EXHIBIT 4.2
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THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAW, AND MAY NOT BE OFFERED FOR SALE, SOLD OR
TRANSFERRED UNLESS A REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS SHALL BE EFFECTIVE WITH RESPECT THERETO, OR AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS
AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER. SUBJECT TO COMPLIANCE
WITH THE REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS, THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT (I)
MAY BE PLEDGED OR HYPOTHECATED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN SECURED BY THIS WARRANT OR ANY OF THE SECURITIES ISSUABLE UPON
EXERCISE OF THIS WARRANT AND (II) MAY BE TRANSFERRED OR ASSIGNED TO AN AFFILIATE
OF THE HOLDER HEREOF.
WARRANT
TO PURCHASE COMMON STOCK
OF
TAG ENTERTAINMENT CORP.
Issue Date: March 30, 2005 Warrant No. 1
THIS CERTIFIES that ______________________ or any subsequent holder hereof
(the "Holder"), has the right to purchase from TAG ENTERTAINMENT CORP., a
Delaware corporation (the "Company"), up to ______ fully paid and nonassessable
shares of the Company's common stock, par value $0.001 per share (the "Common
Stock"), subject to adjustment as provided herein, at a price per share equal to
the Exercise Price (as defined below), at any time and from time to time
beginning on the date on which this Warrant is originally issued (the "Issue
Date") and ending at 6:00 p.m., eastern time, on the date that is the fifth
(5th) anniversary of the Issue Date (or, if such date is not a Business Day, on
the Business Day immediately following such date) (the "Expiration Date"). This
Warrant is issued pursuant to a Securities Purchase Agreement, dated as of March
30, 2005 (the "Securities Purchase Agreement"). Capitalized terms used herein
and not otherwise defined shall have the respective meanings set forth in the
Securities Purchase Agreement.
1. Exercise.
(a) Right to Exercise; Exercise Price. The Holder shall have the right to
exercise this Warrant at any time and from time to time during the period
beginning on the Issue Date and ending on the Expiration Date as to all or any
part of the shares of Common Stock covered hereby (the "Warrant Shares"). The
"Exercise Price" for each Warrant Share purchased by the Holder upon the
exercise of this Warrant shall be equal to $1.00, subject to adjustment for the
events specified in Section 6 below.
(b) Exercise Notice. In order to exercise this Warrant, the Holder shall
send to the Company by facsimile transmission, at any time prior to 6:00 p.m.,
eastern time, on the Business Day on which the Holder wishes to effect such
exercise (the "Exercise Date"), (i) a notice of exercise in substantially the
form attached hereto as Exhibit A (the "Exercise Notice"), and (ii) a copy of
the original Warrant, and, in the case of a Cash Exercise (as defined below),
the Holder shall pay the Exercise Price to the Company by wire transfer of
immediately available funds. The Exercise Notice shall state the name or names
in which the shares of Common Stock that are issuable on such exercise shall be
issued. In the case of a dispute between the Company and the Holder as to the
calculation of the Exercise Price or the number of Warrant Shares issuable
hereunder (including, without limitation, the calculation of any adjustment
pursuant to Section 6 below), the Company shall issue to the Holder the number
of Warrant Shares that are not disputed within the time periods specified in
Section 2 below and shall submit the disputed calculations to a certified public
accounting firm of national reputation (other than the Company's regularly
retained accountants) within two (2) Business Days following the date on which
the Holder's Exercise Notice is delivered to the Company. The Company shall use
commercially reasonable efforts to cause such accountant to calculate the
Exercise Price and/or the number of Warrant Shares issuable hereunder and to
notify the Company and the Holder of the results in writing no later than three
(3) Business Days following the day on which such accountant received the
disputed calculations (the "Dispute Procedure"). Such accountant's calculation
shall be deemed conclusive absent manifest error. The fees of any such
accountant shall be borne by the party whose calculations were most at variance
with those of such accountant.
(c) Holder of Record. The Holder shall, for all purposes, be deemed to have
become the holder of record of the Warrant Shares specified in an Exercise
Notice on the Exercise Date specified therein, irrespective of the date of
delivery of such Warrant Shares. Except as specifically provided herein, nothing
in this Warrant shall be construed as conferring upon the Holder hereof any
rights as a stockholder of the Company prior to the Exercise Date.
(d) Cancellation of Warrant. This Warrant shall be canceled upon its
exercise in full and, if this Warrant is exercised in part, the Company shall,
at the time that it delivers Warrant Shares to the Holder pursuant to such
exercise as provided herein, issue a new warrant, and deliver to the Holder a
certificate representing such new warrant, with terms identical in all respects
to this Warrant (except that such new warrant shall be exercisable into the
number of shares of Common Stock with respect to which this Warrant shall remain
unexercised); provided, however, that the Holder shall be entitled to exercise
all or any portion of such new warrant at any time following the time at which
this Warrant is exercised, regardless of whether the Company has actually issued
such new warrant or delivered to the Holder a certificate therefor.
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2. Delivery of Warrant Shares Upon Exercise. Upon receipt of a fax copy of
an Exercise Notice pursuant to Section 1 above, the Company shall, (A) in the
case of a Cash Exercise, no later than the close of business on the later to
occur of (i) the third (3rd) Business Day following the Exercise Date specified
in such Exercise Notice and (ii) such later date on which the Company shall have
received payment of the Exercise Price, (B) in the case of a Cashless Exercise
(as defined below), no later than the close of business on the third (3rd)
Business Day following the Exercise Date specified in such Exercise Notice, and
(C) with respect to Warrant Shares that are the subject of a Dispute Procedure,
the close of business on the third (3rd) Business Day following the
determination made pursuant to Section 1(b) (each of the dates specified in (A),
(B) or (C) being referred to as a "Delivery Date"), issue and deliver or caused
to be delivered to the Holder the number of Warrant Shares as shall be
determined as provided herein. The Company shall effect delivery of Warrant
Shares to the Holder, as long as the Company's designated transfer agent (the
"Transfer Agent") participates in the Depository Trust Company ("DTC") Fast
Automated Securities Transfer program ("FAST") and no restrictive legend is
required pursuant to the terms of this Warrant or the Securities Purchase
Agreement, by crediting the account of the Holder or its nominee at DTC (as
specified in the applicable Exercise Notice) with the number of Warrant Shares
required to be delivered, no later than the close of business on such Delivery
Date. In the event that the Transfer Agent is not a participant in FAST or if
the Warrant Shares are not eligible to be delivered through the FAST system or
if the Holder so specifies in a Exercise Notice or otherwise in writing on or
before the Exercise Date, the Company shall effect delivery of Warrant Shares by
delivering to the Holder or its nominee physical certificates representing such
Warrant Shares, no later than the close of business on such Delivery Date.
Warrant Shares delivered to the Holder shall not contain any restrictive legend
unless such legend is required pursuant to the terms of the Securities Purchase
Agreement.
3. Failure to Deliver Warrant Shares.
(a) In the event that the Company fails for any reason to deliver to the
Holder the number of Warrant Shares specified in the applicable Exercise Notice
on or before the Delivery Date therefor (an "Exercise Default"), the Company
shall pay to the Holder payments ("Exercise Default Payments") in the amount of
(i) (N/365) multiplied by (ii) the aggregate Exercise Price of the Warrant
Shares which are the subject of such Exercise Default multiplied by (iii) the
lower of twelve percent (12%) per annum and the maximum rate permitted by
applicable law (the "Default Interest Rate"), where "N" equals the number of
days elapsed between the original Delivery Date of such Warrant Shares and the
date on which all of such Warrant Shares are issued and delivered to the Holder.
Cash amounts payable hereunder shall be paid on or before the fifth (5th)
Business Day of each calendar month following the calendar month in which such
amount has accrued.
(b) In the event of an Exercise Default, the Holder may, upon written
notice to the Company (an "Exercise Default Notice"), regain on the date of such
notice the rights of the Holder under the exercised portion of this Warrant that
is the subject of such Exercise Default until such Exercise Default is cured by
the Company. In the event of such Exercise Default and delivery of an Exercise
Default Notice, the Holder shall retain all of the Holder's rights and
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remedies with respect to the Company's failure to deliver such Warrant Shares
(including without limitation the right to receive the cash payments specified
in Section 3(a) above).
(c) The Holder's rights and remedies hereunder are cumulative, and no right
or remedy is exclusive of any other. In addition to the amounts specified
herein, the Holder shall have the right to pursue all other remedies available
to it at law or in equity (including, without limitation, a decree of specific
performance and/or injunctive relief). Nothing herein shall limit the Holder's
right to pursue actual damages for the Company's failure to issue and deliver
Warrant Shares on the applicable Delivery Date (including, without limitation,
damages relating to any purchase of Common Stock by the Holder to make delivery
on a sale effected in anticipation of receiving Warrant Shares upon exercise,
such damages to be in an amount equal to (A) the aggregate amount paid by the
Holder for the Common Stock so purchased minus (B) the aggregate amount of net
proceeds, if any, received by the Holder from the sale of the Warrant Shares
issued by the Company pursuant to such exercise).
4. Exercise Limitations. In no event shall a Holder be permitted to
exercise this Warrant, or part hereof, if, upon such exercise, the number of
shares of Common Stock beneficially owned by the Holder (other than shares which
would otherwise be deemed beneficially owned except for being subject to a
limitation on conversion or exercise analogous to the limitation contained in
this Section 4), would exceed 4.99% of the number of shares of Common Stock then
issued and outstanding. As used herein, beneficial ownership shall be determined
in accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and the rules thereunder. To the extent that the limitation contained
in this Section 4 applies, the submission of an Exercise Notice by the Holder
shall be deemed to be the Holder's representation that this Warrant is
exercisable pursuant to the terms hereof and the Company shall be entitled to
rely on such representation without making any further inquiry as to whether
this Section 4 applies. Nothing contained herein shall be deemed to restrict the
right of a Holder to exercise this Warrant, or part thereof, at such time as
such exercise will not violate the provisions of this Section 4. This Section 4
may not be amended unless such amendment is approved by the holders of a
majority of the Common Stock then outstanding; provided, however, that the
limitations contained in this Section 4 shall cease to apply (x) upon sixty (60)
days' prior written notice from the Holder to the Company, or (y) immediately
upon written notice from the Holder to the Company at any time after the public
announcement or other disclosure of a Major Transaction (as defined below).
5. Payment of the Exercise Price; Cashless Exercise. The Holder may pay the
Exercise Price in either of the following forms or, at the election of Holder, a
combination thereof:
(a) through a cash exercise (a "Cash Exercise") by delivering immediately
available funds, or
(b) if an effective Registration Statement is not available for the resale
of all of the Warrant Shares issuable hereunder at the time an Exercise Notice
is delivered to the Company, through a cashless exercise (a "Cashless
Exercise"), as hereinafter provided. The Holder may effect a Cashless Exercise
by surrendering this Warrant to the Company and noting on the
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Exercise Notice that the Holder wishes to effect a Cashless Exercise, upon which
the Company shall issue to the Holder the number of Warrant Shares determined as
follows:
X = Y x (A-B)/A
where: X = the number of Warrant Shares to be issued to the Holder;
Y = the number of Warrant Shares with respect to which this
Warrant is being exercised;
A = the Market Price as of the Exercise Date; and
B = the Exercise Price.
For purposes of Rule 144, it is intended and acknowledged that the Warrant
Shares issued in a Cashless Exercise transaction shall be deemed to have been
acquired by the Holder, and the holding period for the Warrant Shares required
by Rule 144 shall be deemed to have been commenced, on the Issue Date. For
purposes hereof, "Market Price" means, as of a particular date, the average of
the daily VWAP on each of the five (5) consecutive Trading Days occurring
immediately prior to (but not including) such date and (ii) "VWAP" on a Trading
Day means the volume weighted average price of the Common Stock for such Trading
Day on the Principal Market as reported by Bloomberg Financial Markets or, if
Bloomberg Financial Markets is not then reporting such prices, by a comparable
reporting service of national reputation selected by the Investor and reasonably
satisfactory to the Company. If the VWAP cannot be calculated for the Common
Stock on such Trading Day on any of the foregoing bases, then the Company shall
submit such calculation to an independent investment banking firm of national
reputation reasonably acceptable to the Investors, and shall cause such
investment banking firm to perform such determination and notify the Company and
the Investors of the results of determination no later than two (2) Business
Days from the time such calculation was submitted to it by the Company. All such
determinations shall be appropriately adjusted for any stock dividend, stock
split or other similar transaction during such period.
6. Anti-Dilution Adjustments; Distributions; Other Events. The Exercise
Price and the number of Warrant Shares issuable hereunder shall be subject to
adjustment from time to time as provided in this Section 6. In the event that
any adjustment of the Exercise Price required herein results in a fraction of a
cent, the Exercise Price shall be rounded up or down to the nearest one
hundredth of a cent.
(a) Subdivision or Combination of Common Stock. If the Company, at any time
after the Issue Date, subdivides (by any stock split, stock dividend,
recapitalization, reorganization, reclassification or otherwise) the outstanding
shares of Common Stock into a greater number of shares, then effective upon the
close of business on the record date for effecting such subdivision, the
Exercise Price in effect immediately prior to such subdivision will be
proportionately reduced. If the Company, at any time after the Issue Date,
combines (by reverse stock split, recapitalization, reorganization,
reclassification or otherwise) the outstanding shares of Common Stock into a
smaller number of shares, then, effective upon the close of business on
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the record date for effecting such combination, the Exercise Price in effect
immediately prior to such combination will be proportionally increased.
(b) Distributions. If, at any time after the Issue Date, the Company
declares or makes any distribution of cash or any other assets (or rights to
acquire such assets) to holders of Common Stock in respect of such Common Stock,
as a partial liquidating dividend or otherwise, including without limitation any
dividend or distribution to the Company's stockholders in shares (or rights to
acquire shares) of capital stock of a subsidiary) (a "Distribution"), the
Company shall deliver written notice of such Distribution (a "Distribution
Notice") to the Holder at least thirty (30) days prior to the earlier to occur
of (i) the record date for determining stockholders entitled to such
Distribution (the "Record Date") and (ii) the date on which such Distribution is
made (the "Distribution Date") (the earlier of such dates being referred to as
the "Determination Date"). In the Distribution Notice to a Holder, the Company
shall indicate whether the Company has elected (A) to deliver to such Holder,
upon any exercise of this Warrant after the Determination Date, the same amount
and type of assets being distributed in such Distribution as though the Holder
were, on the Determination Date, a holder of a number of shares of Common Stock
into which this Warrant is exercisable as of such Determination Date (such
number of shares to be determined at the Exercise Price then in effect and
without giving effect to any limitations on such exercise) or (B) upon any
exercise of this Warrant on or after the Determination Date, to reduce the
Exercise Price applicable to such exercise by reducing the Exercise Price in
effect on the Business Day immediately preceding the Record Date by an amount
equal to the fair market value of the assets to be distributed divided by the
number of shares of Common Stock as to which such Distribution is to be made,
such fair market value to be reasonably determined in good faith by the
Company's Board of Directors. If the Company does not notify the Holders of its
election pursuant to the preceding sentence on or prior to the Determination
Date, the Company shall be deemed to have elected clause (A) of the preceding
sentence.
(c) Dilutive Issuances.
(i) Adjustment Upon Dilutive Issuance. If, at any time after the Issue
Date, the Company issues or sells, or in accordance with subparagraph (ii) of
this paragraph (c), is deemed to have issued or sold, any shares of Common Stock
for per share consideration less than the Exercise Price on the date of such
issuance or sale (a "Dilutive Issuance"), then effective immediately upon the
Dilutive Issuance, the Exercise Price shall be adjusted so as to equal the
consideration received or receivable by the Company (on a per share basis) for
the additional shares of Common Stock so issued, sold or deemed issued or sold
in such Dilutive Issuance (which, in the case of a deemed issuance or sale,
shall be calculated in accordance with subparagraph (ii) below).
(ii) Effect On Exercise Price Of Certain Events. For purposes of
determining the adjusted Exercise Price under subparagraph (i) of this paragraph
(c), the following will be applicable:
(A) Issuance Of Purchase Rights. If the Company issues or sells
any Purchase Rights (as defined below), whether or not immediately
exercisable, and the price per share for which Common Stock is
issuable upon the exercise of such Purchase
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Rights (and the price of any conversion of Convertible Securities (as
defined below), if applicable) is less than the Exercise Price in
effect on the date of issuance or sale of such Purchase Rights, then
the maximum total number of shares of Common Stock issuable upon the
exercise of all such Purchase Rights (assuming full conversion,
exercise or exchange of Convertible Securities, if applicable) shall,
as of the date of the issuance or sale of such Purchase Rights, be
deemed to be outstanding and to have been issued and sold by the
Company for such price per share. "Convertible Securities" means
securities or other instruments which are convertible into or
exercisable or exchangeable for Common Stock; and "Purchase Rights"
means or options, warrants or other rights to purchase or subscribe
for Common Stock or Convertible Securities. For purposes of the
preceding sentence, the "price per share for which Common Stock is
issuable upon the exercise of such Purchase Rights" shall be
determined by dividing (x) the total amount, if any, received or
receivable by the Company as consideration for the issuance or sale of
all such Purchase Rights, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the
exercise of all such Purchase Rights, plus, in the case of Convertible
Securities issuable upon the exercise of such Purchase Rights, the
minimum aggregate amount of additional consideration payable upon the
conversion, exercise or exchange thereof (determined in accordance
with the calculation method set forth in subparagraph (ii)(B) below)
at the time such Convertible Securities first become convertible,
exercisable or exchangeable, by (y) the maximum total number of shares
of Common Stock issuable upon the exercise of all such Purchase Rights
(assuming full conversion, exercise or exchange of Convertible
Securities, if applicable). No further adjustment to the Exercise
Price shall be made upon the actual issuance of such Common Stock upon
the exercise of such Purchase Rights or upon the conversion, exercise
or exchange of Convertible Securities issuable upon exercise of such
Purchase Rights.
(B) Issuance Of Convertible Securities. If the Company issues or
sells any Convertible Securities, whether or not immediately
convertible, exercisable or exchangeable, and the price per share for
which Common Stock is issuable upon such conversion, exercise or
exchange is less than the Exercise Price in effect on the date of
issuance or sale of such Convertible Securities, then the maximum
total number of shares of Common Stock issuable upon the conversion,
exercise or exchange of all such Convertible Securities shall, as of
the date of the issuance or sale of such Convertible Securities, be
deemed to be outstanding and to have been issued and sold by the
Company for such price per share. If the Convertible Securities so
issued or sold do not have a fluctuating conversion or exercise price
or exchange ratio, then for the purposes of the immediately preceding
sentence, the "price per share for which Common Stock is issuable upon
such conversion, exercise or exchange" shall be determined by dividing
(x) the total amount, if any, received or receivable by the Company as
consideration for the issuance or sale of all such Convertible
Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion,
exercise or exchange thereof (determined in accordance with the
calculation method set forth in this subparagraph (ii)(B)), by (y) the
maximum total number of shares of Common Stock issuable upon the
exercise, conversion or exchange of all such Convertible Securities.
If the Convertible Securities so issued or sold have a fluctuating
conversion or exercise price or exchange ratio (a "Variable Rate
Convertible Security"), then for purposes of the
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first sentence of this subparagraph (B), the "price per share for
which Common Stock is issuable upon such conversion, exercise or
exchange" shall be deemed to be the lowest price per share which would
be applicable (assuming all holding period and other conditions to any
discounts contained in such Variable Rate Convertible Security have
been satisfied) if the conversion price of such Variable Rate
Convertible Security on the date of issuance or sale thereof were
seventy-five percent (75%) of the actual conversion price on such date
(the "Assumed Variable Market Price"), and, further, if the conversion
price of such Variable Rate Convertible Security at any time or times
thereafter is less than or equal to the Assumed Variable Market Price
last used for making any adjustment under this paragraph (c) with
respect to any Variable Rate Convertible Security, the Exercise Price
in effect at such time shall be readjusted to equal the Exercise Price
which would have resulted if the Assumed Variable Market Price at the
time of issuance of the Variable Rate Convertible Security had been
seventy-five percent (75%) of the actual conversion price of such
Variable Rate Convertible Security existing at the time of the
adjustment required by this sentence; provided, however, that if the
conversion or exercise price or exchange ratio of a Convertible
Security may fluctuate solely as a result of provisions designed to
protect against dilution, such Convertible Security shall not be
deemed to be a Variable Rate Convertible Security. No further
adjustment to the Exercise Price shall be made upon the actual
issuance of such Common Stock upon conversion, exercise or exchange of
such Convertible Securities.
(C) Change In Option Price Or Conversion Rate. If, following an
adjustment to the Exercise Price upon the issuance of Purchase Rights
or Convertible Securities pursuant to a Dilutive Issuance, there is a
change at any time in (x) the amount of additional consideration
payable to the Company upon the exercise of any Purchase Rights; (y)
the amount of additional consideration, if any, payable to the Company
upon the conversion, exercise or exchange of any Convertible
Securities; or (z) the rate at which any Convertible Securities are
convertible into or exercisable or exchangeable for Common Stock (in
each such case, other than under or by reason of provisions designed
to protect against dilution), then in any such case, the Exercise
Price in effect at the time of such change shall be readjusted to the
Exercise Price which would have been in effect at such time had such
Purchase Rights or Convertible Securities still outstanding provided
for such changed additional consideration or changed conversion,
exercise or exchange rate, as the case may be, at the time initially
issued or sold.
(D) Calculation Of Consideration Received. If any Common Stock,
Purchase Rights or Convertible Securities are issued or sold for cash,
the consideration received therefor will be the amount received by the
Company therefore. In case any Common Stock, Purchase Rights or
Convertible Securities are issued or sold for a consideration part or
all of which shall be other than cash, including in the case of a
strategic or similar arrangement in which the other entity will
provide services to the Company, purchase services from the Company or
otherwise provide intangible consideration to the Company, the amount
of the consideration other than cash received by the Company
(including the net present value of the consideration expected by the
Company for the provided or purchased services) shall be the fair
market value of such consideration, except where such consideration
consists of publicly traded securities, in which case the amount of
consideration received by the Company will be the Market
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Price thereof on the date of receipt. In case any Common Stock,
Purchase Rights or Convertible Securities are issued in connection
with any merger or consolidation in which the Company is the surviving
corporation, the amount of consideration therefor will be deemed to be
the fair market value of such portion of the net assets and business
of the non-surviving corporation as is attributable to such Common
Stock, Purchase Rights or Convertible Securities, as the case may be.
Notwithstanding anything else herein to the contrary, if Common Stock
Purchase Rights or Convertible Securities are issued or sold in
conjunction with each other as part of a single transaction or in a
series of related transactions, the Holder may elect to determine the
amount of consideration deemed to be received by the Company therefor
by deducting the fair value of any type of securities (the
"Disregarded Securities") issued or sold in such transaction or series
of transactions. If the Holder makes an election pursuant to the
immediately preceding sentence, no adjustment to the Exercise Price
shall be made pursuant to this paragraph (c) for the issuance of the
Disregarded Securities or upon any conversion, exercise or exchange
thereof. The independent members of the Company's Board of Directors
shall calculate reasonably and in good faith, using standard
commercial valuation methods appropriate for valuing such assets, the
fair market value of any consideration other than cash or securities.
(E) Issuances Without Consideration Pursuant to Existing
Securities. If the Company issues (or becomes obligated to issue)
shares of Common Stock pursuant to any anti-dilution or similar
adjustments (other than as a result of stock splits, stock dividends
and the like) contained in any Convertible Securities or Purchase
Rights outstanding as of the date hereof, then all shares of Common
Stock so issued shall be deemed to have been issued for no
consideration.
(iii) Exceptions To Adjustment Of Exercise Price. Notwithstanding the
foregoing, no adjustment to the Exercise Price shall be made pursuant to this
paragraph (c) upon the issuance of any Excluded Securities. For purposes hereof,
"Excluded Securities" means (I) securities purchased under the Securities
Purchase Agreement; (II) securities issued upon exercise of the Warrants; (III)
shares of Common Stock issuable or issued to (x) employees or directors from
time to time either directly or upon the exercise of options, in such case
granted or to be granted in the discretion of the Board of Directors, as
approved by the independent members of the Board, pursuant to one or more stock
option plans or restricted stock plans or stock purchase plans in effect as of
the Issue Date or subsequently approved by the independent members of the Board
of Directors or by the Company's stockholders, or (y) consultants, either
directly or pursuant to warrants to purchase Common Stock that are outstanding
on the date hereof or issued hereafter, provided such issuances are approved by
the independent members of the Board of Directors or by the Company's
stockholders; (IV) except as required by subparagraph (c)(ii)(E) above, shares
of Common Stock issued in connection with any Convertible Securities or Purchase
Rights outstanding on the date hereof; (V) shares of Common Stock issued to a
Person in connection with a joint venture, strategic alliance or other
commercial relationship with such Person relating to the operation of the
Company's business and not for the purpose of raising equity capital; (VI)
shares of Common Stock (or other securities convertible or exercisable into
shares of Common Stock) issued in connection with the acquisition by the Company
of any corporation or other entity (including, without limitation, the interests
in certain limited partnerships of which the Company or a Subsidiary is a
general
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partner) or substantially all of the assets of any corporation or other entity
or division thereof, as long as a purpose of such transaction is not to raise
equity capital; (VII) any borrowings by the Company, direct or indirect, from a
commercial lending institution that are approved by the Board of Directors,
including any type of loan or payment evidenced by any type of Debt instrument,
provided the value of the equity portion of any such borrowings, including
warrants, options or other rights to purchase capital stock and other interests
convertible into capital stock of the Company, does not exceed ten percent (10%)
of such borrowing; and (VIII) up to an aggregate of $5,000,000 of Film Vehicle
Interests (as defined in the Securities Purchase Agreement).
(iv) Notice Of Adjustments. Upon the occurrence of one or more
adjustments or readjustments of the Exercise Price pursuant to this paragraph
(c) or any change in the number or type of stock, securities and/or other
property issuable upon exercise of this Warrant, the Company, at its expense,
shall promptly compute such adjustment or readjustment or change and prepare and
furnish to the Holder a notice (an "Adjustment Notice") setting forth such
adjustment or readjustment or change and showing in detail the facts upon which
such adjustment or readjustment or change is based, and, on or before the time
that it delivers an Adjustment Notice, publicly disclose the contents thereof.
The failure of the Company to deliver an Adjustment Notice shall not affect the
validity of any such adjustment.
(d) Major Transactions. In the event of a merger, consolidation, business
combination, tender offer, exchange of shares, recapitalization, reorganization,
redemption or other similar event, as a result of which shares of Common Stock
shall be changed into the same or a different number of shares of the same or
another class or classes of stock or securities or other assets of the Company
or another entity or the Company shall sell all or substantially all of its
assets (each of the foregoing being a "Major Transaction"), the Company will
give the Holder at least twenty (20) Trading Days written notice prior to the
earlier of (x) the closing or effectiveness of such Major Transaction and (y)
the record date for the receipt of such shares of stock or securities or other
assets. In the event of a Major Transaction, the Holder shall be permitted (but
shall not be required) to either (i) require the Company to repurchase this
Warrant for an amount to the value of this Warrant calculated pursuant to the
Black-Scholes pricing model or (ii) exercise this Warrant in whole or in part at
any time prior to the record date for the receipt of such consideration and
shall be entitled to receive, for each share of Common Stock issuable to Holder
upon such exercise, the same per share consideration payable to the other
holders of Common Stock in connection with such Major Transaction. If and to the
extent that the Holder retains any portion of this Warrant following such record
date, the Company will cause the surviving or, in the event of a sale of assets,
purchasing entity, as a condition precedent to such Major Transaction, to assume
the obligations of the Company under this Warrant, with such adjustments to the
Exercise Price and the securities covered hereby as may be necessary in order to
preserve the economic benefits of this Warrant to the Holder.
(e) Adjustments; Additional Shares, Securities or Assets. In the event that
at any time, as a result of an adjustment made pursuant to this Section 6, the
Holder of this Warrant shall, upon exercise of this Warrant, become entitled to
receive securities or assets (other than Common Stock) then, wherever
appropriate, all references herein to shares of Common Stock shall be deemed to
refer to and include such shares and/or other securities or assets; and
thereafter the number of such shares and/or other securities or assets shall be
subject to
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adjustment from time to time in a manner and upon terms as nearly equivalent as
practicable to the provisions of this Section 6. Any adjustment made herein that
results in a decrease in the Exercise Price shall also effect a proportional
increase in the number of shares of Common Stock into which this Warrant is
exercisable.
7. Fractional Interests.
No fractional shares or scrip representing fractional shares shall be
issuable upon the exercise of this Warrant, but on exercise of this Warrant, the
Holder hereof may purchase only a whole number of shares of Common Stock. If, on
exercise of this Warrant, the Holder hereof would be entitled to a fractional
share of Common Stock or a right to acquire a fractional share of Common Stock,
the Company shall, in lieu of issuing any such fractional share, pay to the
Holder an amount in cash equal to the product resulting from multiplying such
fraction by the Market Price as of the Exercise Date.
8. Transfer of this Warrant.
The Holder may sell, transfer, assign, pledge or otherwise dispose of this
Warrant, in whole or in part, as long as such sale or other disposition is made
pursuant to an effective registration statement or an exemption from the
registration requirements of the Securities Act. Upon such transfer or other
disposition (other than a pledge), the Holder shall deliver this Warrant to the
Company together with a written notice to the Company, substantially in the form
of the Transfer Notice attached hereto as Exhibit B (the "Transfer Notice"),
indicating the person or persons to whom this Warrant shall be transferred and,
if less than all of this Warrant is transferred, the number of Warrant Shares to
be covered by the part of this Warrant to be transferred to each such person.
Within three (3) Business Days of receiving a Transfer Notice and the original
of this Warrant, the Company shall deliver to the each transferee designated by
the Holder a Warrant or Warrants of like tenor and terms for the appropriate
number of Warrant Shares and, if less than all this Warrant is transferred,
shall deliver to the Holder a Warrant for the remaining number of Warrant
Shares.
9. Benefits of this Warrant.
This Warrant shall be for the sole and exclusive benefit of the Holder of
this Warrant and nothing in this Warrant shall be construed to confer upon any
person other than the Holder of this Warrant any legal or equitable right,
remedy or claim hereunder.
10. Loss, theft, destruction or mutilation of Warrant.
Upon receipt by the Company of evidence of the loss, theft, destruction or
mutilation of this Warrant, and (in the case of loss, theft or destruction) of
indemnity reasonably satisfactory to the Company, and upon surrender of this
Warrant, if mutilated, the Company shall execute and deliver a new Warrant of
like tenor and date.
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11. Notice or Demands.
Any notice, demand or request required or permitted to be given by the
Company or the Holder pursuant to the terms of this Warrant shall be in writing
and shall be deemed delivered (i) when delivered personally or by verifiable
facsimile transmission, unless such delivery is made on a day that is not a
Business Day, in which case such delivery will be deemed to be made on the next
succeeding Business Day, (ii) on the next Business Day after timely delivery to
an overnight courier and (iii) on the Business Day actually received if
deposited in the U.S. mail (certified or registered mail, return receipt
requested, postage prepaid), addressed as follows:
If to the Company:
TAG Entertainment Corp.
0000 Xxxxx Xxxxx Xxxxxx Xxxx., 0xx Xxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Xxxxxxxxx & XxXxxxx, LLP
00 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxxxxxxx, Esq.
Tel: (000) 000-0000
Fax: (212) 557-029
and if to the Holder, to such address as the Holder shall have furnished to the
Company in writing.
12. Applicable Law.
This Warrant is issued under and shall for all purposes be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed entirely within the State of New York.
13. Amendments.
No amendment, modification or other change to, or waiver of any provision
of, this Warrant may be made unless such amendment, modification or change is
(A) set forth in writing and is signed by the Company and the Holder and (B)
agreed to in writing by the holders of at least two-thirds (2/3) of the number
of shares into which the Warrants are exercisable (without regard to any
limitation contained herein on such exercise), it being understood that upon the
satisfaction of the conditions described in (A) and (B) above, each Warrant
(including any Warrant held by the Holder who did not execute the agreement
specified in (B) above) shall
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be deemed to incorporate any amendment, modification, change or waiver effected
thereby as of the effective date thereof.
14. Entire Agreement.
This Warrant, the Securities Purchase Agreement, the Certificate of
Designation, the Registration Rights Agreement, and the other Transaction
Documents constitute the entire agreement among the parties hereto with respect
to the subject matter hereof and thereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein and
therein. This Warrant, the Securities Purchase Agreement, the Certificate of
Designation, the Registration Rights Agreement, and the other Transaction
Documents supersede all prior agreements and understandings among the parties
hereto with respect to the subject matter hereof and thereof.
15. Headings.
The headings in this Agreement are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof.
[Signature Page to Follow]
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IN WITNESS WHEREOF, the Company has duly executed and delivered this
Warrant as of the Issue Date.
TAG ENTERTAINMENT CORP.
By:
-------------------------------------
Name:
Title:
14
EXHIBIT A to WARRANT
--------------------
EXERCISE NOTICE
---------------
The undersigned Holder hereby irrevocably exercises the right to purchase
of the shares of Common Stock ("Warrant Shares") of ___________________________
evidenced by the attached Warrant (the "Warrant"). Capitalized terms used herein
and not otherwise defined shall have the respective meanings set forth in the
Warrant.
1. Form of Exercise Price. The Holder intends that payment of the Exercise
Price shall be made as:
______ a Cash Exercise with respect to _________________ Warrant
Shares; and/or
______ a Cashless Exercise with respect to _________________ Warrant
Shares, as permitted by Section 5(b) of the attached Warrant.
2. Payment of Exercise Price. In the event that the Holder has elected a
Cash Exercise with respect to some or all of the Warrant Shares to be issued
pursuant hereto, the Holder shall pay the sum of $________________ to the
Company in accordance with the terms of the Warrant.
Date:
---------------------------------
---------------------------------------
Name of Registered Holder
By:
-----------------------------------
Name:
Title:
15
EXHIBIT B to WARRANT
--------------------
TRANSFER NOTICE
---------------
FOR VALUE RECEIVED, the undersigned Holder of the attached Warrant hereby sells,
assigns and transfers unto the person or persons named below the right to
purchase shares of the Common Stock of _____________________ evidenced by the
attached Warrant.
Date:
---------------------------------
---------------------------------------
Name of Registered Holder
By:
-----------------------------------
Name:
Title:
Transferee Name and Address:
---------------------------------------
---------------------------------------
---------------------------------------
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