COMMON STOCK OPTION
NEITHER THIS OPTION NOR THE SECURITIES ISSUABLE UPON EXERCISE THEREOF
HAVE BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE OR CANADIAN
PROVINCE, OR UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). THIS OPTION IS RESTRICTED AND MAY NOT BE OFFERED, RESOLD,
PLEDGED OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT OR AN EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS.
Void after October 1, 2004 Right to Purchase 1,200,000 shares of
Common Stock (subject to adjustment)
PREAMBLE
Western Media Group Corporation, a Minnesota corporation (the
"Company"), hereby certifies that, for value received, ___, the holder hereof
(the "Holder"), is entitled, subject to the terms set forth below, to purchase
from the Company at any time or from time to time before 5:00 P.M. New York
time, on October 1, 2004, fully paid and nonassessable shares of the Company's
$.001 par value per share common stock (the "Common Stock"). The purchase price
per share (the "Purchase Price") shall be, in the event of a purchase at any
time during the period commencing on the date hereof and ending on October 1,
2004, $.02. The number of shares of Common Stock and the amount of the Purchase
Price are subject to adjustment as provided herein.
This option is the "Option" (this "Option"), evidencing the right to
purchase shares of Common Stock of the Company, issued pursuant to that certain
Consulting Agreement dated as of October 1, 2001 (the "Consulting Agreement"),
between the Company and the Holder. Capitalized terms used and not otherwise
defined herein shall have the meanings set forth for such terms in the
Consulting Agreement. This Option evidences the right to purchase an aggregate
of 1,200,000 shares of Common Stock of the Company, subject to adjustment as
provided in this Option.
As used herein, the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "Company" includes any corporation which shall
succeed to or assume the obligations of the Company hereunder.
(b) The term "Common Stock" includes all stock of any class or
classes (however designated) of the Company, authorized on or after the date
hereof, the holders of which shall have the right, without limitation as to
amount, either to all or to a share of the balance of current dividends and
liquidating dividends after the payment of dividends and distributions on any
shares entitled to preference, and the holders of which shall ordinarily, in the
absence of contingencies, be entitled to vote for the election of a majority of
directors of the Company (even though the right so to vote has been suspended by
the happening of such a contingency).
(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 this Option at any time shall be
entitled to receive, or shall have received, on the exercise of this Option, 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 6 or otherwise.
(d) The term "Registration Statement" means any registration
statement of the Company filed or to be filed with the SEC which covers any of
the Registrable Securities pursuant to the provisions of this Option, including
all amendments (including post-effective amendments) and supplements thereto,
all exhibits thereto and all material incorporated therein by reference.
(e) The term "SEC," "Securities and Exchange Commission" or
"Commission" refers to the Securities and Exchange Commission or any other
federal agency then administering the Securities Act.
(f) The term "Shares" means the Common Stock issued or
issuable upon exercise of this Option.
(g) The term "Securities Act" means the Securities Act of
1933, as amended, or any successor federal statute, and the rules and
regulations of the Securities and Exchange Commission thereunder, all as the
same shall be in effect at the time.
(h) The term "Securities Exchange Act" means the Securities
Exchange Act of 1934, as amended, or any successor federal statute, and the
rules and regulations of the Securities and Exchange Commission thereunder, all
as the same shall be in effect at the time.
1. RESTRICTED STOCK.
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1.1 If, at the time of any transfer or exchange (other than a transfer
or exchange not involving a change in the beneficial ownership of this Option or
the Shares) of this Option or the Shares, this Option or the Shares shall not be
registered under the Securities Act, the Company will require, as a condition of
allowing such transfer or exchange, that the Holder or transferee of this Option
or the Shares, as the case may be, furnish to the Company an opinion of counsel
reasonably acceptable to the Company or a "no action" or similar letter from the
Securities and Exchange Commission to the effect that such exercise transfer or
exchange may be made without registration under the Securities Act. In the case
of such transfer or exchange and in the case of an exercise of this Option if
the Shares to be issued thereupon are not registered pursuant to the Securities
Act, the Company will require a written statement that this Option or the
Shares, as the case may be, are being acquired for investment and not with a
view to the distribution thereof. The certificates evidencing the Shares issued
on the exercise of this Option shall, if such Shares are being sold or
transferred without registration under the Securities Act, bear a legend similar
to the legend on the face page of this Common Stock Purchase Option.
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1.2 (a) The Company shall make and keep public information available,
as those terms are understood and defined in Rule 144 under the Securities Act,
at all times from and after 90 days following the effective date of the first
registration of the Company under the Securities Act of an offering of its
securities to the general public.
(b) The Company shall file with the Commission in a timely manner all
required reports and other documents as the Commission may prescribe under
Section 13(a) or 15(d) of the Exchange Act.
(c) The Company shall furnish to the Holder of this Option or the
Shares designated by the Holder, forthwith upon request, (i) a written statement
by the Company as to its compliance with the reporting requirements under the
Securities Act (at any time from and after 90 days following the effective date
of the first registration statement of the Company for an offering of its
securities to the general public) and of the reporting requirements of the
Exchange Act, (ii) a copy of the most recent annual or quarterly report of the
Company, (iii) any other reports and documents necessary to satisfy the
information-furnishing condition to offers and sales under Rule 144A under the
Securities Act, and (iv) such other reports and documents as the Holder of this
Option or the Shares reasonably requests to avail itself of any rule or
regulation of the Commission allowing the Holder to sell any such securities
without registration.
2. EXERCISE OF OPTION.
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2.1 EXERCISE IN FULL. The Holder of this Option may exercise it in full
by surrendering this Option, with the form of subscription at the end hereof
duly executed by the Holder, to the Company at its principal office. The
surrendered Option shall be accompanied by payment, in cash or by certified or
official bank check payable to the order of the Company, in the amount obtained
by multiplying the number of shares of Common Stock called for on the face of
this Option by the applicable Purchase Price.
2.2 PARTIAL EXERCISE. This Option may be exercised in part by surrender
of this Option in the manner and at the place provided in Subsection 2.1 except
that the amount of Common Stock obtained through the exercise shall be
calculated by multiplying (a) the number of shares of Common Stock called for on
the face of this Option as shall be designated by the Holder in the subscription
at the end hereof by (b) the Purchase Price. On any such partial exercise,
subject to the provisions of Section 2 hereof, the Company at its expense will
forthwith issue and deliver to, or upon the order of the Holder, a new Option or
Options of like tenor, in the name of the Holder, calling in the aggregate on
the face or faces thereof, for the number of shares of Common Stock equal to the
number of such shares called for on the face of this Option minus the number of
such shares designated by the Holder in the subscription at the end hereof.
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2.3 COMPANY ACKNOWLEDGMENT. The Company will, at the time of the
exercise, exchange or transfer of this Option, upon the request of the Holder
acknowledge in writing its continuing obligation to afford to the Holder any
rights (including, without limitation, any right to registration of the Shares)
to which the Holder shall continue to be entitled after such exercise or
exchange in accordance with the provisions of this Option. If the Holder of this
Option shall fail to make any such request, such failure shall not affect the
continuing obligation of the Company to afford to the Holder any such rights.
3. DELIVERY OF STOCK CERTIFICATES, ETC., ON EXERCISE. As soon as
practicable after the exercise of this Option, in full or in part, and in any
event within ten business (10) 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, a certificate or certificates
for the number of fully paid and nonassessable Shares to which the Holder shall
be entitled on such exercise. No fractional Share or scrip representing a
fraction of a Share will be issued on exercise, but the number of Shares
issuable shall be rounded to the nearest whole Share.
4. ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC.
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4.1 MERGER, ETC. If 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 (any such
transaction being hereinafter sometimes referred to as a "Reorganization") then,
in each such case, the Holder of this Option, on the exercise hereof as provided
in Section 2 at any time after the consummation or effective date of such
Reorganization (the "Effective Date"), shall receive, in lieu of the Shares
issuable on such exercise prior to such consummation or such effective date, the
stock and other securities and property (including cash) to which the Holder
would have been entitled upon such consummation or in connection with such
dissolution, as the case may be, if the Holder had so exercised this Option,
immediately prior thereto. The successor corporation in any such Reorganization
described in clause (b) or (c) above where the Company will not be the surviving
entity (the "Acquiring Company") must agree prior to such Reorganization in a
writing satisfactory in form and substance to the Holder that this Option 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 exercise
after the consummation of such Reorganization, and shall be binding upon the
issuer of any such stock or other securities (including, in the case of any
transfer of properties or assets referred to above, the person acquiring all or
substantially all of the properties or assets of the Company). If the Acquiring
Company has not so agreed to continue this Option, then the Company shall give
30 days' prior written notice to the Holder of this Option of such
Reorganization, during which 30-day period (the "Notice Period") the Holder at
its option and upon written notice to the Company shall be able to (i) exercise
this Option or any part thereof at an exercise price (the "Discounted Exercise
Price") equal to the then prevailing purchase price hereunder discounted at the
Discount Rate (as used herein the "Discount Rate" shall mean the then prevailing
interest rate on U.S. Treasury Notes issued on (or immediately prior to) the
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date of such 30-day notice and maturing on October 1, 2004 (or immediately prior
thereto), such rate to be compounded annually through October 1, 2004, and in no
event to be less than 10% annually); or (ii) on the Effective Date, the Holder
of this Option shall be paid an amount (the "Merger Profit Amount") equal to the
difference between the fair market value per share of Common Stock of the
Company being purchased by the Acquiring Company in the Reorganization and the
Discounted Exercise Price described in clause (i) above and the Option shall
simultaneously expire. The Merger Profit Amount shall be payable in the same
form as the common stockholders of the Company shall be paid by the Acquiring
Company for their shares of common stock of the Company. The fair market value
of any noncash property received from the Acquiring Company upon the
Reorganization shall be determined in good faith by the Board of Directors of
the Company, as approved by the Company's stockholders.
4.2 DISSOLUTION. Except as otherwise expressly provided in Subsection
5.1, in the event of any dissolution of the Company following the transfer of
all or substantially all of its properties or assets, the Company, prior to such
dissolution, shall at its expense deliver or cause to be delivered the stock and
other securities and property (including cash, where applicable) receivable by
the Holder of this Option after the effective date of such dissolution pursuant
to this Section 4 to a bank or trust company having its principal office in New
York, New York, as trustee for the Holder of this Option.
4.3 CONTINUATION OF TERMS. Except as otherwise expressly provided in
Subsection 4.1, upon any reorganization, consolidation, merger or transfer (and
any dissolution following any transfer) referred to in this Section 4, this
Option 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 Option 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 Option as provided in Section 4.1.
5. NO IMPAIRMENT. The Company will not, by amendment of 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 Option, but will, at all times, in good faith, assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Holders of this
Option against dilution or other impairment. Without limiting the generality of
the foregoing, the Company (a) will not increase the par value of any shares of
stock receivable on the exercise of this Option above the amount payable
therefor on such exercise and (b) will at all times reserve and keep available
out of its authorized capital stock, solely for the purpose of issue upon
exercise of this Option as herein provided, such number of shares of Common
Stock as shall then be issuable upon exercise of this Option in full and shall
take all such action as may be necessary or appropriate in order that all shares
of Common Stock that shall be so issuable shall be duly and validly issued and
fully paid and nonassessable and free from all taxes, liens and charges with
respect to the issue thereof.
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6. NO DILUTION.
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(a) In the event the Company shall pay a share dividend or other
distribution payable in shares of Common Stock, or the issued shares of Common
Stock shall be subdivided, combined or consolidated, by reclassification or
otherwise, into a greater or lesser number of shares of Common Stock, the
Purchase Price in effect immediately prior (and each Purchase Price in effect
subsequent) to such subdivision or combination shall, concurrently with the
effectiveness of such subdivision, combination or consolidation, be
proportionately adjusted. In the case of a share dividend or other distribution
payable in shares of Common Stock such adjustment shall occur as follows: the
Purchase Price that is then in effect (and in effect at any time thereafter)
shall be decreased or increased, as the case may be, as of the time of such
issuance, or in the event a record date is fixed, as of the close of business on
such record date, by multiplying or dividing the Purchase Price, as the case may
be, then (and therefore) in effect by a fraction (1) the numerator of which is
the total number of shares of issued Common Stock immediately prior to the time
of such issuance or the close of business on such record date, as the case may
be, and (2) the denominator of which is the total number of shares of issued
Common Stock immediately prior to the time of such issuance or the close of
business on such record date plus the number of shares of Common Stock issuable
in payment of such dividend or distribution; provided, however, that, if such
record date is fixed and such dividend is not fully paid or if such distribution
is not fully made on the date fixed therefor, the Purchase Price shall be
recomputed accordingly as of the close of business on such record date and
thereafter the Purchase Price shall be adjusted to reflect the actual payment of
such dividend or distribution.
(b) Upon the occurrence of each adjustment of the Purchase Price
pursuant to this Section 6, the Company shall prepare a certificate setting
forth such adjustment and showing in detail the facts upon which such adjustment
is based.
(c) The form of this Option need not be changed because of any change
in the Purchase Price pursuant to this Section 6 and any Option issued after
such change may state the same Purchase Price and the same number of shares of
Common Stock as are stated in this Option as initially issued. However, the
Company may at any time in its sole discretion (which shall be conclusive) make
any change in the form of this Option that it may deem appropriate and that does
not affect the substance thereof. Any Option thereafter issued or countersigned,
whether in exchange or substitution for an outstanding Option or otherwise, may
be in the form as so changed.
(d) In case at any time after the date of this Option:
(i) The Company shall declare a dividend (or any other distribution) on
its shares of Common Stock payable otherwise than in cash out of its earned
surplus; or
(ii) The Company shall authorize any reclassification of the shares of
its Common Stock, or any consolidation or merger to which it is a party and for
which approval of any shareholders of the Company is required, or the sale or
transfer of all or substantially all of its assets or all or substantially all
of its issued and outstanding stock; or
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(iii) Events shall have occurred resulting in the voluntary and
involuntary dissolution, liquidation or winding up of the Company; then the
Company shall cause notice to be sent to the Holder at least twenty (20) days
prior (or ten (10) day prior in any case specified in clause (i) above, or on
the date of any case specified in clause (iii) above) to the applicable record
date hereinafter specified, a notice stating (1) the date on which a record is
to be taken or the purpose of such dividend, distribution or rights, or, if a
record is not to be taken, the date as of which the holders of shares of Common
Stock of record will be entitled to such dividend, distribution or rights are to
be determined or (2) the date on which such reclassification, consolidation,
merger, sale, transfer, initial public offering, dissolution, liquidation or
winding up is expected to become effective, and the date as of which it is
expected that holders of shares of Common Stock or record shall be entitled to
exchange their shares for securities or other property deliverable upon such
reclassification, consolidation, merger, sale transfer, dissolution, liquidation
or winding up. Failure to give any such notice of any defect therein shall not
affect the validity of the proceedings referred to in clauses (i), (ii) and
(iii) above.
7. REPORTING REQUIREMENTS. The Company shall provide written notice
to Holder of any "Ineffective Period," as defined below, within two days of the
commencement of any Ineffective Period. "Ineffective Period" shall mean any
period of time after the effective date of a registration statement covering
this Option or the Shares during the term hereof that such registration
statement or any supplemental or amended registration statement becomes
ineffective or unavailable for use for the sale or resale, as applicable, of any
or all of the Shares for any reason (or in the event the prospectus is not
current and deliverable).
8. REPLACEMENT OF OPTIONS. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Option and, in the case of any such loss, theft or destruction of this
Option, 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 Option, the Company at its
expense will execute and deliver, in lieu thereof, a new Option of like tenor.
9. EXPENSES. The Company agrees to pay any and all stamp, transfer and
other similar taxes payable or determined to be payable in connection with the
execution and delivery of this Option and the issuance of this Option.
10. OPTION AGENT. The Company may, by written notice to the Holder of
this Option, appoint an agent having an office in New York, New York, or U.S.
Stock Transfer Corp. for the purpose of issuing Shares on the exercise of this
Options pursuant to Section 2, exchanging this Option pursuant to Section 6, and
replacing this Option 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.
11. REMEDIES. The Company stipulates that the remedies at law of the
Holder of this Option, in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Option, are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
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12. NEGOTIABILITY, ETC. This Option is issued upon the following terms,
to all of which the Holder or owner hereof, by the taking hereof, consents and
agrees:
(a) title to this Option may be transferred by endorsement (by the
Holder executing the form of assignment at the end hereof) and delivery in the
same manner as in the case of a negotiable instrument transferable by
endorsement and delivery;
(b) any person in possession of this Option, properly endorsed, is
authorized to represent himself as absolute owner hereof and is empowered to
transfer absolute title hereto by endorsement and delivery hereof to a bona fide
purchaser hereof for value; each prior taker or owner waives and renounces all
of his equities or rights in this Option in favor of each such bona fide
purchaser, and each such bona fide purchaser shall acquire absolute title hereto
and to all rights represented hereby; and
(c) until this Option 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.
13. NOTICE, ETC. All notices and other communications from the Company
to the Holder of this Option shall be mailed by first class registered or
certified airmail, postage prepaid, at such address as may have been furnished
to the Company in writing by the Holder.
14. MISCELLANEOUS. This Option 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 Option is being delivered in the State of New York and shall be
construed and enforced in accordance with and governed by its laws. The headings
in this Option are for purposes of reference only, and shall not limit or
otherwise affect any of the terms hereof. This Option is being executed as an
instrument under seal. All nouns and pronouns used herein shall be deemed to
refer to the masculine, feminine or neuter, as the identity of the person or
persons to whom reference is made herein may require.
15. EXPIRATION. The right to exercise this Option shall expire at 5:00
P.M., New York time, on October 1, 2004.
Dated: October 1, 2001 WESTERN MEDIA GROUP CORPORATION
By:________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇
Title: President and Sole Director
ATTACHMENT A
NOTICE OF EXERCISE
(To be Executed by the Registered Holder in order to Exercise the Option)
The undersigned holder hereby irrevocably elects to purchase ____
shares of Common Stock of Western Media Group Corporation (the "Company")
pursuant to the Common Stock Option void after October 1, 2004 issued by the
Company according to the conditions set forth in said warrant and as of the date
set forth below.*
Date of Exercise:
Number of Shares be Purchased: __________________________________________
Applicable Purchase Price:
Signature:
[Name]
Address:
* This original Option must accompany this Notice of Exercise.
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