EXHIBIT 4
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of September
28, 2004, by and among Peak Entertainment Holdings, Inc., a Nevada corporation
(the "Company"), and the purchaser(s) set forth on the signature page hereto
("Buyer").
WHEREAS:
A. The Company and Buyer are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by the rules
and regulations as promulgated by the United States Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the "1933
Act");
B. Buyer desires to purchase and the Company desires to issue and sell,
upon the terms and conditions set forth in this Agreement, for the aggregate
purchase price of $500,000: (i) 1,666,666 shares of the Company's common stock
(the "Common Stock"); and (ii) warrants, in the form attached hereto as Exhibit
A, to purchase 1,750,000 shares of the Company's Common Stock (the "Warrants");
(the Common Stock and Warrants are sometimes referred to as the "Securities").
NOW THEREFORE, the Company and Buyer hereby agree as follows:
1. PURCHASE AND SALE OF SECURITIES.
a. Purchase of Securities. On the Closing Date (as defined
below), the Company shall issue and sell to Buyer and Buyer agrees to purchase
from the Company the Securities.
b. Form of Payment. Upon execution of this Agreement, (i)
Buyer shall pay the purchase price (the portion of the $500,000 purchase price
subscribed for) for the Securities to be issued and sold to Buyer at the Closing
(as defined below) (the "Purchase Price") by cash or wire transfer of
immediately available funds.
c. Closing Date. The date and time of the issuance and sale of
the Securities pursuant to this Agreement (the "Closing Date") shall be the date
of receipt and clearance of the Purchase Price.
2. BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer represents and
warrants to the Company solely as to it that:
a. Investment Purpose. As of the date hereof, Buyer is
purchasing the Securities for its own account and not with a present view
towards the public sale or distribution thereof, except pursuant to sales
registered or exempted from registration under the 1933 Act; provided, however,
that by making the representations herein, Buyer does not agree to hold any of
the Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act.
b. Accredited Investor Status. Buyer is a sophisticated
investor (as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited
investor (as defined in Rule 501 of Regulation D), and Buyer has such experience
in business and financial matters that it has the capacity to protect its own
interests in connection with this transaction and is capable of evaluating the
merits and risks of an investment in the Securities pursuant to this Agreement.
Buyer has been represented by counsel and advisors of its choice. Buyer
acknowledges that an investment in the Securities pursuant to this Agreement is
speculative and involves a high degree of risk.
c. Reliance on Exemptions. Buyer understands that the
Securities are being offered and sold to it in reliance upon specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying upon the truth and accuracy of, and Buyer's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of Buyer to acquire the
Securities.
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d. Information. Buyer has conducted its own independent investigation
of the Company, and has received all documents, records, books and other
information pertaining to Buyer's investment in the Company that has been
requested by Buyer. Buyer represents that Buyer has carefully reviewed the SEC
Documents.
e. Governmental Review. Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Securities.
There is no representation that any registration statement will be declared
effective.
f. Transfer or Resale. Buyer understands that: (i) except as
provided for herein, the sale or re-sale of the Securities has not been and is
not being registered under the 1933 Act or any applicable state securities laws,
and the Securities may not be transferred unless (a) the Securities are sold
pursuant to an effective registration statement under the 1933 Act, (b) Buyer
shall have delivered to the Company an opinion of counsel that shall be in form,
substance and scope customary for opinions of counsel in comparable transactions
to the effect that the Securities to be sold or transferred may be sold or
transferred pursuant to an exemption from such registration to the reasonable
satisfaction of the Company, (c) the Securities are sold or transferred to an
"affiliate" (as defined in Rule 144 promulgated under the 1933 Act (or a
successor rule) ("Rule 144")) of Buyer who agrees to sell or otherwise transfer
the Securities only in accordance with this Section 2(f) and who is an
Accredited Investor, or (d) the Securities are sold pursuant to Rule 144, and
Buyer shall have delivered to the Company an opinion of counsel that shall be in
form, substance and scope customary for opinions of counsel in corporate
transactions to the reasonable satisfaction of the Company; (ii) any sale of
such Securities made in reliance on Rule 144 may be made only in accordance with
the terms of said Rule and further, if said Rule is not applicable, any re-sale
of such Securities under circumstances in which the seller (or the person
through whom the sale is made) may be deemed to be an underwriter (as that term
is defined in the 0000 Xxx) may require compliance with some other exemption
under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii)
neither the Company nor any other person is under any obligation to file to
register such Securities under the 1933 Act or any state securities laws or to
comply with the terms and conditions of any exemption thereunder (in each case,
other than pursuant to the provisions herein). Notwithstanding the foregoing or
anything else contained herein to the contrary, the Securities may be pledged as
collateral in connection with a bona fide margin account or other lending
arrangement.
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 the Holder at least ten
days prior to such filing. Upon the written request of the Holder, received by
the Company within ten days after the giving of any such notice by the Company,
to register any of its shares of common stock eligible to be registered, the
Company will cause such shares 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, 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 the
Holder. In the event that the Securities and Exchange Commission restricts or
prohibits the inclusion of any part of the common stock included in the
registration statement on the basis of integration or that such securities are
not deemed owned or paid for or any similar reason, the Company shall 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 be suspend the
Company's obligations discussed in this paragraph.
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):
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"The securities represented by this certificate have
not been registered under the Securities Act of 1933,
as amended. The securities may not be sold,
transferred or assigned in the absence of an
effective registration statement for the securities
under said Act, or an opinion of counsel, in form,
substance and scope customary for opinions of counsel
in comparable transactions, that registration is not
required under said Act or unless sold pursuant to
Rule 144 under said Act."
h. Authorization; Enforcement. This Agreement has been duly
authorized and validly executed and delivered by Buyer and is a valid and
binding agreement of Buyer enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
i. Residency. Buyer is a resident of the jurisdiction set
forth immediately below Buyer's name on the signature page hereto.
j. Not an Affiliate. Buyer is not an officer, director or
"affiliate" (as that term is defined in Rule 405 of the Securities Act) of the
Company.
k. Absence of Conflicts. The execution and delivery of this
Agreement, and the consummation of the transactions contemplated hereby and
thereby, and compliance with the requirements hereof and thereof by Buyer, will
not violate any law, rule, regulation, order, writ, judgment, injunction, decree
or award binding on Buyer or (a) violate any provision of any indenture,
instrument or agreement to which Buyer is a party or is subject, or by which
Buyer or any of its assets is bound; (b) conflict with or constitute a material
default thereunder; (c) result in the creation or imposition of any lien
pursuant to the terms of any such indenture, instrument or agreement, or
constitute a breach of any fiduciary duty owed by Buyer to any third party; or
(d) require the approval of any non-governmental agency third-party (which has
not been obtained) pursuant to any material contract, agreement, instrument,
relationship or legal obligation to which Buyer is subject or to which any of
its assets, operations or management may be subject.
l. Manner of Sale. At no time was Buyer presented with or
solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising.
m. Broker/Finder. Buyer represents that no broker is entitled
to any commission.
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 any material adverse effect on the business,
operations, assets, financial condition or prospects of the Company or its
subsidiaries, if any, taken as a whole, or on the transactions contemplated
hereby or by the agreements or instruments to be entered into in connection
herewith. "Subsidiaries" means any corporation or other organization, whether
incorporated or unincorporated, in which the Company owns, directly or
indirectly, any equity or other ownership interest.
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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
Warrant Agreement (collectively the "Transaction Agreements") and to consummate
the transactions contemplated hereby and thereby and to issue the Securities, in
accordance with the terms hereof and thereof. The execution and delivery of this
Agreement and the Warrant Agreement by the Company and the consummation by it of
the transactions contemplated hereby and thereby (including without limitation,
the issuance of the Warrants and the issuance and reservation for issuance of
the shares underlying the Warrants issuable upon exercise thereof), have been
duly authorized by the Company's Board of Directors. This Agreement has been
duly executed and delivered by the Company by its authorized representative, and
such authorized representative is the true and official representative with
authority to sign this Agreement and the other documents executed in connection
herewith and bind the Company accordingly. This Agreement constitutes, and upon
execution and delivery by the Company of the Warrant Agreement, each of such
instruments will constitute, a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms.
c. Capitalization. As of September 13, 2004, the authorized
capital stock of the Company consists of 900,000,000 shares of Common Stock, of
which approximately 27,274,289 shares are issued and outstanding. As of
September 13, 2004, no shares are currently reserved for issuance except for
shares underlying 8% convertible debentures in the principal amount of
approximately $1,008,500 and shares underlying approximately 12,000,000
warrants/options outstanding and/or to be issued pursuant a company stock option
plan. All of such outstanding shares of capital stock are, or upon issuance will
be, duly authorized, validly issued, fully paid and nonassessable. No shares of
capital stock of the Company are subject to preemptive rights or any other
similar rights of the shareholders of the Company or any liens or encumbrances
imposed through the actions or failure to act of the Company. The Company also
will be implementing a stock option plan, which may be subdivided as
appropriate, for employees, management and other persons entitled to
participate, in an amount of up to 10% of the Company's common stock.
d. Issuance of Shares. The shares underlying the Warrants are
duly authorized and reserved for issuance and, upon exercise of the Warrants in
accordance with the terms thereof, will be validly issued, fully paid and
non-assessable, and free from all taxes, liens, claims and encumbrances with
respect to the issue thereof and shall not be subject to preemptive rights or
other similar rights of shareholders of the Company.
e. Acknowledgment of Dilution. The Company understands and
acknowledges the potentially dilutive effect to the Common Stock upon the
issuance of the shares underlying the Warrants upon exercise of the Warrants.
The Company further acknowledges that its obligation to issue the shares
underlying the Warrants upon exercise of the Warrants in accordance with this
Agreement is absolute and unconditional regardless of the dilutive effect that
such issuance may have on the ownership interests of other shareholders of the
Company.
f. No Conflicts. The execution, delivery and performance of
this Agreement, and the Warrant Agreement, by the Company and the consummation
by the Company of the transactions contemplated hereby and thereby (including,
without limitation, the issuance and reservation for issuance of the shares
underlying the Warrants), will not (i) conflict with or result in a violation of
any provision of the Articles of Incorporation or By-laws, (ii) violate or
conflict with, or result in a breach of any provision of, or constitute a
default (or an event which with notice or lapse of time or both could become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture, patent, patent
license or instrument to which the Company or any of its Subsidiaries is a
party, or (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including federal and state securities laws and regulations
and regulations of any self-regulatory organizations to which the Company or its
securities are subject) applicable to the Company or any of its Subsidiaries or
by which any property or asset of the Company or any of its Subsidiaries is
bound or affected (except for such conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect). Neither the
Company nor any of its Subsidiaries is in violation of its Articles of
Incorporation, By-laws or other organizational documents and neither the Company
nor any of its Subsidiaries is in default (and no event has occurred which with
notice or lapse of time or both could put the Company or any of its Subsidiaries
in default) under, and neither the Company nor any of its Subsidiaries has taken
any action or failed to take any action that would give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its Subsidiaries is a
party or by which any property or assets of the Company or any of its
Subsidiaries is bound or affected, except for possible defaults as would not,
individually or in the aggregate, have a Material Adverse Effect. The businesses
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of the Company and its Subsidiaries, if any, are not being conducted, and shall
not be conducted so long as Buyer owns any of the Securities, in violation of
any law, ordinance or regulation of any governmental entity. Except as
specifically contemplated by this Agreement and as required under the 1933 Act
and any applicable state securities laws, the Company is not required to obtain
any consent, authorization or order of, or make any filing or registration with,
any court, governmental agency, regulatory agency, self regulatory organization
or stock market in order for it to execute, deliver or perform any of its
obligations under this Agreement, or the Warrant Agreement, in accordance with
the terms hereof or thereof or to issue and sell the Warrants in accordance with
the terms hereof and to issue the shares underlying the Warrants upon exercise
of the Warrants.
g. Absence of Certain Changes. Since June 30, 2004, there has
been no material adverse change and no material adverse development in the
assets, liabilities, business, properties, operations, financial condition,
results of operations or prospects of the Company or any of its Subsidiaries,
except as disclosed herein and in the SEC Documents. The term "SEC Documents"
refers to reports, schedules, forms, statements and other documents filed by the
Company with the SEC pursuant to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act").
h. Absence of Litigation. There is no action, suit, claim,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company or any of its Subsidiaries, threatened against or
affecting the Company or any of its Subsidiaries, or their officers or directors
in their capacity as such, that could have a Material Adverse Effect, except as
disclosed in the SEC Documents.
i. Intellectual Property. The Company has the rights stated in
the SEC Documents (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures) and
other similar rights and proprietary knowledge (collectively, "Intangibles")
necessary for the conduct of its business as now being conducted. To the
Company's knowledge, except as disclosed in the SEC Documents, neither the
Company nor any of its subsidiaries is infringing upon or in conflict with any
right of any other person with respect to any Intangibles. Except as disclosed
in the SEC Documents, no adverse claims have been asserted by any person to the
ownership or use of any Intangibles and the Company has no knowledge of any
basis for such claim.
j. No Materially Adverse Contracts, Etc. Neither the Company
nor any of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Company has or is expected in the future to have a Material
Adverse Effect, except as disclosed in this Agreement. Neither the Company nor
any of its Subsidiaries is a party to any contract or agreement which in the
judgment of the Company's officers has or is expected to have a Material Adverse
Effect, except as disclosed in this Agreement or in the February Registration
Statement.
k. Absence of Certain Company Control Person Actions or
Events. None of the following has occurred during the past five (5) years with
respect to a Company Control Person:
(1) A petition under the federal bankruptcy laws or
any state insolvency law was filed by or against, or a receiver, fiscal agent or
similar officer was appointed by a court for the business or property of such
Company Control Person, or any partnership in which he was a general partner at
or within two years before the time of such filing, or any corporation or
business association of which he was an executive officer at or within two years
before the time of such filing;
(2) Such Company Control Person was convicted in a
criminal proceeding or is a named subject of a pending criminal proceeding
(excluding traffic violations and other minor offenses);
(3) Such Company Control Person was the subject of
any order, judgment or decree, not subsequently reversed, suspended or vacated,
of any court of competent jurisdiction, permanently or temporarily enjoining him
from, or otherwise limiting, the following activities:
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(i) acting, as an investment advisor,
underwriter, broker or dealer in securities, or as an affiliated person,
director or employee of any investment company, bank, savings and loan
association or insurance company, as a futures commission merchant, introducing
broker, commodity trading advisor, commodity pool operator, floor broker, any
other Person regulated by the Commodity Futures Trading Commission ("CFTC") or
engaging in or continuing any conduct or practice in connection with such
activity;
(ii) engaging in any type of business
practice; or
(iii) engaging in any activity in connection with the purchase or sale
of any security or commodity or in connection with any violation of federal or
state securities laws or federal commodities laws;
(4) Such Company Control Person was the subject of
any order, judgment or decree, not subsequently reversed, suspended or vacated,
of any federal or state authority barring, suspending or otherwise limiting for
more than 60 days the right of such Company Control Person to engage in any
activity described in paragraph (3) of this item, or to be associated with
Persons engaged in any such activity; or
(5) Such Company Control Person was found by a court
of competent jurisdiction in a civil action or by the CFTC or SEC to have
violated any federal or state securities law, and the judgment in such civil
action or finding by the CFTC or SEC has not been subsequently reversed,
suspended, or vacated.
l. Regulation D. The Company has not at any time since May 1,
2003 made any offer or sales of any security or solicited any offers to buy any
security under circumstances that would eliminate the availability of the
exemption from registration under Regulation D in connection with the offer and
sale of the Securities as contemplated hereby.
m. Dilution. The number of shares of Common Stock, including
upon exercise of the Warrants, may have a dilutive effect on the ownership
interests of the other shareholders (and Persons having the right to become
shareholders) of the Company. The Company's executive officers and directors
have studied and fully understand the nature of the Securities being sold hereby
and recognize that they have such a potential dilutive effect. The board of
directors of the Company has concluded, in its good faith business judgment,
that such issuance is in the best interests of the Company. The Company
specifically acknowledges that its obligation to issue the shares upon exercise
of the Warrants is binding upon the Company and enforceable regardless of the
dilution such issuance may have on the ownership interests of other shareholders
of the Company, and the Company will honor every Notice of Exercise (as
contemplated by the Warrants), unless the Company is subject to an injunction
(which injunction was not sought by the Company) prohibiting the Company from
doing so.
n. Trading in Securities. The Company specifically
acknowledges that, except to the extent specifically provided herein or in any
of the other Transaction Agreements (but limited in each instance to the extent
so specified), Buyer retains the right (but is not otherwise obligated) to buy,
sell, engage in hedging transactions or otherwise trade in the securities of the
Company, including, but not necessarily limited to, the Securities, at any time
before, contemporaneous with or after the execution of this Agreement or from
time to time, but only, in each case, in any manner whatsoever permitted by
applicable federal and state securities laws.
4. COVENANTS.
a. 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 and/or to retire existing
debt.
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c. Authorization and Reservation of Shares. The Company shall
use reasonable best efforts to at all times have authorized, and reserved for
the purpose of issuance, a sufficient number of shares of Common Stock to
provide for the full exercise of the outstanding Warrants and issuance of the
shares underlying the Warrants in connection therewith (based on the Exercise
Price of the Warrants in effect from time to time) and as otherwise required by
this Agreement.
d. Listing. The Company will use best efforts, so long as
Buyer owns at least one-third of the Securities, to maintain the quoting/listing
and trading of its Common Stock on the OTCBB or any equivalent or replacement
quotation service or exchange, including, but not limited to, the Nasdaq
National Market ("Nasdaq"), the Nasdaq SmallCap Market ("Nasdaq SmallCap"), the
New York Stock Exchange ("NYSE"), or the American Stock Exchange ("AMEX") and
will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the National Association of Securities
Dealers ("NASD") and such exchanges, as applicable. The Company will promptly
notify Buyer regarding the continued eligibility of the Common Stock for listing
or quotation should there be a material change.
e. Corporate Existence. So long as Buyer beneficially owns any
Warrants, the Company shall maintain its corporate existence and shall not sell
all or substantially all of the Company's assets, except in the event of a
merger or consolidation or sale of all or substantially all of the Company's
assets, where the surviving or successor entity in such transaction (i) assumes
the Company's obligations hereunder and under the agreements and instruments
entered into in connection herewith or (ii) is a publicly traded corporation
whose Common Stock is listed for trading on the OTCBB, Nasdaq, Nasdaq SmallCap,
NYSE or AMEX, or any other equivalent or replacement quotation service or
exchange.
f. Reimbursement. If (i) Buyer, other than by reason of its
gross negligence or willful misconduct, becomes involved in any capacity in any
action, proceeding or investigation brought by any shareholder of the Company,
in connection with or as a result of the consummation of the transactions
contemplated by the Transaction Agreements, or if the Buyer is impleaded in any
such action, proceeding or investigation by any Person, or (ii) the Buyer, other
than by reason of its gross negligence or willful misconduct or by reason of its
trading of the Common Stock in a manner that is illegal under the federal
securities laws, becomes involved in any capacity in any action, proceeding or
investigation brought by the SEC against or involving the Company or in
connection with or as a result of the consummation of the transactions
contemplated by the Transaction Agreements, or if the Buyer is impleaded in any
such action, proceeding or investigation by any Person, then in any such case,
the Company will reimburse the Buyer for its reasonable legal and other expenses
(including the cost of any investigation and preparation) incurred in connection
therewith, as such expenses are incurred. In addition, other than with respect
to any matter in which Buyer is a named party, the Company will pay to the Buyer
the charges, as reasonably determined by Buyer, for the time of any officers or
employees of the Buyer devoted to appearing and preparing to appear as
witnesses, assisting in preparation for hearings, trials or pretrial matters, or
otherwise with respect to inquiries, hearing, trials, and other proceedings
relating to the subject matter of this Agreement. The reimbursement obligations
of the Company under this section shall be in addition to any liability which
the Company may otherwise have, shall extend upon the same terms and conditions
to any Affiliates of the Buyer who or which are actually named in such action,
proceeding or investigation, and partners, directors, agents, employees and
controlling persons (if any), as the case may be, of Buyer and any such
affiliate, and shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the Company, Buyer and any such
affiliate and any such person. The Company also agrees that neither the Buyer
nor any such affiliate, partner, director, agent, employee or controlling person
shall have any liability to the Company or any Person asserting claims on behalf
of or in right of the Company in connection with or as a result of the
consummation of any of the Transaction Agreements, except as may be expressly
and specifically provided in or contemplated by this Agreement.
g. Available Shares. The Company shall have at all times
authorized and reserved for issuance, free from preemptive rights, a number of
shares (the "Minimum Available Shares") at least equal to the sum of (x) one
hundred percent (100%) of the number of shares of Common Stock issuable upon
exercise of all outstanding Warrants held by Buyer.
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6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. The obligation of
the Company hereunder to issue and sell the Securities to Buyer at the Closing
is subject to the satisfaction, at or before the Closing Date of each of the
following conditions thereto, provided that these conditions are for the
Company's sole benefit and may be waived by the Company at any time in its sole
discretion:
a. Buyer shall have executed this Agreement, and delivered the
same to the Company.
b. Buyer shall have delivered the Purchase Price in accordance
with Section 1.
c. The representations and warranties of Buyer shall be true
and correct in all material respects as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and Buyer shall have performed,
satisfied and complied in all material respects with the covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by Buyer at or prior to the Closing Date.
d. No undisclosed litigation, statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement.
7. CONDITIONS TO BUYER' OBLIGATION TO PURCHASE. The obligation of Buyer
to purchase the Securities at the Closing is subject to the satisfaction, at or
before the Closing Date of each of the following conditions, provided that these
conditions are for Buyer's sole benefit and may be waived by Buyer at any time
in their sole discretion:
a. The Company shall have executed this Agreement and the
Warrant Agreement. The Company shall have submitted irrevocable instructions to
the transfer agent for the issuance of the Common Stock.
b. The representations and warranties of the Company shall be
true and correct in all material respects as of the date when made and as of the
Closing Date as though made at such time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing Date.
c. No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.
d. No material undisclosed event shall have occurred which
could reasonably be expected to have a Material Adverse Effect on the Company.
8. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law. THIS AGREEMENT SHALL BE ENFORCED, GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE
TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS. THE PARTIES HERETO HEREBY SUBMIT
TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS AND THE NEW
YORK STATE COURTS LOCATED IN NEW YORK COUNTY IN THE STATE OF NEW YORK WITH
RESPECT TO ANY DISPUTE ARISING UNDER THIS AGREEMENT, THE AGREEMENTS ENTERED INTO
IN 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
8
NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER
LAWFUL MANNER. The Company and the Buyer hereby waive a trial by jury in any
action, proceeding or counterclaim brought by either of the Parties hereto
against the other in respect of any matter arising out or in connection with the
Transaction Agreements.
b. Counterparts; Signatures by Facsimile. This Agreement may
be executed in one or more counterparts, each of which shall be deemed an
original but all of which shall constitute one and the same agreement and shall
become effective when counterparts have been signed by each party and delivered
to the other party. This Agreement, once executed by a party, may be delivered
to the other party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.
c. Headings. The headings of this Agreement are for
convenience of reference only and shall not form part of, or affect the
interpretation of, this Agreement.
d. Severability. In the event that any provision of this
Agreement is invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law. Any provision hereof which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
hereof.
e. Entire Agreement; Amendments. This Agreement and the
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor Buyer makes
any representation, warranty, covenant or undertaking with respect to such
matters. Except as provided herein, no provision of this Agreement may be waived
or amended other than by an instrument in writing signed by the party to be
charged with enforcement.
f. Notices. Any notices required or permitted to be given
under the terms of this Agreement shall be sent by certified or registered mail
(return receipt requested) or delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile and shall be effective
five days after being placed in the mail, if mailed by regular United States
mail, or upon receipt, if delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile, in each case addressed
to a party. The addresses for such communications shall be:
If to the Company:
Attn.: Xxxxxxx Xxxxxxxxx, President
Peak Entertainment Holdings, Inc.
Xxxxxxx Xxxx, Xxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxx, XX XX00 0XX
Tel: x00(0)0000 000000
Fax: x00(0)0000 000000
With a copy (which shall not constitute notice) to:
Attn.: Xxx Xxxxxxx, Esq.
Law Offices of Xxx Xxxxxxx
00 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Tel: 000-000-0000
Fax: 000-000-0000
If to a Buyer:
At the address and facsimile number listed on the
signature page hereof.
Each party shall provide notice to the other party of any change in address.
9
g. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and assigns.
Neither the Company nor any Buyer shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other.
Notwithstanding the foregoing, subject to Section 2(f), any Buyer may assign its
rights hereunder to any person that purchases Securities in a private
transaction from a Buyer or to any of its "affiliates," as that term is defined
under the 1934 Act.
h. Third Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
i. Further Assurances. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
j. No Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
k. Remedies. The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to Buyer by vitiating the
intent and purpose of the transaction contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Agreement will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Agreement, that Buyer
shall be entitled, in addition to all other available remedies at law or in
equity.
l. Survival. The representations, warranties and covenants
made by each of the Company and Buyer in this Agreement, the annexes, schedules
and exhibits hereto and in each instrument, agreement and certificate entered
into and delivered by them pursuant to this Agreement, shall survive the Closing
and the consummation of the transactions contemplated hereby. In the event of a
breach or violation of any of such representations, warranties or covenants, the
party to whom such representations, warranties or covenants have been made shall
have all rights and remedies for such breach or violation available to it under
the provisions of this Agreement, irrespective of any investigation made by or
on behalf of such party on or prior to the Closing Date.
m. Indemnification.
(a) The Company hereby agrees to indemnify and hold
harmless Buyer and its officers, directors, partners and members (collectively,
the "Buyer Indemnitees"), from and against any and all damages, and agrees to
reimburse Buyer Indemnitees for all reasonable out-of-pocket expenses (including
the reasonable fees and expenses of legal counsel), in each case promptly as
incurred by Buyer Indemnitees and to the extent arising out of or in connection
with:
(i) any material misrepresentation, omission
of fact or breach of any of the Company's representations or warranties
contained in this Agreement, the annexes, schedules or exhibits hereto or any
instrument, agreement or certificate entered into or delivered by the Company
pursuant to this Agreement; or
(ii) any material failure by the Company to
perform in any material respect any of its covenants, agreements, undertakings
or obligations set forth in this Agreement, the annexes, schedules or exhibits
hereto or any 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.
10
(b) Buyer hereby agrees to indemnify and hold
harmless the Company, its affiliates and its respective officers, directors,
partners and members (collectively, the "Company Indemnitees"), from and against
any and all damages, and agrees to reimburse the Company Indemnitees for
reasonable all out-of-pocket expenses (including the reasonable fees and
expenses of legal counsel), in each case promptly as incurred by the Company
Indemnitees and to the extent arising out of or in connection with:
(i) any material misrepresentation, omission
of fact, or breach of any of any Buyer's representations or warranties contained
in this Agreement, the annexes, schedules or exhibits hereto or any instrument,
agreement or certificate entered into or delivered by Buyer pursuant to this
Agreement; or
(ii) any material failure by Buyer to
perform in any material respect any of its covenants, agreements, undertakings
or obligations set forth in this Agreement or any instrument, certificate or
agreement entered into or delivered by Buyer pursuant to this Agreement.
(c) Promptly after receipt by either party hereto
seeking indemnification pursuant to this Section 8(m) (an "Indemnified Party")
of written notice of any investigation, claim, proceeding or other action in
respect of which indemnification is being sought (each, a "Claim"), the
Indemnified Party promptly shall notify the party from whom indemnification
pursuant to this Section 8(m) is being sought (the "Indemnifying Party") of the
commencement thereof; but the omission to so notify the Indemnifying Party shall
not relieve it from any liability that it otherwise may have to the Indemnified
Party, except to the extent that the Indemnifying Party is actually prejudiced
by such omission or delay. In connection with any Claim as to which both the
Indemnifying Party and the Indemnified Party are parties, the Indemnifying Party
shall be entitled to assume the defense thereof. Notwithstanding the assumption
of the defense of any Claim by the Indemnifying Party, the Indemnified Party
shall have the right to employ separate legal counsel and to participate in the
defense of such Claim, and the Indemnifying Party shall bear the reasonable
fees, out-of-pocket costs and expenses of such separate legal counsel to the
Indemnified Party if (and only if): (x) the Indemnifying Party shall have agreed
to pay such fees, out-of-pocket costs and expenses, (y) the Indemnified Party
reasonably shall have concluded that representation of the Indemnified Party and
the Indemnifying Party by the same legal counsel would not be appropriate due to
actual or, as reasonably determined by legal counsel to the Indemnified Party,
potentially differing interests between such parties in the conduct of the
defense of such Claim, or if there may be legal defenses available to the
Indemnified Party that are in addition to or disparate from those available to
the Indemnifying Party, or (z) the Indemnifying Party shall have failed to
employ legal counsel reasonably satisfactory to the Indemnified Party within a
reasonable period of time after notice of the commencement of such Claim. If the
Indemnified Party employs separate legal counsel in circumstances other than as
described in clauses (x), (y) or (z) above, the fees, costs and expenses of such
legal counsel shall be borne exclusively by the Indemnified Party. Except as
provided above, the Indemnifying Party shall not, in connection with any Claim
in the same jurisdiction, be liable for the fees and expenses of more than one
firm of legal counsel for the Indemnified Party (together with appropriate local
counsel). The Indemnifying Party shall not, without the prior written consent of
the Indemnified Party (which consent shall not unreasonably be withheld), settle
or compromise any Claim or consent to the entry of any judgment that does not
include an unconditional release of the Indemnified Party from all liabilities
with respect to such Claim or judgment.
[signature page follows]
11
IN WITNESS WHEREOF, the undersigned Buyer and the Company have caused
this Agreement to be duly executed as of the date first above written.
THE COMPANY: PEAK ENTERTAINMENT HOLDINGS, INC.
By:
-------------------------------------
Wilf Shorrocks
President and Chief Executive Officer
BUYER:
-----------------------------------------
STATE OF RESIDENCE:
----------------------
ADDRESS:
--------------------------------
TELEPHONE:
-------------------------------
FACSIMILE:
-------------------------------
12
EXHIBIT A
THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. EXCEPT AS
OTHERWISE SET FORTH HEREIN, OR IN THE SECURITIES PURCHASE AGREEMENT, NEITHER
THIS WARRANT NOR ANY OF SUCH SHARES MAY BE SOLD, PLEDGED, TRANSFERRED, ASSIGNED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR SUCH SECURITIES UNDER SAID ACT OR, AN OPINION OF COUNSEL, IN FORM,
SUBSTANCE AND SCOPE, CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE
TRANSACTIONS, THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD
PURSUANT TO RULE 144 UNDER SUCH ACT.
Right to Purchase 1,750,000 Shares of Common Stock at $0.50 Per Share
Peak Entertainment Holdings, Inc.
STOCK PURCHASE WARRANT AGREEMENT
THIS CERTIFIES THAT, for value received, ______________ (the "Holder"),
is entitled, upon the terms and subject to the conditions hereinafter set forth,
at any time on or after the closing of the related Securities Purchase Agreement
dated as of September 28, 2004 (the "Initial Exercise Date") and on or prior to
the close of business on September 28, 2007 (the "Termination Date"), but not
thereafter, to subscribe for and purchase from Peak Entertainment Holdings,
Inc., a Nevada corporation (the "Company"), up to 1,750,000 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, dated as of September 28,
2004, by and among the Company and Buyer listed on the execution page thereof
(the "Securities Purchase Agreement"), the Securities Purchase Agreement shall
control. Capitalized terms used and not otherwise defined herein shall have the
meanings set forth for such terms in the Securities Purchase Agreement.
1. Title to Warrant. Prior to the Termination Date and subject to
compliance with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company by the
holder hereof in person or by duly authorized attorney, upon surrender of this
Warrant together with the Assignment Form annexed hereto, properly endorsed.
2. Authorization of Shares. The Company covenants that all shares of
Common Stock which may be issued upon the exercise of rights represented by this
Warrant will, upon exercise of the rights represented by this Warrant, be duly
authorized, validly issued, fully paid and nonassessable and free from all
taxes, liens and charges in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously with such issue).
3. Exercise of Warrant. Except as provided in Sections 4 and 5 herein,
exercise of the purchase rights represented by this Warrant may be made at any
time or times on or after the Initial Exercise Date, and before the close of
business on the Termination Date by the surrender of this Warrant and the Notice
of Exercise Form annexed hereto, duly executed, at the office of the Company (or
such other office or agency of the Company as it may designate by notice in
writing to the registered holder hereof at the address of such holder appearing
on the books of the Company) and upon payment of the Exercise Price of the
shares thereby purchased by wire transfer or cashier's check drawn on a United
States bank, the holder of this Warrant shall be entitled to receive a
certificate for the number of shares of Common Stock so purchased. Certificates
for shares purchased hereunder shall be delivered to the Holder hereof within
three (3) Trading Days after the date on which this Warrant shall have been
exercised as aforesaid. This Warrant shall be deemed to have been exercised and
such certificate or certificates shall be deemed to have been issued, and the
Holder or any other person so designated to be named therein shall be deemed to
have become a holder of record of such shares for all purposes, as of the date
this Warrant has been exercised by payment to, and receipt thereof by, the
Company of the Exercise Price and all taxes required to be paid by Holder, if
any, pursuant to Section 5 herein prior to the issuance of such shares. If this
13
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.
14
(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.
15
(b) Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is a change in or distribution with respect to the Common Stock of the Company),
or sell, transfer or otherwise dispose of all or substantially all its property,
assets or business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Stock
of the Company, then the Holder shall have the right thereafter to receive, upon
exercise of this Warrant, the number of shares of common stock of the successor
or acquiring corporation or of the Company, if it is the surviving corporation,
and Other Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a holder of
the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such event. In case of any such reorganization,
reclassification, merger, consolidation or disposition of assets, the successor
or acquiring corporation (if other than the Company) shall expressly assume the
due and punctual observance and performance of each and every covenant and
condition of this Warrant to be performed and observed by the Company and all
the obligations and liabilities hereunder, subject to such modifications as may
be deemed appropriate (as determined in good faith by resolution of the Board of
Directors of the Company) in order to provide for adjustments of shares of
Common Stock for which this Warrant is exercisable which shall be as nearly
equivalent as practicable to the adjustments provided for in this Section 12.
For purposes of this Section 12, "common stock of the successor or acquiring
corporation" shall include stock of such corporation of any class which is not
preferred as to dividends or assets over any other class of stock of such
corporation and which is not subject to redemption and shall also include any
evidences of indebtedness, shares of stock or other securities which are
exercisable into or exchangeable for any such stock, either immediately or upon
the arrival of a specified date or the happening of a specified event and any
warrants or other rights to subscribe for or purchase any such stock. The
foregoing provisions of this Section 12 shall similarly apply to successive
reorganizations, reclassifications, mergers, consolidations or disposition of
assets.
(c) Adjustment for Spin Off. If, for any reason, prior to the
exercise of this Warrant in full, the Company spins off or otherwise divests
itself of a part of its business or operations or disposes all or a part of its
assets in a transaction (the "Spin Off") in which the Company does not receive
compensation for such business, operations or assets, but causes securities of
another entity (the "Spin Off Securities") to be issued to security holders of
the Company, then
(A) the Company shall cause (i) to be reserved Spin
Off Securities equal to the number thereof which would have been issued to the
Holder had all of the Holder's unexercised Warrants outstanding on the record
date (the "Record Date") for determining the amount and number of Spin Off
Securities to be issued to security holders of the Company (the "Outstanding
Warrants") been exercised as of the close of business on the trading day
immediately before the Record Date (the "Reserved Spin Off Shares"), and (ii) to
be issued to the Holder on the exercise of all or any of the Outstanding
Warrants, such amount of the Reserved Spin Off Shares equal to (x) the Reserved
Spin Off Shares multiplied by (y) a fraction, of which (I) the numerator is the
amount of the Outstanding Warrants then being exercised, and (II) the
denominator is the amount of the Outstanding Warrants; and
(B) the Exercise Price on the Outstanding Warrants
shall be adjusted immediately after consummation of the Spin Off by multiplying
the Exercise Price by a fraction (if, but only if, such fraction is less than
1.0), the numerator of which is the average Closing Bid Price of the Common
Stock for the five (5) trading days immediately following the fifth trading day
after the Record Date, and the denominator of which is the average Closing Bid
Price of the Common Stock on the five (5) trading days immediately preceding the
Record Date; and such adjusted Exercise Price shall be deemed to be the Exercise
Price with respect to the Outstanding Warrants after the Record Date.
16
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 Warrant and the
Exercise Price of such Warrant Shares (and other securities or property) after
such adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which such adjustment was made.
Such notice, in the absence of manifest error, shall be conclusive evidence of
the correctness of such adjustment.
15. Call Provision. Prior to the Termination Date, the Warrant shall be
callable, under the circumstances described in this Section, at the discretion
of the Company, for $0.10 per warrant (the "Call Fee"). The Company's right to
call shall be exercisable commencing upon the day following the tenth
consecutive business day during which the Company's common stock has traded at
prices of, or in excess of, $1.75 per share, subject to adjustment for stock
splits, dividends, subdivisions, reclassification and the like, with weekly
volume of such trading being in excess of the total number of shares represented
by this Warrant. In the event the Company exercises its right to call the
Warrants, the Company shall give the Holder written notice of such decision. In
the event that the Holder does not exercise all or any part of the Warrants or
that the Company does not receive the Warrant from the Holder within 30 days
from the date on the notice to the Holder of the Company's intention to redeem
the Warrant, then the Warrant shall be deemed canceled, and the Holder shall not
be entitled to further exercise thereof or to the Redemption Fee.
16. Notice of Corporate Action. If at any time:
(a) the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or other
distribution, or any right to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or
property, or to receive any other right, or
(b) there shall be any capital reorganization of the Company,
any reclassification or recapitalization of the capital stock of the Company or
any consolidation or merger of the Company with, or any sale, transfer or other
disposition of all or substantially all the property, assets or business of the
Company to, another corporation or,
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to the Holder (i)
at least 30 days' prior written notice of the date on which a record date shall
be selected for such dividend, distribution or right or for determining rights
to vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, liquidation or winding up, and (ii)
in the case of any such reorganization, reclassification, merger, consolidation,
sale, transfer, disposition, dissolution, liquidation or winding up, at least 30
days' prior written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause also shall specify (i) the date
on which any such record is to be taken for the purpose of such dividend,
distribution or right, the date on which the holders of Common Stock shall be
entitled to any such dividend, distribution or right, and the amount and
character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such disposition, dissolution, liquidation or winding
up. Each such written notice shall be sufficiently given if addressed to the
Holder at the last address of the Holder appearing on the books of the Company
and delivered in accordance with Section 18(d).
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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.
The Company shall not by any action, including, without
limitation, amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of the Holder against impairment. Without limiting the generality of the
foregoing, the Company will (a) take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of Common Stock upon the exercise of this Warrant, and
(b) use its best efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations under this Warrant.
18. Miscellaneous.
(a) Jurisdiction. This Warrant shall be binding upon any
successors or assigns of the Company. This Warrant shall constitute a contract
under the laws of New York without regard to its conflict of law, principles or
rules, and be subject to governing law provisions set forth in Section 8 of the
Securities Purchase Agreement.
(b) Restrictions. The holder hereof acknowledges that the
Warrant Shares acquired upon the exercise of this Warrant, if not registered,
will have restrictions upon resale imposed by state and federal securities laws.
(c) Nonwaiver and Expenses. No course of dealing or any delay
or failure to exercise any right hereunder on the part of the Holder shall
operate as a waiver of such right or otherwise prejudice the Holder's rights,
powers or remedies, notwithstanding all rights hereunder terminate on the
Termination Date. If the Company fails to comply with any provision of this
Warrant, the Company shall pay to the Holder such amounts as shall be sufficient
to cover any costs and expenses including, but not limited to, reasonable
attorneys' fees, including those of appellate proceedings, incurred by the
Holder in collecting any amounts due pursuant hereto or in otherwise enforcing
any of its rights, powers or remedies hereunder.
(d) Notices. Any notice, request or other document required or
permitted to be given or delivered to the Holder hereof by the Company shall be
delivered in accordance with the notice provisions of the Securities Purchase
Agreement.
(e) Limitation of Liability. No provision hereof, in the
absence of affirmative action by the Holder to purchase shares of Common Stock,
and no enumeration herein of the rights or privileges of the Holder hereof,
shall give rise to any liability of the Holder for the purchase price of any
Common Stock or as a stockholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company.
(f) Remedies. The Holder, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Warrant.
(g) Successors and Assigns. Subject to applicable securities
laws, this Warrant and the rights and obligations evidenced hereby shall inure
to the benefit of and be binding upon the successors of the Company and the
successors and permitted assigns of the Holder. The provisions of this Warrant
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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.
(i) Amendment. This Warrant may be modified or amended or the
provisions hereof waived with the written consent of the Company and the Holder.
(j) Severability. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provisions or the remaining provisions of this Warrant.
(k) Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
[signature page follows]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereunto duly authorized.
Dated: September 28, 2004
Peak Entertainment Holdings, Inc.
By:
-------------------------------------
Wilf Shorrocks
President and Chief Executive Officer
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NOTICE OF EXERCISE
To: Peak Entertainment Holdings, Inc.
The undersigned hereby elects to purchase ________ shares of Common
Stock (the "Common Stock"), at an exercise price of $0.50 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
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ASSIGNMENT FORM
(To assign the foregoing warrant, execute this form and supply required
information. Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to _________________________________________________
whose address is _____________________________________________________________ .
Dated:
---------------------
Holder's Signature:
---------------------------------
Holder's Address:
---------------------------------
---------------------------------
Signature Guaranteed:
----------------------------
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in an fiduciary or other representative
capacity should file proper evidence of authority to assign the foregoing
Warrant.
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