EXHIBIT 10.2
[FORM OF SECURITIES PURCHASE AGREEMENT, DATED AS OF MARCH 3, 2004]
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of March 3,
2004, by and among Peak Entertainment Holdings, Inc., a Nevada corporation (the
"Company"), and the purchaser set forth on the signature page hereto ("Buyer").
WHEREAS:
A. The Company and Buyer are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by the rules
and regulations as promulgated by the United States Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the "1933
Act");
B. Buyer desires to purchase and the Company desires to issue and sell,
upon the terms and conditions set forth in this Agreement, for the aggregate
purchase price of $500,000: (i) 1,000,000 shares of the Company's common stock
(the "Common Stock"); and (ii) warrants, in the form attached hereto as Exhibit
A, to purchase 600,000 shares of the Company's Common Stock (the "Warrants");
(the Common Stock and Warrants are sometimes referred to as the "Securities").
NOW THEREFORE, the Company and Buyer hereby agree as follows:
1. PURCHASE AND SALE OF SECURITIES.
a. Purchase of Securities. On the Closing Date (as defined below),
the Company shall issue and sell to Buyer and Buyer agree to purchase from the
Company the Securities.
b. Form of Payment. Upon execution of this Agreement, (i) Buyer
shall pay the purchase price of $500,000 for the Securities to be issued and
sold to Buyer at the Closing (as defined below) (the "Purchase Price") by cash
or wire transfer of immediately available funds.
c. Closing Date. The date and time of the issuance and sale of the
Securities pursuant to this Agreement (the "Closing Date") shall be the date of
receipt and clearance of the Purchase Price.
d. Registration Rights. The Company shall use its good faith best
efforts to include filing for the resale of the Common Stock and the shares
underlying the Warrant (the "Registrable Securities") in the contemplated filing
of the next amendment to the Company's Registration Statement on Form SB-2 dated
February 2, 2004 (the "February Registration Statement"), subject to Reasonable
Delay beyond the Company's control and good faith best efforts (as defined
herein). If, the Registrable Securities are not registered pursuant to the
February Registration Statement, the Registrable Securities shall have a demand
registration right exercisable one day after the effective date of the February
Registration Statement, and the Company shall file a registration statement for
the Registrable Securities, to the extent not included in the February
Registration Statement, within ten days of such demand. For each day after such
ten day period, subject to Reasonable Delay, that such registration statement is
not filed, Buyer shall be entitled to $2,500. The registration statement shall
be on Form SB-2 or such form of registration statement as is then available to
effect a registration of the Registrable Securities, to the extent allowable
under the 1933 Act and the rules and regulations promulgated thereunder
(including Rule 416 to the extent applicable). In the event that the Securities
and Exchange Commission restricts or prohibits the inclusion of any part of the
common stock included in the registration statement on the basis of integration
or that such securities are not deemed owned or paid for or any similar reason,
the Company shall register the maximum number of the Registrable Securities that
the Commission will permit, and such occurrence shall not be deemed a breach of
any provision of this Agreement. The Company shall use its best efforts to seek
effectiveness of such registration statement promptly upon receipt of notice
from the S.E.C. that no review of the registration statement will be conducted
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and/or that the S.E.C. has no further comments on its review of the registration
statement. Subject to Reasonable Delay, in the event that the registration
statement is not declared effective within the later of 120 days from date of
closing on this Agreement or thirty days after receipt of a last comment letter
from the S.E.C., if any, Buyer shall be entitled to receive shares of the
Company's unregistered and restricted common stock in the amount of, on a pro
rata basis, equal to 100,000 shares for each subsequent month period in which
the registration statement has not been declared effective. Buyer shall
cooperate with the Company in furnishing such information regarding itself as
reasonably needed to prepare, file and effect the registration statement. All
reasonable expenses, other than underwriting discounts and commissions, incurred
in connection with registrations, filings or qualifications, including, without
limitation, all registration, listing and qualification fees, printers and
accounting fees, and the fees and disbursements of counsel for the Company,
shall be borne by the Company. After 60 days after the February Registration
Statement is declared effective, Buyer shall also be entitled to piggyback
registration rights in connection with the Securities on registration statements
filed by the Company thereafter. The term "Reasonable Delay" refers to good
faith justifiable reasons for delays, including, but not limited to, staleness
of prior reported financial statements and the need for updated financial
statements, provided that the Company will use its good faith best efforts to
effect a filing prior to such financial statements having gone stale, material
developments and fundamental corporate transactions, such as a merger,
reorganization, the acquisition or disposition of significant assets or similar
developments and transactions, typical of those that should be reported on Form
8-K, integration issues arising from the transaction hereby and/or inclusion of
the Registrable Securities in the February Registration Statement, and other
circumstances that are beyond the Company's control, all as confirmed by an
Opinion of Counsel of the Company..
2. BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer represents and
warrants to the Company solely as to it that:
a. Investment Purpose. As of the date hereof, Buyer is purchasing
the Securities for its own account and not with a present view towards the
public sale or distribution thereof, except pursuant to sales registered or
exempted from registration under the 1933 Act; provided, however, that by making
the representations herein, Buyer does not agree to hold any of the Securities
for any minimum or other specific term and reserves the right to dispose of the
Securities at any time in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act.
b. Accredited Investor Status. Buyer is a sophisticated investor (as
described in Rule 506(b)(2)(ii) of Regulation D) and an accredited investor (as
defined in Rule 501 of Regulation D), and Buyer has such experience in business
and financial matters that it has the capacity to protect its own interests in
connection with this transaction and is capable of evaluating the merits and
risks of an investment in the Securities pursuant to this Agreement. Buyer has
been represented by counsel and advisors of its choice. Buyer acknowledges that
an investment in the Securities pursuant to this Agreement is speculative and
involves a high degree of risk.
c. Reliance on Exemptions. Buyer understands that the Securities are
being offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying upon the truth and accuracy of, and Buyer's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of Buyer to acquire the
Securities.
d. Information. Buyer has received all documents, records, books and
other information pertaining to Buyer's investment in the Company that has been
requested by Buyer. Buyer represents that Buyer has received and read the
February Registration Statement.
e. Governmental Review. Buyer understands that no United States
federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Securities. There
is no representation that any registration statement will be declared effective.
f. Transfer or Resale. Buyer understands that: (i) except as
provided in the provision for Registration Rights herein, the sale or re-sale of
the Securities has not been and is not being registered under the 1933 Act or
any applicable state securities laws, and the Securities may not be transferred
unless (a) the Securities are sold pursuant to an effective registration
statement under the 1933 Act, (b) Buyer shall have delivered to the Company an
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opinion of counsel that shall be in form, substance and scope customary for
opinions of counsel in comparable transactions to the effect that the Securities
to be sold or transferred may be sold or transferred pursuant to an exemption
from such registration to the reasonable satisfaction of the Company, (c) the
Securities are sold or transferred to an "affiliate" (as defined in Rule 144
promulgated under the 1933 Act (or a successor rule) ("Rule 144")) of Buyer who
agrees to sell or otherwise transfer the Securities only in accordance with this
Section 2(f) and who is an Accredited Investor, or (d) the Securities are sold
pursuant to Rule 144, and Buyer shall have delivered to the Company an opinion
of counsel that shall be in form, substance and scope customary for opinions of
counsel in corporate transactions to the reasonable satisfaction of the Company;
(ii) any sale of such Securities made in reliance on Rule 144 may be made only
in accordance with the terms of said Rule and further, if said Rule is not
applicable, any re-sale of such Securities under circumstances in which the
seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 0000 Xxx) may require compliance
with some other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder; and (iii) neither the Company nor any other person is under any
obligation to file to register such Securities under the 1933 Act or any state
securities laws or to comply with the terms and conditions of any exemption
thereunder (in each case, other than pursuant to the Registration Rights
provision herein). Notwithstanding the foregoing or anything else contained
herein to the contrary, the Securities may be pledged as collateral in
connection with a bona fide margin account or other lending arrangement.
g. Legends. Buyer understands that until such time as the Securities
have been registered under the 1933 Act or otherwise may be sold pursuant to
Rule 144 without any restriction as to the number of securities as of a
particular date that can then be immediately sold, the Securities may bear a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of the certificates for such Securities):
"The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended. The securities may not be
sold, transferred or assigned in the absence of an effective registration
statement for the securities under said Act, or an opinion of counsel, in
form, substance and scope customary for opinions of counsel in comparable
transactions, that registration is not required under said Act or unless
sold pursuant to Rule 144 under said Act."
h. Authorization; Enforcement. This Agreement has been duly
authorized and validly executed and delivered by Buyer and is a valid and
binding agreement of Buyer enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
i. Residency. Buyer is a resident of the jurisdiction set forth
immediately below Buyer's name on the signature page hereto.
j. Not an Affiliate. Buyer is not an officer, director or
"affiliate" (as that term is defined in Rule 405 of the Securities Act) of the
Company.
k. Absence of Conflicts. The execution and delivery of this
Agreement, and the consummation of the transactions contemplated hereby and
thereby, and compliance with the requirements hereof and thereof by Buyer, will
not violate any law, rule, regulation, order, writ, judgment, injunction, decree
or award binding on Buyer or (a) violate any provision of any indenture,
instrument or agreement to which Buyer is a party or is subject, or by which
Buyer or any of its assets is bound; (b) conflict with or constitute a material
default thereunder; (c) result in the creation or imposition of any lien
pursuant to the terms of any such indenture, instrument or agreement, or
constitute a breach of any fiduciary duty owed by Buyer to any third party; or
(d) require the approval of any non-governmental agency third-party (which has
not been obtained) pursuant to any material contract, agreement, instrument,
relationship or legal obligation to which Buyer is subject or to which any of
its assets, operations or management may be subject.
l. Manner of Sale. At no time was Buyer presented with or solicited
by or through any leaflet, public promotional meeting, television advertisement
or any other form of general solicitation or advertising.
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m. Broker/Finder. Buyer represents that no broker is entitled to any
commission except Legend Merchant Group, Inc., which is a broker registered with
the NASD, shall be entitled to 5% commission ($25,000), resulting in gross
proceeds of $475,000 to the Company, and 100,000 warrants exercisable for three
years at $.50 per share and 60,000 warrants exercisable for three years at $.75
per share, of the same type as the warrants purchased pursuant to the Agreement.
There is no other finder entitled to compensation for introducing Buyer to the
Company. Such broker/finder fees shall not be shared by the broker with an
unaffiliated person/entity who is not registered with the NASD.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to Buyer that:
a. Organization and Qualification. The Company and each of its
subsidiaries, if any, is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction in which it is incorporated,
with full power and authority (corporate and other) to own, lease, use and
operate its properties and to carry on its business as and where now owned,
leased, used, operated and conducted. The Company and each of its subsidiaries
is duly qualified or intends to apply for qualification as a foreign corporation
to do business and is in good standing in every jurisdiction in which its
ownership or use of property or the nature of the business conducted by it makes
such qualification necessary, except where the failure to be so qualified or in
good standing would not have a Material Adverse Effect. "Material Adverse
Effect" means any material adverse effect on the business, operations, assets,
financial condition or prospects of the Company or its subsidiaries, if any,
taken as a whole, or on the transactions contemplated hereby or by the
agreements or instruments to be entered into in connection herewith.
"Subsidiaries" means any corporation or other organization, whether incorporated
or unincorporated, in which the Company owns, directly or indirectly, any equity
or other ownership interest.
b. Authorization; Enforcement. The Company has all requisite
corporate power and authority to enter into and perform this Agreement and the
Warrant Agreement (collectively the "Transaction Agreements") and to consummate
the transactions contemplated hereby and thereby and to issue the Securities, in
accordance with the terms hereof and thereof. The execution and delivery of this
Agreement and the Warrant Agreement by the Company and the consummation by it of
the transactions contemplated hereby and thereby (including without limitation,
the issuance of the Warrants and the issuance and reservation for issuance of
the shares underlying the Warrants issuable upon exercise thereof), have been
duly authorized by the Company's Board of Directors. This Agreement has been
duly executed and delivered by the Company by its authorized representative, and
such authorized representative is the true and official representative with
authority to sign this Agreement and the other documents executed in connection
herewith and bind the Company accordingly. This Agreement constitutes, and upon
execution and delivery by the Company of the Warrant Agreement, each of such
instruments will constitute, a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms.
c. Capitalization. As of February 2, 2004, the authorized capital
stock of the Company consists of 900,000,000 shares of Common Stock, of which
22,774,093 shares are issued and outstanding. As of February 2, 2004, no shares
are currently reserved for issuance except as set forth in the February
Registration Statement. All of such outstanding shares of capital stock are, or
upon issuance will be, duly authorized, validly issued, fully paid and
nonassessable. No shares of capital stock of the Company are subject to
preemptive rights or any other similar rights of the shareholders of the Company
or any liens or encumbrances imposed through the actions or failure to act of
the Company. Except as disclosed in filings with the S.E.C., as of February 2,
2004, (i) there are no outstanding options, warrants, scrip, rights to subscribe
for, puts, calls, rights of first refusal, agreements, understandings, claims or
other commitments or rights of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for any shares of capital
stock of the Company or any of its Subsidiaries, or arrangements by which the
Company or any of its Subsidiaries is or may become bound to issue additional
shares of capital stock of the Company or any of its Subsidiaries, (ii) there
are no agreements or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of its or their securities
under the 1933 Act, and (iii) there are no anti-dilution or price adjustment
provisions contained in any security issued by the Company (or in any agreement
providing rights to security holders) that will be triggered by the issuance of
the Common Stock and the Warrants, or the shares underlying the Warrants. The
Company has also reserved approximately 450,000 shares of common stock issuable
to consultants for services rendered or to be rendered, and warrants to purchase
approximately 1,400,000 shares of common stock in exchange for consultants'
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services and for a loan of $250,000 to the Company, the terms of which yet
remain to be finalized. The Company also will be implementing a stock option
plan, which may be subdivided as appropriate, for employees, management and
other persons entitled to participate, in an amount of up to 10% of the
Company's common stock.
d. Issuance of Shares. The shares underlying the Warrants are duly
authorized and reserved for issuance and, upon exercise of the Warrants in
accordance with the terms thereof, will be validly issued, fully paid and
non-assessable, and free from all taxes, liens, claims and encumbrances with
respect to the issue thereof and shall not be subject to preemptive rights or
other similar rights of shareholders of the Company.
e. Acknowledgment of Dilution. The Company understands and
acknowledges the potentially dilutive effect to the Common Stock upon the
issuance of the shares underlying the Warrants upon exercise of the Warrants.
The Company further acknowledges that its obligation to issue the shares
underlying the Warrants upon exercise of the Warrants in accordance with this
Agreement is absolute and unconditional regardless of the dilutive effect that
such issuance may have on the ownership interests of other shareholders of the
Company.
f. No Conflicts. The execution, delivery and performance of this
Agreement, and the Warrant Agreement, by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby (including, without
limitation, the issuance and reservation for issuance of the shares underlying
the Warrants), will not (i) conflict with or result in a violation of any
provision of the Articles of Incorporation or By-laws, (ii) violate or conflict
with, or result in a breach of any provision of, or constitute a default (or an
event which with notice or lapse of time or both could become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture, patent, patent license or instrument
to which the Company or any of its Subsidiaries is a party, or (iii) result in a
violation of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws and regulations and regulations of any
self-regulatory organizations to which the Company or its securities are
subject) applicable to the Company or any of its Subsidiaries or by which any
property or asset of the Company or any of its Subsidiaries is bound or affected
(except for such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the aggregate,
have a Material Adverse Effect). Neither the Company nor any of its Subsidiaries
is in violation of its Articles of Incorporation, By-laws or other
organizational documents and neither the Company nor any of its Subsidiaries is
in default (and no event has occurred which with notice or lapse of time or both
could put the Company or any of its Subsidiaries in default) under, and neither
the Company nor any of its Subsidiaries has taken any action or failed to take
any action that would give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its Subsidiaries is a party or by which any property or
assets of the Company or any of its Subsidiaries is bound or affected, except
for possible defaults as would not, individually or in the aggregate, have a
Material Adverse Effect. The businesses of the Company and its Subsidiaries, if
any, are not being conducted, and shall not be conducted so long as Buyer owns
any of the Securities, in violation of any law, ordinance or regulation of any
governmental entity. Except as specifically contemplated by this Agreement and
as required under the 1933 Act and any applicable state securities laws, the
Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court, governmental agency, regulatory
agency, self regulatory organization or stock market in order for it to execute,
deliver or perform any of its obligations under this Agreement, or the Warrant
Agreement, in accordance with the terms hereof or thereof or to issue and sell
the Warrants in accordance with the terms hereof and to issue the shares
underlying the Warrants upon exercise of the Warrants.
g. SEC Documents; Financial Statements. Except as disclosed in the
February Registration Statement, the Company has timely filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of the Securities Exchange Act of
1934, as amended (the "1934 Act") (all of the foregoing filed prior to the date
hereof and all exhibits included therein and financial statements and schedules
thereto and documents (other than exhibits to such documents that were not
filed) incorporated by reference therein, being hereinafter referred to herein
as the "SEC Documents"). The Company's Form 10-QSB for the quarterly period
ended September 30, 2003 was not timely filed. Except as disclosed in the SEC
Documents, the SEC Documents will, on or before Closing hereof, comply in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, to the best knowledge of officers and directors
of the Company, will contain any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. Except as disclosed in the SEC Documents, as of their
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respective dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Except as disclosed in the SEC Documents, such financial
statements have been prepared in accordance with United States generally
accepted accounting principles, consistently applied, during the periods
involved (except (i) as may be otherwise indicated in such financial statements
or the notes thereto, or (ii) in the case of unaudited interim statements, to
the extent they may not include footnotes or may be condensed or summary
statements) and fairly present in all material respects the consolidated
financial position of the Company and its consolidated Subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments). Except as described herein and as set forth
in the financial statements of the Company included in the SEC Documents, the
Company has no liabilities, contingent or otherwise, other than (i) liabilities
incurred in the ordinary course of business subsequent to September 30, 2003 and
(ii) obligations under contracts and commitments incurred in the ordinary course
of business and not required under generally accepted accounting principles to
be reflected in such financial statements, which, individually or in the
aggregate, are not material to the financial condition or operating results of
the Company.
h. Absence of Certain Changes. Since September 30, 2003, there has
been no material adverse change and no material adverse development in the
assets, liabilities, business, properties, operations, financial condition,
results of operations or prospects of the Company or any of its Subsidiaries,
except as disclosed herein and in the SEC Documents.
i. Absence of Litigation. There is no action, suit, claim,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company or any of its Subsidiaries, threatened against or
affecting the Company or any of its Subsidiaries, or their officers or directors
in their capacity as such, that could have a Material Adverse Effect, except as
disclosed in the SEC Documents.
j. Intellectual Property. The Company has the rights stated in the
SEC Documents (including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures) and other
similar rights and proprietary knowledge (collectively, "Intangibles") necessary
for the conduct of its business as now being conducted. To the Company's
knowledge, except as disclosed in the SEC Documents, neither the Company nor any
of its subsidiaries is infringing upon or in conflict with any right of any
other person with respect to any Intangibles. Except as disclosed in the SEC
Documents, no adverse claims have been asserted by any person to the ownership
or use of any Intangibles and the Company has no knowledge of any basis for such
claim.
k. No Materially Adverse Contracts, Etc. Neither the Company nor any
of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Company has or is expected in the future to have a Material
Adverse Effect, except as disclosed in this Agreement. Neither the Company nor
any of its Subsidiaries is a party to any contract or agreement which in the
judgment of the Company's officers has or is expected to have a Material Adverse
Effect, except as disclosed in this Agreement or in the February Registration
Statement.
l. Absence of Certain Company Control Person Actions or Events. None
of the following has occurred during the past five (5) years with respect to a
Company Control Person:
(1) A petition under the federal bankruptcy laws or any state
insolvency law was filed by or against, or a receiver, fiscal agent or similar
officer was appointed by a court for the business or property of such Company
Control Person, or any partnership in which he was a general partner at or
within two years before the time of such filing, or any corporation or business
association of which he was an executive officer at or within two years before
the time of such filing;
(2) Such Company Control Person was convicted in a criminal
proceeding or is a named subject of a pending criminal proceeding
(excluding traffic violations and other minor offenses);
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(3) Such Company Control Person was the subject of any order,
judgment or decree, not subsequently reversed, suspended or vacated, of
any court of competent jurisdiction, permanently or temporarily enjoining
him from, or otherwise limiting, the following activities:
(i) acting, as an investment advisor, underwriter,
broker or dealer in securities, or as an affiliated person,
director or employee of any investment company, bank, savings
and loan association or insurance company, as a futures
commission merchant, introducing broker, commodity trading
advisor, commodity pool operator, floor broker, any other
Person regulated by the Commodity Futures Trading Commission
("CFTC") or engaging in or continuing any conduct or practice
in connection with such activity;
(ii) engaging in any type of business practice; or
(iii) engaging in any activity in connection with the
purchase or sale of any security or commodity or in connection
with any violation of federal or state securities laws or
federal commodities laws;
(4) Such Company Control Person was the subject of any order,
judgment or decree, not subsequently reversed, suspended or vacated, of
any federal or state authority barring, suspending or otherwise limiting
for more than 60 days the right of such Company Control Person to engage
in any activity described in paragraph (3) of this item, or to be
associated with Persons engaged in any such activity; or
(5) Such Company Control Person was found by a court of
competent jurisdiction in a civil action or by the CFTC or SEC to have
violated any federal or state securities law, and the judgment in such
civil action or finding by the CFTC or SEC has not been subsequently
reversed, suspended, or vacated.
n. Regulation D. Neither the Company nor any of its Affiliates nor
any person acting on its or their behalf has, directly or indirectly, at any
time since May 1, 2003, made any offer or sales of any security or solicited any
offers to buy any security under circumstances that would eliminate the
availability of the exemption from registration under Regulation D in connection
with the offer and sale of the Securities as contemplated hereby.
o. Dilution. The number of shares of Common Stock, including upon
exercise of the Warrants, may have a dilutive effect on the ownership interests
of the other shareholders (and Persons having the right to become shareholders)
of the Company. The Company's executive officers and directors have studied and
fully understand the nature of the Securities being sold hereby and recognize
that they have such a potential dilutive effect. The board of directors of the
Company has concluded, in its good faith business judgment, that such issuance
is in the best interests of the Company. The Company specifically acknowledges
that its obligation to issue the shares upon exercise of the Warrants is binding
upon the Company and enforceable regardless of the dilution such issuance may
have on the ownership interests of other shareholders of the Company, and the
Company will honor every Notice of Exercise (as contemplated by the Warrants),
unless the Company is subject to an injunction (which injunction was not sought
by the Company) prohibiting the Company from doing so.
p. Trading in Securities. The Company specifically acknowledges
that, except to the extent specifically provided herein or in any of the other
Transaction Agreements (but limited in each instance to the extent so
specified), Buyer retains the right (but is not otherwise obligated) to buy,
sell, engage in hedging transactions or otherwise trade in the securities of the
Company, including, but not necessarily limited to, the Securities, at any time
before, contemporaneous with or after the execution of this Agreement or from
time to time, but only, in each case, in any manner whatsoever permitted by
applicable federal and state securities laws.
4. COVENANTS.
a. Reporting Status. So long as Buyer beneficially owns any of the
Securities, the Company shall use best efforts to timely file all reports
required to be filed with the SEC pursuant to the 1934 Act, and the Company
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shall use best efforts to maintain its status as an issuer filing reports under
the 1934 Act even if the 1934 Act or the rules and regulations thereunder would
permit such termination.
b. Use of Proceeds. The Company shall use the proceeds from the sale
of the Securities for its working capital and/or to retire existing debt.
c. Authorization and Reservation of Shares. The Company shall use
reasonable best efforts to at all times have authorized, and reserved for the
purpose of issuance, a sufficient number of shares of Common Stock to provide
for the full exercise of the outstanding Warrants and issuance of the shares
underlying the Warrants in connection therewith (based on the Exercise Price of
the Warrants in effect from time to time) and as otherwise required by this
Agreement.
d. Listing. The Company will use best efforts, so long as Buyer owns
at least one-third of the Securities, to maintain the quoting/listing and
trading of its Common Stock on the OTCBB or any equivalent or replacement
quotation service or exchange, including, but not limited to, the Nasdaq
National Market ("Nasdaq"), the Nasdaq SmallCap Market ("Nasdaq SmallCap"), the
New York Stock Exchange ("NYSE"), or the American Stock Exchange ("AMEX") and
will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the National Association of Securities
Dealers ("NASD") and such exchanges, as applicable. The Company will promptly
notify Buyer regarding the continued eligibility of the Common Stock for listing
or quotation should there be a material change.
e. Corporate Existence. So long as Buyer beneficially owns any
Warrants, the Company shall maintain its corporate existence and shall not sell
all or substantially all of the Company's assets, except in the event of a
merger or consolidation or sale of all or substantially all of the Company's
assets, where the surviving or successor entity in such transaction (i) assumes
the Company's obligations hereunder and under the agreements and instruments
entered into in connection herewith or (ii) is a publicly traded corporation
whose Common Stock is listed for trading on the OTCBB, Nasdaq, Nasdaq SmallCap,
NYSE or AMEX, or any other equivalent or replacement quotation service or
exchange.
f. Reimbursement. If (i) Buyer, other than by reason of its gross
negligence or willful misconduct, becomes involved in any capacity in any
action, proceeding or investigation brought by any shareholder of the Company,
in connection with or as a result of the consummation of the transactions
contemplated by the Transaction Agreements, or if the Buyer is impleaded in any
such action, proceeding or investigation by any Person, or (ii) the Buyer, other
than by reason of its gross negligence or willful misconduct or by reason of its
trading of the Common Stock in a manner that is illegal under the federal
securities laws, becomes involved in any capacity in any action, proceeding or
investigation brought by the SEC against or involving the Company or in
connection with or as a result of the consummation of the transactions
contemplated by the Transaction Agreements, or if the Buyer is impleaded in any
such action, proceeding or investigation by any Person, then in any such case,
the Company will reimburse the Buyer for its reasonable legal and other expenses
(including the cost of any investigation and preparation) incurred in connection
therewith, as such expenses are incurred. In addition, other than with respect
to any matter in which Buyer is a named party, the Company will pay to the Buyer
the charges, as reasonably determined by Buyer, for the time of any officers or
employees of the Buyer devoted to appearing and preparing to appear as
witnesses, assisting in preparation for hearings, trials or pretrial matters, or
otherwise with respect to inquiries, hearing, trials, and other proceedings
relating to the subject matter of this Agreement. The reimbursement obligations
of the Company under this section shall be in addition to any liability which
the Company may otherwise have, shall extend upon the same terms and conditions
to any Affiliates of the Buyer who or which are actually named in such action,
proceeding or investigation, and partners, directors, agents, employees and
controlling persons (if any), as the case may be, of Buyer and any such
affiliate, and shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the Company, Buyer and any such
affiliate and any such person. The Company also agrees that neither the Buyer
nor any such affiliate, partner, director, agent, employee or controlling person
shall have any liability to the Company or any Person asserting claims on behalf
of or in right of the Company in connection with or as a result of the
consummation of any of the Transaction Agreements, except as may be expressly
and specifically provided in or contemplated by this Agreement.
8
g. Available Shares. The Company shall have at all times authorized
and reserved for issuance, free from preemptive rights, a number of shares (the
"Minimum Available Shares") at least equal to the sum of (x) one hundred percent
(100%) of the number of shares of Common Stock issuable upon exercise of all
outstanding Warrants held by Buyer.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. The obligation of
the Company hereunder to issue and sell the Securities to Buyer at the Closing
is subject to the satisfaction, at or before the Closing Date of each of the
following conditions thereto, provided that these conditions are for the
Company's sole benefit and may be waived by the Company at any time in its sole
discretion:
a. Buyer shall have executed this Agreement, and delivered the same
to the Company.
b. Buyer shall have delivered the Purchase Price in accordance with
Section 1.
c. The representations and warranties of Buyer shall be true and
correct in all material respects as of the date when made and as of the Closing
Date as though made at that time (except for representations and warranties that
speak as of a specific date), and Buyer shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by Buyer
at or prior to the Closing Date.
d. No undisclosed litigation, statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement.
7. CONDITIONS TO BUYER' OBLIGATION TO PURCHASE. The obligation of Buyer
to purchase the Securities at the Closing is subject to the satisfaction, at or
before the Closing Date of each of the following conditions, provided that these
conditions are for Buyer's sole benefit and may be waived by Buyer at any time
in their sole discretion:
a. The Company shall have executed this Agreement and the Warrant
Agreement. The Company shall have submitted irrevocable instructions to the
transfer agent for the issuance of the Common Stock.
b. The representations and warranties of the Company shall be true
and correct in all material respects as of the date when made and as of the
Closing Date as though made at such time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing Date.
c. No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.
d. No material undisclosed event shall have occurred which could
reasonably be expected to have a Material Adverse Effect on the Company.
8. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law. THIS AGREEMENT SHALL BE ENFORCED, GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICT OF LAWS. THE PARTIES HERETO HEREBY SUBMIT TO THE
EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS AND THE NEW YORK
STATE COURTS LOCATED IN NEW YORK COUNTY IN THE STATE OF NEW YORK WITH RESPECT TO
ANY DISPUTE ARISING UNDER THIS AGREEMENT, THE AGREEMENTS ENTERED INTO IN
9
CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. BOTH
PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE THAT SERVICE
OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY
RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW. BOTH PARTIES AGREE THAT A FINAL
NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER
LAWFUL MANNER. The Company and the Buyer 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 the
Transaction Agreements.
b. Counterparts; Signatures by Facsimile. This Agreement may be
executed in one or more counterparts, each of which shall be deemed an original
but all of which shall constitute one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party. This Agreement, once executed by a party, may be delivered to the
other party hereto by facsimile transmission of a copy of this Agreement bearing
the signature of the party so delivering this Agreement.
c. Headings. The headings of this Agreement are for convenience of
reference only and shall not form part of, or affect the interpretation of, this
Agreement.
d. Severability. In the event that any provision of this Agreement
is invalid or unenforceable under any applicable statute or rule of law, then
such provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law. Any provision hereof which may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other provision hereof.
e. Entire Agreement; Amendments. This Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. Except as
provided herein, no provision of this Agreement may be waived or amended other
than by an instrument in writing signed by the party to be charged with
enforcement.
f. Notices. Any notices required or permitted to be given under the
terms of this Agreement shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier (including a recognized
overnight delivery service) or by facsimile and shall be effective five days
after being placed in the mail, if mailed by regular United States mail, or upon
receipt, if delivered personally or by courier (including a recognized overnight
delivery service) or by facsimile, in each case addressed to a party. The
addresses for such communications shall be:
If to the Company:
Attn.: Xxxxxxx Xxxxxxxxx, President
Peak Entertainment Holdings, Inc.
Xxxxxxx Xxxx, Xxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxx, XX XX00 0XX
Tel: x00(0)0000 000000
Fax: x00(0)0000 000000
With a copy (which shall not constitute
notice) to:
Attn.: Xxx Xxxxxxx, Esq.
Law Offices of Xxx Xxxxxxx
00 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Tel: 000-000-0000
10
Fax: 000-000-0000
If to a Buyer:
At the address and facsimile number listed
on the signature page hereof.
Each party shall provide notice to the other party of any change in address.
g. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. Neither
the Company nor any Buyer shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other.
Notwithstanding the foregoing, subject to Section 2(f), any Buyer may assign its
rights hereunder to any person that purchases Securities in a private
transaction from a Buyer or to any of its "affiliates," as that term is defined
under the 1934 Act.
h. Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
i. Further Assurances. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
j. No Strict Construction. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
k. Remedies. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to Buyer by vitiating the
intent and purpose of the transaction contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Agreement will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Agreement, that Buyer
shall be entitled, in addition to all other available remedies at law or in
equity.
l. Survival. The representations, warranties and covenants made by
each of the Company and Buyer in this Agreement, the annexes, schedules and
exhibits hereto and in each instrument, agreement and certificate entered into
and delivered by them pursuant to this Agreement, shall survive the Closing and
the consummation of the transactions contemplated hereby. In the event of a
breach or violation of any of such representations, warranties or covenants, the
party to whom such representations, warranties or covenants have been made shall
have all rights and remedies for such breach or violation available to it under
the provisions of this Agreement, irrespective of any investigation made by or
on behalf of such party on or prior to the Closing Date.
m. Indemnification.
(a) The Company hereby agrees to indemnify and hold harmless Buyer
and its officers, directors, partners and members (collectively, the "Buyer
Indemnitees"), from and against any and all damages, and agrees to reimburse
Buyer Indemnitees for all reasonable out-of-pocket expenses (including the
reasonable fees and expenses of legal counsel), in each case promptly as
incurred by Buyer Indemnitees and to the extent arising out of or in connection
with:
(i) any material misrepresentation, omission of fact or breach
of any of the Company's representations or warranties contained in this
Agreement, the annexes, schedules or exhibits hereto or any instrument,
agreement or certificate entered into or delivered by the Company pursuant to
this Agreement; or
(ii) any material failure by the Company to perform in any
material respect any of its covenants, agreements, undertakings or obligations
set forth in this Agreement, the annexes, schedules or exhibits hereto or any
11
instrument, agreement or certificate entered into or delivered by the Company
pursuant to this Agreement; or
(iii) any action instituted against any Buyer, or any of its
affiliates, by any stockholder of the Company who is not an affiliate of Buyer,
with respect to any of the transactions contemplated by this Agreement.
(b) Buyer hereby agrees to indemnify and hold harmless the Company, its
affiliates and its respective officers, directors, partners and members
(collectively, the "Company Indemnitees"), from and against any and all damages,
and agrees to reimburse the Company Indemnitees for reasonable all out-of-pocket
expenses (including the reasonable fees and expenses of legal counsel), in each
case promptly as incurred by the Company Indemnitees and to the extent arising
out of or in connection with:
(i) any material misrepresentation, omission of fact, or breach of
any of any Buyer's representations or warranties contained in this Agreement,
the annexes, schedules or exhibits hereto or any instrument, agreement or
certificate entered into or delivered by Buyer pursuant to this Agreement; or
(ii) any material failure by Buyer to perform in any material
respect any of its covenants, agreements, undertakings or obligations set forth
in this Agreement or any instrument, certificate or agreement entered into or
delivered by Buyer pursuant to this Agreement.
(c) Promptly after receipt by either party hereto seeking indemnification
pursuant to this Section 8(m) (an "Indemnified Party") of written notice of any
investigation, claim, proceeding or other action in respect of which
indemnification is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the party from whom indemnification pursuant to this
Section 8(m) is being sought (the "Indemnifying Party") of the commencement
thereof; but the omission to so notify the Indemnifying Party shall not relieve
it from any liability that it otherwise may have to the Indemnified Party,
except to the extent that the Indemnifying Party is actually prejudiced by such
omission or delay. In connection with any Claim as to which both the
Indemnifying Party and the Indemnified Party are parties, the Indemnifying Party
shall be entitled to assume the defense thereof. Notwithstanding the assumption
of the defense of any Claim by the Indemnifying Party, the Indemnified Party
shall have the right to employ separate legal counsel and to participate in the
defense of such Claim, and the Indemnifying Party shall bear the reasonable
fees, out-of-pocket costs and expenses of such separate legal counsel to the
Indemnified Party if (and only if): (x) the Indemnifying Party shall have agreed
to pay such fees, out-of-pocket costs and expenses, (y) the Indemnified Party
reasonably shall have concluded that representation of the Indemnified Party and
the Indemnifying Party by the same legal counsel would not be appropriate due to
actual or, as reasonably determined by legal counsel to the Indemnified Party,
potentially differing interests between such parties in the conduct of the
defense of such Claim, or if there may be legal defenses available to the
Indemnified Party that are in addition to or disparate from those available to
the Indemnifying Party, or (z) the Indemnifying Party shall have failed to
employ legal counsel reasonably satisfactory to the Indemnified Party within a
reasonable period of time after notice of the commencement of such Claim. If the
Indemnified Party employs separate legal counsel in circumstances other than as
described in clauses (x), (y) or (z) above, the fees, costs and expenses of such
legal counsel shall be borne exclusively by the Indemnified Party. Except as
provided above, the Indemnifying Party shall not, in connection with any Claim
in the same jurisdiction, be liable for the fees and expenses of more than one
firm of legal counsel for the Indemnified Party (together with appropriate local
counsel). The Indemnifying Party shall not, without the prior written consent of
the Indemnified Party (which consent shall not unreasonably be withheld), settle
or compromise any Claim or consent to the entry of any judgment that does not
include an unconditional release of the Indemnified Party from all liabilities
with respect to such Claim or judgment.
[signature page follows]
12
IN WITNESS WHEREOF, the undersigned Buyer and the Company have caused this
Agreement to be duly executed as of the date first above written.
THE COMPANY: PEAK ENTERTAINMENT HOLDINGS, INC.
By:
---------------------------------------
Wilf Shorrocks
President and Chief Executive Officer
BUYER: __________________________
STATE OF RESIDENCE:
------------------------
ADDRESS:
-----------------------------------
TELEPHONE:
---------------------------------
FACSIMILE:
---------------------------------
13
EXHIBIT A
THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. EXCEPT AS
OTHERWISE SET FORTH HEREIN, OR IN THE SECURITIES PURCHASE AGREEMENT, NEITHER
THIS WARRANT NOR ANY OF SUCH SHARES MAY BE SOLD, PLEDGED, TRANSFERRED, ASSIGNED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR SUCH SECURITIES UNDER SAID ACT OR, AN OPINION OF COUNSEL, IN FORM,
SUBSTANCE AND SCOPE, CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE
TRANSACTIONS, THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD
PURSUANT TO RULE 144 UNDER SUCH ACT.
RIGHT TO PURCHASE ______________ SHARES OF COMMON STOCK AT $0.75 PER SHARE
PEAK ENTERTAINMENT HOLDINGS, INC.
STOCK PURCHASE WARRANT AGREEMENT
CIS13B6.030404 WARRANT NO. __
THIS CERTIFIES THAT, for value received, ______________ (the "Holder"), is
entitled, upon the terms and subject to the conditions hereinafter set forth, at
any time on or after the closing of the related Securities Purchase Agreement
dated as of March 3, 2004 (the "Initial Exercise Date") and on or prior to the
close of business on March 10, 2007 (the "Termination Date"), but not
thereafter, to subscribe for and purchase from Peak Entertainment Holdings,
Inc., a Nevada corporation (the "Company"), up to __________ fully paid and
nonassessable shares of the Company's Common Stock (the "Common Stock"), at the
exercise price of $0.75 per share (the "Exercise Price"). The Exercise Price and
the number of shares for which this Warrant is exercisable shall be subject to
adjustment as provided herein. In the event of any conflict between the terms of
this Warrant and the Securities Purchase Agreement, dated as of March 3, 2004,
by and among the Company and Buyer listed on the execution page thereof (the
"Securities Purchase Agreement"), the Securities Purchase Agreement shall
control. Capitalized terms used and not otherwise defined herein shall have the
meanings set forth for such terms in the Securities Purchase Agreement.
1. Title to Warrant. Prior to the Termination Date and subject to
compliance with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company by the
holder hereof in person or by duly authorized attorney, upon surrender of this
Warrant together with the Assignment Form annexed hereto, properly endorsed.
2. Authorization of Shares. The Company covenants that all shares of
Common Stock which may be issued upon the exercise of rights represented by this
Warrant will, upon exercise of the rights represented by this Warrant, be duly
authorized, validly issued, fully paid and nonassessable and free from all
taxes, liens and charges in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously with such issue).
3. Exercise of Warrant. Except as provided in Sections 4 and 5 herein,
exercise of the purchase rights represented by this Warrant may be made at any
time or times on or after the Initial Exercise Date, and before the close of
business on the Termination Date by the surrender of this Warrant and the Notice
of Exercise Form annexed hereto, duly executed, at the office of the Company (or
such other office or agency of the Company as it may designate by notice in
writing to the registered holder hereof at the address of such holder appearing
on the books of the Company) and upon payment of the Exercise Price of the
shares thereby purchased by wire transfer or cashier's check drawn on a United
States bank, the holder of this Warrant shall be entitled to receive a
certificate for the number of shares of Common Stock so purchased. Certificates
for shares purchased hereunder shall be delivered to the Holder hereof within
three (3) Trading Days after the date on which this Warrant shall have been
exercised as aforesaid. This Warrant shall be deemed to have been exercised and
such certificate or certificates shall be deemed to have been issued, and the
Holder or any other person so designated to be named therein shall be deemed to
have become a holder of record of such shares for all purposes, as of the date
14
this Warrant has been exercised by payment to, and receipt thereof by, the
Company of the Exercise Price and all taxes required to be paid by Holder, if
any, pursuant to Section 5 herein prior to the issuance of such shares. If this
Warrant shall have been exercised in part, the Company shall, at the time of
delivery of the certificate or certificates representing Warrant Shares, deliver
to Holder a new Warrant evidencing the rights of Holder to purchase the
unpurchased shares of Common Stock called for by this Warrant, which new warrant
shall in all other respects be identical with this Warrant.
4. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. As to any fraction of a share which Holder would otherwise be entitled
to purchase upon such exercise, the Company shall pay a cash adjustment in
respect of such final fraction in an amount equal to the Exercise Price.
5. Limitation on Exercise of Warrant. In no event shall the Holder be
permitted to exercise this Warrant for shares of Common Stock in excess of the
amount of this Warrant upon the exercise of which, (x) the number of shares of
Common Stock beneficially owned by such Holder (other than shares of Common
Stock issuable upon exercise of this Warrant) plus (y) the number of shares of
Common Stock issuable upon exercise of this Warrant, would be equal to or exceed
4.9% of the number of shares of Common Stock then issued and outstanding,
including shares issuable upon exercise of this Warrant held by such Holder
after application of this Section 5. As used herein, beneficial ownership shall
be determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder. To the extent that
the limitation contained in this Section 5 applies, the determination of whether
this Warrant is exercisable (in relation to other securities owned by the
Holder) and which portion of this Warrant is exercisable shall be in the sole
discretion of such Holder, and the submission of a Notice of Exercise shall be
deemed to be such Holder's determination of whether this Warrant is exercisable
(in relation to other securities owned by such Holder) and of which portion of
this Warrant is exercisable, in each case subject to such aggregate percentage
limitation, and the Company shall have no obligation to verify or confirm the
accuracy of such determination. Nothing contained herein shall be deemed to
restrict the right of a Holder to exercise this Warrant into shares of Common
Stock at such time as such exercise will not violate the provisions of this
Section 5. The provisions of this Section 5 may be waived by the Holder of this
Warrant upon not less than 75 days' prior notice to the Company, and the
provisions of this Section 5 shall continue to apply until such 75th day (or
such later date as may be specified in such notice of waiver). No exercise of
this Warrant in violation of this Section 5, but otherwise in accordance with
this Warrant, shall affect the status of the Common Stock issued upon such
exercise as validly issued, fully-paid and nonassessable.
6. Charges, Taxes and Expenses. Issuance of certificates for shares of
Common Stock upon the exercise of this Warrant shall be made without charge to
the Holder hereof for any issue or transfer tax or other incidental expense in
respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the name
of the Holder of this Warrant, or in such name or names as may be directed by
the holder of this Warrant; provided, however, that in the event certificates
for shares of Common Stock are to be issued in a name other than the name of the
Holder of this Warrant, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto, duly executed by the Holder
hereof; and the Company may require, as a condition thereto, the payment of a
sum sufficient to reimburse it for any transfer tax incidental thereto.
7. Closing of Books. The Company will not close its shareholder books
or records in any manner which prevents the timely exercise of this Warrant.
8. Transfer, Division and Combination.
(a) Subject to compliance with any applicable securities laws,
transfer of this Warrant and all rights hereunder, in whole or in part, shall be
registered on the books of the Company to be maintained for such purpose, upon
surrender of this Warrant at the principal office of the Company, together with
a written assignment of this Warrant substantially in the form attached hereto
duly executed by Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such surrender
and, if required, such payment, the Company shall execute and deliver a new
warrant or warrants in the name of the assignee or assignees and in the
denomination or denominations specified in such instrument of assignment, and
shall issue to the assignor a new warrant evidencing the portion of this Warrant
not so assigned, and this Warrant shall promptly be cancelled. This Warrant, if
15
properly assigned, may be exercised by a new holder for the purchase of shares
of Common Stock without having a new warrant issued.
(b) This Warrant may be divided or combined with other Warrants upon
presentation hereof 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 Holder or its agent or attorney. Subject to compliance
with Section 8(a), 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 or Warrants to be divided or combined in accordance
with such notice.
(c) The Company shall prepare, issue and deliver at its own expense
(other than transfer taxes) the new Warrant or Warrants under this Section 8.
(d) The Company agrees to maintain, at its aforesaid office, books
for the registration and the registration of transfer of the Warrants.
9. No Rights as Shareholder until Exercise. This Warrant does not
entitle the Holder hereof 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 such 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.
10. Loss, Theft, Destruction or Mutilation of Warrant. The Company
covenants that upon receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant certificate
or any stock certificate relating to the Warrant Shares, and in case of loss,
theft or destruction, of indemnity or security reasonably satisfactory to it
(which shall not include the posting of any bond), and upon surrender and
cancellation of such Warrant or stock certificate, if mutilated, the Company
will make and deliver a new warrant or stock certificate of like tenor and dated
as of such cancellation, in lieu of such Warrant or stock certificate.
11. Saturdays, Sundays, Holidays, etc. If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday, Sunday or a legal holiday, then such action may be
taken or such right may be exercised on the next succeeding day not a Saturday,
Sunday or legal holiday.
12. Adjustments of Exercise Price and Number of Warrant Shares.
(a) Stock Splits, etc. The number and kind of securities purchasable
upon the exercise of this Warrant and the Exercise Price shall be subject to
adjustment from time to time upon the happening of any of the following. In the
event that the Company shall (i) pay a dividend in shares of Common Stock or
make a distribution in shares of Common Stock to holders of its outstanding
Common Stock, (ii) subdivide its outstanding shares of Common Stock into a
greater number of shares of Common Stock, (iii) combine its outstanding shares
of Common Stock into a smaller number of shares of Common Stock, (iv) issue any
shares of its capital stock in a reclassification of the Common Stock, or (v)
otherwise transacts a similar adjustment to its class of Common Stock, then the
number of Warrant Shares purchasable upon exercise of this Warrant and the
Exercise Price immediately prior thereto shall be adjusted so that the holder of
this Warrant shall be entitled to receive the kind and number of Warrant Shares
or other securities of the Company which the holder would have owned or have
been entitled to receive had such Warrant been exercised in advance thereof.
Upon each such adjustment of the kind and number of Warrant Shares or other
securities of the Company which are purchasable hereunder, the holder of this
Warrant shall thereafter be entitled to purchase the number of Warrant Shares or
other securities resulting from such adjustment at an Exercise Price per Warrant
Share or other security obtained by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of Warrant Shares purchasable
pursuant hereto immediately prior to such adjustment and dividing by the number
of Warrant Shares or other securities of the Company resulting from such
adjustment. An adjustment made pursuant to this paragraph shall become effective
immediately after the effective date of such event retroactive to the record
date, if any, for such event.
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(b) Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is a change in or distribution with respect to the Common Stock of the Company),
or sell, transfer or otherwise dispose of all or substantially all its property,
assets or business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Stock
of the Company, then the Holder shall have the right thereafter to receive, upon
exercise of this Warrant, the number of shares of common stock of the successor
or acquiring corporation or of the Company, if it is the surviving corporation,
and Other Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a holder of
the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such event. In case of any such reorganization,
reclassification, merger, consolidation or disposition of assets, the successor
or acquiring corporation (if other than the Company) 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
the obligations and liabilities hereunder, subject to such modifications as may
be deemed appropriate (as determined in good faith by resolution of the Board of
Directors of the Company) in order to provide for adjustments of shares of
Common Stock for which this Warrant is exercisable which shall be as nearly
equivalent as practicable to the adjustments provided for in this Section 12.
For purposes of this Section 12, "common stock of the successor or acquiring
corporation" shall include stock of such corporation of any class which is not
preferred as to dividends or assets over any other class of stock of such
corporation and which is not subject to redemption and shall also include any
evidences of indebtedness, shares of stock or other securities which are
exercisable 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 Section 12 shall similarly apply to successive
reorganizations, reclassifications, mergers, consolidations or disposition of
assets.
(c) 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 part of its business or operations or disposes all or 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
(A) 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; and
(B) the Exercise Price on the Outstanding Warrants shall be
adjusted immediately after consummation of the Spin Off by multiplying the
Exercise Price by a fraction (if, but only if, such fraction is less than 1.0),
the numerator of which is the average Closing Bid Price of the Common Stock for
the five (5) trading days immediately following the fifth trading day after the
Record Date, and the denominator of which is the average Closing Bid Price of
the Common Stock on the five (5) trading days immediately preceding the Record
Date; and such adjusted Exercise Price shall be deemed to be the Exercise Price
with respect to the Outstanding Warrants after the Record Date.
13. Voluntary Adjustment by the Company. The Company may at any time
during the term of this Warrant, reduce the then current Exercise Price to any
amount and for any period of time deemed appropriate by the Board of Directors
of the Company.
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14. Notice of Adjustment. Whenever the number of Warrant Shares or
number or kind of securities or other property purchasable upon the exercise of
this Warrant or the Exercise Price is adjusted, as herein provided, the Company
shall promptly send notice to the holder of this Warrant notice of such
adjustment or adjustments setting forth the number of Warrant Shares (and other
securities or property) purchasable upon the exercise of this Warrant and the
Exercise Price of such Warrant Shares (and other securities or property) after
such adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which such adjustment was made.
Such notice, in the absence of manifest error, shall be conclusive evidence of
the correctness of such adjustment.
15. Call Provision. Prior to the Termination Date, the Warrant shall be
callable, under the circumstances described in this Section, at the discretion
of the Company, for $0.10 per warrant (the "Call Fee"). The Company's right to
call shall be exercisable commencing upon the day following the tenth
consecutive business day during which the Company's common stock has traded at
prices of, or in excess of, $1.75 per share, subject to adjustment for stock
splits, dividends, subdivisions, reclassification and the like, with weekly
volume of such trading being in excess of the total number of shares represented
by this Warrant. In the event the Company exercises its right to call the
Warrants, the Company shall give the Holder written notice of such decision. In
the event that the Holder does not exercise all or any part of the Warrants or
that the Company does not receive the Warrant from the Holder within 30 days
from the date on the notice to the Holder of the Company's intention to redeem
the Warrant, then the Warrant shall be deemed canceled, and the Holder shall not
be entitled to further exercise thereof or to the Redemption Fee.
16. Notice of Corporate Action. If at any time:
(a) the Company shall take a record of the holders of its Common
Stock for the purpose of entitling them to receive a dividend or other
distribution, or any right to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or
property, or to receive any other right, or
(b) there shall be any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
consolidation or merger of the Company with, or any sale, transfer or other
disposition of all or substantially all the property, assets or business of the
Company to, another corporation or,
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to the Holder (i)
at least 30 days' prior written notice of the date on which a record date shall
be selected for such dividend, distribution or right or for determining rights
to vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, liquidation or winding up, and (ii)
in the case of any such reorganization, reclassification, merger, consolidation,
sale, transfer, disposition, dissolution, liquidation or winding up, at least 30
days' prior written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause also shall specify (i) the date
on which any such record is to be taken for the purpose of such dividend,
distribution or right, the date on which the holders of Common Stock shall be
entitled to any such dividend, distribution or right, and the amount and
character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such disposition, dissolution, liquidation or winding
up. Each such written notice shall be sufficiently given if addressed to the
Holder at the last address of the Holder appearing on the books of the Company
and delivered in accordance with Section 18(d).
17. Authorized Shares. The Company covenants that during the period the
Warrant is outstanding, it will reserve from its authorized and unissued Common
Stock a sufficient number of shares to provide for the issuance of the Warrant
Shares upon the exercise of any purchase rights under this Warrant. The Company
further covenants that its issuance of this Warrant shall constitute full
authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for the Warrant
Shares upon the exercise of the purchase rights under this Warrant. The Company
will take all such reasonable action as may be necessary to assure that such
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Warrant Shares may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of the OTCBB or other
market upon which the Common Stock may be listed.
The Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such actions as may be necessary or appropriate to protect the rights of the
Holder against impairment. Without limiting the generality of the foregoing, the
Company will (a) take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant, and (b)
use its best efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof as may be necessary
to enable the Company to perform its obligations under this Warrant.
18. Miscellaneous.
(a) Jurisdiction. This Warrant shall be binding upon any successors
or assigns of the Company. This Warrant shall constitute a contract under the
laws of New York without regard to its conflict of law, principles or rules, and
be subject to governing law provisions set forth in Section 8 of the Securities
Purchase Agreement.
(b) Restrictions. The holder hereof acknowledges that the Warrant
Shares acquired upon the exercise of this Warrant, if not registered, will have
restrictions upon resale imposed by state and federal securities laws.
(c) Nonwaiver and Expenses. No course of dealing or any delay or
failure to exercise any right hereunder on the part of the Holder shall operate
as a waiver of such right or otherwise prejudice the Holder's rights, powers or
remedies, notwithstanding all rights hereunder terminate on the Termination
Date. If the Company fails to comply with any provision of this Warrant, the
Company shall pay to the Holder such amounts as shall be sufficient to cover any
costs and expenses including, but not limited to, reasonable attorneys' fees,
including those of appellate proceedings, incurred by the Holder in collecting
any amounts due pursuant hereto or in otherwise enforcing any of its rights,
powers or remedies hereunder.
(d) Notices. Any notice, request or other document required or
permitted to be given or delivered to the Holder hereof by the Company shall be
delivered in accordance with the notice provisions of the Securities Purchase
Agreement.
(e) Limitation of Liability. No provision hereof, in the absence of
affirmative action by the Holder to purchase shares of Common Stock, and no
enumeration herein of the rights or privileges of the Holder hereof, shall give
rise to any liability of the Holder for the purchase price of any Common Stock
or as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
(f) Remedies. The Holder, in addition to being entitled to exercise
all rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Warrant.
(g) Successors and Assigns. Subject to applicable securities laws,
this Warrant and the rights and obligations evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the successors
and permitted assigns of the Holder. The provisions of this Warrant are intended
to be for the benefit of all Holders from time to time of this Warrant and shall
be enforceable by any such Holder or holder of Warrant Shares.
(h) Indemnification. The Company agrees to indemnify and hold
harmless the Holder from and against any liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, attorneys' fees,
expenses and disbursements of any kind which may be imposed upon, incurred by or
asserted against the Holder in any manner relating to or arising out of any
failure by the Company to perform or observe in any material respect any of its
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covenants, agreements, undertakings or obligations set forth in this Warrant;
provided, however, that the Company will not be liable hereunder to the extent
that any liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, attorneys' fees, expenses or disbursements are
found in a final non-appealable judgment by a court to have resulted from the
holder's negligence, bad faith or willful misconduct in its capacity as a
stockholder or warrantholder of the Company.
(i) Amendment. This Warrant may be modified or amended or the
provisions hereof waived with the written consent of the Company and the Holder.
(j) Severability. Wherever possible, each provision of this Warrant
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provisions or the remaining provisions of this Warrant.
(k) Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
[signature page follows]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its officer thereunto duly authorized.
Dated: March __, 2004
Peak Entertainment Holdings, Inc.
By:
-----------------------------------------
Wilf Shorrocks
President and Chief Executive Officer
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NOTICE OF EXERCISE
To: Peak Entertainment Holdings, Inc.
The undersigned hereby elects to purchase ________ shares of Common Stock
(the "Common Stock"), at an exercise price of $0.75 per share, of Peak
Entertainment Holdings, Inc. pursuant to the terms of the attached Warrant, and
tenders herewith payment of the exercise price in full, in the amount of
$_____________, together with all applicable transfer taxes, if any.
Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
-------------------------------
(Name)
-------------------------------
(Address)
-------------------------------
Dated:
---------------------
------------------------------
Signature
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ASSIGNMENT FORM
(To assign the foregoing warrant, execute this form and supply required
information. Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to whose address is .
Dated: _________________
Holder's Signature: _________________________________
Holder's Address: ___________________________________
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in an fiduciary or other representative
capacity should file proper evidence of authority to assign the foregoing
Warrant.
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