THE REGISTERED HOLDER OF THIS PURCHASE OPTION, BY ITS ACCEPTANCE HEREOF, AGREES THAT IT WILL NOT SELL, TRANSFER OR ASSIGN THIS PURCHASE OPTION, EXCEPT AS HEREIN PROVIDED, AND THE REGISTERED HOLDER OF THIS PURCHASE OPTION AGREES THAT IT WILL NOT SELL,...
THE
REGISTERED HOLDER OF THIS PURCHASE OPTION, BY ITS ACCEPTANCE HEREOF, AGREES
THAT
IT WILL NOT SELL, TRANSFER OR ASSIGN THIS PURCHASE OPTION, EXCEPT AS HEREIN
PROVIDED, AND THE REGISTERED HOLDER OF THIS PURCHASE OPTION AGREES THAT IT
WILL
NOT SELL, TRANSFER, ASSIGN, PLEDGE OR HYPOTHECATE THIS PURCHASE OPTION FOR
A
PERIOD OF ONE YEAR FOLLOWING THE EFFECTIVE DATE (DEFINED BELOW) TO ANYONE OTHER
THAN (I) MAXIM GROUP LLC OR ITS AFFILIATES (“MAXIM”) OR AN UNDERWRITER OR A
SELECTED DEALER IN CONNECTION WITH THE OFFERING (DEFINED HEREIN), OR (II) A
BONA
FIDE OFFICER, PARTNER OR EMPLOYEE OF MAXIM OR OF ANY SUCH UNDERWRITER OR
SELECTED DEALER.
THIS
PURCHASE OPTION IS NOT EXERCISABLE PRIOR TO THE LATER OF (I) ________________,
2007 AND (II) THE CONSUMMATION BY AFFINITY MEDIA INTERNATIONAL CORP. (“COMPANY”)
OF A MERGER, CAPITAL STOCK EXCHANGE, ASSET ACQUISITION OR OTHER SIMILAR BUSINESS
COMBINATION (“BUSINESS COMBINATION”) (AS DESCRIBED MORE FULLY IN THE COMPANY’S
REGISTRATION STATEMENT (DEFINED HEREIN)). THIS PURCHASE OPTION SHALL BE VOID
AFTER 5:00 P.M, NEW YORK CITY TIME, ON _____________,
2011.
UNIT
PURCHASE OPTION
FOR
THE
PURCHASE OF
192,500
UNITS
OF
AFFINITY
MEDIA INTERNATIONAL CORP.
1. Purchase
Option.
THIS
CERTIFIES THAT, in consideration of $100 duly paid by or on behalf of
Maxim
Partners LLC (collectively, with its successors and permitted assigns and/or
transferees, the "Holder"),
as
registered owner of this Purchase Option, to Affinity Media International Corp.
(the "Company"),
Holder is entitled, at any time or from time to time upon the later of (i)
the
consummation of a Business Combination and (ii) _____________, 2007
("Commencement
Date"),
and
at or before 5:00 p.m., Eastern Time, __________, 2011 ("Expiration
Date"),
but
not thereafter, to subscribe for, purchase and receive, in whole or in part,
up
to One Hundred and Ninety Two Thousand and Five Hundred (192,500) units (the
"Units")
of the
Company, each Unit consisting of one share of common stock of the Company,
par
value $.0001 per share (the "Common
Stock"),
and
two warrants (the "Warrant(s)")
expiring four years from the effective date ("Effective
Date")
of the
registration statement ("Registration
Statement")
pursuant to which Units are offered for sale to the public (the "Offering").
Each
Warrant is on the same terms and conditions as the warrants included in the
Units being registered for sale to the public by way of the Registration
Statement,
including that the Warrants underlying the Units comprising this Purchase Option
have an exercise price of $5.00 per share.
If the
Expiration Date is a day on which banking institutions are authorized by law
to
close, then this Purchase Option may be exercised on the next succeeding day
which is not such a day in accordance with the terms herein. During the period
ending on the Expiration Date, the Company agrees not to take any action that
would terminate the Purchase Option. This Purchase Option is initially
exercisable at $6.60 per Unit so purchased; provided,
however,
that
upon the occurrence of any of the events specified in Section 6 hereof, the
rights granted by this Purchase Option, including the exercise price per Unit
and the number of Units (and shares of Common Stock and Warrants) to be received
upon such exercise, shall be adjusted as therein specified. The term
"Exercise
Price"
shall
mean the initial exercise price or the adjusted exercise price, depending on
the
context.
2. Exercise.
2.1 Exercise
Form.
In
order to exercise this Purchase Option, the exercise form attached hereto must
be duly executed and completed and delivered to the Company, together with
this
Purchase Option and payment of the Exercise Price for the Units being purchased
payable in cash or by certified check or official bank check. If the
subscription rights represented hereby shall not be exercised at or before
5:00
p.m., New York City Time, on the Expiration Date, this Purchase Option shall
become and be void without further force or effect, and all rights represented
hereby shall cease and expire.
2.2 Legend.
Each
certificate for the securities purchased under this Purchase Option shall bear
a
legend as follows unless such securities have been registered under the
Securities Act of 1933, as amended (the "Act"):
"The
securities represented by this certificate have not been registered under the
Securities Act of 1933, as amended ("Act") or applicable state law. The
securities may not be offered for sale, sold or otherwise transferred except
pursuant to an effective registration statement under the Act, or pursuant
to an
exemption from registration under the Act and applicable state
law."
-2-
2.3 Cashless
Exercise.
In lieu
of the payment of the Exercise Price multiplied by the number of Units for
which
this Purchase Option is exercisable (and in lieu of being entitled to receive
Common Stock and Warrants) in the manner required by Section 2.1, the Holder
shall have the right (but not the obligation) to convert any exercisable but
unexercised portion of this Purchase Option into Units (the "Conversion
Right")
as
follows: upon exercise of the Conversion Right, the Company shall deliver to
the
Holder (without payment by the Holder of any of the Exercise Price in cash)
that
number of shares of Common Stock and Warrants comprising that number of Units
equal to the quotient obtained by dividing (x) the "Value" (as defined below)
of
the portion of the Purchase Option being converted by (y) the Current Market
Value (as defined below) of the portion of the Purchase Option being converted.
The "Value"
of the
portion of the Purchase Option being converted shall equal the remainder derived
from subtracting (a) (i) the Exercise Price multiplied by (ii) the number of
Units underlying the portion of this Purchase Option being converted from (b)
the Current
Market Value
of a
Unit multiplied by the number of Units underlying the portion of the Purchase
Option being converted. As used herein, the term "Current
Market Value"
per
Unit at any date means: (A) in the event that neither the Units nor Warrants
are
still trading, the remainder derived from subtracting (x) the exercise price
of
the Warrants multiplied by the number of shares of Common Stock issuable upon
exercise of the Warrants underlying one Unit from (y) (i) the Current Market
Price of the Common Stock multiplied by (ii) the number of shares of Common
Stock underlying one Unit, which shall include the shares of Common Stock
underlying the Warrants included in such Unit; (B) in the event that the Units,
Common Stock and Warrants are still trading, (i) if the Units are listed on
a
national securities exchange or quoted on the Nasdaq National Market, Nasdaq
SmallCap Market or NASD OTC Bulletin Board (or successor such as the Bulletin
Board Exchange), the last sale price of the Units in the principal trading
market for the Units as reported by the exchange, Nasdaq or the NASD, as the
case may be, on the last trading day preceding the date in question; or (ii)
if
the Units are not listed on a national securities exchange or quoted on the
Nasdaq National Market, Nasdaq SmallCap Market or the NASD OTC Bulletin Board
(or successor exchange), but is traded in the residual over-the-counter market,
the closing bid price for Units on the last trading day preceding the date
in
question for which such quotations are reported by the Pink Sheets, LLC or
similar publisher of such quotations; and (C) in the event that the Units are
not still trading but the Common Stock and Warrants underlying the Units are
still trading, the Current Market Price of the Common Stock plus the product
of
(x) the Current Market Price of the Warrants and (y) the number of shares of
Common Stock underlying the Warrants included in one Unit. The "Current
Market Price"
shall
mean (i) if the Common Stock (or Warrants, as the case may be) is listed on
a
national securities exchange or quoted on the Nasdaq National Market, Nasdaq
SmallCap Market or NASD OTC Bulletin Board (or successor such as the Bulletin
Board Exchange), the last sale price of the Common Stock (or Warrants) in the
principal trading market for the Common Stock as reported by the exchange,
Nasdaq or the NASD, as the case may be, on the last trading day preceding the
date in question; (ii) if the Common Stock (or Warrants, as the case may be)
is
not listed on a national securities exchange or quoted on the Nasdaq National
Market, Nasdaq SmallCap Market or the NASD OTC Bulletin Board (or successor
exchange), but is traded in the residual over-the-counter market, the closing
bid price for the Common Stock (or Warrants) on the last trading day preceding
the date in question for which such quotations are reported by the Pink Sheets,
LLC or similar publisher of such quotations; and (iii) if the fair market value
of the Common Stock cannot be determined pursuant to clause (i) or (ii) above,
such price as the Board of Directors of the Company shall determine, in good
faith.
2.4
Mechanics
of Cashless Exercise.
The
Cashless Exercise Right may be exercised by the Holder on any business day
on or
after the Commencement Date and not later than the Expiration Date by delivering
the Purchase Option with the duly executed exercise form attached hereto with
the cashless exercise section completed to the Company, exercising the Cashless
Exercise Right and specifying the total number of Units the Holder will purchase
pursuant to such Cashless Exercise Right.
-3-
3. Transfer.
3.1 General
Restrictions.
The
registered Holder of this Purchase Option, by its acceptance hereof, agrees
that
it will not sell, transfer, assign, pledge or hypothecate this Purchase Option
for a period of one year following the Effective Date to anyone other than
(i)
Maxim or an underwriter or a selected dealer in connection with the Offering,
or
(ii) a bona fide officer or partner of Maxim or of any such underwriter or
selected dealer. On and after the first anniversary of the Effective Date,
transfers to others may be made subject to compliance with or exemptions from
applicable securities laws. In order to make any permitted assignment, the
Holder must deliver to the Company the assignment form attached hereto duly
executed and completed, together with the Purchase Option and payment of all
transfer taxes, if any, payable in connection therewith. The Company shall
within five business days transfer this Purchase Option on the books of the
Company and shall execute and deliver a new Purchase Option or Purchase Options
of like tenor to the appropriate assignee(s) expressly evidencing the right
to
purchase the aggregate number of Units purchasable hereunder or such portion
of
such number as shall be contemplated by any such assignment.
3.2 Restrictions
Imposed by the Act.
The
securities evidenced by this Purchase Option shall not be transferred unless
and
until (i) the Company has received the opinion of counsel for the Holder that
the securities may be transferred pursuant to an exemption from registration
under the Act and applicable state securities laws, the availability of which
is
established to the reasonable satisfaction of the Company (the Company hereby
agreeing that the opinion of Xxxxxxxxxx Xxxxxxx PC shall be deemed satisfactory
evidence of the availability of an exemption), or (ii) a registration statement
or a post-effective amendment to the Registration Statement relating to such
securities has been filed by the Company and declared effective by the
Securities and Exchange Commission and compliance with applicable state
securities law has been established.
4. New
Purchase Options to be Issued.
4.1 Partial
Exercise or Transfer.
Subject
to the restrictions in Section 3 hereof, this Purchase Option may be exercised
or assigned in whole or in part. In the event of the exercise or assignment
hereof in part only, upon surrender of this Purchase Option for cancellation,
together with the duly executed exercise or assignment form and, except in
the
case of an exercise of this Purchase Option contemplated by Section 2.3 hereof,
funds sufficient to pay any Exercise Price and/or transfer tax, the Company
shall cause to be delivered to the Holder without charge a new Purchase Option
of like tenor to this Purchase Option in the name of the Holder evidencing
the
right of the Holder to purchase the number of Units purchasable hereunder as
to
which this Purchase Option has not been exercised or assigned.
4.2 Lost
Certificate.
Upon
receipt by the Company of evidence satisfactory to it of the loss, theft,
destruction or mutilation of this Purchase Option and of reasonably satisfactory
indemnification or the posting of a bond, the Company shall execute and deliver
a new Purchase Option of like tenor and date. Any such new Purchase Option
executed and delivered as a result of such loss, theft, mutilation or
destruction shall constitute a substitute contractual obligation on the part
of
the Company.
-4-
5. Registration
Rights.
5.1 Demand
Registration.
5.1.1 Grant
of Right.
The
Company, upon written demand (an "Initial
Demand Notice")
of the
Holder(s) of at least 51% of the Purchase Options and/or the underlying Units
and/or the underlying securities (the "Majority
Holders"),
agrees to register on one occasion, all or any portion of the Purchase Options
requested by the Majority Holders in the Initial Demand Notice and all of the
securities underlying such Purchase Options, including the Units, Common Stock,
the Warrants and the Common Stock underlying the Warrants (collectively, the
"Registrable
Securities").
On
such occasion, the Company will file a registration statement or a
post-effective amendment to the Registration Statement covering the Registrable
Securities within sixty days after receipt of the Initial Demand Notice and
use
its best efforts to have such registration statement or post-effective amendment
declared effective as soon as possible thereafter. The demand for registration
may be made at any time during a period of five years beginning on the Effective
Date. The Company covenants and agrees to give written notice of its receipt
of
any Initial Demand Notice by any Holder(s) to all other registered Holders
of
the Purchase Options and/or the Registrable Securities within ten days from
the
date of the receipt of any such Initial Demand Notice.
5.1.2 Terms.
The
Company shall bear all fees and expenses attendant to registering the
Registrable Securities, including the expenses of any legal counsel selected
by
the Holders to represent them in connection with the sale of the Registrable
Securities, but the Holders shall pay any and all underwriting commissions.
The
Company agrees to use its reasonable best efforts to qualify or register the
Registrable Securities in such States as are reasonably requested by the
Majority Holder(s); provided,
however,
that in
no event shall the Company be required to register the Registrable Securities
in
a State in which such registration would cause (i) the Company to be obligated
to qualify to do business in such State, or would subject the Company to
taxation as a foreign corporation doing business in such jurisdiction or (ii)
the principal stockholders of the Company to be obligated to escrow their shares
of capital stock of the Company. The Company shall cause any registration
statement or post-effective amendment filed pursuant to the demand rights
granted under Section 5.1.1 to remain effective for a period of two (2) years
from the effective date of such registration statement or post-effective
amendment.
5.2 "Piggy-Back"
Registration.
5.2.1 Grant
of Right.
In
addition to the demand right of registration, the Holders of the Purchase
Options shall have the right for a period of seven years commencing on the
Effective Date, to include the Registrable Securities as part of any other
registration of securities filed by the Company (other than in connection with
a
transaction contemplated by Rule 145(a) promulgated under the Act or pursuant
to
Form S-8); provided,
however,
that
if, in the written opinion of the Company's managing underwriter or
underwriters, if any, for such offering, the inclusion of the Registrable
Securities, when added to the securities being registered by the Company or
the
selling stockholder(s), will exceed the maximum amount of the Company's
securities (the "Maximum
Number of Shares")
which
can be marketed (i) at a price reasonably related to their then current market
value, and (ii) without materially and adversely affecting the entire offering,
then the Company shall include in any such registration:
-5-
(i) If
the
registration is undertaken for the Company's account: (A) first, the shares
of
Common Stock or other securities that the Company desires to sell that can
be
sold without exceeding the Maximum Number of Shares; (B) second, to the extent
that the Maximum Number of Shares has not been reached under the foregoing
clause (A), the shares of Common Stock, if any, including the Registrable
Securities, as to which registration has been requested pursuant to written
contractual piggy-back registration rights of security holders (pro rata in
accordance with the number of shares of Common Stock which each such person
has
actually requested to be included in such registration, regardless of the number
of shares of Common Stock with respect to which such persons have the right
to
request such inclusion) that can be sold without exceeding the Maximum Number
of
Shares; and
(ii) If
the
registration is a "demand" registration undertaken at the demand of persons
other than the holders of Registrable Securities pursuant to written contractual
arrangements with such persons, (A) first, the shares of Common Stock for the
account of the demanding persons that can be sold without exceeding the Maximum
Number of Shares; (B) second, to the extent that the Maximum Number of Shares
has not been reached under the foregoing clause (A), the shares of Common Stock
or other securities that the Company desires to sell that can be sold without
exceeding the Maximum Number of Shares; and (C) third, to the extent that the
Maximum Number of Shares has not been reached under the foregoing clauses (A)
and (B), the Registrable Securities as to which registration has been requested
under this Section 5.2 (pro rata in accordance with the number of shares of
Registrable Securities held by each such holder); and (D) fourth, to the extent
that the Maximum Number of Shares has not been reached under the foregoing
clauses (A), (B) and (C), the shares of Common Stock, if any, as to which
registration has been requested pursuant to written contractual piggy-back
registration rights which other shareholders desire to sell that can be sold
without exceeding the Maximum Number of Shares.
5.2.2 Terms.
The
Company shall bear all fees and expenses attendant to registering the
Registrable Securities, including the expenses of any legal counsel selected
by
the Holders to represent them in connection with the sale of the Registrable
Securities but the Holders shall pay any and all underwriting commissions
related to the Registrable Securities. In the event of such a proposed
registration, the Company shall furnish the then Holders of outstanding
Registrable Securities with not less than fifteen days written notice prior
to
the proposed date of filing of such registration statement. Such notice to
the
Holders shall continue to be given for each applicable registration statement
filed (during the period in which the Purchase Option is exercisable) by the
Company until such time as all of the Registrable Securities have been
registered and sold. The holders of the Registrable Securities shall exercise
the "piggy-back" rights provided for herein by giving written notice, within
ten
days of the receipt of the Company's notice of its intention to file a
registration statement. The Company shall cause any registration statement
filed
pursuant to the above "piggyback" rights to remain effective for at least nine
months from the date that the Holders of the Registrable Securities are first
given the opportunity to sell all of such securities. The
Company agrees, at its sole expenses, to use its reasonable best efforts to
qualify or register the Registrable Securities in such States as are reasonably
requested by the Majority Holder(s); provided, however, that in no event shall
the Company be required to register the Registrable Securities in a State in
which such registration would cause (i) the Company to be obligated to qualify
to do business in such State, or would subject the Company to taxation as a
foreign corporation doing business in such jurisdiction or (ii) the principal
stockholders of the Company to be obligated to escrow their shares of capital
stock of the Company.
-6-
5.3 Damages.
Should
the registration or the effectiveness thereof required by Sections 5.1 and
5.2
hereof be delayed by the Company or the Company otherwise materially fails
to
comply with such provisions, the Company shall, in addition to any other
equitable or other relief available to the Holder(s), be liable for any and
all
incidental, special and consequential damages sustained by the Holder(s),
including, but not limited to, the loss of any profits that might have been
received by the holder upon the sale of shares of Common Stock or Warrants
(and
shares of Common Stock underlying the Warrants) underlying this Purchase Option.
5.4 General
Terms.
5.4.1 Indemnification.
The
Company shall indemnify the Holder(s) of the Registrable Securities to be sold
pursuant to any registration statement hereunder and each person, if any, who
controls such Holders within the meaning of Section 15 of the Act or Section
20(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"),
and any
of their respective heirs, successors, permitted assigns and transfers, and
agents and representatives,
against
all loss, claim, damage, expense or liability (including all reasonable
attorneys' fees and other expenses reasonably incurred in investigating,
preparing or defending against litigation, commenced or threatened, or any
claim
whatsoever whether arising out of any action between the underwriter and the
Company or between the underwriter and any third party or otherwise) to which
any of them may become subject under the Act, the Exchange Act or otherwise,
arising from such registration statement but only to the same extent and with
the same effect as the provisions pursuant to which the Company has agreed
to
indemnify the underwriters contained in Section 6 of the Underwriting Agreement
between the Company, Maxim and the other underwriters named therein dated the
Effective Date. The Holder(s) of the Registrable Securities to be sold pursuant
to such registration statement, and their successors and assigns, shall
severally, and not jointly, indemnify the Company, its officers and directors
and each person, if any, who controls the Company within the meaning of Section
15 of the Act or Section 20(a) of the Exchange Act, against all loss, claim,
damage, expense or liability (including all reasonable attorneys' fees and
other
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which they may become subject under the Act, the
Exchange Act or otherwise, arising from information furnished by or on behalf
of
such Holders, or their successors or assigns, in writing, for specific inclusion
in such registration statement to the same extent and with the same effect
as
the provisions contained in Section 5 of the Underwriting Agreement pursuant
to
which the underwriters have agreed to indemnify the Company.
-7-
5.4.2 Exercise
of Purchase Options.
Nothing
contained in this Purchase Option shall be construed as requiring the Holder(s)
to exercise their Purchase Options or Warrants underlying such Purchase Options
prior to or after the initial filing of any registration statement or the
effectiveness thereof.
5.4.3 Documents
Delivered to Holders.
The
Company shall furnish Maxim, as representative of the Holders participating
in
any of the foregoing offerings, a signed counterpart, addressed to the
participating Holders, of (i) an opinion of counsel to the Company, dated the
effective date of such registration statement (and, if such registration
includes an underwritten public offering, an opinion dated the date of the
closing under any underwriting agreement related thereto), and (ii) a "cold
comfort" letter dated the effective date of such registration statement (and,
if
such registration includes an underwritten public offering, a letter dated
the
date of the closing under the underwriting agreement) signed by the independent
public accountants who have issued a report on the Company's financial
statements included in such registration statement, in each case covering
substantially the same matters with respect to such registration statement
(and
the prospectus included therein) and, in the case of such accountants' letter,
with respect to events subsequent to the date of such financial statements,
as
are customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities. The Company shall also deliver promptly to Maxim, as representative
of the Holders participating in the offering, the correspondence and memoranda
described below and copies of all correspondence between the Commission and
the
Company, its counsel or auditors and all memoranda relating to discussions
with
the Commission or its staff with respect to the registration statement and
permit Maxim, as representative of the Holders, to do such investigation, upon
reasonable advance notice, with respect to information contained in or omitted
from the registration statement as it deems reasonably necessary to comply
with
applicable securities laws or rules of the National Association of Securities
Dealers, Inc. (the "NASD").
Such
investigation shall include access to books, records and properties and
opportunities to discuss the business of the Company with its officers and
independent auditors, all to such reasonable extent and at such reasonable
times
and as often as Maxim, as representative of the Holders, shall reasonably
request. The Company shall not be required to disclose any confidential
information or other records to Maxim, as representative of the Holders, or
to
any other person, until and unless such persons shall have entered into
reasonable confidentiality agreements (in form and substance reasonably
satisfactory to the Company), with the Company with respect
thereto.
5.4.4 Underwriting
Agreement.
The
Company shall enter into an underwriting agreement with the managing
underwriter(s), if any, selected by any Holders whose Registrable Securities
are
being registered pursuant to this Section 5, which managing underwriter shall
be
reasonably acceptable to the Company. Such agreement shall be reasonably
satisfactory in form and substance to the Company, each Holder and such managing
underwriters, and shall contain such representations, warranties and covenants
by the Company and such other terms as are customarily contained in agreements
of that type used by the managing underwriter. The Holders shall be parties
to
any underwriting agreement relating to an underwritten sale of their Registrable
Securities and may, at their option, require that any or all the
representations, warranties and covenants of the Company to or for the benefit
of such underwriters shall also be made to and for the benefit of such Holders.
Such Holders shall not be required to make any representations or warranties
to
or agreements with the Company or the underwriters except as they may relate
to
such Holders and their intended methods of distribution. Such Holders, however,
shall agree to such covenants and indemnification and contribution obligations
for selling stockholders as are customarily contained in agreements of that
type
used by the managing underwriter. Further, such Holders shall execute
appropriate custody agreements and otherwise cooperate fully in the preparation
of the registration statement and other documents relating to any offering
in
which they include securities pursuant to this Section 5. Each Holder shall
also
furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be reasonably required to effect the registration of the Registrable
Securities.
-8-
5.4.5 Rule
144 Sale. Notwithstanding
anything contained in this Section 5 to the contrary, the Company shall have
no
obligation pursuant to Sections 5.1 or 5.2 for the registration of Registrable
Securities held by any Holder (i) where such Holder would then be entitled
to
sell under Rule 144 within any three month period (or such other period
prescribed under Rule 144 as may be provided by amendment thereof) all of the
Registrable Securities held by such Holder, and (ii) where the number of
Registrable Securities held by such Holder is within the volume limitations
under paragraph (e) of Rule 144 (calculated as if such Holder were an affiliate
within the meaning of Rule 144).
5.4.6 Supplemental
Prospectus.
Each
Holder agrees, that upon receipt of any notice from the Company of the happening
of any event as a result of which the prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a material fact
or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing, such Holder will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Xxxxxx's receipt of the copies of a supplemental or
amended prospectus, and, if so desired by the Company, such Holder shall deliver
to the Company (at the expense of the Company) or destroy (and deliver to the
Company a certificate of such destruction) all copies, other than permanent
file
copies then in such Holder's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such
notice.
6. Adjustments.
6.1 Adjustments
to Exercise Price and Number of Securities.
The
Exercise Price and the number of Units underlying the Purchase Option shall
be
subject to adjustment from time to time as hereinafter set forth:
6.1.1 Stock
Dividends - Split-Ups.
If
after the date hereof, and subject to the provisions of Section 6.4 below,
the
number of outstanding shares of Common Stock is increased by a stock dividend
payable in shares of Common Stock or by a split-up of shares of Common Stock
or
other similar event, then, on the effective date thereof, the number of shares
of Common Stock underlying each of the Units purchasable hereunder shall be
increased in proportion to such increase in outstanding shares. In such case,
the number of shares of Common Stock, and the exercise price applicable thereto,
underlying the Warrants underlying each of the Units purchasable hereunder
shall
be adjusted in accordance with the terms of the Warrants. For example, if the
Company declares a two-for-one stock dividend and at the time of such dividend
this Purchase Option is for the purchase of one Unit at $6.60 per whole Unit
(each Warrant underlying the Units is exercisable for $5.00 per share), upon
effectiveness of the dividend, this Purchase Option will be adjusted to allow
for the purchase of one Unit at $6.60 per Unit, each Unit entitling the holder
to receive two shares of Common Stock and four Warrants (each Warrant
exercisable for $2.50 per share).
-9-
6.1.2 Aggregation
of Shares.
If
after the date hereof, and subject to the provisions of Section 6.4, the number
of outstanding shares of Common Stock is decreased by a consolidation,
combination or reclassification of shares of Common Stock or other similar
event, then, on the effective date thereof, the number of shares of Common
Stock
underlying each of the Units purchasable hereunder shall be decreased in
proportion to such decrease in outstanding shares. In such case, the number
of
shares of Common Stock, and the exercise price applicable thereto, underlying
the Warrants underlying each of the Units purchasable hereunder shall be
adjusted in accordance with the terms of the Warrants.
6.1.3 Replacement
of Securities upon Reorganization, etc.
In case
of any reclassification or reorganization of the outstanding shares of Common
Stock other than a change covered by Section 6.1.1 or 6.1.2 hereof or that
solely affects the par value of such shares of Common Stock, or in the case
of
any merger or consolidation of the Company with or into another corporation
(other than a consolidation or merger in which the Company is the continuing
corporation and that does not result in any reclassification or reorganization
of the outstanding shares of Common Stock), or in the case of any sale or
conveyance to another corporation or entity of the property of the Company
as an
entirety or substantially as an entirety in connection with which the Company
is
dissolved, the Holder of this Purchase Option shall have the right thereafter
(until the expiration of the right of exercise of this Purchase Option) to
receive upon the exercise hereof, for the same aggregate Exercise Price payable
hereunder immediately prior to such event, the kind and amount of shares of
stock or other securities or property (including cash) receivable upon such
reclassification, reorganization, merger or consolidation, or upon a dissolution
following any such sale or transfer, by a Holder of the number of shares of
Common Stock of the Company obtainable upon exercise of this Purchase Option
and
the underlying Warrants immediately prior to such event; and if any
reclassification also results in a change in shares of Common Stock covered
by
Section 6.1.1 or 6.1.2, then such adjustment shall be made pursuant to Sections
6.1.1, 6.1.2 and this Section 6.1.3. The provisions of this Section 6.1.3 shall
similarly apply to successive reclassifications, reorganizations, mergers or
consolidations, sales or other transfers.
6.1.4 Changes
in Form of Purchase Option.
This
form of Purchase Option need not be changed because of any change pursuant
to
this Section, and Purchase Options issued after such change may state the same
Exercise Price and the same number of Units as are stated in the Purchase
Options initially issued pursuant to this Agreement. The acceptance by any
Holder of the issuance of new Purchase Options reflecting a required or
permissive change shall not be deemed to waive any rights to an adjustment
occurring after the Commencement Date or the computation thereof.
-10-
6.2 Substitute
Purchase Option.
In case
of any consolidation of the Company with, or merger of the Company with, or
merger of the Company into, another corporation (other than a consolidation
or
merger which does not result in any reclassification or change of the
outstanding Common Stock), the corporation formed by such consolidation or
merger shall execute and deliver to the Holder a supplemental Purchase Option
providing that the holder of each Purchase Option then outstanding or to be
outstanding shall have the right thereafter (until the stated expiration of
such
Purchase Option) to receive, upon exercise of such Purchase Option, the kind
and
amount of shares of stock and other securities and property receivable upon
such
consolidation or merger, by a holder of the number of shares of Common Stock
of
the Company for which such Purchase Option might have been exercised immediately
prior to such consolidation, merger, sale or transfer. Such supplemental
Purchase Option shall provide for adjustments which shall be identical to the
adjustments provided in Section 6. The above provision of this Section shall
similarly apply to successive consolidations or mergers.
6.3 Elimination
of Fractional Interests.
The
Company shall not be required to issue certificates representing fractions
of
shares of Common Stock or Warrants upon the exercise of the Purchase Option,
nor
shall it be required to issue scrip or pay cash in lieu of any fractional
interests, it being the intent of the parties that all fractional interests
shall be eliminated by rounding any fraction up or down to the nearest whole
number of Warrants, shares of Common Stock or other securities, properties
or
rights.
7. Reservation
and Listing.
The
Company shall at all times reserve and keep available out of its authorized
shares of Common Stock, solely for the purpose of issuance upon exercise of
the
Purchase Options or the Warrants underlying the Purchase Option, such number
of
shares of Common Stock or other securities, properties or rights as shall be
issuable upon the exercise thereof. The Company covenants and agrees that,
upon
exercise of the Purchase Options and payment of the Exercise Price therefor,
all
shares of Common Stock and other securities issuable upon such exercise shall
be
duly and validly issued, fully paid and non-assessable and not subject to
preemptive rights of any stockholder. The Company further covenants and agrees
that upon exercise of the Warrants underlying the Purchase Options and payment
of the respective Warrant exercise price therefor, all shares of Common Stock
and other securities issuable upon such exercise shall be duly and validly
issued, fully paid and non-assessable and not subject to preemptive rights
of
any stockholder. As long as the Purchase Options shall be outstanding, the
Company shall use its best efforts to cause all (i) Units and shares of Common
Stock issuable upon exercise of the Purchase Options, (ii) Warrants issuable
upon exercise of the Purchase Options and (iii) shares of Common Stock issuable
upon exercise of the Warrants included in the Units issuable upon exercise
of
the Purchase Option to be listed (subject to official notice of issuance) on
all
securities exchanges (or, if applicable on the Nasdaq National Market, SmallCap
Market, OTC Bulletin Board or any successor trading market) on which the Units,
the Common Stock or the Warrants may then be listed and/or quoted.
8. Certain
Notice Requirements.
8.1 Holder's
Right to Receive Notice.
Nothing
herein shall be construed as conferring upon the Holders the right to vote
or
consent as a stockholder for the election of directors or any other matter,
or
as having any rights whatsoever as a stockholder of the Company. If, however,
at
any time prior to the expiration of the Purchase Options and their exercise,
any
of the events described in Section 8.2 shall occur, then, in one or more of
said
events, the Company shall give written notice of such event at least fifteen
days prior to the date fixed as a record date or the date of closing the
transfer books for the determination of the stockholders entitled to such
dividend, distribution, conversion or exchange of securities or subscription
rights, or entitled to vote on such proposed dissolution, liquidation, winding
up or sale. Such notice shall specify such record date or the date of the
closing of the transfer books, as the case may be. Notwithstanding the
foregoing, the Company shall deliver to each Holder a copy of each notice given
to the other stockholders of the Company at the same time and in the same manner
that such notice is given to the stockholders.
-11-
8.2 Events
Requiring Notice.
The
Company shall be required to give the notice described in this Section 8 upon
one or more of the following events: (i) if the Company shall take a record
of
the holders of its shares of Common Stock for the purpose of entitling them
to
receive a dividend or distribution, or (ii) the Company shall offer to all
the
holders of its Common Stock any additional shares of capital stock of the
Company or securities convertible into or exchangeable for shares of capital
stock of the Company, or any option, right or warrant to subscribe therefor,
or
(iii) a dissolution, liquidation or winding up of the Company (other than in
connection with a consolidation or merger) or a sale of all or substantially
all
of its property, assets and business or a merger of the Company wherein the
separate existence of the Company shall cease shall be proposed.
8.3 Notice
of Change in Exercise Price.
The
Company shall, promptly after an event requiring a change in the Exercise Price
pursuant to Section 6 hereof, send notice to the Holders of such event and
change (a "Price
Notice").
The
Price Notice shall describe the event causing the change and the method of
calculating same and shall be certified as being true and accurate by the
Company's President and Chief Financial Officer.
8.4 Transmittal
of Notices.
All
notices, requests, consents and other communications under this Purchase Option
shall be in writing and shall be deemed to have been duly made when hand
delivered, mailed by express mail or private courier service, or sent by
facsimile transmission, with confirmation of receipt: (i) If to the registered
Holder of the Purchase Option, to the address and/or fax number of such Holder
as shown on the books of the Company, or (ii) if to the Company, to the
following address or fax number or to such other address or and fax number
as
the Company may designate by notice to the Holders:
Affinity
Media International Corp.
00000
Xxxxxxxx Xxxx., Xxxxx 0000
Los
Angeles, CA 90025
Attn:
Xxxxxx Xxxx, President
Fax
No.:
000.000.0000
-12-
9.1 Amendments.
The
Company and Maxim may from time to time supplement or amend this Purchase Option
without the approval of any of the Holders in order to cure any ambiguity,
to
correct or supplement any provision contained herein that may be defective
or
inconsistent with any other provisions herein, or to make any other provisions
in regard to matters or questions arising hereunder that the Company and Maxim
may deem necessary or desirable and that the Company and Xxxxx xxxx shall not
adversely affect the interest of the Holders. All other modifications or
amendments shall require the written consent of and be signed by the party
against whom enforcement of the modification or amendment is
sought.
9.2 Headings.
The
headings contained herein are for the sole purpose of convenience of reference,
and shall not in any way limit or affect the meaning or interpretation of any
of
the terms or provisions of this Purchase Option.
10. Entire
Agreement.
This
Purchase Option (together with the other agreements and documents being
delivered pursuant to or in connection with this Purchase Option) constitutes
the entire agreement of the parties hereto with respect to the subject matter
hereof, and supersedes all prior agreements and understandings of the parties,
oral and written, with respect to the subject matter hereof.
10.1 Binding
Effect.
This
Purchase Option shall inure solely to the benefit of and shall be binding upon,
the Holder and the Company and their permitted assignees, respective successors,
legal representative and assigns, and no other person shall have or be construed
to have any legal or equitable right, remedy or claim under or in respect of
or
by virtue of this Purchase Option or any provisions herein
contained.
10.2 Governing
Law; Submission to Jurisdiction.
This
Purchase Option shall be governed by and construed and enforced in accordance
with the laws of the State of New York, without giving effect to conflict of
laws. Each of the Company and Maxim agree that any action, proceeding or claim
against it arising out of, or relating in any way to this Purchase Option shall
be brought and enforced in the courts of the State of New York located in New
York County or of the United States of America for the Southern District of
New
York, and irrevocably submits to such jurisdiction, which jurisdiction shall
be
exclusive. Each of the Company and Maxim hereby waives any objection to such
exclusive jurisdiction and that such courts represent an inconvenient forum.
Any
process or summons to be served upon the Company may be served by transmitting
a
copy thereof by registered or certified mail, return receipt requested, postage
prepaid, addressed to it at the address set forth in Section 8 hereof. Such
mailing shall be deemed personal service and shall be legal and binding upon
the
Company in any action, proceeding or claim. The Company and the Holder agree
that the prevailing party(ies) in any such action shall be entitled to recover
from the other party(ies) all of its reasonable attorneys' fees and expenses
relating to such action or proceeding and/or incurred in connection with the
preparation therefor.
10.3 Waiver,
Etc.
The
failure of the Company or the Holder to at any time enforce any of the
provisions of this Purchase Option shall not be deemed or construed to be a
waiver of any such provision, nor to in any way affect the validity of this
Purchase Option or any provision hereof or the right of the Company or any
Holder to thereafter enforce each and every provision of this Purchase Option.
No waiver of any breach, non-compliance or non-fulfillment of any of the
provisions of this Purchase Option shall be effective unless set forth in a
written instrument executed by the party or parties against whom or which
enforcement of such waiver is sought; and no waiver of any such breach,
non-compliance or non-fulfillment shall be construed or deemed to be a waiver
of
any other or subsequent breach, non-compliance or non-fulfillment.
-13-
10.4 Execution
in Counterparts.
This
Purchase Option may be executed in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which shall be deemed
to be an original, but all of which taken together shall constitute one and
the
same agreement, and shall become effective when one or more counterparts has
been signed by each of the parties hereto and delivered to each of the other
parties hereto.
10.5
Exchange
Agreement.
As a
condition of the Holder's receipt and acceptance of this Purchase Option, Xxxxxx
agrees that, at any time prior to the complete exercise of this Purchase Option
by Holder, if the Company and Maxim enter into an agreement (an "Exchange
Agreement")
pursuant to which they agree that all outstanding Purchase Options will be
exchanged for securities or cash or a combination of both, then Holder shall
agree to such exchange and become a party to the Exchange
Agreement.
10.6 Underlying
Warrants.
At any
time after exercise by the Holder of this Purchase Option, the Holder may
exchange his Warrants for Public Warrants upon payment to the Company of the
difference between the exercise price of his Warrant and the exercise price
of
the Public Warrants, if any.
[Remainder
of Page Intentionally Left Blank]
-14-
IN
WITNESS WHEREOF, the Company has caused this Purchase Option to be signed by
its
duly authorized officer as of the ____ day of __________, 2006.
AFFINITY
MEDIA INTERNATIONAL CORP.
By:_________________________________
Name:
Xxxxxx Xxxx
Title: President
-15-
Form
to
be used to exercise Purchase Option
Affinity
Media International Corp.
_________________________
_________________________
Date:_________________,
200__
The
undersigned hereby elects irrevocably to exercise all or a portion of the within
Purchase Option and to purchase ____ Units of Affinity Media International
Corp.
and hereby makes payment of $____________ (at the rate of $_________ per Unit)
in payment of the Exercise Price pursuant thereto. Please issue the Common
Stock
and Warrants as to which this Purchase Option is exercised in accordance with
the instructions given below.
or
The
undersigned hereby elects irrevocably to convert its right to purchase _________
Units purchasable under the within Purchase Option by surrender of the
unexercised portion of the attached Purchase Option (with a "Value" based of
$_______ based on a "Market Price" of $_______). Please issue the securities
comprising the Units as to which this Purchase Option is exercised in accordance
with the instructions given below.
________________________
Signature
________________________
Signature
Guaranteed
INSTRUCTIONS
FOR REGISTRATION OF SECURITIES
Name_____________________________________________________________
(Print
in
Block Letters)
Address__________________________________________________________
NOTICE:
THE SIGNATURE TO THIS FORM MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE
FACE OF THE WITHIN PURCHASE OPTION IN EVERY PARTICULAR WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE GUARANTEED BY A BANK, OTHER
THAN A SAVINGS BANK, OR BY A TRUST COMPANY OR BY A FIRM HAVING MEMBERSHIP ON
A
REGISTERED NATIONAL SECURITIES EXCHANGE.
-16-
Form
to
be used to assign Purchase Option
ASSIGNMENT
(To
be
executed by the registered Holder to effect a transfer of the within Purchase
Option):
FOR
VALUE
RECEIVED,___________________________________________ does hereby sell, assign
and transfer unto______________________________________ the right to purchase
__________ Units of Affinity Media International Corp. (the "Company")
evidenced by the within Purchase Option and does hereby authorize the Company
to
transfer such right on the books of the Company.
Dated:___________________,
200_
______________________
Signature
______________________
Signature
Guaranteed
NOTICE:
THE SIGNATURE TO THIS FORM MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE
FACE OF THE WITHIN PURCHASE OPTION IN EVERY PARTICULAR WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE GUARANTEED BY A BANK, OTHER
THAN A SAVINGS BANK, OR BY A TRUST COMPANY OR BY A FIRM HAVING MEMBERSHIP ON
A
REGISTERED NATIONAL SECURITIES EXCHANGE.
-17-
