WARRANT TO PURCHASE COMMON STOCK OF THEATER XTREME ENTERTAINMENT GROUP, INC.
NEITHER
THIS WARRANT NOR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD OR
OTHERWISE TRANSFERRED UNLESS THERE IS A REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND OTHER APPLICABLE SECURITIES LAWS IN EFFECT COVERING THIS
WARRANT OR SUCH SECURITIES, AS THE CASE MAY BE, OR THERE IS AVAILABLE AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS.
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July
20, 2007
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(“Original
Issue Date”)
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WARRANT
TO PURCHASE COMMON STOCK
OF
This
is to certify that, for value
received, Xx. Xxxxxxx Xxxxx, or his assignees (the “Holder”) is entitled
to purchase, subject to the provisions of this Warrant and that certain
Promissory Note (the “Note”) dated the date hereof, in the principal amount of
$100,000 by and between, interalia, the Holder and Theater Xtreme
Entertainment Group, Inc., a Delaware corporation (the
“Company”), from the Company that number of shares of Common Stock of the
Company determined in accordance with Section (a). Capitalized terms
used and not defined herein shall have the meanings ascribed to them in the
Note.
The
number of shares of Common Stock to be received upon the exercise of this
Warrant and the price to be paid for a share of Common Stock may be adjusted
from time to time as hereinafter set forth. Common Stock deliverable
upon such exercise, and as adjusted from time to time, are hereinafter sometimes
referred to as “Warrant Shares,” and the exercise price of a share of
Common Stock in effect at any time and as adjusted from time to time is
hereinafter sometimes referred to as the “Exercise Price.”
(a) TERMS
OF WARRANT. This Warrant shall entitle the Holder to purchase that
number of shares of Common Stock equal to the principal amount of the Note
multiplied by the applicable Warrant Coverage Multiplier (as defined
below).
(1) For
purposes of this Warrant, the “Warrant Coverage Multiplier” shall be
0.50.
(2) The
initial Exercise Price shall be $1.00 per share, subject to adjustment as
provided herein (or deemed per share purchase price) of Common
Stock.
(b) EXERCISE
OF WARRANT.
(1) Subject
to the provisions of Section (h) hereof, this Warrant may be exercised, in
whole
or in part at any time from the date of this Warrant until the fifth anniversary
date of the date hereof (the “Termination Date”).
(2) Upon
exercise, the Exercise Price shall be paid by delivering a certified check,
bank
draft or wire transfer of immediately available funds to the order of the
Company. If this Warrant should be exercised in part only, the
Company shall, upon surrender of this Warrant for cancellation, execute and
deliver a new Warrant evidencing the rights of the Holder thereof to purchase
the balance of the shares purchasable thereunder. Upon receipt by the
Company of this Warrant at its office, or by the stock transfer agent of the
Company, if any, at its office, in proper form for exercise and together with
payment of the Exercise Price in the manner provided herein, the Holder shall
be
deemed to be the holder of record of the shares of Common Stock issuable upon
such exercise, provided, however, that if at the date of surrender of such
Warrants and payment of such Exercise Price, the transfer books for the Common
Stock shall be closed, the certificates for the shares in respect of which
such
Warrants are then exercised shall be issuable as of the date on which such
books
shall next be opened, and until such date the Company shall be under no duty
to
deliver any certificate for such shares and the Holder shall not be deemed
to
have become a holder of record of such shares.
(c) RESERVATION
OF SHARES. The Company hereby agrees that at all times there shall be
reserved for issuance and/or delivery upon exercise of this Warrant such number
of shares of its Common Stock as shall be required for issuance and delivery
upon exercise of this Warrant. The Company covenants and agrees that
all shares of capital stock of the Company which may be issued upon the exercise
of this Warrant will be duly authorized, validly issued and fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof to the registered holder hereof.
(d) FRACTIONAL
SHARES. The Company shall not be required to issue fractions of
shares on the exercise of Warrants. If any fraction of a share would,
except for the provisions of this Section, be issuable on the exercise of any
Warrant, the Company will (1) if the fraction of a share otherwise issuable
is
equal to or less than one-half, round down and issue to the Holder only the
largest whole number of shares of Common Stock to which the Holder is otherwise
entitled, or (2) if the fraction of a share otherwise issuable is greater than
one-half, round-up and issue to the Holder one additional share of Common Stock
in addition to the largest whole number of shares of Common Stock to which
the
holder is otherwise entitled.
(e) EXCHANGE,
TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. This Warrant is exchangeable, without
expense, at the option of the Holder, upon presentation and surrender hereof
to
the Company or at the office of its stock transfer agent, if any, for other
Warrants of different denominations entitling the holder thereof to purchase
in
the aggregate the same number of shares of Common Stock purchasable hereunder.
Subject to the provisions of Section (h), upon surrender of this Warrant to
the
Company or at the office of its stock transfer agent, if any, with the
Assignment Form annexed hereto duly executed and funds sufficient to pay any
transfer tax, the Company shall, without charge, execute and deliver a new
Warrant in
2
the
name
of the assignee named in such instrument of assignment and this Warrant shall
be
canceled. If this Warrant should be assigned in part only, the
Company shall, upon surrender of this Warrant in accordance with the procedures
set forth in the preceding sentence, execute and deliver, in addition to the
new
Warrant described in the preceding sentence, a new Warrant evidencing the rights
of the Holder to purchase the balance of the shares purchasable
thereunder. The term “Warrant” as used herein includes any
Warrants into which this Warrant may be divided or exchanged. Upon
receipt by the Company of evidence satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and (in the case of loss, theft
or
destruction) of such indemnification as the Company may in its discretion
impose, and upon surrender and cancellation of this Warrant, if mutilated,
the
Company will execute and deliver a new Warrant of like tenor and
date.
(f) RIGHTS
OF THE HOLDER. The Holder shall not, by virtue hereof, be entitled to
any rights of a stockholder in the Company, either at law or equity, until
this
Warrant is exercised, and then only in respect of the shares of Common Stock
underlying the exercised Warrant, and the rights of the Holder are limited
to
those expressed in the Warrant and are not enforceable against the Company
except to the extent set forth herein.
(g) ANTI-DILUTION
PROVISIONS. The Exercise Price and the number and kind of securities
purchasable upon the exercise of this Warrant shall be subject to adjustment
from time to time as hereinafter provided:
(1) In
case the Company shall issue Common Stock as a dividend upon Common Stock or
in
payment of a dividend thereon, shall subdivide the number of outstanding shares
of its Common Stock into a greater number of shares or shall contract the number
of outstanding shares of its Common Stock into a lesser number of shares, the
Exercise Price then in effect shall be adjusted, effective at the close of
business on the record date for the determination of stockholders entitled
to
receive such dividend or be subject to such subdivision or contraction, to
the
price (computed to the nearest cent) determined by dividing (A) the product
obtained by multiplying the Exercise Price in effect immediately prior to the
close of business on such record date by the number of shares of Common Stock
outstanding prior to such dividend, subdivision or contraction, by (B) the
sum
of the number of shares of Common Stock outstanding immediately after such
dividend, subdivision, or contraction.
(2) If
any capital reorganization or reclassification of the capital stock of the
Company (other than as set forth in subsection (1) of this Section (g)), or
consolidation or merger of the Company with another corporation, or the sale
of
all or substantially all of its assets to another corporation shall be effected,
then, as a condition of such reorganization, reclassification, consolidation,
merger or sale, lawful and adequate provision shall be made whereby the holder
of each Warrant shall thereafter have the right to purchase and receive upon
the
basis and upon the terms and conditions specified in the Warrant and in lieu
of
the shares of Common Stock of the Company immediately theretofore purchasable
and receivable upon the exercise of the rights represented by such Warrant,
such
shares of stock, securities or assets as may be issued or payable with respect
to or in exchange for a number of outstanding shares of such Common Stock equal
to the number of shares of such Common Stock immediately theretofore purchasable
and receivable upon the exercise of the rights represented by such
3
Warrant
had such reorganization, reclassification, consolidation, merger or sale not
taken place, and in any such case appropriate provision shall be made with
respect to the rights and interest of the Holder to the end that the provisions
of the Warrant (including, without limitation, provisions for adjustment of
the
Exercise Price and of the number of shares issuable upon the exercise of
Warrants) shall thereafter be applicable as nearly as may be practicable in
relation to any shares of stock, securities, or assets thereafter deliverable
upon exercise of Warrants. The Company shall not effect any such
consolidation, merger or sale unless prior to or simultaneously with the
consummation thereof, the successor corporation (if other than the Company)
resulting from such consolidation or merger or the corporation purchasing such
assets shall assume, by written instrument, the obligation to deliver to the
Holder such shares of stock, securities or assets as, in accordance with the
foregoing provisions, the Holder may be entitled to purchase.
(3) If
the Company makes a distribution of its assets to the holders of its capital
stock as a dividend in liquidation or by way of return of capital or other
than
as a dividend payable out of earnings or surplus legally available for dividends
under applicable law, the Holder shall, upon its exercise, be entitled to
receive, in addition to the number of shares of Common Stock receivable
thereupon, and without payment of any additional consideration therefor, a
sum
equal to the amount of such assets as would have been payable to it as owner
of
that number of shares of Common Stock receivable by exercise or conversion
of
this Warrant had it been the Holder of record of such Common Stock on the record
date for such distribution, or if no such record is taken, as of the date of
such distribution, and an appropriate provision therefor shall be made a part
of
any such distribution.
(4) Except
for an
Exempt Issuance, as defined below, if the Company at any time while this Warrant
remains outstanding and unexpired shall issue any additional shares of common
stock (otherwise than as provided in the foregoing subsections (1) and (2)
of
this Section (g)) at an aggregate price per share less, or for aggregate other
consideration per share lower, than the Exercise Price, then upon such issuance
the Exercise Price shall be reduced to a new Exercise Price equal to the
aggregate price per share or the aggregate other consideration per share, as
the
case may be, received by the Company for the additional shares of common stock
so issued and the number of shares issuable to Holder upon exercise of this
Warrant shall be increased to the product of the number of shares issuable
to
Holder hereunder immediately prior to such issuance of additional shares of
common stock multiplied by a fraction, the numerator of which is the former
Exercise Price and the denominator of which is the new Exercise Price.. In
the
case of additional shares of common stock issued without consideration, the
Exercise Price shall be reduced in amount and the number of shares issuable
upon
exercise of this Warrant shall be increased in amount so as to maintain for
the
Holder the right to acquire upon full exercise of this Warrant a number of
shares of common stock which will give the Holder the same percentage interest
in the common stock of the Company as the Holder had immediately preceding
such
issuance for the same aggregate consideration payable upon exercise of this
Warrant. No adjustment
of
the Exercise Price shall be made under this subsection (g)(4) upon the issuance
of any additional shares of common stock which are issued pursuant to the
exercise of any warrants, options or other subscription or purchase rights
or
pursuant to the exercise of any conversion or exchange rights in any convertible
securities if any such adjustments shall previously have been made upon the
issuance of any such warrants,
4
options
or other
rights or upon the issuance of any convertible securities (or upon the issuance
of any warrants, options or any rights therefor) pursuant to subsections (5)
or
(6) of this Section (g).
(5) Except
for options issued to employees and an Exempt Issuance, if the Company shall
issue any warrants, options or other rights to subscribe for or purchase any
Additional Shares of Capital Stock and the price per share for which Additional
Shares of Capital Stock may at any time thereafter be issuable pursuant to
such
warrants, options or other rights shall be less than the Exercise Price per
share of Common Stock hereunder, then upon such issuance the Exercise Price
shall be adjusted as provided in subsection (4) of this Section (g) on the
basis
that the aggregate consideration for the Additional Shares of Capital Stock
issuable pursuant to such warrants, options or other rights, shall be deemed
to
be the consideration received by the Company for the issuance of such warrants,
options, or other rights plus the minimum consideration to be received by the
Company for the issuance of Additional Shares of Capital Stock pursuant to
such
warrants, options, or other rights.
(6) If
the Company shall issue any securities (debt or equity) convertible into
Additional Shares of Capital Stock and the consideration per share for which
Additional Shares of Capital Stock may at any time thereafter be issuable
pursuant to the terms of such convertible securities shall be less than the
Exercise Price, then upon such issuance the Exercise Price shall be adjusted
as
provided in subsection (4) of this Section (g) on the basis that (i) the
maximum number of Additional Shares of Capital Stock necessary to effect the
conversion or exchange of all such convertible securities shall be deemed to
have been issued as of the date of issuance of such convertible securities,
and
(ii) the aggregate consideration for such maximum number of Additional Shares
of
Capital Stock shall be deemed to be the consideration received by the Company
for the issuance of the convertible securities plus the minimum consideration
received by the Company for the issuance of such Additional Shares of Capital
Stock pursuant to the terms of such convertible securities. No
adjustment of the Exercise Price shall be made under this subsection upon the
issuance of any convertible securities which are issued pursuant to the exercise
of any warrants or other subscription or purchase rights therefor, if any such
adjustment shall previously have been made upon the issuance of such warrants
or
other rights pursuant to subsection (5) of this Section (g).
(7) Except
for an Exempt Issuance, to the extent that any Additional Shares of Capital
Stock or any convertible securities (debt or equity) or any warrants, options
or
other rights to subscribe for or purchase any Additional Shares of Capital
Stock
shall be issued for a cash consideration, the consideration received by the
Company therefor shall be deemed to be the amount of the cash received by the
Company therefor, or, if such Additional Shares of Capital Stock or convertible
securities (debt or equity) are offered by the Company for subscription, the
subscription price, or, if such Additional Shares of Capital Stock or
convertible securities (debt or equity) are sold to underwriters or dealers
for
public offering without a subscription offering, or through underwriters or
dealers for public offering without a subscription offering, the initial public
offering price, in any such case excluding any amounts paid or incurred by
the
Company for and in the underwriting of, or otherwise in connection with the
issue thereof. To the extent that such issuance shall be for a
consideration other than cash, then, except as herein otherwise expressly
provided, the amount of such consideration shall be deemed to be the fair value
of such consideration at the time of such issuance as determined in good faith
by the Company’s Board of Directors. The consideration for any
Additional Shares of
5
Capital
Stock issuable pursuant to any warrants, options or other rights to subscribe
for or purchase the same shall be the consideration received by the Company
for
issuing such warrants, options or other rights, plus the additional
consideration payable to the Company upon the exercise of such warrants, options
or other rights. The consideration for any Additional Shares of
Capital Stock issuable pursuant to the terms of any convertible securities
(debt
or equity) shall be the consideration paid or payable to the Company in respect
of the subscription for or purchase of such convertible securities, plus the
additional consideration, if any, payable to the Company upon the exercise
of
the right of conversion or exchange in such convertible
securities. In case of the issuance at any time of any Additional
Shares of Capital Stock or convertible securities (debt or equity) in payment
or
satisfaction of any dividend upon any class of stock preferred as to dividends
in a fixed amount, the Company shall be deemed to have received for such
Additional Shares of Capital Stock or convertible securities a consideration
equal to the amount of such dividend so paid or satisfied.
(8) If
after the date hereof the Company shall take any action affecting the Company’s
capital stock, other than an action described in any of the foregoing
subsections (1) through (6), inclusive, of this Section (g) which in the opinion
of the Company’s Board of Directors would have a materially adverse effect upon
the rights of the Holder to purchase the Warrant Shares, the Exercise Price
shall be adjusted in such manner and at such time as the Board of Directors
may
in good faith determine to be equitable in the circumstances.
(9) Upon
each adjustment of the Exercise Price pursuant to subsections (1) through (8),
inclusive, of this Section (g), the number of shares of Common Stock specified
in each Warrant shall thereupon evidence the right to purchase that number
of
shares of Common Stock (calculated to the nearest hundredth of a share of Common
Stock) obtained by multiplying the Exercise Price in effect immediately prior
to
such adjustment by the number of shares of Common Stock purchasable immediately
prior to such adjustment upon exercise of such Warrant and dividing the product
so obtained by the Exercise Price in effect after such adjustment.
(10) Omitted.
(11) The
Company may, at its sole option, retain the independent public accounting firm
regularly retained by the Company, or another firm of independent public
accountants of recognized standing selected by the Company’s Board of Directors,
to make any computation required under this Section (g) and a certificate signed
by such firm shall be conclusive evidence of any computation made under this
Section (g).
(12) Whenever
the Company proposes to take any action that would require an adjustment to
the
Exercise Price or in the number or kind of securities issuable upon exercise
of
the Warrants, or both, as provided in this Section (g), the Company shall (i)
as
promptly as practical, but in any event at least fifteen (15) days prior to
the
applicable record (or determination) date with respect to such action or, if
no
record is to be taken, at least fifteen (15) days prior to the date on which
such action is expected to become effective, deliver written notice of such
action to the Holder hereof at its last address appearing on the books of the
Company, (ii) upon the effectiveness of such adjustment promptly file in the
custody of its
6
Secretary
or Assistant Secretary a certificate signed by the Chairman of the Board or
the
President or a Vice President of the Company and by the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary of the Company,
setting forth the facts requiring such adjustment and the number and kind of
securities issuable upon exercise of each Warrant after such adjustment; and
(iii) cause a notice stating that such adjustment has been effected and stating
the Exercise Price then in effect and the number and kind of securities issuable
upon exercise of each Warrant to be sent to each registered holder of a
Warrant.
(13) The
Board of Directors of the Company may, in its sole discretion, (a) reduce the
Exercise Price of each Warrant, (b) increase the number of shares of Common
Stock issuable upon exercise of each Warrant and/or (c) provide for the issuance
of other securities (in addition to the shares of Common Stock otherwise
issuable upon exercise of the Warrant) upon exercise of each
Warrant.
(14) “Exempt
Issuance” shall means the issuance of (i) shares of Common Stock or options to
employees, officers or directors of the Company pursuant to any stock or option
plan duly adopted for such purpose by a majority of the non-employee members
of
the Board of Directors of the Company or a majority of the members of a
committee of non-employee directors established, (ii) any other securities
exercisable or exchangeable for or convertible into shares of Common Stock
issued and outstanding on the date of the Note, provided that such securities
have not been amended since the date of the Note to increase the number of
such
securities or to decrease the exercise, exchange or conversion price of such
securities, and (iii) securities issued (A) pursuant to a merger or acquisition
of all or substantially all of the capital stock or assets of another person
or
entity or (B) in exchange for services or goods which exchange has been approved
by a majority of the disinterested directors of the Company.
(h) TRANSFER
TO COMPLY WITH THE SECURITIES ACT OF 1933 AND OTHER APPLICABLE SECURITIES
LAWS. This Warrant or the Warrant Shares or any other security
issued or issuable upon exercise of this Warrant may not be sold or otherwise
disposed of unless this Warrant or the Warrant Shares or such other security
may
be legally transferred without violating the Securities Act of 1933 and any
other applicable securities law and then only against receipt of an agreement
of
the transferee to comply with the provisions of this Section (h) with respect
to
any resale or other disposition of such securities.
(i) No
Impairment. The Company will not, by amendment of its charter 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 action as may be necessary or appropriate in
order
to protect the rights of the Holder against impairment.
(j) Amendment
and Waiver by Majority of the Holders. The Warrants, including
this Warrant, may be amended, modified or supplemented, and waiver or consents
to departures from the provisions of the Warrants may be given, if the Company
and the holders of Warrants exercisable for a majority of the Warrant Shares
for
which all Warrants are exercisable
7
consent
to the amendment; provided, however, that no term of this Warrant may be amended
or waived in such a way as to selectively affect the Holder to the exclusion
of
the other Warrant holders without the written consent of the
Holder. Such consent may be effected by any available legal means,
including without limitation at a meeting, by written consent or
otherwise. Any such amendment or waiver shall apply to and be binding
upon the Holder of this Warrant, upon each future holder of this Warrant and
upon the Company, whether or not this Warrant shall have been marked to indicate
such amendment or waiver. No such amendment or waiver shall extend to
or affect any obligation not expressly amended or waived or impair any right
consequent thereon.
(k) Amendment
and Waiver by Xxxxxx. Notwithstanding anything to the contrary
set forth herein, the provisions of this Warrant may be amended, modified or
supplemented, and waiver or consents to departures from the provisions hereof
may be given, upon the written agreement of the Company and the
Holder. Neither the failure nor any delay in exercising any right,
power or privilege under this Warrant will operate as a waiver of such right,
power or privilege and no single or partial exercise of any such right, power
or
privilege by Holder will preclude any other or further exercise of such right,
power or privilege or the exercise of any other right, power or
privilege.
[Execution
page follows]
8
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By:
/s/ Xxxxx X. Xxxxxxxx
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Name:
Xxxxx X. Xxxxxxxx
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Title:
CFO
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9
PURCHASE
FORM
Dated________,
20__
The
undersigned hereby irrevocably elects to exercise the within Warrant to the
extent of purchasing _______ shares of Common Stock and hereby makes payment
of
________ in payment of the Exercise Price thereof.
_______________
INSTRUCTIONS
FOR REGISTRATION OF STOCK
Name________________________________________________________________________
(Please
typewrite or print in block letters.)
Address_______________________________________________________________________
______________________________________________________________________________
Signature______________________________________________________________________
______________
ASSIGNMENT
FORM
FOR
VALUE
RECEIVED,___________________________________________
hereby
sells, assigns and transfers unto
Name________________________________________________________________________
(Please
typewrite or print in block letters)
Address_______________________________________________________________________
______________________________________________________________________________
The
right
to purchase Common Stock represented by this Warrant to the extent of
___________ shares as to which such right is exercisable and does hereby
irrevocably constitute and appoint
___________________,
Attorney, to transfer the on the books of the Company with full power of
substitution in the premises.
Date____________,
20__
Signature_________________________
10
