Document:

Unassociated Document

 

THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") IN RELIANCE UPON THE EXEMPTIONS CONTAINED IN THE ACT.  THIS WARRANT AND ANY SHARES ISSUED UPON EXERCISE OF THIS WARRANT MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS (i) REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS; (ii) PURSUANT TO RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES); OR (iii) THE CORPORATION HAS RECEIVED AN OPINION OF COUNSEL ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.

 

XCEL BRANDS, INC.

 

Warrant

 

	
100,000 Shares of

	
Warrant Number: XB-005

	 	 
	
Common Stock

	
Issue Date: September 29, 2011

 

THIS CERTIFIES that, for value received, GIUSEPPE FALCO or his permitted assigns (the "Holder"), is entitled to subscribe for and purchase from XCEL BRANDS, INC., a Delaware corporation (the "Corporation"), on the terms and conditions set forth herein, 100,000 shares of fully paid and nonassessable common stock ("Common Stock") of the Corporation.  This warrant and any warrant or warrants subsequently issued upon exchange hereof are hereinafter collectively referred to as the "Warrant".

 

  Section 1.              Exercise of Warrant.

 

1.1.           Exercise Price; Term.  The price of the shares of Common Stock purchasable pursuant to this Warrant shall be $5.00 per share, subject to adjustment pursuant to Section 3 below (such price, as adjusted from time to time, being hereinafter referred to as the "Exercise Price").  This Warrant shall vest and become exercisable equally over two years; 50,000 shares shall vest on the first anniversary of the Issue Date set forth above and 50,000 shares shall vest on the second anniversary of the Issue Date. This Warrant shall expire at 5:00 p.m., New York time, on September 29, 2021 (the “Expiration Date”), subject to earlier expiration as set forth below.

 

Except as set forth in Section 12 hereof, if the Holder ceases to be employed by the Corporation for any reason other than (x) termination by the Corporation for Cause (as defined in the Employment Agreement between the Corporation and Holder effective September 16, 2011, hereinafter referred to as “Employment Agreement”) or (y) termination by the Holder for Good Reason (as defined in the Employment Agreement), then all unvested shares of Common Stock underlying the Warrant shall become immediately exercisable; provided, however, that this Warrant must be exercised within ninety (90) days after the date the Holder ceases to be an employee of the Corporation.  After such 90-day period, any unexercised portion of this Warrant shall thereupon terminate immediately.

  

 

  

 

If the Corporation terminates the Holder for Cause or the Holder terminates his employment without Good Reason, the Holder’s right to exercise any unexercised portion of this Warrant shall thereupon terminate immediately. Notwithstanding the above, if the Holder dies or becomes disabled  this Warrant shall be exercisable on the date of death or Disability (as defined in the Holder's Employment Agreement) for one year from the death or Disability of the Holder. 

 

1.2.           Exercise of Warrant.  This Warrant may be exercised in whole or in part (to the extent that it is exercisable in accordance with its terms) by giving written notice to the Corporation at its principal executive office, together with the tender, by cash or check, of the Exercise Price of the shares of Common Stock covered by this Warrant.  Such written notice shall be signed by the person exercising this Warrant, shall state the number of shares of Common Stock with respect to which this Warrant is being exercised, shall contain any warranty required by Section 7 below and shall otherwise comply with the terms and conditions of this Warrant.  The Corporation shall pay all original issue taxes with respect to the issue of the shares of Common Stock pursuant hereto and all other fees and expenses necessarily incurred by the Corporation in connection herewith.  Except as specifically set forth herein, the holder of this Warrant acknowledges that any income or other taxes due from him with respect to this Warrant or the shares of Common Stock issuable pursuant to this Warrant shall be the responsibility of the holder.

 

1.3.           No Redemption; Issuance of Securities.  This Warrant will not be subject to call or redemption by the Corporation.  Upon the exercise of this Warrant, a certificate or certificates (“Warrant Certificate”) for the shares of Common Stock so purchased, registered in the name of the Holder, shall be delivered to the Holder within a reasonable time, not exceeding five (5) business days, after exercise and, unless this Warrant has expired, a new Warrant representing the number of shares (except a remaining fractional share), if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the Holder within such time.  The Holder shall for all purposes be deemed to have become the holder of record of the shares issued upon exercise of this Warrant on the date on which the Warrant was surrendered and payment of the Exercise Price and any applicable taxes was made, except that, if the date of such surrender and payment is a date on which the stock transfer books of the Corporation are closed, the Holder shall be deemed to have become the holder of such shares at the close of business on the next succeeding date on which the stock transfer books are open.

 

  Section 2.              Adjustment of Number of Shares Subject to Warrant.  Upon any adjustment of the Exercise Price pursuant to Section 3 hereof, the Holder shall thereafter be entitled to purchase, at the adjusted Exercise Price, the number of shares (calculated to the nearest tenth of a share) obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of shares purchasable pursuant hereto immediately prior to such adjustment and dividing the product thereof by the Exercise Price resulting from such adjustment.

 

  Section 3.              Adjustment of Exercise Price.

 

3.1.             If the Corporation shall split, subdivide or combine its Common Stock, the Exercise Price shall be proportionately decreased in the case of a split or subdivision or increased in the case of a combination.

  

-2-

  

 

3.2.           If the Corporation shall pay a dividend with respect to the Common Stock or make any other distribution with respect to the Common Stock, except any distribution specifically provided for in Section 4 below, payable in shares of Common Stock, then the Exercise Price shall be adjusted, from and after the date of determination of the stockholders 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 (i) the numerator of which shall be the total number of shares of Common Stock outstanding immediately prior to such dividend or distribution, and (ii) the denominator of which shall be the total number of shares of Common Stock outstanding immediately after such dividend or distribution.

 

  Section 4.              Reclassification, Merger, etc.  In the case of any reclassification of the Common Stock or in the case of any consolidation or merger of the Corporation with or into another corporation (other than a  merger with another corporation in which the Corporation is the surviving corporation and which does not result in any reclassification of the Common Stock) or in the case of any sale of all or substantially all of the assets of the Corporation, then the Corporation, or such successor or purchasing corporation, as the case may be, shall execute a new Warrant Certificate, providing that the Holder shall have the right to exercise such new Warrant and upon such exercise to receive, in lieu of each share of Common Stock theretofore issuable upon exercise of this Warrant, the number and kind of shares of stock, other securities, money or property receivable upon such reclassification, change, consolidation or merger by a  holder of shares of the Common Stock with respect to one share of Common Stock.  Such new Warrant Certificate shall provide for adjustments which shall be identical to the adjustments provided for herein.  The provisions of this Section 4 shall similarly apply to successive reclassifications, changes, consolidations or mergers.

 

  Section 5.              Stock to Be Reserved.   The Corporation will at all times reserve and keep available out of its authorized Common Stock or its treasury shares, solely for  the purpose of issue upon the exercise of this Warrant as herein provided, such number of shares of Common Stock as shall then be issuable upon the exercise of this Warrant.  The Corporation covenants that all shares of Common Stock which shall be so issued shall be duly and validly issued and fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue thereof.

 

  Section 6.              No Stockholder Rights or Liabilities.  This Warrant shall not entitle the Holder to any voting rights or other rights as a stockholder of the Corporation.  No provision hereof, in the absence of affirmative action by the Holder to purchase shares of Common Stock, and no mere enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the Exercise Price or as a stockholder of the Corporation, whether such liability is asserted by the Corporation or by creditors of the Corporation. The holder of this Warrant shall have rights as a stockholder of the Corporation only with respect to any shares of Common Stock  covered by the Warrant after due exercise of the Warrant and tender of the full purchase price for the shares of Common Stock being purchased pursuant to such exercise.

 

  Section 7.              Investment Representation and Legend.  The Holder, by acceptance of this Warrant, represents and warrants to the Corporation that the Holder is receiving the Warrant and, unless at the time of exercise a registration statement under the Act is effective with respect to such shares, upon the exercise hereof will acquire the shares of Common Stock issuable upon such exercise, for investment purposes only and not with a view towards the resale or other distribution thereof except pursuant to an effective registration statement under the Act or an applicable exemption from registration under the Act. The Holder also hereby agrees that the Holder shall not sell, transfer by any means or otherwise dispose of the Warrant or the shares of Common Stock issuable upon exercise of the Warrant without registration under the Act unless in the opinion of counsel reasonably acceptable to the Corporation such proposed sale or transfer is exempt from the registration provisions of the Act.

  

-3-

  

 

The Holder, by acceptance of this Warrant, agrees that the Corporation may affix, unless the shares subject to this Warrant are registered at the time of exercise, a legend to the Warrant Certificates for shares of Common Stock issued upon exercise of this Warrant in substantially the following form:

 

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT").  THE SHARES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS (i) REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS; (ii) PURSUANT TO RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES); OR (iii) THE CORPORATION HAS RECEIVED AN OPINION OF COUNSEL ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.

 

If deemed necessary by the Corporation, it shall have received an opinion of its counsel that the shares of Common Stock may be issued upon such particular exercise in compliance with the Act without registration thereunder.  Without limiting the generality of the foregoing, the Corporation may delay issuance of the shares until completion of any action or obtaining of any consent, which the Corporation deems necessary under any applicable law (including without limitation state securities or “blue sky” laws).

 

  Section 8.              Lost, Stolen, Mutilated or Destroyed Warrant.  If this Warrant is lost, stolen, mutilated or destroyed, the Corporation may, on such terms as to indemnity or otherwise as it may in its discretion reasonably impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination and tenor as the Warrant so lost, stolen, mutilated or destroyed.

 

  Section 9.              Successors.  All the covenants and provisions of this Agreement shall be binding upon and inure to the benefit of the Corporation, the Holders and their respective successors and assigns hereunder.

  

-4-

  

 

Section 10.              Piggyback Registration.

 

10.1.         If at any time prior to the Expiration Date, the Corporation proposes to prepare and file with the Securities and Exchange Commission a registration statement covering equity or debt securities of the Corporation, or any such securities of the Corporation held by its shareholders, other than in connection with a merger, acquisition or pursuant to a registration statement on Form S-4 or Form S-8 or any successor form (for purposes of this Section 1, collectively, a "Piggyback Registration Statement"), the Corporation will give written notice of its intention to do so by registered or certified mail ("Notice"), at least 15 days prior to the filing of each such Piggyback Registration Statement, to Holder.  Upon the written request of Holder, made within five (5) days after receipt of the Notice, that the Corporation include any of the  shares issuable and issued pursuant to this Warrant (“Registrable Shares”)  in the Piggyback Registration Statement, the Corporation shall, include the Registrable Shares which it has been so requested to register Piggyback Registration Statement ("Piggyback Registration"), at the Corporation's sole cost and expense and at no cost or expense to Holder (other than any underwriting or other commissions, discounts or fees of any counsel or advisor to Holder which shall be payable by Holder); provided, however, that if, the Piggyback Registration is in connection with an underwritten public offering and in the written opinion of the Corporation's underwriter or managing underwriter of the underwriting group, if any, for such offering, the inclusion of all or a portion of the Registrable Shares requested to be registered, when added to the securities being registered by the Corporation or the selling stockholder(s), if any, will exceed the maximum amount of the Corporation's securities which can be marketed (i) at a price reasonably related to their then current market value, or (ii) without otherwise having a material adverse effect on the entire offering, then the Corporation may, subject to the allocation priority set forth in the next paragraph, exclude from such offering all or a portion of the Registrable Shares which it has been requested to register.  Without limiting the generality of the foregoing, such underwriter or managing underwriter may condition its consent to the inclusion of all or a portion of the Registrable Shares requested to be registered upon the participation by Holder in the underwritten public offering on the terms and conditions thereof.

 

10.2.           If securities are proposed to be offered for sale pursuant to such Piggyback Registration Statement by other security holders of the Corporation and the total number of the Registrable Shares to be offered by Holder and such other selling security holders is required to be reduced pursuant to a request from the underwriter or managing underwriter (which request shall be made only for the reasons and in the manner set forth above), the aggregate number of Registrable Shares to be offered by Holder pursuant to such Piggyback Registration Statement shall equal the number which bears the same ratio to the maximum number of securities that the underwriter or managing underwriter believes may be included for all the selling security holders (including Holder), as the original number of securities proposed to be sold by Holder bears to the total original number of securities proposed to be offered by Holder and the other selling securityholders.

 

10.3.           Notwithstanding the preceding provisions of this Section 10, the Corporation shall have the right at any time after it shall have given written notice pursuant to this Section 10 (irrespective of whether any written request for inclusion of such securities shall have already been made) to elect not to file any proposed Piggyback Registration Statement filed pursuant to this Section 10, or to withdraw the same after the filing but prior to the effective date thereof.

 

Section 11.              Cashless Exercise. The aggregate Exercise Price of the shares of Common Stock purchasable pursuant to this Warrant may also, in the sole discretion of the Holder, be paid in full or in part a “cashless exercise” at the election of the Holder in which the Holder shall be entitled to receive a new Warrant Certificate for the number of shares of the Common Stock equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

 

 

	
  

	
(A) = the Market Price on the trading day immediately preceding the date of such election;

 

	
  

	
(B) = the Exercise Price of this Warrant, as adjusted; and

 

  

-5-

  

 

	
  

	
(X) = the number of Warrant Shares issuable upon exercise of this Warrant in accordance with the terms of this Warrant by means of a cash exercise rather than a cashless exercise.

 

Notwithstanding anything herein to the contrary, on the Termination Date, this Warrant shall be automatically exercised via cashless exercise pursuant to this Section 2(c).

 

For purposes of this Warrant, “Market Price” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on the Nasdaq Stock Market or another national securities exchange, the last sale price of the Common Stock for such date (or the nearest preceding date) on such national securities exchange on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a trading day from 9:30 a.m. New York City time to 4:02 p.m. New York City time); (b)  if the Common Stock is not traded on the Nasdaq Stock Market or another national securities exchange, the last sale price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board; (c) if the Common Stock is not then listed or quoted for trading on a national securities exchange or the OTC Bulletin Board and if prices for the Common Stock are then reported in the “Pink Sheets” published by Pink Sheets, LLC (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported; or (d) in all other cases, the fair market value of a share of Common Stock as determined in good faith by the resolution of the board of directors of the Corporation.

 

Section 12.              Change of Control.  If, within twelve (12) months following the occurrence of a Change of Control (as defined below), the Corporation terminates the Holder’s employment without Cause or the Holder terminates his employment with Good Reason, then all unvested shares of Common Stock underlying the Warrant shall become immediately exercisable provided, however, that this Warrant shall only be exercisable within ninety (90) days (except in the case of death or disability) from termination without cause (as defined in the Holder’s Employment Agreement) by the Company or termination by Holder for Good Reason (as defined in the Holder’s Employment Agreement).  After such 90-day period, any unexercised portion of this Warrant shall thereupon terminate.

 

For purposes of this Warrant, “Change of Control” means:

 

(a) a change of control of the Corporation of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act, as amended (the “Exchange Act”), whether or not the Corporation is then subject to such reporting requirement; provided that, without limitation, such a Change of Control shall be deemed to have occurred if:

 

(i) any Person becomes a Beneficial Owner of shares of one or more classes of stock of the Corporation representing fifty percent (50%) or more of the total voting power of the Corporation’s then outstanding voting stock; or

 

(ii) the Corporation and any Person consummate a merger, consolidation, reorganization, or other business combination; or

 

(iii) the board of directors adopts resolutions authorizing the liquidation or dissolution, or sale to any Person of all or substantially all of the assets, of the Corporation.

  

-6-

  

 

(b) Notwithstanding the provisions of Section13 (a)(ii) hereof, a Change of Control shall not occur if:

 

(i) the Corporation’s voting stock outstanding immediately before the consummation of the transaction will represent no less than forty-five percent (45%) of the combined voting power entitled to vote for the election of directors of the surviving parent corporation immediately following the consummation of the transaction; and

 

(ii) members of the Incumbent Board will constitute at least one-half of the board of directors of the surviving parent corporation; and

 

(iii) the Chief Executive Officer of the Corporation will be the chief executive officer or co-chief executive officer of the surviving parent corporation; and

 

(iv) the headquarters of the surviving parent corporation will be located in New York, New York.

 

For the purposes of this Warrant, “Person” means any corporation, partnership, firm, joint venture, association, individual, trust, or other entity, but does not include the Corporation or any of its wholly-owned or majority-owned subsidiaries, employee benefit plans, or related trusts; “Incumbent Board” means those persons who either (A) have been members of the board of directors of the Corporation since the date that is 10 calendar days from the filing of the Corporation’s Schedule 14f-1, or (B) are new directors whose election by the board of directors or nomination for election by the shareholders of the Corporation was approved by a vote of at least three-fourths of the members of the Incumbent Board then in office who either were directors described in clause (A) hereof or whose election or nomination for election was previously so approved, but shall not include any director elected as a result of an actual or threatened solicitation of proxies by any Person; “Beneficial Owner” or “Beneficial Ownership” has the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act, as amended from time to time, or any successor rule.

 

Section 13.              Governing Law.  This Warrant shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be construed in accordance with the laws of the said State without giving effect to the rules of said State governing the conflicts of law.

 

Section 14.              Transferability. Subject to compliance with the provisions of Section 7 hereof, this Warrant may be transferred by the Holder only with the written consent of the Corporation to the transfer. Notwithstanding the foregoing, if Holder dies within thirty (30) days after the date of termination of employment (other than termination for Cause, termination without Good Reason (each as defined in the Holder’s Employment Agreement)), this Warrant may be exercised at any time within the earlier of (i) the expiration date of this Warrant set forth in Paragraph 1.1 hereof or (ii) one (1) year following the date of death, by Holder’s estate or by a person who acquired the right to exercise this Warrant because of Holder’s will or the laws of descent or distribution, but only to the extent Holder is entitled to exercise this Warrant at the date of termination.

 

Section 15.              Notices.  All notices, requests, consents and other communications hereunder shall be in writing and shall be deemed to have been duly made when delivered, or mailed by registered or certified mail, return receipt requested:

 

   (a)         If to a registered Holder of this Warrant, to the address of such Holder as shown on the books of the Corporation; or

 

   (b)         If to the Corporation, to the address of the Corporation’s principal executive office as disclosed in the periodic filings made by the Corporation with the United States Securities and Exchange Commission or such other address as the Corporation may designate by notice to the Holder.

  

-7-

  

IN WITNESS WHEREOF, the Corporation has executed this Warrant by its authorized signatory.

	  	
XCEL BRANDS, INC.

	  	  	  
	  	
By:

	
/s/ Robert W. D’Loren

	  	  	
Robert W. D’Loren

	  	  	
Chairman of the Board of Directors and Chief

	  	  	
Executive Officer

  

-8-

  

 

[FORM OF ELECTION TO PURCHASE]

 

The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant, to purchase ______ shares of the Common Stock of XCel Brands, Inc. or any successor corporation (the “Corporation”) and herewith tenders, in payment for such shares, cash or a check payable to the order of __________________________________, in the amount of $_________________ in accordance with the terms hereof.  The undersigned requests that a certificate for such shares be registered in the name of ____________________ whose address is ______________________, and that such certificate be delivered to _________________, whose address is ____________________________.

 

	
Dated:

	
Signature:

	 
	  	  
	  	
(Signature must conform in all respects

 to name of holder as specified on the

face of the Warrant Certificate.)

 

	
_______________________________

	  
	
_______________________________

	
(Insert Social Security or other

	
Identifying number of Holder)EXECUTION VERSION

 

FORM OF WARRANT

 

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR QUALIFIED UNDER ANY STATE OR FOREIGN SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR ASSIGNED UNLESS (I) A REGISTRATION STATEMENT COVERING SUCH SHARES IS EFFECTIVE UNDER THE ACT AND IS QUALIFIED UNDER APPLICABLE STATE AND FOREIGN LAW OR (II) THE TRANSACTION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS UNDER THE ACT AND THE QUALIFICATION REQUIREMENTS UNDER APPLICABLE STATE AND FOREIGN LAW AND, IF THE CORPORATION REQUESTS, AN OPINION SATISFACTORY TO THE CORPORATION TO SUCH EFFECT HAS BEEN RENDERED BY COUNSEL.

 

Warrant Certificate No.: 1

 

Original Issue Date: September 29, 2011

 

FOR VALUE RECEIVED, XCel Brands, Inc. (f/k/a NetFabric Holdings, Inc.), a Delaware corporation (the “Company”), hereby certifies that Great American Life Insurance Company, an Ohio corporation, or its registered assigns (the “Holder”) is entitled to purchase from the Company 255,100 duly authorized, validly issued, fully paid and nonassessable shares of Common Stock at a purchase price per share of $0.01 (the “Exercise Price”), all subject to the terms, conditions and adjustments set forth below in this Warrant.  Certain capitalized terms used herein are defined in 1 hereof.

 

This Warrant has been issued pursuant to the terms of the Credit Agreement dated as of September 29, 2011 (the “Credit Agreement”) among IM Brands, LLC, MidMarket Capital Partners, LLC, as Administrative Agent and the Lenders from time to time party thereto.

 

1.           Definitions.  As used in this Warrant, the following terms have the respective meanings set forth below:

 

“Aggregate Exercise Price” means an amount equal to the product of (a) the number of Warrant Shares in respect of which this Warrant is then being exercised pursuant to Section 3 hereof, multiplied by (b) the Exercise Price.

 

“Board” means the board of directors of the Company.

 

“Business Day” means any day, except a Saturday, Sunday or legal holiday, on which banking institutions in the city of New York are authorized or obligated by law or executive order to close.

  

  

  

  

“Common Stock” means the common stock of the Company, $.01 par value per share or any security into which the Common Stock is converted or issued in exchange for Common Stock whether in connection with a dividend, capital restructuring or reorganization or otherwise.

 

 “Company” has the meaning set forth in the preamble.

 

“Convertible Securities” means any securities (directly or indirectly) convertible into or exchangeable for Common Stock, but excluding Options.

 

“Excluded Issuances” the issuance of (a) Common Stock, options to acquire Common Stock, or other equity awards granted to employees, officers or directors of, or consultants to, the Company pursuant to (x) any stock or option plan in effect at the date hereof, or (y) any amendment to such plan or any new such plan that is duly adopted for such purpose, by a majority of the non-employee members of the Board of Directors or a majority of the members of a committee of non-employee directors established for such purpose; (b) securities upon the exercise or exchange of or conversion of any securities exercisable or exchangeable for or convertible into Common Stock issued (or to be issued on the date hereof) and outstanding on the date of this Warrant; (c) securities pursuant to a merger, amalgamation, plan of arrangement, acquisition and any other business combination, joint venture, strategic transaction or other commercial relationship (the primary purpose of which is not raising equity capital);

“Exercise Date” means, for any given exercise of this Warrant, the date on which the conditions to such exercise as set forth in Section 3 shall have been satisfied at or prior to 5:00 p.m., New York, New York time, on a Business Day, including, without limitation, the receipt by the Company of the Exercise Agreement, the Warrant and the Aggregate Exercise Price.

 

“Exercise Agreement” has the meaning set forth in Section 3(a)(i).

 

“Exercise Period” has the meaning set forth in Section 2.

 

“Exercise Price” has the meaning set forth in the preamble.

 

“Fair Market Value” means, as of any particular date: (a) the volume weighted average of the closing sales prices of the Common Stock for such day on all domestic securities exchanges on which the Common Stock may at the time be listed; (b) if there have been no sales of the Common Stock on any such exchange on any such day, the average of the highest bid and lowest asked prices for the Common Stock on all such exchanges at the end of such day; (c) if on any such day the Common Stock is not listed on a domestic securities exchange, the closing sales price of the Common Stock as quoted on Nasdaq, the OTC Bulletin Board, the OTC Pink Sheets or similar quotation system or association for such day; or (d) if there have been no sales of the Common Stock on Nasdaq, the OTC Bulletin Board, the OTC Pink Sheets or similar quotation system or association on such day, the average of the highest bid and lowest asked prices for the Common Stock quoted on Nasdaq, the OTC Bulletin Board, the OTC Pink Sheets or similar quotation system or association at the end of such day; in each case, averaged over twenty (20) consecutive Business Days ending on the Business Day immediately prior to the day as of which “Fair Market Value” is being determined; provided, that if the Common Stock is listed on any domestic securities exchange, the term “Business Day” as used in this sentence means Business Days on which such exchange is open for trading.  If at any time the Common Stock is not listed on any domestic securities exchange or quoted on Nasdaq, the OTC Bulletin Board, the OTC Pink Sheets or similar quotation system or association, the “Fair Market Value” of the Common Stock shall be the fair market value per share as determined jointly by the Board and the Holder.

 

  

- 2 -

  

 

“Holder” has the meaning set forth in the preamble.

 

“Options” means any warrants or other rights or options to subscribe for or purchase Common Stock or Convertible Securities.

 

“Original Issue Date” means September 29, 2011, the date on which the Warrant was issued by the Company pursuant to the Credit Agreement.

 

 “Nasdaq” means The Nasdaq Stock Market, Inc.

 

“OTC Bulletin Board” means the OTC Market Group, Inc., OTC Bulletin Board.

 

“OTC Pink Sheets” means the OTC Market Group, Inc. OTC Pink Sheets.

 

“Person” means any individual, sole proprietorship, partnership, limited liability company, corporation, joint venture, trust, incorporated organization or government or department or agency thereof.

 

“Warrant” means this Warrant and all warrants issued upon division or combination of, or in substitution for, this Warrant.

 

“Warrant Shares” means the shares of Common Stock or other capital stock of the Company then purchasable upon exercise of this Warrant in accordance with the terms of this Warrant.

 

2.           Term of Warrant.  Subject to the terms and conditions hereof, at any time or from time to time after the date hereof and prior to 5:00 p.m., New York, New York time, on the seventh (7th) anniversary of the date hereof or, if such day is not a Business Day, on the next preceding Business Day (the “Exercise Period”), the Holder of this Warrant may exercise this Warrant for all or any part of the Warrant Shares purchasable hereunder (subject to adjustment as provided herein).

 

3.           Exercise of Warrant.

 

(a)           Exercise Procedure.  This Warrant may be exercised from time to time on any Business Day during the Exercise Period, for all or any part of the unexercised Warrant Shares, upon:

  

  

- 3 -

  

(i)           surrender of this Warrant to the Company at its then principal executive offices (or an indemnification undertaking with respect to this Warrant in the case of its loss, theft or destruction), together with an Exercise Agreement in the form attached hereto as Exhibit A (each, an “Exercise Agreement”), duly completed (including specifying the number of Warrant Shares to be purchased) and executed; and

 

(ii)          payment to the Company of the Aggregate Exercise Price in accordance with Section 3(b).

 

(b)           Payment of the Aggregate Exercise Price.  Payment of the Aggregate Exercise Price shall be made, at the option of the Holder as expressed in the Exercise Agreement, by the following methods:

 

(i)           by delivery to the Company of a certified or official bank check payable to the order of the Company or by wire transfer of immediately available funds to an account designated in writing by the Company, in the amount of such Aggregate Exercise Price;

 

(ii)          by instructing the Company to withhold a number of Warrant Shares then issuable upon exercise of this Warrant with an aggregate Fair Market Value as of the Exercise Date equal to such Aggregate Exercise Price; or

 

(iii)         any combination of the foregoing.

 

In the event of any withholding of Warrant Shares pursuant to clause (ii) or (iii) above where the number of shares whose value is equal to the Aggregate Exercise Price is not a whole number, the number of shares withheld by or surrendered to the Company shall be rounded up to the nearest whole share and the Company shall make a cash payment to the Holder (by delivery of a certified or official bank check or by wire transfer of immediately available funds) based on the incremental fraction of a share being so withheld by or surrendered to the Company in an amount equal to the product of (x) such incremental fraction of a share being so withheld or surrendered multiplied by (y) in the case of Common Stock, the Fair Market Value per Warrant Share as of the Exercise Date.

 

(c)           Delivery of Stock Certificates.  Upon receipt by the Company of the Exercise Agreement, surrender of this Warrant and payment of the Aggregate Exercise Price (in accordance with Section 3(a) hereof), the Company shall, as promptly as practicable, and in any event within ten (10) Business Days thereafter, execute (or cause to be executed) and deliver (or cause to be delivered) to the Holder a certificate or certificates representing the Warrant Shares issuable upon such exercise, together with cash in lieu of any fraction of a share, as provided in Section 3(d) hereof.  The stock certificate or certificates so delivered shall be, to the extent possible, in such denomination or denominations as the exercising Holder shall reasonably request in the Exercise Agreement and shall be registered in the name of the Holder or, subject to compliance with Section 6 below, such other Person’s name as shall be designated in the Exercise Agreement.  This Warrant shall be deemed to have been exercised and such certificate or certificates of Warrant Shares shall be deemed to have been issued, and the Holder or any other Person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Shares for all purposes, as of the Exercise Date.

  

  

- 4 -

  

(d)           Fractional Shares.  The Company shall not be required to issue a fractional Warrant Share upon exercise of any Warrant.  As to any fraction of a Warrant Share that the Holder would otherwise be entitled to purchase upon such exercise, the Company shall pay to such Holder an amount in cash (by delivery of a certified or official bank check or by wire transfer of immediately available funds) equal to the product of (i) such fraction multiplied by (ii) the Fair Market Value of one Warrant Share on the Exercise Date.

 

(e)           Delivery of New Warrant.  Unless the purchase rights represented by this Warrant shall have expired or shall have been fully exercised, the Company shall, at the time of delivery of the certificate or certificates representing the Warrant Shares being issued in accordance with Section 3(c) hereof, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unexpired and unexercised Warrant Shares called for by this Warrant.  Such new Warrant shall in all other respects be identical to this Warrant.

 

(f)           Valid Issuance of Warrant and Warrant Shares; Payment of Taxes.  With respect to the exercise of this warrant, the Company hereby represents, covenants and agrees:

 

(i)           This Warrant is, and any Warrant issued in substitution for or replacement of this Warrant shall be, upon issuance, duly authorized and validly issued.

 

(ii)           All Warrant Shares issuable upon the exercise of this Warrant pursuant to the terms hereof shall be, upon issuance, and the Company shall take all such actions as may be necessary or appropriate in order that such Warrant Shares are, validly issued, fully paid and non-assessable, issued without violation of any preemptive or similar rights of any stockholder of the Company and free and clear of all taxes, liens and charges.

 

(iii)         The Company shall take all such actions as may be necessary to ensure that all such Warrant Shares are issued without violation by the Company of any applicable law or governmental regulation or any requirements of any domestic securities exchange upon which shares of Common Stock or other securities constituting Warrant Shares may be listed at the time of such exercise (except for official notice of issuance which shall be immediately delivered by the Company upon each such issuance).

 

(iv)         The Company shall use its best efforts to cause the Warrant Shares, immediately upon such exercise, to be listed on any domestic securities exchange upon which shares of Common Stock or other securities constituting Warrant Shares are listed at the time of such exercise.

  

  

- 5 -

  

  

(v)           The Company shall pay all expenses in connection with, and all taxes and other governmental charges that may be imposed with respect to, the issuance or delivery of Warrant Shares upon exercise of this Warrant; provided, that the Company shall not be required to pay any tax or governmental charge that may be imposed with respect to any applicable withholding or the issuance or delivery of the Warrant Shares to any assignee or transferee of the Holder in excess of the amount of such taxes or governmental charges that would have been imposed upon issuance of such Warrant Shares to the Holder, and no such issuance or delivery shall be made unless and until the Person requesting such issuance has paid to the Company the amount of any such tax, or has established to the satisfaction of the Company that such tax has been paid.

 

(g)           Conditional Exercise.  Notwithstanding any other provision hereof, if an exercise of any portion of this Warrant is to be made in connection with a public offering or a sale of the Company (pursuant to a merger, sale of stock, or otherwise), such exercise may at the election of the Holder be conditioned upon the consummation of such transaction, in which case such exercise shall not be deemed to be effective until immediately prior to the consummation of such transaction.

 

(h)           Reservation of Shares.  During the Exercise Period, the Company shall at all times reserve and keep available out of its authorized but unissued Common Stock or other securities constituting Warrant Shares, solely for the purpose of issuance upon the exercise of this Warrant, the maximum number of Warrant Shares issuable upon the exercise of this Warrant, and the par value per Warrant Share shall at all times be less than or equal to the applicable Exercise Price.  The Company shall not increase the par value of any Warrant Shares receivable upon the exercise of this Warrant above the Exercise Price then in effect, and shall 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.

 

(i)           Wholly-Owned Subsidiary.  IM Brands, LLC shall at all times remain a wholly-owned direct or indirect Subsidiary of the Company.

 

4.           Adjustment to Number of Warrant Shares.  In order to prevent dilution of the purchase rights granted under this Warrant, the number of Warrant Shares issuable upon exercise of this Warrant shall be subject to adjustment from time to time as provided in this Section 4 (in each case, after taking into consideration any prior adjustments pursuant to this Section 4).

 

(a)           Record Date.  For purposes of any adjustment to the number of Warrant Shares in accordance with this Section 4, in case the Company shall take a record of the holders of its Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock, Options or Convertible Securities or (B) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be.

  

  

- 6 -

  

(b)           Treasury Shares.  The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company or any of its wholly-owned subsidiaries, and the disposition of any such shares (other than the cancellation or retirement thereof or the transfer of such shares among the Company and its wholly-owned subsidiaries) shall be considered an issue or sale of Common Stock for the purpose of this Section 4.

 

(c)           Other Dividends and Distributions.  Subject to the provisions of this Section 4(c), if the Company shall, at any time or from time to time after the Original Issue Date, make or declare, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or any other distribution payable in securities of the Company (other than a dividend or distribution of shares of Common Stock, Options or Convertible Securities in respect of outstanding shares of Common Stock as to which Section 4(d) shall be applicable), cash or other property, then, and in each such event, provision shall be made so that the Holder shall receive upon exercise of the Warrant, in addition to the number of Warrant Shares receivable thereupon, the kind and amount of securities of the Company, cash or other property which the Holder would have been entitled to receive had the Warrant been exercised in full into Warrant Shares on the date of such event and had the Holder thereafter, during the period from the date of such event to and including the Exercise Date, retained such securities, cash or other property receivable by them as aforesaid during such period, giving application to all adjustments called for during such period under this Section 4 with respect to the rights of the Holder; provided, that no such provision shall be made if the Holder receives, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of such securities, cash or other property in an amount equal to the amount of such securities, cash or other property as the Holder would have received if the Warrant had been exercised in full into Warrant Shares on the date of such event.

 

(d)           Adjustment to Number of Warrant Shares Upon Dividend, Subdivision or Combination of Common Stock.  If the Company shall, at any time or from time to time after the Original Issue Date, (i) pay a dividend or make any other distribution upon the Common Stock or any other capital stock of the Company payable in shares of Common Stock or in Options or Convertible Securities, or (ii) subdivide (by any stock split, recapitalization or otherwise) its outstanding shares of Common Stock into a greater number of shares, the number of Warrant Shares issuable upon exercise of this Warrant immediately prior to any such dividend, distribution or subdivision shall be proportionately increased.  If the Company at any time combines (by combination, reverse stock split or otherwise) its outstanding shares of Common Stock into a smaller number of shares, the number of Warrant Shares issuable upon exercise of this Warrant immediately prior to such combination shall be proportionately decreased.  Any adjustment under this Section 4(d) shall become effective at the close of business on the date the dividend, subdivision or combination becomes effective.

  

  

- 7 -

  

  

(e)           Adjustment to Number of Warrant Shares Upon Reorganization, Reclassification, Consolidation or Merger.  In the event of any (i) capital reorganization of the Company, (ii) reclassification of the stock of the Company (other than, subject to Section 3(h), 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 stock dividend or subdivision, split-up or combination of shares), (iii) consolidation or merger of the Company with or into another Person, (iv) sale of all or substantially all of the Company’s assets to another Person or (v) other similar transaction (other than any such transaction covered by Section 4(d)), in each case which entitles the holders of Common Stock to receive (either directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Common Stock, each Warrant shall, immediately after such reorganization, reclassification, consolidation, merger, sale or similar transaction, remain outstanding and shall thereafter, in lieu of or in addition to (as the case may be) the number of Warrant Shares then exercisable under this Warrant, be exercisable for the kind and number of shares of stock or other securities or assets of the Company or of the successor Person resulting from such transaction to which the Holder would have been entitled upon such reorganization, reclassification, consolidation, merger, sale or similar transaction if the Holder had exercised this Warrant in full immediately prior to the time of such reorganization, reclassification, consolidation, merger, sale or similar transaction and acquired the applicable number of Warrant Shares then issuable hereunder as a result of such exercise; and, in such case, appropriate adjustment (in form and substance satisfactory to the Holder) shall be made with respect to the Holder’s rights under this Warrant to insure that the provisions of this Section 4 hereof shall thereafter be applicable, as nearly as possible, to this Warrant in relation to any shares of stock, securities or assets thereafter acquirable upon exercise of this Warrant.  The provisions of this Section 4(e) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, sales or similar transactions.  The Company shall not effect any such reorganization, reclassification, consolidation, merger, sale or similar transaction unless, prior to the consummation thereof, the successor Person (if other than the Company) resulting from such reorganization, reclassification, consolidation, merger, sale or similar transaction, shall assume, by written instrument substantially similar in form and substance to this Warrant and satisfactory to the Holder, the obligation to deliver to the Holder such shares of stock, securities or assets which, in accordance with the foregoing provisions, such Holder shall be entitled to receive upon exercise of this Warrant.  Notwithstanding anything to the contrary contained herein, with respect to any corporate event or other transaction contemplated by the provisions of this Section 4(e), the Holder shall have the right to elect prior to the consummation of such event or transaction, to give effect to the exercise rights contained in Section 2 instead of giving effect to the provisions contained in this Section 4(e) with respect to this Warrant.

 

(f)           Certain Events.  If any event of the type contemplated by the provisions of this Section 4 but not expressly provided for by such provisions occurs, then the Board shall make an appropriate adjustment in the number of Warrant Shares issuable upon exercise of this Warrant so as to protect the rights of the Holder in a manner consistent with the provisions of this Section 4; provided, that no such adjustment pursuant to this Section 4(f) shall decrease the number of Warrant Shares issuable as otherwise determined pursuant to this Section 4.

   

  

- 8 -

  

 

(g)           Certificate as to Adjustment.

 

(i)           As promptly as reasonably practicable following any adjustment of the number of Warrant Shares pursuant to the provisions of this Section 4, but in any event not later than ten (10) Business Days thereafter, the Company shall furnish to the Holder a certificate of an executive officer setting forth in reasonable detail such adjustment and the facts upon which it is based and certifying the calculation thereof.

 

(ii)           As promptly as reasonably practicable following the receipt by the Company of a written request by the Holder, but in any event not later than ten (10) Business Days thereafter, the Company shall furnish to the Holder a certificate of an executive officer certifying the number of Warrant Shares or the amount, if any, of other shares of stock, securities or assets then issuable upon exercise of the Warrant.

 

(h)           Participation Right.  In the event that the Company shall determine to issue shares of Common Stock (“Issued Shares”) or securities convertible into or exchangeable for Issued Shares or any other options, rights or warrants to purchase Issued Shares (“Securities”) to any Person the Company shall notify the Holder in writing of the proposed issuance, the number of Issued Shares or amount of Securities to be issued, the date on or about which such issuance is to be consummated and the price and other terms and  conditions thereof.  For a period of ten (10) days after the Shareholders’ receipt of the notice referred to in the foregoing sentence, the Holder shall have the option to purchase, upon the same price, terms and conditions as such Issued Shares or Securities are issued or proposed to be issued to such Person, that number of such Issued Shares or Securities as may be necessary to adjust the number of shares of Common Stock of the Company owned by the Holder on a fully-diluted as-exercised basis to provide that the percentage of all of the fully-diluted as-exercised shares of Common Stock of the Company owned by such Holder immediately after the date of issuance to such Person and the Holder (the date of any such issuance hereinafter referred to as the “Issuance Date”) is not less than the percentage of all of the fully-diluted shares of Common Stock of the Company owned by such Holder immediately prior to the Issuance Date.  If such Holder exercises its purchase option under this Section 4(h) it shall purchase such Issued Shares or Securities at the time of consummation of the issuance of Issued Shares or Securities to such Person; provided, however, that the Company may consummate such issuance prior to the expiration of the applicable ten (10) day period so long as sufficient Issued Shares or Securities are reserved for issuance to the Holder upon the exercise of its rights under this Section 4(h).  Without limiting the generality of the foregoing, this Section 4(h) shall be applicable to any issuance by the Company of Issued Shares other than any Excluded Issuance.  The rights of the Holders under this Section 4(h) shall be in effect for a period of five (5) years from the Original Issue Date and shall survive the exercise of this Warrant and the issuance of the Warrant Shares.  Each of the Holder and the Company shall execute and deliver subscription and purchase documents (and any ancillary documents) executed and delivered by and to other purchasers of Securities.  Notwithstanding anything herein to the contrary, (i) if the Company issues Securities as part of a more comprehensive transaction or series of transactions and such issuance is not an Excluded Issuance (e.g. in connection with a credit facility), the Holder shall only have the right to participate in the purchase of Securities in accordance with this Section 4(h) but shall not have the right to participate in any other aspect of the transaction, and the Holder and the Company shall negotiate in good faith the price at which the Holder shall have the right to purchase Securities pursuant to this Section 4(h) and (ii) if the consideration received or receivable by the Company in connection with an issuance of Securities is in a form other than cash, the Company and the Holder shall negotiate in good faith the price at which the Holder shall have the right to purchase Securities pursuant to this Section 4(h).

  

  

- 9 -

  

(i)            Notices.  In the event:

 

(i)           that the Company shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon exercise of the Warrant) for the purpose of entitling or enabling them to receive any dividend or other distribution, to vote at a meeting (or by written consent), to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security; or

 

(ii)          of any capital reorganization of the Company, any reclassification of the Common Stock of the Company, any consolidation or merger of the Company with or into another Person, or sale of all or substantially all of the Company’s assets to another Person; or

 

(iii)         of the voluntary or involuntary dissolution, liquidation or winding-up of the Company;

 

then, and in each such case, the Company shall send or cause to be sent to the Holder at least ten (10) days prior to the applicable record date or the applicable expected effective date, as the case may be, for the event, a written notice specifying, as the case may be, (A) the record date for such dividend, distribution, meeting or consent or other right or action, and a description of such dividend, distribution or other right or action to be taken at such meeting or by written consent, or (B) the effective date on which such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up is proposed to take place, and the date, if any is to be fixed, as of which the books of the Company shall close or a record shall be taken with respect to which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon exercise of the Warrant) shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Warrant and the Warrant Shares.

 

5.           Purchase Rights.  In addition to any adjustments pursuant to Section 4 above, if at any time the Company grants, issues or sells any shares of Common Stock, Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of Common Stock (the “Purchase Rights”), then the Holder shall be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder would have acquired if the Holder had held the number of Warrant Shares acquirable upon complete exercise of this Warrant immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.

  

  

- 10 -

  

6.           Transfer of Warrant.  Subject to the transfer conditions referred to in the legend endorsed hereon, this Warrant and all rights hereunder are transferable, in whole or in part, by the Holder without charge to the Holder, upon surrender of this Warrant to the Company at its then principal executive offices with a properly completed and duly executed Assignment in the form attached hereto as Exhibit B, together with funds sufficient to pay any transfer taxes described in Section 3(f)(v) in connection with the making of such transfer.  Upon such compliance, surrender and delivery and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant, if any, not so assigned and this Warrant shall promptly be cancelled.

 

7.           Holder Not Deemed a Stockholder; Limitations on Liability.  Except as otherwise specifically provided herein (including Section 4(c)), prior to the issuance to the Holder of the Warrant Shares to which the Holder is then entitled to receive upon the due exercise of this Warrant, the Holder shall not be entitled to vote or receive dividends or be deemed the holder of shares of capital stock of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, as such, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise.  In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company.  Notwithstanding this Section 7, the Company shall provide the Holder with copies of the same notices and other information given to the stockholders of the Company generally, contemporaneously with the giving thereof to the stockholders.

 

8.           Replacement on Loss; Division and Combination.

 

(a)           Replacement of Warrant on Loss.  Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and upon delivery of an indemnity reasonably satisfactory to it (it being understood that a written indemnification agreement or affidavit of loss of the Holder shall be a sufficient indemnity) and, in case of mutilation, upon surrender of such Warrant for cancellation to the Company, the Company at its own expense shall execute and deliver to the Holder, in lieu hereof, a new Warrant of like tenor and exercisable for an equivalent number of Warrant Shares as the Warrant so lost, stolen, mutilated or destroyed; provided, that, in the case of mutilation, no indemnity shall be required if this Warrant in identifiable form is surrendered to the Company for cancellation.

  

  

- 11 -

  

(b)           Division and Combination of Warrant.  Subject to compliance with the applicable provisions of this Warrant as to any transfer or other assignment which may be involved in such division or combination, this Warrant may be divided or, following any such division of this Warrant, subsequently combined with other Warrants, upon the surrender of this Warrant or Warrants to the Company at its then principal executive offices, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the respective Holders or their agents or attorneys.  Subject to compliance with the applicable provisions of this Warrant as to any transfer or assignment which may be involved in such division or combination, the Company shall at its own expense execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants so surrendered in accordance with such notice.  Such new Warrant or Warrants shall be of like tenor to the surrendered Warrant or Warrants and shall be exercisable in the aggregate for an equivalent number of Warrant Shares as the Warrant or Warrants so surrendered in accordance with such notice.

 

9.           No Impairment.  The Company shall not, by amendment of its Certificate of Incorporation or Bylaws, 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 shall 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 in order to protect the exercise rights of the Holder against dilution or other impairment, consistent with the tenor and purpose of this Warrant.

 

10.           Agreement to Comply with the Securities Act; Legend.  Each Warrant certificate, and each certificate representing shares of Common Stock issued upon exercise of the Warrants, shall be stamped with a legend in substantially the form of the legend on the face hereof.

 

11.           Warrant Register.  The Company shall keep and properly maintain at its principal executive offices books for the registration of the Warrant and any transfers thereof.  The Company may deem and treat the Person in whose name the Warrant is registered on such register as the Holder thereof for all purposes, and the Company shall not be affected by any notice to the contrary, except any assignment, division, combination or other transfer of the Warrant effected in accordance with the provisions of this Warrant.

 

12.           Notices.  Any notices required or permitted to be sent hereunder shall be given to the following addresses, or such other addresses as shall be given by notice delivered hereunder:

 

	
 If to the Company:

	
Xcel Brands, Inc.

	  	
475 Tenth Avenue, 4th Floor

	  	
New York, New York 10018

	  	
Attention: Chief Executive Officer and

	  	
Chief Financial Officer

	  	
Telecopy: (347) 727-2479

  

- 12 -

  

	
with a copy to:

	
Blank Rome LLP

	  	
The Chrysler Building

	  	
405 Lexington Avenue

	  	
New York, New York 10174

	  	
Attention: Robert J. Mittman

	  	
Telecopy: (212) 885-5000

	  	  
	
If to the Holder:

	
Great American Life Insurance Company

	  	
c/o MidMarket Capital Partners, LLC

	  	
430 Park Avenue

	  	
New York, New York 10022

	  	
Attention: Gabriel Gengler

	  	
Telecopy: (866) 376-4175

	  	  
	
with a copy to:

	
Keating Muething & Klekamp PLL

	  	
One East Fourth Street, Suite 1400

	  	
Cincinnati, Ohio 45202

	  	
Attention: John S. Fronduti

	  	
Telecopy: (513) 579-6457

Any notice hereunder shall be deemed to have been given and received on the day on which it is delivered (by means including personal delivery, overnight air courier, United States mail) or telecopied (or, if such day is not a Business Day or if the notice is not telecopied during business hours of the intended recipient, at the place of receipt, on the next following Business Day).

 

13.           Cumulative Remedies.  Except to the extent expressly provided in Section 7 to the contrary, the rights and remedies provided in this Warrant are cumulative and are not exclusive of, and are in addition to and not in substitution for, any other rights or remedies available at law, in equity or otherwise.

 

14.           Entire Agreement.  This Warrant, together with the Credit Agreement and the other Loan Documents, constitutes the sole and entire agreement of the parties to this Warrant with respect to the subject matter contained herein, and supersedes all prior and contemporaneous understandings and agreements, both written and oral, with respect to such subject matter.  In the event of any inconsistency between the statements in the body of this Warrant, the Credit Agreement and the other Loan Documents, the statements in the body of this Warrant shall control.

  

  

- 13 -

  

15.           Successor and Assigns.  Except as otherwise expressly provided herein, the provisions of this Warrant shall be binding upon and inure to the benefit of the respective heirs, executors and administrators and the permitted successors and assigns of the parties hereto, whether so expressed or not.  In addition and whether or not any express assignment has been made, the provisions of this Warrant which are for the benefit of the Holder are also for the benefit of, and enforceable by, any permitted subsequent Holder who consents in writing to be bound by this Warrant.

 

16.           No Third-Party Beneficiaries.  This Warrant is for the sole benefit of the Company and the Holder and their respective successors and, in the case of the Holder, permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever, under or by reason of this Warrant.

 

17.           Headings.  The headings in this Warrant are for reference only and shall not affect the interpretation of this Warrant.

 

18.           Amendment and Modification; Waiver.  Except as otherwise provided herein, this Warrant may only be amended, modified or supplemented by an agreement in writing signed by each party hereto.  No waiver by the Company or the Holder of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving.  No waiver by any party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver.  No failure to exercise, or delay in exercising, any rights, remedy, power or privilege arising from this Warrant shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

 

19.           Severability.  Whenever possible, each provision of this Warrant will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Warrant.

  

- 14 -

  

   

20.           Governing Law.  The rights, duties and obligations of each party hereto shall be construed in accordance with and governed by the laws of the State of New York (without giving effect to any choice of law principles which would result in the application of the law of any other state). Any judicial proceeding brought with respect to any claim arising out of or relating to this Warrant or any other Loan Document (a “Claim”) shall be brought in any court of competent jurisdiction in New York County, New York and, by execution and delivery of this Warrant, the Company and the Holder each (a) accepts, generally and unconditionally, the nonexclusive jurisdiction of such courts and any related appellate court and irrevocably agrees to be bound by any judgment rendered thereby in connection with any Claim and (b) irrevocably waives any objection it may now or hereafter have as to the venue of any such proceeding brought in such a court or that such a court is an inconvenient forum.  The Company and the Holder each hereby waive personal service of process and consent that service of process upon it may be made by certified or registered mail, return receipt requested, at its address specified or determined in accordance with the provisions of Section 12, and service so made shall be deemed completed on the fifth Business Day after such service is deposited in the mail.  THE COMPANY AND THE HOLDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING ANY CLAIM.

    

21.           Counterparts.  This Warrant may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, and all of which counterparts together shall constitute one instrument.

 

22.           No Strict Construction.  This Warrant shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted.

 

[SIGNATURE PAGE FOLLOWS]

  

  

- 15 -

  

 

IN WITNESS WHEREOF, the Company has duly executed this Warrant on the Original Issue Date.

 

	  	
XCEL BRANDS, INC.  

	 	 
	  	
By:

	
/s/ Robert W. D’Loren

	  	Name: Robert W. D’Loren
	  	Title: Chairman of the Board and
	  	          Chief Executive Officer

  

Accepted and agreed, 

	
GREAT AMERICAN LIFE

	  
	
INSURANCE COMPANY

	  
	  	  
	
By:

	
/s/ Mark F. Muething

	  
	Name: Mark F. Muething	  
	Title: Executive Vice President &	  
	Secretary	  

  

  

- 16 -

  

EXHIBIT A

Form of Exercise Agreement

(To be executed only upon exercise of Warrant)

 

The undersigned registered owner of this Warrant irrevocably exercises this Warrant and purchases ________ shares of Common Stock of XCel Brands, Inc.. (f/k/a NetFabric Holdings, Inc.), a Delaware corporation, purchasable with this Warrant, and herewith makes payment therefor in the amount of $_________, all at the price and on the terms and conditions specified in this Warrant.  The undersigned requests that the shares be registered in the name of [________].  If such number of shares does not include all shares of Common Stock issuable as provided in this Warrant, the undersigned does hereby direct that a new Warrant of like tenor for the number of shares of Common Stock not being purchased hereunder be issued in the name of the undersigned.

 

DATED :

	  	  
	  	
(Signature of Registered Owner)

	  	  
	  	  
	  	
(Street Address)

	  	  
	  	  
	  	
(City)

	
(State)

	
(Zip)

  

  

- 17 -

  

  

EXHIBIT B

Form of Assignment

 

FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby sells, assigns and transfers unto the assignee named below all of the rights of the undersigned under the within Warrant, with respect to the number of shares of Common Stock set forth below:

 

	
Name of Assignee

	 	
Address

	 	
No.  of Shares

	  	 	  	 	  

and does hereby irrevocably constitute and appoint ______________________ attorney to make such transfer on the books of XCel Brands, Inc. (f/k/a NetFabric Holdings, Inc.), a Delaware corporation, maintained for the purpose, with full power of substitution in the premises.

 

DATED :

	  	  
	  	
(Signature)

	  	  
	  	  
	  	
(Witness)

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00194-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00194-of-00352.parquet"}]]