THIS WARRANT CERTIFICATE, AND THE SHARES TO BE ISSUED UPON ITS
EXERCISE, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED
FOR SALE, SOLD OR TRANSFERRED UNLESS REGISTERED
UNDER THE ACT, OR UNLESS AN EXEMPTION FROM
SUCH REGISTRATION IS AVAILABLE.
WARRANT CERTIFICATE
Dated: July 1, 1999
Warrant to Purchase up to 200,000 shares of Common Stock,
par value $.0001 per share,
of
KIDEO PRODUCTIONS, INC.
VOID AFTER MIDNIGHT, NEW YORK, NEW YORK LOCAL TIME
ON
JUNE 30, 2004
KIDEO PRODUCTIONS, INC., a Delaware corporation (the "Company"), hereby
certifies that VISION CORPORATE CONSULTING, LLC, its successors and assigns (the
"Holder"), is entitled to purchase from the Company at any time after June 30,
1999 and before Midnight, New York, New York local time on June 30, 2004, up to
100,000 shares of common stock, par value $.0001 per share, of the Company (the
"Common Stock"), at the price of $2.00 per share (the "Exercise Price", subject
to adjustment as provided herein).
1. Exercise of Warrants. In order to exercise the rights to purchase
Common Stock evidenced by this Warrant Certificate, the Holder must, subject to
Section 8 below, present and surrender this Warrant Certificate with the
attached Purchase Form duly executed at the principal office of the Company.
This Warrant Certificate may be exercised with respect to all of the Common
Stock subject hereto or any portion thereof.
2. Exchange and Transfer. This Warrant Certificate at any time prior to
the exercise hereof, upon presentation and surrender to the Company, may be
exchanged, alone or with other Warrant Certificates, if any, of like tenor
registered in the name of the same Holder, for another Warrant Certificate(s) of
like tenor in the name of such Holder or any permissible transferee exercisable
for the same aggregate number of shares of Common Stock as the Warrant
Certificate(s) surrendered.
3. Rights and Obligations of the Holder of the Warrant Certificate. The
Holder shall not, by virtue hereof, be entitled to any rights of a stockholder
in the Company, either at law or in equity; provided, however, in the event that
any certificate representing shares of the Common Stock is issued to the Holder
upon exercise of this Warrant Certificate, such Holder shall, for all purposes,
be deemed to have become the holder of record of such Common Stock on the date
on which this Warrant Certificate, together with a duly executed Purchase Form,
was surrendered and payment of the Exercise Price was made, irrespective of the
date of delivery of such share certificate. The rights of the Holder of this
Warrant Certificate are limited to those expressed herein and the Holder, by
acceptance hereof, consents to and agrees to be bound by and comply with all the
provisions of this Warrant Certificate. In addition, the Holder agrees that the
Company may deem and treat the person in whose name this Warrant Certificate is
registered as the absolute, true and lawful owner for all purposes whatsoever,
unless and until such time as the Company has received written notice to the
contrary.
4. Common Stock.
(a) The Company covenants and agrees that this Warrant Certificate
is duly and validly authorized and issued, and free from all stamp-taxes, liens,
and charges with respect to the delivery or purchase thereof. In addition, the
Company agrees at all times to reserve and keep available an authorized number
of shares of Common Stock sufficient to permit the exercise in full of this
Warrant Certificate.
(b) The Company covenants and agrees that all shares of Common Stock
delivered upon exercise of this Warrant Certificate, will, upon delivery, be
duly and validly authorized and issued, fully-paid and non-assessable, and free
from all stamp-taxes, liens, and charges with respect to the purchase thereof.
5. Disposition of the Warrant and Common Stock. The Holder hereby agrees
and represents that (a) this Warrant Certificate and the Common Stock issuable
upon exercise are being acquired for the Holder's account, and not with a view
to or in connection with any offering or distribution; and (b) no public
distribution of this Warrant Certificate of the Common Stock will be made in
violation of the provisions of the Securities Act of 1933, as amended (the
"Act"), or in violation of the provisions of applicable sate laws. The Holder
further agrees that if any distribution of Warrant Certificate or any of such
Common Stock issued hereunder is proposed to be made, such action shall be taken
only after submission to the Company of an opinion of counsel reasonably
satisfactory to the Company, to the effect that the proposed distribution will
not be in violation of the Act or any applicable sate law. Furthermore, it shall
be a condition to the transfer of any rights set forth in this Warrant
Certificate that any transferee thereof deliver to the Company his or its
written agreement to accept and be bound by all of the terms and conditions of
this Warrant Certificate and the Purchase Agreement. The Holder is responsible
for any transfer taxes due as a result of any transfer of this Warrant
Certificate.
6. Registration Rights. Whenever the Company proposes to register any of
its
2
securities under the Securities Act and the registration form to be used may be
used for the registration of shares of Common Stock (the "Registrable
Securities") for which this Warrant may be exercised (a "Piggyback
Registration"), the Company will give prompt written notice to the Holder of its
intention to effect such a registration and will use its reasonable best efforts
to include in such registration all Registrable Securities requested to be
included within ten (10) days after the giving of the Company's notice, all to
the extent and under the conditions that such registration is permitted under
the Act. In the event that the Piggyback Registration is underwritten and the
managing underwriter (the "Piggyback Underwriter") reasonably believes that the
sale of the number of shares proposed to be sold by the Holder and other holders
of Common Stock requesting piggyback registration (the "Other Holders") would
have a material adverse effect on the market for the Company's stock, the Holder
hereby agree that the number of shares of Registrable Securities which are sold
by the Piggyback Underwriter in the underwritten offering shall be reduced, pro
rata with the shares to be sold by the Other Holders, to such number as the
Piggyback Underwriter reasonably recommends may be sold in the offering without
having a material adverse effect on the market for the Company's stock. Any
reduction shall be pro rata on the basis of the number of shares requested to be
registered by the Holder as well as the Other Holders. Notwithstanding the
foregoing provisions, the Company may withdraw any registration statement
referred to in this Section 6 without incurring any liability to the Holder.
7. Exercise of This Warrant Certificate. After June 30, 1999 and on or
prior to Midnight, New York, New York local time, on June 30, 2004, the Holder
shall have the right to acquire up to 100,000 shares of Common Stock on the
following terms and conditions:
(a) Exercise Price: Fractional Shares. The Exercise Price shall be a
price per share of Common Stock equal to Two Dollars ($2.00), subject to
adjustment as set forth below. All calculations of shares of Common Stock to be
issued in connection with any exercise hereunder shall be rounded to the nearest
one-hundredth of a whole share.
(b) Exercise Procedure.
(1) Payment for Shares. (x) The Holder shall deliver to the
Company this Warrant Certificate and a duly completed Purchase Form at the
Company's principal executive office along with a certified or bank cashier's
check payable to the Company in the amount Exercise Price then in effect times
the number of shares of Common Stock being purchased (the "Aggregate Stock
Purchase Price").
(y) In lieu of paying the Aggregate Stock Purchase Price
upon exercise of this Warrant, for so long as the Common Stock is publicly
traded, the Holder may elect a "cashless exercise" in which event the Holder
will receive upon exercise of this Warrant a reduced number of shares of Common
Stock equal to (i) the number of shares of Common Stock that would be issuable
pursuant to this Warrant upon payment of the Aggregate Stock Purchase Price
minus (ii) the number of shares of Common Stock that have an aggregate fair
market value equal to the Aggregate Stock Purchase Price. For purposes of the
preceding sentence, the fair market value of a
3
share of Common Stock shall mean the average of the last reported sale prices of
the Common Stock on the ten trading days preceding the date of exercise.
(2) Effective Date of Exercise. Each exercise will be deemed
to have been effected as of the close of business on the date that the Purchase
Form and full payment is received by the Company at the principal office of the
Company at 611 Broadway, Suite 515, New York, New York 10012. At such time as
such exercise has been effected, the person (or entity) or persons (or entities)
in whose name or names any certificate(s) for shares of Common Stock are to be
issued upon such exercise will be deemed to have become the holder or holders of
record of the shares of Common Stock represented.
(c) Delivery of Certificates. As soon as practicable after an
exercise has been effected (but in any event within five (5) business days), the
Company will deliver to the Holder:
(1) a certificate or certificates representing the number of
shares of Common Stock issuable by reason of such exercise in such name(s) and
such denomination(s) as the Holder has specified;
(2) a new Warrant Certificate entitling the Holder to purchase
the number of shares of Common Stock as to which the original Warrant
Certificate was not exercised and reflecting any changes to the Exercise Price
which have theretofore been effectuated and which Warrant Certificate shall
otherwise be in form and substance identical to that delivered by the Holder to
the Company for said exercise.
(d) Closure of Issuer Books. The Company will not close its books
against the transfer of Warrant Certificates or of Common Stock issued or
issuable upon exercise of Warrant Certificates in any manner which interferes
with the timely exercise of Warrant Certificates.
(e) Payment of Taxes. The Company will pay all taxes and other
governmental charges (other than taxes measured by the revenue or income of the
Holder) that may be imposed in respect of the issue or delivery of shares of
Common Stock upon exercise of this Warrant Certificate; provided, however, that
the Holder shall pay any such tax which is due because shares of Common Stock
are issued in a name other than such Holder's.
(f) Notices of Record Date. In the event of (i) any taking by the
Company of a record of the holders of any class or series of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution or (ii) any reclassification or recapitalization
of the capital stock of the Company, any merger or consolidation of the Company,
or any transfer of all or substantially all the assets of the Company to any
other corporation, entity or person, or any voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the Company, the
Company shall mail to the Holder at least twenty (20) days prior to the record
date specified therein (the "Notice Period"), a notice specifying (A) the date
on which any such record is to be taken for the purpose of such dividend or
4
distribution and a description of such dividend or distribution, (B) the date on
which any such reorganization, reclassification, transfer, consolidation,
merger, dissolution, liquidation or winding up is expected to become effective,
and (C) the time, if any is to be fixed, as to when the holders of record of
Common Stock (or other securities) shall be entitled to exchange their shares of
Common Stock (or other securities) for securities or other property deliverable
upon such reorganization, reclassification, transfer, consolidation, merger,
dissolution, liquidation or winding up. During the Notice Period, the Holder
shall have the exercise rights provided elsewhere in this Warrant Certificate.
In addition, the Company shall mail to the Holder advance notice of any
determination by the Company to register any shares of Common Stock (not
including the shares of Common Stock purchasable upon the exercise of this
Warrant or the other warrants, if any, issued on the date hereof) promptly upon
the making of such determination by the Company.
8. Exercise Price Adjustments. The Exercise Price and the number of shares
of Common Stock issuable upon exercise of this Warrant shall be subject to
adjustment from time to time as set forth below; however, no adjustment in the
Exercise Price need be made unless the adjustment would require an increase or
decrease of at least 1% in the Exercise Price. Any adjustments that are not made
shall be carried forward and taken into account in any subsequent adjustment.
(a) Adjustment for Common Stock Splits and Combinations. If the
Company shall at any time or from time to time after the date hereof effect a
subdivision of the outstanding Common Stock, the Exercise Price then in effect
immediately before that subdivision shall be proportionately decreased;
conversely, if the Company shall at any time or from time to time after the date
hereof reduce the outstanding shares of Common Stock by combination or
otherwise, the Exercise Price then in effect immediately before the combination
shall be proportionately increased. Any adjustment under this Section 8(a) shall
become effective at the close of business on the date the subdivision or
combination becomes effective.
(b) Adjustment for Certain Dividends and Distributions of Common
Stock. In the event the Company at any time or from time to time after the date
hereof shall make or issue, or fix a record date for the determination of
holders of Common Stock entitled to receive, a dividend or other distribution
payable in additional shares of Common Stock, then and in each such event the
Exercise Price then in effect shall be decreased as of the time of such issuance
or, in the event such a record date shall have been fixed, as of the close of
business on such record date, by multiplying the Exercise Price then in effect
by a fraction:
(1) the numerator of which shall be the total number of shares
of Common Stock issued and outstanding immediately prior to the time of such
issuance or the close of business on such record date, and
(2) the denominator of which shall be the total number of
shares of Common Stock issued and outstanding immediately prior to the time of
such issuance or the close of business on such record date, plus the number of
shares of Common Stock issuable in payment
5
of such dividend or distribution; provided, however, if such record date shall
have been fixed and such dividend is not fully paid or if such distribution is
not fully made on the date fixed therefor, the Exercise Price shall be
recomputed accordingly as of the close of business on such record date and
thereafter the Exercise Price shall be adjusted pursuant to this Section 8(b) as
of the time of actual payment of such dividends or distributions.
(3) Whenever the Exercise Price payable upon exercise of this
Warrant is adjusted pursuant to this paragraph 8(b), the number of shares of
Common Stock purchasable upon exercise of this Warrant shall simultaneously be
adjusted by multiplying the number of shares initially issuable upon the
exercise of this Warrant by the Exercise Price in effect on the date hereof and
dividing the product so obtained by the Exercise Price, as adjusted.
(c) Adjustment for Other Dividends and Distributions. In the event
the Company at any time or from time to time after the date hereof shall make or
issue, or fix a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in securities of
the Company other than shares of Common Stock, then and in each such event
provision shall be made so that Holder shall receive upon exercise of this
Warrant Certificate in addition to the number of shares of Common Stock
receivable thereupon, the amount of securities of the Company that it would have
received had this Warrant Certificate been exercised on the date of such event
and had thereafter, during the period from the date of such event to and
including the exercise date, retained such securities receivable by it as
aforesaid during such period giving application to all adjustments called for
during such period under this Warrant Certificate with respect to the rights of
the Holder.
(d) Adjustment for Reclassification, Exchange or Substitution. If
the Common Stock issuable upon the exercise of this Warrant Certificate shall be
changed into the same or a different number of shares of any class or classes of
stock, whether by reclassification, exchange, substitution or other change
(other than a reorganization, merger, consolidation or sale of assets provided
for in Section 8(e) below), then and in each such event, the Holder shall have
the right thereafter to exercise this Warrant Certificate into the kind and
amounts of shares of stock and other securities and property receivable upon
such reclassification, exchange, substitution or other change, by holders of the
number of shares of Common Stock into which this Warrant Certificate might have
been exercised immediately prior to such reclassification, exchange,
substitution, or other change, all subject to further adjustment as provided
herein.
(e) Reorganization, Mergers, Consolidations or Sales of Assets. If
at any time or from time to time there shall be a reorganization of the Common
Stock (other than a reclassification, exchange or substitution of shares
provided for in Section 8(d) above) or a merger or consolidation of the Company
with or into another corporation, or the sale of all or substantially all the
Company's properties and assets to any other person, then, as a part of such
reorganization, merger, consolidation or sale, provision shall be made so that
the Holder shall thereafter be entitled to receive upon exercise of this Warrant
Certificate, the number of shares of stock or other securities or property of
the Company or of the successor corporation resulting from such
6
reorganization, merger, consolidation or sale, to which a holder of that number
of shares of Common Stock deliverable upon exercise of this Warrant Certificate
would have been entitled on such reorganization, merger, consolidation or sale.
In any such case, appropriate adjustment shall be made in the application of the
provisions of this Warrant Certificate with respect to the rights of the Holder
after the reorganization, merger, consolidation or sale to the end that the
provisions of this Warrant Certificate (including adjustment of the number of
shares issuable upon exercise of this Warrant Certificate) shall be applicable
after that event as nearly equivalent as may be practicable; or
(f) Certificate of Adjustment. In each case of an adjustment or
readjustment of the Exercise Price, the Company, at its expense, shall prepare a
certificate showing such adjustment or readjustment signed by the duly elected
Treasurer or Chief Financial Officer of the Company (the "Adjustment
Certificate) and shall mail the Adjustment Certificate, by first class mail,
postage prepaid, to the Holder at the Holder's address as shown in the Company's
books. The Adjustment Certificate shall set forth such adjustment or
readjustment, showing in detail the facts upon which such adjustment or
readjustment is based including a statement of the Exercise Price and the number
of shares of Common Stock or other securities issuable upon exercise of this
Warrant Certificate immediately before and after giving effect to the applicable
adjustment or readjustment. If the holders of a majority of the shares of Common
Stock represented by all outstanding Warrant Certificates being issued
concurrently herewith do not in good faith believe that such adjustment or
readjustment was calculated in accordance with the terms of this Warrant
Certificate, such holders shall have the right to challenge such adjustment or
readjustment, or method of calculating the same, by delivering written notice to
the Company at 611 Broadway, Suite 515, New York, New York 10012, Attention:
Richard L. Bulman, within thirty (30) days after the Holder's receipt of the
Adjustment Certificate. In the event such holders deliver such written notice to
the Company, the Company, at its expense, shall cause independent certified
public accountants of recognized standing selected by the Company (who may be
the independent certified public accountants then auditing the books of the
Company) to recompute such adjustment or readjustment in accordance herewith and
prepare a certificate signed by such accountants (the "Accountant's Adjustment
Certificate") showing such adjustment or readjustment. The Company shall then
mail the Accountant's Adjustment Certificate, by first class mail, postage
prepaid, to the Holder at the Holder's address as shown in the Company's books.
In the event of any conflict between the Adjustment Certificate and the
Accountant's Adjustment Certificate, the Accountant's Adjustment Certificate
shall control.
9. Survival. The various rights and obligations of the Holder hereof and
of this Company as set forth in Sections 5, 6 and 7 hereof, as may be
applicable, shall survive the exercise of this Warrant Certificate or the
surrender of this Warrant Certificate, and upon the surrender of this Warrant
Certificate and the exercise of all the rights represented hereby, each party
shall, if requested, deliver to the other hereof its written acknowledgement of
its continuing obligations under said Sections.
10. Mutilated or Missing Warrant Certificates. In case this Warrant
Certificate shall be
7
mutilated, lost, stolen or destroyed, the Company will, upon request, issue and
deliver in exchange and substitution for and upon cancellation of the mutilated
Warrant Certificate, or in lieu of and substitution of the Warrant Certificate
lost, stolen or destroyed, a new Warrant Certificate of like tenor and
representing an equivalent right or interest, but only upon receipt of evidence
satisfactory to the Company of such loss, theft, or destruction of such Warrant
Certificate and, in the case of a lost, stolen or destroyed Warrant Certificate,
indemnity, if requested, also satisfactory to the Company. Applicants for such
substitute Warrant Certificate shall also comply with such other reasonable
regulations and pay such reasonable charges as the Company may prescribe.
11. Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been made when
delivered or mailed first class registered or certified mail, postage prepaid,
return receipt requested, as follows: if the Holders, at the address of the
Holder as shown on the Company's registry books, and, if to the Company, at 611
Broadway, Suite 515, New York, New York 10012, Attention: Richard L. Bulman.
12. Governing Law. This Warrant Certificate shall be governed by and
construed in accordance with the laws of the State of New York, without
reference to principles of conflicts of law.
13. Binding Effect. This Warrant Certificate shall be binding upon and
inure to the benefit of the Company and the Holder. Nothing in this Warrant
Certificate is intended or shall be construed to confer upon any other person
any right, remedy or claim, in equity or at law, or to impose upon any other
person any duty, liability or obligation.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed as of the date first above written.
KIDEO PRODUCTIONS, INC.
By: ________________________________
Richard L. Bulman, President
8