EXHIBIT 4 (j)
WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of May 30, 1997, 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 40
units of the Company's securities ("Units"), each Unit consisting of (i) a
senior non-negotiable promissory note in the principal amount of [______]
(individually, a "Bridge Note" and collectively, the "Bridge Notes"), and (ii)
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
"Common Shares"), at an exercise price of $1.00 per share (the "Warrants").
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. The Company shall issue to each Holder a certificate (the
"Warrant Certificate") dated as of the date hereof providing each such Holder
with the right to purchase, at any time, from May 30, 1998, until 5:30 p.m., New
York time, on May 30, 2003, the number of Common Shares listed next to the name
of each such Holder on Exhibit I (the "Warrant Shares") (subject to adjustment
as provided in Section 9 hereof), at an exercise price (subject to adjustment as
provided in Section 9 hereof) of $1.00 per Common Share; provided, however, that
if the Company elects, in its sole discretion, to extend the maturity date of
the Bridge Notes from November 30, 1997 to May 30, 1998, the exercise price of
the Warrants shall be $0.90 per Common Share (subject to adjustment as provided
in Section 9 hereof).
2. Warrant Certificate. The Warrant Certificate to be delivered pursuant to
this Agreement 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 from May 30, 1998, until 5:30 p.m., New York time, on May 30, 2003.
4. Procedure for Exercise of Warrants.
4.1 Cash Exercise. The Warrants are exercisable at an aggregate initial
exercise price per Common Share set forth in Section 7 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 Common Shares equal to the product of (x) the number
of Common 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.
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.
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 per Warrant Shares issued thereunder. 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 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 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.
9.3 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 9.4, the Holder shall
not be entitled to receive the benefits accruing to existing holders of the
Common Shares in such event.
9.4 Changes in Common Shares. In case at any time the Company shall be a
party to any transaction (including, without limitation, a merger,
consolidation, sale 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 securities or other property 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 9.4 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 an 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: Xxxxxxxxx & Xxxxxx, 000 Xxxxx 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 tenth 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.
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. 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.
23. 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 Xxxxxx
--------------------------------
Authorized Officer
ACCEPTED AND AGREED TO:
/s/ Xxxxx Xxxxxxxx
-----------------------------------
Xxxxx Xxxxxxxx
/s/ Xxxxx Xxxxx
-----------------------------------
Xxxxx Xxxxx
/s/ Xxxxxxx Xxxxxx
-----------------------------------
Xxxxxxx Xxxxxx
/s/ Xxxxxx Xxxxx
-----------------------------------
Xxxxxx Xxxxx
/s/ Xxxx Xxxxx
-----------------------------------
Xxxx Xxxxx
[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 May 30,1998
UNTIL
5:30 P.M., NEW YORK TIME, May 30, 0000
Xx. X-XXXX-00-[ ] [ ] 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 from May 30, 1998, until 5:30 p.m. New York time on May 30, 2003
("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 $1.00 per Common
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 May 30, 1997
DIGITAL LAVA INC.
By: /s/ Xxxxx Xxxxxx
-----------------------
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 May 30, 1997 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)
