THE CHILDREN’S INTERNET, INC. WARRANT TO PURCHASE 128,040,988 SHARES OF COMMON STOCK, PAR VALUE $0.001 PER SHARE
Exhibit
1.2
THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
("SECURITIES ACT"). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT
TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
THE
CHILDREN’S INTERNET, INC.
WARRANT
TO PURCHASE 128,040,988 SHARES OF
COMMON
STOCK, PAR VALUE $0.001 PER SHARE
Void
after April 30, 2008
This
certifies that, for value received, receipt and sufficiency of which are hereby
acknowledged, The Children’s Internet Holding Company, LLC, a Delaware limited
liability company, or its registered assigns (the “Holder”), is entitled,
subject to the terms and conditions set forth below, to purchase from The
Children’s Internet, Inc., a Nevada corporation (the “Company”), up to
128,040,988 shares (the “Warrant Shares”) of the Company’s Common Stock, par
value $0.001 per share (the “Stock”), at an exercise price equal to $0.0625 per
share (the exercise price in effect being herein called the “Exercise Price”).
The number of Warrant Shares purchasable upon exercise of this Warrant and
the
Exercise Price shall be subject to adjustment from time to time as described
herein. The term “Warrant” as used herein shall mean this Warrant, any interest
in this Warrant, and any warrants delivered in substitution or exchange therefor
as provided herein.
1. Term
of Warrant.
Subject
to the terms and conditions set forth herein, this Warrant shall be exercisable,
in whole or in part, during the term commencing on the date hereof and ending
at
5:00 p.m. Pacific Standard Time on April 30, 2008 (the “Expiration
Date”).
2. Condition
to Exercise.
This
Warrant shall only be exercisable by the Holder, in whole or in part, after
the
closing of the Definitive Stock Purchase Agreement dated as of October 19,
2007
by and among the Company, TCI Holding, Shadrack Films, Inc., a California
corporation, and solely with respect to Section 7.1(k) thereof, Xxxxxxx Xxxxx
and Xxxxxx Xxxxxxxx (the “DSPA”).
3. Exercise
of Warrant.
(a) Cash
Exercise.
This
Warrant may be exercised in whole or in part by the Holder during the Exercise
Period by (i) the surrender of this Warrant to the Company, with the Notice
of
Exercise annexed hereto duly completed and executed on behalf of the Holder,
at
the office of the Company (or such other office or agency of the Company as
it
may designate by notice in writing to the Holder at the address of the Holder
appearing on the books of the Company) and (ii) the delivery of payment to
the
Company, for the account of the Company, by (A) cash, (B) wire transfer of
immediately available funds to a bank account specified by the Company, (C)
certified or bank cashier’s check, (D) the cancellation by the Holder of
indebtedness or other obligations of the Company to the Holder, or (E) a
combination of any of the above, of the Exercise Price for the number of Warrant
Shares specified in the Notice of Exercise in lawful money of the United States
of America.
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(b) Delivery
of Stock Certificates.
This
Warrant shall be deemed to have been exercised immediately prior to the close
of
business on the date of its surrender for exercise as provided above, and the
person entitled to receive the Warrant Shares issuable upon such exercise shall
be treated for all purposes as the holder of record of such shares as of the
close of business on such date. As promptly as practicable on or after such
date
and in any event within ten business days thereafter, the Company at its expense
shall issue and deliver to the person or persons entitled to receive the same,
a
certificate or certificates for the number of shares issuable upon such
exercise. In the event that this Warrant is exercised in part, the Company
at
its expense will execute and deliver a new Warrant of like tenor exercisable
for
the number of shares for which this Warrant may then be exercised.
4. Adjustment
of Exercise Price and Warrant Shares.
The
number of Warrant Shares (or any shares of stock or other securities or property
at the time receivable or issuable upon exercise of this Warrant) and the
Warrant Price therefor are subject to adjustment upon the occurrence of the
following events:
(a) Adjustment
for Stock Splits, Stock Dividends, Recapitalizations, etc.
The
Warrant Price and the Warrant Shares shall each be proportionally adjusted
to
reflect any stock dividend, stock split, reverse stock split, combination of
shares, reclassification, recapitalization or other similar event altering
the
number of outstanding shares of the Company’s capital stock.
(b) Adjustment
for Other Dividends and Distributions.
In case
the Company
shall
make or issue, or shall fix a record date for the determination of eligible
holders entitled to receive, a dividend or other distribution with respect
to
the shares payable in securities of the Company
then,
and in each such case, the Holder, on exercise of this Warrant at any time
after
the consummation, effective date or record date of such event, shall receive,
in
addition to the Warrant Shares (or such other stock or securities) issuable
on
such exercise prior to such date, the securities of the Company
to which
such Xxxxxx would have been entitled upon such date if such Holder had exercised
this Warrant immediately prior thereto (all subject to further adjustment as
provided in this Warrant).
(c) Adjustment
for Capital Reorganization, Consolidation, Merger.
If any
capital reorganization of the capital stock of the Company, or any consolidation
or merger of the Company with or into another company, or the sale of all or
substantially all of the Company’s assets to another company shall be effected
in such a way that holders of the Company’s capital stock will be entitled to
receive stock, securities or assets with respect to or in exchange for the
Company’s capital stock, and in each such case the Holder, upon the exercise of
this Warrant, at any time after the consummation of such capital reorganization,
consolidation, merger, or sale, shall be entitled to receive, in lieu of the
stock or other securities and property receivable upon the exercise of this
Warrant 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 to the consummation of such capital
reorganization, consolidation, merger, or sale, all subject to further
adjustment as provided in this Section 4; and in each such case, the terms
of this Warrant shall be applicable to the shares of stock or other securities
or property receivable upon the exercise of this Warrant after such
consummation.
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5. No
Fractional Shares or Scrip.
No
fractional shares or scrip representing fractional shares shall be issued upon
the exercise of this Warrant. In lieu of any fractional share to which the
Holder would otherwise be entitled, the Company shall make a cash payment equal
to the Exercise Price multiplied by such fraction.
6. Replacement
of Warrant.
On
receipt of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant and, in the case of loss, theft or
destruction, on delivery of an indemnity agreement reasonably satisfactory
in
form and substance to the Company or, in the case of mutilation, on surrender
and cancellation of this Warrant, the Company at its expense shall execute
and
deliver, in substitution of this Warrant, a new warrant of like tenor and
amount.
7. Rights
as Stockholder.
The
Holder shall not be entitled to vote or to receive dividends or be deemed the
holder of Stock or any other securities of the Company that may at any time
be
issuable on the exercise hereof for any purpose, nor shall anything contained
herein be construed to confer upon the Holder, as such, any of the rights of
a
stockholder of the Company or any right to vote for the election of directors
or
upon any matter submitted to stockholders at any meeting thereof, or to give
or
withhold consent to any corporate action (whether upon any recapitalization,
issuance of Stock, reclassification of Stock, change of par value, or change
of
Stock to no par value, consolidation, merger, conveyance, or otherwise) or
to
receive notice of meetings, or to receive dividends or subscription rights
or
otherwise until the Warrant shall have been exercised as provided
herein.
8. Compliance
with Securities Laws.
(a) Restrictions
on Transferability.
The
Holder agrees not to make any disposition of all or any portion of the Warrant
or the Warrant Shares (the “Securities”) (other than the valid exercise or
conversion thereof in accordance with their respective terms) unless and until
there is then in effect a Registration Statement under the Securities Act
covering such proposed disposition and such disposition is made in accordance
with such Registration Statement.
(b) Restrictive
Legends.
This
Warrant and all certificates presenting the Warrant Shares issued upon exercise
hereof shall be stamped or imprinted with a legend in substantially the
following form (in addition to any legend required by state securities laws):
THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES
UNDER SUCH ACT.
3
The
Company need not register a transfer of legended Securities and may also
instruct its transfer agent not to register the transfer of the Securities,
unless the conditions specified in the foregoing legends are
satisfied.
(c) Removal
of Legend and Transfer Restrictions.
Any
legend endorsed on a certificate pursuant to subsection 8(b) and any transfer
restrictions set forth in this Section 8 shall terminate as to any particular
Warrant Shares when (i) such Warrant Shares are registered under the Securities
Act and a prospectus meeting the requirements of Section 10 of the Securities
Act is available or (ii) the Company shall have received from the Holder an
opinion of counsel in the form and substance reasonably acceptable to the
Company that such legend is not required in order to ensure compliance with
the
Securities Act. Whenever the transfer restrictions imposed in this Section
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shall terminate, the Holder or subsequent transferee, as the case may be, shall
be entitled to receive from the Company without cost to such Holder or
transferee a certificate for the Warrant Shares without such restrictive
legend.
9. Notices.
(a) In
case:
(i) the
Company shall take a record of the holders of its Stock (or other Stock or
securities at the time receivable upon the exercise of this Warrant) for the
purpose of entitling them to receive any dividend or other distribution, or
any
right to subscribe for or purchase any shares of Stock of any class or any
other
securities, or to receive any other right;
(ii) of
any
capital reorganization of the Company, any reclassification of the capital
Stock
of the Company, any consolidation or merger of the Company with or into another
corporation, or any conveyance of all or substantially all of the assets of
the
Company to another corporation;
(iii) of
any
voluntary dissolution, liquidation or winding-up of the Company; or
(iv) of
any
redemption or conversion of all outstanding Stock;
then,
and
in each such case, the Company will mail or cause to be mailed to the Holder
or
Holders a notice specifying, as the case may be, (A) the date on which a record
is to be taken for the purpose of such dividend, distribution or right, and
stating the amount and character of such dividend, distribution or right or
(B)
the date on which such reorganization, reclassification, consolidation, merger,
conveyance, dissolution, liquidation, winding-up, redemption or conversion
is to
take place, and the time, if any is to be fixed, as of which the holders of
record of Stock (or such Stock or securities at the time receivable upon the
exercise of this Warrant) shall be entitled to exchange their shares of Stock
(or such other Stock or securities) for securities or other property deliverable
upon such reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up. Such notice shall be mailed at least
ten
days prior to the date therein specified.
(b) All
notices and other communications required or permitted hereunder shall be
effective upon receipt and shall be in writing and may be delivered in person,
by telecopy, electronic mail, overnight delivery service or United States
mail,
in which event it may be mailed by first-class, certified or registered,
postage
prepaid, addressed (i) if to a Holder, at the address that such Holder on
the
Warrant Register or (ii) if to the Company, at its address set forth on the
signature page hereto, or at such other address as the Company shall have
furnished to the Holder in writing.
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10. Acknowledgment,
Representations and Warranties of Holder.
This
Warrant has been entered into by the Company in reliance upon the
representations and covenants of the Holder. Xxxxxx understands and acknowledges
that neither this Warrant nor the Warrant Shares (collectively, the
“Securities”) have been registered under the Securities Act, or any state
securities laws. As a condition to the issuance of this Warrant and to its
exercise, the Holder hereby represents and warrants to the Company
that:
(a) This
Warrant has been acquired by the Holder for investment and not with a view
to
the sale or other distribution thereof within the meaning of the Securities
Act,
and the Holder has no present intention of selling or otherwise disposing of
all
or any portion of the Warrant. The Holder has acquired the Warrant for the
Holder’s own account only.
(b) At
the
time of exercise of this Warrant, if the Warrant Shares shall not then be
subject of an effective registration statement under the Securities Act, the
securities acquired by the Holder upon exercise hereof are for the account
of
the Holder or are being acquired for its own account for investment and are
not
acquired with view to, or for sale in connection with, any distribution thereof
(or any portion thereof) and with no present intention (at such time) of
offering and distributing such securities (or any portion thereof), except
in
compliance with applicable federal and state securities laws.
(c) The
Holder is capable of evaluating the merits and risks of any investment in the
Securities, is financially capable of bearing a total loss of this investment
and has either (i) a preexisting personal or business relationship with the
Company or its principals or (ii) by reason of the Holder’s business or
financial experience, has the capacity to protect his or its own interest in
connection with this investment.
(d) The
Holder has had access to all information regarding the Company, its present
and
prospective business, assets, liabilities and financial condition that the
Holder considers important to making the decision to acquire the Securities
and
has had ample opportunity to ask questions of and receive answers from the
Company’s representatives concerning an investment in the Securities and to
obtain any and all documents requested in order to supplement or verify any
of
the information supplied.
(e) The
Holder understands that the Securities shall be deemed restricted securities
under the Act and may not be resold unless they are registered under the Act
and
qualified under any applicable state securities law, or in the opinion of
counsel to the Holder in form and substance satisfactory to the Company, an
exemption from such registration and qualification is available.
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(f) The
Holder is familiar with Rule 144 promulgated under the Act, which rule provides,
in substance, that (i) after one year from the date restricted securities
have been purchased and fully paid for, a holder may transfer restricted
securities provided certain conditions are met, e.g., certain public information
is available about the Company and specific limitations on the amount of shares
which can be sold within certain periods and the manner in which such shares
must be sold are complied with, and (ii) after two years have expired from
the date the Securities have been purchased and fully paid for, holders who
are
not “affiliates” of the Company may sell restricted securities without
satisfying such conditions.
(g) The
Holder further understands that if the requirements of Rule 144 are not met,
registration under the Act, compliance with Regulation A, or some other
registration exemption will be required for any disposition of the Securities;
and that, although Rule 144 is not exclusive, the Securities and Exchange
Commission (the “SEC”) has expressed its opinion that persons proposing to sell
restricted securities other than in a registered offering or other than pursuant
to Rule 144, Regulation A or some other registration exemption will have a
substantial burden of proof in establishing that an exemption from registration
is available for such offers or sales and such persons and the brokers who
participate in the transactions do so at their own risk.
(h) The
Holder understands that the Securities are not currently being registered under
the Securities Act by reason of, among other things, reliance upon certain
exemptions therefrom, and that the reliance of the Company on such exemptions
is
predicated upon, among other things, the bona fide nature of the Holder’s
investment intent as expressed herein.
(i) The
Holder is an “accredited investor” as defined in Regulation D under the
Act.
11. Miscellaneous.
(a) Governing
Law.
This
Warrant shall be governed by and construed in accordance with California law,
without regard to the conflict of laws provisions thereof.
(b) Enforcement
Costs.
In the
event of a dispute with regard to the interpretation of this Warrant, the
prevailing party may collect the cost of attorney’s fees, litigation expenses or
such other expenses as may be incurred in the enforcement of the prevailing
party’s right hereunder.
(c) Extension
of Expiration Date.
This
Warrant shall be exercisable as provided herein, except that in the event that
the Expiration Date of this Warrant shall fall on a Saturday, Sunday and or
United States federally recognized Holiday, the Expiration Date for this Warrant
shall be extended to 5:00 p.m. Pacific Standard Time on the business day
following such Saturday, Sunday or recognized Holiday.
(d) Change;
Waiver.
Any of
the terms or conditions of this Warrant may be waived at any time by the party
entitled to the benefit thereof, but no such waiver shall affect or impair
the
right of the waiving party to require observance, performance or satisfaction
either of that term or condition as it applies on a subsequent occasion or
of
any other term or condition.
(e) Amendment.
The
provisions of this Warrant may be amended or modified (either generally or
in a
particular instance, either retroactively or prospectively and either for a
specified period of time or indefinitely), at any time by agreement of the
parties. Any such agreement hereafter made shall be ineffective to modify this
Warrant in any respect unless in writing and signed by the parties against
whom
enforcement of the modification or discharge is sought.
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(f) Headings.
All
headings used herein are used for convenience only and shall not be used to
continue or interpret this Warrant. Except as otherwise indicated, all
references herein to Sections refer to Sections hereof.
(g) Integration.
This
Warrant constitutes the entire agreement between the Company and the Holder
with
respect to the subject matter hereof. Any previous agreement between the Company
and the Holder with respect to the subject matter hereof is superseded by this
Warrant. Subject to the exceptions specifically set forth in this Warrant,
the
terms and conditions of this Warrant shall inure to the benefit of and be
binding upon the respective heirs, successors, administrators, executors and
assigns of the parties hereto.
(h) Counterparts.
This
Warrant may be executed in one or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the
same
instrument.
(i) Severability.
If any
provision of this Warrant is adjudicated by a court of competent jurisdiction
to
be invalid or unenforceable, the remainder of the Warrant which can be given
full force and effect without the invalid provision shall continue in full
force
and effect and shall in no way be impaired or invalidated.
[Remainder
of this page intentionally left blank]
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IN
WITNESS WHEREOF, the parties have executed this Warrant as of the date stated
below.
Dated: December 6, 2007 | ||
THE
CHILDREN’S INTERNET, INC.,
a
Nevada corporation
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By: | /s/ Xxxxxxx X. Xxxxx | |
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Name: Xxxxxxx X. Xxxxx | ||
Title: Acting CEO | ||
Address: 000 Xxxx Xxxxxxxxxx Xx. | ||
Suite 9 | ||
San Ramon, CA 94583 |
THE
CHILDREN’S INTERNET
HOLDING COMPANY, LLC,
a
Delaware Limited Liability Company
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By: | /s/ Xxxxxxx X. Xxxxx | |
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Name: Xxxxxxx
Xxxxx
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Title: Manager | ||
Address: 0000
Xxxx Xxxx Xxxx.
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Suite
201
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Fair Oaks, California 95628 |
8
NOTICE
OF EXERCISE
To: The
Children’s Internet, Inc.
(1) The
undersigned hereby elects to purchase _________ shares of Stock of The
Children’s Internet, Inc., pursuant to the terms of the attached Warrant, and
tenders herewith payment of the purchase price for such shares in full.
(2) In
exercising this Warrant, the undersigned xxxxxx confirms and acknowledges that
the shares of Stock are being acquired solely for the account of the undersigned
and not as a nominee for any other party, or for investment, and that the
undersigned will not offer, sell or otherwise dispose of any such shares of
Stock except under circumstances that will not result in a violation of the
Securities Act of 1933, as amended, or any applicable state securities laws.
(3) Please
issue a certificate or certificates representing said shares of Stock in the
name of the undersigned or in such other name as is specified below:
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(Name)
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(4) Please
issue a new Warrant for the unexercised portion of the attached Warrant in
the
name of the undersigned or in such other name as is specified below:
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(Name)
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(Date)
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(Signature)
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9
ASSIGNMENT
FORM
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 Stock set
forth below and does irrevocably relinquish all rights thereunder:
Name
of Assignee
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Address
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No.
of
Shares
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(Name)
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