warrant Shares or, except as contemplated herein, any of the assets of the
Company, or (ii) entitle the holders of Outstanding Capital Shares to
preemptive or other rights to subscribe for or acquire the Capital Shares or
other securities of the Company. The Convertible Debentures, the Conversion
Shares, the Warrants and the Warrant Shares shall not subject the Investors to
personal liability to the Company or its creditors by reason of the possession
thereof.
Section 4.7. No General Solicitation or Advertising in Regard to this
Transaction. Neither the Company nor any of its affiliates nor, to the
knowledge of the Company, any person acting on its or their behalf (i) has
conducted or will conduct any general solicitation (as that term is used in
Rule 502(c) of Regulation D) or general advertising with respect to the sale
of the Convertible Debentures or the Warrants, or (ii) made any offers or
sales of any security or solicited any offers to buy any security under any
circumstances that would require registration of the Convertible Debentures,
the Conversion Shares, the Warrants or the Warrant Shares under the Securities
Act.
Section 4.8. No Conflicts. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby, including without limitation the issuance of
the Convertible Debentures, the Conversion Shares, the Warrants and the
Warrant Shares, do not and will not (i) result in a violation of the Company's
Certificate of Incorporation or By-Laws or (ii) conflict with, or constitute a
material default (or an event that with notice or lapse of time or both would
become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, indenture
or instrument, or any "lock-up" or similar provision of any underwriting or
similar agreement to which the Company is a party, or (iii) result in a
violation of any federal, state or local law, rule, regulation, order,
judgment or decree (including federal and state securities laws and
regulations) applicable to the Company or by which any material property or
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asset of the Company is bound or affected, nor is the Company otherwise in
violation of, conflict with or default under any of the foregoing (except in
each case for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not have, individually or
in the aggregate, a Material Adverse Effect). The business of the Company is
not being conducted in violation of any law, ordinance or regulation of any
governmental entity, except for possible violations that either singly or in
the aggregate would not have a Material Adverse Effect. The Company is not
required under any Federal, state or local law, rule or regulation to obtain
any consent, authorization or order of, or make any filing or registration
with, any court or governmental agency in order for it to execute, deliver or
perform any of its obligations under this Agreement or issue and sell the
Convertible Debentures or the Warrants in accordance with the terms hereof
(other than any SEC or state securities filings that may be required to be
made by the Company subsequent to Closing, any registration statement that may
be filed pursuant hereto); provided that, for purposes of the representation
made in this sentence, the Company is assuming and relying upon the accuracy
of the relevant representations and agreements of the Investors herein.
Section 4.9. No Material Adverse Change. Since Setptember 30, 1999, no
Material Adverse Effect has occurred or exists with respect to the Company of
which Investors or their counsel are not aware. No material supplier has
given notice, oral or written, that it intends to cease or reduce the volume
of its business with the Company from historical levels.
Section 4.10. No Undisclosed Events or Circumstances. Since September 30,
1999, no event or circumstance has occurred or exists with respect to the
Company or its businesses, properties, prospects, operations or financial
condition, that could be expected to have a Material Adverse Effect which will
not be publicly disclosed in a required SEC Filing.
Section 4.11. No Integrated Offering. Other than pursuant to offerings which
are exempt from registration under the Securities Act, or pursuant to the
issuance or exercise of employee stock options, or pursuant to its discussion
with the Investors in connection with the transactions contemplated hereby,
the Company has not issued, offered or sold the Convertible Debentures, the
Warrants or any shares of Common Stock (including for this purpose any
securities of the same or a similar class as the Convertible Debentures, the
Warrants or Common Stock, or any securities convertible into a exchangeable or
exercisable for the Convertible Debentures or Common Stock or any such other
securities) within the six-month period next preceding the date hereof, and
the Company shall not permit any of its directors, officers or affiliates
directly or indirectly to take, any action (including, without limitation, any
offering or sale to any Person of the Convertible Debentures, Warrants or
shares of Common Stock), so as to make unavailable the exemption from
Securities Act registration being relied upon by the Company for the offer and
sale to Investors of the Convertible Debentures (and the Conversion Shares) or
the Warrants (and the Warrant Shares) as contemplated by this Agreement.
Section 4.12. Litigation and Other Proceedings. There are no lawsuits or
proceedings pending or, to the knowledge of the Company, threatened, against
the Company or any subsidiary, nor has the Company received any written or
oral notice of any such action, suit, proceeding or investigation, which could
reasonably be expected to have a Material Adverse Effect. No judgment, order,
writ, injunction or decree or award has been issued by or, to the knowledge of
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the Company, requested of any court, arbitrator or governmental agency which
could result in a Material Adverse Effect.
Section 4.13. No Misleading or Untrue Communication. The Company and, to the
knowledge of the Company, any person representing the Company, or any other
person selling or offering to sell the Convertible Debentures or the Warrants
in connection with the transaction contemplated by this Agreement, have not
made, at any time, any oral communication in connection with the offer or sale
of the same which contained any untrue statement of a material fact or omitted
to state any material fact necessary in order to make the statements, in the
light of the circumstances under which they were made, not misleading.
Section 4.14. Material Non-Public Information. The Company has not disclosed
to the Investors any material non-public information that (i) if disclosed,
would reasonably be expected to have a material effect on the price of the
Common Stock or (ii) according to applicable law, rule or regulation, should
have been disclosed publicly by the Company prior to the date hereof but which
has not been so disclosed.
Section 4.15. Insurance. The Company maintains general liability and workers'
compensation insurance policies with financially sound and reputable insurers
that is adequate, consistent with industry standards and the Company's
historical claims experience. The Company has not received notice from, and
has no knowledge of any threat by, any insurer (that has issued any insurance
policy to the Company) that such insurer intends to deny coverage under or
cancel, discontinue or not renew any insurance policy presently in force.
Section 4.16. Tax Matters.
(a) The Company and each subsidiary has filed all Tax Returns which it
is required to file under applicable laws; all such Tax Returns are true and
accurate and has been prepared in compliance with all applicable laws; the
Company has paid all Taxes due and owing by it or any subsidiary (whether or
not such Taxes are required to be shown on a Tax Return) and have withheld and
paid over to the appropriate taxing authorities all Taxes which it is required
to withhold from amounts paid or owing to any employee, stockholder, creditor
or other third parties; and since December 31, 1998, the charges, accruals and
reserves for Taxes with respect to the Company (including any provisions for
deferred income taxes) reflected on the books of the Company are adequate to
cover any Tax liabilities of the Company if its current tax year were treated
as ending on the date hereof.
(b) No claim has been made by a taxing authority in a jurisdiction where
the Company does not file tax returns that the Company or any subsidiary is or
may be subject to taxation by that jurisdiction. There are no foreign,
federal, state or local tax audits or administrative or judicial proceedings
pending or being conducted with respect to the Company or any subsidiary; no
information related to Tax matters has been requested by any foreign, federal,
state or local taxing authority; and, except as disclosed above, no written
notice indicating an intent to open an audit or other review has been received
by the Company or any subsidiary from any foreign, federal, state or local
taxing authority. There are no material unresolved questions or claims
concerning the Company's Tax liability. The Company (A) has not executed or
entered into a closing agreement pursuant to Section 7121 of the Internal
Revenue Code or any predecessor provision
11
thereof or any similar provision of state, local or foreign law; or (B) has
not agreed to or is required to make any adjustments pursuant to Section 481
(a) of the Internal Revenue Code or any similar provision of state, local or
foreign law by reason of a change in accounting method initiated by the
Company or any of its subsidiaries or has any knowledge that the IRS has
proposed any such adjustment or change in accounting method, or has any
application pending with any taxing authority requesting permission for any
changes in accounting methods that relate to the business or operations of the
Company. The Company has not been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Internal Revenue
Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Internal Revenue Code.
(c) The Company has not made an election under Section 341(f) of the
Internal Revenue Code. The Company is not liable for the Taxes of another
person that is not a subsidiary of the Company under (A) Treas. Reg. Section
1.1502-6 (or comparable provisions of state, local or foreign law), (B) as a
transferee or successor, (C) by contract or indemnity or (D) otherwise. The
Company is not a party to any tax sharing agreement. The Company has not made
any payments, is obligated to make payments or is a party to an agreement that
could obligate it to make any payments that would not be deductible under
Section 280G of the Internal Revenue Code.
(d) For purposes of this Section 4.16:
"IRS" means the United States Internal Revenue Service.
"Tax" or "Taxes" means federal, state, county, local, foreign, or
other income, gross receipts, ad valorem, franchise, profits, sales or use,
transfer, registration, excise, utility, environmental, communications, real
or personal property, capital stock, license, payroll, wage or other
withholding, employment, social security, severance, stamp, occupation,
alternative or add-on minimum, estimated and other taxes of any kind
whatsoever (including, without limitation, deficiencies, penalties, additions
to tax, and interest attributable thereto) whether disputed or not.
"Tax Return" means any return, information report or filing with
respect to Taxes, including any schedules attached thereto and including any
amendment thereof.
Section 4.17. Property. The Company does not own any real property. The
Company has good and marketable title to all personal property owned by it,
free and clear of all liens, encumbrances and defects except such as do not
materially affect the value of such property and do not materially interfere
with the use made and proposed to be made of such property by the Company; and
to the Company's knowledge any real property and buildings held under lease by
the Company as tenant are held by it under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere with the
use made and intended to be made of such property and buildings by the
Company. The Company's present facilities are adequate for the Company's
reasonably foreseeable needs.
Section 4.18. Intellectual Property. The Company has the rights stated in the
SEC Documents (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures)
and other similar rights and proprietary knowledge (collectively,
"Intangibles") necessary for the conduct of its business as now being
conducted.
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To the Company's knowledge, except as disclosed in the SEC Documents neither
the Company nor any of its subsidiaries is infringing upon or in conflict with
any right of any other person with respect to any Intangibles. Except as
disclosed in the SEC Documents, no adverse claims have been asserted by any
person to the ownership or use of any Intangibles and the Company has no
knowledge of any basis for such claim.
Section 4.19. Internal Controls and Procedures. The Company maintains books
and records and internal accounting controls which provide reasonable
assurance that (i) all transactions to which the Company is a party or by
which its properties are bound are executed with management's authorization;
(ii) the recorded accounting of the Company's consolidated assets is compared
with existing assets at regular intervals; (iii) access to the Company's
consolidated assets is permitted only in accordance with management's
authorization; and (iv) all transactions to which the Company is a party or by
which its properties are bound are recorded as necessary to permit preparation
of the financial statements of the Company in accordance with U.S. generally
accepted accounting principles.
Section 4.20. Payments and Contributions. Neither the Company nor any of its
directors, officers or, to its knowledge, other employees has (i) used any
Company funds for any unlawful contribution, endorsement, gift, entertainment
or other unlawful expense relating to political activity; (ii) made any direct
or indirect unlawful payment of Company funds to any foreign or domestic
government official or employee; (iii) violated or is in violation of any
provision of the Foreign Corrupt Practices Act of 1977, as amended; or (iv)
made any bribe, rebate, payoff, influence payment, kickback or other similar
payment to any person with respect to Company matters.
Section 4.21. Related Party Transactions. The Company is not a party to any
agreement or transaction with any of its officers, directors, greater than 10%
shareholders or any Affiliate (as defined in SEC Rule 405) of any of said
persons that would require disclosure under Item 404 of Regulation S-B that
will not be disclosed in the next the Form 10-KSB.
Section 4.22. Permits and Licenses. The Company holds all necessary permits
and licenses to conduct its business as presently conducted. All of such
permits and licenses are in full force and effect and the Company is not in
material violation of any thereof.
Section 4.23. No Misrepresentation. The representations and warranties of the
Company contained in this Agreement, any schedule, annex or exhibit hereto and
any agreement, instrument or certificate furnished by the Company to the
Investors pursuant to this Agreement, do not contain any 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 were made, not misleading.
ARTICLE V
Covenants of the Investors
Each Investor, severally and not jointly, covenants with the Company
that:
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Section 5.1. Compliance with Law. The Investor's trading activities with
respect to shares of the Company's Common Stock will be in compliance with all
applicable state and federal securities laws, rules and regulations and rules
and regulations of the Principal Market on which the Company's Common Stock is
listed.
Section 5.2. Limitations on Resales. In the event that the Registration
Statement becomes effective within one hundred eighty (180) days from the
Closing Date, the Investor agrees that sales of its Conversion Shares during
each thirty (30) day period beginning on the Effective Date shall not exceed
one third of the Conversion Shares beneficially owned by such Investor as of
the Effective Date. The right to sell such Conversion Shares shall be
cumulative with the Investor's right to sell Conversion Shares in subsequent
thirty (30) day periods. Such limitation on resales shall not apply after any
date when the Common Stock has had a closing bid price of $1.20 or greater for
ten (10) consecutive Trading Days.
ARTICLE VI
Covenants of the Company
Section 6.1. Registration Rights. The Company shall cause the Registration
Rights Agreement to remain in full force and effect and the Company shall
comply in all material respects with the terms thereof.
Section 6.2. Reservation of Common Stock. As of the date hereof, the Company
has reserved and the Company shall continue to reserve and keep available at
all times, free of preemptive rights, shares of Common Stock for the purpose
of enabling the Company to issue the Conversion Shares and the Warrant Shares
pursuant to any conversion of the Convertible Debentures or exercise of the
Warrants. The number of shares so reserved from time to time, as theretofore
increased or reduced as hereinafter provided, may be reduced by the number of
shares actually delivered pursuant to any conversion of the Convertible
Debentures or exercise of the Warrants and the number of shares so reserved
shall be increased or decreased to reflect potential increases or decreases in
the Common Stock that the Company may thereafter be obligated to issue by
reason of adjustments to the Warrants.
Section 6.3. Listing of Common Stock. The Company hereby agrees to use its
best efforts to maintain the listing of the Common Stock on a Principal Market
and as soon as reasonably practicable following the Closing to list the
Conversion Shares and the Warrant Shares on the Principal Market. The Company
further agrees, if the Company applies to have the Common Stock traded on any
other Principal Market, it will include in such application the Conversion
Shares and the Warrant Shares, and will take such other action as is necessary
or desirable in the opinion of the Investors to cause the Conversion Shares
and Warrant Shares to be listed on such other Principal Market as promptly as
possible. The Company will use its best efforts to take all action to
continue the listing and trading of its Common Stock on a Principal Market
(including, without limitation, maintaining sufficient net tangible assets)
and will use its best efforts to comply in all respects with the Company's
reporting, filing and other obligations under the bylaws or rules of the
Principal Market and shall provide Investors with copies of any correspondence
to or from such Principal Market which questions or threatens delisting of the
14
Common Stock, within three (3) Trading Days of the Company's receipt thereof,
until the Investors have disposed of all of their Registrable Securities.
Section 6.4. Exchange Act Registration. The Company will cause its Common
Stock to continue to be registered under Section 12(g) of the Exchange Act,
will use its best efforts to comply in all respects with its reporting and
filing obligations under the Exchange Act and will not take any action or file
any document (whether or not permitted by the Exchange Act or the rules
thereunder) to terminate or suspend such registration or to terminate or
suspend its reporting and filing obligations under said Act until the
Investors have disposed of all of their Registrable Securities.
Section 6.5. Legends. The certificates evidencing the Registrable Securities
shall be free of legends, except as set forth in Article IX.
Section 6.6. Corporate Existence; Conflicting Agreements. The Company will
take all steps necessary to preserve and continue the corporate existence of
the Company. The Company shall not enter into any agreement, the terms of
which agreement would restrict or impair the right or ability of the Company
to perform any of its obligations under this Agreement or any of the other
agreements attached as exhibits hereto.
Section 6.7. Consolidation; Merger. The Company shall not, at any time after
the date hereof, effect any merger or consolidation of the Company with or
into, or a transfer of all or substantially all of the assets of the Company
to, another entity (a "Consolidation Event") unless the resulting successor or
acquiring entity (if not the Company) assumes by written instrument or by
operation of law the obligation to deliver to the Investors such shares of
stock and/or securities as the Investors are entitled to receive pursuant to
this Agreement and the Convertible Debenture.
Section 6.8. Issuance of Convertible Debentures and Warrant Shares. The sale
of the Convertible Debentures and the Warrants and the issuance of the Warrant
Shares pursuant to exercise of the Warrants and the Conversion Shares upon
conversion of the Convertible Debentures shall be made in accordance with the
provisions and requirements of Section 4(2), 4(6) or Regulation D and any
applicable state securities law. The Company shall make any necessary SEC and
"blue sky" filings required to be made by the Company in connection with the
sale of the Securities to the Investors as required by all applicable laws,
and shall provide a copy thereof to the Investors promptly after such filing.
However, the Company understands that no "blue sky" filings are required
because none of the Investors are in the United States and each Investor
represents that Investor's country of residence does not require registration
therein.
ARTICLE VII
Survival; Indemnification
Section 7.1. Survival. The representations, warranties and covenants made by
each of the Company and each Investor in this Agreement, the annexes,
schedules and exhibits hereto and in
15
each instrument, agreement and certificate entered into and delivered by them
pursuant to this Agreement, shall survive the Closing and the consummation of
the transactions contemplated hereby. In the event of a breach or violation
of any of such representations, warranties or covenants, the party to whom
such representations, warranties or covenants have been made shall have all
rights and remedies for such breach or violation available to it under the
provisions of this Agreement, irrespective of any investigation made by or on
behalf of such party on or prior to the Closing Date.
Section 7.2. Indemnity. (a) The Company hereby agrees to indemnify and hold
harmless the Investors, their respective Affiliates and their respective
officers, directors, partners and members (collectively, the "Investor
Indemnitees"), from and against any and all Damages, and agrees to reimburse
the Investor Indemnitees for all reasonable out-of-pocket expenses (including
the reasonable fees and expenses of legal counsel), in each case promptly as
incurred by the Investor Indemnitees and to the extent arising out of or in
connection with:
(i) any material misrepresentation, omission of fact or breach of
any of the Company's representations or warranties contained in this
Agreement, the annexes, schedules or exhibits hereto or any instrument,
agreement or certificate entered into or delivered by the Company pursuant to
this Agreement; or
(ii) any failure by the Company to perform in any material respect
any of its covenants, agreements, undertakings or obligations set forth in
this Agreement, the annexes, schedules or exhibits hereto or any instrument,
agreement or certificate entered into or delivered by the Company pursuant to
this Agreement; or
(iii) any action instituted against the Investors, or any of them
or their respective Affiliates, by any stockholder of the Company who is not
an Affiliate of an Investor, with respect to any of the transactions
contemplated by this Agreement.
(b) Each Investor, severally and not jointly, hereby agrees to
indemnify and hold harmless the Company, its Affiliates and their respective
officers, directors, partners and members (collectively, the "Company
Indemnitees"), from and against any and all Damages, and agrees to reimburse
the Company Indemnitees for reasonable all out-of-pocket expenses (including
the reasonable fees and expenses of legal counsel), in each case promptly as
incurred by the Company Indemnitees and to the extent arising out of or in
connection with:
(i) any material misrepresentation, omission of fact, or breach of
any of the Investor's representations or warranties contained in this
Agreement, the annexes, schedules or exhibits hereto or any instrument,
agreement or certificate entered into or delivered by the Investor pursuant to
this Agreement; or
(ii) any failure by the Investor to perform in any material
respect any of its covenants, agreements, undertakings or obligations set
forth in this Agreement or any instrument, certificate or agreement entered
into or delivered by the Investor pursuant to this Agreement.
16
Section 7.3. Notice. Promptly after receipt by either party hereto seeking
indemnification pursuant to Section 7.2 (an "Indemnified Party") of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the party from whom indemnification pursuant to Section
7.2 is being sought (the "Indemnifying Party") of the commencement thereof;
but the omission to so notify the Indemnifying Party shall not relieve it from
any liability that it otherwise may have to the Indemnified Party, except to
the extent that the Indemnifying Party is actually prejudiced by such omission
or delay. In connection with any Claim as to which both the Indemnifying Party
and the Indemnified Party are parties, the Indemnifying Party shall be
entitled to assume the defense thereof. Notwithstanding the assumption of the
defense of any Claim by the Indemnifying Party, the Indemnified Party shall
have the right to employ separate legal counsel and to participate in the
defense of such Claim, and the Indemnifying Party shall bear the reasonable
fees, out-of-pocket costs and expenses of such separate legal counsel to the
Indemnified Party if (and only if): (x) the Indemnifying Party shall have
agreed to pay such fees, out-of-pocket costs and expenses, (y) the Indemnified
Party reasonably shall have concluded that representation of the Indemnified
Party and the Indemnifying Party by the same legal counsel would not be
appropriate due to actual or, as reasonably determined by legal counsel to the
Indemnified Party, potentially differing interests between such parties in the
conduct of the defense of such Claim, or if there may be legal defenses
available to the Indemnified Party that are in addition to or disparate from
those available to the Indemnifying Party, or (z) the Indemnifying Party shall
have failed to employ legal counsel reasonably satisfactory to the Indemnified
Party within a reasonable period of time after notice of the commencement of
such Claim. If the Indemnified Party employs separate legal counsel in
circumstances other than as described in clauses (x), (y) or (z) above, the
fees, costs and expenses of such legal counsel shall be borne exclusively by
the Indemnified Party. Except as provided above, the Indemnifying Party shall
not, in connection with any Claim in the same jurisdiction, be liable for the
fees and expenses of more than one firm of legal counsel for the Indemnified
Party (together with appropriate local counsel). The Indemnifying Party shall
not, without the prior written consent of the Indemnified Party (which consent
shall not unreasonably be withheld), settle or compromise any Claim or consent
to the entry of any judgment that does not include an unconditional release of
the Indemnified Party from all liabilities with respect to such Claim or
judgment.
Section 7.4. Direct Claims. In the event one party hereunder should have a
claim for indemnification that does not involve a claim or demand being
asserted by a third party, the Indemnified Party promptly shall deliver notice
of such claim to the Indemnifying Party. If the Indemnified Party disputes
the claim, such dispute shall be resolved by mutual agreement of the
Indemnified Party and the Indemnifying Party or by binding arbitration
conducted in accordance with the procedures and rules of the American
Arbitration Association as set forth in Article X. Judgment upon any award
rendered by any arbitrators may be entered in any court having competent
jurisdiction thereof.
ARTICLE VIII
Due Diligence Review
17
Section 8.1. Due Diligence Review. Subject to Section 8.2, the Company shall
make available for inspection and review by the Investors, advisors to and
representatives of the Investors (who may or may not be affiliated with the
Investors and who are reasonably acceptable to the Company), any underwriter
participating in any disposition of the Registrable Securities on behalf of
the Investors pursuant to the Registration Statement, any such registration
statement or amendment or supplement thereto or any blue sky, Nasdaq or other
filing, all proposed filings with the SEC, and all other corporate documents
and properties of the Company as may be reasonably necessary for the purpose
of such review, and cause the Company's officers, directors and employees to
supply all such information reasonably requested by the Investors or any such
representative, advisor or underwriter in connection with such Registration
Statement (including, without limitation, in response to all questions and
other inquiries reasonably made or submitted by any of them), prior to and
from time to time after the filing and effectiveness of the Registration
Statement for the sole purpose of enabling the Investors and such
representatives, advisors and underwriters and their respective accountants
and attorneys to conduct initial and ongoing due diligence with respect to the
Company and the accuracy of the Registration Statement through the Effective
Date of the Registration Statement.
Section 8.2. Non-Disclosure of Non-Public Information.
(a) From and after the filing of the Registration Statement, the Company
shall not disclose material non-public information to the Investors, advisors
to or representatives of the Investors unless prior to disclosure of such
information the Company identifies such information as being non-public
information and provides the Investors, such advisors and representatives with
the opportunity to accept or refuse to accept such non-public information for
review. Other than disclosure of any comment letters received from the SEC
staff with respect to the Registration Statement, the Company may, as a
condition to disclosing any non-public information hereunder, require the
Investors' advisors and representatives to enter into a confidentiality
agreement in form and content reasonably satisfactory to the Company and the
Investors.
(b) The Company will promptly notify the advisors and representatives of
the Investors and, if any, underwriters, of any event or the existence of any
circumstance of which it becomes aware, constituting material information
(whether or not requested of the Company specifically or generally during the
course of due diligence by such persons or entities), which, if not disclosed
in the prospectus included in the Registration Statement would cause such
prospectus to include a material misstatement or to omit a material fact
required to be stated therein in order to make the statements, therein in
light of the circumstances in which they were made, not misleading.
ARTICLE IX
Legends; Transfer Agent Instructions
Section 9.1. Legends. Unless otherwise provided below, each certificate
representing Registrable Securities will bear the following legend or
equivalent (the "Legend"):
18
THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH
OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED,
OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO A TRANSACTION THAT IS EXEMPT
FROM SUCH REGISTRATION.
Section 9.2. Transfer Agent Instructions. Upon the execution and delivery
hereof, the Company is issuing to the transfer agent for its Common Stock (and
to any substitute or replacement transfer agent for its Common Stock upon the
Company's appointment of any such substitute or replacement transfer agent)
instructions substantially in the form of Exhibit F hereto. Such instructions
shall be irrevocable by the Company from and after the date hereof or from and
after the issuance thereof to any such substitute or replacement transfer
agent, as the case may be.
Section 9.3. No Other Legend or Stock Transfer Restrictions. No legend other
than the one specified in Section 9.1 has been or shall be placed on the share
certificates representing the Registrable Securities and no instructions or
"stop transfer orders," "stock transfer restrictions," or other restrictions
have been or shall be given to the Company's transfer agent with respect
thereto other than as expressly set forth in this Article IX.
Section 9.4. Investors' Compliance. Nothing in this Article shall affect in
any way each Investor's obligations to comply with all applicable securities
laws upon resale of the Common Stock.
ARTICLE X
Choice of Law; Arbitration
Section 10.1. Governing Law/Arbitration. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York applicable
to contracts made in New York by persons domiciled in New York City and
without regard to its principles of conflicts of laws. Any dispute under
this Agreement shall be submitted to arbitration under the American
Arbitration Association (the "AAA") in New York City, New York, and shall be
finally and conclusively determined by the decision of a board of arbitration
consisting of three (3) members (hereinafter referred to as the "Board of
Arbitration") selected according to the rules governing the AAA. The Board of
Arbitration shall meet on consecutive business days in New York City, New
York, and shall reach and render a decision in writing (concurred in by a
majority of the members of the Board of Arbitration) with respect to the
amount, if any, which the losing party is required to pay to the other party
in respect of a claim filed. In connection with rendering its decisions, the
Board of Arbitration shall adopt and follow the laws of the State of New York
unless the matter at issue is the
19
corporation law of the company's state of incorporation, in which event the
corporation law of such jurisdiction shall govern such issue. To the extent
practical, decisions of the Board of Arbitration shall be rendered no more
than thirty (30) calendar days following commencement of proceedings with
respect thereto. The Board of Arbitration shall cause its written decision to
be delivered to all parties involved in the dispute. Any decision made by the
Board of Arbitration (either prior to or after the expiration of such thirty
(30) calendar day period) shall be final, binding and conclusive on the
parties to the dispute, and entitled to be enforced to the fullest extent
permitted by law and entered in any court of competent jurisdiction. The Board
of Arbitration shall be authorized and is hereby directed to enter a default
judgment against any party failing to participate in any proceeding hereunder
within the time periods set forth in the AAA rules. The prevailing party shall
be awarded its costs, including attorneys' fees, from the non-prevailing party
as part of the arbitration award. Any party shall have the right to seek
injunctive relief from any court of competent jurisdiction in any case where
such relief is available. The prevailing party in such injunctive action
shall be awarded its costs, including attorney's fees, from the non-prevailing
party.
ARTICLE XI
Assignment
Section 11.1. Assignment. Neither this Agreement nor any rights of the
Investors or the Company hereunder may be assigned by either party to any
other person except as permitted herein, or in the event of a merger or
similar transaction. Notwithstanding the foregoing, (a) the provisions of
this Agreement shall inure to the benefit of, and be enforceable by, any
permitted transferee of any of the Convertible Debentures or Warrants
purchased or acquired by any Investor hereunder with respect to the
Convertible Debentures or Warrants held by such person, and (b) upon the prior
written consent of the Company, which consent shall not unreasonably be
withheld or delayed, each Investor's interest in this Agreement may be
assigned at any time, in whole or in part, to any other person or entity
(including any Affiliate of the Investor) who agrees to make the
representations and warranties contained in Article III and who agrees to be
bound by the terms of this Agreement.
ARTICLE XII
Notices
Section 12.1. Notices. All notices, demands, requests, consents, approvals,
and other communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be (i) hand delivered, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by facsimile, addressed as set forth below or to
such other address as such party shall have specified most recently by written
notice. Any notice or other communication required or permitted to be given
hereunder shall be deemed effective (a) upon hand delivery or delivery by
facsimile, with accurate confirmation generated by the transmitting facsimile
machine, at the address or number designated below (if delivered on a business
day
20
during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the first business day following the date of sending by reputable
courier service, fully prepaid, addressed to such address, or (c) upon actual
receipt of such mailing, if mailed. The addresses for such communications
shall be:
If to the Company: Famous Fixins, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to (shall not constitute Law Offices of ▇▇▇ ▇▇▇▇▇▇▇
notice): ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇▇▇, Esq.
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
if to the Investors: As set forth on the signature pages
hereto
with a copy to: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
(shall not constitute notice) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Green, P.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Either party hereto may from time to time change its address or facsimile
number for notices under this Section 12.1 by giving written notice of such
changed address or facsimile number to the other party hereto as provided in
this Section 12.1.
ARTICLE XIII
Miscellaneous
Section 13.1. Counterparts/ Facsimile/ Amendments. This Agreement may be
executed in multiple counterparts, each of which may be executed by less than
all of the parties and shall be deemed to be an original instrument which
shall be enforceable against the parties actually executing such counterparts
and all of which together shall constitute one and the same instrument.
Except as otherwise stated herein, in lieu of the original documents, a
facsimile transmission or copy of the original documents shall be as effective
and enforceable as the original. This Agreement may be amended only by a
writing executed by all parties.
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Section 13.2. Entire Agreement. This Agreement, the agreements attached as
Exhibits hereto, which include, but are not limited to the Convertible
Debentures, the Warrants, the Escrow Agreement, and the Registration Rights
Agreement, set forth the entire agreement and understanding of the parties
relating to the subject matter hereof and supersedes all prior and
contemporaneous agreements, negotiations and understandings between the
parties, both oral and written relating to the subject matter hereof. The
terms and conditions of all Exhibits to this Agreement are incorporated herein
by this reference and shall constitute part of this Agreement as is fully set
forth herein.
Section 13.3. Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that such severability shall be ineffective
if it materially changes the economic benefit of this Agreement to any party.
Section 13.4. Headings. The headings used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting
this Agreement.
Section 13.5. Number and Gender. There may be one or more Investors parties
to this Agreement, which Investors may be natural persons or entities. All
references to plural Investors shall apply equally to a single Investor if
there is only one Investor, and all references to an Investor as "it" shall
apply equally to a natural person.
Section 13.6. Reporting Entity for the Common Stock. The reporting entity
relied upon for the determination of the trading price or trading volume of
the Common Stock on any given Trading Day for the purposes of this Agreement
shall be Bloomberg, L.P. or any successor thereto. The written mutual consent
of the Investors and the Company shall be required to employ any other
reporting entity.
Section 13.7. Replacement of Certificates. Upon (i) receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of a certificate representing the Convertible Debentures or any
Conversion Shares or Warrants or any Warrant Shares and (ii) in the case of
any such loss, theft or destruction of such certificate, upon delivery of an
indemnity agreement or security reasonably satisfactory in form to the Company
(which shall not include the posting of any bond) or (iii) in the case of any
such mutilation, on surrender and cancellation of such certificate, the
Company at its expense will execute and deliver, in lieu thereof, a new
certificate of like tenor.
Section 13.8. Fees and Expenses. Each of the Company and the Investors agree
to pay its own expenses incident to the performance of its obligations
hereunder.
Section 13.9. Brokerage. Each of the parties hereto represents that it has
had no dealings in connection with this transaction with any finder or broker
who will demand payment of any fee or commission from the other party except
for Union Atlantic, LC, whose fee shall be paid by the Company. The Company on
the one hand, and the Investors, on the other hand, agree to indemnify the
other against and hold the other harmless from any and all liabilities to any
person claiming brokerage commissions or finder's fees on account of services
purported to have been
22
rendered on behalf of the indemnifying party in connection with this Agreement
or the transactions contemplated hereby.
Section 13.10. Publicity. The Company agrees that it will not issue any press
release or other public announcement of the transactions contemplated by this
Agreement without the prior consent of the Investors, which shall not be
unreasonably withheld nor delayed by more than two (2) Trading Days from their
receipt of such proposed release. No release shall name the Investors without
their express consent.
23
IN WITNESS WHEREOF, the parties hereto have caused this Purchase
Agreement to be executed by the undersigned, thereunto duly authorized, as of
the date first set forth above.
Famous Fixins, Inc.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------
▇▇▇▇▇ ▇▇▇▇▇, President
Roseworth Group Ltd.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇, Authorized Signatory
Principal Amount subscribed for: $400,000
Address for notices:
c/o Dr. ▇▇. ▇▇▇▇▇▇▇▇ & Partner
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇
▇▇-▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇-▇▇▇▇
Austost Anstalt Schaan
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇, Authorized Signatory
Principal Amount subscribed for: $250,000
Address for notices:
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇-▇▇▇
Balmore Funds, S.A.
By: /s/ Francois Morax
--------------------------------------
Francois Morax, Authorized Signatory
Principal Amount subscribed for: $350,000
24
Address for notices:
Trident ▇▇▇▇▇▇▇▇
Road Town, Tortola, British Virgin Islands
Fax: ▇▇▇-▇▇▇-▇▇▇▇
25
SCHEDULE 4.3
As of March 6, 2000, without including the securities to be offered and sold
herein:
1.) the Company has 12,220,888 shares of common stock outstanding;
2.) the Company also has 3,730,980 options and warrants
outstanding;
3.) the Company has a convertible debenture outstanding in the
principal amount of $325,000. The terms of conversion of the debentures are
set forth in the Company's SEC Documents.
26
CONVERTIBLE DEBENTURE
NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON CONVERSION HEREOF
HAVE BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE OR UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"). THE SECURITIES ARE RESTRICTED AND MAY NOT BE OFFERED,
RESOLD, PLEDGED OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT OR AN EXEMPTION FROM SUCH REGISTRATION
REQUIREMENTS.
No. 1 US $400,000
Famous Fixins, Inc.
CONVERTIBLE DEBENTURE DUE MARCH 13, 2005
THIS DEBENTURE is issued by Famous Fixins, Inc., a corporation organized
and existing under the laws of the State of New York (the "Company") and is
designated as its Convertible Debenture Due March 13, 2005.
FOR VALUE RECEIVED, the Company promises to pay to Roseworth Group Ltd.,
or permitted assigns (the "Holder"), the principal sum of Four Hundred
Thousand and 00/100 (US $400,000) Dollars on March 13, 2005 (the "Maturity
Date"). The Company will pay the principal of this Debenture on the Maturity
Date, less any amounts required by law to be deducted, to the registered
holder of this Debenture as of the tenth day prior to the Maturity Date and
addressed to such holder at the last address appearing on the Debenture
Register. The forwarding of such check shall constitute a payment of
principal hereunder and shall satisfy and discharge the liability for
principal on this Debenture to the extent of the sum represented by such check
plus any amounts so deducted.
This Debenture is subject to the following additional provisions:
1. This Debenture has been issued subject to investment
representations of the original purchaser hereof and may be transferred or
exchanged only in compliance with the Securities Act of 1933, as amended (the
"Act"), and other applicable state and foreign securities laws. The Holder
shall deliver written notice to the Company of any proposed transfer of this
Debenture. In the event of any proposed transfer of this Debenture, the
Company may require, prior to issuance of a new Debenture in the name of such
other person, that it receive reasonable transfer documentation including
legal opinions that the issuance of the Debenture in such other name does not
and will not cause a violation of the Act or any applicable state or foreign
securities laws. Prior to due presentment for transfer of this Debenture,
the Company and any agent of the Company may treat the person in whose name
this Debenture is duly registered on the Company's Debenture Register as the
owner hereof for the purpose of receiving payment as herein provided and for
all other purposes, whether or not this Debenture be overdue, and neither the
Company nor any such agent shall be affected by notice to the contrary. This
Debenture has been executed and delivered pursuant to the Debenture and
Warrants Purchase Agreement dated as of March 7, 2000 between the Company and
the original Holder (the "Purchase Agreement"), and is subject to the terms
and conditions of the Purchase Agreement, which are, by this reference,
incorporated herein and made a part hereof. Capitalized terms used and not
otherwise defined herein shall have the meanings set forth for such terms in
the Purchase Agreement.
2. The Holder of this Debenture is entitled, at its option, to
convert at any time commencing on the date hereof, the principal amount of
this Debenture or any portion thereof into shares of Common Stock of the
Company ("Conversion Shares") at a conversion price for each share of Common
Stock ("Conversion Price") equal to $0.40 per share subject to proportionate
adjustments for any stock splits or dividends in the form of Common Stock
subsequent to March 7, 2000.
3. (a) Conversion shall be effectuated by surrendering this
Debenture to the Company (if such Conversion will convert all outstanding
principal) together with the form of conversion notice attached hereto as
Exhibit A (the "Notice of Conversion"), executed by the Holder of this
Debenture evidencing such Holder's intention to convert this Debenture or a
specified portion (as above provided) hereof, and accompanied, if required by
the Company, by proper assignment hereof in blank. No fraction of a share or
scrip representing a fraction of a share will be issued on conversion, but the
number of shares issuable shall be rounded to the nearest whole share. The
date on which Notice of Conversion is given (the "Conversion Date") shall be
deemed to be the date on which the Holder faxes the Notice of Conversion duly
executed to the Company. Facsimile delivery of the Notice of Conversion shall
be accepted by the Company at facsimile number (▇▇▇) ▇▇▇-▇▇▇▇ Attn.: ▇▇▇▇▇
▇▇▇▇▇. Certificates representing Common Stock upon conversion will be
delivered to the Holder within three (3) Trading Days from the date the Notice
of Conversion is delivered to the Company. Delivery of shares upon conversion
shall be made to the address specified by the Holder in the Notice of
Conversion.
(b) The Company understands that a delay in the issuance of
shares of Common Stock upon a conversion beyond the three (3) Trading Day
period described in Section 3(a) could result in economic loss to the Holder.
As compensation to the Holder for such loss, the Company agrees to pay late
payments to the Holder for late issuance of shares of Common Stock upon
conversion in accordance with the following schedule (where "No. Trading Days
Late" is defined as the number of Trading Days beyond three (3) Trading Days
from the date the Notice of Conversion is delivered to the Company).
No. Trading Days ▇▇▇▇ ▇▇▇▇ Payment for Each
$5,000 of Principal Amount
Being Converted
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
More than 10 $1,000 +$200 for each Trading Day
Late beyond 10 Trading Days
The Company shall pay any payments incurred under this Section 3(b) in
immediately available funds upon demand. Nothing herein shall limit Holder's
right to pursue injunctive relief and/or actual damages for the Company's
failure to issue and deliver Common Stock to the holder, including, without
limitation, the Holder's actual losses occasioned by any "buy-in" of Common
Stock necessitated by such late delivery. Furthermore, in addition to any
other remedies which may be available to the Holder, in the event that the
Company fails for any reason to effect delivery of such shares of Common Stock
within three (3) Trading Days from the date the Notice of Conversion is
delivered to the Company, the Holder will be entitled to revoke the relevant
Notice of Conversion by delivering a notice to such effect to the Company,
whereupon the Company and the Holder shall each be restored to their
respective positions immediately prior to delivery of such Notice of
Conversion, and in such event no late payments shall be due in connection with
such withdrawn conversion.
If at any time, except in accordance with this Debenture or the
Purchase Agreement, (a) the Company challenges, disputes or denies the right
of the Holder to effect the conversion of this Debenture into Common Stock or
otherwise dishonors or rejects any Notice of Conversion delivered in
accordance with this Section 3 or (b) any
2
Company stockholder who is not and has never been an Affiliate (as defined in
Rule 405 under the Securities Act of 1933, as amended) of the Holder obtains a
judgment or any injunctive relief from any court or public or governmental
authority which denies, enjoins, limits, modifies, delays or disputes the
right of the holder hereof to effect the conversion of this Debenture into
Common Stock, then the Holder shall have the right, by written notice, to
require the Company to promptly redeem this Debenture for cash at a redemption
price equal to one hundred forty percent (140%) of the outstanding principal
amount hereof. Under any of the circumstances set forth above, the Company
shall be responsible for the payment of all costs and expenses of the Holder,
including reasonable legal fees and expenses, as and when incurred in
disputing any such action or pursuing its rights hereunder (in addition to any
other rights of the Holder), subject in the case of clause (b) to the
Company's right to control and assume the defense of any such action. In the
absence of an injunction precluding the same, the Company shall issue shares
upon a properly noticed conversion.
The Holder shall be entitled to exercise its conversion privilege
notwithstanding the commencement of any case under 11 U.S.C. Section 101 et
seq. (the "Bankruptcy Code"). In the event the Company is a debtor under the
Bankruptcy Code, the Company hereby waives to the fullest extent permitted any
rights to relief it may have under 11 U.S.C. Section 362 in respect of the
Holder's conversion privilege.
4. No provision of this Debenture shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the
principal of this Debenture at the time, place and in the coin or currency or
shares of Common Stock, herein prescribed. This Debenture is a direct
obligation of the Company.
5. If the Company merges or consolidates with another corporation
or sells or transfers all or substantially all of its assets to another
person, or spins off a division or subsidiary to its shareholders, and the
holders of the Common Stock are entitled to receive stock, securities or
property in respect of or in exchange for Common Stock, then as a condition of
such merger, consolidation, sale or transfer, the Company and any such
successor, purchaser or transferee agree that the Debenture may thereafter be
converted on the terms and subject to the conditions set forth above into the
kind and amount of stock, securities or property receivable upon such merger,
consolidation, sale or transfer by a holder of the number of shares of Common
Stock into which this Debenture might have been converted immediately before
such merger, consolidation, sale or transfer, subject to adjustments which
shall be as nearly equivalent as may be practicable. In the event of any
proposed merger, consolidation or sale or transfer of all or substantially all
of the assets of the Company (a "Sale"), the Holder hereof shall have the
right to convert by delivering a Notice of Conversion to the Company within
fifteen (15) days of receipt of notice of such Sale from the Company.
6. The Holder of the Debenture, by acceptance hereof, agrees that
this Debenture is being acquired for investment and that such Holder will not
offer, sell or otherwise dispose of this Debenture or the Shares of Common
Stock issuable upon conversion thereof except under circumstances which will
not result in a violation of the Act or any applicable state Blue Sky or
foreign laws or similar laws relating to the sale of securities.
7. This Debenture shall be governed by and construed in accordance
with the laws of the State of New York. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of the
City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement
and hereby waives, to the maximum extent permitted by law, any objection,
including any objection based on forum non conveniens, to the bringing of any
such proceeding in such jurisdictions.
8. The following shall constitute an "Event of Default":
a. The Company shall default in the payment of principal on this
Debenture and same shall continue for a period of five (5) days; or
b. Any of the representations or warranties made by the Company herein,
in the Purchase Agreement, the Registration Rights Agreement, or in any
agreement, certificate or financial or other written statements heretofore or
hereafter furnished by the Company in connection with the execution and
delivery of this Debenture or the Purchase Agreement shall be false or
misleading in any material respect at the time made; or
c. The Company fails to issue shares of Common Stock to the Holder or to
cause its Transfer Agent to issue shares of Common Stock upon exercise by the
Holder of the conversion rights of the Holder
3
in accordance with the terms of this Debenture, fails to transfer or to cause
its Transfer Agent to transfer any certificate for shares of Common Stock
issued to the Holder upon conversion of this Debenture as and when required by
this Debenture or the Registration Rights Agreement, and such transfer is
otherwise lawful, or fails to remove any restrictive legend or to cause its
Transfer Agent to transfer any certificate or any shares of Common Stock
issued to the Holder upon conversion of this Debenture as and when required by
this Debenture, the Purchase Agreement or the Registration Rights Agreement
and such legend removal is otherwise lawful, and any such failure shall
continue uncured for five (5) Trading Days; or
d. The Company shall fail to perform or observe, in any material
respect, any other covenant, term, provision, condition, agreement or
obligation of the Company under the Purchase Agreement, the Registration
Rights Agreement or this Debenture and such failure shall continue uncured for
a period of thirty (30) days after written notice from the Holder of such
failure; or
e. The Company shall (1) admit in writing its inability to pay its
debts generally as they mature; (2) make an assignment for the benefit of
creditors or commence proceedings for its dissolution; or (3) apply for or
consent to the appointment of a trustee, liquidator or receiver for its or for
a substantial part of its property or business; or
f. A trustee, liquidator or receiver shall be appointed for the Company
or for a substantial part of its property or business without its consent and
shall not be discharged within sixty (60) days after such appointment; or
g. Any governmental agency or any court of competent jurisdiction at the
instance of any governmental agency shall assume custody or control of the
whole or any substantial portion of the properties or assets of the Company
and shall not be dismissed within sixty (60) days thereafter; or
h. Any money judgment, writ or warrant of attachment, or similar process
in excess of Two Hundred Thousand ($200,000) Dollars in the aggregate shall be
entered or filed against the Company or any of its properties or other assets
and shall remain unpaid, unvacated, unbonded or unstayed for a period of sixty
(60) days or in any event later than five (5) days prior to the date of any
proposed sale thereunder; or
i. Bankruptcy, reorganization, insolvency or liquidation proceedings or
other proceedings for relief under any bankruptcy law or any law for the
relief of debtors shall be instituted by or against the Company and, if
instituted against the Company, shall not be dismissed within sixty (60) days
after such institution or the Company shall by any action or answer approve
of, consent to, or acquiesce in any such proceedings or admit the material
allegations of, or default in answering a petition filed in any such
proceeding; or
j. The Company shall have its Common Stock suspended or delisted from
trading on a Principal Market for in excess of two (2) Trading Days;
Then, or at any time thereafter, and in each and every such case, unless
such Event of Default shall have been waived in writing by the Holder (which
waiver shall not be deemed to be a waiver of any subsequent default) at the
option of the Holder and in the Holder's sole discretion, the Holder may
consider this Debenture immediately due and payable, without presentment,
demand, protest or notice of any kind, all of which are hereby expressly
waived, anything herein or in any note or other instruments contained to the
contrary notwithstanding, and the Holder may immediately enforce any and all
of the Holder's rights and remedies provided herein or any other rights or
remedies afforded by law.
9. Nothing contained in this Debenture shall be construed as
conferring upon the Holder the right to vote or to receive dividends or to
consent or receive notice as a shareholder in respect of any meeting of
shareholders or any rights whatsoever as a shareholder of the Company, unless
and to the extent converted in accordance with the terms hereof.
10. In no event shall the Holder be permitted to convert this
Debenture for shares of Common Stock in excess of the amount of this Debenture
upon the conversion of which, (x) the number of shares of Common Stock
beneficially owned by such Holder (other than shares of Common Stock issuable
upon conversion of this Debenture) plus (y) the number of shares of Common
Stock issuable upon conversion of this Debenture, would be equal to or exceed
9.9% of the number of shares of Common Stock then issued and outstanding,
including shares issuable upon conversion of this Debenture held by such
Holder after application of this Section 10. As used herein, beneficial
ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as
4
amended, and the rules and regulations thereunder. To the extent that the
limitation contained in this Section 10 applies, the determination of whether
this Debenture is convertible (in relation to other securities owned by the
Holder) and of which a portion of this Debenture is convertible shall be in
the sole discretion of such Holder, and the submission of a Notice of
Conversion shall be deemed to be such Holder's determination of whether this
Debenture is convertible (in relation to other securities owned by such
holder) and of which portion of this Debenture is convertible, in each case
subject to such aggregate percentage limitation, and the Company shall have no
obligation to verify or confirm the accuracy of such determination. Nothing
contained herein shall be deemed to restrict the right of a holder to convert
this Debenture into shares of Common Stock at such time as such conversion
will not violate the provisions of this Section 10. The provisions of this
Section 10 may be waived by the Holder of this Debenture upon not less than 75
days' prior notice to the Company, and the provisions of this Section 10 shall
continue to apply until such 75th day (or such later date as may be specified
in such notice of waiver). No conversion of this Debenture in violation of
this Section 10 but otherwise in accordance with this Debenture shall affect
the status of the Common Stock issued upon such conversion as validly issued,
fully-paid and nonassessable.
IN WITNESS WHEREOF, the Company has caused this Convertible Debenture
to be duly executed by an officer thereunto duly authorized.
Dated: March 13, 2000
Famous Fixins, Inc.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------
▇▇▇▇▇ ▇▇▇▇▇, President
Attest:
_______________________
5
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert $ ________________
of the principal amount of the above Debenture No. 1 into Shares of Common
Stock of Famous Fixins, Inc. (the "Company") according to the conditions
hereof, as of the date written below.
Date of Conversion*_____________________________________________________
Applicable Conversion Price * __________________________________________
Accrued Interest________________________________________________________
Signature_______________________________________________________________
[Name]
Address:________________________________________________________________
________________________________________________________________
*If such conversion represents the remaining principal balance of the
Debenture, the original Debenture must accompany the Notice of Conversion.
6
CONVERTIBLE DEBENTURE
NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON CONVERSION HEREOF
HAVE BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE OR UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"). THE SECURITIES ARE RESTRICTED AND MAY NOT BE OFFERED,
RESOLD, PLEDGED OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT OR AN EXEMPTION FROM SUCH REGISTRATION
REQUIREMENTS.
No. 2 US $250,000
Famous Fixins, Inc.
CONVERTIBLE DEBENTURE DUE MARCH 13, 2005
THIS DEBENTURE is issued by Famous Fixins, Inc., a corporation organized
and existing under the laws of the State of New York (the "Company") and is
designated as its Convertible Debenture Due March 13, 2005.
FOR VALUE RECEIVED, the Company promises to pay to Austost Anstalt
▇▇▇▇▇▇, or permitted assigns (the "Holder"), the principal sum of Two Hundred
Fifty Thousand and 00/100 (US $250,000) Dollars on March 13, 2005 (the
"Maturity Date"). The Company will pay the principal of this Debenture on the
Maturity Date, less any amounts required by law to be deducted, to the
registered holder of this Debenture as of the tenth day prior to the Maturity
Date and addressed to such holder at the last address appearing on the
Debenture Register. The forwarding of such check shall constitute a payment
of principal hereunder and shall satisfy and discharge the liability for
principal on this Debenture to the extent of the sum represented by such check
plus any amounts so deducted.
This Debenture is subject to the following additional provisions:
1. This Debenture has been issued subject to investment
representations of the original purchaser hereof and may be transferred or
exchanged only in compliance with the Securities Act of 1933, as amended (the
"Act"), and other applicable state and foreign securities laws. The Holder
shall deliver written notice to the Company of any proposed transfer of this
Debenture. In the event of any proposed transfer of this Debenture, the
Company may require, prior to issuance of a new Debenture in the name of such
other person, that it receive reasonable transfer documentation including
legal opinions that the issuance of the Debenture in such other name does not
and will not cause a violation of the Act or any applicable state or foreign
securities laws. Prior to due presentment for transfer of this Debenture,
the Company and any agent of the Company may treat the person in whose name
this Debenture is duly registered on the Company's Debenture Register as the
owner hereof for the purpose of receiving payment as herein provided and for
all other purposes, whether or not this Debenture be overdue, and neither the
Company nor any such agent shall be affected by notice to the contrary. This
Debenture has been executed and delivered pursuant to the Debenture and
Warrants Purchase Agreement dated as of March 7, 2000 between the Company and
the original Holder (the "Purchase Agreement"), and is subject to the terms
and conditions of the Purchase Agreement, which are, by this reference,
incorporated herein and made a part hereof. Capitalized terms used and not
otherwise defined herein shall have the meanings set forth for such terms in
the Purchase Agreement.
2. The Holder of this Debenture is entitled, at its option, to
convert at any time commencing on the date hereof, the principal amount of
this Debenture or any portion thereof into shares of Common Stock of the
Company ("Conversion Shares") at a conversion price for each share of Common
Stock ("Conversion Price") equal to $0.40 per share subject to proportionate
adjustments for any stock splits or dividends in the form of Common Stock
subsequent to March 7, 2000.
3. (a) Conversion shall be effectuated by surrendering this
Debenture to the Company (if such Conversion will convert all outstanding
principal) together with the form of conversion notice attached hereto as
Exhibit A (the "Notice of Conversion"), executed by the Holder of this
Debenture evidencing such Holder's intention to convert this Debenture or a
specified portion (as above provided) hereof, and accompanied, if required by
the Company, by proper assignment hereof in blank. No fraction of a share or
scrip representing a fraction of a share will be issued on conversion, but the
number of shares issuable shall be rounded to the nearest whole share. The
date on which Notice of Conversion is given (the "Conversion Date") shall be
deemed to be the date on which the Holder faxes the Notice of Conversion duly
executed to the Company. Facsimile delivery of the Notice of Conversion shall
be accepted by the Company at facsimile number (▇▇▇) ▇▇▇-▇▇▇▇ Attn.: ▇▇▇▇▇
▇▇▇▇▇. Certificates representing Common Stock upon conversion will be
delivered to the Holder within three (3) Trading Days from the date the Notice
of Conversion is delivered to the Company. Delivery of shares upon conversion
shall be made to the address specified by the Holder in the Notice of
Conversion.
(b) The Company understands that a delay in the issuance of
shares of Common Stock upon a conversion beyond the three (3) Trading Day
period described in Section 3(a) could result in economic loss to the Holder.
As compensation to the Holder for such loss, the Company agrees to pay late
payments to the Holder for late issuance of shares of Common Stock upon
conversion in accordance with the following schedule (where "No. Trading Days
Late" is defined as the number of Trading Days beyond three (3) Trading Days
from the date the Notice of Conversion is delivered to the Company).
No. Trading Days ▇▇▇▇ ▇▇▇▇ Payment for Each
$5,000 of Principal Amount
Being Converted
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
More than 10 $1,000 +$200 for each Trading Day
Late beyond 10 Trading Days
The Company shall pay any payments incurred under this Section 3(b) in
immediately available funds upon demand. Nothing herein shall limit Holder's
right to pursue injunctive relief and/or actual damages for the Company's
failure to issue and deliver Common Stock to the holder, including, without
limitation, the Holder's actual losses occasioned by any "buy-in" of Common
Stock necessitated by such late delivery. Furthermore, in addition to any
other remedies which may be available to the Holder, in the event that the
Company fails for any reason to effect delivery of such shares of Common Stock
within three (3) Trading Days from the date the Notice of Conversion is
delivered to the Company, the Holder will be entitled to revoke the relevant
Notice of Conversion by delivering a notice to such effect to the Company,
whereupon the Company and the Holder shall each be restored to their
respective positions immediately prior to delivery of such Notice of
Conversion, and in such event no late payments shall be due in connection with
such withdrawn conversion.
If at any time, except in accordance with this Debenture or the Purchase
Agreement, (a) the Company challenges, disputes or denies the right of the
Holder to effect the conversion of this Debenture into Common Stock or
otherwise dishonors or rejects any Notice of Conversion delivered in
accordance with this Section 3 or (b) any
2
Company stockholder who is not and has never been an Affiliate (as defined in
Rule 405 under the Securities Act of 1933, as amended) of the Holder obtains a
judgment or any injunctive relief from any court or public or governmental
authority which denies, enjoins, limits, modifies, delays or disputes the
right of the holder hereof to effect the conversion of this Debenture into
Common Stock, then the Holder shall have the right, by written notice, to
require the Company to promptly redeem this Debenture for cash at a redemption
price equal to one hundred forty percent (140%) of the outstanding principal
amount hereof. Under any of the circumstances set forth above, the Company
shall be responsible for the payment of all costs and expenses of the Holder,
including reasonable legal fees and expenses, as and when incurred in
disputing any such action or pursuing its rights hereunder (in addition to any
other rights of the Holder), subject in the case of clause (b) to the
Company's right to control and assume the defense of any such action. In the
absence of an injunction precluding the same, the Company shall issue shares
upon a properly noticed conversion.
The Holder shall be entitled to exercise its conversion privilege
notwithstanding the commencement of any case under 11 U.S.C. Section 101 et
seq. (the "Bankruptcy Code"). In the event the Company is a debtor under the
Bankruptcy Code, the Company hereby waives to the fullest extent permitted any
rights to relief it may have under 11 U.S.C. Section 362 in respect of the
Holder's conversion privilege.
4. No provision of this Debenture shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the
principal of this Debenture at the time, place and in the coin or currency or
shares of Common Stock, herein prescribed. This Debenture is a direct
obligation of the Company.
5. If the Company merges or consolidates with another corporation
or sells or transfers all or substantially all of its assets to another
person, or spins off a division or subsidiary to its shareholders, and the
holders of the Common Stock are entitled to receive stock, securities or
property in respect of or in exchange for Common Stock, then as a condition of
such merger, consolidation, sale or transfer, the Company and any such
successor, purchaser or transferee agree that the Debenture may thereafter be
converted on the terms and subject to the conditions set forth above into the
kind and amount of stock, securities or property receivable upon such merger,
consolidation, sale or transfer by a holder of the number of shares of Common
Stock into which this Debenture might have been converted immediately before
such merger, consolidation, sale or transfer, subject to adjustments which
shall be as nearly equivalent as may be practicable. In the event of any
proposed merger, consolidation or sale or transfer of all or substantially all
of the assets of the Company (a "Sale"), the Holder hereof shall have the
right to convert by delivering a Notice of Conversion to the Company within
fifteen (15) days of receipt of notice of such Sale from the Company.
6. The Holder of the Debenture, by acceptance hereof, agrees that
this Debenture is being acquired for investment and that such Holder will not
offer, sell or otherwise dispose of this Debenture or the Shares of Common
Stock issuable upon conversion thereof except under circumstances which will
not result in a violation of the Act or any applicable state Blue Sky or
foreign laws or similar laws relating to the sale of securities.
7. This Debenture shall be governed by and construed in accordance
with the laws of the State of New York. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of the
City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement
and hereby waives, to the maximum extent permitted by law, any objection,
including any objection based on forum non conveniens, to the bringing of any
such proceeding in such jurisdictions.
8. The following shall constitute an "Event of Default":
a. The Company shall default in the payment of principal on this
Debenture and same shall continue for a period of five (5) days; or
b. Any of the representations or warranties made by the Company herein,
in the Purchase Agreement, the Registration Rights Agreement, or in any
agreement, certificate or financial or other written statements heretofore or
hereafter furnished by the Company in connection with the execution and
delivery of this Debenture or the Purchase Agreement shall be false or
misleading in any material respect at the time made; or
c. The Company fails to issue shares of Common Stock to the Holder or to
cause its Transfer Agent to issue shares of Common Stock upon exercise by the
Holder of the conversion rights of the Holder
3
in accordance with the terms of this Debenture, fails to transfer or to cause
its Transfer Agent to transfer any certificate for shares of Common Stock
issued to the Holder upon conversion of this Debenture as and when required by
this Debenture or the Registration Rights Agreement, and such transfer is
otherwise lawful, or fails to remove any restrictive legend or to cause its
Transfer Agent to transfer any certificate or any shares of Common Stock
issued to the Holder upon conversion of this Debenture as and when required by
this Debenture, the Purchase Agreement or the Registration Rights Agreement
and such legend removal is otherwise lawful, and any such failure shall
continue uncured for five (5) Trading Days; or
d. The Company shall fail to perform or observe, in any material
respect, any other covenant, term, provision, condition, agreement or
obligation of the Company under the Purchase Agreement, the Registration
Rights Agreement or this Debenture and such failure shall continue uncured for
a period of thirty (30) days after written notice from the Holder of such
failure; or
e. The Company shall (1) admit in writing its inability to pay its
debts generally as they mature; (2) make an assignment for the benefit of
creditors or commence proceedings for its dissolution; or (3) apply for or
consent to the appointment of a trustee, liquidator or receiver for its or for
a substantial part of its property or business; or
f. A trustee, liquidator or receiver shall be appointed for the Company
or for a substantial part of its property or business without its consent and
shall not be discharged within sixty (60) days after such appointment; or
g. Any governmental agency or any court of competent jurisdiction at the
instance of any governmental agency shall assume custody or control of the
whole or any substantial portion of the properties or assets of the Company
and shall not be dismissed within sixty (60) days thereafter; or
h. Any money judgment, writ or warrant of attachment, or similar process
in excess of Two Hundred Thousand ($200,000) Dollars in the aggregate shall be
entered or filed against the Company or any of its properties or other assets
and shall remain unpaid, unvacated, unbonded or unstayed for a period of sixty
(60) days or in any event later than five (5) days prior to the date of any
proposed sale thereunder; or
i. Bankruptcy, reorganization, insolvency or liquidation proceedings or
other proceedings for relief under any bankruptcy law or any law for the
relief of debtors shall be instituted by or against the Company and, if
instituted against the Company, shall not be dismissed within sixty (60) days
after such institution or the Company shall by any action or answer approve
of, consent to, or acquiesce in any such proceedings or admit the material
allegations of, or default in answering a petition filed in any such
proceeding; or
j. The Company shall have its Common Stock suspended or delisted from
trading on a Principal Market for in excess of two (2) Trading Days;
Then, or at any time thereafter, and in each and every such case, unless
such Event of Default shall have been waived in writing by the Holder (which
waiver shall not be deemed to be a waiver of any subsequent default) at the
option of the Holder and in the Holder's sole discretion, the Holder may
consider this Debenture immediately due and payable, without presentment,
demand, protest or notice of any kind, all of which are hereby expressly
waived, anything herein or in any note or other instruments contained to the
contrary notwithstanding, and the Holder may immediately enforce any and all
of the Holder's rights and remedies provided herein or any other rights or
remedies afforded by law.
9. Nothing contained in this Debenture shall be construed as
conferring upon the Holder the right to vote or to receive dividends or to
consent or receive notice as a shareholder in respect of any meeting of
shareholders or any rights whatsoever as a shareholder of the Company, unless
and to the extent converted in accordance with the terms hereof.
10. In no event shall the Holder be permitted to convert this
Debenture for shares of Common Stock in excess of the amount of this Debenture
upon the conversion of which, (x) the number of shares of Common Stock
beneficially owned by such Holder (other than shares of Common Stock issuable
upon conversion of this Debenture) plus (y) the number of shares of Common
Stock issuable upon conversion of this Debenture, would be equal to or exceed
9.9% of the number of shares of Common Stock then issued and outstanding,
including shares issuable upon conversion of this Debenture held by such
Holder after application of this Section 10. As used herein, beneficial
ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as
4
amended, and the rules and regulations thereunder. To the extent that the
limitation contained in this Section 10 applies, the determination of whether
this Debenture is convertible (in relation to other securities owned by the
Holder) and of which a portion of this Debenture is convertible shall be in
the sole discretion of such Holder, and the submission of a Notice of
Conversion shall be deemed to be such Holder's determination of whether this
Debenture is convertible (in relation to other securities owned by such
holder) and of which portion of this Debenture is convertible, in each case
subject to such aggregate percentage limitation, and the Company shall have no
obligation to verify or confirm the accuracy of such determination. Nothing
contained herein shall be deemed to restrict the right of a holder to convert
this Debenture into shares of Common Stock at such time as such conversion
will not violate the provisions of this Section 10. The provisions of this
Section 10 may be waived by the Holder of this Debenture upon not less than 75
days' prior notice to the Company, and the provisions of this Section 10 shall
continue to apply until such 75th day (or such later date as may be specified
in such notice of waiver). No conversion of this Debenture in violation of
this Section 10 but otherwise in accordance with this Debenture shall affect
the status of the Common Stock issued upon such conversion as validly issued,
fully-paid and nonassessable.
IN WITNESS WHEREOF, the Company has caused this Convertible Debenture to
be duly executed by an officer thereunto duly authorized.
Dated: March _____, 2000
Famous Fixins, Inc.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------
▇▇▇▇▇ ▇▇▇▇▇, President
Attest:
_______________________
5
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert $ ________________
of the principal amount of the above Debenture No. 1 into Shares of Common
Stock of Famous Fixins, Inc. (the "Company") according to the conditions
hereof, as of the date written below.
Date of Conversion*_____________________________________________________
Applicable Conversion Price * __________________________________________
Accrued Interest________________________________________________________
Signature_______________________________________________________________
[Name]
Address:________________________________________________________________
________________________________________________________________
*If such conversion represents the remaining principal balance of the
Debenture, the original Debenture must accompany the Notice of Conversion.
6
CONVERTIBLE DEBENTURE
NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON CONVERSION HEREOF
HAVE BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE OR UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"). THE SECURITIES ARE RESTRICTED AND MAY NOT BE OFFERED,
RESOLD, PLEDGED OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT OR AN EXEMPTION FROM SUCH REGISTRATION
REQUIREMENTS.
No. 3 US $350,000
Famous Fixins, Inc.
CONVERTIBLE DEBENTURE DUE MARCH 13, 2005
THIS DEBENTURE is issued by Famous Fixins, Inc., a corporation organized
and existing under the laws of the State of New York (the "Company") and is
designated as its Convertible Debenture Due March 13, 2005.
FOR VALUE RECEIVED, the Company promises to pay to Balmore Funds, S.A.,
or permitted assigns (the "Holder"), the principal sum of Three Hundred Fifty
Thousand and 00/100 (US $350,000) Dollars on March 13, 2005 (the "Maturity
Date"). The Company will pay the principal of this Debenture on the Maturity
Date, less any amounts required by law to be deducted, to the registered
holder of this Debenture as of the tenth day prior to the Maturity Date and
addressed to such holder at the last address appearing on the Debenture
Register. The forwarding of such check shall constitute a payment of
principal hereunder and shall satisfy and discharge the liability for
principal on this Debenture to the extent of the sum represented by such check
plus any amounts so deducted.
This Debenture is subject to the following additional provisions:
1. This Debenture has been issued subject to investment
representations of the original purchaser hereof and may be transferred or
exchanged only in compliance with the Securities Act of 1933, as amended (the
"Act"), and other applicable state and foreign securities laws. The Holder
shall deliver written notice to the Company of any proposed transfer of this
Debenture. In the event of any proposed transfer of this Debenture, the
Company may require, prior to issuance of a new Debenture in the name of such
other person, that it receive reasonable transfer documentation including
legal opinions that the issuance of the Debenture in such other name does not
and will not cause a violation of the Act or any applicable state or foreign
securities laws. Prior to due presentment for transfer of this Debenture,
the Company and any agent of the Company may treat the person in whose name
this Debenture is duly registered on the Company's Debenture Register as the
owner hereof for the purpose of receiving payment as herein provided and for
all other purposes, whether or not this Debenture be overdue, and neither the
Company nor any such agent shall be affected by notice to the contrary. This
Debenture has been executed and delivered pursuant to the Debenture and
Warrants Purchase Agreement dated as of March 7, 2000 between the Company and
the original Holder (the "Purchase Agreement"), and is subject to the terms
and conditions of the Purchase Agreement, which are, by this reference,
incorporated herein and made a part hereof. Capitalized terms used and not
otherwise defined herein shall have the meanings set forth for such terms in
the Purchase Agreement.
2. The Holder of this Debenture is entitled, at its option, to
convert at any time commencing on the date hereof, the principal amount of
this Debenture or any portion thereof into shares of Common Stock of the
Company ("Conversion Shares") at a conversion price for each share of Common
Stock ("Conversion Price") equal to $0.40 per share subject to proportionate
adjustments for any stock splits or dividends in the form of Common Stock
subsequent to March 7, 2000.
3. (a) Conversion shall be effectuated by surrendering this
Debenture to the Company (if such Conversion will convert all outstanding
principal) together with the form of conversion notice attached hereto as
Exhibit A (the "Notice of Conversion"), executed by the Holder of this
Debenture evidencing such Holder's intention to convert this Debenture or a
specified portion (as above provided) hereof, and accompanied, if required by
the Company, by proper assignment hereof in blank. No fraction of a share or
scrip representing a fraction of a share will be issued on conversion, but the
number of shares issuable shall be rounded to the nearest whole share. The
date on which Notice of Conversion is given (the "Conversion Date") shall be
deemed to be the date on which the Holder faxes the Notice of Conversion duly
executed to the Company. Facsimile delivery of the Notice of Conversion shall
be accepted by the Company at facsimile number (▇▇▇) ▇▇▇-▇▇▇▇ Attn.: ▇▇▇▇▇
▇▇▇▇▇. Certificates representing Common Stock upon conversion will be
delivered to the Holder within three (3) Trading Days from the date the Notice
of Conversion is delivered to the Company. Delivery of shares upon conversion
shall be made to the address specified by the Holder in the Notice of
Conversion.
(b) The Company understands that a delay in the issuance of
shares of Common Stock upon a conversion beyond the three (3) Trading Day
period described in Section 3(a) could result in economic loss to the Holder.
As compensation to the Holder for such loss, the Company agrees to pay late
payments to the Holder for late issuance of shares of Common Stock upon
conversion in accordance with the following schedule (where "No. Trading Days
Late" is defined as the number of Trading Days beyond three (3) Trading Days
from the date the Notice of Conversion is delivered to the Company).
No. Trading Days ▇▇▇▇ ▇▇▇▇ Payment for Each
$5,000 of Principal Amount
Being Converted
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
More than 10 $1,000 +$200 for each Trading Day
Late beyond 10 Trading Days
The Company shall pay any payments incurred under this Section 3(b) in
immediately available funds upon demand. Nothing herein shall limit Holder's
right to pursue injunctive relief and/or actual damages for the Company's
failure to issue and deliver Common Stock to the holder, including, without
limitation, the Holder's actual losses occasioned by any "buy-in" of Common
Stock necessitated by such late delivery. Furthermore, in addition to any
other remedies which may be available to the Holder, in the event that the
Company fails for any reason to effect delivery of such shares of Common Stock
within three (3) Trading Days from the date the Notice of Conversion is
delivered to the Company, the Holder will be entitled to revoke the relevant
Notice of Conversion by delivering a notice to such effect to the Company,
whereupon the Company and the Holder shall each be restored to their
respective positions immediately prior to delivery of such Notice of
Conversion, and in such event no late payments shall be due in connection with
such withdrawn conversion.
If at any time, except in accordance with this Debenture or the Purchase
Agreement, (a) the Company challenges, disputes or denies the right of the
Holder to effect the conversion of this Debenture into Common Stock or
otherwise dishonors or rejects any Notice of Conversion delivered in
accordance with this Section 3 or (b) any
2
Company stockholder who is not and has never been an Affiliate (as defined in
Rule 405 under the Securities Act of 1933, as amended) of the Holder obtains a
judgment or any injunctive relief from any court or public or governmental
authority which denies, enjoins, limits, modifies, delays or disputes the
right of the holder hereof to effect the conversion of this Debenture into
Common Stock, then the Holder shall have the right, by written notice, to
require the Company to promptly redeem this Debenture for cash at a redemption
price equal to one hundred forty percent (140%) of the outstanding principal
amount hereof. Under any of the circumstances set forth above, the Company
shall be responsible for the payment of all costs and expenses of the Holder,
including reasonable legal fees and expenses, as and when incurred in
disputing any such action or pursuing its rights hereunder (in addition to any
other rights of the Holder), subject in the case of clause (b) to the
Company's right to control and assume the defense of any such action. In the
absence of an injunction precluding the same, the Company shall issue shares
upon a properly noticed conversion.
The Holder shall be entitled to exercise its conversion privilege
notwithstanding the commencement of any case under 11 U.S.C. Section 101 et
seq. (the "Bankruptcy Code"). In the event the Company is a debtor under the
Bankruptcy Code, the Company hereby waives to the fullest extent permitted any
rights to relief it may have under 11 U.S.C. Section 362 in respect of the
Holder's conversion privilege.
4. No provision of this Debenture shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the
principal of this Debenture at the time, place and in the coin or currency or
shares of Common Stock, herein prescribed. This Debenture is a direct
obligation of the Company.
5. If the Company merges or consolidates with another corporation
or sells or transfers all or substantially all of its assets to another
person, or spins off a division or subsidiary to its shareholders, and the
holders of the Common Stock are entitled to receive stock, securities or
property in respect of or in exchange for Common Stock, then as a condition of
such merger, consolidation, sale or transfer, the Company and any such
successor, purchaser or transferee agree that the Debenture may thereafter be
converted on the terms and subject to the conditions set forth above into the
kind and amount of stock, securities or property receivable upon such merger,
consolidation, sale or transfer by a holder of the number of shares of Common
Stock into which this Debenture might have been converted immediately before
such merger, consolidation, sale or transfer, subject to adjustments which
shall be as nearly equivalent as may be practicable. In the event of any
proposed merger, consolidation or sale or transfer of all or substantially all
of the assets of the Company (a "Sale"), the Holder hereof shall have the
right to convert by delivering a Notice of Conversion to the Company within
fifteen (15) days of receipt of notice of such Sale from the Company.
6. The Holder of the Debenture, by acceptance hereof, agrees that
this Debenture is being acquired for investment and that such Holder will not
offer, sell or otherwise dispose of this Debenture or the Shares of Common
Stock issuable upon conversion thereof except under circumstances which will
not result in a violation of the Act or any applicable state Blue Sky or
foreign laws or similar laws relating to the sale of securities.
7. This Debenture shall be governed by and construed in accordance
with the laws of the State of New York. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of the
City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement
and hereby waives, to the maximum extent permitted by law, any objection,
including any objection based on forum non conveniens, to the bringing of any
such proceeding in such jurisdictions.
8. The following shall constitute an "Event of Default":
a. The Company shall default in the payment of principal on this
Debenture and same shall continue for a period of five (5) days; or
b. Any of the representations or warranties made by the Company herein,
in the Purchase Agreement, the Registration Rights Agreement, or in any
agreement, certificate or financial or other written statements heretofore or
hereafter furnished by the Company in connection with the execution and
delivery of this Debenture or the Purchase Agreement shall be false or
misleading in any material respect at the time made; or
c. The Company fails to issue shares of Common Stock to the Holder or to
cause its Transfer Agent to issue shares of Common Stock upon exercise by the
Holder of the conversion rights of the Holder
3
in accordance with the terms of this Debenture, fails to transfer or to cause
its Transfer Agent to transfer any certificate for shares of Common Stock
issued to the Holder upon conversion of this Debenture as and when required by
this Debenture or the Registration Rights Agreement, and such transfer is
otherwise lawful, or fails to remove any restrictive legend or to cause its
Transfer Agent to transfer any certificate or any shares of Common Stock
issued to the Holder upon conversion of this Debenture as and when required by
this Debenture, the Purchase Agreement or the Registration Rights Agreement
and such legend removal is otherwise lawful, and any such failure shall
continue uncured for five (5) Trading Days; or
d. The Company shall fail to perform or observe, in any material
respect, any other covenant, term, provision, condition, agreement or
obligation of the Company under the Purchase Agreement, the Registration
Rights Agreement or this Debenture and such failure shall continue uncured for
a period of thirty (30) days after written notice from the Holder of such
failure; or
e. The Company shall (1) admit in writing its inability to pay its
debts generally as they mature; (2) make an assignment for the benefit of
creditors or commence proceedings for its dissolution; or (3) apply for or
consent to the appointment of a trustee, liquidator or receiver for its or for
a substantial part of its property or business; or
f. A trustee, liquidator or receiver shall be appointed for the Company
or for a substantial part of its property or business without its consent and
shall not be discharged within sixty (60) days after such appointment; or
g. Any governmental agency or any court of competent jurisdiction at the
instance of any governmental agency shall assume custody or control of the
whole or any substantial portion of the properties or assets of the Company
and shall not be dismissed within sixty (60) days thereafter; or
h. Any money judgment, writ or warrant of attachment, or similar process
in excess of Two Hundred Thousand ($200,000) Dollars in the aggregate shall be
entered or filed against the Company or any of its properties or other assets
and shall remain unpaid, unvacated, unbonded or unstayed for a period of sixty
(60) days or in any event later than five (5) days prior to the date of any
proposed sale thereunder; or
i. Bankruptcy, reorganization, insolvency or liquidation proceedings or
other proceedings for relief under any bankruptcy law or any law for the
relief of debtors shall be instituted by or against the Company and, if
instituted against the Company, shall not be dismissed within sixty (60) days
after such institution or the Company shall by any action or answer approve
of, consent to, or acquiesce in any such proceedings or admit the material
allegations of, or default in answering a petition filed in any such
proceeding; or
j. The Company shall have its Common Stock suspended or delisted from
trading on a Principal Market for in excess of two (2) Trading Days;
Then, or at any time thereafter, and in each and every such case, unless
such Event of Default shall have been waived in writing by the Holder (which
waiver shall not be deemed to be a waiver of any subsequent default) at the
option of the Holder and in the Holder's sole discretion, the Holder may
consider this Debenture immediately due and payable, without presentment,
demand, protest or notice of any kind, all of which are hereby expressly
waived, anything herein or in any note or other instruments contained to the
contrary notwithstanding, and the Holder may immediately enforce any and all
of the Holder's rights and remedies provided herein or any other rights or
remedies afforded by law.
9. Nothing contained in this Debenture shall be construed as
conferring upon the Holder the right to vote or to receive dividends or to
consent or receive notice as a shareholder in respect of any meeting of
shareholders or any rights whatsoever as a shareholder of the Company, unless
and to the extent converted in accordance with the terms hereof.
10. In no event shall the Holder be permitted to convert this
Debenture for shares of Common Stock in excess of the amount of this Debenture
upon the conversion of which, (x) the number of shares of Common Stock
beneficially owned by such Holder (other than shares of Common Stock issuable
upon conversion of this Debenture) plus (y) the number of shares of Common
Stock issuable upon conversion of this Debenture, would be equal to or exceed
9.9% of the number of shares of Common Stock then issued and outstanding,
including shares issuable upon conversion of this Debenture held by such
Holder after application of this Section 10. As used herein, beneficial
ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as
4
amended, and the rules and regulations thereunder. To the extent that the
limitation contained in this Section 10 applies, the determination of whether
this Debenture is convertible (in relation to other securities owned by the
Holder) and of which a portion of this Debenture is convertible shall be in
the sole discretion of such Holder, and the submission of a Notice of
Conversion shall be deemed to be such Holder's determination of whether this
Debenture is convertible (in relation to other securities owned by such
holder) and of which portion of this Debenture is convertible, in each case
subject to such aggregate percentage limitation, and the Company shall have no
obligation to verify or confirm the accuracy of such determination. Nothing
contained herein shall be deemed to restrict the right of a holder to convert
this Debenture into shares of Common Stock at such time as such conversion
will not violate the provisions of this Section 10. The provisions of this
Section 10 may be waived by the Holder of this Debenture upon not less than 75
days' prior notice to the Company, and the provisions of this Section 10 shall
continue to apply until such 75th day (or such later date as may be specified
in such notice of waiver). No conversion of this Debenture in violation of
this Section 10 but otherwise in accordance with this Debenture shall affect
the status of the Common Stock issued upon such conversion as validly issued,
fully-paid and nonassessable.
IN WITNESS WHEREOF, the Company has caused this Convertible Debenture to
be duly executed by an officer thereunto duly authorized.
Dated: March _____, 2000
Famous Fixins, Inc.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------
▇▇▇▇▇ ▇▇▇▇▇, President
Attest:
_______________________
5
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert $ ________________
of the principal amount of the above Debenture No. 1 into Shares of Common
Stock of Famous Fixins, Inc. (the "Company") according to the conditions
hereof, as of the date written below.
Date of Conversion*_____________________________________________________
Applicable Conversion Price * __________________________________________
Accrued Interest________________________________________________________
Signature_______________________________________________________________
[Name]
Address:________________________________________________________________
________________________________________________________________
*If such conversion represents the remaining principal balance of the
Debenture, the original Debenture must accompany the Notice of Conversion.
6
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT")
OR ANY OTHER APPLICABLE SECURITIES LAWS IN RELIANCE UPON AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER SECURITIES
LAWS. NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF MAY
BE SOLD, PLEDGED, TRANSFERRED, ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR IN
A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE PROVISIONS OF THE
SECURITIES ACT.
STOCK PURCHASE WARRANT
To Purchase 1,000,000 Shares of Common Stock of
Famous Fixins, Inc.
THIS CERTIFIES that, for value received, Roseworth Group Ltd. (the
"Holder"), is entitled, upon the terms and subject to the conditions
hereinafter set forth, at any time on or after March 13, 2000 (the "Initial
Exercise Date") and on or prior to the close of business on March 13, 2005
(the "Termination Date") but not thereafter, to subscribe for and purchase
from Famous Fixins, Inc., a corporation incorporated in New York (the
"Company"), up to one million (1,000,000) shares (the "Warrant Shares") of
Common Stock, $.001 par value, of the Company (the "Common Stock"). The
purchase price of one share of Common Stock (the "Exercise Price") under this
Warrant shall be $0.75. The Exercise Price and the number of shares for which
the Warrant is exercisable shall be subject to adjustment as provided herein.
In the event of any conflict between the terms of this Warrant and the
Convertible Debenture and Warrants Purchase Agreement dated as of March 7,
2000 pursuant to which this Warrant has been issued (the "Purchase
Agreement"), the Purchase Agreement shall control. Capitalized terms used and
not otherwise defined herein shall have the meanings set forth for such terms
in the Purchase Agreement.
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1. Title to Warrant. Prior to the Termination Date and subject to
compliance with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company by
the holder hereof in person or by duly authorized attorney, upon surrender of
this Warrant together with the Assignment Form annexed hereto properly
endorsed.
2. Authorization of Shares. The Company covenants that all shares of
Common Stock which may be issued upon the exercise of rights represented by
this Warrant will, upon exercise of the rights represented by this Warrant, be
duly authorized, validly issued, fully paid and nonassessable and free from
all taxes, liens and charges in respect of the issue thereof (other than taxes
in respect of any transfer occurring contemporaneously with such issue).
3. Exercise of Warrant. Except as provided in Sections 4 and 5 herein,
exercise of the purchase rights represented by this Warrant may be made at any
time or times on or after the Initial Exercise Date, and before the close of
business on the Termination Date by the surrender of this Warrant and the
Notice of Exercise Form annexed hereto duly executed, at the office of the
Company (or such other office or agency of the Company as it may designate by
notice in writing to the registered holder hereof at the address of such
holder appearing on the books of the Company) and upon payment of the Exercise
Price of the shares thereby purchased by wire transfer or cashier's check
drawn on a United States bank, the holder of this Warrant shall be entitled to
receive a certificate for the number of shares of Common Stock so purchased.
Certificates for shares purchased hereunder shall be delivered to the holder
hereof within three (3) Trading Days after the date on which this Warrant
shall have been exercised as aforesaid. This Warrant shall be deemed to have
been exercised and such certificate or certificates shall be deemed to have
been issued, and Holder or any other person so designated to be named therein
shall be deemed to have become a holder of record of such shares for all
purposes, as of the date the Warrant has been exercised by payment to the
Company of the Exercise Price and all taxes required to be paid by Holder, if
any, pursuant to Section 5 prior to the issuance of such shares, have been
paid. If this Warrant shall have been exercised in part, the Company shall,
at the time of delivery of the certificate or certificates representing
Warrant Shares, deliver to Holder a new Warrant evidencing the rights of
Holder to purchase the unpurchased shares of Common Stock called for by this
Warrant, which new Warrant shall in all other respects be identical with this
Warrant. If no registration statement is effective permitting the resale of
the shares of Common Stock issued upon exercise of this Warrant at any time
commencing one year after the issuance date hereof, then this Warrant shall
also be exercisable by means of a "cashless exercise" in which the holder
shall be entitled to receive a certificate for the number of shares equal to
the quotient obtained by dividing [(A-B) (X)] by (A), where:
(A) = the average of the high and low trading prices per share of Common Stock
on the Trading Day preceding the date of such election;
(B) = the Exercise Price of the Warrants; and
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(X) = the number of shares issuable upon exercise of the Warrants in
accordance with the terms of this Warrant.
4. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. As to any fraction of a share which Holder would otherwise be
entitled to purchase upon such exercise, the Company shall pay a cash
adjustment in respect of such final fraction in an amount equal to the
Exercise Price.
5. Limitation on Exercise of Warrant. In no event shall the Holder be
permitted to exercise this Warrant for shares of Common Stock in excess of the
amount of this Warrant upon the exercise of which, (x) the number of shares of
Common Stock beneficially owned by such Holder (other than shares of Common
Stock issuable upon exercise of this Warrant) plus (y) the number of shares of
Common Stock issuable upon exercise of this Warrant, would be equal to or
exceed 9.9% of the number of shares of Common Stock then issued and
outstanding, including shares issuable upon exercise of this Warrant held by
such Holder after application of this Section 5. As used herein, beneficial
ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder. To the extent that the limitation contained in this Section 5
applies, the determination of whether this Warrant is exercisable (in relation
to other securities owned by the Holder) and which portion of this Warrant is
exercisable shall be in the sole discretion of such Holder, and the submission
of a Notice of Exercise shall be deemed to be such Holder's determination of
whether this Warrant is exercisable (in relation to other securities owned by
such Holder) and of which portion of this Warrant is exercisable, in each case
subject to such aggregate percentage limitation, and the Company shall have no
obligation to verify or confirm the accuracy of such determination. Nothing
contained herein shall be deemed to restrict the right of a holder to exercise
this Warrant into shares of Common Stock at such time as such exercise will
not violate the provisions of this Section 5. The provisions of this Section
5 may be waived by the Holder of this Warrant upon not less than 75 days'
prior notice to the Company, and the provisions of this Section 5 shall
continue to apply until such 75th day (or such later date as may be specified
in such notice of waiver). No exercise of this Warrant in violation of this
Section 5 but otherwise in accordance with this Warrant shall affect the
status of the Common Stock issued upon such exercise as validly issued, fully-
paid and nonassessable.
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6. Charges, Taxes and Expenses. Issuance of certificates for shares of
Common Stock upon the exercise of this Warrant shall be made without charge to
the holder hereof for any issue or transfer tax or other incidental expense in
respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the
name of the holder of this Warrant or in such name or names as may be directed
by the holder of this Warrant; provided, however, that in the event
certificates for shares of Common Stock are to be issued in a name other than
the name of the holder of this Warrant, this Warrant when surrendered for
exercise shall be accompanied by the Assignment Form attached hereto duly
executed by the holder hereof; and the Company may require, as a condition
thereto, the payment of a sum sufficient to reimburse it for any transfer tax
incidental thereto.
7. Closing of Books. The Company will not close its shareholder books
or records in any manner which prevents the timely exercise of this Warrant.
8. Transfer, Division and Combination. (a) Subject to compliance with
any applicable securities laws, transfer of this Warrant and all rights
hereunder, in whole or in part, shall be registered on the books of the
Company to be maintained for such purpose, upon surrender of this Warrant at
the principal office of the Company, together with a written assignment of
this Warrant substantially in the form attached hereto duly executed by Holder
or its agent or attorney and funds sufficient to pay any transfer taxes
payable upon the making of such transfer. Upon such surrender and, if
required, such payment, the Company shall execute and deliver a new Warrant or
Warrants in the name of the assignee or assignees and in the denomination or
denominations specified in such instrument of assignment, and shall issue to
the assignor a new Warrant evidencing the portion of this Warrant not so
assigned, and this Warrant shall promptly be cancelled. A Warrant, if
properly assigned, may be exercised by a new holder for the purchase of shares
of Common Stock without having a new Warrant issued.
(b) This Warrant may be divided or combined with other
Warrants upon presentation hereof at the aforesaid office of the Company,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued, signed by Holder or its agent or attorney.
Subject to compliance with Section 8(a), as to any transfer which may be
involved in such division or combination, the Company shall execute and
deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to
be divided or combined in accordance with such notice.
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(c) The Company shall prepare, issue and deliver at its own
expense (other than transfer taxes) the new Warrant or Warrants under this
Section 8.
(d) The Company agrees to maintain, at its aforesaid office,
books for the registration and the registration of transfer of the Warrants.
9. No Rights as Shareholder until Exercise. This Warrant does not
entitle the holder hereof to any voting rights or other rights as a
shareholder of the Company prior to the exercise hereof. Upon the surrender
of this Warrant and the payment of the aggregate Exercise Price, the Warrant
Shares so purchased shall be and be deemed to be issued to such holder as the
record owner of such shares as of the close of business on the later of the
date of such surrender or payment.
10. Loss, Theft, Destruction or Mutilation of Warrant. The Company
covenants that upon receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant
certificate or any stock certificate relating to the Warrant Shares, and in
case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it (which shall not include the posting of any bond), and upon
surrender and cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock certificate of like
tenor and dated as of such cancellation, in lieu of such Warrant or stock
certificate.
11. Saturdays, Sundays, Holidays, etc. If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday, Sunday or a legal holiday, then such action may be
taken or such right may be exercised on the next succeeding day not a
Saturday, Sunday or legal holiday.
12. Adjustments of Exercise Price and Number of Warrant Shares. (a)
Stock Splits, etc. The number and kind of securities purchasable upon the
exercise of this Warrant and the Exercise Price shall be subject to adjustment
from time to time upon the happening of any of the following. In case the
Company shall (i) pay a dividend in shares of Common Stock or make a
distribution in shares of Common Stock to holders of its outstanding Common
Stock, (ii) subdivide its outstanding shares of Common Stock into a greater
number of shares of Common Stock, (iii) combine its outstanding shares of
Common Stock into a smaller number of shares of Common Stock or (iv) issue any
shares of its capital stock in a reclassification of the Common Stock, then
the number of Warrant Shares purchasable upon exercise of this Warrant
immediately prior thereto shall be adjusted so that the holder of this Warrant
shall be entitled to receive the kind and number of Warrant Shares or other
securities of the Company which he would have owned or have been entitled to
receive had such Warrant been exercised in advance thereof. Upon each such
adjustment of the kind and number of Warrant Shares or other securities of the
Company which are purchasable hereunder, the holder of this Warrant shall
thereafter be entitled to purchase the number of Warrant Shares or other
securities resulting from such adjustment at an Exercise Price per Warrant
Share or other security obtained by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of Warrant Shares
purchasable pursuant hereto immediately prior to such adjustment and dividing
by the number of Warrant Shares or other securities of the Company resulting
from such adjustment. An adjustment
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made pursuant to this paragraph shall become effective immediately after the
effective date of such event retroactive to the record date, if any, for such
event.
(b) Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is a change in or distribution with respect to the Common Stock of the
Company), or sell, transfer or otherwise dispose of all or substantially all
its property, assets or business to another corporation and, pursuant to the
terms of such reorganization, reclassification, merger, consolidation or
disposition of assets, shares of common stock of the successor or acquiring
corporation, or any cash, shares of stock or other securities or property of
any nature whatsoever (including warrants or other subscription or purchase
rights) in addition to or in lieu of common stock of the successor or
acquiring corporation ("Other Property"), are to be received by or distributed
to the holders of Common Stock of the Company, then Holder shall have the
right thereafter to receive, upon exercise of this Warrant, the number of
shares of common stock of the successor or acquiring corporation or of the
Company, if it is the surviving corporation, and Other Property receivable
upon or as a result of such reorganization, reclassification, merger,
consolidation or disposition of assets by a holder of the number of shares of
Common Stock for which this Warrant is exercisable immediately prior to such
event. In case of any such reorganization, reclassification, merger,
consolidation or disposition of assets, the successor or acquiring corporation
(if other than the Company) shall expressly assume the due and punctual
observance and performance of each and every covenant and condition of this
Warrant to be performed and observed by the Company and all the obligations
and liabilities hereunder, subject to such modifications as may be deemed
appropriate (as determined in good faith by resolution of the Board of
Directors of the Company) in order to provide for adjustments of shares of
Common Stock for which this Warrant is exercisable which shall be as nearly
equivalent as practicable to the adjustments provided for in this Section 11.
For purposes of this Section 11, "common stock of the successor or acquiring
corporation" shall include stock of such corporation of any class which is not
preferred as to dividends or assets over any other class of stock of such
corporation and which is not subject to redemption and shall also include any
evidences of indebtedness, shares of stock or other securities which are
exercisable into or exchangeable for any such stock, either immediately or
upon the arrival of a specified date or the happening of a specified event and
any warrants or other rights to subscribe for or purchase any such stock. The
foregoing provisions of this Section 12 shall similarly apply to successive
reorganizations, reclassifications, mergers, consolidations or disposition of
assets.
13. Voluntary Adjustment by the Company. The Company may at any time
during the term of this Warrant, reduce the then current Exercise Price to any
amount and for any period of time deemed appropriate by the Board of Directors
of the Company.
14. Notice of Adjustment. Whenever the number of Warrant Shares or
number or kind of securities or other property purchasable upon the exercise
of this Warrant or the Exercise Price is adjusted, as herein provided, the
Company shall promptly mail by registered or certified mail, return receipt
requested, to the holder of this Warrant notice of such adjustment or
adjustments setting forth the number of Warrant Shares (and other securities
or property) purchasable upon the exercise of this Warrant and the Exercise
Price of such Warrant Shares (and other securities or property) after such
adjustment, setting forth a brief statement of the facts
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requiring such adjustment and setting forth the computation by which such
adjustment was made. Such notice, in the absence of manifest error, shall be
conclusive evidence of the correctness of such adjustment.
15. Notice of Corporate Action. If at any time:
(a) the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or other
distribution, or any right to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or
property, or to receive any other right, or
(b) there shall be any capital reorganization of the Company,
any reclassification or recapitalization of the capital stock of the Company
or any consolidation or merger of the Company with, or any sale, transfer or
other disposition of all or substantially all the property, assets or business
of the Company to, another corporation or,
(c) 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 to Holder (i)
at least 30 days' prior written notice of the date on which a record date
shall be selected for such dividend, distribution or right or for determining
rights to vote in respect of any such reorganization, reclassification,
merger, consolidation, sale, transfer, disposition, liquidation or winding up,
and (ii) in the case of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or
winding up, at least 30 days' prior written notice of the date when the same
shall take place. Such notice in accordance with the foregoing clause also
shall specify (i) the date on which any such record is to be taken for the
purpose of such dividend, distribution or right, the date on which the holders
of Common Stock shall be entitled to any such dividend, distribution or right,
and the amount and character thereof, and (ii) the date on which any such
reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, liquidation or winding up is to take place and the
time, if any such time is to be fixed, as of which the holders of Common Stock
shall be entitled to exchange their shares of Common Stock for securities or
other property deliverable upon such disposition, dissolution, liquidation or
winding up. Each such written notice shall be sufficiently given if addressed
to Holder at the last address of Holder appearing on the books of the Company
and delivered in accordance with Section 17(d).
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16. Authorized Shares. The Company covenants that during the period the
Warrant is outstanding, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the issuance of the
Warrant Shares upon the exercise of any purchase rights under this Warrant.
The Company further covenants that its issuance of this Warrant shall
constitute full authority to its officers who are charged with the duty of
executing stock certificates to execute and issue the necessary certificates
for the Warrant Shares upon the exercise of the purchase rights under this
Warrant. The Company will take all such reasonable action as may be necessary
to assure that such Warrant Shares may be issued as provided herein without
violation of any applicable law or regulation, or of any requirements of the
Principal Market upon which the Common Stock may be listed.
The Company shall not by any action, including, without
limitation, amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid
the observance or performance of any of the terms of this Warrant, but will at
all times in good faith assist in the carrying out of all such terms and in
the taking of all such actions as may be necessary or appropriate to protect
the rights of Holder against impairment. Without limiting the generality of
the foregoing, the Company will (a) not increase the par value of any shares
of Common Stock receivable upon the exercise of this Warrant above the amount
payable therefor upon such exercise immediately prior to such increase in par
value, (b) take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable
shares of Common Stock upon the exercise of this Warrant, and (c) use its best
efforts to obtain all such authorizations, exemptions or consents from any
public regulatory body having jurisdiction thereof as may be necessary to
enable the Company to perform its obligations under this Warrant.
Upon the request of Holder, the Company will at any time during
the period this Warrant is outstanding acknowledge in writing, in form
reasonably satisfactory to Holder, the continuing validity of this Warrant and
the obligations of the Company hereunder.
Before taking any action which would cause an adjustment reducing
the current Exercise Price below the then par value, if any, of the shares of
Common Stock issuable upon exercise of the Warrants, the Company shall take
any corporate action which may be necessary in order that the Company may
validly and legally issue fully paid and non-assessable shares of such Common
Stock at such adjusted Exercise Price.
Before taking any action which would result in an adjustment in
the number of shares of Common Stock for which this Warrant is exercisable or
in the Exercise Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.
17. Miscellaneous.
(a) Jurisdiction. This Warrant shall be binding upon any
successors or assigns of the Company. This Warrant shall constitute a
contract under the laws of New York
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without regard to its conflict of law, principles or rules, and be subject to
arbitration pursuant to the terms set forth in the Purchase Agreement.
(b) Restrictions. The holder hereof acknowledges that the Warrant
Shares acquired upon the exercise of this Warrant, if not registered, will
have restrictions upon resale imposed by state and federal securities laws.
(c) Nonwaiver and Expenses. No course of dealing or any delay or
failure to exercise any right hereunder on the part of Holder shall operate as
a waiver of such right or otherwise prejudice Holder's rights, powers or
remedies, notwithstanding all rights hereunder terminate on the Termination
Date. If the Company fails to comply with any provision of this Warrant, the
Company shall pay to Holder such amounts as shall be sufficient to cover any
costs and expenses including, but not limited to, reasonable attorneys' fees,
including those of appellate proceedings, incurred by Holder in collecting
any amounts due pursuant hereto or in otherwise enforcing any of its rights,
powers or remedies hereunder.
(d) Notices. Any notice, request or other document required or
permitted to be given or delivered to the holder hereof by the Company shall
be delivered in accordance with the notice provisions of the Purchase
Agreement.
(e) Limitation of Liability. No provision hereof, in the absence
of affirmative action by Holder to purchase shares of Common Stock, and no
enumeration herein of the rights or privileges of Holder hereof, shall give
rise to any liability of Holder for the purchase price of any Common Stock or
as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
(f) Remedies. Holder, in addition to being entitled to exercise
all rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Warrant. The Company agrees
that monetary damages would not be adequate compensation for any loss incurred
by reason of a breach by it of the provisions of this Warrant and hereby
agrees to waive the defense in any action for specific performance that a
remedy at law would be adequate.
(g) Successors and Assigns. Subject to applicable securities
laws, this Warrant and the rights and obligations evidenced hereby shall inure
to the benefit of and be binding upon the successors of the Company and the
successors and permitted assigns of Holder. The provisions of this Warrant
are intended to be for the benefit of all Holders from time to time of this
Warrant and shall be enforceable by any such Holder or holder of Warrant
Shares.
(h) Indemnification. The Company agrees to indemnify and hold
harmless Holder from and against any liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, attorneys' fees,
expenses and disbursements of any kind which may be imposed upon, incurred by
or asserted against Holder in any manner relating to or arising out of any
failure by the Company to perform or observe in any material respect any of
its covenants, agreements, undertakings or obligations set forth in this
Warrant; provided, however, that the Company will not be liable hereunder to
the extent that any liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, attorneys' fees, expenses
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or disbursements are found in a final non-appealable judgment by a court to
have resulted from Holder's negligence, bad faith or willful misconduct in its
capacity as a stockholder or warrantholder of the Company.
(i) Amendment. This Warrant may be modified or amended or the
provisions hereof waived with the written consent of the Company and the
Holder.
(j) Severability. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder
of such provisions or the remaining provisions of this Warrant.
(k) Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereunto duly authorized.
Dated: March 7, 2000
Famous Fixins, Inc.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------
▇▇▇▇▇ ▇▇▇▇▇, President
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NOTICE OF EXERCISE
To: Famous Fixins, Inc.
(1) The undersigned hereby elects to purchase ________ shares of Common
Stock (the "Common Stock"), of Famous Fixins, Inc. pursuant to the terms of
the attached Warrant, and tenders herewith payment of the exercise price in
full, together with all applicable transfer taxes, if any.
(2) Please issue a certificate or certificates representing said shares
of Common Stock in the name of the undersigned or in such other name as is
specified below:
_______________________________
(Name)
_______________________________
(Address)
_______________________________
Dated:
______________________________
Signature
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
_______________________________________________ whose address is
_______________________________________________________________.
_______________________________________________________________
Dated: ______________, _______
Holder's Signature: _____________________________
Holder's Address: _____________________________
_____________________________
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as
it appears on the face of the Warrant, without alteration or enlargement or
any change whatsoever, and must be guaranteed by a bank or trust company.
Officers of corporations and those acting in an fiduciary or other
representative capacity should file proper evidence of authority to assign the
foregoing Warrant.
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT")
OR ANY OTHER APPLICABLE SECURITIES LAWS IN RELIANCE UPON AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER SECURITIES
LAWS. NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF MAY
BE SOLD, PLEDGED, TRANSFERRED, ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR IN
A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE PROVISIONS OF THE
SECURITIES ACT.
STOCK PURCHASE WARRANT
To Purchase 625,000 Shares of Common Stock of
Famous Fixins, Inc.
THIS CERTIFIES that, for value received, Austost Anstalt ▇▇▇▇▇▇ (the
"Holder"), is entitled, upon the terms and subject to the conditions
hereinafter set forth, at any time on or after March 13, 2000 (the "Initial
Exercise Date") and on or prior to the close of business on March 13, 2005
(the "Termination Date") but not thereafter, to subscribe for and purchase
from Famous Fixins, Inc., a corporation incorporated in New York (the
"Company"), up to six hundred twenty-five thousand (625,000) shares (the
"Warrant Shares") of Common Stock, $.001 par value, of the Company (the
"Common Stock"). The purchase price of one share of Common Stock (the
"Exercise Price") under this Warrant shall be $0.75. The Exercise Price and
the number of shares for which the Warrant is exercisable shall be subject to
adjustment as provided herein. In the event of any conflict between the terms
of this Warrant and the Convertible Debenture and Warrants Purchase Agreement
dated as of March 7, 2000 pursuant to which this Warrant has been issued (the
"Purchase Agreement"), the Purchase Agreement shall control. Capitalized terms
used and not otherwise defined herein shall have the meanings set forth for
such terms in the Purchase Agreement.
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1. Title to Warrant. Prior to the Termination Date and subject to
compliance with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company by
the holder hereof in person or by duly authorized attorney, upon surrender of
this Warrant together with the Assignment Form annexed hereto properly
endorsed.
2. Authorization of Shares. The Company covenants that all shares of
Common Stock which may be issued upon the exercise of rights represented by
this Warrant will, upon exercise of the rights represented by this Warrant, be
duly authorized, validly issued, fully paid and nonassessable and free from
all taxes, liens and charges in respect of the issue thereof (other than taxes
in respect of any transfer occurring contemporaneously with such issue).
3. Exercise of Warrant. Except as provided in Sections 4 and 5 herein,
exercise of the purchase rights represented by this Warrant may be made at any
time or times on or after the Initial Exercise Date, and before the close of
business on the Termination Date by the surrender of this Warrant and the
Notice of Exercise Form annexed hereto duly executed, at the office of the
Company (or such other office or agency of the Company as it may designate by
notice in writing to the registered holder hereof at the address of such
holder appearing on the books of the Company) and upon payment of the Exercise
Price of the shares thereby purchased by wire transfer or cashier's check
drawn on a United States bank, the holder of this Warrant shall be entitled to
receive a certificate for the number of shares of Common Stock so purchased.
Certificates for shares purchased hereunder shall be delivered to the holder
hereof within three (3) Trading Days after the date on which this Warrant
shall have been exercised as aforesaid. This Warrant shall be deemed to have
been exercised and such certificate or certificates shall be deemed to have
been issued, and Holder or any other person so designated to be named therein
shall be deemed to have become a holder of record of such shares for all
purposes, as of the date the Warrant has been exercised by payment to the
Company of the Exercise Price and all taxes required to be paid by Holder, if
any, pursuant to Section 5 prior to the issuance of such shares, have been
paid. If this Warrant shall have been exercised in part, the Company shall,
at the time of delivery of the certificate or certificates representing
Warrant Shares, deliver to Holder a new Warrant evidencing the rights of
Holder to purchase the unpurchased shares of Common Stock called for by this
Warrant, which new Warrant shall in all other respects be identical with this
Warrant. If no registration statement is effective permitting the resale of
the shares of Common Stock issued upon exercise of this Warrant at any time
commencing one year after the issuance date hereof, then this Warrant shall
also be exercisable by means of a "cashless exercise" in which the holder
shall be entitled to receive a certificate for the number of shares equal to
the quotient obtained by dividing [(A-B) (X)] by (A), where:
(A) = the average of the high and low trading prices per share of Common Stock
on the Trading Day preceding the date of such election;
(B) = the Exercise Price of the Warrants; and
2
(X) = the number of shares issuable upon exercise of the Warrants in
accordance with the terms of this Warrant.
4. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. As to any fraction of a share which Holder would otherwise be
entitled to purchase upon such exercise, the Company shall pay a cash
adjustment in respect of such final fraction in an amount equal to the
Exercise Price.
5. Limitation on Exercise of Warrant. In no event shall the Holder be
permitted to exercise this Warrant for shares of Common Stock in excess of the
amount of this Warrant upon the exercise of which, (x) the number of shares of
Common Stock beneficially owned by such Holder (other than shares of Common
Stock issuable upon exercise of this Warrant) plus (y) the number of shares of
Common Stock issuable upon exercise of this Warrant, would be equal to or
exceed 9.9% of the number of shares of Common Stock then issued and
outstanding, including shares issuable upon exercise of this Warrant held by
such Holder after application of this Section 5. As used herein, beneficial
ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder. To the extent that the limitation contained in this Section 5
applies, the determination of whether this Warrant is exercisable (in relation
to other securities owned by the Holder) and which portion of this Warrant is
exercisable shall be in the sole discretion of such Holder, and the submission
of a Notice of Exercise shall be deemed to be such Holder's determination of
whether this Warrant is exercisable (in relation to other securities owned by
such Holder) and of which portion of this Warrant is exercisable, in each case
subject to such aggregate percentage limitation, and the Company shall have no
obligation to verify or confirm the accuracy of such determination. Nothing
contained herein shall be deemed to restrict the right of a holder to exercise
this Warrant into shares of Common Stock at such time as such exercise will
not violate the provisions of this Section 5. The provisions of this Section
5 may be waived by the Holder of this Warrant upon not less than 75 days'
prior notice to the Company, and the provisions of this Section 5 shall
continue to apply until such 75th day (or such later date as may be specified
in such notice of waiver). No exercise of this Warrant in violation of this
Section 5 but otherwise in accordance with this Warrant shall affect the
status of the Common Stock issued upon such exercise as validly issued, fully-
paid and nonassessable.
3
6. Charges, Taxes and Expenses. Issuance of certificates for shares of
Common Stock upon the exercise of this Warrant shall be made without charge to
the holder hereof for any issue or transfer tax or other incidental expense in
respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the
name of the holder of this Warrant or in such name or names as may be directed
by the holder of this Warrant; provided, however, that in the event
certificates for shares of Common Stock are to be issued in a name other than
the name of the holder of this Warrant, this Warrant when surrendered for
exercise shall be accompanied by the Assignment Form attached hereto duly
executed by the holder hereof; and the Company may require, as a condition
thereto, the payment of a sum sufficient to reimburse it for any transfer tax
incidental thereto.
7. Closing of Books. The Company will not close its shareholder books
or records in any manner which prevents the timely exercise of this Warrant.
8. Transfer, Division and Combination. (a) Subject to compliance with
any applicable securities laws, transfer of this Warrant and all rights
hereunder, in whole or in part, shall be registered on the books of the
Company to be maintained for such purpose, upon surrender of this Warrant at
the principal office of the Company, together with a written assignment of
this Warrant substantially in the form attached hereto duly executed by Holder
or its agent or attorney and funds sufficient to pay any transfer taxes
payable upon the making of such transfer. Upon such surrender and, if
required, such payment, the Company shall execute and deliver a new Warrant or
Warrants in the name of the assignee or assignees and in the denomination or
denominations specified in such instrument of assignment, and shall issue to
the assignor a new Warrant evidencing the portion of this Warrant not so
assigned, and this Warrant shall promptly be cancelled. A Warrant, if
properly assigned, may be exercised by a new holder for the purchase of shares
of Common Stock without having a new Warrant issued.
(b) This Warrant may be divided or combined with other
Warrants upon presentation hereof at the aforesaid office of the Company,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued, signed by Holder or its agent or attorney.
Subject to compliance with Section 8(a), as to any transfer which may be
involved in such division or combination, the Company shall execute and
deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to
be divided or combined in accordance with such notice.
4
(c) The Company shall prepare, issue and deliver at its own
expense (other than transfer taxes) the new Warrant or Warrants under this
Section 8.
(d) The Company agrees to maintain, at its aforesaid office,
books for the registration and the registration of transfer of the Warrants.
9. No Rights as Shareholder until Exercise. This Warrant does not
entitle the holder hereof to any voting rights or other rights as a
shareholder of the Company prior to the exercise hereof. Upon the surrender
of this Warrant and the payment of the aggregate Exercise Price, the Warrant
Shares so purchased shall be and be deemed to be issued to such holder as the
record owner of such shares as of the close of business on the later of the
date of such surrender or payment.
10. Loss, Theft, Destruction or Mutilation of Warrant. The Company
covenants that upon receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant
certificate or any stock certificate relating to the Warrant Shares, and in
case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it (which shall not include the posting of any bond), and upon
surrender and cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock certificate of like
tenor and dated as of such cancellation, in lieu of such Warrant or stock
certificate.
11. Saturdays, Sundays, Holidays, etc. If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday, Sunday or a legal holiday, then such action may be
taken or such right may be exercised on the next succeeding day not a
Saturday, Sunday or legal holiday.
12. Adjustments of Exercise Price and Number of Warrant Shares. (a)
Stock Splits, etc. The number and kind of securities purchasable upon the
exercise of this Warrant and the Exercise Price shall be subject to adjustment
from time to time upon the happening of any of the following. In case the
Company shall (i) pay a dividend in shares of Common Stock or make a
distribution in shares of Common Stock to holders of its outstanding Common
Stock, (ii) subdivide its outstanding shares of Common Stock into a greater
number of shares of Common Stock, (iii) combine its outstanding shares of
Common Stock into a smaller number of shares of Common Stock or (iv) issue any
shares of its capital stock in a reclassification of the Common Stock, then
the number of Warrant Shares purchasable upon exercise of this Warrant
immediately prior thereto shall be adjusted so that the holder of this Warrant
shall be entitled to receive the kind and number of Warrant Shares or other
securities of the Company which he would have owned or have been entitled to
receive had such Warrant been exercised in advance thereof. Upon each such
adjustment of the kind and number of Warrant Shares or other securities of the
Company which are purchasable hereunder, the holder of this Warrant shall
thereafter be entitled to purchase the number of Warrant Shares or other
securities resulting from such adjustment at an Exercise Price per Warrant
Share or other security obtained by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of Warrant Shares
purchasable pursuant hereto immediately prior to such adjustment and dividing
by the number of Warrant Shares or other securities of the Company resulting
from such adjustment. An adjustment
5
made pursuant to this paragraph shall become effective immediately after the
effective date of such event retroactive to the record date, if any, for such
event.
(b) Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is a change in or distribution with respect to the Common Stock of the
Company), or sell, transfer or otherwise dispose of all or substantially all
its property, assets or business to another corporation and, pursuant to the
terms of such reorganization, reclassification, merger, consolidation or
disposition of assets, shares of common stock of the successor or acquiring
corporation, or any cash, shares of stock or other securities or property of
any nature whatsoever (including warrants or other subscription or purchase
rights) in addition to or in lieu of common stock of the successor or
acquiring corporation ("Other Property"), are to be received by or distributed
to the holders of Common Stock of the Company, then Holder shall have the
right thereafter to receive, upon exercise of this Warrant, the number of
shares of common stock of the successor or acquiring corporation or of the
Company, if it is the surviving corporation, and Other Property receivable
upon or as a result of such reorganization, reclassification, merger,
consolidation or disposition of assets by a holder of the number of shares of
Common Stock for which this Warrant is exercisable immediately prior to such
event. In case of any such reorganization, reclassification, merger,
consolidation or disposition of assets, the successor or acquiring corporation
(if other than the Company) shall expressly assume the due and punctual
observance and performance of each and every covenant and condition of this
Warrant to be performed and observed by the Company and all the obligations
and liabilities hereunder, subject to such modifications as may be deemed
appropriate (as determined in good faith by resolution of the Board of
Directors of the Company) in order to provide for adjustments of shares of
Common Stock for which this Warrant is exercisable which shall be as nearly
equivalent as practicable to the adjustments provided for in this Section 11.
For purposes of this Section 11, "common stock of the successor or acquiring
corporation" shall include stock of such corporation of any class which is not
preferred as to dividends or assets over any other class of stock of such
corporation and which is not subject to redemption and shall also include any
evidences of indebtedness, shares of stock or other securities which are
exercisable into or exchangeable for any such stock, either immediately or
upon the arrival of a specified date or the happening of a specified event and
any warrants or other rights to subscribe for or purchase any such stock. The
foregoing provisions of this Section 12 shall similarly apply to successive
reorganizations, reclassifications, mergers, consolidations or disposition of
assets.
13. Voluntary Adjustment by the Company. The Company may at any time
during the term of this Warrant, reduce the then current Exercise Price to any
amount and for any period of time deemed appropriate by the Board of Directors
of the Company.
14. Notice of Adjustment. Whenever the number of Warrant Shares or
number or kind of securities or other property purchasable upon the exercise
of this Warrant or the Exercise Price is adjusted, as herein provided, the
Company shall promptly mail by registered or certified mail, return receipt
requested, to the holder of this Warrant notice of such adjustment or
adjustments setting forth the number of Warrant Shares (and other securities
or property) purchasable upon the exercise of this Warrant and the Exercise
Price of such Warrant Shares (and other securities or property) after such
adjustment, setting forth a brief statement of the facts
6
requiring such adjustment and setting forth the computation by which such
adjustment was made. Such notice, in the absence of manifest error, shall be
conclusive evidence of the correctness of such adjustment.
15. Notice of Corporate Action. If at any time:
(a) the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or other
distribution, or any right to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or
property, or to receive any other right, or
(b) there shall be any capital reorganization of the Company,
any reclassification or recapitalization of the capital stock of the Company
or any consolidation or merger of the Company with, or any sale, transfer or
other disposition of all or substantially all the property, assets or business
of the Company to, another corporation or,
(c) 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 to Holder (i)
at least 30 days' prior written notice of the date on which a record date
shall be selected for such dividend, distribution or right or for determining
rights to vote in respect of any such reorganization, reclassification,
merger, consolidation, sale, transfer, disposition, liquidation or winding up,
and (ii) in the case of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or
winding up, at least 30 days' prior written notice of the date when the same
shall take place. Such notice in accordance with the foregoing clause also
shall specify (i) the date on which any such record is to be taken for the
purpose of such dividend, distribution or right, the date on which the holders
of Common Stock shall be entitled to any such dividend, distribution or right,
and the amount and character thereof, and (ii) the date on which any such
reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, liquidation or winding up is to take place and the
time, if any such time is to be fixed, as of which the holders of Common Stock
shall be entitled to exchange their shares of Common Stock for securities or
other property deliverable upon such disposition, dissolution, liquidation or
winding up. Each such written notice shall be sufficiently given if addressed
to Holder at the last address of Holder appearing on the books of the Company
and delivered in accordance with Section 17(d).
7
16. Authorized Shares. The Company covenants that during the period the
Warrant is outstanding, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the issuance of the
Warrant Shares upon the exercise of any purchase rights under this Warrant.
The Company further covenants that its issuance of this Warrant shall
constitute full authority to its officers who are charged with the duty of
executing stock certificates to execute and issue the necessary certificates
for the Warrant Shares upon the exercise of the purchase rights under this
Warrant. The Company will take all such reasonable action as may be necessary
to assure that such Warrant Shares may be issued as provided herein without
violation of any applicable law or regulation, or of any requirements of the
Principal Market upon which the Common Stock may be listed.
The Company shall not by any action, including, without
limitation, amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid
the observance or performance of any of the terms of this Warrant, but will at
all times in good faith assist in the carrying out of all such terms and in
the taking of all such actions as may be necessary or appropriate to protect
the rights of Holder against impairment. Without limiting the generality of
the foregoing, the Company will (a) not increase the par value of any shares
of Common Stock receivable upon the exercise of this Warrant above the amount
payable therefor upon such exercise immediately prior to such increase in par
value, (b) take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable
shares of Common Stock upon the exercise of this Warrant, and (c) use its best
efforts to obtain all such authorizations, exemptions or consents from any
public regulatory body having jurisdiction thereof as may be necessary to
enable the Company to perform its obligations under this Warrant.
Upon the request of Holder, the Company will at any time during
the period this Warrant is outstanding acknowledge in writing, in form
reasonably satisfactory to Holder, the continuing validity of this Warrant and
the obligations of the Company hereunder.
Before taking any action which would cause an adjustment reducing
the current Exercise Price below the then par value, if any, of the shares of
Common Stock issuable upon exercise of the Warrants, the Company shall take
any corporate action which may be necessary in order that the Company may
validly and legally issue fully paid and non-assessable shares of such Common
Stock at such adjusted Exercise Price.
Before taking any action which would result in an adjustment in
the number of shares of Common Stock for which this Warrant is exercisable or
in the Exercise Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.
17. Miscellaneous.
(a) Jurisdiction. This Warrant shall be binding upon any
successors or assigns of the Company. This Warrant shall constitute a
contract under the laws of New York
8
without regard to its conflict of law, principles or rules, and be subject to
arbitration pursuant to the terms set forth in the Purchase Agreement.
(b) Restrictions. The holder hereof acknowledges that the Warrant
Shares acquired upon the exercise of this Warrant, if not registered, will
have restrictions upon resale imposed by state and federal securities laws.
(c) Nonwaiver and Expenses. No course of dealing or any delay or
failure to exercise any right hereunder on the part of Holder shall operate as
a waiver of such right or otherwise prejudice Holder's rights, powers or
remedies, notwithstanding all rights hereunder terminate on the Termination
Date. If the Company fails to comply with any provision of this Warrant, the
Company shall pay to Holder such amounts as shall be sufficient to cover any
costs and expenses including, but not limited to, reasonable attorneys' fees,
including those of appellate proceedings, incurred by Holder in collecting any
amounts due pursuant hereto or in otherwise enforcing any of its rights,
powers or remedies hereunder.
(d) Notices. Any notice, request or other document required or
permitted to be given or delivered to the holder hereof by the Company shall
be delivered in accordance with the notice provisions of the Purchase
Agreement.
(e) Limitation of Liability. No provision hereof, in the absence
of affirmative action by Holder to purchase shares of Common Stock, and no
enumeration herein of the rights or privileges of Holder hereof, shall give
rise to any liability of Holder for the purchase price of any Common Stock or
as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
(f) Remedies. Holder, in addition to being entitled to exercise
all rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Warrant. The Company agrees
that monetary damages would not be adequate compensation for any loss incurred
by reason of a breach by it of the provisions of this Warrant and hereby
agrees to waive the defense in any action for specific performance that a
remedy at law would be adequate.
(g) Successors and Assigns. Subject to applicable securities
laws, this Warrant and the rights and obligations evidenced hereby shall inure
to the benefit of and be binding upon the successors of the Company and the
successors and permitted assigns of Holder. The provisions of this Warrant
are intended to be for the benefit of all Holders from time to time of this
Warrant and shall be enforceable by any such Holder or holder of Warrant
Shares.
(h) Indemnification. The Company agrees to indemnify and hold
harmless Holder from and against any liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, attorneys' fees,
expenses and disbursements of any kind which may be imposed upon, incurred by
or asserted against Holder in any manner relating to or arising out of any
failure by the Company to perform or observe in any material respect any of
its covenants, agreements, undertakings or obligations set forth in this
Warrant; provided, however, that the Company will not be liable hereunder to
the extent that any liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, attorneys' fees, expenses
9
or disbursements are found in a final non-appealable judgment by a court to
have resulted from Holder's negligence, bad faith or willful misconduct in its
capacity as a stockholder or warrantholder of the Company.
(i) Amendment. This Warrant may be modified or amended or the
provisions hereof waived with the written consent of the Company and the
Holder.
(j) Severability. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder
of such provisions or the remaining provisions of this Warrant.
(k) Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereunto duly authorized.
Dated: March 7, 2000
Famous Fixins, Inc.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------
▇▇▇▇▇ ▇▇▇▇▇, President
10
NOTICE OF EXERCISE
To: Famous Fixins, Inc.
(1) The undersigned hereby elects to purchase ________ shares of Common
Stock (the "Common Stock"), of Famous Fixins, Inc. pursuant to the terms of
the attached Warrant, and tenders herewith payment of the exercise price in
full, together with all applicable transfer taxes, if any.
(2) Please issue a certificate or certificates representing said shares
of Common Stock in the name of the undersigned or in such other name as is
specified below:
_______________________________
(Name)
_______________________________
(Address)
_______________________________
Dated:
______________________________
Signature
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
_______________________________________________ whose address is
_______________________________________________________________.
_______________________________________________________________
Dated: ______________, _______
Holder's Signature: _____________________________
Holder's Address: _____________________________
_____________________________
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as
it appears on the face of the Warrant, without alteration or enlargement or
any change whatsoever, and must be guaranteed by a bank or trust company.
Officers of corporations and those acting in an fiduciary or other
representative capacity should file proper evidence of authority to assign the
foregoing Warrant.
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT")
OR ANY OTHER APPLICABLE SECURITIES LAWS IN RELIANCE UPON AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER SECURITIES
LAWS. NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF MAY
BE SOLD, PLEDGED, TRANSFERRED, ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR IN
A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE PROVISIONS OF THE
SECURITIES ACT.
STOCK PURCHASE WARRANT
To Purchase 875,000 Shares of Common Stock of
Famous Fixins, Inc.
THIS CERTIFIES that, for value received, Balmore Funds, S.A. (the "Holder"),
is entitled, upon the terms and subject to the conditions hereinafter set
forth, at any time on or after March 13, 2000 (the "Initial Exercise Date")
and on or prior to the close of business on March 13, 2005 (the "Termination
Date") but not thereafter, to subscribe for and purchase from Famous Fixins,
Inc., a corporation incorporated in New York (the "Company"), up to eight
hundred seventy-five thousand (875,000) shares (the "Warrant Shares") of
Common Stock, $.001 par value, of the Company (the "Common Stock"). The
purchase price of one share of Common Stock (the "Exercise Price") under this
Warrant shall be $0.75. The Exercise Price and the number of shares for which
the Warrant is exercisable shall be subject to adjustment as provided herein.
In the event of any conflict between the terms of this Warrant and the
Convertible Debenture and Warrants Purchase Agreement dated as of March 7,
2000 pursuant to which this Warrant has been issued (the "Purchase
Agreement"), the Purchase Agreement shall control. Capitalized terms used and
not otherwise defined herein shall have the meanings set forth for such terms
in the Purchase Agreement.
1
1. Title to Warrant. Prior to the Termination Date and subject to
compliance with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company by
the holder hereof in person or by duly authorized attorney, upon surrender of
this Warrant together with the Assignment Form annexed hereto properly
endorsed.
2. Authorization of Shares. The Company covenants that all shares of
Common Stock which may be issued upon the exercise of rights represented by
this Warrant will, upon exercise of the rights represented by this Warrant, be
duly authorized, validly issued, fully paid and nonassessable and free from
all taxes, liens and charges in respect of the issue thereof (other than taxes
in respect of any transfer occurring contemporaneously with such issue).
3. Exercise of Warrant. Except as provided in Sections 4 and 5 herein,
exercise of the purchase rights represented by this Warrant may be made at any
time or times on or after the Initial Exercise Date, and before the close of
business on the Termination Date by the surrender of this Warrant and the
Notice of Exercise Form annexed hereto duly executed, at the office of the
Company (or such other office or agency of the Company as it may designate by
notice in writing to the registered holder hereof at the address of such
holder appearing on the books of the Company) and upon payment of the Exercise
Price of the shares thereby purchased by wire transfer or cashier's check
drawn on a United States bank, the holder of this Warrant shall be entitled to
receive a certificate for the number of shares of Common Stock so purchased.
Certificates for shares purchased hereunder shall be delivered to the holder
hereof within three (3) Trading Days after the date on which this Warrant
shall have been exercised as aforesaid. This Warrant shall be deemed to have
been exercised and such certificate or certificates shall be deemed to have
been issued, and Holder or any other person so designated to be named therein
shall be deemed to have become a holder of record of such shares for all
purposes, as of the date the Warrant has been exercised by payment to the
Company of the Exercise Price and all taxes required to be paid by Holder, if
any, pursuant to Section 5 prior to the issuance of such shares, have been
paid. If this Warrant shall have been exercised in part, the Company shall,
at the time of delivery of the certificate or certificates representing
Warrant Shares, deliver to Holder a new Warrant evidencing the rights of
Holder to purchase the unpurchased shares of Common Stock called for by this
Warrant, which new Warrant shall in all other respects be identical with this
Warrant. If no registration statement is effective permitting the resale of
the shares of Common Stock issued upon exercise of this Warrant at any time
commencing one year after the issuance date hereof, then this Warrant shall
also be exercisable by means of a "cashless exercise" in which the holder
shall be entitled to receive a certificate for the number of shares equal to
the quotient obtained by dividing [(A-B) (X)] by (A), where:
(A) = the average of the high and low trading prices per share of Common Stock
on the Trading Day preceding the date of such election;
(B) = the Exercise Price of the Warrants; and
2
(X) = the number of shares issuable upon exercise of the Warrants in
accordance with the terms of this Warrant.
4. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. As to any fraction of a share which Holder would otherwise be
entitled to purchase upon such exercise, the Company shall pay a cash
adjustment in respect of such final fraction in an amount equal to the
Exercise Price.
5. Limitation on Exercise of Warrant. In no event shall the Holder be
permitted to exercise this Warrant for shares of Common Stock in excess of the
amount of this Warrant upon the exercise of which, (x) the number of shares of
Common Stock beneficially owned by such Holder (other than shares of Common
Stock issuable upon exercise of this Warrant) plus (y) the number of shares of
Common Stock issuable upon exercise of this Warrant, would be equal to or
exceed 9.9% of the number of shares of Common Stock then issued and
outstanding, including shares issuable upon exercise of this Warrant held by
such Holder after application of this Section 5. As used herein, beneficial
ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder. To the extent that the limitation contained in this Section 5
applies, the determination of whether this Warrant is exercisable (in relation
to other securities owned by the Holder) and which portion of this Warrant is
exercisable shall be in the sole discretion of such Holder, and the submission
of a Notice of Exercise shall be deemed to be such Holder's determination of
whether this Warrant is exercisable (in relation to other securities owned by
such Holder) and of which portion of this Warrant is exercisable, in each case
subject to such aggregate percentage limitation, and the Company shall have no
obligation to verify or confirm the accuracy of such determination. Nothing
contained herein shall be deemed to restrict the right of a holder to exercise
this Warrant into shares of Common Stock at such time as such exercise will
not violate the provisions of this Section 5. The provisions of this Section
5 may be waived by the Holder of this Warrant upon not less than 75 days'
prior notice to the Company, and the provisions of this Section 5 shall
continue to apply until such 75th day (or such later date as may be specified
in such notice of waiver). No exercise of this Warrant in violation of this
Section 5 but otherwise in accordance with this Warrant shall affect the
status of the Common Stock issued upon such exercise as validly issued, fully-
paid and nonassessable.
3
6. Charges, Taxes and Expenses. Issuance of certificates for shares of
Common Stock upon the exercise of this Warrant shall be made without charge to
the holder hereof for any issue or transfer tax or other incidental expense in
respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the
name of the holder of this Warrant or in such name or names as may be directed
by the holder of this Warrant; provided, however, that in the event
certificates for shares of Common Stock are to be issued in a name other than
the name of the holder of this Warrant, this Warrant when surrendered for
exercise shall be accompanied by the Assignment Form attached hereto duly
executed by the holder hereof; and the Company may require, as a condition
thereto, the payment of a sum sufficient to reimburse it for any transfer tax
incidental thereto.
7. Closing of Books. The Company will not close its shareholder books
or records in any manner which prevents the timely exercise of this Warrant.
8. Transfer, Division and Combination. (a) Subject to compliance with
any applicable securities laws, transfer of this Warrant and all rights
hereunder, in whole or in part, shall be registered on the books of the
Company to be maintained for such purpose, upon surrender of this Warrant at
the principal office of the Company, together with a written assignment of
this Warrant substantially in the form attached hereto duly executed by Holder
or its agent or attorney and funds sufficient to pay any transfer taxes
payable upon the making of such transfer. Upon such surrender and, if
required, such payment, the Company shall execute and deliver a new Warrant or
Warrants in the name of the assignee or assignees and in the denomination or
denominations specified in such instrument of assignment, and shall issue to
the assignor a new Warrant evidencing the portion of this Warrant not so
assigned, and this Warrant shall promptly be cancelled. A Warrant, if
properly assigned, may be exercised by a new holder for the purchase of shares
of Common Stock without having a new Warrant issued.
(b) This Warrant may be divided or combined with other
Warrants upon presentation hereof at the aforesaid office of the Company,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued, signed by Holder or its agent or attorney.
Subject to compliance with Section 8(a), as to any transfer which may be
involved in such division or combination, the Company shall execute and
deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to
be divided or combined in accordance with such notice.
4
(c) The Company shall prepare, issue and deliver at its own
expense (other than transfer taxes) the new Warrant or Warrants under this
Section 8.
(d) The Company agrees to maintain, at its aforesaid office,
books for the registration and the registration of transfer of the Warrants.
9. No Rights as Shareholder until Exercise. This Warrant does not
entitle the holder hereof to any voting rights or other rights as a
shareholder of the Company prior to the exercise hereof. Upon the surrender
of this Warrant and the payment of the aggregate Exercise Price, the Warrant
Shares so purchased shall be and be deemed to be issued to such holder as the
record owner of such shares as of the close of business on the later of the
date of such surrender or payment.
10. Loss, Theft, Destruction or Mutilation of Warrant. The Company
covenants that upon receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant
certificate or any stock certificate relating to the Warrant Shares, and in
case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it (which shall not include the posting of any bond), and upon
surrender and cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock certificate of like
tenor and dated as of such cancellation, in lieu of such Warrant or stock
certificate.
11. Saturdays, Sundays, Holidays, etc. If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday, Sunday or a legal holiday, then such action may be
taken or such right may be exercised on the next succeeding day not a
Saturday, Sunday or legal holiday.
12. Adjustments of Exercise Price and Number of Warrant Shares. (a)
Stock Splits, etc. The number and kind of securities purchasable upon the
exercise of this Warrant and the Exercise Price shall be subject to adjustment
from time to time upon the happening of any of the following. In case the
Company shall (i) pay a dividend in shares of Common Stock or make a
distribution in shares of Common Stock to holders of its outstanding Common
Stock, (ii) subdivide its outstanding shares of Common Stock into a greater
number of shares of Common Stock, (iii) combine its outstanding shares of
Common Stock into a smaller number of shares of Common Stock or (iv) issue any
shares of its capital stock in a reclassification of the Common Stock, then
the number of Warrant Shares purchasable upon exercise of this Warrant
immediately prior thereto shall be adjusted so that the holder of this Warrant
shall be entitled to receive the kind and number of Warrant Shares or other
securities of the Company which he would have owned or have been entitled to
receive had such Warrant been exercised in advance thereof. Upon each such
adjustment of the kind and number of Warrant Shares or other securities of the
Company which are purchasable hereunder, the holder of this Warrant shall
thereafter be entitled to purchase the number of Warrant Shares or other
securities resulting from such adjustment at an Exercise Price per Warrant
Share or other security obtained by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of Warrant Shares
purchasable pursuant hereto immediately prior to such adjustment and dividing
by the number of Warrant Shares or other securities of the Company resulting
from such adjustment. An adjustment
5
made pursuant to this paragraph shall become effective immediately after the
effective date of such event retroactive to the record date, if any, for such
event.
(b) Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is a change in or distribution with respect to the Common Stock of the
Company), or sell, transfer or otherwise dispose of all or substantially all
its property, assets or business to another corporation and, pursuant to the
terms of such reorganization, reclassification, merger, consolidation or
disposition of assets, shares of common stock of the successor or acquiring
corporation, or any cash, shares of stock or other securities or property of
any nature whatsoever (including warrants or other subscription or purchase
rights) in addition to or in lieu of common stock of the successor or
acquiring corporation ("Other Property"), are to be received by or distributed
to the holders of Common Stock of the Company, then Holder shall have the
right thereafter to receive, upon exercise of this Warrant, the number of
shares of common stock of the successor or acquiring corporation or of the
Company, if it is the surviving corporation, and Other Property receivable
upon or as a result of such reorganization, reclassification, merger,
consolidation or disposition of assets by a holder of the number of shares of
Common Stock for which this Warrant is exercisable immediately prior to such
event. In case of any such reorganization, reclassification, merger,
consolidation or disposition of assets, the successor or acquiring corporation
(if other than the Company) shall expressly assume the due and punctual
observance and performance of each and every covenant and condition of this
Warrant to be performed and observed by the Company and all the obligations
and liabilities hereunder, subject to such modifications as may be deemed
appropriate (as determined in good faith by resolution of the Board of
Directors of the Company) in order to provide for adjustments of shares of
Common Stock for which this Warrant is exercisable which shall be as nearly
equivalent as practicable to the adjustments provided for in this Section 11.
For purposes of this Section 11, "common stock of the successor or acquiring
corporation" shall include stock of such corporation of any class which is not
preferred as to dividends or assets over any other class of stock of such
corporation and which is not subject to redemption and shall also include any
evidences of indebtedness, shares of stock or other securities which are
exercisable into or exchangeable for any such stock, either immediately or
upon the arrival of a specified date or the happening of a specified event and
any warrants or other rights to subscribe for or purchase any such stock. The
foregoing provisions of this Section 12 shall similarly apply to successive
reorganizations, reclassifications, mergers, consolidations or disposition of
assets.
13. Voluntary Adjustment by the Company. The Company may at any time
during the term of this Warrant, reduce the then current Exercise Price to any
amount and for any period of time deemed appropriate by the Board of Directors
of the Company.
14. Notice of Adjustment. Whenever the number of Warrant Shares or
number or kind of securities or other property purchasable upon the exercise
of this Warrant or the Exercise Price is adjusted, as herein provided, the
Company shall promptly mail by registered or certified mail, return receipt
requested, to the holder of this Warrant notice of such adjustment or
adjustments setting forth the number of Warrant Shares (and other securities
or property) purchasable upon the exercise of this Warrant and the Exercise
Price of such Warrant Shares (and other securities or property) after such
adjustment, setting forth a brief statement of the facts
6
requiring such adjustment and setting forth the computation by which such
adjustment was made. Such notice, in the absence of manifest error, shall be
conclusive evidence of the correctness of such adjustment.
15. Notice of Corporate Action. If at any time:
(a) the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or other
distribution, or any right to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or
property, or to receive any other right, or
(b) there shall be any capital reorganization of the Company,
any reclassification or recapitalization of the capital stock of the Company
or any consolidation or merger of the Company with, or any sale, transfer or
other disposition of all or substantially all the property, assets or business
of the Company to, another corporation or,
(c) 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 to Holder (i)
at least 30 days' prior written notice of the date on which a record date
shall be selected for such dividend, distribution or right or for determining
rights to vote in respect of any such reorganization, reclassification,
merger, consolidation, sale, transfer, disposition, liquidation or winding up,
and (ii) in the case of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or
winding up, at least 30 days' prior written notice of the date when the same
shall take place. Such notice in accordance with the foregoing clause also
shall specify (i) the date on which any such record is to be taken for the
purpose of such dividend, distribution or right, the date on which the holders
of Common Stock shall be entitled to any such dividend, distribution or right,
and the amount and character thereof, and (ii) the date on which any such
reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, liquidation or winding up is to take place and the
time, if any such time is to be fixed, as of which the holders of Common Stock
shall be entitled to exchange their shares of Common Stock for securities or
other property deliverable upon such disposition, dissolution, liquidation or
winding up. Each such written notice shall be sufficiently given if addressed
to Holder at the last address of Holder appearing on the books of the Company
and delivered in accordance with Section 17(d).
7
16. Authorized Shares. The Company covenants that during the period the
Warrant is outstanding, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the issuance of the
Warrant Shares upon the exercise of any purchase rights under this Warrant.
The Company further covenants that its issuance of this Warrant shall
constitute full authority to its officers who are charged with the duty of
executing stock certificates to execute and issue the necessary certificates
for the Warrant Shares upon the exercise of the purchase rights under this
Warrant. The Company will take all such reasonable action as may be necessary
to assure that such Warrant Shares may be issued as provided herein without
violation of any applicable law or regulation, or of any requirements of the
Principal Market upon which the Common Stock may be listed.
The Company shall not by any action, including, without
limitation, amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid
the observance or performance of any of the terms of this Warrant, but will at
all times in good faith assist in the carrying out of all such terms and in
the taking of all such actions as may be necessary or appropriate to protect
the rights of Holder against impairment. Without limiting the generality of
the foregoing, the Company will (a) not increase the par value of any shares
of Common Stock receivable upon the exercise of this Warrant above the amount
payable therefor upon such exercise immediately prior to such increase in par
value, (b) take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable
shares of Common Stock upon the exercise of this Warrant, and (c) use its best
efforts to obtain all such authorizations, exemptions or consents from any
public regulatory body having jurisdiction thereof as may be necessary to
enable the Company to perform its obligations under this Warrant.
Upon the request of Holder, the Company will at any time during
the period this Warrant is outstanding acknowledge in writing, in form
reasonably satisfactory to Holder, the continuing validity of this Warrant and
the obligations of the Company hereunder.
Before taking any action which would cause an adjustment reducing
the current Exercise Price below the then par value, if any, of the shares of
Common Stock issuable upon exercise of the Warrants, the Company shall take
any corporate action which may be necessary in order that the Company may
validly and legally issue fully paid and non-assessable shares of such Common
Stock at such adjusted Exercise Price.
Before taking any action which would result in an adjustment in
the number of shares of Common Stock for which this Warrant is exercisable or
in the Exercise Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.
17. Miscellaneous.
(a) Jurisdiction. This Warrant shall be binding upon any
successors or assigns of the Company. This Warrant shall constitute a
contract under the laws of New York
8
without regard to its conflict of law, principles or rules, and be subject to
arbitration pursuant to the terms set forth in the Purchase Agreement.
(b) Restrictions. The holder hereof acknowledges that the Warrant
Shares acquired upon the exercise of this Warrant, if not registered, will
have restrictions upon resale imposed by state and federal securities laws.
(c) Nonwaiver and Expenses. No course of dealing or any delay or
failure to exercise any right hereunder on the part of Holder shall operate as
a waiver of such right or otherwise prejudice Holder's rights, powers or
remedies, notwithstanding all rights hereunder terminate on the Termination
Date. If the Company fails to comply with any provision of this Warrant, the
Company shall pay to Holder such amounts as shall be sufficient to cover any
costs and expenses including, but not limited to, reasonable attorneys' fees,
including those of appellate proceedings, incurred by Holder in collecting any
amounts due pursuant hereto or in otherwise enforcing any of its rights,
powers or remedies hereunder.
(d) Notices. Any notice, request or other document required or
permitted to be given or delivered to the holder hereof by the Company shall
be delivered in accordance with the notice provisions of the Purchase
Agreement.
(e) Limitation of Liability. No provision hereof, in the absence
of affirmative action by Holder to purchase shares of Common Stock, and no
enumeration herein of the rights or privileges of Holder hereof, shall give
rise to any liability of Holder for the purchase price of any Common Stock or
as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
(f) Remedies. Holder, in addition to being entitled to exercise
all rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Warrant. The Company agrees
that monetary damages would not be adequate compensation for any loss incurred
by reason of a breach by it of the provisions of this Warrant and hereby
agrees to waive the defense in any action for specific performance that a
remedy at law would be adequate.
(g) Successors and Assigns. Subject to applicable securities
laws, this Warrant and the rights and obligations evidenced hereby shall inure
to the benefit of and be binding upon the successors of the Company and the
successors and permitted assigns of Holder. The provisions of this Warrant
are intended to be for the benefit of all Holders from time to time of this
Warrant and shall be enforceable by any such Holder or holder of Warrant
Shares.
(h) Indemnification. The Company agrees to indemnify and hold
harmless Holder from and against any liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, attorneys' fees,
expenses and disbursements of any kind which may be imposed upon, incurred by
or asserted against Holder in any manner relating to or arising out of any
failure by the Company to perform or observe in any material respect any of
its covenants, agreements, undertakings or obligations set forth in this
Warrant; provided, however, that the Company will not be liable hereunder to
the extent that any liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, attorneys' fees, expenses
9
or disbursements are found in a final non-appealable judgment by a court to
have resulted from Holder's negligence, bad faith or willful misconduct in its
capacity as a stockholder or warrantholder of the Company.
(i) Amendment. This Warrant may be modified or amended or the
provisions hereof waived with the written consent of the Company and the
Holder.
(j) Severability. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder
of such provisions or the remaining provisions of this Warrant.
(k) Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereunto duly authorized.
Dated: March 7, 2000
Famous Fixins, Inc.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------
▇▇▇▇▇ ▇▇▇▇▇, President
10
NOTICE OF EXERCISE
To: Famous Fixins, Inc.
(1) The undersigned hereby elects to purchase ________ shares of Common
Stock (the "Common Stock"), of Famous Fixins, Inc. pursuant to the terms of
the attached Warrant, and tenders herewith payment of the exercise price in
full, together with all applicable transfer taxes, if any.
(2) Please issue a certificate or certificates representing said shares
of Common Stock in the name of the undersigned or in such other name as is
specified below:
_______________________________
(Name)
_______________________________
(Address)
_______________________________
Dated:
______________________________
Signature
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
_______________________________________________ whose address is
_______________________________________________________________.
_______________________________________________________________
Dated: ______________, _______
Holder's Signature: _____________________________
Holder's Address: _____________________________
_____________________________
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as
it appears on the face of the Warrant, without alteration or enlargement or
any change whatsoever, and must be guaranteed by a bank or trust company.
Officers of corporations and those acting in an fiduciary or other
representative capacity should file proper evidence of authority to assign the
foregoing Warrant.
EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of March 7, 2000, between
the investor or investors signatory hereto (each an "Investor" and together
the "Investors"), and Famous Fixins, Inc., a New York corporation (the
"Company").
WHEREAS, simultaneously with the execution and delivery of this
Agreement, the Investors are purchasing from the Company, pursuant to a
Convertible Debenture and Warrants Purchase Agreement dated the date hereof
(the "Purchase Agreement"), $1,000,000 principal amount of Convertible
Debentures and Warrants to purchase up to 2,500,000 shares of the Company's
Common Stock (terms not defined herein shall have the meanings ascribed to
them in the Purchase Agreement) in the number and at the exercise price set
forth in the Purchase Agreement; and
WHEREAS, the Company desires to grant to the Investors the registration
rights set forth herein with respect to the Conversion Shares of Common Stock
issuable upon conversion of the Convertible Debenture purchased pursuant to
the Purchase Agreement and shares of Common Stock issuable upon exercise of
the Warrants issued to the Investors (hereinafter referred to as the "Stock"
or "Securities" of the Company).
NOW, THEREFORE, the parties hereto mutually agree as follows:
Section 1. Registrable Securities. As used herein the term
"Registrable Security" means the Securities until (i) the Registration
Statement has been declared effective by the Commission, and all Securities
have been disposed of pursuant to the Registration Statement, (ii) all
Securities have been sold under circumstances under which all of the
applicable conditions of Rule 144 (or any similar provision then in force)
under the Securities Act ("Rule 144") are met, (iii) all Securities have been
otherwise transferred to holders who may trade such Securities without
restriction under the Securities Act, and the Company has delivered a new
certificate or other evidence of ownership for such Securities not bearing a
restrictive legend or (iv) such time as, in the opinion of counsel to the
Company, all Securities may be sold without any time, volume or manner
limitations pursuant to Rule 144(k) (or any similar provision then in effect)
under the Securities Act. The term "Registrable Securities" means any and/or
all of the securities falling within the foregoing definition of a
"Registrable Security." In the event of any merger, reorganization,
consolidation, recapitalization or other change in corporate structure
affecting the Common Stock, such adjustment shall be deemed to be made in the
definition of "Registrable Security" as is appropriate in order to prevent any
dilution or enlargement of the rights granted pursuant to this Agreement.
Section 2. Restrictions on Transfer. Each Investor acknowledges and
understands that prior to the registration of the Securities as provided
herein, the Securities are "restricted securities" as defined in Rule 144
promulgated under the Act. Each Investor understands that no disposition or
transfer of the Securities may be made by Investor in the absence of (i) an
opinion of counsel to the Investor, in form and substance reasonably
satisfactory to the Company, that such transfer may be made without
registration under the Securities Act or (ii) such registration.
With a view to making available to the Investors the benefits of
Rule 144 under the Securities Act or any other similar rule or regulation of
the Commission that may at any time permit the
Investors to sell securities of the Company to the public without registration
("Rule 144"), the Company agrees to:
(a) comply with the provisions of paragraph (c)(1) of Rule 144; and
(b) file with the Commission in a timely manner all reports and
other documents required to be filed with the Commission pursuant to Section
13 or 15(d) under the Exchange Act by companies subject to either of such
sections, irrespective of whether the Company is then subject to such
reporting requirements.
Section 3. Registration Rights With Respect to the Securities.
(a) The Company agrees that it will prepare and file with the
Securities and Exchange Commission ("Commission"), within fifteen (15) days of
its filing of its Form 10K-SB, a registration statement (on Form SB-2 or S-1,
or such other form as the Company may reasonably deem appropriate) under the
Securities Act (the "Registration Statement"), at the sole expense of the
Company (except as provided in Section 3(c) hereof), in respect of the
Investors, so as to permit a public offering and resale of the Securities
under the Act by the Investors as selling stockholders and not as
underwriters.
The Company shall use its best efforts to cause such Registration
Statement to become effective within ninety (90) days from the required filing
date, or, if earlier, within five (5) days of SEC clearance to request
acceleration of effectiveness, but in any event no later than July 15, 2000.
The number of shares designated in the Registration Statement to be registered
shall be five million (5,000,000) shares of Common Stock and shall include
appropriate language regarding reliance upon Rule 416 to the extent permitted
by the Commission. The Company will notify the Investors of the effectiveness
of the Registration Statement within one (1) Trading Day of such event.
(b) The Company will maintain the Registration Statement or
post-effective amendment filed under this Section 3 effective under the
Securities Act until the earlier of (i) thirty days after the date that one
percent or less of the Securities covered by such Registration Statement are
or may become issued and outstanding, (ii) thirty days after the date that all
but one percent or less of the Securities have been sold pursuant to such
Registration Statement, (iii) the date the Investors receive an opinion of
counsel to the Company, which counsel shall be reasonably acceptable to the
Investors, that the Securities may be sold under the provisions of Rule 144
without limitation as to volume, (iv) thirty days after all but one percent or
less of the Securities have been otherwise transferred to persons who may
trade such shares without restriction under the Securities Act, and the
Company has delivered a new certificate or other evidence of ownership for
such securities not bearing a restrictive legend, or (v) all Securities may be
sold without any time, volume or manner limitations pursuant to Rule 144(k) or
any similar provision then in effect under the Securities Act in the opinion
of counsel to the Company, which counsel shall be reasonably acceptable to the
Investor (the "Effectiveness Period").
(c) All fees, disbursements and out-of-pocket expenses and
costs incurred by the Company in connection with the preparation and filing of
the Registration Statement under subparagraph 3(a) and in complying with
applicable securities and Blue Sky laws (including, without limitation, all
attorneys' fees of the Company) shall be borne by the Company. The Investors
shall bear the cost of underwriting and/or brokerage discounts, fees and
commissions, if any, applicable to the Securities being registered and the
fees and expenses of their counsel. The Investors and their counsel shall have
a reasonable period, not to exceed five (5) Trading Days, to review the
proposed Registration Statement or any
2
amendment thereto, prior to filing with the Commission, and the Company shall
provide each Investor with copies of any comment letters received from the
Commission with respect thereto within two (2) Trading Days of receipt
thereof. The Company shall qualify any of the securities for sale in such
states as any Investor reasonably designates and shall furnish indemnification
in the manner provided in Section 6 hereof. However, the Company shall not be
required to qualify in any state which will require an escrow or other
restriction relating to the Company and/or the sellers, or which will require
the Company to qualify to do business in such state or require the Company to
file therein any general consent to service of process. The Company at its
expense will supply the Investors with copies of the applicable Registration
Statement and the prospectus included therein and other related documents in
such quantities as may be reasonably requested by the Investors.
(d) The Company shall not be required by this Section 3 to
include an Investor's Securities in any Registration Statement which is to be
filed if, in the opinion of counsel for both the Investor and the Company (or,
should they not agree, in the opinion of another counsel experienced in
securities law matters acceptable to counsel for the Investor and the Company)
the proposed offering or other transfer as to which such registration is
requested is exempt from applicable federal and state securities laws and
would result in all purchasers or transferees obtaining securities which are
not "restricted securities", as defined in Rule 144 under the Securities Act.
(e) In the event that (i) the Registration Statement to be
filed by the Company pursuant to Section 3(a) above is not filed with the
Commission within thirty (30) days from the required filing date, (ii) such
Registration Statement is not declared effective by the Commission within the
earlier of ninety (90) days from the Closing Date or five (5) days of
clearance by the Commission to request effectiveness or (iii) such
Registration Statement is not maintained as effective by the Company for the
period set forth in Section 3(b) above (each a "Registration Default") then
the Company will pay Investor (pro rated on a daily basis), as liquidated
damages for such failure and not as a penalty one percent (1%) of the
aggregate market value of shares of Common Stock purchased from the Company
(including the Conversion Shares which would be issuable upon conversion of
the Convertible Debenture on any date of determination, and whether or not the
Convertible Debenture is then convertible pursuant to its terms) and held by
the Investor for the first month and two percent (2%) for each month
thereafter until such Registration Statement has been filed, and in the event
of late effectiveness (in case of clause (ii) above) or lapsed effectiveness
(in the case of clause (iii) above), one percent (1%) of the aggregate market
value of shares of Common Stock purchased from the Company and held by the
Investor (including the Conversion Shares which would be issuable upon
conversion of the Convertible Debenture on any date of determination, and
whether or not the Convertible Debenture is then convertible pursuant to its
terms) for the first month and two percent (2%) for each month thereafter
(regardless of whether one or more such Registration Defaults are then in
existence, and without duplication) until such Registration Statement has been
declared effective. Such payment of the liquidated damages shall be made to
the Investors in cash, within five (5) calendar days of demand, provided,
however, that the payment of such liquidated damages shall not relieve the
Company from its obligations to use its best efforts to register the
Securities pursuant to this Section. The market value of the Common Stock for
this purpose shall be the closing price (or last trade, if so reported) on the
Principal Market for each day during such Registration Default, not to exceed
$50,000 per month.
If the Company does not remit the payment to the Investors of
either liquidated damages or for the repurchase of the Convertible Debentures
as set forth above, the Company will pay the Investors reasonable costs of
collection, including attorneys' fees, in addition to the liquidated damages.
The registration of the Securities pursuant to this provision shall not affect
or limit the Investors' other rights or remedies as set forth in this
Agreement.
3
(f) No provision contained herein shall preclude the Company
from selling securities pursuant to any Registration Statement in which it is
required to include Securities pursuant to this Section 3.
(g) If at any time or from time to time after the effective
date of any Registration Statement, the Company notifies the Investors in
writing of the existence of a Potential Material Event (as defined in Section
3(h) below), the Investors shall not offer or sell any Securities or engage in
any other transaction involving or relating to Securities, from the time of
the giving of notice with respect to a Potential Material Event until the
Investors receive written notice from the Company that such Potential Material
Event either has been disclosed to the public or no longer constitutes a
Potential Material Event; provided, however, that the Company may not so
suspend the right to such holders of Securities for more than twenty (20) days
in the aggregate during any twelve month period, during the period the
Registration Statement is required to be in effect, and if such period is
exceeded, such event shall be a Registration Default. If a Potential Material
Event shall occur prior to the date a Registration Statement is required to be
filed, then the Company's obligation to file such Registration Statement shall
be delayed without penalty for not more than twenty (20) days, and such delay
or delays shall not constitute a Registration Default. The Company must, if
lawful, give the Investors notice in writing at least two (2) Trading Days
prior to the first day of the blackout period.
(h) "Potential Material Event" means any of the following:
(a) the possession by the Company of material information not ripe for
disclosure in a registration statement, as determined in good faith by the
Chief Executive Officer or the Board of Directors of the Company that
disclosure of such information in a Registration Statement would be
detrimental to the business and affairs of the Company; or (b) any material
engagement or activity by the Company which would, in the good faith
determination of the Chief Executive Officer or the Board of Directors of the
Company, be adversely affected by disclosure in a registration statement at
such time, which determination shall be accompanied by a good faith
determination by the Chief Executive Officer or the Board of Directors of the
Company that the applicable Registration Statement would be materially
misleading absent the inclusion of such information.
Section 4. Cooperation with Company. The Investors will cooperate with
the Company in all respects in connection with this Agreement, including
timely supplying all information reasonably requested by the Company (which
shall include all information regarding the Investors and proposed manner of
sale of the Registrable Securities required to be disclosed in any
Registration Statement) and executing and returning all documents reasonably
requested in connection with the registration and sale of the Registrable
Securities and entering into and performing their obligations under any
underwriting agreement, if the offering is an underwritten offering, in usual
and customary form, with the managing underwriter or underwriters of such
underwritten offering. Nothing in this Agreement shall obligate any Investor
to consent to be named as an underwriter in any Registration Statement. The
obligation of the Company to register the Registrable Securities shall be
absolute and unconditional as to those Securities which the Commission will
permit to be registered without naming the Investors as underwriters. Any
delay or delays caused by the Investors by failure to cooperate as required
hereunder shall not constitute a Registration Default.
Section 5. Registration Procedures. If and whenever the Company is
required by any of the provisions of this Agreement to effect the registration
of any of the Registrable Securities under the Act, the Company shall (except
as otherwise provided in this Agreement), as expeditiously as possible,
subject to the Investors' assistance and cooperation as reasonably required
with respect to each Registration Statement:
4
(a)(i) prepare and file with the Commission such amendments
and supplements to the Registration Statement and the prospectus used in
connection therewith as may be necessary to keep such Registration Statement
effective and to comply with the provisions of the Act with respect to the
sale or other disposition of all securities covered by such registration
statement whenever the Investors shall desire to sell or otherwise dispose of
the same (including prospectus supplements with respect to the sales of
securities from time to time in connection with a registration statement
pursuant to Rule 415 promulgated under the Act) and (ii) take all lawful
action such that each of (A) the Registration Statement and any amendment
thereto does not, when it becomes effective, 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 were made, not misleading and (B) the prospectus forming part
of the Registration Statement, and any amendment or supplement thereto, does
not at any time during the Registration Period include 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 were made, not misleading;
(b)(i) prior to the filing with the Commission of any
Registration Statement (including any amendments thereto) and the distribution
or delivery of any prospectus (including any supplements thereto), provide
draft copies thereof to the Investors as required by Section 3(c) and reflect
in such documents all such comments as the Investors (and their counsel)
reasonably may propose respecting the Selling Shareholders and Plan of
Distribution sections (or equivalents) and (ii) furnish to each Investor such
numbers of copies of a prospectus including a preliminary prospectus or any
amendment or supplement to any prospectus, as applicable, in conformity with
the requirements of the Act, and such other documents, as such Investor may
reasonably request in order to facilitate the public sale or other disposition
of the securities owned by such Investor;
(c) register and qualify the Registrable Securities covered
by the Registration Statement under such other securities or blue sky laws of
such jurisdictions as the Investors shall reasonably request (subject to the
limitations set forth in Section 3(c) above), and do any and all other acts
and things which may be necessary or advisable to enable each Investor to
consummate the public sale or other disposition in such jurisdiction of the
securities owned by such Investor;
(d) list such Registrable Securities on the Principal Market,
if the listing of such Registrable Securities is then permitted under the
rules of such Principal Market;
(e) notify each Investor at any time when a prospectus
relating thereto covered by the Registration Statement is required to be
delivered under the Act, of the happening of any event of which it has
knowledge as a result of which the prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in the light of the
circumstances then existing, and the Company shall prepare and file a curative
amendment under Section 5(a) as quickly as commercially possible;
(f) as promptly as practicable after becoming aware of such
event, notify each Investor who holds Registrable Securities being sold (or,
in the event of an underwritten offering, the managing underwriters) of the
issuance by the Commission of any stop order or other suspension of the
effectiveness of the Registration Statement at the earliest possible time and
take all lawful action to effect the withdrawal, recession or removal of such
stop order or other suspension;
5
(g) cooperate with the Investors to facilitate the timely
preparation and delivery of certificates for the Registrable Securities to be
offered pursuant to the Registration Statement and enable such certificates
for the Registrable Securities to be in such denominations or amounts, as the
case may be, as the Investors reasonably may request and registered in such
names as the Investors may request; and, within three (3) Trading Days after a
Registration Statement which includes Registrable Securities is declared
effective by the Commission, deliver and cause legal counsel selected by the
Company to deliver to the transfer agent for the Registrable Securities (with
copies to the Investors) an appropriate instruction and, to the extent
necessary, an opinion of such counsel;
(h) take all such other lawful actions reasonably necessary
to expedite and facilitate the disposition by the Investors of their
Registrable Securities in accordance with the intended methods therefor
provided in the prospectus which are customary for issuers to perform under
the circumstances;
(i) in the event of an underwritten offering, promptly
include or incorporate in a prospectus supplement or post-effective amendment
to the Registration Statement such information as the managers reasonably
agree should be included therein and to which the Company does not reasonably
object and make all required filings of such prospectus supplement or post-
effective amendment as soon as practicable after it is notified of the matters
to be included or incorporated in such Prospectus supplement or post-effective
amendment; and
(j) maintain a transfer agent and registrar for its Common
Stock.
Section 6. Indemnification.
(a) To the maximum extent permitted by law, the Company
agrees to indemnify and hold harmless the Investors and each person, if any,
who controls an Investor within the meaning of the Securities Act (each a
"Distributing Investor") against any losses, claims, damages or liabilities,
joint or several (which shall, for all purposes of this Agreement, include,
but not be limited to, all reasonable costs of defense and investigation and
all reasonable attorneys' fees and expenses), to which the Distributing
Investor may become subject, under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any Registration Statement, or any
related final prospectus or amendment or supplement thereto, or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading; provided, however, that the Company will not be liable in any
such case to the extent, and only to the extent, that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in such
Registration Statement, preliminary prospectus, final prospectus or amendment
or supplement thereto in reliance upon, and in conformity with, written
information furnished to the Company by the Distributing Investor, its
counsel, affiliates or any underwriter, specifically for use in the
preparation thereof. This indemnity agreement will be in addition to any
liability which the Company may otherwise have.
(b) To the maximum extent permitted by law, each Distributing
Investor agrees that it will indemnify and hold harmless the Company, and each
officer and director of the Company or person, if any, who controls the
Company within the meaning of the Securities Act, against any losses, claims,
damages or liabilities (which shall, for all purposes of this Agreement,
include, but not be limited to, all reasonable costs of defense and
investigation and all reasonable attorneys' fees and expenses) to which the
6
Company or any such officer, director or controlling person may become subject
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact
contained in any Registration Statement, or any related final prospectus or
amendment or supplement thereto, or arise out of or are based upon the
omission or the alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
but in each case only to the extent that such untrue statement or alleged
untrue statement or omission or alleged omission was made in such Registration
Statement, final prospectus or amendment or supplement thereto in reliance
upon, and in conformity with, written information furnished to the Company by
such Distributing Investor, its counsel, affiliates or any underwriter,
specifically for use in the preparation thereof. This indemnity agreement will
be in addition to any liability which the Distributing Investor may otherwise
have. Notwithstanding anything to the contrary herein, the Distributing
Investor shall be liable under this Section 6(b) for only that amount as does
not exceed the net proceeds to such Distributing Investor as a result of the
sale of Registrable Securities pursuant to the Registration Statement.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of the commencement of any action against such indemnified
party, such indemnified party will, if a claim in respect thereof is to be
made against the indemnifying party under this Section 6, notify the
indemnifying party in writing of the commencement thereof; but the omission so
to notify the indemnifying party will not relieve the indemnifying party from
any liability which it may have to any indemnified party except to the extent
the failure of the indemnified party to provide such written notification
actually prejudices the ability of the indemnifying party to defend such
action. In case any such action is brought against any indemnified party, and
it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified,
assume the defense thereof, subject to the provisions herein stated and after
notice from the indemnifying party to such indemnified party of its election
so to assume the defense thereof, the indemnifying party will not be liable to
such indemnified party under this Section 6 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation, unless the indemnifying
party shall not pursue the action to its final conclusion. The indemnified
parties as a group shall have the right to employ one separate counsel in any
such action and to participate in the defense thereof, but the fees and
expenses of such counsel shall not be at the expense of the indemnifying party
if the indemnifying party has assumed the defense of the action with counsel
reasonably satisfactory to the indemnified party unless (i) the employment of
such counsel has been specifically authorized in writing by the indemnifying
party, or (ii) the named parties to any such action (including any impleaded
parties) include both the indemnified party and the indemnifying party and the
indemnified party shall have been advised by its counsel that there may be one
or more legal defenses available to the indemnifying party different from or
in conflict with any legal defenses which may be available to the indemnified
party or any other indemnified party (in which case the indemnifying party
shall not have the right to assume the defense of such action on behalf of
such indemnified party, it being understood, however, that the indemnifying
party shall, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out
of the same general allegations or circumstances, be liable only for the
reasonable fees and expenses of one separate firm of attorneys for the
indemnified party, which firm shall be designated in writing by the
indemnified party). No settlement of any action against an indemnified party
shall be made without the prior written consent of the indemnified party,
which consent shall not be unreasonably withheld so long as such settlement
includes a full release of claims against the indemnified party.
7
All fees and expenses of the indemnified party (including reasonable
costs of defense and investigation in a manner not inconsistent with this
Section and all reasonable attorneys' fees and expenses) shall be paid to the
indemnified party, as incurred, within ten (10) Trading Days of written notice
thereof to the indemnifying party (regardless of whether it is ultimately
determined that an indemnified party is not entitled to indemnification
hereunder; provided, that the indemnifying party may require such indemnified
party to undertake to reimburse all such fees and expenses to the extent it is
finally judicially determined that such indemnified party is not entitled to
indemnification hereunder).
Section 7. Contribution. In order to provide for just and equitable
contribution under the Securities Act in any case in which (i) the indemnified
party makes a claim for indemnification pursuant to Section 6 hereof but is
judicially determined (by the entry of a final judgment or decree by a court
of competent jurisdiction and the expiration of time to appeal or the denial
of the last right of appeal) that such indemnification may not be enforced in
such case notwithstanding the fact that the express provisions of Section 6
hereof provide for indemnification in such case, or (ii) contribution under
the Securities Act may be required on the part of any indemnified party, then
the Company and the applicable Distributing Investor shall contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(which shall, for all purposes of this Agreement, include, but not be limited
to, all reasonable costs of defense and investigation and all reasonable
attorneys' fees and expenses), in either such case (after contribution from
others) on the basis of relative fault as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company on the one hand or the applicable
Distributing Investor on the other hand, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Distributing Investor agree that
it would not be just and equitable if contribution pursuant to this Section 7
were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to in
this Section 7. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above in this Section 7 shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
Notwithstanding any other provision of this Section 7, in no event shall
any (i) Investor be required to undertake liability to any person under this
Section 7 for any amounts in excess of the dollar amount of the proceeds
received by such Investor from the sale of such Investor's Registrable
Securities (after deducting any fees, discounts and commissions applicable
thereto) pursuant to any Registration Statement under which such Registrable
Securities are registered under the Securities Act and (ii) underwriter be
required to undertake liability to any person hereunder for any amounts in
excess of the aggregate discount, commission or other compensation payable to
such underwriter with respect to the Registrable Securities underwritten by it
and distributed pursuant to such Registration Statement.
Section 8. Notices. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be
in writing and, unless otherwise specified herein, shall be (i) hand
delivered, (ii) deposited in the mail, registered or certified, return receipt
requested, postage prepaid, (iii) delivered by reputable air courier service
with charges prepaid, or (iv) transmitted by facsimile, addressed as set forth
in the Purchase Agreement or to such other address as such party shall have
specified
8
most recently by written notice. Any notice or other communication required
or permitted to be given hereunder shall be deemed effective (a) upon hand
delivery or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is
to be received), or the first business day following such delivery (if
delivered other than on a business day during normal business hours where such
notice is to be received) or (b) on the first business day following the date
of sending by reputable courier service, fully prepaid, addressed to such
address, or (c) upon actual receipt of such mailing, if mailed. Either party
hereto may from time to time change its address or facsimile number for
notices under this Section 8 by giving at least ten (10) days' prior written
notice of such changed address or facsimile number to the other party hereto.
Section 9. Assignment. This Agreement is binding upon and inures to
the benefit of the parties hereto and their respective heirs, successors and
permitted assigns. The rights granted the Investors under this Agreement may
be assigned to any purchaser of substantially all of the Registrable
Securities (or the rights thereto) from an Investor, as otherwise permitted by
the Purchase Agreement.
Section 10. Additional Covenants of the Company. The Company agrees
that at such time as it otherwise meets the requirements for the use of
Securities Act Registration Statement on Form S-3 for the purpose of
registering the Registrable Securities, it shall use its best efforts to file
all reports and information required to be filed by it with the Commission in
a timely manner and take all such other action so as to maintain such
eligibility for the use of such form.
Section 11. Counterparts/Facsimile. This Agreement may be executed in
two or more counterparts, each of which shall constitute an original, but all
of which, when together shall constitute but one and the same instrument, and
shall become effective when one or more counterparts have been signed by each
party hereto and delivered to the other parties. In lieu of the original, a
facsimile transmission or copy of the original shall be as effective and
enforceable as the original.
Section 12. Remedies. The remedies provided in this Agreement are
cumulative and not exclusive of any remedies provided by law. If any term,
provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth
herein shall remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their best efforts
to find and employ an alternative means to achieve the same or substantially
the same result as that contemplated by such term, provision, covenant or
restriction.
Section 13. Conflicting Agreements. The Company shall not enter into
any agreement with respect to its securities that is inconsistent with the
rights granted to the holders of Registrable Securities in this Agreement or
otherwise prevents the Company from complying with all of its obligations
hereunder.
Section 14. Headings. The headings in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
Section 15. Governing Law, Arbitration. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
applicable to contracts made in New York by persons domiciled in New York City
and without regard to its principles of conflicts of laws. Any dispute under
this Agreement shall be submitted to arbitration under the American
Arbitration Association (the "AAA") in New York City, New York, and shall be
finally and conclusively determined by the decision of a board of
9
arbitration consisting of three (3) members (hereinafter referred to as the
"Board of Arbitration") selected as according to the rules governing the AAA.
The Board of Arbitration shall meet on consecutive business days in New York
City, New York, and shall reach and render a decision in writing (concurred in
by a majority of the members of the Board of Arbitration) with respect to the
amount, if any, which the losing party is required to pay to the other party
in respect of a claim filed. In connection with rendering its decisions, the
Board of Arbitration shall adopt and follow the laws of the State of New York.
To the extent practical, decisions of the Board of Arbitration shall be
rendered no more than thirty (30) calendar days following commencement of
proceedings with respect thereto. The Board of Arbitration shall cause its
written decision to be delivered to all parties involved in the dispute. Any
decision made by the Board of Arbitration (either prior to or after the
expiration of such thirty (30) calendar day period) shall be final, binding
and conclusive on the parties to the dispute, and entitled to be enforced to
the fullest extent permitted by law and entered in any court of competent
jurisdiction. The Board of Arbitration shall be authorized and is hereby
directed to enter a default judgment against any party failing to participate
in any proceeding hereunder within the time periods set forth in the AAA
rules. The prevailing party shall be awarded its costs, including attorneys'
fees, from the non-prevailing party as part of the award. Any party shall
have the right to seek injunctive relief from any court of competent
jurisdiction in any case where such relief is available. The prevailing party
in such injunctive action shall be awarded its costs, including attorney's
fees, from the non-prevailing party.
IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be duly executed, on the day and year first above written.
Famous Fixins, Inc.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
-------------------------------
▇▇▇▇▇ ▇▇▇▇▇, President
Roseworth Group Ltd.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇, Authorized Signatory
Austost Anstalt ▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇, Authorized Signatory
Balmore Funds, S.A.
By: /s/ Francois Morax
-------------------------------
Francois Morax, Authorized Signatory
10
EXHIBIT D
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is made as of March 7, 2000, by
and among Famous Fixins, Inc., a corporation incorporated under the laws of
the State of New York (the "Company"), the investors signatory hereto (each an
"Investor" and together the "Investors"), and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Green, P.C.,
(the "Escrow Agent"). Capitalized terms used but not defined herein shall
have the meanings set forth in the Convertible Debenture and Warrants Purchase
Agreement referred to in the first recital.
W I T N E S S E T H:
WHEREAS, the Investors will be purchasing from the Company $1,000,000
principal amount of Convertible Debentures (the "Convertible Preferred Stock")
and Warrants to purchase up to 2,500,000 shares of Common Stock pursuant to
the formula set forth in the Convertible Debenture and Warrants Purchase
Agreement (the "Purchase Agreement") dated the date hereof between the
Investors and the Company, which will be issued as per the terms contained
herein and in the Purchase Agreement; and
WHEREAS, it is intended that the purchase of the securities be
consummated in accordance with the requirements set forth by Sections 4(2)
and/or 4(6) and/or Regulation D promulgated under the Securities Act of 1933,
as amended; and
WHEREAS, the Company and the Investors have requested that the Escrow
Agent hold the Purchase Price with respect to the Closing in escrow until the
Escrow Agent has received the Convertible Debentures, the Warrants and certain
other closing documents specified herein;
NOW, THEREFORE, in consideration of the covenants and mutual promises
contained herein and other good and valuable consideration, the receipt and
legal sufficiency of which are hereby acknowledged and intending to be legally
bound hereby, the parties agree as follows:
ARTICLE 1
TERMS OF THE ESCROW
1.1. The parties hereby agree to establish an escrow account with the
Escrow Agent whereby the Escrow Agent shall hold the funds for the purchase of
the Convertible Debentures and the Warrants at the Closing.
1.2. (a) At the Closing, upon Escrow Agent's receipt of the Purchase
Price for the Closing into its attorney trustee account from the Investors,
together with executed counterparts of this Agreement, the Purchase Agreement
and the Registration Rights Agreement, it shall telephonically advise the
Company, or the Company's designated attorney or agent, of the amount of funds
it has received into its account.
(b) Wire transfers to the Escrow Agent shall be made as follows:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Green, P.C.
Master Escrow Account
Chase Manhattan Bank
1
▇▇▇▇ ▇▇▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
ABA No. ▇▇▇▇▇▇▇▇▇
Account No. ▇▇▇-▇-▇▇▇▇▇▇
Attention: L. Borneo
1.3. The Company, upon receipt of said notice, shall deliver to the
Escrow Agent the certificates representing the Convertible Debentures and the
Warrants to be issued to each Investor at the first Closing together with:
(i) the original executed Registration Rights Agreement in the form of
Exhibit C to the Purchase Agreement;
(ii) Instructions to Transfer Agent in the form of Exhibit F to the
Purchase Agreement;
(iii) the original executed opinion of Law Offices of ▇▇▇ ▇▇▇▇▇▇▇, in
the form of Exhibit E to the Purchase Agreement; and
(iv) an original counterpart of this Escrow Agreement;
In the event that the foregoing items are not in the Escrow Agent's possession
within three (3) Trading Days of the Escrow Agent notifying the Company that
the Escrow Agent has custody of the Purchase Price, then each Investor shall
have the right to demand the return of said sum.
1.4. At the Closing, once Escrow Agent confirms the validity of the
issuance of the Convertible Debentures and the Warrants by means of its
receipt of a Release Notice in the form attached hereto as Exhibit X executed
by the Company and each Investor, it shall enter the Commencement Date and
Termination Date of each Warrant on the face of each Warrant, insert the
Closing Date on the face of the certificates representing the Convertible
Debentures, and then wire that amount of funds necessary to purchase the
Convertible Debentures and the Warrants per the written instructions of the
Company, net of One Hundred Thousand Dollars ($100,000) to Union Atlantic, LC,
net of Ten Thousand Dollars ($10,000) from Union Atlantic LC to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
& Green, P.C.
Once the funds (as set forth above) have been sent per the Company's
instructions, the Escrow Agent shall then arrange to have the Convertible
Debentures, the Warrants, the Registration Rights Agreement and the opinion of
counsel delivered as per instructions from the Investors and to deliver the
Instructions to Transfer Agent to the Transfer Agent.
ARTICLE 2
MISCELLANEOUS
2.1. No waiver or any breach of any covenant or provision herein
contained shall be deemed a waiver of any preceding or succeeding breach
thereof, or of any other covenant or provision herein contained. No extension
of time for performance of any obligation or act shall be deemed any extension
of the time for performance of any other obligation or act.
2.2. All notices or other communications required or permitted hereunder
shall be in writing, and shall be sent as set forth in the Purchase Agreement.
2.3. This Escrow Agreement shall be binding upon and shall inure to the
benefit of the permitted successors and permitted assigns of the parties
hereto.
2
2.4. This Escrow Agreement is the final expression of, and contains the
entire agreement between, the parties with respect to the subject matter
hereof and supersedes all prior understandings with respect thereto. This
Escrow Agreement may not be modified, changed, supplemented or terminated, nor
may any obligations hereunder be waived, except by written instrument signed
by the parties to be charged or by its agent duly authorized in writing or as
otherwise expressly permitted herein.
2.5. Whenever required by the context of this Escrow Agreement, the
singular shall include the plural and masculine shall include the feminine.
This Escrow Agreement shall not be construed as if it had been prepared by one
of the parties, but rather as if both parties had prepared the same. Unless
otherwise indicated, all references to Articles are to this Escrow Agreement.
2.6. The parties hereto expressly agree that this Escrow Agreement shall
be governed by, interpreted under and construed and enforced in accordance
with the laws of the State of New York. Any action to enforce, arising out
of, or relating in any way to, any provisions of this Escrow Agreement shall
only be brought in a state or Federal court sitting in New York City.
2.7. The Escrow Agent's duties hereunder may be altered, amended,
modified or revoked only by a writing signed by the Company, each Investor and
the Escrow Agent.
2.8. The Escrow Agent shall be obligated only for the performance of
such duties as are specifically set forth herein and may rely and shall be
protected in relying or refraining from acting on any instrument reasonably
believed by the Escrow Agent to be genuine and to have been signed or
presented by the proper party or parties. The Escrow Agent shall not be
personally liable for any act the Escrow Agent may do or omit to do hereunder
as the Escrow Agent while acting in good faith, and any act done or omitted by
the Escrow Agent pursuant to the advice of the Escrow Agent's attorneys-at-law
shall be conclusive evidence of such good faith.
2.9. The Escrow Agent is hereby expressly authorized to disregard any
and all warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law and is hereby
expressly authorized to comply with and obey orders, judgments or decrees of
any court. In case the Escrow Agent obeys or complies with any such order,
judgment or decree, the Escrow Agent shall not be liable to any of the parties
hereto or to any other person, firm or corporation by reason of such decree
being subsequently reversed, modified, annulled, set aside, vacated or found
to have been entered without jurisdiction.
2.10. The Escrow Agent shall not be liable in any respect on account of
the identity, authorization or rights of the parties executing or delivering
or purporting to execute or deliver the Purchase Agreement or any documents or
papers deposited or called for thereunder.
2.11. The Escrow Agent shall be entitled to employ such legal counsel
and other experts as the Escrow Agent may deem necessary properly to advise
the Escrow Agent in connection with the Escrow Agent's duties hereunder, may
rely upon the advice of such counsel, and may pay such counsel reasonable
compensation therefor. The Escrow Agent has acted as legal counsel for the
Investors, and may continue to act as legal counsel for the Investors, from
time to time, notwithstanding its duties as the Escrow Agent hereunder. The
Company consents to the Escrow Agent in such capacity as legal counsel for the
Investors and waives any claim that such representation represents a conflict
of interest on the part of the Escrow Agent. The Company understands that the
Investors and the Escrow Agent are relying explicitly on the foregoing
provision in entering into this Escrow Agreement.
2.12. The Escrow Agent's responsibilities as escrow agent hereunder
shall terminate if the Escrow Agent shall resign by written notice to the
Company and the Investors. In the event of any such resignation, the
Investors and the Company shall appoint a successor Escrow Agent.
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2.13. If the Escrow Agent reasonably requires other or further
instruments in connection with this Escrow Agreement or obligations in respect
hereto, the necessary parties hereto shall join in furnishing such
instruments.
2.14. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the
documents or the escrow funds held by the Escrow Agent hereunder, the Escrow
Agent is authorized and directed in the Escrow Agent's sole discretion (1) to
retain in the Escrow Agent's possession without liability to anyone all or any
part of said documents or the escrow funds until such disputes shall have been
settled either by mutual written agreement of the parties concerned by a final
order, decree or judgment of a court of competent jurisdiction after the time
for appeal has expired and no appeal has been perfected, but the Escrow Agent
shall be under no duty whatsoever to institute or defend any such proceedings
or (2) to deliver the escrow funds and any other property and documents held
by the Escrow Agent hereunder to a state or Federal court having competent
subject matter jurisdiction and located in the County of New York in
accordance with the applicable procedure therefor.
2.15. The Company and each Investor agree jointly and severally to
indemnify and hold harmless the Escrow Agent and its partners, employees,
agents and representatives from any and all claims, liabilities, costs or
expenses in any way arising from or relating to the duties or performance of
the Escrow Agent hereunder or the transactions contemplated hereby or by the
Purchase Agreement other than any such claim, liability, cost or expense to
the extent the same shall have been determined by final, unappealable judgment
of a court of competent jurisdiction to have resulted from the gross
negligence or willful misconduct of the Escrow Agent.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth above.
FAMOUS FIXINS, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
-------------------------------
▇▇▇▇▇ ▇▇▇▇▇, President
Roseworth Group Ltd.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇, Authorized Signatory
Austost Anstalt ▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇, Authorized Signatory
Balmore Funds, S.A.
By: /s/ Francois Morax
-------------------------------
Francois Morax, Authorized Signatory
ESCROW AGENT:
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & GREEN, P.C.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------
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Exhibit X to
Escrow Agreement
RELEASE NOTICE
The UNDERSIGNED, pursuant to the Escrow Agreement, dated as of March 7,
2000 among Famous Fixins, Inc., the Investors signatory thereto and ▇▇▇▇▇▇▇
▇▇▇▇▇▇ & Green, P.C., as Escrow Agent (the "Escrow Agreement"; capitalized
terms used herein and not defined shall have the meaning ascribed to such
terms in the Escrow Agreement), hereby notify the Escrow Agent that each of
the conditions precedent to the purchase and sale of the Convertible Debenture
and Warrants set forth in the Convertible Debenture and Warrants Purchase
Agreement have been satisfied. The Company and the undersigned Investor
hereby confirm that all of their respective representations and warranties
contained in the Purchase Agreement remain true and correct and authorize the
release by the Escrow Agent of the funds and documents to be released at the
Closing as described in the Escrow Agreement. This Release Notice shall not be
effective until executed by the Company and the Investor.
This Release Notice may be signed in one or more counterparts, each of
which shall be deemed an original.
IN WITNESS WHEREOF, the undersigned have caused this Release Notice to
be duly executed and delivered as of this __ day of March, 2000.
Famous Fixins, Inc.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
----------------------------
▇▇▇▇▇ ▇▇▇▇▇, President
INVESTOR: Roseworth Group, Ltd.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
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EXHIBIT E
FORM OF OPINION OF THE COMPANY'S INDEPENDENT COUNSEL
[Date]
Address
Re: Convertible Debenture and Warrants Purchase Agreement between the
Investors Signatory thereto and Famous Fixins, Inc..
Ladies and Gentlemen:
This opinion is furnished to you pursuant to the Purchase Agreement by
and between the investors signatory thereto (the "Investors") and Famous
Fixins, Inc., a New York corporation (the "Company"), dated as of March 7,
2000 (the "Purchase Agreement"), which provides for the issuance and sale by
the Company of (i) $1,000,000 principal amount of Convertible Debentures and
(ii) warrants to purchase up to 2,500,000 shares of Common Stock of the
Company (the "Warrants"). All terms used herein have the meanings defined for
them in the Purchase Agreement unless otherwise defined herein.
We have acted as counsel for the Company in connection with the
negotiation of the Purchase Agreement, the Convertible Debentures, the
Warrants, and the Registration Rights Agreement between the Investors and the
Company, dated as of March 7, 2000 (the "Registration Rights Agreement"), and
the Escrow Agreement between the Investors, the Company and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ &
Green, P.C., dated as of March 7, 2000 (the "Escrow Agreement", and together
with the Purchase Agreement, the Convertible Debentures, the Warrants and the
Registration Rights Agreement, the "Agreements"). As counsel, we have made
such legal and factual examinations and inquiries as we have deemed advisable
or necessary for the purpose of rendering this opinion. In addition, we have
examined, among other things, originals or copies of such corporate records of
the Company, certificates of public officials and such other documents and
questions of law that we consider necessary or advisable for the purpose of
rendering this opinion. In such examination we have assumed the genuineness of
all signatures on original documents, the authenticity and completeness of all
documents submitted to us as originals, the conformity to original documents
of all copies submitted to us as copies thereof, the legal capacity of natural
persons, and the due execution and delivery of all documents (except as to due
execution and delivery by the Company) where due execution and delivery are a
prerequisite to the effectiveness thereof.
As used in this opinion, the expression "to our knowledge" refers to the
current actual knowledge of the attorneys of this firm who have worked on
matters for the Company solely in connection with the Agreements and the
Warrants and the transactions contemplated thereby, and without any
independent investigation of any underlying facts or situations.
For purposes of this opinion, we have assumed that you have all
requisite power and authority, and have taken any and all necessary corporate
action, to execute and deliver the Agreements, and we are assuming that the
representations and warranties made by each Investor in the Agreements and
pursuant thereto are true and correct.
Based upon and subject to the foregoing, we are of the opinion that:
1. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of New York and has all requisite
corporate power and authority to carry on its business and
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to own, lease and operate its properties and assets as described in the
Company's SEC Documents. To our knowledge, the Company does not have any
subsidiaries and does not own more than fifty percent (50%) of the outstanding
capital stock of or control any other business entity other than as disclosed
in the SEC Documents.
2. The Company has the requisite corporate power and authority to enter
into and perform its obligations under the Agreements and the Warrants and to
issue the Convertible Debentures, the Conversion Shares, the Warrants and the
Warrant Shares. The execution and delivery of the Agreements by the Company
and the consummation by it of the transactions contemplated thereby have been
duly authorized by all necessary corporate action and no further consent or
authorization of the Company or its Board of Directors or stockholders is
required. Each of the Agreements has been duly executed and delivered, and
the Convertible Debentures and the Warrants have each been duly executed,
issued and delivered by the Company and each of the Agreements, the
Convertible Debentures and the Warrants constitutes valid and binding
obligations of the Company enforceable against the Company in accordance with
their respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, or similar laws relating to, or affecting
generally the enforcement of, creditors' rights and remedies or by other
equitable principles of general application.
3. The execution, delivery and performance of the Agreements by the
Company and the consummation by the Company of the transactions contemplated
thereby, including, without limitation, the issuance of the Convertible
Debentures, the Conversion Shares, the Warrants and the Warrant Shares, do not
and will not (i) result in a violation of the Company's Certificate of
Incorporation or By-Laws; (ii) to our knowledge, conflict with, or constitute
a material default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, indenture,
instrument or any "lock-up" or similar provision of any underwriting or
similar agreement to which the Company is a party; or (iii) result in a
violation of any federal or state law, rule or regulation applicable to the
Company or by which any property or asset of the Company is bound or affected,
except for such violations as would not, individually or in the aggregate,
have a Material Adverse Effect. To our knowledge, the Company is not in
violation of any terms of its Certificate of Incorporation or Bylaws.
4. The issuance of the Convertible Debentures, the Conversion Shares and
the Warrants in accordance with the Purchase Agreement, and the issuance of
the Warrant Shares in accordance with the Warrants, will be exempt from
registration under the Securities Act of 1933, as amended, and will be in
compliance with the state securities laws of the Company's principal place of
business. When so issued, the Conversion Shares and the Warrant Shares will
be duly and validly issued, fully paid and nonassessable, and free of any
liens, encumbrances and preemptive or similar rights contained in the
Company's Certificate of Incorporation or Bylaws or, to our knowledge, in any
agreement to which the Company is party.
5. We have not been engaged to devote substantive attention to any
claims, actions, suits, proceedings or investigations that are pending against
the Company or its properties, or against any officer or director of the
Company in his or her capacity as such. To our knowledge, the Company is not
a party to or subject to the provisions of any order, writ, injunction,
judgment or decree of any court or government agency or instrumentality.
6. The authorized capital stock of the Company consists of 25,000,000
shares of Common Stock, $0.001 par value per share, of which 12,220,888 shares
were issued and outstanding at March 6, 2000, without giving effect to the
conversion of debentures outstanding or the exercise of options and warrants
outstanding as of that date. All of such issued and outstanding shares have
been duly authorized and are fully paid and non-assessable. No person has
rescission rights with respect to any shares of the Company's Common Stock.
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This opinion is furnished to the Investors solely for their benefit in
connection with the transactions described above and may not be relied upon by
any other person or for any other purpose without our prior written consent.
Very truly yours,
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EXHIBIT F
INSTRUCTIONS TO TRANSFER AGENT
FAMOUS FIXINS, INC.
_____________, 2000
Continental Stock Transfer & Trust Company
▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Dear Sirs:
Reference is made to the Convertible Debenture and Warrants Purchase
Agreement and all Exhibits thereto (the "Agreement") dated as of March 7, 2000
between the investors signatory thereto (the "Investors") and Famous Fixins,
Inc. (the "Company"). Pursuant to the Agreement, and subject to the terms and
conditions set forth in the Agreement, the Company has issued to the Investors
(i) $1,000,000 principal amount of Convertible Debentures (the "Debentures")
and (ii) Warrants to purchase 2,500,000 shares of Common Stock (the
"Warrants"). As a condition to the effectiveness of the Agreement, the
Company has agreed to issue to you, as the transfer agent for the Common Stock
(the "Transfer Agent"), these instructions relating to the Common Stock to be
issued to the Investors (or a permitted assignee) pursuant to the Agreement
upon conversion of the Debentures or upon exercise of the Warrants. All
capitalized terms used herein and not otherwise defined shall have the meaning
set forth in the Agreement.
1. ISSUANCE OF COMMON STOCK WITHOUT THE LEGEND
Pursuant to the Agreement and the Registration Rights Agreement,
the Company is required to prepare and file with the Commission, and maintain
the effectiveness of, a registration statement or registration statements
registering the resale of the Common Stock to be acquired by the Investors (i)
upon exercise of the Warrants and (ii) upon conversion of, or as payment of
interest on, the Debentures, all as provided in the Registration Rights
Agreement. The Company will advise the Transfer Agent in writing of the
effectiveness of any such registration statement promptly upon its being
declared effective, and shall deliver an opinion of its counsel to that
effect. The Transfer Agent shall be entitled to rely on such advice and such
opinion and shall assume that such registration statement remains in effect
unless the Transfer Agent is otherwise advised in writing by the Company or
such counsel, and the Transfer Agent shall not be required to independently
confirm the continued effectiveness of such registration statement. In the
circumstances set forth in the following three paragraphs, the Transfer Agent
shall deliver to the appropriate Investor certificates representing Common
Stock not bearing the Legend without requiring further advice or instruction
or additional documentation from the Company or its counsel or the Investor or
its counsel or any other party (other than as described in such paragraphs).
(a) At any time after the effective date of the registration
statement (provided that the Company has not informed the Transfer Agent in
writing that such registration statement is not effective) upon any surrender
of one or more certificates evidencing Common Stock which bear the Legend, to
the extent accompanied by a notice requesting the issuance of new certificates
free of the Legend to replace those surrendered, in such names and in such
denominations as the Investor may request, provided that in connection with
any such event, the Investor (or its permitted assignee) shall confirm in
writing to the Transfer Agent that (i) the Investor has sold, pledged or
otherwise transferred or agreed to sell, pledge or otherwise transfer such
Common Stock in a bona fide transaction to a third party that is not an
affiliate of the Company; and (ii) the Investor confirms to the transfer agent
that the Investor has complied with the prospectus delivery requirement.
(b) In the event a registration statement is not filed by the
Company, or for any reason the registration statement which is filed by the
Company is not declared effective by the Securities and Exchange Commission,
the Investor, or its permitted assignee, or its broker confirms to the
Transfer Agent that (i) the Investor has beneficially owned the shares of
Common Stock for at least one year, (ii) counting the shares surrendered as
being sold upon the date the unlegended Certificates would be delivered to the
Investor (or the Trading Day immediately following if such date is not a
Trading Day), the Investor will not have sold more than the greater of (a) one
percent (1%) of the total number of outstanding shares of Common Stock or (b)
the average weekly trading volume of the Common Stock for the preceding four
weeks during the three months ending upon such delivery date (or the Trading
Day immediately following if such date is not a Trading Day), and (iii) the
Investor has complied with the manner of sale and notice requirements of Rule
144 under the Securities Act; or
(c) The Investor (or its permitted assignee) shall represent that
it is permitted to dispose of such shares of Common Stock without limitation
as to amount or manner of sale pursuant to Rule 144(k) under the Securities
Act.
In the case of subparagraphs (b) or (c), the Transfer Agent shall be
entitled to require an opinion of counsel to the Company or from counsel to
the Investor (which opinion shall be from an attorney or law firm reasonably
acceptable to the Transfer Agent and be in form and substance reasonably
acceptable to the Transfer Agent). Any advice, notice, or instructions to the
Transfer Agent required or permitted to be given hereunder may be transmitted
via facsimile to the Transfer Agent's facsimile number of ▇▇▇-▇▇▇-▇▇▇▇.
2. MECHANICS OF DELIVERY OF CERTIFICATES REPRESENTING COMMON STOCK
In connection with any conversion of the Debentures or exercise of
Warrants pursuant to which the Investor acquires Common Stock under the
Agreement, the Transfer Agent is hereby instructed to deliver to the Investor,
certificates representing Common Stock (with or without the Legend, as
appropriate) within two (2) Trading Days of receipt by the Transfer Agent of a
copy of the Notice of Conversion (in the case of the Debentures) or Notice of
Exercise (in the case of the Warrant) from the Investor, and to deliver such
certificates to the Investor, in the case of original issuance, and in the
case of subsequent transfer, if the Transfer Agent is able to deliver such
Common Stock to the Investor's account pursuant to the DWAC system of the
Depository Trust Company, the Transfer Agent shall make delivery pursuant to
such system and provide the Investor with confirmation thereof in lieu of such
Common Stock certificates.
3. FEES OF TRANSFER AGENT; INDEMNIFICATION
The Company agrees to pay the Transfer Agent for all fees incurred
in connection with these Irrevocable Instructions. The Company agrees to
indemnify the Transfer Agent and its officers, employees and agents, against
any losses, claims, damages or liabilities, joint or several, to which it or
they become subject based upon the performance by the Transfer Agent of its
duties in accordance with the Irrevocable Instructions, other than as a result
of the Transfer Agent's gross negligence or willful misconduct.
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4. THIRD PARTY BENEFICIARY
The Company and the Transfer Agent acknowledge and agree that the
Investors are each an express third party beneficiary of these Irrevocable
Instructions and shall be entitled to rely upon, and enforce, the provisions
thereof.
Famous Fixins, Inc.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
-----------------------
▇▇▇▇▇ ▇▇▇▇▇, President
AGREED:
By:__________________________
Name:
Title:
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