EXHIBIT 4 (ae)
WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of December 7, 1998, between DIGITAL LAVA INC.,
a Delaware corporation (the "Company"), and the persons whose names and
addresses are set forth on Schedule I annexed hereto (the "Holders").
W I T N E S S E T H:
WHEREAS, pursuant to a subscription agreement of even date hereof between
the Company and the Holders, Holders shall be issued an aggregate of up to 5.5
units of the Company's securities ("Units"), each Unit consisting of (i) a
subordinated promissory note in the principal amount of $100,000 (individually,
a "Promissory Note" and collectively, the "Promissory Notes"), and (ii) warrants
(the "Warrants") to purchase shares of the Company's common stock, par value
$.0001 per share ("Common Stock," shares of Common Stock shall be referred to as
"Shares" or "Common Shares").
NOW THEREFORE, in consideration of the premises herein set forth and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Issue. At the earlier of (x) the closing of an anticipated initial
public offering of the Company's securities (the "IPO") or (y) six months from
the date hereof (the "Warrant Certificate Delivery Date"), the Company shall
issue to each Holder a certificate (the "Warrant Certificate") dated as of the
date hereof providing each Holder with the right to purchase, at any time
commencing on the earlier of one year from the date hereof or six months after
closing of the IPO (the "Initial Exercise Date") until 5:30 p.m., New York time,
on December 7, 2003, up to that number of Common Shares equal to the product of
(i) the number of Units purchased by such Holder times (ii) 50,000. Such shares
shall be referred to as the "Warrant Shares". The number of Warrant Shares shall
be subject to adjustment as provided in Section 9 hereof, and the exercise price
per Warrant Share (also subject to adjustment as provided in Section 9 hereof)
shall equal 130% of the offering price of the Common Shares sold by the Company
in the IPO (the "IPO Price"). If there has not been a closing of the IPO on or
before the date that is six months from the date hereof, the number of Warrant
Shares per Unit will equal the product of (x) 50,000 times (y) the most recent
calculation of the reverse share split anticipated to have occurred immediately
prior to the IPO (which, as of the date hereof, is 9.01) and the exercise price
will be $1.00. The Company will give prompt written notice of the actual number
of Warrants shares issuable upon exercise of the Warrants as well as the
exercise price thereof to the Holders, pursuant to Section 9.3 hereof, as
determined in accordance with the foregoing sentences.
2. Warrant Certificate. A Warrant Certificate shall be delivered to each
Holder, to further evidence rights herein and shall be in the form set forth in
Exhibit X, attached hereto and made a part hereof, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Agreement.
3. Exercisability of Warrants. The Warrants shall be exercisable at any
time commencing on the Initial Exercise Date until 5:30 p.m., New York time, on
December 7, 2003.
4. Procedure for Exercise of Warrants.
4.1 Cash Exercise. The Warrants are exercisable at an aggregate initial
exercise price per Warrant Share set forth in Section 1 hereof payable by
certified check or official bank check in New York Clearing House funds. Upon
surrender of a Warrant Certificate with the annexed Form of Election to Purchase
duly executed, together with payment of the Exercise Price (as hereinafter
defined) for the Warrant Shares purchased, at the Company's principal offices in
Los Angeles, California (presently located at 00000 Xxxxxxxx Xxxxxxxxx, Xxxxx
0000, Xxx Xxxxxxx, XX 90024) the registered holder of a Warrant Certificate
(individually a "Holder" and sometimes collectively the "Holders") shall be
entitled to receive a certificate for the Warrant Shares so purchased. The
purchase rights represented by the Warrant Certificate are exercisable at the
option of the Holder thereof in whole or in part (but not as to fractional
Common Shares underlying the Warrants). In the case of the purchase of less than
all the Warrant Shares purchasable under the Warrant Certificate, the Company
shall cancel said Warrant Certificate upon the surrender thereof and shall
execute and deliver a new Warrant Certificate of like tenor for the balance of
the Warrant Shares purchasable thereunder.
4.2 Cashless Exercise. In addition to the exercise of all or a portion of
the Warrants by the payment of the Exercise Price in cash or check as set forth
in Section 4.1 above, and in lieu of any such payment, the Holder has the right
to exercise the Warrants, in full or in part, by surrendering the Warrant
Certificate with the annexed Form of Election to Purchase duly executed, in
exchange for the number of Warrant Shares equal to the product of (x) the number
of Warrant Shares as to which the Warrants are being exercised multiplied by (y)
a fraction, the numerator of which is the Current Market Price of the Common
Shares (as defined below) less the Exercise Price then in effect and the
denominator of which is the Current Market Price.
4.3 Current Market Price. The term "Current Market Price" shall be deemed
to be the last reported sale price, or, in case no reported sale takes place on
such day, the average of the last reported sales price for the last three (3)
trading days, in either case as officially reported by the principal securities
exchange on which the Common Shares are listed or admitted to trading, or if the
Common Shares are not listed or admitted to trading on any national securities
exchange or quotation by NASDAQ-NMS, the average closing bid price as reported
through NASDAQ (or any similar organization if NASDAQ is no longer reporting
such bid) or, if the Common Shares are not so listed, admitted or quoted, as
determined in good faith by the Board of Directors of the Company based on the
best information available to it.
5. Issuance of Certificate. Upon the exercise of the Warrants, the issuance
of a certificate for Warrant Shares (or Other Securities) shall be made
forthwith (and in any event within five (5) business days thereafter) without
charge to the Holder thereof including, without limitation, any tax which may be
payable in respect of the issuance thereof, and such certificate shall (subject
to the provisions of Sections 6 and 8 hereof) be issued in the name of, or in
such names as may be directed by, the Holder thereof; provided, however, that
the Company shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any such certificate in
a name other than that of the Holder and the Company shall not be required to
issue or deliver such certificate 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.
The Warrant Certificate and the certificate representing the Warrant Shares
(or Other Securities) shall be executed on behalf of the Company by the manual
or facsimile signature of the then present
Chairman or Vice Chairman of the Board of Directors or President or any Vice
President of the Company under its corporate seal reproduced thereon, attested
to by the manual or facsimile signature of the then present Secretary or any
Assistant Secretary of the Company. The Warrant Certificate shall be dated the
date of execution by the Company upon initial issuance, division, exchange,
substitution or transfer.
5.1 Ownership of Common Shares. Upon the Holder exercising the Warrant, it
shall be deemed to be the owner of the Warrant Shares upon delivery to the
Company, regardless of when the certificates representing the Warrant Shares are
issued.
6. Transfer of Warrants. The Holder of the Warrant Certificate, by its
acceptance thereof, covenants and agrees that the Warrants are being acquired as
an investment and not with a view to the distribution thereof. The Warrants may
be sold, transferred, assigned, hypothecated or otherwise disposed of, in whole
or in part, without restriction, subject to compliance with applicable
securities laws.
7. Exercise Price.
7.1 Initial and Adjusted Exercise Price. Except as otherwise provided in
Section 9 hereof, the initial exercise price of each Warrant shall be the price
set forth in Section 1 hereof. The adjusted exercise price shall be the price
which shall result from time to time from any and all adjustments of the initial
exercise price in accordance with the provisions of Section 9 hereof.
7.2 Exercise Price. The term "Exercise Price" herein shall mean the initial
exercise price or the adjusted exercise price, depending upon the context.
8. Registration Under the Securities Act of 1933. Subject to the
Registration Rights Agreement between the Company and the Holders dated as of
the date hereof, the Warrants, the Warrant Shares and any of the Other
Securities issuable upon exercise of the Warrants have not been registered under
the Securities Act of 1933, as amended (the "Act"). Upon exercise, in whole or
in part, of the Warrants, a certificate representing the Warrant Shares
underlying the Warrants, and any of the Other Securities issuable upon exercise
of the Warrants (collectively, the "Warrant Securities") shall bear the
following legend unless such Warrant Shares or other securities previously have
been registered under the Act in accordance with the terms hereof:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("ACT"), AND MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER
THE ACT (OR ANY SIMILAR RULE UNDER THE ACT RELATING TO THE DISPOSITION
OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL
BE REASONABLY SATISFACTORY TO COUNSEL TO THE ISSUER, THAT AN EXEMPTION
FROM REGISTRATION UNDER THE ACT IS AVAILABLE.
9. Adjustments to Exercise Price and Number of Securities. The Exercise
Price and, in some cases, the number of Warrant Shares purchasable upon the
exercise of the Warrants, shall be subject to adjustment from time to time upon
the occurrence of certain events described in this Section 9.
9.1 Subdivision or Combination of Common Shares and Common Share Dividend.
In case the Company shall at any time subdivide its outstanding Common Shares
into a greater number of Common Shares or declare a dividend upon its Common
Shares payable solely in Common Shares, the Exercise Price in effect immediately
prior to such subdivision or declaration shall be proportionately reduced, and
the number of Warrant Shares issuable upon exercise of the Warrants shall be
proportionately increased. Conversely, in case the outstanding Common Shares of
the Company shall be combined into a smaller number of Common Shares, the
Exercise Price in effect immediately prior to such combination shall be
proportionately increased, and the number of Warrant Shares issuable upon
exercise of the Warrants shall be proportionately reduced.
9.2 Dilutive Issuances. In the event that the Company shall sell or issue
at any time after the date of this Warrant and prior to its termination, Shares
(other than Excluded Shares, as defined in Section 9.2.5), or any other equity
securities or rights (including Company treasury stock) which are exercisable,
exchangeable or convertible into Shares, at a consideration per Share less than
the IPO Price (if a closing under the IPO has occurred on or before the date
that is six months from the date hereof) or less than $1.00 (if no such closing
has occurred), as the case may be, then the Exercise Price shall be adjusted to
a new Exercise Price (calculated to the nearest cent) determined by dividing
(a) an amount equal to (i) the total number of Shares Outstanding (as
defined below and subject to adjustment in the manner set forth in Section
9.1) on the date of issuance of this Warrant before such issuance or sale
multiplied by the Exercise Price in effect on the date of issuance of this
Warrant (subject, however, to adjustment in the manner set forth in Section
9.1), plus (ii) the aggregate of the amount of all consideration, if any,
received by the Company for the issuance or sale of Shares since the date
of issuance of this Warrant, by
(b) the total number of Shares Outstanding immediately after such
issuance or sale.
In no event shall any such adjustment be made pursuant to this Section 9.2 if it
would increase the Exercise Price in effect immediately prior to such
adjustment, except as provided in Sections 9.2.3 and 9.2.4. Upon each adjustment
of the Exercise Price pursuant to this Section 9.2, the holder of this Warrant
shall thereafter be entitled to purchase, at the Exercise Price resulting from
such adjustment, the number of Warrant Shares obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
Warrant Shares purchasable pursuant hereto immediately prior to such adjustment,
and dividing the product thereof by the Exercise Price resulting from such
adjustment.
9.2.1 Definitions. For purposes of this Section 9.2, the following
definitions shall apply:
(a) "Convertible Securities" shall mean any indebtedness or securities
convertible into or exchangeable for Shares.
(b) "Options" shall mean any rights, warrants or options to subscribe
for or purchase Shares or Convertible Securities other than rights,
warrants or options to purchase Excluded Securities (as defined in Section
9.2.5).
(c) "Shares Outstanding" shall mean the aggregate of all Shares
outstanding and all Shares issuable upon exercise of all outstanding
Options and conversion of all outstanding Convertible Securities.
9.2.2 For the purposes of this Section 9.2, the following provisions shall
also be applicable:
9.2.2.1 Cash Consideration. In case of the issuance or sale of
additional Shares for cash, the consideration received by the Company
therefor shall be deemed to be the amount of cash received by the Company
for such Shares (or, if such Shares are offered by the Company for
subscription, the subscription price, or, if such Shares are sold to
underwriters or dealers for public offering without a subscription
offering, the public offering price), without deducting therefrom any
compensation or discount paid or allowed to underwriters or dealers or
others performing similar services or for any expenses incurred in
connection therewith.
9.2.2.2 Non-Cash Consideration. In case of the issuance (otherwise
than upon conversion or exchange of Convertible Securities) or sale of
additional Shares, Options or Convertible Securities for a consideration
other than cash or a consideration a part of which shall be other than
cash, the fair value of such consideration as determined by the Board of
Directors (if any, otherwise by the Managers) of the Company in the good
faith exercise of its business judgment (in a duly authorized resolution
certified by the secretary of the Company), irrespective of the accounting
treatment thereof, shall be deemed to be the value, for purposes of this
Section 9, of the consideration other than cash received by the Company for
such securities. If the Holder does not agree with the valuation, he may
seek the opinion of a mutually acceptable appraiser. This cost shall be
borne by the Company, unless the value determined by the appraiser is
within 5% of the value determined by the Board.
9.2.2.3 Options and Convertible Securities. In case the Company shall
in any manner issue or grant any Options or any Convertible Securities, the
total maximum number of Shares of issuable upon the exercise of such
Options or upon conversion or exchange of the total maximum amount of such
Convertible Securities at the time such Convertible Securities first become
convertible or exchangeable shall (as of the date of issue or grant of such
Options or, in the case of the issue or sale of Convertible Securities
other than where the same are issuable upon the exercise of Options, as of
the date of such issue or sale) be deemed to be issued and to be
outstanding for the purpose of this Section 9.2 and to have been issued for
the sum of the amount (if any) paid for such Options or Convertible
Securities and the amount (if any) payable upon the exercise of such
Options or upon conversion or exchange of such Convertible Securities at
the time such Convertible Securities first become convertible or
exchangeable; provided that, subject to the provisions of Section 9.2.3, no
further adjustment of the Exercise Price shall be made upon the actual
issuance of any such Shares or Convertible Securities or upon the
conversion or exchange of any such Convertible Securities.
9.2.3 Change in Option Price or Conversion Rate. In the event that the
purchase price provided for in any Option referred to in subsection 9.2.2.3, or
the rate at which any Convertible Securities referred to in subsection 9.2.2.3
are convertible into or exchangeable for Shares shall change at any time (other
than under or by reason of provisions designed to protect against dilution),
then, for purposes of any adjustment required by Section 9.2, the Exercise Price
in effect at the time of such event shall forthwith be readjusted to the
Exercise Price that would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed purchase
price, additional
consideration or conversion rate, as the case may be, at the time initially
granted, issued or sold, provided that if such readjustment is an increase in
the Exercise Price, such readjustment shall not exceed the amount (as adjusted
by Sections 9.1 and 9.2) by which the Exercise Price was decreased pursuant to
Section 9.2 upon the issuance of the Option or Convertible Security. In the
event that the purchase price provided for in any such Option referred to in
subsection 9.2.2.3, or the additional consideration (if any) payable upon the
conversion or exchange of any Convertible Securities referred to in subsection
9.2.2.3, or the rate at which any Convertible Securities referred to in
subsection 9.2.2.3 are convertible into or exchangeable for Shares, shall be
reduced at any time under or by reason of provisions with respect thereto
designed to protect against dilution, then in case of the delivery of Shares
upon the exercise of any such Option or upon conversion or exchange of any such
Convertible Security; the Exercise Price then in effect hereunder shall, upon
issuance of such Shares, be adjusted to such amount as would have obtained had
such Option or Convertible Security never been issued and had adjustments been
made only upon the issuance of the Shares delivered as aforesaid and for the
consideration actually received for such Option or Convertible Security and the
Shares, provided that if such readjustment is an increase in the Exercise Price,
such readjustment shall not exceed the amount (as adjusted by Sections 9.1 and
9.2) by which the Exercise Price was decreased pursuant to Section 9.2 upon the
issuance of the Option or Convertible Security.
9.2.4 Termination Of Option or Conversion Rights. In the event of the
termination or expiration of any right to purchase Shares under any Option
granted after the date of this Warrant or of any right to convert or exchange
Convertible Securities issued after the date of this Warrant, the Exercise Price
shall, upon such termination, be readjusted to the Exercise Price that would
have been in effect at the time of such expiration or termination had such
Option or Convertible Security, to the extent outstanding immediately prior to
such expiration or termination, never been issued, and the Shares issuable
thereunder shall no longer be deemed to be Shares Outstanding, provided that if
such readjustment is an increase in the Exercise Price, such readjustment shall
not exceed the amount (as adjusted by Sections 9.1 and 9.2) by which the
Exercise Price was decreased pursuant to Section 9.2 upon the issuance of the
Option or Convertible Security. The termination or expiration of any right to
purchase Shares under any Option granted prior to the date of this Warrant or of
any right to convert or exchange Convertible Securities issued prior to the date
of this Warrant shall not trigger any adjustment to the Exercise Price, but the
Shares issuable under such Options or Convertible Securities shall no longer be
counted in determining the number of Shares Outstanding on the date of issuance
of this Warrant for purposes of subsequent calculations under this Section 9.2.
9.2.5 Excluded Shares. Notwithstanding anything herein to the contrary, the
Exercise Price shall not be adjusted pursuant to this Section 9.2 by virtue of
the issuance and/or sale of Excluded Shares, which shall mean the following: (a)
Shares issuable upon the exercise of the Warrants; (b) Shares, Options or
Convertible Securities to be issued and/or sold to employees, advisors
(including, without limitation, financial, technical and legal advisers),
directors, or officers of, or consultants to, the Company or any of its
subsidiaries pursuant to the Company's existing 1996 Stock Option Plan (which
has reserved for issuance 250,000 Common Shares, on a post-reverse split basis)
or any other stock option plan duly adopted by the Board of Directors and
stockholders of the Company; (c) the issuance of Shares, Options and/or
Convertible Securities pursuant Options and Convertible Securities outstanding
as of the date of this Warrant or which the Company has a current obligation to
issue at some future date; (d) the issuance of Shares, Options or Convertible
Securities as a share dividend or upon any subdivision or combination of Shares
or Convertible Securities (for which appropriate adjustments are to be made
pursuant to Section 9.1 hereof); (e) the issuance of Shares (including those
Shares issuable upon the exercise or conversion of Options or Convertible
Securities) in connection a strategic partnership or other business and/or
product consolidation or joint venture and (f) the issuance of Shares, Options
and
Convertible Securities in connection with the IPO (including, without
limitation, those issued as part of the underwriter's over-allotment option and
as compensation to the underwriter). For all purposes of this Section 9.2, all
Shares of Excluded Shares shall be deemed to have been issued for an amount of
consideration per Share equal to the initial Exercise Price (subject to
adjustment in the manner set forth in Section 9.1). In addition, if the amount
of any adjustment pursuant to this Section 9 shall be less than two cents (24)
per Warrant Share no adjustment to the Exercise Price or to the number of
Warrant Shares issuable upon the exercise of the Warrants shall be made;
provided, however, that in such case any adjustment that would otherwise be
required then to be made shall be carried forward and shall be made at the time
of and together with the next subsequent adjustment which, together with any
adjustment so carried forward, shall amount to at least two cents (24) per
Warrant Share.
9.3 Notice of Adjustment. Promptly after adjustment of the Exercise Price
or any increase or decrease in the number of Warrant Shares purchasable upon the
exercise of this Warrant, the Company shall give written notice thereof, by
first class mail, postage prepaid, addressed to the registered holder of this
Warrant at the address of such holder as shown on the books of the Company. The
notice shall be signed by the Company's chief financial officer and shall state
(i) the effective date of the adjustment and the Exercise Price resulting from
such adjustment and (ii) the increase or decrease, if any, in the number of
Common Shares purchasable at such price upon the exercise of this Warrant,
setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based.
9.4 Other Notices. If at any time:
(a) the Company shall declare any cash dividend upon its Common
Shares;
(b) the Company shall declare any dividend upon its Common Shares
payable in securities (other than a dividend payable solely in Common
Shares) or make any special dividend or other distribution to the holders
of its Common Shares;
(c) there shall be any consolidation or merger of the Company with
another corporation, or a sale of all or substantially all of the Company's
assets to another corporation; or
(d) there shall be a voluntary or involuntary dissolution, liquidation
or winding-up of the Company;
then, in any one or more of said cases, the Company shall give, by certified or
registered mail, postage prepaid, addressed to the registered holder of this
Warrant at the address of such holder as shown on the books of the Company, (i)
at least 15 days' prior written notice of the date on which the books of the
Company shall close or a record shall be taken for such dividend, distribution
or subscription rights or for determining rights to vote in respect of any such
dissolution, liquidation or winding-up; (ii) at least 10 days' prior written
notice of the date on which the books of the Company shall close or a record
shall be taken for determining rights to vote in respect of any such
reorganization, reclassification, consolidation, merger or sale, and (iii) in
the case of any such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding-up, at least 15 days' written notice
of the date when the same shall take place. Any notice given in accordance with
clause (i) above shall also specify, in the case of any such dividend,
distribution or option rights, the date on which the holders of Common Shares
shall be entitled thereto. Any notice given in accordance with clause (iii)
above shall also specify the date on which the holders of Common Shares shall be
entitled to exchange their Common Shares for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding-up, as the case may be. If the Holder
of
the Warrant does not exercise this Warrant prior to the occurrence of an event
described above, except as provided in Sections 9.1 and 9.5, the Holder shall
not be entitled to receive the benefits accruing to existing holders of the
Common Shares in such event.
9.5 Changes in Common Shares. In case at any time the Company shall be a
party to any transaction (including, without limitation, a merger,
consolidation, business combination or other sale or conveyance of all or
substantially all of the Company's assets or recapitalization of the Common
Shares) in which the previously outstanding Common Shares shall be changed into
or exchanged for different securities of the Company or common stock or other
securities of another corporation or interests in a non-corporate entity or
other property (including cash) or any combination of any of the foregoing (each
such transaction being herein called the "Transaction" and the date of
consummation of the Transaction being herein called the "Consummation Date"),
then, as a condition of the consummation of the Transaction, lawful and adequate
provisions shall be made so that each Holder, upon the exercise hereof at any
time on or after the Consummation Date, shall be entitled to receive, and this
Warrant shall thereafter represent the right to receive, in lieu of the Common
Shares issuable upon such exercise prior to the Consummation Date, the highest
amount of Common Shares and/or other securities, rights and property receivable
upon such consolidation, merger, sale or conveyance to which such Holder would
actually have been entitled as a holder of an Common Share upon the consummation
of the Transaction if such Holder had exercised such Warrant immediately prior
thereto. The provisions of this Section 9.5 shall similarly apply to successive
Transactions.
10. Exchange and Replacement of Warrant Certificate. The Warrant
Certificate is exchangeable without expense, upon the surrender thereof by the
registered Holder at the principal executive office of the Company, for a new
Warrant Certificate of like tenor and date representing in the aggregate the
right to purchase the same number of Warrant Shares in such denominations as
shall be designated by the Holder thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of the Warrant Certificate, and, in
case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Warrants, if
mutilated, the Company will make and deliver a new Warrant Certificate of like
tenor, in lieu thereof.
11. Elimination of Fractional Interests. The Company shall not be required
to issue certificates representing fractions of Common Shares upon the exercise
of the Warrants, nor shall it be required to issue scrip or pay cash in lieu of
fractional interests, it being the intent of the parties that all fractional
interests shall be eliminated by rounding any fraction up to the nearest whole
number of Common Shares or Other Securities.
12. Reservation of Securities. The Company shall at all times reserve and
keep available out of its authorized Common Shares, solely for the purpose of
issuance upon the exercise of the Warrants, such number of Common Shares or
Other Securities as shall be issuable upon the exercise thereof. The Company
covenants and agrees that, upon exercise of the Warrants and payment of the
Exercise Price therefor, all Common Shares or Other Securities issuable upon
such exercise shall be duly and validly issued, fully paid, non-assessable and
not subject to the preemptive rights of any holder of Common Shares.
13. Notices to Warrant Holder. Except as otherwise provided in Section 9.4,
nothing contained in this Agreement shall be construed as conferring upon the
Holder by virtue of his holding the Warrant
the right to vote or to consent or to receive notice as a holder of a Common
Share in respect of any meetings of such holders for the election of directors
or any other matter, or as having any rights whatsoever as such a holder of the
Company.
14. Notices.
All notices, requests, consents and other communications hereunder shall be
in writing and shall be deemed to have been duly made and sent when delivered,
or mailed by registered or certified mail, return receipt requested:
(a) If to the registered Holder of the Warrants, to the address of
such Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in Section 4 hereof
(with copy to: Xxxxxxxxxx Xxxxxxxxx Xxxxxx & Xxxxxx, LLP 00 Xxxx 00xx
Xxxxxx, 00xx Xxxxx, Xxx Xxxx, XX 10017/Attn. Xxxxxxx X. Xxxxx, Esq.) or to
such other address as the Company may designate by notice to the Holder.
15. Supplements and Amendments. The Company and Holder may from time to
time supplement or amend this Agreement in order to cure any ambiguity, to
correct or supplement any provision contained herein which may be defective or
inconsistent with any provisions herein, or to make any other provisions in
regard to matters or questions arising hereunder which the Company and Holder
may deem necessary or desirable.
16. Successors. All the covenants and provisions of this Agreement shall be
binding upon and inure to the benefit of the Company, the Holder and their
respective successors and assigns hereunder.
17. Termination. This Agreement shall terminate at the close of business on
the fifth anniversary of the issuance of the Warrants.
18. Governing Law. This Agreement and the Warrant Certificate issued
hereunder shall be deemed to be a contract made under the laws of the State of
New York and for all purposes shall be construed in accordance with the laws of
the State of New York without giving effect to the rules of the State of New
York governing the conflicts of laws. Any action or proceeding relating to this
Agreement and the Warrant Certificate may be brought in the courts of New York
sitting in New York County, or in the United States courts located in New York
County, New York, and each of the parties irrevocably consents to the
jurisdiction of such courts in any such action or proceeding.
19. Entire Agreement; Modification. This Agreement contains the entire
understanding between the parties hereto with respect to the subject matter
hereof and may not be modified or amended except by a writing duly signed by the
party against whom enforcement of the modification or amendment is sought.
20. Severability. If any provision of this Agreement shall be held to be
invalid or unenforceable, such invalidity or unenforceability shall not affect
any other provision of this Agreement.
21. Captions. The caption headings of the Sections of this Agreement are
for convenience of reference only and are not intended, nor should they be
construed as, a part of this Agreement and shall be given no substantive effect.
22. Delays or Omission. No delay or omission to exercise any right, power
or remedy accruing to any party to this Agreement (other than delays by the
Holder in the timely exercise of the Warrant), upon any breach or default of
another party under this Agreement, shall impair any such right, power or remedy
of such party nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. All remedies, either under this Agreement or by law or otherwise
afforded to any party, shall be cumulative and not alternative.
23. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and Holder
any legal or equitable right, remedy or claim under this Agreement; and this
Agreement shall be for the sole and exclusive benefit of the Company and Holder.
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 such counterparts shall together constitute but one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement
to be duly executed, as of the day and year first above written.
Very truly yours,
DIGITAL LAVA INC.
By: /s/ Xxxxx Xxxxx
------------------------------
Authorized Officer
ACCEPTED AND AGREED TO:
INVESTOR:
--------------------------------
Name:
Address:
Social Security/Tax I.D. No.:__________
NO. OF UNITS OF SUBSCRIPTION:___
EXHIBIT X
TO
WARRANT AGREEMENT
[FORM OF WARRANT CERTIFICATE]
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT") (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT (OR ANY
SIMILAR RULE UNDER THE ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii)
AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO
COUNSEL FOR THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER THE ACT IS
AVAILABLE.
EXERCISABLE FROM [Initial Exercise Date]
UNTIL
5:30 P.M., NEW YORK TIME, [5th anniversary of Closing Date]
No. W-LAVA-98-[__] [_________] Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that _____________________ or his/her
registered assigns ("Holder"), is the registered holder of [___] Warrants to
purchase initially at any time commencing on the [Initial Exercise Date] until
5:30 p.m. New York time on [fifth anniversary of Closing Date] ("Expiration
Date"), up to [____________________] fully-paid and non-assessable shares of
common stock, par value $.0001 per share ("Common Shares") of DIGITAL LAVA INC.,
a Delaware corporation (the "Company"), at an initial exercise price, subject to
adjustment in certain events (the "Exercise Price"), equal to [$____] per share,
upon surrender of this Warrant Certificate and payment of the initial exercise
price at an office or agency of the Company, but subject to the conditions set
forth herein and in the Warrant Agreement dated as of the date hereof between
the Company and Holder (the "Warrant Agreement"). Payment of the Exercise Price
shall be made by certified check or official bank check in New York Clearing
House funds payable to the order of the Company, unless exercise is made
pursuant to Section 4.2 of the Warrant Agreement.
No Warrant may be exercised after 5:30 p.m., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, 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 Company and the
Holder (the word "Holder" meaning the registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain events
the Exercise Price and the type and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new
Warrant Certificate evidencing the adjustment in the Exercise Price and the
number and/or type of securities issuable upon the exercise of the Warrants;
provided, however, that the failure of the Company to issue such new Warrant
Certificate shall not in any way change, alter, or otherwise impair, the rights
of the holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, 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 transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided herein and in the Warrant
Agreement, without any charge except for any tax or other governmental charge
imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof 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, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the Warrant
Agreement shall have the meanings assigned to them in the Warrant Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed.
Dated as of December 7, 1998
DIGITAL LAVA INC.
By: /s/ Xxxxx Xxxxx
--------------------------
Authorized Officer
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase ______________ Common
Shares and herewith tenders in payment for such securities a certified check or
official bank check payable in New York Clearing House Funds to the order of
DIGITAL LAVA INC. in the amount of $___________, all in accordance with the
terms of Section 4 of the Warrant Agreement dated as of [Closing Date] between
DIGITAL LAVA INC. and the undersigned (or its assignor). The undersigned
requests that a certificate for such securities be registered in the name of
________________________________________ whose address is ______________________
and that such Certificate be delivered to _____________ whose address is
______________.
Dated: ______________________
Signature: _____________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
________________________________________
(Insert Social Security or Other
Identifying Number of Holder)
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED ____________ hereby sells, assigns
and transfers unto
_______________________________________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ___________ Attorney, to
transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated: _______________
Signature: _____________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
________________________________________
(Insert Social Security or Other
Identifying Number of Assignee)
Aggregate
Investor (Name) Amount Invested
--------------- ---------------
1. Xxxx X. Xxxxxxx $10,000
2. Xxxxxxxx X. Xxxxxxxx $50,000
3. Xxxxxxx Xxxxxxxxxxx $50,000
4. Xxxxxxx Xxxxxxxxxxx Custodian $25,000
5. Xxxxxxx Xxxxxxxxxxx Custodian $25,000
6. Xxxxxxx Xxxxxxxxxxx Custodian $25,000
7. Xxxxxxx X. Xxxxxx $20,000
8. Xxxxxxx Read $20,000
9. Adi X. Xxxxxx $25,000
10. Xxxxx X. Xxxxxxx $300,000
