No. of Stock Units: 50,000 Warrant No. BN-1
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WARRANT
to Purchase Common Stock of
RightStart.com Inc.
THIS IS TO CERTIFY THAT Fred Kayne, an individual, or his registered assigns, is
entitled to purchase from RightStart.com Inc., a Delaware corporation
(hereinbelow called the "Company"), at any time on and after the date hereof
(the "Closing Date"), but not later than 5:00 p.m., Pacific Standard time, on
April 18, 2005 (the "Expiration Date"), fifty thousand (50,000) Stock Units, in
whole or in part, at a purchase price per Stock Unit of $6.70 unless and until
the first time after the Closing Date, that the Company issues capital stock for
consideration of not less than $5,000,000 (excluding amounts purchased through
the conversion of debt), at which time the purchase price shall be an amount
equal to 67% of the price per share of Common Stock (as defined herein) (or
Common Stock equivalent) sold in such issuance multiplied by the number of
shares of Common Stock then comprising a Stock Unit, in each case, adjusted as
provided below, all on the terms and conditions hereinbelow provided.
This Warrant has been issued in accordance with that certain Secured Bridge Note
and Warrant Purchase Agreement dated as of the date hereof between the Company
and the investors named therein (the "Purchase Agreement").
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER ANY
STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY
NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS PURSUANT TO
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY REQUIRED
REGISTRATION OR QUALIFICATION UNDER ANY STATE SECURITIES LAWS, OR THE PROPOSED
TRANSACTION DOES NOT REQUIRE REGISTRATION OR QUALIFICATION UNDER FEDERAL OR
STATE SECURITIES LAWS.
Section 1. Certain Definitions. As used in this Warrant, unless
the context otherwise requires:
"Affiliate" of any Person means a Person (1) that directly or
indirectly controls, or is controlled by, or is under common control with, such
other Person, (2) that beneficially owns ten percent (10%) or more of the Voting
Stock of such other Person, or (3) ten percent (10%) or more of the Voting Stock
(or in the case of a Person which is not a corporation, ten percent (10%) or
more of the equity interest) of which is owned by such other Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.
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"Appraised Value" shall mean the fair market value of all outstanding
shares of Common Stock (on a fully diluted basis including any fractional shares
and assuming the exercise in full of all then-outstanding options, warrants or
other rights to purchase shares of Common Stock that are then currently
exercisable at exercise prices less than the Current Market Price), as
determined by a written appraisal prepared by an appraiser acceptable to the
Company and the holders of Warrants evidencing a majority in number of the total
number of Stock Units at the time purchasable upon the exercise of all then
outstanding Warrants. "Fair market value" is defined for this purpose as the
price in a single transaction determined on a going-concern basis that would be
agreed upon by the most likely hypothetical buyer for a 100% controlling
interest in the equity capital of the Company (on a fully diluted basis
including any fractional shares and assuming the exercise in full of all
then-outstanding options, warrants or other rights to purchase shares of Common
Stock that are then currently exercisable at exercise prices less than the
Current Market Price), with consideration given to the effect of all noncompete
covenants signed by the Investor and employment agreements signed by key
management personnel of the Company (and of its subsidiaries), each extending
for a period of time considered sufficient by all parties to effect the transfer
of goodwill from the Investor to the buyer and disregarding any discounts for
nonmarketability of Common Stock of the Company. In the event that the Company
and said holders cannot, in good faith, agree upon an appraiser, then the
Company, on the one hand, and said holders, on the other hand, shall each select
an appraiser, the two appraisers so selected shall select a third appraiser who
shall be directed to prepare such a written appraisal (the "Appraisal") and the
term Appraised Value shall mean the appraised value set forth in the Appraisal
prepared in accordance with this definition. The fees and expenses of any
appraisers shall be paid by the Company, except in the case in which the
valuation of any appraiser who renders an Appraisal is within ten percent (10%)
of the value originally determined by the Board of Directors, in which case the
holders shall pay the fees and expenses of any appraisers. In the event that the
Company bears the cost of the appraisal process, such cost shall be deemed an
account payable of the Company and shall be considered in the determination of
the Appraised Value.
"Board of Directors" shall mean either the board of directors of the
Company or any duly authorized committee of that board.
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which banks in the States of New York or California are required or
permitted to close.
"Commission" shall mean the Securities and Exchange Commission and
any other similar or successor agency of the federal government administering
the Securities Act and the Exchange Act.
"Common Stock" shall mean the Company's authorized Common Stock, $.01
par value per share, irrespective of class unless otherwise specified, as
constituted on the date of original issuance of this Warrant, and any stock into
which such Common Stock may thereafter be changed, and shall also include stock
of the Company of any other class, which is not preferred as to dividends or
assets over any other class of stock of the Company issued to the holders of
shares of stock upon any reclassification thereof.
"Company" shall mean RightStart.com Inc., a Delaware corporation.
"Current Market Price" per share of Common Stock for the purposes of
any provision of this Warrant at the date herein specified, shall be deemed to
be the price determined pursuant to the first applicable of the following
methods:
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(i) If the Common Stock is traded on a national securities
exchange or is traded in the over-the-counter market, the Current Market
Price per share of Common Stock shall be deemed to be the average of the
daily market prices for 20 consecutive Business Days commencing 20
Business Days before such date. The market price for each such Business
Day shall be (a) if the Common Stock is traded on a national securities
exchange or in the over-the-counter market, its last sale price on the
preceding Business Day on such national securities exchange or
over-the-counter market or, if there was no sale on that day, the last
sale price on the next preceding Business Day on which there was a sale,
all as made available over the Consolidated Last Sale Reporting System of
the CTA Plan (the "CLSRS") or, if the Common Stock is not then eligible
for reporting over the CLSRS, its last reported sale price on the
preceding Business Day on such national securities exchange or, if there
was no sale on that day, on the next preceding Business Day on which there
was a sale reported on such exchange or (b) if the principal market for
the Common Stock is the over-the-counter market, but the Common Stock is
not then eligible for reporting over the CLSRS, but the Common Stock is
quoted on The Nasdaq Stock Market, Inc. ("Nasdaq"), the last sale price
reported on Nasdaq on the preceding Business Day or, if the Common Stock
is an issue for which last sale prices are not reported on Nasdaq, the
closing bid quotation on such day, but, in each of the next preceding two
cases, if the relevant Nasdaq price or quotation did not exist on such
day, then the price or quotation on the next preceding Business Day in
which there was such a price or quotation.
(ii) If the Current Market Price per share of Common Stock cannot
be ascertained by any of the methods set forth in paragraph (i)
immediately above, the Current Market Price per share of Common Stock
shall be deemed to be the price equal to the quotient determined by
dividing the Appraised Value by the number of outstanding shares of Common
Stock (on a fully diluted basis including any fractional shares and
assuming the exercise in full of all then-outstanding options, warrants or
other rights to purchase shares of Common Stock that are then currently
exercisable at exercise prices equal to or less than the Current Market
Price).
"Current Warrant Price" per share of Common Stock, for the purpose of
any provision of this Warrant at the date herein specified, shall mean the
amount equal to the quotient resulting from dividing the Exercise Price in
effect on such date by the number of shares (including any fractional share) of
Common Stock comprising a Stock Unit on such date.
"Exchange Act" shall mean the Securities and Exchange Act of 1934, as
amended, and any similar or successor federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect at
any applicable time.
"Exercise Price" shall mean the purchase price per Stock Unit as set
forth on the first page of this Warrant on the Closing Date and thereafter shall
mean such dollar amount as shall result from the adjustments specified in
Section 4.
"Holder" means, initially, Fred Kayne, an individual, and thereafter
any Person that is or Persons that are the registered holder(s) of the Warrant
or Warrant Stock as registered on the books of the Company.
"Liquidity Event" shall mean (i) the sale of all or substantially all
the assets of the Company for cash, (ii) a merger, acquisition, sale or
recapitalization of the Company whereby the Holder of this Warrant is entitled
by the terms of such transaction to receive cash in lieu of this Warrant or its
exercise or (iii) the initial firm-commitment public offering by the Company of
its Common Stock.
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"Nonpreferred Stock" shall mean the Common Stock and shall also
include stock of the Company of any other class which is not preferred as to
dividends or assets over any other class of stock of the Company and which is
not subject to redemption.
"Person" shall include an individual, a corporation, an association,
a partnership, a limited liability company, a trust or estate, a government,
foreign or domestic, and any agency or political subdivision thereof, or any
other entity.
"Restricted Certificate" shall mean a certificate for Common Stock or
a Warrant bearing the restrictive legend set forth in the preamble.
"Restricted Securities" shall mean Restricted Stock and the
Restricted Warrant.
"Restricted Stock" shall mean Common Stock evidenced by a
Restricted Certificate.
"Restricted Warrant" shall mean a Warrant evidenced by a Restricted
Certificate.
"Securities" shall mean the Warrant issued to the Holder, and the
certificates and other instruments from time to time evidencing the same.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and any similar or successor federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at any applicable
time.
"Stock Unit" shall constitute one share of Common Stock, as such
Common Stock was constituted on the date hereof and thereafter shall constitute
such number of shares (including any fractional shares) of Common Stock as shall
result from the adjustments specified in Section 4.
"Purchase Agreement" has the meaning assigned to such term in the
second paragraph of this Warrant.
"Voting Stock" shall mean any equity security entitling the holder of
such security to vote at meetings of shareholders except an equity security
which entitles the holder of such security to vote only upon the occurrence of
some contingency, unless that contingency shall have occurred and be continuing.
"Warrant" shall mean this Warrant to purchase up to an aggregate of
50,000 Stock Units initially issued to Fred Kayne, an individual, and all
Warrants issued upon transfer, division or combination of, or in substitution
therefor.
"Warrant Stock" shall mean the shares of Common Stock purchasable by
the holder of any Warrants upon the exercise thereof.
Section 2. Exercise of Warrant. The holder of this Warrant may, at
any time on and after the date hereof, but not later than the Expiration Date,
exercise this Warrant in whole at any time or in part from time to time for the
number of Stock Units which such holder is then entitled to purchase hereunder.
The Holder may exercise this Warrant, in whole or in part, by either of the
following methods (or a combination thereof or as otherwise determined by the
Company's Board of Directors):
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(a) the Holder may deliver to the Company at its office maintained
pursuant to Section 13 for such purpose (i) a written notice of
such Holder's election to exercise this Warrant, which notice
shall specify the number of Stock Units to be purchased, (ii)
this Warrant and (iii) a sum equal to the aggregate Exercise
Price therefor in immediately available funds; or
(b) on or after the occurrence of a Liquidity Event, the Holder may also
exercise this Warrant, in whole or in part, in a "cashless" or
"net issue" exercise by delivering to the Company at its
office maintained pursuant to Section 13 for such purpose (i)
a written notice of such Holder's election to exercise this
Warrant, which notice shall specify the number of Stock Units
to be delivered to such Holder and the number of Stock Units
with respect to which this Warrant is being surrendered in
payment of the aggregate Exercise Price for the Stock Units to
be delivered to the Holder, and (ii) this Warrant. For
purposes of this subparagraph (b), each Stock Unit as to which
this Warrant is surrendered will be attributed a value equal
to the product of (x) the Current Market Price per share of
Common Stock minus the Current Warrant Price per share of
Common Stock, multiplied by (y) the number of shares of Common
Stock then comprising a Stock Unit.
Any notice required under this Section 2 may be in the form of a
subscription set out at the end of this Warrant. Upon delivery thereof, the
Company shall as promptly as practicable cause to be executed and delivered to
such holder a certificate or certificates representing the aggregate number of
fully-paid and nonassessable shares of Common Stock issuable upon such exercise.
The stock certificate or certificates for Warrant Stock so delivered
shall be in such denominations as may be specified in said notice and shall be
registered in the name of such Holder or, subject to Section 9, such other name
or names as shall be designated in said notice. Such certificate or certificates
shall be deemed to have been issued and such Holder or any other Person so
designated to be named therein shall be deemed to have become a holder of record
of such shares, including, to the extent permitted by law, the right to vote
such shares or to consent or to receive notice as a stockholder, as of the time
said notice is delivered to the Company as aforesaid. If this Warrant shall have
been exercised only in part, the Company shall, at the time of delivery of said
certificate or certificates, deliver to such Holder a new Warrant dated the date
it is issued, evidencing the rights of such Holder to purchase the remaining
Stock Units called for by this Warrant, which new Warrant shall in all other
respects be identical with this Warrant.
The Company shall pay all expenses, taxes and other charges payable
in connection with the preparation, issue and delivery of stock certificates
under this Section 2.
All shares of Common Stock issuable upon the exercise of this Warrant
shall be validly issued, fully paid and nonassessable, and free from all liens
and other encumbrances thereon. The Company will from time to time take all such
action as may be necessary to assure that the par value per share of the
unissued Common Stock acquirable upon exercise of this Warrant is at all times
equal to or less than the Exercise Price then in effect.
The Company shall not issue certificates for fractional shares of
stock upon any exercise of this Warrant whenever, in order to implement the
provisions of this Warrant, the issuance of such fractional shares is required.
Instead, the Company shall pay cash in lieu of such fractional shares upon such
exercise.
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Section 3. Transfer, Division and Combination. Subject to Section 9,
this Warrant and all rights hereunder are transferable, in whole or in part, on
the books of the Company to be maintained for such purpose, upon surrender of
this Warrant at the office of the Company maintained for such purpose pursuant
to Section 13, together with (a) a written assignment in the form set out at the
end of this Warrant duly executed by the Holder hereof or its agent or attorney,
(b) a copy of the Purchase Agreement duly executed by an authorized
representative of the transferee (substantially in the form executed by the
Holder or in such other form as reasonably acceptable to counsel to the Company)
and (c) payment of funds sufficient to pay any stock transfer taxes payable upon
the making of such transfer. Upon such surrender, execution and payment, the
Company shall, subject to Section 9, execute and deliver a new Warrant or
Warrants in the name of the assignee or assignees and in the denominations
specified in such instrument of assignment, and this Warrant shall promptly be
canceled. If and when this Warrant is assigned in blank (in case the
restrictions on transferability in Section 9 shall have been terminated), the
Company may (but shall not be obliged to) treat the bearer hereof as the
absolute owner of this Warrant for all purposes and the Company shall not be
affected by any notice to the contrary. This Warrant, if properly assigned in
compliance with this Section 3 and Section 9, may be exercised by an assignee
for the purchase of shares of Common Stock without having a new Warrant issued.
This Warrant may, subject to Section 9, be divided upon presentation
at the aforesaid office of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by the holder hereof or its agent or attorney. Subject to compliance with
the preceding paragraph and with Section 9, as to any transfer which may be
involved in such division or combination, the Company shall execute and deliver
a new Warrant or Warrants in exchange for the Warrant to be divided or combined
in accordance with such notice.
The Company shall pay all expenses, taxes and other charges incurred
by the Company in the performance of its obligations in connection with the
preparation, issue and delivery of Warrants under this Section 3.
The Company agrees to maintain at its aforesaid office books for the
registration and transfer of the Warrants.
Section 4. Adjustment of Stock Unit or Exercise Price. The number of
shares of Common Stock comprising a Stock Unit, and the Exercise Price per Stock
Unit, shall be subject to adjustment from time to time as set forth in this
Section 4 and in Section 5. The Company will not take any action with respect to
its Nonpreferred Stock of any class requiring an adjustment pursuant to any of
the following Subsections 4.1 or 4.3 without at the same time taking like action
with respect to its Nonpreferred Stock of each other class.
4.1. Stock Dividends, Subdivisions and Combinations. In case at
any time or from time to time the Company shall:
(a) take a record of the holders of its Nonpreferred Stock for the
purpose of entitling them to receive a dividend payable in, or other
distribution of, Nonpreferred Stock, or
(b) subdivide its outstanding shares of Nonpreferred Stock into a
larger number of shares of Nonpreferred Stock, or
(c) combine its outstanding shares of Nonpreferred Stock into a
smaller number of shares of Nonpreferred Stock,
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then the number of shares of Common Stock comprising a Stock Unit immediately
after the happening of any such event shall be adjusted so as to consist of the
number of shares of Common Stock which a record holder of the number of shares
of Common Stock comprising a Stock Unit immediately prior to the happening of
such event would own or be entitled to receive after the happening of such
event; provided, however, that no such event may take place with respect to any
shares of Nonpreferred Stock unless it shall also take place for all shares of
Nonpreferred Stock.
4.2. Other Provisions Applicable to Adjustments. The following
provisions shall be applicable to the making of adjustments of the number of
shares of Common Stock comprising a Stock Unit hereinbefore provided for in this
Section 4:
(a) When Adjustments to Be Made. The adjustments required by Section
4.1 shall be made whenever and as often as any specified event requiring an
adjustment shall occur. For the purpose of any adjustment, any specified event
shall be deemed to have occurred at the close of business on the date of its
occurrence.
(b) Fractional Interests. In computing adjustments under this Section
4, fractional interests in Nonpreferred Stock shall be taken into account to the
nearest one-thousandth of a share.
(c) When Adjustment Not Required. If the Company shall take a record
of the holders of its Nonpreferred Stock for the purpose of entitling them to
receive a dividend or distribution and shall, thereafter and before the
distribution thereof to shareholders, abandon its plan to pay or deliver such
dividend or distribution, then thereafter no adjustment shall be required by
reason of the taking of such record and any such adjustment previously made in
respect thereof shall be rescinded and annulled.
4.3. Merger, Consolidation or Disposition of Assets. In case the
Company shall merge or consolidate into another corporation, or shall sell,
transfer or otherwise dispose of all or substantially all of its property,
assets or business to another corporation and pursuant to the terms of such
merger, consolidation or disposition of assets, shares of common stock of the
successor or acquiring corporation are to be received by or distributed to the
holders of Nonpreferred Stock of the Company, then each holder of a Warrant
shall have the right thereafter to receive, upon exercise of such Warrant, Stock
Units each comprising the number of shares of common stock of the successor or
acquiring corporation receivable upon or as a result of such merger,
consolidation or disposition of assets by a holder of the number of shares of
Nonpreferred Stock comprising a Stock Unit immediately prior to such event. If,
pursuant to the terms of such merger, consolidation or disposition of assets,
any cash, shares of stock or other securities or property of any nature
whatsoever (including warrants or other subscription or purchase rights) are to
be received by or distributed to the holders of Nonpreferred Stock of the
Company, there shall be either, at the Holder's option, (i) a reduction of the
Exercise Price equal to the amount applicable to the number of shares of Common
Stock then comprising a Stock Unit of any such cash and of the fair value of any
and all such shares of stock or of other securities or property to be received
by or distributed to the holders of Nonpreferred Stock of the Company, or (ii)
such Holder shall have the right to receive, upon exercise of its Warrant, such
cash, shares of stock or other securities or property of any nature as a holder
of the number of shares of Nonpreferred Stock underlying a Stock Unit would have
been entitled to receive upon the occurrence of such event. Such fair value
shall be determined in good faith by the Board of Directors of the Company,
provided that if such determination is objected to by the holders of Warrants
evidencing a majority in number of the total number of Stock Units at the time
purchasable upon the exercise of all then outstanding Warrants, such
determination shall be made by an independent appraiser selected by the Company
and said holders. In the event that the Company and said holders cannot, in good
faith, agree upon an appraiser, then the Company, on the one hand, and said
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holders, on the other hand, shall each select an appraiser, the two appraisers
so selected shall select a third appraiser who shall be directed to prepare such
a written appraisal which shall be conclusive and binding on the parties. The
fees and expenses of any appraisers shall be paid by the Company, except in the
case where the valuation of any appraiser who renders an Appraisal is within ten
percent (10%) of the value originally determined by the Board of Directors, in
which case the holders shall pay the fees and expenses of any appraisers. In
case of any such merger, consolidation or disposition of assets, the successor
acquiring corporation shall expressly assume the due and punctual observance and
performance of each and every covenant and condition of this Warrant to be
performed and observed by the Company and all of the obligations and liabilities
hereunder, subject to such modification as shall be necessary to provide for
adjustments of Stock Units which shall be as nearly equivalent as practicable to
the adjustments provided for in this Section 4. For the purposes of this Section
4 "common stock of the successor or acquiring corporation" shall include stock
of such corporation of any class, that is not preferred as to dividends or
assets over any other class of stock of such corporation and that is not subject
to redemption, and shall also include any evidences of indebtedness, shares of
stock or other securities which are convertible into or exchangeable for any
such stock, either immediately or upon the arrival of a specified date or the
happening of a specified event, and any warrants or other rights to subscribe
for or purchase any such stock. The foregoing provisions of this Subsection 4.3
shall similarly apply to successive mergers, consolidations or dispositions of
assets.
Section 5. Notice to Warrant Holders.
5.1. Notice of Adjustment of Stock Unit or Exercise Price. Whenever
the number of shares of Common Stock comprising a Stock Unit, or the price at
which a Stock Unit may be purchased upon exercise of the Warrants, shall be
adjusted pursuant to Section 4, the Company shall forthwith obtain a certificate
signed by independent accountants, of recognized national standing, selected by
the Company and reasonably acceptable to the Holder(s) of the Warrants, setting
forth, in reasonable detail, the event requiring the adjustment and the method
by which such adjustment was calculated (including a statement of the fair
value, as determined by the Board of Directors of the Company or by appraisal
(if applicable), of any evidences of indebtedness, shares of stock, other
securities or property or warrants or other subscription or purchase rights
referred to in Section 4.3) and specifying the number of shares of Common Stock
comprising a Stock Unit and (if such adjustment was made pursuant to Section
4.3) describing the number and kind of any other shares of stock comprising a
Stock Unit, and any change in the purchase price or prices thereof, after giving
effect to such adjustment or change. The Company shall promptly, and in any case
within three days after the making of such adjustment, cause a signed copy of
such certificate to be delivered to each holder of a Warrant in accordance with
Section 14. The Company shall keep at its office or agency, maintained for the
purpose pursuant to Section 13, copies of all such certificates and cause the
same to be available for inspection at said office during normal business hours
by any holder of a Warrant or any prospective purchaser of a Warrant designated
by a holder thereof.
5.2. Notice of Certain Corporate Action. In case the Company shall
propose (a) to pay any dividend payable in stock of any class to the holders of
its Nonpreferred Stock or to make any other distribution to the holders of its
Nonpreferred Stock (other than a cash dividend) or (b) to effect any
consolidation, merger or sale, organic change, transfer or other disposition of
all or substantially all of its property, assets or business, then in each such
case, the Company shall deliver to each holder of a Warrant, in accordance with
Section 14, a notice of such proposed action, which shall specify the date on
which a record is to be taken for the purposes of such stock dividend,
distribution or rights, consolidation, merger, sale, organic change or transfer
is to take place and the date of participation therein by the holders of
Nonpreferred Stock, if any such date is to be fixed, and shall also set forth
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such facts with respect thereto as shall be reasonably necessary to indicate the
effect of such action on the Nonpreferred Stock and the number and kind of any
other shares of stock which will comprise a Stock Unit, and the purchase price
or prices thereof, after giving effect to any adjustment which will be required
as a result of such action. Such notice shall be so delivered as promptly as
reasonably possible.
Section 6. Reservation and Authorization of Common Stock. The Company
shall at all times reserve and keep available for issue upon the exercise of
Warrants such number of its authorized but unissued shares of Common Stock as
will be sufficient to permit the exercise in full of all outstanding Warrants.
All shares of Common Stock which shall be so issuable, when issued upon exercise
of any Warrant or upon such exercise, as the case may be, shall be duly and
validly issued, fully-paid and nonassessable.
Section 7. Taking of Record; Stock and Warrant Transfer Books. In the
case of all dividends or other distributions by the Company to the holders of
its Nonpreferred Stock with respect to which any provision of Section 4 refers
to the taking of a record of such holders, the Company will in each such case
take such record as of the close of business on a Business Day. The Company will
not at any time, except upon dissolution, liquidation or winding up or as
otherwise may be required by law, close its stock transfer books or Warrant
transfer books so as to result in preventing or delaying the exercise or
transfer of any Warrant.
Section 8. Taxes. The Company will pay all taxes (other than federal,
state, local or foreign income taxes) which may be payable in connection with
the execution and delivery of this Warrant or the issuance and sale of the
Restricted Securities hereunder or in connection with any modification of the
Restricted Securities and will save the Holder harmless without limitation as to
time against any and all liabilities with respect to or resulting from any delay
in paying, or omission to pay, such taxes. The obligations of the Company under
this Section 8 shall survive any redemption, repurchase or acquisition of
Restricted Securities by the Company.
Section 9. Restrictions on Transferability. The Restricted
Securities shall not be transferable except upon the conditions specified in
this Section 9.
9.1 Transfer to an Affiliate. The Holder shall have the right to
transfer any Restricted Securities to any Affiliate of the Holder, in each case
free of the restrictions imposed by this Section 9 other than the requirement as
to the legending of the certificates for such Restricted Securities specified in
Section 9.3. No opinion of counsel shall be required for a transfer of
Restricted Securities to an Affiliate of the Holder.
9.2 Transfer to a Non-Affiliate. The Holder and his or her or her
subsequent transferees shall have the right to transfer any Restricted
Securities to a non-Affiliate of Holder as follows:
(a) Prior to any transfer or attempted transfer of any Restricted
Securities to a non-Affiliate of Holder, the holder of such Restricted
Certificate shall give written notice to the Company of such holder's intention
to effect such transfer. Each such notice shall describe the manner and
circumstances of the proposed transfer in reasonable detail.
(b) Upon receipt of such notice, the Company may request an opinion
of counsel of a transferring holder to the effect that such proposed transfer
may be effected without registration under the Securities Act. Upon receipt of
such opinion, or if the Company does not request such an opinion, within five
(5) Business Days after receiving notice of the proposed transfer, the Company
shall, as promptly as practicable, so notify the holder of such Restricted
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Certificate and such holder shall thereupon be entitled to transfer such
Restricted Securities in accordance with the terms of the notice delivered by
such holder to the Company. Each certificate evidencing the Restricted
Securities thus to be transferred (and each certificate evidencing any
untransferred balance of the Restricted Securities evidenced by such Restricted
Certificate) shall bear the restrictive legend set forth in Section 9.3, unless
in the opinion of the Company or the opinion of such counsel, if requested,
pursuant to Rule 144(k) of the Securities Act or otherwise, such legend is not
required in order to ensure compliance with the Securities Act. The fees and
expenses of counsel for any such opinion shall be paid by the Company.
9.3 Restrictive Legend. Unless and until the Restricted Securities
have been registered under the Securities Act, this Warrant, each Warrant issued
to any transferee of the Holder, each certificate for any Warrant Stock issued
upon exercise of any Warrant and each certificate for any Warrant Stock issued
to any transferee of any such certificate, shall be stamped or otherwise
imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER
ANY STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED
UNLESS PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND ANY REQUIRED REGISTRATION OR QUALIFICATION UNDER ANY
STATE SECURITIES LAWS, OR THE PROPOSED TRANSACTION DOES NOT REQUIRE
REGISTRATION OR QUALIFICATION UNDER FEDERAL OR STATE SECURITIES
LAWS."
Section 10. Limitation of Liability. No provision hereof, in the
absence of affirmative action by the Holder to purchase shares of Common Stock,
and no mere enumeration herein of the rights or privileges of the Holder, shall
give rise to any liability of the Holder for the purchase price of the Warrant
Stock or as a stockholder of the Company, whether such liability is asserted by
the Company or by creditors of the Company.
Section 11. Loss or Destruction of Warrant Certificates. Upon receipt
of evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security satisfactory to the Company
(the original Holder's or any other institutional Holder's indemnity being
satisfactory indemnity in the event of loss, theft or destruction of any Warrant
owned by such institutional Holder), or, in the case of any such mutilation,
upon surrender and cancellation of such Warrant, the Company will make and
deliver, in lieu of such lost, stolen, destroyed or mutilated Warrant, a new
Warrant of like tenor and representing the right to purchase the same aggregate
number of shares of Common Stock.
Section 12. Amendments. The terms of this Warrant may be amended, and
the observance of any term therein may be waived, but only with the written
consent of the holders of Warrants evidencing a majority in number of the total
number of Stock Units at the time purchasable upon the exercise of all then
outstanding Warrants; provided that no such action may change the number of
shares of stock comprising a Stock Unit or the Exercise Price, without the
written consent of the holders of Warrants subject to such amendment. For the
purposes of determining whether the holders of outstanding Warrants entitled to
purchase a requisite number of Stock Units at any time have taken any action
authorized by this Warrant, any Warrants owned by the Company or any Affiliate
10
<PAGE>
of the Company (other than an institutional investor which may be deemed an
Affiliate solely by reason of the ownership of Warrants) shall be deemed not to
be outstanding.
Section 13. Office of the Company. So long as any Warrant remains
outstanding, the Company shall maintain an office where the Warrants may be
presented for exercise, transfer, division or combination as in this Warrant
provided. Such office shall be at 5388 Sterling Center Drive, Unit C, Westlake
Village, California 91361, FAX: (818) 707-7132, unless and until the Company
shall designate and maintain some other office for such purposes and deliver
written notice thereof to the Holders of all outstanding Warrants.
Section 14. Notices Generally.
14.1. All communications (including all required or permitted
notices) pursuant to the provisions hereof shall be in writing and shall be
sent, to any registered Holder of any Warrants or Warrant Stock, to the address
of such Holder as it appears in the stock or warrant ledger of the Company or at
such other address as such Holder may have furnished in writing to the Company.
14.2. Any notice shall be deemed to have been duly delivered when
delivered by hand, if personally delivered, and if sent by mail to a party whose
address is in the same country as the sender, two Business Days after being
deposited in the mail, postage prepaid, and if sent by recognized international
courier, freight prepaid, with a copy sent by telecopier, to a party whose
address is not in the same country as the sender, three Business Days after the
later of (a) being telecopied and (b) delivery to such courier.
Section 15. Governing Law. This Warrant shall be governed by and
construed in accordance with the laws of the State of New York (without
regard to conflicts of law provisions thereof).
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
in its name by its President or a Vice President and attested by its Secretary
or an Assistant Secretary.
Dated: April 18, 2000
RIGHTSTART.COM INC.
/s/Jerry R. Welch
------------------
By: Jerry R. Welch
Its: President
ATTEST:
/s/Kendrick F. Royer
--------------------
Name: Kendrick F. Royer
Title: Secretary
<PAGE>
SUBSCRIPTION FORM
(to be executed only upon exercise of Warrant)
The undersigned registered owner of this Warrant irrevocably
exercises this Warrant for and purchases Stock Units of RightStart.com Inc., a
Delaware corporation, purchasable with this Warrant, and herewith makes payment
therefor (by check in the amount of $_____), or hereby tenders _______________
Stock Units as payment therefor, all at the price and on the terms and
conditions specified in this Warrant and requests that certificates for the
shares of Common Stock hereby purchased (and any securities or other property
issuable upon such exercise) be issued in the name of and delivered
to _________________________ whose address is
and, if such Stock Units shall not include all of the Stock Units issuable
as provided in this Warrant that a new Warrant of like tenor and date for the
balance of the Stock Units issuable thereunder be delivered to the undersigned.
Dated: _____________, _____
-------------------------------
(Signature of
Registered Owner)
-------------------------------
(Street Address)
-------------------------------
(City) (State) (Zip Code)
<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the number of
Stock Units set forth below:
Number of Stock Units Name and Address of Assignee
and does hereby irrevocably constitute and appoint Attorney to make sure
transfer occurs on the books of RightStart.com Inc., a Delaware corporation,
maintained for the purpose, with full power of substitution in the premises.
Dated:
---------------------------
Signature
---------------------------
Witness
NOTICE: The signature to the assignment must correspond with the name as
written upon the face of the Warrant in every particular instance,
without alteration or enlargement or any change whatsoever.
The signature to this assignment must be guaranteed by a bank or
trust company having an office or correspondent in New York, New York or Los
Angeles, California or by a firm having membership on the New York Stock
Exchange.
