ANNEX V
TO
SECURITIES PURCHASE AGREEMENT
[PROTOTYPE FOR EACH ISSUANCE]
FORM OF WARRANT
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR
SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
OR AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
CLASS 2004-A2
INFINIUM LABS, INC.
COMMON STOCK PURCHASE WARRANT
1. Issuance. In consideration of good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged by INFINIUM LABS, INC.,
a Delaware corporation (the "Company"), __________________________ or registered
assigns (the "Holder") is hereby granted the right to purchase at any time until
5:00 P.M., New York City time, on the Expiration Date (as defined below),
__________________________ (____________)(1) fully paid and nonassessable shares
of the Company's Common Stock $0.0001 par value (the "Common Stock"), at an
initial exercise price per share (the "Exercise Price") of US$0.266667 per
share, subject to further adjustment as set forth herein. This Warrant is being
issued pursuant to the terms of that certain Securities Purchase Agreement,
dated as of December 23, 2004 (the "Agreement"), to which the Company and Holder
(or Holder's predecessor in interest) are parties. Capitalized terms not
otherwise defined herein shall have the meanings ascribed to them in the
Agreement. This Warrant was originally issued to the Holder or the Holder's
predecessor in interest on _____________, 2004(2) (the "Issue Date").
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(1) Insert number equal to 50% of the number of the Maximum Issue Date
Conversion Shares.
(2) Insert the Closing Date.
2. Exercise of Warrants.
2.1 General.
(a) This Warrant is exercisable in whole or in part at any time
and from time to time commencing on the Commencement Date (as defined below).
Such exercise shall be effectuated by submitting to the Company (either by
delivery to the Company or by facsimile transmission as provided in Section 9
hereof) a completed and duly executed Notice of Exercise (substantially in the
form attached to this Warrant Certificate) as provided in the Notice of Exercise
(or revised by notice given by the Company as contemplated by the Section headed
"NOTICES" in the Agreement). The date such Notice of Exercise is faxed to the
Company shall be the "Exercise Date," provided that, if such exercise represents
the full exercise of the outstanding balance of the Warrant, the Holder of this
Warrant tenders this Warrant Certificate to the Company within five (5) business
days thereafter. The Notice of Exercise shall be executed by the Holder of this
Warrant and shall indicate the number of shares then being purchased pursuant to
such exercise.
(b) The Exercise Price per share of Common Stock for the shares
then being exercised shall be payable to the Company in cash or by certified or
official bank check or by wire transfer in accordance with instructions provided
by the Company at the request of the Holder.
(c) Upon the appropriate payment of the Exercise Price for the
shares of Common Stock purchased, together with the surrender of this Warrant
Certificate (if required), the Holder shall be entitled to receive a certificate
or certificates for the shares of Common Stock so purchased. The Company shall
deliver such certificates representing the Warrant Shares in accordance with the
instructions of the Holder as provided in the Notice of Exercise within three
Trading Days of the later of the Exercise Date or the date the payment of the
Exercise Price for the relevant Warrant Shares is received by the Company.
(d) The Holder shall be deemed to be the holder of the shares
issuable to it in accordance with the provisions of this Section 2.1 on the
Exercise Date.
2.2 Limitation on Exercise. Notwithstanding the provisions of this
Warrant, the Agreement or of the other Transact ion Agreements, in no event
(except (i) as specifically provided in this Warrant as an exception to this
provision, (ii) during the forty-five (45) day period prior to the Expiration
Date, or (iii) while there is outstanding a tender offer for any or all of the
shares of the Company's Common Stock) shall the Holder be entitled to exercise
this Warrant, or shall the Company have the obligation to issue shares upon such
exercise of all or any portion of this Warrant to the extent that, after such
exercise the sum of (1) the number of shares of Common Stock beneficially owned
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by the Holder and its affiliates (other than shares of Common Stock which may be
deemed beneficially owned through the ownership of the unexercised portion of
the Warrants or other rights to purchase Common Stock or through the ownership
of the unconverted portion of convertible securities), and (2) the number of
shares of Common Stock issuable upon the exercise of the Warrants with respect
to which the determination of this proviso is being made, would result in
beneficial ownership by the Holder and its affiliates of more than 4.99% of the
outstanding shares of Common Stock (after taking into account the shares to be
issued to the Holder upon such exercise). For purposes of the proviso to the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "1934 Act"), except as otherwise provided in clause (1) of such sentence.
The Holder, by its acceptance of this Warrant, further agrees that if the Holder
transfers or assigns any of the Warrants to a party who or which would not be
considered such an affiliate, such assignment shall be made subject to the
transferee's or assignee's specific agreement to be bound by the provisions of
this Section 2.2 as if such transferee or assignee were the original Holder
hereof.
2.3 Commencement Date and Expiration Date.
(a) The term "Commencement Date" means the earlier of (i) the date
which is sixty-five (65) days after the Issue Date, or (ii) the Effective Date.
(b) The term "Expiration Date" means [__________], 2009.(3)
3. Reservation of Shares. The Company hereby agrees that at all times
during the term of this Warrant there shall be reserved for issuance upon
exercise of this Warrant one hundred ten percent (110%) of the Warrant Shares.
4. Mutilation or Loss of Warrant. Upon receipt by the Company of
evidence satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) receipt of
reasonably satisfactory indemnification, and (in the case of mutilation) upon
surrender and cancellation of this Warrant, the Company will execute and deliver
a new Warrant of like tenor and date and any such lost, stolen, destroyed or
mutilated Warrant shall thereupon become void.
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(3) Insert date which is the last calendar day of the month in which the fifth
anniversary of the Closing Date occurs.
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5. Rights of the Holder. The Holder shall not, by virtue hereof, be
entitled to any rights of a stockholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in this Warrant and
are not enforceable against the Company except to the extent set forth herein.
6. Protection Against Dilution and Other Adjustments.
6.1 Adjustment Mechanism. If an adjustment of the Exercise Price
is required pursuant to this Section 6, the Holder shall be entitled to purchase
such number of shares of Common Stock as will cause (i) (x) the total number of
shares of Common Stock Holder is entitled to purchase pursuant to this Warrant
following such adjustment, multiplied by (y) the adjusted Exercise Price per
share, to equal the result of (ii) (x) the dollar amount of the total number of
shares of Common Stock Holder is entitled to purchase before adjustment,
multiplied by (y) the total Exercise Price before adjustment.(4)
6.2 Capital Adjustments. In case of any stock split or reverse
stock split, stock dividend, reclassificat ion of the Common Stock,
recapitalization, merger or consolidation (where the Company is not the
surviving entity), the provisions of this Section 6 shall be applied as if such
capital adjustment event had occurred immediately prior to the date of this
Warrant and the original Exercise Price had been fairly allocated to the stock
resulting from such capital adjustment; and in other respects the provisions of
this Section shall be applied in a fair, equitable and reasonable manner so as
to give effect, as nearly as may be, to the purposes hereof. A rights offering
to stockholders shall be deemed a stock dividend to the extent of the bargain
purchase element of the rights.
6.3 Adjustment for Spin Off. If, for any reason, prior to the
exercise of this Warrant in full, the Company spins off or otherwise divests
itself of a material part of its business or operations or disposes all or of a
part of its assets in a transaction (the "Spin Off") in which the Company does
not receive compensation for such business, operations or assets, but causes
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(4) Example: Assume 10,000 shares remain under Warrant at original stated
Exercise Price of US$0.266667. Total exercise price (clause (y) in text)
is (i) 10,000 x (ii) US$0.266667, or US$2,666.66. Company effects 2:1
stock split. Exercise Price is adjusted to US$0.133333. Number of shares
covered by Warrant is adjusted to 20,000, because (applying clause (x) in
text) (i) 20,000 x (ii) US$0.133333 = US$2,666.66.
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securities of another entity (the "Spin Off Securities") to be issued to
security holders of the Company, then the Company shall cause (i) to be reserved
Spin Off Securities equal to the number thereof which would have been issued to
the Holder had all of the Holder's unexercised Warrants outstanding on the
record date (the "Record Date") for determining the amount and number of Spin
Off Securities to be issued to security holders of the Company (the "Outstanding
Warrants") been exercised as of the close of business on the Trading Day
immediately before the Record Date (the "Reserved Spin Off Shares"), and (ii) to
be issued to the Holder on the exercise of all or any of the Outstanding
Warrants, such amount of the Reserved Spin Off Shares equal to (x) the Reserved
Spin Off Shares, multiplied by (y) a fraction, of which (I) the numerator is the
amount of the Outstanding Warrants then being exercised, and (II) the
denominator is the amount of the Outstanding Warrants.
6.4 Adjustment for Certain Transactions. Reference is made to the
provisions of Section 4(g) of the Agreement, the terms of which are incorporated
herein by reference. The number of shares covered by this Warrant and the
Exercise Price shall be adjusted as provided in the applicable provisions of
said Section 4(g) of the Agreement.
7. Transfer to Comply with the Securities Act; Registration Rights.
7.1 Transfer. This Warrant has not been registered under the
Securities Act of 1933, as amended, (the "Act") and has been issued to the
Holder for investment and not with a view to the distribution of either the
Warrant or the Warrant Shares. Neither this Warrant nor any of the Warrant
Shares or any other security issued or issuable upon exercise of this Warrant
may be sold, transferred, pledged or hypothecated in the absence of an effective
registration statement under the Act relating to such security or an opinion of
counsel satisfactory to the Company that registration is not required under the
Act. Each certificate for the Warrant, the Warrant Shares and any other security
issued or issuable upon exercise of this Warrant shall contain a legend on the
face thereof, in form and substance satisfactory to counsel for the Company,
setting forth the restrictions on transfer contained in this Section.
7.2 Registration Rights.
(a) Reference is made to the Registration Rights Agreement. The
Company's obligations under the Registration Rights Agreement and the other
terms and conditions thereof with respect to the Warrant Shares, including, but
not necessarily limited to, the Company's commitment to file a registration
statement including the Warrant Shares, to have the registration of the Warrant
Shares completed and effective, and to maintain such registration, are
incorporated herein by reference.
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(b) In addition to the registration rights referred to in the
preceding provisions of Section 7.2(a), effective after the expiration of the
effectiveness of the Registration Statement as contemplated by the Registration
Rights Agreement, the Holder shall have piggy-back registration rights with
respect to the Warrant Shares then held by the Holder or then subject to
issuance upon exercise of this Warrant (collectively, the "Remaining Warrant
Shares"), subject to the conditions set forth below. If, at any time after the
Registration Statement has ceased to be effective, the Company participates
(whether voluntarily or by reason of an obligation to a third party) in the
registration of any shares of the Company's stock (other than a registration on
Form S-8 or on Form S-4), the Company shall give written notice thereof to the
Holder and the Holder shall have the right, exercisable within ten (10)
business days after receipt of such notice, to demand inclusion of all or a
portion of the Holder's Remaining Warrant Shares in such registration statement.
If the Holder exercises such election, the Remaining Warrant Shares so
designated shall be included in the registration statement at no cost or expense
to the Holder (other than any costs or commissions which would be borne by the
Holder under the terms of the Registration Rights Agreement). The Holder's
rights under this Section 7 shall expire at such time as the Holder can sell
all of the Remaining Warrant Shares under Rule 144 without volume or other
restrictions or limit.
8. Buy-In Amount.
(a) If, by the relevant Warrant Share Delivery Date, the Company fails
for any reason to deliver the relevant Warrant Share Certificates, and after
such Warrant Share Delivery Date, the Holder who has exercised this Warrant (an
"Exercising Holder") purchases, in an arm's-length open market transaction or
otherwise, shares of Common Stock (the "Covering Shares") in order to make
delivery in satisfaction of a sale of Common Stock by the Exercising Holder
(the "Sold Shares"), which delivery such Exercising Holder anticipated to make
using the shares to be issued upon such exercise (a "Buy-In"), the Exercising
Holder shall have the right to require the Company to pay to the Exercising
Holder, in addition to and not in lieu of all other amounts contemplated in
other provisions of the Transaction Agreements, the Warrant Share Buy-In
Adjustment Amount (as defined below). The Company shall pay the Warrant Share
Buy-In Adjustment Amount to the Exercising Holder in immediately available
funds immediately upon demand by the Exercising Holder.
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(b) The term "Warrant Share Buy-In Adjustment Amount" means the amount
equal to the excess, if any, of (i) the Exercising Holder's total purchase price
(including brokerage commissions, if any) for the Covering Shares over (ii) the
net proceeds (after brokerage commissions, if any) received by the Exercising
Holder from the sale of the Sold Shares. By way of illustration and not in
limitation of the foregoing, if the Exercising Holder purchases shares of Common
Stock having a total purchase price (including brokerage commissions) of $11,000
to cover a Buy-In with respect to shares of Common Stock it sold for net
proceeds of $10,000, the Warrant Share Buy-In Adjustment Amount which the
Company will be required to pay to the Exercising Holder will be $1,000.
9. Notices. Any notice required or permitted hereunder shall be given
in manner provided in the Section headed "NOTICES" in the Agreement, the terms
of which are incorporated herein by reference.
10. Supplements and Amendments; Whole Agreement. This Warrant may be
amended or supplemented only by an instrument in writing signed by the parties
hereto. This Warrant contains the full understanding of the parties hereto with
respect to the subject matter hereof and thereof and there are no
representations, warranties, agreements or understandings other than expressly
contained herein and therein.
11. Governing Law.
(a) This Warrant shall be governed by and construed in accordance with
the laws of the State of New York for contracts to be wholly performed in such
state and without giving effect to the principles thereof regarding the conflict
of laws. Each of the parties consents to the exclusive jurisdiction of the
federal courts whose districts encompass any part of the County of New York or
the state courts of the State of New York sitting in the County of New York in
connection with any dispute arising under this Warrant and hereby waives, to the
maximum extent permitted by law, any objection, including any objection based on
forum non coveniens, to the bringing of any such proceeding in such
jurisdictions or to any claim that such venue of the suit, action or proceeding
is improper. To the extent determined by such court, the Company shall reimburse
the Holder for any reasonable legal fees and disbursements incurred by the
Holder in enforcement of or protection of any of its rights under this Warrant.
Nothing in this Section shall affect or limit any right to serve process in any
other manner permitted by law.
(b) The Company and the Holder acknowledge and agree that irreparable
damage would occur in the event that any of the provisions of this Warrant were
not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent or cure breaches of the provisions of this
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Warrant and to enforce specifically the terms and provisions hereof, this being
in addition to any other remedy to which any of them may be entitled by law or
equity.
12. JURY TRIAL WAIVER. The Company and the Holder hereby waive a trial
by jury in any action, proceeding or counterclaim brought by either of the
Parties hereto against the other in respect of any matter arising out or in
connection with this Warrant.
13. Remedies. The Company stipulates that the remedies at law of the
Holder of this Warrant 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
Warrant are not and will not be adequate and that, to the fullest extent
permitted by law, 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.
14. Counterparts. This Warrant may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
[Balance of page intentionally left blank]
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15. Descriptive Headings. Descriptive headings of the several Sections
of this Warrant are inserted for convenience only and shall not control or
affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of
the _______ day of _____________________________, 200__.
INFINIUM LABS, INC.
By:____________________________
_______________________________
(Print Name)
_______________________________
(Title)
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NOTICE OF EXERCISE OF WARRANT
TO: INFINIUM LABS, INC. VIA TELECOPIER TO:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ (941)917-0782
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: President
The undersigned hereby irrevocably elects to exercise the right,
represented by the Class 2004-A Common Stock Purchase Warrant, dated as of
________________, 20___, to purchase shares of the Common Stock, $0.0001 par
value ("Common Stock"), of INFINIUM LABS, INC. and tenders herewith payment in
accordance with Section 2 of said Common Stock Purchase Warrant.
[ ] CASH: US$___________________________ = (Exercise Price x Exercise Shares)
Payment is being made by:
[ ] enclosed check
[ ] wire transfer
[ ] other_____________________
It is the intention of the Holder to comply with the provisions of Section
2.2 of the Warrant regarding certain limits on the Holder's right to exercise
thereunder. Based on the analysis on the attached Worksheet Schedule, the Holder
believe this exercise complies with the provisions of said Section 2.2.
Nonetheless, to the extent that, pursuant to the exercise effected hereby, the
Holder would have more shares than permitted under said Section, this notice
should be amended and revised, ab initio, to refer to the exercise which would
result in the issuance of shares consistent with such provision. Any exercise
above such amount is hereby deemed void and revoked.
As contemplated by the Warrant, this Notice of Conversion is being sent by
facsimile to the telecopier number and officer indicated above.
If this Notice of Exercise represents the full exercise of the
outstanding balance of the Warrant, the Holder either (1) has previously
surrendered the Warrant to the Company or (2) will surrender (or cause to be
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surrendered) the Warrant to the Company at the address indicated above by
express courier within five (5) business days after delivery or facsimile
transmission of this Notice of Exercise.
The certificates representing the Warrant Shares should be transmitted by
the Company to the Holder
[ ] via express courier, or
[ ] by electronic transfer
after receipt of this Notice of Exercise (by facsimile transmission or
otherwise) to:
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
Dated:_______________________
_____________________________
[Name of Holder]
By: _________________________
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NOTICE OF EXERCISE OF WARRANT
WORKSHEET SCHEDULE
1. Current Common Stock holdings of Holder and Affiliates ___________
2. Shares to be issued on current exercise ___________
3. Other shares to be issued on other current exercise(s)
and other current conversion(s)(1) ___________
4. Other shares eligible to be acquired within next
60 days without restriction ___________
5. Total [sum of Lines 1 through 4] ___________
6. Outstanding shares of Common Stock(2) ___________
7. Adjustments to Outstanding
a. Shares known to Holder as previously issued to
Holder or others but not included in Line 6 ___________
b. Shares to be issued per Line(s) 2 and 3 ___________
c. Total Adjustments [Lines 7a and 7b] ___________
8. Total Adjusted Outstanding [Lines 6 plus 7c] _____________
9. Holder's Percentage [Line 5 divided by Line 8]
[Note: Line 9 not to be above 4.99%]
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(1) Includes shares issuable on conversion of convertible securities
(including assumed payment of interest or dividends) or exercise of other
rights, including other warrants or options
(2) Based on latest SEC filing by Company or information provided by executive
officer of Company, counsel to Company or transfer agent
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