THIS WARRANT AND THE SHARES ISSUABLE UPON THE
EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. EXCEPT AS OTHERWISE
SET FORTH HEREIN OR IN A SECURITIES PURCHASE AGREEMENT DATED AS OF
JULY 31, 2008, NEITHER THIS WARRANT NOR ANY OF SUCH SHARES MAY BE
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER SAID ACT OR,
AN OPINION OF COUNSEL, IN FORM, SUBSTANCE AND SCOPE, CUSTOMARY FOR
OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS, THAT REGISTRATION
IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT TO RULE 144
OR REGULATION S UNDER SUCH ACT.
Right to
Purchase
480,000,000
Shares of
Common Stock,
par value $.001
per share
STOCK PURCHASE
WARRANT
THIS CERTIFIES THAT
, for value received, AJW Partners,
LLC or its registered assigns, is entitled to purchase from
Pacificap Entertainment Holdings, Inc., a Nevada corporation
(the “ Company ”), at any time or from time to
time during the period specified in Paragraph 2 hereof,
480,000,000 fully paid and nonassessable shares of the
Company’s Common Stock, par value $.001 per share (the
“ Common Stock ”), at an exercise price per
share equal to $.001 (the “ Exercise Price
”). The term “Warrant Shares,” as used
herein, refers to the shares of Common Stock purchasable
hereunder. The Warrant Shares and the Exercise Price are
subject to adjustment as provided in Paragraph 4
hereof. The term “Warrants” means this
Warrant and the other warrants issued pursuant to that certain
Securities Purchase Agreement, dated July 31, 2008, by and among
the Company and the Buyers listed on the execution page thereof
(the “ Securities Purchase Agreement
”).
This Warrant is subject to the following terms,
provisions, and conditions:
1.
Manner of Exercise; Issuance
of Certificates; Payment for Shares.
Subject to the provisions hereof, this Warrant
may be exercised by the holder hereof, in whole or in part, by the
surrender of this Warrant, together with a completed exercise
agreement in the form attached hereto (the “Exercise
Agreement”), to the Company during normal business hours on
any business day at the Company’s principal executive offices
(or such other office or agency of the Company as it may designate
by notice to the holder hereof), and upon
(i) payment to the Company in cash, by certified
or official bank check or by wire transfer for the account of
the Company of the Exercise Price for the Warrant Shares specified
in the Exercise Agreement or (ii) if the resale of the Warrant
Shares by the holder is not then registered pursuant to an
effective registration statement under the Securities Act of 1933,
as amended (the “Securities Act”), delivery to the
Company of a written notice of an election to effect a
“Cashless Exercise” (as defined in Section 11(c) below)
for the Warrant Shares specified in the Exercise
Agreement. The Warrant Shares so purchased shall be
deemed to be issued to the holder hereof or such holder’s
designee, as the record owner of such shares, as of the close of
business on the date on which this Warrant shall have been
surrendered, the completed Exercise Agreement shall have been
delivered, and payment shall have been made for such shares
as set forth above. Certificates for the Warrant
Shares so purchased, representing the aggregate number of shares
specified in the Exercise Agreement, shall be delivered to the
holder hereof within a reasonable time, not exceeding five (5)
business days, after this Warrant shall have been so
exercised. The certificates so delivered shall be in
such denominations as may be requested by the holder hereof and
shall be registered in the name of such holder or such other name
as shall be designated by such holder. If this Warrant
shall have been exercised only in part, then, unless this Warrant
has expired, the Company shall, at its expense, at the time of
delivery of such certificates, deliver to the holder a new Warrant
representing the number of shares with respect to which this
Warrant shall not then have been exercised. In addition
to all other available remedies at law or in equity, if the Company
fails to deliver certificates for the Warrant Shares within five
(5) business days after this Warrant is exercised, then the Company
shall pay to the holder in cash a penalty (the
“Penalty”) equal to 2% of the number of Warrant Shares
that the holder is entitled to multiplied by the Market Price (as
hereinafter defined) for each day that the Company fails to deliver
certificates for the Warrant Shares. For example, if the
holder is entitled to 100,000 Warrant Shares and the Market Price
is $2.00, then the Company shall pay to the holder $4,000 for each
day that the Company fails to deliver certificates for the Warrant
Shares. The Penalty shall be paid to the holder by the
fifth day of the month following the month in which it has
accrued.
Notwithstanding anything in this
Warrant to the contrary, in no event shall the holder of this
Warrant be entitled to exercise a number of Warrants (or portions
thereof) in excess of the number of Warrants (or portions thereof)
upon exercise of which the sum of (i) the number of shares of
Common Stock beneficially owned by the holder and its affiliates
(other than shares of Common Stock which may be deemed beneficially
owned through the ownership of the unexercised Warrants and the
unexercised or unconverted portion of any other securities of the
Company (including the Notes (as defined in the Securities Purchase
Agreement)) subject to a limitation on conversion or exercise
analogous to the limitation contained herein) and (ii) the number
of shares of Common Stock issuable upon exercise of the Warrants
(or portions thereof) with respect to which the determination
described herein is being made, would result in beneficial
ownership by the holder and its affiliates of more than 4.9% of the
outstanding shares of Common Stock. For purposes of the
immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation 13D-G thereunder,
except as otherwise provided in clause (i) of the preceding
sentence. Notwithstanding anything to the contrary
contained herein, the limitation on exercise of this Warrant set
forth herein may not be amended without (i) the written consent of
the holder hereof and the Company and (ii) the approval of a
majority of shareholders of the Company.
This Warrant is exercisable at any
time or from time to time on or after the date on which this
Warrant is issued and delivered pursuant to the terms of the
Securities Purchase Agreement and before 6:00 p.m., New York, New
York time on the seventh (7 th )
anniversary of the date of issuance (the “Exercise
Period”).
3.
Certain Agreements of the
Company .
The Company hereby covenants and
agrees as follows:
(a)
Shares to be Fully
Paid .
All Warrant Shares will,
upon issuance in accordance with the terms of this Warrant, be
validly issued, fully paid, and nonassessable and free from all
taxes, liens, and charges with respect to the issue
thereof.
(b)
Reservation of
Shares . During the Exercise Period, the
Company shall at all times have authorized, and reserved for the
purpose of issuance upon exercise of this Warrant, a
sufficient number of shares of Common Stock to provide for
the exercise of this Warrant.
(c)
Listing
. The Company shall promptly secure
the listing of the shares of Common Stock issuable upon exercise of
the Warrant upon each national securities exchange or automated
quotation system, if any, upon which shares of Common Stock are
then listed (subject to official notice of issuance upon exercise
of this Warrant) and shall maintain, so long as any other shares of
Common Stock shall be so listed, such listing of all shares of
Common Stock 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.
(d)
Certain Actions
Prohibited . The Company will not, by amendment
of its charter 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. Without limiting the
generality of the foregoing, the Company (i) will not
increase the par value of any shares of Common Stock receivable
upon the exercise of this Warrant above the 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.
(e)
Successors and
Assigns . This Warrant will be binding upon
any entity succeeding to the Company by merger, consolidation, or
acquisition of all or substantially all the Company’s
assets.
4.
Antidilution
Provisions .
During the Exercise Period, the Exercise Price
and the number of Warrant Shares shall be subject to adjustment
from time to time as provided in this Paragraph 4.
In the event that any adjustment of
the Exercise Price as required herein results in a fraction of a
cent, such Exercise Price shall be rounded up to the nearest
cent.
(a)
Adjustment of Exercise Price
and Number of Shares upon Issuance of Common Stock
. Except as otherwise provided in
Paragraphs 4(c) and 4(e) hereof, if and whenever on or after the
date of issuance of this Warrant, the Company issues or sells, or
in accordance with Paragraph 4(b) hereof is deemed to have issued
or sold, any shares of Common Stock for no consideration or for a
consideration per share (before deduction of reasonable expenses or
commissions or underwriting discounts or allowances in connection
therewith) less than the Market Price on the date of issuance (a
“Dilutive Issuance”), then immediately upon the
Dilutive Issuance, the Exercise Price will be reduced to a price
determined by multiplying the Exercise Price in effect immediately
prior to the Dilutive Issuance by a fraction, (i) the numerator of
which is an amount equal to the sum of (x) the number of shares of
Common Stock actually outstanding immediately prior to the Dilutive
Issuance, plus (y) the quotient of the aggregate consideration,
calculated as set forth in Paragraph 4(b) hereof, received by the
Company upon such Dilutive Issuance divided by the Market Price in
effect immediately prior to the Dilutive Issuance, and (ii) the
denominator of which is the total number of shares of Common Stock
Deemed Outstanding (as defined below) immediately after the
Dilutive Issuance. Notwithstanding anything contained in
this Section 4 to the contrary, the holder hereof hereby
acknowledges that the issuance of any shares of Common Stock in
connection with any of the transactions set forth on Schedule
A , attached hereto, shall not be deemed a Dilutive Issuance
and accordingly there will be no reduction to the
Exercise Price.
(b)
Effect on Exercise Price of
Certain Events . For purposes of determining the
adjusted Exercise Price under Paragraph 4(a) hereof, the following
will be applicable:
(i)
Issuance of Rights or
Options . If the Company in any manner issues
or grants any warrants, rights or options, whether or not
immediately exercisable, to subscribe for or to purchase Common
Stock or other securities convertible into or exchangeable for
Common Stock (“Convertible Securities”) (such warrants,
rights and options to purchase Common Stock or Convertible
Securities are hereinafter referred to as “Options”)
and the price per share for which Common Stock is issuable upon the
exercise of such Options is less than the Market Price on the date
of issuance or grant of such Options, then the maximum total number
of shares of Common Stock issuable upon the exercise of all such
Options will, as of the date of the issuance or grant of such
Options, be deemed to be outstanding and to have been issued and
sold by the Company for such price per share. For
purposes of the preceding sentence, the “price per share for
which Common Stock is issuable upon the exercise of such
Options” is determined by dividing (i) the total amount, if
any, received or receivable by the Company as consideration for the
issuance or granting of all such Options, plus the minimum
aggregate amount of additional consideration, if any, payable to
the Company upon the exercise of all such Options, plus, in the
case of Convertible Securities issuable upon the exercise of such
Options, the minimum aggregate amount of additional consideration
payable upon the conversion or exchange thereof at the time such
Convertible Securities first become convertible or exchangeable, by
(ii) the maximum total number of shares of Common Stock issuable
upon the exercise of all such Options (assuming full conversion of
Convertible Securities, if applicable). No further
adjustment to the Exercise Price will be made upon the actual
issuance of such Common Stock upon the exercise of such Options or
upon the conversion or exchange of Convertible Securities issuable
upon exercise of such Options.
(ii)
Issuance of Convertible
Securities . If the Company in any manner issues
or sells any Convertible Securities, whether or not immediately
convertible (other than where the same are issuable upon the
exercise of Options) and the price per share for which Common Stock
is issuable upon such conversion or exchange is less than the
Market Price on the date of issuance, then the maximum total number
of shares of Common Stock issuable upon the conversion or exchange
of all such Convertible Securities will, as of the date of the
issuance of such Convertible Securities, be deemed to be
outstanding and to have been issued and sold by the Company for
such price per share. For the purposes of the preceding
sentence, the “price per share for which Common Stock is
issuable upon such conversion or exchange” is determined by
dividing (i) the total amount, if any, received or receivable by
the Company as consideration for the issuance or sale of all such
Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the
conversion or exchange thereof at the time such Convertible
Securities first become convertible or exchangeable, by (ii) the
maximum total number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible
Securities. No further adjustment to the Exercise Price
will be made upon the actual issuance of such Common Stock upon
conversion or exchange of such Convertible Securities.
(iii)
Change in Option Price or
Conversion Rate . If there is a change at any time in
(i) the amount of additional consideration payable to the Company
upon the exercise of any Options; (ii) the amount of additional
consideration, if any, payable to the Company upon the conversion
or exchange of any Convertible Securities; or (iii) the rate at
which any Convertible Securities are convertible into or
exchangeable for Common Stock (other than under or by reason of
provisions designed to protect against dilution), the Exercise
Price in effect at the time of such change will be readjusted to
the Exercise Price which would have been in effect at such time had
such Options or Convertible Securities still outstanding provided
for such changed additional consideration or changed conversion
rate, as the case may be, at the time initially granted, issued or
sold.
(iv)
Treatment of Expired Options
and Unexercised Convertible Securities
. If, in any case, the total number of
shares of Common Stock issuable upon exercise of any Option or upon
conversion or exchange of any Convertible Securities is not, in
fact, issued and the rights to exercise such Option or to convert
or exchange such Convertible Securities shall have expired or
terminated, the Exercise Price then in effect will be readjusted to
the Exercise Price which would have been in effect at the time of
such expiration or termination had such Option or Convertible
Securities, to the extent outstanding immediately prior to such
expiration or termination (other than in respect of the actual
number of shares of Common Stock issued upon exercise or conversion
thereof), never been issued.
(v)
Calculation of Consideration
Received . If any Common Stock, Options or
Convertible Securities are issued, granted or sold for cash, the
consideration received therefor for purposes of this Warrant will
be the amount received by the Company therefor, before
ded
