The securities represented by this Warrant have not been registered under the Securities Act of
1933, as amended (the Act), or under the provisions of any applicable state securities laws, but
have been acquired by the registered holder hereof for purposes of investment and in reliance on
statutory exemptions under the Act, and under any applicable state securities laws. These
securities and the securities issued upon exercise hereof may not be sold, pledged, transferred or
assigned, nor may this Warrant be exercised, except in a transaction which is exempt under the
provisions of the Act and any applicable state securities laws or pursuant to an effective
Date of Original Issuance: September 15, 2006
|Amended and Restated as of: December 20, 2006
||Certificate No.: A-2
For value received, The Fashion House Holdings, Inc., a Colorado
), hereby grants to Westrec Capital Partners, LLC, a Delaware
), or its permitted transferees and assigns, the right to purchase from
the Company a total of Nine Million (9,000,000) shares of the Companys common stock (Common
), at a price per share equal to $0.40 (the Initial Exercise Price
exercise price and number of Warrant Shares (and the amount and kind of other securities) for which
this Warrant is exercisable shall be subject to adjustment as provided in Section 2 and Section
3(a)(iii) hereof. This Warrant is being issued in connection with that certain Credit Enhancement
Agreement between Westrec and the Company dated as of September 15, 2006 (the Agreement
as amended and restated as of December ___, 2006. Certain capitalized terms used herein are
defined in Section 4 hereof; capitalized terms used but not defined herein have the meanings
ascribed to them in the Agreement.
This Warrant is subject to the following provisions:
SECTION 1. Exercise of Warrant.
(a) Terms of Warrant; Exercise Period. Subject to the terms of this Agreement, the
Registered Holder shall have the right, commencing on the date hereof and expiring at 11:59 P.M.
PST on September 15, 2013 (the Expiration Date), to exercise this Warrant, from time to
time and in whole or in part, and to receive from the Company the number of Warrant Shares that the
Registered Holder may at the time otherwise be entitled to receive on exercise of this Warrant and
payment of the Exercise Price then in effect for the Warrant Shares. To the extent not exercised
prior to the Expiration Date, this Warrant shall become void as to any then unexercised Warrant
Shares, and all rights hereunder in respect of such then unexercised Warrant Shares under this
Warrant shall cease as of the Expiration Date.
(b) Exercise Procedure.
(i) This Warrant shall be deemed to have been exercised on the date specified in a written
notice from the Registered Holder to the Company (the Exercise Time) and within three
business days following the Exercise Time, the Registered Holder shall deliver the following to the
(A) a completed Exercise Agreement, as described in Section 1(c) below;
(B) this Warrant; and
(C) either (I) a wire transfer or a check payable to the Company in an amount equal to the
product of the Exercise Price (as such term is defined in Section 2) multiplied by the number of
Warrant Shares being purchased upon such exercise (the Aggregate Exercise Price), (II)
the surrender to the Company of shares of Common Stock of the Company having a Fair Market Value
equal to the Aggregate Exercise Price, or (III) the delivery of a notice to the Company that the
Registered Holder is exercising the Warrant by authorizing the Company to reduce the number of
Warrant Shares subject to the Warrant by that number of shares having an aggregate Fair Market
Value in excess of the total Exercise Price for such shares equal to the Aggregate Exercise Price
(a Net Exercise).
(ii) Certificates for Warrant Shares purchased upon exercise of this Warrant shall be
delivered by the Company to the Registered Holder within five business days after the date of the
Exercise Time. Unless this Warrant has expired or all of the purchase rights represented hereby
have been exercised, the Company shall prepare a new Warrant, substantially identical hereto,
representing the rights formerly represented by this Warrant that have not expired or been
exercised and shall, within such five-day period, deliver such new Warrant to the Person designated
for delivery in the Exercise Agreement.
(iii) The Warrant Shares issuable upon the exercise of this Warrant shall be deemed to have
been issued to the Registered Holder at the Exercise Time, and the Registered Holder shall be
deemed for all purposes to have become the record holder of such Warrant Shares at the Exercise
(iv) The Company shall not close its books against the transfer of this Warrant or of any
Warrant Shares issued or issuable upon the exercise of this Warrant in any manner which interferes
with the timely exercise of this Warrant.
(v) The Company shall make any governmental filings or obtain any governmental approvals
necessary in connection with the exercise of this Warrant by the Registered Holder.
(vi) The Company shall at all times reserve and keep available out of its authorized but
unissued capital stock, solely for the purpose of issuance upon the exercise of this Warrant, the
maximum number of Warrant Shares issuable upon the exercise of this Warrant. All Warrant Shares
that are so issuable shall, when issued and upon the payment
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of the Exercise Price therefor, be duly and validly issued, fully paid and nonassessable and
free from all taxes, liens and charges. The Company shall take all such actions as may be
necessary to assure that all such Warrant Shares may be so issued without violation by the Company
of any applicable law or governmental regulation or any requirements of any domestic securities
exchange upon which securities of the Company may be listed (except for official notice of issuance
which shall be immediately delivered by the Company upon each such issuance).
(c) Exercise Agreement. Upon any exercise of this Warrant, the Registered Holder
shall deliver an Exercise Agreement in the form set forth in Exhibit I hereto, except that
if the Warrant Shares are not to be issued in the name of the Person in whose name this Warrant is
registered, the Exercise Agreement shall also state the name of the Person to whom the certificates
for the Warrant Shares are to be issued, and if the number of Warrant Shares to be issued does not
include all the Warrant Shares purchasable hereunder, it shall also state the name of the Person to
whom a new Warrant for the unexercised portion of the rights hereunder is to be issued.
SECTION 2. Adjustment of Exercise Price and Number of Shares. In order to prevent
dilution of the rights granted under this Warrant, the Initial Exercise Price shall be subject to
adjustment from time to time as provided in this Section 2 (such price or such price as last
adjusted pursuant to the terms hereof, as the case may be, is herein called the Exercise
Price), and the number of Warrant Shares obtainable upon exercise of this Warrant shall be
subject to adjustment from time to time as provided in this Section 2.
(a) Vesting of Warrant Shares. This Warrant may be exercised from time to time only
as to Warrant Shares that have previously vested at the time this Warrant is exercised. The
Warrant Shares (as initially stated above to aggregate 9,000,000 in number, the Initial Number)
shall vest hereunder in the following percentages on the following dates: 20% of the Initial Number
vested as of September 15, 2006; an additional 20% of the Initial Number vested as of November 14,
2006; and an additional 20% of the Initial Number shall vest on each of December 14, 2006, January
13, 2007 and February 12, 2007, such that the entire Initial Number shall be vested as of February
12, 2007. Notwithstanding the foregoing sentence, however, (i) no previously unvested Warrant
Shares shall vest hereunder after the Agreement Termination Date (as defined in the Agreement), and
(ii) the maximum number of Warrant Shares vested under this Section 2(a) shall not exceed (at any
time such number is calculated) the number equal to the product of (A) the highest amount of
Aggregate Principal Owed (as defined in the Agreement) outstanding at any time since the date of
the Original Agreement (September 15, 2006) (at the time such number is calculated) (the
Highest Aggregate Principal Owed), times (B) the aggregate percentage of Warrant Shares
vested under the previous sentence, it being the intention of the Company and Westrec that the
maximum number of Warrant Shares that can possibly vest under this Section 2(a) shall be the lesser
of 9,000,000 or the number equal to the number of dollars in the Highest Aggregate Principal Owed.
By way of illustration of this Section 2(a), if the Agreement Termination Date occurs after
December 14, 2006 but before January 13, 2007, and the Highest Aggregate Principal Owed prior to
the Agreement Termination Date is $3,500,000, the maximum
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number of Warrant Shares that would have vested under this Section 2(a) would be 2,100,000
(i.e., 60% of 3,500,000).
(b) Conditional Increases in Vested Warrant Shares. The number of Warrant Shares
subject to this Warrant shall be increased by each of the following amounts: if the Agreement
Termination Date (as defined in the Agreement) has not occurred on or before September 14, 2007, an
additional number of Warrant Shares equal to 3% of the Warrant Shares vested under Section 2(a);
plus if the Agreement Termination Date has not occurred on the October 14, 2007, an additional
number of Warrant Shares equal to 5% of the Warrant Shares vested under Section 2(a); plus if the
Agreement Termination Date has not occurred on the November 13, 2007, an additional number of
Warrant Shares equal to 8% of the Warrant Shares vested under Section 2(a); plus an additional
number of Warrant Shares equal to 10% of the Warrant Shares vested under Section 2(a) on December
13, 2007 and on each 30th day thereafter until the Agreement Termination Date occurs.
All Warrant Shares arising under this Section 2(b) shall be immediately, automatically and fully
vested, and shall be in addition to any Warrant Shares that may have become, or may thereafter
become, vested under Section 2(a) or elsewhere hereunder.
(c) Reorganization, Reclassification, Consolidation, Merger or Sale. In case of any
reclassification, capital reorganization, consolidation, merger, sale of all or substantially all
of the Companys assets to another Person or any other change in the Common Stock of the Company,
other than as a result of a subdivision, combination, or stock dividend provided for in Section
2(d) below (any of which, a Change Event), then, as a condition of such Change Event,
lawful provision shall be made, and duly executed documents evidencing the same from the Company or
its successor shall be delivered to the Registered Holder, so that the Registered Holder shall have
the right at any time prior to the Expiration Date to purchase, at a total price equal to that
payable upon the exercise of this Warrant (subject to adjustment of the then-applicable Exercise
Price as provided in Section 2), the kind and amount of shares of stock and other securities and
property receivable in connection with such Change Event by a holder of the same number of shares
of Common Stock as were purchasable by the Registered Holder immediately prior to such Change
Event. In any such case appropriate provisions shall be made with respect to the rights and
interest of the Registered Holder so that the provisions hereof shall thereafter be applicable with
respect to any shares of stock or other securities and property deliverable upon exercise hereof,
and appropriate adjustments shall be made to the then-applicable Exercise Price payable hereunder,
provided the aggregate purchase price shall remain the same.
(d) Subdivisions, Combinations and Other Issuances. If the Company shall at any time
prior to the Expiration Date (i) subdivide its Common Stock, by split up or otherwise, or combine
its Common Stock, or (ii) issue additional shares of its Common Stock or other equity securities as
a dividend with respect to any shares of its Common Stock, the number of shares of Common Stock
issuable on the exercise of this Warrant shall forthwith be proportionately increased in the case
of a subdivision or stock dividend, or proportionately decreased in the case of a combination.
Appropriate adjustments shall also be made to the then-applicable Exercise Price payable per share,
but the aggregate purchase price payable for the total number of Warrant Shares purchasable under
this Warrant (as
- 4 -
adjusted) shall remain the same. Any adjustment under this Section 2(d) shall become
effective at the close of business on the date that the subdivision, combination, issuance or other
event triggering such adjustment becomes effective, or in the case of dividends as of the record
date of such dividend, or in the event that no dividend record date is fixed, upon the making of
(e) Additional Anti-Dilution Provision. This Section 2(e) shall apply and control
notwithstanding anything to the contrary expressed or implied herein. If the Company effects any
transaction that is not covered by Section 2(c) or Section 2(d) above and that includes (or has the
direct or indirect effect of) an issuance of Common Stock or warrants, options or other rights to
acquire Common Stock or other securities convertible into Common Stock (collectively, Equity
Securities) at a per share price that is less than the then-applicable Exercise Price
hereunder (a Reduced Share Price), the then-applicable Exercise Price hereunder shall
automatically then be such Reduced Share Price, and the then-applicable number of Warrant Shares
hereunder, including, without limitation, each of the then-applicable numbers of increased Warrant
Shares set forth in Section 2(b) and in Section 3(a)(iii)above, shall be increased in each case to
the number that results from dividing the number in question by a fraction, the numerator of which
is the Reduced Share Price and the denominator of which is the then-applicable Exercise Price. If
the Company effects any transaction that is covered by Section 2(c) or Section 2(d) above and that
includes (or has the direct or indirect effect of) an issuance of Equity Securities at a Reduced
Share Price, the number of Warrant Shares and the then-current Exercise Price shall be adjusted as
set forth in such Sections, unless the increase to the number of Warrant Shares and the reduction
of the then-current Exercise Price would be less than would occur under the previous sentence, in
which case, the previous sentence shall apply in lieu of such increase and reduction determined
under Section 2(c) or 2(d) as the case may be. This Section 2(e) shall not apply, however, to the
issuance or sale of Common Stock pursuant to options or warrants therefor outstanding and disclosed
to Westrec on or before September 15, 2006.
(f) Issuance of New Warrant. Upon the occurrence of any of the events listed in this
Section 2 that results in an adjustment of the type, number or exercise price of the securities
underlying this Warrant, the Registered Holder shall have the right to receive a new warrant
reflecting such adjustment upon the Registered Holder tendering this Warrant in exchange. The new
warrant shall otherwise have terms identical to this Warrant.
(i) The Company shall give written notice to the Registered Holder of this Warrant at least 10
days prior to the date on which the Company closes its books or takes a record for determining
rights to vote with respect to any event described in this Section 2 or any dissolution or
(ii) The Company shall also give written notice to the Registered Holder of this Warrant at
least 10 days prior to the date on which any event described in this Section 2 or any dissolution
or liquidation shall take place.
- 5 -
SECTION 3. Registration Rights.
(a) Piggyback Registration.
(i) If, at any time commencing on the date hereof and expiring on the Expiration Date, the
Company proposes to file a Registration Statement (other than under a Registration Statement
pursuant to Form S-8 or Form S-4) to register its securities, and all of the Registrable Securities
are not then covered by an effective Registration Statement, the Company shall: (A) give written
notice by registered mail, at least 20 days prior to the filing of such Registration Statement to
the Holders of its intention to do so; and (B) include all Registrable Securities in such
Registration Statement with respect to which the Company has received written requests for
inclusion therein within 15 days of actual receipt of the Companys notice. Notwithstanding the
foregoing, the Company need not include more of the Registrable Securities in Amendment No. 1 to
the Registration Statement on Form SB-2 filed by the Company on November 4, 2006 (File No.
333-136138) than were included in such Amendment.
(ii) The Company shall have the right at any time after it shall have given written notice
pursuant to this Section 3(b) (irrespective of whether a written request for inclusion of any
Registration Securities shall have been made) to elect not to file any such Registration Statement,
or to withdraw the same after the filing but prior to the effective date thereof.
(iii) If the Registration Statement pursuant to this Section 3(b) relates to a firmly
underwritten public offering and the managing underwriter(s) advise the Company in writing that in
their opinion the number of securities proposed to be included in the Registration Statement
(including the Registrable Securities) exceeds the number of securities which can be sold therein
without adversely affecting the marketability of the public offering, the Company will include in
such Registration Statement the number of securities requested to be included which in the opinion
of such underwriter(s) can be sold without adversely affecting the marketability of the offering,
pro rata among the respective holders of all securities proposed to be included in the Registration
(b) Covenants of the Company with Respect to Registration. In connection with each
Registration under this Section 3, the Company covenants and agrees as follows:
(i) The Company shall use its best efforts to have any Registration Statement declared
effective at the earliest practicable time. The Company will promptly notify each Holder of
included Registrable Securities and confirm such advice in writing, (A) when such Registration
Statement becomes effective, (B) when any post-effective amendment to such Registration Statement
becomes effective and (C) of any request by the SEC for any amendment or supplement to such
Registration Statement or any prospectus relating thereto or for additional information.
(ii) The Company shall furnish to each Holder of included Registrable Securities such number
of copies of such Registration Statement and of each such amendment and supplement thereto (in each
case including each preliminary prospectus
- 6 -
and summary prospectus) in conformity with the requirements of the Act, and such other
documents as such Holders may reasonably request in order to facilitate their disposition of the
(iii) If the Company shall fail to comply with the provisions of Sections 3(a), 3(b) and/or
3(c) of this Warrant, the Company shall, in addition to any other equitable or other relief
available to the Holders, be liable for any or all special and consequential damages sustained by
the Holders requesting registration of their Registrable Securities.
(iv) If at any time the SEC should institute or threaten to institute any proceedings for the
purpose of issuing a stop order suspending the effectiveness of any Registration Statement, the
Company will promptly notify each Registered Holder of Registrable Securities and will use all
reasonable efforts to prevent the issuance of any such stop order or to obtain the withdrawal
thereof as soon as possible.
(v) The Company will use its good faith reasonable efforts and take all reasonably necessary
action which may be required in qualifying or registering the Registrable Securities included in a
Registration Statement for offering and sale under the securities or blue sky laws of such states
as reasonably are required by the Holders, provided that the Company shall not be obligated to
execute or file any general consent to service of process or to qualify as a foreign corporation to
do business under the laws of any such jurisdiction.
(vi) The Company shall use its good faith reasonable efforts to cause such Registrable
Securities covered by a Registration Statement to be registered with or approved by such other
governmental agencies or authorities of the United States or any State thereof as may be reasonably
necessary to enable the Holder(s) thereof to consummate the disposition of such Registrable
(vii) The Company shall furnish to each Holder that has included Registrable Securities in a
Registration Statement and to the managing underwriter, if any, a signed counterpart, addressed to
such Holder or underwriter, of (i) an opinion of counsel to the Company, dated the effective date
of such Registration Statement (and, if such Registration Statement includes an underwritten public
offering, an opinion dated the date of the closing under the underwriting agreement), and (ii) a
Cold Comfort letter dated the effective date of such Registration Statement (and, if such
registration includes an underwritten public offering, a letter dated the date of the closing under
the underwriting agreement) signed by the independent public accountants who have issued a report
on the Companys financial statements included in such Registration Statement, in each case
covering substantially the same matters with respect to such Registration Statement and, in the
case of such accountants letter, with respect to events subsequent to the date of such financial
statements, as are customarily covered in opinions of issuers counsel and in accountants letters
delivered to underwriters in underwritten public offerings of securities.
(viii) The Company shall deliver promptly to each Holder that has included Registrable
Securities in a Registration Statement and to the managing underwriter, if any, copies of all
correspondence between the SEC and the Company, its
- 7 -
counsel or auditors and all non-privileged memoranda relating to discussions with the SEC or
its staff with respect to the Registration Statement and permit each such Holder and underwriter to
do such investigation, upon reasonable advance notice, with respect to information contained in or
omitted from the Registration Statement as it deems reasonably necessary to comply with applicable
securities laws or rules of the NASD. Such investigation shall include access to books, records and
properties and opportunities to discuss the business of the Company with its officers and
independent auditors, all to such reasonable extent and at such reasonable times and as often as
any such Holder shall reasonably request.
(ix) All expenses incident to the Companys performance of or compliance with this Agreement,
including without limitation all registration and filing fees, fees and expenses of compliance with
securities or blue sky laws, printing expenses, messenger and delivery expenses, and fees and
disbursements of counsel for the Company and all independent certified public accountants,
underwriters (excluding discounts and commissions) and other Persons retained by the Company will
be borne by the Company. In no event shall the Company be obligated to be pay any discounts or
commissions with respect to the Registrable Shares sold by any Holder. In connection with each
Registration Statement, the Company will reimburse the Holders of included Registrable Securities
for the reasonable fees and disbursements of one counsel chosen by the Holders of a majority of the
included Registrable Securities.
(c) Indemnification and Contribution.
(i) The Company shall indemnify each Holder of the Registrable Securities included in any
Registration Statement, each of its officers, directors and agents (including brokers and
underwriters selling Registrable Securities on behalf of the Holder), and each Person, if any, who
controls such Holder within the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act against all losses, claims, damages, expenses and/or liabilities (including all expenses
reasonably incurred in investigating, preparing or defending against any claim whatsoever) to which
any of them may become subject under the Act, the Exchange Act, any state securities laws or
otherwise, arising from such Registration Statement, including, without limitation, any and all
losses, claims, damages, expenses and liabilities caused by (I) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement, or (II) any omission
or alleged omission to state in the Registration Statement a material fact required to be stated
therein or necessary to make the statements therein not misleading in light of the circumstances
under which they were made, except insofar as such losses, claims, damages or liabilities are
caused by any such untrue statement or omission or alleged untrue statement or omission based upon
information furnished in writing to Company by the Holder expressly for use therein.
(ii) If requested by the Company prior to the filing of any Registration Statement covering
the Registrable Securities, each Holder of the Registrable Securities to be included in such
Registration Statement shall severally, and not jointly, indemnify the Company, its officers and
directors and each Person, if any, who controls the Company within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act, against
- 8 -
all losses, claims, damages, expenses and/or liabilities (including all expenses reasonably
incurred in investigating, preparing or defending against any claim whatsoever) to which they may
become subject under the Act, the Exchange Act or otherwise, arising from written information
furnished by such Holder, or their successors or assigns, for specific inclusion in such
Registration Statement, except that the maximum amount which may be recovered from each Holder
pursuant to this Section 3(d)(ii) or otherwise shall be limited to the amount of net proceeds
received by the Holder from the sale of the Registrable Securities under such Registration
(iii) In case any proceeding (including any governmental investigation) shall be instituted
involving any Person in respect of which indemnity may be sought pursuant to this Section 3(c),
such Person (an Indemnified Party) shall promptly notify the Person against whom such
indemnity may be sought (the Indemnifying Party) in writing and the Indemnifying Party
shall assume the defense thereof, including the employment of counsel reasonably satisfactory to
such Indemnified Party, and shall assume the payment of all fees and expenses; provided that the
failure of any Indemnified Party so to notify the Indemnifying Party shall not relieve the
Indemnifying Party of its obligations hereunder except to the extent (and only to the extent that)
that the Indemnifying Party is materially prejudiced by such failure to notify. In any such
proceeding, any Indemnified Party shall have the right to retain its own counsel, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party unless (A) the
Indemnifying Party and the Indemnified Party shall have mutually agreed to the retention of such
counsel or (B) in the reasonable judgment of such Indemnified Party representation of both parties
by the same counsel would be inappropriate due to actual or potential differing interests between
them. It is understood that the Indemnifying Party shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) at any time for all
such Indemnified Parties (including in the case of Holder, all of its officers, directors and
controlling persons) and that all such fees and expenses shall be reimbursed as they are incurred.
In the case of any such separate firm for the Indemnified Parties, the Indemnified Parties shall
designate such firm in writing to the Indemnifying Party. The Indemnifying Party shall not be
liable for any settlement of any proceeding effected without its written consent (which consent
shall not be unreasonably withheld or delayed), but if settled with such consent, or if there be a
final judgment for the plaintiff, the Indemnifying Party shall indemnify and hold harmless such
Indemnified Parties from and against any loss or liability (to the extent stated above) by reason
of such settlement or judgment. No Indemnifying Party shall, without the prior written consent of
the Indemnified Party, effect any settlement of any pending or threatened proceeding in respect of
which any Indemnified Party is or could have been a party and indemnity could have been sought
hereunder by such Indemnified Party, unless such settlement includes an unconditional release of
such Indemnified Party from all liability arising out of such proceeding.
(iv) To the extent any indemnification by an Indemnifying Party is prohibited or limited by
law, the Indemnifying Party agrees to make the maximum contribution with respect to any amounts for
which, he, she or it would otherwise be liable under this Section 3(c) to the fullest extent
permitted by law; provided, however, that (A)
- 9 -
no contribution shall be made under circumstances where a party would not have been liable for
indemnification under this Section 3(c) and (B) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning used in the Securities Act) shall be entitled to
contribution from any party who was not guilty of such fraudulent misrepresentation.
(d) Nothing contained in this Agreement shall be construed as requiring the Holders to
exercise their Warrants prior to the filing of any Registration Statement or the effectiveness
(e) The Company shall not, directly or indirectly, enter into any merger, business combination
or consolidation in which (i) the Company shall not be the surviving corporation and (ii) the
shareholders of the Company are to receive, in whole or in part, capital stock or other securities
of the surviving corporation, unless the surviving corporation shall, prior to such merger,
business combination or consolidation, agree in writing to assume the obligations of the Company
under this Agreement, and for that purpose references hereunder to Registrable Securities
shall be deemed to include the securities which the Holders would be entitled to receive in
exchange for Registrable Securities under any such merger, business combination or consolidation,
provided that to the extent such securities to be received are convertible into shares of Common
Stock of the issuer thereof, then any such shares of Common Stock as are issued or issuable upon
conversion of said convertible securities shall also be included within the definition of
SECTION 4. Definitions. The following terms have the meanings set forth below:
Act means the Securities Act of 1933, as amended.
Exchange Act means the Securities Exchange Act of 1934, as amended.
Fair Market Value shall be determined on a per Share basis as of the close of the
business day preceding the date of exercise, which determination shall be made as follows: (A) if
the Common Stock is listed on a national securities exchange or admitted to unlisted trading
privileges on such an exchange or quoted on the The Nasdaq Stock Market, the Fair Market Value
shall be the last reported sale price of that security on such exchange or system on such day or,
if no such sale is made on such day, the average of the highest closing bid and lowest asked price
for such day on such exchange or system; (b) if the Common Stock is not so listed or quoted or
admitted to unlisted trading privileges, the Fair Market Value shall be the average of the last
reported highest bid and lowest asked prices quoted on the Nasdaq Electronic Bulletin Board, or, if
not so quoted, then by the National Quotation Bureau, Inc. on such day; or (c) if the Common Stock
is not so listed or quoted or admitted to unlisted trading privileges and bid and asked prices are
not reported, the Fair Market Value shall be determined by the mutual agreement of Registered
Holder and the Company; provided, however, that if they fail to reach such a mutual agreement
within fifteen (15) days, Registered Holder shall designate an independent third-party appraiser to
determine the Fair Market Value, the determination of which shall be conclusive and binding upon
Registered Holder and the Company, and the fees and expenses of which
shall be borne by the Company.
- 10 -
Holders means the Registered Holder, and the registered holders of all other
Warrants (including Additional Warrants) originally issued pursuant the Agreement, and the
registered holders of the Registrable Securities.
Person means an individual, a limited liability company, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization and a government or any department
or agency thereof.
Registered Holder means the registered holder of this Warrant.
Registrable Securities means the Warrant Shares and any securities issued with
respect to the Warrant Shares by virtue of a stock dividend, stock split, reclassification or
reorganization, provided that the Warrant Shares and such other securities shall no longer by
Registrable Securities once they have been sold or transferred pursuant to an effective
Registration Statement under the Act or pursuant to Rule 144.
Registration shall mean a registration of Registrable Securities under the Act
pursuant to Section 3 of this Agreement.
Registration Statement shall mean the Registration Statement, as amended from time
to time, filed with the SEC in connection with a Registration, and each prospectus that is used in
connection with such Registration Statement (including any preliminary prospectus).
Rule 144 means Rule 144 of the SEC under the Act.
SEC means the United States Securities and Exchange Commission, or any successor
Warrant means the right to purchase one or more Warrant Shares pursuant to the terms
of this Warrant, as the same may be transferred, divided or exchanged pursuant to the terms hereof.
Warrant Shares means shares of the Common Stock issuable upon exercise of the
Warrant; provided, however, that if there is a change such that the securities issuable upon
exercise of the Warrant are issued by a Person other than the Company or there is a change in the
class of securities so issuable, then the term Warrant Shares shall mean shares of the security
issuable upon exercise of the Warrant if such security is issuable in shares, or shall mean the
equivalent units in which such security is issuable if such security is not issuable in shares.
SECTION 5. No Voting Rights; Limitations of Liability. This Warrant shall not entitle
the holder hereof to any voting rights or other rights as a stockholder of the Company. No
provision hereof, in the absence of affirmative action by the Registered Holder to purchase Warrant
Shares, and no enumeration herein of the rights or privileges
- 11 -
of the Registered Holder shall give rise to any liability of such Registrable Holder for the
Exercise Price or as a stockholder of the Company.
SECTION 6. Warrant Transferable. Subject to compliance with applicable securities
laws and the terms of this Section 6, this Warrant and all rights hereunder are transferable, in
whole or in part, without charge to the Registered Holder upon surrender of this Warrant with a
properly executed Assignment (in the form of Exhibit II hereto) at the principal office of the
SECTION 7. Warrant Exchangeable for Different Denominations. This Warrant is
exchangeable, upon the surrender hereof by the Registered Holder at the principal office of the
Company, for new Warrants of like tenor representing in the aggregate the purchase rights
hereunder, and each of such new Warrants shall represent such portion of such rights as is
designated by the Registered Holder at the time of such surrender. The date the Company initially
issues this Warrant shall be deemed to be the Date of Issuance hereof regardless of the number of
times new certificates representing the unexpired and unexercised rights formerly represented by
this Warrant shall be issued. All Warrants representing portions of the rights hereunder are
referred to herein as the Warrants.
SECTION 8. Replacement. Upon receipt of evidence reasonably satisfactory to the
Company of the ownership and the loss, theft, destruction or mutilation of any certificate
evidencing this Warrant, and in the case of any such loss, theft or destruction, upon receipt of
indemnity reasonably satisfactory to the Company, or, in the case of any such mutilation upon
surrender of such certificate, the Company shall (at the expense of the Registered Holder) execute
and deliver in lieu of such certificate a new certificate of like kind representing the same rights
represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such
lost, stolen, destroyed or mutilated certificate.
SECTION 9. Notices. All notices, requests, deliveries, consents and other
communications provided for herein shall be in writing and shall be effective upon delivery in
person, faxed, or mailed by certified or registered mail, return receipt requested, postage
pre-paid, addressed as follows:
If to the Company, to:
The Fashion House Holdings, Inc.
6310 San Vicente Boulevard, Suite 330
Los Angeles, CA 90048-5499
Attn: John Hanna, CEO
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If to Westrec, to:
Westrec Capital Partners, LLC
16633 Ventura Boulevard, Sixth Floor
Encino, CA 91436
Attn: Gregory C. McPherson
Fax: (818) 907-1104
or, in any case, at such other address or addresses as shall have been furnished in writing to the
Company (in the case of a Registered Holder of Warrants) or to the Registered Holders of Warrants
(in the case of the Company) in accordance with the provisions of this paragraph.
SECTION 10. Amendment and Waiver. Except as otherwise provided herein, the provisions
of the Warrants may be amended and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only if the Company has obtained the written
consent of the Holders representing a majority of the Warrant Shares obtainable upon exercise of
the then-outstanding Warrants; provided, however, that no such action may change the Exercise Price
of the Warrants or the number of shares or class of capital stock obtainable upon exercise of each
Warrant without the written consent of all Holders.
SECTION 11. Descriptive Headings; Governing Law.
(a) The descriptive headings of the several Sections of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant.
(b) All issues and questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by, and construed in accordance with, the laws
of the State of California
, without giving effect to any choice of law or conflict of law rules or
provisions (whether of the State of California
or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of California
SECTION 12. Warrant Register. The Company shall maintain at its principal executive
office books for the registration and the registration of transfer of this Warrant. The Company
may deem and treat the Registered Holder as the absolute owner hereof (notwithstanding any notation
of ownership or other writing thereon made by anyone) for all purposes and shall not be affected by
any notice to the contrary.
SECTION 13. Fractions of Shares. The Company may, but shall not be required, to issue
a fraction of a Warrant Share upon the exercise of this Warrant in whole or in part. As to any
fraction of a share that the Company elects not to issue, the Company shall make a cash payment in
respect of such fraction in an amount equal to the same fraction of the market price of a Warrant
Share on the date of such exercise (as determined by the board of directors in its reasonable
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SECTION 14. Attorneys Fees. If any action, suit, arbitration or other proceeding is
instituted to remedy, prevent or obtain relief from a default in the performance by any party to
this Agreement of its obligations under this Agreement, the prevailing party shall recover all of
such partys attorneys fees incurred in each and every such action, suit, arbitration or other
proceeding, including any and all appeals or petitions therefrom. As used in this Section,
attorneys fees shall be deemed to mean the full and actual costs of any legal services actually
performed in connection with the matters involved calculated on the basis of the usual fee charged
by the attorney performing such services and shall not be limited to reasonable attorneys fees
as defined in any statute or rule of court.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed and attested by its duly
authorized officers and to be dated as of the Date of Issuance hereof.
||THE FASHION HOUSE HOLDINGS, INC.
||/s/ Michael McHugh
Name: Michael McHugh
||Title: Chief Financial Officer
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The undersigned, pursuant to the provisions set forth in the attached Warrant (Certificate No.
W-___), hereby subscribes for the purchase of
___ Warrant Shares covered by such Warrant and
makes payment herewith in full therefor at the price per share provided by such Warrant. Please
issue the Warrant Shares in the following names and amounts:
||Number of Warrant Shares
undersigned elects to pay the exercise price by Net Exercise:
___ Yes ___ No
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FOR VALUE RECEIVED, hereby sells, assigns and transfers all of
the rights of the undersigned under the attached Warrant (Certificate No. W-___) with respect to
the number of the Warrant Shares covered thereby set forth below, unto:
|Name of Assignee
||No. of Shares
The Assignee agrees to be bound by the terms of the Warrant.
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