EXHIBIT 4.2
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE, AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT, THE RULES AND
REGULATIONS THEREUNDER OR ANY STATE SECURITIES LAWS OR THE PROVISIONS OF THIS
WARRANT.
Warrant to Purchase
1,575,000 shares of Common Stock
WARRANT
To Purchase Common Stock of
IN STORE MEDIA SYSTEMS, INC.
THIS IS TO CERTIFY THAT Michael T. Mozer, or his registered assigns, is
entitled, at any time from the First Exercise Date (as hereinafter defined) to
the Expiration Date (as hereinafter defined), to purchase from In Store Media
Systems, Inc., a Nevada corporation (the "Company"), one million five hundred
seventy five thousand (1,575,000) shares of Common Stock (as hereinafter defined
and subject to adjustment as provided herein), in whole or in part, including
fractional parts, at a purchase price per share equal to two dollars ($2.00)
(subject to any adjustments made to such amount pursuant to Section 4 hereto) on
the terms and conditions and pursuant to the provisions hereinafter set forth,
subject to the Company's right to repurchase this Warrant in whole or in part
set forth herein. This Warrant is dated as of the Warrant Issuance Date (as
hereafter defined).
1. DEFINITIONS
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As used in this Warrant, the following terms have the respective meanings
set forth below:
"Aggregate Exercise Price" shall mean an amount equal to (i) the number of
shares of Common Stock being purchased upon exercise of this Warrant (in full or
in part) pursuant to Section 2.1, multiplied by (ii) the Exercise Price as of
the date or dates of such exercise.
"Business Day" shall mean any day that is not a Saturday or Sunday or a day
on which banks are required or permitted to be closed in the State of Colorado.
"Commission" shall mean the Securities and Exchange Commission or any other
federal agency then administering the Securities Act and other federal
securities laws.
"Common Stock" shall mean (except where the context otherwise indicates)
the common stock, $.001 par value per share, of the Company as constituted on
the Warrant Issuance Date, and any capital stock into which such Common Stock
may thereafter be changed, and shall also include (i) capital stock of the
Company of any other class (regardless of how denominated) issued to the holders
of shares of Common Stock upon any reclassification thereof which is also not
preferred as to dividends or assets over any other class of stock of the Company
and which is not subject to redemption and (ii) shares of common stock of any
successor or acquiring corporation received by or distributed to the holders of
Common Stock of the Company in the circumstances contemplated by Section 4.4.
"Convertible Securities" shall mean evidences of indebtedness, shares of
stock or other securities which are convertible into or exchangeable, with or
without payment of additional consideration in cash or property, for shares of
Common Stock, either immediately or upon the occurrence of a specified date or a
specified event.
"Exercise Price" shall mean, two dollars ($2.00) subject to any adjustments
to such amount made in accordance with Section 4 hereof.
"Exercise Period" shall mean the period during which this Warrant is
exercisable pursuant to Section 2.1.
"Expiration Date" shall mean the close of business on the earlier to occur
of (a) the date five (5) years from the Warrant Issuance Date; or (b) the
Repurchase Date.
"First Exercise Date" shall mean any date which is on or after two years
from the Warrant Issuance Date.
"Holder" shall mean the Person in whose name the Warrant or Warrant Stock
set forth herein is registered on the books of the Company maintained for such
purpose.
"Market Price" means (i) the average of the daily per share closing prices
of the Common Stock as reported on the National Association of Securities
Dealers Automated Quotation System for the National Market, ("NASDAQ") or, if
such security is not listed or admitted to trading on the NASDAQ, on the
principal national security exchange or quotation system on which such security
is quoted or listed or admitted to trading, in each case for the thirty (30)
trading days immediately preceding the date of determination; or (ii) if the
Common Stock are not quoted or listed or admitted to trading on any national
securities exchange or quotation system, the average of the closing bid price of
such security on the over-the-counter market as reported by the National
Association of Security Dealers, Inc., or a similar generally accepted reporting
service, as the case may be, for the thirty (30) trading days immediately
preceding the date of determination. For purposes of clause (i) above, the
closing price shall be the last reported sale price or, in the case no such
reported sale takes place on such day, the average of the reported closing bid
and asked prices. For purposes of clause (ii) above, the bid price shall be the
lowest bid price as reported in the "pink sheets" published by the National
Quotation Bureau, Incorporated.
"Other Property" shall have the meaning set forth in Section 4.4.
"Outstanding" shall mean, when used with reference to Common Stock, at any
date as of which the number of shares thereof is to be determined, all issued
shares of Common Stock, except shares then owned or held by or for the account
of the Company or any subsidiary thereof, and shall include all shares issuable
in respect of outstanding scrip or any certificates representing fractional
interests in shares of Common Stock.
"Person" shall mean any individual, sole proprietorship, limited liability
company, partnership, joint venture, trust, incorporated organization,
association, corporation, institution, public benefit corporation, entity or
government (whether federal, state, county, city, municipal or otherwise,
including, without limitation, any instrumentality, division, agency, body or
department thereof).
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"Registrable Securities" means (a) Warrant Stock; and (b) any Common Stock
issued as a dividend or other distribution with respect to or in exchange for or
in replacement of the shares referenced in (a) above; provided, however, that
"Registrable Securities" shall not include any shares of Common Stock which have
previously been registered or which have been sold to the public.
"Registration Expenses" means all expenses incurred in effecting any
registration pursuant to this Warrant, including, without limitation, all
registration, qualification, and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for the Company, blue sky fees and expenses of
any regular or special audits incident to or required by any such registration,
but shall not include selling expenses and fees and disbursements of counsel for
the Holder.
"Repurchase Date" shall have the meaning set forth in Section 6.1.
"Repurchase Notice" means a written notice setting forth the Repurchase
Date.
"Repurchase Period" shall have the meaning set forth in Section 6.1.
"Repurchase Price" means a price of four dollars ($4.00) per share.
"Restricted Common Stock" shall mean shares of Common Stock which are, or
which upon their issuance on the exercise of this Warrant would be, evidenced by
a certificate bearing the restrictive legend set forth in Section 3.4.
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Transfer" shall mean any disposition of any Warrant or Warrant Stock or of
any interest in either thereof, which would constitute a sale thereof within the
meaning of the Securities Act.
"Transfer Notice" shall have the meaning set forth in Section 3.6.
"Warrant Agreement" shall mean the Warrant Agreement dated as of a date
even herewith by and between the Company and Morris & Mozer Financial, Inc., as
it may be amended from time to time.
"Warrant Issuance Date" shall mean the date on which this Warrant is issued
pursuant to the Warrant Agreement, which, for purposes hereof, shall be deemed
to be January 19, 2001.
"Warrants" shall mean this Warrant and all warrants issued upon transfer,
division or combination of, or in substitution for, any thereof. All Warrants
shall at all times be identical as to terms and conditions and date, except as
to the number of shares of Common Stock for which they may be exercised.
"Warrant Stock" shall mean the shares of Common Stock purchased by the
holders of the Warrants upon the exercise thereof. The Warrant Stock is
Restricted Common Stock unless registered by the Company in accordance with
Section 13.
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2. EXERCISE OF WARRANT
-------------------
2.1. Manner of Exercise. Subject to the Company's right to repurchase this
Warrant in whole or in part set forth in Section 6, from and after the First
Exercise Date and until 5:00 P.M., New York City time, on the Expiration Date,
Holder may exercise this Warrant, on any Business Day, for all or any part of
the number of shares of Common Stock purchasable hereunder (in increments of not
less than 100 shares of Common Stock unless fewer than 100 shares of Common
Stock are then exercisable).
In order to exercise this Warrant, in whole or in part, Holder shall
deliver to the Company at the office or agency designated by the Company
pursuant to Section 12, (i) a written notice of Holder's election to exercise
this Warrant, which notice shall specify the number of shares of Common Stock to
be purchased, (ii) payment by cash, check or bank draft payable to the Company
of the Aggregate Exercise Price in cash or by wire transfer or cashier's check
drawn on a United States bank and (iii) this Warrant. Such notice shall be
substantially in the form of the subscription form appearing at the end of this
Warrant as Exhibit A, duly executed by Holder or its agent or attorney. Upon
receipt of the items referred to in clauses (i), (ii) and (iii) above, of
receipt of such notice the Company shall, as promptly as practicable, [and in
any event within three (3) Business Days,] execute or cause to be executed and
deliver or cause to be delivered to Holder a certificate or certificates
representing the aggregate number of full shares of Common Stock issuable upon
such exercise, together with cash in lieu of any fraction of a share, as
hereinafter provided. The stock certificate or certificates so delivered shall
be, to the extent possible, in such denomination or denominations as Holder
shall request in the notice and shall be registered in the name of Holder or,
subject to Section 3, such other name as shall be designated in the notice. This
Warrant shall be deemed to have been exercised and such certificate or
certificates shall be deemed to have been issued, and Holder or any other Person
so designated to be named therein shall be deemed to have become a holder of
record of such shares for all purposes, as of the date the Warrant has been
exercised by payment to the Company of the Aggregate Exercise Price. If this
Warrant shall have been exercised in part, the Company shall, at the time of
delivery of the certificate or certificates representing Warrant Stock, deliver
to Holder a new Warrant evidencing the rights of Holder to purchase the
unpurchased shares of Common Stock called for by this Warrant, which new Warrant
shall in all other respects be identical with this Warrant.
2.2. Payment of Taxes and Charges. All shares of Common Stock issuable upon
the exercise of this Warrant pursuant to the terms hereof shall be validly
issued, fully paid and nonassessable, and without any preemptive rights. The
Company shall pay all expenses in connection with, and all taxes and other
governmental charges that may be imposed with respect to, the issue or delivery
thereof.
2.3. Fractional Shares. The Company shall not be required to issue a
fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share which Holder would otherwise be entitled to purchase upon
such exercise, the Company shall pay a cash adjustment in respect of such final
fraction in an amount equal to the then current Market Price, multiplied by such
fraction.
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2.4. Continued Validity. A holder of shares of Common Stock issued upon the
exercise of this Warrant, in whole or in part (other than a holder who acquires
such shares after the same have been publicly sold pursuant to a Registration
Statement under the Securities Act or sold pursuant to Rule 144 thereunder),
shall continue to be entitled with respect to such shares to all rights to which
it would have been entitled as Holder under Sections 9, 10 and 14 of this
Warrant. The Company will, at the time of exercise of this Warrant, in whole or
in part, upon the request of Holder, acknowledge in writing, in form reasonably
satisfactory to Holder, its continuing obligation to afford Holder all such
rights; provided, however, that if Holder shall fail to make any such request,
such failure shall not affect the continuing obligation of the Company to afford
to Holder all such rights.
3. TRANSFER RIGHTS OF THIS WARRANT AND WARRANT STOCK
-------------------------------------------------
3.1. Transfer of this Warrant. This Warrant shall not be transferred,
hypothecated or assigned before the satisfaction of the conditions specified in
Section 3, which conditions are intended to ensure compliance with the
provisions of the Securities Act with respect to the Transfer of any Warrant.
Holder, by acceptance of this Warrant, agrees to be bound by the provisions of
this Section 3.
(a) Transfer of this Warrant and all rights hereunder, in whole or in
part, shall be registered on the books of the Company to be maintained for
such purpose, upon surrender of this Warrant at the principal office of the
Company referred to in Section 2.1 or the office or agency designated by
the Company pursuant to Section 12, together with a written assignment of
this Warrant substantially in the form of Exhibit B hereto duly executed by
Holder or its agent or attorney. Upon such surrender, the Company shall,
subject to this Section 3, execute and deliver a new Warrant or Warrants in
the name of the assignee or assignees and in the denomination specified in
such instrument of assignment, and shall issue to the assignor a new
Warrant evidencing the portion of this Warrant not so assigned, which
Warrant shall in all other respects be identical to this Warrant, and this
Warrant shall promptly be cancelled. A Warrant, if properly assigned in
compliance with this Section 3, may be exercised by a new Holder for the
purchase of shares of Common Stock without having a new Warrant issued.
(b) Opinion of Counsel or Registration. The Holder by accepting this
Warrant agrees that this Warrant may not be assigned or otherwise
transferred unless and until (i) the Company has received an opinion of
counsel for the Holder, at such Holder's expense, reasonably satisfactory
to the Company for the Holder that the Warrant may be sold or transferred
pursuant to an exemption from registration under the Securities Act or (ii)
a registration statement relating to such securities has been filed by the
Company and declared effective by the Commission.
3.2. Expenses. The Company shall prepare, issue and deliver at its own
expense the new Warrant or Warrants under this Section 3.
3.3. Maintenance of Books. The Company agrees to maintain, at its aforesaid
office or agency, books for the registration and the registration of transfer of
the Warrants.
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3.4 Restrictive Legend. Any Warrant (including any new Warrant) shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
"THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE,
AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT,
THE RULES AND REGULATIONS THEREUNDER OR ANY STATE
SECURITIES LAWS OR THE PROVISIONS OF THIS WARRANT."
3.5 Transfer of the Warrant Stock. The Warrant Stock issuable upon exercise
of this Warrant shall not be transferred, hypothecated or assigned before
satisfaction of the conditions specified in this Section 3.5, which conditions
are intended to ensure compliance with the provisions of the Securities Act with
respect to the Transfer of any Warrant Stock. Holder, by acceptance of this
Warrant, agrees to be bound by the provisions of this Section 3.
(a) Opinion of Counsel or Registration. The Holder by accepting this
Warrant and any Warrant Stock agrees that the Warrant Stock issuable upon
exercise hereof may not be assigned or otherwise transferred unless and until
(i) the Company has received an opinion of counsel reasonably satisfactory to
the Company for the Holder that such securities may be sold pursuant to an
exemption from registration under the Securities Act or (ii) a registration
statement relating to such securities has been filed by the Company and declared
effective by the Commission.
(b) Restrictive Legend. Each certificate for Warrant Stock issuable
hereunder shall bear a legend substantially worded as follows unless such
securities have been sold pursuant to an effective registration statement under
the Securities Act:
"The securities represented by this certificate have
not been registered under the Securities Act of 1933,
as amended (the "Act") or any state securities laws.
The securities may not be offered for sale, sold,
assigned, offered, transferred or otherwise distributed
for value except (i) pursuant to an effective
registration statement under the Act or any state
securities laws or (ii) pursuant to an exemption from
registration or prospectus delivery requirements under
the Act or any state securities laws in respect of
which the Company has received an opinion of counsel
reasonably satisfactory to the Company to such effect.
Copies of the agreement covering both the purchase of
the securities and restricting their transfer may be
obtained at no cost by written request made by the
holder of record of this certificate to the Secretary
of the Company at the principal executive offices of
the Company."
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3.6. Notice of Proposed Transfers. Prior to any Transfer or attempted
Transfer of any Warrants or any shares of Warrant Stock, the Holder shall give
ten (10) days' prior written notice (a "Transfer Notice") to the Company of
Holder's intention to effect such Transfer, describing the manner and
circumstances of the proposed Transfer, and obtain from counsel to Holder an
opinion that the proposed Transfer of such Warrants or such Warrant Stock may be
effected without registration under the Securities Act or state securities laws.
After the Company's receipt of the Transfer Notice and opinion, such Holder
shall thereupon be entitled to Transfer such Warrants or such Warrant Stock, in
accordance with the terms of the Transfer Notice. Each certificate, if any,
evidencing such shares of Warrant Stock issued upon such Transfer and the
Warrant issued upon such Transfer shall bear the restrictive legends set forth
in this Section 3, unless in the opinion of such counsel such legend is not
required in order to ensure compliance with the Securities Act.
3.7. Termination of Restrictions. Notwithstanding the foregoing provisions
of Section 3, the restrictions imposed by this Section upon the transferability
of the Warrants and the Warrant Stock and the legend requirements of Section 3
shall terminate as to any particular Warrant or share of Warrant Stock (i) when
and so long as such security shall have been effectively registered under the
Securities Act and applicable state securities laws and disposed of pursuant
thereto or (ii) when the Company shall have received an opinion of counsel
reasonably satisfactory to the Company that such shares may be transferred
without registration thereof under the Securities Act and applicable state
securities laws. Whenever the restrictions imposed by Section 3 shall terminate
as to this Warrant, as hereinabove provided, the Holder hereof shall be entitled
to receive from the Company upon written request of the Holder, at the expense
of the Company, a new Warrant bearing the following legend in place of the
restrictive legend set forth hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN
WARRANT CONTAINED IN SECTION 3 HEREOF TERMINATED ON
________, 20__, AND ARE OF NO FURTHER FORCE AND
EFFECT."
All Warrants issued upon registration of transfer, division or combination of,
or in substitution for, any Warrant or Warrants entitled to bear such legend
shall have a similar legend endorsed thereon. Whenever the restrictions imposed
by this Section shall terminate as to any share of Warrant Stock, as hereinabove
provided, the holder thereof shall be entitled to receive from the Company, at
the Company's expense, a new certificate representing such Common Stock not
bearing the restrictive legends set forth in Section 3.
3.8. Listing on Securities Exchange. If the Company shall list any shares
of Common Stock on any securities exchange, it will, at its expense, list
thereon, maintain and, when necessary, increase such listing of, all shares of
Common Stock issued or, to the extent permissible under the applicable
securities exchange rules, issuable upon the exercise of this Warrant so long as
any shares of Common Stock shall be so listed during the Exercise Period;
provided, that only shares of Common Stock issued upon exercise of this Warrant
that are registered or freely transferable shall be listed on any securities
exchange.
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4. ADJUSTMENTS
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The number of shares of Common Stock for which this Warrant is exercisable,
or the Exercise Price, shall be subject to adjustment from time to time as set
forth in this Section 4.
4.1. Stock Dividends, Subdivisions and Combinations. If at any time the
Company shall:
(a) pay a dividend in Common Stock or make a distribution in Common
Stock,
(b) issue, by reclassification of its Common Stock, other securities
of the Company,
(c) subdivide its Outstanding shares of Common Stock into a larger
number of shares of Common Stock, or
(d) combine its Outstanding shares of Common Stock into a smaller
number of shares of Common Stock,
then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the happening of such event, and (ii) the Exercise Price shall be
adjusted to equal (A) the Exercise Price multiplied by the number of shares of
Common Stock for which this Warrant is exercisable immediately prior to the
adjustment divided by (B) the number of shares for which this Warrant is
exercisable immediately after such adjustment.
4.2. Certain Other Distributions.
(a) Except as otherwise provided in Section 4.1, no adjustment in
respect of any dividends or distributions out of earnings shall be made during
the term of this Warrant or upon the exercise of this Warrant.
(b) If at any time the Company shall issue any Common Stock or any
rights, options, warrants or Convertible Securities to all or substantially all
holders of record of its Common Stock, without any charge to such holders,
entitling them to subscribe for or purchase shares of Common Stock at a price
per share less than the Market Price per share of the Common Stock on the date
fixed for such issue, the number of shares of Common Stock thereafter
purchasable upon the exercise of each Warrant shall be determined by multiplying
the number of shares of Common Stock theretofore purchasable upon exercise of
such Warrant by a fraction, the numerator of which shall be the number of shares
of Common Stock Outstanding immediately prior to the issuance of such rights,
options, warrants or Convertible Securities plus the number of additional shares
of Common Stock offered for subscription or purchase, and the denominator of
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which shall be the number of shares of Common Stock Outstanding immediately
prior to the issuance of the rights, options, warrants or Convertible Securities
plus the number of shares which the aggregate offering price of the total number
of shares offered would purchase at such Market Price. Such adjustment shall be
made whenever such rights, options, warrants or Convertible Securities are
issued, and shall become effective immediately and retroactive to the record
date for the determination of stockholders entitled to receive such rights,
options, warrants or Convertible Securities.
(c) If at any time the Company shall distribute to all or
substantially all Holders of its Common Stock, evidences of its indebtedness or
assets (excluding cash dividends or distributions out of earnings) or rights,
options, warrants or Convertible Securities containing the right to subscribe
for or purchase Common Stock (excluding those referred to in Section 4.2(b)
above), then in each case the number of shares of Common Stock thereafter
purchasable upon the exercise of this Warrant shall be determined by multiplying
the number of shares of Common stock theretofore purchasable upon exercise of
such Warrant by a fraction, the numerator of which shall be the Market Price on
the date of such distribution, and the denominator of which shall be such Market
Price on such date minus the then fair value (determined by the Company's Board
of Directors) of the portion of the assets or evidences of indebtedness so
distributed or of such subscription rights, options, warrants or Convertible
Securities applicable to one share of Common Stock. Such adjustment shall be
made whenever any such distribution is made and shall become effective on the
date of distribution retroactive to the record date for the determination of
stockholders entitled to receive such distribution.
4.3. Other Provisions Applicable to Adjustments under this Section. The
following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock for which this Warrant is exercisable and the
Exercise Price provided for in this Section 4:
(a) When Adjustments to Be Made. The adjustments required by this
Section 4 shall be made whenever and as often as any specified event requiring
an adjustment shall occur. For the purpose of any adjustment, any specified
event shall be deemed to have occurred at the close of business on the date of
its occurrence.
(b) Fractional Interests. In computing adjustments under this Section
4, fractional interests in Common Stock shall be taken into account and shall
round up to the nearest whole share.
(c) When Adjustment Not Required.
(i) If the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or
distribution or subscription or purchase rights and shall, thereafter and
before the distribution to stockholders thereof, legally abandon its plan
to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the
taking of such record and any such adjustment previously made in respect
thereof shall be rescinded and annulled.
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(ii) No adjustment shall be required pursuant to this Section 4
unless such adjustment would require an increase or decrease of at least
one percent in the number of shares of Common stock then purchasable upon
the exercise of the Warrants or, if the Warrants are not then
exercisable, the number of shares of Common Stock purchasable upon the
exercise of the Warrants on the first date thereafter that the Warrants
become exercisable; provided, however, that any adjustments which by
reason of this Subsection 4.3(c)(ii) are not required to be made
immediately shall be carried forward and taken into account in any
subsequent adjustment.
(iii) No adjustment shall be required pursuant to this Section 4
in connection with the grant or exercise of presently authorized or
outstanding options to purchase Common Stock under the Company's existing
stock option plan or the exercise of presently outstanding options,
warrants or other securities convertible into shares of Common Stock.
(d) Challenge to Good Faith Determination. Whenever the Board of
Directors of the Company shall be required to make a determination in good faith
of the fair value of any item under this Section 4, such determination may be
challenged in good faith by the Holder, and any dispute shall be resolved by an
investment banking firm of recognized national standing selected by the Holder
and reasonably acceptable to the Company.
4.4. Reorganization, Reclassification, Merger, Consolidation or Disposition
of Assets. In case the Company shall reorganize its capital, reclassify its
capital stock, consolidate or merge with or into another corporation (where the
Company is not the surviving corporation or where there is a change in or
distribution with respect to the Common Stock of the Company), or sell, transfer
or otherwise dispose of all or substantially all its property, assets or
business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Stock
of the Company, then Holder shall have the right thereafter to receive, upon
exercise of the Warrant, the number of shares of common stock of the successor
or acquiring corporation or of the Company, if it is the surviving corporation,
and Other Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a holder of
the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such event. In case of any such reorganization,
reclassification, merger, consolidation or disposition of assets, the successor
or acquiring corporation (if other than the Company) shall expressly assume the
due and punctual observance and performance of each and every covenant and
condition of this Warrant to be performed and observed by the Company and all
the obligations and liabilities hereunder, subject to such modifications as may
be deemed appropriate, subject to the Holder's consent, in order to provide for
adjustments of shares of Common Stock for which this Warrant is exercisable
which shall be as nearly equivalent as practicable to the adjustments provided
for in this Section 4. For purposes of this Section 4.4, "common stock of the
successor or acquiring corporation" shall include stock of such corporation of
any class which is not preferred as to dividends or assets over any other class
of stock of such corporation and which is not subject to redemption and shall
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also include any evidences of indebtedness, shares of stock or other securities
which are convertible into or exchangeable for any such stock, either
immediately or upon the arrival of a specified date or the happening of a
specified event and any warrants or other rights to subscribe for or purchase
any such stock. The foregoing provisions of this Section 4.4 shall similarly
apply to successive reorganizations, reclassifications, mergers, consolidations
or disposition of assets.
4.5. Other Action Affecting Common Stock. In case at any time or from time
to time the Company shall take any action in respect of its Common Stock, other
than any action taken in the ordinary course of the Company's business or any
action described in this Section 4, which would have a material adverse effect
upon the rights of the Holder, the number of shares of Common Stock and/or the
purchase price thereof shall be adjusted in such manner as may be equitable in
the circumstances, as determined in good faith by an investment bank selected by
Holder.
4.6. No Voting Rights. This Warrant shall not entitle its Holder to any
voting rights or other rights as a shareholder of the Company.
5. NOTICES TO HOLDER
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5.1. Notice of Adjustments. Whenever the number of shares of Common Stock
for which this Warrant is exercisable, or whenever the Exercise Price shall be
adjusted pursuant to Section 4, the Company shall give Holder notice of any
event which requires an adjustment pursuant to this Section 4 at the time of
such event, setting forth, in reasonable detail, the event requiring the
adjustment and the method by which such adjustment was calculated, specifying
the number of shares of Common Stock for which this Warrant is exercisable and
(if such adjustment was made pursuant to Section 4.4 or 4.5) describing the
number and kind of any other shares of stock or Other Property for which this
Warrant is exercisable, and any change in the purchase price or prices thereof,
after giving effect to such adjustment or change. The Company shall keep at its
office or agency designated pursuant to Section 12 copies of all such notices
and cause the same to be available for inspection at said office during normal
business hours by the Holder, its representatives, or any prospective purchaser
of a Warrant designated by the Holder.
5.2. Notice of Corporate Action. If at any time
(a) the Company shall take a record of the holders of its Common Stock
for the purpose of entitling them to receive a dividend or other distribution,
or any right to subscribe for or purchase any evidences of its indebtedness, any
shares of stock of any class or any other securities or property, or to receive
any other right, or
(b) there shall be any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
consolidation or merger of the Company with, or any sale, transfer or other
disposition of all or substantially all the property, assets or business of the
Company to, another corporation, or
(c) there shall be a voluntary or involuntary dissolution, liquidation
or winding up of the Company;
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then, in any one or more of such cases, the Company shall give to Holder (i) at
least thirty (30) Business Days' prior written notice of the date on which a
record date shall be selected for such dividend, distribution or right or for
determining rights to vote in respect of any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up, and (ii) in the case of any such
reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, liquidation or winding up, at least thirty (30)
Business Days' prior written notice of the date when the same shall take place.
Such notice in accordance with the foregoing clause also shall specify (i) the
date on which any such record is to be taken for the purpose of such dividend,
distribution or right, the date on which the holders of Common Stock shall be
entitled to any such dividend, distribution or right, and the amount and
character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up. Each such written notice shall be sufficiently given if addressed to Holder
at the last address of Holder appearing on the books of the Company and
delivered in accordance with Section 14.2.
6. REPURCHASE BY THE COMPANY
-------------------------
6.1 Repurchases by the Company. At any time during the Repurchase Period,
the Company may, in its sole and absolute discretion, establish a date (each
such date a "Repurchase Date") on which the Company shall be entitled to
repurchase all or any portion of this Warrant at the Repurchase Price. For
purposes hereof, "Repurchase Period" means the time period commencing after the
later to occur of (i) the date which is thirty (30) months after the Warrant
Issuance Date, and (ii) the date on which the Warrant Stock has been registered
for resale by the holders thereof with the Commission and terminating on the
Expiration Date.
6.2 Repurchase Notice. The Company shall deliver a Repurchase Notice to the
Holder of this Warrant at least sixty (60) days prior to the Repurchase Date;
provided, however, that if the Company shall fail to provide the Repurchase
Notice because of the failure of the Holder to provide a current address, such
failure shall not affect the effectiveness of the repurchase of this Warrant by
the Company.
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK
---------------------------------------------
From and after the date of this Warrant, the Company shall at all times
reserve and keep available for issue upon the exercise of Warrants such number
of its authorized but unissued shares of Common Stock as will be sufficient to
permit the exercise in full of all outstanding Warrants. All shares of Common
Stock which shall be so issuable, when issued upon exercise of any Warrant and
payment therefor in accordance with the terms of such Warrant, shall be duly and
validly issued and fully paid and nonassessable, and not subject to preemptive
rights.
Before taking any action which would cause an adjustment reducing the
Exercise Price below the then par value, if any, of the shares of Common Stock
issuable upon exercise of the Warrants, the Company shall take any corporate
action which may be necessary in order that the Company may validly and legally
issue fully paid and non-assessable shares of such Common Stock at such adjusted
Exercise Price.
12
Before taking any action which would result in an adjustment in the number
of shares of Common Stock for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or exemptions
thereof, or consents thereto, as may be necessary from any public regulatory
body or bodies having jurisdiction thereof.
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
--------------------------------------------------
In the case of all dividends or other distributions by the Company to the
holders of its Common Stock with respect to which any provision of Section 4
refers to the taking of a record of such holders, the Company will in each such
case take such a record as of the close of business on a Business Day. The
Company will not at any time close its stock transfer books or Warrant transfer
books so as to result in preventing or delaying the exercise or transfer of any
Warrant.
9. NO IMPAIRMENT
-------------
The Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such actions as may be necessary or appropriate to protect the rights of Holder
against impairment. Without limiting the generality of the foregoing, the
Company will (a) not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the amount payable therefor
upon such exercise immediately prior to such increase in par value, (b) take all
such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common Stock
upon the exercise of this Warrant, and (c) use its best efforts to obtain all
such authorizations, exemptions or consents from any public regulatory body
having jurisdiction thereof as may be necessary to enable the Company to perform
its obligations under this Warrant.
Upon the request of Holder, the Company will at any time during the period
this Warrant is outstanding acknowledge in writing, in form reasonably
satisfactory to Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
10. SUPPLYING INFORMATION
---------------------
The Company shall cooperate with Holder in supplying such information as
may be reasonably necessary for Holder to complete and file any information
reporting forms presently or hereafter required by the Commission as a condition
to the availability of an exemption from the Securities Act for the sale of any
Warrant or Warrant Stock.
13
11. LOSS OR MUTILATION
------------------
Upon receipt by the Company from Holder of evidence reasonably satisfactory
to it of the ownership of and the loss, theft, destruction or mutilation of this
Warrant and indemnity reasonably satisfactory to it (it being understood that
the written agreement of the Holder shall be sufficient indemnity), and in case
of mutilation upon surrender and cancellation hereof, the Company will execute
and deliver in lieu hereof a new Warrant of like tenor to Holder; provided, in
the case of mutilation, no indemnity shall be required if this Warrant in
identifiable form is surrendered to the Company for cancellation.
12. OFFICE OF THE COMPANY
---------------------
As long as any of the Warrants remain outstanding, the Company shall
maintain an office or agency (which may be the principal executive offices of
the Company) where the Warrants may be presented for exercise, registration of
transfer, division or combination as provided in this Warrant, such office to be
initially located at 15423 E. Batavia Drive, Aurora, Colorado 80011, fax (303)
364-6564, provided, however, that the Company shall provide prior written notice
to Holder of a change in address no less than thirty (30) days prior to such
change.
13. REGISTRATION RIGHTS
-------------------
13.1. Piggyback Registration Rights. If at any time the Company shall
determine to register any of its shares of Common Stock, for the account of any
of its shareholders, other than a registration statement relating solely to
employee benefit plans, a registration statement on Form S-4 pertaining to an
acquisition transaction or a registration on a registration form that does not
permit secondary sales, the Company will:
(a) promptly give to Holder written notice thereof;
(b) use its best efforts to include in such registration (and any
related qualification under the blue sky laws or other compliance), except as
set forth in Section 13.2 below, all of the Registrable Securities specified in
a written request or requests, made by the Holder within twenty (20) days after
the written notice from the Company described in the previous clause (a) is
given. Such request may specify all or a part of Holder's Registrable
Securities; and
(c) pay all Registration Expenses, other than the selling expenses of
Holder's Registrable Securities.
13.2. Underwriting. If the Registration is for a registered public offering
involving an underwriting, the Company shall so advise the Holder as a part of
the written notice given pursuant to this Section. In such event, the rights of
the Holder hereunder are conditioned upon Holder's participation in such
underwriting and the inclusion of the Holder's Registrable Securities in the
underwriting to the extent provided herein. To the extent that the Holder
proposes to distribute its securities through such underwriting, the Holder
shall (together with the Company and any other securityholders of the Company
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company.
14
13.3 Exclusion of Registrable Securities. Notwithstanding any other
provision of this Section, if the managing underwriter of the underwriting
determines that marketing factors require a limitation of the number of shares
to be offered in connection with such underwriting, the managing underwriter may
limit the number of Registrable Securities to be included in the Registration
and underwriting. The Company shall so advise any of its other securityholders
who are distributing their securities through such underwriting pursuant to
their respective piggyback registration rights, and the number of shares of
Registrable Securities and other securities that may be included in the
registration and underwriting shall be allocated first to the Company for
securities being sold for its own account and thereafter to the Holder, pro rata
with any other holders of Common Stock having registration rights at the time of
the filing of the registration statement. If the Holder disapproves of the terms
of any such underwriting, it may elect to withdraw therefrom by written notice
to the Company. Any Registrable Securities so excluded or withdrawn from such
underwriting shall be withdrawn from such Registration. If Registrable
Securities are so withdrawn from the registration or if the number of shares of
Registrable Securities to be included in such registration was previously
reduced as a result of marketing factors, the Company shall then offer to all
persons who have retained the right to include securities in the registration
the right to include additional securities in the registration in an aggregate
amount equal to the number of shares so withdrawn, with such shares to be
allocated among the persons requesting additional inclusion pro rata amongst
those persons requesting inclusion.
13.4. Registration Procedures. In the case of each registration effected by
the Company pursuant to Section 13, the Company will keep Holder advised in
writing as to the initiation of each registration and as to the completion
thereof, at its expense, the Company will use its best efforts to:
(a) Keep such registration effective for a period of one hundred
twenty (120) days or until the Holder has completed the distribution described
in the registration statement relating thereto, whichever first occurs;
provided, however, that (i) such 120-days period shall be extended for a period
of time equal to the period the Holder refrains from selling any securities
included in such registration at the request of an underwriter of Common Stock
(or other securities) of the Company; and (ii) in the case of any registration
of Registrable Securities on Form S-3 which are intended to be offered on a
continuous or delayed basis, such 120-day period shall be extended, if
necessary, to keep the registration statement effective until all such
Registrable Securities are sold, provided that Rule 145 promulgated under the
Securities Act, or any successor rule under the Securities Act, permits an
offering on a continuous or delayed basis, and provided further that applicable
rules under the Securities Act governing the obligation to file a post-effective
amendment permit, in lieu of filing a post-effective amendment that (1) includes
any prospectus required by Section 10(a)(3) of the Securities Act or (2)
reflects facts or events representing a material or fundamental change in the
information set forth in the registration statement, the incorporation by
reference of information required to be included in (1) and (2) above to be
contained in periodic reports filed pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, in the registration statement;
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement;
15
(c) Furnish such number of prospectuses and other documents incident
thereto, including any amendment of or supplement to the prospectus, as the
Holder from time to time may reasonably request;
(d) Notify the Holder at any time when a prospectus relating thereto
is required to be delivered under the Securities Act of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or incomplete in the light of the
circumstances then existing, and at the request of the Holder, prepare and
furnish to the Holder, a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such shares, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading or
incomplete in the light of the circumstances then existing;
(e) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed;
(f) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant to such registration statement and a CUSIP number
for all such Registrable Securities, in each case not later than the effective
date of such registration; and
(g) Otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering the
period of at least twelve months, but not more than eighteen months, beginning
with the first month after the effective date of the Registration Statement,
which earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act.
14. MISCELLANEOUS
-------------
14.1. Nonwaiver and Expenses. No course of dealing or any delay or failure
to exercise any right hereunder on the part of Holder shall operate as a waiver
of such right or otherwise prejudice Holder's rights, powers or remedies,
notwithstanding all rights hereunder terminate on the Expiration Date. If the
Company fails to make, when due, any payments provided for hereunder, or fails
to comply with any other provision of this Warrant, the Company shall pay to
Holder such amounts as shall be sufficient to cover any direct and indirect
losses, damages, costs and expenses including, but not limited to, reasonable
attorneys' fees, including those of appellate proceedings, incurred by Holder in
collecting any amounts due pursuant hereto or in otherwise enforcing any of its
rights, powers or remedies hereunder.
14.2. Notices. Except as may be otherwise provided herein, any notices,
requests, demands or other communication or delivery required or permitted
hereunder shall be in writing and shall be delivered personally or sent by
16
certified mail, postage prepaid, or by a nationally recognized overnight courier
service, and shall be deemed given when so delivered personally or by overnight
courier service, or, if mailed, two (2) days after the date of deposit in the
United States mails, as follows:
(1) if to the Company, to:
In Store Media Systems, Inc.
15423 E. Batavia Drive
Aurora, Colorado 8011
Attention: Robert L. Cohen, Vice President
and Chief Financial Officer
Tel: (303) 364-6550
Fax: (303) 364-6564
with a copy to: Kutak Rock LLP
717 Seventeenth Street, Suite #2900
Denver, Colorado 80202
Attention: Robert Ahrenholz, Esq.
Tel: (303) 297-2400
Fax: (303) 292-7799
(2) if to the Holder to:
Michael T. Mozer:
13033 Harold Circle
Apple Valley, MN 55124
The Company or the Holder may change the foregoing address by notice given
pursuant to this Section 14.2.
14.3. Remedies. If any legal action is instituted to enforce or interpret
the terms of this Warrant, the prevailing party in such action shall be entitled
to attorneys' fees actually incurred in addition to any other relief to which
such party is entitled.
14.4. Successors and Assigns. Subject to the provisions of Section 4, this
Warrant and the rights evidenced hereby shall inure to the benefit of and be
binding upon the successors of the Company and the successors and assigns of
Holder. The provisions of this Warrant are intended to be for the benefit of all
Holders from time to time of this Warrant and, with respect to Section 4 hereof,
holders of Warrant Stock, and shall be enforceable by any such Holder or holder
of Warrant Stock.
14.5. Amendment. This Warrant may be modified, supplemented or amended or
the provisions hereof waived only with the prior written consent of the Company
and the Holder.
14.6. Severability. Wherever possible, each provision of this Warrant shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Warrant shall be prohibited by or invalid under
17
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Warrant.
14.7. Headings. The headings used in this Warrant are for the convenience
of reference only and shall not, for any purpose, be deemed a part of this
Warrant.
14.8. Governing Law. This Warrant shall be governed by the laws of the
State of Colorado, without regard to the provisions thereof relating to conflict
of laws.
14.9 Counterparts; Facsimile. This Warrant may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same instrument.
Delivery of an executed counterpart of this Warrant by facsimile shall be
equally as effective as delivery of an original executed counterpart of this
Warrant. Any party delivering an executed counterpart of this Warrant by
facsimile shall also deliver an original executed counterpart of this Warrant
but the failure to deliver an original executed counterpart shall not affect the
validity, enforceability and binding effect of this Warrant.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK, SIGNATURE PAGE TO FOLLOW.]
18
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
and attested to by its Secretary or an Assistant Secretary.
Dated:
---------- --, ----
IN STORE MEDIA SYSTEMS, INC.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
Attest:
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
ACKNOWLEDGMENT OF INITIAL HOLDER:
The undersigned initial Holder consents to and agrees to the terms set
forth in this Warrant as of the date first above written.
HOLDER
By: /s/
-------------------------------
Michael T. Mozer,
individually
19
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned Holder of this Warrant hereby irrevocably exercises this
Warrant for the purchase of that number of shares of Common Stock, no par value,
of In Store Media Systems, Inc., set forth below, up to a maximum of one million
five hundred seventy five thousand (1,575,000) shares (or such other number of
shares as may be issuable upon the exercise of this Warrant pursuant to the
adjustment provisions hereof), and hereby makes payment of the Aggregate
Exercise Price therefore which is also set forth below, all on the terms and
subject to the conditions specified in this Warrant. The undersigned herewith
makes payment therefor in cash or by check or bank draft made payable to the
Company, all at the price and on the terms and conditions specified in this
Warrant and requests that certificates, if any, for the shares of Common Stock
hereby purchased (and any securities or other property issuable upon such
exercise) be issued in the name of and delivered as provided below, and, if such
shares of Common Stock shall not include all of the shares of Common Stock
issuable as provided in this Warrant, that a new Warrant of like tenor and date
for the balance of the shares of Common Stock issuable hereunder be delivered to
the undersigned.
Number of shares to be exercised:
---------------------------
x Exercise Price $[2.00]
Aggregate Exercise Price: $
--------------
Dated , 20
------------ -- --
ACCEPTED: ----------------------------------
(Name of Holder)
IN STORE MEDIA SYSTEMS, INC., a
Nevada Corporation ----------------------------------
(Signature of Holder)
By:
------------------------------- ----------------------------------
Name: (Street Address for Delivery of
----------------------------- Common Stock and/or Warrant)
Title:
---------------------------- ----------------------------------
(City) (State) (Zip Code)
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby
sells, assigns and transfers unto the Assignee named below all of the rights of
the undersigned under this Warrant, with respect to the number of shares of
Common Stock set forth below:
Name and Address of Assignee No. of Shares of
---------------------------- ----------------
Common Stock
------------
and does hereby irrevocably constitute and appoint _______ ________________
attorney-in-fact to register such transfer on the books of In Store Media
Systems, Inc., maintained for the purpose, with full power of substitution in
the premises.
Dated: Print Name:
------------------- ------------------------
Signature:
-------------------------
Witness:
---------------------------