WARRANT TO PURCHASE COMMON STOCK
(CONVERSION WARRANTS)
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE BEEN ACQUIRED FOR INVESTMENT
AND NOT FOR DISTRIBUTION, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED NEITHER THE WARRANT NOR THE SHARES MAY BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED. THIS WARRANT
MUST BE SURRENDERED TO THE COMPANY OR ITS TRANSFER AGENT AS A CONDITION
PRECEDENT TO THE SALE, PLEDGE OR OTHER TRANSFER OF ANY INTEREST IN THIS WARRANT
OR THE SHARES ISSUABLE HEREUNDER.
Issuer: Odyssey Pictures Corporation
Class of Stock: Common Stock
Issue Date: June ___, 2003
Expiration Date: June ___, 2006
THIS WARRANT TO PURCHASE COMMON STOCK is being issued pursuant to that
certain Securities Purchase Agreement dated as of the date hereof (the "Purchase
Agreement") between Odyssey Pictures Corporation, a Nevada corporation (the
"Company") and La Jolla Cove Investors, Inc. ("Holder").
1.1 WARRANTS. The Company hereby grants to Holder the right to purchase that
number of shares of the Company's Common Stock (the "Shares" or "Warrant
Shares") equal to ten (10) times the number of shares of Common Stock issued to
Holder from time to time pursuant to the conversion of the Debenture (as such
term is defined in the Purchase Agreement). For avoidance of doubt, this Warrant
may be exercised concurrently with or subsequent to the issuance of a Conversion
Notice under the Debenture. The date that the Holder issues a Conversion Notice
under the Debenture is hereafter referred to as the "Conversion Date." Defined
terms not defined herein shall have the meanings ascribed to them in the
Debenture or the Purchase Agreement. Xxxxxx agrees that, beginning in the first
full calendar month after the Registration Statement is declared effective,
Holder will exercise at least 5%, but no more than 10% (such 10% maximum amount
to be cumulative from the Deadline), of the Warrants per calendar month,
provided that the Common Shares are available, registered and freely tradable.
In the event Holder breaches this provision, Holder shall not be entitled to
collect interest on the Debenture for that month.
This Warrant shall expire and Holder shall no longer be able to purchase the
Warrant Shares on June ___, 2006.
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ARTICLE 2
EXERCISE
2.1 METHOD OF EXERCISE. Holder may exercise this Warrant by delivering
a duly executed Warrant Notice of Exercise in substantially the form attached as
APPENDIX 1 to the principal office of the Company, along with a check payable to
the Company for the aggregate Exercise Price for the Shares being purchased.
2.2 DELIVERY OF CERTIFICATE AND NEW WARRANT. As promptly as practicable
after the receipt of the Warrant Notice of Exercise, but in any event not more
than three (3) Business Days after the Company's receipt of the Warrant Notice
of Exercise, the Company shall issue the Shares and cause to be mailed for
delivery by overnight courier, or if a Registration Statement covering the
Shares has been declared effective by the SEC cause to be electronically
transferred, to Holder a certificate representing the Shares acquired and, if
this Warrant has not been fully exercised and has not expired, a new Warrant
substantially in the form of this Warrant representing the right to acquire the
portion of the Shares not so acquired.
2.3 REPLACEMENT OF WARRANTS. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, or surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.
2.4 EXERCISE PRICE. The Exercise Price of this Warrant shall be the
lesser of (a) $0.25; or (b) eighty percent (80%) of the average of the 3 lowest
Market Prices during the twenty (20) Trading Days prior to Holder's election to
exercise ("Discount Multiplier"), provided, that in the event that the
Registration Statement has not been declared effective by the SEC by the
Deadline, then the Discount Multiplier shall decrease by three percent (3%) for
each month or partial month occurring after the Deadline that the Registration
Statement has not been declared effective by the SEC; or (c) the price paid to
convert the corresponding portion of the Debenture.
ARTICLE 3
ADJUSTMENT TO THE SHARES
The number of Shares purchasable upon the exercise of this Warrant and
the Exercise Price shall be subject to adjustment form time to time upon the
occurrence of certain events, as follows:
3.1 RECLASSIFICATION. In case of any reclassification or change of
outstanding securities of the class issuable upon exercise of this Warrant then,
and in any such case, the Holder, upon the exercise hereof at any time after the
consummation of such reclassification or change, shall be entitled to receive in
lieu of each Share theretofore issuable upon exercise of this Warrant, the kind
and amount of shares of stock, other securities, money and/or property received
upon such reclassification or change by a holder of one Share. The provisions of
this Section 2.1 shall similarly apply to successive reclassifications or
changes.
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3.2 SUBDIVISION OR COMBINATION OF SHARES. If the Company at any time
while this Warrant remains outstanding and unexpired shall subdivide or combine
its Shares, the Exercise Price shall be proportionately decreased in the case of
a subdivision or increased in the case of a combination.
3.3 STOCK DIVIDENDS. If the Company, at any time while this Warrant is
outstanding shall pay a dividend with respect to its Shares payable in Shares,
or make any other distribution of Shares with respect to Shares (except any
distribution specifically provided for in Section 2.1 and Section 2.2 above),
then the Exercise Price shall be adjusted, effective from and after the date of
determination of shareholders entitled to received such dividend or
distribution, to that price determined by multiplying the Exercise Price in
effect immediately prior to such date of determination by a fraction, (a) the
numerator of which shall be the total number of Shares outstanding immediately
prior to such dividend or distribution, and (b) the denominator of which shall
be the total number of Shares outstanding immediately after such dividend or
distribution.
3.4 NON-CASH DIVIDENDS. If the Company at any time while this Warrant
is outstanding shall pay a dividend with respect to Shares payable in securities
other than Shares or other non-cash property, or make any other distribution of
such securities or property with respect to Shares (except any distribution
specifically provided for in Section 2.1 and Section 2.2 above), then this
Warrant shall represent the right to acquire upon exercise of this Warrant such
securities or property which a holder of Shares would have been entitled to
receive upon such dividend or distribution, without the payment by the Holder of
any additional consideration for such securities or property.
3.5 EFFECT OF REORGANIZATION AND ASSET SALES. If any (i) reorganization
or reclassification of the Common Stock (ii) consolidation or merger of the
Company with or into another corporation, or (iii) sale or all or substantially
all of the Company's operating assets to another corporation followed by a
liquidation of the Company (any such transaction shall be followed by a
liquidation of the Company (any such transaction shall be referred to herein as
an "Event", is effected in such a way that holders of common Stock are of Common
Stock are entitled to receive securities and/or assets as a result of their
Common Stock ownership, the Holder, upon exercise of this Warrant, shall be
entitled to receive such shares of stock securities or assets which the Holder
would have received had it fully exercised this Warrant on or prior the record
date for such Event. The Company shall not merge into or consolidate with
another corporation or sell all of its assets to another corporation for a
consideration consisting primarily of securities or such corporation, unless the
successor or acquiring corporation, as the case may be, shall expressly assume
the due and punctual observance and performance of each and every covenant and
condition of this Warrant to be performed or observed by the Company and all of
the obligations and liabilities hereunder, subject to such modification as shall
be necessary to provide for adjustments which shall be as nearly equivalent as
practicable to the adjustments provided for in this Section 2. The foregoing
provisions shall similarly apply to successive mergers, consolidations or sales
of assets.
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3.6 ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment in the
Exercise Price, the number of Shares shall be adjusted, to the nearest whole
share, to the product obtained by multiplying the number of Shares, purchasable
immediately prior to such adjustment and the denominator of which shall be the
Exercise Price immediately thereafter.
3.7 NO IMPAIRMENT. The Company shall not, by amendment of its articles
of incorporation or through a 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 to be
observed or performed under this Warrant by the Company, but shall at all times
in good faith assist in carrying out all of the provisions of this Warrant and
in taking all such action as may be reasonably necessary or appropriate to
protect Xxxxxx's rights hereunder against impairment. If the Company takes any
action affecting its Common Stock other than as described above that adversely
affects Holder's rights under this Warrant, the Exercise Price shall be adjusted
downward and the number of Shares issuable upon exercise of this Warrant shall
be adjusted upward in such a manner that the aggregate Exercise Price of this
Warrant is unchanged.
3.8 FRACTIONAL SHARES. No fractional Shares shall be issuable upon the
exercise of this Warrant, and the number of Shares to be issued shall be rounded
down to the nearest whole Share.
3.9 CERTIFICATE AS TO ADJUSTMENTS. Upon any adjustment of the Exercise
Price, the Company, at its expense, shall compute such adjustment and furnish
Holder with a certificate of its Chief Financial Officer setting forth such
adjustment and the facts upon which such adjustment is based. The Company shall,
upon written request, furnish Holder a certificate setting forth the Exercise
Price in effect upon the date thereof and the series of adjustments leading to
such Exercise Price.
3.10 NO RIGHTS OF SHAREHOLDERS. This Warrant does not entitle Holder to
any voting rights or any other rights as a shareholder of the Company prior to
the exercise of Xxxxxx's right to purchase Shares as provided herein.
ARTICLE 4
REPRESENTATIONS AND COVENANTS OF THE COMPANY
4.1 REPRESENTATIONS AND WARRANTIES. The Company hereby represents and
warrants to Holder that all Shares which may be issued upon the exercise of the
purchase right represented by this Warrant, shall, upon issuance, be duly
authorized, validly issued, fully paid and nonasessable, and free of any liens
and encumbrances.
4.2 NOTICE OF CERTAIN EVENTS. If the company proposes at any time (a)
to declare any dividend or distribution upon its Common Stock, whether in cash,
property, stock, or other securities and whether or not a regular cash dividend;
(b) to offer for subscription pro rata to the holders of any class or series of
its stock any additional shares of stock of any class or series or other fights;
(c) to effect any reclassification or recapitalization of Common Stock; (d) to
merge or consolidate with or into any other corporation, or sell, lease,
license, or convey all or substantially all of its assets, or to liquidate,
dissolve or wind up; or (e) offer holders of registration rights the opportunity
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to participate in an underwritten public offering of the Company's securities
for cash, then, in connection with each such event, the Company shall give
Holder (1) at least 20 days prior written notice of the date on which a record
will be taken for such dividend, distribution, or subscription rights (and
specifying the date on which the holders of Common Stock will be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (c) and (d) above; (2) in the case of the matters referred to in
(c) and (d) above at least 20 days prior written notice of the date when the
same will take place (and specifying the date on which the holders of Common
Stock will be entitled to exchange their Common Stock for securities or other
property deliverable upon the occurrence of such event); and (3) in the case of
the matter referred to in (e) above, the same notice as is given to the holders
of such registration rights.
4.3 INFORMATION RIGHTS. So long as Holder holds this Warrant and/or any
of the Shares, the company shall deliver to Holder (a) promptly after mailing,
copies of all notices or other written communications to the shareholders of the
Company, (b) within ninety (90) days of their availability, the annual audited
financial statements of the Company certified by independent public accountants
of recognized standing, and (c) within forty-five (45) days after the end of
each fiscal quarter or each fiscal year, the Company's quarterly, unaudited
financial statements.
4.4 RESERVATION OF WARRANT SHARES. The Company has reserved and will
keep available, out of the authorized and unissued shares of Common Stock, the
full number of shares sufficient to provide for the exercise of the rights of
purchase represented by this Warrant.
4.5 REGISTRATION RIGHTS. If Holder exercises this Warrant and purchases
some or all of the Shares, Holder shall have the Registration Rights set forth
in that certain Registration Rights Agreement executed concurrently therewith.
ARTICLE 5
REPRESENTATIONS AND COVENANTS OF THE HOLDER
5.1 PRIVATE ISSUE. Holder understands (i) that the Shares issuable upon
exercise of Xxxxxx's rights contained in the Warrant are not registered under
the Act or qualified under applicable state securities laws on the ground that
the issuance contemplated by the Warrant will be exempt from the registration
and qualifications requirements thereof, and (ii) that the Company's reliance on
such exemption is predicated on Holder's representations set forth in this
Article 4.
5.2 FINANCIAL RISK. Holder has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment and has the ability to bear the economic risks of its
investment.
5.3 RISK OF NO REGISTRATION. Holder understands that if the Company
does not register with the Securities and Exchange Commission pursuant to
Section 12 of the Act, or file reports pursuant to Section 15(d), of the
Securities Exchange Act of 1934 (the "1934 Act"), or if a registration statement
covering the securities under the Act is not in effect when it desires to sell
(i) the right to purchase Shares pursuant to the Warrant, or (ii) the Shares
issuable upon exercise of the right to purchase, it may be required to hold such
securities for an indefinite period.
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5.4 ACCREDITED INVESTOR. Holder is an "accredited investor," as such
term is defined in Regulation D promulgated pursuant to the Act.
ARTICLE 6
MISCELLANEOUS
6.1 TERM. This Warrant is exercisable, in whole or in part, at any time
and from time to time on or after the Conversion Date and on or before the
Expiration Date set forth above.
6.2 COMPLIANCE WITH SECURITIES LAWS ON TRANSFER. This Warrant may not
be transferred or assigned in whole or in part without compliance with
applicable federal and state securities laws by the transferor and the
transferee (including, without limitation, the delivery of investment
representation letters and legal opinions reasonably satisfactory to the
Company, as reasonably requested by the Company). The Company shall not require
Holder to provide an opinion of counsel if the transfer is to an affiliate of
Holder.
6.3 TRANSFER PROCEDURE. Holder shall have the right without the consent
of the Company to transfer or assign in whole or in part this Warrant and the
Shares issuable upon exercise of this Warrant. Xxxxxx agrees that unless there
is in effect a registration statement under the Act covering the proposed
transfer of all or part of this Warrant, prior to any such proposed transfer the
Holder shall give written notice thereof to the Company (a "Transfer Notice").
Each Transfer Notice shall describe the manner and circumstances of the proposed
transfer in reasonable detail and, if the company so requests, shall be
accompanied by an opinion of legal counsel, in a form reasonably satisfactory to
the Company, to the effect that the proposed transfer may be effected without
registration under the Act; provided that the Company will not require opinions
of counsel for transactions involving transfers to affiliates or pursuant to
Rule 144 promulgated by the Securities and Exchange Commission under the act,
except in unusual circumstances.
6.4 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be delivered personally, or
sent by telecopier machine or by a nationally recognized overnight courier
service, and shall be deemed given when so delivered personally, or by
telecopier machine or overnight courier service as follows:
if to the Company, to:
Odyssey Pictures Corporation
00000 Xxxxxx Xxxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
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if to the Holder, to:
La Jolla Cove Investors, Inc.
0000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xx Xxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
or at such other address as the Company shall have furnished to the Holder. Each
such notice or other communication shall for all purposes of this agreement be
treated as effective or having been given when delivered if delivered
personally, or, if sent by mail, at the earlier of its receipt or five days
after the same has been deposited in a regularly maintained receptacle for the
deposit of the United States mail, addressed and mailed as aforesaid.
6.5 COUNTERPARTS. This agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument. Facsimile execution shall be deemed originals.
6.6 WAIVER. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
6.7 ATTORNEYS FEES. In the event of any dispute between the parties
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys fees.
6.8 GOVERNING LAW; JURISDICTION. This Warrant shall be governed by and
construed in accordance with the laws of the State of California, without giving
effect to its principles regarding conflicts of law. Each of the parties hereto
consents to the jurisdiction of the federal courts whose districts encompass any
part of the City of San Diego or the state courts of the State of California
sitting in the City of San Diego in connection with any dispute arising under
this Warrant and hereby waives, to the maximum extent permitted by law, any
objection including any objection based on forum non conveniens, to the bringing
of any such proceeding in such jurisdictions.
IN WITNESS WHEREOF, the parties hereto have duly caused this Warrant to
Purchase Common Stock to be executed and delivered on the date first above
written.
Odyssey Pictures Corporation La Jolla Cove Investors, Inc.
By :___________________________ By: __________________________
Title:__________________________ Title:_________________________
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APPENDIX 1
WARRANT NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase _____ shares of the Common
Stock of Odyssey Pictures Corporation pursuant to the terms of the Warrant to
Purchase Common Stock issued by Odyssey Pictures Corporation on June ___, 2003
and tenders herewith payment of the purchase price of such shares in full.
2. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name as is specified below:
---------------------
---------------------
---------------------
(Name and Address)
3. The undersigned makes the representations and covenants set forth in
Article 4 of the Warrant to Purchase Common Stock.
--------------------------------
(Signature)
---------------------------
(Date)
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