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Exhibit
10.1
WARRANT PURCHASE
AGREEMENT
This WARRANT PURCHASE
AGREEMENT (this “ Agreement ”) is made and
entered into as of January 26, 2005 by and between PriceSmart,
Inc., a Delaware corporation (the “ Company ”),
and the International Finance Corporation (the “
Investor ”). The Investor and the Company are referred
to herein as the “ Parties .”
W I T
N E S S E T H
:
WHEREAS, the Company desires
to sell to the Investor, and the Investor desires to purchase from
the Company, the Common Stock Purchase Warrant in the form attached
hereto in Exhibit A (the “ Warrant ”) to
purchase 400,000 shares of the Company’s common stock, par
value $.0001 per share (“ Common Stock ”), at an
exercise price of $7.00 per share, on the terms and conditions set
forth in this Agreement; and
NOW, THEREFORE, in
consideration of the premises and the mutual promises herein made,
and in consideration of the representations, warranties and
covenants herein contained, the Parties agree as
follows:
1. AGREEMENT TO
PURCHASE AND SELL WARRANT . Subject to the terms and
conditions of this Agreement and in consideration of the
Investor’s agreement to (i) waive provisions in its loan
agreements with the Company restricting the Company’s ability
to incur additional indebtedness in order to allow the Company to
incur the bridge loan as described in the Company’s Current
Report on Form 8-K filed with the SEC on September 3, 2004 (the
“ Form 8-K ”), (ii) release $5.2 million of the
Company’s cash pledged as partial collateral, (iii) reduce
the carrying costs on that certain C Loan Agreement, dated as of
January 26, 2001, among the Company, PSMT Caribe, Inc., a British
Virgin Islands corporation and wholly owned subsidiary of the
Company (“ PSMT Caribe ”), PSMT Trinidad/Tobago
Ltd., a company organized and existing under the laws of the
Republic of Trinidad and Tobago and subsidiary of the Company
(“ PSMT Trinidad ”), and the Investor (the
“ C Loan ”), and (iv) eliminate the prepayment
premium provisions associated with the C Loan and that certain Loan
Agreement, dated as of January 26, 2001, by and among the Company,
PSMT Caribe, PSMT Trinidad and the Investor, the Company agrees to
issue to the Investor on the date hereof (the “ Closing
Date ”), the Warrant. The shares of Common Stock issuable
upon exercise of the Warrant are referred to as the “
Warrant Shares .” The Warrant and the Warrant Shares
are collectively referred to as the “ Securities
.”
2. REPRESENTATIONS AND
WARRANTIES OF THE COMPANY . The Company hereby represents
and warrants to the Investor that the statements in the following
paragraphs of this Section 2 are true and correct:
2.1 Organization, Good
Standing and Qualification . The Company is a corporation duly
organized, validly existing and in good standing under the laws of
the State of Delaware. Schedule 2.1 sets forth the name and
jurisdiction of organization of each of the
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Company’s subsidiaries
(“ Subsidiaries ”). The Company and each of its
Subsidiaries are duly authorized to conduct business and are in
good standing under the laws of each jurisdiction where such
qualification is required, except where the failure to be so
qualified would not have a material adverse effect on the business,
properties, financial condition, operations or results of
operations of the Company and its Subsidiaries, taken as a whole (a
“ Material Adverse Effect ”). Neither the
Company nor any of its Subsidiaries is in default under or in
violation of any provision of its charter or bylaws. The Company
has full power and authority to execute and deliver this Agreement
and to perform its obligations hereunder. The Company and each of
the Subsidiaries have full power and authority to carry on their
respective businesses as currently conducted.
2.2 Authorization;
Enforceability . All corporate action on the part of the
Company necessary for the authorization, execution and delivery of
this Agreement, the performance of the obligations of the Company
on the Closing Date, and the issuance and delivery of the
Securities, has been taken, and this Agreement has been duly
executed and delivered by the Company and constitutes a valid and
legally binding obligation of the Company, enforceable in
accordance with its terms, except as may be limited by (i)
applicable bankruptcy, insolvency, reorganization or other laws of
general application relating to or affecting the enforcement of
creditors’ rights generally, (ii) the effect of rules of law
governing the availability of equitable remedies and (iii) the
unenforceability under certain circumstances under law or court
decisions or provisions providing for the indemnification of or
contribution to a party with respect to a liability where such
indemnification or contribution is contrary to public policy or
prohibited by law.
2.3 Valid Issuance of the
Securities .
(a) The Warrant has been duly
and validly authorized by the Company and, constitutes a legal,
valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms except as may be limited
by applicable bankruptcy, insolvency, reorganization or other laws
of general application relating to or affecting the enforcement of
creditors’ rights generally.
(b) The Warrant Shares have
been duly and validly authorized by the Company and reserved for
issuance and, when issued in accordance with the terms of the
Warrant, will have been duly and validly issued, fully paid and
nonassessable and will be free of any taxes, liens or claims (other
than those that may be created by the Investor) and free of any
restrictions on transfer other than restrictions on transfer under
applicable federal and state securities laws and will be issued in
compliance with all applicable federal and state securities
laws.
2.4 Capitalization .
The entire authorized capital stock of the Company consists of
20,000,000 shares of Common Stock, of which 7,339,810 shares (not
including 435,845 shares held by the Company as treasury shares)
were issued and outstanding as of September 20, 2004, and 2,000,000
shares of preferred stock, par value $.0001 per share, of which no
shares are issued and outstanding as of the date of this Agreement.
Except as set forth
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in the SEC Documents (as
defined below), there are no outstanding or authorized warrants,
options, purchase rights, subscription rights, conversion rights,
exchange rights or other contracts, commitments or obligations that
could require the Company or any of its Subsidiaries to issue,
grant, deliver or sell or otherwise cause to be issued, granted,
delivered or sold or become outstanding any capital stock of the
Company or any of its Subsidiaries, except for those granted in the
ordinary course of business since the dates of the SEC Documents.
There are no outstanding or authorized stock appreciation, phantom
stock, profit participation or similar rights with respect to the
Company or any of its Subsidiaries. Except as set forth in the SEC
Documents, to the Company’s knowledge, there are no voting
trusts, proxies or other agreements or understandings with respect
to the voting of the capital stock of the Company.
2.5 Noncontravention .
Neither the execution nor the delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, will (i)
violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge or other restriction of any
government, governmental agency or court to which the Company is
subject or any provision of the charter or bylaws of the Company or
(ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right
to accelerate, terminate, modify or cancel, or require any notice
under any agreement, contract, lease, license, instrument, or other
arrangement to which the Company is a party or by which the Company
is bound or to which any of the Company’s assets is subject
(or result in the imposition of any mortgage, pledge, lien,
encumbrance, charge or other security interest upon any of such
assets), except in either case, where such violation, conflict or
default would not have a Material Adverse Effect. Except for (i)
the filing of a Form D with the Securities and Exchange Commission
(the “ SEC ”) and (ii) filings which may be
required under state securities laws, the Company does not need to
give any notice to, make any filing with, or obtain any
authorization, consent or approval of any government or
governmental agency in order for the Company and the Investor to
consummate the transactions contemplated by this
Agreement.
2.6 Reports Filed Under
the Securities Exchange Act of 1934; Financial Statements . The
Company has timely filed all reports required to be filed by the
Company under the Securities Exchange Act of 1934, as amended (the
“ 1934 Act ”). All such reports filed by the
Company in the preceding twelve (12) months (the “ SEC
Documents ”) contain all statements required to be stated
therein in accordance with the 1934 Act and the rules and
regulations promulgated thereunder applicable to the SEC Documents,
and the SEC Documents do not contain any untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading. Any statements made in any such SEC Documents that are
or were required to be updated or amended have been so updated or
amended. As of their respective dates (except as they have been
correctly amended), the financial statements of the Company
included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto. Such
financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied,
during the periods involved (except (a) as may be otherwise
indicated in such financial statements or the notes thereto or (b)
in the case of unaudited interim statements, to the extent they may
exclude footnotes or may be condensed or summary statements) and
fairly present the financial position
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of the Company as of the
dates thereof and the results of its operations and cash flows for
the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). Except as set
forth in the SEC Documents, the Company has no liabilities,
contingent or otherwise, other than (i) liabilities incurred in the
ordinary course of business subsequent to the date of such SEC
Documents, (ii) obligations under contracts and commitments
incurred in the ordinary course of business and not required under
generally accepted accounting principles to be reflected in such
SEC Documents, which liabilities and obligations referred to in
clauses (i) and (ii), individually or in the aggregate, would not
have a Material Adverse Effect, and (iii) contingent liabilities
which, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
2.7 Absence of
Litigation . Except as disclosed in the SEC Documents, there is
no action, suit, proceeding, inquiry or investigation before or by
any court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the Company,
threatened against or affecting the Company, or any of its
Subsidiaries, or any of their directors or officers in their
capacities as such which could reasonably be expected to have a
Material Adverse Effect.
2.8 No General
Solicitation . Neither the Company, nor any of its Affiliates,
nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the
meaning of Regulation D under the Securities Act of 1933, as
amended (the “ 1933 Act ”)) in connection with
the offer or sale of the Warrant. “ Affiliate ”
has the meaning set forth in Rule 12b-2 promulgated under the 1934
Act as in effect on the date hereof. The term “
Affiliated ” has a correlative meaning.
2.9 Securities Laws .
Neither the Company, nor any of its Affiliates, nor any person
acting on its or their behalf, has, directly or indirectly, made
any offers or sales of any security or solicited any offers to buy
any security under circumstances that would require registration of
the Warrants being offered hereby under the 1933 Act or cause the
offering of these Warrants to be integrated with any prior offering
of securities of the Company for purposes of the 1933 Act or any
applicable stockholder approval provisions, including, without
limitation, Rule 4350(i) of the Nasdaq Stock Market or any similar
rule. Assuming the truth and accuracy of the representations and
warranties of the Investor set forth in Section 3 of this
Agreement, Investor will not be a statutory underwriter within the
meaning of Section 2(a)(11) of the 1933 Act.
2.10 Transactions with
Affiliates . Other than the stock options granted pursuant to
the Company’s Option Plans and transactions disclosed in the
SEC Documents, none of the officers, directors, or employees of the
Company is presently a party to any transaction with the Company or
any of its Subsidiaries (other than for services as employees,
officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from, or
otherwise requiring payments to or from any officer, director or
such employee or, to the knowledge of the Company, any corporation,
partnership, trust or entity in which any officer, director, or any
such employee has a substantial interest or is an officer,
director, trustee or partner.
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2.11 Foreign Corrupt
Practices . Neither the Company, nor any of its Subsidiaries,
nor any director, officer, agent, employee or other person acting
on behalf of the Company or any of its Subsidiaries has, in the
course of its actions for, or on behalf of, the Company (i) used
any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expenses relating to political
activity, (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate
funds, (iii) violated (or is in violation of) any provision of the
U.S. Foreign Corrupt Practices Act of 1977, as amended, or (iv)
made any unlawful bribe, rebate, payoff, influence payment,
kickback or other unlawful payment to any foreign or domestic
government official or employee.
3. REPRESENTATIONS AND
WARRANTIES OF THE INVESTOR . The Investor represents and
warrants to the Company that the statements in the following
paragraphs of this Section 3 are true and correct:
3.1 Organization and
Qualification . The Investor is an international organization
established by Articles of Agreement among its member countries.
The Investor has all requisite power and authority to enter into
and perform this Agreement and to carry out the transactions
contemplated by this Agreement.
3.2 Authorization .
All action on the part of the Investor necessary for the
authorization, execution and delivery of this Agreement and the
performance of all obligations of the Investor hereunder has been
taken, and this Agreement has been duly executed and delivered by
the Investor and constitutes a valid and legally binding obligation
of the Investor, enforceable in accordance with its terms, except
as may be limited by the Investor’s Articles of Agreement and
applicable law, including the International Organizations Immunity
Act.
3.3 Purchase for Own
Account . The Securities to be purchased by the Investor
hereunder will be acquired for investment for the Investor’s
own account, not as a nominee or agent, and not with a view to the
public distribution thereof within the meaning of the 1933 Act, and
the Investor has no present intention of selling or otherwise
distributing the same, except in compliance with the requirements
of, or pursuant to a valid exemption from, such Act. The Investor
does not have any contract, undertaking, agreement or arrangement
with any person to sell, transfer or grant participations to such
person or to any third person, with respect to the Securities. The
Investor also represents that it has not been formed for the
specific purpose of acquiring the Securities.
3.4 Accredited Investor
Status . The Investor is an “accredited investor”
within the meaning of Regulation D promulgated under the 1933 Act.
By reason of its business and financial experience, sophistication
and knowledge, the Investor is capable of evaluating the risks and
merits of the investment made pursuant to this Agreement. The
Investor confirms that it is able (i) to bear the economic risk of
this investment, as well as other risk factors as more fully set
forth herein and in the SEC Documents, (ii) to hold the Securities
for an indefinite period of time, and (iii) to bear a complete loss
of the Investor’s investment; and the Investor represents
that it has sufficient liquid assets so that the illiquidity
associated with this investment
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will not cause any undue
financial difficulties or affect the Investor’s ability to
provide for its current needs and possible financial
contingencies.
3.5 Restricted
Securities . The Investor understands that the Securities are
characterized as “restricted securities” under the 1933
Act inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under the 1933
Act and applicable regulations thereunder such securities may be
resold without registration under the 1933 Act only in certain
limited circumstances. In this connection, the Investor represents
that it is familiar with Rule 144 of the U.S. Securities and
Exchange Commission, as presently in effect, and understands the
resale limitations imposed thereby and by the 1933 Act. The
Investor understands that the Company is under no obligation to
register any of the securities sold hereunder, except as provided
in Section 5 below.
3.6 Due Diligence and No
Solicitation . The Investor has had a reasonable opportunity to
conduct comprehensive due diligence and to ask questions of and
receive answers from the Company and its officers, and all such
questions have been answered to the full satisfaction of the
Investor. At no time was the Investor presented with or solicited
by any leaflet, public promotional meeting, circular, newspaper or
magazine article, radio or television advertisement or any other
form of general advertising. Neither such inquiries nor any other
due diligence investigation conducted by Investor or its counsel or
any of its representatives shall modify or affect Investor’s
right to rely on the Company’s representations and warranties
in this Agreement.
3.7 Further Limitations on
Disposition . Without in any way limiting the representations
set forth above, the Investor further agrees not to make any
disposition of all or any portion of the Securities unless and
until:
(a) there is then in effect a
registration statement under the 1933 Act covering such proposed
disposition and such disposition is made in accordance with such
registration statement; or
(b)(i) the Investor shall
have notified the Company of the proposed disposition and shall
have furnished the Company with a statement of the circumstances
surrounding the proposed disposition, which in the case of a sale
to be made pursuant to Rule 144 shall be limited to customary
representations regarding compliance with the requirements of Rule
144 regarding volume, manner of sale and other matters, and (ii)
the Investor shall have furnished the Company at the
Investor’s expense an opinion of counsel, reasonably
satisfactory to the Company that such disposition will not require
registration of such securities under the 1933 Act; provided that
the Company shall not require an opinion of counsel for routine
sales of shares pursuant to Rule 144.
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3.8 Legends . It is
understood that the certificates evidencing the Securities will
bear the legends set forth below:
(a) THE SECURITIES
REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER ANY STATE
SECURITIES LAWS. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD
EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM.
(b) Any legend required by
the laws of the State of California, including any legend required
by the California Department of Corporations.
The legend set forth above shall be
removed and the Company shall issue a certificate without such
legend to the holder of Securities upon which it is stamped, if (a)
the Securities represented by such certificate have been sold
pursuant to an effective registration statement under the 1933 Act
or (b) in connection with the resale of such Securities, such
holder provides the Company with an opinion of counsel, in form,
substance and scope customary for opinions of counsel in comparable
transactions, to the effect that a public sale or transfer of such
Security may be made without registration under the 1933 Act or (c)
such holder provides the Company with reasonable assurances that
such Securities have been sold under Rule 144 or can be sold under
Rule 144(k).
4. COVENANTS .
The Company agrees as follows:
4.1 Form D . The
Company agrees to file a notice of sale on Form D with respect to
the Securities as required under Regulation D promulgated under the
1933 Act and to provide a copy thereof to the Investor promptly
after such filing.
4.2 No Integrated
Offerings . The Company shall not make any offers or sales of
any security (other than the Securities) under circumstances that
would require registration of the Securities being offered or sold
hereunder under the 1933 Act or cause this offering of Securities
to be integrated with any other offering of securities by the
Company.
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5. REGISTRATION
STATEMENT FOR RESALE OF THE WARRANT SHARES .
5.1 Registration
Statement . As promptly as practicable, but not later than
January 31, 2005, the Company will prepare and file with the SEC a
registration statement under the 1933 Act registering all of the
Warrant Shares issuable upon exercise of the Warrant for resale to
the public by the Investor pursuant to such registration statement
(the “ Resale Registration Statement ”) and the
prospectus included therein, free and clear of any restrictions
under the 1933 Act except for prospectus delivery requirements. The
Company shall use all reasonable efforts to cause the Resale
Registration Statement to become effective as promptly as
practicable thereafter and, subject to Sections 5.3(b) and 5.4, to
remain effective until the earlier of (i) two years from the
Closing Date and (ii) such time as the Investor may freely sell to
the public the Warrant Shares held by it without registration and
without regard to volume or manner of sale (the “
Registration Period ”).
5.2 Piggyback Registration
Rights .
(a) Right to Piggyback
. If, at any time during the period commencing upon the
effectiveness of the Resale Registration Statement and ending upon
the earlier of (i) the end of the Registration Period and (ii) such
time as the Investor has completed its resale of the Warrant Shares
(the “ Resale Period ”), the Company proposes to
register any shares of Common Stock with the SEC under the 1933 Act
in connection with the underwritten public offering of such shares,
and the registration form to be used may be used for the
registration of the Warrant Shares (a “ Piggyback
Registration ”), the Company (1) will give written notice
(the “ Piggyback Notice ”) to the Investor no
later than fifteen (15) days prior to the anticipated filing date
of its intention to effect such a registration, which Piggyback
Notice will specify the proposed offering price (or reasonable
range thereof), the kind and number of securities proposed to be
registered, the distribution arrangements and such other
information that at the time would be appropriate to include in
such notice, and (2) will, subject to Section 5.2(b), include in
such Piggyback Registration all Warrant Shares with respect to
which the Company has received written requests for inclusion
therein within ten (10) days after the date of the Piggyback
Notice. Subject to Section 5.2(b), such Warrant Shares shall be
included in the underwriting on the same terms and cond
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