Contract
THIS
WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR THE SECURITIES LAWS
OF ANY STATE. THIS WARRANT AND THE UNITS OF MEMBERSHIP INTEREST ISSUABLE UPON
EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, TRANSFERRED
OR HYPOTHECATED UNLESS REGISTERED UNDER SAID ACT AND STATE SECURITIES LAWS,
PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS OR ON THE OPINION
OF THE REGISTERED HOLDER’S COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED.
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Number
of Shares: 5,000,000
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(subject
to adjustment)
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Date
of Issuance: October __, 2006
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Original
Issue Date: October __, 2006
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COMMON
STOCK PURCHASE WARRANT
(Void
after October __, 2011)
InfoSearch
Media, Inc., a Delaware corporation (the “Company”),
for
value received, hereby certifies that Demand Media, Inc. or its registered
assigns (the “Registered
Holder”),
is
entitled, subject to the terms and conditions set forth below, to purchase
from
the Company, at any time or from time to time on or after the Original Issue
Date through 5:00 p.m. (Eastern time) on October __, 2011, 5,000,000 (Five
Million) shares of common stock, $.001 par value per share, of the Company
(“Common Stock”),
at a
purchase price equal to the average of (x) the average closing price of the
Company’s common stock on the 10 (Ten) trading days ending September 22, 2006
and (y) the average closing price on the 10 (Ten) trading days immediately
following the execution and delivery of the Asset purchase Agreement, between
the Company and Demand Media, Inc. (including the trading day that the Asset
Purchase Agreement is executed if the Company makes a public announcement with
respect thereto prior to 10:00 AM Eastern Time on such date, but otherwise
excluding such trading day). The shares purchasable upon exercise of this common
stock purchase warrant (this “Warrant”),
and
the purchase price per share, each as adjusted pursuant to the provisions of
this Warrant, are hereinafter referred to as the “Warrant
Shares”
and
the
“Purchase
Price,”
respectively.
1. Exercise.
(a) Exercise
for Cash.
After
the Original Issue Date, the Registered Holder may, at its option, exercise
this
Warrant, in whole or in part and at any time or from time to time, by delivery
to the Company at the Company’s principal executive office, or at such other
office or agency as the Company may designate, of this Warrant, a written notice
of exercise in a form substantially similar to that attached hereto as
Exhibit I
duly
executed by the Registered Holder and full payment of the Purchase Price on
the
number of Warrant Shares to be purchased on such exercise , (the “Aggregate
Purchase Price”)
by (i)
wire transfer of immediately available funds or certified cashier’s check or
money order payable to the Company in lawful money of the United States or
(ii) the surrender to the Company of debt or equity securities of the
Company having a Fair Market Value (as that term is defined below) equal to
the
Aggregate Purchase Price; provided, that for such purposes, for purposes of
this
Section, the Fair Market Value of any note or other debt security or any
preferred stock shall be deemed to equal the aggregate outstanding principal
amount or liquidation value thereof, plus all accrued and unpaid interest
thereon or accrued or declared and unpaid dividends thereon.
(b) Cashless
Exercise.
(i) In
addition to the payment methods set forth in Section 1(a), the Registered
Holder may elect to exercise this Warrant, in whole or in part, on a cashless
basis, by delivery to the Company, at the Company’s principal executive office,
or at such other office or agency as the Company may designate, of this Warrant
and a written notice of exercise in a form substantially similar to that
attached hereto as Exhibit I
duly
executed by the Registered Holder and on the cancellation of the Registered
Holder’s right to purchase a portion of the Warrant Shares in payment of the
Aggregate Purchase Price. In the event of an exercise of this Warrant pursuant
to this Section, the number of Warrant Shares issued to the Registered Holder
shall be determined according to the following formula:
X
= Y(A-B)
A
Where:
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X
=
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the
number of Warrant Shares that shall be issued to the Registered
Holder;
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Y
=
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the
number of Warrant Shares for which this Warrant is being exercised
(including the number of Warrant Shares issued to the Registered
Holder
and the number of Warrant Shares being cancelled in payment of
the
Aggregate Purchase Price);
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A
=
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the
Fair Market Value (as that term is defined below) of one share
of Common
Stock; and
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B
=
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the
Purchase Price in effect on the date of
exercise.
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(ii) The
“Fair
Market Value”
per
share of Common Stock shall be determined as follows:
(A) If
the
Common Stock is listed on a national securities exchange, the Nasdaq National
Market, the Nasdaq OTC Bulletin Board or another nationally recognized trading
system as of the Exercise Date (as that term is defined in Section 1(d)), the
Fair Market Value per share of Common Stock shall be the average of the closing
prices of the Common Stock thereon over the 30 day period ending 3 days prior
to
the Exercise Date.
(B) If
the
Common Stock is not listed on a national securities exchange, the Nasdaq
National Market, the Nasdaq OTC Bulletin Board or another nationally recognized
trading system as of the Exercise Date, the Fair Market Value per share of
Common Stock shall be the amount determined most recently by the Board of
Directors of the Company (the “Board”)
to
represent the fair market value per share of the Common Stock (including without
limitation a determination for purposes of granting Common Stock options or
issuing Common Stock under any plan, agreement or arrangement with employees
of
the Company); and, upon request of the Registered Holder, the Board (or a
representative thereof) shall, as promptly as reasonably practicable but in
any
event not later than 10 days after such request, notify the Registered Holder
of
the Fair Market Value per share of Common Stock and furnish the Registered
Holder with reasonable documentation of the Board’s determination of such Fair
Market Value. Notwithstanding the foregoing, if the Board has not made such
a
determination within the 3-month period prior to the Exercise Date, then the
Fair Market Value shall be the fair value per share of the Common Stock, as
mutually determined by the Board and the Registered Holder. If such parties
are
unable to reach agreement within a reasonable period of time (provided, that
any
period of time in excess of 15 days shall be deemed not to be reasonable),
such
fair value shall be determined by an independent appraiser experienced in
valuing securities jointly selected by the Board and the Registered Holder.
The
determination of the appraiser shall be final and binding upon the parties
and
the Company shall pay the fees and expenses of such appraiser.
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(c) “Easy
Sale” Exercise.
In lieu
of the payment methods set forth in Sections 1(a) and (b), the Registered
Holder may pay the Aggregate Purchase Price through a “same day sale” commitment
from the Registered Holder, whereby the Registered Holder irrevocably elects
to
exercise this Warrant and to sell at least that number of Warrant Shares
purchased as a result of such exercise as necessary to pay the Aggregate
Purchase Price and the Registered Holder commits upon its receipt of the
proceeds of the same day sale to forward the Aggregate Purchase Price directly
to the Company, with any sale proceeds in excess of the Aggregate Purchase
Price
being for the sole benefit of the Registered Holder; provided; however, that
the
maximum number of Warrant Shares that may be utilized to pay the Aggregate
Purchase price under this Section 1(c) shall not exceed the Daily Sale Limit
(as
such term is defined in Section 16).
(d) Exercise
Date.
Each
exercise of this Warrant shall be deemed to have been effected immediately
prior
to the close of business on the day on which this Warrant shall have been
surrendered to the Company as provided in Sections 1(a) or 1(b) (the
“Exercise
Date”).
At
such time, the person or persons in whose name or names any certificates for
Warrant Shares shall be issuable upon such exercise as provided in
Section 1(e) shall be deemed to have become the holder or holders of record
of the Warrant Shares represented by such certificates.
(e) Issuance
of Certificates.
As soon
as practicable after the exercise of this Warrant in whole or in part, and
in
any event within 5 business days thereafter, the Company, at its expense, will
cause to be issued in the name of, and delivered to, the Registered Holder,
or
as the Registered Holder (upon payment by the Registered Holder of any
applicable transfer taxes) may direct:
(i) a
certificate or certificates for the number of full Warrant Shares to which
the
Registered Holder shall be entitled upon such exercise plus, in lieu of any
fractional share to which the Registered Holder would otherwise be entitled,
cash in an amount determined pursuant to Section 3; and
(ii) in
case
such exercise is in part only, a new warrant or warrants (dated the date hereof)
of like tenor, calling in the aggregate on the face or faces thereof for the
number of Warrant Shares equal (without giving effect to any adjustment therein)
to the number of such shares called for on the face of this Warrant minus the
number of Warrant Shares for which this Warrant was so exercised (which, in
the
case of an exercise pursuant to subsection 1(b), shall include both the
number of Warrant Shares issued to the Registered Holder pursuant to such
partial exercise and the number of Warrant Shares subject to the portion of
the
Warrant being cancelled in payment of the Aggregate Purchase Price).
(f) Government
Filings and Approvals.
The
Company shall use its best efforts to assist and cooperate with any Registered
Holder required to make any governmental filings or obtain any governmental
approvals prior to or in connection with any exercise of this Warrant
(including, without limitation, making any filings required to be made by the
Company).
(g) Conditional
Exercise.
Notwithstanding any other provision of this Warrant, if the exercise of all
or
any portion of this Warrant is to be made in connection with a registered public
offering, a sale of the Company or any other transaction or event, such exercise
may, at the election of the Registered Holder, be conditioned upon consummation
of such transaction or event in which case such exercise shall not be deemed
effective until the consummation of such transaction or event.
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2. Adjustments.
In
order to prevent dilution of the rights granted under this Warrant and to grant
the Registered Holder certain additional rights, from and after the date on
which this Warrant was first issued (the “Original
Issue Date”)
the
Purchase Price and number of Warrant Shares shall be subject to adjustment
from
time to time as provided in this Section.
(a) Adjustment
for Certain Dividends and Distributions.
In the
event the Company at any time, or from time to time after the Original Issue
Date shall make or issue, or fix a record date for the determination of holders
of Common Stock entitled to receive, a dividend or other distribution payable
in
additional shares of Common Stock, then and in each such event the Purchase
Price then in effect immediately before such event shall be decreased as of
the
time of such issuance or, in the event such a record date shall have been fixed,
as of the close of business on such record date, by multiplying the Purchase
Price then in effect by a fraction:
(A) the
numerator of which shall be the total number of shares of Common Stock issued
and outstanding immediately prior to the time of such issuance or the close
of
business on such record date, and
(B) the
denominator of which shall be the total number of shares of Common Stock issued
and outstanding immediately prior to the time of such issuance or the close
of
business on such record date plus the number of shares of Common Stock issuable
in payment of such dividend or distribution;
provided,
however,
that if
such record date shall have been fixed and such dividend is not fully paid
or if
such distribution is not fully made on the date fixed therefor, the Purchase
Price shall be recomputed accordingly as of the close of business on such record
date and thereafter the Purchase Price shall be adjusted pursuant to this
paragraph as of the time of actual payment of such dividends or distributions.
The number of Warrant Shares issuable upon exercise of this Warrant shall be
increased proportionately to any such decrease in the Purchase
Price.
(b) Adjustments
for Other Dividends and Distributions.
In the
event the Company at any time or from time to time after the Original Issue
Date
shall make or issue, or fix a record date for the determination of holders
of
Common Stock entitled to receive, a dividend or other distribution payable
in
securities of the Company (other than shares of Common Stock) or in cash or
other property (other than regular cash dividends paid out of earnings or earned
surplus, determined in accordance with generally accepted accounting
principles), then and in each such event provision shall be made so that the
Registered Holder shall receive upon exercise hereof, in addition to the number
of shares of Common Stock issuable hereunder, the kind and amount of securities
of the Company, cash or other property which the Registered Holder would have
been entitled to receive had this Warrant been exercised on the date of such
event (immediately prior to such event) and had the Registered Holder
thereafter, during the period from the date of such event to and including
the
Exercise Date, retained any such securities receivable during such period,
giving application to all adjustments called for during such period under this
Section with respect to the rights of the Registered Holder.
(c) Adjustment
for Reclassification, Exchange and Substitution.
If at
any time after the Original Issue Date while this Warrant remains outstanding
and unexpired in whole or in part, the Common Stock issuable upon exercise
of
this Warrant is changed (including by way of a stock split, reverse stock split,
recapitalization or similar change) into the same or a different number of
shares of any class or classes of stock (including Common Stock), this Warrant
will thereafter represent the right to acquire such number and kind of
securities as the Registered Holder would have been entitled to receive had
this
Warrant been exercised immediately prior to such change or event and the
Purchase Price per security underlying this Warrant therefor shall be
appropriately and proportionately adjusted, all subject to further adjustment
in
this Section (e.g., by way of example, the Purchase Price per share would be
proportionately decreased in the event of a stock split and would be
proportionately increased in the event of a reverse stock split).
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(d) Adjustment
for Reorganization.
Any
reorganization, recapitalization, reclassification, consolidation, merger,
sale
of all or substantially all of the Company’s assets or other transaction
involving the Company in which the Common Stock is converted into or exchanged
for securities, cash or other property (other than a transaction covered by
Sections 2(a) and 2(b)) is referred to herein as an “Reorganization”.
Prior
to the consummation of any such Reorganization, the Company shall make
appropriate provision (in form and substance satisfactory to Registered Holders
holding warrants to purchase a majority of the Warrant Shares originally
underlying this Warrant then remaining outstanding and unexpired (the
“Outstanding
Warrants”))
to
ensure that the Registered Holder shall have the right to receive, in lieu
of or
in addition to (as the case may be) such shares of Common Stock immediately
acquirable and receivable upon exercise of this Warrant, the kind and amount
of
securities, cash or other property as may be issued or payable with respect
to
or in exchange for the number of shares of Common Stock immediately acquirable
and receivable upon exercise of this Warrant had such Reorganization not taken
place. In such case, appropriate adjustment (in form and substance satisfactory
to the Registered Holders of a majority of the Outstanding Warrants then
remaining outstanding and unexpired) shall be made with respect to the
Registered Holder’s rights and interests to ensure that the provisions of this
Section shall thereafter be applicable to this Warrant (including, in the case
of any Reorganization where the successor entity or purchasing entity is other
than the Company, an immediate reduction to the Purchase Price to the value
of
the Common Stock reflected by the terms of the Reorganization and a
corresponding increase in the number of shares of Common Stock acquirable and
receivable upon exercise of this Warrant, if the value so reflected is less
than
the Purchase Price then in effect immediately prior to such Reorganization).
The
Company shall not effect any reorganization, recapitalization, consolidation
or
merger unless, prior to the consummation thereof, the successor entity (if
other
than the Company) resulting from the consolidation or merger or the entity
purchasing such assets assumes by written instrument (in form and substance
satisfactory to the Registered Holders of a majority of the Outstanding Warrants
then remaining outstanding and unexpired) the obligation to deliver to each
Registered Holder such shares of stock, securities or assets as, in accordance
with the foregoing provisions, such holder may be entitled to acquire; provided,
that any assumption shall not relieve the Company of its obligations hereunder.
(e) Other
Events.
If any
event occurs that would adversely affect the Registered Holder’s rights but
which has not been expressly provided for by this Section (including, without
limitation, the granting of stock appreciation rights, phantom stock rights
or
other rights with equity features), then the Board will make an appropriate
adjustment in the Purchase Price and number of Warrant Shares to protect the
Registered Holder’s rights; provided, however, that no such adjustment will
increase the Purchase Price or decrease the number of Warrant Shares obtainable
as otherwise determined pursuant to this Section.
(f) Certificate
as to Adjustments.
Upon
the occurrence of each adjustment or readjustment of the Purchase Price pursuant
to this Section, the Company at its expense shall, as promptly as reasonably
practicable but in any event not later than 10 days thereafter, compute such
adjustment or readjustment in accordance with the terms hereof and furnish
to
the Registered Holder a certificate setting forth such adjustment or
readjustment (including the kind and amount of securities, cash or other
property for which this Warrant shall be exercisable and the Purchase Price)
and
showing in detail the facts upon which such adjustment or readjustment is based.
The Company shall, as promptly as reasonably practicable after the written
request at any time of the Registered Holder (but in any event not later than
10
days thereafter), furnish or cause to be furnished to the Registered Holder
a
certificate setting forth (i) the Purchase Price then in effect and
(ii) the number of shares of Common Stock and the amount, if any, of other
securities, cash or property which then would be received upon the exercise
of
this Warrant.
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3. Fractional
Shares.
The
Company shall not be required upon the exercise of this Warrant to issue any
fractional shares, but shall pay the value thereof to the Registered Holder
in
cash on the basis of the Fair Market Value per share of Common
Stock.
4. Investment
Representations.
The
initial Registered Holder represents and warrants to the Company as
follows:
(a) Investment.
It is
acquiring this Warrant, and (if and when it exercises this Warrant) it will
acquire the Warrant Shares, for its own account for investment and not with
a
view to, or for sale in connection with, any distribution thereof, nor with
any
present intention of distributing or selling the same; and the Registered Holder
has no present or contemplated agreement, undertaking, arrangement, obligation,
indebtedness or commitment providing for the disposition thereof.
(b) Accredited
Investor.
The
Registered Holder is an “accredited investor” as defined in Rule 501(a) under
the Securities Act of 1933, as amended (the “Act”).
(c) Experience.
The
Registered Holder has made such inquiry concerning the Company and its business
and personnel as it has deemed appropriate; and the Registered Holder has
sufficient knowledge and experience in finance and business that it is capable
of evaluating the risks and merits of its investment in the Company.
5. Transfers.
(a) This
Warrant and the Warrant Shares shall not be sold or transferred unless either
(i) they first shall have been registered under the Act, or (ii) the
Company first shall have been furnished with an opinion of legal counsel,
reasonably satisfactory to the Company, to the effect that such sale or transfer
is exempt from the registration requirements of the Act. Notwithstanding the
foregoing, no registration or opinion of counsel shall be required for
(i) a transfer by a Registered Holder which is an entity to a parent,
subsidiary or affiliate of such entity or to a stockholder or member of such
entity or to the estate of any such stockholder or member, a transfer by a
Registered Holder which is a partnership to a partner of such partnership or
a
retired partner of such partnership or to the estate of any such partner or
retired partner, or a transfer by a Registered Holder which is a limited
liability company to a member of such limited liability company or a retired
member or to the estate of any such member or retired member, provided
that the
transferee in each case agrees in writing to be subject to the terms of this
Section or (ii) a transfer made in accordance with Rule 144 under the
Act.
(b) Each
certificate representing Warrant Shares shall bear a legend substantially in
the
following form:
“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL SUCH SECURITIES ARE
REGISTERED UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
IS OBTAINED TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED.”
The
foregoing legend shall be removed from the certificates representing any Warrant
Shares, at the request of the holder thereof, (i) at such time as they become
eligible for resale pursuant to Rule 144(k) under the Act or are sold
pursuant to Rule 144 and (ii) at any time that a Registration Statement is
in
effect covering resales of the Warrant Shares.
6
(c) The
Company will maintain a register containing the name and address of the
Registered Holder of this Warrant. The Registered Holder may change its address
as shown on the warrant register by written notice to the Company requesting
such change.
(d) Subject
to the provisions of this Section, this Warrant and all rights hereunder are
transferable, in whole or in part, upon surrender of this Warrant with a
properly executed assignment in a form substantially similar to that attached
hereto as Exhibit II
to
the
Company at its principal office or, if another office or agency has been
designated by the Company for such purpose, then at such other office or
agency.
(e) The
Company shall not close its books against the transfer of this Warrant or any
share of Common Stock issued or issuable upon the exercise of this Warrant
in
any manner which interferes with the timely exercise of this Warrant. The
Company shall from time to time take all such action as may be necessary to
ensure that the par value per share of the unissued Common Stock acquirable
upon
exercisable of this Warrant is at all times equal to or less than the Purchase
Price then in effect.
6. No
Impairment; No Inconsistent Agreements.
The
Company will not, by amendment of its charter or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities 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 Registered Holder against impairment. Without limiting the generality of
the
foregoing, the Company will (a) not increase the par value of any shares of
Common Stock obtainable upon the exercise of this Warrant and (b) take all
such actions as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common Stock
upon the exercise of this Warrant. The Company will not enter into any agreement
with respect to its securities which is inconsistent with the rights granted
to
the Registered Holder or otherwise conflicts with the provisions of this
Warrant. The rights granted to the Registered Holder hereunder do not in any
way
conflict with and are not inconsistent with the rights granted to holders of
the
Company’s securities under any other agreements.
7. Notices
of Record Date, etc.
In the
event:
(a) the
Company shall take a record of the holders of its Common Stock (or other stock
or securities at the time deliverable upon the exercise of this Warrant) for
the
purpose of entitling or enabling them to receive any dividend or other
distribution, or to receive any right to subscribe for or purchase any shares
of
stock of any class or any other securities, or to receive any other right;
or
(b) of
any
capital reorganization of the Company, any reclassification of the Common Stock
of the Company, any consolidation or merger of the Company with or into another
corporation (other than a consolidation or merger in which the Company is the
surviving entity and its Common Stock is not converted into or exchanged for
any
other securities or property), or any transfer of all or substantially all
of
the assets of the Company; or
(c) of
the
voluntary or involuntary dissolution, liquidation or winding-up of the Company,
then, and in each such case, the Company will send or cause to be sent to the
Registered Holder a notice specifying, as the case may be, (i) the record date
for such dividend, distribution or right, and the amount and character of such
dividend, distribution or right, or (ii) the effective date on which such
reorganization, reclassification, consolidation, merger, transfer, dissolution,
liquidation or winding-up is to take place, and the time, if any is to be fixed,
as of which the holders of record of Common Stock (or such other stock or
securities at the time deliverable upon the exercise of this Warrant) shall
be
entitled to exchange their shares of Common Stock (or such other stock or
securities) for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, transfer, dissolution,
liquidation or winding-up. Such notice shall be sent at least 20 days prior
to
the record date or effective date for the event specified in such notice.
Nothing herein shall prohibit the Registered Holder from exercising this Warrant
during the 20 day period commencing on the date of such notice.
7
8. Reservation
of Stock.
The
Company covenants that it will at all times reserve and keep available, from
its
authorized and unissued Common Stock solely for issuance and delivery upon
the
exercise of this Warrant and free of preemptive rights, such number of Warrant
Shares and other securities, cash and/or property, as from time to time shall
be
issuable upon the exercise of this Warrant. The Company further covenants that
it shall, from time to time, take all steps necessary to increase the authorized
number of shares of its Common Stock if at any time the authorized number of
shares of Common Stock remaining unissued is insufficient to permit the exercise
of this Warrant.
9. Issuance
Upon Exercise.
All
shares of Common Stock issuable upon exercise of this Warrant will be duly
authorized and validly issued, fully paid and nonassessable and will be free
of
restrictions on transfer, other than restrictions on transfer under any
agreement between the Registered Holder and the Company and under applicable
state and federal securities laws, and will be free from all taxes, liens,
security interests, encumbrances and charges in respect of the issue thereof
(other than taxes in respect of any transfer occurring contemporaneously or
otherwise specified herein). The Company shall take all such actions as may
be
necessary to ensure that all such shares of Common Stock may be so issued
without violation of any applicable law or governmental regulation or any
requirements of any domestic stock exchange upon which shares of Common Stock
may be listed (except for official notice of issuance which shall be immediately
delivered by the Company upon each such issuance).
10. Exchange
or Replacement of Warrants.
(a) Upon
the
surrender of this Warrant by the Registered Holder and all properly endorsed
and
completed notices, as applicable, to the Company at the principal office of
the
Company, the Company will, subject to the provisions of Section 5, issue and
deliver to or upon the order of the Registered Holder, at the Company’s expense,
a new warrant(s) of like tenor, in the name of the Registered Holder or as
the
Registered Holder (upon payment by the Registered Holder of any applicable
transfer taxes) may direct, calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock (or other securities, cash
and/or property) then issuable upon exercise of this Warrant.
(b) Upon
receipt of evidence reasonably satisfactory to the Company (an affidavit of
a
Registered Holder shall be satisfactory) of the loss, theft, destruction or
mutilation of this Warrant and (in the case of loss, theft or destruction)
upon
delivery of an unsecured indemnity agreement in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender
and
cancellation of this Warrant, the Company will at its expense issue, in lieu
thereof, a new Warrant of like tenor.
11. Notices.
All
notices and other communications from the Company to the Registered Holder
in
connection herewith shall be mailed by certified or registered mail, postage
prepaid, or sent via a reputable nationwide overnight courier service
guaranteeing next business day delivery, to the address last furnished to the
Company in writing by the Registered Holder. All notices and other
communications from the Registered Holder to the Company in connection herewith
shall be mailed by certified or registered mail, postage prepaid, or sent via
a
reputable nationwide overnight courier service guaranteeing next business day
delivery, to the Company at its principal office set forth below. If the Company
should at any time change the location of its principal office to a place other
than as set forth below, it shall give prompt written notice to the Registered
Holder and thereafter all references in this Warrant to the location of its
principal office at the particular time shall be as so specified in such notice.
All such notices and communications shall be deemed delivered (i) 3
business days after being sent by certified or registered mail, return receipt
requested, postage prepaid, or (ii) 1 business day after being sent via a
reputable nationwide overnight courier service guaranteeing next business day
delivery.
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12. No
Rights or Liabilities as Stockholder.
Until
the exercise of this Warrant, the Registered Holder shall not have or exercise
any rights by virtue hereof as a stockholder of the Company. Notwithstanding
the
foregoing, in the event (i) the Company effects a split of the Common Stock
by means of a stock dividend and the Purchase Price of and the number of Warrant
Shares are adjusted as of the date of the distribution of the dividend (rather
than as of the record date for such dividend), and (ii) the Registered
Holder exercises this Warrant between the record date and the distribution
date
for such stock dividend, the Registered Holder shall be entitled to receive,
on
the distribution date, the stock dividend with respect to the shares of Common
Stock acquired upon such exercise, notwithstanding the fact that such shares
were not outstanding as of the close of business on the record date for such
stock dividend.
13. Amendment
or Waiver.
Any
term of this Warrant may be amended or waived only by an instrument in writing
signed by the party against which enforcement of the change or waiver is sought.
No waivers of any term, condition or provision of this Warrant, in any one
or
more instances, shall be deemed to be, or construed as, a further or continuing
waiver of any such term, condition or provision.
14. Registration
Rights.
(a) Not
later
than 60 days after the Original Issue Date of this Warrant, the Company shall
prepare and file a Registration Statement with the Commission on the appropriate
form pursuant to the Securities Act covering the sale or other distribution
of
all but not less than all of the Warrant Shares held by the Registered Holder.
The Company shall use its commercially reasonable efforts to cause such
Registration Statement to become effective as soon as practicable thereafter
and
shall maintain the effectiveness of such Registration Statement until the later
of (i) two years from the Original Issue Date or (ii) one year from the
effective date of the Registration Statement (defined below) . As used in this
Section, “Registration
Statement”
means
a
registration statement filed by the Company with the U.S. Securities and
Exchange Commission (the “Commission”),
to
register for sale or re-sale securities of the Company (other than a
registration statement on Form S-8 or Form S-4, or their successors) and all
amendments and supplements to any such registration statement, including
post-effective amendments, in each case including the prospectus contained
therein, all exhibits thereto and materials incorporated by reference
therein.
(b) Notwithstanding
the foregoing, the Company shall not be required, pursuant to this Section
to
include any Warrant Shares in a Registration Statement if such Warrant Shares
can then be sold pursuant to Rule 144(k) under the Act.
(c) The
Company shall, as expeditiously as possible after the Registration Statement
has
been filed, furnish to each Registered Holder owning Warrant Shares included
in
a Registration Statement (a “Selling Stockholder”) such reasonable numbers of
copies of the Prospectus (as defined below), including any preliminary
Prospectus, in conformity with the requirements of the Act, and such other
documents as such Selling Stockholder may reasonably request in order to
facilitate the public sale or other disposition of the Warrant Shares owned
by
such Selling Stockholder. As used herein, “Prospectus” means the prospectus
included in any Registration Statement, as amended or supplemented by an
amendment or prospectus supplement, including post-effective amendments, and
all
material incorporated by reference or deemed to be incorporated by reference
in
such Prospectus. In addition, the Company shall:
(i) as
expeditiously as possible, notify each Selling Stockholder, promptly after
it
shall receive notice thereof, of the time when such Registration Statement
has
become effective or a supplement to any Prospectus forming a part of such
Registration Statement has been filed;
9
(ii) as
expeditiously as possible following the effectiveness of such Registration
Statement, notify each seller of such Warrant Shares of any request by the
Commission for the amending or supplementing of such Registration Statement
or
Prospectus;
(iii) as
expeditiously as possible, (1) notify each Selling Stockholder of the issuance
by the Commission of (i) any stop order issued or threatened to be issued by
the
Commission or (ii) any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Warrant Shares
for
sale in any jurisdiction or the initiation or threatening of any proceeding
for
such purpose and the Company agrees to use its best efforts to (x) prevent
the
issuance of any such stop order, and in the event of such issuance, to obtain
the withdrawal of any such stop order and (y) obtain the withdrawal of any
order
suspending or preventing the use of any related Prospectus or suspending the
qualification of any Warrant Shares included in such Registration Statement
for
sale in any jurisdiction at the earliest practicable date and (2) notify each
Selling Stockholder of the occurrence of any event as a result of which the
Prospectus included in the Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading or incomplete in light of the circumstances then existing (and upon
the occurrence of any such event, the Company shall furnish to each Selling
Stockholder a supplement to or an amendment of such Prospectus as may be
necessary so that such Prospectus shall not include an untrue statement of
a
material fact or omit to state a material fact required to be stated therein
or
necessary to make the statements therein not misleading or incomplete in light
of the circumstances then existing); and
(iv) use
its
commercially reasonable efforts to take all other actions necessary to effect
the registration of the Warrant Shares contemplated hereby, including (1) to
register and qualify the Warrant Shares under the securities or blue sky laws
of
such jurisdictions as shall be reasonably requested by the Selling Stockholders
(provided that the Company shall not be required in connection therewith or
as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions), (2) to cause the
Warrant Shares to be listed on each securities exchange on which the Common
Stock then issued by the Company is then listed (if any) and (3) to prepare
and
file with the Commission such amendments and supplements to the Registration
Statement as may be necessary to comply with the provisions of the Securities
Act with respect to the securities covered by the Registration Statement.
(d) If
the
Company has delivered a Prospectus to the Selling Stockholders and after having
done so the Prospectus is amended to comply with the requirements of the Act,
the Company shall promptly notify the Selling Stockholders and, if requested,
the Selling Stockholders shall immediately cease making offers of Warrant Shares
and return all Prospectuses to the Company. The Company shall promptly provide
the Selling Stockholders with revised Prospectuses and, following receipt of
the
revised Prospectuses, the Selling Stockholders shall be free to resume making
offers of the Warrant Shares.
(e) In
the
event that, in the judgment of the Company, it is advisable to suspend use
of a
Prospectus included in a Registration Statement due to pending material
developments or other events that have not yet been publicly disclosed and
as to
which the Company believes public disclosure would be detrimental to the
Company, the Company shall notify all Selling Stockholders to such effect,
and,
upon receipt of such notice, each such Selling Stockholder shall immediately
discontinue any sales of Warrant Shares pursuant to such Registration Statement
until such Selling Stockholder has received copies of a supplemented or amended
Prospectus or until such Selling Stockholder is advised in writing by the
Company that the then current Prospectus may be used and has received copies
of
any additional or supplemental filings that are incorporated or deemed
incorporated by reference in such Prospectus. Notwithstanding anything to the
contrary herein, the Company shall not exercise its rights under this Section
to
suspend sales of Warrant Shares for a period in excess of 30 days consecutively
or 60 days in any 365-day period.
10
(f) The
Company will pay all Registration Expenses (as defined below) related to the
filing of the Registration Statement. As used in this Section, “Registration
Expenses”
means
all expenses incurred by the Company in complying with the provisions of
Section, including, without limitation, all registration and filing fees,
exchange listing fees, printing expenses, state securities laws fees and
expenses, the expense of any special audits incident to or required by any
such
registration but excluding underwriting discounts, selling commissions and
applicable stock transfer taxes.
(g) In
the
event of a registration of the Warrant Shares under the Act pursuant to this
Warrant, the Company will indemnify and hold harmless to the fullest extent
permitted by law each Selling Stockholder and each underwriter of such Warrant
Shares and each of their respective directors, officers, employees, advisors,
agents and general or limited partners (and the directors, officers, employees,
advisors and agents thereof), and each other person, if any, who controls such
Selling Stockholder or underwriter within the meaning of the Act or the Exchange
Act (collectively, “Holder
Indemnified Parties”)
from
and against any and all losses, claims, damages, expenses (including, without
limitation, reasonable costs of investigation and fees, disbursements and other
charges of counsel and any amounts paid in settlement effected with the
Company’s consent, which consent shall not be unreasonably withheld or delayed)
or other liabilities (collectively, “Losses”),
joint
or several, to which such Holder Indemnified Parties may become subject under
the Act, the Exchange Act, state securities laws or other federal law, common
law or any rule or regulation promulgated thereunder or otherwise, insofar
as
such Losses (or actions or proceedings, whether commenced or threatened, in
respect thereof) are resulting from or arise out of or are based upon
(i) any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement or any document incorporated by
reference in any of the foregoing, (ii) the omission or alleged omission to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, or (iii) any violation by the Company of
the Act, the Exchange Act, state securities laws or other applicable federal
law, common law or rule or regulation promulgated thereunder; and the Company
will promptly reimburse such Holder Indemnified Parties for any Loss reasonably
incurred by such Holder Indemnified Parties in connection with investigating,
preparing or defending any such loss, claim, damage, liability, action,
investigation or proceeding; provided, however, that the Company will not be
liable in any such case to the extent that any such Loss arises out of or is
based upon any untrue statement or omission made in the Registration Statement
in reliance upon and in conformity with information furnished to the Company
by
or on behalf of any Selling Stockholder or Holder Indemnified Parties,
underwriter or controlling person specifically for use in the preparation
thereof. Such indemnity obligation shall remain in full force and effect
regardless of any investigation made by or on behalf of the Holder Indemnified
Parties and shall survive the transfer of Warrant Shares by such Holder
Indemnified Parties.
(h) In
the
event of any registration of any of the Warrant Shares under the Act pursuant
to
this Warrant, each Selling Stockholder, severally and not jointly, will
indemnify and hold harmless the Company, each of its directors and officers
and
each underwriter (if any) and each person, if any, who controls the Company
or
any such underwriter within the meaning of the Act or the Exchange Act
(collectively, the “Company
Indemnified Parties”),
against any Losses, joint or several, to which the Company Indemnified Parties
may become subject under the Act, the Exchange Act, state securities laws or
other federal law, common law or any rule or regulation promulgated thereunder
or otherwise, insofar as such Losses (or actions or proceedings, whether
commenced or threatened, in respect thereof) are resulting from or arise out
of
or are based upon (i) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement, or (ii) any omission
or alleged omission to state a material fact required to be stated therein
or
necessary to make the statements therein not misleading, if and to the extent
(and only to the extent) that the statement or omission was made in reliance
upon and in conformity with information relating to a Selling Stockholder
furnished in writing to the Company by such Selling Stockholder specifically
for
use in connection with the preparation of such Registration Statement; provided,
however, that the obligations of such a Selling Stockholder hereunder shall
be
limited to an amount equal to the net proceeds to such Selling Stockholder
of
Warrant Shares sold in connection with such registration. Such indemnity
obligation shall remain in full force and effect regardless of any investigation
made by or on behalf of the Holder Indemnified Parties and shall survive the
transfer of Warrant Shares by such Holder Indemnified Parties.
11
(i) Each
indemnified party shall give notice to the indemnifying party promptly after
such indemnified party has actual knowledge of any claim as to which indemnity
may be sought, and shall permit the indemnifying party to assume the defense
of
any such claim or any litigation resulting therefrom; provided, that counsel
for
the indemnifying party, who shall conduct the defense of such claim or
litigation, shall be approved by the indemnified party (whose approval shall
not
be unreasonably withheld, conditioned or delayed); and, provided, further,
that
the failure of any indemnified party to give notice as provided herein shall
not
relieve the indemnifying party of its obligations under this Section except
to
the extent that the indemnifying party is adversely affected by such failure.
The indemnified party may participate in such defense at such party’s expense;
provided, however, that the indemnifying party shall pay such expense if the
indemnified party reasonably concludes that representation of such indemnified
party by the counsel retained by the indemnifying party would be inappropriate
due to actual or potential differing interests between the indemnified party
and
any other party represented by such counsel in such proceeding; provided further
that in no event shall the indemnifying party be required to pay the expenses
of
more than one law firm per jurisdiction as counsel for the indemnified party.
The indemnifying party also shall be responsible for the expenses of such
defense if the indemnifying party does not elect to assume such defense. No
indemnifying party, in the defense of any such claim or litigation shall, except
with the consent of each indemnified party, consent to entry of any judgment
or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of
a
release from all liability in respect of such claim or litigation, and no
indemnified party shall consent to entry of any judgment or settle such claim
or
litigation without the prior written consent of the indemnifying party, which
consent shall not be unreasonably withheld, conditioned or delayed.
(j) In
order
to provide for just and equitable contribution in circumstances in which the
indemnification provided for in this Section is due in accordance with its
terms
but for any reason is held to be unavailable to an indemnified party in respect
to any losses, claims, damages and liabilities referred to herein, then the
indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities to which such party may be
subject in such proportion as is appropriate to reflect the relative fault
of
the Company on the one hand and the Selling Stockholders on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault of the Company and the Selling Stockholders
shall be determined by reference to, among other things, whether the untrue
or
alleged untrue statement of material fact related to information supplied by
the
Company or the Selling Stockholders and the parties’ relative intent, knowledge,
access to information and opportunity to correct or prevent such statement
or
omission. The Company and the Selling Stockholders agree that it would not
be
just and equitable if contribution pursuant to this Section were determined
by
pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to above. No person guilty
of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution
may
be made against another party or parties under this Section, notify such party
or parties from whom contribution may be sought, but the omission so to notify
such party or parties from whom contribution may be sought shall not relieve
such party from any other obligation it or they may have thereunder or otherwise
under this Section. No party shall be liable for contribution with respect
to
any action, suit, proceeding or claim settled without its prior written consent,
which consent shall not be unreasonably withheld, conditioned or
delayed.
12
(k) The
rights and obligations of the Company and the Selling Stockholders under this
Section shall survive the termination of this Warrant.
15. Daily
Sale Limit.
Notwithstanding anything to the contrary contained herein, the Registered Holder
covenants and agrees that it will not sell on any trading day more than the
lesser of (x) 100,000 shares of Common Stock (adjusted to reflect any stock
dividends, stock splits, reverse stock splits, recapitalizations and the like)
and (y) that number of shares of Common Stock that is equal to 50% of the
ten-day average daily trading volume of the Common Stock (the “Daily Sale
Limit”). If all or any portion of this Warrant or the Warrant Shares have been
transferred or assigned (other than Warrant Shares sold pursuant to an effective
registration statement or pursuant to Rule 144 or 144(k), the calculation of
the
Daily Sale Limit shall include all sales by the Registered Holder and all
transferees and assignees of this Warrant and the Warrant Shares.
16. Section
Headings.
The
section headings in this Warrant are for the convenience of the parties and
in
no way alter, modify, amend, limit or restrict the contractual obligations
of
the parties.
17. Governing
Law.
This
Warrant will be governed by and construed in accordance with the internal laws
of the State of New York (without reference to the conflicts of law provisions
thereof).
18. Facsimile
Signatures.
This
Warrant may be executed by facsimile signature.
19. Successors
and Assigns.
This
Warrant shall be binding upon and inure to the benefit of the Registered Holder
and its assigns, and shall be binding upon any entity succeeding to the Company
by consolidation, merger or acquisition of all or substantially all of the
Company’s assets. The Company may not assign this Warrant or any rights or
obligations hereunder without the prior written consent of the Registered
Holder. Subject to the limitations set forth in Section 5 herein, and the
agreement of any assignee to be bound by Section 15 hereof, the Registered
Holder may assign this Warrant without the Company’s prior written consent.
20. Remedies.
In the
event of a breach by the Company of any of their obligations under this Warrant,
the Registered Holder, in addition to being entitled to exercise all rights
granted by law, including recovery of damages, will be entitled to specific
performance of its rights under this Warrant. The Company agrees that monetary
damages would not provide adequate compensation for any losses incurred by
reason of its breach of any of the provisions of this Warrant and hereby further
agrees that, in the event of any action for specific performance in respect
of
such breach, it shall waive the defense that a remedy at law would be adequate.
21. Severability.
The
provisions of this Warrant will be deemed severable and the invalidity or
unenforceability of any. provision hereof will not affect the validity or
enforceability of the other provisions hereof; provided that if any provision
of
this Warrant, as applied to any party or to any circumstance, is adjudged by
a
court, governmental body, arbitrator, or mediator not to be enforceable in
accordance with its terms, the parties agree that the court, governmental body,
arbitrator, or mediator making such determination will have the power to modify
the provision in a manner consistent with its objectives such that it is
enforceable, and/or to delete specific words or phrases, and in its reduced
form, such provision will then be enforceable and will be enforced.
(Signature
on following page)
13
This
Warrant is
executed by the undersigned authorized representative of the Company as of
the
Date of Issuance.
|
COMPANY
|
|
|
By:___________________________________
|
|
|
Name:
|
|
|
Title:
|
|
|
Accepted
and Agreed:
|
|
|
REGISTERED
HOLDER
|
|
|
Demand
Media, Inc.
|
|
|
By:___________________________________
|
|
|
Name:
|
|
|
Title:
|
14
EXHIBIT
I
NOTICE
OF EXERCISE
Date:___________
The
undersigned, pursuant to the provisions set forth in the attached Warrant,
hereby elects to purchase (check
applicable box):
| o |
q
|
____
shares of the Common Stock of covered by such Warrant; or
|
| o |
q
|
the
maximum number of shares of Common Stock covered by such Warrant
pursuant
to the cashless exercise procedure set forth
therein.
|
The
undersigned herewith makes payment of the full purchase price for such shares
at
the price per share provided for in such Warrant. Such payment takes the form
of
(check
applicable box or boxes):
| o |
q
|
$______
in lawful money of the United States by the enclosed certified check
or
money order; or
|
| o |
q
|
$_______
in lawful money of the United States by wire transfer using wiring
instructions provided by the Company; or
|
| o |
q
|
the
cancellation of such portion of the attached Warrant as is exercisable
for
a total of _____ Warrant Shares (using a Fair Market Value of $_____
per
share for purposes of this calculation);
and/or
|
| o |
q
|
the
cancellation of such number of Warrant Shares as is necessary, in
accordance with the formula set forth in the Warrant, to exercise
this
Warrant with respect to the maximum number of Warrant Shares purchasable
pursuant to the cashless exercise procedure set forth therein.
|
The
undersigned Register Holder requests that you issue a certificate or
certificates representing the Warrant Shares purchased hereby in the name of
the
undersigned Registered Holder or in such other name as is specified below and
deliver such certificate to the address indicated.
|
Registered
Name of Certificate Holder
|
Address
of Record
|
#
of
Shares
|
||
REGISTERED
HOLDER
By:
_________________________
Name:
_________________________
Address:_________________________
_________________________
_________________________
15
EXHIBIT
II
ASSIGNMENT
FORM
FOR
VALUE
RECEIVED, ________________________________________ hereby sells, assigns and
transfers all of the rights of the undersigned under the attached Warrant with
respect to the number of Warrant Shares covered thereby as set forth below,
unto:
|
Registered
Name of Certificate Holder
|
Address
of Record
|
#
of
Shares
|
||
REGISTERED
HOLDER
By:
_________________________
Name:
_________________________
Address:_________________________
_________________________
_________________________
Signature
Guaranteed:
By:
_______________________
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.
NOTE:
The
signature to this Assignment Form must correspond with the name of the
Registered Holder as it appears on the face of the Warrant, without alteration
or enlargement or any change whatsoever, and must be guaranteed by a bank or
trust company. Officers of corporations and those acting in a fiduciary or
other
representative capacity should file proper evidence of authority to assign
the
foregoing Warrant.
16
