Contract
THIS
WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE
OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT AND THE
COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO HOUSE OF BRUSSELS CHOCOLATES INC. THAT SUCH REGISTRATION IS NOT
REQUIRED.
Right to
Purchase up to 1,500,000 Shares of Common Stock of
(subject
to adjustment as provided herein)
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No. |
Issue
Date: March 29, 2005 |
HOUSE OF
BRUSSELS CHOCOLATES INC., a corporation organized under the laws of the State of
Nevada (the “Company”), hereby certifies that, for value received, LAURUS MASTER
FUND, LTD., or assigns (the “Holder”), is entitled, subject to the terms set
forth below, to purchase from the Company (as defined herein) from and after the
Issue Date of this Warrant and at any time or from time to time before 5:00
p.m., New York time, through the close of business March 29, 2012 (the
“Expiration Date”), up to 1,500,000 fully paid and nonassessable shares of
Common Stock (as hereinafter defined), $0.001 par value per share, at the
applicable Exercise Price per share (as defined below). The number and character
of such shares of Common Stock and the applicable Exercise Price per share are
subject to adjustment as provided herein.
As used
herein the following terms, unless the context otherwise requires, have the
following respective meanings:
(a) The term
“Company” shall include the Company and any person or entity which shall
succeed, or assume the obligations of, the Company hereunder.
(b) The term
“Common Stock” includes (i) the Company’s Common Stock, par value $0.001 per
share; and (ii) any other securities into which or for which any of the
securities described in the preceding clause (i) may be converted or exchanged
pursuant to a plan of recapitalization, reorganization, merger, sale of assets
or otherwise.
(c) The term
“Other Securities” refers to any stock (other than Common Stock) and other
securities of the Company or any other person (corporate or otherwise) which the
holder of the Warrant at any time shall be entitled to receive, or shall have
received, on the exercise of the Warrant, in lieu of or in addition to Common
Stock, or which at any time shall be issuable or shall have been issued in
exchange for or in replacement of Common Stock or Other Securities pursuant to
Section 4 or otherwise.
(d) The
“Exercise Price” applicable under this Warrant shall be a price of
$1.20.
1. Exercise
of Warrant.
1.1 Number
of Shares Issuable upon Exercise. From
and after the date hereof through and including the Expiration Date, the Holder
shall be entitled to receive, upon exercise of this Warrant in whole or in part,
by delivery of an original or fax copy of an exercise notice in the form
attached hereto as Exhibit A (the “Exercise Notice”), shares of Common Stock of
the Company, subject to adjustment pursuant to Section 4.
1.2 Fair
Market Value. For
purposes hereof, the “Fair Market Value” of a share of Common Stock as of a
particular date (the “Determination Date”) shall mean:
(a) If the
Company’s Common Stock is traded on the American Stock Exchange or another
national exchange or is quoted on the National or SmallCap Market of The Nasdaq
Stock Market, Inc. (“Nasdaq”), then the closing or last sale price,
respectively, reported for the last business day immediately preceding the
Determination Date.
(b) If the
Company’s Common Stock is not traded on the American Stock Exchange or another
national exchange or on the Nasdaq but is traded on the NASD OTC Bulletin Board,
then the mean of the average of the closing bid and asked prices reported for
the last business day immediately preceding the Determination Date.
(c) Except as
provided in clause (d) below, if the Company’s Common Stock is not publicly
traded, then as the Holder and the Company agree or in the absence of agreement
by arbitration in accordance with the rules then in effect of the American
Arbitration Association, before a single arbitrator to be chosen from a panel of
persons qualified by education and training to pass on the matter to be
decided.
(d) If the
Determination Date is the date of a liquidation, dissolution or winding up, or
any event deemed to be a liquidation, dissolution or winding up pursuant to the
Company’s charter, then all amounts to be payable per share to holders of the
Common Stock pursuant to the charter in the event of such liquidation,
dissolution or winding up, plus all other amounts to be payable per share in
respect of the Common Stock in liquidation under the charter, assuming for the
purposes of this clause (d) that all of the shares of Common Stock then issuable
upon exercise of the Warrant are outstanding at the Determination
Date.
1.3 Company
Acknowledgment. The
Company will, at the time of the exercise of this Warrant, upon the request of
the holder hereof acknowledge in writing its continuing obligation to afford to
such holder any rights to which such holder shall continue to be entitled after
such exercise in accordance with the provisions of this Warrant. If the holder
shall fail to make any such request, such failure shall not affect the
continuing obligation of the Company to afford to such holder any such rights.
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1.4 Trustee
for Warrant Holders. In the
event that a bank or trust company shall have been appointed as trustee for the
holders of this Warrant pursuant to Subsection 3.2, such bank or trust company
shall have all the powers and duties of a warrant agent (as hereinafter
described) and shall accept, in its own name for the account of the Company or
such successor person as may be entitled thereto, all amounts otherwise payable
to the Company or such successor, as the case may be, on exercise of this
Warrant pursuant to this Section 1.
2. Procedure
for Exercise.
2.1 Delivery
of Stock Certificates, Etc., on Exercise. The
Company agrees that the shares of Common Stock purchased upon exercise of this
Warrant shall be deemed to be issued to the Holder as the record owner of such
shares as of the close of business on the date on which this Warrant shall have
been surrendered and payment made for such shares in accordance herewith. As
soon as practicable after the exercise and payment of this Warrant in full or in
part, and in any event within three (3) business days thereafter, the Company at
its expense (including the payment by it of any applicable issue taxes) will
cause to be issued in the name of and delivered to the Holder, or as such Holder
(upon payment by such Holder of any applicable transfer taxes) may direct in
compliance with applicable securities laws, a certificate or certificates for
the number of duly and validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) to which such Holder shall be entitled on
such exercise, plus, in lieu of any fractional share to which such holder would
otherwise be entitled, cash equal to such fraction multiplied by the then Fair
Market Value of one full share, together with any other stock or other
securities and property (including cash, where applicable) to which such Holder
is entitled upon such exercise pursuant to Section 1 or otherwise.
2.2 Exercise.
Payment
may be made either in cash or by certified or official bank check payable to the
order of the Company equal to the applicable aggregate Exercise Price, for the
number of Common Shares specified in such Exercise Notice (as such exercise
number shall be adjusted to reflect any adjustment in the total number of shares
of Common Stock issuable to the Holder per the terms of this Warrant) and the
Holder shall thereupon be entitled to receive the number of duly authorized,
validly issued, fully-paid and non-assessable shares of Common Stock (or Other
Securities) determined as provided herein.
3. Effect
of Reorganization, Etc.; Adjustment of Exercise Price.
3.1 Reorganization,
Consolidation, Merger, Etc. In case
at any time or from time to time, the Company shall (a) effect a reorganization,
(b) consolidate with or merge into any other person, or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then, in each such
case, as a condition to the consummation of such a transaction, proper and
adequate provision shall be made by the Company whereby the Holder of this
Warrant, on the exercise hereof as provided in Section 1 at any time after the
consummation of such reorganization, consolidation or merger or the effective
date of such dissolution, as the case may be, shall receive, in lieu of the
Common Stock (or Other Securities) issuable on such exercise prior to such
consummation or such effective date, the stock and other securities and property
(including cash) to which such Holder would have been entitled upon such
consummation or in connection with such dissolution, as the case may be, if such
Holder had so exercised this Warrant, immediately prior thereto, all subject to
further adjustment thereafter as provided in Section 4.
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3.2 Dissolution. In the
event of any dissolution of the Company following the transfer of all or
substantially all of its properties or assets, the Company, concurrently with
any distributions made to holders of its Common Stock, shall at its expense
deliver or cause to be delivered to the Holder the stock and other securities
and property (including cash, where applicable) receivable by the Holder of this
Warrant pursuant to Section 3.1, or, if the Holder shall so instruct the
Company, to a bank or trust company specified by the Holder and having its
principal office in New York, NY as trustee for the Holder of this
Warrant.
3.3 Continuation
of Terms. Upon
any reorganization, consolidation, merger or transfer (and any dissolution
following any transfer) referred to in this Section 3, this Warrant shall
continue in full force and effect and the terms hereof shall be applicable to
the shares of stock and other securities and property receivable on the exercise
of this Warrant after the consummation of such reorganization, consolidation or
merger or the effective date of dissolution following any such transfer, as the
case may be, and shall be binding upon the issuer of any such stock or other
securities, including, in the case of any such transfer, the person acquiring
all or substantially all of the properties or assets of the Company, whether or
not such person shall have expressly assumed the terms of this Warrant as
provided in Section 4. In the event this Warrant does not continue in full force
and effect after the consummation of the transactions described in this Section
3, then the Company’s securities and property (including cash, where applicable)
receivable by the Holder of this Warrant will be delivered to the Holder or the
Trustee as contemplated by Section 3.2.
4. Extraordinary
Events Regarding Common Stock. In the
event that the Company shall (a) issue additional shares of the Common Stock as
a dividend or other distribution on outstanding Common Stock, (b) subdivide its
outstanding shares of Common Stock, or (c) combine its outstanding shares of the
Common Stock into a smaller number of shares of the Common Stock, then, in each
such event, the Exercise Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the then Exercise Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such event, and the
product so obtained shall thereafter be the Exercise Price then in effect. The
Exercise Price, as so adjusted, shall be readjusted in the same manner upon the
happening of any successive event or events described herein in this Section 4.
The number of shares of Common Stock that the holder of this Warrant shall
thereafter, on the exercise hereof as provided in Section 1, be entitled to
receive shall be adjusted to a number determined by multiplying the number of
shares of Common Stock that would otherwise (but for the provisions of this
Section 4) be issuable on such exercise by a fraction of which (a) the numerator
is the Exercise Price that would otherwise (but for the provisions of this
Section 4) be in effect, and (b) the denominator is the Exercise Price in effect
on the date of such exercise (taking into account the provisions of this Section
4).
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5. Certificate
as to Adjustments. In each
case of any adjustment or readjustment in the shares of Common Stock (or Other
Securities) issuable on the exercise of this Warrant, the Company at its expense
will promptly cause its Chief Financial Officer or other appropriate designee to
compute such adjustment or readjustment in accordance with the terms of this
Warrant and prepare a certificate setting forth such adjustment or readjustment
and showing in detail the facts upon which such adjustment or readjustment is
based, including a statement of (a) the consideration received or receivable by
the Company for any additional shares of Common Stock (or Other Securities)
issued or sold or deemed to have been issued or sold, (b) the number of shares
of Common Stock (or Other Securities) outstanding or deemed to be outstanding,
and (c) the Exercise Price and the number of shares of Common Stock to be
received upon exercise of this Warrant, in effect immediately prior to such
adjustment or readjustment and as adjusted or readjusted as provided in this
Warrant. The Company will forthwith mail a copy of each such certificate to the
holder of this Warrant and any Warrant agent of the Company (appointed pursuant
to Section 11 hereof).
6. Reservation
of Stock, Etc., Issuable on Exercise of Warrant. The
Company will at all times reserve and keep available, solely for issuance and
delivery on the exercise of this Warrant, shares of Common Stock (or Other
Securities) from time to time issuable on the exercise of this
Warrant.
7. Assignment;
Exchange of Warrant. Subject
to compliance with applicable securities laws, this Warrant, and the rights
evidenced hereby, may be transferred by any registered holder hereof (a
“Transferor”) in whole or in part. On the surrender for exchange of this
Warrant, with the Transferor’s endorsement in the form of Exhibit B attached
hereto (the “Transferor Endorsement Form”) and together with evidence reasonably
satisfactory to the Company demonstrating compliance with applicable securities
laws, which shall include, without limitation, a legal opinion from the
Transferor’s counsel (at the Company’s expense) that such transfer is exempt
from the registration requirements of applicable securities laws, the Company at
its expense (but with payment by the Transferor of any applicable transfer
taxes) will issue and deliver to or on the order of the Transferor thereof a new
Warrant of like tenor, in the name of the Transferor and/or the transferee(s)
specified in such Transferor Endorsement Form (each a “Transferee”), calling in
the aggregate on the face or faces thereof for the number of shares of Common
Stock called for on the face or faces of the Warrant so surrendered by the
Transferor.
8. Replacement
of Warrant. On
receipt of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant and, in the case of any such loss,
theft or destruction of this Warrant, on delivery of an indemnity agreement or
security reasonably satisfactory in form and amount to the Company or, in the
case of any such mutilation, on surrender and cancellation of this Warrant, the
Company at its expense will execute and deliver, in lieu thereof, a new Warrant
of like tenor.
9. Registration
Rights. The
Holder of this Warrant has been granted certain registration rights by the
Company. These registration rights are set forth in a Registration Rights
Agreement entered into by the Company and Purchaser dated as of the date hereof,
as the same may be amended, modified or supplemented from time to
time.
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10. Maximum
Exercise.
Notwithstanding anything contained herein to the contrary, the Holder shall not
be entitled to exercise this Warrant in connection with that number of shares of
Common Stock which would exceed the difference between (i) 4.99% of the
outstanding shares of Common Stock and (ii) the number of shares of Common Stock
beneficially owned by the Holder and issuable to the Holder upon exercise of
this Warrant. For purposes of the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder. The
limitation described in the first sentence of this Section 10 shall
automatically become null and void without any notice to the Company upon the
occurrence and during the continuance of an Event of Default (as defined in the
Security Agreement dated as of the date hereof among the Holder, the Company and
various subsidiaries of the Company, as amended, modified, restated and/or
supplemented from time to time), or upon 75 days prior notice to the
Company.
11. Warrant
Agent. The
Company may, by written notice to the each Holder of the Warrant, appoint an
agent for the purpose of issuing Common Stock (or Other Securities) on the
exercise of this Warrant pursuant to Section 1, exchanging this Warrant pursuant
to Section 7, and replacing this Warrant pursuant to Section 8, or any of the
foregoing, and thereafter any such issuance, exchange or replacement, as the
case may be, shall be made at such office by such agent.
12. Transfer
on the Company’s Books. Until
this Warrant is transferred on the books of the Company, the Company may treat
the registered holder hereof as the absolute owner hereof for all purposes,
notwithstanding any notice to the contrary.
13. Notices,
Etc. All
notices and other communications from the Company to the Holder of this Warrant
shall be mailed by first class registered or certified mail, postage prepaid, at
such address as may have been furnished to the Company in writing by such Holder
or, until any such Holder furnishes to the Company an address, then to, and at
the address of, the last Holder of this Warrant who has so furnished an address
to the Company.
14. Miscellaneous. 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. This Warrant shall
be governed by and construed in accordance with the laws of State of New York
without regard to principles of conflicts of laws. Any action brought concerning
the transactions contemplated by this Warrant shall be brought only in the state
courts of New York or in the federal courts located in the state of New York;
provided, however, that the Holder may choose to waive this provision and bring
an action outside the state of New York. The individuals executing this Warrant
on behalf of the Company agree to submit to the jurisdiction of such courts and
waive trial by jury. The prevailing party shall be entitled to recover from the
other party its reasonable attorneys’ fees and costs. In the event that any
provision of this Warrant 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 such provision which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision of this Warrant. The headings in this Warrant are for
purposes of reference only, and shall not limit or otherwise affect any of the
terms hereof. The invalidity or unenforceability of any provision hereof shall
in no way affect the validity or enforceability of any other provision hereof.
The Company acknowledges that legal counsel participated in the preparation of
this Warrant and, therefore, stipulates that the rule of construction that
ambiguities are to be resolved against the drafting party shall not be applied
in the interpretation of this Warrant to favor any party against the other
party.
[BALANCE
OF PAGE INTENTIONALLY LEFT BLANK;
SIGNATURE
PAGE FOLLOWS]
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IN
WITNESS WHEREOF, the Company has executed this Warrant as of the date first
written above.
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WITNESS: |
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By: |
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Name |
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Title: |
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7
EXHIBIT
A
FORM
OF SUBSCRIPTION
(To Be
Signed Only On Exercise Of Warrant)
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TO: |
House
of Brussels Chocolate Inc. |
_____________________
_____________________
Attention: Chief
Financial Officer
The
undersigned, pursuant to the provisions set forth in the attached Warrant
(No.____), hereby irrevocably elects to purchase
________ shares of the common
stock covered by such warrant.
.
The
undersigned herewith makes payment of the full Exercise Price for such shares at
the price per share provided for in such Warrant, which is $___________. Such
payment takes the form of
$__________
in lawful money of the United States.
The
undersigned requests that the certificates for such shares be issued in the name
of, and delivered to ______________________________________________ whose
address is
___________________________________________________________________________.
The
undersigned represents and warrants that all offers and sales by the undersigned
of the securities issuable upon exercise of the within Warrant shall be made
pursuant to registration of the Common Stock under the Securities Act of 1933,
as amended (the “Securities Act”) or pursuant to an exemption from registration
under the Securities Act.
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Dated: |
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(Signature
must conform to name of holder as specified on the face of the
Warrant) | ||||
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Address: |
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EXHIBIT
B
FORM
OF TRANSFEROR ENDORSEMENT
(To Be
Signed Only On Transfer Of Warrant)
For value
received, the undersigned hereby sells, assigns, and transfers unto the
person(s) named below under the heading “Transferees” the right represented by
the within Warrant to purchase the percentage and number of shares of Common
Stock of House of Brussels Chocolate Inc. into which the within Warrant relates
specified under the headings “Percentage Transferred” and “Number Transferred,”
respectively, opposite the name(s) of such person(s) and appoints each such
person Attorney to transfer its respective right on the books of House of
Brussels Chocolate Inc. with full power of substitution in the
premises.
Transferees |
Address |
Percentage
Transferred |
Number
Transferred |
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Dated: |
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(Signature
must conform to name of holder as specified on the face of the
Warrant) | ||||
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Address: |
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SIGNED
IN THE PRESENCE OF: | ||||
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(Name) | ||||
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[TRANSFEREE] |
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ACCEPTED
AND AGREED: |
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(Name) |
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