SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Graphix Zone, Inc.
------------------
(Name of Issuer)
Common Stock, par value $0.01
-----------------------------
(Title of Class of Securities)
38870L 10 0
-----------
(CUSIP Number)
Ronald Chaimowitz
GT Interactive Software Corp.
16 East 40th Street, New York, NY 10016
(212) 726-6500
-----------------------------
(Name, Address and Telephone Number of
Person Authorized to Receive Notices
and Communications)
with a copy to:
David P. Levin, Esq.
Kramer, Levin, Naftalis & Frankel
919 Third Avenue, New York, NY 10022
(212) 715-9100
June 28, 1996
-------------
(Date of Event which Requires Filing
of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box: |_|
Check the following box if a fee is being paid with this statement: |X|
Page 1 of 28 Pages
Exhibit Index appears on page 9
<PAGE>
SCHEDULE 13D
CUSIP No. 38870L 10 0
- --------------------------------------------------------------------------------
1) NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
GT Interactive Software Corp. (I.R.S. employer identification no.
13-3689915)
- --------------------------------------------------------------------------------
2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |_|
(b) |_|
- --------------------------------------------------------------------------------
3) SEC USE ONLY
- --------------------------------------------------------------------------------
4) SOURCE OF FUNDS
WC (See Item 3)
- --------------------------------------------------------------------------------
5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(D) OR 2(E) |_|
- --------------------------------------------------------------------------------
6) CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7) SOLE VOTING POWER
800,000 (See Item 4)
NUMBER -------------------------------------------------
OF 8) SHARED VOTING POWER
SHARES Not Applicable
BENEFICIALLY -------------------------------------------------
OWNED BY 9) SOLE DISPOSITIVE POWER
EACH 800,000 (See Item 4)
REPORTING -------------------------------------------------
PERSON 10) SHARED DISPOSITIVE POWER
WITH Not Applicable
- --------------------------------------------------------------------------------
11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
800,000 (See Item 4)
- --------------------------------------------------------------------------------
12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES |_|
- --------------------------------------------------------------------------------
13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
7.1% (See Item 5)
- --------------------------------------------------------------------------------
14) TYPE OF REPORTING PERSON
CO
- --------------------------------------------------------------------------------
Page 2 of 28 Pages
<PAGE>
SCHEDULE 13D
ITEM 1. SECURITY AND ISSUER.
This Statement on Schedule 13D (the "Statement") relates to common stock,
$0.01 par value (the "Common Stock") of Graphix Zone, Inc., a Delaware
corporation (the "Company"). GT Interactive Software Corp. ("GTIS") owns 80,000
shares of Common Stock and has warrants issued by Graphix Zone, Inc., a
California corporation ("GZ Sub"), to purchase 720,000 shares of Common Stock.
The principal executive offices of the Company are located at 42 Corporate Park,
Suite 200, Irvine, California 92714.
ITEM 2. IDENTITY AND BACKGROUND.
This Statement is being filed by GTIS. GTIS is a corporation organized
under the laws of the State of Delaware and is principally engaged in the
business of publishing, merchandising and distributing consumer software. The
address of its principal business and principal office is 16 East 40th Street,
New York, NY 10016.
The name, business address, present principal occupation or employment and
citizenship (and the name, principal business and address of the corporation or
other entity in which such employment is conducted) of each executive officer
and director of GTIS are set forth in Schedule I attached hereto and are
incorporated herein by reference.
(d) During the last five years, neither GTIS nor, to the best knowledge of
GTIS, any of the persons listed on Schedule I hereto, has been convicted in a
criminal proceeding (excluding traffic violations and similar misdemeanors).
(e) During the last five years, neither GTIS nor, to the best knowledge of
GTIS, any of the persons listed on Schedule I hereto, has been a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
that resulted in GTIS or any of the persons listed on Schedule I hereto being
subject to a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, Federal or State securities laws
or finding any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Pursuant to the terms of the Agreement and Plan of Reorganization, dated as
of January 3, 1996 (the "Merger Agreement"), between GZ Sub and StarPress, Inc.,
a Colorado corporation ("StarPress"), the Company became the parent holding
company of GZ Sub and StarPress on June 28, 1996 when the last of
Page 3 of 28 Pages
<PAGE>
the mergers contemplated by the Merger Agreement became effective (the
"Effective Time").
Prior to the Effective Time, under the provisions of the Warrant
Certificate, attached hereto as Exhibit A, issued by GZ Sub to GTIS pursuant to
the Distribution Agreement (as defined in Item 4), GTIS exercised its GZ Sub
Warrants (as defined in Item 4) with respect to 80,000 shares of common stock,
no par value, of GZ Sub (the "GZ Sub Common Stock"). At the Effective Time, by
reason of the Merger Agreement, the shares of GZ Sub Common Stock then owned by
GTIS were converted into 80,000 shares of Common Stock.
The Warrant Certificate provides that, following any merger involving GZ
Sub, GTIS shall have the right to receive, upon the exercise of the GZ Sub
Warrants in accordance with the and subject to the terms of the Warrant
Certificate, the consideration that the holder of the number of shares of GZ
Common Stock purchasable upon the exercise of the GZ Sub Warrants would have
been entitled to receive upon such merger (the "Merger Consideration"). By the
terms of the Merger Agreement, each share of GZ Common Stock outstanding
immediately prior to the Effective Time was converted into one share of Common
Stock. Accordingly, GTIS has the right to receive up to 720,000 shares of Common
Stock upon exercise of the GZ Sub Warrants.
The aggregate amount of funds to be used for purchase of the Company's
Common Stock if and when GTIS opts to exercise the GZ Sub Warrants shall be the
product of (i) the number of shares of Common Stock as to which the GZ Sub
Warrants are then exercised and (ii) the per share Purchase Price (defined
hereafter). The Purchase Price for each share of Common Stock pursuant to the
exercise of each GZ Sub Warrant shall be the lesser of (i) $5.125 per share, and
(ii) the current market price per share of Common Stock, subject to certain
adjustments, as of the date twenty-one (21) trading days following the Effective
Time. As of the date of this Statement, GTIS anticipates that if and when it
opts to exercise the GZ Sub Warrants, its working capital shall be the source of
the necessary funds.
ITEM 4. PURPOSE OF TRANSACTION.
GTIS, GZ Sub and StarPress entered into a Distribution Agreement dated
March 13, 1996 (the "Distribution Agreement") in the ordinary course of
business, relating to the distribution by GTIS of certain products of GZ Sub and
StarPress. In connection with the Distribution Agreement, GZ Sub issued to GTIS
warrants to purchase 800,000 shares of the GZ Sub Common Stock (the "GZ Sub
Warrants"). The GZ Sub Warrants are exercisable at any time prior to February
28, 2001.
GTIS acquired the GZ Sub Warrants for investment purposes and has no
current plans or proposals which relate to or
Page 4 of 28 Pages
<PAGE>
would result in any of the events described in clauses (a) through (j) of the
instructions to this Item 4 of Schedule 13D with respect to the Company.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) As of the date of this Statement, GTIS owns 80,000 shares of Common
Stock which represent approximately 0.8% of the shares of Common Stock of the
Company currently outstanding.1 In addition, GTIS has the right to acquire up to
720,000 shares of Common Stock which, assuming exercise of all of the GZ Sub
Warrants and together with 80,000 shares currently owned by GTIS, would
represent approximately 7.1% of the shares of Common Stock then outstanding.2
(b) Following any exercise of the GZ Sub Warrants, GTIS will have the sole
power to vote and dispose of the Common Stock then beneficially owned by it.
(c) GTIS has not effected any other transactions in the Common Stock during
the past 60 days.
(d) Not applicable.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
SECURITIES OF THE ISSUER.
See Item 3.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit A Warrant Certificate
- --------
1 Based upon 10,590,879 shares, comprised of (i) 10,510,879 shares of
Common Stock reported by the Company to be issuable as a result of the
reorganization in its Amendment No.2 to Form S-4 as filed with the
Securities and Exchange Commission on June 7, 1996, and (ii) 80,000
shares of GZ Sub Common Stock, issued pursuant to the exercise of the
GZ Sub Warrants after the filing date of Amendment No.2 to Form S- 4,
which were subsequently converted into 80,000 shares of the Common
Stock at the Effective Time.
2 Based upon 11,310,879 shares, comprised of (i) 720,000 shares of Common
Stock issuable pursuant to the exercise of the GZ Sub Warrants and (ii)
10,590,879 shares of Common Stock currently outstanding (see footnote 1
above).
Page 5 of 28 Pages
<PAGE>
SCHEDULE I
Directors and Executive Officers of GTIS: The name, business address, present
principal occupation or employment and citizenship of each of the directors and
executive officers of GTIS, and the name of the principal business and address
of any corporation or other entity where such employment is conducted, are set
forth below:
Name and Principal Occupation
Address of Positions or Employment if
Principal with different from the
Business GTIS Citizenship positions with GTIS
-------- ---- ----------- -------------------
Joseph J. Cayre Chairman of the USA Chairman of the Board
GT Interactive Board of Directors of Directors, GTIS
Software Corp. President, GoodTimes Home
16 E. 40th Street Video Corp.
New York, NY 10016
Ronald Chaimowitz President USA
GT Interactive Chief Executive
Software Corp. Officer
16 E. 40th Street Director
New York, NY 10016
Kenneth Cayre Director USA Executive Vice President,
GoodTimes Home GoodTimes Home Video
Video Corp. Corp.
16 E. 40th Street
New York, NY 10016
Stanley Cayre Director USA Chairman, GoodTimes Home
GoodTimes Home Video Corp.
Video Corp.
16 E. 40th Street
New York, NY 10016
Jack J. Cayre Executive Vice USA
GT Interactive President
Software Corp. Director
16 E. 40th Street
New York, NY 10016
Harry M. Rubin Executive Vice USA
GT Interactive President and
Software Corp. General Manager
16 E. 40th Street - International
New York, NY 10016 Division and
Business Affairs
Chris Garske Senior Vice President USA
GT Interactive of Publishing
Software Corp.
16 E. 40th Street
New York, NY 10016
Page 6 of 28 Pages
<PAGE>
Andrew Gregor Chief Financial USA
GT Interactive Officer
Software Corp. Senior Vice President,
16 E. 40th Street Finance and
New York, NY 10016 Administration
Harry Steck Vice President of USA
GT Interactive Operations
Software Corp.
16 E. 40th Street
New York, NY 10016
Charles F. Bond President of Slash USA
7379 Washington Division
Avenue South
Edina, MN 55439
Frank Herman Chairman of G.T. United Kingdom
The Old Grammar Interactive Software
School (Europe) Limited3
248 Marylebone Rd.
London, NW1 6JT
England
Richard Burns Senior Vice President USA
GT Interactive of Sales
Software Corp.
16 E. 40th Street
New York, NY 10016
Jordan Levy Director USA President, Upgrade Corp.
Upgrade Corp. of of America
America
699 Hertel Avenue
Buffalo, NY 14207
William E. Ford Director USA Managing Member,
General Atlantic General Atlantic
Partners Partners, LLC
125 E. 56th Street
New York, NY 10022
Steven A. Denning Director USA Managing Member,
General Atlantic General Atlantic
Partners Partners, LLC
125 E. 56th Street
New York, NY 10022
- --------
3 A wholly owned subsidiary of GTIS.
Page 7 of 28 Pages
<PAGE>
SIGNATURE
After reasonable inquiry and to the best knowledge and belief of the
undersigned, the undersigned certifies that the information set forth in this
Statement is true, complete and correct.
Dated: July 24, 1996
GT INTERACTIVE SOFTWARE CORP.
By: /s/ Ronald Chaimowitz
----------------------
Name: Ronald Chaimowitz
Title: President
Page 8 of 28 Pages
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION PAGE
- ------- ----------- ----
A Warrant Certificate 10
Page 9 of 28 Pages
EXHIBIT A
NEITHER THE WARRANTS REPRESENTED BY THIS WARRANT CERTIFICATE
NOR ANY SHARES ACQUIRED UPON THE EXERCISE OF SUCH WARRANTS
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED OR ANY OTHER SECURITIES LAWS, NOR MAY SUCH WARRANTS OR
SHARES BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
SUCH ACT OR OTHER LAWS. THIS WARRANT AND SUCH SHARES MAY BE
TRANSFERRED ONLY IN COMPLIANCE WITH THE CONDITIONS SPECIFIED
IN THIS WARRANT.
GRAPHIX ZONE, INC.
Common Stock Purchase Warrant
No. 1 800,000 Warrants
NOT EXERCISABLE AFTER THE DATES SPECIFIED HEREIN
THIS WARRANT CERTIFICATE CERTIFIES THAT GT Interactive Software Corp. or
registered assigns, is the registered holder of the number of warrants set forth
above, each of which entitles such holder hereof, subject to the terms,
provisions and conditions set forth herein, to purchase from Graphix Zone, Inc.
(the "Company") at any time prior to 4:00 p.m. New York City time, on February
28, 2001 (the "Exercise Period") at the principal office of the Company or such
other location designated by the Company in accordance with the terms set forth
herein, one fully paid and nonassessable share of the Common Stock of the
Company, no par value per share ("Common Stock"), at the Purchase Price (as such
term is defined below) per share, upon presentation and surrender of this
Warrant Certificate with the Form of Election to Purchase attached hereto duly
executed and payment in full, as provided herein, of the applicable Purchase
Price as to which the Warrant(s) represented by the Warrant Certificate are
exercised, all subject to the terms, provisions and conditions hereof. The
number of Warrants evidenced by this Warrant Certificate (and the number of
shares which may be purchased upon exercise thereof) set forth above, and the
Purchase Price per share set forth above, are as of March 13, 1996. The Warrants
represented by this Certificate are being issued pursuant to the terms of the
Distribution Agreement, dated as of March 13, 1996, by and between GT
Interactive Software Corp., StarPress, Inc. and the Company.
The rights of the holder of this Warrant shall be subject to the following
further terms and conditions:
- 1 -
<PAGE>
SECTION 1. Exercise of Warrants; Purchase Price.
(a) Subject to the provisions of Section 6(d) hereof, the registered holder
of this Warrant Certificate may exercise the Warrants evidenced hereby, in whole
or in part, at any time (the "Exercise Date") during the Exercise Period until
4:00 p.m., New York City time, on February 28, 2001 (the "Expiration Date"),
upon surrender of this Warrant Certificate, with the Form of Election to
Purchase attached hereto duly executed, to the Company at its office maintained
pursuant to Section 2(b) hereof, together with payment of the Purchase Price for
each share of Common Stock as to which the Warrants are exercised. Each warrant
not exercised prior to 4:00 p.m., New York City time, on the applicable
Expiration Date shall become void and all rights thereunder shall cease as of
such time.
(b) The purchase price for each share of Common Stock pursuant to the
exercise of a Warrant shall be the lesser of (i) $5.125 per share, and (ii) the
Alternate Price. For purposes hereof, the Alternate Price shall be an amount
equal to the current market price per share (as defined in Section 8(d) hereof)
of the common stock, par value $.01 per share, of Graphix Zone, Inc., a Delaware
corporation ("New GZ") as of the date twenty-one (21) Trading Days following the
consummation of the Merger. For purposes hereof, the Merger shall mean the last
to occur of the mergers contemplated by the Agreement and Plan of Reorganization
between the Company and StarPress, Inc., dated January 3, 1996, pursuant to
which New GZ is to become the parent holding company of both such corporations.
The Company shall notify the holder in writing promptly following determination
of the Alternate Price, and if the same is less than $5.125, shall, if requested
by the holder, deliver to the holder a replacement Warrant Agreement reflecting
the Alternate Price as the Purchase Price. However, the Purchase Price shall be
subject to adjustment from time to time as provided in Section 8 hereof. The
aggregate Purchase Price shall be payable in cash or by certified or official
bank or bank cashier's check payable to the order of the Company, or, at the
written request of the holder hereof given not less than 5 days prior to
exercise, by "cashless exercise" using the facilities of a brokerage firm
arranged by the Company.
(c) Upon receipt of this Warrant Certificate representing exercisable
Warrants, with the Form of Election to Purchase duly executed, accompanied by
payment of the aggregate Purchase Price for the shares to be purchased and an
amount equal to any applicable transfer tax required to be paid by the holder of
this Warrant Certificate in accordance with Section 6 hereof, the Company shall
thereupon promptly (i) cause to be issued to the holder hereof the Common Stock
certificates for the number of whole shares of Common Stock to be purchased and
(ii) when appropriate, pay to the registered holder hereof, in lieu of the
issuance of fractional shares to which such holder would otherwise be entitled,
an amount in cash in accordance with Section 11 hereof. The Company shall
cooperate fully to effect the exercise in the manner specified by the holder
under Section 1(b) hereof.
(d) If the registered holder of this Warrant Certificate shall exercise
less than all the Warrants evidenced hereby, a new Warrant Certificate
evidencing Warrants equivalent to the Warrants remaining unexercised shall be
issued by the Company to the
- 2 -
<PAGE>
registered holder of this Warrant Certificate or to his duly authorized assigns,
subject to the provisions of Section 11 hereof.
SECTION 2. Split Up, Combination and Exchange of Warrant Certificates;
Mutilated, Destroyed, Lost or Stolen Warrant Certificates.
(a) Subject to the provisions of Section 11 hereof, at or prior to the
Expiration Date this Warrant Certificate, with or without other Warrant
Certificates, may be split up, combined or exchanged for another Warrant
Certificate or Warrant Certificates, entitling the registered holder to purchase
a like number of shares of Common Stock as the Warrant Certificate or Warrant
Certificates surrendered then entitled such holder to purchase. Any registered
holder desiring to split up, combine or exchange this Warrant Certificate shall
make such request in writing delivered to the Company, and shall surrender the
Warrant Certificate or Warrant Certificates to be split up, combined or
exchanged at the office of the Company maintained for such purpose as set forth
below. Thereupon the Company shall sign and deliver to the person entitled
thereto a Warrant Certificate or Warrant Certificates, as the case may be, as so
requested. The Company may require payment of a sum sufficient to cover any tax
or governmental charge that may be imposed in connection with any split-up,
combination or exchange of Warrant Certificates.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of a Warrant Certificate, and, in
case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Warrant
Certificate if mutilated, the Company will make and deliver a new Warrant
Certificate of like tenor to the registered owner in lieu of the Warrant
Certificate so lost, stolen, destroyed or mutilated.
(b) The Company will maintain an office (which may be an agency maintained
at a bank) where notices, presentations and demands in respect of any Warrants
may be made upon it and where it will maintain the Warrant register upon which
transfers and exchanges of Warrants shall be recorded. Such office shall be
maintained at U.S. Stock Transfer Company in Glendale, California, until such
time as the Company shall notify the holders of the Warrants of any change of
location of such office.
SECTION 3. Subsequent Issue of Warrant Certificates. Subsequent to their
original issuance, no Warrant Certificates shall be issued except (a) Warrant
Certificates issued upon any transfer, combination, split-up or exchange of
Warrants pursuant to the terms, conditions and provisions hereof, (b) Warrant
Certificates issued in replacement of mutilated, destroyed, lost or stolen
Warrant Certificates pursuant to Section 2 hereof, (c) Warrant Certificates
issued pursuant to Section 1(d) hereof upon the partial exercise of any Warrant
Certificate to evidence the unexercised portion of such Warrant Certificate, (d)
Warrant Certificates issued pursuant to Section 8(i) hereof and (e) Warrant
Certificates issued pursuant to Section 14 hereof.
- 3 -
<PAGE>
SECTION 4. Cancellation and Destruction of Warrant Certificates. All
Warrant Certificates surrendered for the purpose of exercise, exchange,
substitution, transfer, split-up or combination shall be cancelled by the
Company, and no Warrant Certificates shall be issued in lieu thereof except as
expressly permitted by any of the provisions of this Warrant Certificate. The
Company shall cancel and retire any other Warrant Certificates purchased or
acquired by the Company otherwise than upon the exercise thereof.
SECTION 5. Ownership; Restrictions on Transfer; Registration of Transfers.
(a) Except as otherwise permitted by this Section 5, each Warrant
Certificate (including each Warrant Certificate issued upon the transfer of such
Warrant Certificate) shall be stamped or otherwise imprinted with legends in
substantially the following form:
"Neither the Warrants represented by this Warrant Certificate nor any
shares acquired upon the exercise of such Warrants have been registered
under the Securities Act of 1933, as amended or any other securities laws
nor may such Warrants or shares be transferred, sold or otherwise disposed
of in the absence of such registration or an exemption therefrom under such
act or other laws. This Warrant and such shares may be transferred only in
compliance with the conditions specified in this Warrant.
(b) Except as otherwise permitted by this Section 5, each certificate for
Common Stock (or other securities) issued upon the exercise of this Warrant, and
each certificate issued upon the transfer of any such Common Stock (or other
securities), shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended or any other securities laws
and may not be transferred, sold or otherwise disposed of in the absence of
such registration or an exemption therefrom under such Act or other laws.
Such shares may be transferred, sold or otherwise disposed of only in
compliance with the conditions specified in the Common Stock Purchase
Warrants issued by Graphix Zone, Inc. A complete and correct copy of the
form of such Warrant is available for inspection at the principal office of
Graphix Zone, Inc. or at the office or agency maintained by Graphix Zone,
Inc. as provided in such Warrants and will be furnished to the holder of
such shares upon written request and without charge."
(c) Prior to any transfer of any Warrant Certificate that is not registered
under an effective registration statement under the Securities Act of 1933 (the
"Securities Act"), the holder thereof will give written notice to the Company of
such holder's intention
- 4 -
<PAGE>
to effect such transfer and to comply in all other respects with this Section 5.
Each such notice shall describe the manner and circumstances of the proposed
transfer in sufficient detail to enable counsel to render the opinion referred
to below.
If, in the opinion of counsel for the Company, the proposed transfer may
not be legally effected without registration of such Warrants under the
Securities Act, the Company will promptly so notify the holder thereof and
thereafter such holder shall not be entitled to transfer such Warrant until
either (x) receipt by the Company of a further notice from such holder pursuant
to the foregoing provisions of this Section 5 and fulfillment of the provisions
of this Section 5 or (y) such Warrants have been effectively registered under
the Securities Act.
If, in the opinion of counsel for the Company, the proposed transfer may be
effected without registration of such Warrants under the Securities Act, such
holder shall thereupon be entitled to transfer such securities in accordance
with the terms of the notice delivered by such holder to the Company. Each
Warrant Certificate issued upon or in connection with such transfer shall bear
the restrictive legends required by this Section 5, unless in the opinion of
such counsel, such restrictive legends are not required or advisable.
(d) The restrictions imposed by this Section 5 upon the transferability of
the Warrants relating to the registration of securities under the Securities Act
set forth in clauses (b) and (c) of this Section 5 shall terminate as to any
particular Warrants, (x) when such securities shall have been effectively
registered and sold or distributed under the Securities Act, (y) when, in the
opinion of both counsel for the Company and the holder (each of whom shall be
experienced in securities law matters), any restrictions cease or are permitted
to terminate under applicable securities law, or (z) when, in the opinion of
counsel for the Company (who shall be experienced in securities law matters),
such restrictions are no longer required in order to insure compliance with the
Securities Act or any other applicable securities law, whichever is earliest.
Whenever any such restrictions shall cease and terminate as to any Warrants, the
holder thereof shall be entitled to receive from the Company, without expense
(other than applicable transfer taxes, if any), new Warrants of like tenor not
bearing the applicable legends previously required by this Section 5.
SECTION 6. Reservation and Availability of Shares of Common Stock.
(a) The Company will cause to be reserved and kept available out of its
authorized and unissued shares of Common Stock or its authorized and issued
shares of Common Stock held in its treasury, the number of shares of Common
Stock that will be sufficient to permit the exercise in full of all outstanding
Warrants. The transfer agent for the Common Stock, if any, will be irrevocably
authorized and directed at all times to reserve such number of authorized shares
as shall be required for such purpose. The Company will keep a copy of this
Warrant on file with each transfer agent. The Company will furnish the transfer
agent a copy of all notices of adjustments and certificates related thereto,
transmitted to each holder of a Warrant Certificate pursuant to Section 8
hereof. In the event of a merger or consolidation involving the Company as
contemplated by Section 10 hereof, the Company shall, in connection therewith,
take all such action as may be required to permit
- 5 -
<PAGE>
the holder hereof to fully and effectively exercise this Warrant and receive the
consideration upon such exercise as is contemplated by Section 10 hereof.
(b) So long as the Common Stock issuable upon the exercise of Warrants may
be listed on any national securities exchange, The Nasdaq Stock Market or The
Nasdaq Small Cap Market, the Company shall use its best efforts to cause all
shares reserved for such issuance to be listed as expeditiously as possible on
such exchange upon official notice of issuance upon such exercise.
(c) The Company will take all such action as may be necessary to ensure
that all shares of Common Stock delivered upon exercise of Warrants shall, at
the time of delivery of the certificates for such shares (subject to payment of
the Purchase Price), be duly and validly authorized and issued and fully paid
and nonassessable shares.
(d) The Company will pay when due and payable any and all federal and state
transfer taxes and charges which may be payable in respect of the initial
issuance or delivery of this Warrant Certificate or of the issuance and delivery
of any shares of Common Stock upon the exercise of Warrants, except as set forth
in the immediately following sentence. The Company shall not, however, be
required to pay any tax which may be payable in respect of any transfer or
delivery of this Warrant Certificate to a person other than, or the issuance or
delivery of certificates for Common Stock in a name other than that of, the
registered holder of the Warrant Certificate evidencing Warrants surrendered for
exercise or to issue or deliver any certificates for shares of Common Stock upon
the exercise of any Warrants until any such tax shall have been paid (any such
tax being payable by the holder of such Warrant Certificate at the time of
surrender) or until it has been established to the Company's satisfaction that
no such tax is due.
SECTION 7. Common Stock Record Date. Each person in whose name any
certificate for shares of Common Stock is issued upon the exercise of Warrants
shall for all purposes be deemed to have become the holder of record of the
Common Stock represented thereby on, and such certificate shall be dated, the
close of business on the date upon which the Warrant Certificate evidencing such
Warrants was duly surrendered and payment of the Purchase Price (and any
applicable transfer taxes) was made; provided, however, that if the date of such
surrender and payment is a date upon which the Common Stock transfer books of
the Company are closed, such person shall be deemed to have become the record
holder of such shares on, and such certificate shall be dated, the opening of
business on the next succeeding business day on which the Common Stock transfer
books of the Company are open.
SECTION 8. Adjustment of Purchase Price, Number of Shares or Number of
Warrants. The Purchase Price, the number of shares of Common Stock covered by
each Warrant and the number of Warrants outstanding are subject to adjustment
from time to time as provided in this Section 8.
(a) In case the Company shall at any time after the date hereof, (i) effect
a distribution to all holders of its outstanding Common Stock payable in
- 6 -
<PAGE>
shares of Common Stock, (ii) subdivide the outstanding Common Stock, (iii)
combine the outstanding Common Stock into a smaller number of shares of Common
Stock or (iv) issue any securities of the Company in a reclassification of the
Common Stock (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or surviving
corporation other than a consolidation or merger in respect of which an
adjustment is made pursuant to Section 10 hereof), the number and kind of
securities issuable commencing on the record date for such distribution or the
effective date of such subdivision, combination or reclassification shall be
proportionately adjusted so that the holder of any Warrant exercised after such
time shall be entitled to receive upon exercise of the Warrant the aggregate
number and kind of securities which, if such Warrant had been exercised
immediately prior to such date and at a time when the Common Stock transfer
books of the Company were open, he would have owned upon such exercise and been
entitled to receive by virtue of such distribution, subdivision, combination or
reclassification. Such adjustment shall be made successively whenever any event
listed above shall occur. Notwithstanding the foregoing, if a warrant is
exercised subsequent to the record date, if any, but prior to the relevant
distribution date or payment date, the Company shall not be required to make any
such payment or distribution pursuant to this subsection (a) to the holder of
such warrant prior to such payment or distribution date, but shall make such
payment or distribution on such date.
(b) In case the Company shall issue (by distribution or otherwise) or sell
shares of Common Stock, or rights, options, warrants or convertible or
exchangeable securities containing the right to subscribe for, convert or
exchange into, or purchase shares of Common Stock at a price per share of Common
Stock (determined in the case of such rights, options, warrants or convertible
or exchangeable securities, by dividing (A) the total amount receivable by the
Company in consideration of the issuance and sale of such rights, options,
warrants or convertible or exchangeable securities, plus the total
consideration, if any, payable to the Company upon exercise, conversion or
exchange thereof, by (B) the total number of shares of Common Stock covered by
such rights, options, warrants or convertible or exchangeable securities) that
is below the Purchase Price in effect on the date of such issuance or sale, then
the Purchase Price in effect immediately prior thereto shall be adjusted so that
the same shall equal the price at which such shares of Common Stock are sold or
issued, or the price at which such rights, options, warrants or convertible or
exchangeable securities are exercisable, convertible or exchangeable.
In case the Company shall issue (by distribution or otherwise) or sell
shares of Common Stock or rights, options, warrants or convertible or
exchangeable securities containing the right to subscribe for, convert or
exchange into, or purchase shares of Common Stock for a consideration
consisting, in whole or in part, of property other than cash or its equivalent,
- 7 -
<PAGE>
then in determining the "price per share of Common Stock" and the
"consideration" receivable by or payable to the Company for purposes of the
first sentence of this Section 8(b), the Board of Directors of the Company (the
"Board") shall determine, in good faith, the fair value of such property. In
case the Company shall issue and sell rights, options, warrants or convertible
or exchangeable securities containing the right to subscribe for or purchase
shares of Common Stock, together with one or more other securities as part of a
unit at a price per unit, then in determining the "price per share of Common
Stock" and the "consideration" receivable by or payable to the Company for
purposes of the first sentence of this Section 8(b), the Board shall determine,
in good faith, the fair value of its rights, options, warrants or convertible or
exchangeable securities then being sold as part of such unit. Such adjustment
shall be made successively whenever such issuance or sale occurs.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of Common Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing or surviving corporation other than a consolidation or merger in
respect of which an adjustment is made pursuant to Section 10 hereof) of
evidences of indebtedness or assets (other than cash dividends payable out of
consolidated earnings for the Company's then current or immediately preceding
fiscal year, dividends payable in Common Stock and distributions which result in
an adjustment under Section 8(a) hereof) or rights, options or warrants
(excluding rights, options or warrants the issuance of which results in an
adjustment under Section 8(a) or 8(b) hereof), the Purchase Price in effect
after such record date shall be determined by multiplying the Purchase Price in
effect immediately prior to such date by a fraction, the numerator of which
shall be the then current market price per share (as defined in Section 8(d)
hereof) of Common Stock on such date, less the fair market value (as determined
in good faith by the Board of Directors of the Company) of the portion of
assets, evidences of indebtedness or such rights, options or warrants so to be
distributed or paid applicable to one share of Common Stock (or applicable to
one share of Common Stock) and the denominator of which shall be such current
market price per share of Common Stock. Such adjustments shall be made
successively whenever such a record date is fixed or such an event occurs; and
in the event that a distribution of the kind described above is not so made, the
Purchase Price shall again be adjusted to be the Purchase Price which would then
be in effect if the record date for such distribution had not been fixed.
(d) For the purpose of any computation required in accordance with this
Section 8, the "current market price per share" of any security, including the
Common Stock (a "Security" for the purpose of this Section 8(d)), on any date
shall be deemed to be the average of the daily closing prices (as such term is
hereinafter defined) per share of such Security for the 20 consecutive
- 8 -
<PAGE>
Trading Days (as such term is hereinafter defined) immediately prior to such
date; provided, however, that in the event that the current market price per
share of the Security is determined during a period following the announcement
by the issuer of such Security of (i) a dividend or distribution on such
Security payable in shares of such Security or securities convertible into such
shares, or (ii) any subdivision, combination or reclassification of such
Security and prior to the expiration of 30 consecutive Trading Days after the
ex-dividend date for such dividend or distribution, or the record date for such
subdivision, combination or reclassification, then, and in each such case, the
current market price per share shall be appropriately adjusted to reflect the
current market price per share equivalent of such Security. The "closing price"
for each day shall be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Security is not listed or
admitted to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Security is listed or
admitted to trading or, if the Security is not listed or admitted to trading on
any national securities exchange, as reported by the NASDAQ National Market or
the NASDAQ Small Cap Market, as applicable, or if not so listed, the average of
the high bid and low asked prices in the over-the-counter market, as reported in
the Wall Street Journal, or, if on any such date the Security is not quoted by
any such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the Security
selected by the Board of Directors of the Company. If the Security is not
publicly held or so listed or traded, "current market price per share" shall
mean the fair value of the Security as determined in good faith by the Board of
Directors of the Company, whose determination shall be conclusive. The term
"Trading Day" shall mean a day on which the principal national securities
exchange on which the Security is listed or admitted to trading is open for the
transaction of business or, if the Security is not listed or admitted to trading
on any national securities exchange, a Business Day. The term "Business Day"
shall mean any day other than a Saturday, a Sunday, or a day on which banking
institutions in the State of New York are authorized or obligated by law or
executive order to close.
(e) No adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in such price;
provided, however, that any adjustments which by reason of this Section 8(e) are
not required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 8 shall be made to
the nearest cent or to the nearest one-hundredth of a share, as the case may be.
- 9 -
<PAGE>
(f) In the event that at any time, as a result of an adjustment made
pursuant to Section 8(a) hereof, the holder of any Warrant thereafter exercised
shall become entitled to receive any securities of the Company other than shares
of Common Stock, thereafter the number of such other securities so receivable
upon exercise of any Warrant shall be subject to adjustment from time to time in
a manner and on terms as nearly equivalent as practicable to the provisions with
respect to the shares of Common Stock contained in Section 8(a) through (c)
hereof, inclusive, and the provisions of Sections 1, 6, 7, 10 and 15 hereof with
respect to the shares of Common Stock shall apply on like terms to any such
other securities.
(g) Unless the Company shall have exercised its election as provided in
Section 8(i) hereof, upon each adjustment of the Purchase Price as a result of
the calculations made in Section 8(b) or (c) hereof, each Warrant outstanding
immediately prior to the making of such adjustment shall thereafter evidence the
right to purchase, at the adjusted Purchase Price, that number of shares of
Common Stock (calculated to the nearest hundredth) obtained by (i) multiplying
(x) the number of shares covered by a Warrant immediately prior to this
adjustment of the number of shares by (y) the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price and (ii) dividing the
product so obtained by the Purchase Price in effect immediately after such
adjustment of the Purchase Price.
(h) Upon each adjustment of the number of shares of Common Stock for which
the Warrants are exercisable as provided in Section 8(a) hereof, the Purchase
Price payable upon exercise of a Warrant shall be adjusted by multiplying such
Purchase Price immediately prior to such adjustment by a fraction (i) the
numerator of which shall be the number of shares of Common Stock for which a
Warrant was exercisable prior to such adjustment and (ii) the denominator of
which shall be the number of shares of Common Stock for which a Warrant is
exercisable immediately thereafter.
(i) The Company may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Warrants, in substitution for any
adjustment in the number of shares of Common Stock purchasable upon the exercise
of a Warrant. Each Warrant outstanding after such adjustment of the number of
Warrants shall be exercisable for the same number of shares of Common Stock for
which such Warrant was exercisable prior to such adjustment. Each Warrant held
of record prior to such adjustment of the number of Warrants shall become that
number of Warrants (calculated to the nearest hundredth) obtained by dividing
the Purchase Price in effect immediately prior to adjustment of the Purchase
Price by the Purchase Price in effect after adjustment of the Purchase Price.
The Company shall make a public announcement of its election to adjust the
number of Warrants, indicating the record date for the adjustment, and, if known
at the time, the amount of the adjustment to be made. This record date may be
the date on
- 10 -
<PAGE>
which the Purchase Price is adjusted or any day thereafter, but shall be at
least ten days later than the date of the public announcement. Upon each
adjustment of the number of Warrants pursuant to this Section 8(i), the Company
shall, as promptly as practicable, cause to be distributed to holders of record
of Warrant Certificates on such record date Warrant Certificates evidencing,
subject to Section 11, the additional Warrants to which such holders shall be
entitled as a result of such adjustment, or, at the option of the Company, shall
cause to be distributed to such holders of record in substitution and
replacement for the Warrant Certificates held by such holders prior to the date
of adjustment, and upon surrender thereof, if required by the Company, new
Warrant Certificates evidencing all the Warrants to which such holders shall be
entitled after such adjustment. Warrant Certificates so to be distributed shall
be issued, executed and countersigned in the manner provided for herein and
shall be registered in the names of the holders of record of Warrant
Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or the
number of shares of Common Stock issuable upon the exercise of the Warrants, the
Warrant Certificates may continue to express the Purchase Price per share and
the number of shares which were expressed upon the initial Warrant Certificates
issued hereunder.
(k) Before taking any action that would cause an adjustment reducing the
Purchase 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, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue fully paid and nonassessable shares of
such Common Stock at such adjusted Purchase Price.
(l) Anything in this Section 8 to the contrary notwithstanding, the Company
shall be entitled to make such reductions in the Purchase Price, in addition to
those adjustments required by this Section 8, as it in its sole discretion shall
determine to be advisable in order that any consolidation or subdivision of the
Common Stock, issuance wholly for cash of any Common Stock at less than the
Purchase Price, issuance wholly for cash or Common Stock or securities which by
their terms are convertible into or exchangeable for Common Stock, dividends on
Common Stock payable in Common Stock or issuance of rights, options or warrants
referred to in this Section 8, hereafter made by the Company to its common
stockholders, shall not be taxable to them.
SECTION 9. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Section 8 hereof (other than
situations in which no adjustment is required pursuant to Section 8(e)), the
Company shall (a) promptly provide a certificate of the Company's Chief
Financial Officer setting forth the Purchase
- 11 -
<PAGE>
Price as so adjusted, the number of shares of Common Stock issuable upon the
exercise of each Warrant as so adjusted and a brief statement of the facts
accounting for such adjustment, and (b) mail a brief summary thereof to each
holder of a Warrant Certificate in accordance with Section 16 hereof. The
Company will keep copies of such certificate at its office maintained pursuant
to Section 2(b) hereof and will cause the same to be available for inspection at
such office during normal business hours by any holder of a Warrant.
SECTION 10. Consolidation, Merger or Sale of Assets. If the Company shall
at any time consolidate with or merge with or into another corporation
(including, without limitation, the pending respective mergers of the Company
and StarPress, Inc. with subsidiaries of New GZ (as such term is defined in the
Agreement and Plan of Reorganization between the Company and StarPress, Inc.,
dated January 3, 1996), a Delaware corporation (which is intended to be the
parent holding company of both the Company and StarPress, Inc.) or a merger of
the Company with or into Graphix Zone) or shall sell or transfer to another
entity all or substantially all of the property of the Company, the holder of
any Warrant will thereafter have the right to receive, upon the exercise thereof
in accordance with and subject to the terms of this Warrant, the securities,
cash and other property to which the holder of the number of shares of Common
Stock purchasable (at the time of such consolidation, merger, sale or transfer)
upon the exercise of such Warrant would have been entitled upon such
consolidation, merger, sale or transfer, if any (referred to herein as the
"Merger Consideration"). The Company shall take such steps in connection with
such consolidation, merger, sale or transfer, as may be necessary to assure that
the provisions hereof shall thereafter be applicable, as nearly as reasonably
may be, in relation to any Merger Consideration thereafter deliverable upon the
exercise of the Warrants. The Company, the successor corporation or the
purchasing entity, as the case may be, shall execute and deliver to the holder
an agreement so providing (and, if requested by the holder, a substitute Warrant
Certificate). Notwithstanding any provisions hereof to the contrary, upon a
merger in which the Company is the surviving entity, (i) this Warrant
Certificate shall remain in full force and effect, (ii) the Warrants shall be
exercisable as provided in Section 1 hereof, except that the Merger
Consideration (adjusted as contemplated by the second preceding sentence) shall
be substituted for Common Stock issuable hereunder upon such exercise, and (iii)
the Company shall enter into an agreement with the issuer of the Merger
Consideration providing that, on each Exercise Date, such issuer shall transfer
to the Company the Merger Consideration (as so adjusted) as to which the
Warrants are exercised. The provisions of this Section 10 shall similarly apply
to successive mergers or consolidations or sales or other transfers.
SECTION 11. Fractional Warrants and Fractional Shares.
(a) The Company shall not be required to issue fractions of Warrants or to
distribute Warrant Certificates which evidence fractional Warrants. Subject to
Section 11(c) hereof, in lieu of such fractional Warrants, there shall be paid
to each registered holder of a Warrant Certificate with regard to which a
fractional Warrant would otherwise be issuable, an amount in cash equal to the
same fraction of the current market value of a whole Warrant. For the purposes
of this Section 11(a), the current market value of a whole Warrant shall be the
closing price of the Warrant (as determined pursuant to the second sentence of
Section
- 12 -
<PAGE>
8(d) hereof) for the Trading Day immediately prior to the date on which such
fractional Warrant would have been otherwise issuable. If on any such Trading
Date the Warrants were not publicly held or listed or traded in a manner
described under the second sentence of Section 8(d) hereof, the current market
value of a whole Warrant shall be the fair value of the Warrants on such Trading
Date as determined in good faith by the Board of Directors of the Company, whose
determination shall be conclusive.
(b) The Company shall not be required to issue fractions of shares of
Common Stock upon exercise of the Warrants or to distribute certificates which
evidence fractional shares. Subject to Section 11(c) hereof, in lieu of such
fractional shares of Common Stock, there shall be paid to each registered holder
of a Warrant Certificate with regard to which a fractional share would otherwise
be issuable at the time such Warrant Certificate is exercised as herein
provided, an amount in cash equal to the same fraction of the current market
value of a share of Common Stock. For purposes of this Section 11(b), the
current market value of a share of Common Stock shall be the closing price of a
share of Common Stock (as determined pursuant to the second sentence of Section
8(d)) for the Trading Day immediately prior to the date of such exercise. If on
such Trading Date the Common Stock was not publicly held or listed or traded in
a manner described under the second sentence of Section 8(d) hereof, the current
market value of a share of Common Stock shall be the fair value of a share of
Common Stock as determined in good faith by the Board of Directors of the
Company, whose determination shall be conclusive.
(c) If the Company is unable to pay any amounts of cash to registered
holders of Warrant Certificates in respect of fractional Warrants or fractional
shares of Common Stock in accordance with Section 11(a) or (b) hereof, as the
case may be, by reason of the provisions of the Company's then outstanding debt
obligations or otherwise, the Company shall deliver to such holders an
additional whole Warrant or share of Common Stock, as the case may be, in lieu
of such fractional Warrants or shares.
(d) The holder of a Warrant, by the acceptance of the Warrant, expressly
waives his right to receive any fractional Warrant or any fractional share upon
exercise of a Warrant.
SECTION 12. Right of Action; No Entitlement to Vote or Receive Dividends.
(a) Any registered holder of this Warrant Certificate, without the consent
of the holder of any other Warrant Certificate, may, in his own behalf and for
his own benefit, enforce, and may institute and maintain any suit, action or
proceeding against the Company to enforce, or otherwise act in respect of, his
right to exercise the Warrants evidenced by this Warrant Certificate in the
manner provided herein.
(b) Prior to the exercise of the Warrants evidenced hereby and the date of
the certificate representing the shares of Common Stock issuable upon exercise
of such Warrants pursuant to Section 7 hereof, the holder of this Warrant
Certificate, as such, shall not be entitled to any rights of a stockholder of
the Company with respect to, or be deemed for any purpose the holder of, shares
for which the Warrants shall be exercisable, including,
- 13 -
<PAGE>
without limitation, the right to vote or to receive dividends, or other
distributions, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided herein.
SECTION 13. Agreement of Warrant Certificate Holders. Every holder of this
Warrant Certificate, by accepting the same, consents and agrees with the Company
and with every other holder of a Warrant Certificate that (a) the Warrant
Certificates are transferable only on the registry books of the Company if
surrendered at the principal office of the Company maintained pursuant to
Section 2(b) hereof, duly endorsed or accompanied by a proper instrument of
transfer and (b) the Company may deem and treat the person in whose name the
Warrant Certificate is registered as the absolute owner thereof and of the
Warrants evidenced thereby (notwithstanding any notations of ownership or
writing on the Warrant Certificates) for all purposes whatsoever, and the
Company shall not be affected by any notice to the contrary.
SECTION 14. Issuance of New Warrant Certificates. Notwithstanding any of
the provisions of this Warrant to the contrary, the Company may, at its option,
issue new Warrant Certificates evidencing Warrants in such form as may be
approved by its Board of Directors to reflect any adjustment or change in the
Purchase Price per share and the number or kind or class of shares of stock or
other securities or property purchasable under this Warrant Certificate made in
accordance with the provisions of this Warrant Certificate; provided, that such
new Warrant Certificate shall not have terms inconsistent with the terms of this
Warrant Certificate.
SECTION 15. Notice of Proposed Actions. In case the Company shall propose
(a) to pay any stock dividend to the holders of its Common Stock or to make any
other distribution to the holders of its Common Stock (other than cash dividends
paid out of consolidated earnings for the Company's then current or immediately
preceding fiscal year), or (b) to issue (by distribution or otherwise) or sell
Common Stock or rights, warrants or options or convertible or exchangeable
securities containing the right to subscribe for, convert or exchange into or
purchase any additional shares of Common Stock or shares of stock of any class
or any other securities, rights or options, or (c) to effect any
reclassification of its Common Stock (other than a reclassification involving
only the subdivision or combination of outstanding shares of Common Stock), or
(d) to effect any consolidation, merger or sale, transfer or other disposition
of all or substantially all of the property, assets or business of the Company,
or (e) to effect the liquidation, dissolution or winding-up of the Company,
then, in each such case, the Company shall give to the holder of this Warrant,
in accordance with Section 16 hereof, a notice of such proposed action, which
shall specify the record date for the purposes of such stock dividend, or
distribution of rights, warrants or options, or the date on which such
reclassification, consolidation, merger, sale, transfer, disposition,
liquidation, dissolution, or winding-up is to take place and the date of
participation therein by the holders of Common Stock, if any such date is to be
fixed, and such notice shall be so given in the manner provided in Section 16 at
least 20 days prior to (i) the record date for the purposes of any action
covered by clause (a) or (b) above or
- 14 -
<PAGE>
(ii) the date of the taking of such proposed action or the date of participation
therein by the holders of Common Stock, whichever shall be earlier.
SECTION 16. Notices. Notices or demands authorized by this Agreement to be
given or made by the holder of this Warrant Certificate to or on the Company
shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed (until the holder hereof is notified, in accordance with this
Section 16, in writing by the Company of another address) as follows:
Graphix Zone, Inc.
42 Corporate Park, Suite 200
Irvine, California 92714
Attention: Charles R.Cortright, Jr.
With a copy to:
Gregg Amber, Esq.
Snell & Wilmer
1920 Main Street. suite 1200
Irvine, California 92714
Notices and demands authorized by this Agreement to be given or made by the
Company to the holder of this Warrant Certificate shall be sufficiently given or
made if sent by first-class mail, postage prepaid, addressed to such holder at
the address of such holder as shown on the registry books of the Company.
SECTION 17. Supplements and Amendments. Except as provided in Section 14
hereof, the Company may not amend this Warrant Certificate without the consent
of the holder hereof.
SECTION 18. 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 the principles of conflicts of laws.
SECTION 19. Descriptive Headings. Descriptive headings of the several
Sections of this Warrant are inserted for convenience only and shall not control
or affect the meaning or construction of any of the provisions hereof.
GRAPHIX ZONE, INC.
By:/s/ Charles R. Cortright, Jr.
-----------------------------
Name: Charles R. Cortright, Jr.
Title: President
Attest:
/s/ Angela Cortright
- ----------------------
Secretary
- 15 -
<PAGE>
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED ____________________________________ hereby
sells, assigns and transfers unto ______________________________________________
________________________________________________________________________________
(Please print name and address of transferee)
________________________________________________________________________________
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ____________ Attorney, to
transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Date:
-------------------------
Signature
(Note: The above signature
must correspond with the
name as written upon the
face of this Warrant
Certificate in all
respects, without any
alteration or change
whatsoever.)
- 16 -
<PAGE>
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED ____________________________________ hereby
sells, assigns and transfers unto ______________________________________________
________________________________________________________________________________
(Please print name and address of transferee)
________________________________________________________________________________
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ____________ Attorney, to
transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Date:
-------------------------
Signature
(Note: The above signature
must correspond with the
name as written upon the
face of this Warrant
Certificate in all
respects, without any
alteration or change
whatsoever.)
- 17 -
<PAGE>
Form of Reverse Side of Warrant Certificate -- continued
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise the
Warrants evidenced by the Warrant Certificate.)
To: GRAPHIX ZONE, INC.
The undersigned hereby irrevocably elects to exercise ___________________
Warrants represented by this Warrant Certificate to purchase the shares of
Common Stock of Graphix Zone, Inc. issuable upon the exercise of such Warrants
and herewith [tenders payment for such shares in the amount of $_______] [hereby
instructs you to arrange a cashless exercise pursuant to Section 1(b) of the
Warrant Certificate] in accordance with the terms of this Warrant Certificate.
The undersigned requests that certificates for such shares of Common Stock be
issued in the name of:
Please insert social security
or other identifying number
________________________________________________________________________________
(Please print name and address)
__________________________________________________________________ and that such
certificates be delivered to ___________ whose address is _____________________.
If such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, a new Warrant Certificate for the balance remaining of such
Warrants shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
- 18 -
<PAGE>
Any cash payments to be made in lieu of fractional shares should be made to
____________ whose address is _____________________ and the check representing
payment therefor should be delivered to _____________ whose address is
___________________________.
-------------------------
Signature
(Note: The above signature
must correspond with the
name as written upon the
face of this Warrant
Certificate in all
respects, without any
alteration or change
whatsoever.)
- 19 -
