Exhibit No. 4.4
Xxxxxx Designs, Inc.
Form 10-KSB/ 1997
File No. 33-49854-A
WARRANTS
TO
PURCHASE 75,000 SHARES
OF
COMMON STOCK
OF
XXXXXX DESIGNS, INC.
THE WARRANTS UNDERLYING THIS WARRANT AGREEMENT ARE
ISSUED PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
PROVISIONS OF THE SECURITIES ACT OF 1933 (THE "ACT")
AND QUALIFICATION PROVISIONS OF APPLICABLE STATE
SECURITIES LAWS. NEITHER THE WARRANTS NOR THE SHARES
OF COMMON STOCK FOR WHICH THEY CAN BE EXERCISED CAN BE
SOLD, HYPOTHECATED OR OTHERWISE TRANSFERRED UNLESS
REGISTERED PURSUANT TO THE ACT AND QUALIFIED UNDER
APPLICABLE STATE LAW OR, IN THE OPINION OF COUNSEL TO
THE COMPANY, AN EXEMPTION THEREFROM IS AVAILABLE.
WHEREAS, at a meeting of the Board of Directors of Xxxxxx
Designs, Inc., a Delaware corporation with offices at 0000 Xxx
Xxxx Xxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000 (the "Company") duly
called and held, the Board authorized the granting of 75,000
warrants (each one sometimes hereinafter referred to as a
"Warrant") to purchase 75,000 shares of the Company's post split
Common Stock, par value $0.0001 per share, (the "Common Stock")
to __________________, with an address at
________________________________ (the "Holder") in accordance
with the terms of the Subscription Agreement and Investment
Letter between the Company and the Holder dated August 23, 1996;
and
WHEREAS, each Warrant is one of a series of warrants
(collectively the "Warrants"), all with the same terms and
conditions as those set forth herein, which may be issued by the
Company exercisable for up to an aggregate 880,000 shares of post
split Common Stock (sometimes hereafter referred to as the
"Warrant Shares"); and
WHEREAS, each Warrant is included in a unit (the "Unit") which is
part of an offering of up to 16 Units being conducted by the
Company on a 12 Unit minimum or none to 16 Unit maximum best
efforts basis and each Unit consists of (i) one 12% Convertible
Subordinated Promissory Note (collectively the "Notes") in the
principal amount of $100,000; and (ii) 50,000 Warrants, each to
purchase one Warrant Share at a price of $0.25 per share for a
period of seven years; and
WHEREAS, the Company desires to set forth the terms of the
Warrants and the Holder desires to accept such terms.
NOW, THEREFORE, in consideration of the premises, the parties
hereto agree as follows:
1. Grant of Warrant.
The Company hereby grants to the Holder of each Warrant the right
to purchase one Warrant Share for $0.25 per share, subject to
adjustment as hereinafter provided (the "Exercise Price"). The
Warrant may be exercised in whole or in part at any time
commencing on August 24, 1996 until 5:00 P.M., New York time, on
August 23, 2003 (the "Expiration Date").
2. Manner of Exercise.
The Warrants underlying this Warrant Agreement may be exercised
in whole or in part by surrender of this Warrant Agreement, with
the form of subscription at the end hereof duly executed by the
Holder, to the Company at its principal office, accompanied by
payment in full in cash or by certified or official bank check to
the order of the Company of the Exercise Price of shares to be
purchased. As soon as practicable, but in no event more than 15
days after the Holder has given the aforesaid written notice and
made the aforesaid payment, the Company shall, without charging
stock issue or transfer taxes to the Holder, issue the number of
shares of duly authorized Common Stock issuable upon such
exercise, which shall be duly issued, fully paid and non-
assessable, and shall deliver to the Holder a certificate or
certificates therefor, registered in the Holder's name. In the
event of a partial exercise of this Warrant Agreement, the
Company shall also issue and deliver to the Holder a new Warrant
Agreement of like tenor, in the name of the Holder. for the
exercise of the number of Warrant Shares for which such Warrant
Agreement may still be exercised.
3. Investment Representation
The Holder acknowledges that Warrants underlying this Warrant
Agreement as well as the Warrant Shares for which these Warrants
may be exercised, have not been and, except as otherwise provided
herein, will not be registered under the Securities Act of 1933
(the "Act") or qualified under applicable state securities laws
and that the transferability thereof is restricted by the
registration provisions of the Act as well as such state laws.
The Holder represents that he is acquiring the Warrants and will
acquire the Warrant Shares for his own account, for investment
purposes only and not with a view to resale or other distribution
thereof, nor with the intention of selling, transferring or
otherwise disposing of all or any part of such securities for any
particular event or circumstance, except selling, transferring or
disposing of them upon full compliance with all applicable
provisions of the Act, the Securities Exchange Act of 1934 (the
"Exchange Act"), the Rules and Regulations promulgated by the
Securities and Exchange Commission (the "Commission") thereunder,
and any applicable state securities laws. The Holder further
understands and agrees that (i) the securities may be sold only
if they are subsequently registered under the Act and qualified
under any applicable state securities laws or, in the opinion of
the Company's counsel, an exemption from such registration and
qualification is available; (ii) any routine sales of securities
made in reliance upon Rule 144 promulgated by the Commission
under the Act can be made only in the amounts set forth in and
pursuant to the other terms and conditions including applicable
holding periods of that Rule; and (iii) except as otherwise set
forth herein, the Company is under no obligation to register this
Warrant or the Warrant Shares on his behalf or to assist him in
complying with any exemption from registration under the Act.
The Holder agrees that each certificate representing any Warrant
Shares for which the Warrants may be exercised will bear on its
face a legend in substantially the following form:
These securities have not been registered under the Securities
Act of 1933 or qualified under any state securities laws. They
may not be sold or transferred in the absence of an effective
registration statement under that Act or qualification under
applicable state securities laws without an opinion acceptable to
counsel to the Company that such registration and qualification
are not required.
4. Restrictions.
The Holder shall not be entitled to any dividend declared by the
Company except as may be provided in Section 5 below, and shall
not be entitled to any voting rights by virtue of the Warrant,
except with respect to any shares of Common Stock issued upon
the exercise hereof.
5. Warrant Adjustments.
The Exercise Price and the number of shares purchasable upon
exercise of each Warrant shall be subject to adjustment with
respect to events after August 24, 1996 hereof as follows:
(a) Subdivisions, Consolidation, etc. Except as provided
in Paragraph 5 (k) below, in case the Company shall (i) declare a
dividend on its outstanding Common Stock in shares of its capital
stock, (ii) subdivide its outstanding Common Stock, (iii) combine
its outstanding Common Stock in to smaller number of shares, or
(iv) issue any shares of its capital stock by reclassification of
its Common Stock (including any such reclassification in
connection with a consolidation or merger in which the Company is
the continuing corporation), then in each such case the Exercise
Price and the number and kind of shares receivable upon exercise,
in effect at the time of the record date for such dividend or of
the effective date of such subdivision, combination or
reclassification, shall be proportionately adjusted so that if
the Warrant is exercised after such time the Holder shall be
entitled to receive the aggregate number and kind of shares which
if the Warrant had been exercised immediately prior to such time,
he would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, combination or
reclassification. Such adjustment shall be made successively
whenever such event shall occur. The adjustment shall become
effective immediately after the record date in the case of a
dividend or distribution and immediately after the effective date
in the case of a subdivision, combination or reclassification.
If after an adjustment the Holder upon exercise of this Warrant
may receive shares of two or more classes of capital stock of the
Company, the Company's Board of Directors shall determine the
allocation of the adjusted Exercise Price between the classes of
capital stock. After such allocation, the Exercise Price of each
class of capital stock shall thereafter be subject to adjustment
on terms comparable to those applicable to Common Stock in this
Section 5.
(b) Adjustment for Certain Issues of Common Stock. If the
Company shall at any time or from time to time issue any shares
of Common Stock (other than shares issued as a dividend or
distribution as provided in Paragraph 5 (a) above) for a
consideration per share less than the Exercise Price in effect on
the date of such issue, then, forthwith upon such issue, the
Exercise Price in effect immediately prior to such action (the
"Existing Exercise Price") shall be reduced by dividing the
number of shares so issued by the total number of shares
outstanding after such issuance, multiplying the quotient by the
difference between the Existing Exercise Price and the price of
the shares so issued and subtracting the result from the Existing
Exercise Price. In the case of an issue of additional shares of
Common Stock for cash, the consideration received by the Company
therefor shall be deemed to be the gross cash proceeds received
for such shares. The term "issue" shall be deemed to include the
sale or other disposition of shares held in the Company's
treasury. The number of shares outstanding at any given time
shall not include stores in the Company's treasury.
(c) Subscription Offerings. In case the Company shall
issue rights, options, or warrants entitling tile holders thereof
to subscribe for or purchase Common Stock (or securities
convertible into or exchangeable for Common Stock) at a price per
share (or having a conversion price per share, in the case of a
security convertible into or exchangeable for Common Stock) less
than the Exercise Price per share of Common Stock on the record
date for the determination of stockholders entitled to receive
such rights or the granting date if such holders are not
stockholders, then in each such case the Exercise Price shall be
adjusted by multiplying the Exercise Price in effect immediately
prior to such record or granting date by a fraction, of which the
numerator shall be the number of shares of Common Stock
outstanding on such record or granting date plus the number of
shares of Common Stock which the aggregate offering price of the
total number of shares of Common Stock so to be offered (or the
aggregate initial conversion price of the convertible securities
so to be offered) would purchase at such Exercise Price and of
which the denominator shall be the number of shares of Common
Stock outstanding on such record or granting date plus the number
of additional shares of Common Stock to be offered for
subscription or purchase (or into which the convertible or
exchangeable securities so to be offered are initially
convertible or exchangeable). Such adjustment shall become
effective at the close of business on such record or granting
date; provided, however, that, to the extent the shares of Common
Stock (or securities convertible into or exchangeable for shares
of Common Stock) are not delivered, the Exercise Price shall be
readjusted after the expiration of such rights, options, or
warrants (but only if the Warrant is exercised after such
expiration), to the Exercise Price which would then be in effect
had the adjustments made upon the issuance of such rights or
warrants been made upon the basis of delivery of only the number
of shares of Common Stock (or securities convertible into or
exchangeable for shares of Common Stock) actually issued. In
case any subscription price may be paid in a consideration part
or all of which shall be in a form other than cash, the value of
such consideration shall be as determined in good faith by the
Company's Board of Directors. Shares of Common Stock owned by or
held for the account of the Company or any majority-owned
subsidiary shall not be deemed outstanding for the purpose of any
such computation.
(d) Other Rights to Acquire Common Stock. In case the
Company shall distribute to all holders of Common Stock
(including any such distribution made to the stockholders of the
Company in connection with a consolidation or merger in which the
Company is the continuing corporation) evidences of its
indebtedness or assets (other than cash dividends or
distributions and dividends payable in shares of Common Stock),
or options or warrants or convertible or exchangeable securities
containing the right to subscribe for or purchase shares of
Common Stock (excluding those referred to in Paragraph (c) of
this Section 5), then in each such case the Exercise Price shall
be adjusted by multiplying the Exercise Price in effect
immediately prior to the record date for the determination of
stockholders entitled to receive such distribution by a fraction,
of which the numerator shall be the Current Market Price per
share of Common Stock on such record date, less the fair market
value (as determined in good faith by the Company's Board of
Directors) of the portion of the evidences of indebtedness or
assets so to be distributed, or of such subscription rights,
options, or warrants or convertible or exchangeable securities
containing the right to subscribe for or purchase shares of
Common Stock, applicable to one share, and of which the
denominator shall be such Current Market Price per share of
Common Stock. Such adjustment shall be made whenever any such
distribution is made, and shall become effective on the date of
such distribution retroactive to the record date for the
determination of stockholders entitled to receive such
distribution.
(e) Current Market Price. For the purpose of any
computation under Paragraph (d) of this Section 5, the Current
Market Price per share of Common Stock on any date shall be
deemed to be the average of the daily closing prices for the 30
consecutive trading days commencing 45 trading days before such
date. The closing price for each day shall be the last reported
sales price regular way or, in case no such reported sale takes
place on such day, the closing bid price regular way, in either
case 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 highest reported bid; price as furnished
by the National Association of Securities Dealers, Inc. through
NASDAQ or similar organization if NASDAQ is no longer reporting
such information, or by the National Daily Quotation Bureau or
similar organization if the Common Stock is not then quoted on an
inter-dealer quotation system. If on any such date the Common
Stock is not quoted by any such organization, the fair value of
the Common Stock on such date, as determined by the Company's
Board of Directors, shall be used.
(f) Minimum Adjustment. No adjustment in the Exercise
Price shall be required if such adjustment is less than $0.05;
provided, however, that any adjustments which by reason of this
Paragraph (f) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All
calculations under this Section 5 shall be made to the nearest
cent or to the nearest one-hundredth of a share, as the case may
be.
(g) Referral of Adjustment. In any case in which this
Section 5 shall require that an adjustment in the Exercise Price
be made effective as of a record date for a specified event, if
the Warrant shall have been exercised after such record date the
Company may elect to defer until the occurrence of such event
issuing to the Holder the shares, if any, issuable upon such
exercise over and above the shares, if any, issuable upon such
exercise on the basis of the Exercise Price in effect prior to
such adjustment; provided, however, that the Company shall
deliver to the Holder a due bill or other appropriate instrument
evidencing the Holder's right to receive such additional shares
upon the occurrence of the event requiring such adjustment.
(h) Number of Shares. Upon each adjustment of the Exercise
Price as a result of the calculations made in Paragraphs (a)
through (d) of this Section 5, the Warrant shall thereafter
evidence the right to purchase, at the adjusted Exercise Price,
that number of shares (calculated to the nearest thousandth)
obtained by dividing (i) the product obtained by multiplying the
number of shares purchasable upon exercise of the Warrant prior
to adjustment of the number of shares by the Exercise Price in
effect prior to adjustment of the Warrant Price by (ii) the
Exercise Price in effect after such adjustment of the Exercise
Price.
(i) Transactions Not Requiring Adjustments. No adjustment
need be made for a transaction referred to in Paragraphs (a)
through (d) of this Section 5 if the Holder is permitted to
participate in the transaction on a basis no less favorable than
any other party and at a level which would preserve the Holder's
percentage equity participation in the Common Stock upon exercise
of the Warrant. No adjustment need be made for sales of Common
Stock pursuant to a Company plan for reinvestment of dividends or
interest, the granting of options and/or the exercise of options
outstanding under any of the Company's currently existing stock
option plans, or the exercise of any other of the Company's
currently outstanding options. No adjustment need be made for a
change in the par value or no par value of the Common Stock. If
the Warrant becomes exercisable solely into cash, no adjustment
need be made thereafter. Interest will not accrue on the cash.
(j) Notice of Adjustment. Whenever the Exercise Price is
adjusted, the Company shall promptly mail to the Holder a notice
of the adjustment together with a certificate from the Company's
independent public accountants briefly stating the facts
requiring the adjustment and the manner of computing it. The
certificate shall be prima facia evidence that the adjustment is
correct, absent manifest error.
(k) Reorganization of Company. If the Company and/or the
holders of Common Stock are parties to a merger, consolidation
or a transaction in which (i) the Company transfers or leases
substantially all of its assets; (ii) the Company reclassifies or
changes its outstanding Common Stock; or (iii) the Common Stock
is exchanged for securities, cash or other assets; the person who
is the transferee or lessee of such assets or is obligated to
deliver such securities, cash or other assets shall assume the
terms of this Warrant. If the issuer of securities deliverable
upon exercise of the Warrant is an affiliate of the surviving,
transferee or lessee corporation, that issuer shall join in such
assumption. The assumption agreement shall provide that the
Holder may exercise this Warrant into the kind and amount of
securities, cash or other assets which he would have owned
immediately after the consolidation, merger, transfer, lease or
exchange if he had exercised the Warrant immediately before the
effective date of the transaction. The assumption agreement
shall provide for adjustments which shall be as nearly equivalent
as may be practical to the adjustments provided for in this
Section 5. The successor company shall mail to the Holder a
notice briefly describing the assumption agreement. If this
Paragraph applies, Paragraph 5 (a) above does not apply.
(l) Voluntary Reduction. The Company from time to time may
reduce the Exercise Price by any amount for any period of time if
the period is at least 20 days and if the reduction is
irrevocable during the period. Whenever the Exercise Price is
reduced, the Company shall mail to the Holder a notice of the
reduction. The Company shall mail the notice at least 15 days
before the date the reduced Exercise Price takes effect. The
notice shall state the reduced Exercise Price and the period it
will be in effect. A reduction of the Exercise Price does not
change or adjust the Exercise Price otherwise in effect for
purposes of Paragraphs 5 (a) through (d) above.
(m) Dissolution, Liquidation. In the event of the
dissolution or total liquidation of the Company, then after the
effective date thereof, the Warrant and all rights thereunder
shall expire.
(n) Notices. If (i) the Company takes any action that
would require an adjustment in the conversion price pursuant to
this Section 5; or (ii) there is a liquidation or dissolution of
the Company, the Company shall mail to the Holder a notice
stating the proposed record date for a distribution or effective
date of a reclassification, consolidation, merger, transfer,
lease, liquidation or dissolution. The Company shall mail the
notice at least 15 days before such date. Failure to mail the
notice or any defect in it shall not affect the validity of the
transaction.
(o) Determination by Company Conclusive. Any determination
that the Company or its Board of Directors must make pursuant to
this Section 5 shall be conclusive, absent manifest error.
6. Fractional Shares.
If the number of shares of Common Stock purchasable upon the
exercise of this Warrant is adjusted pursuant to Section 5
hereof, the Company shall nevertheless not be required to issue
fractions of shares upon exercise of the Warrant or otherwise, or
to distribute certificates that evidence fractional shares. With
respect to any fraction of a share called for upon any exercise
hereof, the Company shall round to the nearest share so that if
the fraction is less than 0.5 no share shall be issued and if the
fraction is 0.5 or higher the Company shall issue one full share.
7. Inclusion of Warrant Shares in Registration Statement:
Right to Registration.
The Holder's rights and the Company's obligations with respect to
the registration and qualification of the Warrant Shares under
the Act and applicable state securities laws are set forth in
Sections 3 and 6 of the Notes.
8. Holder Not Deemed Stockholder.
The Holder shall not, as holder of this Warrant, be entitled to
vote or to receive dividends or be deemed the holder of Common
Stock that may at any time be issuable upon exercise of this
Warrant for any purpose whatsoever, nor shall anything contained
herein be construed to confer upon the Holder, as holder of this
Warrant, 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 at any meeting thereof, or to give or
withhold consent to any corporate action (whether upon any
recapitalization, issue or reclassification of stock, change of
par value or change of stock to no par value, consolidation,
merger or conveyance or otherwise), or to receive notice of
meetings, or to receive dividends or subscription rights, until
the Holder shall have exercised this Warrant and been issued
shares of Common Stock in accordance with the provisions hereof.
9. Reservation of Shares.
The Company shall at all times reserve and keep available out of
its authorized but unissued stock, for the purpose of effecting
the issuance of stock upon exercise of this Warrant, such number
of shares as shall from time to time be sufficient to effect the
issuance of shares of Common Stock upon exercise of this Warrant.
10. Amendment.
This Agreement shall not be amended, modified or revoked except
by agreement in writing, signed by the Company and the Holder.
11. Governing Law.
This Warrant shall be governed by the laws of the State of Texas.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed on its behalf by an officer thereunto duly authorized
and the Holder has executed this Agreement as of August 23, 1996.
XXXXXX DESIGNS, INC.
By:________________________________
____________________________________
X. Xxxxxxx Xxx, President
SUBSCRIPTION FORM
To Be Executed by the Holder
in Order to Exercise Warrant
The undersigned Holder hereby irrevocably elects to exercise this
Warrant, and to purchase the shares of Common Stock issuable upon
the exercise thereof, and requests that certificates for such
shares shall be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
________________________________________________________
________________________________________________________
________________________________________________________
[please print or type name and address]
and be delivered to
________________________________________________________
________________________________________________________
________________________________________________________
[please print or type name and address]
and if such number of shares of Common Stock shall not be all the
shares issuable upon the exercise of this Warrants, that a new
Warrant exercisable for the balance of the shares issuable upon
the exercise of this Warrants be delivered to the Holder at the
address stated below.
Dated: ___________________
x ______________________________
______________________________
______________________________
Address
______________________________
Taxpayer Identification
Number
______________________________
Signature Guaranteed
______________________________
