EXHIBIT 10.2
[FORM OF
COMMON STOCK PURCHASE AGREEMENT]
This COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of
October __, 2000 by and between Famous Fixins, Inc., a New York
corporation (the "Company"), and Folkinburg Investments Limited (the
"Purchaser").
The parties hereto agree as follows:
Article I
DEFINITIONS
Section 1.1. Certain Definitions.
(a) "Average Daily Price" shall be the price based on the VWAP of the Company on
the Principal Market.
(b) "Draw Down" shall have the meaning assigned to such term in Section 6.1(a)
hereof.
(c) "Draw Down Pricing Period" shall mean a period of twenty-two (22)
consecutive Trading Days beginning on the date specified in the Draw Down Notice
(as defined in Section 6.1(e) hereof); provided, however, the Draw Down Pricing
Period shall not begin before the day on which such notice is tendered to the
Purchaser.
(d) "Effective Date" shall mean the date the Registration Statement of the
Company covering the Shares being subscribed for hereby is declared effective.
(e) "Investment Amount" shall have the meaning assigned to such term in Section
6.1(e) hereof.
(f) "Material Adverse Effect" shall mean any adverse 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 materially interfere with the ability of the Company to perform any
of its material obligations under this Agreement or the Registration Rights
Agreement or to perform its obligations under any other material agreement.
"Principal Market" shall mean initially the OTC Bulletin Board and
shall include the American Stock Exchange, Nasdaq National Market, the New York
Stock Exchange or the Nasdaq SmallCap Market if the Company is listed and trades
on such market or exchange.
(g) "Purchase Price" shall mean with respect to Shares purchased during each
applicable Settlement Period (excluding Shares issued upon the exercise of
Warrants) eighty-two and one half percent (82.5%) (the "Purchase Price
Percentage") of the Average Daily Price on the date in question.
(h) "Registration Statement" shall mean the registration statement under the
Securities Act of 1933, as amended, to be filed with the Securities and Exchange
Commission for the registration of the Shares pursuant to the Registration
Rights Agreement attached hereto as Exhibit A (the "Registration Rights
Agreement).
(i) "SEC Documents" shall mean the Company's latest Form 10-K or 10-KSB as of
the time in question, all Forms 10-Q or 10-QSB and 8-K filed thereafter, and the
Proxy Statement for its latest fiscal year as of the time in question until such
time as the Company no longer has an obligation to maintain the effectiveness of
a Registration Statement as set forth in the Registration Rights Agreement.
(j) "Settlement Period" shall have the meaning assigned to such term in Section
6.1(b).
(k) "Shares" shall mean, collectively, the shares of Common Stock of the Company
being subscribed for hereunder and those shares of Common Stock issuable to the
Purchaser upon exercise of the Warrants.
(l) "Threshold Price" is the lowest Average Daily Price during any Draw Down
Pricing Period at which the Company will sell its Common Stock with respect to
this Agreement.
(m) "Trading Day" shall mean any day on which the Principal Market is open for
business.
(n) "VWAP" shall mean the daily volume weighted average price of the Company's
Common Stock on the Principal Market as reported by Bloomberg Financial L.P.
(based on a trading day from 9:30 am EST to 4:00 pm EST) using the VAP function.
(o) "Warrants" shall mean both the Initial Warrant and Unit Warrants as that
term is defined in Section 5.2(f) hereof.
Article II
PURCHASE AND SALE OF COMMON STOCK
Section 2.1. Purchase and Sale of Stock. Subject to the terms and conditions of
this Agreement, the Company may issue and sell to the Purchaser and the
Purchaser shall purchase from the Company up to five million dollars
($5,000,000) of the Company's Common Stock (the "Commitment Amount"), $0.001 par
value per share (the "Common Stock"), and the Warrants, based on Draw Downs of
up to Five Million Dollars ($5,000,000.00) per Draw Down.
Section 2.2. The Shares. The Company has authorized and has reserved and
covenants to continue to reserve, free of preemptive rights and other similar
contractual rights of stockholders, a sufficient number of its authorized but
unissued shares of its Common Stock to cover the Shares to be issued in
connection with all Draw Downs requested under this Agreement. Anything in this
Agreement to the contrary notwithstanding, the Company may not make a Draw Down
to the extent that, after such purchase by the Purchaser, the sum of the number
of shares of Common Stock beneficially owned by the Purchaser and its affiliates
would result in beneficial ownership by the Purchaser and its affiliates of more
than 9.9% of the then outstanding shares of Common Stock. For purposes of the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities and Exchange Act of 1934, as
amended (the "Exchange Act").
Section 2.3. Purchase Price and Initial Closing. The Company agrees to issue and
sell to the Purchaser and, in consideration of and in express reliance upon the
representations, warranties, covenants, terms and conditions of this Agreement,
the Purchaser agrees to purchase that number of the Shares to be issued in
connection with each Draw Down. The delivery of executed documents under this
Agreement and the other agreements referred to herein and the payment of the
fees set forth in Article II of the Escrow Agreement, attached as Exhibit B
hereto, (the "Initial Closing") shall take place at the offices of ▇▇▇▇▇▇▇
▇▇▇▇▇▇ & Green, P.C., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ within fifteen
(15) days from the date hereof, or (ii) such other time and place or on such
date as the Purchaser and the Company may agree upon (the "Initial Closing
Date"). Each party shall deliver all documents, instruments and writings
required to be delivered by such party pursuant to this Agreement at or prior to
the Initial Closing.
Article III
REPRESENTATIONS AND WARRANTIES
Section 3.1. Representation and Warranties of the Company. The Company hereby
makes the following representations and warranties to the Purchaser:
(a) Organization, Good Standing and Power. The Company is a corporation duly
incorporated validly existing and in good standing under the laws of the State
of New York and has all requisite corporate authority to own, lease and operate
its properties and assets and to carry on its business as now being conducted.
The Company does not have any subsidiaries and does not own more than fifty
percent (50%) of or control any other business entity except as set forth in the
SEC Documents. The Company is duly qualified to do business and is in good
standing as a foreign corporation 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 on the Company's financial condition.
(b) Authorization, Enforcement. (i) The Company has the requisite corporate
power and corporate authority to enter into and perform its obligations under
this Agreement, the Registration Rights Agreement, the Escrow Agreement and to
issue the Draw Down Shares pursuant to their respective terms, (ii) the
execution, issuance and delivery of this Agreement, the Registration Rights
Agreement and the Escrow Agreement by the Company and the consummation by it of
the transactions contemplated hereby and 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, and (iii) this
Agreement, the Registration Rights Agreement and the Escrow Agreement have been
duly executed and delivered by the Company and at the Initial 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, reorganization, moratorium,
liquidation, conservatorship, receivership 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 will have duly
and validly authorized and reserved for issuance shares of Common Stock
sufficient in number for the issuance of the Draw Down Shares prior to the
Effective Date.
(c) Capitalization. The authorized capital stock of the Company consists of
25,000,000 shares of Common Stock of which 13,866,264 shares are issued and no
shares of preferred stock. All of the outstanding shares of the Company's Common
Stock have been duly and validly authorized and are fully-paid and
non-assessable, except as set forth in the SEC Documents. Except as set forth in
this Agreement and the Registration Rights Agreement and as set forth in the SEC
Documents, or on Schedule 3.1(c) hereto, no shares of Common Stock are entitled
to preemptive rights or registration rights and there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company. Furthermore, except as set forth in this
Agreement and as set forth in the SEC Documents or on Schedule 3.1(c), there are
no contracts, commitments, understandings, or arrangements by which the Company
is or may become bound to issue additional shares of the capital stock of the
Company or options, securities or rights convertible into shares of capital
stock of the Company. Except as set forth in Schedule 3.1(c), the Company is not
a party to any agreement granting registration rights to any person with respect
to any of its equity or debt securities. Except as set forth in Schedule 3.1(c),
the Company is not a party to, and it has no knowledge of, any agreement
restricting the voting or transfer of any shares of the capital stock of the
Company. Except as set forth in the SEC Documents or on Schedule 3.1(c) hereto,
the offer and sale of all capital stock, convertible securities, rights,
warrants, or options of the Company issued prior to the Initial Closing complied
with all applicable federal and state securities laws, and no stockholder has a
right of rescission or damages with respect thereto which would have a Material
Adverse Effect on the Company's financial condition or operating results. The
Company has made available to the Purchaser true and correct copies of the
Company's Charter as in effect on the date hereof (the "Charter"), and the
Company's Bylaws as in effect on the date hereof (the "Bylaws"). The Company has
not received any notice from the Principal Market questioning or threatening the
continued inclusion of the Common Stock on such market.
(d) Issuance of Shares. The Shares to be issued under this Agreement have been
duly authorized by all necessary corporate action and, when paid for or issued
in accordance with the terms hereof, the Shares shall be validly issued and
outstanding, fully paid and non-assessable, and the Purchaser shall be entitled
to all rights accorded to a holder of Common Stock.
(e) No Conflicts. The execution, delivery and performance of this Agreement by
the Company and the consummation by the Company of the transactions contemplated
herein do not and will not (i) violate any provision of the Company's Charter or
Bylaws, (ii) conflict with, or constitute a default (or an event which 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
agreement, mortgage, deed of trust, indenture, note, bond, license, lease
agreement, instrument or obligation to which the Company is a party, (iii)
create or impose a lien, charge or encumbrance on any property of the Company
under any agreement or any commitment to which the Company is a party or by
which the Company is bound or by which any of its respective properties or
assets are bound, or (iv) result in a violation of any federal, state, local or
other foreign statute, rule, regulation, order, judgment or decree (including
any federal or state securities laws and regulations) applicable to the Company
or any of its subsidiaries or by which any property or asset of the Company or
any of its subsidiaries are bound or affected, except, in all cases, for such
conflicts, defaults, termination, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect. The business of the Company and its subsidiaries is not being
conducted in violation of any laws, ordinances or regulations of any
governmental entity, except for possible violations which singularly or in the
aggregate do not and will 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 Shares in
accordance with the terms hereof (other than any filings which may be required
to be made by the Company with the Securities and Exchange Commission (the
"SEC") or state securities administrators subsequent to the Initial Closing and
any registration statement which may be filed pursuant hereto); provided that,
for purpose of the representation made in this sentence, the Company is assuming
and relying upon the accuracy of the relevant representations and agreements of
the Purchaser herein.
(f) SEC Documents, Financial Statements. The Common Stock of the Company is
registered pursuant to Section 12(g) of the Exchange Act and, except as
disclosed in the SEC Documents, the Company has timely filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of the Exchange Act, including
material filed pursuant to Section 13(a) or 15(d) of the Exchange Act (all of
the foregoing including filings incorporated by reference therein being referred
to herein as the "SEC Documents"). The Company has delivered or made available
to the Purchaser true and complete copies of the SEC Documents filed with the
SEC since December 31, 1998. The Company has not provided to the Purchaser any
information which, according to applicable law, rule or regulation, should have
been disclosed publicly by the Company but which has not been so disclosed,
other than with respect to the transactions contemplated by this Agreement. As
of their respective filing dates, the SEC Documents complied in all material
respects with the requirements of the Exchange Act and the rules and regulations
of the SEC promulgated thereunder applicable to such documents, and, as of their
respective filing dates, none of the SEC Documents contained any untrue
statement of a material fact or omitted 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. The financial
statements of the Company included in the SEC Documents comply as to form 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. Such financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") 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 may not include footnotes or may be
condensed or summary statements), and fairly present in all material respects
the financial position of the Company and its subsidiaries as of the dates
thereof and the results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
(g) Subsidiaries. The SEC Documents set forth each subsidiary of the Company,
showing the jurisdiction of its incorporation or organization and showing the
percentage of each person's ownership of the outstanding stock or other
interests of such subsidiary. For the purposes of this Agreement, "subsidiary"
shall mean any corporation or other entity of which at least a majority of the
securities or other ownership interests having ordinary voting power (absolutely
or contingently) for the election of directors or other persons performing
similar functions are at the time owned directly or indirectly by the Company
and/or any of its other subsidiaries. All of the outstanding shares of capital
stock of each subsidiary have been duly authorized and validly issued, and are
fully paid and non-assessable. There are no outstanding preemptive, conversion
or other rights, options, warrants or agreements granted or issued by or binding
upon any subsidiary for the purchase or acquisition of any shares of capital
stock of any subsidiary or any other securities convertible into, exchangeable
for or evidencing the rights to subscribe for any shares of such capital stock.
Neither the Company nor any subsidiary is subject to any obligation (contingent
or otherwise) to repurchase or otherwise acquire or retire any shares of the
capital stock of any subsidiary or any convertible securities, rights, warrants
or options of the type described in the preceding sentence. Neither the Company
nor any subsidiary is a party to, nor has any knowledge of, any agreement
restricting the voting or transfer of any shares of the capital stock of any
subsidiary.
(h) No Material Adverse Effect. Since June 30, 2000 no Material Adverse Effect
has occurred or exists with respect to the Company, except as disclosed in the
SEC Documents or on Schedule 3.1(h) hereof.
(i) No Undisclosed Liabilities. Except as disclosed in the SEC Documents or on
Schedule 3.1(i) hereto, neither the Company nor any of its subsidiaries has any
liabilities, obligations, claims or losses (whether liquidated or unliquidated,
secured or unsecured, absolute, accrued, contingent or otherwise) that would be
required to be disclosed on a balance sheet of the Company or any subsidiary
(including the notes thereto) in conformity with GAAP which are not disclosed in
the SEC Documents, other than those incurred in the ordinary course of the
Company's or its subsidiaries' respective businesses since such date and which,
individually or in the aggregate, do not or would not have a Material Adverse
Effect on the Company or its subsidiaries.
(j) No Undisclosed Events or Circumstances. Since June 30, 2000, no event or
circumstance has occurred or exists with respect to the Company or its
businesses, properties, prospects, operations or financial condition, that,
under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed in the SEC Documents.
(k) Indebtedness. The SEC Documents set forth as of the date hereof all
outstanding secured and unsecured Indebtedness of the Company or any subsidiary,
or for which the Company or any subsidiary has commitments. For the purposes of
this Agreement, "Indebtedness" shall mean (A) any liabilities for borrowed money
or amounts owed in excess of $250,000 (other than trade accounts payable
incurred in the ordinary course of business), (B) all guaranties, endorsements
and contingent obligations in respect of Indebtedness of others, whether or not
the same are or should be reflected in the Company's balance sheet (or the notes
thereto), except guaranties by endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of business; and
(C) the present value of any lease payments in excess of $250,000 due under
leases required to be capitalized in accordance with GAAP. Neither the Company
nor any subsidiary is in default with respect to any Indebtedness.
(l) Title to Assets. Each of the Company and the subsidiaries has good and
marketable title to all of its real and personal property reflected in the SEC
Documents, free of any mortgages, pledges, charges, liens, security interests or
other encumbrances, except for those indicated in the SEC Documents or such that
do not cause a Material Adverse Effect on the Company's financial condition or
operating results. All said leases of the Company and each of its subsidiaries
are valid and subsisting and in full force and effect.
(m) Actions Pending. There is no action, suit, claim, investigation or
proceeding pending or, to the knowledge of the Company, threatened against the
Company or any subsidiary which questions the validity of this Agreement or the
transactions contemplated hereby or any action taken or to be taken pursuant
hereto or thereto. Except as set forth in the SEC Documents or on Schedule
3.1(m), there is no action, suit, claim, investigation or proceeding pending or,
to the knowledge of the Company, threatened, against or involving the Company,
any subsidiary or any of their respective properties or assets. There are no
outstanding orders, judgments, injunctions, awards or decrees of any court,
arbitrator or governmental or regulatory body against the Company or any
subsidiary.
(n) Compliance with Law. The business of the Company and the subsidiaries has
been and is presently being conducted in accordance with all applicable federal,
state and local governmental laws, rules, regulations and ordinances, except as
set forth in the SEC Documents or such that do not cause a Material Adverse
Effect. The Company and each of its subsidiaries have all franchises, permits,
licenses, consents and other governmental or regulatory authorizations and
approvals necessary for the conduct of their respective businesses as now being
conducted by them unless the failure to possess such franchises, permits,
licenses, consents and other governmental or regulatory authorizations and
approvals, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect.
(o) Taxes. 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, 1999, 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.
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 ss. 7121 of the Internal Revenue Code or any
predecessor provision thereof or any similar provision of state, local or
foreign law; and (B) has not agreed to or is required to make any adjustments
pursuant to ss. 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 ss. 897(c)(2) of the Internal Revenue Code
during the applicable period specified in ss. 897(c)(1)(A)(ii) of the Internal
Revenue Code.
The Company has not made an election under ss. 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. ss. 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
not obligated to make payments nor is it a party to an agreement that could
obligate it to make any payments that would not be deductible under ss. 280G of
the Internal Revenue Code.
For purposes of this Section 3.1(o):
"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. (p) Certain Fees. No brokers, finders or financial advisory fees or
commissions will be payable by the Company or any subsidiary with respect to the
transactions contemplated by this Agreement.
(q) Disclosure. To the best of the Company's knowledge, neither this Agreement
or the Schedules hereto nor any other documents, certificates or instruments
furnished to the Purchaser by or on behalf of the Company or any subsidiary in
connection with the transactions contemplated by this Agreement contain any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements made herein or therein, in the light of the
circumstances under which they were made herein or therein, not misleading.
(r) Operation of Business. The Company and each of the subsidiaries owns or
possesses all patents, trademarks, service marks, trade names, copyrights,
licenses and authorizations as set forth in the SEC Documents, and all rights
with respect to the foregoing, which are necessary for the conduct of its
business as now conducted without any conflict with the rights of others.
(s) Regulatory Compliance. The Company has all necessary licenses, registrations
and permits to conduct its business as now being conducted in all states where
the Company conducts its business.
(t) Books and Records. The records and documents of the Company and its
subsidiaries accurately reflect in all material respects the information
relating to the business of the Company and the subsidiaries, the location and
collection of their assets, and the nature of all transactions giving rise to
the obligations or accounts receivable of the Company or any subsidiary.
(u) Material Agreements. Except as set forth in the SEC Documents, neither the
Company nor any subsidiary is a party to any written or oral contract,
instrument, agreement, commitment, obligation, plan or arrangement, a copy of
which would be required to be filed with the SEC as an exhibit to a registration
statement on Form S-1 or other applicable form (collectively, "Material
Agreements") if the Company or any subsidiary were registering securities under
the Securities Act of 1933, as amended (the "Securities Act), the Company and
each of its subsidiaries has in all material respects performed all the
obligations required to be performed by them to date under the foregoing
agreements, have received no notice of default and, to the best of the Company's
knowledge are not in default under any Material Agreement now in effect, the
result of which could cause a Material Adverse Effect. No written or oral
contract, instrument, agreement, commitment, obligation, plan or arrangement of
the Company or of any subsidiary limits or shall limit the payment of dividends
on the Company's Common Stock.
(v) Transactions with Affiliates. Except as set forth in the SEC Documents or on
Schedule 3.1(v) hereto, there are no loans, leases, agreements, contracts,
royalty agreements, management contracts or arrangements or other continuing
transactions exceeding $100,000 between (A) the Company, any subsidiary or any
of their respective customers or suppliers on the one hand, and (B) on the other
hand, any officer, employee, consultant or director of the Company, or any of
its subsidiaries, or any person owning any capital stock of the Company or any
subsidiary or any member of the immediate family of such officer, employee,
consultant, director or stockholder or any corporation or other entity
controlled by such officer, employee, consultant, director or stockholder, or a
member of the immediate family of such officer, employee, consultant, director
or stockholder.
(w) Securities Laws. The Company has complied and will comply with all
applicable federal and state securities laws in connection with the offer,
issuance and sale of the Shares hereunder. Neither the Company nor anyone acting
on its behalf, directly or indirectly, has or will sell, offer to sell or
solicit offers to buy the Shares or similar securities to, or solicit offers
with respect thereto from, or enter into any preliminary conversations or
negotiations relating thereto with, any person (other than the Purchaser), so as
to bring the issuance and sale of the Shares and/or Warrants under the
registration provisions of the Securities Act and applicable state securities
laws. Neither the Company nor any of its affiliates, nor any person acting on
its or their behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D under the Securities Act) in
connection with the offer or sale of the Shares.
(x) Employees. Neither the Company nor any subsidiary has any collective
bargaining arrangements or agreements covering any of its employees, except as
set forth in the SEC Documents. Except as set forth in the SEC Documents,
neither the Company nor any subsidiary is in breach of any employment contract,
agreement regarding proprietary information, noncompetition agreement,
nonsolicitation agreement, confidentiality agreement, or any other similar
contract or restrictive covenant, relating to the right of any officer, employee
or consultant to be employed or engaged by the Company or such subsidiary. Since
the date of the December 31, 1999, Form 10-KSB, no officer, consultant or key
employee of the Company or any subsidiary whose termination, either individually
or in the aggregate, could have a Material Adverse Effect, has terminated or, to
the knowledge of the Company, has any present intention of terminating his or
her employment or engagement with the Company or any subsidiary.
(y) Absence of Certain Developments. Except as provided in SEC Documents or in
Schedule 3.1(y) hereto, since June 30, 2000, neither the Company nor any
subsidiary has:
(i) issued any stock, bonds or other corporate securities or any rights,
options or warrants with respect thereto;
(ii) borrowed any amount or incurred or become subject to any liabilities
(absolute or contingent) except current liabilities incurred in the ordinary
course of business which are comparable in nature and amount to the current
liabilities incurred in the ordinary course of business during the comparable
portion of its prior fiscal year, as adjusted to reflect the current nature and
volume of the Company's or such subsidiary's business;
(iii) discharged or satisfied any lien or encumbrance or paid any
obligation or liability (absolute or contingent), other than current liabilities
paid in the ordinary course of business;
(iv) declared or made any payment or distribution of cash or other property
to stockholders with respect to its stock, or purchased or redeemed, or made any
agreements so to purchase or redeem, any shares of its capital stock;
(v) sold, assigned or transferred any other tangible assets, or canceled
any debts or claims, except in the ordinary course of business;
(vi) sold, assigned or transferred any patent rights, trademarks, trade
names, copyrights, trade secrets or other intangible assets or intellectual
property rights, or disclosed any proprietary confidential information to any
person except to customers in the ordinary course of business or to the
Purchaser or its representatives;
(vii) suffered any substantial losses or waived any rights of material
value, whether or not in the ordinary course of business, or suffered the loss
of any material amount of prospective business;
(viii) made any changes in employee compensation except in the ordinary
course of business and consistent with past practices;
(ix) made capital expenditures or commitments therefor that aggregate in
excess of $500,000;
(x) entered into any other material transaction, whether or not in the
ordinary course of business;
(xi) suffered any material damage, destruction or casualty loss, whether or
not covered by insurance;
(xii) experienced any material problems with labor or management in
connection with the terms and conditions of their employment; or
(xiii) effected any two or more events of the foregoing kind which in the
aggregate would be material to the Company or its subsidiaries.
(aa) Use of Proceeds. The proceeds from the sale of the Shares will be used by
the Company and its subsidiaries for general corporate purposes.
(bb) Acknowledgment Regarding Purchaser's Purchase of Shares. Company
acknowledges and agrees that Purchaser is acting solely in the capacity of arm's
length purchaser with respect to this Agreement and the transactions
contemplated hereunder. The Company further acknowledges that the Purchaser is
not acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions contemplated
hereunder and any advice given by the Purchaser or any of its representatives or
agents in connection with this Agreement and the transactions contemplated
hereunder is merely incidental to the Purchaser's purchase of the Shares. The
Company further represents to the Purchaser that the Company's decision to enter
into this Agreement has been based solely on the independent evaluation by the
Company and its own representatives and counsel.
Section 3.2. Representations and Warranties of the Purchaser. The Purchaser
hereby makes the following representations and warranties to the Company:
(a) Organization and Standing of the Purchaser. The Purchaser is a corporation
duly incorporated, validly existing and in good standing under the laws of the
British Virgin Islands.
(b) Authorization and Power. The Purchaser has the requisite power and authority
to enter into and perform this Agreement and to purchase the Shares being sold
to it hereunder. The execution, delivery and performance of this Agreement by
Purchaser and the consummation by it of the transactions contemplated hereby
have been duly authorized by all necessary corporate action.
(c) No Conflicts. The execution, delivery and performance of this Agreement and
the consummation by the Purchaser of the transactions contemplated hereby or
relating hereto do not and will not (i) result in a violation of such
Purchaser's charter documents or bylaws or (ii) conflict with, or constitute a
default (or an event which 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 agreement, indenture or instrument to which
the Purchaser is a party, or result in a violation of any law, rule, or
regulation, or any order, judgment or decree of any court or governmental agency
applicable to the Purchaser or its properties (except for such conflicts,
defaults and violations as would not, individually or in the aggregate, have a
Material Adverse Effect on Purchaser). The Purchaser is not required 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 to purchase the Shares in
accordance with the terms hereof, provided that for purposes of the
representation made in this sentence, the Purchaser is assuming and relying upon
the accuracy of the relevant representations and agreements of the Company
herein.
(d) Financial Risks. The Purchaser acknowledges that it is able to bear the
financial risks associated with an investment in the Shares and that it has been
given full access to such records of the Company and the subsidiaries and to the
officers of the Company and the subsidiaries as it has deemed necessary or
appropriate to conduct its due diligence investigation. The Purchaser is capable
of evaluating the risks and merits of an investment in the Shares by virtue of
its experience as an investor and its knowledge, experience, and sophistication
in financial and business matters and the Purchaser is capable of bearing the
entire loss of its investment in the Shares.
(e) Accredited Investor. The Purchaser is an "accredited investor" as defined in
Regulation D promulgated under the Securities Act.
(f) Compliance With Law. The Purchaser's trading and distribution activities
with respect to the Shares will be in compliance with all applicable state and
federal securities laws, rules and regulations and the rules and regulations of
the Principal Market.
(g) General. The Purchaser understands that the Company is relying upon the
truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of the Purchaser set forth herein in order to
determine the suitability of the Purchaser to acquire the Shares.
Article IV
COVENANTS
The Company covenants with the Purchaser as follows:
Section 4.1. Securities Compliance.
If applicable, the Company shall notify the NASD, in accordance with their
rules and regulations, of the transactions contemplated by this Agreement, and
shall take all other necessary action and proceedings as may be required and
permitted by applicable law, rule and regulation, for the legal and valid
issuance of the Shares and the Warrants to the Purchaser or subsequent holders.
Section 4.2. Registration and Listing. The Company will cause its Common Stock
to continue to be registered under Sections 12(b) or 12(g) of the Exchange Act,
will comply in all respects with its reporting and filing obligations under the
Exchange Act, will comply with all requirements related to any registration
statement filed pursuant to this Agreement, and will not take any action or file
any document (whether or not permitted by the Securities Act or the rules
promulgated thereunder) to terminate or suspend such registration or to
terminate or suspend its reporting and filing obligations under the Exchange Act
or Securities Act, except as permitted herein. The Company will take all action
necessary to continue the listing or trading of its Common Stock on the
Principal Market and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the NASD and the
Principal Market and shall provide the Purchasers 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 Purchasers have disposed of all of their Registrable
Securities.
Section 4.3. Registration Statement. The Company shall cause to be filed the
Registration Statement, which Registration Statement shall provide for the
resale of the Shares by the Purchaser to the public in accordance with this
Agreement. The Company shall cause such Registration Statement to be declared
effective by the SEC as expeditiously as practicable. Before the Purchaser shall
be obligated to accept a Draw Down request from the Company, the Company shall
have caused a sufficient number of shares of Common Stock to be registered to
cover the Shares to be issued in connection with such Draw Down.
Section 4.4. Escrow Arrangement. The Company and the Purchaser shall enter into
an escrow arrangement with ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Green, P.C. (the "Escrow Agent") in
the Form of Exhibit B hereto respecting payment against delivery of the Shares.
Section 4.5. Registration Rights Agreement. The Company and the purchaser shall
enter into the Registration Rights Agreement in the Form of Exhibit A hereto.
Section 4.6. Compliance with Laws. The Company shall comply, and cause each
subsidiary to comply, with all applicable laws, rules, regulations and orders,
noncompliance with which could have a Material Adverse Effect.
Section 4.7. Keeping of Records and Books of Account. The Company shall keep and
cause each subsidiary to keep adequate records and books of account, in which
complete entries will be made in accordance with GAAP consistently applied,
reflecting all financial transactions of the Company and its subsidiaries, and
in which, for each fiscal year, all proper reserves for depreciation, depletion,
obsolescence, amortization, taxes, bad debts and other purposes in connection
with its business shall be made.
Section 4.8. Amendments. The Company shall not amend or waive any provision the
Articles or Bylaws of the Company in any way that would adversely affect the
dividend rights or voting rights of the holders of the Shares.
Section 4.9. Other Agreements. The Company shall not enter into any agreement
the terms of which such agreement would restrict or impair the ability of the
Company or any subsidiary to perform under this Agreement.
Section 4.10. Notice of Certain Events Affecting Registration; Suspension of
Right to Request a Draw Down. The Company will immediately notify the Purchaser
upon the occurrence of any of the following events in respect of the
Registration Statement or related prospectus in respect of the Shares: (i)
receipt of any request for additional information from the SEC or any other
federal or state governmental authority during the period of effectiveness of
the Registration Statement the response to which would require any amendments or
supplements to the Registration Statement or related prospectus; (ii) the
issuance by the SEC or any other federal or state governmental authority of any
stop order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose; (iii) receipt of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Shares for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; (iv) the happening
of any event that makes any statement made in the Registration Statement or
related prospectus or any document incorporated or deemed to be incorporated
therein by reference untrue in any material respect or that requires the making
of any changes in the Registration Statement, related prospectus or documents so
that, in the case of the Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that in the case of the related prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and (v) the Company's
reasonable determination that a post-effective amendment to the Registration
Statement would be appropriate; and the Company will promptly make available to
the Purchaser any such supplement or amendment to the related prospectus. The
Company shall not deliver to the Purchaser any Draw Down Notice during the
continuation of any of the foregoing events.
Section 4.11. 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 Purchaser such shares of stock
and/or securities as the Purchaser is entitled to receive pursuant to this
Agreement.
Section 4.12. Limitation on Future Financing. The Company agrees that, except as
set forth below, it will not enter into any sale of its securities for cash at a
discount to the current market price until the earlier of (i) 24 months from the
effective date of the Registration Statement or (ii) sixty (60) days after the
entire $5,000,000 of Common Stock has been purchased by the Purchaser. The
foregoing shall not prevent or limit the Company from engaging in any sale of
securities (i) in a registered public offering by the Company which is
underwritten by one or more established investment banks (not including an
equity line type of financing), (ii) in one or more private placements where the
purchasers do not have registration rights, (iii) pursuant to any presently
existing or future employee benefit plan which plan has been or is approved by
the Company's stockholders, (iv) pursuant to any compensatory plan for a
full-time employee or key consultant, (v) in connection with a strategic
partnership or other business transaction, the principal purpose of which is not
simply to raise money or (vi) to which Purchaser gives its written approval.
Further, the Purchaser shall have a right of first refusal, to elect to
participate, in such subsequent transaction in the case of (i),(ii) and (vi)
above. Such right of first refusal must be exercised in writing within seven (7)
Trading Days of the Purchaser's receipt of notice of the proposed terms of such
financing.
Article V
CONDITIONS TO INITIAL CLOSING AND DRAW DOWNS
Section 5.1. Conditions Precedent to the Obligation of the Company to Sell the
Shares. The obligation hereunder of the Company to issue and sell the Shares to
the Purchaser is subject to the satisfaction or waiver, at or before the Initial
Closing, and as of each Settlement Date of each of the conditions set forth
below. These conditions are for the Company's sole benefit and may be waived by
the Company at any time in its sole discretion.
(a) Accuracy of the Purchaser's Representations and Warranties. The
representations and warranties of the Purchaser shall be true and correct in all
material respects as of the date when made and as of the Initial Closing and as
of each Settlement Date as though made at that time, except for representations
and warranties that speak as of a particular date.
(b) Performance by the Purchaser. The Purchaser shall have performed, satisfied
and complied in all material respects with all material covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Purchaser at or prior to the Initial Closing and as of each
Settlement Date.
(c) No Injunction. No statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction which prohibits the
consummation of any of the transactions contemplated by this Agreement.
Section 5.2. Conditions Precedent to the Obligation of the Purchaser to Close.
The obligation hereunder of the Purchaser to perform its obligations under this
Agreement and to purchase the Shares is subject to the satisfaction or waiver,
at or before the Initial Closing, of each of the conditions set forth below.
These conditions are for the Purchaser's sole benefit and may be waived by the
Purchaser at any time in its sole discretion.
(a) Accuracy of the Company's Representations and Warranties. Each of the
representations and warranties of the Company shall be true and correct in all
material respects as of the date when made and as of the Initial Closing as
though made at that time (except for representations and warranties that speak
as of a particular date).
(b) Performance by the Company. The Company shall have performed, satisfied and
complied in all respects with all covenants, agreements and conditions required
by this Agreement to be performed, satisfied or complied with by the Company at
or prior to the Initial Closing.
(c) No Injunction. No statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction which prohibits the
consummation of any of the transactions contemplated by this Agreement.
(d) No Proceedings or Litigation. No action, suit or proceeding before any
arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been threatened, against
the Purchaser or the Company or any subsidiary, or any of the officers,
directors or affiliates of the Company or any subsidiary seeking to restrain,
prevent or change the transactions contemplated by this Agreement, or seeking
damages in connection with such transactions.
(e) Opinion of Counsel, Etc. At the Initial Closing, the Purchaser shall have
received an opinion of counsel to the Company, dated the date of the Initial
Closing, in the form of Exhibit C hereto, and such other certificates as the
Purchaser deems necessary.
(f) Warrants. In lieu of a minimum Draw Down commitment by the Company, the
Purchaser shall receive (i) at the Initial Closing, a warrant certificate to
purchase up to 500,000 shares of Common Stock (the "Initial Warrant"), and (ii)
on each Settlement Date, a warrant certificate to purchase up to a number of
shares equal to 50% of the Shares purchased by the Investor on such Settlement
Date (each a "Unit Warrant")(the Initial Warrant and the Unit Warrants
hereinafter collectively referred to as the "Warrants") (the "Warrant"). The
Initial Warrant shall have a term from its date of issuance of three (3) years.
The exercise price of the Warrant shall be 110% of the VWAP on the Trading Day
immediately prior to the Initial Closing Date. The Unit Warrants shall have a
term from their date of issuance of 35 calendar days. The exercise price of the
Unit Warrants shall be the weighted average of the Purchase Prices of the Common
Stock during the applicable Settlement Period. The Common Stock underlying the
Warrants will be registered in the Registration Statement referred to in Section
4.3 hereof. The Warrants shall be in the form of Exhibit E hereto.
Section 5.3. Conditions Precedent to the Obligation of the Purchaser to Accept a
Draw Down and Purchase the Shares. The obligation hereunder of the Purchaser to
accept a Draw Down request and to acquire and pay for the Shares is subject to
the satisfaction at or before each Settlement Date, of each of the conditions
set forth below.
(a) Satisfaction of Conditions to Initial Closing. The Company shall have
satisfied, or the Purchaser shall have waived at the Initial Closing, the
conditions set forth in Section 5.2 hereof
(b) Effective Registration Statement. The Registration Statement registering the
Shares shall have been declared effective by the SEC and shall remain effective
on each Settlement Date and the Company will furnish to the Purchaser a
prospectus supplement pursuant to Rule 424(b) of the Securities Act relating to
the sale of the Shares on the Settlement Date and such supplement shall be filed
with the SEC within the time period prescribed.
(c) No Suspension. Trading in the Company's Common Stock shall not have been
suspended by the SEC or the Principal Market (except for any suspension of
trading of limited duration agreed to by the Company, which suspension shall be
terminated prior to the delivery of each Draw Down Notice), and, at any time
prior to such Draw Down Notice, trading in securities generally as reported on
the Principal Market shall not have been suspended or limited, or minimum prices
shall not have been established on securities whose trades are reported on the
Principal Market unless the general suspension or limitation shall have been
terminated prior to the delivery of such Draw Down Notice.
(d) Material Adverse Effect. No Material Adverse Effect and no Consolidation
Event where the successor entity has not agreed to perform the Company's
obligations shall have occurred.
(e) Opinion of Counsel. The Purchaser shall have received a "down-to-date"
letter from the Company's counsel, confirming that there is no change from the
counsel's previously delivered opinion, or else specifying with particularity
the reason for any change and an opinion as to the additional items specified in
Exhibit C hereto.
(f) Future Financing.The Company shall have not completed any financing
prohibited by Section 4.11 unless, prior to the Company delivering the first
Draw Down Notice after any such financing, the Company pays the Purchaser the
sum of $100,000 as liquidated damages. Article VI
DRAW DOWN TERMS
Section 6.1. Draw Down Terms. Subject to the satisfaction of the conditions set
forth in this Agreement, the parties agree as follows:
(a) The Company, may, in its sole discretion, issue and exercise a draw down (a
"Draw Down") during each Draw Down Pricing Period, which Draw Down the Purchaser
will be obligated to accept for a period of 24 months commencing immediately
after the Effective Date.
(b) Only one Draw Down shall be allowed in each Draw Down Pricing Period. There
shall be at least seven (7) Trading Days between Draw Down Pricing Periods. The
number of shares of Common Stock purchased by the Purchaser with respect to each
Draw Down shall be determined as set forth in Section 6.1(d) herein and settled
on, (i) as to the 1st through the 11th Trading Days after a Draw Down Pricing
Period commences (the "First Settlement Period"), on the 13th Trading Day after
a Draw Down Pricing Period commences and (ii) as to the 12th through the 22nd
Trading Days after a Draw Down Pricing Period commences (the "Second Settlement
Period"), the 24th Trading Day after a Draw Down Pricing Period. (each, a
"Settlement Date" and the First and Second Settlement Periods collectively
referred to as "Settlement Periods"). In connection with each Draw Down Pricing
Period, the Company may set the Threshold Price. If the Average Daily Price on
any day within the Draw Down Pricing Period is less than the Threshold Price,
the Company shall not sell and the Purchaser shall not be obligated to purchase
the Shares otherwise to be purchased for such day.
(c) The minimum Investment Amount shall be $100,000 and the maximum Investment
Amount shall be $5,000,000; provided, however, the maximum Investment Amount
during any Draw Down Pricing Period shall be limited pursuant to the following
formula: 4.5% of the weighted average price for the Common Stock for the three
(3) month period immediately prior to the Commencement Date (defined below)
multiplied by the total trading volume in respect of the Common Stock for the
three (3) month period immediately prior to the Commencement Date.
(d) The number of Shares of Common Stock to be issued on each Settlement Date
shall be a number of shares equal to the sum of the quotients (for each trading
day within the Settlement Period) of (x) 1/22nd of the Investment Amount and (y)
the Purchase Price on each Trading Day within the Settlement Period, subject to
the following adjustments:
(i) if the Average Daily Price on a given Trading Day is less than the Threshold
price, then the Investment Amount will be reduced by 1/22nd and that day shall
be withdrawn from the Settlement Period; and
(ii) trading of the Common Stock on the Principal Market is suspended for more
than three (3) hours, in the aggregate, on any Trading Day during the Settlement
Period, the Investment Amount shall be reduced by 1/22nd and that day shall be
withdrawn from the applicable Settlement Period.
(e) The Company must inform the Purchaser by delivering a draw down notice, in
the form of Exhibit D hereto (the "Draw Down Notice"), via facsimile
transmission in accordance with Section 9.4 as to the amount of the Draw Down
(the "Investment Amount") the Company wishes to exercise before the first day of
the Draw Down Pricing Period (the "Commencement Date"). If the Commencement Date
is to be the date of the Draw Down Notice, the Draw Down Notice must be
delivered to and receipt confirmed by the Purchaser at least one hour before
trading commences on such date. At no time shall the Purchaser be required to
purchase more than the maximum Draw Down amount for a given Draw Down Pricing
Period so that if the Company chooses not to exercise the maximum permitted Draw
Down in a given Draw Down Pricing Period the Purchaser is not obligated to and
shall not purchase more than the scheduled maximum amount in a subsequent Draw
Down Pricing Period.
(f) On or before each Settlement Date, the Shares purchased by the Purchaser
shall be delivered to The Depository Trust Company ("DTC") on the Purchaser's
behalf. Upon the Company delivering whole shares of Common Stock to the
Purchaser or its designees via DWAC by 1:00 pm EST, the Purchaser shall wire
transfer immediately available funds to the Company's designated account on such
day. Upon the Company delivering whole shares of Common Stock to the Purchaser
or its designees via DWAC after 1:00 pm EST, the Purchaser shall wire transfer
next day available funds to the Company's designated account on such day. In the
event the Purchaser elects to use the Escrow Agent, the Shares shall be credited
by the Company to the DTC account designated by the Purchaser upon receipt by
the Escrow Agent of payment for the Draw Down into the Escrow Agent's trust
account as provided in the Escrow Agreement. The Escrow Agent shall be directed
to pay the purchase price to the Company, net of One Thousand Five Hundred
Dollars ($1,500) as escrow expenses to the Escrow Agent and any brokerage or
placement agent fees as set forth in the Escrow Agreement. The delivery of the
Shares into the Purchaser's DTC account in exchange for payment therefor shall
be referred to herein as "Settlement".
Article VII
TERMINATION
Section 7.1. Termination. The term of this Agreement shall be twenty-four (24)
months from the Effective
Date.
Section 7.2. Other Termination. The Purchaser may terminate this Agreement upon
one (1) Trading Day's notice if (i) an event resulting in a Material Adverse
Effect has occurred, (ii) the Common Stock is de-listed from the Principal
Market unless such de-listing is in connection with the listing of the Common
Stock on the Nasdaq National Market, Nasdaq SmallCap Market, the American Stock
Exchange or the New York Stock Exchange or (iii) the Company files for
protection from creditors under any applicable law.
(a) The Company may terminate this Agreement upon one (1) Trading Day's notice
if the Purchaser shall fail to fund more than one properly noticed Draw Down
within three (3) Trading Days of a Settlement Date.
Section 7.3. Effect of Termination. In the event of termination by the Company
or the Purchaser, written notice thereof shall forthwith be given to the other
party and the transactions contemplated by this Agreement shall be terminated
without further action by either party. If this Agreement is terminated as
provided in Section 7.1 or 7.2 herein, this Agreement shall become void and of
no further force and effect, except for Sections 9.1 and 9.2, and Article VIII
herein. Nothing in this Section 7.3 shall be deemed to release the Company or
the Purchaser from any liability for any breach under this Agreement, or to
impair the rights of the Company and the Purchaser to compel specific
performance by the other party of its obligations under this Agreement.
Article VIII
INDEMNIFICATION
Section 8.1. General Indemnity. The Company agrees to indemnify and hold
harmless the Purchaser (and its directors, officers, affiliates, agents,
successors and assigns) from and against any and all losses, liabilities,
deficiencies, costs, damages and expenses (including, without limitation,
reasonable attorney's fees, charges and disbursements) incurred by the Purchaser
as a result of any inaccuracy in or breach of the representations, warranties or
covenants made by the Company herein. The Purchaser agrees to indemnify and hold
harmless the Company and its directors, officers, affiliates, agents, successors
and assigns from and against any and all losses, liabilities, deficiencies,
costs, damages and expenses (including, without limitation, reasonable attorneys
fees, charges and disbursements) incurred by the Company as result of any
inaccuracy in or breach of the representations, warranties or covenants made by
the Purchaser herein. Notwithstanding anything to the contrary herein, the
Purchaser shall be liable under this Section 8.1 for only that amount as does
not exceed the net proceeds to such Purchaser as a result of the sale of Shares
pursuant to the Registration Statement.
Section 8.2. Indemnification Procedure. Any party entitled to indemnification
under this Article VIII (an "Indemnified Party") will give written notice to the
indemnifying party of any matters giving rise to a claim for indemnification;
provided, that the failure of any party entitled to indemnification hereunder to
give notice as provided herein shall not relieve the indemnifying party of its
obligations under this Article VIII except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice. In case any action,
proceeding or claim is brought against an Indemnified Party in respect of which
indemnification is sought hereunder, the indemnifying party shall be entitled to
participate in and, unless in the reasonable judgment of counsel to the
Indemnified Party a conflict of interest between it and the indemnifying party
may exist with respect of such action, proceeding or claim, to assume the
defense thereof with counsel reasonably satisfactory to the Indemnified Party.
In the event that the indemnifying party advises an Indemnified Party that it
will contest such a claim for indemnification hereunder, or fails, within thirty
(30) days of receipt of any indemnification notice to notify, in writing, such
person of its election to defend, settle or compromise, at its sole cost and
expense, any action, proceeding or claim (or discontinues its defense at any
time after it commences such defense), then the Indemnified Party may, at its
option, defend, settle or otherwise compromise or pay such action or claim. In
any event, unless and until the indemnifying party elects in writing to assume
and does so assume the defense of any such claim, proceeding or action, the
Indemnified Party's costs and expenses arising out of the defense, settlement or
compromise of any such action, claim or proceeding shall be losses subject to
indemnification hereunder. The Indemnified Party shall cooperate fully with the
indemnifying party in connection with any settlement negotiations or defense of
any such action or claim by the indemnifying party and shall furnish to the
indemnifying party all information reasonably available to the Indemnified Party
which relates to such action or claim. The indemnifying party shall keep the
Indemnified Party fully apprised at all times as to the status of the defense or
any settlement negotiations with respect thereto. If the indemnifying party
elects to defend any such action or claim, then the Indemnified Party shall be
entitled to participate in such defense with counsel of its choice at its sole
cost and expense. The indemnifying party shall not be liable for any settlement
of any action, claim or proceeding effected without its prior written consent.
Notwithstanding anything in this Article VIII to the contrary, the indemnifying
party shall not, without the Indemnified Party's prior written consent, settle
or compromise any claim or consent to entry of any judgment in respect thereof
which imposes any future obligation on the Indemnified Party or which does not
include, as an unconditional term thereof, the giving by the claimant or the
plaintiff to the Indemnified Party of a release from all liability in respect of
such claim. The indemnification required by this Article VIII shall be made by
periodic payments of the amount thereof during the course of investigation or
defense, as and when bills are received or expense, loss, damage or liability is
incurred, within ten (10) Trading Days of written notice thereof to the
indemnifying party so long as the Indemnified Party irrevocably agrees to refund
such moneys if it is ultimately determined by a court of competent jurisdiction
that such party was not entitled to indemnification. The indemnity agreements
contained herein shall be in addition to (a) any cause of action or similar
rights of the Indemnified Party against the indemnifying party or others, and
(b) any liabilities the indemnifying party may be subject to.
Article IX
MISCELLANEOUS
Section 9.1. Fees and Expenses. The Company shall pay all fees and expenses
related to the transactions contemplated by this Agreement; provided, that the
Company shall pay, at the Initial Closing, all attorneys and escrow fees and
expenses inclusive of disbursements and out-of-pocket expenses) incurred by the
Purchaser of $10,000 in connection with the preparation, negotiation, execution
and delivery of this Agreement and the transactions contemplated hereunder. In
addition, the Company shall pay all reasonable fees and expenses incurred by the
Purchaser in connection with any subsequent amendments, modifications or waivers
of this Agreement, the Escrow Agreement or the Registration Rights Agreement or
incurred in connection with the enforcement of this Agreement, the Escrow
Agreement and the Registration Rights Agreement, including, without limitation,
all reasonable attorneys fees and expenses. The Company shall pay all stamp or
other similar taxes and duties levied in connection with issuance of the Shares
pursuant hereto.
Section 9.2. Specific Enforcement. The Company and the Purchaser acknowledge and
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions hereof or thereof, this being in addition to any other
remedy to which any of them may be entitled by law or equity.
Section 9.3. Entire Agreement; Amendment. This Agreement, together with the
Registration Rights Agreement and the Escrow Agreement contains the entire
understanding of the parties with respect to the matters covered hereby and,
except as specifically set forth herein, neither the Company nor the Purchaser
makes any representations, warranty, covenant or undertaking with respect to
such matters. No provision of this Agreement may be waived or amended other than
by a written instrument signed by the party against whom enforcement of any such
amendment or waiver is sought and no condition to closing any Draw Down in favor
of the Purchaser may be waived by the Purchaser.
Section 9.4. Notices. Any notice, demand, request, waiver or other communication
required or permitted to be given hereunder shall be in writing and shall be
effective (a) upon hand delivery or facsimile 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 second business day following
the date of mailing by express courier service, fully prepaid, addressed to such
address, or upon actual receipt of such mailing, whichever shall first occur.
The addresses for such communications shall be:
If to the Company: ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇.
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to: Law Offices of ▇▇▇ ▇▇▇▇▇▇▇
notice): ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇.
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to Purchaser: c/o Mischon deReya Solicitors
▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇
Fax: ▇▇▇-▇▇-▇▇▇-▇▇▇-▇▇▇▇
with copies to: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Green P.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Any party hereto may from time to time change its address for notices by
giving written notice of such changed address to the other party hereto in
accordance herewith. Section 9.5. Waivers. No waiver by either party of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provisions, condition or requirement hereof, nor shall any delay or
omission of any party to exercise any right hereunder in any manner impair the
exercise of any such right accruing to it thereafter.
Section 9.6. Headings. The article, section and subsection headings in this
Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.
Section 9.7. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. The
parties hereto may not amend this Agreement or any rights or obligations
hereunder without the prior written consent of the Company and each Purchaser to
be affected by the amendment. After Initial Closing, the assignment by a party
to this Agreement of any rights hereunder shall not affect the obligations of
such party under this Agreement.
Section 9.8. No Third Party Beneficiaries.This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
Section 9.9. Governing Law/Arbitration.This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to the choice of law provisions. Any dispute under this Agreement
or any Exhibit attached hereto 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. The Board of Arbitration shall
be authorized and is directed to enter a default judgment against any party
refusing to participate in the arbitration proceeding within thirty days of any
deadline for such participation. 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 prevailing party shall be awarded
its costs, including attorneys' fees, from the non-prevailing party as part of
the arbitration award. Any party shall have the right to seek injunctive relief
from any court of competent jurisdiction in any case where such relief is
available. The prevailing party in such injunctive action shall be awarded its
costs, including attorney's fees, from the non-prevailing party.
Section 9.10. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and shall become effective when counterparts have been signed by each
party and delivered to the other parties hereto, it being understood that all
parties need not sign the same counterpart. Execution may be made by delivery by
facsimile.
Section 9.11. Publicity. Prior to the Initial Closing, neither the Company nor
the Purchaser shall issue any press release or otherwise make any public
statement or announcement with respect to this Agreement or the transactions
contemplated hereby or the existence of this Agreement. After the Initial
Closing, the Company may issue a press release or otherwise make a public
statement or announcement with respect to this Agreement or the transactions
contemplated hereby or the existence of this Agreement; provided, however, that
prior to issuing any such press release, making any such public statement or
announcement, the Company obtains the prior consent of the Purchaser, which
consent shall not be unreasonably withheld or delayed.
Section 9.12. Severability. The provisions of this Agreement are severable and,
in the event that any court or officials of any regulatory agency of competent
jurisdiction shall determine that any one or more of the provisions or part of
the provisions contained in this Agreement shall, for any reason, be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision of
this Agreement and this Agreement shall be reformed and construed as if such
invalid or illegal or unenforceable provision, or part of such provision, had
never been contained herein, so that such provisions would be valid, legal and
enforceable to the maximum extent possible, so long as such construction does
not materially adversely affect the economic rights of either party hereto.
Section 9.13. Further Assurances. From and after the date of this Agreement,
upon the request of the Purchaser or the Company, each of the Company and the
Purchaser shall execute and deliver such instruments, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement.
Section 9.14. Effectiveness of Agreement. This Agreement shall become effective
only upon satisfaction of the conditions precedent to the Initial Closing set
forth in Article I of the Escrow Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorize officer as of this __ day of
October, 2000.
Famous Fixins, Inc.
By:
▇▇▇▇▇ ▇▇▇▇▇, Chairman & CEO
Folkinburg Investments Limited
By:
Name:
Title:
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of October __, 2000 between
Folkinburg Investments Limited ("Purchaser") and Famous Fixins, Inc. (the
"Company").
WHEREAS, simultaneously with the execution and delivery of this Agreement,
pursuant to a Common Stock Purchase Agreement dated the date hereof (the
"Purchase Agreement") the Purchaser has committed to purchase up to $5,000,000
of the Company's Common Stock (terms not defined herein shall have the meanings
ascribed to them in the Purchase Agreement) and Warrants; and
WHEREAS, the Company desires to grant to the Purchaser the registration
rights set forth herein with respect to the Shares and the shares issuable upon
exercise of the Warrants from time to time (collectively, the "Securities").
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) 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 persons 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. The Purchaser acknowledges and understands
that in the absence of an effective Registration Statement authorizing the
resale of the Securities as provided herein, the Securities are "restricted
securities" as defined in Rule 144. The Purchaser understands that no
disposition or transfer of the Securities may be made by Purchaser in the
absence of (i) an opinion of counsel to the Purchaser, 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 Purchaser the benefits of Rule 144,
the Company agrees to:
(a) comply with the provisions of paragraph (c)(1) of Rule 144; and
(b) file with the Commission in a timely manner all reports and other
documents required to be filed by the Company pursuant to Section 13 or 15(d)
under the Exchange Act; and, if at any time it is not required to file such
reports but in the past had been required to or did file such reports, it will,
upon the request of the Purchaser, make available other information as required
by, and so long as necessary to permit sales of, its Registrable Securities
pursuant to Rule 144.
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 forty-five (45) days after the
date hereof, a registration statement (on Form S-3 and/or S-1, or other
appropriate form of registration statement) 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 Purchaser, so as to permit a
public offering and resale of the Securities under the Securities Act by
Purchaser.
The Company shall use its best efforts to cause the Registration Statement
to become effective within ninety (90) days of the date hereof or five (5) days
of SEC clearance and will within said five (5) days request acceleration of
effectiveness. The Company will notify Purchaser of the effectiveness of the
Registration Statement within one Trading Day of such event.
(b) The Company will maintain the Registration Statement or post-effective
amendment filed under this Section 3 hereof effective under the Securities Act
until the earliest of (i) the date that all the Securities have been disposed of
pursuant to the Registration Statement, (ii) the date that all of the Securities
have been sold pursuant to the Registration Statement, (iii) the date the
holders thereof receive an opinion of counsel to the Company, which opinion
shall be reasonably acceptable to the Purchaser, that the Securities may be sold
under the provisions of Rule 144 without limitation as to volume, (iv) all
Securities have been otherwise transferred to persons who may trade such shares
without restriction under the Securities Act, and the Company has delivered a
new certificate or other evidence of ownership for such securities not bearing a
restrictive legend, or (v) all Securities may be sold without any time, volume
or manner limitations pursuant to Rule 144(k) or any similar provision then in
effect under the Securities Act in the opinion of counsel to the Company, which
counsel shall be reasonably acceptable to the Purchaser (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 Purchaser 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 its
counsel. The Purchaser and its counsel shall have a reasonable period, not to
exceed ten (10) Trading Days, to review the proposed Registration Statement or
any amendment thereto, prior to filing with the Commission, and the Company
shall provide the Purchaser with copies of any comment letters received from the
Commission with respect thereto within two (2) Trading Days of receipt thereof.
The Company shall make reasonably available for inspection by Purchaser, any
underwriter participating in any disposition pursuant to the Registration
Statement, and any attorney, accountant or other agent retained by the Purchaser
or any such underwriter all relevant financial and other records, pertinent
corporate documents and properties of the Company and its subsidiaries, and
cause the Company's officers, directors and employees to supply all information
reasonably requested by the Purchaser or any such underwriter, attorney,
accountant or agent in connection with the Registration Statement, in each case,
as is customary for similar due diligence examinations; provided, however, that
all records, information and documents that are designated in writing by the
Company, in good faith, as confidential, proprietary or containing any material
non-public information shall be kept confidential by the Purchaser and any such
underwriter, attorney, accountant or agent (pursuant to an appropriate
confidentiality agreement in the case of the Purchaser, underwriter, attorney,
accountant or agent), unless such disclosure is made pursuant to judicial
process in a court proceeding (after first giving the Company an opportunity
promptly to seek a protective order or otherwise limit the scope of the
information sought to be disclosed) or is required by law, or such records,
information or documents become available to the public generally or through a
third party not in violation of an accompanying obligation of confidentiality;
and provided further that, if the foregoing inspection and information gathering
would otherwise disrupt the Company's conduct of its business, such inspection
and information gathering shall, to the maximum extent possible, be coordinated
on behalf of the Purchaser and the other parties entitled thereto by one firm of
counsel designed by and on behalf of the majority in interest of Purchaser and
other parties. The Company shall qualify any of the securities for sale in such
states as the Purchaser 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 Purchaser with copies of the Registration Statement and
the prospectus included therein and other related documents in such quantities
as may be reasonably requested by the Purchaser.
(d) The Company shall not be required by this Section 3 to include a
Purchaser's Securities in any Registration Statement which is to be filed if, in
the opinion of counsel for both the Purchaser and the Company (or, should they
not agree, in the opinion of another counsel experienced in securities law
matters acceptable to counsel for the Purchaser 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) If at any time or from time to time after the effective date of the
Registration Statement, the Company notifies the Purchaser in writing of the
existence of a Potential Material Event (as defined in Section 3(f) below), the
Purchaser 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 Purchaser receives
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
(the "Suspension Period"); provided, however, that if a Suspension Period occurs
during any periods commencing on a Trading Day a Draw Down Notice is deemed
delivered and ending ten (10) Trading Days following the end of the
corresponding Draw Down Pricing Period, then the Company must compensate the
Purchaser for any net decline in the market value of any Securities held by the
Purchaser at the beginning of any such Suspension Period, or committed to be
purchased by the Purchaser during such Suspension Period, through the end of
such Suspension Period. Net decline shall be calculated as the difference
between the highest VWAP during the applicable Suspension Period end the VWAP at
the end of such Suspension Period. If a Potential Material Event shall occur
prior to the date the Registration Statement is filed, then the Company's
obligation to file the Registration Statement shall be delayed without penalty
for not more than thirty (30) calendar days. The Company must give Purchaser
notice in writing at least two (2) Trading Days prior to the first day of the
blackout period, if lawful to do so.
(f) "Potential Material Event" means any of the following: (a) the
possession by the Company of material information that is 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 or that disclosure of
such information in the 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 Registration
Statement would be materially misleading absent the inclusion of such
information.
Section 4. Cooperation with Company. Purchaser will cooperate with the Company
in all respects in connection with this Agreement, including timely supplying
all information reasonably requested by the Company (which shall include all
information regarding the Purchaser and proposed manner of sale of the
Registrable Securities required to be disclosed in the 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 its 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. The Purchaser shall
consent to be named as an underwriter in the Registration Statement. Purchaser
acknowledges that in accordance with current Commission policy, the Purchaser
will be named as the underwriter of the Securities in the Registration
Statement.
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
Purchaser's assistance and cooperation as reasonably required:
(a) 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 Securities Act with respect to the sale or other
disposition of all securities covered by such registration statement whenever
the Purchaser of such Registrable Securities 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 Securities 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 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) 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 Purchaser and reflect in such documents all such comments as the Purchaser
(and its counsel) reasonably may propose and (ii) furnish to the Purchaser 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 Securities Act, and such other documents, as the Purchaser
may reasonably request in order to facilitate the public sale or other
disposition of the securities owned by the Purchaser;
(c) register and qualify the Registrable Securities covered by the
Registration Statement under New York blue sky laws (subject to the limitations
set forth in Section 3(c) above), and do any and all other acts and things which
may be reasonably necessary or advisable to enable the Purchaser to consummate
the public sale or other disposition in such jurisdiction of the securities
owned by the Purchaser, except that the Company shall not for any such purpose
be required to qualify to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified or to file therein any general
consent to service of process;
(d) list such Registrable Securities on the Principal Market, and any other
exchange on which the Common Stock of the Company is then listed, if the listing
of such Registrable Securities is then permitted under the rules of such
exchange or the Nasdaq Stock Market;
(e) notify the Purchaser at any time when a prospectus relating thereto
covered by the Registration Statement is required to be delivered under the
Securities 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
the Purchaser who holds Registrable Securities being sold (or, in the event of
an underwritten offering, the managing underwriters) of the issuance by the
Commission or any state authority 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, recission or removal of such
stop order or other suspension;
(g) cooperate with the Purchaser 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
Purchaser reasonably may request and registered in such names as the Purchaser
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 Purchaser
whose Registrable Securities are included in such Registration Statement) 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 Purchaser 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 managing underwriters 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 for its Common Stock.
Section 6. Indemnification.
(a) The Company agrees to indemnify and hold harmless the Purchaser and
each person, if any, who controls the Purchaser within the meaning of the
Securities Act ("Distributing Purchaser") 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), to which the Distributing
Purchaser 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 the Registration Statement, or any related
preliminary prospectus, 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 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 the 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 Purchaser specifically for use in the preparation
thereof. This Section 6(a) shall not inure to the benefit of any Distributing
Purchaser with respect to any person asserting such loss, claim, damage or
liability who purchased the Registrable Securities which are the subject thereof
if the Distributing Purchaser failed to send or give (in violation of the
Securities Act or the rules and regulations promulgated thereunder) a copy of
the prospectus contained in such Registration Statement to such person at or
prior to the written confirmation to such person of the sale of such Registrable
Securities, where the Distributing Purchaser was obligated to do so under the
Securities Act or the rules and regulations promulgated thereunder. This
indemnity agreement will be in addition to any liability which the Company may
otherwise have.
(b) Each Distributing Purchaser agrees that it will indemnify and hold
harmless the Company, and each officer, 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) 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
the Registration Statement, or any related preliminary prospectus, 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 the 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 such Distributing Purchaser specifically for use in the
preparation thereof. This indemnity agreement will be in addition to any
liability which the Distributing Purchaser may otherwise have. Notwithstanding
anything to the contrary herein, the Distributing Purchaser shall not be liable
under this Section 6(b) for any amount in excess of the net proceeds to such
Distributing Purchaser as a result of the sale of Registrable Securities
pursuant to the Registration Statement.
(c) Promptly after receipt by an indemnified party under this Section 6 of
notice of the commencement of any action, 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 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 of actual prejudice demonstrated by the indemnifying party. 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 party shall have the
right to employ 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; provided that if the indemnified party is the Distributing Purchaser, the
fees and expenses of such counsel shall be at the expense of the indemnifying
party if (i) the employment of such counsel has been specifically authorized in
writing by the indemnifying party, or (ii) the named parties to any such action
(including any impleaded parties) include both the Distributing Purchaser and
the indemnifying party and the Distributing Purchaser shall have been advised by
such 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 Distributing Purchaser (in which case the indemnifying
party shall not have the right to assume the defense of such action on behalf of
the Distributing Purchaser, 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 Distributing
Purchaser, which firm shall be designated in writing by the Distributing
Purchaser and be approved by the indemnifying 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.
All fees and expenses of the indemnified party (including reasonable costs
of defense and investigation in a manner not inconsistent with this Section and
all reasonable attorneys' fees and expenses) shall be paid to the indemnified
party, as incurred, within ten (10) Trading Days of written notice thereof to
the indemnifying party; provided, that the indemnifying party may require such
indemnified party to undertake to reimburse all such fees and expenses to the
extent it is finally judicially determined that such indemnified party is not
entitled to indemnification hereunder).
Section 7. Contribution. In order to provide for just and equitable
contribution under the Securities Act in any case in which (i) the indemnified
party makes a claim for indemnification pursuant to Section 6 hereof but is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that the express provisions of Section 6 hereof provide
for indemnification in such case, or (ii) contribution under the Securities Act
may be required on the part of any indemnified party, then the Company and the
applicable Distributing Purchaser 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), 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 Purchaser 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 Purchaser
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) Purchaser be required to undertake liability to any person under this
Section 7 for any amounts in excess of the dollar amount of the net proceeds to
be received by the Purchaser from the sale of the Purchaser's Registrable
Securities (after deducting any fees, discounts and commissions applicable
thereto) pursuant to any Registration Statement under which such Registrable
Securities are to be 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 the Registration Statement.
Section 8. Notices. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be delivered as set forth in the
Purchase Agreement.
Section 9. Assignment. Neither this Agreement nor any rights of the Purchaser or
the Company hereunder may be assigned by either party to any other person.
Notwithstanding the foregoing, (a) the provisions of this Agreement shall inure
to the benefit of, and be enforceable by, any transferee of any of the Common
Stock purchased by the Purchaser pursuant to the Purchase Agreement other than
through open-market sales, and (b) upon the prior written consent of the
Company, which consent shall not be unreasonably withheld or delayed in the case
of an assignment to an affiliate of the Purchaser, the Purchaser'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 Purchaser) who agrees to be
bound hereby.
Section 10. 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 party. In lieu of the original, a facsimile
transmission or copy of the original shall be as effective and enforceable as
the original.
Section 11. Remedies and Severability. 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. It is
hereby stipulated and declared to be the intention of the parties that they
would have executed the remaining terms, provisions, covenants and restrictions
without including any of such that may be hereafter declared invalid, illegal,
void or unenforceable.
Section 12. 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 13. Headings. The headings in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
Section 14. Governing Law. 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 action may be brought as set forth in the
Purchase Agreement. Any party shall have the right to seek injunctive relief
from any court of competent jurisdiction in any case where such relief is
available. 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. The Board of Arbitration shall
be authorized and is directed to enter a default judgment against any party
refusing to participate in the arbitration proceeding within thirty days of any
deadline for such participation. 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 prevailing party shall be awarded
its costs, including attorneys' fees, from the non-prevailing party as part of
the arbitration award. Any party shall have the right to seek injunctive relief
from any court of competent jurisdiction in any case where such relief is
available. The prevailing party in such injunctive action shall be awarded its
costs, including attorney's fees, from the non-prevailing party.
IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights
Agreement to be duly executed, on this __ day of October, 2000.
Famous Fixins, Inc.
By:
▇▇▇▇▇ ▇▇▇▇▇, Chairman & CEO
Folkinburg Investments Limited
By:
Name:
Title:
EXHIBIT B
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is made as of October __, 2000, by
and among Famous Fixins, Inc., a corporation incorporated under the laws of New
York (the "Company"), Folkinburg Investments Limited ("Purchaser"), and ▇▇▇▇▇▇▇
▇▇▇▇▇▇ & Green, P.C., having an address at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
(the "Escrow Agent"). Capitalized terms used but not defined herein shall have
the meanings set forth in the Common Stock Purchase Agreement referred to in the
first recital.
WHEREAS, the Purchaser will from time to time as requested by the Company,
purchase shares of the Company's Common Stock from the Company as set forth in
that certain Common Stock Purchase Agreement (the "Purchase Agreement") dated
the date hereof between the Purchaser and the Company, which will be issued as
per the terms and conditions contained herein and in the Purchase Agreement; and
WHEREAS, the Company and the Purchaser have requested that the Escrow Agent
hold in escrow and then distribute the initial documents and certain funds which
are conditions precedent to the effectiveness of the Purchase Agreement, and
have further requested that upon each exercise of a Draw Down, the Escrow Agent
hold the relevant documents and the applicable purchase price pending receipt by
Purchaser of certificates representing the securities issuable upon such Draw
Down;
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 I
TERMS OF THE ESCROW FOR THE INITIAL CLOSING
1.1. The parties hereby agree to establish an escrow account with the Escrow
Agent whereby the Escrow Agent shall hold the funds and documents which are
referenced in Section 5.2 of the Purchase Agreement.
1.2. At the Initial Closing, the Company shall deliver to the Escrow Agent:
(i) the original executed Registration Rights Agreement in the form of
Exhibit A to the Purchase Agreement;
(ii) the original executed opinion of the Law Offices of ▇▇▇ ▇▇▇▇▇▇▇ in the
form of Exhibit C to the Purchase Agreement;
(iii) the sum of $10,000 for the fees and expenses of the Purchaser's
counsel;
(iv) the original executed Company counterpart of this Escrow Agreement;
(v) the original executed Company counterpart of the Purchase Agreement;
and
(vi) the original executed Initial Warrant in the form of Exhibit E to the
Purchase Agreement.
1.3. Upon receipt of the foregoing, and receipt of executed counterparts from
Purchaser of the Purchase Agreement, the Registration Rights Agreement and this
Escrow Agreement, the Escrow Agent shall calculate and enter the exercise price,
the issuance date and termination date on the face of the Initial Warrant and
immediately transfer the sum of $10,000 to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Green, P.C.
("EB&G"), ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ for the Purchaser's legal,
administrative and escrow costs and the Escrow Agent shall then arrange to have
the Purchase Agreement, this Escrow Agreement, the Registration Rights
Agreement, the Initial Warrant and the opinion of counsel delivered to the
appropriate parties.
1.4 Wire transfers to the Escrow Agent shall be made as follows:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Green, P.C.
Master Escrow Account
Chase Manhattan Bank
▇▇▇▇ ▇▇▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
ABA No. ▇▇▇▇▇▇▇▇▇
Account No. 035 1 346036
Attention: L. Borneo
Article II
TERMS OF THE ESCROW FOR EACH DRAW DOWN
2.1. Each time the Company shall send a Draw Down Notice to the Purchaser as
provided in the Purchase Agreement, it shall send a copy, by facsimile, to the
Escrow Agent.
2.2. Each time the Purchaser shall purchase Shares pursuant to a Draw Down, the
Purchaser shall send the applicable purchase price of the Draw Down Shares to
the Escrow Agent, which shall advise the Company in writing that it has received
the purchase price for such Draw Down Shares. The Company shall promptly, but no
later than three (3) Trading Days after receipt of such funding notice from the
Escrow Agent, cause its transfer agent to issue the Draw Down Shares to the
Purchaser via DTC deposit to the account specified by the Purchaser from time to
time, deliver the Unit Warrants, deliver the original executed opinion of the
Law Office of ▇▇▇ ▇▇▇▇▇▇▇ in the form of Exhibit C and deliver a Form 424(b)
supplemental prospectus to the Escrow Agent. Upon receipt of written
confirmation from the transfer agent or from the Purchaser that such Draw Down
Shares have been so deposited, the opinion and the supplemental prospectus have
been so delivered, the Escrow Agent shall calculate and enter the number,
exercise price, issuance date and termination date on the face of the Unit
Warrant and within one (1) Trading Day wire 90% of the Purchase Price of the
Draw Down per the written instructions of the Company, net of $1,500 as escrow
expenses to the Escrow Agent and the remaining 10% of the Purchase Price as
directed by Union Atlantic, L.C. and deliver the opinion, the Unit Warrant and
the supplemental prospectus to the Purchaser.
Article III
MISCELLANEOUS
3.1. 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 an extension of the time
for performance of any other obligation or act.
3.2. All notices or other communications required or permitted hereunder shall
be in writing, and shall be sent by fax, overnight courier, registered or
certified mail, postage prepaid, return receipt requested, and shall be deemed
received upon receipt thereof, as set forth in the Purchase Agreement.
3.3. This Escrow Agreement shall be binding upon and shall inure to the benefit
of the permitted successors and permitted assigns of the parties hereto.
3.4. 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 their respective agents duly authorized in writing
or as otherwise expressly permitted herein.
3.5. 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.
3.6. 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. Except as expressly set forth herein, any action
to enforce, arising out of, or relating in any way to, any provisions of this
Escrow Agreement shall be brought in the Federal or state courts of New York,
New York as is more fully set forth in the Purchase Agreement.
3.7. The Escrow Agent's duties hereunder may be altered, amended, modified or
revoked only by a writing signed by the Company, Purchaser and the Escrow Agent.
3.8. The Escrow Agent shall be obligated only for the performance of such duties
as are specifically set forth herein and may rely and shall be protected in
relying or refraining from acting on any instrument reasonably believed by the
Escrow Agent to be genuine and to have been signed or presented by the proper
party or parties. The Escrow Agent shall not be personally liable for any act
the Escrow Agent may do or omit to do hereunder as the Escrow Agent while acting
in good faith, excepting only its own gross negligence or willful misconduct,
and any act done or omitted by the Escrow Agent pursuant to the advice of the
Escrow Agent's attorneys-at-law (other than Escrow Agent itself) shall be
conclusive evidence of such good faith.
3.9. 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.
3.10. 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 or hereunder.
3.11. The Escrow Agent shall be entitled to employ such legal counsel and other
experts as the Escrow Agent may deem necessary properly to advise the Escrow
Agent in connection with the Escrow Agent's duties hereunder, may rely upon the
advice of such counsel, and may pay such counsel reasonable compensation
therefor. The Escrow Agent has acted as legal counsel for the Purchaser, and may
continue to act as legal counsel for the Purchaser, 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 Purchaser and
waives any claim that such representation represents a conflict of interest on
the part of the Escrow Agent. The Company understands that the Purchaser and the
Escrow Agent are relying explicitly on the foregoing provision in entering into
this Escrow Agreement.
3.12. 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 Purchaser. In the event of any such resignation, the Purchaser and the
Company shall appoint a successor Escrow Agent.
3.13. 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.
3.14. 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 State and City of New York in accordance with
the applicable procedure therefor.
3.15. The Company and the Purchaser 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 Escrow Agreement
as of this __ day of October, 2000.
Famous Fixins, Inc.
By:
▇▇▇▇▇ ▇▇▇▇▇, Chairman & CEO
Folkinburg Investments Limited
By:
Name:
Title:
ESCROW AGENT:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & GREEN, P.C.
By:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Authorized Signatory
EXHIBIT C
FORM OF OPINION OF THE COMPANY'S INDEPENDENT COUNSEL
[DATE]
[PURCHASER]
Re: Common Stock Purchase Agreement Between [PURCHASER] and Famous Fixins,
Inc.
Ladies and Gentlemen:
This opinion is furnished to you pursuant to the Common Stock Purchase
Agreement by and between [PURCHASER] (the "Purchaser") and Famous Fixins, Inc.
(the "Company"), dated as of October __, 2000 (the "Purchase Agreement"), which
provides for the issuance and sale by the Company of up to $5,000,000 of Common
Stock (the "Shares") of the Company and 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 Warrants issued by the Company at the Closing,
the Registration Rights Agreement between the Purchaser and the Company, dated
as of October __, 2000 (the "Registration Rights Agreement"), and the Escrow
Agreement between the Purchaser, the Company and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Green, P.C.,
dated as of October __, 2000 (the "Escrow Agreement", and together with the
Purchase Agreement, the Warrant 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 transactions contemplated thereby.
For purposes of this opinion, we have assumed that the Purchaser has all
requisite power and authority, and has taken any and all necessary corporate
action, to execute and deliver the Agreements, and we are assuming that the
representations and warranties made by the Purchaser 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 power and
authority (corporate and other) to carry on its business and to own, lease and
operate its properties and assets as described in the Company's SEC Documents.
The Company is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which the Company owns or leases
property, other than those in which the failure so to qualify would not have a
Material Adverse Effect.
2. The Company has the requisite corporate power and authority to enter into and
perform its obligations under the Agreements and to issue the 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, except that the
issuance of the Shares may be limited by corporate governance rules until the
receipt of stockholder approval. Each of the Agreements has been duly executed
and delivered by the Company and each of the Agreements 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 Shares, the Warrant and the
shares issuable upon exercise of the Warrant (the "Warrant Shares"), do not and
will not (i) result in a violation of the Company's Charter (the "Charter) 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 Charter or
Bylaws.
4. When issued and paid for, the Shares and 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 Charter
or Bylaws or, to our knowledge, in any agreement to which the Company is party.
5. To our knowledge, except as disclosed in the SEC Documents, there are no
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, nor has the Company received any written threat
of any such claims, actions, suits, proceedings, or investigations.
6. To our knowledge, there are no outstanding options, warrants, calls or
commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exchangeable for, or giving any right to
subscribe for or acquire any shares of Common Stock or contracts, commitments,
understanding, or arrangements by which the Company is or may become bound to
issue additional shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock, except as described in the SEC
Documents or the Agreements. 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.
7. The authorized capital stock of the Company consists of 25,000,000 shares of
Common Stock, $0.001 par value per share of which 13,866,264 shares are issued
and outstanding and no preferred stock of which none are outstanding.
Items 9 and 10 to be included in Opinion pursuant to Section 5.3 at each
Draw Down.
8. [The Registration Statement has been declared effective by the SEC and no
stop order is in effect with respect to the Registration Statement. Assuming
compliance by the Purchaser with the "Plan of Distribution" caption of the
Registration Statement and timely compliance by the Purchaser with all
prospectus delivery requirements, the Shares shall be freely transferable by
Purchaser.
9. Nothing has come to our attention that has caused us to believe that the
Registration Statement and the Prospectus at the time the Registration Statement
became effective and as of the date of this opinion contained or contains an
untrue statement of a material fact or omitted or omits 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; however,
we express no opinion with respect to the financial statements and the notes
thereto and the schedules and other financial and statistical data derived
therefrom included in the Registration Statement or the Prospectus.] [Items 9
and 10 to be included in Opinion pursuant to Section 5.3 at each Draw Down.]
This opinion is furnished to the Purchaser solely for its 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.
EXHIBIT D
DRAW DOWN NOTICE/COMPLIANCE CERTIFICATE
Famous Fixins, Inc.
The undersigned hereby certifies, with respect to shares of Common Stock of
Famous Fixins, Inc. (the "Company") issuable in connection with this Draw Down
Notice and Compliance Certificate dated _____________ (the "Notice"), delivered
pursuant to the Common Stock Purchase Agreement dated as of October __, 2000
(the "Agreement"), as follows:
1. The undersigned is the duly appointed Chief Executive Officer of the
Company.
2. The representations and warranties of the Company set forth in the
Agreement are true and correct in all material respects as though made on and as
of the date hereof and all SEC Documents are as represented in Section 3.1(f) of
the Agreement.
3. The Company has performed in all material respects all covenants and
agreements to be performed by the Company on or prior to the date of this Draw
Down Notice and has complied in all material respects with all obligations and
conditions contained in the Agreement.
4. The Investment Amount is $___________.
5. The Threshold Price, if any, is $__________.
6. The Draw Down Pricing Period shall commence on ____________.
The undersigned has executed this Certificate this ____ day of ________,
_____.
Famous Fixins, Inc.
Name:
Title:
EXHIBIT E
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 STATE SECURITIES LAWS IN RELIANCE UPON AN EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT PURSUANT TO REGULATION D 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 OR ANY APPLICABLE STATE LAWS. THIS WARRANT MAY
NOT BE EXERCISED BY OR ON BEHALF OF A UNITED STATES PERSON UNLESS REGISTERED
UNDER THE SECURITIES ACT OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE, AS
REQUIRED BY REGULATION D.
STOCK PURCHASE WARRANT
To Purchase __________ Shares of Common Stock of
FAMOUS FIXINS, INC.
THIS CERTIFIES that, for value received, ______________ (the "Holder"), is
entitled, upon the terms and subject to the limitations on exercise and the
conditions hereinafter set forth, at any time on or after the date hereof (the
"Initial Exercise Date") and on or prior to the close of business on _______ __,
200_ (the "Termination Date") but not thereafter, to subscribe for and purchase
from Famous Fixins, Inc., a corporation incorporated in the State of New York
(the "Company"), up to ___________ shares (the "Warrant Shares") of Common
Stock, $0.001 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
$____. 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 Common Stock Purchase
Agreement dated as of October __, 2000 pursuant to which this Warrant has been
issued (the "Purchase Agreement"), the Purchase Agreement shall control.
Capitalized terms used and not otherwise defined herein shall have the meanings
set forth for such terms in the Purchase Agreement.
1. 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 the purchase rights represented
by this Warrant will, upon exercise of the purchase 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.
(a) 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.
(b) 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.
(c) 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 on
the Nasdaq Stock Market, or if the Common Stock is not traded on the
Nasdaq Stock Market, then the Principal Market in terms of volume, and
converted into US Dollars;
(B) = the Exercise Price of the Warrants; and
(X) = the number of shares issuable upon exercise of the Warrants in
accordance with the terms of this Warrant.
(d)Notwithstanding anything herein to the contrary, in no event shall the
holder be permitted to exercise this Warrant for shares of Common Stock to the
extent that (x) the number of shares of Common Stock owned by such Holder (other
than shares of Common Stock issuable upon exercise of this Warrant) plus (y) the
number of shares of Common Stock issuable upon exercise of this Warrant, would
be equal to or exceed 9.9% of the number of shares of Common Stock then issued
and outstanding, including shares issuable upon exercise of this Warrant held by
such holder after application of this Section 3(d). As used herein, beneficial
ownership shall be determined in accordance with Section 13(d) of the Exchange
Act. To the extent that the limitation contained in this Section 3(d) applies,
the determination of whether this Warrant is exercisable (in relation to other
securities owned by the holder) and of which a portion of this Warrant is
exercisable shall be in the sole discretion of such holder, and the submission
of a Notice of Exercise shall be deemed to be such holder's determination of
whether this Warrant is exercisable (in relation to other securities owned by
such holder) and of which portion of this Warrant is exercisable, in each case
subject to such aggregate percentage limitation, and the Company shall have no
obligation to verify or confirm the accuracy of such determination. Nothing
contained herein shall be deemed to restrict the right of a holder to exercise
this Warrant into shares of Common Stock at such time as such exercise will not
violate the provisions of this Section 3(d). The provisions of this Section 3(d)
may be waived by the Holder of this Warrant upon, at the election of the Holder,
with 61 days' prior notice to the Company, and the provisions of this Section
3(d) shall continue to apply until such 61st day (or such later date as may be
specified in such notice of waiver). No exercise of this Warrant in violation of
this Section 3(d) but otherwise in accordance with this Warrant shall affect the
status of the Common Stock issued upon such exercise as validly issued,
fully-paid and nonassessable.
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 such fraction multiplied by
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 stockholder 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. In the event that the Holder wishes to transfer a
portion of this Warrant, the Holder shall transfer at least 50,000 shares
underlying this Warrant to any such transferee. 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.
(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 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.
12. 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 12.
For purposes of this Section 12, "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.
13. Voluntary Adjustment by the Company. The Company may at any time during
the term of this Warrant reduce the then current Exercise Price to any amount
and for any period of time deemed appropriate by the Board of Directors of the
Company.
14. Notice of Adjustment. Whenever the number of Warrant Shares or number
or kind of securities or other property purchasable upon the exercise of this
Warrant or the Exercise Price is adjusted, as herein provided, the Company shall
promptly mail by registered or certified mail, return receipt requested, to the
holder of this Warrant notice of such adjustment or adjustments setting forth
the number of Warrant Shares (and other securities or property) purchasable upon
the exercise of this Warrant and the Exercise Price of such Warrant Shares (and
other securities or property) after such adjustment, setting forth a brief
statement of the facts requiring such adjustment and setting forth the
computation by which such adjustment was made. Such notice, in the absence of
manifest error, shall be conclusive evidence of the correctness of such
adjustment.
15. Notice of Corporate Action. If at any time:
(a) the Company shall take a record of the holders of its Common Stock for
the purpose of entitling them to receive a dividend or other distribution, or
any right to subscribe for or purchase any evidences of its indebtedness, any
shares of stock of any class or any other securities or property, or to receive
any other right, or
(b) there shall be any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
consolidation or merger of the Company with, or any sale, transfer or other
disposition of all or substantially all the property, assets or business of the
Company to, another corporation or,
(c) there shall be a voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least 20 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 20
days' prior written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause also shall specify (i) the date
on which any such record is to be taken for the purpose of such dividend,
distribution or right, the date on which the holders of Common Stock shall be
entitled to any such dividend, distribution or right, and the amount and
character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such disposition, dissolution, liquidation or winding
up. Each such written notice shall be sufficiently given if addressed to Holder
at the last address of Holder appearing on the books of the Company and
delivered in accordance with Section 17(d).
16. Authorized Shares. The Company covenants that during the period the
Warrant is outstanding, it will reserve from its authorized and unissued Common
Stock a sufficient number of shares to provide for the issuance of the Warrant
Shares upon the exercise of any purchase rights under this Warrant. The Company
further covenants that its issuance of this Warrant shall constitute full
authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for the Warrant
Shares upon the exercise of the purchase rights under this Warrant. The Company
will take all such reasonable action as may be necessary to assure that such
Warrant Shares may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of the Principal Market
upon which the Common Stock may be listed.
The Company shall not by any action, including, without limitation,
amending its articles 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 commercially reasonable 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.
Before taking any action which would result in an adjustment in the number
of shares of Common Stock for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or exemptions
thereof, or consents thereto, as may be necessary from any public regulatory
body or bodies having jurisdiction thereof.
17. Miscellaneous.
(a) Jurisdiction. This Warrant shall be binding upon any successors or
assigns of the Company. This Warrant shall constitute a contract under the laws
of New York, 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 willfully 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 disbursements are found in a final
non-appealable judgment by a court to have resulted from Holder's negligence,
bad faith or willful misconduct in its capacity as a stockholder or
warrantholder of the Company.
(i) Amendment. This Warrant may be modified or amended or the provisions
hereof waived with the written consent of the Company and the Holder.
(j) Severability. Wherever possible, each provision of this Warrant shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Warrant shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provisions
or the remaining provisions of this Warrant.
(k) Headings. The headings used in this Warrant are for the convenience of
reference only and shall not, for any purpose, be deemed a part of this Warrant.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its officer thereunto duly authorized.
Dated: October __, 2000
FAMOUS FIXINS, INC.
By:____________________________
Name:
Title:
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.