EXHIBIT 2.1
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933. THE REGISTERED HOLDER OF THIS WARRANT, BY ITS
ACCEPTANCE HEREOF, AGREES THAT IT WILL NOT SELL, TRANSFER OR ASSIGN THIS WARRANT
AND THE SHARES ISSUABLE HEREUNDER EXCEPT AS HEREIN PROVIDED.
VOID AFTER 5:00 P.M. EASTERN TIME, OCTOBER 13, 2010
WARRANT
For the Purchase of
150,000 Shares of Common Stock
of
eGAMES, INC.
1. Warrant.
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THIS CERTIFIES THAT, in consideration of One Hundred Twelve Thousand
Five Hundred Dollars ($112,500) upon the exercise hereof and other good and
valuable consideration, duly paid by or on behalf of Cinemaware, Inc.
("Holder"), as registered owner of this Warrant, to eGames, Inc. ("Company"),
Holder is entitled, at any time or from time to time at or after October 13,
2005 ("Commencement Date"), and at or before 5:00 p.m., Eastern Time October 13,
2010 ("Expiration Date"), but not thereafter, to subscribe for, purchase and
receive, in whole or in part, up to 150,000 shares of Common Stock of the
Company ("Common Stock"). If the Expiration Date is a day on which banking
institutions are authorized by law to close, then this Warrant may be exercised
on the next succeeding day which is not such a day in accordance with the terms
herein. This Warrant is initially exercisable at $.75 per share of Common Stock
purchased; provided, however, that upon the occurrence of any of the events
specified in Section 5 hereof, the rights granted by this Warrant, including the
exercise price and the number of shares of Common Stock to be received upon such
exercise, shall be adjusted as therein specified. The term "Exercise Price"
shall mean the initial exercise price or the adjusted exercise price, depending
on the context, of a share of Common Stock. The term "Securities" shall mean the
shares of Common Stock issuable upon exercise of this Warrant.
2. Exercise.
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2.1 Exercise Form. In order to exercise this Warrant, the exercise form
attached hereto must be duly executed and completed and delivered to the
Company, together with this Warrant and payment of the Exercise Price for the
Securities being purchased. If the subscription rights represented hereby shall
not be exercised at or before 5:00 p.m., Eastern time, on the Expiration Date,
this Warrant shall become and be void without further force or effect, and all
rights represented hereby shall cease and expire.
2.2 Legend. Each certificate for Securities purchased under this
Warrant shall bear a legend as follows, unless such Securities have been
registered under the Securities Act of 1933, as amended ("Act"):
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended ("Act") or
applicable state law. The securities may not be offered for sale, sold
or otherwise transferred except pursuant to an effective registration
statement under the Act, or pursuant to an exemption from registration
under the Act and applicable state law."
2.3 Conversion Right.
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2.3.1 Determination of Amount. Upon the terms and subject to
the conditions set forth in this Warrant, this Warrant may be exercised by
Holder by net issuance as to all or any part of the shares of Common Stock
covered hereby by surrender of this Warrant at Company's principal offices at
2000 Cabot Boulevard West, Suite 100, Langhorne, Pennsylvania 19047-1811 (or
such other address as Company may advise the registered Holder hereof by notice
given by certified, registered or overnight mail), with the form of election to
subscribe attached thereto completed and duly executed and specifying the number
of shares of Common Stock the Holder wishes to purchase. Effective as of the
Exercise Date, for the shares of Common Stock acquired pursuant to such exercise
of this Warrant, Holder shall be deemed to have surrendered to Company the right
to purchase that number of shares of Common Stock issuable upon exercise of this
Warrant as shall equal (1) the shares of Common Stock so purchased multiplied by
(2) an amount determined by dividing (A) the Exercise Price by (B) the
difference between the Market Price and the Exercise Price. Effective upon the
Exercise Date, this Warrant shall be deemed to have been exercised and Holder
exercising the same to have become a holder of record of shares of Common Stock
(or of the other securities or property to which he, she or it is entitled upon
such exercise) purchased hereunder for all purposes, and certificates for such
shares so purchased shall be delivered to Holder within a reasonable time (not
exceeding thirty days) after this Warrant shall have been exercised as set forth
herein above. In the event of a partial exercise of this Warrant, Company shall
issue and deliver to Holder, on the Exercise Date and in substitution of this
Warrant, a new warrant or warrants (at Holder's option), dated as of the date
hereof and with terms identical to the terms hereof, except that such new
warrant or warrants shall be exercisable, in the aggregate, for a number of
shares of Common Stock which shall equal the number of shares of Common Stock
under this Warrant that have not yet been exercised, less those used to exercise
as provided herein, subject to adjustment pursuant to Section 5 hereof. As used
herein, the term "Market Price" at any date shall be deemed to be the average of
the last reported sale prices for the thirty (30) business days immediately
preceding the date on which the Conversion Right is exercised, as officially
reported by the principal securities exchange on which the Common Stock is
listed or admitted to trading, or, if the Common Stock is not listed or admitted
to trading on any national securities exchange or if any such exchange on which
the Common Stock is listed is not its principal trading market, the last
reported sale price as furnished by the National Association of Securities
Dealers, Inc. (NASD) through the Nasdaq National Market or SmallCap Market,
or, if applicable, the OTC Bulletin Board, or if the Common Stock is not listed
or admitted to trading on any of the foregoing markets, or similar organization,
as determined in good faith by resolution of the Board of Directors of the
Company.
2.3.2 Exercise of Conversion Right. The Conversion Right may
be exercised by the Holder on any business day on or after the Commencement Date
and not later than the Expiration Date by delivering the Warrant with a duly
executed exercise form attached hereto with the conversion section completed to
the Company, exercising the Conversion Right and specifying the total number of
shares of Common Stock the Holder will purchase pursuant to such conversion.
3. Transfer.
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3.1 General Restrictions. The registered Holder of this Warrant, by its
acceptance hereof, agrees that it will not sell, transfer or assign or
hypothecate this Warrant to anyone who is not an "accredited investor" as
defined under Rule 501 promulgated under the Securities Act, without an
exemption from registration under the Securities Act, and except upon compliance
with, or pursuant to exceptions from, any other applicable securities laws. In
order to make any permitted assignment, the Holder must deliver to the Company
the assignment form attached hereto duly executed and completed, together with
this Warrant and payment of all transfer taxes, if any, payable in connection
therewith. The Company shall immediately transfer this Warrant on the books of
the Company and shall execute and deliver a new Warrant or Warrants of like
tenor to the appropriate assignee(s) expressly evidencing the right to purchase
the aggregate number of shares of Common Stock purchasable hereunder or such
portion of such number as shall be contemplated by any such assignment.
3.2 Restrictions Imposed by the Securities Act. This Warrant and the
Securities underlying this Warrant shall not be transferred unless and until (i)
the Company has received the opinion of counsel for the Holder, in form and
substance reasonably satisfactory to the Company, that such securities may be
sold to an "accredited investor" pursuant to an exemption from registration
under the Act, and applicable state law, or (ii) a registration statement
relating to such Securities has been filed by the Company and declared effective
by the Securities and Exchange Commission and compliance with applicable state
law.
3.3 Covenants of Holder. The registered Holder of this Warrant, by its
acceptance hereof, represents and covenants that this Warrant and the Common
Stock issuable upon exercise of this Warrant will be acquired for investment and
not with a view to the sale or distribution of any part thereof, and the Holder
has no present intention of selling or engaging in any public distribution of
the Warrant or the Common Stock issuable hereunder except pursuant to a
registration or exemption pursuant to the Act. The Holder understands (i) that
the Warrant and the Common Stock issuable upon exercise of this Warrant are not
registered under the Act or under applicable state securities laws on the ground
that the issuance contemplated by this Warrant will be exempt from the
registration and qualifications requirements thereof pursuant to exemptions
under the Act and any applicable state securities laws, and (ii) that the
Company's reliance on such exemptions are predicated on the representations set
forth in this Section 3.3. The Holder represents that it is an "accredited
investor" within the meaning of Rule 501 of Regulation D under the Act, as
presently in effect.
4. New Warrants to be Issued.
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4.1 Partial Exercise or Transfer. Subject to the restrictions in
Section 3 hereof, this Warrant may be exercised or assigned in whole or in part.
In the event of the exercise or assignment hereof in part only, upon surrender
of this Warrant for cancellation, together with the duly executed exercise or
assignment form and funds (or conversion equivalent) sufficient to pay any
Exercise Price and/or transfer tax, the Company shall cause to be delivered to
the Holder without charge a new Warrant of like tenor to this Warrant in the
name of the Holder evidencing the right of the Holder to purchase the aggregate
number of shares of Common Stock and Warrants purchasable hereunder as to which
this Warrant has not been exercised or assigned.
4.2 Lost Certificate. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this Warrant
and of reasonably satisfactory indemnification, the Company shall execute and
deliver a new Warrant of like tenor and date. Any such new Warrant executed and
delivered as a result of such loss, theft, mutilation or destruction shall
constitute a substitute contractual obligation on the part of the Company.
5. Adjustments
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5.1 Adjustments to Exercise Price and Number of Securities. The
Exercise Price and the number of shares of Common Stock underlying this Warrant
shall be subject to adjustment from time to time as hereinafter set forth:
5.1.1 Stock Dividends - Recapitalization, Reclassification,
Split-Ups. If, after the date hereof, and subject to the provisions of Section
5.2 below, the number of outstanding shares of Common Stock is increased by a
stock dividend on the Common Stock payable in shares of Common Stock or by a
split-up, recapitalization or reclassification of shares of Common Stock or
other similar event, then, on the effective date thereof, the number of shares
of Common Stock issuable on exercise of this Warrant shall be increased in
proportion to such increase in outstanding shares.
5.1.2 Aggregation of Shares. If after the date hereof, and
subject to the provisions of Section 5.2, the number of outstanding shares of
Common Stock is decreased by a consolidation, combination or reclassification of
shares of Common Stock or other similar event, then, upon the effective date
thereof, the number of shares of Common Stock issuable on exercise of this
Warrant shall be decreased in proportion to such decrease in outstanding shares.
5.1.3 Adjustments in Exercise Price. Whenever the number of
shares of Common Stock purchasable upon the exercise of this Warrant is
adjusted, as provided in this Section 5.1, the Exercise Price, on a "per share"
basis, shall be adjusted (to the nearest cent) by multiplying such Exercise
Price immediately prior to such adjustment by a fraction (x) the numerator of
which shall be the number of shares of Common Stock purchasable upon the
exercise of this Warrant immediately prior to such adjustment, and (y) the
denominator of which shall be the number of shares of Common Stock so
purchasable immediately thereafter.
5.1.4 Replacement of Securities upon Reorganization, etc. In
case of any reclassification or reorganization of the outstanding shares of
Common Stock other than a change covered by Section 5.1.1 hereof or which solely
affects the par value of such shares of Common Stock, or in the case of any
merger or consolidation of the Company with or into another corporation (other
than a consolidation or merger in which the Company is the continuing
corporation and which does not result in any reclassification or reorganization
of the outstanding shares of Common Stock), or in the case of any sale or
conveyance to another corporation or entity of the property of the Company as an
entirety or substantially as an entirety in connection with which the Company is
dissolved in such a way that holders of Common Stock shall be entitled to
receive stock, securities or property, the Holder of this Warrant shall have the
right thereafter (until the expiration of the right of exercise of this Warrant)
to receive upon the exercise hereof, for the same aggregate Exercise Price
payable hereunder immediately prior to such event, the kind and amount of shares
of stock or other securities or property (including cash) receivable upon such
reclassification, reorganization, merger or consolidation, or upon a dissolution
following any such sale or other transfer, by a holder of the number of shares
of Common Stock of the Company equal to the number of shares of Common Stock
obtainable upon exercise of this Warrant immediately prior to such event; and if
any reclassification also results in a change in shares of Common Stock covered
by Sections 5.1.1 or 5.1.2, then such adjustment shall be made pursuant to
Sections 5.1.1, 5.1.2, 5.1.3 and this Section 5.1.4. The provisions of this
Section 5.1.4 shall similarly apply to successive reclassifications,
reorganizations, mergers or consolidations, sales or other transfers.
5.1.5 Changes in Form of Warrant. This form of Warrant need
not be changed because of any change pursuant to this Section, and Warrants
issued after such change may state the same Exercise Price and the same number
of shares of Common Stock and Warrants as are stated in the Warrants initially
issued pursuant to this Agreement. The acceptance by any Holder of the issuance
of new Warrants reflecting a required or permissive change shall not be deemed
to waive any rights to a prior adjustment or the computation thereof.
5.2 Elimination of Fractional Interests. The Company shall not be
required to issue certificates representing fractions of shares of Common Stock
upon the exercise of this Warrant, nor shall it be required to issue scrip or
pay cash in lieu of any fractional interests, it being the intent of the parties
that all fractional interests shall be eliminated by rounding any fraction up to
the nearest whole number of shares of Common Stock or other securities,
properties or rights.
6. Reservation and Listing. The Company shall at all times reserve and keep
available out of its authorized shares of Common Stock, solely for the purpose
of issuance upon exercise of this Warrant, such number of shares of Common Stock
or other securities, properties or rights as shall be issuable upon the exercise
thereof. The Company covenants and agrees that, upon exercise of the Warrants
and payment of the Exercise Price therefor in accordance with the terms of this
Warrant, all shares of Common Stock and other securities issuable upon such
exercise shall be duly and validly issued, fully paid and non-assessable and not
subject to preemptive rights of any stockholder. As long as the Warrants shall
be outstanding, the Company shall use its best efforts to cause all shares of
Common Stock issuable upon exercise of the Warrants to be listed (subject to
official notice of issuance) on all securities exchanges (or, if applicable on
Nasdaq) on which the Common Stock is then listed and/or quoted.
7. Certain Notice Requirements.
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7.1 Holder's Right to Receive Notice. Nothing herein shall be construed
as conferring upon the Holders the right to vote or consent or to receive notice
as a stockholder for the election of directors or any other matter, or as having
any rights whatsoever as a stockholder of the Company. If, however, at any time
prior to the expiration of the Warrants and their exercise, any of the events
described in Section 7.2 shall occur, then, in one or more of said events, the
Company shall give written notice of such event prior to or promptly after the
date fixed as a record date or the date of closing the transfer books for the
determination of the stockholders entitled to such dividend, distribution,
conversion or exchange of securities or subscription rights, or entitled to vote
on such proposed dissolution, liquidation, winding up or sale; provided that,
notwithstanding the foregoing, the Company shall give written notice of the
event prior to the above dates if the Company has made public disclosure of such
information. Such notice shall specify such record date or the date of the
closing of the transfer books, as the case may be.
7.2 Events Requiring Notice. The Company shall be required to give the
notice described in this Section 7 upon one or more of the following events: (i)
if the Company shall take a record of the holders of its shares of Common Stock
for the purpose of entitling them to receive a stock dividend or distribution,
or (ii) the Company shall offer to all the holders of its Common Stock any
additional shares of capital stock of the Company or securities convertible into
or exchangeable for shares of capital stock of the Company, or any option, right
or warrant to subscribe therefor, or (iii) a merger or reorganization in which
the Company is not the surviving party, or (iv) a dissolution, liquidation or
winding up of the Company (other than in connection with a consolidation or
merger) or a sale of all or substantially all of its property, assets and
business.
7.3 Notice of Change in Exercise Price. The Company shall, promptly
after an event requiring a change in the Exercise Price pursuant to Section 5
hereof, send notice to the Holders of such event and change ("Price Notice").
The Price Notice shall describe the event causing the change and the method of
calculating same and shall be certified as being true and accurate by the
Company's President and Chief Financial Officer.
7.4 Transmittal of Notices. All notices, requests, consents and other
communications under this Warrant shall be in writing and shall be deemed to
have been duly made on the date of delivery if delivered personally or sent by
overnight courier, with acknowledgment of receipt by the party to which notice
is given, or on the fifth day after mailing if mailed to the party to whom
notice is to be given, by registered or certified mail, return receipt
requested, postage prepaid and properly addressed as follows: (i) if to the
registered Holder of this Warrant, to the address of such Holder as shown on the
books of the Company, or (ii) if to the Company, to its principal executive
office.
8. Miscellaneous.
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8.1 Headings. The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Warrant.
8.2 Entire Agreement. This Warrant (together with the other agreements
and documents being delivered pursuant to or in connection with this Warrant)
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof, and supersedes all prior agreements and understandings of
the parties, oral and written, with respect to the subject matter hereof.
8.3 Binding Effect. This Warrant shall inure solely to the benefit of
and shall be binding upon, the Holder and the Company and their respective
successors, legal representatives and assigns, and no other person shall have or
be construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Warrant or any provisions herein contained.
8.4 Governing Law. This Warrant shall be governed by and construed and
enforced in accordance with the law of the Commonwealth of Pennsylvania, without
giving effect to conflict of laws.
8.5 Waiver, Etc. The failure of the Company or the Holder to at any
time enforce any of the provisions of this Warrant shall not be deemed or
construed to be a waiver of any such provision, nor to in any way affect the
validity of this Warrant or any provision hereof or the right of the Company or
any Holder to thereafter enforce each and every provision of this Warrant. No
waiver of any breach, non-compliance or non-fulfillment of any of the provisions
of this Warrant shall be effective unless set forth in a written instrument
executed by the party or parties against whom or which enforcement of such
waiver is sought; and no waiver of any such breach, non-compliance or
non-fulfillment shall be construed or deemed to be a waiver of any other or
subsequent breach, non-compliance or non-fulfillment.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer as of the 13th day of October, 2005.
eGAMES, INC.
By:/s/ Gerald W. Klein
Name: Gerald W. Klein
Title: President and CEO
Form to be used to exercise Warrant:
eGames, Inc.
2000 Cabot Boulevard W., Suite 110
Langhorne, PA 19406
Date: _____________________, 200__
The undersigned hereby elects irrevocably to exercise the
within Warrant and to purchase ________ shares of Common Stock of eGames, Inc.
and hereby makes payment of $____________ (at the rate of $_________ per share
of Common Stock) in payment of the Exercise Price pursuant thereto. Please issue
the Common Stock as to which this Warrant is exercised in accordance with the
instructions given below.
or
--
The undersigned hereby elects irrevocably to convert its right
to purchase ____________ shares of Common Stock purchasable under the within
Warrant into __________ shares of Common Stock of eGames, Inc. (based on a
"Market Price" of $________ per share of Common Stock). Please issue the Common
Stock in accordance with the instructions given below.
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Signature
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Signature Guaranteed
NOTICE: The signature to this form must correspond with the
name as written upon the face of the within Warrant in every particular without
alteration or enlargement or any change whatsoever, and must be guaranteed by a
bank, other than a savings bank, or by a trust company or by a firm having
membership on a registered national securities exchange.
INSTRUCTIONS FOR REGISTRATION OF SECURITIES
Name ________________________________________________________
(Print in Block Letters)
Address ________________________________________________________
Form to be used to assign Warrant:
ASSIGNMENT
(To be executed by the registered Holder to effect a transfer
of the within Warrant):
FOR VALUE RECEIVED, ________________________________ does
hereby sell, assign and transfer unto _________________________________ the
right to purchase _____________________ shares of Common Stock of eGames, Inc.
("Company") evidenced by the within Warrant and does hereby authorize the
Company to transfer such right on the books of the Company.
Dated: ____________________, 200__
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Signature
NOTICE: The signature to this form must correspond with the
name as written upon the face of the within Warrant in every particular without
alteration or enlargement or any change whatsoever, and must be guaranteed by a
bank, other than a savings bank, or by a trust company or by a firm having
membership on a registered national securities exchange.