EXHIBIT 10.16
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
APPLICABLE STATE SECURITIES LAWS, OR APPLICABLE LAWS OF ANY FOREIGN
JURISDICTION. THIS WARRANT AND SUCH UNDERLYING SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE
OFFERED, SOLD, PLEDGED, HYPOTHECATED, RENOUNCED OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAWS AND IN THE ABSENCE OF COMPLIANCE WITH
APPLICABLE LAWS OF ANY FOREIGN JURISDICTION, OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IN NOT REQUIRED AND SUCH
FOREIGN JURISDICTION LAWS HAVE BEEN SATISFIED.
TOTAL SPORTS INC.
STOCK PURCHASE WARRANT
No. W-____ 318,500 Shares
1. Number and Price of Shares Subject to Warrant. Subject to the terms
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and conditions herein set forth, XXXXX & COMPANY INCORPORATED or permitted
assigns (the "Holder"), is entitled to purchase from Total Sports Inc., a
Delaware corporation (the "Company"), at any time on or before the earliest to
occur of the following: (i) June 30, 2005, or (ii) the closing of the Company's
sale of all or substantially all of its assets or the acquisition of the Company
by another entity by means of merger or other transaction as a result of which
shareholders of the Company immediately prior to such acquisition dispose of at
least ninety percent (90%) of their voting power of the Company as a part of
such acquisition (the "Acquisition"), three hundred eighteen thousand five
hundred (318,500) Shares (which number of shares is subject to adjustment as
described below) of fully paid and nonassessable Common Stock of the Company
(the "Shares") upon surrender hereof at the principal office of the Company and,
at the election of the Holder hereof, upon either payment of the purchase price
at said office in cash or by check or by the cancellation of any present or
future indebtedness from the Company to the Holder hereof in a dollar amount
equal to the purchase price of the Common Stock for which the consideration is
being given, or by converting this Warrant as provided in Section 6.1 hereof.
The Company shall give notice to the Holder of an Acquisition at least thirty
(30) days prior to the closing of such Acquisition. Subject to adjustment as
hereinafter provided, the exercise price for one share of Common Stock (or such
securities as may be substituted for one share of Common Stock pursuant to the
provisions hereinafter set forth) shall be equal to $7.106. The exercise price
for one share of Common Stock (or such securities as may be substituted for one
share of Common Stock pursuant to the provisions hereinafter set forth) payable
from time to time upon the exercise of this Warrant (whether such price be the
price specified above or an adjusted price determined as hereinafter provided)
is referred to herein as the "Warrant Price."
2. Adjustment of Warrant Price, Number and Kind of Shares. The Warrant
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Price and the number and kind of securities issuable upon the exercise of this
Warrant shall be subject
to adjustment from time to time and the Company agrees to provide notice upon
the happening of certain events as follows:
2.1 Dividends in Stock Adjustment. In case at any time or from time
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to time on or after the date hereof the holders of the Common Stock of the
Company (or any shares of stock or other securities at the time receivable upon
the exercise of this Warrant) shall have received, or, on or after the record
date fixed for the determination of eligible shareholders, shall have become
entitled to receive, without payment therefor, other or additional securities or
other property (other than cash) of the Company by way of dividend or
distribution, then and in each case, the holder of this Warrant shall, upon the
exercise hereof, be entitled to receive, in addition to the number of shares of
Common Stock receivable thereupon, and without payment of any additional
consideration therefor, the amount of such other or additional securities or
other property (other than cash) of the Company which such holder would hold on
the date of such exercise had it been the holder of record of such Common Stock
on the date hereof and had thereafter, during the period from the date hereof to
and including the date of such exercise, retained such shares and/or all other
additional securities or other property receivable by it as aforesaid during
such period, giving effect to all adjustments called for during such period by
this subsection 2.1 and subsections 2.2, 2.3, 2.4 and 2.5 of this Section 2.
2.2 Reclassification, Reorganization and Other Adjustment. In case of
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any reclassification or change of the outstanding securities of the Company or
of any reorganization of the Company (or any other corporation the stock or
securities of which are at the time receivable upon the exercise of this
Warrant) or in the event of a consolidation or merger of the Company with
another corporation, or a sale, transfer or other disposition to another
corporation of the properties and assets of the Company, which does not
constitute an Acquisition or other transaction pursuant to which the Common
Stock is automatically or mandatorily converted, retired or otherwise eliminated
(any such event, other than an Acquisition, is referred to herein as an
"Adjustment Event") on or after the date hereof, then and in each such case the
Company shall give the holder of this Warrant at least thirty (30) days notice
of the proposed effective date of such Adjustment Event, and the holder of this
Warrant, upon the exercise hereof at any time after the consummation of such
Adjustment Event, shall be entitled to receive, in lieu of the stock or other
securities and property receivable upon the exercise hereof prior to such
consummation, the stock or other securities or property to which such holder
would have been entitled upon such consummation if such holder had exercised
this Warrant immediately prior thereto, all subject to further adjustment as
provided in subsections 2.1, 2.2, 2.3, 2.4 and 2.5 of this Section 2.
2.3 Stock Splits and Reverse Stock Splits. If at any time on or after
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the date hereof the Company shall subdivide its outstanding shares of Common
Stock into a greater number of shares, the Warrant Price in effect immediately
prior to such subdivision shall thereby be proportionately reduced and the
number of shares receivable upon exercise of this Warrant shall thereby be
proportionately increased; and, conversely, if at any time on or after the date
hereof the outstanding number of shares of Common Stock shall be combined into a
smaller number of shares, the Warrant Price in effect immediately prior to such
combination shall thereby be proportionately increased and the number of shares
receivable upon exercise of this Warrant shall thereby be proportionately
decreased.
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2.4 Common Stock Distribution.
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(a) If and whenever the Company issues or sells, or in
accordance with Section 2.5 below is deemed to have issued or sold, any shares
of Common Stock for a consideration per share less than the Warrant Price in
effect immediately prior to the time of such issue or sale, then immediately
upon such issue or sale or deemed issue or sale the Warrant Price shall be
reduced to a price determined by dividing (i) the sum of (1) the product derived
by multiplying the Warrant Price in effect immediately prior to such issue or
sale by the number of shares of Common Stock Deemed Outstanding (as defined
below) immediately prior to such issue or sale, plus (2) the consideration, if
any, received by the Corporation upon such issue or sale, by (ii) the number of
shares of Common Stock Deemed Outstanding immediately after such issue or sale.
"Common Stock Deemed Outstanding" means, at any given time, the number of shares
of Common Stock actually outstanding at such time, plus the number of shares of
Common Stock deemed to be outstanding assuming exercise and/or conversion of the
Corporation's Options and Convertible Securities (as defined below), whether or
not such Options or Convertible Securities are actually exercisable at such
time.
(b) Notwithstanding any provision in this Section 2, pursuant to
the closing of a Qualified Public Offering (as defined below) in which the price
per share at which shares of the Company's Common Stock are initially sold to
the public is less than the Warrant Price, then, upon the written consent of the
Holder, the Warrant Price in effect immediately prior to the closing of the
Qualified Public Offering shall be reduced to such price per share at which
shares of the Corporation's Common Stock are initially sold to the public in
such Qualified Public Offering.
(c) Notwithstanding any provision in this Section 2, there shall
be no adjustment to the Warrant Price hereunder with respect to (i) the issuance
or sale of up to that number of shares or options to purchase shares of the
Corporation's Capital Stock (subject to adjustment in the event of any stock
dividend, stock split, combination or other similar recapitalization) as are
specified in Section 4(E)(2)(c) of the Company's Certificate of Incorporation,
as it may be amended from time to time, at a price per share less than such
Warrant Price, to officers, directors or employees of or consultants to the
Company pursuant to plans or arrangements approved by the Company's Board of
Directors; provided that such number of shares shall be increased by the number
of shares that are subject to options outstanding on the date specified in
Section 4(E)(2)(c) of the Company's Certificate of Incorporation, as it may be
amended from time to time, or granted thereafter, that expire unexercised; (ii)
the exercise of the Company's Options outstanding as of the date hereof and
(iii) the issuance of Common Stock upon conversion of the Preferred Stock of the
Company.
2.5 Effect on Conversion Price of Certain Events. For purposes of
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determining the adjusted Warrant Price under Section 2.4 above, the following
shall be applicable:
(a) Issuance of Rights or Options. If the Company in any manner
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grants or sells any rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities (as defined below)
("Options") and the price per share for which Common Stock is issuable upon
the exercise of such Options, or upon conversion or
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exchange of any stock or securities directly or indirectly convertible into
or exchangeable for Common Stock ("Convertible Securities") issuable upon
exercise of such Options, is less than the Warrant Price in effect
immediately prior to the time of the granting or sale of such Options, then
the total maximum number of shares of Common Stock issuable upon the
exercise of such Options or upon conversion or exchange of the total
maximum amount of such Convertible Securities issuable upon the exercise of
such Options shall be deemed to be outstanding and to have been issued and
sold by the Company at the time of the granting or sale of such Options for
such price per share. For purposes of this paragraph, the "price per share
for which Common Stock is issuable" shall be determined by dividing (A) the
total amount, if any, received or receivable by the Company as
consideration for the granting or sale of such Options, plus the minimum
aggregate amount of additional consideration payable to the Company upon
exercise of all such Options, plus in the case of such Options which relate
to Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the issuance or sale of
such Convertible Securities and the conversion or exchange thereof, by (B)
the total maximum number of shares of Common Stock issuable upon the
exercise of such Options or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such Options. No
further adjustment of the Warrant Price shall be made when Convertible
Securities are actually issued upon the exercise of such Options or when
Common Stock is actually issued upon the exercise of such Options or the
conversion or exchange of such Convertible Securities.
(b) Issuance of Convertible Securities. If the Company in any manner
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issues or sells any Convertible Securities and the price per share for
which Common Stock is issuable upon conversion or exchange thereof is less
than the Warrant Price in effect immediately prior to the time of such
issue or sale, then the maximum number of shares of Common Stock issuable
upon conversion or exchange of such Convertible Securities shall be deemed
to be outstanding and to have been issued and sold by the Company at the
time of the issuance or sale of such Convertible Securities for such price
per share. For the purposes of this paragraph, the "price per share for
which Common Stock is issuable" shall be determined by dividing (A) the
total amount received or receivable by the Company as consideration for the
issue or sale of such Convertible Securities, plus the minimum aggregate
amount of additional consideration, if any, payable to the Company upon the
conversion or exchange thereof, by (B) the total maximum number of shares
of Common Stock issuable upon the conversion or exchange of all such
Convertible Securities. No further adjustment of the Warrant Price shall be
made when Common Stock is actually issued upon the conversion or exchange
of such Convertible Securities, and if any such issue or sale of such
Convertible Securities is made upon exercise of any Options for which
adjustments of the Warrant Price had been or are to be made pursuant to
other provisions of this Section 2, no further adjustment of the Warrant
Price shall be made by reason of such issue or sale.
(c) Change in Option Price or Conversion Rate. If the purchase price
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provided for in any Options, the additional consideration, if any, payable
upon the conversion or exchange of any Convertible Securities or the rate
at which any Convertible Securities are convertible into or exchangeable
for Common Stock is reduced at any time, the applicable Warrant Price in
effect at the time of such change shall be
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immediately adjusted to the Warrant Price which would have been in effect
at such time had such Options or Convertible Securities still outstanding
provided for such changed purchase price, additional consideration or
conversion rate, as the case may be, at the time initially granted, issued
or sold.
(d) Treatment of Expired Options and Unexercised Convertible
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Securities. Upon the expiration of any Option or the termination of any
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right to convert or exchange any Convertible Security without the exercise
of any such Option or right, the Warrant Price then in effect hereunder
shall be adjusted immediately to the Warrant Price which would have been in
effect at the time of such expiration or termination had such Option or
Convertible Security, to the extent outstanding immediately prior to such
expiration or termination, never been issued.
(e) Calculation of Consideration Received. If any Common Stock,
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Option or Convertible Security is issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor shall be
deemed to be the amount received by the Company therefor (net of discounts,
commissions and related expenses). If any Common Stock, Option or
Convertible Security is issued or sold for a consideration other than cash,
the amount of the consideration other than cash received by the Company
shall be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of
consideration received by the Company shall be the Market Price (as defined
below) thereof as of the date of receipt. If any Common Stock, Option or
Convertible Security is issued to the owners of the non-surviving entity in
connection with any merger in which the Corporation is the surviving
corporation, the amount of consideration therefor shall be deemed to be the
fair value of such portion of the net assets and business of the non-
surviving entity as is attributable to such Common Stock, Option or
Convertible Security, as the case may be. The fair value of any
consideration other than cash and securities shall be determined in good
faith by the Company's Board of Directors. "Market Price" of any security
means the average of the closing prices of such security's sales on the
principal securities exchanges on which such security may at the time be
listed, or, if there has been no sales on any such exchange on any day, the
average of the highest bid and lowest asked prices on all such exchanges at
the end of such day, or, if on any day such security is not so listed, the
average of the last sale prices quoted in the NASDAQ System, or if on any
day such security is not quoted in the NASDAQ System, the average of the
highest bid and lowest asked prices on such day in the domestic over-the-
counter market as reported by the National Quotation Bureau, Incorporated,
or any similar successor organization, in each such case averaged over a
period of five days consisting of the day prior to the day as of which
"Market Price" is being determined and the five consecutive business days
prior to such day.
(f) Integrated Transactions. In case any Option is issued in
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connection with the issue or sale of other securities of the Company,
together comprising one integrated transaction in which no specific
consideration is allocated to such Option by the parties thereto, the
Option shall be deemed to have been issued for such consideration as shall
be determined in good faith by the Company's Board of Directors.
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(g) Treasury Shares. The number of shares of Common Stock
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outstanding at any given time shall not include shares owned or held by or
for the account of the Company or any subsidiary, and the disposition of
any shares so owned or held shall be considered an issue or sale of Common
Stock.
(h) Record Date. If the Company takes a record of the holders of
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Common Stock for the purpose of entitling them (i) to receive a dividend or
other distribution payable in Common Stock, Options or in Convertible
Securities or (ii) to subscribe for or purchase Common Stock, Options or
Convertible Securities, then such record date shall be deemed to be the
date of the issuance or sale of the shares of Common Stock deemed to have
been issued or sold upon the declaration of such dividend or upon the
making of such other distribution or the date of the granting of such right
of subscription or purchase, as the case may be.
(i) Notwithstanding anything to the contrary contained herein,
there shall be no adjustment pursuant to this Section 2.5:
(i) if prior to the issuance of Common Stock, Options or
Convertible Securities, the Company receives written
notice from the Holder of the Warrant, agreeing that no
such adjustment shall be made as the result of such
issuance; or
(ii) with respect to shares of Common Stock issued or
issuable (1) as a dividend or distribution on Preferred
Stock of the Company or (2) by reason of a dividend,
stock split, split-up or other distribution on shares
of Common Stock issued pursuant to this clause (ii).
2.6 Special Reduction in Absence of Strategic Partnership. If the
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Company fails to enter into a Strategic Partnership by the date twelve (12)
months after the date of this Warrant, on such date the number of shares for
which this Warrant may be exercised shall automatically be reduced by the number
of shares equal to 28.57% of the shares for which it may be exercised
immediately prior to such adjustment. For purposes of this Warrant, "Strategic
Partnership" shall mean an acquisition, investment, business combination,
merger, sale of stock or assets, joint venture, or any similar transaction,
whereby shares of the Company's stock constituting at least 15% of the total
voting power of the Company or of any existing or newly-formed subsidiaries of
the Company, are transferred to a third party, where the third party's primary
business is as an operator or manager of broadcasting, media or entertainment
assets, such as broadcast television, radio or cable television networks or
stations.
3. No Fractional Shares. No fractional shares of Common Stock will be
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issued in connection with any subscription hereunder. In lieu of any fractional
shares that would otherwise be issuable, the Company shall pay cash equal to the
product of such fraction multiplied by the fair market value of one share of
Common Stock on the date of exercise, as determined in good faith by the
Company's Board of Directors.
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4. No Shareholder Rights. This Warrant as such shall not entitle its
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holder to any of the rights of a shareholder of the Company until the holder has
exercised this Warrant in accordance with Section 6 hereof.
5. Reservation of Stock. The Company covenants that during the period
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this Warrant is exercisable, the Company will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of Common Stock upon the exercise of this Warrant. The Company agrees that its
issuance of this Warrant shall constitute full authority to its officers who are
charged with the duty of executing stock certificates to execute and issue the
necessary certificates for shares of Common Stock upon the exercise of this
Warrant.
6. Exercise of Warrant.
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6.1 Procedure for Exercise; Closing. This Warrant may be exercised,
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in whole or in part, by Holder by the surrender of this Warrant at the principal
office of the Company, accompanied by payment in full of the exercise price of
the shares purchased thereby or accompanied by a duly completed notice of the
Holder of its intent to convert this Warrant (or any portion thereof) as
provided below. The exercise price shall be payable, at the option of the
Holder, (i) by certified or bank check, or (ii) by cancellation of indebtedness
owed by the Company to the Holder in an amount equal to the exercise price. In
lieu of exercise of any portion of this Warrant as provided by items (i) and
(ii) above, this Warrant (or any portion thereof) may, at the election of the
Holder, be converted into the nearest whole number of Shares equal to: (1) the
product of (a) the number of Shares then issuable upon the exercise of the
portion of the Warrant being converted and (b) the excess, if any, of (I) the
Market Price with respect to the date of conversion over (II) the Warrant Price
in effect on the date of conversion, divided by (2) the Market Price with
respect to the date of conversion. This Warrant shall be deemed to have been
exercised (or converted, as the case may be) immediately prior to the close of
business on the date of its surrender for exercise as provided above, and the
person or entity entitled to receive the shares or other securities issuable
upon such exercise or conversion shall be treated for all purposes as the holder
of such shares of record as of the close of business on such date. As promptly
as practicable, the Company shall issue and deliver to the person or entity
entitled to receive the same a certificate or certificates for the number of
full shares of Common Stock issuable upon such exercise or conversion, together
with cash in lieu of any fraction of a share as provided above. The shares of
Common Stock issuable upon exercise or conversion hereof shall, upon their
issuance, be fully paid and nonassessable. Unless this Warrant has expired or
been exercised (and/or converted) in full, a notation on this Warrant stating
the number of shares exercised shall be made by the Company and this Warrant
shall then be returned to the Holder within five business days.
6.2 Determination of Appraised Market Value for Conversion of
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Warrant. If at any time the shares of Common Stock are not publicly traded, the
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Market Price shall mean the "Appraised Market Value;" provided, however, that
the Market Price for a share of Common Stock sold pursuant to a public offering
by the Company shall be deemed to be the price received by the Company for such
share. The "Appraised Market Value" shall mean the market value of the Common
Stock as agreed by the Company and the Holder hereof or, if the Company and the
Holder cannot agree, as determined by a valuation by an investment banking
company suitable to
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the Company and the Holder. In the event the parties cannot agree on an
investment banking company to perform the valuation described above, the Company
and the Holder shall each select an investment banking company and the two
investment banking companies so selected shall select a third investment banking
company that shall determine the market value. In determining the Appraised
Market Value of the Common Stock, no discount shall be applied because the
shares held by the Holder (i) have not been registered under the Securities Act,
or (ii) represent a minority interest in the Company. The fees and expenses of
the investment banking companies shall be borne by the Company.
7. Certificate of Adjustment. Whenever the Warrant Price or number or
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type of securities issuable upon exercise of this Warrant is adjusted, as herein
provided, the Company shall promptly deliver to the record holder of this
Warrant a certificate of an officer of the Company setting forth the nature of
such adjustment and a brief statement of the facts requiring such adjustment.
8. Notice of Proposed Transfers. Prior to any proposed transfer of this
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Warrant, the shares of Common Stock received on the exercise or conversion of
this Warrant (the "Securities"), unless there is in effect a registration
statement under the Securities Act of 1933, as amended (the "Securities Act"),
covering the proposed transfer, the Holder thereof shall give written notice to
the Company of such Holder's intention to effect such transfer. Each such
notice shall describe the manner and circumstances of the proposed transfer in
sufficient detail, and shall, if the Company so requests, be accompanied (except
in transactions in compliance with Rule 144) by either (i) an unqualified
written opinion of legal counsel who shall be reasonably satisfactory to the
Company addressed to the Company and reasonably satisfactory in form and
substance to the Company's counsel, to the effect that the proposed transfer of
the Securities may be effected without registration under the Securities Act, or
(ii) a "no action" letter from the Securities Exchange Commission (the
"Commission") to the effect that the transfer of such Securities without
registration will not result in a recommendation by the staff of the Commission
that action be taken with respect thereto, whereupon the Holder of the
Securities shall be entitled to transfer the Securities in accordance with the
terms of the notice delivered by the Holder to the Company; provided, however,
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no such registration statement or opinion of counsel shall be necessary for a
transfer by a Holder to any affiliate of such Holder, or a transfer by a Holder
which is a partnership to a partner of such partnership or a retired partner of
such partnership who retires after the date hereof, or to the estate of any such
partner or retired partner or the transfer by gift, will or intestate succession
of any partner to his spouse or lineal descendants or ancestors, if the
transferee agrees in writing to be subject to the terms hereof to the same
extent as if such transferee were the original Holder hereunder. Each
certificate evidencing the Securities transferred as above provided shall bear
the appropriate restrictive legend set forth above, except that such certificate
shall not bear such restrictive legend if in the opinion of counsel for the
Company such legend is not required in order to establish compliance with any
provisions of the Securities Act.
9. Replacement of Warrants. Upon receipt by the Company of evidence
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reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of the Warrant, and in the case of any such loss, theft or
destruction of the Warrant, on delivery of an indemnity agreement or security
reasonably satisfactory in form and amount to the Company, and reimbursement to
the Company of all reasonable expenses incidental thereto, and upon surrender
and cancellation
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of the Warrant if mutilated, the Company will execute and deliver, in lieu
thereof, a new Warrant of like tenor.
10. Registration Rights. The Company agrees to extend to the Shares
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certain registration rights on the same terms and conditions as such rights
shall be extended to purchasers of the Company's shares of Series C Preferred
Stock and, to that end, the Company shall ensure that the definition of
"Registrable Securities" included in such agreement between the Company and the
holders of its Series C Preferred Stock providing for such registration rights
shall include the Shares.
11. Miscellaneous. This Warrant shall be governed by the laws of the
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State of North Carolina. The headings in this Warrant are for purposes of
convenience of reference only, and shall not be deemed to constitute a part
hereof. The invalidity or unenforceability of any provision hereof shall in no
way affect the validity or enforceability of any other provisions. All notices
and other communications from the Company to the holder of this Warrant shall be
delivered personally or mailed by first class mail, postage prepaid, to the
address furnished to the Company in writing by the last holder of this Warrant
who shall have furnished an address to the Company in writing, and if mailed
shall be deemed given three days after deposit in the U.S. Mail.
12. Taxes. The Company shall pay all taxes and other governmental charges
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that may be imposed in respect of the issuance or delivery of the Shares or any
portion thereof.
13. Amendment. Any term of this Warrant may be amended with the written
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consent of the Company and the warrant holder. Any amendment effected in
accordance with this Section 13 shall be binding upon the Holder of this
Warrant, each future holder of such Warrant, and the Company.
ISSUED this 22/nd/ day of September 1998.
TOTAL SPORTS INC.
a Delaware corporation
By:_________________________________
Title:______________________________
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