EXHIBIT 10.5
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933, AS AMENDED OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
REGISTRATION IS NOT REQUIRED.
SMOKY MARKET FOODS, INC.
WARRANT TO PURCHASE SHARES
This Warrant is issued to [__________________] by Smoky Market Foods,
Inc., a Nevada corporation (the "COMPANY"), pursuant to the terms of that
certain Securities Purchase Agreement (the "PURCHASE AGREEMENT"), dated as of
________ __, 2006, in connection with the Company's issuance to the holder of
this Warrant ("HOLDER") of a Convertible Promissory Note (the "NOTE").
(a) PURCHASE OF SHARES. Subject to the terms and conditions
hereinafter set forth and set forth in the Purchase Agreement, Holder is
entitled, upon surrender of this Warrant at the principal office of the Company
(or at such other place as the Company shall notify Holder in writing), to
purchase from the Company up to the number of fully paid and nonassessable
shares of common stock, par value $.0001 per share, of the Company (the "COMMON
STOCK") equal to the number of shares of Common Stock into which the original
principal amount of the Note may convert pursuant to the Note.
2. DEFINITIONS.
(a) EXERCISE PRICE. The exercise price for the Common Stock
shall be $0.25 per share (such price, as adjusted from time to time, is herein
referred to as the "EXERCISE PRICE").
(b) EXERCISE PERIOD. This Warrant shall be exercisable, in
whole or in part, during the term commencing on the date hereof and ending on
the earliest to occur of (i) the nine-month anniversary of the date hereof, or
(ii) immediately prior to a Change of Control. The Company shall provide at
least ten (10) days prior written notice of any event set forth in Section
2(b)(ii).
(c) CHANGE OF CONTROL. The term "CHANGE OF CONTROL" shall mean
(i) any consolidation or merger involving the Company pursuant to which the
Company's stockholders own less than fifty percent (50%) of the voting
securities of the surviving entity or its parent or (ii) the sale of all or
substantially all of the assets of the Company.
3. METHOD OF EXERCISE. While this Warrant remains outstanding and
exercisable in accordance with Section 2 above, Holder may exercise, in whole or
in part, the purchase rights evidenced hereby. Such exercise shall be effected
by:
(i) the surrender of the Warrant, together with a
notice of exercise to the Chief Financial Officer of the Company at its
principal offices; and
(ii) the payment to the Company of an amount equal to
the aggregate Exercise Price for the number of shares of Common Stock being
purchased.
4. CERTIFICATES FOR SHARES. Upon the exercise of the purchase rights
evidenced by this Warrant, one or more certificates for the number of shares so
purchased shall be issued as soon as practicable thereafter, and in any event
within thirty (30) days of the delivery of the subscription notice.
5. ISSUANCE OF SHARES. The Company covenants that the shares of Common
Stock, when issued pursuant to the exercise of this Warrant, will be duly and
validly issued, fully paid and nonassessable and free from all taxes, liens, and
charges with respect to the issuance thereof.
6. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES. The number of and
kind of securities purchasable upon exercise of this Warrant and the Exercise
Price shall be subject to adjustment from time to time as follows:
(a) SUBDIVISIONS, COMBINATIONS AND OTHER ISSUANCES. If the
Company shall at any time prior to the expiration of this Warrant subdivide the
Common Stock, by split-up or otherwise, or combine its shares, or issue
additional shares of its Common Stock as a dividend, the number of shares
issuable on the exercise of this Warrant shall forthwith be proportionately
increased in the case of a subdivision or stock dividend, or proportionately
decreased in the case of a combination. Appropriate adjustments shall also be
made to the purchase price payable per share, but the aggregate purchase price
payable for the total number of shares purchasable under this Warrant (as
adjusted) shall remain the same. Any adjustment under this Section 6(a) shall
become effective at the close of business on the date the subdivision or
combination becomes effective, or as of the record date of such dividend, or in
the event that no record date is fixed, upon the making of such dividend.
(b) RECLASSIFICATION, REORGANIZATION AND CONSOLIDATION. In
case of any reclassification, capital reorganization, or change in the capital
stock of the Company (other than as a result of a subdivision, combination, or
stock dividend provided for in Section 6(a) above), then the Company shall make
appropriate provision so that Holder shall have the right at any time prior to
the expiration of this Warrant to purchase, at a total price equal to that
payable upon the exercise of this Warrant, the kind and amount of shares of
stock and other securities and property receivable in connection with such
reclassification, reorganization, or change by a holder of the same number of
shares as were purchasable by Holder immediately prior to such reclassification,
reorganization, or change. In any such case appropriate provisions shall be made
with respect to the rights and interest of Holder so that the provisions hereof
shall thereafter be applicable with respect to any shares of stock or other
securities and property deliverable upon exercise hereof, and appropriate
adjustments shall be made to the purchase price per share payable hereunder,
provided the aggregate purchase price shall remain the same.
(c) NOTICE OF ADJUSTMENT. When any adjustment is required to
be made in the number or kind of shares purchasable upon exercise of the
Warrant, or in the Exercise Price, the Company shall promptly notify Holder of
such event and of the number of shares of Common Stock or other securities or
property thereafter purchasable upon exercise of this Warrant.
7. NO FRACTIONAL SHARES OR SCRIP. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant, but in lieu of such fractional shares the Company shall make a cash
payment therefor on the basis of the Exercise Price then in effect.
8. REPRESENTATIONS OF THE COMPANY. The Company represents that all
corporate actions on the part of the Company, its officers, directors and
stockholders necessary for the sale and issuance of this Warrant have been
taken.
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9. REPRESENTATIONS AND WARRANTIES BY THE HOLDER. Holder represents and
warrants to the Company as follows:
(a) This Warrant and the Shares issuable upon exercise thereof
are being acquired for its own account, for investment and not with a view to,
or for resale in connection with, any distribution or public offering thereof
within the meaning of the Securities Act of 1933, as amended (the "ACT"). Upon
exercise of this Warrant, Holder shall, if so requested by the Company, confirm
in writing, in a form satisfactory to the Company, that the securities issuable
upon exercise of this Warrant are being acquired for investment and not with a
view toward distribution or resale.
(b) Holder understands that the Warrant and the Shares have
not been registered under the Act by reason of their issuance in a transaction
exempt from the registration and prospectus delivery requirements of the Act
pursuant to Section 4(2) thereof and/or Regulation D promulgated thereunder, and
that they must be held by Holder indefinitely, and that Holder must therefore
bear the economic risk of such investment indefinitely, unless a subsequent
disposition thereof is registered under the Act or is exempted from such
registration.
(c) Holder has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of the
purchase of this Warrant and the shares of Common Stock purchasable pursuant to
the terms of this Warrant and of protecting its interests in connection
therewith.
(d) Holder is able to bear the economic risk of the purchase
of the shares of Common Stock pursuant to the terms of this Warrant.
(e) Holder is an "accredited investor" as such term is defined
in Rule 501 of Regulation D promulgated under the Act.
10. RESTRICTIVE LEGEND.
The shares of Common Stock (unless registered under the Act)
shall be stamped or imprinted with a legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH,
THE SALE OR DISTRIBUTION THEREOF, AND HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SHARES MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
OR AN EXEMPTION THEREFROM UNDER THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS. COPIES OF THE AGREEMENT COVERING THE
PURCHASE OF THESE SHARES AND RESTRICTING THEIR TRANSFER MAY BE
OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF
RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE COMPANY AT
THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY.
If Holder is party to any voting agreement, co-sale agreement, investor rights
agreement or other agreement with the Company requiring that specified legends
be placed upon securities held by Holder, the shares of Common Stock will also
contain such legends.
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11. WARRANTS TRANSFERABLE. Subject to compliance with the terms and
conditions of this Section 11 and any other agreements to which Holder is a
party, this Warrant and all rights hereunder are transferable, in whole or in
part, without charge to Holder (except for transfer taxes), upon surrender of
this Warrant properly endorsed or accompanied by written instructions of
transfer. With respect to any offer, sale or other disposition of this Warrant
or any shares acquired pursuant to the exercise of this Warrant prior to
registration of such Warrant or shares, Holder agrees to give written notice to
the Company prior thereto, describing briefly the manner thereof, together with
a written opinion of Holder's counsel, or other evidence, if requested by the
Company, to the effect that such offer, sale or other disposition may be
effected without registration or qualification (under the Act as then in effect
or any federal or state securities law then in effect) of this Warrant or the
shares of Common Stock and indicating whether or not under the Act certificates
for this Warrant or the shares of Common Stock to be sold or otherwise disposed
of require any restrictive legend as to applicable restrictions on
transferability in order to ensure compliance with such law. Upon receiving such
written notice and reasonably satisfactory opinion or other evidence, if so
requested, the Company, as promptly as practicable, shall notify Holder that
Holder may sell or otherwise dispose of this Warrant or such shares, all in
accordance with the terms of the notice delivered to the Company. If a
determination has been made pursuant to this Section 11 that the opinion of
counsel for Holder or other evidence is not reasonably satisfactory to the
Company, the Company shall so notify Holder promptly with details thereof after
such determination has been made. Each certificate representing this Warrant or
the shares transferred in accordance with this Section 11 shall bear a legend as
to the applicable restrictions on transferability in order to ensure compliance
with such laws, unless in the aforesaid opinion of counsel for Holder, such
legend is not required in order to ensure compliance with such laws. The Company
may issue stop transfer instructions to its transfer agent in connection with
such restrictions.
12. RIGHTS OF STOCKHOLDERS. Holder shall not be entitled, as a Warrant
holder, to vote or receive dividends or be deemed the holder of the shares of
Common Stock or any other securities of the Company which may at any time be
issuable on the exercise hereof for any purpose, nor shall anything contained
herein be construed to confer upon the holder of this Warrant, as such, any of
the rights of a stockholder of the Company or any right to vote for the election
of directors or upon any matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate action (whether upon
any recapitalization, issuance of stock, reclassification of stock, change of
par value, consolidation, merger, conveyance, or otherwise) or to receive notice
of meetings, or to receive dividends or subscription rights or otherwise until
the Warrant shall have been exercised and the shares purchasable upon the
exercise hereof shall have become deliverable, as provided herein.
13. NOTICES. All notices and other communications required or permitted
hereunder shall be in writing, shall be effective when given, and shall in any
event be deemed to be given upon receipt or, if earlier, (a) four (4) days after
deposit with the U.S. Postal Service or other applicable postal service, if
delivered by first class mail, postage prepaid, (b) upon delivery, if delivered
by hand, (c) one business day after the business day of deposit with Federal
Express or similar overnight courier, freight prepaid or (d) one business day
after the business day of facsimile transmission, if delivered by facsimile
transmission with copy by first class mail, postage prepaid, and shall be
addressed (i) if to Holder, at Holder's address as set forth in the Purchase
Agreement, and (ii) if to the Company, at the address of its principal corporate
offices (attention: President) or at such other address as a party may designate
by ten days advance written notice to the other party pursuant to the provisions
above.
14. GOVERNING LAW. This Warrant and all actions arising out of or in
connection with this Agreement shall be governed by and construed in accordance
with the laws of the State of Iowa, without regard to the conflicts of law
provisions of the State of Iowa or of any other state.
15. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT. Unless
otherwise provided herein, the rights and obligations of the Company, of Holder
and of the holder of the shares issued upon exercise of this Warrant, shall
survive the exercise of this Warrant.
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Issued this [__________] __, 2006
SMOKY MARKET FOODS, INC.
By: _______________________________
Title: ____________________________
[SIGNATURE PAGE TO WARRANT TO PURCHASE SHARES]
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EXHIBIT A
---------
NOTICE OF EXERCISE
------------------
TO: Smoky Market Foods, Inc.
__________________________________
__________________________________
Attention: Chief Financial Officer
Facsimile: _______________
1. The undersigned hereby elects to purchase __________ Shares of
_____________ pursuant to the terms of the attached Warrant. The undersigned
tenders herewith payment in full for the purchase price of the shares being
purchased, together with all applicable transfer taxes, if any
2. Please issue a certificate or certificates representing said Shares
in the name of the undersigned or in such other name as is specified below:
_________________________________________
(Name)
_________________________________________
_________________________________________
(Address)
3. The undersigned hereby represents and warrants that the aforesaid
Shares are being acquired for the account of the undersigned for investment and
not with a view to, or for resale, in connection with the distribution thereof,
and that the undersigned has no present intention of distributing or reselling
such shares and all representations and warranties of the undersigned set forth
in Section 9 of the attached Warrant (including Section 10 (e) thereof) are true
and correct as of the date hereof.
___________________________________
(Signature)
___________________________________
(Name)
______________________________ ___________________________________
(Date) (Title)
EXHIBIT B
---------
FORM OF TRANSFER
(To be signed only upon transfer of Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto _______________________________________________ the right represented by
the attached Warrant to purchase ____________ shares of ________________________
of Smoky Market Foods, Inc. to which the attached Warrant relates, and appoints
______________ attorney to transfer such right on the books of __________, with
full power of substitution in the premises.
Dated: ____________________
____________________________________________
(Signature must conform in all respects to
name of Holder as specified on the face of
the Warrant)
Address:____________________________________
____________________________________
____________________________________
Signed in the presence of:
___________________________________
