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EXHIBIT 4.3
WARRANT AGREEMENT
BY AND AMONG
1ST NET TECHNOLOGIES, INC.
AND
TUMMY BUSTERS, INC.,
d.b.a.
CHILDREN'S TECHNOLOGY GROUP
Dated as of April 19, 1999
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TUMMY BUSTERS, INC.
WARRANT AGREEMENT
WARRANT TO PURCHASE SHARES OF COMMON STOCK
VOID AFTER APRIL 19, 2002
This certifies that 1st Net Technologies, Inc. ("1st Net"), or any
party to whom this Warrant is assigned (1st Net and such assignee hereinafter
collectively "Holder"), is entitled to subscribe for and purchase 4,000,000
shares (as constituted on the date of issuance hereof) of the fully paid and
nonassessable Common Stock, no par value (the "Common Stock"), of Tummy Busters,
Inc., a Nevada corporation doing business as "Children's Technology Group" (the
"Corporation"), subject to the provisions and upon the terms and conditions
hereinafter set forth. The purchase price of each such share shall be $0.10 per
share, as adjusted herein (the "Warrant Price"). The number and character of
such shares of Common Stock are subject to downward adjustment as provided
below, and the term "Common Stock" shall mean, unless the context otherwise
requires, the stock and other securities and property at the time receivable
upon the exercise of this Warrant. The term "Warrant" as used herein shall
include this Warrant and any warrant(s) delivered in substitution or exchange
therefor as provided herein.
1. CONSIDERATION; APPOINTMENT OF NEW MANAGEMENT. As consideration for
the issuance of this Warrant, the parties shall have entered into that certain
Technology License Agreement of even date herewith a true and correct copy of
which is attached hereto as Exhibit "A" (by which 1st Net grants the Corporation
an exclusive license and marketing rights to the "Crayon Crawler" web browser
and community software program), and the Corporation shall have paid 1st Net
pursuant thereto cash consideration in the amount of $400,000. As further
consideration, concurrently with the execution and delivery hereof the
Corporation (i) shall have entered into that certain additional Technology
License Agreement with 1st Net a true and correct copy of which is attached
hereto as Exhibit "B" (by which the Corporation grants an exclusive license to
1st Net for x-xxxx.xxx) and (ii) shall hereby remove the existing officers and
directors of the Corporation and appoint (a) Messrs. Xxxxxxx X. Writer, Jr.,
Xxxxxxxx X. Xxxxxxx and Xxxxx X. Xxxxxx, Xx., and Xx. Xxxxxx Xxxxxx, as members
of the Board of Directors, and (b) Xx. Xxxxxxx X. Writer as Chairman, Chief
Executive Officer, and President, Xx. Xxxxxxx Xxxxxxxxx as Vice President,
Investor Relations, Xx. Xxxxxxxx X. Xxxxxxx as Chief Financial Officer and
Treasurer, and Xx. Xxxxxx Xxxxx as Secretary, of the Corporation.
2. METHOD OF EXERCISE; PAYMENT. The purchase right represented by this
Warrant may be exercised by Holder, in whole or in part, by the surrender of
this
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Warrant (with the subscription form attached hereto duly executed) at the
original office of the Corporation located at 00000 Xxxx Xxxxxxxx Xxxxx, Xxx
Xxxxx, Xxxxxxxxxx 00000 and by the payment to the Corporation, by certified or
cashier's check, of an amount equal to the aggregate Warrant Price of the shares
of Common Stock being purchased. In the event of any exercise of the rights
represented by this Warrant, certificates for the shares of Common Stock so
purchased shall be delivered to Holder within thirty (30) days of the surrender
of this Warrant (with the subscription form attached hereto duly executed) and,
unless this Warrant has been fully exercised or expired, a new Warrant
representing the aggregate purchase price of shares with respect to which this
Warrant shall not then have been exercised shall also be issued to Holder within
such time. A 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 shares of Common Stock issuable
upon such exercise shall be treated for all purposes as the holder of such
shares of record as of the close of business on such date.
3. STOCK FULLY PAID; RESERVATION OF SHARES. The Corporation covenants
and agrees that all securities which may be issued by the Corporation upon the
exercise of the rights represented by this Warrant in accordance with its terms
will, upon issuance, be fully paid and nonassessable and free from all taxes,
liens and charges of the Corporation with respect to the issue thereof. The
Corporation further covenants and agrees that, during the period within which
the rights represented by this Warrant may be exercised, the Corporation will at
all times have authorized and reserved for issuance a sufficient number of
shares of its Common Stock or other securities as would be required in the event
of the full exercise of the rights represented by this Warrant. The Corporation
will not, by amendment of its Articles of Incorporation or through
reorganization, consolidation, merger, dissolution, issue or sale of securities,
sale of assets or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the Holder against dilution or other impairment.
4. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES. The applicable
Warrant price from time to time in effect and the number of shares of Common
Stock receivable upon exercise of this Warrant shall be subject to downward
adjustment from time to time after the date hereof as follows:
4.1 ADJUSTMENT TO WARRANT PRICE FOR CERTAIN DILUTING ISSUES.
4.1.1. SPECIAL DEFINITIONS. For purposes of this Article 4, the
following definitions shall apply:
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(1) `ADDITIONAL SHARES OF COMMON STOCK' shall mean all
shares of Common Stock issued (or, pursuant to
Section 4.1.3, deemed to be issued) by the
Corporation after the Original Issue Date, other than
shares of Common Stock issued or issuable:
(A) to officers, directors or bona fide employees of,
or consultants to, the Corporation pursuant to
stock option or stock purchase plans or
agreements on terms approved by the Board of
Directors;
(B) upon exercise of this Warrant; or
(C) for which adjustment of the Warrant Price is made
pursuant to Section 4.2.
(2) `BUSINESS DAY' means any day other than a Saturday,
Sunday, or a day on which banking institutions in the
State of New York are authorized or obligated to be
closed by law or by executive order.
(3) `COMMON STOCK MARKET PRICE' of one share of Common
Stock at any date shall be deemed to be, if the
shares of the Corporation are publicly-traded, the
average of the daily closing prices for the five (5)
consecutive Business Days ending two (2) Business
Days before the day in question (as adjusted for any
stock dividend, split, combination or
reclassification). The closing price for each day
shall be the last reported sales price or, in case no
such reported sales take place on such day, the last
reported bid price, in either case on the principal
national securities exchange on which the Common
Stock is listed or admitted to trading or the last
reported sales price on the National Market System
("NMS") of the National Association of Securities
Dealers Automatic Quotation System ("NASDAQ"), or if
the Common Stock is not included in the NMS, the
average of the reported last closing bid and asked
prices on NASDAQ, or if not listed or admitted to
trading on any national securities exchange or
NASDAQ, the average reported bid price as furnished
by The National Quotation Bureau, Incorporated (or
the equivalent recognized source of quotations), all
as adjusted. If the Shares of the Corporation are not
publicly-traded, the Common Stock Market Price shall
be deemed $0.10 per share. The sale of Common Stock
in a bona fide underwritten public offering shall be
deemed a sale of Common Stock at the Common Stock
Market price, notwithstanding the immediately
preceding sentence.
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(4) `CONVERTIBLE SECURITIES' shall mean any evidences of
indebtedness, shares (other than Common Stock or this
Warrant) or other securities convertible into or
exchangeable for Common Stock.
(5) `OPTIONS' shall mean rights, options, or warrants to
subscribe for, purchase or otherwise acquire either
Common Stock or Convertible Securities.
(6) `ORIGINAL ISSUE DATE' shall mean April 19, 1999, the
date on which this Warrant was first issued.
4.1.2 NO DOWNWARD ADJUSTMENT OF WARRANT PRICE. No decrease in
the Warrant Price shall be made in respect of the
issuance of Additional Shares of Common Stock unless the
consideration per share for an Additional Share of Common
Stock issued or deemed to be issued by the Corporation is
less than the lower of the Warrant Price or the Common
Stock Market Price in effect on the date of, and
immediately prior to, such issue. No increase in the
Warrant Price shall be made in respect of the issuance of
Additional Shares of Common Stock.
4.1.3. DEEMED ISSUE OF ADDITIONAL SHARES OF COMMON STOCK. In the
event the Corporation at any time or from time to time
after the Original Issue Date shall issue any Options or
Convertible Securities or shall fix a record date for the
determination of holders of any class of securities then
entitled to receive any such Options or Convertible
Securities, then the maximum number of shares (as set
forth in the instrument relating thereto without regard
to any provisions contained therein designed to protect
against dilution) of Common Stock issuable upon the
exercise of such Options or, in the case of Convertible
Securities and Options therefor, the conversion or
exchange of such Convertible Securities, shall be deemed
to be Additional Shares of Common Stock issued as of the
time of such issue or, in case such a record date shall
have been fixed, as of the close of business on such
record date, provided that Additional Shares of Common
Stock shall not be deemed to have been issued unless the
consideration per share (determined pursuant to Section
4.1.5 hereof) of such Additional Shares of Common Stock
would be less than the lower of the Warrant Price or the
Common Stock Market Price in effect on the date of and
immediately prior to such issue, or such record date, as
the case may be, and provided further that in any case in
which Additional Shares of Common Stock are deemed to be
issued:
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(1) no further adjustments in the Warrant Price shall be
made upon the subsequent issue of Convertible Securities
or shares of Common Stock upon the exercise of such
Options or conversion or exchange of such Convertible
Securities;
(2) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for
any increase in the consideration payable to the
Corporation, or decrease in the number of shares of
Common Stock issuable, upon the exercise, conversion or
exchange thereof, the Warrant Price computed upon the
original issue thereof (or upon the occurrence of a
record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon any such increase
or decrease becoming effective, be recomputed to reflect
such increase or decrease insofar as it affects such
Options or the rights of conversion or exchange under
such Convertible Securities (provided, however, that no
such adjustment of the Warrant Price shall affect Common
Stock previously issued upon exercise of the Warrant);
and
(3) no readjustment pursuant to clause (2) above shall
have the effect of increasing the Warrant Price.
4.1.4 DOWNWARD ADJUSTMENT OF WARRANT PRICE UPON ISSUANCE OF
ADDITIONAL SHARES OF COMMON STOCK. In the event the
Corporation, at any time after the Original Issue Date
shall issue Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued
pursuant to Section 4.1.3) without consideration or for a
consideration per share less than the lower of the
Warrant Price or the Common Stock Market price in effect
on the date of and immediately prior to such issue, then
and in such event, the Warrant Price shall be reduced,
concurrently with such issue, to a price (calculated to
the nearest cent) equal to the quotient obtained by
dividing:
(A) an amount equal to the sum of
(x) the total number of shares of Common Stock
outstanding immediately prior to such issuance,
multiplied by the lower of the Warrant Price or the
Common Stock Market price in effect on the date of
and immediately prior to such issue, plus
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(y) the consideration received by the Corporation
upon such issuance;
by
(B) the total number of shares of Common Stock
outstanding immediately after the issuance of such Common
Stock, and
(C) in the event the Common Stock Market Price in effect
on the date of and immediately prior to such issue is
lower than the Warrant Price in effect on the date of and
immediately prior to such issue, then by multiplying the
resulting quotient by a fraction, the numerator of which
shall be the Warrant Price in effect on the date of and
immediately prior to such issue and the denominator of
which shall be the Common Stock Market Price in effect on
the date of and immediately prior to such issue.
The Warrant Price adjusted as provided above may be similarly
readjusted upward (but not above the initial Warrant Price to reflect
the issuance of shares of Common Stock for a consideration per share
greater than the lower of the Warrant Price or the Common Stock Market
Price in effect on the date of and immediately prior to such issue.
In the event of any adjustment of the Warrant Price as provided
in this Section 4.1.4, then and in each such case Holder, upon the
exercise hereof, shall be entitled to receive, in lieu of the shares of
Common Stock theretofore receivable upon the exercise of this Warrant,
a number of shares of Common Stock determined by (a) dividing the
Warrant Price prior to the adjustment by the adjusted Warrant Price,
and (b) multiplying the resultant quotient by the total number of
shares of Common Stock called for by the face of this Warrant.
4.1.5 DETERMINATION OF CONSIDERATION. For purposes of this
Section 4.1, the consideration received by the
Corporation for the issue of any Additional Shares of
Common Stock shall be computed as follows:
(1) CASH AND PROPERTY: Such consideration shall:
(A) insofar as it consists of cash, be computed at
the aggregate amount of cash received by the
Corporation excluding amounts paid or payable for
accrued interest or accrued dividends;
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(B) insofar as it consists of property other than
cash, be computed at the fair market value thereof at
the time of such issue, as determined in good faith
by the Board; and
(C) in the event Additional Shares of Common Stock
are issued together with other shares or securities
or other assets of the Corporation for consideration
which covers both, be the proportion of such
consideration so received, computed as provided in
clauses (A) and (B) above, as determined in good
faith by the Board.
(2) OPTIONS AND CONVERTIBLE SECURITIES. The consideration
per share received by the Corporation for Additional
Shares of Common Stock deemed to have been issued
pursuant to Section 4.1.3, relating to Options and
Convertible Securities, shall be determined by
dividing:
4.2 ADJUSTMENTS FOR RECLASSIFICATION AND REORGANIZATION. If the
Common Stock issuable upon exercise of this Warrant shall be changed into the
same or a different number of shares of any other class or classes of stock,
whether by capital reorganization, reclassification or otherwise (other than a
subdivision or combination of shares provided for in Section 4.2), the Warrant
Price then in effect shall, concurrently with the effectiveness of such
reorganization or reclassification, be proportionately adjusted so that this
Warrant shall be exercisable into, in lieu of the number of shares of Common
Stock which the holders would otherwise have been entitled to receive, a number
of shares of such other class or classes of stock equivalent to the number of
shares of Common Stock that would have been subject to receipt by the holders
upon exercise of this Warrant immediately before that change.
4.4 CERTIFICATES AS TO ADJUSTMENT. Upon the occurrence of each
adjustment or readjustment of the Warrant Price pursuant to this Article 4, the
Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and cause independent public
accountants selected by the Corporation to verify such computation and prepare
and furnish to Holder a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of Holder, furnish or cause to be furnished to such Holder, a like
certificate setting forth (i) such adjustments and readjustments, (ii) the
Warrant Price at the time in effect, and (iii) the number of shares of Common
Stock and the amount, if any, of other property which at the time would be
received upon the exercise of the Warrant.
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4.5 NOTICES OF RECORD DATE. In the event that the Corporation shall
propose at any time: (i) to declare any dividend or distribution upon its Common
Stock, whether in cash, property, stock or other securities, whether or not a
regular cash dividend and whether or not out of earnings or earned surplus; (ii)
to offer for subscription pro rata to the holders of any class or series of its
stock any additional shares of stock of any class or series or other rights;
(iii) to effect any reclassification or recapitalization of its Common Stock
outstanding involving a change in the Common Stock; (iv) to merge or consolidate
with or into any other corporation, or sell, lease or convey all or
substantially all of its assets, or to liquidate, dissolve or wind up; or (v) to
enter into any transaction or series of transactions within any three month
period pursuant to an agreement to which the Corporation is a party in which
greater than fifty percent (50%) of the Corporation's voting securities (on
as-converted-to-Common Stock basis) shall be transferred;
Then, in connection with each such event, the Corporation shall send to the
Holder: (1) at least twenty (20) days' prior written notice of the date on which
a record shall be taken for such dividend, distribution or subscription rights
(and specifying the date on which the holders of Common Stock shall be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (iii), (iv) and (v) above; and (2) in the case of the matters
referred to in (iii), (iv) and (v) above, at least twenty (20) days' prior
written notice of the date when the same shall take place (and specifying the
date on which the holders of Common Stock shall be entitled to exchange their
Common Stock for securities or other property deliverable upon the occurrence of
such event).
5. FRACTIONAL SHARES. No fractional shares of Common Stock will be
issued in connection with any subscription hereunder, but in lieu of a
fractional share upon complete exercise hereof, Holder may purchase a whole
share at the then effective Warrant Price.
6. DISSOLUTION OR LIQUIDATION. In case the Corporation shall, at any
time prior to the expiration of this Warrant and prior to the exercise hereof,
dissolve, liquidate or wind up its affairs, Holder shall be entitled, upon the
exercise hereof, to receive in lieu of the shares of the Corporation's Common
Stock which it would have been entitled to receive, the same kind and amount of
assets as would have been issued, distributed or paid to it upon any such
dissolution, liquidation or winding up with respect to such shares of the
Corporation's Common Stock, had it been the holder of record of such shares of
Common Stock or other securities receivable upon the exercise of this Warrant on
the record date for the determination of those entitled to receive any such
liquidating distribution or, if no record is taken, upon the date of such
liquidating distribution. If any such distribution. If any such dissolution,
liquidation or winding up results in a cash distribution or distribution of
property which the Corporation's Board of Directors determines in good faith to
have a cash value in excess of the Warrant Price provided by this Warrant, as it
may be adjusted, then
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Holder may, at its option, exercise this Warrant without making payment of the
aggregate Warrant Price and, in such case, the Corporation upon the distribution
to Holder shall, in making settlement to Holder, deduct from the amount payable
to Holder an amount equal to such aggregate Warrant Price.
7. TERM. This Warrant may be exercised in whole or in part at any
time and from time to time on or after April 19, 1999 and shall terminate on
April 19, 2002.
8. NO SHAREHOLDER RIGHTS. No Holder hereof, solely by virtue hereof,
shall be entitled to any rights of a shareholder of the Corporation.
9. TRANSFER AND EXCHANGE.
9.1 TRANSFER. This Warrant is transferable on the books of the
Corporation at its principal office by the registered holder hereof upon
surrender of this Warrant properly endorsed. Upon such surrender, the
Corporation shall issue and deliver to the transferee a new Warrant or Warrants
representing the Warrants so transferred. Upon any partial transfer, the
Corporation shall issue and deliver to Holder a new Warrant or Warrants with
respect to the Warrants not so transferred.
9.1 EXCHANGE. This Warrant is exchangeable at the principal office of
the Corporation for Warrants to purchase the same aggregate number of shares of
Common Stock purchasable hereunder, each new Warrant to represent the right to
purchase such number of shares as Holder shall designate at the time of such
exchange.
9.2 SECURITIES ACTION OF 1933. The Holder, by acceptance hereof,
agrees that this Warrant and the shares of the Common Stock issued or issuable
upon exercise of this Warrant may not be offered or sold except in compliance
with the Securities Action of 1933, as amended (the "1933 Act"), and then only
against receipt of an agreement of such person to whom such offer of sale is
made to comply with the provisions of this Article 9 with respect to any resale
or other disposition of such securities. The Holder consents to the
Corporation's making a notation on its records in order to implement such
restrictions on transferability.
10. LOSS OR MUTILATION. Upon receipt by the Corporation of evidence
satisfactory to it (in the exercise of reasonable discretion) of the ownership
of and the loss, theft, destruction or mutilation of this Warrant and (in the
case of loss, theft, or destruction) of indemnity satisfactory to it (in the
exercise of reasonable discretion), and (in the case of mutilation) upon
surrender and cancellation thereof, the Corporation will execute and deliver in
lieu hereof a new Warrant.
11. GOVERNMENTAL APPROVALS. The Corporation will from time to time
use its best efforts to take all action which may be necessary to obtain and
keep
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effective any and all permits, consents and approvals of governmental
agencies and authorities and securities act filings under federal and state
laws, which may be or become requisite in connection with the issuance, sale and
delivery of this Warrant, and the issuance, sale and delivery of the Common
Stock or other securities issued or deliverable upon exercise of this Warrant.
12. SUCCESSORS. All the covenants and provisions of this Warrant
shall bind and inure to the benefit of Holder and the Corporation and their
respective successors and assigns.
13. NOTICES. All notices and other communications given pursuant to
this Warrant shall be in writing and shall be deemed to have been given when
personally delivered or when mailed by prepaid registered, certified or express
mail, return receipt requested. Notices should be addressed as follows:
(a) If to Holder, then to:
With a copy (which shall not constitute notice) to:
(b) If to the Corporation, then to:
With a copy (which shall not constitute notice) to:
Such addresses for notices may be changed by any party by notice to the other
party pursuant to this Article 13.
14. AMENDMENT. This Warrant may be amended only by instrument in
writing signed by the Corporation and Holder.
15. CONSTRUCTION OF WARRANT. This Warrant shall be construed as a
whole and in accordance with its fair meaning. A reference in this Warrant to
any section shall be deemed to include a reference to every section the number
of which begins with the number of the section to which reference is made. This
Warrant has been negotiated by the parties hereto and the language hereof shall
not be construed for or against any party.
16. LAW GOVERNING. This Warrant is executed, delivered and to be
performed in the State of California and shall be construed and enforced in
accordance with and governed by the laws of such State without regard to the
conflicts of law provisions of such State.
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Dated as of April 19, 1999
1ST NET TECHNOLOGIES, INC., TUMMY BUSTER, INC.,
a Colorado corporation a Nevada corporation
/s/ XXXXXXX X. WRITER, JR. /s/ XXXXXXXX X. XXXXXXX
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Xxxxxxx X. Writer, Jr., Xxxxxxxx X. Xxxxxxx
Chief Executive Officer Chief Financial Officer
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SUBSCRIPTION FORM
(TO BE EXECUTED ONLY UPON EXERCISE OF WARRANT)
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant and purchased ________ of the number of shares of Common Stock of
_________________, purchasable with this Warrant, and herewith makes payment
therefor, all at the price and on the terms and conditions specified in this
Warrant.
Dated: _________________, 199___
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(Signature of Registered Owner)
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(Street Address)
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(City) (State) (Zip)
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ISSUE OF A NEW WARRANTY
(TO BE EXECUTED ONLY UPON PARTIAL EXERCISE,
EXCHANGE OR PARTIAL TRANSFER OF WARRANT)
Please issue ______ (number) Warrants, each representing the right to purchase
_____ shares of Common Stock of ___________, to the registered holder hereof.
Dated: ____________, 199___
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(Signature of Registered Owner)
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FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under the Warrant, with respect to the number of
shares of Common Stock set forth below:
NAME OF ASSIGNEE ADDRESS NO. OF SHARES
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and does hereby irrevocably constitute and appoint ________________ as
Attorney-in-fact to make such transfer on the books of _______________________,
maintained for the purpose, with full power of substitution in the premises.
Dated: ________________, 199___
_____________________________________
(Signature)
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