EXHIBIT 4.10
WARRANT AGREEMENT DATED APRIL 19, 1996,
BY AND BETWEEN THE COMPANY AND THE MOORE TRUST
WARRANT AGREEMENT
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This Warrant Agreement (the "Warrant Agreement") is made this 19th day of
April, 1996, by and between Janex International, Inc., a Colorado Corporation
(the "Company") and Howard W. Moore, Helene Z. Moore, Shellee A. Friedland,
Susan E. Downing and Michael J. Moore, Co-Trustees of the Howard and Helene
Moore Living Trust, Dated June 28, 1991 (the trust is referred to hereinafter as
"Moore"). The parties agree as follows:
1. THE WARRANT.
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a. GRANT OF WARRANT.
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The Company hereby grants warrants ("Warrants") to Moore to purchase up
to NINE HUNDRED THOUSAND (900,000) shares of the Company's restricted common
stock, no par value (the "Warrant Stock") or any other replacement security of
Company whether by way of merger, consolidation, exchange, recapitalization, or
other reorganization of the Company, pursuant to the terms and conditions of
this Warrant Agreement. The Warrants shall be evidenced solely by this Warrant
Agreement.
b. TERM OF WARRANT.
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The term of the Warrants granted under this Warrant Agreement shall
commence on April 19, 1996, and shall terminate at 5:00 p.m., California time,
on April 19, 2000. The termination date of the Warrants is referred to herein as
the "Warrant Expiration Date".
c. VESTING OF WARRANTS. No Warrant is exercisable until vested. The
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900,000 Warrants granted hereunder, shall vest as follows:
Period (1) Warrants Vested
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1st 6-month period 180,000
2nd 6-month period 180,000
3rd 6-month period 180,000
4th 6-month period 180,000
5th 6-month period 180,000
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(1) Refers to 6-month periods after the date hereof.
The first 180,000 Warrants vest immediately upon the execution of this
Agreement. The remaining Warrants vest on the first day of each period indicated
in the foregoing schedule, provided, however, if the Revolving Credit Line
("Line") granted to the Company by Moore, pursuant to the Revolving Credit Line
Agreement, dated April 19, 1996 ("Credit Agreement"), is paid off and canceled
by the Company during any 6-month period, other than the 5th 6-month period, the
Warrants that vest in the remaining 6-month periods
shall be void, and the Credit Agreement shall be terminated. For example, if
the Line is paid down to zero and canceled during the 3rd 6-month period, then
540,000 Warrants will be vested and 360,000 Warrants will be unvested and will
be void.
d. EXERCISE OF WARRANT.
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Only vested Warrants may be exercised. No Warrant may be exercised within
six months of the date of this Warrant Agreement. Vested Warrants may be
exercised in full or in part (but for not less than 5,000 shares at one time) at
any time prior to the Warrant Expiration Date, by a written notice (the
"Notice") to the Company, specifying the number of shares of Warrant Stock to be
purchased, accompanied by the payment of the exercise price (the "Exercise
Price") specified in paragraph 1(e). Upon receipt of the Notice accompanied by
the Exercise Price, the Company shall cause to be delivered share certificates
to the Warrant Holder representing ownership of the number of shares of Warrant
Stock purchased by Warrant Holder, and the number of Warrants remaining under
this Warrant Agreement shall be reduced by the number of Warrants exercised. As
used herein, the term "Warrant Holder" shall mean Moore, and any permitted
assignee of Moore.
e. EXERCISE PRICE.
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The Exercise Price for each share of Warrant Stock shall be $1.45 per
share. If the Company subdivides or combines its outstanding shares of common
stock, by reclassification, recapitalization, reorganization, merger, or
otherwise, the Exercise Price shall be proportionately decreased or increased,
as the case may be.
f. PAYMENT OF EXERCISE PRICE.
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Payment of the Exercise Price shall be made by cashier's or certified check
made payable to Company.
g. CASHLESS EXERCISE.
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(1) In the event the Company's common stock, no par value ("Common
Stock") is listed on a national securities exchange or traded over the counter
on an inter-dealer quotation system maintained by the National Association of
Securities Dealers, Inc. ("NASD"), and on the date of exercise, the fair market
value (defined below) of the Common Stock is Five Dollars ($5.00) or more, then,
the Warrant Holder shall have the right to convert the Warrants being exercised
("Conversion Right") into shares of Common Stock, without payment of the
exercise price, in accordance with paragraph (2) below. Upon exercise of the
Conversion Right, the Company shall deliver to the Warrant Holder (without
payment by the Warrant Holder of any of the exercise price) that number of
shares of Common Stock equal to the quotient obtained by dividing (i) the
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aggregate value of the Warrants at the time the Conversion Right is exercised
(determined by subtracting the aggregate exercise price for the exercised
Warrants from the aggregate fair market value at that time for the shares of
Common Stock issuable upon exercise of the Warrants as if no cashless exercise
were involved) by (ii) the fair market value of one share of Common Stock
immediately prior to the exercise of the Conversion Right. For example, if the
fair market value of the Common Stock is $6.00, and 5,000 Warrants are
exercised, the number of shares of Warrant Stock to be issued would be
calculated as follows: 5,000 x $1.45 = $7,250, which is the aggregate exercise
price for the Warrants. The aggregate fair market value for the Common Stock is
5,000 x $6.00 = $30,000. Therefore the total number of shares of Warrant Stock
to be issued would be $30,000 - 7,250/ $6.00 = 3,792 shares (rounded).
(2) As used in this paragraph (g), the "fair market value" per share of
Common Stock shall be the average of the closing sale prices of Common Stock on
the principal stock exchange on which the Common Stock is listed or admitted to
trading, or in the over-the-counter market as report by the NASD, for the ten
(10) trading days prior to the date of exercise of the Conversion Right; or,
during such time as there is not a market price available, the fair market value
as mutually determined by the Company and the Warrant Holder. No cashless
exercise of Warrants will be permitted if contrary to the laws of the state of
incorporation of the Company.
h. NO FRACTIONAL SHARES.
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No fractional share shall be issued on exercise of any Warrant.
i. LEGENDS.
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Prior to registration under paragraph 2 below (and, without impairing any
claim of any party under this Warrant Agreement, after such registration if any
Prospectus to be used in connection with a sale of the Warrant Stock fails to
comply with Section 10(a)(3) of the Securities Act of 1933), each certificate
for Warrant Stock issued on exercise of any Warrant shall be stamped or
otherwise imprinted with a legend, which provides substantially as follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 ("THE ACT") AND ARE "RESTRICTED SECURITIES" AS
THAT TERM IS DEFINED IN RULE 144 UNDER THE ACT. THE SHARES MAY NOT BE
OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, OR PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE ACT, THE AVAILABILITY OF WHICH IS TO BE
ESTABLISHED TO THE SATISFACTION OF THE COMPANY."
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A legend referring to applicable state law may also be imprinted on the
share certificate.
2. REGISTRATION.
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a. "PIGGY-BACK" REGISTRATION RIGHTS.
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If at any time or from time to time, but not more than two (2) times,
the Company shall determine to register any of its securities, either for its
own account or the account of any other security holder or holders ("Holders")
on a registration statement under the Securities Act of 1933 (the "Act"), other
than on a Form S-8, the Company will, (1) promptly give Warrant Holder written
notice thereof; and (2) include in such registration (and any related
qualifications under blue sky laws or other compliance) and in any underwriting
involved therein, all shares of the Warrant Stock underlying the Warrants, as
may be requested by Moore in writing not more than ten days after receipt of the
notice from the Company, subject to the terms of paragraph 2(b) below.
b. MARKET CONDITIONS.
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The offering price of the Warrant Stock and the number of shares of
Warrant Stock to be included in any registration which includes the registration
of other Company securities or any separate registration of the Warrant Stock,
shall be determined by then existing marketing conditions and by negotiations
between the Company, the Warrant Holder and one or more underwriters, if any,
who are participating in the offering of the Warrant Stock. In connection with
any registration of the Warrant Stock, the Company and Warrant Holder agree to
execute the usual and customary indemnifications and such other instruments and
documents as an underwriter may reasonably require.
c. INFORMATION.
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The Warrant Holder shall furnish to the Company, in writing, such
information regarding Warrant Holder as the Company may request and shall
further provide such consents as may be required by the Securities and Exchange
Commission or applicable state securities administrators, which shall state that
any information provided to Company pursuant to this Warrant Agreement can be
used in any registration which includes the Warrant Stock.
d. SHELF REGISTRATION.
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The Company shall use its best efforts to keep any registration of the
Warrant Stock effective through the earlier of: (1) the Warrant Expiration Date,
or (2) until all of the Warrants granted hereunder have been exercised.
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e. RESERVATION OF SHARES OF COMMON STOCK.
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The Company agrees that the number of shares of Common Stock
sufficient to provide for the exercise of the Warrants shall at all times during
the term of this Agreement be reserved for exercise.
3. EXPENSES OF REGISTRATION.
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All expenses (which term does not include underwriting discounts or
commissions or Warrant Holder's out-of-pocket expenses) incurred in connection
with any registration of the Warrant Stock, including, but not limited to
printing expenses, fees and disbursements of counsel for the Company, and
accounting fees, shall be borne by Company, provided however, that the Company
shall not be required to pay any fees for any legal counsel retained by the
Warrant Holder in connection with the negotiation and preparation of this
Warrant Agreement or any registration.
4. INDEMNIFICATION.
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a. INDEMNIFICATION BY COMPANY.
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The Company hereby agrees to indemnify, defend, and hold harmless
Warrant Holder, against all claims, losses, damages, and liabilities, and
actions in respect to such claims, losses, damages, and liabilities, including
reasonable attorneys' fees, arising out of or based on (1) any untrue statement
or alleged untrue statement of a material fact made by the Company, in any
prospectus, offering circular, or other document (including any related
registration statement, notification or the like) incident to any such
registration, (2) any omission or alleged omission, by the Company, to state in
any such prospectus, offering circular, or other document a material fact
required to be stated in it or necessary to make the statements in it not
misleading, or (3) any violation by the Company of any rule or regulation
promulgated under the Act applicable to the Company and relating to action or
inaction required of the Company in connection with any such registration.
b. INDEMNIFICATION BY WARRANT HOLDER.
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Warrant Holder hereby agrees to indemnify, defend, and hold harmless
the Company, its officers and directors, each person, if any, who controls the
Company (within the meaning of the Act), against all claims, losses, damages,
liabilities, and actions in respect of such claims, losses, damages, and
liabilities, including reasonable attorneys' fees, arising out of or based on
(1) any untrue statement or alleged untrue statement of a material fact made by
Warrant Holder in any such registration statement or any prospectus, offering
circular, or other document incident to such registration, (2) any omission or
alleged omission by the Warrant
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Holder to state in any such registration statement, prospectus, offering
circular, or other document a material fact required to be stated in it or
necessary to make the statements in it not misleading, but only to the extent,
that such untrue statement, alleged untrue statement, omission, or alleged
omission as specified in (1) and (2) above, is made in such registration
statement, prospectus, offering circular, or other document in reliance on and
in conformity with written information furnished to the Company by the Warrant
Holder for use in, or in connection therewith, or (3) any disposition by Warrant
Holder of the Warrant Stock, which disposition is or is claimed to be in
violation of the Act.
c. REQUIRED NOTICES.
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Each party entitled to indemnification under paragraphs 4(a) and 4(b)
shall give notice to the party required to provide indemnification, promptly
after the 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 from it, 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 that the indemnified party may participate in
such defense at its expense, and provided further that the failure of any
indemnified party to give notice as provided in this paragraph 4(c) shall not
relieve the indemnifying party of its obligations under paragraphs 4(a) and
4(b). No indemnifying party, in the defense of any such claim or litigation,
shall, without the consent of the indemnified party, consent to entry of any
judgment or enter into any settlement that does not include as an unconditional
term the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect to such claim or litigation.
5. MISCELLANEOUS.
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a. NOTICES.
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All notices, requests, demands and other communications required or
permitted to be given hereunder shall be deemed to have been duly given if in
writing and delivered personally, given by prepaid telegram, or mailed first
class, postage prepaid, registered or certified mail, return receipt requested,
as follows:
If to Company: Janex International, Inc.,
21700 Oxnard Street, Suite 1610
Woodland Hills, CA 91367
Attention: President
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With Copy to: TILLES, WEBB, KULLA & GRANT, ALC
433 North Camden Drive, Suite 1010
Beverly Hills, CA 90210
Attn: Ronald J. Grant, Esq.
If to Moore: Mr. Howard Moore, Co-Trustee
15 Muir Beach Circle
Corona Del Mar, CA 92625
With Copy to: Bruce W. Feuchter, Esq.
Stradling, Yocca, Carlson & Rauth, ALC
600 Newport Center Drive, Suite 1600
Newport Beach, CA 92660
Any party may change the address to which such communications are to be
directed to it by giving written notice to the other parties. Except as
otherwise provided in this Agreement, all notices shall be deemed to be given
when delivered in person, or if placed in the mail as aforesaid, then three (3)
days thereafter.
b. MODIFICATIONS.
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The parties may, by mutual consent, amend, modify, supplement and
waive any right under this Warrant Agreement in any manner agreed by them in
writing at any time.
c. ENTIRE AGREEMENT.
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This Warrant Agreement and any documents, instruments or agreements
expressly referred to herein, set forth the entire agreement and understanding
of the parties with respect to the transactions contemplated hereby and
supersede all prior agreements, arrangements and understandings relating to the
subject matter hereof.
d. HEADINGS.
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The section and paragraph headings contained in this Warrant Agreement
are for convenient reference only, and shall not in any way affect the meaning
or interpretation hereof.
e. APPLICABLE LAW.
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This Warrant Agreement shall be governed by and construed in
accordance with the laws of the state of California.
f. SEVERABILITY.
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If any provision of this Warrant Agreement shall be held to be
invalid, illegal or unenforceable, it shall be deemed severable from the
remaining provisions hereof which shall remain in full force and effect.
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g. WAIVER.
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No waiver of any provision of this Warrant Agreement or any breach
thereof shall be deemed or shall constitute a waiver of any other provision
hereof (whether or not similar) or any other breach hereunder nor shall such
waiver constitute a continuing waiver. Either party may waive performance of
any provision of this Warrant Agreement, the non-performance of which would
otherwise constitute a breach of this Agreement, including but not limited to
the non-performance of any condition precedent to such party's performance,
without affecting the enforceability of this Warrant Agreement and the
provisions contained herein.
h. SUCCESSORS AND ASSIGNS.
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Subject to the provisions set forth below, the terms and conditions of
this Warrant Agreement shall inure to the benefit of and be binding upon the
respective successors and assigns of the parties hereto. Neither this Warrant
Agreement nor any interest herein, may be assigned or transferred by Moore
without the prior written consent of the Company.
i. COUNTERPARTS.
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This Warrant Agreement may be executed in counterparts each of which
shall be deemed an original and all of which together shall be one and the same
instrument.
j. REFERENCE TO REVOLVING CREDIT AGREEMENT.
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This Warrant Agreement is entered into pursuant to the provisions of a
Revolving Credit Agreement, dated April 19, 1996, entered into between the
Company and Moore.
IN WITNESS WHEREOF, the parties have executed this instrument as of the
date first above written.
"WARRANT HOLDER" "COMPANY"
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THE HOWARD AND HELENE MOORE
LIVING TRUST DATED JUNE 28, 1991 JANEX INTERNATIONAL, INC.
By: /s/ HOWARD W. MOORE By: /s/ SHELDON F. MORICK
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Howard W. Moore, Co-Trustee Sheldon F. Morick,
President
By: /s/ HELENE Z. MOORE
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Helene Z. Moore, Co-Trustee
By: /s/ MICHAEL J. MOORE
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Michael J. Moore, Co-Trustee
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