THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE
ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
CONSPIRACY ENTERTAINMENT HOLDINGS, INC.
COMMON STOCK PURCHASE WARRANT
1. Issuance. In consideration of good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged by CONSPIRACY
ENTERTAINMENT HOLDINGS, INC., a Utah corporation (the "Company"), XXXXX XXX
XXXXXXXX or registered assigns (the "Holder") is hereby granted the right to
purchase at any time until 5:00 P.M., New York City time, on the Expiration Date
(as defined below), Six Hundred Twenty-Five Thousand (625,000) fully paid and
nonassessable shares of the Company's Common Stock $.001 par value (herein
referred to as the "Common Stock" or the "Warrant Shares"), at an initial
exercise price per share (the "Exercise Price") of US$0.20 per share, subject to
further adjustment as set forth herein. This Warrant is being issued pursuant to
the terms of that certain Consulting Agreement, dated as of September 28, 2004
as heretofore modified (the "Agreement"), to which the Company and Holder (or
Holder's predecessor in interest) are parties. This Warrant was originally
issued to the Holder or the Holder's predecessor in interest on October ___,
2004 (the "Issue Date").
2. Exercise of Warrants.
2.1 General.
(a) This Warrant is exercisable in whole or in part at any time and
from time to time commencing on the Commencement Date (as defined below). Such
exercise shall be effectuated by submitting to the Company (either by delivery
to the Company or by facsimile transmission as provided in Section 9 hereof) a
completed and duly executed Notice of Exercise (substantially in the form
attached to this Warrant Certificate) as provided in the Notice of Exercise (or
revised by notice given by the Company as contemplated by the Section headed
"NOTICES" in the Agreement). The date such Notice of Exercise is faxed to the
Company shall be the "Exercise Date," provided that, if such exercise represents
the full exercise of the outstanding balance of the Warrant, the Holder of this
Warrant tenders this Warrant Certificate to the Company within five (5) business
days thereafter. The Notice of Exercise shall be executed by the Holder of this
Warrant and shall indicate the number of shares then being purchased pursuant to
such exercise.
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(b) The Exercise Price per share of Common Stock for the shares then
being exercised shall be payable to the Company in cash or by certified or
official bank check or by wire transfer in accordance with instructions provided
by the Company at the request of the Holder, or this Warrant may be exercised by
means of "cashless exercise" in which the Holder shall be entitled to receive a
certificate for the number of Warrant Shares equal to the quotient obtained by
dividing [(A-B) (X)] by (A), where:
(A) = the closing price of the Company's Common Stock on
the trading day immediately preceding the date of such
election;
(B) = the Exercise Price of this Warrant, as adjusted; and
(X) = the number of Warrant Shares issuable upon exercise
of this Warrant in accordance with the terms of this
Warrant by means of a cash exercise rather than a
cashless exercise.
Notwithstanding the foregoing, in the event that the Company shall have an
effective Registration Statement registering the Warrant Shares, the warrants
shall be exercisable only by cash, by certified or official bank check or by
wire transfer.
(c) Upon the appropriate payment of the Exercise Price for the
shares of Common Stock purchased, together with the surrender of this Warrant
Certificate (if required), the Holder shall be entitled to receive a certificate
or certificates for the shares of Common Stock so purchased. The Company shall
deliver such certificates representing the Warrant Shares in accordance with the
instructions of the Holder as provided in the Notice of Exercise within three
Trading Days of the later of the Exercise Date or the date the payment of the
Exercise Price for the relevant Warrant Shares is received by the Company.
(d) The Holder shall be deemed to be the holder of the shares
issuable to it in accordance with the provisions of this Section 2.1 on the
Exercise Date.
2.2 Limitation on Exercise. In no event (except (i) as specifically
provided in this Warrant as an exception to this provision, (ii) during the
forty-five (45) day period prior to the Expiration Date, or (iii) while there is
outstanding a tender offer for any or all of the shares of the Company's Common
Stock) shall the Holder be entitled to exercise this Warrant, or shall the
Company have the obligation to issue shares upon such exercise of all or any
portion of this Warrant to the extent that, after such exercise the sum of (1)
the number of shares of Common Stock beneficially owned by the Holder and its
affiliates (other than shares of Common Stock which may be deemed beneficially
owned through the ownership of the unexercised portion of the Warrants or other
rights to purchase Common Stock or through the ownership of the unconverted
portion of convertible securities), and (2) the number of shares of Common Stock
issuable upon the exercise of the Warrants with respect to which the
determination of this proviso is being made, would result in beneficial
ownership by the Holder and its affiliates of more than 4.99% of the outstanding
shares of Common Stock (after taking into account the shares to be issued to the
Holder upon such exercise). For purposes of the proviso to the immediately
preceding sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended (the "1934
Act"), except as otherwise provided in clause (1) of such sentence. The Holder,
by its acceptance of this Warrant, further agrees that if the Holder transfers
or assigns any of the Warrants to a party who or which would not be considered
such an affiliate, such assignment shall be made subject to the transferee's or
assignee's specific agreement to be bound by the provisions of this Section 2.2
as if such transferee or assignee were the original Holder hereof.
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2.3 Commencement Date and Expiration Date.
(a) The term "Commencement Date" means the date which is sixty-five
(65) days after the Issue Date.
(b) The term "Expiration Date" means August 31, 2009.
3. Reservation of Shares. The Company hereby agrees that at
all times during the term of this Warrant there shall be reserved for issuance
upon exercise of this Warrant one hundred ten percent (110%) of the Warrant
Shares.
4. Mutilation or Loss of Warrant. Upon receipt by the Company
of evidence satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) receipt of
reasonably satisfactory indemnification, and (in the case of mutilation) upon
surrender and cancellation of this Warrant, the Company will execute and deliver
a new Warrant of like tenor and date and any such lost, stolen, destroyed or
mutilated Warrant shall thereupon become void.
5. Rights of the Holder. The Holder shall not, by virtue
hereof, be entitled to any rights of a stockholder in the Company, either at law
or equity, and the rights of the Holder are limited to those expressed in this
Warrant and are not enforceable against the Company except to the extent set
forth herein.
6. Protection Against Dilution and Other Adjustments.
6.1 Adjustment Mechanism. If an adjustment of the Exercise Price is
required pursuant to this Section 6, the Holder shall be entitled to purchase
such number of shares of Common Stock as will cause (i) (x) the total number of
shares of Common Stock Holder is entitled to purchase pursuant to this Warrant
following such adjustment, multiplied by (y) the adjusted Exercise Price per
share, to equal the result of (ii) (x) the dollar amount of the total number of
shares of Common Stock Holder is entitled to purchase before adjustment,
multiplied by (y) the total Exercise Price before adjustment.(1)
--------------------
(1) Example: Assume 10,000 shares remain under Warrant at original stated
Exercise Price of US$0.20. Total exercise price (clause (y) in text) is (i)
10,000 x (ii) US$0.20, or US$2,000. Company effects 2:1 stock split. Exercise
Price is adjusted to US$0.10. Number of shares covered by Warrant is adjusted to
20,000, because (applying clause (x) in text) (i) 20,000 x (ii) US$0.10 =
US$2,000.
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6.2 Capital Adjustments. In case of any stock split or reverse stock
split, stock dividend, reclassification of the Common Stock, recapitalization,
merger or consolidation (where the Company is not the surviving entity), the
provisions of this Section 6 shall be applied as if such capital adjustment
event had occurred immediately prior to the date of this Warrant and the
original Exercise Price had been fairly allocated to the stock resulting from
such capital adjustment; and in other respects the provisions of this Section
shall be applied in a fair, equitable and reasonable manner so as to give
effect, as nearly as may be, to the purposes hereof. A rights offering to
stockholders shall be deemed a stock dividend to the extent of the bargain
purchase element of the rights.
6.3 Adjustment for Spin Off. If, for any reason, prior to the
exercise of this Warrant in full, the Company spins off or otherwise divests
itself of a material part of its business or operations or disposes all or of a
part of its assets in a transaction (the "Spin Off") in which the Company does
not receive compensation for such business, operations or assets, but causes
securities of another entity (the "Spin Off Securities") to be issued to
security holders of the Company, then the Company shall cause (i) to be reserved
Spin Off Securities equal to the number thereof which would have been issued to
the Holder had all of the Holder's unexercised Warrants outstanding on the
record date (the "Record Date") for determining the amount and number of Spin
Off Securities to be issued to security holders of the Company (the "Outstanding
Warrants") been exercised as of the close of business on the Trading Day
immediately before the Record Date (the "Reserved Spin Off Shares"), and (ii) to
be issued to the Holder on the exercise of all or any of the Outstanding
Warrants, such amount of the Reserved Spin Off Shares equal to (x) the Reserved
Spin Off Shares, multiplied by (y) a fraction, of which (I) the numerator is the
amount of the Outstanding Warrants then being exercised, and (II) the
denominator is the amount of the Outstanding Warrants.
7. Transfer to Comply with the Securities Act; Registration Rights.
This Warrant has not been registered under the Securities Act of
1933, as amended, (the "Act") and has been issued to the Holder for investment
and not with a view to the distribution of either the Warrant or the Warrant
Shares. Neither this Warrant nor any of the Warrant Shares or any other security
issued or issuable upon exercise of this Warrant may be sold, transferred,
pledged or hypothecated in the absence of an effective registration statement
under the Act relating to such security or an opinion of counsel satisfactory to
the Company that registration is not required under the Act. Each certificate
for the Warrant, the Warrant Shares and any other security issued or issuable
upon exercise of this Warrant shall contain a legend on the face thereof, in
form and substance satisfactory to counsel for the Company, setting forth the
restrictions on transfer contained in this Section.
8. Buy-In Amount.
(a) If, by the relevant Warrant Share Delivery Date, the Company
fails for any reason to deliver the relevant Warrant Share Certificates, and
after such Warrant Share Delivery Date, the Holder who has exercised this
Warrant (an "Exercising Holder") purchases, in an arm's-length open market
transaction or otherwise, shares of Common Stock (the "Covering Shares") in
order to make delivery in satisfaction of a sale of Common Stock by the
Exercising Holder (the "Sold Shares"), which delivery such Exercising Holder
anticipated to make using the shares to be issued upon such exercise (a
"Buy-In"), the Exercising Holder shall have the right to require the Company to
pay to the Exercising Holder the Warrant Share Buy-In Adjustment Amount (as
defined below). The Company shall pay the Warrant Share Buy-In Adjustment Amount
to the Exercising Holder in immediately available funds immediately upon demand
by the Exercising Holder.
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(b) The term "Warrant Share Buy-In Adjustment Amount" means the
amount equal to the excess, if any, of (i) the Exercising Holder's total
purchase price (including brokerage commissions, if any) for the Covering Shares
over (ii) the net proceeds (after brokerage commissions, if any) received by the
Exercising Holder from the sale of the Sold Shares. By way of illustration and
not in limitation of the foregoing, if the Exercising Holder purchases shares of
Common Stock having a total purchase price (including brokerage commissions) of
$11,000 to cover a Buy-In with respect to shares of Common Stock it sold for net
proceeds of $10,000, the Warrant Share Buy-In Adjustment Amount which the
Company will be required to pay to the Exercising Holder will be $1,000.
9. Notices. Any notice required or permitted hereunder shall be given
in manner provided in the Section headed "NOTICES" in the Agreement, the terms
of which are incorporated herein by reference.
10. Supplements and Amendments; Whole Agreement. This Warrant may be
amended or supplemented only by an instrument in writing signed by the parties
hereto. This Warrant contains the full understanding of the parties hereto with
respect to the subject matter hereof and thereof and there are no
representations, warranties, agreements or understandings other than expressly
contained herein and therein.
11. Governing Law.
(a) This Warrant shall be governed by and construed in accordance
with the laws of the State of New York for contracts to be wholly performed in
such state and without giving effect to the principles thereof regarding the
conflict of laws. Each of the parties consents to the exclusive jurisdiction of
the federal courts whose districts encompass any part of the County of New York
or the state courts of the State of New York sitting in the County of New York
in connection with any dispute arising under this Warrant and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on forum non coveniens, to the bringing of any such proceeding in such
jurisdictions or to any claim that such venue of the suit, action or proceeding
is improper. To the extent determined by such court, the Company shall reimburse
the Holder for any reasonable legal fees and disbursements incurred by the
Holder in enforcement of or protection of any of its rights under this Warrant.
Nothing in this Section shall affect or limit any right to serve process in any
other manner permitted by law.
(b) The Company and the Holder acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Warrant were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Warrant and to enforce specifically the terms and provisions hereof, this
being in addition to any other remedy to which any of them may be entitled by
law or equity.
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12. JURY TRIAL WAIVER. The Company and the Holder hereby waive
a trial by jury in any action, proceeding or counterclaim brought by either of
the Parties hereto against the other in respect of any matter arising out or in
connection with this Warrant.
13. Remedies. The Company stipulates that the remedies at law
of the Holder of this Warrant in the event of any default or threatened default
by the Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate and that, to the fullest extent
permitted by law, such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.
14. Counterparts. This Warrant may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one
and the same instrument.
[Balance of page intentionally left blank]
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15. 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.
IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of
the _______ day of October, 2004.
CONSPIRACY ENTERTAINMENT HOLDINGS, INC.
By:
---------------------------------
Xxxxx Xxxxxx
-------------------------------------
(Print Name)
President and Chief Executive Officer
-------------------------------------
(Title)
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NOTICE OF EXERCISE OF WARRANT
TO: CONSPIRACY ENTERTAINMENT HOLDINGS, INC.
000 Xxxxx Xxxxxx Xxxxxxxxx
Xxxxx Xxxxxx, XX 00000
Attn: CEO VIA FAX: (000) 000-0000
------------------------
The undersigned hereby irrevocably elects to exercise the right,
represented by the Warrant Certificate dated as of ________________, 20___ , to
purchase ___________ shares of the Common Stock, $.001 par value ("Common
Stock"), of CONSPIRACY ENTERTAINMENT HOLDINGS, INC. and tenders herewith payment
in accordance with Section 2 of said Common Stock Purchase Warrant.
_ CASH: US$ = (Exercise Price x Exercise Shares)
----------------
Payment is being made by:
_ enclosed check
_ wire transfer
_ the cancellation of such number of Warrant
Shares as is necessary, in accordance with
the formula set forth in subsection 2.1(b),
to exercise this Warrant with respect to the
maximum number of Warrant Shares purchasable
pursuant to the cashless exercise procedure
set forth in subsection 2.1(b).
_ other
------------------------
It is the intention of the Holder to comply with the provisions of
Section 2.2 of the Warrant regarding certain limits on the Holder's right to
exercise thereunder. Based on the analysis on the attached Worksheet Schedule,
the Holder believe this exercise complies with the provisions of said Section
2.2. Nonetheless, to the extent that, pursuant to the exercise effected hereby,
the Holder would have more shares than permitted under said Section, this notice
should be amended and revised, ab initio, to refer to the exercise which would
result in the issuance of shares consistent with such provision. Any exercise
above such amount is hereby deemed void and revoked.
As contemplated by the Warrant, this Notice of Conversion is being sent
by facsimile to the telecopier number and officer indicated above.
If this Notice of Exercise represents the full exercise of the
outstanding balance of the Warrant, the Holder either (1) has previously
surrendered the Warrant to the Company or (2) will surrender (or cause to be
surrendered) the Warrant to the Company at the address indicated above by
express courier within five (5) business days after delivery or facsimile
transmission of this Notice of Exercise.
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The certificates representing the Warrant Shares should be
transmitted by the Company to the Holder
via express courier, or
by electronic transfer
after receipt of this Notice of Exercise (by facsimile transmission or
otherwise) to:
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
Dated:
----------------------
----------------------------
[Name of Holder]
By:
---------------------------------
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NOTICE OF EXERCISE OF WARRANT
10
WORKSHEET SCHEDULE
1. Current Common Stock holdings of Holder and Affiliates _____________
2. Shares to be issued on current exercise _____________
3. Other shares to be issued on other current exercise(s)
and other current conversion(s)(1) _____________
4. Other shares eligible to be acquired within next 60
days without restriction _____________
5. Total [sum of Lines 1 through 4] _____________
6. Outstanding shares of Common Stock(2) _____________
7. Adjustments to Outstanding
a. Shares known to Holder as previously issued
to Holder or others but not included in Line 6 _____________
b. Shares to be issued per Line(s) 2 and 3 _____________
c. Total Adjustments [Lines 7a and 7b] _____________
8. Total Adjusted Outstanding [Lines 6 plus 7c] _____________
9. Holder's Percentage [Line 5 divided by Line 8] _____________%
[Note: Line 9 not to be above 4.99%]
--------------------
(1) Includes shares issuable on conversion of convertible securities (including
assumed payment of interest or dividends) or exercise of other rights, including
other warrants or options (3) Based on latest SEC filing by Company or
information provided by executive officer of Company, counsel to Company or
transfer agent
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