EXHIBIT 4.4
CONVERTIBLE DEBENTURE AND WARRANTS PURCHASE AGREEMENT
Between
Famous Fixins, Inc.
and
the Investors Signatory Hereto
CONVERTIBLE DEBENTURE AND WARRANTS PURCHASE AGREEMENT dated as of
October 19, 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) $400,000
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 each 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
each 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 and any shares of
Common Stock issued as interest upon the Convertible Debenture, or if the
Convertible Debentures shall be exchanged for Convertible Preferred Stock,
the shares of Common Stock issuable upon conversion of such Convertible
Preferred Stock..
Section 1.7. "Convertible Debenture(s)" shall mean the $150,000 principal
amount of 5% Convertible Debentures due October 19, 2002, in the form of
Exhibit A hereto. In the event that the Company shall exercise its option to
cause the exchange of the Convertible Debentures for Convertible Preferred
Stock as set forth in the form of Convertible Debenture, then from and after
the date of such exchange, the term "Convertible Debenture" shall apply to
such shares of Convertible Preferred Stock.
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. "Market Price" on any given date shall mean the average of the
five lowest closing bid prices on the Principal Market (as reported by
Bloomberg L.P.) of the Common Stock on any five Trading Days during the
twenty (20) Trading Day period ending on the Trading Day immediately prior to
the date for which the Market Price is to be determined.
Section 1.15. "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
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Rights Agreement, the Escrow Agreement, the Certificate of Designations or
the Warrants in any material respect.
Section 1.16. "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 1.17. "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.
Section 1.18. "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 1.19. "Purchase Price" shall mean the principal amount of the
Convertible Debenture.
Section 1.20. "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 1.21. "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 first Closing Date in the form annexed hereto as Exhibit C.
Section 1.22. "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 1.23. "Regulation D" shall have the meaning set forth in the recitals
of this Agreement.
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Section 1.24. "SEC" shall mean the Securities and Exchange Commission.
Section 1.25. "SEC Documents" means the Company's Form 10-SB as filed on
September 1, 1999.
Section 1.26. "Section 4(2)" and "Section 4(6)" shall have the meanings set
forth in the recitals of this Agreement.
Section 1.27. "Securities Act" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.28. "Shares" shall have the meaning set forth in Section 1.16.
Section 1.29. "Trading Day" shall mean any day during which the Principal
Market shall be open for business.
Section 1.30. "Warrants" shall mean the Warrants substantially in the form of
Exhibit B to be issued to the Investors hereunder.
Section 1.31. "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 $400,000 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 $300,000 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
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brokerage commissions have been paid as set forth in the Escrow Agreement),
pursuant to the terms of the Escrow Agreement.
(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.
(c) A second Closing shall be held within five (5) Trading days of
the Effective Date at which the Investors shall purchase their pro-rata share
of a further $100,000 principal amount of Convertible Debentures. The second
Closing shall be subject to the satisfaction or waiver by the party to be
benefited thereby of the conditions set forth in Section 2.1(b)(ii) through
(vii), and
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there shall have been no Material Adverse Effect with respect to the Company
since the date of the first Closing. No additional Warrant certificates
shall be deliverable at the Second Closing.
Section 2.2. Warrants. The aggregate number of Warrants to be issued at the
first Closing shall be determined by dividing ten percent (10%) of the total
$400,000 principal amount of the Convertible Debentures to be issued pursuant
to this Agreement by the Market Price of the Common Stock on the Closing
Date. The initial exercise price of the Warrants shall be 125% of the Market
Price on the Closing Date.
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.
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.
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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.
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.
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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, except for its
right of redemption of the Convertible Debentures if the Common Stock trades
below $0.20 per share, 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 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. Sec.
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. Sec. 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. Sec. 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 10,462,624 shares are issued and outstanding as of August 30, 1999.
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 filed a Form 10-SB to register its
Common Stock pursuant to Section 12(g) of the Exchange Act which, subject to
the Company's response to the comment letters received from the SEC staff
with respect thereto, complies with all requirements
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of such Form, and the Company believes it 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, except that, if the Form 10-SB is not
effective and all SEC staff comments cleared on or before November 1, 1999,
the Company can make no representation as to the effect thereof on the
listing or quotation of its Common Stock on the OTCBB, which may be affected
thereby.
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 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
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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 and payment of interest upon 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 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 June 30, 1999, no Material
Adverse Effect has occurred or exists with respect to the Company. No
material supplier has given notice, oral
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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 June 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 the next amendment to the Form 10-SB.
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 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
11
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 Sec. 7121 of
the Internal Revenue Code or any predecessor provision 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 Sec. 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 Sec. 897(c)(2) of the Internal Revenue Code during the
applicable period specified in Sec. 897(c)(1)(A)(ii) of the Internal Revenue
Code.
(c) The Company has not made an election under Sec. 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. Sec.
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 Sec. 280G of the Internal Revenue Code.
12
(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. 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
13
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 5%
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-K that
will not be disclosed in the next amendment to the Form 10-SB.
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:
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. The Investor's sales of Conversion
Shares in any given calendar week (Monday through Friday) shall not exceed
such Investor's proportionate share of fifteen percent (15%) of the total
weekly volume for the Common Stock as reported by Bloomberg, LP, for the
previous calendar week (which volume calculation shall exclude any sales by
the Investor). "Proportionate share" shall mean the percentage found by
dividing the Investor's Purchase Price as shown on the signature pages hereto
by the total offering of $400,000.
14
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, including pursuing the clearance of all SEC staff comments on its
Form 10-SB, and causing its market maker to file a new or revised Form 211 if
necessary, 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 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 use its best
efforts to cause its Common Stock to become 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, including
responding to all SEC staff comments with respect to its Form 10-SB, 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.
15
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.
Section 6.9. Limitation on Future Financing. The Company agrees that it will
not enter into any sale of its securities or any Capital Shares Equivalents
at a discount to the then-current bid price until 180 days after the
effective date of the Registration Statement, except for any sales (i)
pursuant to the exercise of options granted or to be granted under an
employee benefit plan, (ii) pursuant to any compensatory plan for a full-time
employee or key consultant, (iii) in connection with a strategic partnership
or other business transaction, the principal purpose of which is not simply
to raise money, or (iv) pursuant to an equity line of credit in an amount not
to exceed $2,000,000.
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 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
16
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 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 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.
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,
17
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
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
18
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"):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
19
"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 corporation law of the company's state of
incorporation, in which event the corporation law of such
20
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 non-prevailing party
to any arbitration (as determined by the Board of Arbitration) shall pay the
expenses of the prevailing party, including reasonable attorney's fees, in
connection with such arbitration. Any party shall be entitled to obtain
injunctive relief from a court in any case where such relief is available.
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 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
21
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.
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
22
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
agrees 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 First Atlanta Securities, LLC, 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 rendered on behalf of the
indemnifying party in connection with this Agreement or the transactions
contemplated hereby.
23
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.
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/ ▇▇▇▇▇ ▇▇▇▇▇
--------------------------------
AMRO International, S.A.
By: /s/ ▇. ▇. ▇▇▇▇▇▇▇▇
--------------------------------
▇. ▇. ▇▇▇▇▇▇▇▇, Director
Principal Amount subscribed for: $300,000 at
first Closing and $100,000 at second Closing
Address for notices:
c/o Ultra Finanz AG
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇
▇▇▇▇▇▇, ▇▇-▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇-▇▇▇▇
24
SCHEDULE 4.3
Subsequent to August 30, 1999, the Company entered into agreements to issue:
53,191 shares of common stock; warrants to purchase 375,000 shares of common
stock exercisable for five years and expiring in August and September 2004, of
which 50,000 warrants are presently exercisable at $.20 per share, 225,000
warrants are presently exercisable at $.25 per share, and 100,000 warrants
may be exercised at $1.00 at any time after the first date after which the
bid price per one share of common stock quoted on any securities exchange or
any NASDAQ system has exceeded $1.00. The Company may be obligated to issue
additional warrants to purchase 30,000 shares of common stock in August 2000,
which, if issued, would be exercisable for five years at fifty percent of the
30 day average price of the common stock immediately preceding such issuance,
and additional warrants to purchase 55,000 shares of common stock in September
2000, which, if issued, would be exercisable for five years at $.25 per share.
The common stock underlying the warrants are to be included in the Company's
next registration statement.
5% 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 $300,000
Famous Fixins, Inc.
5% CONVERTIBLE DEBENTURE DUE OCTOBER 30, 2002
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 5% Convertible Debenture Due October 30,
2002.
FOR VALUE RECEIVED, the Company promises to pay to AMRO International,
S.A, or permitted assigns (the "Holder"), the principal sum of Three Hundred
Thousand and 00/100 (US $300,000) Dollars on October 30, 2002 (the
"Maturity Date") and to pay interest on the principal sum outstanding from
time to time quarterly in arrears at the rate of 5% per annum accruing from
the date of initial issuance. Accrual of interest shall commence on the
first business day to occur after the date of initial issuance and continue
until payment in full of the principal sum has been made or duly provided
for. Quarterly interest payments shall be due and payable on September 30,
December 31, March 31 and June 30 of each year, commencing with December 31,
1999. If any interest payment date or the Maturity Date is not a business
day in the State of New York, then such payment shall be made on the next
succeeding business day. The interest on this Debenture is payable at the
option of the Company, in cash or in registered shares of Common Stock of the
Company, $0.001 par value per share ("Common Stock") valued at the Conversion
Price (as defined herein) on the interest payment date, at the address last
appearing on the Debenture Register of the Company as designated in writing
by the Holder from time to time. The Company will pay the principal of and
any accrued but unpaid interest due upon 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 and interest
hereunder and shall satisfy and discharge the liability for principal and
interest 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. The Company shall be entitled to withhold from all payments of
principal of, and interest on, this Debenture any amounts required to be
withheld under the applicable provisions of the United States income tax laws
or other applicable laws at the time of such payments, and Holder shall
execute and deliver all required documentation in connection therewith.
2. 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 October 19, 1999 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.
3. 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, together with accrued but unpaid
interest, into shares of Common Stock of the Company ("Conversion Shares") at
a conversion price for each share of Common Stock ("Conversion Price") equal
to the lower of (a) 80% of the Market Price at the Conversion Date (as
defined in Section 5 hereof) or (b) $0.55. The term "Market Price" shall
have the meaning set forth in the Purchase Agreement.
4. In the event that the Conversion Price of the Common Stock is
less than $0.20 per share on any Conversion Date, the Company may elect to
redeem this debenture in its entirety or to deliver to the Holder in
consideration of any such conversion cash, Conversion Shares or any
combination thereof. The amount of cash to be delivered upon such redemption
or conversion shall equal the closing ask price on the Conversion Date (or
the date the Company gives notice of redemption (the "Redemption Date"))
multiplied by the number of shares of Common Stock as would have been issued
at the Conversion Price upon such conversion, or if the Company elects to
redeem this Debenture, as would have been issued if this Debenture had been
converted in its entirety on the Redemption Date. The Company's ability to
deliver cash as full or partial conversion consideration in accordance with
this Section 4 upon a voluntary conversion by the Holder shall be conditioned
on the Company's delivery of notice to the Holder of such election by the
Company either prior to the Company's receipt of a Notice of Conversion or
else no later than two business hours following the Company's receipt of a
Notice of Conversion. The Holder shall then have a further twenty-four (24)
hour period in which to withdraw his Notice of Conversion, or else the Holder
shall be deemed to have accepted such alternative cash consideration.
2
5. (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. Interest accrued or
accruing from the date of issuance to the date of conversion shall, at the
option of the Company, be paid in cash as set forth above or in Common Stock
upon conversion at the Conversion Price on the Conversion Date. 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 5(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
3
The Company shall pay any payments incurred under this Section 5(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 5 or (b) any 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 and all
accrued and unpaid interest hereon. 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. Sec. 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. Sec. 362 in respect of the
Holder's conversion privilege.
6. No provision of this Debenture shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the
principal of, and interest on, this Debenture at the time, place, and rate,
and in the coin or currency or shares of Common Stock, herein prescribed.
This Debenture is a direct obligation of the Company.
4
7. 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.
8. 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.
9. 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.
10. The following shall constitute an "Event of Default":
a. The Company shall default in the payment of principal or
interest 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 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
5
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, except if such suspension is a result of the Company not having cleared
SEC staff comments on its Form 10-SB prior to December 1, 1999;
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.
11. 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.
6
12. At any time after the Company's Common Stock is registered under
Section 12 of the Securities Exchange Act of 1934, 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 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 12. 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 12 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 12. The provisions of this
Section 12 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 12
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 12 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.
13. The Company shall have the right to cause Holder to exchange this
Debenture for shares of the Company's Convertible Preferred Stock upon the
following terms and conditions:
(a) The Convertible Preferred Stock to be issued shall
have been duly authorized by the Company's Board of Directors and
stockholders, and the exchange of such shares for this Debenture shall have
been duly authorized by the Company's Board of Directors, and the holder
shall have received an opinion of counsel to the Company to such effect.
(b) The Convertible Preferred Stock shall have economic
rights identical with that of this Debenture (e.g. the dividend rate and
times of accrual and payment shall be identical to the interest under this
Debenture, the conversion rights and Conversion Price shall be identical to
this Debenture, the liquidation preference shall be equal to the principal
amount of this Debenture) other than priority with creditors of the Company
upon liquidation or dissolution of the Company.
(c) The Registration Statement shall have been declared
effective and shall remain effective following the date of such exchange.
(d) There shall be no Event of Default in existence under
this Debenture.
7
(e) There shall have been no Material Adverse Effect with
respect to the Company since the issuance date of this Debenture.
If all of the foregoing conditions have been met, then the Company
shall have the right, by written notice to the Holder, accompanied by the
opinion of counsel and a certified copy of the amended Certificate of
Incorporation for the Convertible Preferred Stock, to demand that the Holder
tender this Debenture to the Escrow Agent to be held in escrow against
delivery to the Escrow Agent of the certificates representing the Convertible
Preferred Stock (which shall have a liquidation preference equal to the
outstanding principal balance hereof plus all accrued but unpaid interest).
The Escrow Agent shall then deliver such Convertible Preferred Stock
certificates to the Holder and shall deliver this Debenture to the Company.
The Holder shall be entitled to convert all or any part of this Debenture
prior to receipt by the Escrow Agent of such Convertible Preferred Stock
certificates.
IN WITNESS WHEREOF, the Company has caused this Convertible
Debenture to be duly executed by an officer thereunto duly authorized.
Dated: October 19, 1999
Closed + funded Oct. 28, 1999
▇▇▇, escrow agent
Famous Fixins, Inc.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
------------------------------
▇▇▇▇▇ ▇▇▇▇▇, President
Attest:
_______________________
8
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. ___ 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.
9
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 101,202 Shares of Common Stock of
Famous Fixins, Inc.
THIS CERTIFIES that, for value received, AMRO International, S.A.
(the "Holder"), is entitled, upon the terms and subject to the conditions
hereinafter set forth, at any time on or after October 30, 1999 (the "Initial
Exercise Date") and on or prior to the close of business on October 30, 2004
(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 Hundred One Thousand Two Hundred Two (101,202) 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 $$0.494 (125% of the Market
Price on the Closing Date). 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 October
19, 1999 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 Section 4
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. 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.
6. Closing of Books. The Company will not close its
shareholder books or records in any manner which prevents the timely exercise
of this Warrant.
7. 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 7(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.
3
(c) The Company shall prepare, issue and deliver at
its own expense (other than transfer taxes) the new Warrant or Warrants under
this Section 7.
(d) The Company agrees to maintain, at its aforesaid
office, books for the registration and the registration of transfer of the
Warrants.
8. 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.
9. 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.
10. 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.
11. 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
4
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 convertible 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 11 shall similarly apply to successive
reorganizations, reclassifications, mergers, consolidations or disposition of
assets.
12. 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.
13. 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
5
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.
14. 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 16(d).
6
15. 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.
16. 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
7
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 or
9
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.
10
(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: October 28, 1999
Famous Fixins, Inc.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
----------------------------
▇▇▇▇▇ ▇▇▇▇▇, President
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 October 19, 1999,
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"), $550,000 principal amount of Convertible
Debentures and Warrants to purchase 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 and First
Atlanta Securities LLC the registration rights set forth herein with respect
to the Conversion Shares of Common Stock issuable upon conversion of or as
interest upon the Convertible Debenture purchased pursuant to the Purchase
Agreement (or any convertible preferred stock issued in exchange therefor)
and shares of Common Stock issuable upon exercise of the Warrants issued to
the Investors and the similar Warrants issued to First Atlanta Securities LLC
(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) pursue to effectiveness its registration statement on
Form 10-SB, File No. 0-27219;
(b) comply with the provisions of paragraph (c)(1) of Rule
144 following the filing of the Registration Statement; and
(c) from and after the effective date of the Form 10-SB,
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 ten (10)
Trading Days after the date on which the staff of the Commission advises the
Company that the staff has no further comments on the Form 10-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
February 1, 2000. The number of shares designated in the Registration
Statement to be registered shall include all the Warrant Shares, at least
200% of the shares issuable upon conversion of the Convertible Debenture
assuming the Conversion Price were based upon the Market Price at the time of
filing, and such number of shares as the Company deems prudent for the
purpose of issuing shares of Common Stock as dividends on the Convertible
Debenture, 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
Trading Day of such event. In the event that the number of shares so
registered shall prove to be insufficient to register the resale of all of
the Securities, then the Company shall be obligated to file, within thirty
(30) days of notice from any Investor, a further Registration Statement
registering such remaining shares and shall use diligent best efforts to
prosecute such additional Registration Statement to effectiveness within
ninety (90) days of the date of such notice.
(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
2
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 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 required filing date or five
(5) days of clearance by the Commission to request effectiveness, but in no
event later than February 1, 2000, (iii) such Registration Statement is not
maintained as effective by the Company for the period set forth in Section
3(b) above or (iv) the additional Registration Statement referred to in
Section 3(a) is not filed within thirty (30) days or declared effective
within ninety (90) days as set forth therein (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
3
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. As an alternative to paying liquidated damages,
the Company may repurchase the Convertible Debentures for one hundred forty
percent (140%) of their face amount if the Registration Statement is not
effective on or before February 1, 2000 by payment on or before February 15,
2000.
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.
(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
4
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:
(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;
5
(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;
(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
6
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 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.
(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
7
(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.
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.
8
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 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.
9
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
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 non-prevailing party to any
arbitration (as determined by the Board of Arbitration) shall pay the
expenses of the prevailing party, including reasonable attorneys' fees, in
connection with such arbitration. Any party shall be entitled to obtain
injunctive relief from a court in any case where such relief is available.
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
AMRO International, S.A.
By: /s/▇.▇. ▇▇▇▇▇▇▇▇
-------------------------------------
▇. ▇. ▇▇▇▇▇▇▇▇, Director
EXHIBIT D
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is made as of October
19, 1999, 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
$550,000 principal amount of 5% Convertible Debentures (the "Convertible
Preferred Stock") and Warrants to purchase 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 first Closing
and for the purchase of the Convertible Debentures at the second Closing as
contemplated by the Purchase Agreement.
1.2. (a) At the first 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
1
Chase Manhattan Bank
▇▇▇▇ ▇▇▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
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;
(iv) an original counterpart of this Escrow Agreement; and
(v) A Warrant to purchase 50,000 shares of Common Stock at
$1.00 per share registered to First Atlanta Securities
LLC.
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 Exercise Price and
Commencement Date and Termination Date of each Warrant on the face of each
Warrant, insert the first 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 ten percent (10%) of the Purchase
Price as directed by First Atlanta Securities LLC as payment of their
transaction fee.
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, to
deliver the First Atlanta Warrant to First Atlanta, and to deliver the
Instructions to Transfer Agent to the Transfer Agent.
1.5. At the second Closing as to AMRO International, upon
Escrow Agent's receipt of the Purchase Price for the Closing into its
attorney trustee account from the Investors, 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.
1.6. The Company, upon receipt of said notice, shall deliver
to the Escrow Agent the certificates representing the Convertible Debentures
to be issued to each Investor at the second Closing.
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.
2
1.7. At the second Closing, once Escrow Agent confirms the
validity of the issuance of the Convertible Debentures 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 the second 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
per the written instructions of the Company net of ten percent (10%) of the
Purchase Price as directed by First Atlanta Securities LLC as payment of
their transaction fee.
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 delivered as per instructions from the Investors.
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.
2.4. 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
3
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 AMRO International, S.A., one of 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.
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.
4
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
------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇, President
AMRO International, S.A.
By: /s/ ▇.▇. ▇▇▇▇▇▇▇▇
------------------------------------------
▇. ▇. ▇▇▇▇▇▇▇▇, Director
Austost Anstalt ▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇, Authorized Signatory
Balmore Funds, S.A.
By: /s/ Francois Morax
------------------------------------------
Francois Morax, Authorized Signatory
ESCROW AGENT:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & GREEN, P.C.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Authorized Signatory
5
Exhibit X to
Escrow Agreement
RELEASE NOTICE
The UNDERSIGNED, pursuant to the Escrow Agreement, dated as of
October 19, 1999 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 October, 1999.
Famous Fixins, Inc.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇, President
INVESTOR:
By: /s/ ▇. ▇. ▇▇▇▇▇▇▇▇
------------------------------------------
Name: Bachofen H. U.
Title: Director
6
EXHIBIT E
FORM OF OPINION LETTER
October 19, 1999
AMRO International, S.A.
Attn.: ▇. ▇. ▇▇▇▇▇▇▇▇, Director
c/o Ultra Finanz AG
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇
▇▇▇▇▇▇, ▇▇-▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇
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 Convertible Debenture
and Warrants Purchase Agreement, dated as of October 19, 1999 (the "Purchase
Agreement"), by and between the investors signatory thereto and Famous
Fixins, Inc., a New York corporation (the "Company"), which provides for the
issuance and sale by the Company of (i) $400,000 principal amount of
Convertible Debentures and (ii) warrants to purchase shares of Common Stock
of the Company as set forth in Section 2.2 of the Purchase Agreement (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 October 19, 1999 (the "Registration Rights
Agreement"), and the Escrow Agreement between the Investors, the Company and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Green, P.C., dated as of October 19, 1999 (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 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
10,462,624 shares were issued and outstanding at August 30, 1999, without
giving effect to 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.
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,
Law Offices of ▇▇▇ ▇▇▇▇▇▇▇
Cc: Famous Fixins, Inc.
▇▇▇▇▇ ▇▇▇▇▇, President
EXHIBIT F
INSTRUCTIONS TO TRANSFER AGENT
FAMOUS FIXINS, INC.
October 26, 1999
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
October 19, 1999 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) $450,000 principal amount of 5% Convertible
Debentures (the "Debentures") and (ii) Warrants to purchase [ ] 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.
2
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:
3