Exhibit 10.3
EXHIBIT
B
NEITHER THIS
SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY
NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL
OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE
OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
COMMON STOCK PURCHASE
WARRANT
To Purchase 1,334,813 Shares of
Common Stock of
SYZYGY ENTERTAINMENT,
LTD.
THIS COMMON STOCK PURCHASE WARRANT (the “
Warrant ”) certifies that, for value received, Shelter
Island Opportunity Fund, LLC or its registered assigns (the “
Holder ”), is entitled, upon the terms and subject to
the conditions hereinafter set forth, at any time on or after the
date hereof (the “ Initial Exercise Date ”) and
on or prior to the close of business on the fifth anniversary of
the Initial Exercise Date (the “ Termination Date
”) but not thereafter, to subscribe for and purchase from
Syzygy Entertainment, Ltd., a Nevada corporation (the “
Company ”), up to 1,334,813 shares (the “
Warrant Shares ”) of Common Stock, par value $0.001
per share, of the Company (the “ Common Stock
”). The purchase price of one share of Common Stock under
this Warrant shall be equal to the Exercise Price, as defined in
Section 2(b).
Section 1 . Definitions . Capitalized terms used and not otherwise
defined herein shall have the meanings set forth in that certain
Securities Purchase Agreement (the “ Securities Purchase
Agreement ”), dated as of July 15, 2008, as heretofore
and hereafter amended, between the Company and the initial
Holder.
a) Exercise of Warrant . Exercise of the
purchase rights represented by this Warrant may be made, in whole
or in part, at any time or times on or after the Initial Exercise
Date and on or before the Termination Date by delivery to the
Company of a duly executed facsimile copy of the Notice of Exercise
Form annexed hereto (or such other office or agency of the Company
as it may designate by notice in writing to the registered Holder
at the address of such Holder appearing on the books of the
Company); and, within five Trading Days of the date said Notice of
Exercise is delivered to the Company, the Company shall have
received payment of the aggregate Exercise Price of the shares
thereby purchased by wire transfer or cashier’s check drawn
on a United States bank. Notwithstanding anything herein to the
contrary, the Holder shall not be required to physically surrender
this Warrant to the Company until the Holder has purchased all of
the Warrant Shares available hereunder and the Warrant has been
exercised in full, in which case, the Holder shall surrender this
Warrant to the Company for cancellation within three Trading Days
of the date the final Notice of Exercise is delivered to the
Company. Partial exercises of this Warrant resulting in purchases
of a portion of the total number of Warrant Shares available
hereunder shall have the effect of lowering the outstanding number
of Warrant Shares purchasable hereunder in an amount equal to the
applicable number of Warrant Shares purchased. The Holder and the
Company shall maintain records showing the number of Warrant Shares
purchased and the date of such purchases. The Company shall deliver
any objection to any Notice of Exercise Form within two Business
Days of receipt of such notice. The Holder, by acceptance of this
Warrant, acknowledges and agrees that, by reason of the provisions
of this paragraph, following the purchase of a portion of the
Warrant Shares hereunder, the number of Warrant Shares available
for purchase hereunder at any given time may be less than the
amount stated on the face hereof.
If at any time
after the date of the issuance of this Warrant there is no
effective registration statement registering, or no current
prospectus available for, the resale of the shares issuable upon
exercise of this Warrant, in lieu of the payment of the aggregate
Exercise Price, the Holder shall have the right (but not the
obligation), to require the Company to convert up to 50% of this
Warrant, in whole or in part, into shares of Common Stock (the
“ Cashless Exercise ”). Upon the occurrence of a
Cashless Exercise, the Company shall deliver to the Holder (without
payment of the Exercise Price) that number of shares of Common
Stock equal to the quotient obtained by dividing (i) the value of
this Warrant or portion thereof at the time of the Cashless
Exercise (determined by subtracting the aggregate Exercise Price at
the time of the Cashless Exercise from the VWAP of the shares of
Common Stock issuable at the time of the Cashless Exercise) by (ii)
the VWAP of one share of Common Stock at the time of the Cashless
Exercise. The Cashless Exercise may be exercised by surrendering
this Warrant to the Company, with an executed Notice of Exercise
with the conversion section completed, selecting the Cashless
Exercise and specifying the total number of shares of Common Stock
that the Holder will be issued pursuant to such Cashless
Exercise.
b) Exercise Price . The exercise price
per share of the Common Stock under this Warrant shall be $1.01
(the “ Exercise Price ”).
c) Mechanics of Exercise .
i. Authorization of Warrant Shares
. The Company covenants that all
Warrant Shares which may be issued upon the exercise of the
purchase rights represented by this Warrant will, upon exercise of
the purchase rights represented by this Warrant, be duly
authorized, validly issued, fully paid and nonassessable and free
from all taxes, liens and charges created by the Company in respect
of the issue thereof (other than taxes in respect of any transfer
occurring contemporaneously with such issue).
ii. Delivery of Certificates Upon
Exercise . Certificates
for shares purchased hereunder shall be transmitted by the transfer
agent of the Company to the Holder by crediting the account of the
Holder’s prime broker with the Depository Trust Company
through its Deposit Withdrawal Agent Commission (“
DWAC ”) system if the Company is a participant in such
system, and otherwise by physical delivery to the address specified
by the Holder in the Notice of Exercise within 10 Trading Days from
the delivery to the Company of the Notice of Exercise Form,
surrender of this Warrant (if required) and payment of the
aggregate Exercise Price as set forth above (“ Warrant
Share Delivery Date ”). This Warrant shall be deemed to
have been exercised on the date the Exercise Price is received by
the Company. The Warrant Shares shall be deemed to have been
issued, and Holder or any other person so designated to be named
therein shall be deemed to have become a holder of record of such
shares for all purposes, as of the date the Warrant has been
exercised by payment to the Company of the Exercise Price and all
taxes required to be paid by the Holder, if any, pursuant to
Section 2(c)(vi) prior to the issuance of such shares, have been
paid.
iii. Delivery of New Warrants Upon
Exercise . If this
Warrant shall have been exercised in part, the Company shall, at
the request of a Holder and upon surrender of this Warrant
certificate, at the time of delivery of the certificate or
certificates representing Warrant Shares, deliver to Holder a new
Warrant evidencing the rights of Holder to purchase the unpurchased
Warrant Shares called for by this Warrant, which new Warrant shall
in all other respects be identical with this Warrant.
iv. Rescission Rights . If the Company fails to cause its transfer
agent to transmit to the Holder a certificate or certificates
representing the Warrant Shares pursuant to Section 2(c)(ii) by the
Warrant Share Delivery Date, then the Holder will have the right to
rescind such exercise.
v. No Fractional Shares or Scrip
. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of
this Warrant. As to any fraction of a share which Holder would
otherwise be entitled to purchase upon such exercise, the Company
shall at its election, either pay a cash adjustment in respect of
such final fraction in an amount equal to such fraction multiplied
by the Exercise Price or round up to the next whole
share.
vi. Charges, Taxes and Expenses
. Issuance of certificates for
Warrant Shares shall be made without charge to the Holder for any
issue or transfer tax or other incidental expense in respect of the
issuance of such certificate, all of which taxes and expenses shall
be paid by the Company, and such certificates shall be issued in
the name of the Holder or in such name or names as may be directed
by the Holder; provided , however , that in the event
certificates for Warrant Shares are to be issued in a name other
than the name of the Holder, this Warrant when surrendered for
exercise shall be accompanied by the Assignment Form attached
hereto duly executed by the Holder; and the Company may require, as
a condition thereto, the payment of a sum sufficient to reimburse
it for any transfer tax incidental thereto.
vii. Closing of Books . The Company will not close its stockholder
books or records in any manner which prevents the timely exercise
of this Warrant, pursuant to the terms hereof.
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Exercise
Limitations. The Company
shall not affect any exercise of this Warrant and a Holder shall
not have the right to exercise any portion of this Warrant,
pursuant to Section 2(a) or otherwise, to the extent that after
giving effect to such issuance after exercise, such Holder
(together with such Holder’s Affiliates, and any other person
or entity acting as a group together with such Holder or any of
such Holder’s Affiliates), as set forth on the applicable
Notice of Exercise, would beneficially own in excess of 9.99% of
the number of shares of the Common Stock outstanding immediately
after giving effect to such issuance. For purposes of the
foregoing sentence, the number of shares of Common Stock
beneficially owned by such 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 sentence is
being made, but shall exclude the number of shares of Common Stock
which would be issuable upon (A) exercise of the remaining,
nonexercised portion of this Warrant beneficially owned by such
Holder or any of its Affiliates and (B) exercise or conversion of
the unexercised or nonconverted portion of any other securities of
the Company (including, without limitation, any Warrants) subject
to a limitation on conversion or exercise analogous to the
limitation contained herein beneficially owned by such Holder or
any of its Affiliates. Except as set forth in the preceding
sentence, for purposes of this Section 2(d), beneficial ownership
shall be calculated in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended (the “Exchange
Act”) and the rules and regulations promulgated thereunder,
it being acknowledged by the Holder that the Company is not
representing to such Holder that such calculation is in compliance
with Section 13(d) of the Exchange Act and the Holder is solely
responsible for any schedules required to be filed in accordance
therewith. To the extent that the limitation contained in this
Section 2(d) applies, the determination of whether this Warrant is
exercisable (in relation to other securities owned by such Holder)
and of which a portion of this Warrant is exercisable shall be in
the sole discretion of the Holder, and the submission of a Notice
of Exercise shall be deemed to be the Holder’s determination
of whether this Warrant is exercisable (in relation to other
securities owned by the Holder) and of which portion of this
Warrant is exercisable, in each case subject to such aggregate
percentage limitation, and the Company shall have no obligation to
verify or confirm the accuracy of such determination. In addition,
a determination as to any group status as contemplated above shall
be determined in accordance with Section 13(d) of the Exchange Act
and the rules and regulations promulgated thereunder. For purposes
of this Section 2(d), 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 (x) the
Company’s most recent Form 10-QSB or Form 10-KSB, as the case
may be, (y) a more recent public announcement by the Company or (z)
any other notice by the Company or the Company’s Transfer
Agent setting forth the number of shares of Common Stock
outstanding. Upon the written or oral request of the Holder,
the Company shall within two Trading Days confirm orally and in
writing to the 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
conversion or exercise of securities of the Company, including this
Warrant, by the Holder or its Affiliates since the date as of which
such number of outstanding shares of Common Stock was reported. The
provisions of this Section 2(d) may be waived by the Holder, at the
election of the Holder, upon not less than 61 days’ prior
notice to the Company, and the provisions of this Section 2(d)
shall continue to apply until such 61 st day (or such
later date, as determined by such Holder, as may be specified in
such notice of waiver).
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Section 3 . Certain Adjustments .
a) Stock Dividends and Splits
. If the Company, at any time while
this Warrant is outstanding: (A) pays a stock dividend or otherwise
makes a distribution or distributions on shares of its Common Stock
or any other equity or equity equivalent securities payable in
shares of Common Stock (which, for avoidance of doubt, shall not
include any shares of Common Stock issued by the Company upon
exercise of this Warrant), (B) subdivides outstanding shares of
Common Stock into a larger number of shares, (C) combines
(including by way of reverse stock split) outstanding shares of
Common Stock into a smaller number of shares, or (D) issues by
reclassification of shares of the Common Stock any shares of
capital stock of the Company, then in each case, the Exercise Price
shall be multiplied by a fraction of which the numerator shall be
the number of shares of Common Stock (excluding treasury shares, if
any) outstanding immediately before such event and of which the
denominator shall be the number of shares of Common Stock
outstanding immediately after such event. Any adjustment made
pursuant to this Section 3(a) shall become effective immediately
after the record date for the determination of stockholders
entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a
subdivision, combination or re-classification.
b) Subsequent Equity Sales . If the Company at any time while this Warrant
is outstanding, except for issuances contemplated by Section 2(c)
and except for any Exempt Issuances, shall sell or grant any option
to purchase or sell or grant any right to reprice its securities,
or otherwise dispose of or issue (or announce any offer, sale,
grant or any option to purchase or other disposition) any Common
Stock or Common Stock Equivalents entitling any Person to acquire
shares of Common Stock, at an effective price per share less than
the then Exercise Price (such lower price, the “ Base
Share Price ” and such issuances collectively, a “
Dilutive Issuance ”) (if the holder of the Common
Stock or Common Stock Equivalents so issued shall at any time,
whether by operation of purchase price adjustments, reset
provisions, floating conversion, exercise or exchange prices or
otherwise, or due to warrants, options or rights per share which
are issued in connection with such issuance, be entitled to receive
shares of Common Stock at an effective price per share which is
less than the Exe
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