Warrant - Headliners Entertainment Group Inc. and Cornell Capital Partners LP
WARRANT
-------
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION
OF COUNSEL IN A FORM REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION
IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS
SOLD PURSUANT TO RULE 144 UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING,
THIS WARRANT MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT.
HEADLINERS ENTERTAINMENT GROUP, INC.
Warrant To Purchase Common Stock
Warrant No.: CCP-001 Number of Shares: 10,000,000
Date of Issuance: November 17, 2005
Headliners Entertainment Group, Inc., a Delaware corporation (the
"Company"), hereby certifies that, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Cornell Capital
Partners, LP ("Cornell"), the registered holder hereof or its permitted
assigns, is entitled, subject to the terms set forth below, to purchase
from the Company upon surrender of this Warrant, at any time or times on or
after the date hereof, but not after 11:59 P.M. Eastern Time on the
Expiration Date (as defined herein) Ten Million (10,000,000) fully paid and
nonassessable shares of Common Stock (as defined herein) of the Company
(the "Warrant Shares") at the exercise price per share provided in
Section 1(b) below or as subsequently adjusted; provided, however, that in
no event shall the holder be entitled to exercise this Warrant for a number
of Warrant Shares in excess of that number of Warrant Shares which, upon
giving effect to such exercise, would cause the aggregate number of shares
of Common Stock beneficially owned by the holder and its affiliates to
exceed 4.99% of the outstanding shares of the Common Stock following such
exercise, except within sixty (60) days of the Expiration Date (however,
such restriction may be waived by Cornell (but only as to itself and not to
any other holder) upon not less than 65 days prior notice to the Company).
For purposes of the foregoing proviso, the aggregate number of shares of
Common Stock beneficially owned by the holder and its affiliates shall
include the number of shares of Common Stock issuable upon exercise of this
Warrant with respect to which the determination of such proviso is being
made, but shall exclude shares of Common Stock which would be issuable upon
(i) exercise of the remaining, unexercised Warrants beneficially owned by
the holder and its affiliates and (ii) exercise or conversion of the
unexercised or unconverted portion of any other securities of the Company
beneficially owned by the holder and its affiliates (including, without
limitation, any convertible notes or preferred stock) subject to a
limitation on conversion or exercise analogous to the limitation contained
herein. Except as set forth in the preceding sentence, for purposes of
this paragraph, beneficial ownership shall be calculated in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended. For
purposes of this Warrant, in determining the number of outstanding shares
of Common Stock a holder may rely on the number of outstanding shares of
Common Stock as reflected in (1) the Company's most recent Form 10-QSB or
Form 10-KSB, as the case may be, (2) a more recent public announcement by
the Company or (3) any other notice by the Company or its transfer agent
setting forth the number of shares of Common Stock outstanding. Upon the
written request of any holder, the Company shall promptly, but in no event
later than one (1) Business Day following the receipt of such notice,
confirm in writing to any such 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 exercise of Warrants
(as defined below) by such holder and its affiliates since the date as of
which such number of outstanding shares of Common Stock was reported.
<PAGE>
Section 1.
(a) This Warrant is the common stock purchase warrant (the
"Warrant") issued in connection with the Amended and Restated Convertible
Debenture issued by the Company to Cornell (the "Convertible Debenture").
(b) Definitions. The following words and terms as used in
this Warrant shall have the following meanings:
(i) "Approved Stock Plan" means any employee benefit
plan which has been approved by the Board of Directors of the Company,
pursuant to which the Company's securities may be issued to any employee,
officer or director for services provided to the Company.
(ii) "Business Day" means any day other than Saturday,
Sunday or other day on which commercial banks in the City of New York are
authorized or required by law to remain closed.
(iii) "Closing Bid Price" means the closing bid price of
Common Stock as quoted on the Principal Market (as reported by Bloomberg
Financial Markets ("Bloomberg") through its "Volume at Price" function).
(iv) "Common Stock" means (i) the Company's common
stock, par value $0.001 per share, and (ii) any capital stock into which
such Common Stock shall have been changed or any capital stock resulting
from a reclassification of such Common Stock.
(v) "Event of Default" means an event of default under
the Convertible Debenture.
(vi) "Excluded Securities" means, provided such
security is issued at a price which is greater than or equal to the arithmetic
average of the Closing Bid Prices of the Common Stock for the ten (10)
consecutive trading days immediately preceding the date of issuance, any of
the following: (a) any issuance by the Company of securities in connection
with a strategic partnership or a joint venture (the primary purpose of
which is not to raise equity capital), (b) any issuance by the Company of
securities as consideration for a merger or consolidation or the
acquisition of a business, product, license, or other assets of another
person or entity and (c) options to purchase shares of Common Stock,
provided (I) such options are issued after the date of this Warrant to
employees of the Company within thirty (30) days of such employee's
starting his employment with the Company, and (II) the exercise price of
such options is not less than the Closing Bid Price of the Common Stock on
the date of issuance of such option.
(vii) "Expiration Date" means the date five (5) years
from the Issuance Date of this Warrant or, if such date falls on a
Saturday, Sunday or other day on which banks are required or authorized to
be closed in the City of New York or the State of New York or on which
trading does not take place on the Principal Exchange or automated
quotation system on which the Common Stock is traded (a "Holiday"), the
next date that is not a Holiday.
(viii) "Issuance Date" means the date hereof.
(ix) "Options" means any rights, warrants or options
to subscribe for or purchase Common Stock or Convertible Securities.
(x) "Other Securities" means (i) those options and
warrants of the Company issued prior to, and outstanding on, the Issuance
Date of this Warrant, (ii) the shares of Common Stock issuable on exercise
of such options and warrants, provided such options and warrants are not
amended after the Issuance Date of this Warrant and (iii) the shares of
Common Stock issuable upon exercise of this Warrant.
<PAGE>
(xi) "Person" means an individual, a limited
liability company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof.
(xii) "Principal Market" means the New York Stock
Exchange, the American Stock Exchange, the Nasdaq National Market, the
Nasdaq SmallCap Market, whichever is at the time the principal trading
exchange or market for such security, or the over-the-counter market on the
electronic bulletin board for such security as reported by Bloomberg or, if
no bid or sale information is reported for such security by Bloomberg, then
the average of the bid prices of each of the market makers for such
security as reported in the "pink sheets" by the National Quotation Bureau,
Inc.
(xiii) "Securities Act" means the Securities Act of
1933, as amended.
(xiv) "Warrant" means this Warrant and all Warrants
issued in exchange, transfer or replacement thereof.
(xv) "Warrant Exercise Price" shall be $0.20 or as
subsequently adjusted as provided in Section 8 hereof.
(xvi) "Warrant Shares" means the shares of Common Stock
issuable at any time upon exercise of this Warrant.
(c) Other Definitional Provisions.
(i) Except as otherwise specified herein, all
references herein (A) to the Company shall be deemed to include the
Company's successors and (B) to any applicable law defined or referred to
herein shall be deemed references to such applicable law as the same may
have been or may be amended or supplemented from time to time.
(ii) When used in this Warrant, the words "herein",
"hereof", and "hereunder" and words of similar import, shall refer to this
Warrant as a whole and not to any provision of this Warrant, and the words
"Section", "Schedule", and "Exhibit" shall refer to Sections of, and
Schedules and Exhibits to, this Warrant unless otherwise specified.
(iii) Whenever the context so requires, the neuter
gender includes the masculine or feminine, and the singular number includes the
plural, and vice versa.
Section 2. Exercise of Warrant.
(a) Subject to the terms and conditions hereof, this Warrant
may be exercised by the holder hereof then registered on the books of the
Company, pro rata as hereinafter provided, at any time on any Business Day
on or after the opening of business on such Business Day, commencing with
the first day after the date hereof, and prior to 11:59 P.M. Eastern Time
on the Expiration Date (i) by delivery of a written notice, in the form of
the subscription notice attached as Exhibit A hereto (the "Exercise
Notice"), of such holder's election to exercise this Warrant, which notice
shall specify the number of Warrant Shares to be purchased, payment to the
Company of an amount equal to the Warrant Exercise Price(s) applicable to
the Warrant Shares being purchased, multiplied by the number of Warrant
Shares (at the applicable Warrant Exercise Price) as to which this Warrant
is being exercised (plus any applicable issue or transfer taxes) (the
"Aggregate Exercise Price") in cash or wire transfer of immediately
available funds and the surrender of this Warrant (or an indemnification
undertaking with respect to this Warrant in the case of its loss, theft or
<PAGE>
destruction) to a common carrier for overnight delivery to the Company as
soon as practicable following such date ("Cash Basis") or (ii) if at the
time of exercise, the Warrant Shares are not subject to an effective
registration statement or if an Event of Default has occurred, by
delivering an Exercise Notice and in lieu of making payment of the
Aggregate Exercise Price in cash or wire transfer, elect instead to receive
upon such exercise the "Net Number" of shares of Common Stock determined
according to the following formula (the "Cashless Exercise"):
Net Number = (A x B) - (A x C)
-----------------
B
For purposes of the foregoing formula:
A = the total number of Warrant Shares with respect to which
this Warrant is then being exercised.
<PAGE>
B = the Closing Bid Price of the Common Stock on the date of
exercise of the Warrant.
C = the Warrant Exercise Price then in effect for the
applicable Warrant Shares at the time of such exercise.
In the event of any exercise of the rights represented by this
Warrant in compliance with this Section 2, the Company shall on or before
the fifth (5th) Business Day following the date of receipt of the Exercise
Notice, the Aggregate Exercise Price and this Warrant (or an
indemnification undertaking with respect to this Warrant in the case of its
loss, theft or destruction) and the receipt of the representations of the
holder specified in Section 6 hereof, if requested by the Company (the
"Exercise Delivery Documents"), and if the Common Stock is DTC eligible,
credit such aggregate number of shares of Common Stock to which the holder
shall be entitled to the holder's or its designee's balance account with
The Depository Trust Company; provided, however, if the holder who
submitted the Exercise Notice requested physical delivery of any or all of
the Warrant Shares, or, if the Common Stock is not DTC eligible then the
Company shall, on or before the fifth (5th) Business Day following receipt
of the Exercise Delivery Documents, issue and surrender to a common carrier
for overnight delivery to the address specified in the Exercise Notice, a
certificate, registered in the name of the holder, for the number of shares
of Common Stock to which the holder shall be entitled pursuant to such
request. Upon delivery of the Exercise Notice and Aggregate Exercise Price
referred to in clause (i) or (ii) above the holder of this Warrant shall be
deemed for all corporate purposes to have become the holder of record of
the Warrant Shares with respect to which this Warrant has been exercised.
In the case of a dispute as to the determination of the Warrant Exercise
Price, the Closing Bid Price or the arithmetic calculation of the Warrant
Shares, the Company shall promptly issue to the holder the number of
Warrant Shares that is not disputed and shall submit the disputed
determinations or arithmetic calculations to the holder via facsimile
within one (1) Business Day of receipt of the holder's Exercise Notice.
(b) If the holder and the Company are unable to agree upon
the determination of the Warrant Exercise Price or arithmetic calculation
of the Warrant Shares within one (1) day of such disputed determination or
arithmetic calculation being submitted to the holder, then the Company
shall immediately submit via facsimile (i) the disputed determination of
the Warrant Exercise Price or the Closing Bid Price to an independent,
reputable investment banking firm or (ii) the disputed arithmetic
calculation of the Warrant Shares to its independent, outside accountant.
The Company shall cause the investment banking firm or the accountant, as
<PAGE>
the case may be, to perform the determinations or calculations and notify
the Company and the holder of the results no later than forty-eight (48)
hours from the time it receives the disputed determinations or
calculations. Such investment banking firm's or accountant's determination
or calculation, as the case may be, shall be deemed conclusive absent
manifest error.
(c) Unless the rights represented by this Warrant shall have
expired or shall have been fully exercised, the Company shall, as soon as
practicable and in no event later than five (5) Business Days after any
exercise and at its own expense, issue a new Warrant identical in all
respects to this Warrant exercised except it shall represent rights to
purchase the number of Warrant Shares purchasable immediately prior to such
exercise under this Warrant exercised, less the number of Warrant Shares
with respect to which such Warrant is exercised.
(d) No fractional Warrant Shares are to be issued upon any
pro rata exercise of this Warrant, but rather the number of Warrant Shares
issued upon such exercise of this Warrant shall be rounded up or down to
the nearest whole number.
(e) If the Company or its Transfer Agent shall fail for any
reason or for no reason to issue to the holder within ten (10) days of
receipt of the Exercise Delivery Documents, a certificate for the number of
Warrant Shares to which the holder is entitled or to credit the holder's
balance account with The Depository Trust Company for such number of
Warrant Shares to which the holder is entitled upon the holder's exercise
of this Warrant, the Company shall, in addition to any other remedies under
this Warrant or the Placement Agent Agreement or otherwise available to
such holder, pay as additional damages in cash to such holder on each day
the issuance of such certificate for Warrant Shares is not timely effected
an amount equal to 0.025% of the product of (A) the sum of the number of
Warrant Shares not issued to the holder on a timely basis and to which the
holder is entitled, and (B) the Closing Bid Price of the Common Stock for
the trading day immediately preceding the last possible date which the
Company could have issued such Common Stock to the holder without violating
this Section 2.
(f) If within ten (10) days after the Company's receipt of
the Exercise Delivery Documents, the Company fails to deliver a new Warrant
to the holder for the number of Warrant Shares to which such holder is
entitled pursuant to Section 2 hereof, then, in addition to any other
available remedies under this Warrant or the Placement Agent Agreement, or
otherwise available to such holder, the Company shall pay as additional
damages in cash to such holder on each day after such tenth (10th) day that
such delivery of such new Warrant is not timely effected in an amount equal
to 0.25% of the product of (A) the number of Warrant Shares represented by
the portion of this Warrant which is not being exercised and (B) the
Closing Bid Price of the Common Stock for the trading day immediately
preceding the last possible date which the Company could have issued such
Warrant to the holder without violating this Section 2.
Section 3. Covenants as to Common Stock. The Company hereby
covenants and agrees as follows:
(a) This Warrant is, and any Warrants issued in substitution
for or replacement of this Warrant will upon issuance be, duly authorized
and validly issued.
(b) All Warrant Shares which may be issued upon the exercise
of the rights represented by this Warrant will, upon issuance, be validly
issued, fully paid and nonassessable and free from all taxes, liens and
charges with respect to the issue thereof.
<PAGE>
(c) During the period within which the rights represented by
this Warrant may be exercised, the Company will at all times have
authorized and reserved at least one hundred percent (100%) of the number
of shares of Common Stock needed to provide for the exercise of the rights
then represented by this Warrant and the par value of said shares will at
all times be less than or equal to the applicable Warrant Exercise Price.
If at any time the Company does not have a sufficient number of shares of
Common Stock authorized and available, then the Company shall call and hold
a special meeting of its stockholders within sixty (60) days of that time
for the sole purpose of increasing the number of authorized shares of
Common Stock.
(d) If at any time after the date hereof the Company shall
file a registration statement, the Company shall include the Warrant Shares
issuable to the holder, pursuant to the terms of this Warrant and shall
maintain, so long as any other shares of Common Stock shall be so listed,
such listing of all Warrant Shares from time to time issuable upon the
exercise of this Warrant; and the Company shall so list on each national
securities exchange or automated quotation system, as the case may be, and
shall maintain such listing of, any other shares of capital stock of the
Company issuable upon the exercise of this Warrant if and so long as any
shares of the same class shall be listed on such national securities
exchange or automated quotation system.
(e) The Company will not, by amendment of its Articles 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 to be observed or performed by it
hereunder, but will at all times in good faith assist in the carrying out
of all the provisions of this Warrant and in the taking of all such action
as may reasonably be requested by the holder of this Warrant in order to
protect the exercise privilege of the holder of this Warrant against
dilution or other impairment, consistent with the tenor and purpose of this
Warrant. The Company will not increase the par value of any shares of
Common Stock receivable upon the exercise of this Warrant above the Warrant
Exercise Price then in effect, and (ii) will take all such actions as may
be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock upon the
exercise of this Warrant.
(f) This Warrant will be binding upon any entity succeeding
to the Company by merger, consolidation or acquisition of all or
substantially all of the Company's assets.
Section 4. Taxes. The Company shall pay any and all taxes, except
any applicable withholding, which may be payable with respect to the
issuance and delivery of Warrant Shares upon exercise of this Warrant.
Section 5. Warrant Holder Not Deemed a Stockholder. Except as
otherwise specifically provided herein, no holder, as such, of this Warrant
shall be entitled to vote or receive dividends or be deemed the holder of
shares of capital stock of the Company for any purpose, nor shall anything
contained in this Warrant be construed to confer upon the holder hereof, as
such, any of the rights of a stockholder of the Company or any right to
vote, give or withhold consent to any corporate action (whether any
reorganization, issue of stock, reclassification of stock, consolidation,
merger, conveyance or otherwise), receive notice of meetings, receive
dividends or subscription rights, or otherwise, prior to the issuance to
the holder of this Warrant of the Warrant Shares which he or she is then
entitled to receive upon the due exercise of this Warrant. In addition,
nothing contained in this Warrant shall be construed as imposing any
liabilities on such holder to purchase any securities (upon exercise of
this Warrant or otherwise) or as a stockholder of the Company, whether such
liabilities are asserted by the Company or by creditors of the Company.
Notwithstanding this Section 5, the Company will provide the holder of this
Warrant with copies of the same notices and other information given to the
stockholders of the Company generally, contemporaneously with the giving
thereof to the stockholders.
<PAGE>
Section 6. Representations of Holder. The holder of this Warrant,
by the acceptance hereof, represents that it is acquiring this Warrant and
the Warrant Shares for its own account for investment only and not with a
view towards, or for resale in connection with, the public sale or
distribution of this Warrant or the Warrant Shares, except pursuant to
sales registered or exempted under the Securities Act; provided, however,
that by making the representations herein, the holder does not agree to
hold this Warrant or any of the Warrant Shares for any minimum or other
specific term and reserves the right to dispose of this Warrant and the
Warrant Shares at any time in accordance with or pursuant to a registration
statement or an exemption under the Securities Act. The holder of this
Warrant further represents, by acceptance hereof, that, as of this date,
such holder is an "accredited investor" as such term is defined in
Rule 501(a)(1) of Regulation D promulgated by the Securities and Exchange
Commission under the Securities Act (an "Accredited Investor"). Upon
exercise of this Warrant the holder shall, if requested by the Company,
confirm in writing, in a form satisfactory to the Company, that the Warrant
Shares so purchased are being acquired solely for the holder's own account
and not as a nominee for any other party, for investment, and not with a
view toward distribution or resale and that such holder is an Accredited
Investor. If such holder cannot make such representations because they
would be factually incorrect, it shall be a condition to such holder's
exercise of this Warrant that the Company receive such other
representations as the Company considers reasonably necessary to assure the
Company that the issuance of its securities upon exercise of this Warrant
shall not violate any United States or state securities laws.
Section 7. Ownership and Transfer.
(a) The Company shall maintain at its principal executive
offices (or such other office or agency of the Company as it may designate
by notice to the holder hereof), a register for this Warrant, in which the
Company shall record the name and address of the person in whose name this
Warrant has been issued, as well as the name and address of each
transferee. The Company may treat the person in whose name any Warrant is
registered on the register as the owner and holder thereof for all
purposes, notwithstanding any notice to the contrary, but in all events
recognizing any transfers made in accordance with the terms of this
Warrant.
Section 8. Adjustment of Warrant Exercise Price and Number of
Shares. The Warrant Exercise Price and the number of shares of Common
Stock issuable upon exercise of this Warrant shall be adjusted from time to
time as follows:
(a) Adjustment of Warrant Exercise Price and Number of
Shares upon Issuance of Common Stock. If and whenever on or after the Issuance
Date of this Warrant, the Company issues or sells, or is deemed to have
issued or sold, any shares of Common Stock (other than (i) Excluded
Securities and (ii) shares of Common Stock which are issued or deemed to
have been issued by the Company in connection with an Approved Stock Plan
or upon exercise or conversion of the Other Securities) for a consideration
per share less than the current market price at the time of such issuance
(the "Applicable Price"), then the Warrant Exercise Price shall be adjusted
immediately thereafter so that it shall equal the price determined by
multiplying the Warrant Exercise Price in effect immediately prior thereto
by a fraction, the numerator of which shall be the sum of the number of
shares of Common Stock outstanding immediately prior to the issuance of
such additional shares and the number of shares of Common Stock which the
aggregate consideration received for the issuance of such additional shares
would purchase at such current market price per share of Common Stock, and
the denominator of which shall be the number of shares of Common Stock
outstanding immediately after the issuance of such additional shares. Upon
each adjustment of the Warrant Exercise Price pursuant to this Section
8(a), the Warrant outstanding prior to the making of the adjustment in the
Exercise Price shall thereafter evidence the right to receive upon payment
of the Warrant Exercise Price that number of shares of Common Stock
(calculated to the nearest hundredth) obtained from the following formula:
<PAGE>
N' = N x E/E'
where:
N' = the adjusted number of Warrant Shares issuable upon
exercise of a Warrant by payment of the adjusted Exercise Price.
N = the number of Warrant Shares previously issuable upon
exercise of a Warrant by payment of the Exercise Price prior to adjustment.
E' = the adjusted Exercise Price.
E = the Exercise Price prior to adjustment.
(b) Effect on Warrant Exercise Price of Certain Events. For
purposes of determining the adjusted Warrant Exercise Price under Section
8(a) above, the following shall be applicable:
(i) Issuance of Options. If after the date hereof,
the Company in any manner grants any Options and the lowest price per share for
which one share of Common Stock is issuable upon the exercise of any such
Option or upon conversion or exchange of any convertible securities
issuable upon exercise of any such Option is less than the Applicable
Price, then such share of Common Stock shall be deemed to be outstanding
and to have been issued and sold by the Company at the time of the granting
or sale of such Option for such price per share. For purposes of this
Section 8(b)(i), the lowest price per share for which one share of Common
Stock is issuable upon exercise of such Options or upon conversion or
exchange of such Convertible Securities shall be equal to the sum of the
lowest amounts of consideration (if any) received or receivable by the
Company with respect to any one share of Common Stock upon the granting or
sale of the Option, upon exercise of the Option or upon conversion or
exchange of any convertible security issuable upon exercise of such Option.
No further adjustment of the Warrant Exercise Price shall be made upon the
actual issuance of such Common Stock or of such convertible securities upon
the exercise of such Options or upon the actual issuance of such Common
Stock upon conversion or exchange of such convertible securities.
(ii) Issuance of Convertible Securities. If the
Company in any manner issues or sells any convertible securities and the lowest
price per share for which one share of Common Stock is issuable upon the
conversion or exchange thereof is less than the Applicable Price, then such
share of Common Stock shall be deemed to be outstanding and to have been
issued and sold by the Company at the time of the issuance or sale of such
convertible securities for such price per share. For the purposes of this
Section 8(b)(ii), the lowest price per share for which one share of Common
Stock is issuable upon such conversion or exchange shall be equal to the
sum of the lowest amounts of consideration (if any) received or receivable
by the Company with respect to one share of Common Stock upon the issuance
or sale of the convertible security and upon conversion or exchange of such
convertible security. No further adjustment of the Warrant Exercise Price
shall be made upon the actual issuance of such Common Stock upon conversion
or exchange of such convertible securities, and if any such issue or sale
of such convertible securities is made upon exercise of any Options for
which adjustment of the Warrant Exercise Price had been or are to be made
pursuant to other provisions of this Section 8(b), no further adjustment of
the Warrant Exercise Price shall be made by reason of such issue or sale.
(iii) Change in Option Price or Rate of Conversion. If
the purchase price provided for in any Options, the additional
consideration, if any, payable upon the issue, conversion or exchange of
any convertible securities, or the rate at which any convertible securities
are convertible into or exchangeable for Common Stock changes at any time,
the Warrant Exercise Price in effect at the time of such change shall be
adjusted to the Warrant Exercise Price which would have been in effect at
such time had such Options or convertible securities provided for such
changed purchase price, additional consideration or changed conversion
<PAGE>
rate, as the case may be, at the time initially granted, issued or sold and
the number of Warrant Shares issuable upon exercise of this Warrant shall
be correspondingly readjusted. For purposes of this Section 8(b)(iii), if
the terms of any Option or convertible security that was outstanding as of
the Issuance Date of this Warrant are changed in the manner described in
the immediately preceding sentence, then such Option or convertible
security and the Common Stock deemed issuable upon exercise, conversion or
exchange thereof shall be deemed to have been issued as of the date of such
change. No adjustment pursuant to this Section 8(b) shall be made if such
adjustment would result in an increase of the Warrant Exercise Price then
in effect.
(c) Effect on Warrant Exercise Price of Certain Events. For
purposes of determining the adjusted Warrant Exercise Price under
Sections 8(a) and 8(b), the following shall be applicable:
(i) Calculation of Consideration Received. If any
Common Stock, Options or convertible securities are issued or sold or
deemed to have been issued or sold for cash, the consideration received
therefore will be deemed to be the net amount received by the Company
therefore. If any Common Stock, Options or convertible securities are
issued or sold for a consideration other than cash, the amount of such
consideration received by the Company will be the fair value of such
consideration, except where such consideration consists of marketable
securities, in which case the amount of consideration received by the
Company will be the market price of such securities on the date of receipt
of such securities. If any Common Stock, Options or convertible securities
are issued to the owners of the non-surviving entity in connection with any
merger in which the Company is the surviving entity, the amount of
consideration therefore will be deemed to be the fair value of such portion
of the net assets and business of the non-surviving entity as is
attributable to such Common Stock, Options or convertible securities, as
the case may be. The fair value of any consideration other than cash or
securities will be determined jointly by the Company and the holders of
Warrants representing at least two-thirds (b) of the Warrant Shares
issuable upon exercise of the Warrants then outstanding. If such parties
are unable to reach agreement within ten (10) days after the occurrence of
an event requiring valuation (the "Valuation Event"), the fair value of
such consideration will be determined within five (5) Business Days after
the tenth (10th) day following the Valuation Event by an independent,
reputable appraiser jointly selected by the Company and the holders of
Warrants representing at least two-thirds (b) of the Warrant Shares
issuable upon exercise of the Warrants then outstanding. The determination
of such appraiser shall be final and binding upon all parties and the fees
and expenses of such appraiser shall be borne jointly by the Company and
the holders of Warrants.
(ii) Integrated Transactions. In case any Option is
issued in connection with the issue or sale of other securities of the
Company, together comprising one integrated transaction in which no
specific consideration is allocated to such Options by the parties thereto,
the Options will be deemed to have been issued for a consideration of $.01.
(iii) Treasury Shares. The number of shares of Common
Stock outstanding at any given time does not include shares owned or held
by or for the account of the Company, and the disposition of any shares so
owned or held will be considered an issue or sale of Common Stock.
(iv) Record Date. If the Company takes a record of the
holders of Common Stock for the purpose of entitling them (1) to receive a
dividend or other distribution payable in Common Stock, Options or in
convertible securities or (2) to subscribe for or purchase Common Stock,
Options or convertible securities, then such record date will be deemed to
be the date of the issue or sale of the shares of Common Stock deemed to
<PAGE>
have been issued or sold upon the declaration of such dividend or the
making of such other distribution or the date of the granting of such right
of subscription or purchase, as the case may be.
(d) Adjustment of Warrant Exercise Price upon Subdivision or
Combination of Common Stock. If the Company at any time after the date of
issuance of this Warrant subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding
shares of Common Stock into a greater number of shares, any Warrant
Exercise Price in effect immediately prior to such subdivision will be
proportionately reduced and the number of shares of Common Stock obtainable
upon exercise of this Warrant will be proportionately increased. If the
Company at any time after the date of issuance of this Warrant combines (by
combination, reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, any
Warrant Exercise Price in effect immediately prior to such combination will
be proportionately increased and the number of Warrant Shares issuable upon
exercise of this Warrant will be proportionately decreased. Any adjustment
under this Section 8(d) shall become effective at the close of business on
the date the subdivision or combination becomes effective.
(e) Distribution of Assets. If the Company shall declare or
make any dividend or other distribution of its assets (or rights to acquire
its assets) to holders of Common Stock, by way of return of capital or
otherwise (including, without limitation, any distribution of cash, stock
or other securities, property or options by way of a dividend, spin off,
reclassification, corporate rearrangement or other similar transaction) (a
"Distribution"), at any time after the issuance of this Warrant, then, in
each such case:
(i) any Warrant Exercise Price in effect immediately
prior to the close of business on the record date fixed for the
determination of holders of Common Stock entitled to receive the
Distribution shall be reduced, effective as of the close of business on
such record date, to a price determined by multiplying such Warrant
Exercise Price by a fraction of which (A) the numerator shall be the
Closing Sale Price of the Common Stock on the trading day immediately
preceding such record date minus the value of the Distribution (as
determined in good faith by the Company's Board of Directors) applicable to
one share of Common Stock, and (B) the denominator shall be the Closing
Sale Price of the Common Stock on the trading day immediately preceding
such record date; and
(ii) either (A) the number of Warrant Shares obtainable
upon exercise of this Warrant shall be increased to a number of shares
equal to the number of shares of Common Stock obtainable immediately prior
to the close of business on the record date fixed for the determination of
holders of Common Stock entitled to receive the Distribution multiplied by
the reciprocal of the fraction set forth in the immediately preceding
clause (i), or (B) in the event that the Distribution is of common stock of
a company whose common stock is traded on a national securities exchange or
a national automated quotation system, then the holder of this Warrant
shall receive an additional warrant to purchase Common Stock, the terms of
which shall be identical to those of this Warrant, except that such warrant
shall be exercisable into the amount of the assets that would have been
payable to the holder of this Warrant pursuant to the Distribution had the
holder exercised this Warrant immediately prior to such record date and
with an exercise price equal to the amount by which the exercise price of
this Warrant was decreased with respect to the Distribution pursuant to the
terms of the immediately preceding clause (i).
<PAGE>
(f) Certain Events. If any event occurs of the type
contemplated by the provisions of this Section 8 but not expressly provided
for by such provisions (including, without limitation, the granting of
stock appreciation rights, phantom stock rights or other rights with equity
features), then the Company's Board of Directors will make an appropriate
adjustment in the Warrant Exercise Price and the number of shares of Common
Stock obtainable upon exercise of this Warrant so as to protect the rights
of the holders of the Warrants; provided, except as set forth in section
8(d),that no such adjustment pursuant to this Section 8(f) will increase
the Warrant Exercise Price or decrease the number of shares of Common Stock
obtainable as otherwise determined pursuant to this Section 8.
(g) Notices.
(i) Immediately upon any adjustment of the Warrant
Exercise Price, the Company will give written notice thereof to the holder
of this Warrant, setting forth in reasonable detail, and certifying, the
calculation of such adjustment.
(ii) The Company will give written notice to the holder
of this Warrant at least ten (10) days prior to the date on which the
Company closes its books or takes a record (A) with respect to any dividend
or distribution upon the Common Stock, (B) with respect to any pro rata
subscription offer to holders of Common Stock or (C) for determining rights
to vote with respect to any Organic Change (as defined below), dissolution
or liquidation, provided that such information shall be made known to the
public prior to or in conjunction with such notice being provided to such
holder.
(iii) The Company will also give written notice to the
holder of this Warrant at least ten (10) days prior to the date on which
any Organic Change, dissolution or liquidation will take place, provided
that such information shall be made known to the public prior to or in
conjunction with such notice being provided to such holder.
Section 9. Purchase Rights; Reorganization, Reclassification,
Consolidation, Merger or Sale.
(a) In addition to any adjustments pursuant to Section 8
above, if at any time the Company grants, issues or sells any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of Common Stock
(the "Purchase Rights"), then the holder of this Warrant will be entitled
to acquire, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which such holder could have acquired if such
holder had held the number of shares of Common Stock acquirable upon
complete exercise of this Warrant immediately before the date on which a
record is taken for the grant, issuance or sale of such Purchase Rights,
or, if no such record is taken, the date as of which the record holders of
Common Stock are to be determined for the grant, issue or sale of such
Purchase Rights.
(b) Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the Company's
assets to another Person or other transaction in each case which is
effected in such a way that holders of Common Stock are entitled to receive
(either directly or upon subsequent liquidation) stock, securities or
assets with respect to or in exchange for Common Stock is referred to
herein as an "Organic Change." Prior to the consummation of any (i) sale
of all or substantially all of the Company's assets to an acquiring Person
or (ii) other Organic Change following which the Company is not a surviving
entity, the Company will secure from the Person purchasing such assets or
the successor resulting from such Organic Change (in each case, the
"Acquiring Entity") a written agreement (in form and substance satisfactory
to the holders of Warrants representing at least two-thirds (iii) of the
<PAGE>
Warrant Shares issuable upon exercise of the Warrants then outstanding) to
deliver to each holder of Warrants in exchange for such Warrants, a
security of the Acquiring Entity evidenced by a written instrument
substantially similar in form and substance to this Warrant and
satisfactory to the holders of the Warrants (including an adjusted warrant
exercise price equal to the value for the Common Stock reflected by the
terms of such consolidation, merger or sale, and exercisable for a
corresponding number of shares of Common Stock acquirable and receivable
upon exercise of the Warrants without regard to any limitations on
exercise, if the value so reflected is less than any Applicable Warrant
Exercise Price immediately prior to such consolidation, merger or sale).
Prior to the consummation of any other Organic Change, the Company shall
make appropriate provision (in form and substance satisfactory to the
holders of Warrants representing a majority of the Warrant Shares issuable
upon exercise of the Warrants then outstanding) to insure that each of the
holders of the Warrants will thereafter have the right to acquire and
receive in lieu of or in addition to (as the case may be) the Warrant
Shares immediately theretofore issuable and receivable upon the exercise of
such holder's Warrants (without regard to any limitations on exercise),
such shares of stock, securities or assets that would have been issued or
payable in such Organic Change with respect to or in exchange for the
number of Warrant Shares which would have been issuable and receivable upon
the exercise of such holder's Warrant as of the date of such Organic Change
(without taking into account any limitations or restrictions on the
exercisability of this Warrant).
Section 10. Lost, Stolen, Mutilated or Destroyed Warrant. If this
Warrant is lost, stolen, mutilated or destroyed, the Company shall
promptly, on receipt of an indemnification undertaking (or, in the case of
a mutilated Warrant, the Warrant), issue a new Warrant of like denomination
and tenor as this Warrant so lost, stolen, mutilated or destroyed.
Section 11. Notice. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Warrant must be in writing and will be deemed to have been delivered:
(i) upon receipt, when delivered personally; (ii) upon receipt, when sent
by facsimile (provided confirmation of receipt is received by the sending
party transmission is mechanically or electronically generated and kept on
file by the sending party); or (iii) one Business Day after deposit with a
nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile
numbers for such communications shall be:
If to Cornell:
Cornell Capital Partners, LP
101 Hudson Street - Suite 3700
Jersey City, NJ 07302
Attention: Mark A. Angelo
Telephone: (201) 985-8300
Facsimile: (201) 985-8266
With Copy to:
Troy Rillo, Esq.
101 Hudson Street - Suite 3700
Jersey City, NJ 07302
Telephone: (201) 985-8300
Facsimile: (201) 985-8266
<PAGE>
If to the Company, to:
Headliners Entertainment Group, Inc.
501 Bloomfield Avenue
Montclair, New Jersey 07042
Attention: Eduardo Rodriguez
Telephone: (973) 233-1233
Facsimile:
With a copy to:
Robert Brantl, Esq.
322 Fourth Street
Brooklyn, NY 11215
Telephone: (718) 768-6045
Facsimile: (718) 965-4042
If to a holder of this Warrant, to it at the address and facsimile number
set forth on Exhibit C hereto, with copies to such holder's representatives
as set forth on Exhibit C, or at such other address and facsimile as shall
be delivered to the Company upon the issuance or transfer of this Warrant.
Each party shall provide five days' prior written notice to the other party
of any change in address or facsimile number. Written confirmation of
receipt (A) given by the recipient of such notice, consent, facsimile,
waiver or other communication, (or (B) provided by a nationally recognized
overnight delivery service shall be rebuttable evidence of personal
service, receipt by facsimile or receipt from a nationally recognized
overnight delivery service in accordance with clause (i), (ii) or (iii)
above, respectively.
Section 12. Date. The date of this Warrant is set forth on page 1
hereof. This Warrant, in all events, shall be wholly void and of no effect
after the close of business on the Expiration Date, except that
notwithstanding any other provisions hereof, the provisions of Section 8(b)
shall continue in full force and effect after such date as to any Warrant
Shares or other securities issued upon the exercise of this Warrant.
Section 13. Amendment and Waiver. Except as otherwise provided
herein, the provisions of the Warrants may be amended and the Company may
take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company has obtained the
written consent of the holders of Warrants representing at least two-thirds
of the Warrant Shares issuable upon exercise of the Warrants then
outstanding; provided that, except for Section 8(d), no such action may
increase the Warrant Exercise Price or decrease the number of shares or
class of stock obtainable upon exercise of any Warrant without the written
consent of the holder of such Warrant.
Section 14. Descriptive Headings; Governing Law. The descriptive
headings of the several sections and paragraphs of this Warrant are
inserted for convenience only and do not constitute a part of this Warrant.
The corporate laws of the State of Delaware shall govern all issues
concerning the relative rights of the Company and its stockholders. All
other questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by the internal laws of
the State of New Jersey, without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of New Jersey or
any other jurisdictions) that would cause the application of the laws of
any jurisdictions other than the State of New Jersey. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in Hudson County and the United States District Court for
the District of New Jersey, for the adjudication of any dispute hereunder
or in connection herewith or therewith, or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it
<PAGE>
is not personally subject to the jurisdiction of any such court, that such
suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address for such notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be
deemed to limit in any way any right to serve process in any manner
permitted by law.
Section 15. Waiver of Jury Trial. AS A MATERIAL INDUCEMENT FOR EACH
PARTY HERETO TO ENTER INTO THIS WARRANT, THE PARTIES HERETO HEREBY WAIVE
ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO
THIS WARRANT AND/OR ANY AND ALL OF THE OTHER DOCUMENTS ASSOCIATED WITH THIS
TRANSACTION.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed as of
the date first set forth above.
HEADLINERS ENTERTAINMENT GROUP, INC.
By: /s/Eduardo Rodriguez
-------------------------------
Name: Eduardo Rodriguez
Title: Chief Executive Officer
<PAGE>
EXHIBIT A TO WARRANT
--------------------
EXERCISE NOTICE
---------------
TO BE EXECUTED
BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT
HEADLINERS ENTERTAINMENT GROUP, INC.
The undersigned holder hereby exercises the right to purchase
______________ of the shares of Common Stock ("Warrant Shares") of
Headliners Entertainment Group, Inc. (the "Company"), evidenced by the
attached Warrant (the "Warrant"). Capitalized terms used herein and not
otherwise defined shall have the respective meanings set forth in the
Warrant.
Specify Method of exercise by check mark:
1. ___ Cash Exercise
(a) Payment of Warrant Exercise Price. The holder shall pay the
Aggregate Exercise Price of $______________ to the Company in
accordance with the terms of the Warrant.
(b) Delivery of Warrant Shares. The Company shall deliver to
the holder _________ Warrant Shares in accordance with the terms
of the Warrant.
2. ___ Cashless Exercise
(a) Payment of Warrant Exercise Price. In lieu of making
payment of the Aggregate Exercise Price, the holder elects to
receive upon such exercise the Net Number of shares of Common
Stock determined in accordance with the terms of the Warrant.
(b) Delivery of Warrant Shares. The Company shall deliver to
the holder _________ Warrant Shares in accordance with the terms
of the Warrant.
Date: _______________ __, ______
Name of Registered Holder
By: ____________________________
Name:___________________________
Title:__________________________
A-1
<PAGE>
EXHIBIT B TO WARRANT
--------------------
FORM OF WARRANT POWER
---------------------
FOR VALUE RECEIVED, the undersigned does hereby assign and transfer
to ________________, Federal Identification No. __________, a warrant to
purchase ____________ shares of the capital stock of Headliners
Entertainment Group, Inc. represented by warrant certificate no. _____,
standing in the name of the undersigned on the books of said corporation.
The undersigned does hereby irrevocably constitute and appoint
______________, attorney to transfer the warrants of said corporation, with
full power of substitution in the premises.
Dated:_____________________________ ___________________________
By:________________________
Name:______________________
Title:_____________________
B-1