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 A SECURITIES PURCHASE AGREEMENT DATED AS OF OCTOBER 15, 2007,...
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 A SECURITIES PURCHASE AGREEMENT DATED
AS OF
OCTOBER 15, 2007, NEITHER THIS WARRANT NOR ANY OF SUCH SHARES MAY BE SOLD,
TRANSFERRED OR ASSIGNED 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 OR REGULATION S UNDER SUCH ACT.
Right
to
Purchase 363,600 Shares of Common Stock, par value $.00005 per
share
STOCK
PURCHASE
WARRANT
THIS
CERTIFIES THAT, for value
received, AJW Offshore, Ltd. or its registered assigns, is entitled to purchase
from Midnight Holdings Group,
Inc., a Delaware corporation (the “Company”), at any time or from time to
time during the period specified in Paragraph 2 hereof, 363,600 fully paid
and nonassessable shares of the Company’s Common Stock, par value $.00005 per
share (the “Common Stock”), at an exercise price per share equal to $.08 (the
“Exercise Price”). The term “Warrant Shares,” as used herein, refers
to the shares of Common Stock purchasable hereunder. The Warrant
Shares and the Exercise Price are subject to adjustment as provided in Paragraph
4 hereof. The term “Warrants” means this Warrant and the other
warrants issued pursuant to that certain Securities Purchase Agreement, dated
October 15, 2007, by and among the Company and the Buyers listed on the
execution page thereof (the “Securities Purchase Agreement”).
This
Warrant is subject to the following terms, provisions, and
conditions:
1. Manner
of Exercise; Issuance
of Certificates; Payment for Shares.
Subject
to the provisions hereof, this Warrant may be exercised by the holder hereof,
in
whole or in part, by the surrender of this Warrant, together with a completed
exercise agreement in the form attached hereto (the “Exercise Agreement”), to
the Company during normal business hours on any business day at the Company’s
principal executive offices (or such other office or agency of the Company
as it
may designate by notice to the holder hereof), and upon (i) payment to the
Company in cash, by certified or official bank check or by wire transfer
for the account of the Company of the Exercise Price for the Warrant Shares
specified in the Exercise Agreement or (ii) if the resale of the Warrant Shares
by the holder is not then registered pursuant to an effective registration
statement under the Securities Act of 1933, as amended (the “Securities Act”),
delivery to the Company of a written notice of an election to effect a “Cashless
Exercise” (as defined in Section 11(c) below) for the Warrant Shares specified
in the Exercise Agreement. The Warrant Shares so purchased shall be
deemed to be issued to the holder hereof or such holder’s designee, as the
record owner of such shares, as of the close of business on the date on which
this Warrant shall have been surrendered, the completed Exercise Agreement
shall
have been delivered, and payment shall have been made for such shares as
set forth above. Certificates for the Warrant Shares so
purchased, representing the aggregate number of shares specified in the Exercise
Agreement, shall be delivered to the holder hereof within a reasonable time,
not
exceeding five (5) business days, after this Warrant shall have been so
exercised. The certificates so delivered shall be in such
denominations as may be requested by the holder hereof and shall be registered
in the name of such holder or such other name as shall be designated by such
holder. If this Warrant shall have been exercised only in part, then,
unless this Warrant has expired, the Company shall, at its expense, at the
time
of delivery of such certificates, deliver to the holder a new Warrant
representing the number of shares with respect to which this Warrant shall
not
then have been exercised. In addition to all other available remedies
at law or in equity, if the Company fails to deliver certificates for the
Warrant Shares within five (5) business days after this Warrant is exercised,
then the Company shall pay to the holder in cash a penalty (the “Penalty”) equal
to 2% of the number of Warrant Shares that the holder is entitled to multiplied
by the Market Price (as hereinafter defined) for each day that the Company
fails
to deliver certificates for the Warrant Shares. For example, if the
holder is entitled to 100,000 Warrant Shares and the Market Price is $2.00,
then
the Company shall pay to the holder $4,000 for each day that the Company fails
to deliver certificates for the Warrant Shares. The Penalty shall be
paid to the holder by the fifth day of the month following the month in which
it
has accrued.
Notwithstanding
anything in this Warrant to the contrary, in no event shall the holder of this
Warrant be entitled to exercise a number of Warrants (or portions thereof)
in
excess of the number of Warrants (or portions thereof) upon exercise of which
the sum of (i) the number of shares of Common Stock beneficially owned by the
holder and its affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unexercised Warrants and the
unexercised or unconverted portion of any other securities of the Company
(including the Notes (as defined in the Securities Purchase Agreement)) subject
to a limitation on conversion or exercise analogous to the limitation contained
herein) and (ii) the number of shares of Common Stock issuable upon exercise
of
the Warrants (or portions thereof) with respect to which the determination
described herein is being made, would result in beneficial ownership by the
holder and its affiliates of more than 4.9% of the outstanding shares of Common
Stock. For purposes of the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation 13D-G thereunder, except as
otherwise provided in clause (i) of the preceding
sentence. Notwithstanding anything to the contrary contained herein,
the limitation on exercise of this Warrant set forth herein may not be amended
without (i) the written consent of the holder hereof and the Company and (ii)
the approval of a majority of shareholders of the Company.
Page
1
2. Period
of
Exercise.
This
Warrant is
exercisable at any time or from time to time on or after the date on which
this
Warrant is issued and delivered pursuant to the terms of the Securities Purchase
Agreement and before 6:00 p.m., New York, New York time on the fifth (5th)
anniversary of
the date of issuance (the “Exercise Period”).
3. Certain
Agreements of the
Company.
The
Company hereby covenants and agrees as follows:
(a) Shares
to be Fully
Paid. Subject
to the
completion of the Charter Amendment Actions (as such term is defined in the
Securities Purchase Agreement), all Warrant Shares will, upon issuance in
accordance with the terms of this Warrant, be validly issued, fully paid, and
nonassessable and free from all taxes, liens, and charges with respect to the
issue thereof.
(b) Reservation
of
Shares. Subject
to the
completion of the Charter Amendment Actions, during the Exercise Period, the
Company shall at all times have authorized, and reserved for the purpose of
issuance upon exercise of this Warrant, a sufficient number of shares of
Common Stock to provide for the exercise of this Warrant.
(c) Listing. The
Company shall
use it best efforts to secure the listing of the shares of Common Stock issuable
upon exercise of the Warrant upon each national securities exchange or automated
quotation system, if any, upon which shares of Common Stock are then listed
(subject to official notice of issuance upon exercise of this Warrant) and
shall
maintain, so long as any other shares of Common Stock shall be so listed, such
listing of all shares of Common Stock from time to time issuable upon the
exercise of this Warrant; and the Company shall so list on each national
securities exchange or automated quotation system, as the case may be, and
shall
maintain such listing of, any other shares of capital stock of the Company
issuable upon the exercise of this Warrant if and so long as any shares of
the
same class shall be listed on such national securities exchange or automated
quotation system.
(d) Certain
Actions
Prohibited. The
Company will
not, by amendment of its charter or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities, or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed by it hereunder,
but will at all times in good faith assist in the carrying out of all the
provisions of this Warrant and in the taking of all such action as may
reasonably be requested by the holder of this Warrant in order to protect the
exercise privilege of the holder of this Warrant against dilution or other
impairment, consistent with the tenor and purpose of this
Warrant. Without limiting the generality of the foregoing, the
Company (i) will not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then
in
effect, and (ii) will take all such actions 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.
(e) Successors
and
Assigns. This
Warrant will
be binding upon any entity succeeding to the Company by merger, consolidation,
or acquisition of all or substantially all the Company’s
assets.
4. Antidilution
Provisions.
During
the Exercise Period, the Exercise Price and the number of Warrant Shares shall
be subject to adjustment from time to time as provided in this Paragraph
4.
In
the
event that any adjustment of the Exercise Price as required herein results
in a
fraction of a cent, such Exercise Price shall be rounded up to the nearest
cent.
Page
2
(a) Adjustment
of Exercise Price
and Number of Shares upon Issuance of Common Stock. Except
as
otherwise provided in Paragraphs 4(c) and 4(e) hereof, if and whenever on or
after the date of issuance of this Warrant, the Company issues or sells, or
in
accordance with Paragraph 4(b) hereof is deemed to have issued or sold, any
shares of Common Stock for no consideration or for a consideration per share
(before deduction of reasonable expenses or commissions or underwriting
discounts or allowances in connection therewith) less than the Market Price
on
the date of issuance (a “Dilutive Issuance”), then immediately upon the Dilutive
Issuance, the Exercise Price will be reduced to a price determined by
multiplying the Exercise Price in effect immediately prior to the Dilutive
Issuance by a fraction, (i) the numerator of which is an amount equal to the
sum
of (x) the number of shares of Common Stock actually outstanding immediately
prior to the Dilutive Issuance, plus (y) the quotient of the aggregate
consideration, calculated as set forth in Paragraph 4(b) hereof, received by
the
Company upon such Dilutive Issuance divided by the Market Price in effect
immediately prior to the Dilutive Issuance, and (ii) the denominator of which
is
the total number of shares of Common Stock Deemed Outstanding (as defined below)
immediately after the Dilutive Issuance.
(b) Effect
on Exercise Price of
Certain Events. For
purposes of
determining the adjusted Exercise Price under Paragraph 4(a) hereof, the
following will be applicable:
(i) Issuance
of Rights or
Options. If the
Company in
any manner issues or grants any warrants, rights or options, whether or not
immediately exercisable, to subscribe for or to purchase Common Stock or other
securities convertible into or exchangeable for Common Stock (“Convertible
Securities”) (such warrants, rights and options to purchase Common Stock or
Convertible Securities are hereinafter referred to as “Options”) and the price
per share for which Common Stock is issuable upon the exercise of such Options
is less than the Market Price on the date of issuance or grant of such Options,
then the maximum total number of shares of Common Stock issuable upon the
exercise of all such Options will, as of the date of the issuance or grant
of
such Options, be deemed to be outstanding and to have been issued and sold
by
the Company for such price per share. For purposes of the preceding
sentence, the “price per share for which Common Stock is issuable upon the
exercise of such Options” is determined by dividing (i) the total amount, if
any, received or receivable by the Company as consideration for the issuance
or
granting of all such Options, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the exercise of all such
Options, plus, in the case of Convertible Securities issuable upon the exercise
of such Options, the minimum aggregate amount of additional consideration
payable upon the conversion or exchange thereof at the time such Convertible
Securities first become convertible or exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable upon the exercise of all such Options
(assuming full conversion of Convertible Securities, if
applicable). No further adjustment to the Exercise Price will be made
upon the actual issuance of such Common Stock upon the exercise of such Options
or upon the conversion or exchange of Convertible Securities issuable upon
exercise of such Options.
(ii) Issuance
of Convertible
Securities. If the
Company in
any manner issues or sells any Convertible Securities, whether or not
immediately convertible (other than where the same are issuable upon the
exercise of Options) and the price per share for which Common Stock is issuable
upon such conversion or exchange is less than the Market Price on the date
of
issuance, then the maximum total number of shares of Common Stock issuable
upon
the conversion or exchange of all such Convertible Securities will, as of the
date of the issuance of such Convertible Securities, be deemed to be outstanding
and to have been issued and sold by the Company for such price per
share. For the purposes of the preceding sentence, the “price per
share for which Common Stock is issuable upon such conversion or exchange” is
determined by dividing (i) the total amount, if any, received or receivable
by
the Company as consideration for the issuance or sale of all such Convertible
Securities, plus the minimum aggregate amount of additional consideration,
if
any, payable to the Company upon the conversion or exchange thereof at the
time
such Convertible Securities first become convertible or exchangeable, by (ii)
the maximum total number of shares of Common Stock issuable upon the conversion
or exchange of all such Convertible Securities. No further adjustment
to the Exercise Price will be made upon the actual issuance of such Common
Stock
upon conversion or exchange of such Convertible Securities.
(iii) Change
in Option Price or
Conversion Rate. If there
is a
change at any time in (i) the amount of additional consideration payable to
the
Company upon the exercise of any Options; (ii) the amount of additional
consideration, if any, payable to the Company upon the conversion or exchange
of
any Convertible Securities; or (iii) the rate at which any Convertible
Securities are convertible into or exchangeable for Common Stock (other than
under or by reason of provisions designed to protect against dilution), the
Exercise Price in effect at the time of such change will be readjusted to the
Exercise Price which would have been in effect at such time had such Options
or
Convertible Securities still outstanding provided for such changed additional
consideration or changed conversion rate, as the case may be, at the time
initially granted, issued or sold.
(iv) Treatment
of Expired Options
and Unexercised Convertible Securities. If,
in any case,
the total number of shares of Common Stock issuable upon exercise of any Option
or upon conversion or exchange of any Convertible Securities is not, in fact,
issued and the rights to exercise such Option or to convert or exchange such
Convertible Securities shall have expired or terminated, the Exercise Price
then
in effect will be readjusted to the Exercise Price which would have been in
effect at the time of such expiration or termination had such Option or
Convertible Securities, to the extent outstanding immediately prior to such
expiration or termination (other than in respect of the actual number of shares
of Common Stock issued upon exercise or conversion thereof), never been
issued.
Page
3
(v) Calculation
of Consideration
Received. If any
Common
Stock, Options or Convertible Securities are issued, granted or sold for cash,
the consideration received therefor for purposes of this Warrant will be the
amount received by the Company therefor, before deduction of reasonable
commissions, underwriting discounts or allowances or other reasonable expenses
paid or incurred by the Company in connection with such issuance, grant or
sale. In case any Common Stock, Options or Convertible Securities are
issued or sold for a consideration part or all of which shall be other than
cash, the amount of the consideration other than cash received by the Company
will be the fair value of such consideration, except where such consideration
consists of securities, in which case the amount of consideration received
by
the Company will be the Market Price thereof as of the date of
receipt. In case any Common Stock, Options or Convertible Securities
are issued in connection with any acquisition, merger or consolidation in which
the Company is the surviving corporation, the amount of consideration therefor
will be deemed to be the fair value of such portion of the net assets and
business of the non-surviving corporation as is attributable to such Common
Stock, Options or Convertible Securities, as the case may be. The
fair value of any consideration other than cash or securities will be determined
in good faith by the Board of Directors of the Company.
(vi) Exceptions
to Adjustment of
Exercise Price. No adjustment
to
the Exercise Price will be made (i) upon the exercise of any warrants, options
or convertible securities granted, issued and outstanding on the date of
issuance of this Warrant; (ii) upon the grant or exercise of any stock or
options which may hereafter be granted or exercised under any employee benefit
plan, stock option plan or restricted stock plan of the Company now existing
or
to be implemented in the future, so long as the issuance of such stock or
options is approved by a majority of the independent members of the Board of
Directors of the Company or a majority of the members of a committee of
independent directors established for such purpose; or (iii) upon the exercise
of the Warrants.
(c) Subdivision
or Combination
of Common Stock. If the
Company at
any time subdivides (by any stock split, stock dividend, recapitalization,
reorganization, reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a greater number of shares, then, after the date
of
record for effecting such subdivision, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced. If the
Company at any time combines (by reverse stock split, recapitalization,
reorganization, reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a smaller number of shares, then, after the date
of
record for effecting such combination, the Exercise Price in effect immediately
prior to such combination will be proportionately increased.
(d) Adjustment
in Number of
Shares. Upon
each
adjustment of the Exercise Price pursuant to the provisions of this Paragraph
4,
the number of shares of Common Stock issuable upon exercise of this Warrant
shall be adjusted by multiplying a number equal to the Exercise Price in effect
immediately prior to such adjustment by the number of shares of Common Stock
issuable upon exercise of this Warrant immediately prior to such adjustment
and
dividing the product so obtained by the adjusted Exercise Price.
(e) Consolidation,
Merger or
Sale. In case
of any
consolidation of the Company with, or merger of the Company into any other
corporation, or in case of any sale or conveyance of all or substantially all
of
the assets of the Company other than in connection with a plan of complete
liquidation of the Company, then as a condition of such consolidation, merger
or
sale or conveyance, adequate provision will be made whereby the holder of this
Warrant will have the right to acquire and receive upon exercise of this Warrant
in lieu of the shares of Common Stock immediately theretofore acquirable upon
the exercise of this Warrant, such shares of stock, securities or assets as
may
be issued or payable with respect to or in exchange for the number of shares
of
Common Stock immediately theretofore acquirable and receivable upon exercise
of
this Warrant had such consolidation, merger or sale or conveyance not taken
place. In any such case, the Company will make appropriate provision
to insure that the provisions of this Paragraph 4 hereof will thereafter be
applicable as nearly as may be in relation to any shares of stock or securities
thereafter deliverable upon the exercise of this Warrant. The Company
will not effect any consolidation, merger or sale or conveyance unless prior
to
the consummation thereof, the successor corporation (if other than the Company)
assumes by written instrument the obligations under this Paragraph 4 and the
obligations to deliver to the holder of this Warrant such shares of stock,
securities or assets as, in accordance with the foregoing provisions, the holder
may be entitled to acquire.
Page
4
(f) Distribution
of
Assets. In case
the
Company shall declare or make any distribution of its assets (including cash)
to
holders of Common Stock as a partial liquidating dividend, by way of return
of
capital or otherwise, then, after the date of record for determining
shareholders entitled to such distribution, but prior to the date of
distribution, the holder of this Warrant shall be entitled upon exercise of
this
Warrant for the purchase of any or all of the shares of Common Stock subject
hereto, to receive the amount of such assets which would have been payable
to
the holder had such holder been the holder of such shares of Common Stock on
the
record date for the determination of shareholders entitled to such
distribution.
(g) Notice
of
Adjustment. Upon
the
occurrence of any event which requires any adjustment of the Exercise Price,
then, and in each such case, the Company shall give notice thereof to the holder
of this Warrant, which notice shall state the Exercise Price resulting from
such
adjustment and the increase or decrease in the number of Warrant Shares
purchasable at such price upon exercise, setting forth in reasonable detail
the
method of calculation and the facts upon which such calculation is
based. Such calculation shall be certified by the Chief Financial
Officer of the Company.
(h) Minimum
Adjustment of
Exercise Price. No adjustment
of
the Exercise Price shall be made in an amount of less than 1% of the Exercise
Price in effect at the time such adjustment is otherwise required to be made,
but any such lesser adjustment shall be carried forward and shall be made at
the
time and together with the next subsequent adjustment which, together with
any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.
(i) No
Fractional
Shares. No fractional
shares of Common Stock are to be issued upon the exercise of this Warrant,
but
the Company shall pay a cash adjustment in respect of any fractional share
which
would otherwise be issuable in an amount equal to the same fraction of the
Market Price of a share of Common Stock on the date of such
exercise.
(j) Other
Notices. In case
at any
time:
(i) the
Company shall declare any dividend upon the Common Stock payable in shares
of
stock of any class or make any other distribution (including dividends or
distributions payable in cash out of retained earnings) to the holders of the
Common Stock;
(ii) the
Company shall offer for subscription pro rata to the holders of the Common
Stock
any additional shares of stock of any class or other rights;
(iii) there
shall be any capital reorganization of the Company, or reclassification of
the Common Stock, or consolidation or merger of the Company with or into, or
sale of all or substantially all its assets to, another corporation or
entity; or
(iv) there
shall be a voluntary or involuntary dissolution, liquidation or winding up
of the Company;
then,
in
each such case, the Company shall give to the holder of this Warrant (a) notice
of the date on which the books of the Company shall close or a record shall
be
taken for determining the holders of Common Stock entitled to receive any such
dividend, distribution, or subscription rights or for determining the
holders of Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, notice
of
the date (or, if not then known, a reasonable approximation thereof by the
Company) when the same shall take place. Such notice shall also
specify the date on which the holders of Common Stock shall be entitled to
receive such dividend, distribution, or subscription rights or to exchange
their
Common Stock for stock or other securities or property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, or winding-up, as the case may be. Such notice shall be
given at least 30 days prior to the record date or the date on which the
Company’s books are closed in respect thereto. Failure to give any
such notice or any defect therein shall not affect the validity of the
proceedings referred to in clauses (i), (ii), (iii) and (iv) above.
Page
5
(k) Certain
Events. If any
event
occurs of the type contemplated by the adjustment provisions of this Paragraph
4
but not expressly provided for by such provisions, the Company will give notice
of such event as provided in Paragraph 4(g) hereof, and the Company’s Board of
Directors will make an appropriate adjustment in the Exercise Price and the
number of shares of Common Stock acquirable upon exercise of this Warrant so
that the rights of the holder shall be neither enhanced nor diminished by such
event.
(l) Certain
Definitions.
(i) “Common
Stock Deemed
Outstanding” shall
mean the number of
shares of Common Stock actually outstanding (not including shares of Common
Stock held in the treasury of the Company), plus (x) pursuant to Paragraph
4(b)(i) hereof, the maximum total number of shares of Common Stock issuable
upon
the exercise of Options, as of the date of such issuance or grant of such
Options, if any, and (y) pursuant to Paragraph 4(b)(ii) hereof, the maximum
total number of shares of Common Stock issuable upon conversion or exchange
of
Convertible Securities, as of the date of issuance of such Convertible
Securities, if any.
(ii) “Market
Price,” as
of any date, (i) means the average of the last reported sale prices for the
shares of Common Stock on the OTCBB for the five (5) Trading Days immediately
preceding such date as reported by Bloomberg, or (ii) if the OTCBB is not the
principal trading market for the shares of Common Stock, the average of the
last
reported sale prices on the principal trading market for the Common Stock during
the same period as reported by Bloomberg, or (iii) if market value cannot be
calculated as of such date on any of the foregoing bases, the Market Price
shall
be the fair market value as reasonably determined in good faith by (a) the
Board
of Directors of the Company or, at the option of a majority-in-interest of
the
holders of the outstanding Warrants by (b) an independent investment bank of
nationally recognized standing in the valuation of businesses similar to the
business of the corporation. The manner of determining the Market Price of
the
Common Stock set forth in the foregoing definition shall apply with respect
to
any other security in respect of which a determination as to market value must
be made hereunder.
(iii) “Common
Stock,”
for purposes of this Paragraph 4, includes the Common Stock, par value $.00005
per share, and any additional class of stock of the Company having no preference
as to dividends or distributions on liquidation, provided that the shares
purchasable pursuant to this Warrant shall include only shares of Common Stock,
par value $.00005 per share, in respect of which this Warrant is exercisable,
or
shares resulting from any subdivision or combination of such Common Stock,
or in
the case of any reorganization, reclassification, consolidation, merger, or
sale
of the character referred to in Paragraph 4(e) hereof, the stock or other
securities or property provided for in such Paragraph.
5. Issue
Tax.
The
issuance of certificates for Warrant Shares upon the exercise of this Warrant
shall be made without charge to the holder of this Warrant or such shares for
any issuance tax or other costs in respect thereof, provided that the Company
shall not be required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of any certificate in a name
other than the holder of this Warrant.
6. No
Rights or Liabilities as
a Shareholder.
This
Warrant shall not entitle the holder hereof to any voting rights or other rights
as a shareholder of the Company. No provision of this Warrant, in the
absence of affirmative action by the holder hereof to purchase Warrant Shares,
and no mere enumeration herein of the rights or privileges of the holder hereof,
shall give rise to any liability of such holder for the Exercise Price or as
a
shareholder of the Company, whether such liability is asserted by the Company
or
by creditors of the Company.
7. Transfer,
Exchange, and
Replacement of Warrant.
(a) Restriction
on
Transfer. This
Warrant and
the rights granted to the holder hereof are transferable, in whole or in part,
upon surrender of this Warrant, together with a properly executed assignment
in
the form attached hereto, at the office or agency of the Company referred to
in
Paragraph 7(e) below, provided, however, that any transfer or
assignment shall be subject to the conditions set forth in Paragraph 7(f) hereof
and to the applicable provisions of the Securities Purchase
Agreement. Until due presentment for registration of transfer on the
books of the Company, the Company may treat the registered holder hereof as
the
owner and holder hereof for all purposes, and the Company shall not be affected
by any notice to the contrary. Notwithstanding anything to the
contrary contained herein, the registration rights described in Paragraph 8
are
assignable only in accordance with the provisions of that certain Registration
Rights Agreement, dated October 15, 2007, by and among the Company and the
other
signatories thereto (the “Registration Rights Agreement”).
Page
6
(b) Warrant
Exchangeable for
Different Denominations. This
Warrant is
exchangeable, upon the surrender hereof by the holder hereof at the office
or agency of the Company referred to in Paragraph 7(e) below, for new Warrants
of like tenor representing in the aggregate the right to purchase the number
of
shares of Common Stock which may be purchased hereunder, each of such new
Warrants to represent the right to purchase such number of shares as shall
be
designated by the holder hereof at the time of such surrender.
(c) Replacement
of
Warrant. Upon
receipt of
evidence reasonably satisfactory to the Company of the loss, theft,
destruction, or mutilation of this Warrant and, in the case of any such loss,
theft, or destruction, upon delivery of an indemnity agreement
reasonably satisfactory in form and amount to the Company, or, in the case
of any such mutilation, upon surrender and cancellation of this Warrant, the
Company, at its expense, will execute and deliver, in lieu thereof, a new
Warrant of like tenor.
(d) Cancellation;
Payment of
Expenses. Upon
the
surrender of this Warrant in connection with any transfer, exchange, or
replacement as provided in this Paragraph 7, this Warrant shall be promptly
canceled by the Company. The Company shall pay all taxes (other than
securities transfer taxes) and all other expenses (other than legal expenses,
if
any, incurred by the holder or transferees) and charges payable in connection
with the preparation, execution, and delivery of Warrants pursuant to this
Paragraph 7.
(e) Register. The
Company shall
maintain, at its principal executive offices (or such other office or agency
of
the Company as it may designate by notice to the holder hereof), a register
for
this Warrant, in which the Company shall record the name and address of the
person in whose name this Warrant has been issued, as well as the name and
address of each transferee and each prior owner of this Warrant.
(f) Exercise
or Transfer Without
Registration. If,
at the time
of the surrender of this Warrant in connection with any exercise, transfer,
or
exchange of this Warrant, this Warrant (or, in the case of any exercise, the
Warrant Shares issuable hereunder), shall not be registered under the Securities
Act of 1933, as amended (the “Securities Act”) and under applicable state
securities or blue sky laws, the Company may require, as a condition of allowing
such exercise, transfer, or exchange, (i) that the holder or transferee of
this
Warrant, as the case may be, furnish to the Company a written opinion of
counsel, which opinion and counsel are acceptable to the Company, to the effect
that such exercise, transfer, or exchange may be made without registration
under
said Act and under applicable state securities or blue sky laws, (ii) that
the
holder or transferee execute and deliver to the Company an investment letter
in
form and substance acceptable to the Company and (iii) that the transferee
be an
“accredited investor” as defined in Rule 501(a) promulgated under the Securities
Act; provided that no such opinion, letter or status as an “accredited investor”
shall be required in connection with a transfer pursuant to Rule 144 under
the
Securities Act. The first holder of this Warrant, by taking and
holding the same, represents to the Company that such holder is acquiring this
Warrant for investment and not with a view to the distribution
thereof.
8. Registration
Rights.
The
initial holder of this Warrant (and certain assignees thereof) is entitled
to
the benefit of such registration rights in respect of the Warrant Shares as
are
set forth in Section 2 of the Registration Rights Agreement.
9. Notices.
All
notices, requests, and other communications required or permitted to be given
or
delivered hereunder to the holder of this Warrant shall be in writing, and
shall
be personally delivered, or shall be sent by certified or registered mail or
by
recognized overnight mail courier, postage prepaid and addressed, to such holder
at the address shown for such holder on the books of the Company, or at such
other address as shall have been furnished to the Company by notice from such
holder. All notices, requests, and other communications required or
permitted to be given or delivered hereunder to the Company shall be in writing,
and shall be personally delivered, or shall be sent by certified or registered
mail or by recognized overnight mail courier, postage prepaid and addressed,
to
the office of the Company at ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇
▇▇▇▇▇, Attention: Chief Executive Officer, or at such other address as shall
have been furnished to the holder of this Warrant by notice from the
Company. Any such notice, request, or other communication may be sent
by facsimile, but shall in such case be subsequently confirmed by a writing
personally delivered or sent by certified or registered mail or by recognized
overnight mail courier as provided above. All notices, requests, and
other communications shall be deemed to have been given either at the time
of
the receipt thereof by the person entitled to receive such notice at the
address of such person for purposes of this Paragraph 9, or, if mailed by
registered or certified mail or with a recognized overnight mail courier upon
deposit with the United States Post Office or such overnight mail courier,
if
postage is prepaid and the mailing is properly addressed, as the case may
be.
Page
7
10. Governing
Law.
THIS
WARRANT 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 LOCATED IN NEW YORK, NEW YORK WITH RESPECT
TO ANY DISPUTE ARISING UNDER THIS WARRANT, 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 PARTY WHICH DOES NOT PREVAIL IN
ANY DISPUTE ARISING UNDER THIS WARRANT SHALL BE RESPONSIBLE FOR ALL FEES AND
EXPENSES, INCLUDING ATTORNEYS’ FEES, INCURRED BY THE PREVAILING PARTY IN
CONNECTION WITH SUCH DISPUTE.
11. Miscellaneous.
(a) Amendments. This
Warrant and
any provision hereof may only be amended by an instrument in writing signed
by
the Company and the holder hereof.
(b) Descriptive
Headings. The
descriptive
headings of the several paragraphs of this Warrant are inserted for
purposes of reference only, and shall not affect the meaning or construction
of
any of the provisions hereof.
(d) Remedies. The
Company acknowledges that a breach by it of its obligations hereunder will
cause
irreparable harm to the holder, 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
Warrant will be inadequate and agrees, in the event of a breach or threatened
breach by the Company of the provisions of this Warrant, that the holder shall
be entitled, in addition to all other available remedies at law or in equity,
and in addition to the penalties assessable herein, to an injunction or
injunctions restraining, preventing or curing any breach of this Warrant and
to
enforce specifically the terms and provisions thereof, without the necessity
of
showing economic loss and without any bond or other security being
required.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
Page
8
IN
WITNESS WHEREOF, the
Company has caused this Warrant to be signed by its duly authorized officer
as
of the date first above written.
MIDNIGHT
HOLDINGS GROUP,
INC.
By:
/s/▇▇▇▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Chief
Executive Officer
Page
9
FORM
OF EXERCISE
AGREEMENT
Dated: ________ __, 200_
To: ______________________
The
undersigned, pursuant to the provisions set forth in the within Warrant, hereby
agrees to purchase ________ shares of Common Stock covered by such Warrant,
and
makes payment herewith in full therefor at the price per share provided by
such Warrant in cash or by certified or official bank check in the amount of,
or, if the resale of such Common Stock by the undersigned is not currently
registered pursuant to an effective registration statement under the Securities
Act of 1933, as amended, by surrender of securities issued by the Company
(including a portion of the Warrant) having a market value (in the case of
a
portion of this Warrant, determined in accordance with Section 11(c) of the
Warrant) equal to $_________. Please issue a certificate or
certificates for such shares of Common Stock in the name of and pay any
cash for any fractional share to:
Name:
Signature:
Address:
Note: The
above
signature should correspond
exactly with the name on the face of the
within Warrant, if applicable.
and,
if
said number of shares of Common Stock shall not be all the shares purchasable
under the within Warrant, a new Warrant is to be issued in the name of said
undersigned covering the balance of the shares purchasable thereunder less
any
fraction of a share paid in cash.
Page
10
FORM
OF
ASSIGNMENT
FOR
VALUE RECEIVED, the
undersigned hereby sells, assigns, and transfers all the rights of the
undersigned under the within Warrant, with respect to the number of shares
of
Common Stock covered thereby set forth hereinbelow, to:
Name
of
Assignee Address No
of
Shares
,
and
hereby irrevocably constitutes and appoints ___________________________________
as agent and attorney-in-fact to transfer said Warrant on the books of the
within-named corporation, with full power of substitution in the
premises.
Dated: ________
__, 200_
In
the
presence
of:
__________________________
Name: __________________________
Signature:
_________________________
Title
of
Signing Officer or Agent (if any):
__________________________
Address: __________________________
_________________________
|
|
Note:
|
The
above signature should
correspond
exactly with the
name
on the face of the within
Warrant,
if applicable.
|
Page
11
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 A SECURITIES PURCHASE AGREEMENT DATED
AS OF
OCTOBER 15, 2007, NEITHER THIS WARRANT NOR ANY OF SUCH SHARES MAY BE SOLD,
TRANSFERRED OR ASSIGNED 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 OR REGULATION S UNDER SUCH ACT.
Right
to
Purchase 55,800 Shares of Common Stock, par value $.00005 per
share
STOCK
PURCHASE
WARRANT
THIS
CERTIFIES THAT, for value
received, AJW Partners, LLC. or its registered assigns, is entitled to purchase
from Midnight Holdings Group,
Inc., a Delaware corporation (the “Company”), at any time or from time to
time during the period specified in Paragraph 2 hereof, 55,800 fully paid
and nonassessable shares of the Company’s Common Stock, par value $.00005 per
share (the “Common Stock”), at an exercise price per share equal to $.08 (the
“Exercise Price”). The term “Warrant Shares,” as used herein, refers
to the shares of Common Stock purchasable hereunder. The Warrant
Shares and the Exercise Price are subject to adjustment as provided in Paragraph
4 hereof. The term “Warrants” means this Warrant and the other
warrants issued pursuant to that certain Securities Purchase Agreement, dated
October 15, 2007, by and among the Company and the Buyers listed on the
execution page thereof (the “Securities Purchase Agreement”).
This
Warrant is subject to the following terms, provisions, and
conditions:
1. Manner
of Exercise; Issuance
of Certificates; Payment for Shares.
Subject
to the provisions hereof, this Warrant may be exercised by the holder hereof,
in
whole or in part, by the surrender of this Warrant, together with a completed
exercise agreement in the form attached hereto (the “Exercise Agreement”), to
the Company during normal business hours on any business day at the Company’s
principal executive offices (or such other office or agency of the Company
as it
may designate by notice to the holder hereof), and upon (i) payment to the
Company in cash, by certified or official bank check or by wire transfer
for the account of the Company of the Exercise Price for the Warrant Shares
specified in the Exercise Agreement or (ii) if the resale of the Warrant
Shares
by the holder is not then registered pursuant to an effective registration
statement under the Securities Act of 1933, as amended (the “Securities Act”),
delivery to the Company of a written notice of an election to effect a “Cashless
Exercise” (as defined in Section 11(c) below) for the Warrant Shares specified
in the Exercise Agreement. The Warrant Shares so purchased shall be
deemed to be issued to the holder hereof or such holder’s designee, as the
record owner of such shares, as of the close of business on the date on which
this Warrant shall have been surrendered, the completed Exercise Agreement
shall
have been delivered, and payment shall have been made for such shares as
set forth above. Certificates for the Warrant Shares so
purchased, representing the aggregate number of shares specified in the Exercise
Agreement, shall be delivered to the holder hereof within a reasonable time,
not
exceeding five (5) business days, after this Warrant shall have been so
exercised. The certificates so delivered shall be in such
denominations as may be requested by the holder hereof and shall be registered
in the name of such holder or such other name as shall be designated by such
holder. If this Warrant shall have been exercised only in part, then,
unless this Warrant has expired, the Company shall, at its expense, at the
time
of delivery of such certificates, deliver to the holder a new Warrant
representing the number of shares with respect to which this Warrant shall
not
then have been exercised. In addition to all other available remedies
at law or in equity, if the Company fails to deliver certificates for the
Warrant Shares within five (5) business days after this Warrant is exercised,
then the Company shall pay to the holder in cash a penalty (the “Penalty”) equal
to 2% of the number of Warrant Shares that the holder is entitled to multiplied
by the Market Price (as hereinafter defined) for each day that the Company
fails
to deliver certificates for the Warrant Shares. For example, if the
holder is entitled to 100,000 Warrant Shares and the Market Price is $2.00,
then
the Company shall pay to the holder $4,000 for each day that the Company
fails
to deliver certificates for the Warrant Shares. The Penalty shall be
paid to the holder by the fifth day of the month following the month in which
it
has accrued.
Notwithstanding
anything in this Warrant to the contrary, in no event shall the holder of
this
Warrant be entitled to exercise a number of Warrants (or portions thereof)
in
excess of the number of Warrants (or portions thereof) upon exercise of which
the sum of (i) the number of shares of Common Stock beneficially owned by
the
holder and its affiliates (other than shares of Common Stock which may be
deemed
beneficially owned through the ownership of the unexercised Warrants and
the
unexercised or unconverted portion of any other securities of the Company
(including the Notes (as defined in the Securities Purchase Agreement)) subject
to a limitation on conversion or exercise analogous to the limitation contained
herein) and (ii) the number of shares of Common Stock issuable upon exercise
of
the Warrants (or portions thereof) with respect to which the determination
described herein is being made, would result in beneficial ownership by the
holder and its affiliates of more than 4.9% of the outstanding shares of
Common
Stock. For purposes of the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation 13D-G thereunder, except
as
otherwise provided in clause (i) of the preceding
sentence. Notwithstanding anything to the contrary contained herein,
the limitation on exercise of this Warrant set forth herein may not be amended
without (i) the written consent of the holder hereof and the Company and
(ii)
the approval of a majority of shareholders of the Company.
Page
1
2. Period
of
Exercise.
This
Warrant is
exercisable at any time or from time to time on or after the date on which
this
Warrant is issued and delivered pursuant to the terms of the Securities Purchase
Agreement and before 6:00 p.m., New York, New York time on the fifth (5th)
anniversary of
the date of issuance (the “Exercise Period”).
3. Certain
Agreements of the
Company.
The
Company hereby covenants and agrees as follows:
(a) Shares
to be Fully
Paid. Subject
to the
completion of the Charter Amendment Actions (as such term is defined in the
Securities Purchase Agreement), all Warrant Shares will, upon issuance in
accordance with the terms of this Warrant, be validly issued, fully paid,
and
nonassessable and free from all taxes, liens, and charges with respect to
the
issue thereof.
(b) Reservation
of
Shares. Subject
to the
completion of the Charter Amendment Actions, during the Exercise Period,
the
Company shall at all times have authorized, and reserved for the purpose
of
issuance upon exercise of this Warrant, a sufficient number of shares of
Common Stock to provide for the exercise of this Warrant.
(c) Listing. The
Company shall
use it best efforts to secure the listing of the shares of Common Stock issuable
upon exercise of the Warrant upon each national securities exchange or automated
quotation system, if any, upon which shares of Common Stock are then listed
(subject to official notice of issuance upon exercise of this Warrant) and
shall
maintain, so long as any other shares of Common Stock shall be so listed,
such
listing of all shares of Common Stock from time to time issuable upon the
exercise of this Warrant; and the Company shall so list on each national
securities exchange or automated quotation system, as the case may be, and
shall
maintain such listing of, any other shares of capital stock of the Company
issuable upon the exercise of this Warrant if and so long as any shares of
the
same class shall be listed on such national securities exchange or automated
quotation system.
(d) Certain
Actions
Prohibited. The
Company will
not, by amendment of its charter or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities, or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed by it hereunder,
but will at all times in good faith assist in the carrying out of all the
provisions of this Warrant and in the taking of all such action as may
reasonably be requested by the holder of this Warrant in order to protect
the
exercise privilege of the holder of this Warrant against dilution or other
impairment, consistent with the tenor and purpose of this
Warrant. Without limiting the generality of the foregoing, the
Company (i) will not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then
in
effect, and (ii) will take all such actions 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.
(e) Successors
and
Assigns. This
Warrant will
be binding upon any entity succeeding to the Company by merger, consolidation,
or acquisition of all or substantially all the Company’s
assets.
4. Antidilution
Provisions.
During
the Exercise Period, the Exercise Price and the number of Warrant Shares
shall
be subject to adjustment from time to time as provided in this Paragraph
4.
In
the
event that any adjustment of the Exercise Price as required herein results
in a
fraction of a cent, such Exercise Price shall be rounded up to the nearest
cent.
Page
2
(a) Adjustment
of Exercise Price
and Number of Shares upon Issuance of Common Stock. Except
as
otherwise provided in Paragraphs 4(c) and 4(e) hereof, if and whenever on
or
after the date of issuance of this Warrant, the Company issues or sells,
or in
accordance with Paragraph 4(b) hereof is deemed to have issued or sold, any
shares of Common Stock for no consideration or for a consideration per share
(before deduction of reasonable expenses or commissions or underwriting
discounts or allowances in connection therewith) less than the Market Price
on
the date of issuance (a “Dilutive Issuance”), then immediately upon the Dilutive
Issuance, the Exercise Price will be reduced to a price determined by
multiplying the Exercise Price in effect immediately prior to the Dilutive
Issuance by a fraction, (i) the numerator of which is an amount equal to
the sum
of (x) the number of shares of Common Stock actually outstanding immediately
prior to the Dilutive Issuance, plus (y) the quotient of the aggregate
consideration, calculated as set forth in Paragraph 4(b) hereof, received
by the
Company upon such Dilutive Issuance divided by the Market Price in effect
immediately prior to the Dilutive Issuance, and (ii) the denominator of which
is
the total number of shares of Common Stock Deemed Outstanding (as defined
below)
immediately after the Dilutive Issuance.
(b) Effect
on Exercise Price of
Certain Events. For
purposes of
determining the adjusted Exercise Price under Paragraph 4(a) hereof, the
following will be applicable:
(i) Issuance
of Rights or
Options. If
the Company in
any manner issues or grants any warrants, rights or options, whether or not
immediately exercisable, to subscribe for or to purchase Common Stock or
other
securities convertible into or exchangeable for Common Stock (“Convertible
Securities”) (such warrants, rights and options to purchase Common Stock or
Convertible Securities are hereinafter referred to as “Options”) and the price
per share for which Common Stock is issuable upon the exercise of such Options
is less than the Market Price on the date of issuance or grant of such Options,
then the maximum total number of shares of Common Stock issuable upon the
exercise of all such Options will, as of the date of the issuance or grant
of
such Options, be deemed to be outstanding and to have been issued and sold
by
the Company for such price per share. For purposes of the preceding
sentence, the “price per share for which Common Stock is issuable upon the
exercise of such Options” is determined by dividing (i) the total amount, if
any, received or receivable by the Company as consideration for the issuance
or
granting of all such Options, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the exercise of all such
Options, plus, in the case of Convertible Securities issuable upon the exercise
of such Options, the minimum aggregate amount of additional consideration
payable upon the conversion or exchange thereof at the time such Convertible
Securities first become convertible or exchangeable, by (ii) the maximum
total
number of shares of Common Stock issuable upon the exercise of all such Options
(assuming full conversion of Convertible Securities, if
applicable). No further adjustment to the Exercise Price will be made
upon the actual issuance of such Common Stock upon the exercise of such Options
or upon the conversion or exchange of Convertible Securities issuable upon
exercise of such Options.
(ii) Issuance
of Convertible
Securities. If
the Company in
any manner issues or sells any Convertible Securities, whether or not
immediately convertible (other than where the same are issuable upon the
exercise of Options) and the price per share for which Common Stock is issuable
upon such conversion or exchange is less than the Market Price on the date
of
issuance, then the maximum total number of shares of Common Stock issuable
upon
the conversion or exchange of all such Convertible Securities will, as of
the
date of the issuance of such Convertible Securities, be deemed to be outstanding
and to have been issued and sold by the Company for such price per
share. For the purposes of the preceding sentence, the “price per
share for which Common Stock is issuable upon such conversion or exchange” is
determined by dividing (i) the total amount, if any, received or receivable
by
the Company as consideration for the issuance or sale of all such Convertible
Securities, plus the minimum aggregate amount of additional consideration,
if
any, payable to the Company upon the conversion or exchange thereof at the
time
such Convertible Securities first become convertible or exchangeable, by
(ii)
the maximum total number of shares of Common Stock issuable upon the conversion
or exchange of all such Convertible Securities. No further adjustment
to the Exercise Price will be made upon the actual issuance of such Common
Stock
upon conversion or exchange of such Convertible Securities.
(iii) Change
in Option Price or
Conversion Rate. If
there is a
change at any time in (i) the amount of additional consideration payable
to the
Company upon the exercise of any Options; (ii) the amount of additional
consideration, if any, payable to the Company upon the conversion or exchange
of
any Convertible Securities; or (iii) the rate at which any Convertible
Securities are convertible into or exchangeable for Common Stock (other than
under or by reason of provisions designed to protect against dilution), the
Exercise Price in effect at the time of such change will be readjusted to
the
Exercise Price which would have been in effect at such time had such Options
or
Convertible Securities still outstanding provided for such changed additional
consideration or changed conversion rate, as the case may be, at the time
initially granted, issued or sold.
(iv) Treatment
of Expired Options
and Unexercised Convertible Securities. If,
in any case,
the total number of shares of Common Stock issuable upon exercise of any
Option
or upon conversion or exchange of any Convertible Securities is not, in fact,
issued and the rights to exercise such Option or to convert or exchange such
Convertible Securities shall have expired or terminated, the Exercise Price
then
in effect will be readjusted to the Exercise Price which would have been
in
effect at the time of such expiration or termination had such Option or
Convertible Securities, to the extent outstanding immediately prior to such
expiration or termination (other than in respect of the actual number of
shares
of Common Stock issued upon exercise or conversion thereof), never been
issued.
Page
3
(v) Calculation
of Consideration
Received. If
any Common
Stock, Options or Convertible Securities are issued, granted or sold for
cash,
the consideration received therefor for purposes of this Warrant will be
the
amount received by the Company therefor, before deduction of reasonable
commissions, underwriting discounts or allowances or other reasonable expenses
paid or incurred by the Company in connection with such issuance, grant or
sale. In case any Common Stock, Options or Convertible Securities are
issued or sold for a consideration part or all of which shall be other than
cash, the amount of the consideration other than cash received by the Company
will be the fair value of such consideration, except where such consideration
consists of securities, in which case the amount of consideration received
by
the Company will be the Market Price thereof as of the date of
receipt. In case any Common Stock, Options or Convertible Securities
are issued in connection with any acquisition, merger or consolidation in
which
the Company is the surviving corporation, the amount of consideration therefor
will be deemed to be the fair value of such portion of the net assets and
business of the non-surviving corporation as is attributable to such Common
Stock, Options or Convertible Securities, as the case may be. The
fair value of any consideration other than cash or securities will be determined
in good faith by the Board of Directors of the Company.
(vi) Exceptions
to Adjustment of
Exercise Price. No
adjustment to
the Exercise Price will be made (i) upon the exercise of any warrants, options
or convertible securities granted, issued and outstanding on the date of
issuance of this Warrant; (ii) upon the grant or exercise of any stock or
options which may hereafter be granted or exercised under any employee benefit
plan, stock option plan or restricted stock plan of the Company now existing
or
to be implemented in the future, so long as the issuance of such stock or
options is approved by a majority of the independent members of the Board
of
Directors of the Company or a majority of the members of a committee of
independent directors established for such purpose; or (iii) upon the exercise
of the Warrants.
(c) Subdivision
or Combination
of Common Stock. If
the Company at
any time subdivides (by any stock split, stock dividend, recapitalization,
reorganization, reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a greater number of shares, then, after the date
of
record for effecting such subdivision, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced. If the
Company at any time combines (by reverse stock split, recapitalization,
reorganization, reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a smaller number of shares, then, after the date
of
record for effecting such combination, the Exercise Price in effect immediately
prior to such combination will be proportionately increased.
(d) Adjustment
in Number of
Shares. Upon
each
adjustment of the Exercise Price pursuant to the provisions of this Paragraph
4,
the number of shares of Common Stock issuable upon exercise of this Warrant
shall be adjusted by multiplying a number equal to the Exercise Price in
effect
immediately prior to such adjustment by the number of shares of Common Stock
issuable upon exercise of this Warrant immediately prior to such adjustment
and
dividing the product so obtained by the adjusted Exercise Price.
(e) Consolidation,
Merger or
Sale. In
case of any
consolidation of the Company with, or merger of the Company into any other
corporation, or in case of any sale or conveyance of all or substantially
all of
the assets of the Company other than in connection with a plan of complete
liquidation of the Company, then as a condition of such consolidation, merger
or
sale or conveyance, adequate provision will be made whereby the holder of
this
Warrant will have the right to acquire and receive upon exercise of this
Warrant
in lieu of the shares of Common Stock immediately theretofore acquirable
upon
the exercise of this Warrant, such shares of stock, securities or assets
as may
be issued or payable with respect to or in exchange for the number of shares
of
Common Stock immediately theretofore acquirable and receivable upon exercise
of
this Warrant had such consolidation, merger or sale or conveyance not taken
place. In any such case, the Company will make appropriate provision
to insure that the provisions of this Paragraph 4 hereof will thereafter
be
applicable as nearly as may be in relation to any shares of stock or securities
thereafter deliverable upon the exercise of this Warrant. The Company
will not effect any consolidation, merger or sale or conveyance unless prior
to
the consummation thereof, the successor corporation (if other than the Company)
assumes by written instrument the obligations under this Paragraph 4 and
the
obligations to deliver to the holder of this Warrant such shares of stock,
securities or assets as, in accordance with the foregoing provisions, the
holder
may be entitled to acquire.
Page
4
(f) Distribution
of
Assets. In
case the
Company shall declare or make any distribution of its assets (including cash)
to
holders of Common Stock as a partial liquidating dividend, by way of return
of
capital or otherwise, then, after the date of record for determining
shareholders entitled to such distribution, but prior to the date of
distribution, the holder of this Warrant shall be entitled upon exercise
of this
Warrant for the purchase of any or all of the shares of Common Stock subject
hereto, to receive the amount of such assets which would have been payable
to
the holder had such holder been the holder of such shares of Common Stock
on the
record date for the determination of shareholders entitled to such
distribution.
(g) Notice
of
Adjustment. Upon
the
occurrence of any event which requires any adjustment of the Exercise Price,
then, and in each such case, the Company shall give notice thereof to the
holder
of this Warrant, which notice shall state the Exercise Price resulting from
such
adjustment and the increase or decrease in the number of Warrant Shares
purchasable at such price upon exercise, setting forth in reasonable detail
the
method of calculation and the facts upon which such calculation is
based. Such calculation shall be certified by the Chief Financial
Officer of the Company.
(h) Minimum
Adjustment of
Exercise Price. No
adjustment of
the Exercise Price shall be made in an amount of less than 1% of the Exercise
Price in effect at the time such adjustment is otherwise required to be made,
but any such lesser adjustment shall be carried forward and shall be made
at the
time and together with the next subsequent adjustment which, together with
any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.
(i) No
Fractional
Shares. No
fractional
shares of Common Stock are to be issued upon the exercise of this Warrant,
but
the Company shall pay a cash adjustment in respect of any fractional share
which
would otherwise be issuable in an amount equal to the same fraction of the
Market Price of a share of Common Stock on the date of such
exercise.
(j) Other
Notices. In
case at any
time:
(i) the
Company shall declare any dividend upon the Common Stock payable in shares
of
stock of any class or make any other distribution (including dividends or
distributions payable in cash out of retained earnings) to the holders of
the
Common Stock;
(ii) the
Company shall offer for subscription pro rata to the holders of the Common
Stock
any additional shares of stock of any class or other rights;
(iii) there
shall be any capital reorganization of the Company, or reclassification of
the Common Stock, or consolidation or merger of the Company with or into,
or
sale of all or substantially all its assets to, another corporation or
entity; or
(iv) there
shall be a voluntary or involuntary dissolution, liquidation or winding up
of the Company;
then,
in
each such case, the Company shall give to the holder of this Warrant (a)
notice
of the date on which the books of the Company shall close or a record shall
be
taken for determining the holders of Common Stock entitled to receive any
such
dividend, distribution, or subscription rights or for determining the
holders of Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, notice
of
the date (or, if not then known, a reasonable approximation thereof by the
Company) when the same shall take place. Such notice shall also
specify the date on which the holders of Common Stock shall be entitled to
receive such dividend, distribution, or subscription rights or to exchange
their
Common Stock for stock or other securities or property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, or winding-up, as the case may be. Such notice shall be
given at least 30 days prior to the record date or the date on which the
Company’s books are closed in respect thereto. Failure to give any
such notice or any defect therein shall not affect the validity of the
proceedings referred to in clauses (i), (ii), (iii) and (iv) above.
Page
5
(k) Certain
Events. If
any event
occurs of the type contemplated by the adjustment provisions of this Paragraph
4
but not expressly provided for by such provisions, the Company will give
notice
of such event as provided in Paragraph 4(g) hereof, and the Company’s Board of
Directors will make an appropriate adjustment in the Exercise Price and the
number of shares of Common Stock acquirable upon exercise of this Warrant
so
that the rights of the holder shall be neither enhanced nor diminished by
such
event.
(l) Certain
Definitions.
(i) “Common
Stock Deemed
Outstanding” shall
mean the number of
shares of Common Stock actually outstanding (not including shares of Common
Stock held in the treasury of the Company), plus (x) pursuant to Paragraph
4(b)(i) hereof, the maximum total number of shares of Common Stock issuable
upon
the exercise of Options, as of the date of such issuance or grant of such
Options, if any, and (y) pursuant to Paragraph 4(b)(ii) hereof, the maximum
total number of shares of Common Stock issuable upon conversion or exchange
of
Convertible Securities, as of the date of issuance of such Convertible
Securities, if any.
(ii) “Market
Price,” as
of any date, (i) means the average of the last reported sale prices for the
shares of Common Stock on the OTCBB for the five (5) Trading Days immediately
preceding such date as reported by Bloomberg, or (ii) if the OTCBB is not
the
principal trading market for the shares of Common Stock, the average of the
last
reported sale prices on the principal trading market for the Common Stock
during
the same period as reported by Bloomberg, or (iii) if market value cannot
be
calculated as of such date on any of the foregoing bases, the Market Price
shall
be the fair market value as reasonably determined in good faith by (a) the
Board
of Directors of the Company or, at the option of a majority-in-interest of
the
holders of the outstanding Warrants by (b) an independent investment bank
of
nationally recognized standing in the valuation of businesses similar to
the
business of the corporation. The manner of determining the Market Price of
the
Common Stock set forth in the foregoing definition shall apply with respect
to
any other security in respect of which a determination as to market value
must
be made hereunder.
(iii) “Common
Stock,”
for purposes of this Paragraph 4, includes the Common Stock, par value $.00005
per share, and any additional class of stock of the Company having no preference
as to dividends or distributions on liquidation, provided that the shares
purchasable pursuant to this Warrant shall include only shares of Common
Stock,
par value $.00005 per share, in respect of which this Warrant is exercisable,
or
shares resulting from any subdivision or combination of such Common Stock,
or in
the case of any reorganization, reclassification, consolidation, merger,
or sale
of the character referred to in Paragraph 4(e) hereof, the stock or other
securities or property provided for in such Paragraph.
5. Issue
Tax.
The
issuance of certificates for Warrant Shares upon the exercise of this Warrant
shall be made without charge to the holder of this Warrant or such shares
for
any issuance tax or other costs in respect thereof, provided that the Company
shall not be required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of any certificate in a name
other than the holder of this Warrant.
6. No
Rights or Liabilities as
a Shareholder.
This
Warrant shall not entitle the holder hereof to any voting rights or other
rights
as a shareholder of the Company. No provision of this Warrant, in the
absence of affirmative action by the holder hereof to purchase Warrant Shares,
and no mere enumeration herein of the rights or privileges of the holder
hereof,
shall give rise to any liability of such holder for the Exercise Price or
as a
shareholder of the Company, whether such liability is asserted by the Company
or
by creditors of the Company.
7. Transfer,
Exchange, and
Replacement of Warrant.
(a) Restriction
on
Transfer. This
Warrant and
the rights granted to the holder hereof are transferable, in whole or in
part,
upon surrender of this Warrant, together with a properly executed assignment
in
the form attached hereto, at the office or agency of the Company referred
to in
Paragraph 7(e) below, provided, however, that any transfer or
assignment shall be subject to the conditions set forth in Paragraph 7(f)
hereof
and to the applicable provisions of the Securities Purchase
Agreement. Until due presentment for registration of transfer on the
books of the Company, the Company may treat the registered holder hereof
as the
owner and holder hereof for all purposes, and the Company shall not be affected
by any notice to the contrary. Notwithstanding anything to the
contrary contained herein, the registration rights described in Paragraph
8 are
assignable only in accordance with the provisions of that certain Registration
Rights Agreement, dated October 15, 2007, by and among the Company and the
other
signatories thereto (the “Registration Rights Agreement”).
Page
6
(b) Warrant
Exchangeable for
Different Denominations. This
Warrant is
exchangeable, upon the surrender hereof by the holder hereof at the office
or agency of the Company referred to in Paragraph 7(e) below, for new Warrants
of like tenor representing in the aggregate the right to purchase the number
of
shares of Common Stock which may be purchased hereunder, each of such new
Warrants to represent the right to purchase such number of shares as shall
be
designated by the holder hereof at the time of such surrender.
(c) Replacement
of
Warrant. Upon
receipt of
evidence reasonably satisfactory to the Company of the loss, theft,
destruction, or mutilation of this Warrant and, in the case of any such loss,
theft, or destruction, upon delivery of an indemnity agreement
reasonably satisfactory in form and amount to the Company, or, in the case
of any such mutilation, upon surrender and cancellation of this Warrant,
the
Company, at its expense, will execute and deliver, in lieu thereof, a new
Warrant of like tenor.
(d) Cancellation;
Payment of
Expenses. Upon
the
surrender of this Warrant in connection with any transfer, exchange, or
replacement as provided in this Paragraph 7, this Warrant shall be promptly
canceled by the Company. The Company shall pay all taxes (other than
securities transfer taxes) and all other expenses (other than legal expenses,
if
any, incurred by the holder or transferees) and charges payable in connection
with the preparation, execution, and delivery of Warrants pursuant to this
Paragraph 7.
(e) Register. The
Company shall
maintain, at its principal executive offices (or such other office or agency
of
the Company as it may designate by notice to the holder hereof), a register
for
this Warrant, in which the Company shall record the name and address of the
person in whose name this Warrant has been issued, as well as the name and
address of each transferee and each prior owner of this Warrant.
(f) Exercise
or Transfer Without
Registration. If,
at the time
of the surrender of this Warrant in connection with any exercise, transfer,
or
exchange of this Warrant, this Warrant (or, in the case of any exercise,
the
Warrant Shares issuable hereunder), shall not be registered under the Securities
Act of 1933, as amended (the “Securities Act”) and under applicable state
securities or blue sky laws, the Company may require, as a condition of allowing
such exercise, transfer, or exchange, (i) that the holder or transferee of
this
Warrant, as the case may be, furnish to the Company a written opinion of
counsel, which opinion and counsel are acceptable to the Company, to the
effect
that such exercise, transfer, or exchange may be made without registration
under
said Act and under applicable state securities or blue sky laws, (ii) that
the
holder or transferee execute and deliver to the Company an investment letter
in
form and substance acceptable to the Company and (iii) that the transferee
be an
“accredited investor” as defined in Rule 501(a) promulgated under the Securities
Act; provided that no such opinion, letter or status as an “accredited investor”
shall be required in connection with a transfer pursuant to Rule 144 under
the
Securities Act. The first holder of this Warrant, by taking and
holding the same, represents to the Company that such holder is acquiring
this
Warrant for investment and not with a view to the distribution
thereof.
8. Registration
Rights.
The
initial holder of this Warrant (and certain assignees thereof) is entitled
to
the benefit of such registration rights in respect of the Warrant Shares
as are
set forth in Section 2 of the Registration Rights Agreement.
9. Notices.
All
notices, requests, and other communications required or permitted to be given
or
delivered hereunder to the holder of this Warrant shall be in writing, and
shall
be personally delivered, or shall be sent by certified or registered mail
or by
recognized overnight mail courier, postage prepaid and addressed, to such
holder
at the address shown for such holder on the books of the Company, or at such
other address as shall have been furnished to the Company by notice from
such
holder. All notices, requests, and other communications required or
permitted to be given or delivered hereunder to the Company shall be in writing,
and shall be personally delivered, or shall be sent by certified or registered
mail or by recognized overnight mail courier, postage prepaid and addressed,
to
the office of the Company at ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇
▇▇▇▇▇, Attention: Chief Executive Officer, or at such other address as shall
have been furnished to the holder of this Warrant by notice from the
Company. Any such notice, request, or other communication may be sent
by facsimile, but shall in such case be subsequently confirmed by a writing
personally delivered or sent by certified or registered mail or by recognized
overnight mail courier as provided above. All notices, requests, and
other communications shall be deemed to have been given either at the time
of
the receipt thereof by the person entitled to receive such notice at the
address of such person for purposes of this Paragraph 9, or, if mailed by
registered or certified mail or with a recognized overnight mail courier
upon
deposit with the United States Post Office or such overnight mail courier,
if
postage is prepaid and the mailing is properly addressed, as the case may
be.
Page
7
10. Governing
Law.
THIS
WARRANT 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 LOCATED IN NEW YORK, NEW YORK WITH RESPECT
TO ANY DISPUTE ARISING UNDER THIS WARRANT, 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 PARTY WHICH DOES NOT PREVAIL IN
ANY DISPUTE ARISING UNDER THIS WARRANT SHALL BE RESPONSIBLE FOR ALL FEES
AND
EXPENSES, INCLUDING ATTORNEYS’ FEES, INCURRED BY THE PREVAILING PARTY IN
CONNECTION WITH SUCH DISPUTE.
11. Miscellaneous.
(a) Amendments. This
Warrant and
any provision hereof may only be amended by an instrument in writing signed
by
the Company and the holder hereof.
(b) Descriptive
Headings. The
descriptive
headings of the several paragraphs of this Warrant are inserted for
purposes of reference only, and shall not affect the meaning or construction
of
any of the provisions hereof.
(d) Remedies. The
Company acknowledges that a breach by it of its obligations hereunder will
cause
irreparable harm to the holder, 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
Warrant will be inadequate and agrees, in the event of a breach or threatened
breach by the Company of the provisions of this Warrant, that the holder
shall
be entitled, in addition to all other available remedies at law or in equity,
and in addition to the penalties assessable herein, to an injunction or
injunctions restraining, preventing or curing any breach of this Warrant
and to
enforce specifically the terms and provisions thereof, without the necessity
of
showing economic loss and without any bond or other security being
required.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
Page
8
IN
WITNESS WHEREOF, the
Company has caused this Warrant to be signed by its duly authorized officer
as
of the date first above written.
MIDNIGHT
HOLDINGS GROUP,
INC.
By:
/s/▇▇▇▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Chief Executive Officer
Page
9
FORM
OF EXERCISE
AGREEMENT
Dated: ________ __, 200_
To: ______________________
The
undersigned, pursuant to the provisions set forth in the within Warrant,
hereby
agrees to purchase ________ shares of Common Stock covered by such Warrant,
and
makes payment herewith in full therefor at the price per share provided by
such Warrant in cash or by certified or official bank check in the amount
of,
or, if the resale of such Common Stock by the undersigned is not currently
registered pursuant to an effective registration statement under the Securities
Act of 1933, as amended, by surrender of securities issued by the Company
(including a portion of the Warrant) having a market value (in the case of
a
portion of this Warrant, determined in accordance with Section 11(c) of the
Warrant) equal to $_________. Please issue a certificate or
certificates for such shares of Common Stock in the name of and pay any
cash for any fractional share to:
Name:
Signature:
Address:
Note: The
above
signature should correspond
exactly with the name on the face of the
within Warrant, if applicable.
and,
if
said number of shares of Common Stock shall not be all the shares purchasable
under the within Warrant, a new Warrant is to be issued in the name of said
undersigned covering the balance of the shares purchasable thereunder less
any
fraction of a share paid in cash.
Page
10
FORM
OF
ASSIGNMENT
FOR
VALUE RECEIVED, the
undersigned hereby sells, assigns, and transfers all the rights of the
undersigned under the within Warrant, with respect to the number of shares
of
Common Stock covered thereby set forth hereinbelow, to:
Name
of
Assignee Address No
of
Shares
,
and
hereby irrevocably constitutes and appoints ___________________________________
as agent and attorney-in-fact to transfer said Warrant on the books of the
within-named corporation, with full power of substitution in the
premises.
Dated: ________
__, 200_
In
the
presence
of:
__________________________
Name: __________________________
Signature:
_________________________
Title
of
Signing Officer or Agent (if any):
__________________________
Address: __________________________
_________________________
|
|
Note:
|
The
above signature should
correspond
exactly with the
name
on the face of the within
Warrant,
if applicable.
|
Page
11
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 A SECURITIES PURCHASE AGREEMENT DATED
AS OF
OCTOBER 15, 2007, NEITHER THIS WARRANT NOR ANY OF SUCH SHARES MAY BE SOLD,
TRANSFERRED OR ASSIGNED 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 OR REGULATION S UNDER SUCH ACT.
Right
to
Purchase 173,400 Shares
of Common Stock, par value $.00005 per share
STOCK
PURCHASE
WARRANT
THIS
CERTIFIES THAT, for value
received, AJW Qualified
Partners, LLC. or its registered assigns, is entitled to purchase from
Midnight Holdings
Group,
Inc., a Delaware corporation (the “Company”), at any time or from time to
time during the period specified in Paragraph 2 hereof, 173,400 fully
paid and nonassessable shares of the Company’s Common Stock, par value $.00005
per share (the “Common Stock”), at an exercise price per share equal to $.08
(the “Exercise Price”). The term “Warrant Shares,” as used herein,
refers to the shares of Common Stock purchasable hereunder. The
Warrant Shares and the Exercise Price are subject to adjustment as provided
in
Paragraph 4 hereof. The term “Warrants” means this Warrant and the
other warrants issued pursuant to that certain Securities Purchase Agreement,
dated October 15, 2007, by and among the Company and the Buyers listed on the
execution page thereof (the “Securities Purchase Agreement”).
This
Warrant is subject to the following terms, provisions, and
conditions:
1. Manner
of Exercise; Issuance
of Certificates; Payment for Shares.
Subject
to the provisions hereof, this Warrant may be exercised by the holder hereof,
in
whole or in part, by the surrender of this Warrant, together with a completed
exercise agreement in the form attached hereto (the “Exercise Agreement”), to
the Company during normal business hours on any business day at the Company’s
principal executive offices (or such other office or agency of the Company
as it
may designate by notice to the holder hereof), and upon (i) payment to the
Company in cash, by certified or official bank check or by wire transfer
for the account of the Company of the Exercise Price for the Warrant Shares
specified in the Exercise Agreement or (ii) if the resale of the Warrant Shares
by the holder is not then registered pursuant to an effective registration
statement under the Securities Act of 1933, as amended (the “Securities Act”),
delivery to the Company of a written notice of an election to effect a “Cashless
Exercise” (as defined in Section 11(c) below) for the Warrant Shares specified
in the Exercise Agreement. The Warrant Shares so purchased shall be
deemed to be issued to the holder hereof or such holder’s designee, as the
record owner of such shares, as of the close of business on the date on which
this Warrant shall have been surrendered, the completed Exercise Agreement
shall
have been delivered, and payment shall have been made for such shares as
set forth above. Certificates for the Warrant Shares so
purchased, representing the aggregate number of shares specified in the Exercise
Agreement, shall be delivered to the holder hereof within a reasonable time,
not
exceeding five (5) business days, after this Warrant shall have been so
exercised. The certificates so delivered shall be in such
denominations as may be requested by the holder hereof and shall be registered
in the name of such holder or such other name as shall be designated by such
holder. If this Warrant shall have been exercised only in part, then,
unless this Warrant has expired, the Company shall, at its expense, at the
time
of delivery of such certificates, deliver to the holder a new Warrant
representing the number of shares with respect to which this Warrant shall
not
then have been exercised. In addition to all other available remedies
at law or in equity, if the Company fails to deliver certificates for the
Warrant Shares within five (5) business days after this Warrant is exercised,
then the Company shall pay to the holder in cash a penalty (the “Penalty”) equal
to 2% of the number of Warrant Shares that the holder is entitled to multiplied
by the Market Price (as hereinafter defined) for each day that the Company
fails
to deliver certificates for the Warrant Shares. For example, if the
holder is entitled to 100,000 Warrant Shares and the Market Price is $2.00,
then
the Company shall pay to the holder $4,000 for each day that the Company fails
to deliver certificates for the Warrant Shares. The Penalty shall be
paid to the holder by the fifth day of the month following the month in which
it
has accrued.
Notwithstanding
anything in this Warrant to the contrary, in no event shall the holder of this
Warrant be entitled to exercise a number of Warrants (or portions thereof)
in
excess of the number of Warrants (or portions thereof) upon exercise of which
the sum of (i) the number of shares of Common Stock beneficially owned by the
holder and its affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unexercised Warrants and the
unexercised or unconverted portion of any other securities of the Company
(including the Notes (as defined in the Securities Purchase Agreement)) subject
to a limitation on conversion or exercise analogous to the limitation contained
herein) and (ii) the number of shares of Common Stock issuable upon exercise
of
the Warrants (or portions thereof) with respect to which the determination
described herein is being made, would result in beneficial ownership by the
holder and its affiliates of more than 4.9% of the outstanding shares of Common
Stock. For purposes of the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation 13D-G thereunder, except as
otherwise provided in clause (i) of the preceding
sentence. Notwithstanding anything to the contrary contained herein,
the limitation on exercise of this Warrant set forth herein may not be amended
without (i) the written consent of the holder hereof and the Company and (ii)
the approval of a majority of shareholders of the Company.
Page
1
2. Period
of
Exercise.
This
Warrant is
exercisable at any time or from time to time on or after the date on which
this
Warrant is issued and delivered pursuant to the terms of the Securities Purchase
Agreement and before 6:00 p.m., New York, New York time on the fifth (5th)
anniversary of
the date of issuance (the “Exercise Period”).
3. Certain
Agreements of the
Company.
The
Company hereby covenants and agrees as follows:
(a) Shares
to be Fully
Paid. Subject
to the
completion of the Charter Amendment Actions (as such term is defined in the
Securities Purchase Agreement), all Warrant Shares will, upon issuance in
accordance with the terms of this Warrant, be validly issued, fully paid, and
nonassessable and free from all taxes, liens, and charges with respect to the
issue thereof.
(b) Reservation
of
Shares. Subject
to the
completion of the Charter Amendment Actions, during the Exercise Period, the
Company shall at all times have authorized, and reserved for the purpose of
issuance upon exercise of this Warrant, a sufficient number of shares of
Common Stock to provide for the exercise of this Warrant.
(c) Listing. The
Company shall
use it best efforts to secure the listing of the shares of Common Stock issuable
upon exercise of the Warrant upon each national securities exchange or automated
quotation system, if any, upon which shares of Common Stock are then listed
(subject to official notice of issuance upon exercise of this Warrant) and
shall
maintain, so long as any other shares of Common Stock shall be so listed, such
listing of all shares of Common Stock from time to time issuable upon the
exercise of this Warrant; and the Company shall so list on each national
securities exchange or automated quotation system, as the case may be, and
shall
maintain such listing of, any other shares of capital stock of the Company
issuable upon the exercise of this Warrant if and so long as any shares of
the
same class shall be listed on such national securities exchange or automated
quotation system.
(d) Certain
Actions
Prohibited. The
Company will
not, by amendment of its charter or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities, or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed by it hereunder,
but will at all times in good faith assist in the carrying out of all the
provisions of this Warrant and in the taking of all such action as may
reasonably be requested by the holder of this Warrant in order to protect the
exercise privilege of the holder of this Warrant against dilution or other
impairment, consistent with the tenor and purpose of this
Warrant. Without limiting the generality of the foregoing, the
Company (i) will not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then
in
effect, and (ii) will take all such actions 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.
(e) Successors
and
Assigns. This
Warrant will
be binding upon any entity succeeding to the Company by merger, consolidation,
or acquisition of all or substantially all the Company’s
assets.
4. Antidilution
Provisions.
During
the Exercise Period, the Exercise Price and the number of Warrant Shares shall
be subject to adjustment from time to time as provided in this Paragraph
4.
In
the
event that any adjustment of the Exercise Price as required herein results
in a
fraction of a cent, such Exercise Price shall be rounded up to the nearest
cent.
Page
2
(a) Adjustment
of Exercise Price
and Number of Shares upon Issuance of Common Stock. Except
as
otherwise provided in Paragraphs 4(c) and 4(e) hereof, if and whenever on or
after the date of issuance of this Warrant, the Company issues or sells, or
in
accordance with Paragraph 4(b) hereof is deemed to have issued or sold, any
shares of Common Stock for no consideration or for a consideration per share
(before deduction of reasonable expenses or commissions or underwriting
discounts or allowances in connection therewith) less than the Market Price
on
the date of issuance (a “Dilutive Issuance”), then immediately upon the Dilutive
Issuance, the Exercise Price will be reduced to a price determined by
multiplying the Exercise Price in effect immediately prior to the Dilutive
Issuance by a fraction, (i) the numerator of which is an amount equal to the
sum
of (x) the number of shares of Common Stock actually outstanding immediately
prior to the Dilutive Issuance, plus (y) the quotient of the aggregate
consideration, calculated as set forth in Paragraph 4(b) hereof, received by
the
Company upon such Dilutive Issuance divided by the Market Price in effect
immediately prior to the Dilutive Issuance, and (ii) the denominator of which
is
the total number of shares of Common Stock Deemed Outstanding (as defined below)
immediately after the Dilutive Issuance.
(b) Effect
on Exercise Price of
Certain Events. For
purposes of
determining the adjusted Exercise Price under Paragraph 4(a) hereof, the
following will be applicable:
(i) Issuance
of Rights or
Options. If the
Company in
any manner issues or grants any warrants, rights or options, whether or not
immediately exercisable, to subscribe for or to purchase Common Stock or other
securities convertible into or exchangeable for Common Stock (“Convertible
Securities”) (such warrants, rights and options to purchase Common Stock or
Convertible Securities are hereinafter referred to as “Options”) and the price
per share for which Common Stock is issuable upon the exercise of such Options
is less than the Market Price on the date of issuance or grant of such Options,
then the maximum total number of shares of Common Stock issuable upon the
exercise of all such Options will, as of the date of the issuance or grant
of
such Options, be deemed to be outstanding and to have been issued and sold
by
the Company for such price per share. For purposes of the preceding
sentence, the “price per share for which Common Stock is issuable upon the
exercise of such Options” is determined by dividing (i) the total amount, if
any, received or receivable by the Company as consideration for the issuance
or
granting of all such Options, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the exercise of all such
Options, plus, in the case of Convertible Securities issuable upon the exercise
of such Options, the minimum aggregate amount of additional consideration
payable upon the conversion or exchange thereof at the time such Convertible
Securities first become convertible or exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable upon the exercise of all such Options
(assuming full conversion of Convertible Securities, if
applicable). No further adjustment to the Exercise Price will be made
upon the actual issuance of such Common Stock upon the exercise of such Options
or upon the conversion or exchange of Convertible Securities issuable upon
exercise of such Options.
(ii) Issuance
of Convertible
Securities. If the
Company in
any manner issues or sells any Convertible Securities, whether or not
immediately convertible (other than where the same are issuable upon the
exercise of Options) and the price per share for which Common Stock is issuable
upon such conversion or exchange is less than the Market Price on the date
of
issuance, then the maximum total number of shares of Common Stock issuable
upon
the conversion or exchange of all such Convertible Securities will, as of the
date of the issuance of such Convertible Securities, be deemed to be outstanding
and to have been issued and sold by the Company for such price per
share. For the purposes of the preceding sentence, the “price per
share for which Common Stock is issuable upon such conversion or exchange” is
determined by dividing (i) the total amount, if any, received or receivable
by
the Company as consideration for the issuance or sale of all such Convertible
Securities, plus the minimum aggregate amount of additional consideration,
if
any, payable to the Company upon the conversion or exchange thereof at the
time
such Convertible Securities first become convertible or exchangeable, by (ii)
the maximum total number of shares of Common Stock issuable upon the conversion
or exchange of all such Convertible Securities. No further adjustment
to the Exercise Price will be made upon the actual issuance of such Common
Stock
upon conversion or exchange of such Convertible Securities.
(iii) Change
in Option Price or
Conversion Rate. If there
is a
change at any time in (i) the amount of additional consideration payable to
the
Company upon the exercise of any Options; (ii) the amount of additional
consideration, if any, payable to the Company upon the conversion or exchange
of
any Convertible Securities; or (iii) the rate at which any Convertible
Securities are convertible into or exchangeable for Common Stock (other than
under or by reason of provisions designed to protect against dilution), the
Exercise Price in effect at the time of such change will be readjusted to the
Exercise Price which would have been in effect at such time had such Options
or
Convertible Securities still outstanding provided for such changed additional
consideration or changed conversion rate, as the case may be, at the time
initially granted, issued or sold.
(iv) Treatment
of Expired Options
and Unexercised Convertible Securities. If,
in any case,
the total number of shares of Common Stock issuable upon exercise of any Option
or upon conversion or exchange of any Convertible Securities is not, in fact,
issued and the rights to exercise such Option or to convert or exchange such
Convertible Securities shall have expired or terminated, the Exercise Price
then
in effect will be readjusted to the Exercise Price which would have been in
effect at the time of such expiration or termination had such Option or
Convertible Securities, to the extent outstanding immediately prior to such
expiration or termination (other than in respect of the actual number of shares
of Common Stock issued upon exercise or conversion thereof), never been
issued.
Page
3
(v) Calculation
of Consideration
Received. If any
Common
Stock, Options or Convertible Securities are issued, granted or sold for cash,
the consideration received therefor for purposes of this Warrant will be the
amount received by the Company therefor, before deduction of reasonable
commissions, underwriting discounts or allowances or other reasonable expenses
paid or incurred by the Company in connection with such issuance, grant or
sale. In case any Common Stock, Options or Convertible Securities are
issued or sold for a consideration part or all of which shall be other than
cash, the amount of the consideration other than cash received by the Company
will be the fair value of such consideration, except where such consideration
consists of securities, in which case the amount of consideration received
by
the Company will be the Market Price thereof as of the date of
receipt. In case any Common Stock, Options or Convertible Securities
are issued in connection with any acquisition, merger or consolidation in which
the Company is the surviving corporation, the amount of consideration therefor
will be deemed to be the fair value of such portion of the net assets and
business of the non-surviving corporation as is attributable to such Common
Stock, Options or Convertible Securities, as the case may be. The
fair value of any consideration other than cash or securities will be determined
in good faith by the Board of Directors of the Company.
(vi) Exceptions
to Adjustment of
Exercise Price. No adjustment
to
the Exercise Price will be made (i) upon the exercise of any warrants, options
or convertible securities granted, issued and outstanding on the date of
issuance of this Warrant; (ii) upon the grant or exercise of any stock or
options which may hereafter be granted or exercised under any employee benefit
plan, stock option plan or restricted stock plan of the Company now existing
or
to be implemented in the future, so long as the issuance of such stock or
options is approved by a majority of the independent members of the Board of
Directors of the Company or a majority of the members of a committee of
independent directors established for such purpose; or (iii) upon the exercise
of the Warrants.
(c) Subdivision
or Combination
of Common Stock. If the
Company at
any time subdivides (by any stock split, stock dividend, recapitalization,
reorganization, reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a greater number of shares, then, after the date
of
record for effecting such subdivision, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced. If the
Company at any time combines (by reverse stock split, recapitalization,
reorganization, reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a smaller number of shares, then, after the date
of
record for effecting such combination, the Exercise Price in effect immediately
prior to such combination will be proportionately increased.
(d) Adjustment
in Number of
Shares. Upon
each
adjustment of the Exercise Price pursuant to the provisions of this Paragraph
4,
the number of shares of Common Stock issuable upon exercise of this Warrant
shall be adjusted by multiplying a number equal to the Exercise Price in effect
immediately prior to such adjustment by the number of shares of Common Stock
issuable upon exercise of this Warrant immediately prior to such adjustment
and
dividing the product so obtained by the adjusted Exercise Price.
(e) Consolidation,
Merger or
Sale. In case
of any
consolidation of the Company with, or merger of the Company into any other
corporation, or in case of any sale or conveyance of all or substantially all
of
the assets of the Company other than in connection with a plan of complete
liquidation of the Company, then as a condition of such consolidation, merger
or
sale or conveyance, adequate provision will be made whereby the holder of this
Warrant will have the right to acquire and receive upon exercise of this Warrant
in lieu of the shares of Common Stock immediately theretofore acquirable upon
the exercise of this Warrant, such shares of stock, securities or assets as
may
be issued or payable with respect to or in exchange for the number of shares
of
Common Stock immediately theretofore acquirable and receivable upon exercise
of
this Warrant had such consolidation, merger or sale or conveyance not taken
place. In any such case, the Company will make appropriate provision
to insure that the provisions of this Paragraph 4 hereof will thereafter be
applicable as nearly as may be in relation to any shares of stock or securities
thereafter deliverable upon the exercise of this Warrant. The Company
will not effect any consolidation, merger or sale or conveyance unless prior
to
the consummation thereof, the successor corporation (if other than the Company)
assumes by written instrument the obligations under this Paragraph 4 and the
obligations to deliver to the holder of this Warrant such shares of stock,
securities or assets as, in accordance with the foregoing provisions, the holder
may be entitled to acquire.
Page
4
(f) Distribution
of
Assets. In case
the
Company shall declare or make any distribution of its assets (including cash)
to
holders of Common Stock as a partial liquidating dividend, by way of return
of
capital or otherwise, then, after the date of record for determining
shareholders entitled to such distribution, but prior to the date of
distribution, the holder of this Warrant shall be entitled upon exercise of
this
Warrant for the purchase of any or all of the shares of Common Stock subject
hereto, to receive the amount of such assets which would have been payable
to
the holder had such holder been the holder of such shares of Common Stock on
the
record date for the determination of shareholders entitled to such
distribution.
(g) Notice
of
Adjustment. Upon
the
occurrence of any event which requires any adjustment of the Exercise Price,
then, and in each such case, the Company shall give notice thereof to the holder
of this Warrant, which notice shall state the Exercise Price resulting from
such
adjustment and the increase or decrease in the number of Warrant Shares
purchasable at such price upon exercise, setting forth in reasonable detail
the
method of calculation and the facts upon which such calculation is
based. Such calculation shall be certified by the Chief Financial
Officer of the Company.
(h) Minimum
Adjustment of
Exercise Price. No adjustment
of
the Exercise Price shall be made in an amount of less than 1% of the Exercise
Price in effect at the time such adjustment is otherwise required to be made,
but any such lesser adjustment shall be carried forward and shall be made at
the
time and together with the next subsequent adjustment which, together with
any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.
(i) No
Fractional
Shares. No fractional
shares of Common Stock are to be issued upon the exercise of this Warrant,
but
the Company shall pay a cash adjustment in respect of any fractional share
which
would otherwise be issuable in an amount equal to the same fraction of the
Market Price of a share of Common Stock on the date of such
exercise.
(j) Other
Notices. In case
at any
time:
(i) the
Company shall declare any dividend upon the Common Stock payable in shares
of
stock of any class or make any other distribution (including dividends or
distributions payable in cash out of retained earnings) to the holders of the
Common Stock;
(ii) the
Company shall offer for subscription pro rata to the holders of the Common
Stock
any additional shares of stock of any class or other rights;
(iii) there
shall be any capital reorganization of the Company, or reclassification of
the Common Stock, or consolidation or merger of the Company with or into, or
sale of all or substantially all its assets to, another corporation or
entity; or
(iv) there
shall be a voluntary or involuntary dissolution, liquidation or winding up
of the Company;
then,
in
each such case, the Company shall give to the holder of this Warrant (a) notice
of the date on which the books of the Company shall close or a record shall
be
taken for determining the holders of Common Stock entitled to receive any such
dividend, distribution, or subscription rights or for determining the
holders of Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, notice
of
the date (or, if not then known, a reasonable approximation thereof by the
Company) when the same shall take place. Such notice shall also
specify the date on which the holders of Common Stock shall be entitled to
receive such dividend, distribution, or subscription rights or to exchange
their
Common Stock for stock or other securities or property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, or winding-up, as the case may be. Such notice shall be
given at least 30 days prior to the record date or the date on which the
Company’s books are closed in respect thereto. Failure to give any
such notice or any defect therein shall not affect the validity of the
proceedings referred to in clauses (i), (ii), (iii) and (iv) above.
Page
5
(k) Certain
Events. If any
event
occurs of the type contemplated by the adjustment provisions of this Paragraph
4
but not expressly provided for by such provisions, the Company will give notice
of such event as provided in Paragraph 4(g) hereof, and the Company’s Board of
Directors will make an appropriate adjustment in the Exercise Price and the
number of shares of Common Stock acquirable upon exercise of this Warrant so
that the rights of the holder shall be neither enhanced nor diminished by such
event.
(l) Certain
Definitions.
(i) “Common
Stock Deemed
Outstanding” shall
mean the number of
shares of Common Stock actually outstanding (not including shares of Common
Stock held in the treasury of the Company), plus (x) pursuant to Paragraph
4(b)(i) hereof, the maximum total number of shares of Common Stock issuable
upon
the exercise of Options, as of the date of such issuance or grant of such
Options, if any, and (y) pursuant to Paragraph 4(b)(ii) hereof, the maximum
total number of shares of Common Stock issuable upon conversion or exchange
of
Convertible Securities, as of the date of issuance of such Convertible
Securities, if any.
(ii) “Market
Price,” as
of any date, (i) means the average of the last reported sale prices for the
shares of Common Stock on the OTCBB for the five (5) Trading Days immediately
preceding such date as reported by Bloomberg, or (ii) if the OTCBB is not the
principal trading market for the shares of Common Stock, the average of the
last
reported sale prices on the principal trading market for the Common Stock during
the same period as reported by Bloomberg, or (iii) if market value cannot be
calculated as of such date on any of the foregoing bases, the Market Price
shall
be the fair market value as reasonably determined in good faith by (a) the
Board
of Directors of the Company or, at the option of a majority-in-interest of
the
holders of the outstanding Warrants by (b) an independent investment bank of
nationally recognized standing in the valuation of businesses similar to the
business of the corporation. The manner of determining the Market Price of
the
Common Stock set forth in the foregoing definition shall apply with respect
to
any other security in respect of which a determination as to market value must
be made hereunder.
(iii) “Common
Stock,”
for purposes of this Paragraph 4, includes the Common Stock, par value $.00005
per share, and any additional class of stock of the Company having no preference
as to dividends or distributions on liquidation, provided that the shares
purchasable pursuant to this Warrant shall include only shares of Common Stock,
par value $.00005 per share, in respect of which this Warrant is exercisable,
or
shares resulting from any subdivision or combination of such Common Stock,
or in
the case of any reorganization, reclassification, consolidation, merger, or
sale
of the character referred to in Paragraph 4(e) hereof, the stock or other
securities or property provided for in such Paragraph.
5. Issue
Tax.
The
issuance of certificates for Warrant Shares upon the exercise of this Warrant
shall be made without charge to the holder of this Warrant or such shares for
any issuance tax or other costs in respect thereof, provided that the Company
shall not be required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of any certificate in a name
other than the holder of this Warrant.
6. No
Rights or Liabilities as
a Shareholder.
This
Warrant shall not entitle the holder hereof to any voting rights or other rights
as a shareholder of the Company. No provision of this Warrant, in the
absence of affirmative action by the holder hereof to purchase Warrant Shares,
and no mere enumeration herein of the rights or privileges of the holder hereof,
shall give rise to any liability of such holder for the Exercise Price or as
a
shareholder of the Company, whether such liability is asserted by the Company
or
by creditors of the Company.
7. Transfer,
Exchange, and
Replacement of Warrant.
(a) Restriction
on
Transfer. This
Warrant and
the rights granted to the holder hereof are transferable, in whole or in part,
upon surrender of this Warrant, together with a properly executed assignment
in
the form attached hereto, at the office or agency of the Company referred to
in
Paragraph 7(e) below, provided, however, that any transfer or
assignment shall be subject to the conditions set forth in Paragraph 7(f) hereof
and to the applicable provisions of the Securities Purchase
Agreement. Until due presentment for registration of transfer on the
books of the Company, the Company may treat the registered holder hereof as
the
owner and holder hereof for all purposes, and the Company shall not be affected
by any notice to the contrary. Notwithstanding anything to the
contrary contained herein, the registration rights described in Paragraph 8
are
assignable only in accordance with the provisions of that certain Registration
Rights Agreement, dated October 15, 2007, by and among the Company and the
other
signatories thereto (the “Registration Rights Agreement”).
Page
6
(b) Warrant
Exchangeable for
Different Denominations. This
Warrant is
exchangeable, upon the surrender hereof by the holder hereof at the office
or agency of the Company referred to in Paragraph 7(e) below, for new Warrants
of like tenor representing in the aggregate the right to purchase the number
of
shares of Common Stock which may be purchased hereunder, each of such new
Warrants to represent the right to purchase such number of shares as shall
be
designated by the holder hereof at the time of such surrender.
(c) Replacement
of
Warrant. Upon
receipt of
evidence reasonably satisfactory to the Company of the loss, theft,
destruction, or mutilation of this Warrant and, in the case of any such loss,
theft, or destruction, upon delivery of an indemnity agreement
reasonably satisfactory in form and amount to the Company, or, in the case
of any such mutilation, upon surrender and cancellation of this Warrant, the
Company, at its expense, will execute and deliver, in lieu thereof, a new
Warrant of like tenor.
(d) Cancellation;
Payment of
Expenses. Upon
the
surrender of this Warrant in connection with any transfer, exchange, or
replacement as provided in this Paragraph 7, this Warrant shall be promptly
canceled by the Company. The Company shall pay all taxes (other than
securities transfer taxes) and all other expenses (other than legal expenses,
if
any, incurred by the holder or transferees) and charges payable in connection
with the preparation, execution, and delivery of Warrants pursuant to this
Paragraph 7.
(e) Register. The
Company shall
maintain, at its principal executive offices (or such other office or agency
of
the Company as it may designate by notice to the holder hereof), a register
for
this Warrant, in which the Company shall record the name and address of the
person in whose name this Warrant has been issued, as well as the name and
address of each transferee and each prior owner of this Warrant.
(f) Exercise
or Transfer Without
Registration. If,
at the time
of the surrender of this Warrant in connection with any exercise, transfer,
or
exchange of this Warrant, this Warrant (or, in the case of any exercise, the
Warrant Shares issuable hereunder), shall not be registered under the Securities
Act of 1933, as amended (the “Securities Act”) and under applicable state
securities or blue sky laws, the Company may require, as a condition of allowing
such exercise, transfer, or exchange, (i) that the holder or transferee of
this
Warrant, as the case may be, furnish to the Company a written opinion of
counsel, which opinion and counsel are acceptable to the Company, to the effect
that such exercise, transfer, or exchange may be made without registration
under
said Act and under applicable state securities or blue sky laws, (ii) that
the
holder or transferee execute and deliver to the Company an investment letter
in
form and substance acceptable to the Company and (iii) that the transferee
be an
“accredited investor” as defined in Rule 501(a) promulgated under the Securities
Act; provided that no such opinion, letter or status as an “accredited investor”
shall be required in connection with a transfer pursuant to Rule 144 under
the
Securities Act. The first holder of this Warrant, by taking and
holding the same, represents to the Company that such holder is acquiring this
Warrant for investment and not with a view to the distribution
thereof.
8. Registration
Rights.
The
initial holder of this Warrant (and certain assignees thereof) is entitled
to
the benefit of such registration rights in respect of the Warrant Shares as
are
set forth in Section 2 of the Registration Rights Agreement.
9. Notices.
All
notices, requests, and other communications required or permitted to be given
or
delivered hereunder to the holder of this Warrant shall be in writing, and
shall
be personally delivered, or shall be sent by certified or registered mail or
by
recognized overnight mail courier, postage prepaid and addressed, to such holder
at the address shown for such holder on the books of the Company, or at such
other address as shall have been furnished to the Company by notice from such
holder. All notices, requests, and other communications required or
permitted to be given or delivered hereunder to the Company shall be in writing,
and shall be personally delivered, or shall be sent by certified or registered
mail or by recognized overnight mail courier, postage prepaid and addressed,
to
the office of the Company at ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇
▇▇▇▇▇, Attention: Chief Executive Officer, or at such other address as shall
have been furnished to the holder of this Warrant by notice from the
Company. Any such notice, request, or other communication may be sent
by facsimile, but shall in such case be subsequently confirmed by a writing
personally delivered or sent by certified or registered mail or by recognized
overnight mail courier as provided above. All notices, requests, and
other communications shall be deemed to have been given either at the time
of
the receipt thereof by the person entitled to receive such notice at the
address of such person for purposes of this Paragraph 9, or, if mailed by
registered or certified mail or with a recognized overnight mail courier upon
deposit with the United States Post Office or such overnight mail courier,
if
postage is prepaid and the mailing is properly addressed, as the case may
be.
Page
7
10. Governing
Law.
THIS
WARRANT 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 LOCATED IN NEW YORK, NEW YORK WITH RESPECT
TO ANY DISPUTE ARISING UNDER THIS WARRANT, 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 PARTY WHICH DOES NOT PREVAIL IN
ANY DISPUTE ARISING UNDER THIS WARRANT SHALL BE RESPONSIBLE FOR ALL FEES AND
EXPENSES, INCLUDING ATTORNEYS’ FEES, INCURRED BY THE PREVAILING PARTY IN
CONNECTION WITH SUCH DISPUTE.
11. Miscellaneous.
(a) Amendments. This
Warrant and
any provision hereof may only be amended by an instrument in writing signed
by
the Company and the holder hereof.
(b) Descriptive
Headings. The
descriptive
headings of the several paragraphs of this Warrant are inserted for
purposes of reference only, and shall not affect the meaning or construction
of
any of the provisions hereof.
(d) Remedies. The
Company acknowledges that a breach by it of its obligations hereunder will
cause
irreparable harm to the holder, 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
Warrant will be inadequate and agrees, in the event of a breach or threatened
breach by the Company of the provisions of this Warrant, that the holder shall
be entitled, in addition to all other available remedies at law or in equity,
and in addition to the penalties assessable herein, to an injunction or
injunctions restraining, preventing or curing any breach of this Warrant and
to
enforce specifically the terms and provisions thereof, without the necessity
of
showing economic loss and without any bond or other security being
required.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
Page
8
IN
WITNESS WHEREOF, the
Company has caused this Warrant to be signed by its duly authorized officer
as
of the date first above written.
MIDNIGHT
HOLDINGS GROUP,
INC.
By:
/s/▇▇▇▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Chief Executive Officer
Page
9
FORM
OF EXERCISE
AGREEMENT
Dated: ________ __, 200_
To: ______________________
The
undersigned, pursuant to the provisions set forth in the within Warrant, hereby
agrees to purchase ________ shares of Common Stock covered by such Warrant,
and
makes payment herewith in full therefor at the price per share provided by
such Warrant in cash or by certified or official bank check in the amount of,
or, if the resale of such Common Stock by the undersigned is not currently
registered pursuant to an effective registration statement under the Securities
Act of 1933, as amended, by surrender of securities issued by the Company
(including a portion of the Warrant) having a market value (in the case of
a
portion of this Warrant, determined in accordance with Section 11(c) of the
Warrant) equal to $_________. Please issue a certificate or
certificates for such shares of Common Stock in the name of and pay any
cash for any fractional share to:
Name:
Signature:
Address:
Note: The
above
signature should correspond
exactly with the name on the face of the
within Warrant, if applicable.
and,
if
said number of shares of Common Stock shall not be all the shares purchasable
under the within Warrant, a new Warrant is to be issued in the name of said
undersigned covering the balance of the shares purchasable thereunder less
any
fraction of a share paid in cash.
Page
10
FORM
OF
ASSIGNMENT
FOR
VALUE RECEIVED, the
undersigned hereby sells, assigns, and transfers all the rights of the
undersigned under the within Warrant, with respect to the number of shares
of
Common Stock covered thereby set forth hereinbelow, to:
Name
of
Assignee Address No
of
Shares
,
and
hereby irrevocably constitutes and appoints ___________________________________
as agent and attorney-in-fact to transfer said Warrant on the books of the
within-named corporation, with full power of substitution in the
premises.
Dated: ________
__, 200_
In
the
presence
of:
__________________________
Name: __________________________
Signature:
_________________________
Title
of
Signing Officer or Agent (if any):
__________________________
Address: __________________________
_________________________
|
|
Note:
|
The
above signature should
correspond
exactly with the
name
on the face of the within
Warrant,
if applicable.
|
Page
11
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 A SECURITIES PURCHASE AGREEMENT DATED
AS OF
OCTOBER 15, 2007, NEITHER THIS WARRANT NOR ANY OF SUCH SHARES MAY BE SOLD,
TRANSFERRED OR ASSIGNED 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 OR REGULATION S UNDER SUCH ACT.
Right
to
Purchase 7,200
Shares of Common Stock, par value $.00005 per share
STOCK
PURCHASE
WARRANT
THIS
CERTIFIES THAT, for value
received, AJW New
Millennium Capital Partners II, LLC.
or its
registered assigns, is entitled to purchase from Midnight Holdings Group,
Inc.,
a Delaware corporation (the “Company”), at any time or from time to time during
the period specified in Paragraph 2 hereof, 7,200 fully
paid and nonassessable shares of the Company’s Common Stock, par value $.00005
per share (the “Common Stock”), at an exercise price per share equal to $.08
(the “Exercise Price”). The term “Warrant Shares,” as used herein,
refers to the shares of Common Stock purchasable hereunder. The
Warrant Shares and the Exercise Price are subject to adjustment as provided
in
Paragraph 4 hereof. The term “Warrants” means this Warrant and the
other warrants issued pursuant to that certain Securities Purchase Agreement,
dated October 15, 2007, by and among the Company and the Buyers listed on the
execution page thereof (the “Securities Purchase Agreement”).
This
Warrant is subject to the following terms, provisions, and
conditions:
1. Manner
of Exercise; Issuance
of Certificates; Payment for Shares.
Subject
to the provisions hereof, this Warrant may be exercised by the holder hereof,
in
whole or in part, by the surrender of this Warrant, together with a completed
exercise agreement in the form attached hereto (the “Exercise Agreement”), to
the Company during normal business hours on any business day at the Company’s
principal executive offices (or such other office or agency of the Company
as it
may designate by notice to the holder hereof), and upon (i) payment to the
Company in cash, by certified or official bank check or by wire transfer
for the account of the Company of the Exercise Price for the Warrant Shares
specified in the Exercise Agreement or (ii) if the resale of the Warrant Shares
by the holder is not then registered pursuant to an effective registration
statement under the Securities Act of 1933, as amended (the “Securities Act”),
delivery to the Company of a written notice of an election to effect a “Cashless
Exercise” (as defined in Section 11(c) below) for the Warrant Shares specified
in the Exercise Agreement. The Warrant Shares so purchased shall be
deemed to be issued to the holder hereof or such holder’s designee, as the
record owner of such shares, as of the close of business on the date on which
this Warrant shall have been surrendered, the completed Exercise Agreement
shall
have been delivered, and payment shall have been made for such shares as
set forth above. Certificates for the Warrant Shares so
purchased, representing the aggregate number of shares specified in the Exercise
Agreement, shall be delivered to the holder hereof within a reasonable time,
not
exceeding five (5) business days, after this Warrant shall have been so
exercised. The certificates so delivered shall be in such
denominations as may be requested by the holder hereof and shall be registered
in the name of such holder or such other name as shall be designated by such
holder. If this Warrant shall have been exercised only in part, then,
unless this Warrant has expired, the Company shall, at its expense, at the
time
of delivery of such certificates, deliver to the holder a new Warrant
representing the number of shares with respect to which this Warrant shall
not
then have been exercised. In addition to all other available remedies
at law or in equity, if the Company fails to deliver certificates for the
Warrant Shares within five (5) business days after this Warrant is exercised,
then the Company shall pay to the holder in cash a penalty (the “Penalty”) equal
to 2% of the number of Warrant Shares that the holder is entitled to multiplied
by the Market Price (as hereinafter defined) for each day that the Company
fails
to deliver certificates for the Warrant Shares. For example, if the
holder is entitled to 100,000 Warrant Shares and the Market Price is $2.00,
then
the Company shall pay to the holder $4,000 for each day that the Company fails
to deliver certificates for the Warrant Shares. The Penalty shall be
paid to the holder by the fifth day of the month following the month in which
it
has accrued.
Notwithstanding
anything in this Warrant to the contrary, in no event shall the holder of this
Warrant be entitled to exercise a number of Warrants (or portions thereof)
in
excess of the number of Warrants (or portions thereof) upon exercise of which
the sum of (i) the number of shares of Common Stock beneficially owned by the
holder and its affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unexercised Warrants and the
unexercised or unconverted portion of any other securities of the Company
(including the Notes (as defined in the Securities Purchase Agreement)) subject
to a limitation on conversion or exercise analogous to the limitation contained
herein) and (ii) the number of shares of Common Stock issuable upon exercise
of
the Warrants (or portions thereof) with respect to which the determination
described herein is being made, would result in beneficial ownership by the
holder and its affiliates of more than 4.9% of the outstanding shares of Common
Stock. For purposes of the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation 13D-G thereunder, except as
otherwise provided in clause (i) of the preceding
sentence. Notwithstanding anything to the contrary contained herein,
the limitation on exercise of this Warrant set forth herein may not be amended
without (i) the written consent of the holder hereof and the Company and (ii)
the approval of a majority of shareholders of the Company.
Page
1
2. Period
of
Exercise.
This
Warrant is
exercisable at any time or from time to time on or after the date on which
this
Warrant is issued and delivered pursuant to the terms of the Securities Purchase
Agreement and before 6:00 p.m., New York, New York time on the fifth (5th)
anniversary of
the date of issuance (the “Exercise Period”).
3. Certain
Agreements of the
Company.
The
Company hereby covenants and agrees as follows:
(a) Shares
to be Fully
Paid. Subject
to the
completion of the Charter Amendment Actions (as such term is defined in the
Securities Purchase Agreement), all Warrant Shares will, upon issuance in
accordance with the terms of this Warrant, be validly issued, fully paid, and
nonassessable and free from all taxes, liens, and charges with respect to the
issue thereof.
(b) Reservation
of
Shares. Subject
to the
completion of the Charter Amendment Actions, during the Exercise Period, the
Company shall at all times have authorized, and reserved for the purpose of
issuance upon exercise of this Warrant, a sufficient number of shares of
Common Stock to provide for the exercise of this Warrant.
(c) Listing. The
Company shall
use it best efforts to secure the listing of the shares of Common Stock issuable
upon exercise of the Warrant upon each national securities exchange or automated
quotation system, if any, upon which shares of Common Stock are then listed
(subject to official notice of issuance upon exercise of this Warrant) and
shall
maintain, so long as any other shares of Common Stock shall be so listed, such
listing of all shares of Common Stock from time to time issuable upon the
exercise of this Warrant; and the Company shall so list on each national
securities exchange or automated quotation system, as the case may be, and
shall
maintain such listing of, any other shares of capital stock of the Company
issuable upon the exercise of this Warrant if and so long as any shares of
the
same class shall be listed on such national securities exchange or automated
quotation system.
(d) Certain
Actions
Prohibited. The
Company will
not, by amendment of its charter or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities, or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed by it hereunder,
but will at all times in good faith assist in the carrying out of all the
provisions of this Warrant and in the taking of all such action as may
reasonably be requested by the holder of this Warrant in order to protect the
exercise privilege of the holder of this Warrant against dilution or other
impairment, consistent with the tenor and purpose of this
Warrant. Without limiting the generality of the foregoing, the
Company (i) will not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then
in
effect, and (ii) will take all such actions 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.
(e) Successors
and
Assigns. This
Warrant will
be binding upon any entity succeeding to the Company by merger, consolidation,
or acquisition of all or substantially all the Company’s
assets.
4. Antidilution
Provisions.
During
the Exercise Period, the Exercise Price and the number of Warrant Shares shall
be subject to adjustment from time to time as provided in this Paragraph
4.
In
the
event that any adjustment of the Exercise Price as required herein results
in a
fraction of a cent, such Exercise Price shall be rounded up to the nearest
cent.
Page
2
(a) Adjustment
of Exercise Price
and Number of Shares upon Issuance of Common Stock. Except
as
otherwise provided in Paragraphs 4(c) and 4(e) hereof, if and whenever on or
after the date of issuance of this Warrant, the Company issues or sells, or
in
accordance with Paragraph 4(b) hereof is deemed to have issued or sold, any
shares of Common Stock for no consideration or for a consideration per share
(before deduction of reasonable expenses or commissions or underwriting
discounts or allowances in connection therewith) less than the Market Price
on
the date of issuance (a “Dilutive Issuance”), then immediately upon the Dilutive
Issuance, the Exercise Price will be reduced to a price determined by
multiplying the Exercise Price in effect immediately prior to the Dilutive
Issuance by a fraction, (i) the numerator of which is an amount equal to the
sum
of (x) the number of shares of Common Stock actually outstanding immediately
prior to the Dilutive Issuance, plus (y) the quotient of the aggregate
consideration, calculated as set forth in Paragraph 4(b) hereof, received by
the
Company upon such Dilutive Issuance divided by the Market Price in effect
immediately prior to the Dilutive Issuance, and (ii) the denominator of which
is
the total number of shares of Common Stock Deemed Outstanding (as defined below)
immediately after the Dilutive Issuance.
(b) Effect
on Exercise Price of
Certain Events. For
purposes of
determining the adjusted Exercise Price under Paragraph 4(a) hereof, the
following will be applicable:
(i) Issuance
of Rights or
Options. If the
Company in
any manner issues or grants any warrants, rights or options, whether or not
immediately exercisable, to subscribe for or to purchase Common Stock or other
securities convertible into or exchangeable for Common Stock (“Convertible
Securities”) (such warrants, rights and options to purchase Common Stock or
Convertible Securities are hereinafter referred to as “Options”) and the price
per share for which Common Stock is issuable upon the exercise of such Options
is less than the Market Price on the date of issuance or grant of such Options,
then the maximum total number of shares of Common Stock issuable upon the
exercise of all such Options will, as of the date of the issuance or grant
of
such Options, be deemed to be outstanding and to have been issued and sold
by
the Company for such price per share. For purposes of the preceding
sentence, the “price per share for which Common Stock is issuable upon the
exercise of such Options” is determined by dividing (i) the total amount, if
any, received or receivable by the Company as consideration for the issuance
or
granting of all such Options, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the exercise of all such
Options, plus, in the case of Convertible Securities issuable upon the exercise
of such Options, the minimum aggregate amount of additional consideration
payable upon the conversion or exchange thereof at the time such Convertible
Securities first become convertible or exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable upon the exercise of all such Options
(assuming full conversion of Convertible Securities, if
applicable). No further adjustment to the Exercise Price will be made
upon the actual issuance of such Common Stock upon the exercise of such Options
or upon the conversion or exchange of Convertible Securities issuable upon
exercise of such Options.
(ii) Issuance
of Convertible
Securities. If the
Company in
any manner issues or sells any Convertible Securities, whether or not
immediately convertible (other than where the same are issuable upon the
exercise of Options) and the price per share for which Common Stock is issuable
upon such conversion or exchange is less than the Market Price on the date
of
issuance, then the maximum total number of shares of Common Stock issuable
upon
the conversion or exchange of all such Convertible Securities will, as of the
date of the issuance of such Convertible Securities, be deemed to be outstanding
and to have been issued and sold by the Company for such price per
share. For the purposes of the preceding sentence, the “price per
share for which Common Stock is issuable upon such conversion or exchange” is
determined by dividing (i) the total amount, if any, received or receivable
by
the Company as consideration for the issuance or sale of all such Convertible
Securities, plus the minimum aggregate amount of additional consideration,
if
any, payable to the Company upon the conversion or exchange thereof at the
time
such Convertible Securities first become convertible or exchangeable, by (ii)
the maximum total number of shares of Common Stock issuable upon the conversion
or exchange of all such Convertible Securities. No further adjustment
to the Exercise Price will be made upon the actual issuance of such Common
Stock
upon conversion or exchange of such Convertible Securities.
(iii) Change
in Option Price or
Conversion Rate. If there
is a
change at any time in (i) the amount of additional consideration payable to
the
Company upon the exercise of any Options; (ii) the amount of additional
consideration, if any, payable to the Company upon the conversion or exchange
of
any Convertible Securities; or (iii) the rate at which any Convertible
Securities are convertible into or exchangeable for Common Stock (other than
under or by reason of provisions designed to protect against dilution), the
Exercise Price in effect at the time of such change will be readjusted to the
Exercise Price which would have been in effect at such time had such Options
or
Convertible Securities still outstanding provided for such changed additional
consideration or changed conversion rate, as the case may be, at the time
initially granted, issued or sold.
(iv) Treatment
of Expired Options
and Unexercised Convertible Securities. If,
in any case,
the total number of shares of Common Stock issuable upon exercise of any Option
or upon conversion or exchange of any Convertible Securities is not, in fact,
issued and the rights to exercise such Option or to convert or exchange such
Convertible Securities shall have expired or terminated, the Exercise Price
then
in effect will be readjusted to the Exercise Price which would have been in
effect at the time of such expiration or termination had such Option or
Convertible Securities, to the extent outstanding immediately prior to such
expiration or termination (other than in respect of the actual number of shares
of Common Stock issued upon exercise or conversion thereof), never been
issued.
(v) Calculation
of Consideration
Received. If any
Common
Stock, Options or Convertible Securities are issued, granted or sold for cash,
the consideration received therefor for purposes of this Warrant will be the
amount received by the Company therefor, before deduction of reasonable
commissions, underwriting discounts or allowances or other reasonable expenses
paid or incurred by the Company in connection with such issuance, grant or
sale. In case any Common Stock, Options or Convertible Securities are
issued or sold for a consideration part or all of which shall be other than
cash, the amount of the consideration other than cash received by the Company
will be the fair value of such consideration, except where such consideration
consists of securities, in which case the amount of consideration received
by
the Company will be the Market Price thereof as of the date of
receipt. In case any Common Stock, Options or Convertible Securities
are issued in connection with any acquisition, merger or consolidation in which
the Company is the surviving corporation, the amount of consideration therefor
will be deemed to be the fair value of such portion of the net assets and
business of the non-surviving corporation as is attributable to such Common
Stock, Options or Convertible Securities, as the case may be. The
fair value of any consideration other than cash or securities will be determined
in good faith by the Board of Directors of the Company.
(vi) Exceptions
to Adjustment of
Exercise Price. No adjustment
to
the Exercise Price will be made (i) upon the exercise of any warrants, options
or convertible securities granted, issued and outstanding on the date of
issuance of this Warrant; (ii) upon the grant or exercise of any stock or
options which may hereafter be granted or exercised under any employee benefit
plan, stock option plan or restricted stock plan of the Company now existing
or
to be implemented in the future, so long as the issuance of such stock or
options is approved by a majority of the independent members of the Board of
Directors of the Company or a majority of the members of a committee of
independent directors established for such purpose; or (iii) upon the exercise
of the Warrants.
Page
3
(c) Subdivision
or Combination
of Common Stock. If the
Company at
any time subdivides (by any stock split, stock dividend, recapitalization,
reorganization, reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a greater number of shares, then, after the date
of
record for effecting such subdivision, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced. If the
Company at any time combines (by reverse stock split, recapitalization,
reorganization, reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a smaller number of shares, then, after the date
of
record for effecting such combination, the Exercise Price in effect immediately
prior to such combination will be proportionately increased.
(d) Adjustment
in Number of
Shares. Upon
each
adjustment of the Exercise Price pursuant to the provisions of this Paragraph
4,
the number of shares of Common Stock issuable upon exercise of this Warrant
shall be adjusted by multiplying a number equal to the Exercise Price in effect
immediately prior to such adjustment by the number of shares of Common Stock
issuable upon exercise of this Warrant immediately prior to such adjustment
and
dividing the product so obtained by the adjusted Exercise Price.
(e) Consolidation,
Merger or
Sale. In case
of any
consolidation of the Company with, or merger of the Company into any other
corporation, or in case of any sale or conveyance of all or substantially all
of
the assets of the Company other than in connection with a plan of complete
liquidation of the Company, then as a condition of such consolidation, merger
or
sale or conveyance, adequate provision will be made whereby the holder of this
Warrant will have the right to acquire and receive upon exercise of this Warrant
in lieu of the shares of Common Stock immediately theretofore acquirable upon
the exercise of this Warrant, such shares of stock, securities or assets as
may
be issued or payable with respect to or in exchange for the number of shares
of
Common Stock immediately theretofore acquirable and receivable upon exercise
of
this Warrant had such consolidation, merger or sale or conveyance not taken
place. In any such case, the Company will make appropriate provision
to insure that the provisions of this Paragraph 4 hereof will thereafter be
applicable as nearly as may be in relation to any shares of stock or securities
thereafter deliverable upon the exercise of this Warrant. The Company
will not effect any consolidation, merger or sale or conveyance unless prior
to
the consummation thereof, the successor corporation (if other than the Company)
assumes by written instrument the obligations under this Paragraph 4 and the
obligations to deliver to the holder of this Warrant such shares of stock,
securities or assets as, in accordance with the foregoing provisions, the holder
may be entitled to acquire.
Page
4
(f) Distribution
of
Assets. In case
the
Company shall declare or make any distribution of its assets (including cash)
to
holders of Common Stock as a partial liquidating dividend, by way of return
of
capital or otherwise, then, after the date of record for determining
shareholders entitled to such distribution, but prior to the date of
distribution, the holder of this Warrant shall be entitled upon exercise of
this
Warrant for the purchase of any or all of the shares of Common Stock subject
hereto, to receive the amount of such assets which would have been payable
to
the holder had such holder been the holder of such shares of Common Stock on
the
record date for the determination of shareholders entitled to such
distribution.
(g) Notice
of
Adjustment. Upon
the
occurrence of any event which requires any adjustment of the Exercise Price,
then, and in each such case, the Company shall give notice thereof to the holder
of this Warrant, which notice shall state the Exercise Price resulting from
such
adjustment and the increase or decrease in the number of Warrant Shares
purchasable at such price upon exercise, setting forth in reasonable detail
the
method of calculation and the facts upon which such calculation is
based. Such calculation shall be certified by the Chief Financial
Officer of the Company.
(h) Minimum
Adjustment of
Exercise Price. No adjustment
of
the Exercise Price shall be made in an amount of less than 1% of the Exercise
Price in effect at the time such adjustment is otherwise required to be made,
but any such lesser adjustment shall be carried forward and shall be made at
the
time and together with the next subsequent adjustment which, together with
any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.
(i) No
Fractional
Shares. No fractional
shares of Common Stock are to be issued upon the exercise of this Warrant,
but
the Company shall pay a cash adjustment in respect of any fractional share
which
would otherwise be issuable in an amount equal to the same fraction of the
Market Price of a share of Common Stock on the date of such
exercise.
(j) Other
Notices. In case
at any
time:
(i) the
Company shall declare any dividend upon the Common Stock payable in shares
of
stock of any class or make any other distribution (including dividends or
distributions payable in cash out of retained earnings) to the holders of the
Common Stock;
(ii) the
Company shall offer for subscription pro rata to the holders of the Common
Stock
any additional shares of stock of any class or other rights;
(iii) there
shall be any capital reorganization of the Company, or reclassification of
the Common Stock, or consolidation or merger of the Company with or into, or
sale of all or substantially all its assets to, another corporation or
entity; or
(iv) there
shall be a voluntary or involuntary dissolution, liquidation or winding up
of the Company;
then,
in
each such case, the Company shall give to the holder of this Warrant (a) notice
of the date on which the books of the Company shall close or a record shall
be
taken for determining the holders of Common Stock entitled to receive any such
dividend, distribution, or subscription rights or for determining the
holders of Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, notice
of
the date (or, if not then known, a reasonable approximation thereof by the
Company) when the same shall take place. Such notice shall also
specify the date on which the holders of Common Stock shall be entitled to
receive such dividend, distribution, or subscription rights or to exchange
their
Common Stock for stock or other securities or property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, or winding-up, as the case may be. Such notice shall be
given at least 30 days prior to the record date or the date on which the
Company’s books are closed in respect thereto. Failure to give any
such notice or any defect therein shall not affect the validity of the
proceedings referred to in clauses (i), (ii), (iii) and (iv) above.
Page
5
(k) Certain
Events. If any
event
occurs of the type contemplated by the adjustment provisions of this Paragraph
4
but not expressly provided for by such provisions, the Company will give notice
of such event as provided in Paragraph 4(g) hereof, and the Company’s Board of
Directors will make an appropriate adjustment in the Exercise Price and the
number of shares of Common Stock acquirable upon exercise of this Warrant so
that the rights of the holder shall be neither enhanced nor diminished by such
event.
(l) Certain
Definitions.
(i) “Common
Stock Deemed
Outstanding” shall
mean the number of
shares of Common Stock actually outstanding (not including shares of Common
Stock held in the treasury of the Company), plus (x) pursuant to Paragraph
4(b)(i) hereof, the maximum total number of shares of Common Stock issuable
upon
the exercise of Options, as of the date of such issuance or grant of such
Options, if any, and (y) pursuant to Paragraph 4(b)(ii) hereof, the maximum
total number of shares of Common Stock issuable upon conversion or exchange
of
Convertible Securities, as of the date of issuance of such Convertible
Securities, if any.
(ii) “Market
Price,” as
of any date, (i) means the average of the last reported sale prices for the
shares of Common Stock on the OTCBB for the five (5) Trading Days immediately
preceding such date as reported by Bloomberg, or (ii) if the OTCBB is not the
principal trading market for the shares of Common Stock, the average of the
last
reported sale prices on the principal trading market for the Common Stock during
the same period as reported by Bloomberg, or (iii) if market value cannot be
calculated as of such date on any of the foregoing bases, the Market Price
shall
be the fair market value as reasonably determined in good faith by (a) the
Board
of Directors of the Company or, at the option of a majority-in-interest of
the
holders of the outstanding Warrants by (b) an independent investment bank of
nationally recognized standing in the valuation of businesses similar to the
business of the corporation. The manner of determining the Market Price of
the
Common Stock set forth in the foregoing definition shall apply with respect
to
any other security in respect of which a determination as to market value must
be made hereunder.
(iii) “Common
Stock,”
for purposes of this Paragraph 4, includes the Common Stock, par value $.00005
per share, and any additional class of stock of the Company having no preference
as to dividends or distributions on liquidation, provided that the shares
purchasable pursuant to this Warrant shall include only shares of Common Stock,
par value $.00005 per share, in respect of which this Warrant is exercisable,
or
shares resulting from any subdivision or combination of such Common Stock,
or in
the case of any reorganization, reclassification, consolidation, merger, or
sale
of the character referred to in Paragraph 4(e) hereof, the stock or other
securities or property provided for in such Paragraph.
5. Issue
Tax.
The
issuance of certificates for Warrant Shares upon the exercise of this Warrant
shall be made without charge to the holder of this Warrant or such shares for
any issuance tax or other costs in respect thereof, provided that the Company
shall not be required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of any certificate in a name
other than the holder of this Warrant.
6. No
Rights or Liabilities as
a Shareholder.
This
Warrant shall not entitle the holder hereof to any voting rights or other rights
as a shareholder of the Company. No provision of this Warrant, in the
absence of affirmative action by the holder hereof to purchase Warrant Shares,
and no mere enumeration herein of the rights or privileges of the holder hereof,
shall give rise to any liability of such holder for the Exercise Price or as
a
shareholder of the Company, whether such liability is asserted by the Company
or
by creditors of the Company.
7. Transfer,
Exchange, and
Replacement of Warrant.
(a) Restriction
on
Transfer. This
Warrant and
the rights granted to the holder hereof are transferable, in whole or in part,
upon surrender of this Warrant, together with a properly executed assignment
in
the form attached hereto, at the office or agency of the Company referred to
in
Paragraph 7(e) below, provided, however, that any transfer or
assignment shall be subject to the conditions set forth in Paragraph 7(f) hereof
and to the applicable provisions of the Securities Purchase
Agreement. Until due presentment for registration of transfer on the
books of the Company, the Company may treat the registered holder hereof as
the
owner and holder hereof for all purposes, and the Company shall not be affected
by any notice to the contrary. Notwithstanding anything to the
contrary contained herein, the registration rights described in Paragraph 8
are
assignable only in accordance with the provisions of that certain Registration
Rights Agreement, dated October 15, 2007, by and among the Company and the
other
signatories thereto (the “Registration Rights Agreement”).
Page
6
(b) Warrant
Exchangeable for
Different Denominations. This
Warrant is
exchangeable, upon the surrender hereof by the holder hereof at the office
or agency of the Company referred to in Paragraph 7(e) below, for new Warrants
of like tenor representing in the aggregate the right to purchase the number
of
shares of Common Stock which may be purchased hereunder, each of such new
Warrants to represent the right to purchase such number of shares as shall
be
designated by the holder hereof at the time of such surrender.
(c) Replacement
of
Warrant. Upon
receipt of
evidence reasonably satisfactory to the Company of the loss, theft,
destruction, or mutilation of this Warrant and, in the case of any such loss,
theft, or destruction, upon delivery of an indemnity agreement
reasonably satisfactory in form and amount to the Company, or, in the case
of any such mutilation, upon surrender and cancellation of this Warrant, the
Company, at its expense, will execute and deliver, in lieu thereof, a new
Warrant of like tenor.
(d) Cancellation;
Payment of
Expenses. Upon
the
surrender of this Warrant in connection with any transfer, exchange, or
replacement as provided in this Paragraph 7, this Warrant shall be promptly
canceled by the Company. The Company shall pay all taxes (other than
securities transfer taxes) and all other expenses (other than legal expenses,
if
any, incurred by the holder or transferees) and charges payable in connection
with the preparation, execution, and delivery of Warrants pursuant to this
Paragraph 7.
(e) Register. The
Company shall
maintain, at its principal executive offices (or such other office or agency
of
the Company as it may designate by notice to the holder hereof), a register
for
this Warrant, in which the Company shall record the name and address of the
person in whose name this Warrant has been issued, as well as the name and
address of each transferee and each prior owner of this Warrant.
(f) Exercise
or Transfer Without
Registration. If,
at the time
of the surrender of this Warrant in connection with any exercise, transfer,
or
exchange of this Warrant, this Warrant (or, in the case of any exercise, the
Warrant Shares issuable hereunder), shall not be registered under the Securities
Act of 1933, as amended (the “Securities Act”) and under applicable state
securities or blue sky laws, the Company may require, as a condition of allowing
such exercise, transfer, or exchange, (i) that the holder or transferee of
this
Warrant, as the case may be, furnish to the Company a written opinion of
counsel, which opinion and counsel are acceptable to the Company, to the effect
that such exercise, transfer, or exchange may be made without registration
under
said Act and under applicable state securities or blue sky laws, (ii) that
the
holder or transferee execute and deliver to the Company an investment letter
in
form and substance acceptable to the Company and (iii) that the transferee
be an
“accredited investor” as defined in Rule 501(a) promulgated under the Securities
Act; provided that no such opinion, letter or status as an “accredited investor”
shall be required in connection with a transfer pursuant to Rule 144 under
the
Securities Act. The first holder of this Warrant, by taking and
holding the same, represents to the Company that such holder is acquiring this
Warrant for investment and not with a view to the distribution
thereof.
8. Registration
Rights.
The
initial holder of this Warrant (and certain assignees thereof) is entitled
to
the benefit of such registration rights in respect of the Warrant Shares as
are
set forth in Section 2 of the Registration Rights Agreement.
9. Notices.
All
notices, requests, and other communications required or permitted to be given
or
delivered hereunder to the holder of this Warrant shall be in writing, and
shall
be personally delivered, or shall be sent by certified or registered mail or
by
recognized overnight mail courier, postage prepaid and addressed, to such holder
at the address shown for such holder on the books of the Company, or at such
other address as shall have been furnished to the Company by notice from such
holder. All notices, requests, and other communications required or
permitted to be given or delivered hereunder to the Company shall be in writing,
and shall be personally delivered, or shall be sent by certified or registered
mail or by recognized overnight mail courier, postage prepaid and addressed,
to
the office of the Company at ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇
▇▇▇▇▇, Attention: Chief Executive Officer, or at such other address as shall
have been furnished to the holder of this Warrant by notice from the
Company. Any such notice, request, or other communication may be sent
by facsimile, but shall in such case be subsequently confirmed by a writing
personally delivered or sent by certified or registered mail or by recognized
overnight mail courier as provided above. All notices, requests, and
other communications shall be deemed to have been given either at the time
of
the receipt thereof by the person entitled to receive such notice at the
address of such person for purposes of this Paragraph 9, or, if mailed by
registered or certified mail or with a recognized overnight mail courier upon
deposit with the United States Post Office or such overnight mail courier,
if
postage is prepaid and the mailing is properly addressed, as the case may
be.
Page
7
10. Governing
Law.
THIS
WARRANT 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 LOCATED IN NEW YORK, NEW YORK WITH RESPECT
TO ANY DISPUTE ARISING UNDER THIS WARRANT, 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 PARTY WHICH DOES NOT PREVAIL IN
ANY DISPUTE ARISING UNDER THIS WARRANT SHALL BE RESPONSIBLE FOR ALL FEES AND
EXPENSES, INCLUDING ATTORNEYS’ FEES, INCURRED BY THE PREVAILING PARTY IN
CONNECTION WITH SUCH DISPUTE.
11. Miscellaneous.
(a) Amendments. This
Warrant and
any provision hereof may only be amended by an instrument in writing signed
by
the Company and the holder hereof.
(b) Descriptive
Headings. The
descriptive
headings of the several paragraphs of this Warrant are inserted for
purposes of reference only, and shall not affect the meaning or construction
of
any of the provisions hereof.
(d) Remedies. The
Company acknowledges that a breach by it of its obligations hereunder will
cause
irreparable harm to the holder, 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
Warrant will be inadequate and agrees, in the event of a breach or threatened
breach by the Company of the provisions of this Warrant, that the holder shall
be entitled, in addition to all other available remedies at law or in equity,
and in addition to the penalties assessable herein, to an injunction or
injunctions restraining, preventing or curing any breach of this Warrant and
to
enforce specifically the terms and provisions thereof, without the necessity
of
showing economic loss and without any bond or other security being
required.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
Page
8
IN
WITNESS WHEREOF, the
Company has caused this Warrant to be signed by its duly authorized officer
as
of the date first above written.
MIDNIGHT
HOLDINGS GROUP,
INC.
By:
/s/▇▇▇▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇▇▇
▇▇▇▇▇
Chief
Executive Officer
Page
9
FORM
OF EXERCISE
AGREEMENT
Dated: ________ __, 200_
To: ______________________
The
undersigned, pursuant to the provisions set forth in the within Warrant, hereby
agrees to purchase ________ shares of Common Stock covered by such Warrant,
and
makes payment herewith in full therefor at the price per share provided by
such Warrant in cash or by certified or official bank check in the amount of,
or, if the resale of such Common Stock by the undersigned is not currently
registered pursuant to an effective registration statement under the Securities
Act of 1933, as amended, by surrender of securities issued by the Company
(including a portion of the Warrant) having a market value (in the case of
a
portion of this Warrant, determined in accordance with Section 11(c) of the
Warrant) equal to $_________. Please issue a certificate or
certificates for such shares of Common Stock in the name of and pay any
cash for any fractional share to:
Name:
Signature:
Address:
Note: The
above
signature should correspond
exactly with the name on the face of the
within Warrant, if applicable.
and,
if
said number of shares of Common Stock shall not be all the shares purchasable
under the within Warrant, a new Warrant is to be issued in the name of said
undersigned covering the balance of the shares purchasable thereunder less
any
fraction of a share paid in cash.
Page
10
FORM
OF
ASSIGNMENT
FOR
VALUE RECEIVED, the
undersigned hereby sells, assigns, and transfers all the rights of the
undersigned under the within Warrant, with respect to the number of shares
of
Common Stock covered thereby set forth hereinbelow, to:
Name
of
Assignee Address No
of
Shares
,
and
hereby irrevocably constitutes and appoints ___________________________________
as agent and attorney-in-fact to transfer said Warrant on the books of the
within-named corporation, with full power of substitution in the
premises.
Dated: ________
__, 200_
In
the
presence
of:
__________________________
Name: __________________________
Signature:
_________________________
Title
of
Signing Officer or Agent (if any):
__________________________
Address: __________________________
_________________________
|
|
Note:
|
The
above signature should
correspond
exactly with the
name
on the face of the within
Warrant,
if applicable.
|
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11