Document:

Exhibit 10.1

 

AMENDMENT NO. 1 TO MEMBERSHIP INTEREST PURCHASE AND CONTRIBUTION AGREEMENT

AMENDMENT No. 1 (this “Amendment”), dated as of March 31, 2006, to the Membership Interest Purchase and Contribution Agreement (the “Agreement”), dated as of March 7, 2006, by and among Mr. Stanley C. Gale (“SG”), SCG Holding Corp., a Delaware corporation (“SCG” and together with SG, the “Sellers”), Mack-Cali Realty Acquisition Corp., a Delaware corporation, or its designee (the “Purchaser”), and Mack-Cali Realty, L.P., a Delaware limited partnership (“MCRLP”).  Capitalized terms used but not
defined herein shall have the meanings assigned to such terms in the Agreement.

RECITALS:

WHEREAS, the Purchaser, MCRLP and the Sellers have entered into the Agreement;

WHEREAS, pursuant to and in accordance with Section 10.7 of the Agreement, the parties wish to amend the Agreement as set forth in this Amendment;

NOW, THEREFORE, in consideration of the rights and obligations contained herein, and for other good and valuable consideration, the adequacy of which is hereby acknowledged, the parties agree as follows:

Section 1.          Amendments to the Agreement.  (a)  Section 1.01 of the Agreement is hereby amended by adding the following defined term:

“License Agreement” means a license to the Purchaser to use the trademark listed in Section 1.01(b) of the Disclosure Schedule in form and on the terms and conditions to be agreed upon by the Purchaser and SG prior to the Closing.

(b)  The definition of “Ancillary Agreements” in Section 1.01(a) of the Agreement is hereby amended by adding at the end thereof the phrase “and the License Agreement”.

(c)  Section 5.05(b) of the Agreement is hereby amended by adding the phrase “Except as otherwise provided in Section 5.22 hereof,” at the beginning thereof.

(d)          Section 5.22 of the Agreement is hereby amended in its entirety to be and read in its entirety as follows:

“Section 5.22  Non-Portfolio Real Property Interests.  (a)  Prior to the Closing, the parties shall negotiate in good faith, and prepare and enter into an appropriate acquisition or contribution agreement or agreements (the “Non-Portfolio Real Property Interest Purchase Agreement”) as may be desirable to effect the option, sale or transfer of the membership interests of those certain 

 

 

 

 

limited liability companies holding the real property interests identified on Exhibit H (each a “Non-Portfolio Interest”) to the Purchaser from the parties identified thereon.  Exhibit H sets forth (i) the amount of consideration to be paid for each Non-Portfolio Interest, and (ii) the ownership percentage each Non-Portfolio Interest represents in the real property related thereto.  Each of the parties hereto hereby agree that the parties may mutually amend Exhibit H from time to time prior to the Closing.  The Non-Portfolio Real Property Interest Purchase Agreement shall provide that the Sellers shall use their commercial best efforts to obtain such third-party consents as shall be necessary in order to consummate the option, sale or transfer each Non-Portfolio Interest to the Purchaser (the “Non-Portfolio Consents”) and that the Purchaser’s obligations thereunder are subject to the receipt of such Non-Portfolio Consents in form and substance reasonably satisfactory to the Purchaser.  The Non-Portfolio Real Property Interest Purchase Agreement shall further provide that the applicable sellers will be entitled to participate equally with Purchaser in the economic benefit generated by the properties after Purchaser recovers the amount of consideration it paid for such interest plus a preferred return of ten percent (10%).  The parties hereto hereby further agree to consummate the transactions contemplated by the Non-Portfolio Real Property Interest Purchase Agreement, on the terms and conditions substantially set forth therein, simultaneously with or prior to the Closing, subject to the receipt of the applicable Non-Portfolio Consents.

(b)  In the event that any Non-Portfolio Consent is not obtained at or prior to the Closing, the parties hereto agree that additional closings may be made to effect the option, sale or transfer of the applicable Non-Portfolio Interests within ninety (90) days following the Closing, in each case, promptly upon the receipt of the applicable Non-Portfolio Consents.

(c)  In the event that any Non-Portfolio Consent is not obtained within ninety (90) days following the Closing, the Sellers shall be required to promptly thereafter implement any relevant “buy-sell” provisions with respect to the related Non-Portfolio Interest, at a price not less than the price specified on Exhibit H (provided, that if Purchaser shall specify a higher price, the Sellers shall implement such “buy-sell” provisions at such higher price).  If the other party to the “buy-sell” shall agree to acquire the Non-Portfolio Interest at the price offered by the Sellers, then the Sellers shall sell such Non-Portfolio Interest to such other party at the specified purchase price (and shall turn over to the Purchaser any portion of consideration received which is in excess of the price
specified on Exhibit H).  If the other party to the “buy-sell” shall require the Sellers to acquire such other party’s interest, then the Purchaser shall, and MCRLP shall cause the Purchaser to, acquire both such other party’s interest (at the price specified by the Sellers to the other party) and the Sellers’ interest (at the price specified on Exhibit H).  In addition, the Purchaser shall, and MCRLP shall cause the Purchaser to, reimburse the Sellers for all reasonable costs and expenses incurred by the Sellers in implementing and consummating the “buy-sell” contemplated hereby.

 

 

	
             
 	
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(d)  Notwithstanding the foregoing, in the event that there shall not be any “buy-sell” provisions with respect to any Non-Portfolio Interest and the relevant Non-Portfolio Consent shall not have been obtained within ninety (90) days following the Closing, then the Purchaser shall provide written notice to the Sellers, within two (2) Business Days thereafter, of its agreement to either (i) accept the option, sale or transfer of the beneficial economic interests and burdens of the applicable Non-Portfolio Interests or (ii) agree to terminate its obligations to purchase the applicable Non-Portfolio Interests and release the applicable sellers from their obligations to option, sell or transfer such Non-Portfolio Interests.  Notwithstanding anything contained herein to the contrary, in the event that any Non-Portfolio Consent is not received and the Purchaser
agrees to terminate its obligations to purchase such Non-Portfolio Interest, nothing contained in this Agreement or in the Non-Portfolio Real Property Interest Purchase Agreement shall prohibit the applicable sellers from owning such Non-Portfolio Interest and operating the real property related to such Non-Portfolio Interest.”

(e)          Section 7.01 of the Agreement is hereby amended by deleting clause (d) thereof in its entirety.

(f)           Section 7.02 of the Agreement is hereby amended by deleting clause (g) thereof in its entirety and replacing it with the following:

“(g)        No Material Adverse Effect.  Since the Financial Statements Date there shall not have occurred a Material Adverse Effect.”

(g)          Article X of the Agreement is hereby amended by adding the following new Section 10.15:

“Section 10.15.  Specific Performance.  Each of the parties hereto acknowledges and agrees that the other party would be irreparably damaged if any of the provisions of this Agreement are not performed in accordance with their specific terms and that any breach of this Agreement by the other party may not be adequately compensated in all cases by monetary damages alone.  Accordingly, in addition to any other right or remedy to which each party may be entitled, at law or in equity, each party shall be entitled to enforce the provisions of this Agreement by a decree of specific performance and to temporary, preliminary and permanent injunctive relief to prevent breaches or threatened breaches of any of the provisions of this Agreement, without posting any bond or other undertaking.”

(h)          The definition of “Gross Income Threshold” in Exhibit D of the Agreement is hereby amended by replacing the amount of “$15,000,000” in the definition thereof with the amount of “$16,000,000”.

 

 

	
             
 	
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(i)           The definition of “Net Income Threshold” in Exhibit D of the Agreement is hereby amended by replacing the amount of “$5,000,000” in the definition thereof with the amount of “$6,000,000”.

(j)           Exhibit H of the Agreement is hereby amended in its entirety and replaced as set forth on Exhibit H to this Amendment. 

Section 2.          Assignment.  This Amendment may not be assigned by operation of Law or otherwise without the prior express written consent of the Sellers, and the Purchaser or MCRLP which consent may be granted, conditioned, delayed or withheld in the sole discretion of the Sellers or the Purchaser or MCRLP, as the case may be.  Notwithstanding the foregoing, the Purchaser may assign any or all of its interests in this transaction to one or more Affiliates, provided, that any such assignment shall not relieve the Purchaser from its obligations hereunder.

Section 3.        Entire Agreement.  This Amendment constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and undertakings, both written and oral, between the Purchaser, MCRLP and the Sellers with respect to the subject matter hereof.  Except as amended by this Amendment, the Agreement shall continue in full force and effect.

Section 4.          Severability.  If any term or other provision of this Amendment shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Amendment or the validity or enforceability of this Amendment in any other jurisdiction.

Section 5.          Counterparts.  This Amendment shall not be effective or binding until such time as it has been executed and delivered by all parties hereto.  This Amendment may be executed and delivered (including by facsimile transmission or portable document format (PDF)) in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement.

Section 6.          Governing Law.  This Amendment and all others arising out of or relating to this Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware.

 

 

	
             
 	
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IN WITNESS WHEREOF, the Purchaser, MCRLP and the Sellers have caused this Amendment to be executed as of the date first written above by their respective officers thereunto duly authorized.

MACK-CALI REALTY ACQUISITION CORP.,

a Delaware corporation

	
             
 	
            By:
 	
            /s/ MITCHELL E. HERSH
 

Name: Mitchell E. Hersh

Title: President and Chief Executive Officer

MACK-CALI REALTY L.P.,

a Delaware limited partnership

 

	
             
 	
            By:
 	
            Mack-Cali Realty Corporation,
 	
             

	
             
 	
            a Maryland corporation, its general partner
 
	
             
 	
            By:
 	
            /s/ MITCHELL E. HERSH
 	
             

						

Name: Mitchell E. Hersh

Title: President and Chief Executive Officer 

SCG HOLDING CORP.

	
             
 	
            By:
 	
            /s/ STANLEY C. GALE
 

Name: Stanley C. Gale

Title: Chief Executive Officer

STANLEY C. GALE

/s/ STANLEY C. GALE

 

 

	
             
 	
            5
 

 

 

 

EXHIBIT H

 

NON-PORTFOLIO REAL PROPERTY INTERESTS

	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
            Size (SF)
 	
            Value per

SF
 	
            Value
 	
            TGC Interest
 	
            Current TGC Cost/Value(f)
 	
            Partner
 
	
             
 	
            3 Campus Dr.
 	
            122,000
 	
            $35.00
 	
            $4,270,000
 	
            50.0% (b)
 	
            $2,135,000(a)
 	
            Landis 50% (b)
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
            Center of Morris County:
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
            100 Kimball
 	
            175,000
 	
            $68.57
 	
             
 	
            8.3%
 	
            $991,654
 	
            JPM 75%

Hampshire 16.7%
 
	
             
 	
            One Jefferson
 	
            100,000
 	
            $40.00
 	
             
 	
            8.3%
 	
            $424,625(e)
 	
            JPM 75%

Hampshire 16.7%
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
            12 Vreeland

($11,313,017 million of debt in place)

 

 

 

 

 

 

 
 	
            139,750

 

 

 

 

 

 

 

 

 
 	
            $180.00

 

 

 

 

 

 

 

 

 
 	
            $25,155,000

Stan Gale

Mark Yeager

Tom Walsh

Finn Wentworth

K. Weilkopolski

Gene
Diaz

Bart Oates

Total
 	
            15.0%

7.5%

2.5%

15.0%

5.0%

3.75%

1.25%

50.0%
 	
            $2,076,297

$1,038,149

$346,050

$2,076,297

$692,099

$519,074

$173,025

$6,920,991
 	
            S&K 50%

Former Gale employees 25%

 

 

 

 

 
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
            Princeton Forrestal Village
 	
            550,000
 	
             
 	
             
 	
            10.0%
 	
            $1,774,500
 	
            GE 80% 

Witmondt 5%

Mandelbaum 5%
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
            Offices at Bedminster
 	
            190,000
 	
             
 	
            Stan Gale

Mark Yeager
 	
            10.6%

3.375%
 	
             
 	
            JPM 70%
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
            One Newark Center
 	
            419,000
 	
             
 	
             
 	
            TBD
 	
             
 	
            Praedium
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
            Belmar—Redevelopment Rights
 	
             
 	
             
 	
             
 	
            Generally 100%

Hunt-50%

DiFeo-85%
 	
            $1,500,035
 	
            TBD
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
            Newark Transit Village
 	
             
 	
             
 	
             
 	
            50%
 	
            $551,864
 	
            Ivor Braka
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
            Florham Park Corporate Campus (Exxon)
 	
            600,000
 	
            $35.00 (c)
 	
            21,000,000
 	
            50%
 	
            $10,500,000
 	
            The Rockefeller Development Group Corp.
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
            55 Corporate Dr. (d)
 	
             
 	
             
 	
             
 	
            50%
 	
            $10,000,000
 	
            SL Green
 

 

 

 

 

 

 

 

	
             
 	
            (a)
 	
            Subject to a payment of $915,000 to the Morgan Stanley interests.
 

	
             
 	
            (b)
 	
            Assumes exercise of option to buy out Morgan Stanley interests.
 

	
             
 	
            (c)
 	
            Value based upon approvals in place, which are not currently vested.  This would be an option to acquire our interest in the office portion of this development.  35/sq ft price subject to reduction to support a yield of 10%, and if the adjusted price goes below 25/sq ft Gale can terminate
 

	
             
 	
            (d)
 	
            Only insofar as it relates to our interest in the pad site for building 4
 

	
             
 	
            (e)
 	
            Expected future contribution to be funded prior to closing of the subject transaction
 

	
             
 	
            (f)
 	
            Subject to change if additional TGC capital contributions are made.  Such TGC capital contributions shall not exceed $500,000 in the aggregate without the prior consent of Purchaser, such consent not to be unreasonably withheld or delayed.
 

 

 

 

	
             
 	
            2NEITHER 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".

<PAGE>

         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.

<PAGE>

         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.

<PAGE>

         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

<PAGE>

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

<PAGE>

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;

<PAGE>

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

<PAGE>

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]

<PAGE>

         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

<PAGE>

                               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.

<PAGE>

                              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)

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