NEITHER THE SECURITIES REPRESENTED HEREBY NOR THE SECURITIES ISSUABLE UPON THE
EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND MAY NOT BE
OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED UNLESS (1) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES
ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN
OPINION OF COUNSEL TO THE HOLDER OF THIS WARRANT OR SUCH SECURITIES, WHICH
COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT THIS
WARRANT OR SUCH SECURITIES, AS APPLICABLE, MAY BE OFFERED, SOLD, PLEDGED,
ASSIGNED, OR OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR APPLICABLE STATE
SECURITIES LAWS.
THE TRANSFER OF THIS WARRANT IS RESTRICTED AS DESCRIBED HEREIN.
MIDNIGHT HOLDINGS GROUP, INC.
WARRANT FOR THE PURCHASE
OF
SHARES OF COMMON STOCK
APRIL 3, 2006
THIS CERTIFIES that, for value received, RUSSELL BAILEY (together with
all permitted assigns, the "HOLDER") is entitled to subscribe for, and purchase
from, MIDNIGHT HOLDINGS GROUP, INC., a Delaware corporation (the "COMPANY"), up
to 150,000 shares of common stock, par value $0.00005 per share (the "COMMON
STOCK"), upon the terms and conditions set forth herein, at any time or from
time to time during the period commencing on July 1, 2006 (the "INITIAL EXERCISE
DATE") and terminating at 5:00 p.m., New York City local time, on July 1, 2010
(the "EXERCISE PERIOD"). This Warrant is exercisable at an exercise price per
share equal to $1.00 per share (the "EXERCISE PRICE"); provided, however, that
upon the occurrence of any of the events specified in Section 5 hereof, the
rights granted by this Warrant, including the number of shares of Common Stock
to be received upon such exercise, shall be adjusted as therein specified.
This Warrant, together with the warrants issuable upon the transfer
hereof, are hereinafter referred to as the "WARRANTS". Each share of Common
Stock issuable upon the exercise hereof or thereof shall be hereinafter referred
to as a "WARRANT SHARE".
This Warrant has been issued in accordance with that certain Consulting
Agreement, dated April 3, 2006 (the "AGREEMENT"), between the Holder and the
Company.
SECTION 1 EXERCISE OF WARRANT.
This Warrant may be exercised during the Exercise Period, either in
whole or in part, by the surrender of this Warrant (accompanied by the election
form, attached hereto, duly executed) to the Company at its office at 3872
Rochester Road, Troy, Michigan 48083, Attention: President, or at such other
place as is designated in writing by the Company, together with a certified or
bank cashier's check payable to the order of the Company in an amount equal to
the product of the Exercise Price and the number of Warrant Shares for which
this Warrant is being exercised.
SECTION 2 CASHLESS EXERCISE. The Holder may, in its sole discretion,
exercise this Warrant in whole or in part and, in lieu of making the cash
payment otherwise contemplated to be made to the Company upon such exercise in
payment of the aggregate Exercise Price, then in effect, elect instead to
receive upon such exercise the "Net Number" of shares of Common Stock determined
according to the following formula (a "CASHLESS EXERCISE"):
Net Number = (A X B) - (A X C)
-----------------
B
For purposes of the foregoing formula:
A= the total number of shares of Common Stock with respect to
which this Warrant is then being exercised.
B= the Closing Sale Price (as defined below) of a share of
Common Stock on the date immediately preceding the date of the
Notice of Exercise.
C= the Exercise Price then in effect for the applicable
Warrant Shares.
For purposes of this Warrant, "Closing Sale Price" means, for any security as of
any date, the last closing bid price and last closing trade price, respectively,
for such security, on the principal securities exchange or trading market where
such security is listed or traded as reported by The Wall Street Journal
("WSJ"), or if the foregoing does not apply, the last closing bid price or last
trade price, respectively, of such security in the over-the-counter market on
the electronic bulletin board for such security as reported by the WSJ, or, if
no closing bid price or last trade price, respectively, is reported for such
security by the WSJ, the average of the bid prices, or the ask prices,
respectively, of any market makers for such security as reported in the "pink
sheets" by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If
the Closing Sale Price cannot be calculated for a security on a particular date
on any of the foregoing bases, the Closing Sale Price of such security on such
date shall be the fair market value of a share of Common Stock as determined in
good faith by the Company's Board of Directors.
SECTION 3 RIGHTS UPON EXERCISE; DELIVERY OF SECURITIES.
Upon each exercise of the Holder's rights to purchase Warrant Shares,
the Holder shall be deemed to be the holder of record of the Warrant Shares,
notwithstanding that the transfer books of the Company shall then be closed or
certificates representing the Warrant Shares with respect to which this Warrant
was exercised shall not then have been actually delivered to the Holder. As soon
as practicable after each such exercise of this Warrant, the Company shall issue
and deliver to the Holder a certificate or certificates representing the Warrant
Shares issuable upon such exercise, registered in the name of the Holder or its
designee. If this Warrant should be exercised in part only, the Company shall,
upon surrender of this Warrant for cancellation, execute and deliver a Warrant
evidencing the right of the Holder to purchase the balance of the aggregate
number of Warrant Shares purchasable hereunder as to which this Warrant has not
been exercised or assigned.
SECTION 4 REGISTRATION OF TRANSFER AND EXCHANGE.
Any Warrants issued upon the transfer or exercise in part of this
Warrant shall be numbered and shall be registered in a warrant register (the
"WARRANT REGISTER") as they are issued. The Company shall be entitled to treat
the registered holder of any Warrant on the Warrant Register as the owner in
fact thereof for all purposes, and shall not be bound to recognize any equitable
or other claim to, or interest in, such Warrant on the part of any other person,
and shall not be liable for any registration or transfer of Warrants which are
registered or to be registered in the name of a fiduciary or the nominee of a
fiduciary unless made with the actual knowledge that a fiduciary or nominee is
committing a breach of trust in requesting such registration of transfer, or
with the knowledge of such facts that its participation therein amounts to bad
faith. This Warrant shall be transferable on the books of the Company only upon
delivery thereof duly endorsed by the Holder or by his duly authorized attorney
or representative, or accompanied by proper evidence of succession, assignment,
or authority to transfer. In all cases of transfer by an attorney, executor,
administrator, guardian, or other legal representative, duly authenticated
evidence of his, her, or its authority shall be produced. Upon any registration
of transfer, the Company shall deliver a new Warrant or Warrants to the person
entitled thereto. This Warrant may be exchanged, at the option of the Holder
thereof, for another Warrant, or other Warrants of different denominations, of
like tenor and representing in the aggregate the right to purchase a like number
of Warrant Shares (or portions thereof), upon surrender to the Company or its
duly authorized agent. Notwithstanding the foregoing, neither this Warrant nor
the Warrant Shares issued or issuable upon exercise of this Warrant may be sold,
transferred, assigned, hypothecated or otherwise disposed of without the Holder
first providing the Company with an opinion of counsel reasonably satisfactory
to the Company that such sale, transfer, assignment, hypothecation or other
disposal will be exempt from the registration and prospectus delivery
requirements of applicable federal and state securities laws and regulations.
SECTION 5 RESERVATION OF SHARES.
The Company shall at all times reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of providing for
the exercise of the Warrants, such number of shares of Common Stock as shall,
from time to time, be sufficient therefor. The Company represents that all
shares of Common Stock issuable upon exercise of this Warrant are duly
authorized and, upon receipt by the Company of the full payment for such Warrant
Shares, will be validly issued, fully paid, and nonassessable, without any
personal liability attaching to the ownership thereof and will not be issued in
violation of any preemptive or similar rights of stockholders.
SECTION 6 ANTIDILUTION.
(a) If, while this Warrant is outstanding, the Company effects a
subdivision of the outstanding Common Stock, the Exercise Price then in effect
shall be proportionately decreased and the number of Warrant Shares issuable
upon exercise of this Warrant shall be increased in proportion to such increase
of outstanding Common Stock, and conversely, if, while this Warrant is
outstanding, the Company combines the outstanding Common Stock, the Exercise
Price then in effect shall be proportionately increased and the number of
Warrant Shares issuable upon exercise of this Warrant shall be decreased in
proportion to such decrease in outstanding Common Stock. Any adjustment under
this Section 6(a) shall become effective as of the record date for such event.
For purposes of this Section 6(a), a stock dividend shall be considered a stock
split. Simultaneous with any such adjustment, the number of Warrant Shares
issuable upon exercise of this Warrant shall be adjusted to equal the quotient
of (X) divided by (Y), where (X) equals the product of the number of Warrant
Shares issuable upon the exercise of this Warrant immediately prior thereto
multiplied by the Exercise Price per Warrant Share in effect immediately prior
thereto, and where (Y) equals the Exercise Price, as adjusted.
(b) All calculations under this Section 6 shall be made to the nearest
cent or to the nearest one-hundredth of a share, as the case may be.
(c) In any case in which this Section 6 shall require that an
adjustment in the number of Warrant Shares be made effective as of a record date
for a specified event, the Company may elect to defer, until the occurrence of
such event, issuing to the Holder, if the Holder exercised this Warrant after
such record date, the Warrant Shares, if any, issuable upon such exercise over
and above the number of Warrant Shares issuable upon such exercise on the basis
of the number of shares of Common Stock in effect prior to such adjustment;
provided, however, that the Company shall deliver to the Holder a due bill or
other appropriate instrument evidencing the Holder's right to receive such
additional shares of Common Stock upon the occurrence of the event requiring
such adjustment.
(d) Whenever there shall be an adjustment as provided in this Section
6, the Company shall within 15 days thereafter cause written notice thereof to
be sent by registered mail, postage prepaid, to the Holder, at its address as it
shall appear in the
Warrant Register, which notice shall be accompanied by an officer's certificate
setting forth the number of Warrant Shares issuable and the Exercise Price
thereof after such adjustment and setting forth a brief statement of the facts
requiring such adjustment and the computation thereof, which officer's
certificate shall be conclusive evidence of the correctness of any such
adjustment absent manifest error.
(e) The Company shall not be required to issue fractions of shares of
Common Stock or other capital stock of the Company upon the exercise of this
Warrant. If any fraction of a share of Common Stock would be issuable on the
exercise of this Warrant (or specified portions thereof), the Company shall pay
lieu of such fraction an amount in cash equal to the same fraction of the
current market price on the date of exercise of this Warrant.
(f) No adjustment in the Exercise Price per Warrant Share shall be
required if such adjustment is less than $0.01; provided, however, that any
adjustments which by reason of this Section 6 are not required to be made shall
be carried forward and taken into account in any subsequent adjustment.
SECTION 7 RECLASSIFICATION; REORGANIZATION; MERGER.
(a) In case of any capital reorganization, other than in the cases
referred to in Section 6(a) hereof, or the consolidation or merger of the
Company with or into another corporation (other than a merger or consolidation
in which the Company is the continuing corporation and which does not result in
any reclassification of the outstanding shares of Common Stock or the conversion
of such outstanding shares of Common Stock into shares of other stock or other
securities or property), or in the case of any sale, lease, or conveyance to
another corporation of the property and assets of any nature of the Company as
an entirety or substantially as an entirety (such actions being hereinafter
collectively referred to as "REORGANIZATIONS"), there shall thereafter be
deliverable upon exercise of this Warrant (in lieu of the number of Warrant
Shares theretofore deliverable) the number of shares of stock or other
securities or property to which a holder of the respective number of Warrant
Shares which would otherwise have been deliverable upon the exercise of this
Warrant would have been entitled upon such Reorganization if this Warrant had
been exercised in full immediately prior to such Reorganization. In case of any
Reorganization, appropriate adjustment, as determined in good faith by the Board
of Directors of the Company, shall be made in the application of the provisions
herein set forth with respect to the rights and interests of the Holder so that
the provisions set forth herein shall thereafter be applicable, as nearly as
possible, in relation to any shares or other property thereafter deliverable
upon exercise of this Warrant. Any such adjustment shall be made by, and set
forth in, a supplemental agreement between the Company, or any successor
thereto, and the Holder, with respect to this Warrant, and shall for all
purposes hereof conclusively be deemed to be an appropriate adjustment. In the
event of sale, lease, or conveyance or other transfer of all or substantially
all of the assets of the Company as part of a plan for liquidation of the
Company, all rights to exercise this Warrant shall terminate 30 days after the
Company
gives written notice to the Holder that such sale or conveyance or other
transfer has been consummated.
(b) In case of any reclassification or change of the shares of Common
Stock issuable upon exercise of this Warrant (other than a change in par value
or from a specified par value to no par value, or as a result of a subdivision
or combination, but including any change in the shares into two or more classes
or series of shares), or in case of any consolidation or merger of another
corporation into the Company in which the Company is the continuing corporation
and in which there is a reclassification or change (including a change to the
right to receive cash or other property) of the shares of Common Stock (other
than a change in par value, or from no par value to a specified par value, or as
a result of a subdivision or combination, but including any change in the shares
into two or more classes or series of shares), the Holder or holders of this
Warrant shall have the right thereafter to receive upon exercise of this Warrant
solely the kind and amount of shares of stock and other securities, property,
cash, or any combination thereof receivable upon such reclassification, change,
consolidation, or merger by a holder of the number of Warrant Shares for which
this Warrant might have been exercised immediately prior to such
reclassification, change, consolidation, or merger. Thereafter, appropriate
provision shall be made for adjustments which shall be as nearly equivalent as
practicable to the adjustments in Section 6.
(c) The above provisions of this Section 7 shall similarly apply to
successive reclassifications and changes of shares of Common Stock and to
successive consolidations, mergers, sales, leases, or conveyances.
SECTION 8 NOTICE OF CERTAIN EVENTS.
In case at any time the Company shall propose:
(a) to pay any dividend or make any distribution on shares of Common
Stock in shares of Common Stock or make any other distribution (other than
regularly scheduled cash dividends which are not in a greater amount per share
than the most recent such cash dividend) to all holders of Common Stock; or
(b) to issue any rights, warrants, or other securities to all holders
of Common Stock entitling them to purchase any additional shares of Common Stock
or any other rights, warrants, or other securities; or
(c) to effect any reclassification or change of outstanding shares of
Common Stock or any consolidation, merger, sale, lease, or conveyance of
property, as described in Section 7; or
(d) to effect any liquidation, dissolution, or winding-up of the
Company; or
(e) to take any other action which would cause an adjustment to the
Exercise Price per Warrant Share;
then, and in any one or more of such cases, the Company shall give written
notice thereof by registered mail, postage prepaid, to the Holder at the
Holder's address as it shall appear in the Warrant Register, mailed at least 10
days prior to: (i) the date as of which the holders of record of shares of
Common Stock to be entitled to receive any such dividend, distribution, rights,
warrants, or other securities are to be determined; (ii) the date on which any
such reclassification, change of outstanding shares of Common Stock,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution, or winding-up is expected to become effective and the date as of
which it is expected that holders of record of shares of Common Stock shall be
entitled to exchange their shares for securities or other property, if any,
deliverable upon such reclassification, change of outstanding shares,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution, or winding-up; or (iii) the date of such action which would require
an adjustment to the Exercise Price per Warrant Share.
SECTION 9 CHARGES AND TAXES.
The issuance of any shares or other securities upon the exercise of
this Warrant and the delivery of certificates or other instruments representing
such shares or other securities shall be made without charge to the Holder for
any tax or other charge in respect of such issuance. The Company shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of any certificate in a name other
than that of the Holder and the Company shall not be required to issue or
deliver any such certificate unless and until the person or persons requesting
the issue thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
SECTION 10 LEGEND.
Until sold pursuant to the provisions of Rule 144 or otherwise
registered under the Securities Act, the Warrant Shares issued on exercise of
the Warrants shall be subject to a stop transfer order and the certificate or
certificates representing the Warrant Shares shall bear the following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND
MAY NOT BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED UNLESS (1)
A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES
ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN
OPINION OF COUNSEL TO THE HOLDER OF THE SECURITIES, WHICH COUNSEL AND OPINION
ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED,
SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
APPLICABLE STATE SECURITIES LAWS.
SECTION 11 LOSS; THEFT; DESTRUCTION; MUTILATION.
Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction, or mutilation of any Warrant (and upon surrender of any
Warrant if mutilated), and upon receipt by the Company of reasonably
satisfactory indemnification, the Company shall execute and deliver to the
Holder thereof a new Warrant of like date, tenor, and denomination.
SECTION 12 STOCKHOLDER RIGHTS.
The Holder of any Warrant shall not have, solely on account of such
status, any rights of a stockholder of the Company, either at law or in equity,
or to any notice of meetings of stockholders or of any other proceedings of the
Company, except as provided in this Warrant.
SECTION 13 GOVERNING LAW.
This Warrant shall be construed in accordance with the laws of the
State of New York applicable to contracts made and performed within such State,
without regard to principles of conflicts of law.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
IN WITNESS WHEREOF, the Company has executed this Warrant as of the
date first above written.
MIDNIGHT HOLDINGS GROUP, INC.
BY: /S/ NICHOLAS A. COCCO
---------------------
NAME: NICHOLAS A. COCCO
TITLE: CHIEF EXECUTIVE OFFICER
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
attached Warrant.)
FOR VALUE RECEIVED, ______________________ hereby sells, assigns, and
transfers unto _________________ a Warrant to purchase __________ shares of
Common Stock of Midnight Holdings Group, Inc., a Delaware corporation (the
"COMPANY"), and does hereby irrevocably constitute and appoint ___________
attorney to transfer such Warrant on the books of the Company, with full power
of substitution.
Dated: _________________
Signature_______________________
NOTICE
The signature on the foregoing Assignment must correspond to the name
as written upon the face of this Warrant in every particular, without alteration
or enlargement or any change whatsoever.
ELECTION TO EXERCISE
To: Midnight Holdings Group, Inc.
The undersigned hereby exercises his, her, or its rights to purchase
shares of Common Stock (the "COMMON STOCK"), of Midnight Holdings Group, Inc., a
Delaware corporation (the "COMPANY"), covered by the within Warrant and tenders
payment herewith of the exercise price in full, in accordance with the terms
thereof, and requests that certificates for the securities constituting such
shares of Common Stock be issued in the name of, and delivered to:
Payment shall take the form of (check applicable box):
[ ] in lawful money of the United States; or
[ ] [if permitted] the cancellation of such number of
Warrant Shares as is necessary, in accordance with
the formula set forth in Section 2, to exercise this
Warrant with respect to the maximum number of Warrant
Shares purchasable pursuant to the cashless exercise
procedure set forth in Section 2.
- --------------------------------------------------------------------------------
(Print Name, Address, and Social Security or Tax Identification Number)
and, if such number of shares of Common Stock shall not constitute all such
shares of Common Stock covered by the within Warrant, that a new Warrant for the
balance of the shares of Common Stock covered by the within Warrant shall be
registered in the name of, and delivered to, the undersigned at the address
stated below.
Dated: __________________ Name________________________
(Print)
Address:
________________________
(Signature)