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EXHIBIT 4.3
WARRANT AGREEMENT
Between
SOURCE MEDIA, INC.
and
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
as
Warrant Agent
_________________________
Dated as of October 30, 1997
__________________________
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TABLE OF CONTENTS
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SECTION 1. Appointment of Warrant Agent . . . . . . . . . . . . . . . . . 1
SECTION 2. Warrant Certificates . . . . . . . . . . . . . . . . . . . . . 1
SECTION 3. Execution of Warrant Certificates . . . . . . . . . . . . . . . 2
SECTION 4. Registration and Countersignature . . . . . . . . . . . . . . . 2
SECTION 5. Transfer and Exchange of Warrants . . . . . . . . . . . . . . . 3
SECTION 6. Registration of Transfers and Exchanges . . . . . . . . . . . . 4
(a) Transfer and Exchange of Physical Warrants . . . . . . . . 4
(b) Legends . . . . . . . . . . . . . . . . . . . . . . . . . 5
(c) Obligations with Respect to Transfers and Exchanges of
Physical Warrants . . . . . . . . . . . . . . . . . . . 7
SECTION 7. Separation of Warrants: Terms of Warrants, Exercise of
Warrants . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 8. Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 9. Mutilated or Missing Warrant Certificates . . . . . . . . . . . 9
SECTION 10. Reservation of Warrant Shares . . . . . . . . . . . . . . . . 10
SECTION 11. Obtaining Stock Exchange Listings . . . . . . . . . . . . . . 11
SECTION 12. Adjustment of Number of Warrant Shares Issuable . . . . . . . 11
(a) Adjustment for Change in Capital Stock . . . . . . . . . . 11
(b) Adjustment for Certain Issuances of Common Stock . . . . . 12
(c) Adjustment for Other Distribution . . . . . . . . . . . . 13
(i)
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(d) Adjustments for Mergers, Consolidations,
Sale of Assets, Distributions, etc. . . . . . . . . . . . . 14
(e) Current Market Value . . . . . . . . . . . . . . . . . . . 15
(f) When De Minimis Adjustment May Be Deferred . . . . . . . . 17
(g) When No Adjustment Required . . . . . . . . . . . . . . . 17
(h) Notice of Adjustment . . . . . . . . . . . . . . . . . . . 17
(i) Voluntary Reduction . . . . . . . . . . . . . . . . . . . 18
(j) When Issuance or Payment May Be Deferred . . . . . . . . . 18
(k) Reorganizations . . . . . . . . . . . . . . . . . . . . . 18
(l) Form of Warrants . . . . . . . . . . . . . . . . . . . . . 19
(m) Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 13. Fractional Interests . . . . . . . . . . . . . . . . . . . . . 20
SECTION 14. Notices to Warrant Holders . . . . . . . . . . . . . . . . . . 20
SECTION 15. Notices to the Company and Warrant Agent . . . . . . . . . . . 22
SECTION 16. Supplements and Amendments . . . . . . . . . . . . . . . . . . 23
SECTION 17. Concerning the Warrant Agent . . . . . . . . . . . . . . . . . 23
SECTION 18. Change of Warrant Agent . . . . . . . . . . . . . . . . . . . 26
SECTION 19. Identity of Transfer Agent . . . . . . . . . . . . . . . . . . 26
SECTION 20. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 21. Termination . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 22. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 23. Benefits of This Agreement . . . . . . . . . . . . . . . . . . 27
SECTION 24. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 27
(ii)
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WARRANT AGREEMENT (the "Agreement"), dated as of October 30,
1997, between Source Media, Inc., a Delaware corporation (together with any
successors and assigns, the "Company"), and ChaseMellon Shareholder Services,
L.L.C., a limited liability company organized under the laws of the State of
New Jersey, as Warrant Agent (the "Warrant Agent").
WHEREAS, the Company proposes, among other things, to issue
and sell pursuant to a Purchase Agreement, dated as of October 23, 1997, among
the Company and NatWest Capital Markets Limited and Prudential Securities
Incorporated, as Initial Purchasers (the "Purchase Agreement"), 800,000 shares
of its 13 1/2% Senior PIK Preferred Stock (the "Senior PIK Preferred Stock"),
along with Warrants (the "Warrants"), for the purchase of 447,000 shares of its
Common Stock, par value $.001 per share (the "Common Stock," and the shares of
Common Stock issuable upon exercise of the Warrants being referred to herein as
the "Warrant Shares"). The Senior PIK Preferred Stock and Warrants will be
sold in units (the "Units), each Unit representing 1,000 shares of Preferred
Stock and 558.75 Warrants, each Warrant to purchase one share of Common Stock;
WHEREAS, the Company wishes the Warrant Agent to act on behalf
of the Company and the Warrant Agent is willing to act in connection with the
issuance, division, transfer, exchange and exercise of Warrants as provided
herein;
NOW, THEREFORE, in consideration of the premises and mutual
agreements herein, the Company and the Warrant Agent hereby agree as follows:
SECTION 1. Appointment of Warrant Agent. The Company hereby
appoints the Warrant Agent to act as agent for the Company in accordance with
the instructions hereinafter set forth in this Agreement, and the Warrant Agent
hereby accepts such appointment.
SECTION 2. Warrant Certificates. The Warrants will initially
be issued in registered form as physical Warrant certificates (the "Physical
Warrants"). Any certificates (the "Warrant Certificates") evidencing the
Physical Warrants to be delivered pursuant to this Agreement shall be
substantially in the form set forth in Exhibit A attached hereto. Such Warrant
Certificates shall represent such of the outstanding Warrants as shall be
specified therein and each shall provide that it shall represent the aggregate
amount of outstanding Warrants from time to time endorsed thereon and that the
aggregate amount of outstanding Warrants represented thereby may from time to
time be reduced or increased, as appropriate. Any endorsement of a Warrant
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Certificate to reflect the amount of any increase or decrease in the amount of
outstanding Warrants represented thereby shall be made by the Warrant Agent in
accordance with instructions given by the Holder thereof.
SECTION 3. Execution of Warrant Certificates. Warrant
Certificates shall be signed on behalf of the Company by its Chairman of the
Board, Chief Executive Officer, Chief Operating Officer, Chief Financial
Officer, President or a Vice President and by its Secretary or an Assistant
Secretary. Each such signature upon the Warrant Certificates may be in the
form of a facsimile signature of the present or any future Chairman of the
Board, President, Chief Executive Officer, Chief Operating Officer, Vice
President, Treasurer, Chief Financial Officer, Secretary or Assistant Secretary
and may be imprinted or otherwise reproduced on the Warrant Certificates and
for that purpose the Company may adopt and use the facsimile signature of any
person who shall have been Chairman of the Board, President, Chief Executive
Officer, Chief Operating Officer, Vice President, Treasurer, Chief Financial
Officer, Secretary or Assistant Secretary, notwithstanding the fact that at the
time the Warrant Certificates shall be countersigned and delivered or disposed
of he shall have ceased to hold such office. The seal of the Company may be in
the form of a facsimile thereof and may be impressed, affixed, imprinted or
otherwise reproduced on the Warrant Certificates.
In case any officer of the Company who shall have signed any
of the Warrant Certificates shall cease to be such officer before the Warrant
Certificates so signed shall have been countersigned by the Warrant Agent, or
disposed of by the Company, such Warrant Certificates nevertheless may be
countersigned and delivered or disposed of as though such person had not ceased
to be such officer of the Company; and any Warrant Certificate may be signed on
behalf of the Company by any person who, at the actual date of the execution of
such Warrant Certificate, shall be a proper officer of the Company to sign such
Warrant Certificate, although at the date of the execution of this Warrant
Agreement any such person was not such officer.
Warrant Certificates shall be dated the date of
countersignature by the Warrant Agent.
SECTION 4. Registration and Countersignature. The Warrants
shall be numbered and shall be registered on the books of the Company
maintained at the principal office of the Warrant Agent in Ridgefield Park, New
Jersey (the "Warrant Register") as they are issued.
Warrant Certificates shall be manually countersigned by the
Warrant Agent and shall not be valid for any purpose unless so countersigned.
The Warrant
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Agent shall, upon written instructions of the Chairman of the Board, the
President, Chief Executive Officer, Chief Operating Officer, a Vice President,
the Treasurer, Chief Financial Officer or an Assistant Secretary of the
Company, initially countersign and deliver Warrants entitling the Holders
thereof to purchase not more than the number of Warrant Shares referred to
above in the first recital hereof and shall thereafter countersign and deliver
Warrants upon the written instruction of the foregoing officers.
The Company and the Warrant Agent may deem and treat the
registered Holders (the "Holders") of the Warrant Certificates as the absolute
owners thereof (notwithstanding any notation of ownership or other writing
thereon made by anyone) for all purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary.
SECTION 5. Transfer and Exchange of Warrants. The Warrant
Agent shall from time to time, subject to the limitations of Section 6,
register the transfer of any outstanding Warrants upon the records to be
maintained by it for that purpose, upon surrender thereof duly endorsed or
accompanied (if so required by it) by a written instrument or instruments of
transfer, duly executed by the registered Holder or Holders thereof or by the
duly appointed legal representative thereof or by a duly authorized attorney.
Subject to the terms of this Agreement, each Warrant Certificate may be
exchanged for another certificate or certificates entitling the Holder thereof
to purchase a like aggregate number of Warrant Shares as the certificate or
certificates surrendered then entitle each Holder to purchase. Any Holder
desiring to exchange a Warrant Certificate or Certificates shall make such
request in writing delivered to the Warrant Agent, and shall surrender, duly
endorsed or accompanied (if so required by the Warrant Agent) by a written
instrument or instruments of transfer, the Warrant Certificate or Certificates
to be so exchanged.
Upon registration of transfer, the Warrant Agent shall
countersign and deliver by mail a new Warrant Certificate or Certificates to
the persons entitled thereto. The Warrant Certificates may be exchanged at the
option of the Holder thereof, when surrendered at the office or agency of the
Company maintained for such purpose, which initially will be the corporate
trust office of the Warrant Agent in Ridgefield Park, New Jersey or at the drop
office in New York, New York for another Warrant Certificate, or other Warrant
Certificates of different denominations, of like tenor and representing in the
aggregate the right to purchase a like number of Warrant Shares.
No service charge shall be made for any exchange or
registration of transfer of Warrant Certificates, but the Company may require
payment of a sum sufficient to cover any stamp or other tax or other
governmental charge that is imposed in connection with any such exchange or
registration of transfer.
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SECTION 6. Registration of Transfers and Exchanges.
(a) Transfer and Exchange of Physical Warrants. When
Physical Warrants are presented to the Warrant Agent with a request, and after
the Warrant Agent has had adequate time to confer and receive written
instructions from the Company:
(i) to register the transfer of the Physical Warrants; or
(ii) to exchange such Physical Warrants for an equal
number of Physical Warrants of other authorized denominations;
the Warrant Agent shall register the transfer or make the exchange as
requested if the requirements under this Agreement as set forth in
this Section 6 for such transactions are met; provided, however, that
the Physical Warrants presented or surrendered for registration of
transfer or exchange:
(I) shall be duly endorsed or accompanied by a
written instrument of transfer, duly executed by the Holder
thereof or his attorney duly authorized in writing; and
(II) in the case of Physical Warrants the offer
and sale of which have not been registered under the
Securities Act of 1933, as amended (the "Security Act"), such
Physical Warrants shall be accompanied, in the sole discretion
of the Company, by the following additional information and
documents, as applicable:
(A) if such Physical Warrants are being delivered to the
Warrant Agent by a Holder for registration in the
name of such Holder, without transfer, a
certification from such Holder to that effect (in
substantially the form of Exhibit B hereto); or
(B) if such Physical Warrants are being transferred to an
institutional "accredited investor" (as defined in
Rule 501(a)(1), (2), (3) or (7) under the Securities
Act (an "Institutional Accredited Investor"))
delivery of a certification to that effect (in
substantially the form of Exhibit B hereto) and a
Transferee Certificate for Institutional Accredited
Investors in substantially the form of Exhibit C
hereto; or
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(C) if such Physical Warrants are being transferred in
reliance on Regulation S under the Securities Act
("Regulation S"), delivery of a certification to that
effect (in substantially the form of Exhibit B
hereto) and a Transferee Certificate for Regulation S
Transfers in substantially the form of Exhibit D
hereto and an Opinion of Counsel reasonably
satisfactory to the Company to the effect that such
transfer is in compliance with the Securities Act; or
(D) if such Physical Warrants are being transferred in
reliance on another exemption from the registration
requirements of the Securities Act, a certification
to that effect (in substantially the form of Exhibit
B hereto) and an opinion of counsel reasonably
satisfactory to the Company to the effect that such
transfer is in compliance with the Securities Act.
(b) Legends.
(i) For so long as transfer of a Warrant is not permitted
without registration under the Securities Act, each Warrant
Certificate evidencing such Warrant (and all Warrants issued in
exchange therefor or substitution thereof) shall bear a legend
substantially to the following effect:
THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND,
ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE BY ITS ACQUISITION HEREOF OR A BENEFICIAL INTEREST HEREIN,
THE HOLDER (1) REPRESENTS THAT (A) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(a), (1), (2), (3) OR (7) OF
REGULATION D UNDER THE SECURITIES ACT (AN "INSTITUTIONAL ACCREDITED
INVESTOR") OR (B) IT IS NOT A U.S. PERSON, IS NOT ACQUIRING THIS
SECURITY FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON AND IS ACQUIRING
THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATORS
UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE TIME
PERIOD REFERRED TO UNDER RULE 144(k) (TAKING INTO ACCOUNT THE
PROVISIONS OF RULE 144(d) UNDER THE SECURITIES ACT, IF APPLICABLE)
UNDER THE
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SECURITIES ACT AS IN EFFECT ON THE DATE OF THE TRANSFER OF THIS
SECURITY, RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO
SOURCE MEDIA, INC. ("SOURCE") OR ANY SUBSIDIARY THEREOF, (B) INSIDE
THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR
TO SUCH TRANSFER FURNISHES TO THE WARRANT AGENT, A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS SECURITY, AND IF SUCH TRANSFER IS IN
RESPECT OF AN AGGREGATE AMOUNT OF WARRANTS AT THE TIME OF TRANSFER OF
LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO SOURCE THAT
SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (C) OUTSIDE
THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE
904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE, BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO SOURCE), (E)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR (F) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (BASED UPON AN OPINION OF COUNSEL
ACCEPTABLE TO SOURCE) AND IN EACH CASE, IN ACCORDANCE WITH APPLICABLE
STATE SECURITIES LAWS, AND (3) AGREES THAT IT WILL DELIVER TO EACH
PERSON TO WHOM THIS SECURITY OR AN INTEREST HEREIN IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN,
THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON"
HAVE THE MEANING GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE
SECURITIES ACT. THE WARRANT AGREEMENT, DATED AS OF OCTOBER 30, 1997,
BETWEEN SOURCE AND CHASEMELLON SHAREHOLDER SERVICES, L.L.C., CONTAINS
A PROVISION REQUIRING THE WARRANT AGENT TO REFUSE TO REGISTER TRANSFER
OF THIS SECURITY IN VIOLATION OF THE FOREGOING RESTRICTIONS.
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(c) Obligations with Respect to Transfers and Exchanges
of Physical Warrants.
(i) To permit registrations of transfers and exchanges,
the Company shall execute the Physical Warrants and instruct the
Warrant Agent to countersign the Physical Warrants.
(ii) All Physical Warrants issued upon any registration,
transfer or exchange of Physical Warrants shall be the valid
obligations of the Company, entitled to the same benefits under this
Agreement as the Physical Warrants surrendered upon the registration
of transfer or exchange.
(iii) Prior to due presentment for registration of transfer
of any Warrant, the Warrant Agent and the Company may deem and treat
the person in whose name any Warrant is registered as the absolute
owner of such Warrant, and neither the Warrant Agent nor the Company
shall be affected by notice to the contrary.
SECTION 7. Separation of Warrants: Terms of Warrants,
Exercise of Warrants. The Senior PIK Preferred Stock and Warrants will not be
separately transferable until the "Separability Date," which shall be
immediately upon sale of the Units by the Initial Purchasers.
Subject to the terms of this Agreement, each Warrant Holder
shall have the right, which may be exercised commencing on or after the date of
issuance and until 5:00 p.m., New York City time, on November 1, 2007 (the
"Expiration Date"), to receive from the Company upon the exercise of each
warrant the number of fully paid and nonassessable Warrant Shares which the
Holder may at the time be entitled to receive on exercise of such Warrants and
payment of the Exercise Price (as defined below) then in effect for such
Warrant Shares. Each Warrant not exercised prior to the Expiration Date shall
become void and all rights thereunder and an rights in respect thereof under
this Agreement shall cease as of such time. No adjustments as to dividends
will be made upon exercise of the Warrants.
The initial price per share at which Warrant Shares shall be
purchasable upon exercise of Warrants (the "Exercise Price") shall be $.01,
subject to adjustment, provided, that in no event shall the Exercise Price be
less than $.01 per share. A Warrant may be exercised upon surrender at the
office or agency of the Company maintained for such purpose, which initially
will be the corporate trust office of the Warrant Agent in Ridgefield Park, New
Jersey, of the certificate or certificates evidencing the Warrants to be
exercised with the form of election to purchase on the
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reverse thereof duly filled in and signed, which signature shall be guaranteed
by a participant in a recognized Signature Guarantee Medallion Program, and
upon payment to the Warrant Agent for the account of the Company of the
Exercise Price, as adjusted as herein provided, for the number of Warrant
Shares in respect of which such Warrants are then exercised. Payment of the
aggregate Exercise Price shall be made in cash or by certified or official bank
check to the order of the Warrant Agent on behalf of the Company in Immediately
Available Funds.
Subject to the provisions of Section 6 hereof, upon such
surrender of Warrants and payment of the Exercise Price, the Company shall
issue and cause to be delivered with all reasonable dispatch to or upon the
written order of the Holder and in such name or names as the Warrant Holder may
designate a certificate or certificates for the number of Warrant Shares
issuable upon the exercise of such Warrants together with cash as provided in
Section 12; provided, however, that if any consolidation, merger or lease or
sale of assets is proposed to be effected by the Company as described in
subsection (j) of Section 12 hereof, or a tender offer or an exchange offer for
shares of Common Stock of the Company shall be made, upon such surrender of
Warrants and payment of the Exercise Price as aforesaid, the Company shall, as
soon as possible, but in any event not later than 10 days, other than a
Saturday or Sunday or a day on which banking institutions in the State of New
York are not open for business ("Business Day") thereafter, issue and cause to
be mailed the number of Warrant Shares issuable upon the exercise of such
Warrants in the manner described in this sentence together with cash as
provided in Section 12. Such certificate or certificates shall be deemed to
have been issued and any person so designated to be named therein shall be
deemed to have become a Holder of record of such Warrant Shares as of the date
of the surrender of such Warrants and payment of the Exercise Price.
The Warrants shall be exercisable, at the election of the
Holders thereof, either in full or from time to time in part and, in the event
that a certificate evidencing Warrants is exercised in respect of fewer than
all of the Warrant Shares issuable on such exercise at any time prior to the
date of expiration of the Warrants, a new certificate evidencing the remaining
Warrant or Warrants will be issued, and the Warrant Agent shall, at the
Company's direction, countersign and deliver the required new Warrant
Certificate or Certificates pursuant to the provisions of this Section and of
Section 3 hereof, and the Company will promptly supply the Warrant Agent with
Warrant Certificates duly executed on behalf of the Company for such purpose.
All Warrant Certificates surrendered upon exercise of Warrants
shall be cancelled by the Warrant Agent. Such cancelled Warrant Certificates
shall then be disposed of by the Warrant Agent in a manner consistent with the
Warrant Agent's
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customary procedure for such disposal. The Warrant Agent shall promptly pay to
the Company all monies received by the Warrant Agent for the purchase of the
Warrant Shares through the exercise of such Warrants.
SECTION 8. Payment of Taxes. The Company will pay all
documentary stamp taxes attributable to the initial issuance of Warrant Shares
upon the exercise of Warrants; provided, however, that the Company shall not be
required to pay any tax or taxes which may be payable in respect of any
transfer involved in the issue of any Warrant Certificates or any certificates
for Warrant Shares in a name other than that of the registered Holder of a
Warrant Certificate surrendered upon the exercise of a Warrant, and the Company
shall not be required to issue or deliver such Warrant Certificates unless or
until the person or persons requesting the issuance thereof shall have paid to
the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
SECTION 9. Mutilated or Missing Warrant Certificates. In
case any of the Warrant Certificates shall be mutilated, lost, stolen or
destroyed, the Company may at its discretion issue and the Warrant Agent shall
countersign, in exchange and substitution for and upon cancellation of the
mutilated Warrant Certificate, or in lieu of and substitution for the Warrant
Certificate lost, stolen or destroyed, a new Warrant Certificate of like tenor
and representing an equivalent number of Warrants, but only upon receipt of
evidence satisfactory to the Company of such loss, theft or destruction of such
Warrant Certificate and indemnity in the sole discretion of the Warrant Agent.
Applicants for such substitute Warrant Certificates shall also comply with such
other reasonable regulations and pay such other reasonable charges as the
Company or the Warrant Agent may prescribe.
SECTION 10. Reservation of Warrant Shares. The Company will
at all times reserve and keep available, free from preemptive rights, out of
the aggregate of its authorized but unissued Common Stock or its authorized and
issued Common Stock held in its treasury, for the purpose of enabling it to
satisfy an obligation to issue Warrant Shares upon exercise of Warrants, the
maximum number of shares of Common Stock which may then be deliverable upon the
exercise of all outstanding Warrants.
The Company or, if appointed, the transfer agent for the
Common Stock (the "Transfer Agent") and every subsequent transfer agent for any
shares of the Company's capital stock issuable upon the exercise of any of the
rights of purchase aforesaid will be irrevocably authorized and directed at all
times to reserve such number of authorized shares as shall be required for such
purpose. The Company will keep a copy of this Agreement on file with the
Transfer Agent and with every subsequent transfer agent for any shares of the
Company's capital stock issuable upon the exercise
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of the rights of purchase represented by the Warrants. The Warrant Agent is
hereby irrevocably authorized to requisition from time to time from such
Transfer Agent the stock certificates required to honor outstanding Warrants
upon exercise thereof in accordance with the terms of this Agreement. The
Company will supply such Transfer Agent with duly executed certificates for
such purposes and will provide or otherwise make available any cash which may
be payable as provided in Section 12. The Company will furnish such Transfer
Agent a copy of all notices of adjustments and certificates related thereto
transmitted to each Holder pursuant to Section 14 hereof.
The Company covenants that all Warrant Shares which may be
issued upon exercise of Warrants made in accordance with the terms of this
Agreement will, upon payment of the Exercise Price therefor and issue thereof,
be validly authorized and issued, fully paid, nonassessable, free of preemptive
rights and free from all taxes, liens, charges and security interests with
respect to the issuance thereof. The Company will take no action to increase
the par value of the Common Stock to an amount in excess of the Exercise Price,
and the Company will not enter into any agreements inconsistent with the rights
of Holders hereunder. The Company will use its best efforts to obtain all such
authorizations, exemptions or consents from any public regulatory body having
jurisdiction thereof as may be necessary to enable the Company to perform its
obligations under this Agreement. The Company shall not take any action
reasonably within its control, including the hiring of a broker to solicit
exercises, which would render unavailable an exemption from registration under
the Securities Act which might otherwise be available with respect to the
issuance of Warrant Shares upon exercise of any Warrants, unless there is an
effective registration statement with respect to such issuance.
SECTION 11. Obtaining Stock Exchange Listings. The Company
will from time to time take all action which may be necessary so that the
Warrant Shares, immediately upon their issuance upon the exercise of Warrants,
will be listed on the principal securities exchanges and markets within the
United States of America (including the NASDAQ National Market System), if any,
on which other shares of Common Stock are then listed. In the event that, at
any time during the period in which the Warrants are exercisable, the Common
Stock is not listed on any principal securities or exchanges or markets within
the United States of America, the Company will use its best efforts to permit
the Warrant Shares to be designated PORTAL securities in accordance with the
rules and regulations adopted by the National Association of Securities
Dealers, Inc. relating to trading in the Private Offering, Resales and Trading
through Automated Linkages market.
SECTION 12. Adjustment of Number of Warrant Shares Issuable.
The number of shares of Common Stock issuable upon the exercise of each Warrant
(the
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"Exercise Rate") is subject to adjustment from time to time upon the occurrence
of the events enumerated in this Section 12. The Warrant Agent is not
responsible for any calculations or determinations made or to be made under
this Section 12. The Exercise Rate shall initially be one.
(a) Adjustment for Change in Capital Stock. If the
Company:
(1) pays a dividend or makes a distribution on its Common
Stock in shares of its Common Stock or other capital stock of the
Company;
(2) subdivides, combines or reclassifies its outstanding
shares of Common Stock;
(3) makes a distribution to all Holders of its Common
Stock of rights, warrants or options to purchase Common Stock of the
Company at a price per share less than the Current Market Value (as
defined in Section 12(d)) at the Time of Determination (as defined
below); and
(4) makes distributions to stockholders of Common Stock
of the Company or rights, warrants or options to purchase Common Stock
of the Company;
then the Exercise Rate in effect immediately prior to such action shall be
proportionately adjusted so that the Holder of any Warrant thereafter exercised
may receive the aggregate number and kind of shares of capital stock of the
Company which he would have owned immediately following such action if such
Warrant had been exercised immediately prior to such action; provided, however,
that notwithstanding the foregoing, upon the occurrence of an event described
in any of paragraphs (1), (3) or (4) above, which otherwise would have given
rise to an adjustment, no adjustment shall be made if the Company includes the
Holders of Warrants in such distribution pro rata to the number of shares of
Common Stock issued and outstanding (after giving effect to the Warrant Shares
as if they were issued and outstanding).
The adjustment which shall be calculated by the Company shall
become effective immediately after the record date in the case of a dividend or
distribution (the "Time of Determination") and immediately after the effective
date in the case of a subdivision, combination or reclassification.
If after an adjustment a Holder of a Warrant upon exercise of
it may receive shares of two or more classes of capital stock of the Company,
the Board of Directors of the Company shall determine the allocation of the
adjusted Exercise Price
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15
between the classes of capital stock. After such allocation, the exercise
privilege and the Exercise Price of each class of capital stock shall
thereafter be subject to adjustment on terms comparable to those applicable to
Common Stock in this Section.
Such adjustment shall be made successively whenever any event
listed above shall occur.
(b) Adjustment for Certain Issuances of Common Stock.
Subject to Section 12(a), if the Company issues or sells
shares of its Common Stock or distributes any rights, options or warrants to
all Holders of its Common Stock entitling them to purchase shares of Common
Stock, or securities convertible into or exchangeable for Common Stock (other
than pursuant to (1) the exercise of the Warrants, (2) any options, warrants or
rights outstanding as of the date of this Agreement, (3) without limiting any
options, warrants or rights outstanding pursuant to the immediately preceding
clause (2), any director's plans and employee stock option or purchase plans to
the extent that the aggregate number of shares of Common Stock of the Company
(or securities convertible into or exchangeable or exercisable for the Common
Stock of the Company) distributed under all such director's plans and employee
stock option and purchase plans does not exceed 2,300,000 shares of the
Company's Common Stock at any time (of which options to purchase 1,118,599
shares are currently outstanding)), at a price per share less than the Current
Market Value at the Time of Determination, the Exercise Rate shall be adjusted
in accordance with the formula:
E1 = E x (O + N)
-----
(O + (N x P)
-----
M
where:
E(1) = the adjusted Exercise Rate.
E = the Exercise Rate immediately prior to the Time of
Determination for any such distribution.
O = the number of Fully Diluted Shares (as defined in
Section 12(i)) outstanding on the Time of
Determination for any such issuance, sale or
distribution.
N = the number of additional shares of Common Stock
issued, sold or issuable upon exercise of such
rights, options or warrants.
-12-
16
P = the price received in the case of any issuance or
sale of Common Stock or exercise price per share of
such rights, options or warrants.
M = the Current Market Value per share of Common Stock on
the Time of Determination for any such issuance, sale
or distribution.
The adjustment shall be made successively whenever any such
rights, options or warrants are issued and shall become effective immediately
after the record date for the determination of stockholders entitled to receive
the rights, options or warrants. If at the end of the period during which any
such rights, options or warrants are exercisable, not all rights, options or
warrants shall have been exercised, the Warrant shall be immediately readjusted
to what it would have been if "N" in the above formula had been the number of
shares actually issued.
(c) Adjustment for Other Distribution.
Subject to Section 12(a), if the Company distributes to all
Holders of its Common Stock (i) any evidences of indebtedness of the Company or
any of its subsidiaries, (ii) any assets of the Company or any of its
subsidiaries (other than cash dividends or other cash distributions or
distributions from current or retained earnings other than any Extraordinary
Cash Dividend), or (iii) any rights, options or warrants to acquire any of the
foregoing or to acquire any other securities of the Company, the Exercise Rate
shall be adjusted in accordance with the formula:
E(1) = E x M
-----
M - F
where:
E(1) = the adjusted Exercise Rate.
E = the current Exercise Rate on the record date
mentioned below.
M = the Current Market Value per share of Common Stock on
the record date mentioned below.
F = the fair market value on the record date mentioned
below of the indebtedness, assets, rights, options or
warrants distributable to
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one share of Common Stock, based on the number of
Fully Diluted Shares.
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the
distribution. If an adjustment is made pursuant to clause (iii) above of this
subsection (c) as a result of the issuance of rights, options or warrants and
at the end of the period during which any such rights, options or warrants are
exercisable, not all such rights, options or warrants shall have been
exercised, the Warrant shall be immediately readjusted as if "F" in the above
formula was the fair market value on the record date of the indebtedness or
assets actually distributed upon exercise of such rights, options or warrants
divided by the number of shares of Common Stock outstanding on the record date.
Notwithstanding the foregoing provisions of this Section 12(c), (x) an event
which would otherwise give rise to an adjustment pursuant to this Section 12(c)
shall not give rise to such an adjustment if the Company includes the Holders
of the Warrants in such distribution pro rata to the number of shares of Common
Stock issued and outstanding after giving effect to the Warrant Shares as if
they were issued and outstanding and (y) no adjustment shall be made pursuant
to this Section 12(c) with respect to cash dividends other than Extraordinary
Cash Dividends.
This subsection does not apply to rights, options or warrants
referred to in subsection (b) of this Section 12.
(d) Adjustments for Mergers, Consolidations, Sale of
Assets, Distribution, etc.
If (x) the Company merges or consolidates with, or sells all
or substantially all of its property and assets to, another person (other than
an Affiliate of the Company) and consideration is payable to Holders of Common
Stock in exchange for their Common Stock in connection with such merger,
consolidation or sale which consists solely of cash, or (y) in the event of the
dissolution, liquidation or winding up of the Company, then the Holders of
Warrants shall be entitled to receive distributions on the date of such event
on an equal basis with Holders of Common Stock (or other securities issuable
upon exercise of the Warrants) as if the Warrants had been exercised
immediately prior to such event, less the Exercise Price. Upon receipt of such
payment, if any, the rights, of a Holder shall terminate and cease and his or
her Warrants shall expire. In case of any such merger, consolidation or sale
of assets, the surviving or acquiring Person and, in the event of any
dissolution, liquidation or winding up of the Company, the Company shall
deposit promptly with the Warrant Agent the funds, if any, necessary to pay the
Holders of the Warrants. After receipt
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of such deposit from such Person or the Company and after receipt of
surrendered Warrant Certificates, the Warrant Agent shall make payment by
delivering a check in such amount as is appropriate (or, in the case of
consideration other than cash, such other consideration as is appropriate) to
such Person or Persons as it may be directed in writing by the Holder
surrendering such Warrants.
(e) Current Market Value.
"Current Market Value" per share of Common Stock or of any
other security (herein collectively referred to as a "Security") at any date
shall be:
(1) if the Security is not registered under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), (i)
the value of the Security determined in good faith by the Board of
Directors of the Company and certified in a board resolution, based on
the most recently completed arm's length transaction between the
Company and a person other than an Affiliate of the Company in which
such determination is necessary and the closing of which occurs on
such date or shall have occurred within the six months preceding such
date, (ii) if no such transaction shall have occurred on such date or
within such six-month period, the value of the Security most recently
determined as of a date within the six months preceding such date by
an Independent Financial Expert or (iii) if neither clause (i) nor
(ii) is applicable, the value of the Security determined as of such
date by an Independent Financial Expert, or
(2) if the Security is registered under the Exchange Act,
the average of the daily market prices for each business day during
the period commencing 15 business days before such date and ending on
the date one day prior to such date or, if the Security has been
registered under the Exchange Act for less than 15 consecutive
business days before such date, then the average of the daily market
prices for all of the business days before such date for which daily
market prices are available. If the market price is not determinable
for at least 10 business days in such period, the Current Market Value
of the Security shall be determined as if the Security was not
registered under the Exchange Act.
The "market price" for any Security on each business day
means: (A) if such Security is listed or admitted to trading on any securities
exchange, the closing price, regular way, on such day on the principal exchange
on which such Security is traded, or if no sale takes place on such day, the
average of the closing bid and asked prices on such day, (B) if such Security
is not then listed or admitted to trading on any securities exchange, the last
reported sale price on such day, or if there is no such last reported sale
price on such day, the average of the closing bid and the asked prices on
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19
such day, as reported by a reputable quotation source designated by the
Company, or (C) if neither clause (A) nor (B) is applicable, the average of the
reported high bid and low asked prices on such day, as reported by a reputable
quotation service, or a newspaper of general circulation in the Borough of
Manhattan, City of New York, customarily published on each business day,
designated by the Company. If there are no such prices on a business day, then
the market price shall not be determinable for such business day.
"Independent Financial Expert" shall mean (a) NatWest (or any
successor) or (b) another nationally recognized investment banking firm, a
nationally recognized regional investment banking firm or an internationally
reputable accounting firm selected by the Company reasonably acceptable to the
Warrant Agent (i) that does not (and whose directors, officers, employees and
Affiliates do not) have a direct or indirect material financial interest in the
Company, (ii) that has not been, and, at the time it is called upon to serve as
an Independent Financial Expert under this Agreement is not (and none of whose
directors, officers, employees or Affiliates is) a promoter, director or
officer of the Company, (iii) that has not been retained by the Company for any
purpose, other than to perform an equity valuation, within the preceding twelve
months, and (iv) that, in the reasonable judgement of the Board of Directors of
the Company (certified by a board resolution), is otherwise qualified to serve
as an independent financial advisor. Any such person may receive customary
compensation and indemnification by the Company for opinions or services it
provides as an Independent Financial Expert.
"Affiliate" shall mean, with respect to any person, any other
person directly or indirectly controlling or controlled by or under direct or
indirect common control with such person. For the purposes of this definition,
"control" when used with respect to any person, means the power to direct the
management and policies of such person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Extraordinary Cash Dividend" means cash dividends, subject to
the sentence below, with respect to the Common Stock the aggregate amount of
which in any fiscal year exceeds $500,000.
-16-
20
(f) When De Minimis Adjustment May Be Deferred.
No adjustment in the Exercise Rate need be made unless the
adjustment would require an increase or decrease of at least 5% in the Exercise
Rate. Notwithstanding the foregoing, any adjustments that are not made shall
be carried forward and taken into account in any subsequent adjustment,
provided that no such adjustment shall be deferred beyond the date on which a
Warrant is exercised.
All calculations under this Section 12 shall be made to the
nearest cent or to the nearest 1/100th of a share, as the case may be.
(g) When No Adjustment Required.
If an adjustment is made upon the establishment of a record
date for a distribution subject to subsections (a), (b) or (c) hereof and such
distribution is subsequently cancelled, the Exercise Rate then in effect shall
be readjusted, effective as of the date when the Board of Directors determines
to cancel such distribution, to that which would have been in effect if such
record date had not been fixed.
To the extent the Warrants become convertible into cash, no
adjustment need be made thereafter as to the amount of cash into which such
Warrants are exercisable. Interest will not accrue on the cash.
(h) Notice of Adjustment.
Whenever the Exercise Rate or Exercise Price is adjusted, the
Company shall provide the notices required by Section 14 hereof.
(i) Voluntary Reduction.
The Company from time to time may increase the Exercise Rate
by any amount for any period of time (including, without limitation,
permanently) if the period is at least 20 business days.
An increase of the Exercise Rate under this Subsection (i)
(other than a permanent increase) does not change or adjust the Exercise Rate
otherwise in effect for purposes of subsections (a), (b) or (c) of this Section
12.
(j) When Issuance or Payment May Be Deferred.
-17-
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In any case in which this Section 12 shall require that an
adjustment in the Exercise Rate be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event (i) issuing to the Holder of any Warrant exercised after such record date
the Warrant Shares and other capital stock of the Company, if any, issuable
upon such exercise over and above the Warrant Shares and other capital stock of
the Company, if any, issuable upon such exercise on the basis of the Exercise
Rate prior to such adjustment, and (ii) paying to such Holder any amount in
cash in lieu of a fractional share pursuant to Section 13; provided, however,
that the Company shall deliver to the Warrant Agent and shall cause the Warrant
Agent, on behalf of and at the expense of the Company, to deliver to such
Holder a due xxxx or other appropriate instrument evidencing such Holder's
right to receive such additional Warrant Shares, other capital stock and cash
upon the occurrence of the event requiring such adjustment.
(k) Reorganizations.
In case of any capital reorganization, other than in the cases
referred to in Sections 12(a), (b), (c) or (d) hereof, or the consolidation or
merger of the Company with or into another corporation (other than a merger or
consolidation in which the Company is the continuing corporation and which does
not result in any reclassification of the outstanding shares of Common Stock
into shares of other stock or other securities or property), or the sale of the
property of the Company as an entirety or substantially as an entirety
(collectively such actions being hereinafter referred to as "Reorganizations"),
there shall thereafter be deliverable upon exercise of any Warrant (in lieu of
the number of shares of Common Stock theretofore deliverable) the number of
shares of stock or other securities or property to which a Holder of the number
of shares of Common Stock that would otherwise have been deliverable upon the
exercise of such Warrant would have been entitled upon such Reorganization if
such Warrant had been exercised in full immediately prior to such
Reorganization. In case of any Reorganization, appropriate adjustment, as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a duly adopted resolution certified by the
Company's Secretary or Assistant Secretary, shall be made in the application of
the provisions herein set forth with respect to the rights and interests of
Holders so that the provisions set forth herein shall thereafter be applicable,
as nearly as possible, in relation to any shares or other property thereafter
deliverable upon exercise of Warrants.
The Company shall not effect any such Reorganization unless
prior to or simultaneously with the consummation thereof the successor
corporation (if other than the Company) resulting from such Reorganization or
the corporation purchasing or leasing such assets or other appropriate
corporation or entity shall (i) expressly assume,
-18-
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by a supplemental Warrant Agreement or other acknowledgment executed and
delivered to the Warrant Agent the obligation to deliver to the Warrant Agent
and to cause the Warrant Agent to deliver to each such Holder such shares of
stock, securities or assets as, in accordance with the foregoing provisions,
such Holder maybe entitled to purchase, and all other obligations and
liabilities under this Agreement and (ii) enter into an agreement providing to
the Holders rights and benefits substantially similar to those enjoyed by the
Holders under the Registration Rights Agreement of even date herewith.
The foregoing provisions of this Section 12(k) shall apply to
successive Reorganization transactions.
(l) Form of Warrants.
Irrespective of any adjustments in the number or kind of
shares purchasable upon the exercise of the Warrants, Warrants theretofore or
thereafter issued may continue to express the same price and number and kind of
shares as are stated in the Warrants initially issuable pursuant to this
Agreement.
(m) Miscellaneous.
For purposes of this Section 12 the term "Fully Diluted
Shares" shall mean (i) the shares of Common Stock outstanding as of a specified
date, and (ii) shares of Common Stock into or for which rights, options,
warrants or other securities outstanding as of such date are exercisable or
convertible (other than the Warrants). In the event that at any time, as a
result of an adjustment made pursuant to this Section 12, the Holders of
Warrants shall become entitled to purchase any securities of the Company other
than, or in addition to, shares of Common Stock, thereafter the number or
amount of such other securities so purchasable upon exercise of each Warrant
shall be subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the Warrant
Shares contained in subsections (a) through (1) of this Section 12, inclusive,
and the provisions of Sections 7, 8, 10 and 13 with respect to the Warrant
Shares or the Common Stock shall apply on like terms to any such other
securities.
SECTION 13. Fractional Interests. The Company shall not be
required to issue fractional Warrant Shares on the exercise of Warrants. If
more than one Warrant shall be presented for exercise in full at the same time
by the same Holder, the number of full Warrant Shares which shall be issuable
upon the exercise thereof shall be computed on the basis of the aggregate
number of Warrant Shares purchasable on exercise of the Warrants so presented.
If any fraction of a Warrant Share would,
-19-
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except for the provisions of this Section 13, be issuable on the exercise of
any Warrants (or specified portion thereof), the Company shall pay an amount in
cash equal to the Current Market Value on the day immediately preceding the
date the Warrant is presented for exercise, multiplied by such fraction.
SECTION 14. Notices to Warrant Holders. Upon any adjustment
pursuant to Section 12 hereof, the Company shall give prompt written notice of
such adjustment to the Warrant Agent and shall cause the Warrant Agent, on
behalf of and at the expense of the Company, within 10 days after the receipt
of such notice from the Company, to mail by first class mail, postage prepaid,
to each Holder a notice of such adjustment(s) and shall deliver to the Warrant
Agent a certificate of the Chief Financial Officer of the Company, setting
forth in reasonable detail (i) the number of Warrant Shares purchasable upon
the exercise of each Warrant and the Exercise Price of such Warrant after such
adjustment(s), (ii) a brief statement of the facts requiring such adjustment(s)
and (iii) the computation by which such adjustment(s) was made. Where
appropriate, such notice may be given in advance and included as a part of the
notice required under the other provisions of this Section 14.
In case:
(a) the Company shall authorize the issuance to all
Holders of shares of Common Stock of rights, options or warrants to
subscribe for or purchase shares of Common Stock or of any other
subscription rights or warrants; or
(b) the Company shall authorize the distribution to all
Holders of shares of Common Stock of evidences of its indebtedness or
assets; or
(c) of any consolidation or merger to which the Company
is a part and for which approval of any shareholders of the Company is
required, or of the conveyance or transfer of the properties and
assets of the Company substantially as an entirety, or of any
reclassification or change of Common Stock issuable upon exercise of
the Warrants (other than a change in par value, or from par value to
no par value, or from no par value to par value, or as a result of a
subdivision or combination), or a tender offer or exchange offer for
shares of Common Stock; or
(d) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company; or
-20-
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(e) the Company proposes to take any action that would
require an adjustment to the Exercise Rate or the Exercise Price
pursuant to Section 12 hereof;
then the Company shall give prompt written notice to the Warrant Agent and
shall cause the Warrant Agent, on behalf of and at the expense of the Company
to give to each of the registered Holders of the Warrant Certificates at his or
its address appearing on the Warrant register, at least 30 days (or 20 days in
any case specified in clauses (a) or (b) above) prior to the applicable record
date hereinafter specified, or the date of the event in the case of events for
which there is no record date, by first-class mail, postage prepaid, a written
notice containing information provided by the Company to the Warrant Agent and
stating (i) the date as of which the Holders of record of shares of Common
Stock to be entitled to receive any such rights, options, warrants or
distribution are to be determined, or (ii) the initial expiration date set
forth in any tender offer or exchange offer for shares of Common Stock, or
(iii) the date on which any such consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up is expected to become effective or
consummated, and the date as of which it is expected that Holders of record of
shares of Common Stock shall be entitled to exchange such shares for securities
or other property, if any, deliverable upon such reclassification,
consolidation, merger, conveyance, transfer, dissolution, liquidation or
winding up. The failure by the Company or the Warrant Agent to give such
notice or any defect therein shall not affect the legality or validity of any
distribution, right, option, warrant, consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up, or the vote upon any action.
The Company shall give prompt written notice to the Warrant
Agent (in no event less than 45 days prior to the designated record date) and
shall cause the Warrant Agent, on behalf of and at the expense of the Company
to give to each Holder written notice of any determination to make a
distribution to the Holders of its Common Stock of any cash dividends, assets,
debt securities, preferred stock, or any rights or warrants to purchase debt
securities, preferred stock, assets or other securities (other than Common
Stock, or rights, options, or warrants to purchase Common Stock) of the
Company, which notice shall state the nature and amount of such planned
dividend or distribution and the record date therefor, and shall be received by
the Holders at least 30 days prior to such record date therefor.
Nothing contained in this Agreement or in any Warrant
Certificate shall be construed as conferring upon the Holders the right to vote
or to consent or to receive notice as shareholders in respect of the meetings
of shareholders or the election of Directors of the Company or any other
matter, or any rights whatsoever as shareholders of the Company.
-21-
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SECTION 15. Notices to the Company and Warrant Agent. Any
notice or demand authorized by this Agreement to be given or made by the
Warrant Agent or by any Holder to or on the Company shall be sufficiently given
or made when received at the office of the Company expressly designated by the
Company as its office for purposes of this Agreement (until the Warrant Agent
is otherwise notified in accordance with this Section 15 by the Company), as
follows:
Source Media, Inc.
0000 XXX Xxxxxxx
Xxxxx 000
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxxx & Knight, P.C.,
0000 Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
Any notice pursuant to this Agreement to be given by the
Company or by any Holder(s) to the Warrant Agent shall be sufficiently given
when received by the Warrant Agent at the address appearing below (until the
Company is otherwise notified in accordance with this Section by the Warrant
Agent).
ChaseMellon Shareholder Services, L.L.C.
0000 Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxx, XX 00000-0000
Facsimile: (000) 000-0000
SECTION 16. Supplements and Amendments. The Company and the
Warrant Agent may from time to time supplement or amend this Agreement without
the approval of any Holders of Warrants in order to cure any ambiguity or to
correct or supplement any provision contained herein which may be defective or
inconsistent with any other provision herein, or to make any other provisions
in regard to matters or questions arising hereunder which the Company and the
Warrant Agent may deem necessary or desirable and which shall not in any way
adversely affect the interests of any Holder of Warrants.
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26
SECTION 17. Concerning the Warrant Agent. The Warrant Agent
undertakes the duties and obligations imposed by this Agreement (and no implied
duties and obligations shall be read into this Agreement against the Warrant
Agent) upon the following terms and conditions, by all of which the Company and
the Holders, by their acceptance of Warrants, shall be bound:
(a) The statements contained herein and in the Warrant
Certificate shall be taken as statements of the Company, and the
Warrant Agent assumes no responsibility for the correctness of any of
the same except such as describe the Warrant Agent or any action taken
by it. The Warrant Agent assumes no responsibility with respect to
the distribution of the Warrants except as herein otherwise provided.
(b) The Warrant Agent shall not be responsible for and
shall incur no liability to the Company or any Holder for any failure
of the Company to comply with the covenants contained in this
Agreement or in the Warrants to be complied with by the Company.
(c) The Warrant Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder
either itself (through its employees) or by or through its attorneys
or agents (which shall not include its employees) and shall not be
responsible for the misconduct of any agent appointed with due care.
(d) The Warrant Agent may consult at any time with legal
counsel satisfactory to it (who may be counsel for the Company), and
the Warrant Agent shall incur no liability or responsibility to the
Company or to any Holder in respect of any action taken, suffered or
omitted by it hereunder in good faith and in accordance with the
opinion or the advice of such counsel.
(e) Whenever in the performance of its duties under this
Agreement the Warrant Agent shall deem it necessary or desirable that
any fact or matter be proved or established by the Company prior to
taking or suffering any action hereunder, such fact or matter may be
deemed conclusively to be proved and established by a certificate
signed by the Chairman of the Board, the Chief Executive Officer, the
President, the Chief Operating Officer, one of the Vice Presidents,
the Treasurer or the Secretary of the Company and delivered to the
Warrant Agent; and such certificate shall be full authorization to the
Warrant Agent for any action taken or suffered in good faith by it
under the provisions of this Agreement in reliance upon such
certificate. Without limiting the foregoing, the Company shall notify
the Warrant Agent of the occurrence of the
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Separability Date on the Date it occurs, and until receipt of such
notice the Warrant Agent may (but need not) be entitled to assume that
any such date has not occurred.
(f) The Company agrees to pay the Warrant Agent
reasonable compensation for all services rendered by the Warrant Agent
in the performance of its duties under this Agreement, to reimburse
the Warrant Agent for all expenses, taxes and governmental charges and
other charges of any kind and nature (including attorneys' fees)
incurred by the Warrant Agent in the performance of its duties under
this Agreement (including, without limitation, reasonable fees and
expenses of counsel), and to indemnify the Warrant Agent and its
agents, employees, directors, officers and affiliates and save it and
them harmless against any and all liabilities, losses and expenses,
including, without limitation, judgments, costs and counsel fees, for
anything done or omitted by the Warrant Agent in the performance of
its duties under this Agreement, except as a result of the Warrant
Agent's negligence or bad faith. The obligations of the Company to
the Warrant Agent under this subparagraph (f) shall survive the
termination of the agency under this Agreement.
(g) The Warrant Agent shall be under no obligation to
institute any action, suit or legal proceeding or to take any other
action likely to involve expense unless the Company or one or more
Holders shall furnish the Warrant Agent with reasonable security and
indemnity for any costs and expenses which may be incurred, but this
provision shall not affect the power of the Warrant Agent to take such
action as the Warrant Agent may consider proper, whether with or
without any such security or indemnity. All rights of action under
this Agreement or under any of the Warrants may be enforced by the
Warrant Agent without the possession of any of the Warrants or the
production thereof at any trial or other proceeding relative thereto,
and any such action, suit or proceeding instituted by the Warrant
Agent shall be brought in its name as Warrant Agent, and any recovery
of judgment shall be for the ratable benefit of the Holders, as their
respective rights or interests may appear.
(h) The Warrant Agent and any stockholder, director,
officer or employee ("Related Parties") of the Warrant Agent may buy,
sell or deal in any of the Warrants or other securities of the Company
or become pecuniarily interested in any transactions in which the
Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not
Warrant Agent under this Agreement or such director, officer or
employee. Nothing herein shall preclude the Warrant Agent or any
Related Party from acting in any other capacity for the Company or for
any other legal
-24-
28
entity including, without limitation, acting as Transfer Agent or as a
lender to the Company or an affiliate thereof.
(i) The Warrant Agent shall act hereunder solely as
agent, and its duties shall be determined solely by the provisions
thereof. The Warrant Agent shall not be liable for anything which it
may do or refrain from doing in connection with this Agreement except
for its own negligence or bad faith.
(j) The Warrant Agent will not incur any liability or
responsibility to the Company or to any Holder for any action taken in
reliance on any notice, resolution, waiver, consent, order,
certificate, or other paper, document or instrument reasonably
believed by it to be genuine and to have been signed, sent or
presented by the proper party or parties.
(k) The Warrant Agent shall not be under any
responsibility in respect of the validity of this Agreement or the
execution and delivery hereof (except the due execution hereof by the
Warrant Agent) or in respect of the validity or execution of any
Warrant (except its countersignature thereof); nor shall the Warrant
Agent by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any Warrant Shares
(or other stock) to be issued pursuant to this Agreement or any
Warrant, or as to whether any Warrant Shares (or other stock) will,
when issued, be validly issued, fully paid and nonassessable, or as to
the Exercise Price or the number or amount of Warrant Shares or other
securities or other property issuable upon exercise of any Warrant.
(l) The Warrant Agent is hereby authorized and directed
to accept instructions with respect to the performance of its duties
hereunder from the Chairman of the Board, the Chief Executive Officer,
the President, the Chief Operating Officer, the Chief Financial
Officer, any Vice President or the Secretary of the Company, and to
apply to such officers for advice or instructions in connection with
its duties, and shall not be liable for and shall be fully protected
with respect to any action taken or suffered to be taken by it in good
faith and without negligence in accordance with instructions of any
such officer or officers.
(m) Before the Warrant Agent acts or refrains from acting
with respect to any matter contemplated by this Warrant Agreement, it may
require:
(1) an officers' certificate signed by two officers
stating that, in the opinion of the signers, all conditions precedent,
if any, provided for in this
-25-
29
Warrant Agreement relating to the proposed action have been complied
with; and
(2) an opinion of counsel for the Company stating
that, in the opinion of such counsel, all such conditions precedent
have been complied with.
Each officers' certificate or opinion of counsel with respect
to compliance with a condition or covenant provided for in this Warrant
Agreement shall include:
(1) a statement that the person making such
certificate or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of
the examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that in the opinion of such person,
he has made such examination or investigation as is necessary to
enable him to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(4) a statement as to whether or not, in the opinion
of such person, such condition or covenant has been complied with.
The Warrant Agent shall not be liable for and shall be fully
protected with respect to any action it takes or omits to take in good faith in
reliance on any such certificate or opinion.
(n) No provision of this Agreement shall require the
Warrant Agent to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder or in the exercise
of any of its rights or powers if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it.
SECTION 18. Change of Warrant Agent. The Warrant Agent may
resign and be discharged from its duties under this Agreement by giving to the
Company 30 days' notice in writing. The Warrant Agent may be removed by like
notice to the Warrant Agent from the Company. If the Warrant Agent shall
resign or be removed or shall otherwise become incapable of acting, the Company
shall appoint a successor to the Warrant Agent. If the Company shall fail to
make such appointment within a period of 30 days after such removal or after it
has been notified in writing of
-26-
30
such resignation or incapacity by the resigning or incapacitated Warrant Agent
or by any Holder (who shall with such notice submit his Warrant for inspection
by the Company), then the Warrant Agent or any Holder may apply to any court of
competent jurisdiction for the appointment of a successor to the Warrant Agent.
Pending appointment of a successor to the Warrant Agent, either by the Company
or by such court, the duties of the Warrant Agent shall be carried out by the
Company. Any successor warrant agent, whether appointed by the Company or such
a court, shall be a suitable alternate, experienced in these duties and in good
standing, incorporated under the laws of the United States of America or any
State thereof or the District of Columbia and having at the time of its
appointment as warrant agent a combined capital and surplus of at least
$25,000,000. After appointment, the successor warrant agent shall be vested
with the same powers, rights, duties and responsibilities as if it had been
originally named as Warrant Agent without further act or deed; but the former
Warrant Agent shall deliver and transfer to the successor warrant agent any
property at the time held by it hereunder, and execute and deliver any further
assurance, conveyance, act or deed necessary for such purpose. Failure to file
any notice provided for in this Section 18, however, or any defect therein,
shall not affect the legality or validity of the resignation or removal of the
Warrant Agent or the appointment of the successor warrant agent, as the case
may be. In the event of such resignation or removal, the Company or the
successor warrant agent shall mail by first class mail, postage prepaid, to
each Holder, written notice of such removal or resignation and the name and
address of such successor warrant agent.
SECTION 19. Identity of Transfer Agent. Forthwith upon the
appointment of any Transfer Agent for the Common Stock, or any other shares of
the Company's capital stock issuable upon the exercise of the Warrants, the
Company shall file with the Warrant Agent a statement setting forth the name
and address of such Transfer Agent.
SECTION 20. Successors. All the covenants and provisions of
this Agreement by or for the benefit of the Company, the Warrant Agent or any
Holder of Warrants shall bind and inure to the benefit of their respective
successors and assigns hereunder.
SECTION 21. Termination. This Agreement shall terminate on
the Expiration Date. Notwithstanding the foregoing, this Agreement will
terminate on any earlier date if all Warrants have been exercised or redeemed
pursuant to this Agreement.
SECTION 22. Governing Law. This Agreement and each Warrant
Certificate issued hereunder shall be deemed to be a contract made under the
laws of
-27-
31
the State of New York and shall be governed by and construed in accordance with
the laws of said State, without regard to the conflict of law rules thereof.
SECTION 23. Benefits of This Agreement. Nothing in this
Agreement shall be construed to give to any person or corporation other than
the Company, the Warrant Agent and the registered Holders of the Warrant
Certificates any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall be for the sole and exclusive benefit of
the Company, the Warrant Agent and the registered Holders of the Warrant
Certificates.
SECTION 24. Counterparts. This Agreement may be executed in
any number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together
constitute but one and the same instrument.
-28-
32
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
SOURCE MEDIA, INC.
By: /s/ XXXXXXX X. XXXX
-----------------------------
Name: Xxxxxxx X. Xxxx
Title: Chief Financial Officer
CHASEMELLON SHAREHOLDER
SERVICES, L.L.C.
as Warrant Agent
By: /s/ R. XXXX XXXXX, VP
-----------------------------
Name: R. Xxxx Xxxxx
Title: Vice President
-29-
33
EXHIBIT A
[Form of Warrant Certificate]
[Face]
THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND, ACCORDINGLY, MAY
NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES
OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN
THE FOLLOWING SENTENCE BY ITS ACQUISITION HEREOF OR A BENEFICIAL INTEREST
HEREIN, THE HOLDER (1) REPRESENTS THAT (A) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(a), (1), (2), (3) OR (7) OF REGULATION D
UNDER THE SECURITIES ACT (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (B) IT IS
NOT A U.S. PERSON, IS NOT ACQUIRING THIS SECURITY FOR THE ACCOUNT OR BENEFIT OF
A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH REGULATORS UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL
NOT, WITHIN THE TIME PERIOD REFERRED TO UNDER RULE 144(k) (TAKING INTO ACCOUNT
THE PROVISIONS OF RULE 144(d) UNDER THE SECURITIES ACT, IF APPLICABLE) UNDER
THE SECURITIES ACT AS IN EFFECT ON THE DATE OF THE TRANSFER OF THIS SECURITY,
RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO SOURCE MEDIA, INC.
("SOURCE") OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO AN
INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER FURNISHES TO THE
WARRANT AGENT, A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY, AND IF
SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE AMOUNT OF WARRANTS AT THE TIME OF
TRANSFER OF LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO SOURCE THAT
SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (C) OUTSIDE THE UNITED
STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY
RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE, BASED UPON AN OPINION OF
COUNSEL ACCEPTABLE TO SOURCE), (E) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR (F) IN ACCORDANCE WITH ANOTHER EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (BASED UPON AN
34
EXHIBIT A
Page 2
OPINION OF COUNSEL ACCEPTABLE TO SOURCE) AND IN EACH CASE, IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS, AND (3) AGREES THAT IT WILL DELIVER TO EACH
PERSON TO WHOM THIS SECURITY OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANING
GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE
WARRANT AGREEMENT CONTAINS A PROVISION REQUIRING THE WARRANT AGENT TO REFUSE TO
REGISTER TRANSFER OF THIS SECURITY IN VIOLATION OF THE FOREGOING RESTRICTIONS.
35
EXHIBIT A
Page 3
EXERCISABLE ON OR AFTER THE DATE OF ISSUANCE
AND ON OR BEFORE NOVEMBER 1, 2007
No. ______
Warrants
CUSIP No.:
Warrant Certificate
Source Media, Inc.
This Warrant Certificate certifies that _____________________ or
registered assigns, is the registered Holder of Warrants expiring November 1,
2007 (the "Warrants") to purchase shares of common stock (the "Common Stock")
of Source Media, Inc., a Delaware corporation (the "Company"). Each Warrant
entitles the Holder upon exercise to receive from the Company on or after the
date hereof and on or before 5: 00 p.m. New York City Time on November 1, 2007,
_______ fully paid and nonassessable shares of Common Stock (each a "Warrant
Share") at the initial exercise price (the "Exercise Price") of $.001 payable
in lawful money of the United States of America upon surrender of this Warrant
Certificate and payment of the Exercise Price at the office or agency of the
Warrant Agent, but only subject to the conditions set forth herein and in the
Warrant Agreement referred to on the reverse hereof. The Exercise Price and
number of Warrant Shares issuable upon exercise of the Warrants are subject to
adjustment upon the occurrence of certain events set forth in the Warrant
Agreement.
No Warrant may be exercised after 5:00 p.m., New York City
Time, on November 1, 2007, and to the extent not exercised by such time such
Warrants shall become void.
This Warrant Certificate shall not be valid unless
countersigned by the Warrant Agent, as such term is used in the Warrant
Agreement.
This Warrant Certificate shall be governed and construed in
accordance with the internal laws of the State of New York.
36
EXHIBIT A
Page 4
IN WITNESS WHEREOF, Source Media, Inc. has caused this Warrant
Certificate to be signed by its Chairman and by its Secretary.
Dated:
SOURCE MEDIA, INC.
By:
-----------------------------
Name:
Title:
By:
-----------------------------
Name:
Title:
Countersigned:
ChaseMellon Shareholder Services, L.L.C.
as Warrant Agent
By:
----------------------------------
Authorized Signature
37
EXHIBIT A
Page 5
[Form of Warrant Certificate]
[Reverse]
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants expiring November 1, 2007, entitling the
Holder on exercise to receive shares of voting Common Stock, of the Company
(the "Common Stock"), $.001 par value, and are issued or to be issued pursuant
to a Warrant Agreement dated as of October 30, 1997 (the "Warrant Agreement"),
duly executed and delivered by the Company to ChaseMellon Shareholder Services,
L.L.C., a New Jersey limited liability company as warrant agent (the "Warrant
Agent"), which Warrant Agreement is hereby incorporated by reference in and
made a part of this instrument and is hereby referred to for a description of
the rights, limitation of rights, obligations, duties and immunities thereunder
of the Warrant Agent, the Company and the Holders (the words "Holders" or
"Holder" meaning the registered Holders or registered Holder) of the Warrants.
A copy of the Warrant Agreement may be obtained by the Holder hereof upon
written request to the Company.
Warrants may be exercised at any time on or after the date
hereof and on or before November 1, 2007, subject to extension as provided in
the Warrant Agreement. The Holder of Warrants evidenced by this Warrant
Certificate may exercise them by surrendering this Warrant Certificate, with
the form of election to purchase set forth hereon properly completed and
executed, together with payment of the Exercise Price in cash at the office of
the Warrant Agent. In the event that upon any exercise of Warrants evidenced
hereby the number of Warrants exercised shall be less than the total number of
Warrants evidenced hereby, there shall be issued to the Holder hereof or his
assignee a new Warrant Certificate evidencing the number of Warrants not
exercised. No adjustment shall be made for any dividends on any Common Stock
issuable upon exercise of this Warrant.
The Warrant Agreement provides that upon the occurrence of
certain events the number of Warrants set forth on the face hereof may, subject
to certain conditions, be adjusted. No fractions of a share of Common Stock
will be issued upon the exercise of any Warrant, but the Company win pay the
cash value thereof determined as provided in the Warrant Agreement.
38
EXHIBIT A
Page 6
Warrant Certificates, when surrendered at the office of the
Warrant Agent by the registered Holder thereof in person or by legal
representative or attorney duly authorized in writing, may be exchanged, in the
manner and subject to the limitations provided in the Warrant Agreement, but
without payment of any service charge, for another Warrant Certificate or
Warrant Certificates of like tenor evidencing in the aggregate a like number of
Warrants.
Upon due presentation for registration of transfer of this
Warrant Certificate at the office of the Warrant Agent a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferees in
exchange for this Warrant Certificate, subject to the limitations provided in
the Warrant Agreement, without charge except for any tax or other governmental
charge imposed in connection therewith.
The Company and the Warrant Agent may deem and treat the
registered Holder(s) thereof as the absolute owner(s) of this Warrant
Certificate (notwithstanding any notation of ownership or other writing hereon
made by anyone), for the purpose of any exercise hereof, of any distribution to
the Holder(s) hereof, and for all other purposes, and neither the Company nor
the Warrant Agent shall be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entitles any Holder hereof to any rights
of a stockholder of the Company.
ELECTION TO EXERCISE
(TO BE EXECUTED UPON EXERCISE OF THE WARRANT)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase _____ shares of Common
Stock of Source Media, Inc. and herewith tenders in payment for such Shares
$___________ in lawful money of the United States of America. In accordance
with the terms hereof. The undersigned requests that a certificate
representing such Shares be registered and delivered as follows:
-----------------------------------
Name
-----------------------------------
39
EXHIBIT A
Page 7
Address
-----------------------------------
Delivery Address (if different)
If such number of Shares is less than the aggregate number of Shares
purchasable hereunder, the undersigned requests that a new Warrant Certificate
representing the balance of such Shares be registered and delivered as follows:
-----------------------------------
Name
-----------------------------------
Address
-----------------------------------
Delivery Address (if different)
--------------------------------------------------------------------------------
Social Security or
Other Taxpayer Identification Number of Holder
--------------------------------------------------------------------------------
Signature
Note: The above signature must correspond with the name as written upon the
face of this Warrant Certificate in every particular, without alteration or
enlargement or any change whatsoever. If the certificate representing the
Shares or any Warrant Certificate representing Warrants not exercised is to be
registered in a name other than that in which this Warrant Certificate is
registered, the signature of the holder hereof must be guaranteed.
Signature Guaranteed:
------------------------------
ASSIGNMENT
(TO BE EXECUTED BY THE REGISTERED HOLDER IF SUCH
HOLDER DESIRES TO TRANSFER THE WARRANT CERTIFICATE)
For Value Received, the undersigned registered holder hereby sells, assigns and
transfers unto
40
EXHIBIT A
Page 8
-----------------------------------
Name of Assignee
-----------------------------------
Address of Assignee
this Warrant Certificate, together with all right, title and interest therein,
and does irrevocably constitute and appoint
--------------------------------------------------------------------------------
attorney, to transfer the within Warrant Certificate on the books of the
Warrant Agent, with full power of substitution.
--------------------------------------------------------------------------------
Date
--------------------------------------------------------------------------------
Signature
Note: The above signature must correspond with the name as written upon the
face of this Warrant Certificate in every particular, without alteration or
enlargement or any change whatsoever.
--------------------------------------------------------------------------------
Social Security or Other
Taxpayer Identification Number of Assignee
Signature Guaranteed:
-------------------------
41
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF WARRANTS
Re: Warrants to purchase
Common Stock (the "Securities"), of
Source Media, Inc.
This Certificate relates to _________ Securities held in the
form of* ___________ a beneficial interest in ___________ Physical Warrants by
___________ (the "Transferor").
The Transferor:*
/ / has requested that the Warrant Agent by written order to
exchange or register the transfer of a Physical Warrant or Physical Warrants.
In connection with such request and in respect of each such
Security, the Transferor does hereby certify that the Transferor is familiar
with the Warrant Agreement relating to the above captioned Securities and the
restrictions on transfers thereof as provided in Section 6 of such Warrant
Agreement, and that the transfer of these Securities does not require
registration under the Securities Act of 1933, as amended (the "Act") because*:
/ / Such Security is being acquired for the Transferor's own
account, without transfer.
/ / Such Security is being transferred to an institutional
"accredited investor" (within the meaning of subparagraphs (a)(1), (2), (3) or
(7) of Rule 501 under the Act.
/ / Such Security is being transferred in reliance on
Regulation S under the Act.
/ / Such Security is being transferred in reliance on Rule 144
under the Act.
42
EXHIBIT B
Page 2
/ / Such Security is being transferred in reliance on and in
compliance with an exemption from the registration requirements of the Act
other than Rule 144A or Rule 144 or Regulation S under the Act to a person
other than an institutional "accredited investor.
-------------------------------
(INSERT NAME OF TRANSFEROR)
By:
----------------------------
(Authorized Signatory)
Date:
----------------------
*Check applicable box.
43
EXHIBIT C
Form of Certificate to Be
Delivered in Connection with
Transfers to Institutional Accredited Investors
[Date]
[Name of Warrant Agent]
[Address]
Attention: Corporate Trust Administration
Re: Source Media, Inc.
(the "Company") Warrants to purchase Common Stock (the
"Securities")
Ladies and Gentlemen:
In connection with our proposed purchase of Securities, of the
Company, we confirm that:
1. We have received such information as we deem
necessary in order to make our investment decision.
2. We understand that any subsequent transfer of the
Securities is subject to certain restrictions and conditions set forth in the
Warrant Agreement and the undersigned agrees to be bound by, and not to resell,
pledge or otherwise transfer the Securities except in compliance with, such
restrictions and conditions and the Securities Act of 1933, as amended (the
"Securities Act").
3. We understand that the Warrants of the Company
represented by this Certificate are subject to a Warrant Registration Rights
Agreement dated as of October 30, 1997, which contains provisions regarding
restrictions on the transfer and the mandatory transfer of such shares and
other matters.
44
EXHIBIT C
Page 2
4. We understand that the offer and sale of the
Securities have not been registered under the Securities Act, and that the
Securities may not be offered or sold within the United States or to, or for
the account or benefit of, U.S. persons except as permitted in the following
sentence. We agree, on our own behalf-and on behalf of any accounts for which
we are acting as hereinafter stated, that if we should sell any Securities, we
will do so only (A) to the Company or any subsidiary thereof, (B) inside the
United States to an institutional "accredited investor" (as defined below)
that, prior to such transfer, furnishes (or has furnished on its behalf by a
U.S. broker-dealer) to the Warrant Agent a signed letter substantially in the
form hereof, (C) outside the United States in accordance with Regulation S
under the Securities Act, (D) pursuant to the exemption from registration
provided by Rule 144 under the Securities Act (if available), or (E) pursuant
to an effective registration statement under the Securities Act, and we further
agree to provide to any person purchasing Securities from us a notice advising
such purchaser that resales of the Securities are restricted as stated herein.
5. We understand that, on any proposed resale of
Securities, we will be required to furnish to the Warrant Agent and the
Company, such certification, legal opinions and other information as the
Warrant Agent and the Company may reasonably require to confirm that the
proposed sale complies with the foregoing restrictions. We further understand
that the Securities purchased by us will bear a legend to the foregoing effect.
6. We are an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities
Act) and have such knowledge and experience in financial and business matters
as to be capable of evaluating the merits and risks of our investment in the
Securities, and we and any accounts for which we are acting are each able to
bear the economic risk of our or their investment, as the case may be.
7. We are acquiring the Securities purchased by us for
our account or for one or more accounts (each of which is an institutional
"accredited investor") as to each of which we exercise sole investment
discretion.
45
EXHIBIT C
Page 3
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.
Very truly yours,
(Name of Transferor)
By:
------------------------------
(Authorized Signatory)
46
EXHIBIT D
Form of Certificate to Be
Delivered in Connection
with Regulation S Transfers
[Date]
[Name of Warrant Agent]
[Address]
Attention: Source Media, Inc.
Re: Source Media, Inc.
(the "Company") Warrants to purchase Common Stock (the
"Securities")
Dear Sirs:
In connection with our proposed sale of __________ of the
Securities, we confirm that such sale has been effected pursuant to and in
accordance with Regulation S under the Securities Act of 1933, as amended (the
"Securities Act"), and, accordingly, we represent that:
(1) the offer of the Securities was not made to a person
in the United States;
(2) either (a) at the time the buy offer was originated,
the transferee was outside the United States or we and any person acting on our
behalf reasonably believed that the transferee was outside the United States,
or (b) the transaction was executed in, on or through the facilities of a
designated off-shore securities market and neither we nor any person acting on
our behalf knows that the transaction has been prearranged with a buyer in the
United States;
47
EXHIBIT D
Page 2
(3) no directed selling efforts have been made in the
United States in contravention of the requirements of Rule 903(b) or Rule
904(b) of Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to
evade the registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer
restrictions applicable to the Securities.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Defined terms used herein without
definition have the respective meanings provided in Regulation S.
Very truly yours,
(Name of Transferor)
By:
-----------------------------
(Authorized Signatory)
