NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE
UPON ITS EXERCISE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “ SECURITIES ACT ”), OR
ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE OFFERED, SOLD
OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS
(I) PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT OR
(II) IN COMPLIANCE WITH AN EXEMPTION THEREFROM AND
ACCOMPANIED, IF REQUESTED BY DIGITAL LIFESTYLES GROUP, INC., WITH
AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT
SUCH TRANSFER IS IN COMPLIANCE WITH AN EXEMPTION THEREFROM.
THIS WARRANT AND THE
SHARES OF COMMON STOCK ISSUED UPON ITS
EXERCISE ARE SUBJECT TO THE RESTRICTIONS ON
TRANSFER SET FORTH IN ARTICLE II OF THIS WARRANT
DIGITAL LIFESTYLES
GROUP, INC.
Common Stock
Purchase Warrant
THIS IS TO CERTIFY THAT, for value
received of $ , effective
immediately upon , 200
,
(the “ Registered
Holder ”), or his permitted assigns, is entitled to
purchase from DIGITAL LIFESTYLES GROUP INC., a Delaware corporation
(the “ Compan y”), at the place where the
Warrant Office designated pursuant to Section 2.1 is located,
at a purchase price per share of $0.
(as may be adjusted pursuant
to the terms of this Warrant, the “ Exercise Price
”), shares of duly
authorized, validly issued, fully paid and nonassessable shares of
Common Stock, $0.03 par value per share, of the Company, and is
entitled also to exercise the other appurtenant rights, powers and
privileges hereinafter set forth. The number of shares of the
Common Stock purchasable hereunder and the Exercise Price are
subject to adjustment in accordance with Article III hereof.
This Warrant shall expire at 5:00 p.m., P.S.T., on
, 20
,
years from the date of
issuance.
Certain Terms used in this Warrant
are defined in Article IV.
1
ARTICLE I
Exercise of
Warrant
1.1 Method of Exercise . This
Warrant may be exercised by the Registered Holder in whole or in
part immediately at any time on or before
, 200
, at which time this Warrant
shall expire and be of no further force or effect. To exercise this
Warrant, the Registered Holder or permitted assignees of all rights
of the Registered Holder shall deliver to the Company, at the
Warrant Office designated in Section 2.1(a), a written notice
in the form of the Purchase Form attached as Exhibit A
hereto, stating therein the election of the Registered Holder or
such permitted assignees of the Registered Holder to exercise this
Warrant in the manner provided in the Purchase Form,
(b) payment in full of the Exercise Price (in the manner
described below) for all Warrant Shares purchased hereunder, and
(c) this Warrant. Subject to compliance with Section
3.1(a)(vi), this Warrant shall be deemed to be exercised on the
date of receipt by the Company of the Purchase Form, accompanied by
payment for the Warrant Shares to be purchased and surrender of
this Warrant, as aforesaid, and such date is referred to herein as
the “ Exercise Date .” Upon such exercise
(subject as aforesaid), the Company shall issue and deliver to the
Registered Holder a certificate for the full number of the Warrant
Shares purchasable by the Registered Holder hereunder, against the
receipt by the Company of the total Exercise Price payable
hereunder for all such Warrant Shares, (a) in cash or by
certified or cashier’s check or (b) if the Common Stock
is registered under the Securities Exchange Act of 1934, as amended
(the “ Exchange Act ”), by surrendering Warrant
Shares having a Current Market Price equal to the Exercise Price
for all the Warrant Shares so purchased. The Person in whose name
the certificate(s) for Common Stock is to be issued shall be deemed
to have become a holder of record of such Common Stock on the
Exercise Date.
1.2 Fractional Shares . No
fractional shares of Common Stock shall be issued upon exercise of
this Warrant. Instead of any fractional shares of Common Stock that
would otherwise be issuable upon exercise of this Warrant, the
Company shall round up, or down, such fractional interest and shall
issue the appropriate number of shares based on such calculation
whereby a 5/10 or greater shall be rounded up and any other
fractional interest shall be rounded down.
1.3 Termination .
Notwithstanding any other provision of this Warrant, the right to
exercise this Warrant shall terminate upon the earlier of
(a) the close of business on
, 20
or (b) the closing date
of an Asset Transfer or Acquisition.
1.4 Convertible Note . This
Warrant is issued in connection with the execution by and between
the Company and the Registered Holder of that certain convertible
line of credit note agreement (the “Convertible Note”)
as of the date hereof. Pursuant to the terms of the Convertible
Note, the Registered Holder has agreed to convert an aggregate
principal loan amount of $ ,
convertible into Common Stock of the Company in accordance with the
terms of the Convertible Note.
ARTICLE II
Warrant Office;
Transfer
2.1 Warrant Office . The
Company shall maintain an office for certain purposes specified
herein (the “ Warrant Office ”), which office
shall initially be the Company’s office at 1872 West Avenue,
Suite 102, Crossville, Tennessee 38555, and may subsequently
be such other office of the Company or of any transfer agent of the
Common Stock in the continental United States of which written
notice has previously been given to the Registered Holder. The
Company shall maintain, at the Warrant Office, a register for the
Warrant in which the Company shall record the name and address of
the Registered Holder, as well as the name and address of each
permitted assignee of the rights of the Registered Holder.
2.2 Ownership of Warrant . The
Company may deem and treat the Registered Holder as the holder and
owner hereof (notwithstanding any notations of ownership or writing
hereon made by anyone other than the Company) for all purposes and
shall not be affected by any notice to the contrary, until
presentation of this Warrant for registration of transfer as
provided in this Article II.
2.3 Transfer of Warrants . The
Company agrees to maintain at the Warrant Office books for the
registration and transfer of this Warrant. This Warrant may be
transferred in whole or in part only in compliance with the
applicable law. The Company, from time to time, shall register the
transfer of this Warrant in such books upon surrender of this
Warrant at the Warrant Office, properly endorsed, together with a
written assignment of this Warrant, substantially in the form of
the Assignment attached as Exhibit B hereto. Upon any such
transfer, a new Warrant shall be issued to the transferee, and the
Company shall cancel the surrendered Warrant. The Registered Holder
shall pay all taxes and all other expenses and charges payable in
connection with the transfer of Warrants pursuant to this
Section 2.3.
2.4 Registration Rights . The
Company agrees (a) that the Warrant Shares shall be
“Registrable Securities” under the Registration Rights
Agreement (the “Registration Rights Agreement”) between
the Company and Registered Holder, a copy of which is attached
hereto and incorporated herein by reference as
Exhibit C and (b) that the Registered Holder shall
have the rights and obligations of a Holder set forth on the
Registration Rights Agreement.
2.5 No Rights as Shareholder Until
Exercise . This Warrant does not entitle the Registered Holder
to any voting rights or other rights as a shareholder of the
Company prior to the exercise hereof. Upon the surrender of this
Warrant and the payment of the aggregate Exercise Price, the
Warrant Shares so purchased shall be and be deemed to be issued to
the Registered Holder as the record owner of such shares as of the
close of business on the later of the date of such surrender or
payment.
2.6 Expenses of Delivery of
Warrants . Except as provided in Section 2.3 above, the
Company shall pay all reasonable expenses, taxes (other than
transfer taxes) and other charges payable in connection with the
preparation, issuance and delivery of Warrants and related Warrant
Shares hereunder.
2.7 Compliance with Securities
Laws . The Registered Holder (and its transferees and assigns),
by acceptance of this Warrant, covenants and agrees that such
Registered Holder is acquiring the Warrants evidenced hereby, and,
upon exercise hereof, the Warrant Shares, for its own account as an
investment and not with a view to distribution thereof. Neither
this Warrant nor the Warrant Shares issuable hereunder have been
registered under the Securities Act or any state securities laws
and no transfer of this Warrant or any Warrant Shares shall be
permitted unless the Company has received notice of such transfer
in the form of the assignment attached hereto as
Exhibit B , accompanied by an opinion of counsel
reasonably satisfactory to the Company that an exemption from
registration of such Warrant or Warrant Shares under the Securities
Act is available for such transfer, except that no such opinion
shall be required after the registration for resale of the Warrant
Shares has become effective. Upon any exercise of the Warrants
prior to effective registration for resale or except as in
accordance with Rule 144 under the Securities Act,
certificates representing the Warrant Shares shall bear a
restrictive legend substantially identical to that set forth as
follows:
“THE SECURITIES REPRESENTED BY
THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS, OR AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM,
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE
STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER
SAID ACT.”
(c) Any purported transfer of
the Warrant or Warrant Shares not in compliance with the provisions
of this section shall be null and void. Stop transfer instructions
have been or will be imposed with respect to the Warrant Shares so
as to restrict resale or other transfer thereof, subject to this
Section 2.7.
ARTICLE III
Adjustments to
Warrant
3.1 Adjustment of Exercise Price
and Number of Warrant Shares . The Exercise Price shall be
subject to adjustment from time to time as hereinafter provided in
this Article III. Upon each adjustment of the Exercise Price,
except pursuant to Sections 3.1(a)(iii), (iv), and (v), the
Registered Holder shall thereafter be entitled to purchase, at the
Exercise Price resulting from such adjustment, the number of shares
of the Common Stock obtained by multiplying the Exercise Price in
effect immediately prior to such adjustment by the number of shares
of the Common Stock purchasable pursuant hereto immediately prior
to such adjustment and dividing the product thereof by the Exercise
Price resulting from such adjustment.
(a) Exercise Price
Adjustments . The Exercise Price shall be subject to adjustment
from time to time as follows:
(i) Adjustment
for Stock Splits and Combinations . If the Company shall, at
any time or from time to time after the date hereof (the “
Original Issue Date ”) while this Warrant remains
outstanding, effect a subdivision of the outstanding Common Stock,
the Exercise Price in effect immediately before such subdivision
shall be proportionately decreased. Conversely, if the Company
shall at any time or from time to time after the Original Issue
Date combine the outstanding shares of Common Stock into a smaller
number of shares, the Exercise Price in effect immediately
before such combination shall be proportionately increased. Any
adjustment under this Section 3.1(a)(i) shall become effective
at the close of business on the date the subdivision or combination
becomes effective.
(ii)
Adjustment for Common Stock Dividends and Distributions . If
the Company, at any time or from time to time after the Original
Issue Date while this Warrant remains outstanding makes, or fixes a
record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in
additional shares of Common Stock, in each such event the Exercise
Price that is then in effect shall be decreased as of the time of
such issuance or, in the event such record date is fixed, as of the
close of business on such record date, by multiplying the Exercise
Price then in effect by a fraction (i) the numerator of which
is the total number of shares of Common Stock issued and
outstanding immediately prior to the time of such issuance or the
close of business on such record date, and (ii) the
denominator of which is the total number of shares of Common
Stock issued and outstanding immediately prior to the time of such
issuance or the close of business on such record date plus the
number of shares of Common Stock issuable in payment of such
dividend or distribution; provid
