THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY STATE SECURITIES LAWS. EXCEPT AS CONTEMPLATED BY THE
SECURITIES PURCHASE AGREEMENT AMONG AGU ENTERTAINMENT CORP., ITS DIRECT
AND INDIRECT SUBSIDIARIES AND THE ORIGINAL HOLDER OF THIS WARRANT, THIS
WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY
NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT OR THE
UNDERLYING SHARES OF COMMON STOCK UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY
TO AGU ENTERTAINMENT CORP. THAT SUCH REGISTRATION IS NOT REQUIRED.
Right to Purchase up to 2,000,000 Shares
of Common Stock of AGU
Entertainment Corp.
(subject to adjustment as provided herein)
COMMON STOCK PURCHASE WARRANT
No. _________________ Issue Date: December 20, 2004
AGU Entertainment Corp., a corporation organized under the laws of the
State of Delaware ("AGU"), hereby certifies that, for value received, ▇▇▇▇▇▇▇▇
Entertainment Company, a Delaware limited liability company or assigns (the
"Holder"), is entitled, subject to the terms set forth below, to purchase from
the Company (as defined herein) from and after the Issue Date of this Warrant
and at any time or from time to time before 5:00 p.m., New York time, through
the close of business on the later of (a) December 31, 2009 or (b) the maturity
date of the Note issued concurrently herewith pursuant to the terms of that
certain Security Purchase Agreement (the "Purchase Agreement") dated
concurrently herewith among AGU, its subsidiaries and the Holder (the
"Expiration Date"), up to 2,000,000 fully paid and nonassessable shares of
Common Stock (as hereinafter defined), no par value per share, at the applicable
Exercise Price per share (as defined below). The number and character of such
shares of Common Stock and the applicable Exercise Price per share are subject
to adjustment as provided herein.
As used herein the following terms, unless the context otherwise requires,
have the following respective meanings:
(a) The term "Company" shall include AGU and any corporation which
shall succeed, or assume the obligations of, AGU hereunder.
(b) The term "Common Stock" includes (i) the Company's Common Stock,
no par value per share; and (ii) any other securities into which or for which
any of the securities described in (a) may be converted or exchanged pursuant to
a plan of recapitalization, reorganization, merger, sale of assets or otherwise.
(c) The term "Other Securities" refers to any stock (other than
Common Stock) and other securities of the Company or any other person (corporate
or otherwise) which the holder of the Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrant, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 4 or otherwise.
(d) The "Exercise Price" applicable under this Warrant shall be
$2.00 per share, subject to adjustment as provided herein.
1. Exercise of Warrant.
1.1 Number of Shares Issuable upon Exercise. From and after the date
hereof through and including the Expiration Date, the Holder shall be entitled
to receive, upon exercise of this Warrant in whole or in part, by delivery of an
original or copy of an exercise notice in the form attached hereto as Exhibit A
(the "Exercise Notice"), shares of Common Stock of the Company, subject to
adjustment pursuant to Section 4.
1.2 Fair Market Value. For purposes hereof, the "Fair Market Value"
of a share of Common Stock as of a particular date (the "Determination Date")
shall mean:
(a) If the Company's Common Stock is traded on the NASD OTC Bulletin
Board, the NASDAQ SmallCap Market, NASDAQ National Market System, the American
Stock Exchange, the New York Stock Exchange or another national exchange, then
the closing or last sale price, respectively, reported for the last business day
immediately preceding the Determination Date.
(b) Except as provided in clause (c) below, if the Company's Common
Stock is not publicly traded, then as the Holder and the Company agree or in the
absence of agreement by arbitration in accordance with the rules then in effect
of the American Arbitration Association, before a single arbitrator to be chosen
from a panel of persons qualified by education and training to pass on the
matter to be decided.
(c) If the Determination Date is the date of a liquidation,
dissolution or winding up, or any event deemed to be a liquidation, dissolution
or winding up pursuant to the Company's charter, then all amounts to be payable
per share to holders of the Common Stock pursuant to the charter in the event of
such liquidation, dissolution or winding up, plus all other amounts to be
payable per share in respect of the Common Stock in liquidation under the
charter, assuming for the purposes of this clause (d) that all of the shares of
Common Stock then issuable upon exercise of the Warrant are outstanding at the
Determination Date.
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1.3 Company Acknowledgment. The Company will, at the time of the
exercise of the Warrant, upon the request of the holder hereof acknowledge in
writing its continuing obligation to afford to such holder any rights to which
such holder shall continue to be entitled after such exercise in accordance with
the provisions of this Warrant. If the holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to such holder any such rights.
1.4 Trustee for Warrant Holders. In the event that a bank or trust
company shall have been appointed as trustee for the holders of the Warrant
pursuant to Section 3.2, such bank or trust company shall have all the powers
and duties of a warrant agent (as hereinafter described) and shall accept, in
its own name for the account of the Company or such successor person as may be
entitled thereto, all amounts otherwise payable to the Company or such
successor, as the case may be, on exercise of this Warrant pursuant to this
Section 1.
2. Procedure for Exercise.
2.1 Delivery of Stock Certificates, Etc., on Exercise. The Company
agrees that the shares of Common Stock purchased upon exercise of this Warrant
shall be deemed to be issued to the Holder as the record owner of such shares as
of the close of business on the date on which this Warrant shall have been
surrendered together with the Form of Exercise duly completed and executed and
payment made for such shares in accordance herewith. As soon as practicable
after the exercise of this Warrant in full or in part, and in any event within
three (3) business days thereafter, the Company at its expense (including the
payment by it of any applicable issue taxes) will cause to be issued in the name
of and delivered to the Holder, or as such Holder (upon payment by such Holder
of any applicable transfer taxes) may direct in compliance with applicable
securities laws, a certificate or certificates for the number of duly and
validly issued, fully paid and nonassessable shares of Common Stock (or Other
Securities) to which such Holder shall be entitled on such exercise, plus, in
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lieu of any fractional share to which such holder would otherwise be entitled,
cash equal to such fraction multiplied by the then Fair Market Value of one full
share, together with any other stock or other securities and property (including
cash, where applicable) to which such Holder is entitled upon such exercise
pursuant to Section 1 or otherwise.
2.2 Exercise. Payment may be made either (i) in cash or by certified
or official bank check payable to the order of the Company equal to the
applicable aggregate Exercise Price, or (ii) by wire transfer of immediately
available funds, (iii) by delivery of the Warrant, or shares of Common Stock
and/or Common Stock receivable upon exercise of the Warrant in accordance with
Section (b) below, or (iv) by a combination of any of the foregoing methods, for
the number of Common Shares specified in such Exercise Notice (as such exercise
number shall be adjusted to reflect any adjustment in the total number of shares
of Common Stock issuable to the Holder per the terms of this Warrant) and the
Holder shall thereupon be entitled to receive the number of duly authorized,
validly issued, fully-paid and non-assessable shares of Common Stock (or Other
Securities) determined as provided herein. Notwithstanding any provisions herein
to the contrary, if the Fair Market Value of one share of Common Stock is
greater than the Exercise Price (at the date of calculation as set forth below),
in lieu of exercising this Warrant for cash, the Holder may elect to receive
shares equal to the value (as determined below) of this Warrant (or the portion
thereof being exercised) by surrender of this Warrant at the principal office of
the Company together with the properly endorsed Exercise Notice in which event
the Company shall issue to the Holder a number of shares of Common Stock
computed using the following formula:
X=Y (A-B)
-----
A
Where X = the number of shares of Common Stock to be issued to the Holder
Y = the number of shares of Common Stock purchasable under the Warrant
or, if only a portion of the Warrant is being exercised, the portion
of the Warrant being exercised (at the date of such calculation)
A = the Fair Market Value of one share of the Company's Common Stock
(at the date of such calculation)
B = Exercise Price (as adjusted to the date of such calculation)
Notwithstanding the foregoing, no more than fifty percent (50%) of the shares of
Common Stock purchasable upon the exercise of this Warrant may be acquired
pursuant to a "cashless exercise" pursuant to Section 2.2(iii) above.
3. Effect of Reorganization, Etc.; Adjustment of Exercise Price.
3.1 Reorganization, Consolidation, Merger, Etc. In case at any time
or from time to time, the Company shall (a) effect a reorganization, (b)
consolidate with or merge into any other person, or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then, in each such
case, as a condition to the consummation of such a transaction, proper and
adequate provision shall be made by the Company whereby the Holder of this
Warrant, on the exercise hereof as provided in Section 1 at any time after the
consummation of such reorganization, consolidation or merger or the effective
date of such dissolution, as the case may be, shall receive, in lieu of the
Common Stock (or Other Securities) issuable on such exercise prior to such
consummation or such effective date, the stock and other securities and property
(including cash) to which such Holder would have been entitled upon such
consummation or in connection with such dissolution, as the case may be, if such
Holder had so exercised this Warrant, immediately prior thereto, all subject to
further adjustment thereafter as provided in Section 4.
3.2 Dissolution. In the event of any dissolution of the Company
following the transfer of all or substantially all of its properties or assets,
the Company, concurrently with any distributions made to holders of its Common
Stock, shall at its expense deliver or cause to be delivered to the Holder the
stock and other securities and property (including cash, where applicable)
receivable by the Holder of the Warrant pursuant to Section 3.1, or, if the
Holder shall so instruct the Company, to a bank or trust company specified by
the Holder as trustee for the Holder of the Warrant (the "Trustee").
4
3.3 Continuation of Terms. Upon any reorganization, consolidation,
merger or transfer (and any dissolution following any transfer) referred to in
this Section 3, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in the
case of any such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided in Section 4. In the
event this Warrant does not continue in full force and effect after the
consummation of the transactions described in this Section 3, then the Company's
securities and property (including cash, where applicable) receivable by the
Holders of the Warrant will be delivered to Holder or the Trustee as
contemplated by Section 3.2.
4. Extraordinary Events Regarding Common Stock.
4.1 Stock Dividends. In the event that the Company shall (a) issue
additional shares of the Common Stock as a dividend or other distribution on
outstanding Common Stock, (b) subdivide its outstanding shares of Common Stock,
or (c) combine its outstanding shares of the Common Stock into a smaller number
of shares of the Common Stock, then, in each such event, the Exercise Price
shall, simultaneously with the happening of such event, be adjusted by
multiplying the then Exercise Price by a fraction, the numerator of which shall
be the number of shares of Common Stock outstanding immediately prior to such
event and the denominator of which shall be the number of shares of Common Stock
outstanding immediately after such event, and the product so obtained shall
thereafter be the Exercise Price then in effect. The Exercise Price, as so
adjusted, shall be readjusted in the same manner upon the happening of any
successive event or events described herein in this Section 4.
4.2 Share Issuances. If the Company shall at any time prior to the
expiration of this Warrant issue any shares of Common Stock or securities
convertible into Common Stock to a person other than the Holder for a
consideration per share (the "Offer Price"), less than the Exercise Price in
effect at the time of such issuance, then the Exercise Price shall be
immediately reset to such lower Offer Price. The Exercise Price, as so adjusted,
shall be readjusted in the same manner upon the happening of any successive
event or events described herein in this Section 4.2. Notwithstanding the
foregoing, no adjustment will be made under this Section 4 in respect of any
Excluded Stock. Excluded Stock" means any shares of Common Stock or Common Stock
equivalents issued or issuable to the persons and entities described on Schedule
4.3 of the Securities Purchase Agreement. This exclusion shall not apply to any
future issuances of Common Stock unless issued to one of the named individuals
or entities on such Schedule.
5
4.3 EBITDA Adjustment. In the event the Borrower's EBITDA for its
calendar quarter ended September 30, 2006 is not at least $5,000,000, the
Exercise Price shall be reset as of September 30, 2006 to the closing price of
the Common Stock on the Principal Market on the last trading day in such
calendar quarter, if such closing price is less than the Exercise Price in
effect on such last trading day.
4.4 Number of Shares Adjusted.
(a) The number of shares of Common Stock that the holder of this Warrant
shall be entitled to receive upon exercise of this Warrant after the occurrence
of any issuance or event specified in Section 4.1, Section 4.2 and Section 4.3
shall be increased to a number determined by multiplying the number of shares of
Common Stock that would otherwise (but for the provisions of this Section 4.4)
be issuable on such exercise by a fraction of which (i) the numerator is the
Exercise Price that would otherwise (but for the provisions of Section 4.1,
Section 4.2 or Section 4.3 (as applicable)) be in effect, and (ii) the
denominator is the Exercise Price in effect on the date of such exercise.
(b) If the Securities and Exchange Commission has not declared the
Registration Statement (as defined in the Registration Rights Agreement between
Holder and the Company to be entered into concurrently with the issuance of this
Warrant) effective in accordance with the time period set forth in Section 2(b)
of the Registration Rights Agreement, the number of shares of Common Stock that
the holder of this Warrant shall be entitled to receive upon exercise of this
Warrant shall be increased by 20,000 shares for each thirty (30) day period of
delay (prorated for partial periods) at the Exercise Price in effect immediately
prior to such increase.
5. Certificate as to Adjustments. In each case of any adjustment or
readjustment in the Exercise Price or the shares of Common Stock (or Other
Securities) issuable on the exercise of the Warrant, the Company at its expense
will promptly cause its Chief Financial Officer or other appropriate designee to
compute such adjustment or readjustment in accordance with the terms of the
Warrant and prepare a certificate setting forth such adjustment or readjustment
and showing in detail the facts upon which such adjustment or readjustment is
based, including a statement of (a) the consideration received or receivable by
the Company for any additional shares of Common Stock (or Other Securities)
issued or sold or deemed to have been issued or sold, (b) the number of shares
of Common Stock (or Other Securities) outstanding or deemed to be outstanding,
and (c) the Exercise Price and the number of shares of Common Stock to be
received upon exercise of this Warrant, in effect immediately prior to such
adjustment or readjustment and as adjusted or readjusted as provided in this
Warrant. The Company will forthwith mail a copy of each such certificate to the
holder of the Warrant and any Warrant agent of the Company (appointed pursuant
to Section 10 hereof).
6
6. Reservation of Stock, Etc., Issuable on Exercise of Warrant. The
Company will at all times reserve and keep available, solely for issuance and
delivery on the exercise of the Warrant, shares of Common Stock (or Other
Securities) from time to time issuable on the exercise of the Warrant.
7. Assignment; Exchange of Warrant. Subject to compliance with applicable
securities laws, this Warrant, and the rights evidenced hereby, may be
transferred by any registered holder hereof (a "Transferor") in whole or in
part. On the surrender for exchange of this Warrant, with the Transferor's
endorsement in the form of Exhibit B attached hereto (the "Transferor
Endorsement Form") and together with evidence reasonably satisfactory to the
Company demonstrating compliance with applicable securities laws, which shall
include, without limitation, a legal opinion from the Transferor's counsel (at
the Company's expense) that such transfer is exempt from the registration
requirements of applicable securities laws, the Company at its expense (but with
payment by the Transferor of any applicable transfer taxes) will issue and
deliver to or on the order of the Transferor thereof a new Warrant of like
tenor, in the name of the Transferor and/or the transferee(s) specified in such
Transferor Endorsement Form (each a "Transferee"), calling in the aggregate on
the face or faces thereof for the number of shares of Common Stock called for on
the face or faces of the Warrant so surrendered by the Transferor.
Notwithstanding the foregoing, any transfer in whole or in part to a lineal
descendant of ▇▇▇▇▇▇ ▇. and ▇▇▇▇ ▇▇▇▇▇▇▇▇ and their affiliates as contemplated
by the Securities Purchase Agreement between the Company and the original Holder
of this Warrant shall be approved without delivery of any legal opinion or other
condition.
8. Replacement of Warrant. On 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 of this Warrant, on
delivery of an indemnity agreement or security reasonably satisfactory in form
and amount to the Company or, in the case of any such mutilation, on surrender
and cancellation of this Warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
9. Registration Rights. The Holder of this Warrant has been granted
certain registration rights by the Company. These registration rights are set
forth in a Registration Rights Agreement entered into by the Company and
Purchaser dated as of even date of this Warrant.
10. Warrant Agent. The Company may, by written notice to the each Holder
of the Warrant, appoint an agent for the purpose of issuing Common Stock (or
Other Securities) on the exercise of this Warrant pursuant to Section 1,
exchanging this Warrant pursuant to Section 7, and replacing this Warrant
pursuant to Section 8, or any of the foregoing, and thereafter any such
issuance, exchange or replacement, as the case may be, shall be made at such
office by such agent.
7
11. Transfer on the Company's Books. Until this Warrant is transferred on
the books of the Company, the Company may treat the registered holder hereof as
the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.
12. Notices, Etc. All notices and other communications from the Company to
the Holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such Holder or, until any such Holder furnishes to the
Company an address, then to, and at the address of, the last Holder of this
Warrant who has so furnished an address to the Company.
13. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be governed by and construed in accordance with
the laws of State of Florida without regard to principles of conflicts of laws.
Any action brought concerning the transactions contemplated by this Warrant
shall be brought only in the state courts of Florida or in the federal courts
located in the State of Florida; provided, however, that the Holder may choose
to waive this provision and bring an action outside the State of Florida. The
individuals executing this Warrant on behalf of the Company agree to submit to
the jurisdiction of such courts and waive trial by jury. The prevailing party
shall be entitled to recover from the other party its reasonable attorney's fees
and costs. In the event that any provision of this Warrant is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of this Warrant.
The headings in this Warrant are for purposes of reference only, and shall not
limit or otherwise affect any of the terms hereof. The invalidity or
unenforceability of any provision hereof shall in no way affect the validity or
enforceability of any other provision hereof. The Company acknowledges that
legal counsel participated in the preparation of this Warrant and, therefore,
stipulates that the rule of construction that ambiguities are to be resolved
against the drafting party shall not be applied in the interpretation of this
Warrant to favor any party against the other party.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK;
SIGNATURE PAGE FOLLOWS.]
8
IN WITNESS WHEREOF, the Company has executed this Warrant as of the date
first written above.
AGU Entertainment Corp., a Delaware corporation
By:/s/ ▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇, President and Secretary
9
EXHIBIT A
FORM OF SUBSCRIPTION
(To Be Signed Only On Exercise Of Warrant)
TO: AGU Entertainment Corp.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
The undersigned, pursuant to the provisions set forth in the attached
Warrant (No.____), hereby irrevocably elects to purchase (check applicable box):
________ ________ shares of the Common Stock covered by such Warrant; or
________ the maximum number of shares of Common Stock covered by such Warrant
pursuant to the cashless exercise procedure set forth in Section 2.
The undersigned herewith makes payment of the full Exercise Price for such
shares at the price per share provided for in such Warrant, which is
$___________. Such payment takes the form of (check applicable box or boxes):
________ $__________ in lawful money of the United States; and/or
________ the cancellation of such portion of the attached Warrant as is
exercisable for a total of _______ shares of Common Stock (using a Fair
Market Value of $_______ per share for purposes of this calculation);
and/or
________ the cancellation of such number of shares of Common Stock as is
necessary, in accordance with the formula set forth in Section 2.2, to
exercise this Warrant with respect to the maximum number of shares of
Common Stock purchasable pursuant to the cashless exercise procedure set
forth in Section 2.
The undersigned requests that the certificates for such shares be issued in the
name of, and delivered to ____________________________________________ whose
address is ____________________________________________.
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933, as amended (the "Securities Act") or pursuant to an exemption from
registration under the Securities Act.
Dated:
------------------------- ----------------------------------------------
(Signature must conform to name of holder as
specified on the face of the Warrant)
Address:
--------------------------------------
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EXHIBIT B
FORM OF TRANSFEROR ENDORSEMENT
(To Be Signed Only On Transfer Of Warrant)
For value received, the undersigned hereby sells, assigns, and transfers
unto the person(s) named below under the heading "Transferees" the right
represented by the within Warrant to purchase the percentage and number of
shares of Common Stock of AGU Entertainment Corp. into which the within Warrant
relates specified under the headings "Percentage Transferred" and "Number
Transferred," respectively, opposite the name(s) of such person(s) and appoints
each such person Attorney to transfer its respective right on the books of AGU
Entertainment Corp. with full power of substitution in the premises.
Percentage Number
Transferees Address Transferred Transferred
------------ ---------- ----------------- -----------
------------ ---------- ----------------- -----------
------------ ---------- ----------------- -----------
------------ ---------- ----------------- -----------
Dated
---------------------------- --------------------------------------------
(Signature must conform to name of holder as
specified on the face of the Warrant)
Address:
------------------------------------
------------------------------------
SIGNED IN THE PRESENCE OF:
--------------------------------------------
(Name)
ACCEPTED AND AGREED:
[TRANSFEREE]
-----------------------------
(Name)
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