EXHIBIT 10.38
NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
REASONABLY ACCEPTABLE TO THE COMPANY TO SUCH EFFECT, THE SUBSTANCE OF WHICH
SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR
OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS
DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT.
COMMON STOCK PURCHASE WARRANT
To Purchase 650,000 Shares of Common Stock of
GENIUS PRODUCTS, INC.
THIS COMMON STOCK PURCHASE WARRANT (this "WARRANT") CERTIFIES that, for
value received, Sands Brothers International Limited (the "HOLDER"), is
entitled, upon the terms and subject to the limitations on exercise and the
conditions hereinafter set forth, at any time on or after March 12, 2004 (the
"INITIAL EXERCISE DATE") and on or prior to the fifth anniversary of the Initial
Exercise Date (the "TERMINATION DATE") but not thereafter, to subscribe for and
purchase from Genius Products, Inc., a corporation incorporated in the State of
Nevada (the "COMPANY"), up to 650,000 shares (the "WARRANT SHAREs") of common
stock, par value $0.001 per share, of the Company (the "COMMON STOCK"). The
purchase price of one share of Common Stock (the "EXERCISE PRICE") under this
Warrant shall be $3.00, subject to adjustment hereunder. The Exercise Price and
the number of Warrant Shares for which the Warrant is exercisable shall be
subject to adjustment as provided herein. Capitalized terms used and not
otherwise defined herein shall have the meanings set forth in that certain
Private Placement Memorandum of the Company dated March 1, 2004 (the
"MEMORANDUM").
1. INITIAL ISSUANCE. Notwithstanding anything contained herein, the
Company shall issue the Warrants subject to this Warrant Agreement to the Holder
and, upon written instructions to be delivered to the Company within ten
business days following the Final Closing, to officers, employees and
consultants of Holder (collectively, "Permitted Designees") who shall thereafter
be bound by the terms of this Agreement; provided, however, the Company shall
not be required to issue such Warrants to any person who is not an "accredited
investor" within the meaning of Regulation D promulgated under the Securities
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Act of 1933, as amended (the "Act"). Each Permitted Designee shall be required
to execute fully and completely the Investor Representation Letter in the form
attached hereto as Exhibit A prior to the issuance of the Warrant to such
person. The name and address of each Permitted Designee, along with amount of
Warrants transferred to such Permitted Designee shall be set forth on Schedule
A, as amended from time to time.
2. TITLE TO WARRANT. Prior to the Termination Date and subject to
compliance with applicable laws and Section 7 of this Warrant, this Warrant and
all rights hereunder are transferable, in whole or in part, at the office or
agency of the Company by the Holder in person or by duly authorized attorney,
upon surrender of this Warrant together with the Assignment Form attached hereto
as Exhibit C properly endorsed. The transferee shall sign an investment letter
in form and substance reasonably satisfactory to the Company.
3. AUTHORIZATION OF SHARES. The Company covenants that all Warrant
Shares which may be issued upon the exercise of the purchase rights represented
by this Warrant will, upon exercise of the purchase rights represented by this
Warrant, be duly authorized, validly issued, fully paid and nonassessable and
free from all taxes, liens and charges in respect of the issue thereof (other
than taxes in respect of any transfer occurring contemporaneously with such
issue).
4. EXERCISE OF WARRANT.
(a) Exercise of the purchase rights represented by this Warrant
may be made at any time or times on or after the Initial Exercise Date and on or
before the Termination Date by delivery to the Company of a duly executed
facsimile copy of the Notice of Exercise Form attached hereto as Exhibit B (or
to such other office or agency of the Company as it may designate by notice in
writing to the registered Holder at the address of such Holder appearing on the
books of the Company); PROVIDED, HOWEVER, within five Trading Days of the date
said Notice of Exercise is delivered to the Company, the Holder shall have
surrendered this Warrant to the Company and the Company shall have received
payment of the aggregate Exercise Price of the shares thereby purchased by wire
transfer or cashier's check drawn on a United States bank. Certificates for
shares purchased hereunder shall be delivered to the Holder within the earlier
of (i) 10 Trading Days after the date on which the Notice of Exercise shall have
been delivered by facsimile copy or (ii) six Trading Days from the delivery to
the Company of the Notice of Exercise Form by facsimile copy, surrender of this
Warrant and payment of the aggregate Exercise Price as set forth above ("WARRANT
SHARE DELIVERY DATE"); PROVIDED, HOWEVER, in the event this Warrant is not
surrendered or the aggregate Exercise Price is not received by the Company
within five Trading Days after the date on which the Notice of Exercise shall be
delivered by facsimile copy, the Warrant Share Delivery Date shall be extended
to the extent such five Trading Day period is exceeded. This Warrant shall be
deemed to have been exercised on the later of the date the Notice of Exercise is
delivered to the Company by facsimile copy and the date the Exercise Price is
received by the Company. THE WARRANT SHARES SHALL BE DEEMED TO HAVE BEEN ISSUED,
AND HOLDER OR ANY OTHER PERSON SO DESIGNATED TO BE NAMED THEREIN SHALL BE DEEMED
TO HAVE BECOME A HOLDER OF RECORD OF SUCH SHARES FOR ALL PURPOSES, AS OF THE
DATE THE WARRANT HAS BEEN EXERCISED BY PAYMENT TO THE COMPANY OF THE EXERCISE
PRICE AND ALL TAXES REQUIRED TO BE PAID BY THE HOLDER, IF ANY, PURSUANT TO
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SECTION 5 PRIOR TO THE ISSUANCE OF SUCH SHARES, HAVE BEEN PAID. If the Company
fails to deliver to the Holder a certificate or certificates representing the
Warrant Shares pursuant to this Section 3(a) by the sixth Trading Day following
the Warrant Share Delivery Date, then the Holder will have the right to rescind
such exercise. In addition to any other rights available to the Holder, if the
Company fails to deliver to the Holder a certificate or certificates
representing the Warrant Shares pursuant to an exercise by the sixth Trading Day
after the Warrant Share Delivery Date, and if after such day the Holder is
required by its broker to purchase (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by the Holder of the
Warrant Shares which the Holder anticipated receiving upon such exercise (a
"BUY-IN"), then the Company shall (1) pay in cash to the Holder the amount by
which (x) the Holder's total purchase price (including brokerage commissions, if
any) for the shares of Common Stock so purchased exceeds (y) the amount obtained
by multiplying (A) the number of Warrant Shares that the Company was required to
deliver to the Holder in connection with the exercise at issue times (B) the
price at which the sell order giving rise to such purchase obligation was
executed, and (2) at the option of the Holder, either reinstate the portion of
the Warrant and equivalent number of Warrant Shares for which such exercise was
not honored or deliver to the Holder the number of shares of Common Stock that
would have been issued had the Company timely complied with its exercise and
delivery obligations hereunder. For example, if the Holder purchases Common
Stock having a total purchase price of $11,000 to cover a Buy-In with respect to
an attempted exercise of shares of Common Stock with an aggregate sale price
giving rise to such purchase obligation of $10,000, under clause (1) of the
immediately preceding sentence the Company shall be required to pay the Holder
$1,000. The Holder shall provide the Company written notice indicating the
amounts payable to the Holder in respect of the Buy-In, together with applicable
confirmations and other evidence reasonably requested by the Company. Nothing
herein shall limit a Holder's right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Company's
failure to timely deliver certificates representing shares of Common Stock upon
exercise of the Warrant as required pursuant to the terms hereof.
(b) If this Warrant shall have been exercised in part, the Company
shall, at the time of delivery of the certificate or certificates representing
Warrant Shares, deliver to Holder a new Warrant evidencing the rights of Holder
to purchase the unpurchased Warrant Shares called for by this Warrant, which new
Warrant shall in all other respects be identical with this Warrant.
5. NO FRACTIONAL SHARES OR SCRIP. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. As to any fraction of a share which Holder would otherwise be entitled
to purchase upon such exercise, the Company shall pay a cash adjustment in
respect of such final fraction in an amount equal to such fraction multiplied by
the Exercise Price.
6. CHARGES, TAXES AND EXPENSES. Issuance of certificates for Warrant
Shares shall be made without charge to the Holder for any issue or transfer tax
or other incidental expense in respect of the issuance of such certificate, all
of which taxes and expenses shall be paid by the Company, and such certificates
shall be issued in the name of the Holder or in such name or names as may be
directed by the Holder; provided, however, that in the event certificates for
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Warrant Shares are to be issued in a name other than the name of the Holder,
this Warrant when surrendered for exercise shall be accompanied by the
Assignment Form attached hereto duly executed by the Holder; and the Company may
require, as a condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.
7. CLOSING OF BOOKS. The Company will not close its stockholder books
or records in any manner which prevents the timely exercise of this Warrant,
pursuant to the terms hereof.
8. TRANSFER, DIVISION AND COMBINATION.
(a) Subject to compliance with any applicable securities laws and
the conditions set forth in Sections 1 and 7(e) hereof, this Warrant and all
rights hereunder are transferable, in whole or in part, upon surrender of this
Warrant at the principal office of the Company, together with a written
assignment of this Warrant substantially in the form attached hereto duly
executed by the Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such surrender
and, if required, such payment, the Company shall execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees and in the
denomination or denominations specified in such instrument of assignment, and
shall issue to the assignor a new Warrant evidencing the portion of this Warrant
not so assigned, and this Warrant shall promptly be cancelled. A Warrant, if
properly assigned, may be exercised by a new holder for the purchase of Warrant
Shares without having a new Warrant issued.
(b) This Warrant may be divided or combined with other Warrants
upon presentation hereof at the aforesaid office of the Company, together with a
written notice specifying the names and denominations in which new Warrants are
to be issued, signed by the Holder or its agent or attorney. Subject to
compliance with Section 7(a), as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
(c) The Company shall prepare, issue and deliver at its own
expense (other than transfer taxes) the new Warrant or Warrants under this
Section 7.
(d) The Company agrees to maintain, at its aforesaid office, books
for the registration and the registration of transfer of the Warrants.
(e) If, at the time of the surrender of this Warrant in connection
with any transfer of this Warrant, the transfer of this Warrant shall not be
registered pursuant to an effective registration statement under the Securities
Act and under applicable state securities or blue sky laws, the Company may
require, as a condition of allowing such transfer (i) that the Holder or
transferee of this Warrant, as the case may be, furnish to the Company a written
opinion of counsel (which opinion shall be in form, substance and scope
customary for opinions of counsel in comparable transactions and reasonably
acceptable to the Company) to the effect that such transfer may be made without
registration under the Securities Act and under applicable state securities or
blue sky laws, (ii) that the Holder or transferee execute and deliver to the
Company an investment letter in form and substance acceptable to the Company and
(iii) that the transferee be an "accredited investor" as defined in Rule 501(a)
promulgated under the Securities Act.
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9. NO RIGHTS AS SHAREHOLDER UNTIL EXERCISE. This Warrant does not
entitle the Holder to any voting rights or other rights as a shareholder of the
Company prior to the exercise hereof. UPON THE SURRENDER OF THIS WARRANT AND THE
PAYMENT OF THE AGGREGATE EXERCISE PRICE (OR BY MEANS OF A CASHLESS EXERCISE),
THE WARRANT SHARES SO PURCHASED SHALL BE AND BE DEEMED TO BE ISSUED TO SUCH
HOLDER AS THE RECORD OWNER OF SUCH SHARES AS OF THE CLOSE OF BUSINESS ON THE
LATER OF THE DATE OF SUCH SURRENDER OR PAYMENT.
10. LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT. The Company
covenants that upon receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant or any stock
certificate relating to the Warrant Shares, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it (which, in
the case of this Warrant, shall not include the posting of any bond), and upon
surrender and cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock certificate of like
tenor and dated as of such cancellation, in lieu of such Warrant or stock
certificate.
11. SATURDAYS, SUNDAYS, HOLIDAYS, ETC. If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday, Sunday or a legal holiday, then such action may be
taken or such right may be exercised on the next succeeding day not a Saturday,
Sunday or legal holiday.
12. ADJUSTMENTS OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.
For the purposes of this Section 11, the term Exercise Price shall mean
the Exercise Price per share set forth on the first page of this Warrant, as
adjusted from time to time pursuant to the provisions of this Section 11.
(a) STOCK SPLITS, ETC. The number and kind of securities
purchasable upon the exercise of this Warrant and the Exercise Price shall be
subject to adjustment from time to time upon the happening of any of the
following. In case the Company shall (i) pay a dividend in shares of Common
Stock or make a distribution in shares of Common Stock to holders of its
outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock
into a greater number of shares, (iii) combine its outstanding shares of Common
Stock into a smaller number of shares of Common Stock, or (iv) issue any shares
of its capital stock in a reclassification of the Common Stock, then the number
of Warrant Shares purchasable upon exercise of this Warrant immediately prior
thereto shall be adjusted so that the Holder shall be entitled to receive the
kind and number of Warrant Shares or other securities of the Company which it
would have owned or have been entitled to receive had such Warrant been
exercised in advance thereof. Upon each such adjustment of the kind and number
of Warrant Shares or other securities of the Company which are purchasable
hereunder, the Holder shall thereafter be entitled to purchase the number of
Warrant Shares or other securities resulting from such adjustment at an Exercise
Price per Warrant Share or other security 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 by the number of Warrant Shares or other securities of the Company
resulting from such adjustment. An adjustment made pursuant to this Section
11(a) shall become effective immediately after the effective date of such event
retroactive to the record date, if any, for such event.
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(b) REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR
DISPOSITION OF ASSETS. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is a change in or distribution with respect to the Common Stock of the Company),
or sell, transfer or otherwise dispose of any of its property, assets or
business to another corporation (including by way of a spinoff) and, pursuant to
the terms of such reorganization, reclassification, merger, consolidation or
disposition of assets, shares of common stock of the successor or acquiring
corporation, or any cash, shares of stock or other securities or property of any
nature whatsoever (including warrants or other subscription or purchase rights)
in addition to or in lieu of common stock of the successor or acquiring
corporation ("OTHER PROPERTY"), are to be received by or distributed to the
holders of Common Stock of the Company, then the Holder shall have the right
thereafter to receive, at the option of the Holder, (a) upon exercise of this
Warrant, the number of shares of common stock of the successor or acquiring
corporation or of the Company, if it is the surviving corporation, and Other
Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a Holder of
the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such event or (b) cash equal to the value of this Warrant
as determined in accordance with the Black Scholes option pricing formula. In
case of any such reorganization, reclassification, merger, consolidation or
disposition of assets, the successor or acquiring corporation (if other than the
Company) shall expressly assume the due and punctual observance and performance
of each and every covenant and condition of this Warrant to be performed and
observed by the Company and all the obligations and liabilities hereunder,
subject to such modifications as may be deemed appropriate (as determined in
good faith by resolution of the Board of Directors of the Company) in order to
provide for adjustments of Warrant Shares for which this Warrant is exercisable
which shall be as nearly equivalent as practicable to the adjustments provided
for in this Section 11(b). For purposes of this Section 11(b), "common stock of
the successor or acquiring corporation" shall include stock of such corporation
of any class which is not preferred as to dividends or assets over any other
class of stock of such corporation and which is not subject to redemption and
shall also include any evidences of indebtedness, shares of stock or other
securities which are convertible into or exchangeable for any such stock, either
immediately or upon the arrival of a specified date or the happening of a
specified event and any warrants or other rights to subscribe for or purchase
any such stock. The foregoing provisions of this Section 11(b) shall similarly
apply to successive reorganizations, reclassifications, mergers, consolidations
or disposition of assets.
(c) VOLUNTARY ADJUSTMENT BY THE COMPANY. The Company may at any
time during the term of this Warrant reduce the then current Exercise Price to
any amount and for any period of time deemed appropriate by the Board of
Directors of the Company.
(d) NOTICE OF ADJUSTMENT. Whenever the number of Warrant Shares or
number or kind of securities or other property purchasable upon the exercise of
this Warrant or the Exercise Price is adjusted, as herein provided, the Company
shall give notice thereof to the Holder, which notice shall state the number of
Warrant Shares (and other securities or property) purchasable upon the exercise
of this Warrant and the Exercise Price of such Warrant Shares (and other
securities or property) after such adjustment, setting forth a brief statement
of the facts requiring such adjustment and setting forth the computation by
which such adjustment was made.
6
(e) ADJUSTMENT IN NUMBER OF SECURITIES. Upon each adjustment of
the Exercise Price pursuant to the provisions of this Section 11, the Warrant
Shares issuable upon the exercise of each Warrant shall be adjusted to the
nearest full amount by multiplying a number equal to the Exercise Price in
effect immediately prior to such adjustment by the number of Warrant Shares
issuable upon exercise of the Warrants immediately prior to such adjustment and
dividing the product so obtained by the adjusted Exercise Price.
(f) NO ADJUSTMENT OF EXERCISE PRICE IN CERTAIN CASES. No
adjustment of the Exercise Price shall be made if the amount of said adjustment
shall be less than two cents ($0.02) per security issuable upon exercise of this
Warrant, 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
($0.02) per security issuable upon exercise of this Warrant.
13. NOTICE OF CORPORATE ACTION. IF AT ANY TIME:
(a) the Company shall take a record of the holders of its Common
Stock for the purpose of entitling them to receive a dividend or other
distribution, or any right to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or
property, or to receive any other right, or
(b) there shall be any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
consolidation or merger of the Company with, or any sale, transfer or other
disposition of all or substantially all the property, assets or business of the
Company to, another corporation or,
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least 20 days' prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, liquidation or winding up, and (ii)
in the case of any such reorganization, reclassification, merger, consolidation,
sale, transfer, disposition, dissolution, liquidation or winding up, at least 20
days' prior written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause also shall specify (i) the date
on which any such record is to be taken for the purpose of such dividend,
distribution or right, the date on which the holders of Common Stock shall be
entitled to any such dividend, distribution or right, and the amount and
character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their Warrant Shares for securities or other property
deliverable upon such disposition, dissolution, liquidation or winding up. Each
such written notice shall be sufficiently given if addressed to Holder at the
last address of Xxxxxx appearing on the books of the Company and delivered in
accordance with Section 14(d).
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14. AUTHORIZED SHARES; NO IMPAIRMENT. The Company covenants that during
the period this Warrant is outstanding, it will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of the Warrant Shares upon the exercise of any purchase rights under this
Warrant. The Company further covenants that its issuance of this Warrant shall
constitute full authority to its officers who are charged with the duty of
executing stock certificates to execute and issue the necessary certificates for
the Warrant Shares upon the exercise of the purchase rights under this Warrant.
The Company will take all such reasonable action as may be necessary to assure
that such Warrant Shares may be issued as provided herein without violation of
any applicable law or regulation, or of any requirements of the Trading Market
upon which the Common Stock may be listed.
Except and to the extent as waived or consented to by the Holder, the
Company shall not by any action, including, without limitation, amending its
articles of incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such actions as may be
necessary or appropriate to protect the rights of Holder as set forth in this
Warrant against impairment. Without limiting the generality of the foregoing,
the Company will (a) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to such increase in
par value, (b) take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable
Warrant Shares upon the exercise of this Warrant, and (c) use commercially
reasonable 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 Warrant.
Before taking any action which would result in an adjustment in the
number of Warrant Shares for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or exemptions
thereof, or consents thereto, as may be necessary from any public regulatory
body or bodies having jurisdiction thereof.
15. MISCELLANEOUS.
(a) GOVERNING LAW; JURISDICTION. This Warrant will be governed by
and construed in accordance with the laws of the State of New York without
regard to principles of conflict or choice of laws of any jurisdiction. The
parties hereby agree that any action, proceeding or claim against it arising out
of, or relating in any way to this Warrant shall be brought and enforced in the
courts of the State of New York, and irrevocably submit to such jurisdiction,
which jurisdiction shall be exclusive.
(b) RESTRICTIONS. The Holder acknowledges that the Warrant Shares
acquired upon the exercise of this Warrant, if not registered, will have
restrictions upon resale imposed by state and federal securities laws.
(c) NONWAIVER AND EXPENSES. No course of dealing or any delay or
failure to exercise any right hereunder on the part of Holder shall operate as a
waiver of such right or otherwise prejudice Xxxxxx's rights, powers or remedies,
notwithstanding all rights hereunder terminate on the Termination Date. If the
8
Company willfully and knowingly fails to comply with any provision of this
Warrant, which results in any material damages to the Holder, the Company shall
pay to Holder such amounts as shall be sufficient to cover any costs and
expenses including, but not limited to, reasonable attorneys' fees, including
those of appellate proceedings, incurred by Holder in collecting any amounts due
pursuant hereto or in otherwise enforcing any of its rights, powers or remedies
hereunder.
(d) NOTICES. All notices and other communications from the Company
to the Holder of this Warrant shall be mailed by first-class certified or
registered mail, postage prepaid, to the address furnished to the Company in
writing by the last Holder of this Warrant who shall have furnished an address
to the Company in writing. All notices and other communications from the Holder
of this Warrant or in connection herewith to the Company shall be mailed by
first-class certified or registered mail, postage prepaid, to the Company at its
principal office set forth below. If the Company should at any time change the
location of its principal office to a place other than as set forth below, then
it shall give prompt written notice to the Holder of this Warrant and thereafter
all references in this Warrant to the location of its principal office at the
particular time shall be as so specified in such notice.
(e) LIMITATION OF LIABILITY. No provision hereof, in the absence
of any affirmative action by Holder to exercise this Warrant or purchase Warrant
Shares, and no enumeration herein of the rights or privileges of Holder, shall
give rise to any liability of Holder for the purchase price of any Common Stock
or as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
(f) REMEDIES. Holder, in addition to being entitled to exercise
all rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Warrant. The Company agrees that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it of the provisions of this Warrant and hereby agrees to
waive the defense in any action for specific performance that a remedy at law
would be adequate.
(g) SUCCESSORS AND ASSIGNS. Subject to applicable securities laws,
this Warrant and the rights and obligations evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the successors
and permitted assigns of Holder. The provisions of this Warrant are intended to
be for the benefit of all Holders from time to time of this Warrant and shall be
enforceable by any such Holder or holder of Warrant Shares.
(h) AMENDMENT. This Warrant may be modified or amended or the
provisions hereof waived with the written consent of the Company and the Holder.
(i) SEVERABILITY. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provisions or the remaining provisions of this Warrant.
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(j) HEADINGS. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
********************
10
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereunto duly authorized.
Dated: March 12, 2004
GENIUS PRODUCTS, INC.
By:
--------------------
Xxxxx Xxxxxxx, CEO
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EXHIBIT A
FORM OF INVESTOR REPRESENTATION LETTER
DATE
Genius Products, Inc.
000 Xxxxx Xxxxx Xx, Xxxxx 000,
Xxxxxx Xxxxx, XX 000000
Gentlemen:
In connection with my receipt of warrants ("Warrants") to purchase the
number of shares of preferred stock referred to below, I hereby represent,
warrant and covenant as follows:
1. Check each one which is applicable:
___ I am an "accredited investor" within the meaning of Regulation D
promulgated under the Securities Act of 1933 (the "Act");
___ I have such knowledge and experience in financial, tax, and business
matters so as to utilize information made available to me in order to
evaluate the merits and risks of an investment decision with respect thereto;
2. ___ I am affiliated with Sands Brothers International Limited ("Selected
Dealer") and have had the opportunity to ask questions and receive and review
such answers and information concerning Genius Products, Inc. (the "Issuer")
as I have deemed pertinent;
3. ___ I am not relying on the Issuer or the Selected Dealer respecting the tax
and other economic considerations of an investment in the Issuer;
4. ___ I am acquiring the Warrants and the underlying securities related thereto
solely for my own account for investment and not with a view to resale or
distribution. I acknowledge that neither the Warrants nor the underlying
securities have been registered under the Act and may not be resold except
pursuant to an effective registration statement thereunder or an exemption
therefrom;
5. ___ I agree to be bound by the terms and conditions of the Common Stock
Purchase Warrant between the Selected Dealer and the Issuer (the "Warrant
Agreement") as if I were a signatory thereto and acknowledge that all of my
rights and obligations as a Holder of the Warrants are governed by the
Warrant Agreement.
_______________________
Name:
Holder of Warrants to purchase _____ shares
of Genius Products, Inc. pursuant to the
terms of the Warrant Agreement of even
date herewith
12
EXHIBIT B
NOTICE OF EXERCISE
To: Genius Products, Inc.
(1) The undersigned hereby elects to purchase ________ Warrant Shares
of Genius Products, Inc. pursuant to the terms of the attached Warrant (only if
exercised in full), and tenders herewith payment of the exercise price in full,
together with all applicable transfer taxes, if any, in lawful money of the
United States.
(2) Please issue a certificate or certificates representing said
Warrant Shares in the name of the undersigned or in such other name as is
specified below:
_______________________________
The Warrant Shares shall be delivered to the following:
_______________________________
_______________________________
_______________________________
(3) Please issue a certificate or certificates representing said
Warrant Shares in the name of the undersigned or in such other name as is
specified below:
_______________________________
The Warrant Shares shall be delivered to the following:
_______________________________
_______________________________
_______________________________
(4) ACCREDITED INVESTOR. The undersigned is an "accredited investor" as
defined in Regulation D promulgated under the Securities Act of 1933, as
amended.
[PURCHASER]
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
Dated:
-----------------------------
13
EXHIBIT C
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
_______________________________________________ whose address is
_______________________________________________________________.
_______________________________________________________________
Dated: ______________, _______
Holder's Signature: _________________________
Holder's Address:_____________________________
_____________________________
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.
14
SCHEDULE A
PERMITTED DESIGNEES
Name:
Address:
No. of Warrants:
Name:
Address:
No. of Warrants:
Name:
Address:
No. of Warrants:
15
