ANNEX II
TO
SUBSCRIPTION
AGREEMENT
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR AN OPINION OF COUNSEL THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT.
Right to Purchase _______ Shares
of Common Stock of Graphix Zone,
Inc.
GRAPHIX ZONE, INC.
COMMON STOCK PURCHASE WARRANT
GRAPHIX ZONE, INC., a Delaware corporation (the "Company"), hereby
certifies that, for value received, ________________________ or registered
assigns (the "Holder"), is entitled, subject to the terms set forth below, to
purchase from the Company at any time or from time to time after the date
hereof, and before 5:00 p.m., New York City time, on the Expiration Date (as
hereinafter defined), _______ fully paid and nonassessable shares of Common
Stock, $.01 par value per share, of the Company at a purchase price per share
equal to the Purchase Price (as hereinafter defined). The number of such shares
of Common Stock and the Purchase Price are subject to adjustment as provided in
this Warrant.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "Business Day" as used herein shall mean a day on
which the New York Stock Exchange is open for business.
(b) The term "Common Stock" includes the Company's Common
Stock, $.01 par value per share, as authorized on the date hereof, and
any other securities into which or for which the Common Stock may be
converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
(c) The term "Company" shall include Graphix Zone, Inc., a
Delaware corporation, and any corporation that shall
succeed to or assume the obligation of Graphix Zone, Inc. hereunder.
(d) The term "Expiration Date" refers to ___________ __, 1999.
(e) The term "Other Securities" refers to any stock (other than
Common Stock) and other securities of the Company or any other person
(corporate or otherwise) which the Holder of this Warrant at any time
shall be entitled to receive, or shall have received, on the exercise of
this Warrant, in lieu of or in addition to Common Stock, or which at any
time shall be issuable or shall have been issued in exchange for or in
replacement of Common Stock or Other Securities pursuant to Section 4.
(f) The term "Purchase Price" shall mean $5.00, subject to
adjustment as provided in this Warrant.
1. EXERCISE OF WARRANT.
1.1 EXERCISE AT OPTION OF HOLDER. (a) This Warrant may be
exercised by the Holder hereof in full or in part at any time or from time to
time during the exercise period specified in the first paragraph hereof until
the Expiration Date by surrender of this Warrant and the subscription form
annexed hereto (duly executed) by such Holder, to the Company at its principal
office, accompanied by payment, in cash or by certified or official bank check
payable to the order of the Company in the amount obtained by multiplying (a)
the number of shares of Common Stock designated by the Holder in the
subscription form by (b) the Purchase Price then in effect. On any partial
exercise the Company will forthwith issue and deliver to or upon the order of
the Holder hereof a new Warrant or Warrants of like tenor, in the name of the
Holder hereof or as such Holder (upon payment by such Holder of any applicable
transfer taxes) may request, providing in the aggregate on the face or faces
thereof for the purchase of the number of shares of Common Stock for which such
Warrant or Warrants may still be exercised.
(b) Notwithstanding any other provision of this Warrant, in no
event shall the Holder be entitled at any time to purchase a number of shares of
Common Stock on exercise of this Warrant in excess of that number of shares upon
purchase of which the sum of (1) the number of shares of Common Stock
beneficially owned by the Holder and any person whose beneficial ownership of
shares of Common Stock would be aggregated with such holder's beneficial
ownership of shares of Common Stock for purposes of Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Regulation
13D-G thereunder (each a "Restricted Person" and collectively, the "Restricted
Persons") (other than shares of Common Stock deemed beneficially owned through
the ownership of the unexercised portion of this Warrant and shares of Preferred
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Stock beneficially owned by all Restricted Persons) and (2) the number of shares
of Common Stock issuable upon exercise of the portion of this Warrant with
respect to which the determination in this sentence is being made, would result
in beneficial ownership by any Restricted Person of more than 4.9% of the
outstanding shares of Common Stock. For purposes of the immediately preceding
sentence, beneficial ownership shall be determined in accordance with Section
13(d) of the Exchange Act and Regulation 13D-G thereunder, except as otherwise
provided in clause (1) of the immediately preceding sentence.
1.2 NET ISSUANCE. Notwithstanding anything to the contrary
contained in Section 1.1, the Holder may elect to exercise this Warrant in whole
or in part by receiving shares of Common Stock equal to the net issuance value
(as determined below) of this Warrant, or any part hereof, upon surrender of
this Warrant at the principal office of the Company together with notice of such
election, in which event the Company shall issue to the Holder a number of
shares of Common Stock computed using the following formula:
X = Y (A-B)
-------
A
Where: X = the number of shares of Common Stock to be issued to
the Holder
Y = the number of shares of Common Stock as to which
this Warrant is to be exercised
A = the current fair market value of one share of Common
Stock calculated as of the last trading day
immediately preceding the exercise of this Warrant
B = the Purchase Price
As used herein, current fair market value of one share of Common
Stock as of a specified date shall mean the average of the closing bid prices of
the Common Stock on the principal securities market on which the Common Stock
may at the time be traded over a period of five Business Days consisting of the
day as of which the current fair market value of a share of Common Stock is
being determined (or if such day is not a Business Day, the Business Day next
preceding such day) and the four consecutive Business Days prior to such day.
If on the date for which current fair market value is to be determined the
Common Stock is not eligible for trading on any securities market, the current
fair market value of one share of Common Stock shall be the highest price per
share which the Company could then obtain from a willing buyer (not a current
employee or director) for shares of Common Stock sold by the Company, from
authorized but unissued shares, as determined in good faith by the Board of
Directors of the Company,
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unless prior to such date the Company has become subject to a merger,
acquisition or other consolidation pursuant to which the Company is not the
surviving party, in which case the current fair market value of the Common Stock
shall be deemed to be the value received by the holders of the Company's Common
Stock for each share thereof pursuant to the Company's acquisition.
2. DELIVERY OF STOCK CERTIFICATES, ETC., ON EXERCISE. As soon
as practicable after the exercise of this Warrant, and in any event within three
days thereafter, the Company at its expense (including the payment by it of any
applicable issue or stamp taxes) will cause to be issued in the name of and
delivered to the Holder hereof, or as such Holder (upon payment by such Holder
of any applicable transfer taxes) may direct, a certificate or certificates for
the number of fully paid and nonassessable shares of Common Stock (or Other
Securities) to which such Holder shall be entitled on such exercise, in such
denominations as may be requested by such Holder, plus, in lieu of any
fractional share to which such Holder would otherwise be entitled, cash equal to
such fraction multiplied by the then current fair market value (as determined in
accordance with subsection 1.2) of one full share, together with any other stock
or other securities any property (including cash, where applicable) to which
such Holder is entitled upon such exercise pursuant to Section 1 or otherwise.
3. ADJUSTMENT FOR DIVIDENDS IN OTHER STOCK, PROPERTY, ETC.;
RECLASSIFICATION, ETC. In case at any time or from time to time, all the
holders of Common Stock (or Other Securities) shall have received, or (on or
after the record date fixed for the determination of stockholders eligible to
receive) shall have become entitled to receive, without payment therefor,
(a) other or additional stock or other securities or property
(other than cash) by way of dividend, or
(b) any cash (excluding cash dividends payable solely out of
earnings or earned surplus of the Company), or
(c) other or additional stock or other securities or property
(including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate
rearrangement,
other than additional shares of Common Stock (or Other Securities) issued as a
stock dividend or in a stock-split (adjustments in respect of which are provided
for in Section 5), then and in each such case the Holder of this Warrant, on the
exercise hereof as provided in Section 1, shall be entitled to receive the
amount of stock and other securities and property (including cash in the cases
referred to in subdivisions (b) and (c) of this Section 3) which such Holder
would hold on the date of such exercise if on the date hereof the Holder had
been the holder of record of the number of shares of Common Stock called for on
the face of this
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Warrant and had thereafter, during the period from the date hereof to and
including the date of such exercise, retained such shares and all such other or
additional stock and other securities and property (including cash in the case
referred to in subdivisions (b) and (c) of this Section 3) receivable by the
Holder as aforesaid during such period, giving effect to all adjustments called
for during such period by Section 4.
4. ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC.
In case at any time or from time to time, the Company shall (a) effect a
reorganization, (b) consolidate with or merge into any other person, or (c)
transfer all or substantially all of its properties or assets to any other
person under any plan or arrangement contemplating the dissolution of the
Company, then, in each such case, as a condition of such reorganization,
consolidation, merger, sale or conveyance, the Company shall give at least 30
days notice to the Holder of such pending transaction whereby the Holder shall
have the right to exercise this Warrant prior to any such reorganization,
consolidation, merger, sale or conveyance. Any exercise of this Warrant
pursuant to notice under this paragraph shall be conditioned upon the closing of
such reorganization, consolidation, merger, sale or conveyance which is the
subject of the notice and the exercise of this Warrant shall not be deemed to
have occurred until immediately prior to the closing of such transaction.
5. ADJUSTMENT FOR EXTRAORDINARY EVENTS. In the event that the
Company shall (i) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (ii) subdivide or reclassify its
outstanding shares of Common Stock, or (iii) combine its outstanding shares of
Common Stock into a smaller number of shares of Common Stock, then, in each such
event, the Purchase Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the then Purchase Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such event, and the
product so obtained shall thereafter be the Purchase Price then in effect. The
Purchase Price, as so adjusted, shall be readjusted in the same manner upon the
happening of any successive event or events described herein in this Section 5.
The Holder of this Warrant shall thereafter, on the exercise hereof as provided
in Section 1, be entitled to receive that number of shares of Common Stock
determined by multiplying the number of shares of Common Stock which would be
issuable on such exercise as of immediately prior to such issuance by a fraction
of which (i) the numerator is the Purchase Price in effect immediately prior to
such issuance and (ii) the denominator is the Purchase Price in effect on the
date of such exercise.
6. FURTHER ASSURANCES. The Company will take all action that
may be necessary or appropriate in order that the
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Company may validly and legally issue fully paid and nonassessable shares of
stock, free from all taxes, liens and charges with respect to the issue thereof,
on the exercise of all or any portion of this Warrant from time to time
outstanding.
7. NOTICES OF RECORD DATE, ETC. In the event of
(a) any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders thereof
who are entitled to receive any dividend on, or any right to subscribe
for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company
or any transfer of all or substantially all of the assets of the Company
to or consolidation or merger of the Company with or into any other
person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then and in each such event the Company will mail or cause to be mailed to the
Holder, at least ten days prior to such record date, a notice specifying (i) the
date on which any such record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, (ii) the date on which any such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up is to take place, and the time, if any is
to be fixed, as of which the holders of record of Common Stock (or Other
Securities) shall be entitled to exchange their shares of Common Stock (or Other
Securities) for securities or other property deliverable on such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up, and (iii) the amount and character of
any stock or other securities, or rights or options with respect thereto,
proposed to be issued or granted, the date of such proposed issue or grant and
the persons or class of persons to whom such proposed issue or grant is to be
offered or made. Such notice shall also state that the action in question or
the record date is subject to the effectiveness of a registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), or a
favorable vote of stockholders if either is required. Such notice shall be
mailed at least ten days prior to the date specified in such notice on which any
such action is to be taken or the record date, whichever is earlier.
8. RESERVATION OF STOCK, ETC., ISSUABLE ON EXERCISE OF
WARRANTS. The Company will at all times reserve and keep
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available, solely for issuance and delivery on the exercise of this Warrant, all
shares of Common Stock (or Other Securities) from time to time issuable on the
exercise of this Warrant.
9. TRANSFER OF WARRANT. This Warrant shall inure to the
benefit of the successors to and assigns of the Holder. This Warrant and all
rights hereunder, in whole or in part, is registrable at the office or agency of
the Company referred to below by the Holder hereof in person or by his duly
authorized attorney, upon surrender of this Warrant properly endorsed.
10. REGISTER OF WARRANTS. The Company shall maintain, at the
principal office of the Company (or such other office as it may designate by
notice to the Holder hereof), a register in which the Company shall record the
name and address of the person in whose name this Warrant has been issued, as
well as the name and address of each successor and prior owner of such Warrant.
The Company shall be entitled to treat the person in whose name this Warrant is
so registered as the sole and absolute owner of this Warrant for all purposes.
11. EXCHANGE OF WARRANT. This Warrant is exchangeable, upon
the surrender hereof by the Holder hereof at the office or agency of the Company
referred to in Section 10, for one or more new Warrants of like tenor
representing in the aggregate the right to subscribe for and purchase the number
of shares of Common Stock which may be subscribed for purchase hereunder, each
of such new Warrants to represent the right to subscribe for and purchase such
number of shares as shall be designated by said Holder hereof at the time of
such surrender.
12. REPLACEMENT OF WARRANT. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.
13. WARRANT AGENT. The Company may, by written notice to the
Holder, appoint an agent having an office in the United States of America, for
the purpose of issuing Common Stock (or Other Securities) on the exercise of
this Warrant pursuant to Section 1, exchanging this Warrant pursuant to Section
11, and replacing this Warrant pursuant to Section 12, or any of the foregoing,
and thereafter any such issuance, exchange or replacement, as the case may be,
shall be made at such office by such agent.
14. REMEDIES. The Company stipulates that the remedies at law
of the Holder of this Warrant in the event of any default
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or threatened default by the Company in the performance of or compliance with
any of the terms of this Warrant are not and will not be adequate, and that such
terms may be specifically enforced by a decree for the specific performance of
any agreement contained herein or by an injunction against a violation of any of
the terms hereof or otherwise.
15. NO RIGHTS OR LIABILITIES AS A STOCKHOLDER. This Warrant
shall not entitle the Holder hereof to any voting rights or other rights as a
stockholder of the Company. No provision of this Warrant, in the absence of
affirmative action by the Holder hereof to purchase Common Stock, and no mere
enumeration herein of the rights or privileges of the Holder hereof, shall give
rise to any liability of such Holder for the Purchase Price or as a stockholder
of the Company, whether such liability is asserted by the Company or by
creditors of the Company.
16. NOTICES, ETC. All notices and other communications from
the Company to the registered Holder of this Warrant shall be mailed by first
class certified mail, postage prepaid, at such address as may have been
furnished to the Company in writing by such Holder or at the address shown for
such Holder on the register of Warrants referred to in Section 10.
17. INVESTMENT REPRESENTATIONS. By acceptance of this Warrant,
the Holder represents to the Company that this Warrant is being acquired for the
Holder's own account and for the purpose of investment and not with a view to,
or for sale in connection with, the distribution thereof, nor with any present
intention of distributing or selling the Warrant or the Common Stock issuable
upon exercise of the Warrant. The Holder acknowledges that the Holder has been
afforded the opportunity to meet with the management of the Company and to ask
questions of, and receive answers from, such management and the Company's
counsel about the business and affairs of the Company and concerning the terms
and conditions of the offering of this Warrant, and to obtain any additional
information, to the extent that the Company possessed such information or could
acquire it without unreasonable effort or expense, necessary to verify the
accuracy of the information otherwise obtained by or furnished to the Holder
hereof in connection with the offering of this Warrant. The Holder asserts that
it may be considered to be a sophisticated investor, is familiar with the risks
inherent in speculative investments such as in the Company, has such knowledge
and experience in financial and business matters that it is capable of
evaluating the merits and risks of the investment in this Warrant and the Common
Stock issuable upon exercise of this Warrant, and is able to bear the economic
risk of the investment. By acceptance of this Warrant, the Holder represents to
the Company that it is an "accredited investor" as that term is defined in Rule
501 of the General Rules and Regulations under the 1933 Act by reason of Rule
501(a)(3). The Holder acknowledges and agrees that this Warrant and, except as
otherwise provided in the Registration Rights Agreement, dated
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as of September __, 1996, between the Company and _______ (the "Registration
Rights Agreement"), the Common Stock issuable upon exercise of this Warrant (if
any) have not been (and at the time of acquisition by the Holder, will not have
been or will not be), registered under the Securities Act or under the
securities laws of any state, in reliance upon certain exemptive provisions of
such statutes. The Holder recognizes and acknowledges that such claims of
exemption are based, in part, upon the representations of the Holder contained
herein. The Holder further recognizes and acknowledges that because this
Warrant and, except as provided in the Registration Rights Agreement, the Common
Stock issuable upon exercise of this Warrant (if any) are unregistered, they may
not be eligible for resale, and may only be resold in the future pursuant to an
effective registration statement under the Securities Act and any applicable
state securities laws, or pursuant to a valid exemption from such registration
requirements. Unless the shares of Common Stock have theretofore been
registered for resale under the Securities Act, the Company may require, as a
condition to the issuance of Common Stock upon the exercise of this Warrant (i)
in the case of an exercise in accordance with Section 1.1 hereof, a confirmation
as of the date of exercise of the Holder's representations pursuant to this
Section 17, or (ii) in the case of an exercise in accordance with Section 1.2
hereof, an opinion (in form and substance reasonably satisfactory to the
Company) of counsel reasonably satisfactory to the Company that the shares of
Common Stock to be issued upon such exercise may be issued without registration
under the Securities Act.
18. LEGEND. Unless theretofore registered for resale under the
Securities Act, each certificate for shares issued upon exercise of this Warrant
shall bear the following legend:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended.
The securities have been acquired for investment and may not be
sold, transferred or assigned in the absence of an effective
registration statement for the securities under the Securities Act
of 1933, as amended, or an opinion of counsel that registration is
not required under said Act.
19. MISCELLANEOUS. This Warrant and any terms hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement or such change, waiver, discharge
or termination is sought. This Warrant shall be construed and enforced in
accordance with and governed by the internal laws of the State of California.
The headings in this Warrant are for purposes of reference only, and shall not
limit or otherwise affect any of the terms hereof. The invalidity or
unenforceability of any provision hereof shall in no way affect the validity or
enforceability of any other provision.
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IN WITNESS WHEREOF, Graphix Zone, Inc. has caused this Warrant to
be executed on its behalf by one of its officers thereunto duly authorized.
Dated: , 1996 GRAPHIX ZONE, INC.
By ___________________________
Name:
Title:
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FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO GRAPHIX ZONE, INC.
1. The undersigned Holder of the attached original, executed Warrant
hereby elects to exercise its purchase right under such Warrant with respect to
______________ shares of Common Stock, as defined in the Warrant, of Graphix
Zone, Inc., a Delaware corporation (the "Company").
2. The undersigned Holder (check one):
_____ (a) elects to pay the aggregate purchase price for such shares of
Common Stock (the "Exercise Shares") (i) by lawful money of the
United States or the enclosed certified or official bank check
payable in United States dollars to the order of the Company in
the amount of $___________, or (ii) by wire transfer of United
States funds to the account of the Company in the amount of
$____________, which transfer has been made before or
simultaneously with the delivery of this Form of Subscription
pursuant to the instructions of the Company;
or
_____ (b) elects to receive shares of Common Stock having a value equal to
the value of the Warrant calculated in accordance with Section 1.2
of the Warrant.
3. Please issue a stock certificate or certificates representing the
appropriate number of shares of Common Stock in the name of the undersigned or
in such other names as is specified below:
Name: _____________________________________
Address: _____________________________________
_____________________________________
Dated:____________ ___, _____ ____________________________
(Signature must conform to name
of Holder as specified on the
face of the Warrant)
____________________________
____________________________
(Address)
