Exhibit 4.13
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY APPLICABLE STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON STOCK
ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS
TO THIS WARRANT UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO DIGITAL LIFESTYLES GROUP, INC.
THAT SUCH REGISTRATION IS NOT REQUIRED.
RIGHT TO PURCHASE 3,846,154 SHARES OF COMMON STOCK OF
DIGITAL LIFESTYLES GROUP, INC.
(SUBJECT TO ADJUSTMENT AS PROVIDED HEREIN)
COMMON STOCK PURCHASE WARRANT
No. Issue Date: November 29, 2004
DIGITAL LIFESTYLES GROUP, INC., a corporation organized under the laws of the
State of Delaware ("Digital Lifestyles Group, Inc."), hereby certifies that, for
value received, LAURUS MASTER FUND, LTD., or permitted assigns (the "Holder"),
is entitled, subject to the terms set forth below, to purchase from the Company
(as defined herein) from and after the Issue Date of this Warrant and at any
time or from time to time before 5:00 p.m., New York time, through the close of
business November 29, 2009 (the "Expiration Date"), up to 3,846,154 fully paid
and nonassessable shares of Common Stock (as hereinafter defined), $0.03 par
value per share, at the applicable Exercise Price per share (as defined below).
The number and character of such shares of Common Stock and the applicable
Exercise Price per share are subject to adjustment as provided herein.
As used herein the following terms, unless the context otherwise requires, have
the following respective meanings:
(a) The term "Company" shall include Digital Lifestyles Group, Inc. and
any corporation which shall succeed, or assume the obligations of,
Digital Lifestyles Group, Inc. hereunder.
(b) The term "Common Stock" includes (i) the Company's Common Stock, par
value 0.03 per share; and (ii) any other securities into which or for
which any of the securities described in the preceding clause (i) may
be converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
(c) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person
(corporate or otherwise) which the holder of the Warrant at any time
shall be entitled to receive, or shall have received, on the exercise
of the Warrant, in lieu of or in addition to Common Stock, or which at
any time shall be issuable or shall have been issued in exchange for
or in replacement of Common Stock or Other Securities pursuant to
Section 4 or otherwise.
(d) The "Exercise Price" applicable under this Warrant shall be as
follows:
(i) a price per share of $0.44.
1. Exercise of Warrant.
1.1 Number of Shares Issuable upon Exercise. From and after the date
hereof through and including the Expiration Date, the Holder shall be
entitled to receive, upon exercise of this Warrant in whole or in
part, by delivery of an original or fax copy of an exercise notice in
the form attached hereto as Exhibit A (the "Exercise Notice") and
compliance with Section 2 hereof, 3,846,154 shares of Common Stock of
the Company, subject to adjustment pursuant to Section 4, seventy
percent (70%) of which such right shall vest on the date hereof and
thirty percent (30%) of which such right shall vest on the date upon
which an aggregate of Seven Million Five Hundred Thousand Dollars
($7,500,000) of Loans (as defined in the Security Agreement) have been
advanced to the Company pursuant to that certain Security Agreement
dated as of the date hereof among the Company, certain of its wholly
owned subsidiaries and the Holder (the Security Agreement").
1.2 Fair Market Value. For purposes hereof, the "Fair Market Value" of a
share of Common Stock as of a particular date (the "Determination
Date") shall mean:
(a) If the Company's Common Stock is traded on the American Stock
Exchange or another national exchange or is quoted on the
National or SmallCap Market of The Nasdaq Stock Market, Inc.
("Nasdaq"), then the closing or last sale price, respectively,
reported for the last business day immediately preceding the
Determination Date.
(b) If the Company's Common Stock is not traded on the American Stock
Exchange or another national exchange or on the Nasdaq but is
traded on the NASD OTC Bulletin Board, then the mean of the
average of the closing bid and asked prices reported for the last
business day immediately preceding the Determination Date.
(c) Except as provided in clause (d) below, if the Company's Common
Stock is not publicly traded, then as the Holder and the Company
agree or in the absence of agreement by arbitration in accordance
with the rules then in effect of the American Arbitration
Association, before a single arbitrator to be chosen from a panel
of persons qualified by education and training to pass on the
matter to be decided.
(d) If the Determination Date is the date of a liquidation,
dissolution or winding up, or any event deemed to be a
liquidation, dissolution or winding up pursuant to the Company's
charter, then all amounts to be payable per share to holders of
the Common Stock pursuant to the charter in the event of such
liquidation, dissolution or winding up, plus all other amounts to
be payable per share in respect of the Common Stock in
liquidation under the charter, assuming for the purposes of this
clause (d) that all of the shares of Common Stock then issuable
upon exercise of the Warrant are outstanding at the Determination
Date.
1.3 Company Acknowledgment. The Company will, at the time of the exercise
of the Warrant, upon the request of the Holder hereof acknowledge in
writing its continuing obligation to afford to such Holder any rights
to which such Holder shall continue to be entitled after such exercise
in accordance with the provisions of this Warrant. If the Holder shall
fail to make any such request, such failure shall not affect the
continuing obligation of the Company to afford to such Holder any such
rights.
1.4 Trustee for Warrant Holders. In the event that a bank or trust company
shall have been appointed as trustee for the holders of the Warrant
pursuant to Subsection 3.2, such bank or trust company shall have all
the powers and duties of a warrant agent (as hereinafter described)
and shall accept, in its own name for the account of the Company or
such successor person as may be entitled thereto, all amounts
otherwise payable to the Company or such successor, as the case may
be, on exercise of this Warrant pursuant to this Section 1.
2. Procedure for Exercise.
2.1 Delivery of Stock Certificates, Etc., on Exercise. The Company agrees
that the shares of Common Stock purchased upon exercise of this
Warrant shall be deemed to be issued to the Holder as the record owner
of such shares as of the close of business on the date on which this
Warrant shall have been surrendered a properly completed Exercise
Notice shall have been delivered to the Company and payment made to
the Company for such shares in accordance herewith. As soon as
practicable after the exercise of this Warrant in full or in part, and
in any event within three (3) business days thereafter, the Company at
its expense (including the payment by it of any applicable issue
taxes) will cause to be issued in the name of and delivered to the
Holder, or as such Holder (upon payment by such Holder of any
applicable transfer taxes) may direct in compliance with applicable
securities laws, a certificate or certificates for the number of duly
and validly issued, fully paid and nonassessable shares of Common
Stock (or Other Securities) to which such Holder shall be entitled on
such exercise, plus, in lieu of any fractional share to which such
Holder would otherwise be entitled, cash equal to such fraction
multiplied by the then Fair Market Value of one full share, together
with any other stock or other securities and property (including cash,
where applicable) to which such Holder is entitled upon such exercise
pursuant to Section 1 or otherwise.
2.2 Exercise. Payment may be made either (i) in cash or by certified or
official bank check payable to the order of the Company equal to the
applicable aggregate Exercise Price, (ii) by delivery of the Warrant,
or shares of Common Stock and/or Common Stock receivable upon exercise
of the Warrant equal to the aggregate Exercise Price payable to the
Company in accordance with the formula set forth below in this Section
2.2, or (iii) by a combination of any of the foregoing methods, for
the number of Common Shares specified in such Exercise Notice (as such
exercise number shall be adjusted to reflect any adjustment in the
total number of shares of Common Stock issuable to the Holder per the
terms of this Warrant) and the Holder shall thereupon be entitled to
receive the number of duly authorized, validly issued, fully-paid and
non-assessable shares of Common Stock (or Other Securities) determined
as provided herein. Notwithstanding any provisions herein to the
contrary, if the Fair Market Value of one share of Common Stock is
greater than the Exercise Price (at the date of calculation as set
forth below), in lieu of exercising this Warrant for cash, the Holder
may elect to receive shares equal to the value (as determined below)
of this Warrant (or the portion thereof being exercised) by surrender
of this Warrant at the principal office of the Company together with
the properly endorsed Exercise Notice in which event the Company shall
issue to the Holder a number of shares of Common Stock computed using
the following formula:
X=Y (A-B)
A
Where X
= the number of shares of Common Stock to be issued to the Holder
Y = the number of shares of Common Stock purchasable under the Warrant or, if
only a portion of the Warrant is being exercised, the portion of the
Warrant being exercised (at the date of such calculation)
A = the Fair Market Value of one share of the Company's Common Stock (at the
date of such calculation)
B = Exercise Price (as adjusted to the date of such calculation)
3. Effect of Reorganization, Etc.; Adjustment of Exercise Price.
3.1 Reorganization, Consolidation, Merger, Etc. In case at any time or
from time to time, the Company shall (a) effect a reorganization, (b)
consolidate with or merge into any other person, or (c) transfer all
or substantially all of its properties or assets to any other person
under any plan or arrangement contemplating the dissolution of the
Company, then, in each such case, as a condition to the consummation
of such a transaction, proper and adequate provision shall be made by
the Company whereby the Holder of this Warrant, on the exercise hereof
as provided in Section 1 at any time after the consummation of such
reorganization, consolidation or merger or the effective date of such
dissolution, as the case may be, shall receive, in lieu of the Common
Stock (or Other Securities) issuable on such exercise prior to such
consummation or such effective date, the stock and other securities
and property (including cash) to which such Holder would have been
entitled upon such consummation or in connection with such
dissolution, as the case may be, if such Holder had so exercised this
Warrant, immediately prior thereto, all subject to further adjustment
thereafter as provided in Section 4.
3.2 Dissolution. In the event of any dissolution of the Company following
the transfer of all or substantially all of its properties or assets,
the Company, concurrently with any distributions made to holders of
its Common Stock, shall at its expense deliver or cause to be
delivered to the Holder the stock and other securities and property
(including cash, where applicable) receivable by the Holder of the
Warrant pursuant to Section 3.1, or, if the Holder shall so instruct
the Company, to a bank or trust company specified by the Holder and
having its principal office in New York, NY as trustee for the Holder
of the Warrant.
3.3 Continuation of Terms. Upon any reorganization, consolidation, merger
or transfer (and any dissolution following any transfer) referred to
in this Section 3, this Warrant shall continue in full force and
effect and the terms hereof shall be applicable to the shares of stock
and other securities and property receivable on the exercise of this
Warrant after the consummation of such reorganization, consolidation
or merger or the effective date of dissolution following any such
transfer, as the case may be, and shall be binding upon the issuer of
any such stock or other securities, including, in the case of any such
transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall
have expressly assumed the terms of this Warrant as provided in
Section 4. In the event this Warrant does not continue in full force
and effect after the consummation of the transactions described in
this Section 3, then the Company's securities and property (including
cash, where applicable) receivable by the Holders of the Warrant will
be delivered to Holder or the Trustee as contemplated by Section 3.2.
4. Extraordinary Events Regarding Common Stock. In the event that the Company
shall (a) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (b) subdivide its
outstanding shares of Common Stock, or (c) combine its outstanding shares
of the Common Stock into a smaller number of shares of the Common Stock,
then, in each such event, the Exercise Price shall be adjusted by
multiplying the then Exercise Price by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding immediately prior
to such event and the denominator of which shall be the number of shares of
Common Stock outstanding immediately after such event, and the product so
obtained shall thereafter be the Exercise Price then in effect, such
adjustment to take effect at the opening of business on the day upon the
earlier of (i) such subdivision or combination becomes effective and (ii)
the date of issuance, subdivision or combination of the Company's Common
Stock shall occur; or, in the case a dividend, the date fixed for
determination of stockholders entitled to receive such dividend. For the
purpose of this paragraph, the number of shares of Common Stock at any time
outstanding shall not include shares held in the treasury of the Borrower.
The Exercise Price, as so adjusted, shall be readjusted in the same manner
upon the happening of any successive event or events described herein in
this Section 4. The number of shares of Common Stock that the holder of
this Warrant shall thereafter, on the exercise hereof as provided in
Section 1, be entitled to receive shall be increased, or decreased, as
applicable, to a number determined by multiplying the number of shares of
Common Stock that would otherwise (but for the provisions of this Section
4) be issuable on such exercise by a fraction of which (a) the numerator is
the Exercise Price that would otherwise (but for the provisions of this
Section 4) be in effect, and (b) the denominator is the Exercise Price in
effect on the date of such exercise.
5. Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable
on the exercise of the Warrant, the Company at its expense will promptly
cause its Chief Financial Officer or other appropriate designee to compute
such adjustment or readjustment in accordance with the terms of the Warrant
and prepare a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is
based, including a statement of (a) the consideration received or
receivable by the Company for any additional shares of Common Stock (or
Other Securities) issued or sold or deemed to have been issued or sold, (b)
the number of shares of Common Stock (or Other Securities) outstanding or
deemed to be outstanding, and (c) the Exercise Price and the number of
shares of Common Stock to be received upon exercise of this Warrant, in
effect immediately prior to such adjustment or readjustment and as adjusted
or readjusted as provided in this Warrant. The Company will forthwith mail
a copy of each such certificate to the holder of the Warrant and any
Warrant agent of the Company (appointed pursuant to Section 11 hereof).
6. Reservation of Stock, Etc., Issuable on Exercise of Warrant. The Company
will at all times reserve and keep available, solely for issuance and
delivery on the exercise of the Warrant, shares of Common Stock (or Other
Securities) from time to time issuable on the exercise of the Warrant.
7. Assignment; Exchange of Warrant. Subject to compliance with applicable
securities laws as provided in the legend hereon, this Warrant, and the
rights evidenced hereby, may be transferred by any registered holder hereof
(a "Transferor") in whole or in part. On the surrender for exchange of this
Warrant, with the Transferor's endorsement in the form of Exhibit B
attached hereto (the "Transferor Endorsement Form") and together with
evidence reasonably satisfactory to the Company demonstrating compliance
with applicable securities laws, which shall include, without limitation, a
legal opinion from the Transferor's counsel that such transfer is exempt
from the registration requirements of applicable securities laws, the
Company at its expense but with payment by the Transferor of any applicable
transfer taxes, will issue and deliver to or on the order of the Transferor
thereof a new Warrant of like tenor, in the name of the Transferor and/or
the transferee(s) specified in such Transferor Endorsement Form (each a
"Transferee"), calling in the aggregate on the face or faces thereof for
the number of shares of Common Stock called for on the face of the Warrant
so surrendered by the Transferor.
8. 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 any such loss, theft or destruction of this Warrant, on
delivery of an indemnity agreement or security reasonably satisfactory in
form and amount to the Company or, in the case of any such mutilation, on
surrender and cancellation of this Warrant, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
9. Registration Rights. The Holder of this Warrant has been granted certain
registration rights by the Company. These registration rights are set forth
in a Registration Rights Agreement entered into by the Company and
Purchaser dated as of even date of this Warrant.
10. Maximum Exercise. The Holder shall not be entitled to exercise this Warrant
on an exercise date, in connection with that number of shares of Common
Stock which would be in excess of the sum of (i) the number of shares of
Common Stock beneficially owned by the Holder and its affiliates on an
exercise date, and (ii) the number of shares of Common Stock issuable upon
the exercise of this Warrant with respect to which the determination of
this proviso is being made on an exercise date, which would result in
beneficial ownership by the Holder and its affiliates of more than 4.99% of
the outstanding shares of Common Stock of the Company on such date. For the
purposes of the proviso to the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and Regulation 13d-3
thereunder. Notwithstanding the foregoing, the restriction described in
this paragraph may be revoked upon 75 days prior notice from the Holder to
the Company, and shall become automatically null and void upon the
occurrence and during the continuance an Event of Default under the
Security Agreement.
11. Warrant Agent. The Company may, by written notice to the each Holder of the
Warrant, appoint an agent for the purpose of issuing Common Stock (or Other
Securities) on the exercise of this Warrant pursuant to Section 1,
exchanging this
Warrant pursuant to Section 7, and replacing this Warrant pursuant to
Section 8, or any of the foregoing, and thereafter any such issuance,
exchange or replacement, as the case may be, shall be made at such office
by such agent.
12. Transfer on the Company's Books. Until this Warrant is transferred on the
books of the Company, the Company may treat the registered holder hereof as
the absolute owner hereof for all purposes, notwithstanding any notice to
the contrary.
13. Notices, Etc. All notices and other communications from the Company to the
Holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished
to the Company in writing by such Holder or, until any such Holder
furnishes to the Company an address, then to, and at the address of, the
last Holder of this Warrant who has so furnished an address to the Company.
14. Miscellaneous. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or
termination is sought. This Warrant shall be governed by and construed in
accordance with the laws of State of New York without regard to principles
of conflicts of laws. Any action brought concerning the transactions
contemplated by this Warrant shall be brought only in the state courts of
New York or in the federal courts located in the state of New York;
provided, however, that the Holder may choose to waive this provision and
bring an action outside the state of New York. The individuals executing
this Warrant on behalf of the Company agree to submit to the jurisdiction
of such courts and waive trial by jury. The prevailing party shall be
entitled to recover from the other party its reasonable attorney's fees and
costs. In the event that any provision of this Warrant is invalid or
unenforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule
of law. Any such provision which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other
provision of this Warrant. The headings in this Warrant are for purposes of
reference only, and shall not limit or otherwise affect any of the terms
hereof. The invalidity or unenforceability of any provision hereof shall in
no way affect the validity or enforceability of any other provision. The
Company acknowledges that legal counsel participated in the preparation of
this Warrant and, therefore, stipulates that the rule of construction that
ambiguities are to be resolved against the drafting party shall not be
applied in the interpretation of this Warrant to favor any party against
the other party.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK;
SIGNATURE PAGE FOLLOWS.]
IN WITNESS WHEREOF, the Company has executed this Warrant as of the date first
written above.
DIGITAL LIFESTYLES GROUP, INC.
WITNESS:
/s/ J. Xxxxxxx Xxxxxx By: /s/ Xxxxxxxx X. Xxxxxx
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J. Xxxxxxx Xxxxxx Name: Xxxxxxxx X. Xxxxxx
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Corporate Secretary Title Chief Financial Officer
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EXHIBIT A
FORM OF SUBSCRIPTION
(TO BE SIGNED ONLY ON EXERCISE OF WARRANT)
TO: Digital Lifestyles Group, Inc.
Attention: Chief Financial Officer
The undersigned, pursuant to the provisions set forth in the attached Warrant
(No. ), hereby irrevocably elects to purchase (check applicable box):
- shares of the Common Stock covered by such Warrant; or
- the maximum number of shares of Common Stock covered by such Warrant
pursuant to the cashless exercise procedure set forth in Section 2.
The undersigned herewith makes payment of the full Exercise Price for such
shares at the price per share provided for in such Warrant, which is $ .
Such payment takes the form of (check applicable box or boxes):
- $ in lawful money of the United States; and/or
- he cancellation of such portion of the attached Warrant as is exercisable
for a total of shares of Common ttock (using a Fair Market Value of $ per
share for purposes of this calculation); and/or S
- the cancellation of such number of shares of Common Stock as is necessary,
in accordance with the formula set forth in Section 2.2, to exercise this
Warrant with respect to the maximum number of shares of Common Stock
purchasable pursuant to the cashless exercise procedure set forth in
Section 2.
The undersigned requests that the certificates for such shares be issued in
the name of, and delivered to whose address is.
In connection with the exercise of the Warrant to purchase the number of shares
specified above, undersigned makes the following representations and covenants:
1. The undersigned is a "qualified institutional buyer" as such term is
defined in Rule 144A promulgated under the Securities Act of 1933, as
amended (the "Securities Act").
2. The undersigned is purchasing the Shares for the undersigned's own account,
or for one or more investor accounts for which the undersigned is acting as
a fiduciary or agent, in each case for investment, and not with a view to,
or for offer or sale in connection with, any distribution thereof in
violation of the Securities Act.
3. The undersigned has had access to such financial and other information
concerning the Company and the Shares that the undersigned has deemed
necessary in connection with a decision to purchase the Shares, including
an opportunity to ask questions of and request information from the
Company.
4. All offers and sales by the undersigned of the securities issuable upon
exercise of the within Warrant shall be made pursuant to registration of
the Common Stock under the Securities Act of 1933, as amended (the
"Securities Act") or pursuant to an exemption from registration under the
Securities Act.
Dated:
-------------------------------- -------------------------------
(Signature must conform to name
of holder as specified on the
face of the Warrant)
Address:
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EXHIBIT B
FORM OF TRANSFEROR ENDORSEMENT
(TO BE SIGNED ONLY ON TRANSFER OF WARRANT)
For value received, the undersigned hereby sells, assigns, and transfers unto
the person(s) named below under the heading "Transferees" the right represented
by the within Warrant to purchase the percentage and number of shares of Common
Stock of Digital Lifestyles Group, Inc. into which the within Warrant relates
specified under the headings "Percentage Transferred" and "Number Transferred,"
respectively, opposite the name(s) of such person(s) and appoints each such
person Attorney to transfer its respective right on the books of Digital
Lifestyles Group, Inc. with full power of substitution in the premises.
Transferees Address Percentage Number
Transferred Transferred
Dated:
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(Signature must conform to name of holder
as specified on the face of the Warrant)
Address:
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---------------------------------
Signature Guaranteed:
By:
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The signature should be guaranteed by an eligible guarantor institution (banks,
stockbrokers, savings and loan associations and credit unions with membership in
an approved signature guarantee medallion program) pursuant to Rule 17Ad-15
under the Securities Exchange Act of 1934.
ACCEPTED AND AGREED:
[TRANSFEREE]
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(Name)
