AMENDED AND RESTATED
LICENSE AGREEMENT
THIS AMENDED AND RESTATED LICENSE AGREEMENT (this "Agreement") made and
entered into as of the 24th day of September, 1999, by and among CUMBERLAND
PACKING CORP., a New York corporation, with offices at 0 Xxxxxxxxxx Xxxxxx,
Xxxxxxxx, Xxx Xxxx 00000 ("Cumberland"), OLD FASHIONED SYRUP COMPANY, INC., a
Florida corporation, with offices at 0000 XX Xxxx Xxxxx Xxxxxxxxx, Xxxxx X00,
Xxxx Xxxxx, Xxxxxxx 00000 ("Licensee"), Licensee's sole shareholder, MERIDIAN
HOLDINGS, INC. a Florida corporation, with offices at 0000 XX Xxxx Xxxxx
Xxxxxxxxx, Xxxxx X00, Xxxx Xxxxx, Xxxxxxx 00000 ("Meridian") with respect to
Sections 1(p), 14, 15, 18, 19, 20 and 21 herein, and with respect to Sections 15
and 18 herein, Xxxx Xxxxxx and Xxxx Xxxxxxxxxx, the managing shareholders of
Meridian (the "Managing Shareholders"); with reference to the following
background:
A. WHEREAS, Cumberland is the owner of the Licensed Trademark (as such term
is defined below) throughout the world relating to the world renowned xxxx
"SWEET'N LOW" for use in connection with sugar-free reduced calorie sugar
substitutes and various other food items;
B. WHEREAS, Cumberland and Licensee previously entered into a License
Agreement dated as of November 28, 1998 (the "Original Agreement") whereby
Cumberland granted Licensee an exclusive license in the Licensed Territory to
manufacture and sell Licensed Product (as such terms are defined below) under
the Licensed Trademark;
C. WHEREAS, the Original Agreement required certain shareholders of
Licensee (the "Licensee Shareholders") to grant Cumberland a right of first
refusal with respect to the sale or exchange of their Licensee stock providing,
among other things, that if Cumberland did not exercise its right of first
refusal, the Licensee Shareholders were required to pay Cumberland a percentage
of the proceeds from the sale or exchange of their Licensee stock;
D. WHEREAS, the Licensee Shareholders subsequently restructured Licensee's
ownership by transferring their Licensee stock to Meridian in exchange for
Meridian stock and now Licensee is a wholly owned subsidiary of Meridian;
E. WHEREAS, in exchange for Cumberland's consent to the restructured
ownership, Cumberland has agreed to release the Licensee Shareholders from
certain obligations under the Original Agreement and Meridian agrees to grant
Cumberland the Warrant (defined below); and
F. WHEREAS, pursuant to the terms and conditions of this Agreement, the
parties hereto desire to amend and restate the Original Agreement as of the date
hereof.
NOW THEREFORE, for and in consideration of the covenants and obligations
hereinafter set forth, to be well and faithfully performed by the respective
parties hereto, the parties hereby mutually agree as follows, each intending to
be legally bound hereby:
1. Definitions. For purposes of this Agreement, the terms set forth below
shall have the meanings ascribed to them:
(a) "Affiliate" shall mean, with respect to any Person (as such term is
defined below), (i) any Person directly or indirectly controlling,
controlled by or under common control with such Person, (ii) any Person
owning or controlling 10% or more of the outstanding voting interests of
such Person, (iii) any officer, director or general partner of such Person,
(iv) any Person who is an officer, director, general partner, trustee, or
holder of 10% or more of the voting interests of any Person described in
clauses (i) through (iii) of this sentence or (v) any relatives, including
but not limited to, spouse, natural or adoptive lineal ancestors or
descendants, and trusts for his, her or their exclusive benefit, of any
Person described in clauses (i) through (v).
(b) "Agreement Year" shall mean any calendar year during the term of this
Agreement, with the first Agreement Year ending on December 31, 1999, and
each Agreement Year thereafter commencing on January 1 and ending on
December 31 of such year.
(c) "CPI" shall mean the Consumer Price Index for All Urban Consumers, All
U.S. Cities Average (1982-84 Base), as published by the U.S. Department of
Labor, Bureau of Labor Statistics, or any successor index thereto.
(d) "Governmental Agency" shall mean the U.S. Food and Drug Administration,
or its successor, and any other U.S. and foreign government, governmental
agency or authority that monitors, controls or otherwise regulates the
marketing, sale, distribution, purchase, consumption or use of the Licensed
Products in any jurisdiction.
(e) "License" shall mean the license granted by Cumberland to Licensee
pursuant to Section 2 hereof.
(f) "Licensed Product" shall mean the sugar-free, reduced calorie (as each
are defined by applicable Governmental Agency guidelines, laws, rules or
regulations) chocolate flavored syrup product, a sample of the formulation
of which already has been approved by Cumberland, as the same may be
amended pursuant to the terms of this Agreement.
(g) "Licensed Territory" shall initially mean the United States of America
and Canada, and such other territories as may be mutually agreed upon in
writing, to the extent that Cumberland has rights to the Licensed Trademark
therein.
(h) "Licensed Trademark" shall mean the xxxx "SWEET'N LOW " used alone or
in combination with the design of a musical bar and treble clef solely for
use in connection with the manufacture and sale of the Licensed Product.
(i) "Minimum Royalty" shall mean the Minimum Royalty applicable to each
Agreement Year pursuant to Section 5 herein.
(j) "Net Sales" shall mean the total gross invoice price of the sales of
the Licensed Product, less trade discounts and allowances (not to exceed
10% per shipment) and/or refunds for goods returned in the ordinary course
of business, if actually taken, to the extent such items are included in
the gross invoice price. There shall be no reduction from the total gross
invoice price for any other item, including without limitation, coupons,
advertising or other similar items thereto, except for items given to
charity by Licensee, used as samples in promotional tastings and such other
items as may be agreed to by Cumberland in writing.
(k) "Person" shall mean any natural person, partnership, corporation,
limited liability company, trust or other entity or association.
(l) "Prime Rate" shall mean the interest rate published from time to time
by Chase Manhattan Bank, N.A., or its successor, as its prime lending rate.
(m) "Promotional Materials" shall mean all packaging, labels, wrappers,
letterhead, business cards, signs, bulletins, circulars, selling sheets,
brochures, print and broadcast media advertisements and all other
promotional materials whatsoever, regardless of media, relating to the
Licensed Products and/or the Licensed Trademarks.
(n) "Royalty" or "Royalties" shall mean the Royalties set forth in Section
4 herein, payable by Licensee to Cumberland pursuant to the terms and
conditions of this Agreement.
(o) "Trade Class" shall mean each of, the "food service" Trade Class (for
example, restaurants, institutional users) and the "retail" Trade Class
(for example, supermarkets, drug stores, club stores, Wal-Marts).
(p) "Transfer" shall mean (i) a direct or indirect sale, assignment,
delegation, transfer or sublicense by Licensee of any of its rights or
obligations under this Agreement, (ii) a merger involving Licensee or
Meridian where Meridian or Licensee does not survive the merger and there
has been a significant change in control of Licensee or Meridian, (iii) a
transfer of all or substantially all of Licensee's or Meridian's assets (in
a single transaction or a series of related transactions), (iv) a transfer
of all or any portion of a direct or indirect ownership interest (1) in
Meridian by a Managing Shareholder or (2) in Licensee by Meridian, and/or
(v) a significant change in the management or control of Licensee or
Meridian.
2. License.
(a) Grant of License. In exchange for the consideration set forth in
Section 4 and other valuable consideration, Cumberland hereby grants
Licensee the exclusive right, license and privilege to: (i) manufacture
itself or have manufactured on its behalf the Licensed Product under the
Licensed Trademark by a manufacturer or Affiliate approved in writing by
Cumberland, which approval shall not be unreasonably withheld, and (ii)
promote, publicize, advertize, market, sell and distribute the Licensed
Product under the Licensed Trademark in the Licensed Territory for the
Trade Classes, all subject to the terms and conditions of this Agreement.
(b) Brokers, Salespersons and Distributors. Licensee may appoint brokers,
salespersons and distributors, subject to the terms and conditions of this
Agreement. Cumberland shall have the right, in its sole and absolute
discretion, to disapprove of any broker, salesperson or distributor
appointed by Licensee if such Person acts in an unlawful manner or
otherwise adversely affects, or is in conflict with, the business or
reputation of Cumberland or the Licensed Trademark. Licensee shall be
solely responsible for the actions and omissions of its brokers,
salespersons and distributors.
(c) Rights of First Refusal.
(i) Each party agrees that prior to marketing, selling or otherwise
distributing or offering to distribute any non-chocolate flavored
sugar free, reduced calorie syrup, excluding maple syrup, (e.g.,
butterscotch, strawberry, caramel) under any xxxx or label, such
party hereby gives the other party the right of first refusal to
add such flavored syrup to the definition of Licensed Product
hereunder, during the term of this Agreement. In the event such
right of first refusal is not accepted, the requesting party may
proceed with such non-chocolate flavored syrup unencumbered by
this Agreement.
(ii) Each party agrees that prior to marketing, selling, distributing
or otherwise offering to distribute any Licensed Product to or
within a country not in the Licensed Territory, such party hereby
gives the other party the right of first refusal to add such
country to the definition of Licensed Territory under this
Agreement. Furthermore, in the event the Licensed Territory is
expanded by mutual agreement of Licensee and Cumberland pursuant
to this Agreement, Licensee agrees to offer any existing
distributor of Cumberland products in such expanded territory the
right of first refusal to sell the Licensed Product hereunder.
Notwithstanding the foregoing, Cumberland reserves the right in
its sole discretion, to purchase the Licensed Product from
Licensee for sale to its foreign distributors outside the
Licensed Territory at the same wholesale prices charged by
Licensee in the Licensed Territory without offering Licensee the
right of first refusal with respect to such purchases.
(iii)For the purposes of this Section, the right of first refusal
shall operate as follows:
(A) Prior to entering into any transaction ("Transaction") to which the
right of first refusal applies pursuant to this Section 2(c), Cumberland or
Licensee, as the case may be ("Offeror"), shall give the other (the
"Offeree") written notice containing all of the following (the "Offer
Notice"):
(i) the terms and conditions of the proposed Transaction;
(ii) a true and complete copy of any written offer related to the
Transaction from any third party, and
(iii)the Offeror's offer (the "Offer") to the Offeree to cause the
definition of "Licensed Product" or "Licensed Territory," as the
case may be, to be modified to include the Transaction.
(B) The Offer shall be and remain irrevocable for a period (the "Offer
Period") ending at 11:59 P.M. local time at Cumberland's principal office,
on the thirtieth (30th) day following the date the Offer Notice is given.
The Offer may be accepted at any time during the Offer Period in writing.
(C) If the Offer is accepted, the definition of Licensed Product or
Licensed Territory, as the case may be, hereunder shall be modified
accordingly.
(D) If the Offer is not accepted in accordance with the foregoing, the
party who made the Offer shall have the right, for a period of ninety (90)
days after the expiration of the Offer Period (the "Free Transfer Period")
to enter into the proposed Transaction on the same terms and conditions as
set forth in the Offer Notice.
(E) Any Transaction after the last day of the Free Transfer Period or
without strict compliance with the terms, provisions, and conditions of
this Section and the other terms, provisions, and conditions of this
Agreement, shall be null and void and of no force or effect.
(d) Exclusive License. During the term of this Agreement, and subject to
the terms and conditions hereof, neither Cumberland nor its Affiliates will
grant any other licenses for the manufacture or sale of the Licensed
Product under the Licensed Trademark in the Licensed Territory to any other
Person, nor will Cumberland or its Affiliates manufacture or sell the
Licensed Product under the Licensed Trademark in the Licensed Territory.
3. Ownership of Trademarks and Infringement.
(a) Ownership. All right, title and interest in and to the Licensed
Trademark is and shall at all times remain the exclusive property of
Cumberland, and Licensee, on behalf of itself and its Affiliates, shall not
contest or dispute the validity of Cumberland's exclusive rights thereto or
adopt the Licensed Trademark, or any portion or derivative thereof, to
Licensee's own use, except to the extent permitted under this Agreement.
All uses of the Licensed Trademark by Licensee shall inure to the benefit
of Cumberland. Licensee, on behalf of itself and its Affiliates, shall not
file or participate in the filing of any application for registration or
other similar proceeding for protection of intellectual property rights in
any jurisdiction with respect to the Licensed Trademark, or any portion or
derivative thereof, or any xxxx confusingly similar thereto. Licensee shall
promptly notify Cumberland of any actual, perceived or potential
infringement of a third party against any proprietary right of Cumberland
in the Licensed Trademark. Cumberland shall determine, in its sole and
absolute discretion, whether or not to challenge any aforementioned
infringement, and shall be under no affirmative obligation to do so, and
Licensee agrees to assist Cumberland, at Cumberland's expense and request,
in establishing Cumberland's superior proprietary rights in and to the
Licensed Trademark.
(b) Ownership Designators. When used in association with the Licensed
Trademarks, all Licensed Products and all approved Promotional Materials
used by or on behalf of Licensee in connection with the offer, sale or
other distribution of Licensed Products shall bear an indication that the
Licensed Trademarks are owned and licensed by Cumberland, and where
appropriate, the Licensed Trademarks will bear the U.S. Federal registered
trademark symbol " " or such other designator as may be applicable in the
Licensed Territory.
(c) Infringement. As of the date of this Agreement, Cumberland has
registered or filed an application for registration or commenced a similar
proceeding for the protection of intellectual property rights with respect
to the Licensed Trademarks in the Licensed Territory. Provided that
Licensee is not in breach of this Agreement, Cumberland shall defend and
hold Licensee harmless from any claim of trademark infringement resulting
solely from the use of the Licensed Trademark in the Licensed Territory,
provided that with respect to any such claim, Licensee (i) gives Cumberland
prompt notice, (ii) permits Cumberland to control the defense, and (iii)
reasonably cooperates, at Cumberland's expense, in the defense. This
Subsection 3(c) sets forth the sole extent of Cumberland's obligations and
liability to Licensee with respect to infringement relating to the Licensed
Trademark.
4. Royalties.
(a) Royalty Calculation. In consideration of the License granted herein,
Licensee shall pay Cumberland an earned Royalty of seven percent (7%) of
Net Sales, pursuant to the terms and conditions of this Agreement. In
addition, the full seven percent (7%) Royalty must be paid on (i) all "free
goods" given to retailers (in lieu of slotting fees or otherwise) based
upon the Net Sales price which otherwise would have been charged, and (ii)
all "private label" sales of the Licensed Product permitted to be sold
pursuant to Section 15 herein.
(b) Indirect Royalties. In the event that Licensee makes a permitted
Transfer pursuant to Section 18 and Licensee or an Affiliate receives a
direct or indirect royalty, license fee or other compensation from such
Person, the Royalties due Cumberland hereunder shall not be diminished
thereby and, instead, shall be based upon the underlying Net Sales
generated by such Person. Cumberland, in its sole discretion, may collect
such Royalties due hereunder directly from such Person or from Licensee.
(c) Sales to Affiliates. Licensee shall not sell or distribute the Licensed
Products to an Affiliate for a price less than that Licensee usually
charges non-Affiliates for such Licensed Products.
5. Minimum Royalties.
(a) Initial Minimum Royalties. Licensee shall pay Cumberland guaranteed
Minimum Royalties ring each applicable Agreement Year in accordance with
the following schedule:
Agreement Year Minimum Royalty Year
First Agreement Year $ 20,000.00 1999
Second Agreement Year $ 30,000.00 2000
Third Agreement Year $ 40,000.00 2001
Fourth Agreement Year $ 50,000.00 2002
Fifth Agreement Year $ 60,000.00 2003
Sixth Agreement Year $ 70,000.00 2004
Seventh Agreement Year $ 80,000.00 2005
Eighth Agreement Year $ 90,000.00 2006
Ninth Agreement Year $ 100,000.00 2007
Tenth Agreement Year $ 110,000.00 2008
(b) Increase in Minimum Royalties. In the event the term of this Agreement
is extended pursuant to Section 17 hereof, the Minimum Royalty due
hereunder for the first extended Agreement Year shall be $150,000, and such
Minimum Royalty shall be increased by $10,000 each Agreement Year
thereafter.
6. Payment of Royalties. Within thirty (30) days after the end of each calendar
quarter of each Agreement Year, Licensee shall pay Cumberland the Royalties, in
immediately available funds, due as follows:
(a) First Quarter. For the first quarter of each Agreement Year, the
payment shall be equal to one quarter (1/4) of the applicable annual
Minimum Royalties or the amount of actual Royalties calculated from Net
Sales, whichever is greater;
(b) Second Quarter. For the second quarter of each Agreement Year, the
payment shall be equal to one half (1/2) of the applicable annual Minimum
Royalties or the amount of actual Royalties calculated from Net Sales for
the first two (2) quarters, whichever is greater, less Royalties actually
paid by Licensee for the prior quarter;
(c) Third Quarter. For the third quarter of each Agreement Year, the
payment shall be equal to three quarters ( ) of the applicable annual
Minimum Royalties or the amount of actual Royalties calculated from Net
Sales for the first three (3) quarters, whichever is greater, less
Royalties actually paid by Licensee for the prior two (2) quarters; and
(d) Fourth Quarter. For the fourth quarter of each Agreement Year, the
payment shall be equal to the full applicable annual Minimum Royalties or
the amount of actual Royalties calculated from Net Sales for the entire
Agreement Year, whichever is greater, less Royalties actually paid by
Licensee for the prior three (3) quarters.
7. Failure to Meet Minimum. Notwithstanding anything to the contrary contained
herein, in the event that during any Agreement Year the Royalties calculated
from Net Sales are not equal to or greater than the applicable Minimum Royalty,
Cumberland shall have the right to terminate this Agreement or any License
granted hereunder or the exclusivity thereof, effective immediately, by giving
Licensee written notice of such termination.
8. License Limitations.
(a) Trade Class. Each Agreement Year after the First Agreement Year,
Licensee must sell a sufficient quantity of Licensed Product in each Trade
Class to generate one third (1/3) of the applicable Minimum Royalty in each
Trade Class. In the event Licensee fails to generate and maintain such
one-third (1/3) Minimum Royalty in any particular Trade Class, Licensee's
License to such particular Trade Class shall, at Cumberland's sole option,
terminate, and such Trade Class will no longer be included as part of the
License hereunder. In such event, Licensee shall have no further rights to
sell the Licensed Product to such Trade Class, unless otherwise agreed by
Cumberland in writing, and Cumberland shall be permitted to manufacture,
market, sell and otherwise distribute the Licensed Product in that Trade
Class in the Licensed Territory or grant licenses to one or more third
parties with respect to the same. In addition, the applicable Minimum
Royalty due hereunder shall not be reduced as a result of the forfeiture of
Licensee's rights to a particular Trade Class.
(b) Initial Licensed Country. Each Agreement Year after the First Agreement
Year, Licensee must sell a sufficient quantity of Licensed Product in
Canada and the United States (each an "Initial Licensed Country"),
respectively, to generate one quarter (1/4) of the applicable Minimum
Royalty in each Initial Licensed Country. In the event Licensee fails to
generate and maintain such one-quarter (1/4) Minimum Royalty in each
particular Initial Licensed Country, Licensee's License to such particular
Initial Licensed Country shall, at Cumberland's sole option, terminate, and
such Initial Licensed Country will no longer be included as part of the
License hereunder. In such event, Licensee shall have no further rights to
sell the Licensed Product to such Initial Licensed Country, unless
otherwise agreed by Cumberland in writing, and Cumberland shall be
permitted to manufacture, market, sell and otherwise distribute the
Licensed Product in that Initial Licensed Country or grant licenses to one
or more third parties with respect to the same. In addition, the applicable
Minimum Royalty due hereunder shall not be reduced as a result of the
forfeiture of Licensee's rights to a particular Initial Licensed Country.
(c) Stand-Alone Entity. Licensee represents and covenants that it is a
stand-alone entity and shall not engage in any other business or activity
other than the manufacture and sale of the Licensed Products hereunder and
matters incidental thereto without Cumberland's prior written approval.
9. Standards of Quality. All of the Licensed Products sold by Licensee under the
Licensed Trademarks in the Licensed Territory shall at all times be
manufactured, marketed, sold and otherwise distributed in accordance with the
reasonable standards of quality and control required by Cumberland. Licensee
shall not manufacture, market, sell or otherwise distribute any Licensed Product
under the Licensed Trademarks if the same do not satisfy such standards of
quality and control. In order to ensure that the Licensed Products meet such
standards, Licensee shall permit, and shall contractually cause each of
Licensee's manufacturers, brokers, salespersons and distributors to permit,
Cumberland's representatives to inspect at all reasonable times, upon reasonable
notice, any and all manufacturing plants, storage plants and/or shipping
facilities at which the Licensed Products are manufactured, processed, packaged,
stored and/or shipped, and Licensee shall have the right to be present at such
inspection. Cumberland shall also have the right to obtain from time to time,
without charge, a reasonable number of samples of the Licensed Product for
testing purposes. Said samples shall not be distributed by Cumberland for any
other purpose.
10. Formulation and Product Samples.
(a) Formulations and Testing. Cumberland shall have the right to inspect,
test and approve in writing all formulations prior to their use in the
Licensed Products for the purpose of assuring itself that the Licensed
Products conform to the requirements and standards of each Governmental
Agency and of Cumberland. Such approval will not be unreasonably withheld
and once granted shall not be withdrawn unless the Governmental Agency
establishes new criteria or Licensee modifies or changes the formulation
(with Cumberland's approval) in which event the approval process will be
repeated as set forth herein. Unless otherwise required by law, Cumberland
agrees to maintain all formulations in strict confidence, with such
formulations to be disclosed only to those representatives of Cumberland as
are necessary on a need to know basis, and Cumberland will require such
representatives to maintain such formulations in strict confidence.
Cumberland shall be permitted, but not be obligated, to provide advice and
recommendations to Licensee with respect to improving formulation, taste and
texture of the Licensed Product. Licensee agrees to revise the product
formulation consistent with Cumberland's recommendations if such formulation is
reasonably acceptable to Licensee. No product formulation shall be changed
without Cumberland's prior written consent.
(b) No Endorsement of Legality. Anything to the contrary in Sections 9 or
10 notwithstanding, Cumberland's approval or consent to any standard of
quality or control, any product formulation, nutritional labeling or claims
made on labels, shall not be deemed an endorsement of the legality or
compliance of such standard or product formulation with the guidelines,
laws, rules and regulations of any Governmental Agency, and Licensee shall
remain solely responsible for such legality and compliance.
11. Promotional Materials.
(a) Prior Approval. Prior to Licensee's (i) use of the Licensed Trademark
in association with a Licensed Product, (ii) marketing, selling or
otherwise distributing a Licensed Product in a jurisdiction in the Licensed
Territory where such products have not previously been marketed, sold or
distributed, (iii) advertising, promoting or marketing a Licensed Product,
or (iv) use of any Promotional Materials, Licensee will submit to
Cumberland an exact copy or reproduction of all Promotional Materials to be
used in connection therewith for Cumberland's written consent, which
consent will not be unreasonably withheld or delayed.
(b) Legal Opinion. Except for the packaging, labels or wrappers that have
been previously approved by Cumberland, prior to submitting any other
packaging, labels or wrappers (including text and claims appearing thereon)
to Cumberland for approval, Licensee shall obtain an opinion of legal
counsel at Licensee's cost (and forward the same to Cumberland along with
such materials) in the appropriate jurisdiction where the Licensed Product
is to be marketed, sold or otherwise distributed which provides that:
(i) Licensee's packaging, labels, wrappers, advertising or
Promotional Materials used in connection with the Licensed
Product are factually true and accurate and in compliance with
all applicable laws, regulations or other requirements of each
applicable Governmental Agency and are not otherwise false,
misleading or deceptive; and
(ii) to legal counsel's best knowledge, the Licensed Product is
sufficiently distinctive in trade dress so as not to be confused
with other products.
In addition to the foregoing, and upon Cumberland's reasonable request,
prior to submitting any Promotional Materials not included in the materials
described in Subsection 11(b) to Cumberland for approval, Licensee shall provide
a legal opinion as set forth above.
(c) Timing of Rejection or Approval. Either written approval of or written
objection to the Promotional Materials will be given by Cumberland to
Licensee within twenty (20) business days of the receipt of the foregoing.
Failure of Cumberland to object to the Promotional Materials within such
twenty (20) day period shall be considered as approval thereof.
(d) Prohibition Against Use. In the event Cumberland determines that the
Promotional Materials do not comply with the foregoing conditions and all
applicable laws, regulations or other requirements applicable to the
marketing, sale or other distribution of the Licensed Products in such
jurisdiction, Licensee shall not market, sell or otherwise distribute the
Licensed Products in such jurisdiction until corrected. It shall be
Licensee's exclusive responsibility to monitor and comply with the
packaging, advertising and labeling laws, rules and regulations in each
country in which it advertises, markets, sells or otherwise distributes the
Licensed Products and to promptly notify Cumberland of any changes therein.
Cumberland reserves the right, in its sole and absolute discretion, to
prohibit or selectively preclude Licensee from using any Promotional
Materials that specifically references that a Licensed Product "contains no
saccharin" or is "saccharin free" or any similar usage thereto.
(e) Changes and Additions. All new or revised Promotional Materials must be
submitted to Cumberland for written approval in the same manner as set
forth in this Section 11, which approval will not be unreasonably withheld.
(f) Co-Branding and Cooperative Advertising.
(i) All third-party co-branding or cooperative advertising of the
Licensed Products must be approved in writing, in advance, by
Cumberland. Licensee shall furnish Cumberland with a copy of
proposed contracts or agreements prior to Cumberland making a
final determination of approval with respect thereto.
(ii) Any approved co-branded or cooperatively advertised Licensed
Product shall be subject to all of the terms and conditions of
this Agreement, including this Section 11.
(iii)The Licensed Trademarks must appear as prominently as and at
least one hundred-fifty percent (150%) of the size of any
co-branded or cooperatively advertised product name or xxxx on
all Promotional Materials.
12. Advertising and Promotional Efforts. Licensee agrees to use best efforts in
the promotion and sale of the Licensed Products under the Licensed Trademarks in
the Licensed Territory. Licensee agrees to provide the advertising and promotion
during each Agreement Year necessary to achieve adequate sales of the Licensed
Products. Licensee commits to expend the following minimum annual expenditures
solely for advertising and promoting the Licensed Product during each Agreement
Year (the "Minimum Capital Commitment"):
Agreement Year Minimum Capital Commitment
First Agreement Year $150,000
Second Agreement Year $200,000
Third Agreement Year $250,000
Notwithstanding anything to the contrary contained herein, in the event Licensee
fails to expend the Minimum Capital Commitment in any of the First, Second or
Third Agreement Years (taking into account Licensee's Minimum Capital Commitment
expenditures under the Original Agreement), Cumberland shall have the right to
immediately terminate this Agreement, by giving Licensee written notice of such
termination.
For each Agreement Year after the Third Agreement Year, Licensee shall expend a
Minimum Capital Commitment of the lesser of (i) $500,000 (adjusted each year for
increases in the consumer price index), or (ii) 10% of the Net Sales of the
Licensed Product. For purposes of this Section 12, up to [25%] of the Minimum
Capital Commitment for each year may be comprised of costs associated with
"slotting," "free" goods or trade discounts . Upon Cumberland's request,
Licensee shall submit to Cumberland satisfactory evidence that Licensee has the
financial ability to satisfy the Minimum Capital Commitment required hereunder.
Advertising and promotional expenditure may be spent on product sampling, print,
broadcast or other advertising media, promotional events or other advertising as
determined by Licensee. Without prejudice to Cumberland's right to terminate
pursuant to Section 17 herein, in the event of a shortfall in Licensee's
advertising and promotional expenditure during a particular Agreement Year after
the Third Agreement Year, Licensee shall increase its minimum advertising and
promotional expenditures for the ensuing Agreement Year by the amount of such
shortfall. After the Third Agreement Year, Cumberland shall not terminate this
Agreement pursuant to Section 17 unless Licensee fails to make the Minimum
Capital Commitments as measured over a weighted two (2) year average, provided,
however, Cumberland may terminate the Agreement immediately in the event that
the Minimum Capital Commitment shortfall in any Agreement Year is more than ten
percent (10%).
13. Records and Access.
(a) Processing and Packaging Procedures. Licensee shall follow such
processing and packaging procedures as Cumberland shall reasonably specify
to assure itself that the Licensed Products meet the requirements set forth
in this Agreement. Such processing and packaging procedures will include,
at a minimum, the following:
(i) Licensee shall require all manufacturers to keep manufacturing
records showing the number of items, sizes and lot numbers,
permitting identification and tracing of each lot of each batch
of Licensed Products completed and distributed.
(ii) Licensee shall require all manufacturers to keep manufacturing,
process and packaging records showing the history of each lot of
each batch of Licensed Products, as well as any other information
reasonably specified by Cumberland, in triplicate and will
forward one copy of such records to Cumberland's offices by mail
at Cumberland's request, unless Cumberland shall waive such
requirement in writing. Licensee agrees that it will require all
manufacturers to maintain copies of such records on file for a
period of five (5) years or such longer period if required to do
so pursuant to Governmental Agency guidelines, laws, rules or
regulations.
(b) Reports. Within thirty (30) days after the end of each calendar quarter
during the term of this Agreement, and for each period thereafter in which
Licensee may generate Net Sales, Licensee shall submit a written report to
Cumberland showing (i) a sales report for the preceding quarter to include
the name of each customer, purchases made by such customer and the volume,
value and Licensed Product sold to such customer separated by Trade Class
and by countries within the Licensed Territory, and whether such Licensed
Product was sold or otherwise distributed under the Licensed Trademark or
under a "private label", (ii) details of any deduction from gross sales in
arriving at Net Sales, (iii) all "free goods" shipped during the quarter,
and (iv) documentation relating to Minimum Capital Commitment expenditures
for the preceding quarter. In addition, Licensee shall provide Cumberland
with such oral reports and updates as Cumberland may reasonably request
from time to time. Such written report shall include a computation of the
Royalties due based on such Net Sales calculated separately for each Trade
Class and shall specifically identify each deduction from total gross sales
used in arriving at Net Sales.
(c)Financial Statements. On the date of this Agreement and within ninety
(90) days after the end of each fiscal year of Licensee during the term of
this Agreement, Licensee shall submit to Cumberland accurate and complete
copies of Licensee's annual financial statements (including balance sheets
and statements of income with notes) prepared in accordance with generally
accepted accounting principles, consistently applied, and reviewed by
independent certified public accountants, and Cumberland agrees to maintain
the same in confidence. In addition, Licensee shall furnish Cumberland with
an accurate and complete copy of any annual sales reports (or similar data)
from any subscriptions it maintains with information database services,
such as Information Resources, Inc. or Xxxx & Bradstreet or services
similar thereto.
(d)Audit. Licensee shall keep its records in sufficient detail, and
Cumberland shall have the right at any time upon reasonable notice, which
shall be at least one (1) business day, during normal business hours to
have Licensee's records examined by any independent public accountant or
accountants or by a Cumberland representative to whom Licensee shall have
no reasonable objections for the sole purpose of verifying the volume of
inventories, the amount of distributions and sales made, the amount of
Royalties due under this Agreement and the amounts spent on advertising and
promotions. Such examination shall be conducted at Cumberland's expense.
However, if upon such examination it is determined that the amount of
Royalties paid to Cumberland was short by five (5%) percent or more during
any Agreement Year, then, in addition to paying the shortage in Royalties
to Cumberland, Licensee shall pay for the cost of the examination plus
interest on such shortage at the Prime Rate, plus two percent (2%).
14. Reputation, Goodwill and Misrepresentation.
(a)Reputation and Goodwill. Licensee and Meridian warrant and covenant that
neither of them nor their Affiliates, employees, contractors,
representatives, brokers, agents or distributors, during the term of this
Agreement or thereafter, shall make any representations or use any
Promotional Materials in any manner that actually, or in Cumberland's
reasonable discretion may, adversely affect any legal right of Cumberland
or be detrimental to the good name and reputation of Cumberland or any of
the Licensed Trademarks. Licensee and Meridian, on behalf of themselves and
their Affiliates, employees, contractors, representatives, brokers, agents
and distributors, warrants and covenants that each will conduct their
activities in an ethical manner so that they will not harm, misuse or bring
into disrepute the Licensed Trademarks, but on the contrary, will attempt
to maintain the value and reputation thereof to the best of their ability.
(b)No Misrepresentation. Licensee and Meridian, on behalf of themselves and
their Affiliates, employees, contractors, representatives, brokers, agents
and distributors, during this Agreement and thereafter, shall not
misrepresent the quality, composition, use, purpose or price of any of the
Licensed Products, nor make any promise or representation contrary to the
policy or instructions of Cumberland in any manner as set forth in writing.
15. Non-Compete. Licensee, Meridian, the Managing Shareholders and their
respective Affiliates hereby covenant and agree that they shall not establish,
open, be engaged in, or in any manner whatsoever become interested directly or
indirectly in a business or product directly competitive with the Licensed
Product in the Licensed Territory during the term of this Agreement and for a
period of two (2) years after the termination or expiration of this Agreement
for any reason; provided, however, that Licensee may distribute and sell
Licensed Products under "private label", (i.e., super market brands) without any
inclusion or use of the Licensed Trademark, and Licensee shall pay Cumberland
Royalties on all Net Sales of such "private label" Licensed Product sales on the
same terms and conditions as Licensed Product sales sold under the Licensed
Trademark. In no event, however, shall "private label" sales during any
Agreement Year exceed twenty percent (20%) of all sales by Licensee of Licensed
Products made in conjunction with the Licensed Trademark, without Cumberland's
prior written consent.
16. Indemnification and Insurance.
(a)Indemnification. Except as provided in paragraph 3(c) hereof or with
respect to items specifically related to a breach by Cumberland hereunder,
Licensee hereby releases, indemnifies and holds Cumberland, its
shareholders, directors, officers, employees, agents, successors and
assigns, harmless from and against and in respect of any loss, liability,
damages, claims, costs and expenses (including reasonable attorneys' fees)
arising out of, relating to or in any way connected with this Agreement,
including, without limitation, the manufacture, packaging, labeling,
distribution, marketing, sale, content, consumption or advertising of any
of the Licensed Products or the compliance or non-compliance with any
applicable law, rule or regulation of any jurisdiction.
(b)Insurance. Licensee shall obtain and maintain an all risk liability
insurance policy (including product liability coverage) with a reputable
insurer in a minimum amount of one million dollars ($1,000,000) per
occurrence, which policy shall include Cumberland as an additional named
insured during the term of this Agreement. Each Agreement Year, Licensee
shall cause such insurer or its successor to furnish Cumberland with a
certificate of proof of such insurance coverage on the insurer's standard
form. Such policy shall be written on an "occurrence" basis, and Cumberland
shall be entitled to thirty (30) days written notice prior to the
non-renewal, cancellation or material modification of the terms and
conditions of such policy. Every five (5) years from the date of this
Agreement, Licensee shall increase the amount of such insurance coverage to
reflect, at a minimum, the cumulative percentage increase in the CPI during
the preceding five (5) year period.
17. Term and Termination.
(a)Term of Agreement. Unless otherwise terminated as provided herein, the
initial term of this Agreement shall expire on December 31, 2008 with an
option for Licensee to renew for an additional seven (7) year period upon
providing Cumberland with not less than ninety (90) days and not more than
one hundred-eighty (180) days written notice prior to the expiration of the
initial term, provided that Licensee is not then in default of this
Agreement. Any extension or renewal of this Agreement shall be subject to
the increase in Minimum Royalties as set forth in Section 5(b). Following
the expiration of any renewal term, either party may terminate this
Agreement at any time upon ninety (90) days prior written notice to the
other of its intention to terminate this Agreement.
(b)Termination. Unless otherwise terminated as provided herein,
notwithstanding Subsection 17(a), either party hereto may immediately
terminate this Agreement by giving written notice to the other party if:
(i) the other party becomes insolvent or any voluntary petition in
bankruptcy or corporate reorganization is filed by or against
such party, or liquidation proceeding is commenced by or against
such party; or
(ii) Licensee breaches any obligations under Sections 4 through 7,
11(b), 12, 15 or 18; or
(iii)the other party fails to perform any of its obligations under
this Agreement and, unless otherwise provided herein, such
failure is not cured within a reasonable time not exceeding
thirty (30) days in the case of non-payment related obligations,
or ten (10) days in the case of payment related obligations,
after it has received written notice requesting a remedy thereof.
(c)Accrued Obligations. Termination or expiration of this Agreement shall
not relieve the parties hereto from their respective obligations which
shall have accrued hereunder prior to the effective date of such
termination or expiration. Upon the expiration or termination of this
Agreement for any reason whatsoever, all rights and interest of Licensee in
and to the Licensed Trademarks shall automatically cease and terminate and
revert to Cumberland, and Licensee shall, upon request of Cumberland,
execute and deliver to Cumberland such papers and documents as may be
reasonably requested by Cumberland to evidence such termination. Upon
termination or expiration of this Agreement, and provided that Licensee is
not in default hereunder, Licensee shall be permitted ninety (90) days
following the effective date of termination to sell off its remaining
inventory of Licensed Products not exceeding one thousand two hundred
(1,200) cases and shall pay Royalties on Net Sales thereon in accordance
with the terms and conditions of this Agreement.
(d)Right to Injunctive Relief. Licensee expressly acknowledges that
Licensee's breach of this Agreement would cause Cumberland irreparable harm
to Cumberland's rights and interests in the Licensed Trademarks which could
not be adequately remedied at law, and therefore Cumberland shall by
entitled to injunctive relief in addition to any other rights and remedies
otherwise available to Cumberland at law or equity.
18. Transfers and Right of First Refusal.
(a)Transfers. Cumberland shall have the right to freely assign or delegate
any portion of its rights and obligations under this Agreement. Neither
Licensee, Meridian nor the Managing Shareholders shall make a Transfer
without the prior written consent of Cumberland, which consent shall not be
unreasonably withheld, and any such attempted Transfer in violation of this
Section 18 shall be a material breach of this Agreement and entitle
Cumberland to immediately terminate this Agreement. Notwithstanding
anything in this Section 18(a) to the contrary, either Managing Shareholder
may sell individually to a third party purchaser up to twenty-five percent
(25%) of his shares of Meridian common stock held on the date hereof,
pursuant to the terms of the Warrant Agreement (described in Section 20
hereof) without violating this Section 18(a).
In the event Cumberland grants its consent pursuant to this Section 18, any
permitted transferee must expressly agree to be bound by and assume and perform
all of the obligations and duties of Licensee, Meridian or the Managing
Shareholders, respectively, as the case may be, under this Agreement.
Notwithstanding anything contained herein to the contrary, unless otherwise
agreed in writing by Cumberland, Licensee, Meridian and/or the Managing
Shareholders shall not be relieved of any of their duties or obligations under
this Agreement in the event of a Transfer. As of the date hereof, each Managing
Shareholder owns the number of shares of Meridian stock as set forth on Exhibit
B, attached hereto and incorporated herein.
(b)Right of First Refusal. Notwithstanding the foregoing, in the event of a
proposed Transfer, Cumberland shall have the right of first refusal with
respect to such proposed Transfer upon the same terms and conditions
offered by and to the prospective transferee. Licensee, Meridian and/or the
Managing Shareholder(s), as the case may be (individually, the
"Transferor"), shall provide written notice to Cumberland of the terms of
any proposed Transfer and shall allow Cumberland thirty (30) days from
receipt of such written notice to exercise its right of first refusal. In
the event that Cumberland declines to exercise its right of first refusal
within said thirty (30) days and consents to the Transfer, Licensee,
Meridian and/or the Managing Shareholder(s), as the case may be, may
consummate the Transfer on the same terms and conditions set forth in the
foregoing written notice.
(c)Annual Documentation. In addition to the financial statements Licensee
must provide Cumberland pursuant to Section 13(c), during the term of this
Agreement, within thirty (30) days (unless otherwise agreed to by
Cumberland in writing) after Licensee and Meridian, respectively, file
their tax returns, Licensee and Meridian, respectively, shall each send
Cumberland a copy of their respective tax returns and a list of their
officers and directors. Additionally, within forty-five (45) days (unless
otherwise agreed to by Cumberland in writing) after the end of each of the
Managing Shareholders' respective fiscal (or calendar) years during the
term of this Agreement, each Managing Shareholder shall execute a written
statement that sets forth the number of shares of stock such Managing
Shareholder owns in Meridian as of the close of the previous fiscal year
and send such written statement to Cumberland.
(d)Security Interest, etc. Notwithstanding the foregoing, Licensee and
Meridian and their Affiliates shall not directly or indirectly mortgage,
pledge, hypothecate, grant a security interest in, collateralize or
otherwise encumber the License granted hereunder without the express
written consent of Cumberland, which consent may be withheld in
Cumberland's sole and absolute discretion.
19. Review of Prospectus Materials. Licensee and Meridian agree that they will
not disseminate any offering circular or placement memorandum, press releases,
prospectus, registration statement (including but not limited to a Form 10 filed
with the U.S. Securities and Exchange Commission) or like materials that contain
information about, concerning or related to Cumberland, the License granted
hereunder, the Licensed Product or the Licensed Trademark (in each case, the
"Prospectus Materials"), without first (i) submitting drafts of the Prospectus
Materials to Cumberland for review, and (ii) giving due consideration to any
written comments Cumberland may submit concerning the Prospectus Materials. In
the event that Cumberland has comments concerning any provision of the
Prospectus Materials it must submit such comments in writing to Licensee and
Meridian within three (3) days of receiving such Prospectus Materials.
Notwithstanding anything contained in this Section 19 to the contrary, the
information contained in the Prospectus Materials shall be the sole and
exclusive responsibility of Licensee and/or Meridian, and Licensee and Meridian
hereby agree to indemnify and hold Cumberland harmless from any claims, actions
or liability related to or arising out of the Prospectus Materials.
20. Warrant Agreement. Pursuant to a Warrant Agreement executed simultaneous
herewith, Meridian will issue Cumberland a warrant to purchase up to three
hundred and fifty thousand (350,000) shares of Meridian common stock at an
exercise price per share equal to the greater of either (i) two dollars and
fifty cents ($2.50), or (ii) fifty percent (50%) of the average closing trading
price during the twenty (20) day period prior to Cumberland's exercise thereof
(the "Warrant"). The Warrant shall be exercisable through and until December 31,
2008, whether or not this Agreement is terminated earlier for any reason.
Cumberland may exercise the Warrant by notifying Meridian in writing of the
number of shares it desires to purchase and tendering the appropriate exercise
price. The issuance of the Warrant is evidenced by the Warrant Agreement
attached hereto and incorporated herein as Exhibit A.
21. Miscellaneous.
(a)Entire Agreement. This Agreement constitutes the complete agreement
between the parties and supersedes all prior or contemporaneous agreements
or representations, written or oral, including the Original Agreement,
concerning the subject matter of this Agreement. This Agreement may not be
modified or amended except in a writing signed by a duly authorized
representative of each party, and no other act, document, usage or custom
shall be deemed to amend or modify this Agreement. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
(b)No Waiver. The waiver by either party of compliance with any provision
of this Agreement or any default or breach of this Agreement shall not
constitute a waiver of any other or subsequent compliance, default or
breach. No act, delay or omission on the part of either party shall be
deemed a waiver unless expressly made in writing.
(c)Relationship of Parties. The relationship of Cumberland and Licensee
shall be solely that of licensor and licensee. Neither Licensee, Meridian
or the Managing Shareholders nor any of their Affiliates, agents,
representatives or employees shall be deemed agents, representatives or
employees of Cumberland. Neither (i) Licensee, Meridian or the Managing
Shareholders, nor (ii) Cumberland shall have any right or ability to enter
into any contract or commitment in the name of, or on behalf of, the other
or to bind the other in any respect whatsoever. Licensee, Meridian, the
Managing Shareholders and Cumberland do not intend to create any agency,
partnership, joint venture or employer-employee relationship.
(d)Notices. Any notice, payment or statement required by this Agreement
shall be sent by registered or certified mail to the party to whom such
notice, payment or statement is required (pursuant to instructions of the
other party) at the address first set forth above for said party or as may
be changed and furnished by registered or certified mail. Notice shall be
deemed delivered five (5) days after posting if sent from the United States
by registered or certified mail, postage prepaid, and addressed as set
forth in this Agreement. Any notices required hereunder shall be sent to
the parties and addresses set forth below, or to such other place or person
as such person may designate in writing:
If to Cumberland to: with a copy to
Xxxxxxx X. Xxxxxxxxxx Xxxxx X. Xxxxxx, Esq.
Executive Vice President Xxxxx Xxxxxx Xxxxxx & Xxxxxxxxx
Cumberland Packing Corp. A Professional Corporation
0 Xxxxxxxxxx Xxxxxx One Oxford Centre, 40th Floor
New York, New York 11205 Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Phone (000) 000-0000 Phone (000) 000-0000
Fax (000) 000-0000 Fax (000) 000-0000
If to Licensee to: with a copy to:
Xxxx Xxxxxx Xxxxxx Xxxxxxxx, Esq.
President Aronauer Golfarb Xxxxx & Re, LLP
Old Fashioned Syrup Company, Inc. 000 Xxxxxxx Xxxxxx
0000 Xxxx Xxxxx Xxxxxxxxx, Xxxxx 00X Xxx Xxxx, Xxx Xxxx 00000
Xxxx Xxxxx, Xxxxxxx 00000 Phone (000) 000-0000
Phone Fax (000) 000-0000
Fax
(e)Enforceability. In the event any one or more of the provisions contained
in this Agreement shall be held by a court or tribunal of competent
jurisdiction as invalid, illegal or unenforceable in any respect, such
court or tribunal may modify such provision to the minimum extent possible
to make such provision enforceable, and the validity, legality and
enforceability of the remaining provisions of this Agreement shall not in
any way be affected or impaired thereby.
(f)Headings and Captions. The titles or captions of sections and
subsections in this Agreement are provided for convenience of reference
only, and shall not be considered a part of this Agreement for purposes of
interpreting or construing or applying this Agreement, and such titles or
captions shall not define, limit, extend, explain or describe the scope or
extent of this Agreement or any of its terms or conditions.
(g)Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York, without regard to the
conflicts of laws provisions of that or any other jurisdiction. Each party
hereby submits to the laws and jurisdiction of the State of New York, and
neither party shall assert a defense of forum non conveniens or the like in
any action initiated therein.
IN WITNESS WHEREOF the parties hereto have executed this License Agreement
as of the day and year first above written.
Attest: CUMBERLAND
PACKING CORP.
By:/s/Xxxxxx Xxxxxxxxxx
Xxxxxx X. Xxxxxxxxxx, President
Attest: OLD FASHIONED
SYRUP COMPANY, INC.
By: /s/ Xxxx Xxxxxx
Xxxx Xxxxxx, President
Attest: MERIDIAN HOLDINGS,
INC.
By:/s/Xxxx Xxxxxx
Xxxx Xxxxxx, President
THE MANAGING
SHAREHOLDERS:
Witness:
________________________ /s/ Xxxx Xxxxxx
Xxxx Xxxxxx
Witness:
________________________ /s/ Xxxx Xxxxxxxxxx
Xxxx Xxxxxxxxxx
Exhibit A
Warrant Agreement
Exhibit B
Number of Shares of Meridian Stock Held by the Managing Shareholders
Managing Shareholder's Name Number of Meridia Shares
Xxxx Xxxxxx
Xxxx Xxxxxxxxxx
WARRANT AGREEMENT
THIS WARRANT AGREEMENT (this "Agreement") is made as of September ___,
1999, by and between Meridian Holdings, Inc., with an address at 0000 X. X. Xxxx
Xxxxx Xxxx., Xxxxx X-00, Xxxx Xxxxx, Xxxxxxx 00000 (the "Company") and
Cumberland Packing Corp., with an address at 0 Xxxxxxxxxx Xxxxxx, Xxxxxxxx, Xxx
Xxxx, 00000 ("Cumberland").
WITNESSETH
WHEREAS, the Company's wholly-owned subsidiary, Old Fashioned Syrup
Company, Inc. ("Syrup") entered into a License Agreement with Cumberland, dated
as of November 28, 1998 (the "Original License Agreement"); and
WHEREAS, Syrup, the Company and Cumberland have agreed to amend and restate
the Original License Agreement by entering into that certain Amended and
Restated License Agreement (the "Amended and Restated License"), pursuant to
which the Company has agreed to grant to Cumberland certain warrants to purchase
shares of the common stock of the Company (the "Common Stock") pursuant to the
terms set forth herein.
NOW THEREFORE, the parties, in consideration of the mutual premises set
forth herein and in the Amended and Restated License, and intending to be
legally bound, the parties agree as follows:
1. Grant of Warrant. The Company hereby grants to Cumberland and its
successors and assigns (the "Holder(s)") Warrants to purchase up to 350,000
shares (the "Exercise Quantity") of the Common Stock on the date of such
purchase. A Holder has the rights and obligations provided for in the form
of Warrant Certificate (as defined below) and in this Agreement.
2. Warrant Certificate.
(a) Form of Warrant Certificate. Each Warrant shall be evidenced by a
certificate ("Warrant Certificate"), which Warrant Certificate (and the form of
election to purchase Common Stock and of assignment to be attached thereto)
shall be substantially the same as Exhibit A hereto and may have such marks of
identification or designations and such legends, summaries, or endorsements
printed thereon as the Company may deem appropriate and which are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the
Warrants may from time to time be listed. The Warrant Certificate shall entitle
the Holder thereof to purchase such number of shares of Common Stock as shall be
set forth therein at the Exercise Price (as hereinafter defined) at such time or
times as the Holder may elect in its sole discretion, but the number of such
shares of Common Stock and the Exercise Price shall be subject to adjustment as
provided herein.
(b) Countersignature and Registration.
(i) Each Warrant Certificate shall be executed on behalf of the
Company by its authorized officer, either manually or by facsimile
signature, shall have affixed thereto the Company's seal or a facsimile
thereof, and shall be attested by the Secretary or Assistant Secretary of
the Company, either manually or by facsimile signature.
(ii) The Company will keep or cause to be kept, at its principal
office, books for the registration and transfer of the Warrant Certificates
issued hereunder.
(c) Transfer, Split-Up, Combination and Exchange of Warrant Certificates.
At any time prior to the close of business on the Final Expiration Date (as
defined hereinafter), a Warrant Certificate may be transferred, split up,
combined or exchanged for another Warrant Certificate or Warrant Certificates,
entitling the Holder to purchase a like number of shares of Common Stock as the
Warrant Certificate or Warrant Certificates surrendered then entitled such
Holder to purchase; provided, however, that any transfer to an entity not
majority-controlled by Cumberland requires the prior written consent of the
Company, which shall not unreasonably be withheld. Any Holder desiring to
transfer, split up, combine or exchange any Warrant Certificate or Warrant
Certificates shall make such request in writing delivered to the Company, and
shall surrender the Warrant Certificate or Warrant Certificates to be
transferred, split up, combined or exchanged at the principal office of the
Company. Thereupon the Company shall deliver to the person entitled thereto a
Warrant Certificate or Warrant Certificates, as the case may be, as so
requested.
(d) Subsequent Issue of Warrant Certificates. Subsequent to their original
issuance, no Warrant Certificates shall be issued except (a) Warrant
Certificates issued upon any transfer, combination, split up or exchange of
Warrants pursuant to Section 2(c) hereof, (b) Warrant Certificates issued in
replacement of mutilated, destroyed, lost or stolen Warrant Certificates, and
(c) Warrant Certificates issued pursuant to Section 3(d) hereof upon the partial
exercise of any Warrant Certificate to evidence the unexercised portion of such
Warrant Certificate.
3. Exercise of Warrants; Exercise Price; Expiration Date of Warrants.
(a) The Holder of any Warrant Certificate may exercise the Warrants
evidenced thereby (except as otherwise provided herein) in whole or in part upon
surrender of the Warrant Certificate, with the form of election to purchase
attached thereto duly executed, to the Company at its principal office, together
with payment of the Exercise Price for each share of Common Stock as to which
the Warrants are exercised, at or prior to the close of business on December 31,
2008 (the "Final Expiration Date"), or if such day is not a Business Day (as
defined below), then on the next succeeding day that shall be a Business Day.
For the purposes of this Section 3(a), "Business Day" means any day except a
Saturday, Sunday or other day on which commercial banking institutions in New
York City are authorized by law or executive order to close.
(b) The exercise price for each share of Common Stock pursuant to the
exercise of a Warrant shall be equal to the greater of (i) $2.50 per share of
Common Stock issuable upon exercise of the Warrant, or (ii) fifty percent (50%)
of the average Current Market Value (as hereinafter defined) per share of the
Common Stock during the twenty (20) day period immediately preceding an exercise
of the Warrant (the "Exercise Price"), shall be subject to adjustment from time
to time as provided in Section 7 hereof and shall be payable in accordance with
paragraph (c) below.
(c) Upon receipt of a Warrant Certificate representing exercisable
Warrants, with the form of election to purchase duly executed, accompanied by
payment of the Exercise Price for the shares to be purchased and an amount equal
to any applicable transfer tax required to be paid by the Holder of such Warrant
Certificate in accordance with Section 6 hereof in cash, or by certified check
or cashier's check payable to the order of the Company, the Company shall as
soon as practicable (i) requisition from any transfer agent of the Common Stock
certificates for the number of shares of Common Stock to be purchased and the
Company hereby irrevocably authorizes its transfer agent to comply with all such
requests, (ii) when appropriate, requisition from the Company the amount of cash
to be paid in lieu of issuance of fractional shares in accordance with Section 8
hereof, (iii) after receipt of such certificates, cause the same to be delivered
to or upon the order of the Holder of such Warrant Certificate, registered in
such name or names as may be designated by such Holder (assuming that such
transfer is made in accordance with the Securities Act of 1933, as amended, and
applicable state securities law and Sections 5 and 11 hereof) and (iv) subject
to Section 8 hereof, after receipt, deliver such cash to or upon the order of
the Holder of such Warrant Certificate.
(d) In case the Holder of any Warrant Certificate shall exercise less than
all the Warrants evidenced thereby, a new Warrant Certificate evidencing
Warrants equivalent to the Warrants remaining unexercised shall be issued by the
Company to the Holder of such Warrant Certificate or to its duly authorized
assigns, subject to the provisions of Section 8 hereof.
4. Cancellation and Destruction of Warrant Certificates. All Warrant
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall when surrendered to the Company be canceled by it,
and no Warrant Certificates shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Agreement.
5. Restrictive Legend. Certificates representing shares of Common Stock
issued upon exercise of the Warrants, to the extent that and for so long as
required pursuant to the Securities Act of 1933, as amended, and applicable
state securities law, shall bear the following legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY SECURITIES LAWS OF ANY STATE AND MAY NOT
BE TRANSFERRED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OR STATE SECURITIES
LAWS OR AN OPINION OF COUNSEL, SATISFACTORY TO MERIDIAN HOLDINGS, INC., THAT
SUCH REGISTRATION IS NOT REQUIRED."
Any such legend shall be removed and the Company shall issue a certificate
without such legend upon request by the Holder if (a) such securities are
registered under the Securities Act, (b) the Company is provided with an opinion
of counsel reasonably acceptable to the Company to the effect that a public sale
or transfer of such security may be made without registration under the
Securities Act or (c) the Company is provided with reasonable assurances that
such securities can be sold pursuant to Rule 144(k) under the Securities Act.
6. Reservation and Availability of Common Stock.
(a) The Company covenants and agrees that it will cause to be reserved and
kept available out of its authorized and unissued shares of Common Stock or any
shares of Common Stock held in its treasury, free from preemptive rights and
solely for the purpose of issue upon exercise of the Warrants, that number of
shares of Common Stock that will from time to time be sufficient to permit the
exercise in full of all outstanding Warrants.
(b) The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all shares of Common Stock delivered upon the
exercise of Warrants shall, at the time of delivery of the certificates for such
shares of Common Stock (subject to payment of the Exercise Price), be duly
authorized, validly issued, fully paid and nonassessable shares.
(c) The Company further covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges which may be
payable in respect of the issuance or delivery of the Warrant Certificates or of
any shares of Common Stock upon the exercise of Warrants, except that if the
shares of Common Stock or new Warrant Certificates shall be registered in a name
or names other than the name of the Holder, funds sufficient to pay all transfer
taxes shall be paid by the Holder of the Warrant at the time of delivery of the
executed election to purchase or promptly upon receipt of a written request of
the Company for payment.
(d) The Company shall promptly secure the listing of the shares of Common
Stock issuable upon exercise of the Warrant(s) upon each national securities
exchange or automated quotation system, if any, upon which shares of Common
Stock are then listed (subject to official notice of issuance upon exercise of
the Warrant(s)) and shall maintain, so long as any other shares of Common Stock
shall be so listed, such listing of all shares of Common Stock from time to time
issuable upon the exercise of the Warrant(s) and the Company shall so list on
each national securities exchange or automated quotation system, as the case may
be, and shall maintain such listing of, any other shares of capital stock of the
Company issuable upon the exercise of the Warrant(s) if and so long as any
shares of the same class shall be listed on such national securities exchange or
automated quotation system.
7. No Dilution or Impairment.
(a) Calculation and Adjustment of Exercise Quantity. The Company
acknowledges that the initial Exercise Quantity was calculated based upon an
intention that the full exercise of the Warrant would result in the Holder
obtaining shares of Common Stock constituting 6.2893% (the "Applicable
Percentage") of the Company's Common Stock and options, warrants (including the
Warrants), convertible securities, securities and other rights (in each case
whether now existing or hereafter issued or arising) to acquire from the Company
shares of Common Stock ("Common Stock Equivalents") outstanding as of the date
of exercise of the Warrant (based on Five Million Two Hundred Fifteen Thousand
(5,215,000) shares of Common Stock issued or reserved for issuance upon
conversion of outstanding Common Stock Equivalents as of the date hereof). It is
the intent of the parties hereto that after giving effect to the exercise in
full of the Warrants, the Holder's share ownership of the Common Stock will be
equal to the Applicable Percentage. The Exercise Quantity shall be adjusted upon
each additional issuance of shares of Common Stock or Common Stock Equivalents
in order to maintain the Applicable Percentage. Notwithstanding the foregoing,
neither the Exercise Quantity nor the Exercise Price shall be adjusted pursuant
to this Section 7(a) as a consequence of (i) an issuance of Common Stock or
Common Stock Equivalents at an issuance price per share greater than or equal to
the then current Exercise Price, (ii) a grant of Common Stock Equivalents at a
conversion or exercise price per share greater than or equal to the then current
Exercise Price, (iii) an issuance of shares in connection with the Company's
underwritten initial public offering of its Common Stock, or any issuances of
Common Stock or Common Stock Equivalents subsequent to such offering, or (iv)
the issuance or exercise of a warrant to purchase 50,000 shares of Common Stock
pursuant to any license agreement involving the Company and Cumberland relating
to a sports drink product.
(b) Adjustment of Exercise Price and Number of Shares. In addition to the
foregoing, the Exercise Quantity and the Exercise Price shall be subject to
adjustment from time to time upon the occurrence of certain events as follows:
(i) Reclassification, Consolidation or Merger. In case of any
reclassification or change of outstanding securities of the class issuable
upon exercise of this Warrant (other than a change in par value, or from
par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), or in case of any consolidation or
merger of the Company with or into another corporation, or in case of any
sale of all or substantially all of the assets of the Company, or in case
of a share exchange in which 80% or more of the outstanding capital stock
of the Company is exchanged for capital stock of another corporation, any
of which transactions shall be referred to hereinafter as a "Corporate
Transaction," the holder shall have the right to receive the type and
amount of shares of stock and other securities and property to which such
holder would have been entitled if it had received Common Stock by exercise
of the Warrants immediately prior to such Corporate Transaction, and the
Exercise Price shall be adjusted accordingly. Notwithstanding anything to
the contrary herein, in the case of a Corporate Transaction, the Company
may, at its option, elect to purchase the Warrants from the holder thereof,
upon written notice to the holder, for cash in an amount equal to the
dollar value of the Common Stock that the Holder would have been entitled
to receive had (i) the Warrants been exercised immediately prior to the
Corporate Transaction, and (ii) such shares of Common Stock been exchanged
in the Corporate Transaction.
(ii) Subdivision or Combination of Shares. If the Company at any time
while this Warrant remains outstanding and unexpired shall subdivide or
combine its Common Stock, the Exercise Price shall be proportionately
decreased in the case of a subdivision or increased in the case of a
combination.
(iii) Stock Dividends. If the Company at any time while this Warrant
is outstanding and unexpired shall pay a dividend of Common Stock with
respect to Common Stock payable in, or make any other distribution with
respect to Common Stock, then the Exercise Price shall be adjusted, from
and after the date of determination of shareholders entitled to receive
such dividend or distribution, to that price determined by multiplying the
Exercise Price in effect immediately prior to such date of determination by
a fraction, the numerator of which shall be the total number of shares of
Common Stock outstanding immediately prior to such dividend or distribution
and the denominator of which shall be the total number of shares of Common
Stock outstanding immediately after such dividend or distribution.
(iv) Adjustment of Number of Shares. Upon each adjustment in the
Exercise Price, the number of shares of Common Stock purchasable hereunder
shall be adjusted, to the nearest whole share, to the product obtained by
multiplying the number of shares purchasable immediately prior to such
adjustment of the Exercise Price by a fraction, the numerator of which
shall be the Exercise Price immediately prior to such adjustment and the
denominator of which shall be the Exercise Price immediately thereafter.
(v) No Impairment. The Company will not, by amendment of its charter
documents 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 to be observed or performed by it hereunder, but will at all times in
good faith assist in the carrying out of all the provisions of this Warrant
and in the taking of all such action as may reasonably be requested by the
holder of this Warrant in order to protect the exercise privilege of the
Holder of the Warrant against dilution or other impairment, consistent with
the tenor and purpose of this Warrant. Without limiting the generality of
the foregoing, the Company (i) will not increase the par value of any
shares of Common Stock receivable upon the exercise of this Warrant above
the Exercise Price then in effect, and (ii) will take all such actions 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.
(vi) Stockholder Rights Plan. Notwithstanding the foregoing, in the
event that the Company shall distribute "poison pill" rights pursuant to a
"poison pill" stockholder rights plan (the "Rights"), the Company shall, in
lieu of making any adjustment pursuant to Section 7 hereof, make proper
provision so that each Holder who exercises a Warrant after the record date
for such distribution and prior to the expiration or redemption of the
Rights shall be entitled to receive upon such exercise, in addition to the
shares of Common Stock issuable upon such exercise, a number of Rights to
be determined as follows: (i) if such exercise occurs on or prior to the
date for the distribution to the holders of Rights of separate certificates
evidencing such Rights (the "Distribution Date"), the same number of Rights
to which a Holder of a number of shares of Common Stock equal to the number
of shares of Common Stock issuable upon such exercise at the time of such
exercise would be entitled in accordance with the terms and provisions of
and applicable to the Rights; and (ii) if such exercise occurs after the
Distribution Date, the same number of Rights to which a Holder of the
number of shares into which the Warrant to be exercised was exercisable
immediately prior to the Distribution Date would have been entitled on the
Distribution Date in accordance with the terms and provisions of and
applicable to the Rights, and in each case subject to the terms and
conditions of the Rights.
(vii) Officer's Certificate. Whenever the Exercise Quantity or
Exercise Price shall be adjusted as required by the provisions of this
Section 7, the Company shall forthwith maintain at its principal office an
officer's certificate showing the adjustment determined as herein provided,
setting forth in reasonable detail the facts requiring such adjustment and
the manner of computing such adjustment. Each such officer's certificate
shall be signed by the chairman, president or chief financial officer of
the Company and by the secretary or any assistant secretary of the Company.
Each such officer's certificate shall be made available at all reasonable
times for inspection by any Holder and the Company shall, forthwith after
each such adjustment, deliver a copy of such certificate to each Holder.
8. Fractional Shares. The Company shall not be required to issue fractions of
shares of Common Stock upon exercise of the Warrants or to distribute
certificates which evidence fractional shares of Common Stock. If any
fraction of a share would be issuable upon exercise of the Warrant, but for
this Section 8, in lieu of fractional shares of Common Stock, the Company
may pay to the Holders of Warrant Certificates at the time such Warrants
are exercised as herein provided an amount in cash equal to the same
fraction of the Current Market Value of one share of Common Stock computed
to the nearest cent. If the Company elects not, or is unable, to make such
a cash payment, the Holder shall be entitled to receive, in lieu of the
final fraction of a share, one whole share of Common Stock.
9. Determination of Market Value. For purposes of this Agreement, the Current
Market Value of a share of Common Stock (the "Current Market Value") shall
be the closing price per share of Common Stock on the date of
determination. The closing price for any day shall be the last sale price,
regular way, or, in case no such sale takes place on such day, the average
of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the Common Stock is not listed or admitted to trading on
the New York Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the
principal national securities exchange on which the Common Stock is listed
or admitted to trading or, if the Common Stock is not listed or admitted to
trading on any national securities exchange, the last quoted price or, if
not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by NASDAQ (including the OTCBB), the
National Quotation Bureau Incorporated or such other system then in use
with respect to the Common Stock, or, if on any such date the Common Stock
is not quoted by any such organization, the average of the closing bid and
asked prices as furnished by a professional market maker making a market in
the Common Stock selected by the Board of Directors. If the Common Stock is
not publicly held or so listed or traded, the Current Market Value shall
mean the current value per share as determined in good faith by the Board
of Directors of the Company at its expense. If a Holder objects to the
Current Market Value as so determined, an independent investment banker
reasonably acceptable to such Holder(s) and the Company shall make a
determination of Current Market Value which shall be conclusive. If such
determination is five percent (5%) or more greater than the current value
as determined by the Board of Directors, then the Company shall pay the
reasonable costs and expenses of such independent investment banker;
otherwise the Holder(s) shall pay such costs and expenses.
10. Registration of Common Stock.
(a) "Piggyback" Registration. If at any time the Company determines to
register under the Securities Act of 1933, as amended (including pursuant to a
demand of any security holder of the Company exercising registration rights but
other than on a Registration Statement on Form S-4 or Form S-8 or any similar or
successor form or any other registration statement relating to an exchange offer
or offering of securities solely to the Company's existing security holders or
employees), any of its Common Stock (except securities to be issued solely in
connection with any acquisition of any entity or business, shares issuable
solely upon exercise of stock options, shares issuable solely pursuant to
employee benefit plans or shares to be registered on any registration form that
does not permit secondary sales), and either Selling Existing Holder (as defined
in Section 14 below) also determines to register any of his shares of Common
Stock, it must give each Holder, written notice of such determinations at least
thirty (30) days prior to each such filing. If, within fifteen (15) days after
receipt of such notice, each Holder so requests in writing, the Company must
include in such registration statement ("Registration Statement") (to the extent
permitted by applicable regulation) all or any part of each Holder's Warrants
and the shares of Common Stock (or other securities representing Common Stock)
purchasable or purchased from time to time under each Holder's Warrants
(collectively, "Registrable Securities") that each Holder requests to be
registered. Any Registrable Securities which are included in any underwritten
offering under this Section 10 shall be sold upon such terms as the managing
underwriters reasonably request. If such managing underwriter determines that a
cutback in the number of shares to be registered is necessary, such cut back
shall be effected on a pro rata basis among the shareholders of the Company
requesting registration and each Holder. If a Holder disapproves of the terms of
such underwriting, such Holder may elect to withdraw therefrom by written notice
to the Company and the managing underwriter. Nothing in this Section 10 shall
preclude the Company from discontinuing the registration of its securities being
effected on its behalf under this Section 10 at any time prior to the effective
date of the registration statement relating thereto.
Each Holder hereby agrees that, if so requested by the Company or any
representative of the underwriters ("Managing Underwriter") in connection with
the registration of a public offering of equity securities of the Company under
the Securities Act of 1933, as amended ("Securities Act"), that it shall not
sell or otherwise transfer Warrants or any shares of Common Stock or other
securities of the Company (including a sale pursuant to Rule 144 (or any similar
provision then in force) under the Securities Act) during the ten (10) day
period prior to and the 180-day period (or such other lesser period as may be
requested in writing by the Managing Underwriter and agreed to in writing by the
Company) ("Market Standoff Period") following the effective date of a
registration statement of the Company filed under the Securities Act. The
Company may impose stop-transfer instructions with respect to securities subject
to the foregoing restrictions until the end of such Market Standoff Period. The
Company will pay all registration expenses in connection with Registrable
Securities, including without limitation all registration and filing fees;
listing fees; printing expenses; the fees and disbursements of counsel for the
Company, one counsel selected by the Holders and the Company's accountants, and
Blue Sky fees and expenses, but excluding underwriting commissions and discounts
applicable to a Holder's shares of Common Stock.
(b) Indemnification.
(i) In the event of any registration of any of the Exercised Shares
under the Act pursuant to this Section 10, the Company will, to the extent
permitted by law, indemnify and hold harmless each Holder, its directors,
officers or partners, each underwriter (if any) within the meaning of the
Exchange Act (an "Underwriter") and each other person, if any, who controls
such Holder or such Underwriter within the meaning of the Act or the
Exchange Act (a "Controlling Person") against any losses, claims, damages
or liabilities, joint or several, to which such seller or Underwriter or
controlling person may become subject under the Act, the Exchange Act, Blue
Sky laws or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact
contained in any Registration Statement under which such Exercised Shares
were registered under the Act, any preliminary prospectus or final
prospectus contained in the Registration Statement, or any amendment or
supplement to such Registration Statement, or arise out of or are based
upon the omission or alleged omission to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading; and the Company
will reimburse such Holder or such Underwriter and each such Controlling
Person for any legal or any other expenses reasonably incurred by
Cumberland or such Underwriter or Controlling Person in connection with
investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Company will not be liable in any such
case (i) to the extent that any such loss, claim, damage or liability
arises out of or is based upon any untrue statement or omission made in
such Registration Statement, preliminary prospectus or prospectus, or any
such amendment or supplement, in reliance upon and in conformity with
information furnished to the Company by or on behalf of such Holder or such
Controlling Person specifically for use in the preparation thereof, or (ii)
in the case of a sale directly by such Holder or such Controlling Person
(including a sale of such shares through any underwriter retained by such
Holder to engage in a distribution solely on behalf of such Holder), such
untrue statement or alleged untrue statement or omission or alleged
omission was contained in a preliminary prospectus and corrected in a final
or amended prospectus, and such Holder failed to deliver a copy of the
final or amended prospectus at or prior to the confirmation of the sale of
such shares to the person asserting any such loss, claim, damage or
liability in any case where such delivery is required by the Securities Act
or any state securities laws.
(ii) In the event of any registration of any of the Exercised Shares
under the Act pursuant to this Agreement, each Holder will, to the extent
permitted by law, indemnify and hold harmless the Company, each of its
directors and officers, each Underwriter (if any) and each Controlling
Person, if any, of the Company or Underwriter against any losses, claims,
damages or liabilities, joint or several, to which the Company, such
directors and officers, any Underwriter or Controlling Persons may become
subject under the Act, Exchange Act, Blue Sky laws 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 a material fact contained in any Registration Statement under
which such shares were registered under the Act, any preliminary prospectus
or final prospectus contained in the Registration Statement, or any
amendment or supplement to the Registration Statement, or arise out of or
are based upon any omission or alleged omission to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading, if
the statement or omission was made in reliance upon and in conformity with
information furnished in writing to the Company by or on behalf of such
Holder, specifically for use in connection with the preparation of such
Registration Statement, prospectus, amendment or supplement; provided,
however, that the obligations of each Holder hereunder shall be limited to
an amount equal to the proceeds to each seller of shares sold as
contemplated herein, unless such liability arises out of or is based on
willful misconduct by such Holder.
(iii) Each party entitled to indemnification under this Subsection
10(b) (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity
may be sought, and shall permit the Indemnifying Party to assume the
defense of any such claim or any litigation resulting therefrom; provided
that counsel for the Indemnifying Party, who shall conduct the defense of
such claim or litigation, shall be approved by the Indemnified Party (whose
approval shall not be unreasonably withheld); and, provided, further, that
the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this
Subsection 10(b). The Indemnified Party may participate in such defense at
such party's expense; provided, however, that the Indemnifying Party shall
pay such expense if representation of such Indemnified Party by the counsel
retained by the Indemnifying Party would be inappropriate due to actual or
potential differing interests between the Indemnified Party and any other
party represented by such counsel in such proceeding. No Indemnifying
Party, in the defense of any such claim or litigation shall, except with
the consent of each Indemnified Party, consent to entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect of such claim or litigation, and
no Indemnified Party shall consent to entry of any judgment or settle such
claim or litigation without the prior written consent of the Indemnifying
Party.
(iv) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) a
Holder, if exercising rights under this Section 10, or any Controlling
Person of any Holder makes a claim for indemnification pursuant to this
Subsection 10(b) but it 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 this Subsection 10(b) provides for indemnification in such case, or
(ii) contribution under the Securities Act may be required on the part of
such Holder or any such Controlling Person in circumstances for which
indemnifications is provided under this Subsection 10(b), then, and in each
such case, the Company and such Holder will contribute to the aggregate
losses, claims, damages or liabilities to which they may be subject (after
contribution from others) in such proportion so that such Holder is
responsible for the portion represented by the percentage that the public
offering price of its shares offered by the Registration Statement bears to
the public offering price of all securities offered by such Registration
Statement, and the Company is responsible for the remaining portion,
provided however, that, in any such case, (A) such Holder will not be
required to contribute any amount in excess of the proceeds received from
the sale of all such shares offered by it pursuant to such Registration
Statement and (B) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) will be entitled to contribution from any person or entity who was not
guilty of such fraudulent misrepresentation.
(c) Information by Each Holder.
(i) Any Holder, if it has shares included in any registration, shall
furnish to the Company such information regarding it and the distribution
proposed by it as the Company may request in writing and as shall be
required in connection with any registration, qualification or compliance
referred to in this Section 10.
(ii) Each Holder shall report to the Company sales made pursuant to
any registration of Exercised Shares.
(d) Limitations on Subsequent Registration Rights. The Company shall not,
without the prior written consent of each Holder, enter into any agreement with
any holder or prospective holder of any securities of the Company which would
allow such holder or prospective holder to receive registration rights on terms
more favorable than those granted herein.
11. Agreement of Warrant Holder. The Holder consents and agrees with the
Company that:
(a) Warrant Certificates are transferable only on the registry books of the
Company if surrendered at its principal offices, duly endorsed or accompanied by
a proper instrument of transfer in accordance with restrictions on transfer
contained herein or in the Warrant Certificates; and
(b) the Company may deem and treat the person in whose name the Warrant
Certificate is registered as the absolute owner thereof and of the Warrants
evidenced thereby (notwithstanding any notations of ownership or writing on the
Warrant Certificates made by anyone other than the Company) for all purposes
whatsoever, and the Company shall not be affected by any notice to the contrary.
12. Warrant Certificate Holder Not Deemed a Stockholder. No Holder, as such, of
any Warrant Certificate shall be entitled to vote, receive dividends or be
deemed for any purpose the holder of the shares of Common Stock or any
other securities of the Company which may at any time be issuable on the
exercise of the Warrants represented thereby, nor shall anything contained
herein or in any Warrant Certificate be construed to confer upon the Holder
of any Warrant Certificate, as such, any of the rights of a stockholder of
the Company or any right to vote for the election of directors or upon any
matter submitted to stockholders of the Company at any meeting thereof, or
to give or withhold consent to any corporate action, or to receive notice
of meetings or other actions affecting stockholders of the Company, or to
receive dividends or subscription rights, or otherwise, until the Warrant
or Warrants evidenced by such Warrant Certificate that shall have been
exercised in accordance with the provisions hereof.
13. Issuance of New Warrant Certificates. Notwithstanding any of the provisions
of this Agreement or of the Warrants to the contrary, the Company may, at
its option, issue new Warrant Certificates evidencing Warrants in such form
as may be approved by its Board of Directors to reflect any adjustment or
change in the Exercise Price and the number or kind or class of shares or
other securities or property purchasable under the Warrant.
14. Right of Co-Sale. If at any time except when the registration rights under
Section 10 above apply, either or both of Xxxx Xxxxxx or Xxxx Xxxxxxxxxx
(the "Selling Existing Holder") propose to sell shares of Common Stock,
including without limitation any options, warrants or other rights to
purchase Common Stock or securities convertible into Common Stock
("Shares") to parties other than a Holder (a "Third Party Purchaser") in a
transaction (the "Transaction"), the Selling Existing Holder shall have the
right to sell to the Third Party Purchaser, provided that, as a condition
to such a sale by the Selling Existing Holder, each Holder shall have the
option of selling to the Third Party Purchaser, at the same price per share
and on the same terms and conditions as involved in such sale by the
Selling Existing Holder, the same proportion of Shares owned by such Holder
as the proposed sale represents with respect to those Shares then owned
(prior to the proposed sale) by the Selling Existing Holder. The right of
co-sale of each Holder shall be on the following terms and conditions:
(a) The Selling Existing Holder shall deliver to each Holder a written
notice advising each Holder of the right of co-sale pursuant to this Section 14
(the "Co-Sale Notice"), which notice shall specify the terms and conditions of
the proposed sale and the purchase price.
(b) Each Holder, if it elects to exercise the right of co-sale, shall give
notice of such election in writing and delivered to the Selling Existing Holder
within ten (10) days after the date of the Co-Sale Notice, which notice shall
state the quantity of Shares such Holder elects to sell.
(c) Each Holder, if it elects to exercise the right of co-sale, shall
deliver to the Selling Existing Holder for transfer to the Third Party Purchaser
one or more certificates or other appropriate documents, properly endorsed for
transfer, which represent the number of Shares such Holder elects to sell
pursuant to this Section 14.
(d) The Shares that each Holder delivers to the Selling Existing Holder
shall be transferred by the Selling Existing Holder to the Third Party Purchaser
in consummation of the sale of the Shares pursuant to the terms and conditions
specified in the Co-Sale Notice, and the Selling Existing Holder shall promptly
thereafter remit to such Holder that portion of the sale proceeds to which
Cumberland is entitled by reason of its participation in such sale.
(e) The exercise or non-exercise of the co-sale rights of each Holder
hereunder to participate in one or more sales of Shares made by a Selling
Existing Holder shall not adversely affect their rights to participate in
subsequent sales of Shares made by a Selling Existing Holder.
(f) Each Holder, if it elects to exercise the right of co-sale, shall pay
its pro rata share (based on the total number of Shares to be sold) of the
expenses incurred in connection with such sale and shall be obligated to join on
a pro rata basis (based on the total number of Shares to be sold) in any
indemnification or other obligations that the Selling Existing Holder
originating the sale agrees to provide in connection with such sale; provided,
however, that such Holder shall not be obligated in connection with such sale to
agree to indemnify or hold harmless the purchasers with respect to an amount in
excess of the net proceeds paid to such Holder in connection with such sale.
(g) Notwithstanding anything in this Section 14 to the contrary, except
with respect to a sale of all or substantially all of a Selling Existing
Holder's Shares, either Selling Existing Holder may sell individually to one or
more Third Party Purchasers a total of up to twenty- five percent (25%) of his
shares of Common Stock as of the date hereof before any Holder shall have a
right of co-sale. Any sale by a Selling Existing Holder to a Third Party
Purchaser which, alone or together with earlier sales to one or more related
parties or which are part of a related series of transactions ("Related Sales"),
exceeds the 25% threshold, shall cause the right of co-sale to be effective on
the following additional terms:
(i) If the sale which causes the 25% threshold to be exceeded is a Related
Sale, the calculation of the number of Shares that each Holder may sell pursuant
to this right of co-sale shall be made upon the assumption that all Related
Sales from the date hereof by the Selling Existing Holder were made at the time
of the sale which exceeded the 25% threshold;
(ii) The price per share of the Common Stock that each Holder may sell
under the right of co-sale shall be equal to the greater of (1) the per
share price in connection with the proposed sale that would exceed the 25%
threshold, or (2) the average price per share of all Related Sales of
Common Stock by the Selling Existing Holder (including the proposed sale).
(h) In consideration of Cumberland's agreeing to execute the Amended and
Restated License, each Selling Existing Holder, by their signatures to this
Agreement, acknowledges and agrees to the terms of this Section 14 and
represents (i) that Exhibit B hereto is a complete list of the Company's
stockholders as of the date hereof (together with the number of shares of Common
Stock and Preferred Stock, as applicable, held by each) and all Common Stock
Equivalents and the holders of same, and (ii) that the securities indicated with
an asterisk (*) (for Xxxx Xxxxxx) or a double asterisk (**) (for Xxxx
Xxxxxxxxxx) on such Exhibit B are those which are deemed to be Shares of Messrs.
Posner and Xxxxxxxxxx, respectively, for purposes of Sections 10 and 14(g)
above.
(i) If any Shares of a Holder are not of the same type or class as any
shares of a Selling Existing Holder, such Holder and Selling Existing
Holder shall attempt to agree on a value of Holder's securities to be sold
to the Third Party Purchaser. If agreement is not reached within ten (10)
days following the Holder's delivery of notice of election to the Selling
Existing Holder, an independent investment banker reasonably acceptable to
such Holder and Selling Existing Holder shall make a determination of value
which shall be conclusive. If such determination is five percent (5%) or
more greater than the value determined by the Selling Existing Holder, then
the Selling Existing Holder shall pay the reasonable costs and fees of such
independent investment banker; otherwise the Holder shall pay such costs
and expenses.
(j) Within thirty (30) days following any sale of Shares by either Selling
Existing Holder, such Selling Existing Holder shall send a written notice to
Cumberland and each other Holder providing the amount of Shares sold, the price,
the name of the purchaser, the date of the sale, and any other operative terms
with respect to the sale.
15. Headings. The headings in this Option Agreement are for purposes of
reference only, and shall not limit or otherwise affect the meaning hereof.
16. Successors and Assigns. The terms of this Agreement shall be binding upon
the Company, the Holders and their respective successors and assigns.
17. Governing Law: Consent to Jurisdiction; Waiver of Jury Trial. Etc. THIS
AGREEMENT AND ALL RELATED INSTRUMENTS AND AGREEMENTS SHALL BE DEEMED TO BE
CONTRACTS MADE IN THE STATE OF NEW YORK, AND SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT
GIVING EFFECT TO CONFLICT OF LAWS) AND THE UNITED STATES OF AMERICA.
WITHOUT EXCLUDING ANY OTHER JURISDICTION, EACH HOLDER AND THE COMPANY
IRREVOCABLY AGREE THAT THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF
NEW YORK, NEW YORK, BOROUGH OF MANHATTAN, SHALL HAVE NON-EXCLUSIVE
JURISDICTION OVER PROCEEDINGS IN CONNECTION HEREWITH. EACH PARTY HEREBY
WAIVES ANY RIGHT THAT IT MAY HAVE TO A TRIAL BY JURY OF ANY DISPUTE
(WHETHER A CLAIM IN TORT, CONTRACT, EQUITY, OR OTHERWISE) ARISING UNDER OR
RELATING TO THIS AGREEMENT OR ANY RELATED MATTERS, AND AGREE THAT ANY SUCH
DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY. EACH PARTY
FURTHER AGREES NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING, ANY CLAIM
THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT.
18. Counterparts. This Agreement may be executed in any number of counterparts,
each of which together constitute one instrument.
WITNESS the due execution of this Warrant Agreement as of the date first
above written.
ATTEST: MERIDIAN HOLDINGS, INC.
By:/s/ Xxxx Xxxxxxxxxx By:/s/ Xxxx Xxxxxx
Print Name: Xxxx Xxxxxxxxxx Print Name: Xxxx Xxxxxx
Title: President Title:Chairman, Secretary
CUMBERLAND PACKING CORP.
By: /a/ Xxxxxx X. Xxxxxxxxxx
Print Name: Xxxxxx X. Xxxxxxxxxx
Title: President
ACKNOWLEDGED AND AGREED with
respect to Section 14 hereof:
/s/ Xxxx Xxxxxx
Xxxx Xxxxxx
/s/ Xxxx Xxxxxxxxxx
Xxxx Xxxxxxxxxx
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF ARE SUBJECT TO
THE TERMS AND PROVISIONS OF THAT WARRANT AGREEMENT DATED AS OF SEPTEMBER 30,
1999 BETWEEN CUMBERLAND PACKING CORP. ("CUMBERLAND") AND MERIDIAN HOLDINGS, INC.
(THE "COMPANY") (AS THE SAME MAY BE SUPPLEMENTED, MODIFIED, AMENDED, EXTENDED OR
RESTATED FROM TIME TO TIME, THE "WARRANT AGREEMENT"). AMONG OTHER THINGS, THE
WARRANT AGREEMENT CONTAINS PROVISIONS FOR RESTRICTIONS ON TRANSFER AND
REGISTRATION RIGHTS. A COPY OF THE WARRANT AGREEMENT IS AVAILABLE AT THE
EXECUTIVE OFFICES OF THE COMPANY.
COMMON STOCK PURCHASE WARRANT
September 30, 1999
Capitalized terms used and not otherwise defined in this Warrant shall have
the meanings respectively assigned to them in the Warrant Agreement referred to
in the legend above. The Company certifies and agrees that Cumberland Packing
Corp. and its successors and assigns (referred to herein as the "Holder") is
entitled to purchase from the Company an Exercise Quantity initially equal to an
aggregate of 350,000 shares of the Company's Common Stock, par value $0.001 per
share (the "COMMON STOCK"), all upon the terms and provisions and subject to
adjustment as provided in the Warrant Agreement and this Common Stock Purchase
Warrant (the "WARRANT"). The exercise price per share of Common Stock for which
this Warrant is exercisable shall be equal to the greater of (i) $2.50 or (ii)
fifty percent (50%) of the average Current Market Value during the twenty (20)
day period immediately preceding an exercise of this Warrant, as adjusted from
time to time pursuant to the terms of this Warrant and the Warrant Agreement
(the "EXERCISE PRICE").
________________
1. Exercise of Warrant.
1.1 This Warrant may be exercised by the Holder of this Warrant at any
time during the term hereof in whole, or in part from time to time by
presentation and surrender of this Warrant to the Company, together with
the Exercise Form, in the form attached hereto as Exhibit A-1 (the
"EXERCISE FORM"), duly completed and executed and payment in the aggregate
amount equal to the Exercise Price multiplied by the number of shares of
Common Stock being purchased. Payment of the Exercise Price shall be made
by check payable to the order of the Company. Upon the Company's receipt of
this Warrant, the completed and signed Exercise Form and the requisite
payment, the Company shall as soon as practicable issue and deliver (or
cause to be delivered) to the exercising Holder stock certificates
aggregating the number of shares of Common Stock purchased. In the event of
a partial exercise of this Warrant, the Company shall issue and deliver to
the Holder a new Warrant at the same time such stock certificates are
delivered, which new Warrant shall entitle the Holder to purchase the
balance of the Exercise Quantity not purchased in that partial exercise and
shall otherwise be upon the same terms and provisions as this Warrant.
1.2 In the event the Holder of this Warrant desires that any or all of
the stock certificates to be issued upon the exercise hereof be registered
in a name or names other than that of the Holder of this Warrant, the
Holder must so request in writing at the time of exercise, and pay to the
Company funds sufficient to pay all stock transfer taxes (if any) payable
in connection with the transfer and delivery of such stock certificates.
1.3 Upon the due exercise by the Holder of this Warrant, whether in
whole or in part, that Holder (or any other person to whom a stock
certificate is to be so issued) shall be deemed for all purposes to have
become the Holder of record of the shares of Common Stock for which this
Warrant has been so exercised, effective immediately prior to the close of
business on the date this Warrant, the completed and signed Exercise Form
and the requisite payment are duly delivered to the Company, irrespective
of the date of actual delivery of certificates representing such shares of
Common Stock so issued.
1.4 In lieu of physical delivery of the shares of Common Stock for
which this Warrant is exercisable, provided the Company's transfer agent is
participating in The Depository Trust Company ("DTC") Fast Automated
Securities Transfer ("FAST") program, upon request of the Holder and in
compliance with the provisions hereof, the Company shall use its best
efforts to cause its transfer agent to electronically transmit such shares
to the Holder by crediting the account of the Holder's Prime Broker with
DTC through its Deposit Withdrawal Agent Commission system. The time period
for delivery described herein shall apply to the electronic transmittals
described herein.
2. Surrender of Warrant: Expenses.
2.1 Whether in connection with the exercise, exchange, registration of
transfer, replacement or put of this Warrant, surrender of this Warrant
shall be made to the Company during normal business hours on a Business Day
(unless the Company otherwise permits) at the executive offices of the
Company, 0000 XX 0xx Xxxxxx, Xxxxx X00, Xxxx Xxxxx, XX 00000, or to such
other office or duly authorized representative of the Company as from time
to time may be designated by the Company by written notice given to the
Holder of this Warrant.
2.2 The Company shall pay all costs and expenses incurred in
connection with the exercise, registering, exchange, transfer, replacement
or put of this Warrant, including the costs of preparation, execution and
delivery of warrants and stock certificates, and shall pay all taxes (other
than any taxes measured by the income of any Person other than the Company)
and other charges (subject to Section 1.2 hereof) imposed by law payable in
connection with the transfer or replacement of this Warrant.
3. Warrant Register, Exchange, Transfer, Loss.
3.1 The Company at all times shall maintain at its chief executive
offices an open register for the Warrant, in which the Company shall record
the name and address of each Holder to whom a Warrant has been issued or
transferred, the number of shares of Common Stock or other securities
purchasable thereunder and the corresponding purchase prices.
3.2 This Warrant may be exchanged for two or more warrants entitling
the Holder hereof to purchase the same aggregate Exercise Quantity at the
same Exercise Price per share and otherwise having the same terms and
provisions as this Warrant. The Holder may request such an exchange by
surrender of this Warrant to the Company, together with a written exchange
request specifying the desired number of warrants and allocation of the
Exercise Quantity purchasable under the existing Warrant.
3.3 Subject to the provisions of Section 11 of the Warrant Agreement,
this Warrant may be transferred, in whole or in part, by the Holder or any
duly authorized representative of such Holder. A transfer may be registered
with the Company by submission to it of this Warrant, together with an
Assignment Form, in the form of Exhibit A-2 (the "ASSIGNMENT FORM"), duly
completed and executed. Within five (5) Business Days after the Company's
receipt of this Warrant and the Assignment Form so completed and executed,
the Company will issue and deliver to the transferee a new Warrant
representing the portion of the Exercise Quantity transferred at the same
Exercise Price per share and otherwise having the same terms and provisions
as this Warrant, which the Company will register in the new Holder's name.
3.4 In the event of the loss, theft or destruction of this Warrant,
the Company shall execute and deliver an identical new Warrant to the
Holder in substitution therefor upon the Company's receipt of (i) evidence
reasonably satisfactory to the company of such event (with the affidavit of
an institutional Holder being sufficient evidence), and (ii) if requested
by the Company, an indemnity agreement from any institutional Holder or an
indemnity bond from anyone else reasonably satisfactory in form and amount
to the Company.
4. Rights and Obligations of the Company and the Warrant Holder. The Company
and the Holders of this Warrant are entitled to the rights and bound by the
obligations set forth in the Warrant Agreement, all of which rights and
obligations are hereby incorporated by reference herein.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its duly authorized representative and its corporate seal, if any, to be
impressed hereupon and attested to by its Secretary or Assistant Secretary.
MERIDIAN
HOLDINGS, INC.
By________________________________
Its_________________________________
Attest:
_________________________________
Secretary
Exhibit A-1
COMMON STOCK WARRANT
EXERCISE FORM
Meridian Holdings, Inc.
Attention: President
_________________________________
_________________________________
The undersigned Holder of the attached Warrant hereby irrevocably elects to
exercise the within Warrant for the purchase of _____ shares of Common Stock,
$0.001 par value per share, of Meridian Holdings, Inc. (the "Company"), and
herewith (please check as applicable) tenders payment for such shares of Common
Stock to the order of the Company in the amount of $_____ per share (the
Exercise Price currently in effect pursuant to this Warrant) in accordance with
the terms hereof by enclosing a check (payable to the order of the Company) in
the amount of $______________ in payment of the purchase price thereof.
The undersigned hereby surrenders this Warrant Certificate and all right,
title and interest therein to the Company and requests that a certificate for
such shares of Common Stock be registered on the stock transfer books of the
Company as follows:
Name of Transferee: ____________________________________________
State of Organization (if applicable):_______________________________
Federal Tax Identification or
Social Security Number:________________________________________
Address:
______________________________________________________
If this exercise of the Warrant is not an exercise in full, then the
undersigned Holder hereby requests that a new Warrant of like tenor (exercisable
for the balance of the shares of Common Stock underlying this Warrant) be issued
and delivered to the undersigned Holder at the address on the warrant register
of the Company.
Dated:__________________________
___________________________________________
(Name of Registered Holder -
Please Print)
By_______________________________________
(Signature of Registered
Holder or
of Duly Authorized
Signatory)
Title______________________________________
Exhibit A-2
COMMON STOCK WARRANT
ASSIGNMENT FORM
For Value Received, the undersigned Holder of the attached Warrant hereby
sells, assigns and transfers to the transferee whose name and address are set
forth below all of the rights of the undersigned under the within Warrant (to
the extent of the portion of the within Warrant being transferred hereby, which
portion is ___________________________).
Name of Transferee:
________________________________________________
State of Organization (if
applicable):___________________________________
Federal Tax Identification or
Social Security
Number:_____________________________________________
Address:
___________________________________________________________
If this transfer is not a transfer of the Warrant in full, then the
undersigned hereby requests that, as provided in the within Warrant, a new
Warrant of like tenor respecting the balance of the Exercise Quantity not being
transferred pursuant hereto be issued in the name of and delivered to, the
undersigned.
The undersigned does hereby irrevocably constitute and appoint
____________________ attorney to register the foregoing transfer on the books of
the Company maintained for that purpose, with full power of substitution in the
premises.
Dated:_________________________
____________________________________
(Name of Registered
Holder - Please Print)
By_________________________________
(Signature of
Registered Holder or
of Duly
Authorized Signatory)
Title________________________________
THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR QUALIFIED UNDER APPLICABLE STATE
SECURITIES LAWS. THIS WARRANT AND SUCH SHARES MAY BE OFFERED, SOLD OR
TRANSFERRED ONLY IN COMPLIANCE WITH THE REQUIREMENTS OF SUCH ACT AND OF ANY
APPLICABLE STATE SECURITIES LAWS.
________________________________
