EXHIBIT 4 (ab)
AMENDED AND RESTATED OPTION AGREEMENT
This Amended and Restated Option Agreement, dated as of May 1, 1998, is by
and between ▇▇▇▇▇ ▇▇▇▇▇▇ ("▇▇▇▇▇▇") and ▇▇▇▇▇ ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇"; together with
▇▇▇▇▇▇ the "Founders" and each individually a "Founder"), Digital Lava Inc., a
Delaware corporation ("Lava" or the "Company"), and E&Z Investments ("EZ").
The parties previously entered into an Option Agreement, dated as of
December 1, 1997 (the "Option Agreement"), regarding the grant by each of the
Founders to EZ of options to purchase shares of Series A Convertible Preferred
Stock of the Company in consideration for the introduction by EZ to the Company
of 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 EZ, 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 its 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 the number of shares of Series A Convertible Preferred Stock of
the Company ("Series A Preferred Stock") and at the exercise price per share of
Series A Preferred Stock (the "Exercise Price") listed below:
Founder No. Shares No. Shares of Exercise
Series A Common Stock Price
Preferred Stock issuable upon per
covered by conversion of Series Share
Option A Preferred Stock
▇▇▇▇▇▇ 7,500 75,000 $1.00
▇▇▇▇▇▇▇ 7,500 75,000 $1.00
The shares of Series A Preferred Stock that are subject to this Option Agreement
are referred to herein as the "Preferred Shares"; the shares of Common Stock of
the Company 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 EZ or
any designated Purchaser shall be allocated among the Founders as follows:
▇▇▇▇▇▇ - 1/2 and ▇▇▇▇▇▇▇ - 1/2 (for example, if a particular Purchaser has been
designated by EZ as having the
right to purchase 100,000 Converted Shares, the Option will provide such
Purchaser the right to purchase 5,000 Preferred Shares from ▇▇▇▇▇▇ and 5,000
Preferred Shares from ▇▇▇▇▇▇▇).
1.2 If the Preferred Shares have been converted into Converted Shares prior
to the exercise of the Option hereunder, the Option 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 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
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 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 EZ acknowledges that any Preferred Shares or Converted Shares obtained
by it 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 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 Preferred Shares in effect
immediately prior to such subdivision or declaration shall be proportionately
reduced, and the number of 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 Preferred Shares in effect immediately prior to such
combination shall be proportionately increased, and the number of 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 EZ 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 EZ(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 EZ (or its
transferee) does not exercise its Options prior to the occurrence of an event
described above, except as provided in Sections 2.1 and 2.4, EZ (or its
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 EZ (or its transferee), upon the exercise
of its 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
EZ 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 EZ (or
its transferee) had exercised its option immediately prior thereto. The
provisions of this Section 2.4 shall similarly apply to successive Transactions.
3. Registration Rights. The Options and Preferred Shares and Converted
Shares 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 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 EZ 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 EZ (and any
transferee) shall be required to execute and deliver any "lockup" 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 EZ that he is
the sole owner of the Preferred Shares subject to this Option Agreement, that at
the time of transfer to EZ (or any other Purchaser), such 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. Each Founder agrees to waive any rights he may have, by
virtue of any agreement among the Founders, or otherwise, to acquire any of the
Preferred Shares or Converted Shares held by the other Founder.
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 EZ (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 EZ. EZ represents and warrants to the
Founders and to the Company that (i) it has been furnished with all materials
relating to the Company and its current and proposed activities which it 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 it 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) it is acquiring the
Options for its 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 Preferred
Shares or Converted Shares and (iv) it can now, and at all times in the future
will be able to, bear the economic risk of a complete loss of its entire
investment in the Company without materially affecting its financial condition,
(v) it is an investor qualified under applicable federal and state law to have
issued to it the securities described in this Option Agreement and (vi) it has
heretofore neither transferred nor agreed to transfer to any person any of its
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 EZ shall execute and deliver to the Founders and to the
Company an undertaking to perform the obligations of EZ hereunder with respect
to the Options acquired by it, and upon any such transfer, the transferee shall
have all of the rights of EZ hereunder with respect to the Options, including
without limitation, the discretion under Section 1 hereof to designate a
Purchaser of those Preferred Shares or Converted Shares obtainable upon exercise
of the Options acquired by it from EZ.
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 EZ (or its
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 EZ, as indicated herein or at such other address as it (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 EZ (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
FOUNDERS:
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇▇▇▇
E&Z INVESTMENTS
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
General Partner
