EXHIBIT 10.7
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR THE AVAILABILITY OF AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
STOCK SUBSCRIPTION WARRANT
TO PURCHASE COMMON STOCK OF
LIGHTPOINT ENTERTAINMENT, INC., A FLORIDA CORPORATION
(THE "COMPANY")
DATE OF INITIAL ISSUANCE: NOVEMBER 30, 1998
THIS CERTIFIES THAT, for value received, Merit Advisors Group, Inc. or its
assignee (hereinafter called the "Holder") is entitled to purchase from the
Company during the Term of this Warrant at the times provided for herein, the
number of shares of Common Stock, par value $.001 per share, of the Company (the
"Common Stock") as specified herein, at the Warrant Price, payable in the manner
specified herein. The exercise of this Warrant shall be subject to the
provisions, limitations and restrictions herein contained.
SECTION 1. DEFINITIONS.
For all purposes of this Warrant, the following terms shall have the
meanings indicated and capitalized terms used herein but not defined shall have
the meanings ascribed thereto in the Subscription and Investment Representation
Agreement:
COMMON STOCK - shall mean and include the Company's authorized Common
Stock, par value $.001 per share, as constituted at the date hereof, and shall
also include any capital stock of any class of the Company hereafter authorized
which has the right to participate in the distribution of earnings and assets of
the Company without limit to amount or percentage.
SECURITIES ACT - the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
TERM OF THIS WARRANT - shall mean the period beginning on the date of
initial issuance hereof and ending on March 1, 2004.
WARRANT PRICE - is defined in Section 2.1.
-2-
WARRANT RIGHTS - the rights of the Holder to purchase shares of Common
Stock upon exercise of this Warrant, which rights shall not relate to shares of
Common Stock already purchased pursuant to this Warrant.
WARRANT SHARES - shares of Common Stock purchased or purchasable by the
Holder of this Warrant upon the exercise hereof.
SECTION 2. EXERCISE OF WARRANT.
2.1. RIGHT TO EXERCISE. At any time and from time to time on and after the
date hereof, the Holder may exercise this Warrant, in whole or part(s) to
purchase up to [number of shares underlying Warrant] shares of Common Stock. The
Warrant Price shall be $.25 per share.
2.2. PROCEDURE FOR EXERCISE OF WARRANT. To exercise this Warrant the Holder
shall deliver to the Company at its office referred to in Section 9 hereof at
any time and from time to time during the Term of this Warrant a notice of
exercise and the payment of the aggregate Warrant Price with respect to the
Warrants exercised. In the event of any exercise of these rights represented by
this Warrant, a certificate or certificates for the shares of Common Stock so
purchased, registered in the name of the Holder or such other name or names as
may be designated by the Holder, shall be delivered to the Holder hereof within
a reasonable time, not exceeding fifteen (15) days, after the rights represented
by this Warrant shall have been so exercised. The person in whose name any
certificate for shares of Common Stock is issued upon exercise of this Warrant
shall for all purposes be deemed to have become the holder of record of such
shares on the date on which the Notice of Exercise was delivered and payment of
the Warrant Price and any applicable taxes was made, irrespective of the date of
delivery of such certificate, except that, if the date of such delivery and
payment is a date when the stock transfer books of the Company are closed, such
person shall be deemed to have become the holder of such shares at the close of
business on the next succeeding date on which the stock transfer books are open.
2.3. TRANSFER RESTRICTION LEGEND. Each certificate for Warrant Shares shall
bear the following legend (and any additional legend required by (i) any
applicable securities laws and (ii) any securities exchange upon which such
Warrant Shares may, at the time of such exercise, be listed) on the face thereof
unless at the time of exercise such Warrant Shares shall be registered under the
Securities Act:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD
OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE
-3-
REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR THE AVAILABILITY OF AN EXEMPTION
FROM REGISTRATION UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAWS."
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 under a registration statement of the securities
represented thereby) shall also bear such legend unless, in the opinion of
counsel for the holder thereof (which counsel shall be reasonably satisfactory
to counsel for the Company) the securities represented thereby are not, at such
time, required by all applicable securities laws to bear such legends.
SECTION 3. COVENANTS AS TO COMMON STOCK. The Company covenants and agrees
that all shares of Common Stock that may be issued upon the exercise of the
rights represented by this Warrant will, upon issuance, be validly issued, fully
paid and nonassessable, and free from all taxes, liens and charges with respect
to the issue thereof. The Company further covenants and agrees that it will pay
when due and payable any and all federal and state taxes which may be payable in
respect of the issue of this Warrant, or any Common Stock or certificates
therefor issuable upon the exercise of this Warrant. The Company further
covenants and agrees that the Company will at all times have authorized and
reserved, free from preemptive rights, a sufficient number of shares of Common
Stock to provide for the exercise of the rights represented by this Warrant. The
Company further covenants and agrees that if any shares of capital stock to be
reserved for the purpose of the issuance of shares upon the exercise of this
Warrant require registration with or approval of any governmental authority
under any federal or state law before such shares may be validly issued or
delivered upon exercise, then the Company will in good faith and as
expeditiously as possible endeavor to secure such registration or approval, as
the case may be. If and so long as the Common Stock issuable upon the exercise
of this Warrant is listed on any national securities exchange, the Company will,
if permitted by the rules of such exchange, list and keep listed on such
exchange, upon official notice of issuance, all shares of such Common Stock
issuable upon exercise of this Warrant.
SECTION 4. OWNERSHIP.
4.1. TRANSFER OF WARRANTS. This Warrant is fully assignable in whole or in
part, with all rights and privileges herein contained, at the sole discretion of
the Holder.
4.2. OWNERSHIP OF THIS WARRANT. The Company will be notified of all
assignments made in whole or in part to this warrant and will treat the assignee
as the holder and owner hereof for all purposes.
-4-
4.3. LOSS AND REPLACEMENT. Upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft or destruction, and, in such
case, of indemnity or security reasonably satisfactory to it, and upon surrender
of this Warrant if mutilated, the Company will make and deliver a new Warrant of
like tenor, in lieu of this Warrant; provided that if the Holder hereof is an
instrumentality of a state or local government or an institutional holder or a
nominee for such an instrumentality or institutional holder, an irrevocable
agreement of indemnity by such Holder shall be sufficient for all purposes of
this Section 4, and no evidence of loss or theft or destruction shall be
necessary. This Warrant shall be promptly canceled by the Company upon the
surrender hereof in connection with any transfer or replacement. Except as
otherwise provided above, in the case of the loss, theft or destruction of a
Warrant, the Company shall pay all expenses, taxes and other charges payable in
connection with any transfer or replacement of this Warrant, other than stock
transfer taxes (if any) payable in connection with a transfer of this Warrant,
which shall be payable by the Holder.
SECTION 5. RECLASSIFICATION, CAPITAL REORGANIZATION,
CONSOLIDATION OR MERGER
In case of any reclassification, capital reorganization or other change of
outstanding shares of Common Stock, or in case of any consolidation or merger of
the Company with or into another corporation (other than a consolidation or
merger in which the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock), or in case of any sale or conveyance to
another corporation of the property of the Company as, or substantially as, an
entirety (other than a sale/leaseback, mortgage or other financing transaction),
the Company shall cause effective provision to be made so that each holder of a
Warrant then outstanding shall have the right thereafter, by exercising such
Warrant, to purchase the kind and number of shares of stock or other securities
or property (including cash) receivable upon such reclassification, capital
reorganization or other change, consolidation, merger, sale or conveyance by a
holder of the number of shares of Common Stock that might have been purchased
upon exercise of such Warrant immediately prior to such reclassification,
capital reorganization or other change, consolidation, merger, sale or
conveyance. Any such provision shall include provision for adjustments that
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Section 5. The Company shall not effect any such consolidation,
merger or sale unless prior to or simultaneously with the consummation thereof
the successor (if other than the Company) resulting from such consolidation or
merger or the corporation purchasing assets or other appropriate corporation or
entity shall assume, by written instrument executed and delivered to the
Company, the obligation to deliver to the holder of each Warrant such shares of
stock, securities or assets as, in accordance with the foregoing provisions,
such holders may be entitled to purchase and the other obligations under this
Warrant. The foregoing provisions shall similarly apply to successive
reclassification, capital reorganizations and
-5-
other changes of outstanding shares of Common Stock and to successive
consolidations, mergers, sales or conveyances.
SECTION 6. NOTICE OF EXTRAORDINARY DIVIDENDS. If the Board of Directors of
the Company shall declare any dividend or other distribution on its Common Stock
except out of earned surplus or by way of a stock dividend payable in shares of
its Common Stock, the Company shall mail notice thereof to the Holder hereof not
less than fifteen (15) days prior to the record date fixed for determining
shareholders entitled to participate in such dividend or other distribution, and
the Holder hereof shall not participate in such dividend or other distribution
unless this Warrant may be exercised, in whole or in part, pursuant to Section 2
of this Warrant, and is exercised prior to such record date.
SECTION 7. [Intentionally Omitted.]
SECTION 8. REGISTRATION RIGHTS; ETC.
8.1. CERTAIN DEFINITIONS. As used in this Section 8, the following terms
shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Registrable Securities" shall mean the Warrant Shares less any Warrant
Shares theretofore sold to the public or in a private placement.
The terms "registers", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses incurred by the Company in
compliance with section 8.2 hereof other than Selling Expenses, including,
without limitation, all registration and filing fees, printing expenses, fees
and disbursements of counsel for the Company, blue sky fees and expenses, and
the expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the
Company, which shall be paid in any event by the Company).
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities, all fees and
disbursements of counsel for any Holder and any blue sky fees and expenses
excluded from the definition of "Registration Expenses".
-6-
"Holder" shall mean any holder of outstanding Warrant Shares or Registrable
Securities which (except for purposes of determining "Holders" under Section 8.6
hereof) have not been sold to the public.
"Other Shareholders" shall mean holders of securities of the Company who
are entitled by contract with the Company to have securities included in a
registration of the Company's securities.
8.2. COMPANY REGISTRATION.
(a) NOTICE OF REGISTRATION. If the Company shall determine to register any
of its securities either for its own account or the account of a security holder
or holders exercising their respective demand registration rights, other than a
registration relating solely to employee benefit plans, or a registration
relating solely to a Commission Rule 145 transaction, or a registration on any
registration form which does not permit secondary sales, the Company will:
(i) promptly give to each Holder written notice thereof (which shall
include a list of the jurisdictions in which the Company intends to attempt
to qualify such securities under the applicable blue sky or other state
securities laws); and
(ii) include in such registration (and any related qualification under
blue sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests, made by any Holder within fifteen (15) days after receipt of the
written notice from the Company described in clause (i) above, except as
set forth in Section 8.2(b) below.
(b) UNDERWRITING. If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as part of the written notice given pursuant
to Section 8.2(a)(i). In such event, the right of any Holder to registration
pursuant to Section 8.2 shall be conditioned upon such ▇▇▇▇▇▇'s participation in
such underwriting and the inclusion of such Holder's Registrable Securities in
the underwriting to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company, directors and officers and the Other Shareholders distributing their
securities through such underwriting) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for underwriting by
the Company.
Notwithstanding any other provision of this Section 8.2, if the underwriter
determines that marketing factors require a limitation on the number of shares
to be underwritten, the underwriter may (subject to the allocation priority set
forth below) exclude from such registration
-7-
and underwriting some or all of the registrable Securities which would otherwise
be underwritten pursuant hereto. The Company shall so advise all holders of
securities requesting registration, and the number of shares of securities that
are entitled to be included in the registration and underwriting shall be
allocated in the following manner. The number of shares that may be included in
the registration and underwriting on behalf of such Holders, directors and
officers and Other Shareholders shall be allocated among such Holders, directors
and officers and other Shareholders in proportion, as nearly as practicable, to
the respective amounts of Registrable Securities and other securities which they
had requested to be included in such registration at the time of filing the
registration statement.
If any Holder of Registrable Securities or any officer, director or Other
Shareholder disapproves of the terms of any such underwriting, such person may
elect to withdraw therefrom by written notice to the Company and the
underwriter. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration.
8.3. EXPENSES OF REGISTRATION. The Company shall bear all Registration
Expenses incurred in connection with any registration, qualification and
compliance by the Company pursuant to Section 8.2 hereof. All Selling Expenses
shall be borne by the holders of the securities so registered pro rata on the
basis of the number of their shares so registered.
8.4. REGISTRATION PROCEDURES. In the case of each registration effected by
the Company pursuant to this Section 8, the Company will keep each Holder
advised in writing as to the initiation of each registration and as to the
completion thereof. The Company will, at its expense:
(a) keep such registration effective for a period of one hundred
twenty (120) days or until the Holder or Holders have completed the
distribution described in the registration statement relating thereto,
whichever first occurs;
(b) furnish such number of prospectuses and other documents incident
thereto as a Holder from time to time may reasonably request; and
(c) use its best efforts to register or qualify the Registrable
Securities under the securities laws or blue-sky laws of such jurisdictions
as any Holder may request; provided, however, that the Company shall not be
obligated to register or qualify such Registrable Securities in any
particular jurisdiction in which the Company would be required to execute a
general consent to service of process in order to effect such registration,
qualification or compliance unless the Company is already subject to
service in such jurisdiction and except as may be required by the
Securities Act or applicable rules or regulations thereunder.
-8-
8.5. INDEMNIFICATION.
(a) The Company, with respect to each registration, qualification and
compliance effected pursuant to this Section 8, will indemnify and hold harmless
each Holder, each of its officers, directors and partners, and each party
controlling such Holder, and each underwriter, if any, and each party who
controls any underwriter, against all claims, losses, damages and liabilities
(or actions in respect thereof) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any prospectus,
offering circular or other document (including any related registration
statement, notification or the like) incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation by the Company of the
Securities Act or any rule or regulation thereunder applicable to the Company
and relating to action or inaction required of the Company in connection with
any such registration, qualification or compliance, and will reimburse each such
Holder, each of its officers, directors and partners, and each party controlling
such Holder, each such underwriter and each party who controls any such
underwriter, for any legal and any other expenses incurred in connection with
investigating or defending any such claim, loss, damage, liability or action,
provided that the Company will not be liable in any such case to the extent that
any such claim, loss, damage, liability or expense arises out of or is based on
any untrue statement or omission based solely upon written information furnished
to the Company by such Holder or underwriter, as the case may be, and stated to
be specifically for use therein.
(b) Each Holder and Other Shareholder will, if Registrable Securities held
by such person are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify and hold harmless the
Company, each of its directors and officers and each underwriter, if any, of the
Company's securities covered by such a registration statement, each party who
controls the Company or such underwriter, each other such Holder and Other
Shareholder and each of their respective officers, directors and partners, and
each party controlling such Holder or Other Shareholder, against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering circular
or other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Company and such Holders, Other
Shareholders, directors, officers, partners, parties, underwriters or control
persons for any legal or any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus, offering circular or other
document solely in reliance upon
-9-
and in conformity with written information furnished to the Company by such
Holder or Other Shareholder and stated to be specifically for use therein;
provided, however, that the obligations of such Holders and Other Shareholders
hereunder shall be limited to an amount equal to the proceeds to each such
Holder or Other Shareholder of securities sold as contemplated herein.
(c) Each party entitled to indemnification under this Section 8.5 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense (unless the Indemnified Party shall have been
advised by counsel that actual or potential differing interests or defenses
exist or may exist between the Indemnifying Party and the Indemnified Party, in
which case such expense shall be paid by the Indemnifying Party), and provided
further that the failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its obligations under this
Section 8. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
8.6. INFORMATION BY ▇▇▇▇▇▇. Each Holder of Registrable Securities, and each
Other Shareholder holding securities included in any registration, shall furnish
to the Company such information regarding such Holder or Other Shareholder as
the Company may reasonably request in writing and as shall be reasonably
required in connection with any registration, qualification or compliance
referred to in this Section 8.
8.7. RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission which may permit the sale of the
Registrable Securities to the public without registration, the Company agrees
to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times
from and after ninety (90) days following the effective date of the first
registration under the Securities Act filed by the Company for an offering
of its securities to the general public;
(b) Use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
-10-
Securities Act and the Securities Exchange Act of 1934, as amended, at any
time after it has become subject to such reporting requirements; and
(c) So long as the Holder owns any Registrable Securities, furnish to
the Holder forthwith upon request a written statement by the Company as to
its compliance with the reporting requirements of Rule 144 (at any time
from and after ninety (90) days following the effective date of the first
registration statement in connection with an offering of its Securities to
the general public), and of the Securities Act and the Securities Exchange
Act of 1934, as amended (at any time after it has become subject to such
reporting requirements), a copy of the most recent annual or quarterly
report of the Company, and such other reports and documents so filed as the
Holder may reasonably request in availing itself of any rule or regulation
of the Commission allowing the Holder to sell any such securities without
registration.
SECTION 9. NOTICES. Any notice or other document required or permitted to
be given or delivered to the Holder shall be delivered at, or sent by certified
or registered mail to, the Holder at such address as shall have been furnished
to the Company in writing by the Holder. Any notice or other document required
or permitted to be given or delivered to the Company shall be delivered at, or
sent by certified or registered mail to, the Company at Disney MGM Studios, ▇▇▇
▇. ▇▇▇▇▇▇ Production Center, Lake Buena Vista, FL 32830 or to such other address
as shall have been furnished in writing to the Holder by the Company. Any notice
so addressed and mailed by registered or certified mail shall be deemed to be
given when so mailed. Any notice so addressed and otherwise delivered shall be
deemed to be given when actually received by the addressee.
SECTION 10. NO RIGHTS AS STOCKHOLDER; LIMITATION OF LIABILITY. This Warrant
shall not entitle the Holder to any of the rights of a shareholder of the
Company. No provision hereof, in the absence of affirmative action by the Holder
to purchase shares of Common Stock, and no mere enumeration herein of the rights
or privileges of the Holder, shall give rise to any liability of the Holder for
the Warrant Price hereunder or as a shareholder of the Company, whether such
liability is asserted by the Company or by creditors of the Company.
SECTION 11. LAW GOVERNING. This Warrant shall be governed by, and construed
and enforced in accordance with, the laws of the State of Nevada.
SECTION 12. MISCELLANEOUS. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party (or any predecessor in interest thereof) against which
enforcement of the same is sought. The headings in this Warrant are for purposes
of reference only and shall not affect the meaning or construction of any of the
provisions hereof.
-11-
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer this 30th day of November, 1999.
LIGHTPOINT ENTERTAINMENT, INC.
By:
--------------------------------
Name:
Title:
[FORM NOTICE OF EXERCISE]
TO BE EXECUTED BY THE REGISTERED HOLDER IF
SUCH HOLDER DESIRES TO CONVERT THE WARRANT
To_________________________________:
The undersigned hereby irrevocably elects to convert the Warrant to
purchase _____ shares of Common Stock issuable upon the conversion of such
Warrant and requests that Certificate for such shares be issued in the name of:
--------------------------------------------------------------------------------
(Please print name and address)
--------------------------------------------------------------------------------
(Please insert social security or other identifying number)
--------------------------------------------------------------------------------
(Please insert number of shares exercised
--------------------------------------------------------------------------------
Please insert Warrant Price Paid
--------------------------------------------------------------------------------
(Please specify whether payment is in cash or Notes)
If such number of Warrant shall not be all the Warrant evidenced by the
accompanying Warrant, a new Warrant for the balance remaining of such Warrant
shall be registered in the name of and delivered to:
-------------------------------------------------------------
(Please print name and address)
-------------------------------------------------------------
(Please insert social security or other identifying number)
Dated: ___________________, _______.
[HOLDER]
By:
--------------------------------------