Exhibit 10.4
MM COMPANIES, INC.
INVESTOR RIGHTS AGREEMENT
This
Investor Rights Agreement (this "Agreement") is made and
entered
into as of August 15, 2005, by and among MM
Companies, Inc., a Delaware
corporation (the "Company"), and George
Foreman Ventures LLC, a Delaware
limited liability company of which the
Company is a member ("GFV"), on the
one hand, and George Foreman ("GF") and
George Foreman Productions, Inc., a
Nevada corporation ("GFPI", and together
with GF, "Foreman"), on the other
hand.
RECITALS
WHEREAS,
concurrently with, and as a condition to, the execution and
delivery of this Agreement, Foreman, on the
one hand, and GFV, on the other
hand, are entering into an assignment
agreement, in substantially the form
attached hereto as Exhibit A (such
agreement, the "Assignment Agreement"); and
WHEREAS,
concurrently with the execution and delivery of this
Agreement, Foreman and GFV are entering
into a subscription agreement, in
substantially the form attached hereto as
Exhibit B (the "Subscription
Agreement"), pursuant to which GFV is
issuing to Foreman Membership Interests
in GFV having the rights set forth in the
Operating Agreement, which is being
executed and delivered concurrently with
the execution and delivery of this
Agreement (the Membership Interests issued
pursuant to the Subscription
Agreement, the "Foreman Interests");
NOW,
THEREFORE, in consideration of the foregoing, the mutual
promises
hereinafter set forth, and other good and
valuable consideration, the receipt
and sufficiency of which are hereby
acknowledged, the parties hereto agree as
follows:
1. DEFINITIONS. As
used herein, the following terms will have the
following meanings:
Action: Has the
meaning set forth in Section 3(e)(ii).
Agreement: Has the
meaning set forth in the preamble.
Annual Report: Has the
meaning set forth in Section 3(f).
Assignment Agreement:
Has the meaning set forth in the recitals.
Board: Has the meaning
set forth in Section 5(a).
Board of Directors:
Has the meaning set forth in Section 5(a).
Business Day: Any
weekday other than a weekday on which banks in
New York, New York are authorized or
required to be closed.
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Capitalization: As of
any date, the amount equal to the sum of
(x) the average, over the preceding five
(5) trading days, of the result
obtained by multiplying (i) the number of
shares of Common Stock issued and
outstanding as of such trading day by (ii)
the higher of the daily closing
sale price or bid price on such trading day
of the Common Stock (as reported
on the principal securities exchange or
quotation system on which the Common
Stock is then listed or admitted for
trading) and (y) the fair market value
of all outstanding equity securities of the
Company, if any, other than
Common Stock, as determined in good faith
by the Board of Directors.
Certificate of Designations: The Certificate of
Designations,
Preferences and Relative, Participating,
Optional and Other Special Rights of
Preferred Stock and Qualifications,
Limitations and Restrictions Thereof of
Series A Preferred Stock of the
Company.
Common Stock: Has the
meaning set forth in Section 3(b).
Company: Has the
meaning set forth in the preamble.
Controlled Entity: An
entity (x) of which the Company or GFV is
the managing member, sole general partner
or sole director, or (y) which
provides Foreman with the same management
rights provided to Foreman pursuant
to Section 3 of the Operating
Agreement.
Current Report: Has
the meaning set forth in Section 3(f).
Director Designee(s):
Has the meaning set forth in Section 5(a).
8-K Filing: Has the
meaning set forth in Section 8(m).
Exchange Act: Has the
meaning set forth in Section 3(f).
Exchange Date: Has the
meaning set forth in Section 2(b).
Exchange Price:
$1.196745, subject to adjustment pursuant to
Section 2(f).
Exchange Rate: As of
any date, the number of shares of Common
Stock issuable upon the exchange of
Membership Interests having an LLC
Percentage equal to one percent (1%),
determined by dividing (a) the Invested
Amount by (b) the Exchange Price then in
effect.
Foreman: Has the
meaning set forth in the preamble.
Foreman
Assets: Collectively,
the Indicia Rights and the Marks
(as each such term is defined in the
Assignment Agreement).
Foreman Interests: Has
the meaning set forth in the recitals.
Foreman Observer: Has
the meaning set forth in Section 5(e).
Foreman Securities.
The shares of Common Stock owned by Foreman
and the Membership Interests owned by
Foreman.
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Foreman Shares: At any
time, the sum of (i) the number of shares
of Common Stock owned by Foreman and (ii)
the number of shares of Common
Stock for which the Membership Interests
owned by Foreman are exchangeable.
Fully Diluted Company Shares: The sum of (i) the number of
shares of Common Stock outstanding as of
the date hereof and (ii) the number
of shares of Common Stock into which or for
which all presently outstanding
securities of the Company convertible into
or exercisable or exchangeable for
Common Stock may be converted, exercised or
exchanged as of the date hereof.
GF: Has the meaning
set forth in the preamble.
GFPI: Has the meaning
set forth in the preamble.
GFV: Has the meaning
set forth in the preamble.
Holder: Has the
meaning set forth in Section 2(a).
Invested Amount:
$143,589.73 per each one percent (1%) of LLC
Percentage, with the aggregate Invested
Amount of GF and GFPI initially being
$2,153,846.
LLC Percentage: With
respect to each Member (including the
Company, in its capacity as managing
member), the "Company Percentage" (as
such term is defined in the Operating
Agreement) of such Member in GFV with
respect to the Non-Traditional
Businesses.
Material Adverse Change/Effect: Has the meaning set forth in
Section 3(e)(i).
Member: Each Person
whose name is set forth on Schedule A to the
Operating Agreement as a member of GFV, as
such Schedule may be amended from
time to time pursuant to the terms of the
Operating Agreement.
Membership Interest:
The ownership interest of any Member in GFV.
New Securities: Has
the meaning set forth in Section 6(b).
Non-Traditional Businesses: Has the meaning set forth in
the
Assignment Agreement.
Operating Agreement:
That certain amended and restated limited
liability company agreement of GFV, dated
as of the date hereof.
Opposing Proposal: Has
the meaning set forth in Section 7(a).
Permitted Indebtedness: Trade debt, inventory or
receivables
financing, or other commercial indebtedness
incurred by the Company, or
indebtedness owed to GFV or any entity of
which the Company or GFV owns at
least eighty percent (80%) of the
outstanding equity interests.
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Permitted Transferee:
(a) With respect to any natural person,
such natural person's spouse, any lineal
ancestor or descendant of such
person or spouse, the spouses of such
lineal ancestors or descendants, trusts
for the benefit of any of the foregoing, a
corporation all of the outstanding
capital stock of which is at all times
solely owned by, a limited liability
company all of the members of which are at
all times solely, or a partnership
all of the partners of which are at all
times solely, such natural person
and/or any Permitted Transferee and, in the
event of the death of such
natural person, such natural person's
estate; and (b) with respect to any
Person other than a natural person, any
Affiliate of such Person; provided
that, in the case of each of clauses (a)
and (b) above, each such transferee
will be a "Permitted Transferee" for
purposes of this Agreement only if such
transferee shall have executed and
delivered to the Company an instrument
pursuant to which the transferee will have
agreed to be bound by all of the
terms of this Agreement applicable to the
transferor.
Person: An individual,
trust, estate, partnership, joint
venture, association, company, corporation
or other entity.
Pro Rata Portion: Has
the meaning set forth in Section 6(a).
Quarterly Report: Has
the meaning set forth in Section 3(f).
SEC: Has the meaning
set forth in Section 3(e)(iii).
SEC Documents: Has the
meaning set forth in Section 3(f).
Securities Act: The
Securities Act of 1933, as amended.
Series A Preferred Stock: The Series A Preferred Stock of
the
Company, par value $0.01 per share.
Subscription Agreement: Has the meaning set forth in
the
recitals.
2.
EXCHANGE.
(a) Each of GF and GFPI (each, in such capacity, a "Holder")
shall
have the right, at such Holder's option, to
exchange all or any portion of its
Membership Interests into shares of Common
Stock at any time, or from time to
time, on or after the date that is six (6)
months after the date hereof, at
the Exchange Rate calculated as of the
close of business on the Exchange Date
(as defined in Section 1(b) below).
(b) The right of exchange attaching to the Membership Interests
may
be exercised by the Holder thereof by
delivering a duly signed and completed
Exchange Notice to the Company, at its
principal office. The "Exchange Date"
will be the date on which the duly signed
and completed Exchange Notice is so
delivered. As promptly as practicable on or
after the Exchange Date, but in no
event later than seven (7) Business Days
from the Exchange Date, the Company
shall issue and deliver to the Holder at
the Holder's request, either a
certificate or certificates or electronic
shares through "DWAC" for the number
of full shares of Common Stock issuable
upon such exchange, together with
payment in cash, determined as provided
below, in lieu of any fraction of a
share. Such certificate or certificates
shall be delivered by the
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Company to the appropriate Holder by
mailing certificates evidencing the
additional shares to the Holders at their
respective addresses set forth in
the register of Holders maintained by GFV.
All shares of Common Stock issuable
upon exchange of the Membership Interests
shall be fully paid and
nonassessable.
(c) The Company shall not issue a fractional share of Common
Stock
upon exchange of Membership Interests.
Instead the Company shall deliver a
check for an amount equal to the applicable
fraction of a share multiplied by
the Exchange Price per share as of the
close of business on the Exchange Date,
rounded to the nearest cent.
(d) A Holder delivering a Exchange Notice will not be required to
pay
any taxes or duties in respect of the issue
or delivery of Common Stock on
exchange but will be required to pay any
tax or duty that may be payable in
respect of any transfer involved in the
issue or delivery of the shares of
Common Stock in a name other than that of
the Holder of the Membership
Interests, to the extent (if any) otherwise
permitted. Certificates
representing shares of Common Stock will
not be issued or delivered unless all
taxes and duties, if any, payable by the
Holder have been paid.
(e) The Company has reserved and shall continue to reserve out of
its
authorized but unissued Common Stock or its
Common Stock held in treasury
enough shares of Common Stock to permit the
exchange of all of the Membership
Interests for shares of Common Stock
assuming that such exchange took place at
the Exchange Price then in effect and such
shares shall be fully paid and
nonassessable and free of preemptive or
similar rights. The Company shall take
all commercially reasonable steps to comply
with all securities laws
regulating the offer and delivery of shares
of Common Stock upon the exchange
of Membership Interests therefor; provided,
however, that the Company shall
not be required to file a registration
statement with respect to such
securities, except as provided in the
Registration Rights Agreement.
(f) The Exchange Price shall be subject to adjustment as
follows:
(i) In case the Company shall (A) pay a dividend (or make a
distribution) on any class of its capital
stock in shares of its Common Stock,
(B) subdivide its outstanding shares of
Common Stock into a greater number of
shares or (C) combine its outstanding
shares of Common Stock into a smaller
number of shares, the Exchange Price in
effect immediately prior thereto shall
be adjusted (as provided below) so that
Holders of Membership Interests
thereafter surrendered for exchange shall
be entitled to receive the number of
shares of Common Stock which such Holder
would have owned or have been
entitled to receive immediately following
such action had such Membership
Interests been exchanged for shares of
Common Stock immediately prior to such
time. The Exchange Price as adjusted shall
be determined by multiplying the
Exchange Price at which the Membership
Interests were theretofore exchangeable
by a fraction of which the denominator
shall be the number of shares of Common
Stock outstanding immediately following
such action and of which the numerator
shall be the number of shares of Common
Stock outstanding immediately prior
thereto. Such adjustment shall be made
whenever any event listed above shall
occur and shall become effective
retroactively immediately after the record
date in the case of a dividend or
distribution and immediately after the
effective date in the case of a subdivision
or combination.
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(ii) In case the Company shall pay a dividend to all holders of
its Common Stock (including any dividend
paid in connection with a
consolidation or merger in which the
Company is the continuing Company) of any
shares of capital stock of the Company or
its Subsidiaries (other than Common
Stock) or evidences of its indebtedness or
assets or property (other than cash
and excluding dividends or distributions in
connection with the liquidation,
dissolution or winding up of the Company)
or rights or warrants to subscribe
for or purchase any of its capital stock or
those of its Subsidiaries or
capital stock convertible or exchangeable
for Common Stock, then in each such
case adequate provision shall be made so
that each Holder shall have the right
to receive the amount and kind of assets,
evidences of indebtedness, property
or securities such Holder would have
received had such Holder exchanged all of
such Holder's Membership Interests for
shares of Common Stock immediately
prior to the record date for such dividend.
Such adjustment shall be made
whenever any such payment is made, and
shall become effective retroactively
immediately after the record date for the
determination of stockholders
entitled to receive the payment.
(iii) No adjustment in the Exchange Price shall be required
unless the adjustment would require an
increase or decrease of at least one
percent (1%) in the Exchange Price then in
effect; provided, however, that any
adjustments that by reason of this Section
2(f)(iii) are not required to be
made shall be carried forward and taken
into account in any subsequent
adjustment. All calculations under this
Section 2(f) shall be made to the
nearest cent.
(iv) Whenever the Exchange Price is adjusted, as herein
provided,
the Company shall promptly send to each
Holder of record by first class mail,
postage pre-paid, a certificate of an
officer of the Company setting forth the
Exchange Price after the adjustment and
setting forth a brief statement of the
facts requiring such adjustment and a
computation thereof. The certificate
shall be conclusive evidence of the
correctness of the adjustment. The Company
shall promptly cause a notice of the
adjusted Exchange Price to be mailed to
each registered Holder.
(v) In case of any reclassification of the Common Stock, any
consolidation of the Company with, or
merger of the Company into, any other
entity, any merger of another entity into
the Company (other than a merger
that does not result in any
reclassification, conversion, exchange or
cancellation of outstanding shares of
Common Stock of the Company), any sale
or transfer of all or substantially all of
the assets of the Company or any
compulsory share exchange pursuant to which
share exchange the Common Stock is
converted into other securities, cash or
other property, then lawful provision
shall be made as part of the terms of such
transaction whereby each Holder
shall have the right thereafter, during the
period such Membership Interests
shall be exchangeable, to exchange its
Membership Interests only for the kind
and amount of securities, cash and other
property receivable upon the
reclassification, consolidation, merger,
sale, transfer or share exchange of
the number of shares of Common Stock of the
Company into which such Holder's
Membership Interests would have been
exchangeable immediately prior to the
reclassification, consolidation, merger,
sale, transfer or share exchange. The
Company or the Person formed by the
consolidation or resulting from the merger
or which acquires such assets or which
acquires the Company's shares, as the
case may be, shall make provisions in its
certificate or articles of
incorporation
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or other constituent document to establish
such rights and such rights shall
be clearly provided for in the definitive
transaction documents relating to
such transaction. Such certificate or
articles of incorporation or other
constituent document shall provide for
adjustments, which, for events
subsequent to the effective date of the
certificate or articles of
incorporation or other constituent
document, shall be as nearly equivalent as
may be practicable to the adjustments
provided for in this Section 2. The
provisions of this Section 2(f)(v) shall
similarly apply to successive
reclassifications, consolidations, mergers,
sales, transfers or share
exchanges.
3.
REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. The
Company hereby represents, warrants and
agrees to and with Foreman as follows:
(a) Organization and Good Standing. The Company is a corporation
duly
organized, validly existing and in good
standing under the laws of the State
of Delaware and has full corporate power
and authority to conduct its business
as presently conducted.
(b) Capitalization. The authorized capital stock of the Company
consists of 25,000,000 shares of common
stock of the Company, par value $0.01
per share ("Common Stock"), and 5,959,509
shares of preferred stock of the
Company, par value $0.01 per share.
(i) As of August 1, 2005, the outstanding capital stock of the
Company consisted of 3,289,006 shares of
Common Stock. The shares of issued
and outstanding capital stock of the
Company have been duly authorized and
validly issued, are fully paid and
nonassessable and have not been issued in
violation of any preemptive rights or
rights of first refusal.
(ii) As of August 1, 2005, the Company had 53,392 shares of
Common Stock reserved for issuance upon
exercise of outstanding options
(including all stock options outstanding on
such date, whether or not
immediately exercisable, but not including
previously issued stock
appreciation rights with respect to 370,000
shares of Common Stock subject to
settlement in cash or, if so agreed by the
parties thereto, in shares of
Common Stock). As of August 1, 2005, there
were no shares of Common Stock
reserved for issuance upon exercise of
outstanding warrants.
(iii) As of August 1, 2005, the Company had 6,446,608 shares of
Common Stock available for future grant
under the Company's stock option plan.
(iv) The Company has arranged to grant to Jesse Choper, Richard
Huffsmith, Efrem Gerszberg and Jeremy
Anderson options to purchase an
aggregate of 200,000 shares of Common
Stock.
(v) Except as described above and for the transactions
contemplated by this Agreement, the Company
is not party to any contract,
arrangement or understanding with any
Person with respect to any issuance,
sale, grant or other disposition of shares
of Common Stock, or securities
convertible, exercisable or exchangeable
for such shares.
(c) Authorization. The Foreman Shares, when issued pursuant to
this
Agreement upon the exchange of the Foreman
Interests, will be duly and validly
authorized, validly issued, fully paid and
nonassessable.
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(d) Authority;
Enforceability. The Company has all corporate right,
power and authority to enter into this
Agreement and to consummate the
transactions contemplated hereby. This
Agreement has been duly executed and
delivered by the Company and constitutes a
legal, valid and binding obligation
of the Company, enforceable against the
Company in accordance with its terms,
subject to laws of general application
relating to bankruptcy, insolvency and
the relief of debtors and rules of law
governing specific performance,
injunctive relief or other equitable
remedies, and to limitations of public
policy. The issuance and sale of the
Foreman Shares contemplated hereby will
not give rise to any preemptive rights or
rights of first refusal on behalf of
any person.
(e) No Conflict; Litigation; Governmental Consents.
(i) The execution and delivery by the Company of this Agreement
and the consummation of the transactions
contemplated hereby (A) will not
result in the violation by the Company (x)
of any law, statute, rule,
regulation, order, writ, injunction,
judgment or decree of a
