Document:

Exhibit 4.1

 

THIS NOTE AND THE SECURITIES ISSUABLE UPON THE CONVERSION OF
THIS NOTE HAVE BEEN ACQUIRED FOR INVESTMENT ONLY AND NOT WITH THE INTENT OF
FURTHER DISTRIBUTION, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED, OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION
STATEMENT IN EFFECT WITH RESPECT THIS NOTE AND THE SECURITIES UNDER THAT ACT
UNLESS SOLD PURSUANT TO RULE 144 PROMULGATED UNDER THAT ACT OR UNLESS THE SALE,
PLEDGE, HYPOTHECATION OR TRANSFER IS OTHERWISE EXEMPT FROM REGISTRATION.
GRAYMARK PRODUCTIONS, INC. MAY REQUEST A WRITTEN OPINION FROM COUNSEL AND
IN FORM ACCEPTABLE TO GRAYMARK PRODUCTIONS, INC., TO THE EFFECT THAT
REGISTRATION IS NOT REQUIRED IN CONNECTION WITH SUCH SALE, PLEDGE OR
HYPOTHECATION, OR OTHER TRANSFER. THIS NOTE OR ANY SECURITY ISSUABLE UPON THE
CONVERSION OF THIS NOTE MUST BE SURRENDERED TO GRAYMARK PRODUCTIONS, INC. AS A
CONDITION PRECEDENT TO THE SALE, PLEDGE, HYPOTHECATION OR ANY OTHER TRANSFER OF
ANY INTEREST IN THIS NOTE OR ANY SECURITY INTO WHICH THIS NOTE IS CONVERTIBLE.

 

GRAYMARK
PRODUCTIONS, INC.

 

SENIOR
PROMISSORY NOTE

 

	
  U.S. $750,000

  	
  AUGUST 5,
  2005

  

 

FOR VALUE RECEIVED,
the undersigned, GRAYMARK PRODUCTIONS,
INC. an Oklahoma corporation, and all of its existing subsidiaries and
subsidiaries created after the date hereof (hereinafter called the “Company”),
hereby promises to pay to the order of                       
or any future permitted holder of this Senior Promissory Note (the “Payee”),
at the principal office of the Payee set forth herein, or at such other place
as the holder may designate in writing to the Company, the principal sum of
SEVEN HUNDRED FIFTY THOUSAND DOLLARS (U.S. $750,000), or such other amount as may
be outstanding hereunder, together with all accrued but unpaid interest, in
such coin or currency of the United States of America as at the time shall be
legal tender for the payment of public and private debts and in immediately
available funds, as provided in this Senior Promissory Note (the “Note”).

 

Upon
the date of issuance of this Note the Company has no outstanding securities or
other financial instruments that rank senior or pari-passu to this Note.

 

The
Company shall not issue any securities or other financial instruments that rank
senior or pari-passu to this Note without the prior written consent of the
Payee.

 

1

 

1.                                       Principal and Interest Payments.

 

(a)                                  The Company shall repay in full the entire
principal balance then outstanding under this Note in the manner provided in Section 1(c) hereof
on the first to occur (the “Maturity Date”) of: (i) July 27,
2007; (ii) the consummation of a Qualified Financing (as defined in Section 1(c) hereof);
or (iii) the acceleration of the obligations as contemplated by this
Note.  The Company may prepay all or any
part of this Note, in whole or in part at any time, as set forth in Section 6(d) hereof.

 

(b)                                 Interest on the outstanding principal balance of
this Note shall accrue at a rate of eight percent (8%) per annum.  Interest on the outstanding principal balance
of the Note shall be computed on the basis of the actual number of days elapsed
and a year of three hundred and sixty (360) days and shall be payable quarterly
by the Company in cash or in shares of the Company’s equity securities as
contemplated in Section 1(c) hereof. 
Furthermore, upon the occurrence of an Event of Default that shall be
continuing for more than thirty (30) consecutive days following the Company’s
receipt of Payee’s notice describing in reasonable detail the occurrence of an
Event of Default, then to the extent permitted by law, the Company will pay
interest to the Payee, payable on demand, on the outstanding principal balance
of the Note from the date of the Event of Default until payment in full at the
rate of eighteen percent (18%) per annum.

 

(c)                                  The outstanding principal amount of this Note
shall be secured by all assets of the Company including but not limited to, all
purchase agreements and any such options or rights to acquire, all intellectual
and real property, all assets and properties of GrayMark Productions, Inc. and all of its
existing subsidiaries and subsidiaries created after the date hereof.

 

(d)                                 At
the Maturity Date, the outstanding principal amount of this Note plus all
accrued and unpaid interest herein shall be due and payable in cash in the
absence of a Qualified Financing by the Company on or before the Maturity Date
or, in the event of a Qualified Financing by the Company on or before Maturity
Date, automatically converted into equity securities of the Company which may
be issued in connection with the Qualified Financing by the Company of its
equity securities to certain investors; provided, however, the
Company receives aggregate gross cash proceeds in connection with a Qualified
Financing of at least $2,000,000 (excluding the conversion of this Note)
occurring on or before July 27, 2007, the outstanding principal amount of
this Note plus all accrued and unpaid interest herein shall automatically be
converted into shares of equity securities of the Company (the “Qualified
Financing”).  The principal amount
of this Note plus all accrued and unpaid interest shall convert into such
number of shares of equity securities of the Company equal to 120% of the
principal amount of this Note and all accrued interest outstanding divided by
the price per share of the equity securities sold in the Qualified Financing, the
maximum price or value of the Common Stock into which the indebtedness
evidenced by this Note converts shall not exceed the equivalent of $1.10 per
Common Stock share.  Upon the
conversion of this Note, the outstanding principal amount of this Note,
together with accrued interest hereon, shall be deemed to be the consideration
for the Payee’s interest in the equity securities upon consummation of the
Qualified Financing.  In consideration for the loan evidenced by
this Note, the Payee shall receive common

 

2

 

stock
purchase warrants exercisable during a five-year period for the purchase of (i) 250,000
shares of the Company’s common stock, $.001 par value (the “Common Stock”) at
$2.00 per share, and (ii) 250,000 shares of Common Stock at $3.00 per
share (the “Common Stock Purchase Warrants”) in the form attached to this Note
as Exhibits A-1 and A-2.

 

2.                                       Payment on Non-Business Days.  Whenever
any payment to be made shall be due on a Saturday, Sunday or a public holiday
under the laws of the United States of America or the State of Michigan, such
payment may be due on the next succeeding business day and such next succeeding
day shall be included in the calculation of the amount of accrued interest
payable on such date.

 

3.                                       Representations, Warranties and Covenants of the
Company.  The Company represents, warrants and
covenants to the Payee as follows:

 

(a)                            The Company has been duly incorporated and is
validly existing and in good standing under the laws of the state of Oklahoma,
with full corporate power and authority to own, lease and operate its
properties and to conduct its business as currently conducted.

 

(b)                           This Note has been duly authorized, validly
executed and delivered on behalf of the Company and is a valid and binding
obligation of the Company enforceable against the Company in accordance with
its terms, subject to limitations on enforcement by general principles of
equity and by bankruptcy or other laws affecting the enforcement of creditors’
rights generally, and the Company has full power and authority to execute and
deliver this Note and to perform its obligations hereunder.

 

(c)                            The execution, delivery and performance of this
Note will not (i) conflict with or result in a breach of or a default
under any of the terms or provisions of, (A) the Company’s certificate of
incorporation or by-laws, or (B) any material provision of any indenture,
mortgage, deed of trust or other material agreement or instrument to which the
Company is a party or by which it or any of its material properties or assets
is bound, (ii) result in a violation of any material provision of any law,
statute, rule, regulation, or any existing applicable decree, judgment or order
by any court, Federal or state regulatory body, administrative agency, or other
governmental body having jurisdiction over the Company, or any of its material
properties or assets or (iii) result in the creation or imposition of any
material lien, charge or encumbrance upon any material property or assets of
the Company or any of its subsidiaries pursuant to the terms of any agreement
or instrument to which any of them is a party or by which any of them may be
bound or to which any of their property or any of them is subject.

 

(d)                           No consent, approval or authorization of or
designation, declaration or filing with any governmental authority on the part
of the Company is required in connection with the valid execution and delivery
of this Note.

 

(e)                            Upon the date of issuance of this Note the Company
has no outstanding securities or other financial instruments that rank senior
or pari-passu to this Note.

 

3

 

The
Company shall not issue any securities or other financial instruments that rank
senior or pari-passu to this Note without the prior written consent of the
Payee.

 

(f)                              Within ten (10) days
following the occurrence of a Material Adverse Change, the Company shall
provide Payee written notification describing in reasonable detail the events
and circumstances constituting the basis for the Material Adverse Change. For
purposes of this Note, “Material Adverse Change” shall mean (a) a material
adverse change in the business, prospects, operations, results of operations,
assets, liabilities or condition (financial or otherwise) of the Company taken
as a whole, or (b) a material adverse change in the business, prospects,
operations, results of operations, assets, liabilities or condition (financial
or otherwise) of the Company, or (c) a material adverse change in the
motion picture industry as it relates to the Company.

 

4.                                       Events of Default.  The
occurrence of any of the following events shall be an “Event of Default”
under this Note:

 

(a)                            the Company shall fail to make the payment of any
amount of any principal outstanding for a period of three (3) business
days after the date such payment shall become due and payable hereunder; or

 

(b)                           the Company shall fail to make any payment of
interest for a period of three (3) business days after the date such
interest shall become due and payable hereunder; or

 

(c)                            any representation, warranty or certification made
by the Company herein or in any certificate or financial statement shall prove
to have been false or incorrect or breached in a material respect on the date
as of which made; or

 

(d)                           the holder of any indebtedness (“Indebtedness”)
of the Company or any of its subsidiaries shall accelerate any payment of any
amount or amounts of principal or interest on any indebtedness (the “Indebtedness”)
(other than the Indebtedness hereunder) prior to its stated maturity or payment
date the aggregate principal amount of which Indebtedness of all such persons
is in excess of $500,000, whether such Indebtedness now exists or shall
hereinafter be created, and such accelerated payment entitles the holder
thereof to immediate payment of such Indebtedness which is due and owing and
such indebtedness has not been discharged in full or such acceleration has not
been stayed, rescinded or annulled within ten (10) business days of such
acceleration; or

 

(e)                            A judgment or order for the payment of money shall
be rendered against the Company or any of its subsidiaries in excess of
$500,000 in the aggregate (net of any applicable insurance coverage) for all
such judgments or orders against all such persons (treating any deductibles,
self insurance or retention as not so covered) that shall not be discharged,
and all such judgments and orders remain outstanding, and there shall be any
period of sixty (60) consecutive days following entry of the judgment or order
in excess of $500,000 or the judgment or order which causes the aggregate
amount described above to exceed $500,000 during which a stay of enforcement of
such judgment or order, by reason of a pending appeal or otherwise, shall not
be in effect; or

 

4

 

(f)                              the Company shall (i) apply for or consent to
the appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial part of its property
or assets, (ii) admit in writing its inability to pay its debts as such
debts become due, (iii) make a general assignment for the benefit of its
creditors, (iv) commence a voluntary case under the Bankruptcy Code or
under the comparable laws of any jurisdiction (foreign or domestic), (v) file
a petition seeking to take advantage of any bankruptcy, insolvency, moratorium,
reorganization or other similar law affecting the enforcement of creditors’
rights generally, (vi) acquiesce in writing to any petition filed against
it in an involuntary case under the Bankruptcy Code or under the comparable
laws of any jurisdiction (foreign or domestic), or (vii) take any action
under the laws of any jurisdiction (foreign or domestic) analogous to any of
the foregoing; or

 

(g)                           a proceeding or case shall be commenced in respect
of the Company or any of its subsidiaries without its application or consent,
in any court of competent jurisdiction, seeking (i) the liquidation,
reorganization, moratorium, dissolution, winding up, or composition or
readjustment of its debts, (ii) the appointment of a trustee, receiver,
custodian, liquidator or the like of it or of all or any substantial part of
its assets or (iii) similar relief in respect of it under any law
providing for the relief of debtors, and such proceeding or case described in
clause (i), (ii) or (iii) shall continue undismissed, or unstayed and
in effect, for a period of thirty (30) consecutive days or any order for relief
shall be entered in an involuntary case under the Bankruptcy Code or under the
comparable laws of any jurisdiction (foreign or domestic) against the Company
or any of its subsidiaries or action under the laws of any jurisdiction
(foreign or domestic) analogous to any of the foregoing shall be taken with
respect to the Company or any of its subsidiaries and shall continue
undismissed, or unstayed and in effect for a period of thirty (30) consecutive
days.

 

(h)                           a material impairment of
the Company’s ability to perform its financial obligations, or a material
impairment of the enforceability or priority of Payee’s creditor priority as a
result of an action or failure to act on the part of the Company,

 

5.                                       Remedies Upon An Event of Default.  If an
Event of Default shall have occurred and shall be continuing for more than
thirty (30) consecutive days following the Company’s receipt of Payee’s notice
describing in reasonable detail the occurrence of an Event of Default, the
Payee of this Note may at any time at its option, (a) declare the entire
unpaid principal balance of this Note, together with all interest accrued
hereon, due and payable, and thereupon, the same shall be accelerated and so
due and payable; provided, however, that upon the occurrence of
an Event of Default described in (i) Sections 4(f) and (g), without
presentment, demand, protest, or notice, all of which are hereby expressly
unconditionally and irrevocably waived by the Company, the outstanding
principal balance and accrued interest hereunder shall be automatically due and
payable, and (ii) Sections 4(a) through (e), the Payee may demand the
prepayment of this Note pursuant to Section 6 hereof; or (b) exercise
or otherwise enforce any one or more of the Payee’s rights, powers, privileges,
remedies and interests under this Note or applicable law.  No course of delay on the part of the Payee
shall operate as a waiver thereof or

 

5

 

otherwise prejudice the right of
the Payee.  No remedy conferred hereby
shall be exclusive of any other remedy referred to herein or now or hereafter
available at law, in equity, by statute or otherwise.  Notwithstanding the foregoing, Payee agrees
that its rights and remedies hereunder are limited to receipt of cash or shares
of the Company’s equity securities in the amounts described herein.

 

6.                                       Prepayment Options.

 

(a)                            Prepayment.  Notwithstanding anything to the
contrary contained herein, the Payee shall have the right, at such Payee’s
option, to require the Company to prepay all of the sum of this Note at a price
equal to 110% of the outstanding principal amount and any interest accrued and
outstanding under this Note (the “Prepayment Price”), provided,
that such prepayment is requested upon the occurrence of a Major Transaction
(as defined in Section 6(e) below). 
Nothing in this Section 6(a) shall limit the Payee’s rights
under Section 5 hereof.

 

(b)                           Mechanics of Prepayment at Option of Payee.  At least
thirty (30) days prior to the occurrence of a Major Transaction and within one (1) day
after the occurrence of a Major Transaction, the Company shall deliver written
notice thereof via facsimile and overnight courier (“Notice of a Prepayment
Event”) to the Payee.  At any time on
or after the earlier of the Payee’s receipt of a Notice of a Prepayment Event
and the Payee becoming aware of a Major Transaction, the Payee may require the
Company to prepay all of the outstanding principal amount and any interest
accrued and outstanding under this Note by delivering written notice thereof
via facsimile and overnight courier (“Notice of Prepayment at Option of
Payee”) to the Company.

 

(c)                            Payment of Prepayment Price.  Upon the
Company’s receipt of a Notice of Prepayment at Option of Payee from the Payee,
the Company shall immediately notify the Payee by facsimile of the Company’s
receipt of a Notice of Prepayment at Option of Payee and the Payee which has
sent such a notice shall deliver to the Company this Note on or before the
consummation or closing of a Major Transaction.    The Company shall pay the Prepayment Price
to Payee at or prior to the closing of the Major Transaction; provided
that this Note shall have been so delivered to the Company.  If the Company shall fail to prepay all of
the Prepayment Price (other than pursuant to a dispute as to the arithmetic
calculation of the Prepayment Price), in addition to any remedy the Payee may
have under this Note, the Prepayment Price payable in respect of such unprepaid
Notes shall bear interest at the rate of two percent (2.0%) per each period of
thirty (30) consecutive days, pro rated for any period of less than thirty (30)
days until paid in full.  Until the
Company pays such unpaid Prepayment Price in full to the Payee, the Payee shall
have the option (the “Void Optional Prepayment Option”) to, in lieu of
prepayment, require the Company to promptly return to the Payee this Note that
was submitted for prepayment by Payee under this Section 6(c) and for
which the Prepayment Price has not been paid, by sending written notice thereof
to the Company via facsimile (the “Void Optional Prepayment Notice”).   Upon the Company’s receipt of such Void Optional
Prepayment Notice(s) and prior to payment of the full Prepayment Price to
Payee, (i) the Notice(s) of Prepayment at Option of Payee shall be null
and void with respect to this Note submitted for prepayment and for which the
Prepayment Price has not been paid and (ii) the Company shall immediately
return this Note submitted to the Company by the Payee for

 

6

 

prepayment under this Section 6(c) and
for which the Prepayment Price has not been paid.  A Payee’s delivery of a Void Optional
Prepayment Notice and exercise of its rights following such notice shall not
affect the Company’s obligations to make any payments which have accrued prior
to the date of such notice.

 

(d)                           Company’s Prepayment Option.  The Company
may prepay, at the option of its Board of Directors, all or any portion of the
outstanding principal amount of this Note and the accrued and unpaid interest
thereon upon five (5) business days prior written notice to the Payee (the
“Company Prepayment Notice”) at a cash price equal to 110% of the sum of
the outstanding principal amount of this Note and any interest accrued and
outstanding (the “Company Prepayment Price”).  The Company may not deliver a Company
Prepayment Notice to the Payee unless the Company has clear and good funds for
a minimum of the amount it intends to prepay in a bank account controlled by
the Company.  The Company Prepayment
Notice shall state the date of prepayment (the “Company Prepayment Date”),
the Company Prepayment Price, the amount of the Note of such Payee to be
prepaid, the amount of accrued and unpaid interest through the Company
Prepayment Date and shall call upon the Payee to surrender to the Company on
the Company Prepayment Date at the place designated in the Company Prepayment
Notice such Payee’s Note.  The Company
Prepayment Date shall be no more than five (5) trading days after the date
on which the Payee is notified of the Company’s intent to prepay the Note (the “Company
Prepayment Notice Date”).  If the
Company fails to pay the Company Prepayment Price by the sixth (6th)
trading day following the Company Prepayment Notice Date, the prepayment will
be declared null and void and the Company shall lose its right to deliver a
Company Prepayment Notice to the Payee in the future.  On or after the Company Prepayment Date, the
Payee shall surrender the Notes called for prepayment to the Company at the
place designated in the Company Prepayment Notice and shall thereupon be
entitled to receive payment of the Company Prepayment Price.

 

(e)                            For purposes of this Note, “Major Transaction”
means the consummation of any of the following transactions: (i) the
consolidation, merger or other business combination of the Company with or into
a person or entity (other than (A) pursuant to a migratory merger effected
solely for the purpose of changing the jurisdiction of incorporation of the
Company, or (B) a consolidation, merger or other business combination in
which holders of the Company’s or any of its subsidiaries voting power immediately
prior to the transaction continue after the transaction to hold, directly or
indirectly, the voting power of the surviving entity or entities necessary to
elect a majority of the members of the board of directors (or their equivalent
if other than a corporation) of such entity or entities); (ii) the sale or
transfer of all or substantially all of the Company’s or any of its
subsidiaries’ assets; or (iii) the consummation of a purchase, tender or
exchange offer made to the holders of more than 30% of the outstanding shares
of the Company’s common stock; provided, however, the following
shall not be deemed a Major Transaction for purposes of this Note: (a) the
Proposed Financing; (b) a split, reverse split, dividend or distribution
with respect to the common stock of the Company which has been disclosed to the
Payee; (c) the tender, exchange or repricing of any securities of the
Company which are convertible into shares of common stock of the Company which
has been disclosed to the Payee.

 

7

 

7.                                       Replacement.  Upon receipt of a duly executed,
notarized and unsecured written statement from the Payee with respect to the
loss, theft or destruction of this Note (or any replacement hereof), and
without requiring an indemnity bond or other security, or, in the case of a
mutilation of this Note, upon surrender and cancellation of such Note, the
Company shall issue a new Note, of like tenor and amount, in lieu of such lost,
stolen, destroyed or mutilated Note.

 

8.                                       Parties in Interest, Transferability.  This Note
shall be binding upon the Company and its successors and assigns and the terms
hereof shall inure to the benefit of the Payee and its successors and permitted
assigns. This Note may be transferred or sold, subject to the provisions of Section 18
of this Note, or pledged, hypothecated or otherwise granted as security by the
Payee.

 

9.                                       Amendments.  This Note may not be modified or
amended in any manner except in writing executed by the Company and the Payee.

 

Notices.  Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery by telecopy or facsimile at
the address or number designated below (if delivered on a business day during
normal business hours where such notice is to be received), or the first
business day following such delivery (if delivered other than on a business day
during normal business hours where such notice is to be received) or (b) on
the second business day following the date of mailing by express courier
service, fully prepaid, addressed to such address, or upon actual receipt of
such mailing, whichever shall first occur. 
The Company will give written notice to the Payee at least thirty (30)
days prior to the date on which the Company closes its books or takes a record
(x) with respect to any dividend or distribution upon the common stock of the
Company, (y) with respect to any pro rata subscription offer to holders of
common stock of the Company or (z) for determining rights to vote with respect
to a Major Transaction, dissolution, liquidation or winding-up and in no event
shall such notice be provided to such holder prior to such information being
made known to the public.  The Company
will also give written notice to the Payee at least twenty (20) days prior to
the date on which dissolution, liquidation or winding-up will take place.

 

	
  Address of the Payee:

  	
  SXJE, LLC.

  
	
   

  	
  2400 Bryon Circle

  
	
   

  	
  Lansing, MI 48912

  
	
   

  	
  Attention: Sam Eyde

  
	
   

  	
  (517) 333-3430

  
	
   

  	
   

  
	
   

  	
   

  
	
  Address of the Company:

  	
  GrayMark Productions, Inc.

  
	
   

  	
  101 North Robinson, Suite 920

  
	
   

  	
  Oklahoma City, OK 73102

  
	
   

  	
  Attention: John
  Simonelli, CEO

  
	
   

  	
  (405) 601-5300

  
			

 

8

 

10.                                 Governing Law. This Note shall be governed by and construed in accordance with the
internal laws of the State of Michigan, without giving effect to the choice of
law provisions.  This Note shall not be
interpreted or construed with any presumption against the party causing this
Note to be drafted.

 

11.                                 Headings.  Article and section headings
in this Note are included herein for purposes of convenience of reference only
and shall not constitute a part of this Note for any other purpose.

 

12.                                 Remedies, Characterizations, Other Obligations,
Breaches and Injunctive Relief.  The remedies provided in this Note shall be
cumulative and in addition to all other remedies available under this Note, at
law or in equity (including, without limitation, a decree of specific
performance and/or other injunctive relief), no remedy contained herein shall
be deemed a waiver of compliance with the provisions giving rise to such remedy
and nothing herein shall limit a Payee’s right to pursue actual damages for any
failure by the Company to comply with the terms of this Note.  Amounts set forth or provided for herein with
respect to payments and the like (and the computation thereof) shall be the
amounts to be received by the Payee and shall not, except as expressly provided
herein, be subject to any other obligation of the Company (or the performance
thereof).

 

13.                                 Failure or Indulgence Not Waiver.  No
failure or delay on the part of the Payee in the exercise of any power, right
or privilege hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any such power, right or privilege preclude other or
further exercise thereof or of any other right, power or privilege.

 

14.                                 Enforcement Expenses.  The
Company agrees to pay all costs and expenses of enforcement of this Note, including,
without limitation, reasonable attorneys’ fees and expenses.

 

15.                                 Binding Effect.   The obligations of the Company
and the Payee set forth herein shall be binding upon the successors and assigns
of each such party, whether or not such successors or assigns are permitted by
the terms hereof.

 

16.                                 Compliance with Securities Laws.  The Payee
of this Note acknowledges that this Note is being acquired solely for the Payee’s
own account and not as a nominee for any other party, and for investment, and that
the Payee shall not offer, sell or otherwise dispose of this Note other than in
compliance with the laws of the United States of America and as guided by the rules of
the Securities and Exchange Commission. 
This Note and any Note issued in substitution or replacement therefore
shall be stamped or imprinted with a legend in substantially the following
form:

 

“THIS NOTE HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
OR ANY STATE SECURITIES LAW AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS OR GRAYMARK

 

9

 

PRODUCTIONS INC. SHALL
HAVE RECEIVED AN OPINION OF ITS COUNSEL THAT REGISTRATION OF SUCH SECURITIES
UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE
SECURITIES LAWS IS NOT REQUIRED.”

 

17.                                 Severability.  The provisions of this Note are
severable, and if any provision shall be held invalid or unenforceable in whole
or in part in any jurisdiction, then such invalidity or unenforceability shall
not in any manner affect such provision in any other jurisdiction or any other
provision of this Note in any jurisdiction.

 

18.                                 Consent to Jurisdiction.  Each of
the Company and the Payee (i) hereby irrevocably submits to the
jurisdiction of the United States District Court sitting in the Western
District of Michigan and the courts of the State of Michigan located in Ingham
county for the purposes of any suit, action or proceeding arising out of or
relating to this Note and (ii) hereby waives, and agrees not to assert in
any such suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of such court, that the suit, action or proceeding
is brought in an inconvenient forum or that the venue of the suit, action or
proceeding is improper.  Each of the
Company and the Payee consents to process being served in any such suit, action
or proceeding by mailing a copy thereof to such party at the address set forth
in Section 11 hereof and agrees that such service shall constitute good
and sufficient service of process and notice thereof.  Nothing in this Section 20 shall affect
or limit any right to serve process in any other manner permitted by law.

 

19.                                 Company Waivers.  Except as otherwise specifically
provided herein, the Company and all others that may become liable for all or
any part of the obligations evidenced by this Note, hereby waive presentment,
demand, notice of nonpayment, protest and all other demands and notices in
connection with the delivery, acceptance, performance and enforcement of this
Note, and do hereby consent to any number of renewals of extensions of the time
or payment hereof and agree that any such renewals or extensions may be made
without notice to any such persons and without affecting their liability herein
and do further consent to the release of any person liable hereon, all without
affecting the liability of the other persons, firms or Company liable for the payment
of this Note, AND DO HEREBY WAIVE TRIAL BY JURY.

 

(a)                            No delay or omission on the part of the Payee in
exercising its rights under this Note, or course of conduct relating hereto,
shall operate as a waiver of such rights or any other right of the Payee, nor
shall any waiver by the Payee of any such right or rights on any one occasion
be deemed a waiver of the same right or rights on any future occasion.

 

(b)                           THE COMPANY ACKNOWLEDGES THAT THE TRANSACTION OF
WHICH THIS NOTE IS A PART IS A COMMERCIAL TRANSACTION, AND TO THE EXTENT
ALLOWED BY APPLICABLE LAW, HEREBY WAIVES ITS RIGHT TO NOTICE AND HEARING WITH
RESPECT TO ANY PREJUDGMENT REMEDY WHICH THE PAYEE OR ITS SUCCESSORS OR ASSIGNS MAY DESIRE
TO USE.

 

10

 

IN
WITNESS WHEREOF, the Company has executed and delivered this
Note as of the date first written above.

 

 

	
   

  	
  GRAYMARK PRODUCTIONS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  John Simonelli, CEO

  

 

11EXHIBIT 4.2

 

August 5,
2005

 

COMMON STOCK
PURCHASE WARRANT AGREEMENT

 

This COMMON STOCK
PURCHASE WARRANT AGREEMENT (this “Warrant Agreement” or “Agreement”), dated as
of August 5,  2005, is between
GrayMark Productions, Inc. (the “Company”) and                   
(the “Warrant Holder” and with the Company sometimes referred to as “parties”
collectively and as “party” individually.

 

W I T N E S S E T
H:

 

WHEREAS, this Warrant
Agreement is executed by the Company pursuant to the Convertible Loan Note on
the date of this Agreement (the “Convertible Note”) and delivered with
Convertible Note to the Warrant Holder;

 

NOW, THEREFORE, in
consideration of the premises and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

 

1.                                       Grant
and Period.  The above recitals are
true and correct.  This Agreement is
executed and delivered pursuant to the Convertible Note issued by the
Company.  Pursuant to this Agreement, the
Warrant Holder is hereby granted the right to purchase from the Company, at any
time during the period commencing on the date of this Agreement and ending on August 5,
2010 (the “Expiration Time”), 250,000 shares of the Company’s common stock,
$.0001 par value (the “Shares” or “Warrant Securities”)) at an initial exercise
price (subject to adjustment as provided in Article 8 hereof) of $2.00 per
share (the “Exercise Price” or “Purchase Price”), subject to the terms and
conditions of this Agreement (the “Warrant”).

 

Except as specifically
otherwise provided herein, the Shares shall have the same terms and conditions
as such securities are outstanding and as designated in the Company’s
Certificate of Incorporation and any amendments thereto, and the Warrant Holder
shall have registration rights under the Securities Act of 1933, as amended,
covering the Warrant Securities, as more fully described in Section 7 of
this Agreement.

 

2.                                       Warrant
Certificate.  The Warrant Holder’s
rights pursuant to this Agreement shall only be evidenced by this Agreement and
will not be certificated.

 

3.                                       Exercise
of Warrant.

 

3.1                                 Exercise.  The Warrant Holder may effect a cash exercise
of the Warrant by surrendering to the Company this Agreement, together with a
Subscription in the form of Exhibit ”A” attached to this Agreement, duly
executed by the Warrant Holder, at any time prior to the Expiration Time, at
the Company’s principal office, accompanied by payment in cash or by certified
or official bank check payable to the order of the Company in the amount of the
aggregate purchase price (the “Aggregate Price”), subject to any adjustments
provided for in this Agreement.  The
Aggregate Price shall be equal to the exercise price as set forth in Section 6
of this Agreement multiplied by the number of Warrant Securities for which the
Warrant shall be exercised (as adjusted as provided in this Agreement).

 

1

 

3.2                                 Partial
Exercise.  In the event the Warrant
shall be exercised in part and not in whole, the Company, at its expense, will
forthwith issue to the Warrant Holder a new warrant agreement of like tenor
exercisable for the number of Warrant Securities (as constituted as of the date
hereof) for which this Warrant Agreement shall not have been exercised, issued
in the name of the Warrant Holder or as the Warrant Holder (upon payment by the
Warrant Holder of any applicable transfer taxes) may direct.

 

4.                                       Issuance
of Certificates Evidencing the Warrant Securities.  Upon the exercise of the Warrants, the
issuance of certificates for the Warrant Securities shall be made as soon as
reasonably practicable thereafter without charge to the Warrant Holder
including, without limitation, any tax which may be payable in respect of the
issuance thereof, and such certificates shall (subject to the provisions of
Sections 5 and 7 of this Agreement) be issued in the name of, or in such names
as may be directed by, the Holder thereof; provided, however, that the Company
shall not be required to pay any tax that may be payable in respect of any
transfer involved in the issuance and delivery of any such certificates in a
name other than that of the Warrant Holder, and the Company shall not be
required to issue or deliver such certificates unless or until the person or
persons requesting the issuance 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.

 

The Warrant Certificates
and the certificates representing the Warrant Securities shall be executed on
behalf of the Company by the manual or facsimile signature of the then present
Chairman or Vice Chairman of the Board of Directors or Chief Executive Officer,
President or Vice President of the Company, attested to by the manual or facsimile
signature of the then present Secretary or Assistant Secretary of the
Company.  Warrant Certificates shall be
dated the date of execution by the Company upon initial issuance, division,
exchange, substitution or transfer.

 

5.                                       Restriction
On Transfer of Warrants.  This
Warrant Agreement may be assigned or transferred, in whole or in part, as
provided herein so long as such assignment or transfer is in accordance with
and subject to the provisions of the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder (said Act and such rules and
Regulations being hereinafter collectively referred to as the “Securities Act”).  Any purported transfer or assignment made
other than in accordance with this Section 5 shall be null and void and of
no force and effect.  Any assignment
permitted under this Agreement shall be made by surrender of this Agreement to
the Company with the Assignment Form attached to this Agreement as Exhibit ”C”
duly executed and funds sufficient to pay any transfer tax.  In such event the Company shall, without
charge, execute and deliver a new warrant agreement in the name of the assignee
named in the Assignment Form and designate the assignee as the warrant
holder under the new warrant agreement and this Agreement shall promptly be
canceled.  This Agreement may be divided
or combined with other warrant agreement that carry the same rights by
presentation of this Agreement to the Company together with the Assignment Form signed
by the Warrant Holder, specifying the names and denominations in which the new
warrant agreements are to be issued.

 

6.                                       Exercise
Price.

 

6.1                                 Initial
and Adjusted Exercise Prices.  The
initial exercise price of each Common Stock Warrant shall be $2.00 per
Share.  The adjusted exercise price shall
be the price which shall result from time to time from any and all adjustments
of the initial exercise price in accordance with the provisions of Section 8
of this Agreement.  The term “Exercise
Price” herein shall mean the initial exercise price or the adjusted exercise
price, depending upon the context.

 

2

 

7.                                       Registration
Rights.

 

7.1                                 Registration
Under the Securities Act of 1933.

 

The Warrant and the
Warrant Securities have not been registered under the Securities Act.  Upon exercise, in part or in whole, of the
Warrant, certificates representing the Warrant Securities shall bear the
following legend in the event there is no current registration statement
effective with the U. S. Securities and Exchange Commission (the “Commission”)
at such time as to such securities:

 

The securities
represented by this certificate may not be offered or sold except pursuant to (i) an
effective registration statement under the Act, (ii) to the extent
applicable, Rule 144 under the Act (or any similar rule under such
Act relating to the disposition of securities), or (iii) an opinion of
counsel, if such opinion shall be reasonably satisfactory to counsel to the
issuer, that an exemption from registration under such Act and applicable state
securities laws is available.

 

7.2                                 Piggyback
Registration.

 

If, at any time
commencing after July 27, 2005 and expiring July 27, 2010, the
Company prepares and files an amendment to a registration statement, or a new
registration statement under the Act, or files a Notification on Form 1-A
or otherwise registers securities under the Act, or files a similar disclosure
document with the Commission (collectively the “Registration Documents”) as to
any of its securities under the Securities Act (other than under a Registration
Statement pursuant to Form S-8 or Form S-4), the Company will give
written notice by registered mail, at least thirty (30) days prior to the
filing of each such Registration Document, to the Warrant Holder and holders of
the Warrant Securities of the Company’s intention to do so.  If the Warrant Holder or any holder of the
Warrant Securities notifies the Company within 20 days after receipt of any
such notice of its desire to include any Warrant Securities in such proposed Registration
Documents, the Company shall afford the Warrant Holder or holder of the Warrant
Securities the opportunity to have any Warrant Securities registered under such
Registration Documents or any other available Registration Document.

 

Notwithstanding the
provisions of this Section 7.2, the Company shall have the right at any
time after it shall have given written notice pursuant to this Section 7.2
(irrespective of whether a written request for inclusion of any such securities
shall have been made) to elect not to file any such proposed amendment or
registration statement, or to withdraw the same after the filing but prior to
the effective date of the Registration Document.

 

7.3                                 Demand
Registration.  Omitted.

 

7.4                                 Covenants
of the Company With Respect to Registration.  In connection with the filing of any
Registration Document by the Company, the Company covenants and agrees as
follows:

 

(a)                                  The
Company shall use its best efforts to file the Registration Document on the
date indicated in the notice delivered to the Warrant Holder and the holders of
the Warrant Securities pursuant to Section 7.2 or as soon as reasonably
practicable thereafter and shall use its best efforts to have any such
Registration Document declared effective at the earliest practicable time.  The Company will promptly notify each of the
Warrant Holder and holder of Warrant Securities electing to include Warrant
Securities in the Registration Document (collectively the “Selling Securities
Holders”) and confirm in writing, (i) when such Registration Document
becomes effective, (ii) when any post-effective amendment to such
Registration Document becomes effective and (iii) of any request by the
SEC for any amendment or supplement to such Registration Document or any
prospectus relating thereto or for additional information.

 

The Company shall furnish
to each Selling Securities Holder such number of copies of such Registration
Document (or prospectus contained therein) and of each such amendment and
supplement thereto (in each case including each preliminary prospectus and
summary prospectus) in conformity with the requirements of the Securities Act,
and such other documents as the Selling Securities Holders may reasonably
request in order to facilitate the disposition of the Warrant Securities
included in the Registration Document.

 

3

 

(b)                                 The
Company shall pay all costs (excluding transfer taxes, if any, and fees and
expenses of Holder(s)’ counsel and the Holder’s pro-rata portion of the selling
discount or commissions), fees and expenses in connection with all Registration
Documents filed pursuant to Sections 7.2 hereof including, without limitation,
the Company’s legal and accounting fees, printing expenses, blue sky fees and
expenses.  If the Company shall fail to
comply with the provisions of Section 7.4(a), the Company shall, in
addition to any other equitable or other relief available to the Selling
Securities Holders, be liable for any or all special and consequential damages
sustained by the Selling Securities Holders.

 

(c)                                  The
Company shall prepare and file with the SEC such amendments and supplements to
such Registration Document and the prospectus used in connection therewith as
may be reasonably necessary to keep such Registration Document effective for at
least nine months (or such longer period as permitted by the Act), and to
comply with the provisions of the Act with respect to the disposition of all
securities covered by such Registration Document during such period in accordance
with the intended methods of disposition by the Selling Securities Holders of
the Warrant Securities set forth in such Registration Document.  If at any time the SEC should institute or
threaten to institute any proceedings for the purpose of issuing a stop order
suspending the effectiveness of any such Registration Document, the Company
shall promptly notify each Selling Securities Holder and will use all
reasonable efforts to prevent the issuance of any such stop order or to obtain
the withdrawal thereof as soon as possible. 
The Company will use its good faith reasonable efforts and take all
reasonably necessary action which may be required in qualifying or registering
the Warrant Securities included in the Registration Document for offering and
sale under the securities or blue sky laws of such states as reasonably are
required by the Selling Securities Holders; provided that the Company shall not
be obligated to execute or file any general consent to service of process or to
qualify as a foreign corporation to do business under the laws of any such
jurisdiction, nor shall the officers, directors and five percent (5%) or
greater shareholder be required to deposit in escrow and securities of the
Company owned by them or subject such securities to any form of lockup
arrangement in connection with such registration.  The Company shall use its good faith
reasonable efforts to cause the Warrant Securities covered by such Registration
Document to be registered with or approved by such other governmental agencies
or authorities of the United States or any State thereof as may be reasonably
necessary to enable the Selling Security Holders to consummate the disposition
of the Warrant Securities included in the Registration Document.

 

(d)                                 The
Company shall indemnify the Selling Securities Holders and each person, if any,
who controls any Selling Securities Holder within the meaning of Section 15
of the Act or Section 20(a) of the Securities Exchange Act of 1934,
as amended (“Exchange Act”), against all loss, claim, damage, expense or
liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which any of them may
become subject under the Act, the Exchange Act or otherwise, arising from such
registration statement.

 

(e)                                  If
requested by the Company prior to the filing of any Registration Document
covering the Warrant Securities, each of the Selling Securities Holders and
their successors and assigns, shall severally, and not jointly, indemnify the
Company, its officers and directors and each person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20(a) of
the Exchange Act, against all loss, claim, damage or expense or liability
(including all expenses reasonably incurred in investigating, preparing or
defending against any claim whatsoever) to which they may become subject under
the Act, the Exchange Act or otherwise, arising from written information
furnished by the Selling Securities Holder, or their successors or assigns, for
specific inclusion in the Registration Document.

 

(f)                                    Nothing
contained in this Agreement shall be construed as requiring the Warrant Holder
to exercise the Warrants prior to the filing of any Registration Document or
the effectiveness thereof.

 

(g)                                 Notwithstanding
the provisions of Section 7.2 of this Agreement, the Company shall not be
required to effect or cause the registration of any Warrant Securities pursuant
to Section 7.2 hereof if, within 30 days after its receipt of a request to
include Warrant Securities within the Registration Document (i) counsel
for the Company delivers an opinion to the Selling Securities Holder, in form
and substance satisfactory to counsel to the Selling Securities Holder, to the
effect that the entire number of Warrant Securities proposed to be sold by such
Selling Securities Holder may otherwise be sold, in the manner proposed by the
Selling Securities Holder, without registration under the Securities Act, or (ii) the
SEC shall have issued a no-action position, in form and substance satisfactory
to counsel for the Selling Securities Holder, to the effect that the entire
number of Warrant Securities

 

4

 

proposed to be sold by
the Selling Securities Holder may be sold by it, in the manner proposed by the
Selling Securities Holder, without registration under the Securities Act.

 

8.                                       Adjustments
to Exercise Price and Number of Securities.

 

8.1                                 Adjustment
for Dividends, Subdivisions, Combinations or Reclassifications.  In case the Company shall (a) pay a
dividend or make a distribution in shares of its capital stock (whether shares
of its common stock, $.0001 par value (“Common Stock”)  or of capital stock of any other class), (b) subdivide
its outstanding shares of Common Stock into a greater number of shares, (c) combine
its outstanding shares of Common Stock into a smaller number of shares, or (d) issue
by reclassification of its shares of Common Stock any shares of capital stock
of the Company; then, and in each such case, the per share Exercise Price and
the number of Warrant Securities in effect immediately prior to such action
shall be adjusted so that the Warrant Holder of this Warrant thereafter upon
the exercise hereof shall be entitled to receive the number and kind of shares
of the Company which the Warrant Holder would have owned immediately following
such action had the Warrant been exercised immediately prior thereto.  An adjustment made pursuant to this Section shall
become effective immediately after the record date in the case of a dividend or
distribution and shall become effective immediately after the effective date in
the case of a subdivision, combination or reclassification.  If, as a result of an adjustment made
pursuant to this Section, the Warrant Holder shall become entitled to receive
shares of two or more classes of capital stock of the Company, the Board of
Directors of the Company shall reasonably determine the allocation of the
adjusted Exercise Price between or among shares of such class of capital stock.

 

Immediately upon any
adjustment of the Exercise Price pursuant to this Section, the Company shall
send written notice thereof to the Warrant Holder (by first class mail, postage
prepaid), which notice shall state the Exercise Price resulting from such
adjustment, and any increase or decrease in the number of Warrant Securities to
be acquired upon exercise of the Warrant, setting forth in reasonable detail
the method of calculation and the facts upon which such calculation is based.

 

8.2                                 Adjustment
For Reorganization, Merger or Consolidation.  In case of any reorganization of the Company
or consolidation of the Company with, or merger of the Company with, or merger
of the Company into, another corporation (other than a consolidation or merger
that does not result in any reclassification or change of the outstanding
Common Stock), the corporation formed by such consolidation or merger shall
execute and deliver to the Warrant Holder a supplemental Warrant Agreement
providing that the Warrant Holder shall have the right thereafter (until the
Expiration Date) to receive, upon exercise of such warrant, the kind and amount
of shares of stock and other securities and property receivable upon such
consolidation or merger, by a holder of the number of shares of Common Stock of
the Company for which the Warrant might have been exercised immediately prior
to such reorganization, consolidation, merger, conveyance, sale or
transfer.  Such supplemental Warrant
Agreement shall provide for adjustments which shall be identical to the
adjustments provided in Section 8.1 and such registration rights and other
rights as provided in this Agreement. 
The Company shall not effect any such consolidation, merger, or similar
transaction as contemplated by this paragraph, unless prior to or
simultaneously with the consummation thereof, the successor corporation (if
other than the Company) resulting from such consolidation or merger or the
corporation purchasing, receiving, or leasing such assets or other appropriate
corporation or entity shall assume, by written instrument executed and
delivered to the Warrant Holder, the obligation to deliver to the Warrant
Holder, such shares of stock, securities, or assets as, in accordance with the
foregoing provisions, such Warrant Holder may be entitled to purchase, and to
perform the other obligations of the Company under this Agreement.  The above provision of this Section shall
similarly apply to successive consolidations or successively whenever any event
listed above shall occur.

 

8.3                                 Dividends
and Other Distributions.  In the
event that the Company shall at any time prior to the earlier of (i) exercise
of all of the Warrant or (ii) the Expiration Date, distribute to its
shareolders any assets, property, rights, evidences of indebtedness, securities
(other than a distribution made as a cash dividend payable out of earnings or
out of any earned surplus legally available for dividends under the laws of the
jurisdictions of incorporation of the Company), whether issued by the Company
or by another, the Warrant Holder shall thereafter be entitled, in addition to
the Shares or other Warrant Securities and property receivable upon the
exercise thereof, to receive, upon the exercise of the Warrant, the same
property, assets, rights, evidences of indebtedness, securities or any other
thing of value that the Warrant Holder would have been entitled to receive at
the time of such distribution as if the Warrant had been exercised immediately
prior to such distribution.  At the time
of any such

 

5

 

distribution, the Company
shall make appropriate reserves to ensure the timely performance of the
provisions of this Section or an adjustment to the Exercise Price, which
shall be effective as of the day following the record date for such
distribution.

 

8.4                                 Adjustment
in Number of Securities.  Upon each
adjustment of the Exercise Price pursuant to the provisions of this Section 8,
the number of securities issuable upon the exercise of the Warrant shall be
adjusted to the nearest full amount by multiplying a number equal to the
Exercise Price in effect immediately prior to such adjustment by the number of
securities issuable upon exercise of the Warrant immediately prior to such
adjustment and dividing the product so obtained by the adjusted Exercise Price.

 

8.5                                 No
Adjustment of Exercise Price in Certain Cases.  No adjustment of the Exercise Price shall be
made if the amount of said adjustment shall be less than one cent ($.01) per
Share, provided, however, that in such case any adjustment that would otherwise
be required then to be made shall be carried forward and shall be made at the
time of and together with the next subsequent adjustment which, together with
any adjustment so carried forward, shall amount to at least one cent ($.01) per
Share.

 

8.6                                 Accountant’s
Certificate of Adjustment.  In each
case of an adjustment or readjustment of the Exercise Price or the number of
any securities issuable upon exercise of the Warrant, the Company, at its
expense, shall cause independent certified public accountants of recognized
standing selected by the Company (who may be the independent certified public
accountants then auditing the books of the Company) to compute such adjustment
or readjustment in accordance herewith and prepare a certificate showing such
adjustment or readjustment, and shall mail such certificate, by first class
mail, postage prepaid, to the Warrant Holder at the Warrant Holder’s address as
shown on the Company’s books.  The
certificate shall set forth such adjustment or readjustment, showing in detail
the facts upon which such adjustment or readjustment is based including, but
not limited to, a statement of (i) the Exercise Price at the time in
effect, and (ii) the number of additional or fewer securities and the type
and amount, if any, of other property which at the time would be receivable
upon exercise of the Warrant.

 

9.                                       Replacement
of Warrant Certificates.  Upon
receipt by the Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant Agreement, and, in case of
loss, theft or destruction, of indemnity or security reasonably satisfactory to
it, and reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of the Warrant Agreement, if
mutilated, the Company will make and deliver a new Warrant Agreement of like
tenor, in lieu thereof.

 

10.                                 Elimination
of Fractional Interest.  The Company
shall not be required to issue certificates representing fractions of shares of
Common Stock or other Warrant Securities upon the exercise of the Warrant, nor
shall it be required to issue script or pay cash in lieu of fractional
interests, it being the intent of the parties that all fractional interests may
be eliminated, at the Company’s option, by rounding any fraction up to the
nearest whole number of Share or other Warrant Securities, properties or
rights, or in lieu thereof paying cash equal to such fractional interest
multiplied by the current value of the Share or other Warrant Security.

 

11.                                 Reservation,
Validity and Listing.  The Company
covenants and agrees that during the Exercise Period, the Company shall at all
times reserve and keep available out of its authorized shares of Common Stock
or other authorized Warrant Securities, solely for the purpose of issuance upon
the exercise of the Warrant, such number of shares of Common Stock or other
Warrant Securities, properties or rights as shall be issuable upon the exercise
of the Warrant.  The Company covenants
and agrees that, upon exercise of the Warrant, and payment of the Exercise
Price therefor (if applicable), all shares of Common Stock and other Warrant
Securities issuable upon such exercise shall be duly authorized, validly
issued, fully paid, non-assessable and not subject to the preemptive rights.

 

12.                                 Notices
to Warrant Holder.  Nothing contained
in this Agreement shall be construed as conferring upon the Warrant Holder the
right to vote or to consent or to receive notice as a stockholder in respect of
any meetings of shareholders 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 Warrant and its exercise, any of the following events shall
occur:

 

(a)                                  the
Company shall take a record of the holders of its shares of Common Stock for
the purpose of entitling them to receive a dividend or distribution payable
otherwise than in cash, or a cash dividend or

 

6

 

distribution payable
otherwise than out of current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution on the books of the
Company; or

 

(b)                                 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

 

(c)                                  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 as an entirety shall be proposed;

 

then, in any one or more
of said events, the Company shall give written notice of such event at least 15
days prior to the date fixed as a record date of the date of closing the
transfer books for the determination of the shareholders entitled to such
dividend, distribution, convertible or exchangeable securities or subscription
rights, or entitled to vote on such proposed dissolution, liquidation, winding
up or sale.  Such notices shall specify
such record date or the date of closing the transfer books, as the case may be.

 

13.                                 Notices.  All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when sent (i) by facsimile and (ii) delivered
personally or by overnight courier or mailed by registered or certified mail,
return receipt requested:

 

(a)                                  If
to the Warrant Holder or holders of the Warrant Securities, to its address as
shown on the books of the Company; or

 

(b)                                 If
to the Company, to the address set forth below or to such other address as the
Company may designate by notice to the Warrant Holder.

 

John Simonelli

Chief Executive Officer

GrayMark Productions, Inc.

101 North Robinson, Suite 920

Oklahoma City, Oklahoma
73102

 

15.                                 Entire
Agreement: Modification.  This
Agreement contains the entire understanding between the parties with respect to
the subject matter hereof, and the terms and provisions of this Agreement may
not be modified, waived or amended except in a writing executed by the Company
and the Warrant Holder.

 

16.                                 Successors.  All the covenants and provisions of this
Agreement shall be binding upon and inure to the benefit of the Company,
Warrant Holder and the holders of the Warrant Securities and their respective
successors and assigns.

 

17.                                 Termination.  This Agreement shall terminate at the earlier
of (i) the public sale of all of the Warrant Securities, or (ii) at
the close of business on July 27, 2010. 
Notwithstanding the foregoing, the indemnification provisions of Section 7
shall survive such termination.

 

18.                                 Governing
Law; Submission to Jurisdiction. 
This Agreement shall be deemed to be a contract made under the laws of
the State of Michigan and for all purposes shall be construed in accordance
with the laws of said State without giving effect to the rules of said
State governing the conflicts of laws. 
The Company and the Warrant Holder hereby agree that any action,
proceeding or claim arising out of, or relating in any way to, this Agreement
shall be brought and enforced in a federal or state court of competent
jurisdiction with venue only in (i) the Ingham County District Court in
the State of Michigan, or (ii) the United States District Court for the
Western District of Michigan, and irrevocably submits to such jurisdiction,
which jurisdiction shall be exclusive. 
The Company and the Warrant Holder hereby irrevocably waive any
objection to such exclusive jurisdiction or inconvenient forum.  A party to this Agreement named as a
defendant in any action brought in connection with this Agreement in any court
outside of the above named designated county or district shall have the right
to have the venue of said action changed to the above designated county or
district or, if necessary, have the case dismissed,

 

7

 

requiring the other party
to refile such action in an appropriate court in the above designated county or
federal district.

 

19.                                 Severability.  If any provision of this Agreement shall be
held to be invalid or unenforceable, such invalidity or unenforceability shall
not affect any other provision of this Agreement.

 

20.                                 Captions.  The caption headings of the Sections of this
Agreement are for convenience of reference only and are not intended, nor
should they be construed as, a part of this Agreement and shall be given no
substantive effect.

 

21.                                 Benefits
of this Agreement.  Nothing in this
Agreement shall be construed to give to any person or corporation other than
the Company and the Warrant Holder and holders of the Warrant Securities any
legal or equitable right, remedy or claim under this Agreement; and this
Agreement shall be for the sole and exclusive benefit of the Company and the
Warrant Holder and any holder of the Warrant Securities.

 

22.                                 Counterparts.  This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and such counterparts shall together constitute but one and
the same instrument.

 

IN WITNESS HEREOF, the
parties hereto have caused this Agreement to be duly executed, as of the day
and year first above written.

 

	
  “Company”

  	
   

  	
   

  	
  GRAYMARK PRODUCTIONS,
  INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  John
  Simonelli, Chief Executive Officer

  
	
   

  	
   

  	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Mark R. Kidd, Secretary

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  “Warrant Holder”

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Signature
  for an individual, including

  
	
   

  	
   

  	
   

  	
  joint
  tenants and tenants in common:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (Signature)

  	
   

  	
   

  	
  (Signature)

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Name (typed or
  printed)

  	
   

  	
   

  	
  Name (typed or printed)

  
	
  Date: August 5,
  2005.

  	
   

  	
   

  	
  Date: August 5,
  2005.

  

 

8

 

EXHIBIT ”A”

 

FORM OF
SUBSCRIPTION (CASH EXERCISE)

 

(To be signed only
upon exercise of Warrant)

 

TO:                            GrayMark
Productions, Inc.

101 North Robinson, Suite 920

Oklahoma City, Oklahoma
73102

 

The undersigned, the
Warrant Holder, hereby irrevocably elects to exercise the purchase right
provided by the Warrant Agreement for, and to purchase thereunder,                         
Shares of GrayMark Productions, Inc. (the “Company”), and herewith makes
payment of $                              
therefor, and requests that the certificates for such securities be issued in
the name of, and delivered to,                                                                                                     ,
whose address is                                                                                                                                                                 ,
all in accordance with the Warrant Agreement.

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (Signature must conform
  in all respects to

  name of Holder as specified on the face of

  the Warrant Agreement)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (Address)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (Social Security Number
  or

  
	
   

  	
  Tax Identification
  Number)

  

 

9

 

EXHIBIT ”B”

 

FORM OF
SUBSCRIPTION (CASHLESS EXERCISE)

 

(Intentionally
Blank)

 

 

 

 

10

 

EXHIBIT ”C”

 

FORM OF
ASSIGNMENT

 

(To be exercised
by the Warrant Holder if the

Warrant Holder
desires to transfer the Warrant Agreement.)

 

FOR VALUE RECEIVED                                                                                 
hereby sells, assigns and transfers unto

                                                                                                                                                                                          

(Print name and address
of transferee)

 

the Warrant Agreement,
together with all right, title and interest therein, and does hereby
irrevocably constitute and appoint                                                                                                                     
Attorney, to transfer the Warrant Agreement on the books of GrayMark
Productions, Inc., with full power of substitution.

 

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (Signature must conform
  in all respects to

  name of Holder as specified on the face of

  the Warrant Agreement)

  
	
   

  	
   

  
	
   

  	
  Address of Assignee:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (Social Security Number
  or

  
	
   

  	
  Tax Identification
  Number

  
	
   

  	
  of Assignee)

  

 

11

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