EXHIBIT 4.2
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated August 10, 2005,
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. This Agreement is for a private placement offering by the Company
pursuant to which the Buyer is purchasing a $100,000 ninety day convertible
promissory note yielding 10% simple annual interest (the "Private Placement");
C. Buyer desires to purchase and the Company desires to issue and sell,
upon the terms and conditions set forth in this Agreement: (i) 10% convertible
promissory note of the Company, in the form attached hereto as Exhibit A (the
"Promissory Note"), convertible into shares of common stock of the Company (the
"Common Stock"), at a valuation of $0.30 per share ("Bridge Valuation"), upon
the terms and subject to the limitations and conditions set forth in such
Promissory Note; and (ii) such number of warrants as providing a 35% warrant
coverage ("Warrant Coverage"), in the form attached hereto as Exhibit B, to
purchase shares of the Company's Common Stock (the "Warrants"), exercisable for
three years at $0.30 per share; (the Common Stock and Warrants are sometimes
referred to herein as the "Securities")
D. Buyer wishes to purchase, upon the terms and conditions stated in this
Agreement, the amount of Securities issuable in the Private Placement for that
"Amount Invested" that Buyer indicates on the signature page hereto;
NOW THEREFORE, the Company and Buyer hereby agrees 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 agrees to purchase from the
Company such principal amount of Promissory Note as equals the Amount Invested
and such number of Warrants as providing a 100% Warrant Coverage. "Warrant
Coverage" is defined and calculated as the principal amount of the Promissory
Note ($100,000) divided by the warrant exercise price, with that number then
multiplied by 1.00. For example, an Amount Invested of $100,000 would entitle
the Buyer to: (i) $100,000 in principal amount of Promissory Note; and (ii)
warrants to purchase 333,333 shares of common stock.
b. Form of Payment. Upon execution of this Agreement, (i) Buyer
shall pay the purchase price for the Promissory Note and the Warrants to be
issued and sold to them at the Closing (as defined below) (the "Purchase Price")
by wire transfer of immediately available funds shall be paid to the Company by
wire transfer to:
Law Offices of Xxx Xxxxxxx
Escrow Account
Account No. 00000000
Citibank, N.A.
00 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
ABA: 000000000
c. Closing Date. The date and time of the issuance and sale of the
Securities pursuant to this Agreement (the "Closing Date") shall be on or before
August 10, 2005.
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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 Promissory Note and the shares of Common Stock issuable upon conversion of
or otherwise pursuant to the Promissory Note pursuant to this Agreement (such
shares of Common Stock being collectively referred to herein as the "Conversion
Shares") and the Warrants and the shares of Common Stock issuable upon exercise
thereof (the "Warrant Shares" and, collectively with the Promissory Note,
Warrants and Conversion Shares, 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 conducted its own independent
investigation of the Company, has access to the Company's filings on Xxxxx
available at xxxx://xxx.xxx.xxx/, and has, so far as the Buyer is aware,
received all documents, records, books and other information pertaining to
Buyer's investment in the Company that have been requested by Buyer.
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.
f. Transfer or Resale. Buyer understands that: (i) except as
provided for 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 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 provisions 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.
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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
(i) 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, (ii) subject to a court's
discretionary authority with respect to the granting of specific performance,
injunctive relief or other equitable remedies and (iii) except to the extent the
indemnification and contribution provisions, if any, contained in any this
Agreement may be limited by applicable federal or state securities laws or
unenforceable as against public policy..
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 under the 0000 Xxx) of the
Company.
k. 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.
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 an entity duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is incorporated,
organized or formed, 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 a 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
agreements annexed hereto as exhibits (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 the Transaction Agreements by the Company and the
consummation by it of the transactions contemplated hereby and thereby
(including without limitation, the issuance of the Securities), 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,
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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 a legal,
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms.
c. Capitalization. As of August 5, 2005, the authorized capital
stock of the Company consists of 900,000,000 shares of Common Stock, of which
approximately 31,470,108 shares are issued and outstanding. As of August 5,
2005, the Company has a principal amount of $958,500 in 8% convertible
debentures issued in January 2004 outstanding (principal, as well as accrued
interest, are convertible at $.30 per share), a principal amount of $360,000 in
12% convertible debentures issued in May 2005 outstanding (convertible at $.30
per share), and warrants to purchase 9,282,000 shares of common stock (such
warrants or options are exerciseable at prices of $0.35 to $1.20 per share, with
most of those warrants exercisable at either $0.50 or $0.75). The Company has a
consulting agreement pursuant to which 106,380 shares remain to be issued in
2005. The Company also has or is negotiating commitments or plans for adoption
that call for it to issue 5,000,000 shares and/or options or warrants to
employees, consultants, and agents pursuant to negotiations or stock incentive
plans yet to be formally adopted and approved or concluded. The Company also
entered into a letter of intent with Maverick Entertainment Plc, pursuant to
which it may be required to issue securities. All of such outstanding reserved
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 set forth in this paragraph and in the
SEC Documents, there are no outstanding options, warrants, rights (including,
without limitation, rights of first refusal, anti-dilution, conversion,
preemptive or similar rights) or agreements for the purchase or acquisition from
the Company of any shares of its capital stock or any securities convertible
into or ultimately exchangeable or exercisable for any shares of its capital
stockother than the Securities.
d. Issuance of Shares. The Conversion Shares and Warrant Shares are
duly authorized and reserved for issuance and, upon conversion of the Promissory
Note and exercise of the Warrants in accordance with their respective terms,
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 Conversion Shares and Warrant Shares upon conversion of the
Debenture or exercise of the Warrants. The Company further acknowledges that its
obligation to issue Conversion Shares and Warrant Shares upon conversion of the
Promissory Note or exercise of the Warrants in accordance with this Agreement,
the Promissory Note and the Warrants 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 other Transaction Documents 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
Conversion Shares and Warrant Shares), will not (i) conflict with or result in a
violation of any provision of the Company's 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
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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 a 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, the Promissory Note or the Warrants in
accordance with the terms hereof or thereof or to issue and sell the Promissory
Note and Warrants in accordance with the terms hereof and to issue the
Conversion Shares upon conversion of the Promissory Note and the Warrant Shares
upon exercise of the Warrants.
g. Reports and Financial Statements; Absence of Certain Changes. The
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by the Company with the SEC as of the date of this
Agreement (collectively, the "SEC Documents") pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934
Act"), and has previously furnished or made available to Buyer true and complete
copies of such SEC Documents and shall promptly deliver to Buyer any SEC
Documents filed between the date hereof and the Closing Date. Such SEC Documents
complied with the reporting requirements with respect thereto, and none of such
SEC Documents, as of their respective dates (and as amended through the date
hereof), contained or, with respect to SEC Documents filed after the date
hereof, will contain any untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading. All reports, schedules, forms, statements and other
documents required to be filed by any person or entity with respect to the
Company pursuant to Section 16 of the 1934 Act as of the date hereof have been
filed, and do not contain any untrue statement of material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading. Since December 31, 2004, other than in the
ordinary course of business, 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 or in the SEC
Documents.
i. Intellectual Property. The Company has the rights stated herein
and 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 herein and/or 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 herein and/or 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.
The obligations of the Company under the Promissory Note shall
be secured by intellectual property owned by the Company; the security interest
rights granted to the Buyer are behind those previously granted to existing
debenture holders. The Company shall be entitled to grant security interest
rights senior to the rights of the Buyer to a financial institution, subject to
the approval of the Buyer, which shall not be unreasonably withheld. The Company
shall be entitled to grant security interest rights similar to the rights
granted to the Buyer to debenture purchasers in an offering planned to raise a
total of $1 - $4 million dollars.
j. 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 retain the right (but are 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.
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4. COVENANTS.
a. SEC Reporting. 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
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.
c. 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
Promissory Note or 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 and (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. Registration Rights. If the Company proposes to register any of
its securities under the Securities Act for sale to the public, whether for its
own account or for the account of other security holders or both (except with
respect to registration statements on Forms X-0, X-0 and any successor forms
thereto), each such time it will give written notice to such effect to each
holder of the Securities from time to time (a "Holder") at least ten days prior
to such filing. Upon the written request of any Holder, received by the Company
within ten days after the giving of any such notice by the Company, to register
any of its shares of common stock eligible to be registered, the Company will
cause such shares as Buyer has a right to own pursuant to ownership of the
Securities to be covered by the registration statement proposed to be filed by
the Company. Notwithstanding the foregoing, in the event that any registration
pursuant to this provision shall be, in whole or in part, an underwritten public
offering of common stock, the number of shares to be included in such an
underwriting may be reduced (pro rata among the requesting holders and the
Company's placement agent and its assigns (based upon the number of Shares
requested to be registered by them)) if and to the extent that the managing
underwriter shall be of the good faith opinion that such inclusion would reduce
the number of shares to be offered by the Company, its other securities owners,
the placement agent and its assigns or requesting holders of Shares.
Notwithstanding the foregoing provisions, the Company may withdraw any
registration statement referred to in this provision without thereby incurring
any liability to any Holder. In the event that the SEC 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 other reason, the Company shall not register such
shares. Holder shall cooperate with the Company in furnishing such information
regarding itself as reasonably needed to prepare, file and effect the
registration statement, and the failure to cooperate shall suspend the Company's
obligations discussed in this paragraph.
Notwithstanding anything to the contrary, if the Company has
not filed a registration statement within six months hereof, Buyer shall be
entitled to demand the filing of a registration statement covering the resale of
the shares of common stock underlying the Securities purchased pursuant to this
Agreement. Such demand shall be consistent with the Company's year-end federal
securities reporting obligations.
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All expenses other than underwriting discounts and commissions
incurred in connection with registrations, filings or qualifications pursuant to
this paragraph, including, without limitation, all registration, filing and
qualification fees (including "blue sky" fees), printers' and accounting fees,
fees and disbursements of counsel for the Company (including fees and
disbursements of counsel for the Company) shall be borne by the Company.
Whenever required under this paragraph to effect the
registration of any shares of Common Stock underlying Securities of a Holder,
the Company shall, as expeditiously as is feasible:
(i) prepare and file with the SEC a registration
statement with respect to such shares of Common Stock underlying Securities and
use commercially reasonable efforts to cause such registration statement to
become effective, and keep such registration statement effective for a period of
up to 120 days or, if earlier, until the distribution contemplated in such
registration statement has been completed; provided, however, that such 120 day
period shall be extended for a period of time equal to the period a Holder
refrains from selling any securities included in such registration at the
request of an underwriter of Common Stock (or other securities) of the Company;
(ii) prepare and file with the SEC such amendments
and supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply with
the provisions of the Act with respect to the disposition of all securities
covered by such registration statement;
(iii) furnish to each Holder (A) a draft copy of the
registration statement and (B) a prospectus, including a preliminary prospectus,
in conformity with the requirements of the 1933 Act, and such other documents as
it may reasonably request in order to facilitate the disposition of Securities
owned by it;
(iv) in the event of any underwritten public
offering, enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the managing underwriter of such
offering. Each Holder participating in such underwriting, if any, shall also
enter into and perform its obligations under such an agreement. In connection
with any offering involving an underwriting of shares of the Company's capital
stock, the Company shall not be required to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by the Company
and enter into an underwriting agreement in customary form with an underwriter
or underwriters selected by the Company. If the total amount of securities,
including shares of Common Stock underlying Securities of a Holder, to be
included in such offering exceeds the amount of securities that the underwriters
determine in their sole discretion is compatible with the success of the
offering, then the Company shall be required to include in the offering only
that number of securities that the underwriters determine in their sole
discretion will not jeopardize the success of the offering;
(v) notify each Holder of Securities covered by
such registration statement, at any time when a prospectus relating thereto is
required to be delivered under the 1933 Act, of (i) the issuance of any stop
order by the SEC in respect of such registration statement, or (ii) the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing; and.
(vi) use commercially reasonable efforts to register
and qualify the securities covered by such registration statement under such
other securities or "blue sky" laws of such jurisdictions as shall be reasonably
requested by a Holder, provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business, where
not otherwise required, or to file a general consent to service of process in
any such states or jurisdictions, unless the Company is already subject to
service in such jurisdiction and except as may be required by the 1933 Act.
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5. CONDITIONS TO THE COMPANY'S OBLIGATION. 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 and the Company shall have received
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.
6. CONDITIONS TO BUYER'S OBLIGATION. 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 its sole
discretion:
a. The Company shall have executed this Agreement and the Warrant
Agreement. The Company shall have submitted irrevocable instructions to its
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.
7. 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
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.
8
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 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:
9
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
Fax: 000-000-0000
If to 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 fromBuyer or to any of its affiliates.
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.
10
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 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 7(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 7(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
11
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.
n. Certain Fees. Each party will bear its own expenses and fees in
connection with this Agreement.
[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: /s/ Wilf Shorrocks
Wilf Shorrocks
President and Chief Executive Officer
BUYER: CROWN NORTHERN WAY CAPITAL, LLC
CROWN CAPITAL CORPORATION
By: /s/ R. Xxxxxxx Xxxxxx, President
Name: R. Xxxxxxx Xxxxxx, President
Title: Managing Member
STATE OF INCORPORATION/FORMATION: Missouri
ADDRESS: 000 Xxxxxxxxx Xxxxxx
Xx. Xxxxx, Xxxxxxxx 00000
FACSIMILE: 000-000-0000
AMOUNT INVESTED: $100,000
13
EXHIBIT A
THIS PROMISSORY NOTE AND THE SECURITIES PURCHASABLE UPON EXERCISE OF THE RIGHTS
CONTAINED IN THIS PROMISSORY NOTE (COLLECTIVELY, THE "SECURITIES") HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT"). THE
SECURITIES MAY NOT BE SOLD, ASSIGNED, PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED
OF IN THE ABSENCE OF SUCH REGISTRATION UNLESS IN THE OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY AN EXEMPTION FROM SUCH REGISTRATION UNDER THE
SECURITIES ACT IS APPLICABLE TO SUCH PROPOSED EXERCISE OR SALE, ASSIGNMENT,
PLEDGE, TRANSFER OR OTHER DISPOSITION.
CONVERTIBLE PROMISSORY NOTE
$100,000 August 10, 0000
Xxx Xxxx, Xxx Xxxx
FOR VALUE RECEIVED, Peak Entertainment Holdings, Inc., a Nevada
corporation (the "Borrower"), hereby promises to pay to CROWN NORTHERN WAY
CAPITAL, LLC (the "Holder"), the sum of $100,000 on November 8, 2005 (the
"Maturity Date"), together with accrued interest. Borrower shall repay the
principal and any accrued but unpaid interest due upon this Note on the Maturity
Date, by check or wire transfer to the person who is the registered holder of
this Note. Whenever any payment to be made hereunder falls due on a Saturday,
Sunday or business holiday in New York, New York, such payment may be made on
the next succeeding business day and such extension of time will, in such case,
be included in computing interest, if any, in connection with such payment.
Interest shall accrue on the principal amount of the Note at a fixed
simple rate of ten percent (10%) per year, calculated on the actual number of
days elapsed on the basis of a 360 day year.
Until and including on the Maturity Date, the Holder shall have the right
to convert the full unpaid principal and interest of this Promissory Note into
fully paid and nonassessable shares of Borrower's common stock. The conversion
price shall be $0.30 per share (the "Conversion Price"). Any fractional shares
issuable upon conversion of this Note shall be rounded down to the nearest whole
share.
The Conversion Price and the number of shares issuable upon conversion
shall be proportionally adjusted for an Adjustment Event, as defined herein. The
term "Adjustment Event" shall mean any stock split, reverse stock split, stock
dividend, reclassification of the common stock, recapitalization, merger or
consolidation, or like capital adjustment affecting the number of common stock
of the Borrower outstanding. The good faith determination by the Board of
Directors as to what adjustments, amendments or arrangements shall be made to
the Conversion Price, and the extent thereof, shall be final and conclusive,
provided that the Conversion Price is adjusted in a manner that is no less
favorable than the manner of adjustment used as to any other person with similar
adjustment rights.
Conversion of all or a part of this Note shall be effectuated by
submitting a written notice, in the name of the Holder stated in Schedule 1
hereto (the "Notice of Conversion"), executed by the Holder evidencing such
Holder's intention to convert this Note or a specified portion hereof. No
fraction of a share or scrip representing a fraction of a share will be issued
on conversion, but the number of shares issuable shall be rounded down to the
nearest whole share. The date on which Notice of Conversion is given (the
"Conversion Date") shall be deemed to be the date on which the Borrower first
receives the Notice of Conversion. Certificates representing Common Stock upon
conversion will be delivered to the Holder within three (3) trading days,
subject to reasonable delay for processing by the Borrower's transfer agent if
any, from the date the Notice of Conversion is delivered to the Borrower
("Delivery Date"). Delivery of shares upon conversion shall be made to the
address specified by the Holder in the Notice of Conversion.
1
The obligations of Borrower for repayment of principal and payment of
interest on maturity are secured by a subordinated lien on intellectual property
of the Company, that is subordinate to the liens of prior lenders as described
in the Borrower's public filings.
Any notice herein required or permitted to be given shall be in writing
and sent by means of certified or registered mail, express mail, or other
overnight delivery service, hand delivery confirmed by signed receipt or
facsimile transmission (followed by prompt transmission of the original of such
notice by any of the foregoing means) in each case proper postage or other
charges pre-paid and addressed or directed to the Holder or to the Borrower as
the address set forth in the Securities Purchase Agreement. Such notice shall be
deemed given when actually received. Both the Holder and Borrower may change the
address and fax number for notices by service of notice to the other as herein
provided.
The following shall constitute an "Event of Default":
(a) The Borrower fails to issue shares of Common Stock to the
Holder or to cause its Transfer Agent to issue shares of
Common Stock upon proper exercise by the Holder of the
conversion rights of the Holder in accordance with the terms
of this Note; or
(b) The Borrower shall, without cause, fail to perform or observe,
in any material respect, any other material covenant, term,
provision, condition, agreement or obligation of the Borrower
under the Securities Purchase Agreement and such failure shall
continue uncured for a period of thirty days after written
notice from the Holder of such failure; or
Borrower waives demand for payment, notice of nonpayment, presentment,
notice of dishonor, protest, and notice of protest. If default is made in the
payment of this Promissory Note, Borrower shall pay the Holder hereof, interest
at 20%, costs of collection, and including reasonable attorneys' fees.
This Promissory Note shall be governed by the internal laws of the State
of New York. Any proceedings related to this Promissory Note shall be brought in
New York County in the State of New York.
This Promissory Note is the entire agreement between the parties and
neither party is relying on any prior or contemporaneous representation or
promise, or any omission of any information, in entering into this Promissory
Note.
[signature page follows]
2
IN WITNESS WHEREOF, Borrower has caused this Promissory Note to be signed
in its name by its duly authorized representative on the date first written.
PEAK ENTERTAINMENT HOLDINGS, INC.
By: /s/ Wilf Shorrocks
----------------------------
Name: Wilf Shorrocks
Title: Chief Executive Officer
3
SCHEDULE 1
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Debentures)
The undersigned hereby irrevocably elects to convert $ ________________ of
the principal amount of the above Note, dated August 10, 2005 into Shares of
Common Stock of PEAK ENTERTAINMENT HOLDINGS, INC. (the "Company") according to
the conditions hereof, as of the date written below.
Date of Conversion:
-----------------------------------------------------
Conversion Price:
-------------------------------------------------------
Accrued Interest:
-------------------------------------------------------
Number of Shares of Common Stock to be Issued:
--------------------------
Name:
-------------------------------------------------------------------
Signature:
--------------------------------------------------------------
Address:
----------------------------------------------------------------
4
EXHIBIT B
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.
PEAK ENTERTAINMENT HOLDINGS, INC.
COMMON STOCK PURCHASE WARRANT
RIGHT TO PURCHASE 333,333 SHARES OF COMMON STOCK
EXERCISE PRICE: $0.30 PER SHARE
Warrant No. 081005.1
THIS CERTIFIES THAT, for value received, CROWN NORTHERN WAY CAPITAL, LLC
(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 (the "Initial Exercise Date") entered into Peak
Entertainment Holdings, Inc., a Nevada corporation (the "Company") and the
Holder, as of even date, and on or prior to the close of business on the third
year anniversary of this Warrant (the "Termination Date"), but not thereafter,
to subscribe for and purchase from the Company, up to 333,333 fully paid and
nonassessable shares of the Company's Common Stock (the "Common Stock"), at the
exercise price of $0.30 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, 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
this Warrant has been exercised by payment
1
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
2
the assignor a new warrant evidencing the portion of this Warrant not so
assigned, and this Warrant shall promptly be cancelled. This Warrant, if
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. Redemption. Prior to the Termination Date, the Warrant shall be
redeemable, under the circumstances described in this Section, at the discretion
of the Company, for $.10 per warrant (the "Redemption Fee"). The Company's right
to redemption 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, $1.00 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 redeem 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
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exercise of the purchase rights under this Warrant. The Company will take all
such reasonable action as may be necessary to assure that such 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 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
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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 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.
(l) Piggyback Registration Rights. The initial Holder of this
Warrant is entitled to the benefit of certain registration rights with respect
to the shares of Common Stock issuable upon the exercise of this Warrant. If the
Company, at any time from the date of this Warrant through the date of
expiration of this Warrant, proposes to register any of its securities under the
Securities Act for sale to the public, whether for its own account or for the
account of other security holders or both (except with respect to registration
statements on Forms X-0, X-0 and any successor forms thereto), each such time
the Company will give written notice to such effect to the Holder at least 30
days prior to such filing. Upon the written request of Holder, received by the
Company within 30 days after the giving of any such notice by the Company, to
register any of the shares of Common Stock underlying this Warrant, the Company
will cause, at Company's expenses, such underlying shares of Common Stock to be
covered by the registration statement proposed to be filed by the Company, all
to the extent requisite to permit the sale or other disposition by the holder of
such shares so registered.
[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: August 10, 2005
Peak Entertainment Holdings, Inc.
By: /s/ Wilf Shorrocks
--------------------------------
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 $0.30 per share, of Peak
Entertainment Holdings, Inc. pursuant to the terms of the attached Warrant,
Warrant No. 081005.1, 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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