COMMON STOCK PURCHASE WARRANT THEATER XTREME ENTERTAINMENT GROUP, INC.
NEITHER
THIS SECURITY NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY HAVE
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY
AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
SECURITIES.
COMMON
STOCK PURCHASE WARRANT
| Warrant Shares: 460,600 |
Initial
Exercise Date: March 6,
2007
|
THIS
COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value
received, ▇▇▇▇▇▇ Technology, LLC, a Virginia limited liability company (the
“Holder”), is entitled, upon the terms and subject to the limitations on
exercise and the conditions hereinafter set forth, at any time on or after
the
date hereof (the “Initial Exercise Date”) and on or prior to the close of
business on the fifth anniversary of the Initial Exercise Date (the “Termination
Date”) but not thereafter, to subscribe for and purchase from Theater Xtreme
Entertainment Group, Inc., a Florida corporation (the “Company”), up to 460,600
shares (the “Warrant Shares”) of common stock, par value $0.001 per share, of
the Company (the “Common Stock”). The purchase price of each share of Common
Stock under this Warrant shall be equal to the Exercise Price, as defined in
Section 2(b).
Section
1. Definitions.
Capitalized terms used and not otherwise defined herein shall have the
respective meanings set forth in that certain Securities Purchase Agreement
(the
“Purchase Agreement”), dated the date hereof, by and between the Company and
Holder.
1
Section
2. Exercise.
(a) Exercise
of Warrant.
Exercise of the purchase rights represented by this Warrant may be made, in
whole or in part, at any time or times on or after the Initial Exercise Date
and
on or before the Termination Date by delivery to the Company of a duly executed
facsimile copy of the Notice of Exercise Form annexed hereto (or such other
office or agency of the Company as it may designate by notice in writing to
the
registered Holder at the address of Holder appearing on the books of the
Company); and, within three (3) Trading Days of the date said Notice of Exercise
is delivered to the Company, the Company shall have received payment of the
aggregate Exercise Price of the shares thereby purchased by wire transfer.
Each
exercise of this Warrant (other than the final such exercise) shall be for
a
whole number of shares. Notwithstanding anything herein to the contrary, the
Holder shall not be required to physically surrender this Warrant to the Company
until the Holder has purchased all of the Warrant Shares available hereunder
and
the Warrant has been exercised in full, in which case, the Holder shall
surrender this Warrant to the Company for cancellation within three (3) Trading
Days of the date the final Notice of Exercise is delivered to the Company.
Partial exercises of this Warrant resulting in purchases of a portion of the
total number of Warrant Shares available hereunder shall have the effect of
reducing the number of Warrant Shares purchasable thereafter in an amount equal
to the number of Warrant Shares purchased. The Holder and the Company shall
maintain records showing the number of Warrant Shares purchased and the date
of
such purchases. The Company shall deliver any objection to any Notice of
Exercise Form within one (1) Business Day of receipt of such notice. “Business
Day” means any day except Saturday, Sunday, any day which shall be a federal
legal holiday in the United States or any day on which banking institutions
in
the State of New York are authorized or required by law or other governmental
action to close. The Holder and any assignee, by acceptance of this Warrant,
acknowledge and agree that, by reason of the provisions of this paragraph,
following the purchase of a portion of the Warrant Shares hereunder, the number
of Warrant Shares available for purchase hereunder at any given time may be
less
than the amount stated on the face hereof.
(b) Exercise
Price.
The
exercise price per share of the Common Stock under this Warrant shall be One
Dollar and Ten Cents ($1.10), subject to adjustment hereunder (the “Exercise
Price”).
(c) Exercise
Limitations.
The
Company shall not effect any exercise of this Warrant, and Holder shall not
have
the right to exercise any portion of this Warrant to the extent that after
giving effect to such issuance after exercise as set forth on the applicable
Notice of Exercise, Holder (together with ▇▇▇▇▇▇’s Affiliates, and any other
person or entity acting as a group together with Holder or any of Holder’s
Affiliates), as set forth on the applicable Notice of Exercise, would
beneficially own in excess of the Beneficial Ownership Limitation (as defined
below). For purposes of the foregoing sentence, the number of shares of Common
Stock beneficially owned by Holder and its Affiliates shall include the number
of shares of Common Stock issuable upon exercise of this Warrant with respect
to
which such determination is being made, but shall exclude the number of shares
of Common Stock which would be issuable upon (A) exercise of the remaining,
nonexercised portion of this Warrant beneficially owned by Holder or any of
its
Affiliates and (B) exercise or conversion of the unexercised or nonconverted
portion of any other securities of the Company (including, without limitation,
any other Debentures or Warrants) subject to a limitation on conversion or
exercise analogous to the limitation contained herein beneficially owned by
Holder or any of its Affiliates. Except as set forth in the preceding sentence,
for purposes of this Section 2(c), beneficial ownership shall be calculated
in
accordance with Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder, it being acknowledged by Holder that the Company is
not
representing to Holder that such calculation is in compliance with Section
13(d)
of the Exchange Act and Holder is solely responsible for any schedules required
to be filed in accordance therewith. To the extent that the limitation contained
in this Section 2(c) applies, the determination of whether this
2
Warrant
is exercisable (in relation to other securities owned by Holder together with
any Affiliates) and of which a portion of this Warrant is exercisable shall
be
in the sole discretion of Holder, and the submission of a Notice of Exercise
shall be deemed to be Holder’s determination of whether this Warrant is
exercisable (in relation to other securities owned by Holder together with
any
Affiliates) and of which portion of this Warrant is exercisable, in each case
subject to such aggregate percentage limitation, and the Company shall have
no
obligation to verify or confirm the accuracy of such determination. In addition,
a determination as to any group status as contemplated above shall be determined
in accordance with Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder. For purposes of this Section 2(c), in
determining the number of outstanding shares of Common Stock, Holder may rely
on
the number of outstanding shares of Common Stock as reflected in (x) the
Company’s most recent quarterly or annual period report filed under the Exchange
Act, as the case may be, (y) a more recent public announcement by the Company
or
(z) any other notice by the Company or the Company’s Transfer Agent setting
forth the number of shares of Common Stock outstanding. Upon the written or
oral
request of ▇▇▇▇▇▇, the Company shall within two (2) Trading Days confirm orally
and in writing to Holder the number of shares of Common Stock then outstanding.
In any case, the number of outstanding shares of Common Stock shall be
determined after giving effect to the conversion or exercise of securities
of
the Company, including this Warrant, by Holder or its Affiliates since the
date
as of which such number of outstanding shares of Common Stock was reported.
The
“Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the
Common Stock outstanding immediately after giving effect to the issuance of
shares of Common Stock issuable upon exercise of this Warrant. The Beneficial
Ownership Limitation provisions of this Section 2(c) may be waived by ▇▇▇▇▇▇,
at
the election of ▇▇▇▇▇▇, upon not less than sixty-one (61) days’ prior notice to
the Company to change the Beneficial Ownership Limitation to 9.99% of the number
of shares of the Common Stock outstanding immediately after giving effect to
the
issuance of shares of Common Stock upon exercise of this Warrant, and the
provisions of this Section 2(c) shall continue to apply. Upon such a change
by
Holder of the Beneficial Ownership Limitation from such 4.99% limitation to
such
9.99% limitation, the Beneficial Ownership Limitation may be further waived
by
Holder to exceed 9.99% in its sole discretion. The provisions of this paragraph
shall be construed and implemented in a manner otherwise than in strict
conformity with the terms of this Section 2(c) to correct this paragraph (or
any
portion hereof) which may be defective or inconsistent with the intended
Beneficial Ownership Limitation herein contained or to make changes or
supplements necessary or desirable to properly give effect to such limitation.
The limitations contained in this paragraph shall apply to a successor holder
of
this Warrant.
(d) Mechanics
of Exercise.
(i) Authorization
of Warrant Shares.
The
Company covenants that all Warrant Shares which may be issued upon the exercise
of the purchase rights represented by this Warrant will, upon exercise of the
purchase rights represented by this Warrant (including payment for the Warrant
Shares), be duly authorized, validly issued, fully paid and nonassessable and
free from all taxes, liens and charges created by the Company in respect of
the
issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue).
3
(ii) Delivery
of Certificates Upon Exercise.
Certificates for shares purchased hereunder shall be transmitted by the transfer
agent of the Company to the Holder by crediting the account of the Holder’s
prime broker with the Depository Trust Company through its Deposit Withdrawal
Agent Commission (“DWAC”) system if the Company is a participant in such system,
and otherwise by physical delivery to the address specified by the Holder in
the
Notice of Exercise within three (3) Trading Days from the delivery to the
Company of the Notice of Exercise Form, surrender of this Warrant (if required)
and payment of the aggregate Exercise Price as set forth above (“Warrant Share
Delivery Date”). This Warrant shall be deemed to have been exercised on the date
the Exercise Price is received by the Company. The Warrant Shares shall be
deemed to have been issued, and Holder or any other person so designated to
be
named therein shall be deemed to have become a holder of record of such shares
for all purposes, as of the date the Warrant has been exercised by payment
to
the Company of the Exercise Price and all taxes required to be paid by the
Holder, if any, pursuant to Section 2(d)(vii) prior to the issuance of such
shares, have been paid.
(iii) Delivery
of New Warrants Upon Exercise.
If this
Warrant shall have been exercised in part, the Company shall, at the request
of
▇▇▇▇▇▇ and upon surrender of this Warrant certificate, at the time of delivery
of the certificate or certificates representing Warrant Shares, deliver to
Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased
Warrant Shares called for by this Warrant, which new Warrant shall in all other
respects be identical with this Warrant.
(iv) Rescission
Rights.
If the
Company fails to cause its transfer agent to transmit to Holder a certificate
or
certificates representing the Warrant Shares pursuant to this Section 2(d)(iv)
by the second Trading Day following the Warrant Share Delivery Date, then Holder
will have the right to rescind such exercise.
(v) Compensation
for Buy−In on Failure to Timely Deliver Certificates Upon
Exercise.
In
addition to any other rights available to the Holder, if the Company fails
to
cause its transfer agent to transmit to the Holder a certificate or certificates
representing the Warrant Shares pursuant to an exercise on or before the third
Trading Day following the Warrant Share Delivery Date, and if after such date
the Holder is required by its broker to purchase (in an open market transaction
or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of
Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant
Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”),
then the Company shall (1) pay in cash to the Holder the amount by which (x)
the
Holder’s total purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased exceeds (y) the amount obtained by
multiplying (A) the number of Warrant Shares that the Company was required
to
deliver to the Holder in connection with the exercise at issue by (B) the price
at which the sell order giving rise to such purchase obligation was executed,
and (2) at the option of the Holder, either reinstate the portion of the Warrant
and equivalent number of Warrant Shares for which such exercise was not honored
or deliver to the Holder the number of shares of Common Stock that would have
been issued had the Company timely complied with its exercise and delivery
obligations hereunder. For example, if the Holder purchases Common Stock having
a total purchase price of $11,000 to cover a Buy-In with respect to an attempted
exercise of shares of Common Stock with an aggregate sale price giving rise
to
such purchase obligation of $10,000, under clause (1) of the immediately
preceding sentence the Company shall be required to pay the Holder $1,000.
The
Holder shall provide the Company written notice indicating the amounts payable
to the Holder in respect of the Buy-In and, upon request of the Company,
evidence of the amount of such loss. Nothing herein shall limit a Holder’s right
to pursue any other remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company’s failure to timely deliver
certificates representing shares of Common Stock upon exercise of the Warrant
as
required pursuant to the terms hereof.
4
(vi) No
Fractional Shares or Scrip.
No
fractional shares or scrip representing fractional shares shall be issued upon
the exercise of this Warrant. As to any fraction of a share which Holder would
otherwise be entitled to purchase upon such exercise, the Company shall at
its
election, either pay a cash adjustment in respect of such final fraction in
an
amount equal to such fraction multiplied by the Exercise Price or round up
to
the next whole share.
(vii) Charges,
Taxes and Expenses.
Issuance of certificates for Warrant Shares shall be made without charge to
the
Holder for any issue or transfer tax or other incidental expense in respect
of
the issuance of such certificate, all of which taxes and expenses shall be
paid
by the Company, and such certificates shall be issued in the name of the Holder
or in such name or names as may be directed by the Holder; provided, however,
that in the event certificates for Warrant Shares are to be issued in a name
other than the name of the Holder, this Warrant when surrendered for exercise
shall be accompanied by the Assignment Form attached hereto duly executed by
the
Holder; and the Company may require, as a condition thereto, the payment of
a
sum sufficient to reimburse it for any transfer tax incidental
thereto.
(viii) Closing
of Books.
The
Company will not close its stockholder books or records in any manner which
prevents the timely exercise of this Warrant, pursuant to the terms
hereof.
Section
3. Certain
Adjustments.
(a) Stock
Dividends and Splits.
If the
Company, at any time while this Warrant is outstanding: (A) pays a stock
dividend or otherwise makes a distribution or distributions on shares of its
Common Stock or any other equity or equity equivalent securities payable in
shares of Common Stock (which, for avoidance of doubt, shall not include any
shares of Common Stock issued by the Company upon exercise of this Warrant),
(B)
subdivides outstanding shares of Common Stock into a larger number of shares,
(C) combines (including by way of reverse stock split) outstanding shares of
Common Stock into a smaller number of shares, or (D) issues by reclassification
of shares of the Common Stock any shares of capital stock of the Company, then
in each case the Exercise Price shall be multiplied by a fraction of which
the
numerator shall be the number of shares of Common Stock (excluding treasury
shares, if any) outstanding immediately before such event and of which the
denominator shall be the number of shares of Common Stock outstanding
immediately after such event and the number of shares issuable upon exercise
of
this Warrant shall be proportionately adjusted. Any adjustment made pursuant
to
this Section 3(a) shall become effective immediately after the record date
for
the determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective date in
the case of a subdivision, combination or re-classification.
5
(b) Subsequent
Equity Sales.
If the
Company or any Subsidiary thereof, as applicable, at any time while this Warrant
is outstanding, shall sell or grant any option to purchase, or sell or grant
any
right to reprice its securities, or otherwise dispose of or issue (or announce
any offer, sale, grant or any option to purchase or other disposition) any
Common Stock or Common Stock Equivalents entitling any Person other than the
Holder to acquire shares of Common Stock, at an effective price per share less
than the then Exercise Price (such lower price, the “Base Share Price” and such
issuances collectively, a “Dilutive Issuance”) (if the holder of the Common
Stock or Common Stock Equivalents so issued shall at any time, whether by
operation of purchase price adjustments, reset provisions, floating conversion,
exercise or exchange prices or otherwise, or due to warrants, options or rights
per share which are issued in connection with such issuance, be entitled to
receive shares of Common Stock at an effective price per share which is less
than the Exercise Price, such issuance shall be deemed to have occurred for
less
than the Exercise Price on such date of the Dilutive Issuance), then the
Exercise Price shall be reduced and only reduced to equal the Base Share Price
and the number of Warrant Shares issuable hereunder shall be increased such
that
the aggregate Exercise Price payable hereunder, after taking into account the
decrease in the Exercise Price, shall be equal to the aggregate Exercise Price
prior to such adjustment. Such adjustment shall be made whenever such Common
Stock or Common Stock Equivalents are issued. Notwithstanding the foregoing,
no
adjustments shall be made, paid or issued under this Section 3(b) in respect
of
an Exempt Issuance. The Company shall notify the Holder in writing, no later
than the Trading Day following the issuance of any Common Stock or Common Stock
Equivalents subject to this Section 3(b), indicating therein the applicable
issuance price, or applicable reset price, exchange price, conversion price
and
other pricing terms (such notice the “Dilutive Issuance Notice”). For purposes
of clarification, whether or not the Company provides a Dilutive Issuance Notice
pursuant to this Section 3(b), upon the occurrence of any Dilutive Issuance,
after the date of such Dilutive Issuance the Holder is entitled to receive
a
number of Warrant Shares based upon the Base Share Price regardless of whether
the Holder accurately refers to the Base Share Price in the Notice of Exercise.
“Exempt Issuance” shall means the issuance of (i) shares of Common Stock or
options to employees, officers or directors of the Company pursuant to any
stock
or option plan duly adopted for such purpose by a majority of the non-employee
members of the Board of Directors of the Company or a majority of the members
of
a committee of non-employee directors established, (ii) securities issued upon
the exercise or exchange of or conversion of any Securities issued under the
Purchase Agreement or of other securities exercisable or exchangeable for or
convertible into shares of Common Stock issued and outstanding on the date
of
the Purchase Agreement, provided that such securities have not been amended
since the date of the Purchase Agreement to increase the number of such
securities or to decrease the exercise, exchange or conversion price of such
securities, and (iii) securities issued pursuant to acquisitions or strategic
transactions approved by a majority of the disinterested directors of the
Company, provided any such issuance shall only be to a Person which is, itself
or through its subsidiaries, an operating company in a business synergistic
with
the business of the Company and in which the Company receives benefits in
addition to the investment of funds, but shall not include a transaction in
which the Company is issuing securities primarily for the purpose of raising
capital or to an entity whose primary business is investing in
securities.
6
(c) Subsequent
Rights Offerings.
If the
Company, at any time while the Warrant is outstanding, shall issue rights,
options or warrants to all holders of Common Stock (and not to Holder) entitling
them to subscribe for or purchase shares of Common Stock at a price per share
less than the VWAP at the record date mentioned below, then the Exercise Price
shall be multiplied by a fraction, of which the denominator shall be the number
of shares of the Common Stock outstanding on the date of issuance of such rights
or warrants plus the number of additional shares of Common Stock offered for
subscription or purchase, and of which the numerator shall be the number of
shares of the Common Stock outstanding on the date of issuance of such rights
or
warrants plus the number of shares which the aggregate offering price of the
total number of shares so offered (assuming receipt by the Company in full
of
all consideration payable upon exercise of such rights, options or warrants)
would purchase at such VWAP. Such adjustment shall be made whenever such rights
or warrants are issued, and shall become effective immediately after the
distribution date.
(d) Pro
Rata Distributions.
If the
Company, at any time prior to the Termination Date, shall distribute to all
holders of Common Stock (and not to Holder of the Warrant) evidences of its
indebtedness or assets (including cash and cash dividends) or rights or warrants
to subscribe for or purchase any security other than the Common Stock (which
shall be subject to Section 3(b)), then in each such case the Exercise Price
shall be adjusted by multiplying the Exercise Price in effect immediately prior
to the record date fixed for determination of stockholders entitled to receive
such distribution by a fraction of which the denominator shall be the VWAP
determined as of the record date mentioned above, and of which the numerator
shall be such VWAP on such record date less the then per share fair market
value
at such record date of the portion of such assets or evidence of indebtedness
so
distributed applicable to one outstanding share of the Common Stock as
determined by the Board of Directors in good faith. In either case the
adjustments shall be described in a statement provided to the Holder of the
portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock. Such adjustment
shall be made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.
(e) Fundamental
Transaction.
If, at
any time while this Warrant is outstanding, (A) the Company effects any merger
or consolidation of the Company with or into another Person, (B) the Company
effects any sale of all or substantially all of its assets in one or a series
of
related transactions, (C) any tender offer or exchange offer (whether by the
Company or another Person) is completed pursuant to which holders of Common
Stock are permitted to tender or exchange their shares for other securities,
cash or property, or (D) the Company effects any reclassification of the Common
Stock or any compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash or property
(in any such case, a “Fundamental Transaction”), then, upon any subsequent
exercise of this Warrant, the Holder shall have the right to receive, for each
Warrant Share that would have been issuable upon such exercise immediately
prior
to the occurrence of such Fundamental Transaction, at the option of the Holder,
(a) the number of shares of Common Stock of the successor or acquiring
corporation or of the Company, if it is the surviving corporation, and any
additional consideration (the “Alternate Consideration”) receivable upon or as a
result of such reorganization, reclassification, merger, consolidation or
disposition of assets by Holder of the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to such event or (b) at
the
10 Trading Days’ prior written election of either the Company or the Holder
(during which period the Holder has the right to exercise this Warrant for
shares of Common Stock), cash equal to the greater of (i) the value of this
Warrant as determined in accordance with the Black-Scholes option pricing
formula with an annualized volatility that is calculated using the trading
history over the 4 calendar weeks immediately prior to the notice of exercise
date and (ii)
7
upon
completion of the merger or consolidation, the product of (A) the difference
between the merger consideration per share less the Exercise Price and (B)
the
number of Warrant Shares then issuable hereunder. For purposes of any such
exercise, the determination of the Exercise Price shall be appropriately
adjusted to apply to such Alternate Consideration based on the amount of
Alternate Consideration issuable in respect of one share of Common Stock in
such
Fundamental Transaction, and the Company shall apportion the Exercise Price
among the Alternate Consideration in a reasonable manner reflecting the relative
value of any different components of the Alternate Consideration. If holders
of
Common Stock are given any choice as to the securities, cash or property to
be
received in a Fundamental Transaction, then the Holder shall be given the same
choice as to the Alternate Consideration it receives upon any exercise of this
Warrant following such Fundamental Transaction. To the extent necessary to
effectuate the foregoing provisions, any successor to the Company or surviving
entity in such Fundamental Transaction shall issue to the Holder a new warrant
consistent with the foregoing provisions and evidencing the Holder’s right to
exercise such warrant into Alternate Consideration. The terms of any agreement
pursuant to which a Fundamental Transaction is effected shall include terms
requiring any such successor or surviving entity to comply with the provisions
of this Section 3(e) and insuring that this Warrant (or any such replacement
security) will be similarly adjusted upon any subsequent transaction analogous
to a Fundamental Transaction.
(f) Calculations.
All
calculations under this Section 3 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. For purposes of this Section
3,
the number of shares of Common Stock deemed to be issued and outstanding as
of a
given date shall be the sum of the number of shares of Common Stock (excluding
treasury shares, if any) issued and outstanding.
(g) Voluntary
Adjustment By Company.
The
Company may at any time during the term of this Warrant reduce the then current
Exercise Price to any amount and for any period of time deemed appropriate
by
the Board of Directors of the Company.
(h) Notice
to Holder.
(i) Adjustment
to Exercise Price.
Whenever the Exercise Price is adjusted pursuant to any provision of this
Section 3, the Company shall promptly mail to the Holder a notice setting forth
the Exercise Price after such adjustment and setting forth a brief statement
of
the facts requiring such adjustment. If the Company issues a variable rate
security, the Company shall be deemed to have issued Common Stock or Common
Stock Equivalents at the lowest possible conversion or exercise price at which
such securities may be converted or exercised in the case of a Variable Rate
Transaction. The term “Variable Rate Transaction” shall mean a transaction in
which the Company issues or sells (i) any debt or equity securities that are
convertible into, exchangeable or exercisable for, or include the right to
receive additional shares of Common Stock either (A) at a conversion, exercise
or exchange rate or other price that is based upon and/or varies with the
trading prices of or quotations for the shares of Common Stock at any time
after
the initial issuance of such debt or equity securities, or (B) with a
conversion, exercise or exchange price that is subject to being reset at some
future date after the initial issuance of such debt or equity security or upon
the occurrence of specified or contingent events directly or indirectly related
to the business of the Company or the market for the Common Stock or (ii) enters
into any agreement, including, but not limited to, an equity line of credit,
whereby the Company may sell securities at a future determined
price.
8
(ii) Notice
to Allow Exercise by ▇▇▇▇▇▇.
If: (A)
the Company shall declare a dividend (or any other distribution in whatever
form) on the Common Stock; (B) the Company shall declare a special nonrecurring
cash dividend on or a redemption of the Common Stock; (C) the Company shall
authorize the granting to all holders of the Common Stock rights or warrants
to
subscribe for or purchase any shares of capital stock of any class or of any
rights; (D) the approval of any stockholders of the Company shall be required
in
connection with any reclassification of the Common Stock, any consolidation
or
merger to which the Company is a party, any sale or transfer of all or
substantially all of the assets of the Company, of any compulsory share exchange
whereby the Common Stock is converted into other securities, cash or property;
(E) the Company shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Company; then, in each case,
the
Company shall cause to be mailed to the Holder at its last address as it shall
appear upon the Warrant Register of the Company, at least 20 calendar days
prior
to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not
to
be taken, the date as of which the holders of the Common Stock of record to
be
entitled to such dividend, distributions, redemption, rights or warrants are
to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the Common Stock
of record shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange; provided that the
failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice. The Holder is entitled to exercise this Warrant during the
20−day period commencing on the date of such notice to the effective date of the
event triggering such notice.
Section
4. Transfer
of Warrant.
(a) Transferability.
Subject
to compliance with any applicable securities laws and the conditions set forth
in Section 4(d) hereof and to the provisions of Section 4.1 of the Purchase
Agreement, this Warrant and all rights hereunder (including, without limitation,
any registration rights) are transferable, in whole or in part, upon surrender
of this Warrant at the principal office of the Company or its designated agent,
together with a written assignment of this Warrant substantially in the form
attached hereto duly executed by the Holder or its agent or attorney and funds
sufficient to pay any transfer taxes payable upon the making of such transfer.
Upon such surrender and, if required, such payment, the Company shall execute
and deliver a new Warrant or Warrants in the name of the assignee or assignees
and in the denomination or denominations specified in such instrument of
assignment, and shall issue to the assignor a new Warrant evidencing the portion
of this Warrant not so assigned, and this Warrant shall promptly be cancelled.
A
Warrant, if properly assigned, may be exercised by a new holder for the purchase
of Warrant Shares without having a new Warrant issued.
9
(b) New
Warrants.
This
Warrant may be divided or combined with other Warrants upon presentation hereof
at the aforesaid office of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by the Holder or its agent or attorney. Subject to compliance with
Section 4(a), as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants
in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.
(c) Warrant
Register.
The
Company shall register this Warrant, upon records to be maintained by the
Company for that purpose (the “Warrant Register”), in the name of the record
Holder hereof from time to time. The Company may deem and treat the registered
Holder of this Warrant as the absolute owner hereof for the purpose of any
exercise hereof or any distribution to the Holder, and for all other purposes,
absent actual notice to the contrary.
(d) Transfer
Restrictions.
If, at
the time of the surrender of this Warrant in connection with any transfer of
this Warrant, the transfer of this Warrant shall not be registered pursuant
to
an effective registration statement under the Securities Act and under
applicable state securities or blue sky laws, the Company may require, as a
condition of allowing such transfer, that (i) the Holder or transferee of this
Warrant, as the case may be, furnish to the Company a written opinion of counsel
(which opinion shall be in form, substance and scope customary for opinions
of
counsel in comparable transactions) to the effect that such transfer may be
made
without registration under the Securities Act and under applicable state
securities or blue sky laws, and (ii) the Holder or transferee execute and
deliver to the Company an investment letter in form and substance acceptable
to
the Company, and (iii) the transferee be an “accredited investor” as defined in
Rule 501(a)(1), (a)(2), (a)(3), (a)(7), or (a)(8) promulgated under the
Securities Act or a “qualified institutional buyer” as defined in Rule 144A(a)
promulgated under the Securities Act.
Section
5. Miscellaneous.
(a) No
Rights as Shareholder Until Exercise.
This
Warrant does not entitle the Holder to any voting rights or other rights as
a
shareholder of the Company prior to the exercise hereof as set forth in Section
2(d)(ii).
(b) Loss,
Theft, Destruction or Mutilation of Warrant.
The
Company covenants that upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this Warrant
or any stock certificate relating to the Warrant Shares, and in case of loss,
theft or destruction, of indemnity or security reasonably satisfactory to it
(which, in the case of the Warrant, shall not include the posting of any bond),
and upon surrender and cancellation of such Warrant or stock certificate, if
mutilated, the Company will make and deliver a new Warrant or stock certificate
of like tenor and dated as of such cancellation, in lieu of such Warrant or
stock certificate.
10
(c) Saturdays,
Sundays, Holidays, etc.
If the
last or appointed day for the taking of any action or the expiration of any
right required or granted herein shall not be a Business Day, then such action
may be taken or such right may be exercised on the next succeeding Business
Day.
(d) Authorized
Shares.
The
Company covenants that during the period the Warrant is outstanding, it will
reserve from its authorized and unissued Common Stock a sufficient number of
shares to provide for the issuance of the Warrant Shares upon the exercise
of
any purchase rights under this Warrant. The Company further covenants that
its
issuance of this Warrant shall constitute full authority to its officers who
are
charged with the duty of executing stock certificates to execute and issue
the
necessary certificates for the Warrant Shares upon the exercise of the purchase
rights under this Warrant. The Company will take all such reasonable action
as
may be necessary to assure that such Warrant Shares may be issued as provided
herein without violation of any applicable law or regulation, or of any
requirements of the Trading Market upon which the Common Stock may be listed.
Except
and to the extent as waived or consented to by the Holder, the Company shall
not
by any action, including, without limitation, amending its certificate of
incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of
this
Warrant, but will at all times in good faith assist in the carrying out of
all
such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of Holder as set forth in this Warrant against
impairment. Without limiting the generality of the foregoing, the Company will
(a) not increase the par value of any Warrant Shares above the amount payable
therefor upon such exercise immediately prior to such increase in par value,
(b)
take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable Warrant
Shares upon the exercise of this Warrant, and (c) use commercially reasonable
efforts to obtain all such authorizations, exemptions or consents from any
public regulatory body having jurisdiction thereof as may be necessary to enable
the Company to perform its obligations under this Warrant.
Before
taking any action which would result in an adjustment in the number of Warrant
Shares for which this Warrant is exercisable or in the Exercise Price, the
Company shall obtain all such authorizations or exemptions thereof, or consents
thereto, as may be necessary from any public regulatory body or bodies having
jurisdiction thereof.
(e) Jurisdiction.
All
questions concerning the construction, validity, enforcement and interpretation
of this Warrant shall be determined in accordance with the provisions of the
Purchase Agreement.
(f) Restrictions.
The
Holder acknowledges that the Warrant Shares acquired upon the exercise of this
Warrant, if not registered, will have restrictions upon resale imposed by state
and federal securities laws.
11
(g) Nonwaiver
and Expenses.
No
course of dealing or any delay or failure to exercise any right hereunder on
the
part of Holder shall operate as a waiver of such right or otherwise prejudice
Holder’s rights, powers or remedies, notwithstanding the fact that all rights
hereunder terminate on the Termination Date. If the Company willfully and
knowingly fails to comply with any provision of this Warrant, which results
in
any material damages to the Holder, the Company shall pay to Holder such amounts
as shall be sufficient to cover any costs and expenses including, but not
limited to, reasonable attorneys’ fees, including those of appellate
proceedings, incurred by Holder in collecting any amounts due pursuant hereto
or
in otherwise enforcing any of its rights, powers or remedies
hereunder.
(h) Notices.
Any
notice, request or other document required or permitted to be given or delivered
to the Holder by the Company shall be delivered in accordance with the notice
provisions of the Purchase Agreement.
(i) Limitation
of Liability.
No
provision hereof, in the absence of any affirmative action by Holder to exercise
this Warrant to purchase Warrant Shares, and no enumeration herein of the rights
or privileges of Holder, shall give rise to any liability of Holder for the
purchase price of any Common Stock or as a stockholder of the Company, whether
such liability is asserted by the Company or by creditors of the
Company.
(j) Remedies.
Holder,
in addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under this Warrant. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of
the
provisions of this Warrant and hereby agrees to waive and not to assert the
defense in any action for specific performance that a remedy at law would be
adequate.
(k) Successors
and Assigns.
Subject
to applicable securities laws, this Warrant and the rights and obligations
evidenced hereby shall inure to the benefit of and be binding upon the
successors of the Company and the successors and permitted assigns of Holder.
The provisions of this Warrant are intended to be for the benefit of all Holders
from time to time of this Warrant and shall be enforceable by any such Holder
or
holder of Warrant Shares.
(l) Amendment.
This
Warrant may be modified or amended or the provisions hereof waived with the
written consent of the Company and the Holder.
(m) Severability.
Wherever possible, each provision of this Warrant shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Warrant shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provisions or the remaining
provisions of this Warrant.
(n) Headings.
The
headings used in this Warrant are for the convenience of reference only and
shall not, for any purpose, be deemed a part of this Warrant.
[Remainder
of Page Intentionally Left Blank]
12
IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
officer thereunto duly authorized as of the date first above
indicated.
By: /s/
▇▇▇▇▇ ▇. ▇▇▇▇▇
Name:
▇▇▇▇▇ ▇. ▇▇▇▇▇
Title:
Chairman and CEO
13
NOTICE
OF
EXERCISE
TO:
[_______________________
(1)
The
undersigned hereby elects to purchase ________ Warrant Shares of the Company
pursuant to the terms of the attached Warrant (only if exercised in full),
and
tenders herewith payment of the exercise price in full, together with all
applicable transfer taxes, if any.
(2)
Payment shall be in lawful money of the United States.
(3)
Please issue a certificate or certificates representing said Warrant Shares
in
the name of the undersigned or in such other name as is specified
below:
_______________________________
The
Warrant Shares shall be delivered to the following DWAC Account Number or by
physical delivery of a certificate to:
_______________________________
_______________________________
_______________________________
(4)
Accredited Investor. The undersigned is an “accredited investor” as defined in
Regulation D promulgated under the Securities Act of 1933, as amended.
[SIGNATURE
OF HOLDER]
Name
of
Investing Entity:
__________________________________________________
Signature
of Authorized Signatory of Investing Entity:
___________________________
Name
of
Authorized Signatory:
______________________________________________
Title
of
Authorized Signatory:
_______________________________________________
Date:
___________________________________________________________________
14
ASSIGNMENT
FORM
(To
assign the foregoing warrant, execute
this
form
and supply required information.
Do
not
use this form to exercise the warrant.)
FOR
VALUE
RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and all
rights evidenced thereby are hereby assigned to ____________________________
whose address is
______________________________________________________________.
Dated:
______________, _______
Holder’s
Signature: _____________________________
Holder’s
Address: _____________________________
_____________________________
Signature
Guaranteed: ___________________________________________
NOTE:
The
signature to this Assignment Form must correspond with the name as it appears
on
the face of the Warrant, without alteration or enlargement or any change
whatsoever, and must be guaranteed by a bank or trust company. Officers of
corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing
Warrant.
15