STOCK PURCHASE AGREEMENT
Exhibit
10.31
THIS
STOCK PURCHASE AGREEMENT (the “Agreement”) is made and entered into as
of July 31, 2007, by and between Chapeau, Inc., a Utah corporation (the
“Company”), and ___________, an individual (the “Purchaser”).
RECITALS
WHEREAS,
the Company has requested from the Purchaser funds in an amount of $300,000.00
to be used by the Company for general corporate purposes, and the Company
has
agreed to sell to the Purchaser shares of its common stock, par value $0.001
per
share (the “Common Stock”) on the terms and conditions provided
herein;
WHEREAS,
the Company desires to sell to the Purchaser, and the Purchaser desires to
purchase from the Company, 1,000,000 shares of Common Stock (the “Stock”),
together with warrants to purchase up to 1,000,000 additional shares of Common
Stock (the “Warrants”) in accordance with the following terms and
conditions,
NOW,
THEREFORE, in consideration of the foregoing and the mutual terms and
provisions contained herein, the parties hereto agree as follows:
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1.
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Sale
and Purchase.
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(a) Subject
to the terms and conditions of this Agreement, the Company hereby agrees
to sell
and issue to the Purchaser, and the Purchaser hereby agrees to purchase from
the
Company the Stock for a purchase price equal to $0.30 per share or an aggregate
of $300,000.00 (the “Purchase Price”).
(b) In
further consideration for the payment of the Purchase Price by the Purchaser
to
the Company, the Company agrees to issue to the Purchaser simultaneously
with
the Stock, warrants to acquire an additional 1,000,000 shares of Common Stock
at
a purchase price of $0.50 per share of Common Stock (the “Warrants” and together
with the Stock hereinafter referred to as, the “Shares”), the Warrants to be in
the form attached to this Agreement as Exhibit
1(b).
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2.
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Closing.
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(a) The
closing (the “Closing”) of the purchase and sale of the Shares shall occur at
the office of the Company at 10:00 a.m. Pacific Time, on the date first written
above.
(b) The
Company acknowledges that as of the Closing it has, in installments paid
on
January 20, 2006, February 10, 2006, February 14, 2006, February 27, 2006,
March
2, 2006 and March 10, 2006, received the Purchase Price in full, including
without limitation the amount of $15,000.00, which the Company will pay directly
to Calim Private Equity, LLC (“Calim”) as a placement fee (the “Placement Fee”),
and Calim hereby acknowledges that payment of the Placement Fee by the Company
satisfies in full the Company’s obligation to compensate Calim with respect to
the transactions contemplated by this Agreement pursuant to Section 6(b)
of that
certain Financial Advisory Agreement made and entered into June 6, 2002 by
and
between Calim and the Company. The Company acknowledges the duty of
payment of the Placement Fee to Calim and further acknowledges that it is
aware
that Calim is an affiliate of the Purchaser.
(c) As
soon as reasonably practicable following the Closing, the Company’s transfer
agent shall deliver to the Purchaser the certificate representing the Stock,
free and clear of all liens, claims, options or rights to purchase, warrants,
security interests, pledges, encumbrances and other rights of third
parties. In addition, at the Closing the Company shall deliver to the
Purchaser the Warrants.
(d) At
the Closing, and thereafter, each party agrees to execute and deliver to
the
other any and all documents or instruments reasonably requested by the other
party to effect the sale and purchase of the Shares and the payment
of the Purchase Price.
3. Representations
and Warranties of the Company. Except as set forth in
the Schedule of Exceptions attached as Exhibit 3 to this Agreement, the Company
represents and warrants to the Purchaser as follows:
(a) The
Company (i) is duly organized, validly existing and in good standing as a
corporation under the laws of the State of Utah; (ii) has the corporate power
and authority to own or lease and operate its property and to conduct the
business in which it is currently engaged; and (iii) is, to its knowledge,
in
compliance with all requirements of applicable law except to the extent that
the
failure to comply therewith would not reasonably be expected to, in the
aggregate, have a material adverse effect on the business, operations, property
or financial or other condition of the Company or its obligations under this
Agreement and the Warrants (collectively, the “Transaction
Documents”).
(b) The
authorized capital stock of the Company as of the date of the Company’s
Quarterly Report on Form 10-QSB for the quarter ended March 31, 2007 consists
of
(i) 325,000,000 shares of the Common Stock, of which there are currently
54,732,704 issued and outstanding, and (ii) 5,000,000 shares of preferred
stock,
par value $0.001 per share (the “Preferred Stock”), of which none are currently
issued and outstanding. All issued shares of Common Stock are validly
issued, fully paid and non-assessable.
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(c) The
Company has the corporate power and authority to make, deliver and perform
its
obligations under each of the Transaction Documents and to issue the Shares
hereunder and has taken all necessary corporate action to authorize this
Agreement and the other transactions contemplated hereby on the terms and
conditions of this Agreement and to authorize the execution, delivery and
performance of its obligations under this Agreement and the
Warrants. No consent of any other person (including security holders
and creditors of the Company), and no authorization of, notice to, or other
act
by or in respect of any governmental authority, is required in connection
with
the execution, delivery, performance, validity or enforceability of this
Agreement or the Warrants except for the filing of a Form D pursuant to
Regulation D of the U.S. Securities and Exchange Commission under the Securities
Act of 1993, as amended (the “Securities Act”) and any other filings or notices
required by applicable state law. This Agreement and the Warrants
have been duly executed and delivered on behalf of the Company, and assuming
due
authorization, execution and delivery hereof by the Purchaser, constitutes
a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as enforceability may be limited
by
applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws
affecting the enforcement of creditors’ rights generally and general principles
of equity.
(d) Upon
issuance, sale and delivery in accordance with the terms and conditions of
this
Agreement, the Stock will be free and clear of any and all liens, claims,
options or rights to purchase, security interests, pledges, encumbrances
or any
other restrictions or rights of third parties, except for restrictions on
transfer under the securities laws.
(e) The
Stock, when issued, sold and delivered to the Purchaser in accordance with
the
terms and conditions of this Agreement, will be fully paid, validly issued
and
non-assessable, and the shares of Common Stock issuable upon payment by the
Purchaser of the exercise price as set forth herein (as may be adjusted from
time to time pursuant to the terms and conditions of the Warrants) and exercise
of the Warrants in accordance with the terms and conditions of the Transaction
Documents will, upon issuance, sale and delivery to the Purchaser, be fully
paid, validly issued and non-assessable.
(f) The
Company’s Quarterly Report on Form 10-QSB as filed with the United States
Securities and Exchange Commission for the Quarter ended March 31, 2007 is
true,
correct and complete in all material respects, and, from the date thereof
to the
date hereof, there have been no material adverse changes in the business
of the
Company.
4. Purchaser
Representations. The Purchaser
represents and warrants to the Company as follows:
(a) This
Agreement has been duly executed and delivered by the Purchaser and constitutes
a legal, valid and binding obligation of the Purchaser enforceable against
the
Purchaser in accordance with its terms and conditions, subject to applicable
bankruptcy, insolvency, reorganization and moratorium laws and other laws
of
general application affecting the enforcement of creditors' rights generally
and
general principles of equity.
(b) The
Shares are being acquired for investment for the Purchaser’s own account, not as
a nominee or agent, and not with a view to the resale or distribution of
any
part thereof, and the Purchaser has no present intention of selling, granting
any participation in, or otherwise distributing the Shares, in whole or in
part. The Purchaser does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any
of the
Shares.
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(c) The
Purchaser is an investor in securities of companies in the development stage
and
acknowledges that she is able to fend for herself, can bear the economic
risk of
her investment, has adequate means for providing for her current needs and
contingencies and has no need for liquidity with respect to her investment
in
the Company, and has such knowledge and experience in financial or business
matters such that she is capable of evaluating the merits and risks of the
investment in the Shares.
(d) The
Purchaser is an “accredited investor” as that term is defined in Rule 501 of
Regulation D as a result of the Purchaser being either:
(i) a
natural person whose individual net worth, or joint net worth with that person's
spouse, at the time of his purchase exceeds $1,000,000; or
(ii) a
natural person who had an individual income in excess of $200,000 in each
of the
two most recent years or joint income with that person's spouse in excess
of
$300,000 in each of those years and has a reasonable expectation of reaching
the
same income level in the current year.
(e) At
no time was the Purchaser presented with or solicited by any publicly issued
or
circulated newspaper, mail, radio, television or other form of general
advertising or solicitation in connection with the offer, sale and purchase
of
the Shares.
(f) The
Purchaser has received or has had full access to all the information it
considers necessary or appropriate to make an informed investment decision
with
respect to the Shares. The Purchaser further has had an opportunity to ask
questions of and receive answers from the Company regarding the terms and
conditions of the offering of the Shares and to obtain additional information
(to the extent the Company possessed such information or could acquire it
without unreasonable effort or expense) necessary to verify any information
furnished to the Purchaser or to which the Purchaser had access.
(g) The
Purchaser understands that the Shares (and the Common Stock underlying the
Warrants) that it is purchasing or otherwise taking delivery of are or will
be
characterized as “restricted securities” as that term is defined in Rule 144
promulgated under the Securities Act inasmuch as they are being acquired
from
the Company in a transaction not involving a public offering and that under
the
Securities Act and applicable federal and state statutes and regulations
such
securities may be resold without registration only in certain limited
circumstances. The Purchaser represents that it is familiar with Rule
144 promulgated under the Securities Act, as presently in effect, and which
permits limited resale of stock purchased in a private placement subject
to the
satisfaction of certain conditions, including among other things, the existence
of a public market for the stock, the availability of certain current public
information about the issuer, the resale occurring not less than one year
after
a party has purchased and paid for the stock to be sold, the sale being effected
through a “broker’s transaction” or in transactions directly with a “market
maker” and the number of shares of stock being sold during any three-month
period not exceeding specified limitations. The Purchaser understands
and hereby acknowledges that the Company may not be satisfying the current
public information requirement of Rule 144 at the time the Purchaser wishes
to sell the Stock or the Common Stock issued upon exercise of the Warrants,
and
that, in such event, the Purchaser may be precluded from selling such securities
under Rule 144, even if the other requirements of Rule 144 have been
satisfied.
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5.
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Transfer
Restrictions.
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(a) The
Purchaser agrees not to make any disposition of all or any portion of the
Shares
unless and until the transferee has agreed in writing for the benefit of
the
Company to be bound by this Section 5, and:
(i) there
is then in effect a registration statement under the Securities Act covering
the
proposed disposition and such disposition is made in accordance with such
registration statement; or
(ii) (A)
the Purchaser shall have notified the Company of the proposed disposition
and
shall have furnished the Company with a detailed statement of the circumstances
surrounding the proposed disposition and (B) if reasonably requested by the
Company, the Purchaser shall have furnished the Company with an opinion of
counsel, reasonably satisfactory to the Company, that such disposition will
not
require registration of the applicable Shares under the Securities Act;
and
(iii) notwithstanding
(i) and (ii) above, no such registration statement or opinion of counsel
shall
be necessary for a transfer by Purchaser (A) that is a partnership to a partner
of such partnership or a retired partner of such partnership who retires
after
the date hereof, or to the estate of any such partner or retired partner
or the
transfer by gift, will or intestate succession of any partner to his or her
spouse or to the siblings, lineal descendants or ancestors of such partner
or
his or her spouse, or (B) to any entity that is controlled by, controls or
is
under common control with the Purchaser; if the transferee agrees in writing
to
be subject to the terms of this Agreement to the same extent as if it were
an
original Purchaser hereunder.
(b) Certificates
evidencing the Shares shall bear one or all of the following
legends:
(i) “The
securities represented hereby have not been registered under the Securities
Act
of 1933, as amended (the “Act”), or under applicable state securities
laws. These securities are subject to restrictions on transferability
and resale and may not be offered, sold, pledged, hypothecated, assigned,
transferred or resold except as permitted under the Act and applicable state
securities laws pursuant to (i) a registration statement under the Act, which
has become effective and is current with respect to these securities, or
(ii) an
exemption therefrom. The issuer of these securities may require an
opinion of counsel in form and substance satisfactory to the issuer to the
effect that any proposed pledge, hypothecation, assignment, transfer or resale
is in compliance with the Act and any applicable state securities laws.”
and
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(ii) Any
legend required by the laws of the State and any other applicable state of
the
United States.
6. Indemnification. The
Purchaser agrees to indemnify and hold harmless the Company, its officers,
directors, affiliates, subsidiaries, employees and agents from any and all
losses suffered by them as a result of any liability related to a breach
by
Purchaser of a representation or warranty or failure by Purchaser to satisfy
any
covenant or obligation contained in this Agreement (including the reasonable
fees and expenses of defending against such liability or alleged
liability).
7. Agreement. The
Company agrees to pay or reimburse the Purchaser, upon invoice, for its
reasonable legal fees and expenses incurred in connection with this Agreement
and the transactions contemplated hereby.
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8.
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Miscellaneous.
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(a) This
Agreement together with all schedules and exhibits attached hereto and the
Warrants constitutes the entire agreement and understanding between the parties
hereto related to the sale of Shares and supersedes and controls all prior
verbal and written agreements between the parties relating to the sale of
the
Shares.
(b) This
Agreement shall be governed by, and construed in accordance with, the laws
of
the internal laws of the State of California, without reference to principles
of
conflict of laws or choice of laws.
(c) This
Agreement shall be binding upon and shall inure to the benefit of each of
the
parties and their respective successors and assigns. Neither this Agreement
nor
any of the rights, interests or obligations hereunder shall be transferred
or
assigned (by operation of law or otherwise) by either party hereto without
the
prior written consent of the other party such consent not to be unreasonably
withheld. Any transfer or assignment of any of the rights, interests
or obligations hereunder in violation of the terms and conditions of this
Agreement shall be void and of no force or effect.
(d) As
used herein and as the context requires, the masculine, feminine, and neuter
genders shall include the others; the singular shall include the plural and
vice
versa.
(e) If
any term or other provision of this Agreement is invalid, illegal or incapable
of being enforced by virtue of any rule of law, or public policy, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner to the end that the transactions contemplated hereby are fulfilled
to the
maximum extent possible. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then
(i) such provision shall be excluded from this Agreement, (ii) the
balance of the Agreement shall be interpreted as if such provision were so
excluded, and (iii) the balance of the Agreement shall be enforceable in
accordance with its terms.
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(f) The
representations, warranties and covenants of the Company and the Purchaser
contained in or made pursuant to this Agreement shall survive the execution
and
delivery of this Agreement, shall expire upon the expiration of the applicable
statute of limitations (including extensions thereof) in respect thereof,
and shall in no way be affected by any investigation of the subject matter
thereof made by or on behalf of either of the Purchaser or the Company, as
the
case may be.
(g) Unless
otherwise provided, any notice required or permitted under this Agreement
shall
be given in writing and shall be deemed effectively given (i) upon personal
delivery to the party to be notified, (ii) upon confirmed transmission by
facsimile, (iii) four business days after deposit with the United States
Post
Office, by registered or certified mail, postage prepaid, or (iv) one business
day after deposit with a reputable overnight courier service for next day
delivery, and addressed to the party to be notified at the address indicated
for
such party on the signature pages hereof, or at such other address as such
party
may designate by ten days' advance written notice to the other
parties.
(h) This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed an original, but all of which together shall constitute one and the
same
instrument. This Agreement may be executed and delivered by facsimile
and upon such delivery the facsimile signature will be deemed to have the
same
effect as if the original signature had been delivered to the other
parties.
[Remainder
of Page Intentionally Left Blank]
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EXECUTED
AND DELIVERED as of the date and year first written above.
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CHAPEAU,
INC.
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________________________
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By: ____________________
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Its:
____________________
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________________________
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Purchaser
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ACKNOWLEDGED
as of the date first written above with respect to Section 2(b)
by:
CALIM
PRIVATE EQUITY, LLC
________________________
By: __________________
Its: __________________
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EXHIBIT
1(b)
to
Form
of Warrant
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THIS
WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE
NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933
ACT”). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,
HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE 1933 ACT, OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER
THE
1933 ACT AND APPLICABLE STATE SECURITIES
LAW.
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Warrant
to Purchase Common Stock
of
Chapeau,
Inc.
Void
after July 31, 2009
This
Warrant is issued to ___________, or her registered
assigns (the “Holder”) by Chapeau, Inc., a Utah corporation (the “Company”), as
of July 31, 2007 (the “Warrant Issue Date”). This Warrant is issued
pursuant to that certain Stock Purchase Agreement dated as of the Warrant
Issue
Date (the “Purchase Agreement”). Unless otherwise defined herein,
capitalized terms used herein shall have the meanings assigned them in the
Purchase Agreement.
1. Shares.Subject
to the terms and conditions of this Warrant, the Holder is entitled, upon
surrender of this Warrant at the principal office of the Company (or at such
other place as the Company shall notify the Holder in writing), to purchase
from
the Company 1,000,000 fully paid and non-assessable shares of Common Stock,
as
constituted on the Warrant Issue Date. The number of shares of Common Stock
issuable pursuant to this Section 1 (the “Shares”) shall be subject to
adjustment pursuant to Section 9 below.
2. Exercise
Price. The purchase price for the Shares shall be equal to $0.50 per
share, as adjusted from time to time pursuant to Section 10 below (the “Exercise
Price”).
3. Exercise
Period. This Warrant shall be exercisable, in whole or in
part, during the term commencing on the Warrant Issue Date and ending at
5:00
p.m. on the second anniversary of the Warrant Issue Date; provided that in
the
event (each a “Disposition Event”) of (i) the closing of the Company’s sale or
transfer of all or substantially all of its assets, or (ii) the closing of
the
acquisition of the Company by another entity by means of merger, consolidation
or other transaction or series of related transactions, resulting in the
exchange of the outstanding shares of the Common Stock (unless (A) the
shareholders of the Company immediately prior to such transaction or series
of
related transactions are holders of a majority of the voting equity securities
of the surviving or acquiring corporation immediately thereafter, and (B)
each
of such shareholders immediately prior to such transaction or series of related
transactions holds the same pro rata share of such majority of the voting
equity
securities of the surviving or acquiring corporation as each hold of the
Company
immediately prior to such transaction or series of related transactions),
this
Warrant shall, on the date of a Disposition Event, no longer be exercisable
and
become null and void. The Company shall notify the Holder at least 20 days
prior
to the consummation of any Disposition Event; provided that the Holder shall
in
any event have at least 40 days after the Warrant Issue Date to exercise
this
Warrant.
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4. Method
of Exercise. While this Warrant remains outstanding and
exercisable, the Holder may exercise this Warrant, in whole or in part, at
one
time or from time to time, by:
(a) the
surrender of this Warrant, together with a duly executed copy of the form
of
Notice of Election attached hereto, to the Secretary of the Company at its
principal offices; and
(b) the
payment to the Company of an amount equal to the aggregate Exercise Price
for
the number of Shares being purchased.
In
the
event of a partial exercise of this Warrant, the Company shall cause to be
issued to the Holder a Warrant of like tenor to this Warrant for the number
of
Shares for which this Warrant has not yet been exercised.
5. Representations
and Warranties of Holder. The Holder hereby represents and
warrants that:
(a) This
Warrant and the Shares to be received by it upon exercise of this Warrant
(collectively, the “Securities”) are being acquired for investment for the
Holder’s own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof, and the Holder has no present
intention of selling, granting any participation in, or otherwise distributing
the Securities, in whole or in part. The Holder does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third person, with
respect to the Securities.
(c) The
Holder is an investor in securities of companies in the development stage
and
acknowledges that she is able to fend for herself, can bear the economic
risk of
her investment, has adequate means for providing for her current needs and
contingencies and has no need for liquidity with respect to her investment
in
the Company, and has such knowledge and experience in financial or business
matters such that she is capable of evaluating the merits and risks of the
investment in the Securities.
(d) The
Holder is an “accredited investor” as that term is defined in Rule 501 of
Regulation D as a result of the Holder being either:
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(i) a
natural person whose individual net worth, or joint net worth with that person's
spouse, at the time of his purchase exceeds $1,000,000; or
(ii) a
natural person who had an individual income in excess of $200,000 in each
of the
two most recent years or joint income with that person's spouse in excess
of
$300,000 in each of those years and has a reasonable expectation of reaching
the
same income level in the current year.
(e) At
no time was the Holder presented with or solicited by any publicly issued
or
circulated newspaper, mail, radio, television or other form of general
advertising or solicitation in connection with the offer, sale and purchase
of
this Warrant.
(f) The
Holder has received or has had full access to all the information it considers
necessary or appropriate to make an informed investment decision with respect
to
the Securities. The Holder further has had an opportunity to ask questions
of
and receive answers from the Company regarding the terms and conditions of
the
offering of the Securities and to obtain additional information (to the extent
the Company possessed such information or could acquire it without unreasonable
effort or expense) necessary to verify any information furnished to the Holder
or to which the Holder had access.
(g) The
Holder understands that the Securities that it is purchasing or otherwise
taking
delivery of are or will be characterized as “restricted securities” as that term
is defined in Rule 144 promulgated under the Securities Act of 1933, as amended
(the “1933 Act”) inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under the 1933 Act and
applicable federal and state statutes and regulations such securities may
be
resold without registration only in certain limited
circumstances. The Holder represents that it is familiar with Rule
144 promulgated under the 1933 Act, as presently in effect, and which permits
limited resale of stock purchased in a private placement subject to the
satisfaction of certain conditions, including among other things, the existence
of a public market for the stock, the availability of certain current public
information about the issuer, the resale occurring not less than one year
after
a party has purchased and paid for the stock to be sold, the sale being effected
through a “broker’s transaction” or in transactions directly with a “market
maker” and the number of shares of stock being sold during any three-month
period not exceeding specified limitations. The Holder understands
and hereby acknowledges that the Company may not be satisfying the current
public information requirement of Rule 144 at the time the Holder wishes to
sell the Securities, and that, in such event, the Holder may be precluded
from
selling such securities under Rule 144, even if the other requirements of
Rule 144 have been satisfied.
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6.
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Transfer
Restrictions.
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(a) The
Holder agrees not to make any disposition of all or any portion of the
Securities unless and until the transferee has agreed in writing for the
benefit
of the Company to be bound by this Section 6, and:
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(i) there
is then in effect a registration statement under the 1933 Act covering the
proposed disposition and such disposition is made in accordance with such
registration statement; or
(ii) (A)
the Holder shall have notified the Company of the proposed disposition and
shall
have furnished the Company with a detailed statement of the circumstances
surrounding the proposed disposition and (B) if reasonably requested by the
Company, the Holder shall have furnished the Company with an opinion of counsel,
reasonably satisfactory to the Company, that such disposition will not require
registration of the applicable Securities under the 1933 Act; and
(iii)
notwithstanding (i) and (ii) above, no such registration statement or opinion
of
counsel shall be necessary for a transfer by Holder (A) that is a partnership
to
a partner of such partnership or a retired partner of such partnership who
retires after the date hereof, or to the estate of any such partner or retired
partner or the transfer by gift, will or intestate succession of any partner
to
his or her spouse or to the siblings, lineal descendants or ancestors of
such
partner or his or her spouse, or (B) to any entity that is controlled by,
controls or is under common control with the Holder; if the transferee agrees
in
writing to be subject to the terms of this Warrant to the same extent as
if it
were an original Holder hereunder.
(b) Certificates
evidencing the Securities shall bear one or all of the following
legends:
(i) “The
securities represented hereby have not been registered under the Securities
Act
of 1933, as amended (the “Act”), or under applicable state securities
laws. These securities are subject to restrictions on transferability
and resale and may not be offered, sold, pledged, hypothecated, assigned,
transferred or resold except as permitted under the Act and applicable state
securities laws pursuant to (i) a registration statement under the Act, which
has become effective and is current with respect to these securities, or
(ii) an
exemption therefrom. The issuer of these securities may require an
opinion of counsel in form and substance satisfactory to the issuer to the
effect that any proposed pledge, hypothecation, assignment, transfer or resale
is in compliance with the Act and any applicable state securities laws.”
and
(ii) Any
legend required by the laws of the State and any other applicable state of
the
United States.
7. Indemnification. The
Holder agrees to indemnify and hold harmless the Company, its officers,
directors, affiliates, subsidiaries, employees and agents from any and all
losses suffered by them as a result of any liability related to a breach
by
Holder of a representation or warranty or failure by Holder to satisfy any
covenant or obligation contained in this Warrant (including the reasonable
fees
and expenses of defending against such liability or alleged
liability).
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8. Certificates
for Shares. Upon the exercise of the purchase rights
evidenced by this Warrant, one or more certificates for the number of Shares
so
purchased shall be issued as soon as practicable thereafter (with appropriate
restrictive legends, if applicable), and in any event within 15 days following
compliance by the Holder with the requirements of Section 4
above. The Company shall not be required to issue any fractional
shares, and if any fraction of a Share would be issuable on the exercise
of this
Warrant in full, the Company shall pay an amount in cash equal to the then
current fair market value of a Share, as then determined in good faith by
the
Board of Directors of the Company, times the applicable fraction.
9. Reservation
of Shares. The Company covenants that it will at all times keep
available such number of authorized shares of Common Stock, free from all
preemptive rights with respect thereto, which will be sufficient to permit
the
exercise of this Warrant for the full number of Shares specified herein.
The
Company covenants that the Shares, when issued pursuant to the exercise of
this
Warrant and in exchange for the Exercise Price, will be duly and validly
issued,
fully paid and non-assessable and free from all taxes, liens, and charges
with
respect to the issuance thereof.
10. Adjustment
of Exercise Price and Number of Shares. The number of and kind of
Shares purchasable or receivable upon exercise of this Warrant and the Exercise
Price shall be subject to adjustment from time to time as follows:
(a) Subdivisions,
Combinations and Other Issuances. If the Company shall subdivide the Common
Stock, by split-up or otherwise, combine the Common Stock or issue additional
shares of Common Stock as a dividend or other distribution with respect to
any
of its securities, the number of Shares issuable on the exercise of this
Warrant
shall be proportionately increased in the case of a subdivision, dividend
or
distribution and shall be proportionately decreased in the case of a
combination. Appropriate adjustments shall also be made to the Exercise Price,
but the aggregate purchase price payable for the total number of Shares
purchasable under this Warrant (as adjusted) shall remain the same. Any
adjustment under this Section 10(a) shall become effective at the close of
business on the date the subdivision or combination becomes effective, or
as of
the record date of a dividend or other distribution, or in the event that
no
record date is fixed, upon the making of such dividend or
distribution.
(b) Reclassification,
Reorganization and Consolidation. In the event of any reclassification,
capital reorganization or change in the Common Stock, other than as a result
of
an event provided for in (a) above, then, as a condition of such transaction,
the Holder shall have the right at any time prior to the expiration of this
Warrant to purchase, at a total price equal to that payable upon the exercise
of
this Warrant, the kind and amount of shares of stock and other securities
and
property receivable in connection with the applicable transaction by a holder
of
the same number of shares of Common Stock as were purchasable by the Holder
immediately prior to the transaction. In any such case appropriate provisions
shall be made with respect to the rights and interest of the Holder so that
this
provision shall thereafter be applicable with respect to any securities
deliverable upon exercise of this Warrant, and appropriate adjustments shall
be
made to the Exercise Price; provided that the aggregate purchase
price shall remain the same.
6
(c) Notice
of Adjustment. When any adjustment is required to be made in the number or
kind of securities receivable upon exercise of this Warrant, or in the Exercise
Price, the Company shall promptly notify the Holder thereof and of the number
of
Shares or other securities thereafter receivable upon exercise of this Warrant
and the adjusted Exercise Price per share.
(d) No
Impairment. The Company and the Holder will not, by any
voluntary action, avoid or seek to avoid the observance or performance of
any of
the terms to be observed or performed hereunder by the Company or the Holder,
respectively, but will at all times in good faith assist in the carrying
out of
all the provisions of this Section 10 and in the taking of all such action
as
may be necessary or appropriate in order to protect the rights of the Company
and the Holder against impairment.
11. No
Shareholder Rights. Prior to exercise of this Warrant, the
Holder shall not be entitled to any rights of a shareholder with respect
to this
Warrant or the Shares, including without limitation the right to vote, receive
dividends or other distributions thereon, exercise preemptive rights or,
other
than as may be provided in the Purchase Agreement, be notified of shareholder
meetings, and the Holder shall not be entitled to any notice or other
communication concerning the business or affairs of the Company. However,
nothing in this Section 11 shall limit the right of the Holder to be provided
the notices required under this Warrant and, in addition, the Company will
afford to the Holder the right, upon advance notice, to meet periodically
with
the Company’s chief executive and chief financial officers during mutually
agreeable business hours to discuss the Company’s business and
affairs.
12. Transfers. Subject
to compliance with the requirements of Section 6 above, this Warrant and
all
rights (but only with all related obligations) hereunder are transferable
in
whole or in part by the Holder upon reasonable prior written notification
to the
Company. The transfer shall be recorded on the books of the Company upon
(i) the
surrender of this Warrant, properly endorsed, to the Company at its principal
offices; (ii) the payment to the Company of all transfer taxes and other
governmental charges imposed on such transfer; and (iii) the transferee’s
agreement in writing to be bound by and subject to the terms and conditions
of
this Warrant. In the event of a partial transfer, the Company shall
issue to the Holders one or more appropriate new Warrants of like tenor to
this
Warrant.
13. Successors
and Assigns. The terms and provisions of this Warrant shall inure to
the benefit of, and be binding upon, the Company and the Holders and their
respective successors and assigns.
7
14. Registration
Rights. The Shares issuable upon exercise of this Warrant shall be
entitled to be included, pari passu, with any other shares of Common
Stock and any securities issuable upon conversion of the Common Stock, under
the
terms of any registration rights, if any, that the Company may have heretofore
granted or may hereafter grant to any other persons whomsoever, and the Company
agrees to do all such things in connection with any registration rights
agreements or registration of the Common Stock under the 1933 Act to ensure
that
the rights of the Holder hereunder are recognized in connection
therewith.
15. Amendments
and Waivers. Any term of this Warrant may be amended and the
observance of any term of this Warrant may be waived (either generally or
in a
particular instance and either retroactively or prospectively), with the
written
consent of the Company and the Holder.
16. Captions. The
section and subsection headings of this Warrant are inserted for convenience
only and shall not constitute a part of this Warrant in construing or
interpreting any provision hereof.
17. Governing
Law. This Warrant shall be governed by the laws of the State
of Utah.
[Remainder
of Page Intentionally Left Blank]
8
IN
WITNESS WHEREOF,
this Warrant to be executed by the Company and acknowledged by the Holder
July
31, 2007.
|
CHAPEAU,
INC.
|
|
|
________________________
|
|
|
By: ____________________
|
|
|
Its:
____________________
|
ACCEPTED
AND ACKNOWLEDGED:
______________________________
Holder
9
NOTICE
OF EXERCISE
To: Chapeau,
Inc.
The
undersigned hereby elects to purchase _________ shares of the Common Stock
of
Chapeau, Inc. (the “Company”) pursuant to the terms of the attached Warrant, and
payment of the Exercise Price per share required under the Warrant accompanies
this notice.
The
undersigned hereby affirms each and every one of the representations and
warranties contained in Section 5 of the Warrant as of the date of this Notice
of Exercise.
|
WARRANT
HOLDER:
|
|
|
_________________________________________
|
|
|
By:______________________________________
|
|
|
Date:
____________________________________
|
Name
in
which shares should be registered:
_________________________________________
10
EXHIBIT
3
to
Disclosure
Schedule
1. The
representations and warranties contained in Sections 3(b) and 3(f) are subject
in their entirety to any and all disclosure contained in or incorporated
by
reference into the Company’s Quarterly Report on Form 10-QSB for the quarter
ended March 31, 2007 filed with the United States Securities and Exchange
Commission (“SEC”) on May 15, 2007, and the Company’s Current Report on Form 8-K
filed with the SEC on June 29, 2007.
