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EXHIBIT 3
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WARRANT AGREEMENT OF
THE ▇▇▇▇▇▇ ENTERTAINMENT COMPANY
144,618 SHARES
Dated as of June 30, 1999
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COMMON STOCK PURCHASE WARRANT
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WARRANT AGREEMENT (the "Agreement") dated as of June 30, 1999 between
The ▇▇▇▇▇▇ Entertainment Company, a California corporation (the "Company") and
▇▇. ▇▇▇▇ ▇▇▇▇ (collectively with any permitted transferee hereunder the
"Holder").
The Company and the Holder hereby agree as follows:
SECTION 1. ISSUANCE OF THE WARRANTS; TRANSFERABILITY AND FORM OF THE
WARRANTS.
1.1 THE WARRANTS. Subject to satisfaction of the conditions
set forth in Schedule 6 of that certain Note dated as of June 30, 1999 made by
the Company in favor of the Holder, the Company hereby grants to the Holder, (i)
48,206 Common Stock Purchase Warrants (Series A) (the "Series A Warrants") each
to purchase one share of its common stock, no par value per share (the "Common
Stock"); (ii) 48,206 Common Stock Purchase Warrants (Series B) (the "Series B
Warrants"), each to purchase one share of the Common Stock; and (iii) 48,206
Common Stock Purchase Warrants (Series C) (the "Series C Warrants" and
collectively with the Series A Warrants and the Series B Warrants, the
"Warrants") each to purchase one share of the Common Stock. The shares of Common
Stock issuable upon exercise of the Warrant are referred herein as the "Warrant
Shares."
1.2 REGISTRATION. The Warrant Shares constitute "Shareholder
Common Stock" under that certain Registration Rights Agreement, dated as of June
30, 1999, between the Company and the Holder and, accordingly, have the benefit
of the registration rights pursuant to that agreement.
1.3 TRANSFER RESTRICTIONS. The Holder may not transfer any
Warrant without the prior written consent of the Company, which consent may be
granted or denied in the sole discretion of the Company, provided that all or a
portion of any Warrant may be transferred to any family member of the Holder or
in connection with estate planning matters (including by operation of law).
Should such consent be granted, the Warrants so transferred shall continue to be
bound by this restriction in the hands of a subsequent Holder, and the Company
shall not be required to recognize any attempted transfer of the Warrants in
violation of this Agreement.
1.4 TRANSFER - GENERAL. Subject to the terms hereof, the
Warrants shall be transferable only on the books of the Company maintained at
its principal office upon delivery thereof duly endorsed by the Holder or by his
duly authorized attorney or representative, or accompanied by proper evidence of
succession, assignment or authority to transfer. In all cases of transfer by an
attorney, the original power of attorney, duly approved, or a copy thereof, duly
certified, shall be deposited and remain with the Company. In case of transfer
by executors, administrators, guardians or other legal representatives, duly
authenticated evidence of their authority shall be produced, and may be required
to be deposited and to remain with the Company in its discretion. Upon any
registration of transfer, the person to whom such transfer is made shall receive
a new Warrant or Warrants as to the portion of the Warrant transferred, and
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the Holder of such Warrant shall be entitled to receive a new Warrant or
Warrants from the Company as to the portion thereof retained. The Company may
require the payment of a sum sufficient to cover any tax or governmental charge
that may be imposed in connection with any such transfer.
1.5 FORM OF THE WARRANTS. The form of the Warrants and of
the election to purchase Warrant Shares (the "Purchase Form") shall be
substantially as set forth respectively in Annex A and B attached hereto. Except
for the exercise price thereof, the Series A Warrants, the Series B Warrants and
the Series C Warrants shall be identical in all respects. The Warrants shall be
executed on behalf of the Company by its Chairman of the Board, its Chief
Executive Officer, President or one of its Vice Presidents.
The Warrants shall be dated as of the date of execution thereof
by the Company either upon initial issuance or upon transfer.
SECTION 2. TERM OF THE WARRANTS; EXERCISE OF THE WARRANTS; EXERCISE
PRICE, ETC.
2.1 TERM OF THE WARRANTS. Subject to the terms of this
Agreement, the Holder shall have the right, which right may be exercised in
whole or in part, from time to time, beginning on the date six months following
the Closing and ending on the date set forth in the respective Warrant (the
"Expiration Date"), to purchase from the Company the number of fully paid and
nonassessable Warrant Shares which the Holder may at the time be entitled to
purchase on exercise of such Warrant. If the last day for the exercise of the
Warrants shall not be a business day, then the Warrants may be exercised on the
next succeeding business day.
2.2 VESTING OF THE WARRANTS. The Warrants are vested in full
and, subject to Section 2.1 hereof, may be exercised on or after the date hereof
in accordance with the terms of this Agreement and the Warrants.
2.3 EXERCISE OF THE WARRANTS. The Warrants may be exercised
upon surrender to the Company, at its principal office, of the certificate
evidencing the Warrants to be exercised, together with the Purchase Form on the
reverse thereof completed and signed, and upon payment to the Company, of the
Exercise Price (as defined in and determined in accordance with the provisions
of Sections 2.5 and 6 hereof) for the number of Warrant Shares in respect of
which such Warrants are then being exercised (such surrender of Warrants,
delivery of the Purchase Form and payment of the Exercise Price hereinafter
called the "Exercise of the Warrants"). Upon partial exercise, a Warrant
certificate for the unexercised portion shall be delivered by the Company to the
Holder. Payment of the Exercise Price shall be by delivery of cash, or a
certified or official bank check in the amount of such Exercise Price.
Subject to Section 3 hereof, upon such surrender of a Warrant
and payment of the Exercise Price as aforesaid, the Company shall issue and
cause to be delivered with all reasonable dispatch to or upon the written order
of the Holder thereof and in such name or names as the Holder may designate, a
certificate or certificates for the number of Warrant Shares so
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purchased upon the exercise of such Warrant, together with cash, as provided in
Section 6.3 hereof, in lieu of any fractional Warrant Shares otherwise issuable
upon such surrender. Such certificate or certificates shall be deemed to have
been issued and any person so designated to be named therein shall be deemed to
have become a holder of record of such Warrant Shares as of the date of the
surrender of such Warrant and payment of the Exercise Price, as aforesaid.
2.4 COMPLIANCE WITH GOVERNMENT REGULATIONS. The Holder
acknowledges that none of the Warrants or Warrant Shares have been registered
under the Securities Act of 1933, as amended (the "Securities Act"), and
therefore may be sold or disposed of in the absence of such registration only
pursuant to an exemption from such registration and in accordance with this
Agreement. The Warrant Shares will bear a legend to the following effect:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH
THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR WITH THE SECURITIES COMMISSION OF ANY
STATE UNDER ANY APPLICABLE STATE SECURITIES OR BLUE SKY LAWS AND
ARE SUBJECT TO THE WARRANT AGREEMENT, DATED AS OF JUNE 30, 1999,
BETWEEN THE ▇▇▇▇▇▇ ENTERTAINMENT COMPANY AND ▇▇▇▇ ▇▇▇▇ (A COPY
OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY).
SECURITIES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR IN A
TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THOSE
SECURITIES LAWS (IF REQUESTED BY THE COMPANY, UPON PROVISION OF
AN OPINION OF COUNSEL IN FORM SATISFACTORY TO THE COMPANY)."
2.5 EXERCISE PRICE. The price per share at which Warrant
Shares shall be purchasable upon exercise of each Warrant (the "Exercise Price")
shall be (i) $9.00 per share of Common Stock in the case of the Series A
Warrants; (ii) $11.00 per share of Common Stock in the case of the Series B
Warrants; and (iii) $12.00 per share of Common Stock in the case of the Series C
Warrants, in each case subject to adjustment as provided in Section 6 hereof.
SECTION 3. PAYMENT OF TAXES. The Company will pay all documentary stamp
taxes, if any, attributable to the initial issuance of the Warrants and Warrant
Shares upon the exercise of Warrants. The Company shall not be required to pay
any income tax or taxes resulting from the issuance of the Warrants or any other
tax or taxes which may be payable in respect of any transfer involved in the
issue or delivery of the Warrants or certificates for Warrant Shares.
SECTION 4. MUTILATED OR MISSING WARRANT. In case any Warrant certificate
shall be mutilated, lost, stolen or destroyed, the Company shall issue and
deliver in exchange and substitution for and upon cancellation of the mutilated
Warrant, or in lieu of and substitution for
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the Warrant lost, stolen or destroyed, a new Warrant certificate of like tenor
and representing an equivalent right or interest; but only upon receipt of
evidence reasonably satisfactory to the Company of such loss, theft or
destruction of such Warrant certificate and indemnity or bond, if requested,
also reasonably satisfactory to them. An applicant for such substitute Warrant
certificate shall also comply with such other reasonable regulations and pay
such other reasonable charges as the Company may prescribe.
SECTION 5. RESERVATION OF WARRANT SHARES.
5.1 RESERVATION OF WARRANT SHARES. There have been reserved,
and the Company shall at all times keep reserved, out of its authorized and
unissued shares of Common Stock, that number of shares of Common Stock
sufficient to provide for the exercise of the outstanding Warrants. The transfer
agent for the Common Stock and every subsequent transfer agent ("Transfer
Agent") for any shares of the Company's capital stock issuable upon the exercise
of any of the Warrants will be and are hereby irrevocably authorized and
directed at all times until 5:00 p.m. Pacific Time on the Expiration Date
applicable to each Series of Warrants to reserve such number of authorized
shares as shall be requisite for such purpose. The Company will keep a copy of
this Agreement on file with the Transfer Agent for any shares of the Company's
capital stock issuable upon the exercise of the rights of purchase represented
by the Warrants. The Company covenants that all Warrant Shares which may be
issued upon exercise of Warrants will, upon payment in accordance with this
Agreement be validly issued, fully paid, nonassessable, free of preemptive
rights and free from all taxes, liens, charges, pledges, mortgages and security
interests with respect to the issue thereof. The Company will supply the
Transfer Agent with duly executed stock certificates for such purpose and will
itself provide or otherwise make available any cash which may be payable as
provided in Section 6.3 of this Agreement. The Company will furnish to such
Transfer Agent a copy of all notices of adjustments, and certificates related
thereto, transmitted to the Holder. Any Warrant surrendered in the exercise of
the rights thereby evidenced shall be canceled by the Company.
5.2 CANCELLATION OF WARRANTS. In the event the Company shall
purchase or otherwise acquire any Warrants, the same shall be canceled and
retired.
SECTION 6. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.
The number and kind of securities purchasable upon the exercise of the Warrants
and the Exercise Price shall be subject to adjustment from time to time upon the
happening of certain events, as hereinafter defined.
6.1 MECHANICAL ADJUSTMENTS. The number of Warrant Shares
purchasable upon the exercise of the Warrants and the Exercise Price shall be
subject to adjustment as follows:
(a) PROHIBITED ACTIONS. So long as any Warrants are
outstanding, then, the Company will not avoid or seek to avoid the
observance or performance of any of the terms of this Agreement or the
Warrants or impair the ability of the Holder to realize the full
intended economic value thereof, but will at all times in
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good faith assist in the carrying out of all such terms, and of the
taking of all such action as may be necessary or appropriate in order to
protect the rights of the Holder of the Warrants against dilution or
other impairment.
(b) ADJUSTMENT OF NUMBER OF SHARES. Subject to any
applicable exceptions set forth in Section 6.1(g) below, if and whenever
after the date hereof the Company shall in any manner (i) issue or sell
any shares of its Common Stock for less than Fair Value (as defined in
Section 6.1 (k) below) as determined at the time of such issuance or
sale, or (ii) grant (whether directly or by assumption in a merger or
otherwise) any rights to subscribe for or to purchase any options,
warrants, convertible securities, securities and other rights to acquire
from the Company shares of Common Stock ( the "Common Stock
Equivalents"), or issue or sell (whether directly or by assumption in a
merger or otherwise) Common Stock Equivalents, and the price per share
for which Common Stock is issuable upon exercise, conversion or exchange
of such Common Stock Equivalents (determined by dividing (x) the
aggregate amount received or receivable by the Company as consideration
for the issue, sale or grant of such Common Stock Equivalents, plus the
minimum aggregate amount of additional consideration, if any, payable to
the Company upon the exercise, conversion or exchange thereof, by (y)
the total maximum number of shares of Common Stock issuable upon the
exercise, conversion or exchange of all such Common Stock Equivalents)
shall be less than the Fair Value (after taking into account any
consideration received or receivable by the Company with respect to the
exercise, exchange or conversion of any Common Stock Equivalents) on the
date of such issue, sale or grant, whether or not the rights to
exercise, exchange or convert thereunder are immediately exercisable or
(iii) declare a dividend or make any other distribution upon any stock
of the Company payable in Common Stock or Common Stock Equivalents, then
(A) the Exercise Price shall be reduced to a price determined by
multiplying the Exercise Price in effect prior to the adjustment
referred to in this Section 6.1 (b) by a fraction, the numerator of
which is an amount equal to the sum of (x) the number of shares of
Common Stock outstanding (including shares of Common Stock issuable upon
conversion of all outstanding shares of Series A Preferred Stock)
immediately prior to such issue, sale, grant, dividend or distribution,
plus (y) (A) the consideration, if any, received or receivable by the
Company upon any such issue or sale, plus, in the case of Common Stock
Equivalents, the minimum aggregate amount of additional consideration,
if any, payable to the Company upon the exercise, conversion or exchange
of Common Stock Equivalents divided by (B) the Fair Value as determined
at the time of such issue or sale, and the denominator of which is the
total number of shares of Common Stock outstanding (including shares of
Common Stock issuable upon conversion of all outstanding shares of
Series A Preferred Stock) immediately after such issue, sale, grant,
dividend or distribution, and (B) the number of shares of Common Stock,
taking into account all shares of Common Stock thereto issued upon
exercise of each Warrant, required to be issued by the Company to the
Holder (the "Exercise Quantity") shall be adjusted to equal the number
obtained by dividing (x) the Exercise Price in effect immediately prior
to such issue, sale, grant, dividend or distribution multiplied by the
Exercise Quantity immediately prior to such issue, sale, grant, dividend
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or distribution by (y) the Exercise Price resulting from the adjustment
made pursuant to clause (A) above.
(c) RECORD DATE. The record date for the holders of
the Common Stock for the purpose of entitling them (a) to receive a
dividend or other distribution payable in shares of Common Stock or
Common Stock Equivalents, or (b) to subscribe for or purchase shares of
Common Stock or Common Stock Equivalents shall be the date determined by
the Board as the record date for such purposes or, if none is
established by the Board, then the record date shall be the effective
date for such action; provided, however, that if such shares are not
actually issued or sold on the applicable issuance or sale date, then
such shares of Common Stock or Common Stock Equivalents shall not be
deemed to have been sold or issued on such record date.
(d) CERTAIN DIVIDENDS. In case the Company shall pay
a dividend or make a distribution generally to the holders of its Common
Stock of shares of its capital stock (other than shares of Common
Stock), evidences of its indebtedness, assets or rights, warrants or
options (excluding (i) dividends or distributions payable in cash out of
the current year's or retained earnings of the Company, (ii)
distributions relating to subdivisions and combinations covered by
Section 6.1 (e), (iii) distributions relating to reclassifications,
changes, consolidations, mergers, sales or conveyances covered by
Section 6.1 (f) and (iv) rights, warrants or options to purchase or
subscribe for shares of Common Stock or Common Stock Equivalents or
other issuances covered by Section 6(b)), then in each such case (A) the
Exercise Price shall be adjusted so that the same shall equal the price
determined by multiplying the Exercise Price in effect immediately prior
to the record date mentioned below by a fraction, the numerator of which
shall be (x) the total number of shares of Common Stock then outstanding
(including shares of Common Stock issuable upon conversion of all
outstanding shares of Series A Preferred Stock) multiplied by the Fair
Value per share of Common Stock on the record date mentioned below,
minus (y) the Fair Value as of such record date of said shares of stock,
evidences of indebtedness or assets so paid or distributed or of such
rights, warrants or options, plus (z) in the case of rights, warrants or
options, the minimum aggregate amount of additional consideration, if
any, payable to the Company upon the exercise of such rights, warrants
or options, and the denominator of which shall be the total number of
shares of Common Stock then outstanding (including shares of Common
Stock issuable upon conversion of all outstanding shares of Series A
Preferred Stock) multiplied by the Fair Value per share of Common Stock
on the record date mentioned below, and (B) the Exercise Quantity shall
be adjusted to equal the number obtained by dividing (x) the Exercise
Price in effect immediately prior to such dividend or distribution
multiplied by the Exercise Quantity immediately prior to such dividend
or distribution by (y) the Exercise Price resulting from the adjustment
made pursuant to clause (A) above. Such adjustments shall be made
whenever any such dividend is paid or such distribution is made and
shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or
distribution.
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In the event of a distribution by the Company of stock
of a subsidiary or securities convertible into or exercisable for such
stock, then in lieu of an adjustment in the Exercise Price, the Holder
of this Warrant, upon the exercise thereof at any time after such
distribution, shall be entitled to receive from the Company, such
subsidiary or both, as the Company shall determine, the stock or other
securities to which the Holder would have been entitled if the Holder
had exercised such Warrant immediately prior thereto, all subject to
further adjustment as provided in this Section 6; provided, however,
that no adjustment in respect of dividends or interest on such stock or
other securities shall be made during the term of the Warrants or upon
the exercise of the Warrants.
(e) SUBDIVISION OR COMBINATION OF SHARES. In case
the Company shall at any time subdivide its outstanding shares of Common
Stock into a greater number of shares, the Exercise Price in effect
immediately prior to such subdivision shall be proportionally reduced
and the number of Warrant Shares purchasable hereunder shall be
proportionately increased. In case the outstanding shares of the Common
Stock of the Company shall be combined into a smaller number of shares,
the Exercise Price in effect immediately prior to such combination shall
be proportionately increased, but in no event to greater than the
aggregate Exercise Price of all Warrant Shares in effect on the date
hereof, and the number of Warrant Shares purchasable hereunder shall be
proportionately reduced.
(f) REORGANIZATION, MERGER, ETC. In case of any
capital reorganization, reclassification or similar transaction
involving the capital stock of the Company (other than as provided in
Section 6.1 (e)), any consolidation, merger or business combination of
the Company with another corporation, or the sale or conveyance of all
or substantially all of its assets to another corporation, shall be
effected in such a way that holders of the Common Stock shall be
entitled to receive stock, securities, or assets (including cash) with
respect to or in exchange for shares of the Common Stock, then, prior to
and as a condition of such reorganization, reclassification,
consolidation, merger, business combination, sale or conveyance, lawful
and adequate provision shall be made whereby the Holder shall thereafter
have the right to receive upon exercise of the Warrants and in lieu of
the Warrant Shares immediately theretofore purchasable upon the exercise
of the Warrants, such shares of stock, securities or assets (including
cash) as may be issued or payable with respect to or in exchange for a
number of outstanding shares of Common Stock equal to the number of
shares of Common Stock immediately theretofore purchasable upon the
exercise of the Warrants had such reorganization, reclassification,
consolidation, merger, business combination, sale or conveyance not
taken place. In any such case, appropriate provision shall be made with
respect to the rights and interests of the Holder to the end that the
provisions hereof (including, without limitation, provisions for
adjustment of the Exercise Price and of the number of Warrant Shares
purchasable upon the exercise of the Warrants) shall thereafter be
applicable, as nearly as possible in relation to any stock, securities
or assets thereafter deliverable upon the exercise of the Warrants. The
Company shall not effect any such
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consolidation, merger, business combination, sale or conveyance unless
prior to or simultaneously with the consummation thereof the survivor or
successor corporation (if other than the Company) resulting from such
consolidation or merger or the corporation purchasing such assets shall
assume by written instrument executed and sent to the Holder, the
obligation to deliver to the Holder such shares of stock, securities or
assets as, in accordance with the foregoing provisions, the Holder may
be entitled to receive, and containing the express assumption by such
successor corporation of the due and punctual performance and observance
of every provision of this Agreement to be performed and observed by the
Company and of all liabilities and obligations of the Company hereunder.
(g) EXCEPTIONS TO ADJUSTMENT. No adjustment will be
made (i) upon the exercise or conversion of any Warrants, options,
subscriptions, convertible notes, convertible debentures, convertible
preferred stock or other convertible securities issued and outstanding
on the date hereof; (ii) upon the grant or exercise of any stock or
options which may hereinafter be granted or exercised under any employee
benefit plan of the Company now existing or to be implemented in the
future, or upon grant or exercise of any stock or options to or by any
officer, director, employee, agent, consultant or other entity providing
services to the Company, whether or not under a plan; (iii) upon
conversion of any of the Series A Convertible Preferred Stock; (iv) upon
the issuance of securities in connection with any merger, acquisition or
consolidation, or purchase of assets or business from another person, so
long as the Company is the surviving corporation; (v) upon the issuance
of securities issued as the result of anti-dilution rights granted to a
third party; (vi) upon the issuance of securities in a private placement
made within six months of the original issuance date of the Series A
Preferred Stock at a discount below the market price thereof which does
not exceed 20%.
(h) TREASURY SHARES. The number of shares of the
Common Stock outstanding at any time shall not include shares owned or
held by or for the account of the Company or any of its subsidiaries,
and the disposition (but not the cancellation) of any such shares shall
be considered an issue or sale of the Common Stock for the purposes of
Section 6.
(i) ADJUSTMENT NOTICES TO HOLDER. Upon any increase
or decrease in the number of Warrant Shares purchasable upon the
exercise of the Warrants, or upon any adjustment in the Exercise Price,
then, and in each such case, the Company shall promptly deliver written
notice thereof to the Holder, which notice shall state the increased or
decreased number of Warrant Shares purchasable upon the exercise of the
Warrants, setting forth in reasonable detail the method of calculation
and the facts upon which such calculations are based. Such notice shall
also contain a certificate of the Company's independent public
accountants as to the correctness of such adjustments and calculations
and to the effect that such adjustments and calculations have been made
in accordance with the terms hereof.
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(j) EXERCISE PRICE DEFINED. As used in these
Warrants, the term "Exercise Price" shall mean the purchase price per
share specified in these Warrants until the occurrence of an event
specified in this Section 6 and thereafter shall mean said price, as
adjusted from time to time, in accordance with the provisions of said
subsection. No such adjustment shall be made unless such adjustment
would change the Exercise Price at the time by $.125 or more; provided,
however, that all adjustments not so made shall be deferred and made
when the aggregate thereof would change the Exercise Price at the time
by $.125 or more.
(k) FAIR VALUE DEFINED. Fair Value as of a
particular date shall mean the average of the daily closing prices for
the preceding twenty trading days before the day in question. The
closing price for each day shall be the last reported sale price regular
way or, in case no such reported sale takes place on such day, the
average of the reported closing bid and asked prices regular way, in
either case on the principal national securities exchange on which the
Common Stock is listed or admitted to trading or, if not listed or
admitted to trading on any national securities exchange, the average of
the closing bid and asked prices as reported by the National Association
of Securities Dealers Automated Quotation System. If such quotations are
unavailable, or with respect to other appropriate security, property,
assets, business or entity, "Fair Value" shall mean the fair value of
such item as determined by mutual agreement reached by the Company and
[the holders constituting a majority of the unexercised shares of Common
Stock issuable under the Warrants and the warrants issued under that
certain Warrant Agreement dated as of April 26, 1999 (the "April
Warrants") among the Company, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, The
▇▇▇▇▇▇▇-▇▇▇▇▇ Company, ▇▇ ▇▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇▇ (collectively, the
"Majority of the Holders")] or, in the event the parties are unable to
agree, an opinion of an independent investment banking firm or firms in
accordance with the following procedure. In the case of any event which
gives rise to a requirement to determine "Fair Value" pursuant to this
Agreement, the Company shall be responsible for initiating the process
by which Fair Value shall be determined as promptly as practicable, but
in any event within sixty (60) days following such event and if the
procedures contemplated herein in connection with determining Fair Value
have not been complied with fully, then any such determination of Fair
Value for any purpose of this Agreement shall be deemed to be
preliminary and subject to adjustment pending full compliance with such
procedures. Upon the occurrence of an event requiring the determination
of Fair Value, the Company shall give the Holder and the holders of the
April Warrants notice of such event, and the Company, the Holder and the
holders of the April Warrants shall engage in direct good faith
discussions to arrive at a mutually agreeable determination of Fair
Value. In the event the Company and the Majority of the Holders are
unable to arrive at a mutually agreeable determination within thirty
(30) days of the notice, Deloitte & Touche LLP shall make such
determination and render such an opinion. The determination so made
shall be conclusive and binding on the Company and such holders. The
fees and expenses of the investment banking firm retained for such
purpose shall be equally shared by the Company and the holders.
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(l) ADJUSTMENTS: ADDITIONAL SHARES, SECURITIES OR
ASSETS. In the event that at any time, as a result of an adjustment made
pursuant to this Section 6, the Holder of these Warrants shall, upon
Exercise of these Warrants, become entitled to receive shares and/or
other securities or assets (other than Common Stock) then, wherever
appropriate, all references herein to shares of Common Stock shall be
deemed to refer to and include such shares and/or other securities or
assets; and thereafter the number of such shares and/or other securities
or assets shall be subject to adjustment from time to time in a manner
and upon terms as nearly equivalent as practicable to the provisions of
this Section 6.
(m) COMPUTATION OF ADJUSTMENT. If any adjustment to
the number of shares of Common Stock issuable upon the exercise of each
Warrant or any adjustment to the Exercise Price is required pursuant to
Section 6 hereof, the number of shares of Common Stock issuable upon
exercise of each Warrant or the Exercise Price shall be rounded up to
the nearest 1/10th cent or 1/100th Share, as appropriate.
6.2 NOTICE OF ADJUSTMENT. Whenever the number of Warrant
Shares purchasable upon the exercise of the Warrants or the Exercise Price of
such Warrant Shares is adjusted, as herein provided, the Company shall mail by
first class, postage prepaid, to the Holder notice of such adjustment or
adjustments and shall deliver to the Holder a copy of a certificate of either
the Board of Directors of the Company or of a firm of independent public
accountants selected by the Board of Directors of the Company (who may be the
regular accountants employed by the Company) setting forth the number of Warrant
Shares purchasable upon the exercise of the Warrants and the Exercise Price of
such Warrant Shares after such adjustment, setting forth a brief statement of
the facts requiring such adjustment and setting forth the computation by which
such adjustment was made. Such certificate shall be conclusive evidence of the
correctness of such adjustment in the absence of manifest error.
6.3 FRACTIONAL INTERESTS. No fractional shares or scrip
representing fractional shares shall be issuable upon an Exercise of Warrants,
but on Exercise of Warrants, the Holder hereof may purchase only a whole number
of shares of Common Stock. The Company shall make a payment in cash in respect
of any fractional shares which might otherwise be issuable upon Exercise of
these Warrants, calculated by multiplying the fractional share amount by the
closing bid price of the Company's Common Stock on the Date of Exercise as
reported by the NASDAQ National Market or such other principal exchange or
trading market upon which the Common Stock is then traded; provided that the
Exercise of multiple Warrants shall be aggregated so that a cash payment in
respect of fractional shares pursuant to this Section 6.3 shall not be made as
to a total number greater than one for any single Exercise.
6.4 STATEMENT ON THE WARRANTS. Irrespective of any
adjustments in the Exercise Price or the number or kind of shares purchasable
upon the exercise of the Warrants, the Warrants theretofore or thereafter issued
may continue to express the same price and number and kind of shares as are
stated in the Warrants initially issuable pursuant to this Agreement.
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SECTION 7. NO RIGHTS AS STOCKHOLDER; NOTICES TO HOLDER. Nothing
contained in this Agreement or in the Warrants shall be construed as conferring
upon the Holder or its permitted transferees the right to vote or to receive
dividends or to consent to or receive notice as a stockholder in respect of any
meeting of stockholders for the election of directors of the Company or any
other matter, or any rights whatsoever as a stockholder of the Company.
SECTION 8. INSPECTION OF WARRANT AGREEMENT. The Company shall keep
copies of this Agreement and any notices given or received hereunder available
for inspection by the Holder during normal business hours at its principal
office.
SECTION 9. IDENTITY OF TRANSFER AGENT. Forthwith upon the appointment of
any subsequent transfer agent for the Common Stock or any other shares of the
Company's capital stock issuable upon the exercise of the Warrants the Company
will notify the Holder of the name and address of such subsequent transfer
agent.
SECTION 10. NOTICES. Any notice pursuant to this Agreement by any Holder
to the Company, shall be in writing and shall be mailed first class, postage
prepaid, or delivered to the Company at its office at 1999 Avenue of the Stars,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Chief Executive Officer.
Any notice mailed pursuant to this Agreement by the Company to
the Holder shall be in writing and shall be mailed first class, postage prepaid,
or delivered to the Holder at its address on the signature page hereto.
Each party hereto may from time to time change the address to
which notices to it are to be delivered or mailed hereunder by notice in writing
to the other party.
SECTION 11. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, without giving
effect to principles of conflict of laws. The parties hereto agree to submit to
the jurisdiction of the Courts of the State of California in any action or
proceeding arising out of or relating to this Agreement.
SECTION 12. SUPPLEMENTS AND AMENDMENTS. The Company and Majority of the
Holders may from time to time supplement or amend this Agreement in order to
cure any ambiguity or to correct or supplement any provision contained herein
which may be defective or inconsistent with any other provision herein, or to
make any other provisions in regard to matters or questions arising hereunder
which the Company and the Majority of the Holders may deem necessary or
desirable and which shall not be inconsistent with the provisions of the
Warrants and which shall not adversely affect the interests of the Holder.
SECTION 13. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company shall bind and inure to the
benefit of its successors and assigns hereunder.
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SECTION 14. MERGER OR CONSOLIDATION OF THE COMPANY. So long as the
Warrant remains outstanding, the Company will not merge or consolidate with or
into, or sell, transfer or lease all or substantially all of its property to,
any other corporation unless the successor or purchasing corporation, as the
case may be (if not the Company), shall expressly assume, by supplemental
agreement, the due and punctual performance and observance of each and every
covenant and condition of this Agreement to be performed and observed by the
Company.
SECTION 15. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall
be construed to confer upon any person other than the Company and the Holder any
legal or equitable right, remedy or claim under this Agreement and this
Agreement shall be for the sole and exclusive benefit of the Company and the
Holder.
SECTION 16. CAPTIONS. The captions of the Sections of this Agreement
have been inserted for convenience only and shall have no substantive effect.
SECTION 17. COUNTERPARTS. This Agreement may be executed in any number
of counterparts each of which when so executed shall be deemed to be an
original; but such counterparts together shall constitute but one and the same
instrument.
SECTION 18. LIMITATION OF LIABILITY. No provision hereof, in the absence
of affirmative action by the Holder to purchase shares of Common Stock, and no
enumeration herein of the rights or privileges of the Holder of a Warrant, shall
give rise to any liability of the Holder for the purchase price of any Common
Stock or as a shareholder of the Company, whether such liability is asserted by
the Company or by creditors of the Company.
SECTION 19. WAIVER AND COURSE OF DEALING. No course of dealing or any
delay or failure to exercise any right hereunder on the part of any party
thereto shall operate as a waiver of such right or otherwise prejudice the
rights, powers or remedies of such party.
SECTION 20. WAVIER OF JURY TRIAL. THE COMPANY AND THE HOLDER HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR FOR ANY COUNTERCLAIM THEREIN.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed as of the day, month and year first above written.
THE COMPANY:
THE ▇▇▇▇▇▇ ENTERTAINMENT COMPANY
By:_____________________________________
Name:
Title:
▇▇▇▇ ▇▇▇▇
Signature
Address:
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ANNEX A
Warrant Certificate
Warrant No. ______________ ______________ Shares
[SERIES A] [SERIES B] [SERIES C] COMMON STOCK PURCHASE WARRANT
Void After 5:00 P.M.
Pacific Time on [June ___, 2005] [June ___, 2006] [June ____, 2007]
THIS CERTIFIES THAT, for value received, _______________, the registered
holder of this [Series A] [Series B] [Series C] Common Stock Purchase Warrant
(the "Warrant") or permitted assigns (the "Holder"), is entitled to purchase
from The ▇▇▇▇▇▇ Entertainment Company, a California corporation (the "Company"),
at any time until 5:00 p.m. Pacific Time on [June ___, 2005] [June ___, 2006]
[June ____, 2007] (the "Expiration Date"), ___________ shares of the common
stock of the Company, no par value per share (the "Common Stock") at a price per
share of [$9.00] [$11.00] [$12.00] (the "Purchase Price"). The number of shares
purchasable upon exercise of this Warrant and the Purchase Price per share shall
be subject to adjustment from time to time as set forth in the Warrant Agreement
referred to below.
This Warrant is issued under and in accordance with a Warrant Agreement,
dated as of June __, 1999, between the Company the Holder and is subject to the
terms and provisions contained in the Warrant Agreement, to all of which the
Holder of this Warrant by acceptance hereof consents. A copy of the Warrant
Agreement may be obtained for inspection by the Holder hereof upon written
request to the Company.
This Warrant may be exercised in whole or in part by presentation of
this Warrant with the Purchase Form on the reverse side hereof duly executed and
simultaneous payment of the Exercise Price (subject to adjustment) at the
principal office of the Company in Los Angeles, California. Payment of such
price shall be payable at the option of the Holder hereof in cash or by
certified or official bank check or wire transfer. Terms relating to exercise of
Warrant is set forth more fully in the Warrant Agreement.
This Warrant may be exercised in whole or in part. Upon partial
exercise, a Warrant Certificate for the unexercised portion shall be delivered
to the Holder. No fractional shares will be issued upon the exercise of this
Warrant but the Company shall pay the cash value of any fraction upon the
exercise of the Warrant. This Warrant is transferable only in limited
circumstances as described in this Warrant Agreement at the office of the
Company in Los Angeles, California, in the manner and subject to the limitations
set forth in the Warrant Agreement.
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"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH
THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR WITH THE SECURITIES COMMISSION OF ANY
STATE UNDER ANY APPLICABLE STATE SECURITIES OR BLUE SKY LAWS AND
ARE SUBJECT TO THE WARRANT AGREEMENT, DATED AS OF JUNE __, 1999,
BETWEEN THE ▇▇▇▇▇▇ ENTERTAINMENT COMPANY AND ▇▇▇▇ ▇▇▇▇ (A COPY
OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY).
SECURITIES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR IN A
TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THOSE
SECURITIES LAWS (IF REQUESTED BY THE COMPANY, UPON PROVISION OF
AN OPINION OF COUNSEL IN FORM SATISFACTORY TO THE COMPANY)."
The Holder hereof may be treated by the Company and all other persons
dealing with this Warrant as the absolute owner hereof for any purpose and as
the person entitled to exercise the rights represented hereby, or to the
transfer hereof on the books of the Company. Any notice to the contrary
notwithstanding, and until such transfer on such books, the Company may treat
the Holder hereof as the owner for all purposes.
This Warrant does not entitle any Holder hereof to any of the rights of
a stockholder of the Company.
THE ▇▇▇▇▇▇ ENTERTAINMENT COMPANY
By: ____________________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chief Executive Officer
DATED: As of ____ ___, 1999
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ANNEX B
PURCHASE FORM
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant for, and to purchase thereunder,
__________ shares of the stock provided for therein, and tenders herewith
payment of the purchase price in full in the form of cash or by cashier's check
in the amount of $_____________.
The undersigned requests that certificates for such shares be issued in
the name of:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please Print Name, Address and Social Security No.)
DATED: , ______
Name of Warrant Holder:
________________________________________________________________________________
Address:
________________________________________________________________________________
________________________________________________________________________________
Signature: _____________________________________________________________________