THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES ISSUABLE
UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS AND
NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,
PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION
STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR (2) THE COMPANY RECEIVES AN OPINION
OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION
ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE
OFFERED, SOLD, PLEDGED, ASSIGNED, OR TRANSFERRED IN THE MANNER
CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
OR APPLICABLE STATE SECURITIES LAWS.
THE TRANSFER OF THIS WARRANT IS RESTRICTED AS DESCRIBED HEREIN.
AVENUE ENTERTAINMENT GROUP, INC.
WARRANT FOR THE PURCHASE OF SHARES OF COMMON STOCK
600,000 Shares
THIS CERTIFIES that, for value received, Robisin Enterprises, Inc.
(together with any transferee, the "Holder"), is entitled to subscribe for and
purchase from Avenue Entertainment Group, Inc., a Delaware corporation (the
"Company"), upon the terms and conditions set forth herein, six hundred thousand
(600,000) shares of common stock, par value $.01 per share, of the Company (the
"Common Stock"), initially at a price equal to $2.00 per share (as adjusted as
provided herein, the "Exercise Price"). The number of shares of Common Stock
issuable upon exercise of this Warrant (the "Warrant Shares") and the Exercise
Price may be adjusted from time to time as hereinafter set forth. The Holder
shall have the right to subscribe for and purchase the Warrant Shares at any
time or from time to time commencing on the date that all of the six hundred
thousand (600,000) shares of common stock of the Company (the "Subscription
Shares") referenced in that certain Subscription Agreement (the "Subscription
Agreement") dated as of even date herewith (the "Closing Date") between the
Company and the Holder are purchased by the Holder in accordance with the terms
and conditions of the Subscription Agreement and ending on the second
anniversary of the Closing Date (the "Exercise Period"). The Holder may not
exercise this Warrant or purchase any of the Warrant Shares until such time as
all of the Subscription Shares are purchased by the Holder in accordance with
the terms and conditions of the Subscription Agreement.
1. This Warrant may be exercised during the Exercise Period, as to all
or any lesser whole number of Warrant Shares issuable hereunder, by the
surrender of this Warrant (with the election at the end hereof duly executed) to
the Company at its office as set forth in the form of election attached hereto,
or at such other place as is designated in writing by the Company, together with
a certified or bank cashier's check payable to the order of the Company in an
amount equal to the Exercise Price multiplied by the number of Warrant Shares
for which this Warrant is being exercised.
2. Upon each exercise of the Holder's rights to purchase Warrant Shares,
the Holder shall be deemed to be the holder of record of the Warrant Shares
issuable upon such exercise, notwithstanding that the transfer books of the
Company shall then be closed or certificates representing such Warrant Shares
shall not then have been actually delivered to the Holder. As soon as
practicable after each such exercise of this Warrant, the Company shall issue
and deliver to the Holder a certificate or certificates for the Warrant Shares
issuable upon such exercise, registered in the name of the Holder. If this
Warrant should be exercised in part only, the Company shall, upon surrender of
this Warrant for cancellation, execute and deliver a new Warrant evidencing the
right of the Holder to purchase the balance of the Warrant Shares (or portions
thereof) subject to purchase hereunder.
3. (a) Any Warrants issued upon the transfer or exercise in part of this
Warrant shall be numbered and shall be registered in a Warrant Register as they
are issued. The Company shall be entitled to treat the registered holder of any
Warrant on the Warrant Register as the owner in fact thereof for all purposes
and shall not be bound to recognize any equitable or other claim to or interest
in such Warrant on the part of any other person, and shall not be liable for any
registration or transfer of Warrants which are registered or to be registered in
the name of a fiduciary or the nominee of a fiduciary unless made with the
actual knowledge that a fiduciary or nominee is committing a breach of trust in
requesting such registration or transfer, or with the knowledge of such facts
that its participation therein amounts to bad faith. This Warrant shall be
transferable only on the books of the Company upon delivery thereof duly
endorsed by the Holder or by his duly authorized attorney or representative, or
accompanied by proper evidence of succession, assignment, or authority to
transfer. In all cases of transfer by an attorney, executor, administrator,
guardian, or other legal representative, duly authenticated evidence of his or
its authority shall be produced. Upon any registration of transfer, the Company
shall deliver a new Warrant or Warrants to the person entitled thereto. This
Warrant may be exchanged, at the option of the Holder thereof, for another
Warrant, or other Warrants of different denominations, of like tenor and
representing in the aggregate the right to purchase a like number of Warrant
Shares (or portions thereof), upon surrender to the Company or its duly
authorized agent.
(b) The undersigned agrees for the benefit of the Company that
the undersigned will not, prior to the date on which Holder purchases and
acquires all of the 600,000 Shares it is required to purchase pursuant to the
Subscription Agreement, without the prior written consent of the Company, offer,
pledge, hypothecate, sell, contract to sell, grant any option for the sale of,
or otherwise dispose of, directly or indirectly (collectively, "Dispose Of"),
any of the Warrants or Warrant Shares, except that the foregoing restriction
shall not apply to (i) the exercise of the Warrants, (ii) any Warrants or
Warrant Shares Disposed Of at death or, if the donee agrees to be bound by the
same restriction, by gift, or (iii) any Warrant Shares acquired after the
Warrants have been called for redemption. The provisions of this Section 3(b)
shall be binding upon the undersigned and the successors, assigns, heirs, and
personal representatives of the undersigned.
(c) The undersigned realizes that the Warrants and Warrant Shares
are not registered under the Securities Act of 1933, as amended (the "Act"), or
any foreign or state securities laws. The undersigned agrees that the Warrants
and Warrant Shares will not be Disposed Of except in compliance with the Act, if
applicable, and applicable foreign and state securities laws and the
restrictions set forth in Section 3(b). Purchasers of Warrants or Warrant Shares
can only Dispose Of the Warrants or Warrant Shares pursuant to registration
under the Act or pursuant to an exemption therefrom. The undersigned understands
that to Dispose Of the Warrants or Warrant Shares may require in some
jurisdictions specific approval by the appropriate governmental agency or
commission in such jurisdiction. The undersigned has been advised that, except
as provided in Section 9, the Company has no obligation, and does not intend, to
cause the Warrants or Warrant Shares to be registered under the Act or the
securities law of any other jurisdiction or to comply with the requirements for
any exemption under the Act, including but not limited to those provided by Rule
144 and Rule 144A promulgated under the Act, or under the securities law of any
other jurisdiction. The undersigned understands the legal consequences of the
foregoing to mean that the undersigned may have to bear the economic risk of its
investment in the Company for an indefinite period of time.
(d) To enable the Company to enforce the transfer restrictions
contained in Sections 3(b) and 3(c), the undersigned hereby consents to the
placing of legends upon the certificates representing the Common Stock with
respect to the Warrant Shares.
4. The Company shall at all times reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of providing for
the exercise of the rights to purchase all Warrant Shares granted pursuant to
the Warrants, such number of shares of Common Stock as shall, from time to time,
be sufficient therefor. The Company covenants that all Warrant Shares, when
issued upon receipt by the Company of the full Exercise Price therefor, shall be
validly issued, fully paid, nonassessable, and free of preemptive rights.
5. (a) In case the Company shall at any time after the Original Issue
Date (i) declare a dividend on the outstanding Common Stock payable in shares of
its capital stock, (ii) subdivide the outstanding Common Stock, or (iii) combine
the outstanding Common Stock into a smaller number of shares, then, in each
case, the Exercise Price, and the number of Warrant Shares issuable upon
exercise of this Warrant, in effect at the time of the record date for such
dividend or of the effective date of such subdivision or combination, shall be
proportionately adjusted so that the Holder after such time shall be entitled to
receive the aggregate number and kind of shares which, if such Warrant had been
exercised immediately prior to such time, he would have owned upon such exercise
and been entitled to receive by virtue of such dividend, subdivision or
combination. Such adjustment shall be made successively whenever any event
listed above shall occur.
(b) In any case in which this Section 5 shall require that an
adjustment in the Exercise Price be made effective as of a record date for a
specified event, the Company may elect to defer, until the occurrence of such
event, issuing to the Holder, if the Holder exercised this Warrant after such
record date, the shares of Common Stock, if any, issuable upon such exercise
over and above the shares of Common Stock, if any, issuable upon such exercise
on the basis of the Exercise Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to the Holder a due bill or other
appropriate instrument evidencing the Holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.
(c) Whenever there shall be an adjustment as provided in this
Section 5, the Company shall promptly cause written notice thereof to be sent by
registered mail, postage prepaid, to the Holder, at its address as it shall
appear in the Warrant Register, which notice shall be accompanied by an
officer's certificate setting forth the number of Warrant Shares purchasable
upon the exercise of this Warrant and the Exercise Price after such adjustment
and setting forth a brief statement of the facts requiring such adjustment and
the computation thereof, which officer's certificate shall be conclusive
evidence of the correctness of any such adjustment absent manifest error.
(d) The Company shall not be required to issue fractions of
shares of Common Stock or other capital stock of the Company upon the exercise
of this Warrant. If any fraction of a share would be issuable on the exercise of
this Warrant (or specified portions thereof), the Company shall purchase such
fraction for an amount in cash equal to the same fraction of the Current Market
Price (as hereinafter defined) of such share of Common Stock on the date of
exercise of this Warrant.
(e) The "Current Market Price" per share of Common Stock on any
date shall be the average of the daily closing prices for the 20 consecutive
trading days immediately preceding the date in question. The closing price for
each day shall be the last reported sales price regular way or, in case no such
reported sale takes place on such day, the closing bid price regular way, in
either case on the principal national securities exchange (including, for
purposes hereof, the Nasdaq National Market or Small Cap System if such system
is then generally reporting last sale prices) 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, the highest reported bid price
for the Common Stock as furnished by the National Association of Securities
Dealers, Inc. through Nasdaq or a similar organization if Nasdaq is no longer
reporting such information. If on any such date the Common Stock is not listed
or admitted to trading on any national securities exchange and is not quoted by
Nasdaq or any similar organization, the fair value of a share of Common Stock on
such date, as determined in good faith by the board of directors of the Company,
whose determination shall be conclusive absent manifest error, shall be used.
6. (a) In case of any consolidation with or merger of the Company with
or into another corporation (other than a merger or consolidation in which the
Company is the surviving or continuing corporation), or in case of any sale,
lease, or conveyance to another corporation of the property and assets of any
nature of the Company as an entirety or substantially as an entirety, such
successor, leasing, or purchasing corporation, as the case may be, shall (i)
execute with the Holder an agreement providing that the Holder shall have the
right thereafter to receive upon exercise of this Warrant solely the kind and
amount of shares of stock and other securities, property, cash, or any
combination thereof receivable upon such consolidation, merger, sale, lease, or
conveyance by a holder of the number of shares of Common Stock for which this
Warrant might have been exercised immediately prior to such consolidation,
merger, sale, lease, or conveyance and (ii) make effective provision in its
certificate of incorporation or otherwise, if necessary, to effect such
agreement. Such agreement shall provide for adjustments which shall be as nearly
equivalent as practicable to the adjustments in Section 5.
(b) In case of any reclassification or change of the shares of
Common Stock issuable upon exercise of this Warrant (other than a change in par
value or from no par value to a specified par value, or as a result of a
subdivision or combination, but including any change in the shares into two or
more classes or series of shares), or in case of any consolidation or merger of
another corporation into the Company in which the Company is the continuing
corporation and in which there is a reclassification or change (including a
change to the right to receive cash or other property) of the shares of Common
Stock (other than a change in par value, or from no par value to a specified par
value, or as a result of a subdivision or combination, but including any change
in the shares into two or more classes or series of shares), the Holder shall
have the right thereafter to receive upon exercise of this Warrant solely the
kind and amount of shares of stock and other securities, property, cash, or any
combination thereof receivable upon such reclassification, change,
consolidation, or merger by a holder of the number of shares of Common Stock for
which this Warrant might have been exercised immediately prior to such
reclassification, change, consolidation, or merger. Thereafter, appropriate
provision shall be made for adjustments which shall be as nearly equivalent as
practicable to the adjustments in Section 5.
(c) The above provisions of this Section 6 shall similarly apply
to successive reclassifications and changes of shares of Common Stock and to
successive consolidations, mergers, sales, leases, or conveyances.
7. In case at any time the Company shall propose:
(a) to pay any dividend or make any distribution on shares of
Common Stock in shares of Common Stock or make any other distribution (other
than regularly scheduled cash dividends which are not in a greater amount per
share than the most recent such cash dividend) to all holders of Common Stock;
or
(b) to issue any rights, warrants, or other securities to all
holders of Common Stock entitling them to purchase any additional shares of
Common Stock or any other rights, warrants, or other securities; or
(c) to effect any reclassification or change of outstanding
shares of Common Stock, or any consolidation, merger, sale, lease, or conveyance
of property, described in Section 6; or
(d) to effect any liquidation, dissolution, or winding-up of the
Company; or
(e) to take any other action which would cause an adjustment to
the Exercise Price;
then, and in any one or more of such cases, the Company shall give written
notice thereof, by registered mail, postage prepaid, to the Holder at the
Holder's address as it shall appear in the Warrant Register, mailed at least 10
days prior to (i) the date as of which the holders of record of shares of Common
Stock to be entitled to receive any such dividend, distribution, rights,
warrants, or other securities are to be determined, (ii) the date on which any
such reclassification, change of outstanding shares of Common Stock,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution, or winding-up is expected to become effective, and the date as of
which it is expected that holders of record of shares of Common Stock shall be
entitled to exchange their shares for securities or other property, if any,
deliverable upon such reclassification, change of outstanding shares,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution, or winding-up, or (iii) the date of such action which would require
an adjustment to the Exercise Price.
8. The issuance of any shares or other securities upon the exercise of
this Warrant, and the delivery of certificates or other instruments representing
such shares or other securities, shall be made without charge to the Holder for
any tax or other charge in respect of such issuance. The Company shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of any certificate in a name other
than that of the Holder and the Company shall not be required to issue or
deliver any such certificate unless and until the person or persons requesting
the issue thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
9. (a) The Company shall, (i) not later than December 31, 2000, file and
cause to become effective under the Act a registration statement (the
"Registration Statement") registering under the Act the resale of the Warrant
Shares and (ii) after the Registration Statement is declared effective under the
Act, furnish each Holder with such number of copies of the prospectus included
in the Registration Statement as such Holder may reasonably request to
facilitate the disposition of the Warrant Shares owned by such Holder.
(b) If at any time during the period that any Holder owns any
Warrant Shares an event (an "Event") shall have occurred that has caused the
Registration Statement to contain an untrue statement of a material fact or to
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances under
which they were made, the Company shall (i) give each Holder a notice (the
"No-Sell Notice") that an Event has occurred, (ii) promptly (or, if in the
reasonable judgment of the Company disclosure of the Event would be detrimental
to the Company, promptly after disclosure of the Event would not be detrimental
to the Company) take all commercially reasonable efforts to cause the
Registration Statement not to contain an untrue statement of a material fact or
to omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances under
which they were made, and (iii) give each Holder a notice (the "Sell Notice")
when the Registration Statement does not contain an untrue statement of a
material fact or to omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances under which they were made. No Holder shall sell any Warrant
Shares pursuant to the Registration Statement after it has received a No-Sell
Notice until it has received a subsequent Sell Notice.
(c) It is a condition to the Company's obligations under this
Section 9 that, in connection with the Registration Statement, Holder shall
furnish to the Company such information as the Company shall reasonably request.
10. (a) The Company may, at its option, call for redemption all (but not
less than all) of the then outstanding Warrants at a call price of $.01 per
Warrant (the "Call Price"), at any time; provided that the Current Market Price
shall have been greater than or equal to 200% of the then-current Exercise Price
within five business days of the date that notice of such call is sent as
provided in Section 10(b).
(b) Notice of any call for redemption shall be given to the
Holder by the Company not less than 15 days and not more than 45 days prior to
the date established for such call (the "Call Date"). Each such notice of call
will (i) specify the Call Date, (ii) state that payment of the Call Price will
be made by the Company upon presentation and surrender of this Warrant to the
Company at its address as specified in the notice, and (iii) state that the
right to exercise the Warrants will terminate at 5:00 P.M., Los Angeles,
California time, on the business day immediately preceding the Call Date.
(c) Upon the giving of the notice provided in Section 10(b),
effective at the time referred to in Section 10(b), the Warrants will terminate
and no longer be exercisable, and the holder thereof will have no further rights
with respect to such Warrants except to receive the Call Price therefor.
11. Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction, or mutilation of any Warrant (and upon surrender of any
Warrant if mutilated), and upon reimbursement of the Company's reasonable
incidental expenses, the Company shall execute and deliver to the Holder thereof
a new Warrant of like date, tenor, and denomination.
12. The Holder of any Warrant shall not have, solely on account of such
status, any rights of a stockholder of the Company, either at law or in equity,
or to any notice of meetings of stockholders or of any other proceedings of the
Company, except as provided in this Warrant.
13. This Warrant shall be construed in accordance with the laws of the
State of California applicable to contracts made and performed within such
State, without regard to principles of conflicts of law.
Dated: November ___, 2000
AVENUE ENTERTAINMENT GROUP, INC.
By:_____________________________
Cary Brokaw, President
By:_____________________________
_____________, its Secretary
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
attached Warrant.)
FOR VALUE RECEIVED, ________________________________ hereby sells,
assigns, and transfers unto __________________ a Warrant to purchase __________
shares of Common Stock, par value $.01 per share, of Avenue Entertainment Group,
Inc. (the "Company"), together with all right, title, and interest therein, and
does hereby irrevocably constitute and appoint _________________________________
attorney to transfer such Warrant on the books of the Company, with full power
of substitution.
Dated: ________________________
---------------------------
(Signature)
NOTICE
The signature on the foregoing Assignment must correspond to the name as
written upon the face of this Warrant in every particular, without alteration or
enlargement or any change whatsoever.
To: Avenue Entertainment Group, Inc.
11111 Santa Monica Blvd.
Suite 525
Los Angeles, CA 90025
ELECTION TO EXERCISE
The undersigned hereby exercises his/her/its rights to purchase _______
Warrant Shares covered by the within Warrant and tenders payment herewith in the
amount of $_________ in accordance with the terms thereof, and requests that
certificates for such securities be issued in the name of, and delivered to:
(Print Name, Address, and Social Security
or Tax Identification Number)
and, if such number of Warrant Shares shall not be all the Warrant Shares
covered by the within Warrant, that a new Warrant for the balance of the Warrant
Shares covered by the within Warrant be registered in the name of, and delivered
to, the undersigned at the address stated below.
Dated:_________________ Name________________________
(Print)
Address:__________________________________________________
---------------------------
(Signature)