FORM OF COMMON WARRANT
THIS WARRANT AND THE SECURITIES TO BE ISSUED UPON EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS
OF ANY STATE. NEITHER THIS WARRANT NOR ANY INTEREST HEREIN NOR
THE SECURITIES ISSUABLE UPON EXERCISE HEREOF NOR ANY INTEREST
THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED
OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO (I) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR (II) AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAWS, SUCH EXEMPTION TO BE EVIDENCED
BY SUCH DOCUMENTATION AS THE COMPANY MAY REASONABLY REQUEST.
Warrant to Purchase:
________ Shares of Common Stock
Dated: ________, 2004
TO PURCHASE SHARES OF COMMON STOCK OF
EQUITY MARKETING, INC.
THIS IS TO CERTIFY THAT Crown EMAK Partners, LLC, a Delaware
liability company (the "INVESTOR"), is entitled, at any time prior to ________,
2010 (the "EXPIRATION DATE"), to purchase from Equity Marketing, Inc., a
corporation (the "COMPANY"), ________ shares of the Company's Common
Stock, $0.001 par value per share (the "COMMON STOCK"), in whole or in part, at
a purchase price of $______ per share (the "EXERCISE PRICE"), all on the terms
and conditions and pursuant to the provisions hereinafter set forth. The
Exercise Price is subject to adjustment as provided herein.
This Warrant is one of four warrants of like tenor originally issued by
the Company pursuant to the terms of a Warrant Exchange Agreement, dated March
19, 2004 (the "WARRANT EXCHANGE AGREEMENT"), between the Company and the Holder.
As used in this Warrant, the following terms have the respective
meanings set forth below:
"BUSINESS DAY" means any day that is not a Saturday or Sunday or a day
on which banks are required or permitted to be closed in the State of New York
"CLOSING PRICE" means, for each Trading Day, the last reported sale
price on the Nasdaq National Market or, if the Common Stock is not quoted on the
Nasdaq National Market, the average of the closing bid and asked prices in the
over-the-counter market as furnished by any New York
Stock Exchange member firm
selected from time to time by the Company for that purpose.
"HOLDER" means Investor and any person or entity that acquires all or a
portion of this Warrant from Investor or its transferees.
"TRADING DAY" means any day in which the Nasdaq National Market or other
applicable stock exchange or market is open for business.
"TRADING PRICE" means the average of the Closing Prices of the Common
Stock for the 20 consecutive Trading Days ending on the day before the day in
"WARRANT PRICE" means an amount equal to (i) the number of shares of
Common Stock being purchased upon exercise of this Warrant pursuant to Section
2.1, multiplied by (ii) the Exercise Price.
"WARRANT SHARES" means the shares of Common Stock purchased by the
Holder upon the exercise hereof.
2. Exercise of Warrant.
2.1. Manner of Exercise. At any time or from time to time from
and after the date hereof and until 5:00 P.M., New York
time, on the Expiration
Date, Holder may exercise this Warrant, on any Business Day, for all or any part
of the number of shares of Common Stock purchasable hereunder.
In order to exercise this Warrant, in whole or in part, Holder
shall deliver to the Company at its principal office at 6330 San Vicente
Boulevard, Los Angeles, California
90048 (i) a written notice of Holder's
election to exercise this Warrant, which notice shall specify the number of
shares of Common Stock to be purchased, (ii) payment of the Warrant Price in
immediately available funds (unless the Holder elects to exercise on a cashless
basis pursuant to Section 2.2 below) and (iii) this Warrant. Such notice shall
be substantially in the form appearing at the end of this Warrant as Exhibit A,
duly executed by Holder. Upon receipt of the items specified in the second
preceding sentence, the Company shall execute or cause to be executed and
deliver or cause to be delivered to Holder a certificate or certificates
representing the aggregate number of full shares of Common Stock issuable upon
such exercise, together with cash in lieu of any fraction of a share, as
hereinafter provided. The stock certificate or certificates so delivered shall
be in such denomination or denominations as Holder shall request in the notice
and shall be registered in the name of Holder. This Warrant shall be deemed to
have been exercised and such certificate or certificates shall be deemed to have
been issued, and Holder shall be deemed to have become a holder of record of
such shares for all purposes, as of the date the notice, together with the
Warrant Price and this Warrant, are received by the Company as described above.
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 right of Holder
to purchase the unpurchased shares of Common Stock called for by this Warrant,
which new Warrant shall in all other respects be identical with this Warrant,
or, at the request of Holder, appropriate notation may be made on this Warrant
and the same returned to Holder.
2.2. Cashless Exercise. In lieu of exercising this Warrant in the
manner set forth in Section 2.1 above, this Warrant may be exercised by the
Holder, in whole at any time or in part from time to time prior to the
Expiration Date, by surrendering the Warrant at the address set forth above,
without payment of any other consideration, commission or remuneration, together
with the notice appearing at the end of this Warrant, duly executed. The number
of Warrant Shares to be issued by the Company shall be calculated using the
Where X = the number of Warrant Shares to be issued to
Y = the number of Warrant Shares purchasable
under this Warrant or, if this Warrant is being
exercised in part, under the portion of the
Warrant being exercised (at the date of the
surrender of this Warrant and the notice form)
A = the Trading Price (at the date of the surrender
of this Warrant and the notice form)
B = the Exercise Price (as adjusted to the date of
the surrender of this Warrant and the
If this Warrant is exercised in part pursuant to this Section
2.2, this Warrant must be exercised for a number of whole shares of the Common
Stock, and the Holder is entitled to receive a new Warrant covering the shares
of Common Stock in respect of which this Warrant has not been exercised. Upon
such exercise and surrender of this Warrant, the Company will (i) issue a
certificate or certificates in the name of the Holder for the largest number of
whole shares of the Common Stock to which the Holder shall be entitled and, if
this Warrant is exercised in whole, in lieu of any fractional share of the
Common Stock to which the Holder shall be entitled, pay cash equal to the fair
value of such fractional share (determined in such reasonable manner as the
Board of Directors of the Company shall determine) and (ii) deliver the other
securities and properties receivable upon the exercise of this Warrant, or the
proportionate part thereof if this Warrant is exercised in part, pursuant to the
provisions of this Warrant.
2.3. Shares to be Validly Issued. All shares of Common Stock
issuable upon the exercise of this Warrant shall be validly issued, fully paid
and nonassessable. The Company shall be entitled to withhold any amounts
required to be withheld under applicable law from any amounts to be paid to the
2.4. No Fractional Shares. The Company shall not be required to
issue fractions of shares upon the exercise of this Warrant, but in lieu of any
fractional share of the
Common Stock to which the Holder shall be entitled, shall pay cash equal to the
fair value of such fractional share (determined in such reasonable manner as the
Board of Directors of the Company shall determine).
3.1. In case the Company shall (i) declare a dividend or make a
distribution on its Common Stock payable in shares of its capital stock, (ii)
subdivide its outstanding shares of Common Stock through stock split or
otherwise, or (iii) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock, the number and/or nature of Warrant
Shares purchasable upon exercise of each 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 after the happening of any of the events
described above, had such Warrant been exercised immediately prior to the
happening of such event or any record date with respect thereto. An adjustment
made pursuant to this paragraph (a) shall become effective retroactively as of
the record date of such event.
3.2. Merger, Consolidation or Disposition of Assets. In the case
of any capital reorganization or reclassification of the capital stock of the
Company or in the case of consolidation of the Company or the merger of the
Company with or into any other entity or the sale or transfer of all or
substantially all the assets of the Company pursuant to which the Common Stock
is converted into other securities, cash or assets, upon consummation of such
transaction, this Warrant shall automatically become exercisable for the kind
and amount of securities, cash or other assets receivable upon the
reorganization, reclassification, consolidation, merger, sale or transfer by a
holder of the number of shares of Common Stock into which this Warrant might
have been converted immediately prior to such consolidation, merger, transfer or
sale. Appropriate adjustment shall be made in the application of the provisions
herein set forth with respect to the rights and interests thereafter of the
Holder, to the end that the provisions set forth herein shall thereafter be
applicable, as nearly as reasonably may be, in relation to any shares of stock
or other securities or property thereafter deliverable upon the exercise of this
3.3. Adjustments to Exercise Price. Whenever the number of shares
of Warrant Shares purchasable upon the exercise of each Warrant is adjusted, as
provided in this Section 3, the Exercise Price with respect to the Warrant
Shares shall be adjusted by multiplying such Exercise Price immediately prior to
such adjustment by a fraction, of which the numerator shall be the number of
shares of Common Stock purchasable upon the exercise of each Warrant immediately
prior to such adjustment, and of which the denominator shall be the number of
shares of Warrant Shares so purchasable immediately thereafter.
4. No Impairment.
The Company shall not by any action, including, without
limitation, amending its Certificate of Incorporation or comparable governing
instruments 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 against impairment.
Without limiting the generality of the foregoing, the Company will (a) take all
such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common Stock
upon the exercise of this Warrant and (b) 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.
5. Reservation and Authorization of Common Stock.
From and after the date hereof, the Company shall at all times reserve
and keep available for issue upon the exercise of Warrants such number of its
authorized but unissued shares of Common Stock as will be sufficient to permit
the exercise in full of all outstanding Warrants. All shares of Common Stock
which shall be so issuable, when issued upon exercise of any Warrant and payment
therefor in accordance with the terms of such Warrant, shall be duly and validly
issued and fully paid and nonassessable, and not subject to preemptive rights.
6. Transferability; Form of Warrants.
6.1. Transfer. None of the Warrant nor the Warrant Shares
issuable upon exercise hereof nor any interest therein may be offered, sold,
transferred, pledged, hypothecated or otherwise disposed of, except pursuant to
(i) an effective registration statement under the Securities Act and any
applicable state securities laws or (ii) an exemption from the registration
requirements of the Securities Act and any applicable state securities laws,
such exemption to be evidenced by such documentation as the Company may
reasonably request, including an opinion of counsel, in writing and addressed to
the Company (which counsel and opinion shall be reasonably satisfactory to the
Company), that such transfer is not in violation of the Securities Act and any
applicable state laws. The Company shall treat the Holder as the holder and
owner hereof for all purposes, unless the Company has been given notice to the
contrary. Subject to compliance with the transfer restrictions set forth above,
upon the delivery to the Company at its principal corporate office of this
Warrant along with a duly completed Assignment Form substantially in the form of
Exhibit B hereto, the Company shall execute and deliver a new Warrant in the
form of this Warrant, but registered in the name of the transferee, to purchase
the Warrant Shares assigned to the transferee. In case the Holder shall assign
this Warrant with respect to less than all of the Warrant Shares, the Company
shall execute a new warrant in the form of this Warrant for the balance of the
Warrant Shares and deliver such new warrant to the transferring Holder.
6.2. Warrant Register; Ownership of Warrant. The Company will
keep at its principal office a register in which the Company will provide for
the registration of Warrants and the registration of transfers of Warrants. The
Company may treat the person in whose name any Warrant is registered on such
register as the owner thereof for all other purposes, and the Company shall not
be affected by any notice to the contrary.
6.3. Restrictive Legend. Each certificate for Warrant Shares
shall be stamped or otherwise imprinted with the following legend:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE.
NEITHER THIS SECURITY NOR ANY INTEREST HEREIN MAY BE OFFERED, SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ANY APPLICABLE
STATE SECURITIES LAWS OR (ii) AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS, SUCH EXEMPTION TO
BE EVIDENCE BY SUCH DOCUMENTATION AS THE ISSUER MAY REASONABLY REQUEST.
Any certificate issued at any time in exchange or substitution
for any certificate bearing such legend (except a new certificate issued upon
completion of a public distribution pursuant to a registration statement under
the Securities Act ) shall also bear such legend unless, the holder of such
certificate shall have delivered to the Company an opinion of counsel, in
writing and addressed to the Company (which counsel and opinion shall be
reasonably acceptable to the Company), that the securities represented thereby
need no longer be subject to restrictions on resale under the Securities Act or
any state securities laws.
6.4. Registration Rights. The holder of Warrants and Warrant
Shares shall have the registration rights set forth in the Registration Rights
Agreement, dated as of March 29, 2000 between the Holder and the Company, as
amended by the Warrant Exchange Agreement.
7. Loss or Mutilation. Upon receipt by the Company from any Holder of
evidence reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of this Warrant and indemnity reasonably satisfactory
to it, and in case of mutilation upon surrender and cancellation hereof, the
Company will execute and deliver in lieu hereof a new Warrant of like tenor to
such Holder; provided, in the case of mutilation, no indemnity shall be required
if this Warrant in identifiable form is surrendered to the Company for
8.1. Expiration. This Warrant shall expire and be of no further
force and effect on the Expiration Date.
8.2. Notice Generally. Any notice, demand, request, consent,
approval, declaration, delivery or other communication hereunder to be made
pursuant to the provisions of this Warrant shall be sufficiently given or made
if in writing and either delivered in person with receipt acknowledged or sent
by registered or certified mail, return receipt requested, postage prepaid or by
a nationally recognized overnight courier or by telecopy and confirmed by
telecopy answerback, addressed as follows:
(a) If to the Holder, at its last known address
appearing on the books of the Company maintained for such purpose:
with a copy to: Lerner & Squire, LLP
500 Park Avenue, Suite 510
, New York
Attn: Kenneth B. Squire
Facsimile: (212) 339-0054
(b) If to the Company at:
6330 San Vicente Boulevard
Los Angeles, California
Attn: Teresa L. Tormey
Sr. Vice President, General Counsel
Facsimile: (323) 930-8346
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served (i) on the date on which personally
delivered, with receipt acknowledged, (ii) on the date on which telecopied and
confirmed by written or telephonic acknowledgment, (iii) on the date set forth
on the executed return receipt in the case of registered or certified mail or
(iv) on the next business day after the same shall have been deposited for
overnight delivery with a nationally recognized overnight courier, provided that
proof of receipt is received. Failure or delay in delivering copies of any
notice, demand, request, approval, declaration, delivery or other communication
to the Person designated above to receive a copy shall in no way adversely
affect the effectiveness of such notice, demand, request, approval, declaration,
delivery or other communication.
8.3. No Rights as Shareholders. This Warrant shall not entitle
the Holder to any rights as a stockholder of the Company.
8.4. Successors and Assigns. Subject to the provisions of Section
3.2, this Warrant and the rights evidenced hereby shall inure to the benefit of
and be binding upon the successors of the Company.
8.5. Amendment. This Warrant may be modified or amended or the
provisions hereof waived only with the written consent of the Company and the
8.6. 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
provision or the remaining provisions of this Warrant, provided that no such
be effective if it would change the economic costs or benefits of this Warrant
to the Company or the Holder.
8.7. 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.
8.8. Governing Law. This Warrant shall be governed by the laws of
the State of Delaware
, without regard to the provisions thereof relating to
conflict of laws.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed as of the date set forth below.
Dated: March 19, 2004
EQUITY MARKETING, INC.
Donald A. Kurz
, Chief Executive
Acknowledged and Agreed:
CROWN EMAK PARTNERS, LLC
Jeffrey S. Deutschman
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for the purchase of _____ Shares of Common Stock of Equity
Marketing, Inc. and herewith makes payment therefor, all at the price and on the
terms and conditions specified in this Warrant and requests that certificates
for the shares of Common Stock hereby purchased (and any securities or other
property issuable upon such exercise) be issued in the name of the undersigned,
if such shares of Common Stock shall not include all of the shares of Common
Stock issuable as provided in this Warrant, that a new Warrant of like tenor and
date for the balance of the shares of Common Stock issuable hereunder be
delivered to the undersigned.
Check the following box in the case of a "cashless exercise" pursuant to
Section 2.2 [ ].
(Name of Registered Owner)
(Signature of Registered Owner)
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with
the name as written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatsoever.
[To be executed only upon transfer of Warrant]
For value received, the undersigned registered holder of the within Warrant
hereby sells, assigns and transfers unto ____________________ the right
represented by such Warrant to purchase __________________1 Warrant Shares and
appoints _________________ Attorney to make such transfer on the books of Equity
Marketing, Inc. maintained for such purpose, with full power of substitution in
(Signature must conform in all respects to
name of holder as specified on the face of
(City) (State) (Zip Code)
Signed in the presence of:
1 Insert here the number of Warrant Shares as to which this Warrant is being
assigned. In the case of a partial assignment, a new Warrant or Warrants
will be issued and delivered, representing the unassigned portion of the
warrant, to the holder surrendering the Warrant.