THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
UNDER ANY STATE SECURITIES LAW, AND, AS SUCH, MAY NOT BE SOLD, TRANSFERRED OR
ASSIGNED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
AND QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS, OR IN RELIANCE UPON AN
OPINION OF COUNSEL, IN FORM AND CONTENT REASONABLY SATISFACTORY TO THE COMPANY,
THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.
VOID AFTER 5:00 P.M. PACIFIC TIME, JULY 3, 2007
WARRANT
For the Purchase of
500,000 Shares of Common Stock
of
POINT.360
1. WARRANT.
FOR VALUE RECEIVED, Alliance Atlantis Communications Inc., a corporation
organized under the laws of Canada ("AACI"), or its registered assigns (each, a
"Holder"), is entitled, at any time or from time to time on or after the
Commencement Date, and at or before 5:00 P.M., Pacific Time, on the Expiration
Date, but not thereafter, to purchase and receive, in whole or in part, up to
Five Hundred Thousand (500,000) shares of common stock, no par value ("Common
Stock"), of Point.360, a California corporation (the "Company"). This Warrant is
initially exercisable at $2.00 per share of Common Stock purchased; provided,
however, that upon the occurrence of any of the events specified in Section 5
hereof, the rights granted by this Warrant, including the exercise price and the
number of shares of Common Stock to be received upon such exercise, shall be
adjusted as therein specified. This Warrant shall automatically terminate upon
the occurrence of a Termination Event. Terms not otherwise defined in this
Warrant shall have the meanings attributed to them in Section 6 below.
2. EXERCISE.
2.1 EXERCISE FORM. In order to exercise this Warrant, the exercise form
attached hereto must be duly completed, executed and delivered to the Company,
together with this Warrant and payment of the Exercise Price for the Securities
being purchased.
2.2 LEGEND. Each certificate evidencing Securities purchased under this
Warrant shall bear a legend restricting transfer thereof except in compliance
with the terms hereof.
2.3 CONVERSION RIGHT.
2.3.1 DETERMINATION OF AMOUNt. In lieu of the payment of the Exercise
Price in cash, the Holder shall have the right (but not the obligation) to
convert this Warrant, in whole or in part, directly into shares of Common Stock
("Conversion Right"). Upon exercise of the Conversion Right, the Company shall
deliver to the Holder (without payment by the Holder of any of the Exercise
Price) that number of shares of Common Stock equal to the quotient obtained by
dividing (x) the "Value" (as defined below) at the time the Conversion Right is
exercised of the portion of the Warrant being converted by (y) the Market Price.
The "Value" of the portion of the Warrant being converted shall equal the
remainder derived from subtracting (a) the Exercise Price multiplied by the
number of shares of Common Stock covered by the portion of the Warrant being
converted from (b) the Market Price of the Common Stock multiplied by the number
of shares of Common Stock being converted. As used herein, the term "Market
Price" at any date shall be deemed to be the last reported sale price of the
Common Stock on such date, or, in case no such reported sale takes place on such
day, the average of the last reported sale prices for the immediately preceding
three trading days, in either case as officially reported by the principal
securities exchange on which the Common Stock is listed or admitted to trading,
or, if the Common Stock is not listed or admitted to trading on any national
securities exchange or if any such exchange on which the Common Stock is listed
is not its principal trading market, the last reported sale price as furnished
by the National Association of Securities Dealers, Inc. ("NASD") through the
Nasdaq National Market or SmallCap Market, or, if applicable, the OTC Bulletin
Board or BBX, or if the Common Stock is not listed or admitted to trading on any
of the foregoing markets, or similar organization, as determined in good faith
by resolution of the Board of Directors of the Company, based on the best
information available to it.
2.3.2 EXERCISE OF CONVERSION RIGHT. Provided that no Termination Event
has occurred, the Conversion Right may be exercised by the Holder on any
business day on or after the Commencement Date and not later than the Expiration
Date by delivering the Warrant with a duly executed exercise form attached
hereto with the conversion section completed to the Company, exercising the
Conversion Right and specifying the total number of shares of Common Stock the
Holder will purchase pursuant to such conversion.
3. TRANSFER.
3.1 RESTRICTIONS ON TRANSFER OF WARRANT. The Holder agrees that it will
not sell, transfer, assign or hypothecate this Warrant to anyone except pursuant
to an effective registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), and qualification under applicable state
securities laws, or in reliance upon an opinion of counsel, in form and content
reasonably satisfactory to the Company and its counsel, that such registration
and qualification are not required. Notwithstanding the foregoing, provided that
such transfer is otherwise effected in accordance with applicable securities
laws, the Holder may assign and transfer this Warrant to any corporation,
partnership, limited liability company or other entity principally owned and
controlled, directly or indirectly, by AACI. In order to make any permitted
assignment, the Holder must deliver to the Company the assignment form attached
hereto duly executed and completed, together with this Warrant and payment of
all transfer taxes, if any, payable in connection therewith. The Company shall
immediately transfer this Warrant on the books of the Company and shall execute
and deliver a new Warrant or Warrants of like tenor to the appropriate assignee
or assignees expressly evidencing the right to purchase the aggregate number of
shares of Common Stock purchasable hereunder or such portion of such number as
shall be contemplated by any such assignment.
3.2 RESTRICTIONS ON TRANSFER OF SECURITIES. The Holder will not sell,
transfer, assign or hypothecate any of the Securities unless and until (i) it
shall have notified the Company of the proposed transfer or disposition, and
(ii) if requested by the Company, it shall have furnished the Company with an
opinion of counsel, in form and content reasonably satisfactory to the Company
and its counsel, to the effect that (A) appropriate action necessary for
compliance with the Securities Act provisions relating to sale of an
unregistered security has been taken, or (B) exemptions from the registration
requirements of the Securities Act and qualification requirements of applicable
state securities laws are available. Notwithstanding the foregoing, the
restrictions imposed upon the transferability of the Securities shall terminate
as to any particular Security when (1) such Security shall have been sold in
compliance with Rule 144 under the Securities Act, or (2) a letter shall have
been issued to the Holder at its request by the staff of the Securities and
Exchange Commission, or a ruling shall have been issued to the holder at its
request by such Commission, stating that no action shall be recommended by such
staff or taken by such Commission, as the case may be, if such Security is
transferred without registration under the Securities Act in accordance with the
conditions set forth in such letter or ruling and such letter or ruling
specifies that no subsequent restrictions on transfer are required, or (3) such
Security shall have been registered under the Securities Act and sold by the
Holder in accordance with such registration.
4. NEW WARRANTS TO BE ISSUED.
4.1 PARTIAL EXERCISE OR TRANSFER. Subject to the restrictions in Section
3 hereof, this Warrant may be exercised or assigned in whole or in part. In the
event of the exercise or assignment hereof in part only, upon surrender of this
Warrant for cancellation, together with the duly executed exercise or assignment
form and funds sufficient to pay any Exercise Price and/or transfer tax, the
Company shall cause to be delivered to the Holder without charge a new Warrant
of like tenor to this Warrant in the name of the Holder evidencing the right of
the Holder to purchase the aggregate number of shares of Common Stock
purchasable hereunder as to which this Warrant has not been exercised or
assigned.
4.2 LOST CERTIFICATE. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this Warrant
and of reasonably satisfactory indemnification, the Company shall execute and
deliver a new Warrant of like tenor and date. Any such new Warrant executed and
delivered as a result of such loss, theft, mutilation or destruction shall
constitute a substitute contractual obligation on the part of the Company.
5. ADJUSTMENTS.
5.1 STRUCTURAL ADJUSTMENTS TO EXERCISE PRICE AND NUMBER OF SECURITIES.
The Exercise Price and the number of shares of Common Stock underlying this
Warrant shall be subject to adjustment from time to time as hereinafter set
forth:
5.1.1 STOCK DIVIDENDS - RECAPITALIZATION, RECLASSIFICATION,
SPLIT-UPS. If, after the Commencement Date, the number of outstanding shares of
Common Stock is increased by a stock dividend on the Common Stock payable in
shares of Common Stock or by a split-up, recapitalization or reclassification of
shares of Common Stock or other similar event, then, on the effective date
thereof, the number of shares of Common Stock issuable on exercise of this
Warrant shall be increased in proportion to such increase in outstanding shares.
5.1.2 AGGREGATION OF SHARES. If, after the Commencement Date, the
number of outstanding shares of Common Stock is decreased by a reverse split,
consolidation, combination or reclassification of shares of Common Stock or
other similar event, then, upon the effective date thereof, the number of shares
of Common Stock issuable on exercise of this Warrant shall be decreased in
proportion to such decrease in outstanding shares.
5.1.3 ADJUSTMENTS IN EXERCISE PRICE. Whenever the number of shares
of Common Stock purchasable upon the exercise of this Warrant is adjusted as
provided in this Section 5.1, the Exercise Price shall be adjusted (to the
nearest cent) by multiplying such Exercise Price immediately prior to such
adjustment by a fraction (x) the numerator of which shall be the number of
shares of Common Stock purchasable upon the exercise of this Warrant immediately
prior to such adjustment, and (y) the denominator of which shall be the number
of shares of Common Stock so purchasable immediately thereafter.
5.1.4 REPLACEMENT OF SECURITIES UPON REORGANIZATION, ETC. In case of
any split up, recapitalization or reclassification of the outstanding shares of
Common Stock other than as covered by Section 5.1.1 or 5.1.2 hereof or which
solely affects the par value of such shares of Common Stock, or in the case of
any merger or consolidation of the Company with or into another corporation
(other than a consolidation or merger in which the Company is the continuing
corporation and which does not result in any split up, recapitalization or
reclassification of the outstanding shares of Common Stock), or in the case of
any sale or conveyance to another corporation or entity of the property of the
Company as an entirety or substantially as an entirety in connection with which
the Company is dissolved, the Holder of this Warrant shall have the right
thereafter (until the expiration of the right of exercise of this Warrant) to
receive upon the exercise hereof, for the same aggregate Exercise Price payable
hereunder immediately prior to such event, the kind and amount of shares of
stock or other securities or property (including cash) receivable upon such
split-up, reclassification, reorganization, merger or consolidation, or upon a
dissolution following any such sale or other transfer, by a Holder of the number
of shares of Common Stock of the Company obtainable upon exercise of this
Warrant immediately prior to such event; and if any reclassification also
results in a change in shares of Common Stock covered by Section 5.1.1 or 5.1.2,
then such adjustment shall be made pursuant to Sections 5.1.1, 5.1.2, 5.1.3 and
this Section 5.1.4. The provisions of this Section 5.1.4 shall similarly apply
to successive split-ups, reclassifications, reorganizations, mergers or
consolidations, sales or other transfers.
5.2 CHANGES IN FORM OF WARRANT. This form of Warrant need not be changed
because of any change pursuant to this Section, and Warrants issued after such
change may state the same Exercise Price and the same number of shares of Common
Stock and Warrants as are stated in the Warrants initially issued pursuant to
this Agreement. The acceptance by any Holder of the issuance of new Warrants
reflecting a required or permissive change shall not be deemed to waive any
rights to a prior adjustment or the computation thereof.
5.3 ELIMINATION OF FRACTIONAL INTERESTS. The Company shall not be
required to issue certificates representing fractions of shares of Common Stock
upon the exercise of this Warrant, nor shall it be required to issue scrip or
pay cash in lieu of any fractional interests, it being the intent of the parties
that all fractional interests shall be eliminated by rounding any fraction up to
the nearest whole number of shares of Common Stock or other securities,
properties or rights.
6. DEFINITIONS. For the purposes of this Warrant, the following terms shall have
the meanings set forth below:
"OPTION AGREEMENT" means the Option Agreement, dated as of July 3, 2002, between
AACI and the Company pursuant to which AACI is granting to the Company an option
to purchase all of the outstanding capital stock of (i) Tattersall Casablanca
Sound Inc., (ii) Calibre Digital Design Inc. and (iii) Salter Street Digital
Limited (collectively, the "Optioned Companies").
"OPTION" shall have the meaning attributed to such term in the Option Agreement.
"COMMENCEMENT DATE" shall mean the earlier of (i) the date upon which the Option
expires (other than as a result of a Termination Event), or (ii) the date of the
closing of the purchase of the Optioned Companies by the Company under the
Option.
"EXPIRATION DATE" shall mean July 3, 2007, provided, however, that if the
Company does not purchase the Optioned Companies by its exercise of the Option,
such date shall thereupon be decreased to the date which is three years from the
Commencement Date.
"EXERCISE PRICE" shall mean the initial exercise price or the adjusted exercise
price, depending on the context, of a share of Common Stock issuable upon
exercise of this Warrant.
"SECURITIES" shall mean the shares of Common Stock or other securities issuable
upon exercise of this Warrant.
"TERMINATION EVENT" shall mean (i) a material breach of the Option Agreement by
AACI which breach remains outstanding 15 days after notice from PTSX to AACI, or
(ii) the expiration of the Option pursuant to section 3.2.1 of the Option
Agreement because of a judgment, decree, order, law or regulation that prevents
the closing of the purchase, if such judgment, decree, order, law or regulation
is either (a) instituted against AACI or the Optioned Companies, or (b) is based
on any Canadian law, order or regulation. A judgment, decree, order, law or
regulation instituted against the Company or based on any U.S. law, order or
regulation that prevents the closing of the purchase of the Optioned Companies
under the Option shall not, however, constitute a Termination Event.
7. RESERVATION OF SHARES. The Company shall at all times reserve and keep
available out of its authorized shares of Common Stock, solely for the purpose
of issuance upon exercise of this Warrant, such number of shares of Common Stock
or other securities, properties or rights as shall be issuable upon the exercise
thereof. The Company covenants and agrees that, upon exercise of the Warrants
and payment of the Exercise Price therefor, all shares of Common Stock and other
securities issuable upon such exercise shall be duly and validly issued, fully
paid and non-assessable and not subject to preemptive rights of any stockholder.
8. CERTAIN NOTICE REQUIREMENTS.
8.1 NOTICE OF CHANGE IN EXERCISE PRICE. The Company shall, promptly
after an event requiring a change in the Exercise Price pursuant to Section 5
hereof, send notice to the Holder of such event and change ("Price Notice"). The
Price Notice shall describe the event causing the change and the method of
calculating same and shall be certified as being true and accurate by two
officers of the Company.
8.2 TRANSMITTAL OF NOTICES. All notices, requests, consents and other
communications under this Warrant shall be in writing and shall be deemed to
have been duly made on the date of delivery if delivered personally or sent by
overnight courier, with acknowledgment of receipt by the party to which notice
is given, or on the fifth day after mailing if mailed to the party to whom
notice is to be given, by registered or certified mail, return receipt
requested, postage prepaid and properly addressed as follows: (i) if to the
Holder, to the address of such Holder as shown on the books of the Company, or
(ii) if to the Company, to its principal executive office.
9. MISCELLANEOUS.
9.1 HEADINGS. The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Warrant.
9.2 ENTIRE AGREEMENT. This Warrant (together with the other agreements
and documents being delivered pursuant to or in connection with this Warrant)
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof, and supersedes all prior agreements and understandings of
the parties, oral and written, with respect to the subject matter hereof.
9.3 BINDING EFFECT. Subject to Section 3, this Warrant shall inure
solely to the benefit of and shall be binding upon, the Holder and the Company
and their respective successors, legal representatives and assigns, and no other
person shall have or be construed to have any legal or equitable right, remedy
or claim under or in respect of or by virtue of this Warrant or any provisions
herein contained.
9.4 GOVERNING LAW. This Warrant shall be governed by and construed and
enforced in accordance with the internal laws of the State of California,
without giving effect to conflicts of laws principles. 9.5 Waiver, Etc. The
failure of the Company or the Holder to at any time enforce any of the
provisions of this Warrant shall not be deemed or construed to be a waiver of
any such provision, nor to in any way affect the validity of this Warrant or any
provision hereof or the right of the Company or any Holder to thereafter enforce
each and every provision of this Warrant. No waiver of any breach,
non-compliance or non-fulfillment of any of the provisions of this Warrant shall
be effective unless set forth in a written instrument executed by the party or
parties against whom or which enforcement of such waiver is sought; and no
waiver of any such breach, non-compliance or non-fulfillment shall be construed
or deemed to be a waiver of any other or subsequent breach, non-compliance or
non-fulfillment.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer as of the 2nd day of July, 2002.
POINT.360
By: __________________________________
Name
---------------------------
Title
---------------------------
Form to be used to exercise Warrant:
Point.360
- ---------------------------
- ---------------------------
Date: _____________________, 200___
The undersigned her eby elects irrevocably to exercise the within
Warrant and to purchase ________ shares of Common Stock of Point.360 and hereby
makes payment of $____________ (at the rate of $_________ per share of Common
Stock) in payment of the Exercise Price pursuant thereto. Please issue the
Common Stock as to which this Warrant is exercised in accordance with the
instructions given below.
or
The undersigned hereby elects irrevocably to convert its right to
purchase ____________ shares of Common Stock purchasable under the within
Warrant into __________ shares of Common Stock of Point.360 (based on a "Market
Price" of $________ per share of Common Stock). Please issue the Common Stock in
accordance with the instructions given below.
--------------------------------------
Signature
NOTICE: The signature to this form must correspond with the name as
written upon the face of the within Warrant in every particular without
alteration or enlargement or any change whatsoever.
INSTRUCTIONS FOR REGISTRATION OF SECURITIES
Name ________________________________________________________
(Print in Block Letters)
Address ________________________________________________________
Form to be used to assign Warrant:
ASSIGNMENT
(To be executed by the registered Holder to effect a transfer of the
within Warrant):
FOR VALUE RECEIVED, ________________________________ does hereby sell,
assign and transfer unto _________________________________ the right to purchase
_____________________ shares of Common Stock of Point.360 ("Company") evidenced
by the within Warrant and does hereby authorize the Company to transfer such
right on the books of the Company.
Dated:____________________, 200___
-----------------------------------
Signature
- -----------------------------
Signature Guaranteed
NOTICE: The signature to this form must correspond with the name as
written upon the face of the within Warrant in every particular without
alteration or enlargement or any change whatsoever, and must be guaranteed by a
bank, other than a savings bank, or by a trust company or by a firm having
membership on a registered national securities exchange.