EXHIBIT 4.1
[FORM OF]
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of May 6,
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 being made as part of a private placement offering
by the Company pursuant to which a minimum of $300,000 and a maximum of
$1,000,000 of debentures and warrants are to be sold (the "Private Placement"),
and the purchasers in the private placement, including Buyer, are collectively
referred to as the "Buyers");
C. Buyer desires to purchase and the Company desires to issue and sell,
upon the terms and conditions set forth in this Agreement: (i) 12% convertible
debentures of the Company, in the form attached hereto as Exhibit A (together
with any debenture(s) issued in replacement thereof or as interest thereon or
otherwise with respect thereto in accordance with the terms thereof, the
"Debentures"), 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
Debentures; and (ii) such number of warrants as providing a 60% 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 five
years at $0.50 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 Debentures as equals the Amount
Invested and such number of Warrants as providing a 60% Warrant Coverage.
"Warrant Coverage" is defined and calculated as the Amount Invested divided by
the warrant exercise price, with that number then multiplied by 0.6. For
example, an Amount Invested of $100,000 would entitle the Buyer to: (i) $100,000
in principal amount of Debentures; and (ii) warrants to purchase 120,000 shares
of common stock.
b. Form of Payment. Upon execution of this Agreement, (i)
Buyer shall pay the purchase price for the Debentures 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:
Signature Bank
000 0xx Xxx
Xxx Xxxx, XX 00000
ABA: 000000000
For: Peak Entertainment Holdings, Inc.
Account No.: 1500495630
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c. Closing Date. The date and time of the issuance and sale of
the Securities pursuant to this Agreement (the "Closing Date") shall be the date
of the release of the Purchase Price that is received and cleared and the issue
of the Debentures and Warrants.
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 Debentures and the shares of Common Stock issuable upon
conversion of or otherwise pursuant to the Debentures 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
Debentures, 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
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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.
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.
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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, 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 April 7, 2005, the authorized capital
stock of the Company consists of 900,000,000 shares of Common Stock, of which
approximately 31,020,995 shares are issued and outstanding. As of March 31,
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) and warrants to purchase 8,850,000
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 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
Debentures 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
Debentures or exercise of the Warrants in accordance with this Agreement, the
Debentures 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
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violations as would not, individually or in the aggregate, have a Material
Adverse Effect). Neither the Company nor any of its Subsidiaries is in violation
of its Articles of Incorporation, By-laws or other organizational documents and
neither the Company nor any of its Subsidiaries is in default (and no event has
occurred which with notice or lapse of time or both could put the Company or any
of its Subsidiaries in default) under, and neither the Company nor any of its
Subsidiaries has taken any action or failed to take any action that would give
to others any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party or by which any property or assets of the Company or any
of its Subsidiaries is bound or affected, except for possible defaults as would
not, individually or in the aggregate, have a Material Adverse Effect. The
businesses of the Company and its Subsidiaries, if any, are not being conducted,
and shall not be conducted so long as 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 Debentures or the
Warrants in accordance with the terms hereof or thereof or to issue and sell the
Debentures and Warrants in accordance with the terms hereof and to issue the
Conversion Shares upon conversion of the Debentures 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 Debentures
shall be secured by that certain Security Agreement by and between the Company
and the Holder entered into in connection with the Debentures; the security
interest rights granted to the Buyer are behind those previously granted to
existing debenture holders, and shall be on an equal level to the security
interest rights granted to third party purchasers in the Company's sale of
debentures, on terms and conditions similar to the terms herein, in the
principal amount of $1,000,000 occurring on or about the same time as this
Agreement. 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 lender(s) hereafter providing at least $1,500,000 or
more in working capital, subject to the approval of the Buyer, which shall not
be unreasonably withheld.
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p. Trading in Securities. The Company specifically
acknowledges that, except to the extent specifically provided herein or in any
of the other Transaction Agreements (but limited in each instance to the extent
so specified), Buyer 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.
q. Fees to Brokers, Finders and Others. The Company may
utilize a placement agent in connection with the Private Placement, and such
placement agent, if any, shall receive a cash commission fee of up to 10% of the
gross amount raised, and five year placement agent warrants similar to the
Warrants, but with the addition of cashless exercise, equal to 10% of the number
of five year investor Warrants issued to investors, or such other fee as may be
negotiated by the Company and the placement agent. Buyer shall have no
obligation with respect to such fees or with respect to any claims made by or on
behalf of other Persons for fees of a type contemplated in this paragraph that
may be due in connection with the transactions contemplated hereby. The Company
shall indemnify and hold harmless each of Buyer, their employees, officers,
directors, agents, and partners, and their respective Affiliates, from and
against all claims, losses, damages, costs (including the costs of preparation
and attorney's fees) and expenses suffered in respect of any such claimed or
existing fees, as and when incurred.
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
Debentures 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
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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.
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;
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(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.
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.
8
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. 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 toBuyer:
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
11
actual or, as reasonably determined by legal counsel to the Indemnified Party,
potentially differing interests between such parties in the conduct of the
defense of such Claim, or if there may be legal defenses available to the
Indemnified Party that are in addition to or disparate from those available to
the Indemnifying Party, or (z) the Indemnifying Party shall have failed to
employ legal counsel reasonably satisfactory to the Indemnified Party within a
reasonable period of time after notice of the commencement of such Claim. If the
Indemnified Party employs separate legal counsel in circumstances other than as
described in clauses (x), (y) or (z) above, the fees, costs and expenses of such
legal counsel shall be borne exclusively by the Indemnified Party. Except as
provided above, the Indemnifying Party shall not, in connection with any Claim
in the same jurisdiction, be liable for the fees and expenses of more than one
firm of legal counsel for the Indemnified Party (together with appropriate local
counsel). The Indemnifying Party shall not, without the prior written consent of
the Indemnified Party (which consent shall not unreasonably be withheld), settle
or compromise any Claim or consent to the entry of any judgment that does not
include an unconditional release of the Indemnified Party from all liabilities
with respect to such Claim or judgment.
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:
---------------------------------
Wilf Shorrocks
President and Chief Executive Officer
BUYER: ___________________________________________
By:
----------------------------------------
Name:
Title: _____________________
STATE OF INCORPORATION/FORMATION:
ADDRESS:
------------------
TELEPHONE:
----------------------
FACSIMILE:
----------------------
AMOUNT INVESTED: $_______________
13
EXHIBIT A
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE SECURITIES MAY NOT BE
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL IN FORM,
SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR UNLESS SOLD PURSUANT TO RULE
144 UNDER SAID ACT.
PEAK ENTERTAINMENT HOLDINGS, INC.
12% CONVERTIBLE DEBENTURE
Debenture No. 050605.__
THIS DEBENTURE is issued by Peak Entertainment Holdings, Inc., a
corporation organized and existing under the laws of the State of Nevada (the
"Company") and is designated as its 12% Convertible Debenture (the
"Debentures").
FOR VALUE RECEIVED, the Company promises to pay to _________________
(the "Holder"), the principal sum of _______________________ ($_________) on the
Maturity Date (as defined herein) and to pay interest on the principal sum
outstanding from time to time annually in arrears at the rate of twelve percent
(12%) per annum, compounded annually, accruing from the date of the first
closing of the private placement pursuant to which these Debentures are issued
(the "Private Placement"). The "Maturity Date" is the earlier of 270 days from
the first closing of the Private Placement or any future funding of any dollar
amount (excluding funds pursuant to the Private Placement) equaling 15% more
than amounts closed pursuant to the Private Placement at that point in time. The
Company will pay the principal of, and any accrued but unpaid interest due upon
this Debenture on the Maturity Date, by check or wire transfer to the person who
is the registered holder of this Debenture as of the tenth day prior to the
Maturity Date and addressed to such holder at the last address appearing on the
Debenture Register. The forwarding of such check or money order shall constitute
a payment of principal and interest hereunder and shall satisfy and discharge
the liability for principal and interest on this Debenture to the extent of the
sum represented by such check or wire transfer plus any amounts so deducted. The
obligations of the Company under this Debenture shall be secured by that certain
Security Agreement by and between the Company and the Holder entered into in
connection with these Debentures.
This Debenture is subject to the following additional provisions:
1. The Company shall be entitled to withhold from all payments of
interest on this Debenture any amounts required to be withheld under the
applicable provisions of the United States income tax laws or other applicable
laws at the time of such payments, and the Holder shall execute and deliver all
required documentation in connection therewith.
2. This Debenture has been issued subject to investment representations
of the original purchaser hereof and may be transferred or exchanged only in
compliance with the Securities Act of 1933, as amended (the "Act"), and other
applicable state and foreign securities laws. The Holder shall deliver written
notice to the Company of any proposed transfer of this Debenture. In the event
of any proposed transfer of this Debenture, the Company may require, prior to
issuance of a new Debenture in the name of such other person, that it receive
reasonable transfer documentation including legal opinions that the issuance of
the Debenture in such other name does not and will not cause a violation of the
Act or any applicable state or foreign securities laws. Prior to due presentment
for transfer of this Debenture, the Company and any agent of the Company may
treat the person in whose name this Debenture is duly registered on the
Company's Debenture Register as the owner hereof for the purpose of receiving
payment as herein provided and for all other purposes, whether or not this
Debenture be overdue, and neither the Company nor any such agent shall be
1
affected by notice to the contrary. This Debenture has been executed and
delivered pursuant to the Securities Purchase Agreement between the Company and
the Holder entered into as of even date (the "Securities Purchase Agreement"),
and is subject to the terms and conditions of the Securities Purchase Agreement,
which are, by this reference, incorporated herein and made a part hereof.
Capitalized terms used and not otherwise defined herein shall have the meanings
set forth for such terms in the Securities Purchase Agreement.
3. The Holder of this Debenture is entitled, at its option, to convert
at any time commencing on the date of this Agreement, the principal amount of
this Debenture or any portion thereof, into shares of Common Stock of the
Company ("Conversion Shares") at the valuation of $0.30 per share ("Bridge
Valuation" or "Conversion Price"), subject to adjustment for stock splits and
the like. Any conversion at or prior to maturity of this Debenture shall
constitute a waiver of all accrued interest on the Debenture. If, upon any
conversion of this Debenture, the Company's issuance of Conversion Shares would
cause it to violate any listing requirement of the OTCBB or other public market
through which the Company's Common Stock is listed or quoted, then in lieu of
such stock issuance, the Company shall pay the Holder cash in an amount equal to
the closing price of the Common Stock on the Conversion Date multiplied by the
number of shares which would otherwise have been issuable upon such conversion
within five (5) calendar days.
In case of any stock split or reverse stock split, stock
dividend, reclassification of the common stock, recapitalization, merger or
consolidation, or like capital adjustment affecting the Common Stock of the
Company, the provisions of this Section 3 shall be applied in a fair, equitable
and reasonable manner so as to give effect, as nearly as may be, to the purposes
hereof.
The Conversion Price shall be adjusted for dilutive issuances
of securities for value by the Company which shall constitute an Adjustment
Event, as defined herein. The term "Adjustment Event" shall mean any issuance by
the Company for the Company's common stock or convertible in to the Company's
common stock (excluding securities issued to the Company's employees, directors,
consultants and others similarly situtated in the ordinary course of business
and not for capital raising purposes) below the lower of (a) $.30 per common
share, or (b) fair market value for such securities as determined at the time of
issuance. Upon the occurrence of an Adjustment Event, appropriate and
proportionate adjustments shall be made to the Conversion Price on a xxxxx for
xxxxx basis. 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.
4. The rate of interest on this Debenture shall be twelve percent
(12%), per annum, on the outstanding principal until paid or converted. If any
interest payment date or the Maturity Date is not a business day in the State of
New York, then such payment shall be made on the next succeeding business day.
Accrual of interest shall commence on the first business day to occur after the
date of closing of the Securities Purchase Agreement and continue until payment
in full of the principal sum has been made or duly provided for.
5. On the Maturity Date, the Company will pay the principal of, and any
accrued but unpaid interest due upon, this Debenture, less any amounts required
by law to be deducted, to the registered holder of this Debenture and addressed
to such holder at the last address appearing on the Debenture Register.
If the outstanding Debenture held by the Holder are not paid
in full on maturity, and has not been converted, there will be a cash penalty
equal to 1.5% of the outstanding principal amount of the Debenture, compounded
monthly for each month that payment in full is not effected, up to a maximum
cash penalty equal to 9% of the outstanding principal amount of the Debenture,
and, in addition, there will be monthly reduction in warrant exercise price of
the warrants issued pursuant to the Securities Purchase Agreement at the rate of
2.5% and up to a maximum of 20% reduction in the exercise price.
6. Conversion of all or a part of this Debenture shall be effectuated
by surrendering this Debenture to the Company (if such Conversion will convert
all outstanding principal) together with the form of conversion notice attached
hereto as Exhibit A (the "Notice of Conversion"), executed by the Holder of this
Debenture evidencing such Holder's intention to convert this Debenture or a
specified portion (as above provided) hereof, and accompanied, if required by
the Company, by proper assignment hereof in blank. 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 to the nearest whole share. The date
on which Notice of Conversion is given (the "Conversion Date") shall be deemed
2
to be the date on which the Holder faxes the Notice of Conversion duly executed
to the Company. Facsimile delivery of the Notice of Conversion shall be accepted
by the Company at facsimile number x00(0)0000 000000, Attn.: Xxxxxxx Xxxxxxxxx,
President, to the Company's attorneys, Law Offices of Xxx Xxxxxxx at facsimile
number 000-000-0000, Attn.: Xxxxxxx Oh, or such other facsimile number provided,
in writing, by the Company. Certificates representing Common Stock upon
conversion will be delivered to the Holder within three (3) Trading Days from
the date the Notice of Conversion is delivered to the Company ("Delivery Date").
Delivery of shares upon conversion shall be made to the address specified by the
Holder in the Notice of Conversion.
7. No provision of this Debenture shall alter or impair the obligation
of the Company, which is absolute and unconditional, to pay the principal of,
and interest on, this Debenture at the time, place, and rate, and in the coin or
currency or shares of Common Stock herein prescribed. This Debenture is a direct
obligation of the Company.
8. No recourse shall be had for the payment of the principal of, or the
interest on, this Debenture, or for any claim based hereon, or otherwise in
respect hereof, against any incorporator, shareholder, employee, officer or
director, as such, past, present or future, of the Company or any successor
corporation, whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance hereof and as part of the consideration for the issue
hereof, expressly waived and released.
9. (a) In case of any (1) merger or consolidation of the Company with
or into another third party entity, excluding non-material transactions with
parent, subsidiaries or affiliates, or (2) sale by the Company of more than
one-half of the assets of the Company (on an as valued basis) in one or a series
of related transactions, the Holder shall have the right to (A) deem such an
occurrence an Event of Default and exercise its rights of prepayment pursuant to
Xxxxxxxxx 00 xxxxxx, (X) convert its aggregate principal amount of this
Debenture then outstanding into the shares of stock and other securities, cash
and property receivable upon or deemed to be held by holders of Common Stock
following such merger, consolidation or sale, and the Holder shall be entitled
upon such event or series of related events to receive such amount of
securities, cash and property as the shares of Common Stock into which such
aggregate principal amount of this Debenture could have been converted
immediately prior to such merger, consolidation or sales would have been
entitled, or (C) in the case of a merger or consolidation, (x) require the
surviving entity to issue convertible debentures with such aggregate stated
value or in such face amount, as the case may be, equal to the aggregate
principal amount of this Debenture then held by the Holder, plus all accrued and
unpaid interest and other amounts owing thereon, which newly issued debentures
shall have terms identical (including with respect to conversion) to the terms
of this Debenture and shall be entitled to all of the rights and privileges of
the Holder of this Debenture set forth herein and the agreements pursuant to
which this Debenture was issued (including, without limitation, as such rights
relate to the acquisition, transferability, registration and listing of such
shares of stock and other securities issuable upon conversion thereof), and (y)
simultaneously with the issuance of such convertible debentures, shall have the
right to convert such instrument only into shares of stock and other securities,
cash and property receivable upon or deemed to be held by holders of Common
Stock following such merger or consolidation. In the case of clause (C), the
conversion price applicable for the newly convertible debentures shall be based
upon the amount of securities, cash and property that each share of Common Stock
would receive in such transaction and the Conversion Price in effect immediately
prior to the effectiveness or closing date for such transaction. The terms of
any such merger, sale or consolidation shall include such terms so as to
continue to give the Holder the right to receive the securities, cash and
property set forth in this Paragraph upon any conversion or redemption following
such event. This Paragraph shall similarly apply to successive such events.
(b) If, at any time while any portion of this Debenture
remains outstanding, the Company spins off or otherwise divests itself of a part
of its business or operations or disposes of all or of a part of its assets in a
transaction (the "Spin Off") in which the Company, in addition to or in lieu of
any other compensation received and retained by the Company for such business,
operations or assets, causes securities of another entity (the "Spin Off
Securities") to be issued to security holders of the Company, 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 Debentures
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 Debentures") been converted as of the close of
business on the trading day immediately before the Record Date (the "Reserved
3
Spin Off Shares"), and (ii) to be issued to the Holder on the conversion of all
or any of the Outstanding Debentures, 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 principal amount of the Outstanding Debentures
then being converted, and (II) the denominator is the principal amount of the
Outstanding Debentures.
10. The Holder of the Debenture, by acceptance hereof, agrees that this
Debenture is being acquired for investment and that such Holder will not offer,
sell or otherwise dispose of this Debenture or the Conversion Shares except
under circumstances which will not result in a violation of the Act or any
applicable state Blue Sky or foreign laws or similar laws relating to the sale
of securities.
11. This Debenture shall be governed by and construed in accordance
with the laws of the State of New York. Each of the parties consents to the
jurisdiction of the federal courts and the state courts located in New York
County in the State of New York in connection with any dispute arising under
this Agreement and hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on forum non conveniens, to the
bringing of any such proceeding in such jurisdictions.
12. The following shall constitute an "Event of Default":
a. The Company shall default in the payment of principal or
interest on this Debenture at the Maturity Date and same shall continue for a
period of twenty business days; or
b. Any of the material representations or warranties made by
the Company herein, in the Securities Purchase Agreement, the Registration
Rights Agreement, or in any agreement, certificate or financial statements
heretofore or hereafter furnished by the Company in connection with the
execution and delivery of this Debenture or the Securities Purchase Agreement
shall be false or misleading in any material respect at the time made; or
c. The Company 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 Debenture, fails to transfer or to cause its
Transfer Agent to transfer any certificate for shares of Common Stock issued to
the Holder upon conversion of this Debenture as and when required by this
Debenture or the Registration Rights Agreement, and such transfer is otherwise
lawful, or fails to remove any restrictive legend or to cause its Transfer Agent
to transfer any certificate or any shares of Common Stock issued to the Holder
upon conversion of this Debenture as and when required by this Debenture, the
Securities Purchase Agreement or the Registration Rights Agreement and such
legend removal is otherwise lawful, and any such failure shall continue uncured
for twenty business days; or
d. The Company shall, without cause, fail to perform or
observe, in any material respect, any other material covenant, term, provision,
condition, agreement or obligation of the Company under the Securities Purchase
Agreement, the Registration Rights Agreement or this Debenture and such failure
shall continue uncured for a period of thirty days after written notice from the
Holder of such failure; or
e. The Company shall (1) admit in writing its inability to pay
its debts generally as they mature; (2) make an assignment for the benefit of
creditors or commence proceedings for its dissolution; or (3) apply for or
consent to the appointment of a trustee, liquidator or receiver for its or for a
substantial part of its property or business; or
f. A trustee, liquidator or receiver shall be appointed for
the Company or for a substantial part of its property or business without its
consent and shall not be discharged within sixty (60) days after such
appointment; or
g. Any governmental agency or any court of competent
jurisdiction at the instance of any governmental agency shall assume custody or
control of the whole or any substantial portion of the properties or assets of
the Company and shall not be dismissed within sixty (60) days thereafter; or
h. Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against the Company and, if
instituted against the Company, shall not be dismissed within sixty (60) days
after such institution or the
4
Company shall by any action or answer approve of, consent to, or acquiesce in
any such proceedings or admit the material allegations of, or default in
answering a petition filed in any such proceeding; or
i. Upon a properly noticed Notice of Conversion, the Company
fails to deliver Conversion Shares, when lawful to do so, within 10 Trading Days
of such Notice of Conversion.
Then, or at any time thereafter, and in each and every such case,
unless such Event of Default shall have been waived in writing by the Holder
(which waiver shall not be deemed to be a waiver of any subsequent default), at
the option of the Holder, and in the Holder's sole discretion, the Holder may
consider this Debenture immediately due and payable, without presentment,
demand, protest or notice of any kind, all of which are hereby expressly waived,
anything herein or in any note or other instruments contained to the contrary
notwithstanding, and the Holder may immediately enforce any and all of the
Holder's rights and remedies provided herein or any other rights or remedies
afforded by law.
13. Nothing contained in this Debenture shall be construed as
conferring upon the Holder the right to vote or to receive dividends or to
consent or receive notice as a shareholder in respect of any meeting of
shareholders or any rights whatsoever as a shareholder of the Company, unless
and to the extent converted in accordance with the terms hereof.
14. In no event shall the Holder be permitted to convert this Debenture
for shares of Common Stock to the extent that (x) the number of shares of Common
Stock beneficially owned by such Holder (other than shares of Common Stock
issuable upon conversion of this Debenture) plus (y) the number of shares of
Common Stock issuable upon conversion of this Debenture, would be equal to or
exceed 4.9% of the number of shares of Common Stock then issued and outstanding,
including shares issuable upon conversion of this Debenture held by such Holder
after application of this Paragraph 14. 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 Paragraph 14 applies, the determination of
whether this Debenture is convertible (in relation to other securities owned by
the Holder) and of which a portion of this Debenture is convertible shall be in
the sole discretion of such Holder, and the submission of a Notice of Conversion
shall be deemed to be such Holder's determination of whether this Debenture is
convertible (in relation to other securities owned by such holder) and of which
portion of this Debenture is convertible, 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 convert this Debenture into shares
of Common Stock at such time as such conversion will not violate the provisions
of this Paragraph 14. The provisions of this Paragraph 14 may be waived by the
Holder of this Debenture upon, at the election of the Holder, not less than 75
days' prior notice to the Company, and the provisions of this Paragraph 14 shall
continue to apply until such 75th day (or such later date as may be specified in
such notice of waiver). No conversion of this Debenture in violation of this
Paragraph 14 but otherwise in accordance with this Debenture shall affect the
status of the Common Stock issued upon such conversion as validly issued,
fully-paid and nonassessable. If instead of receiving cash on the Maturity Date
the Holder instead exercises its right to convert this Debenture into Common
Stock pursuant to Paragraph 3 by delivery of a Notice of Conversion prior to
receipt of payment, and such conversion would cause the limit contained in the
first sentence of this Paragraph 14 to be exceeded, such conversion of this
Debenture shall occur up to such limit and the remaining unconverted portion of
this Debenture shall be converted into Common Stock (1) in accordance with one
or more Notices of Conversion delivered by the Holder, or (2) 65 days after the
Maturity Date, whichever is earlier. Notwithstanding anything contained herein
to the contrary, no interest shall accrue after the Maturity Date on any such
unconverted portion of this Debenture.
15. By its acceptance of this Debenture, the Holder agrees to be bound
by the applicable terms of the Securities Purchase Agreement.
[signature page follows]
5
IN WITNESS WHEREOF, Borrower has caused this Debenture to be signed in its
name by its duly authorized officer this _______ day of ______________, 2005.
Peak Entertainment Holdings, Inc.
By:
-----------------------------------------
Wilf Shorrocks
President and Chief Executive Officer
6
EXHIBIT A
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 Debenture No. ___ 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:
----------------------------------------------------------------------
7
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 _______ SHARES OF COMMON STOCK
EXERCISE PRICE: $0.50 PER SHARE
THIS CERTIFIES THAT, for value received, _________________ (the
"Holder"), is entitled, upon the terms and subject to the conditions hereinafter
set forth, at any time on or after the closing of the related Securities
Purchase Agreement (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 fifth year anniversary of
this Warrant (the "Termination Date"), but not thereafter, to subscribe for and
purchase from the Company, up to ___________ fully paid and nonassessable shares
of the Company's Common Stock (the "Common Stock"), at the exercise price of
$0.50 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 to, and receipt thereof by, the
1
Company of the Exercise Price and all taxes required to be paid by Holder, if
any, pursuant to Section 5 herein prior to the issuance of such shares. If this
Warrant shall have been exercised in part, the Company shall, at the time of
delivery of the certificate or certificates representing Warrant Shares, deliver
to Holder a new Warrant evidencing the rights of Holder to purchase the
unpurchased shares of Common Stock called for by this Warrant, which new warrant
shall in all other respects be identical with this Warrant.
4. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. As to any fraction of a share which Holder would otherwise be entitled
to purchase upon such exercise, the Company shall pay a cash adjustment in
respect of such final fraction in an amount equal to the Exercise Price.
5. Limitation on Exercise of Warrant. In no event shall the Holder be
permitted to exercise this Warrant for shares of Common Stock in excess of the
amount of this Warrant upon the exercise of which, (x) the number of shares of
Common Stock beneficially owned by such Holder (other than shares of Common
Stock issuable upon exercise of this Warrant) plus (y) the number of shares of
Common Stock issuable upon exercise of this Warrant, would be equal to or exceed
4.9% of the number of shares of Common Stock then issued and outstanding,
including shares issuable upon exercise of this Warrant held by such Holder
after application of this Section 5. As used herein, beneficial ownership shall
be determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder. To the extent that
the limitation contained in this Section 5 applies, the determination of whether
this Warrant is exercisable (in relation to other securities owned by the
Holder) and which portion of this Warrant is exercisable shall be in the sole
discretion of such Holder, and the submission of a Notice of Exercise shall be
deemed to be such Holder's determination of whether this Warrant is exercisable
(in relation to other securities owned by such Holder) and of which portion of
this Warrant is exercisable, in each case subject to such aggregate percentage
limitation, and the Company shall have no obligation to verify or confirm the
accuracy of such determination. Nothing contained herein shall be deemed to
restrict the right of a Holder to exercise this Warrant into shares of Common
Stock at such time as such exercise will not violate the provisions of this
Section 5. The provisions of this Section 5 may be waived by the Holder of this
Warrant upon not less than 75 days' prior notice to the Company, and the
provisions of this Section 5 shall continue to apply until such 75th day (or
such later date as may be specified in such notice of waiver). No exercise of
this Warrant in violation of this Section 5, but otherwise in accordance with
this Warrant, shall affect the status of the Common Stock issued upon such
exercise as validly issued, fully-paid and nonassessable.
6. Charges, Taxes and Expenses. Issuance of certificates for shares of
Common Stock upon the exercise of this Warrant shall be made without charge to
the Holder hereof for any issue or transfer tax or other incidental expense in
respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the name
of the Holder of this Warrant, or in such name or names as may be directed by
the holder of this Warrant; provided, however, that in the event certificates
for shares of Common Stock are to be issued in a name other than the name of the
Holder of this Warrant, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto, duly executed by the Holder
hereof; and the Company may require, as a condition thereto, the payment of a
sum sufficient to reimburse it for any transfer tax incidental thereto.
7. Closing of Books. The Company will not close its shareholder books
or records in any manner which prevents the timely exercise of this Warrant.
8. Transfer, Division and Combination.
(a) Subject to compliance with any applicable securities laws,
transfer of this Warrant and all rights hereunder, in whole or in part, shall be
registered on the books of the Company to be maintained for such purpose, upon
surrender of this Warrant at the principal office of the Company, together with
a written assignment of this Warrant substantially in the form attached hereto
duly executed by Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such surrender
and, if required, such payment, the Company shall execute and deliver a new
warrant or warrants in the name of the assignee or assignees and in the
denomination or denominations specified in such instrument of assignment, and
shall issue to the assignor a new warrant evidencing the portion of this Warrant
not so assigned, and this Warrant shall promptly be cancelled. This Warrant, if
properly assigned, may be exercised by a new holder for the purchase of shares
of Common Stock without having a new warrant issued.
2
(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.
(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
3
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.
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
4
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, $3.00 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 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.
5
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 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.
6
(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]
7
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereunto duly authorized.
Dated: _________ __, 2005
Peak Entertainment Holdings, Inc.
By:
------------------------------------
Wilf Shorrocks
President and Chief Executive Officer
8
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 $0.50 per share, of Peak
Entertainment Holdings, Inc. pursuant to the terms of the attached Warrant, and
tenders herewith payment of the exercise price in full, in the amount of
$_____________, together with all applicable transfer taxes, if any.
Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
-------------------------------
(Name)
-------------------------------
(Address)
-------------------------------
Dated:
---------------------
------------------------------
Signature
9
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.
10
EXHIBIT C
SECURITY AGREEMENT
SECURITY AGREEMENT (this "Agreement"), dated as of _____________, 2005,
by and among Peak Entertainment Holdings, Inc., a Nevada corporation (the
"Company"), and the secured party signatory hereto and its respective endorsees,
transferees and assigns (the "Secured Party").
W I T N E S S E T H:
WHEREAS, pursuant to a Securities Purchase Agreement between the
Company and the Secured Party (the "Purchase Agreement"), the Company has agreed
to issue to the Secured Party and other persons who enter into a similar
Purchase Agreement (collectively the Secured Party and others similarly situated
are referred to hereinafter as the "Secured Parties"), and the Secured Party has
agreed to purchase from the Company certain of the Company's 12% Secured
Convertible Debentures (the "Debentures"), which are convertible into shares of
the Company's Common Stock, par value $.001 per share (the "Common Stock"), and
in connection therewith, the Company shall issue the Secured Party certain
Common Stock purchase warrants (the "Warrants"); and
WHEREAS, in order to induce the Secured Parties to purchase the
Debentures, the Company has agreed to execute and deliver to the Secured
Parties, this Agreement for the benefit of the Secured Parties and to grant to
the Secured Parties a priority security interest, to the extent not already
encumbered, in certain property of the Company to secure the prompt payment,
performance and discharge in full of all of the Company's obligations under the
Debentures and exercise and discharge in full of the Company's obligations under
the Warrants.
NOW, THEREFORE, in consideration of the agreements herein contained and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto hereby agree as follows:
1. Certain Definitions. As used in this Agreement, the following terms
shall have the meanings set forth in this Section 1. Terms used but not
otherwise defined in this Agreement that are defined in Article 9 of the UCC
(such as "general intangibles" and "proceeds") shall have the respective
meanings given such terms in Article 9 of the UCC.
(a) "Collateral" means the collateral in which the Secured
Party is granted a security interest by this Agreement and which shall
include the following, whether presently owned or existing or hereafter
acquired or coming into existence, and all additions and accessions
thereto and all substitutions and replacements thereof, and all
proceeds, products and accounts thereof, including, without limitation,
all proceeds from the sale or transfer of the Collateral and of
insurance covering the same and of any tort claims in connection
therewith:
(i) All Goods of the Company, including, without
limitations, all machinery, equipment, computers, motor
vehicles, trucks, tanks, boats, ships, appliances, furniture,
special and general tools, fixtures, test and quality control
devices and other equipment of every kind and nature and
wherever situated, together with all documents of title and
documents representing the same, all additions and accessions
thereto, replacements therefor, all parts therefor, and all
substitutes for any of the foregoing and all other items used
and useful in connection with the Company's businesses and all
improvements thereto (collectively, the "Equipment");
(ii) All Inventory of the Company, less inventory to
the extent that CK's Supermarket Limited of 00/00 Xxx
Xxxxxxxx, Xxxxxxx XX0 0XX maintains security interests in
inventory pursuant to an agreement for a loan made July 10,
2002;
(iii) All of the Company's contract rights and
general intangibles, including, without limitation, all
partnership interests, stock or other securities, licenses,
distribution and other
1
agreements, computer software development rights, leases,
franchises, customer lists, quality control procedures, grants
and rights, goodwill, trademarks, service marks, trade styles,
trade names, patents, patent applications, copyrights, deposit
accounts, and income tax refunds (collectively, the "General
Intangibles");
(iv) All of the Company's documents, instruments and
chattel paper, files, records, books of account, business
papers, computer programs and the products and proceeds of all
of the foregoing Collateral set forth in clauses (i)-(iv)
above; and
(v) All of the Company's shares of stock of the
subsidiaries of the Company, including, without limitation,
all of the Company's shares of stock of Peak Entertainment,
Ltd.
(b) "Company" shall mean, collectively, the Company and all of
the subsidiaries of the Company.
(c) "Obligations" means all of the Company's obligations under
this Agreement and the Debentures, in each case, whether now or
hereafter existing, voluntary or involuntary, direct or indirect,
absolute or contingent, liquidated or unliquidated, whether or not
jointly owed with others, and whether or not from time to time
decreased or extinguished and later decreased, created or incurred, and
all or any portion of such obligations or liabilities that are paid, to
the extent all or any part of such payment is avoided or recovered
directly or indirectly from the Secured Party as a preference,
fraudulent transfer or otherwise as such obligations may be amended,
supplemented, converted, extended or modified from time to time.
(d) "UCC" means the Uniform Commercial Code, as currently in
effect in the State of New York.
2. Grant of Security Interest. As an inducement for the Secured Party
to purchase the Debentures and to secure the complete and timely payment,
performance and discharge in full, as the case may be, of all of the
Obligations, the Company hereby, unconditionally and irrevocably, pledges,
grants and hypothecates to the Secured Party, a continuing security interest, to
the extent not already encumbered, in, a continuing lien upon, a right to
possession and disposition of and a right of set-off against, in each case to
the fullest extent permitted by law, all of the Company's right, title and
interest of whatsoever kind and nature (including, without limitation, all of
Peak Entertainment Ltd.'s rights) in and to the Collateral (the "Security
Interest"). The Security Interest rights herein shall be on an equal level to
the security interest rights granted to other third party purchasers in the
Company's sale of debentures, on terms and conditions similar to the terms
herein, occurring on or about the same time as this Agreement. Notwithstanding
anything to the contrary herein, the parties understand and agree that the
Security Interest rights herein shall be secondary to any security interest
rights previously granted by the Company in or about January 2005, and that the
provisions of this Agreement shall be interpreted accordingly. The Company shall
be entitled to grant security interest rights senior to the rights of the
Secured Parties to a financial institution, subject to the approval of the
Secured Parties, which shall not be unreasonably withheld. The Company shall be
entitled to grant security interest rights similar to the rights granted to the
Secured Parties to non-financial institution lender(s) hereafter providing at
least $1,500,000 or more in working capital, subject to the approval of the
Secured Parties, which shall not be unreasonably withheld. Secured Parties
acknowledge that the Company will need additional capital for its business.
Except as provided for herein, the Company will not grant to any other person a
security interest in its assets for so long as a majority of the Debentures sold
to the Secured Parties remaining outstanding, except with the consent of
two-thirds of the outstanding face amount of the Debentures held by the Secured
Parties, which shall not be unreasonably withheld.
3. Representations, Warranties, Covenants and Agreements of the
Company. The Company represents and warrants to, and covenants and agrees with,
the Secured Party as follows:
(a) This Agreement constitutes a legal, valid and binding
obligation of the Company enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditor's rights generally.
2
(b) The Company represents and warrants that its principal
place of business is set forth in the Company's filings with the
Securities and Exchange Commission that that it has no place of
business or offices where its respective books of account and records
are kept (other than temporarily at the offices of its attorneys or
accountants) or places where Collateral is stored or located;
(c) The Company is the sole owner of the Collateral (except
for licenses granted by the Company in the ordinary course of
business), free and clear of any liens, security interests,
encumbrances, rights or claims, and is fully authorized to grant the
Security Interest in and to pledge the Collateral, subject to the
surrender and cancellation of previously issued debentures. Subject to
the surrender and cancellation of previously issued debentures, there
is not on file in any governmental or regulatory authority, agency or
recording office an effective financing statement, security agreement,
license or transfer or any notice of any of the foregoing (other than
those that have been filed in favor of any secured party pursuant to
this Agreement or similar agreements) covering or affecting any of the
Collateral.
(d) No part of the Collateral has been judged invalid or
unenforceable. There has been no adverse decision to the Company's
claim of ownership rights in or exclusive rights to use the Collateral
in any jurisdiction or to the Company's right to keep and maintain such
Collateral in full force and effect, and there is no proceeding
involving said rights pending or, to the best knowledge of the Company,
threatened before any court, judicial body, administrative or
regulatory agency, arbitrator or other governmental authority.
(e) The Company shall at all times maintain its books of
account and records relating to the Collateral at its principal place
of business and may not relocate such books of account and records or
tangible Collateral unless it delivers to the Secured Party at least 30
days prior to such relocation (i) written notice of such relocation and
the new location thereof (which must be within the United States) and
(ii) evidence that appropriate financing statements and other necessary
documents have been filed and recorded and other steps have been taken
to perfect the Security Interest to create in favor of the Secured
Party valid, perfected and continuing liens in the Collateral.
(f) This Agreement creates in favor of the Secured Party a
valid security interest in the Collateral securing the payment and
performance of the Obligations and, upon making the filings described
in the immediately following sentence, a perfected security interest in
such Collateral. Subject to the surrender and cancellation of
previously issued debentures, except for the filing of financing
statements on Form-1 under the UCC with the appropriate jurisdictions,
no authorization or approval of or filing with or notice to any
governmental authority or regulatory body is required either (i) for
the grant by the Company of, or the effectiveness of, the Security
Interest granted hereby or for the execution, delivery and performance
of this Agreement by the Company or (ii) for the perfection of or
exercise by the Secured Party of its rights and remedies hereunder.
(g) The Company will prepare and deliver to the Secured Party
one or more executed UCC financing statements on Form-1 with respect to
the Security Interest for filing with the appropriate jurisdictions at
the expense of the Company.
(h) The execution, delivery and performance of this Agreement
does not conflict with or cause a breach or default, or an event that
with or without the passage of time or notice, shall constitute a
breach or default, under any agreement to which the Company is a party
or by which the Company is bound. No consent (including, without
limitation, from stockholders or creditors of the Company) is required
for the Company to enter into and perform its obligations hereunder.
(i) The Company shall at all times maintain the liens and
Security Interest provided for hereunder as valid and perfected
priority liens and security interests in the Collateral in favor of the
Secured Party until this Agreement and the Security Interest hereunder
shall terminate pursuant to Section 8. The Company hereby agrees to
defend the same against any and all persons. The Company shall
safeguard and protect all Collateral for the account of the Secured
3
Party. At the request of the Secured Party, the Company will sign and
deliver to the Secured Party at any time or from time to time one or
more financing statements pursuant to the UCC (or any other applicable
statute) in form reasonably satisfactory to the Secured Party and will
pay the cost of filing the same in all public offices wherever filing
is, or is reasonably deemed by the Secured Party to be, necessary or
desirable to effect the rights and obligations provided for herein.
(j) The Company shall keep and preserve its Equipment,
Inventory and other tangible Collateral in good condition, repair and
order and shall not operate or locate any such Collateral (or cause to
be operated or located) in any area excluded from insurance coverage.
(k) The Company shall promptly execute and deliver to the
Secured Party such further deeds, mortgages, assignments, security
agreements, financing statements or other instruments, documents,
certificates and assurances and take such further action as the Secured
Party may from time to time reasonably request and may in its sole
discretion deem necessary to perfect, protect or enforce its security
interest in the Collateral including, without limitation, the execution
and delivery of a separate security agreement with respect to the
Company's intellectual property ("Intellectual Property Security
Agreement") in which the Secured Party has been granted a security
interest hereunder, substantially in a form acceptable to the Secured
Party, which Intellectual Property Security Agreement, other than as
stated therein, shall be subject to all of the terms and conditions
hereof.
(l) The Company will take all steps reasonably necessary to
diligently pursue and seek to preserve, enforce and collect any rights,
claims, causes of action and accounts receivable in respect of the
Collateral.
(m) All information heretofore, herein or hereafter supplied
to the Secured Party by or on behalf of the Company with respect to the
Collateral is accurate and complete in all material respects as of the
date furnished.
4. Defaults. The following events shall be "Events of Default":
(a) The occurrence of an Event of Default (as defined in the
Debentures) under the Debentures; and
(b) Any breach of, or default under, the Warrants.
5. Rights and Remedies Upon Default. Upon occurrence of any Event of
Default and at any time thereafter, the Secured Party shall have the right to
exercise all of the remedies conferred hereunder and under the Debentures, and
the Secured Party shall have all the rights and remedies of a secured party
under the UCC and/or any other applicable law (including the Uniform Commercial
Code of any jurisdiction in which any Collateral is then located).
6. Responsibility for Collateral. The Company assumes all liabilities
and responsibility in connection with all Collateral, and the obligations of the
Company hereunder or under the Debentures and the Warrants shall in no way be
affected or diminished by reason of the loss, destruction, damage or theft of
any of the Collateral or its unavailability for any reason.
7. Security Interest Absolute. All rights of the Secured Party and all
Obligations of the Company hereunder, shall be absolute and unconditional,
irrespective of: (a) any lack of validity or enforceability of this Agreement,
the Debentures, the Warrants or any agreement entered into in connection with
the foregoing, or any portion hereof or thereof; (b) any change in the time,
manner or place of payment or performance of, or in any other term of, all or
any of the Obligations, or any other amendment or waiver of or any consent to
any departure from the Debentures, the Warrants or any other agreement entered
into in connection with the foregoing; (c) any exchange, release or
nonperfection of any of the Collateral, or any release or amendment or waiver of
or consent to departure from any other collateral for, or any guaranty, or any
other security, for all or any of the Obligations; (d) any action by the Secured
Party to obtain, adjust, settle and cancel in its sole discretion any insurance
claims or matters made or arising in connection with the Collateral; or (e) any
other circumstance which might otherwise constitute any legal or equitable
defense available to the Company, or a discharge of all or any part of the
Security Interest granted hereby. Until the Obligations shall have been paid and
performed in full, the rights of the Secured Party shall
4
continue even if the Obligations are barred for any reason, including, without
limitation, the running of the statute of limitations or bankruptcy. The Company
expressly waives presentment, protest, notice of protest, demand, notice of
nonpayment and demand for performance. In the event that at any time any
transfer of any Collateral or any payment received by the Secured Party
hereunder shall be deemed by final order of a court of competent jurisdiction to
have been a voidable preference or fraudulent conveyance under the bankruptcy or
insolvency laws of the United States, or shall be deemed to be otherwise due to
any party other than the Secured Party, then, in any such event, the Company's
obligations hereunder shall survive cancellation of this Agreement, and shall
not be discharged or satisfied by any prior payment thereof and/or cancellation
of this Agreement, but shall remain a valid and binding obligation enforceable
in accordance with the terms and provisions hereof. The Company waives all right
to require the Secured Party to proceed against any other person or to apply any
Collateral which the Secured Party may hold at any time, or to marshal assets,
or to pursue any other remedy. The Company waives any defense arising by reason
of the application of the statute of limitations to any obligation secured
hereby.
8. Term of Agreement. This Agreement and the Security Interest shall
terminate on the date on which all payments under the Debentures have been made
in full and all other Obligations have been paid or discharged. Upon such
termination, the Secured Party, at the request and at the expense of the
Company, will join in executing any termination statement with respect to any
financing statement executed and filed pursuant to this Agreement.
9. Power of Attorney; Further Assurances.
(a) The Company authorizes the Secured Party, and does hereby
make, constitute and appoint it, and its respective officers, agents,
successors or assigns with full power of substitution, as the Company's
true and lawful attorney-in-fact, with power, in its own name or in the
name of the Company, to, after the occurrence and during the
continuance of an Event of Default, (i) to sign and endorse any UCC
financing statement relating to the Collateral; (ii) to pay or
discharge taxes, liens, security interests or other encumbrances at any
time levied or placed on or threatened against the Collateral; and
(iii) generally, to do, at the option of the Secured Party, at any
time, or from time to time, all acts and things which the Secured Party
deems necessary to protect and preserve the Collateral and the Security
Interest granted therein in order to effect the intent of this
Agreement, the Debentures and the Warrants, as fully and effectually as
the Company might or could do; and the Company hereby ratifies all that
said attorney shall lawfully do or cause to be done by virtue hereof.
This power of attorney is coupled with an interest and shall be
irrevocable for the term of this Agreement and thereafter as long as
any of the Obligations shall be outstanding.
(b) On a continuing basis, the Company will make, execute,
acknowledge, deliver, file and record, as the case may be, in the
proper filing and recording places in any jurisdiction, all such
instruments, and take all such action as may reasonably be deemed
necessary or advisable, or as reasonably requested by the Secured
Party, to perfect the Security Interest granted hereunder and otherwise
to carry out the intent and purposes of this Agreement, or for assuring
and confirming to the Secured Party the grant or perfection of a
security interest in all the Collateral.
(c) The Company hereby irrevocably appoints the Secured Party
as the Company's attorney-in-fact, with full authority in the place and
stead of the Company and in the name of the Company, from time to time
in the Secured Party's discretion, to take any action and to execute
any instrument which the Secured Party may deem necessary or advisable
to accomplish the purposes of this Agreement, including the filing, in
its sole discretion, of one or more financing or continuation
statements and amendments thereto, relative to the Collateral without
the signature of the Company where permitted by law.
10. Notices. All notices, requests, demands and other communications
hereunder shall be in writing, with copies to all the other parties hereto, and
shall be deemed to have been duly given when (i) if delivered by hand, upon
receipt, (ii) if sent by facsimile, upon receipt of proof of sending thereof,
(iii) if sent by nationally recognized overnight delivery service (receipt
requested), the next business day or (iv) if mailed by first-class registered or
certified mail, return receipt requested, postage prepaid, four days after
posting in the U.S. mails, in each case if delivered to the following addresses:
5
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 to (which shall not constitute
notice):
Attn: Xxx Xxxxxxx
Law Offices of Xxx Xxxxxxx
00 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
If to the Secured Party:
At the address and facsimile number as
provided pursuant to the Securities Purchase
Agreement.
11. Other Security. To the extent that the Obligations are now or
hereafter secured by property other than the Collateral or by the guarantee,
endorsement or property of any other person, firm, corporation or other entity,
then the Secured Party shall have the right, in its sole discretion, to pursue,
relinquish, subordinate, modify or take any other action with respect thereto,
without in any way modifying or affecting any of the Secured Party's rights and
remedies hereunder.
12. Miscellaneous.
(a) No course of dealing between the Company and the Secured
Party, nor any failure to exercise, nor any delay in exercising, on the
part of the Secured Party, any right, power or privilege hereunder or
under the Debentures shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or privilege hereunder
or thereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege.
(b) All of the rights and remedies of the Secured Party with
respect to the Collateral, whether established hereby or by the
Debentures or by any other agreements, instruments or documents or by
law shall be cumulative and may be exercised singly or concurrently.
(c) This Agreement constitutes the entire agreement of the
parties with respect to the subject matter hereof and is intended to
supersede all prior negotiations, understandings and agreements with
respect thereto. Except as specifically set forth in this Agreement, no
provision of this Agreement may be modified or amended except by a
written agreement specifically referring to this Agreement and signed
by the parties hereto.
(d) In the event that any provision of this Agreement is held
to be invalid, prohibited or unenforceable in any jurisdiction for any
reason, unless such provision is narrowed by judicial construction,
this Agreement shall, as to such jurisdiction, be construed as if such
invalid, prohibited or unenforceable provision had been more narrowly
drawn so as not to be invalid, prohibited or unenforceable. If,
notwithstanding the foregoing, any provision of this Agreement is held
to be invalid, prohibited or unenforceable in any jurisdiction, such
provision, as to such jurisdiction, shall be ineffective to the extent
of such invalidity, prohibition or unenforceability without
invalidating the remaining portion of such provision or the other
provisions of this Agreement and without affecting the validity or
enforceability of such provision or the other provisions of this
Agreement in any other jurisdiction.
(e) No waiver of any breach or default or any right under this
Agreement shall be deemed a waiver of any subsequent breach or default
or right, whether of the same or similar nature or otherwise.
6
(f) This Agreement shall be binding upon and inure to the
benefit of each party hereto and its successors and assigns.
(g) Each party shall take such further action and execute and
deliver such further documents as may be necessary or appropriate in
order to carry out the provisions and purposes of this Agreement.
(h) This Agreement shall be construed in accordance with the
laws of the State of New York, except to the extent the validity,
perfection or enforcement of a security interest hereunder in respect
of any particular Collateral which are governed by a jurisdiction other
than the State of New York in which case such law shall govern. Each of
the parties hereto irrevocably submit to the exclusive jurisdiction of
any state or federal court sitting in New York County in the State of
New York over any action or proceeding arising out of or relating to
this Agreement, and the parties hereto hereby irrevocably agree that
all claims in respect of such action or proceeding may be heard and
determined in such state or federal court. The parties hereto agree
that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. The parties hereto
further waive any objection to venue in the State of New York and any
objection to an action or proceeding in the State of New York on the
basis of forum non conveniens.
(i) EACH PARTY HERETO HEREBY AGREES TO WAIVE ITS RESPECTIVE
RIGHTS TO A JURY TRAIL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT. THE SCOPE OF THIS WAIVER IS INTENDED TO
BE ALL ENCOMPASSING OF ANY DISPUTES THAT MAY BE FILED IN ANY COURT AND
THAT RELATE TO THE SUBJECT MATER OF THIS AGREEMENT, INCLUDING WITHOUT
LIMITATION CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL
OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES
THAT THIS WAIVER IS A MATERIAL INDUCEMENT FOR EACH PARTY TO ENTER INTO
A BUSINESS RELATIONSHIP, THAT EACH PARTY HAS ALREADY RELIED ON THIS
WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH PARTY WILL
CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH
PARTY FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL, AND THAT SUCH PARTY HAS KNOWINGLY AND
VOLUNTARILY WAIVES ITS RIGHTS TO A JURY TRIAL FOLLOWING SUCH
CONSULTATION. THIS WAIVER IS IRREVOCABLE, MEANING THAT, NOTWITHSTANDING
ANYTHING HEREIN TO THE CONTRARY, IT MAY NOT BE MODIFIED EITHER ORALLY
OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS AND SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT. IN THE EVENT OF A LITIGATION, THIS AGREEMENT MAY BE FILED AS
A WRITTEN CONSENT TO A TRIAL BY THE COURT.
(j) This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the
same Agreement. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile
signature were the original thereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
7
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed on the day and year first above written.
THE COMPANY: PEAK ENTERTAINMENT HOLDINGS, INC.
By:
------------------------------------
Wilf Shorrocks
President and Chief Executive Officer
THE SECURED PARTY: __________________________
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EXHIBIT D
INTELLECTUAL PROPERTY SECURITY AGREEMENT
Intellectual Property Security Agreement (this "Agreement") dated as of
_____________, 2005, by and among Peak Entertainment Holdings, a Nevada
corporation (the "Company"), and the secured party signatory hereto and its
respective endorsees, transferees and assigns (the "Secured Party").
W I T N E S S E T H :
WHEREAS, pursuant to a Securities Purchase Agreement between the
Company and the Secured Party (the "Purchase Agreement"), the Company has agreed
to issue to the Secured Party and other persons who enter into a similar
Purchase Agreement (collectively the Secured Party and others similarly situated
are referred to hereinafter as the "Secured Parties"), and the Secured Party has
agreed to purchase from the Company certain of the Company's 12% Secured
Convertible Debentures (the "Debentures"), which are convertible into shares of
the Company's Common Stock, par value $.001 per share (the "Common Stock"), and
in connection therewith, the Company shall issue the Secured Party certain
Common Stock purchase warrants (the "Warrants"); and
WHEREAS, in order to induce the Secured Parties to purchase the
Debentures, the Company has agreed to execute and deliver to the Secured
Parties, this Agreement for the benefit of the Secured Parties and to grant to
the Secured Parties a security interest, to the extent not already encumbered,
in certain property of the Company to secure the prompt payment, performance and
discharge in full of all of the Company's obligations under the Debentures and
exercise and discharge in full of the Company's obligations under the Warrants.
NOW, THEREFORE, in consideration of the agreements herein contained and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein, terms which are
defined in the Purchase Agreement and used herein are so used as so defined; and
the following terms shall have the following meanings:
"Company" shall mean, collectively, the Company and all of the
subsidiaries of the Company (including, without limitation, Peak
Entertainment, Ltd.).
"Copyrights" shall mean (a) all copyrights, registrations and
applications for registration, issued or filed, including any reissues,
extensions or renewals thereof, by or with the United States Copyright
Office or any similar office or agency of the United States, any state
thereof, or any other country or political subdivision thereof, or
otherwise, including, all rights in and to the material constituting
the subject matter thereof, and (b) any rights in any material which is
copyrightable or which is protected by common law, United States
copyright laws or similar laws or any law of any State.
"Copyright License" shall mean any agreement, written or oral,
providing for a grant by the Company of any right in any Copyright.
"Intellectual Property" shall means, collectively, the
Software Intellectual Property, Copyrights, Copyright Licenses,
Patents, Patent Licenses, Trademarks, Trademark Licenses and Trade
Secrets of the Company, as set forth in Schedule A hereto.
"Obligations" means all of the Company's obligations under
this Agreement and the Debentures, in each case, whether now or
hereafter existing, voluntary or involuntary, direct or indirect,
absolute or contingent, liquidated or unliquidated, whether or not
jointly owed with others, and whether or not from time to time
decreased or extinguished and later decreased, created or incurred, and
all or any portion of such obligations or liabilities that are paid, to
the extent all or any part of such payment is avoided or
1
recovered directly or indirectly from the Secured Party as a
preference, fraudulent transfer or otherwise as such obligations may be
amended, supplemented, converted, extended or modified from time to
time.
"Patents" shall mean (a) all letters patent of the United
States or any other country or any political subdivision thereof, and
all reissues and extensions thereof, and (b) all applications for
letters patent of the United States and all divisions, continuations
and continuations-in-part thereof or any other country or any political
subdivision.
"Patent License" shall mean all agreements, whether written or
oral, providing for the grant by the Company of any right to
manufacture, use or sell any invention covered by a Patent.
"Security Agreement" shall mean the Security Agreement, dated
the date hereof between the Company and the Secured Party.
"Software Intellectual Property" shall mean:
(a) all software programs (including all source code,
object code and all related applications and data files),
whether now owned, upgraded, enhanced, licensed or leased or
hereafter acquired by the Company, above;
(b) all computers and electronic data processing
hardware and firmware associated therewith;
(c) all documentation (including flow charts, logic
diagrams, manuals, guides and specifications) with respect to
such software, hardware and firmware described in the
preceding clauses (a) and (b); and
(d) all rights with respect to all of the foregoing,
including, without limitation, any and all upgrades,
modifications, copyrights, licenses, options, warranties,
service contracts, program services, test rights, maintenance
rights, support rights, improvement rights, renewal rights and
indemnifications and substitutions, replacements, additions,
or model conversions of any of the foregoing.
"Trademarks" shall mean all trademarks, trade names, corporate
names, the Company names, business names, fictitious business names,
trade styles, service marks, logos and other source or business
identifiers, and the goodwill associated therewith, now existing.
"Trademark License" shall mean any agreement, written or oral,
providing for the grant by the Company of any right to use any
Trademark.
"Trade Secrets" shall mean common law and statutory trade
secrets and all other confidential or proprietary or useful information
and all know-how obtained by or used in or contemplated at any time for
use in the business of the Company (all of the foregoing being
collectively called a "Trade Secret"), whether or not such Trade Secret
has been reduced to a writing or other tangible form, including all
documents and things embodying, incorporating or referring in any way
to such Trade Secret, all Trade Secret licenses, and including the
right to xxx for and to enjoin and to collect damages for the actual or
threatened misappropriation of any Trade Secret and for the breach or
enforcement of any such Trade Secret license.
2. Grant of Security Interest. In accordance with Section 3(m) of the
Security Agreement, to secure the complete and timely payment, performance and
discharge in full, as the case may be, of all of the Obligations, the Company
hereby, unconditionally and irrevocably, pledges, grants and hypothecates to the
Secured Party, a continuing security interest in, a continuing lien upon, an
unqualified right to possession and disposition of and a right of set-off
against, in each case to the fullest extent permitted by law, all of the
Company's right, title and interest of whatsoever kind and nature (including,
without limitation, all of Peak Entertainment Ltd.'s rights) in and to the
Intellectual Property (the "Security Interest"). The Security Interest rights
herein shall be on equal level to the
2
other security interest rights granted to third party purchasers in the
Company's sale of debentures, on terms and conditions similar to the terms
herein. Notwithstanding anything to the contrary herein or in the Security
Agreement, the parties understand and agree that the Security Interest rights
herein shall be secondary to any security interest rights previously granted by
the Company, including those granted in or about January 2005, and that the
provisions of this Agreement shall be interpreted accordingly. The Company shall
be entitled to grant security interest rights senior to the rights of the
Secured Parties to a financial institution, subject to the approval of the
Secured Parties, which shall not be unreasonably withheld. The Company shall be
entitled to grant security interest rights similar to the rights granted to the
Secured Parties to non-financial institution lender(s) hereafter providing a
total of at least $1,000,000 or more in working capital, subject to the approval
of the Secured Parties, which shall not be unreasonably withheld. Secured
Parties acknowledge that the Company will need additional capital for its
business. Except as provided for herein, the Company will not grant to any other
person a security interest in its assets for so long as a majority of the
Debentures sold to the Secured Parties remaining outstanding, except with the
consent of two-thirds of the outstanding face amount of the Debentures held by
the Secured Parties, which shall not be unreasonably withheld.
3. Representations and Warranties. The Company hereby represents and
warrants, and covenants and agrees with, the Secured Party as follows:
(a) The Company has the requisite corporate power and
authority to enter into this Agreement and otherwise to carry out its
obligations thereunder. The execution, delivery and performance by the
Company of this Agreement and the filings contemplated therein have
been duly authorized by all necessary action on the part of the Company
and no further action is required by the Company. This Agreement
constitutes a legal, valid and binding obligation of the Company
enforceable in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditor's rights generally.
(b) The Company represents and warrants that it has no place
of business or offices where its respective books of account and
records are kept (other than temporarily at the offices of its
attorneys or accountants) or places where the Intellectual Property is
stored or located.
(c) The Company is the sole owner of the Intellectual Property
(except for licenses granted by the Company in the ordinary course of
business), and is fully authorized to grant the Security Interest in
and to pledge the Intellectual Property, subject to the surrender and
cancellation of previously issued debentures. Subject to the surrender
and cancellation of previously issued debentures, there is not on file
in any governmental or regulatory authority, agency or recording office
an effective financing statement, security agreement, license or
transfer or any notice of any of the foregoing (other than those that
have been filed in favor of the Secured Party pursuant to this
Agreement) covering or affecting any of the Intellectual Property.
(d) The Company shall at all times maintain its books of
account and records relating to the Intellectual Property at its
principal place of business and may not relocate such books of account
and records unless it delivers to the Secured Party at least 30 days
prior to such relocation (i) written notice of such relocation and the
new location thereof (which must be within the United States) and (ii)
evidence that the necessary documents have been filed and recorded and
other steps have been taken to perfect the Security Interest to create
in favor of the Secured Party valid, perfected and continuing liens in
the Intellectual Property to the extent they can be perfected through
such filings.
(e) This Agreement creates in favor of the Secured Party a
valid security interest in the Intellectual Property securing the
payment and performance of the Obligations and, upon making the filings
required hereunder, a perfected security interest in such Intellectual
Property to the extent that it can be perfected through such filings,
and subject to the other and prior security interests to such
Intellectual Property.
(f) Upon request of the Secured Party, the Company shall
execute and deliver any and all agreements, instruments, documents, and
papers as the Secured Party may reasonably request to evidence the
Secured Party's security interest in the Intellectual Property and the
goodwill and general intangibles of
3
the Company relating thereto or represented thereby, and the Company
hereby appoints the Secured Party its attorney-in-fact to execute and
file all such writings for the foregoing purposes, all acts of such
attorney being hereby ratified and confirmed; such power being coupled
with an interest is irrevocable until the Obligations have been fully
satisfied and are paid in full.
(g) The execution, delivery and performance of this Agreement
does not conflict with or cause a breach or default, or an event that
with or without the passage of time or notice, shall constitute a
breach or default, under any agreement to which the Company is a party
or by which the Company is bound.
(h) The Company shall at all times maintain the liens and
Security Interest provided for hereunder as valid and perfected liens
and security interests in the Intellectual Property to the extent they
can be perfected by filing in favor of the Secured Party until this
Agreement and the Security Interest hereunder shall terminate pursuant
to Section 8. The Company hereby agrees to defend the same against any
and all persons. The Company shall safeguard and protect all
Intellectual Property for the account of the Secured Party. Without
limiting the generality of the foregoing, the Company shall pay all
fees, taxes and other amounts necessary to maintain the Intellectual
Property and the Security Interest hereunder, and the Company shall
obtain and furnish to the Secured Party from time to time, upon demand,
such releases and/or subordinations of claims and liens which may be
required to maintain the Security Interest hereunder.
(i) The Company will take all steps reasonably necessary to
diligently pursue and seek to preserve, enforce and collect any rights,
claims, causes of action and accounts receivable in respect of the
Intellectual Property.
(j) All information heretofore, herein or hereafter supplied
to the Secured Party by or on behalf of the Company with respect to the
Intellectual Property is accurate and complete in all material respects
as of the date furnished.
(k) With respect to any Intellectual Property:
(i) such Intellectual Property is subsisting and has
not been adjudged invalid or unenforceable, in whole or in
part;
(ii) such Intellectual Property is valid and
enforceable; and
(iii) the Company is the owner of the right, title
and interest in and to such Intellectual Property and no claim
has been made that the use of such Intellectual Property
infringes on the asserted rights of any third party.
4. Defaults. The following events shall be "Events of Default":
(a) The occurrence of an Event of Default (as defined in the
Debentures) under the Debentures and
(b) Any breach of, or default under, the Warrants.
5. Rights and Remedies Upon Default. Upon occurrence of any Event of
Default and at any time thereafter, the Secured Party shall have the right to
exercise all of the remedies conferred hereunder and under the Debentures, and
the Secured Party shall have all the rights and remedies of a secured party
under the UCC and/or any other applicable law (including the Uniform Commercial
Code of any jurisdiction in which any Intellectual Property is then located).
6. Responsibility for Intellectual Property. The Company assumes all
liabilities and responsibility in connection with all Intellectual Property, and
the obligations of the Company hereunder or under the Debentures and
4
the Warrants shall in no way be affected or diminished by reason of the loss,
destruction, damage or theft of any of the Intellectual Property or its
unavailability for any reason.
7. Security Interest Absolute. All rights of the Secured Party and all
Obligations of the Company hereunder, shall be absolute and unconditional,
irrespective of: (a) any lack of validity or enforceability of this Agreement,
the Debentures, the Warrants or any agreement entered into in connection with
the foregoing, or any portion hereof or thereof; (b) any change in the time,
manner or place of payment or performance of, or in any other term of, all or
any of the Obligations, or any other amendment or waiver of or any consent to
any departure from the Debentures, the Warrants or any other agreement entered
into in connection with the foregoing; (c) any exchange, release or
nonperfection of any of the Intellectual Property, or any release or amendment
or waiver of or consent to departure from any other Intellectual Property for,
or any guaranty, or any other security, for all or any of the Obligations; (d)
any action by the Secured Party to obtain, adjust, settle and cancel in its sole
discretion any insurance claims or matters made or arising in connection with
the Intellectual Property; or (e) any other circumstance which might otherwise
constitute any legal or equitable defense available to the Company, or a
discharge of all or any part of the Security Interest granted hereby. Until the
Obligations shall have been paid and performed in full, the rights of the
Secured Party shall continue even if the Obligations are barred for any reason,
including, without limitation, the running of the statute of limitations or
bankruptcy. The Company expressly waives presentment, protest, notice of
protest, demand, notice of nonpayment and demand for performance. In the event
that at any time any transfer of any Intellectual Property or any payment
received by the Secured Party hereunder shall be deemed by final order of a
court of competent jurisdiction to have been a voidable preference or fraudulent
conveyance under the bankruptcy or insolvency laws of the United States, or
shall be deemed to be otherwise due to any party other than the Secured Party,
then, in any such event, the Company's obligations hereunder shall survive
cancellation of this Agreement, and shall not be discharged or satisfied by any
prior payment thereof and/or cancellation of this Agreement, but shall remain a
valid and binding obligation enforceable in accordance with the terms and
provisions hereof. The Company waives all right to require the Secured Party to
proceed against any other person or to apply any Intellectual Property which the
Secured Party may hold at any time, or to marshal assets, or to pursue any other
remedy. The Company waives any defense arising by reason of the application of
the statute of limitations to any obligation secured hereby.
8. Term of Agreement. This Agreement and the Security Interest shall
terminate on the date on which all payments under the Debentures have been made
in full and all other Obligations have been paid or discharged. Upon such
termination, the Secured Party, at the request and at the expense of the
Company, will join in executing any termination statement with respect to any
financing statement executed and filed pursuant to this Agreement.
9. Power of Attorney; Further Assurances.
(a) The Company authorizes the Secured Party, and does hereby
make, constitute and appoint it, and its respective officers, agents,
successors or assigns with full power of substitution, as the Company's
true and lawful attorney-in-fact, with power, in its own name or in the
name of the Company, to, after the occurrence and during the
continuance of an Event of Default, (i) to sign and endorse any UCC
financing statement relating to the Intellectual Property; (ii) to pay
or discharge taxes, liens, security interests or other encumbrances at
any time levied or placed on or threatened against the Intellectual
Property; and (iii) generally, to do, at the option of the Secured
Party, at any time, or from time to time, all acts and things which the
Secured Party deems necessary to protect and preserve the Intellectual
Property and the Security Interest granted therein in order to effect
the intent of this Agreement, the Debentures and the Warrants, as fully
and effectually as the Company might or could do; and the Company
hereby ratifies all that said attorney shall lawfully do or cause to be
done by virtue hereof. This power of attorney is coupled with an
interest and shall be irrevocable for the term of this Agreement and
thereafter as long as any of the Obligations shall be outstanding.
(b) On a continuing basis, the Company will make, execute,
acknowledge, deliver, file and record, as the case may be, in the
proper filing and recording places in any jurisdiction, all such
instruments, and take all such action as may reasonably be deemed
necessary or advisable, or as reasonably requested by the Secured
Party, to perfect the Security Interest granted hereunder and otherwise
to carry out
5
the intent and purposes of this Agreement, or for assuring and
confirming to the Secured Party the grant or perfection of a security
interest in the Intellectual Property.
(c) The Company hereby irrevocably appoints the Secured Party
as the Company's attorney-in-fact, with full authority in the place and
stead of the Company and in the name of the Company, from time to time
in the Secured Party's discretion, to take any action and to execute
any instrument which the Secured Party may deem necessary or advisable
to accomplish the purposes of this Agreement, including the filing, in
its sole discretion, of one or more financing or continuation
statements and amendments thereto, relative to any of the Intellectual
Property without the signature of the Company where permitted by law.
10. Notices. All notices, requests, demands and other communications
hereunder shall be in writing, with copies to all the other parties hereto, and
shall be deemed to have been duly given when (i) if delivered by hand, upon
receipt, (ii) if sent by facsimile, upon receipt of proof of sending thereof,
(iii) if sent by nationally recognized overnight delivery service (receipt
requested), the next business day or (iv) if mailed by first-class registered or
certified mail, return receipt requested, postage prepaid, four days after
posting in the U.S. mails, in each case if delivered to the following addresses:
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 to (which shall not constitute
notice):
Attn: Xxx Xxxxxxx
Law Offices of Xxx Xxxxxxx
00 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
If to the Secured Party:
At the address and facsimile number as
provided pursuant to the Securities Purchase
Agreement.
11. Other Security. To the extent that the Obligations are now or
hereafter secured by property other than the Intellectual Property or by the
guarantee, endorsement or property of any other person, firm, corporation or
other entity, then the Secured Party shall have the right, in its sole
discretion, to pursue, relinquish, subordinate, modify or take any other action
with respect thereto, without in any way modifying or affecting any of the
Secured Party's rights and remedies hereunder.
12. Miscellaneous.
(a) No course of dealing between the Company and the Secured
Party, nor any failure to exercise, nor any delay in exercising, on the
part of the Secured Party, any right, power or privilege hereunder or
under the Debentures shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or privilege hereunder
or thereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege.
(b) All of the rights and remedies of the Secured Party with
respect to the Intellectual Property, whether established hereby or by
the Debentures or by any other agreements, instruments or documents or
by law shall be cumulative and may be exercised singly or concurrently.
6
(c) This Agreement and the Security Agreement constitute the
entire agreement of the parties with respect to the subject matter
hereof and is intended to supersede all prior negotiations,
understandings and agreements with respect thereto. Except as
specifically set forth in this Agreement, no provision of this
Agreement may be modified or amended except by a written agreement
specifically referring to this Agreement and signed by the parties
hereto.
(d) In the event that any provision of this Agreement is held
to be invalid, prohibited or unenforceable in any jurisdiction for any
reason, unless such provision is narrowed by judicial construction,
this Agreement shall, as to such jurisdiction, be construed as if such
invalid, prohibited or unenforceable provision had been more narrowly
drawn so as not to be invalid, prohibited or unenforceable. If,
notwithstanding the foregoing, any provision of this Agreement is held
to be invalid, prohibited or unenforceable in any jurisdiction, such
provision, as to such jurisdiction, shall be ineffective to the extent
of such invalidity, prohibition or unenforceability without
invalidating the remaining portion of such provision or the other
provisions of this Agreement and without affecting the validity or
enforceability of such provision or the other provisions of this
Agreement in any other jurisdiction.
(e) No waiver of any breach or default or any right under this
Agreement shall be deemed a waiver of any subsequent breach or default
or right, whether of the same or similar nature or otherwise.
(f) This Agreement shall be binding upon and inure to the
benefit of each party hereto and its successors and assigns.
(g) Each party shall take such further action and execute and
deliver such further documents as may be necessary or appropriate in
order to carry out the provisions and purposes of this Agreement.
(h) This Agreement shall be construed in accordance with the
laws of the State of New York, except to the extent the validity,
perfection or enforcement of a security interest hereunder in respect
of any particular Intellectual Property which are governed by a
jurisdiction other than the State of New York in which case such law
shall govern. Each of the parties hereto irrevocably submit to the
exclusive jurisdiction of any state or federal court sitting in the
County of New York in the State of New York over any action or
proceeding arising out of or relating to this Agreement, and the
parties hereto hereby irrevocably agree that all claims in respect of
such action or proceeding may be heard and determined in such state or
federal court. The parties hereto agree that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner
provided by law. The parties hereto further waive any objection to
venue in the State of New York and any objection to an action or
proceeding in the State of New York on the basis of forum non
conveniens.
(i) EACH PARTY HERETO HEREBY AGREES TO WAIVE ITS RESPECTIVE
RIGHTS TO A JURY TRAIL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT. THE SCOPE OF THIS WAIVER IS INTENDED TO
BE ALL ENCOMPASSING OF ANY DISPUTES THAT MAY BE FILED IN ANY COURT AND
THAT RELATE TO THE SUBJECT MATER OF THIS AGREEMENT, INCLUDING WITHOUT
LIMITATION CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL
OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES
THAT THIS WAIVER IS A MATERIAL INDUCEMENT FOR EACH PARTY TO ENTER INTO
A BUSINESS RELATIONSHIP, THAT EACH PARTY HAS ALREADY RELIED ON THIS
WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH PARTY WILL
CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH
PARTY FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL, AND THAT SUCH PARTY HAS KNOWINGLY AND
VOLUNTARILY WAIVES ITS RIGHTS TO A JURY TRIAL FOLLOWING SUCH
CONSULTATION. THIS WAIVER IS IRREVOCABLE, MEANING THAT, NOTWITHSTANDING
ANYTHING HEREIN TO THE CONTRARY, IT MAY NOT BE MODIFIED EITHER ORALLY
OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS AND SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT. IN THE EVENT OF A LITIGATION, THIS AGREEMENT MAY BE FILED AS
A WRITTEN CONSENT TO A TRIAL BY THE COURT.
7
(j) This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the
same Agreement. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile
signature were the original thereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the day and year first above written.
THE COMPANY: PEAK ENTERTAINMENT HOLDINGS, INC.
By:
------------------------------------
Wilf Shorrocks
President and Chief Executive Officer
THE SECURED PARTY: __________________________
9
SCHEDULE A
A. Software Intellectual Property: None.
B. Copyrights: None, other than any, if
any, disclosed in filings
with the S.E.C.
C. Copyright Licenses: None, other than any, if
any, disclosed in filings
with the S.E.C.
D. Patents: None.
E. Patent Licenses: None.
F. Trademarks: None, other than any, if
any, disclosed in filings
with the S.E.C.
G. Trademark Licenses: None, other than any, if
any, disclosed in filings
with the S.E.C.
H. Trade Secrets: None.
10
