TAG-IT PACIFIC, INC.
COMMON STOCK WARRANT
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED UNLESS THERE IS
AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH SALE OR TRANSFER IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
This certifies that, for good and valuable consideration, receipt of
which is hereby acknowledged, ________________________________ (the "Holder") is
entitled to purchase, subject to the terms and conditions of this Warrant, from
Tag-It Pacific, LLC, a Delaware limited liability company (the "Company"),
______ fully paid and nonassessable shares of the Membership Units ("Membership
Units") of the Company, in accordance with Section 2 during the period
commencing on the date (the "Commencement Date") which is the earlier of (i)
February 15, 1999 or (ii) one year from the date of the final prospectus
relating to the Company's initial public offering of securities, which is
registered under the Securities Act of 1933, as amended (the "1933 Act"), and
ending at 5:00 p.m. California time, on the date which is four (4) years from
the Commencement Date (the "Expiration Date"), at which time this Warrant will
expire and become void unless earlier terminated as provided herein. The
Membership Units of the Company for which this Warrant is exercisable as
adjusted from time to time pursuant to the terms hereof, are hereinafter
referred to as the "Shares."
1. EXERCISE PRICE. The initial purchase price for the Shares shall
be the greater of (i) 120% of the price indicated on the cover of the final
prospectus relating to the Company's initial public offering of securities which
is registered under the 1933 Act or (ii) $6.00 per share. Such price shall be
subject to adjustment pursuant to the terms hereof (such price, as adjusted from
time to time, is hereinafter referred to as the "Exercise Price").
2. EXERCISE AND PAYMENT.
(a) CASH EXERCISE. At any time after the Commencement Date,
this Warrant may be exercised, in whole or in part, from time to time by the
Holder, during the term hereof, by surrender of this Warrant and the Notice of
Exercise annexed hereto duly completed and executed by the Holder to the Company
at the principal executive offices of the Company, together with payment in the
amount obtained by multiplying the Exercise Price then in effect by the number
of Shares thereby purchased, as designated in the Notice of Exercise. Payment
may be in cash or by check payable to the order of the Company.
(b) NET ISSUANCE. In lieu of payment of the Exercise Price
described in Section 2(a), the Holder may elect to receive, without the payment
by the Holder of any additional consideration, Membership Units equal to the
value of this Warrant or any portion hereof by the surrender of this Warrant or
such portion to the Company, with the net issue election notice annexed hereto
(the "Net Issuance Election Notice") duly executed, at the office of the
Company. Thereupon, the Company shall issue to the Holder such number of fully
paid and nonassessable Membership Units as is computed using the following
formula:
where: X = Y (A-B)
-------
A
X = the number of shares to be issued to the Holder pursuant to
this Section 2.
Y = the number of shares covered by this Warrant in respect of
which the net issuance election is made pursuant to this Section
2.
A = the fair market value of one share of Common Stock, as
determined in accordance with the provisions of this Section 2.
B = the Exercise Price in effect under this Warrant at the time
the net issuance election is made pursuant to this Section 2.
For purposes of this Section 2, the "fair market value" per share of the
Company's Common Stock shall mean:
i. If the Membership Units are traded on a national securities
exchange or are listed on the Nasdaq National Market (the "NNM") or other
over-the-counter quotation system, the fair market value shall be the last
reported sale price of the Membership Units on such exchange or on the NNM
or other over-the-counter quotation system on the last business day before
the effective date of exercise of the net issuance election or if no such
sale is made on such day, the mean of the closing bid and asked prices for
such day on such exchange, the NNM or over-the-counter quotation system;
and
ii. If the Membership Units are not so listed and bid and ask
prices are not reported, the fair market value shall be the price per share
which the Company could obtain from a willing buyer for Membership Units
sold by the Company from authorized but unissued Membership Units, as such
price shall be determined by mutual agreement of the Company and the Holder
of this Warrant. If the Company and the Holder cannot mutually agree on
such price, the fair market value shall be made by an appraiser of
recognized standing selected by the Holder and the Company, or, if they
cannot agree on an appraiser, each of the Company and the Holder shall
select an appraiser of recognized standing and the two appraisers
shall designate a third appraiser of recognized standing, whose appraisal
shall be determinative of such value.
3. DELIVERY OF CERTIFICATES. Within a reasonable time after
exercise, in whole or in part, of this Warrant, the Company shall issue in the
name of and deliver to the Holder, a certificate or certificates for the number
of fully paid and nonassessable Membership Units which the Holder shall have
requested in the Notice of Exercise or Net Issuance Election Notice. If this
Warrant is exercised in part, the Company shall deliver to the Holder a new
Warrant for the unexercised portion of this Warrant at the time of delivery of
such certificate or certificates.
4. NO FRACTIONAL SHARES. No fractional Membership Units or scrip
representing fractional Membership Units will be issued upon exercise of this
Warrant. If upon any exercise of this Warrant a fraction of a Membership Unit
results, the Company will pay the Holder the difference between the cash value
of the fractional Membership Unit and the portion of the Exercise Price
allocable to the fractional Membership Unit.
5. CHARGES, TAXES AND EXPENSES. The Holder shall pay all transfer
taxes or other incidental charges, if any, in connection with the transfer of
the Shares purchased pursuant to the exercise hereof from the Company to the
Holder.
6. LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT. Upon receipt
by the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to the Company,
and upon reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of this Warrant, if mutilated, the
Company will make and deliver a new Warrant of like tenor and dated as of such
cancellation, in lieu of this Warrant.
7. SATURDAYS, SUNDAYS, HOLIDAYS, ETC. If the last or appointed day
for the taking of any action or the expiration of any right required or granted
herein shall be a Saturday or a Sunday or shall be a legal holiday, then such
action may be taken or such right may be exercised on the next succeeding
weekday which is not a legal holiday.
8. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES. The number of
and kind of securities purchasable upon exercise of this Warrant and the
Exercise Price shall be subject to adjustment from time to time as follows:
(a) SUBDIVISIONS, COMBINATIONS AND OTHER ISSUANCES. If the
Company shall at any time after the date hereof but prior to the expiration of
this Warrant subdivide its outstanding securities as to which purchase rights
under this Warrant exist, by split-up or otherwise, or combine its outstanding
securities as to which purchase rights under this Warrant exist, the number of
Shares as to which this Warrant is exercisable as of the date of such
subdivision, split-up or combination shall forthwith be proportionately
increased in the case of a subdivision, or proportionately decreased in the case
of a combination. Appropriate adjustments shall also be made to the purchase
price payable per Membership
Unit, so that the aggregate purchase price payable for the total number of
Shares purchasable under this Warrant as of such date shall remain the same.
(b) MEMBERSHIP UNIT DIVIDEND. If at any time after the date
hereof the Company declares a dividend or other distribution on Membership Units
payable in Membership Units or other securities or rights convertible into
Membership Units ("Membership Unit Equivalents") without payment of any
consideration by such holder for the additional Membership Units or the
Membership Unit Equivalents (including the additional shares of Membership Units
issuable upon exercise or conversion thereof), then the number of Membership
Units for which this Warrant may be exercised shall be increased as of the
record date (or the date of such dividend distribution if no record date is set)
for determining which holders of Membership Units shall be entitled to receive
such dividend, in proportion to the increase in the number of outstanding
Membership Units (and shares of Membership Units issuable upon conversion of all
such securities convertible into Membership Units) of Membership Units as a
result of such dividend, and the Exercise Price shall be adjusted so that the
aggregate amount payable for the purchase of all the Shares issuable hereunder
immediately after the record date (or on the date of such distribution, if
applicable), for such dividend shall equal the aggregate amount so payable
immediately before such record date (or on the date of such distribution, if
applicable).
(c) OTHER DISTRIBUTIONS. If at any time after the date hereof
the Company distributes to holders of its Membership Units, other than as part
of its dissolution or liquidation or the winding up of its affairs, any shares
of its capital stock, any evidence of indebtedness or any of its assets (other
than cash, Membership Units or securities convertible into Membership Units),
then the Company may, at its option, either (i) decrease the per share Exercise
Price of this Warrant by an appropriate amount based upon the value distributed
on each Membership Unit as determined in good faith by the Company's Board of
Directors or (ii) provide by resolution of the Company's Board of Directors that
on exercise of this Warrant, the Holder hereof shall thereafter be entitled to
receive, in addition to the Membership Units otherwise receivable on exercise
hereof, the number of Membership Units or other securities or property which
would have been received had this Warrant at the time been exercised.
(d) MERGER. If at any time after the date hereof there shall be
a merger or consolidation of the Company with or into another corporation when
the Company is not the surviving corporation then the Holder shall thereafter be
entitled to receive upon exercise of this Warrant, during the period specified
herein and upon payment of the aggregate Exercise Price then in effect, the
number of shares or other securities or property of the successor corporation
resulting from such merger or consolidation, which would have been received by
Holder for the Membership Units subject to this Warrant had this Warrant at such
time been exercised.
(e) RECLASSIFICATION, ETC. If at any time after the date hereof
there shall be a change or reclassification of the securities as to which
purchase rights under this Warrant exist into the same or a different number of
securities of any other class or classes, then the Holder shall thereafter be
entitled to receive upon exercise of this Warrant, during
the period specified herein and upon payment of the Exercise Price then in
effect, the number of shares or other securities or property resulting from such
change or reclassification, which would have been received by Holder for the
Membership Units subject to this Warrant had this Warrant at such time been
exercised.
9. NOTICE OF ADJUSTMENTS; NOTICES. Whenever the Exercise Price or
number of Shares purchasable hereunder shall be adjusted pursuant to Section 8
hereof, the Company shall execute and deliver to the Holder a certificate
setting forth, in reasonable detail, the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated and
the Exercise Price and number of Membership Units purchasable hereunder after
giving effect to such adjustment, and shall cause a copy of such certificate to
be mailed (by first class mail, postage prepaid) to the Holder.
10. RIGHTS AS MEMBER. Prior to exercise of this Warrant, the Holder
shall not be entitled to any rights as a Member of the Company with respect to
the Shares, including (without limitation) the right to vote such Shares,
receive dividends or other distributions thereon, or be notified of Member
meetings, and the Holder shall not be entitled to any notice or other
communication concerning the business or affairs of the Company. However, in
the event of any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend (other than a cash dividend) or other
distribution, any right to subscribe for, purchase or otherwise acquire any
Membership Units or any other securities or property, or to receive any other
right, the Company shall mail to each Holder of this Warrant, at least 10 days
prior to the date specified therein, a notice specifying the date on which any
such record is to be taken for the purpose of such dividend, distribution or
right, and the amount and character of such dividend, distribution or right.
11. RESTRICTED SECURITIES. The Holder understands that this Warrant
and the Shares purchasable hereunder constitute "restricted securities" under
the federal securities laws inasmuch as they are, or will be, acquired from the
Company in transactions not involving a public offering and accordingly may not,
under such laws and applicable regulations, be resold or transferred without
registration under the 1933 Act or an applicable exemption from such
registration. In this connection, the Holder acknowledges that Rule 144 of the
Securities and Exchange Commission (the "SEC") is not now, and may not in the
future be, available for resales of the Warrant and the Shares purchasable
hereunder. Unless the Shares are subsequently registered pursuant to Section 14,
the Holder further acknowledges that the securities legend on Exhibit A to the
Notice of Exercise attached hereto shall be placed on any Shares issued to the
Holder upon exercise of this Warrant.
12. CERTIFICATION OF INVESTMENT PURPOSE. Unless a current
registration statement under the 1933 Act shall be in effect with respect to the
securities to be issued upon exercise of this Warrant, the Holder covenants and
agrees that, at the time of exercise hereof, it will deliver to the Company a
written certification executed by the Holder that the securities acquired by
such Holder upon exercise hereof are for the account of such Holder and acquired
for investment purposes only and that such securities are not acquired with a
view to, or for sale in connection with, any distribution thereof.
13. DISPOSITION OF SHARES. Xxxxxx hereby agrees not to make any
disposition of any Xxxxxx purchased hereunder unless and until:
(a) Holder shall have notified the Company of the proposed
disposition and provided a written summary of the terms and conditions of the
proposed disposition;
(b) Holder shall have complied with all requirements of this
Warrant applicable to the disposition of the Shares; and
(c) Holder shall have provided the Company with written
assurances, in form and substance reasonably satisfactory to legal counsel of
the Company, that (i) the proposed disposition does not require registration of
the Shares under the 1933 Act or (ii) all appropriate action necessary for
compliance with the registration requirements of the 1933 Act or of any
exemption from registration available under the 1933 Act has been taken.
The Company shall NOT be required (i) to transfer on its books
any Shares which have been sold or transferred in violation of the provisions of
this Section 13 or (ii) to treat as the owner of the Shares, or otherwise to
accord voting or dividend rights to, any transferee to whom the Shares have been
transferred in contravention of the terms of this Warrant.
14. REGISTRATION RIGHTS.
(a) PIGGYBACK REGISTRATION. If at any time during the four-year
period commencing on the Commencement Date and ending on the Expiration Date,
the Company shall determine to register for its own account or the account of
others under the 1933 Act any of its equity securities, other than on Form S-4
or Form S-8 or their then equivalents relating to equity securities to be issued
solely in connection with any acquisition of any entity or business, or equity
securities issuable in connection with stock option or other employee benefit
plans, the Company shall send to each Holder of Warrants or Shares, who is
entitled to registration rights under this Section 14(a) written notice of such
determination and, if within twenty (20) days after receipt of such notice, such
Holder shall so request in writing (hereafter a "Selling Holder"), the Company
shall, subject to the provisions of this Section 14(a) which relate to the
ability of a managing underwriter to exclude Registrable Securities (as defined
below) from an offering, include in such Registration Statement all or any part
of the Shares issuable upon exercise of this Warrant and any Warrants issued to
the Holder pursuant to the terms of the Securities Purchase Agreement between
the Company and the Holder, dated December 31, 1997 (collectively, the
"Registrable Securities") such Selling Holder requests to be registered. The
obligations of the Company under this Section 14(a) may be waived by Holders
holding a majority in interest of the Registrable Securities. In the event that
the managing underwriter for said offering, in good faith, advises the Company
that the inclusion of such Registrable Securities in the offering would be
detrimental to the offering, then the Company shall be required to include in
the offering only that number of Registrable Securities which the managing
underwriter determines in good faith will not jeopardize the success of the
offering (the Registrable Securities so included to be apportioned pro rata
among all Selling Holders according to the total amount of Registrable
Securities entitled to be included therein owned by each Selling Holder or in
such other proportions as shall mutually be agreed to by such Selling Holders).
(b) DEMAND REGISTRATION. In addition to any Registration
Statement pursuant to subparagraph (a) above, during the four-year period
beginning on the Commencement Date and ending on the Expiration Date, the
Company will, as promptly as practicable (but in any event within 60 days),
after written request (the "REQUEST") by the Holder, or by a person or persons
holding (or having the right to acquire by virtue of holding this Warrant) at
least 50% of the Registrable Securities (such Holder or Holders to be included
in the definition of "Selling Holder" for the purposes of Section 14(c) hereof),
prepare and file at its own expense a Registration Statement with the SEC and
appropriate "blue sky" authorities sufficient to permit the public offering of
the Registrable Securities and will use its best efforts at its own expense
through its officers, directors, auditors and counsel, in all matters necessary
or advisable, to cause such Registration Statement to become effective as
promptly as practicable and to maintain such effectiveness so as to permit
resale of the Registrable Securities covered by the Request until the earlier of
the time that all such Registrable Securities have been sold or the expiration
of 90 days from the effective date of the Registration Statement; PROVIDED,
HOWEVER, that the Company shall only be obligated to file one such Registration
Statement under this Section 14(b).
(c) OBLIGATIONS OF THE HOLDERS. In connection with the
registration of the Registrable Securities pursuant to either Sections 14(a) or
(b), the Selling Holders shall have the following obligations:
i. It shall be a condition precedent to the obligations of
the Company to take any action pursuant to this Agreement with respect to each
Selling Holder that such Selling Holder shall furnish to the Company such
information regarding itself, the Registrable Securities held by it and the
intended method of disposition of the Registrable Securities held by it as shall
be reasonably required to effect the registration of the Registrable Securities
and shall execute such documents in connection with such registration as the
Company may reasonably request. At least fifteen (15) days prior to the first
anticipated filing date of the Registration Statement, the Company shall notify
each Selling Holder of the information the Company requires from each such
Selling Holder (the "Requested Information") in the case of a Registration
Statement being prepared pursuant to Section 14(b) or if such Selling Holder
elects to have any of such Selling Holder's Registrable Securities included in
the Registration Statement in the case of a Registration Statement being
prepared pursuant to Section 14(a).
ii. Each Selling Holder by such Xxxxxxx Xxxxxx's acceptance
of the Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Xxxxxxx Xxxxxx has notified the
Company in writing of such
Xxxxxxx Xxxxxx's election to exclude all of such Selling Holder's Registrable
Securities from the Registration Statement; and
iii. No Selling Holder may participate in any underwritten
registration hereunder unless such Xxxxxxx Xxxxxx (i) agrees to sell such
Selling Holder's Registrable Securities on the basis provided in any
underwriting arrangements, (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements, and (iii)
agrees to pay its pro rata share of all underwriting discounts and commissions
and other fees and expenses of investment bankers and any manager or managers of
such underwriting, except as provided in Section 14(d) below.
(d) EXPENSES OF REGISTRATION. All expenses incurred in
effecting any registration pursuant to Section 14(a) or Section 14(b) hereof,
including, without limitation, all registration and filing fees, printing
expenses, expenses of compliance with blue sky laws, fees and disbursements of
counsel for the Company, and expenses of any audits incidental to or required by
such registration shall be borne by the Company; PROVIDED, that each Selling
Holder shall bear its own legal expenses (if it retains separate counsel) and
all underwriting discounts or brokerage fees or commissions relating to the sale
of its Registrable Securities
(e) INDEMNIFICATION. In the event any Registrable Securities
are included in a Registration Statement under this Agreement:
i. To the extent permitted by law, the Company will
indemnify and hold harmless each Selling Holder who holds such Registrable
Securities, the directors, if any, of such Selling Holder, the officers, if any,
of such Selling Holder, each person, if any, who controls any Selling Holder
within the meaning of the 1933 Act, any underwriter (as defined in the 1933 Act)
for the Selling Holders, the directors, if any, of such underwriter and the
officers, if any, of such underwriter, and each person, if any, who controls any
such underwriter within the meaning of the 1933 Act (each, an "Indemnified
Person"), against any losses, claims, damages, expenses or liabilities (joint or
several) (collectively, "Claims") to which any of them may become subject under
the 1933 Act or otherwise, insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement when it first became effective, or any
related final prospectus, amendment or supplement thereto, or the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which the statements therein were made, not misleading (a "Violation"). The
Company shall reimburse the Selling Holders and each such underwriter or
controlling person, promptly as such expenses are incurred and are due and
payable, for any legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 14(e)(i) shall not apply in such case to the extent
any such Claim arises out of or is based upon a Violation which occurs in
reliance upon and in conformity
with information furnished in writing to the Company by any Indemnified Person
or underwriter for such Indemnified Person expressly for use in connection with
the preparation of the Registration Statement or any such amendment thereof or
supplement thereto, and shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld.
ii. In connection with any Registration Statement in which
a Selling Holder is participating, each such Selling Holder agrees to indemnify
and hold harmless, to the same extent and in the same manner set forth in
Section 14(e)(i), the Company, each of its directors, each of its officers who
signs the Registration Statement, each person, if any, who controls the Company
within the meaning of the 1933 Act, any underwriter and any other shareholder
selling securities pursuant to the Registration Statement or any of its
directors or officers or any person who controls such shareholder or underwriter
within the meaning of the 1933 Act (collectively and together with an
Indemnified Person, an "Indemnified Party"), against any Claim to which any of
them may become subject, under the 1933 Act or otherwise, insofar as such Claim
arises out of or is based upon any Violation, in each case to the extent (and
only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished to the Company by such Selling
Holder expressly for use in connection with such Registration Statement, and
such Selling Holder will reimburse any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such Claim;
PROVIDED, HOWEVER, that the indemnity agreement contained in this Section
14(e)(ii) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of such Selling Holder,
which consent shall not be unreasonably withheld.
iii. The Company shall be entitled to receive indemnities
from underwriters, selling brokers, dealer managers and similar securities
industry professionals participating in any distribution to the same extent as
provided above, with respect to information furnished in writing by such persons
expressly for inclusion in the Registration Statement.
iv. Promptly after receipt by an Indemnified Party under
this Section 14(e) of notice of the commencement of any action (including any
governmental action), such Indemnified Party shall, if a Claim in respect
thereof is made against any indemnifying party under this Section 14(e), deliver
to the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying parties; PROVIDED, HOWEVER, that an
Indemnified Party shall have the right to retain its own counsel, with the fees
and expenses to be paid by the indemnifying party, if, in the reasonable opinion
of counsel retained by the indemnifying party, the representation by such
counsel of the Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Party and any other party represented by such counsel in such
proceeding. The indemnifying party shall pay for only one separate legal
counsel for the Indemnified Parties;
such legal counsel shall be selected by the Indemnified Parties holding a
majority in interest of the Registrable Securities. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Party under this Section 14(e), except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action. The indemnification required by this Section 14(e) shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as such expense, loss, damage or liability is incurred and is due
and payable.
v. Notwithstanding any of the foregoing, if, in connection
with an underwritten public offering of Registrable Securities, the Company, the
Selling Holders and the underwriter(s) enter into an underwriting or purchase
agreement relating to such offering which contains provisions covering
indemnification and contribution among the parties, the indemnification
provisions of this Section 14(e) and contribution provisions of Section 14(f)
shall be deemed inoperative for purposes of such offering.
(f) CONTRIBUTION. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 14(e) to the fullest extent permitted by
law; PROVIDED, HOWEVER, that (i) no contribution shall be made under
circumstances where the maker would not have been liable for indemnification
under the fault standards set forth in Section 14(e), (ii) no seller of
Registrable Securities guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from
any seller of Registrable Securities who was not guilty of such fraudulent
misrepresentation, and (iii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received by
such seller from the sale of such Registrable Securities.
(g) REPORTS UNDER EXCHANGE ACT. With a view to making available
to the Holders the benefits of Rule 144 promulgated under the 1933 Act or any
other similar rule or regulation of the SEC that may at any time permit the
Holders to sell securities of the Company to the public without registration
("Rule 144"), the Company agrees to:
i. use its best efforts to make and keep public
information available, as those terms are understood and defined in Rule 144;
and
ii. use its best efforts to file with the SEC in a timely
manner all reports and other documents required of the Company under the 1933
Act and the Securities Exchange Act of 1934, as amended (the "Exchange Act");
and
iii. furnish to each Holder so long as such Holder owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company with respect to its compliance with the reporting requirements of Rule
144, (ii) a copy of the most recent annual or quarterly report of the Company
and such other reports and documents so
filed by the Company, and (iii) such other information as may be reasonably
requested to permit the Holders to sell such securities without registration
pursuant to Rule 144.
(h) ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to have
the Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Holders to transferees or assignees of all or any
portion of such securities only if: (i) the Holder agrees in writing with the
transferee or assignee to assign such rights, (ii) the Company is, within a
reasonable time after such transfer or assignment, furnished with written notice
of the name and address of such transferee or assignee (iii) such assignment is
in accordance with and permitted by law and this Warrant and all other
agreements between the transferor or assignor and the Company, including without
limitation, shareholder's agreements, warrants and subscription agreements, and
the transferor or assignor otherwise is not in material default of any
obligation to the Company under any such other agreement, (iv) such transfer of
shares is in a private transaction, not registered under the 1933 Act and not
pursuant to Rule 144 of the 1933 Act and (v) at or before the time the Company
received the written notice contemplated by clause (ii) of this sentence the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein.
(i) TERMINATION OF REGISTRATION RIGHTS. No Holder of Warrants
or Shares shall be entitled to exercise any right provided for in this Section
14 at such time as such Holder would be able to dispose of all of its
Registrable Securities in any three (3) month period under SEC Rule 144 or any
successor rule thereto.
15. TRANSFERABILITY.
(a) GENERAL. This Warrant shall be transferable only on the
books of the Company maintained at its principal office in Los Angeles,
California or wherever its principal office may then be located, upon delivery
thereof duly endorsed by the Holder or by its duly authorized attorney or
representative, accompanied by proper evidence of succession, assignment or
authority to transfer. Upon any registration of transfer, the Company shall
execute and deliver new Warrants to the person entitled thereto.
(b) LIMITATIONS ON TRANSFER. This Warrant shall not be sold,
transferred, assigned or hypothecated by the Holder except to (i) one or more
persons, each of whom on the date of transfer is an officer of the Holder; (ii)
a general partnership or general partnerships, the general partners of which are
the Holder and one or more persons, each of whom on the date of transfer is an
officer of the Holder; (iii) a successor to the Holder in any merger or
consolidation; (iv) a purchaser of all or substantially all of the Holder's
assets; or (v) any person receiving this Warrant from one or more of the persons
listed in this Section 15(b) at such person's or persons' death pursuant to
will, trust or the laws of intestate succession. This Warrant may be divided or
combined, upon request to the Company by the Holder, into a certificate or
certificates representing the right to purchase the same aggregate number of
Shares.
16. MISCELLANEOUS.
(a) CONSTRUCTION. Unless the context indicates otherwise, the
term "Holder" shall include any transferee or transferees of this Warrant
pursuant to Section 15(b), and the term "Warrant" shall include any and all
warrants outstanding pursuant to this Agreement, including those evidenced by a
certificate or certificates issued upon division, exchange, substitution or
transfer pursuant to Section 15(b).
(b) RESTRICTIONS. By receipt of this Warrant, the Holder makes
the same representations with respect to the acquisition of this Warrant as the
Holder is required to make upon the exercise of this Warrant and acquisition of
the Shares purchasable hereunder as set forth in the Form of Investment Letter
attached as Exhibit A to the Notice of Exercise attached hereto.
(c) NOTICES. Unless otherwise provided, any notice required or
permitted under this Warrant shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or three
(3) days following deposit with the United States Post Office, by registered or
certified mail, postage prepaid and addressed to the party to be notified (or
one (1) day following timely deposit with a reputable overnight courier with
next day delivery instructions), or upon confirmation of receipt by the sender
of any notice by facsimile transmission, at the address indicated below or at
such other address as such party may designate by ten (10) days' advance written
notice to the other parties.
To Holder: ____________________________
____________________________
____________________________
____________________________
To the Company: Tag-It Pacific, Inc.
0000 Xxxxx Xxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: President
(d) GOVERNING LAW. This Warrant shall be governed by and
construed under the laws of the State of California as applied to agreements
among Delaware residents entered into and to be performed entirely within
California.
(e) ENTIRE AGREEMENT. This Warrant, the exhibits and schedules
hereto, and the documents referred to herein, constitute the entire agreement
and understanding of the parties hereto with respect to the subject matter
hereof, and supersede all prior and contemporaneous agreements and
understandings, whether oral or written, between the parties hereto with respect
to the subject matter hereof.
(f) BINDING EFFECT. This Warrant and the various rights and
obligations arising hereunder shall inure to the benefit of and be binding upon
the Company and its successors and assigns, and Xxxxxx and its successors and
assigns.
(g) WAIVER; CONSENT. This Warrant may not be changed, amended,
terminated, augmented, rescinded or discharged (other than by performance), in
whole or in part, except by a writing executed by the parties hereto, and no
waiver of any of the provisions or conditions of this Warrant or any of the
rights of a party hereto shall be effective or binding unless such waiver shall
be in writing and signed by the party claimed to have given or consented
thereto.
(h) SEVERABILITY. If one or more provisions of this Warrant are
held to be unenforceable under applicable law, such provision shall be excluded
from this Warrant and the balance of the Warrant shall be interpreted as if such
provision were so excluded and the balance shall be enforceable in accordance
with its terms.
IN WITNESS WHEREOF, the parties hereto have executed this Common Stock
Warrant effective as of the date hereof.
DATED: ___________, 1998 THE COMPANY:
Tag-It Pacific, LLC
By:
Name:
Title:
HOLDER:
Cruttenden Xxxx Bridge Fund, LLC
By:
Name:
Title:
NOTICE OF EXERCISE
To: TAG-IT PACIFIC, LLC
The undersigned hereby elects to purchase _____________ Membership
Units ("UNITS") of Tag-It Pacific, LLC, a Delaware limited liability company the
"COMPANY") pursuant to the terms of the attached Warrant, and tenders herewith
payment of the purchase price pursuant to the terms of the Warrant.
Attached as Exhibit A is an investment representation letter addressed
to the Company and executed by the undersigned as required by Section 12 of the
Warrant.
Please issue certificates representing the Membership Units purchased
hereunder in the names and in the denominations indicated on Exhibit A attached
hereto.
Please issue a new Warrant for the unexercised portion of the attached
Warrant, if any, in the name of the undersigned.
Dated:
Name:
Title:
NET ISSUANCE ELECTION NOTICE
To: TAG-IT PACIFIC, LLC
Date:_____________
The undersigned hereby elects under Section 2 of the attached Warrant
to surrender the right to purchase ___________ Membership Units pursuant to the
attached Warrant. The Certificate(s) for the Membership Units issuable upon
such net issuance election shall be issued in the name of the undersigned or as
otherwise indicated below.
Attached as Exhibit A is an investment representation letter addressed
to the Company and executed by the undersigned as required by Section 12 of the
Warrant.
Please issue certificates representing the Membership Units purchased
hereunder in the names and in the denominations indicated on Exhibit A attached
hereto.
Please issue a new Warrant for the unexercised portion of the attached
Warrant, if any, in the name of the undersigned.
-----------------------------------
Signature
-----------------------------------
Name for Registration
-----------------------------------
Mailing Address
EXHIBIT A
To: TAG-IT PACIFIC, LLC
In connection with the purchase by the undersigned of ___________
Membership Units (the "UNITS") of Tag-It Pacific, LLC, a Delaware limited
liability company (the "COMPANY"), upon exercise of that certain Warrant dated
as of December 31, 1997, the undersigned hereby represents and warrants as
follows:
The Units to be received by the undersigned upon exercise of the
Warrant are being acquired for its own account, not as a nominee or agent, and
not with a view to resale or distribution of any part thereof, and the
undersigned has no present intention of selling, granting any participation in,
or otherwise distributing the same. The undersigned further represents that it
does not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participation to such person or to any third
person, with respect to the Units. The undersigned believes it has received all
the information it considers necessary or appropriate for deciding whether to
purchase the Units.
The undersigned understands that the Units are characterized as
"restricted securities" under the federal securities laws inasmuch as they are
being acquired from the Company in transactions not involving a public offering
and that under such laws and applicable regulations such securities may be
resold without registration under the Securities Act of 1933, as amended (the
"ACT"), only in certain limited circumstances. In this connection, the
undersigned represents that it is familiar with SEC Rule 144, as presently in
effect, and understands the resale limitations imposed thereby and by the Act.
Without in any way limiting the representations set forth above, the
undersigned agrees not to make any disposition of all or any portion of the
Units unless and until:
There is then in effect a registration statement under the Act
covering such proposed disposition and such disposition is made in accordance
with such registration statement; or
(i) The undersigned shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and (ii) if requested,
the undersigned shall have furnished the Company with an opinion of counsel,
reasonably satisfactory to the Company that such disposition will not require
registration of such shares under the Act. The Company will not require an
opinion of counsel for sales made pursuant to Rule 144 except in unusual
circumstances.
The undersigned understands the instruments evidencing the Units may
bear the following legend:
THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED AND MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED UNLESS THERE IS
AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH SALE OR TRANSFER IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
