EXHIBIT 4 (aa)
AMENDED AND RESTATED OPTION AGREEMENT
This Amended and Restated Option Agreement, dated as of May 1, 1998, is by
and between ▇▇▇▇▇ ▇▇▇▇▇▇ ("▇▇▇▇▇▇"), ▇▇▇▇▇ ▇▇▇▇▇▇▇ ("▇. ▇▇▇▇▇▇▇"), ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ("▇. ▇▇▇▇▇▇▇"), ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇"; together with ▇▇▇▇▇▇, ▇.
▇▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇▇ collectively the "Founders" and each individually a
"Founder"), Digital Lava Inc., a Delaware corporation ("Lava" or the "Company"),
and ▇▇▇▇▇▇ ▇▇▇▇▇▇ ("▇▇▇▇▇▇").
The parties previously entered into an Option Agreement, dated as of
January 31, 1997 (the "Option Agreement"), regarding the grant by each of the
Founders to ▇▇▇▇▇▇ of options to purchase shares of Series A Convertible
Preferred Stock of the Company in consideration for the agreement by ▇▇▇▇▇▇ to
provide financial advisory services to the Company and the Founders and to
introduce to the Company potential sources of financing.
Now, for other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties desire to amend and restate the
Option Agreement as follows:
1. Grant of Options.
1.1 Each of the Founders, as to himself only, hereby grants to ▇▇▇▇▇▇, an
irrevocable option (an "Option", collectively, the "Options"), for a period of
ten years from the date hereof (the "Option Period"), to designate in writing to
the Company and the Founders a person or persons, at his sole choice and
discretion, to be the "Purchaser" under the Share Purchase Agreement in the form
of Exhibit A annexed hereto ("Agreement") between such Purchaser and a Founder
for the sale of 20% of the number of shares of Common Stock of the Company
("Common Stock") or Series A Convertible Preferred Stock of the Company ("Series
A Preferred Stock") currently held by each of the Founders at an exercise price
of $1.00 per share of Series A Preferred Stock and $.10 per share of Common
Stock. The number of shares of Common Stock or Series A Preferred Stock held by
each of the Founders for purposes of determining the number of shares (20%)
subject to the Options shall be subject to reduction in connection with any
recapitalization of the Company's outstanding securities resulting in a
reduction in the number of shares held by the Founders so that, in any event,
the Options will give ▇▇▇▇▇▇ the right to purchase on an aggregate basis that
number of Shares and Converted Shares (both as defined below) that equals the
number of Converted Shares held by Messrs. ▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇, taking
into account a reduction equal to the number of Converted Shares covered by the
Options.
The shares of Common Stock held by ▇▇▇▇▇▇▇▇ that are subject to this Option
Agreement are referred to herein as the "Shares"; the shares of Series A
Preferred Stock held by ▇▇▇▇▇▇, ▇. ▇▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇▇ that are subject to
this Option Agreement are referred to herein as the "Preferred Shares"; the
shares of Common Stock issuable upon conversion of the Preferred Shares are
referred to herein as the "Converted Shares" and the Shares, the Preferred
Shares and the Converted Shares together are referred to herein as the "Option
Shares."
The total number of Shares and Converted Shares covered by any Option of
▇▇▇▇▇▇ or any designated Purchaser shall be allocated among the Founders as
follows: ▇▇▇▇▇▇ - 2/8; ▇. ▇▇▇▇▇▇▇ - 3/8; ▇. ▇▇▇▇▇▇▇ - 2/8 and ▇▇▇▇▇▇▇▇ - 1/8
(for example, if a particular Purchaser has been designated by ▇▇▇▇▇▇ as having
the right to purchase 80 Shares and Converted Shares, the Option will provide
such Purchaser the right to purchase 2 Preferred Shares from ▇▇▇▇▇▇, 3 Preferred
Shares from ▇. ▇▇▇▇▇▇▇, 2 Preferred Shares from ▇. ▇▇▇▇▇▇▇ and 10 Shares from
▇▇▇▇▇▇▇▇).
1.2 If the Preferred Shares have been converted into Converted Shares prior
to the exercise of the Option hereunder, the Option with respect to Messrs.
▇▇▇▇▇▇, ▇. ▇▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇▇ shall relate to Converted Shares, and the
exercise price per share shall be $.10, as adjusted pursuant to Section 2
hereof.
1.3 Upon the return to the Founders within the Option Period of an executed
Agreement by any person constituting a Purchaser (which each Founder agrees to
execute), c/o the Company, at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇, together with payment for the Shares or Preferred Shares (or Converted
Shares, if the Preferred Shares have been converted as of such date) in the form
of a certified check or wire transfer of funds to each Founder for $.10 for each
Share or Converted Share of such Founder purchased and $1.00 for each Preferred
Share of such Founder purchased, a binding contract between the Founders and
such person with respect to the Shares, Preferred Shares or Converted Shares to
be purchased by such person shall come into force and effect.
1.4 Any Purchaser exercising an Option in whole or in part must exercise
the Option simultaneously among the Founders in a pro rata manner, as described
in the last paragraph of Section 1.1 hereof.
1.5 ▇▇▇▇▇▇ acknowledges that any Shares, Preferred Shares or Converted
Shares obtained by him or any Purchaser shall be subject to any "lockup"
agreements, risks of forfeiture or any other contractual restrictions imposed
upon the shares of capital stock held by the Founders (excluding employee stock
options).
2. Adjustments to Exercise Price and Number of Securities. The Exercise
Price and, in some cases, the number of Shares, Preferred Shares (or Converted
Shares) subject to this Option Agreement, shall be subject to adjustment from
time to time upon the occurrence of certain events described in this Section 2.
2.1 Subdivision, Combination or Stock Dividend. If the Company shall at any
time subdivide its outstanding shares of Common Stock or Series A Preferred
Stock into a greater number of shares of Common Stock or Series A Preferred
Stock or declare a dividend upon its shares of Common Stock or Series A
Preferred Stock payable solely in shares of Common Stock or Series A Preferred
Stock, the Exercise Price with respect to the Shares or Preferred Shares in
effect immediately prior to such subdivision or declaration shall be
proportionately reduced, and the number of Shares or Preferred Shares subject to
the option hereunder shall be proportionately increased. Conversely, in case the
outstanding shares of Common Stock or Series A Preferred Stock of the Company
shall be combined into a smaller number of shares of Common Stock or Series A
Preferred Stock, the Exercise Price for Shares or Preferred Shares in effect
immediately prior to such combination shall be proportionately increased, and
the number of Shares and Preferred Shares subject to the option hereunder shall
be proportionately reduced. If any such subdivision or combination with respect
only to the shares of Common Stock (and not with respect to the shares of Series
A Preferred Stock) occurs prior to the conversion of the Preferred Shares, the
Exercise Price for the Preferred Shares and the number of Preferred Shares
subject to this Option Agreement shall not be modified, since an adjustment to
the "Conversion Price" of the Preferred Shares (the basis for determining the
number of shares of Common Stock generally issuable upon conversion of the
Series A Preferred Stock) will be made pursuant to the provisions of Section 6.4
of Article 6 of the Company's Amended and Restated Certificate of Incorporation.
2.2 Notice of Adjustment. Promptly after any adjustment of the Exercise
Price or any increase or decrease in the number of Option Shares purchasable
upon the exercise of the options hereunder, the Company shall give written
notice thereof, by first class mail, postage prepaid, addressed to ▇▇▇▇▇▇ at ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, or such other address as he (or
his transferee) designates. 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 Option Shares purchasable at such price,
setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based.
2.3 Other Notices. If at any time:
(a) the Company shall declare any cash dividend upon its shares of
Common Stock or Series A Preferred Stock;
(b) the Company shall declare any dividend upon its shares of Common
Stock or Series A Preferred Stock payable in securities (other than a
dividend payable solely in shares of Common Stock or Series A Preferred
Stock) or make any special dividend or other distribution to the holders of
its shares of Common Stock or Series A Preferred Stock;
(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 ▇▇▇▇▇▇ (or his transferee) at his
address set forth above or otherwise designated by him (or his transferee), (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 shares of Common Stock or Series A Preferred Stock
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 shares of Common Stock or Series A Preferred Stock
for securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, as the case may be. If ▇▇▇▇▇▇ (or his transferee) does not exercise
his Options prior to the occurrence of an event described above, except as
provided in Sections 2.1 and 2.4, ▇▇▇▇▇▇ (or his transferee) shall not be
entitled to receive the benefits accruing to existing holders of shares of
Common Stock or Series A Preferred Stock, as the case may be, in such event.
2.4 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 shares of Common Stock or Series A Preferred Stock) in
which the previously outstanding shares of Common Stock or Series A Preferred
Stock 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 ▇▇▇▇▇▇ (or his transferee), upon the
exercise of his options hereunder at any time on or after the Consummation Date,
shall be entitled to receive from the Founders, and his options shall thereafter
represent the right to receive from the Founders, in lieu of shares of Common
Stock or Series A Preferred Stock issuable upon such exercise prior to the
Consummation Date, the highest amount of securities or other property to which
▇▇▇▇▇▇ would actually have been entitled as a holder of a share of Common Stock
or Series A Preferred Stock upon the consummation of the Transaction if such
▇▇▇▇▇▇ (or his transferee) had exercised his option immediately prior thereto.
The provisions of this Section 2.4 shall similarly apply to successive
Transactions.
3. Registration Rights. The Options and the Shares, Preferred Shares and
Converted issuable upon exercise of the Options have not been registered under
the Securities Act of 1933, as amended (the "Act"). Upon exercise, in whole or
in part, of the Options a certificate representing the Shares, the Preferred
Shares and the Converted Shares issuable upon exercise of the Options
(collectively, the "Option Securities") shall bear the following legend unless
such Option 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 OBTAINED AND PAID FOR BY THE PERSON SEEKING
TO DISPOSE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE, IF SUCH
OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL TO THE ISSUER, THAT AN
EXEMPTION FROM REGISTRATION UNDER THE ACT IS AVAILABLE.
Notwithstanding the foregoing, the Company has agreed that the Option Shares
shall be deemed to be "Registrable Securities" under the Registration Agreement
(the "Registration Agreement") dated as of July 3, 1996 between the Company and
the persons listed on Schedule 1 annexed thereto, which Registration Agreement
is hereby incorporated herein by reference, and that ▇▇▇▇▇▇ or any transferee
shall have all the rights and obligations of a "Holder" under the Registration
Rights Agreement as if he were a party thereto; provided, however, that ▇▇▇▇▇▇
(and any transferee) shall be required to execute and deliver any "lock-up"
agreement limiting his ability to resell his Option Shares that the Founders are
required to execute and deliver by any managing underwriter or other person.
Notwithstanding the foregoing, the parties agree that in the event of any
conflict, inconsistency or ambiguity between the provisions of the Registration
Agreement and the provisions of this Option Agreement, the provisions of this
Option Agreement shall prevail and control.
4. Representations, Warranties and Agreements of the Founders. Each
Founder, as to himself only, represents, warrants and agrees with ▇▇▇▇▇▇ that he
is the sole owner of the Shares or Preferred Shares subject to this Option
Agreement, that at the time of transfer to ▇▇▇▇▇▇ (or any other Purchaser), such
Shares or Preferred Shares (as applicable) will be free and clear of all liens
and encumbrances, and that performance by such Founder of his obligations under
this Option Agreement will not conflict with or violate (i) any indenture, loan
agreement, lease, mortgage or other agreement binding on the Founder, (ii) any
order of a court or administrative agency binding on the Founder or (iii) any
applicable law or governmental regulation. The Founders jointly and severally
represent and warrant to ▇▇▇▇▇▇ that, as of the date hereof, they currently own
the following shares of Common Stock and Series A Preferred Stock (without
taking into effect exercise of the Options granted hereby): (i) ▇▇▇▇▇▇ --
202,391 shares of Series A Preferred Stock; (ii) ▇. ▇▇▇▇▇▇▇ -- 303,587 shares of
Series A Preferred Stock; (iii) ▇. ▇▇▇▇▇▇▇ -- 202,391 shares of Series A
Preferred Stock and (iv) ▇▇▇▇▇▇▇▇ -- 1,011,960 shares of Common Stock, and that
each one share of Series A Preferred Stock is currently convertible into ten
shares of Common Stock. Each of the Founders agrees to waive any rights he may
have, by virtue of any agreement
among the Founders, or otherwise, to acquire any of the Shares, Preferred Shares
or Converted Shares held by the other Founders.
5. Representations and Warranties of the Company. Execution and delivery of
this Option Agreement has been duly authorized by all necessary corporate action
of the Company. At the time of transfer to ▇▇▇▇▇▇ (or to any other Purchaser),
performance by the Company of its obligations under this Option Agreement will
not conflict with or violate the charter documents or bylaws of the Company, or
conflict with or violate, in any material respect, (i) any indenture, loan
agreement, lease, mortgage or other agreement binding on the Company, (ii) any
order of a court or administrative agency binding on the Company, or (iii) any
applicable law or governmental regulation, the effect of any of which would have
a material adverse effect on the Company or its subsidiaries, taken as a whole,
or materially impair or restrict the Company's power to perform its obligations
as contemplated hereby.
6. Representations and Warranties of ▇▇▇▇▇▇. ▇▇▇▇▇▇ represents and warrants
to the Founders and to the Company that (i) he has been furnished with all
materials relating to the Company and its current and proposed activities which
he has requested and has been afforded the opportunity to obtain any additional
information necessary to verify the accuracy of any representations or
information relating to the Company and its current and proposed activities,
(ii) other than as set forth herein, no representations or warranties have been
made to him by the Founders or the Company with respect to the intended business
of the Company, the financial condition, prospects, profitability, operations
and/or potential of the Company and/or the economic or any other aspects of the
consequences of an investment in the Company by means of exercise of the
Options, (iii) he is acquiring the Options for his own account, as principal,
for investment and not with a current view to the resale or distribution of all
or any part of the Option or the Shares, Preferred Shares or Converted Shares
and (iv) he can now, and at all times in the future will be able to, bear the
economic risk of a complete loss of his entire investment in the Company without
materially affecting his financial condition, (v) he is an investor qualified
under applicable federal and state law to have issued to him the securities
described in this Option Agreement and is an "accredited investor" under Rule
501 of the Act and (vi) he has heretofore neither transferred nor agreed to
transfer to any person any of his rights under this Option Agreement, and will
not do so without showing this Option Agreement to each prospective Purchaser.
7. Transferability. The Options covered by this Option Agreement may be
sold, transferred, assigned, hypothecated or otherwise disposed of, in whole or
in part, without restriction, subject to compliance with applicable securities
laws. Any transferee of ▇▇▇▇▇▇ shall execute and deliver to the Founders and to
the Company an undertaking to perform the obligations of ▇▇▇▇▇▇ hereunder with
respect to the Options acquired by him or it, and upon any such transfer, the
transferee shall have all of the rights of ▇▇▇▇▇▇ hereunder with respect to the
Options, including without limitation, the discretion under Section 1 hereof to
designate a Purchaser of those Shares, Preferred Shares or Converted Shares
obtainable upon exercise of the Options acquired by it from ▇▇▇▇▇▇.
8. Miscellaneous.
8.1 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York. Any action or proceeding
relating to this Agreement 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.
8.2 Successors and Assigns. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of and be binding upon the
successors and assigns of the parties.
8.3 Entire Agreement; Amendment. This Agreement, including any Exhibits
hereto, constitutes the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof. Neither this Agreement
nor any term hereof may be amended, waived, discharged or terminated except by a
written instrument signed by the Company, the Founders and ▇▇▇▇▇▇ (or his
transferees).
8.4 Notices. All notices and other communications required or permitted
hereunder shall be mailed by first-class mail, postage prepaid, by nationally
recognized overnight courier, or delivered either by hand or by messenger,
addressed (a) if to ▇▇▇▇▇▇, as indicated herein or at such other address as he
(or any transferee) shall have furnished to the Company and to the Founders in
writing, (b) if to the Company, at its address set forth herein or at such other
address as the Company shall have furnished to ▇▇▇▇▇▇ (or any transferee) in
writing and (c) if to any Founder, to each of the Founders, c/o the Company, as
provided above. All such notices or communications shall be deemed given when
actually delivered by hand, messenger, facsimile or mailgram or, if mailed,
three days after deposit in the U.S. mail, or if sent by recognized overnight
courier, one day after duly sent.
8.5 Delays or Omission. No delay or omission to exercise any right, power
or remedy accruing to any party to this Option Agreement, upon any breach or
default of another party under this Option 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 or in 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 Option Agreement or by
law or otherwise afforded to any party, shall be cumulative and not alternative.
8.6 Severability. In case any provision of this Option Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
8.7 Titles and Subtitles. The titles of the Sections and Subsections of
this Option Agreement are for convenience of reference only and are not to be
considered in construing this Option Agreement.
8.8 Counterparts. This Option Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
IN WITNESS WHEREOF, the parties have caused this Amended and Restated
Option Agreement to be executed and delivered by their duly authorized officers
or partners, as the case may be, as of the day and year first above written.
DIGITAL LAVA INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇▇, Chief Financial Officer
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇▇
FOUNDERS:
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
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/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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