EXHIBIT 4.7
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of January
29, 2004, by and among Peak Entertainment Holdings, Inc., a Nevada corporation
(the "Company"), and the purchaser set forth on the signature page hereto (
"Buyer").
WHEREAS:
A. The Company and Buyer are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by the rules
and regulations as promulgated by the United States Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the "1933
Act");
B. Buyer desires to purchase and the Company desires to issue and sell,
upon the terms and conditions set forth in this Agreement: (i) 8% convertible
debentures of the Company, in the form attached hereto as Exhibit A, in the
aggregate principal amount of Fifty Thousand Dollars ($50,000) (together with
any debenture(s) issued in replacement thereof or as interest thereon or
otherwise with respect thereto in accordance with the terms thereof, the
"Debentures"), convertible into shares of common stock of the Company (the
"Common Stock"), upon the terms and subject to the limitations and conditions
set forth in such Debentures; and (ii) warrants, in the form attached hereto as
Exhibit B, to purchase 100,000 shares of the Company's Common Stock (the
"Warrants"); (the Common Stock and Warrants are sometimes referred to as the
"Securities")
C. Buyer wishes to purchase, upon the terms and conditions stated in
this Agreement, such principal amounts of Debentures and number of Warrants as
are set forth immediately below Buyer's name on the signature page hereto; and
D. Contemporaneous with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement,
in the form attached hereto as Exhibit C (the "Registration Rights Agreement"),
pursuant to which the Company has agreed to provide certain registration rights
under the 1933 Act and the rules and regulations promulgated thereunder, and
applicable state securities laws.
NOW THEREFORE, the Company and Buyer hereby agree as follows:
1. PURCHASE AND SALE OF DEBENTURES AND WARRANTS.
a. Purchase of Debentures and Warrants. On the Closing Date
(as defined below), the Company shall issue and sell to Buyer and Buyer agree to
purchase from the Company such principal amounts of Debentures and number of
Warrants as are set forth immediately below Buyer's name on the signature page
hereto.
b. Form of Payment. Upon execution of this Agreement, (i)
Buyer shall pay the purchase price for the Debentures and the Warrants to be
issued and sold to them at the Closing (as defined below) (the "Purchase Price")
by cash or wire transfer of immediately available funds.
c. Closing Date. The date and time of the issuance and sale of
the Debentures and the Warrants pursuant to this Agreement (the "Closing Date")
shall be the date of receipt and clearance of the Purchase Price.
2. BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer represents and
warrants to the Company solely as to it that:
a. Investment Purpose. As of the date hereof, Buyer is
purchasing the Debentures and the shares of Common Stock issuable upon
conversion of or otherwise pursuant to the Debentures pursuant to this Agreement
(such shares of Common Stock being collectively referred to herein as the
"Conversion Shares") and the Warrants and the shares of Common Stock issuable
upon exercise thereof (the "Warrant Shares" and, collectively with the
Debentures, Warrants and Conversion Shares, the "Securities") for its own
account and not with a present view towards the public sale or distribution
thereof, except pursuant to sales registered or exempted from registration under
the 1933 Act; provided, however, that by making the representations herein,
Buyer does not agree to hold any of the Securities for any minimum or other
specific term and reserves the right to dispose of the Securities at any time in
accordance with or pursuant to a registration statement or an exemption under
the 1933 Act.
b. Accredited Investor Status. Buyer is a sophisticated
investor (as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited
investor (as defined in Rule 501 of Regulation D), and Buyer has such experience
in business and financial matters that it has the capacity to protect its own
interests in connection with this transaction and is capable of evaluating the
merits and risks of an investment in the Securities pursuant to this Agreement.
Buyer has been represented by counsel and advisors of its choice. Buyer
acknowledges that an investment in the Securities pursuant to this Agreement is
speculative and involves a high degree of risk.
c. Reliance on Exemptions. Buyer understands that the
Securities are being offered and sold to it in reliance upon specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying upon the truth and accuracy of, and Buyer's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of Buyer to acquire the
Securities.
d. Information. Buyer has received all documents, records,
books and other information pertaining to Buyer's investment in the Company that
has been requested by Buyer.
e. Governmental Review. Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Securities.
f. Transfer or Resale. Buyer understands that: (i) except as
provided in the Registration Rights Agreement, the sale or re-sale of the
Securities has not been and is not being registered under the 1933 Act or any
applicable state securities laws, and the Securities may not be transferred
unless (a) the Securities are sold pursuant to an effective registration
statement under the 1933 Act, (b) Buyer shall have delivered to the Company an
opinion of counsel that shall be in form, substance and scope customary for
opinions of counsel in comparable transactions to the effect that the Securities
to be sold or transferred may be sold or transferred pursuant to an exemption
from such registration to the reasonable satisfaction of the Company, (c) the
Securities are sold or transferred to an "affiliate" (as defined in Rule 144
promulgated under the 1933 Act (or a successor rule) ("Rule 144")) of Buyer who
agrees to sell or otherwise transfer the Securities only in accordance with this
Section 2(f) and who is an Accredited Investor, or (d) the Securities are sold
pursuant to Rule 144, and Buyer shall have delivered to the Company an opinion
of counsel that shall be in form, substance and scope customary for opinions of
counsel in corporate transactions to the reasonable satisfaction of the Company;
(ii) any sale of such Securities made in reliance on Rule 144 may be made only
in accordance with the terms of said Rule and further, if said Rule is not
applicable, any re-sale of such Securities under circumstances in which the
seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 0000 Xxx) may require compliance
with some other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder; and (iii) neither the Company nor any other person is under any
obligation to register such Securities under the 1933 Act or any state
securities laws or to comply with the terms and conditions of any exemption
thereunder (in each case, other than pursuant to the Registration Rights
Agreement). Notwithstanding the foregoing or anything else contained herein to
the contrary, the Securities may be pledged as collateral in connection with a
bona fide margin account or other lending arrangement.
g. Legends. Buyer understands that the Debentures and the
Warrants and, until such time as the Conversion Shares and Warrant Shares have
been registered under the 1933 Act as contemplated by the Registration Rights
Agreement or otherwise may be sold pursuant to Rule 144 without any restriction
as to the number of securities as of a particular date that can then be
immediately sold, the Conversion Shares and Warrant Shares may bear a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of the certificates for such Securities):
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended. The securities
may not be sold, transferred or assigned in the absence of an effective
registration statement for the securities under said Act, or an opinion
of counsel, in form, substance and scope customary for opinions of
counsel in comparable transactions, that registration is not required
under said Act or unless sold pursuant to Rule 144 under said Act."
h. Authorization; Enforcement. This Agreement and each
agreement attached as an Exhibit hereto which is required to be executed by
Buyer has been duly authorized and validly executed and delivered by Buyer and
is a valid and binding agreement of Buyer enforceable against it in accordance
with its terms, subject to applicable bankruptcy, insolvency, or similar laws
relating to, or affecting generally the enforcement of, creditors' rights and
remedies or by other equitable principles of general application.
i. Residency. Buyer is a resident of the jurisdiction set
forth immediately below Buyer's name on the signature page hereto.
j. Not an Affiliate. Buyer is not an officer, director or
"affiliate" (as that term is defined in Rule 405 of the Securities Act) of the
Company.
k. Absence of Conflicts. The execution and delivery of this
Agreement and each agreement which is attached as an Exhibit hereto and executed
by Buyer in connection herewith, and the consummation of the transactions
contemplated hereby and thereby, and compliance with the requirements hereof and
thereof by Buyer, will not violate any law, rule, regulation, order, writ,
judgment, injunction, decree or award binding on Buyer or (a) violate any
provision of any indenture, instrument or agreement to which Buyer is a party or
is subject, or by which Buyer or any of its assets is bound; (b) conflict with
or constitute a material default thereunder; (c) result in the creation or
imposition of any lien pursuant to the terms of any such indenture, instrument
or agreement, or constitute a breach of any fiduciary duty owed by Buyer to any
third party; or (d) require the approval of any non-governmental agency
third-party (which has not been obtained) pursuant to any material contract,
agreement, instrument, relationship or legal obligation to which Buyer is
subject or to which any of its assets, operations or management may be subject.
l. Manner of Sale. At no time was Buyer presented with or
solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising.
m. No Finder. Buyer represents that, to Buyer's knowledge, no
finder is entitled to compensation for introducing Buyer to the Company.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to Buyer that:
a. Organization and Qualification. The Company and each of its
subsidiaries, if any, is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction in which it is incorporated,
with full power and authority (corporate and other) to own, lease, use and
operate its properties and to carry on its business as and where now owned,
leased, used, operated and conducted. The Company and each of its subsidiaries
is duly qualified or intends to apply for qualification as a foreign corporation
to do business and is in good standing in every jurisdiction in which its
ownership or use of property or the nature of the business conducted by it makes
such qualification necessary, except where the failure to be so qualified or in
good standing would not have a Material Adverse Effect. "Material Adverse
Effect" means any material adverse effect on the business, operations, assets,
financial condition or prospects of the Company or its subsidiaries, if any,
taken as a whole, or on the transactions contemplated hereby or by the
agreements or instruments to be entered into in connection herewith.
"Subsidiaries" means any corporation or other organization, whether incorporated
or unincorporated, in which the Company owns, directly or indirectly, any equity
or other ownership interest.
b. Authorization; Enforcement. The Company has all requisite
corporate power and authority to enter into and perform this Agreement, the
Registration Rights Agreement, the Debentures, and the Warrants (collectively
the "Transaction Agreements") and to consummate the transactions contemplated
hereby and thereby and to issue the Securities, in accordance with the terms
hereof and thereof. The execution and delivery of this Agreement, the
Registration Rights Agreement, the Debentures, and the Warrants by the Company
and the consummation by it of the transactions contemplated hereby and thereby
(including without limitation, the issuance of the Debentures and the Warrants
and the issuance and reservation for issuance of the Conversion Shares and
Warrant Shares issuable upon conversion or exercise thereof), have been duly
authorized by the Company's Board of Directors. This Agreement has been duly
executed and delivered by the Company by its authorized representative, and such
authorized representative is the true and official representative with authority
to sign this Agreement and the other documents executed in connection herewith
and bind the Company accordingly. This Agreement constitutes, and upon execution
and delivery by the Company of the Registration Rights Agreement, the
Debentures, and the Warrants, each of such instruments will constitute, a legal,
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms.
c. Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of 900,000,000 shares of Common Stock, of
which 21,190,760 shares are issued and outstanding as of September 30, 2003,
and, except as set forth in Schedule 3(c), no shares are currently reserved for
issuance pursuant to the Company's stock option plans, no shares are currently
reserved for issuance pursuant to securities exercisable for, or convertible
into or exchangeable for shares of Common Stock, and no shares of preferred
stock are issued and outstanding. All of such outstanding shares of capital
stock are, or upon issuance will be, duly authorized, validly issued, fully paid
and nonassessable. No shares of capital stock of the Company are subject to
preemptive rights or any other similar rights of the shareholders of the Company
or any liens or encumbrances imposed through the actions or failure to act of
the Company. Except as disclosed in Schedule 3(c) and/or in filings with the
S.E.C., as of the effective date of this Agreement, (i) there are no outstanding
options, warrants, scrip, rights to subscribe for, puts, calls, rights of first
refusal, agreements, understandings, claims or other commitments or rights of
any character whatsoever relating to, or securities or rights convertible into
or exchangeable for any shares of capital stock of the Company or any of its
Subsidiaries, or arrangements by which the Company or any of its Subsidiaries is
or may become bound to issue additional shares of capital stock of the Company
or any of its Subsidiaries, (ii) there are no agreements or arrangements under
which the Company or any of its Subsidiaries is obligated to register the sale
of any of its or their securities under the 1933 Act, and (iii) there are no
anti-dilution or price adjustment provisions contained in any security issued by
the Company (or in any agreement providing rights to security holders) that will
be triggered by the issuance of the Debentures, the Warrants, the Conversion
Shares or Warrant Shares.
d. Issuance of Shares. The Conversion Shares and Warrant
Shares are duly authorized and reserved for issuance and, upon conversion of the
Debentures and exercise of the Warrants in accordance with their respective
terms, will be validly issued, fully paid and non-assessable, and free from all
taxes, liens, claims and encumbrances with respect to the issue thereof and
shall not be subject to preemptive rights or other similar rights of
shareholders of the Company.
e. Acknowledgment of Dilution. The Company understands and
acknowledges the potentially dilutive effect to the Common Stock upon the
issuance of the Conversion Shares and Warrant Shares upon conversion of the
Debenture or exercise of the Warrants. The Company further acknowledges that its
obligation to issue Conversion Shares and Warrant Shares upon conversion of the
Debentures or exercise of the Warrants in accordance with this Agreement, the
Debentures and the Warrants is absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of other
shareholders of the Company.
f. No Conflicts. The execution, delivery and performance of
this Agreement, the Registration Rights Agreement, the Debentures, and the
Warrants by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the issuance and
reservation for issuance of the Conversion Shares and Warrant Shares), will not
(i) conflict with or result in a violation of any provision of the Articles of
Incorporation or By-laws, (ii) violate or conflict with, or result in a breach
of any provision of, or constitute a default (or an event which with notice or
lapse of time or both could become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture, patent, patent license or instrument to which the Company
or any of its Subsidiaries is a party, or (iii) result in a violation of any
law, rule, regulation, order, judgment or decree (including federal and state
securities laws and regulations and regulations of any self-regulatory
organizations to which the Company or its securities are subject) applicable to
the Company or any of its Subsidiaries or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected (except for such
conflicts, defaults, terminations, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect). Neither the Company nor any of its Subsidiaries is in violation
of its Articles of Incorporation, By-laws or other organizational documents and
neither the Company nor any of its Subsidiaries is in default (and no event has
occurred which with notice or lapse of time or both could put the Company or any
of its Subsidiaries in default) under, and neither the Company nor any of its
Subsidiaries has taken any action or failed to take any action that would give
to others any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party or by which any property or assets of the Company or any
of its Subsidiaries is bound or affected, except for possible defaults as would
not, individually or in the aggregate, have a Material Adverse Effect. The
businesses of the Company and its Subsidiaries, if any, are not being conducted,
and shall not be conducted so long as a Buyer owns any of the Securities, in
violation of any law, ordinance or regulation of any governmental entity. Except
as specifically contemplated by this Agreement and as required under the 1933
Act and any applicable state securities laws, the Company is not required to
obtain any consent, authorization or order of, or make any filing or
registration with, any court, governmental agency, regulatory agency, self
regulatory organization or stock market in order for it to execute, deliver or
perform any of its obligations under this Agreement, the Registration Rights
Agreement, the Debentures or the Warrants in accordance with the terms hereof or
thereof or to issue and sell the Debentures and Warrants in accordance with the
terms hereof and to issue the Conversion Shares upon conversion of the
Debentures and the Warrant Shares upon exercise of the Warrants.
g. SEC Documents; Financial Statements. Except as disclosed in
Schedule 3(g) and except as disclosed herein, the Company has timely filed all
reports, schedules, forms, statements and other documents required to be filed
by it with the SEC pursuant to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act") (all of the foregoing filed
prior to the date hereof and all exhibits included therein and financial
statements and schedules thereto and documents (other than exhibits to such
documents) incorporated by reference therein, being hereinafter referred to
herein as the "SEC Documents"). The Company's Form 10-QSB for the quarterly
period ended September 30, 2003 was not timely filed. Except as disclosed in
Schedule 3(g) and except as disclosed herein, the SEC Documents will, on or
before Closing hereof, comply in all material respects with the requirements of
the 1934 Act and the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, to the best
knowledge of officers and directors of the Company, will contain any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The Company has
been advised by its accountants of certain changes they require in prior SEC
Documents, which SEC Documents the Company has undertaken to amend. Except as
disclosed in Schedule 3(g) and except as disclosed herein, as of their
respective dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Except as disclosed in Schedule 3(g) and except as disclosed
herein, such financial statements have been prepared in accordance with United
States generally accepted accounting principles, consistently applied, during
the periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may not include footnotes or may be condensed or
summary statements) and fairly present in all material respects the consolidated
financial position of the Company and its consolidated Subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments). Except as described herein and as set forth
in the financial statements of the Company included in the SEC Documents, as may
be amended, the Company has no liabilities, contingent or otherwise, other than
(i) liabilities incurred in the ordinary course of business subsequent to June
30, 2003 and (ii) obligations under contracts and commitments incurred in the
ordinary course of business and not required under generally accepted accounting
principles to be reflected in such financial statements, which, individually or
in the aggregate, are not material to the financial condition or operating
results of the Company.
h. Absence of Certain Changes. Since June 30, 2003, there has
been no material adverse change and no material adverse development in the
assets, liabilities, business, properties, operations, financial condition,
results of operations or prospects of the Company or any of its Subsidiaries,
except as disclosed herein and in Schedule 3(h).
i. Absence of Litigation. There is no action, suit, claim,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company or any of its Subsidiaries, threatened against or
affecting the Company or any of its Subsidiaries, or their officers or directors
in their capacity as such, that could have a Material Adverse Effect, except as
described in Schedule 3(i).
j. Intellectual Property. The Company has the rights stated in
the SEC Documents (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures) and
other similar rights and proprietary knowledge (collectively, "Intangibles")
necessary for the conduct of its business as now being conducted. To the
Company's knowledge, except as disclosed in the SEC Documents neither the
Company nor any of its subsidiaries is infringing upon or in conflict with any
right of any other person with respect to any Intangibles. Except as disclosed
in the SEC Documents, no adverse claims have been asserted by any person to the
ownership or use of any Intangibles and the Company has no knowledge of any
basis for such claim.
k. No Materially Adverse Contracts, Etc. Neither the Company
nor any of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Company has or is expected in the future to have a Material
Adverse Effect, except as disclosed in this Agreement. Neither the Company nor
any of its Subsidiaries is a party to any contract or agreement which in the
judgment of the Company's officers has or is expected to have a Material Adverse
Effect, except as disclosed in this Agreement.
l. Tax Status. The Company and each of its Subsidiaries has
made or filed all federal, state and foreign income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject
(unless and only to the extent that the Company and each of its Subsidiaries has
set aside on its books provisions reasonably adequate for the payment of all
unpaid and unreported taxes) and has paid all taxes and other governmental
assessments and charges that are material in amount, shown or determined to be
due on such returns, reports and declarations, except those being contested in
good faith and has set aside on its books provisions reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of the Company know of no basis for any such claim. The Company
has not executed a waiver with respect to the statute of limitations relating to
the assessment or collection of any foreign, federal, state or local tax. None
of the Company's tax returns is presently being audited by any taxing authority.
m. Absence of Certain Company Control Person Actions or
Events. None of the following has occurred during the past ten (10) years with
respect to a Company Control Person, except as set forth in Schedule 3(m):
(1) A petition under the federal bankruptcy laws or any
state insolvency law was filed by or against, or a receiver, fiscal agent or
similar officer was appointed by a court for the business or property of such
Company Control Person, or any partnership in which he was a general partner at
or within two years before the time of such filing, or any corporation or
business association of which he was an executive officer at or within two years
before the time of such filing;
(2) Such Company Control Person was convicted in a
criminal proceeding or is a named subject of a pending
criminal proceeding (excluding traffic violations and other
minor offenses);
(3) Such Company Control Person was the subject of any
order, judgment or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining him from, or otherwise
limiting, the following activities:
(i) acting, as an investment advisor,
underwriter, broker or dealer in securities, or as an
affiliated person, director or employee of any
investment company, bank, savings and loan
association or insurance company, as a futures
commission merchant, introducing broker, commodity
trading advisor, commodity pool operator, floor
broker, any other Person regulated by the Commodity
Futures Trading Commission ("CFTC") or engaging in or
continuing any conduct or practice in connection with
such activity;
(ii) engaging in any type of business
practice; or
(iii) engaging in any activity in connection
with the purchase or sale of any security or
commodity or in connection with any violation of
federal or state securities laws or federal
commodities laws;
(4) Such Company Control Person was the subject of any
order, judgment or decree, not subsequently reversed,
suspended or vacated, of any federal or state authority
barring, suspending or otherwise limiting for more than 60
days the right of such Company Control Person to engage in any
activity described in paragraph (3) of this item, or to be
associated with Persons engaged in any such activity; or
(5) Such Company Control Person was found by a court of
competent jurisdiction in a civil action or by the CFTC or SEC
to have violated any federal or state securities law, and the
judgment in such civil action or finding by the CFTC or SEC
has not been subsequently reversed, suspended, or vacated.
n. No Integrated Offering. Neither the Company nor any of its
Affiliates nor any person acting on its or their behalf has, directly or
indirectly, at any time since May 1, 2003, made any offer or sales of any
security or solicited any offers to buy any security under circumstances that
would eliminate the availability of the exemption from registration under
Regulation D in connection with the offer and sale of the Securities as
contemplated hereby.
o. Dilution. The number of Shares issuable upon conversion of
the Debentures may have a dilutive effect on the ownership interests of the
other shareholders (and Persons having the right to become shareholders) of the
Company. The Company's executive officers and directors have studied and fully
understand the nature of the Securities being sold hereby and recognize that
they have such a potential dilutive effect. The board of directors of the
Company has concluded, in its good faith business judgment, that such issuance
is in the best interests of the Company. The Company specifically acknowledges
that its obligation to issue the Shares upon conversion of the Debentures and
upon exercise of the Warrants is binding upon the Company and enforceable
regardless of the dilution such issuance may have on the ownership interests of
other shareholders of the Company, and the Company will honor every Notice of
Conversion (as defined in the Debentures) relating to the conversion of the
Debentures, and every Notice of Exercise (as contemplated by the Warrants),
unless the Company is subject to an injunction (which injunction was not sought
by the Company) prohibiting the Company from doing so.
p. Trading in Securities. The Company specifically
acknowledges that, except to the extent specifically provided herein or in any
of the other Transaction Agreements (but limited in each instance to the extent
so specified), Buyer retains the right (but is not otherwise obligated) to buy,
sell, engage in hedging transactions or otherwise trade in the securities of the
Company, including, but not necessarily limited to, the Securities, at any time
before, contemporaneous with or after the execution of this Agreement or from
time to time, but only, in each case, in any manner whatsoever permitted by
applicable federal and state securities laws.
q. Fees to Brokers, Finders and Others. The Company has taken
no action which would give rise to any claim by any Person for brokerage
commission, finder's fees or similar payments by Buyer relating to this
Agreement or the transactions contemplated hereby. Buyer shall have no
obligation with respect to such fees or with respect to any claims made by or on
behalf of other Persons for fees of a type contemplated in this paragraph that
may be due in connection with the transactions contemplated hereby. The Company
shall indemnify and hold harmless Buyer, its employees, officers, directors,
agents, and partners, and their respective Affiliates, from and against all
claims, losses, damages, costs (including the costs of preparation and
attorney's fees) and expenses suffered in respect of any such claimed or
existing fees, as and when incurred.
4. COVENANTS.
a. Reporting Status. The Company's Common Stock is registered
under Section 12(g) of the 1934 Act. So long as Buyer beneficially owns any of
the Securities, the Company shall use best efforts to timely file all reports
required to be filed with the SEC pursuant to the 1934 Act, and the Company
shall use best efforts to maintain its status as an issuer required to file
reports under the 1934 Act even if the 1934 Act or the rules and regulations
thereunder would permit such termination.
b. Use of Proceeds. The Company shall use the proceeds from
the sale of the Debentures and the Warrants for its working capital and/or to
retire existing debt.
c. Authorization and Reservation of Shares. The Company shall
use reasonable best efforts to at all times have authorized, and reserved for
the purpose of issuance, a sufficient number of shares of Common Stock to
provide for the full conversion or exercise of the outstanding Debentures and
Warrants and issuance of the Conversion Shares and Warrant Shares in connection
therewith (based on the Conversion Price of the Debentures or Exercise Price of
the Warrants in effect from time to time) and as otherwise required by the
Debentures. The Company shall use reasonable best efforts to at all times
maintain the number of shares of Common Stock so reserved for issuance at an
amount ("Reserved Amount") equal to no less than two (2) times the number that
is then actually issuable upon full conversion of the Debentures and Additional
Debentures and upon exercise of the Warrants and the Additional Warrants (based
on the Conversion Price of the Debentures or the Exercise Price of the Warrants
in effect from time to time). If at any time the number of shares of Common
Stock authorized and reserved for issuance ("Authorized and Reserved Shares") is
below the Reserved Amount, the Company will use reasonable best efforts to
promptly take all corporate action necessary to authorize and reserve a
sufficient number of shares, including, without limitation, calling a special
meeting of shareholders to authorize additional shares to meet the Company's
obligations under this Section 4(e), in the case of an insufficient number of
authorized shares, obtain shareholder approval of an increase in such authorized
number of shares, and voting the management shares of the Company in favor of an
increase in the authorized shares of the Company to ensure that the number of
authorized shares is sufficient to meet the Reserved Amount.
d. Listing. The Company will use best efforts, so long as
Buyer owns at least one-third of the Securities, to maintain the quoting/listing
and trading of its Common Stock on the OTCBB or any equivalent or replacement
quotation service or exchange, including, but not limited to, the Nasdaq
National Market ("Nasdaq"), the Nasdaq SmallCap Market ("Nasdaq SmallCap"), the
New York Stock Exchange ("NYSE"), or the American Stock Exchange ("AMEX") and
will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the National Association of Securities
Dealers ("NASD") and such exchanges, as applicable. The Company will promptly
notify Buyer regarding the continued eligibility of the Common Stock for listing
or quotation should there be a material change.
e. Corporate Existence. So long as Buyer beneficially owns any
Debentures or Warrants, the Company shall maintain its corporate existence and
shall not sell all or substantially all of the Company's assets, except in the
event of a merger or consolidation or sale of all or substantially all of the
Company's assets, where the surviving or successor entity in such transaction
(i) assumes the Company's obligations hereunder and under the agreements and
instruments entered into in connection herewith and (ii) is a publicly traded
corporation whose Common Stock is listed for trading on the OTCBB, Nasdaq,
Nasdaq SmallCap, NYSE or AMEX, or any other equivalent or replacement quotation
service or exchange.
f. Future Plans. At such future date when the Company has at
least $750,000 in working capital in excess of then existing commitments, the
Company will undertake to implement an investor relations program.
g. The Company covenants that, with respect to the Securities,
other than the stop transfer instructions to give effect to Section 2(g) hereof,
it will give its transfer agent no instructions inconsistent with instructions
to issue Common Stock from time to time upon conversion of the Debentures in
such amounts as specified from time to time by the Company to the transfer
agent, bearing the restrictive legend specified in Section 2(g) of this
Agreement prior to registration of the Shares under the 1933 Act, registered in
the name of the Buyer or its nominees and in such denominations to be specified
by the Buyer in connection with each conversion of the Debentures. Except as so
provided, the Shares shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement and the
Registration Rights Agreement. Nothing in this Section shall affect in any way
the Buyer's obligations and agreement to comply with all applicable securities
laws upon resale of the Securities. If the Buyer provides the Company with an
opinion of counsel reasonably satisfactory to the Company that registration of a
resale by the Buyer of any of the Securities is not required under the 1933 Act,
the Company shall (except as provided in clause (2) of Section 4(a) of this
Agreement) permit the transfer of the Securities and, in the case of the
Conversion Shares, promptly instruct the Company's transfer agent to issue one
or more certificates for Common Stock without legend in such name and in such
denominations as specified by the Buyer.
h. Reimbursement. If (i) any Buyer, other than by reason of
its gross negligence or willful misconduct, becomes involved in any capacity in
any action, proceeding or investigation brought by any shareholder of the
Company, in connection with or as a result of the consummation of the
transactions contemplated by the Transaction Agreements, or if the Buyer is
impleaded in any such action, proceeding or investigation by any Person, or (ii)
the Buyer, other than by reason of its gross negligence or willful misconduct or
by reason of its trading of the Common Stock in a manner that is illegal under
the federal securities laws, becomes involved in any capacity in any action,
proceeding or investigation brought by the SEC against or involving the Company
or in connection with or as a result of the consummation of the transactions
contemplated by the Transaction Agreements, or if the Buyer is impleaded in any
such action, proceeding or investigation by any Person, then in any such case,
the Company will reimburse the Buyer for its reasonable legal and other expenses
(including the cost of any investigation and preparation) incurred in connection
therewith, as such expenses are incurred. In addition, other than with respect
to any matter in which Buyer is a named party, the Company will pay to the Buyer
the charges, as reasonably determined by Buyer, for the time of any officers or
employees of the Buyer devoted to appearing and preparing to appear as
witnesses, assisting in preparation for hearings, trials or pretrial matters, or
otherwise with respect to inquiries, hearing, trials, and other proceedings
relating to the subject matter of this Agreement. The reimbursement obligations
of the Company under this section shall be in addition to any liability which
the Company may otherwise have, shall extend upon the same terms and conditions
to any Affiliates of the Buyer who or which are actually named in such action,
proceeding or investigation, and partners, directors, agents, employees and
controlling persons (if any), as the case may be, of Buyer and any such
affiliate, and shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the Company, Buyer and any such
affiliate and any such person. The Company also agrees that neither the Buyer
nor any such affiliate, partner, director, agent, employee or controlling person
shall have any liability to the Company or any Person asserting claims on behalf
of or in right of the Company in connection with or as a result of the
consummation of any of the Transaction Agreements, except as may be expressly
and specifically provided in or contemplated by this Agreement.
i. Available Shares. The Company shall have at all times
authorized and reserved for issuance, free from preemptive rights, a number of
shares (the "Minimum Available Shares") at least equal to the sum of (x) one
hundred percent (100%) of the number of shares of Common Stock issuable as may
be required to satisfy the conversion rights of the Holders of all outstanding
Convertible Debentures, plus (y) the number of shares issuable upon exercise of
all outstanding Warrants held by all Holders (in each case, whether such
Convertible Debentures or Warrants were originally issued to the Holder, the
Buyer or to any other Holder or Buyer). For the purposes of such calculations,
the Company should assume that all such Debentures were then convertible and all
Warrants were then exercisable without regard to any restrictions which might
limit any Buyer's right to convert any of the Convertible Debentures or exercise
any of the Warrants held by any Holder.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. The obligation of
the Company hereunder to issue and sell the Debentures and Warrants to Buyer at
the Closing is subject to the satisfaction, at or before the Closing Date of
each of the following conditions thereto, provided that these conditions are for
the Company's sole benefit and may be waived by the Company at any time in its
sole discretion:
a. Buyer shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to the Company.
b. Buyer shall have delivered the Purchase Price in accordance
with Section 1.
c. The representations and warranties of Buyer shall be true
and correct in all material respects as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and Buyer shall have performed,
satisfied and complied in all material respects with the covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by Buyer at or prior to the Closing Date.
d. No undisclosed litigation, statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement.
7. CONDITIONS TO BUYER' OBLIGATION TO PURCHASE. The obligation of Buyer
to purchase the Debentures and Warrants at the Closing is subject to the
satisfaction, at or before the Closing Date of each of the following conditions,
provided that these conditions are for Buyer's sole benefit and may be waived by
Buyer at any time in their sole discretion:
a. The Company shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to Buyer in escrow.
b. The Company shall have delivered to Buyer duly executed
Debentures and Warrants in accordance with Section 1 above.
c. The representations and warranties of the Company shall be
true and correct in all material respects as of the date when made and as of the
Closing Date as though made at such time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing Date.
d. No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.
e. No material undisclosed event shall have occurred which
could reasonably be expected to have a Material Adverse Effect on the Company.
8. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law. THIS AGREEMENT SHALL BE ENFORCED, GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE
TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS. THE PARTIES HERETO HEREBY SUBMIT
TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS AND THE NEW
YORK STATE COURTS LOCATED IN NEW YORK COUNTY IN THE STATE OF NEW YORK WITH
RESPECT TO ANY DISPUTE ARISING UNDER THIS AGREEMENT, THE AGREEMENTS ENTERED INTO
IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. BOTH
PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE THAT SERVICE
OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY
RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW. BOTH PARTIES AGREE THAT A FINAL
NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER
LAWFUL MANNER. The Company and the Buyer hereby waive a trial by jury in any
action, proceeding or counterclaim brought by either of the Parties hereto
against the other in respect of any matter arising out or in connection with the
Transaction Agreements.
b. Counterparts; Signatures by Facsimile. This Agreement may
be executed in one or more counterparts, each of which shall be deemed an
original but all of which shall constitute one and the same agreement and shall
become effective when counterparts have been signed by each party and delivered
to the other party. This Agreement, once executed by a party, may be delivered
to the other party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.
c. Headings. The headings of this Agreement are for
convenience of reference only and shall not form part of, or affect the
interpretation of, this Agreement.
d. Severability. In the event that any provision of this
Agreement is invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law. Any provision hereof which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
hereof.
e. Entire Agreement; Amendments. This Agreement and the
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor Buyer makes
any representation, warranty, covenant or undertaking with respect to such
matters. Except as provided herein, no provision of this Agreement may be waived
or amended other than by an instrument in writing signed by the party to be
charged with enforcement.
f. Notices. Any notices required or permitted to be given
under the terms of this Agreement shall be sent by certified or registered mail
(return receipt requested) or delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile and shall be effective
five days after being placed in the mail, if mailed by regular United States
mail, or upon receipt, if delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile, in each case addressed
to a party. The addresses for such communications shall be:
If to the Company:
Attn.: Xxxxxxx Xxxxxxxxx, President
Peak Entertainment Holdings, Inc.
Xxxxxxx Xxxx, Xxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxx, XX XX00 0XX
Tel: x00(0)0000 000000
Fax: x00(0)0000 000000
With a copy (which shall not constitute
notice) to:
Attn.: Xxx Xxxxxxx, Esq.
Law Offices of Xxx Xxxxxxx
00 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Tel: 000-000-0000
Fax: 000-000-0000
If to a Buyer:
At the address and facsimile number listed
on the signature page hereof.
Each party shall provide notice to the other party of any change in address.
g. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and assigns.
Neither the Company nor any Buyer shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other.
Notwithstanding the foregoing, subject to Section 2(f), any Buyer may assign its
rights hereunder to any person that purchases Securities in a private
transaction from a Buyer or to any of its "affiliates," as that term is defined
under the 1934 Act.
h. Third Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
i. Further Assurances. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
j. No Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
k. Remedies. The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to Buyer by vitiating the
intent and purpose of the transaction contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Agreement will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Agreement, that Buyer
shall be entitled, in addition to all other available remedies at law or in
equity.
l. Survival. The representations, warranties and covenants
made by each of the Company and Buyer in this Agreement, the annexes, schedules
and exhibits hereto and in each instrument, agreement and certificate entered
into and delivered by them pursuant to this Agreement, shall survive the Closing
and the consummation of the transactions contemplated hereby. In the event of a
breach or violation of any of such representations, warranties or covenants, the
party to whom such representations, warranties or covenants have been made shall
have all rights and remedies for such breach or violation available to it under
the provisions of this Agreement, irrespective of any investigation made by or
on behalf of such party on or prior to the Closing Date.
m. Indemnification.
(a) The Company hereby agrees to indemnify and hold
harmless Buyer and its officers, directors, partners and members (collectively,
the "Buyer Indemnitees"), from and against any and all damages, and agrees to
reimburse Buyer Indemnitees for all reasonable out-of-pocket expenses (including
the reasonable fees and expenses of legal counsel), in each case promptly as
incurred by Buyer Indemnitees and to the extent arising out of or in connection
with:
(i) any material misrepresentation, omission
of fact or breach of any of the Company's representations or warranties
contained in this Agreement, the annexes, schedules or exhibits hereto or any
instrument, agreement or certificate entered into or delivered by the Company
pursuant to this Agreement; or
(ii) any material failure by the Company to
perform in any material respect any of its covenants, agreements, undertakings
or obligations set forth in this Agreement, the annexes, schedules or exhibits
hereto or any instrument, agreement or certificate entered into or delivered by
the Company pursuant to this Agreement; or
(iii) any action instituted against any
Buyer, or any of its affiliates, by any stockholder of the Company who is not an
affiliate of Buyer, with respect to any of the transactions contemplated by this
Agreement.
(b) Buyer hereby agrees to indemnify and hold
harmless the Company, its affiliates and its respective officers, directors,
partners and members (collectively, the "Company Indemnitees"), from and against
any and all damages, and agrees to reimburse the Company Indemnitees for
reasonable all out-of-pocket expenses (including the reasonable fees and
expenses of legal counsel), in each case promptly as incurred by the Company
Indemnitees and to the extent arising out of or in connection with:
(i) any material misrepresentation, omission
of fact, or breach of any of any Buyer's representations or warranties contained
in this Agreement, the annexes, schedules or exhibits hereto or any instrument,
agreement or certificate entered into or delivered by Buyer pursuant to this
Agreement; or
(ii) any material failure by Buyer to
perform in any material respect any of its covenants, agreements, undertakings
or obligations set forth in this Agreement or any instrument, certificate or
agreement entered into or delivered by Buyer pursuant to this Agreement.
(c) Promptly after receipt by either party hereto
seeking indemnification pursuant to this Section 8(m) (an "Indemnified Party")
of written notice of any investigation, claim, proceeding or other action in
respect of which indemnification is being sought (each, a "Claim"), the
Indemnified Party promptly shall notify the party from whom indemnification
pursuant to this Section 8(m) is being sought (the "Indemnifying Party") of the
commencement thereof; but the omission to so notify the Indemnifying Party shall
not relieve it from any liability that it otherwise may have to the Indemnified
Party, except to the extent that the Indemnifying Party is actually prejudiced
by such omission or delay. In connection with any Claim as to which both the
Indemnifying Party and the Indemnified Party are parties, the Indemnifying Party
shall be entitled to assume the defense thereof. Notwithstanding the assumption
of the defense of any Claim by the Indemnifying Party, the Indemnified Party
shall have the right to employ separate legal counsel and to participate in the
defense of such Claim, and the Indemnifying Party shall bear the reasonable
fees, out-of-pocket costs and expenses of such separate legal counsel to the
Indemnified Party if (and only if): (x) the Indemnifying Party shall have agreed
to pay such fees, out-of-pocket costs and expenses, (y) the Indemnified Party
reasonably shall have concluded that representation of the Indemnified Party and
the Indemnifying Party by the same legal counsel would not be appropriate due to
actual or, as reasonably determined by legal counsel to the Indemnified Party,
potentially differing interests between such parties in the conduct of the
defense of such Claim, or if there may be legal defenses available to the
Indemnified Party that are in addition to or disparate from those available to
the Indemnifying Party, or (z) the Indemnifying Party shall have failed to
employ legal counsel reasonably satisfactory to the Indemnified Party within a
reasonable period of time after notice of the commencement of such Claim. If the
Indemnified Party employs separate legal counsel in circumstances other than as
described in clauses (x), (y) or (z) above, the fees, costs and expenses of such
legal counsel shall be borne exclusively by the Indemnified Party. Except as
provided above, the Indemnifying Party shall not, in connection with any Claim
in the same jurisdiction, be liable for the fees and expenses of more than one
firm of legal counsel for the Indemnified Party (together with appropriate local
counsel). The Indemnifying Party shall not, without the prior written consent of
the Indemnified Party (which consent shall not unreasonably be withheld), settle
or compromise any Claim or consent to the entry of any judgment that does not
include an unconditional release of the Indemnified Party from all liabilities
with respect to such Claim or judgment.
[signature page follows]
IN WITNESS WHEREOF, the undersigned Buyer and the Company have caused
this Agreement to be duly executed as of the date first above written.
THE COMPANY: PEAK ENTERTAINMENT HOLDINGS, INC.
By: /s/ Wilf Shorrocks
-------------------------------------
Wilf Shorrocks
President and Chief Executive Officer
BUYER: /s/ Xxxx Xxxxx
-------------------------
Xxxx X. Xxxxx
STATE OF RESIDENCE: NY
ADDRESS: 00 Xxxxx Xxx Xxxxxxxxxx, XX 00000
TELEPHONE: 000-000-0000
FACSIMILE: 000-000-0000
SUBSCRIPTION AMOUNT:
Debentures: $50,000
Warrants: 100,000
SCHEDULE 3(c)
Securities and rights issued in connection with the Securities Purchase
Agreement dated as of April 22, 2003
Securities and rights issued in connection with Securities Purchase Agreement
dated as of February 28, 2002, as amended March 14, 2003, and as amended June
17, 2003
January 5, 2004 Settlement Agreement and Release Agreement with the holders of
the securities issued under the Securities Purchase Agreement dated as of April
22, 2003 and the Securities Purchase Agreement dated as of February 28, 2002, as
amended.
Warrants to purchase 750,000 shares of the Company's common stock, exercisable
for five years at $0.35 per share issued pursuant to a consulting agreement.
Warrants to purchase 240,000 shares of common stock, exercisable for three years
at $0.50 per share pursuant to an amended consulting agreement with Xxxx
Xxxxxxxx.
Loan of $100,000 from Xxxx Xxxxxxxx exchanged for 583,333 shares of common stock
and common stock purchase warrants to purchase 150,000 shares of common stock,
exercisable for three years at an exercise price of $0.50 per share.
Stock Option Plan, which may be subdivided as appropriate, for Employees,
Management and other persons entitled to participate in an amount of up to 10%
of the Company's common stock.
Securities and rights issued in connection with January 5, 2004 Securities
Purchase Agreements for an aggregate amount of $1,500,000.
SCHEDULE 3(g)
Consulting Agreement with POW! Entertainment LLC and Xxxx Xxx
Consulting Agreement with Xxxx Xxxxxxxx, as amended
Loan of $100,000 Xxxx Xxxxxxxx cancelled in exchange for securities
January 5, 2004 Settlement Agreement and Release Agreement with the holders of
the securities issued under the Securities Purchase Agreement dated as of April
22, 2003 and the Securities Purchase Agreement dated as of February 28, 2002, as
amended, for the resolution of issues and return of securities in connection
with securities and rights issued in connection with the Securities Purchase
Agreement dated as of April 22, 2003, and Securities and rights issued in
connection with Securities Purchase Agreement dated as of February 28, 2002, as
amended March 14, 2003, and as amended June 17, 2003.
Items listed in Schedule 3(c) are incorporated by reference herein.
The Company intends to amend the following SEC Documents:
1. Form 8-K/A filed July 2, 2003
2. Amendment and/or withdrawal of the registration statement for
the resale of the common stock underlying presently
outstanding debentures.
The Company has submitted on November 24, 2003 an amendment to the Form 10-QSB
for the period ended June 30, 2003.
SCHEDULE 3(h)
Consulting Agreement with POW! Entertainment LLC and Xxxx Xxx Consulting
Agreement with Xxxx Xxxxxxxx, as amended Loan of $100,000 Xxxx Xxxxxxxx
cancelled in exchange for securities Items listed in Schedule 3(c) are
incorporated by reference herein. Items listed in Schedule 3(g) are incorporated
by reference herein.
January 5, 2004 Settlement Agreement and Release Agreement with the holders of
the securities issued under the Securities Purchase Agreement dated as of April
22, 2003 and the Securities Purchase Agreement dated as of February 28, 2002, as
amended, for the resolution of issues and return of securities in connection
with securities and rights issued in connection with the Securities Purchase
Agreement dated as of April 22, 2003, and Securities and rights issued in
connection with Securities Purchase Agreement dated as of February 28, 2002, as
amended March 14, 2003, and as amended June 17, 2003.
SCHEDULE 3(i)
January 5, 2004 Settlement Agreement and Release Agreement with the holders of
the securities issued under the Securities Purchase Agreement dated as of April
22, 2003 and the Securities Purchase Agreement dated as of February 28, 2002, as
amended, for the resolution of issues and return of securities in connection
with securities and rights issued in connection with the Securities Purchase
Agreement dated as of April 22, 2003, and Securities and rights issued in
connection with Securities Purchase Agreement dated as of February 28, 2002, as
amended March 14, 2003, and as amended June 17, 2003.
SCHEDULE 3(m)
None.
EXHIBIT A
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE SECURITIES MAY NOT BE
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL IN FORM,
SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR UNLESS SOLD PURSUANT TO RULE
144 UNDER SAID ACT.
Peak Entertainment Holdings, Inc.
8% CONVERTIBLE DEBENTURE DUE January 29, 2007
Debenture No. C-1
THIS DEBENTURE is issued by Peak Entertainment Holdings, Inc., a
corporation organized and existing under the laws of the State of Nevada (the
"Company") and is designated as its 8% Convertible Debenture Due January 29,
2007 (the "Debentures").
FOR VALUE RECEIVED, the Company promises to pay to Xxxx Xxxxx (the
"Holder"), the principal sum of Fifty Thousand Dollars ($50,000) on January 29,
2007 (the "Maturity Date") and to pay interest on the principal sum outstanding
from time to time annually in arrears at the rate of eight percent (8%) per
annum accruing from the date of initial issuance. The Company will pay the
principal of, and any accrued but unpaid interest due upon this Debenture on the
Maturity Date, by check or wire transfer to the person who is the registered
holder of this Debenture as of the tenth day prior to the Maturity Date and
addressed to such holder at the last address appearing on the Debenture
Register. The forwarding of such check or money order shall constitute a payment
of principal and interest hereunder and shall satisfy and discharge the
liability for principal and interest on this Debenture to the extent of the sum
represented by such check or wire transfer plus any amounts so deducted.
This Debenture is subject to the following additional provisions:
1. The Company shall be entitled to withhold from all payments of
interest on this Debenture any amounts required to be withheld under the
applicable provisions of the United States income tax laws or other applicable
laws at the time of such payments, and the Holder shall execute and deliver all
required documentation in connection therewith.
2. This Debenture has been issued subject to investment representations
of the original purchaser hereof and may be transferred or exchanged only in
compliance with the Securities Act of 1933, as amended (the "Act"), and other
applicable state and foreign securities laws. The Holder shall deliver written
notice to the Company of any proposed transfer of this Debenture. In the event
of any proposed transfer of this Debenture, the Company may require, prior to
issuance of a new Debenture in the name of such other person, that it receive
reasonable transfer documentation including legal opinions that the issuance of
the Debenture in such other name does not and will not cause a violation of the
Act or any applicable state or foreign securities laws. Prior to due presentment
for transfer of this Debenture, the Company and any agent of the Company may
treat the person in whose name this Debenture is duly registered on the
Company's Debenture Register as the owner hereof for the purpose of receiving
payment as herein provided and for all other purposes, whether or not this
Debenture be overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary. This Debenture has been executed and
delivered pursuant to the Securities Purchase Agreement, dated as of January 29,
2004 between the Company and the Holder (the "Securities Purchase Agreement"),
and is subject to the terms and conditions of the Securities Purchase Agreement,
which are, by this reference, incorporated herein and made a part hereof.
Capitalized terms used and not otherwise defined herein shall have the meanings
set forth for such terms in the Securities Purchase Agreement.
3. The Holder of this Debenture is entitled, at its option, to convert
at any time commencing on the earlier of the date of effectiveness of the
registration statement or failure to materially fulfill the Registration Rights
Agreement, the principal amount of this Debenture or any portion thereof, plus,
at the Holder's election, any accrued and unpaid interest, into shares of Common
Stock of the Company ("Conversion Shares") at a conversion price for each share
of Common Stock ("Conversion Price") of $0.30 per share, subject to adjustment
for stock splits and the like. If, upon any conversion of this Debenture, the
Company's issuance of Conversion Shares would cause it to violate any listing
requirement of the OTCBB or other public market through which the Company's
Common Stock is listed or quoted, then in lieu of such stock issuance, the
Company shall pay the Holder cash in an amount equal to the closing price of the
Common Stock on the Conversion Date multiplied by the number of shares which
would otherwise have been issuable upon such conversion within five (5) calendar
days.
In case of any stock split or reverse stock split, stock
dividend, reclassification of the common stock, recapitalization, merger or
consolidation, or like capital adjustment affecting the Common Stock of the
Company, the provisions of this Section 3 shall be applied in a fair, equitable
and reasonable manner so as to give effect, as nearly as may be, to the purposes
hereof.
For a two year period from issuance, the Conversion Price
shall be adjusted for dilutive issuances of securities for value by the Company
which shall constitute an Adjustment Event, as defined herein. The term
"Adjustment Event" shall mean any issuance by the Company for the Company's
common stock or convertible in to the Company's common stock (excluding
securities issued to the Company's employees, directors, consultants and others
similarly situtated in the ordinary course of business and not for capital
raising purposes) below the lower of (a) $.50 per common share, or (b) fair
market value for such securities as determined at the time of issuance. Upon the
occurrence of an Adjustment Event, appropriate and proportionate adjustments
shall be made to the Conversion Price on a xxxxx for xxxxx basis. The good faith
determination by the Board of Directors as to what adjustments, amendments or
arrangements shall be made to the Conversion Price, and the extent thereof,
shall be final and conclusive, provided that the Conversion Price is adjusted in
a manner that is no less favorable than the manner of adjustment used as to any
other person with similar adjustment rights.
4. The rate of interest on this Debenture shall be eight percent (8%),
per annum, on the outstanding principal until paid or converted. If any interest
payment date or the Maturity Date is not a business day in the State of New
York, then such payment shall be made on the next succeeding business day.
Accrual of interest shall commence on the first business day to occur after the
date of Closing and continue until payment in full of the principal sum has been
made or duly provided for. Annual interest payments shall be due and payable on
January 29 of each year, commencing with January 29, 2005, provided, however,
that at the option of the Company, interest payments may be accrued beyond the
annual interest payment date, in which event the Holder shall have the option to
(a) accrue the interest payment then due for another interest payment period, or
(b) cause the Company to issue Common Stock in exchange for interest otherwise
payable in cash pursuant to this Debenture, the exact number of shares of Common
Stock into which such interest payment is convertible shall be based on the
average of the closing bid prices of the Common Stock over the twenty (20)
trading days immediately prior to the interest payment date.
5. On the Maturity Date, the Company will pay the principal of, and any
accrued but unpaid interest due upon, this Debenture, less any amounts required
by law to be deducted, to the registered holder of this Debenture and addressed
to such holder at the last address appearing on the Debenture Register.
6. (a) Conversion or all or a part of this Debenture shall be
effectuated by surrendering this Debenture to the Company (if such Conversion
will convert all outstanding principal) together with the form of conversion
notice attached hereto as Exhibit A (the "Notice of Conversion"), executed by
the Holder of this Debenture evidencing such Holder's intention to convert this
Debenture or a specified portion (as above provided) hereof, and accompanied, if
required by the Company, by proper assignment hereof in blank. Interest accrued
or accruing from the date of issuance to the date of conversion shall be paid as
set forth above. No fraction of a share or scrip representing a fraction of a
share will be issued on conversion, but the number of shares issuable shall be
rounded to the nearest whole share. The date on which Notice of Conversion is
given (the "Conversion Date") shall be deemed to be the date on which the Holder
faxes the Notice of Conversion duly executed to the Company. Facsimile delivery
of the Notice of Conversion shall be accepted by the Company at facsimile number
x00(0)0000 000000, Attn.: Xxxxxxx Xxxxxxxxx, President, or such other facsimile
number provided, in writing, by the Company. Certificates representing Common
Stock upon conversion will be delivered to the Holder within three (3) Trading
Days from the date the Notice of Conversion is delivered to the Company
("Delivery Date"). Delivery of shares upon conversion shall be made to the
address specified by the Holder in the Notice of Conversion.
(b) The Company understands that a delay in the issuance of
the Shares of Common Stock beyond the Delivery Date could result in economic
loss to the Lender. As compensation to the Lender for such loss, the Company
agrees to pay late payments to the Lender for late issuance of Shares upon
Conversion in accordance with the following schedule (where "No Business Days
Late" refers to the number of business days which is beyond two (2) business
days after the Delivery Date):1
Late Payment For Each $10,000
of Debenture Principal or Interest
No. Business Days Late Amount Being Converted
---------------------- ----------------------
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
>10 $1,000 +$200 for each Business
Day Late beyond 10 days
The Company shall pay any payments incurred under this Section in immediately
available funds upon demand as the Lender's exclusive remedy (other than the
following provisions of this Section 6 for such delay). Furthermore, in addition
to any other remedies which may be available to the Lender, in the event that
the Company fails for any reason to effect delivery of such shares of Common
Stock by close of business on the Delivery Date, the Lender will be entitled to
revoke the relevant Notice of Conversion by delivering a notice to such effect
to the Company, whereupon the Company and the Lender shall each be restored to
their respective positions immediately prior to delivery of such Notice of
Conversion; provided, however, that an amount equal to any payments contemplated
by this Section 6 (b) which have accrued through the date of such revocation
notice shall remain due and owing to the Converting Holder notwithstanding such
revocation. Anything in the foregoing provisions of this paragraph (b) to the
contrary notwithstanding, the total amount payable by the Company under this
paragraph (b) shall be reduced by an amount equal to fifty percent (50%) of any
Buy-In Adjustment Amount (as defined below) actually paid by the Company to the
Holder (but not by more than the total amount due without regard to the
provisions of this sentence).
--------
1 Example: Notice of Conversion is delivered on Monday, October 3, 2003. The
Delivery Date would be Thursday, October 6 (the third business day after such
delivery). If the certificate is delivered by Monday October 10 (2 business days
after the Delivery Date), no payment under this provision is due. If the
certificates are delivered on October 11, that is 1 "Business Day Late" in the
table below; if delivered on October 18, that is 6 "Business Days Late" in the
table.
(c) If, by the relevant Delivery Date, the Company fails for
any reason to deliver the Shares to be issued upon conversion of a Debenture and
after such Delivery Date, the Holder of the Debentures being converted (a
"Converting Holder") purchases, in an arm's-length open market transaction or
otherwise, shares of Common Stock (the "Covering Shares") in order to make
delivery in satisfaction of a sale of Common Stock by the Converting Holder (the
"Sold Shares"), which delivery such Converting Holder anticipated to make using
the Shares to be issued upon such conversion (a "Buy-In"), the Converting Holder
shall have the right, to require the Company to pay to the Converting Holder, in
addition to and not in lieu of the amounts due under Section 5(b) hereof (but in
addition to all other amounts contemplated in other provisions of the
Transaction Agreements, and not in lieu of any such other amounts), the Buy-In
Adjustment Amount (as defined below). The "Buy-In Adjustment Amount" is the
amount equal to the excess, if any, of (x) the Converting Holder's total
purchase price (including brokerage commissions, if any) for the Covering Shares
over (y) the net proceeds (after brokerage commissions, if any) received by the
Converting Holder from the sale of the Sold Shares. The Company shall pay the
Buy-In Adjustment Amount to the Company in immediately available funds
immediately upon demand by the Converting Holder. By way of illustration and not
in limitation of the foregoing, if the Converting Holder purchases shares of
Common Stock having a total purchase price (including brokerage commissions) of
$11,000 to cover a Buy-In with respect to shares of Common Stock it sold for net
proceeds of $10,000, the Buy-In Adjustment Amount which Company will be required
to pay to the Converting Holder will be $1,000.
(d) In lieu of delivering physical certificates representing
the Common Stock issuable upon conversion, provided the Company's transfer agent
is participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer program, upon request of the Holder and its compliance with
the provisions contained in this paragraph, so long as the certificates therefor
do not bear a legend and the Holder thereof is not obligated to return such
certificate for the placement of a legend thereon, the Company shall use its
best efforts to cause its transfer agent to electronically transmit the Common
Stock issuable upon conversion to the Holder by crediting the account of
Holder's Prime Broker with DTC through its Deposit Withdrawal Agent Commission
system.
(e) The holder of any Debentures shall be entitled to exercise
its conversion privilege with respect to the Debentures notwithstanding the
commencement of any case under 11 U.S.C. ss.101 et seq. (the "Bankruptcy Code").
In the event the Company is a debtor under the Bankruptcy Code, the Company
hereby waives, to the fullest extent permitted, any rights to relief it may have
under 11 U.S.C. ss.362 in respect of such holder's conversion privilege. The
Company hereby waives, to the fullest extent permitted, any rights to relief it
may have under 11 U.S.C. ss.362 in respect of the conversion of the Debentures.
The Company agrees, without cost or expense to such holder, to take or to
consent to any and all action reasonably necessary to effectuate relief under 11
U.S.C. ss.362.
(f) The Company will authorize its transfer agent to give
information relating to the Company directly to the Lender or the Lender's
representatives upon the request of the Lender or any such representative, to
the extent such information relates to (i) the status of shares of Common Stock
issued or claimed to be issued to the Lender in connection with a Notice of
Conversion or exercise of a Warrant, or (ii) the number of outstanding shares of
Common Stock of all shareholders as of a current or other specified date. On the
Closing Date, the Company will provide the Lender with a copy of the
authorization so given to the transfer agent.
7. No provision of this Debenture shall alter or impair the obligation
of the Company, which is absolute and unconditional, to pay the principal of,
and interest on, this Debenture at the time, place, and rate, and in the coin or
currency or shares of Common Stock herein prescribed. This Debenture is a direct
obligation of the Company.
8. No recourse shall be had for the payment of the principal of, or the
interest on, this Debenture, or for any claim based hereon, or otherwise in
respect hereof, against any incorporator, shareholder, employee, officer or
director, as such, past, present or future, of the Company or any successor
corporation, whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance hereof and as part of the consideration for the issue
hereof, expressly waived and released.
9. (a) In case of any (1) merger or consolidation of the Company with
or into another third party entity, excluding non-material transactions with
parent, subsidiaries or affiliates, or (2) sale by the Company of more than
one-half of the assets of the Company (on an as valued basis) in one or a series
of related transactions, the Holder shall have the right to (A) deem such an
occurrence an Event of Default and exercise its rights of prepayment pursuant to
Xxxxxxxxx 00 xxxxxx, (X) convert its aggregate principal amount of this
Debenture then outstanding into the shares of stock and other securities, cash
and property receivable upon or deemed to be held by holders of Common Stock
following such merger, consolidation or sale, and the Holder shall be entitled
upon such event or series of related events to receive such amount of
securities, cash and property as the shares of Common Stock into which such
aggregate principal amount of this Debenture could have been converted
immediately prior to such merger, consolidation or sales would have been
entitled, or (C) in the case of a merger or consolidation, (x) require the
surviving entity to issue convertible debentures with such aggregate stated
value or in such face amount, as the case may be, equal to the aggregate
principal amount of this Debenture then held by the Holder, plus all accrued and
unpaid interest and other amounts owing thereon, which newly issued debentures
shall have terms identical (including with respect to conversion) to the terms
of this Debenture and shall be entitled to all of the rights and privileges of
the Holder of this Debenture set forth herein and the agreements pursuant to
which this Debenture was issued (including, without limitation, as such rights
relate to the acquisition, transferability, registration and listing of such
shares of stock and other securities issuable upon conversion thereof), and (y)
simultaneously with the issuance of such convertible debentures, shall have the
right to convert such instrument only into shares of stock and other securities,
cash and property receivable upon or deemed to be held by holders of Common
Stock following such merger or consolidation. In the case of clause (C), the
conversion price applicable for the newly convertible debentures shall be based
upon the amount of securities, cash and property that each share of Common Stock
would receive in such transaction and the Conversion Price in effect immediately
prior to the effectiveness or closing date for such transaction. The terms of
any such merger, sale or consolidation shall include such terms so as to
continue to give the Holder the right to receive the securities, cash and
property set forth in this Paragraph upon any conversion or redemption following
such event. This Paragraph shall similarly apply to successive such events.
(b) If, at any time while any portion of this Debenture
remains outstanding, the Company spins off or otherwise divests itself of a part
of its business or operations or disposes of all or of a part of its assets in a
transaction (the "Spin Off") in which the Company, in addition to or in lieu of
any other compensation received and retained by the Company for such business,
operations or assets, causes securities of another entity (the "Spin Off
Securities") to be issued to security holders of the Company, the Company shall
cause (i) to be reserved Spin Off Securities equal to the number thereof which
would have been issued to the Holder had all of the Holder's Debentures
outstanding on the record date (the "Record Date") for determining the amount
and number of Spin Off Securities to be issued to security holders of the
Company (the "Outstanding Debentures") been converted as of the close of
business on the trading day immediately before the Record Date (the "Reserved
Spin Off Shares"), and (ii) to be issued to the Holder on the conversion of all
or any of the Outstanding Debentures, such amount of the Reserved Spin Off
Shares equal to (x) the Reserved Spin Off Shares multiplied by (y) a fraction,
of which (I) the numerator is the principal amount of the Outstanding Debentures
then being converted, and (II) the denominator is the principal amount of the
Outstanding Debentures.
10. The Holder of the Debenture, by acceptance hereof, agrees that this
Debenture is being acquired for investment and that such Holder will not offer,
sell or otherwise dispose of this Debenture or the Conversion Shares except
under circumstances which will not result in a violation of the Act or any
applicable state Blue Sky or foreign laws or similar laws relating to the sale
of securities.
11. This Debenture shall be governed by and construed in accordance
with the laws of the State of New York. Each of the parties consents to the
jurisdiction of the federal courts and the state courts located in New York
County in the State of New York in connection with any dispute arising under
this Agreement and hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on forum non conveniens, to the
bringing of any such proceeding in such jurisdictions.
12. The following shall constitute an "Event of Default":
a. The Company shall default in the payment of principal or
interest on this Debenture and same shall continue for a period of twenty
business days; or
b. Any of the material representations or warranties made by
the Company herein, in the Securities Purchase Agreement, the Registration
Rights Agreement, or in any agreement, certificate or financial statements
heretofore or hereafter furnished by the Company in connection with the
execution and delivery of this Debenture or the Securities Purchase Agreement
shall be false or misleading in any material respect at the time made; or
c. The Company fails to issue shares of Common Stock to the
Holder or to cause its Transfer Agent to issue shares of Common Stock upon
proper exercise by the Holder of the conversion rights of the Holder in
accordance with the terms of this Debenture, fails to transfer or to cause its
Transfer Agent to transfer any certificate for shares of Common Stock issued to
the Holder upon conversion of this Debenture as and when required by this
Debenture or the Registration Rights Agreement, and such transfer is otherwise
lawful, or fails to remove any restrictive legend or to cause its Transfer Agent
to transfer any certificate or any shares of Common Stock issued to the Holder
upon conversion of this Debenture as and when required by this Debenture, the
Securities Purchase Agreement or the Registration Rights Agreement and such
legend removal is otherwise lawful, and any such failure shall continue uncured
for twenty business days; or
d. The Company shall, without cause, fail to perform or
observe, in any material respect, any other material covenant, term, provision,
condition, agreement or obligation of the Company under the Securities Purchase
Agreement, the Registration Rights Agreement or this Debenture and such failure
shall continue uncured for a period of thirty days after written notice from the
Holder of such failure; or
e. The Company shall (1) admit in writing its inability to pay
its debts generally as they mature; (2) make an assignment for the benefit of
creditors or commence proceedings for its dissolution; or (3) apply for or
consent to the appointment of a trustee, liquidator or receiver for its or for a
substantial part of its property or business; or
f. A trustee, liquidator or receiver shall be appointed for
the Company or for a substantial part of its property or business without its
consent and shall not be discharged within sixty (60) days after such
appointment; or
g. Any governmental agency or any court of competent
jurisdiction at the instance of any governmental agency shall assume custody or
control of the whole or any substantial portion of the properties or assets of
the Company and shall not be dismissed within sixty (60) days thereafter; or
h. Any money judgment, writ or warrant of attachment, or
similar process in excess of One Hundred Thousand ($100,000) Dollars in the
aggregate shall be entered or filed against the Company or any of its properties
or other assets and shall remain unpaid, unvacated, unbonded or unstayed for a
period of sixty (60) days or in any event later than five (5) days prior to the
date of any proposed sale thereunder; or
i. Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against the Company and, if
instituted against the Company, shall not be dismissed within sixty (60) days
after such institution or the Company shall by any action or answer approve of,
consent to, or acquiesce in any such proceedings or admit the material
allegations of, or default in answering a petition filed in any such proceeding;
j. Subject to the Company's reasonable efforts to obtain
effectiveness of the Registration Statement, the Registration Statement is not
declared effective by the Commission within one hundred eighty (180) days from
the Closing Date;
k. Upon a properly noticed Notice of Conversion, the Company
fails to deliver Conversion Shares, when lawful to do so, within 10 Trading Days
of such Notice of Conversion; and
l. The Company shall have its Common Stock suspended or
delisted from trading on the OTCBB or other quotation service, exchange or
public market on which the Company's Common Stock is then quoted or listed for
in excess of twenty business days, and the Company does not obtain listing or
quotation of its Common Stock with a comparable quotation service, exchange or
public market.
Then, or at any time thereafter, and in each and every such case,
unless such Event of Default shall have been waived in writing by the Holder
(which waiver shall not be deemed to be a waiver of any subsequent default), at
the option of the Holder, and in the Holder's sole discretion, the Holder may
consider this Debenture immediately due and payable, without presentment,
demand, protest or notice of any kind, all of which are hereby expressly waived,
anything herein or in any note or other instruments contained to the contrary
notwithstanding, and the Holder may immediately enforce any and all of the
Holder's rights and remedies provided herein or any other rights or remedies
afforded by law.
13. Nothing contained in this Debenture shall be construed as
conferring upon the Holder the right to vote or to receive dividends or to
consent or receive notice as a shareholder in respect of any meeting of
shareholders or any rights whatsoever as a shareholder of the Company, unless
and to the extent converted in accordance with the terms hereof.
14. In no event shall the Holder be permitted to convert this Debenture
for shares of Common Stock to the extent that (x) the number of shares of Common
Stock beneficially owned by such Holder (other than shares of Common Stock
issuable upon conversion of this Debenture) plus (y) the number of shares of
Common Stock issuable upon conversion of this Debenture, would be equal to or
exceed 4.9% of the number of shares of Common Stock then issued and outstanding,
including shares issuable upon conversion of this Debenture held by such Holder
after application of this Paragraph 14. 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 and regulations thereunder. To the extent
that the limitation contained in this Paragraph 14 applies, the determination of
whether this Debenture is convertible (in relation to other securities owned by
the Holder) and of which a portion of this Debenture is convertible shall be in
the sole discretion of such Holder, and the submission of a Notice of Conversion
shall be deemed to be such Holder's determination of whether this Debenture is
convertible (in relation to other securities owned by such holder) and of which
portion of this Debenture is convertible, in each case subject to such aggregate
percentage limitation, and the Company shall have no obligation to verify or
confirm the accuracy of such determination. Nothing contained herein shall be
deemed to restrict the right of a holder to convert this Debenture into shares
of Common Stock at such time as such conversion will not violate the provisions
of this Paragraph 14. The provisions of this Paragraph 14 may be waived by the
Holder of this Debenture upon, at the election of the Holder, not less than 75
days' prior notice to the Company, and the provisions of this Paragraph 14 shall
continue to apply until such 75th day (or such later date as may be specified in
such notice of waiver). No conversion of this Debenture in violation of this
Paragraph 14 but otherwise in accordance with this Debenture shall affect the
status of the Common Stock issued upon such conversion as validly issued,
fully-paid and nonassessable. If instead of receiving cash on the Maturity Date
the Holder instead exercises its right to convert this Debenture into Common
Stock pursuant to Paragraph 3 by delivery of a Notice of Conversion prior to
receipt of payment, and such conversion would cause the limit contained in the
first sentence of this Paragraph 14 to be exceeded, such conversion of this
Debenture shall occur up to such limit and the remaining unconverted portion of
this Debenture shall be converted into Common Stock (1) in accordance with one
or more Notices of Conversion delivered by the Holder, or (2) 65 days after the
Maturity Date, whichever is earlier. Notwithstanding anything contained herein
to the contrary, no interest shall accrue after the Maturity Date on any such
unconverted portion of this Debenture.
15. By its acceptance of this Debenture, the Holder agrees to be bound
by the applicable terms of the Securities Purchase Agreement.
[signature page follows]
IN WITNESS WHEREOF, Borrower has caused this Debenture to be signed in
its name by its duly authorized officer this 29th day of January, 2004.
Peak Entertainment Holdings, Inc.
By: /s/ Wilf Shorrocks
-------------------------------------
Wilf Shorrocks
President and Chief Executive Officer
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Debentures)
The undersigned hereby irrevocably elects to convert $ ________________
of the principal amount of the above Debenture No. ___ into Shares of Common
Stock of Peak Entertainment Holdings, Inc. (the "Company") according to the
conditions hereof, as of the date written below.
Date of Conversion:_____________________________________________________________
Conversion Price:_______________________________________________________________
Accrued Interest:_______________________________________________________________
Number of Shares of Common Stock to be Issued:__________________________________
Name:___________________________________________________________________________
Signature:______________________________________________________________________
Address:________________________________________________________________________
EXHIBIT B
THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. EXCEPT AS
OTHERWISE SET FORTH HEREIN, OR IN THE SECURITIES PURCHASE AGREEMENT, NEITHER
THIS WARRANT NOR ANY OF SUCH SHARES MAY BE SOLD, PLEDGED, TRANSFERRED, ASSIGNED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR SUCH SECURITIES UNDER SAID ACT OR, AN OPINION OF COUNSEL, IN FORM,
SUBSTANCE AND SCOPE, CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE
TRANSACTIONS, THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD
PURSUANT TO RULE 144 UNDER SUCH ACT.
Right to Purchase 100,000 Shares of Common Stock at $0.50 Per Share
Peak Entertainment Holdings, Inc.
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, Xxxx Xxxxx (the "Holder"), is
entitled, upon the terms and subject to the conditions hereinafter set forth, at
any time on or after the closing of the related Securities Purchase Agreement
dated as of January 29, 2004 (the "Initial Exercise Date") and on or prior to
the close of business on January 29, 2007 (the "Termination Date"), but not
thereafter, to subscribe for and purchase from Peak Entertainment Holdings,
Inc., a Nevada corporation (the "Company"), up to 100,000 fully paid and
nonassessable shares of the Company's Common Stock (the "Common Stock"), at the
exercise price of $0.50 per share (the "Exercise Price"). The Exercise Price and
the number of shares for which this Warrant is exercisable shall be subject to
adjustment as provided herein. In the event of any conflict between the terms of
this Warrant and the Securities Purchase Agreement, dated as of January 29,
2004, by and among the Company and Buyer listed on the execution page thereof
(the "Securities Purchase Agreement"), the Securities Purchase Agreement shall
control. Capitalized terms used and not otherwise defined herein shall have the
meanings set forth for such terms in the Securities Purchase Agreement.
1. Title to Warrant. Prior to the Termination Date and subject to
compliance with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company by the
holder hereof in person or by duly authorized attorney, upon surrender of this
Warrant together with the Assignment Form annexed hereto, properly endorsed.
2. Authorization of Shares. The Company covenants that all shares of
Common Stock which may be issued upon the exercise of rights represented by this
Warrant will, upon exercise of the rights represented by this Warrant, be duly
authorized, validly issued, fully paid and nonassessable and free from all
taxes, liens and charges in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously with such issue).
3. Exercise of Warrant. Except as provided in Sections 4 and 5 herein,
exercise of the purchase rights represented by this Warrant may be made at any
time or times on or after the Initial Exercise Date, and before the close of
business on the Termination Date by the surrender of this Warrant and the Notice
of Exercise Form annexed hereto, duly executed, at the office of the Company (or
such other office or agency of the Company as it may designate by notice in
writing to the registered holder hereof at the address of such holder appearing
on the books of the Company) and upon payment of the Exercise Price of the
shares thereby purchased by wire transfer or cashier's check drawn on a United
States bank, the holder of this Warrant shall be entitled to receive a
certificate for the number of shares of Common Stock so purchased. Certificates
for shares purchased hereunder shall be delivered to the Holder hereof within
three (3) Trading Days after the date on which this Warrant shall have been
exercised as aforesaid. This Warrant shall be deemed to have been exercised and
such certificate or certificates shall be deemed to have been issued, and the
Holder or any other person so designated to be named therein shall be deemed to
have become a holder of record of such shares for all purposes, as of the date
this Warrant has been exercised by payment to, and receipt thereof by, the
Company of the Exercise Price and all taxes required to be paid by Holder, if
any, pursuant to Section 5 herein prior to the issuance of such shares. If this
Warrant shall have been exercised in part, the Company shall, at the time of
delivery of the certificate or certificates representing Warrant Shares, deliver
to Holder a new Warrant evidencing the rights of Holder to purchase the
unpurchased shares of Common Stock called for by this Warrant, which new warrant
shall in all other respects be identical with this Warrant.
4. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. As to any fraction of a share which Holder would otherwise be entitled
to purchase upon such exercise, the Company shall pay a cash adjustment in
respect of such final fraction in an amount equal to the Exercise Price.
5. Limitation on Exercise of Warrant. In no event shall the Holder be
permitted to exercise this Warrant for shares of Common Stock in excess of the
amount of this Warrant upon the exercise of which, (x) the number of shares of
Common Stock beneficially owned by such Holder (other than shares of Common
Stock issuable upon exercise of this Warrant) plus (y) the number of shares of
Common Stock issuable upon exercise of this Warrant, would be equal to or exceed
4.9% of the number of shares of Common Stock then issued and outstanding,
including shares issuable upon exercise of this Warrant held by such Holder
after application of this Section 5. 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 and regulations thereunder. To the extent that
the limitation contained in this Section 5 applies, the determination of whether
this Warrant is exercisable (in relation to other securities owned by the
Holder) and which portion of this Warrant is exercisable shall be in the sole
discretion of such Holder, and the submission of a Notice of Exercise shall be
deemed to be such Holder's determination of whether this Warrant is exercisable
(in relation to other securities owned by such Holder) and of which portion of
this Warrant is exercisable, in each case subject to such aggregate percentage
limitation, and the Company shall have no obligation to verify or confirm the
accuracy of such determination. Nothing contained herein shall be deemed to
restrict the right of a Holder to exercise this Warrant into shares of Common
Stock at such time as such exercise will not violate the provisions of this
Section 5. The provisions of this Section 5 may be waived by the Holder of this
Warrant upon not less than 75 days' prior notice to the Company, and the
provisions of this Section 5 shall continue to apply until such 75th day (or
such later date as may be specified in such notice of waiver). No exercise of
this Warrant in violation of this Section 5, but otherwise in accordance with
this Warrant, shall affect the status of the Common Stock issued upon such
exercise as validly issued, fully-paid and nonassessable.
6. Charges, Taxes and Expenses. Issuance of certificates for shares of
Common Stock upon the exercise of this Warrant shall be made without charge to
the Holder hereof for any issue or transfer tax or other incidental expense in
respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the name
of the Holder of this Warrant, or in such name or names as may be directed by
the holder of this Warrant; provided, however, that in the event certificates
for shares of Common Stock are to be issued in a name other than the name of the
Holder of this Warrant, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto, duly executed by the Holder
hereof; and the Company may require, as a condition thereto, the payment of a
sum sufficient to reimburse it for any transfer tax incidental thereto.
7. Closing of Books. The Company will not close its shareholder books
or records in any manner which prevents the timely exercise of this Warrant.
8. Transfer, Division and Combination.
(a) Subject to compliance with any applicable securities laws,
transfer of this Warrant and all rights hereunder, in whole or in part, shall be
registered on the books of the Company to be maintained for such purpose, upon
surrender of this Warrant at the principal office of the Company, together with
a written assignment of this Warrant substantially in the form attached hereto
duly executed by Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such surrender
and, if required, such payment, the Company shall execute and deliver a new
warrant or warrants in the name of the assignee or assignees and in the
denomination or denominations specified in such instrument of assignment, and
shall issue to the assignor a new warrant evidencing the portion of this Warrant
not so assigned, and this Warrant shall promptly be cancelled. This Warrant, if
properly assigned, may be exercised by a new holder for the purchase of shares
of Common Stock without having a new warrant issued.
(b) This Warrant may be divided or combined with other
Warrants upon presentation hereof at the aforesaid office of the Company,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued, signed by Holder or its agent or attorney.
Subject to compliance with Section 8(a), as to any transfer which may be
involved in such division or combination, the Company shall execute and deliver
a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided
or combined in accordance with such notice.
(c) The Company shall prepare, issue and deliver at its own
expense (other than transfer taxes) the new Warrant or Warrants under this
Section 8.
(d) The Company agrees to maintain, at its aforesaid office,
books for the registration and the registration of transfer of the Warrants.
9. No Rights as Shareholder until Exercise. This Warrant does not
entitle the Holder hereof to any voting rights or other rights as a shareholder
of the Company prior to the exercise hereof. Upon the surrender of this Warrant
and the payment of the aggregate Exercise Price, the Warrant Shares so purchased
shall be and be deemed to be issued to such Holder as the record owner of such
shares as of the close of business on the later of the date of such surrender or
payment.
10. Loss, Theft, Destruction or Mutilation of Warrant. The Company
covenants that upon receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant certificate
or any stock certificate relating to the Warrant Shares, and in case of loss,
theft or destruction, of indemnity or security reasonably satisfactory to it
(which shall not include the posting of any bond), and upon surrender and
cancellation of such Warrant or stock certificate, if mutilated, the Company
will make and deliver a new warrant or stock certificate of like tenor and dated
as of such cancellation, in lieu of such Warrant or stock certificate.
11. Saturdays, Sundays, Holidays, etc. If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday, Sunday or a legal holiday, then such action may be
taken or such right may be exercised on the next succeeding day not a Saturday,
Sunday or legal holiday.
12. Adjustments of Exercise Price and Number of Warrant Shares.
(a) Stock Splits, etc. The number and kind of securities
purchasable upon the exercise of this Warrant and the Exercise Price shall be
subject to adjustment from time to time upon the happening of any of the
following. In the event that the Company shall (i) pay a dividend in shares of
Common Stock or make a distribution in shares of Common Stock to holders of its
outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock
into a greater number of shares of Common Stock, (iii) combine its outstanding
shares of Common Stock into a smaller number of shares of Common Stock, (iv)
issue any shares of its capital stock in a reclassification of the Common Stock,
or (v) otherwise transacts a similar adjustment to its class of Common Stock,
then the number of Warrant Shares purchasable upon exercise of this Warrant and
the Exercise Price immediately prior thereto shall be adjusted so that the
holder of this Warrant shall be entitled to receive the kind and number of
Warrant Shares or other securities of the Company which the holder would have
owned or have been entitled to receive had such Warrant been exercised in
advance thereof. Upon each such adjustment of the kind and number of Warrant
Shares or other securities of the Company which are purchasable hereunder, the
holder of this Warrant shall thereafter be entitled to purchase the number of
Warrant Shares or other securities resulting from such adjustment at an Exercise
Price per Warrant Share or other security obtained by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of Warrant
Shares purchasable pursuant hereto immediately prior to such adjustment and
dividing by the number of Warrant Shares or other securities of the Company
resulting from such adjustment. An adjustment made pursuant to this paragraph
shall become effective immediately after the effective date of such event
retroactive to the record date, if any, for such event.
(b) Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is a change in or distribution with respect to the Common Stock of the Company),
or sell, transfer or otherwise dispose of all or substantially all its property,
assets or business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Stock
of the Company, then the Holder shall have the right thereafter to receive, upon
exercise of this Warrant, the number of shares of common stock of the successor
or acquiring corporation or of the Company, if it is the surviving corporation,
and Other Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a holder of
the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such event. In case of any such reorganization,
reclassification, merger, consolidation or disposition of assets, the successor
or acquiring corporation (if other than the Company) shall expressly assume the
due and punctual observance and performance of each and every covenant and
condition of this Warrant to be performed and observed by the Company and all
the obligations and liabilities hereunder, subject to such modifications as may
be deemed appropriate (as determined in good faith by resolution of the Board of
Directors of the Company) in order to provide for adjustments of shares of
Common Stock for which this Warrant is exercisable which shall be as nearly
equivalent as practicable to the adjustments provided for in this Section 12.
For purposes of this Section 12, "common stock of the successor or acquiring
corporation" shall include stock of such corporation of any class which is not
preferred as to dividends or assets over any other class of stock of such
corporation and which is not subject to redemption and shall also include any
evidences of indebtedness, shares of stock or other securities which are
exercisable into or exchangeable for any such stock, either immediately or upon
the arrival of a specified date or the happening of a specified event and any
warrants or other rights to subscribe for or purchase any such stock. The
foregoing provisions of this Section 12 shall similarly apply to successive
reorganizations, reclassifications, mergers, consolidations or disposition of
assets.
(c) Adjustment for Spin Off. If, for any reason, prior to the
exercise of this Warrant in full, the Company spins off or otherwise divests
itself of a part of its business or operations or disposes all or a part of its
assets in a transaction (the "Spin Off") in which the Company does not receive
compensation for such business, operations or assets, but causes securities of
another entity (the "Spin Off Securities") to be issued to security holders of
the Company, then
(A) the Company shall cause (i) to be reserved Spin
Off Securities equal to the number thereof which would have been issued to the
Holder had all of the Holder's unexercised Warrants outstanding on the record
date (the "Record Date") for determining the amount and number of Spin Off
Securities to be issued to security holders of the Company (the "Outstanding
Warrants") been exercised as of the close of business on the trading day
immediately before the Record Date (the "Reserved Spin Off Shares"), and (ii) to
be issued to the Holder on the exercise of all or any of the Outstanding
Warrants, such amount of the Reserved Spin Off Shares equal to (x) the Reserved
Spin Off Shares multiplied by (y) a fraction, of which (I) the numerator is the
amount of the Outstanding Warrants then being exercised, and (II) the
denominator is the amount of the Outstanding Warrants; and
(B) the Exercise Price on the Outstanding Warrants
shall be adjusted immediately after consummation of the Spin Off by multiplying
the Exercise Price by a fraction (if, but only if, such fraction is less than
1.0), the numerator of which is the average Closing Bid Price of the Common
Stock for the five (5) trading days immediately following the fifth trading day
after the Record Date, and the denominator of which is the average Closing Bid
Price of the Common Stock on the five (5) trading days immediately preceding the
Record Date; and such adjusted Exercise Price shall be deemed to be the Exercise
Price with respect to the Outstanding Warrants after the Record Date.
13. Voluntary Adjustment by the Company. The Company may at any time
during the term of this Warrant, reduce the then current Exercise Price to any
amount and for any period of time deemed appropriate by the Board of Directors
of the Company.
14. Notice of Adjustment. Whenever the number of Warrant Shares or
number or kind of securities or other property purchasable upon the exercise of
this Warrant or the Exercise Price is adjusted, as herein provided, the Company
shall promptly send notice to the holder of this Warrant notice of such
adjustment or adjustments setting forth the number of Warrant Shares (and other
securities or property) purchasable upon the exercise of this Warrant and the
Exercise Price of such Warrant Shares (and other securities or property) after
such adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which such adjustment was made.
Such notice, in the absence of manifest error, shall be conclusive evidence of
the correctness of such adjustment.
15. Redemption. Prior to the Termination Date, the Warrant shall be
redeemable, under the circumstances described in this Section, at the discretion
of the Company, for $.10 per warrant (the "Redemption Fee"). The Company's right
to redemption shall be exercisable commencing upon the day following the tenth
consecutive business day during which the Company's common stock has traded at
prices of, or in excess of, $3.00 per share, subject to adjustment for stock
splits, dividends, subdivisions, reclassification and the like, with weekly
volume of such trading being in excess of the total number of shares represented
by this Warrant. In the event the Company exercises its right to redeem the
Warrants, the Company shall give the Holder written notice of such decision. In
the event that the Holder does not exercise all or any part of the Warrants or
that the Company does not receive the Warrant from the Holder within 30 days
from the date on the notice to the Holder of the Company's intention to redeem
the Warrant, then the Warrant shall be deemed canceled, and the Holder shall not
be entitled to further exercise thereof or to the Redemption Fee.
16. Notice of Corporate Action. If at any time:
(a) the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or other
distribution, or any right to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or
property, or to receive any other right, or
(b) there shall be any capital reorganization of the Company,
any reclassification or recapitalization of the capital stock of the Company or
any consolidation or merger of the Company with, or any sale, transfer or other
disposition of all or substantially all the property, assets or business of the
Company to, another corporation or,
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to the Holder (i)
at least 30 days' prior written notice of the date on which a record date shall
be selected for such dividend, distribution or right or for determining rights
to vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, liquidation or winding up, and (ii)
in the case of any such reorganization, reclassification, merger, consolidation,
sale, transfer, disposition, dissolution, liquidation or winding up, at least 30
days' prior written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause also shall specify (i) the date
on which any such record is to be taken for the purpose of such dividend,
distribution or right, the date on which the holders of Common Stock shall be
entitled to any such dividend, distribution or right, and the amount and
character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such disposition, dissolution, liquidation or winding
up. Each such written notice shall be sufficiently given if addressed to the
Holder at the last address of the Holder appearing on the books of the Company
and delivered in accordance with Section 18(d).
17. Authorized Shares. The Company covenants that during the period the
Warrant is outstanding, it will reserve from its authorized and unissued Common
Stock a sufficient number of shares to provide for the issuance of the Warrant
Shares upon the exercise of any purchase rights under this Warrant. The Company
further covenants that its issuance of this Warrant shall constitute full
authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for the Warrant
Shares upon the exercise of the purchase rights under this Warrant. The Company
will take all such reasonable action as may be necessary to assure that such
Warrant Shares may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of the OTCBB or other
market upon which the Common Stock may be listed.
The Company shall not by any action, including, without
limitation, amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of the Holder against impairment. Without limiting the generality of the
foregoing, the Company will (a) take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of Common Stock upon the exercise of this Warrant, and
(b) use its best efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations under this Warrant.
18. Miscellaneous.
(a) Jurisdiction. This Warrant shall be binding upon any
successors or assigns of the Company. This Warrant shall constitute a contract
under the laws of New York without regard to its conflict of law, principles or
rules, and be subject to governing law provisions set forth in Section 8 of the
Securities Purchase Agreement.
(b) Restrictions. The holder hereof acknowledges that the
Warrant Shares acquired upon the exercise of this Warrant, if not registered,
will have restrictions upon resale imposed by state and federal securities laws.
(c) Nonwaiver and Expenses. No course of dealing or any delay
or failure to exercise any right hereunder on the part of the Holder shall
operate as a waiver of such right or otherwise prejudice the Holder's rights,
powers or remedies, notwithstanding all rights hereunder terminate on the
Termination Date. If the Company fails to comply with any provision of this
Warrant, the Company shall pay to the Holder such amounts as shall be sufficient
to cover any costs and expenses including, but not limited to, reasonable
attorneys' fees, including those of appellate proceedings, incurred by the
Holder in collecting any amounts due pursuant hereto or in otherwise enforcing
any of its rights, powers or remedies hereunder.
(d) Notices. Any notice, request or other document required or
permitted to be given or delivered to the Holder hereof by the Company shall be
delivered in accordance with the notice provisions of the Securities Purchase
Agreement.
(e) Limitation of Liability. No provision hereof, in the
absence of affirmative action by the Holder to purchase shares of Common Stock,
and no enumeration herein of the rights or privileges of the Holder hereof,
shall give rise to any liability of the Holder for the purchase price of any
Common Stock or as a stockholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company.
(f) Remedies. The Holder, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Warrant.
(g) Successors and Assigns. Subject to applicable securities
laws, this Warrant and the rights and obligations evidenced hereby shall inure
to the benefit of and be binding upon the successors of the Company and the
successors and permitted assigns of the Holder. The provisions of this Warrant
are intended to be for the benefit of all Holders from time to time of this
Warrant and shall be enforceable by any such Holder or holder of Warrant Shares.
(h) Indemnification. The Company agrees to indemnify and hold
harmless the Holder from and against any liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, attorneys' fees,
expenses and disbursements of any kind which may be imposed upon, incurred by or
asserted against the Holder in any manner relating to or arising out of any
failure by the Company to perform or observe in any material respect any of its
covenants, agreements, undertakings or obligations set forth in this Warrant;
provided, however, that the Company will not be liable hereunder to the extent
that any liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, attorneys' fees, expenses or disbursements are
found in a final non-appealable judgment by a court to have resulted from the
holder's negligence, bad faith or willful misconduct in its capacity as a
stockholder or warrantholder of the Company.
(i) Amendment. This Warrant may be modified or amended or the
provisions hereof waived with the written consent of the Company and the Holder.
(j) Severability. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provisions or the remaining provisions of this Warrant.
(k) Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
[signature page follows]
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereunto duly authorized.
Dated: January 29, 2004
Peak Entertainment Holdings, Inc.
By: /s/ Wilf Shorrocks
-------------------------------------
Wilf Shorrocks
President and Chief Executive Officer
NOTICE OF EXERCISE
To: Peak Entertainment Holdings, Inc.
The undersigned hereby elects to purchase ________ shares of Common
Stock (the "Common Stock"), at an exercise price of $0.50 per share, of Peak
Entertainment Holdings, Inc. pursuant to the terms of the attached Warrant, and
tenders herewith payment of the exercise price in full, in the amount of
$_____________, together with all applicable transfer taxes, if any.
Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
_______________________________
(Name)
_______________________________
(Address)
_______________________________
Dated:
______________________________
Signature
ASSIGNMENT FORM
(To assign the foregoing warrant, execute this form and supply required
information. Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to whose address is .
Dated:
Holder's Signature: _____________________________
Holder's Address:________________________________
_____________________________
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in an fiduciary or other representative
capacity should file proper evidence of authority to assign the foregoing
Warrant.
EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of January
29, 2004, by and among Peak Entertainment Holdings, Inc., a Nevada corporation
(the "Company"), and the investors signatory hereto (collectively, the "Buyer").
WHEREAS, in connection with the Securities Purchase Agreement by and
among the parties hereto of even date herewith (the "Securities Purchase
Agreement"), the Company has agreed, upon the terms and subject to the
conditions contained therein, to issue and sell to Buyer (i) convertible
debentures in the aggregate principal amount of Fifty Thousand Dollars ($50,000)
(the "Debentures") that are convertible into shares of the Company's common
stock (the "Common Stock"), upon the terms and subject to the limitations and
conditions set forth in such Convertible Debenture, and (ii) warrants (the
"Warrants") to acquire an aggregate of 100,000 shares of Common Stock, upon the
terms and conditions and subject to the limitations and conditions set forth in
such Warrants; and
WHEREAS, the Company desires to grant to Buyer the registration rights
set forth herein with respect to the shares of Common Stock issuable upon
conversion of the Convertible Debenture and the shares of Common Stock issuable
upon exercise of the Warrants issued to Buyer.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and Buyer
hereby agree as follows:
1. DEFINITIONS.
a. As used in this Agreement, the following terms shall have
the following meanings:
(i) "Buyer" means the Buyer and any transferee or
assignee who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 hereof.
(ii) "register," "registered," and "registration"
refer to a registration effected by preparing and filing a Registration
Statement or Statements in compliance with the 1933 Act and pursuant to Rule 415
under the 1933 Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
(iii) "Registrable Securities" means the Conversion
Shares issued or issuable upon conversion or otherwise pursuant to the
Convertible Debentures, and Warrant Shares issuable, upon exercise or otherwise
pursuant to the Warrants, and any shares of capital stock issued or issuable as
a dividend on or in exchange for or otherwise with respect to any of the
foregoing.
(iv) "Registration Statement" means a registration
statement of the Company under the 0000 Xxx.
b. Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings set forth in the Securities Purchase
Agreement, the Convertible Debentures, or the Warrants.
2. REGISTRATION.
a. The Company shall prepare, and, use reasonable efforts to
file within one month from the date of Closing (as defined in the Securities
Purchase Agreement) (the "Filing Date") with the SEC a Registration Statement on
Form SB-2 or such form of Registration Statement as is then available to effect
a registration of the Registrable Securities, covering the resale of the
Registrable Securities underlying the Debentures and Warrants issued or issuable
pursuant to the Securities Purchase Agreement, which Registration Statement, to
the extent allowable under the 1933 Act and the rules and regulations
promulgated thereunder (including Rule 416), shall state that such Registration
Statement also covers, to the extent permissible, such indeterminate number of
additional shares of Common Stock as may become issuable upon conversion of or
otherwise pursuant to the Convertible Debentures and exercise of the Warrants to
prevent dilution resulting from stock splits, stock dividends or similar
transactions. In the event that the Securities and Exchange Commission restricts
or prohibits the inclusion of any part of the common stock included in the
Registration Statement on the basis that such securities are not deemed owned or
paid for or any similar reason, the Company shall register the maximum number of
the Registrable Securities that the Commission will permit, and such occurrence
shall not be deemed a breach of any provision of this Agreement, the Securities
Purchase Agreement of which this Agreement is a part, or any other agreement
that is a part of the Securities Purchase Agreement.
b. The Company shall use reasonable efforts to obtain
effectiveness of the Registration Statement as soon as practicable.
c. Subject to the last sentence of this Section 2(c), if at
any time prior to the expiration of the Registration Period (as hereinafter
defined) the Company shall determine to file with the SEC a Registration
Statement relating to an underwritten offering for its own account or the
account of others under the 1933 Act of any of its equity securities (other than
on Form S-4 or Form S-8 or their then equivalents relating to equity securities
to be issued solely in connection with any acquisition of any entity or business
or equity securities issuable in connection with stock option or other bona
fide, employee benefit plans), the Company shall send to Buyer who is entitled
to registration rights under this Section 2(c) written notice of such
determination and, if within fifteen (15) days after the effective date of such
notice, Buyer shall so request in writing, the Company shall include in such
Registration Statement all or any part of the Registrable Securities Buyer
requests to be registered, except that if, in connection with any underwritten
public offering for the account of the Company the managing underwriter(s)
thereof shall impose a limitation on the number of shares of Common Stock which
may be included in the Registration Statement because, in such underwriter(s)'
judgment, marketing or other factors dictate such limitation is necessary to
facilitate public distribution, then the Company shall be obligated to include
in such Registration Statement only such limited portion of the Registrable
Securities with respect to which Buyer has requested inclusion hereunder as the
underwriter shall permit. Any exclusion of Registrable Securities shall be made
pro rata among Buyer seeking to include Registrable Securities in proportion to
the number of Registrable Securities sought to be included by Buyer; provided,
however, that the Company shall not exclude any Registrable Securities unless
the Company has first excluded all outstanding securities, the holders of which
are not entitled to inclusion of such securities in such Registration Statement
or are not entitled to pro rata inclusion with the Registrable Securities; and
provided, further, however, that, after giving effect to the immediately
preceding proviso, any exclusion of Registrable Securities shall be made pro
rata with holders of other securities having the right to include such
securities in the Registration Statement other than holders of securities
entitled to inclusion of their securities in such Registration Statement by
reason of demand registration rights. No right to registration of Registrable
Securities under this Section 2(c) shall be construed to limit any registration
required under Section 2(a) hereof. If an offering in connection with which
Buyer is entitled to registration under this Section 2(c) is an underwritten
offering, then Buyer whose Registrable Securities are included in such
Registration Statement shall, unless otherwise agreed by the Company, offer and
sell such Registrable Securities in an underwritten offering using the same
underwriter or underwriters and, subject to the provisions of this Agreement, on
the same terms and conditions as other shares of Common Stock included in such
underwritten offering. Notwithstanding anything to the contrary set forth
herein, the registration rights of Buyer pursuant to this Section 2(c) shall
only be available in the event the Company fails to timely file, obtain
effectiveness or maintain effectiveness of any Registration Statement to be
filed pursuant to Section 2(a) in accordance with the terms of this Agreement.
d. The Company represents and warrants that it meets the
requirements for the use of Form SB-2 for registration of the resale by Buyer of
the Registrable Securities. The Company agrees to file all reports required to
be filed by the Company with the SEC in a timely manner so as to remain eligible
or become eligible, as the case may be, and thereafter to maintain its
eligibility for the use of Form S-3, provided that if the Company is not
currently eligible to use Form S-3, not later than 20 business days after the
Company first meets the registration eligibility and transaction requirements
for the use of Form S-3 (or any successor form) for registration of the offer
and sale by Buyer and any other Buyer of Registrable Securities, the Company
shall file a Registration Statement on Form S-3 (or such successor form) with
respect to the Registrable Securities covered by the Registration Statement on
Form SB-2, or other applicable form, filed pursuant to Section 2(a) (and include
in such Registration Statement the information required by Rule 429 under the
0000 Xxx) or convert the Registration Statement on Form SB-2, or other
applicable form, filed pursuant to Section 2(a) to a Form S-3 pursuant to Rule
429 under the 1933 Act and cause such Registration Statement (or such amendment)
to be declared effective no later than forty-five (45) days after filing, to the
extent feasible.
3. OBLIGATIONS OF THE COMPANY. In connection with the registration of
the Registrable Securities, the Company shall have the following obligations:
a. The Company shall use reasonable best efforts to prepare
promptly, and file with the SEC not later than the Filing Date, a Registration
Statement with respect to the number of Registrable Securities provided in
Section 2(a), and thereafter use its best efforts to cause such Registration
Statement relating to Registrable Securities to become effective as soon as
possible after such filing, and keep the Registration Statement effective
pursuant to Rule 415 until such date as is the earlier of (i) the date on which
at least two-thirds of the Registrable Securities have been sold or (ii) the
date on which the Registrable Securities may be immediately sold to the public
without registration or restriction (including without limitation as to volume
by each holder thereof) under the 1933 Act (the "Registration Period"), which
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein, or
necessary to make the statements therein not misleading.
b. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statements and the prospectus used in connection with the
Registration Statements as may be necessary to keep the Registration Statements
effective at all times during the Registration Period, and, during such period,
comply with the provisions of the 1933 Act with respect to the disposition of
all Registrable Securities of the Company covered by the Registration Statements
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller thereof as set
forth in the Registration Statements. In the event the number of shares
available under a Registration Statement filed pursuant to this Agreement is
insufficient to cover all of the Registrable Securities issued or issuable upon
conversion of the Convertible Debentures and exercise of the Warrants, the
Company shall amend the Registration Statement, or file a new Registration
Statement, so as to cover all of the Registrable Securities, in each case, as
soon as practicable, after the necessity therefor arises. The Company shall use
reasonable efforts to cause such amendment and/or new Registration Statement to
become effective as soon as practicable following the filing thereof.
c. Permit a single firm of counsel designated by the Initial
Investors, which firm has requested to receive such notification; each, an
"Investor's Counsel") to review the Registration Statement and all amendments
and supplements thereto a reasonable period of time (but not less than three (3)
business days) prior to their filing with the SEC, and not file any document in
a form to which such counsel reasonably objects;
d. Notify each Investor and the Investor's Counsel and any
managing underwriters immediately (and, in the case of (i)(A) below, not less
than three (3) business days prior to such filing) and (if requested by any such
person) confirm such notice in writing no later than one (1) business day
following the day (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment to the Registration Statement is proposed to be filed;
(B) whenever the SEC notifies the Company whether there will be a "review" of
such Registration Statement; (C) whenever the Company receives (or a
representative of the Company receives on its behalf) any oral or written
comments from the SEC in respect of a Registration Statement (copies or, in the
case of oral comments, summaries of such comments shall be promptly furnished by
the Company to the Investors); and (D) with respect to the Registration
Statement or any post-effective amendment, when the same has become effective;
(ii) of any request by the SEC or any other Federal or state governmental
authority for amendments or supplements to the Registration Statement or
Prospectus or for additional information; (iii) of the issuance by the SEC of
any stop order suspending the effectiveness of the Registration Statement
covering any or all of the Registrable Securities or the initiation of any
proceedings for that purpose; (iv) if at any time any of the representations or
warranties of the Company contained in any agreement (including any underwriting
agreement) contemplated hereby ceases to be true and correct in all material
respects; (v) of the receipt by the Company of any notification with respect to
the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction, or the initiation or
threatening of any proceeding for such purpose; and (vi) of the occurrence of
any event that to the best knowledge of the Company makes any statement made in
the Registration Statement or Prospectus or any document incorporated or deemed
to be incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. In addition, the Company shall furnish the Investor's
Counsel with copies of all intended written responses to the comments
contemplated in clause (C) of this Section 3(d) not later than one (1) business
day in advance of the filing of such responses with the SEC so that the
Investors shall have the opportunity to comment thereon;
e. The Company shall use reasonable efforts to (i) register
and qualify the Registrable Securities covered by the Registration Statements
under such other securities or "blue sky" laws of such jurisdictions in the
United States as Buyer reasonably requests, (ii) prepare and file in those
jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (a) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (b) subject itself
to general taxation in any such jurisdiction, (c) file a general consent to
service of process in any such jurisdiction, (d) provide any undertakings that
cause the Company undue expense or burden, or (e) make any change in its charter
or bylaws, which in each case the Board of Directors of the Company determines
to be contrary to the best interests of the Company and its shareholders.
f. As promptly as practicable, after becoming aware of such
event, the Company shall notify Buyer of the happening of any event, of which
the Company has knowledge, as a result of which the prospectus included in any
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, and use its best
efforts promptly to prepare a supplement or amendment to any Registration
Statement to correct such untrue statement or omission, provided that, the
Company may delay the disclosure of material non-public information concerning
the Company (as well as prospectus or Registration Statement updating) the
disclosure of which at the time is not, in the good faith opinion of the
Company, in the best interests of the Company (an "Allowed Delay"); provided,
further, that the Company shall promptly (i) notify Buyer in writing of the
existence of (but in no event, without the prior written consent of Buyer, shall
the Company disclose to Buyer any of the facts or circumstances regarding)
material non- public information giving rise to an Allowed Delay, and (ii)
advise Buyer in writing to cease all sales under such Registration Statement
until the end of the Allowed Delay. Upon expiration of the Allowed Delay, the
Company shall again be bound by the first sentence of this Section 3(e) with
respect to the information giving rise thereto.
g. Notwithstanding the foregoing, if at any time or from time
to time after the date of effectiveness of the Registration Statement, the
Company notifies the Buyer in writing that the effectiveness of the Registration
Statement is suspended for any reason, whether due to a Potential Material Event
or otherwise, the Buyer shall not offer or sell any Registrable Securities, or
engage in any other transaction involving or relating to the Registrable
Securities, from the time of the giving of such notice until such Buyer receives
written notice from the Company that such the effectiveness of the Registration
Statement has been restored, whether because the Potential Material Event has
been disclosed to the public or it no longer constitutes a Potential Material
Event or otherwise; provided, however, that the Company may not so suspend the
right to such holders of Registrable Securities during the periods the
Registration Statement is required to be in effect other than during a Permitted
Suspension Period (and the applicable provisions of Section 2(b) shall apply
with respect to any such suspension other than during a Permitted Suspension
Period) . The term "Permitted Suspension Period" means up to two such suspension
periods during any consecutive 12-month period, each of which suspension period
shall not either (i) be for more than ten (10) days or (ii) begin less than ten
(10) business days after the last day of the preceding suspension (whether or
not such last day was during or after a Permitted Suspension Period);
h. Use its reasonable efforts to secure and maintain the
designation of all the Registrable Securities covered by the Registration
Statement on the Principal Trading Market within the meaning of Rule 11Aa2-1 of
the SEC under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the quotation of the Registrable Securities on the Principal Trading
Market;
i. The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of any
Registration Statement, and, if such an order is issued, to obtain the
withdrawal of such order at the earliest possible moment and to notify Buyer who
holds Registrable Securities being sold of the issuance of such order and the
resolution thereof.
j. The Company shall permit Buyer to review such Registration
Statement and all amendments and supplements thereto (as well as all requests
for acceleration or effectiveness thereof) within a reasonable period of time
prior to their filing with the SEC, and shall not file any document in a form to
which Buyer reasonably objects and will not request acceleration of such
Registration Statement without prior notice to Buyer. The sections of such
Registration Statement covering information with respect to Buyer, Buyer's
beneficial ownership of securities of the Company or Buyer intended method of
disposition of Registrable Securities shall conform to the information provided
to the Company by Buyer, provided that such information provided by Buyer is
correct and truthful.
k. The Company shall hold in confidence and not make any
disclosure of information concerning Buyer provided to the Company unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction, or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company agrees that
it shall, upon learning that disclosure of such information concerning Buyer is
sought in or by a court or governmental body of competent jurisdiction or
through other means, give prompt notice to Buyer prior to making such
disclosure, and allow Buyer, at its expense, to undertake appropriate action to
prevent disclosure of, or to obtain a protective order for, such information.
l. The Company shall provide a transfer agent and registrar,
which may be a single entity, for the Registrable Securities not later than the
effective date of the Registration Statement.
m. At the request of Buyer, the Company shall prepare and file
with the SEC such amendments (including post-effective amendments) and
supplements to a Registration Statement and any prospectus used in connection
with the Registration Statement which the Company may agree to be necessary in
order to change the plan of distribution set forth in such Registration
Statement.
4. OBLIGATIONS OF BUYER. In connection with the registration of the
Registrable Securities, Buyer shall have the following obligations:
a. It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of Buyer that Buyer shall furnish to the Company such
information regarding itself, the Registrable Securities held by it and the
intended method of disposition of the Registrable Securities held by it as shall
be reasonably required to effect the registration of such Registrable
Securities, and shall execute such documents in connection with such
registration as the Company may reasonably request. At least three (3) business
days prior to the first anticipated filing date of the Registration Statement,
the Company shall notify Buyer of the information the Company requires from
Buyer.
b. Buyer agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statements hereunder, unless Buyer has notified the Company in
writing of Buyer's election to exclude all of Buyer's Registrable Securities
from the Registration Statements.
c. In the event the Company or Buyer determines to engage the
services of an underwriter, Buyer agrees to enter into and perform Buyer's
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities, unless Buyer has notified the Company
in writing of Buyer's election to exclude all of Buyer's Registrable Securities
from such Registration Statement.
d. Buyer agrees that, upon receipt of notice from the Company,
of the happening of any event of the kind such as described in Section 3(e),
Buyer will immediately discontinue disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until Buyer's receipt of the copies of the supplemented or amended prospectus
and, if so directed by the Company, Buyer shall deliver to the Company or
destroy (and deliver to the Company a certificate of destruction) all copies in
Buyer's possession, of the prospectus covering such Registrable Securities
current at the time of receipt of such notice.
e. Buyer may not participate in any underwritten registration
hereunder unless Buyer (i) agrees to sell Buyer's Registrable Securities on the
basis provided in any underwriting arrangements in usual and customary form
entered into by the Company, (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements, and (iii)
agrees to pay its pro rata share of all underwriting discounts and commissions
and any expenses in excess of those payable by the Company pursuant to Section 5
below.
5. EXPENSES OF REGISTRATION; INCLUDABLE SECURITIES.
a. All reasonable expenses, other than underwriting discounts
and commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3 herein, including, without
limitation, all registration, listing and qualification fees, printers and
accounting fees, and the fees and disbursements of counsel for the Company,
shall be borne by the Company.
b. Except as and to the extent specifically set forth in
Schedule 5(b) attached hereto, neither the Company nor any of its subsidiaries
has, as of the date hereof, nor shall the Company nor any of its subsidiaries,
on or after the date of this Agreement, enter into any agreement with respect to
its securities that is inconsistent with the rights granted to the Holders in
this Agreement or otherwise conflicts with the provisions hereof. Except as and
to the extent specifically set forth in Schedule 5(b) attached hereto, neither
the Company nor any of its subsidiaries has previously entered into any
agreement granting any registration rights with respect to any of its securities
to any Person. Without limiting the generality of the foregoing, without the
written consent of the Buyer of a majority of the then outstanding Registrable
Securities, the Company shall not grant to any person the right to request the
Company to register any securities of the Company under the Securities Act
unless the rights so granted are subject in all respects to the prior rights in
full of the Holders set forth herein, and are not otherwise in conflict or
inconsistent with the provisions of this Agreement.
6. INDEMNIFICATION. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:
a. To the extent permitted by law, the Company will indemnify,
hold harmless and defend (i) Buyer who holds such Registrable Securities, (ii)
the directors, officers, partners, employees, agents and each person who
controls Buyer within the meaning of the 1933 Act or the Securities Exchange Act
of 1934, as amended (the "1934 Act"), if any, (iii) any underwriter (as defined
in the 0000 Xxx) for Buyer, and (iv) the directors, officers, partners,
employees and each person who controls any such underwriter within the meaning
of the 1933 Act or the 1934 Act, if any (each, an "Indemnified Person"), against
any joint or several losses, claims, damages, liabilities or expenses
(collectively, together with actions, proceedings or inquiries by any regulatory
or self- regulatory organization, whether commenced or threatened, in respect
thereof, "Claims") to which any of them may become subject insofar as such
Claims arise out of or are based upon: (i) any untrue statement or alleged
untrue statement of a material fact in a Registration Statement or the omission
or alleged omission to state therein a material fact required to be stated or
necessary to make the statements therein not misleading; (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading; or (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities (the matters in the foregoing clauses (i) through (iii) being,
collectively, "Violations"). Subject to the restrictions set forth in Section
6(c) with respect to the number of legal counsel, the Company shall reimburse
the Indemnified Person, promptly as such expenses are incurred and are due and
payable, for any reasonable legal fees or other reasonable expenses incurred by
them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a): (i) shall not apply to a Claim arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company by any Indemnified Person
or underwriter for such Indemnified Person expressly for use in connection with
the preparation of such Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(c) hereof; (ii) shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of the Company, which consent shall not be unreasonably withheld; and
(iii) with respect to any preliminary prospectus, shall not inure to the benefit
of any Indemnified Person if the untrue statement or omission of material fact
contained in the preliminary prospectus was corrected on a timely basis in the
prospectus, as then amended or supplemented, such corrected prospectus was
timely made available by the Company pursuant to Section 3(c) hereof, and the
Indemnified Person was promptly advised in writing not to use the incorrect
prospectus prior to the use giving rise to a Violation and such Indemnified
Person, notwithstanding such advice, used it. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by Buyer pursuant to Section 9.
b. In connection with any Registration Statement in which
Buyer is participating, Buyer agrees severally and not jointly to indemnify,
hold harmless and defend, to the same extent and in the same manner set forth in
Section 6(a), the Company, each of its directors, each of its officers, each
person, if any, who controls the Company within the meaning of the 1933 Act or
the 1934 Act, any underwriter and any other shareholder selling securities
pursuant to the Registration Statement or any of its directors or officers or
any person who controls such shareholder or underwriter within the meaning of
the 1933 Act or the 1934 Act (collectively and together with an Indemnified
Person, an "Indemnified Party"), against any Claim to which any of them may
become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such
Claim arises out of or is based upon any Violation by Buyer, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished to the Company by Buyer
expressly for use in connection with such Registration Statement; and subject to
Section 6(c) Buyer will reimburse any legal or other expenses (promptly as such
expenses are incurred and are due and payable) reasonably incurred by them in
connection with investigating or defending any such Claim; provided, however,
that the indemnity agreement contained in this Section 6(b) shall not apply to
amounts paid in settlement of any Claim if such settlement is effected without
the prior written consent of Buyer, which consent shall not be unreasonably
withheld; provided, further, however, that Buyer shall be liable under this
Agreement (including this Section 6(b) and Section 7) for only that amount as
does not exceed the net proceeds to Buyer as a result of the sale of Registrable
Securities pursuant to such Registration Statement. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf of
such Indemnified Party and shall survive the transfer of the Registrable
Securities by Buyer pursuant to Section 9. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(b) with respect to any preliminary prospectus shall not inure to the
benefit of any Indemnified Party if the untrue statement or omission of material
fact contained in the preliminary prospectus was corrected on a timely basis in
the prospectus, as then amended or supplemented.
c. Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the fees and expenses to be
paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. The indemnifying party shall pay for only one
separate legal counsel for the Indemnified Persons or the Indemnified Parties,
as applicable, and such legal counsel shall be selected by Buyer holding a
majority-in-interest of the Registrable Securities included in the Registration
Statement to which the Claim relates (with the approval of a
majority-in-interest of Buyer), if Buyer are entitled to indemnification
hereunder, or the Company, if the Company is entitled to indemnification
hereunder, as applicable. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is actually prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. CONTRIBUTION. To the extent any indemnification by an indemnifying
party is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under Section 6 to the fullest extent permitted by law; provided,
however, that (i) no contribution shall be made under circumstances where the
maker would not have been liable for indemnification under the fault standards
set forth in Section 6, (ii) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 0000
Xxx) shall be entitled to contribution from any seller of Registrable Securities
who was not guilty of such fraudulent misrepresentation, and (iii) contribution
(together with any indemnification or other obligations under this Agreement) by
any seller of Registrable Securities shall be limited in amount to the net
amount of proceeds received by such seller from the sale of such Registrable
Securities.
8. REPORTS UNDER THE 1934 ACT. With a view to making available to Buyer
the benefits of Rule 144 promulgated under the 1933 Act or any other similar
rule or regulation of the SEC that may at any time permit Buyer to sell
securities of the Company to the public without registration ("Rule 144"), the
Company agrees that hereafter it will:
a. make and keep public information available, as those terms
are understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements and the filing of such reports
and other documents is required for the applicable provisions of Rule 144; and
c. furnish to Buyer so long as Buyer owns Registrable
Securities, promptly upon request, such documents and/or information as may be
reasonably requested to permit Buyer to sell such securities pursuant to Rule
144 without registration.
d. at the request of any Buyer holding Registrable Securities
(a "Holder"), give its Transfer Agent instructions to the effect that, upon the
Transfer Agent's receipt from such Holder of
(i) a certificate (a "Rule 144 Certificate") certifying
(A) that the Holder's holding period (as determined
in accordance with the provisions of Rule 144) for
the shares of Registrable Securities which the Holder
proposes to sell (the "Securities Being Sold") is not
less than (1) year and (B) as to such other matters
as may be appropriate in accordance with Rule 144
under the Securities Act, and
(ii) an opinion of counsel acceptable to the Company (for
which purposes it is agreed that the initial Buyer's
Counsel shall be deemed acceptable) that, based on
the Rule 144 Certificate, Securities Being Sold may
be sold pursuant to the provisions of Rule 144, even
in the absence of an effective Registration
Statement,
the Transfer Agent is to effect the transfer of the Securities Being Sold and
issue to the buyer(s) or transferee(s) thereof one or more stock certificates
representing the transferred Securities Being Sold without any restrictive
legend and without recording any restrictions on the transferability of such
shares on the Transfer Agent's books and records (except to the extent any such
legend or restriction results from facts other than the identity of the Holder,
as the seller or transferor thereof, or the status, including any relevant
legends or restrictions, of the shares of the Securities Being Sold while held
by the Holder). If the Transfer Agent reasonably requires any additional
documentation at the time of the transfer, the Company shall deliver or cause to
be delivered all such reasonable additional documentation as may be necessary to
effectuate the issuance of an unlegended certificate.
9. ASSIGNMENT OF REGISTRATION RIGHTS. The rights under this Agreement
shall be automatically assignable by Buyer to any transferee of all or any
portion of Registrable Securities if: (i) Buyer agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment; (ii)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee, and (b) the securities with respect to which such registration rights
are being transferred or assigned; (iii) following such transfer or assignment,
the further disposition of such securities by the transferee or assignee is
restricted under the 1933 Act and applicable state securities laws; (iv) at or
before the time the Company receives the written notice contemplated by clause
(ii) of this sentence, the transferee or assignee agrees in writing with the
Company to be bound by all of the provisions contained herein; (v) such transfer
shall have been made in accordance with the applicable requirements of the
Securities Purchase Agreement; and (vi) such transferee shall be an "accredited
investor" as that term defined in Rule 501 of Regulation D promulgated under the
1933 Act.
10. AMENDMENT OF REGISTRATION RIGHTS. Provisions of this Agreement may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with
written consent of the Company and Buyer. Any amendment or waiver effected in
accordance with this Section 10 shall be binding upon Buyer and the Company.
11. MISCELLANEOUS.
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
b. Any notices required or permitted to be given under the
terms hereof shall be sent by certified or registered mail (return receipt
requested) or delivered personally or by courier (including a recognized
overnight delivery service) or by facsimile and shall be effective five days
after being placed in the mail, if mailed by regular United States mail, or upon
receipt, if delivered personally or by courier (including a recognized overnight
delivery service) or by facsimile, in each case addressed to a party. The
addresses for such communications shall be:
If to the Company:
Attn.: Xxxxxxx Xxxxxxxxx, President
Peak Entertainment Holdings, Inc.
Xxxxxxx Xxxx, Xxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxx, XX XX00 0XX
Tel: x00(0)0000 000000
Fax: x00(0)0000 000000
With a copy (which shall not constitute notice) to:
Attn.: Xxx Xxxxxxx, Esq.
Law Offices of Xxx Xxxxxxx
00 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Tel: 000-000-0000
Fax: 000-000-0000
If to Buyer:
At the address and facsimile number listed on the
signature page hereof.
c. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
d. THIS AGREEMENT SHALL BE ENFORCED, GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS
MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICT OF LAWS. THE PARTIES HERETO HEREBY SUBMIT TO THE
EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS AND NEW YORK STATE
COURTS LOCATED IN NEW YORK COUNTY IN THE STATE OF NEW YORK WITH RESPECT TO ANY
DISPUTE ARISING UNDER THIS AGREEMENT, THE AGREEMENTS ENTERED INTO IN CONNECTION
HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. BOTH PARTIES
IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF
SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE THAT SERVICE OF PROCESS UPON
A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE
SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR PROCEEDING. NOTHING HEREIN
SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED
BY LAW. The Company and the Buyer hereby waive a trial by jury in any action,
proceeding or counterclaim brought by either of the Parties hereto against the
other in respect of any matter arising out or in connection with the Transaction
Agreements.
e. In the event that any provision of this Agreement is
invalid or unenforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law. Any provision hereof which may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other provision hereof.
f. This Agreement, the Convertible Debentures, the Warrants
and the Securities Purchase Agreement (including all schedules and exhibits
thereto) 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 Agreement and the Securities Purchase Agreement supersede all
prior agreements and understandings among the parties hereto with respect to the
subject matter hereof and thereof.
g. Subject to the requirements of Section 9 hereof, this
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and assigns.
h. The headings in this Agreement are for convenience of
reference only and shall not form part of, or affect the interpretation of, this
Agreement.
i. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement and shall become effective when counterparts have been
signed by each party and delivered to the other party. This Agreement, once
executed by a party, may be delivered to the other party hereto by facsimile
transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement.
j. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
k. Except as otherwise provided herein, all consents and other
determinations to be made by Buyer pursuant to this Agreement shall be made by
Buyer holding two-thirds of the Registrable Securities, determined as if all of
the Convertible Debentures then outstanding have been converted into Registrable
Securities.
l. The language used in this Agreement will be deemed to be
the language chosen by the parties to express their mutual intent, and no rules
of strict construction will be applied against any party.
[signature page follows]
IN WITNESS WHEREOF, the Company and the undersigned Buyer have caused
this Agreement to be duly executed as of the date first above written.
THE COMPANY: Peak Entertainment Holdings, Inc.
By: /s/ Wilf Shorrocks
-------------------------------------
Wilf Shorrocks
President and Chief Executive Officer
THE BUYER: /s/ Xxxx Xxxxx
---------------------------------------
Xxxx X. Xxxxx
STATE OF RESIDENCE: NY
ADDRESS: 00 Xxxxx Xxx Xxxxxxxxxx, XX 00000
TELEPHONE: 000-000-0000
FACSIMILE: -4306
SCHEDULE 5(b)
Warrants to purchase 750,000 shares of the Company's common stock, exercisable
for five years at $0.35 per share issued pursuant to a consulting agreement.
Warrants to purchase 240,000 shares of common stock, exercisable for three years
at $0.50 per share pursuant to an amended consulting agreement with Xxxx
Xxxxxxxx.
Loan of $100,000 from Xxxx Xxxxxxxx exchanged for 583,333 shares of common stock
and common stock purchase warrants to purchase 150,000 shares of common stock,
exercisable for three years at an exercise price of $0.50 per share.
Stock Option Plan, which may be subdivided as appropriate, for Employees,
Management and other persons entitled to participate in an amount of up to 10%
of the Company's common stock.
Securities and rights issued in connection with January 5, 2004 Securities
Purchase Agreements for an aggregate amount of $1,500,000.
